One Year After The CL Bailout

By AFRA RAYMOND

As we enter the wrong side of the boom, it is a little like travelling to the dark side of the moon. Familiar navigation points fade from view and we are forced to use bearings that are new.
The quality of our political rulers has now joined in unholy matrimony with the sheer recklessness of their anointed deal-makers to put our economy into an entirely new and perilous place.
At these moments of turmoil and impending crisis, it is always interesting to observe closely what key people are not saying. Their pauses and silences can be very instructive.
The seriousness of the evolving situation now requires that we discipline the national appetite for melodrama, bacchanal and comesse and face up to the challenges ahead.. 
The main case involves the CL Financial bailout, which was announced a little over a year ago when the first Memorandum of Understanding (MoU) was signed on 30th January 2009.  Given the subsequent revelations as to the withdrawals of funds by important people and the shareholdings of the Minister of Finance in CLF, it is impossible to say exactly when the actual bailout began.  All we can say for sure is that we, the public, were told of a bailout on 30th January 2009.
There has been a cascade of bewildering and disturbing events—those are set out at my blog, www.afraraymond.com—and we are now at a position of deep confusion.  The resignations of three top-level executives of the group and the subsequent bald press releases are most disturbing.  They speak of disputes and jostling taking place in terms of this huge group we are now committed to rescue. For the record, those resignations were: 

12th January – Steve Bideshi, CLF Group CEO, effective 31st January
19th January – Michael Carballo, CLF Group Finance Director, also effective 31st January
3rd February – Claude Musaib-Ali, CEO of CLICO, effective 14th February

The growing sound we are hearing is that the Bob Lindquist forensic report into the dealings of CLICO etc. was due for completion at the end of February. While many anxiously await its release (or leak) for evidence of  possible wrong-doing, the more responsible position would be for the citizenry to press for publication of the Audited Accounts of the CL Financial group as at 31st December 2008. Those accounts should be signed-off by the same professional firm which had done the 2007 audit, PriceWaterhouseCoopers. 
CL’s audited accounts constitute the most important single document, since it will fix an asset value at the end of 2008. That is—12 months after the last audited accounts, which showed a total asset value of $100.666Bn. (http://www.clico.com/pdf/AR07/CL%20Financial%20Annual%20Report%202009.pdf
55 days after Michael Carballo, the then-Group Finance Director, gave statements to the Business Guardian that the group had assets of $100Bn and could weather any storm. (http://legacy.guardian.co.tt/archives/2008-11-07/bussguardian1.html.)
13 days before Lawrence Duprey, the group’s Executive Chairman, wrote to the Governor of the Central Bank to request urgent financial assistance.  That letter was accompanied by a table setting out the group’s asset values – totaling $23.9Bn – and was read into the Hansard by the Minister of Finance on 4th February.
(http://www.ttparliament.org/hansards/hh20090204.pdf at page 628.)
16 days before a dividend of $3.00 per share was paid to the CL Financial shareholders.
30 days before the historic press conference to announce the bailout, at which it was repeatedly stated that the CL Financial group had $100Bn in assets.

Despite its obvious importance in the mystery of the missing money, there is complete silence regarding the progress of the 2008 audit.  It is almost a full year overdue and the only accounts being given to taxpayers are the forensic and confidential ones. The public must insist on this information as a non-negotiable condition of the bailout with taxpayer funds.
Let us mark this moment well, because if the 2008 audited accounts are allowed to fade into obscurity, please worse should be expected with the 2009 accounts.  
There are also other facts, now in the record, which cry out for early attention, without need for special reports or melodrama.
Was the payment of a dividend to CL Financial shareholders, after writing to seek urgent financial assistance, an illegal act by its Board of Directors?  If yes, then what actions are to be taken to both a) recover those sums of money and b) punish the Directors of CL Financial for such action?  If no, then we need to hear the argument to support that conclusion.   As incredible as it might seem, is it possible that the Board of CL Financial did not know that Duprey’s letter had been sent to the Central Bank?

The State is in control of the CL Financial group and ought to be able to present a picture as to who broke their deposits in the last 90 days.  That is guaranteed to be an interesting read and no need for any forensic report there, either.  Maybe more importantly: who borrowed from the floundering group in its last days and on what terms?  
The Governor of the Central Bank has, on several occasions, publicly and clearly stated his deep concern at the actions of the CL Financial chiefs. Two examples:
At a press conference on 22nd April—”If you ask me whether CL Financial did everything that was honourable and beyond reproach, the answer is no! The answer is no!” (http://guardian.co.tt/business/business/2009/04/24/cl-financial-bailout-cost-5-billion-over-two-years.)
Speaking on 10th November 2009, at a conference on The Global Financial Crisis - “I prefer, however, to focus on the governance issues because, without doubt, the failure of Clico was a failure of Governance … it was absence of controls from the Board of Directors.” ( http://www.centralbank.org.tt/news/speeches/2009/sp091110.pdf.)

