"Trust is at the heart of banking. It's not good enough if trust or good ethics exist in the vast majority of the organisation, you've got to do your best to get it right across the organisation."
Ian Narev, CBA CEO, 18 November 2015
“We will be the ethical bank, the bank others look up to for honesty, transparency, decency, good management, openness.”
Yet another bank inquiry because the previous ones were duds
The Parliamentary Joint Committee on Corporations and Financial Services is currently engaged in an inquiry titled ‘The Impairment of Customer Loans’. The dominant issue for consideration is the fraudulent foreclosure of close to 1000 Bankwest borrowers after the Commonwealth Bank took over Bankwest from its parent HBOS in December 2008.
The inquiry was established following long-term pressure from a small group of foreclosed Bankwest borrowers. Given the seriousness of the disclosures and conflicting claims, the inquiry period has been extended.
On Friday 13 November 2015 the JCCFS (PJC for short) held its first public hearing in Sydney. Some testimony was reported briefly in the media – the ABC, Fairfax, and here, and the Australian. The coverage is welcome, alerting the public to the inquiry and its orientation. But the coverage is cursory and there has been no reportage of the victims themselves — by interviews or by noting the contents of their submissions.
The neglect of this dimension of CBA criminality is in marked contrast to media coverage of the Storm Financial, Commonwealth Financial Planning and the current CommInsure scams.
The Committee Secretariat, as is customary, censors submissions of all references to individuals (the front-line guilty parties?) named by bank victims. Bizarrely, the Secretariat even whites out references to such essential background information as relevant court cases. But even the redacted versions expose the nature of the malaise. My original submission (the redacted submission is no.83) is published here.
A previous Parliamentary inquiry in 2012 had been mooted to examine the same scandal. Before the inquiry saw the light, it was hijacked and re-oriented to something else, formally important but amorphous and ultimately (in the context of a visionless political class) innocuous. This was what became the ‘post-GFC banking inquiry’. One infers that the Senate (and then Labor Government?) re-directed the terms of reference under pressure from the CBA.
The post-GFC banking report was a disgrace. The CBA/Bankwest scandal disappeared from view. This in spite of the fact that the Senate Committee heard testimony from selected victims.
One need go no further than the testimony of Sean Butler on 8 August 2012. Butler, a successful West Australian resort owner and hotelier, was brutally destroyed by the CBA and a partner-in-crime liquidator. ASIC told him to buggar off. His and other testimonies disappeared into the ether.
I have previously written an account of this dead-end inquiry, in four parts, here. The regulatory and political copout with respect to the CBA (including with the financial planning inaction) is covered here.
The current inquiry gives select victims a voice
First up to this new inquiry on 13 November was Rory O’Brien. O’Brien’s story, to his successful appeal in April 2013, is told here. The Appeal Court victory provided some optimism in O’Brien’s fight against the CBA (the victory was on narrow technical grounds but implicitly acknowledged potential CBA culpability). O’Brien’s case was due to return to court in May 2014.
In January 2014, CBA chief counsel David Cohen contacted O’Brien with a view to discussing the prospects of a ‘reasonable settlement’. O’Brien replied positively.
Four months later on Tuesday 29 April, a week before the re-trial, Cohen meets O’Brien and suggests a paltry $1.8 million settlement. O’Brien reluctantly agrees, and instigates moves to withdraw from the impending litigation. Cohen breaks his word. At 6 p.m. on Friday (the court case had been scheduled for the Monday) the bank tells O’Brien – we’ll give you $100,000, take it or leave it. This practice of a bank handing over material or deliberations at the eleventh hour before impending litigation is a regular scam. O’Brien, advised by his lawyer, even more reluctantly accepted the bank’s dictate.
As per the conventions for bank out-of-court settlements, all details remain subject to confidentiality. Confidentiality serves only bank interests. All the precious bank documents that O’Brien had obtained in discovery had to be returned. O’Brien’s testimony at the hearings was possible through his obtaining parliamentary privilege.
Much speculation has occurred over the terms on which the CBA bought Bankwest from HBOS. It is known that the ultimate price depended on adjustments linked to unforeseen elements in the quality of the loan book, but that the ultimate adjustment was claimed to be marginal.
Bankwest victims claim that the purchase contract included a “clawback” arrangement, whereby the quantum of Bankwest loans claimed to be of dubious quality could be deducted from the ultimate price paid. CBA executives have consistently denied that any such clawback mechanism existed.
O’Brien claims that the discovery process in his litigation highlighted that the CBA had indeed a clawback arrangement, of which more below.
Other victims claim that a clawback took the form of the discounted purchase price itself — at $2.1 billion. Regardless, this speculation and denials could re readily clarified if the police were sent in and sequestrated all documents relevant to the CBA’s purchase of Bankwest.
Victims have claimed that the fraudulent foreclosure of Bankwest clients was also motivated by the CBA wanting to get the second-tier Bankwest quickly up to speed on the hierarchically graded demands from the Bank of International Settlements at Basel, whose prudential guidelines on bank capital requirements, mediated by national regulators, are applied to all licensed banks.
