Tuesday, 31 August 2010

Hubbard’s ‘bad bank’

By Jenny*

While National MPs claim there is no money to pay teachers or doctors, the government prepares to hand over, up to half a billion dollars to private investors who bet on a lemon.

The lie is, that this must be done for the good of the economy.

It didn’t make any difference in the US and it won’t make any difference here.

Sinking deeper and deeper into recession, the American example shows that the idea that private sector bailouts are good for the economy is pure unadulterated bull. The only ones to benefit from public bailouts of private investment companies and bad banks, were private investment companies and bad banks, their overpaid managers and fat cat shareholders.

The US government and the country at large were impoverished by multi- billion dollar bailouts of bad banks and investment companies.

While wealthy investors were looked after, tens of thousands of average Americans who had their jobs and homes taken from them, due to the malfeasance of these same finance companies and bad banks – were shown no such largesse.

Why can’t New Zealand learn from what has what happened overseas?

The truth is that saving the economy is not what private sector bail outs are all about.

Taking care of the well off, at the expense of everyone and everything else, including the economy, is what it, is all about.

Yesterday, Liam Dann the Herald’s business editor, described how the National government has deemed Alan Hubbard’s “Bad Bank” as a New Zealand’s version of “too big to fail”.

Liam Dann on Hubbard:
Put the probe into his personal financial entities to one side. The real story is South Canterbury Finance – the $900 million liability hanging around the taxpayer’s neck…..
Hubbard lost control of that company earlier this year after it had breached its trust deed.
He was removed from the board and given the sentimental title of President for Life
By that point the Government had already effectively decided the company was too big to fail.
The bad loan “bank” is up to its neck in $600 to $700 million of debt on assets that may yield as little as half of that when they are realised.
When it is euphemistically said that South Canterbury failed to “stick to its knitting” it is the bad bank that people are talking about.

For people on suffering the pain of minimum wages barely enough to pay the rent, without the luxury of spare savings to invest in high finance. It’s a bitter irony that wealthy and middle class investors should have their speculative losses made up by a government that viciously opposed raising the minimum wage. What do these people know about hardship?

While the government continues to do nothing about joblessness and low wages, the question is, how many more millions of dollars will they uselessly throw investors way, as the recession deepens and more finance companies go under?

*First published as a Guest Post on the Standard, submitted by the author to UNITYblog.
The debate on this and other posts on the Standard is worth checking out for those wanting to get their heads around this issue.

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