Bailout money for the rich, crumbs for the poor

Bailout money for the rich;
nothing for the hungry poor

Albay Governor Joey Salceda, an economic adviser to President Arroyo, laments that the world’s richest countries, notably the United States and England, are spending a total of $6.8 trillion to bail out banks and investment houses made bankrupt by the financial crisis sweeping through America and Europe.
Yet, when food prices doubled early this year bringing to the precipice of hunger up to 130 million very poor, all these rich countries could scrounge was $850 million to bail these people out of hunger.
“The elite controls governments and in a crisis, they save their ilk first,” sneers Salceda who made his pile as one of Asia’s leading analysts. With the multi-trillion bailouts, the rich countries will be piling up huge debts chargeable to their taxpayers. Salceda frets that “funds for social services and international development will be displaced, causing income inequality to deteriorate.”
How true.
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That the small people will be the biggest victims of the financial crash in America is amply demonstrated by the way Philamlife is treating its plan holders in the Philippines. Philamlife is the subsidiary of global insurance giant AIG which went bankrupt on Sept. 15 and had to be bailed out by the US government with $85 billion in expensive rescue fund plus another $37 billion later.
A harried mother of three went to Philamlife offices on Dasmariñas, Cavite to inquire if she can cash in her Brilliance University educational insurance. She was told she wouldn’t get anything. Zero. Zilch. For her P87,000 initial payment, she will get a cash surrender value of P1,055 -- but only in the second year.
By any measure, this seems to me like a big swindle. Even banks, if you place a time deposit and want to get out, you pay a termination fee of just 20 percent. With Philam, the pretermination fee is 100 percent. You lose all your money. They take away your money. Just like that. Cannot the Insurance Commission or the SEC do something about this?
What grates the poor housewife is that the people at Philamlife sounded and acted even cold, impersonal, haughty and arrogant. Something like, “if you want your money back, maghintay ka, bruha!”
Wow! And to think that Philamlife is for all practical purposes bankrupt. Its mother company, AIG, owes the US government at least $122 billion, money it cannot possibly raise considering the debts it has piled up, about $450 billion in credit default swaps (CDS) much of it can no longer be converted into cash. To raise money, AIG has to sell its assets including Philamlife.
The sale clearly obscures the outlook of Philamlife. What are the chances of the new owners of Philamlife honoring Philamlife’s obligations?
***
Sen. Chiz Escudero has filed a bill increasing the insurance cover of deposits to P500,000 from the present P250,000. The measure also mandates the Philippine Deposit Insurance Corp. (PDIC) to tighten supervision over banks, check abuses of bank owners and executives as regards pay and bonuses, and ensure regular, prompt and transparent disclosure of financial condition.
The bill affirms the power of the PDIC to invest in banks. This is the Philippine equivalent of a contingent bailout if the financial crisis abroad worsens and starts sweeping through Manila.
In the meantime, our banks and financial houses seem to be on a sound financial footing. Banking, however, is a confidence game. Once a bank loses the confidence of its clients and depositors, the institution, no matter how old, venerable and seemingly stable, can be toppled overnight.
Also, clients, depositors and investors remember who treated them well in good times. And bad.

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