Debates of Nov. 27th, 1995

The House resumed consideration of the motion.

Financial Institutions Act

[The Speaker]

The hon. member for Québec-Est has the floor. He has another 6 minutes approximately.

[Jean-Paul Marchand, Bloc, Québec-Est, QC]

Mr. Speaker, as I was saying before question period in connection with Bill C-100, I find this bill unfortunate for Quebec, because it is an attempt to set up institutions that already exist in Quebec and work very well there.

I said that the great misfortune of the Canadian federal system is this business of duplication and that a policy of decentralization had to be implemented as quickly as possible. The people of Quebec, like elsewhere across the country, have spoken in favour of more decentralization.

Here is the government introducing Bill C-100, which goes against the trend and the wish expressed by so many people. Common sense itself dictates the need for more decentralization in Canada. Quebec has already suffered considerably from the wastage caused by departmental duplication. I was saying that, according to certain studies submitted to the Bélanger-Campeau commission, including the one done by Pierre Fortin, duplication cost Quebec alone some $3 billion a year. This money is wasted. This is pure and simple loss. Not only is it money lost, but it means departments and governments are unable to function and to provide people with quality services.

It seems to me that, if I were in government, and I wanted to save this great and fine country of Canada, I would undertake to decentralize. It seems that it is just good common sense for the government to decentralize; it is obvious. If only the people in government would listen, it could be done. They would understand that, in fact, decentralization is the only way to save the country. I repeat: centralization, the federal government's tendency to take over powers and to duplicate services already available provincially, is costing the Government of Quebec $3 billion. Studies have proven this; these are not groundless allegations.

Just in the area of transport and communications, there has been much talk-call it dispute if you want-much debate about the distribution of powers between the federal and provincial governments. It is estimated that, in the area of transport and communications alone, the shortfall is about $233 million. If the responsibility for transport and communications came under only one level of government instead of being shared by two governments, hence duplication, the Government of Quebec would end up with $233 million more in its pocket. So, there is a shortfall in that regard.

It is the same thing with taxes. If there were only one government collecting taxes in Quebec, this would generate $299 million in savings. In other words, this much, $299 million, is lost, squandered, because of duplication and overlap between our respective departments.

I could give you more examples, with respect to regional development and business assistance for instance. In fact, Bill C-100 is brought forward under the pretext of providing assistance to businesses, when there are well established new business start-up services in Quebec to assist small business. Why more duplication? Why establish more agencies and institutions that we already have at the provincial level?

Same thing with health and culture. The worst of all, of course, is manpower training, an area where the federal government is essentially copying the services provided by the province, duplicating programs. This duplication is apparently responsible for a $250 million shortfall in Quebec and, again, not only is money being lost, squandered, but manpower training is not being conducted.

We are told that, in Quebec, thousands of jobs may have remained vacant because this training was not provided. In many cases, these jobs require special technological training. Since this training was not provided because of intergovernmental duplication, the people who should be holding these jobs end up either on unemployment or on welfare because of the government, again, because of this duplication.

This creates not only deplorable waste but also a great deal of poverty. In fact, this keeps a number of people unemployed and on social assistance. Of course, the federal government does not have a good reputation in this area so far. You know as well as I do, Mr. Speaker, that since the last budget the federal government has introduced a whole series of measures to make cuts in unemployment insurance, in the health sector, in education, and even in old age pensions, which all amount to rather virulent attacks against the most vulnerable in our society.

Allow me to quote from an article by Jean-Robert Sansfaçon that appeared in the May 2 edition of Le Devoir : ``To this day, the only result of the federal government's social reforms has been to move people from unemployment to welfare rolls. Yet, one does not have to be a separatist to know that the provinces are in a better position than the central government to find the solutions that can best meet the needs of their people''.

In fact, we should all learn this lesson, which is constantly repeated in this House. The lesson is that the provincial government is often in a better position to fulfil certain functions, as in the case of financial institutions. Unfortunately, Bill C-100 would put in place institutions that already exist at the provincial level. What a waste.

