Seeing as John has blocked me from his site again (which isn't surprising - Socialist societies of all flavours don't like dissenters or those that pose hard questions. So much for "democratic free speech"), here is my followup comment to my last comment... again:

No compensation John? Does that mean you're advocating theft? Even moving to a society based on "democratic production" does not exinguish prior property rights. So does that mean that your enlightened society is built around theft?

Could you please explain why people would want to move to this ideal of yours? Why would people want to work in a society where their labour does not contribute to their own personal wealth? Are you denying that people are interested in building their own wealth?

Perhaps it's time for a realisation John: There is no flavour in society for socialism. There is no flavour for "democratic production". This is amply demonstrated by the tiny Socialist Alternative membership.

A fair article John; though I myself am staunchly for nationalizing infrastructure, I am somewhat against nationalizing other business in general, and find banks to be somewhere in the middle.

I think the best course of action is for now, to only nationalize banks that had previously been public anyway- thus it returns exactly to its previous owners (who paid for its establishment no less).
The rest can be more strictly regulated regarding lending and charging.

If it turns out successful, we can re-evaluate the others at a later point.

*Nationalising the banks under workers' control would be a good first step in doing that.*

Passy has been calling for revolution for ages, we know all that.

But then who would lose, if our banks were nationalised? Given
that Australian workers super funds own most of their shares,
he clearly proposes to steal the assets from workers back pockets!

Banks make up around 25% of the ASX. Does Passy think that workers
won't notice, if 25% of their superannuation vanishes?

It is competition that keeps prices down - not governments who typically when they interfere in markets either cause oversupply, rationing or a black market to form.

In the early 1900s the same problem occured in the US with Oil Industry - too much concentration of market power. Australia should adopt the same solution as the US did which is to both pass Anti-trust legislation and then implement it. In 1984 for example the USA government broke AT&T.

Just get each bank to split in two (companies split all time - Westfield is doing it now) and implement a big 8 pillars policy and that would change everything.

Gosh, I do hope you feel better after getting that off your chest John.

You are in the luxurious position of being able to spit out these splenetic pieces from the cosy comfort of your idealogical armchair while members of the banking system quietly go about their task of sourcing funds to on-lend to those who seek to borrow them. And guess what, they do so in pursuit of profit - shame on them.

By the way, the cost of sourcing those funds is the driver of interest rates - it's called a profit margin John, and competitive pressures do tend to drive them, though not in the simplistic sense you, Wayne Swan and Joe Hockey like to describe them.

If you'd care to look back in time there was a Labor Government that attempted to nationalise the banks back in the late 1940s - here's a link to the High Court case (http://www.austlii.edu.au/au/cases/cth/HCA/1948/7.html), it's a bit of a read but worth it if you'd like to understand the constitutional basis for saying NO to such ardent nonsense as you suggest.

The Labor Government got kicked out next election by the way, at least partly due to the back lash from engaging in such a pointless exercise.

You don't seem to trust anyone who is involved in the mechanism of commerce do you John? You appear to consider the RBA a bunch of stooges - is that because Bernie Fraser isn't a member any more?

By the way, if you are a member of a super fund (virtually ANY public offer fund, even one of Bernie's Industry Funds) you are a shareholder in one or more of these evil entities. If you are going to stand by your convictions John I suggest you divest yourself of all interests in these blood suckers post haste - or risk having your blog re-named: Je suis Pissant.

So after the Vic and SA governments (ALP) lost their shirts some years ago fiddling with banking, have we learned nothing?

This government will be famous for waste, let's not add banking to that, please.

I think that this is a good discussion to be having, and some form of nationalization of banks may well be part of the answer. Your analysis is ruined however, by the Marxist, worker/bourgeoisie dichotomy which you employ.

Our socio-economic system is not either/or capitalist/communist. In our search for a stable society, it is quite possible that we can blend elements from the 'collectivist' and the 'separatist' perspectives; from the cooperative and the competitive. Enough with the us or them!

Looking to reform the banking system, I think that we need to look at the role that they play in administering currency, lending it into existence with the fractional reserve system. Also their role as the source of finance. (with interest of course)

The current banking system is very much tied into various structural flaws within the broader economic system. These include our addiction to economic growth, (our society falls down and starts quivering if the economy isn't growing), ongoing inflation, high levels of private as compared to community/public ownership etc. Reforming banking is just a small part of the challenge.

GilbertHolmes I agree entirely.

