The Hayne royal commission has opened a Pandora’s box of corruption in the banking and finance sector. All of the major banks, along with several other financial institutions, have been caught brazenly throwing laws and ethical standards to the wind in pursuit of short-term profit. Authorities who knew consistently failed to act.
The sheer scale of the misconduct is breath-taking. This is the biggest scandal in recent memory and a huge blow to the credibility of the Turnbull government, which tried to prevent the commission going ahead for two years and boasted that Australia’s banking system was “world-class”.
The Liberals and Labor are both capitalist parties that gladly take donations from the major banks. They want to shield their backers as much as possible, and had hoped that the royal commission could act as an outlet to vent public anger and restore confidence in a system that has let down so many people. Some superficial regulatory changes are likely, but in the end they want to avoid damaging the profitability of the banks at all costs.
The depth of the scandal, however, means that it could spiral out of their control.
So far, the royal commission’s hearings have unearthed evidence of rampant bribery, fees being charged for no services, forged documents and signatures, and money being deducted from deceased customers’ accounts a decade on from their deaths. It has uncovered intentionally misleading financial advice – in many cases so bad that people lost their homes and life savings – and clear conflicts of interest where mortgage brokers were paid off by banks to sell financial products to consumers.
A number of high-level officials and CEOs have been forced to step down and some could face criminal charges. In particular, the wealth management firm AMP is in turmoil after revelations it repeatedly lied to the Australian Securities and Investment Commission (ASIC, the corporate regulator) to cover up its misconduct. With the royal commission’s interim report not due until the end of September, there is plenty of time for new bombshells to emerge.
These findings give an ugly glimpse of a system that is rotten to the core. This is not the first time that ASIC has failed to rein in criminal activity by the banks. Whistleblowers and anti-fraud campaigners such as the Banking and Finance Consumers Support Association have been calling attention to the systemic injustice in the banking and finance sector for decades.
Former bank employee and whistleblower Jeff Morris provided ASIC with detailed evidence of misconduct inside Commonwealth Bank Australia – the largest of the “big four” banks – all the way back in 2008. ASIC’s response was so inadequate that it led to a Senate inquiry in 2014, which then recommended a full royal commission. This is just one example among dozens of the official regulator refusing, overlooking or delaying investigations into extremely serious allegations.
Experience has shown that on the occasions that ASIC does take action, offenders typically receive nothing more than a slap on the wrist. Ian Narev, former CEO of Commonwealth, took home a $12 million remuneration package after standing down in disgrace last April. The banks as a whole have profited enormously from their practices, to the tune of $30 billion a year.
Banks are not the only ones ripping people off. Wage theft is widespread across numerous industries, with recent high-profile exposures of giants like 7-Eleven and Domino’s Pizza. Petrol and electricity prices are through the roof due to gouging by energy companies. Even when these businesses are operating without making the front page news, their goal is purely to make money, and workers and consumers suffer for it.
Banking should be run as a basic public service rather than a profit making machine. Nationalising the banks, with compensation paid only to small shareholders, would concentrate almost $1.4 trillion of wealth in public hands.
A socialist bank would be democratically controlled by its workers and the wider community. It could provide interest-free loans, scrap all fees, and invest this massive amount of capital into socially useful projects like renewable energy production, scientific research, and public infrastructure works.
Without the profit motive – and the aggressive, sales-driven culture that comes with it – there would be no reason for anyone to be misled in such a setup.
The banking scandal proves once again that regulating capitalism doesn’t work. We need to build a mass movement to fight for full compensation for all victims and to ensure that proper justice is served. However, only a fundamental transformation of society along socialist lines can provide a final, permanent resolution to this crisis, and put an end to big business thievery.
By Jeremy Trott