SCF bailout means lessons not learnt
The $1.7 billion taxpayer bailout of South Canterbury Finance (SCF) was not good for the country, Shareholders' Association chairman John Hawkins told the Christchurch branch yesterday.
Hawkins said the association had pointed out to members before it fell over that SCF was a solid investment because it was included in the Crown Retail Deposit Guarantee Scheme.
''But that doesn't mean it was good for the country.''
It was good for the particular investors, however, when the Government bailed out failing companies, it meant lessons taught through fiscal pain were not learnt, he said.
The Government paid back $1.7 billion in September and October 2010 to about 35,000 investors who had lent to SCF through deposits, debentures and other debt investments.
Five SCF directors and officers face 21 fraud charges related to the Crown guarantee secured by SCF with the Serious Fraud Office alleging the fraud is worth $1.7b.
The five are former SCF directors Ed Sullivan and Bob White, former chief executive Lachie McLeod, accountant Terry Hutton and former SCF chief financial officer Graeme Brown.
South Canterbury Finance (SCF) will be wound up after almost two years in receivership after its remaining assets are nationalised under a Government-owned company.
The company, Crown Asset Management, will talk to the receivers of other finance companies about taking on those assets that are hard to sell off as well.
SCF receiver McGrathNicol has racked up more than $20m on administration fees, accountants, lawyers and investment bankers.
Nine finance houses failed under the Crown guarantee.
The final cost to taxpayers will be less than the total paid to depositors covered by the scheme, but that depends on how much is recovered from the firms involved.
The original deposit guarantee was introduced in late 2008 at the height of the global financial crisis, when the world's banking systems froze up. The Government brought in the guarantee as an emergency measure to maintain confidence in the New Zealand banking system.
The original scheme covered deposits of $133b in 72 banks and finance groups. The Government ended up on the hook for more than $1.8b, to more than 38,000 depositors in the original scheme.
While SCF was the biggest collapse, the scheme also bailed out depositors in other failed finance companies, including Allied Nationwide, Mascot Finance and Vision Securities.
The original scheme expired in October 2010 and was replaced with a much smaller, extended deposit guarantee, covering seven institutions and $1.9b.