Tag Archives: Westpac

Our Banks Sell 30-Year Mortgages To 100 Year-Olds

1 Jun


Australia’s own sub-prime mortgage bubble has a face … and it’s very wrinkly.

From the always superb Michael West, of BusinessDay:

Why you’re never too old for the banks

Heather Simmers turned 102 years of age this week. When she was 98, Westpac signed her up for a 30-year mortgage. Lending that personal touch, the bank manager even made the sojourn to the Clem Jones Nursing Home in Bulimba to sign up Heather for the ”Rocket” investment loan.

It may seem an act of supreme optimism by Westpac to be providing a $440,000 loan facility to a customer who would soon receive her letter from Her Majesty. Yet it is not beyond the realms of possibility that Ms Simmers may have met her obligations.

The greatest authenticated age to which any human has ever lived is French woman Jeanne Louise Calment, who was born on February 21, 1875, and died at a nursing home in Arles in the south of France on August 4, 1997.

Had Jean Louise signed up for Westpac’s Rocket package at the age of 98, she could plausibly have met her obligations by the time she passed at the age of 122 years and 164 days – assuming she made early repayments. It is an attractive option of the Rocket facility that extra repayments can be made at any time without charge.

Incidentally, nine of the 10 oldest people in the world ever are women. But the man is still alive. He is Jiroemon Kimura, who lives in Japan and is 116 years and 43 days old.

Born on April 19, 1897, the supercentarian has survived the rule of no less than 61 Japanese prime ministers. And, as it happens, he is also a client of Westpac, having signed up for a Rocket facility (available with a special 100 per cent offset transaction account for a limited time only, conditions apply).

OK, just kidding, sorry. Mr Kimura is not a client of Westpac, as far as we are aware. He may be. As long as he could sign a piece of paper, he would certainly be eligible.

To be fair to Westpac, though, it is by no means alone in attending to the centarian market. If you are a mature reader of this column, and you are concerned that a Westpac bank manager is about to stride past your nursing station at any moment, toting a clipboard, a pen and a loan application form, fear not!

He could be from ANZ. When challenged during a legal dispute as to its practice of signing up an octogenarian – these are mere ankle-biters by Westpac standards – ANZ declared: ”We don’t discriminate against our customers on the basis of age.”

Dignity hath no bounds.

It would be remiss to omit the celebrated case of Storm Financial too, where the Commonwealth Bank was stitching up pensioners with margin loans.

When it comes to usury, as long as there is a potentially deceased estate as security for the loan, a customer’s age is no barrier. Though longevity is a nuisance for the banks when the ”buffer money” runs dry. This buffer is the extra loan that is structured into the package, for those with little or no income, to meet the interest payments on the main loan. Many of these are coming up for a refinance now.

THANK YOU Michael, for using the correct term!

Perhaps, like the insurance companies who fret about population age, the banks could consider ”longevity swaps” to hedge their rising exposure to the more, er, life-experienced demographic.

Europe’s biggest defence company, BAE Systems, recently struck the largest ever pensions insurance transaction, a £3.2 billion longevity swap to cover 31,000 pensioners. Insurers Legal & General and reinsurers Hannover Re agreed to take on 30 per cent and 70 per cent of the risk respectively.

There is also a risk for the banks that somebody might invent a longer life pill.

Returning to the case of Heather Simmers, Westpac recently and quietly forgave the loans to both Simmers and her 70-year-old daughter, Del Black. They had been inveigled into borrowing to invest in a dodgy Gold Coast property play touting 15 per cent returns. That quickly blew up.

Westpac executive Jim Tate told the Senate banking inquiry last year: ”It was an outright fraud. There is no question about that. Obviously the bank will be disgusted about it, and we would want to take action against the person involved, if it has not already been taken.”

Senator John Williams pointed out that Westpac had even provided oral references for Heather Simmers’ banker, David St Pierre, who had left the bank to work for another mortgage broker. Zero action taken, apart from the provision of job references.

As in the US, it is hard to think of a single action against a banker, by regulators or by the banks themselves, although the abuses of the credit boom are prolific. Bankers are clearly off limits, a protected species.

On Monday, we will reveal the results of an investigation into low doc lending in Australia, along with emails between banks and brokers – and claims of widespread forging of loan documents.

The banks and regulators have their stories ready. They question the credibility of those making the claims and blame any irregularities on ”rogue” mortgage brokers. The victims say the banks are the puppet-masters in a widespread systemic rort and the brokers are merely their agents.

“question the credibility of those making the claims” = The deceitful logic of the ad hominem fallacy.

“blame any irregularities on ‘rogue’ mortgage brokers” – The deceitful logic of the “red herring” fallacy.

Banks. The unnecessary scourge of Planet Earth.

Let us be rid of them.

Westpac, NAB Survive On US Federal Reserve Life Support

24 Dec


UPDATE: Aggregate balance of US Fed loans to Westpac = USD87.52 billion, NAB = USD378 billion (csv file 1e_Fed Dated Estimated Income Ranking Text Only)

From Bloomberg:

Fed’s once-secret data released to the public

Bloomberg News today released spreadsheets showing daily borrowing totals for 407 banks and companies that tapped Federal Reserve emergency programs during the 2007 to 2009 financial crisis. It’s the first time such data have been publicly available in this form.

To download a zip file of the spreadsheets, go to http://bit.ly/Bloomberg-Fed-Data. For an explanation of the files, see the one labeled “1a Fed Data Roadmap.”

The day-by-day, bank-by-bank numbers, culled from about 50,000 transactions the U.S. central bank made through seven facilities, formed the basis of a series of Bloomberg News articles this year about the largest financial bailout in history.

“Scholars can now examine the data and continue the analysis of the Fed’s crisis management,” said Allan H. Meltzer, a professor of political economy at Carnegie Mellon University in Pittsburgh and the author of three books on the history of the U.S. central bank.

The data reflect lending from the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, the Term Auction Facility, the Term Securities Lending Facility, the discount window and single-tranche open market operations, or ST OMO.

Bloomberg News obtained information about the discount window and ST OMO through the Freedom of Information Act. While the Fed initially rejected a request for discount-window information, Bloomberg LP, the parent company of Bloomberg News, filed a federal lawsuit to force disclosure and won in the lower courts. In March, the U.S. Supreme Court decided not to intervene in the case, and the Fed released more than 29,000 pages of transaction data.

As we saw in “Our Banking System Operates With Zero Reserves”, a previous data release showed that Australian banks … including the Reserve Bank of Australia … secretly borrowed billions from the US Federal Reserve to survive during the GFC. In the case of the RBA, the value of its loans totalled around AUD88 billion given the exchange rate at that time:

National Australia Bank Ltd, Westpac Banking Corp Ltd and the Reserve Bank of Australia (RBA) were all recipients of emergency funds from the US Federal Reserve during the global financial crisis, according to media reports.

