Tag Archives: kleptocracy

Aussie Banks Put Taxpayers On The Hook For Another $130+ Billion

7 Nov

Back in July we saw that Australia is a kleptocracy (“rule by thieves”).

Courtesy of esteemed business commentator Robert Gottliebsen, we discovered that the very design of our political system means that our political parties are beholden to the banks who loan them the money to run their election campaigns:

To understand the pivotal role of Australian banks in the funding of political parties requires a deep knowledge of how the system works.

For the most part, in the vicinity of three quarters of a major party’s funding in most elections comes from the public purse. The ‘public purse’ amounts are allocated to parties after the election in accordance with the proportion of the votes that are achieved.

But there is no forward allocation of money. The distribution of ‘public purse’ money is strictly governed by the proportion of the votes actually achieved.

ALP organisers are not looking forward to meeting with their bankers as the election nears. They are deeply apprehensive that as a result of current opinion polls, their bankers will slash the amount of election funding available to the ALP and lock it into a low vote.

Some criticised my article as only assuming that banks actually use this power over our politicians to ensure favourable policies.

However, while tacitly conceding that “yes”, it does look bad that our political parties must go begging bowl in hand to the banks to get loans to cover the cost of running their election campaigns, critics and doubters continue to wilfully ignore the multitudinous evidence in support of our basic contention.

Examples?

The Guarantee Scheme for Large Deposits and Wholesale Funding that was introduced in response to the GFC. It remains the only thing standing between our banks and their having their credit ratings slashed by the ratings agencies.

The ban on short-selling of bank shares.

And the daddy of them all, the Clean Energy Future legislation. Politicians and cheerleaders purport it to be all about using “market mechanisms” to reduce CO2 emissions. In reality, it is nothing more than a new bankster-designed derivatives scam, to replace the banksters’ mortgage-backed securities derivatives scam that caused the ongoing and worsening GFC (see Ticking Time Bomb Hidden In The Carbon Tax).

Now, we have yet more evidence that banksters rule this country. Just as they rule the USA, the UK, and Europe.

What is this latest evidence?

The Green-Labor government, enthusiastically prompted, aided and abetted by the Coalition, has just passed legislation that further helps give a leg up to the banks … while skewering we the taxpayers ever more firmly on the bankers’ hook (debt).

And putting your bank savings at risk too.

Michael West at the SMH takes up the story:

Here is a tale of two leg-ups: a tale to raise the hackles of the so-called 99 per cent and a tale which plays to the contrast between the US and Australia when it comes to corporate welfare.

Late last week, amid the parliamentary din surrounding the carbon tax, a little bill slipped through the Senate with minimal fuss.

This was the “covered bond” legislation – yet another friendly leg-up to the banks and one which effectively lumps another $130 billion of risk into the lap of taxpayers.

But first, late on Tuesday night this little story flashed up on Bloomberg: “Bank of America hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

”The Federal Reserve and Federal Deposit Insurance Corp disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorised to speak publicly.”

Translating from “Bloomglish” into English: a cabal of powerful “counterparties” (read banks) had, with the connivance of the US Fed, shifted a load of derivatives (probably the gnarliest credit default swaps on their books) from that part of the bank not backed by taxpayers to that part of the bank which was backed by taxpayers

Yep. There’s that word “derivatives” again.

… on these fair shores, the banks now enjoy the fillip from “covered bonds”. Covered bonds will allow the banks to raise capital a bit more cheaply. They are issued to big institutional investors but, unlike other corporate bonds, rank ahead of depositors in the event of trouble. They are safer, therefore carry a lower yield.

Let’s not forget the banks have already been propped by guarantees on their wholesale funding and deposits, not to mention the short-selling ban and asset swap arrangements with the Reserve Bank.

Now, with covered bonds – which had previously not been allowed as they provide senior secured funding for bondholders at the expense of depositors – the taxpayer is on the hook for banks’ deposit liabilities.

Mind you the taxpayer is on the hook anyway as the financial crisis demonstrated banks are a cherished species too big to fail.

Observers estimate their cost of funds should be 30 basis points lower thanks to covered bonds, although few expect this little earner to be passed on to customers.

Covered bonds shift risk away from the wholesale bond investors to the taxpayers – and we are talking about $130 billion worth of risk, possibly increasing as time passes. There is no quid pro quo. At least with the sovereign guarantee for wholesale funding the banks were required to pay a fee.

