A mexican standoff?
October 31st, 2008 at 11:30 am by David FarrarThe money markets are chattering over the Mexican stand off with the Big Banks who have, in an unprecedented move joined forces to talk turkey with Treasury, over the deposit guarantee scheme. The Banks want some changes. Treasury is staring them down. The banks are staying firm – they want changes to clauses they think could give non banking institutions an advantage.
Could get interesting.
Tags: deposit guarantee scheme, roarprawn, Treasury
October 31st, 2008 at 11:52 am
Bring in Bruce Willis to shoot the senior banker in the head and then restart negotiations.
Vote:October 31st, 2008 at 11:58 am
It is just appalling that enormous moral hazard is being introduced into the whole financial system by implicit government guarantees. What is the point of having a clear difference between low risk low yield investments and high risk high yield investments, if everyone knows that politicians have now developed an aversion to collapses occurring on their watch?
People who have been sensible and responsible with their money need to be rewarded now, not penalised. If Warren Buffett managed to increase his wealth 27% while markets were collapsing, then obviously it is possible to make the right decisions and not get sucked in to what were, quite frankly, scams on a large scale.
It is dishonest to blame this on deregulation or lack of regulation, there are tens of thousands of people in bureaucracies all over the world being paid lavish salaries to keep a watch on all this sort of thing, and the whole lot of them got it wrong. The heads of Reserve Banks all over the world, who are meant to be the smartest people that governments can get, did not see all this coming. The only people who got it right, are smart investors like Warren Buffett who used their knowledge not to get caught out, and economists and other commentators like the ones from the Ludwig Von Mises Institute who no-one takes any notice of.
The trouble is, it takes a thief to catch a thief. Governments are not going to be able to fix or predict or control these “bubble and crash” problems without doing worse damage to the effective functioning of markets, and full-scale nationalisation would, I wager, lead to the biggest financial disasters of the lot a few years down the track. As long as politicians allow themselves to get captured by the special interests of all the suckers who gambled and lost, these problems will only recur. Seeing that the people who DID predict this are saying that, I think they should be given the benefit of the doubt now, not the losers who didn’t see it coming and lost on their little flutters.
There is NO “REGULATION” like “Caveat Emptor”. We need to get back to that, not further away from it. The Warren Buffett secret is to invest only in assetts and activities that he can pop over and take a look at. “Default Credit Swaps” and “Structured Investment Vehicles” and complicated, opaque, investments that no-one can value accurately in a moment – forget it. Time that valuable, age-old lessons were re-learnt, and there is no way of re-learning like the hard way.
Vote:October 31st, 2008 at 12:03 pm
Some smart guy recently said we don’t just have “sub-prime” mortgages, we have “sub-prime” investments all through the finance sector.
Vote:October 31st, 2008 at 12:19 pm
Good points Phil
This is a bloody important issue and there is an NZ analogy with the US where Washington’s culture is fundamentally different from Wall Street’s culture.
Our present Govt always tries to avoid responsibility and shift the blame.
In the US, Congress has not even held hearings yet in the area where it is most clearly responsible: social engineering through banking by pumping mortgages to unqualified borrowers and laws that required banks to make bad loans. Hearings are promised after the election (no surprises there)
The world has learned that complex modern banking can barely cope with its core function of allocating capital efficiently, much less politically.
Listen to the banks first thanks politicans
Vote:October 31st, 2008 at 12:26 pm
Well written Phil.
Vote:October 31st, 2008 at 12:31 pm
Want to make money today? Simple!
Borrow against your property at 8%, deposit the money with a finance company at 12% (guaranteed).
QED
PS. The banks know it too!
Vote:October 31st, 2008 at 12:43 pm
Good post phil As one who bangs on about the ethical and moral demension I have to say Told you so
Whilst no governemnt can legislate for good ethics and good morals they can legislate AGAINST bad ethics and bad morals
But they dont because they are captive to those bad ethics and bad morals
Talk about 2 faced Take this example Cullen Bollard et al bang on about how citizens should invest outside the real estate market then lower the interest rate boom on those who do DUH!!!!!!!!
Low interest rates will encourage citizens with cash to convert this into real estate at the current prices based on history
Why earn less than inflation in a bank TD?
Real estate prices will rise again and the profits are tax free.
the point about financial instruments made by Phil is correct When bankers admit they dont know the risk in a bundled package then why the hell are they allowed by law to sell it.
