Sunday Dec 15, 2024
Sunday Dec 15, 2024
Wednesday, 31 January 2018 12:00 - - {{hitsCtrl.values.hits}}
Prime Minister Ranil Wickremesinghe has decided that the Report of the Bond Commission has absolved him, his party and his administration of any responsibility for or wrongdoing in the Central Bank Bond Scam.
Development Strategies Minister Malik Samarawickrama who is the eager Hanuman to Ranil’s Rama has claimed in a press interview that the Government has not lost a cent in the bond scam.
The commission in its report has stated that their task was not a ‘witch-hunt or a whitewash’. The report has not done a ‘whitewash’. It seems to have scrubbed the wall and the Prime Minister and his troupe have decided to paint it in the most convenient hue that suits them.
The Bond Commission Report informs us that it has striven to perform its function as per Edmund Burke: “With cold neutrality of an impartial judge but also fairly.” In hindsight, it appears that the commission would have been wiser if they had taken note of another pearl of wisdom from Burke: “Whoever undertakes to set himself up as a judge of truth and knowledge is shipwrecked by the laughter of the gods.”
The assurance that it is no witch-hunt or a whitewash was totally unneeded. Though two years too late, the appointment of the commission was regarded as a step in the right direction. The commission was accepted and respected. When serving judges are appointed to commissions, the people expect them to retain utmost impartiality. People expect them to remain aloof from political considerations.
The commission explains that it considered it proper and appropriate to formulate the questions that it wished to ask the Prime Minister and request the Prime Minister to furnish his answers by way of an affidavit rather than by way of time-consuming oral evidence.
The commission’s decision not to summon the Prime Minister to give oral evidence in this age of transparency is regrettable. The Commissioners explained why it decided to “request the Prime Minister to furnish his answers by way of an affidavit, rather than by way of time-consuming oral evidence”.
He was not summoned, we were told. He was invited to clarify some of his written answers. Why?
The Prime Minister is a politician. Explaining and justifying his conduct, past, present and future is his full-time vocation. Obligation of giving oral evidence is a major part of his territory. If summoned he was duty bound to appear before the commission.
His busy schedule is not a tenable proposition. The Prime Minister’s high office has not prevented him visiting deities in their shrines in India. His high office has not prevented him consulting expert medical opinion in America. His high office has not prevented him attending convocations in Australian universities to receive honorary doctorates. Surely, his appearance before the commission would not have paralysed or crippled the Government.
That his governance mechanism has been brain dead for some time is neither here nor there.
It is noteworthy that the commission has treated the appearance of the Prime Minister of the Republic before the commission as an occasion where only the principal law officer of the State should lead his evidence.
It is a telling commentary on the commission’s aloofness from politics. Tony Blair must be wishing that Sir John Chilcot possessed such proprieties!
The Prime Minister has now announced that losses will be recovered. He hasn’t said a word on the conduct of Mahendran, before or after the report except for that famous defence – Arjun Mahendran has done nothing wrong.
There is an explanation. People are sensitive to inconsistencies between their beliefs and actions. There are three ways to resolve such inconsistencies.
You can change your belief. You can change your action. The third is more complex but very familiar. You change the perception of your action! That is where the Prime Minster excels.
Two Social Psychologists Carol Travis and Elliot Aaronson published a path-breaking book in 2007, ‘Mistakes were made. But not by me’. It explains how we make decisions that turn out to be mistakes. It is about ordinary decisions and also decisions that can affect nations, lands and millions of people.
The authors have brilliantly captured the self-entrapment that we create for ourselves: “As fallible human beings, all of us share the impulse to justify ourselves and avoid taking responsibility for any actions that may turn out to be harmful, immoral, or stupid. Most of us will never be in a position to make decisions affecting the lives and deaths of millions of people, but whether the consequences of our mistakes are trivial or tragic, on a small scale or a national canvas, most of us find it difficult, if not impossible, to say, ‘I was wrong; I made a terrible mistake.’ The higher the stakes — emotional, financial, moral — the greater the difficult.”
The report finds Arjun Mahendran to have knowingly acted improperly and wrongfully in intervening in established procedures of the Central Bank. It has found him to be the source of inside information received by Perpetual Treasuries – the errant primary dealer.
Arjun Mahendran is an Economist and an Investment Banker. He was requested by the Ranil Wickremesinghe-led administration to be the Governor of the Central Bank. The Prime Minister has stated that the selection was the result of a general consensus of the new Government.
The claim that the choice was a collective decision of the Government was not challenged before the commission. The record now shows that he was appointed by the President on the recommendation of the Minister of Finance. The reassignment of the Central Bank to the Prime Minister in his capacity of Minister of National Policies and Economic Affairs was an Executive action.
The resulting complexities arising from horizontal diffusion of power responsibilities have not been addressed by the commission. Such an exercise would be outside the scope of its warrant.
The commission has not focused on the process that made Mahendran the Governor. It explains that the he was appointed before the period covered by its warrant – 1 February 2015 and 31 March 2016.
The Prime Minister was not questioned as to why Arjun Mahendran was considered the most outstanding candidate for the top job in the Central Bank.
Soon after the new Government was installed, Arjun Mahendran appeared before the Ceylon Chamber of Commerce in the company of Finance Minister Ravi Karunanayake to explain the new economic vision of the Government. The current Governor served as moderator. Arjun Mahendran was more than the Governor of the Central Bank. He was a pivotal player in Ranil Wickremesinghe’s Economic Think-Tank.
Why did Arjun Mahendran do what he now stands accused of doing?