This leg-up is perhaps best-described as a backdoor sovereign guarantee.

Bank shareholders can take comfort from the fact that their government lobbyists, as usual, have been working overtime to have their way with Canberra.

Regular readers will not be in the least surprised to learn that the Banking Amendment (Covered Bonds) Bill 2011 that enabled this latest leg-up for banks, enjoyed enthusiastic bipartisan support from our political class.

Indeed, Hansard reveals that the only real point of argument between our political parties, was over the fact that the Shadow Treasurer Joe Hockey wanted credit for the idea. The Opposition were rather put out that Labor had simply stolen Joe’s idea and acted on it 12 months later … in just the same way that Labor recently stole the Liberal Party’s plan to steal your super.

Oh, by the way … did we forget to mention?

Until recently, Joe’s wife was head of foreign exchange and global finance at Deutsche Bank. A 14-year investment bankstering veteran, in fact.

And Joe himself is a banking and finance lawyer, who “kiboshed a ‘phenomenal job’ in New York as chief advisor to the CEO of one of the world’s biggest banks” to return home “for the ‘unfinished business’ of politics and to fulfil a lifelong destiny as ‘a warrior for the Australian people'”.

Lovable, cuddly, amiable Joe. Can there possibly be three lower forms of bloodsucking societal parasite – the lawyer, banker, and politician? Our Joe is all three.

Just like his close mate from uni, and Goldman Sachs’ man in Oz, carbon-trading pusher Malcolm Turnbull.

Interestingly, only one year ago when Joe was first floating his 9-point banking plan that included the covered bond idea, both the RBA and the banking regulator APRA were apparently not overly enthusiastic.

From Dow Jones Newswires via The Australian, 30 November 2010:

The introduction of covered bonds into Australia could threaten depositors and debt investors, both the RBA and APRA regulator said. Covered bonds are common in Europe but Australian financial institutions can’t issue them because domestic law requires banks to place depositors above all other creditors in their claims on assets.

The worry for regulators is the bonds would subordinate depositors as they typically give the bond-buyer recourse to both the issuer and the pool of mortgages, or other secured collateral that stay on the bank’s books and “cover” the bond.

“Covered bonds are common in Europe”. The epicentre of ongoing global financial turmoil and banking systemic risk.

Hmmmmm. Another brilliant idea then, that we must follow.

Between them, Australia’s big four banks have a fund-raising task of around $140 billion, much of which is sourced in foreign-currency borrowing, though domestic investor appetite is strong. The smaller banks have largely depended on the securitisation market and are further hurt by high deposit costs.

Smaller institutions in Australia fear they would be at a disadvantage if the major lenders could issue covered bonds, especially as the debt would probably initially be pitched to overseas investors who are mostly familiar with the biggest banks.

So not only does this enthusiastically bipartisan-supported legislation benefit the big banks, at the risk of savers and taxpayers.

Contrary to all the high-sounding rhetoric from both “sides” of Australian politics about “free markets” and increasing competition, the covered bond legislation will actually reduce competition in the domestic banking sector, in favour of the Big Four banks.

Shadow Assistant Treasurer Mathias Cormann tacitly conceded as much, in his speech in favour of the Bill in the Senate:

Covered bonds are likely to be used mainly by the big four banks, although the bill does provide for ADIs to enter into an aggregating entity to issue covered bonds as well. It is unlikely that the smallest authorised deposit-taking institutions will use this funding facility.

And sure enough, the Commonwealth and the NAB are the first out of the blocks to increase their share of the Big Four’s monopoly. And hence, increase their Too Big Too Fail protected species status:

Two of Australia’s biggest banks are planning to test support from global investors for covered bonds, with the push coming just days after Canberra approved new rules allowing banks to sell the new form of bonds.

The race is on between Commonwealth Bank and National Australia Bank to become the first Australian lender to issue a covered bond, with both planning a series of investor meetings in Europe and the US from later this month.

A covered bond gives money market investors a claim on the underlying assets such as mortgages if a bank runs into difficulty.

Previously depositors had the rights to all of the assets of a failing bank.

It’s very important to understand the significance of this new legislation.

A vital place to start, is in understanding what a bank considers to be an “Asset”, and what it considers to be a “Liability”.

