Shorten ups the ante on bank Royal Commission

By Leith van Onselen

Labor leader, Bill Shorten, has dialled-up calls for a banking Royal Commission, appearing on Sky TV yesterday to call-out the Coalition’s constant defence of the banks, which he claims is against the will of the electorate. From Adele Ferguson:

Bill Shorten’s comments that the Coalition should “join with us and the voice of the people and have a banking royal commission” will add to the chills already running through the financial services sector…

“Nothing less than a royal commission into Australia’s banking and financial services industry will suffice and it doesn’t matter even if we don’t fall across the line and form a government, but instead we are the opposition, we will be prosecuting the case for a banking royal commission”…

The Coalition underestimated the disquiet among Australians about the behaviour of the banks. This was nowhere more evident than the polls, which showed majority support for a royal commission.

The upshot is only the believers and the gullible bought the Coalition’s arguments. The problem is existing laws don’t provide enough protection against conflicted advice and remuneration, and ASIC hasn’t been able to fix systemic problems in the industry…

Labor’s backing for a bank royal commission is turning into a key strength as most of the minority parties and crossbenchers are strong advocates of a royal commission.

The arguments for a banking Royal Commission are compelling.

First, there’s the recent explosive reports about banks manipulating the bank bill swap rate, which need thorough investigation.

Second, there is the 1000-plus examples whereby borrowers’ loan documentation has been forged by the banks, as revealed by LF Economics’ Lindsay David on Four Corners in May, as well as in LF Economics’ detailed submission to the 2016 Parliamentary Inquiry into Penalties for White-Collar Crime, which provided compelling evidence showing that Australia is a haven for white-collar criminality and control fraud.

Reports of widespread mortgage fraud has also emerged from other quarters (for example here and here).

Finally, there’s the dodgy lending standards underpinning Australia’s massive mortgage debts, as expressed recently by former chief executive of NAB, Don Argus:

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…

“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”…

While the Turnbull Government claims that ASIC has the powers to investigate these issues, why hasn’t it done so already and where are the penalties?

It seems that a banking Royal Commission may be the only way to get to the bottom of the banks’ systemic dodgy practices. Bring it on.

[email protected]

Unconventional Economist

Comments

  1. A Banking Royal Commission is about the only certain thing to come out of the election. If nothing else, Katter will ask for it in return for his support.

    That said, I reckon it will be an horrendous waste of time and money.

  2. TailorTrashMEMBER

    Right now “there has never been a more exciting time to be an Australian ” ……….yeh! ……..push it Bill …….it’s a winner

  3. But what scares the “hell out of” every other bonus-mining CEO actually still working in banking ? Contraction in lending and valuation write-downs. And what scares the hell out of every bonus-mining fund manager holding banks as 15%-20% of their portfolio’s exposure ? Contraction in bank earnings and cuts to dividends. And what kind of power do these miscreants have ? Shit loads. More than ASIC, APRA and your local federal member, that’s for sure.

    • Yeah, but this is the perfect wedge.

      You’re right about what causes fear amongst the work shy parasites of the banking industry and also with respect to their relative power.

      But there is one area it doesn’t extend…

      The core of 40 or so safe ALP seats that trade unionists tend to get parachuted in to.

      Now imagine if you will, this group of 40 federal members recognising this power, and also how it needs to be dismantled for the good of the country.

      The wedge, start in the front foot, call that royal commission, as a powerful opposition (if you concede the Libs will have it) against the lamest of lame duck governments.

      You may crash the economy from opposition, but the government will hold the can.

      You get to kill the bad guys, and probably inherit the country from the floor, with the only way being up.

      • I sure hope so, but somehow I don’t think it’s going to be that simple.

        Because of the remaining 80 or so perhaps seats that can swing

        Now imagine if you will, that group of 80 potential federal members + 1 Liberal Party strategist recognising the fickleness of the electorate, and also how it needs to be harnessed for the good of the Liberal Party.

        The attack, start on the front page of the Australian, AFR and Herald, make Labor and the Independents own the consequence of that Royal commission, real or imagined, and as a Party with direct lines into every powerful institution and lobby you need to call on.

        You talk up the undermining of the economy by the Opposition and independents, ensuring they will hold the can for the fall in bank share prices and other run-on effects.

        You get to save the bad guys, dole out the AOs, and inherit a directorship.

