DATE: July 2008
Headquarters of the American Life and General Insurance Company (Algico).
At least one Caribbean country is bracing for the possible fallout of the turmoil in the United States financial market that has seen major companies bought out, bailed out and bowing out this week.
Bermuda’s Finance Minister Paula Cox said yesterday that she fears there could be job losses as a result of the upheaval and also cautioned that because of the current crisis, prospects for economic growth in Bermuda next year may be lowered.
Her words of caution came on the heels of the world’s fourth largest investment bank, Lehman Brothers, filing for bankruptcy; Merrill Lynch being bought by Bank of America Corporation for about US$50 billion; and the US government bailing out insurer American International Group Inc (AIG), which employs about 200 people in Bermuda, by giving a two-year, US$85 billion loan to prevent the worst financial collapse in history. In exchange, the US Federal Reserve will take an almost 80 per cent stake in the company’s stock.
“While it is far too early to determine with any certainty what precise impact the current financial events unfolding in the US will have on Bermuda, there are clear signals that the changes will have some potential employment repercussions in Bermuda and perhaps implications for financing of some private sector projects.
“I have indicated already that the growth prospects for our economy through the balance of 2008 are lower as a result of the continuing fallout of the sub-prime debacle. In the face of the most recent events involving Lehman Brothers and American International Group (AIG), that outlook may very well characterise 2009 as well.
“Lehman Brothers had important financial relationships with private sector entities in Bermuda. Likewise, AIG has an important footprint in Bermuda as it does in some 130 other countries around the world. That is why it is not surprising that the US Government has intervened in the manner that it has. Global financial stability is clearly at stake,” she added.
Meantime, in T&T, Mark Hansen, managing director of Algico—a member of AIG—said in a statement that the local company’s assets, employees and policy holders remain in a strong position, despite the turbulence affecting AIG and the US financial system.
“Policy holder funds and investments are not at risk,” he sought to assure, adding that the company was “well capitalised and financially solid”.
Over in Jamaica, there were concerns that the collapse of Lehman Brothers could make it more difficult for the country to secure loans on the international market.
But vice-president of First Global Financial Services, Kevin Richards, said the country was still in a safe position right now.
©2005-2006 Trinidad Publishing Company Limited