Housing sector bucks ‘Jobo bills’

Housing industry leaders warned the government yesterday of an economic and political catastrophe should the Bangko Sentral push through with its reported plan to shore up the peso by issuing securities with yields of 40 percent or more similar to the ‘Jobo bills’ of the early 1980s.

Lawyer Manuel M. Serrano, founder and chairman of the Chamber of Real Estate and Builders’ Associations (CREBA) said that this move would cause banks to jack up lending rates to levels which the economy simply cannot withstand.

Such a move at this time will serve as the proverbial last nail on the coffin of business that is already choking, the people who are already suffering, and an economy that is collapsing – not having recovered from the 1997 regional crisis and yet again reeling from the recent round of oil price increases, the Mindanao crisis, the demand for higher wages and a host of other problems, Serrano said.

The scenario is not simply that of a complete economic standstill, Serrano said, but rather a total economic wreck due to mass bankruptcies and mass layoffs that a steep escalation in bank lending rates will spawn.

Small-and-medium-scale industries will definitely be wiped out completely, while large-scale businesses will suffer serious dislocations.

The end result would be that the rich will get richer and the poor poorer, Serrano said.

No economic program should ever be crafted that will allow for the few to rise upon the ruins of many, Serrano added.

While these extraordinary times call for extraordinary measures, the country’s financial managers, however, are once again resorting to the IMF-World Bank prescribed "textbook solutions" such as trifling with interest rates to "mop up liquidity," which have time and again proven disastrous to our economy, Serrano said.

To avert the peso‘s decline without causing greater hardship, Serrano said, the BSP should instead fix the exchange rate at a realistic, tolerable and effective level of, say, P45 to a dollar.

In addition, the BSP should prescribed a limit to the banks’ dollar holdings, and require that excess dollars be sold to BSP at the fixed exchange rate.

This twin measure will dampen the activities of speculators, Serrano said, even as it would encourage OFWS to remit their dollar earnings and thus help shore up the country’s dollar reserves, instead of hoarding the same in anticipation of the peso’s further decline.

A fixed peso-to-dollar rate will also obviate the need for BSP forays in the spot exchange market, which not only is unaffordable, but so far has proved futile.

Serrano clarified that these exchange controls are meant to be temporary, and may be lifted when normalcy would have been achieved.

If a fixed exchange rate bodes any adverse implications at all, Serrano said, these would pale into insignificance when compared to the catastrophic impact of ‘Jobo bills.’

These crises should serve as a lesson to the government‘s financial and economic managers to encourage capital investments, rather than portfolio investments which do nothing for the economy except to provide an open field for both foreign and local speculators, Serrano added.