Nigel Clarke | Navigating the FINSAC conundrum

Policymaking is by its nature challenging. It becomes easier, however, when you accept a fundamental reality of leadership, which incorporates a card-playing analogy: You do not choose your hand but must make the best plays with the hand that you are dealt. Often this means deciding between less-than-optimal options. Decisions must be made, and these will not please everyone.

By the time I became Minister of Finance and the Public Service, the Cabinet had effectively lost confidence in the ability of the FINSAC Commission (the Commission) to not only produce a final report, but to produce one that would be received as credible by a majority of the country. The Commission had at least twice before promised to produce a final report in return for an injection of additional funds. They failed to do so on both occasions.

Given that the last disbursement to the FINSAC Commission exceeded $35 million, which brought the total tally to $160 million, Government of Jamaica (GOJ) felt exposed to the possibility of incurring significantly higher costs with no guarantees of an acceptable end-product. Further, the commissioners’ credibility in this process had been severely weakened by events over the preceding decade. Believing that a report from them would have appeared compromised, Cabinet therefore pulled the plug.

The remaining commissioners eventually resigned and sent to me, in my capacity as minister of finance, an electronic drive with the FINSAC files, organised into folders. This was 2019.

With respect to the FINSAC Commission, these facts, decisions, and outcomes represent the cards that I was dealt. Further funding was not forthcoming. The commissioners had resigned, and the data from the Commission’s hearing were transferred to me. It was my job to play those cards in the best way possible and there were only two endgame scenarios. Either I fold my hand and the information is suppressed, or I show my cards and share the data with Jamaica.

This was not a difficult decision. I was immediately convinced, after surveying the submissions, affidavits, and testimony in my possession, that in the absence of a report, which was now not feasible, this data belonged with the Jamaican people.

I was motivated by the following facts:

The data were gathered in the process of a commission of enquiry, paid for by taxpayer funds. The FINSAC Commission was, by definition, a public commission, and its hearings were conducted in public and covered by the media. These data are therefore the property of the Jamaican people.

The matter covered by the Commission is of enormous importance. Jamaica’s banking crisis ranks among the most devastating of the modern world’s long history of similar disasters, as measured by the cost of the intervention as a proportion of GDP. For comparison’s sake, while the US government’s intervention in response to the failure of several large financial institutions during the 2009 global financial crisis cost nine per cent of GDP, the Government of Jamaica’s intervention cost 40 per cent of GDP.

Jamaica’s debt-to-GDP ratio prior to the creation of FINSAC (the vehicle through which the GOJ intervened) was approximately 72 per cent. This debt ratio soared to just under 130 per cent within six years after FINSAC’s creation, and Jamaica’s fiscal trajectory veered out of control as interest costs alone eventually consumed over 60 per cent of tax revenues.

DESTRUCTIVE TRAIL

The financial crisis had a long and destructive tail, and Jamaica has spent 30 years dealing with the fiscal, economic, and social impact. As such, we are duty bound to do all that we can to understand this period and to absorb its lessons. Whatever the shortcomings of the FINSAC Commission project – and there were many – they did manage to capture perspectives, narratives, and accounts from the key stakeholders at the time: policymakers, administrators, regulators, shareholders, executives, and borrowers. And they kept impeccable records. The analysis, synthesis, and condensation that would have been inherent in a report would have been of value, and it is a loss that we do not have that.

We should, however, acknowledge that a report would have represented the product of just three commissioners. As such, I would argue, it still would have been necessary to publish the submissions and information gathered by the Commission in order to have a full appreciation of the period. The 9/11 Commission in the United States provides an example. A very readable and useful report exists; however, in the interest of transparency and for deeper enquiry, a 9/11 Commission archive also exists online with the transcripts of all the hearings, organised by date. In addition, summaries of the 9/11 Commission’s interviews with hundreds of persons are preserved and available online, along with many other records they gathered.

The commitment to release the archive to the public was therefore the easy part. Getting it done, and done properly, proved far more challenging and has taken time. I started on the journey to bring transparency to the FINSAC Commission Archives in 2019, but the COVID-19 pandemic rightly reordered my policy priorities. With economic recovery largely achieved by 2022, I returned my attention to this goal in that year.

It was not, however, straightforward. We owe the current manifestation of the project to an iterative process, rife with obstacles and challenges. I first tried to have the archives hosted by a prominent institution. Despite my efforts, both direct and through intermediaries, this proved unsuccessful.

Whenever one proposes to step outside of the tried, tested, and expected, one must be prepared to do the work of bringing people along. The FINSAC Commission Archive project required this, too, within the Ministry of Finance and beyond. I gratefully acknowledge the Attorney General’s support in this regard.

Approximately two months ago fresh internal and technical ministry concerns, regarding data privacy issues related to the recently enacted Data Protection Act, surfaced, which caused me to fear that I would not be successful with this project, even though I had already made sufficient progress to support a public announcement of the policy intent in March 2024

SUPPORTIVE

In a subsequent conversation with former Prime Minister P.J. Patterson on other matters, I shared what I was working on with respect to the archives and explained my reasons. He was immediately supportive, and strongly endorsed the publication of the archives, largely for similar reasons: to support, exhaustive, multidisciplinary and thorough research to ensure we never repeat the experience. I then shared the fresh ministry concerns regarding the Data Protection Act, and the strength of his response was all I needed to push through to completion, given, among other things, his singularly unique position as prime minister during the financial crisis. (I am sharing this anecdote here with his consent.) In the end, residual technical concerns were satisfied by my agreement to accept redaction decisions recommended by a technical ministry committee, constituted for this purpose, in order to protect the personal privacy of individuals in compliance with relevant laws.

I have also had the opportunity to speak at great length on this matter with former Finance Minister Dr Omar Davies. First more than a year ago, and a few times more recently as well. This anecdote also appears with his consent. While having reservations about the shortcomings of the FINSAC Commission, Dr Davies saw value in having his (and other) written accounts enter the public record, but registered strong opposition to the decision to redact.

I also consulted with former Finance Minister Audley Shaw, who would have preferred a report, but under the circumstances, supported my efforts.

Of course, there would have been many calls for the (non-existent) FINSAC report – over many years, from journalists, FINSAC’d entrepreneurs, and other members of the public, too. I have tried to be empathetic and responsive.

The FINSAC Commission Archives will generate some banter in the short term, for sure. However, that is a cost worth bearing in exchange for the potential long-term value of this archive. The GOJ is catalysing research and scholarship into this important era of Jamaica’s banking crisis with $20 million in research grants. We expect research interest outside of this as well. Over time, scholars will peel back the layers of what happened during this devastating period, and by the time that we are further and sufficiently removed in time from these events, the lessons will have revealed themselves in full.

And with respect to the FINSAC Commission, I will have done my best to play the hand that I was dealt.

Dr Nigel Clarke is minister of finance and the public service, and member of parliament for St Andrew North West. Send feedback to opedjamaica@gmail.com or columns@gleanerjm.com