[recession we had to have]

Linket

Bank guarantee to be withdrawn: Swan


February 7, 2010 - 1:09PM
AAP

The federal government will withdraw its guarantee for bank deposits and wholesale funding, Treasurer Wayne Swan has announced.

The withdrawal would begin on March 31, Mr Swan said on Sunday.

He said the government was acting on the advice of the Council of Financial Regulators.

The announcement does not affect the Financial Claims Scheme, which will give consumers certainty over deposits of up to $16 million until the cap is reviewed in October 2011.

Mr Swan said the guarantee scheme for large deposits and wholesale funding had stabilised the Australian economy, while others collapsed under the weight of the global financial crisis.

"It gave our banks continued access to global capital markets on competitive terms, which has been critical in supporting the flow of credit through the Australian economy," he said in a statement on Sunday.

Mr Swan said Australian banks and other lenders had so far paid around $1.1 billion for the use of the guarantee and will pay around $5.5 billion over its full term.

[Darth Vader]

Bank guarantee to be withdrawn: Swan
February 7, 2010 - 1:09PM AAP

The federal government will withdraw its guarantee for bank deposits and wholesale funding, Treasurer Wayne Swan has announced.

The withdrawal would begin on March 31, Mr Swan said on Sunday.

He said the government was acting on the advice of the Council of Financial Regulators.

The announcement does not affect the Financial Claims Scheme, which will give consumers certainty over deposits of up to $16 million until the cap is reviewed in October 2011.

Mr Swan said the guarantee scheme for large deposits and wholesale funding had stabilised the Australian economy, while others collapsed under the weight of the global financial crisis.

"It gave our banks continued access to global capital markets on competitive terms, which has been critical in supporting the flow of credit through the Australian economy," he said in a statement on Sunday.

Mr Swan said Australian banks and other lenders had so far paid around $1.1 billion for the use of the guarantee and will pay around $5.5 billion over its full term.




Will do more research on the Financial Claims Scheme, as this suggests that this will only affect the big boys.





As an aside; lots of propaganda in the newspapers this weekend! Just a sea of utter crap. In particular they were saying that internet job ads were down in Jan, thus no rate rise. Now they are saying that job ads in Jan were up. The media is full of shit at present.

[MOD: RWHTH started the same topic 5 mins before so they are merged]

[Darth Vader]

Financial Claims Scheme



Depositors in ADIs (banks, building societies, credit unions) already receive preference in any liquidation, which means they will almost certainly recover all of their funds eventually. However there is currently no mechanism to provide depositors or general insurance policyholders with timely access to at least some of their funds in the event of a failure.

In light of the potential for delays to cause real hardship, and to further assist the management of a failing institution, the FCS will allow customers to quickly recover money in deposit accounts. Customers will be able to recover monies up to a specified cap (up to a limit per person of $20,000), with the remainder likely to be recovered when the ADI is liquidated.










20k and then the rest when liquidated. That could/will take frikkin years!

[Bernard L. Madoff]

Looking at the CDS spreads for certain countries, certain US states and some banks (CRE and other bad debt exposures) when the brown stuff hits the rotating thingy later this year, that'll be one on the best u turns since the old Dukes of Hazzard TV series.

Quote

The withdrawal would begin on March 31, Mr Swan said on Sunday..

The global contagion should be noticeable by then with the TED up at 50+. Man, he is a C grader. NFI.

We need the dude in your Avatar Rececession WHTH.

Quote

He said the government was acting on the advice of the Council of Financial Regulators

They must be a sharp lot.

