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Key: we were told SCF would fail

Written By: - Date published: 2:45 pm, March 31st, 2011 - 68 comments
Categories: accountability, business, john key - Tags: ,

In a raucous public meeting in Timaru last night, John Key said “The entire time I’ve been Prime Minister I’ve had Treasury in my office week after week, month after month telling me South Canterbury Finance was going bankrupt”. So, why did National sign SCF into the scheme and renew its deed three times?

On November 19th 2008, Key and his ministers were sworn in. That very day, Treasury Head John Whitehead signed the deed admitting SCF into the retail deposit guarantee scheme “on behalf of the Minister of Finance” Bill English.

The deed was renewed on December 11th 2009, again signed by a senior Treasury official on behalf of English. It was updated on April 1st 2010, once more signed by the same senior Treaury official on behalf of English. And then amended on June 17th, again signed off by the senior Treaury official in English’s name.

The mere fact that there were so many reviews of the deed shows that Treasury knew things weren’t right. And Key’s acknowledgement that he and English were being repeatedly told “week after week” about SCF’s problems raises the question of why they kept on having their officials sign new deeds keeping SCF in the scheme.

Remember, the upshot of SCF being kept in the retail deposit scheme through all these reviews and updates was a bailout that put an average of $50,000 into the hands of the depositers, paid other debtors $300 million – all funded by us as taxpayers at a cost of $1.8 billion. We’re now lumbered as effective owners of a finance company that is only worth a fraction of what we paid because of the choices Key and English made.

For me, Key’s entire attitude to this affair and governing in general is summed up when, in the RadioNZ clip, he calls $100 million “chump change”.

68 comments on “Key: we were told SCF would fail”

  1. Draco T Bastard 1

    I suppose Blinglish sees this as one of those “necessities” – the necessity of bailing out the rich and guaranteeing their profits from the taxpayers money.

    • Mark M 1.1

      obviously in your small world anybody with a few dollars to put away is a “rich” prick.
      Isnt it wonderful to be blinded by jealousy.

      NZ would be much better off if people like you aspired to success instead of trying to drag everyone back to your level so you can justify your failure

      • Colonial Viper 1.1.1

        Telling the serfs to aspire to success while John Key sups on his $14,000 dinner?

        Rich!

      • Carol 1.1.2

        Curious that you think everyone sees being excessively rich as a sign of success to be aspired to, MM. You seem to be projecting your envious aspirations onto everyone else.

      • Jum 1.1.3

        mark m

        Jealousy is the very last thing on my mind when I ‘look’ at you through your post. Your master john key really does control you if you think that with the current NZ situation with all the unemployed that $100million is ‘chump change’.

        So much for the individual thinking in the rightwing camp. You people are like robots. Pathetic little monkey paws of Key.

        I can only imagine you have cashed in on the New Zealand stock market already; maybe you’re one of the SCF that stole New Zealanders’ money for your so called ‘risky’ ventures. Like I said, pathetic little creature with no balls. You and your kind have stolen from my children.

        I should thank you; you have just ratcheted up my activism.

      • RobC 1.1.4

        Mark M,

        NZ would be much better off if society understood the meaning of compassion, realised that wealth and poverty, success and failure, is not solely determined by effort and/or “aspiration”

      • M 1.1.5

        ‘NZ would be much better off if people like you aspired to success instead of trying to drag everyone back to your level so you can justify your failure’

        You’ve got to be fucking kidding me – if aspiring to success means:

        Poisoning the seas and rivers
        Mining all minerals as quickly as possible with the resultant problems: peak oil, mine cave-ins, global warming, more extreme weather
        Ruination of arable land through creeping desertification
        Fishing species to extinction – 90% of the big fish are gone because we ate them and we’re busy fishing the rest down the line to extinction http://news.nationalgeographic.com/news/2003/05/0515_030515_fishdecline.html
        Problems in dealing with increasing human and animal effluent
        Needing a big oversized car, never getting public transport because it’s so declasse, buying designer everything just so someone can show off for a moment hoping to induce pangs of jealousy in someone else, buying a home mortgaged to the hilt
        Air travel being one of the worst offenders for the environment just so some bugger can have skiting rights about his holiday
        Supporting slavery in third world countries so cheap T shirts, shoes and furniture can put NZers out of work

        Count me out

        If however people live simple lives with respect for the environment and its limits, use resources frugally and acknowledge that life does not require a load of expensive wanky rubbish then count me in. Hell one of my simple pleasures is when you first open a packet of tasty cheese – it never tastes better than when you first open it, well that’s if you can still afford it.