EQ- not quite; costs are tied to resource maintenance, security and wages of employees among many other business expenses needed to run the company in question; a private business also expects to make a profit in order to actually maintain itself- and if it wants investment, needs to also make returns to its shareholders.
In a private company, if there actually IS a lot of competition (and in Australia, there is not); that company may well be motivated to reduce its' cost (either in profits or in business expenditure)- but the minimal cap is always higher than in a public-owned business, which does not need to make a profit at all.

Thus the only difference is in quality of management in reaching the bottom line of expenditure without compromising the quality of the service- which although leans greatly towards the private sphere (where, obviously more competent managers prefer to be) is most definitely not limited AGAINST the public sphere (with a fairly good record before being sold off).

Take over the banks?

I thought old style socialists like this had gone the way of Soviet union and other dinosaurs.

Nationalizing the banks has never lead to improvements in long term interest rates or any improvement in the economy. In other words - been there, done that, not stupid enough to do it again.

Come on Shadow Minister. You are no fool. You know very well that
this whole drama is being caused by political shin kicking by
your very own party and has little to do with the actual
figures revealed by the banks.

The public can't be expected to understand the ins and outs
of bank financial drivers etc, but Abbott and Hockey can.

Its time we had a statesman lead the liberals, not a
a bunch of opportunists, as we have now.

Well.... I didn't think it would happen in this universe or lifetime..but I AGREE with Passant on this (the basic idea of public ownership of a bank)

We only need ONE... we did HAVE one...but some screwball/nutjob/political opportunist SOLD it...and now we have the obscene economic 'flesh eating bacteria' behavior of Westpac and it's quietly spoken (but luxurious living) CEO.

PEOPLES BANK... it isn't hard.

-High lending standards
-No Fees
-Profit goes back to benefitting THE COMMUNITY rather than greedy CEO's who swim in their money like scrooge McDuck.

Oh dear....I think I've just become a socialist :) gotcha

Good comments from Gilbert and King Hazza.

Not sure if banks should be nationalised as such but there seems to be an issue with competition especially the difficulty in changing banks with the cost of transfer of loans etc. So not much competition to sort out the good, bad and the ugly. It is not like we can choose not to use banks, it is almost impossible to get employers to pay their staff in cash so one is forced into the banking system.

It stinks when the profits just seem to keep going up and up. The problem as GH says is the system itself. It is not just about banking.

Why is retirement so tied in with the finance industry? It is too insecure and fraught with too many fingers wanting a piece of the retirement pie - makes a mockery out of the push for self funded retirement when there could be a superannuation payment from employers into a government pension fund with a levy on wage earners as well. Any extra to this can be risked voluntarily on the open market as desired.

Here is an even better idea.
http://www.counterpunch.org/ebrown10292010.html

"The simplest public credit model is the electronic community currency system. Consider, for example, one called “Friendly Favors.” The participating Internet community does not have to begin with a fund of capital or reserves, as is now required of private banking institutions. Nor do members borrow from a pool of pre-existing money on which they pay interest to the pool’s owners. They create their own credit, simply by debiting their own accounts and crediting someone else’s. If Jane bakes cookies for Sue, Sue credits Jane’s account with 5 “Favors” and debits her own with 5. They have “created” money in the same way that banks do, but the result is not inflationary. Jane’s plus-5 is balanced against Sue’s minus-5, and when Sue pays her debt by doing something for someone else, it all nets out. It is a zero-sum game."

The rest of the article goes into more detail including addressing problems and scaling up to larger businesses and projects.

Lets see the banks compete with community credit. hahahaha

*No Fees
-Profit goes back to benefitting THE COMMUNITY rather than greedy CEO's who swim in their money like scrooge McDuck.*

Ah Boaz, your envy is just dripping off the OLO pages. All emotion
and no reason, is not just a good thing.

You don't want bank fees but you clearly want bank services handy.
You want something for nothing. You must be Scottish :)

Bank profits do indeed benefit the community. Apart from the taxes
they pay, virtually every Australian super fund account holder,
benefits from bank profits. Westpac alone has another 560'000
shareholders. Those grey nomads cruising around Australia, who
saved their pennies years ago, all now benefit. Good on them!

Why is it ok to pay footballers, golfers, tennis players, singers,
actors, etc, large salaries, but not people loaded up with huge
responsibilities?

