Foreign banks bleeding us dry

Written By: - Date published: 6:47 am, February 14th, 2012 - 340 comments
Categories: capitalism, overseas investment - Tags:

The Bankers’ Crisis is hurting people all over the world. From the deepest, darkest austerity in Greece, to the continuing foreclosure tsunami in the US, to cutbacks and job losses here, it’s the ordinary people suffering the hangover for the bankers’ wild decades of unbridled excess and profit. But at least the banks are suffering too, eh? Yeah, nah.

(source for graphs)

Over $3 billion a year in profit. Nearly all of that money is flowing offshore to the foreign banks. That’s equivalent to all exports of wool, wine, and fish put together going just on the profits for the Aussie banks.

Kiwibank has 4% market share but accounts for only 0.4% of the after-tax profits made by the banks. The rest is the Aussies.

And don’t forget that we’ve given these poor dears a 5% cut to their corporate tax rate in the past four years, which was worth about quarter of a billion to them last year. Every time you hear of some important service being cut, remember the Aussie banks are pocketing a million dollars per week day in tax cuts.

So, how are they making record profits? By getting cheaper funding from offshore and lowering savings rates here, while not passing the full benefits on to their customers.

Again, Kiwibank is a stand-out, its interest expense is a much higher portion of its interest income than other banks – it pays better interest to savers and offers lower borrowing rates.

The second graph above shows how the banks’ profits have grown despite the amount they are lending being steady. The one below shows that what they’ve done is lend less to businesses for productive investment and more to the household sector – which has left the house price bubble still significantly intact (good news for the banks, which don’t want to write down the value of their loans).

So, we’re being creamed by the Aussie banks, who are fueling our housing bubble, not passing on their lower cost of capital to us, and reaping record profits, helped by the tax cuts we gave them.

Time to switch to Kiwibank, eh?

340 comments on “Foreign banks bleeding us dry”

  1. And they are now our tax collectors too it seems!

    • Kevin Welsh 1.1

      And, no doubt, clipping the ticket along the way.

        • The Gormless Fool formerly known as Oleolebiscuitbarrell 1.1.1.1

          If you do not pay your rates, the Council can sell your property to recover the unpaid rates. The bank does not want this to happen because it affects their security.

          So they pay it and add it on to your debt.

          They do not want to do this. They would much prefer that you just paid your rates. The bank profits by the very minor amount of the interest on the rates they have paid but it hardly something they set out to do.

          • travellerev 1.1.1.1.1

            Nope they don’t. I asked them to send me a snail mail response outlining the next steps if I didn’t pay my rates and I was phoned on my Sunday afternoon to be told that I now was two weeks in arrears (while I automatically pay my mortgage without fail) and if I didn’t make good on the missed payments they would start the process to force me to pay which means if I don’t pay repossessing my house.

            For more details read my post on the subject. So I now have to make either an arrangement with the bank or pay up all my outstanding rates in one foul swoop.

            Now if you live in Auckland and you have just bee confronted with a massive wave of possible tax and rate increases which they can just steal from your bank account if you refuse making a foreign unelected unaccountable all powerful your judge and executioner while the government and the councils can use your bank account as an ATM machine for whatever hubristic adventure they wish to engage in with the only recourse not to elect them the next time.

            If this doesn’t scare the shit out of you you have not been paying attention.

            • Te Reo Putake 1.1.1.1.1.1

              Is this stuff new to you, Trav? Banks have been required to deduct money from customer’s accounts since forever. It is usually in the situation you appear to be in, where people can’t or won’t pay their rates or personal or business taxes. Bosses can also be required to garnish your wages to pay for fines or liable parent contributions. It’s just not that unusual at all and it’s fair enough, too. 
               
              Most councils are pretty reasoable with arrears, because they know they have security over the property in the long run. If you sell up, they get paid out. If you scarper, then after a period of time, they can sell the property and recoup what is owed. Nothing wrong with that, is there? We all have to pay our bills, don’t we?
               
              I don’t want to pry into why you got into arrears, but if its just because you don’t want to pay your dues, well, you reap what you sow.

            • Colonial Viper 1.1.1.1.1.2

              If this doesn’t scare the shit out of you you have not been paying attention.

              Dmitri Orlov recommends finding a property, someone elses, to safeguard and inhabit as a live in ‘property manager’ for just this reason.

              • Read my post on the subject TRP.

                I know that the government can do all this and have been for a long time but if you think that governments can force banks to anything you are sadly mistaken and if you think it is OK that the government, our elected servants, should have unfettered access to your bank accounts you should ask the Greek how they are faring with that kind of unlimited power over their funds. 

                • Te Reo Putake

                  I did read it before I commented, but I’m still unsure what your point is. Government regulates the banking system and occasionally uses it for its own ends, reclaiming money owed by citizens in default of their obligations. I don’t see any problem there at all.
                   
                  By the way, this arm of Government (and council) are not our elected servants. They are just staff doing their jobs, collecting the money that pays for public services.

                • Colonial Viper

                  There are no such thing as secure bank accounts any more. People can reach into your account and take money out at will. The MF Global scandal proved that. Segregated client accounts were emptied without client authorisation by unknown parties. Clients who had gold and silver bullion stored by MF Global and who hold warehouse storage receipts for that bullion have been told that they will only get some, not all of it back.

                  And many of these clients on the losing end aren’t Joe Averages, but multimillionaires in their own right.

                  The top 0.1% is now stealing outright from the top 10%.

  2. Colonial Viper 2

    The Greek parliment just passed severe austerity slash and burn measures demanded by German banks and others in order to secure the next hundred billion plus bail out from the European community. 81% of that new debt is destined to go out in March to repay existing European bank debt, not to provide any benefits to the Greek people.

    Who responded by burning down dozens of buildings around Athens.

    And here Max Keiser talks about how on earth Greece was discovered to have another 15B euro gap in its finances, just like that.

  3. just saying 3

    I’ve found Kiwibank okay, but it should be mentioned that Taranaki Savings Bank and credit unions are also NZ owned.

    I read that we’re more likely to change our spouse than change banks, which is a damn shame. Apparently KB has some sort of special deal on now that makes changing less of a hassle.

    The Aussie banks stole millions from us in unpaid taxes in recent years and then threatened to tie the matter up in the courts for years if the government didn’t let them off much of the debt, which duely happened. And the government still loyally banks with the Aussie bandit Westpac. Time to cut the bastards loose I reckon.

    • Yet they can be forced to steal from our accounts to pay taxes to our councils. Hmmmm wonder how that works?

    • Janice 3.2

      They’ll hardly cut Westpac loose now that they have their lapdog, Simon Power, safely enconced there to handle the asset sales and make sure that their mates get the inside running of the bargain basement sale, not to mention the commission for the sale.

      • ianmac 3.2.1

        Most of my modest banking is with the excellent PSIS. Secure. Friendly. Good interest paid on my Internet banking. Totally NZ owned by us. And some banking with Kiwibank.

  4. Wonker 4

    Hi – what’s the source for the graphs?

    [http://media.nzherald.co.nz/webcontent/document/pdf/20126/PwC%20Banking%20Perspectives.pdf]

  5. vto 5

    These (Greek “bailouts”) are the biggest lies in the world.

    The bailout is like, say your $15,000 car loan was up for repayment, but you can’t repay it (which btw, the lender always knew you wouldn’t be able to repay)…… so you get given a second loan of $15,000 to repay the first loan of $15,000. Nothing more nothing less. But instead of simply rolling over the first $15,000 loan the lender says “I aint giving you loan number two unless you do this, this and this”.

    And do you know who the unelected PM of Greece is? A banker.

    it

    is

    a

    farce.

    • Colonial Viper 5.1

      Actually the second loan has to be for $20,000 because the first $15,000 loan has accrued interest. And because you’re at risk of default and your credit rating is junk, the second $20,000 loan is going to need $30,000 to pay back in 3 months time. When you will be crying for yet another bail out.

      Meanwhile the bankers are telling you to not use the lights or refrigerator at home or even feed the kids as part of the ‘austerity’ agreement which you need to sign first.

    • ianmac 5.2

      Wonder if the Greek decision makers also cut their own salaries by say 40%, to show solidarity with the poor?

      • Vicky32 5.2.1

        Wonder if the Greek decision makers also cut their own salaries by say 40%, to show solidarity with the poor?

        Almost certainly not! It’s horrific and the sheepy-people in the msm just love the bankers!

      • Nope, and they are the best paid parliamentarians of Europe

    • Bored 5.3

      The tragedy of the Greek scenario should not be lost upon us regardless of where we sit on the political spectrum (RWNJs and LWNJs take note: we are all in the same boat).

      What we are concurrently spectators and victims of is the failure of the rule of law as practiced by democratic states to prevent the larcenous usage of money to subvert both justice and democracy. The end result is that financiers worldwide have been able to transfer massive debt loadings from themselves and onto the people.

      In NZ the symptoms are currently those of a mild cold, as Greece defaults as they must do the dominos fall, and you will see National (if Labour were in they would aswell) doing what the IMF and the financial world dictates. This represents the failure of our democratic systems to manage and control financial interests from imposing their dictatorship onto us, the people.

  6. Good stuff James.

    This is precisely the same reason so many of us are against the privatisation of the Power Companies.  The same thing will happen.  Prices will increase.  Every quarter a huge amount of money will be sent overseas to enrich the powerful at our cost.  And the state will be that much weaker and that much less able to actually improve the plight of ordinary kiwis.

    The Banks are especially disturbing because through a process of receiving our money and then lending it back to us at a greater cost and through financial hocus pocus where it is effectively manufactured out of thin air they bleed us dry. 

  7. tsmithfield 7

    It is actually a good thing for the banks to be making good profits. If they are making good profits in NZ, they will put more money here which is great for people wanting to buy a home, or for people investing in their businesses.

    The other point is that high margins also reflect the greater risk (risk v return, right?) in the world economy. If banks are at greater risk of bad debts they will need greater profits to cover those risks.

    So, for banks in NZ, it is probably a combination of both points. Firstly, in relative terms, NZ is a safe place to invest money, compared to say Europe. Secondly, in absolute terms, the world is a riskier place, where ever they invest money, so margins need to be higher to cover the risk.

    • Colonial Viper 7.1

      It is actually a good thing for the banks to be making good profits. If they are making good profits in NZ, they will put more money here which is great for people wanting to buy a home, or for people investing in their businesses.

      lolololololol by “put more money here” you mean give out more and bigger mortgages and increase NZ’s private debt even further?

      Jeeez mate you’re reaching.

      • tsmithfield 7.1.1

        You’ve heard of good debt and bad debt, right?

        Bad debt= HP to buy a new TV, or taking out an overdraft to gamble at the casino.

        Good debt= borrowing to expand an exporting business, creating more jobs and bringing in more foreign exchange.

        If money is being borrowed for good debt, I have no problem with banks lending more here.

        So far as housing goes, prices are set through supply and demand. Banks provide the funding so people can afford the prices. Simple.

        • Colonial Viper 7.1.1.1

          NZers love bad debt. Mostly goes into property speculation as you know. And in a world with no per capita economic growth – virtually all debt is bad debt and will be unrepayable.

        • Colonial Viper 7.1.1.2

          So far as housing goes, prices are set through supply and demand. Banks provide the funding so people can afford the prices. Simple.

          Total bullshit misconception of how it works.

          Cheap and easily available bank credit fuels asset price inflation. People then enter into high levels of leverage with the expectation of high capital gains based on that leverage. I suppose that’s the “demand” you are talking about.

          Last one carrying the biggest mortgage before the bubble pops is the one left carrying the can. And typically the banksers get bailed out by the tax payer at that stage while the private individual is screwed.

    • mik e 7.2

      tsm only while the commodity boom continues when and not if!

  8. higherstandard 8

    If you think the Aussie banks are disliked in NZ I can assure you it’s nothing compared to the disregard in which they are held across the Tasman – at least amongst my circle of friends.

  9. Dv 9

    That is about $750 from each person in NZ!

  10. Takere 10

    Tax their Profits! Remove tax from savings! Have all Government ministries use KiwiBank for all government transactions instead of wankpac … where Simon Powers has become uber Broker for them for SOe sales.

    • Fortran 10.1

      KiwiBank could not take on Government business.
      They are in no way solvent enough. Ask the Reserve Bank, who supervise this.
      They would need billions injected to make them a safe bank.

      • AAMC 10.1.1

        If Kiwibank had solvency issues, in light of it’s Govt ownership, would it be likely the Govt would be forced politically to guarantee deposits?

      • Colonial Viper 10.1.2

        Fortran’s full of it. The simple way around his vacuous claims is to make the government Kiwibank. That is, all the business transactions the government conducts, and all the assets it owns, is done not just through Kiwibank, but as Kiwibank.

        Very similar set up to the state bank of North Dakota.

      • Mike 10.1.3

        Auckland rates revenue would provide billions as well as a captive deposit base.

  11. AAMC 11

    I’ve just moved am moving everything, business, mortgage etc to Kiwibank & tossing up between TSB & PSIS. Anybody got any experience with PSIS?

    I gather most on here have probably done the same? If not, get to it, starve the cancer!

    Perhaps The Standard should push a campaign to “Change Your Bank / Move Your Money”?

    My next intention is to try to purchase Solar, I appreciate this is a luxury (expensive) but beats paying ever increasing power bills, I also intend to start collecting water from my roof, my vegetable gardens have expanded to inhabit every space inch of my very small section, get on with it, decentralise!

    • DH 11.1

      Solar isn’t a luxury at all if you don’t need to use batteries. If you’re on mains power look at a grid-tie system & run with Meridian who buy power back at 1:1. If you have a reasonable north facing site for sunlight over the full day, do most of the install yourself and shop around for bulk panels you should be able to set up a solar install that costs the same or even less than mains power. It’s only the initial capital outlay that hurts.

    • insider 11.2

      Note PSIS is now called “the Co-operative Bank”, just in case you couldn’t find them.

      If you are worried about ever increasing power bills, why are you going for one of the most expensive forms of power available? If you rely on it alone you will have significant issues maintaining the current most houses need to operate eg you may not be able to run computers and modems at the same time as the washing machine. If you are maintaining your grid connection you will still face lines charges.

      • DH 11.2.1

        You’re well out of date there. Do the homework before you buy, do most of the install yourself, and solar can be cheaper than grid power. Lines charges are presently much cheaper than batteries & don’t make up a lot of the bill so it’s still economic to stay connected to the grid. With a grid-tie system there’s no issues of current or voltage drops.

        • Lanthanide 11.2.1.1

          “do most of the install yourself”

          Good luck selling your house or getting it insured?

