The Tribune

By NICOLE BURROWS

When you don’t trust your government, you constantly and effortlessly think of all the new reasons why you shouldn’t. And, once you’re on this road, there’s no turning back.

We, yes, desperately need a comprehensive Freedom of Information (FOI) Act, but perhaps we also need a standing, annual Commission of Inquiry to investigate all the allegations of political corruption and suspicious deals being made by Bahamian politicians, the political elite and all their company; instead of waiting for them to march to the beat of their own drum(s) they should be forced to answer to the people to whom they swore to be accountable, with a price to pay at the end of it.

If we, the people, don’t require such investigations to be ongoing in all facets of government and public administration, particularly within the leadership, we will forever be asking questions and never getting answers to them.

Sure, the job of a leader can be dirty sometimes, but leaders make their choices, and they live with the consequences like everyone else. And that goes as much for the leadership of the country as it does for the leadership of the Bank of The Bahamas (BOB).

In what developed, functional economy can a bank so obviously and drastically ailing, receive a $100m rescue by the government, to be paid for ultimately by the Bahamian people, and the managers and directors of the bank still remain in place?

The managing director of the bank needs to go; what has he been doing? How does a publicly-traded, publicly-owned and audited bank end up understating its commercial loans and mortgages to the extent that putting them right in one quarter throws them completely out of whack, with huge net losses? And, of course, we’re all left wondering, was this by design, this seemingly unnoticed then sudden disclosure, to buy time for the BOB and the government to figure out what to do to save the bank they knew was failing even though they swore it wasn’t?

Every single person on the board of directors, regardless of how clean their hands might be, also needs to be replaced yesterday, including the chairman of the board who is a certified fraud examiner. Unbelievable.

All the men and women who sit on the BOB board and those in the day-to-day, executive management of the bank, with 15, 20, 25, 30, 40 years of experience in their respective fields, as boasted in their company biographies ... what were they doing with all of their expertise? How did none of them see this coming?

If the powers that be want us to believe that the bank can so easily and seamlessly return to profitability after now, why was its management incapable of getting or keeping it there before?

Anyone paying attention should have seen this coming. In 2003, the BOB bought Citibank NA Bahamas’ mortgage portfolio of $20m. Two years later, they doubled their loan portfolio with more mortgage debt. Two more years later, they purchased more mortgage debt from Citibank, according to their own company timeline.

And two years after that, in 2009, (following a preferred share offering in 2006), they offered more preferred shares to increase capital to “support their expansion”. In the throes of the recession, they were seeking to ‘expand’? Who spends money they don’t have in a recession? Who bought this story? Every finance professional knows that increasing preferred shares (an easier sell, as they carry more attractive, higher rates of return than common shares) makes the company’s balance sheet/financial position look better.

Sure the BOB opened one new branch thereafter, but all this sourcing of capital and amassing mortgage portfolio assets should have been a large blip on investors’ and government’s radar. You have to inquire about what more is going on when a business uses these mechanisms as their growth strategy.

And now, as the bank is majority-owned by the Bahamas government, ie the Bahamian people, the list of bad debts should be in the public domain.

Who are the debtors? Who created/approved the uncollectable debts? Since Paul McWeeney insists they are mostly commercial debts, what businesses do the debtors own that Bahamians patronise? Are they flourishing, unbeknownst to the Bahamian public/taxpayers, at the taxpayers’ expense while the loan holders continue to default on their loans?

And, if the BOB’s horrid bad debts were really on account of ‘inordinate commercial loans’ defaulted, does this suggest that the BOB tried in some way to assume the role of the Bahamas Development Bank (BDB), which, as it stands, seems not to even focus on the agricultural and industrial development of the Bahamas as was intended?

And, if the BOB’s biggest business is indeed commercial, per McWeeney, why was the bank so heavily invested in buying up boatloads of homeowners’ debt? What percentage of these mortgages were actually commercial mortgages? Was the bank attempting to assume the role of the Bahamas Mortgage Corporation, too, given all the purchases of mortgage loan portfolios? This mess is all over the place.

In the Resolve press statement, the new entity insists that ‘no taxpayer dollars were directly spent’ in what the government still insists was not a bailout of BOB. Not directly. But taxpayer dollars have been spent, because that’s the bottom line any time the government incurs a bill; their primary revenue is taxpayer dollars. And taxpayers will pay all the same.

And so the answer to save the BOB is to transfer debt from a company mostly owned by government to one wholly-owned by government? What positive outcome can be expected from such a move? How is this supposed to help make things better?

Resolve is a debt collection agency for the BOB/Bahamas government? The Bahamas government is the debt collector for itself? This just gets crazier and crazier. But let’s keep going.

Why is there a need to hire an accounting firm to collect, on behalf of Resolve, the previously uncollectable loans? And will that accounting firm be separate and apart from the one or more which have evaluated the BOB in the last 10 to 15 years? Will it be the same one that audited the Public Hospitals Authority (PHA)? Or, the same one collecting uncollectable real property taxes?

The reason for creating Resolve and bailing out the BOB, as given by Central Bank governor Wendy Craigg, is the “emerging risk posed by some of the BOB’s unpaid commercial loans”. What is this risk? That foreign investors will see our banking system and our government as unstable and corrupt? What if Ms Craigg could make these and other important decisions when they affect Bahamians on a daily basis? There are other recommendations just aching for her endorsement. And maybe, instead of waiting for something to become an international concern, we could handle our business the right way, for ourselves, and it would already be right for others.

McWeeney commented that the loans held by politically exposed persons (PEPs) only “represent a small percentage when compared to the total loans outstanding.” But the percentage total loans held by PEPs could say absolutely nothing about their total loan value; five per cent of all defaulted borrowers could be PEPs who owe $75m and 95 per cent could be non-PEPs who owe $25m. Why do they take Bahamian people for fool so?

Furthermore, why bother at all to insert this one line about PEPs in the BOB’s November 3 press release? Who thought this was smart? Who handles their public relations? It just sticks out like a sore thumb. Frankly, whether the BOB included this one line or not, the Bahamian people would still arrive at the same conclusion that many politicians and many of their friends have more to do with the failings of this bank than they want the people to know. But this – throwing out one line about the politically exposed – just makes them look guilty.

And to wrap up the relentless line of questioning here, why, after having already identified their net operating losses at the end of June and moving to establish Resolve, did the BOB then seek to pay preferred shareholders $1.1m via the government’s treasury deposits, especially when they were adamant that they weren’t insolvent or in danger of being liquidated? Preferred shareholders are ‘preferred’ in liquidation.

This whole BOB affair re-emphasises the reason we can’t get ahead as a nation; everyone has their own hidden agenda.

In all the pockets of the economy, society and government/public administration, we constantly support what fails, is failing or has failed long ago. So everything gets to fall to pieces simultaneously. This ship has a thousand holes and all the little groups of ineffective people are still trying to bail an ocean of water out of the ship with tiny buckets which have holes of their own. And all this without being seen.

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