Bankers, Spivs and Lynch Mobs

What happens when bankers bed with spivs? Answer: political one-upmanship and a royal commission into banking. Grandstanding lawyers. Abject confessionals. And, then, even more political one-upmanship with no end in sight. Meanwhile, beneath the confected funk, the ordinary business of life, including banking, goes on unaffected. Or, at least, hopefully it does for the sake of financial stability and the health of the economy.

Banking doesn’t draw the most competent or brightest of people. Don’t let multimillion dollar salaries fool you. Incompetence can go unpunished, as it can’t among, say, airline pilots, carpenters, civil engineers and dentists. Of course, there are some talented people in banking; nevertheless, it provides one of the more lucrative pathways for those whose acumen might be ordinary. This can be a drawback in the dock.

If you doubt this listen to some of the evidence being given at the royal commission. One highly-paid gentleman banker was accused by the media of smiling through part of his testimony while admitting his institution misled ASIC. Defensive dimwits grin reflectively. Another highly-paid lady banker answered a question so incoherently that Mrs Malaprop would have been proud. Another answered “yes” to the question, “You’d be the gold medallist if ASIC was handing out gold medals for fee for no service?” There are so many deflective ways to answer such a question that you would have to be a highly-paid banker, promoted well beyond your ability, to fall into the trap of making the simplest affirmative response.

Dimwittedness is no excuse.  Undoubtedly bankers, like us all, are flawed. However, I’d like to see any service industry withstand forensic examination via a royal commission and come out smelling sweet. In my experience, having worked in and around banks for twenty-four years, bankers as a whole unlike, say, used car salesmen or real estate agents, do not systematically set out to rip off their customers; certainly, in any egregious way.

Fees for, say, overdrawing accounts, or for a range of services, take advantage of customer inertia in swapping banks. All banks know that this inertia exists. All banks therefore are prone to overcharging. But, let’s be straight, while this kind of thing makes good headlines it is small beer. We have also learnt through the royal commission that fiddling has gone on between bankers and home-loan brokers to boost the eligibility of borrowers. There’s a clue in there for bankers. Watch out who you consort with. They’ll drag you into their schemes.

Enter financial planners. Banking and financial planning are whole different kettles of fish. Carpetbaggers, opportunists, main chancers, spivs, and swindlers are drawn to financial planning like ants to a honey pot. Clearly not all financial advisors and planners are of bereft of morality. But enough are to make their mark. Set the scene. Financially unsophisticated people with money asking where they should invest. Enter Bernie Madoff and his ilk.

Bankers should never have got entangled with financial advisory and planning services. They are way out of their depth. Financial advisers and planners will always attract scoundrels among their number who seek to enrich themselves by cheating the gullible, widow women and older folk out of their money. Think any of that will ever change and you are dreaming. Banks should voluntarily disengage from providing financial advisory and planning services, as some are already doing. Nothing much else need be done or should be done.

This royal commission is being turned into absurd theatre by the media and low-life politicians. So far as I can tell, everything bringing the sky down is already under investigation by ASIC and/or has been remedied. And will someone, anyone, please, please, tell Scott Morrison that banks are not natural persons. They don’t pay taxes or fines.

Threaten bankers, as people, with financial penalties for malfeasance all you like. Go for it with a vengeance. Send them to jail if you must. But who does Morrison think will pay fines on banks of up to $210 million or 10% of annual turnover, which apparently is now in the knee-jerk legislative offing.  Let me get personal. As a bank shareholder I will pay it. My next-door neighbour will pay it. Neither of us is well off. In general, bank shareholders (which includes millions of people through their superannuation funds), bank customers and modestly-paid bank employees will pay it.

Let me go further. The whole country might pay profoundly if this misconceived orgy of bank bashing continues. And we are now being threatened by Mathias Cormann with a further year of the ordeal. Will there be no end to the extraction of confessions from benighted bankers? You would expect the Treasurer and Finance Minister to bring balance to the process, not to rabble-rouse. As a complete aside, wouldn’t it be wonderful to have Peter Costello back; and preferably as member for Wentworth.

A sound and profitable banking sector is not a “nice to have”. It is essential. One of the main reasons that Australia didn’t suffer too badly during the GFC (excepting the long-term damage inflicted by the stupid stimulus spending orchestrated by Kevin Rudd and Ken Henry – now, ironically, chairman of NAB) was the strength of the banks. More than enough is being done to undermine confidence in Australian banks by short sellers, who must be making a bundle each time a bumbling banker appears before the commission making an ill-coached confession; by the sensationalising media; and by Bill Shorten and his comrades.

The job of Malcolm Turnbull, Morrison and Cormann is to bring perspective, reason and sanity to bear. I’m waiting.