Cake stall for redundant LWR workers

Lane Walker Rudkin has been placed in receivership - a situation created by inept management and the short sighted and self serving actions of Westpac bank.

Tomorrow, outside Westpac House on Willis Street (Wellington), the National Distibution Union is holding a cake stall to support the redundant workers. If you are out for lunch between 12pm and 1pm a cake or a donation will be greatly appreciated.

Stalls in other centres are being cooked as we speak. If you are on facebook please join Bake a Cake for LWR workers for updates.

Last week the receivers announced 186 jobs will go. There is no guarantee the workers will see any of the holiday or redundancy pay. This is capped under the receivership laws at $16,420, and long serving employees face losing most of the money they are owed. As Westpac instigated the receivership they will have priority as a creditor.

As Laila Harre explains
"This is a dreadful situation and the workers and their union are very angry. How the bank allowed LWR to continue to trade and build up so much debt for so long is beyond belief. Yet today, that same bank, Westpac, washes its hands of its responsibility to the workers and refuses to even meet with the NDU and Council of Trade Unions to discuss the situation.

"We need both the Government and Westpac to come up with a mechanism that will guarantee the holiday and redundancy pay owed to the workers. And the Government also needs to come to the party to fund a worker-led redundancy support service"

Great to see some good blog support already for Bake a Cake from the Hand Mirror and The Standard.

Greedy debt pushers cause economic damage

In my last post I highlighted the decision of the Advertising Standards Authority to uphold a complaint about an advertisement from Bond and Bond that stated "NZ has the 3rd highest level of personal debt, help us get to No. 1". The ASA found the advertisement to be socially irresponsible.

While its completely out of the purview of the ASA [tongue in cheek], I believe the actions of the large retailers in encouraging their customers into high levels of debt is also economically irresponsible. And that goes for the Australian owned banks pushing residential mortgages, and the finance companies who deal in high interest loans.

New Zealand has a long standing current account deficit, a problem only made worse by the liberalisation of consumer and other forms of credit by Roger Douglas in the first term of the Forth Labour Government. That money for the TV has to come from somewhere, and it can usually be traced to overseas sources, thereby placing greater pressure on NZ to source foreign investment (eg asset sales) to balance the books. While souring large mortgages for property investment deals in more significant amounts, the growth of consumer credit over the past 22 or so years has also got to be a factor. Since Douglas, levels of private debt have ballooned.

In some ways debt is a little like alcohol. It can function as a social lubricant as consumption is kept in moderation. In the same way bars are forbidden to sell alcohol to intoxicated persons, I believe it would be socially responsible for the government to place greater restrictions on consumer finance.

• The loan sharks need to be targeted and run out of town like the illegal bootleggers.
• There needs to be tough rules around high interest car loans, particularly where the level of debt is going to grow to be significantly higher than the cost of the car (perhaps this could involve restrictions on the assets that can be repossessed).
• I also support the recommendations of the Parasites on Poverty campaign, such as setting a maximum finance rate for all borrowing (related the rate of inflation) and ensuring all loan forms have to be in "plain English" in order to be enforceable.

One of causes of the current sub-prime mortgage crisis in the United States is the high interest rates charged on these mortgages. So in some ways the greed of American financial institutions has made them the authors of their own difficulties. In New Zealand the trouble with Provincial Finance began with the high number of high risk vehicle loans held by the company. In this case, why is there so much sympathy and focus on the investors who have lost money, and so little sympathy for the people who were struggling to pay off these loans in the first place?

I find it surprising effect of consumer credit and the use of credit cards is hardly ever mentioned in debates over monetary policy and the old bug bear of 'restraining inflation'. While greater restrictions on the use of consumer credit may in itself only have a small economic impact, there is potential for this to contribute to a change in consumer behaviour, meaning that people would be more likely to save if they wanted a big screen TV. An increase in overall savings rates would have a positive impact on the current account deficit.

