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House of Commons Hansard #80 of the 41st Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was banks.

Topics

Financial System Review ActGovernment Orders

3:15 p.m.

NDP

Brian Masse NDP Windsor West, ON

Mr. Speaker, when I listened to my colleague, I was reminded that there seemed to be a chapter missing, and that was the chapter where John Manley tried to deregulate our banks. We heard this for years and years.

I had representatives of the banking association in my office. They talked about how they saved the Canadian financial system. I asked if we should get the deck after deck that I was given year after year, saying that we had to become like the American banks. If the NDP had not pushed back against John Manley at that time, the banking system would have been deregulated. I would like the member to address that time and error.

A big debate took place in the House of Commons. The Conservatives, the Alliance, were in favour of this, cheerleading it all the way through the process. However, a small band of individuals, and I see one of the members now, came into this chamber day after day telling the Liberals and John Manley that they were wrong and that they should not allow the banks to become Americanized.

Financial System Review ActGovernment Orders

3:20 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

Mr. Speaker, at that time there was a Liberal majority government. It was also a Liberal majority government that made the decision not to deregulate Canadian banks and to follow the global trends. It was a Liberal majority government that did have respect for all parties in the House of Commons. Certainly, in the spirit of co-operative and constructive engagement with all parties, the Liberal government would have meaningfully engaged and listened to members of Parliament from all parties.

That is in stark contrast to the current Conservative government. It clearly does not listen to even its own backbenchers, perhaps even some of its ministers, and certainly not members from any other political party in the House of Commons.

Financial System Review ActGovernment Orders

3:20 p.m.

NDP

Pat Martin NDP Winnipeg Centre, MB

Mr. Speaker, I thank my colleague for Windsor West for reminding the House of that important piece of Canadian history.

There was a movement afoot from the unofficial prime minister of Canada, Thomas d'Aquino, chief executive and president of the Canadian Council of Chief Executives. He was saying that we must allow the banks to merge so they could be competitive and play on this larger marketplace. They were dying to jump into this sub-prime mortgage fiasco, but they were not really big enough therefore they should be allowed to merge.

There was a national campaign, “Purge the Urge to Merge”. People were crashing the shareholder meetings of the national banks trying to stop this runaway freight train of Canadian banks merging.

Had it not been for the sober second thought of the NDP in exposing this, as the official opposition was all for it, those banks would have merged and dove right into the big leagues in which they wanted to play. They would have brought upon our country the catastrophic outcomes that they exposed other countries to, specifically the United States.

I would ask my colleague to perhaps reflect for a moment on his own party's position on banking as it pertains to Bill S-5.

Financial System Review ActGovernment Orders

3:20 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

Again, Mr. Speaker, it is the practice of the Liberal Party of Canada, both in opposition and in government, to always listen to members of Parliament from all political parties and to consider carefully and respectfully their contribution to the debate. Certainly we would listen and take it seriously.

However, there was a strong group of Liberal caucus members, led by Tony Ianno, a member of Parliament at that time, that mobilized, that did cross-country town halls and round tables on this issue. It met with small business and community organizations, heard from Canadians and made some very strong recommendations to then Prime Minister Chrétien and finance minister Paul Martin. It said that we should not follow the global trend of deregulation.

What the hon. member is describing, however, is the way parliaments ought to work, where members of Parliament from all parties, including the governing party, contribute constructively and meaningfully to public policy debate and decisions ultimately reached by a government. Hon. members have described a Liberal government that listened to all members of Parliament from all parties and its own backbenchers.

There is no such thing as a bad seat in the House of Commons. We are all chosen and given the privilege to serve the people who elect us and have the responsibility to defend our interests. Mature governing parties recognize the importance of enabling that and respecting that Parliament will ensure it happens.

Financial System Review ActGovernment Orders

3:20 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Mr. Speaker, I will pursue some of the themes pursued by my colleague in a somewhat different way.

One of the things I have noticed in the debate today, and I have listened to Conservatives and New Democrats, is a kind of triumphalist tone, that everything about the Canadian banking system and the economy is not only wonderful, but every job created has to be because of the economic action plan and no job loss has anything to do with the policies of the government.

As my colleague pointed out, this is totally ridiculous. As he pointed out, do the Conservatives really believe they are responsible for the oil and minerals in the ground and the high commodity prices around the world today? Obviously not. Do the Conservatives really believe they are responsible for the strong fiscal position which they inherited and, in large measures, squandered? Evidently not.

The third area, which is where I will focus the rest of my remarks, is the banking system.

I believe I can speak about the banking system because I am a former banker. I was involved in the debate on the proposed bank mergers.

We can say that today's banking system is robust, but that this is not due to measures taken by the Conservative government or the Conservative Party. On the contrary, the banking system remains strong in spite of the Conservatives' actions.

I would like to talk about three areas that prove this point.

The first of these areas is the area of bank regulation. As we know, in the 1990s there was a strong trend toward bank deregulation in the United States. The Liberal government of the day, in the 1990s and early 2000s, resisted the temptation to go the route of deregulation. It may be true, as my colleague from Winnipeg Centre pointed out, that Tom d'Aquino wanted to go that route, but Tom d'Aquino was not the government. The government was a majority Liberal government and the Liberal government of the day decided not to go that route notwithstanding the statements by Tom d'Aquino or by certain Reform Party politicians.

