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Banking Very Bad

Banking Very Bad

The banking sector in Australia is corrupt – period. Criminal activities have been an integral feature of the banks’ business models during the almost forty years era of financial deregulation.
Evan Jones

(This article is 10,000 words in length)

Blind Freddy should be asking the question: is there any relation between the nature of financial deregulation in Australia and the corrupt activities that took off at the same time and have continued apace. Nobody in authority is asking that question.

Adele Ferguson’s August 2019 Banking Bad is an important read. If we follow the media we know most of the contents already. But Ferguson’s book compresses in accessible form the content of her banking article exposés with colleagues over many years (especially involving the CBA) and the content of the Hayne Banking Royal Commission that was strung out over most of 2018. Confronting anew that material in quick time leads one to the ineluctable conclusion: the banking sector in Australia is corrupt – period.

Remarkably (or not!), those in authority have yet to draw that appropriate conclusion. This is not a recent phenomenon but is as old as financial deregulation itself.

Recently Pamela Williams, who has been around the journalistic beat forever, claimed (‘ASIC’s magnificent seven lay down gauntlet’, AFR, 30 August 2019):

‘The royal commission was expected by government and the banks to provide a circuit-breaker against Labor calls for heads to roll. But it became a monster, exposing more than anyone had ever guessed after years of appalling behaviour in the financial services sector.’

Exposing more than anyone had ever guessed? Hardly. Even the mainstream media has been covering bank escapades from the 1980s onwards, albeit partially and erratically. The regulators and the pollies knew, of course, because they have been the constant recipients of complaints from bank victims. However, they have kept that information to themselves and turned the victims away.

Peter Martin, another longtime economic journalist, nails it in a review of Ferguson and other books (‘How the banks went bad, and what can be done about it’, August 23, 2019):

‘On those rare occasions when important parts of our world really do change, as they did in the 1980s when our banks suddenly started behaving monstrously, we react as if they haven’t, as if each new piece of bad news is isolated and our financial institutions remain on the whole "world class", as one leading commentator infamously claimed while warding off calls for a royal commission. …

‘Australia's most venerable bank [the Commonwealth] – the one we let into our schools – couldn't be completely rotten. I thought that myself, even while spending time with the first wave of bank victims who'd been plied with foreign-currency loans whose repayments had exploded to more than their businesses and properties had been worth, taking everything they had.

‘I put [the foreign currency victims] on PM on ABC radio. But I kept my equilibrium. Surely the banks were still trustworthy institutions that had themselves been victims of currency gyrations just as their customers were. They can't have intended to make them destitute.

Exactly. The disconnect, the cognitive dissonance. How could the venerable Commonwealth Bank be guilty of that which we are witnessing? Martin admits to not wanting to confront the implications of what was before him.

He wasn’t alone. Of which more below.

Bank corruption and financial deregulation

There is a glimmer, rare, from political flash in the pan John Hewson. Hewson has no political influence but the media’s peculiar continual seeking of his opinions renders his statements important. For some years, including during 2009 and 2010 (i.e. post-GFC), Hewson was a weekly columnist for the Australian Financial Review. In multiple articles he criticised the banks. In one article (‘An abuse of privilege’, 19 June 2009), he admits:

‘I am embarrassed and disturbed to have to write this column. As one who has fought for financial deregulation and reform since the early 1970s, and who was instrumental in the initiation of the Campbell committee and in the early implementation of its recommendations, I am now appalled at how today's deregulated banks are abusing the privilege of being such a bank.’

Hewson repeats the mea culpa in a later article (‘Bankers have ho shame’, 13 August 2010).

In the mid to late 1970s, not long out of US graduate school and steeped in monetary orthodoxy, Hewson served as economic adviser to Liberal Treasurers Phillip Lynch and John Howard. Hewson was a key figure in Howard’s initiation of the Campbell Committee and its review of the Australian financial system.

Following the issue of Banking Royal Commissioner Hayne’s Final Report Hewson is critical (Sydney Morning Herald, 20 February 2019) but has softened his line. Hewson replicates the Hayne inference – it’s all a problem of the banks’ ‘culture of greed’. Among the predictable hand-wringing is an atypical stance:

‘Genuine reform of banking now calls for a complete rethink of banking legislation and regulatory structures, not just an attempt to patch up the existing system, bringing a few convictions as a response to the excesses, abuses and illegalities highlighted by Hayne.

Quite. But this is a throwaway line, with a glib add-on regarding making Boards more representative. No context is provided. Given that Hewson was in the thick of the origins of Campbell, it would have been instructive to have him educate us on the then mentality, the key players and those strategically excluded.

Fred Argy, ex-Treasury and Secretary of the Campbell Committee review, would also have an important story to tell. But he left this world in 2018, feted as a progressive public servant, without leaving us an insider account of that pivotal review and report – and certainly without a mea culpa à la John Hewson.

Certainly much of the contemporary regulatory structure had to give, with inevitable globalisation of capital markets, but nobody on the Committee represented the broad public interest, and certainly not bank customers.

Keith Campbell himself was then Chair of Hooker Corporation, a real estate company with an earlier dubious reputation (‘Hooker the rooker’). Although evidently a savvy businessman, he at times dwelt on the margins of respectable finance (though his ADB biography casts him as a man ideal for his key role in the financial system review in the supposed public interest).

The Reserve Bank (RBA), represented on the Committee, had long since abandoned the broad vision of long-time central bank governor H. C. Coombs (1949-68). During the 1970s it become a narrow-minded, technocratic, even reactionary institution, supporting Milton Friedman’s dysfunctional Monetarist prescriptions for fighting inflation.

The opening paragraph of the Campbell Committee’s 838 page Final Report (September 1981) reads:

‘The Committee starts from the view that the most efficient way to organise economic activity is through a competitive market system which is subject to a minimum of regulation and government intervention.’

This is a preposterous, outrageous proposition. Scandalous. A product of ignorance, or self-interest or venality? There is no historical understanding in the Campbell Report, no recognition of why governments of all persuasions have historically involved themselves with banking. Campbell proffers a scorched earth prescription. No-one in authority or amongst the then ‘experts’ was embarrassed or dismayed.

More detail on the Campbell Committee’s enforced myopia is in my 2016 article ‘Self-regulating banks rob us blind’.

A decade down the track

Come 1991 and the Labor Government is forced to initiate a general inquiry into the banking sector. After a chaotic decade during which Campbell’s promise of a post-deregulation utopia proved to all those awake to be demonstrably absurd, no-one in authority wanted to acknowledge that reality. It took Democrat Senator Paul McLean, coupled with assistance from media coverage, to push Labor into action.

