No banker should run the Wallis Inquiry

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For some reason the SMH is floating the idea that former CEO of CBA David Murray will head any post-election Wallis Inquiry:

The former chief executive of Australia’s biggest bank says he would consider chairing a review of the country’s financial system if he were asked.

David Murray, who steered the Commonwealth Bank through privatisation in the 1990s, says it is time for a proper review of the financial system, given the last review was nearly two decades ago.

His comments come after Joe Hockey, the shadow treasurer, last month said the Coalition would begin a comprehensive review of the country’s financial system if it won the federal election.

”The last review by [Stan] Wallis recommended that a review be done within 10 years,” Mr Murray said. ”The system changes a lot, and the question to be asked isn’t how [do] you regulate everybody as much as how does the economy get funded. And what is fundamentally different today is the size of the superannuation investment pool, and how that gets re-intermediated in the economy.”

…Mr Murray, who is the former chairman of the Future Fund, also said Australia’s three main financial institutions – the Reserve Bank, Treasury and the Australian Prudential Regulation Authority – should continue to balance transparency, independence and accountability, but that government needed to be more transparent about its dealings with the agencies.

…Mr Murray said if he were asked to chair a review of the financial system he would give it ”careful consideration”. He also said he believed business confidence would pick up after the election if the election delivers a stable majority government.

Most of David Murray’s public statements since leaving the CBA have made plenty of sense. He has for the most part attacked Australia’s current account deficit and has been harsh on banks’ dependence upon offshore borrowing. He has shown himself to be frank and fearless. In this sense he’s be a good choice.

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But I’d still have concerns about David Murray heading any Wallis Inquiry. Frankly put, no banker should get the job. Part of the resona for having it to restore faith in the system and that can hardly be done by those who broke it. And as former head of CBA – at the helm throughout the great globalisation of banking that transpired across the millennium – David Murray oversaw the creation of many of the problems that this inquiry would be designed to address. While I have no doubt about the man’s integrity, this is a simple conflict of interest.

Murray’s professed views on the causes of the GFC make the point. He blames the event squarely upon the governments, as if banks and the banking system didn’t do everything in its power to maximise short term gains at the expense of long term stability (without being too precise about it).

Mr Murray’s expertise and insider knowledge would be invaluable at the inquiry. But he should there presenting evidence not running it.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.