The REAL Story Behind the Big Australian Bank Customer Gouging Policies

Today, a Sydney Morning Herald analysis of a Reserve Bank of
Australia report discovered that “The big four Australian banks [ANZ,
Commonwealth, NAB, and Westpac] have used the cover of the global financial
crisis to charge borrowers more than the increase in their own costs, resulting
in big profits for the lenders and much higher interest bills for many
customers… The analysis reveals that a borrower with a three-year fixed-rate
home loan of A$300,000 ($370,500) pays a personal contribution to extra bank
profit of between A$75 and A$125 of the monthly mortgage bill.”

Christopher Zinn, a spokesman for the consumer advocacy
group Choice, further added, “It's well documented that the large banks
profited in various ways from the financial downturn, including taking market
share from smaller competitors, and increasing their lending profit margins.''

Though big Australian banks were hit with a 1.3% to 1.4%
increase in funding costs, they increased interest rates on fixed rate
mortgages by 1.7% to 1.8%; on business loans by 2% or more; and on personal
loans by more than 3.4%.  By
gouging fixed rate mortgage holders, and business and personal loan holders,
the Australian banks were able to limit the increase in their ARMs  (1.1%) to less than their increase in
funding costs.

Steve Munchenberg, the chief executive of the Australian
Bankers Association, stated that these huge increase in interest rates were
necessary to compensate for the additional riskier profiles of their customers.
But Munchenberg's argument is circular and without merit because banks were
responsible for introducing more risk into the global financial system by
lobbying for the creation of complex derivative products that were never
intended to benefit the consumer but only to fatten the bottom line of banks.
When these products blew up because  consumers/institutions either:

(1) never fully understood what they were buying due to the
complexity of these products; or

(2) never fully understood what they were buying due to the
deliberate manner in which bankers misrepresented the safety of such products
to their customers,

banking executives rationalize their gouging of customers
because of the excessive risk that they themselves injected into the
marketplace.

But the REAL story behind this headline is that banks have
been gouging customers daily for decades before the advent of this current
financial crisis. Interest rates charged to customers should not have to be well
above a bank’s funding cost to be considered gouging.  In reality, given the fraudulent nature of our monetary
system, any interest rate charged on virtually zero labor should be considered
gouging. And the truth of our monetary system is that nearly every loan a bank
creates is merely a digital entry on a computer that requires zero labor and
one in which the paper cash that constitutes that loan is never even printed by
a Central Bank nor ever physically possessed by the commercial bank that
generated the loan. Ninety pecent or more of the global monetary base and supply consists of a
digital world of digital bytes assigned to various debtors and
creditors that enables banks to charge excessive interest rates at all times on their
unsuspecting marks at a cost of virtually zero labor for them and 100% deceit for their customers.

If you’ve ever had that gnawing feeling that something was
wrong with the banking system on a very fundamental level but could never
figure out exactly what is so wrong about the system, then focus on the big
picture. Focus on the minutiae, and you draw energy away from the larger issues
that should be commanding your attention. Focus on the minutiae and you may win
the short-term battle but you will definitely lose the long-term war.

If you’ve been right about the big picture for the past five
years, you’ve likely avoided huge losses and potentially have even made some
huge gains during the first phase of this monetary crisis. And continuing to be
right about the big picture will mean that your financial health will continue
to flourish even when phase 2 of the global monetary crisis kicks into top
gear. The minutiae distracts people from understanding the reality of the
system so that’s why the media loves to entangle the public in the minutiae.
For example, the recent up 2% on Monday, down 2% on Tuesday rollercoaster ride
of manipulated stock markets confuses and distracts investors from
understanding the big picture of the huge bubble underlying most major global
stock markets today.  And the
minutiae of stories about banks gouging their customers with excessive fees
distracts citizens from understanding the much more important big picture of
the fractional reserve lending scam.

About the author: JS Kim is the Chief Investment Strategist
and Managing Director of SmartKnowledgeU, LLC, a fiercely independent wealth
consultancy company that guides investors in the best ways to invest in gold
and silver through the progression of this global financial crisis.

Comments

[ozziindaus]

I can attest to this. I've made numerous money transfers back to OZ and got nailed with fees every time. My complaint is that I got nailed 2x the amount because I got the account number wrong. In another instance, the account had been closed for a few months and the fee went from $30 (normal int. transfer fee) to $80. I was too afraid to contact the bank in case they send me a whopper for actually doing something. Fuck them. It's well know that the most profitable banks in the world are Australian.

[TheGoat]

They will need to keep some of this cash. Recently legal proceedings have been commenced via a class action, the action is being bank rolled by a legal team called IMF (no not the actual IMF). This action claims millions of dollars compensation from the big 4 due to over changing customers for over drawn accounts.

