When Banks Go Bad Page 1

Contents Preface 3 1. Westpac a broken bank 6 2. Penalty fees 11 3. Errors and Mistakes 21

4. Small Business Scandal 28 5. Burger Gate 31 6. OGME v Westpac 42 7. Taking it to the board 53 Part 2 The Big Picture 8. Where does money come from? 61 9. Where did all the money go? 71 10. So Where to now? 78

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Preface Let us possess the public confidence so long only as, by a faithful discharge of the honourable trust reposed in us, we may show ourselves worthy of it. Whenever any one man may say with truth the bank has broken faith with us be then our ruin and ours only, the immediate consequence . Inscription on the early Bank of New South Wales bank notes (with thanks to Edna Carew) Note to Gail Kelly CEO Westpac. Dear Gail, Here stands one man and I say in truth the bank has broken faith with us Shall you work to restore our faith or shall ruin be the consequence? Your reaction to the claims in this book will tell. Yours Sincerely, Craig Harwood, On behalf of the hundreds of thousands of customers who believe Westpac has fail ed to act honestly and within the laws of Australia. When Banks Go Bad Page 3

This book is about the lies, corruption, greed and hubris that have dominated Au stralian and world banking systems in recent years. From simple things like excessive fees through to the arrogance of believing the mselves to be above the law, the attitude is evident throughout our banking system and it is t his attitude that is now leading to the collapse of many of the world s banks. Australia s banks are n ot immune to collapse and we may have already seen at least one of our banks go if it had not been for the support of the government using taxpayer money. Now that the Australian taxpayer is propping up these companies, we should start demanding that regulations are tightened and banks are made more accountable to the taxpay er. If not, why then should the taxpayer prop them up? No book about banking rip offs can really begin without establishing the corrupt ion that exists in our system of creating money, because it is that faulty system that cr eates the opportunity for the greedy to control us and to ensure that no matter how much y ou earn and how much you can buy you will never be able to purchase anything of real value. Many books have been written about our money system and why it is destined to fa il, many have predicted the crash of 2008 and the oncoming financial crisis. At the end of the book you will find resources where you can learn about the Fia t Money system and what may best be described as an out of control Fractional Reserve Ba nking system, the two structural factors that have guaranteed we will experience the g reatest financial pain since the great depression. What surprises me is the lack of will ingness by our political leaders to address these issues and the way in which politicians of al l parties have walked away from their responsibility to the Australian people leading us down t he path to financial ruin. As voters we should be clear. We should expect our politicians and regulators to uphold the law and ensure our banks are operating honestly and fairly, this is simply not h appening. Banks have become untouchable, able to sit above the law in Australia. Politicians and regulators will continue to refuse to act until the pressure fro m the public becomes unbearable. Bankers will continue to get away with as much as they think they can until the pressure builds to an extent that they are forced to stop. It is this cycle of greed and remorse that we see happening continuously in our economic cycles, creating boom

s and then recession as greed builds a house of cards destined to collapse. It is within this flawed system that our banking practices and in particular Wes tpac s practices, some of which are detailed in this book, have developed, however abus ing customer trust and operating outside the law are not excusable just because the system lets you get away with it and ultimately the public will want to see those responsibl e pay the price. When Banks Go Bad Page 4

What is contained in this book should make you angry, it should also serve as a wake up call. In order to survive and prosper over the coming years you are going to need to e ducate yourself about money. You may need to challenge many of the things that you beli eve were right and look for new ways of securing a future for yourself and your family. This book is just a starting point, once you understand where you at this point of time its so much easier to decide where you want to be and how to get there. Now I must make this clear. I am not making any specific accusations of Illegal activities by Westpac, their staff or Directors. I am not seeking to harm the reputation of the bank, its employees or directors in any way. I am not offering any financial advice. To do so would land me in court and see this book banned. What I seek to do is p resent the facts as they are known and let you make the decisions Do you believe the action s were legal or morally correct? Read on and make your own decisions. When Banks Go Bad Page 5

"The whole profit of the issuance of money has provided the capital of the great banking business as it exists today. Starting with nothing whatever of their own, they have got the whole world into their debt irredeemably, by a trick. This money comes into existence every time the banks 'lend' and disappears every time the debt is repaid to them. So that if industry tries to repay, the money of the nation disappears. This is what makes prosperity so 'dangerous' as it destroys money just when it is most needed and precipitates a slump. There is nothing left now for us but to get ever deeper and deeper into debt to the banking system in order to provide the increasing amounts of money the nation requires for its expansion and growth. An honest money system is the only alternative." -Frederick Soddy, Nobel Prize Winner Chapter 1. In the 1980 s Westpac was Australia s success story, riding high on the successes of the boom, Westpac was going to be Australia s bank on the world stage. By 1992 Westpac was a broken bank, facing bankruptcy. The proud history of the B ank of New South Wales had been destroyed by executive greed and a lack of control by d irectors. There were losses of Billions of Dollars, the share price dropped to the mid two dollar level, the corrupt and illegal activities of the bank were exposed along with the infam ous Westpac letters and their efforts to silence former staff members, politicians and group s of customers duped in the foreign loans scandals. Within a few months seven directors were gone and the bank had to go to the mark et to plead for capital to continue operating. Several great books detailing this time are Westpac The Bank that Broke the Bank b y Edna Carew (Doubleday) and Bankers and Bastards by Paul McLean (Hudson Publishing) The bank just survived and went on to rebuild itself with an aggressive business model concentrating on the domestic market and gaining growth through its own network and through acquisitions, to the point just 16 years later, when it was able to take over St George Bank to become Australia s largest bank. The recovery was achieved by bringing in an experienced American banker Bob Joss and establishing many of the practices that today link the American and Australian b anking When Banks Go Bad Page 6

industries. With Joss leading the way at Westpac our other banks kept close watc h taking on practices that worked well for Westpac. So the current banking model in Australia developed with Westpac recovering from near dead and the others adopting many of the tactics and practices that proved succe ssful for Westpac and other banks around the world. The recovery has been extraordinary however were the lessons learned? You be the judge. One feature of the management model that has lead to this recovery is incentivis ing executives and branch based staff based on short term performance goals. Executives were required to make profit and performance targets, consisting of h uge bonuses, were given when they reached these profits. In order for these targets to be ach ieved it was going to be necessary to incentivise all front line staff. Branch staff were edu cated in sales techniques and turned from customer service personnel into sales staff with targ ets for selling credit cards and loans. Branch managers became business managers and millions wa s spent on developing sales and profit reporting systems that could be used to determine the contribution to profit of individual sales staff. To be successful in this process it was going to be necessary to redefine their entire purpose, Debt became a new product that could be manufactured cheaply and sold to custome rs at every opportunity. Of course the average consumer doesn t want to buy debt, so marketing campaigns concentrated on the things that you could get with this debt, the new house, the holiday, the Plasma TV, the computers, cars, Jet ski s, the list was endless. It could have sto pped there had someone not thought of selling you your own future. What you really needed w as investments for the future so that you can have a passive income, retire early a nd never need to work again. Anyone with cash in the bank or equity in their house became a potential target for the banks financial advisors . These top flight sales people would earn significant incomes f or themselves but even greater windfall for the bank. In house financial planners could show you how to use the equity in your home to create more debt and invest in managed funds. The financial advisor could show you how to leverage investments into the stock market, whilst buying a few negatively geare

d investment properties as well. Westpac wasn t the only bank playing this game but they were incredibly good at it , they had to be. Remember, they were coming from being a basket case, they had to sell mor e debt and extract more profit from that sale than their competitors to regain their positi on. The need to outsell and out profit their competitors, lead to some creative deci sions on extracting profit from their customers. When Banks Go Bad Page 7

In order to gain sales they had to be competitive on price, that is interest rat e, they also found that if they would lend a customer more it had a twofold effect 1. They would be selling more debt to the customer (more sales) and 2. By offering the customer a higher loan amount they could attract more custome rs Because the sales and marketing process was all about selling the customer on wh at they would be using the debt for example buying a new home, a holiday or car etc. The customer feels like the bank is giving them more. Phrases like, with your income you don t h ave to settle for a small home, we can lend you XXX dollars that will buy you a bigger home and you can afford to have a pool and you could buy a new car and wrap it all into a home equity loan became common. The ability to create more product (debt) at will with almost no production cost was a dream come true. It did present however a small accounting issue. Australian banks are required to keep a proportion of their assets (the debt they sell to consumers is their main asset) with the reserve bank. Since banks manufacture debt not cash, the cash to be deposited wi th the reserve bank must come from borrowings or from raising capital. There was another answer that could greatly increase the flow of money yet not r equire the capital to support it. If the loans that had been made were bundled up and sold off for a share of the interest component the asset (debt) could be moved off the balance sheet. It was even possible to create new entities to hold and trade these parcels of debt all off the balance sheet and away from the eyes of the regulators. Thus creativity meant there was no limit to the amount of debt that could be cre ated. The bank did not actually need to have the money in the vault to lend it out again, it could just create an entry in the computer and presto the funds were available for you to b uy whatever you wanted. This was the new style of banking and Westpac was good at it. Of course this easy supply of credit does amazing things for consumers, we can b uy almost anything with 2 years interest free, new products are created for consumers flus h with debt, the economy booms and anyone who wants to buy a home or investment property can. The old problem of having to save 20% deposit for a house is taken care of with mortgage insurance so now you can borrow 100% of the house value, but wait there s more why

not throw in the legal costs and stamp duty as well and you can borrow 105% of the p urchase price. Property is always going to go up in value, isn t it? So soon your house is going to be worth more. Brilliant! Back just a few years ago a young married couple could only borrow from the bank to buy a house if they could prove their income was enough to pay the mortgage. This coul d be calculated using about 30% of the couple s income (discounting the women s income by 50% When Banks Go Bad Page 8

in case she became pregnant). In such a short time we went from this incredibly conservative approach to the other extreme. The Low Doc and then the No Doc loan meant that a nyone could qualify. Westpac even teamed up with real estate sales people who spruiked the new econom ic marvel real estate goes up in value 10% per year, so you can buy this investment propert y now and in two years refinance and buy another one, then in another two years refinance both buy another two properties, just keep doing that and in no time you will be truly we althy . The new economic miracle meant that a property marketer could add thirty thousan d dollars to the price of a property and the bank would still lend on it, it was easy mone y for the property marketer and even easier money for the bank. No one had to be left behind, I ve even seen a bank sell credit cards to bankrupts , the push for sales had few limits. While Westpac was really good at this, the great United States of America was ev en better. With an underclass of poor and migrants much bigger than in Australia they were keen to make sure that everybody was able to share in this new found method of creating profits. This debt frenzy was never going to last at some point the bubble gets so big th at it bursts, we hear the phrase now of the housing bubble and somehow we are supposed to believe t hat the world financial crisis was caused by a bunch of low doc loans given to poor people in America that could not afford them. More enlightened observers however point to the dramatic increase in debt. Debt manufactured at little cost and flogged to the public in order to gain bonuses, profits and share deals. Caught up in trying to achieve their monthly targets, those people flogging you the debt by the bucket load couldn t see the big picture, they couldn t see that liv ing the dream was going to be come a nightmare for lots of people. When Banks Go Bad Page 9

Source: Prof Steven Keen 2008. The graph above shows Australia duct, it is the dollar value of how much old was the only one in Australia, then GDP tively as a country it is how much has been s debt to GDP ratio. GDP is the Gross Domestic Pro is produced in Australia. Imagine if your househ would be the total income into your house. Effec borrowed compared to the country s income. The two

previous peaks were just before Australia s two depressions 1890 s and 1930 s. To give you some perspective on this the two small drops in the graph in the 1970 s and the ea rly 1990 s show our last two recessions as the debt pressure from an overheated economy was released. The debt pressure now makes these recessions look like child s play. Now to be fair not all economists agree with Prof Keen that debt is a major prob lem (but many more are now starting to consider his point of view seriously) and time wil l tell wether the Australian public can ever actually pay for the success of our banks selling strategies. If you are interested in this area there s lots of great reading on the web. A gre at place to start is Steven Keens blog http://www.debtdeflation.com/blogs/ and his book. http://www.debunkingeconomics.com/ Having now established how this push for selling debt and creating maximum profi t from each account came about, let s look at some of the unfair and illegal practices th at were created in this rush for profits, how you have been ripped off by your bank and most importantly what you can do about getting your money back. Chapter 2 Penalty Fees. When Banks Go Bad Page 10

Generally consumers see interest rates as the cost of the money they are borrowi ng to have all those great things that were on offer. With the need to gain the maximum market share and increase the sales of debt th e banks wanted to keep interest rates as low as possible to encourage people to borrow y et at the same time they needed to get as much profit as possible out of every customer . One way to do this is to create fees and charges that are not really seen as par t of the cost. What was a great idea to gain a little bit extra soon became a huge source of in come for the banks. New fees and charges were created with lots of different names for lots of diffe rent things, making it hard to compare the banks products with each other, the game became on e of trying to appear to have the cheapest loans for the consumer while getting the most pro fit out of them with back door fees and charges. At the same time fees on deposit accounts meant that most of the money the bank borrows from customers costs them nothing. The fees appeared in contracts or the terms and conditions booklets that come wi th your credit cards, loans or accounts but were not easily calculated or added into the cost of the product. The reserve bank only started keeping data on fees and charges in 1997, partly i n response to consumer complaints, by then the banks had already been able to create fees wort h over 4 Billion Dollars (that s four thousand million dollars) This strategy was a massive success for the banks. Income from fees for Australi an banks was over 10.5 Billion Dollars in 2007-it s not much if you say it quickly how abou t Ten and Half Thousand Million Dollars, or write it out with all its zeros $10,500,00 0,000. You can also look at it as about $525.00 per year for every man women and child in Australia (including babies in nappies) your going to need the baby bonus just to cover ba nk fees. When Banks Go Bad Page 11

Source: Reserve Bank of Australia Some of these fees appear to be legal and some are not. Some fees the banks are quite within their rights to charge and if you agreed to the terms and conditions then you ha ve to pay them however, the big issue is that in their excitement the banks couldn t stop themsel ves and they decided to create fees that weren t exactly legal. This issue has become a big one and it could be that Australian banks owe their customers refunds of fees that would amount to many Hundreds of Millions of Dollars. So what makes a fee legal or illegal? This is a challenge as no cases have actually made it to court to get a definite ruling. The banks are settling claims outside court to avoid a decision going against them. If a precedent was set in court then the banks would have little choice but to refund all the i llegal fees charged for the last 6 years, which would be devastating for them. Now the banks have known this for quite a while and they have just kept it quiet . When it was revealed in 2004 Rich report that many of the Penalty Fees charged by banks were probably illegal it did not stop them, in fact Westpac lead the charge to increa se the fees even further. One of the greatest disappointments is that the regulators are all unwilling to do the job that they are entrusted with. The Ombudsman, ASIC, the ACCC and APRA are simply refusing to investigate and ru n a test case. Our prime minister can say that we have one of the best regulated ban king industries in the world, but how can this be true when the regulators simply ref use to act on clear breaches of the regulations? The basis of the claim that these fees are illegal stems from the thorough inves tigation of the issue carried out by Nicole Rich in 2004 (the rich report) and you can download a copy of that report from the resource page on our web site. When Banks Go Bad Page 12