That is the first point because there is a consensus view that the 2008-09 global financial crisis was in large measure the result of this deregulation, this idea that we now know to be false, that if we just allow the banks to regulate themselves, everything will be okay. Canada said no to that under the Liberals. The U.S. and the U.K. said, yes, and that is a big part of the explanation for why we are where we are.

The second area is bank mergers. I must admit that when I was the chief economist at the Royal Bank, I supported the proposed merger. I had to support the merger if I wanted to keep my job.

To be honest, I was also in favour of bank mergers because at that time, in the late 1990s, I had been persuaded that the benefits of bank mergers were greater than the costs. At that point, before I went into politics, I was aligned with the Reform Party, which was pushing for bank mergers with the banks and with Mr. Thomas d'Aquino who was also pushing for bank mergers. Perhaps he was not because he had to play both sides of the banking field. I do not remember that. In any event, that is how it was.

Then fast-forward 10 years and we have the global financial crisis. I realized at that point that I had been wrong. For Mr. Chrétien to say no to bank mergers was the right decision. I only realized that after the world financial crisis. When I think back to when I was at the Royal Bank, the mentality of the day within the bank was that it wanted to grow up fast, kick global butt and grow up to be like Citibank or Citigroup. We saw what happened to them. Having observed the financial crisis, I became completely converted to the view that Mr. Chrétien was right, that bank mergers were bad for Canada and it was in spite of the Reform Party, not because of it, that Canada said no to bank mergers.

If I can admit now that I was wrong and that the government was right about bank mergers, perhaps members representing the government could stand one day and make similar admissions, that they were wrong back then to advocate bank mergers and that what Mr. Chrétien did was the right decision.

Finally, I come to mortgages. We have a more modern and recent example of the current government's tendency to favour deregulation. What did it do in 2006, soon after being elected? Before it was elected, the rules for mortgages under Liberal governments were that they could be no longer than 25 years with a 5% down payment. What did the Conservatives do? They went from 25 years to 40 years with a zero down payment. Imagine, this is like U.S. sub-prime mortgages. That is what they did in 2006.

Essentially, it is like deregulating mortgages, just like they wanted to deregulate banking. Potentially, this is a very bad and risky decision. If we go back to 2006, we find that no less than 60% of first-time home buyers took advantage of these rules and had a 40-year mortgage. Now that we have this high level of debt, now that we have talk of the housing bubble possibly bursting, people who took out those 40-year mortgages with zero down payment, thanks to the actions of the current government in 2006, may be seriously at risk.

We do not know if this housing bubble will burst. We never know if a bubble will burst or whether it is even a bubble until after it has burst. No less a magazine than the The Economist has suggested that Canada is first among the countries eligible to experience that. It has pointed out that Vancouver has the highest housing prices-to-income-ratio of anywhere in the English speaking world.

Then, on the other hand, CMHC comes out with a rosy projection that housing prices will continue to rise over the next two years.

Therefore, we do not know whether this will come to pass, but based on our knowledge of history and what we see in other countries, that there is a risk. If it does come to pass, if the housing bubble does burst, if we see banks having major losses and Canadians suffering because of major foreclosures, then a part of the reason for this will have been that decision taken by the Conservative government in 2006 to allow 40-year mortgages with zero down payment. If that comes to pass, I think Canadians will legitimately lay part of the blame for that at the feet of the government.

In closing, I basically said that Canada is in a relatively strong position, but not a perfect one as they sometimes claim. This relatively strong position has nothing to do with the actions of this government and the Conservative Party. On the contrary, this success is the result of the actions taken by the Liberal governments in the 1990s. The actions of the Conservative government, particularly with regard to mortgages, have created more problems, not solved our problems.

Financial System Review ActGovernment Orders

3:30 p.m.

Conservative

Joe Preston Conservative Elgin—Middlesex—London, ON

Madam Speaker, to you, my wife Geri, and all members, happy Valentine's Day.

Madam Speaker, I will be splitting my time with the great member for Yukon.

I truly appreciate the opportunity to lend my voice to today's debate in favour of the timely passage of Bill S-5, also known as the financial system review act. While very technical, this is a critically important piece of legislation.

This bill is the right thing for Canadians and the right thing for Canada's economy. It builds upon and complements the range of initiatives our Conservative government has introduced and will continue to introduce to improve the security of our financial system and to strengthen consumer protection for Canadians.

Indeed, Bill S-5 supports those principles in many important areas, including modernizing, strengthening and clarifying the consumer provisions in the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act, and the Trust and Loan Companies Act, as well as others.

Members can rest assured that our Conservative government understands the importance of protecting consumers and the importance of protecting the larger financial system. During the global financial crisis, we came to appreciate the very real consequences of poor financial sector regulations around the world, especially in the United States and in Europe.

In particular, we saw that the interconnected structure of global finance demands a comprehensive and effective regulatory regime able to prevent problems in one area from spilling over into others. We also saw that ignoring these problems may bring unpredictable and often catastrophic results to a country's economy.

For this reason, it is important to take into consideration the strength, effectiveness and security of the broader financial sector in the regulatory framework when we discuss the positive attributes of Bill S-5.

Our Conservative government recognizes the importance of a stable and well-functioning financial system to the overall Canadian economy. Indeed, Canada has received high praise for our well-regulated financial system during a time of global economic turmoil. Even the Toronto Star was forced to admit:

Canada has won international accolades after the World Economic Forum ranked its banking system as the soundest in the world....Canadian banks...have largely skirted the worst of the turmoil. Unlike in the United States and Europe, no banks collapsed or had to be rescued in Canada during this financial crisis.