The reason for the inaction is that the regulatory authorities and the relevant bureaucracy were all complicit with the banking sector-induced mayhem. This would be a pattern that has been reproduced until this day.

Thus did Treasurer Paul Keating install fellow NSW Right-winger Stephen Martin as Chair of an inquiry that dominated most of 1991.

Martin shafted the foreign currency loan borrowers whose travails were being exposed regularly in the media, ignoring Senator McLean’s massive submitted evidence. This was a blatant political act, not unlike the later Hayne Royal Commission’s marginalisation of small business and farmer victimisation.

Of relevance, the Martin inquiry was the first occasion on which consumer representative organisations made an official appearance. Indeed, formally the inquiry was supposed to have the consumer experience of financial deregulation as its central focus. In the late 1970s, the Campbell Committee and staff didn’t want to know, and consumer organisations were then too fragmented and weak to command a hearing.

Coincidentally, I was part of the Consumer organisations’ team at the time (my contribution being the monograph Banks a decade after Campbell: promise and performance), but I hadn’t realised the significance of the occasion. My instinct at the time was that the consumer groups were politely listened to and then subsequently ignored – an instinct that turned out to be correct.

Then prominent consumer advocate Supriya Singh detailed the experience of the consumer organisations with the Martin inquiry in an article in the academic Journal of Consumer Policy (curiously a German publication), March 1992, ‘Banking Deregulation and Its Effects on Australian Consumers’.

Singh highlights that the banks were unrepentant. The Australian Bankers’ Association claimed:

‘The greatest benefits to customers will come from the preservation and expansion of a strong, competitive banking system which is not hampered by regulation, and which does not provide special privileges for particular groups where those privileges are unrelated to marketplace considerations.’

The ANZ bank claimed:

‘As a consequence of deregulation and the subsequent building of competitive markets, there has been a complete switch in the bank-customer relationship with the customer now holding the dominant position.’

Both claims are total blather.

The banking system in 1991 was in a parlous state, due to the bank’s excesses and regulatory indifference. An iconic article by financial journalist Trevor Sykes in Australian Business Monthly, October 1993, “How the Banks Lost $28bn”, laid out the carnage. The banks wrote off at least $28.5 billion between 1988 and 1993. Westpac, on life support, topped the list with a $6.367 billion write-off.

And it was not competitive, with the Big Four already dominating retail banking (that dominance would be later further cemented), and herd-like behaviour regarding business strategies. On Big Four dominance, see my ‘The oxymoron that is banking competition’, and ‘All Power to the Big Four’.

As for ‘the customer now holding the dominant position’, the Consumer Federation emphasised:

‘One of the most striking differences between the submissions from the consumer groups and the banking industry was in the evaluation of the banking customer relationship. The overriding point made by the consumer movement is that there is an imbalance of power between the banks and consumers.’

Quite. It is an essential fact, self-evident to honest people, that has been obliterated in all the white noise dominating banking victim grievances ever since. The legal profession, especially once elevated to the judiciary, remains conscientiously oblivious.

In particular, all groups in any way disadvantaged had been left behind during the 1980s. The consumer groups recommended that the government mandate that the banks provide basic banking products. The Martin Committee declined to so recommend, preferring a consultative procedure with the Department of Social Security (joke). The consumer groups also highlighted that superannuation funds needed special oversight.

The consumer groups emphasised that banking was a public good and that the banks had to face regulatory pressure to face their social obligations. The RBA told Martin, ‘buggar off, it’s not in our bailiwick’ (this from Labor’s appointed Governor, so-called good guy Bernie Fraser, who had previously been Labor’s Treasury Secretary 1984-89), so Martin recommended that the Trade Practices Commission take on the role of ‘social obligation’ watchdog.

This push was totally inappropriate, both because of the formal role of the TPC and because the to date three Trade Practices Commission Chairmen holding office since the TPC’s creation in 1974 (Bob McComas, Ron Bannerman, Bob Baxt) proved themselves either submissive to or supportive of business predatory practices.

In any case, nothing came of this proposal. Martin proposed ‘consultation’ with respect to any entrenched bank customer problems, which was hot air. Soon, the central agenda for the sector became formally sanctioned self-regulation, especially via a banking ombudsman and a new code of banking practice. An early formal plan to have the TPC oversee the development of the banking code was shelved as the banks themselves took it over.

The cynical development of the Code of Banking Practice is told in passing in a 2013 article I wrote on the Priestley farming siblings, victims of the NAB,

The Commonwealth Bank – from People’s Bank to corporate monster

During the very period that the government was facing a groundswell of dissent by dissatisfied and aggrieved bank customers, and via the focal point of Senator Paul McLean’s tablings in the Senate, Labor Treasurer Paul Keating was gearing up to privatise the Commonwealth Bank.

With deregulation, the publicly-owned bank accompanied its privately-owned peers into corrupt activities, notably foreign currency loans and broader small business predation – the latter exemplified by the takedown of Tony Rigg’s business (Submission #15) in Nowra, NSW.

An early argument for the CBA’s privatisation was that, as a public entity, capital raising was going to be difficult in a deregulated setting. The debt-ridden State Savings Bank of Victoria provided a cynical opportunity to buy off the oppositional Parliamentary Labor Left and the CBA union, and the SSBV was incorporated into the CBA in 1991. Even then, Keating bought off his detractors with the prospect of the privatisation of a minority 25 per cent shareholding, which was a lie.

Ferguson’s book provides a complementary vignette (Ch.2) in the privatisation story. Keating appointed his friend Tim Besley as CBA Chairman in 1988. Besley was gung ho for the acquisition of the SSBV. Besley was also a key proponent of the elevation of the youngish David Murray to be CEO. Besley was in the chair until 1999, during which he presided over the entire privatisation process in 1991, 1993 and 1996. Besley the non-banker was a convenient vehicle for the CBA’s transformation.

Murray, in conjunction with then legal counsel Les Taylor, led the transformation of the CBA from a ‘brown-cardigan’ public bank (Murray’s term) into a gung ho private bank. This process included the strategic dismantling of the small business/farmer Commonwealth Development Bank. Murray is also responsible for the early introduction of mad dog front-end staff incentive structures involving ridiculous targets. Upon his ascendancy to CEO, Murray immediately pushed widespread branch closures, especially in rural/regional and lower-income suburbs. He was defiant against strong criticism and dismay in this endeavour.

Murray (with John Ralph, replacing Besley as Chairman in 1999) is responsible for the takeover of Colonial in 2000, thus spawning the cross-selling mania with all its dodgy practices. One Colonial senior executive opposed the share price monovision at any cost imposed on the merged entity (Ferguson, p.62), with that executive forced out because of his failure to toe the line.

