Kiwis are asking a lot of serious questions about about the SCF debacle.
Down South, Cantabrians think their favourite financier was royally shafted by an at best uncaring or incompetent, and at worst cunniving and self-interested Government.
Elsewhere around Godzone, Kiwis are gobsmacked by the scale of the mess, how it could have been left to fester for so long, and the huge bill that they have been left to pick up.
All are left wondering how come “moral hazard” means hard up uninsured home owners cannot be covered, but senior debt holders in SCF can be paid out millions of interest, fees and profits. They want to know just who gained and who lost, how and how much.
For goodness sake the Government even widened the payout retrospectively to include non-residents and non-citizens! Kiwis want to know for whom, and at what cost, and why?
Make no mistake, this is the biggest bailout in NZ corporate history. It dwarfs, for example, Treaty settlements that were agonized over for years.
Others have contacted me to ask how come Hubbard was treated (they perceive) more harshly than other finance company heads that appear more self-interested.
Kiwis are fair minded. They want to know this kind of catastrophe can never happen again. They want reassurance their hard earned taxes have not been wasted through either incompetence or competing agendas.
As they are now paying the bill, they are entitled to real answers.
Do you actually not know the answers to your own questions David, or are just trying to whip up public feeling?
If its the first, I would seriously have a rethink about being opp finance spokesperson. If its the second, its a clumsy attempt.
Did the Double Dipper Bill English not rule out a Public Enquiry into SCF bailout? What is he trying to hide? Or is it once again the arrogance of the self-entitled who think they are a law unto themselves?
I actually think these are questions for which we DESERVE answers
“All are left wondering how come “moral hazard” means hard up uninsured home owners cannot be covered, but senior debt holders in SCF can be paid out millions of interest, fees and profits. They want to know just who gained and who lost, how and how much.
For goodness sake the Government even widened the payout retrospectively to include non-residents and non-citizens! Kiwis want to know for whom, and at what cost, and why?”
Thousands of investors get left with nothing or $00.01 in the dollar, while non eligible people get paid out, plus profit, leaky home owners are on their own (notwithstanding the long promised but short on detail government response), teachers are striking, doctors are striking, radiographers are striking cos there’s no money, but we can bailout a company?
@Sweetd – You wil find out what we know when we continue with our lines of questioning. There is a lot more to come
Who was running the Government when the majority of finance companies failed?
Who was running the government when the majority of finance companies failed and no protection given to investors?
Who was running the government when the RGS was put in place and was allowed to cover SCF?
Was David a senior member of Cabinet when all of these decisions were taken, if not who was that tall blond guy?
Good opposition is like good cross examination, never ask a question you dont know the answer to.
Nice questions insider…
Who renewed SCF guarantee when they knew the company was in a very precarious position, with potential liability falling on taxpayers?
I am not holding this or any other government responsible for the collapse of FC’ they had no input into or control over. (other than the appalling lack of legislation in this area since 1987 from both major parties).
I am trying to ascertain if this government overstepped the mark or acted negligently with our money when they renewed SCF’s guarantee.
Oh, and another question for you insider, I think you forgot to put it in your list
Who was running the country when the majority of finance companies failed and didnt suck the taxpayer dry with a handout?
Who was the whizz Finance Industry man who was PM when the guarantees were extended?
“Down South, Cantabrians think their favourite financier was royally shafted by an at best uncaring or incompetent, and at worst cunniving and self-interested Government.”
No perhaps all of NZ was shafted by some extremely marginal loans being taken out and even senior management from within SCF agree with this. So some Canterbrians that yo are referring to should keep quiet, using all of our money to speculate with.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10670285
It would also be good to know why the insurance scheme allowed “banks” to enter into without having to contribute if their source of funds was below $5b. This was a porly contstructed scheme that had a very limited lifespan, and was able to continual well beyond its natural sorry life. I was taken back 2 weeks or so ago by A.Bollard on Q&A when questioned on this. If the Res Bank was aware of risky financne coys that were able to enter why was there no contributions based on this risk. What were both the Lab and Nat govts briefings from the Res Bank, and what actions resulted from these briefings?
There appears to be some funny busiess soemwhere within this sorry saga
@ tracey Another one for the list
Under which guarantee was SCF paid out – the original 2008 one or the 2010 extension? If the former, what is the relevance of the latter?
Hi David, didn’t your party introduce the retail guarantee scheme for banks? And didn’t your party fully support the extension of the RGS to finance companies as necessary to maintain the integrity of the financial system? Didn’t your party remain silent when SCF signed up to the RGS?
Yup insider that is a fair question…its’ like Mr joyce refusing to release something under the OIA, it’s just that we are all too stupid to understand this stuff, so best we not know about it.
smhead IF the Government knew that SCF was in BIG trouble and it was likely a government bailout could be needed, and they renewed the guarantee when they could have let it lapse, would that be a bad thing?
Herodotus
Good questions
- If the Res Bank was aware of risky financne coys that were able to enter why was there no contributions based on this risk. What were both the Lab and Nat govts briefings from the Res Bank, and what actions resulted from these briefings? -
@ Insider: you are too kind to describe me as the “tall blond guy”. Let’s get real here: the RDGS was a greed by consensus between the two main parties during the election campaign in light of the GFC and the Australian scheme being imminent. (As I recall, it did not go to cabinet as there was no meeting at that time). The SCF argument does not revolve around whether the scheme was a good ideaa – it is common ground that it was imperfect but necessary.
