A Presidential Challenge

By Dr. Selwyn R. Cudjoe
December 01, 2010

What does the president of a country do when he is asked to break the law? He responds firmly and comes down on the side of the law knowing that political leaders are always more concerned about gaining partisan advantage than respecting the laws they were elected to uphold. The Cabinet of Trinidad and Tobago has sent a letter to the President of the Republic demanding that he revokes the appointments of the non-executive directors of the Central Bank before their respective terms expire.

He should not do it. If he does he would be breaking the law of the land. It is not the example he wishes to set for the nation. [Full disclosure: I am a member of the Board.]

In 1997, after the United National Congress (UNC) and the National Alliance for Reconstruction (NAR) formed the government, Winston Dookeran was appointed Governor of the Central Bank. He served until Governor Ewart Williams was appointed to replace him. In 2001, the Board consisted of Randolph King, Permanent Secretary, Winston Thompson, Patrick Watson, Raymond Ottley and Kamal Mankee.

In 2002 PNM won the elections. The members of the Board remained in place until their terms expired. In so doing PNM merely followed established precedence: a newly elected government waits until a director's term of office expires and then replaces him/her with a person of their choice.

In May 2010 the UNC-led coalition won the election. Its first order of business was to call for the resignations of the directors of all Boards. Among its many objectives was to replace the directors of the Central Bank Board and the Securities and Exchange Committee which is led Deborah Thomas-Felix. This proposed course of action led Thomas-Felix to write the President a strong letter about the illegality of his proposed action. Presently, the SEC is unable to function because its Board does not have the necessary quorum.

The Central Bank's Board is approaching a similar dilemma. Section 7 of the Central Bank Act provides that the President shall appoint the Governor, the Deputy Governors and the other directors of the bank. Under Section 12 of the Act the President may terminate the appointment of the Governor, the deputy governors or any director if she or he becomes of unsound mind, bankrupt, imprisoned; is convicted of dishonesty; guilty of misconduct in relation to his duties and is absent from two consecutive meetings without leave granted by the Board.

Nothing in the Act contemplates the revocation of a member's appointment when a new political party is elected to office. There are three major reasons for this: the Board stands as an independent institution in the society; nationally and internationally, the economic stability of a country depends on its monetary and fiscal policies; and the assurance that its policies are informed by economic consideration rather than the demands of party politics.

When one government replaces another it is imperative that the Central Bank remains and seen as being stable. Continuity must be its watch word. The international community does not care who is elected to government. It is concerned about the Bank's independence; the stability of its financial systems; the integrity of its judiciary; and a corporate governance structure that passes international muster. The international community wants to be assured that the money it invests in our country is safe and our courts honor contracts that are made?

When David Cameron and the Conservatives won the recent election in England it did many things such as leveling the most severe cuts in the British economy since World War II. It did not touch the directorship of the Bank of England. The Bank was concerned with the effect government spending would have on demand and whether such actions would lead to a diminishing of investors' confidence. Cameron was smart enough to let the bank do what it does best: that is, regulate the economy.

When President Barark Obama was elected president of the United States he did not touch the Federal Reserve Board, the U.S. Central Bank, or its Ben Bernanke, its chairman, although the country was undergoing its worst recession since 1929. Not only did he work hand in hand with Bernanke, a Republican who was appointed by President George Bush, another Republican, to stabilize the nation's economy, he also selected him for another term of office. President Obama recognized that to rescue a faltering economy he needed an independent Central Bank. He also knew that once they were elected, the Governor and the directors could not be removed from office because of their policy views.

A few Saturdays ago the Minister of Finance asserted that because the country voted "change" the Prime Minister can do what she wishes, including removing the directors of the Central Bank and the SEC and presumably the Chairman of the latter institution. Could this also mean that he soon would be asking for the revocation of the governor's appointment? Yet, in this uncertainty one does not hear the voices of Transparency International or the Bankers whose concern cannot only be the bottom line.

The independence of the Central Bank and the stability of the financial system are especially important now that the government may have to go to the international market to obtain loans to inject into CLICO and other entities. Recently Paul Krugman (New York Times, November 26) reminded his readers of the tragedy that befell the Irish economy after the politicians, in cahoots with the bankers, destabilized the economy leading to tremendous pressure on the nation's credit worthiness.

If the President yields to the illegal acts he may be setting the stage to commit further illegal acts. Both the President and the Chief Justice assumed their positions because of political acts. Once they were appointed to public offices their terms of office were dictated by the law of the land which no political party could circumvent because it disagrees with the fact that they (President and Chief Justice) were appointed by another political party.

The President has no choice but to reject the illegal moves the Prime Minister and her Cabinet are asking him to undertake. If he succumbs to their pressure the revocation of his and the CJ's appointment could open up the floodgates to other illegal acts. His failure to be resolute will only set the stage of entrenching a tyrannical government which is not what Trinidadians and Tobagonians voted for in May 2010.

Professor Cudjoe's email address is scudjoe@wellesley.edu

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