MORENA, GOOD MORNING AND WELCOME TO Q+A. I'M GREG BOYED. TODAY ` YEAH, IT'S PRETTY HEARTBREAKING, AND... YEAH. KAIKOURA CUT OFF AND FACING A BILLION-DOLLAR RECOVERY; WELLINGTON STILL UNCERTAIN ABOUT THE FATE OF SOME OF ITS BUILDINGS. COULD WE HAVE BEEN BETTER PREPARED FOR THIS LATEST DEVASTATING QUAKE? AND ARE WE READY FOR THE BIG ONE? JESSICA MUTCH IS STANDING BY. SHE'LL BE INTERVIEWING WELLINGTON MAYOR JUSTIN LESTER AND ACTING CIVIL DEFENCE MINISTER GERRY BROWNLEE THIS MORNING. THEN CORIN DANN MEETS VISITING STANFORD UNIVERSITY PROFESSOR ANAT ADMATI. SHE'S TAKING ON WALL STREET WITH HER CAMPAIGN FOR SAFER BANKS. WHAT ARE HER HOPES FOR CHANGE UNDER PRESIDENT TRUMP? HE HAS A HISTORY OF REALLY LIKING DEBT, AND SO THAT WORRIES ME A LITTLE BIT. DUE TO THE LIVE NATURE OF Q+A, WE APOLOGISE FOR THE LACK OF CAPTIONS FOR SOME ITEMS. AND WE'LL HAVE ANALYSIS FROM OUR PANEL ` POLITICAL SCIENTIST DR BRYCE EDWARDS FROM OTAGO UNIVERSITY, MICHELLE BOAG, PR PRACTITIONER AND FORMER NATIONAL PARTY PRESIDENT, AND MATT MCCARTEN, LABOUR ADVISER, BACK IN AUCKLAND AFTER A STINT AS CHIEF OF STAFF IN WELLINGTON. BUT FIRST, HERE'S JESS. THANKS, GREG. WELL, A FLURRY OF AFTERSHOCKS CONTINUE TO ROCK THE GROUND AROUND KAIKOURA OVERNIGHT. THEY'VE CONTINUED FOR ALMOST A WEEK AFTER THE 7.8 QUAKE ON MONDAY, KILLING TWO AND CAUSING DEVASTATION. coffee making is not as easy as it used to be. THE MAINS WATER SUPPLY IS NOW BACK ON TO KAIKOURA, BUT IT HAS TO BE BOILED, AND TOILETS CAN'T BE FLUSHED, AND NOT EVERYONE HAS POWER BACK ON. GOVERNMENT AGENCIES LIKE THE EARTHQUAKE COMMISSION HAVE SET UP IN KAIKOURA, AND THERE'LL BE SOME ASSISTANCE FOR AFFECTED BUSINESSES. FISHING'S A FOCUS, AN INDUSTRY THAT WAS THE LIFEBLOOD OF THE TOWN. PEOPLE CONTINUE TO BE EVACUATED. ANOTHER 200 WERE TAKEN FROM KAIKOURA TO LYTTLETON OVERNIGHT ON THE HMNZS CANTERBURY. AND IN WELLINGTON, THE LIST OF BUILDINGS CLOSED AND CONDEMNED CONTINUES TO GROW IN THE WAKE OF THE QUAKE AND ITS AFTERSHOCKS. TWO BUILDINGS POSE AN IMMINENT RISK OF COLLAPSE. THE STATISTICS NZ BUILDING IS ALSO NOW CONSIDERED HIGH-RISK. ANOTHER EIGHT WILL BE CLOSED INDEFINITELY, AFFECTING THE SURROUNDING BUILDINGS. 60 BUILDINGS HAVE NOW BEEN EVACUATED AND CORDONS REMAIN ON KEY CBD STREETS, RESTRICTING MOVEMENT AROUND THE CITY. JOINING ME NOW IS WELLINGTON MAYOR JUSTIN LESTER. I want to start by asking you what is the latest on the situation in Wellington? no news is good news. We have not had any further updates. We are going to start deconstruction of 61 Molesworth Street. The cordon has been reduced around corny place. courtney place. we are taking precaution because of the possibility of a really strong earthquake. you have to be realistic, without scaring people, that more earthquakes are likely. we are set up really well here in Wellington. We have not had interaction to water or power. Our transport has largely remained in place. But we want to make sure that we are prepared. you talk about being focused on people. Was that at the forefront of your mind when on Tuesday, 24-hour is after the quake, you said that you are open for business. Did you get poor advice? no. We had good advice. It is proven to be correct. We sat down with NZ police and the fire service and emergency response officials. They have worked through other earthquakes like down in Christchurch. We have a complex decision. There are 17,000 people in our CBD. We want to make good decisions. was a risky decision, given that you had not checked all of those buildings? it was a difficult decision. We had checked all the public faces. We have told that employeers must check Gerry Brownlee has said he was somewhat unhappy that message was given out to quickly. Did you put too much emphasis on getting businesses back and there and try to be reassuring to people. When you complacent? we had the expert advice on the ground. We met with the Minister a few days ago. but the message on the Tuesday. We had people in the CBD. They need to know it was safe to leave the buildings and walk on the streets. We took a localised approach and that proved to be the correct one. The vast majority of buildings in Wellington have fared well. The majority of people said we have made the right decision and support us. We took a calm and rational approach based on expert advice. some of those buildings that have got into trouble when you buildings. We surprised? I was a little surprise. We need to ask questions around that in the fullness of time. what questions? what where the engineering designs and what is the ground beneath them? do we need to make changes to the building code and will building on reclaimed land be looked at? they build an airport in the middle of the