Tuesday, March 27, 2007

Credit Union details come to light

Folks, you aren't going to believe it! The Lord Tories "implemented" a policy that was illthoughtout and not properly budgeted in order to win votes.

No, I'm not talking about the shadow toll fiasco that continues to cost NB taxpayers hundreds of thousands of dollars per month to pay for out of province drivers to use our best roads.

No, I'm not talking about the deathbed conversion by the Tories in 2003 to fixing the insurance problem that they failed to fix and saw New Brunswickers hosed by insurance companies for three more years.

No, I'm not talking about having an agreement-in-principle for Orimulsion but a failure to sign that deal and then going ahead with retrofitting a powerplant anyway and then finding out the other party is no longer willing to sign the deal.

No, I'm not talking about dramatically increasing adminstrative costs at NB Power to enable its priviatation and then backing down when that option is unpopular.

No, I'm not talking about allowing a city to negotiate a deal with a third party that the province will have to pay for and then, without participating in the process, ratifying the deal after the fact by pushing legislation through the legislature.

No, I'm not talking about undertaking unsustainable tax cuts and making up for the lost revenue through the back door by increasing gas tax by 50% and doubling of user fees.

No, I am not talking about 3 out of 7 budgets being called, essentially, lies by the Auditor General because they claim surpluses where deficitis exist.

No, I'm not talking about the HST rebate that was supposed to cost $45 million + adminstration that was budgeted for with $13 million and had no administrative plan.

I'm talking about another fiasco. It has been revealed that the reason for the for the $60 million payout to save the Shippigan credit union is because of Tory legislation that put the province on the hook for any failures in these organizations.

Worse, the Tories left the position of Superintendant of Credit Unions vacant for over three years which is what allowed this problem to come into place and then, because it was popular, and probably saved them a lot of their Francophone seats which they were expected to loose, they came up with the bizarre policy of protecting all assets to be lost by a credit union as opposed to the national standard for banks and province-by-province for credit unions which is up to $100,000.

Spinks says this should be some kind of a loan. But that obviously doesn't make sense. Thanks the the legislation passed by the Tories, there Credit Union has two options: 1) take the money the government is offering or 2) fold, have the government reimburse everyone who losses money and then open a new credit union. There is no option here but to stabalize the credit union. Moreover, it has been revealed in the legislature today that some of this money may be paid back, however the comptroller has said that it would be inproper to account for it as anything but an expense as there is no guarantee it will be paid back until such time as the credit union returns to profitability.

Spinks also says there should be an investigation of fraud, etc, well, because we thankfully have filled the long standing vacancy in the office of the Superintendant of Credit Unions it will be.

Also, I think it is dispicable that the Tories are alleging that this is a "sweetheart deal" being undertaken because former Liberal premier Camille Thériault is the president of the Credit Union Federation.

18 comments:

Anonymous said...

The Lord Tories "implemented" a policy that was illthoughtout and not properly budgeted in order to win votes.

No, really? Who would have ever thought ;)

Spinks said...

I'm with you on the ill thought out part on the PC's part. Who sets no maximum? Dumb.

But some answers need to be forthcoming. Look at the bad loans that were given without a proper risk analysis. That's ridiculous. You and I as taxpayers deserve to know what the heck went on up there and who was responsible. We're on the hook for it and we deserve some answers. I still can't get my head around this not being paid back...ever. That's just plain wrong. Pay it back over 50 years but just handing it over because of ineptness and incredibly poor management? The lion's share of the blame rests with the Caisse Populaire itself. Every New Brunswicker deserves and explanation...from them.

Muddy River Tory said...

Well it might have taken the PC's 7 years to get to that point in your opinion but I can see that with most of the very poor decisions made and many promises broken by the newbie Liberals so far.....they are more than halfway there already. It's going to be a long 4 years but alas....what is that "blue light" at the end of the tunnel. Ha Ha

scott said...

There no doubt that transparency and accountability should be front and centre --- numero uno --- on the agenda of every Liberal in Canada these days when dealing with taxpayer's dollars.

I'm with Spinks here, no matter how you spin past tory policies nbpolitico, there is no evidence anywhere on record to suggest that the Tories ever considered funnelling public funds into the hands of unaccountable deadbeats like your party has done.

The bottom line is the Liberals are being irresponsible with taxpayers money. And you think they would have learned their lesson after the federal sponsorship scandal? I guess not.

Anonymous said...

Scott, Spinks, take your Troy hats off for a few minutes.

It was the Tories that put in legislation that makes the Province liable for these losses. (I am not opposed to these guarantees as it protects depositors.)

It was the Tories that did not properly monitor the situation. THIS is the big problem.

The Liberals have been in power for 6 months; they are simply left with the mess to clean up.

Duh??

Marg

Muddy River Tory said...

