web analytics

Our $20 million bill for Nats’ expediency

Written By: - Date published: 8:48 pm, September 1st, 2010 - 28 comments
Categories: business, capitalism, class war, labour, national - Tags: , ,

One of the frequent criticisms of political journalism is that it is more concerned with the art or sport of politics – awarding politicians points for doing things that they judge to be good politics – than with the substance of their policies and how they handle issues. Case in point was John Armstrong’s piece:

“National’s strategy was simple. Act decisively. Deal with the problem in total in a day. Get it off the political agenda. Bury it, don’t just sweep it under the carpet. This meant making some decisions to simplify and thus expedite the payout by, for example, not worrying about such criteria as a depositor’s citizenship and tax residency. This will cost an extra $20 million.”

Armstrong frames that like it’s a good thing. But let’s put the same facts another way:

‘Questions over why every taxpayer is bailing out a small number of mostly rich investors (the average deposit in SCF was $45,000) out after they investing in a company that should never have received the government guarantee in the first place, have the potential to be politically damaging for National if the issue drags out. So, the Government ignored the rules of that guarantee and paid out all the depositors, including ineligible ones, at an additional the cost of $20 million’

That is an absolute scandal, an utter disregard for taxpayer. For purely political reasons, National just spent $20 million of our money.

It’s not the only fishy thing around SCF. We can argue till the cows come home over whether the whole bail-out was even legally required (Cactus Kate and others think not). We can argue about the giant rort that seems to have occurred with SCF bond buyers making more than a 40% return in as little as a day due to the Government’s decision to pay back SCF’s debt as well as its depositors. But, one thing is absolutely clear: this $20 million did not have to be spent.

National’s priority was to pay out its South Island supporters ( I read somewhere they’re worried they could lose Rangitata) and kill the issue. We’re being footed with the bill for National’s political expediency.

So, forgive me if I don’t congratulate Key and co for their crisis management skills.

Now, I’m no 3rd floor political strategist but if Labour ever gets their act together on this issue they might like stop with facetious claims that had National grown the economy faster SCF could have been saved and, instead, to ask why the guarantee was extended to SCF in April this year and why the Government went beyond the terms of the guarantee to the cost of $20 million.

In particular, they might like to look at section 6 of the Crown Retail Deposit Guarantee Scheme Act, bearing in mind that Bill English extended SCF’s guarantee on April 1:

Minister may give guarantee (1) The Minister may, on behalf of the Crown, give a guarantee in writing for a period that ends on or before 31 December 2011 in respect of any or all debt securities issued by an eligible entity if it appears to the Minister to be necessary or expedient in the public interest to do so.(2) The Minister may give the guarantee on any terms and conditions that the Minister thinks fit.

But then, I’m no 3rd floor strategist.

28 comments on “Our $20 million bill for Nats’ expediency ”

  1. Scott 1

    Getting the overseas investors out of the picture will probably save the taxpayer more money in the long run. It was done to ensure that the Government will be the sole creditor in the receivership and can call the shots when it comes to selling the assets of SCF. That way it will probably be able to achieve a better price.

    Armstrong is right that it was a smart move, even if (as always) he seems more interested in the politics of the Government’s action than whether it was the right thing to do.

    • BLiP 1.1

      In first with the Blinglish National Ltd™ “official version”, eh Scott? Perhaps you can be a little more specific than “probably” – the names of the foreign investors for whom the government broke the rules to spent my money would be interesting. How long before we get that information?

      The only thing smart about this issue is the fact that National Ltd™ have pulled of a billion dollar shell game sleight of hand move right in front of the public eye. But, never mind, Clueless is off to see the Queen – did you know? – just like Dick Whittington – perhaps she’ll make Lord Mayor of London when he scarpers with his suitcase full of money.

      • Scott 1.1.1

        “In first with the Blinglish National Ltd™ “official version”, eh Scott?”

        You’re accusing me of being a Bill English supporter? I can’t stand the man. It is possible to dislike a government without disliking every single thing it does. They’re bound to get it right occasionally. In this case they did.

        “Perhaps you can be a little more specific than “probably””

        It’s not that complicated. When a company is in trouble and multiple creditors are scrambling around to get paid and assert rights, things can get messy and potential buyers can be deterred. I don’t see it matters who the overseas investors were.

        If the govt hadn’t done this people would be attacking them in six months time for failing to spend a bit more to secure a better sale price.

