Thursday, February 07, 2019

'It's way too soft': Father-of-five who lost the family farm to the bank after drought slams royal commission report and demands the banks pay compensation to victims

I have experienced my share of idiocy from banks in my time so I am not the obvious person to defend banks but I do think there is a lack of perspective here.

When a bank makes a home loan it has to prophecy what your finances will be in 15 or 20 years.  That's rather heroic.  I would not lend anyone money under those circumstances.  So banks have to be very self-protective to stay in business at all.  With Australian farmers it is even worse.  Banks have to predict the WEATHER many years in advance.  Nobody can do that, not even the Greenies with their global warming religion.  It would be a reasonable view to say that banks should not lend to out-West farmers at all.  But they do.

The only protection they have for their funds is the value of the farm concerned.   So if the farmer has stopped making his payments it is normal commercial practice to seize the asset and sell it off.  But farmers feel mightily aggrieved when banks do that.  They seem to want the banks to be fairy godmothers who just keep on shelling out indefinitely regardless of whether the  bank has any prospect of getting its money back.

The real fault lies with the farmers -- with rural gamblers.  They know they are gambling on when rain will fall and want the banks to finance their gamble.

What the farmer should do after a bad year or two is to lock the farm gates and go and get a job.  No historic family farm would be "lost" if they did that.  The  farmer can come back when the rain falls again and plant a crop, make hay or agist his pastures.

In some cases he might be able to leave family on the property with a shotgun or two and just come home on the weekends.  There are a lot of workers who don't get to come home every night.  Members of the armed services may not see their families for months

There would be a case to protect farmers from themselves by banning farm lending altogether -- or at least make loan conditions a lot tougher and loans a lot less frequent.  As it is, all the recent bank bashing may achieve that anyway.  Why would a banker want to risk his reputation by lending to fools who will  turn on him when the rain stops?

A farmer who lost it all to the National Australia Bank after a drought has slammed the royal commission report as 'way too soft' and its proposals as 'twenty years too late'.

Father-of-five Bill Mott and his family lost their $22 million estate in Meanderra, in Queensland's Western Downs region, to the bank in 2014, following several poor seasons. 

The crop and cattle farmer attended all but one of royal commissioner Kenneth Hayne's hearings and this week scoured the report in detail to see what Mr Hayne had to offer farmers. He walked away disappointed.

'It was way too soft and no where near deep enough so I'm very disappointed with the outcome,' Mr Mott said. 'I think I'm going to be even more disappointed with the way the government's going to deal with it.'

Criminal charges should have been laid and 'examples made', he said, calling for a 'wow, bang' approach rather than just 'bashing (bank executives) about the ears'.

He argued the commissioner, a former High Court justice, was 'not the right man for the job', as his appointment gave the inquiry too much of a legal focus.

Most importantly, he said the report was missing redress for victims of the financial services industry.

In his report, Mr Hayne made criminal and civil referrals for some financial entities, but they were not named, and no charges have been laid against executives.

Mr Hayne recommended three major measures to help farmers:

* the banking code should change so banks do not charge default interest on agricultural land loans during droughts or national disasters 

* that banks only call in receivers or administrators for a distressed loan for a last resort, and

* the establishment of a national farm debt mediation scheme


Default interest is the interest payable on amounts which are not paid when they are due. Mr Mott said he was 'buggered' by default interest after poor seasons on his farm, prior to losing the farm to the National Australia Bank.

Mr Mott said while the measures were no doubt a 'good thing', they were a 'no brainer' and twenty years too late.

The measures came after the commission was told stories of farmers who were hit with penalty interest for defaulting on their loans.

Mr Mott was himself 'buggered up' by default interest, paying a total of $1.5 million to the bank during his ordeal. 'It should be a no brainer (not to charge default interest during drought),' he said. 'When somebody gets into trouble how the hell are they going to get out of trouble if they keep flogging them?

'With farming, almost every case of default is when there is a natural disaster of some kind.

'Farmers are quite conservative people. They don't put themselves out there, but when things get really bad, you've got to spend money to make it.

He said the problem was, simply: 'Our banking system in this country does not adequately provide a service for rural farmers'.

Mr Mott's biggest disappointments were that there was 'nothing' to protect victims from the bank, and there was 'no redress', or compensation, for victims. 'There's nothing there to protect the victims against the bank,' Mr Mott said.

The National Australia Bank came in for particular criticism in Kenneth Hayne's royal commission report

'When you ultimately take out a bank loan, all the paperwork you sign, you sign away all your rights to that bank,' he said.