Murray is thus ultimately responsible for the moulding of CBA’s corporate culture that spawned its myriad corrupt unconscionable and fraudulent practices. Probably half of Ferguson’s book is devoted to CBA corrupt practices, reflective of the balance of CBA coverage in Ferguson’s articles over the years. I have previously chartered the CBA’s corrupt trajectory in ‘The Dark Side of the CBA’ and, in particular, its large scale crime against Bankwest borrowers in ‘The Commonwealth Bank takedown of Bankwest customers’ (in four parts).

Ferguson’s account highlights not merely CBA’s crimes but its ongoing belligerence and brutality against any questioning or resistance to its behaviour – whether from staff, victims, politicians, the media (cancelled advertising) or the regulators themselves. Being in receipt of bank victim testimony for 20 years I can confirm Ferguson’s account.

Murray remains unrepentant to this day. During 2016, when some regulators belatedly discovered the concept of ‘corporate culture’ and the putrid versions entrenched in the banking sector, Murray (‘David Murray lashes regulators on culture crackdownAFR, April 6, 2016):

‘… launched a scathing attack on the corporate watchdog for championing the idea that company directors should be held legally responsible for poor corporate culture.’

Post Hayne Commission Final Report, Murray used his status to decry any tightening of lending guidelines that might follow from the Hayne recommendations (‘David Murray leads Hayne backlash’, AFR, March 26, 2019).

On both issues, Murray’s reasoning was spurious (as indeed has been his commentary on general economic policy matters over the decades).

I appear to have been a lone voice highlighting Murray’s perfidious role in turning the CBA into a corporate monster. But here is confirmation from Peter Martin, as quoted above.

‘The first inkling I had that the banks might no longer care about their customers came in a conversation with David Murray, then the head of, or about to become head of, the Commonwealth Bank, and for me the most intriguing person in Ferguson's book, Banking Bad.

‘He told me the victims of currency loans must have known the risks. One was a maths teacher. But my mother had been a maths teacher and she wouldn't have known the risks unless they had been carefully pointed out to her.

‘I put it down to an unfortunate lack of empathy on Murray's part, not to a change in the nature of the institution he led.’

There was both a comprehensive lack of empathy on Murray’s part and a dramatic change in the nature of the institution he led, courtesy of Murray himself. Murray was either ignorant of the CBA’s foreign currency involvement (totally improbable as the foreign currency loan crisis consumed the bank’s energies in the late 1980s) or knowingly lying. The heartless Murray was the ideal man to lead the CBA into comprehensive corruption.

Note that many CBA customers (most?) that were fraudulently plundered or defaulted went to this bank with trust, a trust based on the CBA’s historical public character. An elderly personal family member is Exhibit A for this deception. But I have received myriad tales from CBA victims of their innate trust in their bank, often following a long term relationship. The usual lying advertising, common across the industry, re ‘putting the customer first’ further mislead the customer.

This deception, leveraging the public bank reputation that Murray was rapidly destroying, was neatly camouflaged behind the privatised entity retaining the same name. Up until the CBA’s privatisation, any public instrumentality or enterprise bearing the name ‘Commonwealth’ was forced to change its name. Understandably. For years, the Commonwealth also fought to have private companies using the name ‘Commonwealth’ drop the label. But whoever oversaw the privatisation of the CBA saw the immense value of the brand name, even though the company was simultaneously shedding any concern for the commonweal. Misleading representation and deception incarnate.

The transformation and installation and entrenchment of corruption in the CBA encapsulates the corruption of the entire financial system.

Basic banking services and their oversight

The consumer organisations’ claims for basic banking services in 1991 came at precisely the time that the CBA was started on its privatisation course. Post-Campbell, deregulation had destroyed the SSBV and the State Bank of South Australia (Sykes: $2.4bn and $3.1bn write-off to 1993 respectively). Other State banks were in the process of being privatised. The CBA would have been the natural institution to provide such.

Created in 1911, chained by the private banks’ success in restricting its charter, the CBA early proved its initiative in providing banking services to servicemen and women during World War I. Its school initiatives are of course legendary. But that was before the Campbell era. The CBA’s massive deposit book was stuffed with the people’s savings, including welfare and pension recipients. But Murray would leverage that base for his own nefarious purposes. Basic banking was old hat. And the Labor Party in office, creator of the Commonwealth Bank, facilitated and legitimised the holdup.

Post-1991, banking self-regulation reigned. Belatedly, consumer protection in banking was handed to the then corporate watchdog, the Australian Securities Commission, courtesy of a (surprising) recommendation from the 1996-97 Wallis Committee inquiry. Thus ASC became ASIC in 1998. ASIC has never been comfortable with this massive responsibility; indeed, ASC and its predecessor NCSC showed themselves previously little competent

in dealing with corporate malfeasance and stock exchange shenanigans. We know the result.

Ian Harper, key architect of the current post-Wallis Committee regulatory framework, in 2018 (faced with Royal Commission disclosures) admitted that he placed too much faith in the new ASIC to deal with consumer mistreatment (he should have added APRA). However Harper did not go near the basic fabric of financial deregulation of which he has long been an ardent defender.

The 1990s saw the banks slash employment, branches and agencies as a means of the losses from their disastrous 1980s excesses. Rural populations were especially hit by the moves. Naturally, anti-bank sentiment again ran high. Labor’s financial services spokesperson Senator Stephen Conroy claimed: ‘Banks have become a symbol of people moving away and the sense that there's no future to this place. People get a real sense of abandonment.’

In response, in March 2001 Labor proposed a social charter for banks that included some form of face-to-face services for all, basic banking services, etc. Here we were again, two decades from Campbell, which promised the world to everybody through ‘competition’, and a decade down the track from the devious Martin inquiry, which formally ushered in self-regulation.

The usual suspects were not happy with Labor clearly catering to public dissatisfaction. Among the affronted were the AFR editorial writers, the wretched Joe Hockey, then Financial Services Minister, and (would you believe it) CBA CEO David Murray. In a June 2001 speech, Murray threatened Labor that he would withdraw from nationwide banking if he could not get a fair return on investment. They all predicted that the extra demands and costs, a return to the bad old days, would disarm this significant sector to the detriment of consumers themselves. This would be a familiar refrain with any attempt to reigning in bank excess.

Alas, the August Tampa affair allowed Howard an unlikely re-election in November 2001, and Labor’s proposed social charter disappeared into history when it returned to the Opposition benches.

The banks would continue to run their own show unhindered (save for once in a blue moon court judgments against them).

