How much bank profits can we afford?

nioka · 31 October 2010

"I think we are getting off topic here. If Joe Hockey and the banks merits so much discussion, shouldn't we open a thread for him/them "Can Joe Hockey add up?"; "When is an Audit not an Audit?"; "How much bank profits can the public support?"; and "Where will the banks turn for a profit after the public have nothing left to give?""

NullaNulla, Good idea. thread started.

We will see the usual "free market economy" statements but they should be tempered by the fact that we are a captive audience and held that way by government policy. For example Medibank Private only pay refunds into a bank account as do a lot of businesses and government departments. We will hear that you have a choice of banks. Yes, you do the greedy and the greedier.

nukz · 31 October 2010

Re: How much Bank profits can we afford.

Greed is good hehe

I'm all for bank profits, they will need it when we have the collapse here. Nice dead-cat-bounce going on in ASX / DOW which mirror's what happened in the great depression. I suspect these large profits will be short lived.

I'm not 100% sure about this but i thought some banks atleast the one who reported a 5.3b profit this week had adopted a mark-to-market accounting method a little while back.

I believe Enron used this accounting method and valued some assets way more than their market value at the time.

c-unit · 31 October 2010

I don't really understand the argument against bank profits. Their profits really aren't that large when you consider the size of their balance sheets and the scope of their operations. Likewise monthly account fees. You pay to use a service, just like anything else.

With interest rates, well, people will always complain when interest rates are increased by the banks, yet never congratulate the banks when they lower their rates. Can't have it both ways, people!

moXJO · 31 October 2010

c-unit said:
I don't really understand the argument against bank profits. Their profits really aren't that large when you consider the size of their balance sheets and the scope of their operations. Likewise monthly account fees. You pay to use a service, just like anything else.

With interest rates, well, people will always complain when interest rates are increased by the banks, yet never congratulate the banks when they lower their rates. Can't have it both ways, people!

They have a monopoly over the industry thanks to government and are protected with taxpayer funds when it comes to the crunch. Plus nobody likes bankers

Smurf1976 · 31 October 2010

moXJO said:
They have a monopoly over the industry thanks to government and are protected with taxpayer funds when it comes to the crunch. Plus nobody likes bankers

Given that taxpayers are ultimately taking the risk, it seems only fair that taxpayers also should be receiving the profits. That is free market capitalism - those who take the risk, receive the rewards.

Julia · 31 October 2010

moXJO said:
Plus nobody likes bankers

Well, I've only ever experienced good treatment from banks, no complaints.
Sometimes you do have to ask for what you want.
Thousands of people whine about account fees but could access fee-free a/c if they just asked.

Smurf1976 said:
Given that taxpayers are ultimately taking the risk, it seems only fair that taxpayers also should be receiving the profits. That is free market capitalism - those who take the risk, receive the rewards.

Let's remember that the banks have been paying the government a reasonable fee for the guarantee which was, after all, just a political measure to stop customers panicking and unnecessarily pulling funds out at the time of the GFC.

moXJO · 31 October 2010

Julia said:
Well, I've only ever experienced good treatment from banks, no complaints.
Sometimes you do have to ask for what you want.
Thousands of people whine about account fees but could access fee-free a/c if they just asked.

Let's remember that the banks have been paying the government a reasonable fee for the guarantee which was, after all, just a political measure to stop customers panicking and unnecessarily pulling funds out at the time of the GFC.

Do you own bank shares:

Na I'm ok with bankers, going to help build my bank managers palace / err I mean house. Being that I'm self employed I'm hoping after this I can borrow more than $50 without promising my first born and life story in hardcover.

alphaman · 31 October 2010

Smurf1976 said:
Given that taxpayers are ultimately taking the risk, it seems only fair that taxpayers also should be receiving the profits. That is free market capitalism - those who take the risk, receive the rewards.

We might have already received the profits. Imagine if the big 4 actually collapsed.

nioka · 31 October 2010

moXJO said:
Do you own bank shares:

Na I'm ok with bankers, going to help build my bank managers palace / err I mean house. Being that I'm self employed I'm hoping after this I can borrow more than $50 without promising my first born and life story in hardcover.

I once asked my bank manager when my long service leave was due. He asked me why i asked him.

