At the end of October 2008 Australian banks became aware that a guarantee from the Australian government was going to come with strings attached. While it ultimately came to little, the banks came under pressure to bail out market-linked investment funds with liquidity problems, by buying their assets at "market" prices. Prime Minister Kevin Rudd made it clear that he saw this as a quid pro quo for the provision of government guarantees and he enlisted former CBA CEO, David Murray, to act as his enforcer.Now it is the turn of the New Zealand banks to be made aware of the strings attached to the guarantees provided by that government. The Governor of the Reserve Bank of New Zealand observed mid-week that rising term interest rates (read bank mortgage rates - most mortgages are provided at fixed rates in New Zealand) were out of line with RBNZ expectations. Moreover, if these rates were maintained it would put unnecessary pressure on borrowing costs for firms and households.This was the trigger for Finance Minister, Bill English, to come right to the point and say that the banks shouldn't be expecting to make big profits when the government was subsidising their borrowing costs through the provision of guarantees. The Federated Farmers and the bank employees union promptly joined his call. No doubt the banks are going to feel some heat for a while now.Once again this brings into question the value of a government guarantee. In the New Zealand domestic market, the recent strength of retail demand for non-guaranteed bond issues says a guarantee is not required. And, as we pointed out last week, it appears to be of little value in raising term debt in the international markets.Perhaps it is useful in raising short-term debt in international markets but one wonders whether the New Zealand banks may not be tempted to relinquish the guarantees.