Matt Gilligan - Interest Rates / Banking / NZ Market Update

[Monkeyboy]

They're in business to make money Olly, not make us feel good or look after us.

If Bollard wants that he will have ot get the government to legislate.

Otherwise this "poor victim" mentality is silly. Youand I would employ managers and CEO's who would maximise our profits wouldn't we?? A bank is no different.

Banks are not the same as other Businesses. They have certain responsibilities, one is to ensure that financial stability is maintained. Yes they should make as much money as they can but they also have to act responsibly to ensure this happens.

[OllyN]

Dean - there is a difference between "profit" and "usury".
You, of all people should be aware of what the Good Book teaches.

[Dean@Massiveaction]

I don't change my mind Munga, I just try to keep up with what is happening. No one of us saw the level of carnage we have coming. We are all in uncharted territory.
The Gold Coast is doing well thanks yes. Their visitor numbers are doing well and occupancy is high.

And I'm lost at how there is a prediction in my comments about the banks. I'm simply pointing out that they exist to make money. It might not be "fair" or "right", but it is the fact of the matter.

PS the future is bright. There has never been a better time to invest than now. The next round of super rich are being created as we speak.

[Dean@Massiveaction]

I agree Olly but how do you set that line in the real world?? Competition is meant to control it.

In your heyday would you ever go to your managers and say: "Hey I think we're making too much money on this project, let's give some money back to the punter"?

[Munga]

The next round of super rich are being created as we speak.

The super rich are made and broken all the time.

[whitt]

Disagree Dean.

The government is merely suggesting the truth.
Banks need to think of the big picture and assist the country out of this recession. They are a key part to any recovery.

Easing pressure on businesses and rates will help. If they keep driving profits then it will create small business collapses and the recession will drag on.

If people look at it short term and support the banks high profits then they miss the big picture long term.

Everyone in NZ including the banks need to work together to get us out of this situation. They should be having CEO salary freezes and increasing productivity, just like the rest of NZ is.

[Dean@Massiveaction]

But where do you get that idea from Whitt. The banks have nevre been instrumental in solving recessions. Governments taking over banks is what happens. Where do we get thei idea that the banks will save us or help. They never have before?

I agree Munga but there is more opporunity than normal at current in terms of buying cash positive assets, distressed vendors, low interest rates etc.

[Munga]

I agree Munga but there is more opporunity than normal at current in terms of buying cash positive assets, distressed vendors, low interest rates etc.

Dean - I would also say that there is equal opportunity for crash and burn in this environment too. We have yet to see the effects of high unemployment play it's hand.

[Dean@Massiveaction]

I agree completely, that's why you have to do the right thing and not over leverage etc.

[whitt]

The banks have never been instrumental in solving recessions. Governments taking over banks is what happens. Where do we get their idea that the banks will save us or help. They never have before?

Nobody did much to get us out of the last depression either. In hindsight history shows us that was a bad mistake. There were monetary controls that could have been placed which would not have prolonged it for that time-frame which it occurred.

Now decades on the world has globalized and each country needs to work together. Banks are encouraged (verbally or through tighter govt regulation) to assist.

Take the high business rates or funds for example. The reality is if they don't drop rates or have funds become more accessible many small bussinesses will fail. It is at that point governments will need to step in with regulation. Unemployment will rise and recession will drag longer.

The banks can assist and every small part helps the big picture.

The world finances are not in the same place it was decades ago.

[mortgage broker]

I don't see how anyone can realistically expect a bank which is basically a business to suddenly grow a soul or start acting for the greater good.

We have a state owned bank, surely thats a pretty strong instrument to experiment with whatever airy fairy economics you want to.

[whitt]

Funny you say that.
There is talk today of them doing just that with Kiwibank.

When it first started they had artificially lower than the big boy rates.
At that point they took 2/3 of all new mortgages for a period of time. Untill they needed to raise it due to excessive demand.

Govt could potentially do same again and force the big boys down. They would not want to lose 2/3 of market share again.

[exnzpat]

It's all very well discussing bank break fees and the costs involved. What is being over looked is the rip off occurring right now with bank charges on business accounts.

Totally ignoring Dr Bollards demand that banks lower interest rates, the National/ANZ business bank charges are as follows: (copied direct from statement)

Up to $10,000 17.85%
$10,000 to $25,000 17.85%
Above $25,000 22.85%

So much for helping the economy, encouraging business, and creating jobs.

The last time I saw rates like that was during the 80's when inflation was 18% and rising.

Olly, imagine your wrath after the banks have gone to the government and told them that they can no longer sustain their bad mortgage debts. They tell the government that unless the tax payer intercedes and bails them out that they will fail. The government, in an effort to do the right thing, takes over the banks’ bad debt and then -- and then -- after the government lowers interest rates to historic lows in an extra effort to help out the economy -- the banks still refuse to lower their mortgage rates – even though you, the tax payer, are now the owner!

That’s what’s going on in the States right now. I have no doubt that New Zealand and Australia will repeat these same mistakes. When? Before year’s end I think. We will see.

[micheleco]

I agree with Olly, usury is a word I'm using alot in regard to banks. They were quick to raise rates to over 11% last year and real slow to bring em down, and quick to raise em again to lock us into long term rates.
All businesses are bringing their prices down ie cutting margins to keep consumers buying, why arent the banks? Coz they are greedy sods. How quick did they lay off their own staff and close branches when things got tight???? Unlike other businesses they also seem to get away with price fixing, ie they all have similar rates. Other businesses compete to lower their prices to attract customers. Banks collude to stay profitable and keep their rates high.
My pick...in winter when houses sales traditionally slow down, banks will be awash with cash deposits and no one to lend it to (thats after all, where they make their money), so we will see a (probably brief) rates war. Maybe jul/aug.
Im hoping...cant afford to fix yet, need the lower floating rates.
Another consideration, the dude who ran Countrywide bank in the US is now buying up distressed loans at discounted rates to relend to the punters at lower rates so they can AFFORD to make their payments. A concept banks could learn from.
After all us landlords are being told to lower or not raise our rents to help out tenants out so they can AFFORD to pay the rent, and we get some income (as opposed to none) to cover our mortgages. Gee whiz what a concept.

[whitt]

Another consideration, the dude who ran Countrywide bank in the US is now buying up distressed loans at discounted rates to relend to the punters at lower rates so they can AFFORD to make their payments. A concept banks could learn from.
After all us landlords are being told to lower or not raise our rents to help out tenants out so they can AFFORD to pay the rent, and we get some income (as opposed to none) to cover our mortgages. Gee whiz what a concept.

I wonder if they could pull it off?