Non-bank woes grow for sunny Jim Chalmers
ASIC's stop order on La Trobe 'deposits' is a harbinger of things to come.
When federal Treasurer Jim Chalmers sits down this week to write the list of attributes he's seeking in the next chair of the Australian Securities and Investments Commission, he should include: "Preferably has experience in dealing with a full-blown subprime debt crisis." Without a shadow of doubt, Australia is lurching – like a drunk heading home after five drinks too many – into another subprime credit crisis that will shrink the savings of tens of thousands of unsophisticated investors.
Exiting ASIC chairman Joe Longo gave a hint of what's to come when he signed off last week on the cryptic stop order to prevent the La Trobe Australian Credit Fund from accepting new money into its 12 Month Term Account and 2 Year Account products. The cryptic nature of the ASIC stop notice lies in what it didn't say: those two products account for the vast majority of La Trobe's fund inflows.
Unless the fund manager La Trobe Financial Services can have the stop order rescinded very quickly, both the fund and the fund manager will face an existential crisis. And $13 billion of hard-earned – mostly from mum and dad investors – will be frozen until the mess can be cleaned up.