Something you may have missed in this month's news cycle

Before he entered federal parliament in 2004 Australian Prime Minister Malcolm Bligh Turnbull was Chairman and Managing Director of Goldman Sachs Australia from 1997 to 2001 and a Partner in Goldman Sachs and Co from 1998 to 2001.

In 2009 it was reported that Goldman Sachs made a confidential settlement on his behalf in the matter of the HIH collapse.

To this day he still invests with Goldman Sachs and, this month that investment bank paid US$5.06 billion in civil penalties for serious misconduct which contributed to the Global Financial Crisis (GFC) of 2008. 

Department of Justice

Office of Public Affairs

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FOR IMMEDIATE RELEASE

Monday, April 11, 2016

Goldman Sachs Agrees to Pay More than $5 Billion in Connection with Its Sale of Residential Mortgage Backed Securities

The Justice Department, along with federal and state partners, announced today a $5.06 billion settlement with Goldman Sachs related to Goldman’s conduct in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007.  The resolution announced today requires Goldman to pay $2.385 billion in a civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and also requires the bank to provide $1.8 billion in other relief, including relief to underwater homeowners, distressed borrowers and affected communities, in the form of loan forgiveness and financing for affordable housing.  Goldman will also pay $875 million to resolve claims by other federal entities and state claims.  Investors, including federally-insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued and underwritten by Goldman between 2005 and 2007. 

“This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail,” said Acting Associate Attorney General Stuart F. Delery.  “This $5 billion settlement includes a $1.8 billion commitment to help repair the damage to homeowners and communities that Goldman acknowledges resulted from its conduct, and it makes clear that no institution may inflict this type of harm on investors and the American public without serious consequences.” 

“Today’s settlement is another example of the department’s resolve to hold accountable those whose illegal conduct resulted in the financial crisis of 2008,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Viewed in conjunction with the previous multibillion-dollar recoveries that the department has obtained for similar conduct, this settlement demonstrates the pervasiveness of the banking industry’s fraudulent practices in selling RMBS, and the power of the Financial Institutions Reform, Recovery and Enforcement Act as a tool for combatting this type of wrongdoing.”

“Today’s settlement is yet another acknowledgment by one of our leading financial institutions that it did not live up to the representations it made to investors about the products it was selling,” said U.S. Attorney Benjamin B. Wagner of the Eastern District of California.  “Goldman’s conduct in exploiting the RMBS market contributed to an international financial crisis that people across the country, including many in the Eastern District of California, continue to struggle to recover from.  I am gratified that this office has developed investigations, first against JPMorgan Chase and now against Goldman Sachs, that have led to significant civil settlements that hold bad actors in this market accountable.  The results obtained by this office and other members of the RMBS Working Group continue to send a message to Wall Street that we remain committed to pursuing those responsible for the financial crisis.”

The $2.385 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud.  The settlement expressly preserves the government’s ability to bring criminal charges against Goldman, and does not release any individuals from potential criminal or civil liability.  In addition, as part of the settlement, Goldman agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.

Of the $875 million Goldman has agreed to pay to settle claims by various other federal and state entities: Goldman will pay $575 million to settle claims by the National Credit Union Administration, $37.5 million to settle claims by the Federal Home Loan Bank of Des Moines as successor to the Federal Home Loan Bank of Seattle, $37.5 million to settle claims by the Federal Home Loan Bank of Chicago, $190 million to settle claims by the state of New York, $25 million to settle claims by the state of Illinois and $10 million to settle claims by the state of California.

Goldman will pay out the remaining $1.8 billion in the form of relief to aid consumers harmed by its unlawful conduct.  $1.52 billion of that relief will be paid out pursuant to an agreement with the United States that Goldman will provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country, as well as financing for affordable rental and for-sale housing throughout the country.  This agreement represents the largest commitment in any RMBS agreement to provide financing for affordable housing—a crucial need following the turmoil of the financial crisis.  $280 million will be paid out by Goldman pursuant to an agreement separately negotiated with the state of New York.

The settlement includes a statement of facts to which Goldman has agreed.  That statement of facts describes how Goldman made false and misleading representations to prospective investors about the characteristics of the loans it securitized and the ways in which Goldman would protect investors in its RMBS from harm (the quotes in the following paragraphs are from that agreed-upon statement of facts, unless otherwise noted):

