Cosgrove Clayton: Non-bank Deposit Takers Bill — Second Reading 
Text is incorporated into the Bound Volume 
Cosgrove Clayton: Non-bank Deposit Takers Bill — Second Reading 
[Sitting date: 02 August 2012. Volume:682;Page:4254. Text is incorporated into the Bound Volume.] 
Hon CLAYTON COSGROVE (Labour) 
: 
 For a moment I was almost in tears! My colleagues will note that very few things in life stun me into silence but for a moment there I became a tad misty-eyed I have to say. It is an emotional place the Parliament from time to time is it not? 
Getting back to this bill the Non-bank Deposit Takers Bill the Labour Party does indeed support this piece of legislation. It is part of a series of measures many of which were initiated when we were in Government in terms of preserving the integrity and credibility of the financial sector. But I have to say that when I read the bill given recent weeks and where it talked about non-bank deposit takers I thought for a moment that they were talking about John Banks. Because you could argue that John Banks of course was a non-bank deposit taker—in a number of ways! When we get to the Committee stage I just wonder whether we could ask the Minister of Finance when he is in the chair whether these provisions would apply to all sorts of banks including the Hon John Banks. 
 I am sure we could wax eloquent and in the spirit of Mr McClay’s fondness for my career prospects I will not delve into that— 
Andrew Williams 
: But did he take a deposit? 
Hon CLAYTON COSGROVE 
: Pardon? 
Andrew Williams 
: Did he take a deposit? 
Hon CLAYTON COSGROVE 
: Well the member raises a very—not Mr McClay; that would be unfair. Did John Banks take a deposit indeed? 
Dr Cam Calder 
: He is voting against the bill. 
Hon CLAYTON COSGROVE 
: He is voting against the bill is he? Oh that is interesting. But I have to say on a more serious note given that there is a lot of love in the room that this bill is about preserving the credibility and integrity of our financial system. 
But I would just make this other point in passing on a very serious note. Although these regulations are about the private sector and as Mr Parker said prior to the global financial crisis we had institutions in New Zealand that fell over and as a result of that—well you could argue that they fell over. I do not mean this in a humorous way but you could also argue that some were deliberately pushed by some of the individuals who now reside in the clink and yet it is the poor old taxpayer or the investors—thousands of them—some of whom for those reasons find their future financial security is in jeopardy. But I just say this: that is the private sector. 
There is also a scheme called the Crown Retail Deposit Guarantee Scheme. Although this is not absolutely germane to this piece of legislation I do note in passing that as the result of the scheme which was of course put in by the Labour Government—I know Dr Nick Smith will jump up and down and become possibly animated if he takes a call about this. It was put into place—and before Dr Smith makes the point on this I will do it for him. I remember the day it was put into place because I was an Associate Minister of Finance. It was the day of our party launch. I know Dr Smith is fond of saying that that was all done for political hanky-panky sorts of purposes but it was done because the Australians as I recall contacted us and said: “We are doing it. We are letting you know.” and we had to act that afternoon because we did not want the possible fiscal implication of people saying: “Our deposits are secure in Australia.” Therefore if the Government of New Zealand at the time was not going to do it there would have been a run on the banks—not John Banks—and deposits would flow out of New Zealand to Australia where in theory they would have been more secure. 
Dr David Clark 
: Faster than a helicopter to the Dotcom mansion. 
Hon CLAYTON COSGROVE 
: “Faster than a helicopter to the Dotcom mansion.” Mr Clark said. Well I could not possibly comment. But the point is that that scheme was put in place to ensure that there was not a run on deposits. 
The point I am getting to because this is an important point as we return to the bill is that that scheme was then inherited by the National Government. We heard before the Finance and Expenditure Committee that there was we think—the Auditor-General of course did a report and there was $300 million possibly even $500 million of excess losses right? Excess losses that the taxpayer had to pay for as banks ramped up because when the Auditor-General actually came in and spoke to the select committee I recall her saying that there was no written communication between Treasury and the Minister of Finance over a period of I think a month or a couple— 
Dr David Clark 
: Oh 3 months. 