ocean in Japan. It is a question of how you build. this event will inform those future decisions, which is great, because we are constantly improving building practices in NZ. have you talked about a subsidy for Wellington businesses, around $500 per person if you have fewer than 20 employees? we have talked about that. We will talk to the government about it. how likely is that? we need to discuss that. We will talk with government and see if we can get support where is required. some people are saying the buildings that were damaged, it is an opportunity to move some of those functions out of the Wellington CBD to some other areas, like Northland who are saying they do not have earthquakes. What do you say to that? I think it is a knee-jerk reaction. It came up in 2013 when we had an earthquake. There are volcanoes around the country. Christchurch did not expect an earthquake. Other parts of the country face natural disaster events. we need to manage the risk. Wellington is city in the middle of a zone that has earthquakes all the time. Is it realistic to say that you RED and will wait for the next one? it is not realistic to say you know when the next event is going to occur anywhere. I am realistic. We know it Wellington there will be future earthquakes. We need to be well prepared. thank you. It has been a busy first six weeks on the job. GERRY BROWNLEE IS THE ACTING CIVIL DEFENCE MINISTER. HE JOINS ME NOW. how is Wellington coping do you think? what did you think about him sending out that open for business message so early? Justin is doing a great job. It is an unenviable position. he will be right at the heart of the response. Some of the reporting has not been quite as it should be. I was concerned about the way whether there was a process for private building owners to report in two emergency services or the council to say the buildings were safe for re-entry as opposed to just declaring themselves they were safe. What I have discovered is that the engineering firms that make those checks are supposed to tell the Council the buildings are clear. Under the health and safety act, they have an absolute duty to inform the tenants as well as the owner of the building. That is not happening is it? I am told that it is. I am in constant contact with the emergency services and with Justin. When these things happen you need someone who is calm and capable and I think you are seeing the in Justin Lester. I would discuss that with him tomorrow. We have the same objective. This is not Christchurch. Christchurch had 185 people dead and many many buildings in the state of partial or complete collapse. Transport was impassable through most of the city, no power and no water and no sewerage. this has always been a warning shot for Wellington to get it right. my next point was that Christchurch had the September earthquake and went through checks. And we learnt from the buildings that collapsed and killed people in Christchurch and those who lost their lives through falling masonry there have been changes to building codes as a result of that. these are new structures some of these. Nick Smith is the minister responsible for building codes NZ. he is investigating what has happened to those buildings. You have to be careful you don't let the rumour machine go mad. It always tends to. They did with Christchurch. People tell you that it is pancaked. Neither of those buildings have pancaked we need to know the reasons and what was the cause of it. but we need them to be upfront with people and say it is a little bit of damage and be honest with the people who work there and with public. the earthquake at 12:02 on Sunday morning, now there has been many more earthquakes. There has been cumulative damage as well. Last week we published through GNS I think called the decay curve which gives you mathematical probablites about how this will unfold over time. There will be intense after-shocks. can you give us details? it is provided to all media and in a graphic form. It starts with a 7.8. Over time the probabilities of larger earthquakes diminishes but remains on a diminishing curve. it is about 30% that we will get another 7.8 quake. it was 30% last Thursday. So now it will have fallen to a lower figure. you can't predict these things accurately. If we knew it was going to happen that night everyone would have been waiting for it. Similar to Christchurch. All we can do is respond to what has happened and prepare better and better if these occur in the future. but this tsunami warning that should have gone out did not go out until later. What went wrong? Did the system fail? the earthquake was sitting did inland. It generally does