Banks now are a lot different than the bad old days, when heavy regulation made the practice of lending money a very one-sided affair.
Banks now are a lot different than the bad old days, when heavy regulation made the practice of lending money a very one-sided affair.
Thirty years ago, everyone had to bow and scrape to their bank manager.
These days, competition from other lenders has changed the landscape for many who need money.
Still, though, there are those who don’t like banks. Small business people still find loans hard to come by without putting their house on the line.
Even large businesses can be brought undone by head-office banking decisions to pull the plug on their exposure to a certain sector or a particular company.
There are several well-known business people in Western Australia who will privately outline how their banks undid them; unnecessarily, in their opinion.
While there are two sides to every story, the old conspiracy theorists’ line about how banks act when they pull the rug out from under a business still ring true today.
Often, it seems, their actions relate more to covering their own ineptitude or as a result of some internal management decision. Worse, sometimes they appear to benefit beyond the recovery of due debts.
Generally, they take the superior line that they are simply looking after their deposit makers’ money and their shareholders’ interests.
So it is with some cynicism in recent years that I watched some banks getting caught up in the type of speculative money making enterprises considered out of bounds for most of their customers.
At the upper end of the spectrum is the sub-prime disaster, a global economic catastrophe created solely by banks which sought to widen the exposure of loans to people who should never have been given money in the first place.
The same could be said for the various giant rip-offs and losses incurred by traders on behalf of banks.
On one hand, banks tell their clients to be prudent. On the other hand, they risk billions in speculative markets with individuals they seem to have little control of, all in the name of adding to their bottom lines.
At least in those examples the banks have lost, too.
The case of the collapse of Opes Prime is another issue.
Do banks check out how many fast cars are being bought by the people they are lending to? That ought to be a leading indicator of trouble.
ANZ has already taken a big hit from Opes Prime. Unlike the sub-prime disaster, they look more likely to have some security, but will cop plenty of bad PR as they seek to sell shares which margin borrowers think are theirs.
But there is something more. Opes Prime has rattled markets and hurt shares in numerous companies, to the detriment of many innocent shareholders.
I used to dismiss the conspiracy theorists’ views on banks. At least Australian banks were listed on the stock market and therefore, being an investor, you could hedge against views that they were only looking after themselves.
But lately the banks have been losers too, which makes you wonder who actually does win from all this speculative investment in financial engineering products.
Some winners might be cashed-up investors seeking prime Perth properties at fire-sale prices.
Some shareholders hit by Opes Prime’s collapse may well be unloading property in the near future to attempt to recover their assets, either by direct payment or through legal cases.
Oh and, as usual, the lawyers will win. Pity it’s hard to buy shares in their businesses.