Mr. Speaker, in question period on November 25, I raised the issue of the need for a community reinvestment act in Canada. At that time I asked the finance minister why, if the United States has a community reinvestment act and if Canadian banks such as the Bank of Montreal have to live by its provisions when they buy American banks like the Harris bank in Chicago, we could not enact a community reinvestment act in this country.
The Liberal reply was right out of the briefing book supplied by the Canadian Bankers Association to all members of Parliament. I wish his officials would expand their reading list a bit on this topic. He misstated the purpose of a community reinvestment act and implied that it would ghettoize parts of Canada in terms of loans and investments made by the banks.
I will explain what a community reinvestment act really is for the secretary of state in the House. I will also explain why the New Democratic Party advocates this policy. When the Bank of Montreal wanted to buy the Harris bank in Chicago in 1993, U.S. regulators delayed approval until it met obligations under the American community reinvestment act to provide loan funding for small business and community development in the Chicago area. Eventually about $497 million Canadian in loan commitments was made to local housing projects and area small business over a five year period.
This idea has never been more relevant with the announcement of the monster merger of the Royal Bank and the Bank of Montreal. According to last Saturday's Globe and Mail , 206 communities in Canada rely solely on either the Royal Bank or the Bank of Montreal for banking. Matthew Barrett of the Bank of Montreal said yesterday that none of them will close but I think there are 206 communities in Canada waiting for the other shoe to drop.
Other banks are pulling out of communities. In January, on the day it announced record profits to its annual shareholders meeting, the CIBC closed a branch, the only financial institution in Lynn Lake, Manitoba. A Braxton Associates study last year estimated that 5,700 bank branches will close over the next decade, putting as many as 35,000 employees out of work. We will start to see bank branches in small communities closing as fast as post offices. The merger mania is one of the reasons these branches will close. It is a sad commentary on the declining attention being paid to the needs of rural life in Canada.
A community reinvestment act makes financial institutions accountable for their behaviour in our communities. It requires the banks to invest in the communities deemed in need. In the U.S. banks have to prove they are meeting the credit needs of small business, community economic development and low income residential mortgages. They have to keep lending statistics on loan requests, denials and approvals, and report their record in lending to visible minorities, women, low income neighbourhoods and so on.
It requires those financial institutions to commit funds in order to meet these needs and to work together with community groups and businesses to make plans for doing so. It is not rocket science. At first, U.S. banks did not like the idea but now they have found they have very low default rates on residential mortgages. Matthew Barrett knows all about it. He had to comply with these regulations before he bought the Harris bank in Chicago.
My point is this. We need jobs in Canada. We have a higher unemployment rate than in the U.S. Banks are making record profits in Canada but they are not investing in small businesses that create jobs or meeting their responsibilities to smaller communities in Canada. In the U.S. they have to do it by law.
Here is one way for them to do it. Why does the government not consider this idea?