From Rory O’Brien:
“There were also compelling reasons at the time why CBA wanted to impair and default many of these inherited loans from Bankwest to meet their Basel II liquidity requirements. This is a crucial issue peculiar to the banking industry which has been somewhat overlooked in this saga …”
From Romesh Wijeyeratne:
“Several CBA public documents state that the goal for the Bankwest purchase strategy was to be 'capital neutral to maintain its Basel ratio'. …
Essentially, capital adequacy is dictated by the Basel ratio. A Basel ratio is effectively capital divided by risk-weighted assets, which is the bank's money divided by the customers' loans, and you get a ratio out of that. Different banks have different certifications and they have to abide by different ratios. At the time of the purchase,
Bankwest was a Basel I accredited bank, and Commonwealth Bank was the first bank to move to Basel II advanced accreditation. So they had different capital profiles. We now know that Commonwealth Bank were having difficulty raising capital during this period, so the solution was to reduce the amount of customers that they had on the books. …
“But the problem with this Bankwest scenario … is that Bankwest was subject to the Bankwest act, which stopped Bankwest from being moved up to the Basel II advanced accreditation. That could not be moved up in line with Commonwealth Bank, which created a discrepancy of capital profile between the two banks. The resolution of that was that they could not raise the capital; therefore, they terminated the customers.”
At the 29 April meeting with Cohen, O’Brien claimed (his lawyer present) that the CBA had O’Brien’s loan within the clawback quantum. OBrien notes:
“During the discovery process, however, it was definitively established through indisputable written evidence that, pursuant to the provisions of the sale contract, CBA did in fact attempt to clawback our loan from the vendors of Bankwest, through their advisers, PricewaterhouseCoopers. …
“CBA improperly tried to influence Bankwest to impair our loans. CBA's attempt to impair our loans was contested by HBOS Lloyds, understandably, as the vendors and sent to the appointed arbiter, Ernst & Young. Ernst & Young found out that our loan was in fact stable and ultimately unimpaired and refused to allow the clawback of CBA.”
Obsfucation and lies by CBA management concerning the contract terms have led victims to closely examine CBA financial reports to infer what the bank declines to disclose to victims and public authorities but is happy (or compelled) to disclose to shareholders.
Thus did Trevor Hall, victim Iyad Rafidi’s lawyer, say to the Inquiry Committee members — don’t take our word for it. Rather, examine what the bank has had to say itself about the contract terms and the orgy of defaults and foreclosures. See also the anonymous submission (#111), titled “Critical Analysis of CBA and Bankwest Public Statements 2008 to 2015”.
The CBA had a warranty window of 18 months (until end of financial year 2009-10) to invent “impaired” loans in its purchased loan book. Which it did with gusto.
From the hearing transcript:
“Mr Rafidi: The Bankwest commercial loan book that we assessed was about $23 [b]illion; $8.2 [b]illion of it was impaired. That is 42 per cent of the book, to our calculations. Every loan that had a risk rating of six or greater—the Bankwest credit policy describes an RG6 loan as 'adequate', but in recent cases that we have seen the bank now describes a risk rating 6 loan as 'substandard' and 'watch list', which tells you the way they started thinking I guess. They just impaired every loan; 100 per cent of any loan that had a risk rating of six or greater got impaired. They happen to be 42 per cent of the book.
Senator WILLIAMS: How do you know that?
Mr Rafidi: Just have a read of the financial statements and do the maths. We sent it to you in the submission, and they have not questioned it. They have not said that number is wrong.”
And the broader significance of it all? From private consultant Peter McNamee (whose submission to the inquiry is no.107):
“The CBA's own documents that we have state[d] that the average size of these performing loans that were reviewed was $8 million. So it all sounds about right: the CBA probably defaulted a thousand loans with an average value of $8 million for a total of $8 billion in total defaults. This must be the largest mass default of commercial loans and the largest mass destruction of Australian family businesses in our history.
“And these are not people who overspent on their credit cards by $5,000. You will have read their submissions; these are people who are in their 50s, 60s and 70s who have been in business their whole lives. They are successful business people and successful families. They are people of substance. The average loan was $8 million; a bank would not approve a loan for an $8 million facility if the borrower were not already very successful, trustworthy and financially strong.”
The scale of the crime is also put into perspective by Rafidi’s adviser Ross Waraker:
“To put the seriousness of this alleged crime in context, in June of this year, a former Commonwealth Bank employee was reportedly jailed for stealing $19,000. This crime is, conservatively, half a million times bigger.”
The O’Brien experience is not an aberration (as with the Butler case). The testimony of Trevor Eriksson is also a shocker.
Eriksson was a large-scale successful developer in the booming region of Orange NSW. His work involved development of significant infrastructure for both private and public sector institutions. From Eriksson’s testimony:
“The Senate inquiry came up in 2012. David Cohen took over. There was a bit of lull there. Then they served a bankruptcy notice on me in March 2013, but it was dated two weeks after your Senate inquiry. There was a bit of a payback for me doing a submission to the Senate inquiry, so I think.”
The Eriksson account is also a classic exhibit for the absolute corruption of the entire system. Lawers Norton Rose Fulbright, receivers Grant Thornton and bankruptcy trustee Ferrier Hodgson all were corrupt partners in the heinous takedown. ASIC said to Eriksson, “don’t bother us”.
I originally thought that the O’Brien experience was an outlier in terms of the monetary scale of the victim’s loss (several hundred million dollars). But no. At the 13 November hearing I met several others in that category. One of these, Chris Evanian, has been previously off the radar publically. Evanian made a submission to the inquiry (no.124). I met another victim who had lost a lifetime’s hard work, in this instance on rural and semi-rural properties. He remains off the radar, but he’s out there.
