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'Many lives were destroyed' - Ex-banker
— says '90s high interest rate policy killed entrepreneurial spirit
BY PATRICK FOSTER Observer writer fosterp@jamaicaobserver.com
Friday, March 25, 2011
ELON Beckford, former chairman of the folded Horizon Merchant Bank, yesterday declared that the high interest rate policy pursued by the Government of the 1990s has destroyed the entrepreneurial spirit of Jamaicans.
"It will take generations for us to fully understand what the destruction in the 90s of several enterprises built by the blood, sweat and tears of hard-working, honest, trustworthy and credible Jamaicans has done to the psyche of our nation," Beckford said. "Lives were destroyed — many lives."
Former chairman of Horizon Merchant Bank, Elon Beckford, testifying at the Finsac Commission of Enquiry at the Jamaica Pegasus Hotel yesterday. (Photo: Michael Gordon)
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The former banker was giving testimony at the ongoing enquiry into the financial sector meltdown of the 1990s that led to the establishment of the Financial Sector Adjustment Company (Finsac). The enquiry is being held at the Jamaica Pegasus Hotel in Kingston.
"We are producing a generation of professionals who are frighteningly risk-averse," Beckford told the commission of enquiry. "The period weakened our entrepreneurial spirit, energy and passion".
Beckford yesterday charged that the high interest rate policy, introduced by then Finance Minister Dr Omar Davies, was kept in place for too long.
However, he admitted that he and many other Jamaicans understood the rationale for the policy shift when interest rates were raised to support the exchange rate and "reduce overheating in the economy".
But Beckford, who also served as managing director of Jamaica Citizens Bank, asserted that this shock treatment by Government should have been kept for only a short period of time.
"Maybe a few months," he said. "But lo and behold it was not to be; it went for years and years resulting in safe-investment, fixed-deposits interest rates increasing in excess of 50 per cent and the BOJ's (Bank of Jamaica's) overdraft lending rate to prime customers exceeding 120 per cent.
"No honest and objective person can [now] argue against the view that the high interest rates were sustained for far too long a period," Beckford testified.
"As a result, many institutions, organisations, companies individuals and lives were destroyed," he told an audience far bigger than most other days of the sparsely attended hearings.
"It was painful to journey with hard-working, honest, creditable, trustworthy and up to then, successful entrepreneurs who lost the will to fight," Beckford commented.
Beckford's Horizon Group of Companies, which included a building society and the merchant bank, was taken over by Finsac in the late 1990s.
Yesterday, he told the commission that when the BOJ made its first intervention in a major financial institution in 1995, most indigenous financial institutions started experiencing increases in the levels of withdrawals of deposits.
"As the rumours became stronger in late 1997 that further BOJ interventions were likely, our institution started experiencing higher than normal levels of withdrawals," Beckford said.
According to Beckford, arguments that local financial institutions were badly managed leading to the crisis were unfounded. He instead charged that if consultations were made with members of the local financial institutions the outcome would have been different.
In his witness statement yesterday, Beckford implored the commissioners to objectively answer the questions, 'why did good loans turn bad? and why did good investments fail?'.
"Finsac is now history," said Beckford. "We need to focus on how we rebuild and rescue lives, [and] rekindle the spirit of entrepreneurship that is so urgently needed to move this country to another level.
"If this is achieved, we may live to experience our nation getting closer to the realisation of our ultimate national economic social goal -- a better quality of life for all."
Read more: http://www.jamaicaobserver.com/news/...#ixzz1Hbmg2pKw
— says '90s high interest rate policy killed entrepreneurial spirit
BY PATRICK FOSTER Observer writer fosterp@jamaicaobserver.com
Friday, March 25, 2011
ELON Beckford, former chairman of the folded Horizon Merchant Bank, yesterday declared that the high interest rate policy pursued by the Government of the 1990s has destroyed the entrepreneurial spirit of Jamaicans.
"It will take generations for us to fully understand what the destruction in the 90s of several enterprises built by the blood, sweat and tears of hard-working, honest, trustworthy and credible Jamaicans has done to the psyche of our nation," Beckford said. "Lives were destroyed — many lives."
Former chairman of Horizon Merchant Bank, Elon Beckford, testifying at the Finsac Commission of Enquiry at the Jamaica Pegasus Hotel yesterday. (Photo: Michael Gordon)
1/1
The former banker was giving testimony at the ongoing enquiry into the financial sector meltdown of the 1990s that led to the establishment of the Financial Sector Adjustment Company (Finsac). The enquiry is being held at the Jamaica Pegasus Hotel in Kingston.
"We are producing a generation of professionals who are frighteningly risk-averse," Beckford told the commission of enquiry. "The period weakened our entrepreneurial spirit, energy and passion".
Beckford yesterday charged that the high interest rate policy, introduced by then Finance Minister Dr Omar Davies, was kept in place for too long.
However, he admitted that he and many other Jamaicans understood the rationale for the policy shift when interest rates were raised to support the exchange rate and "reduce overheating in the economy".
But Beckford, who also served as managing director of Jamaica Citizens Bank, asserted that this shock treatment by Government should have been kept for only a short period of time.
"Maybe a few months," he said. "But lo and behold it was not to be; it went for years and years resulting in safe-investment, fixed-deposits interest rates increasing in excess of 50 per cent and the BOJ's (Bank of Jamaica's) overdraft lending rate to prime customers exceeding 120 per cent.
"No honest and objective person can [now] argue against the view that the high interest rates were sustained for far too long a period," Beckford testified.
"As a result, many institutions, organisations, companies individuals and lives were destroyed," he told an audience far bigger than most other days of the sparsely attended hearings.
"It was painful to journey with hard-working, honest, creditable, trustworthy and up to then, successful entrepreneurs who lost the will to fight," Beckford commented.
Beckford's Horizon Group of Companies, which included a building society and the merchant bank, was taken over by Finsac in the late 1990s.
Yesterday, he told the commission that when the BOJ made its first intervention in a major financial institution in 1995, most indigenous financial institutions started experiencing increases in the levels of withdrawals of deposits.
"As the rumours became stronger in late 1997 that further BOJ interventions were likely, our institution started experiencing higher than normal levels of withdrawals," Beckford said.
According to Beckford, arguments that local financial institutions were badly managed leading to the crisis were unfounded. He instead charged that if consultations were made with members of the local financial institutions the outcome would have been different.
In his witness statement yesterday, Beckford implored the commissioners to objectively answer the questions, 'why did good loans turn bad? and why did good investments fail?'.
"Finsac is now history," said Beckford. "We need to focus on how we rebuild and rescue lives, [and] rekindle the spirit of entrepreneurship that is so urgently needed to move this country to another level.
"If this is achieved, we may live to experience our nation getting closer to the realisation of our ultimate national economic social goal -- a better quality of life for all."
Read more: http://www.jamaicaobserver.com/news/...#ixzz1Hbmg2pKw
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