Gratuitous PR advice for our friends in banking

Gottakloo says:

09:11am | 09/11/10

You could always choose not to go and eat at home.

This would prevent much of the whining about not getting what you want.

If people didn’t mortgage themselves to the hilt to buy an overpriced McMansion then a 0.25% to 0.45% increase in rates (which are stll well below their norm) wouldn’t be a problem.

j&t and b&h says:

10:20am | 09/11/10

Gottakloo says:09:11am | 09/11/10
umm - a lot of people didn’t mortgage themselves to the hilt to buy an overpriced McMansion, some have just bought a reasonable family home to raise their family and you wanna try and defend the banks in general because you think you are smarter and a better saver or investor than those that are affected by the banks greed, well good on you, you probably voted for labor who had less votes and seats but still managed to get in and are basically ignored (snubbed) by the banks - i think you’re missing something hear gottakloo and i’m glad you don’t live near me cause that’d mean i’d be living in a studio bedsit with a view of a brick alley

Chris L says:

12:37pm | 09/11/10

@Gottakloo, you can’t choose to eat at home when your groceries are automatically delivered to the restaurant.

Currently I have no debt, and I pay no fees due to being an employee of a lesser bank. While I am therefore unaffected by the gouging I can still see how it is wrong in the face of such immense profits and the fortunes that CEOs and the board get to take home. We don’t expect any business to survive without profit but these companies get way, way more than enough. You can’t pickpocket someone while smiling and saying you have their best interests at heart. Well, you can, but don’t be surprised when they don’t believe you.

Sandy says:

12:57pm | 09/11/10

Gottakloo not. Average wage after tax is $51K. Saving 30% of that a year for ten years gives a deposit of $150k. (assume that wages, house prices and bank inetrest after tax are all approx in line with inflation)  Need to borrow at least $200K to get anything in a city.  That’s a mortgage to the hilt in my book.  Those nasty lazy whingers.  Yay for banks and investors. Those masters of the universe.  Boo to manufacturers and all other service providers (mostly SMEs) etc that have to scramble for the crumbs.  Get a clue mate.

Matt says:

04:01pm | 09/11/10

Sandy, isn’t the problem real estate prices not the rates? The real estate prices themselves have gotten out of control fueled by too much access to cheap credit, surely ending that access is a good thing?

I’m personally quite happy about the rates going up. It encourages investment by saving money, not by borrowing money and speculating on property.

Chris L, I can appreciate your argument, but what is ‘enough’ profit?

Besides that, there are plenty of lenders out there. People don’t need to go to any of the big four, and it is just one of those four that have recently put up rates anyway!

Daryl says:

07:41am | 09/11/10

have another read of the article champ - if you bothered to read it in the first place.  Pay special attention to this piece in particular:

” NSW Health documents obtained by Seven News reveal doctors at Bega were told Canberra was not appropriate for Elijah, as the hospital didn’t have a paediatric intensive care unit.”

Seems it was those poor doctors that you claim had no power, who actually stuffed up.  Its all fine and good to support one side of politics over the other but trying to blame the ALP for the flawed decisions of medical staff - doctors - is just ridiculous.

PaulB says:

08:29am | 09/11/10

If Doctors stuck to just doing their job honestly instead of assuming they were the Gods at the top that everyone else was required to bow down to they would find they had lost no power at all.  It’s not the medicine its the constant displays of laziness, selfish arrogance and greed that bothers us.

No hope for silly people says:

09:25am | 09/11/10

Silly boys, doctors have no say in where a patient goes. I may want the best for my patient but a decision from a bed manager or someone ‘on top’ will derail my choice because of the need for stats to look good.

http://www.health.act.gov.au/c/health?a=&did=10074799
If Canberra hospital does kids surgery I think they can manage a baby with meningitis. Looks like the ALP has sucked more people in again

Kaz says:

10:07am | 09/11/10

Bed managers and nurses don’t have the power to transfer a patient out of a hospital or decide which hospital that patient goes to.  That decision still lies with doctors.  Whatever your agenda is, it’s misplaced.

Connie says:

12:04pm | 09/11/10

Change will only occur when people really want it, till that happens we can only hope not many people or children die.

Kath Grant says:

07:50am | 10/11/10

Isn’t this discussion about banks?

Seamus says:

08:11am | 09/11/10

And there speaks a bank manager methinks.

Muttley says:

08:15am | 09/11/10

Just like any business they can charge. But when profits for a company reaches the six billion mark questions should be asked. And if their unmitigated greed cant be held in check by themselves, then perhaps they need someone to help them. No one begrudges them a profiit, but enough is enough. This has nothing to do with tall poppy syndrome, so dont start that crap. This is about out of control greed and collusion.

Justified attack on banks says:

08:18am | 09/11/10

Dont cry too hard, the banks will be okay. It is the customers who actually pay the banks and keep them strong, not their parasitical CEOs.  Increasing competition simply by way of making banking and mortgages portable will by default make banks at least attempt to make their customers happy if they wish to retain their customer base. This may hurt some of their profits but that is just capitalism at work. You cannot criticise increased competition and in fact as I re-read your post you havent attempted to and rightly so. Your best argument is deflect from the argument and insteas post a diatribe against the government. Perhaps you mistakenly posted on the wrong forum?

Also moved on from a housing commission start says:

09:19am | 09/11/10

Well said Muttley. And it’s not just the six billion profit, it’s the astronomical salaries that are paid to the executives. No wonder they are out of touch with what the real impact of losing the roof over your head means to most people.

David P - just a quick request, would you please proof read your article for typos before you upload it

Sandy says:

09:26am | 09/11/10

@ unjustified
Your whole submission revolves around comparing banks to ... Ever heard the expression that two wrongs don’t make a right?

“Since when do private businesses not charge for their services.” Ummm ...errr ... banks charge interest.  You know .... like   .... the margin between borrowing and lending.  And then out of that they pay wages, rent, IT, advertising, christmas parties, travel, legal departments, director fess, company profits etc ect etc.  Why take a select chunk of these expenes out and chuck them on the end of the loan as an exit fee.

You’re support for exit fees is indefensible.  Face it, it’s a penalty designed to reduce competition.  Howard fought hard for mobile number portability.  Now we’ve finally got some more political courage through Hockey.  Why do you think they have to fight so hard for bringing about competition?

The fact that exit fees are being so vigourously defended says it all really.

As for banks being private businesses.  Well ... um ... errr .... they’re nothing like a regular private business. Especially not since they turned to MY tax payer dollars and MY AAA rating to bail them out through the deposit guarantee and the AOFM propping up the RMBS market.

