Citizens Electoral Council of Australia

Media Release Wednesday, 21 May 2014

Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Email: cec@cecaust.com.au
Website: http://cec.cecaust.com.au

S&P are criminal fraudsters for the banks; screw their budget advice—send them to jail

Australians should not tolerate the Abbott government making vicious budget cuts to meet the demands of criminal fraudsters at Standard & Poor’s who should be in jail.

Who cares if S&P is threatening that unless Parliament passes Abbott and Hockey’s budget cuts, it will take away Australia’s AAA credit rating? A triple-A rating from S&P is a worthless piece of junk, as 90 local councils and charities in Australia discovered in 2007-08, when they lost tens of millions on investments in toxic CDO derivatives, which S&P had rated AAA. This was a fraction of the global losses suffered by victims of S&P worldwide.

S&P’s rating wasn’t a mistake, it was a monstrous fraud. Predatory investment banks paid S&P to rate the derivatives AAA, so they could lure in the local councils and charities.

This fraud was at the heart of the global financial crisis, but like the criminals in the investment banks, S&P got away with its crime.

Well, mostly—Australia is the one jurisdiction in the world where a court has upheld a civil legal claim against S&P for its role in the fraud.

Given that, for Australian politicians to give the disgraced S&P any credibility, or, worse, any respect as an umpire of the financial system, is itself an act of fraud.

Killing people to save banks

Make no mistake, the budget measures that the fraudsters at S&P are endorsing—$7 tax on doctor visits and $5 tax on medicines; slashing pensions by indexation fraud; no dole for six months for under 30s at a time of very high youth unemployment; massive hikes in university fees, from $30,000 to over $100,000—are calculated to prop up Australia’s bankrupt financial system.

This was acknowledged in the revealing 20 May Australian Financial Review story on S&P, in which Bank of America Merrill Lynch Australia chief economist Saul Eslake pointed out:

“Our banks have lots of liabilities which ratings agencies now recognise could become government liabilities in the wrong circumstances.”

S&P analyst Craig Michaels echoed this connection between the banks and Australia’s credit rating; AFR reported:

“Mr Michaels emphasised Australia was unusual among the 12 nations granted S&P’s gold-plated rating because it relies heavily on foreign investors for capital, including its major banks, Westpac, Commonwealth Bank, National Australia Bank and ANZ Bank. ‘Australia is fairly unique among AAA-rated sovereigns in that its external position is very weak,’ he said. ‘What that means is that to retain the AAA rating, everything else needs to remain very strong, including public finances.’”

AFR elaborated, “Australia’s [triple-A] rating carries an implicit assumption the federal government would bail out local banks in a crisis.”

Such a crisis is threatening Australia right now: the property bubble that is consuming the Australian economy is stretched to breaking point, and when it bursts, it will wipe out Australia’s banks.

Solution: Glass-Steagall

An Australian government that actually served the people, instead of the banks, would immediately act to protect the real economy from the fallout of the inevitable meltdown of the financial bubble, by imposing a Glass-Steagall separation of banking.

That means bust up the Big Four and Macquarie: separate out all of their deposits into separate retail banks that get government protection, to shield depositors from any exposure to the $23 trillion in toxic gambling bets that the banks have built largely on mortgage speculation.

The banks would then no longer be too-big-to-fail, the government would be free to focus on its responsibilities to the welfare of the people, and normal bank credit would no longer be sucked into the financial bubble but be available for real economic activity that grows the economy.

As for S&P and the banks, it is time for an Australian “Pecora Commission”, modelled on the stunning U.S. investigation in 1933 that laid bare the crimes of Wall Street, so that financial fraudsters and their political lackeys finally go to jail.

The CEC has long warned of this situation; now it’s time to fight. Join the CEC!

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