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:6057] 
STUART NASH (Labour) 
: 
 That was a very interesting speech I say to Mr Bennett. I am not too sure what it was about or what it tried to prove—it did not say much at all. Anyway I rise to support the Crown Retail Deposit Guarantee Scheme Bill. Let me give a little bit of background. On 12 October 2008 the then Minister of Finance Dr Michael Cullen announced that using powers under the Public Finance Act the Government was to introduce an opt-in retail deposit guarantee scheme. This was on the heels of a very similar scheme announced by the Australian Government—a Labor Government—I believe the previous day. 
At the time Dr Cullen announced that the scheme would cover all retail deposits in participating New Zealand - registered banks and retail deposits by locals in non-bank deposit taking entities. These included building societies credit unions and deposit-taking finance companies. The deposit guarantee scheme did not include related party liabilities and the initial scheme was free for institutions with total retail deposits of under $5 billion. A fee of 10 basis points per annum was levied on total deposits above $5 billion. That meant that a bank with about $20 billion in retail deposits would pay approximately $15 million in fees per annum. Quite simply the deposit guarantee was designed to give assurance to New Zealand depositors that the New Zealand banking system remained sound. I quote Dr Cullen: “We want to ensure that ordinary New Zealanders feel that their deposits are safe in the current uncertain international financial market conditions.” 
That scheme came into effect on 13 October through the delegation of authority by the Minister of Finance Dr Cullen to the Secretary to the Treasury under section 65ZD of the Public Finance Act 1989—another piece of Labour legislation of course. As mentioned the original retail deposit guarantee scheme was implemented under the Public Finance Act so this legislation before the House is now appropriate in order to continue that certainty and to ensure the ongoing stability of the New Zealand banking system. 
The reason why the original scheme did not have its own legislation is simply that the House was not sitting at the time. However as alluded to the Minister of Finance has powers under the Public Finance Act to enact such a scheme as long as “it appears to the Minister to be necessary or expedient in the public interest to do so.” Given the overwhelming international move to provide a similar scheme this test would appear to have been met. 
This bill will protect over $120 billion in deposits currently held by the banking and non-banking sector. Why is this important? There are a couple of very important reasons. The first is that there is another cost over and above the figure of between $625 million—at the most optimistic—to $1 billion which is between about 40 percent and 70 percent of total exposure of losses incurred by hard-working New Zealanders since the first of about 30 finance companies collapsed decimating the savings the lives and the well-being of many ordinary Kiwis. 
One of the main reasons why I support this bill is that—as far as we know—so far two investors who lost their savings in finance company collapses have taken their own lives and many are on suicide watch. An Auckland man in his late 60s who lost more than $100000 invested in Bridgecorp Finance killed himself after going into a deep depression. Suzanne Edmonds who runs a group representing thousands of Blue Chip and Bridgecorp investors said she knew of at least one other person in his 70s who had taken his own life and of many others who had become sick. 
If we remember Bridgecorp collapsed in July 2007 owing $459 million to over 14000 secured debenture holders—14000 ordinary Kiwi mothers fathers sisters brothers husbands and wives who had worked and saved for their retirement or for their children’s or grandchildren’s education. The vast majority were savers and not investors only to have the impossible happen. The plague that visited and wiped the savings of earlier generations in the form of the Great Depression was now visiting their homes and it made us all sick to the stomach as we watched and read about the horror stories—some of us were much sicker than others though. 
Then there was the story in the  
New Zealand Herald  
on 16 August about Karina Williams who has watched her parents’ health deteriorate rapidly since they lost more than $200000 in the Blue Chip collapse. The article states: “Williams said her father Jack 84 had a heart attack last Christmas when he and his wife Ngaire 72 received a Property Law Act notice that their house would be sold to pay off their debt. ‘It’s the stress that is taking its toll’ Williams said. ‘The financial costs are becoming like a crippling cancer that’s affecting these people. There’s been attention drawn to the fact of the collapse of these companies but not the collapse of health inflicted because of the waiting.’ Ngaire Williams said she was staying positive. Her husband was released from hospital last Friday 11 days after suffering an aneurysm she attributes largely to stress.”—and that stress was caused by the collapse of that finance company. 
The human cost of financial collapse has been huge. At the time New Zealanders demanded that their Government take action which the great Dr Cullen did as he always did. This bill simply seeks to extend Dr Cullen’s and Labour’s scheme. As far as ordinary New Zealanders are concerned the scheme works by protecting eligible depositors against default by participating institutions up to a maximum of $500000 per depositor per institution for bank deposits and $250000 per depositor per institution for non-bank deposits. It should be noted that the scheme does not protect financial institutions against commercial processes such as business growth shrinkage mergers take-overs restructures or most important failures. 
I am also very supportive of this scheme because it provides a high level of stability to the financial sector during fragile global economic times. As we are all aware—and as the Labour Green and Progressive party banking inquiry confirmed—the banks have been making an extraordinary profit on short-term floating interest rates. However we all acknowledge that the cost of international finance has increased substantially since the beginning of the financial crisis. Let us say that this began or became a globally acknowledged issue with the bankruptcy of Lehman Brothers on 15 September 2008. Actually did that not happen before the last election? 
Hon Steve Chadwick 
: It did. 
STUART NASH 
: It did—while the National Party was still promising tax cuts because we could afford them? 
Hon Steve Chadwick 
: That’s right. 
STUART NASH 
: Well hold on a second. Mr English according to him was not aware of the financial crisis until after the passing of the first tax cuts and the cancelling of the second and third instalments. I wonder where he was asleep? 
Bill English the Rip Van Winkle of New Zealand politics went to sleep at a pivotal moment in global economic history. He slept during the most important and far-reaching crisis for two generations and then awoke and started to implement the trickle-down or supply-side economic theory in an attempt to fix the problem without realising that the world had moved on. He did not realise that the US the UK Australia and a host of other nations had in fact left Friedman economic thought behind and started to implement economic measures that were actually targeted at those who needed them—those on middle to low incomes—instead of one-third of all tax cuts going to the top 3 percent of wage and salary earners which is not fair. 
We could talk about 9 long months of broken promises at length but I digress and I apologise. If I had a dollar for every time a constituent asked me why the Government cut taxes for upper-income earners and did not give one penny to low-income earners I would be a wealthy man. [ 
Interruption 
] As I was saying before I was rudely interrupted by annoyance at broken tax promises a strong and robust banking system is the most important thing for the health of the economy. By this I mean that New Zealanders need to be able to put their money into reputable financial institutions in the knowledge that their money will not be wiped out by another tidal wave of company and institutional failures. 
One of the reasons this is important—apart from the obvious which I previously alluded to—is the ability of the financial sector to maintain or if necessary increase its bank deposit levels so as to be able to lend money to the business the farming and the private sectors. The last thing we want is for ordinary New Zealanders to lose confidence in our banking and non-banking sector and that is why I am supporting this bill. Thank you Mr Deputy Speaker.