It was found that under contract law some of these fees could amount to penaltie s. Under contract law penalties can only be used to recover the actual losses incurred wh en someone breaches the contract. The true cost to the bank of you breaching your contract and paying your credit card bill a few days late is a couple of cents at the most and in an y case you will be charged additional interest that will more than cover any losses. As I said none of these cases have actually made it to court as yet, if you comp lain you will have a good chance of your bank refunding your money, if they don t refund it you need to take the next step of the legal process by lodging a claim against the bank in t he relevant small claims tribunal in your state. This will almost certainly result in the ba nk refunding your money. As far as we can tell every claim has been settled by the banks in this matter, they have not defended a single case. One interesting case is Adam Schwab Vs Citibank. Although Citibank had repaid Mr Schawb the forty dollars he was claiming plus costs of $135.00 prior to the hearing the tribunal made a point of issuing a decision that found: The late fee was a Penalty and Unenforceable and That the term in the contract that imposed the fee was unfair. At last there was a ruling from the legal system that these fees are unenforceab le and that the banks terms and conditions in their customer contract breach the Fair Trading Ac t. Tribunal rulings do not set a precedent for higher courts however if you chase your claim in small claims tribunal it will definitely be used as a guide. You would think with that the regulators would have to act, unfortunately they a re still failing to do their jobs. ASIC, The Ombudsman, ACCC and APRA are all refusing to take on the banks. Our banks are able to act outside the law and our regulators sit on their hands and do nothing. Compare this with the example in England. Consumer action in the U.K. on this is sue was stronger than here, the reality is Australians are too easy going and we will st and by while we are being robbed and do nothing about it. In 2005 British consumers revolted aga inst the banks and started taking the banks to court to claim their money back. It became bigger and bigger, with the banks settling out of court in thousands of cases, so that ther

e was no binding decision against them. The banks handed back over 100 Million pounds in one 12 m onth period alone. It became such a big issue that the UK s Office of Fair Trading eventually had to act. They intervened and set the maximum credit card late fee at 12 Pounds and launched a case against the banks on the other fees. The result was a mixed ruling but the courts were c lear that the fees were unfair. There is now a process going on to set fair fees. This will al low the banks to recover true costs without ripping off consumers. When Banks Go Bad Page 13

It is clear that in Australia our regulators will not take the first step. The A CCC, ASIC and APRA have completely failed in their duty, our banks are not well regulated and the regulators are going to leave it to you to sort the law out for yourself. The ruling from the Victorian Civil and Administrative Tribunal put the director s on notice, they are most probably breaking a number of laws including sections of the corpo rations act and federal laws punishable with jail terms. But hey, do they care? It s worth $10 .5 Billion to them. This is my personal opinion, but I expect that if a person robs a bank and they go to jail, as they should, we should also expect that when a bank executive robs the customers the bank executive should be charged and jailed as well What do you think? For 18 months I have been running a free service assisting people with the infor mation they need to recover these fees. On the following pages you ll find all you need in ter ms of draft letters etc. to claim your fees back. This is your money, you are entitled to it , claim it back. Start with the letters to your bank, be polite and please remember when writing or talking to bank staff, it s not their fault, they didn t make these decisions and they probably don t agree with it either. The fault lies clearly with senior executives and the board. If you don t get satisfaction change banks and lodge a claim with the small claims tribunal in your state. We have been assisting people reclaim thousands of dollars of fees from banks, b uilding societies, finance companies and credit card companies. It only takes a small am ount of work to get it underway, so tonight have a look through your bank and credit card sta tements. You could be surprised just how much has been taken out of your account that you are entitled to have back. Fees you should contest Inward cheque dishonour fee -Probably Illegal Most banks have cut it out but consumers and particularly small businesses need to be aware that these fees are probably not legal and you can request a refund for fees tak en from your account up to 6 years ago. Over-limit fee -Unenforceable

This fee is probably unenforceable and you should challenge this. Banks have the ability to stop you going over your limit by rejecting the transaction but allow it so they can pick up the fee. They are should only charge a fee to recover their costs (which they are ge tting in interest anyway) When Banks Go Bad Page 14

Late payment fee -Unenforceable Again this is unenforceable and should not be charged. Claim the fee back from y our credit card provider or bank. Honour / Dishonour Fees -Unenforceable Again these fees are unenforceable and should not be charged. It has been the ba nks decision whether to honour or dishonour a transaction and any fee should only be to recov er costs. Claim the fee back. "Late" payment fee for being early -Unenforceable This is a tricky one, you are going to be away when your credit card statement c omes so you pay it early before you leave. However if you pay it before the billing cycle yo u will have two payments in one cycle and nothing in the next, so they charge you. As with t he late payment fee they are only allowed to cost recover in this case no cost to them. Request that the fee be returned to your account. Fees they can Charge Discharge fee Lenders charge a fee for handling all the paperwork when the loan is paid out. U sually these can not be contested unless they have been raised significantly during the perio d of your loan. Annual mortgage service fee Again the fee is legal and you should be aware of how much it is before you sign the documents generally unless an increasing fee is included within the contract ter ms it should not be increased during the life of the loan. Foreign currency conversion fee The fee has increased by around 150% over the last 5 years even though costs hav e probably gone down, still there is nothing illegal about the fee. Annual credit card service fee Be careful when selecting a credit card and look at the fees. Often these Cards are loaded with extras that appear to be good value but come with fees attached. Decide if you really need those extras or are you better off with a basic card. Overseas ATM charges As with charges to use other banks ATM s here, fees are legal, but you should plan

ahead when travelling and know what fees your going to pay before leaving. When Banks Go Bad Page 15

Early termination fee These fees are generally found in Mortgage contracts ( but sometimes on fixed le ngth loan agreements such as Car loans / leases as well) and will specify that if the loan is paid out early or within a set time the borrower will pay a penalty. Provided they are re asonable and are not set up specifically to trap a borrower these fees are usually legal. You should look at these fees when taking out a mortgage. What would happen if your circumstances c hange? In the case of fixed rate mortgages ensure that you are willing to be committed to that interest rate for the amount of time specified in the contract. So dig out those statements and join the thousands of other people claiming thei r money back-it s yours -you deserve to have it back. Update: We have had a major victory and the banks have reduced or in some cases eliminat ed unfair penalty fees. However you are entitled to take action to recover unfair fees cha rged over the last 6 years. In many cases it will be well worth your time going back over your statements and taking the banks on with your claim. The bank may initially deny your claim but over and over we see that if you take your claim to the small claims tribunal in our state then they settle prior to the case being heard. They simply don t want another ruling agains t them. When Banks Go Bad Page 16

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Penalty fees charged by your Bank, Credit Union or Building Society or other ser vice providers may be illegal and should not be charged. You can use this template to draft a complaint to the bank or company charging t he penalty Just fill in the sections in blue then when you finished filling in the sections change all the text to black and delete this section before printing and sending. Don t forget to keep a copy yourself and follow up if you have not received an ans wer in 21 days. [Insert your contact address] [Insert Today s Date] [Insert Name of your Financial Institution] [Insert Address of your Financial Institution] Dear Sir/Madam Your Name Account Number: [BSB and Account No or Credit Card Account No] Default fees charged to the above account I have been charged a number of default fees in relation to my account with [Ins ert Name of your Financial Institution]. The total amount of the default fees charged to my account between [INSERT Date of First Fee] and [INSERT Date of Last Fee] is $[Insert Tot al Amount of the Fees you are challenging]. When Banks Go Bad Page 18

The default fees were Date Fee Description Amount $ [list the fees and the dates you were charged them on your statement eg periodic payment and direct debit dishonour fees; cheque dishonour fees; overdrawn account honour fees; deposited (inward) cheque dishonour fees; credit card late payment fees; credit card overthelimit fees and the date of each charge]. These fees are excessive and I therefore write to make a formal complaint about the charging of these fees. I ask that you repay the entire amount of these fees to my account in resolution of my complaint. My complaint and request for repayment is based on the following grounds. First, the fees are out of all proportion and unconscionable in comparison with the loss suffered by you in processing my defaults. The fees you charged me were between $[Insert amount of lowest fee] and $[Insert amount of highest fee]. I do not believe that your costs in dealing with my defaults were even close to these amounts. However, I am willing to consider any evidence you can provide me to the contrary. Secondly, there is a clear difference in bargaining power between [Insert name o f your Financial Institution] and me as an individual consumer. As you would be aware, I had no opportunity to negotiate the terms of my account contract with you and, in any c ase, would have no ability to change any of the terms imposing fees and charges. In these circumstances, it would be unconscionable for you to enforce the fees. Given the above, the default fees you have charged to my account are penalties , in accordance with the well-established legal principle set out in cases such as Du nlop Pneumatic Tyre Co Ltd and O Dea v Allstates Leasing System (WA) Pty Ltd. This make s them void, meaning they could not be enforced against me in court. As they are v oid and unenforceable, they should not have been charged to my account and should be rep aid. The issue of Penalty Fees has been tested in the Victorian Civil and Administrat ive Tribunal where Credit card late fees were found to be unenforceable at law and the terms imposing such fees to be unfair under the fair trading act 1999. A copy of the VCAT decis ion is attached. Further, it is also possible that by enforcing the terms of my account contract

imposing these excessive fees on my account, aging in unconscionable conduct within Act 1974, particularly because of e fact that the terms imposing these fees your legitimate interests. When Banks Go Bad Page 19

[Insert name of your Financial Institution] is eng the meaning of section 51AB of the Trade Practices my lack of bargaining power relative to you and th are not reasonably necessary for the protection of

Accordingly, please refund the total amount of these fees to my account, being $ [Insert Total Amount of the Fees you are challenging]. I look forward to receiving your response within 21 days of the date of this let ter. If I do not hear from you, I may take further action to recover the amount of these fees wit hout further notice to you. Yours sincerely [Sign your name here] [Insert your Typed Name here] This form is supplied courtesy of www.WhenBanksGoBad.com This form was modified from the original supplied by Choice, and The Consumer Ac tion Law Centre, Victoria. When Banks Go Bad Page 20

"The era of trusting the banks has long gone." Justice Clarke, New South Wales Supreme Court. Chapter 3 Mortgage Errors

Another Disclaimer: I m not suggesting that Australian banks are intentionally allowing errors or mistake s to occur in mortgage calculations. If they were intentionally being allowed to o ccur they wouldn t be errors or mistakes would they? and that could be fraud. I m not suggesting that there is a reason that banks put in writing that you shoul d check your statements for errors. I m not suggesting that commercial laws accepting that erro rs and omissions occur could be used as a convenient cover for ripping off consumers. I wouldn t suggest those sorts of things it could land me in court. Could calculation errors and mistakes be another way of increasing profits?

Obviously it would be naive to think that the banks never make mistakes. If you think your statements must be error free just because you are dealing with a bank, you coul dn't be more wrong. We are prompted to ask though why almost all the errors are in the banks favour? You would think that genuine errors over time and over a number of accounts woul d end up being about 50% in the banks favour and 50% in the customers favour. Us Australian s are very easy going lot we can live with occasional errors, we wou ld be annoyed that these errors were there but as long as they were small and it was r oughly 50 / 50 we could all just blame computers and get on with working our buts off to pay th e mortgage so one day we could retire and do what we really wanted to do with our lives. But what if I told you that the occasional errors are something more than occasi onal, like over time 98% of mortgages have errors in them? What if I told you that 84% of errors favour the bank that s 84% for them and 16% for you. Hmm interesting. Over the last five years we have seen tens of thousands of refunds given back to customers for mistakes made by the banks. You normally don t hear a lot about it because commo n practice is that as part of the settlement customers are required to not disclos e the details. When Banks Go Bad Page 21

An often quoted survey in a Sydney newspaper contained some staggering statistic s. This study looked at 200 monthly mortgage statements across 18 different lenders. The key findings of the study were .. 54% of individual statements contained errors 84% of errors favoured the banks The average monthly error was an amazing $242 That is just monthly errors, how much could that be costing you a year, let alon e over the life of your mortgage? It's frightening isn't it? You could be in the exact same situ ation of as Millions of other Australians and have lost thousands and thousands of dollars t o banking errors and not even know it. So if this is true and we know that banks have hundreds of millions of dollars t o spend on the best computer systems in the world, why wouldn t they just fix this problem? Well remember our banks that were short of profits in the early 1990 s and remembe r how close Westpac was to being bankrupt? Remember how to gain more sales they had to be competitive and look like they had low interest rates but somehow they had to ex tract more profit from each sale? Have a look at what a few little mistakes or errors could do for a bank s profits. Let just work through the numbers Annual statements: 12 Statements with errors: 6 (12 x 54%) Mistakes in lenders favour: 84% Number of statements with errors in banks favour: 5 (6 x 84%) Average monthly statement error: $242 Yearly error in banks favour $242 x 5 = $1,210.00 Not bad but as your maths teacher could have told you, its all about leverage. I t costs no more to make mistakes in all your mortgages than it does in one. So if a bank wa s holding say 1 million mortgages the extra profit would be $1210.00 x 1,000,000 = $1,210,000,000 That s right a few errors here and there could add an extra 1.2 Billion dollars to the profit for the year each year. And remember they are also collecting additional interest on that amount as well so that gives them even more and its straight profit. When Banks Go Bad Page 22

Now if senior executive bonuses are related to profit or share price there would n t be a great incentive to track down these nasty little errors would there? Those figures are just too big to mean much to the average person going to work everyday to pay off their mortgage. But taking those figures again lets look at what it can mean to the average person. Annual statements: 12 Statements with errors: 6 (12 x 54%) Mistakes in lenders favour: 84% Number of statements with errors in banks favour: 5 (6 x 84%) Average monthly statement error: $242 Yearly error in banks favour $242 x 5 = $1,210.00 On a twenty year Mortgage $1210.00 x 20 = $24,410.00 But it gets even worse remember you re paying interest on the outstanding amount i ncluding the errors . You are also paying interest on the interest as the errors and interest compound. To make the calculations a bit easier lets say the error was only averaged $100. 00 a month. Monthly amount of errors: $100 Life of Loan: 20Years Interest Rate:7.5% Total amount of errors: $24,100 Total amount of additional Interest: 31,719.15 Total Extra you pay $55,819.15 Plus it will add years to your repayments. Have you ever wondered why your mortgage seems to go down so slowly? So where do these errors happen and how do the lenders manage to get away with i t? Well they aren t always that easy to find by just looking at your statement or goi ng over it with a calculator to see if it ads up, but below you will find a list of mistake s found in When Banks Go Bad Page 23

monthly statements. The following is an overview of the most common ways that le nders can overcharge you on your loan. Mistakes by financiers have been discovered or are likely in the following areas;

The Original Calculation of your Repayment amount is incorrect. e.g. a client s repayments were $19.00 per month more than it should have been for 22 years (if not discovered this could have resulted in the customer paying an extra $15, 800 based on an interest rate of 9% p.a.). The Incorrect Interest Rate is Applied. e.g. 7.75% used instead of 7.25% (if not discovered this would have resulted in the customer paying an extra $9,760 in additional interest). The Interest was charged at least one day earlier than it should be charged. This could cost the customer thousands of dollars in extra interest. The Interest Charge was calculated on an Incorrect Balance. E.g. the loan balance used was $110,000 but the loan balance should have been $1 01,000; this could cost the customer an extra $20,000 + Interest Rate Changes: The New Lower Rate was applied one month late; the New Higher Rate was applied one month early. This could cost the customer extra thousands of dollars in additional interest a nd must be watched during this time of continually changing interest rates. A Payment was Credited at least one day late. This would cost the customer extra thousands of dollars in additional interest o ver the life of a loan. Bank Charges are too high or include extra charges. Customers have discovered extra fees of up to several thousand dollars incorrect ly charged to their accounts. Leap Year: 365 days is used by the financier instead of 366 days when calculating interest. The financiers reap an additional $80 million + from accounts every four years and then lend it back to customers. Incorrect Dates are used when calculating interest. The Interest Debit calculated on the daily balance one or two days prior to the da te appearing on the statement, i.e. the financier charges additional interest, or the Interest Credit calculated on the daily balance one or two days after the date

appearing on the statement, i.e. the financier pays less interest. An Incorrect Amount is Credited (Debited) to the account. When Banks Go Bad Page 24