In the wider scale, New Zealand's economic problems are not due to bad consumers who will not stop spending. Retailers who run advertising campaigns encouraging their customers into high levels of debt at usurious interest rates are contributing to the problem. However, the most fundamental problem is continuation of poor public policy which continues to leave the debt markets so unregulated.

ANZ does in Feltex, I close my account

At lunchtime today I went into my local National Bank branch and closed my last account. While my main accounts were transferred over to Kiwibank some time ago, I had banked with National and its predecessors since I was about 7 years old, including the time before the ANZ/National monster ate Countrywide.

On the form where it asks why I closed my account I wrote "Due to the greedy and shortsighted decision of the ANZ National bank to force Feltex into receivership".

To be honest it was an account I planned to close anyway - but I was pleased to have a chance to make the point.

Affording a first home

There has been some interesting talk among the blogs in the last few days on the question of how darn difficult it is for those now in their 20s and 30s to afford their first home. This follows a column in the NZ Herald by John Roughan who advocated a capital gains tax on non owner-occupied housing.

As Jordan puts it,
"There is something wrong with a housing market that is structured to deliver endless capital gains to people who have capital, and deny the ownership of housing to the upcoming generation as the consequence."

Successive Governors of the Reserve Bank and many of the neo-liberal acolytes bemoan the fact New Zealanders sink so much money into the housing market, pretending the "market" cannot be interfered with, when there is an obvious solution - a capital gains tax. Such a tax could have significant downstream benefits for the New Zealand economy as more locally based capital would become available to finance local business. The sharemarket would get a boost, and less overseas ownership of New Zealand companies would help reduce the current account deficit. In other words, we would be more productive in using our money.

The difficulty is building political support for such a change, especially when many of the 'baby boomers' already own a house and an investment property or two. Given that they were only responding to the unbalanced way investments are taxed in this country, perhaps it would be reasonable to give a few years warning before a capital gains tax took full effect. Unfortunately, because there are so many of them, we need to convince the baby boomers to put aside their self interest in favour of the best interests of the wider New Zealand economy.

I thought of some other ways the cycle of first house unaffordability could be broken. At present, the banks have a significant bias towards lending to the housing market. If greater restrictions were placed on the ability of the banks to boost their short term profits by selling more and more housing related debt, this could also help control house prices. While this could restrict the availability of mortgages, measures could be taken at the same time to encourage and assist first home buyers.

The State Advances Scheme introduced by the second Labour Government offered 3% morgages and the ability to capitalise the family benefit to make up the deposit. The main argument used against such policies is that they might push up house prices further. Yet as we are dealing with a scheme introduced in 1958, this should be an empirical question - ie look for a link between the number of loans offered through the State Advances Scheme and increasing house prices in the surrounding areas. I would be interested if anyone knows of any figures on this. We should not let the right get away with arguing from pure theory (which is usually a simplification of the real world anyway).

Brian Gaynor: Profits for banks, losses for New Zealand

Bryan Gaynor in the NZ Herald demonstrates how the New Zealand economy loses while the overseas owned banks profit.

"One of the unique features of the New Zealand economy is the size, influence and profitability of the banking sector. KPMG's Financial Institutions Performance Survey 2006 says the country's 16 registered banks had net earnings of $2.66 billion in 2005, compared with $980 million 10 years earlier. Banking is the most profitable commercial activity in New Zealand by a country mile."

While it has been common among the right wing elite to criticise Kiwis for sinking too much of their capital into the housing market, Gaynor points out this could have a lot to do with the lending practices of the banks themselves.

The banks, particularly the four major Australian-owned banks, have a strong bias towards the housing market as residential mortgages now represent 50.5 per cent of total bank lending compared with 47.7 per cent at the end of 2004. By comparison, residential mortgages have fallen from 36.3 per cent to 35.2 per cent of total Australian bank lending over the same period.

Despite the continued hype about attracting foreign investment, allowing significant overseas ownership of core assets like banks is never a free lunch. Overseas owned banks account for 98.2% of New Zealand's total banking assets, and this is a major contributor to our mammoth current account deficit.

