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mt/en/newsdetails/news/national/National-Bank-discussion-on-State-TV-turnsnasty-20120603 National Sunday 3 June 2012 - 15:00

National Bank discussion on State TV turns nasty

A rare opportunity to thrash out the issue goes begging, as televised debate is drowned by constant interruptions, angry outbursts and irrelevant digressions. In part four of MaltaTodays ongoing analysis, last nights special edition of Dissett is dissected.

Current affairs programme Dissett attempted to delve into the National Bank saga, as the actual discussion often struggled to rise above the level of constant interruption and thinly-veiled antagonism Raphael Vassallo

Not since the movie 'Dear Dom' has the forced takeover of the National Bank of Malta been discussed in detail on any comparable forum... least of all a televised debate.

Yesterday's edition of Dissett sought to redress this omission, purporting to allow space for 'both sides' to supply their own versions of what happened in that chaotic whirlwind that was the first week of December, 1973.

But despite Reno Bugeja's best efforts to imbue the programme with some intelligible format and a little token impartiality on his own part (he even ended the show by expressing his wish that 'the shareholders get compensation, if that's what they deserve'), the actual discussion often struggled to rise above the level of constant interruption and thinly-veiled antagonism.

But first, the guests. On one hand there was Jeremy Cassar Torregiani: great-grandson of the National Bank's original founder, and representative the interests of some 350 dispossessed shareholders who are still fighting for compensation 40 years later.

In the other corner (for the second half of the show, at any rate) sat economist and financial consultant Alfred Mifsud: who appeared in his own personal capacity, but seemed at moments to be talking directly on behalf on the Central Bank itself... attempting to justify that institution's conclusion that the NBM was "not only illiquid, but also insolvent".

(Before proceeding I feel I must correct a mistake that crept into an earlier article in this series, when I erroneously identified the same Alfred Mifsud as "a former Central Bank employee". This was inaccurate: he was actually an employee of Barclays Bank at the time. The error is regretted.)

Peppering the space in between were cameos by economist John Consiglio, and (towards the end) Finance Minister Tonio Fenech: who significantly acknowledged that his government now feels it has a "moral obligation" to reach some kind of agreement on this long-drawn out issue... though he was less forthcoming when asked why that same government had also tried to derail ongoing legal proceedings, on the dubious grounds that the entire case was now time-barred.

All in all, the stage was set to finally address at least one or two of the unanswered questions that have dogged this thorny issue for 38 years. Questions like: what caused the run on the National Bank of Malta in December 1973? Why did the Central Bank fail to honour its legal commitment to act as lender of last resort? Was the government justified in issuing 'emergency legislation' that permitted the newly set-up 'Administrative Council' - which effectively replaced the bank's legitimate board at Mintoff's orders - to bypass any law it deemed fit, so long as it had the Prime Minister's blessing?

And perhaps most crucial of all (at least, in the context of this particular discussion): on what basis did the Central Bank actually decide that the NBM was "insolvent" in the first place... when the same bank had only just registered record profits for both 1971 and 72, and had projected even higher profits for the following year?

Revolving around this latter question are numerous smaller satellites of uncertainty. Why was no official explanation for the Central Bank's diagnosis ever forthcoming during the next four decades? What has kept the Central Bank from publishing the internal inspection reports on which its conclusion was based? And why did the same Central Bank reach diametrically opposed conclusions regarding the liquidity and solvency of the same bank (not to mention the recoverability of its so-called 'bad debts') just a few months later, by which time it was no longer the privately-owned 'National Bank of Malta' but the newly repackaged, stateowned 'Bank of Valletta'?

Who's asking whom?

Some of these questions were in fact raised during the programme; and in a curious twist to the natural order of things, they were asked mostly by Cassar Torregiani himself of Reno Bugeja... who found himself trying (in most cases unsuccessfully) to answer them, oblivious to the fact that in so doing, he momentarily appeared to be defending the actions of the Mintoff government, though he had no remit to do anything of the kind.

Equally absurd was the same Bugeja's insistence on challenging Cassar Torregiani to declare whether or not he had faith in the "integrity" of the former Central Bank governor, R. J. Earland. When a visibly perplexed Cassar Torregiani replied that Earland was never even present for the meetings between shareholders and Central Bank in December 1973 - pointing out that it was Prime Minister Mintoff who had conducted those meetings, effectively replacing Earland as unofficial 'governor' - he found himself confronted with the 'facts' that: a) Earland was "English", and therefore (or so Bugeja seemed to be arguing) automatically above all kind of suspicion or reproach; and b) that the same Earland had much later chosen to retire in Malta.