The seeming incomprehension of the Committee members
The details of bank victim stories, highlighting the extent of the corruption and depth of amorality, always shock. But the most depressing aspect of the 13 November hearings of the current inquiry was the input of the Inquiry Committee members.
Of the ten PJC members, present at this hearing were Senator David Fawcett (Liberal, Chair), Senator Deborah O’Neill (ALP), MP Philip Ruddock (Liberal) and Senator John Williams (National).
Senator O’Neill was the most conscientious of questioners amongst the Committee, having done some homework. Senator Fawcett as Chair played a straight bat and was rarely heard from.
Fawcett did put to Rory O’Brien the claim/question:
“… the Commonwealth Bank is a commercial entity and it would want to minimise any losses. Having realised that it could not go for, in your words, the easy option, why would it not go for the loss minimisation option of working out …”
The “easy option” here refers to the CBA’s attempt to obtain an offset from HBOS for the O’Brien loan, supposedly impaired. The “loss minimisation option” refers to the notion that the CBA should rationally see through the O’Brien to successful completion.
Fawcett’s claim/question exposes his naivete as to a bank’s modus operandi. Fawcett imagines that banks operate according to a strict pecuniary-driven rationality.
Bank management is also driven by hubris, the love of power for its own sake, and by sadism when the opportunity allows. The takedown of Trevor Eriksson after his submission to the 2012 inquiry evidences a sadistic streak (as does the entire operation after the Bankwest takeover).
If a bank was genuinely oriented to “loss minimisation” it would uniformly be working to ensure the sustainability of commercial borrowers, and it would certainly not be selling foreclosed properties under value (ridiculously under value in many cases) and throwing a motza in legal bills to destroy its customers.
There are clearly no Members of Parliament, none, who have deigned to get interested in how banks actually operate — this in spite of some of their misdemeanours having been splashed across the business pages for decades.
In his numerous interventions on 13 November, Philip Ruddock appears stuck on the idea that Bankwest was a lender of last resort for borrowers. Thus were the borrowers’ activities intrinsically dodgy, which the GFC brought undone on a mass scale. End of story.
Ruddock to Rory O’Brien:
“One of the arguments that I understand is put is that, of course, there were many more impaired loans in Bankwest because they were at the fringe and essentially they took the most risky customers, whom you would expect would be in default. Presumably you went to Bankwest because you would find it difficult to get money anywhere else. …”
“So any inference … that we were somehow a desperate customer who got last-minute desperate financing is absolute nonsense. It is merely smoke and mirrors and a post-rationalisation and reverse engineering to justify what they have done.”
Undeterred, Ruddock later repeats the assertion to victim Iyad Rafidi:
“You may have heard me question earlier about the strategy of Bankwest. To get business meant that they took on clients who were higher risk. The argument is that the four major banks get the best clients and the next level of banks get the clients who are riskier. Bankwest was with a number of other banks receiving riskier clients.”
As O’Brien had earlier intimated, this claim is bullshit – a canard pushed by the CBA.
Ruddock keeps at it with the next victim appearance, Trevor Eriksson:
“[Eriksson:] Why would they sell my property for 45 per cent of four independent valuations that were all current?
[Ruddock:] I do not know. I am looking at what is happening in the housing market at the moment in Sydney. It has come off very significantly. You might have got a very big price last week, but this week it is down.
[Eriksson:] Not by 65 per cent.
[Senator Williams:] Or 55 per cent.
[Eriksson:] What I am saying here is that you could not justify a 45 per cent sale when the valuation is only four months old.
[Ruddock:] I do not know. If there were a global financial crises that was impacting on the Australian market, it might well come off more than that.”
It is transparently clear that Ruddock does not know, and appears doggedly reluctant to raise himself from that state of ignorance. We have businesspeople with a solid commercial history behind them offering chapter and verse of a heinous crime and Ruddock apparently prefers the fairy tale fabricated by the CBA.
Is Ruddock playing the devil’s advocate, hiding his own views? If so, it has been a consummate performance.
Ruddock was also involved in an ill-informed discourse on the evident failures of the relevant regulatory apparatus. In exchange with Romesh Wijeyeratne, sometime ASIC staffer, Ruddock opined:
“… I am interested in the conflicts between the functions of the different regulatory agencies. ASIC has been given, as I understand it, the responsibility for ensuring that the banks remain viable — in other words, protecting the depositors and their interests. The ACCC, normally, would be dealing with the protection of the customers to ensure that contracts were not unreasonable and the conditions under which people are being dealt with are fair and appropriate. But, as I understand it, ASIC has been asked to deal with both.
“In relation to these issues, I am trying to understand whether there was in fact a substantial regulatory requirement to ensure the viability of the banking system that required the Commonwealth Bank to behave in this way in relation to Bankwest loans. In other words, were we dealing with a bank, Bankwest, that had a whole lot of largely impaired loans that needed to be cleaned up, and the Commonwealth Bank had the hard job?”
This is a mess. There is again the “fact”, that Ruddock cannot relinquish, of “a whole lot of largely impaired loans”.
Responsibility for customer protection in financial dealings did pass from the ACCC to ASIC in 1998 for retail customers and in 2001 (operational 2002) for business/farmer customers. But the responsibility for “ensuring that the banks remain viable” lies not with ASIC but with APRA (and, subsidiarily) the Reserve Bank.
