It’s always amusing to see senior politicians caught in the headlights and that’s exactly what we witnessed this week when the report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was released.
The Treasurer, Josh Frydenberg, possesses a special kind of chutzpah, perhaps the type that helped to get him to where he is today, but that wasn’t enough to disguise the weaving, mental gymnastics and deflection that he went through to try to abandon all responsibility and divert any negative fallout to the Labor Party.
While Frydenberg made himself look foolish, at least he had tenacity to front up, even if he did show up with more front than his local Camberwell Place Shopping Centre.
As for the Prime Minister, Scott Morrison, who vehemently denied the need for a banking Royal Commission – on the day it was announced in November 2017, he said “the recklessness of the Leader of the Opposition and the Shadow Treasurer for over two years calling into question the integrity and the system security of our banking system and financial system” – he simply went missing, hiding in a military tank in far north Queensland.
The banking Royal Commission was a pertinent matter for many people and the ethics and actions of the financial services sector were seriously called into question. We discovered the big four banks – Commonwealth, ANZ, NAB and Westpac, along with financial giants AMP and Macquarie Bank – were engaged in highly unethical practices, as well as potentially criminal acts. Many thousands of its customers were severely affected by these questionable practices and, in many cases, advice was provided that was detrimental to the interests of the consumer.
The Royal Commission uncovered almost the full gamut of unethical and illegal acts by the banks: charging fees to clients who had died; charging fees to customers for services not rendered; bribery; forgery and falsifying paperwork; selling incorrect insurance products; loaning large sums of money to people on low incomes; and misleading the corporate regulator, the Australian Securities and Investments Commission.
For many thousands of people who had been seriously affected by corruption in the banking sector, the Royal Commission was an opportunity to uncover serious problems within the sector, as well as an opportunity to remedy those wrongful actions.
It would have been wise for the two politicians that accepted the report, Frydenberg and Morrison, to offer a simple apology to the public, to announce they seriously misread the mood of the public, to clearly work in the public interest to improve the services offered by the financial sector, and avoid the mistakes of the past.
But getting a public mea culpa from either of these two was more difficult than extracting a tooth embedded high up in the back of an elephant’s jawbone. Both Morrison and Frydenberg are opportunists in the extreme – in the process of releasing the report, Frydenberg did his best to take credit for the Royal Commission, and tried to deflect all of the faults of the banking sector back to the Labor Party and Leader of the Opposition, Bill Shorten, even though they’ve been out of office for over five years and Shorten was the one who actively and consistently called for the investigation.
To find out where this all started, we need to go back to September 2013, when the incoming Liberal–National Party, under the leadership of Tony Abbott, was “determined to weaken protections” in the financial sector previously introduced by Labor. His infamous ‘red-tape repeal day’ in 2014 removed many of these regulations, but ended up being more like a ‘brown-nose day’ for corporate Australia.
This was further exacerbated by cuts to ASIC of $120 million in the 2014 Budget (a total of $200 million over the past five years) which severely curtailed ASIC’s ability to regulate financial services and corporations. In response to these cutbacks, Abbott said “the onus was on the industry to self-regulate”.
It’s fair to say this didn’t work out so well.
An ABC Four Corners report in 2014 exposed a wide range of malfeasance within the banking sector, including money laundering for drug syndicates, ignoring financing to terrorist groups, impropriety in foreign exchange trading, manipulating interest rates through bank bill swap rates, and fraudulently loaning millions of dollars to people who had no ability to pay the money back.
As result of the Four Corners report and the widespread outrage in the community, a Senate Committee assessed the performance of the Australian Securities and Investments Commission, and recommended a Royal Commission into the financial services sector.
The report from this Senate Committee was published in June 2014. Since this time, there have many demands to hold a banking Royal Commission: in a National Press Council speech before the 2016 election, Bill Shorten called for a commission and pledged to hold one if Labor won government.
Throughout 2016 and 2017, there were more calls to hold a commission, including from Liberal Party MP, Warren Entch, and National Party MPs, George Christensen, Llew O’Brian, Barry O’Sullivan and John Williams.
In the Senate, the Government voted 26 times against holding a banking Royal Commission. The Treasurer at the time, Scott Morrison, called it “nothing more than a populist whinge” and advised Shorten to stop playing “reckless political games”, adding Labor “just intended to bolster and prop up the stocks of a leader of the opposition”.
