South Canterbury Finance Limited

[Balance]

http://www.stuff.co.nz/business/mone...s-owe-SCF-190m

How devious.

The Hubbard money-go-round.

It's the equivalent of turning diamonds into coal - that 's what Hubbard has done. SCF took deposits/cash from investors, Hubbard then took the cash from SCF and then, pledge his shares in SCF as security to SCF!!!!!

[Enumerate]

... and who was it that took deliberate and calculated steps to turn the equity value of SCF to zero ... the NZ government.

Statutory Management of Allan Hubbard at a time of the greatest stress to SCF was the critical damaging blow.

However, the passive attitude Treasury took to the reconstruction attempts and the veto of a viable reconstruction proposal was the killing blow.

NZ government actions to reduce SCF equity to zero value are a gigantic "own goal".

[minimoke]

... and who was it that took deliberate and calculated steps to turn the equity value of SCF to zero ... the NZ government.

A bit of re-writing history there Enumerate. You don't have to go to far back to see it was the Government that allowed SCF into the Guarantee Scheme. That gave SCF some breathing space which they exploited to the detriment of the tax payer. If you have any anger against the government perhaps it should be pointed towards treasury and how on earth they let SCF into the Extended Guarantee Scheme.

You can also blame the government for moving when they did as that has prevented us from seeing the SCF Year End accounts (which were late anyway). Had they delayed a bit further SCF might just have squeezed at an year end report and we would have seen their latest version of their position.

Had AH had a succession plan and delegated authority to others well before the GFC (as he should have at his age and health) the fall out wouldn't have been so great - it would have been a retired ex accountant in Stat Man rather than a pig headed and delusional man who allowed the blind and mislead to continue to pump funds into his business for no other reason than to support AH.

[Enumerate]

... it was the government guarantee that got SCF into vast problems to begin with.

It was a market distortion, when SCF ranked well; it killed them when they ranked poorly.

Government meddled, got cold feet and killed the company.

[Balance]

... it was the government guarantee that got SCF into vast problems to begin with.

It was a market distortion, when SCF ranked well; it killed them when they ranked poorly.

Government meddled, got cold feet and killed the company.

So if donors contribute food generously to those in need but those in need choose to over-indulge and die, it's the donor's fault?

Very profound logic!

[minimoke]

... it was the government guarantee that got SCF into vast problems to begin with.

So you're saying that in 2008 all was rosy in the SCF camp. There were no problems with exposure to property developments or ramping up the values of diary farms? Lachie was doing such a sterling job there was no need for him to leave? You're saying there was no need for related party lending to bolster diminishing capital requirements?
Was it some One World plot to haul those reliable Ashburton Auditors over the coals for their dodgy practices in the 2008 YE accounts?

Don't you remember what the Auditors said back in early 2009. They said that SCF's Chief Financial Officer and Group Accountant weren't being kept in the loop about major transactions. Don't you remember that despite the obvious speed wobbles in 2008 the Directors couldn't be bothered meeting. Was that the government pulling the strings or was it AH?

After SCF got into the Guarantee Scheme the Directors continued with their practice of related party loans on the back if minimal notation at board meetings. Lending out of Timaru continued without the controls applied to other branches. There was no Audit Committee; documents for major transactions were sketchy and no one was in a hurry to provide them. Related party disclosures wasn't happening and "off market" transactions weren't properly documented. The Finance Department as under resourced adn - jeez the list goes on. And you think this is all the Governments Fault?

What the Guarantee did do that was wrong was to allow Finance Companies under its umbrella in the first place. They were paying higher interest to (supposedly) cover the additional risk and SCF used it as an opportunity to offer well over the odds rates. You can blame the govt for letting them get away with it - but not for SCF's downfall.

If you want to see who was responsible for getting SCF into its vast problems you really need to get more creative than trying to blame the government. There is no evidence to support that view - despite it being a labour government run by that twit Cullen.

[Enumerate]

So you're saying that in 2008 all was rosy in the SCF camp.