What these pricks did was no different to an apple sellers in a market putting a few good apples on top of the barrel full of rotten ones and selling the barrel as all good apples.
It just amazes me that the pollies civil servants and media commentators arent prepared to face up and admit they stuffed up and tell it like it is.
they are just a pack of Bullshit artists
Vote:October 31st, 2008 at 1:17 pm
PinkGina
In the US, Congress has not even held hearings yet in the area where it is most clearly responsible: social engineering through banking by pumping mortgages to unqualified borrowers and laws that required banks to make bad loans. Hearings are promised after the election (no surprises there)
Welcome to the legacy of Bill “I did not have sex with that woman” Clinton.
Vote:October 31st, 2008 at 1:47 pm
With the Labour government intent on redistributing wealth the concept of getting ahead, planning your own way forward and standing on your own becomes more and more a distant memory from a time past.
Vote:October 31st, 2008 at 2:02 pm
Good on the banks for standing up to this power mad government. I’ve always known that New Zealand’s businessmen were the true soldiers of freedom in this country but it is nice to see it confirmed.
We can’t go wrong if we do what the bankers say… OUT WITH CLARK ON NOVEMBER 8
Vote:October 31st, 2008 at 2:30 pm
Thank you for the kind comments.
Pink Gina, that is abolutely right about the US, because the media is in the tank for Obama and the Democrats, this whole financial crisis issue has been spun as a vote loser for McCain – McCain, who along with some of his Republican colleagues happened to have called for investigations into subprime lending, only to be condemned as “mean spirited” by the Democrats and the media, who now of course whitewash their role and count on their audience’s short memories.
While Barack Obama was in it up to his eyeballs, to the extent of:
Vote:1) training ACORN staff in shaking down banks for financing for “the disadvantaged”
2) taking, as a lawyer, cases against banks who were not co-operating with political requirements that they include “the disadvantaged” in their lending portfolios
3) being the biggest recipient of campaign donations from Fannie Mae and Freddie Mac, by a substantial margin
4) being the favoured object of campaign donations and massive electoral activism on his behalf, by ACORN.
October 31st, 2008 at 2:32 pm
And “gd”, on the moral and ethical dimension, Melanie Phillips said THIS recently:
“……(Oliver Kamm) said the financial crisis was not about morality but about incompetence and stupid decisions, and he did not agree with me that at root what lay behind it was, in the words of his fellow witness the Abbot of Worth, ‘militant atheism’. In direct contrast to Oliver I cannot understand how, along with every other form of human interaction, the administration of capitalism cannot have a moral dimension. It is surely important that bankers behave ethically, that politicians behave responsibly and that ordinary people behave prudently.
I see this financial breakdown, moreover, as being not merely a moral crisis but the monetary expression of the broader degradation of our values – the erosion of duty and responsibility to others in favour of instant gratification, unlimited demands repackaged as ‘rights’ and the loss of self-discipline. And the root cause of that erosion is ‘militant atheism’ which, in junking religion, has destroyed our sense of anything beyond our material selves and the here and now and, through such hyper-individualism, paved the way for the onslaught on bedrock moral values expressed through such things as family breakdown and mass fatherlessness, educational collapse, widespread incivility, unprecedented levels of near psychopathic violent crime, epidemic drunkenness and drug abuse, the repudiation of all authority, the moral inversion of victim culture, the destruction of truth and objectivity and a corresponding rise in credulousness in the face of lies and propaganda — and intimidation and bullying to drive this agenda into public policy.
The financial crisis was brought about essentially by a public which threw away all notions of prudence and committed itself to spending today what it could never afford to pay back tomorrow, and a banking, regulatory and political sector which ruthlessly and cynically exploited and encouraged such catastrophic irresponsibility with a criminal disregard of the ruinous consequences for the poor. The financial crisis and our social meltdown are thus combining to form a perfect cultural storm.
The link between all that and the US presidential election is – as Oliver himself acknowledges – the figure of Sarah Palin. It seems to me that the reason she has sparked such an unprecedented campaign of lies, smears, abuse and dangerously unhinged hatred (if you think that’s an exaggeration, just look at the readers’ posts on this very site) is because, as I wrote in the Mail on Monday, she stands against the tide of secular nihilism in the culture wars. Oliver and I dare say Hitchens (although I have not discussed this with him) may be shoulder to shoulder with me on foreign policy but they stand on the other side from me in the culture wars – what I see as nihilism, I suspect they view as progressive — and it is no coincidence that they both stand also for militant (or in Oliver’s case, rather less militant) atheism which they assume (falsely, in my view) is synonymous with rationality. Palin’s evangelical Christianity, and the moral and social positions that flow from that faith, would therefore strike them as beyond appalling. That’s why Oliver sees her as embodying
anti-intellectualism, insularity, social intolerance and anti-rationalism.