The Irish Times declared:

Canada's policy of fiscal discipline and strict banking supervision was a reason why it was one of the world's strongest performers during the recession.

In my remarks, I would like to highlight the housing market in particular. The housing sector warrants particular attention in light of its role in the 2008 financial crisis and the ongoing pressures arising from the U.S. housing bubble that are still being felt by the American financial system and have slowed that country's economic recovery.

In order to protect our housing market from the worst excesses seen abroad, our Conservative government has acted repeatedly and decisively to ensure its stability, especially with regard to mortgage financing.

Mortgage financing plays a key role in providing a reliable source of funds for prospective Canadian homeowners. Prudent mortgage lending standards and mandatory mortgage insurance for high ratio loans allowed Canada to avoid the housing crisis that occurred in other countries, especially the United States.

Since 2008, our Conservative government has taken prudent and measured steps to ensure that this system remains stable over the long term while maintaining economic growth.

In July 2008, February 2010, and January 2011, we announced a series of sensible adjustments to the rules for government-backed insured mortgages. The measures include: reducing the maximum amortization period for new government-backed insured mortgages to 30 years; requiring a 5% minimum down payment, and a 20% down payment on non-owner occupied premises; lowering the maximum amount lenders can provide when refinancing insured mortgages to 85% of the value of the property; requiring buyers to meet a five year fixed rate mortgage standard; and withdrawing government insurance backing on home equity lines of credit.

These adjustments will significantly reduce the total interest payments Canadians make on their mortgages, promote long-term sustainable home ownership, and limit attempts by banks to repackage consumer debt into mortgages guaranteed by Canadian taxpayers. Taken together, they would go a long way toward strengthening the regulatory oversight of the mortgage insurance industry. Many of these improvements to the mortgage insurance guarantee framework have helped to encourage Canadians to use their homes as a way to save responsibly for their families and their futures.

This would help to ensure that Canada's housing market remains strong. It has been applauded by numerous commentators and economists. Credit Canada's executive director, Laurie Campbell, called the most recent moves a “step in the right direction because it means more money in consumers’ pockets ”.

An editorial in Waterloo's The Record added, “The federal government has done the right thing in tightening up the rules for mortgages in this country”.

In a similar vein, a recent Calgary Herald editorial applauded the government's proactive approach and added, “It's good to see the government continue to be vigilant on this file”.

Furthermore, as the Minister of Finance has said repeatedly, our government will continue to monitor the housing market very closely and take further action if it is necessary.

We all recognize there is always work to be done to ensure the continued stability of the Canadian financial system and that ongoing vigilance is vital. That is why we are pushing for the timely passage of the financial system review act. The bill would provide the framework that would benefit all participants in the financial services sector, not only financial institutions but, more importantly, everyday Canadians. It would maintain the long-standing practice of ensuring regular reviews of the regulatory framework for financial institutions, a unique practice that sets Canada apart from almost every other country in the world.

Bill S-5 would play a key role, together with other strong links we are forging in areas like mortgage insurance, in protecting consumers and building a more efficient, effective, sound and competitive financial system for all Canadians. Renewing the Canadian financial institution legislation on a regular basis has resulted in a robust and effective financial system that is aligned and responsive to developments in financial markets and the broader global economy.

In summary, I would encourage all members to join in our efforts to ensure the strength and stability of Canada's financial system and support the financial system review act.

Financial System Review ActGovernment Orders

3:40 p.m.

NDP

Mike Sullivan NDP York South—Weston, ON

Madam Speaker, a number of things are missing from this review. I wonder if the member opposite would like to answer why, for example, there is no review of the fees that are charged to ordinary consumers and the way those fees are promulgated by the banks. Nor is there a review of the ability of the big banks to speculatively invest in such things as sub-prime mortgages which our banks were involved in through the unregulated nature of their ability to invest. Would the member opposite like to comment, please?

Financial System Review ActGovernment Orders

3:40 p.m.

Conservative

Joe Preston Conservative Elgin—Middlesex—London, ON

Madam Speaker, I thank the member for York South—Weston for his attention today during this debate. He has asked many questions.

The first part of the question was about how simple banking fees affect consumers, whether it is the cost of mortgages, fees on a chequing account or ATM fees. Those are consumer-driven costs and are not covered by this Bank Act review. Consumers have the choice to go from bank to bank to find out what the fees are.

The other part had to do with whether the banks can put mortgages and other lending into one pile. Some of the act does cover how the banks deal with mortgages in that way. It certainly is a reason for review every five years. If new items like this do come up, they could be reviewed.

Financial System Review ActGovernment Orders

3:40 p.m.

NDP

Kennedy Stewart NDP Burnaby—Douglas, BC

Madam Speaker, last week I asked a question on this bill to get more of a general answer about the economy. When Paul Martin was finance minister, he declared the natural rate of unemployment in Canada to be about 7%. The U.S. Federal Reserve reports it to be 7% and rising. Last week, the member for Wascana reported that it was only 4% in Canada. I wonder if the member opposite could report what his government believes the natural rate of unemployment in Canada to be.

Financial System Review ActGovernment Orders

3:40 p.m.

Conservative

Joe Preston Conservative Elgin—Middlesex—London, ON

Madam Speaker, I am not certain I can speak for the whole world as to what I think the natural percentage of unemployment is. I know that in my area of the country, even during the best times when things were really booming, there was unemployment.

However, I will tell members what my personal views are. Any person who is unemployed, looking for work and wants a job, should find it. If that person cannot, then there is one too many people unemployed in our country.

