FT echoes accusations of “knowingly profiting from murder” against World Bank, but not mistakes by bank regulators?

Sir, Shawn Donnan’s “Lawsuit” of March 9, has left me dumbstruck.

In 2002-2004 I was an Executive Director at the World Bank (IFC) occupying the Chair that, among others, represents Honduras. In 2003, surely before Dinant and its late owner Miguel Facussé times, I have never heard about them, I visited some of those palm plantations in the Bajo Aguán region of Honduras.

In an Op-Ed I then wrote, I stated that I found these to be horrible, appalling; basically because to me it looked like that it “could be the mother of all poverty traps”, “ the borderline of lowest overall marginal cost, that is, where the least is paid to farmers for their labor”; and also because I always felt that “if we let globalization simply pursue the lowest marginal cost of labor, then Great Bad Deflation will inevitably come”.

But, as to the World Bank or the IFC “knowingly profiting from the financing of murder”? And of these being a detonator? “Lawyers lay out a build-up of violence before and after the IFC began lending to the company” I have to say no, no and no!

Could IFC, the World Bank, be lured into lending or investing in something that has something awful going on behind the curtains? Yes, that could happen to anyone. 

Could some individual from IFC and the World Bank be involved in something criminal? Of course, but from there to launch this type of accusations against the institutions as such, only damages without serving any purpose. How much seed of suspicions can you seed before you do irremediable damage?

Also could it not be that someone is knowingly exploiting some poor suffering Honduran farmers, in an ambulance chasing type of action? I do not know EarthRights, and I have absolutely no reason to suspect anything but good intentions on their part, but profiteering happens, and so one needs to always proceed with utmost care.

I am no longer an ED, and since I am no longer capable, in my profession, of making one to my conscience honest living in my Venezuela… I now belong to a Civil Society (don’t ask me to explain precisely what that means). And as a member of it I do my best to generate constructive advice to valuable institutions such as the World Bank (and, disclaimer, absolutely not only because my wife works there).

Sir, let me get back to how I have titled this letter: The Basel Committee for Banking Supervision has made some mindboggling and very dangerous mistakes. FT has not shown a willingness to clearly echo my concerns or even ask bank regulators for some very basic explanations. But, “without fear and without favour”, you now allow this against the World Bank to be published. How come the differential treatment? Could not bad regulations be a murder weapon?

PS. Nowadays I hope for robots to take care of those palm plantations; and by taxing a bit those robots, be able to provide the poor farmers of Honduras a better chance to place themselves closer to something more profitable for them, and foremost for their children and grandchildren.

@PerKurowski

Mme Lagarde, IMF owes Greece and it’s creditors, to explain and correct what was done wrong with bank regulations

Sir, Shawn Donnan writes: “There is broad agreement that the fund and its European partners badly miscalculated the extent of the negative impact of the punishing reforms and severe austerity imposed on Greece”, FT Big Read IMF “Lagarde eyes new act in Greek drama” August 14.

In 2011 during a Civil Society Town Hall meeting at the IMF I asked Mme Lagarde: “If bank regulators had defined a purpose for banks before regulating, we might have had a very different bank crisis, but not as large, systemic, and dangerous as this one…when are you going to require the regulators in the Basel Committee to openly and explicitly define the purpose of our banks… to see if we all agree? 

And Mme Lagarde answered: “My sense is that the most critical mission for the banks--and that is what we are trying to say when say that banks have to rebuild their capital buffers--is to actually finance the economy, first and foremost, and that should be really the critical mission”.

As is, now, some years later, banks still have to operate under the influence of credit-risk-weighted capital requirements, something that of course has absolutely nothing to do with adequately “financing the economy”.

So how can IMF or its European partners get anything right about Greece, if it does not want to acknowledge, or even dare to understand, how current regulations distorts the allocation of bank credit?

Those distortions, by favoring so much public debt, caused the Greek tragedy and, by discriminating against the fair access to bank credit of the “risky”, like SMEs and entrepreneurs it, stops the Greek tragedy from ending.

Mme Lagarde: IMF owes the Greek, and Greece’s creditors, to explain and to correct what was done wrong when regulating banks. That must come before anything else.

What I would do? Make sure banks needed to hold slightly less capital when lending to the private sector than when lending to government bureaucrats.

@PerKurowski

If the ordinary citizen, not just “civil society”, is not part of the climate change challenge, we are all toast.

Sir, my first reaction when I read Nicholas Stern’s “World leaders must act faster on climate change” September 30, was “How could they? There are none.

When about a decade ago I was an Executive Director at the World Bank, I often held that since at our board no one spoke for the world at large, and really only parochial interests were represented, we should perhaps in the name of transparency, rename us the World Pieces Bank, or perhaps the World Puzzle Bank.

And I also held and hold that if we allow acting on climate change to become just another rent seeking opportunity, or a political agenda pushing opportunity, we are all toast!

Having had the opportunity of flying over many environmentally affected areas, I really do not need a lot of scientifically studies to know that something is very wrong with how we maintain our planet, or our pied à terre as I like to call it. But what can we do about it?

I have no definitive answers of course, but I do firmly believe that impeding “climate change” to become an issue which belongs solely to an elite, and engaging the full attention of the ordinary citizen, is an absolute must.

For example when reading about the Copenhagen Climate Change Conference of 2009, I got upset about how often it was implied that the solution was the exclusive responsibility of the rich countries, as if the poorest human being, in the poorest of the countries has not exactly the same right, and duty, as an indigenous of the world, to participate in the challenge.

And to stimulate such citizen participation, and by which I mean immensely more than “civil society”, creating a visual aide, such as an environmental Google-map that tracks the climatic and environmental changes, and make it accessible in all schoolrooms around the world, could help.

If the threat to our earth is truly serious, something that I have no real evidence to doubt, it is clear that we cannot leave its solution to politicians, and green rent seekers. If we do so we are toast.

Sunshine rules might signify more darkness

Sir, those “Sunshine rules” you refer to August 23, namely the Sec ordering US-listed companies to disclose the payments they make to the host governments, are absolutely great news… for those countries where civil society is strong enough to matter... and governments have at least the intention of listening to it.

But, in those countries where civil society is truly weak, something which so often is the case of countries suffering the curse of abundant natural resources, those sunshine rules might only mean more darkness, as they would tend to exclude the sort of more reasonable or least unethical extractive industry corporations from participating, leaving the field open to the truly unreasonable and least ethical. 

Why not invest instead all these efforts in supporting the development of strong “independent” civil societies which can demand better results where it really matters, not in the corporate reports of companies listed in the stock-exchanges of developed countries, or in an annual report of a well intention NGO, but on their own oil-fields and mines? 

Now if the SEC would follow up this by approving a list of countries where a reasonable active participation of civil society existed, and in which therefore these sunshine rules would apply, and a list of those countries where they are impossible to apply, that could be more helpful, not only for us oil cursed citizens, but even for their own listed natural resource companies. 

PS. One of the main promoters of “sunshine”, which is good, is the Extractive Industries Transparency Initiative, and the Dodd-Frank Act even makes a direct reference to EITI. 

Nonetheless, EITI, as its second principle states: “We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.”, and that to me, as an oil-cursed citizen, is a totally unacceptable principle. 

I believe that the individual citizens will always, on average, make a better use of any natural resource blessings, than their government managing all of these… and using all of these so as to guarantee themselves some truly submissive citizens.