But now they’re squealing like a bunch of spoilt children.

As for blowing sunshine by the banks.  You’re obviously not a client of Storm Financial.  Face it - banks prey.  And now it’s come back to bite them.

Gottakloo says:

09:47am | 09/11/10

Sandy

Please detail this amount of money that the banks were bailed out.

I’ll think you’ll find it was a nice round figure: 0

The guarantee didn’t give banks any money. It only said that if they do fail (which they didn’t) then the government would give people back their deposits (which is didn’t need to do).

None of “your” money (which I’m betting you pay little more than $20k per year in taxes) went to the banks

Aaron says:

10:08am | 09/11/10

@Unjustified and I bet the Liberals who are near insolvency would have handled the Australian economy better?

FFS says:

10:18am | 09/11/10

Yes gottakloo, you’re right. The banks didn’t actually get that money. The safety net of having the guarantee, however, allowed them to operate as usual without having to change their strategies or practices. As I have said in another blog, I am sick to death of the banks trumpeting their role in keeping Australia relatively untouched by the GFC. What got us through safely is the strong resource sector and a (then) $55 billion government surplus. The banks were beneficiaries, not providers.

Unjustified says:

11:07am | 09/11/10

The bank-hate argument is diminished by suggesting that an alternative opinion necessarily brands me as a bank manager when I’m just a satisfied bank customer.  I’m paid interest at 6% on my modest term deposit, so that’s about 1.5% difference in mortgage interest level. 
Oz banks were never “bailed out” and never came close to it. The guarantee was meant to stop an unnecessary run on well-capitalised banks and I suspect the government knew the banks were rock solid, but chaos-panic was averted by announcing the “guarantee”.  Profit levels should never be determined by regulation for any private institution - otherwise doctors’ fees (they bury their mistakes and continue on regardless) would be regulated.  When you dampen thriving businesses (banking or any other) you stifle initiative and incentive for success and prosperity that flows to every business sector and community development.
There’s heaps of service providers who charge an arm and a leg - why not regulate them?  Telephone providers (essential service), where does it all end?  Pre-USSR days?  Look at Russia’s current day standards and see how government over-interference served their people! Value judgements about what is enough reward for overseeing and taking responsibility for huge businesses can never be legislated.  It’s shareholders who have final say in how their bankers are reimbursed.  As for Storm Financial and the foolish mature-age investors who stupidly borrowed on the value of their homes to buy shares - well those people should have had more sense than risking their life-long most valuable possession. Then they had the cheek to blame everyone else for their taking on high-risk debt.  Only fools would risk the roofs over their heads.  People have to take responsibility for their own bad judgements and that means living within our financial capabilities.  Borrowing money comes at a price according to fluctuating economic circumstances.  If it costs the banks more to borrow money to re-lend as mortgage loans, then that’s the price for the privilege of being trusted with a loan to buy a home.  It’s a privilege extended to responsible citizens, it’s not a right.

Sandy says:

11:18am | 09/11/10

Your dead right Gottakloo.  The ‘money’ figure is as you say: 0.  But I’m not as superficial as that.  Nice try tricksy.

Money is what you pay.  Value is what you get. The banks paid zip but got a truck load of value FREE .  And that value cost us tax payers a lot of money to build.

And they didn’t fail because of that FREE value.  If they didn’t neeed it, then why did they push for it?

‘Money’ is a voucher, an exchange note or a contract. It’s a medium. If you do this thing for me then I will do that.  The exchange is measured in the $ money that you note. So while you’re using you’re little magic wand to try to distract me from your sneaky slight of hand to perform your trick - I’m very much focussed on what’s really going on.

My tax $ got your precious banks off the hook. And that my tricksy friend is worth 100s of billions thaht we were on the hook for that every single one of your precious bank staff and employees benefited from.  But your precious banks paid ... $0.

So it’s OK for your precious banks to put a $ monetory value on the financial securities it holds but not for the us tax payers to do so also.  Typical banker. 

Oh and I shouldn’t need to pay any $ to my insurers for the service they provide because according to you the security they provide has no value.  Want more examples, I’ve got a bumch.  Just look at the ‘$ valuations’ your precious banks put on their ‘financial assets’ on their balance sheets.  According to you they should all be set at: 0. Because they have no value.

Oh and you conveniently also omit the tax payers dollars via the AOFM that took over buying RMBS to get your precious banks off the hook when the international buyers evaporated.

Sandy says:

11:38am | 09/11/10

@ Gottakloo.  Clearly you don’t. Because I take your comment about the tax I pay as an insult. 

For me to provide goods and services for my family I need to sell my labour to my employer to get these voucher things called $ which I can give to other labourers for the good and services they provide.  Over those two transactions I pay nearly 40% tax (average income tax + GST). Heaps more if those goods are things like alcohol (WET) or petrol (excise).  And I still have to pay for government services through rates etc and quasi government services like water, sewerage and electricity. And I still get slugged stamp duty for moving my family home closer to work. For what?  To keep people like you in a job?  But go on, if in fact you do have a clue, keep spinning this forum away from the truth. I’ll stay here spinning it right back.

Az says:

12:29pm | 09/11/10

Maybe the banks should remeber that when the next recession comes along and it is us taxpayers that guarantee (underwrite) bank deposits and their foolishly extravagant and high risk investments.

Sandy says:

12:38pm | 09/11/10

@ unjustified of 11:07 am.

I’m not a bank hater. On the contrary, I think all of god’s children need lots of love.  I’m a BS basher. And it’s gushing forth from all you bank protectionists.

I have a great idea that could save children unnecessary misdiagnosis. It could reduce medical costs, get kids better quicker and possibly even reduce the amount of time parents are off work.  Hey, the government may even let me make a profit from my innovative/inventive step. But it would certainly have something to say about the level of profit.  So it certainly has income earning capability, albiet regulated like bank profits.

But it’s worth $0 because no one has yet backed it with $ capital (depositors and shareholders). Banks on the other hand, apparently, are also a great idea because they also do good things for the community. There’s plenty of capital backing their little enterprise.  Human capital too with all those employees whose education was paid for by the tax payer and their parents. 

What makes banks so special then? Why is my enterprise ‘worth’ $0 but the ‘value’ of a banking enterprise, who has had their chance, must have the depositor’s capital preserved?  These are rhetorical Qs.  I know the real answer.  Do you?

What makes banks so special compared to my innovation.  The answer is they are not.  They have branding, legal and political clout and priviledges.

And don’t take me to that old if you’re not with my you’re against me. (The George Bush ultimatum) Calling me a socialist. There’s miles of middle ground.

