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Money from public purse

The Development Finance Corporation wasn’t established by Roger Douglas (Letters, May 25) but by Norman Kirk in 1964.

Its lending blossomed under prime minister/finance minister Robert Muldoon when all banks and financial markets were highly regulated. Douglas inherited the DFC merchant bank mess which threw taxpayer money to business ventures based largely on cash flow.

On April 1, 1987, DFC became a limited liability company, the same day nine SOEs were created. Like the BNZ, the DFC was undercapitalised, but took higher risks because it was implicitly backed by taxpayers. Finance minister David Caygill, unwisely, glowingly praised the DFC in a speech in Hong Kong, words which came back to bite him.

The DFC was sold in November 1988, amazingly for $111,280,000 to Salomon Bros (20%) and the National Provident Fund (80%), but a year later was put under statutory management. Now the Japanese lending institutions had the NZ government over a barrel, threatening to withhold future loans unless we came to the bank’s aid, so taxpayers were forced to bail out DFC creditors by $112 million.

This history’s for you, Stuart Nash ( Small-business help, May 21): these ‘‘new’’ ideas have been tried before and failed. The moral is that, if private lenders won’t back business schemes, then politicians have no right risking taxpayers’ money on them. If you think it’s so great, fund it yourself.

Deborah Coddington, Martinborough

Opinion | Letters

en-nz

2022-05-27T07:00:00.0000000Z

2022-05-27T07:00:00.0000000Z

https://stuff.pressreader.com/article/282316798659513

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