More on Son of Wallis – Andrew Selby Smith

Today we note that the article on the Son of Wallis Challenge outcomes has been published on a couple of other news sites. The Age Sydney Morning Herald Andrew Selby Smith is the another Son of Wallis Challenge entrant. Andrew did an excellent job of explaining alternatives to the current system of banking and his

Latest posts


Westpac drops mortgage lending standards

Earlier this month I warned of the unintended consequences of increased bank competition. This article described how the intensification of competition for mortgage lending in Australia from the mid-1990s caused credit standards to drop and offshore borrowings to explode. The resulting increase in the availability of credit arising from this increased competition, combined with unresponsive housing supply, has caused the housing bubble that


Son of Wallis Challenge Winner

Regular readers would be aware that I was a co-sponsor and judge of the Son of Wallis Challenge, a privately run competition to promote a comprehensive government inquiry into the Australian financial system. Today the winner was announced and I congratulate Kaon Li for her winning entry.  Thanks, too, to all of our contestants. I can honestly say that all entries were excellent and it was a closely


Holiday Reading

Dear Readers, I will be away until January 10th, 2011. Hopefully the world will not implode in that time. For your reading pleasure over Christmas, following this post are the nine leading entries to the Son of Wallis Challenge. The winner, Kaon Li, is first but the others are not presented in any particular order.


SOW – Rory McKeown

Individuals and companies have been incentivised perversely across the banking industry, and being led by a corrupt banking ideology, Australia has paid a price for this. It could should shape itself as a role model for banking leadership by implementing the following proposals, and creating incentives for small banks, and securitized bonuses. Until these factors


SOW – Sam Birmingham

1. Wholesale Debt: Risks & Benefits Australian lenders have increasingly relied on wholesale debt markets to fund the expansion of domestic loan books. Benefits of wholesale debt issuance include: • Expanded Lending: There is a finite pool of domestic funding (equity capital, customers deposits, etc) available to retail lenders. In the absence of further capital,


SOW – Andrew Selby Smith

1) What are the risks and benefits of large bank wholesale debt and how should each be addressed? The risk is that the capital borrowings by the large banks to meet their prudential liquidity requirements are generally shorter term than the mortgage assets that the banks are borrowing against. This leads to bank risk as


SOW – Robert Coulter

1. Background 1. What my comments address. 1.1 The thrust of the 4 published questions (Business Day 24/11/10-David Llewellyn-Smith) raises basically 2 issues against a GFC backdrop. 1.2 First Issue -The risks and benefits of Australian 4 pillar banks (“4PB”) and their present wholesale debt fund raising strategies including the use/future use of Federal Government


SOW – Russell Bradshaw

This article mainly relates to the following terms of reference for the Son of Wallis Challenge: 3. Given securitisation was at the centre of the GFC, what role should it play in renewed competition?

4. How can competition be returned to the financial services sector, as well as balanced against the need for stability in the


SOW – Heath Behncke

Australian politicians reacting to out of cycle mortgage re-pricing perceive a lack of banking competition as the reason. The more likely answer is a rising cost of capital and ongoing structural change in bank funding globally. The evidence is clear when you look at banking systems around the globe. We are not alone. In fact,


SOW – Peter Rieder

The international economic and financial crisis revealed several inadequacies in Australian banking and financial regulation. Large Australian banks remain dependent on international investors to secure wholesale debt. Demand for securitisation increased in the decade before the economic and financial crisis. The Australian Government responded to the unprecedented uncertainty after the collapse of Lehman Brothers by providing


SOW- Martin Haggas

1. What are the risks and benefits of large bank wholesale debt and how should each be addressed? The benefits of wholesale funding are quite straightforward: assuming global wholesale debt markets are operating in an efficient manner, they represent an almost endless source of funding for a bank that faces pressure raising sufficient retail funding


Christmas Guest Post : Homes4aussies on Spruikers

Brett Edgerton is a long time campaigner for affordable housing and an advocate for social equity in housing policy. He runs a website Home4aussies and is also a long time contributor to bubblepedia. Although the post below is about his perceptions on current real estate market strategies, he has a very broad expertise in housing


