Three years after Hayne, the robber barons are back in charge

Nov 3, 2021
Kenneth Hayne and Josh Frydenberg
Kenneth Hayne with Josh Frydenberg. (Image: AAP/Kym Smith)

In banking scandals, Crown casino and half a dozen other such disasters, the cover-up begins with government, now skilled at evading accountability.

Those who read the casino report, or reports, will think immediately of the Hayne royal commission report into the banks three years ago. Remember that? It was initially resisted by then prime minister Malcolm Turnbull, well informed about the banking end of town, and his redoubtable treasurer, Scott Morrison. Both (along with the Treasury and other financial regulatory agencies) insisted that an inquiry was completely unnecessary. First, if there had been bad practice, Morrison and Turnbull had already picked it up and acted. Second, an inquiry might be dangerous because it could shake international confidence in the Australian banking system.

But the commission was forced on the government because a host of rebel National Party members were incensed by reports of abuses they had heard from constituents. Once the commission got going, it became clear that those abuses were but the mere tip of an iceberg. Indeed that banks, like modern governments, were being treated as if they were casinos, run by scoundrels, if anything less honest. Modern police consorting squads, now focused on bikies and drug dealers, might have seemed, for a while, better deployed against members of banking boards.

The whole barrel was rotten. Corrupt and dishonest practices were not the work of a few rotten apples but fundamental to the whole system — at board level,  with senior management, and all the way down the line. Bankers of great repute were personally implicated in devising, implementing, and, if needs be, covering up completely dishonest practices. They lost no caste for their rapaciousness or greed, or even for the giving of advice to some that they should deposit any moral qualms at the door.

A culture of profit at any cost had taken over institutions once regarded as fiscally and morally conservative and honest.  So also seemed to have disappeared any concept of social contract (in exchange for the great boon of a banking licence), fiduciary duty or trust to clients, particularly ordinary people at a disadvantage in dealing with great institutions. Some of the headline stories — about charging fees to dead clients, or, in the financial services section of the industry selling funeral benefits for Indigenous babies, were shameful enough, but so was a whole culture of fee-gouging, ripping off clients, and promoting schemes not for the best interests of customers but so as to maximise personal commissions and bank profits.

It also became clear that the banks, major donors to Liberal Party campaign funds, had demanded and received a quid pro quo in the form of the effective repealing of legislation designed to make the financial services industry more honest and efficient, and, in particular, obliged to discuss kickbacks and other inducements to recommend poor investments. This was almost by itself enough to explain why most banking financial service investments provided such poor returns compared with industry-based superannuation funds.

It shouldn’t surprise that casinos, banks and modern governments are so similar in their dishonesty and lack of concern for decency and the public interest. Their managers and their boards come from the same stock, often educated in the same Christian private schools, studying the same subjects at universities and moving interchangeably between sectors, as well as in other layers of government (such as regulation, ministerial advising, consultancy, and the modern bureaucracy). It is by no means clear that Morrison and his ministers are the pick of the bunch.

 Morrison, who discovered the money tree and magic pudding when the pandemic struck 18 months ago, has discovered that it can be harvested with the morals and the ethics of the modern banker or casino operator. Over the past week of grandstanding about his plan to have a plan to make emissions go away without new policies, Morrison was making much of an argument that voters at the last election, in May 2019, had rejected Labor’s policy of a 45 per cent cut in emissions by 2030, preferring the Coalition promise of only a bit over half. This was mandate stuff, the electorate’s endorsement of his plan, he was asserting.

We did not hear so much about another big issue of the 2019 campaign. Labor campaigned strongly on promises to implement all of the recommendations made by Hayne, asserting that the Coalition, implicated in some of the rorting, simply could not be trusted to implement the recommendations. This was strongly denied by the new Treasurer, Josh Frydenberg, who insisted that he would implement all of the recommendations.

