House of Commons Hansard #80 of the 41st Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was banks.

Topics

Presence in Gallery
Oral Questions

3 p.m.

Some hon. members

Hear, hear!

Oral Questions
Point of Order
Oral Questions

3 p.m.

Liberal

Mauril Bélanger Ottawa—Vanier, ON

Mr. Speaker, yesterday, in response to a question from one of my colleagues to the Minister of Public Safety about a bill that was to be and actually was introduced this morning concerning police powers with respect to the Internet and the need to investigate, the minister told all members of the House—including myself—that if we do not support the bill, we stand with child pornographers.

I have three grandchildren, and I find these comments insulting and offensive. I believe that this applies to all members of this House. You cannot say to someone that if they do not support a bill, they are siding with child pornographers.

Does the minister intend to withdraw his remarks and apologize to his colleagues in the House?

We will recall that when the hon. Ed Broadbent and the right hon. Joe Clark left the House they complained about the low level of debate. It goes without saying that I have no problem debating a bill. However, in light of the dishonourable insults addressed to members of this House, I believe that you must intervene, Mr. Speaker.

Oral Questions
Point of Order
Oral Questions

3:05 p.m.

Conservative

The Speaker Andrew Scheer

I will take the matter under advisement and get back to the House if necessary.

Short Title of Bill C-30—Speaker's Ruling
Point of Order
Oral Questions

3:05 p.m.

Conservative

The Speaker Andrew Scheer

Further to the point of order raised by the member for Saanich—Gulf Islands, I would like to provide clarification concerning the introduction of the government bill during this morning's routine proceedings.

Following the introduction of Bill C-30, An Act to enact the Investigating and Preventing Criminal Electronic Communications Act and to amend the Criminal Code and other Acts, there was an error in a limited number of courtesy copies distributed to the House. These have since been replaced with the correct version. I want to reassure the House that the bill, as introduced, was in its correct form and, therefore, is properly before the House.

I regret any inconvenience this may have caused members.

The House resumed consideration of the motion that Bill S-5, An Act to amend the law governing financial institutions and to provide for related and consequential matters, be read the second time and referred to a committee.

Financial System Review Act
Government Orders

3:05 p.m.

Conservative

The Speaker Andrew Scheer

The hon. member for Yellowhead has two minutes left to conclude his remarks.

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3:05 p.m.

Conservative

Rob Merrifield Yellowhead, AB

Mr. Speaker, this is important legislation that we have before us. As I only have a minute and a half, I will reiterate some of what I have said. I mentioned how important the financial system is to Canada, how well we are actually doing compared to other countries and that some of the changes are a tweaking and of a technical nature of the Financial Systems Act.

One of the issues I was talking about before the question period break was that no financial institution can invest more than 10% of its assets in another international jurisdiction. That is to make certain that the system is protected and Canadians are not overly exposed. In fact, the Canadian Bankers Association, which we would think would be a bit concerned about this kind of imposition, said that it fully supports it.

We do have a great system in Canada. It is the best in the world. We have the greatest finance minister in the world. We have been recognized by international agencies in countries around the world as having done our job and done our job well. We have low taxes, stable finances and great opportunities. I believe that our best years are yet to be realized in this country if we just continue the course.

This legislation should meet with the approval of all members of the House as we move forward. I encourage everyone to consider this bill for what it is worth and the importance of it so that it can be completed in time for the April 20 deadline.

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3:05 p.m.

Liberal

Scott Brison Kings—Hants, NS

Mr. Speaker, it is with pleasure that I rise today to speak to this legislation. The legislation does not make extraordinary changes to the Canadian banking system but I would like to speak to some of the changes that it would make.

I will be sharing my time today with the hon. member for Markham--Unionville.

The reality is that the Canadian economy is doing better than some of the other global economies with which we compete. There are three principal reasons for that. One is the fact that we do have a somewhat stronger fiscal situation than other countries, and I will speak to that in a moment. Second, we are riding a global commodity boom as a country that has a remarkable amount of natural resource wealth in oil and gas and minerals. Third is the prudential strength of our banks and our banking system.

I have heard throughout the debate today the Conservatives taking credit for all three. First, in terms of the fiscal situation, when the Conservatives were elected in 2006 they inherited the best fiscal environment of any incoming government in the history of Canada with a $13 billion surplus. The Conservatives spent through that surplus at a rate of three times the rate of inflation and put Canada into a deficit position even before the downturn of 2008.

