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Opinion: Why the government should allow South Canterbury to be put into receivership
By Bernard Hickey
John Key and Bill English will have to decide by Tuesday whether South Canterbury Finance really is Too Big To Fail.
The government has already guaranteed the NZ$1.7 billion worth of investments in South Canterbury Finance by more than 20,000 investors until the end of next year.
So many would say it has already decided South Canterbury Finance is Too Big To Fail by accepting the nation's largest independent finance company into the extended scheme earlier this year.
But now the government faces an urgent decision between putting South Canterbury into receivership now, or putting in yet more taxpayers money in the hope it can survive and then thrive past the end of the government guarantee.
The choice is a difficult one. The immediate pain from a receivership would be substantial.
Receivership would trigger a payout to investors under the government guarantee of around NZ$1.7 billion. Some believe that shock to the government's finances would be enough to trigger a review of New Zealand's sovereign credit rating downgrade by Standard and Poor's and/or Moody's.
I don't believe it would be enough to justify a rating review, but if it did that would immediately increase wholesale interest rates, which would eventually flow through to the entire economy. There is also the fallout on the South Island rural economy.
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Any receiver would force through sales of farms, property developments and small businesses, many of whom are not paying the interest on the loans received from South Canterbury Finance. Dairy farm prices in the South Island could potentially take a big hit. Some believe this could send a new chill through the South Island that eventually cost jobs and stunt any recovery of economic growth. That's because the Australian-owned banks are unlikely to step in to take over the loans.
Yet this pain of receivership may be less than the eventual pain of a slow-moving collapse of South Canterbury.
Let's not create more Zombies
Sometimes Zombies need to be put out of their misery before they infect others.
South Canterbury Finance does not have a future beyond the end of the Deposit Guarantee. To have such a future, it would need to substantially increase its credit rating, find a new funder and convince already sceptical investors to go naked in backing the finance company without a deposit guarantee. They will also have to do it without their talisman Allan Hubbard, who will be long gone as owner and maestro.
At some point New Zealand's dairy farming sector, particularly in the South Island, will have to reduce its debt.
When that happens it will be painful.
But as many investors in finance companies such as Strategic, St Laurence, Hanover and Dominion would attest, giving finance companies more time to 'work it out' and wait for the 'market to bounce back' is often worse than pulling the plug immediately. The New Zealand government faces a bail out decision in the same way Hanover Finance investors did 8 months ago and 12 months before that.
Those investors chose badly. Let's hope the government does not.
169 Comments
When you think about it, what
When you think about it, what future does SCF have? Who is going to trust it enough for invest money in it, ever? The name is hopelessly tarnished. The same argument goes for some big-$$ investor taking over the company - what sort of brand and good will would they be buying?
The reality with farm land is that it is hopelessly over valued at present. A woman at work has a "farm" in the back country, it is as steep as, inaccessible, & mainly covered with bush & scrub. Yet it is "valued" at $1.5 million. Time to let it return to a value that reflects its actual productive potential. Keeping zombie quasi-banks on life support, just to sustain these valuations, is both crazy and inefficient.
Yes, there will be pain, but it needs to happen, sooner or later. Why drag it out by risking taxpayers' money? And isn't farming supposed to be part of a capitalist system, not a socialist state-directed one?
Cheers to all.
Philly, the New Zealand
Philly, the New Zealand government will inject more cash. I guarantee it. They won't let it fold. It's only taxpayers money & there's plenty more where it came from. The New Zealand government will mortgage the earnings of the next three generations if it has to in order to prevent a collapse of SCF, the South Island economy & land values in New Zealand. They will keep pumping money in, because this is what governments do. If they have to, they will nationalise it, just like the U.S. Government nationalised some of the biggest financial institutions in the world during the credit crisis & various European governments nationalised their banks. Allowing these robber banks collapse quite simply is not an option. The New Zealand economy & the country's credit rating is safe, for now at least. I agree that land is ridiculously overpriced, but it's also safe, for now at least. The con job that is modern global finance has some gas in the tank yet. As long as we've got politicians making decisions about anything, especially money, we will have wrong decisions because politicians care only about one thing, that's themselves.
There's a shitload of
There's a shitload of overstatement in these claims.
The demise of SCF will not cause the SI economy to collapse.
A few ventures which should never have been funded will go the way of the dodo, and it will be for the best.
But the small number of people who fear the end of their incredibly indulgent lifestyle are shrieking about how the End is Nigh for everyone in the hope that they can save themselves.
Think about it: if the entire SI economy is so fragile as to be disrupted by the death of a single commercial finance company then it is already beyond saving.
What a complete mess. Thanks
What a complete mess. Thanks Bernard for the reporting. You leave the Granny Herald / NBR and TVNZ for dead. The next 72 hours will be fascinating.
According to this, which
According to this, which quotes Hubbard, it sounds as though Treasury will (thankfully) reject saving SCF
http://www.scoop.co.nz/stories/BU1008/S00900/government-wont-help-says-a...
You dont think the decision
You dont think the decision was made months ago ? There is a reason they are holding such a large provision.
Effect the sovergn rating ... Are yiu serious ?
They may have made provision
They may have made provision on the balance sheet but I can promise you they do not have the funds on hand. Thats from inside the treasury!
You so sure about that. Who
You so sure about that. Who is your source
First loss for the tax payer
First loss for the tax payer will be the best. Accounting rules are mark to market and the government should bite the bullet here and accept the loss now and move on rather than try to hold and salvage what is bound to become a government sponsored moratorium..... and we all know how successful they have been, in particular when its comes to destroying investor confidence by keeping the Zombie Finance Company in the press every 5 minutes.
Let it go.....
Reducing debt of any
Reducing debt of any consequence is too difficult. Pay off principal and create yourself a tax problem. I know, I just did. Wont do that again.
Never had debt. Never will
Never had debt. Never will either, knock on wood. If I couldn't pay for something, I didn't try to buy it. Paid in full for my house the day I bought it, no mortgage, kept my soul, didn't let it become trapped in a bank vault. People talk about all sorts of fancy accounting tricks and how debt sets you free but at the end of the day debt is still just debt.
Oh and never been on a
Oh and never been on a benefit because I have been fortunate enough to always have a job and to not get seriously ill, and never have I received gifts or inheritances. Not that I begrudge benefits for those poor blighters with no other choice because hard times can befall everyone when they least expect it.
Farmer Will, is this a wind
Farmer Will, is this a wind up? Are you in business to make as little money as possible?
If I understand you correctly, you'd rather pay interest to the bank so you can reduce your tax.
Your tax is probably no more than about 30% of profit, how are you better off?
I agree Kiwidave.
I agree Kiwidave. Unfortunately this is the approach of a lot of farmers.
Those investors chose badly.
Those investors chose badly. Let's hope the government does not.
All hope is lost with todays governments,they will I feel try to turn the impossible around and fail.
Why not ask Watson and
Why not ask Watson and Hotchin to mount a rescue ?
I am sure they have enough moolah stashed to give it a go.
The government should not be
The government should not be in the business of propping up finance companies...
and if they do they will lose my vote!!
I suppose your fine with all
I suppose your fine with all the lost millions they have paid out over the years proping- up NZ Rail. Or the 75 million that is paid out every year, for no return to the many south pacific Island countrys, in what could only be discribed as a handout. At least there will be a return helping out people who bother to save for their retirement. Where's the return for payments for the other two.
