Hard News: The Bollard Book
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This Alan Bollard was no quiet authority figure working through the crisis, but rather a screaming, ranting madman who resorted to violence (of the armed and unarmed variety) whenever he did not get his own way. It was more like a cross between Japanese manga comics and Fear and Loathing in Las Vegas than a boys-own annual.
Hmmm. Is namechecking of manga and Fear and Loathing a sign that Dr Bollard has a wild side after all?
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It has alwas seemed to me that Reserve Bank Governors have to appear boring because all their statments are checked and scanned for hidden meanings
Which makes it interesting that the business hacks have missed so much and an honest answer might have brought the whole shakey structure downInterestingly we sat next to the Australian Govenor as he flew to Canberra at that time
Never have I seen such an agitated person, we commentated on it and were then told who he was, he was in a cold sweat. with hindsight ot surprisingly -
Yes, but does PA favourite Don Abel rate a mention?
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Bollard clearly agonised about the scheme more than any other measure taken – he knew there would be a cost, he knew it would be gamed – but, in the end, settles for having fended off a collapse of the banking system.
Which put him in very good company that could fill a football stadium or two, I suspect.
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Yes, but does PA favourite Don Abel rate a mention?
Of course. He is an associate governor of the Reserve bank, you know.
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including the international currency trade (How's it work? Who are these people? What's it for?).
Work on him. It is about time someone at the level of the Reserve Bank explained the damn thing in words of one syllable.
Reading what he has writ makes you wonder what sort of ropey scheme this whole money system is. It does beggar belief that he had to write a whole press release "between the lines" so that the country wouldn't make a run for the tellers. He must have managed to convince a few banks to ensure their employees kept their trap shut as well. And that makes it even more amazing!
Any bankie folk out there who could confirm or deny such happenings???
Is it really really that unstable?
Answers his own question. Yes it is.
Shit.
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@ Craig. I guess that 'football stadium' and 'collapse' have a certain resonance at the moment. :-)
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Is it really really that unstable?
Leveraged up the wazoo
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Is it really really that unstable?
Answers his own question. Yes it is.
Shit.
Actually, the big four Aussie banks who account for the large majority of the business in New Zealand were extremely solid compared to many others in the world.
But no retail bank has the ability to immediately disburse all its deposits in cash, on demand. A bank run -- if it were to happen -- becomes self-perpetuating. You want to get your money out while there's still some in the vault to get.
It's amazing how much of Bollard's job was about striking the balance between giving a fair and honest account of the grave financial situation we faced -- and trying not to send markets and savers into a hysterical frenzy.
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But no retail bank has the ability to immediately disburse all its deposits in cash, on demand. A bank run -- if it were to happen -- becomes self-perpetuating. You want to get your money out while there's still some in the vault to get.
Didn't this happen to/at Countrywide Bank at one point?
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http://amazon.com/gp/aw/d/0071448454/ref=mp_s_a_1?qid=1285016069&sr=8-1
is the standard text. I'd recommend reading it through, then getting pissed with a few traders.
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I don't accept your criticism Russell.
I'm not sure that I or any of my colleagues at the Herald had any conversations with RBNZ about whether or not we would report the imminent failure of our banking sector before it was apparent, but we certainly often had these discussions amongst ourselves.
Helping precipitate a full blown run on our banks and the attendant misery by reporting early signs of it is not the kind of scoop I want on my CV.
If I'd felt otherwise, I suspect it wouldn't have been as easy as asking Grant Spencer (Bollard was away at a Bank of International Settlements meeting in May 09 and generally doesn't front FSRs anyway) how safe our banks were seven months after the worst of the crisis.
As it goes, I was asking how safe our banks were 15 months or even a couple of years earlier.
The statement you quote Bollard referring to looked to me like clear signs of shakiness.
[n]one of the media asked what might trigger interventions. And we had another week or two to work out for ourselves just what our response may be.
I can't recall whether I asked the RBNZ for details around this particular statement or not, but I've found they invariably deal with such inquiries by flatly declining to answer them.
As Raymond puts it:an honest answer might have brought the whole shakey structure down
And the guarantee?
As for how desperate things were behind the scenes, I think we gave a pretty good flavour a year after Lehman's collapse, months before Bollard's book. -
I don't accept your criticism Russell.
Well, it's more Bollard's account, but I take your point. Bernard Hickey said something similar to me.
But the book does contain multiple instances (ie: more than those quoted above) where Bollard seems to feel he dodged a bullet because journalists didn't ask the questions he feared they might.