Gail Kelly for example, is responsible for six hundred and eighteen
thousand million dollars. That is the amount of assets on the Westpac
books. You begrudge her a house. Much of her pay this year, was
a performance bonus. You might have noticed, but our bankers came
through the GFC somewhat better then British bankers of American
bankers. Staff who achieve those kinds of results, deserve more
then a gold watch IMHO.

Gail Kelly is married to a surgeon. You have no idea as to how
much he contributed to her house. I think she should be admired,
for starting as a bank teller and achieving what she has.

All you can do is drip envy. That is really sad

My understanding of a financial loan is, it is the same as a hire purchase loan. You get an item on hire purchase with the ultimate end result that you own it when the final payment is made. Is a mortgage not a hire purchase loan? When you purchase an item on hire purchase the interest is fixed for the life of the loan and does not alter even with RBA interest hikes. Mortgage loans should be the same, if it was it would stop the banks dictating interest rates on their customers. I would assume that would be a fairer system to everyone. It would allow people to budget better and hopefully not lose their homes back to the banks due to struggling to keeping the payments up.
Fixed interest for the entire life of the mortgage would certainly safer way to go - variable interest is dangerous and unsafe.

Interest rates, pincer rates, what are the real cost drivers? I know the federal government may have no control over green labor states when affordable housing is the main cost concern. Most of the posts here go on about utility prices and blame the liberals for basically, not having more money to spend, but it is labor and their green mates and their regulations which inflate all prices over all products and services, the biggest being housing cost inflation which no one wants to really talk about and if they do it is to blame the banks. What about the supply side of housing where people on private property want to build affordable housing but the labor state and local council won't let them. Where is competition in the housing market to stimulate choice or price? No I am not a labor mate who gives donations to political parties to gain approval. It seems those who own a home don't want any others building more homes in their backyard, as it may be a newer model than theirs. But it is not their backyard but others who do want to supply housing, which will make a difference and also deliver what people really want, competition.

"Bank profits do indeed benefit the community. Apart from the taxes
they pay"
-which would consist of the entire profit if nationalized, as opposed to a portion of it.

"Why is it ok to pay footballers, golfers, tennis players, singers,
actors, etc, large salaries, but not people loaded up with huge
responsibilities?"
Strawman.

King Hazza:

Simple answer to your question;

"Why is it ok to pay footballers, golfers, tennis players, singers,
actors, etc, large salaries, but not people loaded up with huge
responsibilities?"

When I turn on my shiny new updated technologically perfect HD Television set, the programmes are evenly divided between Sport on the one hand and Business news on the other. Apparently nothing else in life matters but sport and banking!

Conclusion:

Since obviously the population is evenly divided between Bankers and Sportsmen, then to pay them evenly is only fair.

Interesting point Diver Dan- though it wasn't actually me who asked- merely disassociating it from an argument of wage justification.

*which would consist of the entire profit if nationalized, as opposed to a portion of it.*

You seemingly haven't thought that one through very well, Hazza.
For we know what happens when Govts start to nationalise things,
overseas investors run a mile. Venezuela plays these games,
they also pay 15-20% interest, sometimes more. Fact is,
given that we borrow so much and don't save much, around 40%
of bank money comes from offshore, so our banks have little
say in the rate. No confidence in the econommic policies of
our govt would mean higher and higher rates, given the increased
risk.

Gypsy, you certainly can obtain a fixed rate mortgage, for 10
years if you want. The longer the fixed rate, the more you
pay, given the increased risk to the bank. They don't set the
rates, overseas markets do.

Higher purchase is different. The rates and margins are much
much higher. The 12% or so that they charge, would cover any
increase in interest. Not so for housing loans, where margins
are extremely slim.

There is a solution to all this of course. If Australians saved
more and the treasury allowed for inflation in their tax payments,
then more Australians would save and there would be no need to
import so much money.

Yabby when I purchased my current home 18 months ago I fixed my mortgage for 3 years. At the time variable intrust was around 4.9%.
By fixing I had to pay 6.9% which I did not mind doing as I believed that would be the total amount of intrust I would be paying each month for the entire fixed intrust portion of the loan. Each time the RBA increases the intrust my intrust went up as well. I pay my mortgage weekly by direct debit from my account. To date I have paid an extra $13,890 above my normal payments, they come of the back end of my mortgage loan, not off the principal. Yes my mortgage is with the C.B.A. I am 61 years of age and realised if when I retire I could not afford private rental on a pension, so I found a cottage by the sea in country Victoria at a price I could pay off before retirement. But as fast as I make my payments and show my mortgage receding intrust rates go up and the time it will take to pay off increases. I can understand the RBA altering intrust rates in line with inflation, but the big 4 banks should not be allowed to increase it further as they have been doing. They are demonstrating signs of being a banking cartel.