As for your attack on Storm’s victims.  Your government, ASIC and CBA don’t share your view.  If you really think you live in a dog eat dog world you’re deluded. You’re life would be a lot harder if it were. You’d be a serf or a peasant.  In case you haven’t noticed, most of humanity has moved on from that.  There’s rules and Storm and CBA stepped over the line. And they know it.

Are you really saying:  The banks are awesome, they’re doing everything absolutely right so competition can only be a bad thing.  The are the peak of evolution.  It can only go downhill from here.  They are masters of the universe. Yay for banks.  Hip hip hooray.  All the problems are everybody else’s fault. They don’t work hard enough.

Biteme says:

01:03pm | 09/11/10

It’s not even the 6 Billion Dollars the CBA made that’s a problem. It’s the level of Net Profit that show they are rorting the people. For example the Bank of America Corp. made 14,982.0 Billion, but there turnover was $120 Billion, that’s less than 10% Net. Our big four run on 20% Net, double what the other World banks do. That’s what’s unfair, they are ripping people off because there is no competition. If I could buy something for $1 and sell it to you for $1,000.00 you think that is fair. And what market conditions would allow that? Competition would have me selling that item for $5.00, and I don’t mean my 3 mates as my competitors either.

Scott says:

03:34pm | 09/11/10

I heard Paul Clitheroe speak. You are all quite right that the banks got $0 from a bailout. However, there was a large run on the Australian banks with people withdrawing lots of money quickly (Paul Clitheroe’s words not mine) Without the Guarantee, the banks may not be here. This did not get a lot of media attention.

Matt says:

04:19pm | 09/11/10

Unjustified, what you said made perfect sense, and the responses against your post left me confused, bewildered and a little afraid at what goes on in some people’s heads.

Richard says:

05:59pm | 09/11/10

Sandy, your knowledge of banking is limited.  You clearly have read some half baked ideas and repeated them as your own.  For example, you mention the government guarantee and the AOFM RMBS program. 

Well, the tax payer has not paid one cent for the guarantee and the big banks will be paying (as they should) YOU the taxpayer for nothing more than a contingent risk.  It is the major banks that are lobbying to have the deposit guarantee removed and the smaller banks that want it continued.  Feeling uncomfortable? 

The major banks didn’t lobby for the guarantee, it was Suncorp and Macquarie.  Still so certain of your views?  Your dollars didn’t get anyone out of anything.  The banks aren’t squealing - you are.

The AOFM program supported pretty much every significant lender that wanted it, other than guess who?  That’s right, the major banks.

Did you know that mjor banks charge the lowest exit fees and that to remove them would materially damage the competitive position of the non-bank sector?  Feeling less certain of your ignorant statements yet?

If banks “prey”, could the same be said of every customer of a bank which borrows from them to buy an investment property and then sells it for a capital gain?  Know anyone who has done that?  I thought so.

The chip on your shoulder does not give you the moral high ground.  It is just distorting your views.  Go away, do your research and the next time you feel like regurgitating a bunch of rubbish you have read somewhere without understanding, try not doing it.

Zeta says:

08:01am | 09/11/10

Wow, you were one Jewish reference away from a racist trifecta.

Macca says:

09:20am | 09/11/10

I didn’t know Jews ate food, I assumed their bodies were sustained by hording Money and Gold. Na, i’m just joking Moderator…

Atleast I didn’t go as far as saying I’d never get an Asian to sell pasta…

Muttley says:

09:45am | 09/11/10

so merely mentioning a nationality now is racist. Thanks for the update. I must have missed that memo from PC headquarters.

Macca says:

11:47am | 09/11/10

@Muttley, I think Zeta was probably referring to my Italian money quote. If you’ve ever spent 5 minutes reading The Punch you would know that Zeta is hardly PC.  He also doesn’t rate Melbourne

My most favourite line of his in recent history “and that guy got 11/10”. If anyone can remember the story I will give them +1 internets

Glen says:

08:31am | 10/11/10

I’m intrigued Macca

M says:

08:51am | 09/11/10

The Australian banks make around 20% Return on Equity which high in the context of an implicit bank guarantee. The Australian community is paying bank shareholders and bank executives too large amounts for running what is in essence a government, that would be taxpayers, backed utility. Any Canberra $500k mandarin could run a bank about as well as the incumbents.

Sandy says:

11:49am | 09/11/10

It’ll happen when the resources run out or the population supported by those resources gets a lot higher.  In the mean time there’s enough to share to keep people happy and the $ strong.

Matthew says:

03:07pm | 09/11/10

Yes, but the restaurant said $35 + another $35 in interest over the next 15 years.  But after 6 months it’s suddenly $50 in interest.  It cost them the same for the steak when you got it, why should the cost change as time goes along?  Even if the cost of cleaning the cutlery was factored in and you knew it was going to go up over the 15 years, but they say “well, the cost to clean the cutlery has gone up $2 this year” and then slap on $15 of cost to you.  Suddenly after 15 years you’re paying $13 x 15 years extra to them and they’ve only had $26 extra in cost.  (or worse still, the cutlery cleaning cost is lowered (They installed a dishwashing machine) but they give you less than the cost saving).

If only I could use the same rules when leading them money.

Sandy says:

10:03am | 09/11/10

not directed @ you jf

“Already people are massively over-exposed, due to their own decisions. ”  Who’s decisions? Ummm .... it’s the banks who make the decision to lend and NOT the client making the decision to borrow.  Clients will always borrow as much as they can.

So to all the pro bankers who are thinking of trying to run the argument “it’s the client’s fault because they borrowed too much”

First thing to do is stick your fingers in your ears and say la la la la la. The Storm Financial thing never happened.

Now take your fingers out to hear this:  you’re wrong.  Fail.

Kerry Packer had a quote along the lines of: borrow a little and the debt is your problem, borrow a lot and your debt is the bank’s problem.  You think that stuff comes from nowhere.  It’s a hundreds of years old principle.  Well guess what, the home mortgage debt is not a whole lot of little debt - it’s a single block of huge debt.

But I suspect the Banks knew this and put their peddle to the metal to make the debt so big that it’s now the government’s problem.  Exactly like what happened in the US.  The banks have grabbed the government in one giant bear hug and said, if I’m going down, you’re coming with me.

DG says:

12:21pm | 09/11/10

“. it’s the banks who make the decision to lend and NOT the client making the decision to borrow.  Clients will always borrow as much as they can.”

The clients do make a decision to borrow. That’s the decision that they make when they sign on the dotted line at the bottom of the application form.

That’s the whole point. If the clients are applying for loans that they are unable to pay (and remember it is an application, a bank doesn’t offer you a loan, you apply for one).

