Storm Financial Group

[Judd]

Thanks Clovie,

Another reinforcement for me of one thing that has always been at the back of my mind and this thread has confirmed in a way in that why one person takes a particular path and another doesn't is apparently an individualistic thing.

Though it still perplexes me why, when doubts by some individuals were increasing markedly, they still followed the advisers suggesting to increase debt instead of just saying No. Even read of one case in the submissions to the Parliamentary Inquiry where one couple hid from their adviser the fact that they had spare cash but seemingly could not face the adviser to instruct him/her to get them out of the market. Amazing stuff.

 

[DocK]

Thanks Clovie,

Another reinforcement for me of one thing that has always been at the back of my mind and this thread has confirmed in a way in that why one person takes a particular path and another doesn't is apparently an individualistic thing.

Though it still perplexes me why, when doubts by some individuals were increasing markedly, they still followed the advisers suggesting to increase debt instead of just saying No. Even read of one case in the submissions to the Parliamentary Inquiry where one couple hid from their adviser the fact that they had spare cash but seemingly could not face the adviser to instruct him/her to get them out of the market. Amazing stuff.

I've never studied psychology, but I do think sometimes it comes back to our training from childhood to "do what you're told by those in authority" be they parents, then teachers, then employers and doctors and dentists and financial advisers etc. If our doctor tells us we must cut cholesterol or alcohol intake etc - we'd generally believe that they know best and we'd be well-advised to follow their advice for our own benefit. Likewise when our accountant tells us what we can and can't claim as tax deductions we know we risk serious penalties if we ignore their advice. I think this played into the whole Storm saga - most of their clients were not financially savvy (or they'd probably not have sought their advice in the first place) and therefore the relationship between client and adviser was one where the adviser was the authority figure. Seems rather dumb when you consider that the "employer" was actually the client - but the person with the expertise was supposedly the adviser. I think quite a lot of us got that niggly feeling in our gut that all was not quite right before it all went to hell - it then became an internal tussle to either overcome ingrained habits of "doing what you're told" or facing/admitting that those we trusted were not who we thought they were. Some took control back into their own hands, some went half-way by keeping some details hidden as in the example above, and others either couldn't or didn't want to admit that their trusted authority figure was doing them a disservice. Some still seem to believe in Manny, just as some people will never hear criticism of family or friends no matter what evidence is put before them. When you've spent your whole life (60+ years for a lot of clients) trusting those who are in positions of authority in society, it can be a very hard habit to break, and one we're often preconditioned against.

 

[SJG1974]

Gut feel and common sense are two important factors people should trust whenever they make any decision, whether it be buying a tv or handing over your life savings to a "financial adviser". As this thread has shown, for reasons that are still a mystery to me, so many people ignored their gut feeling, and showed limited common sense at best when dealing with Storm.

And now they are destitute, it is all someone else's fault. I am sure there will be conmen in Townsville running their hands together in anticipation of Storm investors being awarded compensation over this whole mess...

 

[jez47]

And now they are destitute, it is all someone else's fault..

If it was the investor's fault why did CBA offer their Resolution Scheme via Slater and Gordon? Surely not from the kindness of their heart ?

 

[shibby]

And now they are destitute, it is all someone else's fault. I am sure there will be conmen in Townsville running their hands together in anticipation of Storm investors being awarded compensation over this whole mess...

Well I slept on your comment and here it is 4.00pm and I still feel the same so here goes - what a pathetic little man you must be that you found it necessary to write that last sentence.

The irony is that the banks will win because 99% of us will probably put our so called “compensation!!!!!” in a bank or spread it over a variety of banks in an account with a pittance of interest (inverse relationship between risk and interest rate) fearful to ever trust ourselves or anyone again.
Just think of all the money the bank will make lending it out at exorbitant rates of interest, so don’t you fret SJG1974 your precious banks will live to rip off yet another generation or two.

