US gangster Al Capone once said: “Capitalism is the legitimate racket of the ruling class.” 19th century US president Thomas Jefferson said: “Banking institutions are more dangerous to our liberties than standing armies.”
These quotes capture the bastard nature of the dangerous racket that is the Australian banking cartel.
The “big four” of the Commonwealth Bank, Westpac, NAB and ANZ recently announced a combined annual profit of $24.4 billion, up 12% from the previous year, making them the most profitable banks in the world.
They even came out of the financial crisis stronger. Non-bank lenders such as Rams were crippled, while the big four were given the federal government’s deposit guarantee. The cartel gobbled up opposition and now monopolises more than 90% of all lending by financial institutions in Australia.
Now the cartel plans to sack thousands of staff.
Westpac announced on February 2 it would cut 560 staff and send jobs to “lower-cost countries”. Chief executive Gail Kelly previously ordered 1000 positions to be culled. Kelly's “pay” totals $8.7 million ― but there was no mention of Kelly’s position going to a “lower-cost country”.
A week before, ANZ sacked 130 workers, and plans to cut 1000 jobs over six months “to protect profit margins”. Those profit margins that need protecting just grew 19%, to $5.36 billion. ANZ CEO Michael Smith pocketed a cool $10 million package.
This is just the start.
Australian banks will slash more than 7000 jobs over two years, says finance house UBS, bigger than the banking job cuts after the global financial crisis.
Finance Sector Union national secretary Leon Carter said banking staff “were there during the global financial crisis, helped customers, and this is how their loyalty is being rewarded”.
The banks’ net profit was $110,000-$185,000 for every bank worker last year.
Fees? You can bank on it
The great thing about being a cartel is that you can charge whatever you like.
In 1997, households paid $1.16 billion in bank fees, but by 2010 this had risen to $4.2 billion.
This impacts most on the poor ― overdraft, dishonour or late payment fees can chew up more than 20% of a welfare recipients' weekly income.
But mass sackings and fee gouging at times of record profits are just the start of banking bastardry. The big four’s racket also costs the planet.
A 2010 Greenpeace report showed that in the past five years, Australia’s big banks invested more than $5 billion in mining, transporting and burning coal, and only $78 million in renewable energy.
Coal is Australia’s biggest contributor to climate change, but there are plans for new coal-fired power stations across the country, underwritten by the banks.
And the banks have few qualms about evicting ordinary people from their homes and farms.
Late last year, NAB sought the power to evict tenants without notice. To understand the potential consequences, consider that in the US, 2.8 million households faced foreclosure in 2010, while 7 million households were at risk.
Their greed shapes our future, channelling wealth away from social need. The banksters divert the collective savings of society away from hospitals, housing, public transport and renewable energy ― and into fossil fuels, military arms and speculation.
To justify their super profits, banks blatantly lie. A compliant corporate media parrot the propaganda.
One favourite is that the financial crisis means the cartel must keep rates up and slash jobs to protect their margins. Yet Australian banks have come out of the financial crisis even more profitable than ever.
Another lie is about “rising cost of funds”. But RBA figures undermine this argument. They showed funds raised from short-term foreign debt ― most affected by the crisis ― actually fell from 32% to 20% in recent years. That is, Australian banks are more profitable and less exposed to international problems than a few years ago.
Obscene profits from monopoly
The banks’ lies are meant to distract from the key issue ― their obscene, monopoly
Since 2008, these parasites have added the equivalent of five official rate rises either by not passing on cuts or by increasing rates beyond official rises. That’s an extra 1.25% straight to profits.
The Australia Institute’s David Richardson estimates that of the banks’ pre-tax profits of
around $35 billion a year, a huge $20 billion is due to exploiting market power in Australia.
That market power is growing. During the 2008 crisis, non-bank lenders such as Rams were crippled, while the big four were given the federal government’s deposit guarantee. The result? The cartel gobbled up the opposition.
This is capitalism in full flight. For all the pretense of being a “free market”, capitalist
competition leads naturally to greater concentration of ownership and market domination.
The cartel now control more than 90% of all lending by financial institutions in Australia.
The global financial crisis shows where a profit-mad banking system will take us if not
confronted ― to disaster.
Working people’s money bailed out the bankers ― the same institutions whose insatiable greed helped cause the economic crisis.
The United States, Britain and the Eurozone have poured more than US$14 trillion into the banks since 2008. Now pro-corporate governments are demanding savage cuts to social services, welfare and the public sector, while handouts to business and military expenditure are deemed “necessary” and excused from cuts.
But working people, the 99% from Greece to Spain to the UK to Wall Street, are declaring its time the banks paid for their system’s failures.
The reality is the cartel aren’t really worried, they simply want to continue record profits.
The long delay of the cartel in passing on the 0.25 percentage point cut in December was their way of testing the waters. Now the belligerent banks are openly saying they will “unhook” themselves from the RBA, and set their own interest rate timetable.
There is huge public anger at the cartel’s profiteering, executive salaries, job cuts, interest rate manipulation, fee gouging and monopoly control.
A December survey found 83% of people wanted the banks to be forced to pass on interest rate cuts.
The Greens support a “Robin Hood” financial transactions tax which could raise significant revenue from the trillions sloshing through the banking system, while acting as a penalty against speculation. They also advocate a super profits tax on banks.
Yet, as addicts of the profits-first neoliberal system, Labor and the Coalition won’t touch the banks. Both helped deregulate the industry, and the banks contribute significant funds to the big parties' coffers.
But if the banks are too important to the economy to allow them to fail, why not put them in public hands?
A bank in public hands could provide essential banking services to the entire community to meet human needs, not corporate profits. Executives would not be paid millions, jobs would stay, interest rates would not be manipulated for profit, fees could be cut and people wouldn’t face eviction.
Is it so extreme? Just two years ago governments in the US and Europe gave trillions in public money to private banks to save the capitalist system from itself. Surely this money could instead nationalise banks to ensure our collective survival?
The banking cartel have had their time. It has landed us in disaster. It's time for a new economic direction away from casino capitalism, and toward a people and planet first system.