Hubbard’s SCF: Too big for govt not to create another big balls up

Talk has now turned from the Serious Fraud Office’s Kafka-esque harassment of to Aalan Hubbard and his other companies to a government “bailout” for the company he founded and chaired, South Canterbury Finance (SCF). 

“Too big to fail”?  Surely that should mean “too big for taxpayers’ money to be wasted.” What it means, however—and I say this with much sadness—is that it’s too big for governments to ignore.  And you know what that’s going to mean, don’t you. Another balls up.

Consider the foolishly offered government guarantee scheme for failing finance companies, without which talk of “bailout” would even be talk.  Or shouldn’t be.  As many sane and sober folk were saying when Michael Cullen and John Key agreed to the scheme, “The big banks didn't need it, even at the height of the crisis, and sure don't need it now, and its only function was to prop up risky finance companies that should have failed.”  Now a big one has, and with the combination of imminent collapse and Bill’s foolishness the taxpayer now finds him-and-herself on the hook for several hundred million dollars. Thanks Michael.  Thanks John. You dickheads.

Consider too the harassment of South Canterbury Finance’s founder and chairman Alan Hubbard by the Serious Fraud Office—an investigation over issues in another company which are still not clear, which have been deliberately left vague, and which have been used as a stick with which to blackmail Mr Hubbard into handing over the keys to this company—an investigation done so poorly and so publicly that it all but guaranteed any chance of South Canterbury Finance finding another funder to make up its capital reserves was effectively extinguished. (We’ll never know whether SCF did have a chance of saving itself, but the jackboots rendered that possibility null.)

What the government should have done was not what it did. Risking taxpayers’ money with this sort of guarantee was unconscionable; putting it at risk with the Keystone Cops’ persecution of the company’s chairman was intolerable. To compound both errors now by pouring taxpayers’ money down what looks like a black hole would be beyond irresponsible—which is what it will probably happen.

What it should do now is allow liquidators to the clean out the dead wood as quickly and effectively as possible so that resources tied up in this debacle can be set free for other entrepreneurs to find a better use for them, ASAP—to use them as fertiliser for new ventures, unencumbered by whatever meddling strings the government would like to attach .

Since that’s the most logical thing to do, however, we can be almost certain that it won’t be done. Expect instead to see South Canterbury Finance effectively nationalised, using the money you were thinking of using on home improvements, debt repayment and educating your children to be used instead to prop up a zombie company that was doing moderately well until the jackboots came through the door.