  2. ianmac 2

    Heard Key say that this morning, so are they that slow to respond? Especially since it was taxpayers money at risk. If the MSM is consistent, Key will dodge all that .

  3. Well its all a bit of a laugh. Remember that nice Mr Hubbard telling us that “When Mr Key gets back he will fix it. If he had been in the country this would not have happened. Its pathetic bailing out all those rich greedy oldies. Who’s whole attitude to life seems to be making more and more money instead of enjoying the few more years of life they have left.
    Do they honestly believe that workers on the mininum wage care about these money grabbers . The taxpayers hand out paid to those people would have been better spent on state health and education. But English would not see that.

  4. “The entire time I’ve been Prime Minister I’ve had Treasury in my office week after week, month after month telling me South Canterbury Finance was going bankrupt”. So, why did National sign SCF into the scheme and renew its deed three times?

    yep i heard that too – and i still don’t understand why Key would’ve admitted to that

    • grumpy 4.1

      Imagine if they hadn’t extended the scheme and just allowed SCF to go through.

      Who would be the bad guys then?

      • the sprout 4.1.1

        umm, the people responsible for SCF’s collapse?
        and just imagine all the millions of taxpayer dollars that wouldn’t have been flushed down the crapper

      • freedom 4.1.2

        from the public point of view ? who can tell. But , if the TRUTH actually came out then the only bad guys would be seen to be a private business. A business vulnerable to the law of the markets, and the law of the courts. A business that is backed by an Industry driven by greed. Ultimately though, a business which chose to ignore the reality that a principal risk of their investments is many hundreds of thousands of people may lose. And lose a lot.

        If they had been allowed to fail, the fall-out may have actually been useful to help educate these thick skulled troglodytes that all investment has risk and demands a certain amount of social responsibility.

        • the sprout 4.1.2.1

          and would’ve saved about twice the amount government is now looking to axe from social services in the next budget

          • grumpy 4.1.2.1.1

            Nah, you’re only looking at the initial payment, the proceeds from the sale of assets need to be taken off that.

            • The Economic Illiteracy Support Group 4.1.2.1.1.1

              But there is a timing issue – the cuts to public services are coming on May 19, but the recoveries from the sale of the SCF assets are coming …. when? And when they do finally arrive, does anyone seriously believe that Key and English will reinstate the services they cut?

        • grumpy 4.1.2.2

          I agree, but if they had failed to carry over the guarantee, most of the investors would have tried to pull their money and as we now know there was nowhere near enough to pay them – it would have gone tits up then.

          I think Key made a poor decision to renew the guarantee but I can understand that the temptation was there in the hope that it could be saved.

          it will be interesting to see what the nett cost is to taxpayer – it might even make a profit???

          • Colonial Viper 4.1.2.2.1

            it would have gone tits up then.

            Which is what should have happened.

            When it finally did go belly up, speculators had bloated it full of funds which could never be paid back – unless the tax payer stumped up.

            Which under Bill and John, we did.

            Let it fail small is the lesson from overseas, but English and co. wouldn’t have the first clue.

          • RobC 4.1.2.2.2

            “it will be interesting to see what the nett cost is to taxpayer – it might even make a profit???”

            You have got to be fucking kidding me. Generous estimate $300 million loss. More likely $600-700 million.

          • Draco T Bastard 4.1.2.2.3

            …it would have gone tits up then.

            Yep, that’s the whole point of market discipline.

            it will be interesting to see what the nett cost is to taxpayer – it might even make a profit???

            It won’t as, IMO, it appears that the reason why SCF was kept in the government guarantee scheme was to transfer taxpayer monies to NACTs rich mates – especially the foreign ones who got paid out even though they weren’t covered by the guarantee.