Data released by the Fed shows the RBA borrowed $US53 billion in 10 separate transactions during the financial crisis, which compares to the European Central Bank’s 271 transactions, according to a report in The Australian Financial Review.

NAB borrowed $US4.5 billion, and a New York-based entity owned by Westpac borrowed $US1 billion, according to The Age.

This new data release allows us to see more detail about the secret loans to Westpac and NAB.

Two of the four pillars of our allegedly “safe as houses” banking system.

And now we can see that it wasn’t just a “New York-based entity owned by Westpac” that borrowed from the Fed. It was Westpac itself.

Between 20 Dec 2007 and 16 Jan 2008, Westpac secretly borrowed USD90 million per day from the US Federal Reserve.  Between 9 Oct 2008 and 1 Jan 2009, Westpac borrowed USD1 billion per day. For a total of 113 days, Westpac was surviving on daily loans from the US Fed:

Click to enlarge

For a total 252 days straight, between 6 November 2008 and 15 July 2009, National Australia Bank survived by secretly borrowing USD1.5 billion per day from the US Fed:

Click to enlarge

[Don’t forget that during the GFC, the AUD plummeted from 98c to the USD, to 60c … where the RBA actively bought AUD’s in order to keep it propped at 60c. So these USD quoted loans were in fact dramatically higher when considered in light of the relative value of the Aussie dollar at the time]

Half of our “Four Pillar” bankstering system survived on USD2.5 billion per day of US Fed-supplied life support during the peak GFC “fear” period … and in NAB’s case, for many months afterwards.

And all on the hush hush.

We’d never know about it, except for Bloomberg News taking the US Fed to court when they refused an FOI request for the information.

How’s your con-fidence in our AAA-rated Ponzi now?

If you’ve not read it yet, and if like most Aussies you are oblivious to the hushed up bank run that was occurring right here in Oz during the GFC, then you should take the time to read my June 24 blog, “Our Banking System Operates With Zero Reserves”:

Ian Harper, one of Australia’s leading financial economists, spent much of the weekend of October 11-12, 2008, reassuring journalists that Australian banks were safe.

But there was something about the calls Harper was getting from reporters over that weekend that worried him.

“There was a whiff of panic,” he recalls. It had been building all week. He had no doubt that the government and the Reserve Bank would be able to manage a run on cash, but it might take days to arrest. Panic has been an unpredictable force in the history of banking. And the instant world of electronic banking had never been tested with a full-scale crisis of confidence.

He talked about media calls with his wife. “Come Monday morning and they tell us one of the banks is in strife and internet banking is down, I can’t look you in the eye and say you can pay this week’s grocery bills.”

The man who had just been reassuring everyone there was nothing to worry about went down the street to the ATM and made a sizeable withdrawal to make sure his wife would have enough cash.

All around the country, banks were facing unusual demands for cash. Small businesses in Queensland and Western Australia were switching their deposits from regional banks to accounts with the big four banks.

An elderly woman turned up in the branch of one bank in Queensland with a suitcase and asked to withdraw her term deposits of $100,000 or more. Once filled, she took the suitcase down to the other end of the counter and asked that it be kept in the bank’s safe.

A story did the rounds of the regulators about a customer who wanted to withdraw his six-figure savings. The branch manager said he did not have that quantity of cash on hand, but offered a bank cheque, which the customer accepted, apparently unaware that the cheque was no safer than the bank writing it.

It was a silent run, unnoticed by the media. Across the country, at least tens and possibly hundreds of thousands of depositors were withdrawing their funds. Left unchecked, there would soon be queues in the street with police managing crowd control, as occurred in London at the Golders Green branch of Northern Rock a year earlier.

“With a bank run, or any rumour of a bank run, you can’t play games with that,” says Treasury Secretary Ken Henry.

“You can’t pussyfoot around that stuff. It’s a long time since Australia has had a serious run on a financial institution, but it’s all about confidence, and you cannot allow an impression to develop generally in the public that there is any risk.”

Now, what was it that I wrote just hours ago … about our AAA-rated Ponzi economy?

Starve The Beast

17 Oct

In observing the “Occupy” movement now growing around the Western World, your humble blogger recalls an old wisdom story, attributed to a Native American elder:

“Inside of me there are two dogs. One of the dogs is mean and evil. The other dog is good. The mean dog fights the good dog, all of the time.” When asked which dog wins, he reflected for a moment and replied, “The one I feed the most.”

On the weekend I was reminded of this wisdom, upon reading the following article in Australia’s Sunday Telegraph:

Banks are handing out bonuses to staff who upsize your debt

BANK staff are being offered Christmas party bonuses, free meals and other prizes to push more credit cards, loans, insurance policies and other products to customers.

Australia’s biggest lender – the CBA – has launched a “double up” campaign to push personal bankers and tellers into selling twice as many products, such as increasing credit limits, each week.

The other three major banks – the NAB, ANZ and Westpac – are also forcing branch staff to meet stringent weekly sales targets as the “big four” battle for market share.

An internal CBA document obtained by The Sunday Telegraph reveals the pre-Christmas push to supersize customers – increase their credit limits, convince them to take out home and contents policies and open up new accounts.

“We are under increasing pressure from competitors who are looking for a greater share of our retail banking business,” CBA retail banking boss Ross McEwan says in the document.

The briefing reads: “The campaign encourages sales teams to double their sales productivity during October and November to earn double the fun (and funds) at their end of year team celebrations.”

Staff at the four major banks, which are expected to record a combined profit of $24.2bn this financial year, have also revealed the tactics used to win over customers.

Sales targets differ depending on the branch size and location. Convincing a customer to roll their credit card debt into their mortgage is a target winner.

At Westpac, each personal banker has a revenue target of about $3750 a week.

Selling a credit card earns $150 towards that goal. At NAB, a city branch with four staff would have to sell 72 products a week, while a teller has to make 10 “quality” referrals to personal bankers that result in a sale.

Personal bankers have to sell 13-16 items. Debt products are worth the most because they are more lucrative for the bank.

All banks encourage staff to “cross sell” so when a customer opens a savings account, staff are likely to offer an increased credit card limit or income protection insurance.

“Staff get really desperate, to the point where they will convince customers they need something when they really don’t,” a Westpac staffer said.

Even more telling, the small inset story accompanying this article, in the paper’s print version:

Bank staff say their targets are so high and unrealistic they are selling customers products they don’t need or can’t afford.

Staff from Commonwealth, Westpac, ANZ and NAB describe work as a pressure cooker and say they are forced to meet stringent targets – a claim all four banks categorically deny.

