Bungling Kevin Rudd creates a financial crisis where there was none before

There were no problems with Australia's banks. They were and are still making profits. Sub-prime loans have not been a significant problem in Australia. So drama-queen Kevin Rudd had to puff up his own importance by "guaranteeing" bank deposits (which were already protected by long-standing "lender of last resort" facilities anyway). But he didn't guarantee other deposit-takers such as cash management trusts. Cash management trusts are widely used in Australia by those who have significant funds as they are the only way to get some interest on your money. Bank interest is negligible. So Rudd created the impression that only the banks were safe and caused a huge run on all the "left-out" institutions -- which now have had to suspend withdrawals -- with dire consequences for many, as seen below

SELF-FUNDED retiree Greg Russell is the human face of the Rudd government's mishandling of its response to the global financial meltdown: he now has $5 in his bank account. Because he put his money into a cash management account, Mr Russell's assets are frozen, along with those of his wife Debbie and the savings accounts of his two children. And, because he is in the process of selling his business, he still owes the tax man a big bill for his quarterly Business Activity Statement (BAS).



When the East Coast Mortgage Company on NSW's North Coast froze Mr Russell's assets on Tuesday, along with a raft of other secondary lenders, the results were shocking. He's had to take out a $50,000 loan to cover his BAS commitments and to maintain his, and his family's, living costs. East Coast Mortgage is just one of a series of institutions which have had to freeze customer deposits because the federal Government's guarantee of savers' deposits only applies to major banks. This has seen a flood of money pour out of smaller institutions, like East Coast Mortgage, which didn't get government backing.



East Coast isn't alone. Big non-bank players, such as AXA (formerly National Mutual), are among 13 major groups which have been forced to freeze withdrawals by depositors.

Treasurer Wayne Swan told people like Mr Russell, 59, that they should go to Government welfare agency Centrelink for income support if they found themselves in trouble. Mr Russell says the Treasurer doesn't know what he's talking about. "It's a complete joke,'' Mr Russell said. ``Imagine how the staff at Centrelink are going to cope with my circumstances.

"Wayne Swan is clutching at straws. There's pride involved here, as well. "Self-funded retirees don't want to be lining up at Centrelink. He's run out of ideas. They don't know what's going on. "I sold my business and have always supported local, well-run mortgage funds. "I have invested a large portion of the proceeds from the sale of my business into these organisations. I'm speaking, not only on behalf of myself, but for a large number of investors throughout Australia.

"The Government made a `rush of blood' decision to guarantee banks, credit unions and building societies and exclude mortgage funds. We now find there are $14 billion of frozen funds and how are investors going to survive throughout the next three, six and 12 months?'' As a result of the Government decision, Mr Russell has been left with $5 in his personal account and $165 in his business account at the NAB.

Source


Posted by John Ray. For a daily critique of Leftist activities, see DISSECTING LEFTISM. For a daily survey of Australian politics, see AUSTRALIAN POLITICS Also, don't forget your roundup of Obama news and commentary at OBAMA WATCH (2). Email me (John Ray) here

No comments:

Post a Comment

All comments containing Chinese characters will not be published as I do not understand them