$400 mln xmas gift for banks

Written By: - Date published: 10:30 am, December 24th, 2009 - 21 comments
Categories: corruption, crime, national/act government, tax - Tags:

The banks, who tried to rip us off to the tune of $2.6 billion, have agreed to pay us $2.2 billion.

I don’t get it. We’ve spent tens of millions so far on court cases to get our money. We’ve won every case. The judgments have been damning of the banks. So, why did the IRD agree to settle for 80% of what the banks owe us? Why are we giving the banks a $400 million gift? If we had run through the rest of the court process, we would have got more than $2.6 billion when you add penalty tax and court costs.

I have a sinking feeling that this is a political decision to get the cash in hand now for National’s objectives. There can be no doubt that a decision of such magnitude was approved by ministers.

Bill English, Peter Dunne, and John Key are going to have to answer for this $400 million dollar Christmas gift to the banks.

21 comments on “$400 mln xmas gift for banks ”

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  1. burt 1
    24 December 2009 at 10:44 am

    Yes it is a shame that the banks couldn’t simply validate their theft and move on. Hell if they refused to pay it back like Labour’s special friend Winston then Labour would have probably let them run the country and take anon donations from big business for tax reductions in the banking sector.

    • Pascal's bookie 1.1
      24 December 2009 at 10:47 am

      How do you know that’s not what happened?

      ACT and the Nats should really open their trusts.

  2. prism 2
    24 December 2009 at 10:47 am

    We must remember when we are trading to ask for the discount that goes with cash payments. The banks have got lots of money, and they know how to get a good deal. We must learn from them, maybe we will get rich too -(shout yourself a Lotto ticket this Christmas as well).

  3. Herodotus 3
    24 December 2009 at 10:53 am

    A perspective from someone who has just refinanced $150m that will be why the banks have just slapped an increase in their cost add ons to us by the order of 1.5% to 2%, this is on top of the gloabal credit fee and the increase in industry risk fee. Yet another cut being made to the veins of the economy. Yet they are receiving an increase in their funds acquired internally. They appear to me anyway to be recouping this cost off their client base. Pity all other industries did not have the same ability. Air NZ will have to increase their scheduled flights across the Tasman to copewith the flood of money leaving the country to Aust banks head offices.

  4. gomango 4
    24 December 2009 at 11:08 am

    This is a commercial decision – may or may not be a good one, but any settlement takes into account the probability the banks will win on appeal – presumably privy council in this case after a round with the supreme court – so at least 3 to 5 years of waiting for the process to exhaust itself. Do a probability weighted, npv calculation and I’d guess its roughly reasonable. Even if theres only a 5% chance of losing at the Privy council, with costs etc that skews the math very heavily. Very simple solutiopn is to look at what advice the IRD gave to the ministers in terms of settling/not settling. I’ll bet they were in favour of settling. Notwithstanding the cash, if the IRD settles now they look forward to some very strong precedents entrenched in our case law around thin cap transactions. That will mike their life a lot easier for the next decade.

    And herodoltus – you cant look at the current account flows without also looking at the capital account. I think you’ll find that in respect of the banks, the net flows (dividend outflows minus capital inflows) arent skewed like you assume they are.

    • poneke 4.1
      24 December 2009 at 1:06 pm

      any settlement takes into account the probability the banks will win on appeal presumably privy council in this case after a round with the supreme court

      Appeals to the Privy Council were abolished in 2005. The Supreme Court is, thank goodness, our final appellate court.

      What is likely here is that the four banks have realised they are unlikely to win in the Supreme Court, after the damning and lucid judgements against them in the High Court and Court of Appeal.

      The Supreme Court is not the soft touch for corporates that the Privy Council was. Ask yourself why the biggest supporters of appeals to the Privy Council were corporates and the Business Roundtable.

      The lawyers for the banks will have advised settling for a discount, which the solicitor general agreed to last night, probably to save the cost of years more of litigation (it could take that long to go through the Supreme Court).

      It was an abrupt capitulation as only this very month, those banks got leave to appeal to the Supreme Court.

      Our politicians would not have been involved at all. This country is not corrupt, no matter which party is in power. The deal will have been done by IRD, Crown Law and the lawyers for the banks.

  5. Scott 5
    24 December 2009 at 11:10 am

    It’s a perfectly understandable decision by IRD.

    The IRD’s lawyers will have assessed the risk of a successful legal appeal by the banks, concluded there is some risk of an appeal succeeding, and advised the IRD to make the deal.

    Any settlement where the plaintiff still gets over 80% of what was claimed is still a pretty good result.

  6. searching 6
    24 December 2009 at 12:21 pm

    Gomango – get up to date. Appeals to the Privy Council ended with cases decided 31 Dececember 2003.