Financial System Review ActGovernment Orders

3:45 p.m.

NDP

Brian Masse NDP Windsor West, ON

Madam Speaker, one of the things that Bill S-5 does not address is the patriot act. Canadians' personal information could be accessed in the United States through the patriot act. We need an international treaty to deal with that.

I wonder if the member supports the need for an international treaty. Without it, banking records and information and credit card information could be used by the U.S. government through its patriot act.

Financial System Review ActGovernment Orders

3:45 p.m.

Conservative

Joe Preston Conservative Elgin—Middlesex—London, ON

Madam Speaker, I know the member works very hard on U.S. issues, being in a border community. I thank him for that work.

My answer to the question is, if it is affecting Canadian consumers, we should look at it. If at all, we should be working as much as we can in a collegial manner with the Americans. We will continue to discuss with them the problems Canadians have and, hopefully, they will bring to us problems Americans have and we can work together on a solution.

Financial System Review ActGovernment Orders

February 14th, 2012 / 3:45 p.m.

Conservative

Ryan Leef Conservative Yukon, YT

Madam Speaker, I am pleased for the opportunity to speak at second reading of Bill S-5, the financial systems review act.

I want to begin by noting that this legislation is vital to the stability of Canada's financial sector, and explain how it came before the House today. Every five years the government reviews the policy framework that governs federally regulated financial institutions. The last review was completed in 2007.

Launched on September 20, 2010, the current five year review began with the Minister of Finance inviting Canadians to share their views on how to improve our financial system through an open consultation process. This process has helped to ensure that Canada remains a global leader in financial services. Making sure that Canadians continue to have a strong and secure financial system, one that has been a model for countries around the world during the recent global turmoil, is a key priority for our Conservative government.

This bill would help ensure that our system continues to be recognized.

For the fourth year in a row, Canada was ranked as having the soundest banks in the world by the World Economic Forum. This strength has been widely recognized by independent observers, both here and abroad. An Ottawa Citizen editorial acknowledged that, and I quote:

Our banking and financial system is the envy of the world. While the great money edifices of countries such as the U.S., Britain and Switzerland cracked at the beginning of the recession, Canada's banks stood firm.

In the Toronto Sun columnist Peter Worthington has said:

Canada's banking system is now widely recognized as arguably the world's best. No Canadians fear for their deposits as many Americans do.

We have also been recognized beyond our borders. Indeed, we have heard from voices around the world.

When it recently renewed Canada's top-tier, AAA credit rating, Fitch, the world renowned credit rating agency, pointed out:

Canada's banks proved more resilient than many peers thanks to a conservative regulation and supervision environment.

The influential Economist magazine recently stated that:

Canada has had an easier time than most during the recent global recession, in part because of a conservative and well-regulated banking system.

The Irish Times commented recently that:

Canada's policy of fiscal discipline and strict banking supervision was a reason why it was one of the world's strongest performers during the recession.

U.K. Prime Minister David Cameron praised our system:

In the last few years, Canada has got every major decision right. Look at the facts. Not a single Canadian bank fell or faltered during the global banking crisis...Your economic leadership has helped the Canadian economy to weather the global storms far better than many of your international competitors.

I echo that high praise.

Moreover, I would like to add that the financial services sector is a constant presence in the daily lives of Canadians. The industry employs over 750,000 people in good, well-paying jobs. It represents about 7% of Canada's GDP. The sector is a key pillar of our economy through its role in fostering financial stability, safeguarding savings and fuelling the growth that is essential to Canada's economic success.

Canada is set apart from almost every country in the world through the implementation and practice of the mandatory five year review that produced the bill we are discussing today. This practice ensures that the laws governing our financial institutions are updated and responsive to a constantly changing global marketplace.

I would also add that the recent financial crisis helped us recognize the importance of a stable and well-functioning housing market to the economy and the financial system. While our banks and financial institutions remained sound, well capitalized and less leveraged than their international counterparts during the crisis, in order to ensure stability in our housing market our government proactively moved three times to adjust our mortgage insurance guarantee framework.

These adjustments included reducing the maximum amortization period to 30 years from 35 years for government-backed insured mortgages with loan-to-value ratios of more than 80%. We also reduced borrowing limits in refinancing and withdrew government insurance from home equity lines of credit.

These adjustments have been applauded by observers and economists alike. TD Economics praised the changes highly, stating that “these policy changes were prudent and act to help limit risk in Canadian real estate”.

Our government is committed to renewing the key elements of our financial system and bolstering it with new tools. We are committed to fine-tuning, clarifying, harmonizing and modernizing the existing framework. We are doing just that through the financial systems review act.

Canadians recognize that the current framework functions well. Canada's financial system continues to be recognized as one of the soundest in the world. From that solid foundation, the proposed legislative package includes measures that would modernize financial institutions' legislation to encourage financial stability and ensure Canada's financial institutions continue to operate in a competitive, efficient and stable environment. Measures would fine-tune the consumer protection framework, including enhancing the supervisory powers of the Financial Consumer Agency of Canada and improve efficiency by reducing the administrative burden on financial institutions and adding regulatory flexibility.

Other measures contained in this bill include: improving the ability of regulators to share information efficiently with international counterparts while respecting privacy laws; guaranteeing that all Canadians have the right to cash government cheques under $1,500 free of charge at any bank in Canada; and promoting competition and innovation by enabling cooperative credit associations to provide technology services to a broader market. The bill would reduce the administrative burden for federally regulated insurance companies offering adjustable policies in foreign jurisdictions by removing duplicative disclosure requirements.

