Citizens Electoral Council of Australia
Media Release Tuesday, 21 June 2016
Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Glass-Steagall debate rages! David Murray attacks calls to break up Big Four banks
As chief executive of the Commonwealth Bank from 1992 to 2005, David Murray presided over its mutation from a public bank that served the community—the “people’s bank”—into a profit-gouging Too Big To Fail (TBTF) conglomerate, which now is at the centre of virtually every financial scandal in Australia.
Small surprise then that Murray has gone into battle for the Big Four conglomerate banks against the Citizens Electoral Council’s call to break up their so-called “vertical integration” with a Glass-Steagall separation of retail banking from investment banking.
Murray defended his old bank and its competitors in a 20 June column in the Australian Financial Review, entitled “Why breaking up the banks is ‘not in the national interest’”. In it he effectively admits that they are TBTF and rely on an implicit government guarantee. He argues, however, that the Big Four banks shouldn’t be broken up because Australia needs foreign investment—if the banks weren’t as big as they are they wouldn’t be able to borrow money cheaply on foreign markets. “To break up the major banks would risk access to debt markets and stifle funding of the economy”, he wrote. (Emphasis added.)
So let’s just be clear about this argument: to keep the banks intact as conglomerates, their depositors—around 80 per cent of Australians—must wear the risk for anything that goes wrong in their investment banking deals, their stock-broking businesses, their insurance businesses, their wealth management businesses, and the multi-trillions of dollars in derivatives bets the banks have made to hedge their various deals. But, Murray is saying, that risk to depositors is acceptable, because as conglomerates the banks are better positioned to borrow from overseas.
OK, so what have the banks done with this all-important foreign capital that their size enables them to borrow from foreign markets? How precisely have they used it to “fund the economy”? Well, ask a small business owner or a farmer how easy it is to get credit from the banks. In a submission to the 2014 Financial System Inquiry (FSI) that David Murray chaired, former ANZ director John Dahlsen accused the banks of starving businesses and farms of credit.
Instead of lending to productive sectors, the banks have generally poured every spare cent they can get their hands on into one sector—housing. The hundreds of billions of dollars they have borrowed from overseas has been force-fed into the over-inflated housing market, creating a real estate bubble that is the greatest single threat to the Australian economy. It is also a threat to the banks themselves, which will be wiped out when the bubble inevitably bursts. Therefore NONE of this foreign borrowing by the Big Four banks has benefited the Australian economy in any way. (The CEC has already refuted the claim that Australia has always depended upon foreign investment.)
As David Murray knows full well, more than 700 Australians, including former Prime Minister Malcolm Fraser, made submissions to his FSI in 2014 calling for Glass-Steagall. His AFR column this week proves the CEC has succeeded in igniting in Australia a fierce but subsonic debate on Glass-Steagall that is causing tectonic rumblings among politicians, bankers and financial journalists, but is largely being kept out of earshot of the public by the lying media. (When Eddie McGuire is the lead news story, what is the media not reporting?)
This means that the CEC’s Operation Glass-Steagall is working! If Murray, on behalf of his fellow bankers, feels it is necessary to suddenly attack the call to break up the banks, you can be sure that the banks are panicked about losing the ability to gamble with our deposits. That’s good, but it is urgent that we win the fight for Glass-Steagall now, before the next global financial crash hits, which many expect will be soon, so that we can save deposits and banking that serves the real economy.
What you can do
Get involved in Operation Glass-Steagall: