Originally Posted by
Enumerate
The government guarantee engineered a vast flood of "hot money" into SCF due to the fact that the deposits were government guaranteed.
Clearly, SCF was not in a position to rationally allocate all this money. Given, at the the time, SCF was held in high regard ... this money kept flowing.
The key problem loans originated during this period as SCF sought to expand its loan book outside the core domain of lending.
Once the retail deposit guarantee began to look tenuous; following on from Hubbard's Statutory Management - the "hot money" took flight.
Without the retail deposit guarantee ... a classic market distortion ... SCF would not have the level of bad debts entry in to property development lending foreshadowed.
This point is quite different from: "in 2008 all was rosy in the SCF camp".