Workers say white boards are used in branches to track sales.

“We don’t want to be pushing debt on to people but you have the pressure of your job security hinging on it,” a CBA staffer told The Sunday Telegraph.

“A home loan is a life long debt. We shouldn’t be selling it like a box of crackers.”

After three years as a CBA teller, the “cut-throat” environment became too much for 20-year-old Tyson Adams.

“The whole time your target is being pushed on you really hard and it is never negotiable … it doesn’t even matter if you are off sick, you have to make it up.”

An NAB worker said” “It is not about whether you are great with the customers; at the end of the day it is how much you have either referred or you have sold.”

A Westpac banker said: “They give us lists of customers who have almost paid out their home loans so we have to call them and get them to borrow more, go get an investment property or something.”

Your humble blogger has a word of advice for the growing thousands in the “Occupy” movement, who are (apparently) protesting against Greed.

Just DON’T Do It.

Borrow, that is.

They say that “money makes the world go ’round”.

They lie.

Our world runs not on “money”, but on debt.

Your agreement to borrow is The Beast’s daily bread.

In the old Native American wisdom tale, the winner in the fight of good versus evil was the one that he fed the most.

A simple, alternative view of the same tale, is that the loser is the one we feed the least.

Starve The Beast.

“After these things I saw another angel coming down from heaven, having great authority, and the earth was illuminated with his glory. And he cried mightily with a loud voice, saying, “Babylon the great is fallen, is fallen, and has become a dwelling place of demons, a prison for every foul spirit, and a cage for every unclean and hated bird! For all the nations have drunk of the wine of the wrath of her fornication, the kings of the earth have committed fornication with her, and the merchants of the earth have become rich through the abundance of her luxury.”

And I heard another voice from heaven saying, “Come out of her, my people, lest you share in her sins, and lest you receive of her plagues.”

* Please see also “The People’s NWO: Every Man His Own Central Banker”


Paying down (y)our debt, and refusing to take out more, is the fastest way to kill the Beast. Most people don’t even realise that the simple act of paying down debt (and not taking out more) reduces the banks’ “assets” on their balance sheet. Eventually, all they have is Liabilities (your actual savings, plus outgoing interest payments owed to you on your savings) … and no Assets.

I Was Right – Our Banks Begin Preparing Carbon Derivatives Market

14 Jul

It did not take long. Just 3 days.

From Business Spectator (emphasis added):

Australian banks are eyeing opportunities to cash in on the proposed carbon tax by developing new financial products and services that capitalise on a market seen to be worth billions of dollars annually, according to a report by the Australian Financial Review.

Australian financial firms that have experience in European carbon markets, such as Macquarie Group Ltd, Westpac Banking Corp Ltd and ANZ Banking Group Ltd are particularly keen to establish their presence in the Australian market.

The initial three-year fixed carbon tax period from 2012 will serve as time to prepare for the release of ETS permits by 2015, when opportunities will really open up for banks to capitalise on the carbon market.

ANZ’s head of energy trading said the value of the derivatives carbon market would dwarf the $10 billion initially raised by the government, according to the AFR.

I was right.

On Carbon Sunday, I dissected the Government’s newly-announced “carbon pricing mechanism” (see “Our Bankers’ Casino Royale – ‘Carbon Permits’ Really Means ‘A Licence To Print'” ).

Here’s a couple of quotes from that article. The first is in reference to the “initial fixed price period” that the Government would have you believe is “like a tax”:

I was right.

The carbon permits will have no expiry date.

They are an artificial construct – “an electronic entry” – that is deemed by government decree to be a new “financial product”.

Moreover, note carefully the sentence I have bold underlined.

The creation of equitable interests, and taking security over them, simply means this.  The carbon permits can be used as the basis for bankers to create other, new financial “securities”.

Carbon derivatives, in other words.

Derivatives (or “securities”) are the toxic, wholly-artificial financial “products” that were at the heart of the GFC.  The same bankster-designed “widgets” that the world’s most famous investor, Warren Buffet, spoke of as “a mega-catastrophic risk”, “financial weapons of mass destruction”, and a “time bomb”.

You can stop reading this piece right now if you like.

Because from that Table 6 alone, you now have conclusive proof that this is nothing whatsoever to do with the climate.

It is all – and only – about global bankster profits. At the direct expense of the common people of planet earth.

Note well. The banks do not have to wait until the “flexible price period” commences after 3 years, to begin creating their “securities” (ie, derivatives), based on the notion of the underlying “value” of the “fixed price” carbon permits.

The Government’s scheme allows this from Day 1. Naturally. Because that is what the banksters – and their “leading economist” shills – are all salivating over. A government-decreed excuse, to create a whole new kind of “derivatives” market.  It is the whole point of the scheme.

In specific reference to the “flexible price period” to follow three years later, I wrote this:

Now, why have I bold underlined “borrowing“?

And why have I bold underlined “advance auctions of flexible price permits…”?

Because these are the key words from the “banking and borrowing” section. The words that tell you all you need to know.

That this SCAM is nothing whatsoever to do with the global climate.

And that it is 100% about creating a new, global, CO2 derivatives-trading market for the banksters.

The world’s biggest-ever financial cesspool.

Of toxic, intrinsically-worthless, humanity-raping financial “instruments” called derivatives.

Non-existent, digital “widgets”.

That can be borrowed from the future – ie, before these artificial carbon “widgets” are even issued – and leveraged by scum-of-the-earth banksters.

And then, traded by these parasites at multiples of hundreds and thousands of times more than the underlying, artificially-created “value” of the carbon permit.

Furthermore, the “advance auctions of flexible price permits in the fixed price period” proves beyond all shadow of doubt, that I was right.

That this “carbon pricing mechanism” is the bankers’ CPRS by another name. From Day 1.

Why does it prove it?

The advance auctions of flexible price permits “in the fixed price period” means this.

From Day 1, the government is effectively allowing the setting up of a futures trading market, for Australian CO2 permits.

Futures trading of nothing. Before the nothing is even created.

The banksters’ wet dream.

Australia – you have been monumentally conned.

The Green-Labor-Independent Alliance’s plan to “save the planet”, is a gigantic scam.

It is the bankers’ Casino Royale.

Where “carbon permits” really means, “A Licence to Print”.

Thank you, Australian Financial Review and Business Spectator.

For confirming that I was right.

Oh … just one more thing.

To help give you some idea – a picture in your mind – of how gigantic the new (government-rigged) “market” for the banksters’ carbon derivatives can become, take a look at the following chart, sourced from the RBA’s Statistics data.

