Banking Royal Commission exposes shocking corruption – but must be extended two years -
Deregulation has helped parts of the financial industry to become captured by fraudsters. Faked pay slips, forged documents and cash-stuffed envelopes used as bribes to secure loans are just some of the examples of dodgy practices exposed so far by the banking royal commission. But before you think “some people will do anything to get a mortgage”, it’s crucial to remember that the people creating and engineering these frauds were actually at the top of the banking system. The evidence paints a picture of an industry captured by people being recruited by Major Banks to sell what looked like innocent mortgages on commission-driven schemes to dish out ever bigger mortgages to borrowers who cannot afford them. Over 80% of the loan books are Interest Only loans. If you think that we are immune from the United States GFC Crash and the UK downturn, please think again. There is evidence to suggest regular and widespread criminality has been committed by industry since the 1980s. Over the past two decades, Australia’s leading financial consumer activist and president of the Banking Finance. Consumers Support Association (BFCSA), Denise Brailey, has obtained many loan application forms that demonstrate mortgage fraud. Further evidence pointing to criminality in lending is based on the research of the world’s leading academic specialist in banking fraud, Prof William K Black. He was a former US thrift regulator during the 1980s, cleaning up illegal industry practices and also warning about the epidemic of subprime mortgage fraud during the 2000s. According to Economist Philip Soos, Black developed the concept of control fraud, which is where the people in positions of power within an organisation use it to carry out fraud. Control frauds are generated and amplified by the conservative neo-liberal agenda, which has significantly and regressively altered the banking industry since the 1980s. Privatisation, deregulation, self-regulation, desupervision and de facto decriminalisation has created a criminogenic environment: a toxic organisational setup which is conducive to criminal activity. By removing constraints on lending, household debt has ballooned to historical and global extremes, which explains Australia’s unaffordable house prices. Rather than enhance efficiency and competition, failed conservative economic ideology has produced excessive financialisation, banks that are too big to fail, record private indebtedness, gigantic asset bubbles and numerous control frauds. Soos Says: "Along the line, industry has shifted from prudent to imprudent to potentially breaching lending laws. Rather than rein in runaway household debt, regulators have let the industry run wild while constantly claiming to “keep close watch” over lending practices." Brailey insists: "Borrowers have been betrayed by the regulators’ neglect, despite their knowledge of the mortgage control fraud. Even worse, regulators are drawn from industry itself (the revolving door) and the entrenched conflict of interest via ownership of real estate and stocks in the industry they are supposed to regulate. Their registers of financial interests are carefully concealed from the public, something that must be subject to discovery by the royal commission." Brailey has vigorously campaigned for a Royal Commission into banking since 2001. Brokers have featured prominently in the royal commission so far, given their important role in mortgage lending. Yte they are farm being described as "engineers." Bank Mangers and Broker Agents are responsible for arranging about $180 billion worth of IO Loans per year. It is common knowledge that brokers face handsome incentives to maximise loan volumes and the quotas set out by the Banks are perverse. The broker /agent network was developed by industry to function as a bullet-shield between itself and borrowers. The High Court has ruled these sellers are indeed the agent of the Banks. If allegations of fraud arise, lenders will blame all sellers. They function as the “fall guys” or “dupes” who can easily be thrown under the bus. On Monday, ANZ’s home loan boss admitted that the bank did not bother to check the details of personal living expenses (and therefore their affordability) on any loan applications whether submitted by field agents or bank officers. Banks have repeatedly and erroneously claimed the broker is the agent of the borrower but the former banking ombudsman Colin Neave argued that brokers are the agents of lenders. The "sellers" are all following the same processes as taught by the Business Development Managers ("BDMs"). The income fraud on the Loan Applications is created by a serviceability calculator, engineered by the Bank. The royal commission was the opportunity to examine how the government and the economy have come to be dominated by the financial industry and uncover wrongdoing in the sector. But it has been sabotaged by the Turnbull Government, by being given limited resources and only one year. Given the size and complexity of industry, it is a near impossibility that it will be able to thoroughly examine this issue. It is widely expected the ALP will win the next federal election, it can change the terms of reference, provide more resources, expand the number of commissioners and allow for at least two years to examine this grave issue. As the royal commission into the institutional responses to child abuse demonstrated, entrenched organisational criminality takes time to uncover and prosecute. That two year RC by necessity, was extended tor five years. Accountability and transparency needs to be restored to the Banking and financial services industry, as confidence in the economy is built on the essential pillar of trust. Industry must not be able to commit and profit from Control Frauds, despite this becoming a way of life for some bankers. Consumer victims of these bank generated frauds will need to be active in convincing Labor to take over the Royal Commission and provide better resources, a second Royal Commissioner - possibly Three - and extend the time frame for a further two years minimum. If we as a nation, the majority of us wish a clean out of our vile Banking System, the corruption, the asset-stripping, fraud and shonky lending practices, we will all need to work harder and stronger to achieve that aim. Philip Soos, Denise L Brailey.
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