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The Forum > Article Comments > Ben Chifley was right all along about the banks > Comments

Ben Chifley was right all along about the banks : Comments

By James Cumes, published 13/3/2009

We must not waste public resources keeping zombie banks alive or being tender to toxic paper.

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Great stuff. I particularly liked his comments re Chifley and his predictions re the future results of the Bretton-Woods "agreement"

The other posting by Geoff Davies supplements the themes of this essay at a more micro level.

By the way in his book, Geoff has an excellent discussion of the toxic delusions which are at the base of our current financial/banking system (Ponzi scheme)--and of the inevitable devastating consequences thereof.
Posted by Ho Hum, Friday, 13 March 2009 9:55:36 AM
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It is so interesting that even Adam Smith, father of the free-market believed lending societies should be overseen by government.

Cheers, BB, WA.
Posted by bushbred, Friday, 13 March 2009 3:56:45 PM
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The most drastic estimate of the effect of the recession I've seen so far is that we have gone back about five years. If the banks had been nationalised and stayed that way we would be back about twenty years.

It's called capitalism. Get used to it.
Posted by Jon J, Friday, 13 March 2009 4:26:09 PM
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Even to an economic illiterate as myself this makes enormous sense. Did we learn nothing from all the other "market corrections" such as 1987 and 1997?

Ironically the pop-up ad on the article was for CommSec. I laughed till I cried.

RF
Posted by RF, Friday, 13 March 2009 4:46:10 PM
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Jon J,

In Australia, the nationalisation of Banks has not been under consideration since the 1940s. When Sir Garfield Barwick was in his prime. The High Court has ruled and its not on.

That said, The Commonwealth Bank (also the Central Bank then)played an important role in stabilising the Banking Sector in the Great Depression. Something that is now lost because of Thatcherism. Had the Commonwealth Bank not been privatised, strangely enough,its public ownership could have helped the Free Market, by passing-on the RBA's interest rate reductions. Instead we have the Banks thwarting the Market for their own pofitable ends. At least ours' are not yet Socialist, as in the States.

Incidently, the DOW has halved its value, at least six times since 1906, and only once was there a depression.

The indices 7,000 in the US and 3,000 in Oz, will prove to be very resistant to downward pressure.

Today, we really only have the destruction of Middle Class wealth, where a Superannuant has lost say $500K-$2M on paper. Someone worth $10 million in 1990, before the market took-off, is still worth several times that amount, now.

Going back to Chiirfley's day, one can note, that loyal Bank staff fought hard to protect the Banks from nationalisation. Future generations of Bank staff, now, just as loyal, are so easily pushed aside by the Banks, creating redundancies, for sustained mega-profits.
Posted by Oliver, Friday, 13 March 2009 5:50:16 PM
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excellent.
Posted by Grim, Friday, 13 March 2009 6:53:02 PM
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It should be obvious to anyone that you cannot allow total privatisation of the banks. The welfare of the whole country and the world is in the hands of these unknown bank executives.

Why is it not being proposed to write it into the constitution?

Neither total capitalism or total communism ever work. They are always prone to fail as we have just witnessed with the spectacular failure of the privatized capitalist run banks.
What does work; is a capitalist(free market society) with some communism(for the community), provided where necessary by democraticly elected government who’s job should be to protect the community where necessary from the harmful excesses of capitalism. The lack of training of future skilled workers and now the collapse of the banks is an example of governments not fulfilling their role as guardians of the public interest.
Posted by sharkfin, Friday, 13 March 2009 11:36:29 PM
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Excellent and well-timed article. The news last night revealed the ANZ banks plans to shift more jobs to India. I hope this does not mean our private information is also being shipped offshore.

Compeition does not exist in the banking industry as they are all, for the most part as bad as each other and all gain to reap the benefits of higher fees, using offshore labour, not passing on all the interest rate cuts in a timely manner, and high loan break costs.

Mmmmm which poison to choose from...arsenic or should it be cyanide. Difficult choice.

Normally when faced with choice the consumer can write to said business and then vote with their feet - but in the case of banks where will our feet take us? Not far.

Even the smaller credit unions are not much better anymore - we need a people's bank for and by the people and targetted regulation - that is the only way real competition can thrive to the benefit of the consumer.
Posted by pelican, Saturday, 14 March 2009 1:11:25 PM
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Well said Pelican.
A better model already exists.
http://en.wikipedia.org/wiki/JAK_members_bank
It's time to move on.
Posted by Grim, Saturday, 14 March 2009 6:26:41 PM
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Great link Grim. You are right it is time.
Posted by pelican, Sunday, 15 March 2009 9:10:57 AM
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When Chiffley was PM, the banks were under control by the courts. One of the payoffs for the massive financial support the banks gave to Menzies campaign, was to destroy the courts, and install lawyers as judges. The first step was to gut the powers of the High Court by controlling who could access it. Before 1952, it was freely accessible to all, but since it has been a simple government public service backwater.

Menzies got his way from them by reminding them that any time he wanted he could prosecute them under the common law, and Crimes Act 1914 and they would lose all their pensions and entitlements. The only way a judge, and protect himself from either the State Governments or the Commonwealth, is by taking a jury verdict. The Magna Carta guaranteed both sentencing and the determination of guilt or innocence, was the prerogative of a local committee of 12 electors, called together in a political meeting.

No Prime Minister since has wanted to give courts back their political power. The courts could and did control banks. Now they can all be bought, and the highest bidder wins. The Legal Prodfession have degenerated into a form of Justice Brokers, who arrange deals between a Judge and the richest litigant present. This has made them really rich so it suits them to have a lawyer as a Judge. It is not great for Justice, but the legal professions attitude is I’m alright Jack, and the devil take the hindmost.
Posted by Peter the Believer, Sunday, 15 March 2009 11:49:25 AM
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Pelican, there are good reasons why banks don't pass on all interest
rate cuts. Fact is that our banks borrow roughly half their money
offshore, at much higher rates then local ones.