Economics has progressed beyond the rational choice theory. Today, economic behaviour is a new discipline known as behavioural economics. It deals with the psychology of economic behaviour. Richard Thaler, this year’s Nobel laureate, specialises in behavioural finances!
The search for ways in which humans violate rules of rationality is a frontier less land yet to be explored. The science of economics in the world of paper money is not a precise science.
Why did two Ministers and the Advisor to the Prime Minister go to the Central Bank for breakfast with the Governor? Not to discuss bonds, they have insisted. Of course, a smart cookie would insist that the Central Bank was the place where the new Governor was serving breakfast with choice bacon!
The commission has held that no decision was taken at the ‘Breakfast Meeting’ held on 26 February to raise money for the road projects at the auction of Treasury bonds held on 27 February.
The Bond Commission has determined that “the Governor and other members of the Monetary Board, Deputy Governors and other senior officers of the CBSL hold those offices subject to the Public Trust Doctrine and are subject to accountability”.
It has determined that Deputy Governors Silva and Weerasinghe were negligent and were in breach of their responsibilities as Deputy Governors of the Central Bank. They had a duty to advise the Governor to desist from folly.
There were good reasons for the Deputy Governors of the Central Bank not to teach Mahendran monetary theory. Arjun Mahendran was a key figure in the economic pantheon Ranil assembled. It was not because those good people were less informed of the doctrine but they were more informed of his political clout.
The pursuit of a utopia is understandable. But an ideal utopia? The Doctrine of Public Trust is invoked when dealing with situations not covered by precise laws or regulations. That is also the fertile field for patrimonial politics.
It has held that “Deputy Governor Samarasiri was grossly negligent and in grave breach of the duty and responsibility he had, as the Chairman of the Tender Board. He had supinely obeyed the instructions given by Mr. Mahendran.”
The report comments on the conduct of Dr. Samaratunga, Secretary of the Ministry of Finance and member of the Monetary Board: “Since Dr. Samaratunga, Secretary to the Ministry of Finance, who was present at this meeting, is also a member of the Monetary Board, he was personally obliged to convey to the CBSL that the three State banks had been instructed to place bids within a specified range of yield rates at the Treasury bond auction to be held on 29 March 2016 and that the three State banks had been given an assurance that bids at higher yield rates would not be accepted at this auction. There is no evidence that Dr. Samaratunga did so.”
The Commission has held these officials subject to the Doctrine of Public Trust. Is the Prime Minister exempt from the Doctrine of Public Trust? Is he not accountable for the appointment of this Governor? Did he not condemn the practice of private placements and advocate auctions? Private placements can be rigged. Auctions too can be rigged. In this business is not the tune but the piper who matters.
That explains Friedrich Hayek’s disarmingly simple critique of central banks: “There is no answer in the available literature to the question why a government monopoly of the provision of money is universally regarded as indispensable. ... It has the defects of all monopolies.”
It is the Prime Minister who took over the responsibility of pulling the nation from the brink of the abyss and provide us one million jobs, a Volkswagen plant, and his vision of 2020 or whatever.
He brought Arjun Mahendran back. He brought Paskaralingam back. He brought Charitha Ratwatte back. By mid-January 2015 he had assembled all his knights at his round table.
The Bond Commission report does not fault the Prime Minster. “If only he was less trusting” seems to be the refrain he has earned.
The report concludes that Mahendran and Deputy Governor Samarasiri deliberately and mala fide misled the Prime Minister and sussed materiel facts. It says: “…the Hon. Prime Minister would have been better advised, if he had independently verified what had happened at the CBSL on 27 February 2015 before making any statement , instead of relying on the briefing note and reports submitted by Mr. Mahendran and Deputy Governor Samarasiri.”
This indeed is really thick. The Prime Minster should have sought a second opinion on what was told to him by the Governor and the Deputy Governor. The Governor was appointed on 23 January 2015. The Commission is of the view that his briefing notes in March 2015 should have been independently verified!
Our Prime Minister is an authority on the Doctrine of Public Trust. In an op-ed piece in the Sunday Times of 24 February 2013, the then Leader of the Opposition Ranil Wickremesinghe accused the then Government of betraying the Doctrine of Public Trust. The Supreme Court observations he quotes in his homily on public trust are the identical judgements quoted by the report of the Bond Commission.
There is no doubt that our Prime Minister is very learned in the law. Very interestingly, he has in the same essay defined the role of the ideal Attorney General and criticised the then AG in precise and plain language:
“The Attorney General of the United Kingdom Dominic Grieve in a speech to the BPP Law School on the ‘Role of the Attorney General’ said: “As Chief Legal Advisor to the Crown, I advise government departments on how policy can be achieved in a lawful and proper way.”
“However that does not detract from the fact that in carrying out the function of legal adviser to the Government, the Attorney General’s role is to support and protect the rule of law. I think that the role of the Attorney General as the Government’s Chief Legal Adviser was neatly summed up by a former Attorney General, Lord Mayhew of Twysden, who said: “The Attorney General has a duty to ensure that the Queen’s ministers who act in her name, or purport to act in her name, do act lawfully because it is his duty to help to secure the rule of law, the principal requirement of which is that the government itself acts lawfully.”
“Regrettably, our Attorney General has failed to maintain the high standards of his Office. Furthermore, the Attorney General has also deliberately misled the House.”
Let us go back to those exciting days of the first 100 days of ‘Yahapalanaya’. Ranil took over the command. Did he tell Arjun Mahendran full steam ahead and damn the torpedoes? This writer has no reason to doubt Arjun Mahendran’s sanity.
