The Sacred Cow


It has been virtually six months since my last commentary on the CL Financial fiasco, my silence was due to other pressing duties, but Terrence Farrell’s No Sacred Cows published in the Trinidad Express on 16 July demands a proper reply.  For those of you who have not read it, this is a good time to take the chance to do so, by clicking on the link above.

The fact that there are potent questions of whether the best process was followed in making the critical appointment of the new Central Bank Governor, Jwala Rambarran, has been raised by several commentators, most notably in last week’s BG View Is Jwala’s appointment good or bad for T&T?  Those questions revolve around the scope of discretion which our governments are allowed in these matters and the extent to which the public interest can be sacrificed in favour of what can appear to be political favouritism.  Matters of public importance must always be open to robust scrutiny in the press.

My own view is that there is a critical series of Central Bank issues which are in danger of being obscured by the line Farrell has taken in this debate.

Email exchange with Dr. Terrence Farrell

On Tue, Jul 24, 2012, at 8:53 AMTerrence Farrell wrote:

Dear Mr Raymond,

I took note of your article in today’s Express. I do not respond in public to comments on articles I write and I will continue that policy in respect of your comments. I merely attach for your perusal the Adlith Brown Memorial Lecture I delivered at the Central Bank in November 2010, and in particular the sections dealing with CLICO and CL Financial. That lecture was delivered before a full auditorium including Governor WIlliams and his top staff. Suffice it to say, it did not endear me to the Bank!! My name did not appear on the Bank’s invitation list for about a year afterward.

You do not know me, but I am not one who ‘puts water in my mouth’. I call a spade a spade and a shovel a shovel. Those who suggest that I leave my critiques only for this government have not read or have forgotten my article in the T&T Review on ‘Our Irresponsible Elite’, my articles in the Express on the Integrity in Public Life Act and sundry others. Re the Central Bank and CLICO, I did not have all the information then since the inquiry had not yet started and in fact up to now, the Governor and the Bank have not yet testified to the Commission. They should do so in September. But I felt I knew enough to suggest that the Bank had failed in respect of CLICO and CL Financial.

The assessment of Williams’ tenure will come (and I may well do it myself) and in that assessment the CLICO/CL FInancial debacle will not have done the Bank proud. That though is no reason to now appoint a new governor of questionable credentials and no argument to defend the ongoing assault on our institutions.

Stay well

Terrence Farrell

On Tue, Jul 24, 2012 at 9:27 AMAfra Raymond wrote:

Dear Dr. Farrell,

Thank you for your swift, pointed response to my article in today’s Express.

I am familiar with the Adlith Brown Memorial lecture you delivered in November 2010 and it is my view that, given what was known at that time, your critique of the Central Bank was muted – space limits did not allow me to delve into all those areas, but the evidence I cited in today’s article was all available by mid-2010. You did say that you may make a full critique of the CBTT’s role in this fiasco and that would be interesting to consider. I am not surprised that you were off the CBTT ‘guest list’ for a spell, which that tells a sad story of hubris and such.

With respect to the new Governor and for what it is worth, I am all in favor of us upgrading these systems by which key appointments are made, as per the second para of my article. I will be sure to hold him to the same high standard to which our leaders should set.

Thanks for taking the time to respond.

Afra Raymond

Sent from my iPad

From: Afra Raymond
Date: Wed, 25 Jul 2012 12:18:41 -0400
To: Terrence Farrell
Subject: Re: Your Article in Today’s Express

Hello Dr. Farrell,

I am soon going to publish onto my blog an expanded version of the Express article and would like to include our email exchange, along with your 2010 Adlith Brown Memorial lecture – I am seeking your agreement to that.

More than just this immediate request, the fact is that the decision of our educated classes to opt-out of the public debate has led us to a time which is much poorer, in all the senses of that phrase…The voices we hear are largely party-political roars which are barely-sensible, the reluctance of our thinking-class to engage in a critical discourse is really the source of the brandy being served in ever-stingier portions, with some people choosing to express it as a declining (I should have written ‘increasing‘) proportion of water…As always, these issues have more than one cause and I am inviting you to reconsider your stance of not responding to comments on articles you write…let me just say that in other places it would be a matter of professional pride and minimum editorial standards that such a response be forthcoming…Of course, we might agree that not everything foreign is to be imitated, but surely such habits which cultivate progressive discourse are to be emulated….