Obviously you have money
Obviously you have money "invested" with Hubbard.
I dont know him personly. But
I dont know him personly. But he seems well respected around the country, enough for people to get out and march the streets supporting him. he seems to be a different breed from the other rats who tried to hide everything in trusts when their finance companies looked like going under. I think its a shame that he seems to be getting baged the same way as those other rats have been. He's not the same as them.
"I dont know him
"I dont know him personly...He's not the same as them."
Uhuh.
You know, generally I'm all
You know, generally I'm all for letting businesses crash and burn if they can't stand on their own two feet. But then I didn't think Air NZ should be bailed out a few years ago and its been a reasonable success story since government intervevention. Also, we were one of the few countries that didn't support our established businesses/industries following the '87 crash and that cost us dearly, taking us longer to recover than many other places. If SCF is seen as strategically important to the SI rural economy, then intervention may very well be the right course.
Access to unlimited amounts
Access to unlimited amounts of money can do a lot BD. But the taxpayer does not have unlimited amounts of money. And we're currently borrowing 200 million a week or so. You can turn any dog into a race horse given enough money. This country does not have enough money. It's bleeding into bankruptancy and the only thing that is saving is is Australia.
SCF is strategically
SCF is strategically important to the New Zealand economy as a whole. The Government will provide as much cash as SCF needs indefinitely. Mark my words.
And if they don't prop it
And if they don't prop it up,they will lose alot more than your vote.
Typical NZ vested interest:
Typical NZ vested interest: Forget about the nation's wellbeing, concentrate on the farmer only.
The farm is valued at $1.5
The farm is valued at $1.5 million,but can she actually sell it for that ?
Dairy farms have come back 25% in value.which is still douldle what they were 15 years ago.
Sheep farms are back up to 40%,which is still double what they were 15 years ago.
The upward movement in farm values happened with the Rogernomics government of the 80's making access to funding easy,the older bankers being shown the door,and a team of younger bankers being brought in,to sell as much of it as they could.
Now banks are turning back the clock,and at a status quo of $5.50 for dairying,it is alot harder to make it stack up.
Hardly any farms are selling.
Anyone friendly with any rural land agents ?
South Canterbury has been a
South Canterbury has been a Zombie for sometime. So let's not say that if SCF is not saved the NZ economy will be effected. They have not been actively lending for since late 2007.
The gov't has consistency demonstrated over the years that it is not a good manager. They are especially not a good banker of banks (BNZ). Moving into agri/sme lending is a stupid move. The government know this but need the to insure any political fall out is minimum. Key is not stupid. They have expertly undermined the credibility of Hubbard and will continue to isolate him from any support he has. Watch as the Hubbard supporters fade back into the South Island high country as more is drip feed to the public.
The issue is the process of liquidating SCF. The gov't understands that a quick liquidation which floods a rural real estate market which has no bids is not the answer. Foregins will swoop just as they are in Uraguay.
That is the delemia - How to ensure productive land is not given away to foreginers at prices which are too low. Gearing up landcorp or some other insitution to take over 1% of NZ's dairy herd is important.
Didn't Allan Hubbard say he
Didn't Allan Hubbard say he would throw money at the problem to make up any shortfall.....
For Sale
Yellow VW, offers please
And who was responsible for
And who was responsible for the 1.7 billion guarantee? Are we going to demand responsibility?
Labour.
Labour.
If this costs the taxpayer
If this costs the taxpayer then National will be history for us. Let SFC go - this is a capitalist society. It may be painful but other businesses have to stand or fall by their own hand. Bleating farmers - hold us to ransom - how about their products being more affordable for New Zealanders - the cost of milk meat butter is ridiculous. Where can I get a loan and not pay the interest - the queue would be the length of the country.
GOOD Hubbard giving interest free loans to cronies - all very well - and now the faithful will have to pay .
No hope Anon. Capitalism dies
No hope Anon. Capitalism dies during the GFC when the U.S. Government stepped in & bailed out some of the world's largest financial institutions. The minions of this world, the pay as you earn taxpayer will get it in the neck again, same as they always do. SCF is as safe as houses mate. The government is in this up to its eyeballs, they will do nothing to endanger the continuance of the charade that is the New Zealand economy. Borrow boy, borrow, for tomorrow is tomorrow's problem.
BH says - "So many would say
BH says - "So many would say it has already decided South Canterbury Finance is Too Big To Fail by accepting the nation's largest independent finance company into the extended scheme earlier this year."
Bernard - I have asked this question repeatedly, how did SCF manage to get an extension to its Gov't G'tee earlier this year. Surely the Treasury officials who went through the accounts must have been completely negligent. Can you please get an answer to why this G'tee was extended.
The number of people
The number of people employed in/by NZ agriculture is around 100,000-200,000 (depending upon source).
The total number of people employed by IBM is 386,000.
IBM's total annual earnings for 2009 was US$95.8b (NZ$134.5b).
NZ agriculture's total export earnings are around NZ$15b p/a.
IBM - a single American company - utterly dwarfs NZ agriculture, and it's not alone in doing so.
Just imagine where NZ would be if we were courageous enough to invest in something besides agriculture.
What's that you say? "Agriculture is all we're good for"?
"Agriculture is all we're
"Agriculture is all we're good for"? No, we also sell houses to each other.
and we're good at joining
and we're good at joining unions and working for the gummint.
Or living life on benefits - oh wait a minute they're the same fucking thing
Well, maybe if you weren't a
Well, maybe if you weren't a bludger things would be better for everyone.
I am wondering whether
I am wondering whether this whole sorry episode has been orchestrated by insiders working to protect their money.
The outing of Aorangi and statutory management put direct/indirect pressure on SCF to reexamine its book/status and so it has also been forced to look for rescue.
Finally the whole thing will end up in the lap of the government which will have to honour the guarantee and pay off the investors.
Seems like someone or a group of interested people have stage-managed all this and are waiting to collect soon.
Just like the bailout in the US was orchestrated by the Wall Street Bankers with the help of key officials in the Administration.
What absolute rubbish. If
What absolute rubbish.
If they wanted their money back they could have asked Hubbard for it. Hubbard had NEVER missed a payment.
How about they publish a list
How about they publish a list of the debenture holders and other creditors detailing how much each is owed and how long each has been due.
FOR THE LOVE OF
FOR THE LOVE OF CHRIST!
We've been telling you dolts this very thing for months.
Certain government people At The Very Top have personal funds invested with Hubbard and now they want it back, which is why they unleashed the dogs on SCF yet continued to ignore all those other crooks and their failed ventures.
DUH!
What absolute rubbish. If
What absolute rubbish.
If they wanted their money back they could have asked Hubbard for it. Hubbard had NEVER missed a payment.
...And if they were worried
...And if they were worried that he owed them more than he could repay?
Was he using his own money
Was he using his own money when repaying investors who wanted it back.
Nah get in and grab ALL
Nah get in and grab ALL your loot for yourself before the receiver freezes everything then doles out what's left in pennies-on-the-dollar to everyone.
SCF has acted as in the Role
SCF has acted as in the Role that DFC used to do by funding businesses at start up.
