Benny Holiday
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Why the Australian economy is under stress
The Sunday Telegraph editorial
Novemeber 30, 2008
What a Pack of Bankers
November 30, 2008 12:00am
THERE has always been a certain romantic mystique about the banking and finance sector.
Most of us weren't entirely sure what the money geniuses got up to in their plush-carpeted offices, beyond vaguely knowing it had something to do with margins and hedges, but not in a horticultural sense.
Most of us were happy to leave all the calculations to the stripey-shirt brigade and get on with life.
Now we know the truth - the boffins were not all that bright after all.
At times, they appeared to be making it up as they went along; creating bond markets out of thin air, manipulating the structures of the share-market to speculate on unfortunate companies, and apparently failing to notice when it all, inevitably, came unglued.
They were giving too much money to the wrong people, taking too much from the right people and skimming an obscene amount off the surface for themselves. Pretty simple, really.
Now the major banks and insurance companies are being exposed as poor performers on another front: the management of superannuation funds.
Not only have they been investing unwisely and falling behind the superannuation sector's top funds in the generation of financial returns - they have also been charging customers enormous fees, so they can in turn pay commissions to financial planners.
Why do they need to pay commissions? So the planners will direct customers towards their superannuation funds.
It's an unpleasant merry-go-round of greed, with everybody having a grand old time except the hapless consumers, whose investments have been stripped of value.
At least we are now finding out the truth.
The one good thing about the global financial crisis is that it has ripped away all the mystery and misguided respect we've had for financial institutions in the past.
Bankers used to rate highly in the most-trusted occupation surveys, somewhere slightly below doctors and teachers, and significantly higher than politicians, actors, journalists and used-car salesmen.
It's a safe bet that will no longer be the case (and there are some great used-car deals to be had these days, thanks again to the economic meltdown).
Now, it's time for the finance-sector party to end.
The economic downturn will not last forever. Things will improve. But when they do, we must ensure lessons have been learned from all the carnage.
The Federal government and its regulatory agencies must take this opportunity to ensure Australia's finance sector is run to the highest standards.
Careful consideration should be given to controlling the level of fees being charged by banks and other institutions, including superannuation funds.
Methods for controlling overblown executive salaries should be explored - and it is time to examine closely the arguments for ensuring banks pass on interest-rate cuts promptly when the Reserve Bank adjusts its rates, rather than the present situation of delayand obfuscation.
Macquarie Bank doesn't seem to have grasped the message just yet - despite all its solemn talk about prudence and caution, the Fee Factory still managed to find enough cash to splurge over half a million on a Christmas party.
The event had a gothic theme, with coffins and gargoyles to get everyoneinto the spooky spirit of the looming recession. For those people whose funds have been frozen in managed funds, or who have been made redundant, it's no laughing matter.
But it's interesting to see Macquarie finds it all so amusing.
The Sunday Telegraph editorial
Novemeber 30, 2008
What a Pack of Bankers
November 30, 2008 12:00am
THERE has always been a certain romantic mystique about the banking and finance sector.
Most of us weren't entirely sure what the money geniuses got up to in their plush-carpeted offices, beyond vaguely knowing it had something to do with margins and hedges, but not in a horticultural sense.
Most of us were happy to leave all the calculations to the stripey-shirt brigade and get on with life.
Now we know the truth - the boffins were not all that bright after all.
At times, they appeared to be making it up as they went along; creating bond markets out of thin air, manipulating the structures of the share-market to speculate on unfortunate companies, and apparently failing to notice when it all, inevitably, came unglued.
They were giving too much money to the wrong people, taking too much from the right people and skimming an obscene amount off the surface for themselves. Pretty simple, really.
Now the major banks and insurance companies are being exposed as poor performers on another front: the management of superannuation funds.
Not only have they been investing unwisely and falling behind the superannuation sector's top funds in the generation of financial returns - they have also been charging customers enormous fees, so they can in turn pay commissions to financial planners.
Why do they need to pay commissions? So the planners will direct customers towards their superannuation funds.
It's an unpleasant merry-go-round of greed, with everybody having a grand old time except the hapless consumers, whose investments have been stripped of value.
At least we are now finding out the truth.
The one good thing about the global financial crisis is that it has ripped away all the mystery and misguided respect we've had for financial institutions in the past.
Bankers used to rate highly in the most-trusted occupation surveys, somewhere slightly below doctors and teachers, and significantly higher than politicians, actors, journalists and used-car salesmen.
It's a safe bet that will no longer be the case (and there are some great used-car deals to be had these days, thanks again to the economic meltdown).
Now, it's time for the finance-sector party to end.
The economic downturn will not last forever. Things will improve. But when they do, we must ensure lessons have been learned from all the carnage.
The Federal government and its regulatory agencies must take this opportunity to ensure Australia's finance sector is run to the highest standards.
Careful consideration should be given to controlling the level of fees being charged by banks and other institutions, including superannuation funds.
Methods for controlling overblown executive salaries should be explored - and it is time to examine closely the arguments for ensuring banks pass on interest-rate cuts promptly when the Reserve Bank adjusts its rates, rather than the present situation of delayand obfuscation.
Macquarie Bank doesn't seem to have grasped the message just yet - despite all its solemn talk about prudence and caution, the Fee Factory still managed to find enough cash to splurge over half a million on a Christmas party.
The event had a gothic theme, with coffins and gargoyles to get everyoneinto the spooky spirit of the looming recession. For those people whose funds have been frozen in managed funds, or who have been made redundant, it's no laughing matter.
But it's interesting to see Macquarie finds it all so amusing.
