Don Argus shames the banks

By Leith van Onselen

Don Argus, former chief executive of the National Australia Bank, has today launched a stinging attack on the banks’ shoddy lending standards, which he admits “scares the hell out of” him.  From The AFR:

What scares the “hell out of” Don Argus, a former chief executive of National Australia Bank and former chairman of BHP Billiton?

Iron ore prices? Interest rate rigging scandals? No. It is interest-only home loans.

“It scares the hell out of me – the size of the debt people are taking on without principal repayments,” he says.

The famously forthright executive says banks giving million-dollar home loans to young people had lost perspective. “It used to be very difficult to get a home loan in the old regulated banking environment,” he says. “Now it’s like a commodity”…

Argus’ views on interest-only loans are taken seriously in banking circles because he built his career around being rigorous on lending standards in the late 1980s and early ’90s, avoiding the disastrous commercial loan exposures that hobbled his peers.

He says Australian consumers are among the most indebted in the developed world and the governments that have been embracing interest-only loans will leave a terrible legacy for future generations.

Argus says a correction in house prices is inevitable, starting with the apartment market…

It’s even worse than that Don, since the loose lending has been funded by unprecedented offshore borrowing, thus leaving the banks and broader economy open to a liquidity shock:

ScreenHunter_12341 Mar. 29 15.40

We also know from LF Economics’ detailed submission to the 2016 Parliamentary Inquiry into Penalties for White-Collar Crime that there are 1000-plus examples whereby borrowers’ loan documentation has been forged by the banks.

Bank Royal Commission now!

[email protected]

Comments

  1. The famously forthright executive says banks giving million-dollar home loans to young people had lost perspective. “It used to be very difficult to get a home loan in the old regulated banking environment,” he says. “Now it’s like a commodity”…

    So Don wants to make it even harder for young people to enter the property market? He should be ashamed young people just want a roof over their heads. If the banks won’t loan us obscene amounts of money how can we compete with investors? This guy sounds unAustralian he’s against the “fair go”.

    /Signed
    The Australian Property Lobby.

  2. [email protected]

    This must be really frightening. Don Argus (DON’T ARGUE) is no “girlie man”!

    • TailorTrashMEMBER

      Reckon he’d be having the odd dinner ( with a glass of Grange or two ) with his old insider mates keeping up with the dirt on the industry ………..it scares him but those kids with million dollar interest only mortgages know no fear …………yet !

      • MichaelMEMBER

        They’ve got no savings to lose.
        The interest probably costs less than rent on that million dollar property, and they have no equity to lose.
        When housing falls in the inevitable hole, there will be a flood of “investment” properties that used to be empty so they can rent one of those on the cheap.

        Fear? What’s that?

  3. Hundreds said same before him, and what had actually happened?
    Nothing
    House prices still through the roof
    Dogs bark and cars keep moving

  4. [email protected]

    Well, we’ll see for how long in both Sydney and Melbourne. These two remaining markets are “DIFFERENT” like all the others that fell in a heap, ah?
    P.S. wanna buy a Melbourne condo at 30% off? All you need is a 30% deposit plus your parents guarantee!

  5. Saint MatthewMEMBER

    But what does it matter? The SS Australia will sink with the band playing Waltzing Matilda, but we’ll all go down together.

    • Yes, and probably using bail-ins to nick my house deposit. I am sure they will find some way to stop us enjoying their comeuppance.

  6. Australian household debt has increased far more and at a far greater pace than household debt did in the US leading up to 2008. The idea that “our” banks have high lending standards and “theirs” did not is idiotic fantasy of the highest order.

  7. Oh, Don Argus, would that be the genius of the Homeside NAB kinda banking type of lets go USA type of guy? FFS he is a first class clown. He may be concerned but he’s 20 years late. Classic snout found trough type of bank wanker.