Most Australians simply have no clue that the vast majority of our banks’ so-called “Assets”, are actually loans.  Your bank loan – whether it be a housing loan, car (personal) loan, or business loan, is considered the bank’s asset. Recall what we saw above:

The worry for regulators is the bonds would subordinate depositors as they typically give the bond-buyer recourse to both the issuer and the pool of mortgages, or other secured collateral that stay on the bank’s books and “cover” the bond.

Your mortgage or car loan or whatever is the bank’s “asset”, which they will now put into “pools” and use as collateral for their new ‘covered bonds’. In practical reality, these are just another form of Residential Mortgage-Backed Security (RMBS), or Collateralised Debt Obligation (CDO). A derivative. Or as Warren Buffet called them in 2003, “financial weapons of mass destruction”.

What about bank “Liabilities”?

Your “savings” with the bank, are their liability.  If you come to the bank and want your money, they have to give it to you (in popular urban myth, at least).

So how to understand the significance of these “covered bonds”, in context of bank Assets versus Liabilities?

Here’s how Senator Cormann described covered bonds in his Senate speech:

Covered bonds are bonds issued by a financial institution that is secured by a pool of assets.

Remember, the “assets” of banks are actually the loans they sign people up to. So the “pool of assets” that is the security (collateral) for the covered bonds that our banks will sell to raise cash from foreign investors, will include “assets” like your loan with the bank.

Can you say “My house/car/business loan is not owned by NAB; it is really owned by a Russian mafia-financed Wall Street-based hedge fund, or an “Old European monied class” generationally wealthy inbred globalist lunatic’s private investment fund, or a Chinese sovereign wealth fund”?

Back to Senator Cormann:

In the event of [bank] insolvency, the holder has recourse to the pool of assets underpinning the bonds, and the holders of covered bonds have first rights to the pool of assets covering them ahead of shareholders and ahead of other holders of debt.

If the bank goes belly up … say, because Australia’s housing market continues its downhill slide, and the banking Ponzi scheme of selling ever more loans implodes here in Australia, just as it has throughout the Western world … then holders of these new covered bonds have first rights to the banks’ “assets”. Meaning, they have first rights to you, your “assets” and your future earnings, my dear debt slave.

But not only that. If you are a saver, that means you are effectively a holder of bank debt. Remember – a bank’s debts (or “liabilities”) include what they owe you – the savings of depositors in that bank.

And the key thing to understand, is that buyers of these new covered bonds have first rights to any real (ie, not loan) “assets” the bank may have, before you get your savings.

Our politicians are keen to reassure otherwise, of course. Here’s Senator Cormann again:

The rights of other holders of debt are protected in two ways. First, the proportion of Australian assets [loans] that can be committed to covered bond pools is limited to eight per cent. Second, the financial claim scheme provides a government guarantee for small depositors, currently up to a limit of $1 million, which will be reduced to $250,000 from February 2012. These protections are crucial, because the introduction of covered bonds is a major departure from one of the core elements of the banking system in Australia, which has been the primacy of the claims of depositors.

Ok.

So even though the government’s new law gives (foreign) holders of covered bonds first rights to the banks “assets”, even before other holders of bank debt such as Aussie savers (ie, depositors), the government wants to reassure you that your savings will be protected anyway, by the government guarantee for small depositors.

Ummmm.

Can you see the circular reasoning, the gaping flaw in logic (ie, the Big Lie) here?

The government has no money with which to guarantee anything.

Firstly, a government guarantee is simply a promise to use taxpayers’ money for something.

So in this instance, the government is saying don’t worry, all is well with covered bonds, because even though holders of those bonds get first rights on the banks’ assets, if that means Aussie savers are left out when (not if) a bank collapses, we the government will guarantee to pay out the Aussie savers who have been shafted using their own future earnings (taxes).

Secondly, our government (ie, the taxpayer) is under a mountain of debt already.

$218 billion worth of debt, in fact.

And they are not making any headway at all on reducing that debt. Quite the reverse:

Click to enlarge | Source: Australian Office of Financial Management (AOFM)

Their latest budget is already shot to hell. In just 5 months.

So when (not if) our banks go to the wall – as they will, since according to Fitch Ratings ours are amongst the most vulnerable to Europe’s debt crisis – then our government has no savings, no surplus with which to “guarantee” anything.