Much movement but what substance?

Post-Hayne, a certain ‘quiet’ has set in. Finance journalists are scrambling for meaty material – with little success because of the paucity of material of the acceptable variety. Media reporting is now dominated by the shifting of chairs.

The government

The Coalition Government has promised to implement the Hayne recommendations and has goaded the regulators to play their part.

In August 2019 the government published a Royal Commission ‘Implementation Roadmap’. Formally elaborate (‘a comprehensive package of reforms’), there are some positive moves but much of it is hot air. The package essentially depends upon the regulators and external dispute resolution agencies lifting their game and the financial firms reforming themselves. What chance this miracle happening? The government has restored funding to

ASIC that the Coalition had cut in previous budgets, but greater funding alone will not alter ASIC’s effectiveness.

One item in the road map is of particular interest. Frydenburg’s roadmap includes (p.7):

‘The Government committed more than $35 million in the 2019-20 Budget to enable the jurisdiction of the Federal Court of Australia to expand to include corporate crime. The funding will support the appointment of two additional judges, additional registry and support staff as well as the construction of new court facilities for the hearing of criminal proceedings. This will ensure that those who engage in financial sector criminal misconduct are prosecuted and face the appropriate punishment for their actions in a timely manner.’

This item is out of left field. It has no reference in the Hayne reports – indeed, the crucial (and partisan) role of the judiciary in mediating bank-customer conflicts has been rendered totally invisible. (As for the partisanry, see my submission to the Senate Legal and Constitutional Affairs Committee inquiry in February 2019.) We even have the sanitised ‘misconduct’ replaced here by ‘corporate crime’. But there is no acknowledgment that the judiciary has to be seriously re-educated if the extra resources are to have the desired effect. Money down the drain?

The Australian Securities and Investments Commission

ASIC promises a different outfit to its pre-Royal Commission incarnation with a formal restructuring (though it continues to deny its useless and complicit past). In late August ASIC published its Corporate Plan for the coming years. A quick entrée into ASIC’s formal ambitions is Commissioner Sean Hughes speech 30 August.

ASIC claims to be eschewing backdoor secret deals and lurching into enforcement, by litigation if necessary. The shift began after the appointment of James Shipton as ASIC Chairman beginning February 2018. In September 2018, ASIC sued NAB super subsidiaries MLC Nominees and NULIS.

In 2019 ASIC announced that it had upped the tempo during and following the Royal Commission hearings and Haynes’ Interim and Final Reports. Representative is ASIC’s suing the NAB in August 2019 over its dodgy home loan ‘introducer’ scheme.

In March 2017 (during the Medcraft era, atypical), ASIC took Westpac to court for that bank’s over dependence on a crude automatised home loan approval criterion. In September 2018, ASIC and Westpac reached a settlement on the matter, but a Federal Court judge nullified the settlement. Finally, in August 2019, Justice Perram ruled against ASIC, claiming that the National Consumer Credit Protection Act did not support ASIC’s reading of it.

In mid August it was reported that:

‘Westpac is the latest major bank to experience a rise in the number of home loan customers getting into financial trouble, reporting an increase in mortgage arrears in the June quarter, as more properties were repossessed by the bank.’

Nobody in authority has joined the dots re Westpac home loan repossessions and its loan criteria. Have these borrowers in trouble suddenly gone on a consumer binge (as per the learned judge’s stance) once the loan is in the bag? The loans in arrears are a small proportion of the loan book (just less than 1 per cent), which is all that the authorities and bank analysts care about re institutional stability. But every repossessed home is a family disaster, and nobody cares that such events might have been avoided or reduced in incidence.

ASIC is appealing against the court decision, but it needs to revise its case if it has any chance of success. I don’t like its chances. What makes mortgage lending questionable and potentially predatory across the industry is not just the use of a bottom line benchmark for household expenditure to the neglect of the prospective borrower’s financial details but a range of dodgy practices. Westpac had admitted, as background to its September 2018 settlement, that it had breached appropriate lending standards. The August judgment had consumer credit advocates (on the front line of dealing with casualties) claiming that it was a dangerous precedent, with bank lending rules discretion remaining intolerably permissive. And is the judiciary up to scratch on the real world of banking practices?

Regardless, we had the unsavoury spectacle of members of the Joint Parliamentary Committee questioning ASIC executives on 13 September. Liberal Senator James Paterson (ex Institute of Public Affairs flunkey), Liberal MP Jason Falinski and LNP MP Bert van Manem aggressively criticised the ASIC executives for initiating the appeal. The hearings were reported thus:

‘Over the course of 90 minutes, ASIC was accused of creating market uncertainty, failing to have solid evidence that Westpac’s practices caused harm to customers and not taking into account the wider economic consequences of its actions.’

This is the pits. Is this a window into the Liberal Party’s real state of mind? It makes a mockery of the formal intent of the governments’ road map. We await this trio being brought into line by Prime Minister Morrison and Treasurer Frydenburg.

In early September, ASIC launched action (also here) against two second-tier banks, Bendigo and Bank of Queensland. The action accused the two banks of widespread use of ‘unfair contract terms’ in SME lending. This is years after the practice was made illegal, of which more below.

This move stands out as atypical, because it is to date the singular action by the regulators that transcends the Hayne agenda. In that respect, it is an atypically courageous move by the new ASIC and deserves commendation. Of course, the second tier have been merely copying what the Big Four do and get away with. The second tier has been hoping to stay under the regulatory radar. Hayne ignored them. Bendigo in particular deserves a treatment as brutal as it has handed out to its customers.

Beyond the litigation, a couple of things on the ASIC agenda deserve mention.

The first is the ‘Product Intervention Power’ that allows ASIC to rule on the functionality of particular financial products for a particular set of customers and, behind PIP, ‘Design and Distribution Obligations’ that allow ASIC to target production functionality at an early stage. PIP is a rare positive instrument that ASIC was supporting in its pre-RC dark days of general complicity.

The second is ASIC’s ‘Close and Continuing Monitoring Program’ and, behind that, its ‘Corporate Governance Taskforce’. The CCMP sees ASIC staff on-site, monitoring processes with intent to transform such processes (such as breach reporting and resolution) rather than having to react after persistent failures by the banks, etc.

But as I wrote in my May 2019 ‘A Banking Regime Steeped in Inefficiency’:

‘As for the post-Hayne adoption by ASIC of the placing of an ASIC operative or two inside the banks, there appears to have been little to no public exposure of any investigation by Australian authorities in the experience of such a practice in the US. The US Office of the Comptroller of the Currency has long had multiple OCC staffers inside the big US banks. To what ultimate effect? What were these staffers doing when the nefarious practices leading to the catastrophic GFC were playing out? We await with interest an audit of this experiment down under down the track.’

