Madam Speaker, it is pleasure to rise in the House to talk about this very important issue. I too want to clarify this. I do not think that the intent of the bill is to attack banks or their charitable donations in Canada. It is more a debate about commerce in our country, about where we are headed, and about financial institutions in general and what type of role they should play in dealing with some of the problems we have as a country right now. Banks can play a larger role. I think they could and I think it would be a good investment opportunity.
I also want to note that right now with regard to lending practices we know that some of the banks have actually had some very questionable business lending practices to larger corporations and larger institutions, which have actually affected their earnings and profits. They have not been the small guy, so to speak, that has been characterized in terms of this particular initiative.
We need to recognize that this is not just a rural issue. It is an urban issue too. It is a situation that has developed because we have seen banks leave the impoverished urban neighbourhoods. I can tell the House for a fact that in my riding bank mergers have had a direct impact on our urban setting. Because they have consolidated, we see empty storefronts and we have seen a lot of different planning go out the window. They have simply usurped the investment and made one or two choices available to consumers. That has had a detrimental impact, not only just on people's choices in terms of the type of service they receive, but also on the urban landscape they participate in as storefronts are closed. That consolidation also has had a positive impact, I guess, with the massive profits that the banks have been able to recoup through that business development plan, but at the same time there has been an incredible loss of employment.
There is one issue in this whole process about commerce that we do not often think about, which is Internet banking, and I will give a good example. Here is a situation that is really interesting. As a consumer, I have to purchase equipment. I pay for that equipment: the computer, the screen, the printer and all those different things. On top of that I pay a monthly service fee to use the Internet. I have to pay to use the access service of online banking. At the same time, I use my own personal time in that process to do the actual physical work. Here is what is ironic. The bank should be paying me for that investment, but I am paying the bank for that service. It is another service fee. At the same time, the bank lays off somebody. It ends up that I take somebody out of a job in my community and I pay for all the infrastructure to do it. I actually physically sit down and do the work.
The big winner in this situation is the bank and the big loser is the consumer and I think we have to recognize that. That is the bank's business plan and that is fine. It is up to the bank to be able to go through it, but we have to at least identify that it is a problem or at least a result of policy directives by the government.
I think there is a connection with regard to the lobbyist suggestion. We can look back in terms of when we had the bank merger. I just came from a discussion on Bill C-15, the new lobbyists bill. One of the expert witnesses identified that $30 million to $40 million was used by the banks to lobby during that process. That is a lot of money and a lot of investment in terms of the way the government goes about doing business. Putting forward this bill is a good attempt to address some of the crises that we have in our communities, and the banks do have a responsibility and a role to play. If they can spend $30 million to $40 million to lobby public policy, I do not think it is too onerous to have a good debate about it again.
With regard to the summary of the bill, to be specifically clear to constituents, the purpose of the bill is to achieve equity in community reinvestment by providing individuals and businesses with equitable access to credit, and to be very specific, where the unemployment rate is equal to or higher than the national average. That makes reasonable efforts to implement equity in community investments. That is important, because sometimes communities, rural or urban, ebb and flow with regard to a certain stage of development or their length of time as a community. Having banks doing commerce in those areas is very functional for business development.
Being a former member of the City Centre Business Association and Sandwich Business Improvement Association in Windsor, I can tell the House that banks are very important to the whole landscape of the economic development of that community. Their participation on a regular basis is very much appreciated. It is clearly an asset to attracting other businesses. There is no doubt whatsoever about that. We have seen that the closures and some of the consolidations have meant that there has been a price to pay in the general sense.
With regard to the community reinvestment act in the United States, I think there are some interesting points that we should discuss. Its purpose was to encourage federally chartered deposit taking institutions to grant loans to persons living in low and medium income neighbourhoods. It was really a tool to improve the access point for people who are generally denied mortgage loans. Its purpose was also to study mortgage loans granted under the CRA in order to determine their profitability. There is a monitoring process to ensure that there is a win-win situation and to support small lenders. We often talk about small businesses and their important role in the Canadian economy. This is absolutely magnificent. This is an element to be able to get entrepreneurs up and going and to at least give some access to people who would normally be denied the ability to participate or to chase down dreams, people who often become significant contributors in the larger sense as their companies grow.
There was a survey with regard to the American banking system. Six hundred institutions participated, with 98% of the respondents stating that loans granted under the CRA were profitable. That is a 98% return rate. Imagine if we actually got that in our other investments. That is a 2% failure rate. That is absolutely incredible, and we can calculate all the profits and all the improvements stemming from that.
In terms of the advantages that were perceived, respondents surveyed they said they had an improved corporate image in the community, so they are inclusive, they are building relationships, important and trusting relationships. Another advantage is the help for the community to develop and prosper, so there is a long term vision buy-in by the city. There is the creation of a client group for future products and services, so they are very much integrated.
With regard to the effects, what they found is that for Afro-Americans nationwide their actual mortgage loans shot up by 47.5%, so there was a positive correlation there to a situation that they wanted to improve. Mortgage loans granted to Hispanics leaped by 36%. Mortgage loans granted to low and medium income individuals rose by 22%. What is important to note is that in the version they have, there are different categories for the loans: less than $100,000; between $100,000 and $250,000; and over $250,000.
Can we imagine how we could tackle some of our crises in affordable housing with regard to this community if people were actually able to access those loans? In many communities, a loan of $100,000 can buy a home for a decent standard of living within which a family can grow and flourish. I think that is important because we know that we have an affordable housing crisis. We know it is not good for our economy. We know it is not good for Canada.
This is a tool that I think can be profitable for both the banks and the community. I think that is important to recognize. People have a better chance to participate and achieve in a world economy when they have a roof over their head and a sense of security and stability. It could also potentially lead into another boom with regard to housing and would continue a very strong market. I know that in my area we have had a successful housing boom, but it certainly would be nice to see the range around $100,000 or so take off as well. Affordable housing has not really taken off as it should and getting at those targeted individuals would certainly be a benefit.
With regard to whether this is too onerous for the banks or whether it is too costly or the regulations are going to burden them, I do not think that is the case, because we have to look at the fact that 60% of Canadian communities right now have one financial institution to serve them. There really is not a consumer choice there and that is not good. That is almost like a monopoly, because there is predominantly limited exposure for consumer choice. If consumers want to go to something like Internet banking if they are in a setting that only has one, once again, they have to pay for the equipment, pay for the service, pay to do the work and pay a fee. At the same time the bank gets all the rewards of the relationship. That is simply not acceptable in my opinion.
Yesterday, for example, the Royal Bank recorded profits yesterday that are 14% higher than profits in 2001. It reported $2.76 billion in sheer profit. How can that be a hardship? The TD Bank had a record of $2.96 billion at one point and $3 billion in profits. That is generally what is happening right now.
This is a very important bill. I think it is worth debating. What we are talking about is branches working toward equitable community reinvestment and getting branches to analyze their operations, systems and regulations and be inclusive in the community. There are a number of things that will happen after that. Representatives will start to get involved. There will be community capacity building, which will be very popular.
To indicate my sincerity with regard to the merits of this case, in Windsor West right now the unemployment rate falls below the national average. I could see the benefits of this but I would not necessarily receive them. I think all of Canada should look at this because we are certainly going to have some improvements.
