Bad Banks media release
24 December 2009
“It’s great news that the Aussie-owned banks have to pay up their unpaid tax,” says Vaughan Gunson, Bad Banks campaign manager. “It’s a defeat for them.” [See NZ Herald article Banks to pay taxman billions]
“It shows that big corporations can be brought into line. While the IRD had the law on its side, we shouldn’t underestimate the role mass public opinion has played in getting the banks to cough up,” says Gunson.
Bad Banks campaigners have been on the streets over the last few months handing out leaflets with information on the banks and the world economic crisis. “We’ve found there’s a real bad mood against the banks,” says Gunson.
“People know the Aussie banks have been making exorbitant profits over the last decade by charging high interest rates for mortgages and credit cards, high fees, and through mega-scale tax avoidance,” says Gunson.
People have been telling us, “Yes, the banks are bad”, “They’re ripping us off big time”, “The banks want to turn us all into debt slaves”.
“And there’s a high level of awareness that it’s the global banking cartels who are responsible for the world economic crisis which is causing large-scale job losses in New Zealand, along with widespread clamps on wages and salaries,” says Gunson.
“The banks and other corporates are trying to make ordinary working people bear the cost of the crisis. We need to resist,” says Gunson.
“To make the big banks and financial speculators pay we’re campaigning for the introduction of a Financial Transaction Tax. A small percentage tax on every financial transaction would net hundreds of millions from banks and international speculators who shift billions and billions of dollars around every year,” says Gunson.
“A tax that targets the mega-rich would allow us to shift the tax burden off low and middle income earners,” says Gunson. “We could take GST off food, which would be a big help to grassroots New Zealanders struggling to pay the bills.”
“Just because the banks have been forced to pay their unpaid tax bill, doesn’t mean they should be let of the hook,” says Gunson. “To protect our people we urgently need major reform of the banking industry.”
To contribute to the national debate that we must have in New Zealand about the banking system, Bad Banks offers these suggestions for transforming the power relationship between banks and the people:
1. Immediate government intervention to stop banks chucking "mum and dad" homeowners out of their homes because of a job loss or income cut.
2. The establishment of a government regulatory body to oversee the renegotiation of mortgages based on realistic market values and the ability of the homeowner to pay.
3. Turn Kiwibank into a proper "public service" bank offering first-home buyers a 3% interest state loan.
4. Zero-fee banking offered to people on modest incomes. Facilitated by expanding the role of Kiwibank and forced regulation of all banks operating in New Zealand .
5. Introduction of a Financial Transaction Tax (FTT) that would net the banks and other financial speculators. A decisive step in shifting the tax burden off low and middle income people and onto the mega-rich.
6. All bank loans to big business over a fixed amount to be approved by a government regulatory body that acts to protect the environment and communities. Such a measure is essential to preventing powerful global banking interests from sabotaging the necessary emergency mobilisation against climate change.
7. A full public inquiry which looks at every aspect of banking operations in New Zealand , with public meetings held throughout the country, so that grassroots people can tell their stories.
For more comment, contact:
Vaughan Gunson
Bad Banks campaign manager
(09)433 8897
021-0415 082
svpl@xtra.co.nz
See also the media release from CAFCA, IRD Delivers Best Possible Xmas Present To Long Suffering Kiwi Taxpayers.
23.12.09
Latest UNITY Journal - Bad Banks: What are the alternatives?
CONTENTS
5 A "public option" against the banks
DAPHNE LAWLESS, editor of UNITY
11 Targeting capitalism's exploitation of labour and nature
GRANT MORGAN, Socialist Worker (NZ)
15 The "collapse" of global capitalism
GRANT MORGAN
18 Target Bad Banks and you target neo-liberalism
VAUGHAN GUNSON, Socialist Worker (NZ)
22 Market volatility and profitability crisis
GRANT MORGAN
25 An end to private banks
SUE BRADFORD, former Green Party MP
32 Bank and tax systems due for overhaul
RUSSEL NORMAN MP, Green Party leader
33 Inquiry shows need for govt to act
FINSEC
34 Aussie tax-dodging robber banks
MURRAY HORTON, Campaign against Foreign Control of Aotearoa
35 Protecting New Zealand jobs through bank guarantee schemes
FINSEC
39 Is it "Kiwi" to be anti-union?
VAUGHAN GUNSON interviews Andrew Campbell
41 CTU conference 2009: can unions build an alternative?
GRANT BROOKES, New Zealand Nurses Organisation
45 What's a "fractional reserve"?
DAPHNE LAWLESS
47 Banks, money and thin air
ADAM BUICK, Socialist Party of Great Britain
50 Socialist Worker Appeal
55 Ron Paul: a right-wing alternative?
PETER De WAAL, Socialist Worker (NZ)
60 Why community currencies?
DEIDRE KENT, Living Economies
63 Financial Transactions Tax: making Wall Street pay
DEAN BAKER, Center for Economic and Policy Research
65 Our alternative to market madness
CHRIS HARMAN, Socialist Workers Party (Britain)
70 Is nationalization socialism?
YEN CHU, No-one Is Illegal (Canada)
74 Venezuela closes banks
BRONWEN BEECHEY, Socialist Worker (NZ)
78 Latin America's economic rebels
MARK WEISBROT, Center for Economic and Policy Research
81 Feedback: letters from David Frazer, Peter de Waal, Pat O'Dea and David Colyer
To purchase a copy of this issue ($5 plus postage) contact Len, email organiser@sworker.pl.net, or phone (09)634 3984.
To subscribe to UNITY Journal ($25 for four issues a year) contact Grant, grantmorgan@paradise.net.nz. Send a cheque made out to 'UNITY' to Box 13-685, Auckland, NZ, along with your postal details.
Société Générale Predicts Global Economic Collapse In Two Years Time
by Ambrose Evans-Pritchard
22 December 2009
from Telegraph.co.uk
Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.
In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.
Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.
"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.
Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.
Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.
(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).
The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.
Inflating debt away might be seen by some governments as a lesser of evils.
If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.
The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.
SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.
Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would "generate turbo-charged returns" mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan's 10-year yield dropped to 0.40pc. The Fed would hold down yields by purchasing more bonds. The European Central Bank would do less, for political reasons.
SocGen's case for buying sovereign bonds is controversial. A number of funds doubt whether the Japan scenario will be repeated, not least because Tokyo itself may be on the cusp of a debt compound crisis.
Mr Fermon said his report had electrified clients on both sides of the Atlantic. "Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried," he said.
22 December 2009
from Telegraph.co.uk
Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.
In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.
Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.
"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.
Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.
Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.
(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).
The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.
Inflating debt away might be seen by some governments as a lesser of evils.
If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.
The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.
SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.
Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would "generate turbo-charged returns" mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan's 10-year yield dropped to 0.40pc. The Fed would hold down yields by purchasing more bonds. The European Central Bank would do less, for political reasons.
SocGen's case for buying sovereign bonds is controversial. A number of funds doubt whether the Japan scenario will be repeated, not least because Tokyo itself may be on the cusp of a debt compound crisis.
Mr Fermon said his report had electrified clients on both sides of the Atlantic. "Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried," he said.
22.12.09
Bad Banks "exposures" of ASB - Auckland and Whangarei
Bad Banks campaigners outside ASB Bank on Queen Street.
The leaflet also linked this particular Bad Bank to the international bank cartels responsible for the global financial implosion and their role in blocking meaningful action on climate change. From the leaflet:
"This implosion sparked the world economic crisis which is today causing large-scale job losses in New Zealand, along with widespread clamps on wages and salaries.The leaflet was positively received, with a few hundred handed out in Auckland and close to a hundred in Whangarei. A dozen people filled out the contact sheet to keep in touch with the campaign.
The international bank cartels (to which ASB is affiliated) control global investment flows chasing after maximum profits, at the expense of social and ecological welfare. Thus the world’s bankers are choking off vital “green energy” investments needed to save humanity from climate chaos and oil depletion."
Regular Bad Banks stalls or "leaflet drops" are essential. Being out on the street, in tandem with our media work, will raise the profile of the campaign. People will see us and remember us. They will respect us for doing the hard yards.
And by being active and handing out leaflets we're able to engage with people. We can then gauge what issues and ideas are really connecting with them. The questions people are ask, the conversations we have, can all be fed back into the campaign, so that it becomes a living and evolving thing. That way it has the best chance of becoming a popular movement.
Next year
If you would like to get involved with Bad Banks stalls next year contact Vaughan Gunson, email svpl@xtra.co.nz or ph/txt 021-0415 082. We can arrange for a bunch of leaflets and other campaign material to be sent to you.
It's possible to do a stall with just one or two people. Give it a go. You’ll get a positive reception from most people. And by getting out there you’ll inspire others to help out. Because of the simmering mood against the banks you’ll come into contact with people who are looking to get involved in a campaign like this.
It should be possible next year to get regular Bad Banks stalls and other campaign initiatives happening in a number of cities around New Zealand. That’s the goal.
A new person signs up to the Bad Banks campaign, while Peter and Len are engaged in conversations (about Bad Banks of course). Queen Street, Auckland.
Vaughan and Aaron (Green Party activist) outside an ASB in Whangarei. A positive reception to Bad Banks leaflets from most people. The ASB Regional Manager for Northland was not so keen.
21.12.09
Calling the bankers' bluff over tax
by Ruth Sunderlund
from The Observer
22 December 2009
It's fortunate for a number of reasons that the British Airways cabin crew strike has been averted - not least because disenchanted London bankers can head for Heathrow airport right now, if that's what they really want.
The argument that banks and bankers are highly mobile and would leave London if provoked is endlessly deployed to defend bonuses, but it is not interrogated nearly enough. Now Andy Haldane, the Bank of England's head of financial stability, has called the bankers' bluff. He is on safe ground to suppose there will not be overspill in the departure lounge.
Hedge funds and small financial outfits might be reasonably footloose, but big banks are much less so. And where would the refugee bankers, fleeing cruel persecution in Britain, find sanctuary? If they really want to turn their backs on advantages such as the English language, the favourable time zone, the world-class cultural life and the honeypot of business services in London, they would have to find a jurisdiction prepared to underwrite their activities.
Tax havens such as the Cayman Islands have been overbalanced by the credit crunch and would not be capable of doing so. Traditional magnets such as Switzerland are stretched to breaking point by supporting their existing banks - they would not want to take on responsibility for any more. And why would the US, or China, contemplate burdening their taxpayers with institutions that define themselves as too buccaneering for Britain?
