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No wonder we hate the banks
By Chris Berg
Updated 19 Apr 2016, 1:23am
Bill Shorten during Question Time, May 12 2015
Photo: Bill Shorten had ample opportunity for regulatory change to the sector when he was Minister for Financial Services and Superannuation. (AAP: Lukas Coch)
Our financial and corporate regulatory system manages to be both bad for the economy and bad for public transparency. And neither the Government nor the Opposition has a plan that will likely resolve it, writes Chris Berg.
It's not really a surprise that two-thirds of voters support Labor's royal commission into banking, as the Fairfax/Ipsos poll found yesterday. Anti-bank populism is a fundamental part of Australia's political culture.
Back in 2012 Essential asked voters how, specifically, they would like the banks to be controlled. Ninety per cent wanted the government to fix bank fees. Eighty-one per cent wanted the government to fix the salaries of bank CEOs. Seventy-four per cent wanted to forcefully peg interest rates to the Reserve Bank's monthly interest rate determinations.
It seems likely that voters would welcome a return to the pre-1980s regulatory regime where the government fixed interest rates and micromanaged the products and investments of the banks - where credit was scarce and you had to beg banks for a loan.
So this fortnight's debate over the royal commission into banks and the government's alternative - to boost the powers and funding of the Australian Securities and Investment Commission (ASIC) - is not just a minor election year spat.
It's a revealing window into how the government changed the way it controls business over the last few decades.
The market-oriented reform of the 1980s and 1990s revitalised the Australian economy after the stagflation of the 1970s. But in the wake of that reform grew up a complex regulatory state that pleases no one.
Now control of the economy has been delegated to arms-length independent regulators. They oversee vast regulatory regimes that create uncertainty and impose heavy costs, while at the same time doing nothing to satisfy the anti-corporate populists who imagine that industries like banking have been left up to the "free market".
We can debate how heavily regulated companies should be, but surely we can agree that the regulation should be transparent.
Take, for instance, the complaint last week in the Sydney Morning Herald by Allan Fels - himself a former regulator - that ASIC has failed to be the "tough cop" on the corporate beat because it has been too eager to sign negotiated settlements with the firms it is supposed to regulate. Fels would rather ASIC take more firms to court.
No doubt many readers nodded in approval, the report further confirming their belief that ASIC is soft and that we need a royal commission.
But the idea that the increasing use of negotiated settlements and so-called "enforceable undertakings" is a sign of regulatory softness is bizarre.
The practice of negotiating enforceable undertakings - essentially promises made by firms to do certain actions which can be enforced in court - was developed to give regulators discretion to be more intrusive, not less.
The idea is this: rather than going to court every time the regulator wants a firm to do something, it can negotiate. Negotiation is cheaper for all involved, but it also gives the regulator more power. With a negotiated settlement, the regulator can persuade firms to do more than the letter of the law would require: do this, and we won't take you to court.
Enforceable undertakings are a big part of the "responsive regulation" idea that was supposed to strengthen the power of regulatory agencies. ASIC is a big fan of responsive regulation.
Now, in my view, this sort of regulatory practice is bad policy. Firms should know exactly what is lawful and what is unlawful. Regulation shouldn't be a matter of discretion - it should be clear and unambiguous. Uncertainty is bad for the economy.
But it's bad politics, too. Recall that old aphorism: not only must justice be done, it must also be seen to be done. Regulatory agencies spend their life negotiating in private with firms rather than publicly enforcing clear rules in court. No wonder voters think those agencies are a bit hopeless.
We can debate how heavily regulated companies should be, but surely we can agree that the regulation should be transparent.
Into that political void has fallen Bill Shorten and his royal commission into banks - an exercise that appears more about adverse publicity rather than a genuine desire for reform.
After all, if Shorten had any grand regulatory dreams for the sector he had ample opportunity to chase them in the three years he spent as Minister for Financial Services and Superannuation.
But it is hard to imagine a royal commission that did not recommend more regulation. They're structurally designed that way. Lawyers tend to be more sympathetic to legal controls on market transactions than the economists that dominate most other forms of banking inquiry.
The Coalition government has its own policy to strengthen ASIC - with new powers, a new funding model, and some more resources.
None of these options is likely to resolve the deeper problem - that the discretionary, arms-length, ambiguous regulatory state offers nothing but uncertainty to firms and the public.
No wonder voters don't have confidence in the system. No wonder they like the idea of a populist royal commission.
Chris Berg is a Senior Fellow with the Institute of Public Affairs. His new book The Libertarian Alternative is published by Melbourne University Publishing in May. Follow him at @chrisberg.
Topics: bill-shorten, turnbull-malcolm, banking, royal-commissions, business-economics-and-finance
First posted 18 Apr 2016, 11:45pm
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Comments (231)
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GeroDero:
19 Apr 2016 9:56:03am
Chris Berg is wrong about the use of negotiated settlements particulary with respect to serious breaches of the law. It is a disgrace that these white collar criminals not only escape a conviction but are able to retain their positions within the corporate bureaucracies that protect them.
This idea that money fixes everything is crap. The U.S. uses it and abuses it, as shown by the settlements with powerful corporates that committed serious fraud costing consumers billions of dollars so that they could obtain bonuses of sometimes 100s of millions of dollars to a single person. If that person should not be behind bars for fraud, then no-one should be.
Regulation is not something that should be capable of being bargained away with bribes.
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Andrew Thomas:
19 Apr 2016 10:16:46am
"This idea that money fixes everything is crap."
Hi GeroDero,
I get where you are coming from, but I think you're slightly off the mark. It is the way we view and understand money, and how we use it to facilitate our society. Currently we run our society to facilitate the economy, heading in the same way that America has. This is actually a case of the tail wagging the dog and explains why American society is and will continue to slide backwards.
The answers are out there if we wish to see them. We could start by examining how the Nordic Bloc countries value and use money as a means of creating a society. By all accounts, they seem to be doing a lot better than America.
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Realist1:
19 Apr 2016 10:27:05am
Andrew T
You mean like Switzerland and the banking system they have? Or maybe Norway and their wealth built of oil you know that big bad climate changer oil.
I guess you best watch how that system crumbles under the weight of the immigration issue that is already buckling under the weight of unemployed immigrants.
But hey we could do the same.
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Andrew Thomas:
19 Apr 2016 11:14:45am
Hi Realist1,
Yes, the Nordic Bloc is not perfect. But it is better. I'd like to hear from you about an alternative. What are your thoughts?
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Steve_C:
19 Apr 2016 12:06:51pm
G'Day Andrew.
I know I'm not Realist1; but, I find myself unable to resist the opportunity to offer a response to your 'challenge'...
Like Realist1; I am somewhat 'cheezed' by the persistent calls by certain Australians who look at the 'Nordic' Nations through what are clearly rose coloured glasses; and apparently also back to a time in their recent past that they no doubt will (or do) see as their "best years".
What is wrong with US having our OWN solution for our own unique situation? What is wrong with Australians using their own nouse for once? Are we that ashamed of our own abilities that we have to 'look' to others for the answers all the time?!
Sure; we need to recognise our own shortcomings and have the balls to talk about them without making it seem that anywhere else is any better, or if it 'is' "better" (as debatable as that actually is, given how green the grass on the other side of the fence always is!), then - to again; look at ourselves dispassionately and with one National goal in mind... namely to make this Country and every last one of it's citizens as good as they are capable of being, do what is necessary here for here to be that better place.
This land once again needs a 'philosophy' - a "charter" that every last man woman and child can make part of their "Australian-ness". To have National ideals once again.
Ideals that we know - regardless of being ALP/LNP, left or right, socialist or conservative... "matter" to us all.
Ideals that we can 'defend' when we see them being abused by our very own 'opportunists'. Ideals that give the 'teeth' to any organisations we charge with actually defending those ideals.
What's truly sad, is that those ideals are actually there - but the media and those with agendas that saw such ideals as standing in the way of those personal agendas being realised, have hijacked and distorted the dialogue to the extent where those of us who ought to know better, are now running around extolling the virtues of foreign systems such as those in Nordic countries...
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Andrew Thomas:
19 Apr 2016 12:18:49pm
"What is wrong with US having our OWN solution for our own unique situation? What is wrong with Australians using their own nouse for once? Are we that ashamed of our own abilities that we have to 'look' to others for the answers all the time?!"
Ironically Steve_C, I totally agree with you! Sadly, we Australians seem to lack the fortitude, but rather look to America with even rosier coloured glasses (or totally opaque). I wish more Australians thought like you!
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HPH:
19 Apr 2016 1:10:16pm
@ Steve
"Like Realist1; I am somewhat 'cheezed' by the persistent calls by certain Australians who look at the 'Nordic' Nations through what are clearly rose coloured glasses; and apparently also back to a time in their recent past that they no doubt will (or do) see as their "best years".
What is wrong with US having our OWN solution for our own unique situation? What is wrong with Australians using their own nouse for once? Are we that ashamed of our own abilities that we have to 'look' to others for the answers all the time?!"
If some people are doing something better than you such as manufacturing better products (Saab, Volvo) and looking after their workers & communities, providing a good quality of life for all their citizens, why don't we emulate them?
This is has nothing to do with national pride.
Looking after and caring for your fellow human being is not a competition.
:)
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DannyS:
19 Apr 2016 5:13:36pm
HPH, it's a pity that you used SAAB as a shining example of making a better product and contributing to the local economy and community.
They went broke because they were making silly, iconic yes, but silly cars. When GM in Detroit bailed them out they kept making stupid, inordinately expensive cars and GM had to finally wash their hands of the whole exercise.
GM did manage to get a 12 billion bailout from the US government though so the only losers were the Swedish workers and the US taxpayer.
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HPH:
19 Apr 2016 6:53:30pm
@D
Look at all the mining & construction equipment and machinery they are manufacturing over there and then get back to me.
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DannyS:
19 Apr 2016 8:05:35pm
Hmmm, hit a nerve have I?
You did mention SAAB in the same sentence as Volvo. I assumed you were talking about motor vehicles. Anyway, SAAB just seem to be in the Defence and Security fields these days.
Do they have a mining and construction equipment arm too?
By the way, have you heard of the Bofors scandal in the 80's and 90's when kickbacks were being thrown back and forth between Delhi and Stockholm? A wonderful example of industrial and moral malfeasance perpetrated by the Swedes. Not all of them of course, just an influential few.
Oh and the circumstances behind the assassinations of Anna Lindh and Olaf Palme don't really put the Swedes up as a shining example of integrity.
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HPH:
20 Apr 2016 1:03:55pm
My reply (to Steve just below you) about pride, an Australian prime minister and offshore bank account hit a nerve somewhere else.
:)
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Steve_C:
20 Apr 2016 10:59:20am
"...why don't we emulate them?"
We do - though those we mimic/copy more than any other tend to be the U.S. and the Brits.
And without putting to fine a point on it; I'm sure the halcyon days of Sweden you're hoping I'll be more inclined to check out are as long gone as our own.
Their current issues with 'immigration' and the rise of the politically extreme right are not dissimilar from our own - so; indeed "emulate" them we are...
And dare I say it, but emulating something without even attempting to improve upon it is not my idea of "clever"; even if it may be your's...
"This is has nothing to do with national pride."
It ought to! There's nothing wrong with having some 'pride' in the place that you plant your butt for life!
If it's good enough to poo and pee in and on, and provide your living to you, you ought to be at least a tiny bit grateful!!
And having "national pride" doesn't make you by inference some flag waving loony tune pseudo Nazi - except in the minds perhaps of individuals who haven't got the foggiest about the English language and it's interpretation!
It's no more (or ought not be!) alarming or alarmist as having "pride" in your own personal appearance!!!!! I bet those who get in a lather at the thought of "National Pride" still take some interest in their appearance... or perhaps they don't - which might explain a few things.
And maybe - if more people in other Nations took more pride in their particular parts of the World, and pride in the World as a whole, the place wouldn't be as messed up as it is now - especially compared with where it could have been if we had maintained the drive and ambition to achieving goals for "all mankind" that the Kennedy era invoked in the Western World.
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waterloo DD Sunsettttt:
19 Apr 2016 1:47:09pm
To engender all of the above, we need higher education standards and better educated teachers.
Once we have that, we will have thinkers and philosophers, instead of 'panel celebrities' masquerading as academics.
It may change sooner, if young people that fled, yearning for better cerebral climes, come home to roost, but I'm not hopeful, because their is nothing for them here.
Someone ( yen) wrote yesterday that a past academic was a PM, however, I would just add that, in the land of the blind, the one eyed man (oops person) is King.
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truthnotfaith:
20 Apr 2016 7:29:56am
We currently have teachers who must act like robots toeing the socio engineering of government over rule. Teachers used to be mentors and inspirational people with idiosyncrasies. Now if they discuss anything considered outside their realm, like life? they are mustered and put out to pasture. Schools have become factories building robots preprogramed instead of individuals with knowledge how to enable themselves into groups for social purposes. Governments do not like that. Student unions crushed to seperate the leaders from the sheep so they can be pilloried if not following doctrines propogandised by political parties.
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J:
19 Apr 2016 7:00:47pm
Steve. I'm ok with the use of the Nordic example. It simply identifies a model that directs its revenue towards more socially considered programs and investments, as opposed to a US model that's centred on private market driven forces.
Of course it should be tailored for an Australian model. The terms of reference is what is in question here.
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the yank:
19 Apr 2016 11:36:29am
Can't we learn anything and do better? Are you arguing that we don't try and just become satisfied with what is an approaching that is failing the society?
The perfect LNP answer. Bash the unions but ignore society's core problems.
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Realist1:
19 Apr 2016 2:25:45pm
yank
You have a problem, please show me where in my comment I have bashed the unions.
The perfect LNP answer.... what????
Please do enlightens us to the "core problems " of society that are being ignored.
By the way I spent nine years of my life as a full time union official.
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the yank:
19 Apr 2016 3:33:45pm
Good now tell me why doing nothing about banks is OK?
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Blzbob:
19 Apr 2016 5:38:47pm
We need a Royal Commission into corruption in banking and business, and the corruption around our political donation system.
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Lardo:
19 Apr 2016 6:15:05pm
Bizbob
Yeah, I want the Royal Commission to examine why those rotten banks only lend you money in the hope of making a profit! I mean, the way they actually expect you to pay back what you borrowed, with interest, to buy stuff you couldn't afford just stinks!.
Bill to the rescue, make those banks give money away to all!
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Fairdinkum:
20 Apr 2016 10:21:32am
Please can someone explain to me why we need a Royal Commission into the banking system in this country?
If the system was not working, then we would not have the so called scandals being reported by the media. the scandals would be hidden away and no one would be the wiser.