I await your reply…

Thank you

Afra Raymond

On Wed, Jul 25, 2012 at 2:49 PMTerrence Farrell wrote:
Apologies for the tardy response. I am out of the country and did not have Internet access for a while.

I have no problem with you publishing the exchange on your blog. The Lecture should be on the CCMS website.

Terrence Farrell
Sent from my BlackBerry® device from…

From: Afra Raymond
Date: Wed, Jul 25, 2012 at 2:00 PM
Subject: Re: Your Article in Today’s Express
To: Terrence Farrell

Much appreciated, I do hope you can find time to ‘tune-in’ to our discourse…

Dr. Terrence Farrell

For those who do not know, Dr. Terrence Farrell is a former national scholar and a highly-educated member of the regional financial sector.  Among his several top positions, he has been a Deputy Governor of the Central Bank of T&T.  In addition, he has also held top-level private sector appointments in the financial industry.

In writing on the CL Financial fiasco, I have adopted the phrase ‘Code of Silence’ to describe the unspoken agreement that the entire mess is to be mentioned as little as possible.  That silence is especially pronounced amongst those best equipped to analyse the issues, so the intention of the Code would appear to be to preserve the existing order of things.

Silence is the Enemy of Progress, so this crisis has exposed an abysmal showing from our most educated brethren, miserable really.  Nothing from the Accountants, Lawyers, Bankers, Insurance or other professional and industry associations.  UWI is only now becoming involved in the necessary discourse.

So, why am I taking precious time to respond to Terrance Farrell?  A few examples to show my concerns –

Firstly, in the 30th January 2009 Central Bank Press Release – by then Governor Ewart Williams – on the first page we are told:

…In our regular monitoring of CIB, and of Clico since 2004 (when insurance supervision was transferred from the Ministry of Finance), the Central Bank has consistently focused on these deficiencies but have been stymied by the inevitable challenge of change and by inadequacies in the legislative framework which do not give the Bank the authority to demand these changes….

So we need to pause here and look closely at the three facts before us –

  1. Ewart Williams was saying that since 2004 serious problems were identified in the CL Financial group and that he did not have the proper tools to deal with these.
  2. Within a week of that fateful bailout date, our Parliament had debated the Central Bank (Amendment) Bill and the Insurance (Amendment) Bill, both being assented to on Friday 6 February 2009.
  3. Farrell’s opinion is that the Governor must be “…sufficiently strong and respected to keep the financial system stable…”.  In his appreciation of Ewart Williams, he clearly conferred that level of performance onto the outgoing Governor.

The burning question is ‘Where were these Draft Bills when the CL Financial crisis was gathering force since 2004?‘  Had they been prepared and never been put to the political administration or had they been submitted and rejected by the politicians?  Or are we to believe that both Bills were swiftly drafted?

Of course all three facts cannot be correct and I believe that the third fact is the false one.  Farrell’s inference that Williams had the necessary stature to be an effective Governor is obviously disproven by the CL Financial fiasco.

Please remember that this is the same Governor who had two investments with that ‘deficient’ group.  How can one possibly reconcile a top official of acumen and strength with that investment?

But there is more.  According to para 23 of the 16 April 2010 affidavit by the Inspector of Financial Institutions:

…With respect to the Creditors of the Petitioner, the Petitioner has met the statutory obligations for the Board of Inland Revenue (except for Corporation Tax Returns for 2007, 2008 and 2009 which are being prepared and remain outstanding)…

I am reliably advised that means that CIB did not pay Corporation Tax for those years.  Yet CIB was able to retain its banking licence thoroughout that period, and, upon collapsing, obtain an immediate bailout on most generous terms.

Farrell also tells us that the Central Bank needs to be “…a decisive actor when action is required…”.  Obviously, that standard did not obtain over the last decade.