          • felix 11.2.1.1.1

            Not at all. With most electrical work you only need a sparkie to hook it up and sign off, no need to need to pay them to run cables around if you’re handy and have the time.

            • DH 11.2.1.1.1.1

              Yeah it’s pretty easy for anyone with a bit of DIY nous. Do all the labouring yourself and get it connected & signed off by a certified electrician. All legit, no issues with insurance or compliance.

        • insider 11.2.1.2

          But if you are maintaning your grid connection and paying for power when voltage drops you are doubling up a lot of costs on top of the cost of the solar supply. No batteries means no capture of power surplus which means you will be paying for grid electricity when there is no sun. Peak use is generally during that time.

          EECA says PV power is 35 to 50cpkWh at about $6k tp 9k per kW installed. That is hugely expensive compared to grid power of 25c, plus you are saying maintain grid support. It all sounds very very complicated and expensive.

          • DH 11.2.1.2.1

            You feed the surplus back into the grid & draw it back at night, power companies pay a feed-in tariff. Meridian pay 1:1 for feed-in because it’s in daytime which is peak demand time. Grid-tie inverters are common overseas now, Aus is into it in a big way although they do subsidise it there.

            EECA is way out of date. Do the homework & you can install solar for less than 25c Kw/hr now.

            • AAMC 11.2.1.2.1.1

              Thanks for the solar advice, I was in pursuit of Batteries, but the tie in sounds to make sense.

              insider – why pursue these alternatives, cause I’m happy to live in the center of Auckland, but I don’t want to be part of your game any more, less I have to funnel up via this trickle up economic system the better. If I have to pay a little more not to pay the new Wall St shareholders, happy to do so.

              • DH

                If we’re both still hanging around here when you decide to make the plunge drop me a note & if we can work out how to exchange contact details I’ll give you all the info. I’ve bought panels in & done all the research.

                Batteries kill it, they cost around 30c per Kw/hr. They’re only viable if you’re facing a hefty cost to connect to the grid. Grid-tie needs only inverter & panels.

                • AAMC

                  I’m pretty much ready to make the plunge, so how do we go about this contact detail stuff I wonder?

                  Through a moderator?

                  If your on Twitter, drop me a note there @AAMCommons, then we can DM?

                  Thanks!

      • ianmac 11.2.2

        Thanks insider. I’ve banked with PSIS for 30+ years and didn’t notice the change to “The Cooperative Bank.”
        Anyway: “The change meant the co-op can call itself a bank, which it said would help “clarify” its position in the market. Its status as a bank would draw a distinction between the new bank and finance companies with much higher risk profiles. …….and to change the misconception that it was only for State Servants.”

        • Fortran 11.2.2.1

          PSIS now Cooperative bank will have to merge probably with Kiwi Bank to give solvency strength to both.
          Soon.

          • AAMC 11.2.2.1.1

            And it’s the solvency of those Aussie Banks that the Fed was bailing out with all those billions I was worrying about..

  12. Red Rosa 12

    NZ has always been a nation of borrowers. That’s why we don’t own our banks. The Japanese live in small houses and have cash at the bank. NZ’ers live in big houses, have big mortgages, and net equity close to zero.

    We are actually lucky that the main NZ banks are owned by the Aussies, and that the Oz government ensures they can’t be on-sold. Imagine if they’d been owned by the American banks when the crisis hit in 2009? Those sharks would have sucked every possible $ back to the US, to prop up their operations there.

    Borrowing costs in NZ are currently the lowest since the 1950s.

    The Greeks have voted for successive governments which have 1. not collected enough tax 2. set up some of the most featherbedded salary and pension deals in Europe and 3. overlaid all this with cozy crony business/government deals, across the board. They are dreaming, if they think the German taxpayer will fork out for this nonsense. No sympathy required.

    The US banks behaviour has been reprehensible. It is still a puzzle why Obama did not nationalize those who came demanding cash by the $00’s billions from the Fed in 08/09. But bankers have done this in times of crisis for 150 years, so no surprise there. The real surprise is that millions of Americans still follow the old GOP mantra of ‘less government’, when without government millions more of them would be bust.

    Interesting times.

    • Colonial Viper 12.1

      They are dreaming, if they think the German taxpayer will fork out for this nonsense. No sympathy required.

      The Germans have to, and they will. Its a Mexican standoff. If the Germans allow Greece to default, German bank holdings in Spain, Portugal and Italy become at risk as those countries will begin thinking…Greece did it, why not us.

      NZ has always been a nation of borrowers. That’s why we don’t own our banks.

      That’s an illogical (and untrue) statement. We don’t own our banks because we decided to sell the BNZ, sell Postbank, sell Trust Bank, sell the Rural Bank, sell ASB,…

      We are actually lucky that the main NZ banks are owned by the Aussies, and that the Oz government ensures they can’t be on-sold.

      Oh yes, we’re so lucky not to have control of our own financial system, let me count my blessings.

      • mikesh 12.1.1

        I was once told (though I don’t know whether it is true) that in the days when one needed overseas funds to buy certain cars such as Holden Kingswoods, people used to purchase NBNZ shares and resell them to Lloyds Bank in England in order to obtain the necessary overseas funds; and that that is how NBNZ passed into overseas ownership.

        • Colonial Viper 12.1.1.1

          Shit, that’s a lot of Kingswoods.

        • insider 12.1.1.2

          my father said he needed muldoon’s sign off as min of finance/treasurer for the release of overseas funds to buy a computer for a govt agency. Hard to envisage those kind of controls in these days of Amazon

          Note the National Bank was founded in the UK and HQed in the UK up until 1978, so the story sounds good but bogus

          • The Gormless Fool formerly known as Oleolebiscuitbarrell 12.1.1.2.1

            I heard that the Hyatt hotel in Auckland was built without air conditioning because the government claimed it was unnecessary and we could not afford the foreign currency.

    • thatguynz 12.2

      “We are actually lucky that the main NZ banks are owned by the Aussies, and that the Oz government ensures they can’t be on-sold. Imagine if they’d been owned by the American banks when the crisis hit in 2009?”


      Minor point of note – have a good look at the major shareholders of every one of the big Australian banks and you’ll see a familiar pattern.  They all have significant ownership by Citigroup, JP Morgan, HSBC etc.  Granted, one of those is categorised as being British rather than American but make no mistake – they are already largely foreign (to the Aussies) owned..

  13. AAMC 13

    “In the end, just as with a Greek tragedy or a Yeats poem, this center cannot hold and things fall apart. When one abuses the laws and principles of mathematics and capitalism, claiming to be a faithful servant, consequence and accountability eventually catch up. The breaking point inexorably nears. Citizens are beginning to think, voice, and act: “We can do without the false idols that call themselves banks. In fact, we need them to be dissolved for us to survive and thrive.””

    http://www.zerohedge.com/news/guest-post-first-dominoes-greece-reality-and-cascading-default

  14. insider 14

    Kiwibank charges about the same fees and interest rates as other banks. It’s a nonsense to say their interest cost is higher because they pay more and lend lower. There is nothing in this report supporting that or in their published data.

    So given their rates are consistent with the market, why are they not considered to be bleeding us dry? Wasn’t KB supposed to bring down margins?

    • Colonial Viper 14.1

      Oh yeah you missed the point where KiwiBank’s profits go back to the government to provide services to NZ citizens, whereas the big Aussie banks profits leave this country and help support the lifestyle of Australian investors.

      Do you see the difference?

      • insider 14.1.1

        What profit? They made 1% on shareholder equity. Wouldn’t that $600m be better off being put on term deposit at Westpac where it could earn a bit more?

        • Colonial Viper 14.1.1.1

          Source for your 1% figure please. And note that Kiwibank’s profit last year was severely impaired by a one off charge for bad loans.

          • insider 14.1.1.1.1

            it’s in the report the graphs above come from. $600m shareholder equity $6m net profit. Note that is six month figure so added to the 14m for the previous half year makes it 3%.

            Most banks had bad loans charges in the last year. KB’s was huge in comparison – 60% of core earnings. Could be a timing issue ie KB got hit later than the competitors.

    • The Baron 14.2

      That’s cos they make no money – despite the fact that they leverage off the existing retail network of postshops. 0.4% of market profits, WAY under their market share.

      On a return on capital basis, you wouldn’t invest in KB – well, unless you were really fucking dumb with your money. But in CV’s ivory tower, this means that the Govt should stump up for the stupid investment instead.

      • Colonial Viper 14.2.1

        LOL you guys have no idea do you. You talk as if entering into a market competing against billion dollar banking players who have huge resources and decades entrenched positions should be some sort of walk in the park – and that KB should already be an equal to them in every way.

        • The Baron 14.2.1.1

          10 years in and 4% retail market share, 0.4% revenue share. You wanna play out more rope? Easy to say when it ain’t your personal money.

          Compare to 2Degrees – 3 years of operation, 8% retail market share, against similarily entrenched multi-billion dollar competitors.

          KB is a loser investment for the Govt, but economic stay at home retards like you want to keep it cos it has the word Kiwi in it. Lame, lazy analysis from the golden armchair socialist again.

          • thatguynz 14.2.1.1.1

            Um it IS our personal money dumbarse.  Assuming you pay taxes yes?  You know just like the power companies that we ALREADY own..
             
            Would seem to me you are hardly in a position to be calling people a “retard”…
             
            I for one would much prefer to have any profits (irrespective of magnitude) returned to us as a nation rather than to offshore shareholders…  YMMV.

            • The Baron 14.2.1.1.1.1

              Oh, you’re claiming that Govt money is yours personally are you – you’ve hardly invested anything in Kiwibank have you. OK, your third form understanding of money doesn’t change the argument anyway – since you’re clearly struggling already with your responsibilities as a red flag waving retard, let me break it down for you really simple like:

              Over the 13 years since Saint Jim created it, Kiwibank:

              – Has failed to introduce competition, cos only 4% of customers use it
              – Has failed to make banking cheaper, cos it charges the same as everyone else
              – Has failed to keep the money onshore, cos it only earns 0.4% of market profits.
              – Has prevented our Govt from using those billions invested in capitalising it, money that could have been spent on things like schools and hospitals.

              Your move. Oh no, thatguy, you’ve proven already you can’t keep up. Quiet time now please.

              • Lanthanide

                “- Has failed to make banking cheaper, cos it charges the same as everyone else”

                I think you’ll discover that after Kiwibank came into the marketplace, the other banks reduced their various fees. Certainly I now have a bank account on which I pay $0 monthly fees.

                Once I sell my house and clear the mortgage I’m intending to move to Kiwibank to take advantage of their nice $0 fee credit card.

                • The Baron

                  Righto. Worth tying billions of dollars up in that then wasn’t it – so you can save $50 on CC annual fees, which you could get from the national bank anyway (look it up – having been a KB customer, I don’t think your move is worth it – they are really, really amateurish and rubbish – but that’s a wholly different problem with this whole idea).

                  Look, I have no idea if they had that impact. If I could be fucked, there might be a banking fees index that might back you up. But given I still pay a small amount of fees for my banking, and kiwibank only has 4% retail market share, even if that is true it has hardly been a revolution worth waiting for, has it.

                  • Lanthanide

                    Hah, had a look at the National bank CC offering.

                    $5 fee per purchase per month, capped at $10.

                    Kiwibank offers $0 fees as long as you make at least 1 purchase in a 3 month window. Since I use my CC for about 90% of everyday expenses, the National bank CC is a joke. I’d be paying way more than my current fees using that.

                    • insider

                      I think you are looking at the wrong card Lanth. The Thoroughbred card has no transaction $5 fee and minimum spend. Note it is $45 a year but you’d only have to put $4500 through your card a year to make it free, anything more and they start giving you money – far more fungible than airmiles. KB charges $15 a quarter if you don’t use it.

                    • Lanthanide

                      insider: Kiwibank has a card that is $0 fees if you use it every 3 months. That’s it. I’m not interested in hocus-pocus money-back schemes.

                • Jackal

                  Earth to planet Baron… we don’t want all our banks owned by foreign interests.

                  Kiwibanks zero fees are great! They also have a number of better provisions for paying off a mortgage faster and consistently have the lowest mortgage rates. Depending on your existing mortgage, it may be worth while switching before it’s fully paid off and just taking the early payment fine on the chin.

                  • insider

                    Plenty of banks don’t charge fees. And Westpac’s basic mortgage is currently cheaper than KB.

                    If you want a credit card go for National because they give cash back on their basic card. None of this airpoints crap. I think you get up to $300 back a year depending on usage. Well worth the $20 fee if you are willing and able to run all your spending through it.

                • insider

                  No they didn’t. There was no change on entry of KB. There were already providers in the market doing zero or low fees – mainly BankDirect and some other online banks well before KB. There has been some change since, but given KB has been going 12 years and does charge fees, I think you’d be hard pressed to draw a direct connection. I believe there was a similar move to simplify fees in Aus where no KB exists.

                  PS LAnth, you need to negotiate a bit with your bank. I never paid bank fees because I had a mortgage. that was a pretty common trade off in the 90s/early 00s – you’d get 0.5% off your mortgage easily and free banking via Westpac if you worked for govt plus no credit card fee, or other banks through company deals. So headline rates can be misleading, though I note my bank is now much more trying to get rid of those deals as is Westpac to focus on headline rates. IF you can’t get a free credit card you need to push back. 🙂

                  • Lanthanide

                    I hope to have this house sold within 3 months (and not buying another) so it doesn’t concern me.

                    But next(?) time I get a mortgage I will be requiring the bank pony up on the CC fees etc.

              • thatguynz

                “Oh, you’re claiming that Govt money is yours personally are you”
                That’s precisely what I’m claiming.  It’s mine, it’s yours, it belongs to everyone that is a citizen of this once-fine nation.  The fact that neo-liberal ideologues like yourself and our current government think otherwise is more a reflection on you than me.  If however you want to discuss the literal definition of what “money” really is as opposed to its ownership, go right ahead – I’ll put my supposed “third form understanding of money” up against yours any day.
                 
                “red flag waving retard”
                Unsurprisingly incorrect on both counts.
                 
                “- Has failed to introduce competition, cos only 4% of customers use it
                – Has failed to make banking cheaper, cos it charges the same as everyone else
                – Has failed to keep the money onshore, cos it only earns 0.4% of market profits.
                – Has prevented our Govt from using those billions invested in capitalising it, money that could have been spent on things like schools and hospitals.”
                Here – let me correct these for you.
                – Has introduced competition by capturing 4% of the domestic banking market.
                – Has maintained cost parity with foreign own banked – no mean feat given their level of capitalisation yet still has returned profit to the New Zealand government.
                – Has kept returns onshore.
                Your final point is rot as you know full well that it is not within the mandate of this government to expend money in these areas anyway.  Using an “opportunity cost” argument in this sense is fallacious.
                 