    • Loota 1.2

      Yeah, we’re going to crucify National over this, over the next 12 months. Over and over again.

      About 1.77 billion times.

  2. TightyRighty 2

    45k? way to lower the bar on being rich. all issues aside, terming someone with 45k rich is a bit low brow wouldn’t you agree eddie? a useful bit of information might be the average age of the depositors. but that would diminish your spin wouldn’t it?

    • Ari 2.1

      $45,000 was not the income of those investors, it was the amount invested. As in “oh, look what I had left between the couch, $10,000! Let me find a few more of those and put them together in a fund.”

      Anyone who’s investing that kind of money is taking a big risk and ought to know it.

      • TightyRighty 2.1.1

        not really taking a risk, see the last labour moved to shore up confidence in the finance industry by guaranteeing the deposits of all people in selection of finance houses. government backed security for your deposit? bring it on.

        • Marty G 2.1.1.1

          it was national’s decision to extend scf’s guarantee in april of this year.

          and it was treasury that failed to carry out proper oversight.

          you may recall that cullen never wanted to put in the guarantee but at the height of the financial crisis he was advised that everyone else had done it and there would be capital flight if nz didn’t.

          • TightyRighty 2.1.1.1.1

            but you guys always say capital flight won’t happen when taxes are raised etc, so it’s only when treasury advises to do something because of the risk of capital flight that it actually occurs? get your myths straight boyo.

            the capital flight would have been to safe deposit options, like the big 4, kiwibank, psis and tsb and all the other stable institutions. the ones who paid the fees to fund the deposit guarantee scheme i might add, $600m dollars worth i believe.

            it’s not like cullen ever really cared about treasury advice and it’s also not good listening if you come up with shoddy policy withing 48 hours of said advice.

    • Marty G 2.2

      how many kiwis,even retirees, have $45k to put in a finance company? and that’s just the average – as always, it’ll be a smaller subsection with the lion’s share

    • Draco T Bastard 2.3

      45k that they can lose without worrying about it – yeah, I’d call them rich. Unless they were stupid, which is possible – they do vote NACT after all, and didn’t have that money to begin with in which case they should lose everything.

      • TightyRighty 2.3.1

        no shit they should lose everything. but 45k is not masses of money if you have been saving all your life. so i want to know, before anybody with 45k in the bank starts feeling persecuted for being dilligent and hard working, what the average age of investors was? if it’s 22 then yes they are probably quite wealthy. If, as i suspect it’s closer to 60 then the vast majority will have worked hard and saved to achieve that.

      • Lanthanide 2.3.2

        “which is possible – they do vote NACT after all”
        Citation needed that all investors in SCF vote National, please.

        You’re no worse than Fisiani making hyperbolic crap up.

  3. Cactus Kate 3

    I would have to agree that compared to other New Zealanders, having $45,000 in a deposit does sadly put you in a wealthier category than many others. Today those people have every right to ask the questions they are asking. Why bailout people (and paying out on the DoG’s is a bailout) with more money than I’ve got?

    If you argue against welfare (as I do) for the poor then you have to be consistent and argue against it for the not-so-poor.

    Given Treasury’s steadfast announcement today in response to my post that SCF did not breach the guarantee, I am more interested now to know for how long officials have known the precise potential exposure and that risky lending that was still being written during the guarantee period. If SCF disclosed what they were doing then that is about the only conclusion I can draw to Treasury’s claim that SCF did not breach the DoG.

    Labour started the nonsense however the original DoG with SCF was signed in the first two weeks of the National government in 2008.

    Labour should be asking how long this was going on.

    • Lazy Susan 3.2

      Appreciate your great analysis of this Cactus but take issue with

      Labour started the nonsense

      This was not nonsense – Labour implemented the scheme at the time of the global credit crunch. Most developed countries had put in place similar schemes and without it there would have been a flight of capital from NZ to safer havens.

      The “nonsense” is that SCF was allowed to write up millions of dollars of dodgy loans and get themselves so far underwater before anything was done about it.

      The “nonsense” is that this government has coughed up $1.7 billion of taxpayers money so readily without any analysis of what their true obligations are and how best to meet them. They’ve already admitted $20 million they were not even obliged to pay. Compare this to the penny pinching that is going on in such areas as early childhood education.

      This is a gift for Labour – a fairly easy to understand mighty f*** up by National. A simple “privatise the profits socialise the losses” story but on a gigantic scale. If Labour don’t run with this one I really will despair.

