What APRA and the reserve bank fail to disclose is that all four...

What APRA and the reserve bank fail to disclose is that all four banks especially the NAB, the ANZ and the Commonwealth Bank bought large (I mean very large) parcels of securitized debt underwritten by the family home that will never be liquid and must be written off as a loss.

The failure to disclose or to disclose honestly and on time is an offence but not so if you are a large institution with access to government. There is failure to disclose those huge commissions paid to salesmen who closed useless mortgages and crooked accountants who assisted with compliance. These are breaches of the law the banks won’t admit to because they ‘were committed by the originators from whom they bought’ their mortgage assets.

Then weighted cost of capital from those debts is enormous and none of the local banks had a capacity to measure it. If they had it they failed so they will not comment on their negligence there.

If disclosure had been made properly and according to law and the regulators including APRA had done their job, a simple economics student could have told them that there is no way in the world the bulk of these assets could be realized without a hefty discount (meaning without huge losses). But APRA failed again and the Costello Howard government acquiesced in that disaster.

All of what these banks bought from brokers and other intermediaries were suspect, low quality and very volatile debt. They now say we have no ‘sub prime crisis’.

The word ‘sub prime’ is a coined American phrase for what used to be called ‘Junk Bonds’. This is a re creation of Michael Milken’s ‘Air fund’. It is in fact the mother of all Air funds.

The Air fund was a term Michael Milken coined to describe to his followers as the ultimate act of confidence. He would claim to his private secondary market (in actual fact his primary market) that he had raised $2 billion dollars for such audacious bids as the take over of Conoco Phillips by some minion.

Believing he was able to deliver from his previous successes in his other Ponzi schemes, these bankers from the mainly state chartered banks who Regan had now allowed to enter into this fragile insecure junk bond markets subscribed in order not to look stupid. It was always about appearances and not being left out of a scheme.

This is where the disaster begins and ends:

Most of the so called financial gurus and economists do not know what’s happening in the real world and had no confidence in their abilities because they were and continue to be ignorant. They encouraged their bank boards to buy into these schemes, the low doc mortgages which over 70% were and still are. We call it low doc mortgages they call it sub prime. We say Potatoe they say Tomatoe (get it fools).

Saul Eslake was speaking so confidently during the Howard era about those endogenous variables like unemployment as if he created the model for measuring the variable. He continually and willfully if not negligently denied there were high levels of unemployment when unemployment was high by shifting its definitions for politically expedient purposes.

Perhaps he did create that model, a flawed model for reading unemployment statistics but not without an equally ignorant and arrogant partner like Peter Costello in tow. What’s Peter Costello and he going to say now we know these three banks were up to no good, continue to deny they held and continue to hold bad paper then as they do now? No, Costello cannot say that because his book is out and it would further erode what little is left of his credibility.

More damming is the fact none will acknowledge the Banks got a wink and a nod from the treasurer then Costello and his prime minister that they would not take the blowtorch to these banks (on compliance issues) already hurting from the emergence of Aussie Home Loans and other non bank lenders and fall in near monopoly market share. The honeymoon appeared well and truly over for the 4 pillars (of salt).

There would be no reserve bank pressure on the banks to curtail the imprudent practice of buying crap paper (sub primes) from brokers and other intermediaries. After all these were mainly commission driven cowboys who were creating a phenomenon that would allow Howard and Costello (How’s that for a coincidence? No it wasn’t. It was a Hill song God driven warning) to seek further terms for their economic miracle.

No checks, no balances and no fixed overheads. That’s what was attractive about the competition. These were mainly commission driven fast talking salesmen giving away money like the US treasurer Paulson is doing today. The weight of those commissions and discounting were never considered.

No questions asked. “Just sign along the dotted lines and the house is yours for a mere $400,000.00” in Inala or St. Albans. Doesn’t really matter “By the way what do you do for a living mate?” “I am unemployed”. “That’s okay pal Howard will look after you. He is a good Christian”. And yes the Churches including the one mentioned had mortgage agents selling in the name of Christ. They fished in a congregation baited by this scam. And Howard and Costello were huge backers of these vote banks.

Shamelessly the accounting profession also got into the act signing away financial statements on behalf of no hoper home buyer borrowers. But who cared. It was a case of “never mind the width just feel the material”.

Today they continue to proffer advice to borrowers and lenders alike. We have no sub prime crisis. (Don’t mention the war?). They then act as insolvency experts and liquidators to finish off what’s left under protection of an outdated legislation and incompetent courts. Undertakers at least with who liquidators are compared do not feed off the corpse like these maggots do.

The National Australia Bank and the Commonwealth Bank have horrendous losses being concealed and not one regulator will dare ask that multi billion dollar question. It is a billion dollar question. In fact more than just one billion dollars. Not one accounting firm will put their hands up for aiding and abetting in the process either. So what’s that light you see at the end of the tunnel? Is it an oncoming train or relief?


Get out of the banks. Get out now. Remember the State bank of New South Wales/ The state Bank of Victoria? The State Bank of South Australia (they had a Phd from Harvard to wreck that one), the SGIO in all states? Yes how could you forget, you probably also said then that writers who warned you were looney and an Aussie Bank could never fail. That’s the same message reportedly scrawled by a worker at the Clyde on the Titanic. His was even more audacious “even god can’t sink this ship”.

When banks stop buying securities from other banks you know there’s something fundamentally wrong. They’ve all got their money tied up in short term liabilities and worthless pieces of paper and wont’ come clean. Try not paying your rent for a week and see what happens to you.

Crooked Bankers don’t go to jail, they go to the Bahamas. But if you sell the banks down now, there won’t just be a Royal commission, the government and YOU will be forced to find solutions like jailing these maggots and reconstructing the major financial institutions, removing self regulation from accountants and lawyers allowing the battler to retain at least his dignity finally.

Good luck with your football club loyalty if you do not wish to participate. Keep with your bank stocks till they sinks then go tell Tracey Grimshaw or Tracey Curo how sad you are how you were ripped off, cry live and get your 15 seconds of fame.

Otherwise get a letter to your MP ask that the major accounting firms be investigated with the banks and petition for liquidators, the large ones that always show up at a funeral
Be barred and that all liquidations be carried out by government employed accountants on government wages.