I'm not sure what the optimal size of the financial sector is, but given that taxpayer bailouts are an integral feature of the industry, occurring periodically and costing more each time, it is not in the least obvious that bigger is better. Proportionately, public sector interventions in Britain during the financial crisis were much larger than in the US or the euro area, reaching more than 70 per cent of GDP this year.
The problem with relying so heavily on financial services is that we are hanging our national fortunes on a sector that is potentially very lucrative, but also ruinously risky.
Health, not size, is key.
Haldane's comments are not only interesting in themselves, but because they appear to be a harbinger of a tougher stance. The Bank of England's latest financial stability report urges the banks to replenish their capital now, while the sun is, if not shining brightly, at least casting a few wintry rays.
It wants to see them start a virtuous circle, by retaining more capital instead of paying bonuses and dividends. That would send down the cost of funds, which in turn would get credit flowing through the economy. Non-financial companies would then perform better, resulting in lower loan losses for banks.
In the long term, everybody's happy. In the short term, bank shareholders will squeal - share prices have already fallen in response to the Chancellor Alistair Darling's bonus tax - and the bonus lobby will cry that it is infringing their basic human right to the moolah.
The bank's exhortations come against a background of international reform. The Basel committee on banking supervision is suggesting a series of measures, including proposals that would limit the ability of banks to pay bonuses and dividends if their capital dropped close to the minimum required.
The system looks more stable and more resilient than it did six months ago, but there is a very difficult road ahead. Next year, we can expect progress on an international level on improving the regulation of capital and liquidity.
It will take longer to resolve two parallel debates: The first is around dynamic provisioning - or whether central banks can let the air out of bubbles before they burst, by insisting that banks build up cushions of capital in the good times to soften their landings in the bad. The second is about firms that are too big to fail - how they can be wound up with the least possible damage, and whether there should be a separation of utility banking from the casino variety as I have advocated, and far more importantly, as has the bank's governor, Mervyn King.
People are calling this an "ice age" for bankers, but it is blatantly premature for them to be receiving bonuses off the back of free money injected by central banks, at a time when there are still enormous risks.
Some individual households are very highly leveraged and vulnerable to a rise in interest rates. Potentially bad loans in the commercial property sector are looming like a black cloud: £160 billion ($364 billion) of loans are due to be refinanced by 2013. So far, we have only had a liquidity crisis - the real credit crisis is yet to happen.
from The Observer
22 December 2009
It's fortunate for a number of reasons that the British Airways cabin crew strike has been averted - not least because disenchanted London bankers can head for Heathrow airport right now, if that's what they really want.
The argument that banks and bankers are highly mobile and would leave London if provoked is endlessly deployed to defend bonuses, but it is not interrogated nearly enough. Now Andy Haldane, the Bank of England's head of financial stability, has called the bankers' bluff. He is on safe ground to suppose there will not be overspill in the departure lounge.
Hedge funds and small financial outfits might be reasonably footloose, but big banks are much less so. And where would the refugee bankers, fleeing cruel persecution in Britain, find sanctuary? If they really want to turn their backs on advantages such as the English language, the favourable time zone, the world-class cultural life and the honeypot of business services in London, they would have to find a jurisdiction prepared to underwrite their activities.
Tax havens such as the Cayman Islands have been overbalanced by the credit crunch and would not be capable of doing so. Traditional magnets such as Switzerland are stretched to breaking point by supporting their existing banks - they would not want to take on responsibility for any more. And why would the US, or China, contemplate burdening their taxpayers with institutions that define themselves as too buccaneering for Britain?
I'm not sure what the optimal size of the financial sector is, but given that taxpayer bailouts are an integral feature of the industry, occurring periodically and costing more each time, it is not in the least obvious that bigger is better. Proportionately, public sector interventions in Britain during the financial crisis were much larger than in the US or the euro area, reaching more than 70 per cent of GDP this year.
The problem with relying so heavily on financial services is that we are hanging our national fortunes on a sector that is potentially very lucrative, but also ruinously risky.
Health, not size, is key.
Haldane's comments are not only interesting in themselves, but because they appear to be a harbinger of a tougher stance. The Bank of England's latest financial stability report urges the banks to replenish their capital now, while the sun is, if not shining brightly, at least casting a few wintry rays.
It wants to see them start a virtuous circle, by retaining more capital instead of paying bonuses and dividends. That would send down the cost of funds, which in turn would get credit flowing through the economy. Non-financial companies would then perform better, resulting in lower loan losses for banks.
In the long term, everybody's happy. In the short term, bank shareholders will squeal - share prices have already fallen in response to the Chancellor Alistair Darling's bonus tax - and the bonus lobby will cry that it is infringing their basic human right to the moolah.
The bank's exhortations come against a background of international reform. The Basel committee on banking supervision is suggesting a series of measures, including proposals that would limit the ability of banks to pay bonuses and dividends if their capital dropped close to the minimum required.
The system looks more stable and more resilient than it did six months ago, but there is a very difficult road ahead. Next year, we can expect progress on an international level on improving the regulation of capital and liquidity.
It will take longer to resolve two parallel debates: The first is around dynamic provisioning - or whether central banks can let the air out of bubbles before they burst, by insisting that banks build up cushions of capital in the good times to soften their landings in the bad. The second is about firms that are too big to fail - how they can be wound up with the least possible damage, and whether there should be a separation of utility banking from the casino variety as I have advocated, and far more importantly, as has the bank's governor, Mervyn King.
People are calling this an "ice age" for bankers, but it is blatantly premature for them to be receiving bonuses off the back of free money injected by central banks, at a time when there are still enormous risks.
Some individual households are very highly leveraged and vulnerable to a rise in interest rates. Potentially bad loans in the commercial property sector are looming like a black cloud: £160 billion ($364 billion) of loans are due to be refinanced by 2013. So far, we have only had a liquidity crisis - the real credit crisis is yet to happen.
20.12.09
Kiwibank should be turned into proper public bank
Bad Banks media release
20 December 2009
An article in the Sunday Star Times, Anger at Kiwibank closures (20 Dec 2009), outlines plans by Kiwibank to close 20 branches nationwide. A cost saving initiative by the bank.
"This decision by Kiwibank bosses shows that when it comes to maintaining its "bottom line" there's not much difference between Kiwibank and the other banks, " says Vaughan Gunson, Bad Banks campaign manager.
"Kiwibank has tried to market its difference to the Aussie banks (ANZ National, BNZ, Westpac and ASB) who dominate the banking industry in New Zealand, but the reality is simply that Kiwibank currently doesn't offer much of an alternative," says Gunson. "That's because Kiwibank was founded by the government in 2002 to operate as a business, one that has to compete "fairly" with other banks, and at the same time deliver a return to the government."
The comment in the Sunday Star Times article by Jim Anderton, leader of the Progressive Party and proponent of Kiwibank, reveals the limits of the market model that Kiwibank operates under. Anderton justified the closures on the grounds that this is "what happens with a modern business".
"Anderton is right," says Gunson, "a modern business serves its own purpose, not the wider needs of the community. This is the whole problem with the banking sector in this country and internationally".
"The financial implosion that almost brought down the global economy last year, and which is continuing to wreck havoc on the lives of grassroots people, shows that we need to urgently rein in the power of the banks, " says Gunson. "Turning Kiwibank into a proper public bank would be a good start."
"A proper public bank", says Gunson, "could offer 3% state loans to first home buyers and zero-fee banking to low and middle income people. Such bold and sensible initiatives would transform banking in this country."
"Public service banking could easily be financed by raising the taxes on the wealthy, including the introduction of a Financial Transaction Tax (FTT) that nets the banks and other "fat cat" financial speculators that distort the NZ economy," says Gunson.
To contribute to the national debate that we must have in New Zealand about the banking system, Bad Banks offers these suggestions for transforming the power relationship between banks and the people:
1. Immediate government intervention to stop banks turfing "mum and dad" homeowners out of their homes because of a job loss or income cut.
2. The establishment of a government regulatory body to oversee the renegotiation of mortgages based on realistic market values and the ability of the homeowner to pay.
3. Turn Kiwibank into a proper "public service" bank offering first-home buyers a 3% interest state loan.
4. Zero-fee banking offered to people on modest incomes. Facilitated by expanding the role of Kiwibank and forced regulation of all banks operating in New Zealand.
5. Introduction of a Financial Transaction Tax (FTT) that would net the banks and other financial speculators. A decisive step in shifting the tax burden off low and middle income people and onto the mega-rich.
6. All bank loans to big business over a fixed amount to be approved by a government regulatory body that acts to protect the environment and communities. Such a measure is essential to preventing powerful global banking interests from sabotaging the necessary emergency mobilisation against climate change.
7. A full public inquiry which looks at every aspect of banking operations in New Zealand, with public meetings held throughout the country, so that grassroots people can tell their stories.
For more comment, contact:
Vaughan Gunson
Bad Banks campaign manager
(09)433 8897
021-0415 082
svpl@xtra.co.nz
-----------------------------------------------------
Backgrounder:
Anger at Kiwibank closures
from Sunday Star Times
20 December 2009
Kiwibank - the brand that brought local banking back into fashion - is axing more than 20 of its branches, angering customers who bought into its patriotism-based advertising.
The closures come as Kiwibank instigator, Jim Anderton, credits the bank with reversing a trend towards shutting small branches.
David Tripe, director of Massey University's Centre for Banking Studies, said Kiwibank was undermining its own public relations pitch. "Essentially they're looking to close branches for the same reason as all the other banks closed them in the 1990s."
Since launching in 2002, Kiwibank has attracted 650,000 customers. Its advertising uses World War II-era imagery to push a theme of resistance to foreign invaders - the overseas-owned banks, which shut more than 1300 New Zealand branches in the 1980s and 1990s.
Since January, Kiwibank's owner, New Zealand Post, has either shut, or announced plans to shut, at least 20 of its about 300 branches, prompting public meetings, petitions and demonstrations.
Kiwibank exists in two forms: either as a franchise, typically run by a small business owner out of a dairy or stationery shop, or as part of a corporate branch of NZ Post. In some cases, NZ Post has shut a Kiwibank franchise and directed customers to one of its corporate branches. In others, where a franchisee has opted out, customers have received letters from New Zealand Post blaming the closure on the franchisee, but has not said if it has sought a replacement.
Kiwibank spokesman Bruce Thompson said two branches had opened in the past year. Another 29 had been upgraded or relocated, or both.