not trigger a tsunami. because of its intensity and its length the faults that came out of it did run out to the sea. So it did not work? They found out about it. there is no time for a warning. Does not matter what your system is. That is pretty scary. You have to build from here. But they found a fault that ran 150 km out to the sea. That immediately triggered the tsunami possibilities and we have a good structure of who gets to do what in NZ. And in that nice and friendly sharing of obligations there has been a breakdown. No question in my mind. We have been open and going to fix it. how are you helping the people in rural communities outside of Kaikoura? we have had a lot of ministers going into that area. not so much into the rural areas. yes. Nathan Guy has spoken to the farming community. Ian Simpson from EQC. there will always be people who will feel a little isolated but you need to keep looking at what needs to be fixed. But then you have communities like Hanmer Springs, where there is not a lot of damage, in the last thing they want is people not coming to visit them. The hot pools might be really good for you with a lot of stress. how important is it that even though Kaikoura is affected and will be for several months we are looking at the economic base for a lot of small businesses in Christchurch their customers said they would not call you or place orders because we do not want to bother you, but that is what they want. I spoke to someone in Kaikoura yesterday that runs a mail order business out of Kaikoura and they can stay in business as long as they can get their parcels out. There are all sorts of things we can look at in the coming weeks to try make things work. All of the attractions that were in Kaikoura prior to the earthquake are still there. It is about accessing them for the operators and for people visiting. let's talk about the cost. How much will this Kaikoura earthquake cost us and can we afford it? the Prime Minister thinks it will run into well over $1 billion. I think that is a reasonable estimate at the start. There are some things you have to do regardless of where you are at. There has to be access in and out of Kaikoura. We need a through road that takes us through to Picton to keep that connection going. We will need to get some temporary work done on the inland road. 700 trucks a day and so if that is the case that road will have to have some work to make it safe and accessible. ministers have said they don't want to do a quick fix. They want to say for the future. Isn't it a priority to get up and running and then slowly do that? there will be some quick fixes. The road into Kaikoura is a lot more difficult to open than first thought. But it will be a quick fix. We will not leave isolated. with Geo net, the job is to monitor natural disasters, do you think they should be funded to operate 24 seven? they are pulling stuff and at the moment but they can't do that all year round. 24 seven personnel being there doesn't make any difference to the sensor arrangements and the international connections that they use as part of the global network to assess what has happened in earthquakes. hasn't the time come to do this? we have spoken to GNS, which is the owner of Geo net, on the question is what would be the difference the other day if they were 24 seven? the US geological survey, the tsunami warning service in Hawaii, I saying this was a very difficult event to get a handle on. STAY WITH US. WE'LL CHANGE FOCUS AND TALK ABOUT YOUR DEFENCE PORTFOLIO AFTER THE BREAK. WE'RE ABOUT TO TALK TO GERRY BROWNLEE ABOUT HIS DEFENCE PORTFOLIO, BUT FIRST, A MAJOR DECISION ABOUT WHO WILL LEAD AMERICA'S INTERNATIONAL SECURITY EFFORTS HAS BEEN MADE BY PRESIDENT ELECT DONALD TRUMP. MR TRUMP'S OFFERED RETIRED LT. GEN. MICHAEL FLYNN THE JOB OF NATIONAL SECURITY ADVISER. MR FLYNN HAS ADVISED TRUMP ON NATIONAL SECURITY ISSUES FOR MONTHS, BUT HIS VIEWS TROUBLE SOME. HE'S OPENLY EXPRESSED HIS DISLIKE OF THE ISLAMIC FAITH AND BACKS THE USE OF MORE FORCE TO FIGHT JIHADISTS IN THE MIDDLE EAST. MEANWHILE, HERE'S SOME PICTURES OF MR TRUMP SHAKING HANDS WITH MITT ROMNEY, WHO'S EXPECTED TO BECOME THE NEW SECRETARY OF STATE. IN THE US PRESIDENTIAL CAMPAIGN, ROMNEY CALLED TRUMP A 'CONMAN' AND A 'FRAUD', WHILE TRUMP REPEATEDLY CALLED ROMNEY A 'LOSER'. very interesting stuff to deal with. Run-of-the-mill politics. usual day. President-elect Donald Trump will now be in charge of the defence direction for America. What will that mean for NZ? Will he have more expectations of us when it comes to defence? we have had a growing relationship with the United States which culminated with the arrival of the Sampson and NZ. The