Sensible guarantee scheme but what is the secret agenda?
October 13th, 2008 at 7:53 am by David FarrarThe decision by the Government, backed by National, to guarantee bank deposits is sensible in the current climate, and really just brings us into the international mainstream.
It will also cover finance companies, but not the ones that have already collapsed:
It applies to finance companies that take deposits but is not retrospective, so it will be of no comfort to the thousands of investors who have lost money in collapses.
There is a valid argument that a government guarantee encourages more risky behaviour, but I think there has been so much of that behaviour regardless, that is less of an issue.
Helen Clark said a mini-Budget would be produced in December if Labour won the November 8 election.
Amazing – the biggest secret agenda of them all. We will announce our response to the financial crisis – after the election!
It is easy to conclude tax cuts will be cancelled (they will call it a delay) at a minimum.
Related posts:
- The retail deposit scheme
- Bollard admits risks in depost guarantee scheme
- The secret mini-Budget
- The deposit insurance scheme
October 13th, 2008 at 8:00 am
What a disgrace. Labour has no credibility on the economy.
The country is a deep recession and the voters are expected to take lectures from Cullen on how an economy is run?
Voters have to come to their senses and vote Labour out.
TIME FOR A CHANGE
Vote:October 13th, 2008 at 8:04 am
To repeat, Labour has no credibility on the economy. Who are they trying to kid?
Vote:October 13th, 2008 at 8:18 am
This is the stupidest piece of legislation that i can think of since Labour passed their last piece of legislation.
Scenario A: the banks start losing their money on the back of mortgagee house sales. They use transfers to take the deposit money and prop up houses (which people have lost their shirts on), sell them off at negligible prices and then claim the deposit money is gone. The government then has to guarantee their losses, which are actually on the housing market not deposit. They have no incentive to sell at anything approaching a market price.
Scenario B: a bank is looking at multi-billion dollar losses on its exposure to the credit markets. It decides to take the investor deposits and “gamble” with them on foreign exchange, oil prices, CDO’s you name it, knowing full well that any losses will be picked up by the taxpayer and any gains are ‘banked’ by them. That’s the same scenario that got us into this fuckup in the first place.
And they’re just two that a small-brain like me was able to think up in a few minutes. You don’t think the banks won’t be putting their big-brains onto working out exactly how they can make some serious coin out of this?
Vote:October 13th, 2008 at 8:23 am
I am not fooled, she is going to use it to punish the voters more likely to have voted against her. She will be out for revenge for all the bad polls and humiliation over the last few years. And if she has no Winston, she will have a clean slate to do what she likes as the Greens will nod yes to everything.
Vote ACT and give National their spine back! OECD, you are so very very right. NZ needs a Nat/ACT Govt in November more than ever.
Vote:October 13th, 2008 at 8:31 am
Had to laugh at Helen’s suggestion of Cullen’s competent stewardship of the economy, yesterday. Two words to rebutt that: Train Set.
The claims of Labour’s election ad’s are sounding like slogans from a country that isn’t NZ, from a time 40 years past. It sounds hollow and fake. Labour’s one and only plan for the economy is higher taxes. Somehow, as a result of that, there is going to be massive economic growth. Don’t think so, Helen.
It’s like the couple that buy a do-up house that takes them way over budget and to cover the $100,000 blowout they start eating 2 minute noodles and save $40 a week on food, while they become increasingly sickened by the bad diet and no further toward addressing the problem.
The Greens take on the economy is to suggest we need to “go through the hard times to transcend an unsustainable global culture of western consumption.” With the economy going into a serious downturn and after 9 years of slow contraction and increased domestic living costs, there is not much more movement for “hard times” before it becomes widespread economic depression and decay. Don’t know how they’re going to sell “hard times” to the people who still harbour an irrational resentment of the “hard times” Rodger Douglas gave them already. The difference between the two versions of “hard times” is that Douglas’ led to slightly better times – that the new Labour Coalition promptly harvested, but forgot to re-sow. The total destruction of agriculture and dairy industry in NZ under the Green’s communist ideas isn’t going to lead to better times. They haven’t grasped that to spend money, you have to make it and if your way of making it is to steal it, you have a very finite source. Dreamers, Complete dreamers. If they weren’t criminally insane, they’d just be plain liars.