Second, it is very hard for the Conservatives to take credit for the fact that we are benefiting as a country from an oil and gas and mining boom. The recovery, as it exists in Canada, is largely focused in a couple of provinces. Over 60% of the new jobs created in the last year were created in one province, Alberta. We know that we are hemorrhaging jobs in other parts of the country. We are seeing a bit of a Dutch disease where a commodity boom is shoving our dollar higher and is driving out and crowding out value added jobs in some of the other provinces, like Ontario, Quebec and the Maritimes. However, the Conservatives almost seem to be taking credit for the strength of the overall numbers, which would be a little like saying that they were responsible for putting the oil and gas under the ground or the potash under the ground in Saskatchewan. They cannot take credit for that, obviously, and they cannot take credit for the oil and gas under the water off Newfoundland because everyone knows that was Danny Williams.

The fact is that it gets a bit silly in the House sometimes when the Conservatives go on and on taking credit for where the Canadian economy is when they did not really have a lot to do with the decisions made or the good fortune we have as a country in terms of our natural wealth.

The third area where the Conservatives have been doing this throughout the day is when they take credit for the prudential strength of the Canadian banks. It was, of course, in the nineties when Paul Martin, as finance minister, and Jean Chrétien, as prime minister, fought the global trend of deregulation of the financial services sector. At that time, people in the Reform Party were critical of the Liberal government and said that we were missing out on the global trend of deregulation and that--

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3:10 p.m.

Conservative

The Speaker Andrew Scheer

Order, please. Someone has left a phone behind again and it seems to be ringing. It seems to have stopped now. If members hear a phone going off again they can bring it up to the front and we will hold it for whomever it belongs to.

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3:10 p.m.

Liberal

Scott Brison Kings—Hants, NS

Mr. Speaker, the reality is that, in opposition, the Reform Party fought vigorously against the decision of the Chrétien government to maintain strong regulations around Canadian banks, the very regulations that kept Canadian banks from following the global trend and off the cliff like the lemmings in Europe, in the U.K. and in the U.S.

What did the Conservatives do in government in terms of the prudential management of banks? One of the first things the Minister of Finance did in 2006 in his first budget was to bring in 40 year mortgages with no down payments. This created the loosest approach to mortgage lending in the history of Canada.

Furthermore, in 2007, the Conservatives went further. Under the Liberal government, Canadians needed mortgage insurance if the down payment on their mortgage was less than 25%. In 2007, the Conservatives changed that and lowered the threshold to 20%.

Those were just some of the changes they made to create looser mortgages, looser regulations, which led to, among other things, what many economists are now referring to in Canada as a housing bubble, certainly a personal debt bubble. We have the highest level of personal debt in Canada today, which is $1.53 of personal debt for every dollar of annual income. That is the highest in our history and it is higher than that of our neighbours to the south in the U.S.

The February 4 edition of The Economist magazine states:

When the United States saw a vast housing bubble inflate and burst during the 2000s, many Canadians felt smug about the purported prudence of their financial and property markets.

It went further and cited the Prime Minister at that time boasting in 2010. It then states:

Today the consensus is growing on Bay Street... that [the Canadian Prime Minister] may have to eat his words.

The Economist then said that Canada's housing prices had doubled since 2002. This has coincided with a massive growth in our personal debt levels. We see a great increase in speculation in the housing markets, particularly in some hot markets, such as Toronto and Vancouver, among others, and we see this growth having occurred, in part, in a response to the deliberate decisions by the Minister of Finance to loosen up debt and mortgage regulations back around 2006 and 2007.

The government must be held to account for those decisions, which actually helped create what we hope is not a housing bubble that ends badly but is certainly a personal debt bubble that needs to be managed.

It is important to realize that the Conservative government cannot take credit for the prudential decisions made by the previous Liberal government, and that the current government must be held to account for some of the foolhardy decisions it made as a government to loosen banking regulations and to loosen mortgage rules early in its term.

I want to note a couple of other things about Bill S-5 because some of the changes would have an impact on Canada's incredibly strong banking sector and its role in the world. One change is requiring the minister, in order to approve foreign acquisitions by a Canadian entity, under certain circumstances, for instance if the foreign entity being acquired has equity of at least $2 billion and if the acquisition of the entity would increase the size of the Canadian entity by at least 10%.

Under those circumstances and conditions in this legislation, it would mean that the Bank Act would require the minister to approve the acquisitions of these foreign financial institutions by Canadian banks. That is a change. The previous rules simply required that the Superintendent of Financial Institutions, OSFI, would approve those within the public service, within the bureaucracy.

Recent deals that would have triggered this mechanism of ministerial approval would have been the Manulife John Hancock deal, the TD Commerce Bancorp deal, the BMO Marshall & Ilsley deal and Sun Life. There are other large acquisitions that have occurred in the last couple of years: Scotia Bank bought Banco Colpatria, Colombia's fifth largest bank, and it also bought the Royal Bank of Scotland's Colombia assets as well 20% of the Bank of Guangzhou.

