Day: November 7, 2018

The PRC and New Zealand: bits and pieces

Michael Reddell China, NZ politics, Uncategorized

For anyone who hasn’t yet listened to it I recommend Anne-Marie Brady’s interview with Wallace Chapman on Radio New Zealand last weekend.  Half-hour interviews are pretty rare, and this one gives a good flavour of the issues and concerns she has been raising since the publication of her Magic Weapons paper last September.  I’m not going to go over old ground again, but in listening to her I found four points worth noting:

  • she has been surprised by how slow the New Zealand official reaction has been to the material revealed in the Magic Weapons paper,
  • in discussing the Chinese-language media here, she noted that the Chinese Herald had initially reported her paper and also some of Matt Nippert’s Herald articles about Jian Yang.  She heard later that the editor had been called to Beijing to be straightened out, and that fresh people had been sent in.  There been no repeats of such deviations from the Party line (the PRC strategy to “harmonise” foreign Chinese language media with the line from Beijing) since.    She noted in passing how large the Chinese-language media is (in a population of only around 200000) , contrasting that with the straitened circumstances of the mainstream media in New Zealand.   “Who is funding them”, she asked.  The implied – if unstated – answer was pretty clear.   She sees this situation as itself a breach of New Zealand’s sovereignty.
  • she was asked about the description of New Zealand as the “soft underbelly of Five Eyes”.  As she noted, this wasn’t her description but the sort of line she heard repeatedly from the capitals of our traditional allies.  Of all that was in the paper, she suggested that this was the line that had riled official Wellington most.
  • asked about the (as yet unresolved) burglaries of her house and office, she was cautious about how much she said, but was clear that in her view there were unmistakeable indications of Chinese government involvement.

Brady’s paper is essential reading for the specific New Zealand context.  In the last week or so I’ve read a couple of other papers about the international situation, which I’d also recommend for anyone interested.   There is a paper from a researcher for a Canadian think-tank, “Hard Edge of Soft Power”, which I thought was an exceptionally clear description of the issues and challenges for countries like ours (and written for a general intelligent audience, whereas Brady’s paper (as released) was an academic conference paper and draft book chapter).  And then there was the original research from the Australian Strategic Policy Institute on the way in which Chinese military academy researchers have increasingly been using collaboration with Western universities (notably the UK, Australia, and Canada) to tap, and develop, potentially highly sensitive military technologies (summary here, including a link to the full report).

In terms of background resources, I just noticed that the Asia Media Centre here has a timeline of coverage on the PRC influence issues, with links to lots of the articles that have appeared over the last year or so.

Meanwhile the New Zealand government and opposition blithely act as if there is no reason for any concern.  They know what is going on, of course.  But they just don’t care.

Occasionally there are a few suggestion that things might be a little different, at least as far as our foreign and defence policies are concerned.   On the count, I noticed a post on the (relatively new) Point of Order blog (set up by a group of veteran political journalists).    The post (“Peters leading NZ away from trying to balance relations with US and China”), was clearly rather well-informed (probably from the Minister himself).   There we learned that

Led by Foreign Minister Winston Peters, the Coalition government has eased away from the previous National government’s ready accommodation with China and the presumption that NZ could easily balance United States and China relations to a more hard-nosed approach.  Several elements have contributed.

First, a powerful pro-Beijing faction in the Ministry of Foreign Affairs and Trade has lost influence.

Second, the present government is more attuned to current geopolitical shifts in NZ’s immediate north-west. Now there is a new, sharper understanding of the implications of a move by China into contacts with NZ’s immediate Pacific environment such as the Cook Islands.

It went on

Many New Zealanders   who cherish  their  country’s  “independent” foreign policy  have  little   idea   of  how  active   China has been  in  spreading its influence  into  this region.  Even  within  the  Labour and  Green  parliamentary  elements of the  government, where anti-Trump  feeling is dominant,  the  realignment of  NZ towards the stance  of    its  long-time closest  partners  may not  yet be fully understood.

and

But it is clear  Winston Peters   has been  instrumental  in the policy  revision  in Wellington, moving   NZ  in its attitude  to Beijing back towards that of  its closest  partners…….

The intelligence community is relieved by the government’s attitude. Before the general election, the National government seemed unwilling to accept or acknowledge the extent of Chinese penetration despite the growing indications of influence in NZ Chinese media and the apparent interventions of Chinese agents in NZ academic circles.

