So if the Banking collapses started it all....

Conchman

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Most people would agree that the bank collapses started the economic bust - mostly via the exchange rate.

But what were Hippo's options besides bailing out all depositors? If he didn't bail them out, what would the consquences have been? Would it have adverted the exchange rate delimna?

Can the bank failures themselves be attributed to Hippo by not acting on warnings? There were rumours around for 1 year before Bankinter actually went bust.

Just wanted an overall review of this, please give me some ideas what you think.
 

SalsaBlondie

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Conchman said:
Most people would agree that the bank collapses started the economic bust - mostly via the exchange rate.

But what were Hippo's options besides bailing out all depositors? If he didn't bail them out, what would the consquences have been? Would it have adverted the exchange rate delimna?

Can the bank failures themselves be attributed to Hippo by not acting on warnings? There were rumours around for 1 year before Bankinter actually went bust.

Just wanted an overall review of this, please give me some ideas what you think.

i dont think personally the bank failures were because hippo did not act, i think nothing that huge can be averted once in action.. but once it came to a head, why did he allow the banks to pay off the largest investors to the full deposit amount not only the insured amount, therefore leaving nothing for the little guys who had their whole life savings in there? that was cruel. he paid 97% of the banks money to 3% of depositors. (something like that if i remember correctly)... this also made everyone stop believing in the banking system in the DR (look at the high interest rates to seduce people).

i think it did hasten the economic collapse but i also think it was on a downward spiral beforehand... like everyone blaming 9/11 here for the economy when in reality.. the stock market had been slowly declining a good 2 years before 9/11.
 

Conchman

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You mean the little guys were not able to collect their deposit insurance money? Couldnt they sue the government since they deposited this money under the assumption it was insured?
 

SalsaBlondie

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Conchman said:
You mean the little guys were not able to collect their deposit insurance money? Couldnt they sue the government since they deposited this money under the assumption it was insured?

i'm looking for articles on this now, that is definitely what i read last year. here is an interesting article anyway:
http://www.miami.com/mld/miamiherald/business/6136930.htm?1c

i dont know the answer to that (suing the gov't), maybe they were promised their money "eventually" but that was not my understanding at the time.
 

Dolores1

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The goverment paid back most of the money, with very few exceptions, mostly political. On the contrary, the big complaint is that the Mejia government violated Monetary Law stipulation that said bank deposits were insured only up to RD$500,000. If the government had adhered to that clause, the theory is that there would have been money to return the money to everyone up to that amount, and pay off what was possible to those with more than that amount with the remainder of the depositors with the assets of the bank. Those that had their money in off shore banking or had big deposits knew they were taking a risk with their deposits because of the very high interest rates offered by that bank and all the scandals (including the Pepegate credit card case). Instead the government chose to destroy the value of several of the assets, including the insurance company, that had a portfolio of clients any company would have given a right arm for.

Check the DR1 news archives. Several times we reported on the number of 80 something big big depositors that had by far most of the deposits in the bank and were repaid in full, with some exceptions that for political reasons were deposited in the Central Bank, making high interest rates for those involved.

The main complaint is that it has been so easy up to now to just pass the bill on to Dominican people in general, in inflation and depreciation of the peso, and let those that made millions, from financial schemes with the complicity of the government, go enjoy their millions.
 

SalsaBlondie

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Dolores said:
The goverment paid back most of the money, with very few exceptions, mostly political. .

dolores,
ive been doing research on this .. thank you for the input. it's correct what you say.. i misunderstood the first time around.

the only thing we can hope for now is that fernandez does a better job than mejia did. :( and is less corrupt (can't aim for perfection now, can we).

http://www.cato.org/pubs/fpbriefs/fpb83.pdf
 
Apr 26, 2002
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Cato Institute. Excellent link. Thanks SalsaBlondie.