[John Williams, Reform, St. Albert, AB]

Mr. Speaker, it is a pleasure to speak to Bill C-100, an act to amend OSFI and CDIC and related acts.

Looking back in history, some years ago we had what were then known as the four pillars of our financial industry, which were the banks, the trust companies, the insurance companies, and the brokers. At that time, the government of the day saw fit to allow the banks to break down these barriers among the four pillars of the financial industry. So the banks started to take over the trust companies and the brokerage houses. Today, as we know, the banks virtually control the other two pillars of the industry, which only leaves the insurance companies, which by and large are removed from the banks. At this point we still have a clear separation of what banks can do in the insurance industry, and insurance companies are kept out of the banking industry.

We know there is serious lobbying and serious pressure by the banking industry to get into the insurance business, which is going to take away the pillars of our financial industry that kept us four square on the ground and leave us standing on one leg. I am not exactly sure that we are going to find that standing on one leg interminably is actually going to be good for our health. It might get a little cramped and painful after a while.

I have some serious concerns about the wisdom in the long term about decisions such as allowing the conglomeration of all the financial services in this country to come into the realm of the banks. Without being derogatory to the banks, there are not that many of them left. We have a very serious concentration of power in the hands of a very small number of elite people in this country, all of whom are unknown, unelected, and responsible to no one, hardly even to their shareholders.

The banks are such a complex business that those people involved in the senior management of the banks would have great problems, I am sure, trying to explain the intricacies of their jobs to the shareholders who own their business and to the depositors who participate or create the business to the benefit of the country and to the government at large.

As I have said, I have serious concerns about the wisdom of taking the four pillars of the financial institutions and making them into one.

I know the banks have always put forth the argument that competition requires that they get bigger. When we look around the world we see some behemoths as far as the financial world is concerned. I understand the merger of the Chase Manhattan Bank and the Chemical Bank in the United States will create an organization of $300 billion in size. That is truly a behemoth under any rule we wish to use.

However, here in Canada we are a small country. If we are to agree that big is beautiful in the world of international finance, we cannot have it both ways. We can either have competition with a large number of competing companies or we can meet the desire to be large and compete on an international scale by using the same measures as the huge banks around the world. Therefore we may end up having a choice between big banks and no competition or small banks and much competition, or we may have to have an arrangement or a comprise in between.

I say that competition surely is the way to go. When we look around the world we always find that competition brings out the best in business. It brings out the best service, the best products, and the best prices. I am sure that rule applies to the financial industry every bit as much as it applies to every other industry that serves our Canadian public.

The other argument for competition is these huge banks that are being created around the world. It was earlier this year when the first surprise was sprung upon the world with the Barings Bank disappearing overnight with a $1 billion loss, all because of one rogue trader in one office who was on the opposite side of the world from the head office. The entire organization was destroyed overnight.

A couple of months ago one of the Japanese banks in New York admitted to losing $1 billion. Again it was the fault of one rogue trader, who perhaps was in collusion with others within the organization. That overnight loss was revealed to the general public.

In the last decade there was a $500 billion loss in the savings and trust loans fiasco in the United States. Now we are facing a situation in Japan, where the largest of the world banks have been based for some time, in which losses may be as high as $1 trillion. That is a tremendous vote of non-confidence in people's ability to manage institutions that big.

That is why competition is vitally important. Bigger is not necessarily better.

Bill C-101 deals primarily with two things: the Canadian Deposit Insurance Corporation and the Office of the Superintendent of Financial Institutions. I would like to talk about the CDIC.

The CDIC is sponsored by government to insure deposits within the federally regulated banking system up to $60,000. We thought it was working well for many years because there was never a claim. However, in the last few years we have seen quite a number of institutions that have been claiming on a regular basis, from the vast sums of money claimed by Confederation Life to other trust companies that have failed over the years. They have cost the Canadian taxpayer large sums of money.