I have found it of great interest in reference to the Storm Financial saga that all these corrupt people found each other, doesn’t anyone else?
What are the odds on that (always loved statistics).
Is there a baddies radar out there? Do they just instinctively know or simply recognise each other?

One financial advisory firm and most Australian banks are involved in this financial mess and the banks are up to their armpits in corruption, yet to be proven in a court of law of course, so bring on September 2012 I say.

So for the sake of preventing yet another argument, for this exercise we will ignore all the hundreds and hundreds and hundreds of loans that have been completely wiped, of course very quietly. Or all the very special deals that have been done on interest rates, all done under the table with signed lengthy legal documentation never to be revealed under the threat of a fate worse than death.

Seriously our generation, the baby boomers plus a decade or two, wouldn’t have expected this behaviour from a bank as Dock pointed out “the trusted authority figure” yet scratch the surface and all the documentation is there, the banks didn’t even bother to hide the evidence that’s how secure they felt in their position, because they are a bank and beyond reproach, most people trust their banks we fundamentally just do or should I say did its just one more sacred cow that has befallen our expectations.

 

[jjtebj12]

Yes Shibby its amazing all the deals that have been done. Maybe thats why all the high profile people are silent. Another back door deal???? Regardless of the signed confidentiality agreements the truth will come out, trust me on that!!! SJG your attitude is typical of the Banks you support!! The Banks wouldn't offer anything, they are just going to fight because they have to as the claim against the Banks exceeds 2 billion dollars. 10% compensation isn't good enough.

 

[SJG1974]

I am still not sure why some around here think I am a bank sympathiser.

Is it because I believe people had a choice to go with Storm and therefore should take some responsibility for that? That believe the bank on its own didn't cause the loss these people suffered? That a combination of a high risk strategy, a share market collapse and a lack of due diligence on investors behalf also played a role?

Its got me beat. As I have said ad nauseum, if the courts find the banks liable for wrongdoing, then I will have no issue with that at all. But if people expect me to believe that there was no carrot dangled in front of them, that they thought gearing was low risk and that they only geared to the gills to preserve capital, despite the fact that the Storm website was all about creating wealth, and a simple google search will tell people the risks of gearing, then they have another thing coming I am afraid.

Still, good luck to those fighting the banks..I hope they pay if they have done wrong. Wouldn't have thought I could be much clearer than that (although I have thought that previously).

 

[jjtebj12]

I did have the ability to pay out my margin call, however I never got one. If only the banks gave me one phone call things would be so different. Wonder why the media is so quiet, maybe they are helping their own with secret deals!!! The whole thing is abhorrent. The heads of the banks know their wrong doings and think they can hide. It won't happen. They are gone and so many will be found out!!!!

 

[bunyip]

I did have the ability to pay out my margin call, however I never got one. If only the banks gave me one phone call things would be so different. Wonder why the media is so quiet, maybe they are helping their own with secret deals!!! The whole thing is abhorrent. The heads of the banks know their wrong doings and think they can hide. It won't happen. They are gone and so many will be found out!!!!

I'd be interested to know what aggreement you had with your lender in regard to margin calls. For example, did your aggreement state that it was the lender's responsibility to advise you when you were in margin call? Or did it state that it was your responsibility to know when you were in margin call?

Why I'm asking these questions is because of the followng post from Doobsy that appeared on page 337 of this thread.



Found this in the Colonial Margin Lending Terms and Conditions booklet from 2006.

Notice of Margin Call
4.3 (a) You agree that we may provide notice of margin call by any
or all of the following ways to you or your Client Adviser:
• In writing (including by fax, email or other electronic
means)
• Orally, including by telephone
• Updating the Colonial Geared Investments website.
Page 4 Need help? Contact us on 1800 252 351
(b) It is your obligation to keep your or your Client Adviser’s
contact details up to date.
4.4 You are responsible for:
(a) monitoring your portfolio and determining when your loan is
subject to a margin call; and
(b) being in a position to receive any communications from us
in relation to this clause and to act within the time limits
specified in this clause; and
(c) ensuring that a margin call does not occur.

