This article was first published in the Wairarapa News in November 2012

Wairarapa MP John Hayes recently questioned the Minister of Finance about whether trading banks are profiteering – ‘gouging customers’, as he put it, with high overdraft interest rates. Farmers, said Mr Hayes, are especially hard hit. Three out of New Zealand's Australian-owned big four banks had reported record results and between them generated net profits of $3.5 billion for the year, up from $3.2 billion on the previous year.

The Minister echoed the Reserve Bank governor’s recent defence of banks, reasserting that the local mortgage market is competitive and that bank profits are in line with those in most developed countries.

This is a tacit admission by both men that banks operate as a pack and that bank profiteering is ubiquitous.

Neither Mr English nor Mr Wheeler concedes that trading banks comprise a cartel, or minds the unnecessary outflow of billions of dollars annually from local communities. In their unquestioning acceptance of bank profits, these officials can hardly be said to be serving the common good.

When considering the common good, it’s vital to distinguish trustworthy management from product marketing. It’s in communities’ interest that banking be a profession, not a business. Professional compensation is just; maximising profits at others’ expense is something altogether different.

Professional bankers would be stewards, personally responsible and accountable for the safety of the funds entrusted to them. They would put the service of their clients before their own financial interests; they would not be granted charters to operate banks as business corporations or be legally authorised to earn profits for shareholders.

Banks aren’t going to reform themselves into professional services of their own accord, of course. They’re in clover: they’ll continue to aim to farm the likes of farmers. It’s only by reducing our dependence on bank finance that communities can hope to realise bank reform and avoid being gouged forever.

The primary means of reducing our dependence on expensive loans is by organising ourselves into mutually supportive pools. Federated Farmers and Fonterra are examples of effective information and marketing pools. Since farmers are the first to notice that the returns from the land they work can't keep pace with the exponential growth of the interest from their loans, it would be logical for farmers to form similar federations or cooperatives specifically to access interest-free funding.

One of the most ingenious methods for practically eliminating interest was first adopted by Swedish farmers when the JAK Members Bank was founded to strengthen the rural economy in 1965. Each farmer began making regular contributions against the day a major purchase was needed. Today this mutually supportive pool boasts some 40,000 members.

It would be sensible for twenty farmers, for example, rather than make individual mortgage applications and pay bank interest twenty times over, to take turns at making use of their own pooled income. Creating such a pool is like building a reservoir in a valley, from which all the farmers whose streams contribute can draw for free. Methods of conserving local wealth demand at least as much of our attention as we give to local water conservation schemes.

Ultimately, there’s little point in railing against banks. They’ll continue to exploit us for as long as we let them. Our efforts on behalf of our communities become more effective when we realise there’s a banker in each of us. We choose what we do with our money. Whether that choice involves a professional, service-oriented approach to our fellow creatures or effectively squeezes them for all they are worth is a matter we decide every morning we climb out of bed.

Living Economies offers free ongoing administrative support to any group of individuals or businesses interested in forming its own pool. If you consider that saving the hundreds of thousands of dollars it would otherwise cost to service bank loans is worth the modest effort involved in pooling funds with others, we can put you in touch with one another.