US and Canadian militaries have been operating alongside NZ in Kaikoura. you have a defence force to pursue peace and when you can make people's lives a little bit easier, as has been the case this week, that is a good thing. The relationship we have the United States, I can't see it changing significantly at all. Donald Trump has signalled he wants a focus on defence for the US. Australia has already started to get in on it. he will expect more from NZ. we are working with the United States on a number of fronts. Since the camp David talks in the early 1980s. We have the coalition that we are part of in Iraq. and we have a number of other engagements including the Antarctic. he is planning on spending $500 billion to put in context they spent $586 billion a year now. When he says he is going to do these things, is it immediately or an annual increase? there are different people in charge and they will have different expectations. Have you talked about what the expectations will be under a Donald Trump presidency? he has not chosen his secretary of defence yet and that is separate from the strategic adviser. Michael Flynn sends a message though. he is a decorated soldier and military man. A long and decorated record. I have not seen where he would think the US should go. He would be much more aggressive. terrorist activity is not acceptable. That is not condemnation of Islam, which is a peaceful religion. do you think they have taken on more responsibility of fighting terrorism than other countries? they have shouldered the burden. they have taken a strong lead on it. As you look at the coalition that is dealing with Iraq and Syria, we are one of 11 who are active in that arrangement. You have to have someone who takes a lead role and coordinates it. They have done a good job. Will we be asked to step up in that regard by President Trump? have you talked about that? No, we have not talked about it. we will be part of the mission until December 2018, and if there is any change to that it will be well signalled. We have an election next year. We will see the lie of the land and have a better idea then of what a Trump presidency means. Australia has already said they want in on this. They said they would help with construction. Experts are saying they will look to increase their GDP budget spending on defence to more than 2%. Do you think that is smart? I will not comment on Australian politics. shall we do something similar? our defence Force is getting $20 million of capital investment over 12 years. That is a lot of money. That is alongside another commitment we have made to the operating budget and that will keep us steady at the 1% mark of our GDP. You look at all the needs in NZ at the moment and we are identifying a lot of infrastructure that needs to be built. We will face more costs in the Kaikoura region. It is about what you can reasonably do to participate. If we were to spend 2% or 3% of GDP we will not keep up with the Australian capacity because they are a bigger economy. we will have to leave it there. Thank you THANKS, JESS. SEND US YOUR THOUGHTS. WE'RE ON TWITTER @NZQANDA, YOU CAN EMAIL US AT Q+A@TVNZ.CO.NZ, OR TEXT YOUR THOUGHTS AND FIRST NAME TO 2211. KEEP THEM BRIEF ` EACH TEXT COSTS 50C. WE'LL BRING IN OUR PANEL AFTER THE BREAK. WE'LL STAY TALKING ABOUT THE GOVERNMENT'S EARTHQUAKE RESPONSE, PLUS LOOK AT WHETHER IT'S TIME TO MOVE SOME GOVERNMENT DEPARTMENTS OUT OF THE CAPITAL. LET'S BRING IN OUR PANEL. POLITICAL SCIENTIST DR BRYCE EDWARDS FROM OTAGO UNIVERSITY; MICHELLE BOAG, PR PRACTITIONER AND FORMER NATIONAL PARTY PRESIDENT; AND MATT MCCARTEN, LABOUR ADVISER, BACK IN AUCKLAND AFTER A STINT AS CHIEF OF STAFF IN WELLINGTON. How would you rate the government response to the earthquake? Average. They had a practising Christchurch. I was listening to an interview, and most Nzers would think, at this stage that it is okay. It's always a difficult thing. There was always a national consensus politically. I know the media want a bit more adventure, but you have the mayor and the government doing nicely, or you will have panic. You will always have things that won't work right but there will always happen in every disaster. The best they can come up with was being too optimistic. Evidence has shown the mayor was right. You might disagree Michelle? We have had some very lucky convergence here. We have the Acting Minister of civil defence who was also the Minister of defence. He has been able to pull on resources very quickly. Secondly, we have had overseas defence forces, 23 countries, in our celebration of the Navy. The fact that Canada, Australia and the US were able to divert and help was fantastic. We