• Goldman told investors in offering documents that “[l]oans in the securitized pools were originated generally in accordance with the loan originator’s underwriting guidelines,” other than possible situations where “when the originator identified ‘compensating factors’ at the time of origination.”  But Goldman has today acknowledged that, “Goldman received information indicating that, for certain loan pools, significant percentages of the loans reviewed did not conform to the representations made to investors about the pools of loans to be securitized.”
• Specifically, Goldman has now acknowledged that, even when the results of its due diligence on samples of loans from those pools “indicated that the unsampled portions of the pools likely contained additional loans with credit exceptions, Goldman typically did not . . . identify and eliminate any additional loans with credit exceptions.”  Goldman has acknowledged that it “failed to do this even when the samples included significant numbers of loans with credit exceptions.” 
• Goldman’s Mortgage Capital Committee, which included senior mortgage department personnel and employees from Goldman’s credit and legal departments, was required to approve every RMBS issued by Goldman.  Goldman has now acknowledged that “[t]he Mortgage Capital Committee typically received . . . summaries of Goldman’s due diligence results for certain of the loan pools backing the securitization,” but that “[d]espite the high numbers of loans that Goldman had dropped from the loan pools, the Mortgage Capital Committee approved every RMBS that was presented to it between December 2005 and 2007.”  As one example, in early 2007, Goldman approved and issued a subprime RMBS backed by loans originated by New Century Mortgage Corporation, after Goldman’s due diligence process found that one of the loan pools to be securitized included loans originated with “[e]xtremely aggressive underwriting,” and where Goldman dropped 25 percent of the loans from the due diligence sample on that pool without reviewing the unsampled 70 percent of the pool to determine whether those loans had similar problems.
• Goldman has acknowledged that, for one August 2006 RMBS, the due diligence results for some of the loan pools resulted in an “unusually high” percentage of loans with credit and compliance defects.  The Mortgage Capital Committee was presented with a summary of these results and asked “How do we know that we caught everything?”  One transaction manager responded “we don’t.”  Another transaction manager responded, “Depends on what you mean by everything?  Because of the limited sampling . . . we don’t catch everything . . .”  Goldman has now acknowledged that the Mortgage Capital Committee approved this RMBS for securitization without requiring any further due diligence.   
• Goldman made detailed representations to investors about its “counterparty qualification process” for vetting loan originators, and told investors and one rating agency that Goldman would engage in ongoing monitoring of loan sellers.  Goldman has now acknowledged, however, that it “received certain negative information regarding the originators’ business practices” and that much of this information was not disclosed to investors. 
• For example, Goldman has now acknowledged that in late 2006 it conducted an internal analysis of the underwriting guidelines of Fremont Investment & Loan (an originator), which found many of Fremont’s guidelines to be “off market” or “at the aggressive end of market standards.”  Instead of disclosing its view of Fremont’s underwriting, Goldman has acknowledged that it “[u]ndertook a significant marketing effort” to tell investors about what Goldman called Fremont’s “commitment to loan quality over volume” and “significant enhancements to Fremont underwriting guidelines.”  Fremont was shut down by federal regulators within several months of these statements.
• In another example, Goldman was aware in early-mid 2006 of certain issues with Countrywide Financial Corporation’s origination process, including a pattern of non-responsiveness and inability to provide sufficient staff to handle the numerous loan pools Countrywide was selling.  In April 2006, while Goldman was preparing an RMBS backed by Countrywide loans for securitization, a Goldman mortgage department manager circulated a “very bullish” equity research report that recommended the purchase of Countrywide stock.  Goldman’s head of due diligence, who had just overseen the due diligence on six Countrywide pools, responded “If they only knew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .”
• Meanwhile, as Goldman has acknowledged in this statement of facts, “[Around the end of 2006], Goldman employees observed signs of uncertainty in the residential mortgage market [and] by March 2007, Goldman had largely halted new purchases of subprime loan pools.”  

Assistant U.S. Attorneys Colleen Kennedy and Kelli Taylor of the Eastern District of California investigated Goldman’s conduct in connection with RMBS, with the support of the Federal Housing Finance Agency’s Office of the Inspector General (FHFA-OIG) and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).

“Goldman Sachs had a fiduciary responsibility to investors, which they blatantly side stepped,” said Deputy Inspector General for Investigation Rene Febles of FHFA-OIG.  “They knowingly put investors at risk and in so doing contributed significantly to the financial crisis.  The losses caused by this irresponsible behavior deeply affected not only financial institutions but also taxpayers and one can only hope that Goldman Sachs has learned the difference between risk and deceit.  Two Federal Home Loan Banks suffered significant losses so we are pleased to see both entities receive a portion of this settlement.  We will continue to work with our law enforcement partners to hold those accountable who have engaged in misconduct.”

“Goldman took $10 billion in TARP bailout funds knowing that it had fraudulently misrepresented to investors the quality of residential mortgages bundled into mortgage backed securities,” said Special Inspector General Christy Goldsmith Romero for TARP.  “Many of these toxic securities were traded in a taxpayer funded bailout program that was designed to unlock frozen credit markets during the crisis.  While crisis investigations take time, SIGTARP is committed to working with our law enforcement partners to protect taxpayers and bring accountability and justice.”

The settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered tens of billions of dollars on behalf of American consumers and investors for claims against large financial institutions arising from misconduct related to the financial crisis.  The RMBS Working Group brings together attorneys, investigators, analysts and staff from multiple state and federal agencies, including the Department of Justice, U.S. Attorneys’ Offices, the FBI, the U.S. Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, SIGTARP, the Federal Reserve Board’s OIG, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network and multiple state Attorneys General offices around the country.  The RMBS Working Group is led by Director Joshua Wilkenfeld and five co-chairs: Principal Deputy Assistant Attorney General Mizer, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Director Andrew Ceresney of the SEC’s Division of Enforcement, U.S. Attorney John Walsh of the District of Colorado and New York Attorney General Eric Schneiderman.  This settlement is the fifth multibillion-dollar RMBS settlement announced by the working group.

Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at www.StopFraud.gov. 

Quote of the Week

If you believe the conservative line, Australia’s banks are not only too big to fail but too fragile to be openly investigated.

The argument goes like this: yes, the financial sector has behaved very badly, even criminally; but the establishment of a royal commission to examine the seemingly endless stream of scandals could lead to a devastating loss of confidence. [Mike Seccombe in The Saturday Paper, 16 April 2016]

Do We Need A Royal Commission Into The Banks?

The Fairfax Ipsos poll of April 17 found 65% of the public supported a banking Royal Commission.  Yet the Government (minus initially a few backbenchers) vigorously opposes it, slamming it as “populist”, “reckless”, a “distraction”, and a waste of money.  Furthermore the Government claims it would take too long and be likely to erode public confidence in the finance system.

These Government spokesmen – Turnbull, Morrison, Cormann and others – obviously cannot see that the community is sick of the recurring finance sector scandals and has no confidence in any current measures for making these powerful institutions behave ethically – and indeed within the law.

Another oft-cited reason for the Government’s rejection of a royal commission is that we already have “a tough cop on the beat” in the form of the Australian Securities and Investments Commission (ASIC).  ASIC, they reiterate, has both the power to investigate and to prosecute.  They point out that while a Royal Commission can investigate, it has no power to prosecute.

While the “tough cop’s” powers may exist, it has not had any success in stemming the flow of finance sector scandals.  Indeed many of the revelations of bad behaviour have not been as a result of ASIC investigations but the work of whistleblowers and financial journalists. And it would seem that the fines resulting from ASIC investigations have seemed more like “slaps on the wrist” for bad behaviour rather than effective deterrents.

In addition the “tough cop”, along with other government entities, has had its response capacity limited by the very Government which claims ASIC has all that is needed to keep the banks and other finance institutions in line.  In the 2014 budget ASIC lost $120 million over 5 years.  This has obviously affected its investigative capacity.

The increasing clamour for a Royal Commission has worried the Government because of the proximity of the election. Consequently Treasurer Morrison announced recently a series of measures which he claims will solve the bank problem.  These measures include at least $120 million in extra funding, tougher penalties for wrong-doing, greater powers for ASIC and an extra commissioner to focus on prosecuting crimes in the finance sector.  These changes will be financed by the banks who will be hit with a levy of $121 million. The costs to the banks are not, according to the Government, to be passed on to bank customers.

Morrison and the Government are obviously hoping this response will undermine the appeal of Labor’s Royal Commission commitment. Presumably the Government backbenchers  who were supporting the need for a Royal Commission are now satisfied but it’s doubtful that many in the broader community – and particularly those who have been ripped off by the banks – will be.

Those who want the kind of extensive open inquiry that a Royal Commission can provide, have no confidence in ASIC as a body to expose and deal with financial industry malpractice.  This view was highlighted by a Senate committee in 2014 which found ASIC to be “a timid, hesitant regulator, too ready and willing to accept uncritically the word of the bank”.  There is considerable doubt about whether these latest measures will change that. 

Furthermore, is ASIC to investigate its own responses to the plethora of financial scandals? This is a matter which certainly needs to be investigated to ensure that such inadequate responses do not happen again.  Conflict of interest issues mean ASIC cannot be given this important task.  There is, of course, a question about whether the Government wants a light shone on ASIC’s performance just as there is a question about what appears to be its cosy relationship with the banking/finance industry.

This close relationship has been seen as a major reason for the reluctance of the Abbott/Turnbull Government to take effective action to protect consumers.  A prime example of this was its desire to wind back the Future of Financial Advice reforms legislated by the previous Labor Government.   These reforms had been introduced to protect customers from unscrupulous behaviour by advisers and their employers.  The Government failed to wind them back only because of Senate opposition.  Another more recent example of this close relationship is the funding the National Australia Bank is providing as a co-sponsor for a political fundraising breakfast for Kelly O’Dwyer, member for Higgins and the Assistant Treasurer.

The sense of entitlement that banks have about being able to operate with as little government interference as possible – even when behaving badly – was clearly obvious early this month after Labor announced that, if elected, it would hold a banking Royal Commission.  The head of the banking industry lobby, the Australian Bankers Association, refused to rule out the possibility of a mining-style tax ad campaign against Labor.  Presumably the widespread community support for a Royal Commission revealed in a recent poll might make this lobby group realize that such a campaign could backfire.

