Yesterday, the Ministry of Finance officially forced the takeover of 35 poorly-performing grassroots farmer/fishermen and credit cooperatives by commercial banks. In front of several targeted cooperatives, police in riot gear met fierce and violent resistance by employees and supporters of these cooperatives. The ministry showed some foresight in buying NT$10 million of personal accident insurance for each employee of the Financial Reconstruction Fund (金融重建基金), which is the resolution trust corporation-like mechanism established to clean up those grassroots institutions with negative net worth.
What has prompted such fierce resistance by these cooperatives? After all, the 35 co-ops all have negative net worth. In fact, one has non-performing loans amounting to 97 percent of its total loan portfolio. All these non-performing loans will be absorbed by the Financial Reconstruction Fund before the take over.
Furthermore, all employees of the credit associations below the deputy-manager level will receive jobs with the takeover banks. As for the lower-level employees of the farmers' and fishermen's cooperatives, 30 percent will be retained, while the Council of Agriculture (
Why is the government so keen on pushing through the takeovers? After all, not even the banks taking over the cooperatives are willing participants. United World Chinese Commercial Bank (
The reality is that grassroots cooperatives had become a haven for "black gold" corruption. The elections for the cooperatives' member representatives, board members, chairpersons and even chief executive officers have long been plagued by intimidation by gangsters, violence and vote-buying.
Why would anyone risk so much just to get elected? Well, those who have control of the cooperatives have the freedom to turn them into their own private piggy banks. Not only could they extend loans to family, friends and themselves, they could also extend loans in exchange for political, monetary or other personal favors from powerful and influential politicians and individuals.
Time and time again such loans have proven to do wonders in helping political careers. For example, someone who has received a loan as a favor may return the favor in the form of nomination in the next local legislative election. Thus the chain of patronage operates. This is certainly not a bad way for crime bosses to put on suits and ties in order to find a career in politics after retiring from their life as gangsters -- although some might argue that it is hard to tell the difference between their pre- and post-retirement activities.
Many local political factions thrive on these cooperatives. Many such factions have been instrumental in helping out with vote-buying for political parties, especially the KMT -- which is why the party has tried so hard to abort the Legislative Yuan's efforts to establish the Financial Reconstruction Fund -- and why the DPP has fought so hard for it.
The clean-up effort is certainly timely. With the year-end mayoral, county commissioner and legislative elections just over two months away, the Chen Shui-bian (
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