Hard News: Meaning well with the money of others
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Islander - please don't take any of this personally. It's just under-reported stuff that should be taken into account by the government when deciding whether to finance those industries including potentially tipping $1.5 billion into SCF in case agriculture firms are harmed. Apparently it will cost us $600 million to just take over SCF under the government guarantee and that's the minimum we're up for as taxpayers.
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In a nutshell the future is bleak and we are all screwed. SCF is part of the iceberg we have run ourselves into and we are sinking.
We are probably lucky our banks are Australian owned so we couldn't screw them up to badly.
The phenomenal growths of credit since the 70s through to now has gone unchecked and capital markets during this time have largely operated without regulatory controls.
Governments during this sustained period of hyper credit have failed to legislate for the “good of the public”, they have grown massive bureaucracies, reduced services, and have been happy to collect the windfall hat hyper credit has bestowed from consumption taxes and to a lesser degree personal tax.
Remember the 1987 crash – Banks/Finance/Property Development Companies flourished, lending got out of control and there was spectacular failure in considerable numbers.
Deja Voodoo
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Wasn't the deposit scheme financed partly by a levy on financial institutions and banks? Do we know if the scheme has been triggered before, and how much money has gone into the coffers as a result of the levy?
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Grossly incompetent business class loses another 1.6 billion dollars; breaths sigh of relief as Rodney Hide gives them Auckland in compensation.
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I was once upgraded to business class. That was bliss.
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if South Canterbury Finance has poor record keeping, poor lending policies, questionable governance and probably lacks the financial resources to pay back its investors then
There are multiple entities involved with Hubbard, of which South Canterbury Finance is one. You are confusing, I think, some of the allegations related to Aorangi Securities etc. with SCF. SCF is publically listed, whereas some of the other entities exist in greyer areas, where there is far less regulation, and they are not included in the guarantee scheme.
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Wasn't the deposit scheme financed partly by a levy on financial institutions and banks? Do we know if the scheme has been triggered before, and how much money has gone into the coffers as a result of the levy?
And how much do ya want to bet it found its way to the same financial blackhole as the speed camera fines.........
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That's a different question, though, if it turns out the scheme is in the black by any significant amount it ought to be part of the conversation. So long as I understood how the levy even worked, which remains to be confirmed.
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if South Canterbury Finance has poor record keeping, poor lending policies, questionable governance and probably lacks the financial resources to pay back its investors then how did it get the ok to join the guarantee scheme in the first place?
A very good question. The RDGS is insurance. Every insurance company protects itself against this sort of moral hazard by e.g. not insuring homes from owner-arson. I would have expected our government to have taken at least some basic steps to protect us from the financial equivalent. If they didn't, then its gross incompetence, which looks set to cost us a large amount of money.
This debacle also shows what a dumb idea it was to extend the RDGS to finance companies. It is one thing to protect customers, who are innocent third parties. It is quite another to protect investors. What next? The government will guarantee people against gambling losses?
Unfortunately, those shit decisions have been made, so all we can do now is try and mitigate the damage from them. And if its a question of $1500 million or $600 million, then I'd go for the latter - followed by cutting those finance companies out of the RDGS ASAP.
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And just how would that be done Graeme? I mean NZ is not exactly flooded with FakeReceipt 1.0 software, is it?
If you can't think of at *least* three ways to evade tax in this manner - at least initially - you're not trying hard enough. Crime is easy, it's the not-getting-caught bit that demands thought.
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the evolution of single-cell organisms...
Crime is easy,
it's the not-getting-caught bit
that demands thought.this is a classic - T-Shirt please!
or at least a mail sack sampler... :- ) -
This debacle also shows what a dumb idea it was to extend the RDGS to finance companies. It is one thing to protect customers, who are innocent third parties. It is quite another to protect investors.
The idea was to prevent a run on the Finance Companies, followed by a tidal wave of collapses and then foreclosures and forced sales across the country as they all went under at once. So it worked pretty well in that respect.
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With the proviso that we'll never know whether it would in fact have happened, yes.
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Receivership.
Thank fuck. I thought we were being lined up to gift several hundred dollars a head to farmers, property spivs and an overseas billionaire.
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That's anarchist clap trap Steve is spouting, it is not mainstream right-wing.
Angus, darling, please don't interfere with the tease.
This debacle also shows what a dumb idea it was to extend the RDGS to finance companies. It is one thing to protect customers, who are innocent third parties. It is quite another to protect investors. What next? The government will guarantee people against gambling losses?
