Banks 'saviour' revisits 2008

The details of the Australian government's actions in late 2008 in shoring up the banking industry may become a fresh point of political discussion, with the restored prime minister, Kevin Rudd, emphasising the topic late last week.

In his two media briefings on Wednesday (as newly elected Labor leader) and then on Friday (as PM), Rudd chronicled his earlier achievements and said he'd "saved banks".

"Let me say this to Australian business: I want to work closely with you. I have worked with you closely in the past, particularly during the... [global financial crisis] and there were some white-knuckle moments then, as the heads of the major banks will remember," Rudd said.

In the most informative of the Australian histories of the financial crisis, The Great Crash of 2008, Ross Garnaut and David Llewellyn-Smith, wrote that:

"In the early days of October 2008, money poured into the big four Australian banks from other financial institutions. But life was becoming increasingly anxious for them as well.

"One by one they advised the Australian government they were having difficulty rolling over their foreign debts. Several sought and received meetings with Prime Minister Rudd.

"The banks told him that, if the government did not guarantee their foreign debts, they would not be able to roll over the debt as it became due. Some was due immediately, so they would have to begin withdrawing credit from Australian borrowers.

"They would be insolvent sooner rather than later."

The Australian Bankers Association contested this analysis at the time.