Gainers and Losers in the Latest Senate Show
The Philippine Star
June 17, 2002

Opinion makers say the recent coup at the Senate is nothing but a circus of sort, providing temporary amusement to the ever-colorful world of politics and giving media something to babble about until the second regular session of Congress resumes on July 22.

The setting was mellow-dramatic enough. A change of heart of a displeased senator and the absence of an ailing colleague did it all.

Sen. John Osmena's defection empowered the erstwhile opposition group to wrestle control of all crucial committees at the Senate after garnering a vote of 12 out of 23 senators in town. It was however not enough to unseat the Senate President, who could only be booted out by a vote of a simple majority of all 24 senators.

As of now, the public is given the usual dosage of political tidbits, rumors of secret, behind-closed-door dinners, and one-on-one meetings as each group tries to project that they are in control of the Senate. Recently, however, a number of those belonging to the administration bloc accepted the reality of simple arithmetic - they are only eleven and therefore are the minority. Keep in mind, however, that switching of positions before Congress opens on July 22 is always a possibility.

Was the Senate Coup Merely Political?

Setting aside the political maneuvering and positioning, the question is whether the amusing circus is not without any economic cost. Who are the gainers and losers? Men being men, and senators being no exception, there must be motivation in making the change and in taking all possible steps (like "safekeeping" the symbolic mace) to prevent change.

To the administration senators, the coup happened because the opposition wanted to save a fellow senator-presidentiable. To the opposing group, the move was to preserve the Senate's integrity and to maintain its independence from the clutches of Malacanang.

To the public and particularly those who like to see our country move forward such as the business sector and potential investors, what they saw was a costly waste of time. In the name of politics, several priority bills aimed on reviving the local economy were left unattended.

However, a naughty question nags. Is it possible that the coup happened precisely to prevent the passage of certain bills that are advantageous to certain vested interests?

Let us now examine some of the bills that were not rammed through because of the change in majority.

The heavily loaded SPAV

As discussed in my earlier columns, the Special Purpose Asset Vehicle (SPAV) bill was meant to relieve the banking sector of billions of non-performing assets (NPAs) that have saddled their profitability and kept lending interest rates high despite efforts to drive down the cost of money.

In a nutshell, SPAV is an asset management company that buys banks' non-performing assets at substantial discounts. The company then either improves on the value of the acquired assets or just simply holds on to these, and then sells them once the economy has recovered and investors' confidence and willingness to buy are restored.

Discussions on the bill hit a snag after the banking industry lobbied against the Senate version that they deemed as "pro-borrower." Or in other words, too generous to borrowers who originally reneged on their obligation that resulted to the existence of "non-performing assets."

There are talks in the grapevine that a very influential "defaulting borrower" who owes several billions of pesos sunk in low cost housing and other property developments, has been closely monitoring and aggressively lobbying for and against certain provisions of the bill. Thus, the bill as it stands (and was ready for passing had there been no senate coup) is heavily loaded in favor of a reneging borrower.

Based on news articles, the Senate committee handling the SPAV bill chaired by Sen. Ralph Recto has inserted new provisions such as the following:

(1) Allowing an original borrower who failed to pay his debts to join in the bidding for the foreclosed assets that he previously owned and used as collateral for the bad loan.

Being considered a SPAV, the original borrower who defaulted is therefore allowed to avail of the tax incentives and other perks given to SPAVs.

(2) Allowing the original borrower to be free from all his obligations to the bank once the foreclosed assets are disposed of to the SPAV at usually substantial discounts.

In effect, if I am a "naughty" borrower and borrow P100 million, and then through influence and contacts, am able to mortgage a property almost of the same amount, I could choose not to pay my obligations and then wait for my property to be foreclosed.

And since the buying rate of SPAVS are discounted at 70 percent of the price tag, I could buy my asset back at P30 million and walk away scot-free from my P100 million loan.

And then, if I'll even be wiser, I could then turn around and sell my asset to another investor and at the same time avail of all the perks of a SPAV.

My e-bugs say that some senators consider these provisions not only grossly advantageous to "defaulting and reneging borrowers," but also highly immoral and unethical in nature because it would benefit directly some of them. My e-bugs further say that it is supposedly one of the reasons why the Senate coup had to happen.

Some bankers have even made a joke out of the SPAV bill. It's no more a "Special Purpose Asset Vehicle" bill, but a bill for the "Special Purpose Asset of V…."

Is it true that some bankers are happy that a Senate coup saved the day for them?

It's economics, not politics, dummy!

In my succeeding columns, we will examine the other bills that failed to pass because of the senate coup. Perhaps, then, we would clearly see that there was more than merely politics in what happened in the Senate; that there are clear economics undertones; and that there were potential gainers and losers who were protecting, preserving or enhancing their economic status and influence.

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