The banking system here sucks and as I have said before with 2 of the banks holding over 50% of their assets as Aussie mortgages should our property bubble burst our banks are in serious trouble

[LeBalance]

Greetings, your most humble editor suggests a change from "understanding the much more important big picture" to "understanding the bigger picture." Take care. LB.

[Mitchman]

This is exactly the behavior one would expect from a party that has been granted a monopolistic franchise by the government.  We should not be surprised that this is the case.   However, it does beg the question as to why the smaller banks have not competed more effectively on the bais of price.

[Matto]

Market too small with only 20 million people.

Smaller participants have tended to struggle as they have limited brankc numbers outside of their region and struggle to implement technological improvements (online banking etc)

Most smaller participants pretty much just got devoured by the big 4 during the GFC (1)

[Anton LaVey]

The same thing is very true in Europe.

In France, for instance, the largest banks have recently admitted that the different fees levied on their customers represent 40% of their profits. Since individual customers represent 60% of the total activity of the French banks, this means customers are actually subsidizing the bank's profits.

Here is another take on this, which I found very interesting since (a) it is written from a French perspective and (b) it pretty much sums up the complaints of people the world over (some of the things that are said could have been written on ZH!).

Here is my personal translation - enjoy!

French banks have a debt ratio/leverage ratio of 30: the default risk is now permanent.

By Charles Dereeper, published on 05/21/2010

Would you like to know why France has intervened on a massive scale to save Greece? Hidden behind a pompous Euro "rescue plan", that was supposed not to cost anything to the French tax-payers, the reality is quite different.

BNP PARIBAS, SOCIETE GENERALE, CREDIT AGRICOLE... These three banks serve millions of customers in France. To say that they are 'managed' is quite an overstatement... Let's just say that they function with a risk level superior to that of a lot of hedge funds - you know, those nasty, evil  traders, that are 100% responsible for the crisis...

But let's take a look at the numbers in detail, since most people around me look at me in a strange way when I talk about them.

BNP has a total debt of 1,940 billion Euros. Its capitalization is around 60 billion. Their leverage is 32. All it would take is 3% of defaults on its loans, without any hope of recovering the original sums, for BNP to go bust. Quite a solid bank, don't you think?

SOC GEN has a total debt of 1054 billion Euros, to be compared with a capitalization of 43 billion Euros. Its leverage is 24.

CREDIT AGRICOLE has 1620 billion of Euros of debt vs a capitalization of  53 billion Euros, and a leverage of 30.

According to the BIS, the loans of French banks to Greece amount to 79 billion Euros.

In more normal times, Greece should have defaulted on its debt. The loaners would have been punished for their failure to correctly assess the risks. This would have practically made all the French banks go bust. They would then have been nationalized and re-capitalized.

Instead, French "fonctionnaires" and politicians orchestrated the stealing of public money, a constant for the past 30 years, by taking money from the piggy bank to guarantee the errors of Greece and allow it to reimburse its creditors.

In plain words: money was stolen from the French, to be given to the stockholders of the French banks, while the same stockholders should have lost everything. 

I don't know what the best solution is, but the message is clear: the "élites" will steal everything, down to the last penny, to save their toys that spit out imaginary money. If, just like me, you cannot support this way of doing, there is no point in voting anymore. We need to move to another country and stop supporting this mafia system with our work and our tax money.

This system can only exist for one reason, and one reason alone: the vast majority of citizens do not understand it, and cannot, therefore, argument and complain about it as they should. It is totally unacceptable that the ECB and all the others power-that-be let French Bank, or Deutsche Bank in Germany, have a leverage of 30.

The funniest thing about it, is that policians are explaining that a European law is being adopted to better control hedge funds. Once this law is in place, everything will be all right. I have heard this from French ministers very recently. They also sometimes say that a monetary union is impossible without an economic and budgetary union. What this means is that there is a level ground, an equality, between the Germans, who are hard workers and organized people and the Latin "wankers". In reality, allowing adjustements to take place between different nations is a way of admitting publically that French, Spanish, Greeks or Italians are inferior to the Germans. That would quite a smear on the dogma of SOLIDARITY and EQUALITY...

This reminds me of the East Germany government in the months before the fall of the Berlin Wall. The blindness was so amazing that one could not help but wonder how it could exist.

Charles Dereeper

You can read the whole article - in French - at this address:

http://www.abcbourse.com/analyses/chronique-les_banques_francaises_ont_un_effet_de_levier_de_30_le_risque_de_faillite_est_permanent-428.aspx

[Hephasteus]

Oh no we gouged on fees and they put us in our place. We are under control. We have been fixed and defeated. Yaa you good guys win!!