          • Jum 4.1.2.2.4

            grumpy,
            what a load of crap you talk. Key deliberately allowed the guarantee to carry on because the end goal was the amount of money the so-called risk venturers stood to gain. Gain to taxpayers; what a turkey you are. The Taxpayers always pay when NAct is in government. Unlike when Labour Greens are in, when the taxpayers actually receive some benefit through public services.

            Anyway how long have you been blogging so far; when Crosby and Textor paid you to or did you do it for the love of greed?

    • Red Rosa 4.2

      This saga has a long way to run, and the sprout’s question will be valid for months yet.

      According to Virginia Green’s biography of Hubbard, on 3 July 2009 Key was fully briefed, in Timaru, on the parlous state of SCF. The shambles of SCF/Hubbard resignations and sackings, ongoing with an increasingly desperate search for fresh capital around that time, are well set out.

      Why the government guarantee was extended in the following February, when the final collapse was a bare six months away and totally foreseeable, needs to be asked, and asked again.

      • vto 4.2.1

        Agree 100%. Who can ask Key that question best?

        And pink postman that clanger of Hubbard’s was certainly worthy.

    • felix 4.3

      “i still don’t understand why Key would’ve admitted to that”

      Off guard. He’s not used to being in a room filled with people who see through him and say so.

    • Deborah Kean 4.4

      Because he believes no one can do anything about his admission – or worse, that no one cares!

  5. Carol 5

    So why isn’t this front page headline news? And why aren’t major commentators and journalists questioning Key’s leadership?

    • grumpy 5.1

      Because yet another Labour flunky has managed to hog the headlines.

      • Carol 5.1.1

        Would that be the natural disaster, crime or crash stories, or business confidence plummets? I guess Labour is responsible for all those then?

        • Tigger 5.1.1.1

          Just heard Newstalk where host (Willisms) was decrying how badly Key was treated at the meeting, how those questioning him were inappropriate. So yeah, MSM working to protect them…

          • Draco T Bastard 5.1.1.1.1

            That seems to be normal for the MSM – they really lost the plot a long time ago. They’re supposed to be holding politicians and business people to account – not protecting them. Although, as the journos are owned by the business people and the business people want this bunch of psychopaths (NACT) in power we really shouldn’t be surprised that that’s what they’re doing.

    • The Voice of Reason 5.2

      It’s not only the msm that’s missing in action, Carol, the night shift at Crosby/Textor appear to have all taken a sickie. I’m guessing it’s not just because of the law change tomorrow.

  6. fermionic_interference 6

    Is this a case of criminal negligence?
    Or corruption within the halls of power, ie; my friends/family have money invested here, therefore the company must be bought into the deposit guarantee scheme?

    Is it time for a major enquiry?

    • freedom 6.1

      yes, yes and ahh yes

    • grumpy 6.2

      Should be looked at. I seem to remember that a major hedge fund was bailed out from their SCF investment (Torchlight) when they were not strictly eligible. At the time it was presumed for ease of disposition of assets (no squabble over priority) but looks suspicious.

  7. freedom 7

    ahhh the unbiased and interested media we enjoy these days,

    we can comment on the baking by the cooks
    http://www.stuff.co.nz/the-press/news/4833206/Key-takes-the-biscuit

    but not the cooking of the books
    http://www.stuff.co.nz/the-press/4830643/John-Key-I-like-Hubbard

  8. logie97 8

    It would be terrible if people close to cabinet members were revealed to have benefitted from this bailout…

    captcha: intelligence

    • The Economic Illiteracy Support Group 8.1

      It might be terrible, but would anyone be particularly surprised?

    • Draco T Bastard 8.2

      It wouldn’t be terrible at all as we do need to remove the thieves from power and it is certainly something that needs to looked at.

  9. Ms X 9

    Just remember, this guy is all smoke and mirrors, but he ain’t stupid. If he’s admitting to something to raise our ire, then there’s something he’s not admitting that’s going on that will shake us to the core – if we spot it…..