The Central Bank issued updated regulations as to the qualities of person considered to be fit and proper to serve as Directors or Senior Officials of Financial companies – that is at http://www.central-bank.org.tt/news/releases/2005/mr050510.pdf. At 3.1, it states—
“In accordance with governing legislation a person is considered to be fit and proper if the person essentially is of good character, competent, honest, financially sound, reputable, reliable and discharges and is likely to discharge his/her responsibilities fairly.” The Governor of the Central bank has spoken, in unmistakable terms, about the conduct of CL Financial officials. Does the evidence in his possession rise to a level that contravenes “fit and proper” regulations? And if it does, what will the Governor do about it?
We do not need to wait for any forensic report to be leaked or any opinion from expensive foreign lawyers.  Sweet as the melodrama can be, it is a highly dangerous distraction for all of us.

—www.afraraymond.com  afra@tstt.net.tt

By REAY GREAVES

TRINIDAD & TOBAGO

$2 million in the wind. —Photo: JERMAINE CRUICKSHANK

• Climate change was the dominant theme of the 54th meeting of the Commonwealth Heads of Government in Port of Spain  after French President Nicolas Sarkozy dropped in for some last-minute talks ahead of this month’s summit in Copenhagen. Also, Rwanda was voted in as  the 54th member of the Commonwealth.

• One Caribbean Media Ltd posted a profit before tax of $58.7 million for the nine-month period ended September 30, 2009. This was 28 per cent lower than the $82.1 million recorded for the same period for 2008.

•The Unit Trust Corporation announced the appointment of Eutrice Carrington  to the position of CEO, Financial Services. Ms Carrington previously held the position of UTC vice-president, Asset Management.

•Carib Cement posted a loss of $431 million during the three months ended September 30, 2009.

• Minister of Energy & Energy Industries, Conrad Enill granted consent to state-owned Petrotrin to enter into a ten-year sub-licence agreement with contractors.  Fram Exploration was one of five contractors to benefit from the agreement.

•Minister of Sport Gary Hunt and chairman of Sport Company of Trinidad and Tobago (Sport) Kenneth Charles confirmed that the total price of the 60 feet by 36 feet national flag fluttering at the Hasely Crawford Stadium cost $2 million.

•RBTT Financial group announced that Canadian banking executive Jim Westlake, would take over as new chairman.

•ANSA Merchant Bank became the first local institution to manage a euro-denominated mutual fund to be offered in Trinidad and Tobago.

•Losses from discontinued operations pulled down Guardian Holdings Ltd’s overall performance to a net loss of $655 for the year ended September 30, 2009.

•Scotiabank posted income after taxes of $455.1 million for its year ended October 31,
2009. This was an increase of 5.4 per cent over the comparative period last year.

•Republic Bank chairman Ronald Harford announced the appointment of William H
Pierpont Scott to the bank’s board of directors.
•The Central Bank issued a special $100 note to commemorate the Commonwealth Heads of Government Meeting (CHOGM).

•William H Scott, Arthur Lok Jack and Kenneth Gordon joined eight other local
pioneers in the Chamber of Industry and Commerce Business Hall of Fame.

•Rating agency CariCRIS lowered its rating on the US$3 million issue of the Barbados government to CariAA (Foreign Currency Rating) and Cari AA+ (Local Currency Rating) on its regional scale from CariAA+ (Foreign Currency Rating) and CarAAA (Local Currency Rating).

•First Citizens Bank (FCB) won the “Best Bank” award for a second time.

JAMAICA

•Jamaica welcomed back British Airways to Montego Bay. The airline had stopped flying to Montego Bay seven years ago.

•Jamaica’s central bank governor, Derick Latibeaudiere -who was leading negotiations with the IMF for a $1.2 billion stand-by loan, resigned. His successor was named as Byron Wynter, a former deputy governor.

•Standard & Poor’s downgraded Jamaica one notch, to “CCC” and kept the negative outlook on the island’s credit following the resignation of central bank governor, Derick Latibeaudiere.