In typical Latin American fashion, the ostensible "champion of the poor", the Hippo-led PRD, in essense stole from the poor and middle class to pay off the influential rich - in this case the wealthy speculators in the Baninter.
 

mondongo

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Please do not propagate the myth that the Banniter collapse caused the DR problems. Mejia had already stolen/borrowed TWICE that amount before the collapse. Check the DR1 Forum archives and you will see plenty of analysis and facts PRIOR to the Banniter collapse.

The CATO institute article does a dis-service by intimating that the Banniter collapse cause the economic collapse in the DR. The article's intent is not to show why the DR economy collapsed. Its intent is to ,yet again, voice an American opinion on why the DR should dollarize.
 
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mondongo said:
The CATO institute article does a dis-service by intimating that the Banniter collapse cause the economic collapse in the DR. The article's intent is not to show why the DR economy collapsed. Its intent is to ,yet again, voice an American opinion on why the DR should dollarize.
But the Cato Institute does not hold typical American perspectives, if Criss Colon and Texas Bill are examples of it. For example, the Cato Institute says the following in an article promoting the eliminatiion of the IMF:

"The main losers in a world without the fund would be the businesses that today lobby so heavily for it. The IMF's proclivity to bail out the profligate creates what economists call a moral hazard: Western investors make irresponsible decisions in the belief that they will be protected regardless of the results. In effect, the fund is promoting capitalism without loss, rather like Christianity without hell."

I love the last line.

Indeed, the pains of the DR are multifacited: Hippo's reckless (or worse) borrowing and spending, the Baninter collapse (and, even more so, Hippo's reckless -- or worse -- handling of it), and the unholy conglomeration of JP Morgan, Morgan Stanley, the IMF, et. al.
 
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Narcosis

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mondongo said:
Please do not propagate the myth that the Banniter collapse caused the DR problems. Mejia had already stolen/borrowed TWICE that amount before the collapse. Check the DR1 Forum archives and you will see plenty of analysis and facts PRIOR to the Banniter collapse.

The CATO institute article does a dis-service by intimating that the Banniter collapse cause the economic collapse in the DR. The article's intent is not to show why the DR economy collapsed. Its intent is to ,yet again, voice an American opinion on why the DR should dollarize.

Totally agree with you. The Baninter collapse is simply the effect of a series of causes that the PRD fueled. Starting with the simple fact they came into power in 2000 was already a negative sign for many, but just a few months into the term they came out with the "paquetico" fiscal reform which included the 1.5% on gross sales, this stupid and illegal reform was just the tip of the iceberg.

A forced and planned depreciation of the exchange rate from 16 to 20 to 1 was the actual spark that started major disaster. The PRD economic team and monetary council thought that a slight depreciation of the peso would help dollar-producing industries and thus they (PRD) would increase tax collection from the proposed growth of the favored tourism and free zone industries. What they lacked to realize is that hundreds of Dominican and foreign owned industries capitalizing on the great economic stability of the 90's, held dollar loans at foreign banks at lower than DR bank rates to finance expansion as well as new investments.

The planned depreciation caused hundreds to be forced to pay more pesos per dollars to cover these loans as well as anticipation of further depreciation, caused the snowball effect of pesos chasing dollars.

The above as well as the goverment taking loans from Baninter and other local banks to finance internal spending as well as non-payment in scandals such as Pepe-gate started to take hold.

But the mother of all stupidity came when the goverment actually fostered mass confusion and anarchy by publically condeming Baninter for fraudulent actions unlawfully without going through the correct judicial procedures and seizing all of the banks assets unlawfully. The PRD managed to destroy perfectly profitable business of the group, sell off at below market value to Scotiabank and others such as the Listin Diario and RNN were maintained by subsidies for electoral reasons. They caused the last major stampede of depositors and the whole banking system almost failed because of this.
 

CyaBye3015

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Porfio_Rubirosa said:
and the unholy conglomeration of JP Morgan, Morgan Stanley, the IMF, et. al.

