The ABC TV, Inside Business program, on 31st May last year, reported Mike Smith, CEO of ANZ, conceding; “we’ve now got two pillars and two stumps,” referring to exposure to liability from the Global Financial Crisis [GFC].

It reported Queensland’s Suncorp declaring competition was dead.

It further reported, in the first quarter of last year, 23 of the 25 billion dollars of residential lending were accounted for by CBA and Westpac, including their effective takeover merger entities, Bankwest, and St George, respectively. These figures represented more than 90% of residential lending effectively controlled by CBA and Westpac.

The ACCC Chairman was reported as expressing regret about CBA’s takeover of Bankwest.

It reported Brett Le Mesurier, Banking Analyst for Wilson HTM, referring to the Federal Govt guarantee the Four Pillars enjoyed during the onset of the GFC, and its affect on the three remaining regionals, Bendigo and Adelaide, Bank of Queensland, and Suncorp, that; “they are effectively paying on the wholesale markets for term funding a hundred points or more than the major banks.”

Bank of Queensland Chief, David Liddy was reported as observing; “Clearly you know, when elephants dance ants tend to die.”

It reported the Four Pillars were enjoying 9-10% growth compared with the regionals 2-3%, significant of the Four Pillars failure to pass on the discount they were receiving from the wholesale markets relevant to the Govt guarantee.

[Ostensibly the Four Pillars were not passing this saving on for the purpose of hastening redeeming of their exposure to the GFC.]

In response to the comments;

“some force that currently does not exist in this country”
- Pericles

“prisoners of the pursuit of profits…service ethos” - DRW

I contend there is a practice that exists not only in this country, the known science of management. That it may be increasingly harder to discern within the banking sector in Australia, is demonstrated not as consequence of the failure of the science, but its application. - Cont.

As parents are not required to retain accreditation for parenthood, nor are politicians required accreditation for management, nor leadership. However, as differentiated from parenthood, leaders in public office may readily attain a level of management training that would assist them significantly in navigating the intricacies developed in this field, that may translate to more astute policy.

For as commented;

“The process is rarely explained in terms that the public can understand” - Forkes

I observe the record of the GFC that realised CDO’s for internationally accessible packaged loans, found the financial institutions responsible for them, unable to readily identify the loan contents of those packages, compounding the impact upon the credit freeze generated by the crisis.

The excessive practice demonstrated by this aberration observes the extent of its prudential failure as nothing less than contempt by an industry that retains prudence as its benchmark for confidence in its markets.

Therefore it appears to me, it is the culture within this field that requires redress, for the practice may be observed a paradigm and dimension differentiated from the core principles of the science, such as, proficient servicing of the market, distribution of wealth, ethical integrity and transparency.

Market leaders outside closed monopoly advantage, demonstrate as consistent, the rigour of discipline attending these principles. Consequently they are valued such that their brands generate increased and relative value.

Management case studies demonstrate, the market inevitably demands myopic performers obsessed with their own vested interest, are replaced, often realising opportunity for a new dynamic. In the Australian banking sector that change is required now, however, the flawed and aberrant ideology of the current Federal Liberal party, is observed even less likely to deliver it.

Two things happened in this country to shift the balance to the banks. First there was the sale of the Commonwealth Bank. This was a huge mistake and should be fixed by Government asap. Second, under Keating, was the move to compulsory banking for all Australians. Cash was taken out of pay offices and social security and everyone had to have a bank account or you simply didn’t get paid. These two events alone gave the banks a virtual license to control money. Remedy, for the Government to re-establish and control a bank with no day-to-day changes on bank accounts, and loans at very low interest: <3% and support loans for low income households. Competition will not serve the public interest only a non-profit operation can curtail the banker’s greed.

Underlying this whole issue is the broad move by Government to extensive Privatisation of essential public services. This should NEVER be allowed to happen. Competition: no problem. If another service wants to operate in an area that Government provides for – say Water for example – then they should be allowed to do so. But the Government should be preserving and supplying this service to everyone. Two issues exist in relation to Privatisation. Firstly it means that profit becomes a motive. Therefore, any service provision which holds no profit would not be provided. It would logically not be in a company’s interest to supply a product if the cost was greater than the return. This makes sense. When it comes to essential services there are many places where it is not profitable to deliver.
Secondly, it brings a third element to the cost of a good or service. Under public hands you have the cost of the product plus the wages to deliver. In private hands you then have to add in the profit side of the equation. This tends to add at least 10 percent to the cost of most items. In many cases even this small amount makes the service provision untenable. Therefore the private operator reduces maintenance or the quality of the service to maintain profit. This works until the infrastructure breaks down and there is not enough money to fix the problem. This has occurred already in SA with ETSA and SA Water.
To finalise the issue it should be carefully noted that Privatisation has not deliver better, cheaper service in any country anywhere in the world. In fact, in the US and the UK has been total failure providing a massive profit to business while draining the tax payer. The shift to Privatisation is a massive failure and plunges the tax payer into dept in order to maintain key services. Government should preserve all essential service in public hands and stop financing corporate profits.

Pericles
So are you in favour of fractional reserve banking, or against it?

Sometimes you have to choose between the lesser of two evils. Which is preferable:

Obscenely profitable banks that don't fail? Or

Marginally profitable banks that do fail and need bailouts?

Perhaps we should regard the extra 10% return on equity our banks earn as a sort of insurance premium we pay to prevent a Lehman Brothers type collapse in Australia.