Digital Finance Analytics‘ Martin North has done an excellent primer video on the first two weeks of the Banking Royal Commission, as well as the potential implications, which is well worth a watch.
LF Economics’ Phil Soos has also written a good summary at The Guardian:
Faked pay slips, forged documents and cash-stuffed envelopes used as bribes to secure loans are just some of the examples of dodgy practices exposed so far by the banking royal commission…
The evidence paints a picture of an industry captured by people falling over themselves to get rich quick on commission-driven schemes to dish out ever bigger mortgages to borrowers who cannot afford them…
So if you had always thought that Australia’s banking system was well-managed by upstanding people and well-regulated by Eliot Ness-type bureaucrats, and therefore immune from the systemic disasters seen in the UK and the US 10 years ago, then maybe think again.
There is evidence to suggest regular and widespread criminality has been committed by industry since the 1980s…
Rather than enhance efficiency and competition, failed conservative economic ideology has produced excessive financialisation, banks that are too big to fail, record private indebtedness, gigantic asset bubbles and numerous control frauds.
Along the line, industry has shifted from prudent to imprudent to potentially breaching lending laws. Rather than rein in runaway household debt, regulators have let the industry run wild while constantly claiming to “keep close watch” over lending practices…
Borrowers have been betrayed by the regulators’ neglect, despite their knowledge of the mortgage control fraud…
Brokers have featured prominently in the royal commission so far, given their important role in mortgage lending. They are responsible for arranging about half of all loans. It is common knowledge that brokers face perverse incentives to maximise loan volumes given origination and trailing commissions.
The broker network was developed by industry to function as a bullet-shield between itself and borrowers. If allegations of fraud arise, lenders will blame brokers. They function as the “fall guys” or “dupes” who can easily be thrown under the bus…