Banks are an essential part of any economy. If they were not providing the services they are, then we would not see the level of home ownership in this country.
Sure there have been problems with financial planners and some insurance arms, but those are side lines to the actual functions of a banking system.
There are many other aspects of society that are not working as well as the banks - perhaps the construction businesses reaping billions of dollars in profits from infrastructure spending, but not paying subcontractors and killing workers via unsafe work practices would be a good place to start.
Frankly speaking, maybe a Royal Commission into the legal system which makes it more expensive to pursue your legal rights than to forgo them would be a better use of taxpayer dollars.
Unfortunately that will never happen because the legal system contols the outcome of Royal Commissions.
The other good use of taxpayers money would be a Royal Commission into the medical profession and why specialist doctors are charging $500 over and above Medicare for a 15 minute consultation, whilst complaining about the inability of the Government to control medical costs, while those same specialist doctors have to decide which of their hoes they will reside in, and which Mercedes they will drive this week to get there.
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Realist1:
20 Apr 2016 12:06:31pm
yank
First I have not said we shouldn't do anything about the banks.
I reckon ASIC should be asked what are they doing as it is their job to sort them
Second why did you avoid ignore the question about the core problems ?
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william:
20 Apr 2016 11:11:01am
Well the CFMEU is bashing business - why should they not be penalised? Over 100 CFMEU louts in the courts. How many bankers?
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Skeptic:
19 Apr 2016 12:25:24pm
Geography lessons are a wonderful thing, they can give you important information such as the fact the Switzerland located somewhere in the center of Europe and therefore unlikely to be a Nordic country. The last time I checked a world map the Nordic countries were composed of Sweden, Norway and possibly also Denmark. What they have to do with the Swiss banking system is a bit of a mystery to me, so I am not sure why you are confusing that country with the ones further north.
Have a nice day.
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Rat Bag:
19 Apr 2016 1:49:14pm
You forgot Finnland.
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rockpicker:
19 Apr 2016 4:42:12pm
Step one, learn where Switzerland is. Step 2 Norway's revenue is suffering, but it has a lot of oil money stored unlike the idiots in the LNP did here. They think past three years and they don't think being a billionaire makes you a god. Yes they will have troubles settling new migrants, but then our problem has never been refugees, it has been the vast numbers of legal migrants who outnumber the refugees 10 year total by 10 fold every single year.
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Blzbob:
19 Apr 2016 5:34:18pm
"our problem has never been refugees," Tell that to the people who lived here a couple of hundred years ago.
You are correct rockpicker and if we halved our immigration rate, we could afford to take all the refugees that have been beating on our door.
Only problem would be that we would have to invest in education and training for them instead of stealing pre trained people from other impoverished countries.
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Grey:
20 Apr 2016 10:09:19am
Some interesting thoughts there Bizbob if not so connected to banking.
How you get from halving our immigration rate to affording to take all refugees is somewhat beyond my understanding but maybe you think all the banks could just cough up a heap of money for the government to use without ever having to pay it back or interest and then of course you could ask just where do you expect the banks could get the money from.
It may surprise you to know that Australia is an island with very few people and that is one reason why our industries will always struggle - just not enough people to sustain them as other product markets are far away which then involve shipping costs to countries where like products can be produced so much cheaper.
While our industries struggle, so the demand for skilled people diminishes and it could be asked just how much money ought to go into education and training when there will be limited opportunities available for that to be used.
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Lardo:
19 Apr 2016 6:16:09pm
rockpicker
The Future Fund, last count was 120 Billion, was set up by Costello. Show me a similar Labor initiative.
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Realist1:
20 Apr 2016 12:08:27pm
rockpicker and labour did what when in power...oh so both have failed is that right?
In terms of Switzerland.. I was making the points about banking, I guess I need to write more slowly for you
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DocStrange:
19 Apr 2016 10:40:35am
geroDero is spot on the money - the banking system is legalized theft and always has been. The Marx Brothers rightly made the joke 'what's robbing a bank against founding one?' a long time ago and the only thing that has changed is that the profits and the boni of the big banks and managers have shot through the roof.
High time to bring those criminals behind bars for the money they rob from the people, hospitals and schools.
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Zing:
19 Apr 2016 11:16:02am
"the banking system is legalized theft and always has been."
Banks aren't a charity.
They loan you money and expect payment. Don't like it? Don't borrow money and save up your own instead.
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FormerFormerGuardianReader:
19 Apr 2016 11:25:29am
You must be delighted then that that power is in the hands of a cartel.
With the banks you get the worst of every kind of world:
1. they have a monopoly over supply of an essential thing;
2. they operate in a massively concentrated market which means that it is almost impossible to arrive at any level of efficiency and you can forget about the market "correcting itself" if there's only about 5 players; and
3. they don't even operate on the basic principles of capitalism since they are too big to fail.
How can anybody: right, left, up or down, think that the way the banks are set up is in any way good for anything other than the banks.
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Grey:
20 Apr 2016 10:13:16am
FFGR, there may be what are known as the big four or now five who all compete with one another for their share of the market if you want to call that a Cartel.
You also need to have a look at just how many other banking and like institutions there are about that are continuing to nibble away at the Cartel's share.
I could probably come up with half a dozen without trying too hard.
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FormerFormerGuardianReader:
20 Apr 2016 12:03:05pm
What is an oligopoly?
1. There are a smaller number of players;
2. There are high barriers to entry and exist;
3. The operators have the ability to set prices;
4. The operators have the ability (indirectly or directly) to share information (if there's only 5 of you it's pretty easy to figure out what everyone is charging and doing);
5. The operators are interdependent and therefore all actions are considered by reference to those few other players.
And the result of the above is the market does not tend to compete on price and operators are capable of maintaining abnormal profits.
In economics all of these things are considered undesirable in a market. Because the market does not operate efficiently.
This is the thing that free marketers don't seem to get (or don't want to get): the free market only works if you have a large number of players competing. That's the only way it will self-correct. It does not work if you have an oligopoly or a monopoly.
When governments hand over monopolies to a few big players they are doing the complete opposite to embracing the free market. They are embracing cartels.
For many of these cartels it's too late. The damage has already been done. The market forces will naturally lead to a great deal of inefficiency which will impact consumers greatly. That means that you absolutely need the tightest regulation possible to restrain these market forces.
This is not good. It's not good for capitalism. It's not good for consumers. And it's not good for the economy.
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Stirrer:
19 Apr 2016 11:37:50am
'Don't borrow. great advice Zing- so unlike Joe Hockey who told us to 'go out borrow and spend".
If only your advice was followed we would not be ensnared in the debt trap we are in- our households would nave have a debt to income ratio- of over 180%- no housing or other 'asset 'bubbles".
Neither would we have had the 'growth' we have had over the last couple of decades- which is illusory anyway and Bank CEOs would not have their multi million dollar packages.
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Zing:
19 Apr 2016 1:13:49pm
Stirrer. You misunderstand.
My advice isn't "Don't borrow". My advice is "Don't borrow and then whinge about it".
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Sarah:
19 Apr 2016 4:26:42pm
Sure you wrote, "don't borrow money, save your own instead".
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John:
19 Apr 2016 6:02:18pm
@Zing
Borrowing is only part of it. Why are banks allowed to charge fees as a percentage of amounts? (transfer of $1000000 compared to $1 differs by just a few nanoseconds of computer time...) Why a transaction at ATM cost $2 (what is actual cost and what is greed)?
Can you *avoid* banks? NO! Just imagine if I ask my employer to pay my salary in cash (because I do not like banks and paying the fees to them)!
...and learning from the US - if the things go well - the profit is private and huge bonuses go to the geniuses in management. If things go to hell - suddenly it is the taxpayer who has to bail out the banks. If a company is too big to fail, there have to be additional responsibilities. And if the taxpayer is to intervene - then the taxpayer has to become a co-owner of the business (either to share the profits in future or to be able to sell back the share - and recover the bailout funds in future). Why this has to be just a *gift* to banksters?
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Grey:
20 Apr 2016 10:17:13am
John, I have transferred money many times, some times even internationally and whilst regardless of amount I have paid a flat fee for an international transfer, I pay no fee whatsoever for transfers within Australia.
Whatever costs of running ATMs are, banks do need to recuperate those costs and do check out all banks and see if you can find one with cheaper ATM fees.
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Steve_C:
19 Apr 2016 12:19:58pm
"Banks aren't a charity."
Indeed... They were founded upon the premise that they could keep the 'valuables' of those who felt the need for improved security, in such improved secure states.
In other words; they only existed in the first place to look after the money of account holders.
"They loan you money and expect payment."
More correctly; they loan out your money combined with the money of other account holders, and then expect (for the privilege of giving said funds to you) that you show requisite appreciation in the form of 'interest'.
So; you're sort of right whilst being wrong.
Glossing over the fact that without account holders, banks wouldn't have the funds to lend out to earn the interest in the first place is probably the most glaring of your omissions.
Whether you did so deliberately or out of politically motivated ignorance is something only you know the answer to.
Either way; it doesn't make the perception of the banks being 'right' and 'entitled' that you clearly seem to endorse, accurate or justifiable - merely deluded, ignorant and indefensible.
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Maynard:
19 Apr 2016 12:43:31pm
Their lending should backed up by 100% of capital
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Blzbob:
19 Apr 2016 5:47:19pm
I agree Maynard.
How can you lend money you don't even have, and then expect to charge a fee for doing it.
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Zing:
19 Apr 2016 1:12:13pm
Steve.
The bank acts as an intermediary between those with extra money and those who need it. They earn a fee for the service, just as any intermediary in any transaction would.
Why you don't understand this or think it qualifies as a flaw in my argument, only you can say.
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Blzbob:
19 Apr 2016 5:51:32pm
Zing the fee they charge is multiple times higher than the cost of their capital.
I don't mind them getting a commission of perhaps 15% maximum as a middle man.... but a commission of 400% ???????
Pure robbery.
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Grey:
20 Apr 2016 10:28:04am
Bizbob, " Zing the fee they charge is multiple times higher than the cost of their capital.
I don't mind them getting a commission of perhaps 15% maximum as a middle man.... but a commission of 400% ??????? "
Any business will look at a number of core issues re the running of their business.
. Cost of their services which will include all manner of things such as their plant, Bank buildings themselves, ATMs etc for banks and then of course they have employees to pay and contracts for such things like security and legalities, fees to be paid to various government organisations
. and of course tax before they see just how much profit may be made for shareholders.
. Regulations require that they have so much by way of reserves and so that amounts to what could be called dead money, a certain amount not being loaned out to earn interest.
. We should also not too easily forget that banks do not always get back money loaned out, defaulters from whom payment may never be likely.
So yep, call them a middle man if you like and make up whatever commission figure you want to but do realise that at the end of the day, their operations are looked at far more closely by auditors than would ever occur by a RC.
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Lardo:
19 Apr 2016 6:18:51pm
Zing
You're right, but I think you're wasting your time. Nobody on this site wants to hear garbage such as "profits are good for the economy" or "we're all born with a brain and a free will, so your life is up to you". Why, that's just pre-GFC thinking, neo-liberal tosh!
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Blzbob:
19 Apr 2016 7:44:48pm
And where do profits actually come from I wonder!
Do they magically manifest from pure ethereal nothingness?
Fall through a wormhole in space into our dimension?
Or do they come out of some customer or clients pocket?
Profit is the gain made by one person on a loss made by another.
Profits on their own are not good for the economy at all
Profits are only good for the economy, in so far as they are usually taxed, and that tax then goes back in to levelling up a skewed system, which is why governments like economic growth.
It isn't the size of the economy that they benefit by, but the rate at which and the volume of the money which changes hands.
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Lardo:
20 Apr 2016 9:52:37am
Bizbob
Profits come from a consumer paying another entity for a the supply of a good or service that I don't want to, or have the ability to, provide myself.
For instance, I don't like mowing my lawn so I pay a guy $50. We both entered the transaction willingly, I'm not sure what his profit margin is, but I'm sure that he makes some profit because he's not just going to do it because he likes me (nice bloke though he is though).
Likewise, I don't want to learn to be a mechanic or a plumber, or to make my own clothes, so I pay others to provide me those services. Again, we both enter into the transaction willingly, for mutual benefit.
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Steve_C:
20 Apr 2016 11:10:50am
"The bank acts as an intermediary between those with extra money and those who need it. They earn a fee for the service, just as any intermediary in any transaction would."
Ah yes; you make it sound so innocent... so 'honest' - like a matchmaker's service.
Even matchmakers don't continue charging once they've found a suitable match...
The only 'intermediaries' that spring to mind who do continue extracting 'fees' after the original agreement has been expedited are "stand-over merchants" like the Mafia - in which case your description may well carry some weight.
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Rae:
19 Apr 2016 3:37:05pm
The banks were founded to mind the gold and valuables of the elite as the bankers were such bloodthirsty bastards no one dared do wrong by them. Not even the Borgias.
Not much has changed except the banks no longer have private armies or torture so blatantly as they once did. It is a very subtle squeeze over today and you trust them at your own risk because the government really doesn't give a damn about any of us.
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android48:
19 Apr 2016 12:21:30pm
Tired, old and predictable knee jerk, adding nothing of value to the debate.
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Maynard:
19 Apr 2016 12:41:27pm
And put us all at risk for their massive leverage, not adequatly supported by capital adequacy.
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enno:
19 Apr 2016 2:14:52pm
But, Zing, if you earn money and save it up, then you put it in the bank and a bank employee steals it.
That's a very different issue to the problems that some people have repaying loans.
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Zing:
19 Apr 2016 2:47:16pm
"Zing, if you earn money and save it up, then you put it in the bank and a bank employee steals it."
Really?
Most banks actually pay you money for depositing funds with them, which they call "interest". So either you've picked the wrong bank, or you need to have a chat to ASIC.
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enno:
19 Apr 2016 4:10:22pm
Try getting asic to look into a bank employee theft. Good luck with that.
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bobrox:
19 Apr 2016 5:39:43pm
enno:
The best example of what you say correctly would be the case of the mint employee who stole well over a million dollars from all of us and got off with a non-custodial slap on the wrist.
One law for white collar crime ,another for everyone else.
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Grey:
20 Apr 2016 10:38:16am
" The best example of what you say correctly would be the case of the mint employee who stole well over a million dollars from all of us and got off with a non-custodial slap on the wrist.
One law for white collar crime ,another for everyone else. "
Seems that was a matter for the Mint and our Justice system bobrox, so which one would you like a RC into or look, get onto Billy boy about it will you.
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Grey:
20 Apr 2016 10:40:10am
" Try getting asic to look into a bank employee theft. Good luck with that. "
enno, I would hope that ASIC would not be wasting their time and taxpayers money with something like that when it ought to be a matter for some part of our justice system to deal with.