Secondly, any person that takes money out of their home to ‘gamble’ on the stock exchange is taking a huge risk. Even if someone tells you it’s a ‘dead cert’ you’d have to be a mug to believe them. Rule 1 - never gamble more than you can afford to lose.

Storm happened for the same reason that Nigerian money scams work - people are greedy. People gamble more than they can afford to lose, and then throw good money after bad in the hope that just another $5,000 will make it better. It probably won’t.

No sugar coating it. It’s one thing to borrow lots of money, it’s another to borrow more than you can afford to pay back. The top of the risk pyramid is gambling more than you can afford to lose.

Packer’s quote is relevant to a point - A bank takes a risk when they lend large amounts of money. The risk is that the person applying for the loan is incapable of paying back the loan. This is why they run credit checks and investigate your capacity to pay and demand mortgage insurance.
The decision of Joe average to make a request of to borrow money is a risk - he takes a risk. tThe bank makes sure that he can afford it, even demands that he take out insurance to cover his capacity to pay to mitigate his risk - what responsibility do you proposed Joe takes for his decision? None?

You blame the bank.

Sandy says:

02:09pm | 09/11/10

@ DG

Joe takes plenty of risk and responsibility. Rest assured that Storm clients will remain bady burnt despite some compensation.  The Storm case was an example of the sudden drop in Bank lending standards combining with the financial planning industry acquiring the Commonwealth Brand through ASIC’s ill thought out AFS Licencing system and the accompanying drop in stabdards of advice. There was a drop in both banking standards and advice standards. How was Joe supposed to know that risk had effectively been repriced by these two changes?  Even ASIC and parliament see they were caught out and is proposing changes subsequent to the Ripoll inquiry.  Did you also know that CBA is compensating clients for the advice of a wayward advisor?  There were game changing moves by the banks at play and Storm clients got caught.

What is wrong with you bank lovers that you can’t see that banks are partially to blame? They refuse to accept ANY responsibility.  And then they crossed the line by refusing to remove anti competitive practices.

OK, yes, clients do make a decision to borrow.  Let me clarify what I was saying.  It’s the banks that decide HOW MUCH to lend.  The value of money is not fixed so Joe is in NO position to make any sort of judgment call on how much to borrow in a 20 to 30 year contract.  The value of our money is changed constantly.  Cerrently at about 3% but that could change dramatically a number of times in the next 3 decades. And that is the the domain of our RBA and the instrument they use to get the money out there: fractional reserve banking.  The vector for deploying that instrument are the banks. So when the banks DROP their lending standards it changes the value of money. And that is why the decision on HOW MUCH to borrow has got absolutely nothing to do with what Joe asks for and everything to do with what the bank offers.

If you disagree then let’s dicth thr RBA and fractional reserve banking and return to the gold standard.  What do you think our precious banks will have to say about that.  Well, now that central banks are losing control because of wild behaviour by banks, we are effectively heading in that direction already.  Hence, the big rise E.g. China doesn’t want fiat currency anymore, they want commodities.  How’s Joe supposed to know how much to borrow when currencies are doing all these wild things?  The solution is for Joe to not borrow and our whole growth model goes awry.

So, do you still believe that banks aren’t in any way responsible for any ‘bad’ behaviour?

jf says:

02:19pm | 09/11/10

Hi Sandy

Firstly Packer was referring to it being the Bank’s problem not that it is their responsibility.

To suggest that the bank’s are responsible for client’s borrowing habits is an extraordinary comment. People must be responsible for their own decisions.

The Storm situation is different. Clients sought advice from a licensed financial planner purporting to act in their interests and charging a fee for advice.

The banks are not providing advice. Their credit checks are to ensure that, as Packer says, the debts don’t become their problem.

And the key and important differences between our banks the banks in the US are that our banks are much larger and more financial stable due to their size and the prudential requirements imposed upon them by the Governments.

jf says:

02:23pm | 09/11/10

Futhermore Sandy I am able to borrow six times my current level. I could live in a much flasher home and drive a European car.

I have chosen not to. I don’t I am that different to a lot of people. And if I am, something needs to be done to educate people.

Once again, this is not the Bank’s responsibility.

Sandy says:

05:10pm | 09/11/10

@ jf from 2:19 and 2:23 pm

“I am able to borrow six times my current level.  .... I have chosen not to.” True but you’ve just highlighted my point.  Who decides how much you are “able to borrow”?  Yes.  The banks.  Not you.  The banks.

As for educating people.  That’s not what it’s all about.  Financiers know how people behave.  And that barely changes. (Not really even since Adam Smith’s Wealth of Nations.) The change came when they increased that multiple and lowered lending ratios and their credit worthiness standards. And that is really what probably increased banks borrowing costs.

Rudd knew this system response when he handed out his $900 wads of cash.  People would spend it.  And they did.  Just like he wanted them to.

If you want people to spend then you throw money at them.  If you don’t want them to spend then don’t throw money at them.  When the RBA wants us to start or stop spending money it ups and lowers the cash rate.

So why do you think the same system will respond any differently when banks change their lending practices whereby poeple get cash more easily?

Bankers are well aware of this.

“To suggest that the bank’s are responsible for client’s borrowing habits is an extraordinary comment. ”  I know. Extraordinary isn’t it.  Crazy even.  Totally flies in the face of what people brought up under the Bretton Woods system were taught to believe. But that’s our fiat money system for you. The RBA and bankers wanted control and they got it.  Now they’re denying they have any responsibility.

If you really think that banks don’t have any responsibility then tell me, assuming you’re still in the same job, how much do you think you’ll be earning in 20 years?  You don’t know do you.  So how do you know how much to borrow now? You don’t.  So the bank has caculated it for you.  6 times your income.  That’s their decision, not yours.

So if everyone, like one giant Kerry Packer, jumped on that and maxed out to 6 times their salary, the banks would have a huge problem.  Well actually, Australia as a whole would have a huge problem.  Just like Ireland has a huge problem now.  The next step is then sovereign default. And the banks know all this.  Most people don’t because they study things like medicine, engineering etc. So why are the banks offering you 6 times your salary?

jf says:

05:35pm | 09/11/10

Hi Leigh

(1) Primarly responsibility for the Storm stuff up was ASIC closely followed by Storm. ASIC licensed these crooks and audited them in relation to (a) their ASX listing and (b) their AFSL less than twelve months before they went broke. They were well known within the industry as promoting a strategy to clients for whom it was not appropriate. ASIC should hand their heads in shame.

