I think it’s fair to say that with us entering the third day following the rate cut, the banks will not be passing the full easing on. That has sent the politico housing complex berserk. Following is a list of the commentary:
- Ian Verrender says the banks are greedy
- Matthew Drummond and Jonathon Shapiro say wholesale funding costs are no excuse because they now rely on deposits
- Unsatisfied, Matthew Drummond pens a second, bizarre piece, in which he claims that wholesale funding costs haven’t risen because no bank has issued any for months because costs are so expensive
- Michael Evans sees a perverse inter-generational transfer
- John Durie says the banks are right to keep the cash as European insurance
- Tim Boreham says banks should stop micro-managing margins
- Richard Gluyas (whoever he is) says mortgages are barely profitable
- George Megalogenis says banks show a pattern of meanness
- The Treasurer and government insist on the cut going through, while Jennifer Hewitt insists the government is an idiot.
No doubt the West Wyalong Bugle is equally incensed.
This is all sound and fury signifying nothing and really goes to show that the media is nothing more than a symposium of blow hard interests determined to reinforce one prejudice or another within the existing system. Only two commentators have one foot outside of this blather, Stephen Bartholomeusz at BS who offers a useful take on the majors funding pressures, including the notion that February is the witching hour for a bank funding crunch and Michael West at the SMH who asks whether the big four really are guaranteed. Well…I’m sorry to say Michael that yes, the banks are fulsomely guaranteed, just ask S&P.
Which leads me to my point for the morning. Surely this wellspring of drivel is the final exclamation mark on the total failure of the government, the academic community, the media, business and regulators – ‘thought leaders’ if you like – to address the banks within an adult context of political economy since they were bailed out in 2008.
With the exception of a five minute discussion generated by the “six economists” letter in 2009 and another two minute discussion in 2010 when Joe Hockey briefly embraced reason with his ten point plan, the last three years of public discussion has been a total fantasy in which we have had no housing bubble, prudent banks, brilliant regulators and endless growth. Yet throughout, the current travails have been as plain as the nose on your face.
The only question that matters is the one nobody asks. What social contract do we want with banks in a world in which offshore funding is tenuous? That’s it. Not so awful.
If we want absolute adherence to official interest rate decisions then the banks will probably need to be nationalised.
If we want the banks to be private, profit making entities then we must step back from guaranteeing anything and let them fail.
If we want some some reasonable exchange of private banks with public support where appropriate then we must talk it out openly and decide what the sensible quid pro quos are.
Are we a nation or a small country town?