What is very obvious is that there is a need to shine a very strong light on the banking/ finance industry in order to force the changes that are required to make it fairer and more responsive to customer needs.  Moreover there is an ongoing need to ensure proper compensation for consumers who have been hurt by unscrupulous behaviour over recent years.  And the “bad apples” in the sector need to be identified and removed.  This would lead to a marked improvement in public confidence in the banking/finance system.  The Government measures are clearly too little, too late and were merely rolled out because of fear of an electoral backlash rather than because of any conviction that action was needed.

The Royal Commission into Institutional Responses to Child Sexual Abuse has shown how powerful is the shining of a strong, very public light on institutions which have done the wrong thing.  We need a Royal Commission into the banking/finance industry to force a sweeping clean-up in this sector.

Hildegard

Northern Rivers

GuestSpeak is a feature of North Coast Voices allowing Northern Rivers residents to make satirical or serious comment on issues that concern them. Posts of 250-300 words or less can be submitted to ncvguestspeak AT gmail.com.au for consideration. Longer posts will be considered on topical subjects.

Global corruption of democracy in the 21st Century

The Guardian UK, 11 April 2016:

Because at root, the Panama Papers are not about tax. They’re not even about money. What the Panama Papers really depict is the corruption of our democracy.

Following on from LuxLeaks, the Panama Papers confirm that the super-rich have effectively exited the economic system the rest of us have to live in. Thirty years of runaway incomes for those at the top, and the full armoury of expensive financial sophistication, mean they no longer play by the same rules the rest of us have to follow. Tax havens are simply one reflection of that reality. Discussion of offshore centres can get bogged down in technicalities, but the best definition I’ve found comes from expert Nicholas Shaxson who sums them up as: “You take your money elsewhere, to another country, in order to escape the rules and laws of the society in which you operate.” In so doing, you rob your own society of cash for hospitals, schools, roads…

“Those who exited our societies are now also exercising their voice to set the rules by which the rest of us live”

But those who exited our societies are now also exercising their voice to set the rules by which the rest of us live. The 1% are buying political influence as never before. Think of the billionaire Koch brothers, whose fortunes will shape this year’s US presidential elections. In Britain, remember the hedge fund and private equity barons, who in 2010 contributed half of all the Conservative party’s election funds – and so effectively bought the Tories their first taste of government in 18 years.

To flesh out the corrosion of democracy that is happening, you need to go to a Berlin-born economist called Albert Hirschman, a giant in modern economic thinking. Hirschman died in 2012 at the age of 97, but it’s his concepts that really set in context what’s so disturbing about the Panama Papers.

Hirschman argued that citizens could protest against a system in one of two ways: voice or exit. Fed up with your local school? Then you can exercise your voice and take it up with the headteacher. Alternatively, you can exit and take your child to a private school.

In Britain and in America, the super-rich have broken Hirschman’s law – they are at one and the same time exercising economic exit and political voice. They can have their tax-free cake and eat it……

Political Cartoon of the Week

Cathy Wilcox

Dear Mr. Morrison........

North Coast Voices was sent a copy of the following letter sent to Australian Treasurer Scott Morrison, with permission to publish:

EMAIL TO TREASURER MORRISON SENT ON GOVERNMENT  EMAIL FORM 8^th April 2016

Dear Mr Morrison

I was interested to hear your interview on Radio National "Breakfast" this morning. 

It was quite astonishing that you rejected the notion of a Royal Commission into the banks given all the shonky behaviour we have seen from all of the "Big 4" in recent years. It's quite obvious that these all-powerful institutions have no respect for the regulators (your cop on the block or whatever you called it) or for the Australian community.  Whenever a new outrage is revealed, we hear sounds of contrition from the offending bank and then some time later there's another outrage revealed.

In your comments criticising the Leader of the Opposition for his suggestion that a Royal Commission be considered, you ignored the fact that there are backbenchers in your Government calling quite strongly for a Royal Commission.  Don't you hear your backbenchers, Mr Morrison?

Don't you understand that there is considerable community concern about the continuing outrageous behaviour of the major banks?

We need a royal commission into the big 4 banks.  Maybe that will result in some improvement in their behaviour.

Yours sincerely

Leonie Blain

8^th April 2016

FILE UNDER NOTHING CHANGES: Liberal & Nationals MPs poised to help out their banker mates once more

Assistant Treasurer and Liberal MP for Higgins Kelly O'Dwyer was quick to deny the content of the media release (below) concerning the Superannuation Legislation Amendment (Transparency Measures) Bill 2015: Product dashboards.

However Allens Linklater appears to support Industry Super Australia’s take on the new rules:

The Bill sets up (and proposes changes to) the application of the product dashboard rules as follows:

* Choice product dashboards now only need to be provided for a fund's 10 largest choice investment options by funds under management (with some exclusions) rather than all choice products. For the purposes of working out a fund's largest choice investment options, a lifecycle option should be treated as one option.

* Although a choice lifecycle option should be treated as one option for the purposes of identifying its size, a separate product dashboard is required for each lifecycle stage in the option (and this applies to both MySuper and choice lifecycle options).

