Bank hold-ups to be certified A-OK? (Part 6)

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Dr Evan Jones continues his six-part analysis on the series of parliamentary inquiries into systemic bank corruption as the victims of fraudulent foreclosures continue to wait for justice.

Read the other parts of this series:

Part 1

Part 2

Part 3

Part 4 

Part 5

THE DEEP SIGNIFICANCE of the current banking inquiry. What does it all mean?

Finance sector criminality comprehensive and endorsed

One can’t overstate the significance of the subject matter of the current banking inquiry into The Impairment of Customer Loans. At issue is a comprehensive criminality of the Australian banking sector, a criminality that extends across related key sectors — not least the legal profession (infiltrating the judiciary itself) and the receiver sector. This criminality is ultimately condoned by the entire regulatory and political apparatus.

The selective coverage of this poison, especially impoverished with respect to small business and farmer borrowers, over decades by the media is a key reason why the scale and character of this criminality is so poorly comprehended. And its implications.

The selective media coverage helps us reside in a comfort zone of “real world” avoidance. We can go to watch American films of Wall Street corruption (Margin Call, The Big Short and so on) that help more to inoculate than to educate. Couched in fictionalised form, did it really happen? If so, it happened “over there”, on the other side of the world, home of the capitalist beast. We leave the cinema and return to the comfort zone.

Then there’s the recent Russian film, Andrey Zvyagintsev’s aptly-named Leviathan. Corruption seeps everywhere. Scary stuff. Ah, we say, but that’s Russia, a hangover from the decadent Soviet Union. Over there.

Kolya, Leviathan’s main victim, is formally protected by a raft of laws and associated enforcement procedures. The rule of law prevails. Upfront, everything is in perfect working order. But it’s hollow. The rule of law is a sham, enhancing the perfidy.

But that shameful scenario is over there. Nothing to do with us.

We too have the rule of law, and it’s substantive. But is it?

An elaborate legal and regulatory apparatus may be conducive not to ensuring justice for victimised SME/farmer bank borrowers but to facilitating and obfuscating their brutal destruction. The legal and regulatory apparatus is part of the problem.

Hence the utter despair of the victims. Officialdom and the mainstream media look dimly at the formal apparatus and they mime — what is the problem? It needs tweaking at the margin, at best.

If one wanted an Australian version of a financial sector corruption flick/play there is one readymade in the hearings transcripts from the current Joint Committee banking inquiry — on which this multi-part article is based. One doesn’t need scriptwriters because the key players have provided the script themselves. One merely needs a judicious editing for those with short attention spans.

Boring? Perhaps. There is no obligatory love/sex interest (that we know of) to add the flavour. But there is a swathe of colourful characters, real people playing themselves. The script may have little entertainment value (the odd witticism/cynicism intrudes), but it has significant instructional value. If one wants emotion, the script can be guaranteed to raise one’s temperature (as is experienced by victim attendees and their sympathisers at the hearings).

It is a tragedy that at the centre of this sham is the Commonwealth Bank of Australia (CBA) — originally named the “People’s Bank”. The CBA was created in 1912 by the then federal Labor Government to fill a yawning hole in community banking needs left by a profit-oriented and short-sighted banking sector. As I noted in 'The Dark Side of the Commonwealth Bank':

The scale of the loss of a one hundred year heritage has yet to be comprehended. The current Commonwealth Bank colossus contains a panoply of previously independent publicly-owned banking institutions. …

The bank has embodied, catered to, then vanquished the hopes of those who wanted a public institution that served the broader public purpose and which accommodated commercial imperatives to an extent, but transcended private sector constraints.

Post-deregulation and privatisation, the CBA is driven not merely by private sector imperatives but by criminal intent as well. And, to date, without restraint.

Legacy of the “reformers”

The current state of play is a direct consequence of the reforming zeal of the banking vested interests, the neo-liberal ideologues and associated ill-tutored technocrats. It can be read directly off the directions generated by three key events.

First, the 1981 Campbell Committee report which recommended wholesale deregulation and privatisation of the banking sector. The only regulation deemed necessary was for macroeconomic purposes — that of a “prudential” character that would enforce minimum capital holdings on lending institutions to ensure the stability of a key sector of the economy.

