Think Twice Finance

The Four Pillars or the Four Stooges?

The beleaguered customers of Australia’s large retail banks are a little like galley slaves. They soldier on day after day, fed fee-infested gruel and constantly lashed by the mortgage whip, but when they have seditious thoughts, they ask themselves “If we killed the officers, who would know how to get to port?”

These conflicting thoughts have been brought into sharp relief in the past months. The slaves have been grateful that the galley steered clear of the subprime mortgage tempest, but on the other hand, it was off-putting when the mortgage whip was raised again in spite of the relatively friendly trade winds.

But now, rumor of the possible bankruptcy of Countrywide Finance, the pilot at the helm of the Subprime juggernaut in the United States, hit the markets yesterday. To my shock, amazement, dismay and every other bad adjective I can think of, the big Australians had taken a $1 billion piece of Bank of America’s earlier capital rescue of Countrywide. This is the financial equivalent of swearing one’s allegiance to Rome a month after the Goths sack the city.

There was no article featuring this fact in The Australian ([11/1] apologies to Scott Murdock who did write such an article, which goes on to speculate whether the reason for the investment might be further undisclosed exposures.)

Does this mean the galley slaves are being taken for granted? It is one thing to take them for granted under ordinary conditions, and quite another to expect them to stand for a whipping on the way to the sacking of Rome. What’s that rumbling sound beneath the decks?