Declarations
5.6 You and the Guarantor declare that:
(a) you and the Guarantor solely own the secured property held
by you, or by another for you; and
(b) you and the Guarantor have told us about all rights affecting
the secured property (such as other mortgages or the rights
of a beneficiary under a trust); and
(c) all the information you and the Guarantor have given us is
correct and not misleading; and
(d) you and the Guarantor have not withheld any information
which might have caused us not to enter into this
agreement;


From the sections I've highlighted in red, it appears, at least in this particular aggreement, that the onus is on the borrower to monitor his portfolio and determine when the loan is subject to a margin call.
And also to ensure that a margin call does not occur.

Pleast note that I'm not a bank sympathiser, I don't know who your lender was, and I'm not making any assumptions or passing any judgement here.
I'm simply asking you what your aggreement stated in regard to whose responsibility it was to monitor the margin call situation.

 

[Julia]

Wonder why the media is so quiet, maybe they are helping their own with secret deals!!!

Perhaps simply consider that until something further happens with Storm, there's really nothing for the media to be interested in, given they have a hugely broader spectrum of interest than just one financial services debacle.

 

[Frank Ainslie]

For Bunyip and interested parties

Found this in the Colonial Margin Lending Terms and Conditions booklet from 2006.

Notice of Margin Call
4.3 (a) You agree that we may provide notice of margin call by any
or all of the following ways to you or your Client Adviser:
• In writing (including by fax, email or other electronic
means)
• Orally, including by telephone
• Updating the Colonial Geared Investments website.
(b) It is your obligation to keep your or your Client Adviser’s
contact details up to date.
4.4 You are responsible for:
(a) monitoring your portfolio and determining when your loan is
subject to a margin call; and[/COLOR]
(b) being in a position to receive any communications from us
in relation to this clause and to act within the time limits
specified in this clause; and
(c) ensuring that a margin call does not occur.[/COLOR]

From the sections I've highlighted in red, it appears, at least in this particular aggreement, that the onus is on the borrower to monitor his portfolio and determine when the loan is subject to a margin call.
And also to ensure that a margin call does not occur.

Bunyip,

You have quoted conditions from a typical CBA margin loan and state that because these conditions are clearly outlined, “the onus is on the borrower to monitor his portfolio and determine when the loan is subject to a margin call”.

So why do you think ASIC and we are litigating against these Banks if it’s all that simple? The fact of the matter is that it isn’t and it’s therefore quite wrong in the case of Storm and the Banks for anyone to look at everything in insolation. The issues involved are far more complex than that! If everything were that straightforward and aboveboard, then the Banks wouldn’t be facing the charges that have currently been brought against them.

It should also be remembered that we are suing the Banks for breach of contract (among a number of other things) which are linked with their banking codes where issues such as imprudent lending come into the equation. The conditions of contract you mention are, of course, relevant and will form a substantial part of the Banks’ counter arguments when they are defending themselves. However, the question of whether the Banks’ conditions of contracts will stand up in law is another thing.

In the ‘Goodridge v Macquarie Bank/Leverage Equities Case’ a particular clause was contentious:

"BNP may notify you of the margin call and of details of the actions which can be taken to satisfy the margin call"

His Honour referred to the NSW Court of Appeal decision in Morgan v BNP Paribas Equities (Aust) Limited [20061. NSW, CA 197, in construing the Clause in margin loan documents, namely that by finding that in that context: "may" in effect means "shall", when it comes to making a margin call in terms of the loan agreement.

"Otherwise the client would simply not know what were the actions which should be taken to satisfy the margin call. Nor would the client know, in the absence of knowing a margin call existed, that actions were required to be taken in the first place." (per: Santow JA, with whom Gyles and McCole JJA, agreed).”

A similar clause occurred in the later version of the Colonial Margin Call Agreement.