* Eligible rollover funds and pooled superannuation funds are specifically excluded from the product dashboard rules.

Industry Super Australia, media release, 28 January 2016:

GOVERNMENT PROPOSALS WILL PREVENT CONSUMER “COMPARE THE PAIR”

A carve out of an estimated 72% of the bank-owned and retail super sector from requirements to disclose their investment returns, fees and costs on proposed “product dashboards” for super funds could make it nearly impossible for Australians to readily make informed choices about their superannuation, industry super funds have warned.

The new federal Government proposals carve out bank-owned super funds held through platforms and some legacy products from having to disclose details on ‘dashboards’.

Product “dashboards” are designed to provide consumers with a standardised and simple presentation of fees, all underlying costs, risk and net returns.

The proposed changes mean many bank-owned super products will not have to disclose many of their underlying investment costs.

According to independent analysis by Rainmaker, as at December 2014, 72 per cent of the $572 billion of retail superannuation assets were held via platforms.

“Australians need to be able to compare the net performance of super funds to be able to make informed choices”, said David Whiteley, Chief Executive of Industry Super Australia.

“It is unsurprising that the banks oppose having to disclose the performance of their super funds in an easily comparable and transparent manner. According to SuperRatings, industry super funds have outperformed bank owned super funds over the short, medium and long term to 31 December 2015.

The Government is also seeking to remove existing limited exemptions to choice of fund legislation introduced by the Howard government at the request of employers. It is estimated the exemptions currently cover less than seven out of a hundred Australian employees.

In submissions to Treasury, ISA has recommended that the Government not proceed with the changes until:

* The product dashboard regime includes all superannuation products and investment options with no carve outs for banks and retail funds; and

* A cost benefit analysis is undertaken of the plan to remove Howard Government choice of fund rules.

“Industry super funds support a strong default fund safety net, the ability of members to choose their own fund, and access to information to make informed decisions.

“We are concerned that these proposals have not been through a rigorous evaluation. In their current form the proposals are internally inconsistent, seeking to extend choice of fund without providing consumers with the necessary information to make informed decisions.”

“Despite very few Australians actively choosing a fund other than the default one their employer has in place, everyone needs to be able to compare the performance of funds to be able to make an informed decision. It is not good enough that the banks want to hide their chronic under-performance from consumers”, said David Whiteley.

Background

Brisbane Times, 28 January 2016:

ISA and the Australian Institute of Superannuation Trustees, the lobby group for all non-profit funds including public sector and corporate funds as well as industry funds, argued that requiring funds to produce dashboards only for their 10 largest investment options meant too many retail products would be exempt. 

In their submission to Treasury, AIST pointed to the findings of a soon-to-be-released report it commissioned by SuperRatings that showed retail MySuper fees and costs were on average 28 per cent higher than those passed on to the public by non-profit providers. 

The upcoming report will also show that in the choice market, the like-for-like fees and costs charged by retail funds were 85 per cent to 300 per cent higher than the comparable investment options from non-profit funds. 

"Members of many bank-owned super funds are being kept in the dark about high fees that will materially affect their retirement," AIST chief executive Tom Garcia said. 

All MySuper products, the no-frills funds that employers can nominate for default flows, are already required to produce a product dashboard. The new rules will extend this requirement to choice products. 

Non-profit super providers dominate the $547 billion MySuper sector with a market share of 83 per cent, while retail providers dominate the $681 billion choice sector with a market share of 64 per cent, according to the regulator's latest statistics. 

Time to keep track of what the boss and the banks want to do with your super

Medianet Release 2 March 2015:

BANKS OFFER INCENTIVES TO EMPLOYERS TO GAIN ACCESS TO EMPLOYEE SUPER

New research indicates that banks appear to be offering business bundling deals to employers, which could result in employees being switched into superannuation funds irrespective of the impact on their net returns and long term retirement savings.

A survey of 550 small and medium businesses conducted by UMR has produced some deeply concerning findings:

* 26% of employers surveyed said that a major bank had approached them about transferring their employees’ default superannuation to the bank’s own retail super fund in the last year.

* Just under half those approached say their bank offered them benefits to change funds.

* The most common offers made by the banks involved a direct benefit to the business rather than employees, such as discounts on business banking and insurance products. Some employers report being offered tickets to sporting events.

* 33% of employers offered benefits say they were persuaded to switch to a super fund promoted by their bank, and many more (57%) report that they are still considering switching.

* Two banks in particular appear to be the most active in approaching employers about switching default super fund arrangements and recommending their own fund.

“UMR’s employer survey gives rise to serious questions about the banks’ behaviour. It appears they are approaching employers and offering deals to bundle business banking services with employee default superannuation,” said David Whiteley, Chief Executive of Industry Super Australia.

"This could result in employees’ super contributions being paid into bank-owned super funds, which have on average historically produced lower net returns to their members.”

