Sorry, about my absence, I have been out of town and also dealing with other matters and blogging went way down the list.
The Australian sub prime Pandora's Box continues to reveal quite the toxic underworld that is Australian mortgage financing.
So $50B worth of loans are 4x more likely to default? 5% of the mortgage market are of this type. Only 1% of the new loans are now of this nature. Talk about shutting the gate after the horse has bolted.
Ms Brailey has been tipping quite the bucket of shit on financial prudence and governance in Australia. You can almost sense the squirming from the Liberals as this poor regulatory nest of vipers is the cornerstone of Howard's prosperity.
Its a long read but well worth it. The Chair is Senator Bushby, Liberal Senator for Tasmania.
BRAILEY, Ms Denise, President, Banking and Finance Consumers Support Association Inc.
[14:18]
CHAIR:
I now call the Banking and Finance Consumers Support Association. Good
afternoon, Ms Brailey. I invite you to make an opening statement.
Ms Brailey :
We have a number of members who have been what they see as victims of
low doc loans and bad lending practices—and, indeed, are suffering, as
Senator Cameron was saying earlier, the downside of taking the entire
risk for some bad practices: losing their homes, their cars, their
livelihoods; and being in very dire circumstances. I have also copied 10
copies for you of what I am about to about to deliver—not to read now.
CHAIR: Is it a particularly long statement you are about to read?
Ms Brailey : No, what I am going to read will take less than 10 minutes—maybe six minutes.
CHAIR: Okay. If we can keep it as short as possible so there is time for questions, that would be appreciated.
Ms Brailey :
Yes, thank you, Mr Chairman. The main thing I am going to raise, the
first issue, is that the government has bought $14 billion worth of
RMBSs since the GFC and I understand has committed another $4 billion to
further purchases. The Fitch ratings say that eight to 10 per cent of
all these RMBSs are low doc and approximately are loans obtained by
fraud, and the government is holding tainted securities and profiting
from that fraud. We believe there is about $57 billion involved. And,
judging by the average loans, which go above FOS's jurisdiction—we are
talking about maybe 100,000 families affected—a government cannot, or at
least cannot be seen to be profiting from that fraud of its
constituents and must rectify that situation. The government must also
rectify all of the other loans secured on falsified loan application
forms—the documents that I have been gathering of late—because the
government's regulator, ASIC, has failed to regulate the financial
industry as required by the ASIC act. ASIC did nothing before the GFC,
nothing during the GFC and have refused, by letters to me and to other
people within our group, to do anything since the GFC, as the letters
from BFCSA state.
So
we see that the path to rectification centres on this premise: any
lender who approved a loan without verifying the loan application data
with the borrower was imprudent, negligent and in many cases just plain
reckless. Indeed, most of the loans would have been rejected if the
lenders had made a simple phone call to the borrowers—they chose, in a
corporate decision, not to do so—and ascertained the borrowers' true
financial circumstances, that would have revealed those flaws in the
system and those practices. In the case of the 25 Australian Banking
Association members, they are also in breach of their contract with the
borrower to assess the borrower's ability to repay the loan, as provided
for in article 25 of the Code of Banking Practice. No lender, and no
holder of loan securities, including the government, should be allowed
to maintain any loan which the lender would not have given had it
applied the simplest of lending criteria tools—namely, verifying the
loan application details with the borrower. And that simply was not
done.
In
the pack that I delivered, I have actually provided six links in the
chain. There were six links purposely designed in this structure, and it
is the structure that I and my members are aggrieved by. The banks
provided commissions for mortgage managers, mortgage originators and
mortgage introducers that came down in a chain to employing brokers. The
brokers copped the full brunt of the blame that they were falsifying
loan application forms. I have brought along with me today a small
bundle—I have 4,000 of these—of documents relating to every bank
represented by the top banks, as demonstrated by their names. The four
majors are in there. They are all responsible, through a series of
emails from banks to brokers, instructing the brokers how to get their
deals across the line—'make the deal fit' was their usual
interpretation. They targeted older people, carers, people on parenting
allowance and the aged pension. These are all on flyers sent to 40,000
representatives throughout Australia, from the banks.