My reaction at the time was much as it was when the Defence strategy document was released a few months ago “well, that is all very well –  and I welcomed the P8 purchases – but I will believe it means anything much when I hear it from the Prime Minister”.  She, after all, leads the largest party in the government, and – together with National –  her party is deeply complicit in the kowtowing to Beijing, at home and abroad.     The Prime Minister was never heard from on the defence strategic issues.

In a sense, I didn’t have long to wait this time. In her weekly interview on Morning Report on Tuesday the Prime Minister was asked about Chinese overt and covert influence activities in the Pacific and in New Zealand and whether she had any concerns.  Kim Hill –  the interviewer –  explicitly referenced the situation in the Cooks and Nuie (touched on in a Sunday-Star Times story) and Anne-Marie Brady’s work.   It is hardly a secret that China has been very active in the Pacific (both Melanesia and Polynesia) and is widely thought to be sounding out possibilities for future naval bases etc.

And what did our Prime Minister have to say?  She burbled on about the “realm territories”  –  officialese for the unusual constitutional position of the Cooks and Niue – trying to somehow allay any concerns solely with the irrelevant observation that the two countries had had diplomatic relations with China for some years.   She said she didn’t want to single out any individual player –  as if, you know, someone other than Germany was threatening Czechoslovakia in 1938 –  and talked only about how we (New Zealand) needed to up our game in the Pacific regardless of what anyone else was doing.  Of New Zealand and China, she claimed that our relationship was “broad, complex, and vital”, but with no sign that she had any concerns whatsoever.   Of course, she asserted that New Zealand policy would always be made in New Zealand’s interests, and then went on to adopt the juvenile phrase beloved of the New Zealand left “we will always take an independent foreign policy”.  What, even when we face common interests and threats?   She somehow managed to avoid engaging on the domestic issues – be it donations, Jian Yang, collaboration between universities and the PRC, the break-in to Anne-Marie Brady’s house, the attempts to control the local Chinese language media, to suborn or silence ethnic Chinese New Zealanders.  Just nothing.

Winston Peters can talk a good talk to friendly –  but not widely read –  journalists, and even when he meets Mike Pompeo or Marise Payne. Perhaps it will even temporarily ease some of the behind the scenes pressure on the government, to stop lagging behind in taking the PRC influences activities more seriously. But until the Prime Minister is on side, openly engaging with the public we can safely assume nothing much we change about the corruption of our system and society –  National and Labour hand in hand.

(One reader observed to me yesterday that to listen to the Prime Minister on such issues it is rather like a Palmolive ad –  “squeaky clean”, nothing to see here.)

Take, for example, the ongoing disgrace of Jian Yang.   It is pretty bad that our immigration and citizenship officials appear to have done nothing about his acknowledgement a year ago that he misrepresented his past –  in the PLA military university –  when applying to move to New Zealand (not only has he acknowledged misrepresenting his past, but claimed –  as if in defence –  that the Beijing authorities had told him to do so).  It is worse –  frankly extraordinary – that a former PLA intelligence official, member of the Chinese Communist Party, someone never once heard to criticise any aspect of PRC policy (despite its heinous human rights record, expansionist foreign policy etc), sits in our Parliament –  defended by the National Party, and accommodated (left unbothered, not criticised) by the Labour Party (and all the other parties).  When did the party of the decent centre-right middle classes come to be the party that covers for such a person, simply (it appears) for all the donations he manages to pull in, and despite his ongoing close associations with the embassy of Communist China?

As part of the new podcast series by John Campbell, TVNZ yesterday released a podcast on Chinese influence in New Zealand, including the cases of Yikun Zhang (he of no English, very close Communist Party ties, donations and –  nominated by both parties – honours) and Jian Yang.    I was among those Campbell interviewed, along with Tze Ming Mok (an Auckland ethnic Chinese commentator, of Singaporean/Malaysian background) and Clive Hamilton, the Australian academic.   There isn’t a great deal that is new in the podcast, but the detail I thought was telling was Campbell’s effort to give Jian Yang a chance to talk.  He went to the constituency office Jian Yang shares with Paul Goldsmith.  Jian Yang was in the office, but simply refused to come out to talk.  He is apparently still quoted reasonably often in the Chinese-language media but simply refuses to explain himself to his majority English-speaking electors.  It is shameful, but it is also telling.  A decent man would want to front up and tell his story. A decent party would insist on it.  A decent opposition party would repeatedly highlight any failure to do so.  I wonder what Paul Goldsmith –  seemingly an otherwise decent National MP –  makes of his office mate’s refusal to talk?