Anderton said Kiwibank's network was still the biggest of any bank operating in New Zealand. That included more than 30 towns and suburbs where there were no other banks.
Since Kiwibank opened, not a single overseas-owned bank had shut a branch in New Zealand. The closures were "what happens with a modern business".
Tripe said Kiwibank faced the same challenge as any other bank in making branches work - generating enough revenue to surpass running costs. In the case of the 20 closures, Kiwibank had responded no differently to the major banks.
KIWIBANKS AXED
(Including closures of actual buildings, as well as downgrades of PostShops offering Kiwibank and bill payment services.)
Mahora, Hastings
Glendene, Auckland
Te Puni, Lower Hutt
Henderson, Auckland
Braid Rd, St Andrews, Hamilton
H&J Smith, Invercargill
Balmoral, Auckland
Sandringham, Auckland
Papatoetoe South, Auckland
Greenwoods Corner, Auckland
Redwood Downs, Christchurch
Onekawa, Napier
Beckenham, Christchurch
Hereford St, Christchurch
Waimairi Rd, Ilam, Christchurch
Hokowhitu, Palmerston North
Awapuni, Palmerston
North Books and More, High St, Lower Hutt
Linwood, Christchurch
20 December 2009
An article in the Sunday Star Times, Anger at Kiwibank closures (20 Dec 2009), outlines plans by Kiwibank to close 20 branches nationwide. A cost saving initiative by the bank.
"This decision by Kiwibank bosses shows that when it comes to maintaining its "bottom line" there's not much difference between Kiwibank and the other banks, " says Vaughan Gunson, Bad Banks campaign manager.
"Kiwibank has tried to market its difference to the Aussie banks (ANZ National, BNZ, Westpac and ASB) who dominate the banking industry in New Zealand, but the reality is simply that Kiwibank currently doesn't offer much of an alternative," says Gunson. "That's because Kiwibank was founded by the government in 2002 to operate as a business, one that has to compete "fairly" with other banks, and at the same time deliver a return to the government."
The comment in the Sunday Star Times article by Jim Anderton, leader of the Progressive Party and proponent of Kiwibank, reveals the limits of the market model that Kiwibank operates under. Anderton justified the closures on the grounds that this is "what happens with a modern business".
"Anderton is right," says Gunson, "a modern business serves its own purpose, not the wider needs of the community. This is the whole problem with the banking sector in this country and internationally".
"The financial implosion that almost brought down the global economy last year, and which is continuing to wreck havoc on the lives of grassroots people, shows that we need to urgently rein in the power of the banks, " says Gunson. "Turning Kiwibank into a proper public bank would be a good start."
"A proper public bank", says Gunson, "could offer 3% state loans to first home buyers and zero-fee banking to low and middle income people. Such bold and sensible initiatives would transform banking in this country."
"Public service banking could easily be financed by raising the taxes on the wealthy, including the introduction of a Financial Transaction Tax (FTT) that nets the banks and other "fat cat" financial speculators that distort the NZ economy," says Gunson.
To contribute to the national debate that we must have in New Zealand about the banking system, Bad Banks offers these suggestions for transforming the power relationship between banks and the people:
1. Immediate government intervention to stop banks turfing "mum and dad" homeowners out of their homes because of a job loss or income cut.
2. The establishment of a government regulatory body to oversee the renegotiation of mortgages based on realistic market values and the ability of the homeowner to pay.
3. Turn Kiwibank into a proper "public service" bank offering first-home buyers a 3% interest state loan.
4. Zero-fee banking offered to people on modest incomes. Facilitated by expanding the role of Kiwibank and forced regulation of all banks operating in New Zealand.
5. Introduction of a Financial Transaction Tax (FTT) that would net the banks and other financial speculators. A decisive step in shifting the tax burden off low and middle income people and onto the mega-rich.
6. All bank loans to big business over a fixed amount to be approved by a government regulatory body that acts to protect the environment and communities. Such a measure is essential to preventing powerful global banking interests from sabotaging the necessary emergency mobilisation against climate change.
7. A full public inquiry which looks at every aspect of banking operations in New Zealand, with public meetings held throughout the country, so that grassroots people can tell their stories.
For more comment, contact:
Vaughan Gunson
Bad Banks campaign manager
(09)433 8897
021-0415 082
svpl@xtra.co.nz
-----------------------------------------------------
Backgrounder:
Anger at Kiwibank closures
from Sunday Star Times
20 December 2009
Kiwibank - the brand that brought local banking back into fashion - is axing more than 20 of its branches, angering customers who bought into its patriotism-based advertising.
The closures come as Kiwibank instigator, Jim Anderton, credits the bank with reversing a trend towards shutting small branches.
David Tripe, director of Massey University's Centre for Banking Studies, said Kiwibank was undermining its own public relations pitch. "Essentially they're looking to close branches for the same reason as all the other banks closed them in the 1990s."
Since launching in 2002, Kiwibank has attracted 650,000 customers. Its advertising uses World War II-era imagery to push a theme of resistance to foreign invaders - the overseas-owned banks, which shut more than 1300 New Zealand branches in the 1980s and 1990s.
Since January, Kiwibank's owner, New Zealand Post, has either shut, or announced plans to shut, at least 20 of its about 300 branches, prompting public meetings, petitions and demonstrations.
Kiwibank exists in two forms: either as a franchise, typically run by a small business owner out of a dairy or stationery shop, or as part of a corporate branch of NZ Post. In some cases, NZ Post has shut a Kiwibank franchise and directed customers to one of its corporate branches. In others, where a franchisee has opted out, customers have received letters from New Zealand Post blaming the closure on the franchisee, but has not said if it has sought a replacement.
Kiwibank spokesman Bruce Thompson said two branches had opened in the past year. Another 29 had been upgraded or relocated, or both.
Anderton said Kiwibank's network was still the biggest of any bank operating in New Zealand. That included more than 30 towns and suburbs where there were no other banks.
Since Kiwibank opened, not a single overseas-owned bank had shut a branch in New Zealand. The closures were "what happens with a modern business".
Tripe said Kiwibank faced the same challenge as any other bank in making branches work - generating enough revenue to surpass running costs. In the case of the 20 closures, Kiwibank had responded no differently to the major banks.
KIWIBANKS AXED
(Including closures of actual buildings, as well as downgrades of PostShops offering Kiwibank and bill payment services.)
Mahora, Hastings
Glendene, Auckland
Te Puni, Lower Hutt
Henderson, Auckland
Braid Rd, St Andrews, Hamilton
H&J Smith, Invercargill
Balmoral, Auckland
Sandringham, Auckland
Papatoetoe South, Auckland
Greenwoods Corner, Auckland
Redwood Downs, Christchurch
Onekawa, Napier
Beckenham, Christchurch
Hereford St, Christchurch
Waimairi Rd, Ilam, Christchurch
Hokowhitu, Palmerston North
Awapuni, Palmerston
North Books and More, High St, Lower Hutt
Linwood, Christchurch
No easing of mortgagee sales predicted
20 December 2009
Source: NZPA
The number of people losing their homes to a mortgagee sale may have dipped according to the most recent data but numbers are still expected to remain high into the New Year.
Figures from land information company Terralink International show there were 298 registered mortgagee sales during October down 45 from September but still well above the 174 recorded in October 2008.
While the October figures showed a decline Terralink managing director Mike Donald expected numbers to remain high for a while yet.
"It's a mistake to think that a decrease this month means that mortgagee sales are set to return to pre-recession levels. There's a slight easing in October but when you look at the whole picture you'll see the numbers remain at an all time high. It's still a volatile situation and the numbers of mortgagee sales we have been seeing shows the length of time it takes to work through the financial stress of the recession."
The percentage of mortgagee sales from individual homeowners with only one property had been climbing, Mr Donald said.
"These are the people who we'd probably think of as the `Mum and Dad' homeowners. They now make up nearly one in four of the total mortgagee sales in New Zealand, or 24%.
"As the year has gone on, and spending has decreased, and redundancies have increased more and more ordinary New Zealanders have been affected by the recession. Forced sales of their homes has unfortunately been a consequence for some," Mr Donald said.
Regions hardest hit in October were Auckland and Waikato while Otago, Southland and Taranaki all experienced increases.
Mortgagee sales accounted for almost 5 percent of the total nationwide property sales in October.
Source: NZPA
The number of people losing their homes to a mortgagee sale may have dipped according to the most recent data but numbers are still expected to remain high into the New Year.
Figures from land information company Terralink International show there were 298 registered mortgagee sales during October down 45 from September but still well above the 174 recorded in October 2008.
While the October figures showed a decline Terralink managing director Mike Donald expected numbers to remain high for a while yet.
"It's a mistake to think that a decrease this month means that mortgagee sales are set to return to pre-recession levels. There's a slight easing in October but when you look at the whole picture you'll see the numbers remain at an all time high. It's still a volatile situation and the numbers of mortgagee sales we have been seeing shows the length of time it takes to work through the financial stress of the recession."
The percentage of mortgagee sales from individual homeowners with only one property had been climbing, Mr Donald said.
"These are the people who we'd probably think of as the `Mum and Dad' homeowners. They now make up nearly one in four of the total mortgagee sales in New Zealand, or 24%.
"As the year has gone on, and spending has decreased, and redundancies have increased more and more ordinary New Zealanders have been affected by the recession. Forced sales of their homes has unfortunately been a consequence for some," Mr Donald said.
Regions hardest hit in October were Auckland and Waikato while Otago, Southland and Taranaki all experienced increases.
Mortgagee sales accounted for almost 5 percent of the total nationwide property sales in October.
19.12.09
Kiwibank needs to be turned into a proper public bank
The article in the Sunday Star Times, Anger at Kiwibank closures (20 Dec 2009), outlines plans by Kiwibank to close 20 branches nationwide. A cost saving initiative by the bank.
While Kiwibank has tried to market its difference to the Australian owned banks who dominate the banking industry in New Zealand, the reality is that Kiwibank currently doesn't offer much of an alternative. That's because Kiwibank was founded by the government in 2002 to operate as a business, one that has to compete "fairly" with other banks, and at the same time deliver a profit to the government.
The comment in the Sunday Star Time article by Jim Anderton, leader of the Progressive Party and proponent of Kiwibank, reveals the limits of the market model of banking that Kiwibank operates under. Anderton justified the closures on the grounds that this is "what happens with a modern business".
