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:6109] 
STUART NASH (Labour) 
: 
 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. 
Amy Adams 
: Yes I mentioned it twice. 
STUART NASH 
: Ms Adams has mentioned it. Well done. That member did it once. That must be once out of about 30 calls. Mind you members opposite have stopped taking calls to shut down this debate. But the social aspect of this is quite significant. Dr Cullen and the Labour Government made it very clear that one of the major reasons Labour was implementing this retail deposit guarantee scheme was to prevent a further deterioration in confidence in our financial sector in addition to that which existed because of the collapse of around 30-odd finance companies. It was 30 or 40; the number escapes me. It is incredible that so many New Zealanders lost so much money. 
David Parker and Lianne Dalziel talked at length about the distortions a retail guarantee scheme puts in place and that is what I will lead into at the moment. The banks are now debating their continued participation in this scheme. There is a huge difference between now and a year ago due to the nature of the crisis. Global liquidity has freed up to a certain extent. To be part of the scheme banks had to pay money so they are now undertaking a cost-benefit analysis around it. The concern I have relates to the non-bank sector. In respect of retail companies we saw a lot of savers versus investors. There is a very important distinction there. Savers are those people who are putting their money away and who have paid taxes all their lives. They have put their money away for their retirement for their children’s education or for their grandchildren’s education for whatever reason. But they squirreled away money in those companies and they have lost it. They have nothing to go back to. I firmly believe they did not price risk. As mentioned this week is actually financial literacy week. I firmly believe New Zealanders have very much a DIY attitude to their financial management which is not the right way to go about it. When they see icons like Sir Colin Meads stand up and say that an investment is as solid as houses or as solid as the proverbial— 
Hon Lianne Dalziel 
: He said: “Solid as.” And he is Sir Colin Meads. 
STUART NASH 
: I am sorry; Sir Colin Meads. He said it was “solid as” and many New Zealanders believed him without pricing risk without going through the disclosure statements and they lost their money. I believe that the shift towards finance companies has gone from savers to investors. Investors understand that their funds are guaranteed under the current scheme. Evidence of that is $880 million in deposits put into finance companies since the scheme was implemented. That is an increase of 19 percent in funds in a sector in which the deposits had begun to shrink. They had absolutely begun to shrink. My one major concern is that investors are now the main contributors to finance companies. What will happen when the scheme runs out? There are two options—two things might happen. Investors who are probably in a better position to price risk will say that investment in a finance company has now—