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Opposition undecided about Govt bank guarante -

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Opposition undecided about Govt bank guarantee

The World Today - Wednesday, 29 October , 2008 12:10:00

ELEANOR HALL: The Federal Opposition leader Malcolm Turnbull says he hasn't yet decided whether to
back the Government's proposal to address the run on fund management companies.

But he has certainly made it clear he doesn't think much of it.

The Government is offering to extend its bank guarantee to mortgage funds and cash management
trusts but only if they're willing to comply with the same capital funding rules and levels of
regulation that apply to banks.

Mr Turnbull says he wants a full briefing from Treasury before making a decision about the policy,
but that he doubts that many of the market-linked investment funds would apply to become banks.

The Treasurer though, insists that several companies have already expressed a keen interest in the
deal.

In Canberra, Kirrin McKechnie reports.

KIRRIN MCKECHNIE: Wayne Swan denies the new scheme is all about telling investment funds to put up
or shut up.

WAYNE SWAN: Not at all, we are working very constructively with the industry. It's a diverse
industry and there are diverse challenges depending upon which sector of the industry you are
dealing with.

But some sectors have indicated a willingness to seek to come under the cover of APRA and become in
time, deposit taking institutions. We've said that we will accelerate that process and in
particular provide additional resources to APRA to ensure that it can process those applications in
a speedy way.

KIRRIN MCKECHNIE: The Government's throwing a lifeline to funds who've been forced to lock up more
than $25-billion in deposits.

But in the short-term there's still no solution for hundreds of thousands of Australians who can't
access their cash.

The Treasurer denies he's leaving investors stranded.

WAYNE SWAN: We are discussing variety of other approaches as well, as you know we are discussing
with sections of the industry how we may assist in hardship cases, in terms of those funds which
may have frozen redemptions, what action can be taken there.

There are a variety of responses and the Government is considering all options, all options are on
the table, and this is a difficult situation because we as the Government must take the responsible
course of action. Our bank deposit guarantee and the guarantee for wholesale term funding has
stabilised the system.

The banking system is the core of the system, but there are other parts of the system that are
affected by what is occurring on global stock markets, what is occurring in the property market,
and we're exploring all of those issues in great detail with those sectors.

KIRRIN MCKECHNIE: The Opposition leader is not convinced investment trusts will be keen to jump on
board.

MALCOLM TURNBULL: That is no mean feat, that will, that will not be easy in this climate naturally,
they'll have to raise capital, they're quite substantial restructuring, and some of them may feel
that it's not worth the costs and risks involved are not worth the effort.

So, you know, we'll have to see how that goes, we don't, we're not going to express a definitive
view on it until we've had proper briefings from the Treasury and from the regulators and indeed
consulted with the industry. So the jury is out on that one.

KIRRIN MCKECHNIE: Malcolm Turnbull moved some of his vast fortune out of a managed fund just days
before the big freeze.

But on Channel Ten this morning, he's denied he was spooked by the guarantee on bank deposits.

MALCOLM TURNBULL: Well you know, you take advice from your financial planners, you invest in
things, you dispose of things. I mean that fund had like all of the real estate investment funds
had declined significantly in value and you know, we were advised to dispose of it or to, you know,
liquidate it.

KIRRIN MCKECHNIE: But privately the Government has seized on those comments, saying the Opposition
leader has been spruiking one message for the public, yet his actions don't follow his rhetoric
when it comes to his own cash.

ELEANOR HALL: Kirrin McKechnie reporting.