Why Hubbard Is A Four Letter Word....
Back in August last year I completed a series of posts that ultimately questioned why on earth South Canterbury Finance was allowed in the guarantee deposit scheme, least of all why there was a payout when breaches of the deeds were clearly made.
Here
And here
Treasury had a spitty tanty and replied on my point claiming nothing was breached
So what has happened this week? John Key fronted a meeting of oldies and had this to say:
"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."
Oh dear. He's really landed Treasury and Bill English in the poop here. So Treasury from day one of his Prime Ministership were warning the PM that "SCF was going bankrupt"?
I remind you of the first deed signed:
“During the guarantee period (12th October 2008 for two years) the principal debtor shall ensure its business and operations (and the business and operation of its subsidiaries) are conducted in a proper, businesslike, efficient and prudent manner”
Since when can a business be run "proper businesslike, efficient or prudent manner" when on the guarantee period signing, Treasury wonks were running around crying bankrupt to the PM? Unless they knew it was going to tank and put it in the scheme anyway to protect investors from day one for unknown reasons.
SCF and Allan Hubbard are four letter words. The whole thing has been a debacle from day one, the guarantee was executed solely on the "too large to let fail" basis.
Say what you want about Hotchin and Watson and Hanover - they are yet to cost the taxpayer a cent.
Between the limp chumps at Treasury and those in Bill English's offices, this decision was made to include a company that the Prime Minister even admits was doomed to fail as it was on life-support throughout until the plug was finally pulled.
It won't cost the taxpayer a $1 billion once the wash up is made but estimates are around $3-400 million.
Clearly putting SCF into the guarantee scheme was a political decision. The real question now is who benefited the most?
Watch out for Treasury to chuck another spitty tanty at this blogger in response.
posted by Cactus Kate at 11:21 PM
7 Comments:
I'm amazed at the expectation for govts to do sensible stuff when history shows fairly consistently that they don't.
The worst bit is that the govt paid a good rate of return to investors who should have been darn grateful just to get their principle back.
The whole economy benefitted. If it had failed you would have had whole sale destruction of property values across the country. Dairying would have failed first (SCF holds massive dairy paper)which would have devalued the rest of the dairy sector triggering calls for equity injections to correct lending ratios..More collapse in farm value as more forced sales occur.. The wider economy would then see property values slump as the holdings in commercial/apartment and development property were dumped and banks chase the non SCF borrowers to correct their ratios. There was reckless or ill advised lending but the fundamentals (when you have an $8 payout) mean the govt could quite possibly get all its money back.
Small point - the National Government was voted in on 8 November 2008 - after the Labour Government allowed South Canterbury to stay in the guarantee scheme. Please do not link John Key with allowing South Canterbury into the scheme - the actual act that caused this terrible burden on the taxpayer. At that point the taxpayer was on the line until they pulled the plug - in the period that followed they tried to see if it was rescured but you are right - it was doomed.
I don't know if you follow David Hillary's blog at all, but he is always illuminating on SCF and Hubbard. Here is a link to his latest:
http://www.lostsoulblog.com/2011/03/crowns-kid-gloves-for-scf-directors.html
Jack - the deed is dead if there was a breach. I argue that all along there has been. The "announcement date" was 12 October 2008 but the Original deed was signed by National on 19th November 2008. Didn't have to sign it did they?
http://www.scribd.com/doc/36661537/Original-Deed
10.15am - extremely arguable that scenario, if the economy is now only benefiting because of the intervention, what does that tell you about the market? It tells you that government is holding up the market. In the meantime people whinge about property affordability.
the dairy payout would be the same irrespective of whether some over extended parties got foreclosed on or not. Some smart players who used their debt LVRs properly would have bought the properties at sensible values. The farmers of capital gain would get a reality check and productivity, the thing that really matters will get a shot in the arm.
SCF is NZ's version of fannie mae. It should have been allowed to go to the wall on its own. But alas, every bugger has their handout for a slice of the over taxation benevolence.
Anyone know why on earth they paid interest as well?Must have had some influential investors.
Post a Comment
Links to this post:
Create a Link
<< Home