In the wake of the collapse into receivership of South Canterbury Finance, Treasury says taxpayers' will now foot the bill for all depositors of Crown guaranteed finance companies that default, including those that have already defaulted, regardless of any previous eligibility criteria in place for the Retail Deposit Guarantee Scheme.
(Update adds line on Treasury not disclosing what the extra cost to the taxpayer will be).
Acting Secretary to The Treasury Gabriel Makhlouf said the scale and complexity involved with repaying South Canterbury Finance depositors altered the costs involved in running the guarantee scheme.
"Repaying all depositors of all guaranteed companies that default will save taxpayers from having to pay ongoing interest that otherwise would have accrued as thousands of claims were assessed, processed and paid," said Makhlouf.
“Criteria relating to citizenship and tax residency will no longer apply and depositors will not be assessed using those criteria. The criteria for being repaid is that you are on the register of debt securities at the date of default,” Makhlouf added.
The decision applies for defaults by approved institution from the start of the current Retail Deposit Guarantee Scheme in October 2008 until it ends on October 12, 2010.
The following eight Crown guaranteed institutions have defaulted: South Canterbury Finance, Allied Nationwide Finance, Mutual Finance, Viaduct Capital, Vision Securities, Strata Finance, and Mascot Finance.
"The Treasury will publish details in due course about the process for repaying previously ineligible depositors," Makhlouf said.
Spokesman Angus Barclay said Treasury wouldn't disclose at this point how much paying previously ineligible investors in already failed companies would cost the taxpayer.
Debt securities eligible for repayment include: call deposits, term deposits, non-guaranteed deposits, debentures, and bonds. Equity securities such as ordinary shares and preference shares remain ineligible for repayment under the Crown guarantee.
This decision means repayments will now be made to some depositors who may not have previously been eligible for repayment.
"Eligibility criteria that include citizenship and tax residency will continue to apply in the event of a default after October 12, 2010 by entities approved for the extension to the Guarantee scheme. The extension to the Retail Deposit Guarantee Scheme runs from October 12, 2010 to December 31, 2011."
42 Comments
Polling Wolly. Only a year at most to next election. If the Govt doesn't step in big time now, the economy's down the plughole before the end of summer. Key's strategists really want to keep their numbers up so National can hang on until after the World Cup and coast in off the feelgood factor, and there'll be no close look at their policies with the hoo-ha around the rugby sucking most of the media airheads' airtime. That way they can finish what they've started this term in the structural reforms that are going to happen in their second term.
Why are you still in Noddyland?....when you get to aus, rent don't buy....one day soon you will understand why...in the meantime stop dreaming about getting rich when you have a wife and three kids...they are all the wealth you need!...less time trying to get rich and more time with the sprogs and the better half mate.
Bloke - take a deep breath. I don't agree with the socializing of private losses either but try and keep things in perspective...
Don't think for a moment Australia isn't capable of making bad economic decisions for political reasons.
As for the tax you pay here - look at this and ask yourself - "is the grass always greener?"
https://community.oecd.org/community/factblog/blog/2010/05/11/tax-who-p…
"Repaying all depositors of all guaranteed companies that default will save taxpayers from having to pay ongoing interest that otherwise would have accrued as thousands of claims were assessed, processed and paid"
I'm not happy about paying out otherwise inelligible people, either, but reading the quote above, it looks like keeping it quick and simple will save money, in that SCF et al is going to take ages to sort, during which time interest, admin, etc, costs all mount up.
Alan Hubbard has a lot to answer for....
You must be joking, is this any way to be running a Government?
Is this an indication of the respect this outfit has for the rule of law and taxpayers money?
So what if there is an interest component if the pay out is delayed, they are going to be borrowing the money anyway, there may be a difference in the rate that's all.
These guys are so stupid they'll be sending our money to Nigerian scammers next.
Anony, firstly how hard can it be to establish eligibility, let the claimants provide the proof, 99% of the rest can be done by some ning nong with a tick box. No "serious amount of time" involved
Secondly, - and this should have been done when they were rolled over by National - get the finance companies to establish the eligibility of their investors. Not difficult stuff is it.
Well I suppose it would be easier to just throw away our hard earned to folk that aren't entitled.
It does bespeak a kind of glazed-eye desperation.
