K
Keith R
Guest
Re:What Banks closed? Kidding me?
TW,
A couple of points:
1. The financial failures of the 1980's were not all financieras. Some of them were (supposedly) regulated & supervised S&Ls. I know, my suegra had a savings account tied up in one of those failures, and believe me, she was not getting 40% interest on her account! But she did deposit it at the time because peso accounts received more than she could get in dollar accounts in the US. Sound familiar?
2. Yes, the government made sure the depositors got their money back -- but they took 10 years to do it! When the S&L my suegra used went under, the peso was US$1=DR$3, when she finally was repaided her money (with no interest, of course), the exchange rate was US$1=DR$12.5. Yeah, she lost money big time. Not to speak of the problem of not being able to touch that money for 10 years! Can you afford to have your money tied up for ten years, not earning interest and subject to high echange risk?
Can you really assure people that a future DR government wouldn't act this way in case of a round of bank closures? As I read current law, there is nothing to prevent it. And in any case, we all know that the law on the books in the DR and the actual practice, particularly when it comes to the government's obligations, "es otra cosa." And you cannot depend on the courts for help unless the judge is your brother or accepts a hefty "incentive" payment.
3. One of the DR banks went bankrupt in the 1990's while I lived there (1995-99), and it wasn't Metropolitano. So it's not just an issue of a long ago era. And rumors were rife in the DR banking community in 1998 of another possible bankruptcy (you'd be surprised at the name), which thankfully did not happen, mostly because the Central Bank worked quietly behind the scenes to avert it and kept the matter out of the newspapers somehow until the mini-crisis passed.
4. How solid the banks appear and how solid they actually are differs. Yes, bank supervision has improved immensely since 1989, but since it was improving from "poor," "improving" is not necessarily as good as it needs to be. The DR banks have cleaned up their act alot, but more work needs to be done. Someone I am close to was a DR bank auditor for four years, and the stories I heard could make your hair stand on end. Many times the top officers, and certainly the Boards of the individual banks, do not know all their trouble spots and how vulnerable they are. And, TW, I am not talking about small, new banks.
5. "The Bolsa de Valores is a safe bet"? Honestly, TW, that is not a responsible statement, and frankly surprising coming from what I regard as a savvy guy. The Bolsa is unregulated, basically unsupervised, and you are getting the good rates PRECISELY because it is risky. Risky does not mean "safe." IT IS A BET, a gamble. Yes, it may be a calculated risk with strong probability of a return and perhaps a good one at that, but that does not, by any definition I know of in legal and financial circles, make it "safe." You may not get your money back and there is legal recourse in the DR if that happens. There is risk and it should be acknowledged. Short terms just make the risk more manageable.
6. Hipolito's government has not shown me anything close to what I would consider fiscal responsibility, and we have at least 2 1/2 yrs more of his "management" (if you can call it that), maybe longer if he wins his bid to change the constitution and cons the Dominican people into voting for him again. Unless he cleans up his act soon, he can do immeasurable harm to the Dominican economy and the peso. That thought alone would keep me out of peso savings accounts. A peso checking account to meet current, short-term needs, okay, but nothing less liquid.
Respectfully,
Keith
TW,
A couple of points:
1. The financial failures of the 1980's were not all financieras. Some of them were (supposedly) regulated & supervised S&Ls. I know, my suegra had a savings account tied up in one of those failures, and believe me, she was not getting 40% interest on her account! But she did deposit it at the time because peso accounts received more than she could get in dollar accounts in the US. Sound familiar?
2. Yes, the government made sure the depositors got their money back -- but they took 10 years to do it! When the S&L my suegra used went under, the peso was US$1=DR$3, when she finally was repaided her money (with no interest, of course), the exchange rate was US$1=DR$12.5. Yeah, she lost money big time. Not to speak of the problem of not being able to touch that money for 10 years! Can you afford to have your money tied up for ten years, not earning interest and subject to high echange risk?
Can you really assure people that a future DR government wouldn't act this way in case of a round of bank closures? As I read current law, there is nothing to prevent it. And in any case, we all know that the law on the books in the DR and the actual practice, particularly when it comes to the government's obligations, "es otra cosa." And you cannot depend on the courts for help unless the judge is your brother or accepts a hefty "incentive" payment.
3. One of the DR banks went bankrupt in the 1990's while I lived there (1995-99), and it wasn't Metropolitano. So it's not just an issue of a long ago era. And rumors were rife in the DR banking community in 1998 of another possible bankruptcy (you'd be surprised at the name), which thankfully did not happen, mostly because the Central Bank worked quietly behind the scenes to avert it and kept the matter out of the newspapers somehow until the mini-crisis passed.
4. How solid the banks appear and how solid they actually are differs. Yes, bank supervision has improved immensely since 1989, but since it was improving from "poor," "improving" is not necessarily as good as it needs to be. The DR banks have cleaned up their act alot, but more work needs to be done. Someone I am close to was a DR bank auditor for four years, and the stories I heard could make your hair stand on end. Many times the top officers, and certainly the Boards of the individual banks, do not know all their trouble spots and how vulnerable they are. And, TW, I am not talking about small, new banks.
5. "The Bolsa de Valores is a safe bet"? Honestly, TW, that is not a responsible statement, and frankly surprising coming from what I regard as a savvy guy. The Bolsa is unregulated, basically unsupervised, and you are getting the good rates PRECISELY because it is risky. Risky does not mean "safe." IT IS A BET, a gamble. Yes, it may be a calculated risk with strong probability of a return and perhaps a good one at that, but that does not, by any definition I know of in legal and financial circles, make it "safe." You may not get your money back and there is legal recourse in the DR if that happens. There is risk and it should be acknowledged. Short terms just make the risk more manageable.
6. Hipolito's government has not shown me anything close to what I would consider fiscal responsibility, and we have at least 2 1/2 yrs more of his "management" (if you can call it that), maybe longer if he wins his bid to change the constitution and cons the Dominican people into voting for him again. Unless he cleans up his act soon, he can do immeasurable harm to the Dominican economy and the peso. That thought alone would keep me out of peso savings accounts. A peso checking account to meet current, short-term needs, okay, but nothing less liquid.
Respectfully,
Keith
eople who don't read..