Frydenberg panics, demands return of criminal mortgages

It would be amusing if it were not so horribly corrupt, via the AFR comes Amateur Treasurer Josh Frydenberg mainlining panic straight into bank executive veins:

“I would encourage the banks when it comes to lending, in particular for small business, make sure you get the balance right, keep the books open and don’t lose sight of the broader public good,” he said.

“We all know the royal commission has brought into focus the issues of responsible lending and examples of misconduct. While both issues are important, I do see them to some extent as separate, with different responses required.”

…”Great care needs to be taken around any further changes to responsible lending in order to prevent an unnecessarily restrictive approach to credit.”

Sadly, in Australia’s housing addicted economy there is no division between mortgages and business lending, given deflating housing assets secure both. Neither is there a division between criminal behaviour and predatory lending. See the Royal Commission.

Charging dead people:

  • In April the commission revealed the sordid details in which planners from Commonwealth Bank subsidiary Count Financial profited for years from dead customers’ fees.
  • In the worst case revealed, a planner knew a client had died in January 2004, but was still taking almost $1000 a year in fees until December, 2015.
  • By August it was also revealed how National Australia Bank superannuation services whacked fees on the accounts of more than 4000 dead customers.
  • A month later, in September, it was the turn of AMP to be caught out charging life insurance to dead people on their superannuation accounts.

Bullying, stalking and abusing the disabled and infirm:

  • The call revealed a salesman bombarding the young man with information, with the 26-year-old offering hesitant, one word answers. Mr Stewart said his son not understand what was happening.
  • When he pleads: “I need to go”, the salesman pressures him for bank details to set up direct debit.
  • In September the commission heard how aggressive case managers at insurance giant TAL who hounded a nurse with an anxiety disorder for six years — including using a private detective to film her at a swimming pool — went unpunished.
  • Insurance giant TAL hired a private detective to spy on the nurse. Picture: Stock image
  • The commission heard how CommInsure rejected a woman’s claim after she was treated for breast cancer because her surgery wasn’t “radical” enough.
  • In March, the commission heard from a man who told the Commonwealth Bank “I’m a gambler, I’ve got a gambling problem” as he pleaded to escape a credit card debt spiral. Instead he was offered more credit.
  • Youth-focused insurer Youi provided service that was anything but “awesome”, leaving victims of natural disasters displaced from their homes for more than a year.

Rapacious incentives:

  • The commission saw evidence of how Freedom Insurance — the company which pressure sold to a man with Down syndrome — rewarded the best salespeople with Vespa scooters and trips to Bali.
  • But it was revealed funeral insurer Let’s Insure did similar incentives, offering top sales people trips to Las Vegas to stay at a “glitzy hotel”.
  • In yet another case a BankWest manager was awarded a trip to Hayman Island and hailed as a “regional champion” before his dodgy lending practices contributed to a struggling farmer losing his property.
  • In one case, the royal commission blasted Aussie Home Loans for keeping tearful victims of a shonky mortgage broker in the dark about his fraud, all the while continuing to collect trailing commissions on the $70 million of loans he wrote.
  • In one case a victim was kept in the dark even after she called Aussie in tears after being accused by her bank of presenting faked loan documents.

Evil planners and predatory lending:

  • In April we heard of rogue National Australia Bank staff who falsified documents to secure mortgages for customers in return for cash bribes paid across the counter, the banking royal commission has heard.
  • In another case — a high-flying Westpac executive said the bank was too busy to tell the corporate cop about a shonky financial planner, even though it had secretly started paying back the planner’s victims.
  • One of the scariest things in the whole commission were questions over how safe our mortgage market actually is.
  • The commission posed serious questions about the Household Expenditure Measure (HEM) — the benchmark used to assess a customer’s debts and liabilities — which was heavily criticised in the interim report.
  • The commission said lenders did not diligently analyse a customer’s household expenses which could restrict or prohibit their ability to take out a loan.

Where is the “public good” in protecting this disaster? I mean, come on.

We know where this “advice” is coming from. The corrupt and captured regulators which are increasingly abandoning all pretense of independence. Recall that behind the scenes the RBA is working with Treasury to prevent any change to the corrupt banking regime exposed by the Hayne Royal Commission upon which its favourite property bubble depends:

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.

