Armstrong on SCF

September 2nd, 2010 at 11:00 am by David Farrar

Just caught up with John Armstrong’s column from yesterday:

Watching John Key and Bill English dispose of South Canterbury Finance yesterday was a bit like watching a python swallowing an antelope.

Except it all happened a lot quicker.

The Prime Minister and the Minister of Finance must have swallowed hard at the prospect of forking out $1.6 billion under the Crown Retail Deposit Guarantee Scheme.

They had no choice. But they did have plenty of warning of the likely receivership. So the Government was ready with a plan.

That involved wrapping its jaws around the company, swallowing it whole and spitting out anything which might have stopped it becoming the sole creditor.

That way the Government is now calling the shots, even though the failed company is technically under the control of receivers.

So good marks for the Government. And Labour:

Otherwise, this was one of the smoothest crisis-management operations conducted by this Government.

It is on such days that the Opposition is better off displaying bipartisan support.

Phil Goff, instead, took the line that the firm might have traded its way out were economic conditions more favourable. It was the Government’s fault that was not the case.

This line is truly hard to swallow given ’s difficulties sprang from the heady boom times in the property market when Labour was in power.

Goff would have been better advised to have said nothing.

One of the challenges of Opposition is to hold your tongue and not try for cheap publicity on every issue.

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21 Responses to “Armstrong on SCF”

  1. eszett (2,394 comments) says:

    Phil Goff’s remarks are truly stupid.
    Not even Labour supports would buy that nonsense and see it for what it is. A very low and dumb attempt to score some cheap political points.

    Most useless opposition party, ever!

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  2. Guy Fawkes (702 comments) says:

    Keep it Phil!

    We all love you.

    Don’t change a thing.

    Magic.

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  3. emmess (1,420 comments) says:

    If they sell the assets to this guy – http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10670519
    Won’t that be p-p-p-p-privatization?

    Another broken promise from those far right ideologues

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  4. berend (1,699 comments) says:

    The only thing I see being swallowed is the party line.

    Propping up finance companies is the stupidest thing one can do, and National did that. Spending taxpayers money on something is the easiest thing in life.

    Can National please get started with some of the harder things like the 50% wage gap with Australia?

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  5. Danyl Mclauchlan (1,066 comments) says:

    this was one of the smoothest crisis-management operations conducted by this Government.

    Translation: English’s press secs returned Armstrong’s calls real quick, and possibly even arranged a private briefing with the Minister.

    It is on such days that the Opposition is better off displaying bipartisan support.

    Because when governments do incredibly controversial, unpopular things it’s the job of the opposition leader to support them.

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  6. wreck1080 (3,865 comments) says:

    It will be fascinating to see the post mortem on scf.

    One theory in the herald today, attributes some blame to the govt guarantee, because high value investors withdrew funds so that they were under the maximum guarantee level, thus causing a funding crisis.

    But, investor behaviour is surely irrelevant, the root cause of the collapse must be because the secured assets were worth less than the amount loaned, and as a result interest from loans could not cover outgoing investor payments.

    This can only be due to very poor quality lending practices (due to greed). You could say, it’s the recession to blame, but , who in their right mind would run a business that cannot survive during both boom times and recessions. It’s the normal business cycle.

    Ah yes, it all comes down to Greed.

    Greed was everywhere, it was with SCF gambling on loans, it was with the investors chasing an extra 1 or 2% regardless of actual risk .

    As soon as people start wanting their money returned, there is none.

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  7. kaya (1,360 comments) says:

    Interesting piece by Armstrong, did you miss the article by Fran O’Sullivan in the same rag? I thought her comments were at least as interesting.

    “Finance Minister Bill English owes taxpayers a clear explanation over why the new National Government did not insist Treasury undertake a deep due diligence on South Canterbury Finance before it was brought within the guarantee scheme.

    It was, after all, only a matter of months before the Government was making multi-million dollar provisions in its own accounts for finance company failures.”

    Did you miss Liam Dann’s comments too?:

    “For most New Zealanders, only one question about South Canterbury Finance matters – why am I liable for this mess?

    This was a big question in April when the Government bent over backwards to ensure the company was allowed into the extended guarantee scheme.

    It is an even bigger question now the Government has handed over $1.7 billion of taxpayers’ money.

    We didn’t get a straight answer in April, and we’re not getting one now. But for that kind of money, we deserve one.

    A lot was already wrong with South Canterbury when it had its public guarantee extended.

    For a start it was effectively in breach of its trust deed and had failed to file audited accounts. Having a look at the numbers is usually considered important when assessing a business decision.

    The Treasury – which officially makes the call on who gets in to the scheme – could have waited months before accepting the finance company.

    But it didn’t. It rushed South Canterbury in to safety because the Government knew it was a goner without the guarantee – although in the end it was a goner anyway.
    When those accounts finally arrived a few days later, the auditors highlighted serious concerns about the company’s viability.

    Six weeks later, ratings agency S&P downgraded South Canterbury Finance to a level that would have made it ineligible for the scheme.

    In June S&P dropped the rating again. But it didn’t matter. All the risk belonged to the taxpayer.

    The only conclusion is that the Government believed this company was too big to fail.

    John Key is sticking to his guns on the final cost to the taxpayer being $600 million after the assets are realised.

    That is pure spin. In three years of finance company failures, when have original projections for recovery ever been realised?”

    Not quite the cheerleaders for Key and co. as Armstrong seems to be and with good reason.

    The guarantee scheme was morally and fiscally wrong. The “too big to fail” argument is as nonsensical in NZ as it is in the US. These are people who produce nothing, the real world will function absolutely fine without them. This is theft, nothing more or less.