recently announced a $1.8 million surplus. All of those things have worked to give NZ is a level of comfort that things are under control and that we can afford to actually look after the things that need to be done. Did you share that level of comfort, Bryce? It was chaotic, and the last week in Wellington has seemed chaotic. There is in the mood for the nice politics free zone that these two might want. There is more of a mood of rebellion, of questioning authority. We have seen that with the Dominion Post and other media that we have seen. The media is pushing authority figures to ask what went wrong. Ever since the midnight quake, every element of the system has not really be up to scratch. We have been talking in the last few months about an antiestablishment politician uprising. There is a mood that is a bit more questioning of authority, and that is a good thing. So the government has less of a period of time to explain itself. What went wrong? I can't say what the council government should have done differently, but all I can say is that it was wrong, and they weren't clear messages going out to the public, with you had to talk to building owners or employers, whether to go out into the CBD. So the system is broken and not joined up. It is a systemic problem. It should not be the case. Our authorities are too complacent. They have had the Pike River mine and Christchurch. There are wake-up calls that the establishment is not the thing to. Christchurch was really big. You are right about the Wellington` it is big there. Let's bear in mind, this was not Wellington is quite. It is Kaikoura's quake and they have been hit hard. Michelle was right, they have had extra personnel to put down. They know they have to put resources into it immediately. Gerry said that. It is too early to tell. You will give a problem of day-to-day, that's what happens when there is an earthquake, stuff happens. They put out information as it happens, and they should. If everyone starts out covering their butt, you have a worse problem. The mayor was right. It was not Christchurch. Yes, two buildings came down. That is a worry because Wellington is the earthquake capital. You have 17,000 people there, thousands who come into work and all the government departments. They won't say, oh we will let you know in a week. He took advice from civil defence, that is life and bureaucracy. He as the mayor has made that call. Someone has to be the spokesperson and he made the call. He was proved correct. Michelle, people are scoffing at this. Is it time to move departments Out of Wellington? There are certainly people who would like that to happen, and from a regional development point of view, we shouldn't see it just as an emergency response. I would like to see in these days of technology Digital overlay to our emergency services. I don't know of anyone at the top is saying, "okay let's start from scratch, what should we do?" Should we have this mobile numbers of everyone in the country, should we be able to break those down? Lots of people are saying they don't want the government having my number! But this sort of thing is very real. There is no doubt that if you had a system where you could communicate with people via mobile phone` what about having a broadcaster that does that? Most people are not lying in bed at night with the radio on. They are when earthquakes go on. They don't lie in bed and say I will just turn the radio on. Everyone has their cellphone somewhere because it is charging. I think we need to be thinking from a helicopter view about what technology can do. Politically, if you have this happen and the government looks like it is in control, it is a good thing? That is always the challenge. In an opportunist way, you can't be seen to do that. My general view is that when it is immediate, you close ranks and get on with it. Once you have a bit of time in to see what went wrong, I think the public would punish any politician if it looks like they are grandstanding, that has been done. But you have to do it in a way which is seen to be about the people, not about politics. At this we will move on to Defence. How much pressure will the government come under to put boots on the ground in Syria and Afghanistan? As we have learned with Donald Trump, you cannot make predictions. As he said before the election, things he is moving back from, I have heard soundings that the TPP negotiations that we might have some form of the US being involved. The reason why is because they don't want to abdicate that sort of power to China. It will depend very much on what Donald Trump does, the advisers around him and what they say. I don't think