This despite four out of five Australians losing faith in their own banking system:

Only one in five Australians believes banks act ethically and only one in four thinks banks take responsibility for mistakes and keep their promises to customers, according to the damning findings in a new national survey.

The survey underlines that the job of repairing customer trust in the wake of the Hayne royal commission will be a long and challenging road.

The inaugural Deloitte Trust Index – Banking 2018 has found the public’s dim view of banks is not influenced by major political party persuasion, class or gender. Nor are branch customers any more trusting than those banking over the internet.

As well, Frydenberg recently reappointed APRA chairman Wayne Byers out of the blue amid fierce criticism and immediately took the quid pro quo of using the regulator’s brand in a political attack, via the AFR:

Mr Frydenberg on Wednesday accused Labor of trying to “smash” the already-falling housing market from its plan to curtail negative gearing and capital gains tax breaks.

He has instead endorsed the prudential regulator’s interventions to cool the property market via cracking down on investor loans.

So, will Amateur Treasurer Frydenberg’s panic, circumvention of the Hayne Royal Commission, politicisation of the regulators, crushing of monetary independence and embrace of criminal banking succeed? Let’s ask the banks, also at the AFR:

Amid growing fears the banking royal commission will force banks to restrict the credit needed to grow the economy, business banking heads at National Australia Bank and Westpac Banking Corp have responded to Treasurer Josh Frydenberg by pledging to keep their doors open to SME customers as both banks urged Commissioner Kenneth Hayne not to over-regulate the space.

After Mr Frydenberg, in the AFR Weekend, urged banks to “keep open the books” and help avoid “an unnecessarily restrictive approach to credit”, Anthony Healy, NAB’s chief customer officer for business and private banking, said on Sunday: “We are open for business”.

Pretty weak stuff. ANZ gave the real answer decisively, also at the AFR:

…From November 25 the bank will be using new “comprehensive credit reporting” checks by having third-party agencies check on applicants’ credit card, home, personal, or car loan debt.

In addition, mortgage brokers will be required to provide “enhanced verification” about applicants’ income and rental expenses. This will include more details about changes to financial circumstances, including impending retirement. More details will be asked for about living expenses and any other commitments.

Brokers will asked to look out for any signs of financial hardship, including late payments, overdrawn accounts, gambling and pay day lender transactions.

The bank will also require segmented proof of income divided by overtime, bonuses and part timers will have to show six months employment.

Constraints on business loans is not the problem. Constraints on mortgages is. One automatically implies the other as the underlying security deteriorates. There is also the fact that the bank’s don’t care what Frydenberg thinks. The Royal Commission is Labor’s baby. With the election a foregone conclusion, only Labor is in the minds of banking executives as they prepare for its reform of tax concessions, regulators and criminal activity.

Which leads to one fateful conclusion. The abjectly corrupt RBA, APRA and Treasury are going to throw every gun, grenade, knife and stone that they can grasp at Shadow Treasurer Chris Bowen to force him to endorse criminal banking, as well as back flip on negative gearing reform.

I hope you’re ready, Chris. The nation is counting on you to stand firm in the real “public good” of draining this festering, stinking swamp.

Houses and Holes
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  1. When i think of this muppet Frydenberg i picture him standing next to the ex SA Premier, mind spinning, like a bag of gutless sheet. I expect Bowen to be no different.

  2. Strength of character, the personal quality that you allude to is in large part a skill developed through practice. For me Tom Uren is the yardstick and his iron principles we’re forged by life’s struggles.

    Bowen et al have no understanding of such difficulties and thus are bound to flounder.

  3. “comprehensive credit reporting”

    I wonder how many borrowers have not been up front about all their debt? Interesting.

  4. “Amateur Treasurer Frydenberg”. The best quote from this piece. And the worry is, from someone looking from afar, is that it appears you could tell Josh that jelly beans will save the economy, and he’d repeat that line if it came from an ‘expert’!

  5. Amid growing fears the banking royal commission will force banks to restrict the credit needed to grow the economy

    By “grow the economy” I presume they mean continue the housing bubble?