The entire scenario reeks of corruption in the highest offices in the Republic and on the largest possible scale.  We are witness to an epic swindle being carried out on our Treasury and in broad daylight.

There is plenty more evidence to discuss on this issue, including the seminal 15 July 1996 Republic Bank Letter to Shareholders  which warned of the perils of the then ongoing aggressive takeover by CLICO.

At the critical turns in this crisis, we have been without Farrell’s views in terms of the rigorous scrutiny from which we ought to have been benefitting.

Farrell also adds, in relation to Williams’ impact at the Central Bank, that it was “…repaired and strengthened by Ewart Williams over the last ten years…”.  That seems to be a straight case of Nearer to church, further from God’.  Given Farrell’s reading of events, it seems that Ewart Williams is being treated like a ‘Sacred Cow’.

That is the root of my concern here, given Farrell’s headline ‘No Sacred Cows’, which is usually used to convey that someone is a fearless critic.

I continue to be outraged that the outgoing Governor appears to have retired with full benefits after having presided over a disaster on this scale.

The quest for better governance is not just a matter of criticising the administration, the educated commentators also have to hold to some consistent standard of rigour.  Given his background, I consider Farrell’s contribution on this fiasco to be lacking that standard.

It is not too late, because I am sure that the Colman Commission would benefit from Farrell’s input in relation to the strategic view of the roots of the crisis and the sort of interventions which could have avoided this sorry situation.

For my own part, I will be looking to see how Rambarran performs on the burning issue of properly applying the ‘Fit & Proper regulations’ to the Financial Sector.  Given the poor record of the outgoing Governor on this count, I am going to be calling for the new broom to make a clean sweep.


7 thoughts on “The Sacred Cow

  1. Clico/ CIB was allowed to fester for years by Mr. Williams. Why?. Was the reason the same as the one for giving Mr. Monteil’s lawyer the responsibility to draw up the M.O.U. with the Government. You crash a financial institution and you get to dictate the terms of the bailout?.I hope the Commission of Enquiry delves into the cushy relationship between the CBTT regulators and Clico/CIB before during and after the intervention. Why was no assessment of the assets and liabilities being taken on by the Government done by the CBTT. Can Mr. Williams tell the nation who said to his staff ” I do not want to hear the word intervention in an election year”. Could Mr. Williams also explain what Euric Bob meant when he said ” Geeta never left…” G.O.N. DAVIES

    1. This comment received from the SANTA ROSA TEAM, which is a group seeking the interest of CLICO policyholders –

      Fri, Jul 27, 2012 at 8:06 PM

      Good Day Afra,

      I’ve been enjoying the dialogue between Terrence Farrell and yourself. I was pleased that he had expressed his very strong views on the Governor’s appointment so succinctly. He is a commentator who I hold in the highest regard.

      While I agreed with almost everything he wrote, I struggled to comprehend the fulsome praise for Ewart Williams, given his clear failings in the very expensive CLICO debacle. How is this contradiction to be explained?

      The answer, it seems to me, lies in the two distinct roles that the Governor of our Central Bank is asked to perform. Firstly, he is a classical Central Bank Governor dealing with monetary policy etc. But secondly, he is the regulator of several important financial institutions.

      His failings are in this second role. I leave judgment on his performance of the first role to those more qualified than myself. My confidence in the expertise of TF in that area is certainly sufficient to accept that he has performed creditably.

      Equally, it should be obvious to all and sundry that he has failed spectacularly in his regulatory role. It pains me that we haven’t had the urgent review of this failing that is needed to prevent a repeat. More than three years after the collapse, we have had no admission of regulatory failures, just excuses. Without an understanding of how we went wrong, what hope is there of corrective action?

      You will also know Afra, that I consider the failings of the Regulator after the MOU to be more serious and more costly than before the MOU. It is illogical to expect one institution to both run a business and be its regulator. Many of the things being done by CLICO would fall foul of a half-decent regulator, but who is there to protect us?