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Blzbob:
19 Apr 2016 5:58:16pm
Zing
The banks will pay you interest on you money that they are "looking after for you", at a rate of less than 50% of the inflation rate.
They will then loan that money to someone at a rate of at least double the inflation rate.
Now think about it and tell me, ... what do you reckon drives inflation?
The answer is greed, and who do you reckon is exercising that greed?
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rastos:
19 Apr 2016 6:25:16pm
Funny that I have to put my money in a bank before I can use it, earn interest and then pay tax on it. I cant claim any Tax Deduction for being a money lender. It would be interesting to see a Banks Tax claim, that is if they put one in.
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Bibbicton:
19 Apr 2016 3:13:32pm
The banking system in a purely fiat money society (which we have today) is not what most people think it is. Banks do not get most of their money to lend from deposits. They get it from monetary expansion which is facilitared by the governemnt a nd the Reserve bank which is not technically a bank as we know it.
Most of banks' income comes from multiplication of loans which is not bad in itself but a very significant amount of other money comes from the Reserve bank in a process of ceation of new money to fund the fedral defict with the cooperation of the Federal government which involves the sale of treasuries to collect money from the private sector.
Those treasury bonds are created out of thin air and the interest burden on the is paid by the taxpayer on whom the financial burden ultimately falls.
A private company or an individual is not legally allowed to operate like this since it is what is regarded as fraud but a federal government is allowed to by present laws.
It is the Federal government system that supports banks. that was so evident to everyone when the federal government guaranted the baks against failure during the GFC. It was done at the tax payer's expense
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Rae:
19 Apr 2016 3:31:11pm
And here I am really missing the reward of that cash in the envelope and more so the cheque the publican cashed once a fortnight while we workers had a few beers and a few games of pool and a bistro meal.
Once the banks got our paychecks it was a free for all on the fees and charges, believe it or not they actually paid to get us to deposit our pay with them before that little scam.
We have bent over ever time the business community whimpered and it is time to pay all that forward.
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UnKnown:
19 Apr 2016 9:42:23pm
Once the banks got our paychecks it was a free for all on the fees and charges.
The cry of "If you are unhappy with your bank, go somewhere else" is garbage. One- they are all the same and two- the pay office is not going to be happy when you tell them to change where your pay is to go.
You can not change easily, too many things have to be changed and so the bankers just laugh at you.
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rastos:
19 Apr 2016 6:19:48pm
As most of us are on a wages/ salary system our money automatically goes into a bank. This money is used by banks to lend to people. They don't borrow all their money from overseas.
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Tas Yeti:
19 Apr 2016 11:24:16am
I agree with you Andrew. The people should be put before the 'profits', and that will lead to a healthier and more prosperous society.
Governance is not about running a business (alone), its supposed to be closer to shepherding for the well-being of the 'flock'. If you find some of your flock are getting fat while the majority are beginning to fade away, the shepherd should intervene and ensure a 'fair' share of grass is available for all.
Protecting the fat sheep, with the belief that keeping their stomachs full will some-how trickle down to benefit those less nourished is stupid.
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Tas Yeti:
19 Apr 2016 11:49:57am
My analogy doesn't go far enough though.
I'm not sure how to address a situation where the fat sheep turn out to be wolves (poorly disguised), and use the shepherd as a front man to continue their devouring of the hapless sheep.
Soon enough, the wolves will be left with only mangy, diseased sheep to fill their ever expanding waistlines. I guess they will then just move to another country where the pickings are better.
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Andrew Thomas:
19 Apr 2016 12:00:14pm
"Protecting the fat sheep, with the belief that keeping their stomachs full will some-how trickle down to benefit those less nourished is stupid."
Agreed Tas Yeti,
History is full of examples of where such approaches have led to social implosion. There is nothing wrong with working hard, taking risks and earning a good living. But when we get to a place where the profits are privatised and the risks are socialized, it is only a matter of time before history repeats itself yet again.
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Kevin:
19 Apr 2016 10:23:25am
Interesting day 1 of the election campaign from the ABC. Their two headline political articles are one from the IPA and the other from the Liberal and in particular, Turnbull loving Annabel Crabbe who goes so far as to lie about Labor re-introducing a carbon price in her bias piece of dribble.
I hope this is not an indicator of the standard we can expect from the ABC during this election??
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TombeiTheMist:
19 Apr 2016 11:35:42am
The LNP have dug a very nice hole for themselves. To have journos dig them out because "we love Malcolm" will only happen if voters insist on NOT getting to grips with the real issues. Sorry but the libs do not deserve a free ride. They have been, by any measure a very ordinary govt. The truckies friend???.... Please.....
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BkDw:
19 Apr 2016 1:29:03pm
The Real Issues. There are two.
Ageing Population and Climate Change.
In terms of the Banking debate, the Banks need regulatory encouragement to work with the rest of Australian Society towards improved outcomes for the two big issues.
There are opportunities available.
The aspirations of post boomers have blown up a property bubble with enormous household debt as a consequence. However, the Ageing part of the Ageing population are enjoying untold wealth as a result. Instead of our banks, economists and accountants working feverishly at the latest swindle and tax dodge, they might be encouraged by the right regulatory climate to find some social wins in the property and retirement income sphere.
Old money invested in Fossil Fuels has locked our country into a dinosaur economy championed by our donation and favour fed politicians. Banks have a big part to play in financing responsible long term investment. There have been suggestions around remuneration for bankers related to long term performance. There will be regulatory opportunities to move Australia into a sustainable future. Experts are suggesting that a renewable energy future is already cheaper than the current energy model. Peabody is bankrupt and where there is smoke there is fire.
The really unfortunate part of our banking situation in Australia is that profit for bank shareholders has been created by brokering foreign capital to debt addicted Australians. Australians have not been smart enough to realise that the process has sucked the cream of the mining boom into the coffers of the mega rich.
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bide and fecht:
19 Apr 2016 11:38:43am
Take one step back, I expect more from our political parties.
Don't shoot the messenger.
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Kevin:
19 Apr 2016 12:16:31pm
It has been decades since the Australian media have been the messenger. This is just one of many myths in Australian politics, all disproven by the facts, such as:
The coalition are better economic managers
The coalition are better on national security
The public vote for a PM and that PM has power to chose the direction of the government.
etc.
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Politically Incorrect:
19 Apr 2016 10:25:46am
Indeed, the banking execs that caused the GFC under a non-corrupt system would be in jail.
But countries like Australia & America have adopted a new Golden Rule: whoever has the gold makes the rules.
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Gary:
19 Apr 2016 11:19:34am
Come now - all they need is a good stern talking to by Malcolm the merciless.
And he's done that - so it's all good.
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DocStrange:
19 Apr 2016 11:23:06am
It's called democratic representation in the West: 'One dollar - one vote', just as they demanded in the Boston Tea Party of old...
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Stubby:
19 Apr 2016 1:50:53pm
and here I always thought the Boston Tea-partiers wanted "no taxation without representation"
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DocStrange:
19 Apr 2016 4:21:59pm
Well, that's how it started of course as you rightly point out - but this is what it has become...
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deluded_jim:
19 Apr 2016 10:43:38am
I'm was confused about what Berg's view actually was here too.
He talks about enforceable undertakings as being good because while they are a negotiation, they also lead to greater access and transparency, but then he says:
"Now, in my view, this sort of regulatory practice is bad policy. Firms should know exactly what is lawful and what is unlawful. Regulation shouldn't be a matter of discretion - it should be clear and unambiguous. Uncertainty is bad for the economy. But it's bad politics, too. Recall that old aphorism: not only must justice be done, it must also be seen to be done. Regulatory agencies spend their life negotiating in private with firms rather than publicly enforcing clear rules in court. No wonder voters think those agencies are a bit hopeless."
So, I can appreciate why you say you disagree with him, but in the wash up, I think your comments are agreeing with him more than they are disagreeing.
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sdrawkcaB:
19 Apr 2016 3:36:49pm
"I'm was confused about what Berg's view actually was here too."
It was not a view but a task. The task was to protect their donors - in this case the banks.
The means was to belittle people who are sitting on the fence by snidely labelling them as populist.
Next, I would not get too carried away with Berg's 'logic'. Berg's common tactic is to make some specious declaration and then carry is if that statement is immutable law. The result is his premise is invariably wrong which means his whole article becomes based on fantasy.
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Jsck44:
19 Apr 2016 10:47:55am
I think you missed the point Gero. I thought Chris Berg was arguing against "negotiated settlements" and was pro court hearings. Or that's the way I interpreted it.
I myself am wildly against "negotiated settlements" also, and for two reasons which I believe are pertinent.
1. If someone has broken the law, then that should be tested in a court of law. Not by some nincompoop like Allan Fels. And they should suffer the consequences of such law breaking.
2. I refer to the State of New York which has now made an art form out of blackmailing entities through the Attorney General. He may think he is God's answer to justice. I think he is just as immoral as his targets in demanding money under threat. And the last thing I want to see is ASIC going down THAT particular track.
As to the rest, anyone using banks for services other than banking only has themselves to blame. Personally I never do. Outcome ? I am happy with my bank.
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GeroDero:
19 Apr 2016 12:50:48pm
I gave up on the banks about 9 years ago. I use a credit union, which is able to provide me with all the services of a bank with much less stress and distaste.
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daniel:
19 Apr 2016 7:20:52pm
It does not just provide the services of a bank it IS a bank by definition! Besides which most are credit unions in name only. Leaving aside the fact most are also owned or have been fully integrated into one of the larger banks.
Truthfully the service is usually better, but at the end of the day they are little more than banks with lower liquidity and greater risk exposure .
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JaneS:
19 Apr 2016 12:57:51pm
@Jsck44
You may have mis-read the article; Allan Fels was complaining that ASIC, with which he hasn't been associated for some time, is entering into too many negotiated agreements & should be taking more firms to court.
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FormerFormerGuardianReader:
19 Apr 2016 10:54:35am
I am in two minds about a Royal Commission.
The problem with Royal Commissions for anything other than very serious public issues such as child abuse, is that they are a massive distraction.
And the good thing about a massive distraction is that the people who are responsible for the various issues which gave rise to an enquiry get to bide their time, avoid responsibility and often just walk after going through a little bit of awkwardness in the stand.
However you make an interesting point. The thing is the Royal Commission maybe should not be about the banks (who should be regulated) but about the regulators who are not regulating.
Now that could get very awkward!
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Filz:
19 Apr 2016 11:24:58am
I'm more than sympathetic to your viewpoint, but you have to look at this situation as "horses for courses".
Where ASIC discover that a company, through its director(s), has breached the Corporations Law, they can only act on the evidence available. Let's assume in one case, that it's a minor breach. The sort of monetary value breach that a Magistrates Court would hear if it was a small debt. It's pointless involving lawyers and court costs over this. If an enforceable undertaking can be negotiated and a fine paid, the matter gets resolved and hopefully, the company keeps its corporate nose clean in the future.
In the case of larger matters, worthy of deep and penetrating examination, ASIC do fall down and the reasons for that are many and varied. A visit to their website would certainly help you, as it lists recent court cases, banned directors and so on. So Mr Berg's assertion in that ASIC operates in secret is incorrect.
With reference to the GFC and US prosecutions, the answer here is relatively simple. After the dust settled, a team of prosecuting lawyers was assembled with a view to gaoling wrongdoers, but cases were beset with delays and legal obfuscations. It wasn't helped by the fact that the prosecutors had never had to tackle anything like this before in their lifetimes. They managed to secure ONE conviction attracting a gaol term, that being for an analyst who had worked for Credit Suisse. He was sentenced to 30 months gaol, but given the fact he was previously earning $US7 million a year, his biggest problem was how to spend his gaol time.
The prosecutors then decided that fines were the way to go and to date, some $US31 billion has been recovered, with many cases ongoing.
Sometimes it's better to go for an achievable goal, rather than one that's unattainable.
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GeroDero:
19 Apr 2016 12:53:35pm
Trouble is, those fines are ultimately paid by the company shareholders, when they should be recovered from corporate managers' personal accounts, and I especially include the board of directors in the term "corporate managers"!
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Filz:
19 Apr 2016 1:37:26pm
Not strictly true Gero. A recent settlement was obtained in the US against Goldman Sachs in January 2016, whereby they pay $US5 billion for their part in the sub-prime mortgage scam. The firm will pay and it will reduce Goldman Sachs' profit (for one financial quarter only - this is chickenfeed to them). The shareholders will suffer a one-off hit to profits, but likely that loss will be made up over the ensuing 9-12 months.
The fine is totally out of proportion to Goldman Sachs' involvement in the GFC, the fact that US taxpayers had to bail them out and the obscene profits they continue to make.
In an "ideal world", I would have not bailed any of the US banks out, they should have been allowed to fail. The directors of each concern involved in the GFC fraud should have been barred for life from being office-bearers in anything and they should have been stripped of their own and their families' personal wealth. What they displayed in the lead-up to the GFC was outright fraud, criminality and manipulation of the financial markets.
Unfortunately, we don't live in an ideal world.
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Nell:
19 Apr 2016 3:32:38pm
Right or wrong the ATO takes a similar approach re risk managing the legal expenses. These conniving corporates are very cashed up.
Hence the naming, shaming and making consumers averse, divestment etc are far more powerful social levers to bring them into line with social expectations. Also, exposing the mutually beneficial i.e. symbiotic networks between these corporate executives and their political puppets is necessary.
Just look at the effectiveness of the limited exposures of the Panama papers re Iceland, David Cameron.
Look at the changing shareholder culture re divestment of companies engaged in tax evasion, slavery, environmental destruction.
The tiger is being tamed.
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Rat Bag:
19 Apr 2016 1:48:06pm
Gero, I have read Chris' essay three times and I still can't understand what is the nature of your complaint. You and Chris seem to be on the same page.
Chris is criticising negotiated settlements in the same way you are. He agrees that negotiated settlement lead to a waffle fest that allows corporations to escape clear regulation by avoiding court. He agrees it is not transparent and stops the public from observing legal justice.
Where exactly do you have a problem with Chris' views?
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paulinadelaide:
19 Apr 2016 1:57:16pm
GeroDero: Stupidity is not against the law. It's clear most of these companies didn''t break the law. If they had I'm sure the investigators in the US would have prosecuted.
There have been civil suits, but from my viewpoint that was about stupid investors giving money to stupid financiers and the investors shouldn't have won the cases.
All bankers everywhere are regulated. The GFC occurred under the noses of those regulators. Hardly an advertisement for regulation.
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The Pav:
19 Apr 2016 2:41:21pm
One issue that is missed in the argument about the banks is the enormous harm done by their huge profits which results in a transfer of wealth from business to the banks thus limiting capital for growth.
