Stuart Nash MP - Financial Alarmist (on the Crown Retail Deposit Guarantee Scheme)

Who is the most Alarmist and Inaccurate proponent of the Crown Retail Deposit Scheme?

Today I have found the answer in a transcript of a Parliamentary Debate on the Crown Retail Deposit Scheme Bill that was rushed into law last month. It appears that MPs had plenty of very good criticisms of the scheme (huray!), but they all voted for it anyway (very bad).


However I've also found this gem from Stuart Nash MP (Labour, list):

I will back up a lot of what my colleagues have said around the Crown Retail Deposit Guarantee Scheme Bill. Labour supports it for a number of important reasons. The first of three main reasons relates to the fact that, at the time the retail deposit guarantee scheme was set up by the Labour Government, the world was going through a period of intense financial crisis. I mentioned that the BNZ was literally days away from putting in place its crisis management strategy plan for operating a major financial institution without the ability to raise overseas funds. That was done on a Sunday evening. I think Dr Cullen worked for 48 hours flat without sleep to get it implemented, and I think it was done a day after the Australians announced their scheme. It came in at pretty much the same time. The reason for that, as has been outlined, is that there was a belief that if the Australians had set up such a scheme and New Zealand had not, then there may be a run on funds from New Zealand banks across the Tasman, therefore necessitating the collapse of the New Zealand banking sector. We all know that would have been a complete and utter disaster for our economy.
First and foremost, the measure was undertaken to shore up the financial sector. That was vitally important. The second reason why we support this bill—and it relates to a lot of Part 2—is that a social cost is involved. It is disappointing, because I do not think the National Government has once mentioned the social benefit of this scheme.

So there you have it:

1. Bank funding crisis management strategy plans are produced to make nice reading for the depositors/creditors and/or supervisors, to make them feel good about how well prepared the bank is. God forbid that they might actually take actions to deal with stress situations! That is what the government is for, isn't it?
2. The BNZ actually considered using a crisis management strategy! Surely it shows that the bank was on the brink of failure! Err.. no ... actually their December 2008 quarterly disclosure statement shows they continued to be profitable, well capitalised and liquid during the quarter. (They continued to have access to supposedly closed offshore commercial paper markets to raise funds, however on very short maturities (i.e. overnight), so, each day they would roll over their CP funding, and the crisis plan would only be used if the bank was unable to roll them over or re-issue. (see below for more detail and for the evidence.) And if they did use the crisis plan, there is no indication it would not have been successful, as the big banks had ample sources of alternative funding, via selling assets to their Australian parents and using their residential mortgage loan books as security to borrow from the RBNZ.)
3. Contrary to RBNZ and Treasury advice 2 days before the scheme was introduced, that the scheme was not necessary and not recommended, "there was a belief that if the Australians had set up such a scheme and New Zealand had not, then there may be a run on funds from New Zealand banks across the Tasman, therefore necessitating the collapse of the New Zealand banking sector." Yeah Right!
4. Contrary to the same RBNZ and Treasury advice that major NZ banks continued to have access to offshore commercial paper (albeit at higher cost and shorter terms than usual) that to others were 'closed' and a RBNZ report released in May 2009, showing that New Zealand banks were still able to access supposedly 'closed' offshore wholesale funding during the height of the crisis and that no liquidity crisis occured, the entire NZ banking system was heading down the tubes!
5. The scheme prevented a social costs and had social benefits. Hmm.. like the $800m the government provisioned for paying out losses under the scheme? Like all the distortions his colleague MPs, Treasury and RBNZ and other have complained about?

One wonders if it is possible to find a less accurate and more sensationalist and alarmist presentation of the issue. Thanks Stuart Nash, MP (Labour, list). All those degrees in management and business are paying off well, thank God we have such financially literate and wise MPs to represent us.