The media have been portraying the Sunday announcement of the deposit guarantee scheme by the PM during her campaign launch as a master stroke and evidence of substantiveness. The more we dig, the more we disagree. Rather it seems that this was an essential emergency action by a Government facing a potential crisis of confidence. We also understand that officials are feeling great discomfort that the PM chose to politicise this issue. The conclusions of our digging also suggest that our response only coordinated with Australia in a general way. Yes, the two schemes were announced on the same day, but the differences in the detail of the schemes is the result of the New Zealand scheme being drafted in great haste without full knowledge of the content of the Australian scheme.
Here is Bollard's account in the Herald this morning. This largely verifies everything we are being told behind the scenes:
Bank customers' fears about the safety of their savings as the credit crisis gathered momentum were a big factor in the Government's move to guarantee bank deposits, Reserve Bank Governor Alan Bollard said yesterday.
He acknowledged that the Reserve Bank had deliberately kept a low profile as the credit crisis spread across overseas markets and economies.
"We've felt it was not the time to stand up and make a big fuss about that, but we did start to get more intelligence from the banks about needing to think about these sorts of things.
"People weren't taking money out of the banks but they did get a lot of inquiries."
Dr Bollard said the Government had asked the Reserve Bank and the Treasury last week to draft a blueprint for a deposit guarantee scheme.
That paper was delivered on Friday night, as the Government and the bank began to receive calls from their Australian counterparts about a similar scheme, which Canberra unveiled on Sunday, the same day as Prime Minister Helen Clark announced New Zealand's plan at an election rally.
"Inevitably there was a little bit of co-ordination and some attempt to ensure our scheme lined up against theirs," Dr Bollard said.
Before the announcement by Helen Clark on Sunday, there were fears that New Zealand customers would shift cash from local banks across the Tasman if Canberra was to introduce some kind of deposit protection and Wellington did not.
But once the decision was made to go ahead, Dr Bollard said, it was important it was done "early enough and big enough to stick".
He conceded that the swiftly drafted scheme would give rise to a number of potential problems including "boundary issues" concerning exactly what qualified as a deposit and would therefore be covered.
