BY SUE BOLAND
At the beginning of the 20th century banks had a reputation as "bloodsuckers". Is it over-the-top to still describe them this way? When we consider the record of the major banks today (see accompanying article this page), this apparently lurid term is still entirely justified.
Australia's "big four" — the National Australia Bank (NAB), the Commonwealth Bank (CBA), Westpac and ANZ — can commit all their crimes, from closing branches to endlessly increasing fees, for a simple reason: they have the clout, financial and institutional, to get away with it.
Most people have no choice but to maintain an account with one of them. Nearly all our wages and salaries are paid into bank accounts and it's pointless to change banks because each treats small depositors with the same disregard. Such is the monopoly power of Australia's "competitive" banking sector.
This catch-22 situation has incensed small depositors, sparking demonstrations in Sydney and rural areas against the closure of banking services. The anger is growing among Liberal and National supporters such that Prime Minister John Howard felt obliged last February to call on banks not to close rural branches.
This made the banks nervous. Would public pressure force the government to re-regulate the banking industry?
They were relieved when a federal cabinet meeting ruled out using compulsion to force banks to provide branches in rural areas. Howard said that "the idea of legislating to force the re-establishment of institutions [rural bank branches] is a bit unrealistic".
But he did warn the banks that if they wanted further deregulation "one of the things that the government will take into account is the level of service provision in rural and regional Australia".
Yet it was Howard as treasurer in 1981 who was largely responsible for the deregulation that began the mergers that led to emergence of the "big four" predators. The process began when the strongest banks used their monopoly control of the payment system (the cheque and now electronic transfer systems) and their vast branch networks to marginalise non-bank competitors.
In 1983 the federal Labor government deregulated the banking system by removing controls on bank lending and allowing competition from foreign banks. Between 1980 and 1985, 26 foreign banks entered the Australian market.
The number of domestic banks remained virtually unchanged, but the big four banks gobbled up more than half building societies and credit unions. In 1995, the Labor government sold off the remainder of CBA. By 1997, the big four banks had increased their share of deposit-taking at the expense of other financial institutions.
However, although the "big four" dominate the domestic banking scene and have gobbled up most of the smaller fry, they are still small players in global banking markets. They also risk falling further behind because over the past decade these markets have been the site of a massive wave of mergers and acquisitions. This trend threatens to leave the Australian quartet looking small and vulnerable to takeover.
This pressure — and not the supposedly severe competition in the housing mortgage market from bit players like Aussie Home Loans — has made the dismantling of the "four pillars" policy the next deregulation target of the big banks. This policy prevents any of the four major banks from merging with each other, although they are allowed to take over state banks, building societies and credit unions.
In 1998 Howard indicated that he supported dismantling, even if it resulted in only two pillars being left standing. However, since then fear of a voter backlash and of boosting the audience for One Nation funny money populism has forced Canberra to retain the "four pillar" policy.
'Alternatives'
Community anger with the banks has inevitably bred the push to find alternatives. For example, faced with the loss of bank services in many towns and suburbs, some local communities have banded together to set up "community" banks. The leader in this field, Victoria's Bendigo Bank, has helped communities in four states to establish 29 community banks during the past two years.
If a community can raise about $250,000 in seed capital and demonstrate that a "community" bank will have enough customers to be financially viable, Bendigo Bank will help set up the branch and guarantee the bank's funds in exchange for roughly half the operating revenues.
While an understandable reaction, there are severe limitations as to how much of an alternative "community" banks can be. First, because a poor community couldn't come up with $250,000 in seed capital. Second, because the bank is only accessible when you are in your local community. Third, because the bank will be operating as a profit-making concern, subject to competitive pressures from other banks but without the economies of scale available to the big four.
As a profit-making outfit, such a bank must inevitably put profits ahead of the interests of the community whenever these clash.
The use of the friendly term "community bank" can also be highly misleading. For example, in June, former federal Labor treasurer John Dawkins formed the Elders Rural Bank which will be a joint venture between agri-business giant Elders and Bendigo Bank to offer bank-like services in rural areas. This move will only increase Elders' monopolistic control over small farmers and graziers.
What will be the difference between being in hock to your friendly "community" bank rather than the ANZ — especially when that "community" bank's principal partner is the main player in the push for the deregulation of marketing boards for rural produce?
Some consumer groups have called for a partial re-regulation of banks, with a social charter written into bank licence requirements and the ACCC directed to monitor fees. Howard responded with the comment "I am not a regulation man. I don't like regulation because it's costly and it doesn't work."(Sydney Morning Herald, November 4)
During the 1998 federal election campaign, the ALP indicated that it would partially re-regulate the banks if elected. It dropped this idea shortly after the election. In recent months the ALP has supported the call for a "social charter" for banks. In the same breath it ruled out making such a charter compulsory, stating that banks should make a voluntary commitment.
The Australian Democrats also support a voluntary "social charter" for banks. However, they go a tiny bit further in saying that if the banks don't agree to a voluntary charter, then there should be some level of compulsory re-regulation.
Neither the ALP nor the Democrats have spelt out what degree of "good corporate citizenship" such a charter should demand of the big four.
Nationalise them!
None of the proposals for community banks, a social charter or re-regulation address the massive contradiction that lies at the heart of bank activities. Millions of people rely on banks to provide an essential service, and yet the purpose of the banks' existence is to make profits.
Even record profits, as each of the four big banks achieved this year, aren't enough. They each have plans to continue closing branches, axing jobs and increasing transaction fees for small depositors. So making profits is not compatible with providing an essential service.
The only way of resolving this problem is to remove profit making from the equation by nationalising the banking industry and merging all of the banks into one single publicly controlled bank with a charter to provide essential banking services to the entire community.
Some would say that this is a fantasy. But the real fantasy is to think that a profit-making enterprise can be relied on to provide an essential service to all who need it. This fact is reconfirmed on a daily basis by the banks' actions.
Moreover, it is not the first time that the demand to nationalise the banks has been raised. No less a mainstream politician than Labor prime minister Ben Chifley advocated bank nationalisation in 1947. And in times of war, the capitalist state has always placed the entire finance sector on a tight leash in order to fund the war effort.
However, for such a single nationalised bank to be publicly controlled and not just publicly owned, it can't be run by highly paid government bureaucrats or the former CEOs of capitalist corporations, because they will run it like a private bank. That was how the Commonwealth Bank was run before privatisation.
Instead, a nationalised bank needs to be run by an elected board of delegates from amongst the bank workers and the broader community. The involvement of the bank workers would be key because they are the ones who are in a position to make the delegates accountable, and they have the knowledge and the skills to run the banking service efficiently.
Of course, a government that is committed to helping private banks make profits, such as Liberal and Labor governments, could not be relied upon to carry out bank nationalisation. It can only become a feasible, realisable demand when advanced by a movement dedicated to placing the overall needs of people before those of the capitalist minority and its parties.
The rise of the new movement against globalisation provides an important opportunity to repopularise the demand to nationalise the banks. As that movement evolves into a more structured and organised political alternative bank nationalisation will need to be a central plank in its platform of struggle against the destructive and anti-human free-market.