Trading Masks

One reason the Canadian economy didn't suffer as much as it might have done, is that banks here are under federal control, and permission to allow mergers has been resisted steadily for more than 10 to 12 years.

Here's a current (October 8, 2008 ) article on the topic from the Report on Business: http://www.theglobeandmail.com/s...NStory/ Business

Ten years ago this fall, after [Prime Minister Jean Chretien's] government rejected a pair of proposed bank mergers, the financial community was awash in dire prophesy: Canadian banks were too small to compete with their bulked-up neighbours to the south, the critics complained.

They were too insulated to remain relevant in a global economy characterized by lightning change and mind-bendingly complex products.

Yet today, amid the worst financial crisis in a generation, those predictions have been turned squarely on their head. While Wall Street titans succumb to a credit meltdown, spreading their contagion to Europe, the Canadian banking system has emerged as the most stable and best performing in the world.

Three Canadian banks are now in the top 10 in North America by market value, and the remaining two are not far behind.

Two ironic points -- Mr. Chretien's party, the Liberal Party, under Chretien and his successor Paul Martin, behaved conservatively to limit the rush of the banks to get in on the gravy train of international banking and innovative instruments. Canada is now grateful for that prudence.

Meanwhile who was pushing for the financial gold rush? Why, the right wing, the "conservative" element of Canadian politics. The Progressive Conservative, Conservative and Reform parties urged greater international involvement and mergers, (Reform opposed a big 1998 proposed merger, but only because they wanted "consumers and businesses to be assured of open competition in the Canadian banking industry... the merger should not go ahead unless it's accompanied by changes to the Bank Act that would open the Canadian market to more international competition.")

Under the most recent 12 year reign of our Liberal Party, a whole whack of the federal debt was paid down too, and Canada's economy as a whole is one of the most stable in the world.

There is a reason why bank buildings are big and heavy and modeled after classical Greek and Roman architecture. They were supposed to be careful, far-seeing, stable and secure. Our left wing knew that and stubbornly upheld the idea. Our right wing apparently doesn't.

At what point in time did they exchange masks and decided to take on the other's role? I am not sure. But it would be a grand topic for a book.

Noni