The Dim-Post

August 30, 2010

Here we go

Filed under: finance — danylmc @ 8:38 pm

Stronger hints from Key that there will be no government bailout of South Canterbury Finance. I wonder if the deciding factor was the cashflow? The money to refund debenture investors is there in the deposit scheme but if they wanted to buy a couple of hundred million dollars of toxic assets they’d presumably need to borrow the money offshore. English has delayed his trip to Asia to deal with the crisis – this is probably the most serious challenge this government has faced (at least that we’ve heard about).

It’d be nice to hear the Commerce Minister explain what steps he’s taking to prevent another disaster like the finance company collapses from occurring in New Zealand.

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13 Comments »

  1. Stronger hints that total provisions for SCF are half of SCF debts-how is that a strong hint Key is going to hang SCF out to dry? Wishful thinking are intentional shit stirring.

    Comment by dribble — August 30, 2010 @ 9:29 pm

  2. Well, if:

    – they actually have the “comprehensive plan” for a deposit-guaranteed finance company like Key says (and after the US ones and Hanover it’d be criminal not to), and

    – they’ve seen this coming for at least a few months and had that time to find buyers, and

    – it’s a toss-up between the government backing up a good deal, or letting SCF go into receivership, and

    – it’s down to the “final night” and there’s not a word of optimism about a potential deal, then

    They’re nowhere near getting a good enough offer and it’ll go into receivership, surely.

    Comment by gazzaj — August 30, 2010 @ 9:44 pm

  3. It’d be nice to hear the Commerce Minister explain what steps he’s taking to prevent another disaster like the finance company collapses from occurring in New Zealand.

    The Minister could ban such investments as well as raising the drinking age to 20 and maybe make people who play lotto, bet on the horses and play the pokies take out gambling insurance.

    heaven forebid that people should face the reality that some of their decisions are not very good and perhaps based on greed.

    Comment by NeilM — August 30, 2010 @ 10:08 pm

  4. And someone/s interested and will be wanting to pay low while the government will want high. The inability to understand negotiation is a common problem with Kiwi’s. Tonite is negotiation time, why else is B’linglish staying at home.

    Comment by dribble — August 30, 2010 @ 10:09 pm

  5. It’d be nice to hear the Commerce Minister explain…

    that’s almost a defining feature of govt – to protect the few from the stupidity of the many.

    Comment by NeilM — August 30, 2010 @ 11:06 pm

  6. Just exactly what should the Commerce Minister do? Have a govt health warning on any investment earning more than 4% saying “Sorry this is a bit risky and you might lose your money”?

    Comment by insider — August 30, 2010 @ 11:37 pm

  7. It’d be nice to hear the Commerce Minister explain what steps he’s taking to prevent another disaster like the finance company collapses from occurring in New Zealand.

    The government probably can’t stop all finance companies from collapsing, and it almost certainly shouldn’t even try. If depositors want high returns over a 40 year + period then they have to prepared for at least one once-in-a-100 year collapse, especially if the returns come from leveraging property and consumer credit.

    While a lot of people lost a lot of money, it’s hardly a “disaster”… life goes on.

    What the government can and should do is set up regulation so that directors of failed finance companies aren’t able to take huge amounts of money out along the way. Or at least make it not so ridiculously easy. Plus NeilM’s idea of graphic tobacco-style warnings on finance company brochures so that people know not to put all their life savings in one place.

    Comment by gazzaj — August 30, 2010 @ 11:41 pm

  8. The money to refund debenture investors is there in the deposit scheme but if they wanted to buy a couple of hundred million dollars of toxic assets they’d presumably need to borrow the money offshore.

    Wouldn’t the toxic assets be collateral pledged against the deposit guarantee money? Maybe there’d be no difference.

    If you’re right though then factoring in the cost of borrowing and the potential downgrade has gotta make receivership even *more* likely.

    Maybe it’s such a small amount that someone overseas is willing to take a punt. Interesting times if they’re Chinese :-)

    Comment by gazzaj — August 30, 2010 @ 11:57 pm

  9. Gazzaj wrote: “What the government can and should do is set up regulation so that directors of failed finance companies aren’t able to take huge amounts of money out along the way. Or at least make it not so ridiculously easy. Plus NeilM’s idea of graphic tobacco-style warnings on finance company brochures so that people know not to put all their life savings in one place.”

    agreed. I’d also make it illegal for the finance companies to pay investment advisors to recommend them.

    Comment by kahikatea — August 31, 2010 @ 8:46 am

  10. gazzaj, He could always insist on pictures of skinny people living in tents on the packets, that would do it for sure.

    Comment by DavidW — August 31, 2010 @ 9:04 am

  11. kahikatea, we may as well also have Government reminders over Public Radio countinuously bradcasting “DO NOT FORGET TO BREATHE”

    Comment by DavidW — August 31, 2010 @ 9:05 am

  12. DavidW, he suggested “old couples living in tents” on the other thread :-) I reckon a nice big disclaimer on the front saying that it’s not a risk-free investment would do.

    Kahikatea, I wouldn’t go that far – investment advisors need to make money somewhere, and if it’s not from the finance company then it’d have to be charged to the customer, making investment advice more expensive. Again I think a disclosure would do. It’s all about the information being obvious and upfront, not hidden away in small print.

    Comment by gazzaj — August 31, 2010 @ 9:11 am

  13. insider @6. “Just exactly what should the Commerce Minister do? Have a govt health warning on any investment earning more than 4% saying “Sorry this is a bit risky and you might lose your money”?”

    Yes.

    Also: Have a govt health warning on any investment earning less than 5% saying “Sorry this is a bit shite and you will lose your money through inflation and taxation”

    Comment by Clunking Fist — August 31, 2010 @ 6:02 pm


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