E.g. $17.50 is credited to your account instead of $175.00 or $2,050.00 is debit ed to your account instead of $205.00. Your Repayment Amount is Credited to someone else s account. This kind of mistake can happen very easily. Simple typos happen all the time, w hy would you think it wouldn't happen at the bank? Payout Figure is too High. The Balance Outstanding is too high. An incorrect Penalty Formula is applied. Th e date of payout is included for calculation, this results in an extra day s interest being charged. Offset Accounts' (e.g. Savings) include Incorrect Transactions. The balance in the savings / offset account is too low. Offset Accounts' Interest Earned Calculation is Incorrect. The interest offset against the home loan interest is not enough. Removal of funds from an Account. The financier transfers funds from the customer s deposit account to the customer s loan account without the customer s approval, or mistakenly transfers funds from one cu stomer s account to another customer s account. Changing (ignoring) the Rules. Bank treats Principal & Interest Loan as an Interest Only Loan without informing the customer. Charging Interest after every Transaction. Instead of charging interest to the customer s account at the end of the month man y of the financiers are now charging interest to the account whenever a deposit is made e .g. weekly or in some cases daily. This negates most of the benefit of making weekly payments on your home loan or making extra payments. It increases the financiers effective interest rate on the loan! So, how do we find all these mistakes? Unlike Penalty Fees, which are quite simp le to find, for most of these errors you need to use some dedicated software designed to fin d these errors and recalculate the statement. We have looked at available software and can recommend just one. While it perfor ms complicated calculations, it s really easy to use you don t need any accounting expe

rience. It s been checked and certified, so that the bank shouldn t be arguing about calcula tion methods etc. and it has a proven track record with thousands of people already g etting their money back. When Banks Go Bad Page 25

Update: We thought it was so good we went to the creators of the software and ha ve negotiated a special offer for our friends. So that you can check your mortgage we have arranged for a 30 day free trial period of the software for you (there is a very small postage and handling fee to send it out). You can get the software and check your mortga ge statement and if there are no errors just let them know and you will not be charged for th e software. That s a great deal there is absolutely no risk, you either find errors or don t pay for the software. So Just go to www.mortgagewatchdog.com.au/loanchecker to get the speci al trial deal. So if the software is so good and the mistakes so common what have others found? "[In accounts for over 20 of my clients] I have discovered overcharges in approxi mately 75% of cases. The total of all mistakes, including overcharges of interest, fees and other irregularities amounts to over $500,000" Joe Naggy former Citibank executive now runs Midmark Financial Services The bank statements are never clean, [citing the experience of some 350 clients since IRB opened in 1994]. "Significant errors" occurred in 90% of statements.." -Roy Brown Managing Director of IRB A recent survey of bank statements conducted by The Interest Savers for Sydney M orning Herald readers showed an error rate of 54%, ....... The Herald's switchboard was jammed for a week by callers wanting their statements checked. -Journal of The Institute of Chartered Accountants in Australia "Thanks everyone. I've just found $1,100.00 over the last 3 years owing to me fr om my bank in overcharged interest on a home and investment loan. They were totally sh ocked with being caught. Steve Atkin -Port Macquarie. NSW When Banks Go Bad Page 26

Knowing what you now know, you have to make an important decision -how you are g oing to deal with it. I hope that I ve been able to make it a no brainer. We We We re it know that these Mistakes are there know that just about every mortgage holder has mistakes in their accounts know that the banks are making Billions of Dollars in extra profits and you a paying for

And now we know how to check your mortgage for errors and get your money back. Plus remember with the special deal we have organized you get the software fee f or 30 days to check your accounts so no risk, if you don t find errors you don t have to pay fo r the software. This is the only outside service you find me promoting within this book and its here because I believe checking your loans for errors is essential if you want to kee p banks honest. Along with that the software producers have agreed to give readers a gre at deal and a huge guarantee. Just click on the following link or copy and paste the following into your brows er http://www.mortgagewatchdog.com.au/loanchecker When Banks Go Bad Page 27

Chapter 4 -Small Business Scandal There are literally thousands of stories from Small business owners who have bee n treated harshly, probably illegally and certainly immorally by their banks. In most case s it leads to the person being emotionally destroyed, there are many suicides, marriage breakd owns and families destroyed. The devastation and social costs is enormous. This is a very dark side of business banking that very few want to talk about. There is no available mediation or ombudsman service for most of these people. T here are gaps in legislation that mean many small business owners can not be protected by consumer legislation and they are unable to afford to take on banks with almost unlimited legal funds in a court of law. Small business is the life blood of Australia providing the majority of the coun tries employment and wealth yet when dealing with the finance sector and the big four banks in particular they are left hung out to dry, fair game for a banking sector that ha s come to treat both the law and fairness as a game. There is an urgent and immediate need for the government to legislate to protect small and medium size businesses from predatory behaviour by banks, liquidators, receivers and administrators. Over the next few years we are going to see a huge increase in failures of small businesses through the recession. Many of these will be dealt with in ways that either are or should be illegal but there will be nothing that they can do about this. Most loans to small businesses are backed up by personal guarantees and mortgage s on the owner s home or other property. The bank will require that the directors / owners of the business have enough personal assets that can be sold to meet any shortfall from the sale of the business and its assets if something goes wrong. The bank will want to gain access to as many assets as possible. The loan documents / guarantees and mortgages will also usually include the term s fixed and floating charge . This is a killer, what it means is that not only are you lib el for the amount borrowed you can be liable for any amount of other costs that the bank ca n put against the account. It is common for banks to load in huge fees, penalty intere st rates and legal costs so that the amount to be reclaimed from assets can end being up bein

g much more than the amount of the original loan. I personally will never agree to a fixed and floating charge again. When Banks Go Bad Page 28

Most loans to small businesses are on a on call basis, meaning that the bank can c all in the loan at any time and you have to come up with the cash to repay them or they wil l exercise the right to call on the Guarantees. Alternatively some banks may be in the habit of inserting escape clauses in the contracts. One such escape clause is requiring the borrower to do something obscure in the docu ments but not bringing it to their attention. One example of this would be including in th e documents the requirement to supply full copies of accounts promptly each quarter for revi ew by the bank but never actually asking for the accounts or acknowledging the clause. The fine print will say that if these terms are not met the bank may then at any time in the fu ture recall the loan without notice. The process by which this usually happens is that the bank will call in loans or refuse to roll over loans for businesses that they deem to be problem accounts. It can be subtl e, a tightening of terms and the banker saying that we are reducing our exposure in this market s egment, so we no longer want to finance your business to giving notice that you are in breac h of one of the many hidden terms and conditions in your finance agreement and that all loan s are to be immediately repaid. If you are ever in the situation of having a business fail and the bank call on assets you are really between a rock and a hard place. If the bank decides to take control of t hose assets they are able to have those assets sold off at a fraction of their real value. Even t hough there are laws intended to prevent it, there are ways for them to avoid getting a fair mar ket value, they can avoid selling at a public auction or even advertising them for sale. But you would wonder why on earth a bank would not want to recover the maximum a mount from the sale of assets. The reason goes back to having personal guarantees and mortgages on the Directors personal assets. Assume that the bank knows it has done something wrong, or that there may be rea sons a business owner could contest the bank calling in the loans. The best option then is for the bank to bury the business owner. That is, not only take the assets of the busine ss, but also the assets of the owner as well, and if at all possible bankrupt them. Its clean, th ere are no arguments or court cases and the bank can wash its hands of the matter and move on.

You see once the bank has sold up the persons assets, they will have no money to sue the bank in a court of law. Even better, if you bankrupt them, then even if they are able to raise the money from a family member to go to court, bankrupts are unable to sue anybo dy. This is one of the areas where small business plays on such an unlevel field, th e conditions for large businesses and public companies are very different. Large businesses d on t have to back up their loans with the assets of the directors. Public companies only risk the shareholders money. When Banks Go Bad Page 29

In many cases banks don t even hold mortgages or charges over the assets of these larger organisations, this is why companies like ABC learning and Allco can borrow huge sums of money and when it goes bad there aren t enough value in the assets to back up the loans. In my opinion it is absolutely essential, for all small business people with ban k loans to review their loan documents, business and personal asset structures with someone who can provide sound specialist legal advice in this area. Knowing the best ways to protect your assets and following through with it could save your business and your home. Well structured assets protection is often only used by larger or more entrepreneurial businesses but without getting this right you are incredibl y exposed. The next chapters will give case studies of business affected in this way. Read through the case studies and make up your own mind if the banks acted legally and ethically. In each case these business owners expected that their bankers were honest and w ould act with integrity and within the law. They didn t structure their businesses and asse ts to take into account all possible events including that their banking relationships might not be what they thought they were. One last point, business owners are not exempt from the issues raised in the las t chapter on Mortgage errors. I have found similar errors in business loan accounts, transactio n and overdraft accounts it is essential that you have these checked, either by yourse lf or your book keeper. The mortgage Checker software can be used to check loan accounts as well . Click here to read more about the software and a free 30 day trial. When Banks Go Bad Page 30

Chapter 5 Disclaimer:

Burger Gate

Let s be clear here. I m not accusing Westpac of deceptive and misleading conduct or of fraud or obtaining money by deception that would land me in court however I can show you copies of documents submitted to parliament on the public record. I have to be careful here I m not repeating or adding any weight to allegations ma de by others that could land me in court as well, however I will present publicly avai lable documents that anyone could find via Google and let you be the judge. Size matters with banks and if you control large sums of cash flow then banks wi ll do amazing things to secure that cash flow and keep it away from competitors. The larger your business the higher up the management structure of the bank you have influence. To involve a bank acting in a particular way across several operation al areas, even to the extent of creating special purpose property trusts and capital raisings y ou would have to be negotiating at a very high level within the bank. As a shareholder I think it s inconceivable that directors would not or should not know about deals of this na ture. As I ve described before normally things are cleaned up fairly well, the victims o f a sting are buried, discredited or silenced through the legal system. But every now and then something really big leaks out, often it happens in the form a few good bankers who can no longer live with what they are seeing happen and are prepared to turn whistleblower. It happened with Westpac in the early 1990 s with the foreign loans scandal and th e Westpac letters which they fought so hard to prevent from being made public. I hav e a feeling that the following may be just as damaging. There is much more that I would like to say about Burger Gate and I hope in time m ore will be made public in the form of a Royal Commission into banking practices but until then the following documents and letters will serve to lift the curtain on the sort o f high level deals that are done in boardrooms by our banks. There is just one more thing to point out. I m told of the 40 or so franchisees that were affected in this debacle there have been two suicides along with many divorces, families ruined and lives destroyed.

When Banks Go Bad Page 31

The following information has been supplied by one of those victims. I can say I have been proud to meet the Rampling family and I have huge regard for their stand on tryi ng to achieve justice not just for themselves but for many others. The fight has come at a huge cost for them also. There has been incredible finan cial loss to the family, there is no doubt that Rick and Sue s children have been affected in s o many ways. Rick s health has suffered, but to their credit the family has hung together and not given up the good fight. The following pages are copies of Rick s submission to the South Australian Govern ment s investigation into franchising which provided Rick the opportunity to get this s tory into the public arena. For legal reasons, I can not comment on these letters or on the matter directly, but I think that these documents will tell the story well enough. When Banks Go Bad Page 32

Lobban, Paul From : Sent : Friday, 22 February To : Lobban, Paul Subject : RAMPLING SUBMISSION FOR SA INQUIRY INTO FRANCHISING Importance : High Good morning Dr . Lobban, Thank you for your time on the phone yesterday and granting us permission to lodge our submission for your inquiry into franchising . Below is our submission . Background 13/05/2008 Hungry Jacks alias Jack Cowin trades in Australia, so-called successfully, plus has his fingers in many other pies. Hungry Jacks had expanded from Western Australia eastward . Bur ger King Corporation then decided that they wanted a piece of the action in Australia and wanted all Cowin's restaurants to be re-branded to the world-wide recognised brand of `Burg er King' . Burger King then started advertising for franchisees to come on board put forwar d sites and they put a stop on Hungry Jacks expanding in Australia . Apparently in 1996 litigatio n started in the Sydney Supreme Court between Burger King Corporation and Hungry Jacks Pty Limite d/Jack Cowin . Meanwhile, even as these actions were taking place, Burger King was merr ily signing up franchisees and if approved to be a Burger King operator, was asking for $100 k per franchise fee . Many of the Burger King franchisees were totally unaware that there were a ny court proceedings taking place between Burger King and Hungry Jacks . Burger King stil l took their franchise money. Many Burger King franchisees found sites throughout NSW, VIC an d QLD and were now starting to invest many hundreds of thousands of dollars on securin g their sites and developing them . Enter Westpac Banking Corporation -Introduced to many of the Burger King franchi sees by the General Manager and Franchise Development Manager at Burger King as being the 'p referred lender' . (Let me point out that Westpac was heavily involved with the Hungry Ja cks corporation . In other words, Westpac was well aware of what was going on, on bo th sides of the fence.) This is how our story began SUBMISSION FOR STATE INQUIRY INTO FRANCHISING WHERE DID BURGER KING DISAPPEAR TO ? ? ?

We owned a number of hotels in NSW and had decided to build a Burger King restau rant on the front block of one of our hotels in Sydney. We had already been approved as a Bu rger King franchisee but had still not been informed about the litigation between Burger K ing & Hungry Jacks. (At no time was this litigation disclosed to us -not when we first approa ched Burger King in July 2000, nor at the time of signing up as a Burger King franchisee and paying our fees in 2001 .) Rumours were around that these two companies were fighting, but of co urse this information was kept closely guarded by the Burger King hierarchy . After our re staurant was approved to be constructed at a cost of close to $2million we too, were introduc ed to Westpac as being the 'preferred lender' for the franchisees . At this stage, our hotels were financed When Banks Go Bad Page 33

through HostPlus Superannuation Fund and we were seeking only the finance for th e construction/fit-out of our Burger King restaurant. On our first meeting with We stpac's representatives, they informed us that we would be far better off if we moved in to 'mainstream banking' seeing as we were building the Burger King restaurant and suggested, af ter lengthy discussions about our asset holdings, that they finance our whole group which co nsisted of close to $29million worth of assets with a gearing of less than 50%. Sue and I w ere quite wary of placing all our eggs in one basket, but the Westpac representatives assured u s emphatically that this was the best direction for our group. They were furnished with our extremely multifaceted memorandum stamped "Private & Confidential", as you would expect, a s we were borrowing around $13.2million . After receiving our second approval letter from Westpac, we were visited by Ms Jill Baptist, who headed the Franchise Division of Westpac at Penrith, and she was overjoyed to have us on board and excited at the prospect of moving forw ard with our plans to expand and grow our businesses . News Flash. We finally found out that Jack Cowin wins law suit against Burger Ki ng . He informs Burger King that he wants all the restaurants rebranded to his Hungry Ja cks plus the total amount awarded to him by the Supreme Court -in excess of $70million . To s ay this news sent shock waves through the Burger King franchisee community was an understatem ent! We were totally disgusted in Burger King for the repetitive lies and for the mislea ding and deceptive conduct that they had entered into by 'sucking in' innocent franchisees to fund their expansion in Australia . At this stage Jack Cowin and Burger King were at loggerheads with ea ch other and I immediately called for a meeting with Mr Cowin and the hierarchy of Burger King in Sydney along with another Burger King franchisee who was also in the process of investi ng close to $2million for his store. I said to Mr Cowin and the Burger King hierarchy that b oth of these companies had operated in a misleading and deceptive manner and that many of the stores would become unviable (unprofitable) if this form of merger was to take place. I was basically told to get lost, they were not interested in anything I had to say, and I conti nued to be extremely outspoken about it . (How can any company cause so much damage to so many innoce nt people offering them no compensation, no support or back up while they manoeuvre d themselves for their own greed????) First problem -our store was under construct ion ;