      • outofbed 3.2.1

        If Labour don’t run with this one I really will despair.

        gee you have lasted this long ?

    • pollywog 3.3

      Why bailout people (and paying out on the DoG’s is a bailout) with more money than I’ve got?

      …cos Rich Whitey will always look after their own first.

  4. Draco T Bastard 4

    We can argue till the cows come home over whether the whole bail-out was even legally required (Cactus Kate and others think not).

    I’m wondering if it’d be possible to make a police complaint about it actually.

    In particular, they might like to look at section 6 of the Crown Retail Deposit Guarantee Scheme Act, bearing in mind that Bill English extended SCF’s guarantee on April 1:

    What are you getting at with that because I can’t see anything.

    The RWNJs complained about the $800k used for the election card that Labour used and now their in there giving away 25 times that amount and nary a whisper can be heard.

  5. Carol 5

    And some of the investors have A LOT of money spare for investing, and sped the decline of SFC:
    http://www.stuff.co.nz/business/industries/banking-finance/4085964/The-rich-blamed-for-SCFs-fall

    South Canterbury Finance’s collapse appears to have been caused in part by rich investors pulling out cash to get below new limits for the government’s deposit guarantee scheme.

    Trustee Executors regional manager Yogesh Mody said “many investors” with deposits above the $250,000 limit that will apply to the revised scheme from October 12 had been “rearranging” their investments to get below that figure ahead of the deadline.

    • Loota 5.1

      Yeah like instead of having one of their family trusts having $500K in SFC, have $250K in each of two family trusts and hold it in SFC.

  6. just saying 6

    Did Key chuck in the interest for them too?

  7. quasimodo 7

    Forgive me for sounding cynical, but it looks as though Key’s minders have removed him as far as possible from the blowback of the SCF collapse. They don’t wish to tarnish their prized electoral asset, and he gets to resurface after a discreet interval with a bit of the reflected glory of President Sarkozy and PM Cameron.

