http://newvision.co.ug/D/8/13/651373

Our Central Bank governor must be either nuts or is not very good at expressing himself...or maybe our journalists just misquoted him. I choose the latter two because I believe Mutebile is a smart man.

The article in itself has a misleading title -> Uganda safe from global economic crisis – Mutebile. No we are not safe, in fact if you read the bottom of the article, it clearly states how much we stand to lose.

"“There may also be an impact from reduced private transfers to Uganda especially as industrialised economies take a hit in terms of reduced GDP growth and market liquidity. There is also a possibility of reduced aid flows from developed to low income countries.”

Uganda gets about $800m annually in aid inflows, while private transfers amount to $900m per year. "

So if $900 million is nothing to the Ugandan economy, then we can say we are safe from the financial breakdown, but otherwise, the New Vision editors should re-think their title.

Also, there is a reason why this is called a Global Financial crisis.

Osama Bin Laden still has his job..
Do you have yours?

American Banking System Vs. Ugandan Banks, where is your money safer?

9/15/08 : historic day..So this morning we receive the historic news that Lehman Bros. the 4th largest investment bank; is going bankrupt. RIP Lehman.
I was actually working on developing a trading interface for Lehman and that project is now on hold..indefinitely.

9/17/08: So what does the current financial crisis mean to me? I'm the average worker that does not hold any Lehman, Merrill Lynch or AIG stock. My bank account is with Bank of America which is buying Merrill Lynch so things should be good for me, right?
I was not an employee of Lehman so I'm not losing my job. So why should I care that Lehman is going down...what is all this hullabaloo about?

Effects
Credit card rates: It probably will cause credit card rates to go up because banks will be eager to recoup their losses any way they can.

Tough Mortgage It will make banks less likely to lend money which means that it will be tougher to get a mortgage

Tougher job market With over 25 000 ppl being laid off at Lehman and many more at these other firms, you'd best be a good employee during these times because it's a tough time out in the unemployment world. Supply of labor is going to exceed demand.

Retirement accnts: This is a good time to re-balance your 401K investments to ensure that you're trading Lehman stock. Move from more risky stocks and funds to relatively safe bonds. I use Fidelity's automatic re-balancing tool so I should be safe on this one.

Spread your Bank accounts I put this point out there for ppl with lots of money i.e. > 100K in one bank accnt. Although by the time you have this much, you should have the sense to know that FDIC only insures up to $100K of your money in case of a bankruptcy.
I had a near death experience with IndyMAC bank. I had a 6month CD with them that I closed out a few weeks before they went bankrupt.

Banks that we always thought as safe havens for our money are not safe anymore.

Back to Uganda:
Meanwhile back in Uganda, our banks are not any safer. We are not facing financial breakdowns, but rather break-INs...literally. According to this article[http://newvision.co.ug/D/8/12/650014], robbers made off UGX 300million from Bank of Baroda which brings the number of bank robberies to 3 in a month.
Again, as is common with most heists in Kampala, the guards were in on it. If I were an entrepreneur in Uganda, I'd start a security company that monitors security because that's where the loop hole is in our system.

In the US, banks that are FDIC registered pay back your money up to $100K, I wonder how much of your money is insured in Uganda. Does anyone know?

As an avid follower of both Uganda and US news, its funny to see the parallels between issues that affect both countries' major financial institutions that are supposed to be regulated.

In the US, there is the current subprime mortgage crisis going on with Fannie Mae.
Brief history: In the late 30s, the US govt. formed Fannie Mae, to help the mortgage market. Why you may ask? People always want to buy homes--> to buy a home, you need to borrow money from the bank, which seems simple, but the problem arises when more people want to borrow housing loans than the bank can supply at fixed interest rates. Hence Fannie Mae was created to make sure banks have enough money for you when you decide to borrow money to buy a house i.e. provide liquidity in mortgage market.

Okay, seems simple enough still, where and how did things go wrong?
As is usual with human nature, the people that were lending/giving out loans got too greedy and figured out a way to make money off of the system. They started to give loans to subprime borrowers(people with bad credit history and are at risk of not repaying back the loan).

But aren't there laws governing who banks can give loans to?
Yes there are, but as I said, they found ways to beat the system by packaging loans in affordable ways only to increase them to extreme interest rates later on.
Let's use a car loan example. Car sales men are always trying to make the sale.

A car salesman only has his profit/commission in mind when he's selling you a car. He doesn't care if you can afford the car or not--> that's someone else's problem according to him.
So car salesmen will ignore all laws requiring them to check credit background of car buyers before selling cars. They will put the car companies at risk by selling cars to people that cannot afford them.
We end up having happy car salesmen with huge commission checks, and a lot of car buyers driving around Hondas and BMWs that they cannot afford. In the end, the car companies lose because they can't get their money back and are forced to repossess their cars. Transfer all this to the housing market and you have the 1.4 million plus foreclosures we've had this year.

Okay,but why do I care and how does all this affect me you ask?
1. houses that are repossessed are definitely losing value and entire neighborhoods are losing value. Imagine the value of your house going down just because your neighbor could not afford to pay for his own house..sounds unfair but it's life and it's happening.
2. For those of us without houses, the bad news is that it's going to get much much harder to borrow mortgage loans. There are going to be stricter credit history requirements and higher down payments to ensure that there are no loan defaults in the future.


Back to UGANDA
We have our equivalent of Social Security governed by a body called NSSF - National Social Security Fund.
Well, the fund must obviously be doing some things right because in June 08 they announced a record profit of UGX 131 billion (one hundred thirty one billion shillings) for the financial year making them the most profitable financial institution in Uganda.

However, like all human trends, they seem to be following the greed of the US mortgage lenders hence the current controversy they are facing. Read here
In brief, some top officials in the NSSF overpaid UGX 10 billion for a plot of land in a deal that is rife with scandal. The details of this scandal have politics, tribalism and corruption smeared all over them.


These two examples show that greed/corruption, like AIDS, is not just an African virus, but a human flaw. My conclusion is that all human beings act in rational self interest and ultimately greed takes over even those with the best interest. We should accept greed as a part of human nature and then find adequate solutions to that problem other than trying to stop human greed and corruption itself.


Sources:
http://www.monitor.co.ug/artman/publish/sun_news/Jamwa_rejects_Suruma_advice_to_step_aside_71488.shtml
http://www.nssfug.org/index.php?i=61
http://en.wikipedia.org/wiki/Fannie_Mae
http://brainstuff.howstuffworks.com/2007/11/28/how-the-subprime-mortgage-crisis-works/