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On bailouts, there are no rules. This is the mood and mindset of
governments across the globe.
The US government came out with a $85 billion
succor to prevent the collapse of the troubled AIG. It rescued
Freddie Mac and Fannie Mae. It threw a lifeline to Goldman Sachs and
Morgan Stanley on the condition that they revert to the status of
commercial banks. With this status comes strict government
regulation.
Yet, it let Lehman go under and allowed the sale
of its scraps at basement prices. It took over teetering Washington
Mutual. It gave the green light for the sale of Merrill Lynch.
Before this, was the disposal of what was left of Bear Stearns.
Though there was no iron-clad rule on what to
bail out and what to let go, the basic bench mark was this: size
matters. The repercussions of an AIG meltdown (the sheer size and
diversity of the insurance-anchored business) on global financials
was the basic consideration for the rescue of insurance giant.
In the Philippine context, monetary authorities
consider two things: the size and cronyism. And one more
thing—urban bias. As Exhibit A, I will again cite the case of the
United Coconut Planters Bank.
The UCPB, a bank with a long history of coziness
with the powers-that-be, was recently given a P30 billion lifeline
by the Bangko Sentral ng Pilipinas. It was probably an acceptable
move given the jitters in the banking world. But what made the BSP
bailout look odious and appalling were some pockets of minor banking
troubles that took place at about the same time the BSP gave a
lifeline to UCPB.
At about the same time the BSP made an
unequivocal decision to bail out the troubled UCPB, the Coop Bank of
Aklan was asking for a lifeline. Its requirement was peanuts, about
.03 per cent of what UCPB needed. You know what? The government
people told the Coop Bank of Aklan coop bankers to “go and f..k
yourself.”
The UCPB and the Coop Bank of Aklan—the
general assumption was—got shafted by bad decisions. This what got
them in real trouble. One stumbled big time, the other was a
provincial operation that spooked small-time investors in a province
that would have languished in obscurity had it not been for Boracay.
There was sameness and uniformity in their portfolio of woes.
Until, of course, the recent revelation that
UCPB got stung by a $10 million bad investment in Lehman Brothers.
It turns out that the bad judgment of UCPB did not just cover
domestic exposure and operation. It turns out that its banking
investment sins were graver than those of the Coop Bank of Aklan.
Yet, the BSP bailed out UCPB for bungling big
time and investing in Lehman. The government allowed the Coop Bank
of Aklan to go under because it had no crony connections whatsoever.
Where is banking justice in this country, asked
Butil party-list Rep. Ka Nellie Chavez. The coop banks, the lifeline
of farmers and rural people, are closed arbitrarily and with extreme
prejudice because they are small and they are owned by small people.
The big banks with owners, shareholders and officers that share the
same clubs and fancy associations of the central bankers are bailed
out every time they run into trouble.
To answer Ka Nellie’s question, there is no
banking justice in this country. Size matters. Cronyism, too. Plus,
the urban bias of central bankers. Central bankers, even if they are
raised in farming towns such as Apalit, often forget the agrarian
conditions of their hometowns once they don those fancy suits.
The ongoing effort of the coop banking sector to
clean out the bad loans and fully rehabilitate the Coop Bank of
Nueva Ecija is Exhibit B of the urban bias of government banking
regulators and the finance department people.
The Coop Bank of Nueva Ecija has proposed a
complete rehabilitation plan that does not involve government
monetary infusion. In fact, the bank has detailed a plan that would
bring it back to full financial health within the medium term via
the conversion of the soured loans into some form of life-saving
equity.
The government bankers and the finance people
going over the rehab plan have spent eternity poking holes where
there are none. The coop bankers running the Nueva Ecija bank—the
first coop bank in the country—just wish they had the
“connect” of the UCPB people.
mvrong@yahoo.com
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