No Happy End for bank merger agenda

TERENCE CORCORAN

Canada’s big banks, masters of political grovelling and socially responsible appeals for public sympathy as great corporate citizens, can once again write their efforts off as total failures. Speaking in New York last week, Prime Minister Paul Martin declared bank mergers to be a dead issue. Also dead is any possibility of change in foreign ownership rules or in the government’s position on cross-pillar mergers between banks and insurance companies.

The prime minister’s declarations on bank policy came during a question and answer session following his comments before the Economics Club of New York. There was no room for ambiguity (see text below). Bank reform is dead. After hiring crews of Liberal lobbyists, running massive charitable-giving operations and spending millions on image-burnishing cultural ventures, the banking industry has collected another fat return on investment: zero.

There should be no surprise here. The industry’s failure to win hearts and minds on bank reform is an expected result of botched public policy. Canada’s banks believe their future rests in denying their existence as profitmaximizing institutions in a competitive world. We need to merge so we can cut costs and make more money. It’s our right as bankers and as representatives of shareholders. But we cannot and will not say as much.

No bank publicly trumpets these important and, one must assume, overriding corporate objectives. Instead, they hire lobbyists to weasel around Ottawa. They fill their public relations efforts with feel-good blather, campaigns for cancer cures and cultural programs that say: We’re not banks, we’re not in this for profit. We’re in this for the good of society and to keep artists painting and actors performing.

How any of these activities help banks promote their agenda is a mystery. All too often, moreover, these activities directly subvert the banks as banks. Take, for example, recent theatre offerings at The Shaw Festival in Niagarathe- Lake, Ont. One of the plays is Happy End, a Kurt Weill-Bertold Brecht musical. It is, in summary, a Marxist/Communist romp around the political morality of robbing banks — sponsored by TD Canada Trust. “ Robbing a bank is no crime compared to owning one,” quips one of the characters. That line gets big laughs from the audience.

The play ends with a call to arms based on the old Communist doctrine that a little bit of violence to bring about social justice is a good thing, especially if the violence is aimed at J.P. Morgan and the banking industry. “Blasting open a safe is nothing — we’ve got to blast open the big gang that keeps the safe locked. So slip on your brass knuckles and learn where to hit.” As the play ends, we hear “Bring on the tanks and the cannon,” because we’re heading up to Ed Clark’s office to smooth out the inequities in our social system.

So, every few days all summer a few hundred people leave a theatre in Southern Ontario humming along with a different kind of bank reform agenda. How many of these people go home thinking, well, gee, that reminds me, wouldn’t it be a good idea if Canada’s banks were allowed to compete in a more open and less regulated market, perhaps merge or join forces with insurance companies to improve service and profits?

More likely they go home thinking like Paul Martin. “I’m not sure,” he said in New York, “that public policy would benefit from, in fact, a merger between an insurance company and a large bank in Canada at the present time.” He said he won’t let banks merge until he’s sure there would not be a reduction in competition. As for allowing greater foreign ownership of the banks, he said he “could not see a change” in the current 20% limit.

The reason for maintaining these restrictions on banking and insurance is to protect the public, the poor masses who might otherwise slip into soup-kitchen lines and revolutionary mode if the current banking laws and regulations were suddenly dismantled. Formal Marxism may be dead, but its general themes still waft through our culture, from politics to the theatre, often sponsored by the banks. Indeed, there’s a certain Brechtian quality to Mr. Martin’s anti-bank comments. A little bit of regulatory violence to keep the banks from doing what the banks would do in an open market is a good thing, he is saying, if it means protecting Canadians from the capitalist monsters of Bay Street.

And that’s where the banks today find themselves — back where they started a decade ago, when Mr. Martin, then Minister of Finance, killed two bank mergers in a theatrical gesture than earned him great political applause. If political support for bank reform is ever to materialize in Canada, it’s hard to imagine where it will come from. If the banks won’t openly sell their policy objectives, who will? It certainly won’t come from Ottawa, or the arts community or any of the other circles of ideological influence where the banks spend millions currying favour.