Dear Editor,
“Is nuttten but bobbol again!” Here was the concluding comment of an animated conversation I couldn’t but overhear. Two gentlemen – apparently working class Trinidadians, not business moguls – were discussing the business news last Thursday while awaiting their flight. In transit myself, I had adequate reading material for my stopover at Piarco International.
Upon learning that the CLICO/HCU Commission of Enquiry report was complete and handed over to the President, I abandoned my planned reading – an excellent book on forecasting and its links to “art and science” and tried to get the newspapers. I could only lay my hands on Newsday and the Guardian. Apparently the Express was either in high demand or wasn’t on board Caribbean Airlines that day; previous travellers had mangled Newsday.
The news was for the most part welcome. After five years and approximately TT$36.2 million, five million pages of documentation in the presence of 77 lawyers (Guardian) the report was finally complete. But it would not be made public. Hopefully this shall change. So where are we now?
Sole Commissioner Sir Anthony Colman referring to the principals of the collapsed institutions CL Financial and HCU noted one alleged connecting tissue claimed for them: “vision”. Unable to read the report it is unclear whether Sir Anthony meant to infuse an element of irony, even sarcasm. But the quote, adroitly chosen by the Guardian from Sir Anthony’s remarks, tells its own story: “ … in spite of all the warnings received from the Central Bank and the auditors they went on, like Icarus, only to be destroyed by the sun of their own vision.”
To be honest, there was never any need for an expensive enquiry to determine why these two institutions imploded. There exists sufficient economic and financial theory, driven by exhaustively investigated, empirically verifiable historical antecedents both far away and close in space and time that explain financial collapse. And it is this: inadequate regulatory rules/legislation and enforcement systems – call it regulatory failure – coupled with human greed on the part of a population, hubris and/or fraud among principals, inevitably lead to financial crash.
To verify this consider the US Savings and Loan crash, ENRON, Arthur Andersen, Lehman Brothers, AIG and the 2008 Wall Street meltdown, Jamaica’s indigenous financial services sector crash of mid-1996; and we might go on, rather, go back in time. The story is always and everywhere the same, with but a few orchestral tutties. As the Glass-Steagall Act was jettisoned for the Gramm-Leach-Bliley gift to Wall Street, the New York Times (November 5th 1999) reported: “The decision to repeal the Glass-Steagall Act of 1933 provoked dire warnings from a handful of dissenters that the deregulation of Wall Street would someday wreak havoc on the nation’s financial system. The original idea behind Glass-Steagall was that separation between bankers and brokers would reduce the potential conflicts of interest that were thought to have contributed to the speculative stock frenzy before the Depression.” (The great depression 1929 …)
Senator Byron L Dorgan, Democrat of North Dakota said: ‘’I think we will look back in 10 years’ time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930’s is true in 2010 … I wasn’t around during the 1930’s or the debate over Glass-Steagall. But I was here in the early 1980’s when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.’’ Doesn’t this statement appear amazing today? The collapse Dorgan predicted occurred almost to the day!
Yet, although we do know the basic structural and architectural elements of collapse, to fix things, enquiries, reports and recommendations are mandatory – part of political feasibility. That said, what has been done? What must be done?
Insurance legislation tabled in parliament should be debated, amended if necessary and passed; regulatory apparatus modernized for today’s global realities; publish the Commission report. It was refreshingly encouraging to have Commission proceedings freely available on the web. The alarming cynicism of the opinion: “Is nuttten but bobbol again!” must be addressed. Only transparency can counter this. Democracy requires equality before the law among citizens. These two gentlemen seem to have resigned themselves to playing on a field, relegated to the rutted, uneven end.
Yours faithfully,
Wilberne Persaud
Former Head, Department of
Economics
UWI, Mona
