Thank you, Chairman Easter.
First of all, I would like to take a moment before making my comments to express some gratitude that I think a lot of Canadians share.
My friend and mentor, and a former colleague of many of you, a gentleman by the name of the Honourable Ed Holder, once told me there is no higher calling than commitment to public service. Quite frankly, our political class has been put through a fair bit over the last few months, and I would like to thank everyone for their service.
I have spent 30 years, as of today actually, in the financial services business, starting in insurance, then banking, then moving to the vice-presidency of an investment dealership and ending up as director of a Canadian mutual fund company. So I've had a somewhat diverse experience around the financial services sector. In my semi-retirement, I've also had the unique opportunity of sitting on boards of not only a couple of Canadian companies but also a couple of U.S. companies. I'd certainly welcome questions at the end of the presentations on the difference in the experience as a director between Canada and the U.S., and some of the different programs they've implemented.
Hopefully our nation is embarking on the recovery phase of the crisis. I believe it is critical to take a look at two really important historical cornerstones of our economy. The first is obviously our strong, stable, globally recognized banking system. The second is the entrepreneurial community that has been a part of Canada's history from our establishment.
Canada is recognized for both of these things, but, quite honestly, although we're recognized for both, I'm not sure these things always move well in parallel. In the best of times, commercial credit can be difficult for small and medium-sized entities, and these are certainly not the best of times. So as I said, these two realities—that success we have with entrepreneurship and business development and the success of our banking sector—are, in fairness, not always closely related.
Canadian banks, as I said, are recognized globally for their strength and sound banking practices. Much of the western world in the 2008-09 credit crisis had disasters on their hands, and between some very strong leadership at the federal government level and some strong leadership at the banking level, we were able to navigate that crisis better than just about any other nation in the western world. That said, there were still some bumps and bruises.
Right now, Canadian banks are faced with an unbelievable combination. Coming out of that credit crisis, we've had a lengthy period of real estate appreciation, and tagging along with that has been a massive expansion of consumer debt; and now we're looking at a total decimation of the commercial real estate sector, massive job losses and the potential of a mortgage cliff a few months out that will certainly impact the banking sector.
Coming out of this I certainly don't believe our strong banking system is going to be able to extend credit or more generosity to small business. I believe that's a real challenge, and our banks are going to have to do everything in their power to ensure their balance sheets are strong and their income statements are not impacted too dramatically by near-zero interest rates, which I think are with us for a long time to come.
That being said, I think it's important that the committee and the Government of Canada take a look at how it might intervene in the economy, recognizing that, as I believe, it will be very difficult to do that through traditional banking models, with our having essentially half a dozen big, dominant banks in Canada. It's perhaps more difficult in Canada to reach the small businesses than in some other countries where other western nations have more developed alternative finance businesses.
Our tight number of banks and our small collection of large banks does present one challenge that has emerged over the last number of years and was exacerbated in the last credit crisis 20 to 30 years ago when an awful lot of investment products were for entrepreneurs who lacked access to traditional bank lending.
They could go to the capital markets and borrow money either through the IPOs of small businesses, high-yield debt, or go to leasing companies, and there was asset-backed commercial paper. There were a lot of different alternatives for financing, and a lot of these have disappeared. This is not a point of blame; it's just a reality.
In the capital markets world, the syndication desks that look after the issuance of new products for investment clients have essentially contracted as the banks have gobbled up probably 90% of the wealth management assets in Canada, and relatively few, shall we say, innovative or financing products are making it out to retail investors.
There are a lot of good reasons for this. They certainly present higher risk, and there's a desire to protect investors from scams and inappropriate vehicles, from things that don't suit their comfort level with risk. Some of the products, we discovered, really weren't as safe as they appeared to be going into the credit crisis in 2008.
There are valid reasons that these sources of funding may have dried up, but as we enter the recovery phase, it's important to talk about how we can reach out to our capital markets businesses and find alternative solutions that don't put pressure on, for example, the banks to reach out and step outside of their traditional lending mandates that they do very well, but allow our small businesses to access more secure sources of factoring, trade credit, and leasing.
All of these sources ultimately trickle back up to the banks or to bank alternatives, like insurance companies, and in many cases, those sources are just not going to be available with the pressure that's being put on our major financial institutions. The government does have an opportunity to work, whether it's with moral suasion, or with policy, and particularly, with direct support to programs, with innovative entrepreneurs who have capital markets experience, but that may not be a part of the traditional bank model that can come forward with lending and financing solutions.
I've spearheaded a group that has put forward a proposal that has made it to several members of the committee. It's based, essentially, on the principle of the victory bond back in the Second World War. I've read a couple of the commentaries of different economists on this call who have pointed out that we're going through an economic crisis that really hasn't had a precedent since World War II. It's good to look back at what worked through history.
On that note, I certainly would welcome any comments or questions that people have on what I see with regard to the junior capital markets and the opportunities there to work in conjunction with the banks, in conjunction with their syndication departments, and in conjunction with the federal government to make sure that trade credit and financing factoring are available to the small and medium enterprises that are going to be so critical in ensuring that we aren't at 8% or 10% unemployment two or three years from now.