Ruddock should know that ASIC has systematically ignored its acquired responsibilities. The authorities delegated to the CBA the responsibility to ensure continuity of operations of Bankwest in the face of a failing parent bank, but the government did not consciously delegate to the CBA “the hard job” of fraudulently foreclosing on a swathe of Bankwest commercial customers.
Nationals Senator John Williams is a rare Member of Parliament who has interested himself over the years in the rough treatment of commercial customers by the banks.
“I do a lot of work with the banks in my office. I know there are farmers and landholders in Western Queensland who have been in severe drought for coming up to four years. I know some of the banks have stuck with them all the way. In fact, they have been very good to them. Then I see what has happened in this case we are talking about, with CBA taking over Bankwest. I know people personally who had never missed payments to the bank but who were put under tremendous pressure.”
Williams acknowledges the qualitative significance of the CBA’s takeover of Bankwest, but the presumption that this behaviour is atypical is absurd.
Williams has undoubtedly helped, on the margin, some farmers in trouble with their banks through personal intermediation, but he hasn’t changed the culture of the sector or any particular bank one iota. The banks continue to default and foreclose farming families at their discretion. The evidence does not support Williams’ claim of perennial bank support for farmers in distress through the drought years.
Williams’ evident belief that he can change banking culture through personal links with senior banking executives is misplaced. He has such links with senior CBA executives and it hasn’t made a damn bit of difference. (And remember that Williams’ own family was a victim of CBA bastardry during the foreign currency loan saga, so Williams’ exposure to bank corruption is of long duration.)
In spite of this history, Williams’ interventions during the 13th November hearings were mostly perfunctory, concerned with marginal issues. Remarkable really, given that, as a member of the Senate Economics Committee, he sat through the 2012 so-called Post-GFC Banking Inquiry and the testimony of Bankwest victims (which report, as noted, completely ignored the Bankwest debacle).
The submerged iceberg of victim stories neglected
In short, at the 13 November hearing, there was manifest amongst the PJC members a particular and surprising lack of familiarity with the subject matter and the scale of the crime.
It was as if the Committee members had read none of the copious submissions from victims. Of course, Parliamentarians are busy people. At one stage, Senator Williams commented:
“I have not read everything. If I read everything that comes into the committee, I would do nothing else but read 24/7, I can tell you!”
Quite. But doesn’t the Committee Secretariat summarise the content of submissions for the busy Committee members?
Moreover, a random delving in the odd submission would not take the busy Parliamentarian too much time and would give her/him a ready feeling for the nature of the beast, and instances of the losses and the personal suffering involved.
Apart from the submissions of those who have appeared before the inquiry, one could pick out, say, Rigg (no.15, a 1980s victim), Kelgon (no.24), Wallader (no.52), Burge (no.63), El Khoury (no.71) and Evanian (no.124).
Readers might also profit from checking the Hearings transcript of the PJC’s visit to Brisbane, 19 November. The testimony of Colin Powers, long time hotelier, is instructive. It is also heart-rending. But it is not exceptional.
Powers had strategically avoided borrowing from the CBA because of his father’s adverse experience with that bank. Thus he banked with Colonial First State. But we know that the CBA took over Colonial First State. So Powers moved to Bankwest. We know of course that the CBA took over Bankwest. Thus Powers’ reaction:
“When I heard of their takeover of Bankwest, my words to my wife were, 'This is the beginning of the end of us.' Two times I ran from them and I got away from them.
They are barbaric. They were impossible to deal with.”
And the outcome?
“I will number in order the procedures they executed against me to leave me living in a garage for 12 months, with $32 left to my name and on the dole when I had an asset value in excess of $14 million in 2009. I lost my marriage, my children to another man for a while — who was a violent alcoholic — my family home, my beach-side unit and many other components. My wife and I had worked for 55 years of our lives to enable our children to benefit from their studies at the private school where we had them enrolled and from universities for their own choice to launch into professional careers.”
Powers has evidently been a beneficiary of what economists call the merits of “competition”! But ivory-towered economists and kindred spirits in the bureaucracy and regulatory agencies don’t care to examine how the beatified competition works in practice.
None among the PJC members appears to have read my submission to this inquiry (no.83). Or, indeed, any of my submissions to previous cognate inquiries, not least the submission to the 2012 Post-GFC banking inquiry (held in camera, i.e. censored, but which drew extensively on my The Dark Side of the Commonwealth Bank), and the submission to the 2013 ASIC inquiry.
These submissions deal with the big picture, highlighting the long history of CBA criminality and the general complicity which allows bank criminality in general to continue unopposed. If the PJC members had read these submissions, Mr Powers’ testimony would have been readily comprehensible.
This inquiry is not just about the CBA, but the CBA as representative of the bastardry and criminality. Belatedly, ANZ has been brought into the loop. The 16 February hearings that were intended for the re-questioning of CBA executives instead witnessed the testimony of the “colourful” Rod Culleton and a fellow WA victim of ANZ, and Culleton’s barrister Peter King.
Culleton no doubt leveraged his access to the testimony box by his stellar performance in the 60 Minutes program (10 May 2015) on ANZ bastardry in the Wild West. The story of Culleton and others is also summarised by the ABC (29 December 2014) and the Land (17 March 2015).