      The lack of input by our professionals and institutions is shameful. We need more dialogue and more transparency from the authorities. I thank TF for joining the discussion and helping to break what you so correctly describe as a Code of Silence.

      I look forward to even more insightful discourse in the near future.


    2. Also, received from Godfrey Martin…

      From: Godfrey J. Martin
      Sent: 25 July 2012 10:46
      To: ‘Afra Raymond’
      Subject: Your recent article

      Hi Afra,

      I read Terrence Farrell’s article on the appointment of Jwala and it makes impelling reading. Notwithstanding the issues that you have raised about Ewart Williams’ stewardship, the central thesis of the article is germane. We have been seeing an assault on all the key institutions and there is no pretence about seeking to make use of the most competent. It appears that ethnic balancing, loyalty and race may be decisive factors here. This is not to say that the PNM did not engage in some of the same behaviour. We are a small society and our talented resources in key areas are limited. When governments continue to simply move people because they belong or appear to be associated with the wrong party then we are on a slippery slope. As one colleague points out, when you assault critical institutions, the injury to the fabric of the society runs deep.

      One of the important lessons from the advanced economies is the role of institutional building. This is what is going to help us to survive and prosper in the long run. This helps to build successors. What I have seen with some of the appointments is disheartening. Look for instance, the appointments at UTT for example and the attempts to clearly damage this institution. They have fired some of the best talent at UTT and effectively appear to be dismantling some key programmes. There is no serious national plan or programme and one commentator referred to the goings on as “We time come”.

      I think that Terrence was clearly illuminating the dangers and the consistent pattern in their behaviour and we have to recognise that. I am very glad that he came out and spoke openly and I think that more of our professionals and economists need to do more of this. The situation can deteriorate into serious conflicts within the society and it is incumbent on “the validating elites” to also speak up.

      I recognise that many of our professionals have been silent on many of the critical issues of the day. These include the absence of any serious discussion from the university and from any of the professional associations. None of the lawyers came out to comment on the behaviour of Gita in the CL affair. None of the accountants came out to deal with the conduct of one of their lot in the handling of the audit of the CL accounts. You have pointed out that there has been a “code of silence”.

      I am very grateful that you were one of the few that have led the debate on the behaviour of key stakeholders in this CLICO/CL fiasco. It is unfortunate that many did not take up the mantle to engage in serious dialogue here. We really need to learn the lessons from this episode and in my view several people should have been arrested and brought to book a long time ago. This may now never occur.

      We have to re-engineer the financial infrastructure in T&T and in the Caribbean. We cannot import the models in use in the Western capitals. Those of us who work in some of these centres understand the failures and the mistakes. We have to revisit the fundamentals of what we want to do in our societies and our mode of development. I fully endorse that transparency will be critical and is one of the important ingredients in reducing corruption, malfeasance and poor corporate governance. I remember Lloyd Best saying that you cannot have a “19th century economy and economic relations and want to operate as if you are running a “21st century economy”. I think that we have to go back to some fundamentals. One of the things that we will have to change is some of our cultural practices that are inimical to our own development.

      Anyhow, I thought that your article did not do justice to Terry’s intent. You were letting the Prime Minister and her government off the hook. The performance of Ewart Williams and many others will come under scrutiny soon but I would suggest that that is not the critical issue here and should not divert our attention from the central thesis.

      Furthermore, do not only blame the regulators. They may be guilty of omission, innocence, allowing political interference to dictate matters among other things, but they were not the owners and directors who engage in corrupt and illegal behaviour and broke the law. These Directors lied to their shareholders and their customers and the Government and they lived way above their means. Should Duprey and Harry and Monteil be living off the fat that they captured?

      Let the debate continue! Keep on writing.



      Godfrey J. Martin, PhD

  2. “UWI is only now becoming involved in the necessary discourse.”

    Wasn’t the UWI the recipient of funds from CLICO? If I am correct, then you can understand their tardiness or reluctance to become involved in any meaningful discourse. Ditto for political parties and the Boards of Directors of CLICO companies, all handsomely rewarded. So you can understand the “Code of Silence”.

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