The Bad Banks campaign advocates turning Kiwibank into a proper public bank, as part of major reform of banking in New Zealand. Kiwibank should offer 3% state loans to first home buyers and zero-fee banking to low and middle income people.
This could be financed by raising taxes on the rich, including the introduction of a Financial Transaction Tax (FTT) that nets the banks and other "fat cat" financial speculators that distort the NZ economy.
See Make Kiwibank Public.
12.12.09
Naughty banks need more than a slap on the wrist
from NZ Herald
13 December 2009
The Australian banks last week had their Prime Minister scolding them to take a hard look at themselves. That's because they snuck through an interest rate rise after their Reserve Bank raised its rates.
Westpac was the worst with a 45-point hike, even though the Reserve Bank raised the rate by only 25 points.
Westpac rubbed salt into its customers' wounds by sending them an email comparing the bank's profit-gouging decision to a situation when a tropical storm hits a banana plantation. Apparently, such an occurrence would increase the price of a banana smoothie.
Of course, the comparison was dishonest and patronising.
A bank's unethical profiteering that puts people in a situation of not being able to pay their mortgage is outrageous enough. But comparing it with paying more for a banana smoothie has caused a furore in Australia.
Westpac won't want that public relations disaster following it over here, given it has announced it is making over its New Zealand brand to show how much it cares about us.
The other Australian banks (ANZ, ASB, BNZ and National) have followed with a charm offensive, too. There are lots of soothing words about how they want to get closer to New Zealanders by opening more branch offices and offering more intimate services.
It's a bit hard to understand their strategy, given they recently sacked hundreds of Kiwi bank tellers and shipped their work offshore to call-centre factories. It seems only yesterday we were being told local bank branch closures would save us money.
Despite those rather inconvenient truths, the public relations campaign to win our goodwill is well under way. Recently, BNZ proudly promoted its public spirit credentials by closing its doors for a day and paying its employees to do community work for the day.
I'm not trying to piss on the parade, but the day after, I was in a BNZ bank and the staff were running ragged. One of them dryly noted that BNZ got good publicity, but it also meant the workers had to fit five days' work into four days that week.
One of the BNZ's main competitors, the ASB Bank, is now rebranded as the "caring bank". It also claims to have been a "Kiwi bank since 1847".
I doubt the Commonwealth Bank of Australia is aware of the new change of ownership.
It seems that the new initiatives to win our favour are twofold. Despite the widespread political opposition and scepticism to setting up a publicly owned community, Kiwibank has gone from strength to strength as many New Zealanders have swapped their bank accounts over. Nationalism and sovereignty are strong emotions.
The second reason is the public mood is going dog on them. There's been too much news about interest fixing, exorbitant fees and the outrageous tax evasion cases now before the courts.
That's on top of the increasing numbers of ordinary New Zealanders losing their homes as the banks start foreclosing on them.
Vaughan Gunson from the Bad Bank campaign claims the Australian bank owners are terrified that the public sentiments will lead to politicians on both sides of the Tasman following their American colleagues and regulating the industry to curb its excessive profiteering. Gunson blames the banks for causing the financial crisis that almost collapsed the global economy.
The Bad Bank supporters picketed a bank in downtown Auckland on Friday as part of their campaign to force the Government to hold a formal inquiry into the role of banks in this country.
Westpac ran a stupid banana campaign, says Gunson, but the whole world banking system has gone bananas. One slip on a skin and we're all gone.
The Government's siding with the Australian bank owners in not holding an inquiry makes me nervous.
ANZ's intricate tax dodging continues
In an article that appeared in the Sunday Star Times, ANZ in intricate deal on eve of court battle (13 Dec), reporter Rob Stock details how ANZ (but not just not them) used shonky loan deals with foreign banks labelled "money go rounds" to avoid tax.
Rob Stock gives examples of one particular money go round set up within New Zealand:
Rob Stock gives examples of one particular money go round set up within New Zealand:
The BNP Paribas transaction is not the only curious-looking structure on ANZ National Bank's books. There are several related-party loan deals that have a similar appearance to tax dodging money-go-rounds.
Cortland Finance, for example, was owed $437m by ANZ National Bank at the end of September 2008, though it is a wholly owned subsidiary of Arawata Finance, which is 100% owned by ANZ National Bank. In other words, ANZ had put capital into the company and then borrowed it back again.
Similarly, ANZ National Bank owes more than $2b to its wholly owned subsidiaries Tui Finance and Tui Endeavour, money that represents capital put in by the bank. Also at the end of September 2008, Arawata Finance was owed $717m by ANZ National Bank, but it owed the bank $533m.
10.12.09
"It's the whole banking system which is bananas", say Bad Banks campaigners
Bad Banks media release
10 December 2009
Australian prime minister Kevin Rudd has just given a very public serve to Westpac for an email the bank sent to mortgage customers featuring a cartoon video about selling bananas to justify a big hike in its mortgage rates. (See Westpac goes bananas - http://www.news.com.au/couriermail/story/0,,26462786-3122,00.html.)
"This is just another example of the silly tricks that the Big Four Australian-owned banks (ANZ National, BNZ, Westpac and ASB) are pulling to try and "win over" the public", says Vaughan Gunson, Bad Banks campaign spokesperson.
In New Zealand, BNZ closed the doors of its branches and instructed staff to do community work for a day. And ASB Bank has been pushing an advertising campaign which tries to paint a picture of a "caring bank" that serves us.
"ASB have made the ridiculous claim that they've been a "Kiwi bank since 1847", when in fact they're fully owned by Commonwealth Bank of Australia", says Gunson.
"The banks are trying to "suck up" because they know there's a bad public mood against them, as a result of their interest gouging, fee charging, and tax dodging", says Gunson. "Many New Zealand homeowners are experiencing mortgage stress, thanks to the banks."
"What the Aussie banks are worried about is that the public mood against them will put pressure on governments on both sides of the Tasman to put in place tough regulations that curb their power and rein in their profits", says Gunson.
The Bad Banks campaign is doing its bit to keep the pressure on the banks. Tomorrow (Friday) at 12noon we're going to be outside ASB's Queen Street branch (cnr Wellesley St) with placards and a new leaflet exposing ASB.
"Our aim is to promote a nationwide and popular debate on the banks and their role in the economy", says Gunson. "It goes way beyond a few bad banks, we think the whole banking system is bananas."
"The financial implosion that almost brought down the global economy last year, and which is continuing to wreck havoc on the lives of grassroots people, shows that we need to urgently bring the banks under control", says Gunson.
There is momentum building even amongst the global financial elite for more regulation and control to be imposed on the banks. (See Ex-Fed chief Paul Volcker's 'telling' words on derivatives industry - http://www.telegraph.co.uk/finance/economics/6764177/Ex-Fed-chief-Paul-Volckers-telling-words-on-derivatives-industry.html.)
To contribute to the national debate that we must have in New Zealand about the banking system, Bad Banks offers these suggestions for transforming the power relationship between banks and the people:
1. Immediate government intervention to stop banks turfing "mum and dad" homeowners out of their homes because of a job loss or income cut.
2. The establishment of a government regulatory body to oversee the renegotiation of mortgages based on realistic market values and the ability of the homeowner to pay.
3. Turn Kiwibank into a proper "public service" bank offering first-home buyers a 3% interest state loan.
4. Zero-fee banking offered to people on modest incomes. Facilitated by expanding the role of Kiwibank and forced regulation of all banks operating in New Zealand.
5. Introduction of a Financial Transaction Tax (FTT) that would net the banks and other financial speculators. A decisive step in shifting the tax burden off low and middle income people and onto the mega-rich.
6. All bank loans to big business over a fixed amount to be approved by a government regulatory body that acts to protect the environment and communities. Such a measure is essential to preventing powerful global banking interests from sabotaging the necessary emergency mobilisation against climate change.
7. A full public inquiry which looks at every aspect of banking operations in New Zealand, with public meetings held throughout the country, so that grassroots people can tell their stories.
Contact:
Vaughan Gunson
Bad Banks media spokesperson
(09)433 8897
021-0415 082
svpl@xtra.co.nz
10 December 2009
Australian prime minister Kevin Rudd has just given a very public serve to Westpac for an email the bank sent to mortgage customers featuring a cartoon video about selling bananas to justify a big hike in its mortgage rates. (See Westpac goes bananas - http://www.news.com.au/couriermail/story/0,,26462786-3122,00.html.)
"This is just another example of the silly tricks that the Big Four Australian-owned banks (ANZ National, BNZ, Westpac and ASB) are pulling to try and "win over" the public", says Vaughan Gunson, Bad Banks campaign spokesperson.
In New Zealand, BNZ closed the doors of its branches and instructed staff to do community work for a day. And ASB Bank has been pushing an advertising campaign which tries to paint a picture of a "caring bank" that serves us.
"ASB have made the ridiculous claim that they've been a "Kiwi bank since 1847", when in fact they're fully owned by Commonwealth Bank of Australia", says Gunson.
"The banks are trying to "suck up" because they know there's a bad public mood against them, as a result of their interest gouging, fee charging, and tax dodging", says Gunson. "Many New Zealand homeowners are experiencing mortgage stress, thanks to the banks."
"What the Aussie banks are worried about is that the public mood against them will put pressure on governments on both sides of the Tasman to put in place tough regulations that curb their power and rein in their profits", says Gunson.
The Bad Banks campaign is doing its bit to keep the pressure on the banks. Tomorrow (Friday) at 12noon we're going to be outside ASB's Queen Street branch (cnr Wellesley St) with placards and a new leaflet exposing ASB.
"Our aim is to promote a nationwide and popular debate on the banks and their role in the economy", says Gunson. "It goes way beyond a few bad banks, we think the whole banking system is bananas."
"The financial implosion that almost brought down the global economy last year, and which is continuing to wreck havoc on the lives of grassroots people, shows that we need to urgently bring the banks under control", says Gunson.
There is momentum building even amongst the global financial elite for more regulation and control to be imposed on the banks. (See Ex-Fed chief Paul Volcker's 'telling' words on derivatives industry - http://www.telegraph.co.uk/finance/economics/6764177/Ex-Fed-chief-Paul-Volckers-telling-words-on-derivatives-industry.html.)
To contribute to the national debate that we must have in New Zealand about the banking system, Bad Banks offers these suggestions for transforming the power relationship between banks and the people:
1. Immediate government intervention to stop banks turfing "mum and dad" homeowners out of their homes because of a job loss or income cut.
2. The establishment of a government regulatory body to oversee the renegotiation of mortgages based on realistic market values and the ability of the homeowner to pay.