Given that backdrop, the public interest would be served in the sector’s pursuit of private interest by the single vehicle of competition. Magic.

Second, the 1991 Martin Parliamentary Inquiry into the banking sector. This inquiry was initiated to head off the groundswell of resentment against the banks, reflecting that the promise of Campbell and the late 1980s reality were two different animals.

The Martin report recommended more or the same, with self-regulation added (banking ombudsman, code of banking practice).

Third, the 1995 Wallis Inquiry, motivated by the already tolerated overlap of segments of the financial sector, especially banking and superannuation/insurance. Wallis recommended no more walls, and a regulatory apparatus that accommodated the free-for-all.

The trajectory of Colonial Mutual Life (CML) is Exhibit A for this third plank. CML, founded in 1873, effectively entered the banking arena when it was permitted to take over the State Bank of NSW in 1994. It demutualised and listed in 1997 and was taken over by the CBA in 2000.

Its Wikipedia entry describes this transformation in gushing terms:

'Colonial was differentiated in the marketplace through its fundamental strategy known as bankassurance or ‘allfinanz’, the provision of a broad range of integrated solutions to its customers’ lifelong financial needs. These financial solutions were delivered through innovative methods of distribution that are most convenient and relevant to customers’ individual needs.'

Customers’ individual needs indeed. Colonial’s key businesses provided the foundation for the CBA’s “wealth management” division CFP and its insurance division CommInsure — both, as we now know, infested by criminal intent and generating a social catastrophe for its customers.

Campbell plus Martin plus Wallis has given us minimal competition, and what we have is of the wrong sort. Self-regulation is an oxymoron. And the conflation of distinct “product” segments into the same organisation has ensured that the public’s precious nest eggs have become mere playthings for predators.

The entire relevant establishment, immersed in this shit, doesn’t see it because they acquired their present positions by signing on (explicitly or implicitly) to the vaunted merits of the system that is now hegemonic. They cannot see how one arrived here (the bad stuff, seen through a glass darkly) from there (all the boxes ticked as representing desirable progress). 

As for the elusive idea of “competition”, consider a brief exchange at the 16 February hearing. Dr Mark McGovern, academic and consultant, is before the Committee:

[McGovern]: Given the oligopoly structure of banking, there is no incentive to compete. There is actually the opposite. There is a self reinforcing — if it is not a cartel, it is just a nice cooperative now.

[Senator Fawcett]: If there is no incentive to compete why does NAB, for example, have ads on TV talking about the targets they are looking at for lending? I read an article: I think they had a billion dollar target and they have reached $2 billion, in terms of their lending.

[McGovern]: You are right. That is in terms of market share and growth. But in terms of competing over the quality of the loan, you just stick with whatever will do. As long as you all use the same product, everyone is similarly advantaged or disadvantaged. But it is a product that you agree on. If you start differentiating your products in finance, you are starting to compete, but we are not seeing evidence of that.

McGovern is right. I wrote a letter to then NAB CEO, Cameron Clyne, in July 2010. Citing a list of NAB SME/farmer victim casualties of which I was aware, I claimed that the bank over which he presided was effectively running a racket (behind a mountain of public relations hyperbole).

I noted that the way out of this inefficient and moral quagmire was for Clyne to differentiate his bank from the pack — to genuinely compete by instilling a culture rooted genuinely in honesty and competence. Whatever the initial cost, the NAB would be rewarded with absolute dominance of the SME/farmer market for the indefinite future.

Clyne replied to me, via a flunkey, inviting me to buggar off. The NAB remains set in its ways of corruption and incompetence (Exhibit A its long time British subsidiary, Clydesdale).

The CBA, meanwhile, has channelled its “competitive” gene into upping the ante against other banks’ corruption/incompetence to become top of the pops. And what an inglorious achievement.

At the current banking inquiry (and previous such inquiries), the regulators all claim that the particular banking industry crisis under examination is outside their particular bailiwick, not their responsibility. This elaborate regulatory apparatus thus lets a succession of major crises generated by the financial sector falls through the cracks.

But the cracks are clearly seismic. Ergo, the current regulatory apparatus is a joke, not fit for purpose. Campbell, Martin & Wallis all got it wrong, individually and in aggregate.