there is any point in speculating whether NZ will be asked to do more. Is it realistic to expect some sort of TPP? What Trump and the Republican base will be most upset about is the freeloading as they see it of Japan and South Korea. With Germany and France and Russia. That's what they are focusing on. We do do heavy lifting Won't really apply to us. A lot of posturing there. The Americans will be more militaristic. There is a chance of a silver lining with a Trump presidency, that he does live up to his isolationist rhetoric, that he does stop invading countries. TPP without or with America? He will need a new name for it and sell it as a different thing. If by chance it does go ahead, what will it be worth? It is still very valuable to NZ because we have the opportunity to build relationships with new countries. We are totally dependent on that for our own economic well-being. If we can work something out with the US, that is a bonus. It won't happen. It went to Trump because of international agreements. Bernie Sanders, Clinton and Trump all campaigned on it. Not going to happen. People don't believe Clinton. This is one of the things Trump can deliver on. Hillary said it won't happen in the lame-duck period. We believe that one there. Donald Trump's ability to spend. *spin. AFTER THE BREAK ` THE STANFORD PROFESSOR WALL STREET LOVES TO HATE. ANAT ADMATI SAYS THE 'TOO BIG TO FAIL' BANKS ARE BACK TO THEIR OLD WAYS AND GOVERNMENT'S MUST REGULATE TO AVOID ANOTHER FINANCIAL CRISIS. HER INTERVIEW WITH CORIN DANN NEXT. AS WE MENTIONED, THE WORLD IS WAITING TO SEE EXACTLY WHAT KIND OF PRESIDENT DONALD TRUMP WILL BE, BUT WALL STREET IS BETTING THE NEW ADMINISTRATION WILL BE GOOD FOR BANKERS. MR TRUMP HAS SPENT MOST OF THIS WEEK HOLED UP IN TRUMP TOWER IN NEW YORK AS HE DECIDES ON HIS NEW CABINET. MEANWHILE, BANK STOCKS ARE UP 10% SINCE THE ELECTION, APPARENTLY CONFIDENT MR TRUMP WILL CUT RED TAPE IN THE BANKING SECTOR AS HE PROMISED IN THE CAMPAIGN. MR TRUMP HAS VOWED TO REPEAL OBAMA'S DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT, WHICH HAS BEEN BLAMED FOR CURBING BANK PROFITS. MR TRUMP HAS ALSO PROMISED TAX CUTS FOR THE RICH. SO ARE THE BIG WALL STREET BANKS RIGHT? ANAT ADMATI IS A PROFESSOR AT THE STANFORD UNIVERSITY SCHOOL OF BUSINESS AND THE AUTHOR OF "THE BANKERS' NEW CLOTHES: "WHAT'S WRONG WITH BANKING AND WHAT TO DO ABOUT IT". SHE'S ON A VISITING FELLOWSHIP TO VICTORIA UNIVERSITY, PAID FOR BY THE RESERVE BANK. CORIN DANN MET HER IN WELLINGTON THIS WEEK AND ASKED HER WHAT SHE THINKS OF A TRUMP PRESIDENCY. I'M NOT SURE WHAT TO EXPECT, EXACTLY. I'M NOT SURE WHAT TO EXPECT, EXACTLY. I THINK ONE OF THE THINGS ABOUT DONALD TRUMP IS THE GREAT UNCERTAINTY THAT THERE IS. SOME THINGS THAT HE SAYS OR PEOPLE AROUND HIM SAY MIGHT... GIVE YOU HOPE OF RETHINKING, ON THE OTHER HAND, SWEEPING STATEMENTS LIKE 'WE ARE GONNA HAVE TO ABOLISH ALL REGULATIONS' AND 'FREE MARKETS WORK', THAT'S WRONG IN THE CASE OF BANKING SYSTEMS AND FINANCIAL SYSTEMS; THEY DON'T WORK WELL WITH OUT GOOD REGULATION. IT'S ALSO THE CASE THAT SOME OF THE REGULATIONS ARE TOO COMPLICATED OR MAYBE NOT COST BENEFICIAL, SO MAYBE. BUT ALSO HE HAS A HISTORY OF REALLY LIKING DEBT, AND SO THAT WORRIES ME A LITTLE BIT. SO GIVE ME AN EXAMPLE OF A TYPICAL BANK AND HOW MUCH DEBT THEY HAVE AND HOW MUCH THEY CAN LEND ON THAT. A TYPICAL BANK WOULD HAVE THEIR FUNDING COME ABOUT 95% OR SOMETHING LIKE THAT. BORROWED IT FROM SOMEWHERE ELSE? THEY BORROWED IT FROM ALL OF US. WE LEND THEM MONEY IN DEPOSITS. WE DON'T QUITE VIEW OURSELVES AS LENDERS TO THE BANKS, BUT THAT'S PRECISELY THE KIND OF MONEY THAT THEY LIKE THE MOST, BECAUSE DEPOSITORS ARE SUCH NICE LENDERS. THEY DON'T BOTHER YOU LIKE OTHER CREDITORS WOULD. AND SO THE BANKS HAVE ENORMOUS DEBT, BUT THEY DON'T FEEL A BURDEN OF DEBT. TO THE POINT THAT THE CEO OF THE BANK WHERE I PUT MY MONEY, WHICH RECENTLY GOT INTO BIG TROUBLE ABOUT CONDUCT ` WELLS FARGO BANK, IN THE US ` THEIR BY NOW EX-CEO SAID, 'WE HAVE A LOT OF RETAIL DEPOSIT IN WELLS FARGO, 'AND THEREFORE WE DON'T HAVE A LOT OF DEBT' HE SAID, WHICH IS THE MOST RIDICULOUS STATEMENT IN MY COLLECTION OF NONSENSE THAT I HEAR ALL THE TIME IN BANKING. WHAT?! HE FORGOT HE OWES ME THE MONEY. BUT YOU SEE, THAT'S BECAUSE I DON'T BEHAVE AS SOMEBODY WHO HAS LENT MONEY. USUALLY, THE BANK ITSELF, WHEN IT LENDS, IT WORRIES ABOUT WHAT YOU DO, AND IT WOULD SQUEEZE YOU IF YOU DIDN'T PAY IT BACK. AND SO IT'S A VERY TOUGH LENDER, BUT ITSELF HAS VERY NICE CREDITORS, VERY NICE LENDERS. AND YOU BELIEVE THAT INSTEAD OF THAT RELIANCE ON DEBT, BANKS SHOULD HAVE, WHAT, MORE CAPITAL? MORE EQUITY? IF THEY MAKE MONEY, WHICH THEY OFTEN DO, THE QUESTION IS ` WHAT DO THEY DO WITH THAT MONEY? WHAT