financing had been approved by Westpac; they opened bank accounts for all our co mpanies; we had used most of our liquid cash to initiate the construction of our Burger King restaurant based on the written and verbal loan approvals given by Westpac. Our original funders, HostPlus, had been told that we were moving to Westpac, hence they had started to wind up all our financial connections with themselves and were organizing payouts on our loans. Second problem -phone call arrives from representative of Westpac informing us t hat they had decided not to finance our group -no reason explaining their decision was verbal ly given . Nor was any written letter explaining their decision received . When we wrote to Ms Baptist asking for an explanation and for the return of our documentation, we received a letter from her informing us that if we were to continue inferring that `things weren't right' t he bank would sue us for defamation -still with no reason given as to why they actually stopped the f unding and our documents have never been returned . (Westpac also listed on our CRAA report tha t they had declined our loan application.) To say that this action caused problems within o ur companies would be an understatement and one that our companies would never recover from . Not only had we `lost' our funding, but on signing our franchise agreement with Burger Ki ng we were given a certain period of time to construct and open our restaurant or we would be sued for breach of contract. Through this construction period our relationship with Burge r King was icy cold and of course we had Mr Cowin from Hungry Jacks, causing havoc within the i ndustry. Our restaurant eventually opened in January 2002. Whilst Burger King & Hungry Jacks were continuing with their fight or negotiations, mostly all the Burger King franchis ees were left to their own devices with no backup, no support, certainly no direction from Burger King and most When Banks Go Bad Page 34

franchisees were experiencing major problems with erratic supplies, suppliers an d financial difficulties occurred because internal information was being passed between West pac, Burger King &Hungry Jacks which destabilized the financial future of the franchisee and their investment . The $100,000 .00 franchise fee was supposed to give us support through all the issues of setting the business up (not to mention our royalty fees as well) but I can assure you that we had very little, if any, help or support of any kind . In 2002 we had on ly 2 franchisee meetings -one in March and the other in November. Burger King themselves were in damage control and we believe that when they entered this country they were insolvent. (At that stage they were owned by Diageo in England who later sold out to Texas Pacific Group . ) The hierarchy and people employed by the Burger King brand were like rats abandoning a sinking ship -thus leaving us to deal with new people who had no background of our parti cular situation. Jack Cowin/Hungry Jacks stood by and saw the damage done to the innoc ent franchisees and did nothing to rectify the situation, hoping that he could pick up restaurants for next to nothing. To this day Mr Cowin has never offered any kind of compensation to any of the families who were greatly affected through no fault of their own. In fact, he st ood by and watched most of them go to the wall . After Burger King lost their appeal, they were making arrangements to exit the c ountry as quickly as possible; the Burger King franchisees had no idea as to what was goin g on. In July 2002, Burger King brought in TPF Restaurants from New Zealand to take over as th e master franchisee. At the November 2002 meeting when franchisees were informed about TP F Restaurants and all met for the first time, we learned that sales were down cons iderably and things were looking bleak. TPF Restaurants told us that "they were going to lead us into the future". All the while, Burger King constantly informed us that Hungry Jacks wou ld be 'out of the picture' and Burger King would keep expanding. (In 2004 or 2005 TPF Restaurants sued Burger King Corporation for misleading and deceptive conduct.) We also met the n ew General Manager of Burger King who, we later found out, was a director of both Burger Ki ng and Hungry Jacks -how can this be when the two separate companies are competitors?? Another problem for Burger King -their branded restaurants had to be handed over to Hungry Jacks as part of the 'deal' between them . Burger King then decided to do so-called 'operational audits',

unannounced, on the franchisees' stores with the hierarchy walking in and automa tically shutting them , in full view of customers, (no breach notices issued allowing time given to rectify breach) for minor/bogus breaches or, on some occasions for no reason at all, wit h the specific aim to disrupt the franchisees' cash flows which would have a flow on affect to hurt them financially. (Isn't this type of bullying behaviour [unconscionable conduct] fro m the franchisor detrimental for the brand you are trying to sell and what was the purpose of doi ng it???) Many of the franchisees, before they opened, were told by the Burger King hierarchy o f projected sales they should achieve. As it turned out, these figures were physically unatt ainable once their restaurants opened. So, many of them, including ourselves, were having dif ficulties in meeting financial obligations. The Burger King hierarchy further involved themse lves in the franchisees' businesses by telling various suppliers that the franchisee was in financial difficulty which 'spooked' suppliers who took the view that they would not be paid if they provided stock. In our case, the Burger King hierarchy also phoned our hotel suppliers telling t hem that we were not 'financially sound' after we refused to pay royalty fees due to lack of adve rtising, support and backup . (We were not the only ones who refused to pay royalty fees at that time .) Again, what was Burger King's reasoning behind all this?? NOW LET ME DROP A BOMBSHELL AND I HOPE THAT YOU, AS AN AUSTRALIAN, ARE AS DISGUSTED AS US TO LEARN HOW WE WERE TREATED BY WESTPAC BANKING When Banks Go Bad Page 35

CORPORATION AND BURGER KING AND HUNGRY JACKS. Whilst we were building our restaurant in Sydney, and of course being told constantly by Burger King that th ere would be no more Hungry Jacks restaurants built in Australia, out of the blue, 6 kilometres down the road from us, a Hungry Jacks restaurant begins construction . This restaurant was own ed by a Mr Barry Hammond who worked extremely closely with Jack Cowin in the expansion of t he Hungry Jacks empire. Even before opening our restaurant, we had asked to be bought out by either Burger King or Hungry Jacks, as we no longer wanted to deal with people that had problems telling the truth . Approximately 6 months after opening our restaurant, again, out of the blue, I w as contacted by Mr Barry Hammond, a prominent HJ's franchisee, who asked for a private meeting w ith me . Mr Hammond said he had been sent by Jack Cowin to see me and asked whether I would like to sell my restaurant . I said that I could be interested providing I got back the $2million that I had invested in it . We chatted for a while, never reaching a decision, and I then e scorted Mr Hammond to his car. It is here that he informed me that my personal files, banki ng information and loan application which was stamped "Private & Confidential" and which contai ned extremely multifaceted and sensitive information about ourselves, our companies and our fu ture plans, were handed over to him in a meeting in the Westpac's Offices in Sydney and that the suggestion at this meeting was that my funding 'be pulled' . I believe this was done to make it as difficult as possible for me as a BK franchisee to make my business succeed . So now we have a major Australian Bank involving themselves in corrupt activities with my compe titor. To give you an update on this, we are in the middle of negotiations with Westpac for com pensation . They have asked us not to talk to any authorities, media or police until they co nduct their own internal investigations . Our latest email from them (09/01/08) said that they w ere "interviewing people who appear to be involved in the matter" and will get back to us shortly . This has dragged on now for almost 6 months. We believe that Westpac's 'internal investig ation' is a sham as they have shut down communication and not responded to recent phone call s or emails . We have also asked for help from the ACCC, ASIC and the Privacy Commiss ion for their immediate assistance in our case. We have since come across an internal Westpac document which we will quote direc tly from: "Hammond is a Hungry Jacks man (as opposed to a Burger King man), has regular di

alogue with Jack Cowin and often mixes with other Hungry Jack franchisees (eg those we' ve funded at Chatswood RBC are regularly mentioned) and he obviously knows the fast food game very well. We've talked about where the industry is going. Yes, it is a mature industry and we know the Bank has some concerns (your email this week re the Victoria experiences refers) about the future . Barry Hammond believes that, following the recent court ruling against Burger King's appeal in the Jack Cowin case (refer attached 11/99 Age News item for background ) a shakeout will result. Hammond's and Cowin's view is that the ruling may see Burger King c onsider quitting Australia resulting in closure of poorly located/ performing Burger Kin g stores with those left to be re-badged Hungry Jacks and offered (firstly) to existing H ungry Jacks franchisees such as Hammond. All very much conjecture but indicative that a shak eup in the industry maybe imminent." Signed by J D Titmarsh employee of Westpac Bank dated 10/08/01 . This J D Titmarsh is the same Westpac employee who handed over my personal banki ng documentation to Mr Barry Hammond. (As per Mr Hammond's statement which is suppo rted by another statement from an ex-Westpac director) Mr Hammond informed us that all t he information that he attained at this meeting was passed onto Mr Cowin at Hungry Jacks . (Acceptable business practice -we think not!!) For Mr Hammond to come to us with this information would have taken a lot of guts on his part seeing as he was our comp etitor. Also, let When Banks Go Bad Page 36

us inform you that Westpac was going to most of the other Burger King franchisee s asking for reductions in their LVR's (Loan to Value Ratios) even before some of them had st arted trading. Of course many franchisees were not able to do this and consequently their resta urants were put into receivership; their restaurants never went to public auction and were b asically bought back by the then master franchisee -Hungry Jacks -for minimal cost while the ban ks took all the franchisees' personal assets and if they didn't have enough personal assets, bankrupted them. (The best method used to silence a franchisee.) Westpac were told that Bur ger King restaurants would be surplus to the needs of Jack Cowin therefore making Westpac quick to move on all Burger King restaurants that fitted the scenario outlined above. It is also interesting to note newspaper articles published on April 11, 2002 where Jack Cowin states h e is going to buy all the Burger King restaurants and then changes his mind later on, on April 25, 2002. (As per copies from the Sydney Morning Herald) Then on June 05, 2002 it is announced that Jack Cowin has set up the Westpac Family Restaurant Property Trust -he has sold a gro up of his restaurants to Westpac for $47.5million of which $20.16million is raised as equi ty (to purchase the Burger King restaurants at bargain basement prices when all the franchisees have gone bust) -very innovative says Westpac. (As per copy of Archive Media Release) A lot of these statements, articles and documentation can be provided . The sett ing up of the Westpac Family Restaurant Property Trust needs to be thoroughly investigated and other issues into the Hungry Jacks/Burger King takeover also need to be thoroughly investigat ed by the relevant authorities. To any layman it would appear that collusion between Burge r King, Hungry Jacks & Westpac was rife . We have contacted Jack Cowin and asked him if he has ever seen our personal bank ing files and if he has, we would appreciate them to be returned . He continues to have bo uts of amnesia; says that he never discussed anything with Westpac about the Burger Kin g/Hungry Jacks/Westpac debacle, but here we have it quoted in an internal Westpac documen t that he believes many stores will become unviable after the merger. We have also asked h im whether he is prepared to offer compensation to all the franchisees that went `bust' thr ough this whole debacle and of course, he denies any wrongdoing -I mean, what a joke! We believe that it should be compulsory for the companies involved, as well as the bank, to attend a Federal inquiry so that we can get to the bottom of what really happened . We believe th at all participants in this debacle have a case to answer to and it never ceases to ama

ze us that this particular fiasco has been able to avoid any investigations or inquiries from an y of our so-called `watchdogs' . The cost to innocent franchisees in this debacle -anywhere from $5 0million plus and this is a conservative estimate . Also I think that this points out that thi s proves that churning took place, and at this stage many of the restaurants that went into receivershi p from Westpac Bank are now being operated by Hungry Jacks while the poor franchisees that owne d these stores have been thrown out into the street . We find it amusing that Mr Cowin now seeks the help of the West Australian Gover nment to help in his KFC issue with Yum Foods especially when he finds it difficult to answer pertinent questions into the Burger King collapse and Westpac's involvement in the whole d ebacle. I think that you would now have an idea as to how fraudulent, unconscionable, misl eading and deceptive this whole industry can be. We have not been silenced by any `confiden tiality agreement' like most other franchisees who leave the system and are happy to att end the inquiry to furnish signed statements and documents that will corroborate and ver ify our allegations. We have tried to keep this as simple as possible. Our Burger King restaurant was only open and trading for a period of 13 months and the devastation it caused us has been horr endous, to say the least. We have ended up with nothing but the clothes on our backs and even s ome of those we have sold to live on . We're certain it confirms that churning definitely occ urs ; it also confirms collusion between Westpac Banking Corporation and the franchisors ; we believe t hat we are the only ex-franchisees who actually have written documents proving our case. As for franchising, we believe that it should be stopped until appropriate measures can be put in pl ace to ensure the safety and the financial security of these poor families who have been abuse d by this When Banks Go Bad Page 37

system. PS . A further update. The reason for the delay in submitting this is due to the fact that Competitive Foods Australia Limited attempted to enter into mediation with us wi th what we believe to be the sole purpose of stopping us in lodging our submissions to the SA & WA inquiries. We were told that if we attempted to lodge any of our submissions, th at the mediation would cease immediately. If this is not blackmail, I don't know what is . Westpac were asked by CFAL to attend this mediation and declined. We were constantly told that Burger King would like to attend this mediation as well, but of course, they didn't . We hope this gives you an insight to our dilemma and again, we offer our assista nce to the inquiry if needed . Please advise receipt of this email . If you require any further information or clarification, please do not hesitate to contact us anytime. Yours faithfully, Rick & Sue Rampling Lobban, Paul From: Sent : Tuesday, zo rebruary 2008 12:00 PM To: Lobban, Paul Subject : Addendum to Rampling Submission for SA Inquiry into Franchising Importance : High Good morning Dr . Lobban Having re-read our submission we felt it necessary to clarify the introduction o f the New Zealand Group, TPF Restaurants into taking over as master franchisee for the Burger King brand in Australia . In 2001 the NSW Supreme Court awarded damages to Hungry Jacks/Jack Cowin (Competitive Foods Australia Limited) in its fight against Burger King regarding the Development Agreement between the two corporations . In the damages figure an amount of around $26million was allocated as compensation to 3rd party franchisees -not one red cent of this compensation has been paid to any franchisee . In April 2002 Burger King appealed the courts decision . In July 2002 TPF Restaurants was brought over to Australia to operate as master franchisee for the Burger King brand . (TPF Restaurants is the Burger King master franchisee in New Zealand and operates over 60 franchises) In May 2003 TPF Restaurants high-tailed it back to New Zealand (less than 12 months in operation) . In 2004 or 2005 TPF Restaurants sued Burger King Corporation for misleading and deceptive conduct and won . Franchisees were unaware of TPF Restaurants' existence until the franchisee meeting in November 2002 . We thought that this was a very strange occurrence and did not understand the reasoning behind this appointment nor were we told why TPF Restaurants were appointed . In hindsight it is all very clear -Burger King were stalling handing the restaurants over to Hungry lacks whilst they sought appeal in the NSW Supreme Court to overturn the 2001 court decision . This caused a massive de-stabilization within the Burger King franchisee community -as if there wasn't enough going on already -and more problems for the franchisees . At this November 2002 meeting the franchisees were

When Banks Go Bad Page 38

informed by TPF Restaurants that their projected figures for the July-October period were down by $4million for the same period in the previous year. This also reflected in the de-valuing of the Burger King franchisees' restaurants . The following is from Westpac s web site and is a copy of their press release on t he set up of the Westpac Family Restaurant Property trust and the raising of money to purchas e these restaurants from Jack Cowin s company and lease them back to his company. Approx $ 20 Million was raised from an unsuspecting public by Westpac. Archive media release 5 June 2002 Bite size. A take away slice of the fast food market. The new Westpac Family Restaurants Property Trust literally gives investors the chance to take a bite out of the fast food market. Instead of the usual commercial properties, the closed end unlisted unit trust w ill own 36 Hungry Jack's and KFC family restaurants across Australia. Competitive Foods wil l be the lessee of the properties. The trust will raise $47.5 million, of which $20.16 million will be raised as eq uity. Westpac Institutional Bank is the arranger and underwriter to the issue. Director at Westpac Property Advisory, Arthur Psaltis said: "We're always lookin g at new and innovative ways of doing business and this was something that struck us stra ight away as being a good solution for both Competitive Foods and investors." Almost all of the properties would be leased to Competitive Foods via 'triple ne t leases' for periods of 12 years with two, five year options . Triple net means that this is net cash flow, where all property expenses and capital expenditure is funded by the tenant, in this case Competitive Foods. "Competitive Foods adopts a detailed selection criteria when it originally purch ases its properties. It has sought long term leases, as it believes that these properties are in strategically valuable locations. This demonstrates Competitive Foods' view of t he long term viability of the restaurants," Mr Psaltis said. Under the leases and master contract of sale, Competitive Foods will pay rent, w ith a minimum annual escalation of 3.5%, all outgoings, expenses and capital expenditu re, and any charges or fines imposed on the trust due to the nature of the properties.