Son of Wallis Challenge Winner

Our Daily readers would be aware that we were a co-sponsor and judge of the Son of Wallis Challenge, a privately run competition to promote a wide ranging government inquiry into the Australian banking system. Today the winner is announced and we are proud to say that this competition has been an amazing experience and


Son of Wallis Challenge – winner

The Government’s response to the Opposition push for a debate on post-GFC banking reform has been to throw a blanket over the issue. Rather than open up discussion with a wide “Son of Wallis” inquiry leading to ‘root and branch’ reform, Wayne Swan has rushed a minimal package of regulatory changes and corralled debate in


More news on the "tapped out" consumer.

As we said a few days ago. … it seems to us that the Australian consumer simply can’t and/or isn’t willing to take any more debt. We’ll say it once, we’ll say it again. Sustained falls in the rate of debt issuance in a debt driven economy lead to recession. There isn’t enough [real] evidence


New Zealand Deleverages

Following Standard and Poor’s November downgrading of New Zealand’s sovereign credit rating from AA+ stable to AA+ negative, the New Zealand Government recently warned that its budgetary situation has worsened amid deleveraging by New Zealand households. Finance Minister Bill English foreshadowed a New Year review of government spending in the wake of figures showing the budget deficit running


Message from a boomer

As noted by our previous post and responses, housing prices in Australia are a contentious issue, with many sides to every story. There is probably no other topic, outside of religion, that stirs such a strong response from Australian society at the moment. This in itself shows that we all, collectively, have a problem that


Links December 22: Henry’s irony

Ken Henry. Barry HughesMiners win on MRRT. Malcolm MaidenFed exit strategy. Calculated RiskChina supports euro. BloombergAn executive defends executive remuneration. Judith SloanContagion today: Ireland, Portugal, Greece, Spain, ItalyNew record for copper. ReutersArse departs BDI. Dry ships


Happy Debtmas

Fitch is once again reporting on mortgage stress on the run up to Christmas. Overall, delinquencies have considerably increased across all six states in Australia. As of September 2010, 1% of borrowers were one month or more behind on their scheduled balance. Delinquent borrowers tend to be in arrears on higher-than average outstanding loan balances


Risk 2011

For those that don’t know, every year Saxo, a Danish investment bank, publishes a list of ten “outrageous predictions” for the following year. This year’s are out and they contain a nasty surprise for Australia. At number 5 is this little doozy: AUSSIE-STERLING DIVES 25%The UK returns to the values of the old days; they


Links December 21: China in 2011

What is credit creation. Qfinance (h/t nakedcapitalism)Ten economic questions for 2011. Calculated RiskOther big bond moves. Alphaville Brazil financial crisis. BloombergContagion today: IrelandChinese chess. Weekly StandardGold rush. BloombergChina cracks down on land prices. China DailySaxo’s ten outrageous predictions for 2011. AlphavilleChinese growth for 2011. Michael PettisDon’t buy commodities. AlphavilleDon’t buy the Aussie. BloombergShift 25% of


China: the Bull Case

A reader has sent me the below email, which comes from the President & CEO of CapitaLand, Mr LIEW Mun Leong, and was sent to all staff in July this year. CapitaLand has apparently been the major residential developer in China for the past 15 years. The email presents a rather bullish view of China,


RPData admits it has all gone bad lately

In what can only be described as a “turn up for the books” RPData’s latest newsletter is heavy reading for the property bulls. Australia’s housing market changed direction in June 2010 according to rpdata.com research director Tim Lawless. He confirmed that capital growth actually ground to a halt on the back of seventeen months of


Still can’t see the debt for the trees

As we have been concentrating on recently the fall in debt issuance is having a dramatic effect on the economy. Only today we note that the trend continues. The value of credit and debit card transactions dropped for the 12th straight month in November, but retail broker CommSec says there’s light at the end of