However somehow it drifted into the property market and got over exposed. Also funding the banana industry, oops I mean dairy industry to such an extent has in hindsight proved to be a poor decision
On top of that ordinary savers have found out that finance companies are not a great investment. People have stopped saving in them so costs have risen and funding dried up. This is not good for NZ business. Where are new businesses going to get funding? Not the banks they prefer safe lending at high interest rates so they get their profit.
If SCF dies and no one else takes the important role that SCF provided to business then the consequence to NZ are not good.
The government may take (like all the previous governments back to 1984) that it is not its roll to assist business. The governments need to look at the old DFC model and create again. Let’s not dismiss it as the government picking winners.
If no buyer exists for SCF then the government has the opportunity to take the good bits (not property, vehicle leasing, consumer finance etc) and start an institution to help NZ business and then NZ. It is in all our interest to have new businesses. There is opportunity to fund future growth. This is much better for future generations or NZ that pointless tax cuts (or redistribution). The future starts in 3 minutes time it does not end there.
As a country we will not advance as a banana republic or a Dairy Dominion. Short term thinking that has dominated NZ since 1984 most be replaced with vision
Personally I agree with Ian,
Personally I agree with Ian, despite being very right wing on such issues - we don't need another retail bank (i.e. Kiwibank) but we funded one! What we desperately need are good second tier lenders, especially over the next 3-4 years. I reluctantly think the Govt should inject cash, guarantee to retain investers (desposits at market rates), redirect its activities, make sure the right people are in place, and then indicate that it will sell out sometime in the future when the company and economy is back on a sound footing - that maybe within 5 years, possibly more than a decade.
You are on the money Sam.
You are on the money Sam.
The biggest travesty is the
The biggest travesty is the bail-out.
Why do SCF's "mum and dad" investors deserve to be rescued?
Those who invested in all the other failed finance companies had to take their chances with the receivers like everybody else.
Now the excuse is that the 'South Island rural economy will suffer'?
So what?
A generation of people decided they should not have to be responsible for the choices they made, and that they should only ever be allowed to win and never permitted to fail, even as that generation lectures other generations about such things as responsibility and "learning to make do with less".
Let SCF burn, and Hubbard, and all those who believed they couldn't lose and who also believed they shouldn't be allowed to lose.
Revoke the GG: why should everyone else pay for your misakes, especially when you've so stridently decried any suggestion of having to support any other?
The Aussie gummint set this
The Aussie gummint set this sorry saga in place when it offered a GG to its banks in 08. NZ gummint rightly or wrongly followed suit and offered the guarantee to NZ financial institutions- including finance companies. Bad timing for Bridgecorp,Strategic,Hanover et al - they were already past tipping point so didn't qualify.By allowing the remaining finance companies to be included, they CREATED the problem- money flooding into finance companies because of the guarantee. Now the brown stuff has hit the fan and the gummint has to HONOUR its guarantee( it is irrevocable, that is why Ma & Pa put their dosh in) and start writing the chqs. $100m+ for ANF,SCF $1bln+ and get it all done in one hit.Or do they put $200mln in now and wind SCF down over 2-3 yrs,which will cost the taxpayer a lot less.The ball is in the gummints court and a decision will be made by Tuesday night.
Don't you mean it's the fault
Don't you mean it's the fault of the finance company director's for being crooked and incompetent?
Or do we blame the "bluddy guvmint" for absolutely everything, now?
SCF applied for the extended
SCF applied for the extended GG, the gummint via treasury(after due diligence??) approved the application, Gummint created the environment (finance company with a gilt edged non revokable government backed guarantee) how else would you expect Ma & Pa investor with a few spare dollars looking for a decent return to react? Sheeple are easily led, no different to a carrot in front of a donKey.
Well let it go ...Then they
Well let it go ...Then they Govt is responible for the whole lot 1.7b...Intelligent lot you are ...I would thought take in new investor Plus Govt take's a stake of around 200mill & then sell's it of over the next 2/3 yrs without a loss of money & jobs bussiness etc.. You guy's think this is only a South Isld Problem..Just take a look at the finance Co's that SCF has bought or Merged with in the last 3 yrs & you will see this is spread all over NZ..So wake you doppy lot & take a constructive sensible & ecomnomail view on this Problem..Bernard I am surprised at your continuous harsh criticising with this Co when clearly there is a way out of this...
Translation: "I am a SI
Translation: "I am a SI ag-person who stands to see his profits slashed by the deth of SCF so I demand that the rest of you bail me out and stop questioning it."
The government should not be
The government should not be in any role of rescuing companies. The writing has been on the wall for years now - SFC & Hubbaard thought they were so smart to be so big and that they would get away with it all. Heads should role regarding them getting the extra GG and also the trustees granting them an exemption to limp along for a few months - this should have been sorted when they did not qualify under the deed.
Ex Pat & Anan, agree with you
Ex Pat & Anan, agree with you both. The Govt should not be responsible, but it did take that responsibility a couple of years ago, along with just about every other western Govt. The question is what to do now. And I agree with Anonymous as well, I won't say I don't care about SCF's investors, but you take the risk, you pay the price.
But the facts remain, recievership will be a nationwide depressant that will unquestionably set back any recovery, and so the actions of the Govt have to be cognisant of that. Yes there is the risk of throwing good money after bad, as was the case with some of the other fiannce company "restructures", but the Air NZ example shows that a considered investment by a big player, coupled with appropriate restructuring, can pay off. Normally you wouldn't consider a SCF as a key nation asset like Air NZ, but in this environment over the ext 2-3 years, maybe it got to be considered in a similar manner.
These comparisons with Air NZ
These comparisons with Air NZ are a load of cobblers. When the govt bailed out Air NZ, people were happy to buy tickets for flights, as the overall risk was minimal. But investing tens of thousands in a finance company is a totally different beast. You want close to absolute confidence that you will get your $$ back.
OK, the govt also bailed out BNZ. But in that case, there was an implicit govt guarantee, so the Joe Blow public was happy to keep putting their little bit into it. A finance company, one without a govt guarantee (which in the long term is how they have to operate, or the whole concept of a finance company becomes meaningless) is a different kind of risk.
No the brand of SCF is totally defunct, no future in it.
I am talking maintaining a
I am talking maintaining a Govt guarantee Philly...."Govt should inject cash, guarantee to retain investers" ...it wouldn't work without it. The BNZ brand wasn't much chop back in the early 1990's either, but it recovered it. They had the systems, relationships and people(SCF have replaced theirs with better) to recover over the fololowing few years. SCFs has been hammered too, but I believe like the BNZit has the ability to do likewise as well if the Govt support is still there until no longer needed.
All of you supporting Govt
All of you supporting Govt assistance for SCF are essentially saying its got "too big to be allowed to fail".
Try debating that with rank and file Americans, who've been there done that and look at the results unfolding.....................
Sam - why didn't the Govt sell out of Air NZ when it could have got its money back and a handsome profit?
If it gets into SCFI'd say it won't know what to do beyond the very short term, or how and when to get out of it...................
Bernard, When you say any
Bernard,
When you say any receiver would force sales of any farms, property developments and businesses that were delinquent, this might drop land prices and employment significantly, I think you're too alarmist.
Most people and businesses in NZ are employed and solvent, so I would expect by far most of SCF's loans would be going ok. Surely it doesn't matter if loans are at low, or no interest, or principle only, as long as the loan terms are being complied with there is stuff all receivers can do about it?