In the conditions you have quoted it states:

“Notice of Margin Call
4.3 (a) You agree that we may provide notice of margin call by any or all of the following ways to you or your Client Adviser:
• In writing (including by fax, email or other electronic means)
• Orally, including by telephone
• Updating the Colonial Geared Investments website.”

As to whether or not the CBA or other Banks could assign to Storm the obligation to make a margin call, His Honour's finding with regard to the non-assignability of obligation is important. Clearly, he was of the opinion that the Banks’ could not assign their obligation in this regard.

Because the margin loans contracts were between the Banks and their Storm clients they cannot in his opinion assign the obligations they have to their customers to make margin calls to a third-party - in this case, Storm. Whether they made margin calls to their customers’ client adviser, Storm or not is completely irrelevant. Their primary “obligation” in this regard is to their customers, not Storm. Some will say that this procedure of notifying the financial adviser rather than the customer is standard practice and has therefore become the accepted norm. That is also an erroneous argument because the “obligation” for the Banks to also notify their customers remains, and is not, as Justice Rares has explained, assignable as Banks would have everyone believe.

In saying this, ‘the ‘Goodridge’ decision was overturned on appeal BUT the Court of Appeal in so doing did not dispute Justice Rares’ remarks in this respect. Whether another Court has different ideas is anyone’s guess. As I have said before, the only certain thing about the Law is its uncertainty. That’s why we have a chain of different Courts so that decisions in Law can be clarified and determined.

The interesting thing about all this is that the CBA’s resolution scheme was based for the most part on the assumption that Storm could act as our agent in matters such as these and accordingly, the Banks could by-pass its margin loan customers and take their instructions from Storm. This is an assumption rather than a fact in law and it is therefore strange that both ‘The Panel’ and Slater & Gordon who negotiated this scheme accepted this notion as the basis for the resolution scheme.

Incidentally, Justice Rares also found that a notice on a website was insufficient notice.

"Therefore, I am of the opinion that the web pages could not be notice to him of any assignment of his loan at law, by statute or in equity. It mostly invited speculation."

Rares J. quoted from Griffith CJ with approval in Anning v Anning [1907J 4 CLR 1049 at 1060:

"Written notice means a document addressed to, and intended to be retained by, the debtor."

So you see, what are sometimes contained in the conditions of contract can be misleading or suspect. This means that even though one party can put what they like in their contractual conditions, and such can be agreed to by the second party, these conditions must stand up to legal scrutiny.

For years now the Banks have had it all their own way when it comes to margin loans because they have sought to dictate the terms and you could either “take it or leave it!” Their stance has never been really challenged in law (with the possible exception of the ‘Goodridge’ case) until now. Statutory regulations have now been brought in where margin loans are concerned because it has been recognised that margin loans in their past form have been somewhat inequitable when it comes to the rights of those taking out the loans as opposed to those that lend them; namely the Banks.

Note that I said “statutory regulations” (such did not fully cover them before), but this does not mean that margin loans were not covered in the past under the tenets of commercial law contracts. All commercial agreements (unless statutory law has been introduced superseding such) are subject to common law principles. Therefore, margin loans have not fallen through any legal net whatever applied in the past. Contracts existed in law as far as these margin loans were concerned and “obligations” and “rights” will therefore play a prime role when deciding breach.

The Courts always view commercial contracts in terms of the obligations imposed on both parties and the rights that both parties should have. In terms of equity, they will also assess whether there is a superior position held by one that impinges on the other’ right’s.

“Schroeder Music Publishing Co Ltd v Macaulay [1974] 1 WLR 1308, 1316, per Lord Diplock: ‘To be in a position to adopt this [‘take it or leave it’] attitude toward a party desirous of entering into a contract to obtain goods or services provides a classic instance of superior bargaining power.”’

