Nobody loves banks, nor ever has. Why would you? Sure, banks lend money, but they expect you to pay back more than you borrowed. And when you entrust them with your hard-earned, they pay paltry interest and then clip your ticket every time you try to go near the stuff.
There's not much to be said in favour of banks, except that, without them, we wouldn't be allowed to have nice things. We might eventually own houses and cars, or be able to invest in new business ventures, but this would have to wait until the later part of our lives, when we'd accumulated every necessary cent.
Bank-bashing has been a feature of virtually every populist insurrection in the West for well over a century. The enemies of capitalism, right and left, have always argued banks need to be disciplined, prosecuted, brought to heel, or even by-passed altogether by some sort of "funny money" system.
Elements of this mindset are apparent in the current climate in Australia as we career towards a seemingly inevitable banking inquiry. The housing affordability crisis – which means banks are not performing their traditional "intermediation" function for a generation of young people in Sydney and Melbourne – has made things even worse for the banks. The strongest impetus for the most punitive form of inquiry is coming from within the "agrarian socialist" wing of the Nationals, where there is, as ever, a strong element of self-preservation.
Nevertheless, even with so many foes circling, it would be hard to argue the banks have a worse enemy than themselves. Where do you start? The allegations of misbehaviour range all the way from bastardry to outright lawlessness. They include rigging interest rates, using credit cards as a "debt trap," providing flawed financial advice to clients, avoiding proper liability under insurance claims, and even turning a blind eye to money laundering. The fines levied on banks for gouging and rorting their customers have tipped into the billions.
The banks have made some attempt to respond to their loss of social contract – for example, by scrapping some ATM fees – but it is a case of too little, too late. Throughout it all, as the banks' profits have well exceeded those of other sectors, their senior executives have continued to pay themselves exorbitant salaries and bonuses. Now they are using those profits to try to massage how the public views them, and to lawyer up ahead of the feared commission of inquiry.
The Herald has long supported a federal inquiry into the banking system, and we continue to do so. Prime Minister Malcolm Turnbull read the riot act to the banks in a notorious, and entirely justified, speech last year, yet opposes a full-scale inquiry. Unfortunately for him, he simply does not have the political capital to hold out indefinitely. As always in such matters, it is better to cave in now, rather than suffer even worse humiliation later.
By owning an inquiry, rather than having one presented to him by rebel MPs joining forces with Labor, Mr Turnbull can shape the terms of reference and determine the all-important issue of who will conduct it. Above all, by taking charge, he can guarantee the inquiry is not a bank-bashing exercise, but a serious attempt to improve the performance and accountability of this vital cog in our financial architecture.