Gov't needs opposition support to pass bailout bills

The government will present two bills in Parliament Monday seeking approval to bail out CL Financial. The sitting is expected to generate heated debate on the issue, which has far-reaching implications for the nation.

On Friday the Government announced that it would step in to help the country's biggest insurance company, CLICO, and British American Insurance in return for equity interest in order to protect depositors and policy holders.

CLICO has more than 100,000 policy holders and provides group pension plan services for thousands of workers in the country. CLICO may also begin trading on the local stock market but its investment bank, CIB, will be dissolved next, with 20 of its 100 employees losing their jobs immediately and the rest of the jobs disappearing later.

CL Financial chairman Lawrence Duprey admitted that he had underestimated the global and local financial troubles. He approached the Central Bank for help on January 13.

Duprey would have to sell some of CL Financial's lucrative assets in return for Government's cash and support. It means surrendering its 55 per cent stake in Republic Bank Ltd, the country largest commercial bank and a change in the ownership structure for CL's media business, which includes the country's top private television station, TV6.

The opposition has been meeting in emergency session to prepare for the debate and sources say there are going to be some startling revelations from opposition members. Speakers will include Vasant Bharath, Basdeo Panday and Ramesh Lawrence Maharaj.

The bills are the Central Bank Amendment Bill and the Insurance Amendment Bill. They are critical in changing the regulatory framework to facilitate the bailout for CL and would require opposition support.

The Central Bank Amendment bill requires a three/fifths majority because it infringes on the right to privacy by allowing the Central Bank to gather and share information about the business and records of policyholders with other authorities across the world.

Senior cabinet minister Conrad Enill told the Trinidad Express Government may not be in a position to disclose how much money is involved in the bailout or to table the agreement between itself and CL. Enill also said Government cannot give a financial account of the management of the company.

The opposition is demanding full disclosure before it can consider supporting the two bills. Chief Whip Maharaj has said the opposition agrees in principle that the Government can use taxpayers' money to assist the depositors, shareholders and policyholders of CLICO.

However he said the opposition is concerned about a clause in the Central Bank Act which gives the Bank the power to provide, if it deems necessary, "such financial assistance to companies carrying on banking, insurance and business of a financial nature".

Siparia MP Kamla Persad-Bissessar calls that "a blank cheque" since there is no clear criteria outlining the circumstances for such assistance. "From henceforth and forever more, the Government, through the Central Bank, can give financial assistance. Does it mean that anytime someone goes to them and cry, they can get financial help? "she asked.

She expressed deep concern about giving the Government "the power to pour money into a black hole."

Maharaj has the same concern. He said this clause provides "the opportunity for the Government to abuse its power and it will put financial institutions, insurance companies and banks at the whim and fancy of Government".

Enill disagrees. He said the purpose of the Bill is to allow the Central Bank to be able to take action in instances "where a matter could impact on the financial system, while ensuring that at some point in time they report to someone or provide a mechanism...(where the bank) is accountable to someone, such as the Minister of Finance."

The opposition is also expected the raise the issue of apparent double standards that the government is using in helping one financially-troubled organization when it turned its back on another.

Last year the government shut down the Hindu Credit Union and put the organization into receivership, refusing to consider any proposal to restructure and make the organization solvent again.

The HCU closure means tens of thousands of shareholders and depositors stand to lose millions of dollars. In some instance citizens are likely to lose their entire life savings.

A lobby group formed to look after the interests of HCU members and depositors had presented what it said is a viable recovery plan based on a government loan of $100 million. It made it clear that the money would not be a handout but capital to help restructure the HCU with a new management, dispose of its assets in an organized manner and pay everyone most if not all of the money they had in the HCU.

The government rejected it outright.