Bob Brown (Tasmania, Australian Greens) Share this | Hansard source

Let me express at the outset the greatest disquiet about the process that is taking place here. These bills, the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008, the Financial Claims Scheme (ADIs) Levy Bill 2008 and the Financial Claims Scheme (General Insurers) Levy Bill 2008, are to guarantee deposits in banks, other financial institutions and insurance companies and to transfer that responsibility across to the taxpayers of Australia. Whatever other arguments we might put forward about the better management of such institutions in Australia compared to the United States, the legislation comes out of a real concern by the government that one or other of these institutions might fail, leaving depositors out of pocket and leading to a run on other institutions, with the inevitable consequences that flow from a situation not unlike that which we are seeing in the United States, where overnight yet another bank was mooted to be on the verge of failure. This whole process comes from the neo-liberal and conservative view which has prevailed not just in recent decades but right through the last century that small government is good government, that government should get out of the way and that financial institutions and big business in general should be able to run the market because the market knows best. I have heard that expressed in second reading speeches in this place just in the last month or so. This is the view that in a democratic system the interests of the majority of the people are best served by allowing those who are wealthiest to effectively run the financial system. It has been demonstrated yet again how wrong that is.

I accept Senator Coonan’s observation that regulation is better in this country than it is in other countries, and that includes some of the regulation brought in during the Howard government years. But the fact is that with this legislation before the parliament today we are seeing that it is not enough to guarantee that there will not be a bank, insurance company, or credit union failure in this country in a situation where the American system has gone belly up. All the assurances going right back through history that the market knows best are again being found to be patently wrong. We are now seeing the fix up, the ambulance, arrive in the form of this legislation before us and similar legislation in other countries around the world, simply because the culture of greed has threatened the wellbeing of millions of people and their deposits, not only in this country but right around the world.

It is quite extraordinary how successive parliaments, under great pressure I might add from sections of the media and vested interests, will not respond to the greater need of the public over those vested interests, which lobby so patently in this place and in parliaments elsewhere around the world. For those who missed it, I would point to John Kenneth Galbraith’s great book The Culture of Contentment, which is one of the many books of this great economist’s output over the last century—he recently died, bless him. I read this book in 1992, and it nails the failures of the democratic system to deal with greed, which has the inevitable outcome he was predicting and which we are now seeing unfold around the world. I would just take one quote from page 5 of this book, where John Kenneth Galbraith is referring to testimony before congress in the 1930s. He says:

Testifying before a Senate committee, the American Banker J.P. Morgan—

note the name—

warned, ‘If you destroy the leisure class, you destroy civilisation.’ Asked later by reporters to identify the leisure class, he said, ‘All those who can afford to hire a maid.’ For Morgan the threat from Washington was no casual concern: ‘The family of J. P. Morgan used to warn visitors against mentioning Roosevelt’s name in [his] august presence—

that is, Morgan’s august presence—

lest fury raise his blood pressure to the danger point.’

And we all know about Roosevelt’s New Deal to deal with the depression that was caused by people like Morgan back in the 1929-30 crash. Galbraith goes on to say:

It is now generally accepted that the Roosevelt revolution saved the traditional capitalist economic system in the United States and the well-being of those whom capitalism most favoured. By adaptation the anger and alienation were diminished, and economic life became more stable and secure. This would not have happened had those who, on the full maturity of time, were saved and most rewarded had their way. If in the election of 1932 they had been fully aware of what was to come, there might well have been no salvation. The energy, money, public concern and propaganda that would have been released in that year by a full knowledge of the impending changes could well have assured a Roosevelt defeat.

Galbraith is saying that whether you have the Democrats or the Republicans in power—read the Labor Party or the coalition in Australia—the democratic system is so nobbled by the big end of town and the culture of contentment that if it is accepted that rich people have a special wisdom to run the economic system then that will lead repeatedly to a failure of the financial system in the way that we are witnessing yet again in what many analysts are describing as the worst economic crisis since the Great Depression itself.

I was born in 1944 and I was very alert to the world in the 1950s. I remember very clearly the swaggies on the road around Australia in the early 1950s as a result of the Great Depression and then the war coming afterwards. We never want to see the country back in those circumstances. But here we are looking at the real possibility of massively increasing unemployment in this country, failure of small businesses and, as this legislation so obviously puts it, the potential failure of major financial institutions, unless government guarantees are given to them in 2008.

I want to comment about a couple of matters in the limited time we have here. I note at the outset that there are three speakers on this bill. Here are three of the most important pieces of financial regulatory legislation that we will ever see before this place in our tenure in this parliament. Here is one of the great financial crises that needs to be analysed and for which we need to understand the causes, to go to them and have them explained to the parliament and to remedy the failures of those who have caused it, and we have got only three speakers on this legislation. This legislation went through the lower house yesterday in one day, and there will be no Senate inquiry. There will be no going out to seek the opinions of economists, let alone people whose deposits are inherently—because the legislation makes it clear—potentially at risk, and that is all Australians in one way or another. And there will be no going out and getting the opinions of people who have already lost money—ask the superannuants—because of the financial crisis caused by the greed, self-invested contentment and the nobbling of democracy by those self-empowered in Wall Street who, by extension, have tens of thousands of lobbyists in Washington with prodigious lobbying power.

We have had the inanities from the Reaganites, from President Reagan, then Prime Minister Thatcher—much admired by former Prime Minister Howard—who wanted to put a brake on democracy, in the interests of people generally, in regulating the excesses of the rich. Instead of that, we have got a truncated debate here today and we are going to be giving a guarantee to the banks, but we are not going to have the government’s analysis of why there needs to be a $10.4 billion package added to this guarantee and an analysis of the root cause of the problem, because the big end of town will not want too much of an expose on that.

