Is Loke Yuen Yow prepared to announce that he would resign from all government and public offices if Bank Negara does not recoup the $131.6 million from its gold-leasing activities to Drexel Trading by next year?

By Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, in Petaling Jaya on Tuesday, June 26, 1990:

Is Loke Yuen Yow prepared to announce that he would resign from all government and public offices if Bank Negara does not recoup the $131.6 million from its gold-leasing activities to Drexel Trading by next year?

Deputy Finance Minister, Loke Yuen Yow, has misled Parliament in claiming that the Bank Negara was confident of recovering the $100 million gold deposits with Drexel Trading Company.

Loke claimed that Drexel Burnham Lambert Trading Company had no insolvency problem as its assets exceeded its liabilities, and that Drexel Trading had applied for bankruptcy because of the financial problems of its parent company, Drexel Burnham Lambert Group Inc.

Loke also claimed that Bank Negara would make $16.7 million profit for leasing gold to Drexel Trading Company.

Loke had been irresponsible in trying to pull wool over the eyes of MPs and the Malaysian public. Technically, Loke way be right when he claimed that Drexel Trading is solvent, as its assets exceeds its liabilities. According to its petition for bankruptcy under Chapter 1 of the United States Bankruptcy Code on 10th three months ago, Drexel Trading has assets US$587 million, more than enough to cover its US$504 million in total liabilities to creditors.

However Loke had deliberately hidden from Parliament the important fact that a large part of this asset base of Drexel Trading is US$550 million owed to it by its parent company, Drexel Group, which has gone into bankruptcy because of its billion-dollar ‘junk bonds scandal’ which shook the United States.

Loke was right in that Drexel Trading had no financial problem, but when the parent Drexel Group ran into trouble because of the billion-dollar US junk-boards scandal, the parent Drexel group drained money from the Drexel Trading. This is how the parent Drexel company came to owe Drexel Trading US$550 million.

A spokesman of Bank of Portugal, the latest creditor of Drexel Trading in the gold-leasing scandal, gave a beautiful description of this operation: “What really happened is that the Drexel family managed to turn gold into junk.”

Clearly, the parent Drexel Group would not be able to repay US$550 million to Drexel Trading, which will send Drexel Trading from its solvent state of US$83 into an insolvent state of being as deep in the red as US$467. Bank Negara will therefore lose its $115 million gold deposits leased to Drexel Trading, and will never be able to realise the so-called paper profit of $16.7 million.

As Loke claimed in Parliament yesterday that Bank Negara would be repaid its gold deposits of totaled 112,646 ounces valued at $115 million together with the profit of $16.7 million, once Drexel companies are restructured next year, is Loke prepared to resign from all public offices in government and Parliament if Bank Negara does not recoup the $131.7 million by next year?

Is the Finance Minister, Daim Zainuddin, also prepared to stand by Loke that Bank Negara would recoup the $131.7 million, and resign from all government posts if this is not fulfilled?

Call for a new watchdog institution to supervise the speculative activities of Bank Negara

The Deputy Finance Minister has not been able to give a satisfactory explanation as to why Bank Negara should get involved in playing the gold markets. Malaysia had its fingers burnt when the Malaysian Government tried to corner the tin market in 1981 through Maminco, resulting in a loss of $660 million.

Now Malaysia stands to lose $131.6 million because Bank Negara played the gold market. Bank Negara is the second biggest creditor of Drexel Trading – next to the Bank of Portugal.

The Bank Negara had also been known to speculate in foreign currency, in Yen and the American dollar. Recently, the United States Treasury protested against Bank Negara’s speculation in the American currency.

As I said in Parliament, with the Bank Negara’s speculative activities in the world currency and commodities market, there is a need for a new watchdog committee to supervise Bank Negara itself. When the game warden becomes a poacher, then a new game warden must be appointed!

Bank Negara had not been very successful in overseeing the banks and financial institutions in the world. I asked in Parliament yesterday what the Bank Negara is doing about the Malaysia International Finance Bhd., which has wiped cut its $60 million capital base through mismanagement as well as huge loans to individuals with high political connections.

Malaysian International Finance Bhd. is intimately connected with the family of a top UMNO Baru leader holding high office in Government.