Banking Inquiry Speech by Senator John Williams in the Australian Federal Senate

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Bankers and Bastards
… is all about the way banks and bankers have moved from being the respected pillars of the community, providing a trusted service and reliable advice, into being profit-oriented purveyors of dubious 'products'. It's also about how we suffer the consequences and the government mainly looks on and watches.

The authors became involved because people came to them for help: Renton as a lawyer, McLean as a politician. Paul McLean has been a teacher, an army officer and a social planner. But it was as Australian Democrat Senator for New South Wales that he became interested in bank malpractice. His battle to get the Westpac Letters before the Senate is now history.

James Renton is a Barrister and Solicitor of the High Court of Australia. He has made a specialty of white-collar crime, and has advised hundreds of victims of bank malpractice. It was his files which provided many of the cases tabled in the Senate by Paul McLean.

Banking Inquiry Speech by Senator John Williams in the Australian Federal Senate March 12, 2009

I rise tonight to talk about what I consider to be the greatest oxymoron in Australia at the moment—that is, ethical banking. I wish to relate some of my experiences during the early 1980s when my family were involved in a foreign currency loan in Swiss francs. We drew down the loan in January 1985. Shortly after that, we saw the depreciation of the Australian dollar. There was only one way to protect yourself from those loans and that was to hedge your loan. I went to my bank manager, Peter Neil—a good man who lives out here near Goulburn these days—and requested that I hedge my loan. He informed me that I could not, that that would change our currency and you could do that only at rollover periods. The rest is history because Mr Neil was wrong. The bank had not trained their staff properly and it led to me and my brother losing five generations of farming and a long, drawn-out battle in the courts as I pleaded with the banks to come to some agreement. Of course, they were not one bit prepared.

As I lodged claims in the court, we came to mediation with Sir Laurence Street. Prior to that mediation, my solicitor informed me that I had to write the whole truth and nothing but the truth of the history of the experience I had through the foreign currency loan—which I did, some 12 pages. The banks also had to forward statements to Sir Laurence Street and to me about their experiences. I was quite amazed when I got Peter Neil’s statement from the bank’s solicitor, one Bob Jones, who worked for LE Taylor, an in-house soliciting company for the Commonwealth Bank. I wondered why it was so brief and after the mediation—not before—I rang Peter Neil and said, ‘Why did you not tell the truth and give the whole story in mediation?’ He said, ‘Is my signature at the bottom of that page?’ I said: ‘No. Your name is printed here on a document headed “Statement of Peter Neil”.’ He said, ‘Until my signature is on it, it is not my statement.’ That was exactly the situation. The bank’s solicitor forwarded a statement to me and to my solicitors, and to Sir Laurence Street, knowing full well that the person they had written it for had refused to sign the very same statement.

I come back to the issue of ethical banking. We should ask the question: why is the world economy now on its knees? The answer comes back to reckless, foolish, greedy, stupid banking. The subprime fiasco in America has now flown around the world we live in today where we see people lose their jobs, their livelihoods. I have documents which have been presented to me by a former senator in this place. Those documents highlight the fraud of one major bank in Australia. It is not my opinion that the bank committed fraud; it is the opinion of their own solicitors—Allen, Allen and Hemsley. People around this place might wonder why I wanted a banking and financial inquiry. It is because I want to bring out the truth. I know we cannot do anything about the past but we can set standards so that in the future Australians can once again have confidence in our banking system. When I left school in the 1970s, it was an absolute honour to sit at the bar in a hotel after a day’s shearing with Peter Lepordivan, manager of the National Australia Bank in Jonestown, a decent bloke who commanded an enormous amount of respect in the community—as were all bank managers in those days. They were the people you went to for advice, they were the people you could trust; they are probably the last people you would go to today to ask for the same thing.

