O'Connor says Fed Farmers 'pathetic'
Labour MP and agriculture spokesman Damien O'Connor says Federated Farmers' response to the sale of interest rate swaps to farmers is “pathetic”.
O'Connor said he will call for a Parliamentary inquiry into the sale of interest rate swaps to farmers by banks such as ANZ and Westpac if the Commerce Commission does not act.
O'Connor told Radio New Zealand that Federated Farmers was “letting its members down” by not championing the cause of affected farmers, and described the organisation's response to the issue as “pathetic”.
Interest rate swaps are complex instruments that can be used to fix interest rates. They were aggressively sold to farmers between 2007 and 2009 but rather than protecting them from interest rate rises, they effectively locked some into high rates when interest rates fell after the Global Financial Crisis.
The swaps also appear to have been sold at a time when many bank economists and money markets indicated global interest rates were expected to fall rather than rise.
Federated Farmers president Bruce Wills, a former banker, accused O'Connor of playing politics and said he needs to “learn to listen”.
Wills said he had talked to O'Connor about swaps recently and was very close to the issue, speaking to members, the Commerce Commission, bankers, the Banking Ombudsman and the Bankers Association.
“I'm extremely comfortable with the position Federated Farmers has taken,” he said.
Wills said he welcomed the Commerce Commission's independent inquiry.
“It's better to have experts looking at them rather than politicians scoring points.”
Wills said swaps were a private transaction between the banks and the farmers involved. According to information he had received from the banks, the numbers affected were much smaller than portrayed by O'Connor and the media.
Wills said he had a democratic role representing 30,000 New Zealand farmers and, according to the banks he hadspoken to, less than 5 per cent have been affected by swaps sales. If a settlement was made to these farmers the banks would recoup that in charges from farmers who had not signed such contracts.
“I have to be careful taking a position for a small minority of farmers that would work against the interests of the vast majority,” he said.
Wills said he has been contacted by farmers who had signed swaps contracts who said they were “wonderful” products. “Ninety to ninety-five per cent of farmers have an entirely satisfactory and happy relationship with their banks,” he said.
O'Connor told Radio NZ the Commerce Commission, which is assessing whether there were any potential breaches of the Fair Trading Act in the the sale of the swaps, had an opportunity to show leadership on the issue, but if it chose not to he would call for a Parliamentary inquiry into the sale of swaps.
He contrasted regulatory action in the UK, where banks have been told to go back and settle with farmers and other small businesses which were sold into swap contracts, with the inaction to date in New Zealand.
O'Connor said with $49 billion in rural debt, a difference of two or three percent in interest rates would see billions more going to Australian-owned banks in profit and out of the New Zealand economy.