(2) “accompanying drop in stabdards of advice” There was no drop in standards. They were, and remain, diabolically low. This is a great shame as people desperately need competent, relevant advice. The country desperately needs people to get this advice in order for an ageing population give itself the best chance of funding their own retirement.

(3) “CBA is compensating clients for the advice of a wayward advisor”. Advisers, like doctors, dentists, accountants, lawyers (etc…) act badly (granted, more advisers seem to act badly than any other advice based industry). Isn’t it a good thing that the CBA is providing compensation?

(4) “What is wrong with you bank lovers that you can’t see that banks are partially to blame?” I’m not a bank lover any more than I am a hospital lover, car manufacturer lover or dog breeder lover. I am interested in fairness and good outcomes for the most people.
At no point did I say that the Banks aren’t partially to blame for some problems. However, one thing that I can say with certainty is that the margin on CBA’s variable loan is lower now than it was 30 years ago when it was federally owned and the Banks were more highly regulated (check it out if you don’t believe me). I agree that the regulators should take action against the Banks when they exploit people or act illegally. I don’t think that lending people money that they have reasonably applied for and where they have demonstrated that they can pay it back is either exploitative or illegal. In fact, I can just imagine the lefties jumping up and down if the banks only loaned to the relatively wealthy.

(5) Of course I don’t think that the “banks aren’t in any way responsible for any ‘bad’ behaviour”. However, I don’t think that seeking a reasonable return on capital (much lower than most businesses, particularly small and medium enterprises seek) is “‘bad’ behaviour”.

Sandy, I understand your frustration. Sadly, those to whom you look to for leadership on this issue (Hockey, Swan, Gillard and the media) continue to play a populist, anti-intellectual game. The best outcome from their posturing is that nothing will happen and the Banks will continue to get away with their genuinely bad behaviour, masked by nothing policy over percieved bad behaviour. The worst outcome is that they will be forced to implement policies that will only serve to make banking even more expensive (like it used to be in Australia) or unavailable to ordinary people (like it is in many highly regulated countries).

jf says:

09:45am | 10/11/10

Who decides how much you are “able to borrow”?  Yes.  The banks.  Not you.  The banks.

I didn’t say six times my salary I said six times my current level. I thought that it was reasonably clear that I meant six times my current level of borrowings as this was immediately preceded the comment. But I guess it’s clear now.

Your comments are illogical. You say that the banks tell people how much to borrow. They don’t. They tell them how much they are able to borrow. I guess that they could lower that amount but then they would still be telling them how much they can borrow. And if they did, I’m betting that you, just like all the bank’s critics in the US ten years ago, would be outraged that they wouldn’t give lenders a fair go. The fact that Australia’s default rates are incredibly low, as to be all but negligible is testimony to the fact that the banks have pretty much got it right.

The bank’s, as lenders, are not in the business of providing advice. If they endeavoured to do so, this would be forcing their advisory service (for which they would charge) on to those that only wanted to borrow and did not want advice. I for one, feel that I am sufficiently self-aware and financially literate to know at which point I become financially over-extended. A lot of people aren’t and probably should get advice, for which they should be prepared to pay. That advice is freely and readily available (my previous comments not-withstanding). Now, should the borrower consult one of Bank’s financial planners (or any other financial planner) who assessed their situation, advised them on how much they could borrow and got it wrong, I would absolutely agree with you that they are culpable and should be held to account.

Sandy says:

11:26am | 10/11/10

@ jf at 9:45

Agreed jf.  You didn’t say six times salary.  You said 6 times ‘current level’.  Level of what? But that’s moot.  I was just using it as an example of how our banks have been dropping lending standards. Another example is ratios. You never used to be able to borrow more than 80% of the house ‘value’.  I’ve read that years before it was 50%.  Now you can borrow 100% + the stamp duty. Have you ever wondered why? 

I never said “banks tell people how much to borrow.”  I always said “They tell them how much they are able to borrow.”  So how am I illogical?

A bank telling you how much you are ABLE to borrow: isn’t that advice?  I had an ANZ banker come to my house 10 years ago. After going through our financials he told us we could borrow $600k.  What! I thought.  That’s insane. NO WAY.  I hate debt.  But that’s because my father grew up during the depression. But my wife wasn’t as adverse.  Her pressure on me to spend spend spend took off after that and largely lead to our separation. What impact do you think that such banker’s advice has on spending habits on millions of Australians. Upward pressure on prices including real estate.  That’s what it does.  And it’s happening every single day in thousands of homes. The ANZ even mocks sensible behaviour in their ads featuring compedian Tany Lacy.  Gordon Brown was accused of being ‘dour’ for being frugal.  Do you seriously believe that none of this has any impact on people’s comfort with debt levels?

Face it, common sense with debt is under attack and banks are leading the charge.

As for me being ‘outraged’.  No way. 

As for ‘low default rates’ - have a read of how Ponzi Schemes work.  Everything looks fine until ... pop! Banks monitor credit growth rates.  Doesn’t that make you go WOW!.  I’m not talking monitoring credit levels.  I’m saying GROWTH RATES. And that’s how ponzi schemes work.  Ever increasing money coming in.  And where’s it mostly going: homes.

And foreign investors know this. (go to debtdeflation.com and search Grantham)  So now they want more % for the $ they lend to Aussie banks.

It’s very simple.  Banks dropped their lending standards, so more was borrowed, house prices went up, foreign creditors to our banks revalued this risk and want more %, banks push that onto borrowers, bank employees and shareholders don’t take any of the hit.  It really is as simple as that.  Yes our banks weren’t as silly as in Ireland, Iceland and the Fannie Mae and Freddie Mack in the US.  But they have been silly.

Don’t forget that the current Australian banking system is in it’s infancy. The RBA was born in 1960 and CBA sold in 1991. Prior to 1960, controlling and valuing money by these two institutions was with government. We are living a financial experiment.  Seems quite a lot of you have forgotten what money really is.

Forget ACCC,  ASIC etc.  They are out of their depths. Even APRA and the RBA have obviously flexed under the enourmous pressure ‘the market’ (namely the banks) is putting on them.

Sandy says:

12:37pm | 10/11/10

@jf 5:35pm

Who’s leigh?

(1)  Agreed ASIC is way out of their depth. Overselling and under delivering on their capabilities is recklessly dangerous to any of the unfortunate who has faith in them.  Either that or their AFSL system was deliberately designed to use the Commonwealth brand via a huge drop in the standards of financial advisors to get us to prize open our wallets to get he cash flowing.  Read up about the velocity of money.

(2) Couldn’t disagree with you more.  We used to be able to spot shonky advisors a mile off.  We had our natural guard up.  That’s all gone because of ASIC’s AFSL scheme.  The market used to quickly weed the dodgy out.  Not so now that they can sell off the back of the Commonwealth’s AFSL brand. They stay in business much longer.