Westpac Funds Management Limited is the responsible entity (manager and custodia n) of the trust. The properties will be purchased at independent valuation and have been s ubject to due diligence. When Banks Go Bad Page 39

"An investment in the trust should provide investors with an attractive investme nt as the trust aims to provide stable and growing income distributions," said Mr Psaltis. "The first year yield for the Trust is forecast at 8.77%, with a first year tax deferred component of 70%. Minimum investment is $10,000 and then increases in multiples of $1,000. Westpac will continue to grow these types of offerings as part of its We alth Creation strategy for its customers. "Applications for units in the trust may only be made on the application form at tached to the Product Disclosure Statement dated 3 June 2002. Westpac Banking Corporation does not guarantee the performance of the trust.," he said. Competitive Foods Competitive Foods is Australia's largest franchisee of family restaurants and ha s over 32 years experience in the industry. It holds franchise agreements for 165 Hungry J ack's restaurants nationally and 45 KFC restaurants in Western Australia and the North ern Territory. Competitive Foods commenced operations in December 1969 when it acquired the KFC (then Kentucky Fried Chicken) franchise rights for WA. Since then the company ha s remained the sole franchisee in that state and is the third largest franchisee o f KFC restaurants in Australia. The company acquired the Australian Burger King franchise in 1971 from the Burge r King Corporation and commenced business in Western Australia under the Hungry Jack's trademark. Competitive Foods principal is Mr Jack Cowin who is majority owner and founder o f the company. Competitive Foods has operated family restaurants on the properties tha t will make up the Trust for an average of 15 years. Australian Family Restaurant Market Australian Family Restaurant retailing, or the fast food sector, generated sales of $7 billion in Australian in the 2001 financial year. This represented over 11% of total foo d retailing for the year. Historically, growth of fast food retailing has averaged 5.5% pa over the 1986 t o 2001 period. There are significant entry barriers to this highly competitive industry .

Release ends. A second trust the Westpac Family Restaurant property trust No2 was also set up under the same type of arrangement with Westpac raising more money from investors that was channelled back in the same way. When Banks Go Bad Page 40

Whether it was part of the plan originally or the result of other circumstances Westpac appears to have had a change of heart in 2008 and decides to tell the investors that this is not such a good deal after all and we should sell the properties and close the trust s. The following information was released. Westpac Banking Corporation is likely to sell off 64 Australian fast food proper ties worth about $100 million because of tougher refinancing and retail conditions. The bank has called meetings of two of its unlisted property trusts, which owns properties occupied by Hungry Jack's, KFC, Red Rooster Family Restaurants and others. Westpac has warned that the trusts -the Westpac Family Restaurants Trust and the Westpac Family Restaurants Property Trust No.2 -will "face difficulties" if the restaura nts are not sold. It cited increased refinancing costs and lower capital growth in future ye ars, made possible by a softening retail property market. Lessees of the properties have the first right of refusal to acquire the propert ies in the trust. The first trust owns 36 Hungry Jack's and KFC stores, which it bought in 2002. T he second trust's 28 properties comprise 19 Red Rooster restaurants, nine Chicken Treats, three Domino's Family Restaurants, one Subway Family Restaurant and one delicatessen. End of release. Of course these buildings are now all leased to the respective tenant companies on long leases with good terms for the tenant along with first right of refusal I wonder who th e buyers will be? I personally find it difficult to imagine that the involvement of Westpac in pul ling the finances of burger King franchisees, the selling up of their buildings and the s et up of the Westpac Property Trusts to funnel funds back into the Hungry Jacks businesses of Jack Cowan were not related in some way. The question would be just how high up in Westpac were these events co-ordinated ? These were multimillion dollar deals involving over 40 companies and a major cor porate client along with the setting up of two property trusts to raise around 100 Mill ion dollars from public, institutional investors and borrowings. As a shareholder of Westpac I wo uld expect

that the board had, or should have had full knowledge of these activities. When Banks Go Bad Page 41

Chapter 6

OGME v Westpac

Overseas Game Meat Export Pty Ltd v Westpac. Claim of deceptive and misleading c onduct and breaches of the corporations act. Out of all the stories that are contained in my research files this one is perso nally the most devastating, the one that caused me to have to work through two years of depress ion and pain, the one that reduced me to tears on a number occasions, not for my own sak e, but for the loss of such a great business and all those people involved with it. It pain ed me for the loss of potential, the loss of hope and the impact it had on my family. Only if you have experienced it can you truly understand the range of emotions t hat occur when you are chewed up and spat out by your bankers in this manner, everything y ou own taken away from you, bankrupted, you are cast on the scrap heap. The frustration of not being able to provide for your child, of not being able t o pay for food at the supermarket or put fuel in a car, the stigma of being a bankrupt, a failure, is not something that I wish on anyone, yet I know that there are many who have and sti ll are experiencing this right now. This chapter is dedicated to all those people. This is my story. My father James Harwood and I built Overseas Game Meat Export Pty Ltd from the g round up into a multi award winning business recognised by Governments on both sides o f politics as a great example of Australian Small Business. The achievements included: Regional Family Business of the Year. The Gold Award for Quality. Finalist -Queensland Exporter of the Year (3 times). Winner -Queensland Exporter of the Year. Finalist Australian Exporter of the Year. Craig Harwood (Centre) receives Qld Exporter of The Year Award from Queensland p remier Peter Beattie When Banks Go Bad Page 42

Craig Harwood Congratulated By Prime Minister John Howard (Australian Exporter o f The Year Awards) The OGME factory at Wulkuraka, Brisbane. From nothing to a turnover of $ 12 Million Dollars per year and leadership in ou r industry, it was achieved the same way most small business owners do it, a load of hard work, long hours and mortgaging everything to the bank to fund the growth. The business grew to employ up to 100 people in a processing plant and across si tes throughout regional Queensland. These people also contributed incredibly to the success of the business and there is a long list of people, too long to mention here, that are both deserving of congratulations for the efforts they put in and also were badly aff ected by Westpac s actions. When Banks Go Bad Page 43

The business had over the years received several government grants and was well recognised by both State and Federal Governments. As part of our expansion plan to meet inc reased demand we purchased a factory at Wulkuraka (Western Brisbane) This was to be a m ajor employment boost in the area that suffered from lack of work opportunities and w ould provide more than 100 new jobs. The Federal Government assisted with a Grant of $1.25 million, (which it would make back in taxes and charges in around 18 months). We estimated that we would require an additional 1.3 Million Dollars over and ab ove our existing borrowings to refit the processing plant buy new equipment and bring it into operation. We approached several lenders, including the Commonwealth Bank. The Commonwealth Bank had approached us before and new our history well. They came back with a pr oposal giving us the funds we needed. Because of my father s relationship with Westpac of over 40 years, and because Westpac were our current bankers we asked Westpac if they cou ld match the Commonwealth Bank offer. A few days latter came the call from our Westpac business banking manager, we can match the offer, you are good customers and the bank doesn t want to lose you . This is where the first issues of deceptive conduct raises itself. It turns out that the deal wasn t the same. With a little smoke and mirrors he had made it sound the same but had in fact taken away some of our existing facilities and pu t the money back in again into the new loans to make it look the same. We later found out when we tried to draw down some of the funds that they weren t available. He had given with one hand and taken away with the other. What I believe happened is this. It turns out that managers at different levels have limits that they are able to approve. Increasing the amount to the level required would have exceeded his level of authority. Managers are under such pressure to achieve their sales targ ets that they don t want to lose a customer and losing an account as big as ours would have been a big issue. With the local manager of the next level above him on holidays I believe our business banking manager thought he could keep the account, moving the facility around to make it appear that we had been given the additional funds and that he was matching the When Banks Go Bad Page 44

Commonwealth bank offer. I guess he hoped that as long as he kept the business, the details could get sorted out later but it never did work out that way. It was a huge problem for us without that promised money we couldn t finish the ne w factory and keep operating the old one at the same time something would have to give. We complained to Westpac s head office, and that was probably a big mistake. Senio r executives don t like problems and the potential of a claim against them for decep tive conduct was not very attractive. The bank closed ranks and put our business into the asset recovery section. That s where they put troubled customers, its a bit like surgery at a really bad hospital, you might make it through if your lucky but more than likely the n ext one that s going to see you is the undertaker. Asset recovery is responsible for getting the banks money back. They make the de cision to call in loans and appoint liquidators, to sink the business if they have to, in order to get their money. It s a case of do whatever it takes. This section sits outside the normal i nternal reporting systems that control banking activities. There is very little executiv e oversight of this section of the business. One past employee of this section told me we were a law unto ourselves. We could do just about anything we wanted and as long as we got the r esult there were no questions asked. Customers had no one to appeal to . We were a bit unusual, there was over a million dollars of public money involved and we already had an issue of deceptive conduct against the bank. I believe we came across an honest banker, Gary Fryar. I believe understood the position we were in and importantly the position the bank was in. Over a period of time we w orked through a payout figure that suited the bank and we agreed to drop the legal cla im, it worked for both sides. In early March 2005 we met at Westpac s Brisbane office. In this meeting were myse lf, my father James Harwood, our financial advisor, Gary Fryar who we had been dealing with up until then, and a new Westpac person we had not met before by the name of Greg B uzza. The purpose of this meeting was to make sure all the details were tied up before formally setting up a Deed of Company Arrangement (DOCA) which has to go to a vote of all the company creditors. The two Westpac mangers confirmed that Westpac was satisfied with the

When Banks Go Bad Page 45

terms of the agreement that we would put up at the creditors meeting. This was v itally important as the bank held the upper hand; with their one vote at the meeting th ey could control the outcome. They specifically guaranteed they would support the agreeme nt and not vote at the meeting using these exact words. This meant that assuming that there was a majority vote for the deal by creditor s it would be carried. We would be able to pay out the bank the agreed amount, make payments t o creditors and get on with the business. A week later at the creditors meeting we found out that Gary Fryar had left the Brisbane office for a transfer to Melbourne. Greg Buzza was t here representing the bank. The creditors voted to accept the arrangements, however after having only 1 week previously guaranteeing us that the bank would not be voting, Greg Buzza of Westpac voted a gainst the agreement. He went against the agreement he had made with us and he used his vot e to overturn the vote of all other creditors. You can imagine I was sitting there with an open mouth, what was he doing and wh y? His next move was even more of a shock. He then used his voting power to put the com pany into receivership and appointed liquidators, again overturning the combined vote of e veryone else in the room to do it. By then it was about 5.15 pm and the meeting was closed. I n 45 minutes there had been a series of actions that didn t make sense to anybody. Westpac, via the receivers they appointed, had taken control of the business and all its assets. Completely going against the agreement they had made just a week earlier. If that was a shock there was more to come. At 9.30 the next morning we were tol d that all the assets of the business had already been sold to someone they refused to name for an amount they would not disclose. No Advertising, No Public Auction, No Chance for Other Offers, Sold. And it turned out sold at a fraction of their real value to one of our competitors. We found that this was a burial Westpac style, where you are the guest of honour at you own funeral. Many of these actions of course would breach sections of the corporations act, b ut it works like this. When Banks Go Bad Page 46

Westpac does the figures on what you owe and what your personal assets like your home are worth. They can then do an under the table deal to appoint a liquidator and sell the business off to one of their friends at a fraction of what it is worth, the shortfall is ta ken up by selling your personal assets. Westpac gets all its money, the liquidator gets a huge fee (in our case they got around 250,000 Dollars), the creditors get next to nothing, while the customer is left bankrupt and unable to afford a legal challenge. It s the perfect sting, there will never be an investigation. No one will ever rea lly know if there was money changing hands under the table, or what deals were really done. It s all quite neat as far as they are concerned. In our case the assets were sold to a shelf company with a bogus director and sh areholder that had been set up by a competitor, just weeks before. Our competitor got all the assets, buildings, machinery, supply chain, the lot, for a discount of at least 10 Milli on dollars off their replacement value. We jumped in as quick as we could and came up with another buyer willing to put at least 10% more, proving that there was more money available for the assets than what t hey were being sold for. We tried to push them into a public auction or tender but they w eren t interested, the deal was already done, in fact we found out later that the contr act has a special clause letting the buyer out of the deal if the bank didn t appoint the liquidator named in the contract proof that the bank negotiated the sale before the creditors meeting, b efore the liquidator was even appointed. You would think that with something so blatant, that included over a million dol lars of public money, we could get someone to investigate well it doesn t work like that, there i s no justice or honesty with regulators either. To add to the injustice emselves but also within the offices ecting the Australian Public. This n and as you will see throughout the is the cover up that occurs not just within the banks th of the Government regulators who are supposed to be prot is something that desperately needs further investigatio book it is a common theme.

In our case, in response to our complaints we had the following: When Banks Go Bad Page 47

Westpac s internal system closes ranks and their internal customer advocate can t find anything wrong and they said, if there was, you couldn t do anything about it anyway. The banking ombudsman won t investigate it (outside terms of reference). The banking code of practice says there will be external dispute resolution avai lable, but Westpac simply refuse. The regulator, ASIC simply refuse to investigate. As a bankrupt you are unable to launch a court case against them (and there s no money to pay for it anyway) The following pages contain two of our many letters to Westpac on this matter at tempting to get mediation and review. There can be no doubt that senior Westpac executives w ere aware of our complaints and our accusation of illegal and unethical behaviour by their senior managers. As I ve now found out this is not an isolated case, it has become acceptable pract ice in Westpac. How high does approval of this sort of practice go in Westpac? I have t o say this goes all the way to the CEO, because I made sure then CEO David Morgan was made aware of the case. In recent months I ve written to each member of the current Westpac Board individu ally to ensure they are personally aware of this matter. If there has been illegal or improper activity in our case then it is clear that each member of the board has or should have knowledge of this. As they say, a fish goes rotten from the head down. If individual board members are aware of illegal activities of their business an d are not responding to this in the proper way then I believe they should be investigated for offenses under the Corporations act. If they are personally profiting from these activities, say through profit or share price related bonuses then many may argu e they are also guilty of criminal offences. When Banks Go Bad Page 48

The Senior Manager Westpac Complaint Review Service, Westpac Banking Corp Level 13, 50 Pitt St, Sydney 2000 By fax 02 92205816 6 November 2005 Without prejudice Dear Sir, We are writing in regards to an ongoing dispute with Westpac that we have been u nable to resolve to date. James Harwood and Craig Harwood being the former directors of Overseas Game Meat Export Pty Ltd We have become aware that within the banking code of practice there exists the p rovisions for both internal and external dispute resolution system. Since we have been unable to re solve this issue with our normal contacts and we feel that we have been severely disadvantaged by the actions of certain Westpac managers we wish to have this matter dealt with through the external dis pute resolution system. The dispute relates to the following areas. Issues outlined in a letter to the Manger Regulatory Bodies ( then Mr John Apps ) of 11 July 03 which have not been fully addressed. Subsequent actions of Mr. Greg Buzza with relation to the negotiations carried o ut with Westpac to establish a Deed of Company Arrangement for the company (then in administration) and agreements on a payout figure to Westpac. Undertaking made by Westpac in front of an independent witness with regards to t heir confirmation that they would not vote at the creditors meeting of Overseas Game Meat Export P ty Ltd the following week, upon which we relied. When Banks Go Bad Page 49

A private meeting between administrators Robert Hutson of Korda Mentha and Greg Buzza of Westpac at which Greg Buzza agreed to break Westpac s undertaking to us, and to ta ke actions that would benefit Mr. Hutson and Korda Mentha. Greg Buzza s use of Westpac s vote at the creditors meeting and his reasons and moti ves to use Westpac s vote to act against the best interest of creditors. Greg Buzza s knowledge of, and involvement with the sale of the assets of the comp any by Korda Mentha without advertising the business or assets for sale. The banks knowledge of and involvement in the selling of the assets below market value and despite being aware of an offer of at least $ 300,000 greater on the same terms from ano ther Westpac customer. The actions of Mr. Buzza had a disastrous effect personally on James Harwood and Craig Harwood but also meant that approx $ 1 million of Federal Government funds were lost and that a business that had been highly awarded including the Premier of Queensland s Export Award wi nner and recipient of various State and Federal Government grants was wound up. We are required to keep both State and Federal Government departments briefed on the outcome of this matter and trust that you will see that it is in all our interests to be ab le to demonstrate that the banking industry and in particular Westpac is able to resolve issues such as the se in an effective manner. At this time Mr. Buzza is using Mortgage Guarantees provided by James Harwood to force the sale of the family properties in order to recover monies that could have and should have been recovered from the sale of company assets, if he had not been instrumental in selling thos e assets of the business below value and below the best offer on the table at the time. Further the amount being claimed by Mr. Buzza as owing to Westpac is far in excess of the payout figure, which Westpac had agreed to accept. We look forward to providing full details of these matters to an external enquir y and ask in the meantime that the responsibility for this matter be moved from Mr. Buzza and tha t department and be handed over to senior management with responsibility for resolving a dispute of this significance. Further we would ask that the bank undertakes to not force the sale of those pro perties under mortgages until there can be a settlement of this issue.