Therfore it will be business as usual for most of SCF's creditors - apart from the more recent ones which may be able to be recalled from the time it was judged SCF was in trouble and they were favourably treated?
Fungus Wake up and smell the
Fungus
Wake up and smell the roses. SCF will FAIL without govt intervention. There is a reason for this. Its loans are non-performing. If all was OK as you are suggest then this discussion wouldn't be happening.
I will be angry if the
I will be angry if the government get involved in this. Let it take its own course. And whoever agreed to give them that extension should be fired.
What about all the struggling small businesses - they would like a handout too
Last time I checked the
Last time I checked the gummint is involved, turn their backs come Tuesday evening and they will be signing off a $1.7Bln cheque. That is sort of involved...me thinks...
Stat Mgmt is a higher form of
Stat Mgmt is a higher form of RECEIVERSHIP the difference is that the govt the taxpayer now have the problems on the basis of it's 100% Guarantee. Game Over.
The govt is now faced with doning a deal or losing $900 Million more like $1.5 Billion by the time costs are taken into consideration.
The Govt should never have financed PONZIE FINANCE COMPANIES for any reason, finance compainies where into fraud and corruption and passing depositor funds on the the Directors or owners of the finance companies and their developer mates.
The depositors had not a clue what was going on.
Hubby...... Game Up..... come clean..... you used the funds for mostly your own use and gain.
Hubby has now caused a $1.5 Billion Problem for Cabinet on Tuesday Morning.
Hubby is a goner....game over for him.
Sad that at 81 years of age their is still so much greed.
Its not a point of SCF Misery
Its not a point of SCF Misery it's now about Govt ( Taxpayer Misery) how much good would $1.5 Billion do for this country rather than propping up FRAUD.
The Govt ( Mgmt) Backed by the Taxpayer, has no right to 100% guareentee such PONZIE SCHEMES the depositor greeed excepts the risk and the REWARD why should the losses be socialised.
All the Guareentee did was push up Bank Interest Rates and make it harder for Banks.
A good hard look at those in Govt MGMT is needed. It's just crazy the risk that, the Govt (Mgmt) have put the taxpayer into.
It is a pity the GG included
It is a pity the GG included interest accruals up into the date of settlement. Investers here stand to make 8% interest on their investment even when the GG pays out.
The Govt (Taxpayer) will be
The Govt (Taxpayer) will be forced to bail out SCF..............End of Story
SCF is like the Titanic,
SCF is like the Titanic, there is going to be a change coming very soon...How much time is Jonh Key putting it to tis disaster plenty i would say...............
SCF has the taste of a
SCF has the taste of a LEMON.....................
ANOTHER TAX PAYER
ANOTHER TAX PAYER LEMON................
I commented on this site this
I commented on this site this is what is going to happen when government guarantee was introduced. It is a moral hazard. I actually said SCF is goingto fail 2 years ago :0
Of course it's moral hazard.
Of course it's moral hazard. Governments have engaged in this repeatedly since the GFC began. SCF will get the money, then it will be business as usual.
Citibank were given 300+ billion in cash & guarantees from the U.S. government in '08 & they're already back lending to every tom dick & harry. I should know as I've recently received a $17000 line of credit from them here in Aussie & I've only been here a few weeks.
The money WILL BE FORTHCOMING for SCF. The farmers are safe. They will have their loans re-scheduled, re-organised & re-hashed. It will be business as usual. The government will just borrow more on the basis of future generations taxes. As usual, the tax-payer will get it in the neck.
.......FOR THE TAXPAYER TO
.......FOR THE TAXPAYER TO SUCK............
but it shouldn't have to.....there is a clause in the government guarantee agreement that gives it an "out" if the finance company has acted fraudulantly.
This ponzie scheme is fraud- and if the govt. props it up for a while it will fail again later...
then taxpayers can get squeezed again!!
Fair enough, as you say
Fair enough, as you say people should be responsible and paying by themselves for their failures, I agree. But I can’t remember you saying same when banks worldwide needed bail-out few years ago. If BNZ runs into trouble again next year and say same happens would you be saying the same or advocating bail-out?
last time the bnz failed, it
last time the bnz failed, it didn't get bailed out by the gov did it?
Someone back there had it
Someone back there had it right, methinks. Too many 'big boys' involved and wanting to not get burned.
So the poor old taxpayer underwrites. The problem there is that there is a limit to that too - this is a permanent recession we're looking at - but for a 'pollie' to acknowledge that permanency, whilst guaranteeing certain sectors immunity, would be to admit fraud. So I don't think they'll acknowledge.
This ain't the only problem facing them in the next twelvemonth, either. Despite the teflon protection (note the 'surprise visit' to Afghanistan the weekend 40,000 marched?) Key is looking like a one-term phenomenon. Without him, the rest closely resemble a headless chook.
They run around for a bit, but they always fall over.
If it goes into receivership,
If it goes into receivership, many of the loans will be able to be recovered eventually, so how much will the gov lose in total?, Perhaps not much more than that they have already provisioned for.
SCF will be bailed out, to
SCF will be bailed out, to stop panic...........and south island farm prices colapsing and the Nat vote colapsing.
The Lesson don't give out taxpayer Pg"S unless you can stand the wright off..... end of story,,,,,,,,,,,,,,Nerdsssssssssssss
How many nerds run the RSB
How many nerds run the RSB and wake up friday morning to see the $10k Salary AP appear in their bank account like a miricale....................? No risk all reward something is wrong with the system lets start with old fashioned leadership...................?
How many Labour people own
How many Labour people own farms?
This whole thing stinks and
This whole thing stinks and im now rolling in my grave.
We need to revolt against this pressent government if it bails out SCF.
We need a government with moral discipline.Send in the receivers!
Send it to the CREMATORIUM
Send it to the CREMATORIUM you mean...................
Sometimes the system becomes
Sometimes the system becomes so corrupt we need to just start all over again.This is one such time,so yes the CREMATORIUM for SCF....for they will not harken
Jeremiah 7:16
"So do not pray for this people nor offer any plea or petition for them; do not plead with me, for I will not listen to you.
Jeremiah 14:12
Although they fast, I will not listen to their cry; though they offer burnt offerings and grain offerings, I will not accept them. Instead, I will destroy them with the sword, famine and plague."
@Jesus... a Tower of babel
@Jesus... a Tower of babel event!... Don't look back lest ye mighty Smiter will smite thee.
Good evening Bernard and
Good evening Bernard and Gareth you guys are taking the night off I hope.Live it up!!
If even some of the stuff I hearing today is true the question you guys need to asking the Government on Monday morning is-:
How did this company ever comply with the terms of the GG? Who bungled?
You need to interview the ratings agency and ask them some pointed questions as well!!
Surely they are inept to the nth degree!!
Whp was the ratings agency? Standard and Poors again....
It complied withthe GG,
It complied withthe GG, becasue the rating agencies gave it a creditable rating. More questions should be asked about these international ratings companies, especially Fitches ratings.
Are these the same ratings
Are these the same ratings agencies that gave mortgage backed CDO's AAA ratings back in the pre GFC days? Well, they all turned out to be worthless, as probably is SCF's loan book. The ratings agencies will say anything to get their fee's.