    • Bright Red 9.1

      I think it’s more that he doesn’t think we’re really listening. Remember, this quote was reported by RNZ and the Herald etc and none of them thought to compare it to how the Nats had handled SCF.

      captcha: critical – as in the msm have plenty of cynicism but little in the way of critical thinking.

    • Jum 9.2

      Yeah, Ms X,

      He learned his craft in the back alleys of the stock market where being bothered by adverse criticism would be the last thing to shake his steady hand on the tiller of greed.

      Check out the Trans Pacific Partnership Agreement that he and his nzbusinessrotundtable ticks are pushing through just before the election. That would be just one of the criminal acts perpetrated on this country and New Zealanders.

  10. Red Rosa 10

    The SCF/Hubbard mess is big, and complex. $1.7bn is of course serious money. There is a tangle of related party lending, cross-shareholding and personal involvement which is keeping a heap of expensive people working hard in Timaru to sort out. There are something like 500 Hubbard-related entities, and the documentation by his own admission is scanty.

    The political fallout is mixed, too. Most of the disgruntled hecklers at the Timaru meeting looked like National Party supporters. Chances are, some of them are debenture holders who have been paid out in full! But a lot of South Canterbury people have been helped by Hubbard – some owe practically all they have to him. As something of a local icon, he gets heaps of sympathy.

    It would be most interesting to see the list of, and $’s paid out to, all the debenture holders.

    That might help explain things better.

    • Marty G 10.1

      There may be a works where the government thinks the people have the right to know whose benefiting when it signs a $1.8 billion cheque. But it isn’t this one.

    • vto 10.2

      Two things methinks;

      one following the money is always illuminating and
      two the SCF bailout is without doubt a “nice to have”

      • felix 10.2.1

        Follow the money is right.

        Gee I hope none of it ended up in investment vehicles that Key didn’t know he owned.

        • burt 10.2.1.1

          Our excellent investigative journalists would have been all over that one.

          Ummm is that too long for a billboard ?

  11. Oleolebiscuitbarrell 11

    Don’t remember this amount of censure when Labour brought in the retail deposit guarantee scheme and extended it to Mascot Finance at a cost of $70m.

    • Lanthanide 11.1

      $1.6bn is a bit different than $70m. Also, by Key’s admission, they knew SCF was in trouble for years ahead of it’s final collapse, and deliberately re-extended the guarantee 3 times.

      It is a legitimate question, but if you can’t see the difference in scale between these cases, then there’s something wrong with you (or you’re in denial).

      • burt 11.1.1

        Arguably the scale makes it more important to include them. The policy was after all to protect private investors. I guess Labour’s definition of ‘worthy’ and National’s were always going to be different though. The bit that I think really smarts is the timing of the inclusion, a cynic might say it was repaying party donations…

  12. RobC 12

    oleole, neither do I. If you could point out your censure when Labour brought in the retail deposit guarantee scheme, much obliged. Cheers.

    • Oleolebiscuitbarrel 12.1

      I’m sorry RobC, I am not going to be able to give you a link or anything but can you just take it from me that I have always been against the government propping up any private enterprise.

      • felix 12.1.1

        I’ll take your word for that. You must be livid about this $1.6bn then.

        You must be furious that we’re paying the fucking interest to these thieves.

        • Oleolebiscuitbarrel 12.1.1.1

          I am. I blame the mentality that throwing other people’s money at a problem is a good idea if it serves a greater good. I think that this was what Labour had in mind when it put the scheme in place.

          • felix 12.1.1.1.1

            We may disagree on the merits of public money serving a public good, but what we see here is a govt throwing public money at a private problem to serve a private good.

            Plus interest.

          • burt 12.1.1.1.2

            I agree with that, arguing over what scale is acceptable is a waste of time, it’s personal opinion stuff and really the ass-end of the politics.

            The failure is indeed the mentality that it is valid for the state to prop up failing business for the greater good.

            • felix 12.1.1.1.2.1

              It’s the interest that really gets my goat though.

              Even if the state making up the capital losses could be justified (and I don’t think it can) there’s just no fucking way the investors should be getting a dividend on their losses, paid for by the state.

              Have English or Key even bothered to come up with an excuse for paying the interest?

