All the king’s horses
ARE WE PUTTING Humpty Dumpty together again?
We wait to see if the changed formats will be ahead of the bankers. We wait to see which lowerranking person in the Well will be bold enough to say “that was not my advice to the minister”. What will happen to the person? Would not the difference of opinion have been already discussed at Cabinet, where there is collective responsibility?
Listening in on a bankers’ conversation the other day, I was behind a wall in another room. They were discussing a fellow called Wild Coot. One man, who was a banker from back in those funny days, said, “I know him well. He ain’t come from nowhere. He comes from Roebuck Street. Barclays had no right to make him privy to our secrets. You see how he does mash up our balance sheets in the newspapers. He has highlighted our profits, and now the effects of losses occasioned by the bonds.
“He told the people that he could present a balance sheet in several different ways: you know what he means by that. He wants locking up.
Mark you, this thing that happened to the bonds is presenting us with a real challenge. Our auditors say that we cannot leave the value that we paid for these bonds in our books. We have to write them down or off.
“My best advice will be to write them down to one dollar and take a little piece from Government at a time when interest is due periodically until 2030. This means that the Government is obligated to pay a bank little by little and the Central Bank cannot write us off. Such interest we could include in our profit as it comes along, although we would have claimed relief when we wrote down the bonds and reduced profit. But we claimed relief when the tax rate was about 30 per cent and we shall pay tax on receipts for bonds at a vastly reduced rate. So the banks, over the years, are in for a better deal than perhaps the King’s Horses envisaged.”
Deal with overseas creditors
The bond issue will not go away until we have dealt with the overseas creditors. I have maintained that they also have their obligations. Depending on their particular situation, payment from these bonds is required on a quarterly basis. What they have had to do we do not know. Maybe they have already sold the bonds at a loss to some party willing to wait until whenever Barbados decides to make payment. Maybe the imposition of penalties will greatly increase the sum due.
But certainly our reputation will be damaged.
Our decision to engage in repayment on terms stated may well be constrained by the amount of foreign exchange at our disposal. Meanwhile, encouraging external investment may be inhibited by our tardiness to finalise repayment arrangements.
But problems are not only surfacing in Barbados.
Look at Antigua! Those fellows have a similar problem to bankers in Jamaica in the 1970s. One speaker then, whose name I would not call here, had to remind the bank at a rally of over 800 staff, that selling a bank does not include selling the workers; that the outgoing bank had a responsibility to all workers for pension rights and other terms of employment before departure.
That caused a big fuss in Jamaica even as the sole representative from abroad got the better of the bevy of lawyers and accountants employed by the government that refused help from the staff that was more familiar with what was on sale than anybody else. However, if it is finally agreed that Republic Bank will assume responsibility for all entitlements to staff, then that must be an iron-clad agreement affecting both temporary and permanent staff.
The tax situation with respect to the change in payment for the customers’ money that the banks invested in bonds is not the only issue that our Government needs to be aware of. Our main worry is the shortage of foreign exchange occasioned by the way the Central Bank regulates (or not regulates) foreign exchange.
There is no incentive to bring US dollars into the island. Despite statements from higher places to the contrary, hotels and other business take advantage of the many loopholes. The Central Bank cannot enforce the law that states that all foreign currency should be deposited with a commercial bank. Right now, with credit cards proliferating, how can a check be kept?
Harry Russell is a banker.