Via the AFR:
ANZ CEO Shayne Elliott has warned the Reserve Bank that its expected interest rate cuts will further drown the financial system in liquidity, hitting bank profits by squeezing margins but doing next to nothing to stimulate the economy and jobs.
Mr Elliott said he wasn’t sure what problem further easing would solve because there was little demand and the additional liquidity was forcing the bank to buy low yielding assets, further tightening the screws on profits for shareholders already punished with dividends crimped at the request of the prudential regulator.
“People don’t want it, borrowers don’t want it, it becomes a burden for me because I end up having to buy government bonds or bank it with the RBA,” Mr Elliott said.
“That has a real impact on bank margins and people sit back and go ‘Who cares?’, and well, at some point it matters because we need to generate a return.”
…If home owners don’t want a mortgage at 2.5 per cent its not clear to me they’ll want one at 2.4 per cent.
Well, Shayno, let’s ask how we got here. It has been a several decades-long process of putting your bank at the centre of macro policymaking.
First, the government gave up on controlling credit distribution and instead decided to manage the price via the cash rate, as your profits boomed.
Second, it embraced a rational market hypothesis that assumed you would act reasonably which you have ignored ever since, as your profits boomed.
Third, we installed a bunch of global capital requirements that privileged mortgages over business lending, as your profits boomed.
Fourth, we created an independent central bank that only ever cut rates as the economy became ever more dependent upon mortgage credit and house prices to grow, as your profits boomed.
Fifth, we split the prudential regulator from the central bank and buried it in smoke so you could capture it, as your profits boomed.
Sixth we added taxpayer subsidies to mortgage speculation, as your profits boomed.
Eventually, all of this credit poured into unproductive uses hollowed out the economy and asset prices became the only game in town, as your profits boomed.
As we approached the end, every time there was a cyclical hiccup, the entire shaking edifice of mortgage credit demanded ever more extreme fiscal support lest it crash, with no accountability or public ownership, as your profits boomed.
Finally, we reach today, in which enormous household debt now requires zero interest rates, wages destroying third world people flows and mass money printing simply to stay aloft. And yes, these policy levers are slowly but surely going to kill your bank as the government seeks to sustain the great bubble at whatever cost.
So, as you complain about it, just remember who brought us here and why.