Also, some 20% of readers vote ACT

Silly saps who believe that banks are gouging, ought to buy some common stock in the banks, to profit from the "gouging". Rather than standing on the side-lines bleating, 'cos they're victims of the gouging. Since when were banks meant to be social services, non-profit making enterprises, to assist the masses ?

Anyone recall 18 months ago, when oil was soaring to the stratosphere and beyond, and the bleeding hearts were exhorting government action to levy special super profit taxes on the oil companies. Where are those super profits now !

Whether banks are gouging or not has initiated some good discussions in a few threads on this site. I think what is more important has been the focus given to some subject areas like the apparent cross-subsiding of fixed with floating; residential with business; access to credit, for example see:

Smaller firms 'starved of credit'

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1057...

Then to consider how aggregated with the influence of bad debt provisioning on lending/debt pricing behaviour, this may well have a self-fulfilling effect we could do without - in what many are considering an unusually risky and volatile time. Which is why RBNZ have cautioned the banks to increase provisioning I guess, hmmm. Then, also subject areas like economic sovereignty and weaknesses in NZ monetary policy. In case of the latter, the analysis provided by the Westpac economists is useful:

http://www.interest.co.nz/ratesblog/index.php/2009/06/23/westpac-economi...

I think we can conclude it works as well on the upswing as it does on the down!

Notwithstanding your beliefs, conclusions about gouging, if you can spare 2 minutes NZMEA are running a slightly more indepth survey about how banks are treating their customers and it's linked from my name on this comment if you would like to take part. The survey will close on 25th June.

Cheers, Les.

If we didn't have srong profitable banks, we would probably be in a far worse position than the US is at the moment, with their failing banks, which would require bailouts. However you could also say that that that extra money that the banks have been making over the years, could have been invested in our economy, and made us a stronger and richer country.

>45% of readers say banks are profit gouging

Fact: 50% of the population have below average intelligence

Goodness Bernard,

Clearly this one expresso a week thing is getting to you.....

Dear Generations X and Y: leave ASAP

http://blogs.nzherald.co.nz/blog/show-me-money/2009/6/23/dear-generation...

"They will lend up to 100 per cent against the value of land and buildings, but are reluctant to lend to back the business ideas and entrepreneurial vigour of Generations X and Y."

Well said.

@Les .. I totally agree. I have to be careful what I say, since I work at a bank .. but if I were to highlight an area where I think banks could do better, it would be in the lending to small businesses, entrepreneurs, start-ups, and other productive or potentially productive enterprises in the community.

Sure banks see this as a higher risk area (than property), but there are ways and means of mitigating some of those risks. I think its a shame when the door is closed to some bright and talented individuals and companies with great ideas that would create employment and stimulate the economy.

Matt S - yep, but how should we expect banks to behave when NZ's 'three-strand economy' (primaries, tourism, PI) is supported by the 'subsidy that got away' to become the 'asset tax haven' it is? (See Bernard's article linked above and point on CGT/LVT.)

neil c - good question. One answer might be, I think, "It's irrelevant because the effect is aggregated into gross margin and that is declared, you know, just like bad debt provisions are declared so as to come up with suitable net margin results - even as instructed by RBNZ" (Hmmm.) Also good question on op. costs.

It'd be interesting to know more about these two aspects, particularly, how much debt/money retail banks can/do write (fractionate?) into existence for given levels of reserves? Or in your words Neil, "what volume of loans they originate for a given volume of funding?" It would be good to know, because the way things are generally described it sounds like they take X in, and X is all they have to lend out. Or is it one of those things we are best not to know, as per a letter I read in The Press, 30th May, entitled 'Banks racketeering', which I repeat below:

"Your article on banks alluded to the margin between deposits and loans being the banks' primary source of income (May 16). One does not have to be a genius to realise what sort of reserves a would need to be profitable upon those dynamics.

What was overlooked is the reason the banks make so much loot - and that is the wonder of fractional reserve banking couple with the miracle of compound interest, which will see most people pay twice the value of their home in order to buy it, after the bank has made most of the loan appear out of thin air.

This is a racket the Mafia would be proud of.

Few seem to now that banks commonly lend many times what they have in reserve, and that is how they literally make money.

Henry Ford said that if people truly understood banking there would be a revolution"

Seems like Rod Oram would be good mates with Henry Ford, all this talk of revolution and revolts, tut, tut.

So I think its time for a revolution - throw away the banks and lets do it ourselves. We want revolution? Here it is: http://www.guardian.co.uk/money/2009/apr/04/zopa-savings-account-borrowing

86 percent of respondents supported an inquiry into the financial sector in a survey conducted by the New Zealand Manufacturers and Exporters Association (NZMEA) over the last two weeks of June. This survey comes out on the heels of the Finance and Expenditure Select Committee's decision not to have an inquiry into bank's lending practices.

The survey also found that:

63% of respondents reported that their bank had increased the margins they paid on credit facilities;
57% of respondents reported that their bank had tightened covenants associated with their credit facilities;
55% of respondents reported that their bank had increased charges associated with their credit facilities;
27% of respondents reported that their bank had tried to increase their credit facility costs but maintained existing arrangements when they complained; and
46% of respondents reported that their bank had used the opportunity of any change of credit facilities to increase cross guarantees.

NZMEA Chief Executive John Walley says, "These results show clear and deep dissatisfaction with the banks; not universal but very strong. There is overwhelming support for a wide ranging inquiry into the financial sector and its impact on the real economy."

"The issue is far more complex than simply looking at the gap between the Official Cash Rate and retail interest rates. We have no control over credit volumes that fuel inflation when the domestic economy is having a party and constantly place unwarranted upward pressure on our exchange rate. This process is further compounded by New Zealand's asset tax haven."

"Part of this discussion should involve a debate on the role that Kiwibank might play in driving competition in the mainly foreign owned banking sector," says Mr. Walley.

"The attitude from the majority of the Select Committee seems to be that the Reserve Bank will look after interest margins, but the issues are much wider. Problems caused by monetary policy and tax imbalances lie at the very heart of the economic crisis and its solution."

"What we do as we come out of the crisis will determine the shape of the next growth cycle; either another debt driven asset bubble, or strong growth in the real economy, export returns and jobs. We should focus on how to stop the first and encourage the second even in the face of vested interests fighting for the status quo."

Taken from - 86% support inquiry into financial sector - survey, 2nd June 2009, here:

http://www.mea.org.nz/media/pressreleases.aspx