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Canadian Banks, Something to be proud of.

March 22, 2009

I had been thinking about this a lot recently.  Some of the more right wing people I read from the States have been arguing that this crisis does not mean that the markets need to be regulated.  While I have tended to agree with this I’ve often wondered about what regulations mean.  Then I read this article from the Globe and Mail and could not help but think maybe I’m wrong.

Former central bank governor David Dodge agrees. Canadian bank executives keenly remember that period, “and there was therefore perhaps a degree of prudence, a lack of aggressiveness, in comparison with major banks around the world,” he said.

And he gives top marks to the Office of the Superintendent of Financial Institutions, Canada’s banking regulator, for being more conservative than those in the U.S. or Britain. “I think that, from a regulatory point of view, you can say that the Canadian banks were more appropriately regulated.” (Emphasis mine)

The idea of the free market only really makes sense if you do not have powerhouses, like the American banks, that can manipulate the system.  When it comes to corporations or the Government having controls I’ll choose the Government; at least when they screw up the little guys can fire them.

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2 comments

  1. I tend to agree. While I am not in favor of the absolute control by government over the market popular in some countries (looking at you, most of South America) I tend to believe that something has to act as a counter weight to powerful market players, such as multi-nationals, banks, massive hedge funds etc. Something I have never been able to understand is the almost religious faith some people have (not just in America, all over) in the inherent good of a totally unregulated market. I believe this faith mistaken for two reasons. First, it assumes that everyone starts from the same position of wealth and education, which is no more true now then when the theory was first developed by Locke, Smith et al. Second, it also overlooks the fact that if everyone is pursuing their own interest without regard for the big picture (which is unfortunately a tendency of humans), eventually the picture is going to crumble to pieces. The Great Depression, the dot-com bubble, the Asian financial crisis, Japan’s lost decade and the current economic chaos are cases in which this supervision did not exist. Until we come up with something better, the government should have the power to A) regulate and B) enforce decisions made with the public good in mind. As you say, governments can be “un-elected” by the public…CEOs don’t seem to have this problem.
    Cheers Mate.


  2. One more thing though. We aren’t quite as far from trouble as we would believe. We have our own sub-prime mortgage problems. The GLobe and Mail did a great piece on how lending companies were supported by banks in their operations, which did go bad, but that the problem is centred in already economically depressed areas (oil sand country Alberta, East Coast, Northern Ontario) so that it hasn’t been noticed or felt as badly.



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