It shows the size of our banks’ current holdings of Off-Balance Sheet derivatives bets, on the future of Interest Rates, and Foreign Exchange Rates:

Click to enlarge

Yes, that’s $3.98 Trillion in Foreign Exchange derivatives bets. And a whopping $11.68 Trillion in Interest Rate derivatives bets. Off-Balance Sheet. At March 2011.

Here’s another chart – also sourced from RBA data – showing our banks’ current On-Balance Sheet “Assets” (66% of which are actually loans) – the blue line – compared to their total Off-Balance Sheet “Business” (ie, derivatives) – the red line:

Click to enlarge

Yes, that’s $2.68 Trillion in “Assets” (mostly loans). Compared to … $16.8 Trillion in Off-Balance Sheet derivatives gambling. Mostly on Interest Rates, and Foreign Exchange rates.

Just try to imagine the size of the brand new carbon dioxide “hot air” derivatives market casino that our banksters’ will create, in the form of leveraged bets on the underlying so-called “value” of carbon permits.

It is Armageddon waiting to happen.

Fresh Evidence Our Banks In ‘Race To The Bottom’ Means You Can Kiss Your Super Goodbye

9 Jun

From news.com.au, 7 June 2011:

Fresh evidence is emerging of a “race to the bottom” among banks and other lenders as demand for mortgages slides and competition boils over.

Lenders are increasingly cutting standards by enabling home buyers to make smaller deposits, new research indicates.

About three in every five mortgage products now enable home buyers to borrow up to 97 per cent of the value of their property, according to financial research group RateCity.

RateCity chief Damian Smith said the rise in loan-to-value ratios (LVR) indicated that lenders wanted to kick-start growth in the sluggish home loan market.

“We haven’t seen this level of money offered to mortgage borrowers since the start of 2009,” Mr Smith said.

He warned that change in lending criteria was putting borrowers at risk.        

“There is a concern for some borrowers who take on too much debt, because it makes them more susceptible to risk if rates increase or property values fall.”

It’s not just borrowers that are put at risk.

What this means is that the day is drawing nearer when the Government proclaims “No Super For You!!”

How’s that, you say?

Bear with me on this. All will become clear:

High loan-to-value ratios also place banks at greater risk, with the likelihood of a lender absorbing a loss in the foreclosure process increasing as the amount of equity decreases.

Similar borrowing practices were behind the collapse of the US housing sector when people with a higher chance of defaulting on on their payments were provided loans at higher-than-normal interest rates.


It places banks at greater risk.

On 18 May 2011, Fitch’s Ratings credit rating agency offered this ominous warning about Australia’s banks’ lending standards (from Business Week):

… Australian banks could have their credit ratings cut if they lower standards to boost mortgage sales as demand for home loans slumps.

If we do start to see signs of erosion in those lending standards, there may be some negative pressure on ratings coming through,” Tim Roche, director of Fitch’s financial institutions group in Sydney, told a credit forum today.

Here’s how the domino effect works.

1. House prices fall – as they are right now.

2. Banks lower lending standards – as they are right now.

3. Arrears on mortgages rise – as they are right now.

4. Ratings agencies cut Big Four banks’ credit rating – as they have just done, and are threatening to do again.

5. Banks cost for wholesale funding rises due lower credit rating.

6. Banks pass on increased costs to you, as interest-rate increases.

7. Mortgage arrears rise further due to interest rate, cost-of-living pressure.

8. House prices fall further due “distressed” vendor sales.

9. Banks’ “asset” values, profits fall.

10. Residential Mortgage-Backed Securities (RMBS) fall in value and are downgraded – as they are right now.

11. Banks’ lose trillions on “derivatives” bets related to RMBS.

12. Banks’ credit ratings downgraded even further.

13. Rinse and Repeat, from 5.

14. Bank/s cannot borrow (a “credit squeeze”).

15. Short-sellers smell blood in the water; Banks’ share prices collapse.

16. Banks fail … just as in the USA, UK, and the EU.

17. Government pilfers your super to prop up our government-guaranteed, Too Big Too Fail banks.

Think it can’t happen here?

It can.

And it will.

Both parties are already planning for it.

The Government has effectively guaranteed it (How? By guaranteeing the banking system; a guarantee underwritten by you, the taxpayer).

And Senator Joyce has specifically forewarned of it.  Just as he (correctly) forewarned of the US debt default that is happening right now.

Labor has introduced legislation moving in that direction in the May budget.

And the Liberal Party has just announced a new policy – disguised as a “reform” to “help” business – that is aimed squarely at getting the ATO‘s hands on your super … before it even gets to your super fund.

Learn all about the wave of superannuation confiscations rolling across the Western world, and our own super theft to come, here.


h/t reader and Guest Poster “JMD”, in Comments below.

Want to try and access your super early, and beat the government to it?

No can do.

Not unless you’re underwater on your mortgage. Then you can … to pay out the banksters:

“You can however access your super early, ‘to prevent your home being sold by the mortgage lender as a result of non payment on your home loan’. It would be interesting to find out when that rule was slipped in, allowing the banks to access your super but not you.”

Go to http://www.rest.com.au/Forms-Publications.aspx

You will see a tab to click on; Withdrawals from your account, then a pdf; “Fact Sheet: Accessing your super early.”

And These #JAFA’s And Morons Want One Here!?!

3 Jun

Saul Eslake & Bill Evans call for "independent" (unelected, unaccountable) authority for pricing CO2

Oops. Sorry.

#JAFA‘s and morons.

Bit of a tautology there.

Anyhow, from the Guardian UK newspaper, 1 June 2011:

World Bank warns of ‘failing’ international carbon market

The international market in carbon credits has suffered an almost total collapse, with only $1.5bn (£916m) of credits traded last year – the lowest since the market opened in 2005, according to a report from the World Bank.

A fledgling market in greenhouse gas emissions in the US also declined, and only the European Union’s internal market in carbon remained healthy, worth $120bn. However, leaked documents seen by the Guardian appear to show that even the EU’s emissions trading system is in danger.

And yet, only yesterday we saw 13 “eminent”, “high profile” Australian economists – 10/13 with connections to the banking sector – publish an Open Letter to our government, advocating for an emissions trading scheme here in our pissant little (but great) nation.

Indeed, we even witnessed the telling spectacle of the most prominent of these “eminent” economists retaliating to criticism of these #JAFA‘s position, right here on this pissant little blog.

It is abundantly clear that these very “economists” are – unsurprisingly – still as contemptibly useless a bunch of ivory-towered, commonsense-bereft tea-leaf readers as when they all utterly failed to foresee and forewarn of the onrushing GFC.  Only the biggest, most catastrophic financial disaster in almost a century.

These “experts” are either ignorant, or simply dismissive of, the parlous state of carbon dioxide “schemes” around the world.

