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WILDCOOT: Essay á Carl

Harry Russell

WILDCOOT: Essay á Carl

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When Dudus cOMES out of prison, he will be about 65 years old. Of course, when Sir Allen comes out he will be about 175 years old (still a young man, bearing in mind that Methuselah, son of Enoch and grandfather of Noah, lived 969 years).
Bernie Madoff will be about 200 years old. I wonder if we have the guts in Barbados to give any of our gentlemen a stiff one. Perhaps not as many as 200 years but like Dudus’ 23.
One has to admire the tolerance of Bajans and our society. Imagine a Clico incident, and nobody in jail or suffering the consequences. Our expensive Judicial Manager comes up with something that may very well only please Cabinet when it gets a chance to look at it.
But will Cabinet be able to translate it?
My friend Monsieur Carl says that one should let the imagination roam when writing an essay. The more experience one has from travelling and seeing how other people behave, the deeper the well from which to draw.
The banks are in a dilemma. They are forced to relegate loans that are more than 90 days in arrears to monthly payments. Such interest (profit) as may have accumulated on recalcitrant accounts has to be suspended, but not necessarily lost – a point to bear in mind as such interest can become a source of profit later.
Charging higher interest to others so as to widen the spread might only make matters worse. However, the call for a reduction in the savings interest rate from 2.5 per cent even on fixed deposits is a clarion call to increase profitability even in these difficult times.
It has no regard for the expected interest that people who save are looking forward to from their nest egg.
It would be another nail in their coffin in addition to the stranglehold that has been imposed by Government so as to maintain the status quo, politically speaking.
Our Prime Minister seems to have grasped the urgency of the matter and has put on his peripatetic wings in order to garner support from abroad. I am sure that with his gift for oratory there will be some success – which has evaded him on other occasions.
I believe that the call to do something about our expected fall from grace by the rating agencies has galvanized our Prime Minister and he has shown that he can match his eloquence with swift action in seeking help from abroad.
We stand waiting.
Meanwhile, back at the ranch, banks have withdrawn into their shell except for dealing with Mr Pat. We must analyze whether their call to arms makes sense. Loan interest rates are supposed to move commensurate with the savings interest rate.
If a central bank raises the savings interest rate by one per cent, banks raise their loan rates by one per cent or more. Will the banks then lower their loan rates at least to the same extent they want the savings rate to be lowered?
In theory, wouldn’t the spread be the same? How then will that better their spread and hence their profitability?
Is there something fishy in Denmark, Mr Howell? If as the chief guru you want to make interest rates a free-for-all, you must say why. The reason, I presume, is that
it is supposed to improve the profitability of the banks – all are foreign-owned.
Banks are in a dilemma. The underlying security for loans is deteriorating and the excess liquidity has very few profitable outlets. The heavy outlay in meeting Tier 1 and Tier 2 standards is taking a toll on return on investment, and the boast of three or four years ago about the relative strength of the banks is forcing the same downgrade as the one facing the economy itself.
Banks are in a dilemma, and so is the economy. Therefore I wish our Prime Minister success in his foreign explorations.
Have you noticed how the Wild Coot, comme les politicians, speaks with forked tongue? The spot on which he lives is too small for the new hospital. Stop guessing!
Are you going to bind a new administration, whether it be the present Government or the Opposition, with a commitment for a new hospital on the verge of demitting office? Why?
• Harry Russell is a banker.