Financial regulation needs to be reconsidered and reconstructed from the ground up. Nobody in authority gets the point. So more crises and more personal financial catastrophes will continue to occur.

I would recommend that the entire political and regulatory class be forced to watch, chained to their seats, Luis Buñuel’s 1962 The Exterminating Angel. Several times, if necessary, for them to grasp its relevance (if metaphorical!) and their own presence in the script. All we like sheep.

We have met the enemy and he is us

Further insight into this imbroglio can be had from the experience of iconic whistleblower Daniel Ellsberg, his story magnificently recounted in the 2009 documentary The Most Dangerous Man in America.

Ellsberg attempted to get his surreptitiously photocopied "Pentagon Papers" released in the Senate, not least via two presumably sympathetic Senators — William Fulbright, acknowledged statesman and then Chair of the Senate Foreign Relations Committee, and the vociferously anti-war George McGovern.

It didn’t happen. It didn’t happen because Fulbright and McGovern, no matter how “principled”, were integral members of the system. The content of the Pentagon Papers signified not merely condemnation of a series of American Presidents but condemnation of the entire system. We have met the enemy and he is us.

So also in the current banking imbroglio in Australia. Not merely the banks and their supplicant hangers-on are implicated but so also are the entire regulatory apparatus and the entire political class.

In this light, the current impasse is understandable. The SME/farmer banking victims (ditto retail investor victims) are sacrificial lambs in a process that ensures the continuity of the comprehensive complicity of all incumbents in the system of authority.

In this light one contemplates the demand of many victims (and Senator Williams) for a Royal Commission into the Australian banking sector.

This call carries much emotional baggage. It speaks of a dramatic exposure of the rot and a subsequent dramatic clean-out with its attendant catharsis. The sin shall be purged. Something like the Last Judgement, in which the books will be opened. As in the Dies Irae of the Mass (preferably accompanied by a terrifying cacophony of brass and percussion, as exemplified in Berlioz’s Grande Messe des morts):

“So when the judge takes his seat, whatever is hidden will be made manifest, nothing will remain unavenged”

Run competently and honestly (an extraordinarily lengthy and costly affair), a Royal Commission could potentially unearth some of the deep structural causes. Potentially. But who would be chosen as Commissioner? The judiciary and (ex-judiciary) is equally complicit. A large pool of ex-judges could be guaranteed to deliver a whitewash desired by the system.

Back in the real world, there is close to zero prospect of getting a Royal Commission into banking corruption. Zero.

The current banking inquiry, contrary to my immediate inference from the 13 November hearings, has since shown some signs of life, of promise. In particular, an additional hearing was scheduled for 16 February, and yet another mooted for 4 April in which CBA personnel will be called upon to account further for their institution’s behaviour and for the past misrepresentations of the personnel themselves. This additional grilling is unprecedented.

But parliamentary inquiries have no powers. My money is on the likelihood that governments of any persuasion will do nothing, and will produce platitudes to hide their inaction. The CBA will be called on to investigate a compensation scheme — which will, true to form, turn into a farce.

The CBA’s culture, entrenched in criminality, insouciance and defiance, is amply demonstrated in CEO Ian Narev’s response to current disclosures of the diabolical CommInsure fraud (4 Corners, 7 March 2016).

In spite of the enormity of this and previous scandals, it is my estimation that the Commonwealth Bank and its peers can remain confident that their entrenched racketeering will be certified, even if de facto, as A-OK.

The fact that the CommInsure CEO and Board haven’t been sacked immediately by Narev, and Narev hasn’t been in turn sacked by the CBA’s Board Chairman David Turner, with Turner subsequently falling on his sword (the entire CBA Board following suit?), highlights that they’re there for the long haul. No worries.

The adverse consequences are profound. Along with the public’s thwarted attempts to safeguard its future in the disposition of its savings, the much-praised entrepreneurial spirit can never flourish in Australia as long as it can be readily extinguished by corporate criminal cabals, the latter confident that they will never be brought to heel.

This is the final in an Independent Australia six-part series analysing ongoing bank corruption and ineffectual parliamentary inquiries, as victims remain uncompensated. 

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