    A pragmatic result.

  7. randal 7
    24 December 2009 at 1:38 pm

    searching.
    we are a mature nation of inteeligent people. we dont need anyone like a privy council (I mean who are they) to tell us what to do.
    $400Mil buys a lot of popcorn and toys for infantilised idiotes.

  8. tsmithfield 8
    24 December 2009 at 7:03 pm

    Net present value of money.

    If the banks had decided to go through the full court process, they probably could have dragged it out for years. Also there was the chance they could have won on appeal to the Supreme Court.

    Receivers/the taxman etc love money in the till.

    • Jenny 8.1
      25 December 2009 at 1:07 am

      Where’s the guts to stand up to these fraudsters? I bet if they were facing some real jail time, they wouldn’t be so happy to wait in a cell for the results of some drawn out appeal.

      It beggars me that a solo mother can face jail and separation from her children for a $4 grand and most likely would stay in jail if she appealed her sentence.

      Yet these bank fraudsters can get away with $400 million and return to the beds in their mansions every night.

      Maybe Paula Bennet’s high profile beneficiary bashing can shave some money from the Social Welfare budget to pass on to the banksters.

  9. gomango64 9
    25 December 2009 at 10:02 pm

    fully aware of the privy council status. I put presumably because I wasnt sure of the timeline and thought these tax cases may have started before abolition of the privy council rights for NZ, but given the timeline i guess thats not true in this case.

    And poneke – just because the banks settle doesn’t mean the crown have to, and if the case was that cut and dried why would they. Its by mutual agreement obviously.

    I do believe this judgement is correct, but as important as the current cases, is the effect it will have on future behavior around NZ as an offshore tax jurisdiction. And whether you buy the arguments or not, the case for the privy council (imo) is more about independence of the judiciary from political influence, and quality of the judges given our very small talent pool.

    And also bear in mind that there was a very significant settlement last year by one foreign owned bank with a stronger case (based on one crucial structural difference) than the aussie banks. That settlement was in excess of 100mm, and under the labour government. I would be surprised if either then (labour) or now (national) the politicians settle on terms that conflict with the advice from the IRD and crown law.

  10. expat 10
    25 December 2009 at 10:15 pm

    $2.2bn now is better for our balance sheet than maybe $2.6bn some time later.

    Lifes full of these types of compromises, makes me think of the under investment in roading and telecoms and electricity generation and transmission during the Clark years so that the spend-a-thon on social services could go ahead.

    • George.com 10.1
      26 December 2009 at 12:01 am

      Correction for expat – the years of under investment in our infrastructure were the Roger Douglas and Jim Bolger years. Clarks govt made big inroads into our infrastructure deficit following those years of neglect under the neo-liberals.

      • Herodotus 10.1.1
        26 December 2009 at 10:21 am

        Given both the destruction in the value of money and the volume that had been floating around. It has and still is not that dificult to throw large $$ around. Both govts within the last 10 years can say “WE” are/have spent more on this or that than any other time. The question on all spending should be the quality of that spending and the on-going benefits that have arisen from this.

    • Jenny 10.2
      27 December 2009 at 7:44 am

      Why wait for the outcome of an appeal? Stick these thieves in Mt Eden Remand Prison on Friday and the full $2.6 billion would probably be paid by close of business, on Monday. And if not keep them there till it is.

      When they get out they they can still mount an appeal for the the $200 million if they want.

      This is how it works for everyone else.

      • Akldnut 10.2.1
        27 December 2009 at 2:45 pm

        Good Idea Jenny, the bastards are just thieves – we do that and we go to jail.
        The do it and they go for a holiday for Christmas to someplace like ahhhhh Hawaii.

        The Govt should just throw senior management in the slammer until it’s paid.
        (Thats the ranting side of me coming out, cause I could do with some of that cash as tax relief)

  11. prism 11
    27 December 2009 at 11:46 am

    expat I understood that the Clark government tried to follow the right-wing trend demanded by business interests and give more opportunities for business through contracting or privatisation, rather than government doing everything itself.
    The government was committed to maintaining social welfare but also to setting up policies that would lessen the number on benefits. This after the Nat right-wingers had wiped out so many jobs with jolly unconcern, in the belief that the capital released would be more usefully directed to new job-making operations. Like destructive rich children whose parents will replace their broken Christmas presents.

    • prism 11.1
      27 December 2009 at 4:45 pm

      Wasn’t the British government setting the scene for us in using a political practice called “The third way’ which we were also following, as we trailed behind their Labour government? This was to go down the middle of socialism and capitalism, allowing business to proceed fairly unfettered and ensuring welfare was effective and fair.

  12. expat 12
    28 December 2009 at 6:33 am

    Buying tranzrail back doesn’t count

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