We look forward to your reply with regards to the handling of the file and to th e setting up of an external enquiry into this matter. Best regards, James Harwood. Craig Harwood When Banks Go Bad Page 50

Craig Harwood P.O Box 1084 Oxenford. Queensland 4210 26th July 2007 Mr David Morgan, CEO, Westpac Banking Corp Via email. Dear Mr Morgan, I have been corresponding with your senior management staff for some time with r egards to a dispute that we have had with your organisation. The full details of this dispute are on file in your customer advocate departmen t and I have on several occasions requested that you have been kept fully informed. I have included with this attachment a copy of a statement on the matter and for information a background profile document. I have exhausted your internal dispute resolution system however I note that at no time has the process worked. There has never been any interest demonstrated by the bank in ac tually resolving the matter. Your staff have continued to refuse to agree to the appointment of a med iator or to even meet to discuss this matter. I have been left now in a position of having no alternative than to seek satisfa ction through other channels for the concerned parties, these being the Directors and shareholders o f the company, creditors of the company and the public who via the commonwealth have suffered a significant loss. Additionally I have started further investigations into customer complaints, irr egularities in fees charges and dissatisfaction with the bank s dispute resolution process. I expect as these matters progress in the public forum there will be an adverse reaction, which will necessarily cause a reduction in share value, and as a shareholder myself, I wou ld wish to avoid this. I would request that you personally intervene in this matter. Should you wish to discuss this matter please feel free to contact me at any time on 0418280064. Regards, Craig A. Harwood. When Banks Go Bad Page 51

Update: I wrote this book and in particular the chapter about my experience both because I was angry and also I guess as therapy for me to get it out of my system. I firml y believe that if you hang onto these things they eat away at you over time (and most probably cau se a serious illness). In researching this book I ve seen so many cases of people falli ng ill with cancer and other aliments 3 to 5 years after the event, that the link is impossi ble to ignore. It was however written from a victim s position and I have thought about re writin g this chapter from a new stronger position, or even withdrawing this book from sale ta king down the site and just getting on with life. I m no longer a victim, I ve moved on and I truly wish the best in life for the people that wronged me, there is simply no benefit for myself, my family or anyone else in holding onto being a victim. There is still however a need for people to know about these issues, for without recognising the current situation there is no reason to develop or change the way we do thin gs in order to create a more fairer and honest society. Without recognising the dark there is n o incentive to create light and without me being prepared to tell my story I m not being of servi ce to you, your friends, family or colleagues, so this chapter remains in the book and the book remains available to assist people that can benefit from it. Far from being powerless in the hands of the banks erful position, it is in fact our power that scares them band together we can change the way our banking system operates. tomers actually have the power they just don t realise it we are actually in a very pow the most, should enough of us More than ever before the cus yet.

This book then is about understanding what is actually going on so you can then take back your personal power and create the life you really want. I was able to turn my s ituation around and rebuild my life and start new businesses on my terms. I m now financial ly independent again thanks to starting a couple of small businesses. Having busine sses run largely on autopilot gives you not just a great income but more importantly, fre edom. The key to turning any situation around starts with mindset and being able to ta ke control of the unconscious mind, this is the first step to true wealth and my next project will be on sharing the steps to achieving this. When Banks Go Bad Page 52

Chapter 7 -Taking it to the Board. The ultimate responsibility for the operations of a company lies with the board of Directors. Under our corporations law it is these directors who are to ensure that the acti vities of the company are carried out legally and responsibly and adhere to the laws and regul ations under which companies and specifically banks operate. It is up to the directors to see that there are systems and monitoring programs in place to ensure that senior executives are also acting within the rules and regulations b oth of the company and the wider community. With a public company such as Westpac there are two types of Directors. The exec utive Directors such as CEO Gail Kelly are involved with the business on a full time b asis. The Non Executive Directors are only involved part time for board meeting / committe e meetings etc. They are paid significant amounts of money for there knowledge and oversigh t of the companies activities. Often they will serve on several boards and can collect sa laries of around $500,000 per year for the equivalent of one day per week s work. You would think that directors who are paid very large salaries for very little work would be we ll aware of activities in the bank that could leave them exposed to criminal charges and wou ld want to ensure that the business is operating in a way that is legal and ethical. With this in mind I sought to ensure that the directors of Westpac were aware of the issues raised in previous chapters along with several others that I haven t specifically written about. I did this in the most relevant way possible to ensure that all directors had am ple time to launch an internal investigation of allegations raised before this book was publ ished. In my mind I wanted it to be clear that there were no surprises here and that la ck of knowledge could not in any way be used as an excuse for lack of action. Following is a copy of my question to the Westpac Board of Directors at the 2008 Annual General Meeting in Sydney along with a copy of my letter which was sent individu ally to all board members in October 2008 referring to the Overseas Game Meat Export complai nt. One of the concerning things for me is that the directors claimed to have no kno wledge of the Burger King fiasco or the trusts set up to funnel money back to Jack Cowan. You would have to ask how such things can happen within a bank and the directors claim to have

no knowledge. Similarly the directors claim to have no knowledge of the allegation of serious criminal breaches levelled against the bank in federal parliament. Really how can these p eople justify multimillion dollar salaries and bonuses when a 10 year old kid with an internet connection can know more about serious criminal allegations against their bank than they do ? When Banks Go Bad Page 53

Question to Westpac Board by Craig Harwood Mr Chairman and Directors,

Westpac AGM 2008

I have recently completed research for a book soon to be released. During resear ch for that book I came across a number of matters of disputes with Westpac that I don t belie ve have been fully provisioned for. (the bank is required to make provisions in its acco unts where there is the likelihood of a loss or payout in a dispute) It is evident with the recent Bell decision that many of these disputes can be i nvolved, long running and have significant impact on profitability. As an example could you ex plain to shareholders the level of provisioning with regards to a. Bell b. Foreign Loans disputes still outstanding c. Penalty Fees I note the bank is apparently settling some claims up front and som e are being delayed until court or tribunal hearings are applied for. d. Systemic errors in mortgage calculations e. What has been referred to as Burger Gate For the benefit of shareholders that are not familiar with Burger Gate , in Septem ber this year ( 2008 ) federal MP Joanna Gash used parliamentary privilege to raise alleg ations against Westpac of fraud, breaches of the Privacy Act and obtaining financial ad vantage by deception. This is on record in Hansard and I have been able to confirm that a s ubmission for investigation is being prepared for lodgement with the federal Police. These are very serious criminal charges involving senior management of Westpac. It appears from my research that this matter involves some 40 to 50 Burger king franchisees funded by Westpac who s assets, in particular the restaurants, were seized by West pac and sold to Jack Cowan of Hungary Jacks. It appears that Westpac management set up two unlisted property trusts,(The West pac Family Restaurant Trusts) apparently raising in excess of 70 Million dollars in these t wo trusts from investors and borrowings in 2002. Management announced, coincidentally around the times the allegations were made in parliament that these investment trusts are no longer viable and the portfolios are to be sold off. Naturally Jack Cowan s group is the most likely buyer given that he has favou

rable long term leases with options and first right of refusal. When Banks Go Bad Page 54

I would like to understand if the board had full knowledge of these activities b ack in 2002 and what provisions have been made for restitution given what has already been r evealed in parliament. I might also add how can full restitution given that the lives of these 40 or so small business owners have been destroyed, most have been made bankrupt and sadly I m informed th at two have suicided over this issue. Mr Chairman, when I read of activities such as burger gate I wonder if management has forsaken morality and legalities in favour of short term goals and bonuses. I wo nder if we really have any idea of what we are exposed to, for while executives can receive s substantial bonuses and jump with so called Golden Parachutes, it is the customers and the s hareholders that are left with the bill, both financially and morally. When Banks Go Bad Page 55

Craig Harwood P.O. Box 1084, Oxenford Qld 4210 Ms Gail Kelly, CEO, Westpac Banking Corporation 275 Kent St, Sydney NSW 2000 28 October,2008 Dear Ms. Kelly, I am a former director of a company by the name of Overseas Game Meat Export Pty Ltd which operated in Queensland until 2004. Our family had been long term customers of We stpac. I wish to give you a very brief summary of events and would like to refer your a ttention to files held by your Customer Advocate department. In 2003 we had a dispute with Westpac which related non provision of facilities. The disputes carried on and severely hampered the business expansion leading us to eventually in late 2004 appointing a voluntary administrator to work through a deed of company arrangement (DOCA) and refinancing of the business. At a meeting at Westpac s Brisbane office approx 1 week before the creditors meeti ng the bank s manager agreed to the terms of the proposed DOCA , the payout figure to Westpac and expressly stating in front of witnesses that the bank would not vote at an upcoming credit ors meeting. Less than a week later without further reference to the directors the manager concern ed did vote at the creditors meeting, using his vote to overturn the combined vote of all other cre ditors, rejecting the DOCA that he had agreed to less than a week prior and then despite condemnation from other creditors appointed a liquidator. That meeting concluded at approx 5.15pm on a Thursday and we were told at 9.30 a m the following day that the assets of the company had already been sold for a sum which we late r found out to be less than half their estimated value. When Banks Go Bad Page 56

We have since been advised that the manager concerned negotiated with the firm t o be appointed liquidator, a sale of the assets of the business to a shelf company with a bogus director and shareholder set up by a third party known to the Liquidator and the bank. This s ale was arranged and the contract drawn up prior to Westpac appointing the Liquidator and indeed the contract of sale reflects that it was conditional on the bank appointing the company as liquidato r. I point out that at no time was a public sale of the assets undertaken, there wa s no auction, tender or advertising of the assets and in fact we know that that in the days after appoin ting the liquidators all parties were made aware of another offer of at least $300,000 greater with the b ank and the liquidator refusing to allow the prospective purchaser time to formalise his off er. As the deal that your manager negotiated conveniently left the bank short of the total amount owing the bank was able to call in guarantees held and forced the sale of these assets leaving the Directors to face Bankruptcy and unable to take legal action against the bank. All the evidence of the above along with my letters to the bank, including one t o former CEO David Morgan regarding this, should be contained in files held by your customer advoca tes office. My intention with this letter is to ensure that the board is fully aware and bri efed on this matter and that the board has the opportunity to remedy the situation. Yours Sincerely, Craig Harwood, When Banks Go Bad Page 57

After the AGM I had a meeting with Gail Kelly CEO of Westpac and the person who as Executive Director and CEO becomes personally legally responsible for the action s of the business. Ms Kelly told me that straight after the AGM, just minutes before our meeting sh e was briefed on Burger Gate and the accusations made in parliament. Ms Kelly claims t hat senior staff new of the allegations but did not advise the board because they believe t he allegations to be false. I was then passed over to Jane Counsel, a Senior Media Relations Manager (a fanc y title for a PR person whose job it is to sweet talk investors and make sure bad things don t g et into the media). Ms Counsel told me that they had a letter from the Privacy Commissioner saying that there was no investigation into Westpac with regards to Rampling s complaints and th at the statement made in parliament was wrong and they were going to have it changed. M s Counsel offered to send me a copy of the letter from the Privacy Commissioner to back up her claim. This is apparently the line they have been taking with the media and it has been sufficient to throw journalists off the track and to have them believe there is no story here . Not to be deterred I contacted MP Joanna Gash s office and confirmed that the Hans ard record would not and could not be changed. Once it is on record its there, even a bank has trouble getting Hansard changed. When the letter promised by Ms Counsel did not materialise, I chased her several times via email and phone messages to get the copy. Finally I received the following email: When Banks Go Bad Page 58

From: Jane Counsel Sent: Wednesday, 17 December 2008 5:11 PM To: Craig Harwood Subject: Re: Burgergate / Priv. Comm Hi Mr Harwood, Further to our conversation after the AGM and your email -the Letter from the Of fice of the Privacy Commissioner on the 12th September 2008 relates to a private matter raised betwe en the Commissioner, Mrs Gash and Mr Rampling. I can advise you that the letter did sta te that "It was incorrect to state that this Office is working with the Australian Federal Polic e pursuing any breach of the Criminal Code. This Office has had no contact with the AFP in relation to th e complaint, nor has the Office indicated to the individual that it had such contact". Westpac has not had any indication from the office of the Privacy Commissioner t hat it intends to pursue this matter any further. I understand that you are in regular contact with Mr Rampling so you may wish to ask him to provide you with a copy of the letter I refer to above which will support the paragraph I have just outlined to you. I trust this now clarifies the facts of the matter. Now that I have clarified this for you, I personally do not intend to discuss th is matter any further with either yourself or Mr Rampling. regards, Jane When Banks Go Bad Page 59

Ms Counsel it appears has back peddled a little. The letter in question, of whic h I now have a copy, does not say what Jane Counsel of Westpac attempted to have me believe. Wh ile it did say that there had not been contact with the Federal Police this was back in Sep tember 2008. Mr Rampling has since advised me that there is a complaint being prepared for th e federal Police and it will be lodged with them. Ms Counsel specifically stated in her email to me above Westpac has not had any i ndication from the office of the Privacy Commissioner that it intends to pursue this matte r any further . Yet I have a copy of the letter from the Privacy Commission and it refers to the ir ongoing investigation And specifically says At this stage our investigation into the complaint is continuing. We have not yet formed a final view on the matter. I believe it is clear that Westpac attempted to hose down this issue attempting to mislead myself and probably other media and journalists. Further more if Ms Kelly and th e Board of Directors are to be believed, a number of people in senior positions in Westpac have withheld information from the board. These are serious matters that could lead to criminal sentences and jail terms f or senior Westpac executives if found guilty. The position I believe is now clear. All dir ectors have been made aware of the burger gate allegations and they should be questioning se nior management as to what went on. I believe also that the directors should instigat e an external investigation as it appears that there could have been a series of cover ups at very senior levels in order to hide this from the board. Note: The draft of this chapter and of chapter 6 were supplied to Ms Gail Kelly CEO We stpac by email 20th February 2009. Westpac were invited to issue a statement for inclusion in this book however the y declined to do so. When Banks Go Bad Page 60

Part 2 The big picture of what is wrong with our financial system "I believe that banking institutions are more dangerous to our liberties than st anding armies. Already they have raised up a money aristocracy that has set the government at defiance. This issuing power should be taken from the banks and restored to the people to whom it properly be longs. If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathe rs conquered. I hope we shall crush in its birth the aristocracy of the moneyed corporations which al ready dare to challenge our Government to a trial of strength and bid defiance to the laws of our country" Thomas Jefferson, Third president of the United States of America -1791 Maybe we should think ourselves lucky that banks here in Australia don t have acce ss to a market economy the size of the America. Unless you haven t watched the news or read a paper for the last 18 months you mus t know that something is not right in the world s financial system. However for most Aust ralians just going along working, paying bills and hoping they will have a job, all the talk of recessions and depressions seems a bit surreal, generally everything was appearing to go al ong ok in Australia and it s hard to see why the problems on wall street should effect us so much. Why is it that our prime minister was running around handing out money all over the place when we didn t even have a recession yet? Why is it such a big deal? The truth is that the average Australian has very little knowledge of even the m ost basic workings of our money system. The people that do know how the system works, are seeing that our entire society could be about to undergo some very big changes. The reality is that the world s financial and money system is at a crossroads, wha t happens in the next two to three years will affect everything in your life and your childre n s lives. When Banks Go Bad Page 61

Everything is up for change, the way we work, the way we live, how our society f unctions is going to change. I know that sounds a bit dramatic but it is really that big. Last year I was ited to the Prime Ministers briefing to small business in Brisbane. By the end of the briefing elt sorry for him. He had won an election that made him the leader of a very small country endent on the rest of the world s economic growth at a time when there was going to be sive economic and social shift in the world. I shook hands with Mr Rudd after the meeting and literally had the feeling he knew this was going to be a time that could label him as one of Australia s greatest rs, that gave us a new and brighter direction, or just as a failed labour Prime Minister lead Australia into depression. One that sacrificed our children s future to pay for debt d trying to protect our banking system from a disaster of its own creation. inv I f dep a mas

that reforme that incurre

Which direction will it be? Well that depends a lot on each person reading this book. The time will soon come when there will be opportunity for the people to start havin g their voices heard about how we want to live and how we want our money systems to work. To cr eate a real lasting change that will set the people free of banks you are going to have to stand up and be heard, you are going to have to educate yourself about our money system and d emand that governments take back control of our money systems from banks and the powerful individuals that control them. At some point we are going to have to demand that our government governs at we elected them for! When Banks Go Bad Page 62 that s wh

Chapter 8

Where does money come from?

