Isherwood: Hockey’s bank bashing a smokescreen for busted banks; national bank the only solution

Australia’s banks are as bankrupt as the global financial system they are part of, which is why they have no choice but to jack up the interest rate pressure on mortgage-stressed families—and it is entirely the Parliament’s fault, stressed Citizens Electoral Council leader Craig Isherwood today.

“Joe Hockey’s hot air about curbs on bank interest rate rises is nothing but a smokescreen to hide the true state of the banks,” Mr Isherwood said, adding, “but look at the hysterical reaction!

“Why are the banks untouchable? They are only open because the public has propped them up, but the flurry over Hockey’s call for curbs shows the public—through the government—has no right to demand they behave.

“Listen to Parliament’s best-known banker, Malcolm Turnbull—everyone has to bow to the magic spirit called the ‘free market’.”

The real issue, Mr Isherwood insisted, is the bankruptcy of the banking system. He pointed to the mortgage foreclosure crisis in the U.S., where Bank of America has just been sued by the world’s biggest bond trader PIMCO, to repurchase $47 billion in actually worthless securities because Bank of America can’t prove it holds the titles to the mortgages on which the securities are based.

“This crisis is going to blow apart the whole edifice of government life support for the banks through bailouts that is the only thing keeping the global banking system propped up since the September 2008 collapse of Lehman Brothers—and Australia’s banks are right in the middle if it,” he said.

He explained that for years, the Australian banks poured hundreds of billions of dollars into the Australian property market, which inflated a massive bubble, driving up property prices many-fold over the past decade. The bubble was so insatiable, the banks ran out of depositors’ funds to invest, and borrowed from overseas—usually on just short-term, 90-day bills—to funnel into domestic mortgages.

Since the onset of the “GFC”, the banks know that if Australia’s property bubble bursts the way America’s has, they would all be bankrupt, so they have no choice but to keep fueling the bubble with mortgages loans, borrowed from overseas. This puts the banks—and by extension the nation—at the mercy of the international money markets: every 90 days, when the banks borrow again to roll over their existing loans, they have to take the interest rate at the time, and when they get hit with higher interest rates on 90-day bills, they have to pass that on to their variable-rate mortgage customers. In October 2008, foreign lenders refused to roll over the banks’ 90-day bills by lending more money, so the Rudd government had to step in and guarantee the banks’ foreign borrowings, or the supposedly “sound” Australian banks would have collapsed. The current Bank of America-centred foreclosure crisis in the U.S. is a deadly threat to Australia’s banks all over again.

“This is the Parliament’s fault,” Mr Isherwood charged. “The Constitution places them in charge of banking and money—not the fairy-tale ‘free market’—and they have the power to solve this crisis with the CEC’s Homeowners and Bank Protection Bill 2007, and to guarantee a truly sound banking system by establishing a national bank.

“The Australian people must demand that the Parliament grow a backbone, and take charge of the banking system the way the old Labor Party did when King O’Malley created the Commonwealth Bank in 1911, and the way John Curtin and Ben Chifley made the private banks toe the line with heavy regulations during WWII.”