Stephen Bartholomeusz writes:
The anti-bank sentiment unleashed by Joe Hockey and the weak response to it by Wayne Swan has now resulted in a coalition of re-regulationists, with the six cross-benchers pledging their support for the Greens’ dangerous proposals for "reform".
Now is the time for Swan and Hockey to renounce populism and make the case for a banking system that has served the economy well during a stressful and threatening period. It might also be useful if the bank regulator, the Australian Prudential Regulation Authority, defended the system it is responsible for.
The Greens have introduced a bill into parliament that seeks to re-regulate interest rates, abolish foreign ATM fees, mandate basic transaction accounts and mortgage products and limit fees. Today they were backed by all the cross-benchers.
The anti-bank sentiment whipped up by Joe Hockey is creating a political issue of such magnitude and momentum that it threatens to destabilise a sound but quite delicate system. Wayne Swan hasn’t helped defuse the risk that the government will be forced by the political pressures into doing something that could be damaging to the banking system, the economy and bank customers’ interests by referring to the "bad behaviour" of the banks and promising his own range of reforms.
All the banks have done is to (belatedly) pass on their higher funding costs and help the Reserve Bank tighten monetary policy, which is the RBA’s stated policy intention.
And fair enough too. This column does not agree with regulating interest rates or fees. Until we stabilise the system vis-a-vis its dependence upon wholesale funding, we remain at the beck and call of the banks foreign creditors. If funding costs were to rise suddenly for whatever reason capping bank revenue streams could result in dire outcomes, hastening government intervention.
However, it seems to this blogger shallow to blame this upon Joe Hockey. Although the shadow treasurer has been a bit inconsistent, he has by and large framed his statements as the need to reconstitute the deal between Australian society and its banks. He has not simple bashed the big four willy nilly.
The blame for the populism goes to Labour, the bureaucracy, the regulators, the banks and fawning media for hopeless governance. Since the GFC, all have endeavoured tirelessly to convince us that the banks are invincible and that there is nothing that needs investigating in the system. They did this even as the banks themselves demonstrated its falsehood in their radical new interest rate movements.
By basing post-GFC bank policy on such an obvious lie, the authorities, banks and media opened a vast credibility gap around themselves that was begging for someone with enough brains and gumption to drive through ot.
That Hockey has done so with a trailing of the uninformed is only an indication of how wide is the gap.
A transparent policy process rationally examining the issue arising from the GFC would have prevented all of this.