Hon CLAYTON COSGROVE 
: —3 or 4 months. So that money just sort of washed out the door. You could argue that the financial sector gamed the Government because with a guarantee in place that guaranteed every deposit that was put in there and when you give a guarantee you have an absolute right to seek information and demand information to ensure you are not being gamed. So for there to be no traffic and no paperwork and no questions asked by the Minister of Finance at the time Bill English over a 3-month period it is absolutely evident in my view and the view of most of us on the committee— 
John Hayes 
: It’s not related to the bill. 
Hon CLAYTON COSGROVE 
: —on our side that we were gamed. It is interesting that Mr Hayes makes an interjection because I was about to come to “Sir Les Patterson” and it is this and I thank him for reminding me that I had to come back to him. In the Finance and Expenditure Committee we were actually very concerned—very concerned—that there was not appropriate oversight. Members will recall that the Government blocked us from getting Treasury and actually having a proper examination of this. We wanted to do that because the estimates were $300 million to $500 million of losses to the taxpayer and Mr Hayes interjected in the committee: “That’s loose change.”—loose change. 
John Hayes 
: No I didn’t. Quite wrong. 
Hon CLAYTON COSGROVE 
: Oh he denies that now. I would be very careful denying that on the record given the number of witnesses who there were. But putting that aside—putting “Sir Les Patterson’s” comment aside—that shows that it is not loose change to lose $300 million to $500 million. Returning to the bill the comparison I will make is this— 
Hon Trevor Mallard 
: Is this Dotcom’s bank? 
Hon CLAYTON COSGROVE 
: No no we were talking about non-bank deposit takers and I had already referred Mr Mallard to John Banks. I know that Mr Mallard having been a former Associate Minister of Finance will be eager to take a call on this bill given his intricate knowledge of non-bank deposit takers one of whom I think may be residing in this Chamber as we speak—from up north. But getting back to it we have a set of regulations here that are very appropriate—and we support them—to secure and maintain the security of our private sector financial markets. But the point I make in briefly alluding to the Crown Retail Deposit Guarantee Scheme is that you could argue that because of the lack of oversight from this Government it was gamed to the tune of $300 million to $500 million. It refused any retrospective oversight by the Finance and Expenditure Committee or to have this debated in the Parliament so you could ask: does the Government need to up its game in terms of ensuring that there are not unintended financial losses to the taxpayer? I would have thought the loss of $300 million to $500 million is not as John Hayes said to the committee “loose change”. It is a substantial amount of money. 
So I would argue that if it is good enough for us—and it is and it should be and the Government has done the right thing in carrying on the work of our previous Government. I am not point-scoring on that. I think both Governments have worked—and certainly Mr McClay is right about the Finance and Expenditure Committee as we work well together in New Zealand’s interests. But I think if it is good enough for us to make sure that there are strict requirements on the private sector in terms of non-bank deposit takers and ensuring that the private sector’s integrity and credibility is locked in and therefore that confidence is maintained to invest in that market and in that sector the Government has an equal responsibility to ensure its house is in order. I just say for the record that it is interesting through the passage of this bill that there has been a lot of appropriate effort put into this but the committee and Mr English and every Government member has refused any form of Government inquiry into the Crown Retail Deposit Guarantee Scheme. 
 Even when the Auditor-General came before a committee and said that there was no written communication between a finance Minister and his department the Minister of Finance did not say: “Am I being gamed? Are there any controls in place to ensure that financial institutions do not rip the taxpayer off”—if you like—“and ramp up the deposits they take because they are guaranteed by the Crown?” and the Minister of Finance failed to ask any critical questions. I think one of the excuses that was brought up by Dr Nick Smith Mr Hayes and whoever else was on the Finance and Expenditure Committee was that there was an election. Well for 3 months after the election the Minister of Finance was derelict in his duty to ask the critical questions as he provided a guarantee to depositors to ensure that the Crown was not gamed. 
So if it is good enough I think for us through this bill to ensure that there is credibility and integrity around the private sector I say for the record that it should be good enough for the Government and its Ministers to at least wake up in the morning and ask the critical questions when they provide a Crown guarantee for deposits. I know Dr Nick Smith—as I said—will get up and say it was all politics. The record is that the Aussies went ahead and did it and if we had not moved on it that very day—that very day—there was the potential that Sunday for a run on the banks. He will get up and talk about politics campaign launches and stuff but I say this that “Sir Les Patterson” should get up and tell us why he called $300 million to $500 million “loose change”. Maybe it is because some of the change is a bit loose between his ears.