Vote:October 13th, 2008 at 9:17 am
Hey everybody you all have it all wrong (that includes DPF). Labour are doing a simply wonderful job right now, John Armstrong says so in today’s NZ Herald. Armstrong doesn’t explain why Labour are still behind in all the major opiniion polls though.
Vote:October 13th, 2008 at 9:26 am
goodgod says at 8:31 am:
Another word to rebutt Hels suggestion: RECESSION.
Vote:October 13th, 2008 at 9:30 am
Lindsay Addie says at 9:17 am:
But according to the Left the NZ Herald is bias against Labour and doing everything in their power to get National elected.
I can’t square the difference.
Vote:October 13th, 2008 at 9:32 am
I hadn’t picked up on finance companies. That seems a bit strange – I would have thought encouraging prudent deposits sensible.
I am also surprised by the lack of comment on the timing of this issue. Labour has known what was in the books since August, National has been talking all week about a deposit guarantee and yet it has taken until the Labour launch for this to be announced. Probably just a coincidence.
Vote:October 13th, 2008 at 10:36 am
Pity those who lost money in the finance companies that have collapsed. Cullen says ‘it’s time to move on…’
I think that if National makes it restrospective then they will gain more voters. Then if they take the directors of said finance companies, and wound their family trusts back out, then they would also appeal to the swinging labour voters.
Now there’s a plan National!
Vote:October 13th, 2008 at 10:43 am
the aussies had told hulun to get with the fucking program.
and wonder how much cash has hit the public trust in the last month.
Vote:October 13th, 2008 at 10:45 am
“…John Armstrong says so…”
That man is a “deliberate falsifier of veracity”
Couple of days ago he was saying Winston was completely cleared, nothing to see, clean as whistle, move on to victory – and somehow tying it to John Key. He’s an embarrasment to journalism and an active agent of the Left. No surprise he works for a Leftwing propaganda machine.
Vote:October 13th, 2008 at 11:21 am
NeilR at 8.18 AM, you are not wrong, the people who have given you negatve karma are dicks. And has anyone calculated the exposure of the taxpayer to this measure? I read in the Wall Street journal that Ireland has issued a guarantee like this and the taxpayer exposure is TWO TIMES G.D.P.
Goodgod, that is absolutely fair comment about John Armstrong, same goes for Tracey Watkins. If the people of NZ do not learn that most MSM op-ed commentary on economic issues is blatantly untrue and easily rebutted propaganda, pity help us. The MSM is doing the same in the USA with the current crisis, tying the blame to Bush and McCain when it is really the Democrats responsibility. Articles have been dug up from the New York Times (and the like) over the last few years, praising the Democrats for having increased home ownership among the disadvantaged at no cost to the taxpayer by simply leaning on financial institutions, and criticising Bush and the Republicans as “mean-spirited” for endeavouring to introduce some sort of brake on the process. The same media are now all out to stick the blame for the crisis, on Republicans. Faaarrrrrrk, it makes me PUKE.
Who is to blame for the housing price crisis that has built up over the last few years in NZ? Who has only just introduced an “Affordable Housing Bill” that contains a couple of piss-ineffective measures like forcing developers to sell a percentage of houses below cost, (who decides what lucky buyers get those few houses and how does the developer recoup the cost? DUH) and moving the government into the field of lending money and taking equity in our homes. Er, who can say “Fannie Mae” and “Freddie Mac”? DUH. DUH. DUH.
Hugh Pavletich and Owen McShane are two guys who are more entitled than anyone to be saying “we told you so”, right now, but is there a cat’s chance in hell of the MSM giving these guys any time or space to explain what is at the root of what has gone wrong?