A reader who is fluent in Chinese sent me a couple of snippets on Jian Yang.

In one of the …. files released last Oct by the immigration office under OIA , Jian Yang declared he entered to Luo Yang University in 1978 and graduated in 1982 where he obtained a bachelor degree of English Study.

When I checked the background of this university in Chinese source, I found this university (Luo Yang university) wasn’t even founded until 1980 which means the university didn’t exist in 1978, the year Mr Yang declared he started his university education.

Here is a brief introduction of the Luo Yang university in Chinese in Wikipedia which I have translated into English.

Luoyang University, is It was a Tertiary institute that existed between 1980 and 2007. The school was funded in September in 1980 through World Bank education loan and Luoyang City council, and was a full-time polytechnic. In 1997, Luoyang University began the construction of a new campus at Luolong District, south bank of Luo River. In 1999, Luoyang University moved to the new campus. The old campus still has the Luoyang University Adult College and some ancillary facilities. 

Before 2006, Luoyang University is a polytechnic level institute. The school had tried to upgrade to university level several times, but not successful. In 2007 Luoyang University merged with another polytechnic Luoyang Industrial Polytechnic, and became a university level institute called Luoyang Institute of Science Technology.

The certificate that Jian YANG submitted to the immigration office seems a official document issued by the university and that has left a question: why the university would take a risk to make a statement which is apparently again the fact?

Either the certificate itself didn’t come from the university but was made up by someone else or Jian Yang was assisted by the university for a purpose to cover up his military background.

Again, in serious and decent countries these matters would be taken at least as seriously as the dodgy Czech currently (and rightly) under investigation.

I was sent a link to a debate hosted by a local Chinese-language TV station during last year’s election among ethnic Chinese candidates from four different parties.   Among them were Jian Yang, and an ethnic Chinese (Malaysian born) candidate for the Maori Party.     I was sent a translation and brief commentary on an exchange between these two (at about 1:03)

Jian Yang was challenged by Maori Party’s Chinese candidate, Wetex Wang (a Malaysian born Chinese), asked if he has done anything about introducing foreign investment to help the local economy in his 6 years sitting in parliament.

Below is a translation of Jian Yang’s answer.

Our Yili Group, built milk powder factory here. Our Mengniu Dairy, that is, Yashili International Holdings. These enterprises came to New Zealand, in fact they have all contacted with me, including our largest waste disposal factory, Waste Management, is invested by Chinese. We all contacted with (them). I went to their companies to introduce New Zealand’s policy, why New Zealand is a good place, why you should come to New Zealand.

My reader notes

(Please note that Jian Yang in the video has kept referring those Chinese companies as  “Our Yili, Our Mengniu, Our Waste Management” which sounds like he is a CCP official.  This is quite strange for me. Even if Jian Yang is an ethnic Chinese, he is a NZ politician. I would not imagine Kiwi politicians would refer those Chinese companies as Our.. Our…Our… instead, they would say Chinese Yili, Chinese Mengniu.  Apparently, Jian Yang still positions himself as a CCP representative but sitting in a foreign political circle.)

Perhaps a small thing in its own right, but put it together with his background, his ongoing close ties to the PRC Embassy, his refusal to talk to the media, his refusal ever to say anything critical of the PRC, it makes my reader’s point that there is little sign that Jian Yang –  despite serving in the New Zealand Parliament –  prioritises New Zealand interests and perspectives.      And our government seems unbothered.

Of course, there is always the alternative perspective. I noticed the China Council –  New Zealand government paid champions of and apologists for the People’s Republic of China –  tweeting a link to this article by a New Zealand living and working, and publishing, in China.   He champions the China Council and concludes

There’s no quick fix, and it will definitely take time and effort, but the sooner the world understands that China and the Chinese people are just like the rest of us, the sooner the world will reap the sweetest fruit that trade liberalization and economic globalization can grow.