You can't really expect banks to pay say 8.5% overseas, to lend
it out locally at 6.5%. Even you should understand that :)

But lets clear up a few points here.

Today the spread on housing loans is around 2%. When CBA was
Govt owned, before Keating freed up banking, it was 4%.

In those days I was told by a banker, that the day would never
come, when bank paid interest on cheque accounts. How wrong he
was. Competition sorted that one out.

Yes, bank CEOs strive to make larger profits. They are driven
to do that, by their owners, which are largely Australian super
funds. Those super fund managers want to show you guys, their
owners, how clever they are at increasing your savings, so that
they too can get a pay rise. Any CEO not up to scratch, would
soon get the chop, under their pressure.

So the whole show is a bit like a dog chasing its tail. What banks
take out of your left pocket, they put back into your right
pocket through dividends, paid to your super fund.

This weekend's FR has a two page article on why Australian banks
have come through so well this present storm, in global terms.

In 2003 Costello appointed a tough regulator, who seemingly has
taken his job very seriously. Rudd has kept him on, for he is
clearly doing a good job.

In contrast Bush and Co decided that enforcing regulation should
not be taken seriously, the result is the present mess on Wall St.

That is a political failure, as voted by the people. Americans
and now the rest of the world, are paying a high price for having
appointed a dummie as Prez. Democracy is not perfect, but it is
the best that we have.
Posted by Yabby, Sunday, 15 March 2009 12:46:30 PM
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What everyone is missing is we are in this mess because of inadequate democracy within the corporate world.

How is it in the shareholders interest that bonus payments could be made to executives on relative performance without the qualifier of a positive return ?

How is it in the interest of shareholders that their companies buy derivatives where the risk analysis is conducted by firms paid by the seller of the derivative?

Why do we have a taxation system that rewards high levels of debt for investment?

Why do unitholders in managed funds or superannuation not have a direct say at AGMs proportion to their funds shareholdings in the corporation?
Posted by slasher, Sunday, 15 March 2009 8:07:49 PM
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Great article.
Jon J. If it was pure capitalism then the banks would have failed by now and we would have needed massive government intervention: Effectively a new State bank. Would you prefer this?
"too big to fail" should only apply to governments, or it is just corruption in the form of charity to the wealthy.
Democracy and transparency in business would help too. the "accountants" have done well in making nothing accountable. Auditors audit the same companies they fiddle the books for.
Posted by Ozandy, Monday, 16 March 2009 9:11:02 AM
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Ozandy,

I'm not fully convinced about Banks being too big to fail. While shareholders can loose equity, a failing Bank would be just dismembered and the parts swallowed-up by more nimble and more prudent rivals.

Under free markets it is role of the unfit to go under, so the more capable survive to better serve the Market
Posted by Oliver, Monday, 16 March 2009 4:58:36 PM
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It has been too much like a return to the Roaring Twenties.

Which as a growing lad I remember so much with the very short skirts and the loosely legged panties.

It has just been the same routine, purely just brash care-free-ness with too many business executives acting like mugs putting too many bets on nags at a 100 to 1.
Posted by bushbred, Tuesday, 17 March 2009 1:18:52 PM
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(a)Dear Dr. Cumes,

Yours is another lesson in history and an accurate diagnosis of a patient in trouble.

The Economy lies wounded in a field where the battle to denude the majority of Australian of their wealth and dignity rages.

It probably was the richest country in the world.

A country in which public records were open for all to see, where the Obituaries of prominent citizens published the import of their estate, where the tax office from time to time received money from anonymous senders, ‘conscience money’ was called.

Those were the riches of our country. Riches gone; squandered!

We can remember them with nostalgia but that’s all.

From now on forests of paper filled with rules and regulations and threat of penalties, the paraphernalia that politicians and lawyers are made of, may make of this country an English boarding house with all don’t this and don’t that and six penny gas meters, and have armies to enforce the rules, but without moral compulsion, health wont return to our patient.

Not that the poor people have no decency. We remain great. Our discipline in the face of the Victorian water crisis, our generosity towards the victims of natural tragedies and those issued from ignorance and carelessness of politicians, is proof of our nobility
Posted by skeptic, Tuesday, 17 March 2009 10:51:15 PM
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(b) Dear Dr. Cumes

What worries is the arrogance of those to whom our politicians have sold our power; Bankers, Estate agents, Media barons, Merchants, Industrialists, Accountants, Lawyers, Do-gooders, Corporations of all sorts, from universities to refuse management, these de facto Lawmakers whose power they use to exact their cut and insult our intelligence, every day.

The egotism, the greed, the corruption is in these morally destitute charlatans.

Your diagnosis is right Dr. Cumes, but you have not pondered long enough on the etiology of the malaise.

Privilege!

It has come to us from the Magna Carta, from monarchic England, from Imperial England.

The other day an Australian High Court Judge rolling his tongue talked of tradition. What tradition? Whose tradition?

Westminster says the Politician. As if those stones and those bells were around the corner

Punishment! Prisons! In the third Millennium?

How hard for one who has lived close to a quaint republic in Europe; San Marino. Crime? Yes. Judges? Yes. Vengeance? No. Prison? No. Politicians? Non existent.

Dear Mr. Cumis, I admire you for your historical sense and magisterial prose and I admire those who shoeless and undernourished went to the same State school frequented by that judge. I know their history. It kept then from arrogance.
Posted by skeptic, Tuesday, 17 March 2009 10:55:26 PM
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