I love it when people say that the PC's made the mess. Lets face it the people "AT THE CREDIT UNION" those inept and obviously unqualified managers and lenders made the problem. Don't blame it in the PC's who wanted to gurantee people's money. They had best interests at heart. Blame, investigate and then vigorously prosecute those responsible for making bad loans. Stop passing the buck.

Anonymous said...

The PC's didn't monitor the situation.

Would you guarantee someone's loan and not keep an eye on whether they were making payments?

Would you let them keep defaulting on payment month after month without taking corrective action?

Marg

Anonymous said...

First, I believe The Federal Government guarantees deposits to what? 60,000 dollars? How many people in the Acadian Peninsula, or NB for that matter have more than $60,000 stocked away as cash in a single bank account? Most people have their equity in homes, cars, and pension funds. Therefore, I don't think that NB guaranteeing the credit union deposits is a very big deal. I'd bet most deposits in that credit union are much less than 60 large.

Second, have heads been rolling yet? Is the same dude who managed the credit union before still in charge?

Third, why do we need an English and a French credit union system? I see that as another example of the segregated society we are building in NB. Separate schools, separate hospitals, separate cities, and separate credit unions. We are supposed to be a bilingual province, not two provinces mashed into one.

And finally, I wish TJ Burke, Kelly Lamrock, and the rest of the crowd would stop pointing fingers and saying: It's their fault. Goddamn it guys, you're the government now. Your job isn't to oppose Bernard Lord, he's up in Montreal now. It seems every problem in NB is due to
the population having the audacity to vote Blue for two elections. I'd love to hear a Liberal minister on the radio, and have him/her defend a position without resorting to finger pointing almost immediately.

BTW, where is Premier Shawn in all of this? Haven't heard much from him lately, unless he's riding helicopters in Alta, watching a hockey game, or going to Boston. Isn't he in charge of this whole shebang?

nbpolitico said...

I wish New Brunswick hansard was available. Both yesterday and today in Question Period and yesterday during debate on an opposition motion there was some very good explanation of exactly how the details of this worked.

I can't explain all of the details to the extent that they were explained, but it seems to me that the Tories were going to give the credit union a "loan" that did not have to be repaid unless they made major profits - unlikely or impossible for a not-for-profit organization - so the province would have ended up giving them the same amount of money as the Liberals have and then have had to have written off an additional $40+ million in loans.

Also, all of the problems propped up yes because of mismanagement but mismanagement that never would have been allowed to happen if there had been a Superintendant of Credit Unions appointed rather than left vacant.

If you are interested in the details, I would suggest you reques the Hansard, but be prepared to wait a while.

Rob said...

NBP makes a good point regarding the Hansard. Why isn't it available immediately via the Internet? Visit www.pialberta.org, and read their Democratic Renewal proposal. Government openness is a major part of their blueprint for a more democratic Alberta.

Their first point: Ensure openness in government and access to information.

It's too bad Bernard Lord's Democratic Renewal never went anywhere. I sincerely doubt any one in the government old boy's club (Red and Blue teams combined) have much interest in shaking things up.

Andrew said...

It is also by sheer coincidence Camille Theriault is the president of 'Mouvement des caisses populaires acadiennes' ;) It would be appreciated if the 'mess' was not cleaned up by forking out the tax dollars they just pulled out of my a$$. It's the liberal way baby. Just imagine if it was an NDP government :o

Cheers.

scott said...

Also, all of the problems propped up yes because of mismanagement but mismanagement that never would have been allowed to happen if there had been a Superintendant of Credit Unions appointed rather than left vacant.

You are wrong, nbpolitico. It's not all about the mismanagement, although it does factor in. It has more to do with the unrealistic and uncompetitive business approach [model] of the Caisse Populaire in Shippigan itself. In a competitive global economy, no company or credit union can afford to offer services to a limited pool of clients. You do this at your own peril. Moreover, does anybody in this thread believe in the will of a free market? Does this mean that every private company or credit union that's on the verge of bankruptcy be handed a bailout because they couldn't remain competitive in a free market society? If they are in NB, they are the responsibility of the provincial government, no? So what about owners of Nortel stock? Should they be reinbursed for their losses? The fact of the matter is this Credit union couldn't wash without being propped up by the government [and our money], that is the main issue here, not the fact that a bureaucratic position [Superintendant of Credit Unions] remained unfilled. What? Are these bureaucrats suddenly rainmakers wherein they can change the business climate to suit a bad business model? If that's what your saying, then I will drop my arguement and head home.

Another thing, people in New Brunswick didn't elect a government so that the rhetoric coming out of Fredericton becomes extremely overblown, so much so that a tax lawyer couldn't understand. People want clarity in this province, not complexity, on positions taken by its government, and it's obvious here that you, the Premier and a handfull of Ministers are not being honest with the people. If you were, then the books would be wide open and tabled on what happened in Shippigan, not to mention, why taxpayers on the hook for $60 million dollars and a tax hike to boot.

nbpolitico said...