It is time for us to take a new look at the situation. This bill unfortunately goes a short way by proposing rated premiums for the CDIC, which will be based on its assessment of the risk. It will vary the premiums according to the risk. The bad thing is that the CDIC intends to do this behind closed doors. That I cannot accept. If they think they are going to tell a financial institution that the risk is high and therefore the premium on the deposits is high, the

Canadian public must be made aware that there is a potential risk involved in the financial institution and be governed accordingly.

About a decade ago in my home province of Alberta we had a fiasco called Principal Trust. I know that was a provincially regulated institution, but the principle is still the same. If an institution that is being fraudulently managed wants to work behind the veil of secrecy, it can do so, making the Canadian public vulnerable to loss.

It is absolutely vital that the information be provided upfront. I cannot see any harm in that. I do not see how an institution can prevent it from becoming public knowledge.

We all know that once the bill is adopted the premium ratings will be applied. All it requires is someone at the annual meeting of the financial institution to ask what is the rating of the premium paid to the CDIC. They will either find out or management will lie to the shareholders. I hope they will not lie to the shareholders. The information should become public very quickly. I see no real reason for the information to be kept private.

Another thing regarding the CDIC, which perhaps has more of a bearing on the government than the CDIC, is the fact that if it needs money it will be given the opportunity to borrow the money on the open market rather than dipping into the consolidated revenue fund. While it may seem a fairly innocuous change, if we look more closely we see it is another way to slide borrowings off the balance sheet of the Government of Canada and on to the private sector so that they will not show up in the public accounts of Canada.

It is shameful and disgraceful the government would even propose such a move. If the government is to stand behind the deposits of investors, let it show in its records what it is costing taxpayers. It is shameful the government would even propose the amendment to which I am totally and absolutely opposed.

The money markets of the country are not the place in which to subsidize the losses of financial institutions that create the money markets in the first place. We could go around and around in ever increasing circles and accomplish absolutely nothing.

The government should be prepared to stand up to its obligations, have the information in front of the public, tell people what is happening and let the people decide while the government still enjoys their confidence. If they do not we know the consequences. To hide behind the barriers and the veils of secrecy cannot be tolerated in this day and age. On OSFI the veil is being drawn even more tightly than on CDIC, perhaps with even more disastrous results.

We can look at some of the items in the white paper released by the government back in February 1995 prior to the tabling of the legislation. OSFI's role is to monitor and supervise financial institutions to ensure that they are safe for the general public to invest in. The government has come up with the phrase that it is a privilege rather than a right to own a financial institution. I tend to agree with the statement that no one has the right to own a financial institution if it allows them to rip off the public and hence the Canadian taxpayer.

There are four steps that OSFI envisages if an institution were to decline financial help. In stage one, the early warning stage, the management and the board of directors of financial institutions are formally notified by OSFI of concerns and requested to take measures to rectify the situation. Perhaps it is not as strong as we would like it to be. Therefore some directives are being issued.

In stage two the financial health of the institution has continued to deteriorate in the opinion of OSFI. At that point senior OSFI officers meet with the management and board of directors of the financial institution and with the external auditor of the institution to outline concerns and discuss remedial actions. The management and board of directors are formerly notified that the institution is being placed on the regulatory watch list. That is more involvement by OSFI which perhaps at that stage is not bad. OSFI is getting more and more involved in the daily administration of the institution.

If it continues to slide it gets into stage three where the management and the board of directors and external auditor of the institution are informed of the problems. Depending on circumstances, pressures may be exerted on the management and the board of directors to restructure the institution or to seek an appropriate prospective purchaser.

That brings us to stage four. The organization is continuing to deteriorate. The government's says that pressure to rectify the situation is exerted on the management and the board of directors of the financial institution with frequent meetings with senior officers. If statutory conditions for taking control of the assets exist and if circumstances are such that there is an immediate threat to the safety of depositors and other creditors, OSFI may take control of the assets of the institution for a short period.

While the financial institution is still solvent everything in steps one, two, three and four have taken place behind closed doors, in secrecy. They have watched the institution deteriorate. They have become more and more closely involved with the management of the institution on a daily basis. It may be that their management

has caused the institution to deteriorate. While the institution is still solvent they took upon themselves the authority to seize it and manage it.

