JOHN GREEN LLB
All of Tasmanian’s Credit Unions have now been demutualised after a long struggle.
Mutual organisations are cooperative societies, many of which are formed towards the end of the 19th century and during the course of the 20th century.
They provided a self help mechanism for ordinary people who were not multi millionaires to assist themselves.
Credit Unions are a form of mutual cooperative society in which the members, through the mechanism of the mutual organisation, lent money to themselves and borrowed money from themselves.
Because there were no shareholders or greedy CEO’s they were able to both offer a slightly higher rate of interest and lend money at a slightly lower rate than banks and other profit making organisations.
Also they normally charge lower fees and provide financial assistance to members who got into financial difficulty, at least by way of advice and time to pay.
With the rise of economic fundamentalism under Thatcher and Regean governments that spread to Australia, there’s been a consistent tendency to destroy mutual associations as the ruling elite is opposed to ordinary people organising themselves to be able to improve their conditions or assert their rights.
The advocates of that ruling elite have a proclaimed faith in the “free market”.
Experience shows that the only thing the free market does with certainty is make the rich richer and the poor poorer.
It’s major defect is it’s instability which causes a great deal of suffering and distress, as is shown by the Great Depression of 1890 and the even worse depression of 1930 and the current global financial crisis and a number of minor crises along the way, like the 1961 credit squeeze, the 1970’s stagflation and the 1990’s recession.
Experience shows that the free market should be strictly controlled by government regulation and there should be much greater government intervention in the economy including the ownership of many enterprises, so there’s some competition.
But the advocates of the free market with a religious fervour that would be admired by Ayatollah Khomeini refuse to believe that the market would ever be in any way imperfect.
In the financial sector which is the relevant one under discussion, there are four major banks and it’s quite obvious they don’t really compete with each other, because they offer similar interest rates to people who lend money to them, charge similar rates to people and borrow from them and charge similar fees.
Credit Unions provided some competition and were a great benefit to ordinary people.
Ayatollah Reidy, the former chairman of the MyState Credit Union, when he was chairman of the Connect Credit Union, tried to demutualise that and was defeated by a narrow margin. He then proceeded to combine MyState Credit Union with Connect Credit Union and now he’s succeeded in demutualising MyState Credit Union.
This followed the amalgamation of a large number of smaller credit unions in the last 20 years or so.
Now that MyState has been demutualised the former members will be worse off, because now the demutualised organisation has to pay lots of money for shareholders, CEO’s, Senior Management and Directors, which it didn’t have to pay before.
The lack of restraint of CEO’s in demanding ever greater salaries is well known.
The major mechanism used to demutualise MyState seems to have been to hire a telemarketer, using members’ money, to lobby members to vote for demutualisation on a promise that they’d get shares in the demutualised organisation, worth about $1,200.00.
Mr Reidy did not deny that at the meeting of members which led to the demutualisation.
Anecdotal evidence suggests that the telemarketing was targeted towards young members who had recently joined, although Reidy denied that at the meeting.
In my opinion it is unethical to use members’ money to persuade them to demutualise the organisation as the constitution of the organisation enshrines the principal of mutuality, especially so since the 240 page booklet did not, in the opinion of many people, in any way adequately put the case against demutualisation or expound or defend the principles upon which mutual organisations are based.
Of interest in this was the actions of the Mercury Newspaper.
The only media outlet which publicised the demutualisation was the Tim Cox talk back show on ABC radio.
The Mercury gave a little publicity in the back pages to a statement by Jeff Briscoe against demutualisation and failed to publish a long article which I sent to the Mercury and which was published in the Tasmanian Times and failed to publish articles by Bill Godfrey and lots of letters against demutualisation.
After the demutualisation is completed the Mercury gave a lot of publicity on the front page and then a small article on page 14 putting the arguments against demutualisation when it’s too late to have any effect.
If of course there’d been wide spread public debate on what is obviously a controversial matter, the demutualisation may have failed.
