​
Simon Burnett
CDOs were riddled with hidden risks and impossible to price. In May 2005, the Financial Times's Gillian Tett wrote that "models" used to predict their behaviour had lost track with reality. In October 2005, ING (New Zealand) blundered on and set up the second of its two ultimately doomed funds, the Regular Income Fund (RIF) and packed it with CDOs to sell to unsuspecting retail clients.
​
(Photo: David Columbia/New York Social Diary)
In June 2005, Federal Reserve chairman Alan Greenspan warned against investing in "not fully tested trading strategies" such as CDOs. Four months later, ING (NZ) opened the RIF, bragging about the "expertise" of its "investment professionals." In September 2007, as the crisis hit and agencies agencies butchered CDO ratings, Greenspan was even blunter about CDOs and their subset, CLOs. "They do not work." ING continued selling the RIF to retail customers.
​
(Photo: Zuma Press/Alamy Stock)
CDOs should not be sold to retail investors, said the man who helped pioneer them, Lew Ranieri, in December 2006. Ranieri publicly condemned his creations as being almost impossible to understand. But ING (NZ) persisted in loading CDOs into the DYF and the RIF. Ranieri said later that "I wasn't out to invent the biggest floating craps game of all time, but that's what happened."
​
(Photo: Bloomberg/Getty Images)
​
​
​
Auckland fund manager Norman Stacey realised at an early stage that the ING (NZ) team seemed to be on track for disaster. Why did ING's half owner, the ANZ bank, with its teams of experts, not see that?
​
(Photo: N. Stacey)
The front row of the frozen funds team. From left, national protest coordinators Paul Markham, Andrew Davidson and Gerard Prinsen.
​
(Photo: G. Prinsen)
​
In September 2007, the month Fed chairman Greenspan warned that CDOs and CLOs "do not work", ING (NZ) persuaded Kerry Jex-Blake to invest in the RIF, which was packed with both. Despite an explosion of defaults, liquidations and downgradings, and an admission by Moody's that rating CDOs was impossible, ING kept the RIF open to new customers until early March 2008. Then both it and the DYF were frozen. Jex-Blake's ability to buy a house had vanished
(Photo: K. Jex-Blake)
Paul and Linda Milsom led the protest charge when they organised in Richmond the first of what quickly turned into a nation-wide series of demonstrations outside ANZ branches.
​
(Photo: G. Prinsen)
When Bruce Graham spoke to the ANZ in 2003 about a low-risk, secure investment, the bank did not seem to understand what "low-risk" meant. It placed his money in ING (NZ)'s Diversified Yield Fund (DYF) , which was packed with CDOs. These were being openly described at the time as "toxic waste", "time bombs" and being of "Byzantine complexity" with risks that could not be measured. After the DYF crashed, Graham's case was raised in Parliament by John Boscawen, MP.
​
(Photo: B Graham)
Passersby on Wellington's Lambton Quay constantly stopped to chat with demonstrators. The author is at right.
​
(Photo: G. Prinsen)