23 September 2008 Media Statement

US bailout mocks Nat plan to sell Kiwibank

The socialisation of a trillion New Zealand dollars worth of the financial sector in the United States is further proof the value of the public sector being involved in the financial sector, Progressive leader and Kiwibank champion Jim Anderton said today.

"If anyone still believes the public sector has no role in banking, let them now say the US government should have let the financial system there collapse.

"This episode makes a mockery of National's plan to sell Kiwibank 'eventually.'

"Even in the home of free markets, a hands-off banking system has failed.
The alternative to the Bush administration's nationalisation of banking securities would have been to let the market sort out the crisis. Not even the free market barons of Wall Street could tolerate that.

As one commentator said,

"[A] Republican administration has decided that the only way to keep the American economy alive is to have the federal government take the reins of some of the largest financial institutions in the world. There is a term in political philosophy to describe a government takeover of a critical industry: That term is socialism. The government is telling us that capital and credit markets cannot, for several reasons, solve the current crisis on their own—only the federal government and its massive taxpayer base have the authority and the resources to solve it. That is state socialism: the philosophy preached by the founders of the Second International, by the radical wing of the American labor movement, through the formation of the Soviet Union and its satellites, and now by Henry Paulson."
[James Ledbetter, Slate Big Money magazine, http://www.thebigmoney.com/articles/judgments/2008/09/21/henry-paulson-socialist]

Jim Anderton said the involvement of the American government to rescue the financial system there was the last nail in the coffin for those in New Zealand who have argued that the state has no role in banking.

"The 'hands-off' approach led to a crisis in the United States, and if it had continued the crisis would have spread globally.

"One reason I championed Kiwibank was that we were the only developed country in the world that owned virtually none of our financial sector. That left us even more vulnerable to financial shocks.

"The United States government acted because the consequences of leaving the market to its own devices would have been disastrous. The idealogues who want Kiwibank sold, including Bill English, couldn't have been more emphatically proven wrong."

ENDS

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