Money in the banks
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Date Posted:
August-19-2010 11:46
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American journalist A.J. Leibling wrote in a 1960 article for
The New Yorker: “Freedom of the press is guaranteed only to those who own one.” A parallel can be drawn with banks. Unless you’re a banking executive or substantial shareholder, chances are you hate financial institutions and their intimidating, frustrating ways.
While the rest of the economy is in the shit and no one’s making money, they’re making jaw-dropping profits.
In a recent
article on Crikey, Dr Richard Denniss, executive director of The Australia Institute, highlighted the issue. “Last year banks made actual profits of about $23 billion, which translates into more than $1000 in profit for every man, woman and child in the country,” he wrote. This year, profits look to be on the increase again.
Dr Denniss then pointed out that Commonwealth Bank
– which announced a record net cash profit of $6.1 billion this year, up 41 per cent on 2009
– dished out far more to its shareholders than to its 45,000 employees.
The question is: how was this achieved? Credit card interest rates are often triple normal interest rates and Australia has a serious, chronic problem with credit card debt. Also, banks offer credit cards to almost anyone, no matter their money situation. And we needn’t tell you about the myriad fees (hidden or otherwise) they charge.
The solution, according to Dr Denniss, is stronger regulation. Or, failing that, the implementation of a super profits tax.
In a
forum this week, Reserve Bank of Australia governor Glenn Stevens said that other nations are taking a leaf out of Australia’s book when it comes to financial regulation.
Really?Well, he’s talking about a specific type of regulation. Stevens went on to say that banks should limit their risks, lest they start losing money and potentially destabilise the economy. "The finance industry, certainly at the level of the very large internationally active institutions, needs to seek to be less exciting, less ambitious for growth, less complex, more conscious of risk and more responsible about where those risks end up, than we saw for the past decade or two.”
We interpret that as meaning the RBA governor doesn’t mind if banks rake in the Benjamins, so long as they do it in an orderly fashion. We’re fine with a business making profit, but this is ridiculous.
How about some socially aware regulation? Maybe if profits were taxed more heavily, they could be funnelled into welfare schemes for the homeless, unemployed or those whose lives have been afflicted by debt (more the families of gambling addicts than white-collar investors)? Unlike the proposed mining tax, banks aren’t a primary industry, so we’re cool with upping their tax rate.
What do you think of upping the tax rate on banks? If not, is there some other measure we should take to address their insane profits? Grab this month's copy of FHM to see if we printed your correspondence and you could win a prize!
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