To answer your original question, "Can it be argued that the customers were ultimately responsible for monitoring their own margin calls? that will, of course, will be for the Law to decide, not the Banks. Certainly, the time-factors involved (CBA -10 to 12 weeks) and (Macquarie Bank 3 to 4 weeks) should blow this argument out of the water! What were the Banks doing during this time? Whistling "Dixie!" perhaps? Were they not in a position to know that margin calls should have been made? For that matter, were they not concerned about their own positions?

As I recently stated to GG, nothing about our cases is straightforward. There are a plethora of different issues and they are many facetted. Therefore, no one has the answers at this stage. Certainly, not me or anyone else on this website. I therefore hasten to add that what I state here is based on my own knowledge of the Law and should not be considered Gospel because I am not, after all, a lawyer. A fellow victim was quick to point this out in a recent email he sent to me in which he quoted a Jewish proverb:

"He who glorifies himself in his knowledge of the law is like a dead beast at the side of the road. Sure it attracts the attention of those passing by - but they all hold their hand to their nose for it stinks!" I gather from this that he didn't agree with my assessment of all this?

Certainly something stinks about this whole business and the smell is not wholly emanating from my carcass at the side of the road.

If nothing else, the forthcoming trial promises to be fascinating when the lawyers strut their stuff.

 

[doobsy]

Frank, as part of the CML info came from a post I made I thought I would comment.

1. Under the terms and conditions the client (victim) also had a responsibility to CML and themselves to keep an eye on things.

2. As previously discussed I personally think the imprudent lending claim will cover around 10% of storm clients. In most cases due to the fact that the banks, certainly the margin lenders, were working within legal framework at them time, will be found that the lending was in fact quite prudent and reasonable on information provided on the application forms.

3. Goodridge had the ability to cover his margin loan. 90% of storm clients were completely tapped out.

4. Not that I have any direct exposure to any banking stocks but as a depositor I would hope that the bank put in place adequate protection before onlending my money to others. Whether this be for a home, investment, vehicle, whatever. As such I am glad they were able to recover monies from parties they had lent to. I think borrowers in most cases think the bank should be grateful for the business, it is the other way around, being lent money (other peoples savings) is a priviledge that should be taken much more seriously than currently occurs in Australian society.

 

[DocK]

(snip)
As I recently stated to GG, nothing about our cases is straightforward. There are a plethora of different issues and they are many facetted. Therefore, no one has the answers at this stage. Certainly, not me or anyone else on this website. I therefore hasten to add that what I state here is based on my own knowledge of the Law and should not be considered Gospel because I am not, after all, a lawyer. A fellow victim was quick to point this out in a recent email he sent to me in which he quoted a Jewish proverb:

"He who glorifies himself in his knowledge of the law is like a dead beast at the side of the road. Sure it attracts the attention of those passing by - but they all hold their hand to their nose for it stinks!" I gather from this that he didn't agree with my assessment of all this?

Certainly something stinks about this whole business and the smell is not wholly emanating from my carcass at the side of the road.

If nothing else, the forthcoming trial promises to be fascinating when the lawyers strut their stuff.

It will indeed be most interesting to have a legal decision on the issue of both the timing and method of margin calls, or lack thereof as the case may be. Fascinating times ahead indeed - I just hope there won't be delays and stalling actions to prolong the process.

 

[bunyip]

Bunyip,

You have quoted conditions from a typical CBA margin loan and state that because these conditions are clearly outlined, “the onus is on the borrower to monitor his portfolio and determine when the loan is subject to a margin call”.

So why do you think ASIC and we are litigating against these Banks if it’s all that simple? The fact of the matter is that it isn’t and it’s therefore quite wrong in the case of Storm and the Banks for anyone to look at everything in insolation. The issues involved are far more complex than that! If everything were that straightforward and aboveboard, then the Banks wouldn’t be facing the charges that have currently been brought against them.

Frank

You should quote me properly if you’re going to quote me at all.