Another target of the CCMP is the institutions’ internal dispute resolution procedures. This arena will be an interesting test case. CBA victim Craig Caulfield (and Bank Warrior group founder) has recently claimed”:

‘I and many other bank victims have noticed banks’ reversion to intransigence, obfuscation and cover up of wrongdoing since the FSRC disappears in the rear vision mirror.’

Quite. My experience with bank victim correspondence confirms Caulfield’s evaluation in spades. The banks’ internal dispute resolution procedures remain high farce, devoted to wearing out victims. ASIC’s mettle will be demonstrated in this arena.

These are the ingredients of what is dubbed the new ‘mongrel’ ASIC.

Australian Prudential Regulation Authority

APRA, however, is declining to bear its teeth. Andrew White reports (‘Watchdog won’t rock the boat too much …’, The Australian, 4 September 2019):

‘The prudential regulator has set a limit on its willingness to name and shame offenders and laggards, saying it will not do so if it threatens financial stability of the organisation of the system.’

That is, bank profits is all we care about (to maintain institutional stability) regardless of how those profits are obtained.

APRA did atypically ‘lash out’ with a lawsuit against the relative minor IOOF in December 2018. But that suit also appears to have been a rushed and ill-prepared job. It was reported that:

‘The Federal Court dismissed the regulator's action that claimed IOOF's directors, executives and entities failed to act in the best interest of superannuation members.’

Adele Ferguson claims that APRA ‘botched the case’:

‘It is worth noting that IOOF is no cleanskin. For years it thumbed its nose at the regulators. Indeed, ASIC conducted an investigation into IOOF in 2015 on the back of revelations in a series of media exposés in The Age and Sydney Morning Herald and found a number of serious concerns including compliance arrangements, breach reporting, management of conflicts of interest, staff trading policy, disclosure, whistleblower management and protection and cyber security. But no fines, no sanctions, no banning orders, no enforceable undertaking or licence conditions were imposed.’

Superannuation has long been a source of plunder in the for-profit entities (IOOF was once a mutual), so APRA’s loss in this case is another litigation failure of general import.

Australian Financial Complaints Authority

The creation of AFCA in November 2019 combined separate financial ombudsman services, including the useless and complicit FOS.

The news on AFCA’s complaint handling is not promising. As least lead ombudsman Philip Field, with multiple black marks to his name, has been ‘let go’, thanks to bank victim pressure. But it’s evident that some staff are not up to the task of dealing with the serious stuff of bank criminality, so more time-wasting and dead ends ensue. AFCA has also been pushing victims to engage in telephone hook-up mediations. A Westpac victim noted to me that the exercise was a complete waste of time, with Westpac continuing to stonewall, lying relentlessly. Another victim rightly declined AFCA’s request to engage in such a charade. In short, AFCA, in spite of Chair Helen Coonan’s public rhetoric, is not yet up to the job. I’ve told AFCA CEO David Locke what the name of the game is. He’s still on a steep learning curve.

The banks

Senior bank executives play their roles in this grand spectacle of going through the motions, claiming to suffer remorse for past sins and promising a new look in the future – a sackcloth stance to which we were witness right through the Royal Commission hearings over 2018 and ongoing.

Thus we hear from CBA CEO Matt Comyn on 7 August: ‘The Commonwealth Bank says it is determined not to repeat its past errors and scandals’.

On 22 August, ANZ Chair David Gonski is reported as admitting: ‘ANZ is short-sighted, slow and lazy.’ Why then hasn’t Gonski, such a high profile public figure, already fallen on his sword?

As early as 2014, the NAB CEO in waiting, Ross McEwan, is reported thus:

‘The boss of the Royal Bank of Scotland yesterday said banks have to repair decades of decline in customer confidence. Bank customers are worried that their lenders view them as a ‘zero sum game’, Ross McEwan told the British Bankers’ Association yesterday. He said: “Are we here to serve ourselves or our customers? That is the question the financial crisis and the years that followed have put in lights for our customers.”’

We await McEwan’s arrival at the NAB and the belated transformation of its anti-customer culture with baited breath.

Under pressure, the banks are slowly dealing with their crimes in the ‘wealth management’ areas, forking out compensation in dribs and drabs, always miserly. Total compensation to date, while large, is readily manageable – water off a duck’s back.

A colleague told me that his recent visit to his local CBA branch had the teller trying to flog a financial adviser to him. What? Wasn’t this stuff supposed to have stopped? No shame. And the misleading and deceptive advertising continues. In the Sydney Morning Herald, 9 September 2019, a CBA ad reads:

‘The CommBank app can now help you use your tax refund to improve your financial position. It’s just the start – better for you.’

On banking matters it’s also business as usual, as noted with Craig Caulfield’s first-hand experience above. AFCA, the reconstructed ombudsman, has been flooded with complaints since its establishment – see here (June) and here (September). Of course, only a subset of complaints refer to banking, and many complaints would be minor, but it’s not a good look.

Below this surface churn is an untouched core. That is the almost 40 years of unconscionability and fraud against small business and family farmers and myriad mortgagors. The banks continue to ignore this legacy. The regulatory and political superstructure, with an imprimatur from the Royal Commission’s neglect, continues to treat this carnage as non-existent. Throw a sop to complainants by allowing victims of the last ten years to submit their case to AFCA.

The Hayne reports as the touchstone, imperfect

All this flurry of ‘reform’ activity post-Hayne takes, implicitly rather than explicitly, as ground zero the Hayne reports, Interim and Final. This is a peculiar phenomenon. Hayne delivered on a restricted deadline, knowing that that deadline restricted the scope of investigation and exposure. If Hayne and his team had any lack of understanding about the nature of the beast they would have been disabused by the substance of the 10,000 submissions and the complementary correspondence received during the hearings by outraged victims (especially the CBA/Bankwest victims).

I have already outlined the limitations and the failings of the Hayne reports, not least in ‘The gaping hole in the Royal Commission’s final report’, and ‘Bank Victims Lose the Royal Commission and the Election’.
But the status of two instances of reforms currently in play are instructive – enforceable industry codes and unfair contract terms.

Making industry codes enforceable

One development in the wings is the making of the code of banking practice (now included under the generic label ‘industry code’) enforceable. This is Hayne recommendation 1.15, and it is supposed to be in place by June 2020.

The banks have ignored the implications of their code and its successive expanding revisions since its inception in 1996. The authorities have universally been complicit in the deception.

The enforceability of industry codes is discussed in the Final Report Ch.6. There is an intrinsic problem, however, on which the report is opaque. The Code of Banking Practice is a code developed by the banks, coordinated by the Australian Bankers’ Association. It is the essence of self-regulation.

Hayne proposes to make select parts of the banking code enforceable. But what does that mean for the status of those parts of the code that are not to be made enforceable? Do they have any force? Will they continue to be treated glibly in future as was the entire code to date? Indeed, if the code has to be made enforceable (if only in part), what is the point of an industry code per se? Why don’t we just have legislated conduct proscriptions?

Hayne acknowledges a problem with the code:

‘… something beyond the existing mechanisms is required. Experience shows that systemic issues identified by the Financial Ombudsman Service (FOS), or revealed in the course of determining individual disputes, have not always been resolved in ways that have encouraged or secured future compliance with norms. Entities have sometimes disagreed with the conclusions reached by the external dispute resolution body and, where they have, they may have chosen to persist in some practice that has been criticised.’

Quite, but what namby-pamby language. The code has been a joke. And how will enforceability be carried out?

‘… an individual customer should be able to seek appropriate redress through the subscriber’s internal and external dispute resolution arrangements for non-compliance with an applicable approved code; …

‘Customers will be able to elect whether to enforce any breaches of those provisions through existing internal or external dispute resolution mechanisms or through the courts.’ (pp.106, 108)

It’s up to the victim to enforce the code! Unbelievable. Internal dispute resolution is a farce. External dispute resolution, previously a joke (and when it came to life it was ignored, as noted), has been reconstructed but has yet to prove its mettle. As for victims fighting enforceability through the courts … This is a tragedy not a comedy.

The 2015 Victorian Supreme Court judgment of Elliott J in NAB v Rice ruled that the code was part of the contract. The judgment was reinforced on a failed appeal by the NAB. But that judgment doesn’t seem to have made any difference to NAB’s behaviour or, indeed, of the banking sector in general. I would have thought that the judgment was definitive for the code’s ‘enforceability’, but the naysayers (Hayne included, p.105) have it that the judgment is limited to the specifics of Rice. And what of the power of precedent? Used, it appears, only when the establishment forces (i.e. for the bank litigator) find it useful, On that interpretation, any victim fighting enforceability of the select portions of the code will thus be fighting on grounds specific to that victim’s case. And so on.

The whole thing is a joke, and the government considers this a major reform. Hayne lends his sagacity to the conundrum and comes up with a damp squid. Complete rubbish.

Unfair contract terms

In November 2015, the Coalition government legislated to extend (from consumer law) the banning of ‘unfair contract terms’ to small business standard contracts which include the bank – small business loan contract. The national small business ombudsman ASBFEO was active in pushing this development.

The banks were generously given twelve months to accommodate the new regime. We have legislated against domestic violence but we’ve allowed you another twelve months to keep on beating your wife, possibly even to death. In March 2017, following a joint investigation by ASIC and ASBFEO, nothing much had happened. Ombudsman Kate Carnell exclaimed: ‘I’m gobsmacked really.’ From a 9 March 2017 SMH article, Carnell is reported thus:

‘"The banks all rush to take out full page ads and billboards about how much they love small business but they are failing to comply with these legislative requirements".

‘ASIC and the ASBFEO found the banks continue to use clauses that give them broad discretion to unilaterally vary terms and conditions of the contract, provide for non-monetary loan ‘default’ in a broad range of circumstances and absolve the banks from responsibility for conduct, statements or representations that the banks make to borrowers outside of the contract. …

‘"Once again, repeated calls for the banks to amend their practices are falling on deaf ears, despite inquiry after inquiry highlighting major flaws in the way they treat their small business customers."’

Hayne deals with the process of the banks’ implementation (or rather non-implementation) of the new rules in the Interim Report (pp.281ff). What we read there is an account of the absolute indifference of ASIC to the bank’s ongoing non-compliance, a chumminess with which the banks were perfectly happy. Thus:

‘CBA submitted that ASIC’s approach was “constructive”, and enabled “understanding from ASIC’s perspective” of the ‘genuine interests of the bank.’

Quite. This conscientious inaction was presided over by ASIC senior executive Michael Saadat. In the Interim Report, Hayne responded:

‘A regulator should look carefully at such positive reviews [by the banks of ASIC’s inaction]. They point to the regulated community having its way about when and how the law will be enforced. In this particular case it is necessary to bear at the very forefront of consideration the inescapable fact that the regulator did not cause the regulated community to begin to obey the law by the date set by Parliament. Obedience came later than the law required. That is unsatisfactory. That the regulated community found the result convenient and free from discomfort is simply beside the point.’

A rap over the knuckles to the banks and ASIC, albeit in restrained terms. Peculiarly, Hayne doesn’t return to the ‘unfair contract terms’ matter in the Final Report, save to recommend that the provisions be extended to insurance contracts. But what point any legislation if the parties to which it is addressed ignore it? In any case, the legislation remains weak.

In January 2019, Labor decided to make unfair contracts, still rampant across small business contracts with corporates, an election issue. Of course, Labor lost the election (Tampa revisited), and the eradication of unfair contracts remains in the wishful thinking category.

In the meantime, Michael Saadat (possibly on the nose at the new ASIC) leaves ASIC to join ultra spiv outfit Afterpay – yet another revolving door scandal. Saadat and fellow ASIC executive Warren Day had been behind ASIC’s ongoing neglect of its responsibilities under s12C of the ASIC Act regarding unconscionable conduct (see my letter to ASIC Chairman James Shipton, 3 April 2019).

Thus Hayne leaves both enforceable industry codes and unfair contract terms in a parlous state where nothing substantive can be expected from either domain to restrain bank oppression of small business/farmer borrowers.

Action on the margins, entrenching inefficiency at the centre

All this considerable effort by the government in its ‘road map’, the revved up ASIC and APRA and the associated monitoring of the regulators themselves, doesn’t get to the root of the problem. It is hugely inefficient – thus my article ‘A Banking Regime Steeped in Inefficiency’ – and hugely expensive in the drain on the public purse.

This hoopla is expected to give the general public confidence that all the dysfunctionality of the Australian finance sector and its ‘misconduct’ is on its way to being redressed.

Sometime staffer at both ASIC and APRA, Wilson Sy takes a hard line regarding the prospect for dramatic improvement in finance sector behaviour dependent on continuing emphasis on the extant regulatory structure and no attack on the structure of the system itself. He argument is elaborated in a March 2019 document titled ‘The Farce of Fake Regulation: Royal Commission Exposed Australia’. Sy claims that ‘The system was never designed with enforcement in mind. Fake regulation was established as a façade to placate the detractors of deregulation.’

