Richard Inder: Bank's win means little guys feel the most pain

The financial consequences of the Feltex collapse are horrendous - more than $250 million of investors' funds down the drain, suppliers out of pocket to the tune of $7.5 million.

However, for all but the most foolhardy these losses represented just a small proportion of their wealth. The shares were part of a portfolio of assets that, for most, would have included property, bank deposits, and other shares.

Sure, the collapse in Feltex's shares from $1.70 at flotation in 2004 to 3c now is galling, but for most shareholders it did not herald a fundamentally different outlook.

They could still afford the latte and breakfast at the local cafe and still fill their cars with petrol and contemplate their next summer holidays.

Suppliers will suffer, but for the most part the losses will not put them out of business.

Compare these losses to those suffered by the workers at Feltex's plant at Kakariki, who were told this week they were without a job; or the small community that depends on the plant for its livelihood; or the worry of workers at the Christchurch plant, who will spend this weekend fretting over whether they will be among the unfortunate few tagged for redundancy.

One well-worn worker, leaving the Riccarton plant on the day the receiver Feltex McGrathNicol broke the news of job losses, cast her and her workmates' plight in the starkest terms.

"How would you feel?" she spat at the reporter who had asked the inevitable question.

She and her husband, both long-serving Feltex workers were facing redundancy and a dramatic drop in family income.

Promised redundancy payments - which might have amounted to six figures and given her the security to stick with Feltex through the turmoil of the past two years - had been wiped out by the receivership.

Jeffrey Iwikau, a worker at the Kakariki plant, who spoke to One News wearing a well-loved Feltex-branded peaked cap, told a similarly tragic story.

"We are feeling quite empty. It's sort of, you wake up in the morning expecting to be at work and it's six or seven o'clock and you wake up and think, well, I have got nothing."

I have not spoken to Iwikau, but I guess he and many of his colleagues are either contemplating a move to a larger centre to find work, or a future marked by a series of low-paid jobs.

And even if they did shift, they would incur an enormous emotional cost in cutting long-established ties with their community.

In short, the financial stakeholders had a lot less riding on the success of the carpet-maker than did the blue-collar workers of Riccarton and Kakariki.

Such inequalities are unavoidable and, to a greater or lesser extent, they are ones to which everybody is exposed. Most people are two or three monthly pay cheques from bankruptcy and - to a greater or lesser extent - their financial wellbeing depends on their employers continuing to thrive. If the money dries up, most will quickly begin to struggle with mortgage payments.

This is especially the case in Auckland, where mortgages are much larger than the national average.

But the Feltex case highlights how these inequalities can create hazards not only for the workers on the ground, but also smaller retail share-market investors and even larger institutional investors.

For instance, did the principals of the US-based Credit Suisse First Boston private equity fund - no doubt a clutch of seasoned financial engineers - really believe New Zealand's retail investors were getting a fair deal when they floated the firm in 2004?

Or did they see the float as an opportunity to quit a less-than-reliable performer?

Feltex's lender, ANZ, is at the very least open to accusations that it let purely financial considerations dominate its actions towards Feltex.

Receivership has clearly provided the best financial result for the bank. ANZ would have likely taken a loss under the rescue deal put forward by Graeme and Craig Turner, principals of the Sleepyhead bedding group.

Under receivership and the subsequent sale of the firm to Australia's Godfrey Hirst, however, the bank has recovered its entire $140 million loan. Losses were instead borne by Feltex's suppliers and the workers stripped of the previously generous redundancy entitlements.

It is at least worth asking whether a small New Zealand-owned bank, whose future was more closely tied to fostering a thriving local business community, would have acted the same way.

No matter how the financiers at Credit Suisse and ANZ reply, it is a fair bet their distance from New Zealand and the rhetoric of caveat emptor is helping them sleep easier at night.

It is difficult to be unequivocal. But, in an economy such as New Zealand's, which grows ever more reliant on the goodwill and confidence of financiers in Melbourne, Sydney, Tokyo, London and New York, these questions are worthy of consideration.