Were this the case, employees could retire with lower savings or feel compelled to commit more of their wages to super, or work longer, perhaps past 70, before they achieve a sufficient level of retirement income.

“In the best interests’ of employees, the law should be changed to prohibit a bank-owned super fund from providing default super services where it is also the provider of business banking services to the employer,“ said Mr. Whiteley.

“The research also reinforces the need for Australia’s super system to provide employers with a strong safety net of high performing funds to choose from, which have been assessed for quality by the Fair Work Commission. For the vast majority of Australians who leave it to their employer choose a fund for them, this process promotes consumer confidence in the system which safeguards Australia's retirement savings.

“However, the banks are lobbying the government to scrap the safety net. This would suit their vertically integrated business model and reduce competition by creating barriers to entry for super funds not owned by the banks,” he said. 

“It would also remove consumer protection for around eight million Australians who don’t choose their own super fund. Last year the banks unsuccessfully tried to remove consumer protections for Australians needing financial advice, now they are attempting to do the same with superannuation.

“Encouragingly, the research also found that most employers want to do the right thing by their employees,” said Mr. Whiteley.

“Fees and returns rank first and second as their most important considerations when selecting a default superannuation fund for their workers.”

Get the full report here.

An Open Letter To The Australian People: "banks and foreign mining companies are deliberately and cruelly forcing our own Australian farmers off the land"

Charlie Phillott (The Australian) December 2014 

and

 Florence Owens Thompson (Dorthea Lange) March 1936 

(originally photographed in b&w; and retouched)

AN OPEN LETTER TO THE AUSTRALIAN PEOPLE:

Dear Men and Women of Australia,

There are two photographs on this page, and while they might look like father and daughter, they are separated by two nations, one ocean and some seventy years.

Yet incredibly, they are both part of the same tragedy, the kind that leaves deep and irreparable scars on a nation and its people for a lifetime.

The young woman who was born in 1907. The elderly man who was born twenty seven years later in 1934.

The photograph of the woman was taken in the Great Depression of 1936 when the man was a two year old boy.

Her name was Florence Owens Thompson and she was a 32 year old mother of seven who was photographed sitting homeless in a tent. The image was published across the newspapers of America and it managed to enrage the nation, because people could not believe that Americans could be treated in such a way.

It forced President Roosevelt to act, to step up and become a leader for his times: he launched soup kitchens, work gangs, programs for the homeless, dams and roads and railways were built - and he gave his people hope.

John Steinbeck later wrote a book called The Grapes of Wrath which became an American literary Icon. It was about a drought that made the farmers penniless - and how the banks had forced them off their land so they could sell it on to the big powerful corporations. What happened to the farmers of Oklahoma ultimately carved a deep and shameful scar across the American identity that was felt throughout the Twentieth Century.

The second photograph on this page is of Charlie Phillott, now 80, an elderly farmer from the ruggedly beautiful Carisbrooke Station at Winton. He has owned his station since 1960, nurtured it and loved it like a part of his own flesh. He is a grand old gentleman, one of the much loved and honoured fathers of his community.

Not so long ago, the ANZ bank came and drove him off his beloved station because the drought had devalued his land and they told him he was considered an unviable risk. Yet Charlie Phillott has never once missed a single mortgage payment.

Today this dignified Grand Old Man of the West is living like some hunted down refugee in Winton, shocked and humiliated and penniless. And most of all, Charlie Phillott is ashamed, because as a member of the Great Generation - those fine and decent and ethical men and women who built this country - he believes that what happened to him was somehow his own fault. And the ANZ Bank certainly wanted to make sure they made him feel like that.

Last Friday my wife Heather and I flew up with Alan Jones to attend the Farmers Last Stand drought and debt meeting in Winton. And after what I saw being done to our own people, I have never been more ashamed to be Australian in my life.

What is happening out there is little more than corporate terrorism: our own Australian people are being bullied, threatened and abused by both banks and mining companies until they are forced off their own land.

So we must ask: is this simply to move the people off their land and free up it up for mining by foreign mining companies or make suddenly newly empty farms available for purchase by Chinese buyers? As outrageous as it might seem, all the evidence flooding in seems to suggest that this is exactly what is going on.

What is the role of Government in all of this? Why have both the State and Federal Government stood back and allowed such a dreadful travesty to happen to our own people? Where was Campbell Newman on this issue? Where was Prime Minister Abbott? The answer is nowhere to be seen.

For the last few months, the Prime Minister has warned us against the threats of terrorism to our nation. We have been alerted to ISIS and its clear and present danger to the Australian people.

Abbott has despatched Australian military forces into the Middle East in an effort to destroy this threat to our own safety and security. This mobilization of our military forces has come at a massive and unbudgeted expense to the average Australian taxpayer which the Prime Minister estimates to be around half a billion dollars each year.

We are told that terrorism is dangerous not only because of the threat to human life but also because it displaces populations and creates the massive human cost of refugees.

