Wall St was down 94 overnight, its biggest fall in a month, while the local market is down 66.
No one blameless in the Great Bank Guarantee Kerfuffle
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The political class is having a fine time in relation to the bank guarantee, that dud policy for which, lest we forget, we can thank the Irish Government. How many people actually care about all this outside Canberra? It’s impossible for me to judge from inside the asylum but I’ll have a guess: no one. I’m encouraged to that view by the fact that that stalwart journal of record and favoured rag of the punters, Sydney’s Telegraph, didn’t bother covering it today. The Herald Sun gave it an editorial, and nothing else. “Rudd right on guarantee” the Hun averred. No love lost in the News Ltd stable, it seems. The issue of who said what and when — turned into a non-issue by Ken Henry yesterday — might’ve been faintly comprehensible to most punters. The issue of how to minimise the unintended consequences of a sovereign guarantee in finance markets is problematic even for the RBA. And the debate about whether a levy for large deposits should be compulsory — despite the Coalition’s best efforts to dress it up as a new tax — is a further complication. You suspect the only message reaching people is that the Coalition doesn’t support the Government’s handling of the crisis, and that’s dangerous ground for Malcolm Turnbull. His cranky reaction to journalists’ questioning of his own $100,000 proposal — this morning he sounded like he nearly lost it telling Chris Uhlman he didn’t understand — won’t help. There’s plenty of blame to go round for the dissolution of bipartisanship into rancour and argument. Turnbull has been desperate to avoid being sidelined in the debate — a legitimate goal, but one not to be pursued, as Turnbull himself and some of his senators did, by undermining the top economic official in the country. He might have also kept some of the “quibbling” about the economic stimulus package from his frontbenchers in check. And Ken Henry had a point when he suggested yesterday that Turnbull, in calling for an increase in the original $20,000 deposit guarantee to $100,000, contributed “unhelpfully” to the pressure to guarantee deposits. But the Government can’t escape blame. The Opposition has a right to ask questions and try to hold governments to account. The Prime Minister and Treasurer have treated the simplest questions from the Opposition about the guarantee and the stimulus package like economic high treason. For all its talk of bipartisanship, this Government’s instinct is to play hardball first and worry about the rest later. A more genuine effort at bipartisanship from Rudd, given the alleged criticality of the circumstances we face, would’ve been more appropriate and more politically effective. And while he was in extremis yesterday, Ken Henry’s claim that there should be less debate about the difficult economic decisions currently being considered was also over the top. Few would disagree that several hours of questioning from Eric Abetz is a particularly cruel and unusual punishment – the protestor who briefly threatened to jump into the Reps yesterday was apparently taken straight to the Economics committee for torture — but even if the finest economic minds in Australia would like to be left alone to consider how best to rebalance markets after a massive government intervention, politicians and the rest of us have a right to debate it, however ill-informed we might be by The Australian. Oddly enough, the Herald Sun — and for that matter, the Australian Financial Review yesterday — got it right. The Government had to make a decision on the fly about a guarantee, and it did so, and it flagged that there would be implementation issues. We’re now seeing those issues playing out, but that doesn’t make Government irresponsible or incompetent. Everyone — including Rudd and Swan — should take a valium and stop going over the top. For one thing, the crisis is too acute for this sort of politicking and undermining of officials. For another, people outside Canberra couldn’t care less. |
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9 Comments
Bernard is right about those outside of Canberra. In early October, I was out on the water with no mobile phone covereage, no laptop, no TV and no radio and I do remember that the sun came up and went down while the tide ebbed and flowed, strangely untroubled by the happenings on Wall St. I guess the real lesson is that a stockmarket investor is the last person you would want beside in a tight situation - all flight and no fight response.
Listening to Malcolm Turnbull say that the fee on accounts over a million is actually a new tax is viewed with contempt on Struggle St. People with over a million in the bank are getting those funds guaranteed by the rest of us - a small fee is a small ask for someone so wealthy . By playing to the millionaires’ club he may be strengthening his own constituency and looking after himself but I echo the view put by Bernard Keane - noone cares. Trying to hang Ken Henry out to dry has been a most unpleasant look from both sides.