I’m not making any accusations against the Mercury, but the sequence of events is interesting.
There’s ample anecdotal evidence that the list of members of MyState was in disarray as people who hadn’t been members for years were given proxy forms and the booklet. People with more than one account received a number of booklets and a number of forms and could have voted multiple times, although apparently the people who opposed demutualisation were too principled to take advantage of it.
One feature of this is to emphasise the powerlessness of ordinary people in our plutocratic society where all of the wealth belongs to 5 or 10% of the population, half of whom live overseas.
If one had wanted to try to persuade about 120,000 plus members of MyState that they should oppose demutualisation, just by sending them a letter, the cost of postage and printing would have exceeded $70,000.00 or $80,000.00, well beyond the means of most people.
To challenge the legality of the demutualisation process would have cost tens of thousands of dollars, which ordinary people don’t have it to spare.
It’s because of the relative powerlessness of ordinary people that mutual organisations are formed, that’s why they’re called credit unions, they were ordinary people uniting to protect their economic interest.
It emphases the importance of trade unions where ordinary people unite to defend their economic interests, be they white collar workers or blue collar workers, wharfies or teachers or nurses. The only protection most people have against exploitation is a strong trade union movement and in practice only a strong trade union movement protects democracy and, of course, only a strong trade union movement consistently advocates the interests of ordinary people.
It’s probably one of the failings of the trade union movement that they never warmly embraced credit unions and other cooperatives, but that is history now, except that there’s a possibility that the Victorian Teachers Credit Union might move to Tasmania with the assistance of the Tasmanian Teachers Union, which will give an opportunity for people who believe in mutuality to invest their money in a credit union.
The history of demutualisations is a history of disaster.
AMP a mutual insurance company demutualised and would have become bankrupt if big business hadn’t decided it should be rescued.
Tasmania’s savings bank, which was a trustee bank and a form of a mutual bank, were forced into the Tasmania Bank by Robin Grey and appointed a CEO who was spectacularly unsuccessful and made them nearly bankrupt. They were taken over by the demutualised Colonial Mutual Insurance Company, which also got into financial trouble and was gobbled up by Commonwealth Bank of Australia.
CEO megalomania is often the disease which destroys demutualised organisations.
And so the story goes, bankruptcy and disaster seems to befall demutualised organisations.
If the new demutualised and combined financial organisation manages to survive, which is doubtful, it could become a takeover target for one of the four major banks.
Nearly all the smaller banks have been gobbled up. An example is the Westpac gobbled up St George, partly because Westpac was so unpopular it wanted to trade as St George and pretend St George wasn’t Westpac.
I’m not sure that strategy will fool many people for very long, but no doubt one of the big 4 would take over MyState if it was successful in offering any real competition.
The 4 major banks are notorious for lack of service.
Branches are closed, telephone lines are computerised. You ring up the toll free number and get a statement which says your call is valuable and then you wait half an hour before you get a menu and if you wait another half an hour and if you’re very lucky and extremely patient you might find a human being to talk to.
Of course that human being might be Mumbai or Outer Mongolia and know nothing, but such is the joy of being a customer of one of the 4 major banks.
And of course then there are fees for everything, including fees for questioning why they charge you so many fees and low interest rates for the money you lend to them and high interest rates when you borrow from them.
I get the impression the 4 major banks don’t really want retail customers, because they provide so little service and are so unfriendly in their practices.
As a lawyer, my major frustration is dealing with 2 of the major banks who have centralised their mortgage operations on the mainland, so they take days or weeks to do the simplest of things and having to deal with their computerised telephone systems.
Of course the other consolation is that B & E Limited (the former Bass and Equitable Building Society) is still more or less a mutual organisation and a more friendly one than the major banks.
It’s another place you can put your money without having to deal with the major banks.
Also the Bendigo Bank, while not a mutual, has some community conscience and is probably better to deal with than the major banks or the new extremely large financial institution created by the demutualisation of MyState.
John Green LLB