It seems as though the banks have finally got under William Shorten's skin. And he has announced that when elected, the Labor Party will hold a Royal Commission in the banks.
W&D is no fan of the banks, as readers know well. The banks, the RBA and Treasury have engineered a banking structure that reminds W&D of the risible World Championship Wrestling .
In that sport, the participants made money, the media made money, the promoter made money. But the audience was deluded into a fantasy of a fair fight - and paid for the privilege. Sound familiar?
But a Royal Commission? Nuh, it would be a waste of time for one simple reason: You don't need an expensive, two-year whinge-a-thon for hundreds of aggrieved customers to know what is wrong with banks:
- Too little competition
- Executive and director compensation linked to the wrong incentives
- Regulatory regime based on the absurd proposition that big is best
Chief Sitting Turnbull just needs to ask W&D for the prescription.
BTW (By The Way) #1: the Labor Party doesn't have much credibility when it comes to finance matters. The most recent example: it's truculent Senator and public face of bank-bashing, Sam Dastyari, said two Thursday's ago (about Westpac), "The Prime Minister went out to a bank that yesterday had charges laid against it for rorting everybody's home loan."
Err, no. Westpac was charged with rigging BBSW, the base rate for wholesale commercial loans. BBSW has nothing to do with the setting of retail home loan rates.
The distinction between retail home lending and wholesale commercial lending - such a simple concept, really.
BTW #2: as Charlie Munger, that most successful US investor and partner of Warren Buffett, said, "show me the incentive and I'll show you the outcome."