Blunder: How ANZ and ING squandered 800 million dollars in a Wall Street casino—and ignited a revolt of small-time investors

by Simon Burnett

Between 2003 and early 2008, fifteen thousand people in New Zealand with little knowledge of finance were persuaded to invest their savings in packages of hyper-speculative securities. They were told that these were safe alternatives to bank deposits. The investments crashed. The shell-shocked investors, mostly elderly and risk-averse and in no position to recover from financial disaster, banded together, formed a national committee, set up regional groups, took the battle on to the streets, and won. The securities, known as CDOs, were packed into two mutual funds (or unit trusts) managed by the New Zealand arm of the Dutch financial giant, ING. Its joint-venture partner and half owner, the Australia and New Zealand Banking Group (ANZ), was a major sales agent. When the CDOs tanked and the funds tanked with them, the ANZ and ING began a desperate cover up, blaming unforeseen circumstances. This was baloney and the investors knew it. They demonstrated outside branches of the ANZ up and down the country. The pressure and the negative publicity increased. A financial regulator began investigating. The protest campaign continued for almost two years. The regulator ruled that there was enough evidence for a criminal prosecution, but decided not to go ahead. The ANZ and ING were required to return most of the investors’ money. The author has built up a data bank of more than 3,000 sources and quotes many of them directly. These show that neither the ANZ nor ING performed even rudimentary research. If they had read the financial media, they would have known that these CDOs were a casino devised by Wall Street in which the odds were stacked against the buy side. Lew Ranieri, the former Salomon Brothers bond dealer who pioneered the use of mortgages inside CDOs, was appalled that they were offered to retail clients at all. He compared dealing in them to playing a game of dice. A financial industry insider (whose identity is known to the author) described the case as “one of the biggest rip-offs in NZ history, not so much because of the amount (some of the finance companies match them), but because it was done by a leading bank and investment house—if you can’t trust these guys to be prudent with your savings, who can you trust?” This is the story of the biggest, most sustained, investor revolt in New Zealand history, told not by a financial expert but by one of the ANZ/ING investors who himself took part in demonstrations. The author unravels the financial complexities that neither the ANZ nor ING apparently were aware of. The scandal was regional, but the lesson is it illustrates just what can happen when financial institutions do not check what they are investing in and pass on the risks to unsuspecting customers. Financial commentator and economist Gareth Morgan wrote that, “For anyone investing their savings with the financial sector in New Zealand—especially with some of the biggest brands in the business—I commend this book to you as a good background on what you can expect if you do not do your homework.” Writer and filmmaker Christine Dann said that, “It is a shocking story that deserves to be widely known—so that action is taken to prevent it ever happening again.” Investigative journalist and author Nicky Hager called the book “a fine piece of investigative journalism.”

539 pages, Kindle Edition

Published July 21, 2018