Lunatic RBA takes corruption directly to bank CEOs

Unbelievable, from The Australian:

Reserve Bank governor Philip Lowe is understood to have met the big four bank chiefs in recent weeks to caution them against an overzealous tightening of credit supply in response to lending rules and the Hayne royal commission.

A key message conveyed was that, while prudent lending was the aspiration, the banks were in some instances turning away good loans or not taking enough risk to warrant even a small tick-up in ­arrears, senior sources at the big four banks said. The meetings were conducted separately with each bank.

The major lenders are walking a fine line, though, as they seek to meet responsible lending requirements and move away from controversial benchmarks such as the Household Expenditure Method to assess loan serviceability.

Well Holy Shit. We just returned to the bad old days of centralised credit standards fixing. Or, the corrupt RBA is trying its best to take us there.

The RBA’s independence from both government and the banks has now collapsed. It’s role is supposed to be to use the cash rate to meet its mandated obligations free of political considerations and most definitely free of bank contact. It is doing neither.

It is perhaps forgivable that that the RBA might cross the line and use its chairmanship of the CFR to involve itself in the lending standards governed by APRA, that separation is arbitrary and is one reason why an inquiry into regulator responsibility is needed. What is totally out of line is that it would do so to subvert the outcomes of the Hayne Royal Commission before we’ve even gotten the results. Here’s what Phil Lowe said himself about the Hayne RC:

Dr Lowe said the banking royal commission was “showing the benefit of sunlight” being shone on the internal workings of the banks.

“Sunlight is acting as a very good disinfectant here. We need this disinfectant, and it actually working,” Dr Lowe told a House of Representatives economic committee hearing.

“Like most Australians I have been following what’s been happening very carefully, and I have to say I’m incredibly disappointed and in many cases I’ve been appalled.”

Now he’s standing right behind the appalling behaviour which is…appalling!

As for free of government, we already know that the RBA is working hand-in-glove with Treasury and the Treasurer, who must be loving the benefits for the Coalition as the RBA isolates Labor’s housing affordability agenda.

Not to mention that the RBA’s public statement about monetary policy are no entirely irreconcilable with its wild private behaviour.

Phil Lowe should be sacked forthwith for gross violation of just about every tenet of his mandate.

Will the RBA’s ribald corruption campaign succeed? Nope:

  • the Hayne RC does not deliver its outcome until February and before then bankers will be sticking with higher standards lest they go to prison;
  • even if the Hayne RC is nobbled by the corrupt CFR, it will still result in new legislation that will have no time to be delivered before the federal election in May leaving bankers on tenterhooks;
  • Labor will need to show a firm hand in response at minimum and we still have its negative gearing reforms coming anyway.

That takes us out to mid-2019 before we get any respite. By then Sydney will be down more than 15% and Melbourne more than 10% and the imploding internal dynamics of the market will have taken over as the economy buckles. Immigration is a long term support that can’t fix a cyclical crash.

The RBA will have to do then what it should be doing today. Instead of throwing its weight around like some monetary mobster, it will be forced to cut rates.

Finally, let me observe that Australia’s political-housing swamp is now so perverse that the government and RBA are publicly endorsing illegal, predatory mortgages, as well as actively targeting a decline in Australian living standards, while the chastened banks, legal system and ordinary people are on the side of morally and economically sustainable lending and economic growth.

Comments

  1. “prudent lending was the aspiration”

    Lol – aspiration. How about ‘absolute baseline non-negotiable requirement’, instead? these are government-guaranteed institutions we are talking about here!

    • +1000 mate. forget yellow or orange (waves at my comrade EP) vests we should just go straight to guillotines. fckn bstrds.
      I am all for paying higher taxes as long as that means better and more public schools and hospitals and free uni for all talented kids. But to see my taxes to be used to bail out corrupt bankers and some fckn gamblers like Mr Iq??

      Edit – my comments about taxes is.. end game will be to bail out the scum and RBA is making sure the price to bail them out will be to the moon.

    • Well, I mean, we’d all *love* it if lending were prudent, but just think where that could lead!

    • Jumping jack flash

      Buttering up the banks in preparation for interest rate cuts?

      He knows that if he were to cut right now nothing would happen because (apparently) lending standards are now too high. Well, nothing would happen that was any good, anyway.

      RBA has effectively lost control of the private banks, because, ironically, the banks are now suddenly more prudent than the RBA and the regulators! Who could have picked that?

