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.