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FAI Money should never have been given guarantee
FAI Money should never have been given a Crown guarantee
A decision by FAI to stop raising money from the public without the government guarantee shows the company should never have been given a Crown guarantee in the first place, Progressive Party leader and Wigram MP Jim Anderton says.
FAI Money has reportedly written to investors saying the company would no longer be raising money from the public to fund its lending. FAI is owned by Hanover and, through a network of companies, by Mark Hotchin and Eric Watson.
“The Crown guarantee was the only thing that kept FAI Money in the public marketplace,” Jim Anderton said.
“But FAI should not have been in the public marketplace after what happened to Hanover, and the behaviour of Mr Hotchin and Mr Watson.”
Jim Anderton says the Crown guarantee was introduced to make sure there wouldn’t be a run on financial institutions in the difficult global economic conditions of late 2008 and 2009.
“The guarantee was never intended to provide backing for businesses that were not going to cut the mustard in more normal times. Treasury’s guidelines for considering a Crown guarantee were ‘the maintenance of public confidence in New Zealand’s financial system; and maintaining the confidence of general public depositors in New Zealand financial institutions.’
“The guarantee for FAI never met that guideline. The Treasury says factors that should be taken into account in giving a guarantee include the size of the entity and related party exposure, the business practice of the entity, the ‘good character’ and business acumen of the entity and “The track record of the entity.”
“Bill English should never have allowed Hotchin and Watson’s business to get a Crown guarantee and the confirmation today that they will not be seeking funds from the pubic proves it.
“The Crown guarantee was a good policy; but that doesn’t mean everyone should have got it”
Jim Anderton has been raising queries about the Crown guarantee for FAI since early 2009.
In 2008, before the global meltdown and the Crown guarantee, Hanover froze over half a billion of investors’ money.
ENDS
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