The point is that the post-Campbell deregulated structure was ‘built’ on the premise that no regulation was necessary, save for a basic ‘prudential’ requirement of a minimum capital ratio. To me, the contradiction is most clearly manifest in the Royal Commission’s recommendation to make select parts of the Code of Banking Practice enforceable, as outlined above. How is a Code that has been designed and re-designed by the industry itself to be ineffective, and has succeeded brilliantly in that aim, to be made enforceable and only in part?

The implication of Sy’s view is that the entire regulatory apparatus has been knowingly and strategically put in place explicitly to be ineffective against finance sector malpractice. Sy claims that ‘Financial regulation in Australia is mainly to protect the system and its financial institutions.’ I agree, as clearly evidenced by APRA’s actions and explicit admissions regarding its objectives. However, I surmise that the regulatory apparatus has been put in place with extraordinary pragmatism over time in the face of endless finance sector dysfunctionality, but in which none of those responsible have confronted the inbuilt contradictions in this shaky edifice.

Regardless, the fundamentals of this no-regulation-is-needed-deregulated system are not to be examined. This unwritten axiom is transparent, for example, in Hayne’s recommendation that vertical integration should remain. This means, in particular, that the ongoing farce of for-profit institutions managing superannuation accounts is to be tolerated in spite of the inbuilt tendency for fraud. And that ASIC and APRA have been jointly given regulatory oversight over this high octane rip-off machine in spite of the transparent unsuitability of either regulator for the job.

Sy’s experience as staffer in ASIC and APRA, plus feedback to him from other employees, provides outsiders with a rare insight into the bureaucratic complexity of both regulators, particularly the labyrinthine and dysfunctional structures of information gathering and hoarding, and the commitment to such structures that militate against successful regulation. From Sy’s personal experience:

‘APRA shut down its research unit several years ago [which Sy headed before his resignation] to extract an “efficiency dividend”, as if efficiency is undesirable – the research budget was eradicated because research was too efficient. … To cover trails of past research successes, APRA research papers which may have been too revealing, are now made difficult to access on its current website.’

He sums it up thus:

‘With fake regulation, there is no real need for extensive knowledge or expertise about financial products, conduct and operations. People and employees, who understand the industry and know what is wrong with the system, are redundant and unhelpful to the work of the fake regulators. Would-be reformers among employees are considered misguided and are avoided by the regulators. Competence may be a career liability.’

Who will reform the Australian financial sector?

It was the Hayne Royal Commission’s job to expose the dysfunctionality of the Australian financial sector. It did so superficially (much of it already known), constrained by the politically-determined short time made available.

It could not be the Hayne Commission’s role to devise a reformed or properly functioning financial system in Australia. Hayne made a large number of recommendations. They are currently taken as the bottom line by the government (the Frydenburg ‘road map’) and by the regulators. But the recommendations are as superficial as the Royal Commission reports themselves.

Who then is to devise an appropriate system? No individual or grouping equipped for the task exists for such an essential purpose. Perhaps some whistleblowers could be brought in as consultants, but only Jeff Morris has put his head above the parapet, and nobody in authority is interested in his or other whistleblowers’ experience.

One generalisation is of importance. The federal Treasury is not in the hunt. Here is a significant institution that goes completely under the radar. The Treasury has the ultimate oversight of the financial sector, with all regulatory and advisory bodies (save for the formally independent Reserve Bank) under its purview.

Treasury staffers would have been significant members of the secretariat that wrote the Royal Commission reports, though phrased as if Hayne personally wrote the text. (It is possible that Hayne himself did not agree with everything written under his name.) Hayne agreed to Treasury’s determination of the Commission’s ‘key questions’ (Final Report, Vol.1, p.5), the fourth of which was the soporific:

‘What more can be done to achieve effective leadership, good governance and appropriate culture within financial services firms so that firms ‘obey the law, do not mislead or deceive, are fair, provide fit for purpose service with care and skill, and act in the best interests of their clients’?’

Treasury’s traditional role was as a bean counter. Courtesy of Treasury’s crucial role in budgetary control, it gradually acquired a role for economic advice and policy and then a monopoly in that expanding domain during the Post-World War II period. It was a period when appointments increasingly drew on university economics graduates with no real world experience.

Malcolm Fraser created the federal Department of Finance in 1976 as a rival source of opinion because he could not stand Treasury’s dogmatism. But by the early 1980s, when Labor was elected to government, Finance had become ideologically attuned to Treasury. With Finance taking up a significant part of Treasury’s traditional role as bean counter, the ideas and policy arena became a larger part of Treasury’s role. But economics graduates have a limited understanding of how economies work.

Everything that is publicly known about the Treasury is not appealing. It sat back (with the RBA) and did nothing while the banking sector went crazy during the 1980s during the first decade of deregulation. Deputy Secretary David Morgan coupled inaction with belated wrong-headed support for a further hike in interest rates which gave us ‘the recession we had to have’. He then jumped ship to the corrupt and near-bankrupt Westpac. Morgan’s revolving door initiative was followed by 1990s Treasury Secretary Ted Evans who spent the 2000s as Chair of Westpac. Later Ken Henry took a comparable career path from Treasury Secretary to Chair of NAB. Morgan, Evans and Henry did nothing to eliminate the tendency to corruption in Westpac and NAB.

John Fraser left Treasury as Deputy Secretary (Economic) in 1993 and returned as Treasury Secretary in January 2015. He spent the intervening 20 years working for Swiss Bank Corporation and (after 1998) the merged bank UBS, mostly at a senior level. UBS has a shocking reputation for dodgy practices, not least facilitating large-scale tax evasion and money laundering, for which it was belatedly given a massive fine by a French court after years of obfuscation and pursuit of whistleblowers. That Fraser could have had no knowledge of this activity is unlikely as the European media covered the issue for years. Fraser was brought back into Treasury as a desperate choice when the Abbott government got rid of a Secretary they couldn’t control. Fraser dutifully rocked no boats. But then he resigned in July 2018 when the going was getting hot. Not a good look. And he joined the Board of AMP soon after – again, not a good look.

In my June 2019 article ‘Bank Victims Lose the Royal Commission and the Election’, I referred to multiple instructive lessons from those appearing at the hearings of the Post-GFC Banking inquiry on 8 August 2012. One important lesson was the mentality of the Treasury boffins:

‘Senior Treasury officials Jim Murphy and Ian Beckett who claim that bank malpractice is outside of their bailiwick … and that the court system is the right place for aggrieved bank customers to pursue their grievances.’

