Contributed by Joe Montero
The Turnbull government compelled by circumstances to respond to popular pressure of action on the banks, the disclosures of whistleblowers and finally rebellion among its Coalition partners in the National party, with a Royal Commission.
At to this point, there had been a straight out refusal to budge, and there is still no real desire for a proper investigation. The government has been forced to make a concession, but even this has been manipulated, by widening its terms of reference to include the whole financial industry, and most importantly, including the superannuation funds.
By doing this, Turnbull expected to turn the spotlight away from the banks, and there has been an attempt to wheel in through the back door, the already declared and cherished aim of privatising the industry superannuation funds and handing them over to the same banks. On the one hand, these banks are supposed be be investigated, and on the other, the ground is set for rewarding them. This is intended as a scam to hoodwink the public and protect the banks, not punish them.
At least this was supposed to be how it was going to work. But it seems the Royal Commission, has taken something of a life of its own. By the end of last week, the chiefs of AMP, Commonwealth, and Westpac had had fronted up and evidence came out that showed widespread use of alleged bribery, forged documents, repeated failure to verify customers’ living expenses before lending them money, and miss-selling insurance to people who can’t afford it.
The AMP admitted that it had been lying to regulators, and the Commonwealth Bank admitted some of its financial planners have been charging fees to clients who have died.
AMP CEO Craig Meller fell on his sword and stepped down immediately. Other casualties might follow.
People have been hurt. Sometimes, they have lost homes and businesses. Meanwhile, profits went through the roof last year, with the Commonwealth Bank making $9.8 billion, up 4.6 percent. this was followed by Westpac (full-year profit $8.1bn, up 3 percent), ANZ ($6.4bn, up 12 percent), and NAB ($6.6bn, up 2.5 percent).
Many might welcome the downfall of tycoons. While we relish the punishment of guilty individuals, attention should never be taken away from the the reality that this is not a case of a few rotten apples, but a serious systemic failing that must be corrected. The industry needs regulation and clearly defined boundaries. Years of deregulation and giving it a free hand, has both created the scenario that has encouraged and legitimised what is going on.
The nature of banking and finance in general is twofold. It is a mechanism to facilitate the circulation of money, and a means to create a centralised pool of investment capital. Its function is not to create value, that is to increase what the economy newly creates. It profits by charging a premium for the use of money, by shifting ownership of something to someone else.
The services that banks and other financial institutions provide are necessary for the functioning of the economy. There is no problem when they operate within the needs of the economy. It is when they cross this line that there is a problem, and in doing so, become parasitic.
A core problem is that banking and finance have grown at the expense of other sectors of the economy, and consequently, the generation of profit has increasingly depended on the generation of business through other than legitimate means.
For instance, the promotion of debt, the housing price bubble and playing the futures market. All of these practices have spiraled out of control. For some years now, the banks have been agitating for a change that gives them access to the industry superannuation funds. And these will be used for the same purposes, if the conditions under which they operate remain the same.
The fundamental problem that the money side of the economy has become far too disconnected from the real economy remains. It must be made to serve the real economy and society, not lead them. Only by imposing sufficient regulation can this happen.
Telling evidence of the excessive growth and disconnection, is that the seven largest lending organisations in the country hold a collective $4.6 trillion in assets, which is nearly two and a half times the size of Australia’s $1.8 trillion economy. This comes from the Royal Commission. It tells us that there is an enormous mountain of money that must be put into circulation at all costs. Without this, the enormous profits of recent years would not be possible. With this excess and its continuing disconnection with the real economy, corners are going to be cut and worse. action is needed to narrow the gap, and ensure investment goes where it is needed to improve the economy and society.
Malcolm Turnbull and his people can say all they want about increasing fines and providing for the possibility of longer jail times for individuals caught out. A fewheads might roll. What next? If the environment that encourages unethical and corrupt behaviour is not removed, very little is going to change.
The Royal Commission has not been set up to bring about systemic change.
The reason is that the government is thoroughly immersed in a belief in its belief in unrestrained capitalism, no matter how much harm it inflicts along the way. There is also a more sinister reason, and it is the banks, do not only have immense economic power in their hands, but are also a major pillar supporting a government that works for them.
In recent years, the unpopularity of the banks has meant that they have had to refrain from openly putting money into the Coalition’s coffers. But there are other, more covert ways of lending a hand. They have influence in the peak big business organisations (mostly through bigger international banks that have a major stake in them). They are closely tied to the Coalition associated think tanks, like the Institute of Public Affairs (through ownership of a large part of the mining industry and other sectors).
Malcolm Turnbull comes from their ranks. As well as operating his own banking investment company, was the managing director of the American giant Goldman Sachs’ subsidiary in Australia and a partner in the parent company.
Connections like this help to explain why the government has been so reluctant to act, and it means that there is still a very good chance that the outcome will be very little action, above a pretence This is a good reason why people should not be complacent. The pressure on the banks needs to be kept up.
No one in the Liberal Party saw it comming.?
If yes, then they are the worst financial party in the history of Australian Banking.
If No, then they are criminally culpable for aiding and abetting Bankers by weakening Labor’s proposed FOFA legislation.
Lying has been raised to post Howard “Bubble” proprtions by the neo-liberal zealots of Abbott and Turnbull.
Any Law that financially punishes any lying by any politician would help save our democratic capitalism.