Hard News: Meaning well with the money of others
195 Responses
First ←Older Page 1 … 3 4 5 6 7 8 Newer→ Last
-
Hmmm. That Cullen budget reference from 2008 says that
The scheme will be free for institutions with total retail deposits under $5 billion. A fee of ten basis points per annum will be charged on total deposits above $5 billion. This means that a bank with $20 billion in retail deposits would pay $15 million in fees per annum.
So SCF wouldn't have had to pay anything to be in the scheme. But all the big banks will have provided the money which goes out the door to investors. Bet the big banks won't be pleased.
My take on the incredibly rapid payout is that Treasury is very scared. If the guarantee scheme didn't pay up quickly in this case, then it isn't a guarantee scheme at all. Thus people would stop saving and putting money into financial institutions and those financial institutions wouldn't have money to lend on houses or businesses... That way lies a second credit crisis.
BTW, something I ran across when the 2008 credit crunch hit (probably in The Australian because we were over here travelling about) was the only explanation I've ever seen of why Standard and Poor (or other rathing agencies) gave such bogus safe ratings to those packaged up house loans. It was because AIG underwrote them. Apparently if a big financial institution underwrites some financial paper then that paper takes on the rating of the insurer. That explains both why the ratings of the junk CDOs were wrong, and why AIG nearly went under and was (that phrase again) too big to fail. That's also why lots of people were annoyed when the US Government gave all the bucks to bail out AIG and they passed it on to the chief culprits in the whole affair! Contracts in place.
I mention all this because here we have Treasury playing the role of AIG. Contracts are in place, and the money goes to the investors. Is Treasury too big to fail? Hope so!
-
It would perhaps be more sensible to put away the bad words for once and take a break from pointlessly personalising the issue.
Quite so. You make points clearly here and on your blog. There's no need to smear invective over them.
People make the wrong decisions, for the wrong reasons. By the mid-2000s it was pretty clear to me that many of Cullen's were about priming a bubble economy - and for that reason I think the National Government have a point. There isn't much way for them to let huge masses of non-productive capital out of the economy without stagflation or a prolonged recession, or a collapse in property (residential, commercial, and farm) prices. Of course, I'm hardly convinced they think inflationary capital is a bad thing either. But the point is that Cullen, like his counterparts, thought he had the interests of New Zealand in mind. Calling him something peurile might make you happier - he may deserve it - but it drives away people for whom it grates. I can't tell you how to blog, but I negative comments from reasonable people about the tone of your blog, at the same time as they commend the content.
-
It wasn't just "Michael Cullen" -- the scheme had cross-party support because there was a real risk of a ruinous loss of confidence in the banking system.
Sure -- but I don't think you had to be a ding-dong Tea Bagger (since you brought them up) to be ever so slightly pissed off that TARP funding went to eight and nine-figures bonus payments for the pirates who landed Wall Street in the crapper in the first place.
Yes, you can say that unintended consequences are part of life especially when time is of the essence. But that's pretty cold comfort for the Republicans who (however reluctantly) thought voting for it was the least of all possible evils, and got themselves a primary tea-bagging from their own right flank for their troubles.
-
Why? Because he was a lovely guy? Or he saw how best to run such a wild machine.
There's a statue somewhere in Washington depicting trade as a wild horse being bridled by a man. IIRC it was a federally-funded art piece as part of the response to the Depression. One can see the inspiration.
-
But all the big banks will have provided the money which goes out the door to investors
Ah, no.
The government has collected $74 million, and has budgeted to pay out $900 million
-
Given the global context, I doubt the response would have been any different no matter who was in government - and didn't they explicitly work together on it anyway?
Can I slap both Cullen and Bill English as long as I promise not to put my jewellery back on when it's Mike's turn? :)
Sure -- but I don't think you had to be a ding-dong Tea Bagger (since you brought them up) to be ever so slightly pissed off that TARP funding went to eight and nine-figures bonus payments for the pirates who landed Wall Street in the crapper in the first place.
Having said that, there's toxic levels of shameless chutzpah as the GOP spins itself as the party of fiscal probity and prudential stewardship. In the real world, high functioning psychosis and early-onset senility are considered serious health problems. On Capitol Hill it's a successful mid-term strategy.
-
Can I slap both Cullen and Bill English as long as I promise not to put my jewellery back on when it's Mike's turn? :)
No, Mike would slap back, Irish primal shit.
