Saturday, 7 July 2012

Who will defend the taxpayer?

A clubby affair
to prepare one for the road
As the Prime Minister and The Minister of Finance prepare to meet representatives of the former shareholders of the National Bank of Malta to seek an out of court settlement for the claims of compensation which have been subject to cases in court for just too long,  I asked who will defend the taxpayer at such meeting or will it be a pre-election clubby affair?

This brought vibrant reaction, especially from ex-shareholders who have a direct interest in forcing the government in this pre-election vote sensitive period to offer clubby compensation before risking that the voters send them to the other side.
Here is my last contribtuon ( in answer to comments by ex-shareholders) which summarises my position:

Unlike you I have no personal direct interest in this matter and the only interest I have is that of a tax paying citizen who expects government to spend the nation's money like a bon pater familias. I am all for fairness and justice and I have said all along that if the court finds that the run on the bank was started by government with malicious intent then I will stand by the Court's decison to award whatever compensation it deems fair to the ex NBM shareholders.

I do however object to ex NBM shareholders putting political pressure on government in this pre-election vote senitive period to award danages which are not due as no one has yet proven that the run on the bank was started by government with malicious intent. This is poltical interference for party politics ( i.e. votes) by sectorial interest to the detriment of the general taxpayer. It would also fail to provide the same robust proof of justice being made as would be sourced from a cout decision.

So rather than wasting eneregy to reach out of court settlement to favour its own, government's duty is to see why a court case is taking so long to get decided. This givernment has been in sede for 25 years - I would say enough time to get the Courts working as they should.

As to why I think no compensation should be due I have made my case over and over a again and those who want to see why, can follow this link:

Final points:

1. Why were loans from other banks blocked? - Once the CBM judged the NBM insolvent and not just illiquid it would have been senseless to allow other banks to provide liquidity which the Central Banks was not ready to provide. Insolvency requires fresh capital not liquidity. If insolvency is treated with liquidity all that happens is that the lending banks would become secured creditors, as banks would only lend aganst security and this would prejudice the rights of ordinary depositors. Furthermore there is no hard proof of the true availability of bank funding and Louis Galea is reported saying that Barcalys would not exclude the possibility rather than Barclays are ready to assist with temporary loans.

2,. Governor Earland's statement that it is inconceivable that the NBM closes down makes perfect sense. Closure of the business run by the NBM would have damaged the economy and the depositors so someone had to save it. The cure was fresh capital to address its insolvency. Once the shareholders of the NBM at no point offered to put up fresh share capital then it was the political duty of the government to save the bank by capitalising it under a fresh set up such as BoV. So the business of the NBM never closed down, it just changed owners when those who had owned it for 160 odd years were not prepared to save it through infusion of fresh capital.

3. Mintoff is Mintoff. At least until 1979 he was invariably correct in the substance but unnecessarily rough at the edges. After 1979, having accomplished all he worked for he also started going wrong in the substance. I am not one who defended Mintoff whatever.

4. There is irrefutable proof even from friendly sources that in its last few years of its existence NBM was very unprofessionally run. Mr Curmi refutes he used the words Banka tal-Lottu ( I never said he did as I used that as a figure of speech to denote an unprofessionally run bank) but he has added a lot of colour to my sketch that NBM was a one man show with incompetent management, very low lending standards and without even an operational manual. The ex-NBM sharholders should start considering whether the run was more likely home grown rather than maliciously inspired. Certainly if it is the case that the source of the run was home grown than they cannot expect the taxpayer to bail out the shareholders ( who were not prepared to save their 160 year old cash cow bank by putting up fresh capital when needed) after having taken the risk to bail out the depositors.

Alfred Mifsud

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