Saturday, June 18, 2011

Warren Chifley bashes banks

The Feral Member for Leichhardt, a leading luminary in the socialist pork faction of the LNP, has blasted greedy banks for "interest gouging" and demanded a special moratorium for Cairns on loan to valuation ratios. Warren seems strangely unaware that the pricing of risk has changed following the GFC and with changes to bank regulation and capital requirements is not going to revert to what it was anytime soon.

Perhaps this partly explains the demise of CEC? Yet again, there is no policy idea for business finance except demanding a handout. We have previously posted on some of the policy and regulation issues re SME banking which would be a more constructive focus for Warren if he actually capable of understanding the situation.
Meanwhile, Stephen  Bartholomeusz at BusinessSpectator has noted "the Reserve Bank submission to the Senate inquiry into competition in banking last year showed that net interest margins remain within the range of 2.25 per cent to 2.5 per cent of what they were in pre-crisis. In the 1980s they were north of 5 per cent."

"The crisis has refocused banks everywhere, and their regulators, on the imperative of appropriately pricing risk and lending to businesses in a weak and volatile economy is risky."

"Assuming the ABA study is broadly in tune with the RBA’s findings, it would be useful if the politicians and other bank bashers thought about the evidence – or, when it comes to gouging, the lack of it – before embarking on any more populist "reforms"."

Among commentary at the Journal of Ignorance prolific ranter John Green has offered financial advice: "People wanting or thinking about purchasing commercial property in Cairns can contact me as I know the names of at lease(sic) 2 major bankers who are more than willing to lend here.There(sic) criteria has been similar for years,you need about 40% deposit and an encouraging valuation"

Perhaps John didn't read what Warren said because lending on these 'meagre' terms was exactly what he was complaining about: "Most major banks are now seeking 65 per cent or lower debt to equity ratios from their existing customers  ...... This is unconscionable and it is driven by greed and the banks’ desire to increase profits."

I wonder what John's qualifications are for such advice and services but do note the Journal do seem to have now removed an email address that was previously posted. Would you take property finance advice from a man who didn't at lease know his leasts?

Note: Bartholomeusz post was based on a survey by the Australian Bankers Association which showed that bank fees on households actually fell last year. This is supported by RBA data as posted by Peter Martin.

Update: Terry McCrann on the populist policy folly of banning mortgage exit fees.

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