                “Your move. Oh no, thatguy, you’ve proven already you can’t keep up. Quiet time now please.”
                Yes I can understand you need quiet time now – all that thinking must have really taken it out of you.  Nap time is it?


          • DH 14.2.1.1.2

            Kiwibank has been an extremely good investment for the Govt. As a publicly owned business it’s the overall economic returns that are measured, not just nett profits. It is suffering now because the Govt refuses to fund it’s growth.

            • insider 14.2.1.1.2.1

              How did it fund the purchase of the GM kiwisaver fund if govt isn’t funding its expansion?

              If you are going to assess the overall economic returns for KB, shouldn’t you do the same for all banks? How does that return differ just through govt ownership? Note: the Aus banks paid about $1.3b in tax last year and the govt didn’t have to invest a cent in them.

              • DH

                Banks need more capital to expand their lending. Kiwibank can’t get much more market share without more capital. That’s the rules of banking, they have to maintain capital adequacy levels.

                The $1.3b tax paid by the big banks has to be offset against the loss of GDP caused by profits going offshore plus the non-taxed interest paid to overseas lenders. $3billion profits spent locally should generate over $5billion in GDP, add interest on $130billion worth of offshore borrowing & you’re talking lost GDP of over $10billion. Not so great then is it.

                • The Baron

                  Your numbers make no sense, but lets pretend they do – the solution then would be to stop borrowing money in such massive quantities.

                  What’s the bet though that you voted last election for a party, lets call them LABOUR, who would have increased our net debt in their first term through their GST and income tax cut bribes, benefit increases, and other craziness; and backed it up with a return to surplus plan that had no credibility at all?

                  How does that stack up with your sage analysis, mastermind?

                  And out of interest, how much longer would you continue to pour money into KB when it is failing to perform so spectacularly on every measure? Do you understand what an opportunity cost is, or would you just borrow your way around that too?

            • The Baron 14.2.1.1.2.2

              Oh yeah, should be easy for you to back up that claim that it has been “extremely good” – given its returned profits way under the market standard, has no real market share, has had 13 years to gain scale and failed, is soaking up massive amounts of capital in the public balance sheet…

              Wow, sounds awesome. But I’m sure you have even more convincing data to back up your claim that its been “extremely good”.

              • DH

                I’ll refer you to my previous comment. If you knew anything about banking in NZ you’d know that a bank can’t keep getting more market share without injections of capital. Kiwibank funded it’s growth mostly through retained earnings, which was why their growth was slow but steady. Clearly you’re ignorant of all that so there’s not much point in me continuing.

                • The Baron

                  I know plenty, including that 4% market share after 13 years is hardly worth the investment. This is money we could be, and should be using to do other things that might actually work.

                  Kiwibank has failed to deliver, so stop doing it. Simple.

                  • RedLogix

                    Kiwibank is a stunning success. 4% market share in 12 years is actually pretty dammed good.

                    Besides you grossly exaggerate the capital ‘tied up’. As someone who works for one of KB’s competitors you know that perfectly well.

                    • The Baron

                      Can we please have a debate on here without someone bringing up boogeymen with ulterior motives? It’s a pretty paranoid and pointless way of shutting down a debate, and commenters on this site are addicted to it like crack. People can have opinions without being paid for them, you know.

                      To address your assertion, I’m a private citizen with an opinion of my own in this regard. I’m not, nor have ever been an employee of another bank.

                      I have however been a kiwibank customer, and found them complete rubbish. I suspect that is why their market share is only 4%. As to whether that is successful – well international comparisons of success upon market entry would be the best way of proving that. I can’t be fucked trawling for that in this pissing contest – can you? And even then, we would need to do it for the spectacularly dismal 0.4% of profits.

                      I admire your patriotism, guys. But keeping the relative failure that is KB could well be what is preventing a real change in the banking system. Have you thought about that?

                    • RedLogix

                      On the other hand a very old and close friend of mine has a project worth over $20m with KB and has nothing but praise for them.

                      No you have come on here with a fixed and negative attitude about KB and you stink of an ulterior motive. True or not that is how I read you.

                    • AAMC

                      If there’s a vested interest, perhaps some of the bluster is a result of the international trend for moving your money, claims of 10 million participants..

                      http://www.guardian.co.uk/money/2012/feb/10/banks-lesson-move-your-money

                      Perhaps if we push hard the move to Kiwibank, they can push that 4% market share up and make The Baron’s argument and Aussie employer less stable.

                    • AAMC

                      Steve Keen’s got some data on falling Aussie house prices, I guess that can’t be making the Aussie banks that happy either..

                      http://www.debtdeflation.com/blogs/2012/02/01/house-prices-outlook-for-2012/

                      “The ABS house price data for December 2011 has just been released, and it shows that house prices fell 4.8% in nominal terms between December 2010 and December 2011”

                  • DH

                    Sure you do. Like you know that a 4% market share is commensurate with the amount of capital invested. I don’t see you saying that the Govt should have invested more capital so they could increase the market share. Wonder why.

              • Jum

                thebaron

                Given your idea of a ‘good’ bank is one that takes and gives little back, I can see why you would love the Australian banks.

                You’re just greedy. That’s all – greedy. If you are one of the thatcher ‘dubbed ones’ for screwing over workers of course you want to get rid of KiwiBank.

                Greedy, greedy, greedy.

        • felix 14.2.1.2

          CV there is only one legitimate function for any entity: return a dividend to its shareholders.

          When are you going to realise there is nothing more to any discussion than this?

          • The Baron 14.2.1.2.1

            oh is this you being cheeky and reminding us all that they’re there to “keep the big guys honest”, “keeping our money on shore” and “providing a return for NZers” and all that other clap trap?

            And how is that working out at 4% market share, felix? Not really keeping anyone honest when you’re not succeeding getting customers.

            And how is that working out with the 0.4% share of profits, felix? Not really succeeding on the other two counts either.

            Instead, we have billions of dollars tied up in running an unsuccessful bank on all of these measures. Billions that could be used on things that actually might make a difference, like schools and hospitals and all that other motherhood and apple pie stuff. The experiment has had 12 years – more than enough for it to succeed if it was going to, just as challenger brands have proven they can in other industries.

            But the bad news – it hasn’t worked.

            As I said – how much more rope do you wanna play out, felix? Got anything up there apart from smarmy come backs? Wanna actually try be a big kid and mount a real argument?

            • vto 14.2.1.2.1.1

              Hey Mr Clever, how is having our banking system owned overseas beneficial to us again?

              • The Baron

                Its not, but in yet another stellar contribution, your comeback doesn’t really make sense.

                If you think that having foreign owned banks dominating your banking is a problem, then, um, buy those banks. The Kiwibank idea is all about competing them out of the market – and to remind you again, they’ve SPECTACULARLY FAILED at doing that. The best you can take of this is that it was worth a try, but the dice came up snake eyes. Time to move on.

                But hey, all of you would clearly love to keep throwing good money after bad on what is now a clearly failed experiment. So instead of investing in things that would make a difference, we’re gonna keep our money in capitalising kiwibank even though it continually fails to perform or deliver the market change your seeking.

                You might think thats noble – I think its fucking stupid.

                • vto

                  Thanks Baron (I only asked one question) for your answer “having our banks owned by foreigners is not beneficial to NZ”.

                  Now, instead of charging off on all sorts of assumptions, see if you can keep a logical train of thought going…

                  Next question if you don’t mind, an important one – do you want New Zealand to structure its economy so that the various sectors work to the benefit of New Zealand?

                  If yes, then what do you imagine one way of restructuring this banking sector to make it beneficial to NZ might be, especially in light of the fact that having our banks owned by foreigners is not beneficial to NZ?

                  If no or don’t care, then best I button my lips lest I get banned for abuse …

                  • The Baron

                    READ vto. I’m not disagreeing with you on this – what I am saying is that your current method of changing the market structure ISN’T WORKING.

                    If you wanna have a debate about the way to change the market for banking in NZ, then fine. My opening argument is that Kiwibank has had 13 years to do so, got 4% market share, 0.4% of revenues, and really delivered no change at all.

                    Wouldn’t you wanna try something else, if that’s your objective? Rather than tying up so much money in a competitor that isn’t delivering the change you want? And how much longer do you wanna keep trying for?

                    • vto

                      ok ok, fair enough, calm down… Excellent. It is quite apparent that the ownership structure of NZ’s banking system needs changing so that instead of being of detriment to NZ, it is of benefit. And you claim that the current method of trying to compete with the foreign-owned banks isn’t working. You may well be right.

                      So, another method of changing the ownership structure of NZ’s banking system is needed. Good.

                      Starter for ten… lets look to what sort of end result would be best to get a benefit for NZ. Then we can work out how to get there. I would suggest that if the banking system were owned at least significantly, if not majority owned or completely owned by NZ, then it would be of benefit to NZ.

                      The way to get there? Hmmmm…. legislate a form of nationalisation? Begin to grow more of our own (KB, SBS, TSB, PSIS is a start) combined with limiting any future foreign ownership? Time to start the debate and move it quickly to a conclusion and action. I suggest future limitations on foreign ownership as an easy start.

            • felix 14.2.1.2.1.2

              It seems like you’re agreeing that there’s no legitimate function of any entity other that to return a dividend to it’s owners, but are you?

              (I happen to think that would mark you as a money-grubbing philistine with a cripplingly limited set of values, but that’s just my opinion.)

              So are you agreeing with the above or not? If so, you shouldn’t be ashamed to say it.

              • The Baron

                You’re interviewing your keyboard, Felix.

                I believe in companies delivering to what they say they would. That may be returns for some, or social change for others. The market, via investors, will choose which one they wanna focus on.

                As I have made very, very clear, Kiwibank has delivered to none of its objectives, be they financial or social.

                Time to wind it up.

                • felix

                  So is that as a yes or a no? It wasn’t a complex question.

                  • The Baron

                    Oh FFS Mr Binary ok – NO.

                    The NO was above anyway – can’t you read? Entities can deliver whatever they wanna deliver – investors can choose between them according to what sort of return they value, be it financial, social or something else entirely.

                    So what does that say about me now, hmm? And what does that say about how well KB has delivered to its wider set of objectives, which you seem to be conveniently ignoring right now.

                    • felix

                      I don’t know what it says about you Baron.

                      But as a kiwibank owner I’m very happy with its performance. And as you don’t measure the worth of an entity in purely monetary terms I don’t see how you can have a problem with that.

                    • The Baron

                      I’m glad you’re happy, felix. I’m not sure why, cos I see no wider benefits – please tell me the ones I’ve missed.

                    • felix

                      Why exactly? I can think of any number of reasons why I like being an owner of Kiwibank but I hardly see that I need you to understand them.

                    • Hi The Baron,

                      I went to a public meeting years ago in Lyttelton when Jim Anderton outlined the Alliance’s plan to form Kiwibank.

                      The point he emphasised in that speech was that Kiwibank (I don’t think it had any particular name – he just talked about the idea) would have physical branches for people to bank in.

                      Anderton and the Alliance presumably had other objectives but the one he focused on was making branches available through a pre-existing network of shops (Post shops) for people who just wanted to have a bank close by that they could go to.

                      That was when much of the debate over banking was about branch closures and the inaccessibility of banks for many people (both physically and because their relatively minor business wasn’t really wanted – e.g., beneficiaries, superannuitants, poor people).

                      As I recall, it was also about the perception of the existing banks’ general, impersonal and poor ‘service’ to ordinary customers (and their slathering over corporates and the extremely well-heeled).

                      It was, therefore, partly publicised as a response to the corporatisation of banking operations that took banking out of communities and into faceless head offices with their automated facilities and rigid policies that any ‘local’ ‘personal banker’ had no ability to affect.

                      I think Kiwibank has had some positive effect on that physical availability of banking. Other banks started to re-open branches, I presume as a competitive response to a market threat.

                      Along those lines, do you remember ANZ’s notoriously poor service ratings and its PR response since then? – in those surveys I seem to remember that Kiwibank was quite well regarded by customers.

                • mik e

                  the baron or is it king kong in drag.Before Kiwibank Aussie banks were charging ridiculous fees and increasing them at every opportunity!
                  A lot of families have managed to buy their homes because of kiwibank .
                  The aussie cartel would rather lend to property speculating landlords.

            • AAMC 14.2.1.2.1.3

              Given the entire global banking system is only solvent because of QE and bailouts I’d suggest not throwing stones in a glasshouse Baron.

              I see Germany is now prepared to see Greece cut loose now the ECB via the LTRO has stabilized their predatory banks, will be interesting to see if they deliver now the balls back in their court.

    • mik e 14.3

      If kiwibank weren’t in the market bank charges and interest rates would be higher, there is no doubt that the Aussie banks want kiwibank to carry on their cartel!
      Cartels and monopolies rule New Zealands economy and media!

  15. DH 15

    Personally I think they’ve been shafting us a lot more than we know. People might recall that before the crash of ’09 mortgage rates always tracked the rise & fall of the OCR. Whenever Bollard or Brash changed the OCR the banks changed mortgage & deposit rates immediately. There’s some good data here that shows it, look at the mortgage interest rates and 90day rates graphs together & trim them to 2000-2011

    http://www.rbnz.govt.nz/keygraphs/

    The key issue in this is that the OCR affects domestic interest rates only. And the banks were funding mortgages from (mostly) overseas borrowing. If the OCR went up the local cost of funding for the banks went up, but the cost of their offshore borrowing did not.

    The scenario before 2009 was high domestic interest rates and cheap offshore rates. That equals very high profit margins for the banks. The scenario now is low domestic rates and higher offshore rates. That equals much lower profit margins. The $64k question is; how can the banks be making more profit now than they did before 2009? The figures say their profits should be much, much lower. Or perhaps their real profits before 2009 were vastly higher than they reported.

  16. vto 16

    .

    The banking system is a ponzi scheme.

    Learn it.

    .

  17. Jum 17

    Usual crap has started with the various brain blanks putting in the have to sell, have to sell mantra.

    David Thorndon on Radio NZ telling us nobody wants the vison that Len Brown wants – but he won by a landslide because of that vision that Key is trying to stop NZers from enjoying the economic and public transport benefits of.

    Now the baron trying to negate the good of Kiwi Bank and trying to sell it so that the foreign banks can have free reign again; in effect the aussie banks are just thieves given they were found out to be criminal in their theft of Kiwis’ money and had to hand it back after costing Kiwis a lot of tax money to force them to do so through the courts.

    So we have thieves and liars and wealthy people trying to screw New Zealanders over yet again.

    Choose which box you want to put the baron, thorndon, POA ceo in. Whatever they and Key and backers are up to, it is never for the benefit of New Zealand workers.

