Greedy banks? It's started again
Sydney Morning Herald
Monday June 29, 2009
WHEN the Western banking system was bailed out on the brink of disaster during the past year, it was expected that the bad habits of the banks notably, excessive greed would not survive, at least until the danger had passed. But old habits die hard; bad habits die hard. During the boom years, the culture of entitlement among the executive class became so entrenched that the top executives of large financial conglomerates paid themselves enormous sums on the basis of profits built on speculative short-term profits. The most absurdly symbolic moment of corporate hubris was when the heads of America's loss-hemorrhaging car-makers, who also happen to be large financial companies, flew to Washington to ask for billions of dollars in hand-outs, and did so in their corporate jets.Now it is the turn of one of the world's biggest banks to repeat the same grotesque misreading of the political and cultural landscape. Under the taxpayer-funded protection of hundreds of billions of dollars of loan guarantees and capital injections, many banks are making robust profits again. One of the largest, Citigroup, wants to raise the salaries of top executives by 50 per cent. Why? To compensate, because their bonuses plunged during the financial meltdown last year.Closer to home, an analysis by the Herald of credit card interest rates reveals that even though the Reserve Bank has aggressively cut the benchmark interest rate by 4.25 per cent since the global recession hit, the bulk of the cuts have not been passed on to the most vulnerable borrowers, people paying interest on their credit cards. Interest rates of close to 18 per cent are still the norm. This is usury, especially in a recession.Australian banks are doing nicely with risk-free lending, thanks to billions of dollars of loan guarantees extended by the Federal Government. Little wonder that of the eight top-rated banks in the world in terms of credit rating, four are Australia's big four banks, which have been allowed to swallow much of their competition.We also note there is shameless gouging going on by insurers in the building industry in NSW and Victoria. Insurance companies are demanding exorbitant indemnities, and the impact is starting to ripple through the industry.The banking and insurance industries are thus ripe for further scrutiny by the federal authorities. Given the events of the past year, excessive charges by banks and insurance companies should be a target for regulators.
© 2009 Sydney Morning Herald