Vote:October 13th, 2008 at 11:34 am
On 9-to-noon just now Cullen’s response when questioned by Bill English on whether Labour would reduce contributions to Kiwisaver in the December mini-budget was repeatedly ‘that is not our intention’ right now.
That is code for ‘we know we have fucked thousands of small kiwi businesses by imposing unreasonable burdens on them in too short a time frame and we are a bunch of useless nonces! Those communications bureaucrats and shower head flow investigative task forces, as well as soon to be ex-ministers comfy retirements provisions have to be paid for somehow’.
Therefore we can only conclude that should Labour/Green ‘eco-mmunist’ pact get put in, Cullen-Clark mini-budget will be used to hypocritically ramp back on kiwisaver contributions, and drop the recently and much needed real economic stimulus of putting cash into the economy through tax cuts. Handy that the Nats are softening up the electorate about this right now so it won’t seem as such a suprise when it comes.
Vote:October 13th, 2008 at 11:37 am
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10537124
and heres another reason.
the probablity of an au bank going tits up increases
Vote:October 13th, 2008 at 11:48 am
You know what is happening in England and California and Ireland, and NZ, with housing? Prices have consistently escalated through the roof, finance companies have been creatively developing ways of getting people financed into houses in the belief that THEIR equity was going to be safe because of the continuing increases. Meanwhile, the numbers of people unable to afford a house at all has steadily increased AND the number of new homes getting built has been dropping in spite of increasing shortfalls in the provision of housing for population increase. What is WRONG with this picture? Who studied economics, supply and demand? The price of something is going up and up and up and SUPPLY IS DROPPING? England is short of 5 million houses, yet their house building industry has collapsed?
We could build new houses for 120 Grand and Brittons Building Movers can sell and move a used one onto a site for 30 Grand, yet it is impossible to buy even the worst dump for less than 270 Grand? When we are 1.4% urbanised?
Look, what is stopping us from giving the Council “planners” a boot in the backside and requiring them to give us bloody affordable houses NOW? Guess what it is? Existing home owners, lots of them, LIKE the way their “assett” has “doubled” in value over a matter of years, they don’t give a toss for the oncoming generation. And we go on about “Wall Street greed”? This is one of the most CLASSIC illustrations of government interference and political ideology stuffing up lives.
What happens when we carry on this way? Eventually, because first home buyers are squeezed right out of the market, the housing market slows down. Then a few “investors” get scared and start selling, and wheeee………down the market goes again. But because there is so much equity lost, financial institutions fall over, and lending is tightened up, and the lenders are wary about the values of the properties against which they might now be lending money. Plus, the expectations of people selling homes remains high, and they take their properties off the market rather than sell for a realistic value. Thus first home buyers remain locked out of the market in spite of it having slowed. Many of those potential first home buyers have also lost the deposit they had saved, as the financial institutions fell over.
We end up in a “bind”, with houses not selling, money not being lent, and what is more, the house building sector collapsed, all the while population increases and new generations come on and overcrowding of the existing number of homes, especially rented accomodation, increases. And we get financial “experts” saying that the government should buy up homes and bulldoze them, to keep the values of homes up so as to keep the financial markets solvent? FFS.
At some stage, should we not just face reality and let people have 150 grand homes to buy and finance and live in, and let people who want retirement nest eggs find something else to invest their money in, preferably some productive activity that adds to the productive economy, not just artificial blowups in the values of assetts that were produced long ago?
Vote:October 13th, 2008 at 11:57 am
http://www.smh.com.au/news/national/rudd-guarantees-700b/2008/10/12/1223749845710.html
Vote:October 13th, 2008 at 12:09 pm
And has anyone calculated the exposure of the taxpayer to this measure?
Vote:PhilBest, i saw some figures this morning that said $150bn (pretty much around 1x GDP or 3x annual taxtake). Now that’s a big number in anyone’s language – $37,500 for every man, woman and child in the country. If this fuck’s up we are all in so much doodoo that it won’t really matter who’s in power. Mind you, it will be the end of the welfare state, because there won’t be any money to pay the dole, sickness benefit, DPB or super.
