Dr Davies and the Finsac dilemma

[Lazie]

Raulston Nembhard
Tuesday, March 04, 2008


Dr Omar Davies seems to be suffering from Finsac Anxiety Syndrome, given his recent anxiety over Mr Audley Shaw's desire to audit Finsac. Anyone with a modicum of concern would understand the need for such an audit and a Commission of Inquiry into what happened. The meltdown of the financial sector was a matter of monumental proportions that has affected, and will continue to affect Jamaica for years to come. The country is entitled to know what happened. If this event had happened in the United States, a number of people would have been called before committees of Congress to give an account of their stewardship. Maybe grand juries would have been put in place to begin prosecution of actors in the saga.
Those who are arguing that this is a witch-hunt and a waste of time are missing the point and are being disingenuous. Is there a sinister motive for them not wanting to find the truth? One wonders whether members of the previous administration who are getting apoplectic about the audit have something to hide. What do they have to fear about the truth being exposed?
At the very basic level there was not a great deal of transparency that went into the sale of government assets to Dennis Joslin and the Jamaica Redevelopment Company. The transactions were done through the Ministry of Finance presided over no doubt by Dr Davies and agents appointed by him. He and his agents acted as laws unto themselves and brooked no criticism of their handling of what amounted to billions of dollars of what had become the country's patrimony.
In the context of the shroud of secrecy that surrounded these transactions, it would help the country to know if sweetheart deals were entered into. We need to know if special people got special treatment because of their proximity to the political directorate, and if transactions were done in the best interests of the Jamaican people who became saddled with the debt portfolio.
Furthermore, we need to know why a foreigner was invited to take over Jamaican assets at 30 cents to the dollar and to have them resold to Jamaicans at a horrendous 12 per cent, when going loan rates in the USA at the time were at five to eight per cent. How many people will lose their assets when the five-year balloon payments on these reconfigured loans kick in? Will we see the great suffering as has accompanied the sub-prime crisis in America?
And people are already suffering as a result of the unconscionable and generous terms given by the government of Jamaica to Joslin. Individuals have been calling the talk shows with horrific stories of the suffering they are enduring. Some have already almost repaid the loans and yet owe more than three-quarters the initial principal sum they agreed to.
The government must be encouraged to proceed with full speed ahead into this matter. They must not be deterred by those who have a pony in this race. On reflection (and Lent is a good time to do this), people like Dr Davies should be ashamed of their complicity in bringing the financial sector to its knees in the 90s. Proud, longstanding institutions such as Mutual Life were crippled. Banks were selectively saved and others driven into the ground. It appeared as if personal peeves were used to put people in their places, and many hit the mute button on their lips for fear of reprisal from an uncaring political directorate.
There is still a lot of pain from this meltdown, Dr Davies. Healing will never be fully achieved until we know the truth of what went on. If you are an advocate of healing you will see to it that the truth is arrived at, for it is only the truth that will bring closure and set many free.
The contractor-general's office
The contractor-general, Mr Greg Christie, has again raised concern about the lack of personnel and staff to do the work that his office has been called on to do. In many ways Mr Christie has been given "basket to carry water". The truly remarkable thing is the amount of water he has been able to carry since assuming office.
No one can say that his office has not been an oasis in the desert of corruption that Jamaica has become. He has stuck to his tasks tenaciously, despite harsh criticisms and obvious dangers to his well-being. It would behove the government to give him and his staff all the support they need, especially in doing the field work that is so crucial to his mandate. Things have improved in recent times, but there is a great deal to be done. Over to you, Mr Prime Minister.
stead6655@aol.com

[Jawge]

Well this is what Omar had to say:

Rebutting those outlandish Finsac comments
Omar Davies, Minister of Finance


Wednesday, August 01, 2007


DAVIES. I played an integral role in the establishment of FINSAC and hence I speak from a particular vantage point

It was with much incredulity that I read the article in the Business Observer (Wednesday, July 25, 2007) entitled 'Bad taste of FINSAC still lingers'.

In that article, a group of persons described as "corporate players" assessed the way in which the Government had handled the problems in the financial sector in the latter part of the 1990s. Let me begin by "declaring interest" in that I played an integral role in the establishment of FINSAC and hence I speak from a particular vantage point.

Before rebutting some of the more outlandish assertions made in that article, it is useful to place on record the rationale for the establishment of FINSAC. It is a fact that during the mid 90s, several financial institutions ventured into activities outside their "core" functions and also supported initiatives, with marginal prospects of viability, from selected borrowers. These activities were financed by deposits/investments of their clients.

In many instances, short-term deposits/investments were used to support ventures which, at best, had potential to be profitable in the long term. To compound matters, in order to cover up the fact that many of these investments were failing and the associated loans were not being serviced, the owners/managers of the institutions made them "evergreen".
This meant moving the bad loans between institutions within their "group" of companies. Whilst I am willing to engage in a reasoned discussion on the impact of high interest rates on the viability of some of the projects, the bald fact was that there was a mismatch of assets and liabilities in all of the troubled institutions.