You have to realise they will look after their kind, and their 'core' voter types.
Which inevitably will be close to home.
This is only a symptom of their bigger problem, remember. Irrespective of which players are on or off the board, this is what you get under a sinking lid.
Pity some folk didn't listen to Donella Meadows et al, circa '72.
Greg G
FYI No credit rating downgrade for NZ, says S&P
http://www.interest.co.nz/news/standard-and-poors-says-south-canterbury…
cheers
Bernard
Not at all impressed with this bailout.
They made their bed - they should also lie in their bed.
Have never had any of my funds in 'finance' companies - I have always seen them as Ponzi-esque - yet I am helping out along with all other taxpayers, paying for all the plonkers that have and thought it was a good thing.
As for blaming Key, English Cullen whoever - a waste of time.
The problem is not with the current politicians - it is with all politicians chasing votes and wanting to be seen to be doing something and acting like they are in control. The forces at work here are beyond mere politicians ability to sort out..
A plague on all their houses.
Grumpy grumpy
@BMR789
Remember the government guarantee for banks was seperate to the GG for finance companies, with the scheme being extended to deposit taking entities later than that to banks. the rationale for extending the scheme from memory was a little different - the Govt needed banks to keep on lending and avoid stressed borrowers, and bought into the (BS) that the banks were too important to fail. I have no idea what the rationale was to extending the guarantee to finance companies was, other than to stop a run of funds out of them to banks that were covered.
work out what the future holds (it's not rocket science, read a little Heinberg, google Prof Albert Bartlett, take a look at Stuart Staniford's blog) then stockpile what you think will be needed.
Wa/olly was onto it with copper. PV panels would be a good bet too. Don't think in terms of making money, skip that step and realise that money is just legal tender - go for the stuff of scarcity. It may be that you can make your house less energy-dependent, which is effectively the same thing. Ours costs nothing to run these days - last time we paid a power bill was back in '04.
The fiscal system can't outsurvive peak energy, unless everyone agrees to zero (then negative) interest - ain't that what we are seeing now? - so investing, in the traditional sense, will be a waste of time. If energy is to become the scarcity, why not invest in not being beholden to it?
cheers
We have been a socialist egalitarian state for many decades now , and this privatizing of SCF losses just proves the point . Both Labour and National have fallen into the trap of social welfarism . Buying votes ............... and picking someone elses' pocket to pay for it . Lest we forget , under both Mulddoon and John Key , the businessmens' friend , National , have behaved just as spendthrifty , just as wasteful of tax-payers' monies , as those perennial wastrals , Labour ............
WE ARE STUFFED !
Government simply wants the cheapest option for taxpayer. Back in 2008, there was no choice but to bring in the GG as otherwise huge amounts would have been taken out and deposited in Ausy and elsewhere, all who had brought in GG's.There would have been a depression in NZ there and then.
Now, it is cheaper to quickly pay every investor back quickly, rather than spend a lot of time trying to work out who and why are/are not eligible (gets very complicated ), as otherwise there would be an on-going interest bill piling up- I had deposits with SCFat 10.5% and 10.75%, so can understand why the govt wants this paid asap.
Get a grip Justice. The GG came about through no choice of the government, unless it moved once Aussy govt brought their one in, NZ was facing a run on the banks. Now, it has to honour the agreement as best it can. What's the point of suing the government, that's just nonsense . Thank goodness English and Key seem to be more level headed than the emotive clap-trap some are coming up with on this site.
I have always said and will say it again, this country looks after the very rich and the very poor ....if you are in the middle YOU are the sucker who bails these groups out ....SCF is a classic case in point.
"Privatise the gains and socialise the losses" seems to be the norm ......... the greed of those at the very bottom (expecting handouts) and those at the top of the economic heap (trying to make an unsustainable "fastbuck") have caused this mess .... so they should be the ones that sort it out.
Has anyone out there heard of the expression "PERSONAL RESPONSIBIITY" !
And that's why we are set to become the Financial hub of the South Pacific .
Because the taxpayer unwittingly underwrites every sweet deal....
And the same question arises to every sticky situation .....In whose interest..?
Mom and Pop ......? my arse
P.S. Bernard don't forget to add the new debt to each taxpayer Household debt ratio plus projected interest as they (for the most part) are in hock to the eyeballs or just flat broke.
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