For me, by contrast, although the nature of her faith and the churches with which she has been associated certainly make me uneasy, they do not alarm me. That’s because I regard evangelicals as allies in the fight to defend authentic liberal, and thus moral, values which I believe are rooted in Judeo-Christian thinking. I’m sure that, had I been around during the Victorian era, I would not have cared either for the evangelicals then trying to convert everyone to Christianity – but the fact remains that it was through their faith that they campaigned against slavery and for just about every social reform that we now think of as enlightened and progressive. For me, ‘anti-intellectualism, insularity, social intolerance and anti-rationalism’ have indeed been unleashed upon our society – not by Christian evangelicals but by the forces of secular fundamentalism and bigotry through such phenomena as scientism, political correctness and post-modernism.
I don’t much care whether Palin believes in a hundred ridiculous things before breakfast — because what she stands for is a defence of bedrock western moral values against the nihilistic onslaught……”
Vote:October 31st, 2008 at 2:55 pm
Great quote from Melanie Phillips, Philbest.
Most times, mankind comes a guttser when they try to re-invent the wheel – particularly on traditional values.
Vote:October 31st, 2008 at 3:13 pm
I trust the banks about as much as I trust the government, Mexican stand off my arse. Whats the bet that in a couple of weeks the banks and the government will come out and make a public statement that they have come to a compromise and both partys will say it is a win win situation. You can bet the farm it will be the poor old taxpayer that will lose lose once again.
Vote:October 31st, 2008 at 3:18 pm
Surely Auntie Helen (with her extensive, private sector banking experience) could persuade the banks to harden up on consumers, what the banks just need is more Government money.
Definitely a case to cancel tax cuts !
Whew I’d been waiting for an opportunity to do that.
A vote for Winston = a vote for Labour/Green axis = a vote for corruption.
Vote:October 31st, 2008 at 3:59 pm
Ive said it before and so Ill say it again
What would have stopped this disaster would have be good legislation and regulation that allowed the ethical and moral operators to ply their trade whilst putting in place severe and I do mean severe penalities for those who broke the rules.
Not as we had penalities that were merely priced into the equation so the punters paid up front and the crooks went ahead anyway.
There were organisations that pleaded with governemnts to take the right actions including in NZ One was told by Dalzeil in March 2002 that their recommendations to regulate the finance companies where over the top and not necessary as there was no risk and all it would do was add to their compliance cost
The requests were about requiring the companies to adopt good governnace standards. Apart from those who tried their best to prevent the problem all we can say is Told you so but that doesnt help who lost their shirts..
Frustrating never the less to watch idiots like Dalziel and her dumbarse officials who dont know and dont care/.,
Vote:October 31st, 2008 at 6:43 pm
thanks for the comments dudes,
especially ‘Philbest’ leading along with ideas,
I sent our family money to $AUD this week,
I didn’t know what else to do,
if Helengrand monster takes government your money is play school thing,
If good government is introduced I still have good currency with $AUD,
Eventually and sooner than we think $US dollar must fail,
death to helengrand dudes,
Vote:death to her regime says pq,
October 31st, 2008 at 7:57 pm
PhilBest , secular fundamentalism, amusing, one thing about this bloke who lives a secular lifestyle, I do not go knocking on the doors of others to tell them the wonders of it.
Duty and responsibility to others, yep I like that.
Should that duty apply to the EB when their country calls on them for service, who should they keep the right to opt out of that duty ?
Should we expect loyalty to country from those of all religions, or should we be understanding if some put other countries before NZ in their loyalty ?
Should we also have freedom from religion ?
Vote:October 31st, 2008 at 8:28 pm
“one thing about this bloke who lives a secular lifestyle, I do not go knocking on the doors of others to tell them the wonders of it.”
Thats because you have nothing worth telling people about.
Oh and, most Christians don’t do the door knocking thing either.
“Should that duty apply to the EB when their country calls on them for service”
The EB is a tiny fringe group at best. Using them to beat up on other Christians, including mainstream evangelicals, is a poor tactic that says more about the person using it.
“Should we also have freedom from religion?”
Nice Marxist idea. Secularism is a religion.
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