    If the RC has uncovered all this, you can only imagine the malfeasance that remains hidden like the bulk of an iceberg beneath the water

  6. The Royal Commissioner has proved to be a decent man who has done and is doing the right thing in his work.
    The people running this site have been brave and shown great strength in backing the Royal Commissioner.
    After all the criminal acts that have been uncovered by the Commission this year it is very bleak to realise that our Country’s treasurer has decided that despite the clear evidence provided, he would ask said banks to continue their activities without waiting for the Commissioner’s final report.
    Political pressure on the Commissioner by a government that did its best to stop the Royal Commission into Banking even being a possibility is frightening.
    A quote from James Madison, ‘Father of the US Constitution’ is pertinent:
    “The House of Representatives… can make no law which will not have its full operation on themselves and their friends, as well as the great mass of society.This has always been deemed one of the strongest bonds by which human policy can connect the rulers and the people together.It creates between them that communion of interest and sympathy of sentiments, of which few governments have furnished examples, but without which every government degenerates into tyranny.”
    — James Madison, Federalist Paper No.57, 1788.

    • There is no need to pressure the commissioner. They can simply ignore him, as they probably will given all indications to this point.

  7. I’ve got a cellar full of the finest schadenfreude for the coming celebrations. I’ve tried a bottle of Bonfire of the Vanities, vintage 1999. Dry, full of the nuance of ironies and sarcasms with a hint of acid contempt. Magnificent.

  8. Forgive the cynicism, but Open Borders Bowen as Treasurer will be even more dangerous than when he was immigration minister. Ie business as usual.

    • +1
      We should not forget that in 2009 it it was Bowen as Assistant Treasurer who opened up existing property to foreign investors. Bowen is part of the problem.

    • The “correction”.

      Love the dry understatement. hahaha More like the Apocalypse we had to have. haha

    • Red, that is only half the story
      There is still 50 odd BILLION of interest accruing credit card debt to be repaid.
      Plus we still need to spend 24 bill on the pokies
      this sudden evaporation of loot is gunna make Straya look like the middle of Lake Eyre.
      SJ >A dry understatement, I get it.
      dry as a dead dingo’s donger.

      • Dingoes lost in the middle of Lake Eyre. lol Pretty much describes the whole political class today. Hope-less.
        Vote No 1 or 2 or 3 Sustainable Australia in the Senate.

      • If you can understand this
        You can understand the hurdle
        Its times like this Mr Minty is correct.

        “All of which goes to prove that corporations will only invest if they can see a return on it.
        They won’t invest or hire extra workers simply because they have extra cash with which to play.
        The problem now is that while the resulting debt needs to be repaid, there isn’t enough extra earnings capacity to cover the rising cost of all that extra borrowing once interest rates rise.
        And many of the executives who benefitted from this wondrous experiment have ridden off into the sunset, saddlebags packed with gold.”

  9. Please big law firms sue the appropriate people and organizations if they have been engaging in allegedly illegal activity. It’s almost like the treasurer is seeking to circumvent this

    • The big law firms are probably giving legal advice to these same people, for much larger fees than any likely to arise from calling them out.

  10. Hmmm how many times have I read some MMT’ers wet dream that the RBA can provide all the liquidity Australia requires at the stroke of a pen. If you ask me it’s high time for the RBA to start stroking that pen, maybe we should all chip in and buy Phil a left hand mouse, so that he can devote his full attention to stroking his pen.

    • I don’t see a liquidity shortage, do you?

      The stroking has successfully delivered fountains of liquidity so far. They might even think about transitioning from fountain to ball-point, to make less of a mess in the future.

      • From what I hear good “fountain pen” penmanship is all in the wrist action, to be a successful penman you’ve got to have a subtle wrist and soft hands, otherwise there’s a serious risk of blots and spillage resulting in the creation of indecipherable scribble, now we wouldn’t want the carefully crafted words, for which the RBA is so renowned, spoiled by bad penmanship, would we?