      • FiftiesFibroShack

        I’d like to see that.

        The government of the day usually wears the fallout from current events, responsible or not. News Corp can whinge as much as they want, but once the stories of corruption start to flow – and they will be juicy – they’ll shut the fuck up, and public anger will be a huge asset for those that backed the RC.

        The timing is tricky, but well worth the punt for the ALP. It’s time.

  4. Ronin8317MEMBER

    If the LNP needs to form a minority government, the ALP plus the cross bench will have enough numbers to force a Royal Commission, and they’ll have the numbers in the Senate as well. The opposition passing a bill against the wish of the government would be a wonderful sight to behold.

  5. Pathetic. If a RC into the Building Industry / Trade Unions was effectively useless then there is no prospect of a banking RC being anything but a waste of money. Fraud, rigging, scandals, taking money off the poor and defenceless is all terrible news but it is just another day in the modern world we live in. Regrettably. Even Biw Shorten and the Unions say RC’s are just witch hunts. Evidence suggests this will be yet another waste of taxpayers money as there is not the will to fix anything properly in the country any more. If they wanted to fix the bankers, property scams, Unions, dodgy builders, dodgy politicians, conflicted journalists, dodgy border officials and visa scammers, ineffective FIRB, hopeless ASIC etc they would do it, but they haven’t.

  6. HE is going to have to move fast
    Looks like theyre are going under in the UK
    The British pound fell to a 31-year low against the greenback after three property investment funds in the UK[ M&G, Aviva and Standard Life] Suspended withdrawals amid concerns about the impact of Brexit on financial markets.
    The three funds account for about one third of the 35 billion pounds ($61 billion) invested in property funds in the UK
    http://www.abc.net.au/news/2016-07-06/british-pound-falls-to-31-year-low-global-markets-flounder/7572532?section=business

  7. Meh. Best thing that might happen is a couple of lowly traders get served up as a token offering, while Gail, Ian et al continue on as normal.

    • Exactly. And in 6 months those sacked banking staff will have swapped seats and be back doing the same crap with each other.

  8. The Pecora Commission did its job in the past so there is historical precedent, those that make out otherwise with divisive commentary are part of the problem and not solutions, and should be remembered as such….

    Disheveled Marsupial… like the rapture ready some are compelled to force negative outcomes just so they can claim validity…

  9. A Royal Commission must address as a first point self-evident truths in banking:
    1. Banks do NOT act as intermediaries between savers and borrowers.
    2. The Banks social license to “print money” ex-nihlo must end as only the sovereign should be responsible for credit creation.

    If an RC can address these first principles then all else flows from the enlightenment.

  10. How do these F&^$ers get away with charging 3% on Cards used O/Seas + their loaded currency conversion ? Or their 2% on Cash withdrawals + 20% immediate charge! This at a time when the majority of accounts are likely to be getting .5% if lucky! Australians are dead stupid to let these mongrel Bankers get away with these blatant rip offs. It doesn’t happen in Europe – & for American issued AMEX cards there is no 3% charge for Overseas purchases BUT there is for Australian Issued AMEX !

    NB -I don’t pay these fees BUT most Aussies do because of ignorance & stupidity which Bankers feed on.

    • TailorTrashMEMBER

      Interested …how do you avoid these charges on credit cards ?

      Just had discussion with NAB re the use of a cash card I took to the US …loaded it with $US ….and used it only once to withdraw $us …..funny thing was it converted my $US back into $A at a crappy exchange rate and then charged that back against my $US loaded card ………so The cost to me was about 12.5% ………Took it up with NAB and they are crediting me with the reconversion charges .
      If the card has $US on it that I paid for in Australia at the nice to the bank favourable exchange rate and I use the card to with draw $US cash in the US …….then it’s a bit rich to convert that back to $Aus and deduct more US dollars from my card than I actually got in $US cash ……

      Banks are now behaving like pickpockets ………steal your wallet while you are not looking …………if you kick up a fuss they give you your wallet back ……..but how many people never check this on their trip to Bali and get ripped off ………….

      • Just get a citibank plus card. Far lower fees and actually acceptable exchange rates.

      • Best card I’ve found for foreign currency transaction is the 28 Degrees card. https://www.28degreescard.com.au

        $0 overseas fees on purchases
        $0 currency conversion
        $0 foreign transaction fees

        It used to also have free cash withdrawals from OS ATMs but they now charge.