I thought they had already
I thought they had already changed their name to 'Sub-standard and Very Poor'
Chq this on
Chq this on Stuff.....http://www.stuff.co.nz/business/4072243/Hubbard-faces-a-wealth-wipe-out
"Although the final details of a rescue package to save South Canterbury from collapse are still being finalised, they are likely to include an arrangement for the government to take over more than $500m of the company's impaired loans"
So the plan is to Socialize the losses... this is wrong!
"Wrong" ...let's just see if
"Wrong" ...let's just see if we can beat the government spin doctors to the justification......"..so I have to tell you that the govt has decided after much thought to put to one side our firm and unwavering support for free enterprise and the separation of private business from the state...err arm... have decided to use govt funds to secure the future for the many farm owners and related companies in the Canterbury region by providing a capital injection of $500 million...on the firm understanding that all of those involved will turn out on election day next year to support the local National Party candidate."
But maybe the won't. Maybe
But maybe the won't. Maybe they will be honorable and won't socialize the losses (beyond the guarantee) that is. Maybe there IS no conspiracy. Maybe the government IS doing the right thing. Maybe officials are Not being influenced.
And if that be the case aaa
And if that be the case aaa Wolly will say sorry...but Wolly expects the govt to behave the way all NZ govts have behaved in the passed...what about you aaa?
If that is the case and they
If that is the case and they bail them out, then this government is no better than the last. I will apologize to you wolly and make sure my vote goes to the greens or united future
I hope that these reports are
I hope that these reports are merely noise and not reality. No ways should the govt bail them out in any way.
Can I have a bailout for all
Can I have a bailout for all these bailouts I have to keep funding through my taxes?
What makes you think you have
What makes you think you have a right to a bailout Angus...you're just a Kiwi peasant...you don't own a business that's made stupid investment decisions for yonks and put at risk hundreds of millions...pay your bloody taxes and be grateful you have people with integrity in govt prepared to save their arses in an election using your money. Any more moaning and you can expect to be paying another tax...or three.
Or 4.
Or 4.
Gezz Wolly I think you have
Gezz Wolly I think you have hit the nail on the head !
No way should the govt take the losses ( and apparently purchasing at face value easy when is not your money !) and socailise the debts - you have to wonder what those investors in forms like Marac and others that are working hard to put there house in order would think - they will struggle to compete moving forward
Also what about the retail investors in all the other finance firms - effectivley they would give the keys to the finance sector in NZ to a firm that has over a 3rd of its loan book imparied ! Treasury have $900 Mill budgeted for losses- tip SCF into recevership and keep the playing feild even same rules are supposed to apply to all...
At least my taxes wont pay for it moving forward If they do this- then I like a number of other small businessman I know already have will leave for Aussie .
Stat Mgmt extend to SCF Tues
Stat Mgmt extend to SCF Tues
It's a Big can of
It's a Big can of worms...........
How about this ? Nationalise
How about this ?
Nationalise (pun intended) SCF and negotiate longer repayment terms with the debenture holders/creditos, get new management to run the company and gradually get it to a stable position. With the Government ownership, the panic will subside and business can go on till times improve. The present owners have to take a hair-cut in their stake as payment for mis-management. They don't get much payout for the takeover.
There is no immediate payout by the Govrnment, so its finances and rating are not affected.
May be down the line, they can sell it for a profit too.
SFC..Is sounding like a"
SFC..Is sounding like a" hole in the water into which you pour money"..Its a superb lesson in "La La land economics".....How shocking and shamefull! that virtually all the non bank lending sector in New Zealand has turned out to be a giant Ponzi, sucking money out of peoples hard earned wealth. It's no good blaming the Baby Boomers ,its their wealth going up in smoke, the wealth they were leaving to their kids.
What about all the money lost before the GG? .if they bail out SCF. They should pay back everyone who were conned into putting their money into the Ponzi mess!..because they let this shody mess exist, with poor regulation in the first place. Go the whole Hog!! socialise all our losses.
Just imagine the repercusions
Just imagine the repercusions if govt (taxpayers) buy the bad bank....lots of people will reason that they might as well park there money in SCF and collect 8% interest until the end of the govt. guarantee at the end of next year.......money will flood in and create another wall of maturities for the end of next year- but no-one will want to roll over their deposits to the following year when there will presumably be no guarantee...............then SCF will go under and the taxpayer will be forced to pay for all the extra deposits and interest payments that have flooded in on top of the ones it is already signed up for !!
I give up - I thought national was not going to be a nanny state.
By Jesus yes of course your
By Jesus yes of course your right let the fire burn in this land long enought to get rid of the ROT,FRAUD AND INCOMPENTANT DIRECTORS.
YOU ARE RIGHT A RECESSION IS NORMAL IN THE CYCLE, THE RECESSION SHOW WHO HAS THER PANTS DOWN WHEN THE TIDE GOES OUT.
AL had his pants down round is ankles.
Therefore the loss is with the stake holders NOT THE TAXPAYER.
THE GOVT GUARANTEE WAS A HUGE
THE GOVT GUARANTEE WAS A HUGE MISTAKE, THE GOVT (MGMT) SHOULD NEVER HAVE ALLOWED THE TAXPAYER (SHARHOLDER) TO BE SO BADLY EXPOSED TO LOSS AND TO GIVE OUT AN UNLIMITED GUARANTEE TO PONZIE FINANCE COMPANIES. OR ANY OTHER PRIVATE COMPANY FOR THAT MATTER.
ENSURING A LOSS FOR THE TAXPAYER (SHAREHOLDERS NZ INCORP)
WHEN DID THESE COMPANIES EVER RETURN ANYTHING TO NZ INCORP NOTHING THEY WHERE GREEDY AND KEEP IT ALL FOR THEMSELVES.
THEN WHEN THE TIDE WENT OUT THEY WANT THE NZ INCORP TO PULL THEIR PANTS UP PLUS GIVE THEM AN ICECREAM SO THEY COULD CARRY ON THE FRAUD WAYS.................................?
Not a mistake for those in
Not a mistake for those in govt who had personal funds invested with Hubbard. You can be sure they are the ultimate in preferential creditors. Everyone else will have to wait in line for whatever meagre return they are eventually offered.
Absolutely.
Absolutely.
One takes a risk and either
One takes a risk and either gets a reward or a loss, why does the taxpayer only share in the loss side of the ledger?
The mgmt is using taxpayers
The mgmt is using taxpayers funds in a fraudulent way, take payer funds are not there for the puroposes of under writing risk and loss.
Why not pay a bounus to the NZ Incorprated shareholder of $900.00 each cause that what it's going to cost 1 million working tax paying nz
That might pay a lot of bills for the shareholder of nz incorporated.
The government will also be
The government will also be looking at the timing issues here and comparing the relative risk to their reputation as a result of whatever action they take.
If they say no, (which IMO they certainly should) and the receivers are called in then there will no doubt be political damage in S. Canterbury (but I would say so what, the folk down there seem to have collectively lost their reason in following their messiah), but not that much elsewhere.
This is because they can hide behind the fact that the retail scheme was not their invention and SCF joined it initially under their Labour predecessors. Now you could say (very reasonably) that the decision to let SCF into the extended guarantee WAS their decision (well Treasury's but we know who calls the tune really), but note that this is all coming to a head just before the extended guarantee actually comes into effect (how fortunate), so they have a get out of jail card there. They also have the fact that loss provisions of $800m have already been made against the GG so they can turn around to the taxpayer and say - 'its bad, but we have already budgeted for it, and by the way the original decsions were all taken under Labour'. So take this option and all in all the potential political damage is contained and of a relatively defineable quantity - with a known end-point (the wind down of SCF and the re-payment of debentures etc).