Probably many Chinese people do have much the same aspirations, but the Chinese people have no freedom of expression, no freedom of religion, no ability to change their government, often not even freedom of movement, no benefit of the rule of law.   Not just like us at all.  It is the Chinese government we –  and they –  have to worry about.   There were fellow-travellers and sympathisers writing from Berlin in 1938, or from Moscow throughout the Cold War too.  But most New Zealanders  –  and then both the government and the opposition (National and Labour) – knew better.

Our leaders should –  and I hope one day will –  hang their heads in shame at what they brush over, and consciously look past, just not caring, so long as the donations and deal keep flowing.

 

 

 

 

 

 

 

 

 

The Fed and Lehmans

Michael Reddell Financial stabilty, USA

On the day of the US mid-term elections it seems appropriate to have a US topic.

I read a lot of books each year.  Many of them provide a fresh angle on some or other issue I’m interested in, but few lead me directly to change my mind.  Professor Laurence Ball’s The Fed and Lehman Brothers is one of the exceptions.   I wasn’t pre-disposed to expect much from Ball (a professor of economics at Johns Hopkins university): my impressions of him were formed by his visit to New Zealand 20 years ago when, as Reserve Bank professorial fellow at Victoria University, he somewhat embarrassed his hosts by suggesting that the conduct of key elements of fiscal policy should be handed over to independent technocrats.  Interesting idea I suppose, but given that the point of spending public money on the fellowship had been to buttress public support for an independent Reserve Bank, it didn’t really help, especially in an election year with Winston Peters in the ascendant.

But the new book looked intriguing. As it turned out, it was much more than that, and I’d go as far as to call it a “must-read” for any serious student of the 2008/09 financial crisis.

It is a very careful and detailed study focused largely on one question: could the US authorities have lawfully prevented the failure of Lehmans that fateful weekend in September 2008 if they had wanted to?   Key decisionmakers have claimed, at the time and subsequently, that there were no lawful options open to the Fed (Bernanke, for example, is quite explicit in his claim that the authorities could only have intervened in breach of the law).  Ball shows, pretty conclusively, that such claims are simply wrong.  The decision not to provide liquidity support to the Lehmans group was just that, a choice.  And he goes on to illustrate that although in law any decision to have provided liquidity support (or not) rested solely with the Board of Governors of the Federal Reserve, in fact the key player was the US Secretary to the Treasury, Hank Paulson, with the Fed apparently deferring to his preferences.

Under the Federal Reserve Act as it stood in 2008, the Fed could lend to non-banks (as Lehmans then was, and as Bear Stearns had been) only in “unusual and exigent circumstances”.  Most commentators will agree that in September 2008 –  a year into an unfolding financial crisis, shortly after the US government had intervened to support the mortgage agencies –  that particular strand of the legal test could readily have been passed, in respect of a major investment bank closely intertwined with the rest of the wholesale financial system in the US and abroad (Lehmans had major operations in London).  The other strand of the legal test was that any loans had to be “secured to the satisfaction of the Reserve Bank” making the loan.  There apparently wasn’t much (or any) case law on this provision, but it was generally accepted within the Fed that the Federal Reserve shouldn’t be lending if they weren’t pretty sure of getting their money back.

But what wasn’t in the statute was a requirement that the borrower itself still be solvent (positive net equity).   A financial institution’s directors would presumably have quite severe limits on their ability (or willingness to risk doing so) to trade while insolvent, but from the point of view of the Federal Reserve, considering providing lender of last resort liquidity support, the relevant issue wasn’t the solvency of the institution, but the adequacy of the specific collateral the Fed would receive to cover any loan.  Nonetheless, senior policymakers have since claimed that Lehmans was insolvent and that, in any case, there was insufficient good collateral to support a loan of the size that might have been required.    Ball challenges both claims.

He does so using an array of published material, including regulatory filings, bankruptcy examiners’ reports, and the report (and supporting documents) of the Financial Crisis Inquiry Commission.

On the solvency front, one issue Ball has to grapple with is that when Lehmans was placed in bankruptcy there proved to be a considerable shortfall in net assets: not just shareholders (who lost everything) but creditors lost significant sums (and some court cases are still unresolved).   But that is a quite different issue from whether there was positive net value in the business at the point where the decision not to provide liquidity support was being made.  Economists have long recognised the concept of “bankruptcy costs”, and Ball makes a pretty compelling case that the bankruptcy process itself resulted in significant transfers of value to other parties that would be unlikely to have occurred in a more orderly process (the three areas he singles out relate to the termination of derivatives contracts, the fire sale of subsidiaries, and the disruption of various investment projects (mainly in real estate) that Lehmans was party to.  But on a going concern basis Ball concludes his detailed analysis this way

…the best available evidence suggests that Lehman was on the border between solvency and insolvency based on realistic mark-to-market accounting, and it was probably solvent based on its assets’ fundamental values.