"Net bank overseas borrowings of $68.2 billion are a huge cost to the country and these borrowings contribute an estimated $1.7 billion to the current account deficit.

Thus, the 14 overseas trading banks contributed in excess of $4 billion to the March 2006 year $14.5 billion current account deficit through a combination of their net earnings and offshore borrowings. Bank economists don't quote these figures in their analysis of the New Zealand economy.

This makes the banking sector the fourth-largest contributor to the current account deficit after oil, mechanical machinery and automotive imports, which all exceed $5 billion a year."

I am pleased to see someone else (other than me), point out how the so called 'economic commentary' offered by the banks so often coincides with their own private interests.

If you want to do something about New Zealand current account deficit - start by banking with a New Zealand owned bank, and stop these bunch of bankers profiting at our expense. We also need to call for greater controls on the lending pratices of the banks, to ensure they are not encouraged to damage the New Zealand economy in pursuit of their own short term profits.

Combating Corporate Spin: Westpac Bank

This week Westpac Banking Corporation released their half year profit figures, along with a predictable press release attempting to make Westpac look wonderful. To say this statement is 'carefully worded to be misleading' would be a touch too charitable!

"In the latest benchmark AC Neilsen Consumer Finance Monitor survey, covering the March 2006 quarter, Westpac was the only one of the major banks to record an increase in the percentage of respondents rating overall service as 'excellent' or 'very good'’. Our rating now stands at 60%, not far off the leading bank."

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One would hope Westpac would record the greatest improvement when it comes to customer satsifaction - given they have been sitting at or near the bottom of such surveys for years.

In the University of Auckland business school retail bank survey released in November 2005, Westpac only gained a satisfaction rating of 64% - the lowest of the banks. New Zealand owned TSB and state-owned Kiwibank lead the ratings with 95% each. (Press, 14/11/05, 'Kiwi banks shine')

"An increase in income tax expenses, from $92 million in the half-year to March 2005 to $162 million in the current period, is primarily a result of the unwinding of structured finance transactions in the prior period."

Which is only because Westpac were told off by the Inland Revenue Department for using structured finance transactions the IRD regarded as tax abusive. The taxmen and taxwomen presented Westpac with a lovely large bill, and they continue to investigate the dodgy tax dealings of the banks. Westpac faces a potential tax liability of NZ $611 million (NZ$750 million if you include the interest). More detail here.

"Ann Sherry said Westpac continued to demonstrate its commitment to corporate responsibility with a number of initiatives. These include the installation of '‘talking'’ ATMs in the five major centres, and the raising of more than $500,000 in Westpac's annual chopper appeal in support of rescue helicopter trusts around New Zealand. “In the next few months we will also roll out a financial literacy programme, initially to Westpac staff and later to customers and the wider community. "

In 2005 Westpac's "support" for the Westpac Rescue Helicopter included free chopper rides for children of Westpac executives, and eight of their little friends, for a 'special treat' (NZ Herald, 4/3/05, 'Birthday treat on rescue copter'). The executive in question later resigned, with no one saying why. Management thanked her for her "great contribution" to Westpac.

No doubt the aim of the 'financial literacy' programme will be to blame individuals for making poor money management decisions, instead of Westpac demonstrating some real corporate responsibility. Financial union Finsec and others have called on Westpac to change its debt selling practices that encourage people to make poor money management decisions. Of course, the banks make more money when the debt levels of their customers are higher.

The Consumers Institute criticised Westpac in 2005 when it heralded its decision to lower minimum monthly payments from 5% to 3% as "good news" for customers. "Of course its not good news," said David Russell. "Its about keeping people in hock for longer". Westpac staff gain more 'performance points' on their reviews by selling debt products, such as credit cards, than they do for savings products. Profit driven debt selling also places pressure on interest rates. In greedy pursuit of profits, Westpac damages the New Zealand economy.

Last year Westpac were also blamed for fueling an unsustainable 'mortgage price war'. The CEO of Westpac expects the 'war' to flare up again this year.

