Exercises in futility are part and parcel of government. And so, the royal commission into banking and whatnot will not be out of step. Like Baldrick, I have a cunning plan. Why not put in place regular royal commissions, say every five or ten years or so, to investigate and report on the extent of sin and what should be done about it. That should cover the field and provide victims with an ever-present outlet to vent their grievances.
This royal commission, forced on Malcolm Turnbull, largely because numbers of National Party MPs want one, is a particularly futile exercise. According to the draft terms of reference, it is to look into the nature and extent of misconduct in the financial services industry and, if such misconduct is found, to assess whether cultural practices are complicit and, if they are, what the government or regulators should do about them. I think that’s about right in a nutshell.
Ignore the “ifs”. Of course, the commission will find misconduct and attribute it to cultural practices of one kind or another and will, of course, propose remedies. What royal commission worth its salt inquiring into anything would do less?
The commission could save a lot of time and money by just calling me to the stand. I worked seven years for a large bank and another nineteen years for organisations with close connections to banks and other financial institutions. I’ve got the inside story.
A first thing to remember is the nature of banking. It has grown more complex over the years around the edges but its core business remains exactly as it was hundreds of years’ ago. Banks take in money at one rate of interest and lend it at a higher rate. My granny, God bless her soul, could have done it well enough. After all, she was able to bake apple pie while tending to her seven children.
When I was being made redundant as my bank collapsed (chose wrong bank; might have been rich now) a senior colleague also being made redundant confided in me that his father had advised him, in view of his intellectual shortcomings (“you’re not so bright, son”), to join a bank. And why not? It is an easy business. What this means is that it provides safe haven for incompetents; as, say, carpentry or piloting or brain surgery doesn’t. At this point I should claim ‘present writer excepted’.
It is also the case that everyone needs banks to live their lives and one bank is like another. Ergo, competition between banks, all offering exactly the same services at, more or less, exactly the same prices, is perforce muted. In turn, this makes banking very profitable. In turn again, this allows bank boards to tick-off paying their executives enormous salaries, mostly, quite at odds with their talent and responsibilities. Now I need to turn to amateur psychology.
Give untalented people lots of money for doing bugger all to justify it and you likely get a lot of people who need to act like pompous thugs to avoid scrutiny and to bolster their self-esteem. And, in my experience, that is exactly what you get. Empathy is a casualty. Thus, providing people with dodgy advice at the cost of their savings; encouraging people to take out loans they can’t afford; and charging unconscionable fees, are all symptoms of self-serving behaviour at the cost of others.
I now want to turn full circle. Egregious behaviour should be punished as it occurs and is discovered. But, sharks are sharks and you can’t make them into carp. Banking is vital to the success of capitalism – the least worst of all economic systems.
We can’t do without banks. And we can’t make banks into Christian charities. They are what they are and always will be. We have to put up with them. No Royal Commission will change them. Ergo it is a waste of time and money to try.
It’s worth looking at a lot of the literature after the GFC, otherwise called the Great Recession. “Greedy bankers,” was a recurring theme and explanation for the financial and economic collapse. What a complete and utter joke.
If it all it took was greedy bankers we would be in permanent recession. ‘Ungreedy bankers’ is a contradiction in terms. Before ending I want to go back to the start and the National MPs keen on the Commission.
Alongside greedy bankers there are farmers who think that banks owe them a living. Now I support farmers and think they contribute positive externalities by maintaining vibrant regional centres. We surely don’t want to be a nation only of capital cities infested with green voters. I therefore think that government support, particularly in hard times, is well justified. But that isn’t the job of banks.
Somehow, I get the impression from National MPs that they believe banks should go on lending money, and not foreclose, when the chances of a farm business becoming viable has become close to zero. Bankers might not be the brightest kids on the block but they understand that they are not in the business of giving their shareholders’ money away. As a bank shareholder, albeit of extremely modest proportions, I appreciate that. I don’t appreciate paying the cost of Sisyphean efforts to ‘cure’ banking.