I didn’t say “the onus is on the borrower to monitor his portfolio and determine when the loan is subject to a margin call”.
You conveniently left out the first part of my sentence.
What I said was.....
‘From the sections I've highlighted in red, it appears, at least in this particular agreement, that the onus is on the borrower to monitor his portfolio and determine when the loan is subject to a margin call.
And also to ensure that a margin call does not occur.’
The words ‘it appears’ make it plain that I’m not drawing any definite conclusion here. I’m happy to acknowledge that I don’t know (and I don’t care either to be quite honest) what interpretations can or will be put on the wording of margin call documents in a court of law.

I’m not so foolish as to believe that the Storm case is so cut and dried and simple that it can or will be solved simply by referring to margin call documents. Clearly there must be other bigger issues at hand, or at least allegations of such, to warrant the considerable time, effort and expense of instigating class action.

As for the rest of your post – I didn’t read it. Some people may like to read your interminably long posts, but I’m not one of them.

One thing I can assure you of though Frank, is that if the banks are proven in a court of law to be guilty of illegality, then I certainly have no problem with them receiving appropriate punishment.

 

[Frank Ainslie]

Frank, as part of the CML info came from a post I made I thought I would comment.

1. Under the terms and conditions the client (victim) also had a responsibility to CML and themselves to keep an eye on things.

2. As previously discussed I personally think the imprudent lending claim will cover around 10% of storm clients. In most cases due to the fact that the banks, certainly the margin lenders, were working within legal framework at them time, will be found that the lending was in fact quite prudent and reasonable on information provided on the application forms.

3. Goodridge had the ability to cover his margin loan. 90% of storm clients were completely tapped out.

4. Not that I have any direct exposure to any banking stocks but as a depositor I would hope that the bank put in place adequate protection before onlending my money to others. Whether this be for a home, investment, vehicle, whatever. As such I am glad they were able to recover monies from parties they had lent to. I think borrowers in most cases think the bank should be grateful for the business, it is the other way around, being lent money (other peoples savings) is a priviledge that should be taken much more seriously than currently occurs in Australian society.

Doobsy,

“1. Under the terms and conditions the client (victim) also had a responsibility to CML and themselves to keep an eye on things.”

As I have already stated, it will be for the Court to decide on the degree of responsibility customers had for keeping their eye on things! I am happy to accept the decision the Court finally hands down in this regard although I am confident that they will find in our favour.

“2. As previously discussed I personally think the imprudent lending claim will cover around 10% of storm clients. In most cases due to the fact that the banks, certainly the margin lenders, were working within legal framework at them time, will be found that the lending was in fact quite prudent and reasonable on information provided on the application forms.”

Imprudent lending is about one tenth of our case so that sounds just about right.I suppose the Courts will ignore the dodgy paperwork and obvious churning of customers' assets. At least this will please the owner managers of the BOQ in North Ward who have been busy planning a "free-board-and-lodgings" vacation.

“3. Goodridge had the ability to cover his margin loan. 90% of storm clients were completely tapped out.”

In order to cover margin loans one has to know about them to start with? It’s a bit difficult if few were made. Judge Rares tends to agree.

"Otherwise the client would simply not know what were the actions which should be taken to satisfy the margin call. Nor would the client know, in the absence of knowing a margin call existed, that actions were required to be taken in the first place." (per: Santow JA, with whom Gyles and McCole JJA, agreed).”

"4. Not that I have any direct exposure to any banking stocks but as a depositor I would hope that the bank put in place adequate protection before on-lending my money to others. Whether this be for a home, investment, vehicle, whatever. As such I am glad they were able to recover monies from parties they had lent to.”

Adequate protection and prudent lending go hand in hand. Unfortunately, the Banks’ track record on "imprudent lending" is appalling. The world today is a financial basket case because Banks around the world have lent money unwisely. Sub Prime is a classic example of this.

“I think borrowers in most cases think the bank should be grateful for the business, it is the other way around, being lent money (other peoples savings) is a privilege that should be taken much more seriously than currently occurs in Australian society.”