      • Liquidity shortages?
        On a more serious note, Yes I am beginning to see signs of Liquidity shortages.
        At the wholesale Import side of things many smaller Importers, the Alibaba brigade, definitely have reduced their presence and participation in the market. I’m guessing Liquidity issues are what’s really driving this change, although it could also be simply the raise of consumers direct importing through Amazon and Ebay.
        It’ll be interesting to see what happens to Australian inflation IF we see a narrowing of our importer base. Many traditional Importers would gladly see the Alibaba brigade legislated against, of course I’m much more of a free market guy so that sort of thinking does not sit well with me.

      • Well that’s one way of viewing the facts.
        Another is to say that changes in Aggregate Liquidity occur first at the margins. For a head-up on market direction I always look closely at what happens to markets at-the-margin. Alibaba Importers are a very good At-the-Margin indicator of the healthy of wholesale business if for no other reason than their ability to participate at will (when profitable and possible due to Liquidity availability) Most major (and all listed) businesses are stuck in a sort of Investor sales expectation dilemma, in that they blind themselves to reality because to admit reality would suggest that they contract their business an action for which the Share market (and possible the bond markets) will punish them unmercifully. So big businesses extend and pretend while managers prepare their who-could-have-known-it speech.
        Small Alibaba actors don’t have this dilemma they participate only when it suits them making their actions a much better indicator of the market than the actions of those that can’t adjust to market dynamics.

      • At the moment liquidity is tightening: US rates are headed higher and the Fed’s balance sheet is declining. Those are the only things that matter. As the USD is the de facto ‘gold standard’ these days liquidity in all other markets (no exceptions) tracks what’s happening to the Dollar. Things might look great right now but the effects of this tightening occur with a lag so it’s just a matter of time.

      • Just to be clear about Liquidity.
        I’m not particularly interested in how much money is flowing within Australia because my premise is that the amount of $AUD circulating wont matter because that’s easy to adjust. What’s not easy to adjust is the volume and diversity of things on the shelves (figuratively). So in a way I expect the next liquidity crises to manifest itself through shortages of imported items we’re all accustomed to buying. Meaning it’ll be goods that are in short supply.

      • So in a way I expect the next liquidity crises to manifest itself through shortages of imported items we’re all accustomed to buying. Meaning it’ll be goods that are in short supply.

        If you mean in absolute terms, you must be high.

        If that’s code for imported things will get more expensive – then maybe. But I don’t think that’s what you mean, given your disregard for the number of A$ in circulation….

      • No I mean in absolute the wholesale market will be less diverse.
        Typically this means reduced High end and low end offerings and the absence of third tier brands from the shelves. Indirectly that enables price inflation for the main-stream offerings.

    • They will be less likely to get outbid on everything by hundreds of thousands of dollars by feral low quality high risk borrowers in their frenzied grab for all land?

    • What Peachy said, I’ll finally be able to buy something without competing against every numpty from Asia or Bogan with a few Jetskis already. Or those quassi developers who build shyte quality town houses and knock down lovely high quality period homes.

  11. The banks are now at Stage 3 – Anger and Bargaining.
    By ‘accepting’ what’s happening around them and publicly pointing it out (anger), they are hopeful of getting some respite from The Authorities. (the Bargaining bit).
    And we know what comes when that doesn’t work and they hit Stage 4 don’t we!

  12. “don’t lose sight of the broader public good..”

    Ah, we’re taking a leaf out of the CCP’s book. The banks are to become SOEs … an arm of Govt.

  13. Using GDP ( GNP in the US ) is a dreadful way of measuring economic “progress” For example if someone goes “Postal” and shoves a knife into half a dozen people he will contribute lots to the GDP. Only a $M or so if they all die, but possibly many
    millions if they take a long time to recover. Even the cheapest hospital charges > $1K/day for a stay. $6K/day for ICU. Jails also cost almost as much per day.
    For a good summary of this look up ‘RFK GNP’ on UTUBE.

  14. “broader public good”

    Will someone please think of all the politicians with multiple investment properties.

  15. Translation of Frydenburg’s comment – We are getting slaughtered in the polls”

    “We all know the royal commission has brought into focus the issues of responsible lending and examples of misconduct. While both issues are important, I do see them to some extent as separate, with different responses required.”