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Thursday, August 30, 2012
Banks exposed by gutsy consumer advocate
Vanguard September 2012 p. 3 Nick G.
Echoes of the US sub-prime mortgage scam were heard in claims made before the Senate Economics References Committee on August 8 2012.
Denise Brailey, (above), an advocate for banking and finance consumers, tabled documents exposing the role of banks in fraudulently making loans to persons unable to meet the repayment conditions.
She claimed that as many as 100,000 families were affected and were faced with “losing their homes, their cars, their livelihoods, and being in very dire circumstances”.
Bradley’s claims pull the rug out from under the banking industry’s claim to being a highly professional, client-centred, clean and honest industry.
She shows how an industry infamous for its annual record profit announcements has deliberately preyed upon the weakest and most vulnerable members of society “including older people, carers, people on parenting allowances and the aged pension.”She cited the case of a “woman in an aged-care facility and at the age of 98 she signed a document for a 30-year loan.She must have a good doctor!”
Low Doc and No Doc…or What’s Up, Doc?
The fraud revolves around what are known as low doc and no doc loans, the former targeting residential home-owners and the latter investors.
In both cases, applicants are required to do not much more than declare an income backed by minimal documentation.
Mortgage brokers typically then require the applicant to sign a three page document which promises an income stream backed by equity in the applicant’s property.
The broker then uses a “service calculator” supplied by the banks to misrepresent the income so that the applicants – most of them earning $40,000 to $50,000 per year - was “fudged towards $180,000”.The original three page document became an 11-page document containing the altered application.“The people would never see the rest of the document,” she said.
The banks provided mortgage commissions to the brokers rather than issuing the mortgages themselves, which would be cheaper, because they hoped to legally separate themselves from the actions of the brokers; however, the brokers were merely the big banks’ pawns, falsifying loan applications using software supplied by the banks.
Monopoly collusion, not competition
Brailey claimed that the banks acted in collusion.
“I have brought along with me a small bundle – I have 4,000 of these – of documents relating to every bank represented by the top banks…The four majors are in there.They are all responsible…”
She claimed that evidence existed of one bank having created a hybrid low doc loan that was then flagged to all the other banks so that “the product miraculously appeared on every lender’s books at the same time”.
Too powerful to be prosecuted
This was not the only matter that she had raised with the regulatory Australian Securities and Investments Commission (ASIC); all of her complaints to that body over a period of five years had been ignored, she said.
“ASIC will not enforce the law.It has decriminalised that which parliament deemed criminal activity.”
She described finding “utter fraud from the highest level of banking” including collusion between the banks.
They did it, she said, because they did it in America.She cited the phrase “too big to fail”.
A better phrase would be “too big to fear prosecution”.
Finally, when asked by Labor Senator Doug Cameron whether she agreed that those who win at capitalism “often possess less admirable characteristics…The ability to skip the law or to shape the law in their own favour, the willingness to take advantage of others, even the poor and to play unfair when necessary”, she replied “Yes, I do”.
Whether or not the Australian Government acts upon her call for a royal commission into banking will be one indication of the continuing power and arrogance of these fraudsters.