Pearls and Irritations

I was horrified today to hear that the coalition government this week wants to step up its pursuit of “welfare cheats”, a few millions of dollars chasing the poor, disabled and ignorant. Then Treasurer Scott Morrison is impelled to say, the government “might” gaol the execs who defrauded bank customers of what may well prove to be billions, not due to impoverishment (quite the reverse), disability (lets grab the loot) and we know it’s illegal (but that’s business, isn’t it ?) A further Memo to Kenneth Hayne: Proportionate punishment, enshrined in law, should mean that if a dole cheat manages a few thousand and gets two years, then a crook banker who engineers billions should get a life sentence. Has anyone even been charged ? Until “equality before the law” becomes a reality rather than a legal fiction, now we know that they knowingly engaged in systematic theft, the managers , if the principle holds, should have a severe criminal penalty imposed, and the bank should have its licence revoked, on the basis of clear breach of trust.  All those shareholders who thought banks were a licence to print money ( i.e., steal), should wear the risk they took in buying the shares. Isn’t that what capitalism is all about ?

We need barely ask what Paul Keating now makes of the benefits of deregulation of the banking system.

Dear Old Saul Eslake thinks a bit of tinkering with the regulators will get business back to usual. Just what we don’t need. The usual was the race to the bottom, where profit, high dividends and deal dishonestly with the customer, were the stuff of the banking “business”. If these institutions are allowed to survive, and we should ask,  ”Is it in the national interest that they do survive?”, then how do we make them behave legally and responsibly?

As an aside, I am old enough to remember having a bank manager who I trusted, indeed he was, at no charge, the trustee of my superannuation fund, and rang me if I might inadvertently become overdrawn ! Gees, you must be old, Jim!

Well, on that, baby and the bathwater reasoning (“Too Big To Fail”), we let them survive (think of the Real Estate !). Sure as shooting we don’t trust them anymore! We regulate them in a detailed way: any charge must be justified, credit card charge and interest rates fully justified by accounting details. Usurious rates to be punished.

No problem with “commercial in confidence”, given that there are no serious secrets which go to true competition, although the regulator, which hereafter should be right into the detail of the finances of the banks, and the sales practices they use, can show some discretion. Nothing less will restore belief that they aren’t cheating the customers.

Lastly, just because Di Natale thinks it’s a good idea, does not mean it isn’t: Return the Reserve Bank to the previous role of the pre-Menzies Commonwealth Bank as the “people’s Bank”, as well as the central bank. True competition, referable to government and the people, instead of playing the narrow monetarist game of interest rate adjustments, which become useless, as they now have, due to the significant wealth distribution disparity brought on by an absurd belief that ”letting business to get on with the job” is serious economics. Try banking for size.

Jim Coombs is nearly retired magistrate and former economist.

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