Doobsy, I now suspect you are having a lend of me! Without people borrowing money from banks, where would the banks be? They are not providing this service out of the kindness of there hearts but rather because that’s how they make their money.

Here’s an article written about banks that may be of interest to you:

“How Banks Work
The original idea of banking is you would give your money to the bank for safekeeping. They would lend some of it out, and give you a cut of the interest they received. In return the bank took the risk of the loan defaulting, and handling all the details of making the loans and collecting the payments. The bank attempts to lend money mainly to people who don’t need it since they have the best chance of paying it back, hence the invention of the credit card and minimum monthly payment.
The banks today don’t quite create money out of thin air to lend, but close.
Consider this simplified version. Imagine an isolated town with only one bank. Somebody comes into the bank and deposits $1000.
The bank then lends out $900 of that money to other people in the town. The borrowers of course keep the money in the same bank. Even if they spend it, say at the town lumberyard, the lumberyard will deposit that money back in the bank. So the bank still has $1000 on deposit, even though it also has $900 of it out on loan, generating interest for them.
So they lend $900 of the $1000 on the books out again. The government used to insist they keep some 8% of it on hand in case someone made a withdrawal. Since Brian Mulroney, the bank is not required to maintain any reserves at all, though common sense insists they have to keep some reserves to handle daily withdrawals.
The bank can lend the same money out over and over and over. This is equivalent to creating money.
This all falls apart if for some reason people start withdrawing money, since the bank doesn’t have the money. It is mostly out on loan. The bank has insurance to rescue them should they get an unexpected run of withdrawals.
The bank lends the borrowers money the bank does not really have, but the borrowers pay back with real money plus interest, quite a sweet deal for the banks.
The same process works even if there is a bank with two branches in the same isolated town, two independent banks, two independent banks in two towns, or 5 banks with hundreds of branches in an entire country. They work as a coordinated whole. Who gets the profits from which branches is irrelevant to this process of re-lending the same money over and over. I don’t mean re-lending the same money after a loan completes, I mean lending the same money over and over at the same time to different people.
If the banks could do the same thing with paintings, you could leave your fine art with them for safekeeping and they could rent that same original painting out to dozens of people at once. It would be considered a form of temporary counterfeiting.
The whole game depends on the fact that when people borrow money, they usually keep it in a bank, not necessarily the same bank, even though they are not strictly required to, so that it becomes subject to re-lending.
The right of the banks to lend out the same money over and over is equivalent to the right the print temporary money. Just like printing real money, this ability causes inflation. The more money there is, the less each dollar is worth. Many people, myself included, think there is no reason banks should be granted what effectively amounts to a get-out-of-jail-free-for-counterfeiting card. The ability to be the goose that lays the golden eggs should be reserved for the government. Otherwise it forfeits much of its control over the money supply and inflation."

Even if only part of this is true, it doesn’t encourage me to share your sympathy for banks. We, their customers, are the ones that require sympathy if you ask me!

 

[Julia]

If the banks could do the same thing with paintings, you could leave your fine art with them for safekeeping and they could rent that same original painting out to dozens of people at once.

There is only one original painting. How can it be rented out to dozens of people at once?

 

[Judd]

There is only one original painting. How can it be rented out to dozens of people at once?

Not only that Julia, it is my understanding that it was not banks involved but art dealers. What happened in a number of cases is that a client bought a painting from a dealer (and a number of clients were SMSFs) and it was held in storage by the dealer. It was then sold again to another client without the knowledge of the previous client and again still held in but held in storage and so on. Quite a clever scheme.

Blowed why I know why the banks are supposedly to blame since they are not art dealers but note that the poster who made the claim has not cited any author or actual source for the allegations. Also note that I rarely read the ravings of the poster but quickly skim over the mainly unsubstantiated claims.

