- Date published:
7:46 am, June 1st, 2012 - 14 comments
Categories: bill english, economy, treasury - Tags: retail deposit guarantee scheme
Labour are pushing for an enquiry into how Treasury oversight of the Retail Deposit Guarantee Scheme was so poor that it has cost us hundreds of millions of dollars.
And fair enough. The Auditor-General and her Deputy have had separate reports, agreeing that it’s cost us probably hundreds of millions. Although without an enquiry figures are a stab in the dark, the latest figure out yesterday was $400 million of unnecessary expense if Treasury oversight had started earlier, and been more rigorous.
Treasury’s excuses – that the scheme was complicated and that’s why they took half a year to have any oversight; and that they didn’t want to interfere in the markets even when they were overseeing it – don’t add up. The scheme in itself was interference in the market – interference that many took advantage of as South Canterbury Finance, for instance, upped their retail deposits by a quarter – adding $300 million to what we had to pay out.
The ODT has an excellent editorial on the need for an enquiry. $2 billion was paid out as 9 of the 30 finance companies covered by the scheme failed. Less than half of that is expected to be recovered.
Oversight of the scheme was so lax that money ended up in the hands of the likes of:
Gavin Arthur Bennett, former managing director of IT company DataSouth, [who] was sentenced to eight years’ jail. His crime? Committing frauds totalling $103 million, including $23 million from South Canterbury Finance (SCF).
Now losing $400 million unnecessarily is no small change:
The great IT disaster that was INCIS cost $110 million – and got a full enquiry.
$400 million would pay for us to host another whole Rugby World Cup.
Hekia Parata’s cutting a teacher from each school around the country is hoping to save us $170 million. So we could keep that teacher and get ourselves another one with cash to spare.
Bill English can’t be allowed to hide this under the plus Treasury carpet, so his lack of oversight of Treasury isn’t shown up.
We need an enquiry to make sure this doesn’t happen again.
Any other Government Department that had just lost the country a million dollars, let alone several billion, would have had the Chief Executive and probably the entire senior management team wiped out. Where ‘s the Audit office when you need them?
They are also utterly incompetent at holding the single discipline of their “Better Business Case” discipline onto either NZTA or the Minister of Transport. So now we get to have BC’s to the end of the earth for Auckland’s City Rail Link, but oh no we can’t possibly run a decent ruler over the Puhoi-Wellsford motorway. And just as bad, the Wellington-Foxton series of motorways. Hypocrisy and waste at the same time.
Quite happy being the great attack dogs for their Minister against every other Ministry or local government initiative, but just a bunch of cowards when it comes to their own house.
And even worse despite being the ‘best and the brightest’ the public sector has to offer, because they keep telling the entire public service that’s what they are, they can’t forecast their way out of a paper bag, so the Government never forecasts its cash position or its total income position so badly (and therefore has to borrow more every year).
The mind-shift those guys are going to have to do if Russell Norman gets into Minister of Finance is going to be amazing to watch.
I hope a Labour-Greens government goes through the entire Treatury like cold steel. Root those arrogant worms out one by one and expose them. Or merge them out of existence.
I’m thinking that Treasury are due for their own efficiency cuts. If we cut their budget by 50% or more I’m sure they’ll get real efficient real fast – they won’t cost as much and their forecasts will still be wrong.
Agreed there should be an enquiry, but it will not take place until we have a Labour led Government.
As Minister of Finance Russel Norman will be the first to inplement this.
However as a Minister he should be careful politically interfering in a Govenment department – it could backfire, as it is with Parata, where the Ministry like her even less than Trolley Tolly, and that’s being mild.
When such losses happen such an inquiry should be automatic so, although good that they’re pushing for one now, they also need to put forward a law that makes it automatic.
The RDGS and South Canterbury Finance’s continued permitted membership has been the crime of the century to date. And we’re only 12 years into it!
Why won’t Key or English stand up and answer in a full and complete manner the questions around why the outfit was allowed to remain in the scheme despite Key and English being told on their first day in office that “(they) knew it was going under”.
Was it because the loss of $1,700,000.00 to the wider Canterbury region, and especially the farming investors, would stifle the planned irrigation and intensification of Canterbury farmland? Was it because it would have simply pissed off so many in Timaru, often a labour seat, that it was detrimental to future politics? Was it because most of the SCF investors were simply good long-time Nat Party members?
Why was it?
Why? What was the reason?
The money had already been spent so couldn’t possibly be the reason. The only reason was that a few people, who took the risk of loaning out money, wouldn’t get it back.
That was a rare opportunity for the beancounters at Treasury to show they could hack it in the real world. Textbook theory met reality and didn’t they blow it big time. The business community frequently warned the Govt what would happen, it was utterly predictable, but the Treasury trogs knew better than the people in business. Tossers.
Can’t see English going for an inquiry, Treasury is the Finance Minister he’s just the talking head.
Key and English won’t have one. This is why:
Key renewed SCF when he knew they were a lemon yet he keeps blaming labour. This guy is turning out to be a pathological liar.
IF we had a proper MSM asking the hard questions, Key would have been “gone by lunchtime.” The media is suppose to informing the public but they only gossip.
That’s the problem with private MSM where the owners want the best for themselves and the journalists are afraid* to publish the truth because it wouldn’t be best for the owners.
* this could be subconscious
I’d forgotten that SCF was admitted into the guarantee by National in 2010, which really does change the picture I had. Take SCF out of the equation and the losses attributable to Labour aren’t that great considering the original circumstances.
I’d think a list of all the people who had money invested in SCF before they were admitted to the guarantee might be very revealing. It’s become clear now they stood to lose most of their cash if SCF hadn’t been admitted to the scheme. Lucky them huh.
Kerr, of the torchlight fund, got 100mil out first as an example.
Yeah I can remember that one. I did misread the linked commentary though. Just checked and SCF were part of the original guarantee, it’s the extended guarantee that National approved them for. That changes things a bit but still doesn’t negate the need for a full inquiry.
Yes it does because there is more information that will come out. I read, can’t remember the name, that an American company was going to buy SCF with both liabilities and assets. Key stopped the deal without an explanation. I believe it would have cost the taxpayer more like 300 million if the deal went through. I believe some of Key’s mates made a lot of money off the backs of the taxpayers.
Tha NACTS agreed to the deposit guarantee at the start.
They rolled over th guarantee.
Follow the money.
Chris lee has written quite bit.
The whole thing is very smelly.