After a number of high profile banking scandals, ordinary people are rightfully angry at the criminal actions of financial institutions and banks.
The Commonwealth Bank’s financial advisers misled thousands of people who lost hundreds of millions of dollars in 2014. Earlier this year ANZ, NAB and Westpac were also investigated by the Australian Securities and Investments Commission amidst allegations of “unconscionable conduct and market manipulation”.
The 2008 global financial crisis demonstrated that predatory financial corporations will stop at nothing to maximise their profits – even if it risks dragging the entire world economy into a recession. Across the globe anger at big corporate banks is increasing and politicians are under pressure to be seen to be acting.
The Labor opposition has raised the idea of a Royal Commission into the banking sector. Malcolm Turnbull has so far dismissed the suggestion claiming that there are other ways to deal with misconduct. Turnbull is an ex-banker himself and we should expect him to try and dismiss the problems that exist.
As an alternative to a Royal Commission Turnbull is proposing a toothless parliamentary committee that would summon the heads of the major banks for questioning once a year. Such a committee would have no power to prosecute or address any wrongdoings.
While Labor are posing as opponents of big bank greed now, when in government between 2009 and 2013 they opposed any investigation into the banks in the aftermath of the GFC. Labor also hypocritically took more than $330,000 in donations from the big banks in the 2014-15 financial year.
Even if a Royal Commission was set up to investigate the banks, it too would be unable to address the root causes of the problem. Royal Commissioners are appointed by the government of the day and, most often, sympathetic figures are chosen. Royal Commissions also operate within the terms of reference written by the government. These terms can be manipulated to suit a particular outcome.
Royal Commissions are often used as political tools, sometimes to build up a one-sided case for action, as was seen with the Royal Commission into trade unions. In that case big business corruption was ignored while attempts were made to discredit the union movement, paving the way for new anti-worker laws.
At best, a Royal Commission could uncover some incidents of the criminal behaviour in the banking sector, but no substantial changes can be expected.
For example, in Iceland bankers were prosecuted, but received a mere slap on the wrist. Larus Welding, CEO of one of the big Icelandic banks, was found guilty of fraud but did only three months in prison. Working class people are thrown in jail for much longer for petty theft!
The truth is that the trials against the Icelandic bankers were designed to curb people’s anger, and divert it away from the real problems. While attention was given to the trials, swathes of social spending cuts were pushed through. This is exactly how a Royal Commission into banking here would be used.
The key problem with the banking sector is that it is privately owned, and operated purely to make profits. The major parties are financed by those private owners and so they act in the banks interests.
Even if, under pressure, more stringent regulation is imposed, the banks will seek to pass on extra costs to consumers to offset any loss of profits. As we have seen in the Panama papers, they are also prepared to do whatever it takes to circumvent laws in order to avoid paying tax.
In a nutshell, you cannot control what you do not own.
As long as the banks are owned and controlled by a rich minority, they will continue to exploit ordinary people to make profits. The only way to really address the issues would be bring the ‘big four’ banks into public ownership and create a single state-owned bank that is under the democratic control of workers and the community.
In that way the immense resources contained in the banks could be used for the public good. Immediately fees and charges could be abolished and cheap loans provided to those in need. Instead of distributing billions of dollars to already rich shareholders, that money could be used to invest in schools, hospitals and other social services.
These socialist solutions are the only way to end greed and corruption. Do not expect any Royal Commission, or either major party, to support policies like this. They, along with the ‘big four’, are part of the problem.
By Tim Tran