These “experts” are also either ignorant, or simply dismissive of, the parlous state of Australia’s taxpayer-propped banking sector, as has been amply demonstrated both on this blog and in other, rather more “recognised” commentary.

These “experts'” advocacy for an “independent” authority to administer a carbon “pricing” scheme, represents a blatant attack on the democratic  (and Constitutional?) rights of the citizens of this country, to elect those who will be afforded the power to determine and impose taxes and levies by popular ballot.

These “experts'” advocacy for an “independent” Carbon Bank with the power to borrow against future government (ie, taxpayer) revenues, represents a wilful moral and intellectual dereliction of responsibility, one that is especially repugnant given their “eminent” positions of “authority” on matters concerning finance and banking.

It’s long past time that the Australian public clearly recognised these shills for Big Corporate interests for what they actually are.

Useless, parasitical rent-seekers.

Otherwise known as …


By Saul’s Own Words They Stand Condemned

3 Jun

Yesterday my post Here Comes The Banksters’ Glee Clubrather surprisingly drew the attention of one of its “eminent” subjects.

Mr Saul Eslake.

Former chief economist for ANZ Bank.  Now director of the Grattan Institutea “public policy” “think tank” whose telling provenance we will return to shortly.

Mr Eslake responded to my post as follows (complete unaltered quote):

Oh what a cheap shot. I don’t work for a bank any more, and neither do two of the other signatories; while three others have, as far as I know, never worked for a bank. And while it is true that banks might make money from an emissions trading scheme, they could just as likely lose (as many banks have done from trading other ‘derivatives’. However there’s no way that banks would make any money out of a carbon tax. Moreover, none of the signatories of this open letter are likely to derive much if any benefit from whatever ‘compensation’ arrangements accompany whatever means is eventually adopted to put a price on carbon emissions.

So you are way, way off beam in accusing any of us of being motivated by self-interest – which is a typical accusation made by those who can’t be bothered debating the issue itself. Playing the man, not the ball, as we say in the southern states

Let us very closely examine each one of Mr Eslake’s comments.

In so doing, we will see clearly not only the heights of vanity and hypersensitivity to which much-lauded #JAFA‘s such as Mr Eslake climb (he has found and bitten at a post by a lowly and insignificant blogger, after all).

We will also see clearly the depths of deception to which they will stoop.

Shall we begin? (emphasis added):

ESLAKE: I don’t work for a bank any more

1. Not working for a bank “any more” is misleading, and entirely beside the point. What is important to note is what Mr Eslake does not say.  He does not claim to have abandoned all financial or other interest in his former employer (the ANZ Bank), its executive managment, shareholders, former colleagues, or those of any other bank or related financial entity.

Unless Mr Eslake will categorically state that neither he, his family, former colleagues, nor any other person associated with himself stands to benefit in any way, at any time, from the introduction of a “pricing carbon” scheme, then this simplistic defence is a Red Herring, and as such is, IMO, thoroughly misleading and (intellectually) dishonest.

2. Mr Eslake is director for the Grattan Institute. The Grattan Institute’s website states that:

Grattan Institute is grateful for the support of our founding members: the Australian Government, the State Government of Victoria, The University of Melbourne and BHP Billiton. They contributed to an endowment that provides ongoing funds towards Grattan Institute’s programs.

So, is Mr Eslake’s employer the Grattan Institute? Or, is his directorship of the institute entirely unpaid?

If he does in fact receive any form of remuneration from the Grattan Institute, then who is really his employer?

It is the Australian and Victorian Governments, a university, and/or … BHP Billiton. The CEO of whom (Marius Kloppers) appears on the Grattan Institute’s Board of Directors.

We have previously seen (BHP’s 100% Carbon Tax Rebate, While You Pay Higher Electricity) that BHP Billiton – the world’s largest miner – will likely not suffer losses under a carbon dioxide trading scheme. Rather, the mighty BHP Billiton stands to benefit from the incestuously cosy relationship it has formed with this Labor Government. Remember those closed-door, by invitation-only MRRT “negotiations”, that excluded the small-medium mining companies?

Mr Eslake too, appears to be intimately associated with the current and future fortunes of BHP Billiton, its executive management, employees, and shareholders, through his directorship of the BHP Billiton-funded Grattan Institute.

This fact alone – entirely separate to and irrespective of his former relationship with a major bank – raises a serious conflict-of-interest question mark over the integrity and credibility of any public policy “advice” that Mr Eslake chooses to make, wherever such advice or comment may influence public policy decisions relevant to the financial interests of BHP Billiton.

Moving on (emphasis added):

ESLAKE: … and neither do two of the other signatories;

There are “13 eminent economists” who co-signed the Open Letter in favour of a carbon “tax” / pricing scheme.

According to Mr Eslake, only three (3) of the thirteen (13) economists (himself included) “don’t work for a bank anymore”.

Can we take it then, that ten (10) of the thirteen (13) signatories DO work for a bank?

ESLAKE: … while three others have, as far as I know, never worked for a bank.

Ok. Let’s generously take Mr Eslake at his word on this, and accept that (a) 3/13 co-signatories “don’t work for a bank anymore“, and (b) another 3/13 have never worked for a bank “as far as (he) knows”.

So, let’s do the sums shall we?

According to Mr Eslake’s own words, we can take it as read that a clear majority 7/13 of the co-signatories to the Open Letter supporting a carbon pricing scheme, are presently employed by banks.

Another 3/13 have previously worked for banks.

Making a total of 10/13 signatories having past or present direct connections with the banking industry.  The very same industry that “might make money from an emissions trading scheme”.

Leaving a mere 3/13 who have no past or present connections with the banking industry … “as far as I know”.

Enough said?

No, let’s go deeper.

Let’s move on to the nitty gritty of Mr Eslake’s defence of the banking industry – on behalf of whom we are expected to believe he is not arguing, despite his very post’s self-evidence to the contrary (emphasis added):

And while it is true that banks might make money from an emissions trading scheme, they could just as likely lose (as many banks have done from trading other ‘derivatives’.


1. Mr Eslake openly concedes – though his concession is adulterated with the weasel word “might” – that “it is true” that banks stand to make money from an emissions trading scheme. Therefore, on the basis of this concession, the Open Letter co-signed by 13 economists, 10 of whom Mr Eslake concedes have past and/or present direct connections with banks – clearly represents a blatant example of lobbying, under the deceitful guise of “eminent” economic advice.

The moral and intellectual integrity of Mr Eslake and each one of his co-signatories is immediately called into question by the openly conceded profit-making opportunity that legislative passage of a CO2 pricing scheme represents to the current and/or former employers of the great majority (10/13) of the Open Letter’s co-signatories.

