With the final report of the Banking Royal Commission handed down, now is a good time to reflect on its consequences. Certainly, bankers have acted unscrupulously and deserve to be punished, potentially with criminal sanctions.
But one of the casualties of the commission’s report appears to be the concept of personal responsibility.
The concept of predatory lending can be misleading
Predatory-lending is somewhat of a misnomer.
In order to get a loan, you must first accept the terms and conditions.
Take for instance the case of Georgia Clark, who believes she was the victim of such a practice.
The Sydney Morning Herald went with the headline ‘I am amazed they approved me: CBA lashed for lending to the naïve’.
Basically, Ms Clark went to the bank when she was 19 and asked for a loan to finance a trip to Europe.
CBA promptly offered her a loan at 16.9% for $18,500.
She struggled to pay it back.
She was a ‘victim’ according to the report.
But how much of a victim was she really?
What is often lost in discussion of financial malpractice is the fact that those who receive bad loans are complicit in their own difficulties.
Ms Clark should not have taken this loan out, and to blame a bank for offering it is absurd.
Ms Clark was an adult capable of making her own decisions and to label her a victim is an insult to her agency.
Another similarly lost narrative is one which comes from the global financial crisis.
Banking Royal Commission: Don’t lose sight of personal responsibility
As with the Banking Royal Commission, any analysis of the global financial crisis must move from the macro to the micro.
Banks were deregulated allowing them to sell mortgage-backed securities which bundled up bad loans in an opaque manner.
But at the end of these mortgage-backed securities were people who took out loans they could not afford. At some point the macro collapses into the micro.
When critiquing banks, we frequently lose sight of the two-party nature of any loan.
Being naïve does not make you a ‘victim’ of the banks. The banks were simply offering the going market rate for a poorly devised scheme to holiday in Europe.
So yes, punish the bankers. But don’t sweep away the concept of personal responsibility in doing so.