John Passant discusses the Turnbull Government's ongoing commitment to protecting the banks' profitability, even gifting them billions in tax cuts, as the Banking Royal Commission continues to uncover "utterly shocking" truths.
THE STORIES coming out of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry are "utterly shocking".
It will only get worse. This is because the Royal Commission has only just started its investigations and because what the banks and other financial institutions are only interested in, is profit.
This exchange between counsel assisting the Royal Commission Michael Hodge QC and AMP’s head of advice Jack Reagan captures the thinking of business very well.
Mr Hodge asked:
“What we seem to be seeing is that a conscious decision is made to protect the profitability of AMP at the expense of complying with AMP's licence, do you agree?"
Mr Regan conceded:
"Yes, I believe that's what that shows, yes."
The problem is the quest for profit that all businesses have at their essence, which has caused banks – and other businesses far removed from the spotlight of a Royal Commission – to cheat their small customers. Imagine what a Royal Commission into wage and superannuation guarantee theft would yield. Or deaths on building sites. Or precarious employment.
Don't forget that this was the coalition's response to calls for a Royal Commission into the banking sector up until just recently. You can thank the Labor Party for forcing the issue because the government weren't having a bar of it. #auspol #BankingRC #BanksRC pic.twitter.com/HMBaxAgkJS
— Fred Smith (@actualfredsmith) April 22, 2018
The Coalition's response to Labor calls for a royal commission into the banking sector. (Source: @actualfredsmith).
The Banking Royal Commission is putting capitalism on trial — and it is not looking good for the banks or for the system. That is why the Turnbull Government spent years resisting Labor’s calls for a Royal Commission into the banks.
As Member for Grayndler Anthony Albanese said recently:
‘ … the Government had been running a protection racket for the banks and finance sector, voting against establishing the [banking] commission more than 20 times.’
Turnbull only relented when the banks suggested what they thought would be a restricted inquiry that they could handle. It just shows how divorced from reality the bankers and Turnbull Government are, that they thought they could massage a royal commission.
People power and the political capital Labor was accumulating from the anger, forced the banks to approach Turnbull to set up what they thought would be a restrictive and restricted inquiry. The old adage about never set up a royal commission you do not know the answer to has to be qualified.
The Turnbull Government and banks knew any shining of a light into the dark places under their rocks would see the bugs scramble out. What they hoped was that they could argue it was a few rotten bugs rather than the whole body that was the problem. Capitalism is the bug.
The Government must have known all along about the dodgy practices of banks and the other financial leeches. ASIC, the inadequately empowered and underfunded regulator, is a classic example of regulatory capture by capital. Constituents have been telling Government MPs for many years about the abuses.
But the Turnbull Government did not want to upset one of the most powerful groups of capitalists in Australia. The finance and Insurance sector accounts for 9.4% of gross value added to the economy each year. The banks are a key part of the structures of power. The Government supposedly feared a banking collapse if there were any inquiry. This seems unlikely given the revelations coming from the Royal Commission are not about how unprofitable Australian banks are. The banks make super profits off the people.
Until recently, Australian banks were the most profitable in the world. They are still among the most profitable.
‘Research [by the Productivity Commission] published ahead of the inquiry said the four major banks were among the most profitable lenders in the world, earning profit margins of 36.4% in the June quarter of 2017. Returns on equity after tax were 13.6%.’
Treasurer Scott Morrison said a year ago that Australian banks
"... have a return on equity which is about twice, if not more than that, what you see particularly in other parts of the advanced developed economies of the world."
Despite the evidence, the big banks cry poor and tell us they are not very profitable. Like the Turnbull Government attempts to claim credit for the Royal Commission, no one believes the banks either.
What solutions are there? To answer that let’s put a few big-picture issues on the agenda? The history of capitalism (both the "free" market version and the Stalinist state capitalist version) for the last century or more has been the history of the concentration of capital, the development of finance capital as a key to capitalist development, and the close relationship between the state and capital.
At its apogee, this latter development culminated in the state capitalism of the fake socialist regimes. But even with the overthrow of the Stalinist states, developments in the West highlighted the closer and closer relationship between the state and capital.
There are those like the Productivity Commission who argue for more competition in the banking sector. This is King Canute stuff. It imagines that the current state-supported oligopoly – the Big Four banks account for about 80% of the banking market – can be remedied by state intervention. It imagines you can turn back the systemic developments and structural realignments within capitalism, and that those systemic drivers will not reassert themselves.
How much better would it really be to have more banks ripping us off, all driven by cut-throat competition? The throats that would be cut are ours.
Arguments for more regulation suffer the same King Canute problem of ignoring the systemic drivers of capitalism. Such regulation would have to be light handed — that is, ineffective, given the role of finance capital in the Australian economy. More criminal offences and civil control will be subverted.
Speaking of criminal offences, how many white bank CEOs will Minister for Home Affairs Peter Dutton attempt to gaol or deport? Maybe Australia should set up a special camp offshore for these alleged crooks — only, of course, to stop the bloats.
I (and others) have argued for a tax on the economic rent (super profits) of any business. That includes mining companies and banks. It is not enough, but stands in stark contrast to the Turnbull Government’s $65 billion company tax cuts — including $14 billion for the Big Four.
Discussing Minister for Revenue and Financial Services Kelly O'Dwyer's repeated refusal to concede the Government's error in delaying the Royal Commission and insisting the banks should still receive corporate tax cuts, Opposition finance spokesperson Jim Chalmers was quoted by SBS:
' ... Ms O'Dwyer's comments show she was "spectacularly out of touch" ... the Commonwealth Bank of Australia would receive a tax cut of almost $4 billion while Westpac would pocket $3.5 billion, the ANZ $3.2 billion and National Australia Bank $2.6 billion.’
Good luck with selling that bank tax cut shit sandwich, Prime Minister.
We could set up not for profit providers, which is what AMP used to be. That, too, misunderstands the systemic drivers and does not challenge the oligopoly of the Big Four.
Short of a flowering of democracy that overthrows capitalism, I support Ben Chifley's solution — nationalise the bastards that are the banks.
And if my dreams were to come true, bank workers could take their banks over and run them democratically for people, not profit.
Financial Services Minister Kelly O’Dwyer has repeatedly refused to concede the government should have called a banking royal commission sooner. @AirlieWalsh #9News pic.twitter.com/VTictjiZ81
— Nine News Australia (@9NewsAUS) April 22, 2018
Kelly O'Dwyer repeatedly refused to concede the government should have called a banking royal commission sooner (source: @9NewsAUS).
Read more by John Passant on his website En Passant or follow him on Twitter @JohnPassant. Signed copies of John's first book of poetry, Songs for the Band Unformed (Ginninderra Press 2016), are available for purchase from the IA store HERE.
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