What will a Royal Commission mean for consumers?
by Dr. Andy Schmulow
Our poor banks. At great pains to convince anyone who’ll listen that a Royal Commission (RC) is unnecessary, wasteful, redundant, a distraction. Their mouthpiece, the ABA, has attempted to scare Australians by saying it will lead to higher interest rates, and be bad for everyone’s super. Nothing could be further from the truth. Let’s debunk the myths one by one:
An RC will make banks look vulnerable, spook foreign investors, and lead to higher off-shore funding costs, which will have to be passed-on to consumers: Nonsense. Borrower-default risk determines funding costs. That risk is almost zero, thanks to an Australian government (ie taxpayer) guarantee. If the Australian government’s credit-rating was downgraded, then yes, funding costs would increase. Moreover, foreign investors might actually regard our banks as less risky if, thanks to an RC, they were more trustworthy. Plus, if banks are so worried about keeping rates low, maybe they wouldn’t have rigged Australia’s benchmark interest rate?
As above: Our banks are the most profitable in the world. Their return on equity is three times the European average – which also reduces their funding costs. But such high profitability involves gouging every borrower in this country. Every individual. Every business.
Your super will suffer: Nonsense. By being the world’s most profitable banks, they reduce profitability across every other Australian business. Those ‘other businesses’ constitute the bulk of every Super fund’s investments. It’s like petrol. Increase the price and yes, petrol companies make more money, but every other business makes less.
Everything’s under control, we’ve addressed our shortcomings: Another day, another scandal. And each time we are told ‘this one’s the last’.
We provide an essential service, be grateful: Protected from competition (four pillars), higher executive remuneration than any other industry, with taxpayers ready to bail them out. When the going is good, shareholders and Executives win. When the going is bad, taxpayers lose. Maybe banks should show some gratitude. Funny way of showing it though: defrauding customers on an industrial scale.
We’ve had internal enquiries, we don’t need more: Each of those enquiries was constituted, funded, and had their terms of reference set by the banks, without power to compel witnesses or seize evidence. That lacks the mere aroma of credibility.
We’ve no more skeletons in the closet: Hard to believe. Rotten, corrupt, dishonest, arrogant culture, rewarded by perverse bonus structures breeds skeletons like maggots on road-kill. The Churches said the same thing before their RC. Look how that panned out.
We’ve compensated customers we fleeced: Except for the thousands they haven’t. Some are now dead. Some went to early graves because of the stress and anxiety caused when crooked bankers on million dollar bonuses stole their life savings, and then unleashed an armada of lawyers on anyone who made a fuss.
We do so much good: For whom? Themselves, and in the case of CBA’s money laundering side-line, the methamphetamine trade. The same trade shattering families, killing kids, and obliterating country towns.
A bank RC would be a distraction: Then learn to walk and chew gum. And when accountability for damaging the lives of hundreds of thousands of customers – the same people who’s taxes underwrite bank’s losses – pommelled by now almost nine years of scandals occurring anew almost monthly is called a ‘distraction’, you can be sure, nothing’s changed.
What possible good will it do?: Plenty. Victims will be heard. Countless new skeletons aired. The rot exposed. Spin debunked. Maybe some crooked banksters jailed. And afterwards, a new narrative: scrap the four pillars. Open up competition. Construct a banking system serving the community, not the other way round.