excellent peice by Anna Pha writing in the Guardian, paper of the Communist Party of Australia
“Why did it happen?”, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry asks in its interim report. “Too often, the answer seems to be greed – the pursuit of short term profit at the expense of basic standards of honesty. How else is charging continuing advice fees to the dead to be explained,” the Commission concludes.
The Commission has got to the essence of capitalism – the pursuit of private profit no matter what suffering it causes or how corruptly the financial institutions behave. The pubic hearings did reveal a few of the thousands of examples of the suffering the financial institutions have caused through their illegal, corrupt and dishonest practices.
Treasurer Josh Frydenberg drew the amazing conclusion that the financial institutions had put profits before people!
However, it did not require the spending of millions of dollars of taxpayers’ money and heart-wrenching public hearings to discover this.
The pub test or a reading of Lenin’s Imperialism: the Highest Stage of Capitalism was all that was needed. Lenin’s work would also have explained the source of the power of finance capital and hence why the big banks and insurance companies are “too big to fail” and “too big to touch”.
“From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales.”
The public hearings revealed a litany of horror stories – of fraud, dishonesty, of theft of people’s property, of loans that could never be repaid, payment for services that were never delivered and corruption.
The law requires them to “do all things necessary to ensure” that the services they are licensed to provide are provided “efficiently, honestly and fairly,” the Commission said. “Much more often than not, the conduct now condemned was contrary to law.”
But they have treated the law with contempt; that they have nothing to fear from breaching regulations or the law. As Richard Denniss from the Australia Institute points out, there is nothing to stop our regulators from being as focused on preventing malfeasance in the banking sector as they are when it comes to welfare overpayments.
“When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done. The conduct regulator, ASIC [Australian Securities and Investments Commission], rarely went to court to seek public denunciation of and punishment for misconduct.
“The prudential regulator, APRA [Australian Prudential Regulation Authority], never went to court,” the report noted, shifting much of the blame onto the “enforcer” and the financial sector “regulator.”
“Much more often than not, when misconduct was revealed, little happened beyond an apology from the entity, a drawn-out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct. Infringement notices imposed penalties that were immaterial for the large banks.”
Power of finance capital
Labor Treasurer Paul Keating commenced the privatisation of the Commonwealth Bank in 1991 and deregulation of the financial sector. State insurance offices were privatised during the 1990s.
This opened the way for a free-for-all for the private sector as well as the newly privatised institutions. Australian banks, as far as returns on equity are concerned, are amongst the most profitable in the world.
The finance sector (banking, insurance, investment, etc) holds 56 percent of the wealth of the ASX top 100 Index. (As measured by capitalised value) (S&P/ASX 20 List).
The power of finance capital is principally derived from the vast amount of capital it has at its disposal. It can decide what investments go ahead and bankrupt corporations, farmers and individuals.
The pubic hearings of the Royal Commission have illustrated how inhumanely it exercises some of its powers against farmers, small businesses and individuals in the pursuit of private profits.
The interim report also asks “what now”, but does not provide solutions to rectify the situation.
Instead it asks a host of questions with particular reference to banks, loan intermediaries (eg brokers) and financial advice. Superannuation is not dealt with in this report.
One of the themes that comes through is the question of simplifying the law as if this might solve the problem. It won’t. It is not the cause. Changing the regulations or law will not eliminate the capitalist profit motive. Far more fundamental change is required.
As a first small step, the financial institutions that committed the crimes and the individuals responsible should be subjected to appropriate penalties including jail sentences and massive fines. They should be forced to fully compensate the victims of their crimes for their losses and suffering.
APRA and ASIC have proven to be paper tigers. They should be shut down and replaced by new, well-funded bodies with greater powers led by people not afraid to impose the law.
But even such measures will not be enough as long as the scourge of private profit remains.
People before profits
The Communist Party of Australia is calling for the separation of financial advisers, investment managers and banks. Banks should be limited to their banking role as intermediaries handling savings and loans.
As a first step towards complete nationalisation of the financial sector, the CPA is also calling for a People’s Bank, a public insurance office and national superannuation fund.
These should be publicly owned and managed with strong social characteristics that focus on services for their clients. They should be run along democratic lines with elected boards, including representatives of trade unions and other community groups.
Such institutions would put the interests of their clients/members first and play a progressive role in the community assisting states with loans at reasonable rates for the construction of public housing, schools and other public infrastructure.
The Royal Commission invites the public, financial institutions and advocacy groups to make submissions by October 26 in response to its report.