CL Financial bailout – False Equivalence?

tony fraser article

In today’s world of ‘Alternative Facts’ we have to be alert to the special dangers posed by ‘False Equivalence’. False Equivalence arises when two arguments are presented as being of equal relevance, but in fact one is solidly fact-based and the other is mere speculation or invention. Those dangers are especially present in matters of public importance, as recent events have shown.

Tony Rakhal-Fraser’s Sunday Guardian column on 25 June 2017, titled Appointing ‘Fit and Proper’ People, made me wince, despite his usual high standard of writing. My reaction arose from what appeared to be an attempt by the Central Bank Governor to promote a new discussion on the fit and proper rules.

Central Bank Governor Dr Alvin Hilaire

Of course nothing is wrong with public officials making new proposals to deal with serious issues, no reasonable person could find fault with that. My issue is that the Governor, from the statements reported in that article, outlined the Central Bank’s intentions of creating fit and proper rules to govern our country’s financial institutions. The Governor also reportedly said he did not know whether the extent of the interlocking directorate in our country had increased or declined. Well I tell you.

The key phrase, at the start of the second paragraph was –

“…This is a responsibility that, among others, the bank (the Central Bank) plans to exercise by instituting international systems and criteria that will ensure that the financial institutions place on their boards people of known training, experience in financial and related matters, along with board members having solid integrity and independence of thought and action…” (emphases are mine)

My two most recent columns examined this issue and identified other prominent persons – beyond Duprey and Monteil – who also ought to be subject to adverse findings under those rules.

The entire thrust of the article was the exact opposite of what I believe to be the true position.

Directly contrary to the central assertion in that article, the Central Bank published its ‘Fit and Proper Guideline’ in May 2005 and those are applicable to the CL Financial fiasco. The entire article spoke to the need for rules to ensure conformity with prudent international standards of corporate governance for financial institutions. But that narrative is misdirected, to say the least, since the real story is that these rules have been in place in T&T since May 2005, but never implemented. The big question is ‘Why Not?

Our Central Bank has refused and/or failed to enforce its own ‘fit and proper guideline’ in relation to the largest and most serious financial collapse to hit our region. Thousands of savers and pensioners have been wiped-out across our Region and yet our Regulator has not followed its own rules. In my view, the “unresponsibility” of the Regulators is really what we should be sternly interrogating.

On 31 January 2017 I wrote an open letter to the Central Bank Governor, co-signed by Rishi Maharaj as CEO of Disclosure Today and David Walker. The very first point we raised in our joint letter to Governor Hilaire is the failure and/or refusal of the Central Bank to enforce its own fit and proper rules. On 2 April 2017, the Central Bank replied to our letter and flatly refused to answer any of our pertinent and focused questions on the grounds of that Institution’s statutory duty of confidentiality. Just imagine my surprise to read that the Governor answered questions on these matters. I tell you.

Much of my work on the scandalous CLF bailout has been focused on this blatant failure and/or refusal by the Central Bank to follow their own rules. After all, if no one is dis-qualified from leading our financial institutions after this immense CLF debacle, then what? As we used to say, back in the day – ‘If the Priest could play…‘. The moral authority of the Central Bank has surely been reduced by its inaction on the CLF matter.

Of course, Rackhal-Fraser’s column is well-respected, so the likely effect of that one would be to defuse/diffuse much of the work I have been doing on this critical area. I have no issue with strong criticism of my positions, so this is not an attempt to portray my work as somehow being exempt from that.

The Inter-locking Directorates

The Interlocking Directorate is very much alive and well, it is an integral part of how big business is really conducted, so Dr Hilaire’s statement that he does not know about its extent is startling.

“Governor of the Central Bank, Dr Alvin Hilaire ,a seemingly mild-mannered man, and a high-quality technocrat not given to excursions into the political economy, responded to my question as to whether or not the interlocking directorate pattern had changed; he said he did not know, I assume the research work has not been done.” (Tony Rakhal-Fraser, 2017)

One can make a critical observation about the Central Bank’s approach to interlocking directorships. Recall that such interlocking directorships were stated by the very Central Bank (through then Governor Ewart Williams) as one of the principal reasons for the CLICO/CLF failure – the rubric being ‘excessive related-party transactions’. The Bank should be required to explain, in the circumstances, why it continued and expanded, that policy upon taking control of CLICO.

We have seen Directors sitting on CLF, Angostura, CLICO and MHTL boards simultaneously despite the Central Bank’s stated concerns. It was not through a lack of power or weakness of the legal or regulatory regime. The Bank chose to perpetuate interlocking directorships under its control. They can hardly complain. We need to consider removing the Central Bank from its role as the driver of any exercise to improve regulation of the financial services sector. They cannot be expected to properly analyze or criticize their failings.

It seems to me that we would be better served if the Central Bank were removed from non Central Banking roles totally, except where satisfactory arguments can be made in their favour. But that is an argument for a later time.


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