WILD COOT: Allen or Sir Allen
WE WILL NEVER KNOW if the Americans had not intervened whether Mr Stanford might have been able to wriggle out of an impending difficult position or not. There is no clear indication that he had been swamped by a run on his organization to the extent that people were not being paid as their investments matured. The public remains blissfully unaware when banks are in a difficult position, and that applies recently to American banks
The overarching question is: at what stage does a financial institution become a Ponzi scheme? Is it when it is dependent on incoming investments to pay maturing investments? Is it an analysis of the current use of people’s investments? Was this the heart of the matter?
I have stood on steps outside banks beseeching people not to withdraw their money, and the banks survived.
One of the factors in Stanford’s favour was the way Latin America reacted to the world crisis. It is from here that most of Mr Stanford’s business originated. Brazil, Argentina, to name a few in South America, fared somewhat better than their European counterparts who were heavily involved and implicated in the credit swap vacuum that left countries “catspraddled”.
South American countries have experienced favourable growth during the past four years and clients that patronized Mr Stanford still face the kind of situation in their country that drew them to him.
There is still the need to keep their money away from the meddling hands of their government. There is still the need to avoid possible unwanted knowledge of their assets for fear of ransom for themselves or their family. Could Mr Stanford’s organization have continued to attract business so as to pay maturing investments in a timely fashion or did he have sufficient liquid assets to offset these maturing investments?
What seems to have happened is that the American inspectors (I saw them in 2002 in Houston) who had been tracking Mr Stanford’s organization all along saw the impending situation and may themselves have triggered the collapse. One of Mr Stanford’s defences was that he was able to meet his obligations. It is funny that over $300 million in liquid funds available to him are now being sought; and they claim that he could not pay maturing investments.
There is no doubt that the investment in personal assets and in cricket and cricketers was drawing attention to the origin of the splurge. Mr Sanford could have brought about his own downfall. But did not the financial meltdown triggered by Wall Street have something to do with it?
Can we say that there were others who benefited from the huge credit vacuum and have walked away free or even been helped by the billions of dollars pumped into the system that even now leaves a hole – nay a gulf – only to be financed by “confidence” and the various “haircuts”
There is no doubt that Mr Stanford will get a hefty sentence. Perhaps due to his apparent frail health prison will be his last resting place. Unfortunately, what has happened has drawn attention to us in the Caribbean and in particular Antigua and made an already shaky reputation even shakier by virtue of other players that may have been involved with Mr Stanford.
One has to spare a thought for the many innocent workers who enjoyed the bounty of his many projects and who honestly and faithfully worked to make the bank prosper.
As it is now portrayed, Mr Stanford did something bad, but many people in Antigua would not agree with how he has been treated in the United States courts.Was it a case of, as they say in gay Pari’, “pour encourager les autres”?
•Harry Russell is a former banker.
Email [email protected]