Friday, November 06, 1998

Everybody's a bank expert

Two comments from Paul Martin sum up the importance of the report of the National Liberal Caucus Task Force on the Future of the Financial Services Sector. The day before the report was released, the finance minister declared he was "really proud of the work" the NLCTFFFSS had done -- though he had not yet actually read the report. But did he feel bound by it, he was asked the next day? "No. Not at all." Perhaps he had time to read it in the interim. Far from the visionary document it pretends, far even from a focused assessment of the case for and against allowing the big banks to merge, the report is a rehash of every populist gripe or special-interest grudge that has ever been held against the banks. Not only would the task force nix the proposed mergers, but it would also prevent the banks from using their branches to sell insurance or lease cars.

Indeed, it's difficult to say whether they would be allowed to operate as banks, as such.

The report is full of helpful recommendations for how the banks should run their business, from requiring that 33% of loans should go to small businesses (why 33%? why not?), to demanding special treatment for women and minorities, to that old standby, capping interest rates on credit card balances. Occasionally a pro-competition suggestion is thrown in, such as granting access to the payments system to mutual funds and insurers, but in the main the task force would prefer that everyone stay in their own corner of the marketplace, undisturbed by rivals. This, allegedly, in the name of consumers.

Just how determined the task force was to find against the banks can be seen in the report's claim that the mergers should be rejected, among other reasons, because interest rates are too low. That's right, too low. "Canadian interest rate spreads," it notes, "are among the lowest in the world." As indeed they are, at 1.73% in 1996, compared to 2.35% in the U.S. and higher still elsewhere. According to the report, this apparent competitive efficiency "raises serious doubts whether Canadians would gain any cost benefits from merger-enlarged banks." Of course, if spreads were higher in Canada than in other countries, that, too, would argue against the mergers, on the grounds that the industry was already too concentrated.

And if the mergers did lead to increased efficiency, well, the task force would be against that, too: the report warns of "massive" job losses and branch closings should the mergers proceed. (The task force would apparently prefer that the banks keep every existing branch open. It just doesn't want them to do any actual business there.)

This is what comes of the idiocy of backbench life: the endless days of futility to which the ordinary MP, in our executive-driven system, is consigned. Lacking any real power or responsibility, they are forced to invent roles for themselves, like neglected children.

They become nursery martinets, ordering imagined regiments this way and that. Certainly Tony Ianno, the task force's chairman, was in no doubt of his own world-historic importance. "We," he said -- he and his 53 fellow Liberal MPs and senators -- "we represent the people of Canada and we will dictate how this country is governed, not the bank chairmen." Good. Just so long as someone is dictator.

Absolute impotence, in short, corrupts absolutely. "There is no evidence that the mergers are necessary," the task force complains. Maybe so. But then, there is precious little evidence for the necessity of the task force itself. The government is hardly lacking for expert advice on the merger question, having canvassed reports from the MacKay commission, the Superintendent of Financial Institutions, and the Competition Bureau.

Nor is it short of political input, with the imminent arrival of reports from both the Senate banking committee and the Commons finance committee. What special insight do the MPs and senators on the Liberal caucus task force possess that was denied to the members of the all-party committees? Oh, I get it: they're all Liberals. Not just the natural governing party, it seems, but also the only one.