The
culprit in the structure is actually progressed with the BDMs, the
business development managers, who were employed by the banks; however,
the paperwork suggests they were merely following policy changes that
were both rapid and carried massive risk, which was to be borne by the
consumer. These are serious allegations—I do not make them lightly. I
have been researching this for over eight years. And the piece of the
jigsaw, the proof that we require to bring it to the Senate, were these
emails. The emails do not lie. They show a direct connection between the
banks, at a high level of policy, and going under the radar of their
own lending policy guidelines, to put these people in a position—most of
them earning $40,000 or $50,000 a year—and giving them loans through a
document called the 'service calculator'. The banks will not supply
those service calculators to us. We want, somehow, the parliament to
force these banks to give the copies of these documents that these
people are entitled to that formed part of the reasoning why their loan
should have been falsified through the service calculator—their income,
for want of another word, was fudged towards $180,000 instead of
$40,000, in all cases.
We
have the loan application forms from over 400 people in the last six
weeks. During that time, not one of them is a clean document—each one
has been fraudulently dealt with. But the brokers will get the blame
that they put the figures on, but the figures that they have written in
the original loan application form are calculated by the banks'
calculator through the system, as taught by the BDMs, or business
development managers. This structure needs to be looked at before we can
even start to work out whether we have a problem here in Australia. My
evidence shows that we have a massive problem here in Australia with
these low doc loans. I want to know what we are going to do about them,
because the government has purchased around $20 billion worth of them.
That is it, thank you.
CHAIR:
Thank you, Ms Brailey. Just to clarify: you are saying that the people
who are the borrowers under these loans did not know what was happening
with these loans? Where is the level of knowledge that they would have
had on this—that they knew they were getting a loan, but they did not
know what the details were that were being put on the loans?
Ms Brailey : That is right.
CHAIR: What you are saying is that those applications were doctored after they had looked at them?
Ms Brailey :
That is right. I have complained to each of the chairmen and CEOs of
the banks involved. They have all had letters from me, in the last two
or three years in particular. Each time I have said that these people
got these loans without any knowledge or authority, given—
CHAIR: They knew they were getting a loan, though.
Ms Brailey :
But they did get the loan; the banks will argue that they got the
benefit of the loan—however, there was a sustainability factor: there
was never any affordability criterion in the process.
CHAIR:
So the issue from the consumers' perspective, which is whom you
represent, is that people have been provided with loans that they should
not have been, because they did not have the financial ability to meet
the obligations under the arrangement as it ended up, and that put them
in financial hardship because of what happened up the line?
Ms Brailey : Yes, precisely: the affordability factor was—
CHAIR: You used the term 'fraud'. Where is your allegation that the fraud occurs? At which stage of the process?
Ms Brailey :
I am a criminologist, Mr Chairman, so I understand a bit about that.
The fraud is in misrepresenting the true income. It was very easy for
several years, for all of us, to blame the brokers who, to use their
analogy, fudged the figures. But what I have found out since is that,
through a service calculator, each BDM would teach the brokers to use a
service calculator online and put in certain parameters such that the
calculator, belonging to the bank—engineered by the bank—would actually
bring out a figure that was highly inflated, based on a possible rental
from a property. But we even have vacant blocks of land on them. What,
are the cows paying rent? There is just no truth in the document at all.
But the end problem was the whole idea that they would get a tax
advantage and that was calculated in—capital gains and all these
incentives. The emails actually tell them that that is what the
calculator does. As one broker put it very simply to me: 'Denise,
without a calculator, we did not know what figure to put in. We put in
the figure that the calculator brought to us. We were told to do that
back at the office after we had the signature.' Therefore, there was no
knowledge on the part of the consumer.
CHAIR:
You are raising serious issues. We have heard from Treasury that the
level of defaults under the securitised mortgages in Australia has been
particularly low and there is no evidence of any systemic problem with
the securities that form part of the RMBS packages in Australia. Clearly
there were in America and other parts of the world. The evidence here
suggests that there is no systemic issue. Obviously there will be
individual cases that you can find where there have been some problems
but there is no systemic problem. How do you respond to that?
