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Issue #1817      April 11, 2018

The Big Four Bastards

Deposit-taking institutions (banks, permanent building societies, etc) hold $4.6 trillion in assets, around two-and-a-half times the size of Australia’s $1.8 trillion nominal economy. The profits of the finance and insurance sector of the economy are larger than those for any industry, including construction, resources, tourism or agriculture. No wonder the expression “too big to fail” became the slogan when the government rushed in to protect the banks during the 2008 global financial crisis and subsequent economic crisis.

The major banks, the Big Four, are the major providers of home loans, car loans and other personal loans, as well as providing insurance and investment products through their subsidiaries.

As at November 2017, there was a total of $1.07 trillion outstanding in finance for owner-occupied housing and a further $560 billion in investment housing finance (a total of around $1.6 trillion in housing finance). Around 98 percent of this housing finance was provided by banks, an indication of their monopoly over the sector. The remainder was provided by permanent building societies and credit co-operatives. Their monopoly over financial services is not surprising when their size and power is considered.

The major banks made whopping increases in their profits last year. They did this by such means as increasing interest rates on home loans, reducing rates on term deposits, sacking thousands of staff and blatant deception, misleading conduct and breaches of the law. Between them the Big Four netted a gross profit of more than $30 billion.

A Royal Commission was the last thing they wanted, but they got one in the end when public and internal pressure within the ranks of the Coalition became too much to withstand. The Hayne Royal Commission into Misconduct in the Banking, Superannuation and Finance Services Industry has been given a deadline of January 1, 2019 to produce its final report – just over a year. In contrast, the attack on organised labour – the Heydon Royal Commission into Trade Union Governance and Corruption – spent two years trying to vilify trade unions and their officials.

The differences in the names of the two Commissions speak volumes about the government’s hoped-for outcomes. On the one hand a rap over the knuckles for the banks for “misconduct”, and on the other for the trade unions a raft of anti-union, anti-worker legislation.

Rowena Orr, counsel assisting, summed up the first two weeks of hearings saying: “... over the last two weeks, the Commission has received evidence of misconduct and conduct falling below community standards and expectations by a number of financial services entities.” During those two weeks the Commission looked at examples of this misconduct in relation to home loans, car loans, credit cards and overdraft facilities and the sale of insurance products.

Westpac staff had received payments from referrers for the referral of customers to Westpac for loans, and for loans made to customers who did not have the capacity to repay them. NAB bankers engaged in conduct such as falsifying documentation and knowingly accepting falsified documentation in connection with home loan applications, receiving payments from introducers, failing to disclose personal relationships with introducers, etc etc. The CBA has already paid out millions of dollars in remediation of errors, brokers submitting false or misleading information.

The Commission took up the question of conflict of interest where the larger the loan and the longer the loan period (i.e. more interest), the larger the commission. It also looked at the additional profits being made through the corrupt practices of the banks. The second week finished with the Commission having hardly scratched the surface regarding loans and credit cards.

They have certainly lived up to their reputation as bastards.

The Australian Securities and Investments Commission (ASIC) has been proven to be a paper tiger, hardly touching the profound corruption of these powerful, parasitic monsters.

As it is, the Royal Commission is running to an extremely tight schedule with inadequate time to explore the issues in great depth. For it to achieve anything, then two things need to come out of it.

First, strong legislation with the necessary machinery to enforce it and serious penalties, including jail for CEOs of banks that seriously defile people’s lives. Second, the establishment of a People’s Bank, with a strong social charter that puts people before profits and invests deposits in projects of benefit to the community.

Next article – An unnecessary crisis – Public housing in peril

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