This is probably the most important chapter in the book. I suggest you read and re read this until you really understand how our banks cr eate money and what this means to you. Once you understand this you will know why our debt is always increasing and mos t people will never be able to pay off their debt. You will understand just how wrong thi s system is and The Big Fat Lie that has been sold to us by the banks. You will also underst and why 95% of Australians don t know where money comes from. Test yourself on how well you understand this by explaining The Big Fat Lie to o ther people. Fiat Money and Fractional Reserve Banking. The concepts of Fiat Money and the Fractional Reserve System have given banks th e ability to create all this money that has been used to advance our society over th e last 45 years. Without these you probably wouldn t have the desktop computer, the space pr ogram, mobile phones, and advances in aeroplanes, cars and housing that we have seen ov er recent years. Fiat Money and Fractional Reserve Banking have enabled all sorts of research and development to be financed; they provided the capital for start up businesses an d paid provided the money that s paid your wages. The problem is that this money is not actually real; it s a lie, a fabrication, a gigantic Ponsi scheme. Used in a controlled fashion by responsible governments the system may have worked, but along the way governments across the world shed their responsibility to their people, they gave away their most important power, that of controlling money cre ation to private banks and individuals. And that is what we are now paying for. In these few pages I want to firstly alert you to what is happening and how our money system actually works, from there you really need to read more and educate yourself abo ut this. There needs to be public discussion. We need to be talking about Fiat Money and Fractional Reserve Banking at BBQ s and child care centres and at the pub, you need to have a n opinion and that opinion should be heard.

First, lets get some idea of what it is we are talking about with these definiti ons from Wikipedia and I ll try to give you a very condensed version of the world of making money. When Banks Go Bad Page 63

Money: is anything that is generally accepted as payment for goods and services and repayment of debts. The main uses of money are as a medium of exchange, a unit o f account, and a store of value. Some authors explicitly require money to be a standard of deferred payment. The dominant form of money is currency. wikipedia. Fiat Money: The terms fiat currency and fiat money relate to types of currency o r money whose usefulness results not from any intrinsic value or guarantee that it can b e converted into gold or another currency, but instead from a government's order (fiat) that it must be accepted as a means of payment Wikipedia Fractional-reserve banking is the banking practice in which banks keep only a fr action of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder, while maintaining the simultaneous obligation to redeem all deposits immediately upon demand. This practice is universal in modern banking. Prior to the 1800s, savers looking to keep their valuables in safekeeping depositories deposited gold coins and silver coins at goldsmiths, receiving in turn a note for their deposit (see Bank of Amsterdam). Once these notes became a trusted medium of exchange an early form of paper money was born, in the form of the goldsmiths' notes. As the notes were used directly in trade, the goldsmiths observed that people wo uld not usually redeem all their notes at the same time, and saw the opportunity to inve st coin reserves in interest-bearing loans and bills. This left the goldsmiths with more notes on issue than reserves to pay them with. This generated income a process that altered their role from passive guardians of bullion charging fees for safe storage, to interest-paying and earning banks. Fractional-reserve banking was born. Wikipedia So all that probably doesn t mean much yet, so let s go a little deeper. So money can be just about anything we all agree on to have value. Money was fir st used instead of barter and its early days modern money was in the form of Gold and Si lver coins. These were ideal because they were stable (they didn t rot) and there was limited supply so you couldn t just make more, they had a real value. In early Europe it was common to store your gold and silver with a gold store or bank, they would give you a piece of paper for the coins and you could come back and draw t hem out when you needed. The gold keeper would take a small fee for keeping your gold sa

fe. The next development came when these gold keepers found that they could lend out the gold they had to other people for a fee (interest). They said to their depositors I c an lend your gold out and as it is paid back with interest we can share that interest so both you and I will make more gold. This was the first development of what we today would consider ba nking. This form of banking was controversial to say the least and for many cultures at the time the collecting of interest (Usury) was still seen as illegal or immoral. In fact man y religions had banned usury and it is mentioned many times in the bible. Never the less, for th e crafty When Banks Go Bad Page 64

banker this was seen to be a great step forward, however it had other problems a lso. Firstly the amount of gold that could be loaned out was limited to how much gold he had in his bank and he had to keep some of it for people who wanted to draw it out. The amount h e kept back or his reserve was a fraction of the total amount and the first use of Fractional Reserve . Secondly as mining gold was difficult and there was a limited supply there was n ever much new gold coming into the system that meant that how much a person could borrow w as limited to how much gold he was able to earn to pay it back. Then the next major advancement that would create our current banking system cam e about. A group of smart and dishonest bankers came together. They realized that there w ould be almost unlimited money to be made if they allowed people to trade with their rec eipts for the gold that was deposited at the bank. They issued new notes (which we now know as bank notes) these could be both traded for goods or taken to the gold store and swapp ed for gold. They agreed to honour each others notes and from time to time they would swap Go ld around between them as necessary to keep the system running. These dishonest bankers could then lend bank notes rather than gold. Very soon t hey were lending out far more notes than they had gold. As long as there was not a run of people wanting to withdraw their gold they could in effect lend out the same amount of gold many, many times over. As always seems to happen greed got the better of them and they kept making more and more banks notes. The country was awash with money and the banke rs very rich. But the extra money in the system started to cause inflation as more people were prepared to pay more money for the resources available. Eventually the king started to get concerned. He knew the country was becoming v ery rich and all the Lords had a lot of money, so much in fact that some now controlled l arge amounts of land and lots of common people worked those lands. The lords were able to fee d and cloth the workers and also bring in new workers from the lands that the king s army conq uered. It had been a good system and the country had prospered while everyone had plent y of money, not least the king, who had been able to borrow large amounts of money to finance the army to raid neighboring countries, but the king now owed large amounts of m oney to the bankers. The solution was found the king would simply decree by fiat that the ba nk notes

were of a certain value. The king would receive a percentage of the printed note s and the bankers could resume loaning money to the people. Thus Fiat money and the unholy alliance between government and bankers was born. The basic problem of this system has been and still remains that when the banker s get greedy and create too much money there is inflation and a boom and bust cycle as the amount of money in the system increases too quickly (the boom years) and then reduces a gain during the bust years. When Banks Go Bad Page 65

Our Current Financial system. If you ask many people where banks get there money from that they lend out they will tell you it s from deposits. It s common for people to think that you put money in the ba nk and the bank lends that money out again to others making a profit on the difference in interest rates. Indeed the banks will encourage you to believe this, but it s only partly t rue. The money that you put into the bank feeds the Fractional Reserve System. Like t he dishonest gold stores above the banks lend out much more than what they have, wi th each dollar deposited being lent out up to 90 times over. As money circulates through the system it is continually multiplied creating new money or Debt Money over and over again. I know this is a hard concept for many people to uld think that the government or the reserve bank controls ed, and this they do, but cash or printed money is now a very ey in our system. In fact, it is the banks, not government y created. Money creation happens in two ways. 1. The Reserve Bank of Australia (RBA) makes money available to our commercial banks. They direct the mint to print cash money and also provide electronic fund s through the accounts the commercial banks. They may also in some cases buy government bonds (this is what would be referred to as the government printing i ts own money). 2. Commercial banks use the fractional reserve system to turn a small injection fro m the reserve (or money borrowed from overseas) into a large amount of money through creating debt money or credit as they like to call it. The amount of Debt Money in the system is now many times RBA. This is where the money For an example of this let s ts and no one hoards cash so it all larger than real money or base money issued by the you and I use everyday comes from. use the simplest model -only one commercial bank exis goes around in the system. get their heads around. Most wo the amount of money being print small part of the amount of mon that control the amount of mone

If there is a reserve ratio of 10% and you deposit $100, the bank will lend out to a customer $90 and keep $10 in reserve. This is where it stops for most people and they und erstand that the bank no longer has all of their money; they have lent part of it out. But it goes further, much further than that. The fractional reserve system allows the bank to continue this process.

The person they lent your $90 to buys something from a shop and the shop keeper deposits his takings ($90.00) in the bank. The bank now holds back 10% ($9.00) and lends out another $81.00. When Banks Go Bad Page 66

From the original $100 there is now $171.00 being lent out by the bank and the b ank has 19.00 in cash reserves. They have two people who think they have deposits with t he bank (you for $100 and the shop owner for $90) It doesn t end there either. That last $81 lent out will be deposited by another s hopkeeper or tradesman and again the bank will hold back 10% or $8.10 and lend out $72.90. Th e bank will continue cycling the money through the economy collecting interest on its l oans and paying a smaller or no interest on its borrowings. If you were to follow your $100.00 through system like this until the reserve am ount exhausts the amount that can be loaned out, you would end up with it being loaned out 67 times. The actual figures look like this. Assuming a reserve ratio of 10.00%, a deposit interest rate of 2.00%, a loan int erest rate of 6.00%, and an initial deposit of 100.00, the model's results are as follows: Total Deposits: 999.23 in 68 deposit accounts Total Loans: 899.23 in 67 loan accounts Total Reserves: 99.91 Total Reserves + Last Deposit: 100.00 Interest In: 53.95 Interest Out: 19.98 Net Profit: 33.97 As you can see from the above rather than the bank just taking your hundred doll ars and lending it out again where they would make $4 per year ( 6% lending rate less th e 2% they give you) with this model they can make $33.97 per year on the $100.00 you depos it. If you want to understand this even more and play around with different figures there is an excellent online calculator you can use at. http://www.novapoly.com/articles/finance/fractional-reserve-banking-model/ Now if you have your mind around that, I want to take you a step further. The fr actional reserve ratio is crucial in this model of the economy, and governments used to h ave control of those reserve ratios. However this is where it got really out of control. In the push for deregulation the government and the reserve bank gave away control of that reser ve ratio figure. Now Australian banks have the option of using a reserve ratio of 9% or they can just go for it and make a statement that they carry sufficient reserves to survive a 5 day name

crisis which is their term for a bank run. So in theory there is little if any control over how much money a bank creates. When Banks Go Bad Page 67

If you use the same calculations as above but put in a reserve ratio of 1% you w ill find a bank can lend out $9,991.71 for each $100.00 of new money that the Reserve bank of Au stralia creates. The figures would look like this: Total Deposits: 9991.71 in 706 deposit accounts Total Loans: 9891.71 in 705 loan accounts Total Reserves: 99.92 Total Reserves + Last Deposit: 100.00 Interest In: 593.50 Interest Out: 199.83 Net Profit: 393.67 If you do that try inputting a lending rate of say 12% which is about what a sma ll business customer overdraft will cost or even 16% which is what many Credit Cards are ret urning banks. You can see why they want you to use a credit card rather than cash. Now obviously the system is a little more complicated than that, because there a re more banks and more money out in the system in the form of cash (but the amount of ca sh is much less now that we have electronic banking). With the modern banking system it jus t means that the banks agree to carry balances for each other so at the end of each day all t hose transfers between banks are totaled up and the banks charge each other interest on the amo unts they owe each other. This complexity also makes it easier to manipulate the system and there is evide nce to suggest that our banks have actually just been lending out money with disregard to any fractional reserve ratio at all and then topping up their reserves as need from borrowing both overseas and from our own reserve bank when required. See Prof Steven keens arti cle on his blog regarding this point. http://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/ So this is how money is actually created in Australia, the government does not c ontrol the amount of money in circulation in Australia, the banks do. Now there are 3 big problems with this. 1. Notice the banks create the loan money but not the money that is required to pay the interest. That means that technically the only way interest can be paid is by mo re Debt Money being borrowed into the system so the money is available for interest to b e

paid. It s like a giant pyramid scheme and this is the reason that usury was outla wed for so long. It enslaves people into debt. When Banks Go Bad Page 68

2. The system can only continue to function while debt levels and the amount of mon ey in the economy continue to increase, if the growth stops then the whole system s tarts to collapse. This is not a new thing, it has happened before in history and ever y time in the past this system has been used it has collapsed. 3. Although the bank is holding in the above example $9991.23 in deposits for 706 different customer accounts in fact it only has $100.00 in cash. You need to understand how unstable that is. As soon as the amount of money in the system st arts to go down by people withdrawing it from the bank or by the banks having to mark down large amounts of defaulting loans the whole system collapses. You need to let this sink in. It s not just that they have lent out the money you deposited in the bank. The banks by manipulating the Fractional Reserve System have been able to position themselves so that they now control the creation of money. With the acc eptance of debt they are able to just create money through an entry on a computer and it s im possible for it to be paid back without the system collapsing. This is why the banks urgently needed Kevin Rudd to agree to guarantee all depos its in Australian banks because they know the money is simply not there to repay deposi ts. Now we the taxpayers are responsible for all this fake money. When the system starts to collapse, as it must, the taxpayer is to pick up the bill. Now I don t know about you but I figure it s like this. I don t really trust politicia ns that much, but I trust banks a lot less. I believe we elect our politicians to govern our country, to do the best for us and our country as a whole. We didn t elect them to hand over t he most important part of governing our economy over to banks. Successive governments have handed banks more and more power, removing regulatio ns and government controls allowing them to self regulate to the point, as we have seen , banks are above the law. Did you notice that when Kevin Rudd came to power there was talk of bringing the banks into line and forcing them to reduce credit card rates and make banking fairer? That lasted for about three months and then reality set in. Within a few months the banks were g iving the government a lesson on who is in control and the government turned around to sta rt supporting the banks. You may not know it but even the future fund was raided to support the banks, public money has been spent supporting banks share prices and doing deals

while our bankers continue to pay themselves multi million dollar salaries out of your tax ation dollars. This system of Fiat money and modified Fractional Reserve Banking has never real ly worked, it is unstable by design and it s that instability that keeps you a slave to the system. Several attempts have been made to break away from this system over the last thr ee hundred years. There is a lot of good reading about America s money systems and the variou s attempts to set the American people free of this form of control, even down to s ections of the When Banks Go Bad Page 69