Yes Bernard - you are on the track in this piece today.
But the point that is still being missed is that Rudd Swan and Henry expect us all to tug our forelocks and say “Well done boys.” What is unfortunate though is that what they have done is so controversial and unconventional that every one of us should be asking “Why?” And anyone who does ask is branded a traitor.
Sorry guys - not about scoring points. It’s about wondering why this stupid Government received and accepted advice (if indeed they did) to do these very dangerous things. What was that advice and from what authority. We have already seen the folly of the unlimited guarantee, and in due course we will see the folly of the $10billion handout. Are we not entitled to be told why these things have been done. Is that not the democratic way in our democratic country. Only in war are we expected to take what the Govt decides without question - or that is what I thought, until now!
At the end of the day, I heard Henry say that he heard Stevens say that Stevens agreed with “the direction” the Government was taking. And he said that AFTER the announcement - not before.
A very good, balanced piece. It’s also a salutary reminder to the government that the opposition will do “whatever it takes” to score political points (or at least attempt to), whatever crisis the nation might face. A far cry from the bipartisanship offered a couple of weeks ago.
The media reorting on this has much to do with the perception in the general community.
I notice on the ABC that it was Turnbull and Bishop given a ‘grilling’ rather than Swan.
Turnbull was right in his original suggestion of a guarantee to $100,000 in deposits.
Governor Stevens might reflect on that.
This fiasco will cost the economy very real money and also confidence in Australian financial institutions.
In other words it can be made real and relevant with good reporting; something we have not had thus far.
The Funds – AXA, Perpetual, etc., have chosen to lock down funds, blaming the Government for it. I think that matters to anyone with Super in one of those funds.
These Funds have been on easy street since the inception of compulsory Superannuation. They have not had to work hard to generate capital inflow – all they had to do was open their doors for business. This has led to an amazing degree of arrogance on their part.
I pulled most of my savings out of one of these funds several months ago. The Fund withheld part of the moneys against taxes. So I asked for a statement for the last year. I am still waiting.
This lack of transparency is endemic in the Financial Services Industry in Australia. Given that lack of transparency allowed the US Investment Banks to get so far out of control as to bring the Global Financial System to its knees, surely this is a cause for concern – and action.
It would be silly to let these businesses go to the wall because the Government had to act quickly to provide Bank Guarantees. But I think we are a long way off that. However, for the Funds to sit back and say “not our problem – we’ll just shut off withdrawals” is deliberate blackmail.
These Funds need to convince Investors, Regulators and the Government that they are sound. Transparency is a key part of that. If the Funds are not prepared to do that, then maybe the Government should respond by locking down all Fund assets in Australia until they do.
Rather than play “my stick is bigger than yours”, these Funds need to convince us that they are sound. Only then should we consider their interests with respect to guarantees. The ball is in their court.
Plp15
The collective noun ‘Financial Institutions’ suggests that all those who dwell in that pond are of equal standing and repute. As the waters recede, the flotsum at the edge will be exposed and start to reek. Those who felt blessed worshiping the God of Success must also submit to the Wrath of Failure. There are some institutions whose faux respectability no one should have faith in. The more things change …
I thought that Malcolm did a good job this morning trying to get the point across to Chris Uhlmann
The unlimited guarantee is not what is required and is causing massive distortions among funds
Chris did not seen to have his head around the question
I got an early start today so at 4.30 am I calls up the local abc as we bloggers are prone to do with our inspirations (called the 1:9:90 rule by some) and told them about this:
7 April 2007 More than enough dirt under his fingernails - Opinion - smh.com.au
by Alan Ramsey quoting that covert ‘greenie’ … Ken Henry ….. such that the Coalition might just be a bit too willing and giving their mixed motives away. The long brown Howard tail indeed!?