October 13th, 2008 at 12:11 pm
Regardless of the merits or otherwise, it simply is not appropriate for this to be announced during the runup to the election and especially not at a campaign launch. Of course a government has to continue governing, but at the very least National should have been informed in advance.
Vote:October 13th, 2008 at 12:33 pm
i have a question. At the end of two years what happens to the monies in the deposit insurance scheme. Does it go back to the banks? I agree with the scheme but we should acknowledge that depositors will be the ones to pay with a 10 basis point reduction in our deposit interest rates.
Vote:October 13th, 2008 at 12:41 pm
Thanks, NeillR, I agree that what we might be seeing from all this, is not so much the demise of Capitalism, as the demise of “big government”. All over the world, tax revenues are collapsing AND CREDIT is TIGHTENING. So there is every possibility that governments will both run out of revenue AND be unable to borrow.
I am actually saying repeatedly that it would be better to have Helen and Mikhael cling to government again now and do a swift suicide job, rather like the end of “Atlas Shrugged”; rather than have a nice guy like John Key spend 3 years prolonging the agony and getting hell from the MSM in the process.
Vote:October 13th, 2008 at 12:42 pm
Just a few days ago dear leader was saying it was not on the agenda… What changed ? Which of our major banks is about to go tits up and rain on deal leaders claims that her and Dr.
Vote:MuppetCullen have been prudent managers of the economy ?October 13th, 2008 at 1:04 pm
I’ve got a couple of small investments with Finance companies one paying 14% the other 15% neither has reneged on quarterly interest todate, still its nice to know that my investment is now gilt edged especially as I considered them moderate to high risk when I invested.
Vote:October 13th, 2008 at 1:28 pm
Given the appalling governance and ethics and morals displayed by the wizards that got the worlds economy into this mess giving a bank guarantee is akin to giving a recovering alcoholic a case of what they fancy most.
the only thing a guarantee will guarantee is we will. have a repeat and it will be a large multiple of the current disaster.
The correct action should be to put in place a risk management strategy that includes big penalities for the crooks who caused the problem and a warning to the others of what they will face.
This was all about greed and corruption Nothing more nothing less. It was about playing Russian roulette with other peoples money knowing the penalities were non existant therefore well worth the non existant risk.
The really scary thing is the so called experts dont know how to prevent it happening again Or so they say IMHO its not they dont its just they are too chicken to take the steps.
So the good ole taxpayer will just keep digging into their pockets to reward the crooks and the pollies.
Vote:October 13th, 2008 at 1:37 pm
Dr Cullen had to go with the gurantee scheme otherwise he would have been rightly pilloried for not doing what the rest of the world was doing. Failure to take this step would have created uncertainty in the minds of the customers of the Banking sector and lead to more instability.
Vote:However making it a political decision rather than a bipartisan decision shows how low the man can go.
October 13th, 2008 at 1:54 pm
Can someone tell a feeble minded person like myself how these socialist tossers can guarantee bank deposits when the pantry is bare?. Is this just more pissing into the wind from the socialists?. So if the banks fall over will the taxpayers pick up the tab, I fucking doubt it, the people have been bled dry already by these leeches. The Liarbore party should be had up for EFS taxes as the bastards are putting out a lot of hot air. If people believe the lying mad cow Dear Leader can guarantee bank deposits they have rocks in their heads.
Vote:October 13th, 2008 at 2:37 pm
ssb Following my post above if were a banker I would be laughing all the way to the bank excuse pun I can now take really big risks with other peoples money and if it all goes to custard the taxpayer will pick up the tab.
I mean the bankers took gambles and lost even without the guarantees the problem is the pollies cant legislate and regulate for good ethics and good morals What theyc an do but wont is put in place such severe penalities that the crooked bankers wont take the risks.
But they wont so the taxpayer will continue to pick up the peices
Vote:October 13th, 2008 at 7:56 pm
So true gd, so sad also.
Vote: