A rocket surgeon, a brain scientist. This is Don Cherry.
You do not have to be a rocket surgeon to know that if we have an economy that has gone down the tube like the economy in Ontario we increase the amount of money that is available under the Small Businesses Loans Act that is guaranteed 90 per cent by the Government of Canada; that is taxpayers at 10 bucks a pop. What is going to happen? The banks are going to roll all of their questionable loans into the small business loans. They are all going to be guaranteed by the taxpayer-guess what, at 1.75 per cent above prime.
What entrepreneur would go into a bank and say: "I would like to borrow some money but I'm prepared to pay 2 or 2.75 or 2.5 above prime and use my own money and by the way I don't want the government to backstop it so you use your money because that is why you're in a risk business". They go in there and say: "I want a Small Businesses Loans Act loan" and the bank is quite happy to have its risk guaranteed by the government.
Is it any wonder that the use of small businesses loans skyrockets? This is not rocket science here. This is fairly basic.
Then what do we do? We say we are going to try to increase the amount of money that is made available under the Small Businesses Loans Act to small business. What is that going to do? That is going to give the banks that much more freedom to get all of their small business loan accounts guaranteed by the taxpayer.
That distorts the banking business and it distorts the responsibility of the entrepreneur going into business. When someone goes into business, it is not the responsibility of the taxpayers to hold them harmless from risk because with risk comes reward.
In the report there is one particularly good recommendation that I would hope the government would take to heart and incorporate: "The program should increase the availability of credit rather than allowing lenders to reduce the risk on loans that would be made without the guarantee".
That means the banks should be making loans to small business and the loan rate should be commensurate with risk. If the Government of Canada, that means the taxpayers of Canada, is going to be guaranteeing loans to businesses, small or medium, those loans should carry a rate of interest commensurate with the risk so that in the long term small business loans would be self-financing or self-liquidating. The losses of some would be offset by the profits of others.
Surely if a loan is going to be guaranteed by the Government of Canada, the taxpayers of Canada, that should carry a cost to the user that it would ensure that the citizens of Canada are held harmless from any risk. That rate should also be high enough that the loans may be determined and may be provided by the bank without having to go to the well of the taxpayer.
If for instance the small business loans were at a rate of 2.5 per cent and the average small business could get a loan at prime plus two or prime plus one and a half, there would be some impetus on the part of the banks and the borrower to borrow money without having to go to the public trough. That is the way it should be.
That is a particularly good recommendation in the report and I would certainly suggest that the government should take it to heart. It is not so much a question of how much within reason a small business or an entrepreneur pays for the use of someone else's money, it is whether that money is available at all.
Another consideration in the small business loans came up in discussion of just what part of the loan should be guaranteed. Should it be the first 90 per cent or the last 90 per cent? Should any loan be guaranteed the first half of it or the last? In my view it should always be, if the Government of Canada is guaranteeing anything, the last portion of the loan, not the first portion.
If I am lending money to someone, I want that person to be lying awake at night trying to figure out how they are going to pay it back. I want to make darn sure that if I lend someone money their number one objective in life is repaying that money, not repaying the last half of it. It is pretty basic but it is real.
A change in the Small Businesses Loans Act which is perhaps the most important is it should be available for working capital, not just for bricks and mortar, not just for equipment, not just for inventory.
If a venture has the strength, and now we are talking about businesses that as a nation we are going to need more of as we get into the knowledge based economy, we are going to be making decisions on working capital which will allow entrepreneurs to develop knowledge based material such as computer programs, CD-ROMs, things that require virtually no inventory, very little bricks and mortar but without working capital would never get off the ground.
The consideration of making working capital requirements of business available under the Small Businesses Loans Act is another very worthwhile objective. I would caution that we are going to have to be very vigilant to ensure that there is oversight on these loans.
We are not doing anyone a favour if we ask them to put their house up, put all of their possessions up and then do not vigorously give an objective analysis to the new venture, to say: "Wait a minute. Make sure you have all your bases covered before you risk everything you have in life".
The next subject I would like to speak about is role of the Federal Business Development Bank. I must admit that I have mixed emotions about the FBDB because it is a lender of last resort. Its purpose is to lend money when chartered banks will not lend money and my feeling is that if a chartered bank will not lend the money or the treasury branch in Alberta, we really have to wonder why on earth the taxpayers of Canada should be taking the risk.
I know that the banks in Canada have not over the last 50 years or so been particularly venturesome. There is a need for longer term patient capital. is possible that the Federal Business Development Bank may be able to fill a legitimate role in this. Frankly, I just do not know.
I would caution that if a bank using taxpayers' money is going to get into the business of lending money on a long term basis to high risk businesses, we had better make sure that it does so in an extremely prudent manner. This cannot be a shotgun approach where we are going to throw enough money at it and hope we will have enough spectacular winners that they will offset the losers.
That brings me to the next part of what I would like to speak about. It is the whole notion of governments at all levels, including the governments in the great province of Quebec that somehow consider their function, their legitimate purpose is to tax money from individuals, take it into the government and then lend it out to other people to go into business against businesses or individuals who paid the taxes in the first place.
What is it about us as politicians that when we get elected we somehow think we have the knowledge or the ability to tell the private sector what it should do? How is it that we think we somehow have the right or even the responsibility to manage an economy? Our country did not get into the hole by $535 billion federally because we in this House have proven to be such great stewards of the taxpayers' wealth.