2. Mr Eslake openly concedes that banks “could just as likely lose” money from trading on the back of a CO2 pricing scheme. In particular, it is important to note that Mr Eslake concedes that “many banks have [lost money] from trading other ‘derivatives’.

Conveniently, in conceding that banks “could just as likely lose” money, and that “many banks have” lost money “from trading other ‘derivatives'”, Mr Eslake fails to address crucially pertinent facts relating to the past and present state of the Australian banking industry.

Specifically, he fails to address the fact that in recent weeks, leading credit rating agency Moody’s has effectively stated that our banks are Too Big Too Fail and must continue to be guaranteed by the government (ie, by taxpayers) else they will be downgraded, which would inevitably lead to higher funding costs / reduced bank profits.  While another leading credit rating agency Fitch’s has recently downgraded 54 ‘tranches’ of Australian Residential Mortgage-Backed Securities, indicating that “cash-strapped borrowers and tight-fisted mortgage insurers are a greater threat to Australian banks than previously thought“.

Nor does Mr Eslake address the fact that “other derivatives” were at the very heart of the GFC.

Nor does he address the fact that Australia’s banking system presently has $15 Trillion in Off-Balance Sheet “Business” versus a mere $2.7 Trillion in On-Balance Sheet “Assets”. Or that most of that “Off-Balance Sheet” $15 Trillion (more than 10 times our nation’s annual GDP) is “invested” in those “other derivatives” which nearly blew up the financial world in 2008-09.

Nor does he address the fact that he and his co-signatories are not only publicly advocating for a “carbon pricing mechanism”, they are also publicly supporting the Garnaut proposal for an “independent” – unelected, unaccountable – Carbon Bank to administer the money from the scheme.  A “bank” empowered to borrow against future government “carbon tax” earnings – meaning the taxpayer is placed on the hook for any losses incurred by said “independent” Carbon Bank.

Nor does he address the fact that none of these “leading”, “eminent” economists had the wisdom, foresight, or indeed the simple commonsense to see and forewarn of the oncoming Global Financial Crisis. And hence, he does not address the fact that there is no logical reason why any sane citizen, government official, or elected representative, should ever again trust these same failed economists’ “wisdom” and “insight” when it comes to another, far bigger ‘derivatives’-based financial scheme, and/or the means of administering the finances thereof.

In light of all these concerns about our banking industry and the proposed Carbon Bank, for Mr Eslake to argue in defence of carbon pricing the view that banks “could just as likely lose” money, clearly represents a gross dereliction of moral and intellectual responsibility to the Australian public as a whole. As a “leading” and “eminent”, “high profile” economist, Mr Eslake should be utterly condemned for advocating a public policy that would – by his own tacit admission – manifestly increase financial risk to Australian taxpayers.

Especially when said public policy “might make money” for his and/or his co-signatories past and/or former employers, and/or any of their respective personal and/or professional connections in the banking and business world.

Moving on (emphasis added):

However there’s no way that banks would make any money out of a carbon tax.

Mr Eslake stoops to blatant dishonesty here. Either that, or he is ignorant of what this government’s own website has to say about the “carbon pricing” mechanism it is proposing, and that Mr Eslake and his co-signatories are publicly supporting. From the government’s official Climate Change website:

Broad architecture of the carbon price mechanism

A carbon price mechanism could commence with a fixed price (through the issuance of fixed price units within an emissions trading scheme)


The government is not proposing a carbon “tax”. Though they have apparently become content to have that misconception widely perpetrated by the media, and their own party members.

What the government is proposing, is a “fixed price” Emissions Trading Scheme.  As a temporary, interim step towards a “flexible price” ETS. Once again from the government’s official Climate Change website:

Transition arrangements

At the end of the fixed price period, the clear intent would be that the scheme convert to a flexible price cap-and-trade emissions trading scheme.

There you have it. The government is proposing a “fixed price” ETS, for a limited period before a “transition” to a full, “flexible price” cap-and-trade ETS.

And what is it that Mr Eslake and his 10/13 majority bankster-connected Open Letter co-signatories really want?  What sort of scheme are they advocating as their “preferred option”?

A group of senior economists has written an open letter advocating a price on carbon as an essential reform for the national economy, with an emissions trading scheme the preferred option.

In my opinion, it is highly implausible that an “eminent” economist  such as Mr Eslake could be ignorant of the fact that the government is proposing an introductory fixed price ETS, and not a “tax”.

To argue that “there’s no way that banks would make any money out of a carbon tax” is misleading and deceptive. Furthermore, it conveniently distracts attention from the fact that Mr Eslake and his co-signatories are themselves not advocating a “tax” either, but rather, an ETS.

Moving on (emphasis added):

Moreover, none of the signatories of this open letter are likely to derive much if any benefit from whatever ‘compensation’ arrangements accompany whatever means is eventually adopted to put a price on carbon emissions.

Once again, Mr Eslake employs a misleading and deceptive misdirection.

Noone – certainly not this blogger – has either claimed or inferred that Mr Eslake, or any of his co-signatories, stand to derive benefit from “compensation arrangements” arising from a “carbon pricing” mechanism.

Having initially resorted to a misleading and deceptive Red Herring (“there’s no way that banks would make any money out of a carbon tax“), to very weakly (“much if any”) single out “compensation arrangements” as his sole remaining argument, is to have secondarily resorted to the use of the misleading and deceptive Straw Man fallacy.

If Mr Eslake’s moral and intellectual credibility is ever to be taken remotely seriously, he must cease from employing such blatant rhetorical dishonesties, and address the actual points of his opponent’s arguments, without obfuscation, distraction, misdirection, and diversion.

What has been inferred, both in this blog and in myriad commentaries elsewhere, is that the banking industry clearly stands to benefit from a “carbon pricing” mechanism.

And whilst still resorting to the deceitful use of weasel words (“might”), Mr Eslake has nonetheless openly conceded that this inference is in fact, true:

And while it is true that banks might make money from an emissions trading scheme…

Finally, it is noteworthy that Mr Eslake chose to respond again to my comments made in response to his assertions. What is remarkable about this is his failure to address the simple, direct questions asked, preferring instead to demonstrate remarkable hypocrisy by “playing the man and not the ball” throughout.

Indeed, Mr Eslake demonstrates this hypocrisy most ably in making this loaded comment in his follow up response:

It’s easier to argue by re-iterative assertion … than to engage with facts or arguments.

… and yet he proceeds to again avoid engaging with any of the facts or arguments himself, with regard to (eg) the banking industry, its profitability, derivatives trading history, and independently verified (by international credit rating agencies) risk concerns, that I have presented in my numerous arguments posited previously on this blog, and now again in direct comments in response to Mr Eslake.

Most notably, he either ignores or semi-skillfully attempts to sidestep the direct questions originally posed to him.