Likewise there was bipartisan consensus on the need to strengthen disciplines on financial markets – hence the previous Govt passed some new laws and others were passed with bipartisan support by the new Govt. Hindsight is always 20/20 on timing – because as Bill English says “it is never too late to use it”. Again, however, that is just not the isse around SCF.
The issues around SCF are company specific and timed in 2009 and 2010: provisioning, extension, receivership and statutory management of (practically) related entities.
Bill English’s attempts to paint this as a “labour gvt problem” backfired: he had to apologise in the House today for getting his dates wrong.
@Tracey: BTW don’t imagine we don’t know the answers to (most) of these questions…
Tracey
the extended Guarantee dosent start till October.
The SCF payout is on the original guarantee that David probably countersigned
David, I was imagining quite the opposite.
Well David you are taller than most of the parliamentary midgets – or so it appears on tv, and you are fairer than me so that makes you a blond in my book (without drawing any inferences though
).
Re the issues, if the extension wasn’t used then surely it is moot? Not trying to blame Labour just saying you can’t wash your hands of the results.
Labour more right-wing than National..?
@Tracey – some good questions above, thanks.
@Insider – I don’t think anyone is blameless here – not SCF, not Hubbard, not the regulators and not the designers of the RDGS. By definiton it was rushed and I agree imperfect. Also bipartisan, so not the bit of the debate we are currently focused on.
@smhead: some of your questions on the RDGS were asked and answered above. Re the one below:
“IF the Government knew that SCF was in BIG trouble and it was likely a government bailout could be needed, and they renewed the guarantee when they could have let it lapse, would that be a bad thing?”
… the answer depends on whether letting it lapse earlier or later would have cost the taxpayer less or more money. Arguably the govt gott he worst of both worlds: payed millions to extend its life .. but failed to achieve a workable recap deal… why? What changed? What bet was taken and lost? Who won?
Also, don’t assume that the best counterfactual was receivership: What analysis was done of alternavies like a statutory management trade-through (more like a US Chapter 11). These are some of the crunch issues the public needs answers on.
$1.7Billion of our money should not have been given to greedy people taking a risk on a high risk, high return investment. If you take a high risk and it fails then in my books tough shit.
$1.7Billion is a lot of money and could’ve been used to help fix any number of problems such as pay increases for our striking teachers or radiographers etc. Or investment in our economy my personal favourite idea- R&D particularly in the area of green technology, which in my view has the chance of transforming our economy.
http://www.newstalkzb.co.nz/thisweek/hourrecs/Fri,%20Sep%2010%2009.00%20trn-newstalk-zb-akl.asf
David, just listened to JK radio appearance last week, interested into your response to around the 40 minute mark. Especially in that the SCF was under the pre election guarantee and that Nats guarantee does not commence yet. There appears to me at least that both Nat and Lab are expending alot of energy with the smoke and mirrows. At least JK was unfront in commenting that at the time 2008 there was not alot that he would have proposed differently from Labs. From his comments I have not read or heard anything to contra that it is the Lab guarantee that was uthe reason for SCF
Also no comment to my previous post as to Why “banks” with deposits under $5b were excluded from making payments. When in fact these institutions were the ones that were likely to fail.
While the deposit guarantee was required, though there should have been a ban on new lending for finance companies.
Ironically SCF does set one good example – the capital investor/owner lost his money too. It should be mandatory that whenever a finance company goes bankrupt all money paid out of the company in profits to owners should be returned to the company (with all profits placed in trusts still accessible for this purpose) and placed in the pool of money to refund investors. Thus placing a deterrent on risky (greed motivated) behaviour by the companies.
The responsibility for the finance company crashes lies with government – their acceptance of speculation in property (residential and farmland) across decades is the cause.
When Douglas allowed foreign capital/finance to flow through local banks to borrowers (without applying a CGT) he caused our private foreign debt blow out (to $150B today to homeowners and farmers). We have spent 20 years bidding up the price of local land assets with this borrowed money. All assisted by allowing foreigners on higher income to buy homes and farms as well.
It was not profligate government spending that left us with the high foreign debt but the legacy of that disastrous policy course.
And yet no one has yet acted to face up to this problem – so it will continue (Bollard’s move to require banks to have more long term and local funding notwithstanding and the move on depreciation allowance are not nearly enough). The crossover impact of the speculation on the real economy in farming has been perverse as farmers are left unable to afford to invest capital of their own to transform their industry and add value to their products. The rest of us subsidise the government investment in R and D and bear the cost of the dairy industry pollution of our waterways while they struggle on until they reach their happy place, when they retire and reap a large untaxed capital gain.
Perhaps if Maori were to argue that the $1B promised for Treaty settlements was based on land values at that time, and the comparable land value of today could be well over $5B, then government might then re-consider whether encouraging speculation on land by not taxing profits was inept policy. And why not, the iwi have done better with their money than the finance companies that those saving for retirement trusted.
Here again the government’s practice of taxing the inflation component of interest income pushes savers (especially after the 1987 crash) to the riskier option (and where there is no CGT, there is always greater speculation and greater risk of loss).
The government is to blame for so much of the economic mess, and yet there are no clear proposals to change much.
A CGT would fund tax changes allowing for a tax on only half of interest income (a broad assumption that half the rate is to inflation proof the stored saving). Of course the government rules out the option of a CGT – coz its class is the one that is called “capitalist”. Just ask the PM.