I hope this is a democratic country. If it is, that cannot be tolerated. We cannot have an agency of government getting intimately involved in the daily management of the affairs of a financial institution, participating in the decline of the financial health of the institution and seizing control of the institution prior to it becoming insolvent. That is not democratic and that has to be opposed.

I stand fully behind the idea that we have solid, sound financial institutions, but I do not stand behind the idea that the government shall get into bed behind closed doors, dictate to the management of a financial institution and seize it if it does not like the proposals coming from management. Also I do not like the idea that we have rated premiums which are supposed to be kept secret from CDIC.

It is time to rethink the entire bill and talk about such things as co-insurance. The government could perhaps ensure 90 or 95 per cent of deposits up to a certain limit. At that time investors would know they have a potential exposure. Perhaps it is small but nonetheless it is exposure. In that way they would take more of an interest in their money and more of an interest in financial institutions. It is the same as the bond rating system in place for governments, for institutions and for money markets. They are rated according to financial strength, soundness, liquidity and so on. They have a rating which people know when they put up their money. The same could quite easily apply up front, above board, in the open so Canadian depositors know how well financial institutions are being run.

As far as the supervision of institutions that are falling short is concerned, Canadians need to be assured that the government is looking over their shoulders. We saw in the Financial Post over the weekend that the managers of a brokerage house a number of years ago are off to prison because they helped themselves to several million dollars of the company's money and mismanaged the company to the point of losing quite a number of millions of dollars.

I hope that is not the type of supervision we are looking at. I hope we will be able to monitor rather than get into daily management of the organization. We will be asking them to ensure they meet the margins they require and that the risks are not being totally ignored.

As I said earlier, Japan is now looking at $1 trillion in bad debts because they all jumped on the same bandwagon and inflated real estate to such an astronomical or exorbitant price that people were getting 100-year mortgages to try to pay for the property they were buying. The banks caused the problem. They are the ones that now have to suffer the problem. The taxpayers in Japan will be left holding the bag as they did in the United States under the Resolution Trust situation.

Let us get the situation out in the open now while it is sound and while we can see it. If warts are to grow on our financial institutions, let us watch them grow rather than wait until the cancerous growth will kill us.

The government could have done much more in conjunction with financial institutions to make it an open system, an accountable system, a system that would work. Then Canadians would know what is going on and would have some faith in it.

[The Acting Speaker (Mr. Kilger)]

Is the House ready for the question?

[Some hon. members]

Question.

[The Acting Speaker (Mr. Kilger)]

Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Acting Speaker (Mr. Kilger)]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.

[The Acting Speaker (Mr. Kilger)]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Acting Speaker (Mr. Kilger)]

In my opinion the yeas have it.

And more than five members having risen:

[The Acting Speaker (Mr. Kilger)]

Call in the members.

And the bells having rung:

[The Acting Speaker (Mr. Kilger)]

Pursuant to Standing Order 45, a division on the question now before the House stands deferred until Tuesday, November 28, at the end of government business, at which time the bells to call in the members will be sounded for not more than 15 minutes.

The House resumed from December 13 consideration of Bill C-52, an act to establish the Department of Public Works and Government Services and to amend and repeal certain acts, as reported (with amendments) from the committee; and of Motions Nos. 2 and 3.

Department Of Public Works And Government Services Act

[The Acting Speaker (Mr. Kilger)]

When Bill C-52 was last before the House the hon. member for Elk Island had approximately two minutes remaining on debate.

[Ken Epp, Reform, Elk Island, AB]

Mr. Speaker, I realized there were some hazards when I got into the political business, but I did not realize I would be interrupted for 349 days, almost a year, on an

important statement that I was making. Because I have so little time left I want to get right to the statement.

Bill C-52 would put into action a decision made by the previous government to establish the department and we are dealing with some amendments to the bill. I go on record as reviewing what I said almost a year ago and emphasizing as strongly as I can that I think we would make a gross error in approving some of the items in the bill unless we accept the amendment proposed by the Bloc to delete clause 16.

We run the risk of actually losing the very foundation of the economic system of the country, namely free enterprise or the private initiative to go out and get it. The government has taken it upon itself to tax everyone to death and use that money to subsidize activities that should properly take place in the private sector and, most important, to compete unfairly with it.

It is unjustifiable to force businesses to pay taxes and then use that money to provide the services the companies are in the business of providing. It is a contradiction that will destroy the economic basis of the country if we proceed. I emphasize as strongly as possible that we should not do what the bill proposes, which is to give the Minister of Public Works and Government Services carte blanche to do anything for anyone as the bill proposes, just anything that he decides, using government departments to provide engineering services, printing services, advertising services, all the services which many businesses depend on in order to provide for their employees for their very survival.

Instead, we have this move by the government to give the minister unbridled ability to do whatever he or she wants in terms of competing with private enterprise. That is a wrong principle.

Let us ask for some careful thought on the part of the government. Let us not wait until the other place has to be the Chamber of sober second thought. Let us do some sober thinking in this Chamber and defeat this bill unless we can get the amendments for which we asked.

[The Acting Speaker (Mr. Kilger)]

Let me commend the hon. member for Elk Island for being so patient and waiting all those number of days to close his intervention. It seems just like yesterday that he spoke on this very important matter.

[Ronald J. Duhamel, Liberal, Parliamentary Secretary to President of the Treasury Board]

Mr. Speaker, I am delighted to resume the debate.

When I heard my hon. colleague say this bill will somehow shake up or destroy the economic system of the nation, I think there is some exaggeration.

I heard my colleague say we are forcing businesses to pay taxes. My goodness, I think most businesses pay taxes rather willingly. Some have questioned some sections of the bill, but they have also acknowledged some of the meaningful changes that have been made.

When he suggests there ought to sober thinking here, I hope there is thinking and that the people who are doing the thinking are sober. If that is so, it would be sober thinking.

It has been almost a year since we debated this bill, as my colleague has pointed out. With Bill C-52, an act to establish the Department of Public Works and Government Services, four common service agencies are being integrated into one: Supply and Services Canada; Public Works Canada; the Translation Bureau and the Government Telecommunications Agency. The bill has a single and simple purpose, integration. The government is setting out a solid legislative process for integrating virtually all common service agencies within one organization. The result will be increased savings, efficiency and improvement in services for government, business and, most important, the Canadian taxpayer.

Through overlap and duplication reduction, system streamlining and expertise pooling, the cumulative savings for the Canadian taxpayer will be approximately $180 million by 1997-98.

We are talking here about integrating four former departments. We are talking about efficiency and about improving services to all Canadians. We are also talking about saving taxpayers' money.

Under this bill, the Minister of Public Works and Government Services will have the authority to provide services in several areas, including acquisition of material and services for other departments, printing and publishing, communications and translation, real property services, including the administering of federal real estate, realty services and architectural and engineering services, acting as a receiver general, providing administrative services such as management consulting, information services audit, accounting and financial management.

The authorities contained in Bill C-52 essentially reflect those contained in the legislation of the four components of government that are being amalgamated. However, changes were made to modernize the legislative responsibilities of the department and to ensure consistency across the newly amalgamated organizations.

The Public Works Act dates back to 1867 and the Supply and Services Act back to 1969.

We are merging four former departments. We take into account the legislation of these departments, of course, but we also modernize.

Bill C-52 is about savings, efficiency, improved services. The integration of virtually all common service agencies into one department is achieving savings, increasing efficiency and improving services by reducing overlap and duplication, streamlining systems and pooling expertise. This will ensure the most efficient and cost effective delivery of our services and generate significant savings for Canadians, savings I have indicated previously in the magnitude of $180 million annually.

As a result of budget and program review decisions, the department will reduce the workforce in five years by 5,263 full time equivalent positions, or by about 30 per cent of its current population. About 85 per cent of these reductions will occur by the end of 1997-1998 fiscal year.