It should be no surprise that Westpac was one of the co-winners of the 2005 Roger Award for the Worst Transnational Corporation Operating in Aotearoa/New Zealand.

There is heaps more in the Westpac statement I could fisk, but that will do for now :)

Tags: New Zealand, Corporates, Westpac

Roger Report goes on the parliamentary record

I am currently mildly chuffed to discover that Sue Bradford put the Roger Award on the Parliamentary record on Wednesday night, in the debate on the Westpac Bank Bill.

In the prestigious Roger Awards for the worst transnational operating in New Zealand, the 2006 award went jointly to Westpac and the Bank of New Zealand. The judges' report and supporting documents make sobering reading. [strictly speaking it was the 2005 award]

I wrote the Roger Report, one of the supporting documents :)

One of the key reasons for the 'win' of the BNZ and Westpac in 2005 was the appalling way the banks treated their own employees. Sue covers this ground well.

I was especially pleased to see that Sue picked up on my point about the highly partisan nature of the so called 'economic commentary' offered freely to the media by the banks.

"Finally NZ Westpac customers of all political persuasions have to put up with the highly partisan and ideological comments of Westpac Chief Economist, Brendon O'Donovan. For all intents and purposes Mr O'Donovan acts as the economic cheerleader for the National Party and is a constant critic of the economic policies of Labour, the Greens or any other of the Government support parties. There was blatant politicking from Mr O'Donovan prior to the last election. To give one example, Mr O'Donovan attacked Labour and Green's student loan policies pre the election, and was subsequently forced to admit that some of the estimates that he was using to cost the scheme were extreme. "

I do not necessarily have a problem with the banks having their views, but I do see a problem when they attempt to portray the comments made by their 'economists' as non-partisan and "independent of any other bank interest" when they so obviously are not. They, and the media reporting their comments need to be more transparent when it comes to disclosing the bank's conflicts of interest. In the 1980s it was more common for journalists to ask academic economists to comment on economic issues - now we only ever seem to hear the whining of the banks when Alan Bollard increases the official cash rate. The banks are whining because they will be "selling" fewer mortgages.

Today ANZ National pleaded guility to 45 charges for breaching the Fair Trading Act, for failing to disclose the existence of hidden fees charged when customers made overseas currency transactions on their credit cards. The BNZ and Westpac are also facing similar charges, so hopefully ANZ National will not be the only bank to be fined in the region of $1.125 million and forced to repay their customers over $10 million in refunds.

As far as I know, this is the first time something that I wrote has indirectly ended up in Hansard. Of course there was the odd speech I wrote while a Parliamentary Researcher for Alliance MPs, but that shouldn't really count in the same way.

Unfortunately when I went to check the Hansard Advances I found the days on line only go up to the 28th of March - a mere one day short. I want to find out if the Roger Report was tabled in the house! Will be checking tomorrow!

BNZ and Westpac worst transnational corporations in NZ in 2005

Congratulations to the Bank of New Zealand and Westpac Banking Corporation for being joint winners of the 2005 Roger Award - assessed by an eminent panel of judges as being the worst transnational corporations operating in New Zealand in 2005.

"The BNZ and Westpac are the Roger Award's first co-winners. They won because of tax avoidance, profiteering, bullying of the Government and banking authorities, blatant attempts to lure Kiwis into debt, and treatment of their workers. To quote the Judges' Report: "…many of the practices they have adopted also apply to the other two large Australian-owned banks ASB and ANZ– and had they also been nominated then the likelihood is that all four would have been joint winners. Together these banks constitute a '‘gang of four'’ wielding huge power and influence over the NZ economy and operating solely in their own interests rather than that of their accountholders, employees and the wider community"”

Third Place: Toll Holdings
Forth Place: Telecom
Special Award for the Protection of Profit and Privilege at the Expense of Public Health: Guardian Healthcare, British American Tobacco and Merck, Sharp and Dohme.

Judges: John Minto, Laila Harre, Mary-Ellen O'Connor and Marie Leadbeater. The judges statement can be read here.

