Alan Bollard's story (as reported) doesn't really square with the position of the RBNZ and Treasury in their advice to the government on 10th October 2008, and now more than ever, policy advisers, ministers and the public should recognise that the scheme was not a success.

Firstly, it was not needed to 'save' our financial system or our banks. RBNZ and Treasury advice on Friday 10th Oct 2008 clearly stated that New Zealand's major banks still had access to funding, including funding on the supposedly closed US commercial paper market (this was also confirmed on subsequent Financial Stability Reports).

Secondly, even if some of New Zealand banks had have faltered or failed, this does not mean that the New Zealand financial system was in jeopardy. The legal framework covering registered banks enables a large failed New Zealand registered bank to be put into statutory management, closed, creditors and depositors claims partly converted into equity, and re-opened, and could have done this kind of 'open bank resolution' within a few business days and without excessive disruption to the financial system or bank customers, and, importantly, without using taxpayer funds to socialise the banks losses or protecting bank creditors from taking their losses.

Thirdly, the overall effect of the scheme is, now more than ever, become clear: it propped up weak and faltering financial institutions with liquidity support when their liquidity problems were caused by their questionable solvency, which in the end caused their failure notwithstanding the scheme. If Allied Nationwide and SCF had have failed a year or 18 months earlier, and without taxpayer support for their creditors, I believe their losses would have been smaller, and the health of the financial system, by allocating their losses sooner, would have been better, not worse.

Indiscriminate depositor confidence in weak and faltering financial institutions (even if they're large) is NOT a good thing. The reality is that the NZ investing public and the wholesale financial markets were willing to supply strong financial institutions with funding even during the height of the crisis. Why should the lack of funding to weak or faltering financial institutions be called a crisis? To me it is just how things should be, not a market failure in need of correcting.

Dr. Bollard has written a book on the financial crisis that he thinks is behind him. The crisis is still in it's infancy, and the governor of the Reserve Bank is none the wiser. Oh dear.

What a well written post!

If the intended effect was to save the finance companies left - did it really work? The few rubbish ones that haven't gone will be gone by Dec 31 next year - leaving only the good ones who prob would have survived anyway.

I wonder if the GG actually helped in the demise of SCF - since they went on an orgy of dodgy properrty lending when they got it.

David Hillary is right. It was unnecessary corporate welfare and was always going to protect the weak and prop them up all be it on a temporary basis but in doing so increase their ultimate losses and the cost to taxpayers.

What sticks in my craw and others is that some of us had the nous to invest wisely and now we are punished for doing so.

Alas this is the way of all governments who continue to punish the goos citizens and reward the bad citizens by dumb governance