I have been looking though today’s Financial Review and to give it its credit, it has done quite a lot on exposing the obscene rake-off by executives who should know better and should have a greater social conscience in this country. Let me state this from the outset: whether or not you say they are important jobs that need good pay—and I am not going to quibble with that—I ask anybody in this chamber to explain how, in an age where the Prime Minister is on 300 and something thousand dollars a year and works very hard as the chief executive of this country, these bankers and other CEOs who are on multiples—and I am talking about 10 or 20 or 30 times the Prime Minister’s pay—justify the rake-off that they are getting. These screen jockeys have been so willing to up their own take-home pay to levels that simply cannot be justified.

We have Babcock & Brown’s chief, Phil Green, with remuneration of $22.1 million and a share price fall of 94.5 per cent. NAB’s John Stewart’s remuneration is $8.8 million and the share price has fallen 37.2 per cent. And when I say ‘share price fall’, we are looking at people losing 20 per cent—some say six, some say 10 and some say 20 per cent—of their superannuation or their investments from which they are making ends meet. These people are being hurt. Every time you look at a fall, there are people suffering economic hardship in our community in much greater numbers than the executives I am talking about. ANZ’s Mike Smith receives remuneration of $12 million and the share price has fallen 33.7 per cent as of yesterday. Macquarie’s Nicholas Moore’s remuneration is $19.2 million. How could you justify anybody in Australia talking $19.2 million out of the public pool, because that is what it is—this is everybody’s money and that is $19.2 million going to somebody whose institution has had a share price fall of 54.3 per cent? And so it goes on: CBA’s head gets $8.7 million; St George’s Paul Fegan gets $3.5 million; Westpac’s Gail Kelly gets $8.7 million.

I therefore put it to the Senate—and I am sorry to hear it being dismissed already by the coalition—that this is a very belated time, but the proper time, for some sort of curb to be put on these excesses. The Greens have spoken about it and I have spoken about it in this place repeatedly over the years, but it seems like you are actually attacking the institution of Australia by talking about curbing these obscene payouts. And now it is shown as being nothing of the sort. In a ‘fair go’ Australia, it is something that goes right against the fabric of this country and its sense of a fair go. These people cannot justify this executive rake-off no matter which way you look at it. You cannot justify it against any decent parameter that might be brought forward.

Prime Minister Rudd has now said that he is going to get APRA to do something. He has cut funding to APRA in his general slash of the Public Service because that is what the big end of town thought would be a good thing in the run to the last election. He is going to ask APRA now to come up with some sort of formula to regulate these CEO obscene payments, but not more than that. What he intends to do is then ask the international community to adopt whatever APRA comes up with and, if they do, then Australia will. This is a rerun of the Howard idea that, yes, we will respond to climate change but we will not do it until Baluchistan or, rather, Kazakhstan does. We will wait till everybody else does it.

So I can see here the Prime Minister has got a very neat mechanism for saying, ‘I am going to deal with these CEO payouts, but not now.’ Sure, we will shore up the banks, and you know what that does. It gives a guarantee to these banks which will enable the chief executives to ensure that they get a payout greater than if that guarantee did not exist. So it is actually going to feed into them being able to claim a bigger salary than they would otherwise get and they do not have to, any longer, provide the guarantee. Ipso facto, it means that they are not quite so constrained in the decisions they will make in the coming three years. So we provide the guarantee and they will be able to use that to argue to get a bigger salary than they otherwise would have gotten. No doubt the salaries are going down but they are going to remain totally out of whack with the value of a CEO as against another citizen. I am not ashamed to say that that means other citizens who are making bricks, who are policing our security, who are teaching in our schools and who are nursing in our hospitals. Why should these people be on less than 100th the take-home pay of the CEO? Justify that if you can; I cannot.

It is time that this obscenity was hauled in by a Prime Minister acting now. He can act to guarantee the banks; let him act on these CEO wages. That is why, on behalf of the Greens, I have an amendment here to cap these wages at $5 million or at 10 times the base wage of the Prime Minister, whichever is the lesser—I can tell you it is the second that is the lesser—as at least a defined measure here and now. If the bank, the insurance company or the financial institution is going to get this public guarantee—that means taxpayer backed-up guarantee—then let them quid pro quo take at least some rein in on the extraordinary wealth that they are unfairly draining out of the Australian financial system, and that means out of the pockets of fellow Australians in 2008.

We also read Geoff Winestock’s piece in today’s Financial Review that the Australian Prudential Regulation Authority has had to delay the updating of some of its rules for banks because of the extra workload in the financial crisis. Now listen to this:

The delay comes amid questions over why APRA’s expenditure fell and its staff ceiling was lowered in the federal budget in May.

David Rush, APRA’s general manager policy development, said in a speech in Sydney last month that APRA had identified the need for new “liquidity management requirements” for banks this year.

Months ago they identified the problem coming down the line but they could not do anything about it because their funds had been cut. By who? By Prime Minister Rudd, who sacked 3,000 public servants when he came in. They were not the top ones, mind you—the Howard public servants are still advising him—but out went other public servants. You cannot have a prudential authority dealing with the problems of this country if you have cut its funding by one, two, three or four per cent. The Minister for Finance and Deregulation, Lindsay Tanner, says if APRA required further resources they would of course receive them. The message to Mr Tanner is: they do require it. The Prime Minister wants them to look at executive salaries, for example. That will go on the backburner, I can tell you, unless they are given the wherewithal, and that applies to other authorities which are there in the interests of the average Australian in containing some of the excesses of the corporate sector. (Time expired)