How incredibly naive, 99% of the DR?s financial problems can be directly associated with local corruption!! Don?t blame the rest of the would!!!
 

SalsaBlondie

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CyaBye3015 said:
How incredibly naive, 99% of the DR?s financial problems can be directly associated with local corruption!! Don?t blame the rest of the would!!!

why don't we make the DR another US territory! that would for sure solve all their problems! :p they already have all the ones we do: poverty, bad public education, high taxes, racism, bad health care system.. murder.. hmmm..
 

Escott

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mondongo said:
Please do not propagate the myth that the Banniter collapse caused the DR problems. Mejia had already stolen/borrowed TWICE that amount before the collapse. Check the DR1 Forum archives and you will see plenty of analysis and facts PRIOR to the Banniter collapse.

The CATO institute article does a dis-service by intimating that the Banniter collapse cause the economic collapse in the DR. The article's intent is not to show why the DR economy collapsed. Its intent is to ,yet again, voice an American opinion on why the DR should dollarize.
Well it would be a CATO Institute opinion why the DR should dollarize but other than that I agree with Mondongo. The theft started with the Sovereign Bonds and continued into every stinking 100 million loan that came just about daily for a long time.

The people in Baninter should have had their balls cut off and NOT bailed out but the difference to the DR wasn't as great as all the other stuff.

Scott
 

CyaBye3015

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SalsaBlondie said:
why don't we make the DR another US territory! that would for sure solve all their problems! :p they already have all the ones we do: poverty, bad public education, high taxes, racism, bad health care system.. murder.. hmmm..

I, for one don't think we need another country "sucking off the USA's public tit," and I'm not going to get into a debate about the merits of either country's social systems, I think that the number of Dominicans trying to escape that island speaks volumes. I certainly do not remember ever hearing of anyone drowning trying to escape from the USA!

BTW, I love the DR.

Joe
 

SalsaBlondie

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CyaBye3015 said:
I, for one don't think we need another country "sucking off the USA's public tit," and I'm not going to get into a debate about the merits of either country's social systems, I think that the number of Dominicans trying to escape that island speaks volumes. I certainly do not remember ever hearing of anyone drowning trying to escape from the USA!

BTW, I love the DR.

Joe

i'm going to stop joking on this forum.
:paranoid:
 
Apr 26, 2002
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CyaBye3015 said:
How incredibly naive, 99% of the DR?s financial problems can be directly associated with local corruption!! Don?t blame the rest of the would!!!
Here we go again! Wake up and smell the coffee!

According to Websters, a "conspiracy" is:
"CONSPIRACY, n. [L. See Conspire.]

1. A combination of men for an evil purpose ...

3. A concurrence; a general tendency of two or more causes to one event."

Wall Street knew that the money loaned to the DR government at exhorbitant rates of interest would be stolen. After all, most of the money had shallow (if any) project earmarking and no guidance or project completion requirements attached, and similar money had been stolen before in the DR and other Latin American countries. The Dominican government knew that it was going to steal the money, so didn't care about the interest. Wall Street also knew that the DR government could not pay it back without a bailout by the IMF - an institution by charter essentially controlled by the US (though with the participation of other wealthy nations) with which Wall Street shares interlocking directorates. Finally, the IMF knew that it was going to bail out Wall Street at its absurd rates of interest and make the Dominican poor and middle class pay it all back through imposed austerity. After all, it had done so many times before even though treatis after treatis had been written that this was morally flawed.

Finally, where was it written that the Dominican people don't deserve the blame for electing crooks. Of course they do. But remember also that this loan money has funded the crooks' election campaigns and patronage to the tune of millions of dollars - artificially strengthening them politically. Thus, the great Wall Street/IMF/US conspiracy continues to weaken democracy and the establishment of strong institutions in Latin America.

Really, there is nothing new or not obvious here. It's just that Americans always think it's anti-American to mention it. What's the old line: "The guilty flee where nobody pursue".
 