•Ratings agency Moody’s Investors downgraded Jamaica’s local and foreign currency bonds from B2 to Caa1 with a negative outlook. Later in the month, Fitch Ratings became the third agency to downgrade Jamaica’s credit ratings for the month of November.

•For the fourth consecutive year, Jamaica was named the World’s Leading Cruise Destination in the World Travel Awards.

•Jamaica’s National Water Commission (NWC) floated a seven-year bond on the domestic market, successfully raising J$900 million one-week private placement.

•Jamaica Money Market Brokers (JMMB) acquired an 80 per cent stake in Corporacion de Credito America S.A. (CCA), a Dominican Republic-based savings and loans institution.

•The Statistical Institute of Jamaica (STATIN) reported 9.1 percent fall in inflation for the period January - October 2009 when compared to the same period last year.
CUBA

•For the sixth year in a row, visitor arrivals in Cuba crossed the two million threshold, this time two weeks before the date it was reached in 2008.

•Canada’s WestJet airline started operations to Cuba.

•Russian state oil company Zarubezhneft signed contracts with Cuba to search for oil along Cuba’s northern coast.

HAITI

•Prime Minister Michele Pierre-Louis was removed by the Senate.

VENEZUELA

•Venezuela’s PDVSA restarted its 180,000-barrel-per-day Petropiar crude upgrader, a
joint venture with Chevron.

•Venezuela’s state-owned oil giant PDVSA agreed to buy nearly half of the government-owned Dominican Oil Refinery for US$131.5 million.

•Venezuela permanently closed four banks-the Canarias and ProVivienda banks, saying the authorities had detected major financial problems.

BAHAMAS

•WestJet Airlines announced direct service to the Bahamas from Toronto, Canada.
BARBADOS
•Grantley Adams International Airport Inc. released figures showing that 2.1 million passengers had passed through the airport up to June 30, 2009. This represented a 1.7 per cent fall off in the numbers when compared to the same period last year.

•The 2009 Corruption Perceptions Index (CPI), done by Transparency International, put Barbados as the least corrupt country in the Caribbean.

OTHER REGIONAL

•The International Monetary Fund approved a $1.7 billion loan program for the Dominican Republic to shore up confidence in the government’s economic policies and win additional financing from other lenders.

By Gregory McGuire

Today is budget day and all of Trinidad and Tobago will wait in anticipation for what has become the most important economic statement from the Government. By this time, most of the national stakeholders such as the private sector chambers, umbrella trade union bodies and other civil society institutions would have submitted their respective proposals to the Government for consideration. In keeping with the spirit of Budget season, it would be worthwhile to share my perspective on some of the essential elements of Budget 2009–10.
First, Government must acknowledge the true state of the economy, including a report on the realised hydrocarbon prices and revenue for the last fiscal year.  Government must recognise that while the economy is, indeed, stronger today than when it faced the post-boom recession of the 1980s , there can be no denying that it remains highly vulnerable to both fiscal and balance of payments dislocation. This is the nature of the beast, and despite the rapid expansion and diversification within the energy sector (offshore), the economy remains vulnerable.
The greatest risk, to both Government revenue and the external account lies in the condition of markets for our major resource based export commodities—oil, gas and petrochemicals. Crude oil prices have stabilised and, with the resumption of growth in the major consuming countries, coupled with sustained discipline on the part of OPEC, it is reasonable to expect some uplift over the next fiscal year. The markets for petrochemicals have also stabilised at closer to average long-run prices.
An entirely different picture emerges in the natural gas market. The outlook for natural gas prices particularly in the USA, remain dismal. In August, natural gas prices had slumped to below US 3.00 /mmbtu, its lowest level in seven years. The market has been hit by three negative forces: a dramatic decline in global industrial demand for natural gas and electricity; an expected surge in liquefied natural gas (LNG) supply, and an unexpected surge in North American unconventional gas supply. While the cyclical factors—demand destruction—will reverse, analysts are bearish on the prospects for an immediate balancing of the structural changes on the supply side. Moreover, the excess supply is likely to pull prices down in all markets—not just the USA. Market conditions suggest a conservative price peg of US$50/bbl (WTI) for oil and US$3.00 per Mcf (Henry Hub) for natural gas, which would yield effective fair-market values at well head of approximately US$ 40.00 for oil and US$ 1.60/mcf for gas .
Revenues from the energy sector, which constitute over 55 per cent of total Government revenue, will also be impacted negatively by a 5 percent decline in oil production, and the introduction of a new fiscal regime, with a lower Government take. Government can also expect lower non-energy revenues as a result of lower returns from significant contributors like NGC and reduced collections in VAT and Customs and Excise duties in light of the “deep economic slowdown”. In summary, the evidence suggests that Government would be hard pressed to obtain revenues in excess of TT$40 billion in the next fiscal year.
This means that for the first time in a decade Government expenditure is facing a revenue constraint. The Government has been the conduit through which energy sector revenues are pumped into the economy, thereby stimulating more broad based economic growth. Government expenditure skyrocketed from $15.3 billion in 2003 to $45.8 billion in 2008, an average increase of 24 percent per year, as Government took advantage of increased revenues to meet its social and economic objectives.
In the context of lower revenue projection, Government has two choices. It may seek to maintain expenditure at 2008–09 levels by drawing down savings and or borrowing to make up the deficit.
This was the approach taken at the end of the first oil boom in 1983, when the Government attempted to bring the economy to a “soft landing”. The result was a rapid drawdown on special funds until all were exhausted by 1986, to pave the way for the IMF in 1988. Alternatively, Government may choose the more difficult option to cut expenditure through a variety of carefully crafted strategies, aimed at striking the right balance among competing needs.