I am happy to report that many public interest groups have shown strong support for today's bill. For example, the Canadian Life and Health Insurance Association proclaimed:

It is important that legislation be periodically reviewed so that it keeps up with the changing environment... The industry welcomes a number of measures outlined in [the financial system review act].

In summary, today's act would reinforce financial sector stability, fine-tune consumer protection provisions and adjust the regulatory framework so it can better adapt to new developments. It would provide for a framework that would benefit stakeholders in the financial services sector, financial institutions, as well as all Canadians who rely on our banking system daily. Our Conservative government recognizes that in order to remain an international leader in the area of financial sector stability, we must continually consider what regulatory changes are needed to foster competitiveness and to ensure the safety and soundness of our system.

Today's bill would maintain the long-standing practice of frequently reviewing the regulatory framework for financial institutions, ensuring that Canada remains the leader in this regard. I therefore urge all members to support the financial system review act, along with the sensible regulation of our banking system that has served us so well.

Financial System Review ActGovernment Orders

3:50 p.m.

NDP

Mathieu Ravignat NDP Pontiac, QC

Madam Speaker, I share the concerns of many people in my riding and many other Canadians about the power the banks have over our lives, particularly when there is a large concentration of capital. One worry that I have is the process through which this bill came forward. It surprises me that the other place had a greater kick at the can. I wonder why the government decided to restrict the scope of the review of this particular bill to technical issues.

Given the extraordinary nature of the banking industry and its influence on us, it would have been better to go ahead with broader public consultation on this bill. I wonder if the member has any comments as to why the government has taken this approach.

Financial System Review ActGovernment Orders

3:50 p.m.

Conservative

Ryan Leef Conservative Yukon, YT

Madam Speaker, the consultation started in September 2010. We heard from Canadians about their recommendations for adjustments and input on this bill. We are looking at fine-tuning something that is working quite well right now. The timeframe we have before this regulation sunsets would not necessarily lend us the opportunity to open it up. There are other regulatory regimes where we can adjust consumers' concerns. The finance committee is an area where the opposition would be able to express concerns and suggestions.

Financial System Review ActGovernment Orders

3:55 p.m.

NDP

Jamie Nicholls NDP Vaudreuil—Soulanges, QC

Madam Speaker, I would like to talk about the part of the bill that touches on foreign bank subsidiaries in Schedule 1. The changes mean that foreign banks will be subject to the same operating restrictions in Canada as other banks. This measure will eliminate tax evasion, one of our biggest problems.

Therefore, I ask the member what penalties will be imposed for tax evasion, for example, if someone transfers funds to a tax haven such as Switzerland or the Cayman Islands.

Financial System Review ActGovernment Orders

3:55 p.m.

Conservative

Ryan Leef Conservative Yukon, YT

Madam Speaker, I apologize to my hon. colleague, as I was trying to catch up with the translation. I think the question was: What are the penalties levied on foreign entities under this regulation if they are involved in tax evasion?

Although I do not know the specific penalties in terms of dollars and dimes, there is a host of legislation in our country allowing regulatory enforcement agencies to deal specifically with that. When investigations are conducted, the penalties imposed are going to be dependent on the investigation and the evidence presented of the violations that have come forward.

While we can talk about a range of penalties or maximums and minimums, we know that in any process the actual penalty meted out depends on the weight of the evidence provided by an investigation.

Financial System Review ActGovernment Orders

3:55 p.m.

NDP

Mike Sullivan NDP York South—Weston, ON

Madam Speaker, I asked the member who spoke previously a question about speculation in derivatives and other speculative instruments and why the bill does not deal with that. Could the member comment on that, please?

Financial System Review ActGovernment Orders

3:55 p.m.

Conservative

Ryan Leef Conservative Yukon, YT

Madam Speaker, as has been addressed a few times in the House today, when we get down into things that can be dealt with in a regulatory regime, that is where they belong.

We are looking at a high-level of fine-tuning of something that is working quite effectively. From the consultation process we have heard the adjustments that Canadians want to see made. We know from debate within this House and from what will come forward from committee that we are looking at things that are designed to deal with the fine-tuning of a very technical aspect.

I believe there will be other opportunities and occasions to deal with things that are probably outside the scope of this review and would be a better fit for the regulatory process.

Financial System Review ActGovernment Orders

3:55 p.m.

NDP

Pat Martin NDP Winnipeg Centre, MB

Madam Speaker, thank you for the opportunity to enter this debate on this comprehensive and sweeping piece of legislation regarding our financial institutions, both their well-being and their duty and obligation to provide adequate service to Canadians.

I need to preface my remarks by noting that the bill is entitled Bill S-5, the S meaning that it does not originate in the House of Commons, the chamber of the duly elected representatives of the people. It has its origins in the other place, the Senate of Canada. As democrats, each and every one of us should take note, pause and reflect on the significance and meaning of the bill. More and more, we are finding bills originating in the Senate, when in fact all pieces of legislation should find their origins in the duly elected chamber of the House of Commons, not the unelected, undemocratic Senate. I profoundly resent this chamber being seized with a bill that has originated there. I will state that for the record.

The other thing comment I would say before discussing the substance of this legislation is the fact that once again we are faced with a debate on a bill with a gun to our heads, under pressure, under the time limitation placed on our democratic review, scrutiny, analysis, and due diligence of the bill, the very reason we were sent here as representatives of the people. We are being denied that right systematically once again by a government that introduces a closure motion almost on the same day it tables a piece of legislation. This is the 16th time in a row, in this short session of this 41st Parliament, that we are being denied our democratic right to give full study and examination of the bill and to have our comments within this place recorded in Hansard.