  2. The CEOs won’t ease up, because Phil Lowe can’t stop them being put in jail, credit is tight and won’t change.

  3. I’d like to also add, there another thing MB hasn’t included in their analysis and are proponents for, MB is supporting “to get rid of mortgage brokers” and banks want to intro a flat fee.
    Mortgage brokers will just close shop and there is no way the banks have capacity to do the loans
    Add another 10% fall just from that.

    • Even StevenMEMBER

      Disagree. The banks can (physically) do the loan processing, might just take two weeks to be approved instead of one week.

      But if you mean prices will fall because banks won’t dodgy up the application as much as the mortgage brokers do – yes, agree. It’s worth at least a couple percent off prices.

    • ErmingtonPlumbingMEMBER

      Mortgage Brokers are nothing more than Subcontractors that allow banks to employ less people and to make “at home” signups cheaper.
      If every thing is not “straight up normal” and problems arise, the bank you are borrowing from will not communicate with you directly!,….you have to go through a third party! the Broker.

      I used a broker when I first brought my house 16 years ago,…I had already done my research and wanted to go with ME bank but didnt have a big enough deposite so decided to go Commonwealth Bank because of a very low first year introductory rate,…with the intention of refinancing with ME at a later date, something I did 3 to 4 years later when my wife and I brought out my brother who went in 3rds with us to buy the property we (the wife and I) had been renting for 5 years prior.

      The paper work was structured for a couple purchasing not 3 people and problems arose in making the settlement date.
      My broker said he was on to it but he wasn’t and I knew it,…so I called Colonial (thought we were supposed to be with Commonwealth but our loan was organised with Colonial)
      And they said they couldn’t talk to me as Id gone through a broker,…to which I replied with much profanity saying if Im going to owe you guys 100s of thousands of dollars I should be fking able to comunicate directly with you!
      They said no, not unless I wanted to make a formal complaint against the broker,…which I immediately did.
      Much attention was then given to me by several “Managers” and I got my issue sorted.
      The Broker was Irate and saying I shoukd have not called them.
      I told him that I should not have employed the services of a Mortgage broker who does nothing more than hold someones hand filling in some paperwork at home,…you have done nothing, anyone couldn’t have done for themselves.
      I will never put someone inbetween me and a lending instution again,…pissed off at myself for doing it this time,…stupid! I went on telling him.

      He still sent me direct marketing $hite for years afterwards.

      • The mortgage broker acts as a fall guy for the banks when dealing with those who are not ‘straight up’. It gives them plausible deniability as to frauds necessary to get the loan across the line. This is why they always blame the broker when in fact the fraud is inside the bank itself.

      • Jumping jack flash

        Mortgage brokers = nothing more than a bank’s arse cover…

        I do know a guy though who can get you any amount of debt you want… so I’ve been told.

      • Its the trailing fees for mortgage brokers that irritate me.
        The broker does a job once and then gets a fee for 25 years. It’s so wrong I want to splutter.

        The horrible irony is a friend of mine who has “a great broker” is perfectly fine about them because (and I quote) “The bank pays the fees”

        I pointed out that the bank may pay the broker but they pay it from fees they get from the customer. My friend got a rather cats bum look on her face and I decided it was probably a good time to change the topic.

        Ain’t no such thing as a free lunch.

  4. Even StevenMEMBER

    Why MB is surprised about RBA’s role in all this I don’t know. RBA is chair of CFR. It is the independent institution with primary oversight of Australian economy as they are essentially staffed with economists/researchers and have resources which exceed the other agencies.

    They have been on record cheerleading the run up in property prices, and until recently, had consistently downplayed the risks associated with high levels of household debt.

    The RBA has been in La La land. Complacent in the extreme. Not the only organisation to be so, but certainly the worst. FIRB would be a contender but the reality is they are (deliberately?) understaffed. What’s RBA’s excuse?

    • The Traveling Wilbur

      And the Oscar for best director, best ‘actor’ in a trag-com, and best film goes to…

  5. proofreadersMEMBER

    Irresponsible lending proudly promoted and sponsored by your RBA? Apart from screwing savers in to the grave, the ivory tower inhabitants have to another raison d’etre?

    • They haven’t even started yet. All we have at the moment is a bit of jawboning. When they start relaxing the legislation around responsible lending we are into the unnatural acts.