For interest and clarity, I will repeat verbatim each of the direct questions originally asked of Mr Eslake:

1. Will you come out and categorically deny that banks stand to make profits from an ETS?

2. What does recent history show us all very clearly about who picks up the cost when (“if”, to use your weasel words) those banks do “just as likely lose” from their trading on the back of a CO2 scheme?

3. Would you care to publicly and categorically state that (a) you, and/or (b) each one of your fellow signatories to your Open letter, will NEVER receive ANY personal financial benefit, either directly OR indirectly, from the introduction by government of the proposed scheme for “pricing carbon”?

I note that Mr Eslake did subsequently respond in part to the third of those questions, as follows:

I can’t speak for the other signatories to that letter…

[Interesting. Mr Eslake showed no such reluctance to speak out in defence of his co-signatories in his original comments]

But I can say, categorically, that I can think of no way in which I will personally benefit from the introduction of a carbon tax or ETS. (Hydro Tasmania, of which I am a non-executive director, thinks it will benefit from the introduction of a carbon price or ETS; but the remuneration I derive from that position is entirely unaffected by Hydro Tasmania’s financial results).

“I can think of no way” is, again, an example of the use of weasel words.

I would refer Mr Eslake to the very specifically worded question previously posed (emphasis added):

Would you care to publicly and categorically state that (a) you, and/or (b) each one of your fellow signatories to your Open letter, will NEVER receive ANY personal financial benefit, either directly OR indirectly, from the introduction by government of the proposed scheme for “pricing carbon”?

By way of particular example, I refer to Mr Eslake’s present directorship of the (Labor) Australian Government + BHP Billiton-founded/co-sponsored/co-funded Grattan Institute, and pose the following questions:

1. Will he categorically affirm that his relationship with the Grattan Institute, and/or BHP Billiton, and/or the Australian Government, would in no way be affected were he to refuse to publicly support carbon (dioxide) pricing?

2. Will he categorically affirm that his relationship with the Grattan Institute, and/or BHP Billiton, and/or the Australian Government, would in no way be affected were he to publicly denounce carbon pricing as representing an increased risk to the Australian banking sector, and thus to Australian taxpayers, whose explicit and implicit government-invoked “guarantee/s” are directly influential upon the banks’ credit ratings, cost of wholesale funding, and thus their ultimate profitability?

3. Will he categorically affirm that his relationship with the Grattan Institute, and/or BHP Billiton, and/or the Australian Government, would in no way be affected were he to publicly denounce the proposal for an “independent” Carbon Bank as representing an (unelected, unaccountable) increased risk to the financial well-being of Australian taxpayers?

4. Will he categorically affirm identical answers to each of the above questions, as pertaining to each and every one of his twelve (12) Open Letter co-signatories vis-a-vis their relationships with their respective past and/or present employers?

In closing, I note that Mr Eslake – in hypocritically accusing me of “playing the man and not the ball” before repeatedly doing precisely this himself – has indulged in the classically-totalitarian inclination to either proclaim, or simply infer, a willingness to exercise force in order to silence those who oppose their views:

Easy to tweet that I’m a “liar” – simply because my view is different from yours – free of the risk of being sued, because you don’t have the balls to identify yourself.

Mr Eslake expresses a threatening dissatisfaction with the fact that I am a (barely) anonymous blogger exercising my Universal Human Right of free speech in criticising his public position on a controversial proposed public policy.

It is truly remarkable – and telling – that an “eminent” and “high profile” economist such as Mr Eslake should even find, much less feel the need to retaliate against, the musings of a lowly and insignificant blogger.

One with a public-opinion-steering grand total of little more than 170 Twitter followers, across the entire planet.

I can only interpret Mr Eslake’s actions here – quite irrespective of his words – as being indicative of a most revealing hypersensitivity to any kind of public criticism of his position on this multi-billion-dollar topic.

Or perhaps more simply … of a guilty conscience.

Here Comes The Banksters’ Glee Club

2 Jun

Surprise, surprise.

A high profile “group of senior economists” – read “corporate shills for the bankstering industry” – have come out in support of their fellow #JAFA Ross Garnaut’s proposal for an “independent” Carbon Bank:

A group of senior economists has written an open letter advocating a price on carbon as an essential reform for the national economy, with an emissions trading scheme the preferred option.

The group of high-profile economists includes Grattan Institute director Saul Eslake, St George chief economist Besa Deda, Citigroup Global Markets’ Paul Brennan and Westpac chief economist Bill Evans.

Saul Eslake is the former chief economist for ANZ Bank.

Macquarie Bank‘s chief economist Richard Gibbs is also mentioned in the above article.

Given that banksters like these stand to make a killing on any carbon “tax” / emissions trading scheme, it’s hardly a surprise at all to see their glee club out on stage singing for their supper.

We can’t allow this to happen.

Handing the money from a “carbon tax” over to an “independent” Carbon Bank guarantees that this country will be bankrupted by the same greedy scum who brought the GFC on the world.

Learn why here – “Our ‘Squeeze Pop’ Carbon Bank” – and here – “Unelected, Unaccountable JAFA Garnaut Calls For Unelected, Unaccountable, Unholy Trinity Of Carbon Gods”.


Saul Eslake takes issue, in Comments below.

By Hook Or By Crook – Moody’s Says Our Banks Are Too Big To Fail

20 May

Australia’s Big Four banks have all just received a credit rating downgrade by ratings agency Moody’s.

From the Sydney Morning Herald:

Moody’s Investors Service has downgraded the long-term debt ratings of Australia’s big four banks to Aa2 from Aa1, citing their relatively high reliance on overseas funds rather than local deposits.

For a closer analysis of what this really means for Australia’s economic future, we turn to a man far more knowledgeable on this topic than I.

From the must-read MacroBusiness.com.au (emphasis added):

Moody’s analysis of the Australian banks’ vulnerability is pointed. In fact, it’s right on the money as it were, capturing both the past vulnerability and potential future problems, as well as solutions.

To put it bluntly, Moody’s is onto us.

For well over a decade, Australia’s banks have funded huge swathes of the current account deficit. As well, over the past two commodities booms, much of the export income has been leveraged up and blown on housing and fancy living. Moody’s is effectively calling the risks of this model to account. And they’re still not finished:

At Aa2, the major banks’ ratings continue to incorporate 2 notches of uplift from systemic support. Moody’s views bank supervisors and the government in Australia to be supportive by global comparison and the banks to have high systemic importance, as implicitly recognized by the government’s “Four Pillars” policy (which restricts M&A among the banks).

Moody’s also notes that creditor-unfriendly initiatives — such as bail-in legislation — are not on the policy agenda in Australia.

