Fran O'Sullivan asks in today's NZ Herald
New Zealand's political heavyweights have been loath to suggest this country could ever find itself in a similar mess.
Finance Minister Michael Cullen blames the global economic slowdown on the crisis in the US sub-prime mortgage lending market, which he said was caused by what should be considered "scandalous and immoral business practices".
Cullen is not ruling out what he quaintly calls a "technical" recession here - one where economic growth contracts for two quarters in a row. But he believes New Zealand has enough headroom to weather any storm.
The US regulatory system is vastly different to New Zealand's. But in both countries private lending has got out of control. Bankers took leave of common sense through issuing loc doc loans to consumers who did not stand a chance of funding their positions once the giant Ponzi stopped.
Financial institutions were not held to account for their own disclosure practices - it has been up to consumers to check out the health of their lenders.
The Reserve Bank's figures show housing debt more than doubled from 1986-2006, which leaves the economy vulnerable to downturn.
The resultant global credit crunch - more an issue of lack of confidence than a lack of real cash - has resulted in higher loans premiums, including in New Zealand.
But the real issue - just how safe are our banks - has been glossed over. These issues are on the table in the US right now and will trickle down to influence debate here.
Unfortunately the absurdity of the Paulson remedy is that his blueprint predates the current credit and mortgage markets crisis.
Rather like the new rules governing finance companies in New Zealand, the proverbial door is being locked after the horse has bolted, carrying with it investors' savings.
