The president on Monday mounted a startling 11th-hour defense of Vice President Boediono and Finance Minister Sri Mulyani Indrawati, blamed by political parties for what they call an illegal bailout of Bank Century in 2008, by saying he bears ultimate responsibility.
“As a step taken to save our economy and banking sector, it was right, and I am responsible for it although the technical operation was done by the officials who have the authority given by the law,” Susilo Bambang Yudhoyono said. “I did not issue an instruction or directive, but I approved of the act.”
Boediono and Sri Mulyani were named last week by four of the nine political factions at the House of Representatives as being responsible for the Rp 6.7 trillion ($720 million) bailout by the state.
Both have argued that they acted to prevent a systemic collapse of the country’s banking sector amid the financial crisis that had begun to grip the world in the second half of 2008.
Yudhoyono, speaking just a day before a special committee of the House probing the bailout was due to present its recommendations to a House plenary session, said everyone should take into account that precarious situation.
“I have to urge the people of Indonesia to understand the situation at the time,” he said, adding that a global recession was on the horizon and officials had to act. “What was important was that our country should be safe and a crisis such as happened 10 to 11 years ago did not happen again.”
He said that at the height of the crisis, he had to go to Washington, accompanied by Sri Mulyani, who asked permission to return to manage the problems at home.
Yudhoyono said he had told her: “Do whatever is necessary to save the economy.”
He said that in judging whether the decision was right or not, logic and common sense should be used. “So far we have been silent, because we respect the ongoing legal and political process, but in truth, we were concerned,” he said, adding that the case had been dragging on for too long.
The president said he “respected” the process at the House but reminded all that the inquiry was not a law-enforcement investigation.
“This should be clear, so that the public gets a comprehensive understanding,” he said.
“We all hope the Bank Century case can be resolved soon. How can we reduce poverty and mobilize the small and middle-scale economic sectors [otherwise]?”
Arie Sujito, a political observer at Gadjah Mada University, said Yudhoyono’s last-minute defense of his subordinates was based on what he thought the committee would say. “It possibly shows that SBY has been able to calculate the configuration of the changes going on” in the committee, Arie said.
Sigit Pramono, chairman of the Indonesian Banks Association (Perbanas), said most bankers agreed that a bailout had been right.
“Closing one bank would have had a systemic impact, as other customers might have rushed to withdraw their money,” said Sigit, who is also publisher of the Jakarta Globe.
He said the bank was saved by the “industry helps industry” concept where most of the bailout funds, aside from some state assets as capital, were premiums paid by banks to the Indonesian Deposit Insurance (LPS).
Sigit said a survey conducted by the association showed that 58 of the 63 respondents backed the decision to save the ailing lender as a way to save and stabilize the banking system.
Agus Martowardoyo, chairman of the Indonesian Banker Association (IBI), also agreed with the decision to save Bank Century. “If in the bailout there was a procedure that had been neglected, it is something to be learned for the future not to be repeated again,” he said.
“The policy might not have been carried out properly because the condition was critical.”
Andrinof Chaniago, a political expert at the University of Indonesia, said the government should separate legal issues from those regarding policy decisions. “Yudhoyono might have said it is not a law violation, but it could be a mistake in a policy decision,” he said.