THEY TEND TO DO WITH THAT MONEY IS TO TAKE A FRACTION OF IT AND PAY IT TO OBVIOUSLY BONUSES, VERY LARGE ` AS LONG AS THERE ARE PROFITS, AND EVEN WHEN THE PROFITS GO DOWN ` AND THEY THROW A BONE TO SHAREHOLDERS, WHICH AGAIN, IS SORT OF ALL OF US, BUT IT'S PRIMARILY THEIR OWN LEADERS, PAID WITH STOCK AND STOCK OPTIONS AND LIKE THAT. BY THAT, THAT MONEY IS NOT USED FOR LENDING OR TO ENSURE THAT THE DEBTS ARE PAID. BUT ISN'T THAT HOW CAPITALISM WORKS? I MEAN, WHY WOULD PEOPLE INVEST IN BANKS IF THEY'RE NOT GOING TO GET THE RETURN THEY EXPECT? AH, WHY DO PEOPLE INVEST IN ANY OTHER COMPANIES AND EXPECT THE KIND OF RETURN THE COMPANY CAN GENERATE? AND THE QUESTION IS ` IF THE BANK HAS THE BUSINESS MODEL OF GENERATING VALUE, OF MAKING A LOAN AT APPROPRIATE PRICES AND MONITORING THAT LOAN AND ALL OF THAT, VERSUS THE BUSINESS JUST TO BORROW MORE, BECAUSE THAT'S A CHEAP FORM OF FUNDING FOR THEM. IF THAT'S THE CASE, THAT ONLY MEANS THAT THE BANK FOUND A WAY TO SHIFT SOME OF THEIR COSTS AND RISKS TO THE REST OF US. AND THAT IS NOT A DEAL FOR US, THAT WE HAVE SUBSIDISED THE BANK TO HAVE CHEAP FUNDING AND THEN WE HAVE TO CLEAN UP AFTER THE BANK. YOU BELIEVE THAT WE'VE SUBSIDISED BANKS BECAUSE THERE IS AN IMPLICIT 'TOO BIG TO FAIL'. THAT GOVERNMENTS ULTIMATELY ` IT'S HAPPENED IN NZ, WE'VE BAILED OUT BANKS BEFORE ` THEY WILL STEP IN YES, THE GOVERNMENTS CAN, IN PRINCIPLE, BE AGAINST IT AND HATE IT, AND THEN WHEN THE TIME COMES, THEY HAVE TO BEHAVE IN THE BEST WAY FOR THEIR CITIZENS, AND EVERYBODY WANTS THE BAILOUT RIGHT AT THAT POINT. AND THE POLITICIANS WILL DO THAT, AND I'M NOT EVEN CRITICISING THEM FOR DOING THAT. THAT'S LIKE YOU WANT EMERGENCY HELP IN AN EARTHQUAKE, OK? THE QUESTION IS ` ARE WE TALKING ABOUT EARTHQUAKES OR NOT? WHAT I AM SAYING IS THAT FINANCIAL CRISIS AND INSTABILITIES IN FINANCIAL MARKETS ARE ENTIRELY PREVENTABLE, NOT LIKE EARTHQUAKES. WHAT'S YOUR FEELING ON THE NZ BANKS AND OUR SYSTEM? WE HAVE OBVIOUSLY LARGE AUSTRALIAN-OWNED BANKS WITH SUBSIDIARIES OPERATING IN NZ. IT DOES` FROM TIME TO TIME, THERE IS CRITICISM THAT NZ LACKS CONTROL OVER ITS OWN BANKING SYSTEM. FOR A SMALL COUNTRY LIKE NZ, THE KEY IS TO MAKE SURE THAT THE INSTITUTIONS THAT ARE OPERATING ON YOUR LAND ARE UNDER THE CONTROL OF YOUR REGULATORS AND YOUR SUPERVISORS, WHO ARE PROTECTING YOUR CITIZENS. SO I THINK IN THE WORLD THAT WE KEEP, WITH THESE GLOBAL MULTINATIONALS, WE SOMETIMES FORGET THAT EVERY CORPORATION THAT ENTERS A COUNTRY STILL HAS TO OBEY BY THE LAWS OF THAT COUNTRY. AND NZ BANKS ARE PROFITABLE ` THE NZ SUBSIDIARIES. IT MAKES $1B IN PROFIT. AND THEN CAN PRESUMABLY JUST DISTRIBUTE THAT $1B BACK TO ITS SHAREHOLDERS. YEP. AND YOUR MODEL, YOU WOULD SAY WHAT, THEY SHOULD ONLY RETAIN HALF OF THAT? RETAIN MORE OF IT FOR A WHILE, YES. AND KEEP IT THERE? THEY CAN INVEST IT. SO WHEN COMPANIES DON'T MAKE PAYOUTS TO THEIR SHAREHOLDERS, THEY'RE STILL INVESTING ON THEIR BEHALF. AS LONG AS THAT IS PAID, THAT MONEY, SHAREHOLDERS ARE ENTITLED TO IT. COMPANIES OFTEN DON'T PAY DIVIDENDS FOR VERY LONG TIME AND THE STOCK PRICE SOARS. LOOK AT WARREN BUFFET'S COMPANY OR GOOGLE OR ANY OF THESE COMPANIES WHO RETAIN ENORMOUS` AND THEY INVEST THEM AND THEIR SHARES GO UP, AND IF THEIR SHAREHOLDER NEEDS MONEY, THEY CAN SELL A LITTLE BIT OF THE SHARE AND CREATE THEMSELVES A DIVIDEND. SO THAT'S AN INTERESTING POINT FOR VIEWERS. SO YOU'RE NOT SAYING THAT THAT MONEY IS SUDDENLY` DOESN'T GO TO USE. NO. THAT THE MONEY ITSELF STILL REMAINS THE ASSET ON THE BOOKS AND CAN EARN INTEREST SOMEWHERE ELSE? WHEN YOU BUY A HOUSE AND YOU PUT A DOWN PAYMENT IN THE HOUSE, THAT MONEY IS INVESTED IN THE HOUSE. IT'S JUST NOT A MORTGAGE MONEY INVESTED IN THE HOUSE. NOW, FOR THAT YOU NEED MONEY, BUT CORPORATIONS CAN GO TO INVESTORS AND GET THE MONEY AT THE APPROPRIATE RETURN. NOW, WHEN THE HOUSE PRICE GOES UP, THAT'S LIKE MAKING A PROFIT, RIGHT? WHEN THE HOUSE PRICE GOES UP AND YOUR EQUITY INCREASES, HERE IS EXACTLY WHAT HAPPENED BEFORE THE FINANCIAL CRISIS IN THE UNITED STATES ` PEOPLE TOOK A SECOND MORTGAGE. PEOPLE WERE TOLD TO TAKE THEIR HOUSE ON VACATION, TO TAKE CASH OUT, THAT'S EXACTLY LIKE THE DIVIDENDS. AND THEY REDUCED THEIR EQUITY IN THE HOUSE, AS HOUSING PRICES ARE GOING UP AND ASSUMED TO ALWAYS GO UP, AND THEN WHEN THEY GO DOWN, THEN THERE'S NOT EQUITY. SO WHEN YOU GO AND TALK TO A WALL STREET BANKER, A GOLDMAN SACHS BANKER AND YOU SAY TO THEM, 'YOU NEED TO RETAIN MORE OF YOUR EARNINGS AND KEEP IT IN THE COMPANY, 'INVEST IT SOMEWHERE ELSE,' WHAT DO THEY SAY TO YOU? THEY'LL SAY A VARIETY OF THINGS, NONE OF WHICH MAKE SENSE FROM SOCIETY'S PERSPECTIVE. NONE ON THIS ISSUE. WHEN GOLDMAN SACHS, SINCE YOU MENTIONED GOLDMAN SACHS, WAS A PARTNERSHIP, THEY WERE MORE PRUDENT, LET'S JUST