I read in SN on Saturday that the government has obtained passage of a bill that allows it to bailout banks. There have been murmurings that such a rescue act(s) was already overdue in some places around here. In fact, that such a lifeline is direly needed if only to protect depositors and to stabilize matters. The first is always laudable and convenient, and the second usually functions well as the euphemism of choice to cosmeticize a whole litany of sins.
Having seen closeup and firsthand the greed-related excesses, executive mismanagement, and catastrophic failures of commercial banks and Wall Street investment banks a short decade ago, along with the financial Armageddon staved off by the Federal government’s Troubled Asset Relief Program (TARP), the following questions come quickly: what are the possible banking sins that necessitated this bill, which has urgent underpinnings embedded? What high altitude speculations and corporate recklessness led to what is a still an unfolding situation? It is arguably a not-so-secret one and sure to be a frightening one when exposed to the light of day. Which sector(s) and which of the local powerhouse players incentivized the staid banking industry to the edge of the precipice? Or is it better asked as to what could have lured what used to be conservative (very) establishment houses to get into bed with the highly questionable and the incorrigibly problematic? Last, is this why there has been such determined resistance in some quarters to open up books and records?
Clearly, there were some massive fears as to where roads were leading, and clearly some marks of the devil are well imprinted. Whatever it is, and whosoever are involved in what promises to be a wide telltale net, some partial truths will emerge. They have been long in coming; it is time for facts to replace the dogged foolishness that has prevailed.
Now that this bill is soon to be the law of the land, I should hope that the government is going to insist upon some tough standards. As examples, any bailout assistance must include: changing senior management right from the start; obtaining seats on the board of directors for government representatives; demanding unlimited access to all books and records; introducing a new risk regime; and reconfiguring the compliance enforcement, among many other things.
While it may be argued in smart circles that this country does not have any institution that rises to the level of “too big to fail” there is the reality of a society so small as to reel from any fall. I venture that though the interlocking nature and dependencies of foreign places, incestuous to a fault at times, may be lacking in local financial circumstances, there are some participants who have played with fires that are threatening, and alarmingly so. I envision this as more than protecting poor vulnerable depositors, but rather addressing what could rise to the troubles of systemic failure.
I think that the Central Bank and its people have to be unflinching in fulfilling its new mandate. There cannot be halfway measures if durable remedies are to follow. The territory of coming actual intervention and oversight promises to be wide, and rocky. There might be a small problem: in this society, where everybody is related in some way to everybody else, the requisite thoroughness and ruthlessness may be somewhat short of the optimum. One would hope that the criminally negligent are pilloried appropriately. Now I wait with the rest of Guyana to see the application of this bill in real life situations.