In late 2009, ANZ acquired the financing subsidiary, Landmark, of the Australian Wheat Board as the AWB was being fully privatised. Landmark, like other strictly rural lenders (all now history), had special financing arrangements with its borrowers. Upon the purchase of Landmark, ANZ readily began imposing “conventional” conditions (i.e. unsuitable for farmer borrowers) on its new customers, soon foreclosing on many.
The ANZ takeover of Landmark, also at a discount price relative to book value, was thus readily comparable to the CBA takeover of Bankwest, and fitted naturally into the structured orientation of the inquiry.
Not so with the NAB. In the victim submissions, there is a sample of NAB victims to be had — as in Pappalardo (no.13), Kreutzer (no.39), Hitchens (no.66), Andrews (no.102), and Troiani & Barrett (joint, no.114). The confidential submission no.168 is from an NAB victim; no doubt there are others. The NAB has to date remained totally under the radar, even though the NAB has been pursuing comparable unconscionable and fraudulent foreclosures of its SME/farmer borrowers continuously over the last thirty years.
The “impartiality” of the court system laid bare
In his interventions during the 13 November hearing, Committee member Philip Ruddock showed that he had read one submission, that of the CBA itself (no.48). The CBA submission is replete with the usual blah (“we work with the customer’s best interests at heart”, etc.) and the usual lies (the GFC’s impact on property values pushed multiple Bankwest loans into non-viability).
But the bank also used the occasion (customary for bank submissions) to nail the coffin shut with presumably damning confirmation from the courts.
“[The bank] has also provided evidence in response to these allegations in a number of legal cases. In those cases, no evidence providing credible foundation for these allegations has ever been put forward. Indeed, where the substance of allegations has been tested in court it has been found in favour of [the] Commonwealth Bank.”
There followed a substantive exchange between Ruddock/Williams and Romesh Wijeyeratne.
Wijeyeratne replied, on the contrary:
“[Victim allegations have] not been tested in the courts. It has been put to the courts — and then people run out of money, so the courts do not get to actually test it. …
Well, I am hoping you can work out what is wrong with the court system, when you see the evidence which is about to come before you! That is why I have been focusing on the parliament for the last three years. We cannot fix this through the judicial branch of government. It has to be done through the executive. You will see different results …”
To which Senator Williams retorted:
“Are you saying that these judges have made very bad decisions in these cases?”
Quite. Wijeyeratne held his ground but, to my mind, was too kind in his response.
Why the deference, implicit in the tone, to the courts? Williams himself has seen scandalous judicial partisanry at first hand during the bloody litigation over 1980s foreign currency loans.
This is evidence again that the members have not read my submissions to this inquiry or previous. In my submission to the current inquiry I include a section specifically on “bank malpractice and the courts”. There I note:
“At worst, some judges appear to be complicit with bank malpractice in deciding for the bank in litigation. Perhaps sometimes subconsciously — after all, a not inconsiderable numbers of judges have been elevated to the bench after acting for banks. That, after all, is where the money is.
“The judge presiding over recent litigation between Bankwest and a high profile CBA/Bankwest victim had himself previously acted as energetic counsel for the very same Commonwealth Bank. In his latter day incarnation, he gave judgement for the bank.
“Worse, some bank litigation judgements are so manifestly unsavoury that one infers that the complicity would have to be conscious. The absence of a register for judicial pecuniary interests facilitates potential complicity of this nature.
“At best, the judiciary appears to be poorly educated. Legal education is steeped in the law of contract under common law, and the judiciary appears to be attracted to it as to a religion. The borrower had borrowed funds from the bank lender; the borrower owes those funds, plus interest and fees, to the bank lender, end of story. Summary judgement awarded to the bank, costs awarded against the borrower. …
“Few judges bother to augment their impoverished tertiary training with some self-education regarding the nature of the bank – SME/farmer borrower relationship. Such a relationship is complex but, above all, it is fundamentally asymmetric. The power and discretion of the lender over the borrower is significant.”
The high profile victim litigation referred to above is that of Bankwest borrower Geoff Shannon in CBA v Geoffrey Shannon NSWSC 1076 (12 August 2013). The presiding judge was one John Sackar, anointed to the NSW bench in February 2011. Sackar decided for the bank.
The same man acted for the same bank in litigation whose court case I have described in some detail, that of Dwyer v CBA, NSWSC 50463/90 (18 October 1991). None of the Dwyer litigation is available publically. The behaviour of Sackar in this hearing was base beyond measure. It is so disgusting that I had to take regular breaks to regain the emotional strength to finish writing the article. Geoff Dwyer, a hapless foreign currency loan victim, was crucified by the venality and dishonesty of Sackar.
It so happens that Sackar discloses in his swearing-in-ceremony to the bench (these events can be illuminating as to the law profession’s incestuousness):
“One person I had all too little exposure to was the extraordinary Doug Staff QC. He was often not well especially in the latter part of his career. That said his intellect, integrity and courage were in such abundance. On one occasion and over our daily ritual of whisky …”
It also so happens that Staff (as Acting Judge) presided over the Trial hearing of Dwyer v CBA (as above) at which Sackar appeared as counsel for the bank. It was a shocker of a judgement — a mere 2500 words — displaying complete indifference to the character of the foreign currency loan phenomenon and undefended partisanry regarding Dwyer’s personal experience. Intellect, integrity and courage, rather than being in abundance, were nowhere to be seen.
