By Stan Collender
Many members of the U.S. House and Senate have complained long and hard about what they say is an out-of-control Federal Reserve Bank. They protested when the Fed took what they considered to be unprecedented measures during the recession, railed against someone other than an elected official making critical decisions about the U.S. economy and complained about what they claim is the Fed’s overbearing regulatory stance.
But congressional critics of the Federal Reserve should count their blessings: Instead of the Fed, they could be dealing with the increasingly hard-to-explain and harmful actions of the National Bank of Ukraine.
There is no doubt about the difficulty of the economic situation in the Ukraine. The value of the country’s currency has recently lost two-thirds of its value and inflation has soared to what for Americans is a hard-to-believe almost 43 percent.
Ukraine’s political situation is just as difficult. Just a few weeks ago, Vice President Joe Biden demanded in a speech in Ukraine’s capital city of Kiev that the country quickly move ahead with governmental reforms that he insisted were long-promised and much-needed.
But Ukraine’s economic and political challenges do not explain or justify the actions by the National Bank of Ukraine that are actually exacerbating rather than alleviating the country’s problems.
In the midst of one of the worst economic downturns in Ukraine’s history that put serious stress on the country’s banking system, the NBU chose to close almost 60 banks rather than arranging for the strong ones to take over the operations of the weak. This made credit less available to Ukrainians at the precise time that it was most needed and exacerbated rather than alleviated the difficult economic situation.
It also greatly reduced the confidence Ukrainians have for the banks in their country. After the inept way the NBU acted, a survey conducted by The Ilko Kucheriv Democratic Initiatives Foundation this past July 2015 showed that almost 77 percent of Ukrainians did not completely or mostly trust their banks.
The NBU is also making it far more difficult than necessary for the surviving institutions and by doing so it reduced both current and future economic activity.
Read the full article here in The Hill.