Consumer banking guru Peter Mair has really given it to Commonwealth Bank CEO David Murray for some very petulant remarks of late.

Strike one

The aftermath of the cash-for-comment expose, elicited a confession from young David – from recollection, along the lines of “it wasn’t me that was responsible” (for the involvement of the Australian Bankers’ Association, and the CBA, in the deal with John Laws).

Later press reports, sourced to industry insiders, loaded the primary responsibility on to a then back-in-America Bob Joss, who had been both Westpac CEO and Chairman of the Australian “Burglars” Association at the relevant time. What is not widely understood is that, putting aside the clumsy implementation of a deal that was apparently contrary to the broadcasting ‘law’, the considered comment about the banking industry that went to air was quite constructive. It was not the whole truth mind you, but not really misleading either and clearly intended to be positively educational. Its main sentiments were things that should have been widely publicised (including by the banking authorities). This was only to be expected of Bob Joss – a man who shone brightly in the company of his ‘peers’.

Strike two

It is ironic that young David, now also the Chairman of the Australian Bankers’ Association, would probably have been in an easier situation had the Bob Joss plan been smoothly executed. Instead, the people are still waiting to be properly informed about banking policy matters, and consequently in an election year a possibly temporary ‘deal’ (a can’t-be-core promise) has been stitched up between incumbent politicians and the banks. If it were an offence for parliamentarians to mislead the people, a few charges would probably be pending – and banks would be accessories.

Consider, in a remarkable turnaround in March the members of the Australian Burglars’ Association apparently rediscovered a sense of ‘social obligation’, the progressive loss of which was apparent over recent years and had been confirmed only a few months previously (in August 2000, in Adelaide). The March statement included words to the effect that ‘everybody’ would again have access to ‘free’ transactions available from banks in standard features, basic bank accounts.

God help us if that is true! Who is going to pay for it, and how?

Is there honor among these “thieves” . The commitment to “free for all” banking was announced by the ABA prior to young David of the People’s Bank becoming its Chairman. To the extent such a “free for all” commitment by the industry has any durable substance, it is inevitable that the burden will fall most heavily on young David and the shareholders in his People’s Bank. The People’s Bank is the one with the most customers likely to benefit if basic transaction facilities are to be ‘free’ of charge (but not free of cost). The other members of the burglars’ club will benefit if the People’s Bank has costs without revenues and loses caste with the ASX.

Now, why it took young David some three months to say something publicly about opportunistic behaviour back at the ABA club is a matter for later discussion. Did he ‘vote’ on the ABA proposal as to how banks would rediscover their social obligation? Was he then concerned about the possible impact on the People’s Bank shareholders? Did he say so, and to whom? But, in the end, did he unwillingly go along with the majority at the ABA club, again? And what else has he agreeed to do over the years that he would have preferred not to do? Questions, questions — spare my days!

What happened, as we know now, is that in response to a question recently following his National Press Club address, young David again displayed a tendency to emotional incontinence. An answer he gave was interpreted, including by the Prime Minister, as saying the People’s Bank might abandon the people. Heaven forbid.

What young David actually said, paraphrased, is that a long-standing commitment by the CBA to bank all Australians may have to be reviewed if it cannot get a fair price for service. And fair enough too!

Waiting for the next pitch

The relationship between young David of the People’s Bank and his brother bankers at the ABA has some of the features of a script for a Marx Brother’s comedy routine. In particular a story line for a script might read,

“Young David, our leading man, should probably not have joined a club that would admit him — and he should not stay in a club that does not seem to want him: yet he is the president of the club.” (Audience cue card — “do not smile, it is not funny”.)

This cannot go on – can it? I won’t elaborate as young David is in enough trouble already.

Meanwhile, back at the RBA ‘payments system policy headquarters’

It is disturbing that young David and his People’s Bank has been left defenceless in a brutal marketplace. Both are unfairly under attack, including from the very representatives of the people that should be defending him; the People’s Bank itself and, indeed, the proper interests of the people that they are supposed to represent.

Of course, in an election year, one is inclined to be forgiving of a little rhetorical excess in the Rialto — although it has been excessive lately. ‘Murphy’ has been at large — whatever can be said about retail banking that is ‘really silly’ seems to have been said, and an end is not in sight.

The other ‘real’ people’s bank, the RBA

Normally of course when things are going ‘wrong’ there also is a “sweeper” (a Mrs Murphy) in the background charged with maintaining a modicum of commonsense and decorum about the ‘rated’ going on in the Rialto.

One such “sweeper”, the Reserve Bank, is charged to keep clean and sensible, the policy debate about banking matters, and in particular about retail banking matters, transaction fees et al. Indeed, the representatives of the people in the Rialto knowing that they are inclined to be impetuous have put institutions, like the Reserve Bank, in place to ensure a sense of ongoing, ‘on-proper-advice’ counseling of political decision-making processes.

The Reserve Bank has formal, legislatively charged, responsibility for the competitive efficiency of the payments system as well as its prudential soundness. Occasionally this ‘Mrs Murphy’ has been known to put a warning about in the Rialto when the debating contest has lost its sense of direction and the ‘promises’ were likely to get out of hand.

There is a good deal of accumulating nonsense to be swept aside. Has this Mrs Murphy lost her broom, among other things!

I am not aware of anything having been said, by Mrs Murphy, about the sheer folly of the, apparently bi-partisan, political compromise forced on the banks to deliver ‘free banking for all’.

There will be more to say next week – or perhaps more will be said.

Peter Mair, July 14

(Footnote 1. In the press release announcing Mr Murray’s ‘election’ as chairman, the ABA reported Mr Ciccuto of NAB, as saying “Clearly, the highlight of my term was the release of the Action Plan, and in particular gaining industry support for the development of the Basic Bank Account which means that up to five million Australians will be able to have access to free banking,”. And today, 12 July, it is reported that Westpac ‘has reaffirmed its commitment to serve low-income earners’.)

Peter Fray

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