The comparison has been made several times here and elsewhere between depositors at a credit union and people investing in the stock market. It is not a fair comparison.

I do not use credit unions and I agree with some of your points that their model is not all that great.

However, our views on the merits of the credit union model are not the point here.

Both the Liberal and PC Party in New Brunswick, and the governments of every province in Canada, choose to treat credit unions in a fashion similar to how the federal government treats banks. They insure the deposits held there and guarantee investors that they will not loose their money.

Whether we like the model or not or think that credit unions are a sound venture or not, is not relevant here.

The fact of the matter is that, for decades, the Government of New Brunswick has insured deposits in credit unions. New Brunswickers have been told that if they deposit their money into a credit union, it will be just as safe as if it were deposited in a bank and, if the credit union should fold, the government will pay up and they will not lose their savings.

This may or may not be the policy you like, but it is the law of New Brunswick and it has been for a long time.

Scott, this is not like "owners of Nortel stock ... [being] reinbursed for their losses". There is no law that protects investors of the stock market, there is one that protects investors in a credit union.

The government did not have an option to walk away from this matter. They had two options and two options only:

a) prop up the credit union at a cost of ~$40 million
b) let the credit union fold and pay out the deposits at a cost of $87 million

I think they took the more prudent option. It is unfortunate that they had to undertake this large expenditure, I agree, however you cannot fault the Liberals for the fact that:

a) the amount of deposits they would have to pay out is higher thanks to an amendment passed under the Lord government guaranting 100% of deposits

b) there was no Superintendant of Credit Unions for 3 years who would have been reviewing the books and who would have intervened when the trouble began at a far lower cost to government

As for the details not being available. They are, click here.

scott said...

The Caisse Populaire de Shippagan was put under supervision of the Brunswick Credit Union Federation Stabilization Board (operating as the Risk Management Agency) in June 2004, following concern over aggressive lending practices and a rapidly deteriorating loan portfolio.

Nice try. But being fully accountable as a minister is not allowing the Premier's office to force through a decision without debate and then react to all the public outrage after the fact, it is to debate the policy first to all your citizens and then let them decide. Your party didn't do that, mine did. As well, I guess your party's version of full acountabilty and transparency, differs from what I view as the details of a full audit.

Case: when your government came to power, you had no qualms about breaking open the books then [auditing them] so that you could have a sense of where the finances were so that you could figure out how to move forward on your party's excessive promises in your '06 election platform. I'm not going to complain because I fully expected that to happen after viewing red book last fall.

However, now that your government has made a top down decision to use $60 million in taxpayers dollars to bail out a mismanaged credit union without full debate, you see this as normal practice. Well, so be it, but in the meantime as a private citizen, I have higher standards and would like to see the details [full audit] of what happen there? IMHO, we are no further along here today than we were yesterday or the days before that. And yes, I read the rhetoric on the government issued press release.

Spinks said...

Scott's bang on. Politics aside what's lacking is an audit. What the heck happened and who did what? When every taxpayer in NB sees their taxes rise because of this, well...some answers need to be forthcoming about what the heck happened. Those answers rest with the Caisse Populaire itself. The parties can quibble all they want but if this was, let's say, NB POWER we'd know who did what and with whom. Not so in this case...so far.

RVT said...

I was watching Rogers tonight with SG on. What is this 300-400 fiscal imbalance that he keeps talking about? I was under the understanding that this was not in the budget as the previous govt did not account for the federal transfers until they were sent, which was not until last week? Can somebody clear this for me please? Maybe a person who supports each political party.
Also, I am glad to see that Robert Jones cleared up the HST rebate problem and showed that SG flat out lied to NBer's. I suspect that we will see a lot more of this in the future. He made that promise on CBC before the election and he should have respected that promise.
I also seen the political spin that he tried to put on the subject that they are "now" the most popular party in the province, however on election day they were not. He never mentioned that there was what, roughly 2000 less people who voted?
Just me thoughts

nbpolitico said...

rvt - the 300-400 million is the size that the independent accounting firm Grant Thornton predicted the deficit would be for 2007-08 if the Liberals continued with the spending practices and programs of the Lord government.

You can find details on it here.

Anonymous said...

I have been following this thread with some interest. It seems one fact has been ignored here (and in the press). In the cbc.ca article you point to in your original post it seems to quote TJ Burke as saying:

"He said the government will grant $31.5 million to the New Brunswick Credit Union Deposit Insurance Corp., which will give the money to the stabilization board of the Fédération des caisse populaires acadiennes. The stabilization board will in turn grant it to the caisse"

In other words the bailout seems to be conditional on the caisse in Shipagan rejoining the francophone organization. Am I missing something here, or does this mean the current Liberal government is giving $40 million of taxpayers money to boost the assetts of an organization run by a former Liberal premier.

Also why did they only call for a criminal investigation AFTER they announced the bailout?