Home bank’s legacy of mistrust
National Post .
Jim Flaherty, Canada’s Finance Minister, keeps hopping on and off the bank bashing wagon. In late January he appeared to support socialist Jack Layton, leader of the NDP, who wants to force our “big banks” to drop all fees associated with their ATMs.
Mr. Layton claimed these fees generated $420 million for banks, but one of his officials admitted to me afterwards that the NDP doesn’t really know how much our banks make on ATM fees or how much they charge. They would just like to see the banks absorb all the costs associated with the services they offer the public, reducing the banks’ profits by $6.2 billion, an amount equal to 32% of total bank profits in 2006.
Thus it was not surprisin michael kors g that Mr. Flaherty, having done the math and enjoyed his media splash alongside Mr. Layton, was soon in the House of Commons telling a surprised NDP caucus that: “The government, of course, does not regulate the day to day transactions of financial institutions with respect to fees and services. But we do believe in competition and choice for consumers.”
But when the cameras were on Mr. Flaherty again last week and the media was asking him about ATMs, his tune changed. and has “told the bank [CEOs] that I want them to have another look at it.” A reasonable person might ask what purpose this serves, considering that consumers have plenty of choice if they don’t like their current bank. Next week he will probably tell the House the banks are doing a great job.
Anyone who thinks reason will straighten the twists and turns of politicians on banking is mistaken. Canadian banking is a “blood sport,” as former Scotiabank chief executive Peter Godsoe famously called it after the ill fated bank merger bids in 1998. Why is this?
To find answers, our banks have been moved to spend millions on polling and as much employing lobbyists who try to persuade politicians to stop using banks as punching bags whenever they need a little face time with the media. Yet much of the media the Toronto Star is a prime example continues with an uncritical and cliched understanding of the whole industry as an uncompetitive old boys club. None of this has advanced our understanding
of banking issues in Canada; it has only left the industry spinning its wheels michael kors as government after government prevents banks from merging, selling insurance or receiving a fair hearing in public. Perhaps that is about to change.
On Sunday evening CPAC will air a landmark of sorts the first documentary looking at one of the most important pieces in the puzzle that is Canadian banking history: the 1923 failure of the Home Bank of Canada.
Called The Big Bank Job, the documentary produced by CPAC’s Holly Doan tells the story of the Toronto based bank that began its life as a one branch savings office in 1854, catering to the city’s Irish and Catholic working class. By 1905 it had obtained a federal bank charter and soon began opening branches and collecting deposits across Canada.
But the deposits made at the more than 70 Home Bank branches were not put to good and cautious use. Instead they funded fanciful land speculators and overextended magnates the likes of Sir Henry Pellatt, who built Toronto castle Casa Loma.
Within eight years of becoming a federal bank, the Home was all but insolvent and should have been closed. The First World War prolonged its life because the federal government did not want to stir panic. The Home finally came crashing down in 1923, taking its customers with it. The Big Bank Job helps explain why Canadians appear innately suspicious of their banks, why the federal government started regulating banks, and why we have large bank michael kors s roughly 25% of all banks failed in Canada between 1867 and 1923, leading Canadians and their governments to see big banks as safer.
When Messrs. Flaherty and Layton beat up the banks in the media, they are not so much interested in changing this or that policy as they are interested in tapping into Canadians’ deep historical reserve of mistrust of banks. That mistrust was largely ignited by the 1923 failure of a bank that set off a storm of protest from coast to coast and lingers in our national memory today.
John Turley Ewart has a Ph D in Canadian banking and political history and is the National Post’ s Deputy Comment Editor.