I do not want anyone in the country who has been observing the activities of our Canadian Parliament to think for one minute that these are normal circumstances. These are anything but normal. These are extraordinary. This is the most appalling abuse and undermining of the democratic process that anyone has ever seen.

I have been a member of Parliament for six terms. I have sat in majority and minority Liberal governments. I have sat in majority and minority Conservative governments. No one has ever seen anything like this before. This cannot be allowed to continue without condemning it in the strongest possible terms. I hope the people of Canada take note that the Conservative government of the day, and I do not say this lightly, is undermining the integrity of our parliamentary institutions by systematically denying the right of members of Parliament to study bills, per our constitutional parliamentary democracy. It offends the sensibilities of anyone who calls himself or herself a democrat to see this happening systematically.

While I am on the subject, I would also note that I just came from a committee meeting earlier today, where there has been a systematic denial of the public's right to know what its government is doing with its money, in its bills and policy development, by invoking the shroud of secrecy over the otherwise ordinary activities of parliamentary committees that have traditionally been held in public. The government has moved to put these in camera. For any ordinary Canadian watching, this means that the doors will be shut, everyone will be asked to leave, and there will be no cameras and no one will have any right to ever divulge what happened behind those closed doors. That is the in camera rule.

In times gone by, three or four years ago, it used to be the rare exception if the activities of a parliamentary committee were held in camera. It would be in matters of national security, or of profound commercial sensitivity where someone's right to privacy in a commercial setting would otherwise be violated.

Now in camera meetings are being used willy-nilly for any little issue that may be controversial or potentially embarrassing to the government. The government slams down the in-camera rule and shuts down the cameras, ironically. Everyone is kicked out of the room and no one in that meeting is ever allowed to divulge anything that happened behind those closed doors under the rule and penalty of the Speaker of the House of Commons. It is a very serious violation to contradict the in camera rule. There is no justification for this whatsoever. I cannot even divulge the matter we were discussing at today's in camera meeting, because it was in camera.

This has been a systematic undermining of the democratic procedures and the processes that have evolved over time to make our Westminster model of parliamentary democracy the best in the world. However, I caution the members across and anyone listening that our parliamentary democracy is a fragile construct. It exists only by virtue of both sides stipulating that they agree to abide by a set of rules that includes openness to the greatest possible, and respecting the role of the opposition to test the merits of the proposals put forward by the government before they are implemented into legislation.

Again, I caution the government of day. It may in fact be doing irreparable harm to our democratic institutions. I think that if it allows pendulum to swing too far this way, it will never get it back to the norm. The toothpaste might never go back into the tube; the genie might never go back into the bottle. The government has pushed the limits of the integrity of our system. It is like pulling a thread on a sweater: the whole sweater can unravel if we keep yanking on that thing. That is what the government is doing. It is testing not only our patience but also the integrity of our whole fragile, yet precious, parliamentary democracy.

I resent profoundly that we are facing closure once again on this bill for the 16th time since we returned to work after the parliamentary summer recess. It is an absurd situation that we find ourselves in. We are being systematically denied the ability to do our job as agents of the people who elected us here to provide scrutiny, oversight and due diligence and to hold the government to account. That is the very function of Parliament and it is what is being denied to us.

We are talking about banks. If there were any subject in the country that warranted a greater examination by the elected representatives of the people, it is the way banks are, or are not, serving the best interests of Canadians. It warrants enhanced scrutiny. It warrants not only a thorough examination but also a royal commission. The failure of banks to meet the needs of Canadians, and their gouging us in the process, is almost ridiculous. The biggest PR campaign in the country right now is not to sell cars, not to promote the oil sands, but the PR job of banks trying to peddle themselves to Canadians as warm, fuzzy and benign institutions that have our best interests at heart.

I challenge that. I would have welcomed the ability to challenge it in a much more thorough way as we go through the bill to amend the law governing the financial institutions of this country. I say this because in the riding of Winnipeg Centre, which I represent, chartered banks are closing like crazy. They are disappearing. They are going the way of the dodo bird. Whereas we used to have a bank, an accessible institution, on the street corner, they are all shutting down and are being merged into one conglomerate. There were 14 bank closures in my riding alone.

Do members know what is filling the void left behind? It is the fringe banking institutions, the Money Marts and payday loan outfits that are charging not the 60% that the usury laws of this country allow them to charge, but which should have been reviewed in this process, but 1,000% to 1,500%. The Government of Manitoba did an investigation and one example it found was a payday loan charging 10,000% interest.

Do members not think that warrants a bit of debate and analysis and scrutiny by the elected representatives of the people, the fact that people are being gouged because of the unwillingness of our chartered banks to live up to the terms and conditions of their charters to provide reasonable financial services to Canadians no matter where they live?

Because of their failure in that department, they have left a void that is being filled in by these predatory lenders. I do not know what can be done to make a 10,000% profit. Selling cocaine does not even give, I presume, a 10,000% profit. However, they are springing up like mushrooms all over the inner city and preying on poor people and gouging them in the most egregious way. The Parliament of Canada is silent on it because we are being denied the right to even do a thorough analysis of the job that financial institutions are doing to provide basic services.

