June 26, 2018–The federal Member for Kennedy Bob Katter on June 25 introduced a private member’s bill into the Australian Parliament to protect the economy and bank customers from dangerous financial speculation and predatory banking.
The Banking System Reform (Separation of Banks) Bill 2018 is based on the USA’s successful Glass-Steagall Act. It will separate Australia’s commercial banks, which hold deposits, from risky investment banking, as well as other financial services that Australia’s banks have acquired in recent decades, including insurance, superannuation, wealth management, and stock broking.
“On the Brink of Disaster”
The ongoing Financial Services Royal Commission, which Bob Katter led the political fight to establish, has laid bare the predatory banking practices that the bill will end. The revelations from the royal commission have been so dramatic that it has attracted global attention, and kindled fear in the City of London that Australia’s inquiry could lead to a renewed push to break up Britain’s too-big-to-fail banks.
Katter excoriated Australian banking in a passionate speech introducing his bill. “The situation in Australia is ugly and it is evil”, he said, “and this legislation is needed to overcome those problems and what effectively it says is—‘Mr Banks you are no longer out there in the market, in the arena buying and selling. Your job is to loan to people that buy and sell, develop and invest. You don’t do that, you judge them.’”
Aside from the conflicts of interests in banking, Katter’s chief concern in moving Glass-Steagall is for the looming financial crisis arising from the banks’ speculation in real estate and derivatives. He identified the reckless speculation threatening the financial system today was also the cause of the 1929 crash, which led to the passage of the Glass-Steagall Act in 1933.
“What we’re talking about here is derivatives: when you don’t buy a loaf of bread; you buy a contract to buy a loaf of bread”, he said. “That is what we call a derivative.
“Glass-Steagall came in and it overcame the vast bulk of those problems so that the American economy ran fairly effectively, making it three, four, five times the size of any other economy on earth, until Mr. Bill Clinton, ‘Mr. Free Markets’ himself. … In 1999, he abolished the Glass-Steagall Act. Within two years, the dot-com collapse occurred, taking down trillions of dollars of savings, superannuation and retirement moneys of Americans and the rest of the world, and in 2008, as we’re all familiar with, came the GFC.
“Clearly, that timeline indicates the necessity for Glass-Steagall legislation in this place,” Katter said. “Does anyone seriously think we are not sitting on the brink of disaster?”
The Danger in Australia
The most immediate danger for Australia, Katter emphasized, is from the bubble in the real estate market.
Katter singled out the team of people responsible for organizing the bill, including Robert Barwick, Dr. Wilson Sy, and Bob Butler. Sy is the former principal researcher at bank regulator APRA (Australian Prudential Regulation Authority). Barwick and Butler are representatives of the Citizens Electoral Council, which has led a nine-year campaign to get Glass-Steagall legislation enacted in Australia.
As a private member’s bill, Katter’s Separation of Banks Bill 2018 will only be debated if a majority of members of parliament agree to do so, which will require the support of one or the other major party. Ordinarily, the governing Liberal Party would be expected to protect the banks, but many Liberal politicians are shocked by the revelations of the royal commission and are concerned about a financial crash. And what about the Labor Party—will it block or delay Glass-Steagall the way it blocked the banking royal commission for six years, or return to its roots as champions of working people against the Money Power?
And in Washington?
Meanwhile, in Washington, D.C., where conditions for an even more cataclysmic debt blowout are maturing, Congress and the Trump Administration continue to stonewall on pending Glass-Steagall legislation. Maybe it’s now time for Americans to follow the Australian example.
Tags: Australia, Bob Katter, derivatives, Glass-Steagall
Hi, I would respectfully like to point out that your statement of the Labor Party blocking the Royal Commission for six years is incorrect. It was the current governing Liberal Party that blocked the call for a Royal Commission for six years.
The Labor Party and the Greens were the reason a Banking Royal Commission was ever called.
Kind regards
Wanita Ellis
Our post is based on a Media Release received from the Citizens Electoral Council of Australia. We reached out to the CEC for comment. From their reply: “Until 2016, the Labor Party voted with the Liberal Party for years against every attempt to start a royal commission into the banks. Here’s an example. Labor only changed its position in mid-2016, ahead of a general election…. The misconduct and crimes that have been exposed in the [Royal Commission] hearings all relate to cases from the years that Labor was voting it down.”
What is the current position of this bill
My Australian sources report that the Glass-Steagall bill introduced into the House of Representatives in June 2018 lapsed in December. But on Tuesday 12 February it will be introduced into the Senate, where there are more Senators who aren’t in the major parties, most of whom support bank separation.
They will be able to get more scrutiny for the bill, such as examination in a Senate committee.
So although the final report of the dramatic banking inquiry released this week didn’t recommend separation, no doubt under extreme pressure, supporters of Glass-Steagall will escalate the issue.