Jones Shane: Financial Markets (Regulators and KiwiSaver) Bill Auditor Regulation and External Reporting Bill — First Reading 
Jones Shane: Financial Markets (Regulators and KiwiSaver) Bill Auditor Regulation and External Reporting Bill — First Reading 
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Hon SHANE JONES (Labour) 
: 
 Kia ora ano tatou. One hopes that members of the financial community up and down the country are taking note that legislation is wending its way through Parliament although the legislation really is a belated reaction in terms of the $6 billion - odd that has gone west associated with the failure of multiple finance companies. You see that was New Zealand’s episode of the subprime mortgage crisis. We are told that the derivatives market—opaque and complex; numbering trillions of dollars—actually lay beneath the collapse of much of the financial system in northern Europe and the United States of America. Although much of our financial apparatus was spared such pain we have lived through the loss of $6.5 billion worth of toilers’ and garden-variety Kiwis’ wealth; it has gone up in smoke. 
Those finance organisations actually had a very important role to fulfil. Mezzanine finance provided a level of financial support for investors and entrepreneurs beyond what a bank could prudentially allocate. It makes one wonder had those types of people been in charge of our major trading banks what the result might have been. One shudders to think about that. Other than Kiwibank we are stuck with Aussie-owned banks. Those banks remained stable during the recent financial imbroglio but many of the finance companies have turned to custard. This legislation unfortunately will not bring that money back in any manner or form. Let us not forget the size of the loss and the fact that an entire generation of savers have watched their wealth vanish. 
One of the most extraordinary examples concerned the protagonists behind the failed Hanover Finance investment. It is hard to imagine that the long arm of the law will ever catch up with them but who knows? Events like those show why legislation of this nature and extreme vigilance is needed. The original owners of Hanover Finance passed the spoiled goods over to Allied Farmers and what do we read about in the newspaper now? That company too is teetering on the point of absolute collapse. 
I preface my remarks on the bills with those comments because we did not move with enough pace to bring to justice the people in whom society had posited their trust. We will live to regret that because it is difficult now to get a range of projects up and going. Although capital may be there it is very chary and it is very frightened of falling again into the hands of the characters who have ruined people’s lives. As we have said earlier we support this legislation but we ask whether it will enhance the confidence of savers to bring money back into circulation so that it fulfils this mezzanine purpose. I hesitate to agree that it will other than to say that it is an important building block on a long road to recovery. 
My colleague Lianne Dalziel played a key role in launching the work related to the Capital Market Development Taskforce. I do not fully subscribe to the notion that New Zealand is short of capital. I prefer the approach that says New Zealand has capital but that it is both misallocated and at the moment very shy; it is staying in an area where it is unlikely to be squandered as a consequence of dodgy decision-makers. So this apparatus has to fulfil the purpose of causing a new source of capital to be made available to firms entrepreneurs and investors in our country because it is only through investment that we will create jobs and enhance the number of firms that will produce a greater level of goods and services—hopefully to generate foreign exchange earnings. 
Often a celebrated case is seized upon and the culprits in a given case are jumped upon from a great height. The style of compliance pursued by the Inland Revenue Department tends in my assessment to search out for egregious examples of wrongdoing smash them hard and then hope and trust that the severe punitive measures visited upon the culprits will send a message out to a wider group of people. Well that is really what needs to happen as a consequence of the passage of these bills. There is an enormous contrast. We can watch television and see the hapless individuals who have been fast and loose with the funds of American citizens being marched out of their offices surrounded by heavies—I dare not say “goons” but they are very frightening individuals—wearing FBI-emblazoned jackets. However in Aotearoa New Zealand those wrongdoers often go away for a holiday overseas then come back— 
Hon David Cunliffe 
: Hawaii. 
Hon SHANE JONES 
: Yes. Well the man who is in Hawaii is a particularly unpleasant chap: Hotchin. 
Hon David Cunliffe 
: Oh Hotchin or Key? 
Hon SHANE JONES 
: Ha ha! Well Mr Key has enough explaining to do in terms of his role in relation to Mr Hubbard’s empire. But with the fullness of time no doubt information will continue to trickle to this side of the House in that regard. 
Hon David Cunliffe 
: It’s a torrent at the moment. 
Hon SHANE JONES 
: Yes. Well there we go—the quantity of the information although it may take a while to sieve through contains a number of nuggets; of that we can be sure. 
The point I will make though is that unless the regulators are able to visit significant criminal consequences on culprits then I fear that garden-variety Kiwis with their several hundreds of thousands - odd dollars etc. will be at risk again. 
Too much of the capital that we refer to as mezzanine capital ended up in the hands of people who fed an asset-price spike through commercial property investments residential property investments and land conversions. None of those are inherently wrong but when there is a significant misallocation and when the asset prices become decoupled from the cash-generating capacity of the actual asset then one is on a hiding to nothing in the event that capital prices do not keep rising. At one level it is important that we as savers show some due diligence. At another level it is important that the people whom we trust are aware that if they break that trust and if they act in a fashion that is reckless fast and loose then they personally will bear the consequences: they personally will lose their liberty and they personally will be ruined in terms of their reputations in that sector. The reason that Labour supports these two bills is that we feel that this legislation is an important step in that direction. 
As I finish my speech I will give an indication of how difficult it is to make those people aware of the trust they hold. I felt ill as I read the newspaper the other day and saw that the person representing the ratings agency that had looked at various aspects of the Hubbard empire said the agency may have been a little casual and it may have been insouciant in relation to the level of information that it asked for as if it had no responsibility whatsoever for what has occurred. So despite the loss of $6.5 billion the imbroglio around South Canterbury Finance is an example of how far we have to go. Hopefully this legislation will make a good contribution.