The Dwyer Trial hearings occurred during May and September 1991. Sackar’s brutality was doubly necessary for the CBA because the bank had suffered a significant loss in an appeal court only several months previously — that of Quade v CBA, FCA 26 (14 February 1991). That iconic victory for a victim (indeed for all bank victims) had to be obliterated in order to turn back the tide in favour of the bank. Sackar was a key vehicle for this corrupt process.
All the organisations within the financial regulatory apparatus claim that the courts are the ultimate vehicle for presumed victims of financial sector crimes to achieve justice. Whether through ignorance, cowardice or venality, the regulators are an integral part of the ongoing farce.
The CBA counter-attacks
The CBA appeared before the Parliamentary Joint Committee (with nine members present) on 2 December. Representing the bank were David Cohen, Group General Counsel, and David Craig, Chief Financial Officer.
There were the usual absurd claims about working with borrowers through any problems. This from Cohen:
“… the average period, or the average number of days where a customer is being looked after by our team that manages troubled loans is about 550-odd days, I believe. That is the time from when the loan becomes sufficiently troubled to be taken out of the hands of the normal relationship manager and goes into this team to resolution. The reason for that is because our practice is to try to come to a resolution that does not involve a sale, or a forced sale of the properties. That is the last resort. It is not the first resort. … So it is actually not in our interest to move to a quick resolution that involves a receivership.”
This claim is complete and utter bullshit.
Senator O’Neill called Cohen on this claim, asking for “a time line and evidence documenting the bank’s attempt to assist [the foreclosed borrowers providing submissions and evidence]”.
David Craig similarly gushes:
“Chair [Fawcett}: What I am trying to understand is: what are the things that motivate the behaviours of your executive and the people who are managing the credit business?
Craig: Seeing satisfied and excited customers wanting to do business with this us. …
Chair: That is very noble.”
The chutzpah defies belief.
Then there’s the dissembling and the lies. For example:
“Craig: I think it is really important to understand what default is. A default is when a customer breaches their loan agreement. We do not default accounts. We have a contract between us and a customer and, if a customer does not pay us their interest or has poor financial results or whatever, they may well be in default of their loan agreement. But we do not default customers.”
“Let me emphasise: the price adjustment mechanism allowed for changes to the quantity and quality of Bankwest's loan book at the time it was bought by CBA; it did not allow for any claw-back for loans which subsequently went bad. …
“In conclusion, there was no way for CBA to benefit from any loan that went into default after the day it took ownership of Bankwest. CBA did not engineer defaults, contrary to claims by witnesses, and had no incentive to do so.”
The CBA consistently denies a motive to default Bankwest borrowers via a purchase price “clawback” mechanism, but admits to it in practice. Default of the Bankwest loans on the books at the time of purchase are precisely what is at issue with respect to the clawback controversy.
There was no early cut-off point — the CBA defaulted Trevor Eriksson years later, evidently out of revenge for Eriksson going public with his treatment. The CBA did engineer defaults, as evidenced by witnesses, and it had multiple incentives to do so — partly financial (the clawback mechanism), partly regulatory (Basel capital requirements) and partly cultural (pure right-to-rule bastardry).
The most important element of the CBA appearance on 2 December was the strategic attempt to demolish systematically the integrity of victim Rory O’Brien.
They bizarrely claimed that the CBA had nothing to do with O’Brien because he borrowed from Bankwest and another institution. But Bankwest was by 2009 a wholly-owned subsidiary of the CBA, wtih a CBA flunkey installed at its head. O’Brien’s previous excellent relationship with Bankwest staff stalled immediately when the CBA started dictating the terms to now subordinate Bankwest staff.
Cohen & Craig also assert that the project was a mess. Among the claims, O’Brien had mislead potential apartment buyers, that his claims regarding the scale of committed purchasers’ deposits was substantially inflated, that the project was far from completed in being beset with building flaws, and so on.
For example, Cohen referred to 57 pages of building faults that remained to be rectified, implicitly denying O’Brien’s claim as to the state of completeness of the project. But the project comprised 104 dwellings of 3 bedrooms each. The scale of the small-scale components of the interior fittings is thus significant, to be remedied as per convention, and it becomes a cynical vehicle for the CBA to deny the veracity of O’Brien’s claim.
These claims by key CBA executives regarding O’Brien, being replete with fine detail, could be taken by a know-nothing outsider as credible. On the contrary; they are also complete bullshit.
The project was effectively complete at the time of the CBA purchase of Bankwest. There was approximately $100 million in funds committed by would-be unit buyers, which a Malleson’s lawyer, on O’Brien’s behalf, attempted to get Bankwest (the CBA) to process as a means of dramatically reducing the debt owed. The CBA/Bankwest (and receiver Korda Mentha subsequently) declined to proceed with these contracts, and the receiver sold the $250 million complex for $56 million.
This time, Committee members were less than enthusiastic about the bank’s spiel.
Out of the blue, Philip Ruddock asked the bank to implement a compensation scheme for those borrowers deemed (by “experts”) to be wrongly treated. Cohen responded by querying what “universe” Ruddock was referring to. Ruddock reiterated that Cohen and Craig had themselves claimed that the numbers for whom receivers were sent in for the relevant period (in addition to the claim that foreclosures always involved receivers) was less than 200.
