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Citizens Electoral Council of Australia
Media Release Friday, 14 September 2018
Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Email: cec@cecaust.com.au
Website: http://www.cecaust.com.au
10 years after the GFC, financial system again on the brink
The global financial crisis started 10 years ago tomorrow, 15 September 2008, when the giant Wall Street investment bank Lehman Brothers collapsed.
The Citizens Electoral Council’s Australian Alert Service magazine has marked the anniversary with feature articles that reveal:
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Australia’s banks were not sound, as proclaimed, but also faced collapse, and had to be rescued by the government and the US bank bailout: “Australia did not avoid the GFC! The Australian banking crisis of 2008”.
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The global financial system is in even greater danger today, because proper financial reforms were not implemented after 2008, namely a return to the Glass-Steagall separation of banking from financial speculation: “Financial system more vulnerable than 2008, and we’re less prepared”.
Click here for a free copy of the 12 September 2018 Australian Alert Service magazine.
The number one lesson of the global financial crisis is that financial authorities and most financial “experts” have no idea what they are talking about. All over the world those in positions of authority over the financial system—at the heads of banks, the central banks, the regulators and in the government—denied the brewing crisis until the world blew up under their feet. In his 2007 book The Age of Turbulence, newly retired guru US Federal Reserve chairman Alan Greenspan praised the credit default swap derivatives that caused the meltdown the following year, for minimising risk! Almost all media experts also had no clue.
In every other country in the world, these authorities could no longer deny the crisis after Lehman Brothers collapsed, and triggered a global meltdown. Except Australia.
As the AAS reveals, Australia’s authorities had to scramble desperately to prop up the banks, but all the while they insisted the banks were sound, thanks to the world-leading prudential regulation of the bank supervisor APRA. Because they succeeded in propping up the banks, they have continued to proclaim this ever since.
This is a lie. APRA had allowed, and even encouraged, the banks to engage in the same reckless mortgage lending as their US counterparts, and suppressed an internal 2007 report that warned that Australia’s banks faced the same consequences.
Because of this lie, the measures that the government put in place in 2008 to prop up the banks have set Australia up for a bigger crash today. Specifically, they deliberately pushed up house prices, and in doing so incentivised the banks’ reckless lending and even fraud turning Australia into the biggest housing bubble in the world.
The Financial Services Royal Commission briefly examined the mortgage fraud in its first round of hearings, but was unable to scope out the full extent of the problem. However, the little it was able to highlight has forced a tightening of bank lending standards, which has sparked fears that the tighter standards will constrain lending and cause house prices to fall. There is only one reason for this fear: the size of the Australian housing bubble is entirely dependent on the banks’ endemic mortgage control fraud!
Denise Brailey of the Banking and Finance Consumers Support Association (BFCSA), who is the leading expert on mortgage fraud in Australia from years of fighting tirelessly on behalf of the victims, has exposed the true extent of the mortgage fraud in a presentation to a CEC seminar in Perth on 30 June 2018. Denise recounted how people express fear that a proper clean-up of mortgage fraud will crash the economy. Denise replies: “Well if we’re going to crash the economy, we’ve got a problem haven’t we?” Yes, we’ve got a problem!
(Click here to watch Denise’s explosive presentation, which should be required viewing for every politician: Mortgage Fraud Explained.)
Glass-Steagall
The ultimate cause of the global financial crisis was that the cancer of speculation had been allowed to take over the global financial system. This started from the neoliberal financial deregulation of the 1980s, but it exploded in 1999 when the US Congress repealed the Glass-Steagall Act, which for 66 years had separated normal banking from speculative investment banking. This separation had been a brake on speculation. Before the repeal, the derivatives that would bring down the system in 2008 had taken 13 years to grow to US$100 trillion; after the repeal, derivatives grew at US$100 trillion per year! Banks commit mortgage fraud because they need more and more mortgages to fuel the highly profitable but highly risky derivatives bets they make on mortgages—in Australia, bank derivatives have soared from $4 trillion in 1999, to $40 trillion today.
Since the GFC, there has been a global campaign to restore Glass-Steagall, or establish it as a basic financial regulation in every country. In Australia, the CEC drafted the Banking System Reform (Separation of Banks) Bill 2018, which Bob Katter MP introduced into Parliament on 25 June, to enact a Glass-Steagall separation of Australia’s banks. With a new, more devastating financial crisis looming—one which Australia has no hope of avoiding, and may even trigger through a crash of the housing bubble here—it is urgent that this bill be debated and passed right away.
What you can do:
Click here for a free DVD of two presentations from the CEC’s 30 June seminar in Perth: the BFCSA’s Denise Brailey on Mortgage Fraud Explained, and Australian Alert Service editor Elisa Barwick on China’s Glass-Steagall standard.
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.
