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LETTER OF THE DAY - Do financial gurus reallyworry about the poor?
published: Tuesday | November 20, 2007
THE EDITOR, Sir:
As I and the Jamaican public are bombarded by the media, Financial Services Commission, the Tax Administration Department, a consortium of financial leaders and the rumour mill about the pending doom of Cash Plus, Olint and other high-interest financial institutions and warning us to beware of investing in these institutions, I was heartened by the new surge of social conscience in big business, the media and various government organisations in protecting the poor.
However, in reading and analysing some recent financial developments worldwide, this feeling of euphoria about this great interest in the welfare of the poor is slowly waning.
a) The four largest banks have reported substantial decrease in the last-quarter profits and have stepped up the harassment of these institutions. The harassment includes threats against their employees who participate in these schemes, to reviewing long-standing clients of the banks overdraft facilities after they participate in these schemes.
b) Threats of closure of these institutions accounts held at these banks and making their normal banking arrangements as difficult as possible.
c) Some of these well-established institutions instituting schemes with interest rate as high as 62 per cent per annum on foreign exchange dealings.
The above makes me reach the conclusion that these established financial institutions are acting in self-interest instead of concern for the welfare of the poor, as they see their pool of low-interest money being significantly reduced.
If these institutions are interested in the welfare of the poor, why are not more ads in the papers about loans for micro business financing instead of all these ads about car loan schemes and new credit cards to fuel spending on consumer goods? Also why are the banks not instituting new schemes that their junior employees and ancillary staff can get low interest loans for housing and education at the same time that they are threatening them with dismissal for joining the high-interest schemes?
Even if my above analysis is flawed, the almost deadly silence from these same groups about the worldwide financial crisis caused by the collapse of the subprime mortgage scheme in the United States is the dead giveaway that they are acting in self-interest and not in concern for the poor.
Event of bankruptcy
Here is an event that brought Northern Rock Bank in the U.S. to almost bankruptcy, and caused a US$8 billion loss to Merrill Lynch in the U.S. and there are no serious sustained, public discussions on this phenomenon by the financial gurus and these well-established financial institutions.
In Jamaica the cost of housing and other real estate has almost doubled in the past eight years. The real estate market is booming and fetching unprecedented prices financed by banks and building societies (which have poor people's money at low interest), and our mortgage rates are about three times those that exist in the U.S.
If there was to be a correction in the value of real estate that precipitates any serious default on mortgage in Jamaica, would not the financial crisis caused by this be more than tenfold any fall-out in Olint and Cash Plus would cause? Remember that it took only a 20 per cent mortgage default in the U.S. to precipitate a over US$200 billion worldwide financial crisis.
We need to hear from the financial gurus and leaders what proactive things that are being done to protect the mortgage institutions in Jamaica from this crisis on the horizon, if they have anytime left after bashing Olint, Cash Plus, World Wise, etc.
I am, etc.,
AINSWORTH DICK Kingston 5
published: Tuesday | November 20, 2007
THE EDITOR, Sir:
As I and the Jamaican public are bombarded by the media, Financial Services Commission, the Tax Administration Department, a consortium of financial leaders and the rumour mill about the pending doom of Cash Plus, Olint and other high-interest financial institutions and warning us to beware of investing in these institutions, I was heartened by the new surge of social conscience in big business, the media and various government organisations in protecting the poor.
However, in reading and analysing some recent financial developments worldwide, this feeling of euphoria about this great interest in the welfare of the poor is slowly waning.
a) The four largest banks have reported substantial decrease in the last-quarter profits and have stepped up the harassment of these institutions. The harassment includes threats against their employees who participate in these schemes, to reviewing long-standing clients of the banks overdraft facilities after they participate in these schemes.
b) Threats of closure of these institutions accounts held at these banks and making their normal banking arrangements as difficult as possible.
c) Some of these well-established institutions instituting schemes with interest rate as high as 62 per cent per annum on foreign exchange dealings.
The above makes me reach the conclusion that these established financial institutions are acting in self-interest instead of concern for the welfare of the poor, as they see their pool of low-interest money being significantly reduced.
If these institutions are interested in the welfare of the poor, why are not more ads in the papers about loans for micro business financing instead of all these ads about car loan schemes and new credit cards to fuel spending on consumer goods? Also why are the banks not instituting new schemes that their junior employees and ancillary staff can get low interest loans for housing and education at the same time that they are threatening them with dismissal for joining the high-interest schemes?
Even if my above analysis is flawed, the almost deadly silence from these same groups about the worldwide financial crisis caused by the collapse of the subprime mortgage scheme in the United States is the dead giveaway that they are acting in self-interest and not in concern for the poor.
Event of bankruptcy
Here is an event that brought Northern Rock Bank in the U.S. to almost bankruptcy, and caused a US$8 billion loss to Merrill Lynch in the U.S. and there are no serious sustained, public discussions on this phenomenon by the financial gurus and these well-established financial institutions.
In Jamaica the cost of housing and other real estate has almost doubled in the past eight years. The real estate market is booming and fetching unprecedented prices financed by banks and building societies (which have poor people's money at low interest), and our mortgage rates are about three times those that exist in the U.S.
If there was to be a correction in the value of real estate that precipitates any serious default on mortgage in Jamaica, would not the financial crisis caused by this be more than tenfold any fall-out in Olint and Cash Plus would cause? Remember that it took only a 20 per cent mortgage default in the U.S. to precipitate a over US$200 billion worldwide financial crisis.
We need to hear from the financial gurus and leaders what proactive things that are being done to protect the mortgage institutions in Jamaica from this crisis on the horizon, if they have anytime left after bashing Olint, Cash Plus, World Wise, etc.
I am, etc.,
AINSWORTH DICK Kingston 5
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