Cohen spontaneously accepted the prospect of a compensation scheme, claiming that it was consistent with the bank’s culture, with not a hint of irony failing to acknowledge the strategically aborted compensation schemes for the Storm Financial scandal and the Commonwealth Financial Planning scandal.
Behind Ruddock’s request was an implicit threat. He noted that this road could be “a fallback strategy” to calling for a Royal Commission. Ruddock noted that the bank had perennially claimed that we “do not want to see people in these situations …”. Effectively, put your money where your mouth is.
Ruddock subsequently reiterated the implicit threat:
“Perhaps if you would take it on notice, because I suspect the way in which you have dealt with it encourages me to look at what more robust approach we should take.”
This threat has been received with optimism by some borrowers, and the scribes have realised its significance — for example, Richard Gluyas in the Australian (9 January 2016).
But the Committee members could have gone in harder. They had O’Brien’s testimony (Part 1) that Cohen had offered to settle with O’Brien to pre-empt a court re-hearing following an appeal victory for O’Brien in which the three appeal judges decided that the bank had something to answer. And they heard that Cohen had reneged on the verbal deal, threatening O’Brien, with O’Brien compelled to come out with effectively nothing.
If the bank had the goods on O’Brien’s claims, with contrary evidence ready to demolish O’Brien in court, why did it not take that option? A pro-bank court judgement would have had exemplary publicity value. Cohen’s despicable behaviour regarding the proposed settlement highlights that the bank had something to hide. The PJC members should have confronted Cohen with this issue.
The regulators to the rescue — of the banks
The Inquiry Committee also heard from representatives of the Australian Securities and Investments Commission on 23 November. Present were Adrian Brown, Warren Day and Michael Saadat, all “senior executive leaders”. And no doubt all paid a motzah for their efforts.
The testimony of the ASIC trio is a scandal. One becomes used to the customary lies and arrogance of bank executives. But here are public servants, employed to control corrupt activity, tacitly admitting and defending their complicity with such corruption.
Remember that ASIC was also subject to an inquiry regarding its manifest failings (oriented mostly to ASIC’s failings with respect to the CBA’s Commonwealth Financial Planning Ltd scandal), the damning report of the Senate Economics Committee being handed down in June 2014. The trio showed no humility regarding ASIC’s well-publicised failings. Indeed, the trio’s mentality highlights that ASIC personnel have learned nothing from the inquiry.
Saadat’s opening statement sets the scene:
“Generally speaking, ASIC does not intervene in individual disputes in financial services and corporate regulation and is not funded to undertake such a role. The exception is where such action would serve a broader public interest.”
ASIC perennially receives requests for action from small business and farmer victims of bank unconscionable conduct and fraud. The sizeable scale and the heinous character of the victimisation would render many of these complaints ideal for ASIC to pursue in the “broader public interest”.
But no. Here is ASIC’s Day:
“… we have not seen a case where we would say we get involved and will explore or better something or widen the class or the definition of 'unconscionable conduct'. We just have not seen that type of case in what has been brought to us. So, in effect … any case we would take on we would effectively be becoming a form of pro bono lawyer for the individual borrower concerned. We would be using taxpayers' funds where we are trying to get a wider interest for the Australian public.”
On the CBA takeover of Bankwest front, ASIC has been confronted with cases involving transparent criminality, involving hundreds of millions of dollars. And these overpaid flunkeys show no embarrassment in demonstrating their guile and their gutlessness.
Saadat chimes in:
“What we would say is that there is scope to establish precedents that have wider applicability, whereas in these commercial contracts, whilst you might get a decision in favour of a borrower in a particular case with particular facts, it is unlikely that those decisions would automatically provide a remedy for other borrowers because whether or not the conduct is unconscionable for another borrower will really turn on the very specific facts of the case, whereas in the consumer space we see much more scope for that wider applicability.”
Superficially, unconscionability in “consumer space” is more standardised, although ASIC’s success in this domain is also lamentable — as demonstrated in ASIC’s slovenly handling of the Storm Financial and the Commonwealth Financial Planning sagas. But in the domain of commercial contracts, litigation involving “the very specific facts of the case” nevertheless contributes to the establishment of precedent — the rock (if rather slippery) on which judicial impartiality and objectivity is supposed to be based.
Saadat’s claim is exposed by Committee member Ann Sudmalis (Liberal MP):
“I would like to disagree with that statement because I believe that if you did actually pursue one of those cases and put a return on investment to the wider community as to taxpayer dollars lost in other associated employees and other associated industries, I think you might find the return to investment on your investigation might be enormous and it will be a case that will stand up against other cases because you will get an index of social cost.”
Exactly. Elementary my dear Watson. Saadat parries Sudmalis by blaming the federal Treasury for imposing directives on the allocation of ASIC’s resources to particular areas. One deserves to see the evidence for this claim.
The ACCC acquired responsibility for business to business unconscionable conduct in 1998 after a damning 1997 Parliamentary report regarding corporate abuse of small business, called Finding a Balance. This responsibility was written into the Trade Practices Act as s51AC (now s22 in the revamped Australian Consumer Law).
The ACCC assiduously avoided going after the big corporates, but it did leverage the new section against some offenders in the “broader public interest”. After s51AC was copied directly into the ASIC Act in August 2001 (in s12C), ASIC declined to follow precedent.
