APRA and ASIC may be the one’s left carrying the bag for Australian bank’s housing bubble excesses but they had good company in the RBA and Treasury. Following the GFC the RBA openly declared that Australian household debt was a clear and present danger to the economy yet when its mooted thirty year mining boom went bust in three it then about-faced and egged on the blow-off phase of the property bubble. Treasury’s David Gruen openly agreed with the volte face.
The rest is history. To float the economy temporarily over his mining investment cliff, Glenn Stevens re-inflated the bubble, blew it to new extremes, fought any effort at containment via maccoprudential, then retired before the destruction of the banking system was discovered.
This was the RBA’s and Treasury’s “dumb bubble”, blown explicitly in the wake of the GFC, the greatest standing warning against such economic vandalism in a century, just so it could dodge the consequences of regulator’s own China stupidity.
Should we be surprised then that today we get this, via the AFR:
The Reserve Bank of Australia and Treasury have privately cautioned the Morrison government that any regulatory response to the financial services Royal Commission must be careful to avoid putting the brakes on lending to home buyers and business.
The advice from two of the country’s top financial policy agencies appears to partly explain why Treasurer Josh Frydenberg has signalled he must balance cracking down on nefarious misconduct in the industry and ensure credit keeps flowing to borrowers to grow the economy.
Sources said the RBA and Treasury had confidentially emphasised to the government the importance of avoiding a credit squeeze.
Saul Eslake, a former commercial bank economist, said …”The royal commission hasn’t really shown systematic imprudent lending and borrowing of the sort that was at the heart of the US financial crisis,” Mr Eslake said.
WTF Saul. Which royal commission have you been watching? The great Aussie property blow-off was built on illegal and immoral lending and exactly the same LIAR, NINJA and reset loans as the US bubble. Only we did it a handful of years after the same phenomenon damn near destroyed the world economy just to protect a few sorry regulator’s skins.
The RBA has a cash rate to cut if things get bad. What business has it telling others to not regulate criminal behaviour? How is that in the interest of financial stability long term?
The RBA and Treasury should hang their sorry, corrupted heads.