Ms Brailey :
That is why we need a royal commission into the banking sector—they are
strong words but that is what we need, because those figures are
clearly wrong. The way the figures are translating at the moment makes
you think that but that is not the reality. The reality is that some of
these people were given buffer loans to refinance, refinance and
refinance, so they are never in default. I have a list 100 people who
are still in their houses and have not paid a payment for four years
simply because I have been there. There is a stalemate going on. They
are not taking the houses but on the other hand the defaults are there,
and I do not know what figures the bankers have decided to put those
into.
CHAIR:
That is interesting as well because we have also had a lot of
complaints that the banks are too aggressive in coming and taking the
collateral.
Senator WILLIAMS:
There are many low doc loans or no doc loans issued from banks. I have
some cases here today and one is of a woman in an aged-care facility and
at the age of 98 she signed a document for a 30-year loan. She must
have a good doctor!
Ms Brailey : Yes, that is fairly prevalent.
Senator WILLIAMS:
Of course on the advice of the bank manager she invested that and that
company went broke. She is one of many. Are you telling me that these
low doc loans and no doc loans were packaged up by some institutions and
sold off to the Australian Office of Financial Management as
residential mortgage backed securities?
Ms Brailey : Yes.
Ms Brailey :
Fitch is saying that it is around eight to 10 per cent on low docs. I
suspect that it is lower simply because inadequate figures have been
provided.
Senator WILLIAMS:
I asked witnesses earlier who about rates these packages of loans when
they are sold off to the government or anyone else? I think the response
was that it is Moody's and other rating agencies.
Ms Brailey : That is right.
Ms Brailey : Exactly right.
Senator WILLIAMS:
You mentioned the Financial Ombudsman Service, FOS. If you want to
lodge a complaint with FOS, their maximum loan limit is $600,000—is that
correct?
Ms Brailey :
No, a correction there: it is $500,000 that they can investigate but
only $280,000 in terms of compensation. That is a decrease on a $500,000
loan. So the victims, the consumers, who are still suffering this are
told to wear half the problem, and they may end up in their seventies
and their eighties with a $400,000 or $500,000 loan.
Ms Brailey :
Yes, that was the original idea: low doc for self-employed, ABNs for
two years minimum plus GST registered. In these emails, I have
highlighted where they show, time and time again—and some in big
letters: 'We do ABNs for a day. No LMI.'
Ms Brailey : The banks. There are 36 lenders involved that I have emails from showing them all doing the same thing.
Senator WILLIAMS: Are you saying that to be self-employed and to prove that you have an ABN the banks will issue you with one?
Ms Brailey :
The brokers get them online. The BDMs teach the brokers to go online
and get an ABN and then, 'You can do that if you have the ladies or
gents TFN.'
Senator WILLIAMS:
I have a document here from one of the big four banks. It says, 'What's
new? Low doc loan policy requires a main income earner primary
applicant to be self-employed. While self-employed status is declared by
the customer in their loan application this information is not
validated during the loan approval process.'
Ms Brailey : Yes, that is right. I have seen emails like that.
Senator WILLIAMS:
I can ask the banks about this on Friday. You wrote to ASIC and in that
letter dated 21 November 2011 you said, 'On behalf of all consumers of
bank products and services in Australia the two key questions we are
seeking answers to are these. Which bank flagged a hybrid low doc model
to all the other lenders so that the product miraculously appeared on
every lender's books at the same time?' Are you saying that one bank
went out to the public saying, 'Here's our low doc loans' and all the
other banks did the same thing on the same day?
Ms Brailey :
I believe so. Evidence suggests that, but, again, that is why we need a
royal commission. These are valid questions that go to the very heart
of our banking system.
Senator WILLIAMS:
The next question you asked is, 'Which bank designed the six degrees of
separation between lender and borrower and ensured the plans were
identical?'
Ms Brailey :
That is the structure that I designed. There are six degrees of
separation in order to escape liability—there cannot be any other
reason. All they had to do was to get a white sheet of paper and put on
it, 'We do low docs here' and stick it in the window, and they did not
have to pay commissions to all these people, unless there was an
ulterior motive.
Senator WILLIAMS: These people with low doc loans were classed as asset rich, income poor—is that correct?
Ms Brailey : Yes.
Senator WILLIAMS:
Your letter says that public identification of pensioners in 2004 as a
new $50 billion market by one particular investment bank ought to have
sent regulatory alarm bells ringing.