3. Turn Kiwibank into a proper "public service" bank offering first-home buyers a 3% interest state loan.
4. Zero-fee banking offered to people on modest incomes. Facilitated by expanding the role of Kiwibank and forced regulation of all banks operating in New Zealand.
5. Introduction of a Financial Transaction Tax (FTT) that would net the banks and other financial speculators. A decisive step in shifting the tax burden off low and middle income people and onto the mega-rich.
6. All bank loans to big business over a fixed amount to be approved by a government regulatory body that acts to protect the environment and communities. Such a measure is essential to preventing powerful global banking interests from sabotaging the necessary emergency mobilisation against climate change.
7. A full public inquiry which looks at every aspect of banking operations in New Zealand, with public meetings held throughout the country, so that grassroots people can tell their stories.
Contact:
Vaughan Gunson
Bad Banks media spokesperson
(09)433 8897
021-0415 082
svpl@xtra.co.nz
Bad Banks exposure of ASB's "Kiwi bank" claim - 12noon, Friday 11 December
7 December 2009
http://www.badbanks.co.nz/
Bad Banks campaigners will be outside ASB Bank on Queen Street (cnr Wellesley St), Auckland, this Friday to expose ASB's claim that it's a "Kiwi bank".
"ASB ain't no Kiwi bank," says Vaughan Gunson, Bad Banks media spokesperson. "They're 100% owned by the Commonwealth Bank of Australia, one of the bigger banks in the world. They're misleading the New Zealand public, to say the least."
"We find their recent advertising campaign hard to stomach, and I'm sure many people feel the same," says Gunson, "because ASB and the other Aussie-owned banks (ANZ National, BNZ, and Westpac) aren't serving our interests at all. Their only goal is to make as much money as possible for bank bosses and corporate shareholders."
"The Aussie-owned banks have been making exorbitant profits for years from high interest rates on mortgages and credit cards, as well as imposing high fees and late penalties. They've been hurting grassroots New Zealanders," says Gunson.
"And now with the recession and people struggling to pay the bills, the banks are out to protect their own equity position by forcing mortgagee sales in record numbers," says Gunson.
On top of these injustices, ASB is refusing to pay an unpaid tax bill of $285 million. "Rather than big-budget advertising campaigns designed to mislead us, ASB bosses should just pay up the tax they owe," says Gunson.
"It's obvious that ASB and the other big banks are trying to suck up to us. Why? Because they're worried that the bad public mood against them will result in the government being forced to curb banking power and rein in their profits. Which is exactly what the Bad Banks campaign wants to see, " says Gunson.
"We've started a long term campaign to build pressure on the banks, which we hope will result in tougher regulations being placed on the banking and finance industries. Most people would say it can't happen too soon," says Gunson.
Bad Banks campaigners recently nominated ASB Bank for the 2009 Roger Award, given annually to the "Worst Transnational Corporation Operating in Aotearoa/New Zealand" (see Backgrounder #2 below).
"It was difficult to choose which bank to nominate for The Roger Award, because in the eyes of most New Zealanders all banks are bad," says Gunson. "But what tipped the balance in favour of ASB, was the fact that ASB bosses have been very hostile to the bank workers union, Finsec."
"Today, ASB is the only big bank which is not unionised. Which begs the question: is it "Kiwi" to be anti-union?" asks Gunson.
Bad Banks campaigners will be carrying placards, making some noise, and handing out leaflets to the public outside the Queen Street branch of ASB Bank at 12noon, this Friday, 11 December. Media are invited to attend to get more comment, plus photos/footage.
The cartoon image attached to this media release is by ex-NZ Herald cartoonist, KLARC. It is freely available for reproduction on websites or in print publications.
For more comment, contact:
Vaughan Gunson
Bad Banks media spokesperson
(09)433 8897
021-0415 082
svpl@xtra.co.nz
________________________________________
Backgrounder #1
The Bad Banks campaign has been initiated by Socialist Worker-New Zealand. We believe the banks in New Zealand and globally have grown to exercise enormous and dangerous power over the economy. The big banks and their government backers are driving forward economic policies that threaten people and planet.
There are a range of measures needed to stop the banks, from tough government regulations to establishing proper public banks which provide credit as a service rather than to make a profit.
The Bad Banks campaign also advocates measures like a Financial Transaction Tax (FTT) to net the banks and other financial speculators whose profits from wheeling and dealing goes largely untaxed. Such a tax would allow New Zealand to move towards a fairer tax system which shifts the tax burden off low and middle income people and onto the big wealthy corporates.
For more information on the Bad Banks campaign go to http://www.badbanks.co.nz/
Backgrounder #2
These were the 10 reasons given by Bad Banks campaigners for why ASB deserved to receive the 2009 Roger Award:
1. Interest gouging grassroots Kiwi homeowners.
Mortgage holders know it. Even the Reserve Bank in 2009 came out and said that the banks, including ASB, were keeping their interest rates too high. High interest rates on large mortgages put modest income earners under considerable financial stress in 2009, as many were affected by job losses, income cuts, and general financial insecurity. (See http://www.nzherald.co.nz/interest-rates/news/article.cfm?c_id=235&objectid=10582846)
2. Foreclosing on people's homes.
2009 saw record numbers of mortgagee sales, as banks moved to protect their own equity position by turfing increasing numbers of "mum and dad" mortgage holders out of their homes. Hundreds of homeowners were foreclosed in Auckland, ASB's home turf. (See http://business.scoop.co.nz/2009/09/28/record-high-for-mortgagee-sales-despite-recovery)
3. Continuing to make massive profits at the expense of grassroots people.
The recession of 2008/09 did not prevent ASB making a big profit, $238 million for the first six months of the financial year. Such a high profit in a recession points to the power the bank has to shift the burden of economic hard times on to ordinary New Zealanders. (See http://tvnz.co.nz/business-news/asb-tax-operating-profit-down-2477075)
4. Mega-scale tax dodging.
It came to public attention in 2009 the full extent of tax dodging by the Big Four Aussie-owned banks, over $2 billion. The IRD is after $285 million from ASB for unpaid tax between 2001 and 2004. Having been caught, ASB bosses are still refusing to pay up, and will likely use teams of expensive lawyers to drag the process through the courts, costing the IRD and the Crown millions. (See http://www.nbr.co.nz/article/asb-estimates-285-million-exposure-nz-tax-case-113373)
5. Failing to face up to public scrutiny.
Nobody from ASB Bank fronted up to the parliamentary inquiry into the operations of the banks organised by the Green, Labour and Progressive parties in 2009. While this inquiry had no teeth, because it was not supported by the National government, this disregard for the New Zealand public showed how arrogant and conceited is the position of the Aussie-owned banks. (See http://www.scoop.co.nz/stories/PA0909/S00049.htm)
6. Union busting.
The ASB Bank has determinedly used anti-union practices to stop Finsec Union from organising bank workers. To inquire more about ASB's union busting you could contact Finsec Union directly, phone 04 385 7723, email union@finsec.org.nz.
7. Imposing a wage freeze on workers.
All ASB Bank employees earning over $50,000 have been informed this year that they will be subject to a wage freeze. This will affect 3,500 of the bank's 4,700 staff nationwide. The low bar compares unfavourably with that being used by ASB's parent company in Australia, Commonwealth Bank, where the wage freeze is for staff earning over $100,000. (See http://finsec.wordpress.com/2009/04/24/asb-bank-freeze-staff-wages-%E2%80%93-no-union-members-to-stop-it/)
8. Deceiving New Zealanders by claiming to be a "Kiwi Bank".
ASB advertisements in October 2009 used the phrase "we've been a KIWI BANK since 1847", when in fact ASB is almost entirely Aussie owned. The phrase cynically seeks to convey the impression that the ASB Bank operates in the interests of New Zealanders, when its corporate practices plainly tell another story. (See http://www.nzherald.co.nz/sideswipe/news/article.cfm?c_id=702&objectid=10604600)
9. Cutting funding to community groups.
Just when many community organisations needed it most, to deal with the human fallout of the recession, ASB Bank, through its ASB Charitable Trust, froze grants for six months in 2009. This is despite continuing to make big profits. (See http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10603631)
10. Using the media to frame public debate in a way that's advantageous to banks.
Any search of news websites like NZ Herald or Stuff for "ASB" reveals just how often spokespeople for the bank are in the media. The bank produced a constant stream of statements and commentary on economic indicators, which are clearly designed to frame media debate on economic issues in a way that's favorable to banking operations.
For more information on CAFCA (Campaign Against Foreign Control of Aotearoa) and The Roger Award go to http://canterbury.cyberplace.co.nz/community/CAFCA/
(Note ASB was not one of The Roger Award finalists recently announced by CAFCA)
9.12.09
Interview with Andrew Campbell, campaigns director for the bank workers union, Finsec
The back page of Bad Banks leaflet #5 features an interview with Andrew Campbell, campaigns director for the bank workers' union, Finsec. ASB Bank is the only major bank operating in NZ which is not unionised. ASB bosses have taken an anti-union stance. Andrew heads up Finsec's "Better Banks" campaign, which is about getting better pay and industry standards for bank workers, but is also about refoming the way the banks operate in New Zealand. Finsec wrote a submission to the parliamentary inquiry initiated by the Greens, Labour and Progressive parties. They still support a full public inquiry into the banks. Is it "Kiwi" to be anti-union?
“ASB is a deunionised bank.” That’s the situation at ASB Bank according to Andrew Campbell, campaigns director for Finsec, the bank workers union.
“They’ve made it very difficult for ASB workers to be part of a union”, says Andrew. “Whilst Finsec hasn’t actively organised in there in recent years, the last time we did, we faced stiff opposition. They made it very very clear to people that they viewed the union as a negative.”
“People close to the union, or who joined the union, were spoken to by management. Anti-union information was circulated at the time. Even though it was made clear that you had the legal right to join, all evidence to the contrary was put up, so that joining the union was seen as an act of hostility to the employer. That’s a very scary situation to put people in”, says Andrew.
No union means that ASB bosses have more power over their staff. This year, all ASB employees earning over $50,000 have been subjected to a wage freeze. This will affect 3,500 of the bank’s 4,700 staff nationwide.
The low bar compares unfavourably with that being used by ASB’s parent company in Australia, Commonwealth Bank, where the wage freeze is for staff earning over $100,000.
“There’s evidence that workers at ASB are losing out because they aren’t able to collectively bargain”, says Andrew. He believes ASB can afford to pay more, “their profits are comparable to the other banks”.
