Why, yes, politicians should run local banks to boost the local economy

A former director of the banking giant whose implosion forced Spain to seek a €100 billion bank bailout has admitted she doesn’t know anything about finance.

Mercedes Rojo-Izquierdo, a former adviser to the regional government of Madrid, which is run by the ruling Popular Party, appeared as a witness before the National Criminal Court in Madrid, which is investigating alleged mismanagement in Bankia. The judge is examining claims of falsification of accounts, false administration, misappropriation of funds and price-fixing.

Ms Rojo, who was paid €374,000 by Bankia in 2011, said she had qualifications in chemistry, not finance. When Bankia’s accounts for 2011 were presented, Ms Rojo told the court that she “didn’t understand anything”.

She joined the Bankia board in December 2010, when the lender was formed from the fusion of seven regional savings banks. Before that, she had been on the board of Caja Madrid, one of the country’s biggest savings banks, since 2006.

Bankia’s board was filled with appointees with a political background. Other Bankia executives included Ángel Acebes, a former Interior Minister in the centre-right government of José María Aznar, and José Luis Olivas, the former president of Bancaja, one of Spain’s biggest savings banks.

Don\’t you think that political acceptability is more important than technical ability?

12 comments on “Why, yes, politicians should run local banks to boost the local economy

  1. Even more amazing is the arrogance that leads political appointees to feel they have no need to learn anything.

    ….she had been on the board of Caja Madrid, one of the country’s biggest savings banks, since 2006….

    ….When Bankia’s accounts for 2011 were presented, Ms Rojo told the court that she “didn’t understand anything”…..

    Between 2006 and 2011 she didn’t think to read a book or two on finance / accounting / banking, or even enrol on a course of some kind.

    For someone with a Chemistry degree, the basics of finance and accounting are not going to be beyond their ability to learn.

  2. Welcome to Spain.

    The Cajas (Mutuals) used to be regionally-based savings & mortgage lending entitities. As such, they worked really well.

    When we got into the devolved, autonomous government system, local politicians, on top of taking on the air of prime ministers despite being no more than a Manchester City Councillor (if those exist) discovered that they could control a real BANK. They filled the boards with mates (fourth-rate local politicians, union memebers, politically in-line employees, politically in line local ‘businessmen) and started ‘developing’ their areas.

    Rubbish decisions, rampant corrution allied to ignorance and in recent years a politically subservient Bank of Spain (a great institution devalued by MAFO under the woolly Zapatero) and the appalling influx of cheap cash from Europe/Euro brought us to where we are.

    Some years with more housing starts than UK, Germany and France combined. Land banks built up at enormous expense on borrowed money. Now all worthless or nearly and meanwhile the most ignornant leave their Cajas under a cloud first having ‘raped’ the institution for vast pension pots.

    You couldn’t make it up.

    In my area, famous for being more business-like, the local Cajas are merging and as we didn’t have a second-dwelling boom they are as rock-solid as a bank can be these days.

    Bankia is basically the merger of lots of little and medium and a large money-losers into a gynormous crap institution. We are going to ‘save’ it. The government has put a serious banker in charge, but those banks that don’t need rescuing are up in arms talking about unfair competition. Fair comment.

    Let the crap go to the wall. Sack without compensation and haul in front of the courts those responsible.

  3. In my area, famous for being more business-like…

    And, perhaps more famously, for barely being part of Spain. Whereas the Basques might have struggled to justify independence before, being forced to be part of such a shower of incompetents is a worthy basis for self-rule.

  4. @bilabaoboy, I can confirm there are plenty of Manchester City councillors, 99 of them last time I voted for any of them (admittedly a while back). There are of course no Manchester United councillors.

  5. I suppose it’s conceivable that with these criminal cases going on Ms Rojo is being less than frank about how much she understood.

  6. “When Bankia’s accounts for 2011 were presented, Ms Rojo told the court that she “didn’t understand anything”.”

    Yes, I’m not sure we should take this statement literally.

    Pretending ignorance in the face of the law is a fairly common stratagem.

  7. F you appoint for political purposes you can guarantee everyone is a socialist. Not so easy if you appoint on the grounds of technical ability.

  8. Don’t be too hard on the unqualified. The qualified financial superstars at the London Borough of Haringey poured £38 million down the Icelandic bank chute despite years of warning that Iceland – and its banks – were . . er . . overstretched.

  9. Maybe she was appointed to the Board by those who actually did understand what was going on at the Bank not in spite of her ignorance, but because of it.

  10. She should learn her lesson and move to the UK. She sounds like the perfect non-executive director.

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