To play devil's advocate for a moment, why should the government guarantee "innocent" customers against their lack of due diligence on over-sold and under-performing investments offered by banks, or those foolish enough to put their savings in institutions massively exposed to sub-prime mortgages?
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The NZ Herald piece on the announcement includes the following line, which nicely answers my question from last night:
"There is $900 million in the scheme, calculated to be enough to cover all the companies which signed up to it."
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3410,
"There is $900 million in the scheme, calculated to be enough to cover all the companies which signed up to it."
(Not to contradict, but to clarify:) Rod Oram says $885m. I can't imagine that the second half of that quote is accurate. For starters, that's not how insurance works. Also, SCF alone looks like it could eat up two-thirds of that.
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ISTR that in return for the guarantee scheme, finance companies were supposed to adopt full banking levels of compliance. This doesn't seem to have happened.
Really, the previous government should have shut down the secondary finance sector years ago. It was obvious that failure was only a matter of time
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You are never going to run successful finance companies if the world economy tanks every ten years. Economics is boring but not difficult in principle. The problem is the designers of business are basically guessing and its time the whole game was given new workable sustainable rules.
And I don't think Andre's musing on the bizzare social contract Gen X and Y seem to have with the babyboomers and all the lack of opportunity that entails deserves the tears it got.
Everybody born before 1967, I struggle with the vision of the majority in there.
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sorting the wheat from the chaff
There still seems to be a lot of confusion between the SCF situation being conflated into the other Hubbard enterprises and trusts' problems and management...and I'd imagine that didn't help SCF find new investors...
(I'll also be interested to know if the Dave Hendersons of the world got their hooks in there as well...)... so I think some blame can be laid at the Govt's door for the heavy handed way they stepped in to the whole Hubbard financial avalanche management process and didn't help in clarifying what was what, and who was who...
Reading the uninformed redneck idiotic and banal comments on Bernard Hickey's seemingly unmoderated site is as depressing as talkback, Kiwi blog and ilk...
Big men writing under the cover of anonymity, impressive stuff...
bring on the killer asteroid!Hell I hear that Obama is a Muslim
and other Chinese whispers... -
I heard that Muhammad Ali was a Muslim and he's the greatest.
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Many clients that I have had that are finance companies have told me that everything is legit and that they are different than other finance companies. They even get right down to the specifics of how they are lending short term only and therefore there won't be a risk to investors etc. Then they go under. Many of them were really honest straight-up kiwis caught in a crash. Others were greasy pieces of crap that made you feel like taking a bath after meeting with them. One guy tried to hire us 2 days before he went under (for $20 million) and was still saying that his firm was sound and the future was bright. We've been lucky to stay in business over this period by avoiding the worst ones. I was stunned when companies like Dominion Finance went under. They seemed so safe and dependable and they had good staff for example.
The industry is inherently risky and prone to collapse during a dowturn. All of them are similar to Ponzi schemes in that when new depositers aren't found or existing depositers decide to withdraw their funds they collapse.
The government should give some sort of capital guarantee on investments in NZ-owned listed firms instead. We need the money that was pushed into property to be diverted to business instead. The current guarantee scheme does the opposite. All that we need to do is sort out NZX regulation as well so that we can't be re-Feltexed in future. Can you believe they found those Feltex directors not guilty? What does it take to be done for lying and ripping off $200 million in this country? -
Thank you Craig, you're such a tease ;-)
The problem is the designers of business are basically guessing and its time the whole game was given new workable sustainable rules.
People think I'm joking when I say the rules of economics should be based on Thermodynamics, Money cannot be created or destroyed, merely changed from one state to another. The difficulty in this is the measuring of potential value, basing it on risk alone is ridiculous, you end up with perceived high values being the least likely to eventuate. The best way to do it is...
Send answers on the back of unmarked $100 bills to....
ETA. The biggest part of the problem, as far as I understand, is that the risk of an investment is calculated by its risk assessment and that risk assessment is supported by confidence in the diligence of the Financier this must, inevitably, lend itself to conflicts of interest.
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Others were greasy pieces of crap that made you feel like taking a bath after meeting with them
Bob Jones, Michael Fay, Ray Smith, Micheal Hill Jeweller have the same effect on me, business is run by some weird boys.
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The best way to do it is...
Find the applicable scientists and get them on to it.
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