However, take option B - the bad bank plus a 're-animated' SCF and all of a sudden (from a political stand point) you introduce a whole range of unkowns. Anything that happens henceforth can now only be laid at the feet of National as they will actively have made the decision to prolong the SCF story. No more escape clause as to the origins of the GG under Labour. There will still be substantial financial loss anyway (buying the bad banks assets has been estimated to cost $600m) and then there is the not insubstantial risk that the 'good' remnant of SCF runs again into trouble again some time next year (particularly bad if its towards the election date). 'Throwing good money after bad' then becomes an easy slogan for the opposition. Recall that in all cases thus far, Finance company accounts have tended to progressively deteriorate over time, even after moratoria, take-overs etc - just look at the Hannover story and ALF! Even PGC and Marac which went down the good bank/bad bank route are still finding out their initial provisions were far too rosy and are still throwing up impaired loans.
Even worse - another scenario - the new investor who comes on board with the good SCF bank, rapidly starts asset stripping it (anyone care for a large unjustified dividend payout? - its happened before!) and 12 months down the line leaves a wreck that not only needs more govt pumping in, has now also been tainted by what you might call 'sharp' business practice. A wonderful vote winner!
If I was a policy wonk with national I'd be telling them to shut SCF down pronto and take the local SI flack NOW. Re-animate the corpse and you generate a vast range of known unknowns (good old Rumsfield) and run the real risk of its exploding in their faces close to an election, where it wont just be a few SI cultists getting upset with them.........
Absolutely agree. I recon
Absolutely agree. I recon all the media noise is an orhested campiagn by the mighty one down south who while looking naive really knows how to manipulate the press. The campaign is to force the government to bail out when it really doesn't want to. Also all treasury advice etc will be discoverable, so if minister goes agosnt a recommendation, then really looks bad on Nats. For once I hope political decisions are made on economic reality rather than a number of lobby groups
National know that if it
National know that if it comes to the crunch most South Islanders will still choose National over Hubbard, however grudgingly on the part of some.
Down here, National is as much a religion as it is a political party.
Why should the taxpayer bail
Why should the taxpayer bail out SCF.I for one did not cause this mess,so the whole lot should be cut lose.Also maybe the money given to some former members of the company should be pursuied a bit harder.
They will lobby that it will
They will lobby that it will cost them less to bail it out, and will mean farmers are not forced to sell their land, at a big loss.If I was a Hanver investor, I would be spewing if the government bailed them out, and took over the company. Many investors who are in SFC are covered by the GG should it fail, and the government have already provisioned for it failing, and that is as far as they should take it. The main concern for nationa; though is the forced selling of the farms. However I don't think that is any different to the forced firesale of other finance comapny assets, and why should farmers be treated differently from other forms of investment. All investment has risks, including farmers.
"...and will mean farmers are
"...and will mean farmers are not forced to sell their land, at a big loss."
How often does that happen? Seriously. Sweet FA, in reality.
Farmers are the one group in this country that knows it will never have to face the harsh choices the rest of us do sometimes.
"Farmers are the one group
"Farmers are the one group in this country that knows it will never have to face the harsh choices the rest of us do sometimes".....what a total load of effluent anon. !
No offer to recapitalise or
No offer to recapitalise or biy SCF shares it appears, other than with hundreds of millions of taxpayer sweetening as a requirement.
For my say on where to from here:
http://www.lostsoulblog.com/2010/08/bail-out-why-not.html
Thanks David. A well
Thanks David.
A well considered contribution to the debate.
And thank you David for
And thank you David for complimenting yourself via a pseudonym.
Your reply says more about
Your reply says more about your mindset than you probably realise. If you have the balls - and I am assuming you are competent to use a phone directory - give me a call to confirm who I am. But then, you hide behind anonymous for a reason.
Thanks Dave.
Thanks Dave.
Anonymous. Colin Riden is
Anonymous.
Colin Riden is here if you wish to call now.
Thanks Colin. I've noticed
Thanks Colin. I've noticed that those who have a go at me often hide behind 'anon'. Thanks for your support and for standing up to the faceless coward.
Spot on IMHO David, your
Spot on IMHO David, your strategy makes total sense.
I really resent the way this (and others) finance company has been promoting itself since the Govt. G'tee. Virtually saying " doesn't matter how crappy our loan book is, we've got the G'tee". Disgusting.
i didnt know the govt
i didnt know the govt were financing a ponzie scheme i thought it was illegal
I voted for National at the
I voted for National at the last election. But if these pricks help to support this company rather than let it go down (even if there is a cost to the taxpayer through the GG) they have completly lost my vote, I dont care who the leader of Labour is at the time. I dont care about the greedy dairy farmers in the south Island that will feel pain if the company goes under, it will open up oppurtunities for other people to invest in the farms.
Easy answer here. Put SCF in
Easy answer here. Put SCF in statutory management and just unwind the whole shooting box over time along with Hubbards other entities.
The Govt's decision is -
The Govt's decision is - either to wind up SCF now or face a bigger loss bailing it out with MORE tax payer money before the election next year.
Is it likely SCF will trade out of a hole by the end of the GG before the next election within a worldwide economic situation that is looking more and more precarious?
Then there's the likelihood of more finance co failures between now and then.
I personally expect the Govt will make the hard decision now to limit their liabilities asap.
Either way - Alan Hubbard will always be associated with the event that rocked NZ's realestate markets to the bone (I believe).
I have other reasons to believe this SCF situation has been covered up for ages by the company itself - and the SFO was sent in when it did to uncover the extent of the issues this year (and not before time!) to clean it up before the election.
The US bailouts delayed
The US bailouts delayed the double dip/coming depression and fooled the world that Govt was capable of stopping the train wreck.
Do we want to delay the economic pain/rising interest rates that are surely coming? We probably do, hence we'll bail out SCF.
Then we're doomed, mainly because of the precedent it will set, not because of the one off cost.
No worries folks...sit back
No worries folks...sit back and watch the Cabinet squirm...do they present themselves as being the backbone of capitalism by saying "no" to handing over taxpayer money to prop up a failing private finance company that has been on GG life support for nealy two years.....or will the Cabinet present themselves as having no backbone and say "yes"!
Oh but the potential political pain!
Personally, I feel rather
Personally, I feel rather sorry for John Key on this one.
A real case of damned if you do, and damned if you don't.
I rarely feel sorry for
I rarely feel sorry for multi-millionaires, especially those who made it in currency trading. You step up to leadership, you take the pain.
It's down to a political
It's down to a political calculation about what is least damning:
http://www.stuff.co.nz/the-press/business/4073437/Finance-company-assurances-restated
"But he reiterated assurances that a $900 million rescue package earmarked for investors affected by finance company failures would protect depositors should the company go under. "
'Deal could still save SCF - Hubbard '
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10669737
"Federated Farmers president Don Nicolson said the impact of a collapse would be severe.
"The cascade of a meltdown will not only be felt inside the farm gate but outside the farm gate through the investors and the communities of the region," he said.
As always, the farmers
As always, the farmers believe it's all about them and nothing (and no-one) else matters.