(3) Just using this as another example of lowered standards.  Who do you think the CBA wil lpass the compensation costs on to.  Shareholders, staff, depositors?  Or borrowers.

(4). “CBA’s variable loan is lower now than it was 30 years ago” Perhaps that’s because of IT and they could shut down all those branches and dump 10s of thousands of staff. The IT revolution created a collosal surge in productivity gains around the world.  Even just email on its own - remember all those typing pools. Don’t you dare give our banks credit for that.  The hard yards for those improvements was shouldered by others’ capital and handed to our banks on a plate.

(5) Banks carry far far far less risk than SMEs.  A that’s why the returns should be lower.And they are nothing like a normal business. They are given enourmous priviledges.

You finish your post with “or unavailable to ordinary people (like it is in many highly regulated countries). ”  Isn’t that the whole point.  Debt should be unavailable to people who can’t afford it?

Sandy says:

01:10pm | 10/11/10

@ jf @02:19pm 09/11/10

“Firstly Packer was referring to it being the Bank’s problem not that it is their responsibility.”  Problem vs responsibility.  The difference doesn’t matters when there’s mutually assured destruction (MAD). If Packer defaults then the bank collapses because it can’t carry the loss. The normal rules of who’s responsible no longer apply.

And that’s what millions of Australians being allowed to borrow too much and putting it all in property, like one collosal Kerry Packer,  has lead us.  Who’s fault?  IMO it’s because of looser lending practices.  Just as happend in the US, UK and Ireland.

jf says:

10:47am | 11/11/10

Who’s leigh? Dunno.

(1)  & (2) Adviser’s education and experience requirements are way higher now and they are now required to be licensed. However, the standards are still way to low and the licensing is poorly regulated (ASIC has a lot of power but fails to use it effectively). I doubt that you could spot a shonky adviser a mile off it’s just that the pay off for being shonky has increased due to more complicated structured products. As to having your guard up, I agree. ASIC has created an impression of false security by licensing advisers but not enforcing the legislation effectively. Much like the banks.

(3) There will always be shonks, whether it is in medicine, finance, law or whatever. I see this as at least some evidence that the system is working at least on some level.

(4). I didn’t give the bank’s credit for it, I stated the fact. However, if you don’t think that regulation and the Bank’s investment in efficiency measures had something to do with this then you are clearly overly irrational in your sheer hatred of the Banks and your opinion is therefore hopelessly tainted.

(5) That’s my point. And I agree with your entire comment. I was just trying to demonstrate that, when put into scale a multi-billion dollar profit is not to any one person it is shared amongst millions. With a small business, it is shared amongst far fewer. I love small business. I am a small business owner. I would never have got a start if it wasn’t for cheap, efficient finance. That’s not to say that I haven’t had my beefs with the banks but, by and large, they work.

Yes, it should be unavailable to people who can’t afford it. Thank god we don’t live in a country where ordinary people are able to afford to borrow to buy a home.

Sandy says:

12:50pm | 11/11/10

@ jf

(1) & (2) “way higher now” Compared to what?  Who was giving advice? Reality is that most advisors were accountants whose education is WAY higher than the current AFSL system.  Reputation was fiercely protected because it was the main instrument for generating income.  Basically all the AFSL system did was give some credibility to the sharks, peddlers, fly-by-nighters and back yard operators by lending them the Commonwealth brand.  They don’t need ownership over the brand. Before that, they were on their own. If they didn’t rise off their own bat quickly, the market quickly put them out of business. But now, some of them can comfortably sustain themselves feeding off the bottom. Draining Australia of desparately needed capital. The conceit of ASIC in all of this astounds me.

I said the market, not the individual, could spot them a mile off.  Word of mouth, brand and reputation.  Some individuals would get screwed but the feed back loop was far more effecitive before ASIC put an artificial screen in place.  AFSL puts doubt in the mind of individuals about the voracity of negative feedback. ASIC was fiddled with the sting of the market forces that used to protect us.

ASIC do not,have never and will never have the capacity to enforce the laws they write.  They rely on us to defend ourselves. But ASIC’s actions have lead to an increase in the number of instances in which individuals need to take legal action.  And ASIC is refusing to even acknowledge responsibility for this.

More complicated structured products are on the rise BECAUSE of the drop in competance of advisors. Skilled artisans see them for what they are and where appropriate steered their clients clear.

(3) See above.  And the banks stood by and did nothing.  They knew it would benefit them.  When that stone rolled their way, they build vices to squeeze it. FPA and the like are still fighting the banning of commissions.  At least the accountancy profession is stepping in and putting their brand to quality financial advice.  If they succeed, you’ll see AFSL and all that it spawned including the FPA quickly die and join the history books as another failed social experiment.  The 500 year old legal instrument that was born out of the Renaissance, giving rise to more meritocracy and made western society dominant will resume its rightful throne: thou shalt not trade on someone else’s reputation. Beware of False Prophets like ASIC.

(4) I don’t hate the banks at all. I’m just going to slap down anything that is BS.  And the banks have proven themselves to be quite happy to profit from misconceptions in the community. You were leading your readers to believe that the big drop in borrowing costs could have been attributed to our banks, on their own volition, reduced profits and salaries etc to make borrowing cheaper. This entices your readers to conclude that if we push the banks around then they could relieve the downward pressure they put on their costs and profits and hence we could return to those bad old days of expensive finance.  I content this wouldn’t happen because the banks did no such soul searching.  A huge technological shift created those savings and banks have essential been behaving exactly the same as they always have been.  The likelihood of finance costs rising to those old days is accordingly diminished.

(5) See my posts @ Brett on Punch’s subsequent thread on this topic.  If banks defeat the government in this stoush, their shares will have a risk profile approaching government bonds. Their share prises will rise even more to reduce the ROE even more.  Bank equities are currently very different from other multi billion AU$ Aussie equities .  And their share price reflects this.  This market knows. And the market is happy to take the smaller ROE. IMHO

The really scary thing is that if our banks don’t pull their heads in until it’s too late, someone might come along and short the AU$ like Soros did to the GBP.  How does that grab you for high finance?  Think we’re smarter than the Brits? I don’t. That’s the reality of what’s going on in the background. And your SME could just become a smattering of colateral damage.  We’re all in this together.

jf says:

03:40pm | 11/11/10

(1) & (2) “Compared to what?” Compared to zero. However, I’m agreeing the standards are to low. What is wrong with you Sandy? You seem to have a pathological need to disagree regardless. As to accountants. Please. I have an accounting degree (plus three post-graduate qualifications including a masters) and have worked for and with accountants including having worked for one of the big four accounting firms. They are good at what they do. Strategic financial planning is not what they do. Tax effective managed investments schemes (surely the most comprehensive financial SNAFU in Australian history if not in scale then in completeness) were overwhelmingly recommended by accountants.  “The conceit of ASIC in all of this astounds me.” “ASIC do not,have never and will never have the capacity to enforce the laws they write.” “And ASIC is refusing to even acknowledge responsibility for this.” I agree and agree and agree. “More complicated structured products are on the rise BECAUSE of the drop in competance of advisors.” Absolute rubbish. How could you go from a system that had zero competence requirements to one that had (at least some) and say that there was a drop? It’s illogical.