Attacking Labor MP Wayne Swan in Parliament in 2016, he said a Royal Commission would just be “crass populism”.
The then Prime Minister, Malcolm Turnbull, and the Ministers responsible for financial matters – Morrison (Treasurer), Kelly O’Dwyer (Minister for Revenue and Financial Services, as well as former NAB executive), Mathias Cormann (Minister for Finance) – all ruled out the need for an investigation into the financial sector.
Even the night before the Royal Commission was announced, Turnbull said, almost proudly: “I can tell you we have as a government decided not to have a Royal Commission, we made the decision a long time ago”.
But twelve hours is a long time in politics. Turnbull announced the Royal Commission the morning after the banks themselves requested it. The terms and conditions of the Royal Commission were curtailed but, nevertheless, the next 15 months of enquiry managed to uncover enough evidence for the public to confirm what they already knew: banks are virtually a law unto themselves; are motivated solely by corporate greed; and will never ever act in the public interest unless they are regulated carefully and diligently.
Regulation and oversight of the financial sector was reduced under the watch of the Liberal–National Government – not just since they were elected in 2013, but going back all the way to 1996. The Liberal–National Party has governed Australia for 17 of the past 23 years, and the crisis in the banking sector has to be sheeted back to them and their constant calls for less regulation in the sector.
Last week, the commissioner of the inquiry, former High Court judge, Kenneth Hayne, released his findings to Treasurer Frydenberg. There are 76 recommendations, and a suggestion there are 20 acts of criminality that should be investigated further. These 76 recommendations offer positive solutions for the financial sector, and will go a long way to restoring public confidence.
But it’s an outcome that has been delivered far too late.
Frydenberg’s immediate response to any criticism about denying the need for a Royal Commission was more well rehearsed than a Marcel Marceau performance: “Look, we can debate for hours what Labor failed when they were in office” [NB: years in office since 1996: LNP, 17 years; ALP six] … “we did call the Royal Commission and today we’ve responded to it” [NB: technically yes, but they voted against it 26 times in the Senate, and brought it on only when the banks requested one].
Would he apologise for delaying the Royal Commission by almost two years? “We can debate for hours Labor’s failures when they were last in opposition”. Of course, this is standard political procedure – deny the obvious, deflect the blame to others, take no responsibility. But the report of the banking Royal Commission required a different response and Frydenberg’s denials were too blatant for them to resonate with the public.
Fresh from his northern jaunt and donned in military fatigues, Morrison joined Frydenberg in his political spin cycle: “I called the Royal Commission. I introduced the banking executive accountability regime.”
How does he reconcile this with his previous musings, when he claimed it would be “a lawyer’s picnic” and “the Government is not proposing a Royal Commission and we’ve opposed one consistently”.
No mention of the $200 million they pulled out from ASIC funding? No mention of the correspondence between Scott Morrison and the Chairman of National Australia Bank, Ken Henry, developing the terms of the Royal Commission, who would be a suitable commissioner, and how the commission should proceed to minimise scrutiny on the banking sector?
Or was Morrison too busy counting the donations the Liberal Party receives from the big four banks, which tallied over $500,000 in 2016?
These are the days when the idiot is king but, even still, the performances offered by Morrison and Frydenberg won’t wash with the public.
There has been great discussion about the ‘trust deficit’ now facing banks and what they can do to improve their trustworthiness to the Australian community.
The trust deficit is a problem for the banks, but there’s an even bigger trust deficit for the two people who are now trying to claim all the credit for something they were determined would never happen and, based on all the evidence in front of us over the past four years, couldn’t care less about.
Morrison and Frydenberg are even more untrustworthy than the banks they were enthusiastically defending and protecting from public scrutiny.
Fortunately, they won’t be the people trusted to implement, as Frydenberg puts it, “the legislative framework to provide the regulators with the powers and resources to hold those who abuse out trust, to account.” The Liberal–National Government have always removed those powers and resources, so why should the public trust them now?
Parliament will only be sitting for eight days before the next election, due in May 2019: not enough time to enact a legislative framework – that’s something that takes months. And only politicians with the chutzpah of Morrison and Frydenberg would claim they’re doing everything possible, even if there’s no chance of it ever happening under their watch.
Whatever the results are of Hayne’s 76 recommendations, that will be left to a different government to take care of.