In ASIC’s responses to SME complainants, telling them to “buggar off”, ASIC has regularly lied, denying that the organisation has legislative responsibility for corrupt conduct against SMEs. But the trio’s testimony on 23 November exposes a different reason for its inaction.
“It is important to note that courts generally impose a high bar when a party is seeking to establish unconscionable conduct in a commercial loan. The courts put significant weight on the enforceability of contractual promises as being central to the conduct of commerce. In making a finding of unconscionability, the courts have generally concluded that some serious moral fault or lack of ethics must be proved. This requires a consideration of legal, commercial and social norms.”
Quite. ASIC correspondence with aggrieved victims never admits to this claimed reason for its inaction. Can one imagine ASIC disclosing to disgruntled victims that it will not pursue their cases, in spite of its legislated obligation, because it has strategically decided that it lacks the skills and will to carry out its mandated obligations?
It is precisely ASIC’s role to champion individual disputes in the courts because the victims lack the resources to do so. Whatever the outcome, lessons are learned for the more honed pursuit of future litigation.
At the hearing the ASIC trio claim that they have consistently argued for governments to deal with the impasse. Yet in the cited ASIC submissions to various inquiries I can find no evidence for this claim. There is ASIC support for the extension of “unfair contract terms” to SME contracts, pushed elsewhere. This development is important but ultimately not central to the criminal character of bank default mechanisms and judicial complicity. ASIC personnel have shown no interest in surmounting the barriers they claim to have inhibited their action in the courts.
At one stage, Ruddock evinces a mild irritation with the ASIC personnel reiterating, effectively, “all this has nothing to do with us”. Claims Saadat:
“I suppose where we cannot help you is demonstrating whether the allegations that have been made by borrowers are, in fact, true, because that is not something we have tested. In reviewing whether ASIC can intervene we have made the working assumption that if these allegations were true what could ASIC do about it, and in all the cases that we have seen we have determined that ASIC was not in a position to do anything about those matters.”
To which Ruddock responds:
“You are going to give us an analysis of that but I do not know how representative that is if the people who have substantial complaints took the view of, 'Why would I go to ASIC? It is not going to get me anywhere.' That is the impression I get.”
Exactly. ASIC has conscientiously made itself completely useless. And that has been the reaction of many victims. Why go to ASIC, as it’s a waste of time and energy.
Soon after, Senator Williams launches into a selective rendition of the horrors that have been visited upon the Bankwest victims. To which ASIC’s Day responds:
“I think it is a really difficult area for us to wade into because there is so much commercial judgment involved in that space. I do not think any of us at ASIC would necessarily say that we are experts in this space. That is about business, trading commerce judgment calls, around what seems to be the right value. It is very difficult, sitting here, to actually, line by line against each of those decide what is right and what is wrong. It is very hard.”
Commercial judgement? No — transparent criminality.
And, with respect to Williams’ recounting of the treatment of O’Brien in particular, Day again:
“I think there are always two sides to a discussion about that. The lender may have a very different take on some of those statements for their own perspective because they may say, 'I hear that but we had this risk to deal with. We had this risk to deal with.' As I said before, they might say, 'We weren't prepared to throw good money after bad and so we didn't want to take that risk. We're risk averse businesses because we're banks.' I am just hypothesising in that respect. They might say, 'We're not prepared to do that. We just need to get out', and to a certain extent …”
Day admits implicitly to complicity with bank criminality.
Representatives of the Australian Prudential Regulatory Authority appeared at the 16 February hearings. They demonstrated possession of the same mentality as the ASIC representatives.
According to APRA representatives, the deliberation and management of impaired loans is a matter for the banks. We trust their judgement. More, we have seen nothing (in bank foreclosure processes) that would lead us to question their judgement and our faith in their judgement. End of story.
APRA also categorically denied victim claims that Bankwest’s capital needs for an upgrading on Basel criteria, coupled with the CBA’s inability to raise adequate capital, were a factor in CBA’s default spree. Indeed, its denial was taken up by Richard Gluyas the following day in the Australian, who wrote:
“APRA’s intervention has effectively silenced that argument.”
Well no it hasn’t. How could Gluyas, a veteran reporter of bank bastardry, be so definitive? The APRA representative glibly dismissed the question without explanation. He could readily have used his no doubt detailed understanding of Basel procedures to decisively scotch the claim. He declined to do so, being economical with the truth.
The APRA representative is covering for APRA going missing in action during the CBA Bankwest takeover. Bankwest’s capital requirements were significantly higher than those for the parent bank until Bankwest was brought fully into the parent bank in October 2012.
Here we have a deep insight into the nature of the regulatory impasse. ASIC and APRA personnel are imbued not merely with indifference to victim suffering, but share the mentality of the bank lenders. Paid as public servants to protect the public interest, they act as flunkeys for the powerful vested interests that they are required to regulate.
The complicity of the financial “regulatory” apparatus with corporate criminality is comprehensive.
Finance sector criminality comprehensive and endorsed
What does it all mean?
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, etc.) that helps 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 (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 my 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 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, t]here 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 Bunuel’s 1962 The Exterminating Angel. Several times, if necessary, for them to grasp its relevance (if metaphorical!) and their own presence in the script.
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 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 article first appeared in six parts on Independent Australia between 13 March & 30 March 2016.