(3) Tell me, why are commissions bad. Every day doctors and lawyers and accountants and others see clients and have to reconcile a conflict between how they earn their income and how much they earn. The key difference is education and ethics. If the education, experience and ethical standards required to be a financial planner were increased, the method of payment would not be an issue. Ergo. like everying else ASIC has done, the banning of commissions is a red herring and will have about as much impact as licencing.

(4) I don’t disagree with your arguments about technology leading to a gradual increase in efficiences. However, the evidence (supported by the facts) is that there was a structural shift downwards in the cost of financing when the system was de-regulated.

(5) “Bank equities are currently very different from other multi billion AU$ Aussie equities .  And their share price reflects this.  This market knows. And the market is happy to take the smaller ROE.” I agree. However, as you say in your comment that “the market is happy to take the smaller ROE” the ROE is already smaller and so, all the banks are doing is maintaining that ROE. If they were ripping their customers off, surely their ROE would be higher.

“short the AU$ like Soros did to the GBP.  How does that grab you for high finance?” Ahhh, it all becomes clear. You have been reading the financial conspiracy theory websites. Your commentary and thesis is extremely disjointed and frequently contradictory. Your financially literate comments are constantly out of context and you are unneccessarily paranoid.

I have been arguing with a financial illiterate and conspiracy theorist. What an idiot I am.

Sandy says:

10:26am | 09/11/10

Umm perhaps because Duff, miners produce REAL GDP.  In reality all those accountants, recruiters, bankers, lawyers, etc etc are just ...well ..they are just administrators.  They are back office.  They don’t actually produce ANYTHING that other countries really want. And I’m one of them.

As a kid did you ever think: when I grow up I want my very own accountant and my very own banker.  And if I work really hard, I can have my very own lawyer.  My guess is that you didn’t.  And neither do the 6bn people in other countries with stuff to trade.  They’ve got plenty of their own administrators to support with housing, food, transport, health care, energy, entertainment and education.

Look, these administrators have even tried to make Sydney a regional finance hub. That little pipe dream seems to be failing right before our eyes with the ASX potentially going off to Singapore.

The reality is that Australia’s prosperity comes from 4 facts: we’re a giant mine and a giant farm supporting a relatively small population and we haven’t stuffed up.  We haven’t done particularly well, not by a long shot, but we haven’t stuffed up with social experiments like communism, facism, extreme capitalism etc etc. It’s as simple as that.

Martin says:

10:46am | 09/11/10

The mining companies do not get their dirty hands on our money first. We do not have to pay them to get our money.  Just two reasons why we do not hate them as much as the banks. Did anybody ever ask a question, why is it that the bankswant and get our money first?

Biteme says:

12:50pm | 09/11/10

How about mining companies are entrepreneurial (make sure you know the correct definition of entrepreneurial ).
Banks are parasites (make sure you know the correct definition of parasite).

Duff says:

04:26pm | 09/11/10

Australia has one of the highest personal debt levels in the modern world.  Some forecasters reckon that our house prices are up to 40% overvalued.  The rest of the world had a price correction.  We had another price boom.  We pump-prime the market with first time buyers grants.  We have negative gearing.  House prices are a central topic at any dinner party.  We go to house auctions for the fun of it.  We are obsessed with the housing market and are all very heavily invested in it, way beyond our means.  The whole thing is one big teetering ponzi scheme and the only thing that keeps it going is the hope that the banks keep their rates down.  Yet, they are telling us they are going to go up.  That the days of cheap money are over.  Oh, who to blame?

Biteme says:

10:19pm | 09/11/10

You know sandi, you are right. The bank supporters whinge we are in a free market, and that we have no right to argue the profits. OK, then let’s make it a real free market, open it up and let all the banks in. We can then choose who we want. A free market is a free market. Stop protecting the big four and allow proper consumer choice from many suppliers.

Sandy says:

07:26am | 10/11/10

Biteme “let’s make it a real free market”

Free market economists like Milton Freedman, who are brave enough to go there, finally realise that the only way to get to a real free market is with anarchy.  Which will never happen.  Even if we in Australia along with the US did get close to a true free market they’d fail because they are part of a global community and ‘free market’  means something different in significant players like China and Russia.

We are and always will be quasi free market.

Sandy says:

10:11am | 09/11/10

Yeah OK.  Whatever Ralph.  But what’s that got to do with anti competitive practices?

If you’re not scared of dumping mortgage exit fees, then why not get rid of them.  If you’re doing such a good job then competitors will .... well ... not be able to compete.  Your call.

Before you respond though, where do I send the bill for your banks use of my tax dollars and the AAA credit rating my taxes and labour generated.  That’s two centuries of Australian labour and tax payers that your jhonny-come-lately business is profitting from.

Sandy says:

11:41am | 09/11/10

So I have to take responsibility for borrowing too much but banks don’t have to take responsibility for lending too much. Great logic Jack.  Another pailing on your great Bank con kicked in.

TIMFROMTHETOPEND says:

12:24pm | 09/11/10

The service you get from banks is much like the service cows get from bulls!

I had to laugh at the puffy faced ANZ Boss the other day berating Joe Hockey. “their customer satisfaction rating is above 80%”. I go into the bank I approach the teller to withdraw some of MY money, the teller gives MY Money to me. How was my dealing with bank? Satisfactory.
I wonder what they did to the other 20per cent?

TheRealDave says:

01:01pm | 09/11/10

SO its MY fault if I borrow x amount and the bank decided to up interest rates over and above the standards set by the reserve bank AND I am reponsible and need to help pay back bad financial desicions by the bank when it throws away billions in poor overseas investments?

As long as the sharholders, of which the other 3 major banks are the major shareholders, get increased dividend returns each year….heaven forbid they only get the same as last year, or, dare i say it, less than last year…..