*Yabby when I purchased my current home 18 months ago I fixed my mortgage for 3 years*

Gypsy, something is wrong here. Perhaps a visit to your bank manager
could clarify it.

If you took out a 3 year loan, fixed at 6.9%, that is all that they
can charge you. So I would find out where the wires are crossed,
for clearly there is a problem.

Yabby the contracted mortgage loan term was 14 years. When I took out the loan the interest rate was fixed at 6.6% P.A. for the first 3 years
Repayment Type - Pricipal and Interest
Interest Rate Type - Discount Rate Expires 13/02/2012
The current interest they are now charging me is 7.13% P.A.
Not sure what the new interest rate will be after the recent interest rate increase by both the reserve bank then the commonwealth bank.
By my calculations the fixed interest term should not end until February 2012.
As at today my loan payment is $14,174.31 in advance.
My understanding of the interest rate is, the interest was set at 6.6% until 13/02/2010. My question is how can the Commonwealth bank increase the interest rate to my loan prior to 13th February 2012.
Hopefully the above information will make it more clearer to understand.

http://www.smh.com.au/business/use-your-brain-before-joining-the-lynch-mob-20101105-17hfm.html

Ross Gittins brings a bit of perspective to the hysteria being
generated in the common press about banks.

Gypsy, I can't really go into your indivual situation on here.
Its not appropriate for other users and you are the one with
all the documents and facts.

The thing is, if you agreed to a fix term for 3 years, then that
is what the bank has to charge you. Don't be afraid to go and
sort it out with your bank manager, that is what he is there for.

You pay them a fee for services, so are entitled to clear answers
if there is a problem. I've bargained down fees with them,
none of them have ever bitten me, so they are housetrained and
quite safe :)

.

In today's SMH, Mike Carlton suggests the Government should set up in competition with the major Banks.

http://www.smh.com.au/opinion/politics/economists-kicked-in-the-crystal-balls-20101105-17hdp.html

"The answer is to inject real competition into the system. You bust up the oligarchy by picking up the suggestion from David Murray, the boss of the Future Fund, that Australia Post be licensed to offer retail banking services, including ATMs."

That would be interesting.

But possibly not in the way Mr Carlton thinks.

For those who don't read newspapers, David Murray used to be the Chief Exec at Commonwealth Bank. And the current head of Australia Post is Ahmed Fahour, ex local chief at NAB. So they have the recommendation of one Banker, and the talent of another at the top.

But Australia Post's revenue last year was a touch under $5 billion. Their profit is down below $100m, their net margin is a shade over 2%, a fifth of what it was five years ago. They only have $500 million cash in the Bank, and their quick ratio (current assets to current liabilities) is a wobbly 0.78.

So where would they get their working capital - the stuff with which to provide "retail banking services"? They wouldn't have the same clout as the existing Banks in terms of favourable cost-of-funds, after all.

Why, the "Future Fund", of course!

There's $87 billion in that particular pot - that should give the nasty rotten Banks something to think about, eh?

Can anyone see any flaws in this plan?

Give it a shot, why don't you. Crank up a spreadsheet, and start filling in some numbers.

For the sake of the exercise, you can be as inventive as you like in the amount of business the new "People's Bank" conducts. But make sure to calculate their profit margins, the impact on tax revenues, the effect on the country's Super Funds as they re-weight their portfolios etc. as well as factoring in unemployment costs etc. etc.

Simple, eh?

Good luck.

I expect at the very least, it will help you understand why Mike Carlton is a journalist, and not a Banker.

http://www.couriermail.com.au/news/opinion/should-the-federal-government-regulate-commercial-decisions-by-private-companies/story-e6frerdf-1225948136194

do please take the time to read this.

http://www.smh.com.au/business/curbing-bank-powers-takes-more-than-pollies-media-and-punters-will-admit-20101107-17ixu.html

Try this too.

Gypsy, if the Bank Manager does not change your interest rate or waive the excessive interest you have been paying; inform your Bank Manager that you have no alternative other than to transfer your loan to a building society at a lower rate over the same period.

Do it immediately to cease the Bank ripping you off over the next ten years.

There are better options and competition out there for Home Loans now as opposed to 20 years ago when I was paying one off.