Finsec have an ongoing campaign called “Better Banks”, which aims to achieve better pay and industry standards across the banking sector.
Better Banks is also about bringing the banks into line. “We think the banks need to change how they operate”, says Andrew, who heads up the campaign.
“They need to start operating in the interests of the NZ economy and their NZ customers, rather than in the interests of their Australian shareholders. They need to be more ethical, they need to be more regulated, and they need to stop taking the NZ taxpayer for granted.”
Andrew was disappointed the National government didn’t support calls for a full public inquiry into the banks: “We think the banks lobby got in Bill English’s ear, which shows which side National is on. They’re on the side of big banks, not NZ workers.”
Finsec still wants to see a full public inquiry, “but we want to see real changes”, says Andrew, “not just a talk fest”.
“Workers and customers will have to be active to pressure politicians to make the fundamental changes to the banking system we all need.”
8.12.09
Bad Banks leaflet #5: 'ASB misleads us'
ASB bosses are trying to "suck up" to us because they're worried that the bad public mood against the banks might force the government to curb their power and rein in their profits. Which is, of course, exactly what the the Bad Banks campaign would like to see.
The text on the front page exposes all the other bad things that ASB has been doing, including how the ASB is linked to the international bank cartels responsible for the global financial implosion.
The back page features an interview with Andrew Campbell from Finsec about ASB's anti-union stance. ASB is currently the only major bank that is not unionised. See Is it "Kiwi" to be anti-union?
If you would like bulk copies of the Bad Banks leaflet #5 sent to you, email Vaughan svpl@xtra.co.nz or ph/txt 021-0415 082. Invite other interested people in your area to do an "exposure" of ASB outside a local bank branch.
6.12.09
Pay for bank bosses needs to be regulated
As the article below argues extreme levels of pay, topped up with obscene bonuses, are a factor in the banks taking extreme lending risks. Individuals within individual banks chasing "big bonuses" in competition with other banks has played its part in driving forward the expansion of credit to unsustainable levels, threatening the stability and continuation of the global market economy.
Any movement looking to curb banking power needs to include the demands for government regulation of bankers' salaries and bonuses. This demand would be popular with grassroots people wanting to see the banks brough into line.
Any movement looking to curb banking power needs to include the demands for government regulation of bankers' salaries and bonuses. This demand would be popular with grassroots people wanting to see the banks brough into line.
Bankers had cashed in before the music stopped
by Lucian Bebchuk, Alma Cohen and Holger Spamann
from Financial Times (UK)
6 December 2009
According to the standard narrative, the meltdown of Bear Stearns and Lehman Brothers largely wiped out the wealth of their top executives. Many – in the media, academia and the financial sector – have used this account to dismiss the view that pay structures caused excessive risk-taking and that reforming such structures is important. That standard narrative, however, turns out to be incorrect.
It is true that the top executives at both banks suffered significant losses on shares they held when their companies collapsed. But our analysis, using data from Securities and Exchange Commission filings, shows the banks’ top five executives had cashed out such large amounts since the beginning of this decade that, even after the losses, their net pay-offs during this period were substantially positive.
In 2000-07, the top five executives at Bear and Lehman pocketed cash bonuses exceeding $300m and $150m respectively (adjusted to 2009 dollars). Although the financial results on which bonus payments were based were sharply reversed in 2008, pay arrangements allowed executives to keep past bonuses.
Furthermore, executives regularly took large amounts of money off the table by unloading shares and options. Overall, in 2000-08 the top-five teams at Bear and Lehman cashed out close to $2bn in this way: about $1.1bn at Bear and $850m at Lehman. Indeed, the teams sold more shares during the years preceding the firms’ collapse than they held when the music stopped in 2008.
Altogether, equity sales and bonuses over that period provided the top five at the two banks with cash of about $1.4bn and $1bn respectively (an average of almost $250m each). These cash proceeds considerably exceed the value of the executives’ holdings at the beginning of 2000 (which we estimate to be in the order of a respective $800m and $600m).
Of course, the executives would have made much more had the banks not blown up. By contrast to shareholders who stuck with the banks, however, the executives’ total pay-offs during the period were decidedly in the black.
Our analysis undermines the claims that executives’ losses on shares during the collapses establish that they did not have incentives to take excessive risks. The fact that the executives did not sell all the shares they could prior to the meltdown does indicate that they did not anticipate collapse in the near future. But repeatedly cashing in large amounts of performance-based compensation based on short-term results did provide perverse incentives – incentives to improve short-term results even at the cost of an excessive rise in the risk of large losses at some (uncertain) point in the future.
To be sure, executives’ risk-taking might have been driven by a failure to recognise risks or by excessive optimism, and thus would have taken place even in the absence of these incentives. But given the structure of executive pay, the possibility that risk-taking was influenced by these incentives should be taken seriously.
The need to reform pay structures is not, as many have claimed, simply a politically convenient sideshow. Even if the type of incentives given to executives of Bear and Lehman – and others with similar pay structures – were not the cause of risk-taking in the past, they could be in future. Financial institutions, and the regulators overseeing them, should give the necessary priority to redesigning bonuses and equity-based compensation to avoid rewarding executives for short-term results that are subsequently reversed.
The stories of Lehman and Bear will undoubtedly remain in the annals of financial disaster for decades to come. To understand what has happened, and what lessons should be drawn, it is important to get the facts right. In contrast to what has been thus far largely assumed, the executives were richly rewarded for, not financially devastated by, their leadership of their banks during this decade.
29.11.09
Bad Banks Exposure of ASB - 12noon, Friday 11 December
ASB ain’t no “Kiwi bank”, protest their •interest gouging •profit taking •tax dodging •union bashing •and for turfing people out of their homes.
12noon, Friday 11 December
Outside ASB Bank,
cnr Queen St and Wellesley St,
Auckland Central.
You will have noticed that the Big Four Aussie-owned banks have been trying to suck up to us lately. BNZ closed their doors for a day so staff could do community work. And ASB, well, they're trying to convince us that they’re a "Kiwi bank". But as John Minto said in his article for the Christchurch Press: "What a brazen lie – like hell it’s a kiwi bank". Because ASB is 100% owned by the Commonwealth Bank of Australia, one of the world's biggest banks.
Why are the banks trying to cuddle up to us? Because ANZ National, BNZ, Westpac and ASB Bank know there's a bad mood rising against them. And it's well deserved, here's a few reasons why people hate the banks:
• Despite the recession they’re continuing to make mega-profits by interest gouging grassroots Kiwis.
• They’re inflicting high fees and penalties on low and middle income people.
• They’re forcing mortgagee sales in increasing numbers.
• They’re hiring teams of lawyers to try and get out of paying $2.25 billion of unpaid tax.
• And in the case of ASB, they’ve used anti-union practices to drive Finsec, the bank workers union, out of ASB branches.
At 12noon on Friday 11 December we’re planning an “exposure” of ASB Bank. We’ll be handing out a leaflet that draws attention to ASB falsely claiming to be a “Kiwi bank”, as well as exposing the other bad things ASB and the rest of the Australian banks are up to.
To download a flyer advertising the action, click here.
Please come along to support this action. Bring your own placards and your grassroots voices. We’ll be inviting the media along, so the more people the better.
Hope to see you there.
Vaughan Gunson
Bad Banks publicity coordinator
svpl@xtra.co.nz
021-0415 082
26.11.09
Are New Zealand's major banks sound?
by Grant Morgan
International credit rating agency Standard & Poor says that all Australian banks have "insufficient funds to cover their lending exposures", reports the Sydney Morning Herald on 25 November 2009.
No Australian banks were included in the handful that Standard & Poor believe meet the minimum threshold to be considered safe for depositors.
Given that Australian banks own all major New Zealand banks, this news is hugely significant for the Bad Banks campaign in Aotearoa.
The Standard & Poor analysis points towards the financial unsoundness of Australian-owned banks in New Zealand. See Australian banks fail new capital test.
International credit rating agency Standard & Poor says that all Australian banks have "insufficient funds to cover their lending exposures", reports the Sydney Morning Herald on 25 November 2009.
No Australian banks were included in the handful that Standard & Poor believe meet the minimum threshold to be considered safe for depositors.
Given that Australian banks own all major New Zealand banks, this news is hugely significant for the Bad Banks campaign in Aotearoa.
The Standard & Poor analysis points towards the financial unsoundness of Australian-owned banks in New Zealand. See Australian banks fail new capital test.
Australian banks fail new capital test
by Eric Johnston
Sydney Morning Herald
25 November 2009
RATINGS agency Standard & Poor's has warned that nearly all the world's big banks - including Australia's major lenders - have insufficient funds to cover their lending exposures and risk a ratings downgrade unless they move to bolster their balance sheets over the next 18 months.
The warning follows the release of a tougher global measure of bank capital by Standard & Poor's, which has found that most large banks do not meet the minimum 8 per cent threshold under the credit ratings agency's new risk-adjusted capital ratio.
The findings appear to be out of step with claims by Australian banks that they are among the strongest in the world under the traditional measure of bank capital known as the tier 1 ratio.
Over the past year, Australian banks have raised more than $20 billion in new capital to strengthen their balance sheets. This has resulted in an increase in the average tier 1 ratio of the big four banks to 8.9 per cent from 7.8 per cent a year ago.
But critics warn that these measures of tier 1 can be misleading because they fail to distinguish between higher-risk and lower-risk forms of lending. As well, the tier 1 measure is not consistently calculated on an international level.
Australian banks argue that their capital ratios would increase by about 2 per cent on average if they were calculated under existing British rules.
Under the new measure, S&P gives a lower rating to hybrid capital because it behaves more like debt than equity. For Australian banks, hybrid securities can make up to a quarter of their total capital. Specific exposures including trading desks and private equity would require banks to significantly increase the level of capital.
S&P reviewed 45 banks around the world under its new risk-adjusted measure. No Australian banks were included in the handful that hit the minimum threshold to be considered safe.
Of three local lenders included in the review, ANZ scored the highest rating with 7.1 per cent. National Australia Bank was at 6.9 per cent and Commonwealth Bank at 6.3 per cent.
While Australian banks benefited from having a large exposure to low-risk residential mortgages, S&P said a narrow geographic and business base counted as a negative. It also noted that the capital raisings by the local banks had been used mainly to fund acquisitions or balance sheet growth.