This capital is then misdirected to investment housing which is hardly the way to develop the agile technologically superior economy. Given the bank's risk averse approach to lending then capital for venture projects is limited thus inhibiting growth.
Try being a start up and getting growth funding from an australian bank. No chance
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Bibbicton:
19 Apr 2016 2:57:41pm
Yes - You are so right. there should be no difference between what a normal person has to comply with in respect to law and a head of some corporation but Not only that. There should be no distinction when a politician has lied to get elected and then not instituted what they said thay would or not disclosed what their closed meetings discussed on commercial matters and oter financial matters.
Politicians are mosty the guilty ones when it comes to fraud and manipulation on a grand scale. Yet they have rules about what they secretly discuss and conspire which protect them and immunity from prosecution when they make promises thay have not kept.
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firthy:
19 Apr 2016 5:01:38pm
I can see why your annoyed and to a fair degree I agree with your complaint about corporate crooks not being dealt with properly. But your wrong in having a go at Berg here - in this article he bemoans the deals that have prevented the prosecution of individuals who have behaved in a criminal manner because those deals aren't transparent.
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nevvv :
19 Apr 2016 10:01:00am
I think the point is that should the too big to fail banks get into trouble they will be calling for the tax payer to bail them out. So it wouldn't hurt to get an idea of the tricks they get up to fleecing the tax payer before that time.
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UnKnown:
19 Apr 2016 10:01:55pm
If when the government bails out a bank, shouldn't the 'government', that is the people, become major shareholders.
The banks can pay out shares to the government until they can buy out the government, with interest.
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Mark D.:
19 Apr 2016 10:03:32am
Nobody actually wants an RC.
Not Labor, not the LNP.
It is bad for confidence and we need confidence in the financial sector.
But the number, frequency and ... rip off's are such that something has to be done.
Labor has committed to something - though I still do not know what. The parameters of the RC have not been announced.
If they do it right, they will get changes.
It could be "removing the cross services like insurance and the like from banks."
It could be different legislation.
The possibilities are endless - and it all depends on the fine print of what the RC is given as its objectives.
It might even be to set up a new bank - "to keep the bastards honest."
Oh - we tried that (LNP original policy) - it worked well until it was sold off - and now we have a mess.
Shrug.
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Falcon:
19 Apr 2016 10:40:36am
The confidence in the banking system is already gone. They damaged it themselves, that's why there is need for a Royal Commission, to restore that confidence.
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Bibbicton:
19 Apr 2016 3:31:08pm
As If a "royal commission" wil make any useful contribution. It wil be stuck with frames of reference that exclude any fnding on the real issues at stake. All that will happen is banks may be regulated and that wil be worse than it is now for any customers.
Most people's perceptions of what banks do or how the monetary system operates is totally naive since they have never bothered to find out how they operate but think they do by watching the TV news or listening to politicians' too often naive comments which pander to constituent's emotions..
Most of the people who are appopinted to the costly "royal commission' will be political appointees who either will be steered in a way to avoid the relevant issues or financially inept enough to not even grasp the concepts of what is happening.
The outcome wil be that banks are more heavily regulated and the customers will wear the cost of new regulations since in the end you cannot regulate for creation of wealth.
It will be a total waste of time and the taxpayer will again be the sucker who pays for thsoe regulations and the cost of the commisiion. After all you don't expect the government to pay and the banks must pass on their costs to customers.
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UnKnown:
19 Apr 2016 10:13:12pm
"Most of the people who are appointed to the costly "royal commission' will be political appointees who either will be steered in a way to avoid the relevant issues...."
You just described Tony's attack on the unions. When the bloke in charge was busted doing a lib fund raiser, he was able to rule that he didn't do anything wrong/ that it wasn't relevant.
We don't want an attack just on the banks or just on the union, we want the whole business system cleaned up. A union is just another business, it's business is protecting the workers.
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Dean:
19 Apr 2016 11:30:34am
There's no reason why the government can't start a new bank at any time. Create a commercial branch of the RBA and provide conservative banking products.
Wait until the LNP take power in both houses and sell it off, then when you get back in power, start another one. The Government could create a bank to sell every second election cycle. It could create billions.
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TombeiTheMist:
19 Apr 2016 11:47:33am
If we seriously pursued perceived wrong doers via an independent regulatory body none of it would be needed (assuming it is properly funded). The regulator currently is no such beast. In a p@#$!@g competition over wrong doing, irregularities and or breaches of the law I am not so sure unions would win by a straight. I have been in a union for 42 years and so far in my life I have had far more of a problem with businesses - insurance, consumer law etc. Bet it's the same for many. White collar crime? No such beast according to Malcolm. If it is it's just that is not yet house trained.
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jockstrap:
19 Apr 2016 10:05:01am
Hate the Banks so much I have not dealt with them for 21 yrs,
it's Building Societities for Company and personal financial services.
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DocStrange:
19 Apr 2016 10:46:06am
Good on you jockstrap, until we put our money where our mouth is the big banks will continue to bleed us dry with lofty promises of our own home in the future that really only finances the many mansions of their managers and shareholders.
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Steve_C:
19 Apr 2016 12:34:58pm
Ahhh - hate to point this out Jockie... (well maybe not!! :-) ) but I'm pretty well more than certain that there isn't a (modern/current) "Building Society/Community Bank" that isn't 'underwritten' by one of the major banks.
They tend to do it by the old 'octopus' methodology... i.e. You start up your local Building Society/Community Bank, and until you achieve the target number of account holders/available funds to 'self support', you're founding 'committee' enters into a "strategic alliance" with an already established Building Society/Community Bank, which has in turn strategic alliances with other Building Societies/Community Banks and or the big banks.
I watched that happen here in the Blue Mountains a few years ago... All good intentions and all. Just that in the end, the 'comfort' of knowing "you're not associated with the big banks" is merely an illusion.
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jockstrap:
19 Apr 2016 1:42:19pm
Hi Steve, Pretty sure the Newcastle Permanent is free from bank interference
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awake:
19 Apr 2016 10:25:38am
Hating banks is part of Australian culture - well that is an amazing idea. Of course the banks had nothing to do with the GFC, interest rate rigging, zombie financial advice for customers, strange cultural tendencies and all round unmitigated greed.
Obscene salaries for upper management, stuff all for tellers and the other plebs. Actually get rid of all lower level staff and use robots, so said at a high level banking convention.
Unions deserved their smack around the head, but the GFC where millions of people lost their homes, incomes, marriages, cars, cash - nothing happened. Just let them rip off same as before - funny old world we live in.
I hope Chris and IPA members never have to face any of the above mentioned terrors.
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Alfie:
19 Apr 2016 11:15:59am
"Hating banks is part of Australian culture"
Not at all. Only predominantly by those of left (who despise anyone with more money than them).
As a shareholder and someone who actually supports a strong Australian economy, I am delighted with the way our banking sector is performing.
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Stirrer:
19 Apr 2016 11:29:21am
All recipients of the proceeds of crime i.e legal theft are delighted.
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whogoesthere:
19 Apr 2016 11:59:19am
and those on the right despise anyone with less many than them.
Do you really see any point in these useless, silly, stupid generalisations ?.
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Steve_C:
19 Apr 2016 1:01:54pm
"As a shareholder and someone who actually supports a strong Australian economy".... I am appalled with the way our banking sector is performing.
You see, as an account holder: I too am a shareholder.
I also have pride in the achievements that our nation has made, economically, socially and scientifically to name just a few of the fields of endeavour that I know Australia and Australians have 'led the way'...
However: I comprehend that hatred of something like the banks wells from the sense of inequity that the ongoing reduction/s in interest paid to the accounts of 'ordinary' account holders (which form the backbone of the "assets" that banks leverage when determining their own worth, because without 'ordinary account holders' there wouldn't be the bank in the first place) feel when they are insulted even further by the imposition of "charges" for the simple act of handing YOUR money over to the bank and then being charged again when you decide to take YOUR money out!!!
I dare say you might appreciate the hatred more via this analogy... Imagine you've got a brother who tells you he can keep your toys safe. So you give your toys to him.
Then one day he say to you; "You must let me give your toys to my friends. They promise to let you play with their toys for a little while in return - OK?" So you say "OK!"
Then the story changes to "My friends have broken your toys (tantamount to defaulting for instance!) and you have to give me some new toys for them to play with, otherwise you won't be given any time playing with theirs!" So you go ahead and trust your bro...
Then any time you had playing with your bro's friend's toys disappears, you keep on supplying toys for them to play with, and they start expecting you to hand over lollies as well!!!
You go to Mum and Dad, and chuck a spaz! They give you a slap and tell you to "grow up"!!
Do you still love your Bro like you appear to love the banks?
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Stubby:
19 Apr 2016 1:53:21pm
"Actually get rid of all lower level staff and use robots"
Ahh, the benefits of a high minimum wage. McDonalds is doing the same thing.
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sdrawkcaB:
19 Apr 2016 3:54:18pm
High minimum wage - seriously?
$18 an hour - 40 hours a week - $635 a week net.
Average rent for a flat is $460 so $185 left.
After food and basic expenses I imagine they would have $5 remaining for a weekly treat - a packet of Twisties perhaps.
What happens now is about 3 million people have been taken out of the part of the economy that relies on people having disposable income. It's why the whole thing tanks when mining catches the sniffles. People do not having money to waste of frivolous junk and it's that junk that keeps the wheels turning.
So apparently the answer to that is even less money so they can' t live in proper housing but in slums. If you want a living example of an unliveable minimum wage then try the bad side of any American city...and good luck with emerging without someone sticking a knife in you for your sneekers.
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Left of Centre:
19 Apr 2016 7:08:01pm
"So apparently the answer to that is even less money so they can' t live in proper housing but in slums."
No the answer was the give them credit cards and easy access to borrowed money.
Then you get a whole bunch of these various debts and mortgages and you bundle them up and sell them to merchant bankers in financial products that no-one can really explain or understand.
Everyone wins!
What can go wrong?
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Slow Sometimes:
20 Apr 2016 6:28:41am
The GFC wasn't caused by the banks. Check the timelines. The GFC was because the banks ignored the REAL economy, ie people losing jobs, not paying mortgages, defaulting on home loans, economy under performing.
When they woke up, the GFC happened, which made things worse.
Of course there is bad behaviours, within any business, by both management and staff, all of which should know better.
In analysing any specific event, remember action, reaction, inaction. they all play a part. The GFC was a reaction to inaction.
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Tabanus:
19 Apr 2016 10:25:50am
I think Mr Berg has it wrong.
I do not want a Royal Commission to force banks to do anything: it has no power to do so anyway.
What I want is for the culture of the big banks to be exposed to all: to show publically what bastardry they will endorse to ensure evergrowing profit increases. Not evergrowing profits: that could be accepted. But as is clear it is the rate of increase that is now the term of measurement.
Unfortunately a Royal Commission is the only way to get the dirty laundry, the unmitigated greed and contempt that govern the business practices of the banks, into the open.
ASIC cannot do it: it has been crippled and has found anyway that fighting opponents with regiments of QCs and bottomless taxpayer subsidised funds to frustrate and delay attempts to halt their depredations is not an effective method of fixing the problem.
There is no point fixing a particular scheme to rob and defraud the public when another scheme will be created within weeks.
We need to change the culture, and the way to do that is to publically humiliate those responsible for promoting behaviour that encourages and rewards such behaviour. A few million in fines is nothing: being recognised as the person who had to publically confess that s/he endorsed unethical and probably illegal activity is far more effective. To admit that the "best" employees were those who ripped off the most, who came up with the most deceptive or blatantly corrupt methods to increase profits. That "customer service" was a joke and that any staff member who thought it important would be viewed with suspicion.
If we had to have a Royal Commission to investigate those relatively few who used institutions to prey on vulnerable children, because the courts were not an effective tool, then I see no problem with using an RC to expose a just as deep seated and evil presence that preyed on the vulnerable through our financial systems.
As a simple example, I would love to see a CEO explain to a RC why his/her bank charged my daughter, who at the time earned about $300 per week, $50 for being overdrawn. When she complained that the money was in her account: that her wages went in the day that the money was withdrawn, she was politely informed that all deductions were made before credits were applied. That was "bank practice". So she was overdrawn before the money went in. Not in time, both were at the stroke of midnight, but in the order in which the transactions were processed.
So a young girl is robbed of a day's pay and the bank pockets $50 to cover the trouble to which they were put: about a nano-second of computer time.
I would love to see a QC assisting the RC grill a CEO about the ethics of such a policy.
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David:
19 Apr 2016 2:41:21pm
Because not all bank transactions occur at exactly the same time, and because any regular transactions, such as your daughter's debit, are set up on the basis that the funds have to be clear, in the account, on the day BEFORE they're due, as the debits will be drawn first thing so that the money can be sent on to where it's supposed to go, because if that didn't happen, then the people who are owed the money would be complaining.
This is all spelt out CLEARLY when you set up any regular or scheduled payment.
Your daughter's salary, coming from somewhere else, will make its way into the account at some stage during the day via one of the regular interbank transfers and will be too late to cover the debit, which has already gone.
You don't need a bank CEO to explain that to you - you just need to read the information that's put in front of you and understand it. Or if you can't do that, then the lowliest of call centre employees could have explained it to your daughter.
Furthermore, the standard fee for overdrawing your account via a direct debit is from $0 to $10 on all major bank's basic transaction accounts.
So, in a nutshell, you're making it up because as a regular Drum contributor, you feel a duty to complain about whatever's being complained about today.
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Tabanus:
19 Apr 2016 4:33:59pm
Dear David
You may believe I am making it up, but it is certainly true. And I have seen the arguments about the amount of time it takes for a bank to "clear" a transaction. It is rubbish.
I rec'd a large cheque from the UK once and was told it would take in excess of 2 weeks to clear. During which time I would not receive interest. On top of paying a huge amount for the privilege of having the bank convert to A$. All this despite having several accounts with the bank, the cheque being from a large legal firm and having a perfect credit rating.
It would have been cheaper and quicker for me to fly to the UK, cancel the cheque, pick up the cash and fly home.
When I pointed out that withdrawals from any bank were immediate, but that all banks insisted that it could be days for credits to be acknowledged and queried who obtained the benefit of all the funds in transit, I was met with silence.
You may believe the guff put out by banks to justify their depredations, but please use common sense.
Does it seem sensible to you that you charge someone a large amount for doing nothing? When funds are there, when anyone, even a software program, could easily see a pattern of regular deposits, all of which have been validated. You seem to think that charging a person a huge amount (about a week's disposable income to my daughter) because you can is a good thing. I beg to differ.
And I accept that recently banks have sharply reduced the amounts they charge for failed transactions. That at least is partly the result of court cases that showed that such transactions cost the banks fractions of a cent. It was and is pure profit.
