Political pressure builds for bank royal commission

By Leith van Onselen

Momentum for a banking Royal Commission continues to build with Labor and The Greens tempting National cross-benchers to “cross the floor” in support of an inquiry. From The AFR:

Mr Shorten and his senior shadow ministers will work on wooing a Coalition MP, most likely a Nationals MP, to cross the floor and support a resolution calling for the bank probe, in a bid to embarrass the government. Labor and the Greens will easily have the numbers to pass a resolution in the Senate.

While a resolution would not force the government’s hand, Labor believes having both Houses of Parliament supporting a bank royal commission would, a source said, be “highly problematic for the government”.

Nationals senators John Williams and Matt Canavan have previously called for a banking Royal Commission, suggesting there may be enough support from within the National Party to force a resolution in the House of Representatives.

However, a resolution alone cannot force a Royal Commission, since only the executive government has the powers to create one. So the Coalition will need to be pressured/embarrassed into pursuing a banking Royal Commission.

The rationale for pursuing a Royal Commission into the banks is as compelling as ever and includes:

  • damning evidence of bank manipulation of the bank bill swap rate, which the banks have shown no contrition over;
  • the 1000-plus examples whereby borrowers’ loan documentation has been forged by the banks (see here, here, here and here), again with little remorse shown; and
  • overall dodgy lending standards.

The corporate regulator, ASIC, has proven utterly inept in investigating and prosecuting these cases, meaning there is little choice but to conduct a sweeping Royal Commission into the banks’ practices.

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Comments

  1. Is fractional reserve banking fraud? If the punters found out banks could create money for free and loan it out at interest, while bank execs got paid millions, surely they would be a bit pissed. Also, Deutche Bank is looking ‘unhealthy’ today.

    • ErmingtonPlumbingMEMBER

      They’ll be even more pissed after the “Correction” and they discover that they were never really in on the game.

      Im predicting Negative Equity shooters and truck attacks.

      • It will be a surprise for some realise that while shares can go to zero, leveraged property can go a long, long way below that.

      • You see… I’m not buying that housing will get utterly smashed by 40-70%. In the short term maybe, but look at SFO property price trends over the last 30 years.

        http://www.paragon-re.com/3_Recessions_2_Bubbles_and_a_Baby

        The good times definitely outweigh the bad times and the bad times only last a few years. (say 5 on average). So as long as you don’t need to sell in the bad times it’s game on..

        What if Oz property in say Sydney / Melbourne only adjusts by 25-30%? Then it’s back to what 2014 prices? Woop-eeeee…

      • Ronin8317MEMBER

        re:Gavin. While what you say is logical, it’s the bank, not the owner, who makes the call on whether you have to sell. If unemployment rise to 8%, there will be a lot of forced sales.

      • “look at SFO property price trends over the last 30 years.”

        And look at what happened to Melbourne property prices after the 1890s crash. Took around 60 years for them to return to the same level in real terms.

        “So as long as you don’t need to sell in the bad times it’s game on..”

        Which is kind of the point. A high degree of leverage makes it far more likely that you will indeed have to sell during the bad times.

      • @Ronin, what you are saying also makes sense but say you buy with at least 20% deposit and your serviceability was still ok, you will be fine. It’s not like we we will wake up one day and suddenly property is down by 20/30%. Also, it’s not a property market , its property markets so some places will do better than others.

      • “So as long as you don’t need to sell in the bad times it’s game on..”

        It’s just wrong on so many levels. The price is set by actual sales, not by holdouts. Sure people can hold on to properties for dear life, but if the buyer can’t finance the purchase, there is no price. All it takes is one forced sale at lower price, and the whole area get valued down.

      • I’ve mentioned it before but it maybe worth repeating.

        According to one of the big 4 banks state managers (got him to open up in a drunken friday drinks session) The banks have a plan for when it goes pear shaped.

        They are not going to fire sell everything off this time. They did that in the 1990’s and it didnt end well for the balance sheet. This time the plan is to hold the properties, rent them out and trickle feed them back into the real estate market. They dont want to swamp the market like they did last time.

        The banks are prepared to become landlords to protect their own equity, proving once again that they are bastards and profits come before people.

    • Yes DBK looking very sick – down 2 Euro in a week (mid 13 to mid 11). Lost 4.58% overnight!
      When it hits 10 is when it all goes feral is my pick.

    • Groan….. the fractional reserve was refuted long ago, the loanable funds model is make believe…

      Now if you want to crack a fat try honing in on marginalism and the wing nuts that thought rational agent models was sufficient reason to deregulate everything…

      Disheveled Marsupial…. confusion ensues….

      • LOL….

        Go to the BOE web site and then reference Keynes and Kaldor and PKE….

        Disheveled Marsupial… like shooting fish in a barrel…. Austrians are the thickest…

  2. It will only take one LNP in the House of Reps to cross the floor for this to get up. I think all the cross benchers (and obviously the ALP) are in favour of one as is a clear majority of the Senate.

    So who’s it going to be?

  3. [email protected]MEMBER

    RC to your hearts content, just make sure APRA n ASIC get it in the neck as well…

  4. August 3, AP – Two Korean backpackers working as cleaners at a Sydney college have been underpaid nearly $10,000 in just three months. The pair, travelling in Australia on 417 working visas, were paid cash-in-hand at rates as low as $15 an hour between March and June this year.
    The Fair Work Ombudsman says the pair were entitled to a minimum of $18 an hour,
    rising to $45 on public holidays. The pair have since been reimbursed $5400 and $4085 each.
    Fair Work spokeswoman Natalie James says their employer was fined $850 and issued with
    a formal letter of caution.”
    $850 fine…..that’s it. Do you think they didn’t know what they were doing was wrong?
    This is where the Royal commission should set up

    • “paid cash-in-hand”
      How was it possible the employer was not fined for tax evasion?

    • So someone steals $10,000 and only receives an $850 fine. White collar crime is the path to riches in this country. Matt Tiabbi gave a lecture on this topic, and the mental attitudes of the justice system that is very enlightening and very infuriating.
      https://m.youtube.com/watch?v=2kd4jpPZrRs