Ms Brailey :
Yes. It was published as well. I was front row when 1,000 planners were
in the room and they were discussing ARIPs. I have never heard it
before, asset rich, income poor—let's go after the pensioners. I
thought, 'My god, this is where they are going.'
Senator WILLIAMS:
So these pensioners, if we can call them that, might own their own
home. The value of it would depend on where they live. In Inverell where
I live, it might be $250,000 or $300,000 and in Sydney in might be $1
million.
Ms Brailey : In Chatswood in Sydney, an average suburb, a 1960s home would easily be $1.5 million.
Senator WILLIAMS:
They would get a low doc loan, borrow half a million dollars and they
would not have any income coming in to pay for that loan. They would
invest the money wherever and then it would turn pear-shaped; hence they
would have trouble. Are these low doc loans still being issued today?
Ms Brailey :
My word they are because the broker channel really only sells low doc
and no doc. We have tracked the no docs back to 2005-06 when the first
couple came through. Thirty-six lenders became involved in the no docs.
The only reason they came into play was that the brokers just did not
get the service calculator and it all became too hard. So they ditched
the service calculator and said, 'We don't have any income anymore.'
Again, these emails say: 'No income. No asset and liability this
statements.' I have one particular email where the BDM is particularly
saying to the broker, 'If you want to switch from a low doc and no doc,
you really have to write it up again because we know now what the asset
and liability is, and we know at the income is, so you will have to do
it again and submit it as a new one. You cannot just change over because
we have seen the other two documents.'
Senator WILLIAMS:
I was on the parliamentary joint committee that inquired into the crash
of Storm Financial and Opes Prime et cetera. We saw the situation where
a retired couple who may own their home that was worth $600,000 were
lent $300,000 from whatever bank and then that became a deposit on a $1½
million loan in shares. The stock market crashed and everything went
pear-shaped, and we all know what happened then. Many of those Storm
loans would have been low doc loans as well, I imagine.
Ms Brailey :
Yes, I have seen some of those and they were definitely fraudulent loan
application forms by persons unknown. That is why I say, even to ASIC,
'by persons unknown'. Until we have an inquiry, we do not know whose
writing is on those forms. Every form we have uncovered so far—and this
is for the people who are behind me here today as well as the other 500
members—has had three people's handwriting on those forms. Unless the
broker decides to write in three different hands—
Senator WILLIAMS: Let us just go through the application form. Normally an application form is three pages.
Ms Brailey :
The banks have told us they were three pages. The banks gave the courts
documents to say the loan application form was three pages. They were
not; they were an 11-page document—always.
Senator WILLIAMS: So when the customer signed off the loan application form, the customer signed three pages not 11?
Ms Brailey : Three pages, that is right.
Senator WILLIAMS: You are saying that after the customer signed those application forms, figures were altered on the 11-page form?
Ms Brailey :
Yes. The way it worked was that the other pages of the application—and I
have this complete one here—were inserted and that would be faxed
through to the bank. The people would never see the rest of the
document.
Ms Brailey :
Yes. All they are saying of late is that they have the new NCCP laws
and they cannot look into anything further, and we have letters that say
they assess every case. They are motherhood statements. They say they
assess every case but they are not doing anything about it.
Senator WILLIAMS: I am very familiar with the motherhood statements from ASIC. Were those applications for loans processed by solicitors?
Ms Brailey :
Yes, and the predominant one I wish to bring to the attention of the
committee is Gadens. Kemp Strang is in there a fair bit, but mostly the
major banks use Gadens. I am tired of Gadens being the bully in this in
terms of handing over the documents. The banks are sending these people
around in circles saying, 'You've got to ring Gadens to get the copy of
the documents because we have given it all to them.' Then Gadens say,
'You're not entitled to those documents.' I have Gadens' letters to me
saying that the people are not entitled to those documents.
Ms Brailey :
Yes. I am also asking for the service calculator. They say they did not
sign the service calculator. For two or three years, I am the one who
has had to argue on that level with the banks and their lawyers that
these people are entitled to these documents—they have signed them, they
went as a package and the bank relied upon them to furnish the loan.
This is the document they relied on. The actual loan application form,
the complete set, is 39 pages.