"We've been fleecing the stupid townie taxpayers for decades, so why shouldn't we fleece 'em some more by making them bail out our personal pyramid scheme?"
Maybe some do and some don't
Maybe some do and some don't anon but here's a suggestion for you...turn up to a sheepshed meeting and give them the benefit of your opinions...I promise you will be looked after...even listened to...give it a try anon.
Take some of your own advice,
Take some of your own advice, Wal.
Oh, that's right, you don't offer advice, you just lecture.
Yay more advocacy for
Yay more advocacy for continued intimidation of the nation by the farming sector! THEY'RE THE BACKBONE OF THE COUNTRY.
IMO, Don Nicholson is right
IMO, Don Nicholson is right to point out what he has.
Get real, think context, vulnerability and criticality, see:
http://www.interest.co.nz/comment/reply/50451/571894
If you want it to change, change the shape of the economy, that means:
http://www.interest.co.nz/comment/reply/50503/571881
"The government would be more astute to understand what underlies our atrociously deficient record on investment. It’s not lack of savings that’s led to our slide down the OECD per capita income rankings; it’s the tax breaks and directives to banks to lend to those who have accumulated property rather than put it to work, and have purchased farms rather than invested in farm productivity."
Ready for some change then?
Les.
Any criminal proceedings
Any criminal proceedings against those who brought the companies to this stage ?
At least the deposit holders
At least the deposit holders will be protected under the GG. But the government should not prop up the company, how is it any different from any of the other finance companies? I think SCFs' reputation is now stuffed and will be unable to raise funds until they have strong liquidity. All their risky and on the knife edge lendings will have to be sold off to keep the company going and to strengthen its balance sheet. There will be some pain for a few years but it will be for the best.
Why should the deposit
Why should the deposit holders be protected?
And don't trundle out the hackneyed "ordinary Kiwi mums and dads" crap.
They made a commercial decision.
Even if fraud by Hubbard et al can be proved, the depositors should have to take legal action to recoup their funds, not stick their hands out and collect a taxpayer-funded bail-out.
SCF have no business to look
SCF have no business to look forward to after the GG finishes. They have managed an overvalued "book" for years. Their business is worth nothing. The SFO should investigate the SCF and clean up this fiasco and the economy take the hit - realestate has been levitating for years - can't miss this bullet, either now or after the GG finishes.
Anon @ 7.51 - right on. The
Anon @ 7.51 - right on.
The BB/middle class swallowed it hook, line and sinker. Exponential growth forever on a finite little tennis-ball spinning in space. That myth was needed to underwrite what was borrowing from the future. The future, from this point, can't pay.
If they didn't have the cranial capacity to step back and see the bigger picture, tough. Some of us have been warning of it for decades.
Interesting thing now, is that I suspect our elected crowd suffer from the same cranial affliction. They will consider reacting in a way which hastens a return to BAU.
Which - as this little exercise should point out - has ceased to be AU.
We live in interesting (oops) times.
They probably gave scf the
They probably gave scf the extended guarantee as it limits the government's exposure to 250k from 1m, plus any modified terms. If they hadn't then the trustee would have tipped it over and the govt would have had to pay out under the original gtee terms. Like an earlier post said there are likely some sizable deposits in there.
How about: The
How about: The depoitors/debenture holders etc. get their investment protected; but why should they make a profit out of this? Those who bought the discounted securities should have their 'investment' protected ( ie: the 75% face value, or whatevere, they paid, but not any enhancement, just because the GG was in place? The objective was to protect peoples money, not provide a profit making scheme at tax payer cost.
"How about: The
"How about: The depoitors/debenture holders etc. get their investment protected..."
Why?
Seriously, why?
If I invest in a business and it goes broke I have no right to a taxpayer-funded bailout.
If I bet on the wrong number at a roulette table I'm not entitled to get my wager returned.
Even if fraud is a factor, I still have no right to expect everyone else to pay for my misfortune.
The wilful abdication by so many of all financial responsibility is one of the main reasosn we have these problems.
Simply because the GG is a
Simply because the GG is a fact. Right or wrong it is a reality. But let's not make it a profit making scheme as well!
The GG offer should be
The GG offer should be withdrawn because it sets a very dangerous precedent, as well as being just plain wrong.
Too late! What do you think
Too late! What do you think NZ'ds reputation would be worth internationally if the Governments' word was retractable? If you want to see interest rates thought the roof, reneg on the GG! But, yes, let's not ever do this again.....
If the government does try to
If the government does try to bail out SCF, I among thousands, will no longer vote for National at the next elections. Think very carefully John and Bill.
Just add it to the Welfare
Just add it to the Welfare bill. Now every demographic is covered, although this is more costly. No risk investing, you can't beat it
So what have we learned! Not
So what have we learned! Not much, apparently.
"...DFC, and the lessons the Reserve Bank, has learned. These lesson relate to both the causes of the DFC failure, and to our handling of the that failure......government guarantee. This guarantee was removed with repsect to all debt issues in 1977....At the end of 1990, Sandy Maier...took over as Statutory Manager...."
http://www.rbnz.govt.nz/research/bulletin/1987_1991/1991mar54_1brash05mar.pdf
The Latest GG was a rort, the
The Latest GG was a rort, the last GG was put in place as the RSB (Part of the MGMT team in Govt) Assumed it would go away or push it down the tract as the next boom was going to start monday 8am next week.
Of course they know that was BS but it pushed the problem down the tract.
Sandy was relied upon to do his magic trick, but the tricks did not work, but one trick that did work is Sandy gets paid $10k a week and the taxpayer got tricked along the tricking the Mgmt team at the RSB whom the govt team relied upon.
However it is easy to give PG's out especially if the one giving them does not have to front for the loss should one occur.
Well here we have $1.5/ Loss with key caually stating on tv this am on well dont worry we the mgmt have budget $900 million of taxpayer funds ( Shareholder Funds NZ Incorp) to fund the loss no big deal, and look the other $800m on well wherre is that coming from, yes borrowed offshore and rapaid over the next 20 years, the real cost is billions and lost opportunity cost of what the billions could have done for NZ Incorp.
But when it come to funding the Railways it is a big deal. Why? and other good things for the shareholders of NZ Incorp!
Should the govt set up a
Should the govt set up a special educational program to explain to rich investors how RISK AND REWARD WORKS........?
IT COULD BE A LOT CHEAPER IN HE LONG RUN.
ONE OF THE OPENING RULES COULD BE SOMETHING IN BOLD....YOUR INVESTMENT IS NOT GG.
IF YOU INVEST YOUR FUNDS HERE YOU DO HAVE A RISK OF LOSING 100% OF YOUR RISK FUNDS.
YES EVERYONE IS A CAPITALIST.......UNTIL IT ALL TURNS TO A LEMON.....THEN IT'S LOOK FOR THE SAVIOUR!
WELL SANDY HAS LEARN'T A
WELL SANDY HAS LEARN'T A LOT....... BEING AN UNDERTAKER....... PAYS WELL $$$ !
Wow....this has got the blood
Wow....this has got the blood pumping.... what a curly one John Boy...!
You are indeed damned either way.
As I said the other day the outcomes one way or the other will be affected by a measure of ...........intent......... to defraud by Hubbard through a network of dealings.