Among the global banks considered most vulnerable are Mizuho Financial (2 per cent), Citigroup (2.1), UBS (2.2) and Sumitomo Mitsui (3.5). The global average came in at 6.7 per cent.
''The results to date appear to confirm our view that capital is a rating weakness for a majority of banks in our sample,'' S&P said.
The ratings agency said it expected banks to continue strengthening their capital ratios over the next 18 months to comply with tougher regulatory standards. ''Failure to achieve this could put renewed pressure on ratings,'' it said.
The top-rated global bank is HSBC on 9.2 per cent, followed by Dexia on 9 per cent and ING on 8.9 per cent.
The review of capital strength comes as Australian banks face a crackdown on rules related to liquidity.
19.11.09
Like hell it's a kiwi bank
from stuff.co.nz
12 November 2009
The other night when I went out to get an ice-cream at a local dairy I was gobsmacked to be confronted with a wall of huge yellow advertising posters with heavy black lettering – “We’ve been a KIWI BANK since 1847” with the ASB logo at the bottom. What a brazen lie – like hell it’s a kiwi bank.
Back in the 1980s when it was a respected trustee bank, owned by its New Zealand account holders and serving their interests, it could legitimately make the claim. But in 1989 it was privatised and like our other big three banks – ANZ National, BNZ and Westpac – it’s owned by Australians.
And with the shift to private shareholder ownership the ASB’s first priority has changed to delivering dividends to its shareholders rather than service to its customers. No wonder the big four banks score so lowly in customer satisfaction surveys. The only thing keeping them going is the huge hassle and extra expense involved in changing banks. Without customer inertia these banks would be run out of town.
It’s no surprise to find yesterda'ys release of the multi-party Parliamentary Banking Inquiry’s report confirms the big banks did not pass on the full effect of reductions in the Official Cash Rate to New Zealanders in recent times. More billions into the banker’s coffers.
They have all been guilty of various customer and taxpayer rorts and have acted more like a cartel than competing businesses.
It’s not just the exorbitant fees and unjustified charges for all sorts of normal customer services but they have actively targeted their customers to go further into debt and have put a lot of pressure on bank employees to sell more debt to indebted customers.
They openly mocked Finance Minister Michael Cullen’s attempts to reduce lending for investment properties and will continue to undermine any government initiative which gets in the way of increasing their profits.
In most years these banks have taken $2 billion in profit across the ditch and we wonder why our current account deficit is so high.
And then there are the tax evasion cases where the High Court has found the banks guilty of screwing taxpayers through structured financial transactions which have been described as a sham to avoid tax.
The ASB owes us $280 million while the others (Westpac $961 million, ANZ National $562 million, BNZ $661 million) are even worse. It’s an appalling abuse - together these banks owe $500 in unpaid tax for every person living in New Zealand.
With such well-deserved bad publicity the banks are going on a charm offensive. As well as the ASB bank’s attempt to resurrect a nostalgic kiwi connection from its arrogant abuse of customers and taxpayers, the misnamed BNZ announced last week it was “Closed – for good” If only.
Most of the bank staff were out doing work in the community for a day to show what a good corporate citizen the bank is. The BNZ PR machine was working well because our local suburban newspaper (and I’m sure this was repeated throughout the country) had a story showing bank staff working hard clearing land for a garden for the families of cancer sufferers here in Auckland.
“Banks just genuinely believe that we need to be part of the community” said BNZ head of external communications Diana Maxwell.
She says the BNZ accepts there has been a loss of customer trust in the big banks “and we need to work hard to rebuild that trust”. They could start by paying back the $661 million they owe and apologising for their bad behaviour.
The latest charm offensive is just company spin. Former BNZ boss and now chief executive of BNZ parent bank, the National Australia Bank says the current hostility towards the major Australian banks is not tenable for viable businesses.
That’s the reason for the charm offensive – nothing to do with any genuine belief about needing to be part of the community.
Our economy has lots of parasites feeding on the wealth created by others. The ASB and its Aussie mates are the biggest bludgers.
I’m pleased these banks are having a harder time and I hope their spending of millions to buy kiwi goodwill is a failure.
9.11.09
Bad Banks leaflet #4: The Rich Have Stolen the Economy
The leaflet aims to connect with some of the issues raised in the film, in particular the massive government bailouts of the world's biggest banks, but it also points towards a more fundamental crisis of the system. On the back page of the leaflet is Grant Morgan's short-essay, 'Senior investment guru forecasts longrun damage to capitalism's profits'.
At the same time as we provide a "big picture" analysis of the global economic crisis and it's fallout, we need to be looking at what immediate demands the Bad Banks campaign can raise. This leaflet promotes a Financial Transaction Tax (FTT) to net the big banks and other financial speculators. A small percentage tax on financial transactions would easily make up for tax revenue lost as a result of removing GST tax off food, a demand made popular last year by RAM-Residents Action Movement (http://www.ram.org.nz/).
While the leaflet is intended to connect with people attending Michael Moore's new film, it can still be used on other Bad Banks stalls in combination with the leaflets already produced. If you would like bulk copies printed and sent to you, email Len office@sworker.pl.net.
7.11.09
Banks know there's a bad mood rising
The Big Four Australian-owned banks know that the public mood is against them, because, well, they're interest gouging, profit-taking, tax dodgers - there's not much to like!
But they're trying to do the impossible and suck up to us anyway. See the NZ Herald article below, 'Banks: your new best friend'. In the article, the BNZ's person in charge of media spin, Dianne Maxwell, says "Banks just genuinely believe that we need to be a part of the community". That's a hard sell when you've just been caught avoiding $661 million of tax.
This clumsy attempt at sucking up to us could seriously backfire. Most people will see it for what it is, and if we can highlight the banks' deception, perhaps we can turn the mood even more sour against them. And in doing so we can seek to achieve a higher public profile for pro-grassroots policy demands like removing GST off food and introducing a Financial Transaction Tax instead, which would force the banks and other "fat cat" financial speculators to pay a greater share of the tax burden than they do now.
But they're trying to do the impossible and suck up to us anyway. See the NZ Herald article below, 'Banks: your new best friend'. In the article, the BNZ's person in charge of media spin, Dianne Maxwell, says "Banks just genuinely believe that we need to be a part of the community". That's a hard sell when you've just been caught avoiding $661 million of tax.
This clumsy attempt at sucking up to us could seriously backfire. Most people will see it for what it is, and if we can highlight the banks' deception, perhaps we can turn the mood even more sour against them. And in doing so we can seek to achieve a higher public profile for pro-grassroots policy demands like removing GST off food and introducing a Financial Transaction Tax instead, which would force the banks and other "fat cat" financial speculators to pay a greater share of the tax burden than they do now.
Banks: your new best friend
by Adam Bennett
from NZ Herald
7 November 2009
You may have noticed the big Australian-owned banks trying to cuddle up to you lately.
In one television commercial a big clumsy Westpac guy, prompted by wordless admonitions from a bunch of everyday Kiwis, eventually does the right thing by going to some inconvenience to retrieve his discarded icecream wrapper from the sea.
ASB Bank, on the other hand, is trying to convince people it is one of us, running adverts telling us it has been a "Kiwi bank" since 1847.
3.11.09
Free public transport instead of bailouts for the banks
Rather than bailing out the banks with trillions of dollars of public money, which governments in Europe and North America have been doing, ecosocialists in Britain are calling for "environmentally friendly job creation" and "a massively expanded public transport system that is fully integrated, publicly owned and free".
£40bn more to be added to banking bail-out ‘fiddle’
from Socialist Resistance
3 November 2009
Today, it has been announced that another £40 billion is to go into the Lloyds/HBOS & RBS Bank bail-outs. Alastair Darling says it represents a “better deal for the taxpayer”. But “better deal for the taxpayer” than what?
The reality in fact is that best deal for the tax payer would be the complete nationalisation of all these banks without compensation, this since without the state’s intervention they’d all already be bankrupt and likely have dragged down the entire UK banking system with them. This would have made most shares and not only those of the Banks completely worthless.
Given the Government stepped in precisely to avoid the latter, and indeed to avoid the possible collapse of the entire Capitalist system as a whole, surely the very least a due diligent, astute and businessman-like ‘taxpayer’ should have expected is for ‘the state’ to have picked up these bankrupt businesses lock stock and barrel for absolutely nothing - especially given the unknown liabilities being taken on. That’s usually what happens in the real ‘free market’ world, and in some cases with criminal/civil proceedings being taken out against those responsible for the bankruptcy.
However, instead of taking over these banks entirely as it did with Northern Rock, the Government decided instead to allow these banks’ shareholders to keep their shares, giving them a financial value they wouldn’t otherwise possess. In so doing the Government effectively unnecessarily transferred many £billions of ‘taxpayers’ money directly to the value of the share portfolios of those banks’ current and former investors.
Furthermore, if the Government’s plans work out and the share-value of these banks rise and the banks themselves can be re-floated (i.e. re-privatised) the biggest beneficiary won’t be so much the taxpayer who has effectively taken on all of these banks’ entire liabilities and the ‘risks’ associated with them (and will likely continue to do so), but their existing private shareholders i.e the very same people who had they invested in other sectors of the economy would have lost their shirts and have nothing to show for their investment whatsoever!
The part nationalisation of Lloyds/HBOS/RBS is one humongous fiddle that needs exposing. It’s not the nationalisation part that’s wrong but that the state has decided to reward the shareholders of these otherwise bankrupt banks with anything (i.e. a part share in a nationalised bank) and is currently directing huge resources to their re-privatisation.
Also, if state intervention including nationalisation is right for the banks (and/or under certain circumstances) why not other sectors of the economy in other circumstances? And if such huge sums of money can be found almost at a drop of a hat to ’sort out the banks’ (the £40 billion injection today just further shores up existing investors, will not create any new jobs, but rather is to be accompanied with staff cuts) why not much smaller amounts for environmentally ‘friendly’, job creation and economically more reflationary measures such as a massively expanded public transport system that is fully integrated, publicly owned and free to everyone at the point of use, such as is being advocated by the Campaign for Free Public Transport?
Along with the complete nationalisation of Lloyds/HBOS/RBS without compensation, free and better public transport and many other similar ideas would be much ‘better value’ to the taxpayer, whatever they cost, than the £40bn being used to re-capitalise these otherwise ‘bankrupt’ banks today, and the ultimate purpose of which as already indicated, is to nothing other than to assist in their future re-privatisation.
