Malaysian Maverick: Mahathir Mohamad in Turbulent Times by Barry Wain (fantasy novels to read .TXT) 📕

of Dr. Mahathir's panel of economic advisers, while Hashim was Bank Bumiputra's executive director, a post that ranked second in the bank's hierarchy. Ibrahim Jaafar, who ran BMF's day-to-day operations in Hong Kong as general manager, reported directly to Lorrain and Hashim.

In an incriminating turn, the Hong Kong-based press discovered that two of these three executives, who had controlled BMF from its inception, had outside business connections with customers. Ibrahim held large personal overdraft facilities in Hong Kong banks that were guaranteed by Carrian. Hashim became a director of a small company three days before it received a cheque for RM1.1 million from the wife of the chairman of Eda, just as BMF loaned the group US$40 million.[25]

As the controversy swirled through Southeast Asia with each fresh round of revelations in Hong Kong, the Malaysian authorities remained tight-lipped except to deny Bank Bumiputra faced a crisis. The dual nature of the bank blurred ministerial responsibility. Nobody at cabinet level admitted knowing anything about BMF's operations. As a commercial bank, Bank Bumiputra was subject to monitoring by Bank Negara, which came under the finance ministry. The public identified the bank with Tengku Razaleigh as he had been chairman from 1969 until he became finance minister in 1976. But Tengku Razaleigh said the bank was one of several government agencies answerable directly to the Prime Minister's Department. As finance minister, he ordered Bank Negara to conduct an inquiry into BMF after reading about its troubles in the regional press towards the end of 1982.[26] Bank Negara Governor Abdul Aziz Taha, in his first comments to reporters in April 1983, characterized the problem as a "situation of what you call an over-exposure of loans, which I would regard as exceeding...usual banking prudence". Bank Bumiputra's senior executives as well as the bank's external auditor were examining the subsidiary, he said, and "nobody should be alarmed" about the loans because "the government is fully behind" Bank Bumiputra.[27]

In their annual reports for the year ended 31 March 1983,[28] Bank Bumiputra and BMF maintained the same line, minimizing problems in Hong Kong, emphasizing that the parent would give full support to its offspring, and offering no explanation for the lending spree. But figures in the reports indicated that it would be impossible to keep the lid on much longer. BMF had doubled its lending in Hong Kong in 1982, when other banks were running for cover, and it was funded entirely by head office, Bank Bumiputra.[29] After a couple of years of modest growth, BMF's total lending, including short-term money-market deposits and inter-bank loans, had ballooned 285 per cent in 1981 and 1982 to RM1.55 billion. Bank Bumiputra made only small provisions for losses that might arise from its Hong Kong loans. At the same time, though, it increased its paid-up capital by RM600 million — 126 per cent — which suggested it was preparing to cover extensive bad debts, even though the bank denied it.[30]

Dr. Mahathir publicly addressed the issue of BMF's doubtful loans for the first time at a press conference in July 1983, on the completion of his second year as premier. It was eight months after the damaging disclosures began to surface, and Malaysia's normally cautious and respectful press was demanding answers. After all, the two government shareholders in Bank Bumiputra already had been required to kick in an extra RM600 million to increase the bank's capitalization in proportion to their holdings. That meant 70 per cent of the burden fell on the National Equity Corporation, which was established to hold blue-chip Malaysian corporate equity on behalf of bumiputras by selling them shares in its investment portfolio through a unit trust plan. The remaining 30 per cent was held by the Minister of Finance Inc., the ministry's holding unit. Also, there was no indication of how BMF could repay the RM1.2 billion it owed Bank Bumiputra. Whether BMF was paying interest on its debt, which would amount to RM93 million to RM124 million a year at prevailing rates, was also crucial. If the bank was not charging interest, it was tying up a huge amount in assets to subsidize the Hong Kong operation and act as a de facto reserve against BMF's possible bad debts.[31]

Answering Malaysian reporters' questions, Dr. Mahathir was sanguine. He acknowledged that BMF erred by lending too heavily in the real-estate market, but suggested the collapse of property values was the primary cause of the problems. "Almost all" the banks in Hong Kong were similarly affected, he said. He agreed it had not been wise to provide the bulk of loans to only three groups. "It is not prudent, but you must remember the atmosphere in Hong Kong at that time. Banks were anxious to lend money simply because the economy was booming, and when somebody who is established comes to you to borrow money, you don't look too closely, although by rights you should," he said. "This was their mistake." Dr. Mahathir sidestepped the question of accountability, promising that Malaysia would "take action" if malpractices were uncovered, but said the emphasis was on trying to salvage overdue debts, not on "witch hunting". He said that "how you deal with the mistake that has been made in Hong Kong depends also on how much we can recover. The priority at the moment is on recovery and not on punishment yet".[32]

What Dr. Mahathir did not tell the reporters was that in late 1982 he had approved a secret plan hatched by Nawawi Mat Amin, the man he installed as executive chairman of Bank Bumiputra, to maximize those recovery efforts. Much later, Dr. Mahathir admitted he was briefed by Nawawi about the plan to retrieve "as much money as possible", though he was not informed of the details and did not get involved in their implementation. "I agreed with this action," he said.[33] The most controversial part of the plan was to buy Carrian assets in the United States through an intricate web of dummy companies without informing other creditors, after Carrian