We need to remind ourselves that we granted the chartered banks their charter and what comes with the charter is the exclusive monopoly for certain very lucrative financial transactions, the credit cards, cheque cashing and all of these things, that are enormously profitable. In exchange for the exclusive monopoly on these lucrative transactions, they were to provide at least the basics that financial consumers might need.

We in the NDP have been trying to rectify this for a decade or more, which is why these rare, once every five years, opportunities are so precious. Myself and the former leader of the NDP actually got some proxy shares and used to crash shareholder meetings of the big chartered banks. We would go to the Royal Bank shareholders meetings, as well as the Bank of Montreal, the Toronto Dominion Bank and the CIBC meetings. We would move motions at those shareholders meetings trying to bring these big institutions to account, to stop the gouging and to make them responsible.

Exactly. I see my colleague gets it. He seems as perturbed as I am about this situation.

I will give an example. This is quite an experience. Everybody here should do this. Members should go to a shareholders meeting of one of the chartered banks, such as the Royal Bank of Canada. My good friend, John Cleghorn, was the CEO of the Royal Bank. I had just enough proxy shares to move some motions. Nine motions were moved that year at the shareholders meeting of 1,500 people and I moved all nine of them. Everybody else just goes there to find out how much money they made. I went there to try to introduce some democratic reform to these appalling undemocratic organizations.

One of the motions I moved even my colleague from Nepean would enjoy. I moved a motion to limit the CEO's salary to 20 times that of the average employee. Now the average employee salary, if anyone did the math, is about $47,000 a year, and 20 times that is almost $1 million year, which is pretty good. Sadly, however, the motion was defeated.

Another motion, however, that we moved was for gender parity on the board of directors. This motion was what scared John Cleghorn. Matthew Barrett was not nearly as amused by all of this but John Cleghorn was a good sport. The motion for gender parity on the board of directors failed by this ratio, the exact same as the last Quebec referendum, 49.4% to 50.6%. We almost got it.

There is a lesson here. The shareholders' democratic movement should be inspired by this. A room of 1,500 people who did not come there to talk about amendments to democratic reform or corporate governance had an appetite for corporate governance. There was an interest.

Again, when we did the same thing with Matthew Barrett, he had a hissy fit and was openly wondering how Alexa McDonough ever got in there with any shares in his bank.

Other people are interested in this and, believe me, on behalf of those people who are being victimized by fringe banking in low income neighbourhoods like mine, we owe it to them to give a far more thorough analysis of our once in five year opportunity to amend the laws governing financial institutions and to provide for related and consequential manners. We should not be having it rammed down our throat by a bunch of unelected senators, hacks, flaks and bagmen in the Senate, many of them recently appointed by the government.

With all due respect for the Senate of Canada, it has no business introducing legislation for the House of Commons to have to deal with. It is supposed to be the other way around.

I have talked briefly about the importance of charter banks. I will talk at length, if given the opportunity, on the importance of charter banks and their obligation to provide basic financial services to ordinary Canadians. They have reneged on that deal systematically over the last many decades, to the point where they are now charging money at an ATM. First, they brought in ATMs, presumably to save money so they could lay off bank tellers. Finally, when they got people used to the idea that they had to use ATMs, they started introducing service fees. So they are not only saving a fortune and posting record profits every quarter, even through the economic downturn, but they are gouging ordinary Canadians for $1.50 each way to take $20 out of their bank account. I would like to see the percentage charge on that, extrapolated over the lending fees associated with the usury provisions. I think in the Criminal Code of Canada, if more than 60% is charged they are guilty of usury.

Therefore, how is it that the Money Marts, the payday lenders and the title loan lenders in my riding are charging 1,000%, 1,500% and, in this one egregious example, 10,000% interest and the government of the day and the enforcement agencies regarding financial institutions are silent on the matter? Clearly something is fundamentally wrong.

I have notes about Bill S-5 but many of the observations and points being made here are so narrow and specific that they miss the big picture. More often than not in this place we do not see the forest for the trees and the fact is that we are not being well served by our financial institutions. We are being gouged by our financial institutions. We should be screaming from the rooftops condemning the treatment of ordinary Canadians by the gouging that is going on.

I have talked about the shareholders' rights efforts that we used to make. We should probably mention that again but I want to talk about one other thing in the global picture of how we view the relationship we have with the financial institutions that seem to have such great influence over this country.

I hear time and time again the government side bragging that we have the best banking regime in the world, that it is due to the wizardry of our Minister of Finance and that somehow everything is rosy in this regard.

I want to remind anyone listening today that were it not for the Herculean efforts of the NDP, not five or seven years ago, the charter banks of Canada would have been allowed to merge into massive institutions, as they wanted to do. They were dying to merge. They were asking permission. They were knocking on the door. The John Manleys and the Paul Martins of the world were eager to receive the message. Do members know why they wanted to merge? It is because they wanted to play in the big leagues in the biggest game in town. The biggest game in town at that time was the sub-prime mortgage industry. Our banks were too small to play a meaningful, realistic role in that industry sector but they were dying to merge so they could dive in there and we would have been in just as much trouble as the big institutions in the United States, crashing and burning in this catastrophic notion of bundling the sub-prime mortgages and marketing them as a financial product.

Fortunately, we managed to prevail and block the urge to merge. I remember the national campaign was purge the urge to merge. It was Lorne Nystrom's campaign, the NDP finance critic of the day, criss-crossing the country. I see he is outside here today. We should recognize and pay tribute to Lorne Nystrom because we owe him a great debt of gratitude. He is a big businessman and he knows something of these things.