PS My daughter's pay was placed in her account by her employer: she had nothing to do with it. She had arranged for a debit to hit the account the day the money went in. In her foolishness, she thought that the fact her wages were sitting there entitled her to draw on them. Of course she had to be punished for thinking that way, and severely. It could not be expected that the bank let people think that they ran a service for customers. Imagine if all business worked that way: sorry, you can't take the groceries as we don't know if the bank will honour this bank note.
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Zing:
19 Apr 2016 5:30:36pm
"Imagine if all business worked that way"
They do.
If your daughter used a card with no funds and no overdraw services, the transaction would be declined. She can tell the shop that her paycheque will get deposited in her account this afternoon, but why would they take her word for it?
If her paycheque hasn't been processed, it hasn't been processed. And the bank can't assume her paycheque will clear until it does. A line was drawn and she ended up on the wrong side of it. That's life.
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Tabanus:
19 Apr 2016 7:06:23pm
Dear Zing
You have missed the point.
The funds were processed immediately after the debit claim was knocked back.
It was not a matter of the funds not being in the account: it was a matter of the order in which the transactions were processed.
The debits were processed first, then the credits.
(Hope I got that right - banks treat credits and debits the reverse way to everyone else).
So the funds were processed, taken from her employer's account, deposited in her account. The funds were there: the bank pretended they were not as it allowed them to make a quick, no cost, profit.
And in any case, as I pointed out, all currency transactions are carried out on the basis that a bank will at some later point accept the currency tendered to the seller. So the shop could theoretically tell you that the goods/service would be provided once someone had run down to the bank to present the bank note.
In reality, they accept it will be acknowledged. Unfortunately, banks are allowed to pretend that reality does not apply to them, and to profit from it.
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Slow Sometimes:
20 Apr 2016 6:39:53am
Lesson learnt - Direct debits are not something that should be lightly entered into. Be aware of clearance times within the bank, and plan accordingly.
After all, if your daughter was paid by cheque, she would have to take it to the bank, wait, while they checked the funds available, and then go pay cash to meet her regular obligation. How much is her time worth ? The bank can do it automatically, but if you stuff up the timing, its your fault.
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Left of Centre:
20 Apr 2016 12:58:13pm
It's all about relative bargaining power. The objective reality is commercial reality.
If your daughter held a multi-million dollar account with the bank, one phone call to her personal bank manager (who would have standing instructions that the phone cannot ring more than 3 times) and that $50 fee would have been happily waived.
The reality is that the bank can (and does) waive its policies and contractual terms as it sees fit. The commercial reality is it is more likely to do so for certain customers. e.g. the wealthy ones.
While it is probably trite to say that your daughter ought to manage her affairs better to prevent this from occurring, it is perhaps worthy to note the tenor of bank advertising these days.
Is your daughter with the NAB? Isn't the slogan: "More give, less take"?
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Inspector Poirot:
19 Apr 2016 10:25:54am
I could never understand why the media continues with this notion with everyone hating the banks. I, for one, have nothing but the best to say about our banks. If it wasn't for the bank, I could never afford my house or any of my investments. Bank gives you money, you pay the interest on your loan and it is up to you how well you manage that money. The banks provide you with the options and opportunities and it is up to the individual person how they use such opportunities.
I think that the people who claim to hate the banks should have a long and hard look at their own financial management. These are mostly the people who have no financial discipline and continue to spend more than they can afford. Instead of having to reconsider their expenditure, which is hard, and reduce their expenditure to be in tune withe their earnings, which requires strong financial discipline, they get themselves in a dire financial trouble. Instead of admitting that the entire problem is of their own doing and try to take control of their finances, they take the easy option - transfer the blame onto someone else. Why not blame the banks?!
Unfortunately, while putting blame onto someone else may make you feel good, it does nothing to your financial situation.
To all of you 'bank haters' I suggest; Sort out your financial situation first and you will be able to 'use the banks' rather than let the banks use you.
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Dove:
19 Apr 2016 11:07:11am
It's not the banks that are to blame.
It's the politicians and political parties that have passed law after law to enable financial institutions to squeeze out competition and operate under a regulatory framework of their own choosing.
Labor has no intention of restructuring the out-of-control industry. At the most they'll hold a show-commission and then makes some changes around fees and charges. Nickel and dime stuff whilst the institutionalised corruption and in-built distortion of the economy stays in place.
Banks don't pass laws, parliaments do. And ours won't. So don't hate profit driven enterprises for being driven to make a profit. Blame those that make the rules and who profit directly from those rules
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Darcy:
19 Apr 2016 12:43:15pm
I can help you out here and give you a clue why a lot of us hate the banks. Have you ever heard of the GFC??? If not do some homework and I think you may find you have made an ignorant judgement.
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Tabanus:
19 Apr 2016 1:14:29pm
Dear Inspector Poirot
My loathing for the behaviour of the major banks (not hatred of the institution of banks as such) is based not on anything they have done to me personally.
I was lucky enough to be born intelligent and in circumstances where I obtained a good education. I earned good money and was able to deal with banks, if not as an equal, at least with some idea of what was going on and the ability to defend myself.
What I despise about the banks is their abuse of the power and position they hold in society and the economy to extort more and more from the system, particularly the weak and the vulnerable.
There is no magic in banking, no requirement for tremendous skill or mental agility. Even our current PM was able to skim millions out of others for being nothing more than an intermediary. Banks do not make anything, nor do they really facilitate anything.
In the past, one could have said they weighed risk, judged future prospects etc. Now they just calculate the statistics and whether they can recoup losses from those who pose little or no risk. And how much they can squeeze or trick from those with little power or ability to complain to those who hold power.
They glory in the knowledge that they cannot be allowed to fail. We have politicians even now claiming that to criticise a bank is to wantonly damage the economy. One must simply pay up in silence. Anyone who asks "Why?" is considered a troublemaker at best, an anarchist at worst.
I have never been in financial trouble, am probably rich by some standards (like everyone, I am comfortable, you are wealthy, he is obscenely rich). So I hardly fall into the category of some person blaming "the banks" for my current position.
I blame them for their role in creating a split society of haves and have nots.
PS Should it not be "Inspector Poirot (ret)"? I am sure that in the book in which he was introduced (A Mysterious Affair at Styles) Agatha Christie described him as having retired from the Belgian police force.
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GRAYAM:
19 Apr 2016 3:29:27pm
Maybe the media continues with this notion to deflect attention away from the continuous ranking of journalists above bankers in the most contemptible polls.
Banks / Media; its a close call with me.
Also, if you joined the Amish religion you could acquire a house without going to the banks.
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PN:
19 Apr 2016 10:27:12am
When a subsidiary of the Reverse Bank of Australia involves in corruption conducts here and overseas you know that there are problem with the banking industry in Australia.
If it is illegal to offer or to take bribes in Australia then it is illegal for Australia firms to do so overseas as well.
Those Australian banks that operate in Asian countries especially the countries with low CPI that is corruption perception index need to come clean with their dealing with officials in those countries.
Some have been exposed by the ABC and The Ages investigative journalists but many are not yet to be held accountable for their corrupted conducts overseas.
Let have a Royal Commission into the banking system in Australia.
Those good and honest banks have nothing to fear of this RC, haven't they?
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enno:
19 Apr 2016 4:28:28pm
That scam, outrageous though it may be, had nothing to do with actual banking.
A specialised printing company, which developed the technology for plastic banknotes, was trying to drum up business overseas, and doing what businesses often have to do overseas, unfortunately.
The printing company was owned by the reserve bank.
A few years ago, you could be proud to be an Australian overseas and show off our colourful high-tech banknotes. It's not like anything else can be made and exported from Australia any more.
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PN:
19 Apr 2016 9:02:17pm
Fair comment!
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Alpo:
19 Apr 2016 10:27:58am
First, the banks are not necessary: The Government creates the money we need and could distribute it directly to investors through a system of Government institutions. It then takes the money back through taxes.
But given that we do have banks and other financial institutions, it is fundamental that we are not taken for a ride by them, as all of us often are.
Are the banks "well regulated now"?.... No! As shown by evidence.
Can we better regulate the banks by using available mechanisms (ASIC)?.... No! As shown by evidence.
What should we do then?.... Simple, organise and carry out the promised Royal Commission on Banks, and after the commission has done its thorough investigative job, we expect a list of strong recommendations that the Shorten Labor Government will be bound to implement.
After that, we will see whether the banking system improves. All the way, what IPA says is just an opinion, lost in the cacophony of a million other opinions.
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Les P Delescalier:
19 Apr 2016 10:33:22am
"None of these options is likely to resolve the deeper problem - that the discretionary, arms-length, ambiguous regulatory state offers nothing but uncertainty to firms and the public. No wonder voters don't have confidence in the system."
The author needs to expand his circle of friends and acquitances. Any "deeper problem" with regulatory authorities may be causing uncertainty for banking sector insiders and economic commentators.
But, I'm pretty certain that it's not at the top of wider public thinking when people's minds turns to the problems in the banking sector.
My guess is people are thinking about things like contemporary banking practices that they, and/or the people in their orbit, and/or the people they see in the media have experienced. And all the while banking execs earn salaries that are several orders larger than the incomes of ordinary people.
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Jungle Boy:
19 Apr 2016 12:50:39pm
Mr Berg's article moans about heavy regulation several times.
But if the regulation is so heavy, how could there be so many rorts, scandals and rip-offs in the financial sector?
And how could the banks be gushing with profits?
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Les P Delescalier:
19 Apr 2016 3:25:06pm
"But if the regulation is so heavy, how could there be so many rorts, scandals and rip-offs in the financial sector? And how could the banks be gushing with profits?"
Agreed - These facts don't support the author's concern.
I left the door open on concerns about our regulatory authorities in my first paragraph. ASIC is not nearly as vigorous in the execution of its responsibilities as the US SEC. This could leave those banking execs with dubious scruples thinking the authorities don't take these issues seriously.
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PN:
19 Apr 2016 10:34:04am
How are billions of dollars being brought to Australia from China and Vietnam? They aren't brought in via postal services for sure.
They are being transferred here via the banking system.
Anyone bother to check how were this massive amount of money acquired?
What if they have been stolen by corrupted officials from the notorious corrupted governments of China and Vietnam?
What if this money was acquired by illegal dealings with corrupted officials in these countries?
We can't just take the money without any regards to its origins.
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Dean:
19 Apr 2016 11:35:24am
The broader international banking system is built on raking in as much money as you can. Money has no quality, only quantity (and risk).
Don't ask don't tell is part of their culture. When managers notice that a staff member is raking in lots of loans, they don't ask about quality, they just give a bonus. When financial planners sell more products, they don't worry about customer satisfaction, they just give a bonus.
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Ted:
19 Apr 2016 10:34:21am
Berg says that hating the banks is a fundamental part of our culture. He is only a little bit right. We hate the banks for the decisions they make that affect us badly. High fees, branch closures (particularly in rural areas), loan knock backs. The underlying issue is that we feel powerless against them and as a result they don't have to do much wrong to get us off side.
Maybe the Shorten Royal Commission will throw some light on dubious practices like those adopted by the financial advice industry. If so, well and good. The rest of the stuff should already be known so if stronger regulation is really needed, just do it.
Here is something that is never raised. I have sold three houses over the last few years to people needing bank finance. On every occasion the bank has come in at the last minute to drop the price, presumably to limit their exposure. I dealt with each case differently, but on the third occasion I cancelled the sale and advised the buyer that they would be liable for re-advertising and any loss on sale. The bank caved in. We should not have had to go through this unpleasantness. It demonstrated a complete lack of respect for commercial practice which one would not normally expect. Not good enough.
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whogoesthere:
19 Apr 2016 10:51:40am
'we feel powerless against them'
But why ?. We are not forced to use them. Like a post above I haven't used the 'big four' all my adult life. I've had three mortgages and my partner has run a small business. I don't know why people feel they need to use the big four.
It's the same with supermarkets, people complain about the 'big two', but still seem to flock to them.
I don't get it.
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Ted:
19 Apr 2016 12:02:42pm
For most of my life I used credit unions and building societies, but then the banks started taking them over with government encouragement until I ran out of them. This is not the case in my rural hometown which used to have 4 banks but now has none. Physical banking (cash taken by the supermarket, the rural store etc) has to be done 50 kms away.
However, my personal experience has been OK apart from selling houses to bank customers. I was commenting on society as a whole.
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R Supwood:
19 Apr 2016 10:35:48am
ASIC does what it was set up to do, giving forgiveness and mild treatment to crooks and misdemeanour professional operators. ASIC has virtually blessed the sinners, let them off from violent financial criminality with barely a check. The conservatives in finance and politics want a public safety valve like a show trial. It suits them to allow some action so as to camouflage and smokescreen along, gouging, grabbing and gathering. When the Skase and Bond and Adler types get little checking or justified legal retribution, when the big Pratt types get forgiven and get state funerals, you know it stinks. The insiders gather together in the compound, safe insiders in a system that rewards selfish manipulators and shady operators. Palmer alone needs thorough investigation; such heartless cunning makes us all reduced, especially the robbed workers under his umbrella of gross selfishness. Corporate criminality is a thousand times worse than is publically revealed. Too much is deliberately and cunningly hidden. Investigate banks fully.
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kali:
19 Apr 2016 10:36:21am
Banks don't fear negotiated settlements, they welcome them. It means that they can essentially do what they like and if they get caught out, they wheel in their high priced legal team to do a snow job on the under resourced regulator who thinks success is getting a piece of the crust when the bank takes the rest of whole loaf.
Bank bosses are scared stiff of a Royal Commission because they have to show their faces and get grilled by people who know what they have been up to. Shame is a very powerful weapon, as we have seen in the other Royal Commission taking place at the moment.
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Mike Adams:
19 Apr 2016 10:41:45am
This is all more pontificating by politicians and experts to shore up their own positions. The real issue is that people no longer trust the banks(or politicians) we see people in Australia struggling to make ends meet as the banks announce another year of record profits massive executive salaries and bonuses and more job cuts, branch closures and off shore services and awful customer service. A royal commission will be a waste of money as more rich overeducated idiots out of touch with reality fall in love with their own words and achieve nothing. Banks have caused global recessions and walked away without a scratch. The only answer is to regulate or continue to be ripped off.
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DocStrange:
19 Apr 2016 11:18:53am
Spot on Mike, we need to regulate those rogue bastards making literally a killing with money that is sorely needed for schools, hospitals and public services.
Steal 500$ and you go to jail. Steal 500 million and you become CEO.
Until the first managers are behind bars for their massive crimes nothing will change.
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Regionalgranny:
19 Apr 2016 10:42:41am
As with any large organisation, banks are almost a law unto themselves. I do not hate them, because you cannot hate a corporate, you can only hate what they do. I have little to complain about.