Yet not one single newspaper or politician in this land has exposed the fact that the worst form of terrorism that is happening right now is going on inside the very heartland of our own nation as banks and foreign mining companies are deliberately and cruelly forcing our own Australian farmers off the land.

What we saw in the main hall of the Winton Shire Council on Friday simply defied all description: a room filled with hundreds of broken and battered refuges from our own country. It was a scene more tragic and traumatic than a dozen desperate funerals all laced onto the one stage.

Right now, all over the inland of both Queensland and NSW, there is nothing but social and financial carnage on a scale that has never before been witnessed in this nation.

It was 41 degrees when we touched down at the Winton airport, and when you fly in low over this landscape it is simply Apocalyptic: there has not been a drop of rain in Winton for two years and there is not a sheep, a cow, a kangaroo, an emu or a bird in sight. Even the trees in the very belly of the creeks are dying.

There is little doubt that this is a natural disaster of incredible magnitude - and yet nobody - neither state nor the federal government - is willing to declare it as such.

The suicide rate has now reached such epic proportions right across the inland: not just the farmer who takes the walk "up the paddock" and does away with himself but also their children and their wives. Once again, it has barely been covered by the media, a dreadful masquerade that has assisted by the reticence and shame of honourable farming families caught in these tragic situations.

My wife is one of the toughest women I know. Her family went into North West of Queensland as pioneers one hundred years ago: this is her blood country and these are her people . Yet when she stood up to speak to this crowd on Friday she suddenly broke down: she told me later that when she looked into the eyes of her own people, what she saw was enough to break her heart.

And yet not one of us knew it was this bad, this much of a national tragedy. The truth is that these days, the Australian media basically doesn't give a damn. They have been muzzled and shut down by governments and foreign mining companies to the extent that they are no longer willing to write the real story. So the responsibility is now left to people like us, to social media - and you, the Australian people.

And so the banks have been free to play their games and completely terrorise these people at their leisure. The drought has devalued the land and the banks have seen their opportunity to strike. It was exactly the excuse that they needed to clean up and make a fortune, because once the rains come - as they always do - this land will be worth four to ten times the price.

In fact, when farmers have asked for the payout figures, the banks have been either deeply reluctant or not capable of providing the mortgage trail because they have on-sold the mortgage - just like sub-prime agriculture.

This problem isn't simply happening in Winton, but rather right across the entire inland across Queensland and NSW. The banks have been bringing in the police to evict Australian famers and their families from their farms, many of them multigenerational. One farmer matter of factly told us it took "oh, about 7 police" to evict him from his first farm and "maybe about twelve" to evict him from his second farm which had been in his family for many generations. You think they are kidding you. Then you see the expression in their eyes.

And there was something far worse in the room on Friday: the fear of speaking out against the banks: when we asked people to tell us who had done this to them, they would immediately start to shake and cry and look away: They have been silenced to protect the good corporate image of their tormentors called the banks. What in God's name have the bastard banks been allowed to do to our people?

This is a travesty against the rights and the human dignity of every Australian.

So it's only fair that we start to name a few of major banks involved: The ANZ is a major culprit (they made $7 billion profit last year). Then there is Rabo - which is an international agricultural bank - the NAB, Bank West and Westpac (who paid CEO Gail Kelly a yearly salary of some $12 million). They are all equally guilty. For any that we have missed, rest assured they will be publicly exposed as well.

But here's the thing: when these people are forced off their farms, they have nowhere to go. There are no refugee services waiting, such is the case for those who attempt to enter the sovereign borders of this nation. The farmers simply drive to the nearest town - that's if the banks haven't stripped their cars off them as well - and they try and find somewhere to sleep. Some are sleeping on the backs of trucks in swags. There is basically no home or accommodation made available to take them. They camp out, shocked and broken and penniless - and they are living on weet bix and noodles. If there is someone that can lend a family enough money to buy food, they will: otherwise they are left completely alone.

And consider this: not one of them has asked for help. Not one. They just do the best they can, ashamed and broken and brainwashed by the banks to believe that everything that has happened is completely their own fault.

There is not one single word of this from a politicians lips, with the exception of the incredibly courageous father and son team of Bob and Robbie Katter, who organised the Farmers Last Stand meeting. The Katter family have been in the North since the 1890's, and nobody who sat in that hall last Friday could question their love and commitment to their own people.

There is barely a mention of any of this as well in the newspapers, with the exception of as brief splash of publicity that followed our visit.

The Minister for Agriculture Barnaby Joyce attended the meeting in a bitter blue-funk kind of mood that saw him mostly hunched over and staring at the floor. He had given $100 million of financial assistance in a lousy deal where the Government will borrow at 2.75% and loan it back at 3.21%.

The last thing these people need is another loan: they need a Redevelopment Bank to refinance their own loans: issuing a loan to pay off a loan is nothing more than financial suicide.

The reality is that Joyce cannot get support from what he calls "the shits in Cabinet" to create a desperately needed Redevelopment Bank so that these farmers can get cheap loans to tide them through to the end of the drought.

