People go into business to make profits.  Banks are publicly listed companies in which shareholders subscribe capital and the directors manage the business to maximise the return of profit to those shareholders in the form of dividends.  If they run the business for another purpose, they break the law.

People running a general store in a country town do so to make profits.  But they also provide services that the community needs – bread and milk, newspapers, and postal facilities.  If they drop some of those services because they are not profitable enough, they will lose trust and goodwill.  In a bad case they may be driven out of business.

Any business has to pay some attention to its customers.  The banks certainly have to.  They occupy a privileged and protected position.  They are licenced by government, and de facto guaranteed by government.  A government body also controls the price of the basic commodity of banks – borrowed money.  That is a very unusual intervention into the market in what is said to be a capitalist economy.  It sounds like a kind of ‘dirty float.’

Banks are money lenders.  They borrow money at x% and lend it out at y%.  The difference between x and y is their profit (or loss).  The higher that y is over x, the more profit the bank makes, and the more dividends go to shareholders.

In principle, it would be quite wrong for the bank to prefer the interests of its customers – the borrowers – and take less back from them, because that way they would be putting the interests of bank borrowers ahead of their shareholders.  They bank directors are not allowed to do that.

Yet that is what we hear governments asking them to do by passing on the full fall of the cost of money to the banks to the borrowers rather than doing what they can to maintain profits for shareholders.  The bank directors have to make a business judgment about their standing in the community and its effects on the profitability of their bank, but otherwise government ministers howl for show.  Even our Treasurer might see that.

People don’t like moneylenders, and they have lost faith in Australian banks.  They stop us getting access to real people who know us and what they are doing.  They are offering incentives to their people to cheat and they are paying people more than five times what we pay our brain and heart surgeons.  They ruthlessly exploit silly people who borrow long on credit cards, and they in fact derive a lot of their capital from timid investors who think it is better to deposit their money in a bank rather than profit from investing in it.  Macquarie Bank makes people very ill because it makes big profits from dodgy deals like those that brought on by the GFC – while you and I stand behind it.  As a mate said during the GFC, if Macquarie falls over, it will have been worthwhile.

Yes, banks are ugly and untrustworthy, but they are not there to be ordered around by government.  Leave that to Mr Putin.  We are said to believe in competition.

Poet of the Month: Kenneth Slessor

William Street

The red globes of light, the liquor-green,

The pushing arrows and the running fire

Spilt on the tongues, go deeper than a stream;

You find this ugly, I find it lovely.

Ghosts’ trousers, like the dangle of hung men,

In pawn-shop windows, bumping knee by knee,

But none inside to suffer or condemn;

You find this ugly, I find it lovely.

Smells rich and rasping, smoke and fat and fish

And puffs of paraffin that crimp the nose,

Or grease that blesses onions with a hiss;

You find this ugly, I find it lovely.

The dips and molls, with flip and shiny gaze

(Death at their elbows, hunger at their heels)

Ranging the pavements of their pasturage;

You find this ugly, I find it lovely.