However much I was looking forward to launching my own incredibly risky finance company, I’m glad that the RBNZ and Treasury have tidied up what was a terrible decision by the government to extend deposit protection to finance companies at no charge.
Details here (ht: Migeul Sanchez). News coverage here
I particularly like the quote in the stuff article from an anonymous commentator
“The two-year deposit guarantee announced by the Government on Sunday was a “free lunch for [finance company] gluttons”
While I prefer the term economic opportunist to glutton:) I thin it sums up the situation before the rule change quite nicely.
Now that I think about it, 3% off the 30% return I’m promising may not actually be that bad given how risky our investments will be, we just need to work out how to get a BBB- credit rating….
Agnitio
5 comments
2 pings
Miguel Sanchez says:
October 16, 2008 at 8:06 am (UTC 12 )
“we just need to work out how to get a BBB- credit rating….”
Shouldn’t be a problem – with those fat margins you can afford to cut S&P in on the deal.
Miguel Sanchez says:
October 16, 2008 at 8:07 am (UTC 12 )
Or tell them you’re investing in subprime, that should get you at least an AA.
Kimble says:
October 16, 2008 at 10:05 am (UTC 12 )
Tranche it!
Matt Nolan says:
October 16, 2008 at 10:10 am (UTC 12 )
Is CDO still a dirty word?
Kimble says:
October 17, 2008 at 10:31 am (UTC 12 )
Yes Matt, CDO is still a four letter word.
Insurance Blog » Deposit Insurance Crackdown says:
October 16, 2008 at 9:07 am (UTC 12 )
[...] the rest of this great post here [...]
We now have insurance based on risk!! « The visible hand in economics says:
October 23, 2008 at 11:01 am (UTC 12 )
[...] have discussed that here (*, *, *, [...]