  13. burt 13

    Eddie

    On November 19th 2008, Key and his ministers were sworn in. That very day, Treasury Head John Whitehead signed the deed admitting SCF into the retail deposit guarantee scheme “on behalf of the Minister of Finance” Bill English.

    What more needs to be said !

  14. Miracle Worker 14

    If you want to know what was behind all of this – take a close look at Botherway’s relationship with Kerr (and Key), as well as some of the ‘key’ dates. The same day AH tipped Scales and HNZ into SCF to shore it up, the ‘anonymous complaint’ appeared on Simon Botherway’s desk. Statutory Management and the SFO investigation were announced exactly six days after Simon Botherway’s brother was declared bankrupt, the consequence of actions precipitated by SCF. That course of action sunk SCF – no doubt about it. Deposits went from average $2 million per day to less than $5K per day within 72 hours. It killed it. Stone dead. If there was a chance to save it before they slammed AH with that, that chance was destroyed by those actions.

    Torchlight and PGC had already been sniffing around Treasury – trying to influence decisions on SCF – prior to SM and the SFO announcement. The Treasury and RBNZ document dumps from late 2010 prove it. PGC was in there on behalf of Kerr, sniffing around and trying to influence the SCF situation. According to the Treasury emails that refer to it – no steps were taken to manage or stop that conflict.

    In addition to this – those RBNZ and Treasury emails make clear references to SecCom (Botherway) sniffing around in the background, signalling the intent to use SM on Allan Hubbard as early as October 2009 and February 2010 (in fact, the last reference to it was exactly 4 days prior to the ‘anonymous complaint’ magically appearing on Botherway’s desk on 28th Feb 2010).

    Torchlight (George Kerr) pocketed tens of millions from the SCF receivership under the RDGS.

    George Kerr went to Christ College with Simon Botherway. He also went to Canterbury University with Simon Botherway, at the same time. George Kerr also went on to co direct and co-run 4 separate companies with Simon Botherway. Hardly an “arms length” relationship.

    Simon Botherway was employed by Key at Bankers Trust, over eight years ago.

    It looks likely that Botherway was shoulder tapped by Key for the FMA.

    And all these guys know each other – really, really well.

    On top of all that – who is the biggest benificiary of SCF’s collapse? PGC……..now known as CBS……the new ‘Heartland Bank’.

    While Botherway and Key might be smart enough to avoid the obvious questions that will arise if CBS is suddenly seen to be “buying” SCF’s assets cheap – the one thing neither of them can hide is the most obvious thing of all….

    George Kerr had a lot of help getting rid of his biggest potential competitor in the rural lending marketplace – and destroying that competitor’s reputation completely is a very good way of ensuring he can’t bounce back and cost you business.

    Do the math people – and do your research. The information is all available – you just have to connect the dots.

    • vto 14.1

      Well put together miracle worker. I think I said at the time that the thing to watch would be where SCF’s assets end up.

      There is absolutely no doubt deals were done behind closed doors involving politicians. It is quietly acknowledged even. And Key has admitted it – why was SCF allowed into the RDGS when Key was told from his first day as Prime Minister that it was going broke? Why? Key? Answer up please.

      Note that these exact same backroom deals involving the exact same people and politicians and organisations is going on as we speak over the Central Plains Water scheme. It is a done deal – just ask David Carter how it is going to be paid for and where the assets will end up. And watch his snake tongue fork.

    • Bright Red 14.2

      are the treasury and rbnz docs online?

  15. randal 15

    “the entire time I have been prime minister”.sounds like he has had enough.
    If I were Him I would take the money and run now before the crap really hits the fan.

  16. Miracle Worker 16

    Here’s a bit from my research – the RBNZ documents are particularly revealing. It is absolutely gob-smacking that the media have overlooked the content of those emails – in fact it is an absolute scandal. I can only conclude that reporters/journalists in this country either have ridiculously short attention spans, or they avoid anything that requires research, or this stuff leapt off the page at them but they were under strict instructions not to say anything about it.

