So there's really no new model for how to run this economy, and nobody's even, I think, thinking about that question, much less an answer."
-Doug Henwood, of Left Business Observer, on The Real News Network
Ever since the 2008 financial crisis, Canadian banks have enjoyed almost heroic stature for not being like those bad Wall Street banks that collapsed, triggering a global recession.
Certainly there's been no talk of imposing higher taxes on Canadian banks, to make them help pay for the huge government deficits brought on by the financial crisis and resulting recession.
That wouldn't be fair, since our banks -- unlike the Wall Street banks -- played no role in bringing about the financial crisis.
But why doesn't that logic apply to other groups who also played no role in bringing about the financial crisis?
Canada's financial system emerged from the global crisis in better shape than in many other countries. Canadian banks avoided the all-out panic that struck some jurisdictions. It's a myth that Canadian banks stood on their own two feet right through the crisis; they received important and timely liquidity assistance from government agencies during the worst months of the meltdown (through a C$200-billion "Extraordinary Financing Framework"). But no bank failed or was taken over by the state. This relative (imperfect) stability has been important to Canada's partial economic recovery since the crisis.
Concerned about the increasing frequency of banking crises? Don't worry. Bad things can't happen to banks in Canada.
Certainly we are not Spain. Or Iceland. Or Ireland. Well, let's just say Europe more generally over recent years. Or, come to think about it, the USA with its subprime crisis and its major banks on the rails in the 2008 financial crisis.
Canada is smarter than all those other countries. Canadian banks are just better behaved than banks elsewhere, and in any case the extraordinary vigilance of Canadian banking regulators will protect us.
It's membership time. Cultivate Canada's media. Support rabble.ca. Become a member.
Adam Smith's "invisible hand" to organize the market and make it work smoothly isn't really that invisible after all! I can even go further by declaring that there are several "real" hands working frantically to keep a special key interest rate, the Libor, artificially low.
John Kenneth Galbraith famously described financial genius as "a rising market." This was on display in the expansionary era of the 1950s and 1960s. New bank credits funded growing businesses. Investment bankers injected their own capital into initial share offerings of "public" companies, allowing businesses to grow by taking in shareholders as partners. Finance flourished.
Capitalism is looking pretty mean these days. No amount of profit is enough, and no level of collateral damage to get that profit is unreasonable. And when capitalism on steroids runs amok, any extremes of public pain are justified to save the butts of those who made the mess in the first place.
Corporations understand that they have a green light to punish people ruthlessly for even a modest improvement to their bottom line (ask Caterpillar workers if you want details). Whole nations may be bled dry to shield financial institutions from the consequences of their own bad behaviour. The Greek government is deliberately creating a national great depression to appease international financial interests.
You can say one thing for the powers that be in the banking industry. They've got a lot of nerve.
This past week, our own finance minister, Jim Flaherty, along with Mark Carney, the Governor of the Bank of Canada, came out strongly in opposition to a modest proposal to regulate the U.S. banking system.
Their interventions followed a concerted effort by American bank lobbyists to spark international opposition to U.S. regulatory reforms.