[tom]

Darth Vader, on 07 February 2010 - 02:34 AM, said:

with the remainder likely to be recovered when the ADI is liquidated.[/b][/u][/i]

With our real estate market and the banks exposure to it, I dont think that is likely at all. At least not getting back all of it sure you will get back half at least, short of a complete rout of Australian Real Estate, but I dont think it is a foregone conclusion. I would like to know if the 20k you get here gets prorated with the est of your payout or comess off what you get paid,

i.e. gov gives you 20k up front out of say your deposit with a failed bank of 40k, upon liquidation you are found to get 20k only,

does the government take the 20k from liquidation as a debt due from you.
do you get this 20k as well? and teh gov loses 20k. (I bet this is not how it goes)
do you get another 10k this time and the gov takes a hit equal to your own pro rata style?

[tom]

Tinpusher, on 07 February 2010 - 02:44 AM, said:

Looking at the CDS spreads for certain countries, certain US states and some banks (CRE and other bad debt exposures) when the brown stuff hits the rotating thingy later this year, that'll be one on the best u turns since the old Dukes of Hazzard TV series.

Like you I will believe it when I see it. Even if they actually get up to stopping it I reckon within weeks we will have bank deposit guarantee Mk2.

[Mr Medved]

Tinpusher, on 07 February 2010 - 02:44 AM, said:

The global contagion should be noticeable by then with the TED up at 50+. Man, he is a C grader. NFI.

Don't worry, they'll just slap it back and look like the fools they are.

If I were a betting man I'd also consider the odds for a return for the financials short-selling ban.

[Chimerica]

So it appears that we'll be seeing the Big 4 independantly raising rates in the coming months. With no Govt guarantee, funding is going to cost the banks more. This is getting very interesting.

[Bernard L. Madoff]

Mr Medved, on 07 February 2010 - 04:02 AM, said:

If I were a betting man I'd also consider the odds for a return for the financials short-selling ban.

LOL

A Swan can be predictable lame duck.

Whaddayareckon All Ords passing 4200 or 4000 before we see that?

[Easy Tiger]

I see I have to get up super early to beat you guys



LINK

</h1>

Quote

<h1>Government to withdraw bank guarantee

February 07, 2010 01:36pm

THE Federal Government is withdrawing its guarantee scheme for banks as it is no longer needed given the strength of the Australian financial system.

Australia's financial regulators say the guarantee scheme for large deposits and wholesale funding – introduced at the height of the global financial crisis to help the nation's banks borrow funds overseas – can now be phased out because of improved funding conditions.



The withdrawal, effective March 31, will mean an early end to what had initially been expected to be a three-year scheme.



Treasurer Wayne Swan said the guarantee had been vital to the stability of Australia's financial system when others were collapsing under the weight of the global financial crisis.



"It gave our banks continued access to global capital markets on competitive terms, which has been critical in supporting the flow of credit through the Australian economy," he said today.



The Government announced it would guarantee bank wholesale borrowing, and all deposits, in October 2008 to reassure depositors and ensure lenders could keep doing their jobs.



Mr Swan said Australian banks and other lenders had so far paid around $1.1 billion for the use of the guarantee and will pay around $5.5 billion over its full life.



"Without the guarantee, our banks would have lent less and interest rates for borrowers would have been higher, leading to lower growth and higher unemployment," Mr Swan said.



"The guarantee has also been vital in helping to support competition in the banking sector throughout the global financial crisis which hit smaller lenders particularly hard."



The guarantee, which offered wholesale funding certainty to more than 150 Australian authorised deposit-taking institutions, had allowed the country's non-major banks to raise over $32 billion in funding from international credit markets, the Government said.



The announcement does not affect the Financial Claims Scheme, which the Government said would give consumers certainty over deposits of up to $1 million until the cap was reviewed in October 2011.



Mr Swan said the Council of Financial Regulators – made up of the Reserve Bank, Treasury, Australian Securities and Investments Commission and Australian Prudential Regulation Authority heads – had advised that because of improved bank funding conditions, the guarantee was no longer needed.



"Importantly, our regulators explicitly advise that removing the guarantee will not materially affect banking sector funding costs," he said.



The Government is also closing the state and territory borrowing guarantee to new bond issues from December 31.



The central bank-administered scheme started last July.