With the increasing number of bad debts, many of the financial institutions collapsed. The Government took the decision to intervene based on the explicit policy of protecting depositors, holders of life insurance policies, as well as several pension funds managed by insurance companies.

The actions of FIS/FINSAC were geared at protecting approximately 1.5 million account holders, 570,000 life insurance policies and over 100,000 pensioners whose savings were managed by failing insurance companies.
Simply put, FINSAC was created to address an existing problem.

A reading of the article does not yield a coherent critique from these "corporate players" of the decision of the Cabinet to create FINSAC, or of the subsequent activities of that institution. Mr Patrick Lynch opined that some of the indigenous bankers have been treated like thieves "when they are not all crooks" (my emphasis). This is interesting observation from Mr Lynch!! Perhaps he would wish to make his differentiation more explicit by identifying those who he would characterise as "crooks". However, the article goes no further to develop Mr Lynch's critique of the way the crisis was handled or explaining how things could have been done differently.

Mr Godfrey Dyer, a former hotelier, in making his contribution to the discussion, complained about the exponential growth in his own debts. It is not clear why this represents a critique of FINSAC, since these debts preceded the existence of the organisation. In fact, to my certain knowledge, the Board of FINSAC, endorsed by Cabinet, returned his hotel to him, in the process writing off a significant percentage of his debts. These debts he had incurred with NCB, before FINSAC was even contemplated.

The chairman of the Observer, Mr 'Butch' Stewart, is quoted as saying that "the Government used FINSAC to gag any opposition from the private sector". This is an interesting observation from an entrepreneur who expanded his "empire" by purchasing several assets from FINSAC. As someone who was intimately involved in most of the negotiations for the sale/purchase of these assets, and with whom Mr Stewart consulted on various occasions, I cannot recall these concerns/reservations being expressed then.

Another 'corporate player', Mr Dennis Chung, ranted that "FINSAC is the worst thing that ever happened to this country. that was a cruel act". The establishment of FINSAC was posited by Mr Chung as analogous to the US war in Iraq. Perhaps Mr Chung could indicate whether preserving the life savings of hundreds of thousands of citizens was a "cruel act". Or does he also object to the rescue of several pension funds and insurance companies?

It is interesting that the gathering of "corporate players" did not reflect on the fact that there were other financial institutions which, despite facing the same challenges, did not disintegrate like those headed by the 'indigenous owners' who are now being hailed. I refer not only to externally owned institutions but moreso to local security brokerage houses and credit unions operating with far less fanfare, which were more astutely managed.

The least one would have expected would have been an attempt to identify differentiating factors between those institutions which failed and those which remained viable.

Unless the substance of the discussion at the Chairman's luncheon was missed by the reporter, that which was carried in the newspaper does little to recommend these deliberations as deserving of coverage. Of course, it helps if you own the medium. Then you simply invite some like-minded friends over for a meal, utter some unsubstantiated observations and have some 'unsuspecting' reporter convert this into "news".


Any comments Lazie?

[Lazie]

Omar is being less than honest. Didn't him same one said if he was to open a bank he would model it off Century National Bank? You are aware that him same one had a meeting with the head of CNB wanting to insert one of his friends in a top post of the bank and when he was rejected .... started withdrawing all the gov't monies from Century, which lead to a run on the bank?

You are one of them that will believe any bull that come from any of those jokers. I read and I listen. Try it sometime.

The fact is assets of Jamaican entrepreneurs were seized that sold to numerous friends and "comrades" at very low rate. Some sold at 30 cents on the $. Yuh have any idea how much the solution to a mess created by Omar cost the Jamaican taxpayers?

Better yuh gwaan search and post female pictures fi past yuh time.

[Jawge]

Lazie, I cited a source, could you
put up yours?

BTW Yuh nuh like di pitcha dem? Oh sorry boss, figet say yuh into di
more mature crowd (MRS. Robinson comes to mind). Nuh worry mi ah go fine suppen fi yuh.

[Karl]

Are they sure they want a real investigation?

In the past some claimed those who operated those financial instituions whould have had all assets seized, and the former owners, then managers and or otherwise operators of the financial institutions jailed or worse!

Wonder if this writer was genetically connected to any of the then rip-off artists...and or if this is to hopefully make good on the rip-off...i.e. reclaiming what was claimed were their ill-gotten gains?

[Exile]

A good response. FINSAC was hated because it did not support the status quo as it was then. All was not good it but it served a purpose. Sm of these pvt. institutions should have been made to go down....it all a part of the history of Jamaican business people in their overindulgence, top-heavy mgt and not enough management and re-investmenst....then everybody gte vex when the Trinis come and take over.....Benz, BMWs, SUV's - name it -for everyone who had a suit and tie.
I have friends who were on both sides of the coin - govt and FINSAC and pvt industry..its a tale to tell.

[Gamma]

that is part of the story.....it may yet be revealed that this provided a further gorging at the trough for the distribution of scarce benefits and spoils.

yes, there needed to be some house cleaning but in the end was it really? a very good friend of mine worked on the restructuring and while he was not able to relay specifics...it was not pretty.