I want to look at what is happening now. Australian taxpayers, through the Rudd government, are underwriting investments in our banks. We all know that. When they went to do it, they underwrote those financial institutions that come under APRA—banks, building societies and credit unions. I asked in this chamber, ‘What about those companies that come under ASIC, such as debenture issuing companies, which were not underwritten by this government?’ What has happened? We have seen 50-year-old Bidgee Finance at Mildura go broke and 40 jobs go. We have seen South Eastern Secured Investments go into receivership. Since I have been out in the media on this very issue, I have received calls about many others who are in trouble. It was a major error of this parliament to underwrite those banks and not the other institutions because, simply, if you have money invested in an institution that is underwritten by the government and taxpayers rather than in that other group, surely during turbulent economic times people are going to withdraw their funds out of that group and put it in the underwritten institutions for safety reasons. The result is now showing up. I warned the parliament and I warned the ministers. Exactly what I warned them of is now happening and I find that disgraceful.

I now find myself on the Parliamentary Joint Committee on Corporations and Financial Services. I am proud to be on it. It is chaired by Bernie Ripoll. Today I thank my colleague Senator Ian Macdonald, who has lodged notice in this Senate to broaden the terms of reference. The Storm fiasco, which we are going to investigate, gives me nothing but bad news. I was first to address the people at Redcliffe near Brisbane in January. I had to stand up in front of 350 people and see that they were going through what I had to go through in the 1980s and the 1990s—losing everything you have worked for, that you have tried to protect for your children. Now, after a recent trip to Cairns to address another group, we are going to investigate one hell of a mess.

I want to know who has been part of it and who was responsible for it et cetera. No doubt answers will come out in the investigation. I questioned ASIC during estimates: ‘Who was responsible for monitoring these debts? Why did someone who was worth $1 million end up with a debt of $1.3 million with all equity gone?’ Their answer was, ‘The client, the broker and the banks.’ Surely the banks had the biggest interest in monitoring those levels of debts, because they were the ones going to lose when their customers and clients ran out of equity. I look forward to getting the answers to those questions. In the committee we have sent out the invitations. It will be an interesting six months until we report on 23 November.

I am gobsmacked at what has been feeding into my office. Today I got an email from a lady who was very concerned about her mother. Her mother borrowed $300,000-odd from the National Australia Bank and used the money to go into a marginal loan with Storm Financial. Plenty of people did that. There was just one difference here. Her mother was 91 years of age when she took out the loan last year. Her daughter contacted the National Australia Bank and asked: ‘Why did you lend my mother, at that age, that amount of money? How is she going to pay it back?’ The bank’s reply, as it has been fed into my office, was, ‘She was investing in Storm,’ as though it was all fine. What sort of pressure are people at that age under when they face being thrown out of their houses and onto the street? This is their life savings, their life’s earnings. I met people in Melbourne who immigrated from Greece. They worked hard on a cane farm up in the north of Queensland. They came here with nothing and they worked hard. They were 62- and 64-years-old respectively. Now they face living on the street. What sort of a mess is this and who brought it on? Who was responsible? Who stress-tested the whole loan issue and asked, ‘What if this turns bad?’

We need a whole new attitude in our banking system, not only in Australia but right around the world. I know banks are an essential part of our economy, an essential part of our life. None of us would have anything without a bank. We have all borrowed money. I would not have a house today if it were not for the bank or financial institution that lent me the money to buy it. We have to go back to the days of conservative banking, where we did not have risk lending. There is the greed of banks in search of more profit. They have safe, secure loans for land, property, bricks and mortar. Then, when that market is saturated, they go off into the risk area and they start throwing money at people. The next thing is that it turns sour and they have write-downs of their loans. Who loses then? The people who lose are the ordinary working Australian families, those with the superannuation that everyone has. I condoned the Labor government years ago for bringing in compulsory super. These are the people who lose because of banks striving for profits, for a few extra dollars. They want to make profits for any reason whatsoever.

Just today I was told a fee increase by the Commonwealth Bank will be coming in on 8 May. The previous fee was $1.25. It will be 1.25 per cent for cash advances. That is an increase of almost 1,000 per cent. Who in Australia or around the world, in this economic climate, can increase their charges by 1,000 per cent? This is a big issue. I am not going to let it lay down. I look forward to this inquiry. (Time expired)

Greg Kachel
Chief of Staff
Senator John Williams
Nationals Senator for NSW
144 Byron Street
INVERELL 2360

Ph..67 214500
Fax ..67 214544
greg.kachel@aph.gov.au

See also: Bank Fraud: Crucifixion and Resurrection in Australia