It temporarily guaranteed debt raisings by the states, which had been struggling to raise money on financial markets for crucial infrastructure projects.



"The longer withdrawal period... is needed for states to establish liquidity in new unguaranteed bond lines," Mr Swan said.

[spark]

Very good.
IRs up
AUD up.

[savagegoose]

so i have till martch 31 to trade my savings to gold. wow i hope theres some more lows on the way.

[Darth Vader]

savagegoose, on 07 February 2010 - 04:36 AM, said:

so i have till martch 31 to trade my savings to gold. wow i hope theres some more lows on the way.

Wait for Perth Mint to put a delay/hold on physical delivery like early last year. Interestingly, i transfered a sinificant amount of cash between Ubank and my regular bank on Friday and the transaction has not yet appeared in Ubank yet. Normally, when you make a transfer, the money disappears straight away and stays in banking heaven for a few days, then eventually appears in your nominated account. Do they need my money that badly? They could have just told me i'm not allowed my money until the GFC is over and i would be understanding.

This post has been edited by Darth Vader: 07 February 2010 - 04:58 AM

[Bernard L. Madoff]

http://www.theaustra...f-1225827557697

Quote

Banks warned against rate rise excuse

TREASURER Wayne Swan has warned the banks not to use the withdrawal of the Government's deposit guarantee as an excuse to slug consumers with higher interest rates.

The Federal Government announced today it would withdraw its guarantee for banks of deposits more than $1 million from the end of March.

The program to help banks borrow funds overseas, otherwise known as the wholesale bank funding guarantee, will also be phased out at this time.

Mr Swan said bank borrowing costs had returned to where they were before the onset of the global financial crisis in 2008.

This meant they would no longer be justified in raising interest rates beyond moves by the Reserve Bank of Australia.

He warned the banks to avoid using the withdrawal of the larger deposit and wholesale funding guarantees as an excuse to slug consumers with higher rates.

"If any major bank were... to attribute some move above the Reserve Bank rate to a decision such as this they would be wrong to do so," Mr Swan said.

"They would incur the wrath not just of the Australian people but of the Australian Government."

The Government will continue to guarantee deposits of less than $1 million until the cap is reviewed in October 2011.

What a knob. They'll do what they want.

[recession we had to have]

Tinpusher, on 07 February 2010 - 02:44 AM, said:

Looking at the CDS spreads for certain countries, certain US states and some banks (CRE and other bad debt exposures) when the brown stuff hits the rotating thingy later this year, that'll be one on the best u turns since the old Dukes of Hazzard TV series.

The global contagion should be noticeable by then with the TED up at 50+. Man, he is a C grader. NFI.

We need the dude in your Avatar Rececession WHTH.


They must be a sharp lot.

Don't get me started on these donkeys Tin...

[goethe]

They better hope their hubris is not tested.

[Solomon]

Quote

The federal government will withdraw its guarantee for bank deposits and wholesale funding, Treasurer Wayne Swan has announced.
The withdrawal would begin on March 31, Mr Swan said on Sunday.
He said the government was acting on the advice of the Council of Financial Regulators.

I'm sure these guys know exactly what they are doing.
I think they're the same people who could not see Oct 2008 coming!!! Remember they were fighting inflation by raising interest rates, just one month before the greatest financial crisis in the past 70 years.
Aren't they also those who said there is no bubble in Australian house prices??

Be interesting to know what each of em did, before getting their lucrative postings to these high profile positions?
Surely not the financial world.

Council of Financial Regulators

This is one of its objectives as detailed in the Memorandum of Understanding between the various entities.

Quote

5.2 Assessment of financial stress and implementation of response options
If significant potential or actual financial distress has been identified, the Council serves as a coordination forum for assessing the situation and considering possible response options. If a decision and its implementation fall directly within the responsibility of a Council member, that agency is responsible for that decision.

In the event of a major financial distress they are responsible for advising the government about policy.
Any of you fella's ever heard of Greece? Portugal? Spain? UK? USA?

I have to wonder on what basis they are advising the government to life the guarantee on funds over $1 million?
This has to jeopardise large scale funds parked in the banks since the inception of the guarantee.
So is this to get those funds to move into something else now?
Is it so that the banks can fail and the largest amounts won't hit the bottom line of the governments balance sheet?

I just don't know.
It would seem to me far to early to be lifting this kind of protection when the world markets are far from stabilised, even if the Australian economy is reasonably stable.
Maybe I've been hanging around these forums too long, but I can only speculate on what has forced them to move now.
Why couldn't they wait another 6 months/12 months?

[tom]

Solomon, on 07 February 2010 - 10:49 AM, said:

It would seem to me far to early to be lifting this kind of protection when the world markets are far from stabilised, even if the Australian economy is reasonably stable.
Maybe I've been hanging around these forums too long, but I can only speculate on what has forced them to move now.
Why couldn't they wait another 6 months/12 months?

The sooner they get rid of it the better. It is just that it is surprising teat Rudd and co woul dbe this responsible.

The longer it is in place the more chance the banks are going to become irrisponsible.

It is a classic moral hazard. For example if the government guaranteed any money lent to me, I would have a crack at making billions. Im either going to lose millions or make them and if I lose it is not my money anyway.

The bankers see this years profit as their primary objective, in order to make the most profit they need to secure the most capital at the right price. Finding punters who will borrow the capital off them is the easy part finding people who will loan to them the hard bit. With a guarantee it is so much easier to grow their business.

For so long as the govrnment leaves the guarantee in place the more reliant on the guarantee the banks will become. Westpac was clearly moving to wean themselves off the guarantee by becoming more fussy with who they lend to. This will help then source funding later if there average mortgage LVR is lower than the other banks. I imagine the government has already floated this past the banks hence westpacs moves of late.

All that said like yourself in reality I can only see some calamity befalling the banks within weeks of it being removed and Swan just putting the guarantee right back in place. Given another year or two of teh guarantee there will be no going back. And if the governemnt has to guarantee banks forever than we might as well nationalise all of them. At least then the government can make teh money, not just take on the risk.

[Bernard L. Madoff]

I'm a fan of deposit insurance since it protects us plebs from bank failures and guards against bank runs and encourages saving.

$50-$60,000 max for cash deposits.

http://en.wikipedia....posit_insurance

On the other hand our guarantee that guarantees the banks borrowings OS and enables them to get involved in quasi sub prime lending is just crap because it encourages risky lending and exacerbates the risky debt problem creating a house of cards scenario.

Also, non-CGT and Tax free dividends for Infrastucture investment by the plebs may finally see some High speed transit, metro rail and super high speed intercity (Syd-Mel) rail; and, Highway one (Cairns to Adelaide) become a multi lane divided highway with truck lanes and on and off ramps.

[tom]

Tinpusher, on 07 February 2010 - 02:00 PM, said:

I'm a fan of deposit insurance since it protects us plebs from bank failures and guards against bank runs and encourages saving.

$50-$60,000 max for cash deposits.

http://en.wikipedia....posit_insurance

On the other hand our guarantee that guarantees the banks borrowings OS and enables them to get involved in quasi sub prime lending is just crap because it encourages risky lending and exacerbates the risky debt problem creating a house of cards scenario.

But together all us plebs form a large part of the banks capital. Better it is a true market so we put out money with the safest bank. This way banks our rewarded for prudence. We don't have much choice in Australia but if capital became scarce you would see one of the banks move to become the safe bet.

Tinpusher, on 07 February 2010 - 02:00 PM, said:

Also, non-CGT and Tax free dividends for Infrastucture investment by the plebs may finally see some High speed transit, metro rail and super high speed intercity (Syd-Mel) rail; and, Highway one (Cairns to Adelaide) become a multi lane divided highway with truck lanes and on and off ramps.

Like the sound of that.