    They’re just greedy and selfish. NActs always have been, are and always will be.

  18. Bill Sykes 18

    Banks are good for all the reasons we use them. What’s the alternative ?

  19. Reagan Cline 19

    If youn own shares in the Aussie Banks you can share in the profits. Buying shares is easy, just phone a broker or do it on-line. Just keep an eye on prices and buy when they are cheap – like they were in the recent financial crisis. Hope this helps.

  20. Jan 20

    Here are the links to do it now.
    https://www.kiwibank.co.nz/join/easy-switch/index.asp
    http://www.psis.co.nz/InternetBanking/nt/bankwithus.aspx
    http://www.tsb.co.nz/Banking/AccountForms.aspx

    Changing banks to a NZ owned bank must surely be the biggest single impact that an individual can make to limit the expatriation of NZ profits. It’ll take two or three hours – a bit of fiddle and detail but pretty easy to achieve.

    If there is a concern that Kiwibank is to be sold there would be nothing easier than a campaign to ensure that what is sold is a hollow shadow of its public ownership self – especially when there are 2 fully serviced banks that are fully NZ owned. Surely that’s a no brainer. (In contrast there are significantly fewer alternatives to sourcing electricity or a NZ airline and which are harder to influence directly.)

  21. Gosman 21

    Where’s the evidence that the introduction of Kiwibank had an impact on the Aussie banks profits? I have read a number of comments implying this yet these stats don’t seem to back it up.

    • insider 21.1

      Bank Margins have in fact increased….go kiwibank

      • DH 21.1.1

        More like go RBNZ. Kiwibank was hamstrung by the RBNZ upping the core funding ratio after the big crash of ’09. The big banks started scrambling to get longer term funding and that started a bidding war on term deposits. Kiwibank’s funding came from the domestic market so they got caught in the middle of it.

    • RedLogix 21.2

      As you know perfectly well, most mortgages are for terms in the order of 15-30 years. This means that for the majority of existing mortgages it is simply not worth breaking them and re-financing them with a new bank.

      You know exactly how table mortgages work. And how they are designed to lock customers into one bank.

      Kiwibank has been about for 12 years it is true, but only in the last 6-7 years has it been actively pursuing larger scale commercial business. When I first looked at them about 8 years ago they were interested but simply not setup to meet our requirements.

      Unfortunately even as much as I would like to change from my existing bank, the process is not easy and when I do make the change it will be in about 8 months time when the fixed term on the biggest loan expires. When I do make the change it will be worth about $160k over a period of 8 years … so there is an incentive to do it… but when the timing is right. And my current bank know this; suddenly in the last few month I’ve had all sorts of pleasant phone calls enquiring after my ‘happiness’ with them.

      So while Kiwibank’s impact of the NZ market looks small at present; the effect is cumulative. In a few more years that modest looking 4% (that is actually a pretty good result given the context), will be closer to 8%. Each year they will pick up new loyal customers who won’t go back to an Aussie bank if they can at all help it.

      But the real threat that the Aussie absolutely hate is Kiwibank’s close affiliate New Zealand Home Loans. These guys are doing things that the ordinary banks are very reluctant to do…critically they help customers drive the term of their loans down below the 20 year mark, usually closer to 12-15 years. The total interest savings are enormous. In the long run this is the real threat to the Aussie bank oligopoly strip-mining this country.

      • insider 21.2.1

        @ red

        You are confusing a few things. You might calculate your mortgage payments on a term of 15 to 30 years (I suspect 30 is very rare given average home ownership is 7 years before selling) but that is not locked in. Table mortgages is a calculation method not a contract method. It locks you into nothing. No bank in NZ I know of offers more than a 5 year fixed term loan.

        There is little stopping you transferring banks when on a variable rate – competitor banks often pay a fee subsidy to attract you and the fee is usually a legal transfer one not loan related. Only fixed term loans have a significant break cost.

        There has been a massive shift over the last couple of decades back and forward between fixed and variable loans showing how flexible the system is, so saying KB has not been in the market long enough to impact that doesn’t fly. It’s had massive publicity and a huge branch network.

        NZ Home loans has been around for even longer than KB without making any significant impact. Not sure why you think they are feared or hated. Their interest costs are no better than the banks and they have negligible market share.

        IMO if any mortgage is ‘dangerous’ or locks you in to long term debt, it is those revolving credit ones that allow you to keep borrowing your mortgage – it’s like having a $200k credit card limit.

        • RedLogix 21.2.1.1

          Table mortgages is a calculation method not a contract method. It locks you into nothing.

          Then you haven’t thought about them have you?

          First payment = 100% Interest

          Last payment = 100% Capital

          The further into the mortgage you are the more costly it is to transfer to a new mortgage where the interest is reset back to 100%.

          Oh and you comment about NHL is off base as well. Sure their interest rates are the same; but that isn’t the point.

          • insider 21.2.1.1.1

            red

            you are not forced into staying on a table mortgage for any amount of time unless you are on a fixed term. It is purely a method for structuring payments. If you remortgage you will only be paying 100% interest on the remaining principal which will not be 100%.

            I had one, had repayments set at 20 year levels, reduced that to 15 years and then 12 at no additional cost. I could have adjusted the principal v interest ratio too. I could have paid it off in one day without penalty if I had decided to go to another bank and they had given me the cash to pay it in full.

            In the spirit of the Standard and your own posts, I’m going to automatically assume your avid fandom in the face of their lack of market share and inability to induce fear into major lenders means you must work for KHL or one of their franchises, and so are inherently untrustworthy on the issue. If you are one of their customers, and you are quoting their advice, you might watn to look around for more because it sounds like you are being spun

            • RedLogix 21.2.1.1.1.1

              If you remortgage you will only be paying 100% interest on the remaining principal which will not be 100%.

              Work out the total interest over the lifetime of the loans. Everytime you refinance with a new loan you reset the interest clock back to 100% and for the first 2/3 of the term the majority of each repayment is interest … not principle.

              I could have paid it off in one day without penalty if I had decided to go to another bank and they had given me the cash to pay it in full.

              Two words: Break Fees. The kind of loan you describe sounds very much like an insider staff perk, because despite my repeated attempts to restructure with the ASB… no dice.

              I’m going to automatically assume your avid fandom in the face of their lack of market share and inability to induce fear into major lenders means you must work for KHL or one of their franchises

              Nope. Nor am I a client.

              • insider

                Yes you do reset the clock but you also don’t pay the full interest owed over the whole loan term. So if I refinance my loan or pay it off more quickly, I don’t pay additional interest at refinancing for the period I haven’t used. And the new loan will be on a much lower principal so the interest component will be lower too (assuming the rate is the same). but that is again your choice. You could have used a reducing loan or you could have opted to pay a higher level of principal in your table loan. These are standard options available to any customer.

                Break fees only exist on ‘fixed term loans’ – I have pointed this out a number of times. No fixed term, no break fee. No-one forces you to accept a fixed term loan. Floating rate loans are a standard offer to all customers. The only fee you’d generally face with a floating loan if switching is the legal fee to discharge the mortgage, which competitor banks often subsidise to attract customers. Again a standard offer (or was when I was looking for one) to all customers.

                I’m happy to take your word on NZHL. I repeat they are a non issue competitively in the NZ market. Less than 1%. Given the time they’ve been in the market I can’t see them revolutionising it any time soon.

  22. Gosman 22

    So where is the positive effect of Kiwibank on the NZ banking scene again?

    If it is only in reducing the flow of profits overseas then this applies to all foreign owned businesses such as Comelco. Following the logic of some here we should immediately nationalise that.

    • felix 22.1

      If you only acknowledge monetary benefits then this entire subject, like so much else, is going to be way over your head.

  23. AAMC 23

    Gosman – which bank do you work for again?

    • Gosman 23.1

      I’ve worked for most of the major banks in NZ including Kiwibank. One thing you will find is the reason Kiwibank’s margin is lower than the other banks is not because they are more competitive but because of the inherent structural issues with the bank.

      • McFlock 23.1.1

        strangely appropriate you should be a banker.
             
        It obviously provides a benefit for its customers, because they’re getting quite a few. 
         
         

        • Gosman 23.1.1.1

          Kiwibank picked up a lot of customers in it’s first few years of operation it is true. However many of these were the low value customers which the other banks didn’t really want. Most banks operate on an 80/20 rule which is to say that 80 percent of their profits come from only about 20 percent of their customer base. Kiwibank picked up a lot of the 80 percent that treat banking as a mere transactional facilitator (i.e. they spend all their income). Many high valued customers are still with the other banks and in fact Kiwibank can’t even attract them as their underlying systems are not yet developed enough to provide the same level of service. The other trouble Kiwibank has is that it has problems with attracting enough deposits to support their lending. The Australian banks don’t have the same level of problem in this area as they can rely on funding from their parent companies. This is something lefties tend to ignore when it comes to the benefits of foreign ownership.

          • Jackal 23.1.1.1.1

            You appear to have little understanding of how banking works Gosman. The banks often compete for the same monetary sources, with lending not simply weighed against deposits. Kiwibanks mortgage book growth has recently been second only to BNZ. It’s currently around NZ$10.325 billion. The main problems Kiwibank is facing at the moment is the CFR causing foreign banks to compete for domestic retail deposits and a reduction in its profit margin because of impairment losses due to the Christchurch earthquakes. Despite this, their total net loans and advances, rose NZ$251.3 million in the 2011 March quarter.

            • Gosman 23.1.1.1.1.1

              I have 15 years experience in banking Jackal. What is your experience of the subject? Perhaps you read a book on the subject once?

              • Jackal

                I find it hard to believe you have 15 years experience in banking considering your numerous factually incorrect statements on the subject.

              • mik e

                Gooseman You are factually incorrect and given your experience in banking it sounds like you were sacked for incompetence where do the aussie banks get their money from.
                Kiwibank is in a much better position as far as deposit to lending ratio than the Aussie banks’the problem with Kiwibank is that it can’t access foreign i.e. European and Asian money like the aussie banks can.
                That makes the Aussie banks more vulnerable to a melt down particularly if Asia has a cold .
                That’s why the labour govt in Aus is demanding stress tests on their banks because of exposure to Asia.

            • insider 23.1.1.1.1.2

              Just a technical point, total advances is not just mortgages. Given KB in the first half had $10.5b in total advances I can’t believe you are saying it is ALL mortgages. Are there no personal or business loans, or ODs in there or credit card debt? Also the report above says it was $11.5b end 2011, third in absolute after Westpac and BNZ, but first as a proportion of the total lending increase

              • Jackal

                My comment properly defines what figures I’m quoting insider. The point is that gosman is being completely disingenuous in his argument. He has ignored (or does not know) how the banking sector works in a pathetic attempt to discredit Kiwibank and lefties. Not only is his argument defunct, his arrogance that it should be believed because of his apparent banking experience is laughable.

                • Gosman

                  Where does Kiwibank get the money to fund the increased lending Jackal?

                  • Colonial Viper

                    From market sources, like any other retail bank. Why is that relevant to the claim that you are being disingenuous?

                    • Gosman

                      What market sources C.V?

                      There are three main ones for banking so where is Kiwibank sourcing a lot of the increase in lending from?

                      BTW what is your practical expericence of banking again? You seem to think it makes a difference so perhaps you could expand on your involvement in this sector?

                    • Jackal

                      Gosman. Why are you asking questions you should know the answer to already? BTW You are the one claiming your banking experience validates your argument. Considering your argument, I’m glad you don’t do my banking.

                    • Gosman

                      I’m asking C.V for his practical expeience of banking because he accused me of forming opiniopns from a textbook. That obviously implies that his opinions on the subject are of a more practical bent. So therefore he should have practical experience of the anking industry. I just wish to find out what this is.

                      BTW I still waiting for you to point out one inaccurate statement on banking that I have made on this thread.

                    • Jackal

                      I have pointed out a number of your inaccuracies. If you do not have the ability or inclination to recognize it, repetition is not going to help you.

                      You are requesting personal information from CV in a vain attempt to justify your defunct argument. Similarly you have tried to discredit my opinion by saying I have only read one book on the subject. Do you realize how childish such debate becomes with the type of attitude you’re displaying? It is subversive and troll like.

                    • Gosman

                      No you haven’t. As far as I am aware you have expressed your opinion that my views are banking are inaccurate. Given your opinion is most likely ill informed on the banking sector, (what is your background here? Have you studied this at University or something?), then that matters not a jot to me. Of course you can simply point out one inaccurate statement that I have made and why it is inaccurate and you could end this discussion here and now.

                    • Jackal

                      What is your qualifications… but it doesn’t matter a jot? WTF Gosman!

                      The other trouble Kiwibank has is that it has problems with attracting enough deposits to support their lending.

                      Kiwibanks mortgage book growth has recently been second only to BNZ. Total net loans and advances, rose NZ$251.3 million in the 2011 March quarter.

                    • AAMC

                      We’ve all had a lot of experience with banking recently Gosman, they have bankrupted the planet, we’re all feeling it. Having worked in banking 15yrs just weakens / clouds your position, you are siding with the looters.

                    • Gosman

                      Since you seem to be incapable of understanding the issue here Jackal I’ll let you know what it is.

                      Kiwibank is having trouble funding it’s lending growth via deposits. It therefore has to go on to the Wholesale money markets and borrow from there at a higher rate than it would if it funded via the other two main methods, (you know what these are do you?). This squeezes it’s margins and also makes it more vulnerable to external factors. Something the foreign owned banks have less of a problem with.

                    • Jackal

                      What evidence do you have that Kiwibank is having trouble funding it’s lending growth? Because the information I’ve provided clearly shows they aren’t.

                    • Gosman

                      http://www.kiwibank.co.nz/about-us/news-room/show-news.asp?story=172

                      Please note the large gap between Retail deposits and Loans and advances and that they have been trying very hard to increase the deposit rate (realitively succcessful to date it must be stated).

                      The shortfall is funded via the Wholesale money markets. The Aussie banks can fund anyshortfall via their parent company as well. Kiwibank has less option in this area.

                    • Jackal

                      You really are a tool if you think that supports your argument Gosman. Here is the relevant part from what Kiwibank Chief Executive Paul Brock said:

                      In the last year, Kiwibank:
                      • Increased loans and advances by 10% from $10.4 billion to $11.5 billion
                      • Increased retail deposits by 14% from $6.9 billion to $7.9 billion.

                      They haven’t just been trying to increase the the deposits rate, they have increased the rate:

                      Throughout the year Kiwibank has maintained a strong focus on customer funding with deposits now accounting for 80% of all bank funding.

                      Does that compute for you Gosman? Loans and advances have increased 10.58% while deposits have increased 14.5%, clearly showing you are wrong!