PUT IT THIS WAY, THAN WHEN THEY BECAME A CORPORATION TRADING BUSINESS INVESTING OTHER PEOPLE'S MONEY. OUR PANEL'S BACK AFTER THE BREAK. WE'LL ALSO HAVE YOUR FEEDBACK. AND A LOOK BACK IN POLITICAL HISTORY ` US PRESIDENT BILL CLINTON'S VISIT TO NZ AND HOPES OF A RELATIONSHIP THAW. How worried should we be that Donald Trump should be loosening regulators? Banks borrow in US dollars, that is a potential worry in terms of loans. His position of deregulating, that is a worry. The whole financial crisis, because they were deregulated. In NZ, banks are regulated but they weren't over in the US. They try to sell stock that was worthless. The act meant that only 3% of those deals were to be done. The problem is people never` people should have gone to jail. It was a bailout which, I think, hurt Obama. He got attacked from the right. None of those bankers went to jail, and now they think they are back in. That is the problem now. If Trump follows through with the regulation, we are in for a ride. Do you think he will do this or is he just saying it? Entirely uncertain about what he is going to do. In NZ, we have a strong Reserve Bank. Which is independent. We mostly have Australian banks. The best way to keep those banks honest is to keep competition. We do have regulation, but our banking system is sound and we saw that in the GFC. The Americans have thousands of banks. I think that is complacency from both of you. Yes, they survive the global financial crisis, we are reliant on the Australian banking system. I don't think we should be pulling away from scrutiny. This visiting professor does have some good ideas, and we should be challenging the system. We are not sure if it is strong enough. Because our banks are foreign-owned, all the money goes offshore. 85% of the money made in banks goes to Australia. That is our issue. In America, it will potentially have everyone` banks get more cautious about lending when they hold back. That is a choice that people make. People can choose to bank with an honest rally in banks, and some of them do. There is choice. There is increasing choice` there are NZ banks. Which have great support. There are new banks coming along all the time. Really, you have two convince 85% of NZ who banks with Australia. YOUR FEEDBACK NOW. A lot of support of the people of Kaikoura. Questions about how they will cope with more earthquakes in the future. There has been some support for Gerry Brownlee's views. THIS WEEK'S VISIT BY THE US WARSHIP THE USS SAMPSON IS THE FIRST SINCE NZ BECAME A NUCLEAR-FREE ZONE NEARLY 30 YEARS AGO. IT'S TAKEN A LONG TIME TO GET TO THIS POINT. BACK IN 1999, WHEN US PRESIDENT BILL CLINTON VISITED AUCKLAND FOR APEC, THE LANGUAGE WAS CLEAR ` THE TWO COUNTRIES WERE NOT ALLIES, BUT THE FRIENDSHIP WAS 'WARM'. HERE'S A REPORT BY JOHN STEWART. WELL, WE REGARD THIS AS A PRETTY WARM TICK FOR A WHOLE LOT OF THINGS WE'RE DOING HERE. ARCHIVE: DON MCKINNON ON THE SYMBOLISM OF THE CLINTON VISIT. HE SAYS OUR NO-NUKES POLICY ` WHICH GREW OUT OF NZERS' STRONG OPPOSITION TO VISITS BY NUCLEAR-POWERED OR ARMED SHIPS ` REMAINS UNAFFECTED. MIND YOU, SINCE THE BITTER DAYS OF 1984, THINGS HAVE WARMED A LOT. WE HAVE ACCESS TO THE HIGHEST LEVELS IN WASHINGTON AGAIN, AND THE AMERICANS HAVE REINSTATED ACCESS TO INTELLIGENCE. WE DO REMAIN OUT OF ANZUS, AND OUR TROOPS STILL CAN'T EXERCISE WITH THE AMERICANS. BUT WITH MADELEINE ALBRIGHT'S VISIT LAST YEAR ` THE FIRST BY A SECRETARY OF STATE SINCE GEORGE SHULTZ'S IN '84 ` AND THE PRESIDENT HIMSELF HERE NOW, THE THORN IN THE SIDE REMAINS A SMALL ONE. SURE, WE'RE NOT BACK IN FIRST DIVISION AS WE WERE WITH ANZUS, AS AUSTRALIA IS. BUT CERTAINLY, WE'RE PLAYING A ROLE THAT WE CAN MANAGE. CERTAINLY THE UNFINISHED BUSINESS ON DEFENCE, SECURITY MATTERS IS THERE, AND THAT WON'T CHANGE ON THIS VISIT. BUT OVERALL, THE RELATIONSHIP, I HAVE TO SAY, IS IN VERY VERY GOOD POSITION. THE RELATIONSHIP BETWEEN WASHINGTON AND WELLINGTON IS NOW CHARACTERISED AS FRIEND BUT NOT ALLY, AND THE POLITICAL REALITY IS THAT THAT WILL REMAIN UNCHANGED. THE FACT NZ IS A FRIEND AND NOT AN ALLY OF THE UNITED STATES PROBABLY ASSISTED NZ IN ACCOMPLISHING THE THINGS THAT IT WAS ABLE TO ACCOMPLISH AT APEC. PLANS FOR NZ TO SHARE IN AMERICA'S OFFERS OF COMMUNICATIONS AND OTHER LOGISTIC SUPPORT IN EAST TIMOR BEAR OUT THE CLAIM THAT WE ARE INDEED WARM FRIENDS, IF NOT ALLIES. WAKA HUIA IS NEXT. REMEMBER, Q+A REPEATS TONIGHT AT 11.35PM. THANKS FOR WATCHING AND THANKS FOR YOUR CONTRIBUTIONS. THOSE WERE THE QUESTIONS, AND THOSE WERE THE ANSWERS. THAT'S Q+A. SEE YOU NEXT SUNDAY MORNING AT 9. CAPTIONS BY INGRID LAUDER AND ALEX WALKER. CAPTIONS WERE MADE POSSIBLE WITH FUNDING FROM NZ ON AIR. COPYRIGHT ABLE 2016