Nash Stuart: Crown Retail Deposit Guarantee Scheme Bill — In Committee Third Reading 
Nash Stuart: Crown Retail Deposit Guarantee Scheme Bill — In Committee Third Reading 
[Volume:657;Page:6131] 
STUART NASH (Labour) 
: 
 I rise to support the Crown Retail Deposit Guarantee Scheme Bill in its third reading. It appears that there will be two things that will expire in October 2011—the Crown retail deposit guarantee scheme and by the look of things the National Government. Bring that on! As has been previously alluded to the Crown retail deposit guarantee scheme was urgently put into place by the Labour Government for a number of social and financial reasons. The main financial reason however was to create a level of global confidence in the New Zealand banking sector through the provision of Crown guarantees thereby allowing the level of liquidity required to allow New Zealand - domiciled banks to operate. Put more simply the scheme allowed our banks to continue to borrow money when there was a risk that they could not. That risk was not good. Australia had instigated a similar scheme just the day before I believe and if New Zealand - domiciled banks were to be able to gain access to a very tight pool of global funds the scheme was imperative. 
Members will remember at the time—a year ago—global financial institutions and household names like Lehman Brothers Bear Stearns Bank of America Fannie Mae and Freddie Mac had either failed or were in the process of failing. They were huge institutions with enough leverage to cause the type of credit crunch that the world was beginning to experience. At this point we were not sure what depositors in New Zealand would do. Would they do what they had previously done to the finance companies—namely start a run on deposits caused by a crisis of confidence leading to a sector-wide collapse and near extinction? The scheme came into effect on 13 October 2008 and was to last for 2 years. Hence the reason we are in this House today debating the passage of this bill. 
As I mentioned and many of the Labour speakers have mentioned it I have some concerns over the urgency nature of this bill because I believe it favours the rule of money over the right of the people to have their say through the select committee process which is a fundamental principle of our democracy. Of course the dire and urgent circumstances under which the first Crown retail deposit guarantee scheme was implemented are markedly different from the state of the current global financial sector today. The reason the original scheme did not have its own legislation is simply that the House had been dissolved in the countdown to the general election and therefore technically there was no ability to take this through the legislative route but most important in October 2008 the world’s financial system was in meltdown and decisive action was required. That is why it was done in 24 hours and implementation was immediate. 
The times have changed. If nothing else we now know the state of the global economic situation and this knowledge has allowed Governments around the world to put in place packages that have alleviated the worst of the effects of the global meltdown. That knowledge has allowed prudent banks including those operating in the New Zealand market to rethink their fundamental philosophies around the pricing of risk and the management of growth. That has allowed them to develop strategies that are in line with the state of the market as we now know it. Actually we are now at the point where the large banks are currently analysing the cost versus the benefit of their participation in the retail deposit guarantee scheme. There is a price for participation. For example a bank with $20 billion in retail deposits would pay around $15 million in fees per annum. That is more than the Government has cut from adult and community education in the Budget which means that for example in Napier no high school will be running night classes in 2010. So the 6000 students who took those classes in Hawke’s Bay will not have the opportunity to upskill socialise or improve themselves personally or professionally. Our people in our communities are the worse for it. But that is another story. 
The reason that I bring up the change in circumstances is that this bill need not have been forced through under urgency. It could have had a very tight reporting-back time. As a member of the Finance and Expenditure Committee assuming that the bill had come to that committee I would have been most interested in hearing submissions from all affected parties especially submissions for the major banks—except that the major banks are averse to presenting submissions. That is the irony of this bill. The major Australian banks have done very well out of this scheme as have the New Zealand economy and New Zealand depositors. Do not get me wrong; I understand the value to the New Zealand economy of the big Australian banks. But the irony of this bill is that the banks have taken advantage of the scheme but they have refused to appear before a banking inquiry to alleviate the fears and dispel the rumours about the current state of the banking industry and the way they are treating ordinary Kiwis in terms of the amount they are charging on short-term floating mortgage rates. I spoke to one of the bigwigs of one of these large banks and asked him why he did not just come along to the inquiry just to show and prove to Kiwis that in fact the banks are not ripping off ordinary New Zealanders to dispel that rumour and dispel that perception. He said: “Cobber you are probably right.” but it did not change the bank’s stance. 
Anyway as I was saying the true urgency has actually now disappeared from this scheme. It has another 13 months to run in its current form and therefore there is enough time to follow the proper course for passing legislation. The Minister of Finance told us yesterday that he made a call due to the need for certainty. I accept the fact that financial markets operate optimally in an environment of certainty but I would contend that we could still have afforded certainty 13 months out. I also ask if this bill was important enough to rush through under urgency why it was not on the Order Paper 6 months ago when we were debating the secondhand-car dealer bill or other legislation that although important perhaps did not have the same national interest as this Crown retail deposit guarantee scheme does. After all this bill will protect over $120 billion in deposits currently held by the banking and non-banking sector. Did Gerry forget to put it on the Order Paper? 
That Minister of Finance coincidentally was also the Minister of Finance during the last crisis of the 20th century. Most economic commentators and historians have concluded that he handled that crisis pretty badly. Coincidentally he is still trying to implement 20th century stimulus packages when the rest of the world has left Friedman behind and started limiting economic measures to those targeted at people who need them—those on low and middle incomes—instead of a third of all tax cuts going to the top 3 percent of wage and salary earners. Do members know that if a person earns under $40000 that person receives nothing from the Government tax cuts? In Hawke’s Bay that is around 75 percent of the population who receive not a penny in tax cuts from Mr English and the National Government. Anyway I digress. 
Hon Dr Nick Smith 
: How much did Labour give in 9 years? They put their tax up for 9 years. 
STUART NASH 
: That is very interesting because I would say that the Labour Government was in fact the only Government in two generations that cut the corporate tax rate. And do you know what? Nick Smith voted against it. Nick Smith voted against a cut to the corporate tax rate. Goodness me! Anyway I digress. 
Along with all my colleagues I support the substance intention and philosophy of this bill but I reiterate my grave concern about the lack of any sort of transparent consultation with the wider community. In my view meetings with Treasury and the Reserve Bank do not constitute wide consultation with the affected participants that make up the bank sector and non-bank sector in all its many and varied permutations. Thank you Mr Deputy Speaker. 
Bill read a third time.