I will leave it to the intelligence and fair-mindedness of thread readers to determine if this is what I have said.

However, I have a feeling this will lead to some kind of "straw man" argument ...

There were no problems with exposure to property developments or ramping up the values of diary farms? Lachie was doing such a sterling job there was no need for him to leave? You're saying there was no need for related party lending to bolster diminishing capital requirements? Was it some One World plot to haul those reliable Ashburton Auditors over the coals for their dodgy practices in the 2008 YE accounts?

*snip*

Yup, looks like I was right.

[minimoke]

I will leave it to the intelligence and fair-mindedness of thread readers to determine if this is what I have said.

It is you who is asserting "... it was the government guarantee that got SCF into vast problems to begin with." Its for you to front up with your evidence to show SCF did not have vast problems prior to the Govt Guarantee. I suspect we'll have a long wait.

[Enumerate]

It is you who is asserting "... it was the government guarantee that got SCF into vast problems to begin with." Its for you to front up with your evidence to show SCF did not have vast problems prior to the Govt Guarantee. I suspect we'll have a long wait.

The government guarantee engineered a vast flood of "hot money" into SCF due to the fact that the deposits were government guaranteed.

Clearly, SCF was not in a position to rationally allocate all this money. Given, at the the time, SCF was held in high regard ... this money kept flowing.

The key problem loans originated during this period as SCF sought to expand its loan book outside the core domain of lending.

Once the retail deposit guarantee began to look tenuous; following on from Hubbard's Statutory Management - the "hot money" took flight.

Without the retail deposit guarantee ... a classic market distortion ... SCF would not have the level of bad debts entry in to property development lending foreshadowed.

This point is quite different from: "in 2008 all was rosy in the SCF camp".

[minimoke]

The government guarantee engineered a vast flood of "hot money" into SCF due to the fact that the deposits were government guaranteed.

Clearly, SCF was not in a position to rationally allocate all this money. Given, at the the time, SCF was held in high regard ... this money kept flowing.

The key problem loans originated during this period as SCF sought to expand its loan book outside the core domain of lending.

Once the retail deposit guarantee began to look tenuous; following on from Hubbard's Statutory Management - the "hot money" took flight.

Without the retail deposit guarantee ... a classic market distortion ... SCF would not have the level of bad debts entry in to property development lending foreshadowed.

This point is quite different from: "in 2008 all was rosy in the SCF camp".

Lets not forget the Deposit guarantee scheme was an "opt in" scheme. There was no compunction for SCF to join. But they did - and that was probably the wise thing to do. So SCF is responsible for entering the scheme.

It was SCF, not the govt, that set SCF deposit rates and it was SCF that set them a couple of points above the the market rate. SCF was responsible for setting their rates.

It was SCF that spruiked their deals. It was them that spruiked at rates over the odds.That they could not do it rationally is their problem. Not the government.

Its debatable if SCF was held in high regard. in 2008 finance companies were not held in high regard. There was risk of people running scared - that's why the Scheme was set up.

It was SCF who decided to extend loans outside its core business. Blame that on an ineffective Board, not the Government.

SCF had its problems before their entry into the Scheme. Refer to the Auditors letters for an idea of just how bad they were. If that doesn't interest you don't forget SCF had difficulty entering the original scheme - there were already issues around capital sufficiency ratios. You can blame the govt for letting SCF in on that basis - it was thought SCF's Tier 1 capital ratio was less than 5% where as the recognised minimum was around 6% for banks and 8% for finance co's.

And if you look closely SCF wasn't properly reporting where its loans were going (they had a broad interpretation of ANZIC codes) - so its probably not fair to say they had problems only when they got into Property Development. In early 2008 they had already sunk mega millions (some thing like $38m) into dodgy developments like Denerau.

You are right to be cross with the government - but only insofar that they let SCF into the original scheme.

The Guarantee was not supposed to cover related party loans - I guess we can blame the government on their intervention so that we may never get to know the extent of these loans. But we know SCF continued with these loans after their entry into the original scheme. Again SCF's responsibility.