In my last article, I gave advice to policyholders of CLICO. Because of foolish decisions of unprepared virgins, the present stark alternative is to take whatever cents in the dollar a liquidation of assets can offer and be glad you are not six feet under now. Do not envy the judicial managers whose nine million was earned. The Government is in dire straits and cannot help you. To help you it would have to dig a deeper hole to fill a hole.
The Wild Coot was the person who, along with Dr Kurleigh King, got the Caribbean Bankers Association going in 1981 in St Lucia under the chairmanship of Mr McDonald Dixon of the National Commercial Bank St Lucia Ltd (now Republic Bank) after it had been defunct for a few years. It was anticipated that the bankers would be the guiding light for the Caribbean as they sought to transform the colonial (still evident) aspect of the industry to one that suited our model of life. Therefore an address by the veteran banker Ronald Harford to this body was in keeping with a desire to see these bankers at the forefront of the economic development of the Caribbean.
Mr Harford’s assertion that the model is broken is a serious charge. For me it is not only broken, but reminds me of the children’s ditty “Humpty Dumpty Sat On A Wall”. I can associate willingly with what he said, being a banker over the past 52 years and steeped in the mindset of a banker who has fair knowledge of the inner workings of the political class. What Mr Harford has said will fall on the deft ears of the politicians. It may be a warning to the bankers. You are on your own. The gulf between the outlook of a banker and that of a politician can be gauged from St Luke 16:20 (look it up in your Bible).
The broken model comprises the politician’s obsession with retention of power and self-aggrandisement. A politician would budget over 100 per cent of expenditure, mainly on wages, in order to curry votes in the next elections knowing quite well the deleterious effect that decision would have on the economy. His thinking would be, “after we win, we will fix it”. The problem is that the fixing may not be in his hands and becomes almost impossible due to unforeseen circumstances. Funny enough, we are seeing such a situation in some Caribbean islands now despite the cacophony of warnings.
Mr Harford is a banker. For him, bankers balance their accounts on a daily basis. That is a cardinal rule. Therefore it is anathema for a banker for expenditure to be 141 per cent of revenue even though there is a loan financing the deficit. His model is broken.
The Wild Coot has been telling the Barbados Government that printing of unearned money from the days of Tom Adams was digging a hole to fill a hole. Four billion dollars of wages by the present Government since 2008 facilitated by a borrowing of $40 million per month is mainly the cause of the broken model here and Barbados’ prostate cancer.
That Mr Harford has spoken out to his colleagues is a sign of pure frustration on a Caribbean level as banks are forced to participate in this, according to our Central banker, “redistribution”. The problem is that commercial bankers are not politicians, and aside from doing what little they can to garner as much as possible in profit from the customer, they do not have the dubious skills of the politician.
While international banks can show their displeasure at what is happening budgetary wise in the Caribbean with dysfunctional governments breaching their own parliamentary procedures and country laws, they can retrench or up shop and leave. Caribbean banks cannot do so. The unsecured debts of government in Treasury bills, bonds and statutory investment obligations that they are constrained to hold have been unsustainable. Therefore the model is broken and can only be fixed by a politician with honesty and guts. The public has for too long been fed on handouts. Figure this out. The Government of Barbados owes the banks nearly 20 per cent of the $9 billion of our savings in the banks of Barbados – unsecured. That amounts to $1.8 billion of our money not including direct loans. And we still pay tax.
“Wild Coot, what about my National Insurance?” asked a nice old lady. “I want to know why oil prices reduce from $110 to almost $50 a barrel and we only get five cents ease on kerosene oil.”
Harry Russell is a banker. Email quijote70@gmail.com