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You've just guaranteed their profits

Posted by: Michael Smith | 3 February, 2009 - 12:09 PM

When I bought my first car dad guaranteed my loan using the family’s home as security.

I was 17, I had no credit history and the bank wanted more security.

What did my dad get? The satisfaction of knowing that I was on the path to financial responsibility (and yes, I paid it all back).

Well right now I’m bloody angry that our "dad" Kevin Rudd has decided that he’ll use our "family-home" to subsidise and guarantee our banks to the tune of trillions of dollars this past year.

Why am I angry? Today the Commonwealth has advised the stock exchange that its profits for the first 6 months of this year will be 20% higher than expected. When you add in the profit the CBA booked on taking out its competitor BankWest, the Commonwealth Bank’s statutory profit after tax will be $2.5 billion – 9% higher than the same period last year.

Even before the Rudd guarantees our banking system was the envy of the world. Julia Gillard has just addressed the Davos economics summit saying our banks were "better than world class.”

I think you and I are entitled to ask what we’ve got back for the trillions in subsidies and guarantees Kevin has given the bankers.

How’s this for size.

Credit card rates that hover at 19.5%
No guarantee to pass on interest rate cuts
Huge staff retrenchments from banks
ANZ chief executive rewarded with 700,000 share options on top of $13M pay
Banks buying up competitors – CBA has bought BankWest, Westpac has bought St George – competition for loans is drying up
Bank executive bonus schemes untouched

And the real biggie for me. The banks are free to hand out the immediate benefits of our guarantees and subsidies to an exclusive group – to their shareholders as dividends and to their executives as bonuses. You and I are taking all the risk in guaranteeing the downside – with no access to the upside.

The bankers are off being bankers. Amongst other things they’re using our taxpayer guarantee to subsidise their adventures in other countries. The ANZ is reported to be rationing credit to the $3.4 trillion Australian housing market and using the extra cash to buy up banking businesses in Asia. The ANZ has already increased its stake in one Indonesian bank – it could have used that $170 million as equity on its own Australian balance sheet, equity that could have supported many more millions in local home loan borrowings. And no protest from our government.

The bankers are master negotiators. They’ve run rings around Kevin and Wayne in their negotiations. They’re laughing all the way to the bank.

Blog comments

I am quite suspicious of the whole way the downturn of the world economy was handled. The big banks and the monstrously rich are not suffering. They are taking advantage of this to become ever more richer and greedier. I think we are being taken for a ride by the Labor Party. It is all smoke and mirrors, the same as when they and the Unions conspired to take control of Australia and its people.Lies, lies, and more lies!

Glenis Batten Tuesday 10 February, 2009 - 5:10 PM
Unfortunately Michael, you are right on the money.

Philip Crowley Wednesday 4 February, 2009 - 11:03 AM
smithy cant agree with you more.

steve Tuesday 3 February, 2009 - 4:08 PM