When somebody gets in to trouble, how are they going to go out if they keep getting flogged?

'If you default, whether the bank has done the wrong thing or you have done the wrong thing, if that goes to court you've already signed away all your rights before you even go to court.

Mr Mott said Mr Hayne did a good job, but the commission should have been run by a panel of eminent Australians, rather than just a former High Court judge

The government has supported the commission's recommendation to scrap default interest charges for farmers.

Agriculture Minister David Littleproud said this week: 'It's time that despicable practice ended full stop because I don't believe the rate the banks charge reflects the actual cost to them'.

The government has also pledged to set up a national scheme to help farmers seek mediation to work out a way for them to repay their loans where possible.

As for Mr Mott, he and his son live next to the farm they used to own. Perversely, it has thrived under new ownership, thanks to a few strong seasons, he said.


Reserve Bank backs Morrison's 'cautious' approach on finance industry

Reserve Bank governor Philip Lowe has backed the Morrison government's cautious approach to winding back payments to mortgage brokers, warning there are legitimate competition issues that are worth taking the time to work through.

Speaking two days after the government released the banking royal comission's final report, Dr Lowe   said bank culture needed to change from the top and questioned whether the profit levels of banks were sustainable in the long term.

He told the crowd of business and political leaders at the National Press Club in Sydney that their growth rates had "generated a sense of hubris

In one of his key recommendations, commissioner Kenneth Hayne found mortgage brokers commissions should be replaced by an up-front fee charged to consumers on the value of the home loan.

While Labor has pledged to implement the recommendation, Treasurer Josh Frydenberg has cautioned against embracing it in full, warning it could destroy the broking industry and give greater power to the big four banks.

Dr Lowe said the government was "right to be cautious about going the full way and making the borrower pay". "There are legitimate competition issues and I think it is worth taking the time to work through those competition issues," he said.

Labor has also vowed to fast-track a key finding to scrap "grandfathered" fees for financial advisers by implementing the recommendation a year earlier than the Morrison government if elected.

Dr Lowe said by global standards Australian banks had a higher return on equity at about 13 per cent, compared to 10 per cent for their peers.

"It is a good question to ask or contemplate why it is that the Australian banks can earn, on average, higher rates on return on equity than similar banks overseas," he said.

Dr Lowe said a more aggressive approach from regulators was required after the commission found they had been reluctant to pursue misconduct in the courts.

"Do the regulators need to punish bad behaviour?" said Dr Lowe. "The answer to that is yes. I think kind of a more aggressive approach by the Australian Securities and Investments Commission is called for. There needs to be accountability when things go wrong".

Overall, he said the royal commission's recommendations were balanced and contained much-needed reforms.

"It is not revolution, which we didn't need. We needed sensible, we needed pragmatic reform and that's what we've got," he said. "I really hope and expect that the banks learn the lessons."


Green policies are wrecking Australia

Viv Forbes, writing below, is a farmer and a geologist.  He seems a bit weak on economics however.  Most of what he says below is well said but he should have been more circumspect about the prospect of recycling abundant coastal water into the dry interior.  It is a proposal that seems commonsense and so has been rumbling on for decades but all the studies tell us it would be a big boondoggle. 

The cost of doing it would be large and the benefit small.  It would allow the growing of more crops and the raising of more cattle but most primary products have long been in worldwide glut.  As a farmer Viv should know that. Only the most efficient producers can make a buck selling primary products --- and even efficient farmers can go broke if they are not close to their markets. Transport is a large component of costs.

It was all shown unambiguously in the Ord experiment.  They could grow anything there and did but they could not sell it.  The Ord was reasonably close to the huge markets of Asia but Asians wanted to grow their own rice and other food, thank you very much.  And they're pretty good at growing their own food. Because of its near equatorial position, nearby Java grows two crops of rice every year. All that the Ord grows now for export is sandalwood -- no food

There is an existing market for products from inland Australia -- when drought allows -- but increasing the volume produced would undoubtedly decrease prices, which would be pretty self-defeating  and could send ALL the inland farmers broke.  A good use of taxpayer funds?  Australia certainly needs more dams for both flood control and water supply -- but only to serve nearby big cities

There is even a lot of scope for barrages.  They are simple and cheap and should not arouse much in the way of Greenie objections.  The barrage on the Fitzroy does a good job of providing the city of Rockhamption with potable water.  A barrage on the Brisbane river just upstream of the port could be very useful. 