Because my dealings with banks these days are very straight forward and I have little borrowings(I do have a credit card), my issues are not particularly earth shattering. However, I have had plenty of experience with businesses slogging it out with their bankers and I do know people who have had terrible issues with their lenders.
Some conduct by banks is really beyond the pale including allowing hopelessly indebted graziers to stay on their properties as unpaid caretakers until the seasons pick up and then turfing them out and selling on a rising market. How they can justify lending to such people until the situation is out of hand just makes me shake my head. It is no wonder there is a rising number of farmers and graziers taking their own lives.
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stranger:
19 Apr 2016 10:44:08am
A Royal Commission into banking practises will not only give victims a chance for justice but will shine a light on many of the loopholes and gaps in the banking sector.
From here on we can then look at further regulation where necessary.
Unfortunately only Labor has enough guts to propose this.
Turnbull & the big 4 banks have a relationship that will never be deterred.
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MJS:
19 Apr 2016 10:47:45am
Mark D, I like the way you think. Banking is a fundamentally conflicted business, where suppliers are customers. Allowing banks to broaden their services, increases the scope for further conflicted business. I believe it was ANZ that wanted to enter into a voluntary undertaking re BBSW rate rigging, but even though prepared to pay a fine and sign the undertaking, still refused to plead guilty; and are now happy to go to the courts with ASIC -- how arrogant is this!! Maybe it is time, if the banks cannot behave properly, they should be made to divest themselves of all but the basic banking business.
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Stirrer:
19 Apr 2016 10:47:50am
Si Chris Berg suggesting we negotiate with ALL criminals not just white collar one as ASIC and the ATO does now?
I can just imagine negotiating with drug pushers- burglars - maybe even pay them not to do crime- as we do with polluters.
There is one law for some and another for others.
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DocStrange:
19 Apr 2016 11:16:02am
This country was built on the foundation of state sanctioned robbery and two different laws and two different classes - the corrupt officers of the Crown and private school boys in high office and the prisoners and later labourers and immigrants that were exploited by them.
Nothing has changed other than the titles and the rightful owners of this land are still excluded from society.
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Left of Centre:
19 Apr 2016 1:35:30pm
Just so you know, negotiations do take place between prosecutors and alleged criminals.
Many reasons for this, usually it is about securing an early plea of guilty without wasting money/court time. But sometimes it is about getting co-operation from the accused to assist find a body/property, find other victims or dob in ringleaders.
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Stirrer:
19 Apr 2016 2:33:13pm
yes - but usually those negotiations are held AFTER they have been charged. The way ATO and ASIC operate it leads to money being paid to escape charges.
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Nell:
19 Apr 2016 10:50:35am
Chris, you are relying on legalism, clear explicit laws interpreted in their most literal sense, to cure a culture of predatory behaviour often targeting the most vulnerable in our society.
The Australian people have responded to the ongoing revelations of unconscionable behaviour with such anger and disgust. Jane Caro expressed it well on Q&A when she described a breakdown of trust. We need more than arming up the cop on the beat, we need a change to the idealogical underpinnings behind the leadership of the country that has given the green light to these behaviours, that condones the whatever it takes profiteering that we are now seeing in graphic detail.
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offgrid2utopia:
19 Apr 2016 10:57:47am
Given the trillions of funny money spewed forth into the corporates by the corporate banks at near enough zero interest for over a decade now, the regulation industry is obviously a farce. As fraudulent as the corporate ALEC/IPA agenda bender industry I think.
Too scared of the banks or too beholden to the waxing of many palms culture? Who cares, it is just plain fraud. For the many have lessened dependency on flaky corporate bankster currency, we do eagerly await peak fraud to be announced.
That govts have no significant control over offshore everything does miss the IPA gaze by default it seems. lol
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DocStrange:
19 Apr 2016 11:29:40am
Hear hear! The old boys up there in their boardrooms, offices and private schools will never give up these privileges, powers and profits unless we take it back to the sovereign they robbed it from: the people.
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Rhino:
19 Apr 2016 11:04:03am
As usual berg has the wrong end of the wrong stick.
Banks need to be regulated and heavily, they need to carry that burden if they want to be in the envious position they are in. Nothing your mug extremist libertarianism does can make me agree with you on this Chris Berg.
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Skeptic:
19 Apr 2016 12:56:52pm
Agreed. Before we were all forced to deal with banks to access the contents of our pay packets, things were much better as far as being able to access our own money each week is concerned.
The rot set in the day my employer started to give me my weekly hard-earned as a cheque, instead of cash in a pay packet. I had no say in this and ever since that day I have been forced to lose part of my weekly wage to a bank in the form of fees. Firstly this was just to have my pay turned into cash with which I could buy anything and now monthly bank fees are inescapable. How the size of some of these fees are calculated is also somewhat hard to fathom. For example I don't believe for one second that it really does cost as much as $2 to move a few dollars from my bank to another, so I can access my money via an ATM. This should take only a fraction of a second to do. If, and only if, a human being is required to keep tabs on this process, it could not possibly take more than a tiny fraction of bank employee's time to check each computer transaction.
Now the banks are so large and well cashed up they can get away with almost anything at all, including daylight robbery (or so it seems!). Banks definitely need to be heavily regulated for the protection of consumers, because we have no choice but to use them.
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DocStrange:
19 Apr 2016 11:12:40am
Commonwealth Bank is allowed to advertise their foul products and overpriced services to our primary school kids and it's sold to the stupid as a 'saver' program where kids learn to deal with money.
What they are really told is how to part with their money so a dirty corporation that is presented as part of our public schools can make a hefty profit with it.
Bring on the Royal Commission!
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Rick:
19 Apr 2016 11:13:11am
We can put forward all the theories we want but the fact is the vast majority want a Royal Commission into banks and the finance industry because we all feel we are being ripped off. Whether it is the manipulation of interest rates, the high interest rates on credit cards or banks making their own interest rate adjustments when official rates move down. Whether it is because of the fees and charges levied by banks on us in order to access our own money.
Maybe it is because the banks are making massive profits and providing obscene salaries for those at the top.
Perhaps it is because despite the government telling us that we have great regulators in place the rorts of banks and the finance industry just continue and nothing of any consequence ever happens to those responsible. The fees and charges only get higher, the profits continue to grow, the salaries of those at the top get larger while the average worker and their families fall further and further behind.
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OmegaEconomics:
19 Apr 2016 11:13:33am
Berg (IPA) manage to display their economic illiteracy.
If banks are proven to have engaged in 'rate rigging' (of bank bill rate) then they have been STEALING from all Australians.
They currently enjoy taxpayer profits through guarantees on wholesale funding and deposits. The IMF said this amounts to a taxpayer transfer of 1.2% on $1.6 trillion or $19.2 billion transferred from the taxpayer.
Malfeasance on financial advice and insurance claims.
Shame Mr Berg. Please be honest with Australians.
Craig Stevens.
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AJB:
19 Apr 2016 11:15:22am
Have a royal commission to bring it all out in the open. All enforceable undertakings should be open and exposed so that everyone can see them. That way we can see if punishment meets the crime.
In ohs law individuals, office holders and the like are responsible for complying with the law. If we saw some ceos and board members in court we might see some more responsible behaviour.
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Mikk:
19 Apr 2016 11:16:18am
What was wrong with pre 1980s banking?
Why is it bad to have to show your bank manager you can save and deserve a home loan?
Better than today where they splash out money to anyone and then whinge for handouts when it all goes pear shaped.
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Hudson Godfrey:
19 Apr 2016 11:18:44am
I think Berg is right about some things. That the proposed Royal Commission is possible as omelette to eggs, liable to create some damaging uncertainty for a time. Roping in banks with financial advisers, may also lead to confusion about likely outcomes. Whereas many of the same institutions are involved in both banking and investment, its the practices within the latter that would probably come in for greatest scrutiny, and I would suggest regulation of the former that animates the public.
Where Chris' critique falls short here is in offering solutions to perceived and often real problems with banking regulation. In some respects he may not even permit himself to entertain notions the public would support because they'd make retail banking less profitable. Of course the public, most of whom aren't bank shareholders, doesn't care whether their banks are profitable. They'd plump for any change that would reliably do something about the threat of housing bubbles and stop ripping the public off.
Far be it from anyone to say the prime purpose of the old State Banking system wasn't to make profits, or point out other things we could do like regulating the Reserve Bank's base rate for commercial and residential lending separately because the risks greatly differ. And okay, these may not ultimately be the best suggestions, I don't know for sure, but I do know we need some suggestions because the problems are real, as is the dissatisfaction.
Governments meanwhile would be very courageous indeed to go it alone on policy change. That's what reports, white papers, inquiries and ultimately Royal Commissions are for. It depends on the terms of reference. An RC could primarily investigate and punish some of the behaviour we've heard about for which a few banks are long overdue their comeuppance. Given broader scope it could act as a circuit breaker and policy engine to get needed change to the front of the queue.
What's clear is that we've gone from one extreme to the other with banking. Overregulation made our banks moribund and lazy, underregulation exposes the amorality of greed is good capitalism. In the minds of most voters being just slightly ahead of the US or Greece isn't quite the gold standard in prudence they were hoping for. In the minds of even more of them their hip pocket nerve is an issue they'll vote on.
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Pavo:
19 Apr 2016 11:20:35am
"Anti-bank populism is a fundamental part of Australia's political culture." No Chris, people hate banks because just about every one of us has either been personally dudded, ripped off or given the bum's rush by one of these cowboys.
Ridiculous set-up fees for doing nothing (it's all automatic these days). Exit fees (that's them ripping you off because you had the temerity to clear you loans early), or over-the-top penalties for being a day late with a payment.
Oh, and of course my all time favourite, when you spend, the money is taken out of your account immediately, but when you deposit, those funds take 2-3 days to appear in your account.
Of course we can always change banks, oh give me a break. Different dog, same leg action, every time.
Sometimes I wonder if Chris Berg lives in a little bubble of his own delusions.
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foxlike:
19 Apr 2016 11:48:39am
Negotiated settlements are fine, just so long as they are then available for the rest of the country to read.
The so-called 'commercial in confidence' that governments use to deny the paying citizens knowledge of how they have arrived at shovelling money a commercial contract, is dishonest. A bit like if the courts refused to publish sentences because they were 'personal-in-confidence'... and as the negotiated settlement is in fact part of the legal processes available to ASIC, then publish the damn things.
A 'negotiated' settlement presumably also has risks of corrupt behaviour, failure to use appropriate penalties, and how do we know if the agreed actions of the settlement are carried out? Is there a timeframe? How do we know anything about these mates' rates deals if there is no publication?
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Peter:
19 Apr 2016 11:49:24am
Note that the big four banks are donors to the Institute of Public Affairs, which lobbies on their behalf for less regulation and scrutiny of banks.
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FormerFormerGuardianReader:
19 Apr 2016 11:54:47am
Nice abbreviated and unbalanced account of the last 40 years of banking in this article.
The idea that de-regulating the banks somehow "set us free" involves a level of delusion that you really only get with religion.
It's as if, before the great 1980s including the post-war years where western society pulled itself out of the biggest man made disaster in history (the two world wars) and landed on the moon to boot, that nothing seemed to work properly because nobody had any money.
These were the days that you might earn a wage and that wage might have some correlation to the value of the home that you were able to afford to buy.
These were the days where remarkably people worked fewer hours (as in only half the population worked (mostly men) and those men worked fewer hours. Now we have double the population working more hours, doing increasingly less useful things (mostly different forms of self-regulation and "professional" services).
And then to top it all off when the system spectacularly collapsed during the Great FINANCIAL Crash, the taxpayers were left to foot the bill.
Now everything seems to be unaffordable: health, education, pensions, and it's all deficit deficit deficit.
So we're working more hours than we have ever done before, spending less time with our family and friends and we still cannot afford to buy a house. And we apparently have been set free?
(And yes this rant is definitely focusing on first world problems, we won't go into the effect that the last 40 years has had on the poorest in society where the gap between the wealthiest and the poorest in society continues to grow).
Now I'm sure people will come on here and say that that's a very rose tinted view of history. It is.
But equally someone will have to explain to me why handing a monopoly right to an essential part of the capitalist system to a tiny number of profit maximising players who are then indemnified by the taxpayer and who can then sell and cross-sell imaginary products which many of the sales people and the regulators don't understand and who are incentivised to take the maximum risk possible and who are able (and almost required by the market forces) to collude to rig the market, is a sensible way of conducting our affairs.
I mean in absence of total delusion or corruption, what exactly is the deal?
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whatif:
19 Apr 2016 11:55:25am
the banks are just self feeding sharks, they take it all and give nothing, the rates stay down and so they take the cash rates to heart, what you get is what the rba has said is okay, but at the same time they put uo mortage rates to fill their own need for greed, its not a society that thrives on any thing but them selves, if the government wont stand uo and do something, then maybe the people should.
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Son of Zaky:
19 Apr 2016 12:08:47pm
"It seems likely that voters would welcome a return to the pre-1980s regulatory regime where the government fixed interest rates and micromanaged the products and investments of the banks - where credit was scarce and you had to beg banks for a loan"
Yep, sounds good.
I remember those times well - people had full-time jobs, houses were affordable, kids got a decent education for a decent price, we had unions everywhere and yet somehow the whole shebang kept making money and growing year on year, taxes were higher and yet somehow everybody was fairly happy that things were moving in the right direction, the future was something to look forward to and not something to think of with dread, and we seemed to be able to get on with things without endless fretting about non-issues.
I thank Chris Berg for having the courage, and the honesty, to admit that the new-age economics and assorted parallel dross he peddles for a living has been a mistake, and that he and his fellow travellers have taken something that had the chance of a future and cocked it up. Better late than never.
I look forward to hearing that Bob Menzies has been elected patron saint of the IPA, and that a programme of public floggings is commenced to purge the group of the no-hopers that have brought it to its knees. Hopefully Chris will volunteer to go first.
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sleepykarly:
19 Apr 2016 12:10:19pm
Chris Berg says "Firms should know exactly what is lawful and what is unlawful."
That's right, Chris! Otherwise, how can they be expected to use the loopholes efficiently, , and structure their practices to absolute last millimetre? Why let ethics get in the way of a profit?
The IPA rides forth to save the villains yet again!
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Geoff:
19 Apr 2016 12:24:02pm
The best way to get the message through to the banks is to ditch them! I did after they tried to rob me. I get great satisfaction knowing that my savings are being lent out to young people to buy their first home from an honourable building society.
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Christine:
19 Apr 2016 12:26:16pm
I detest legalisations of psychoactive substances for example. But I guess banks are a step up from drugs and do deserve differential treatment, not for being saints of course not, but for not entering the bloodstream. People have a choice I think. If they haven't, give it to them.
