Canadian-style banking crisis

It was only a matter of time, I suppose, before some larger-than-life iconic character took advantage of this old school method of lending.

In the ’80s and early ’90s one such family, headed by a well-known undoubted real estate developer from Eastern Canada, convinced bankers all over the world, including all the big banks in Canada, to lend them billions of dollars, for simultaneous projects which were variously drowning.

This included some serious real estate, such as the World Trade Center in New York, Canary Warf in London and First Canadian Place in Toronto, among others.

These guys were huge. Huger-than-Trump huge.

So large in fact, that the banks stopped asking questions. Much of their financial hubris was updrafted by the willingness of banks to dish out loans without the usual checks and balances required of most borrowers.

Abandoning standard lending practice, they lent truckloads on the family’s reputation alone.

When it all collapsed in March 1992, a bundle of world-wide banks were struggling under the weight of some $20 billion dollars in debt.

It was not enough to sink them, but enough to take on water that couldn’t be ignored. And it hurt across the board. That year at RBC we received no Christmas bonus and the next year no raise, followed by a year with a vexing round of layoffs. Even at head office they lost their bonuses and raises – avoiding a juxtaposition that would haunt American bankers a couple of decades later. But there were no bailouts. And changes at my employer did not result from government or regulatory oversight.

Change occurred from pressure we put on ourselves to never have a day like that again.