                      Much of what Kiwibank does is underwritten by the government. Kiwibank does not have less options via the wholesale money market.

                    • Gosman

                      Do you notice the shortfall Jackal?

                      I mention it because when I worked for Kiwibank and was speaking with the manager in charge of Savings it was pointed out to me that this was a big issue for Kiwibank.

                      The focus was to try and increase the deposit rate because the situation as it stood, (and still does to an extent), meant that Kiwibank relied more on the Wholesale money markets to fund their lending book than the other banks, with a flow on effect to their margins.

                      But hey what would they guy in charge of Kiwibank’s savings area know eh? Much better to rely on someone like you who just regurgitates stuff he finds on the internet.

                    • Jackal

                      It is not the deposits to loans/advances that drove Kiwibank to look for hot money, it is the CFR that is increasing competition from Australian banks.

                      Since you want some facts from the internet: According to this media release, Westpac New Zealand has a customer deposit to loan ratio of 63.5%, while Kiwibanks is 80%.

                      Could you define what you meant by “most banks”?

                    • Gosman

                      The difference is that the Aussie owned banks can fund the difference from their parent companies at a much lower rate. They don’t need to rely on the Wholesale money markets. But you would have known that if you knew anything about the NZ banking scene.

                    • Colonial Viper

                      Just have Kiwibank source its funds through the NZ Government. Which can print those funds at 0% interest rate.

                    • Jackal

                      I believe the CFR requires 70% of funding to be sourced locally. Australian banks do need to rely on the wholesale money market. A five year old reading a comic book would display more knowledge about banking than you Gosman.

                    • Gosman

                      I was going to string this out a little longer Jackal and ask you where you got your information that the banks have to fund the CFR ration via the domestic market but I grow tired of hand holding you through basic banking.

                      See this article:

                      http://www.economist.com/node/14363244

                      Please note where the article states the following “The banks’ larger Australian parents can always borrow cheaply in the short-term market in Australia, where no comparable rule exists, and pass on the proceeds in the form of longer-term lending.”

                      Now why would The Economist claim that meeting the CFR ratio requirements of the RBNZ is not as problematical as first thought because the Australian parent banks can lend the money to them cheaply?

                • Bored

                  Jeez Gos, are you still going on about this….if you look up and around you may notice that since you have been writing we have been bled dry.

                  • Gosman

                    Jackal made an incorrect statement about funding of the CFR last night. I was replying to that. I see no prtoblem with this.

                    • Jackal

                      I was under the impression that 70% of the core funding ratio had to be supplied by the local market. If that’s wrong (which the article you’ve linked to does not clarify) I don’t particularly give a fuck. You argue that the way in which Kiwibank funds its loans means it pushes up fees. This is clearly incorrect as Kiwibanks fees are consistently lower than other banks. You argued that Kiwibanks loans/advances to deposits ratio of 80% means it cannot support its lending, while its mortgage book growth is second only to BNZ march 2011. Its deposit growth is also more than it’s lending growth. Your motivation is obviously to discredit Kiwibank with incorrect information.

      • vto 23.1.2

        aha Gosman, no wonder you measure everything in simple dollar terms only.

        I would be interested to hear your opinion on the privately owned fractional reserve banking system…

        • Gosman 23.1.2.1

          The trouble with the whole Fractional Banking theory that seems to underpin many a leftists objection to banking is that it ignores standard banking best practice, (admittedly something which banks themselves sometimes do as well), and doesn’t take into account the wider productive economy. The whole idea behind it seems predicated on the concept that the banks multiply the money supply by lending money out that they themselves lent in the first place. What that ignores is that when I lend someone capital it is on the basis that the person borrowing it should look to generate an income to cover the outgoings. So therefore if I borrow 100,000 dollars at 10 % I wouldn’t just borrow another 110,000 dollars to pay it off in a years time. I will need an income from a productive source such as selling my labour or an idea that generates an income sufficient for me to meet my debt outgoings. Problems arise when borrowings are used for speculative purposes and people overleverage. This is where proper risk management techniques should be employed by the banks to restrict their exposure to credit defaults. Now I am the first to acknowledge that banks haven’t been very good at doing this but that is the beauty of the market. Any bank that doesn’t follow prudent credit risk management will end up like Northern Rock and Lehman Bros. The poblem with this is that the downside of collapses is that they tend to freeze up the credit markets for a long time and have a big impact on the economy. Electorates don’t tend to like this so they wish to reduce the impact of these market lessons.

          • Colonial Viper 23.1.2.1.1

            So therefore if I borrow 100,000 dollars at 10 % I wouldn’t just borrow another 110,000 dollars to pay it off in a years time. I will need an income from a productive source such as selling my labour or an idea that generates an income sufficient for me to meet my debt outgoings.

            Uh, you may think its a productive source, but if the money you are being paid by clients for your ‘productive work’ is sourced from bank credit (e.g. a customer’s overdraft or credit card) all you are doing is using money from one bank debt to pay off another bank debt.

            Bottom line: most of the money in our economy was lent into existance by the creation of interest bearing debt, and interest bearing debt needs a perpetually growing economy to service without falling behind.

            • vto 23.1.2.1.1.1

              “Bottom line: most of the money in our economy was lent into existance by the creation of interest bearing debt, and interest bearing debt needs a perpetually growing economy to service without falling behind.”

              That is it CV, the problem with fractional reserve banking in a nutshell.

              A bank, when it makes a loan, creates the debt from nothing (or pretty much nothing. I think to make a $100 loan it only needs $10 deposited. And that $10 is often debt from elsewhere as well!)

              The fractional reserve banking system we operate under is a ponzi scheme in its purest sense.

              It is completely and utterly unsustainable. The recent GFC and the current continuings are the reverberations before the complete collapse. It has hit the wall. Watch out!

            • Gosman 23.1.2.1.1.2

              You would be correct if the money that people spend is purely or even mainly sourced via credit sources. It is one of the contributing factors to the US economic problem it is true. But Creditcard companies also need to take into account the ability of their customers to service their debts. Considering many of these are commerical banks then the same Credit risk management restrictions apply.

              • Colonial Viper

                But Creditcard companies also need to take into account the ability of their customers to service their debts. Considering many of these are commerical banks then the same Credit risk management restrictions apply.

                You must be fucking kidding me.

                The situation in NZ is not so bad as there are some controls on credit card lending (but seriously, 20.95% interest rates and penalties and fees up the wazooo???). In the US the practice was to send unsolicited pre-approved credit cards out in the mail expecting the cards to default in 1/3 or 1/4 of cases, but the fees and interest on the remaining cards sent out still made the practice hugely profitable.

                • Gosman

                  Yep, it all about the managing of risk. The greater the risk the higher the rate of return. Hence why Credit cards have such a high interest rate. Still the Credit card companies have a fine balancing act to ensure the rate of default doesn’t get too high.

                  • Colonial Viper

                    lol so your standard banking “credit risk management restrictions” are only one step away from a loan sharking scam.

                    • Gosman

                      It is a similar principle I would agree.

                      What is your practical experience in the banking industry C.V?

                    • Colonial Viper

                      What is your practical experience in the banking industry C.V?

                      I am an independent expert commentator 🙂

                      What’s your experience? Lackey and bellboy? At a couple of pay grades below our esteemed PM?

          • AAMC 23.1.2.1.2

            Which is why the ECB has pumped all that liquidity into Euro banks, which they are depositing back at the ECB rather than lending, so they can weather the storm when Germany cuts Greece loose in the next few days.

            Perhaps rather than this free market Theology which results in corporate socialism to deal with to deal with these bubbles – rather than having to face the obvious consequences of collapse – we could have a ref on the field to prevent Banker greed from leading us there in the first place?

            • Gosman 23.1.2.1.2.1

              Greece is not a problem with Banker greed. Sovereign debt tends to be low margin business. This is why Governments tend to be able to borrow funds cheaper than commercial entities. If Banker’s were purely interested in the higest return then they would be only lending to individuals. The problem is the Greek Government was like a junkie that couldn’t stop spending on social services and inefficent government owned businesses without sorting out their tax base. The banks made the fatal mistake in thinking that simply because Greece was a member of the EU and the Euro it would never default. They were wrong.

              • muzza

                “The banks made the fatal mistake” – No Gosman they did not make any mistakes genius!

                • Gosman

                  Having to take a 70 % reduction in the value of their loans is pretty severe wouldn’t you agee Muzza?

                  • mik e

                    gooseman corruption in Greece and fraudulent banks was the cause .
                    BBC world news.

                  • Colonial Viper

                    Having to take a 70 % reduction in the value of their loans is pretty severe wouldn’t you agee Muzza?

                    That only effects the portion of Greek’s debt which does not belong to the Troika.

                    And by the way, when you look at the figures, its not going to be a 70% reduction of the rest of the debt, its going to be a full write down.

              • Colonial Viper

                Sovereign debt tends to be low margin business.

                This is not the reality in southern Europe now e.g. Greek 10 year bond yeilds have crossed 200%. Why do you keep citing irrelevancies to what is being discussed?

                • Gosman

                  Did you not notice that I used the term ‘tends’. Of course Greek debt yeilds are high. That is because the risk of default has increased dramatically.

                  Now what was your practical experience in banking again C.V?

              • AAMC

                U like to simplify things don’t you Gosman, yes Greece – more so than Italy, Spain, Portugal, Ireland – has a history of bloated public spending, you’ll find there are however other contributing factors, like their elite failing to pay tax, and the fallout through recession from Wall St’s insanity leading to the GFC.

                If we look at the other PIIGS, your banker mates who inflated the bubble that brought the world’s economy to it’s knees had perfectly sustainable debt pre recession, a fact conveniently ignored by Theologians in order to blame everything on lazy Greeks rather than Greedy Bankers.

                • Gosman

                  All debt is by definition sustainable if you have enough coming in to cover the outgoings. The trouble is the Greeks weren’t reducing debt but increasing it by bloated Government spending and an inefficient/corrupt taxation system, (by the way what part of neo-liberalism states you shouldn’t have an efficient tax collecting system?). I remember reading articles, (most likely in The Economist), at the time of the assession of Greece to the Eurozone arguing that the country had a fiscal policy that was inconsistent with operating within a common monetary system and that this could cause issues later on. These fears were well founded it seems.

  24. johnm 24

    The Predatory nature of the Bankers is clearly shown by the Invasion and pillaging of Greece.

    “Financial Oligarch Power Raping Greece ”
    By Stephen Lendman
    refer link: http://sjlendman.blogspot.co.nz/

    “Greece’s working class faces impoverished neoserfdom. Those on pensions have less than ever to survive on, and the nation’s youths have no futures.”
    “As a result, capital flight’s increasing. People are voting with their feet and leaving. Those remaining face hospitals short of medicines, unprecedented homelessness and hunger, schools without basic supplies, and imagine what’s coming when new cuts are implemented.”
    “Moreover, bankers demand more. So far, mandated wealth confiscation alone is their only excluded diktat, but it’s happening incrementally. Under systematic sacking, Greece’s life force is dying in meltdown.”
    “Michael Hudson calls predatory finance “a form warfare.”

    It operates like pillaging armies, seizing land, infrastructure, other tangible assets, and all material wealth. In the process, countries and ordinary people are devastated.”

    The same process is happening small time here with the People’s assets being sold off to enrich already well off people. Australian banks lending easy money to greedy property “investors” and creating a property bubble making first homes unaffordable for young kiwi couples. And of course Governments in on the same capital gain get rich schemes all using fiat currency created on computers to enable their ponzi scheme which exploits the weaker members of our society and those just starting out.

    “Shame on Europe for betraying Greece

    Capitalism is triumphant as EU states sacrifice the Greek people in a desperate attempt to appease the gods of speculation”
    Refer link: http://www.guardian.co.uk/profile/william-wall

    “In essence, this crisis is a failure of the EU states to show solidarity in the face of an onslaught from the financial markets. At first glance this seems to be a very simple fight. In one corner you have nation states, which have the wellbeing of their citizens as their raison d’être; in the other you have global capitalism as represented by the financial markets, which has the wealth of a tiny few as its raison d’être. But the nation state has, for a considerable time, identified itself with those same markets. States have agreed to see themselves as economies rather than societies. More recently we have been led to believe that the market alone can provide everything the citizen needs and much more efficiently than the structures that the citizens normally rely on and which they have, over generations, erected as protections against the revenge of the market.”

    Shonkey is on the side of global capitalism and has conned himself that is NZ’s interest! SELL OUT!

    • Gosman 24.1

      From what I have read about the proposed plan for Greece the debtors are going to have to take a haircut of around 70%. How is this rewarding the banks?

      • AAMC 24.1.1

        No, they’ll let Greece go to the wall to trigger the CDS so they get paid out, the ECB has already pumped them with any shortfall. You Bankers want it both ways!

        For every addict there is a dealer! The dealer should properly asses the risk of not being paid back, instead they push their debt and then pillage you when you’re on your knees.

        from Stiglitz to Gosman

        • Gosman 24.1.1.1

          The Greeks are still free to default on their Sovereign debt. In fact the deal that is being pushed through means up to 70 % of the values of the loans will be written off.

          Of course the problems the Greek Government has is even with a debt renegotiation they are running a budget deficit. As they can no longer print money to devalue the debt they owe their only real options are to either cut spending, raise revenue, or beg for more money. If they want more money they will have to do combinations of the first two anyway.

          As for the CDS being paid out. This is rather more complicated but essentially that is their purpose. To protect the owner of debt from the consequences of a default. In essence they are insurance policies. It is like the Christchurch Earthquake. You don’t begrudge people being paid out insurance because of that do you?

          • muzza 24.1.1.1.1

            More sloppy replies G – Explain how with an ex Goldman Sachs boss, unelected Greek PM, answering to an ex Goldman Sachs boss running the ECB, that the Greeks have any say in defaulting.

            They were going to hold a referendum, until Papademous was dropped into position and ended that possibility!

            Where will the money for the CDS come from Gossie? Oh thats right it doesnt exist does it – Not on the scale they would require, hence why the default has not been allowed to happen, but thats ok, because the ex GS boss of the ECB Draghi, has alreay made sure that between the ECB and the FED, the zombie banks have had their losses covered already. They now want to feast on the carcass of Greece! More mistakes I guess eh G!

            They were nothing but another fee generating instrument!

          • mik e 24.1.1.1.2

            gooseman if they cut spending any more their economy will go into free fall and they will have to default any way so Greece is stuffed completely.especially after a fire sale by corrupt politicians and bankers . The Greek lottery was sold at one twentieth of its true value by a right wing corrupt government.

            • Colonial Viper 24.1.1.1.2.1

              Gosman’s 70% figure is all wrong any way. It only includes the portion of Greek debt which is not held by the Troika (who together have the largest holding of Greek debt). And also when you look at the figures you will see that 70% is highly optimistic – its going to be a full writedown of non-Troika Greek debt.

