Thursday, June 15, 2006

Helping the Stock Market Victims

Dr. Khaled Batarfi

You hardly join a discussion these days without dwelling on the stock market Big Bang. People are confused, astonished, and angry.

When three to four million Saudis out of 13 are hurt you don't need a whistle-blower to tell you that something is worth keen attention. Unfortunately most discussions are focused on the market itself, less time is devoted to the social effects of the crash.

What do you do to help millions of affected people? Some sold all their worldly possessions to "gamble" in the bourse. Others left their secure jobs to find time and energy to invest in high-flying stocks. Many sold their homes, cars, shops and businesses below market prices to raise some reasonable capital. Women used their life savings, jewelry and dowry to get on board.

The crash was worse still for those who bought cars at installments and then sold them at much less than the original price. Also for those who got long-term bank loans and the workers who took advanced salaries from their companies. They all hoped to pay debts and make a fortune in a market that doubled in value for two consecutive years. They all turned into players in stock trade. Even the likes of my illiterate poor mother-in-law suddenly became proud shareowners, keen readers and armchair analysts of market trends.

A person I know was typical of many. He resigned a good position, collected retirement compensation, as well as the jewelry of his wife, daughters and sisters, plus some friends' savings. Then sold his farm and three loaned cars and put all proceeds in a bank portfolio. Against his three million riyals, the bank gave him three more. After the crash, he lost half the portfolio and the bank reclaimed the other half. He came out from this business with huge loans and debts and no revenue to pay them back or even to live on. He is now in deep depression after some heart and other health complications.

Like him, people of limited means and huge losses, are struggling to make ends meet. Imagine the short- and long-term effect of this shocking experience on them socially, psychologically, mentally and politically. How are they going to feel about those "fat cats", who stole the market? How are they going to evaluate the performance of the government agencies that were supposed to well manage the market and protect the weak and the unaware? And where will they go to pay huge debts and to cover daily expenses?

When crises hit, you need strong crisis management. We urgently need a high commission made of highly professional representatives of all concerned authorities and parties. Their mission should be to study and manage the social calamity and to provide solutions to affected people.

After the New York Stock Exchange crash of 1929, millions went broke and hungry, until President F. D. Roosevelt sponsored the congressional bill that created the Social Security Act of 1935. The new system provided a safety network for the needy and unemployed. It also helped spur the economic recovery in the 1940s and 1950s.

What we need is urgent steps to help people cope with their losses and challenges. For example, we should reach an understanding with loaners such as banks, government loan funds and car companies, to reschedule loans to market victims. We ought to make it easier for those who resigned jobs to reclaim them. And we must give more support to charities to help them provide food, shelter, medical and social services to the deprived.

We also need more good economic news - more business and job opportunities, greater investments and projects, higher public spending, lower rates on services (electricity, natural gas etc.) and salary bonuses. For the unemployed, we should provide social security benefits.

When the stock market crisis hit Asia in the mid-1990s, most governments were financially ill prepared to deal with the aftermath. Fortunately, our finances are in good shape with oil prices hovering around $70 a barrel and we could afford to deal with this situation.

Fixing the stock market is top national priority; so is helping the victims and providing for the most affected.

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