For more reasons why the banks won the Roger Award this year, see the Roger Report (written by me) and the Sue Newberry's Financial Analysis.

The Roger just made Nightline. Apparently the banks have no comment to make...

Tags: Politics, New Zealand, Corporates, Westpac, BNZ

Worst transnational operating in New Zealand: The finalists

CAFCA and GATT Watchdog have announced the finalists for the 2005 Roger Award for the worst transnational corporation (TNC) operating in New Zealand.

The nominees are, in no particular order:

• Telecom
• Westpac
• BNZ
• Toll (took over Tranz Rail in 2004)
• Comalco (including subsidiary NZ Aluminium Smelters Ltd)
• Guardian Healthcare (owns private aged care rest homes and hospitals)
• Merck Sharp and Dome (a drug company)
• British American Tobacco

In reaching their decision a team of eminent judges will assess the negative impact of the finalists in each or all of the following categories:

• Economic Dominance - monopoly, profiteering, tax dodging, cultural imperialism.
• People - unemployment, impact on tangata whenua, impact on women, impact on children, abuse of workers/conditions, health and safety of workers and the public, cultural imperialism.
• Environment - environmental damage, abuse of animals.
• Political interference - cultural imperialism, running an ideological crusade.

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In a novel move, Action on Smoking and Health (ASH) have "congratulated" British American Tobacco on being a finalist in the 2005 Roger Award.
“In light of the fact that half of their best customers will die as a result of smoking their products, it is only right that British American Tobacco New Zealand be recognised for their contribution to our society,” says Becky Freeman, Director, ASH NZ.

Judges for the 2005 Roger Award are John Minto, Laila Harre, Maire Leadbeater and Mary-Ellen O'Connor. May the very worst transnational win!

PS: If you have any goss on irresponsible deeds committed by the TNCs listed above please feel free to comment. Who do you think should win?

Big Business: Helen's real coalition partner

Fran O'Sullivan in the NZ Herald (Hat tip Cathy) alleges that Helen Clark and senior ministers sought the advice of senior business CEOs on the makeup of her new cabinet and a more pro-business direction for her third term in office.

"While television journalists traipsed about the Beehive after self-important minor party leaders as coalition negotiations deepened, Clark was carrying out parallel "coalition" negotiations with an arguably more important constituency: NZ business."

Clark is understood to have invited:

"Ann Sherry (Westpac CEO and chairwoman of the Government's Innovation Advisory Group); Theresa Gattung (Telecom CEO and GIAB member); Mark Weldon (NZX CEO), Fonterra chiefs, Craig Norgate (Rural Portfolio Investments managing director and GIAB member); NZ Institute CEO David Skilling, Rob Fenwick (Council for Business Sustainability); Michael Barnett (CEO Auckland Regional Chamber of Commerce); and a group of energy sector players convened by Wellington lawyer Mai Chen." ... "The CEOs were whisked to her ninth-floor office for individual consultations with Clark, her chief of staff, Heather Simpson, and Finance Minister Michael Cullen. Other ministers from Clark's inner circle such as Pete Hodgson and Trevor Mallard were brought in as required."

I wonder if there were any similar meetings with trade union representatives, poverty campaigners, environmentalists or community groups? Surely it would have been more appropriate to hold such a meeting prior to the election, or subsequent to the formation of the government? Or are we leading to a situation where dosh leads our democracy?

Now I have no problem with business leaders meeting with the Government to discuss policy issues, so long as their level of access to Ministers is no different to that offered to any other individual or other group in New Zealand. But I believe it is highly inappropriate for big business to have a say in the formation of a government. This should be the exclusive domain of voters and those they elected to be their representatives, with 'apolitical' public servants providing constitutional advice where necessary. Even inviting business leaders into such a meeting gives them the impression they have more power than they are entitled to.

What is Helen scared of?

Does this help explain why the Green party attempted to improve relations with the business community with a well intentioned, but ultimately ill fated meeting? Was it your idea Helen?

