Bank stocks

[macduffy]

So why shouldn't Govt just be paying up for all those broken windows to get fixed & forget all thoughts of some further dumb ill-conceived Loan Scheme (probably only to give another large bunch Public Sector papershufflers further jobs for the next 5 years) and of which will likely only cause further grief down the track ?

Let's not forget that the "Govt just be paying up" is really the taxpayers of NZ, current and future, paying for these broken windows! As for who's responsible for breaking them in the first place, I wouldn't hazard a guess at this early stage of the inquest!

[Tomtom]

Govt set the scene for those windows to get broken in the first place...

Just to be clear here your argument is that restitution, in the form of a subsidised loan scheme, is owed due to what is essentially an Act of God?

[ynot]

Just to be clear here your argument is that restitution, in the form of a subsidised loan scheme, is owed due to what is essentially an Act of God?

Don't think it was God that instigated the lockdown.

[Tomtom]

Don't think it was God that instigated the lockdown.

Would the alternative course of action have been any better for SMEs overall?

[Tomtom]

Update: It looks like MPs passed the wrong legislation because they didn't read it before rubber stamping it.

[Cyclical]

Update: It looks like MPs passed the wrong legislation because they didn't read it before rubber stamping it.

What a shambles. I actually thought the COL were doing pretty well with dealing with this covid thing, given the immense pressure and timelines they've been under, but now I'm getting really concerned about the constant lolly scrambles consisting of billions in loans etc that we'll likely never get back, while all the good hardworking people out there spend the rest of their lives paying it back in the form of tax. Whatever happened to the days when poorly run businesses were allowed to fail when there was an economic crisis? In a lot of instances, we're just putting off the inevitable anyway.

[percy]

No1 daughter's employer has just suffered a mental breakdown.
Cause.Worry about her business surviving.Still can not open under level 3.
There will be thousands of small business owners worrying themselves sick.
Not only the employers,but all their staff.
In a couple of years time we may be able to look back, and see in hindsight, what the correct course of attention would have been.
At present time it is a dark trip into the unknown.

[Waltzing]

the real problem is most MP's dont know one end of a balance sheet from the PL to the equity from the liabilities to the assets... and reserve banks dont really want to put money directly into bank accounts.. but you dont want complete destruction of the system due to a virus... they have no choice but to just move fast and apply a very limited set of parameters and clean the mess up later. The internal systems cannot be changed over night to cater for something that happened this fast. Its a case of just move the credit out there. As it is the destruction will be huge in NZ. But stock markets like the USA are already looking thorough the destruction due to the amount of credit being extende is greater in ONE month apparently than 2 years worth under the GFC. My simple book keeping and transaction knowledge does not extend to reserve bank systems.

[Tomtom]

In a lot of instances, we're just putting off the inevitable anyway.

Yeah, banks realised that but the government where not happy as they wanted to do something - or anything.

Will this help? It depends what you mean by "help". In 2008/9 providing liquidity to banks worked because what we where facing was predominantly a liquidity crisis. However this is more of a traditional recession scenario where cashflow and ultimately solvency tend to be the limiting factor for business survival.

I'm hesitant to say that however because I'm not sure Grant Robertson would flinch at the idea of fully subsidising businesses cashflow at this point. I suspect a lot of this is aimed at being able to point at having "done something" come the next election and hoping people don't look too hard at what has been done.

[Snoopy]

"While both Finance Minister Grant Robertson and Reserve Bank Governor Adrian Orr have urged banks to lend courageously to businesses under this scheme (the Business Finance Guarantee Scheme, through which taxpayers are underwriting 80% of individual bank loans to eligible SMEs), banks will ultimately lend according to their own criteria and within their own risk appetites."

"Banks can also only lend to businesses under the scheme if those businesses have exhausted other options with their banks."

If those quotes are right, then no wonder the banks are hesitant to lend to small business. Banks are still expected to lend according to their own risk appetites (understandable). But the 'Business Finance Guarantee Scheme' will only kick in if all other finance options have been turned down. So the finance scheme can only be offered to those deals the bank has rejected. And since the bank has rejected such loans, they won't be happy with taking a 20% risk in a loan they have determined is no good. That means the 'Business Finance Guarantee Scheme' cannot work - no loan can qualify. Or have I got that wrong?

Update: It looks like MPs passed the wrong legislation because they didn't read it before rubber stamping it.

The article mentioned there were issues with the previous Business Finance Guarantee Scheme too

"But here’s the kicker - a line was slipped into the bottom of the release, saying the Government is no longer requiring banks to take security when issuing taxpayer-backed loans under the existing Business Finance Guarantee Scheme (which is distinct from the new scheme)."

"So it will be at banks’ discretion whether they take security for the $6.25 billion of loans they’re expected to give businesses, which taxpayers are 80% on the line for. No big deal!"

Looks like I was right. The original terms of the first announced 'Business Finance Guarantee Scheme' were unworkable.

SNOOPY


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