The political opposition to Glass-Steagall in Australia is wavering. The Senate yesterday voted on a Notice of Motion by Senator Pauline Hanson calling for the separation of Australia’s banks. Although the government and ALP joined forces to vote down the motion
Citizens Electoral Council of Australia
Media Release Friday, 19 October 2018
Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Nationals senator crosses floor to support motion to break up the banks; vote unsuccessful, but major party opposition wavering
The political opposition to Glass-Steagall in Australia is wavering. The Senate yesterday voted on a Notice of Motion by Senator Pauline Hanson calling for the separation of Australia’s banks. Although the government and ALP joined forces to vote down the motion—as they regularly did before 2016 to block a banking royal commission, to their embarrassment now—cracks are appearing in their opposition. And significantly, a member of the government, National Party Senator Barry O’Sullivan, crossed the floor to vote with One Nation, the Greens, Centre Alliance, Katter’s Australian Party and Independent Senator Tim Storer for banking separation. (Independent senators Derryn Hinch and David Leyonhjelm voted with the government and Labor.)
Senator Hanson’s Notice of Motion stated:
That the Senate:
a. notes that:
i. trust in banks is essential to the economy,
ii. trust in the banks has been undermined by adverse findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry,
iii. misconduct related to poor standards of mortgage lending affects all Australians and risks financial instability,
iv. concentration on mortgage lending makes the economy vulnerable to a downturn in the housing market,
v. reliance on overseas debt markets for short-term borrowing by the major banks, and contagion from overseas counterparties through trillions of dollars of derivatives related to mortgages, pose serious systemic risk,
vi. misconduct related to financial advice, small business lending, superannuation and insurance shows that the business model of major banks is based on exploitation rather than customer service,
vii. the integrated structure of banks facilitates misconduct due to the lack of transparency when traditional commercial banking is linked with investment banking, financial advice, wealth management, stockbroking, superannuation and insurance businesses,
viii. the integrated structure creates a conflict of interests because the lack of transparency enables banks to extract profits through cross-subsidies of various activities, and the indirect cost to retail superannuation members runs to many billions per year,
ix. the enormous profits extracted through the integrated structure entrenches the major banks as an effective cartel, preventing market competition and increasing concentration, and
x. the integrated structure puts bank deposits at risk as collateral for major banks’ speculation in mortgage-backed securities and derivatives—this puts the real productive economy at unnecessary risk; and
b. calls on the Federal Government to reduce the conflicts of interests by legislating the structural separation of the banking system, where traditional commercial banking of taking deposits and making loans is separated from investment banking and all other financial services, including financial advice, wealth management, superannuation, stockbroking and insurance.
Despite the motion being voted down, the government is now wavering in its opposition to banking separation. For a number of years, government MPs have sent form letters to concerned constituents, stating that the “Government has no intention of legislating to structurally separate retail and commercial banking from investment banking in Australia … it is not considered necessary in Australia at this time”.
In response to this notice of motion, however, instead of expressing flat-out opposition, government Senator Anne Ruston said the government is awaiting the outcome of the royal commission:
“The government opposes this motion. In order to have a stronger economy, it is integral to have a financial system that is efficient, stable and trustworthy. The government will await the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.” (Emphasis added.)
In other words, the government has now moved to Labor’s position, which has long said it will wait for the recommendations of the royal commission, as ALP Senator Anthony Chisholm reiterated:
“Labor fought for a royal commission. Labor has called for the royal commission to hear from more victims. Labor is doing everything it can to hear from those through roundtables around the country.
But we can’t rush into significant reforms like those proposed in this motion before the royal commission has delivered its final report. Labor will look with interest in the final report in February 2019 for recommendations to address the shocking findings outlined in the interim report.”
Greens leader Senator Richard Di Natale expressed strong support for the motion:
“The Greens support breaking up the banks because we recognise there is a fundamental conflict of interest at the heart of the banking sector. We’ve been leading reform in this space. We led the campaign for a royal commission, and we’re now leading the campaign to reform the banks. We said it was important to do that back in 2017. Since then, the Productivity Commission has said it too, ASIC has said it too and the royal commission is clearly saying it as well. ASIC says financial advisers to big banks recommend their own products instead of what’s best for consumers 75 per cent of the time. If that’s not a conflict of interest, I don’t know what it is.”
This episode in the Senate demonstrates the progress that has been made in the fight for Glass-Steagall in Australia. Until 2016 Labor was flatly opposed to banking separation, as was the government until this week; now both major parties know they can’t flatly oppose the policy, and are awaiting the outcome of the royal commission. Moreover, government members are now taking a stand in public support of the policy.
This is a fight we can win—don’t let up!
What you can do
Right now, the most important thing you can do is make a submission to the banking royal commission by the deadline of 5:00 PM 26 October to:
1. Tell Commissioner Kenneth Hayne the only way to fix the banks is to break them up through a Glass-Steagall separation of traditional commercial banks with deposits, from all other financial services. Click here to read the CEC’s release on Hayne’s interim report in which he seeks submissions on structural change and cites Glass-Steagall to show that structural separation is not “novel”.
2. Ask Commissioner Hayne to investigate APRA’s bail-in powers, and the banks’ ability to change the terms and conditions of deposit accounts without notice to allow APRA to order a bail-in of deposits. A Treasury official told a concerned citizen last week that this should be taken up with the royal commission, so ask Mr Hayne to investigate the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2018 and the banks’ powers to arbitrarily change their terms and conditions. Click here to read the CEC’s release on the new evidence of bail-in uncovered by Digital Finance Analytics’ Martin North and economist John Adams.
* You have seven days to make a submission; click here for the online submission form: https://royalcommissioninterimreportwebform.lawinorder.com.au/#/
Click here to order a free copy of the CEC’s new banking handbook, The Next Financial Crash is Certain! End the BoE-BIS-APRA Bankers’ Dictatorship: Time for Glass-Steagall Banking Separation and a National Bank.