"Why would an Englishman of integrity, with a sense of fair play, choose to settle here in Malta, if he doubted the rule of law?" Bugeja asked, with the look of a card player placing his trump card on the table. Cassar Torregiani promptly returned fire with a question of his own: why did the same Earland resign as chairman of the Central Bank in March 1974, just a few months after having been sidelined and excluded from all proceedings by Mintoff, who effectively took over his role as unofficial Central Bank governor?

Short of asking Earland himself - who has to date avoided any public statement on the NBM issue - the chances are we will never know either way. As a viewer, my own question was (and still is): why on earth was so much time wasted discussing Earland's choice of retirement destination... when the real questions concern whether the National Bank of Malta had been unfairly (and unlawfully, according to the plaintiffs in a 38year-old lawsuit) devalued and appropriated by the government of the day?

Here is where John Consiglio, a respected economist, may have shed a little light on the issue. And to be fair he was the only one who came close to acknowledging what should really have been the starting point of the entire discussion: i.e., that the sequence of events had to be seen in the 'context of the time'.

Pointing out that the shareholders had been given a deadline of less than 24 hours to hand over their shares without compensation to government, Consiglio questioned whether this constituted the sort of 'peaceful approach' (as he described it) necessary to take such a momentous decision as to divest oneself of ownership of a profitable bank.

Shuffling through his papers, Cassar Torregiani reminded viewers that many of the shareholders were not merely denied a 'peaceful approach'... they had been subject to physical and psychological intimidation; and

by the time the transfer of shares was effected, Mintoff had already passed legislation enabling the Administrative Council to bypass any law they deemed fit... raising the possibility (already threatened by Mintoff) that the same shareholders could lose their limited liability and become personally liable for any loss (real or engineered) attributable to the same bank.

Drowning debate

But it was with the advent of Alfred Mifsud for the second half that matters got decidedly jumpy. Mifsud roundly dismissed all suggestions of unlawful or improper behaviour on government's part: insisting instead that the bank had all along been a victim of the unprofessional attitude of its former proprietors. He described the entire operation as a 'one-man show', and accused the previous family-run administration of gross mismanagement.

As a former Barclays employee he claimed to be privy to private conversations with colleagues at the time, in which other bankers professed disbelief at the banking practices adopted by the NBM board of governors.

Much more central to his own thesis was the argument - also aired earlier on his blog - that the Central Bank did not have a legal obligation to act as lender of last resort at all... because the NBM was at the time "insolvent".

This marked the beginning of a circular argument that could not (and quite possibly cannot) ever really go anywhere: Mifsud declares that the NBM was 'insolvent'; Cassar Torregiani demands to know on what basis the assumption was made. Mifsud replies that it is the Central Bank's prerogative to take such decisions, and that it had based its opinion on professional evaluations and internal reports. Cassar Torregiani asks to see these reports and evaluations; Mifsud replies that he is not answerable for the Central Bank (which incidentally makes one wonder why he was answering questions about its operations in the first place). Mifsud repeats his conviction that the Central Bank took its decisions for all the right reasons... whereupon the whole discussion simply starts all over again.

Only it gets slightly louder and a good deal more belligerent each time... with Alfred Mifsud at one moment practically shouting: "Be quiet, I am talking now" ('Oqghod kwiet, ha nitkellem jiena'). After that, only invidiual soundbites could really be made out in the general hubbub: mostly Jeremy Cassar Torregiani repeatedly demanding to know whether a loan taken out by the Corinthia Group - deemed a 'bad loan' back in 1973 - was ever recovered by Bank of Valletta over the next 40 years.

Was this loan one of the 84% of 'unrecoverable' loans that were actually recovered shortly after the National Bank of Malta changed hands and became the Bank of Valletta? Or was it one of a handful of loans that returned a "file not found" reply, in a sample case study of 'bad' NBM loans ordered by the law courts?

If Mifsud answered this question in yesterday's Disset, his reply was lost to my ears in the confusion which characterized the final few minutes. To the best of my knowledge it remains one of the many questions that remain unanswered to this day.