Monday, September 6, 2010

Who Would Have Guessed?

Sometimes little gems are found in amongst the dross.

Here's one from Reserve Bank Governor Bollard in today's Herald.

New Zealand officials set about devising a local version, with a cap and with a risk-based fee for the institutions covered.

But the more Finance Minister Michael Cullen heard about the likely parameters of the Australian scheme the more concerned he became, Bollard recalls.

"He now wanted to introduce a more generous guarantee, as the Australian one apparently would be. He thought the scheme should have free entry ... Such a plan would be very costly and would leave the way open for entrepreneurial finance companies to undertake risky investments at taxpayers' expense."

So now you know. It was MICHAEL CULLEN who let South Canterbury Finance in for a free ride on the tax payer.


Anonymous said...

Surprise surprise!

Well done Adolf.

Psycho Milt said...

From the same article:

The Reserve Bank's directors were not impressed by the guarantee scheme. "They considered it risky, mispriced and distorting. I had to agree but argued that, more importantly, it had stopped an incipient bank run."

Which is, of course, why Cullen had the full support of National to "let South Canterbury Finance in for a free ride on the tax payer," and why National had the full support of Labour when they extended the scheme a year later.

Also from the article:

It is easy to argue in retrospect that the parameters of the scheme should have been drawn differently, but Bollard is not so sure. "Could we have put in tougher entry conditions? I don't know."

Neither do the rest of us.

kevin said...

Yet another dead rat for cullen to own...

gravedodger said...

I do not care who did what to who but when any government puts a scheme in place to protect its citizens the said citizen should remember the quote from Ron Reagan, "The scariest words you will ever hear are I am from the government and I am here to help".
The deposit guarantee scheme was just more welfare and all welfare has unforeseen consequences that cause further harm and the SCF bailout was no exception.

Anonymous said...

It is a great shame that more people do not heed Gravedodger's excellent comments.