Sandy says:

02:34pm | 09/11/10

To make things clear to everyone.  These rate increases don’t bother me much.  My mortgage is small and the extra I pay is well offset by the benefits to my super.

But unlike many of you who are smugly sitting back saying ‘I’m OK you suckers’ - I can see the damage this is doing long term to Australia. More and more of our resources being squandered as more and more of us move into paper and number pushing jobs and hollow out our economy.  And that will effect us all. The less competition for banks and the like, the faster this will happen. When the supply boot is no longer on Australian feet, it will kick our demanding back sides hard as it can.  And there won’t be any strong feed back loop for us to use to make them ease up.  Pad up.

Sandy says:

01:39pm | 09/11/10

Spot on N.  The world is awash with cash.  The US just told us it was going to print another US$600 billion of it.

When the banks say “the increased cost of getting finance”, do they say why said cost has increased?  Wouldn’t happen to be because of the relaxing of bank’s lending practices over the years would it?  (Do I even need to mention Storm Financial?) I.e. Borrowers were no different than they have ever been. That it was the banks that changed the game.  Seeking more profit, they dropped lending standards, increasing their risk profile, making it harder for them to borrow.  Pretty much well the consensus of what happened in the US and that lead to caused the GFC isn’t it? Only in the US, Wall St held a gun to the world’s head and the Fed started printing money.  Over here, it just means that our banks need to pay more for foreign capital to account for the higher risk.

Looks like the bank anger the US say in 2008 has hit our shores.

Money has no intrinsic value.  It is only worth what we perceive it to be.  And when our banks, bestowed with the priviledge of fractional research banking, dropped their lending standards, they dropped the value of our money for some of us.

M says:

08:12pm | 09/11/10

The answer is multi-faceted.

Different economies have different interest rates depending on where they are in the economic and inflation cycle. Rates for USD are low because inflation is low and their economy is screwed. Swiss rates are low because inflation is low and they are usually considered a safe haven with less of a chance of devaluing than USD so money is flowing into SFR. US and Swiss banks can at the moment borrow for close to zero in their own currencies for short terms. Therefore they lend at lower rates in their own currencies. But this can’t be considered in isolation of margin which I cover a little further on.

Whereas 40 years ago Australian banks held most consumer and corporate savings, Australian banks now work in a system where compulsory superannuation has diverted savings from the banks to fund managers and their ilk. So, the Australian banks have less consumer deposits than they used to. They have to borrow the money they formerly had on deposit from the fund managers. But the fund managers have prudent credit limits on how much money they will lend to the banks for longer terms. So the banks can’t get as much of the long term money they need locally. At the same time, the Australian banks are required by APRA to fund a certain portion of their balance sheets for longer terms for prudent management reasons. While there is a sufficient pool of Australian dollars in the economy for the banks to fund themselves there are insufficient long term funds available. So the banks have a shortfall of long term funds available to them and they compete across the world to find lenders that will lend long term. Individual investors across the world also have prudent credit limits for individual Australian banks and Australian banks compete with other countries banks for those investors’ dollars. So, as the Australian banks, and others, compete for the money in this environment the cost of borrowing, say, 3 year money today is much much higher than it was 3 years ago. So as a 3 year bond matures it is replaced with money costing a lot more. Hence the argument that the cost of funds is rising.

The Australian banks do not take fx risk, nor should they take fx risk, on their borrowings in other currencies. They swap using derivatives all the foreign money back into Australian dollars thereby eliminating currency risk. The cost to do the derivatives equalises the cost of borrowings in cheaper currencies like USD and SFR back to the cost of Australian borrowings. But it is the margin on top of the raw USD, SFR and AUD interest rates that the banks compete among each other for. The Australian banks are well managed in this regard and their argument is legitimate.

HOWEVER, we need to consider total margin. As a previous poster has said, they keep complaining about cost of funds but they still make record profits. So they are increasing their revenues as fast or faster than the increases in their cost of funds. My issue is that the Australian banks have an implicit government guarantee yet still want to make 20% return on equity when 10% or less is more appropriate. There is insufficient competition to drive returns lower-this is an accident of government policy. As Biteme says, this means Australian banks are earning $12b more than they should be. That $12b turns up in the form of higher prices for every banking service than just about anywhere else in the world.

The banks borrow from Depositors and Investors. The latter in the form of bonds.

Steve_of_Cornubia says:

02:50pm | 09/11/10

Twelve Billion is actually twelve thousand million, if you’re Australian or American, while in the UK it would be twelve million million.

Pedantic? Me?

Sandy says:

11:50am | 10/11/10

LOL Biteme.  A high level Public Servant DID run the CBA prior to 1991.

Sandy says:

08:43am | 10/11/10

US rates are low because the Fed has artificially set it low.  The Fed is throwing money at banks and begging them to lend it but they’re hanging onto it to rebuild their balance sheets.  Bubbles are popping up everywhere as that cash seeks a home.

As for the Swiss franc:  it’s in crisis.  Loose lending practices by PIIGS countries has put the Euro under pressure and Europeans are fleeing to currencies like the franc and pushing it through the roof.  The Swiss are doing whatever they can to push it back to a ‘normal’ level so their exporters don’t go out of business. Oh and hence the Swiss banks don’t need to pay interest.

From Business Spectator ‘Ireland’s brutal bankruptcy reality’ 9Nov10 Proff Morgan Kelly warns if early next year Ireland is “forced to repay the ECB at the 5 per cent interest rate imposed on Greece, our debt will rise faster than our means of servicing it, and we will inevitably face a State bankruptcy”

The common denominator everywhere is looser lending practices.  Just like we have here in Oz.

Exhibit A:  Storm Financial.  Exhibit B: able to borrow 6 times your salary.

All caused by banks chasing higher profits knowing they’ll get bailed out.  All really simple really.  We’re in the midst of a currency war.  Exactly the sort of behaviour that fertilised the soil for the lead up to WW1.  Nothing ever changes.

Sandy says:

11:42am | 10/11/10

M. You forgot to mention that bank interest cops the full wack of income tax.  Capital gains (after 12 mnths) gets a 50% discount.  And capital gains on our homes (less than 2 hectares) is NOT taxed. Any working Australian who chooses bank interest will be lucky to stay in front of inflation.  That pretty much well explains why we chuck all our money into our homes and banks need to go offshore to borrow the money for us to buy our homes isn’t it?

Super funds trustees have a higher fiduciary duty and so CANNOT fund all of our banks risky enterprises.

Reality is that government and the banks squeezed the middle as much as they could and went offshore to get funding to continue playing the game.  Foreign creditors have woken up to the rsisk.  The game is up.  But our banks still want to play.