I want to raise as a concern, that the government consider the politicization of these foreign investments by our Canadian banks and the potential risk to the capacity that we have in doing so. The fact is we now have some of the largest banks in the world that are world leaders in terms of governance and success. With the capacity to significantly increase Canada's influence in the world in terms of a very important financial services sector, this politicization could lead to some highly political and potentially bad decisions in the future which would limit the role of Canadian banks in the world.

I raise that as a concern and I look forward to questions from my colleagues.

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3:15 p.m.

NDP

Brian Masse Windsor West, ON

Mr. Speaker, when I listened to my colleague, I was reminded that there seemed to be a chapter missing, and that was the chapter where John Manley tried to deregulate our banks. We heard this for years and years.

I had representatives of the banking association in my office. They talked about how they saved the Canadian financial system. I asked if we should get the deck after deck that I was given year after year, saying that we had to become like the American banks. If the NDP had not pushed back against John Manley at that time, the banking system would have been deregulated. I would like the member to address that time and error.

A big debate took place in the House of Commons. The Conservatives, the Alliance, were in favour of this, cheerleading it all the way through the process. However, a small band of individuals, and I see one of the members now, came into this chamber day after day telling the Liberals and John Manley that they were wrong and that they should not allow the banks to become Americanized.

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3:20 p.m.

Liberal

Scott Brison Kings—Hants, NS

Mr. Speaker, at that time there was a Liberal majority government. It was also a Liberal majority government that made the decision not to deregulate Canadian banks and to follow the global trends. It was a Liberal majority government that did have respect for all parties in the House of Commons. Certainly, in the spirit of co-operative and constructive engagement with all parties, the Liberal government would have meaningfully engaged and listened to members of Parliament from all parties.

That is in stark contrast to the current Conservative government. It clearly does not listen to even its own backbenchers, perhaps even some of its ministers, and certainly not members from any other political party in the House of Commons.

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3:20 p.m.

NDP

Pat Martin Winnipeg Centre, MB

Mr. Speaker, I thank my colleague for Windsor West for reminding the House of that important piece of Canadian history.

There was a movement afoot from the unofficial prime minister of Canada, Thomas d'Aquino, chief executive and president of the Canadian Council of Chief Executives. He was saying that we must allow the banks to merge so they could be competitive and play on this larger marketplace. They were dying to jump into this sub-prime mortgage fiasco, but they were not really big enough therefore they should be allowed to merge.

There was a national campaign, “Purge the Urge to Merge”. People were crashing the shareholder meetings of the national banks trying to stop this runaway freight train of Canadian banks merging.

Had it not been for the sober second thought of the NDP in exposing this, as the official opposition was all for it, those banks would have merged and dove right into the big leagues in which they wanted to play. They would have brought upon our country the catastrophic outcomes that they exposed other countries to, specifically the United States.

I would ask my colleague to perhaps reflect for a moment on his own party's position on banking as it pertains to Bill S-5.

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3:20 p.m.

Liberal

Scott Brison Kings—Hants, NS

Again, Mr. Speaker, it is the practice of the Liberal Party of Canada, both in opposition and in government, to always listen to members of Parliament from all political parties and to consider carefully and respectfully their contribution to the debate. Certainly we would listen and take it seriously.

However, there was a strong group of Liberal caucus members, led by Tony Ianno, a member of Parliament at that time, that mobilized, that did cross-country town halls and round tables on this issue. It met with small business and community organizations, heard from Canadians and made some very strong recommendations to then Prime Minister Chrétien and finance minister Paul Martin. It said that we should not follow the global trend of deregulation.

What the hon. member is describing, however, is the way parliaments ought to work, where members of Parliament from all parties, including the governing party, contribute constructively and meaningfully to public policy debate and decisions ultimately reached by a government. Hon. members have described a Liberal government that listened to all members of Parliament from all parties and its own backbenchers.

There is no such thing as a bad seat in the House of Commons. We are all chosen and given the privilege to serve the people who elect us and have the responsibility to defend our interests. Mature governing parties recognize the importance of enabling that and respecting that Parliament will ensure it happens.

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3:20 p.m.

Liberal

John McCallum Markham—Unionville, ON

Mr. Speaker, I will pursue some of the themes pursued by my colleague in a somewhat different way.

One of the things I have noticed in the debate today, and I have listened to Conservatives and New Democrats, is a kind of triumphalist tone, that everything about the Canadian banking system and the economy is not only wonderful, but every job created has to be because of the economic action plan and no job loss has anything to do with the policies of the government.

As my colleague pointed out, this is totally ridiculous. As he pointed out, do the Conservatives really believe they are responsible for the oil and minerals in the ground and the high commodity prices around the world today? Obviously not. Do the Conservatives really believe they are responsible for the strong fiscal position which they inherited and, in large measures, squandered? Evidently not.

The third area, which is where I will focus the rest of my remarks, is the banking system.

I believe I can speak about the banking system because I am a former banker. I was involved in the debate on the proposed bank mergers.

We can say that today's banking system is robust, but that this is not due to measures taken by the Conservative government or the Conservative Party. On the contrary, the banking system remains strong in spite of the Conservatives' actions.

I would like to talk about three areas that prove this point.

The first of these areas is the area of bank regulation. As we know, in the 1990s there was a strong trend toward bank deregulation in the United States. The Liberal government of the day, in the 1990s and early 2000s, resisted the temptation to go the route of deregulation. It may be true, as my colleague from Winnipeg Centre pointed out, that Tom d'Aquino wanted to go that route, but Tom d'Aquino was not the government. The government was a majority Liberal government and the Liberal government of the day decided not to go that route notwithstanding the statements by Tom d'Aquino or by certain Reform Party politicians.

That is the first point because there is a consensus view that the 2008-09 global financial crisis was in large measure the result of this deregulation, this idea that we now know to be false, that if we just allow the banks to regulate themselves, everything will be okay. Canada said no to that under the Liberals. The U.S. and the U.K. said, yes, and that is a big part of the explanation for why we are where we are.

The second area is bank mergers. I must admit that when I was the chief economist at the Royal Bank, I supported the proposed merger. I had to support the merger if I wanted to keep my job.

To be honest, I was also in favour of bank mergers because at that time, in the late 1990s, I had been persuaded that the benefits of bank mergers were greater than the costs. At that point, before I went into politics, I was aligned with the Reform Party, which was pushing for bank mergers with the banks and with Mr. Thomas d'Aquino who was also pushing for bank mergers. Perhaps he was not because he had to play both sides of the banking field. I do not remember that. In any event, that is how it was.

Then fast-forward 10 years and we have the global financial crisis. I realized at that point that I had been wrong. For Mr. Chrétien to say no to bank mergers was the right decision. I only realized that after the world financial crisis. When I think back to when I was at the Royal Bank, the mentality of the day within the bank was that it wanted to grow up fast, kick global butt and grow up to be like Citibank or Citigroup. We saw what happened to them. Having observed the financial crisis, I became completely converted to the view that Mr. Chrétien was right, that bank mergers were bad for Canada and it was in spite of the Reform Party, not because of it, that Canada said no to bank mergers.

If I can admit now that I was wrong and that the government was right about bank mergers, perhaps members representing the government could stand one day and make similar admissions, that they were wrong back then to advocate bank mergers and that what Mr. Chrétien did was the right decision.

Finally, I come to mortgages. We have a more modern and recent example of the current government's tendency to favour deregulation. What did it do in 2006, soon after being elected? Before it was elected, the rules for mortgages under Liberal governments were that they could be no longer than 25 years with a 5% down payment. What did the Conservatives do? They went from 25 years to 40 years with a zero down payment. Imagine, this is like U.S. sub-prime mortgages. That is what they did in 2006.

Essentially, it is like deregulating mortgages, just like they wanted to deregulate banking. Potentially, this is a very bad and risky decision. If we go back to 2006, we find that no less than 60% of first-time home buyers took advantage of these rules and had a 40-year mortgage. Now that we have this high level of debt, now that we have talk of the housing bubble possibly bursting, people who took out those 40-year mortgages with zero down payment, thanks to the actions of the current government in 2006, may be seriously at risk.

We do not know if this housing bubble will burst. We never know if a bubble will burst or whether it is even a bubble until after it has burst. No less a magazine than the The Economist has suggested that Canada is first among the countries eligible to experience that. It has pointed out that Vancouver has the highest housing prices-to-income-ratio of anywhere in the English speaking world.

Then, on the other hand, CMHC comes out with a rosy projection that housing prices will continue to rise over the next two years.

Therefore, we do not know whether this will come to pass, but based on our knowledge of history and what we see in other countries, that there is a risk. If it does come to pass, if the housing bubble does burst, if we see banks having major losses and Canadians suffering because of major foreclosures, then a part of the reason for this will have been that decision taken by the Conservative government in 2006 to allow 40-year mortgages with zero down payment. If that comes to pass, I think Canadians will legitimately lay part of the blame for that at the feet of the government.

In closing, I basically said that Canada is in a relatively strong position, but not a perfect one as they sometimes claim. This relatively strong position has nothing to do with the actions of this government and the Conservative Party. On the contrary, this success is the result of the actions taken by the Liberal governments in the 1990s. The actions of the Conservative government, particularly with regard to mortgages, have created more problems, not solved our problems.