Banking system safe, says PM

[Lazie]

PRIME Minister Bruce Golding says the country's official banking system is strong enough to withstand any possible fallout that could result from whatever occurs with unregulated investment schemes which have gained popularity in the island.

In the meantime, the prime minister says Government was awaiting the outcome of two court cases involving the alternative investment schemes before deciding on its course of action.

"A lot hinges on the courts' rulings because that will determine whether the regulators have a basis for intervention," Golding said in answer to questions following his address at a seminar on press freedom and corruption at the University of the West Indies yesterday. "If they don't have a basis for intervention, the question is going to be: 'Should government go to Parliament to provide the legislative authority to allow for that intervention'?"

The alternative investment schemes, some of which offer interest rates starting at 10 per cent per month, have been gaining the interest of Jamaicans in recent times, despite warnings from the financial regulators - the Bank of Jamaica and the Financial Services Commission - that investors have no recourse if they are unable to retrieve their money.

Golding said yesterday that he has been in constant dialogue with the financial regulators who reassured him that the official banking system was safe, despite some exposure as a result of the alternative schemes.

"The banking system in Jamaica is sufficiently strong and the banks are sufficiently liquid, that if any of them have extended three or four per cent of unsecured loans, and they were called upon to write off those loans, they can withstand that without any tremors to the system," Golding said.

But while noting it was important that financial investments be protected, the prime minister said he was not in favour of regulating every single business activity in Jamaica.

"I want to approach this one cautiously," he said. "I do not subscribe to the view that Government should so regulate business activity that if two people want to get together to go into a business venture they must seek the approval of Government."

The prime minister indicated that the Government may have to look at new laws to regulate how persons can invest in business ventures.

He said, for example, that while there were several laws that regulated against the lending of money, there were none against the borrowing of money, as at least one of the schemes claims it is doing.

The prime minister also announced that amendments to the Contractor General's Act to criminalise breaches to the guidelines for the award of government contracts were expected to come before Parliament before next April.

[Muadib]

Him need to chat to Jawge and get himself heducated...

[Lazie]

I very much doubt there is a need to be concerned about the financial institutions. If these schemes should go under, the question is how will it impact on the social conditions of the country? A man put all his money in such a scheme, I've heard that people are mortaging their homes to put in these schemes .... if a Cash Plus should go under, can you imagine the shock?

Just caught Ralston Hyman and Ronnie Thwaites talking about these schemes and both are saying the gov't is dancing around the issue, if my memory serves me right, one ite said the same thing here, they may be right. Strange there wasn't much concern about these schemes prior to this gov't taking office.

Gamma, as a legal mind, is it sufficient for the gov't to wait on the courts? It is said that the wheels justice turns slowly (or something like that), couldn't it be too late by the time a ruling is handed down?

[Assasin]

Lazie what can the government do Lazie? Are there regulations in place?
Other than warning people they have to go to the drawing board fi regulate them.

Since it is the courts then them have to wait. Remember if them make the regulations draconian it could affect other schemes such as throwing partners.

[Lazie]

Lazie what can the government do Lazie? Are there regulations in place?
Other than warning people they have to go to the drawing board fi regulate them.

Since it is the courts then them have to wait. Remember if them make the regulations draconian it could affect other schemes such as throwing partners.

Thats why I put it out there for discussion. There are investors that kill dem dead, cash Plus is the way to go. The PM already said, that there will be no bailout, which I agreed with it. However, looking at it, if Cash Plus goes under, many families are going to be affected. A man that tek out a mortage to invest in Cash Plus, may very well end up homeless. If the gov't sits and waits for a court ruling which doesn't come until the horse gone through the gate, who is gonna get blamed?

[Muadib]

Yuh know how much man lose dem house in Jamaica ahready ?

What is new ?

[Assasin]

Currently in the US you have junk bonds etc. and people invest with the expectation of high returns of buss. As long as them know what will happen and them diversify it is ok. If them have a house and some money inna a traditional bank and maybe some government bonds then them doing ok, no reason not to role the dice a little.

Mi wouldn't take the chance to invest in these now because them under too much pressure and mi down on mi luck, but if me did have all this information 2 years ago and had a 5 grand mi woulda try a thing too. You never know and without any chances you will not achieve much but a salary fi go a work next week.

[Willi]

Yuh young...go ask Karl about Eddie Lai Enterprises.

Ah nuff get rich quick schemes pass thru Jamaica. We love a carry down artist.

Dip dem Badward, dip dem, dip dem in di healing stream... Dip dem deep, but not too deep...
Dip dem to cure bad feelings.

[Islandman]

Yes but junk bonds are not the kind of investments that the man on the street in the US invests in. On the other hand, the real estate speculation is now squeezing the man on the street which is why Bush and company are getting involved in trying to ease the pain.

The bottom line is that when any kind of investment mania gets to the point where its failure will possibly cause wide social unrest, the govt has a duty to keep their eye on it.

No matter how much Bruce says there will be no bailout, if people start riot and bun down the place because them lose them life savings there will be some kind of financial govt intervention, maybe they just won't call it a bailout.

[Lazie]

Yes but junk bonds are not the kind of investments that the man on the street in the US invests in. On the other hand, the real estate speculation is now squeezing the man on the street which is why Bush and company are getting involved in trying to ease the pain.

The bottom line is that when any kind of investment mania gets to the point where its failure will possibly cause wide social unrest, the govt has a duty to keep their eye on it.

No matter how much Bruce says there will be no bailout, if people start riot and bun down the place because them lose them life savings there will be some kind of financial govt intervention, maybe they just won't call it a bailout.

Well, that is what I'd have a problem with. Investments involve some amount of risk and the investor must decide if he /she wants to take that risk.

[Jawge]

Oh yes thanks; at least he
caught on from Omar about making public statements about finance. This guy will have to learn on the job whilst the nation suffers.

[Assasin]

I was just talking about the risk involved. Do you think a anybody get inna Cash Plus?

Yes it can affect the society at large but the government saying there was a housing bubble never stop none of us. The government have been saying it for 6 years now so people took their chances.

[Gamma]

true because omar handed over a healthy economy ....

[Islandman]

In principle you are absolutely correct. Unfortunately sometimes when people take foolish risks it affects other people in society who were responsible and conservative in their risk taking.

I give you two examples, one local (JA) and one foreign (US)

In the roaring 1920s in New York the commercial banks were very carefree in their loan management, lending to speculators to buy stocks on Wall Street, etc , somewhat similar to what took place recently with sub-prime loans. The Fed repeatedly warned them about this but with little success. When the loans began to default after the stock market started to tank the Fed decided to teach them a lesson and not bail them out. The result was that not only the banks went under, but also thousands of small businesses who depended on them for credit. Many feel that it made the Great Depression much worse and lasted much longer than it would have if the banks had been helped.

When PJ Patterson was giving up the post of PM a few years ago he gave a speech in which he recalled the period in the mid-90s when they were debating wether they should or should not bailout the banks during the crisis which led to FINSAC. He said at a PNP meeting with representatives from across the island , a comrade from Trelawny got up and said him nuh really understand most of what them discussing, but all him know is when him sharpen him cutlass and go Falmouth to him bank, them better have him money or him going to be in the news. The thought of hundreds, maybe thousands of like-minded people across the country went a long way in convincing the PNP top brass that all those banks could not be allowed to fail.

[Lazie]

I get yuh point. Suh its a matter of damn if you do, because bailing out these investors is going to cause a strain on our already weak financial situation ... borrowing more money to bail out risk takers .. and damn if you don't as these risk takers may cause an unrest among others.