-
and violence is bad o.k
-
Blaming Michael Cullen is very unfair. A lot of his work has been undone by this government. They could have removed the guarantee too if they wanted.
-
The thing is we had nine years of growth and it feels worthless. The
last three were totally artificial , what could a finance minister do but pat the economy on the head? It's the economy. -
I'm not sure we can blame Government for the fact a big payout is required under the guarantee scheme. Had the scheme excluded finance companies, as some have suggested, it may have led to a number of institutions collapsing overnight as people tried to get their money out. Sure, some of these (including SCF) have collapsed anyway, but it would have been pretty hairy for our economy had they all folded at once.
If we're going to blame politicians, then let's ask them why it has taken decades for us to even begin to talk about proper regulatory oversight of our capital markets. Maybe if our leaders hadn't been quite so obsessed with deregulation we might have seen a better a better organisation and co-ordination of regulatory authorities to catch out some of these rip-off companies and shysters. Some more sensible disclosure rules would also help, so investors get information that actually informs them.
And the sports stars and celebrities who endorsed these failed companies ought to be tarred and feathered...
-
Careful. That's "mum and dad investors"™ you're talking about.
hell no, they're all waiting in the wings to invest in KiwiBank - The Willy Wally from Wallace, er Bill English, told us so...
In the US after the '29 crash and the great depression Roosevelt passed a bunch of laws limiting what banks and other financial could do, at the same time providing limited deposit insurance.
The Glass-Steagall Act the repeal of which was championed by the triumvirate of financial "Freedom" er, malfeasance: Larry Summers, Robert Rubin and Alan Greenspan, the fourth rider of the apocalypse must've been on holiday in the Bahamas (or Caymans)...
There's a statue somewhere in Washington depicting trade as a wild horse being bridled by a man.
saddled with debt and
spurred on by cowboys... -
..and shat on by passing Steagalls
-
Blaming Michael Cullen is very unfair. A lot of his work has been undone by this government.
@Hillary: Would it be OK to grant that not every thing Michael Cullen did as Minister of Finance was a heartbreaking work of staggering genius laid to waste by the evil baby-eating Tories? In return, I'll concede that on the balance of probabilities he didn't write his Budgets using the blood of virgins.
20/20 hindsight would be a wonderful thing if we didn't have to put up with crappy reality, but ignoring reality is that useful either.
-
If a farm goes bust because the farmers leveraged himself up the wazoo, it's still a farm and can keep on growing and selling stuff, albeit with a different owner. Surely
We're really talking about welfare for National voters here, aren't we. -
Find the applicable scientists and get them on to it.
Physicists. The financial institutions paid shitloads for them because they were "good" at modelling chaos.
.......I wonder how many are left....???
-
We're really talking about welfare for National voters here, aren't we.
Really? No - if anything, this is a political lose-lose for the Government no matter what happens. And if you don't believe me, just look at the battering the Democrats are taking in the polls because they got stuck holding the Rosemary's Baby the GOP are now disclaiming all paternity of.
-
We're really talking about welfare for National voters here, aren't we.
Yes, I'm sure that's exactly what Mr Cullen's plan was when he set the deposit scheme up.
-
20/20 hindsight would be a wonderful thing if we didn't have to put up with crappy reality,
But Craig, dear chap, it's not the reality were looking at, it's the collapse of fantasy that is the problem here. The system is supposed to work like this.
You give me your money and I will give you more back, as long as I can find people who want to borrow that money from me at a higher price than you are charging me. This works great all the while I am lending to people who are adding value with their expertise and hard work. It turns to shit when that added value is purely imaginary, as in too good to be true.
I am still at a loss as to where the money has gone, or was it just imaginary money to start with?. -
I am still at a loss as to where the money has gone, or was it just imaginary money to start with?.
Isn't that what the banks did (do), lend money they haven't got yet.
Capitalisation baby. -
I am still at a loss as to where the money has gone
In a whole lot of brown envelopes scribbled on in builder's pencil and buried in suitcases in the backyard Timaru soil..
-
The mind boogles the morning the independent auditor or whatever finds the amount of debt at these places.
" Ah, Alan can I have a word to you after morning tea."
-
3410,
lol, Sacha.
-
Any thoughts on the effect of that much money freeing up for re-investment more-or-less at once? It seems like a huge amount to me, but how does it actually compare to a typical say, month on the NZ markets?
-
3410,
Radio news now reporting that English expects to get only $600m back, so - if correct - now it looks like we might be in the hole for $1.2b!
Post your response…
This topic is closed.