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Matthew H:
19 Apr 2016 12:27:00pm
I have always thought that total deregulation of the banking sector is fraught with danger.
If there was one nationalized bank it would keep the others honest. Deterioration of the sector as a whole began with the privatization of the Commonwealth Bank. Not only do we as customers lose the only bank that was ore or less run to the letter of the law; it was and still is the biggest bank in the country.
Probably the best example of why privatization should be approached with due caution.
Private/Public infrastructure projects are another category of questionable decisions by government in my opinion as well. It's not like the public actually get a say in the 'private' part of the equation, and governments have proven time and time again that they are not as 'equal and transparent' as they pretend to be, nor are they sufficiently skilled when drawing up contracts.
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dwa:
19 Apr 2016 12:28:45pm
"Uncertainty to firms"?
Actually, the last banking crisis showed that there is no uncertainty in the banking industry.
The only risk involved is related to how large the banks get. They will not be allowed to fail.
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Darcy:
19 Apr 2016 12:37:10pm
Politicians wont clean up banks and dont waste money with a royal commission into them. People ie. customers are the only force powerful enough to shut them down. Close down all accounts and move mortgages to credit unions or mutual societies or anywhere where members are the owners not Corporations like the Big 4. Just do your homework and be careful who you choose and look at the alternatives entering the market like Bitcoin. Just leave the banks to do their own hatchet job on themselves they are doing a fine job and will do the clean up job for us. A royal commission will cost us (the public) money and tell us something we already know and nothing will change. People should just get together in small groups and start their own lending co-ops as well and more financial institutions should be allowed into the market (which I think is happening now anyway). Just pay attention to any financial institution you move to and make sure they cannot be infiltrated by the greed disease. Wherever you find power you normally find abuse so a monopoly so I say open the flood gates to many financial institutions and destroy the Big 4 monopoly or should I say the Big 1 monopoly because there is no competition between them just collusion to dominate, defraud and feed their insatiable greed for never enough profit. Most people who are employed by banks hate them too, its only the guys at the top that are happy with the corporate culture that was never designed with the best interests of customers, the customers are just there to feed the greed. Shorten's announcement was just well timed not well intentioned. He had the opportunity to do something about this about 2 years ago and didnt.
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The Dirty Digger:
19 Apr 2016 2:32:57pm
Well said, Darcy. I did what you suggested years ago, but the prospects of the mass doing the same are close to zero. That's how the banks get away with the fraud and the theft. Hume said it: 'the real power lies with the ruled, not the rulers.' The ruled have chosen not to exercise it. Why wouldn't the banks take them to the cleaners if the victims didn't care enough to do anything about it? We have to avoid putting our money in the wrong place and giving our vote to the wrong people. It's not complicated. No Royal Commission needed, especially another Claytons Banking Inquiry.
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wrong way go back:
19 Apr 2016 12:43:18pm
I am confused with the title and the contents relationship?
After reading the article I thought the author has done better in the past in honing in on the right argument and sentiment.
The current ASIC Westpac and ANZ litigation into the BBSW manipulation is one reason why the system is not working and extra money from the Treasurer will not fix the problem. It is like sending in more plumbers to stop the leaks in the dam instead of fixing the structural problems which are leading to the faults.
The Reserve Bank's close business relationship outside the RBA is another.
I don't think a Royal Commission is necessary or would achieve a good outcome for the tax payer but then again I can't think of another third party option which would be as transparent.
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wrong way go back:
19 Apr 2016 3:26:07pm
...... The Reserve Bank's chair business relationship with the banks outside the RBA is another.
The RBA chair also chairs the Financial Markets for Children Foundation which has a board made up of directors who are the Managing Directors and CEO's of the major banks in Australia.
Through this Foundation the RBA chair is connected to the conduct of the major banks where the MD's and CEO's banks engage in illegal conduct ie BBSW manipulation for profit.
Does this raise a conflict of interest where the RBA chair is also chair of the Council of Financial Regulators who collectively are responsible for regulating the big banks? Besides the RBA the members of the Council are ASIC and APRA.
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max downham:
19 Apr 2016 12:44:39pm
Until the madness that set in in the later 1970s (economic rationalism), we had the banks on a leash and we had a people's bank. The leash has gone, and so has the people's bank - to go on to become the biggest bully and profiteer of them all. Pollies aren't up to a solution, but the coming economic collapse will sort it out. It's how change comes in this dithering country. We reap what we sow.
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purgatory:
19 Apr 2016 12:52:29pm
At least pre-80's banking was competitive due to the 'public player' in the market keeping the private banks a little more honest about their rates etc..
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eLJayeF:
19 Apr 2016 12:58:50pm
Nearly 70% percent want a RC into the Banking and financial sector. The salaries of the executives and the CEO's must be regulated. The ASIC must expose, name and shame the CEO's and executives to change their culture. Chris Berg is from the IPA and they are bankrolled by the 1% so his comments must be taken with a grain of salt. ASIC alone cannot do the job.
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DocStrange:
19 Apr 2016 1:54:12pm
Luckily it's not about what the majority wants but who's got the majority in this demockracy and as we know money talks, especially once it's billions as the mining, banking and building industry splash around the noses of our dear leaders...
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Left of Centre:
19 Apr 2016 1:27:45pm
"Negotiation is cheaper for all involved, but it also gives the regulator more power. With a negotiated settlement, the regulator can persuade firms to do more than the letter of the law would require: do this, and we won't take you to court."
Yes, negotiation is cheaper than days of court hearings.
Yes, negotiation gives the regulator 'power' in the sense that it can obtain outcomes or remedies that may not within the power of a court to grant.
However, I think the use of the word 'power' is misleading in this context.
Negotiation doesn't give the regulator 'power' in a coercive sense to bring dodgy companies and directors to heel. Sometimes ASIC negotiates because there is no certainty that it can secure a conviction if it took the matter to trial. As the same uncertainty would apply to the company or director, this provides both parties with the incentive to negotiate.
Which brings me to the second point made by Mr Berg:
"that the discretionary, arms-length, ambiguous regulatory state offers nothing but uncertainty to firms and the public."
This is nonsense.
You are never going to have a crystal clear, unambiguous regulatory system. Why? Because there is always going to be shades of grey in the law - especially corporate law. This is why we have courts and judges.
If Mr Berg would prefer that ASIC "publicly enforc[ed] clear rules in court", he might want to consider how ASIC and the courts will be staffed and funded to achieve that goal and, if ASIC and the courts aren't going to be sufficiently funded, whether having a backlog of pending cases in State and Federal Court assists the economy and the facilitation of commerce?
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fcg:
19 Apr 2016 1:36:07pm
Dop we really need to spend $53m on a royal commission which may, at the end of the day, say that the system needs fixing. We already know that there is something wrong so let's fix it and stop doing what Labor always does - waste money.
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Jack:
19 Apr 2016 2:00:56pm
The only way that we are truely going know what need fixing is to have a fully open AND VERY public inquiry. As with the TURC inquiry, the guilty were identified, and the same should happen the the shonks in the financial industry.
There were some very dodgy individulas in the CFMEU, but the I think they will pale when compared to the 'gentry' in the financial industry.
All I can say, it must be really bad if Mal and the LNP are going to such lengths to protect them from a public inquiry.
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Giles:
19 Apr 2016 1:44:31pm
The strength of the Australian banks largely due to regulation introduced by the Howard government in the late 1990s was a major factor in Australia sailing through the GFC.
Why would anyone hate them particularly when most of us are shareholders through Superannuation?
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Jack Toff:
19 Apr 2016 1:45:32pm
Thanks Chris for an informative offering.
Just one question. When has an enforceable undertaking ever changed the culture of an organisation?
Most CEOs are not remotely interested in the long term sustainability or perceived fairness of a business but a fast buck to increase their own private wealth. Given culture is driven from the top down this fast buck ethos sets a poor example. Bring on a Royal Commission, put some of these rip off merchants on the mat, drag the truth out of them and let the experience warn all bank CEOs that we are sick of being used to line their pockets.
The Liberals are being the ultimate hypocrites on this one. They rip the heart out of ASIC funding and then inform Australians that ASIC has the resources to deal with bank exploitation of us ordinary folk. What a joke!
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Jack:
19 Apr 2016 1:46:08pm
A RC into the Private Health business would also be in order. As was the case with concerns over the activities of some trade unions, the spotlight should now be used to light up the murkey activities of the financial industry and private health industry.
I am sure the costs of these could be mitigated by selling the televioion rights to one of the commercial TV broadcasters as the 'biggest reality program of the decade'.
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Reinhard:
19 Apr 2016 1:48:50pm
Mr Berg dips into the IPA's bag of false argument tricks, using apparent memory loss, half truths and appalling oversimplifications to make the usual case "regulation bad, deregulation good".
Berg conveniently forgets that the Gillard govt implemented much vital reform and as Minister for Financial Services and Superannuation, Bill Shorten introduced the Corporations Amendment (Future of Financial Advice) Act 2012 and the Corporations Amendment (Further Future of Financial Advice Measures) Act 2012, that came into effect on 1 July 2013.
Berg has also tried to paint as legitimate policy this week's cabinet discussions on strengthening ASIC, too little too late and an obvious knee jerk response to Labor's call for a royal commission into the banking and financial services sector.
This is encouraging for Labor as the first sign of a truly panicked and dysfunctional govt is constantly being caught on the back foot and allowing the opposition to dictate the policy debate..
Job done and bring on the DD!
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bazza43:
19 Apr 2016 1:50:38pm
I have to say that Mr Berg makes a good, logical case for avoiding a banking Royal Commission, and my head agrees. My heart, though, doesn't. Nothing (short of World Peace) would please me more to see a procession of greedy, obscenely overpaid bankers dragged over the coals by a good QC, and, hopefully, thoroughly humiliated in the process. I just crave some good old-fashioned revenge for the way the banks have treated us over the years.... bring it on, Mr Shorten.
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Smells:
19 Apr 2016 1:50:41pm
The ABC is governed by the CIA and the same oligarchs that runs our government whores, whom I might add, have broken the peoples "Social Contract". That is, they work for "Wall Street instead of Main Street".
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enno:
19 Apr 2016 2:07:18pm
Never mind the fees and the greed. The biggest problem is stealing.
Bank employees can steal from you, and be absolutely untouchable.
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mike j:
19 Apr 2016 5:31:47pm
The ABC takes your money and doesn't represent you at all. Half the time, it won't even bother to print your opinion (for free) on its website for fear of upsetting the delicate nexus of minority victimhood narratives which is under constant siege from slight breezes.
But Ray Martin says it's doing nothing wrong, so it's untouchable.
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JessC:
19 Apr 2016 2:22:18pm
"Firms should know exactly what is lawful and what is unlawful. Regulation shouldn't be a matter of discretion - it should be clear and unambiguous."
Exactly Mr Berg, so why do the banksters flout the rules? Could it be that what others are saying is true (that they're in charge around here, not the government)?
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PN:
19 Apr 2016 2:27:23pm
It's just wrong that petty thieves are jailed like in Northern Territory while "daylight robbers" are free to enjoy their proceeds.
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AlwaysWatching:
19 Apr 2016 2:30:52pm
Typical Berg whitewash.
We hate the banks because of the way they treat people. Nothing more complicated than that.
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GrumpiSkeptic:
19 Apr 2016 2:33:35pm
I have divided loyalty. I put a bob each way by owning bank shares as well as being a customer of the banks. So I know the damn nuisance the banks can be, as well as the fact that they can be a great help.
With careful planning and partnering with the devils, ie. the banks, I managed a reasonable living out of my investments, but nothing like Clive Palmer's. However, through all those years of banking, I did have the occasional problems with them and they tried to be clever and tricky with me. They would add a bit of extra charges here and there, or suddenly changed their terms and conditions by hiding the details in small prints within a voluminous "update". Before I can yell "Holly Batsh*t", money was taken out. Then a lot of conversations with the not-too sympathetic, often not even too up to scratch bank employees to sort out the "miss-understanding". Of course, that will only happen if I am lucky enough to get past all those dodgy recorded self-promotion messages, and being told that "All our consultants are busy helping other customers. Your position is now advancing !" 20 minutes later, my mobile charges were becoming more expensive than the fees in dispute. Guess what, I was still waiting...
Sure enough, higher bank earning means better dividends for me. Can't really argue with that. However, I believe profits ought to be made in an ethical way, ie. you deal straight with your customers, and not being clever and tricky, like not to pay out insurance by finding in-excusable excuses.
ASIC is not exactly an efficient watchdog, judging by the number of failures it has accrued. A settlement is one way to saying "I give up. Just make it look good for you and me by paying a tiny settlement amount." Enforcement has to been to be done, and not quietly behind closed doors.
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DocStrange:
19 Apr 2016 4:29:29pm
Well maybe the only reason bank shares are so 'profitable' is because they make such dirty business, same as with tobacco, mining, weapons or illegal drugs - the more gritty the deals, the higher the profits.
Maybe it's time we forfeit the unethical profits for as long as we are as greedy as the banks with our greed for getting paid for doing nothing through owning houses or shares they'll keep winning
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GrumpiSkeptic:
20 Apr 2016 2:27:06pm
"...doing nothing through owning houses or shares they'll keep winning"
A criticism of the capitalistic system we live in, and enjoy ? Or a touch of sour grapes there, DocStrange ? I bet you have derived much benefits from "doing nothing", being the beneficiary of a capitalistic Oztraya? How about the infrastructures, schools, hospitals, etc? Some of the funding come from the taxes paid by the banks and other businesses some of us do own shares in.
Unlike your good self, some of us saw the need to invest for their future, so that they don't have to lean on the government for higher pensions. We own shares at the expense of not buying the latest electronic gadgets, the widest TV sets, and the flashy cars. We done our bit so that hard-earned money is available to pay for the shares.
The accusation of "doing nothing" is downright stupid because my shares are actually working, in fact, keeping many others, possibly yourself, at work while I am doing some other jobs I am good at. I hope that clears up a bit for you?
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Jeffo:
19 Apr 2016 3:10:41pm
Banks used to approach business and deal with the public in an ethical manner. To use the Australian colloquialism, they believed in giving their customers a fair go. Since the 80's however, it seems that the Banks and big business generally have taken the approach that anything which isn't specifically proscribed by law is fair game. That even if it is proscribed by law and they get caught with their hands in the cookie jar, their too big to fail rep and the favour they've curried with politicians and regulators is usually enough to get them off with little more than a slap. The arrogance that that situation breeds is what has led to the corrosive "culture" that everyone is babbling about.