All they have, is the promise of the taxes you and your kids will pay in the future.

Oh yes, silly me.

There is another source of “money” with which the government can “guarantee” the safety of your savings.

They can borrow more.

But then … that’s no solution either.

Because you’ll just have to pay that back too.

You and your kids.

At its dark heart, Australia’s political system is no different to the USA. The UK. Or Europe.

We are all captive to banksters.

Our politicians of all sides are not only beholden to the banks (campaign funding loans).

They not only pass laws that only benefit banksters, at the expense of society (carbon derivatives scheme scam).

They are selling this country … they are selling you, the worker (and thus, the wealth generator) … into perpetual debt servitude.

With every single additional dollar of debt, with every financial guarantee, with every legislative leg-up for the banks, with every pledge of money that isn’t theirs to globalist parasite bodies like the UN and the IMF, what our politicians are really doing is this.

They are selling you, and your children, to foreigners (see Our Government *Officially* Does Not Know Who Owns More Than 60% Of Australia’s Debt).

Australia is not a democracy.

It is a kleptocracy.

Ruled by thieves:

Senator CORMANN (Western Australia) (13:11): As I have mentioned, this is an idea that was promoted by the shadow Treasurer, Joe Hockey, as far back as October last year. It was a very prominent part of the coalition’s nine-point banking plan and was copied in Treasurer Swan’s announcement of the government’s Competitive and Sustainable Banking System plan. While we are disappointed that it took the Treasurer so long to finally act on this, we are pleased that we are now finally dealing with this legislation and commend it to the Senate.

William Black, associate professor of Law and Economics, former financial regulator, and author of “The Best Way To Rob A Bank Is To Own One”, says it best.

To rob a country … own a bank:

The late George Carlin was right (must watch):

Funding For Policy Scandal – Australia Is A Kleptocracy

26 Jul

Do you want to know how deep the rabbit hole goes?

h/t to Twitterer @Kmorefive for bringing the following to my attention.

From Business Spectator (emphasis added) –

An ALP funding horror

Robert Gottliebsen

If an election is held in the next few months, Australian banks will play a big role in the outcome. And unless there is a dramatic change in the fortunes of the parties, the banks will still be key players if (as is likely) the next election is two years away.

Australia has rarely seen such a banking/election event in its history and it certainly did not occur in recent elections. The looming role of the banks could force the ALP into a pre-election leadership change and in extreme situations force it to modify its carbon tax.

To understand the pivotal role of Australian banks in the funding of political parties requires a deep knowledge of how the system works.

For the most part, in the vicinity of three quarters of a major party’s funding in most elections comes from the public purse. The ‘public purse’ amounts are allocated to parties after the election in accordance with the proportion of the votes that are achieved.

But there is no forward allocation of money. The distribution of ‘public purse’ money is strictly governed by the proportion of the votes actually achieved.

ALP organisers are not looking forward to meeting with their bankers as the election nears. They are deeply apprehensive that as a result of current opinion polls, their bankers will slash the amount of election funding available to the ALP and lock it into a low vote.

Conversely, Liberal and National Party organisers believe that as a result of their opinion polling they will receive a huge increase in support from their bankers to fund unprecedented amounts of advertising and promotion.

If, theoretically, an election was to be held in a few months’ time, ALP organisers would go to their bankers and negotiate to borrow the money required to fund the campaign expecting to pay it back when they receive their ‘public purse’ money after the election. This might be the conversation:

Banker: What proportion of the votes do the opinion polls suggest you will gain?

ALP organiser: The current Nielson poll suggests we would gain 26 per cent of the primary vote but we know we will do better.

Banker: Maybe you will, but if I lend you money that represents the amount you will receive from the ‘public purse’ if you attained, say, 40 per cent of the vote, I might bankrupt the ALP if you only receive 26 per cent because you could not pay me back. That would not only give my bank a bad debt but it would be disastrous for Australian democracy.

ALP organiser: But it will be disastrous for Australian democracy if we are decimated at the polls because we have only meagre advertising money.

Banker: I am sorry but I have shareholders and I need a safety margin. I will fund your advertising on the basis that you receive 20 per cent of the votes. You will need to be much more skilled in using non-advertising promotions.

The Coalition conversations with their bankers would be the exact reverse of this.

The ALP organisers fear that the party is going to be much more dependent on union contributions than it has been in recent times. This may tend to spin the party to the left, although many unions are opposed to the carbon tax. Those unions opposed to the carbon tax may require modification before they inject ‘rescue’ money. However, if they see Tony Abbott moving to water down industrial relations legislation they may be tempted to dig deep.

In the case of the Coalition, the parties will depend less on contributions from party members and corporate supporters, assuming they maintain the current lead in the polls.

In reality, if the current opinion poll levels are maintained then it will make it very difficult for the ALP to gain the election funding to change its fortunes at the polls.

As the horror of this outcome becomes apparent to party members, they may seek to replace the prime minister with someone who might either lift the party’s ratings in the polls or who will attract more union rescue money. The ALP has its back to the wall.

There you have it.

The banksters do have a powerful, direct influence over the direction this nation goes.

Now we understand even more clearly, why a Banksters’ Glee Club comprising a clear majority bank-employed “leading” economists has been publicly barracking for the government’s carbon pricing scheme scam.

Mr Gottliebsen’s revelations on how electoral funding really works in practice are seriously troubling, in their implications for what amounts to a clear opening for the perversion of the democratic process.

And yet, I think he is (perhaps naively?) completely misunderstanding what those implications are, in terms of the most controversial public policy right now.

Quite simply, he’s reading the implications backwards.

Because I suspect that the ALP will not have much difficulty in getting the loans they want/need for their election campaign. Especially whilstever they cling to the bankster-driven “pricing carbon” policy.

And in terms of the Liberal Party, in light of the constant appeals for donations that seemingly appear in all of their public communications collateral (emails, newsletters etc), I suspect that the anti-carbon tax Abbott-led Coalition is not sitting as prettily with their bankers as Mr Gottliebsen seems to believe.

Now, to an interesting and directly related front.

If our basic contention – as implied by Mr Gottliebsen’s article – is that our political parties’ policies can be and ultimately are determined by their financial backers’ willingness to loan (or donate) to their election campaign funding, then we only see further supporting evidence for that somewhat chilling reality check in this news story about another of Green-Labor’s proposed policies (emphasis added) –

About 1800 cement industry jobs are at risk from Labor’s carbon tax and proposed new shipping rules, the federal opposition says.

Nationals leader Warren Truss says the $2 billion a year industry is facing a double whammy under the Gillard government.

He says domestic cement manufacturers could be killed off by “dirtier” imports, made cheaper under the carbon tax.

“The paradox is Australian cement production is a leader in low emission technology and any shift to imports will force global CO2 emissions to rise,” Mr Truss said in a statement.

Mr Truss said Australian cement had the world’s second lowest greenhouse gas emissions behind Japan.

“But the carbon tax will price Australia’s cleaner cement out of the market, giving the green light to our international competitors to boost their higher CO2-emitting production and flood Australia with dirty cement,” he said.

“… the Australian cement industry will be crushed by competitors who will not be paying a carbon tax.”

Mr Truss said Labor was also rewriting the Navigation Act to force businesses that ship products around Australia to use local, union-dominated vessels.

He said “unionised shipping” costs significantly more than current market rates, which would be another blow to the industry.

“Right now it costs about the same to ship cement from China to Australia as it does to ship it from Adelaide to Port Kembla,” he said.

Under the Gillard government’s sop to the maritime union, our biggest competitors in cement – China, Indonesia, Taiwan and Thailand – will dramatically undercut Australian suppliers on shipping costs alone.”

He said a large section of the cement manufacturing sector would not be compensated under the carbon tax plan.

The compensation package only applied to processing clinker, the first stage of making cement, he said.

“The second milling stage to make what we know as cement receives no compensation,” Mr Truss said.

So, the real reason why the Green-Labor Government has been slowly re-regulating (ie, re-unionising) the Australian economy … is because they need their money to finance their election campaign.

The lesson we must learn?

When it comes to the all-important consideration of why a politician or party really adopts the policy/s that they do, the Golden Rule always applies.

Follow The Money.

The following of which will always lead you down the rabbit hole … into the wonderland of global finance.

More honestly and accurately called, “bankstering”.

Ladies and gentlemen … we are not living in a democracy.

We are living in a kleptocracy.

What are you going to do about that?

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