              • Gosman

                I stated up to 70% of the debt and that is specified in the plan. That obviously does not include all debt and the rate could change depending on what happens from here.

                Now what is your practical, (not theoretical), experience of banking again C.V?

          • AAMC 24.1.1.1.3

            How many people are you prepared to see starve or commit suicide in order for the debt to be repaid Gosman?

            “aid workers and soup kitchens in Athens are struggling to provide for the city’s “new poor.” Since the economic crisis has taken hold, poverty has taken hold among Greece’s middle class. And suicide rates have nearly doubled.”

            http://www.zerohedge.com/news/pictures-greek-soup-kitchen

            RE CDS, what I was implying is a lot of investors are fighting the PSI writedown as they would rather an involuntary default that triggered the CDS and we may yet see that happen, catch is, as muzza points out, is there enough money to do so?

            • Gosman 24.1.1.1.3.1

              I doubt a lot of the debt will be repaid AAMC. I am not really interested if it is. People who lent the money took the risk on Greece paying back their money with interest. The Greek Government then spent their money on inefficient social welfare spending and corruption and found that they couldn’t. The issue is the Greek Government still needs external capital to function. It can only get more lending if it implements austerity measures. The alternative is it defaults but still can’t pay for it’s budget deficit because noone will lend any more Euro’s to it.

  25. A Bank (any) has one job only
    TO LEND MONEY.

    • Gosman 25.1

      That actually is incorrect. A bank has two main jobs. One is to provide people a place where they can (realitively) safely store their capital. The second is to enable people without sufficient capital the ability to access it. In a sense they are a financial intermediary between people with surplus capital and those who don’t have enough much the same way a Stock market is.

      • travellerev 25.1.1

        That is actually incorrect. It used to be that an investment bank tried to scam its customers out of as much money as possible to gamble with and that commercial banks performed the function described above. But with the deregulation in the 90s culminating in the repeal of the Glass Steagall act all banks are now in the business of bubble and bust and making a few bastards very rich while the rest of us are being bled dry

        • Gosman 25.1.1.1

          Ah wrong. My description of banking applies equally to investment and retail banks pre-Glass Steagall repeal. If you disagree then explain why Investment banks are not performing the function of intermediaries between those who have capital and those that need it.

          • Colonial Viper 25.1.1.1.1

            pre Glass-Steagal repeal? Why do you think the investment banks paid millions in lobbyists and capaign funds to get Glass-Steagal repealed?

            Don’t you find it interesting that the majority of derivative (and even crude oil) trading done by the big financial institutions all occur in opaque ‘dark pool’ exchanges?

            • Gosman 25.1.1.1.1.1

              I presume you mean OTC trades. There is a case to be made for financial transactions to be managed through formal exchanges. That stated by doing so you introduce a certain amount of rigidity into the system.

              • Colonial Viper

                You have no idea of the market realities you are talking about. Get your nose out of the textbooks for a bit.

                • Gosman

                  Ummmmm…. I have worked with OTC derivatives so I don’t see how your view that my opinions are from a text book are valid. In fact I’d suggest it is you who have formed opinions from books rather than reality. Have you worked in banking at all?

                  • muzza

                    Working in banking has nothing to do with it Gosman, but then again you would not know anything about that eh!

                    Plenty of smart people who are very aware of the real problems behind the FAILED capitalist banking system, free market mantras, do not work in banking…

                    • Gosman

                      Perhaps you need to direct this to C.V as he seems to think that getting information from such things as books (SHOCK HORROR!) is in some way to be frowned upon.

  26. Jum 26

    gosman, re Gosman …15 February 2012 at 5:19 pm

    Well, when you lie you LIE.

    Of course banks like lending to governments. When they help governments into debt they can control the government and therefore they can control whole countries and their people – what’s not to like about that when you’re a greedy banker swindler.

    If you’re in banking as you claim gosman, you know that power and control is what gives the average banker their highs. Look at Key. The look on his face when he got his govt in on 26 November wasn’t the face of someone wanting to help their country; it was the face of greed and the knowledge that his job was done; his masters would be pleased.

    Greed and power and acquisition is what makes bankers like you (if you are and you certainly display the characteristics) slaver over.

    Interesting word that: ‘slaver’. Two meanings; one meaning to dribble saliva and the other is the power over others. Every time I see that word I think of john key – slave-owner. Having seen him in Hawaii I think he would enjoy that prospect.

    • Gosman 26.1

      For a start I never stated that Bankers don’t like lending to Governments. I stated if all they cared about was greed then lending to Governments isn’t the best way to make money as it has a low rate of return.

      As for your claim about having power over Governments, you may well be correct to an extent. This is why it would have been crazy for NZ to borrow money from overseas bankers to speculate as the Labour party was advocating at the last election.

      Good to see someone on the left acknowledging the idiocy of that policy.

      • Colonial Viper 26.1.1

        Actually its been the National Govt who has borrowed tens of billions to speculate with.

        • Gosman 26.1.1.1

          How has the National led Government borrowed money to speculate. Please explain what they have invested money in which could be classified as speculation.

          • Bored 26.1.1.1.1

            CV is perhaps not as accurate as he should be here. What Key did to get elected was promise to the electorate tax cuts that the electorate through the economic summer of the Labour regime had decided they deserved, and could be justified if things carried on as they were. Unfortunately as sure as summer follows spring he was soon deep in an early economic autumn, the events of 2008 made sure cuts were not affordable.

            In effect Key has for nearly 4 years borrowed to pay for tax cuts to keep him in power. He has tried to find domestic savings in the “fat” areas of state delivered services to reduce the total required. And now he needs to sell the silver off (he would have done this anyway, he belongs to the minute portion of the world population who wish to charge everyone for drinking water and farting).

            In short as an economic manager Key has sublimated responsible action for personal; gain. Regardless of our position in society and economy we are all losers in his stupidity.

            PS Before you prattle on about socialist, Zimmers and Labour kindly accept that I dont think they are relevant in the slightest. We are talking simple book keeping and good economic judgement. Key has neither.

            • Gosman 26.1.1.1.1.1

              Yes I suspect C.V. means Tax cuts here. However Government’s don’t borrow to fund tax cuts. They borrow to fund a shortfall between revenue and expenditure. I might as well claim that the Government borrowed to spend on unemployed people given the fact that the unemployment rate increased at the same time. It is equally nonsense.

              • Bored

                If you read what I said the gap between revenue and expenditure is well explored, and the obvious culprit is tax cuts (that is of course unless you advocate the end of any state health, education pension and welfare systems which are major expenditure components).

                If I ran my businesses by borrowing to make up for a loss of revenue streams I would go broke quickly. Key is in effect doing exactly that, he may examine and cut costs but allowing a major expenditure to proceed in the face of diminishing revenue is just plain stupid. It make no business sense (unless of course you don’t have to care because you are not invested).

                • AAMC

                  “end of any state health, education pension and welfare systems”

                  I imagine that is exactly what Gosman advocates.

                  So we can have a prison system like this
                  “the company is asking for a 20-year management contract, plus an assurance that the prison would remain at least 90 percent full”

                  http://www.huffingtonpost.com/2012/02/14/private-prisons-buying-state-prisons_n_1272143.html?page=1

                  & follow Englands lead on their reforms of the health system, all party of your Theology isn’t it Gosman?

                • Gosman

                  The Tax cuts were designed to be fiscally neutral. Whether they were or not is irrelevant. I’d agree with the sentiment to a degree that the policy was not prudent if it was designed from the outset to cause a deficit. That is not to say you can’t implement tax cuts when the economy is in a downturn. In fact it is recommended under traditional Keynesian economics, something many lefties seem to bang on about.

                  • Jum

                    Gosman …
                    16 February 2012 at 10:30 am

                    said “The Tax cuts were designed to be fiscally neutral. Whether they were or not is irrelevant.”

                    Irrelevant? What a ninny you are Gosman and highly disinterested in the general welfare of an equally high and growing section of New Zealand that are directly badly affected by them.

                    If the tax cuts are not fiscally neutral that makes Key and English LIARS for the hundred and one times they assured New Zealanders the tax cuts were neutral and it makes you a ruthless, moneytrader just like your hero Key. Key is clearly unable to empathise with the financial needs of the people in his care that are suffering from his targeting of support to those that don’t need it.

                    The tax cuts to the rich were planned in opposition to help the rich to buy up assets that already belong to all New Zealanders.

                    Key and his backers deliberately set about achieving that inequality. He was never a leader to respect; he was always a ruthless moneytrader and still is. Greed is his god and to steal New Zealand assets to feed his hungry backers is his goal.

                    He is succeeding admirably.

                    He’ll no doubt get a knighthood for ransacking New Zealand and reducing working New Zealanders to a poverty of health, welfare and wealth of ownership. Shame on you for defending him.

                    • Gosman

                      It doesn make them liars at all. To be liars they would have had to have known the tax cuts were not going to be fiscally neutral and then stated they were. There is a mountain of Treasury advice at the time of the tax cuts which suggests the figures implied they would be fiscally neutral. You may disagree with this advice but you can’t deny it exists.

                  • Colonial Viper

                    The Tax cuts were designed to be fiscally neutral. Whether they were or not is irrelevant.

                    What is relevant is that they were not redesigned to be fiscally neutral once it became clear that the tax cuts were going to miss by a billion or two dollars.

                    Now why is that and do you think the tax cuts will be corrected this budget?

                    • Gosman

                      Government’s don’t tend to tweak Tax rates every year based on the previous years results especially the areas they touched upon in those original tax cuts. The complience costs would be mental having everyone reverse the GST rise and reimpose the higher tax rate. It is simply not going to happen. The Government is projected that the budget will be back in balance in 2014. That is the target they are aiming for now. Whether or not this requires extra taxes is a matter for them in addressing reaching this target.

                    • Colonial Viper

                      Wow, a little bit of work in the last budget to get in another billion or two billion dollars but for some reason “it’s simply not going to happen”?

                      BTW I did not suggest reversing the changes, I suggested modifying them to achieve the originally stated primary goal of fiscal neutrality. After all, fiscal neutrality was a primary goal of the tax cuts, weren’t they?

                    • Gosman

                      Fiscal neutrality wasn’t a primary goal of the tax cuts. The primary goal’s was to change the tax system to favour savings over consumption and to satisfy an election commitment made in 2008. The fiscal neutrality component was added simply because of the economic conditions at the time. It was a secondary consideration added so that the Government could seem to be fiscally sensible.

            • Gosman 26.1.1.1.1.2

              As for good economic judgement Bored, what has happened to NZ savings rate over the term of the Key led Government? What are the contributing factors for this?

              • Bored

                Its increased, standard for a recessionary time. Nothing to do with government policies mind you, and you need to take into account the effect of the”Cullen Fund”. Investment is seen as a risky option, for some silly reason the banks are seen as a safe option (so long as they are guaranteed by the tax payer).

                • Gosman

                  Agreed that recessions tend to increase the savings rate but so does lower income tax rates.

                  Given that much of the structual problem with NZ is to do with a low savings rate and private sector debt I think anything that has an impact on this area has more positives than negatives.

                  • Bored

                    As said before (while I don’t disagree that lower tax rates can be beneficial to savings rates) tax cuts have to be affordable. If we are borrowing as a country (on behalf of all the taxpayers / citizens) to pay for tax cuts we:
                    1. Build up debt against everybody.
                    2. Transfer the benefit to the savings of those receiving the tax cuts.

                    Its bot bad economics, its unsustainable and it is inequitable.

      • Matt 26.1.2

        Allow me to acknowledge and recognize all manner of idiocy, yours included.

  27. mik e 27

    to build roads when their will be no cars

  28. infused 28

    Pitty Kiwibank is such a shit bank. I’d use it if it was actually decent.

    That’s why it’s only @ 4%

    • Colonial Viper 28.1

      Must be why English’s mates are so keen to buy it up, its so shit 🙄

      • infused 28.1.1

        I think if possible, anyone would by a bank, regardless.

        For the customer, it’s shit. Shop around, every other bank is better.

        Better fees, better interest, better mortgages.

        When I did my home loan, Kiwibank didn’t even sit in the top 3. Ended up going with TSB.

        Business, they were beaten by ANZ.

  29. For all of you who still think Greek people are lazy corrupt bastards who borrow money and sit on their ass all day. Here is an analysis from Greg Palast, one of the last real intrepid journalists in search of the truth: http://sw9red.wordpress.com/2011/11/08/how-goldman-sachs-sacked-greece-greg-palast/

    • Gosman 29.1

      What a rubbish article that was. It somehow conflated a 2.3 Billion Euro loan back in 2002 and Goldman Sachs trading on CDS on Greek debt to the cause of the Greek sovereign debt issues. I think if you look at the history of the Sovereign debt problems of Greece travellerev they stretch way back before 2002. Greece was not some paragon of fiscal rectitude that was led astray by the perfidious global investment banking cabal. It was their socialist inspired economic policies which led to huge budget deficits which they then attempted to keep secret from the ECB (a bank that many leftists are blaming for screwing the Greeks over for forcing them to accept austerity.

      • muzza 29.1.1

        You got one right Gosman, the Greek corruption goes back well before 2002, bravo!

        Greece should never have been allowed into the EU, but anyone with half a brain knows that the EU was not formed for trade purposes, well not for the vast majority of the countries involved anyway!

        • AAMC 29.1.1.1

          And wasn’t it Goldman Sacs that cooked the books to get them into the EU, and who now have their guy in charge flogging off their assets..

          • Gosman 29.1.1.1.1

            Where’s you evidence about Goldman Sach’s involvement in helping Greece get into the EU?

            I am only aware of the single deal in 2002 that keeps getting brought up as if it is some kind of smoking gun proof that Greece’s problems are all as a result of that nasty investment bank Goldman Sachs.

            • muzza 29.1.1.1.1.1

              You like to point to seeing “only one” Gosman, and you alo like to tell take the position that its not “a smoking gun”

              Silly boy, of course it is a smoking gun! – Why the hell would GS want to commit fraud by covering up the deficits of Greece to hide them? – Because Goldmans have a long history of financial criminality, and they want the country!

              • Gosman

                So no evidence that Goldman Sach’s helped get Greece into the EU then?

                • muzza

                  It will come out in the wash eventually….in the meantime, I’ll say this.

                  If Goldman Sachs deceived the EU/ECB (FACT), by creating fraudulant accounts, with the consent and assistance for the Greek government, then it is reasonable to assume Goldmans were involved in the initial fraud to manipulate the Greek accounts, so they would meet the requirements to join the EU!