We really should be making the bankers and bank shareholders pay for the financial shit we’re in rather than rewarding them! Plus if we can find the money to bail-out and re-capitalise the banks, which we wouldn’t actually need if we owned them outright, then that should be being used to defend existing jobs and to create new ones and/or avoiding us ordinary folk having to pay for it.
1.11.09
US protest against the banksters
by Mary Bottari
from PR Watch.org
26 October 2009
With the newspapers full of talk about “zombie” banks and parasitic “vampire squid” financial institutions, it was particularly fitting that the “Showdown in Chicago” started with a ghoulish group of zombies rocking out to Michael Jackson's “Thriller.” Chicago's own South Shore Drill Team opened the three days of banks protests with a bang and had the crowd of thousands of activists dancing in no time.
The Showdown promises to be the first major American protest against the banks since the financial meltdown in September 2008. Thousands are expected to join three days of educational activities and the large march on Tuesday to the American Bankers Association (ABA) convention at the downtown Sheraton hotel.
The Reverend Eugene Barnes of the Central Illinois Organizing Project opened the evening’s festivities, stating:
“Welcome to the Showdown in Chicago, we have come together to reclaim America and hold Wall Street accountable. Imagine a story as terrible as this, the same financial institutions that created the crisis, sent the economy into a tailspin, handed out bonuses on top of bonuses, and needed hundreds of billions of dollars of taxpayers money, are back in business as usual. They are spending millions on Capitol Hill trying to defeat legislation that would help ordinary people and strengthen our economy. Each of us has traveled here to Chicago today because we will not stand what is being done to our families and communities. If we needed confirmation that we are all in this together, the financial crisis caused by Wall Street is living proof. Everyone has been impacted by the greed of the big banks. Bank-owned properties are littering our communities, rising unemployment, sky-high credit card interest rates, payday loans at 1,000% interest, and not to mention billions of dollars in lost pensions. It is a sad fact when you are 65 years old and you realize you have to go back to work. We have come here in Chicago because we are sick and tired of being sick and tired, but we are also here because we have hope because we know America can do better. It is time to put people first.”
Here is a smattering of the speakers who followed:
* Tom Balanoff, the President of Service Employees International Union (SEIU) Illinois, noted that not a single person in this room caused the economic crisis. He reminded the crowd that it was appropriate that they were are starting this movement for reform of the financial system in the same city where the push for an eight-hour workday began and spread around the globe, referring to the 1886 Haymarket massacre.
* U.S. Senator Dick Durbin of Illinois demonstrated that he was in touch by showing up and telling harrowing tales of hard-working constituents who had been scammed by adjustable rate mortgage firms. Even though the Senate failed to pass legislation that would have allowed judges the discretion to modify mortgages to help keep people in their homes, Senator Durbin said he had not giving up the fight. He also hinted that he working on some new approaches, including an idea that would allow families whose homes have been foreclosed on to rent their own homes from the banks, keeping them off the streets and keeping the homes occupied and cared for. He noted, “We are working on this idea, and it would be helpful if one bank would step up to the idea.”
* And, the audience heard from regular folks as well: people caught in the payday loan trap, like Mitzi Rivers-Singleton of Witchita, Kansas, who finally worked her way our of crippling debt with the help of a credit union and a local community group. She said, “I stand with you toe to toe up against big banks. I want to let the know that enough is enough, so I tell my friends and family you don't go there. You have other options.”
But this was the warm up act. After the welcoming comments, the activists took to the streets. Carrying signs featuring Dorothea Lange’s famous photo of a Depression Era mom with her two children. The activists marched through the streets to the Sheraton where the ABA was meeting, chanting: “ABA, you’re the worst! It’s time to put people first!” And, “Bailout? No, thanks! Bust up big banks!” And, “Enough is enough!” Huge posters portraying Jamie Dimon of JPMorgan and Citigroup’s Vikram Pandit were part of the crowd.
The rambunctious, but peaceful, crowd gathered outside the hotel, quickly attracting a large police presence. At least seven luxurious limousines pulled up in front of the Sheraton, but their parties seemed reluctant to appear and face the crowd. Soon a large group of well-dressed people exited the Sheraton chanting. At first, this reporter was confused. Could this be the bankers rushing their own limos? But when I recognized Hugh Espey of Iowa Citizens for Community Improvement, it became clear that these were protestors, too. They were chanting: “We’ll be back!” Later, “We laid low in the building all day until we simultaneously converged on the lobby and burst into changes. It was all very quiet and then all of a sudden it was very loud,” Espey said with a grin on his face.
Aretha Franklin was a theme of the evening as a singer performed “Think” at the Showdown conference, and one activist sang “Shame, shame, shame on you,” to the tune of her song “Chain of Fools” in front of the Sheraton. Oddly enough, none of the Banksters seemed to share the sentiment.
The protestors attempted to deliver a letter to ABA President Edward Yingling listing their concerns and demands, but no representative of the ABA would come out to accept the letter, guaranteeing that the protestors would try again later.
See also moves in Britain to break up big banks, go to Government to break up the banks.
28.10.09
Follow my lead: ditch that tax-dodging bank
by Finlay MacDonald
from Sunday Star Times
18 October 2009
IT'S EARLY for New Year's resolutions, I know, but here's a suggestion in advance: fire your Australian-owned bank. If you need a reason, look no further than the recent billion-dollar judgement against Westpac for tax avoidance. That came on the back of a similar judgement against the BNZ for half a billion. Tell your Aussie bank you're mad as hell and you're not going to take this any more!
Why Do Bankers Make So Much Money?
Below are some instructive comments from Rick Bookstaber, formerly a senior risk manager and derivatives creator for big banks in America.
Speaking from the point of view of a somewhat cynical insider who retains his essential faith in "free markets", Bookstaber comments: "I think the invocations of talent for money producers in finance are akin to those that, in times past, were set aside for the mystical powers of saints and witches."
Speaking from the point of view of a somewhat cynical insider who retains his essential faith in "free markets", Bookstaber comments: "I think the invocations of talent for money producers in finance are akin to those that, in times past, were set aside for the mystical powers of saints and witches."
Why Do Bankers Make So Much Money?
by Rick Bookstaber
23 October 2009
A tenet of economics is that in competitive markets there are no economic rents. That is, people get fairly paid for their efforts, their capital input, and for bearing risk. They are not paid any more than is necessary as an incentive for production. In trying to understand the reason for the huge pay scale within the finance industry, we can either try to justify the pay level as being a fair one in terms of the competitive market place, or ask in what ways the financial industry deviates from the competitive economic model in order to allow economic rents.
Do the banks operate in a competitive market?
No one expects competitive levels of compensation when there are deviations from a competitive market. In what ways might the banks – and here I mean the largest banks and those banks that morphed over the past year from being investment banks – fall away from the model of pure competition?
One way is through creating inefficiencies to keep competitive forces at bay. Banks can do this, for example, by constructing informational asymmetries between themselves and their clients. This gets into those pages of small print that you see in various investment and loan contracts. What we might call gotcha clauses and what the banks call revenue enhancers. And it also gets into the use of complex derivatives and other “innovative products” that are hard for the clients to understand, much less price.
Another way is to misprice risk and push it into other parts of the economy. The fair economic payoff increases with the amount of risk taken. If a bank takes on more risk it should get a higher expected payoff. If the bank can get paid as if it is taking on risk while actually pushing the risk onto someone else, then it will start to pull in economic rents. The use of innovative products comes up again in this context. They provide a vehicle for the banks to push risk to others at a less than fair price. Or, they can push the risk onto the taxpayers by hiding the risk and then invoking the too-big-to-fail protections when it comes to be realized. The current “heads I win, tails you lose” debate centers precisely on this point.
A third, and most obvious reason banks might not be economically competitive entities is the organization of the industry. There are barriers to entry. No one can just decide to set up a major bank. And there are constraint in the amount of business any one bank can do. As we have seen with Citigroup, there finally are diseconomies of scale – after a point the communication and management issues make the bank less efficient and more prone to crisis. If there is fixed supply, then the banks can push up the price of their services. The crisis over this past year has made matters worse. If you are one of those still standing, you are a beneficiary of that crisis, which has choked off the supply even further.
Are the workers getting paid fairly for their efforts?
An alternative to the idea that the industry is not competitive is that the industry really is competitive and those who are getting these outsized paychecks are being fairly compensated for their efforts. This comes back to the term we hear bandied about in conversations on banker compensation: talent.
There is no denying there are many smart people in the banking industry. (Though I think from a social welfare standpoint, we might have done better if some of those physicist and mathematicians that populate the ranks of the banks had found greener pastures in, say, the biological sciences). But I don’t buy the notion that there are so many who have the level of talent that justifies tens and even hundreds of million in compensation. I think this level of compensation, and the notion of talent behind it, is the result of the inherent uncertainty in the financial enterprise, one that makes it very difficult to assess talent. Indeed, I think the invocations of talent for money producers in finance are akin to those that, in times past, were set aside for the mystical powers of saints and witches.
Far more than other fields of endeavor, it is difficult in finance to tell if someone is good or lucky. A top trader or hedge fund manager might have a Sharpe Ratio of 1.0 or 2.0.But that Sharpe Ratio is nothing less that a statement that if you get a hundred people trading, a few will do well just by luck. (And it doesn’t matter if that Sharpe Ratio occurred over the period of one year or twenty – though the greater sample size helps, it is still the same point in terms of statistical inference, so a long track record does not get you away from this problem).
How does this tie in with saints and witches? People want certainty, and if they can’t get the certainty they want from the empirical, they fall back on superstition and witchcraft, or at least they used to way back when. In some medieval village, a priest prayed and a supplicant was healed. The odds that the supplicant would have healed spontaneously was whatever it was, but there was more of a sense of certainty to feel that it was the manifestation of healing power.
There were false saints and true saints. The difference between them became manifest over time by how frequently the prayers were answered with affirmative results. Not that any saint had to bat a thousand. Sometimes there were understandable, exogenous circumstances that inhibited the saint’s healing talents from being operative, most commonly a lack of righteousness on the part of the supplicant, occasionally an inevitability, a higher power that overshadowed that of the saint. Maybe the will of God, maybe an unknown, evil curse.
I hope the analogy is apparent. And there is a related one, an analogy to Pascal's Wager. The bank should wager that the talent of its star employee exists, because it has much to gain over time if it does, while if it does not exist, the bank will lose little in expected terms. And in a competitive world, it is even worse if they incorrectly let the talent go for lack of proper compensation, because then some competitor will pick it up.
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