        As far as hedging favourable exchange rates, I have USD cash purchased when the AUD was above parity sitting in a (non-bank) safety deposit box.

      • Citibank plus for ATM card, and 28 degrees for credit card.

        Those two cards for everything international.

        Use other cards as backups if needed. For example, a non expiring travel wallet gives poor rates, but as a hedge against suddenly dropping AUD it can be regarded as insurance.

      • Avoiding charges — –
        I use 28% Credit Card for ALL O/Sea’s purchases on line – using it linked to Pay pal fro security etc.
        Also take with us when O/seas as Back up if purchasing goods – (Always pay in that Countries currency – don’t let merchant change to A$ – will lead to Higher fees)
        *All credit Cards paid monthly Automatically by Macquarie Bank a/c.
        Also have Swiss Bankers PrePaid Card – Via Swiss Bank. https://www.swissbankers.ch/en/home.aspx
        https://www.28degreescard.com.au/credit-card-features/?&gemid1=Jun15-28d-sem-google-28D_BRA&mkwid=s06L9E5PU-dc_pcrid_58036055809_pkw_%2B28%20degrees%20%2Bmaster%20%2Bcard_pmt_b_

        http://whirlpool.net.au/wiki/28_degrees
        https://mozo.com.au/rate-and-review/28-degrees/credit-card-reviews
        Some New to Me ( Last paragraph) Info — Re Pay Pal – –
        For those who noticed that your bank has not charged you any “foreign transaction fee” when purchasing via PayPal linked to your credit card, it’s because PayPal has already converted your overseas purchase amount into AUD. Hence, a local transaction as far as your bank is concerned.
        However PayPal’s conversion rate is not as good as Mastercard’s or Visa’s. If you set PayPal to “Bill me in the currency listed on the seller’s invoice”, your Mastercard or Visa will do the conversion to AUD instead, at a much favourable rate. BUT BUT BUT your
        Read more
        BANK will charge you a “foreign transaction fee” of around 3% on top of that – for their “effort”! You avoid this fee altogether when you use the 28 Degrees Mastercard (or similar no-fee ones) because it’s not issued by a conventional retail bank.
        By the way, the widely published exchange rate (on TV, etc.) is always the spot-rate or interbank rate. You will never get that rate. Credit card rate will add around 2%. The rate for paper currency being the highest at more than 5%. And god-forbid the airport kiosk rate! 28 Degrees charges 3% for overseas cash withdrawal which is close to the kiosk rate of 5% when you include Mastercard’s 2% (on top of spot-rate).
        To change the PayPal default setting, login to PayPal: Payments > Pre-approved payments > Set Available Funding Sources (hard to find, but it’s there) > Conversion Options > Bill me in the currency listed on the seller’s invoice.

  11. Stephen Morris

    Will it address protection of the funds management industry??

    If Australian wage and salary earners were forced to surrender 9.5% of their income and put it towards buying Australian made cars there would be an outcry of “industry protection”.

    But Australian wage and salary earners (the wealthy with investment income are exempt) can be forced to surrender 9.5% of their income and put it towards buying Australian made “funds management” which is currently pulling out fees of $20+ billion per annum . . . with little indication that it produces anything at all of net value.

    • Yes, if $20Bn goes for tax breaks for high net worth individuals, it’s evil. But if the same amount goes in fees to high net worth banks, meh.

    • Sadly this is right on the money so to speak. Perhaps self managed fund should be compulsory rather than the exception?

  12. With all the talk about Mediscare, people (and the media) forgot what Turnbull said at the beginning of the campaign: “Vote Labor and see your house value go down”. If that’s not a scare campaign I don’t know what is. I am very surprised that he was not taken to task at that..

  13. I thought the first rule about Royal commissions was:
    Never ask for a RC unless you know in advance everything that will be discovered/uncovered.
    I’m not sure anyone knows the true depths of financial shenanigans that goes on within the Australian banking sector. That fact alone would make me very wary of starting an RC.
    What would disturb me even more is the likelihood that the banking sector would try to clean itself up, put on a good show while the RC was in town. Reminds me somewhat of the disastrous effects in China of the steps taken to regulate China’s shadow banking sector, it was all well intentioned I’m sure but non-the-less it was a disaster for the sectors of the economy that depended on this flow of capital. from shadow banking sources (in China think manufacturing and construction in Australia think existing housing)