Nash Stuart: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
Nash Stuart: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
[Volume:657;Page:6087] 
STUART NASH (Labour) 
: 
 I will talk about some of the clauses in the regulatory impact statement of the Crown Retail Deposit Guarantee Scheme Bill. I will also pose a couple of questions in the next 5 minutes to the Minister of Finance in the hope that he will take a call and answer these questions. As has been mentioned I think this is a very important bill and it has fiscal implications. It has wide-ranging investor and saver implications and I think all of New Zealand would like to hear what the Minister of Finance has to say on those things. 
As my colleague the Hon David Cunliffe mentioned the amount of the fees collected under the current fee structure to date is approximately $87.4 million per annum. Imagine I ask my colleagues how much of that $87.4 million collected in fees for the retail guarantee scheme could have gone to the adult and community education scheme. If the Government put $13 million into adult and community education it would not be in the bother it is in at the moment. But anyway that is another story. One thing I will elaborate on which the regulatory impact statement talks about— 
The CHAIRPERSON (Eric Roy) 
: A thoroughly different story. 
STUART NASH 
: It is another story but it is a very important story Mr Chairperson. One day we will talk about that. I found the regulatory impact statement on the Internet. It is not in the bill. It is not in the bill at all. If we want to know what this bill is about we have to go to the Internet which I do not think is a great process. 
Hon Lianne Dalziel 
: It would be all right if we had a select committee hearing. 
STUART NASH 
: Well we should have a select committee hearing really should we not? I will elaborate on a couple of points that my colleague the Hon David Parker talked about which relate to economic distortions. I will read a couple of things in this regulatory impact statement. “Economic distortions include encouraging guaranteed depositors and deposit taking institutions to make riskier investment decisions since the gains from these riskier decisions will be accrued by the depositors and deposit taking institutions while potential losses to depositors (of up to $1 million per depositor per institution) will be borne by the taxpayer. This is referred to as a ‘moral hazard’ problem. An example of this ‘moral hazard’ problem within the current DGS is that finance companies which tend to be involved in higher-risk and higher-return lending have grown their deposit books by approximately $880 million (19%) since the guarantee was introduced in October 2008. Before the guarantee the deposit books of many finance companies were shrinking. In some cases finance companies have used retail funding to replace their bank funding lines.” I think many New Zealanders would find this rather abhorrent considering how many ordinary Kiwis have lost their life savings through the mismanagement of depositors’ money. 
Let us look at the objectives in the regulatory impact statement. “The Government seeks a stable and economically efficient financial sector that supports growth in economic activity by minimising economic distortions while not exposing the Crown (and thus taxpayers) to undue fiscal costs or risks.” I think we all agree with that. “This requires a diversity of innovative financial service providers that are prudent in their lending decisions can adapt to changing circumstances and investors in these institutions that understand the risks involved and can price these risks accordingly. This reduces moral hazard ensuring well-priced credit markets. Ensuring a viable non-bank sector in the future is important to this end particularly as it provides competitive pressures upon banks and provides services in areas not otherwise provided.” This is what I talked about in my second reading speech when I discussed the differentiation between savers and investors. The vast majority of Kiwis who lost their money in finance companies were actually savers. They trusted Colin Meads Richard Long and all those characters— 
Hon Lianne Dalziel 
: Sir Colin Meads.  
STUART NASH 
: —sorry Sir Colin Meads—who said: “Invest in this.” Ma and pa who watched Colin Meads play his 55 tests said: “He knows what he is talking about. I will put my money”— 
Amy Adams 
: Solid as! 
STUART NASH 
: Good one! They said: “I will put my money in this.” The savers did that. I argue that the vast majority of Kiwis who lost their money were savers but I now contend that many people who put their money in finance companies—we are talking about $880 million worth of funds that have been invested which is an increase of 19 percent—are actually investors. They are not putting their money in there to save; they are putting their money there because they know it is under a Government guarantee. 
I want to know how the Government and the Minister of Finance believe that the Government will be able to extricate itself from the situation it has found itself in without a further run on non-bank funds like we saw with the collapse of the finance sector. It could be that once the Government guarantee is over people will pull their money out because it is a risky investment and they will put it back into a bank. That is a big concern and it invites the question: will we be back here in a year again debating under urgency an amendment to the Crown Retail Deposit Guarantee Scheme Act called the Crown Retail Deposit Guarantee Scheme Amendment Bill of 2010?