      • aaah – so what you’re saying is they’re at the “come on, baby, just the tip” pleading stage… the Flunitrazepam and assorted muscle relaxants heavy artillery are yet to come up…

      • Oh you mean after the regulators themselves have been given a reaming at the RC? Sure would love to see that.
        I can imagine a petition starting soon to continue the RC for regulators this time. The sentiment is rising.

      • @ino,
        Pretty much lol
        “https://www.macrobusiness.com.au/2018/12/apra-shits-self-lifts-interest-mortgage-cap/” is simply going back to how things were until a year ago, not anything new at all.

        @Divya,
        the RC can verbally ream whoever it likes, but has no legal power to do anything other than call witnesses. The regulators have clearly and publicly made their positions on this known, and given the government has done nothing about it they have the tacit support of the only people who have the power to do anything.

      • @ino,
        Pretty much lol
        “apra-lifts-interest-mortgage-cap/” is simply going back to how things were until a year ago, not anything new at all.
        @Divya,
        the RC can verbally ream whoever it likes, but has no legal power to do anything other than call witnesses. The regulators have clearly and publicly made their positions on this known, and given the government has done nothing about it they have the tacit support of the only people who have the power to do anything.

      • Omg,
        is the key word regulators, ream? tacit?

        No – it’s the “…-shìt-…” in the URL you pasted… CensorshipBot looks at URLs and snips messages with naughty words inside URLs too…

      • I worked that out, they also didn’t like my commentary regarding MB censoring itself so that post is gone permanently.
        Which is probably fair enough.

  6. A novelist would be laughed at for making up such an implausible scenario. Yet here we have it in real life, real time.

    Prudent lending is NOT secondary to freely available credit. If Dr Lowe is uncomfortable with current settings he had better begin with the perpendicular pronoun, I. He knew the banks were comprehensively engaging in fraudulent lending – the credit aggregates made this very clear. The public record shows no concern, no warnings, no dissent, by any financial regulatory agency from the mistaken belief that land prices could go up forever.

    Not only will my taxes be used to bail out banks and lying borrowers, they will have to fund a new prison to house an entire generation of senior public servants who did not do their job and sent my country to hell.

    Don’t Buy Now!

  7. Is it Morrison’s hand up his arse too? Surely there throwing anything and everything at this economic hot potato so they don’t wear it at election time.

  8. I suspect we just got a glimpse of the gloves Dr Lowe dons when tasked with something particularly distasteful, but we still haven’t seen the RBA’s kitchen sink.
    We’ll see the kitchen sink tossed in before we see an end to this particular chapter.

  9. Nobody should be surprised.
    Expect a lot more of these meetings behind closed doors as bank funding cost rise and NPL’s start to increase; things the RBA have little control over.
    The RBA and APRA are saying just keep lending while the banks will be saying OK but will you have our back if it turns sour.
    Throw in the s-storm brewing in the stock market and China’s credit impulse in a coma and things look gloomy indeed.

    By the way does anyone have any insights into the Australian RMBS and CDS markets?

  10. LOL. Have not laughed so hard this early in the morning (over in WA) at the excellent comments posted here. Good work, folks. If HnH judiciously turns of CensorshipBot on a permanent basis (and not just to rope in new subscribers then turn it back on again!) I might become a paying member.
    My gripe at the RBA? Shredding past tax returns I came across old TD certificates from 2008ish – one could get 8.5%, short term then. Compare to the crap on offer now.

  11. The running of this country is a sick joke in so many ways, from this to immigration and employment rorts to uni education rorts it is truly unbelievable. Thanks MB for exposing this at least

  12. Jumping jack flash

    “A key message conveyed was that, while prudent lending was the aspiration, the banks were in some instances turning away good loans or not taking enough risk…”

    So close….
    Come on now, juuuust say it, I know you want to….

    “The economy depends on debt spending and that mysterious “wealth effect” which is simply debt viewed at a different angle. If we tighten lending standards too much, or actually, if we tighten them at all, we’ll get a recession, or worse. So, while we go on about prudent lending and all that crap, what we actually mean is to hell with prudent lending, we need cheap debt, and loads of it! Ignore the risk, what risk?”

    Its that easy

  13. 1. Royal Commission
    2.Federal Election
    3.RBA QE activation admittance

    How this shit goes down the wire is FUBAR -fucked up beyond any repair.
    June 2019 to 2025.