A royal commission would almost certainly shine a strong light on that culture. Then the government and regulators could think about ways to force big business and the banks to return to operating ethically since, left to themselves, they've abandoned that approach completely.
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Codger:
19 Apr 2016 3:13:03pm
Chris Berg pleading that negotiated enforceable undertakings are tougher remedies than prosecutions is a bit like Brer Rabbit pleading Brer Fox not to be thrown in the bramble patch.
Just for a start the poor publicity resulting from prosecution will have the effect of forcing banks to act more ethically. It will become an economic imperative which can be justified to shareholders. It is abundantly clear that morality is not in the natural make-up of banks or indeed any corporations.
Instead of just bleating about unfairness it is up to human beings to force change by means of market and political pressure.
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raymond:
19 Apr 2016 3:20:59pm
It's fascinating that Bill Shorten wants a Royal Commission because the last Royal Commission he hadn't anything to do with he was almost was in contempt of.
If there is a Royal Commission into the Banks Shorten would do well to show more respect.
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Lee Boldeman:
19 Apr 2016 3:31:10pm
Berg is a libertarian. What would you expect him to say? Libertarianism is a philosophy that seeks to redefine the ordinary term freedom as individual autonomy and then seeks elevates that autonomy as the supreme and absolute political value. This is just playing with words to justify minimalist government, something that the bulk of the population would reject.
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Geoff Ballard:
19 Apr 2016 3:46:59pm
There is a very simple solution to the perceived problem of CEO and Senior Management bank Salaries and Benefits being off the scale so to speak. 81% "want the government to fix the salaries of Bank CEO's".
Bank CEO salaries should be based on the return on total assets NOT the leveraged return on equity as an indicator of performance. The latter encourages borrowing and ultimately irresponsible lending leading to debt defaults, loan provisioning and asset impairment charges etc.
Measuring performance on total assets discourages the race to higher gearing and is a better measure of how efficiently a bank is running its operations.
This is of course not just an Australian issue but a global issue as the economy has been effectively highjacked by the financial sector.
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JMJ:
19 Apr 2016 4:12:10pm
Chris, in respect to ASIC their motto is 'market misconduct' will not be tolerated' even though ASIC entered into 53 'enforceable undertakings' with a number of entities between 1 January 2012 and 30 June 2014 excluding 'cases involving deliberate misconduct, fraud, or conduct involving a high level of recklessness' which may warrant a Royal Commission.
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Chincogan:
19 Apr 2016 4:20:21pm
One day, not too far into the future, a Federal government will have to face up to the issue of whether our Big Four Banks have become too big and which, without a breakup, represent a systemic risk to the entire Australian economy. The Big Four plus Macquarie all carry a government-backed indemnity since 2008. Kevin Rudd is long gone but the indemnity is still in place. Meanwhile, they continue to engage in all sorts of risky investment ventures. They gamble on currency swaps and on capricious property lending until reined in by APRA. They indulge various forms of illegal behaviour by their traders who, once fingered, are deemed mere rotten apples in an otherwise spotless basket. They control the average workers 9% super contribution from cradle to grave. They control almost 70% of the retail super funds and they control most of the so-called financial advisors. They have outrageous fees which would not be accepted in the UK or US. They have secret trailing commissions for which the average worker would need a lawyer to explain They lobby for legislation to suit their shareholder interests rather than that of their fund members. Conflicts of interests? They are riddled with them. Yet, commentators such as Chris Berg argue we do not need a Royal Commission. I always fail to understand why people like Chris who are attached to the IPA always argue in favour of the current regulatory system even when its obviously failing and subject to abuse. Somehow there is a perfect IPA worldview and their ideological blinkered view so often seem to coincide with that of the vested interests who support their organisation. Funny that.
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raymond:
19 Apr 2016 4:33:05pm
We don't hate banks what we really hate is people who don't agree with us and when I say we, I mean 'you'.
Censorship is a blunt instrument and it never works.
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steve3:
19 Apr 2016 4:40:31pm
The ABC can state the obvious problems with banking and the opposition can make promises, but banking is rotten to the core and cannot be fixed.
Here in Australia banks have become parasites on the Australian economy.
If you want to see the future of Australian banking look at the banks in Europe, Japan and the United States with negative interest rates, bail ins, troika sending Greece into social collapse, Libor fixing, looming Deutsche Bank insolvency, HSBC money laundering, Goldman Sachs mortgage securities scams, RBS breaking economic sanctions against countries such as Iran and altering documents in an effort to conceal its actions thereby helping terrorists move money around internationally.
That is just a FEW of the major crimes these banks have committed with no-one doing jail time.
Fraud, scams, lies and social parasitism are the business models of international banking.
In Australia as far as we know they have "only" been involved in financial adviser scams and helping to inflate the housing bubble. Give them a few more years and they will copy the overseas banking lead and become criminally toxic to the Australian economy.
Our politicians like Turnbull, an ex-banker, are BLIND to the problem. They willfully refuse to see that high home prices are economic POISON. Exorbitant home prices destroy the social fabric, as the young and productive cannot afford to buy a home and they are forced to become an noncompetitive labor force because they have to ask for sky high wages to afford the sky high mortgages and rentals they are charged. All because GOVERNMENT POLICY and banking GREED have ARTIFICIALLY sent prices to the moon.
How blind are politicians?
Tony Abbott- "High home equity is a good thing"
Malcolm Turnbull- "I don?t think many Australians who own houses want housing prices to fall."
Fact-
Australia has around $2 trillion in unconsolidated household debt (mostly mortgage) relative to $1.6 trillion in GDP.
Australias ratio of 123.08% is the highest in the OECD.
If you are not appalled by these figures you must be a banker or a politician (social parasites).
The system is broken and can not be fixed.
We need a revolution.
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Ali Gharaibeh:
19 Apr 2016 4:47:33pm
Thomas Jefferson said: "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.... I believe that banking institutions are more dangerous to our liberties than standing armies.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." I cannot see this happening anywhere in this world...who agrees with me?
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Grey:
20 Apr 2016 1:24:51pm
Sorry Ali, not too many replys and I am not joining with agreement.
If you wanted issuing power to be with the people, I suspect you may even find great levels of corruption developing and more of the weakest succumbing.
Meanwhile, many people acting responsibly use banking as part of their lifestyle and quite successfully so.
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ateday:
19 Apr 2016 5:57:10pm
We do???
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rastos:
19 Apr 2016 6:44:13pm
During the GFC banks were given Billions of dollars of taxpayers money. Have they paid it back and with interest. How do we know if they default and will they be subject to the same treatment that is metered out to users of their system.
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Grey:
20 Apr 2016 1:21:31pm
rastos, please check your facts for there was not billions of dollars given to banks but something called guarantees put in place as instruments to shore up confidence.
The only billions being handed around during the GFC was our own taxpayers money being distributed by the then government in a poorly controlled manner, money that was actually borrowed in our name with all Australians to be responsible for the repayments and interest.
We surely do not not want more of the government reverse banking style.
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Reinhard:
20 Apr 2016 2:05:19pm
From "The Crisis Down Under" by Joseph Stiglitz, former head economist at the world bank and a Nobel Laureate in economics.
"Kevin Rudd, who was prime minister when the crisis struck, put in place one of the best designed Keynesian stimulus packages of any country. Rudd's stimulus worked, Australia had the shortest and shallowest of recessions of the advanced industrial countries."
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Bob G:
19 Apr 2016 7:46:48pm
Shorten and his mate Bowen could not manage a "one dollar" bank account let alone a Royal Commission into the so called Big Four.
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Christine:
19 Apr 2016 7:55:00pm
Where else are we going to borrow money from?
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saline:
19 Apr 2016 8:12:40pm
There is a better idea than making banks change to fit your model.
Open another government sponsored bank. Deliver a set of rules by which to run it. Channel low income business their way exclusively. After all, the poor are a burden to them.
Then go to all the non government banks and tell them you have a unit of skilled bankers watching their business and associates.
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Christine:
19 Apr 2016 8:12:41pm
I don't hate the banks. If we were going to use words like "hate", think about people who leave people no choice but to borrow from the bank! Ha! Who do you think banks are? Even friends and relatives have to charge you something for favours, that's if they agree to them. Is it really the banks' obligation to nanny us? Banks are profit making entities bear that in mind. No profit, why lend?
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John Joyce:
19 Apr 2016 8:26:34pm
Why do we hate the Banks when our future Superannuation benefits depend so much on their success???
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Rod53:
19 Apr 2016 8:48:33pm
I had a drawdown mortgage with one of the big four. This was being used to make additions to my property and the drawdown was taken at each stage. I then found that I was being charged interest on the money the bank had not yet paid out. I moved immediately to a mainly online bank with an orange logo. They were good and I never had any problems with them.
This investigation is long overdue and the regulator has to be independent and have ferocious teeth to deal with these leeches.
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bettysteve:
19 Apr 2016 9:50:45pm
l've said it before, banks and massive profits, they are a listed company, to continue to attract investors, their profits must exceed the previous years profits, this year they are going to have to make 5% profit on *how* much money to beat last years "growth" by 5%??!
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PN:
20 Apr 2016 6:23:42am
Would the bank's fat-cats pay back hundred of millions in bonuses and outrages salaries if any inquiry found that criminality and negligence happened under their watches?
It's only fair to retrieve them to compensate those who lost their hard earn savings.
The community wants real actions for good results, not a fishing exercise for the high paid silks.
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Grey:
20 Apr 2016 9:53:36am
A fine reading of the article does confirm just what a political/media beat-up the calls for a RC is for on one hand:
" It seems likely that voters would welcome a return to the pre-1980s regulatory regime where the government fixed interest rates and micromanaged the products and investments of the banks - where credit was scarce and you had to beg banks for a loan. "
And in truth it could be asked just how likely that is when one reality of life is that it does not matter what type of working/services environment one has experience with, there will always be dud products and some less than creditable operators, they usually getting exposed without a RC being necessary and there being legal provisions for compensation to be sought if it is not forthcoming.
Taking legal action is never easy nor cheap and thus settlements may give a much better result or shall we have a RC into our legal systems and perhaps even how legislation is created?
Thus, what Allan Fels would rather:
" Take, for instance, the complaint last week in the Sydney Morning Herald by Allan Fels - himself a former regulator - that ASIC has failed to be the "tough cop" on the corporate beat because it has been too eager to sign negotiated settlements with the firms it is supposed to regulate. Fels would rather ASIC take more firms to court. "
does need to be questioned.
What we all ought to know is that legal processes and settlements just add to any organisation's costs and the bottom line will be that an organisation will remain solvent and pass on costs into products/services provided or just go to the wall with the public the ultimate payer either way.
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Steve_C:
20 Apr 2016 11:20:20am
I suspect you'll find Grey, that Alan Fells is a fully paid up member of what John Howard described as "a litigious society".
They appear to believe that "when all else fails, go to court", as if it's some sort of 'magic bullet'.
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Reinhard:
20 Apr 2016 2:58:53pm
And the alternative is what, asking nicely?
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Steve_C:
20 Apr 2016 4:55:33pm
Gosh! Only one "alternative"?!!
I'd have thought there'd be scope for more than one...
And whilst I may have some concepts of a number of mechanisms that could be leveraged in order to attain outcomes without involving litigation - such as mediation; to expect that I and I alone would be the one to define in detail the sorts of mechanisms that may be possible if there was/is the political and community will to undertake whatever is necessary in order to achieve such a result, is probably more indicative of how so many Australians of today are prepared to denigrate others whilst patting themselves on the back for doing nothing more than demeaning their fellows.
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John Forbes:
20 Apr 2016 9:59:53am
The brainwashing of the general public into believing in the dictates of the LAW are ( at least for ME) are taking a huge battering!!
The LAW seems to apply to the disadvantaged & the poor but no to the corporations or the wealthy!!
So a total disrespect for the LAW in its current dress is not unwarranted in my view.
Coupled with - at least - what appears to be special treatment for those with CASH world wide the erosion of respect is not at all un warranted!!!
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whatif:
20 Apr 2016 11:11:45am
the bigger than big difference between unions and banks, the unions help people, the banks rip the guts out of them when they are down and out.
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Radical:
20 Apr 2016 11:15:40am
Here's an idea. Since banks are fictitious legal entities, imposing huge fines only hurts voiceless shareholders. Make the CEOs personally responsible, and punishable, for the misdemeanours of their staff. After all, they earn millions for 'running' the banks, so let them earn their money!
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wheatbeltbelle:
20 Apr 2016 12:22:42pm
RE: banks and fees. Coming from North America, the first thing that shocked me were bank fees. 1/ for maintaining an account, while they get the use of my deposit. 2/ additional charges for loans and mortgages, such as 'quarterly accounting fees'. Pardon me, but that expense should be included as part of the interest. I have never seen anything like that at any other bank. 3/ Pay-downs and payouts of mortgages and loans incurring a fee. When the loan is paid off, it is done, that's all. This endgame charge is punitive.
Basically, the law says the bank must do the best for its shareholders, not customers, but surely fees can be regulated to an ethical industry standard.
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Grey:
20 Apr 2016 1:13:40pm
Belle, I suspect that you will find that there will always be differences in many things from one country to another, not just NM and Oz nor with just banks.
Having a monthly account keeping fee not included in an interest payment is no big deal for if it was, then the interest charged would be higher and as interest diminishes as a loan is paid down, account keeping likely remains the same regardless of amount in the account/loan is the theory for keeping the account charge separate.
As for early or final payments etc., it pays to shop around for you will find that all fees structures vary a bit be it up front ones or final ones.
With a pay out of a mortgage, what you may not realise is that just as taking out a mortgage means a legal action, so does closing a mortgage, something that is part of our property titles/legalisation structure and something the banks have to contend with too so of course there will be fees involved that a bank will pass on.
It would be beaut if the whole property transactions/loans/ legalities could all be streamlined courtesy of computerisation, doing it all without real estate agents or legal professionals but then they have a thumb in the personal interest pie, that is hardly ever likely to happen.
The ethical standards imply that there ought to be legal people involved for protection of people who can not do without them and legal entities just like banks compete and charge as much as their competition will allow.
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Geoff :
20 Apr 2016 4:38:01pm
The $120 000 000 watch dog (hopefully with teeth) that our PM has just announced should keep the bastard banks honest.....They may very well have ripped off the public in the past but to nowhere near the amount that the building worker thugs have done.
A young couple buying a high rise unit pays 30% more than they have to because the unions cream that much more off for themselves. Can't see the banks with their snouts in the trough to this extent.
Can you?
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PN:
20 Apr 2016 5:31:55pm
The union thugs use threats and violent to extort their victims to archive their goal.
The banks use their financial power to extort their victims for their own gains
Both effectively have been stealing from their victims for too long.
It's time both of them are held accountable for their criminality.
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