Now what would have happened if I, or any other voter rang Clark's office and requested a meeting to discuss the formation of a the new government. "Hi Helen, could I give you some advice on who you should put in your cabinet?" I would expect to be told to noddy off until the politicians had completed their negotiations.

Fran also talks to business leaders "speaking on background" who take delight in Clark appointing more pragmatic (read right-wing) ministers into economic portfolios and report they expect Clark to be "'much more pragmatic' about economic reality". Yet they give no grounding to their metaphysical speculations, leading me only to recall the words of David Hume about 'sophistry and illusion'.

It seems the third term of this Labour-led government will be driven by a greater sense of cash consciousness.

PS: Now I admit I do take anything written by Fran O'Sullivan with a touch of salt, given her history of strong "advocacy" journalism on issues such as free trade with the US, joining NAFTA and taking trips abroad "courtesy" of the free trade lobby. It may not directly influence her writing, but its not a good look. I get the impression Fran is no fan of Helen's either.

Internet banking and security issues

The Sunday Star Times and DPF report that a hacker accessed internet banking accounts by using keystroke spyware installed at an internet cafe.

While I do not doubt there are security issues with internet banking, I suspect a great deal of the anxiety is due to internet banking being an unfamiliar technology.

I do not believe that people, even those who are particularly security conscious, choose to use a form of payment on the basis of a rational assessment of the risks. I came to this conclusion while working behind a checkout counter during my student years. Many customers, especially those of the older generations, preferred writing cheques to using EFTPOS, and some even claimed that cheques were more secure. From witnessing over 100 transactions in a week it was obvious to me that EFTPOS was far more secure. Faking a signature on a check is relatively easy with preparation, especially if the forger can sign the check in front of the teller with apparent confidence.

Unlike DPF I do not think the two-part identification adopted by ASB and BankDirect is a great improvement in security. With this system a customer is sent a text message containing a specific second password to enter before money can be transferred. IMHO this just creates a greater incentive for people to take off with my cellphone. If they have taken the time to keylog my other password - nicking the cellphone is a cinch. Especially in an internet cafe, where spodders have their attention elsewhere (note I am not a thief, but a victim of this in London).

Whether it be conducted by cheque, EFTPOS, or handing over wads of cash, no method of banking is ever going to be 100% secure. Its always going to be a tradeoff between greater security and usability. If intenet banking is twisted up in security knots, people will stop using it, especially those who are less confident with computers.

For a few months my bank insisted that I change my password for access to internet banking every month. I was unable to recycle a set of passwords, I constantly had to think of new ones. This immediately stuck me as being counterproductive, as it increased the chances that people would write their passwords down. To make matters worse, I happened to be overseas one time my password expired, and the only way I could regain access was to ring the bank in New Zealand. Suffice to say I did not bother making a toll call from Europe, but it was highly inconvenient as it left me with no way of knowing how much money I had in my account before it was spent on German beer (yummy!) etc.

On the couple of occasions I was a victim of card fraud while in the UK, the ability to access a live statement of my account by internet banking allowed me to catch and identify the fraud within hours. IMHO it would be terrifying to find loads of fraud on the statement at the end of the month!

I personally like the system adopted by HSBC in the UK, whereby your pass number stays the same, but you are asked for three different letters of the passcode each day. For example if your password was 123456, on one day the system may ask you for the 3rd letter of your passcode(3), the 1st letter of your passcode(1) and the 6th letter of your passcode(6). While not entirely foolproof against keylogging (nothing is), a significant advantage with HSBCs system is that the full password is never revealed.

Perhaps restricting access to internet banking to a certain range of IP addresses could cut down the chances of fraud, especially as it would minimise the chances of overseas based crims accessing NZ internet banking accounts. If you were going overseas you could tell your bank to remove this restriction (like global roaming on cellphones) perhaps replacing this with an alternative type of verification for the time you were overseas.

Ultimately, the best solution may be an additional piece of hardware, such as a thumbprint reader or card swipe and pin. But I bet Bonny and Clyde already know how to make the heist on that one.