The previous article delved into the meaning of counterfactual, that being a ‘baseless claim, hypothesis or belief’. I started my Season of Reflection by confronting the false narratives of certain thought leaders who are seemingly oblivious to the irrefutable and considerable achievements of the CL Financial group.
The size and scope of the CLF group make it impossible to really discuss business, investment, finance or real estate at a national or regional level without that group being a significant element in that discussion. To discuss those important topics at a national or regional level and be silent on CLICO and the CLF group is to literally ignore the Elephant in the Room. You see?
Considering that the CLF group was established, managed and owned by an African-descended group, it is mind-boggling to hear these repeated claims of Black non-achievement from people who ought to know better.
About a year ago, one of these eminent people published an article making those points about the decline of Black business in T&T and so on. When I wrote to remind him of the existence of CLICO and CLF as a fact, irrespective of what one thought of that company, his response proposed that there were many truths and so on. Postmodernism is a broad field of philosophy, but even that one was way beyond the boundary.
This week, I will examine the second counterfactual in this series – that is the ‘baseless claim, hypothesis or belief‘ that East Indian people are especially corrupt, especially those who are Hindus. We have all heard it, the love of money and the love of land and so on and so forth. Up to a few nights ago my ears twitched as a well-regarded Minister in the current administration confided those views to me, I am not sure if he recognised the sheer disbelief on my features, but he was called away before my response could be delivered.
The case I am making in this article is that the CL Financial bailout is the single largest and most corrupt act in our country’s history, if not the entire region’s history.
The CLF bailout is the hugest loan ever of perpetually-scarce Public Money to the wealthiest people in the Caribbean on the most generous terms. Sweetheart Deal does not even begin to describe this level of access to our Treasury, our Cabinet and our very Future.
Consider these points about the CLF bailout –
No limit or ceiling was ever set, so the State effectively agreed to write a blank cheque to the CLF shareholders. As we are now told, the total cost is in excess of $25 Billion. By way of comparison, the Wall Street bailout in 2008 was estimated in December 2010 by the USA Treasury Secretary, Timothy Geithner, to cost about 1% of GDP. The CLF bailout cost more than 10% of our GDP, according to the Ministry of Finance in the 2011 Budget Statement.
No repayment period
Neither of the two agreements contain any provisions to cover repayment period. In the event, the shareholders’ agreement was extended seventeen times.
Neither agreement contains any provisions as to the interest to be paid on this huge loan of Public Money. As it unfolded the first $4.9 Billion, which was paid to CLICO was done via issuing a 4.5% preference share. On the basis of a weighted average cost of capital analysis, the interest payable for that loan of over $25 Billion in Public Money is less than 1%. Yes, that is the real interest rate. In comparison, companies bailed-out on Wall Street paid over three times the prevailing base-rate to get Federal funds.
One of the questions I was examining in getting the details of this bailout is the cost of interest and financing to the State. You see, the State had to borrow heavily to lend the CLF shareholders. That sum is $4,830,506,986.33, as at 30th June 2018. By my analysis, the monthly cost of interest and financing escalated from $30,640,697.82 per month between 30 January 2009 and 30 April 2016 to $85,895,308.99 per month between 30 April 2016 to 30 June 2018. You see?
On this single aspect of interest, the loss of Public Money has been huge.
Rationale for the bailout was what, really?
The public was sold the CLF bailout by appeals to the plight of pensioners and the stability of the economy and so on.
The first estimates of cost were about $5.0 Billion, but when the PP won the May 2010 election it was reported that some $7.3 Billion had been spent. The proposal made by then Finance Minister Winston Dookeran in his inaugural budget was to offer 20-year bonds to ease the burden on the Treasury. The protests and rapid organisation which followed that announcement were epic, with various Policyholders and Depositors groups being formed. When then PM, Kamla Persad-Bissessar, addressed the Parliament on 1 October 2010, her question was pregnant –
“…Because if it is today after the $7.3 Billion, all these EFPA people, the policy group and so on, they are out there, where is their money? Where is their money? Did you have a priority listing of who should be paid? Why did you go—and you are now crying crocodile tears about trade unions, credit unions, the poor man and the small man—why did you not pay them first? Why did you not pay them first? Where did that $7 Billion go?…”
In closing, ask yourself who were the Chiefs in negotiating and agreeing to this epic toxic deal? How many of them were East Indian, or Hindu, for that matter? It’s a straight case of ‘Nearer to Church, further from God‘, as the old people used to say.