CyaBye3015

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Porfio_Rubirosa said:
Here we go again! Wake up and smell the coffee!

According to Websters, a "conspiracy" is:
"CONSPIRACY, n. [L. See Conspire.]

1. A combination of men for an evil purpose ...

3. A concurrence; a general tendency of two or more causes to one event."

Wall Street knew that the money loaned to the DR government at exhorbitant rates of interest would be stolen. After all, most of the money had shallow (if any) project earmarking and no guidance or project completion requirements attached, and similar money had been stolen before in the DR and other Latin American countries. The Dominican government knew that it was going to steal the money, so didn't care about the interest. Wall Street also knew that the DR government could not pay it back without a bailout by the IMF - an institution by charter essentially controlled by the US (though with the participation of other wealthy nations) with which Wall Street shares interlocking directorates. Finally, the IMF knew that it was going to bail out Wall Street at its absurd rates of interest and make the Dominican poor and middle class pay it all back through imposed austerity. After all, it had done so many times before even though treatis after treatis had been written that this was morally flawed.

Finally, where was it written that the Dominican people don't deserve the blame for electing crooks. Of course they do. But remember also that this loan money has funded the crooks' election campaigns and patronage to the tune of millions of dollars - artificially strengthening them politically. Thus, the great Wall Street/IMF/US conspiracy continues to weaken democracy and the establishment of strong institutions in Latin America.

Really, there is nothing new or not obvious here. It's just that Americans always think it's anti-American to mention it. What's the old line: "The guilty flee where nobody pursue".

OMG, I'm green with envy! If only the rest of us had your wisdom and insight, perhaps some day I'll know everything too!!
 

Seachange

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Porfio_Rubirosa said:
Wall Street knew that the money loaned to the DR government at exhorbitant rates of interest would be stolen. After all, most of the money had shallow (if any) project earmarking and no guidance or project completion requirements attached, and similar money had been stolen before in the DR and other Latin American countries. The Dominican government knew that it was going to steal the money, so didn't care about the interest. Wall Street also knew that the DR government could not pay it back without a bailout by the IMF - an institution by charter essentially controlled by the US (though with the participation of other wealthy nations) with which Wall Street shares interlocking directorates. Finally, the IMF knew that it was going to bail out Wall Street at its absurd rates of interest and make the Dominican poor and middle class pay it all back through imposed austerity. After all, it had done so many times before even though treatis after treatis had been written that this was morally flawed.

Finally, where was it written that the Dominican people don't deserve the blame for electing crooks. Of course they do. But remember also that this loan money has funded the crooks' election campaigns and patronage to the tune of millions of dollars - artificially strengthening them politically. Thus, the great Wall Street/IMF/US conspiracy continues to weaken democracy and the establishment of strong institutions in Latin America.

Really, there is nothing new or not obvious here. It's just that Americans always think it's anti-American to mention it. What's the old line: "The guilty flee where nobody pursue".

This is absolutely on target. The Wall Street/IMF/US conspiracy as it relates to Latin American debt reminds me of how the American Welfare system works (or doesn't). Theorectically, it is designed to assist low-income families. However, practically, it supports and finances multi-million dollar companies which do nothing to end the cycle of poverty.

Lets call the IMF/Wall Street crowd what they are - "poverty pimps."
 

CyaBye3015

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Seachange said:
This is absolutely on target. The Wall Street/IMF/US conspiracy as it relates to Latin American debt reminds me of how the American Welfare system works (or doesn't). Theorectically, it is designed to assist low-income families. However, practically, it supports and finances multi-million dollar companies which do nothing to end the cycle of poverty.

Lets call the IMF/Wall Street crowd what they are - "poverty pimps."

OMG, another attempt to suggest the Dominican Republic is a victim!! Victim of this, Victim of that!! I suggest, if they want an answer to their problems, they look in the mirror!!