Governments should turn back the banks before the boats.
You would think that the attempts of desperate people seeking to gain entry to Australia on rickety boats was a bigger threat to Australia than the proven disasters stemming from lack of regulation of the banking system and inadequate consumer laws to protect ‘mum and dad’ investors in Australia.
You could be forgiven for believing that the preoccupation of the major political parties with unauthorised landings on Australian shores is a sorry deflection from their dereliction of responsibility, demonstrated towards the massive losses suffered by ordinary folk through the banks’ profligate lending policies up to and even during the GFC.
While the big banks churned loans for profit and in the case of Storm, presided over the most widespread collapse of managed funds in Australian history, significant law reform has not taken place as a result of what happened in order to prevent it from happening again.
There have been some amendments of the Corporations Act with regard to margin lending but generally, there is insufficient legislation to give adequate protection to unsophisticated investors whose vulnerability has been exploited for profit by our major lending banks.
One of the most terrifying aspects of living in Nazi Germany and in Apartheid South Africa, as members of a persecuted religion or race, was that they could be murdered, raped, humiliated and have their property confiscated with impunity, while the perpetrators were protected by the State. In fact, the State and the oppressors shared a common identity.
While we do not live in a totalitarian society, we live in a Commonwealth where the banks generate fantastic wealth for themselves from unabated profits made from investors, borrowers and deposit-holders, who are then in a position to overbear Government. While there are some statutory and common law remedies available to the banks’ most wounded victims, they are difficult and expensive to access, particularly when the victims are being intimidated or threatened by the banks, while they are trying to defend themselves.
The Government and its watchdog, ASIC, do little if anything, effectively to intervene to protect the consumer.
With the exception of exceptional politicians like the Hon. Senator John Williams (National Party, New South Wales) there has scarcely been a public comment by a member of the Government or of the Opposition concerning victims of inappropriate low-doc (and sometime no-doc) loans, unconscionable margin lending and contraventions of the Code of Banking Practice, committed during the period leading up to the GFC and indeed in some instances, during the GFC.
ASIC is not quite sure whether it is a watchdog protecting consumers or a doberman guarding the bank vaults and protecting senior bank executives.
ASIC has failed to prevent abuses in the banking system and has consistently shrunk from discharging its statutory responsibility under section 1(2)(g) of the ASIC Act to “take whatever action it can take, and is necessary, in order to enforce and give effect to the laws of the Commonwealth that confer functions and powers on it”, and to “promote the confident and informed participation of investors and consumers in the financial system.” (Section 1(2)(b)).
ASIC sees its best hope of promoting confidence in the financial system, in taking whatever action it can to ensure that institutional infractions and misdeeds committed by major banks are removed from public scrutiny by deals done behind closed doors. This is decided by bureaucrats in glass (non-reflective) towers, who make policy within the organisation. It is not apparent that decisions taken by ASIC are signed off by Government in advance of their being made, notwithstanding their enormous impact on citizens’ rights.
What is apparent is that the Government has delegated its responsibility to ASIC – which is itself, an arm of Government – and that responsibility is not being reliably discharged or overseen.
When the banks’ irresponsible lending causes their customers loss, ASIC and the banks made sure that the banks’ funds are quarantined as far as possible. If ASIC is involved, it is likely that the victims’ compensation will not exceed the bank’s profit margin or its insurance cover; if there is a capital loss, the victim will have to wear much of it.
So it remains a struggle for victims to access justice when Government aligns itself with large financial institutions against the consumers of financial products and services.
At Levitt Robinson, we continue to fight the good fight.
Still we, and those whom we represent, would appreciate both the Government and Opposition recognising the importance of the battle we are waging and their own responsibilities to line up with us, to protect the banks’ victims and to seek justice for them.