A more conservative approach to spending may yield several benefits. First, it permits a slowing of the economy to more manageable growth trajectory that is consistent with its absorptive capacity, thus reducing inflationary pressures.
Secondly it provides the opportunity for saving in the event that prices in commodity markets turn out better than budgeted. Thirdly, it compels Government to prioritise and sequence its expenditure programme, and sends the correct signal to the population.
The necessary prioritisation and rationalisation of expenditure should be informed by an unbiased assessment of our social conditions. It has become the norm in past budgets to trumpet the known successes such as rising GDP/capita, lower unemployment, free education from nursery to tertiary, free health care and medication for chronic ailments. These are often used as indicators of progress on the road to towards “developed country status”. But there are several other Human Development Indicators, which, when compared with comparator countries, show that Trinidad and Tobago may be now further removed from developed country status than when we started the Vision 2020 journey in 2003. The most obvious are with respect to crime, health and provision of public utilities, particularly water.
For instance, whereas Trinidad and Tobago outperformed Barbados in GDP/capita, the latter retained its Human Development Rank 31 while T&T slipped nine places to 59. In 2008, the infant mortality rate in Trinidad and Tobago was 23.59 deaths per 1000,000 live births, compared with 11.05 in Barbados and just 3.65 in Singapore. T&T growing reputation as a dangerous place to be is borne out by the data on homicides which shows the wide gap between this country and others. In 2007 our homicide rate climbed to 43 per 100,000, compared with 10 in Barbados and less than 1 in Singapore.

These are just a few indicators of the extent to which the human/services side of development has been sacrificed in the quest for economic growth. Inefficiencies in water distribution, transportation systems, air and sea bridge, drainage and health add to the frustrations experienced daily by citizens.
This situation demands a reordering of priorities so that greater emphasis and resources can be placed into addressing areas in which T&T lags behind.
The fiscal challenge for Government in 2009–10 is to strike the right balance between competing needs. Indeed this is not unique to the current fiscal year but remains standard practice for a hydrocarbon-dominated economy. In the traditional sense, a balance budget refers simply to the tailoring of expenditure to match the available revenues. A much broader concept of balance is advocated here. It comprises four dimensions: economic, social, geographic and inter-generational.
The economic balance requires the Finance Minister to take into consideration several imperatives. The primary consideration will have to be avoiding an escalation in the levels of unemployment while at the same time dodging inflation and preparing the economy for sustainable long term growth. Another consideration is the allocation of state resources between the energy sector and the non-energy sector.
If employment generation is its primary objective, it would be wise for Government to put its weight behind the latter i.e non-energy or the onshore economy. This may mean that Government will have to specifically target its expenditure and/or incentives package to stimulate output in sectors that (a) have a high local content and (b) boost domestic demand. Agriculture, tourism and construction are perhaps the likely candidates. This may well mean deferral and or cancellation of prestigious projects—rapid rail and the industrial island in the Gulf, both of which are of questionable economic import at this time.
On the revenue side of the equation, some short-term gains may be accomplished by simply increasing the efficiency of the tax collections. Reports suggest that the long awaited revised fiscal package for the energy sector will be introduced in the next Budget. It is hoped that this will yield increased activity in Exploration and Production, eventually boosting output and exports. Only time will tell the output elasticity of these measures.
The social balance refers to the quality and effectiveness of social services: education, health security, sport, culture and the arts. These areas have received generous levels of transfers over the last five years. The problem is that the outputs have been less than satisfactory. In the context of the projected revenue constraints of 2009–10 Government needs to (a) place greater emphasis on improving service delivery and (b) impose penalties for non compliance. For example, there is little doubt that the crime problem is aggravated by low detection and conviction rates. The data shows little evidence that the billions spent on sophisticated technological solutions (Blimp etc), have made an impact of the spiraling crime rate. A much less expensive option seems to be an increase in manpower levels in the police service and the magistracy, backed up by tougher legislation and swift justice for firearms offences.
Each year the Tobago House of Assembly puts forward an annual Budget laying its claim to the size of the pie. However, the question of geographic equity is hardly ever spoken about in Trinidad. Government expenditure in Trinidad and Tobago has had an urban bias historically. In the last, five years we have witnessed the greatest ever concentration of spending in the capital and urban Trinidad.
While the quest to build the most modern city in the Caribbean, such aspiration ought not to be at the expense of the rest of the country. The urban renewal thrust has been accompanied by increasing urbanisation with all its attendant ills—including distorted real estate prices, inflated rents, urban ghettoes, and urban crime.
In contrast, most rural communities are in a state of stagnation or slow deterioration, with century-old schools, limited water supply, poor roads and bridges, dilapidated community centres, and poor or nonexistent recreation facilities. These communities also have the highest levels of unemployment, although in the case of the South West and South East communities providing the country with a substantial amount of its wealth. This emerging trend will only intensify if a conscious effort is not made by Government to balance the geographic spread of its expenditure.
An important initiative in this regard will be the construction of major cross-country highways linking city to country and cutting travel time between extreme points to less than two hours. Such projects can yield multiple social and economic benefits. The shifting of certain Government Ministries—e.g. Agriculture; Labour; Education; Sport and Youth—from the capital city to other town centres will also assist in reducing congestion, promoting commercial activity and employment in other town centers.
Inter–generational balance addresses the issue of the distribution of natural resources wealth across generations.
Oil and gas are depleting resources. Each unit used today is unavailable to the people of tomorrow. In order to accomplish some degree of intergenerational balance, part of today’s output must be reserved for tomorrow, regardless of the level of prices.
As I have argued elsewhere, the concept of a single Heritage and Stabilization Fund (HSF) with two purposes but common rules of accrual and withdrawal is flawed.
Savings for heritage is very much like saving for pension. It is deliberate and happens regardless of the level of income (price). Savings for stabilisation is discretionary and dependant on hydrocarbon prices. The recent announcement of the Minister of Finance that no allocation will be made to the HSF for the fiscal year 2008–09 was not a surprise.
What is required is a amendment to the HSF Act that make savings for heritage a mandatory five per cent of annual energy income, irrespective of price. When buttressed by stringent rules of withdrawal, the heritage portion of the Fund will accumulate annually and over time will build up to serve the needs of the future.

Neo-liberal Free Market Exposed As Dotishness

By Lester Henry

When Wall Street moguls of high finance find themselves running to Uncle Sam for public assistance you know that we are living in interesting times. Make no mistake about it what they are seeking- and getting- are billions of dollars in “welfare”. This is the exact same thing that they and their rich friends in the Senate and Congress deride against when it is sought after by the poor. But unlike the poor, they ask for handouts of US$700 billion and US$ 85 billion. The population is supposed to go along with this because, they are told, it is necessary to “save the system”. As the lowly rated US President Bush himself said, if they don’t get this money “this sucker is gonna blow”. Those of us looking on remain puzzled as to how an advanced developed country like the US could find itself in such a mess, making it look like a financial banana republic. The answer lies in a combination of greed and skullduggery that was justified under the hubris of neo-liberal free-market fundamentalism.

The Market

The belief that markets work best when left on their own is at the core of the current financial crisis. Even though this should have long been discredited - at least since the Great Depression of the 1930s- policymakers in the US have held on to it, actually believing their own rhetoric! The truth is that free markets always tend to create speculative bubbles, chaos and a concentration of wealth and power into the hands of a few. This is why nowhere in the world are markets ever allowed to be completely free from government intervention. The temptation to take excessive risk, to cheat or to form monopolies is built into the system. As students of economics will know, when there is anything close to a free market - e.g. the case of perfect competition - economic profit goes to zero for all firms. So in order to make any extra normal profits a firm has to engage in some form of risk, non-competitive or rather shady behavior.