As noted earlier, the critical (legal) criterion wasn’t about institutional solvency, but about the specific collateral the Fed could have obtained.

You might have assumed –  in a hazy way I think I did –  that by the end Lehmans wouldn’t have had much decent collateral left.  Perhaps you assumed that if the Fed had lent, it would all have been “secured” on dodgy commercial real estate loans.  But, as Ball demonstrates, that view is quite wrong.    Lehmans had been funding a large proportion of its balance sheet (as was the norm then for investment banks) through repos using fairly high-quality securities (ones that Fed was happy to accept), and the run on Lehmans primarily took the form of counterparties not being willing to roll over this repo finance (itself an interesting phenomenon, given that repo contracts should have left any counterparty with a clean ownership of the collateral security in the event of bankruptcy). But to the extent the repos didn’t roll over –  and it was clear they wouldn’t have on the Monday morning without Fed support – Lehman would still have been left with the (good quality) securities.  It also had long-term funding on its balance sheet, which couldn’t go anywhere in the short-term.  Ball demonstrates that Lehman had sufficient volumes of good quality acceptable collateral that it could have secured a large enough Fed loan to have replaced all its short-term funding if necessary.   The numbers would have been large, but as Ball points out no larger than the amounts injected into AIG a few days later (for a risky equity stake), or lent to Morgan Stanley a short time later.

There is an important distinction to be made here.  The issue Ball is dealing with is not whether the US authorities should have taken over, and recapitalised, Lehmans.  His argument –  nested in the liquidity provisions of the Federal Reserve Act –  is that liquidity support could (lawfully) have been provided, and that had it been provided it would have opened the way to a less costly, less disruptive, resolution over the following months.  Perhaps it would have been possible to inject more private equity to the holding company and enable it to continue as a going concern.  But if not, the prospects for a takeover of the business would have been greater –  for example, a key obstacle to Barclays taking over Lehmans was the need for a shareholder vote which would have taken at least a month –  or it would have been possible to have sold subsidiaries –  including the valuable asset management subsidiary –  in a more orderly and competitive process.  At worst, a more orderly wind-down would have been facilitated.

One of the other things Ball documents is the work that had gone on inside the Fed over several months, right up to the fateful weekend, on possible liquidity support mechanisms for Lehmans.  It seems pretty clear that there was never a presumption inside the Fed that if a private buyer was not be found that Lehmans would simply be left to the tender mercies of the bankruptcy administrator.  (In fact, as he notes even when Lehmans was forced to file for bankruptcy, the Fed provided substantial liquidity support to keep the New York broker-dealer subsidiary open for several days until Barclays committed to purchase it.)

So why didn’t the Fed prove willing to provide liquidity support for the whole group?  Ball argues, pretty conclusively, that the key player here was Secretary to the Treasury, Hank Paulson.  In law, the Secretary to the Treasury (or anyone else in the Administration) had no role in such decisions.   And it is not as if, in the specifics of the time and system, Paulson had any greater political legitimacy than, say, Bernanke.  Both were appointed by (outgoing) President Bush, and both had been confirmed by the Senate.   Presumptively, Paulson was likely to be out of office in January 2009 no matter who won the election, while Bernanke had more of his term to run.  But, of course, the politics around Wall St “bailouts” had been turning increasingly nasty since the Bear Stearns intervention (where the Treasury had got involved, implicitly underwriting the Fed’s credit risk) and Paulson –  a strong personality –  was quite open that he didn’t want to be remembered by history as Mr Bailout.  Perhaps the distinction between well-collateralised liquidity support and (actual or implicit) equity support got bypassed in the heat of the moment.