                  That is just common sense logic G! Would the Greek government really change its criminal banking partner, who helped them remain in the EU, from another who criminally asisted them to entry in the first place!

                  Wouldnt stand up in court, but then again , the sytem has been so blatantly corrupt, getting anyone loccked up for the worlds biggest corruption crisis is seemingly impossible to this point!

                  Make sense Sherlock?

                • Here’s a year (or two) old column that seems level-headed on the whole Greek debt issue. Is it any good?

                  Sadly, I don’t follow some of the intricacies of financial instruments, deals and general shenanigans. But it does seem to portray Goldman Sachs as being predatory:

                  I read a story a month ago about two pilots who ejected from their distressed airplane and they parachuted into the jungle. They heard a lion’s roar, and so one immediately put on his running shoes. The other said to him, “You can’t outrun a lion.” The former replied, “I don’t need to outrun the lion. I need to outrun you.

                  The lion is Goldman Sachs and the Hedge Funds, while Portugal and Spain are the pilot with running shoes, and Greece is right now running for its life.” 
                   

            • AAMC 29.1.1.1.1.2

              It’s inclusion in the EU, which is preventing it from printing, devaluing it’s currency and becoming competitive enough to start growing and paying it’s debt. This is a failure of the Maastricht Treaty – not enough financial unification, but Goldman’s swindle to get them in put them in a position that they could only fail.

              http://www.spiegel.de/international/europe/0,1518,676634,00.html

              Lets not underplay Germany’s part in suppressing wages (as low as 2 euro an hour reportedly paid in it’s no minimum wage economy, in order to make things to sell to the Greeks et al, who were borrowing German savings in order to do so. Same relationship as China USA.

              Again, why do you like to simplify things into such easy boxs, are you just trying to prove the post here recently about the study showing the Right Wing to be a little simple?

              • AAMC

                On German wage suppression..

                “I’ve had some people earning as little as 55 cents per hour,”

                http://www.reuters.com/article/2012/02/08/us-germany-jobs-idUSTRE8170P120120208

              • Gosman

                It was the Greeks entry into the Eurozone rather than the EU that has imposed these restrictions but aside from this your points are largely correct.

                However noone forced the Greek Government to join the Euro. They wanted the benefits of the single currency without first thinking through the implications.

                This is just another examplke of how the Greek problem is largely self inflicted.

                • AAMC

                  The Europe problem you could argue is self inflicted, if the Maastrict Treay was to work there needed to be more financial unification so stronger parts can prop weaker. They’re all part of the cause of the problem, Germany and France as much as Greece.

                  • Gosman

                    Well that is essentially what is happening with German taxpayers expected to foot the bill to help out with the crisis. However given that I think it is unlikely German taxpayers are willing to fund their poorer European brethren without a say on how that money is spent, (no taxation without representation remember), it is unlikely that this will happen until a fully federal state is set up.

                    • Colonial Viper

                      Bullshit. The German government is doing this for the Bundesbank and private investment banks, no more, no less. The German citizens are being screwed by their government almost as much as the Greek citizens are being screwed by their government.

                      (no taxation without representation remember)

                      What a fucking joke. You’re talking as if its the Greek Government has passed laws taxing German citizens, so therefore German citizens should have a say over the Greek Government. Are you out of your mind?

                      Most of Greek’s “bail out” money goes straight back offshore to the creditors, of which the Troika are the largest.

                • insider

                  I wonder what Aristophanes and Eurypides would have made of these tragi farces.

                  • Te Reo Putake

                    Well, the judge did say to the government ‘eurypides deal up’, ho ho.
                     
                     

                  • AAMC

                    No, you’re right, it’s a farce…

                    “the European Central Bank (ECB). Back in December, the mighty ECB had to step in with yet another massive liquidity injection to avert a total meltdown in the EU banking system. On December 21st, they flooded 523 separate EU banks with a “Long Term Refinancing Operation” (LTRO) program totaling €489.1 billion ($626 billion).9 The program consists of loans that are due in three years and will charge an accommodating 1% interest rate. The liquidity injection will allow the EU banks to participate in a delightfully convenient carry-trade whereby they can take the borrowed money at 1% interest and invest it in various sovereign debt auctions that will likely pay them 3% or higher. The banks will keep the difference in profit, and the EU PIIGS countries get to breathe easier knowing they’ll be able to sell their garbage paper to the EU banks at suppressed rates as long as the LTRO loan money lasts. And the best part? It doesn’t involve any money printing, so there’s really no risk of inflation, you see? So just so we’re on the same page, if everything goes according to plan this year, European sovereign governments will fund their debt auctions with borrowed money lent to them by over 500 European banks who have themselves borrowed hundreds of billions of euros from the European Central Bank”

                    http://www.zerohedge.com/news/eric-sprott-financial-system-farce

                • muzza

                  Gosman, the greek people did NOT want to join the EU. I was actually in Greece end of 2000, end they certainly did not want to join. I have family in France also, and they did not want the Euro. In fact, when you dig into it, no body wanted the euro, apart from the banker, and corrupted politicians!

                  You also seem to think that the government are the people, and that democracy actually worked in this instance. The greek government did not act in the interest of the people or the country, and that fact that they have used GS to cover up the deceipt is more than enough to illustrate the greek govt did not give a rats arse about the country or the people!

                  Furiously trying to cover it up, only shows how criminal the whole EU always was. You reckon that Greece is the only country that Goldmans will be involved with this kind of dirty activity…and Im not just talking about Europe!

                  • AAMC

                    Exactly, Gosman seems to forget that the real people, on the ground, cleaning streets, pouring drinks, they have no part in his game, other than to clean up the mess, with their and their progeny’s futures.

                    It’s a Tragedy not a Farce Insider.

                    • Gosman

                      I’ve had fun letting you guy’s make fools of yourselves but time to bring you back to reality.

                      Greece joined the EEC, (The precurser to the EU), in 1981.

                      The EU was set up as a result of the Maastricht treaty in 1992. All countries whose parliaments ratified the treaty, (including Greece), joined the EU at this stage.

                      The Euro was adopted as an Accounting currency on January 1 1999.

                      Greece joined the Eurozone on 19th of June 2000 after the other founding members of the Eurozone because it failed to meet the criteria for joining by January 1 of the preceding year.

                      Euro notes and coins began circulating in Eurozone countries on 1 Januray 2002.

                      I’m surprised you can make such a fundamental mistake over the EU and the Eurozone. On second thoughts, no I’m not.

                    • RedLogix

                      So Greece joined the EU in 2000… exactly as muzza said?

                    • AAMC

                      And again I’ll suggest you watch this lecture by Steve Keen who will lay out a solid argument as to how the basis of your entire economic belief structure is a fundamental mistake. Go on Gosman, watch it..

                      Re Europe, why are you so focused on Greece Gosman, you’ve got Ireland, Portugal, Spain and Italy to contend with also, non of whom can be put into your profligate Govt meme.

                    • Gosman

                      @ Redlogix

                      Ahhhhh…. no. What part of the following statement do you not understand?

                      The member nations of the EEC who ratified the Maastrict treaty of 1992 became members of the EU.

                      The Eurozone is not the same as the EU. The UK is a member of the EU but not the Eurozone. Does this make sense to you? Do you understand that EU does not equal Eurozone?

                    • RedLogix

                      Oh yes.. I was busy dealing with another bonehead and I got the Eurozone and EU mixed myself. So now we have established that Greece formally joined the Eurozone in 2000.. what was your point again?

                    • AAMC

                      I think we all understand the difference between the Eurozone & the EU.

                      What that has to do with the Fed and the ECB pumping money into European banks to keep them solvent, the part Wall St has played in the game or the fact that now that asset prices are falling the debt you guys have created with your Ponzi is unsustainable and will very likely pop without ( due to financial instruments like re-hypothecation ) the assets to back up your exposure, has to do with it I’m not sure.

                      And your desire to pin the whole thing on the Greek govt spending too much money on pensions shows your fundamental delusion rather than ours.

                    • Gosman

                      My point is that commentators like muzza expect their ideas on the problems with the Eurozone Sovereign debts should be taken seriously when they make fundamental errors such as equating the EU with countries using the Euro.

                    • Gosman

                      You haven’t demonstrated a link between this ‘ponzi’ liquidity and the Greek crisis. I have provided a link which shows the main debtor countries for Greece are France and German and even Greek financial institutions rather than from places like the US and the UK, which would likely be the case if your hypothesis was correct.

                    • AAMC

                      “the moral hazard is in letting the financial sector create debt that should never have occurred in the first place and expecting the public to pay it” – Steve Keen

                      Why are the people of Greece being made to pay – in some cases with their lives – for the mistakes of bankers and politicians?

                    • Gosman

                      Because they voted for the Politicians and enjoyed the largesse their Governments spent the borrowed money on. It is kind of like the partner of a crook whose lifestyle is funded with the proceeds of a crime complaining that they shouldn’t have to suffer any discomfort when it all comes to an end. The Greek people had the power to stop this happening and did very little. They will have to go through a rather painful process to wean themselves off their collectively unproductive and corrupt previous life.

                    • RedLogix

                      Gosman,

                      Your boring technical point is a distraction. In the context of Goldman Sachs scamming the Greek state the distinction between the EU and the Eurozone is of very modest relevance.

                      It’s more or less like trying to discredit an argument with the Grammar Nazi Gambit… never fails to underwhelm.

                    • AAMC

                      We’ll get to see the links if they default won’t we. My understanding is that Wall St investment in French and German banks exposes them to the risk of a Greek default.

                      But you’re misreading my point, the Global Recession played a massive part in Europe’s current debt crisis; particularly in the other PIGGS, who’s public debt was low relative to the likes of Germany pre Lehman Bros. The slow down in GDP, decrease in tax revenue, decline in aggregate demand and deleveraging of personal debt shrunk their economies and increased their public debt.

                      In our globalized interconnected neo-liberal world and all that… you guys created it, don’t try and get all parochial on us now, we’re only just coming to terms with your quick take up of socialism when you needed the citizenry to bail you out.

                    • Gosman

                      I call BS on your view that these nations debt was low prior to the GFC. Greece failed to gain entry into the Eurozone in 1999 because of concerns over it’s public finances. To argue that it has suddenly turned toxic just recently is stretching the facts too much me thinks.

      • Bored 29.1.2

        Correct, Greece has a record of default as long as their arm. The biggest “crime” of the financial markets worldwide is the manner in which they responded to deregulation (such as the removal of Glass Steigel). Basically they slipped the leash of prudent lending, and countries like Greece became recipient of their new found “generosity”. Greed from both sides. I have little sympathy with either side. Anybody with any sense Left or Right would conclude that both parties are entirely culpable.

        • Gosman 29.1.2.1

          Your argument would have more validity if it was the Anglo-Saxon nation’s, (i.e. those who enagaged in the greatest amount of financial deregulation), that were the main ones caught up in the Greek sovereign debt crisis. However it is the French and German banks that have been caught out on this one. The major US and British financial houses exposure is much less.

          • travellerev 29.1.2.1.1

            Fuck Gosman,
            You’re thick. England is the most deregulated country in the world and the American banks via the city of London are on the hook for the biggest derivatives (the French and German and all the major hedge funds hedged their bets with the too big to fail banks in the US) bubble in the history of the universe.
            And hey it’s all legal folks!!
             

            • AAMC 29.1.2.1.1.1

              MF Global anyone? Re-hypothication?

            • Gosman 29.1.2.1.1.2

              That just serve to illustrate your ignorance of the market for Derivatives.

              What is important is the net outstanding amount not the total.

              I’ll give you a couple of examples,

              If Bank A sell a CDS swap to Bank B to cover 1 Billion dollars of Debt then I think we would agree that the Derivatives market is worth 1 Billion dollars.

              If Bank A then buys a CDS swap from Bank C for 500 million then the total amount of Derivatives in the market is 1.5 Billion but the total exposure for all banks is still 1 Billion dollars.

              If Bank D and E both trade 1 billion dollars worth of CDS’s between themselves, (i.e. they buy and sell the same amount to zero off their position), then the market has again increased by 2 Billion dollars but the net effect is zero.

              This is not to state that unwinding positions aren’t complicated and fraught with problems just that your scaremongering figures are meaningless.

              • AAMC

                ” Under the U.S. Federal Reserve Board’s Regulation T and SEC Rule 15c3-3, a prime broker may re-hypothecate assets to the value of 140% of the client’s liability to the prime broker. For example, assume a customer has deposited $500 in securities and has a debt deficit of $200, resulting in net equity of $300. The broker-dealer can re-hypothecate up to $280 (140 per cent. x $200) of these assets.

                But in the UK, there is absolutely no statutory limit on the amount that can be re-hypothecated. In fact, brokers are free to re-hypothecate all and even more than the assets deposited by clients. Instead it is up to clients to negotiate a limit or prohibition on re-hypothecation. On the above example a UK broker could, and frequently would, re-hypothecate 100% of the pledged securities ($500).

                This asymmetry of rules makes exploiting the more lax UK regime incredibly attractive to international brokerage firms such as MF Global or Lehman Brothers which can use European subsidiaries to create pools of funding for their U.S. operations, without the bother of complying with U.S. restrictions.

                In fact, by 2007, re-hypothecation had grown so large that it accounted for half of the activity of the shadow banking system. Prior to Lehman Brothers collapse, the International Monetary Fund (IMF) calculated that U.S. banks were receiving $4 trillion worth of funding by re-hypothecation, much of which was sourced from the UK. With assets being re-hypothecated many times over (known as “churn”), the original collateral being used may have been as little as $1 trillion – a quarter of the financial footprint created through re-hypothecation.”

                “With collateral being re-hypothecated to a factor of four (according to IMF estimates), the actual capital backing banks re-hypothecation transactions may be as little as 25%. This churning of collateral means that re-hypothecation transactions have been creating enormous amounts of liquidity, much of which has no real asset backing.”

                http://www.zerohedge.com/news/why-uk-trail-mf-global-collapse-may-have-apocalyptic-consequences-eurozone-canadian-banks-jeffe

                • Gosman

                  None of this detracts from the fact that stating there is 1.2 Quadrillion of supposed derivatives is disingenuine when it is the net position that matter more than the accumulated total.

                  • AAMC

                    Steve Keens got a thing or two to say about what bankers claim to know and about the sustainability of debt…

                  • Colonial Viper

                    the fact that stating there is 1.2 Quadrillion of supposed derivatives is disingenuine when it is the net position that matter more than the accumulated total.

                    You’re a dick and totally 100% wrong. Your argument is the extension of why neoliberal economists missed the GFC. They dont see total debt levels as important since one persons debt is another person’s asset so it all nets out.

                    WRONG

                    One phrase: counterparty risk.

