WoW,Its only feels like yesterday when every thing was going so well and they could see no reason for pessimism. In banking speak this is pretty grim. Statements like this

South Canterbury was not heavily exposed to the dairy farming sector and was actually looking to expand into that market, McLeod said.

Sound like a desperate attempt to find a little bright spot in a gloomy market. This is not the place to go looking. The recession has hardly begun and some of their loans are looking pretty dodgy.
The days of banking being the best way to make your millions may be behind us for a while.
http://www.guardian.co.uk/business/2009/jul/01/bank-england-south-sea-bu...

Pete; well said,could not agree more.

Pete, yes we already pay enough taxes, but if we don't pay taxes, where would the money come from to run the country, our health services, or education system, our infrastructure etc???.
As the amount of taxes being collected has decreased, we either need a way to increase productivity mightly quickly, which will generate more money and tax for NZ, or we need to increase the percentage of the amount of tax we collect per person, otherwise services will decrease, and we will slip down the OECD ladder and become a third world country. The govt needs to work out a way to more fairly. I can see that increasing GST may be around the corner to help to cover the shortfall.
I am very worried about NZ at the moment, and people who save for their retirement, are being penalised. I am now against saving long term, live for today I say, don't keep money for retirement, otherwise you won't get any super when it is asset tested.

These finance comapnies are now Govt Guarranteed, but that won't help the country when they need bailing out, as it will mean the Govt will need more tax to pay for bailing them out.

Getting this piece back on topic i.e. SCF. This company has been hailed by many financial commentators as the best finance company in the country with VERY conservative lending policies. Yet it now appears to be in trouble. One of the most important things that I have learnt during the GFC is that if the head of any company goes on record to say that their company isn't in trouble - it means they are. It will be interesting to see what happens with SCF. Meetings with John Key, Treasury looking at related party lending, it would seem that there is a lot more to come with this story in the near future.

Sally - The reason that no NZ Govt will ever make substantial cuts in public expenditure is the NZ voter. At the last election only one political party had in its manifesto the proposal of cutting public expenditure and it received a mere 3% of the vote. Labour in its last 9 years of power ensured that a near majority of voters were on some kind of welfare payment e.g Working for Families. Most voters will vote what's best for them not for the nation.

shuttle Says:
July 3rd, 2009 at 8:30 pm

I have learnt during the GFC is that if the head of any company goes on record to say that their company isn't in trouble - it means they are.

Agreed. I remember when Hanovers bosses were on the business news, when the first finance companies started failing, saying how strong they were, and how the industry needed to have credit ratings for all companies. Well we all know what happened then, and how their credit rating was slashed the day after they froze their funds.

Shuttle - Apologies for getting off the SCF topic but I happened to see the Capital Gains poll while on this page and fired off my missive and hijacked the topic. I'm stuck with it now so will continue...

Rob, I agree that we need taxes to pay for an infrastructure that any modern western country aspires to. No argument. My post was really to jolt people into not blindly accepting a need for a brand new tax - Capital gains in this case. There are already enough taxation options for a govt without allowing them more channels of tax. lets look at the history...

The reality is that both Roger Douglas and Trevor deCleene told me in the late 80's that the introduction of GST (which I support by the way) at 10% increased the then labour government's revenue 5 fold (yes 5 times) on what it was. Remember, Muldoon had bankrupted the country and there was NO money for Labour after they won the 1984 election...thats another story.

Douglas reformed the tax system, introduced the GST at 10%, and reduced Muldoon's crazy 66% marginal income tax rate down to 33%. Tax morality in NZ was restored (previously NZ was rife with the black mkt, cashies, etc) as working NZ's accepted that keeping 2/3 of your income and giving the govt 1/3 seemed "fair". The taxpayers also grew to accept the fairness of the broad GST net, which was the tradeoff for the reduced income tax rate.

The govt had increased its income 5 fold so it was happy at the time too. The company rate also went to 33% and the trust rate was 33%. Harmony prevailed from a tax point of view and people (and their advisers) focused on improving their and the country's wealth. Perfect. The country's finances improved and people got used to a stable tax environment.

Having increased the govts revenue beyond their most optimistic forecasts, Douglas commenced attacking the profligate govt spending as he wanted to reduce the tax burden further in future because the govt was getting in co much money from GST.

Whoa, the wheels then fell off. Spineless Lange kicked for touch and called for "a cup of tea". Having allowed Douglas to gather the increased revenue, Lange reneged on the second leg of the journey, sacked Douglas/deCleene and installed Caygill who after the 1988 election immediately broke the pact with the people and increased the GST to 12.5% (along with a raft of other hidden taxes and imposts... another story). Result loss of harmony in the tax system.

Then Bolger came in and installed Richardson to do the job that Lange should've let Douglas do - review and reduce wasteful spending. She was vilified by the opposition labour and an increasingly socialist electorate and was fired.

Eventually labour got in again and Clarke and Cullen broke the pact further by increasing the income tax rate to 39% - more disharmony and a quick return to tax immorality. The cashy society resumed and government spending was never reined in.

...Thus my comments about not encouraging new taxes - your money will simply be wasted. People should instead be calling for a restoration of balance in the tax system, harmony between the various forms of structure (personal, company, trust), sensible levels of tax, and reduction of wasteful expenditure.

This is now easier said than done because too many voters are welfare dependent in one way or another (eg a $100,000 income houshold can get a tax credit under working for families in some circumstances), or work for the government, or get free student loan interest, or are a beneficiary or whatever. They wont vote to remove the trough their snouts are in, just like the list polititicians wont throw out MMP and lose their trough.

Unfortunately, necessary reforms can never be implemented again until the country goes broke again and we are forced to make the changes, as we were in 1984. That wont happen until the government sector completely strangles the private sector which after all is where all wealth and income are created.

Pete - you want make a run for parliament, I'm voting for you !

Roger Thompson: John Key can't have "...reduced the Nat's to a gutless "me too" imitation of Labour" because he hasn't had a summit yet to decide if he will.
Re SCF: I guess we are in for an FDIC type evolution after the Guarantee period is up? I can't see anyway, other than that ,to stop a flood of redemption of SCF debt if it just expires.

Back (once again) to the topic ... I agree this is NOT good news at all .. in fact quite a shock. It would be usual in the circumstances for the major shareholder to buy-out the minorities for zippo in this situation ... rather than looking for a equity partner .... if things were really 'not so bad' Hubbard would have played a different card , in my opinion... really looks like the rating agency has 'put the wind' up SCF and Hubbard was forced into a hurried partial bail-out. A run on funds may be next. Ouch!