Luke averted a bigger crisis!

Fri, Feb 8, 2013

Editor: The decision by the Financial Services Authority (FSA) to take over the operations of the Building and Loan Association is testament that the call for action by Luke Browne two weeks ago was not a red herring by a young politician seeking political upheaval.{{more}} If anything, the last crisis in the local and regional insurance industry should have taught us that “operating in the light” is much better than the clouded charade financial magicians dangle at the public’s expense.

Whether it was the Lehman Brothers in the US or the collapse of CL Financial, CLICO (Trinidad), CLICO International Limited (CIL) and British American Insurance Company (BAICO), we have learnt that the public, especially the poor, working class should never be held ransom to the “other” economists’ belief that information should be concealed. So, instead of us always beholden to the economic theories, incapable of addressing our sui generis (of its own kind; unique) market structure, alarmists at Luke Browne should have been more sympathetic to the 20,000 shareholders who today are now in a better position to safeguard their investments.

As Luke pointed out, not everyone is blessed with financial literacy or will read the reports of the IMF. How many of the shareholders ever descended to the Association headquarters to take part in the annual general meetings? A large representative of the company’s clients resides in the diaspora, when would it have been too late to inform them that all was not well, beyond the nicely worded press releases by the institution? We have to trust our citizens more by bringing information to the public and allowing us to be wise in our decision-making. If we continue to feed the beast of contempt towards our working class, then how will we ever develop a strong middle class society? Of course, sober reflection must be paid to the motive of Luke Browne in our usual “messenger not message” analysis, but our debate should quickly move beyond one of citation of the young man and other imaginative political posturing.

So, on the macro level, we have failed to see that the systems implemented at the height of the crisis some years ago have worked. The Financial Services Authority (FSA), a reformed state arm, was quick to step in to ensure the continued viability of the Association safeguarding its image and the “wealth” of the depositors. This is a great signal that a regulatory watchdog that is willing to use its statutory powers has strengthened our financial system. It also speaks well for strong, independent professionals at the institution, who have to make decisions that have a gauge on the daily political thermometer. As we continue to teeter our way to recovery, all institutions would have to play their role in overseeing the critical structures of our economy.

Luke’s situation is rather unique, as he did not have direct purview to the information he released, in the scope of his work, but it also opened up a can of worms. How can we protect others with critical information in the

line of their work? The US and other jurisdictions have strong whistleblower laws that protect the identity and jobs of those who bring information to the competent authority.

As for us, we are not yet willing to admit to the high levels of corruption and lethargy in our society or to effectively deal with their genesis. We watch as both parties have played political football with Integrity Legislation. There is also no Ombudsman, which was a casualty of the Constitutional Reform exercise. So, while others may be able to save other

institutions in a responsible way, our systems are waiting for another shock therapy like the 2008 financial crisis. One can only hope that the mischief peddlers that brought us the episodes of “the bridge over troubled waters”, the Rabacca bridge hoax, airport scandal, the NCB saga, and NIS tale will also see the need for the proper management of public information.

So, let us not be too quick to condemn or reprimand the young man for averting a bigger crisis, but be willing to put mechanisms in place to allow those among us who are not only concerned about receiving a monthly pay cheque to responsibly strengthen our institutional deficiencies. If not, our “FM” politics will continue to hold us back.

Adaiah J Providence-Culzac

cemsvg@gmail.com