Harnarine, the former head of the HCU, leads employees and
shareholders outside the Ernst & Young building in St
Photo: Shirley Bahadur
is our record in this country of ensuring that those who
led financial institutions into perdition are called to
account? What is our record of ensuring that those who were
responsible for monitoring and regulating our financial
institutions are called to account?
Monday, an organisation calling itself the Credit Union
Members Group (CRMG) called on the Government to provide
a $300 million bailout to the HCU Group of Financial Companies.
In effect, this group wants taxpayers to provide a loan
of $200 million and a straight cash infusion of $100 million
to this insolvent financial institution.
According to the CRMG, if the Government does not take action
to prevent the liquidation and closure of the credit union,
HCUs shareholders and depositors, who are said to
number more than 100,000, will face imminent financial
The request for the bailout package is being positioned
in the context of the current global financial crisis in
which governments and central banks throughout the
world are being called upon to provide trillions of dollars
to rescue and bail out ailing financial institutions.
There are several points that need to be made about the
request by this credit union group for taxpayers money:
n Governments and central banks have provided support to
financial institutions when there is a significant risk
that the failure of the institution (commercial bank, investment
bank, mortgage institution or insurance company) could lead
to systemic problems for economies or financial sectors.
The US Government stepped in to save Freddie and Fanny as
well as the AIG because failure to do so would have meant
(even more) calamity for mortgage holders, pension deposits
and foreign currency reserves throughout the world.
Given the fact that once exotic (but now toxic) financial
instruments generated by Wall Street were sold around the
worldbut apparently not in T&Tthere were
fears that the collapse of institutions that were considered
too large to fail could cause institutions in other countries
to come tumbling down.
Apart from stepping in to save specific institutions, in
cases where there is no evidence that the closure of a bank
will cause systemic risk, governments and central banks
around the world have allowed some financial institutions
to be acquired by others at a fraction of the value of the
assets. In other cases, financial institutions have been
allowed to go into liquidation while some investment banks
have been forced to change their method of doing business
into something that more closely resembles commercial banks.
Question: Will the closure of the HCU cause systemic risk
to the local financial sector?
n Governments and central banks around the world will ensure
that those who were responsible for the evaporation of trillions
of dollars in shareholder value will be held accountable.
We are now in the mode of trying to ensure that the fire
that threatens to engulf the global financial sector is
put out. But as soon as things settle down, it is guaranteed
that the billionaire CEOs and their financial wizards will
be called to account for their misdeeds. Forensic investigators
will be let loose to probe whether there was any hint of
financial impropriety in the collapse of institutions. The
judgments of those who arranged to receive hundreds of millions
in compensation will be questioned....repeatedly. Some of
them, no doubt, will be charged, convicted and jailed.
And the scrutiny will extend not only to those who profited
while financial companies were collapsing but to the supervisors
and the regulators who were being paid to raise red flags
Questions: What is our record in this country of ensuring
that those who led financial institutions into perdition
are called to account? And what is our record of ensuring
that those who were responsible for monitoring and regulating
our financial institutions are called to account for doing
little when cheques were not honoured.
If one can detect a mood coming out of the financial meltdown
it is that those who were reckless and irresponsible with
other peoples money should not be rewarded in any
What is our record of ensuring that directors who served
on the boards of companies that ignored the existing regulations
and any semblance of financial prudence are prevented from
serving in similar capacities again?
n The most important lessons from the crisis of the last
few weeks is that regulation and surveillance are extremely
important. What are our regulators doing to prevent further
financial failure given our local context of interlocking
directorates, insider trading and unregulated related party
n It is clear that the mismanagement of HCU has caused significant
financial pain to those who were either blinded or refused
to see what was happening there.
There are few governments in the world that would ignore
people in pain. On the other hand, it would be extremely
reckless for the Government to provide a bailout to HCU
without ensuring that taxpayers are eventually compensated
and a cleanout of the credit union takes place. However
receiving taxpayers money cannot be a licence to continue
business as usual.
There is significant irony in the fact that the Government
is now being called upon to provide financial assistance
to the HCU when, six years ago on June 11, 2002, employees
of the Hindu Credit Union, led by their president Harripersad
Harnarine, converged upon Balisier House, demanding an apology
from and the resignation of then junior finance minister
The only crime that Enill committed was saying that the
HCU was being probed by the Credit Union Supervisory Unit
of his Ministry and expressing personal concerns
about the rapid growth of HCU.
Isnt it incredible that for saying things which now
appear prescient, Enill was required to apologise under
the duress of a mob of HCU employees calling for his blood?
Will Enill, who is now chairman of the PNM and arguably
T&Ts most important minister, forget his HCU experience
in 2002? Will it matter?