Banking Day reports that the witching hour for bank reform is upon us:
Momentum may be reaching a peak over the federal government’s activist policy package on banking, with talk of an announcement by the Treasurer, Wayne Swan, this Sunday.
Speculation over the contents of the policy plan is centring on a widening of the Australian Office of Financial Management’s mandate so it becomes an investor and guarantor of pools of mortgage securities.
The AOFM seems set to become an investor, and price leader, in subordinated tranches of mortgage-backed securities rather than restricting itself to AAA-rated senior debt, as it does now.
Some version of the Canadian system of guarantees on mortgage bonds, with the AOFM once again at its centre, is also being talked about.
Just about every option is covered here so it isn't adding much to yesterday's SMH leak. This blog will only note in passing that it hopes the SMH proves to be right because what is being suggested here is beyond the pale. If the AOFM uses your money and mine to buy subordinated tranches of RMBS, that is the the high risk securities that default first, then this blogger is emigrating.
And the SMH has more details on moves by credit unions:
An alliance of 25 credit unions is setting up a vehicle to tackle the big banks with money from superannuation funds and global markets.
Sources told BusinessDay plans were well advanced for the funding vehicle, which expects to raise up to $1 billion to provide mortgages. Bank regulator the Australian Prudential Regulation Authority has given in-principle support for the scheme.
Let's wait and see.