There's also the select committee meeting where he admits to being worried about journalists being in the room, and thus arranged with chair Craig Foss that the committee wouldn't ask certain questions he didn't want to answer. That's fairly interesting.
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You want to get your money out while there's still some in the vault to get
But this is exactly what the Government guarantee does: provide liquidity to pay deposit holders in folded stuff. A bank's money is tied up in investments and loans. You won't see mortgage holders queue up to pay off their loan in full because the bank is in trouble (even though I suppose a bank could ask for its money back early - read the fine print in your mortgage and personal/business loan documents).
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There's also the select committee meeting where he admits to being worried about journalists being in the room, and thus arranged with chair Craig Foss that the committee wouldn't ask certain questions he didn't want to answer. That's fairly interesting.
Fairly interesting indeed. I wonder if all the members bought into that, or if there was some serious arm twisting going on.
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I wonder how many NZ financial journalists had their spare cash stuffed under the bed during the last financial crisis.
Also, given that the media considers itself part of the financial system and wont deliver us inconvenient information, what are the possibilities of crowdsourcing cash issuance levels from banknote serial numbers?
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what are the possibilities of crowdsourcing cash issuance levels from banknote serial numbers?
Sounds like the potential for shit going awfully wrong would be quite high there.
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The word was on the street that certain finance companies were looking really shaky for months before it was reported because the journalists involved would be repeating hearsay and be taken to court for libel if they repeated them in print. The old boys networks knew first and got out before the mom and pops who were burned in many cases. The journalists mixing in those circles were told. How did Allan Bollard somehow never find out? I was in Auckland but surely he should have known more than me about it all even from The Terrace.
We didn't just guarantee our banks, we guaranteed the finance companies as well. What a uniquely kiwi world view.
Allan Bollard unfortunately sold us down the river at that point. He's a nice man but that is the unfortunate outcome. SCF was not a natural disaster so why are my kids still guaranteeing these shonky investments owned by mainly wealthy people? Thanks Allan. -
Well, it's more Bollard's account
I suspect I'm taking umbrage more with your interpretation of Bollard's account, ie that we weren't doing our job very well, rather the account itself.
I've not read the book yet so I have to rely on my colleague Brian Fallow's take on it in this regard but I'm more than than comfortable doing that.
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I suspect I'm taking umbrage more with your interpretation of Bollard's account, ie that we weren't doing our job very well, rather the account itself.
Okay, perhaps my interpretation was uncharitable, but the passages I cited (and there are others) did seem to indicate that Bollard was repeatedly relieved that journalists didn't ask questions he didn't want to have to answer.
Add in the "vicarious pleasure" bit, and it's not unreasonable to form the impression that Bollard didn't rate the local media all that highly. Although he does, remarkably, credit unnamed expert blogs with helping him understand the crisis as it began to unfold.
Anyway, I'll ask him about this tomorrow.
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How did Allan Bollard somehow never find out? I was in Auckland but surely he should have known more than me about it all even from The Terrace.
Oh, I think they knew a lot. It's striking how much they relied on others having imperfect knowledge to keep the situation stable.
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Okay, perhaps my interpretation was uncharitable, but the passages I cited (and there are others) did seem to indicate that Bollard was repeatedly relieved that journalists didn't ask questions he didn't want to have to answer.
Either way it says something interesting - either our financial journalists aren't very good at asking the right questions, OR they knew stuff but chose not report it or report it in full (I think on Media 7 once you had a guy who stated the second answer as a financial reporter Russell).
The second leads to intereresting questions about who knew about impeding trouble and was able to get their money out of things, and who didn't. Who are the people that have that information independent of the financial media? Was it, as Andre claims, beneficial to the old boys network richer people?
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OR they knew stuff but chose not report it or report it in full
Bernard Hickey says he declined to report multiple rumours of bank runs -- for quite good reasons. No one wants to be that guy.
(I think on Media 7 once you had a guy who stated the second answer as a financial reporter Russell).
From memory, that was about the 1984 currency crisis, when some journalists agreed not to report what they knew, for the public good. I don't have a problem with that.
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Allan Bollard unfortunately sold us down the river at that point. He's a nice man but that is the unfortunate outcome. SCF was not a natural disaster so why are my kids still guaranteeing these shonky investments owned by mainly wealthy people? Thanks Allan.
How? It's perilously close to a civics man-splain to observe that the Governor of the Reserve Bank's powers do not include vetoing legislation or beating the Finance Minister over the head until he come back to the paths of fiscal righteousness.
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The run on currency lasted about a month before dropping back to normal levels. What is strange, however, is that it has not returned into the system subsequently.
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