Independent Senators Basharat Ali, Subhas Ramkhelawan, Corrine Baptiste-McKnight, Helen Drayton, Rolph Balgobin, Harold Ramkissoon, James Armstrong and temporary senator Dr Lennox Bernard voted in support of the Central Bank (Amendment) Bill 2011. All 15 Government senators present also voted for the bill, which was passed 23-6.
Six Opposition Senators voted against the bill, among them Pennelope Beckles, Fitzgerald Hinds, Dr Lester Henry, Shamfa Cudjoe, Terrence Deyalsingh and former Minister in the Ministry of Finance Mariano Browne, a temporary senator who replaced former Clico Investment Bank director Faris Al Rawi.
One temporary Independent Senator — Professor Karl Theodore (replacing Dr Victor Wheeler who is out of the country) — was absent from the vote.
The legislation stays all legal actions against institutions subject to emergency State intervention as well as the State, pending the duration of the intervention.
It was passed alongside the Purchase of Certain Rights and Validation Bill 2011, which retroactively validates the pumping of more than $5.3 billion in Treasury funds into the CL Financial Group, under the terms of a 2009 bailout memorandum of understanding. The latter bill was passed in a simple vote with no division taken.
In wrapping up debate of both bills, Finance Minister Winston Dookeran said the State will table special legislation to preserve the right of Clico policyholders to sue after the emergency intervention has ended. This legislation, Dookeran said, will amend the Limitation (of Certain Actions) Act to allow claims beyond the period in question.
“I am prepared to give the undertaking that I will liaise with the Attorney General to bring before this House an amendment to the Limitations Act to ensure that citizens’ right of action are not extinguished,” Dookeran said.
The point, he noted, had been raised by Senator Helen Drayton who, on Friday, had noted that statutory limitations could bar legal action by those who would not like to sell their legal rights. The Finance Minister said the risk of legal action triggering liquidation stemmed not only from policyholders, but also creditors and shareholders. (See page 14).
Dookeran also clarified that the bonds being offered to Clico product-holders with investments of $75,000 and above, will have discount rates which are subject to market fluctuations.
The Finance Minister said the issue was the subject of discussion with the Bankers’ Association and the Association of Trinidad and Tobago Insurance Companies, and he was assured, in a letter, that at current estimates the discount rates of 80 cents to the dollar for bonds of less than ten-year terms would hold.
“The discount figure is highly sensitive to the interest rate environment,” he warned.
“I cannot hold back the world from changes given the global tremors taking place. No one can say with certainty what tomorrow’s markets will see.”
He urged policyholders to take advantage of the deal on the current rates or face uncertainty.
“Based on our estimates, the interest rate environment is likely to remain where it is for some time. I will not say for how long,” he said.
He read a letter from the Bankers’ Association in which bankers estimated that the discount rate should be 20 percent “for years”, but based on Government guarantees and current projections.
“I believe that our valuations are likely to be correct,” Dookeran said.
Noting that the rates are tied to economic factors, he said, “I would urge citizens to utilise the window of low interest rates as long as they can.”
Dookeran was also at pains to emphasise that the Clico bailout was justified only because of its systemic risks and, in a strong warning to investors, hinted that in future, citizens would be required to bear their own risks.
“We have decided to take this approach with respect to Clico because Clico has such an impact on the rest of the country,” he said.
“We really cannot run a country where people invest without regard to the risk and when it does not work out they turn to the Government to pay. From now on, all investors must realise that they must take the responsibility for their investment and demand information from the institutions they invest in.”
Noting criticisms based on the fact that final audited accounts for the years 2010 and 2009 were not yet available, he said decisions had to be taken regardless.
“We sometimes have to make decisions which imperfect information,” he said.
The issue of information available to the State has been a contentious issue throughout the history of the bailout.
The bailout plan, according to Attorney General Anand Ramlogan, will cost taxpayers an average of $50,000 per person. Speaking during the debate, he said $7 billion had been pumped into the bailout under the PNM and that the PP Government was committed to a further $13 billion, making a total of $20 billion. He estimated that there are 400,000 taxpayers in the country.
“Every single taxpayer in this country is about to take $50,000 of their own money and give it to Clico EFPA policyholders. They (taxpayers) have constitutional rights too,” he said.
Ramlogan said there was precedent for legislation staying legal challenges, namely sections 55 to 57 of the Bankruptcy and Insolvency Act. He said if an avalanche of legal challenges are allowed, the only persons who would benefit are the liquidator and lawyers.
“By the time they finish, all the milk from the cow done,” he said.
He said, however, that there is no moral obligation to pay product holders.
“This was a voluntary intervention and the State was not under any moral and legal obligation,” Ramlogan said.
A Parliament website poll showed that an average of 76.2 percent of persons polled supported both bills, but did not give a sample size. The legislation was also approved in the House of Representatives on Thursday and was passed in the Senate without amendment. Both debates took 27 hours over four days in total.
They were among the last business to take place at the Red House on Abercromby Street for two years, as the Parliament temporarily relocates to Tower D at the Waterfront on Wrightson Road during restoration.