Links to post

Recent Comments

Recent Posts

  • NZ announces a third P-3 deployment in support of UN sanctions
    The Government has deployed a Royal New Zealand Air Force P-3K2 Orion (P-3) maritime patrol aircraft to support the implementation of United Nations Security Council (UNSC) resolutions imposing sanctions against North Korea, announced Minister of Foreign Affairs Winston Peters and Minister of Defence Ron Mark. “New Zealand has long supported ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Pacific trade and development agreement a reality
    Pacific regional trade and development agreement PACER Plus will enter into force in 60 days now that the required eight countries have ratified it. Trade and Export Growth Minister David Parker welcomed the announcement that the Cook Islands is the eighth nation to ratify this landmark agreement. “The agreement represents ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Securing a pipeline of teachers
    The Government is changing its approach to teacher recruitment as COVID-19 travel restrictions continue, by boosting a range of initiatives to get more Kiwis into teaching. “When we came into Government, we were faced with a teacher supply crisis,” Education Minister Chris Hipkins said. “Over the past three years, we ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Border exceptions for a small number of international students with visas
    The Government has established a new category that will allow 250 international PhD and postgraduate students to enter New Zealand and continue their studies, in the latest set of border exceptions. “The health, safety and wellbeing of people in New Zealand remains the Government’s top priority. Tight border restrictions remain ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • First COVID-19 vaccine purchase agreement signed
    The Government has signed an agreement to purchase 1.5 million COVID-19 vaccines – enough for 750,000 people – from Pfizer and BioNTech, subject to the vaccine successfully completing all clinical trials and passing regulatory approvals in New Zealand, say Research, Science and Innovation Minister Megan Woods and Health Minister Chris Hipkins. ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • International statement – End-to-end encryption and public safety
    We, the undersigned, support strong encryption, which plays a crucial role in protecting personal data, privacy, intellectual property, trade secrets and cyber security.  It also serves a vital purpose in repressive states to protect journalists, human rights defenders and other vulnerable people, as stated in the 2017 resolution of the ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Ministry of Defence Biodefence Assessment released
    The Ministry of Defence has today released a Defence Assessment examining Defence’s role across the spectrum of biological hazards and threats facing New Zealand. Biodefence: Preparing for a New Era of Biological Hazards and Threats looks at how the NZDF supports other agencies’ biodefence activities, and considers the context of ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020
    New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020 Hon David Parker’s response following Thomas Piketty and Esther Duflo. Good morning, good afternoon, and good evening, wherever in the world you might be. I first acknowledge the excellent thought provoking speeches of Thomas Piketty and Esther ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Kaipara Moana restoration takes next step
    A Memorandum of Understanding has been signed today at Waihāua Marae between the Crown, local iwi and councils to protect, restore and enhance the mauri of Kaipara Moana in Northland. Environment Minister David Parker signed the document on behalf of the Crown along with representatives from Ngā Maunga Whakahī, Ngāti ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Zealand and Uruguay unite on reducing livestock production emissions
    Agriculture Minister Damien O’Connor and Uruguayan Minister of Livestock, Agriculture and Fisheries Carlos María Uriarte have welcomed the launch of a three-year project that will underpin sustainable livestock production in Uruguay, Argentina, and Costa Rica.  The project called ‘Innovation for pasture management’ is led by Uruguay’s National Institute of Agricultural ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • 3100 jobs created through marae upgrades
    Hundreds of marae throughout the country will be upgraded through investments from the Provincial Growth Fund’s refocused post COVID-19 funding to create jobs and put money into the pockets of local tradespeople and businesses, Regional Economic Development Minister Shane Jones and Māori Development Minister Nanaia Mahuta have announced. “A total ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Health volunteers recognised in annual awards
    Health Minister Chris Hipkins has announced 9 teams and 14 individuals are the recipients of this year’s Minister of Health Volunteer Awards.  “The health volunteer awards celebrate and recognise the thousands of dedicated health sector volunteers who give many hours of their time to help other New Zealanders,” Mr Hipkins ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Community COVID-19 Fund supports Pacific recovery
    The Minister for Pacific Peoples, Aupito William Sio says a total of 264 groups and individuals have successfully applied for the Pacific Aotearoa Community COVID-19 Recovery Fund, that will support Pacific communities drive their own COVID-19 recovery strategies, initiatives, and actions. “I am keen to see this Fund support Pacific ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Community benefits from Māori apprenticeships
    Up to 50 Māori apprentices in Wellington will receive paid training to build houses for their local communities, thanks to a $2.75 million investment from the Māori Trades and Training Fund, announced Employment Minister Willie Jackson today. “This funding will enable Ngāti Toa Rangatira Incorporated to provide its Ngā Kaimahi ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Training fund supports Māori jobseekers
    Rapidly growing sectors will benefit from a $990,000 Māori Trades and Training Fund investment which will see Wellington jobseekers supported into work, announced Employment Minister Willie Jackson today. “This funding will enable Sapphire Consultants Ltd. to help up to 45 Māori jobseekers into paid training initiatives over two years through ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Ruakura Inland Port development vital infrastructure for Waikato
    The Government is investing $40 million to develop an inland port at Ruakura which will become a freight super-hub and a future business, research and residential development for the Waikato, Urban Development and Transport Minister Phil Twyford, and Māori Development Minister Nanaia Mahuta announced today. The funding has been has ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Appointments made to Defence Expert Review Group
    Defence Minister Ron Mark announced today the establishment of an Expert Review Group to review a number of aspects of the New Zealand Defence Force’s (NZDF) structure, information management and record-keeping processes.  The Expert Review Group’s work arises out of the first recommendation from the Report of the Government’s Inquiry ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • No active community cases of COVID-19
    There are no active community cases of COVID-19 remaining in the country after the last people from the recent outbreak have recovered from the virus, Health Minister Chris Hipkins said today. “This is a big milestone. New Zealanders have once again through their collective actions squashed the virus. The systems ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Clean energy upgrade for more public buildings
    More public buildings will be supported by the Government to upgrade to run on clean energy, the Minister for Climate Change James Shaw announced today. Minister Shaw announced that Lincoln and Auckland universities will receive support through the Clean-Powered Public Service Fund to replace fossil fuel boilers. Southern, Taranaki, and ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Schools back donations scheme for the second year
    More schools have opted in to the donations scheme for 2021, compared to 2020 when the scheme was introduced. “The families of more than 447,000 students will be better off next year, with 94% of eligible schools and kura opting into the scheme,” Education Minister Chris Hipkins said. “This is ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Ruapehu cycle trails gets PGF boost
    The spectacular Mountains to Sea cycle trail in Ruapehu District will receive $4.6 million in funding from the Provincial Growth Fund for two additional trails, Regional Economic Development Minister Shane Jones announced today. “This is an exciting development for the local community, and one that will provide significant economic opportunities ...
    BeehiveBy beehive.govt.nz
    3 weeks ago