But the other relevant aspect, given the political aversion to more “bailouts”, seems to have been a sense within the Fed that the pressures on Lehmans had been so well-foreshadowed, over months, that its failure wouldn’t prove that disruptive.  Key players now claim that that wasn’t their view –  Bernanke is on record claiming that he always knew it would be a “catastrophe” –   but Ball demonstrates that such claims are simply inconsistent with what the Fed was saying or doing at the time.  For example, the FOMC met two days after the Lehmans failure.  Had the Fed thought the Lehmans failure would prove “catastrophic”, or even just aggravating the severity of the recession, a cut to the Fed funds rate would surely have been in order.  There wasn’t one.  And the published records of the meeting show no sign of any heightened concern or anxiety about the financial system or spillover effects to the economy.  If that was the prevailing view at the top levels of the Fed, it makes more sense as to why central bankers would defer to political pressure not to have provided (liquidity) support for Lehmans.

Central bankers don’t emerge with much credit from Ball’s book.  Anyone can make mistakes in the heat of the moment –  even a large institution with a deep bench like the Federal Reserve –  but what is perhaps more troubling is the suggestion (which seems pretty convincing to me) that key players (Bernanke, Geithner and Paulson) had been spinning the situation in their memoirs, rather than confronting the specifics of the data and the law.  Perhaps I become a bit more sympathetic than I was to (former BOE Governor) Mervyn King’s choice to avoid memoirs, and a defence of his involvement, in his own post-crisis book.  Thank goodness then for the efforts of a careful, apparently dispassionate, academic like Ball.

Of course, to agree with Ball’s conclusion that the Fed could have provided liquidity support to Lehmans if it had wished to do so is not to immediately jump to the conclusion that they should have done so.   Although it isn’t the focus of his book, it is pretty clear that Ball thinks such support should have been given.

A counter-argument could have a number of strands:

  • first, Lehmans had been under pressure for months to raise additional outside equity, and had failed to do so.  Had they done so, even at deeply discounted prices, it is unlikely that the wholesale run would have developed as it did (and even had it done so, the politics of liquidity support might have been different),
  • second, had Lehmans been a bank supervised by the Fed it would probably not have been allowed to stay open even as long as it did without new capital.  In bankruptcy courts, the relevant test might be whether there are still positive net assets, but bank supervisors who are doing their job should have been intervening pretty strongly –  including using directive powers –  before any question arose as to whether net assets were still (perhaps barely) positive, and
  • third, there is still the unanswered question (which may never be satisfactorily resolved) as to just how much the Lehmans failure exacerbated the recession.  Counterfactual history is hard.   The consensus view at present is that the adverse effects were large, but if much of the disruption would have happened anyway –  even if Lehmans had been left limping for a couple of months on liquidity life-support –  the case for intervention is weaker than many would allow (and, for example, AIG’s plight was largely unrelated to the Lehmans failure).  After all, there is a salutary place for market discipline, including around the urgency of injecting new capital when dark clouds loom.

I was one of those who tended to welcome the decision not to “bail out” Lehmans (better still not to have intervened around Bear Stearns months earlier) but I probably haven’t distinguished clearly enough between liquidity and solvency support.   The latter option –  which wasn’t something the Fed could have done anyway –  isn’t the focus of this book, but Ball does make a pretty persuasive case around liquidity support, including based just on facts that were available at the time (on the aftermath, no one could be certain).

I could still mount a counter-argument based on the first couple of bullet points above.  Providing liquidity support in such circumstances would have sent a signal to boards and managers of other institutions that any urgency to raise new capital, at deep discounted prices, was less than it might have seemed.  On the information availabe at the time, that would have been unfortunate.   Then again, within days that whole argument was tossed out the window as the authorities rushed to respond to a deepening crisis.

But perhaps what finally gets me over the line in thinking the Fed made a mistake, in not lending and in deferring to Paulson (in a politicised time six weeks out from an election), is an assessment of the probabilities.  Perhaps the Lehmans failure really wasn’t that big a deal.  Perhaps the Fed at the time was justified in its view that a failure could be managed without too much spillover downside.  But operating in a world of heightened uncertainty, no one could really know.  There had to be a chance that simply allowing Lehmans to go into bankruptcy –  the largest bankruptcy in US history, all done in rush –  would prove very very disruptive and economically costly.  But if providing strongly-collateralised liquidity support, quite possibly at a high interest rate and with ample haircuts, could have alleviated that risk –  even if it was only a 10 per cent risk – it is hard not to conclude (even without the benefit of hindsight) that the central bank should have acted.  After all, lender of last resort provisions are put in statutes for a purpose –  and not just a decorative one.