                    Let’s say you have $1000 in greek bond derivatives which go down the toilet. Good thing is you’ve hedged against that with credit default swaps also valued at $1000.

                    According to you that nets out to a zero position = zero net loss.

                    EXCEPT IF THE COUNTERPARTY TO THE CDS GOES UNDER AND CANT PAY OUT

                    And then you are up for the whole $1000 you lost on the greek bond derivatives PLUS the fee you paid for the now useless CDS. And this is exactly what happened to dozens of financial institutions when AIG went under and couldn’t pay out.

                    Counterparty risk. Remember it.

                    • Gosman

                      I agree there are additional risks involved in the whole process. As you pointed out if someone can’t pay they can’t pay. What is clear is that even with Counterparty risk there is no way that any unravelling of the positions involved in these financial transactions would lead to anywhere near 1.2 Quadrillion dollars. To try and put this figure up as if it is meaningful is rubbish.

              • muzza

                “If Bank D and E both trade 1 billion dollars worth of CDS’s between themselves, (i.e. they buy and sell the same amount to zero off their position), then the market has again increased by 2 Billion dollars but the net effect is zero.” – Your example illustrates nothing other than the fact that derivatives add FUCK ALL benefit to the planet, and should be illegal exactly the way they used to be!

                • Gosman

                  So insurance should be made illegal muzza? Interesting that you believe that.

                • Gosman

                  What area of banking did you work in muzza? Was it Janitorial services by any chance?

                  It is just that you don’t seem to realise that the products banks put together and buy and sell are just intruments to manage financial risk. In that regard a Financial Derivative is much the same as a Mortgage loan just with a different risk profiles.

                  But you should have known that if you had actually worked in banking in any meaningful capacity.

                  • mik e

                    gfoose futures trading is nothing more than a bet on the future direction of a particular market if it doesn’t come off you loose.
                    Inssurance has a guaranteed outcome

                  • felix

                    In my humble opinion Gosman’s ongoing campaign of demanding to know about commenters’ work history is getting pretty close to the line and maybe a mod should have a look at it.

                  • Colonial Viper

                    apparently Gossie you think that only bankers and former bankers have any right to comment on and regulate the banking system.

                    This must be why they are installing bankers as the senior advisors and heads of western countries around the world.

                    Stupid.

          • AAMC 29.1.2.1.2

            Doesn’t Wall St have about 4 trill exposure via it’s investment in French & German Banks?

          • muzza 29.1.2.1.3

            Are you sure you work in banking G!

            The FED has been bailing out bad bets made by US banks in Europe through the ECB using various means of fraudulant, swaps etc!

            Why do you think they are doing that?

            • Gosman 29.1.2.1.3.1

              Look at the realitive exposure levels to direct Greek debt muzza. The major creditor countries are France and Germany (and interesting Greece itself) as well as the Euro area. Anglo-Saxon countries, especially the US, hardly feature.

              http://ftalphaville.ft.com/blog/2011/06/17/597776/top-of-the-greek-bond-exposure-pops/

            • travellerev 29.1.2.1.3.2

              To be honest Muzza,

              I think he’s getting paid to keep saying that the Derivatives market is an innocent insurance service to help framers and other industrious types to insurance against future mishaps. They just found out the hard way that this is not so with MF Global stealing more than 1 billion out of their segregated bank accounts and getting away with it.

              For those of you getting confused by Cowboy hat boy Gosman here is the link to some more information:
              Derivatives: The Quadrillion Dollar Financial Casino Completely Dominated By The Big International Banks

              • muzza

                Yes generally someone trying to defend the indefensible, has a reason for doing so, lets call it self interest..

                The rest of us seem to have an interest in seeing the system working in a fair and reasonable way. and those who have committed henious fraud and crime, in jail for life as start, if not more for all the lives that the banking system had ruined or ended over the decades it has been raping the planets resources and the people!

                Nice one Gosman, keep at it mate!

                • Gosman

                  States the person who can’t tell the difference between the EU and the Eurozone.

                  • Colonial Viper

                    Yeah well a lot of the people who can tell the difference between the EU and the Eurozone helped create this frakking mess, so how is knowing that of any help?

                    • Gosman

                      Classic!

                      Gotta love the logic behind that statement which essentially boils down to –

                      “A lot of smart people made mistakes which caused a big problem therefore there is no benefit being smart”

                      Better tell your Teacher Union buddies about that C.V.

                    • Colonial Viper

                      Actual the logic boils down to “a lot of smart people caused a big problem, and you have to be stupid to still think they have any real smarts”

                    • felix

                      It’s that set/subset problem again Gosman. I really thought you would’ve got your head around that by now.

                    • Gosman

                      Ah Felix, while we are are on the subject of set and sub-set care to comment on muzza and AAMC mistaking the Eurozone for the EU?

                    • felix

                      No I only came here to comment on you and your grasp of logic, thanks.

                      Stick to what I know.

                    • AAMC

                      Never mistook the Euro currency for the Eurozone Gosman, don’t put words in my mouth.

                    • Gosman

                      Perhaps you would explain what you meant then when you made this reply earlier on in the thread AAMC

                      “It’s inclusion in the EU, which is preventing it from printing, devaluing it’s currency and becoming competitive enough to start growing and paying it’s debt. This is a failure of the Maastricht Treaty – not enough financial unification, but Goldman’s swindle to get them in put them in a position that they could only fail.”

                      How is Greece’s inclusion in the EU preventing it from printing, devaluing it’s currency and becoming competitive enough to start growing and paying it’s debt.?

                      The UK is in the EU and can can potentially do all those things so why is Greece somehow different?

                    • Gosman

                      Actually just re-reading your reply,you even mistook what I was poining out. Not that you mistook the Euro currency for the Eurozone but you mistook the EU with the Eurozone. You basically did it again there.

                  • muzza

                    Your googled comments about the Eurozone/EU showed nothing other than what a dick you come across as! – I lived/Worked in the UK/Europe for 11 years (mostly in banks), so know the set up quite well. Using technical terms as your way to try divert attention, from the fact that shows nothing more than you, or your avatar, whatever you might be are so terribly missguided!

                    • Gosman

                      Techinical terms???

                      You mean calling things by their actual names and not mistaking a multi-lateral political entity with a currency union?

                      Yeah I can see that is rather too technical for someone who has supposedly worked in finance.

                      What area did you work by the way?

                    • muzza

                      Gosman, you have technically had a win about a point, that I used terms incorrectly, well done! I was responding to illustrate , where you were, yet again wrong, and you have run with that points win for all it is worth!

                      Again all this shows is how small your mind is, and shows everyone else on here, that you are indeed, just comic relief!

                      Go champ!

                    • Gosman

                      Why are you avoiding the question about what area you worked in? I have been entirely upfront about my experience in banking. You have stated you have worked in the industry yet somehow fail to understand some basic concepts such as what financial products actually are. So what area of banking did you work in and what products did you deal in?

                    • felix

                      You know this whole ignore-the issue-and-instead-try-to-win-some-tangential-point thing that Gosman always does and pretends no-one can see?

                      It’s exactly how John Key behaves.

                    • Gosman

                      There is no ignore the issue here felix.

                      There is a point out the ignorance of people who don’t understand what a derivative, (or any financial product really), is, or the difference between a net and overall size of a market.

                      There is an intolerance of people simply posting up other people’s views on the subject as if they are the be all and end all of the discussion on the topic without fully understanding it.

                      However there is no ignore the issue. It is usually only you who does that.

                    • felix

                      lol, you know perfectly well I was referring to your usual behaviour, the shit you pull here almost every day.

                      But now you’re going to try to turn that general remark into some anal-retentive lawyering bullshit, probably centred on my misuse of the word “always”.

                      And still you think no-one sees what you’re up to.

                      What a fucking joke you are, cowboy-hat boy.

                    • Gosman

                      You should be flattered felix. Any nit picking tactics I use in debates I picked up after observing how you deal with people here you disagree with. I agree that it sometimes detracts from a discussion. Although that stated pointing out someones fundamental misunderstanding of basic principles certainly highlights that perhaps there understanding of the wider issue isn’t as good as they would like to think it is.

                    • Gosman,

                      there understanding“??

                      Where? 

                      🙂 

                    • felix

                      I don’t think I’ve ever seen you in a debate, Gosman.

                  • Hi Gosman,

                    Since you are concerned for precision – when you (twice) mentioned “CDS swap…” in this comment, presumably you meant a particularly fiendish instrument?

                    A ‘swap swap’? 

                    • Gosman

                      No different from calling an ATM an ATM machine. It happens in English with acronymns.

                    • It only ‘happens in English’ when people aren’t careful – but, lack of care at that level doesn’t bother me.

                      I just thought that kind of thing bothered you – judging by your ‘EU’ vs ‘Eurozone’ comments (implying a lack of understanding on the part of those confusing the two).

                    • Gosman

                      You are quite wrong. That sort of thing doesn’t bother me. I’d even let someone mistype EU for Euro once or twice without comment. However fundamentally not understanding that the EU is not the same as the Eurozone and constantly repeating this even after it has been pointed out is just idiotic especially when discussing matters to do with the Sovereign debt crisis and Greece. If you want your opinions to be taken seriously get your terminology correct otherwise when you make statements such as the Greeks didn’t want to join the EU in 2000 it just makes it completely ridiculous.

      • AAMC 29.1.3

        On the meme of Greek lazyness

        “Greeks worked on average 48% more than their industrious German neighbors. Chandler: “The OECD data shows the average Greek worker spent 2120 hours at work compared with 1429 hours in Germany. Moreover, Greece is one of the only OECD countries in which workers were working longer in 2008 than in 1998. With 1802 hours at work”

        http://www.calesinvestments.com/newsletter/2012/NL011512/body.html

        • Gosman 29.1.3.1

          Working hours are largely irrelevant in terms of whether an economy is working well ot not.

          If I have 100 people working 50 hours a week but only producing the output that 50 could do in 30 hours is that a good use of these people’s time?

          If those 100 people mean that the Government controlled business is losing hundred’s of millions of Euro’s a year and needs Government money to bail it out what does it matter how hard they work?

          • Colonial Viper 29.1.3.1.1

            None of which is related to Greece’s situation.

            • Gosman 29.1.3.1.1.1

              I obviously disagree. The fact that a large number of government owned companies are making massive losses and that a large number of Greeks work for the Government would suggest the productivity levels of the average Greek worker isn’t great.

              • Colonial Viper

                Aside from your long chain of inferences, I’d say that worker productivity is irrelevant to an economy where improved productivity benefits foreign bankers and essentially everyone else but the people in that country,

                • Gosman

                  So lack of productivity in a Government owned business has no impact on the wealth of an economy does it C.V when it means the state has to finance the loss of the business via borrowing from those big bad evil bankers you seem to be so concerned about?

                  • Colonial Viper

                    The only impact lack of productivity from public AND private sector workers is that the foreign owners don’t get paid.

                    Oh whoops, that’s exactly what is happening to Germany, by Greece, by coincidence haha

              • mik e

                The Greek economy doesn’t have the diversity to to make productivity gains Germany can. Nothing to do with the individual. southern European countries run on corruption .Northern European countries run on subsidies .Obviously the best economies in Northern Europe know where to put their subsidies while the south side corrupt gain ends up in Switzerland.Corrupt bankers meet corrupt politicians.
                Gooseman you can’t tell me these massive banks with their massive resources didn’t know Greeces ability to pay, they knew full and well the banksters who loaned the money have kept their massive bonuses no doubt!
                These banksters also knew that the German government would bail them out as well otherwise the German economy would go into free fall.
                Just like SCF!
                You are an expert liar goosman!
                In other words a career politician!

          • mik e 29.1.3.1.2

            goose man government controlled business like the huge subsidies the German government pays businesses

  30. Mark 30

    Here’s an idea then.
    Why don’t you all pull your money out of foreign banks. Sell all your houses (the price may drop a bit, but that will burst the bubble and allow the working poor to buy in)
    Pool together with all this capital, and buy a big bunch of land so we don’t sell it to foreigners. You’ll have the best teachers in the world, and no National Standards or bullshit like that.
    Own your own wind, solar, hydro plants.. you won’t need much power as you will be able to build very energy efficient houses.
    No roads, no cars.. build a train track and some rolling stock. Won’t have to worry about peak oil & all that shit.
    Those that work harder and contribute more will be taxed higher, allowing those that don’t to live equally.. they could do the populating I guess. Set up a Port (no foreign imports mind) wharfies could earn more than everyone else as they deserve it.
    You can’t use any natural resources however, especially not to create jobs and income.
    Self govern, with fair elections  (no fucking MSM and rightwingers stealing them)
    It would be Utopia.. no Elite or Born to Rule allowed.
    How about it people? 

    • Gosman 30.1

      But then they would have noone to blame for being poor and pathetic. Can’t have that. No fun and too much personal responsibility.

      • muzza 30.1.1

        You really get a kick of posting like an absolute child, dont you! The sad thing is that myself and others bother to respond to your posts, only serves to feed some rather deep need you have. I’ll not be responding further to anymore of your posts, and would encourage others to do the same, thats a personal choice obviously.

        Good luck Gosman, really!

        PS – One last tip, don’t expect others to answer your questions, when your history here shows you are the world champ on these boards at ignoring questions, then coming up with spurious claims like “I have been entirely upfront about my experience in banking”

        Go champ!

        • Gosman 30.1.1.1

          I don’t answer ‘When did you stop hitting your wife?’ type questions or usually respond to people who have not responded to a question from myself that was asked well in advance. Other than that I am entirely upfront. I even provided the name of the Epidemiologist I spoke to about the Spirit level after I checked with her it was okay to mention her by name. You on the other hand are big on asking questions but not on answering them.

      • Puddleglum 30.1.2

        Hi Gosman,

        Do only personal choices produce human reality? (Your comment seems to assume that is the case) 

    • Colonial Viper 30.2

      Hey Mark that kind of shit is what the Government is supposed to do for its people. You know, to accomplish large scale nationwide things that individuals cannot easily accomplish for themselves.

  31. Mark 31

    CV, I’m suggesting you do it collectively.. after all, 51% of the voters didn’t vote for the Goverment remember, surely you could cobble together a few hundred thousand unhappy souls, and a few 100 million dollars.. fuck, when you have all the answers as to how and why society is fucked, and the solutions, anything is possible.. you could get the mallard to scalp a few tickets and return the profits to the needy as well lol. Chris Carter could be in charge of travel expenses and anti corruption, Ms Clark could run dental care,  shit, might even come along to the party myself. (-:

    • Colonial Viper 31.1

      Hey Mark

      TPTB hold on the levers of power is becoming a death grip. We’ll talk again in a couple of years when you and you’re progeny have been fucked by the crew you love to support today..

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