    Either way – for some of the snippets in those emails (which were all given to the media) to have gone unchallenged/unreported – really is a scandal.

    http://www.treasury.govt.nz/publications/informationreleases/scf/pdfs/scf-t2010-1586.pdf

    http://www.treasury.govt.nz/publications/informationreleases/scf

    http://www.treasury.govt.nz/publications/informationreleases/scf/pdfs/scf-m-km-tsy-1sep10.pdf

    http://www.beehive.govt.nz/speech/ministerial-statement-parliament-south-canterbury-finance

    http://www.beehive.govt.nz/release/govt-moves-swiftly-repay-all-scf-depositors

    http://www.rbnz.govt.nz/finstab/nbdt/scf/index.html

  17. Once again the money trader who learned to leave his morals at home whenever he deals with money, he seems to forget that he is playing with peoples lives, but people are not money so they are unimportant to money traders. The money trader just expects you to make this a good country for him and his favoured few to love in.

    • Jum 17.1

      Excellent comment, Margaret. I was trying to work out what made John Key tick. So I ticked through the items that annoyed me about his behaviour.
      – he was handing out bottles of wine to journalists at Christmas from the vineyard he wasn’t supposed to know he owned.
      – the wondering how that illegally poached antarctic pebble came to be in his pocket
      – the forgetfulness about how many shares he owned in this and that, yet he’s a moneytrader who is supposed to have the accounting brain of a steel trap, yet he says he knows the price of everything but we know he knows the value of nothing
      – the deliberate bypassing of Pharmac to hand out a longer supply of Herceptin cancer treatment to women just before the 2008 election – how convenient – that was as yet unproven – but gained the women’s vote, never mind he removed their right to pay equity for the next 10 years and has sent more women than men on to the unemployment line and tells solo mothers that their most important job of bringing up baby is not as important as cleaning some rich woman’s loo…

      But people like him. They think he’s just like them, believe it or not.

      He’s not like them.
      A. He’s a moneyman and money and power is what motivates him, not caring about people. He’s seriously wealthy, but did he earn it by hard work that produced something concrete. No. He just produced more paper money for those that didn’t need it and was handsomely rewarded. The fact that he helped a client make a possibly damaging speculative run on the New Zealand $ seems to mean nothing to people.

      B. He listens to the advice of spin doctors, exported from Howard’s Australian election and later Brash’s election, based on Hollow Man promises and spin and happily voted against English for Brash when he had promised his fealty to English. What a man.

      C. He acts like NZ is his private business.

      Then I realized why, not only was he annoying me but he was really making me angry. He truly believes New Zealand IS his private company, and he’s out to cut costs. That’s us, ladies and gentlemen – we’re the expenses. This from the man who had free education and cheap housing and taxpayer support for his widowed Mum, rest her soul.

      PS Come November, he’s going to hand us over to foreign corporates and we’ll lose our sovereignty for the next (100) years. Then, he might trip off back to America, whether NZers elect NAct again or not, to get a pat on the head from his American masters who stand to gain much from the TPPA. He’ll also be able to cash in his $million loan he made the Bank of America – services rendered, who knows.

      Have a nice life, John, and don’t ever come back. English will send the knighthood over in return for you handing us over to him and the NZBusinessRotundtable; deal done – John’s good at that.

  18. MC 18

    MAY DAY.  1 MAY 2011.  ANTI-CORRUPTION PROTEST OUTSIDE PARLIAMENT FROM MIDDAY.  YOU’RE INVITED.

  19. JMK 19

    “Miracle Worker” [deleted]. Mate you’re like a stuck record
    Try answering the following;

    “the ‘anonymous complaint’ magically appearing on Botherway’s desk”. What was the true sequence of events i.e who referred the complaint to SEC COM?
    SB took up the role at SEC in Feb 2010. Your reference to 2009?
    Are you sure SB went to CU?
    What “tens of millions” did GK make make other than that which was part of the agreement brokered between SCF and Torchlight?
    PGC – CBS?
    4 separate companies?

    Innuendo and misinformation

    [lprent: Speculation on peoples identities is not allowed here – read the policy section on privacy. Since there is no way for you to know who leaves comments then speculating on them is completely futile and likely to be incorrect as well as defamatory. Do it again and you will not be allowed to comment here. ]

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