In other words, Treasury doesn’t want to know, doesn’t care, and is deeply complicit with bank corruption. It can oversee legislation to increase white collar crime penalties, and write Frydenberg’s ‘road map’, but it is merely going through the motions to facilitate an essential continuity of the problem.

Interestingly, Treasury makes an appearance in Adele Ferguson’s Banking Bad. It’s a cameo appearance, but better than nothing. She notes (p.362):

‘… a number of economists from Treasury were pushing the view in submissions and briefings to the royal commission that any radical changes to vertical integration, small-business lending or responsible lending laws would have unintended consequences and could trigger a credit crunch that would have devastating effect on the country.’

In other words, succumb to the banks’ blackmail and allow them to continue to operate on their own terms. The Treasury economists haven’t been paying attention. Or perhaps they have in mind a future senior position in the finance sector à la Morgan, Evans, Henry and Fraser.

When the Hayne Final Report came out, the share prices of the Big Four banks, AMP and IOOF shot up. Ferguson again (p.374):

‘The report clearly pleased executives and boards, including AMP director John Fraser, who until 31 July 2018 had been the head of Treasury. Fraser had joined the ranks of AMP on 6 August as a key proponent of vertical integration, bringing with him a powerful network of contracts in Treasury and the government.’

Who then has the competence and the authority to genuinely overhaul the Australian finance sector? Certainly, the Hayne Royal Commission, in concertedly ignoring submissions from all those with at least partial experience and expertise on the big picture, contributed its status to undermining any possibility of a fundamental overhaul of the sector.

Bank criminality, corporate criminality

The essence of the problem is criminality of the finance sector, with the banks at its core.

This proposition ought to be self-evident (it is to bank victims), but it is well hidden behind a blanket language of weasel words employed by the politicians/regulators/media. The catchword of the Turnbull government’s circumscribed Royal Commission was ‘misconduct’. Even ASIC’s new Deputy Chair Karen Chester, in an August 2019 speech full of blather, gives us this:

‘Common, indeed foundational, to all our priorities is the value of fairness. As we’ve seen that many firms in our financial system are not always delivering fair and competitive outcomes to consumers, especially vulnerable consumers.’

This language is not atypical for Chester’s speeches. ASIC Chairman Shipton has the bug as well. This mentality highlights that significant sections of the new ASIC executive team still don’t know or admit to the name of the game.

Let’s go to the root of the problem – the corporation per se. The joint stock limited liability corporation, a product of the nineteenth century that gave it ‘personhood’, is subject to restraint through democratic means only to a limited extent. Indeed the joint stock corporation was created before the adult franchise was still a work in progress, so even the limited form of electoral democracy was strangled in the cradle.

The corporation, in its relative legal immunity and impunity (certainly the responsible executives), has a natural tendency to criminality. Amongst much literature on this score, Harry Glasbeek’s 2002 Wealth by Stealth and 2017 Class Privilege are instructive. I give the short version of the argument in a October 2018 article, ‘Systemically Corrupt Capitalism’.

Private for-profit banks, being corporations, have the same innate tendencies to corruption. By the nature of their business, banks have a far greater capacity than does the non-financial corporation to engage in corrupt activity. The capacity and the imperative combine. Competition, the mantra of the Campbell Report, the Productivity Commission and economists like Chester, does not offset the banks’ capacity for and imperative towards criminality. On the contrary. Apart from the intolerable but tolerated rise to dominance of the Big 4 and its capturing of the ‘wealth management’ domain, the particular way in which banks choose to compete in pursuit of market share increases rather than impedes the imperative to criminality. I outlined this perverse claim regarding the power of competition in my 10,000 word submission to the 2010-11 Senate Economics Committee Inquiry ‘Competition within the Australian banking sector’, but it was held as confidential and its contents ignored.

As I have outlined in other articles and submissions, by virtue of the asymmetric character of the bank lender – small business/farmer borrower, fraudulently appropriating borrower assets is as easy as falling off a log. By virtue of the discretion of loan managers, including via the use of false or forged data, customers can be readily defrauded.

Crime syndicates often find it amenable to have a person or persons inside the bank to leverage this inbuilt capacity for fraud. Through this heinous practice, met with indifference by the host bank itself, one elicits victims like Jim and Debbie Barker, Guilia Mandarino and Paul Karaminovksi (CBA, Victoria), Patricia Thirup (NAB, NSW) and Patrick Hayes (Westpac, Queensland). A rare glimpse of this bank-criminal gang in cahoots phenomenon can be seen in ASIC’s belated (over seven years delay) pursuit of ponzi scheme spiv Bradley Silver who operated in tandem with Westpac insider David St. Pierre. Patrick Hayes, victim of a comparable Westpac network, knows all about St. Pierre, but nobody in Westpac or in authority is interested in Hayes’ comprehensive knowledge of this phenomenon or in pursuing the perpetrators of the comparable crime against him.

All those in authority, including the judiciary, prefer to look the other way, which only acts to enhance the imperative of banks to use their innate capacity for criminality.

Criminality continues apace because top executives have been immune. White collar crime penalties have been increased, but so what? What happened to the senior executives of Commonwealth Financial Planning and its parent Colonial First State as a result of the exposure of the widescale fraud against hapless investors? Nothing.

Peculiar then that Pamela Williams, a seasoned journalist for the ultra respectable and pro-bank Australian Financial Review, should use the ‘jail’ word, indeed hammer it home (‘ASIC's magnificent seven lay down gauntlet’, 30 August):

‘The big issue for ASIC now, with its enforcement strategy, is that the new "team" has talked up a lot of prosecutions. For the everyman who watched snippets of the Hayne commission or read the papers, the burgeoning horror stories created a climate of disbelief and a call for accountability. In the public mind, and on the front pages, that usually means jail for executives. …

‘So who will be ASIC's main targets in the new "why not litigate" era? And will they go to jail? Will it be the local branch bankers … Or will it be what the public hungers for - top bankers with big names? …

‘Now the public wants to know if it's the big players, the big public names – chairmen and chief executives of banks for example – who will face prosecution, and pay the price. How far up the tree can ASIC take the evidence? This is the challenge it has set for itself with its big talk.’

Sterling stuff, but don’t bet on such an outcome. Remember that David Cohen, integral figure in the large scale fraudulent foreclosure of many hundreds of commercial property Bankwest borrowers remains as Deputy CEO of the CBA. This is the ultimate slap in the face for CBA/Bankwest victims whose businesses have been destroyed and their lives overturned.

The formal optimism of the current political class, the regulatory leadership and the relevant bureaucracy is entirely unfounded.

Last modified onThursday, 26 September 2019 06:28

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