What Happened:

The Market Unleashed

This is precisely what happened in the US financial system. Wall Street bankers had been pushing the envelope for more and more deregulation since the late 1970s. During the 1980s they got tremendous leeway under Ronald Reagan and rewarded him with the Savings and Loans crisis that ended up costing American taxpayers some US$600 billion. That bailout helped to push up interest rates around the world and caused many developing countries to fall deeper into the debt crisis. But it was during the 1990s under Bill Clinton that they really hit the jackpot. This came in the form of the repeal of the Glass-Steagall Act of 1933. Among other things, this act had set strict barriers on what commercial banks, merchant (or investment) banks, and mortgage and trust companies could have done. In other words, firms had to choose which one they wanted to be. With that out of the way, there became a financial free for all. So for example, insurance company AIG started acting like an investment bank and dealing in sub-prime junk derivatives. This was chiefly responsible for its rapid demise.

When Alan Greenspan was being warned about the exploding housing bubble he said he had nothing against “wealth creation”.

The Sub-Prime

Base of the Pyramid

The base of the financial pyramid rested upon the sub-prime mortgage market. Since I have previously written about how this financial bubble came about and how it crashed before in the TTR, I will not dwell too much on it here. However, suffice it to say that it started with fraudulent, greedy developers and naïve home buyers over the period of the housing bubble, roughly between 2000 and 2006. Throw in over-eager financial institutions with lots of liquidity on their hands and you have the recipe for what is now called “toxic waste” in the financial markets. That is, many firms ended up with pieces of paper that became completely worthless once the original borrowers began to default en masse. So now Merrill Lynch is part of Bank of America and Lehman Brothers is now part of history.

The Revolving Door

Apart from the removal of laws allowing further deregulation of the financial sector in the US, there was also a revolving door from Wall Street to the government. High ranking Wall Street CEOs like Robert Rubin and Henry Paulson became Treasury Secretaries of the State, the former under Bill Clinton and the latter under George Bush. Were they then supposed to be “regulators” to their own firms?

The Credit Rating Agencies

Furthermore, the complicity of the rating agencies such as Standard and Poors and Moodys helped boost up the size of the pyramid. These agencies were all too eager to stamp AAA ratings on all sort of junk paper called fancy names like SIVs (Structure Investment Vehicles) and CDOs (Collateralized Debt Obligations), all of them based on sub-prime mortgages. These high ratings also contributed to an internationalization of the skullduggery. When European and Asian investors saw such ratings on these instruments they dived in head first or maybe “headless”. Now many of them will go the way of Merrill Lynch or Bear-Sterns unless their governments bail them out.

The Crash

As with all pyramid schemes eventually it had to collapse. It was good for about 5 to 6 years and many Wall Street crooks made fortunes out of the housing bubble. But as one commentator put it, if you jump out of a 100-storey building, for 99 floors, you can really think that you are flying. Many readers may have forgotten that this current financial crisis started to unfold more than a year ago. The first major casualty was Countrywide, the largest mortgage company in the US at the time. This was followed by some small and medium-size bank failures. But from then until now the names just kept getting bigger and bigger, culminating with the likes of Bear-Sterns, Lehman Brothers, Merrill-Lynch, AIG and now Washington Mutual Bank. After losing a fortune in the South Sea bubble of the 1600s, the great Sir Isaac Newton is reported to have mumbled “I can calculate the movement of the stars, but not the madness of men”.

The Lessons

The first lesson is that unregulated financial markets are a disaster waiting to happen. The neo-liberals should be hanging their heads in shame. Partial deregulation resulted in the Savings and Loans crisis in the 1980s. Full deregulation has now caused the worst financial crisis in the world since the Great Depression of the 1930s. Second, continuously appointing financial industry executives as regulators is asking for trouble. How could they be expected to act in the best interest of a nation when they are so closely tied to the industry? A case of who will guard the guards? Third, all of the high finance and complex mathematical modeling of financial markets being pushed by top business schools will have to be debunked as pure obfuscation. It’s just a pyramid! Fourth, we should perhaps not be too hasty to get highly sophisticated in our financial system here in Trinidad and Tobago. Look at what it has brought. As for the Americans, as Nobel Prize winning economist Joseph Stiglitz has suggested “we need to impose a special financial sector tax to pay for the bailouts conducted so far. We also need to create a reserve fund so that poor taxpayers won’t have to be called upon again to finance Wall Street’s foolishness”