All Ministers should publicly declare any interest in Clico (Guyana)

Mar 17, 2009 Features / Columnists, Peeping Tom

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On Sunday evening, the CBS Sixty Minutes show featured the Chairman of the U.S. Federal Reserve defending his organisation’s decision to rescue the large banks that had gambled on the capital markets.
On the show, the Chairman said that not to have supported these banks would have exposed the financial system to serious problems. In effect, he was saying that the collapse of these large banks would have had a systemic effect on the financial system, and thus they needed to be supported in order to preserve the financial system.
One can conclude that, had the possible collapse of these banks not threatened the overall financial system of the United States, they would have been allowed to simply go under. What saved them was the adverse effect that their collapse would have had on the system.
In Guyana, we were told that, since the assets of CLICO (Guyana) represented only three per cent of the country’s total financial assets, the problems of that company were not likely to have a systemic impact on the overall financial system, which remains sound.
The question that arises therefore is why is the government of Guyana then moving towards guaranteeing all policyholders when there is no systemic impact? Why bail out CLICO (Guyana)?
We may be tempted to assume that this is being done because we have a caring working-class government that does not wish to see the pensions and policies of Guyanese workers eroded or lost.
But I am not convinced this is the reason. For one, despite the fact that there is likely to be a significant impairment of the statutory fund of CLICO (Guyana) because of the investments in the Bahamas, the event-driven claims are not likely to empty what remains of that fund in Guyana, and therefore I believe that the pensions and event-driven claims could have been honoured from what remains with the company, since not every policyholder will get sick, have an accident or drop dead at the same time, and not every pension plan will mature at the same time.
There has to be good reason why the government is making such massive intervention to guarantee that no policyholder will lose his or her investment. What is the reason?
I believe that a useful hypothesis to start with is the need to protect the investments of vested members of the bourgeoisie class who were lured to invest in CLICO (Guyana) because of the attractive interest rates that were offered in short- and medium-term instruments.
And I believe that the Economic Services Committee of the National Assembly, which will be tasked with monitoring the developments concerning the future of CLICO (Guyana), should test this hypothesis. They should in effect be asking just whom Government is protecting through this guarantee. They should ask for a list of all the major shareholders in CLICO (Guyana). Then they should ascertain the names of those who have invested large sums in CLICO (Guyana) under annuities and similar instruments passed off as insurance policies. In these names could possibly be found the motivation for the government’s intervention.
I am sure also that some of the big investors got their monies out. There was a run on the institution, an unusually high run since we are now being told that the sale of CLICO’s interest in the Berbice River Bridge was used to pay claims.
Some persons may have had inside information as to the imminent move to the Courts and they may have gotten their monies out in time. There needs to be a detailed assessment of those who got their monies out to determine how many did so because they got wind of the move towards judicial administration.
In Trinidad and Tobago there is now a major controversy brewing after it was discovered that the Minister of Finance had shares in CL Financial, and that she was able to withdraw her monies just before the government took over the institution. Questions are now being asked as to whether the withdrawals were because she knew what was taking place, and also whether the action of the Trinidad government to take over the institution was self-serving on her part.
We must ask similar questions in Guyana. And the Government should move swiftly to remove any questions that its actions are self-serving. As a first step, all the Ministers of the Government should publicly indicate whether they have shares, policies or investments in CLICO (Guyana) and the extent of this interest, if any. If any of them had any investments or policies in CLICO prior to the company being placed under judicial management, and if there were any withdrawals, sales or surrenders of these interests, these should also be made public.
I think that the government should learn from what is taking place in Trinidad and avoid such controversies. The President should therefore ask all his Ministers to publicly state whether they had any investments/policies with CLICO (Guyana), and what is the extent of this interest.
Making these facts public will help disabuse the naysayers of accusing the Government of acting in a self-serving manner by supporting the placement of CLICO under judicial administration.
After the Ministers would have been cleared of having major investments in CLICO (Guyana), we can then move on to the friends of the government.

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