Our sources suggest that those "shits in Cabinet" include Malcolm Turnbull - Minister for Communications and the uber-cool trendy city-centric Liberal in the black leather jacket:, Andrew Robb - Minster for Trade and Investment and the man behind the free trade deal, the man who suddenly acquired three trendy Sydney restaurants almost overnight, the man who seems to suddenly desperate to sell off our farms to China - and one Greg Hunt, Environment Minister and the man who is instantly approving almost every single mining project that is put in front of him.

At the conclusion of the meeting, we stood and met some of the people in the crowd. My wife talked to women who would hug her for dear life, and when they walked away people would suddenly murmur "oh, she was forced off last week" or "they are being forced off tomorrow" . Not one of them mentioned it to us. They had too much pride.

The Australian people need to be both informed and desperately outraged about what is being done to our own people. This is about every right that was once held dear to us: human rights, property rights, civil rights. And most all, our right to freedom of speech. All of that has been taken away from these people - and the rest of us need to understand that we are probably next.

In the last four weeks the Newman Government has removed all farmers rights to protest to a mine and given mining companies the rights to take all the water they want from the Great Artesian Basin - and at no cost to them at all.

And all of this has happened under the watch of both Premier Newman and Prime Minister Abbott.

Until Friday, we used to think of Winton as the home of Waltzing Matilda: it was written at a local station and first performed in the North Gregory Hotel. I think it was Don McLean who wrote, "something touched me deep inside…the day the music died"… in his song American Pie, and for us, last Friday was the day music died.

We will never be able to sing Waltzing Matilda again until we see some justice for these people, and all the farmers of the inland.

This is no longer the Australia we once knew: no longer our country, no longer our people, no longer the decent caring leaders we once remembered.

Right now, the banks, the mining mates, the corrupt politicians and all the 'mongrels in suits' have won - and the Australian people don't have a clue what has been done to them.

Like the American Depression and the iconic photograph of Florence Owens Thompson, there is a terrible, gaping wound that has been carved across the heartland of this nation.

We need to fully grasp that, and to understand that our people - dignified, decent and honourable old men like Charlie Phillott - have been deliberately terrorized, brutalised - and sold out.

In one sense, Charlie Phillott has become the symbol overnight of every decent Australian: the simple right to live out our lives on the land we love - and the land we are still free to call our own. At least until some dangerously persuaded corrupted trendy liberal theorist decided to strip all that away.

The truth is, no Australian was ever consulted about whether or not they wanted to see their land mined into oblivion or see our precious water poisoned and given away for free, whether they wanted to be driven off their land by the greed of banking executives who saw the chance to make a profit by wiping out the weakest and most vulnerable amongst us.

No Australian was ever consulted about whether or not we wanted to see our beloved homeland sold on the cheap to greedy faceless foreigners just because some slimy two-faced minister managed to convince a weakened prime minster to meekly carry out his bidding.

Nobody has asked us. We the People. Not once.

So if we are ever going to do something, then we'd better realise that it’s now only two minutes to midnight - so we'd better move fast.

Regards

David

* NOTE: Dr. David Pascoe BVSc PhD is a veterinarian practicing in Queensland, Australia

The banking and finance sector is still cleaning up after the last mess yet Abbott & Co want to let financial planners off the leash again

The Abbott Government introduced the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 into the Australian Parliament on 19 March 2014 to implement changes to Future of Financial Advice (FOFA) legislation.

This bill winds back consumer protections put in place in 2012 after the 2009 Storm Financial-Commonwealth Bank debacle and resulting court cases revealed significant problems in the finance and banking sector and, winds them back in the face of evidence (such as the media report below) that the sector still hasn’t finished clearing up the mess left by avaricious financial planners.

ABC News 16 May 2014:

The Commonwealth Bank will reopen compensation offers to thousands of its clients affected by its financial planning scandal, after the corporate regulator said it was "extremely disappointed" in the bank's compensation process.

The move follows a joint investigation by Four Corners and Fairfax which exposed how poor financial planning advice at the bank had left some clients almost penniless.

The program revealed that commissions and bonuses helped create a sales-driven culture inside the bank which led to some planners losing millions of their customers funds.

The Commonwealth Bank will now have to dramatically expand its compensation scheme, with 4,000 clients now potentially having their case for compensation reopened. Originally, only 1,100 were offered compensation.

Australian Securities and Investment Commission (ASIC) chairman Greg Medcraft said the problem was not with the original compensation arrangements, but with the implementation.

"The compensation process originally developed was carefully designed to include a range of measures to protect the interests of customers involved. ASIC is extremely disappointed that not all of those measures were applied to all customers," he said.

"We are now taking immediate action to remedy the inconsistent treatment."…..

On 20 March 2014, the Senate referred the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 to the Senate Economics Legislation Committee for inquiry and report due on 16 June 2014.

The Senate changes composition on 1 July 2014 and the Abbott Government is likely to vigorously woo those new senators from minor parties in order to get its own way.