It is our job and our obligation to ensure the financial institutions meet the needs of Canadians, not to have it rammed down our throat in a bill put forward by the undemocratic, unelected Senate.

Financial System Review ActGovernment Orders

4:15 p.m.

Nepean—Carleton Ontario

Conservative

Pierre Poilievre ConservativeParliamentary Secretary to the Minister of Transport

Madam Speaker, I am pleased to learn that my hon. friend is a believer in shareholders' rights. Shareholders across Canada are our next door neighbours, our moms and dads, and our pension funds. In fact, one of the biggest shareholders of all is the Canada pension plan or the Canada Post pension plan. Blue collar workers, many of them unionized, are shareholders. They can only be paid a return on their shareholding investment on after tax corporate profits. There is literally no other way that a shareholder can get a dividend than for a company to pay that dividend out of the after tax profits.

The member and his party want to raise taxes on those profits, leaving less for the dividend receiving shareholder, meaning that all of the people for whom he purports to fight on behalf of would have less of a return, our pension funds would be less funded and the people who invest in companies to create jobs in the initial stage would receive a smaller return.

As a shareholders' rights advocate, I am curious how the member can advocate raising taxes on those same shareholders.

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4:20 p.m.

NDP

Pat Martin NDP Winnipeg Centre, MB

Madam Speaker, as a former trustee of employee benefit plans, I concur that employee benefit funds and union pension plans are one of the largest single investors out there. In fact, over 50% of all of the trading that goes on at the New York Stock Exchange, and, in fact, the TSX, are employee benefit plans and union pension funds being moved around; the buying, selling and representing the beneficiaries of those plans.

One of the biggest things that has backfired in the Conservatives' zeal to keep lowering corporate taxes is that it has become obvious that businesses and corporations that are the beneficiaries of these lower taxes, such as the banks and the oil companies, are not reinvesting the money and are not paying it out as dividends to their shareholders. They are hoarding the money and stockpiling it. It is like Scrooge McDuck rolling around in his bank vault with all of his coins and dollar bills. They seem to be basking in all this dough.

The logic has not really played out. I understand their reasoning that if we allow businesses to make more profits they will reinvest and create more jobs. However, they have not been doing that. Their own analysts have been telling them that. The minister himself has expressed his frustration. They are not putting that money into circulation. It is not having the desired effect and, therefore, is a bit convoluted. It is Conservative pretzel logic that keeps this blind fundamentalist orthodoxy that lower taxes will trickle down to the average consumer. If anything, the companies that need help are not getting it because they are not paying taxes anyway if they are in dire straits.

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4:20 p.m.

Liberal

Rodger Cuzner Liberal Cape Breton—Canso, NS

Madam Speaker, I always appreciate the interventions by my colleague from Winnipeg. I also appreciate the history lesson. I do not disagree with the fact that maybe John Manley and Paul Martin were leaning toward a merger at the time. That had been discussed. I know we had an admission from my colleague, a former economist himself and a supporter of deregulation at the time, who saw the light.

However, I thought maybe Jean Chrétien and the 161 Liberals who were in the House at the time had something to do with that. I did not realize that the NDP had punched so far over its weight with the 19 members that it had, so I appreciate the history lesson from my colleague.

After the current government took power, it came forward with two changes, one being the extension of mortgages to 40 years and the other being the zero down payment, both of which led to the devastation of the banking industry in the United States. This was the road that the government began to take this country down.

With the implosion of the economy in the United States, does the member believe that maybe this was the first indicator? Those guys were sort of bailed out by the implosion that took place south of the border and perhaps, with further endeavours by the government, we would be in a similar situation as the United States now had the time period they had at the controls been a little bit longer. I ask my colleague for his comments on that.

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4:20 p.m.

NDP

Pat Martin NDP Winnipeg Centre, MB

Madam Speaker, as I understand the question of the member for Cape Breton—Canso, I, too, remember the early days of 2008 when the current Minister of Finance was in complete denial that there were any clouds on the horizon. In fact, he was predicting surplus budgets. It was such a head-in-the-sand attitude that it led the opposition parties to come together and form the coalition that almost led to the defeat of that government. It was an irresponsible, reckless attitude.

It is galling to me to hear the endless praise heaped on the Minister of Finance. I do not recognize him as any kind of sorcerer. If anything, I see him as a road-weary magician pulling sedated bunnies out of a tattered top hat and thinking that he is impressing Canadians, when he is not.

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4:25 p.m.

NDP

Jamie Nicholls NDP Vaudreuil—Soulanges, QC

Madam Speaker, the House leader earlier today said that this bill had to be passed before April. I seem to remember at the beginning of the session that the first priority of the Prime Minister was to appoint his buddies to the Senate: Fabian Manning, Josée Verner and Larry Smith. Rather than telling the Senate that we needed to pass this important banking legislation, he was putting his buddies into the Senate.

How long does he wait until he finally lights up and says this is important? It was November when he said that we needed to get this through the House. There are important things in this legislation that we have to look at, like tax evasion. Our country loses millions, maybe billions, per year by people who put their money in offshore paradis fiscaux, as we say in French. They are places where people can evade their taxes. This bill starts to address these things, but we have more questions, such as what the enforcement will be like.

We can see that the priority of the government was to put its buddies in places of importance rather than pass important legislation. Now we are stuck with not being allowed to debate. There are 300 ridings in the country. Each MP was elected to speak for his or her constituents. Unfortunately, due to the lack of planning of the government, we are not able to do so.

Would my hon. colleague elaborate on this point?