Ms Brailey :
Yes, and was never given a copy. That was one of the key indicators I
raised with ASIC in 2003. The ATO did an investigation into this in
2005. It was broadcast on the ABC. I rang Mr Carmody at the time, or his
office. I went to Sydney and spoke with two of their investigators on
this issue and they told me at that time, 'Denise, if you're right then
there is nothing in it for us.' They closed down the investigation.
'This is a job for ASIC.' But ASIC never did anything. So we went around
again. I probably killed that investigation for the tax office. What
they clearly saw was that both cannot be right. You have a tax return
that says that somebody, like the people behind me here, might have
$20,000 income and then over there it says that they have $180,000. Of
course the tax department thought there were an awful lot of people not
getting their tax returns right and that the true figure, if there are
two figures and one is wrong, is in the tax return. But once they had a
chat with me, and I took in six of these to show them what was going on,
it all closed down and went away.
Senator CAMERON:
Congratulations, Ms Brailey, on the work that you are doing, trying to
protect people from the excesses of some of these banks. I do not want
to go through all of the issues that Senator Williams has been through.
As I understand it, you are acting mainly for people who have taken out
low doc loans and these are predominantly individuals and companies—is
that correct?
Ms Brailey : That is right.
Senator CAMERON:
Would it surprise you to know that I have had complaints on similar
terms to the ones you have raised but also from people who have been
induced into borrowing to $2 million—
Ms Brailey : I think we have a lady in the room who has borrowed $4 million, and she is in her seventies on her own, a widow.
Senator CAMERON: Are you aware of an ANZ product called ING Wholesale Property Securities Trust?
Ms Brailey :
I am not sure. I would have to take that on notice simply because I
have seen ING on several documents, whether it is that particular trust
you are talking about.
Senator CAMERON:
This constituent who has written to me has indicated that he sought
some financial advice from ANZ and he met with a relationship manager,
an assistant manager and a financial planner. He was advised: 'Here's
what we can do for you. Your money won't be at risk and you will get an
ongoing income.' Is that a consistent position that you have heard?
Ms Brailey :
That is right. The relationship manager is the one I referred to as the
business development manager—they all have something similar.
Ms Brailey : Yes, consistent with what I have been discussing.
Senator CAMERON:
This individual constituent said that he was given a range of figures
by ANZ. These figures were substituted after they had signed with a
whole new set of figures that were completely inconsistent with the
original figures and meant that there could never be any return from
this investment. Have you heard of issues like that before?
Ms Brailey : Yes.
Senator CAMERON:
He goes on to say that he complained to the ANZ on many occasions. He
complained about bullying tactics, high-pressure tactics, having all of
the funds going to debt reduction, asking him to sign blank documents,
telling him not to date documents, advising that he could not change any
conditions he was not happy with, just sign the documents, fix them up
and if he did not sign they would all be sent to Melbourne and he would
be disadvantaged. Have you heard of issues like this?
Ms Brailey : There are issues like that, yes.
Senator CAMERON:
He was told he would be investing in what he thought was a stand-alone
fund, but the actual investment was in a holding fund which was a range
of different funds. Is that common?
Ms Brailey : Yes, meaning the funds are gone.
Senator CAMERON:
Yes. People are experiencing problems and these are people who probably
should have known better than to sign documents and to leave things the
way they were. But I suppose that is what happens.
Ms Brailey : They trusted the banking system.
Ms Brailey : Yes, they did not give the funds to the chap down the road.
Senator CAMERON:
I would like to take you through a couple of points. Professor Joe
Stiglitz, a Nobel prize-winning economist, had a look at the banking
system in the US and the issues that system brought about for the global
financial crisis. He recommends a number of things to reduce
rent-seeking in the global financial crisis in his latest book called The Price of Inequality.
On page 269 he says what should happen is that there should be a curb
on excessive risk-taking in the too-big-to-fail and
too-interconnected-to-fail financial institutions. Do you agree with
this?
Ms Brailey : Yes.
Senator CAMERON: You would agree with that curb on excess risk-taking in the banking system, that it is a good thing?
Ms Brailey : Yes, absolutely.
Senator CAMERON:
Professor Stiglitz goes on to say that we should make banks more
transparent, especially in their treatment of over-the-counter
derivatives. That is consistent with your view?
Ms Brailey : Absolutely.
Senator CAMERON: He says that Warren Buffett said that these are 'financial weapons of mass destruction'. I think we have seen some of this.
Ms Brailey : I have seen the destruction. I am at the coalface of seeing that with my own eyes.
Senator CAMERON:
He goes on to say that we should make banks and credit card companies
more competitive and make sure that they act competitively.
Ms Brailey :
I do not tend to be the expert on competition, but I can assure you
that the commissions that were being set, as the professor said before,
and the amounts of money being pumped through in bonuses and other
incentives have been a real catalyst here.
Senator CAMERON:
I will come to that, but this is about competition in the banking
industry. Do you think there is enough competition in the banking
industry?
Ms Brailey :
I think that word is a bit overused in the context of this at the
moment. I would not say that there should not be competition in the
banking sector, but on the other hand what we need is an enforcement of
law. We need strong enough regulations so these sorts of things are not
happening.
Senator CAMERON:
Professor Stiglitz says we should make it more difficult for banks to
engage in predatory lending and abuse of credit card practices, and we
should curb the bonuses that encourage excessive risk-taking and
short-sighted behaviour. I suppose that is bonuses right through the
banking system.
Ms Brailey : Yes, that has been a catalyst.
Senator CAMERON:
He argues that offshore banking centres such as the Cayman Islands
should be closed down because they are being used to facilitate this.
Would you agree that these are issues that are important for this
committee to consider?
Ms Brailey : I certainly do.
Senator CAMERON: Are you aware of the High Court decision on FirstMac in Queensland?
Ms Brailey :
I am glad you brought that up. I was the person that put those people
together in the first place. I then brought the legal issues up and I
took them to Neil Jenman to see if he would fund the case—he is a friend
of mine. That is how that case got up and running. We knew that normal
processes of funding would only be for a few of these families—I had 50
families in that situation at that time in Sydney and we were only able
to get funding for three families. As you know, that would be at least
$1½ million if they go all the way and we would need deep pockets to
keep going. I was in litigation funding myself and I understand those
issues fully. I understand that particular case. I have 12 of the
original files at home and they were all fraudulent loan application
forms, exactly as you are seeing today. Nothing has changed since 2003.
Senator CAMERON: What are the lessons for legislators in relation to this state decision and the High Court decision?
Ms Brailey :
The lesson is that the legislators got it right. They actually provided
the laws, but those laws were not being used. I wrote to the ASIC
chairman—excuse my emotion in that—to say this was in the public
interest and asking for funding to take this case, as an atypical case,
to court. That funding was not forthcoming, and then ASIC had the gall
to waste my time in 2009 by making me sit in the court for two days and
listen to their twaddle about how they are helping us out. I must admit I
get emotional about that. I had to fly to Sydney and listen to them for
two days out of five they had allocated to this case.
Senator CAMERON: ASIC are appearing before this committee, so we will be able to ask them about the 'twaddle'.
Ms Brailey : I would love you to do that.
Senator CAMERON:
In Professor Stiglitz's book, he talks about some of the risk-taking
behaviour of banks. He says that the risk-taking is a major source of
the volatility in the economy. He says there are four explanations for
the behaviour, and given that you have been dealing with banks I want to
get your view on that. He says there are four possible explanations for
this risk-taking behaviour. First, organisational incentives, and the
banks actually push off much of the risk to government because they are
too big to fail. That is a big debate that has been taking place
worldwide. Second, individual incentives which he describes as agency
problems. Those inside the bank have incentives that encourage
risk-taking. Third, self-selection in that in any society there are
those who are risk-loving and are attracted to the financial sector. You
get people going into the financial sector who like risk-taking.
Fourth, what he describes as pervasive irrationality. Those in the
financial sector systematically underestimate risk and their investors
do not understand the risks of leverage and underestimate its
consequences. Do those issues resonate with you in your experience?
Ms Brailey :
Yes, they were not real investors. They were mums and dads who owned
their own homes and they were told: 'If you just borrow this amount of
money for the next six months or so, suck it and see. Try and get
yourself an extra $10,000 a year, and we can invest it for you.' That is
where you find that the banks are interrelated at times with the source
of the properties they are putting them into. That is what needs a
royal commission. If we do not get it right this time we cannot have a
son of Wallis. That is just a review. I cannot put it any more strongly
than this: we need the Senate to push as hard as it can for a royal
commission into the banking sector and have all this examined, so these
people behind me get some justice.
Senator CAMERON:
I suppose that is one way of going down that path. My experience of
royal commissions in the building and construction industry has not been
very good—lots of money spent, but not a lot of outcomes. Maybe there
are other avenues we could have a look at, and that is the role of ASIC
providing support for litigation and test cases like the one that you
have raised.
Ms Brailey :
I would not agree with that at all. I am sorry, but I have a different
opinion. ASIC will not enforce the law. It has decriminalised that which
parliament deemed criminal activity.
Ms Brailey :
Yes. We are talking about policy, and ASIC blames the government for
the policy, whichever government is in power. I just go around in a loop
at a fairly high level with ASIC. I have got as far as talking to the
deputy chairman at some time. I have had several discussions with ASIC
on those sorts of levels. I am saying that unless we have documents from
the banks tabled somewhere—these people do not have the money to take
the banks to court and the banks know that—you will not get to the
truth. You have $57 billion worth there and 100,000 families that are
possibly infected with this problem. If we put blinkers on and say we do
not want to look at it or it is all too hard or it is too costly, as
you said before, the cost of this could be much, much worse if we ignore
it.
Senator CAMERON:
What we are being told by all the evidence that has come before us
today—I think that is right—is that our banking industry is different
from the international banking industry. We have a highly professional
banking industry. The industry is regulated to such an extent that it is
not tarnished by the problems that tarnished the US and the British
banking systems, for instance. But what you are saying is that in our
banking industry we have a degree of criminality—that is your
allegation—and lack of any view that society counts for anything. Is
that your submission here today?
Ms Brailey :
That is right. We have this problem with all of these people. Do we
wait until we have 100,000 outside parliament? It may sound dramatic,
but we found utter fraud from the highest level of banking, not the
underlings at the bottom in the various small departments. We are
talking about a structure, somebody sat on the top of the banking world
who flagged it to every other bank. Why? Because they did it in America,
Too Big to Fail.
That book goes into the mix as well. George Bush had the same problem
in America as we do now. He went to the bankers who said, 'We are as bad
as we are, but what are you going to do about it?' Who is in charge in
our country, our nation? I want the parliament to take control of this
situation, because I am trying to flag to parliament, in my own small
and modest way, that there is a major problem out there. The figures
show that there is no problem in the banking sector and these documents
do not lie, but there is a problem in the banking sector, because one of
us is lying—and it is not me.
Senator CAMERON:
One last question, Stiglitz describes modern capitalism in the finance
sector like this: those that win at it—that is, the capitalist
system—often possess less admirable characteristics as well. The ability
to skip the law or to shape the law in their own favour, the
willingness to take advantage of others, even the poor and to play
unfair when necessary. Is that how you would describe Australia's
banking system?
Ms Brailey : Yes, I do.
Ms Brailey :
Yes, I am not making that comment lightly. I am saying, yes, I agree
100 per cent because of what I have seen for the last eight years
starting with that High Court case. If I had not done what I had done at
that moment in time in 2003 of taking the trouble—free of
charge—spending 18 months gathering those people and those documents
together, it would never have got to the High Court.
Senator WILLIAMS:
You are calling for a royal commission. I have called for that before
into white-collar crime in Australia. If only 10 per cent of what comes
into my office is true, we have a problem.
Ms Brailey : Yes.
Senator WILLIAMS:
Where does it stop? Look at the Health Services Union. Look where the
money has gone there. I agree, we should have a royal commission and
include the union in it as well for where people's union's fees or a
people's money is being spent, laundry or what games are being played.
Ms Brailey :
I managed to get a royal commission in Western Australia one time. I
have got 12 inquiries through lobbying including a royal commission so
far. That royal commission, although you could sit back and say well it
did not do all the things we wanted it to do, it brought the documents
out and it brought a lot of truth out we would not have got had we not
had it.
and there are some interesting links there.
Indeed. We have more household debt.
The only country with a worse household balance sheet is Ireland. The Greeks and Spaniards have better household debt numbers.