This is about competition. The minister recognizes that more than ever the government has to be sensitive to the needs of the private sector and the real and legitimate concerns about unfair competition from the public sector. That is why the minister has moved swiftly to rectify the situation when specific examples of unfair competition have been brought to his attention.

In the case of architectural and engineering services, the minister has directed a review take place to determine the most cost effective means to deliver these types of services for the government as a whole.

A consultative committee has been established to guide this review, with representatives from industry associations and firms as well as union and government officials participating, including members of the Association of Consulting Engineers of Canada.

The minister has stated on several occasions that the department will not be allowed to compete against the private sector. This legislation will only be used by the department to support Canadian businesses to expand successfully, I might add, and to obtain a greater share of global markets, as well as to reduce overlapping duplication in all levels of government.

This bill has now the inclusion of a requirement for an order in council. The inclusion of a requirement for an order in council in section 16, proposed by the member for Guelph-Wellington, will ensure that the government obtain full direction from cabinet before the authority contained in this section is exercised and, therefore, ensuring accountability.

Business Of The House

[Alfonso Gagliano, Liberal, Secretary of State (Parliamentary Affairs) and Deputy Leader of the Government in the House of Commons]

Mr. Speaker, I wish to inform the House that Tuesday, November 28 and Thursday, November 30 are hereby not allotted and shall not be opposition days.

The House resumed consideration of Bill C-52, an act to establish the Department of Public Works and Government Services and to amend and repeal certain acts, as reported (with amendments) from the committee; and of Motions Nos. 2 and 3.

Department Of Public Works And Government Services

[Ronald J. Duhamel, Liberal, St. Boniface, MB]

Mr. Speaker, this bill is a further safeguard to ensure that the government is committed to govern with integrity and will take every measure necessary to restore confidence in the institutions of government.

This bill is about public-private partnering. The Minister of Public Works and Government Services is committed to further investigation and development of a potential for partnering. He is working at building the kinds of partnerships and working arrangements which will be beneficial to the government, the business community and the people of Canada. This commitment is shared by the Prime Minister.

Bill C-52 is needed to allow the minister to fulfil his commitment to further investigate and develop the potential for beneficial public-private partnering and working arrangements as well. This bill is about the efficiency of the federation.

PWGSC is contributing to the efficiency of the federation initiatives in the area of shared government support services. Priority areas identified include infomatics, procurement and realty services. PWGSC is in the process of negotiating with the provinces and territories on shared government support services.

Bill C-52 will enhance efficiency of the federation initiatives in that it will simplify administrative processes, leading to sharing arrangements with other levels of government.

Bill C-52 is about good government and improving services. It is essential that we get on with this bill. I look forward to the support of my colleagues.

This bill is about responsible and responsive government. We have consulted extensively with the Association of Consulting Engineers of Canada, the ACEC, and have made every effort to accommodate the concerns of this special interest group.

We recognize that the issue raised is a very important one.

First, we have put forward two separate amendments to section 16 of the bill, one at committee stage clarifying that the department would only provide services outside the federal government at the request of another level of government or private sector firm.

The member for Guelph-Wellington has now also introduced an amendment stating that this will be done only after receiving governor in council approval.

Second, the minister has directed his department to undertake a comprehensive review of the levels of out-sourcing of the government's architectural and engineering requirements. For this review, a consultative committee comprised of industry, union and government representatives has been established to provide advice throughout all phases.

This study is now under way with a report expected in the spring.

As I just pointed out, we are merging departments. We are integrating, if you will, four former departments, and we are modernizing. We are responsive to the issues raised by a number of people and we are trying to be sensitive to their concerns. I believe this bill does just that.

[The Acting Speaker (Mr. Kilger)]

Before I recognize the hon. member, I must inform the House that the hon. member, who wishes to take the floor, has already spoken on the same group of Motions, that is group No. 2, which we are debating. So, do we continue the debate?

Is the House ready for the question?