The public was conned. Nearly three years later, most of Hayne’s concrete recommendations are not implemented. Some have been formally abandoned. Others lie at the wayside with no plan for doing anything. The government, and Frydenberg, seems to have lost all zeal to reform the sector — one which, accordingly, continues to shower the Coalition with donations. If the National Party has become a wholly owned subsidiary of the fossil fuel industry, the ideas and ideals of the banks and the financial sector now seem to govern the Liberal Party. The pandemic provides some cover and some distraction, but it could hardly be said to have changed the moral or financial arithmetic, given that the banks are awash with free cash provided by the government. On the key performance indicator Frydenberg set for voters to judge him in 2019, he scores less than 50 per cent. He’s also the steward who handed out $40 billion to businesses and private schools which, contrary to their initial claims, they didn’t need, but who were told, airily they could have it anyway. Perhaps because we could retrieve the money through another bout of robodebt on the undeserving poor.

Some Hayne recommendations of mostly rhetorical flourish can be said to have been promulgated, but very important ones — focused on the robber-baron culture which had developed — have simply been abandoned. The robber barons are back in charge — or in some cases, a new generation of the same DNA and business morality. Disgraced but unshameable bankers are again seen at the best clubs, and offering apparently disinterested advice about the economy and “over-regulation”. One could be forgiven for thinking that the royal commission never happened. One can be reasonably sure that Kenneth Hayne will never get another opportunity to refuse to shake Frydenberg’s hand, a preventive pre-pandemic measure to avoid the risk of contamination from a government which had helped create the mess in the first place.

Pretty well all of the conditions exist for a repeat of the circumstances which saw Australia’s major banks and financial institutions appropriate billions of taxpayer dollars to their own interests, in conduct that a future inquiry could call “disgraceful”, “illegal, dishonest, unethical and exploitative” and “callous”.

Those who write the terms of reference for royal commissions are always careful to exclude constant but embarrassing factors at the heart of the problems. With the banking scandals, with Crown casino and in half a dozen other systemic scandals of modern business ethics and conduct one can see that the cover-up begins with government, now skilled at evading accountability.

There is regulatory failure, and, in some cases (including at Crown) regulatory capture. This does not usually happen by accident. It occurs because those who are supposed to secure the public interest are deliberately starved of funds and staff, regarded by their own government (especially by bureaucrats in departments of finance) as examples of red tape and over-regulation. Victoria is replete with examples of the bullying capacity of a casino too big to be allowed to fail: if anything inconvenient to casino management emerged, a call to the responsible minister or the premier — probably with menaces from an old ALP apparatchik — would mostly do the trick.

Regulators have not only been deprived of resources. They have been deprived of truly independent power to protect the public interest. And in some cases government has chosen regulators not for their will to carry out the letter and the spirit of the law, but for “understanding the industry”, “believing in a light touch and persuasion rather than forcefulness and fines”, for being chosen from the corps of mates, cronies and nominees of the regulated. Some skate between being foxes and hounds, or who are given reputations they have yet to deserve.  I would have thought, for example, that if the former Victorian Ombudsman — the person chosen to lead Crown out of the morass — was such an outstanding regulator, Victoria would not have so many chronic problems of small-g government.

Inquiries rarely look at the direct relationships between banks, or casinos, or wheat boards, with government ministers and government agencies. But they are almost invariably too intimate, and, were inquiries allowed to ask, would implicate ministers in the mismanagement, misbehaviour and misconduct. The vacuum leaves fertile space of corruption commissions of wide ambit.

In theory, Morrison will be talking about the environment for most of the next week. But even if he cannot contribute much to world, or national, or local, debate on the physical environment, he might spend some of his time contemplating the moral environment in which we now all live.

It is pointless to ask whether the banks learnt their ethics from the casinos or vice versa, or whether both learnt them from the examples of integrity provided by modern politicians. But all are rotten, and it is a major problem of future good government. Indeed, I do not think we could have the mendacity we have seen on display in parliament last week had we not all been wading in the same sewer.

Jack Waterford is a regular commentator and former Editor of The Canberra Times

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