This week the Australian media has devoted hours of airtime to a Deputy Prime Minister who struggles to keep his pants on for any length of time. Meanwhile, the Australian Parliament is quietly rubber stamping a piece of legislation that puts the interests of the Big Four Banks ahead of its citizens.
The Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017 [Provisions] just passed the lower house without even a vote.
So, what's the big deal? Planning for a financial crisis makes sense – no one would like to see the economy implode because the financial system collapsed. And to be fair, the Australian Financial system has systemic weaknesses that will be exposed at some time in the future.
The Bill, as it stands makes no attempt to address those systemic weaknesses but makes provision for when those chickens come home to roost. Hidden away in the arcane legalese that masquerades as law is the intention to give the Government the power to confiscate bank deposits, allow APRA to choose in secret between protecting depositors funds and protecting “financial stability” and to Bail In Banks in financial trouble.
To put it simply this bill puts the interests of the Big banks ahead of the people that bank with them.
This is yet another sop to the G20 determination to legislate Bank Bail-Ins to protect the interests of the corrupt banking cabals that dominate our financial system.
The financial system in Australia has been stable since Federation. Australians have come to expect that their deposits are safe and the banking system is reliable. The changes to the banking system over the past 20 -30 years have gradually eroded the stability of the system, but the changes have been gradual and their effects unnoticeable at a surface level.
Up until the 1980's, the banking system was tightly regulated and there was a distinct divide between trading and savings banks. This division limited savings banks to taking deposits and providing mortgages while trading banks were able to operate within the money market. These divisions have been removed – essentially allowing banks to invest depositors funds in the money market. This “freed” banks up to speculate in the money market and has resulted in large profits for the banking sector. It also exposed the banks to significant risk in the form of the derivatives market.
The Ticking Time Bomb
The derivatives market simply explained are financial betting shops. Derivatives are bets placed on interests rates, exchange rates, market indices and various combinations.
Read that last paragraph again and let it sink in and then consider this. Some financial experts believe the worldwide value of derivatives to be $US1.2 quadrillion.
Banks around the world are treating depositor savings like a drunken sailor might treat his pay packet at the race track. This is not going to end well.
Australian banks are seemingly addicted to derivatives. As at 2014, the big four banks had exposure of 27.7 trillion dollars in derivatives. Each of the big four's exposure far outstripped their assets and was at least nine times the number of total deposits that banks held.
It's a ticking financial time bomb with nuclear capability.
The Australian Government could take reasonable steps to mitigate the risk – firstly by introducing legislation that would prevent banks from exposing depositor's funds to such risks. It has chosen not to do so. Instead, it has sided with the banks, drafting legislation that gives them a get out of jail free card while leaving ordinary people terribly exposed.
You would expect little else from a Liberal/National Party government led by former Goldman Sachs executive Malcolm Turnbull who has been shown to hold significant assets offshore in the Cayman Islands. What is disappointing is the attitude of the Australian Labor Party who have advocated strongly for a Royal Commission into banks and championed the plight of people who have been mugged and robbed by the Big Four. However, when push comes to shove, the ALP have again displayed a lack of courage in the face of major International interests.
What You Can Do
Ring your local member and tell them that the legislation as it stands is unacceptable. Tell them you want legislation reducing bank exposure to the Derivatives market and most importantly sign this petition here