Constitution of the United States of America being written to try to prevent thi s system from gaining hold again. I really suggest that you do some searching on the web aroun d the terms Debt Money , Fractional Reserve and Fiat Money . Unfortunately bankers were able to manipulate corrupt or naive politicians into allowing this system to develop aga in. And again we are faced with a collapse of the system. The current financial crisis that we see unfolding can be traced back to the mid 1960 s. Since the end of World War 2 western financial systems operated under what was known a s the Bretton Woods System, named after the place where the agreement was made in 1944 . This allowed the banks to create money with control of certain reserve ratios gi ven to Government. It was agreed under this system that the United States Dollar would be a reference currency and that the US Dollar itself would be backed by Gold. Theref ore all currencies were indirectly linked to gold and no country could go printing a lot of money without devaluing their currency. This system served until the mid 1960 s when it became obvious that the USA Federal Reserve Bank (The Fed) was cheating on the system b y producing more money than they had gold to back up (some things never change). The world was steadily becoming awash with US Dollars, American companies were s tarting to buy up assets around the world and American bankers seemed to have plenty of money to lend. Other countries were upset that American bankers had manipulated the syste m and cheated on the agreement. Some countries, lead by the French, started to demand gold in return for their stocks of American Dollars. Of course the Americans could not l et this happen, they would be caught out, unable pay in Gold so in 1971 president Nixon, backed into a corner by the bankers, removed the gold backing from the US Dollar. Since then bankers have been free to create as much debt money as they wanted and have done so with little regard for the consequences to ordinary people. It wasn t too long before we joined the party as well. The Australian banking syst em was deregulated. The government sold off the commonwealth bank and gave away control of our financial system under the guise of joining the free market economies of the wor ld. It is only now as we wake up from the party we realize maybe the free market eco nomy wasn t so free after all, and once the bed stops spinning we are going to work out we have

one hell of a hangover. So the reality is The Government or Reserve Bank of Australia does not control t he creation of money in Australia, our commercial banks do through the modified fractional res erve system and how much they create is almost entirely unregulated. But remember, your bank creates with a click of the mouse the debt money that yo u borrow, but never do they create the interest that has to be paid on that borrowing. The only way that interest can be paid is for more money to be borrowed and circulated in the syst em. This is why we will for ever be in debt until we demand that government takes back the p ower of creating money. When Banks Go Bad Page 70

Chapter 9 So where did all the money go? The question so often asked is, if in the good times all this extra money is cre ated where does it go during a recession and how can the value of assets ( like my house) drop s o much? Like everything there is a complicated explanation and one that the rest of us c an understand. Since I m no economist lets go for the simple one. We saw how banks created Debt Money or credit as they like to call it from nothing and basically it goes backwards the same way. As the bubble gets to the point where it can no longer sustain itself it deflates and this Debt gets destroyed as bank loans are called in. Look at it this way. Say a bank lent a whole load of money to a company to conti nue to grow its business; it seems like a good loan. The company is listed on the stock exch ange it shows good profits and it has lots of real estate, say childcare centers for instance. The reality is however, the profits don t actually come from looking after kids bu t from the value of the shares and property and the business as a whole continually increas ing. While the music is playing all the kids are happy and there is expansion. Money is applied to growing the business (buying or building new child care centers) but before it has to be paid back there is more borrowing for more growth and on it goes. There is lots of fun and the kids are laughing and screaming as the music gets faster and faster it s so exciting. Bye now the music is so fast that the kids are almost falling over each other. W hen a business gets to a certain size it becomes harder to grow. It might be that finding sites gets more difficult or you have bought out most of your competitors and there is no more t o take over, whatever it is it causes the return on that debt to slow down (economists could call this the law of diminishing returns) once this happens more debt no longer brings in enou gh new growth to fund the business expenses and the interest on the borrowings and it g ets harder to borrow new money to pay back the interest on the old money. At some point reality hits and the music stops. Once the music stops there is a mad race for a chair and it s only then that everyone realises that there isn t enough chairs (or e nough assets) for all the debt that is owed. The kids are racing for chairs knocking each othe r over, in the

process there are skinned knees and tears everywhere. When an economy is good, businesses can fail and there will be someone to buy th e assets at a reduced but reasonable value. But think what its like if the whole economy is getting to that point. There are no kids that want to take the risk of playing that game any mor e, even the ones that weren t playing are worried, they have seen all the other kids coming aw ay crying and bleeding and start to think that maybe this is not such a good game after al l. This is being played out in all sorts of areas from Business lending to Margin l ending, Credit Card debt to Car Loans right across the economy. When Banks Go Bad Page 71

And from a few skinned knees and some tears the attitude of the market changes. When the attitude of the market changes no one really wants or needs those new a ssets. Most businesses are shrinking, so why buy factories or equipment, why take the risk u nless you can buy it really cheap. Banks repossess these assets and sell them off to the highest bidder for a fract ion of the book value. The bank is forced to write off the difference between the loan and what the asset was sold for. In this process they have destroyed that debt money that they had crea ted with their lending. Any asset, whether it is a factory a car or your house in fact has no real value t is only worth what a willing buyer is prepared to pay for it. Some assets are more stable than others, simply because in a recession or depres sion people still need to eat, to be clothed and have shelter. Therefore basic clothing, foo d and housing will maintain a greater percentage of its value than say expensive foods, trendy clothes and luxury holiday apartments. Share markets for example are very liquid and its not necessary for us to keep shares in order to be able to survive so they are sold down very quickly which is why a share market crash is one of the early signs of an impending recession. There are two further points to consider. 1. With the fractional reserve system debt money is multiplied on the way up and so it is on the way down as well. Remember how the bank turned $100.00 into $9,991.71 of debt money through the banking system? Most economists fear that debt process wi ll continue to unwind causing the entire system to collapse. This is the reason tha t Governments all over the world are throwing taxpayer dollars at our financial sy stem rather than risk its entire collapse. 2. The intensity of the unwinding may be relative to the quality or the usefulness of the assets. That could determine the bottom price of those assets and how much of th e debt money will be recovered. Let s consider point 1. In theory it may be possible to have some form of orderly unwinding at least for a while if you can keep everyone believing that the money they have deposited in the bank i s safe. This is why the banks convinced the government that you and I the taxpayers here shou i

ld guarantee all cash deposits in banks. So far it has worked there has not been a run on our banks, however if outside influences still cause an unwinding, the fractional re serve system will be exposed for what it really is and those guarantees would be called on. I n effect the bank would only survive because the Government (us the taxpayer) would have to c ough up the money to cover the shortfall. That expense could be massive and our governme nt would have to borrow to cover it making our children pay it back for years to come. When Banks Go Bad Page 72

This is a huge issue. Your government

us, are now in a now win situation, having

guaranteed something that we have very little understanding of and no control ov er. The bankers have been smart, maybe they were too big to fail before, but now if they do fail, we pay the bill. Point 2 This concerns me although I have to confess I have no real idea how this aspect of the problem will play out. At this point I d like to introduce a definition of what is an asset and what real ly is not. This definition I have borrowed from Robert Kiyosaki. It s really simple and serves my purpose here. An asset is anything that puts money in your pocket . Now let s look at what has happened with all that Debt Money that has been created , much of it has gone to build or buy things, from machinery to factories, seed for planti ng, tractors for harvesting, mining equipment and so on. These things all fit our definition of a n asset (having said that they may be sold off before they actually produce the income) If debt is spent on an income producing asset the income produced by it will add to the countries GDP or income. In fact in theory if you had a 100% return on that inve stment the GDP would rise by the same amount as the debt. But remember the graph from chapter 1. The ratio of debt to GDP has skyrocketed from 55% of GDP in 1985 to almost 160% in 2007. All that debt that the banks have been cr eating has not gone to income producing assets. It s gone into liabilities (something which t akes money from your pocket) or as Kiyosaki calls them Dodads like plasma TV s the latest pho ne, game station or anything else that you don t really need. We now have bugger all of a manufacturing sector in Australia, we import almost all consumer goods, have a walk though Harvey Normans and try to find 10 things made in Australia. Even our basic items like food, shelter and clothing are increasingly imported or owned by foreign companies. So most of those Dodads we bought gave no lasting be nefit to the Australian economy. We have become a service society, a bunch of consumers running around selling th ings to

each other that none of us really need in the first place and it s all paid for wi th borrowed money. Like many others I have a really uncomfortable feeling about this but I doubt th at anyone truly sees the implications of it yet. When Banks Go Bad Page 73

So with that in mind let s have another look at that graph from chapter 1

Source Prof Steven Keen This graph will probably have more meaning to you now; you can see the boom in t he late 1800 s when money was flooding into Australia from the UK. In fact in the late 180 0 s Australians had the highest per capita income in the world. Then in the 1890 s the supply of money started to decrease and Australia had its first depression. Some of the interesting happenings from these years are listed below. Notice the level of social upheaval that went with Australia s first depression also. 1890-The Great maritime strike 1891-Australian shearers' strike 1891-16 small banks and building societies collapse in Melbourne 1892-Broken Hill strike 1892-133 limited companies go into liquidation in Victoria alone 1893-Major international depression 1893-Australian banking crisis of 1893: the Federal Bank collapses; many financi al institutions, including several major ones, suspend trading 1 May 1893-Government of Victoria implements a five-day bank holiday to address the panic 1894-The worst of the economic crisis was over and the task of rebuilding societ y started. There were some reforms to regulation and law with a view to preventing future abuse. You can find the above referenced on Wikipedia and follow links for more detail. When Banks Go Bad Page 74

Wikipedia notes the following: The 1893 banking crisis occurred in Australia when several of the commercial ban ks of the colonies within Australia collapsed. During the 1880s there was a speculative boom in the Australian property market. Australian banks were operating in a free banking system, in addition to few legal restrict ions on the operation of banks, there was no central bank and no government-provided deposit guarantees. The commercial banks lent heavily, but following the asset price col lapse of 1888, companies that had borrowed money started to declare bankruptcy. The full banking crisis became apparent when the Federal Bank failed on 30 January 1893. By 17 Ma y, 11 commercial banks had suspended trading. ( source Wikipedia reference Hickson, C. R. and Turner, J. D. 2002. Free banking gone awry: the Australian banking crisis of 1893. Financial History Review 9:147-167) There was then a long slow rebuilding process and it wouldn t be until the 1920 s wh en Australia s debt levels would start to increase again. This time the glory years w ere cut short by the great depression when money supply again became tight and our debt levels dropped again. I believe we should all do something really sensible in the next few week s go find an old person and talk to them about the depression. Anyone who has lived through t hat is a wonderful resource for you. Moving along the graph, note also the stable years provided by the Bretton Woods agreement from 1944 to the mid 1960 s when the American money supply was cranked up. The 1970 s recession was the result of the influx of foreign money working it s way through the system and the collapse as many of the ventures failed to provide the antici pated returns. Co-incidentally it was also the time credit cards were introduced which also inc reased the debt levels. By 1980 s you can see another boost resulting from deregulation of our banking sec tor with banks pushing money into the system. This is the time of the banks throwing huge amounts of money at Alan Bond and many other entrepreneurs, resulting in the inevitable collapse of the recession we had to have . By the mid 90 s the banking sector had found what they believed to be the answer, if a

bubble forms in an asset area and the inevitable collapse starts to happen, the answer is to pump more money into the system, this creates a bubble in a new market sector an d the banks can move on, writing off one set of losses with new gains in another area. This is how they were able to move through the Tech Wreck . When the market for tech stocks collapse d they were able to push money into new areas to compensate. One of these areas was housing, so with cheap money available to anyone they cou ld convince to borrow, there has been a significant increase in house values, with loans given to When Banks Go Bad Page 75

people who would never be able to afford to repay them. In America this resulted in the sub prime crisis with an oversupply of houses here it resulted in increased prices a nd a housing affordability crisis. The following graph shows house price trends in Australia to 2006 house prices a re a reflection of both supply and demand for houses / land and the money available t o build. Provided by ABC Television It would appear that much of that new Debt money has gone into housing. That may make you feel better since houses are considered to be an asset. But are they? If a p roperty is negative geared does it fit our new definition of an asset -is it actually putti ng money in your pocket and what if incomes drop and the tax benefit is lost? So what about the h ome you live in? Does it put money in your pocket (or at least cost you less than you would h ave to spend to rent somewhere else?) Your bank will tell you that your car and even your gol f clubs are assets but whose assets are they yours or the banks? Another area to benefit from all this Debt Money has been the stock market. With the banks promoting margin lending their financial Advisors would encourage people to borrow money and invest it in the stock market. Companies could also borrow easily and without having to demonstrate a realistic return on the funds borrowed. They appeared to be growing but in reality all they were doing was growing on borrowed money. The stock mark et boomed with huge amounts of Debt Money fuelling it. When Banks Go Bad Page 76

When you look at it from this point of view its easy to see how all sorts of ass et classes can be priced up simply because there is a flood of Debt Money in the market looking for somewhere to be spent. As the supply of money decreases again the effects of leveraging multiply the pa in, if you have assets bought with borrowed money that are now worth less than the debt ser ious problems start to occur. Currently our banks have governments in a bind, they are selling the story that if the consumer and business are no longer borrowing then government (which in reality is the taxpayer you and me) should borrow and push the funds into the market to re stim ulate the markets. Governments are going along with this and are mortgaging our children s future to prop up a system that many say must and will fall over, in order for some order to be rest ored in the world financial system. Will we head to another world depression anyway, but with massive borrowings tha t can not be repaid, or will somehow another bubble be found to set up a growth in debt ag ain in the hope of pushing the inevitable forward a few years? Whatever happens the next year or so will determine how long this world recessio n or depression will be. What is also necessary though is to start to look forward and to learn from the lessons so that we can be better prepared to these cycles in the future. By that WE, I don t mean government or economists or bankers, I propose something really radical. What would happen if instead of keeping the general population in the d ark and making them slaves to debt, we actually empowered them to learn about our financ ial system and how money is created? What would happen if we understood who is controlling our money and our lives uld we let the same people have control again? When Banks Go Bad Page 77 wo

Chapter 10 So, where to now? I hope I ve opened the door for you into the world of money and banking in Austral ia. To recap We have seen how banks have been using unfair and illegal methods to take money from you. We have seen how you can protect yourself against that and get your money back. We have seen how small business is at the mercy of the banks and has no where to turn for help. We have seen how banks become so self serving that they can even let good people on their boards fall victim to the self serving system. Then we looked at the big picture: The reality that most money banks. is not created by governments but by our commercial

We saw that most of what we think is money is actually just debt circulating thr ough our economy. We saw that our Governments have lost control of money and of debt creation, tha t they have unwittingly allowed government and the population be controlled by the se companies and individuals. We saw that the cycles of boom and bust are actually created by bankers and that our current debt levels have put us in line for a huge bust. We saw a lot of things that aren t very good but before we were blind, and now we see. Where you go now is up to you. What you have learnt so far in this book is just a starting point but it s my inte ntion to support you in educating yourself and your children in how our money systems work so tha t rather than being a slave to it you can be a master. Many of my more spiritual friends speak of the year 2012 being a significant tur ning point in our society, a time when we start to consciously create for the good of all not just for the few. I trust they are right, because in this current financial collapse we are being handed a golden

opportunity to create a new money system where all people can participate. That system will only happen if people like us educate ourselves and step up to take a role in de manding that our financial systems of the future be controlled, not by private enterprises or wealthy individuals, but by Governments of the people, for the people. When Banks Go Bad Page 78

Become part of an educated society, through our web site, through our chat rooms and message boards and join with others in discussing these things. Via the web site and email newsletters we will also have recommended reading alo ng with free articles and gifts from others seeking to create a positive change in socie ty. We will attempt to keep you up to date in a simple readable form and provide opp ortunities for you to become more educated about money and how to prosper in the years to c ome. Finally, I would like to thank you for reading this far and for being concerned about what is happening to our country and our economy. This information is something that nee ds to be shared and discussed and for average Australians to have an opinion about. So I would invite you to share this information and discuss it with friends and with your children for its going to be our children that have to pay back the money that i s being borrowed to prop up our broken system. Profits from this book go to creating a fairer society for all of us, to pay for the development of our website and its ongoing growth, so I ask you respect that. Rather than ju st passing this book around, please direct others to the web site so that they may purchase this book and contribute to the discussion as well. If you are registered on the site there ar e many other free gifts and book summaries that we do encourage you to share free of charge with y our friends. If you would like to earn money from sharing this book or donate to your favouri te charity you can sign up to become an affiliate and can be paid a percentage on sales of this book. When Banks Go Bad Page 79