It would be a better alternative to Brisbane's absurd and costly desalination plant.  From a Greenie viewpoint a desalination plant is part of the problem.  It uses heaps of electricity every time it is switched on.  A barrage just sits there

Water conservation peaked in Australia in 1972 – our last big dam was Wivenhoe in Queensland, built 35 years ago.

Elsewhere in Australia, water conservation virtually stopped when Don Dunstan halted the building of Chowilla Dam on the Murray in 1970 and Bob Brown's Greens halted the Franklin Dam in 1983 (and almost every other dam proposal since then).

The Darling River water management disaster shows that we now risk desperate water shortages because our population and water needs have more than doubled, and much of our stored water has been sold off or released to "the environment."

However, we regularly see floods of water being shed by the Great Dividing Range, most of it ending up in the Pacific Ocean, while to the west of that watershed there is severe drought.

Our ancestors had the prudence and the will to build great assets like the Tasmanian and Snowy hydro schemes, Lake Argyle, Fairbairn Dam, and the Perth to Kalgoorlie water pipeline.  What are we building for our children?

Politicians can pass laws or find money for games, stadiums, climate jamborees, study tours, gifts to foreigners, green energy toys, and useless giant batteries.  Canberra alone spends a billion dollars every day.

Our engineers know how to lay large pipelines over hundreds of miles to export natural gas and bore road and rail tunnels through mountains and under cities and harbors.

But we cannot find the funds or the courage to build a couple of dams on the rainy side of the Great Divide somewhere between the Ross River at Townsville and the Clarence River at Grafton and some pumps, tunnels and pipes to use and release it into the thirsty Darling River basin.

Someone is always cursing either droughts or floods.

We need to curse less and dam more.


PM Morrison defends Liberal inquiry chair

Scott Morrison has swatted away calls to sack the Liberal chairman of an economics committee accused of "highly unethical" behaviour. The prime minister dismissed the Labor demands as an attempt to "throw mud" at the man giving retirees a voice.

Liberal MP Tim Wilson has led a series of town-hall style meetings across Australia seeking feedback on Labor's plans to scrap cash payments for excess franking credits.

Unusually, there are no formal witnesses scheduled for the hearings, with members of the public instead given three minutes each to speak. It is also unusual for the committee to be investigating an opposition policy, rather than government legislation.

Hundreds of self-funded retirees have shared concerns about what the proposed changes might mean for their incomes.

Mr Wilson has been under fire for including a Liberal petition against the policy on a website promoting the committee's work and allowing his colleagues to hand out party membership forms at public hearings.

It has now been revealed Mr Wilson holds shares in a fund management firm leading the charge against Labor's changes and is related to its chairman. Mr Wilson has confirmed he sought testimony from the high-profile fund manager.

The Sydney Morning Herald reports that some of the public hearings were timed to coincide with an investor roadshow by the fund manager, so that its members could protest the policy.

Labor's Matt Thistlethwaite said Mr Wilson must resign. "He has a massive conflict of interest as he's a shareholder in the company that is leading the charge in undermining this policy," Mr Thistlethwaite told reporters in Sydney.

Shadow treasurer Chris Bowen argued the prime minister must intervene if Mr Wilson refused. "Tim Wilson has no choice but to resign and if he won't resign the prime minister should sack him," he said. "This is a clear and fundamental breach of convention, of understanding and, frankly, of standing orders."

Mr Morrison was quick to dismiss their comments. "The Labor Party aren't content with arrogantly dismissing thousands upon thousands, hundreds of thousands, of retirees around the country who they basically want to steal money from with higher taxes," he told reporters.

"Now they're going to throw mud at the person who's giving those retirees a voice."

The round of public hearings is believed to be costing taxpayers around $160,000.

"I think it's great that retirees all around the country have got a voice and they can bring forward their concerns in this forum," Mr Morrison said.

"That's what the parliament is supposed to be about, giving Australians a voice. Bill Shorten wants to shut them down, arrogantly dismiss them, and take their money."


 Posted by John J. Ray (M.A.; Ph.D.).    For a daily critique of Leftist activities,  see DISSECTING LEFTISM.  To keep up with attacks on free speech see Tongue Tied. Also, don't forget your daily roundup  of pro-environment but anti-Greenie  news and commentary at GREENIE WATCH .  Email me  here

1 comment:

Paul said...

Excellent commentary on Banks and lending, Mr Ray. So many people now seem to think that the debt they take on IS the money.