Monday, September 22, 2008
Over the weekend President Bush unveiled the largest financial rescue in American history, asking to let the Treasury buy as much as $700 billion of bad mortgages from financial institutions in trouble.
In an Australian television interview Sunday Mr Turnbull called on Mr Rudd to consider doing the same thing.
“We know that it has been very, much harder for banks, particularly the second-tier banks and financial institutions, to re-finance mortgages,” he told the Nine Network.
“In the US, the government is taking a role, proposing to buy some of these securities, in effect to provide additional liquidity to take the pressure off mums and dads.”
“We've got the capacity to do that through the Office of Financial Management...
That's something I'd like to talk to the Prime Minister about to see if we can agree on some bipartisan measures.”
The Treasurer Wayne Swan immediately rejected the idea, labelling it “either a monumental gaffe or intentionally irresponsible”.
“The fact is Australia simply does not have the type of bad debts prevailing in the US banking system,” he said.
"In the national economic interest, it's important Mr Turnbull stop talking down our banking system at a time of global uncertainty.”
Reserve Bank figures show only 0.4 per cent of all Australian mortgages are seriously in arrears, no more than were in trouble a year ago.
"As the Reserve Bank Governor pointed out, the reality is that the health of our banks is light years away from that of US banks,” the Treasurer said.
On Friday Mr Turnbull quibbled with the Reserve Bank Governor’s assessment, saying that “light years suggests millions of miles away - the world is more connected than that”.
Late yesterday he expanded on his suggestion saying that earlier this year the Government had introduced legislation that would allow the Office of Financial Management to buy Australian mortgages.
“There would be no need to take on the excessively risky portfolio that might be desirable in US and the UK,” he said.