I told him that I had been working for the bank for 40 years so they should pay up with long service entitlements. My brother retired at 55 from a bank job with big super payout plus long servise leave after only working there for 35 years.

Calliope · 31 October 2010

Bank bashing is second only to Howard bashing as a favoured sport on ASF chat. Both have an idealogical basis.

moXJO · 31 October 2010

Calliope said:
Bank bashing is second only to Howard bashing as a favoured sport on ASF chat. .

Also for Joe Hockey
Oh snap

Macquack · 31 October 2010

moXJO said:
They have a monopoly over the industry thanks to government and are protected with taxpayer funds when it comes to the crunch. Plus nobody likes bankers

The thing with banks is that by default, they have a monopoly over all industries.

Privatising the Commonwealth Bank was a big mistake as the government (read people) was a player in the market keeping the bankers honest.

I say bring back a "peoples bank" an listen for the 'squealing pig' private bankers.

Macquack · 31 October 2010

Calliope said:
Bank bashing is second only to Howard bashing as a favoured sport on ASF chat. Both have an idealogical basis.

That's a laugh coming from the head cheerleader of the Rudd/Gillard Bashing Club.

Julia · 31 October 2010

moXJO said:
Do you own bank shares:

Not at present, simply because I don't have much faith in the sector at the moment. Or in the entire market, for that matter.

Na I'm ok with bankers, going to help build my bank managers palace / err I mean house. Being that I'm self employed I'm hoping after this I can borrow more than $50 without promising my first born and life story in hardcover.

Fair comment, I'm sure. I've never been in the position of wanting to borrow for anything other than real estate mortgages.

Calliope said:
Bank bashing is second only to Howard bashing as a favoured sport on ASF chat. Both have an idealogical basis.

It's something that puzzles me a bit, given the successful history of our banks being one of the main factors that allowed Australia to weather the storm of the GFC so well.

medicowallet · 31 October 2010

Banks only profit what their clients are willing to pay them.

ie a highly leveraged housing bubble = record profits for banks.

We have caused our own problem, the banks only facilitated it.

So, what I am saying, is to improve competition in banking, stop government propping up of a housing bubble, which makes houses less expensive, and kills off leveraged demand.

Banks then will have to compete more for market share, and we all win.

Better lifestyles
Cheaper banking
Less whining

(Alternately the whiners can just purchase bank shares, instead of purchasing property)

nukz · 1 November 2010

medicowallet said:
Banks only profit what their clients are willing to pay them.

Thats true to some extent but fractional reserve banking also helps a great deal. If that was not around we would never see profits this large.

alphaman · 1 November 2010

Julia said:
It's something that puzzles me a bit, given the successful history of our banks being one of the main factors that allowed Australia to weather the storm of the GFC so well.

Australian banks were simply lucky. Thing would be very different if we had the same level of competition as in the US, and/or we did not have commodities boom supporting the Australian economy.

nioka · 1 November 2010

alphaman said:
Australian banks were simply lucky. Thing would be very different if we had the same level of competition as in the US, and/or we did not have commodities boom supporting the Australian economy.

They also did it on the backs of the mortgage brokers by holding back on funds available to them and forcing them out of business. They are also profiting from the compulsory super that has to channel any funds through the banks.

Mofra · 1 November 2010

moXJO said:
They have a monopoly over the industry thanks to government and are protected with taxpayer funds when it comes to the crunch. Plus nobody likes bankers

There are industries with far more entrecnched oligopolies and less competition than banking.

Take out WES/WOW and MTS (which is still less than 20% of the market) and that leaves almost no one left in the grocery space.

TLS/Optus and Voda rule the telco market.

Media? Two major players (although the internet has opened up small players in the news space).
TV? Similar to the banking industry.

Bank bashing is just lazy politics; do we really want to weaken our banking system in preperation for a GFC mk2?

Mofra · 1 November 2010

nioka said:
They also did it on the backs of the mortgage brokers by holding back on funds available to them and forcing them out of business.

No they didn't. The CBA maintained the warehousing facilities to securitised lenders during the GFC - the MBS/CDO market (predominately offshore) collapsed so that the warehoused debt couldn't be shifted to market.

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