 

[Solly]

<snip>

“How Banks Work
The original idea of banking is you would give your money to the bank for safekeeping. They would lend some of it out, and give you a cut of the interest they received. In return the bank took the risk of the loan defaulting, and handling all the details of making the loans and collecting the payments. The bank attempts to lend money mainly to people who don’t need it since they have the best chance of paying it back, hence the invention of the credit card and minimum monthly payment.
The banks today don’t quite create money out of thin air to lend, but close.
Consider this simplified version. Imagine an isolated town with only one bank. Somebody comes into the bank and deposits $1000.

<snip>

I mean lending the same money over and over at the same time to different people.
If the banks could do the same thing with paintings, you could leave your fine art with them for safekeeping and they could rent that same original painting out to dozens of people at once. It would be considered a form of temporary counterfeiting.
The whole game depends on the fact that when people borrow money, they usually keep it in a bank, not necessarily the same bank, even though they are not strictly required to, so that it becomes subject to re-lending.
The right of the banks to lend out the same money over and over is equivalent to the right the print temporary money. Just like printing real money, this ability causes inflation. The more money there is, the less each dollar is worth. Many people, myself included, think there is no reason banks should be granted what effectively amounts to a get-out-of-jail-free-for-counterfeiting card. The ability to be the goose that lays the golden eggs should be reserved for the government. Otherwise it forfeits much of its control over the money supply and inflation."

Even if only part of this is true, it doesn’t encourage me to share your sympathy for banks. We, their customers, are the ones that require sympathy if you ask me!

Hi Frank

I believe I understand where you are going with your above example. To me you appear to be commenting on that 'slippery slope' of the fractionalisation of money, the decree of fiat and the consequent impacts of M1, M2, M3, Money Supply. I suppose it all works as long as there is trust and everybody sings from the same hymn book. Did someone mention "tulips"?

S

 

[doobsy]

Rather than explain and argue on this I recommend that everyone try to find a TV series called the ascent of money done by Niall Ferguson.

Frank - When the bank lent you money for your first home, your first business loan, did you feel responsible to keep an eye on things? I suspect the answer is yes as you would have wanted to keep the house and business running and to establish a good credit rating. Why did so many ignore this responsibility just because it was for investment / speculation on the stockmarket? Because Storm said "she'll be right, we got this"? Pity

Again, Goodridge had money to meet the margin call if he had received it. He has a grievance. If Storm clients had got their margin call they had no money to meet the call in the majority of cases. All that would have happened would have been an earlier sell out. I have already put my position forward many times saying clients that were sold out should be considered to have been sold out at the correct time, not 3-8 weeks late.

If the bulk of clients can't claim imprudent lending, then why are we going through this process? It seems to be what the case is based on.

You confuse my banks lending paragraph. It is not the bank's money. It is MY money they are lending. As such I want to ensure MY money is protected from morons who want to borrow it to gamble on things they don't understand.

 

[DocK]

Rather than explain and argue on this I recommend that everyone try to find a TV series called the ascent of money done by Niall Ferguson.

Frank - When the bank lent you money for your first home, your first business loan, did you feel responsible to keep an eye on things? I suspect the answer is yes as you would have wanted to keep the house and business running and to establish a good credit rating. Why did so many ignore this responsibility just because it was for investment / speculation on the stockmarket? Because Storm said "she'll be right, we got this"? Pity

Again, Goodridge had money to meet the margin call if he had received it. He has a grievance. If Storm clients had got their margin call they had no money to meet the call in the majority of cases. All that would have happened would have been an earlier sell out. I have already put my position forward many times saying clients that were sold out should be considered to have been sold out at the correct time, not 3-8 weeks late.

If the bulk of clients can't claim imprudent lending, then why are we going through this process? It seems to be what the case is based on.

You confuse my banks lending paragraph. It is not the bank's money. It is MY money they are lending. As such I want to ensure MY money is protected from morons who want to borrow it to gamble on things they don't understand.

Very nice!