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  8. JiveKitty (869 comments) says:

    “Because when governments do incredibly controversial, unpopular things it’s the job of the opposition leader to support them.”

    No. It’s the job of the opposition to consider if there were viable alternatives and advocate for the policy which they feel is likely to give the most benefit. They haven’t done this. Goff’s statements were fucking stupid. Opposition for the sake of opposition. This was the cleanest thing to do.

    Goff should be critiquing this problem with what the government’s done: “If things stay as they are, the message to Kiwi investors is pretty clear. Forget all that “diversify your portfolio” nonsense. Put everything into a government-guaranteed roulette wheel. Heads you get high interest payments; tails the government covers you. Here’s the list of companies covered by the deposit guarantee scheme; just be sure that the product you purchase is covered under the extended deposit insurance scheme through the end of 2011 and that the maturity date falls prior to end 2011.”

    http://offsettingbehaviour.blogspot.com/2010/08/propping-up-finance-companies.html

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  9. Nookin (3,266 comments) says:

    http://www.stuff.co.nz/dominion-post/national/4085892/The-rich-blamed-for-SCFs-fall
    What a headline! People withdrew money in excess of the guaranteed limit when and as it fell due because the company is shaky and they are to blame because the company could not honour obligations that it had assumed 6, 12, 18 or 24 months before hand. If the paper wants to go down that line the headline should have been “Absence of really stupid people with money to burn cause company failure.” Better still “SCF borrowed short and lent long to lost causes”

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  10. questlove (242 comments) says:

    So good marks for the Government.

    How many times does this guy want to try and spin it that the government has done nothing wrong?

    They have.

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  11. Rich Prick (1,662 comments) says:

    questlove, I agree! The government has socialised 100% of this loss (obviously shareholder loss aside), but only 25% of the leaky building loss. Not only has it done something wrong, it can’t even be consistent about it.

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  12. krazykiwi (9,189 comments) says:

    This headline pisses me off: The rich blamed for SCF’s fall.

    Apparently if you have more than $250k worth of assets you’re rich. What planet are these rick-prick envy mongers on?

    A couple who purchased a very average family home in the 1960, and then traded down on retirement would have $250k capital liberated to create some retirement income.

    Bloody MSM and their leftist envy.

    People who work hard, pay taxes, sacrifice and save should be applauded. Not sneeringly denigrated as happens almost daily at the hand of the MSM.

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  13. Ross Miller (1,686 comments) says:

    Phil Goff …. a voice in the wilderness looking for a headline and picking the wrong one.

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  14. Tauhei Notts (1,680 comments) says:

    Allan Hubbard;
    Many people want to besmirch him and I will have nothing of it. Related party loans and all other sorts of mischief. It is crap.
    I have had a look at the balance sheet for two outfits; let’s call them Na and Ka. Allan Hubbard and his wife own 25% of each of them. Na has assets of $14,186,334 and Ka has assets of $13,909,426. Neither outfit has any borrowings whatsoever from South Canterbury Finance or any of the other Hubbard related outfits that have been placed, at considerable expense, in statutory management. They each have decent borrowings from an Australian owned bank.
    So I looked further and noted that neither dairy farming partnership took advantage of the marvellous tax planning opportunities presented by section EC 20 (1) (b) of the Tax Act, when cattle prices fell dramatically during the year to 30 June 2009. Apparently Hubbard would have no truck with such chicanery.
    Now compare Hubbard with Telecom. Telecom’s Income Statement on page 72 of their Annual Report shows that the company made a profit before tax of $553,000,000. Search further, as far as page 120, where in Note 30 it shows that Telecom paid income tax during the year of, get this, $1,000,000.
    Somehow I have more respect for Hubbard’s business ethics than I have for the Telecom directorate’s business ethics.
    Declaration of interest. I do not have any beneficial interest in Na or Ka. My sharebrokers were unable to get me shares in the Mafia, but they did buy Telecom for me at $1.90 several weeks ago.

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  15. reid (16,222 comments) says:

    Yeah but why are Goff’s comments surprising in anyway?

    It’s in Liarbore’s genes to obfuscate, score cheap points, frankly, lie.

    Recall how during the first part of the 5th Liarbore govt’s execrable reign the first and most repetitive response of almost every single minister for a full 4.5 years, was that “it was the Nats fault because they…” Remember that?

    Finally it wore out because you can some of the people, etc…

    And Goff’s attempt today is but yet another angle on this same old canard.

    Liarbore aren’t skillful at politics, they’re skillful at propaganda. Study the way the most skillful propaganda masters in history manipulated the useful idiots and you have Liarbore’s entire modus operandi past, present and future.

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  16. side show bob (3,660 comments) says:

    You have to love Phil of it. If I was Shonkey I would offer the man the top job to manage this mess, he could be the headless receiver. Poor old Phil of it would fill his pants.

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  17. CharlieBrown (992 comments) says:

    The whole SFO investigation stenches of political interference. I can just imagine an unnamed finance minister using as much influence as he can to bring the SCF saga to an end, and the SFO investigation into Hubbard was the catalyst to achieving that.

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  18. Viking2 (11,367 comments) says:

    http://www.interest.co.nz/opinion/opinion-dear-allan-hubbard-please-say-sorry-and-thanks-taxpayers-nz-and-investors-scf

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  19. Caleb (479 comments) says:

    quite simply, this is nationals train set… and so early in their term/s.

    it certainly was too late to not honor the DOG but it never should have been extended in the first place.

    shameful interferance and once agian the taxpayer foots the bill.

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  20. Caleb (479 comments) says:

    Hickey is pissed… far enough too, but;

    Shit… the government has the whole responsibility here.

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  21. Viking2 (11,367 comments) says:

    Second post down; read first ,

    http://asianinvasion2006.blogspot.com/

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