Heavens to Betsy.  It’s finally out in the open. The big four are too big to fail and Moody’s rates the Australian government’s implicit guarantee of the banks’ wholesale debt (as well as the explicit deposit guarantee) as worth two ratings notches. Moreover, by phrasing it this way, Moody’s has essentially put the Australian government on notice that if it dares back away from that guarantee then it can count on the result. The further implication is that the Budget had better remain shipshape to provide the guarantee.

Moody’s is rightly concerned about our banks’ heavy reliance on borrowing from off-shore, in order to lend into our housing bubble.

But as we have recently seen (“Tick Tick Tick – Aussie Banks’ $15 Trillion Time Bomb“), our banking system is vulnerable to a much greater danger than reliance on wholesale funding.


The exotic financial instruments at the very heart of the GFC, that the world’s most famous investor, Warren Buffet, famously called “a mega-catastrophic risk”, “financial weapons of mass destruction”, and a “time bomb”.

To give you an idea of the vast disconnect between our banks’ $2.66 Trillion in On-Balance Sheet “Assets” (66% of which are loans), and their $15 Trillion in Off-Balance Sheet exposure to OTC derivatives, take a look at the following chart.

It shows our banks’ combined total Assets – blue line – versus a red line of total Off-Balance Sheet “business” (click to enlarge):

$2.66 Trillion in "Assets" versus $15 Trillion in Off-Balance Sheet "Business"

Never mind the risk of wholesale funding liabilities.  What happens when our banks’ $15 Trillion worth of Off-Balance Sheet “financial weapons of mass destruction” blow up – just as they did in the USA?  That’s more than 10x the entire value of this country’s annual GDP!

Now you know the answer.

The takeout from the Moody’s downgrade is very simple.

Moody’s has effectively just warned the Australian government that it MUST continue to guarantee the liabilities of our entire banking system. Or else the Big Four banks’ credit ratings will be downgraded even further.

Meaning much higher interest rates.  And, the real risk of off-shore funding drying up completely.

Australian taxpayers are now firmly on the hook … to bail out the crooks.

Because – just like in America – they are now considered Too Big To Fail.

For a sneak preview of our future, here’s how Australia will look when the SHTF.

Tick Tick Tick – Aussie Banks’ $15 Trillion Time Bomb

6 May

*This post follows up on my August 2010 post, “Aussie Banks’ $14.2Trillion Time Bomb”. Please read the article for detailed background to this update.

How safe are Australia’s banks?

Previously we saw that our “safe as houses” banks have a massive disconnect between their On-Balance Sheet Assets, and their Off-Balance Sheet “Business” (specifically, OTC derivatives).  Last time we checked, they held $2.62 Trillion in Assets, and a new record $14.2 Trillion in Off-Balance Sheet “Business”.

The disconnect has widened even further.

First, let’s take a look at a chart of their “Assets”.

In the chart below, the yellow line represents the total value of Personal Loans. The green line represents Commercial Loans.  The red line represents Residential Loans.  And the blue line represents the grand Total of Bank Assets (click to enlarge):

$1.77 Trillion of Total "Assets" = Loans

The total value of Bank Assets has barely moved – $2.66 Trillion. It has still to regain the peak of $2.67 Trillion in Dec 2008.

It’s worth noting that $1.77 Trillion (66%) of the banks’ $2.66 Trillion in “Assets”, is the value of Loans – personal, commercial, and residential.  That’s right.  Your debt to the bank is considered their “Asset”.  Slavery is still a thriving business in the 21st Century.  It’s how bank(ster)ing works.

What about their Off-Balance Sheet “Business”?

It has blown out by another $1.3 Trillion at its recent peak ($15.5 Trillion), and as at December 2010 sits at just under $15 Trillion.

To give an idea of the vast disconnect between our banks’ “Assets” (66% of which are loans), and their exposure to OTC derivatives, the following chart shows their total Assets – blue line from the above chart – versus a red line of total Off-Balance Sheet “business” (click to enlarge):

$2.66 Trillion in "Assets" versus $15 Trillion in Off-Balance Sheet "Business"

What are derivatives?

Derivatives are the exotic financial instruments at the very heart of the GFC.

Back in 2003, the world’s most famous investor, Warren Buffet, famously called derivatives “a mega-catastrophic risk”, “financial weapons of mass destruction”, and a “time bomb”.

Take note of the sharp dip in the near-parabolic rise in the red line on the chart. This coincides precisely with the late 2008 / early 2009 impact of the GFC on our banking system.

Our banks reduced a little of their exposure to OTC derivatives at that time (down $1.4 Trillion from Sep ’08 to Jun ’09) but quickly resumed their old ways.

At least, until September last year.  Again we see a sharp dip forming through the December quarter of 2010.

A final thought to consider.

If our banks were really so safe, why did two of our Big 4 (Westpac and NAB) both quietly borrow billions of dollars directly from the US Federal Reserve during the GFC?  And never advised shareholders, the prudential regulatory authority (APRA), the RBA, or the public?

An even bigger question – why did the RBA borrow $53 billion from the Federal Reserve without informing anyone?

National Australia Bank Ltd, Westpac Banking Corp Ltd and the Reserve Bank of Australia (RBA) were all recipients of emergency funds from the US Federal Reserve during the global financial crisis, according to media reports.

Data released by the Fed shows the RBA borrowed $US53 billion in 10 separate transactions during the financial crisis, which compares to the European Central Bank’s 271 transactions, according to a report in The Australian Financial Review.

NAB borrowed $US4.5 billion, and a New York-based entity owned by Westpac borrowed $US1 billion, according to The Age.

All is clearly not as safe as we are told in our “safe-as-houses” banking system.


Still have confidence in our banks – especially the two that had to borrow from the US Federal Reserve?

Westpac, Australia’s second-largest bank, suffered a catastrophic IT meltdown yesterday when its entire banking system collapsed after an air-conditioning failure.

The bank’s ATM and eftpos facilities were useless for about six hours and its internet banking website was offline for 10 hours.

Customers reacted with fury over the system collapse, which came days after Westpac reported a record $3.96 billion net profit, up 38 per cent for the first half of the year…

Many Westpac customers flocked to Twitter to vent their anger, but the bank’s outage pales in comparison to the National Australia Bank‘s recent IT problems.

In late November, software issues at NAB lasted for more than a week and brought other financial institutions to their knees. The incident forced chief executive Cameron Clyne to issue an unprecedented public apology in major newspapers.

Three weeks ago, workers could not access their pay when a 24-hour IT failure affected employers who used NAB for their payroll processing.

The Commonwealth Bank has also had its share of IT glitches, from its internet banking going offline to ATMs discharging incorrect amounts of cash.

%d bloggers like this: