Citizens Electoral Council of Australia

Media Release Thursday, 9 April 2015

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

Hockey’s deposit tax is a fraud—only Glass-Steagall will protect savings

Treasurer Joe Hockey looks set to copy his ALP predecessor Chris Bowen’s deposit tax scheme—a 0.05 per cent levy on bank deposits, ostensibly to fund the government’s supposed guarantee on bank deposits up to $250,000.

The deposit levy is a fraud, just another ploy in the austerity agenda of finding ways to gouge ordinary people—through charges and taxes, and cuts to healthcare, pensions and welfare—to prop up the failing financial system.

Besides, as the government knows, the only way to actually guarantee bank deposits is by stopping the banks from gambling with their customers’ money, through a full Glass-Steagall separation of retail banking from all forms of investment banking.

The deposit levy is of the same intention as “bail-in”—making bank customers pay to prop up failing banks.

On The Bolt Report on 29 March Hockey explained, “It’s five basis points [0.05 per cent] on deposits and it’s meant to pay for a potential bank failure and, as a trade-off, Australians with up to $250,000 in their bank accounts have a government guarantee.” Shifting the blame to Bowen, Hockey continued, “What happened was, he decided to collect the money before a bank failure. Previously the policy has been that you would impose a levy to recoup money after a bank failure.” [Emphasis added.]

It is estimated the levy will raise $500 million per year, yet deposits of $250,000 or less in the big four banks alone are more than $700 billion.

How on earth is this levy supposed to cover deposits in the event of a failure of one or more of the Big Four banks?

And that’s what’s on the cards: the Big Four banks’ over-extension in the domestic property market is terminal. A plunge in house prices will wipe them out. This is considered unthinkable in the bubble centres of Sydney and Melbourne, but it has already happened right across the mining boom areas of Western Australia and Queensland, where houses sold for millions of dollars a few years ago are now going for a few hundred thousand. The carnage is so bad that the banks must already be sitting on big losses from those areas.

The more worrying sign of the banking crisis is their ice-like addiction to derivatives speculation. Total combined Australian bank derivatives obligations are skyrocketing, up more than $1 trillion in the last quarter for which records are available, to more than $27 trillion. The banks all claim these derivatives are the plain vanilla variety, merely for hedging, and not the risky, toxic instruments that melted down the global financial system in 2008.

However, what on earth are they hedging in Australia, at the rate of over $1 trillion in a quarter?! The breakneck growth in their derivatives speculation is a dead give-away that the banks are playing a dangerous game with their depositors’ savings.

The Citizens Electoral Council is leading the fight in Australia for the Glass-Steagall solution: split up the Big Four banks into retails banks that hold deposits, in which the deposits are kept safe under both protection from the government and through being separated away from all forms of investment banking, including, especially, derivatives speculation.

Importantly, likely US Democratic Party presidential candidate Martin O’Malley has made Glass-Steagall the key plank in his election platform, putting Wall Street, London and all their subsidiary banking systems around the world, including in Australia, on notice that their days of reckless gambling are numbered.

Anything less than Glass-Steagall, such as the Bowen-Hockey deposit levy, is a fraud and must be fought; to fight, join the CEC.

Click here for a free copy of the CEC’s pamphlet Glass-Steagall NOW!, which details the Glass-Steagall solution.

Click here to join the CEC as a member.

Click here to refer others to receive regular email updates from the Citizens Electoral Council of Australia.