Irrespective of academic opinion the face saving exercise will become more important than the collapse itself..... and in that I say the SFO are working their nuts off looking to expose ............(or cover) the trail of the tape.
Being seen to have done due process prior to today's announcement will have been crucial ...or they (the Govt) may even use this a a stall and gauge tactic.
My money say's that if the sheet is clean on......... intent......... they will bail it with a( Proviso) that may include some interesting clip ons.
Then said Jesus unto him, Put
Then said Jesus unto him, Put up again thy sword into his place: for all they that take the sword shall perish with the sword.
—Matthew 26:52
In your short verse..a
In your short verse..a mouse.... exactly who would Jesus be talking to....a brief chat with Hubbo about vanity may have served a better lesson.
many years ago SCF started
many years ago SCF started financing corporate farming in Canterbury. The result? Large scale land buy ups by a few "families" .The price of land went up. Many farmers were not making a decent profit but living off the equity gained in the rising land prices & here Hubbard's grand plan has gone to custard...it only worked when the land prices kept going up...and at some point the income that could be derived from that land, even with the appalling factory farming methods employed, got out of balance with the liability of owning that high priced land. The interest not being paid on some loans is indicative that the rising price of the land is not sustainable...haven't we been here before?...anyone out there old enough to have had the skids put under them in the mid 1980s? We sure as hec did & had to bite the bullet & get on with it. There has been this false thinking that they are not making any more land...true but there are countries bigger than NZ not being farmed to their potential & there is no excuse for pushing land prices beyond what the income can sustain except pure greed and empire building. Well the ivory towers are falling. The pillar of salt is undermined & while Hubbard may never have "intended" to defraud anyone his methods have been shonky at best. The good that may come out of this current fiasco is that ordinary New Zealand farming families may once again be able to afford land. Why should I subsidise, via my taxes, some idiot investors who went for the top dollar in returns? If they are ignorant enough to not realise that the top return is linked to top risk then that is their loss. If they did realise that & took the risk then tough bikkies. We all make choices in life...some good...some bad...if it was guaranteed that no matter what choice we made it would be a safe one we could all do lots of crazy stuff with no fear of the consequences.
This is not a bailout by the
This is not a bailout by the goverment. If they do come in to save the company this will be the SECOND bailout of the company. Remember if the Goverment had not given a blanket gurantee for all finance companies (SCF included), they would have collapsed two long years ago.
National will vote for
National will vote for receivership. Labour would have been a soft touch with those South Islanders. If the government agrees to support a buyer of SCF it would set a president that is quite simply unacceptable and flys in the face of capitalism. Option 1 receivership... all parties will be paid and we will all get over it, quickly !. Option 2 Government support and we will still be reading about this every week for the forseen future. Time to cut the apron strings.....By the way South Islanders your farms where never worth that money they have been inflated by the finance ponzi and its reality time.
privatise the gains ......
privatise the gains ...... socialise the losses
says it all really, doesn't it.
ps note to John Key:
Dear Mr Key,
I started this small business, but I am being taxed out of existence. Would you consider perhaps a 50% tax waiver for this current year ending 31 March, 2011.
This will increase my cash flow, as it would reduce my current provisional tax payments. This would enable me to spend more and get the economy going.
There's a good fellow, I am sure you can "arrange something".
Look forward to your positive reply.
Yours faithfully
NZ Small Business
Just as an idea, would the
Just as an idea, would the taxpayer be better off if the government keeps SCF going until the GG runs out?
Then they could let it go down the gurgler, and just bear the loss of what was put in to keep it going rather than the cost of the whole capital write-down and receivers fees etc.
Of course, they would have to keep such a strategy entirely secret otherwise investors wouldn't touch SCF with a 40-ft barge pole...or maybe they would; there seem to be some idiotic investors around.
Having been out of NZ for
Having been out of NZ for much of this year, I am not fully up with the conditions relating to the extended GG, but was it not the case that the GG was only available to firms with a credit rating?
If so, that begs the question 'How did an a firm that was making losses, and offering very generous terms to investors, get a credit rating?'
The market price for anything
The market price for anything is what a willing but not anxious seller is prepared to sell to a willing but not anxious buyer. If SCF does go into receivership then a probable result is the distressed sale of a significant chunk of dairying land (and possibly the associated Fonterra shares) in the South Canterbury region.
This could result in - a significant buying spree from offshore interests providing the OIO approves (which would keep the land unit costs up) or a fire sale price for those with the cash and/or funding to stump up and net a bargain.
Given Graeme Hart and Rank/Reynolds Group are up to their eyeballs with Pactiv - then there is a road paved for a bunch of smart and astute investors to jump in... unfortunately the myopia of unsophisticated investors (yep the ones who have overweighted investment in relatively risky investments such as finance companies and the like for what appears to have been a few points over risk free) are likely to ignore the opportunity to get into a pastoral company that may be able to enter at a firesale price with a decent chunk of Fonterra or be able to obtain synergies from the supply chain/logistical savings with Synlait or their own processing plant.
I dunno if there is anyone who can move into the opportunity space but there's a bloody yawning opportunity if the current administration keeps the shackles on overseas investment - otherwise you'll see a big wealth transfer... and it won't be staying domestic.
I am uncertain what is the
I am uncertain what is the Government's exposure on the guarantee. Whatever, there is already an effective receivership. If the Government is called on to pay $1.7bn they will call the shots anyway. They will step in, having rights as the largest creditor, and be expected to minimise their losses and recover what they can. The failure already has occurred and risk offloaded to the taxpayer via the guarrantee ; once again short term deposits have been applied to fund long assets or speculative ventures with uncertain income. The taxpayer will have to pick up some or all pieces to recover their position under the guarrantee and possibly minimise other economic hazards. This is going to be political and financial can of worms. So far no one has questioned the honesty of the parties but some unsound judgement is certainly evident.
Consideration should be give to providing a mandatory term of imprisonment for all the directors and the principal accountant of any company that fails if it accepts short term deposits from the public and applies them to long term loans or situations. The risk has been known for centuries and no accountant or director can argue they have not acted recklessly in taking it on.
It isn't true that by
It isn't true that by accepting the nation's largest independent finance company into the extended scheme earlier this year, the government has already decided South Canterbury Finance is Too Big To Fail. Any finance company, big or small, that meets the criteria set by the previous Labour Government is entitled to be in the scheme.
The government should not be guaranteeing finance companies, any more than it should be guaranteeing banks, or any other business. But governments throughout the world have been doing just that for the last two years. The alternative was financial meltdown, the cost of which would be much greater.
Mismanagement of some finance companies, and fraud with others, has meant those companies failed earlier. It is a surprise in hindsight that SCF has lasted so long, with suspicions of both. But all will now die, the good, the bad and the indifferent. The reason is simple - a crisis in confidence. A classic "run on the bank". No one puts money in finance companies now. They are history.
Unfortunately most of the world will avoid this problem. They will prop up their banks, some will fail, but most will survive. The cost to the taxpayer will be minimal.
Here we will have to meet the cost of the failure of the remaining finance companies who are under the deposit guarantee scheme. Hopefully the rest will not fail until after the scheme ends.
When the final bill is known, it should be sent to Washington. America ultimately caused this financial disaster, and should pay the cost.
" Bill English will be hold a
" Bill English will be hold a press conference at 1.00pm to give the Government's response"