Nine finance companies covered by the scheme have failed, including South Canterbury Finance. The Government has paid $1.972 billion; about $1.58 billion of that going to South Canterbury investors.
The Government now expects to recover just $900 million from the combined receiverships.
This is markedly less than Bill English indicated the Government expected to get back from the South Canterbury Finance receivership after it refused to backstop a credible private sector offer for the company last year.
But neither English nor the Treasury seem particularly fazed by the Auditor-General's findings.
Treasury Secretary Gabriel Makhlouf disagrees "with the assertion that more intervention in finance companies may have reduced the fiscal risks that were an inevitable consequence of the scheme".
Makhlouf - who has only been in the top job a matter of months and wasn't a player when the Crown guarantee was first issued - could have taken a much more robust stance. He said the Treasury considered a range of further interventions but couldn't find a case where it was more likely to create a better outcome. All interventions carry a degree of risk and "we don't believe that the Auditor-General's report gives sufficient weight to the risks that further interventions would have created".
This is risible.
The Auditor-General's report shows that Treasury admitted Equitable Mortgages into the scheme despite the Reserve Bank's view it wasn't eligible because it was providing financial services to a related party. Treasury ultimately wrote $178 million in cheques to Equitable's lucky depositors when that company also failed.
Maybe the Finance Minister and Treasury have a different perspective to Provost because of the huge borrowings that are being chalked up each week to keep the fiscal stimulus pump working.
Even though the taxpayer is now tail-end Charlie for more than $1 billion through the failure of nine finance companies that enjoyed Crown guarantee status, it seems to be chump change as far as officials are concerned. Why else would they adopt a mindset that said it was easier to write cheques out to depositors once the finance companies went into receivership, than stop them expanding their businesses in an unsustainable fashion?
The scheme was set up in the dying days of the Helen Clark government to avert a run on the banks as the global financial crisis deepened. Initially it was to cover trading bank deposits. But even though finance companies were dropping like flies by late 2008, the scheme was widened to cover eligible "non-bank deposit-takers". Ostensibly this was because of fears their investors would otherwise shift their funds to the Government-guaranteed banks.
In the circumstances you would have expected Treasury to have been much more vigilant. But it wasn't.
Have things changed?
I'm not sure that the Government's claim that it runs a tight fiscal ship these days really holds as much water as their spinmeisters suggest.
Just a couple of recent examples.
Next week, the plastic waka that has cost the taxpayer $2 million will be unveiled on the Auckland waterfront. It will ostensibly be there to showcase Maori culture. But blowing $2 million on a project that will only be open to the touring Rugby World Cup supporters for the last 11 days of the tournament is a complete waste of public money.
And this week, it was decided the Government and Auckland Council would spend an unbudgeted $5.5 million to boost the extent of Auckland's fan zones for the final weeks of the cup. It's no wonder the ratings agencies walloped this country with a downgrade.
