Why keeping your money in an old sock is an increasingly better idea

Allan Fotheringham January 23 1978

Why keeping your money in an old sock is an increasingly better idea

Allan Fotheringham January 23 1978

Why keeping your money in an old sock is an increasingly better idea

Allan Fotheringham

There is a commerce professor in one of our universities who makes it a practice each year to ask how many students would like to end up as president of a Canadian bank. When a few tentative hands appear, he then says, “Right. If that’s your goal get out of this class. Get out of this university. A university degree will disqualify you for the job.”

It’s a dramatic way of pointing out that in the last quarter of this supposedly enlightened century, the Canadian banking system is one of the final refuges of the high-school dropout. Until 1970, there was only one head of a Canadian bank who’d been to university. The average climb to the top, from clerk’s window to upholstered pot belly, took a numbing 38 years. That is Canadian banking: the teller mentality with the boardroom salary. One of the wonders of the world is why the docile public of this complacent realm puts up with the unconscionable concentration of power among these few faceless men who combine all the worst characteristics of the civil service (humorless seniority) and the business community (arrogance married with sanctimonious rectitude). Canada is controlled not by politicians but by the system of interlocking directorships, with the banks the linchpin. Dr. John Porter in The Vertical Mosaic proved 13 years ago how just 907 men in Canada shared 81 % of the directorships of the dominant corporations as well as 58% of the bank directorships and the same proportion of the life insurance companies. Today it’s even more concentrated : 300 men—centred on the bank boards— holding more than 3,000 directorships of corporations with assets of $700 billion. It’s a tight little club and it works, oh, so efficiently.

What brings the bile juices to a boil is the fact Ottawa now has a chance via the decennial review of the Bank Act to do something about the cozy cartel and, at last, one of the provinces has stepped in on behalf of the consumer to describe the essential character of bank practices, BC Minister of Consumer and Corporate Affairs Rafe Mair, a Social Credit millionaire lawyer who is hardly a radical, says chartered banks “flagrantly break” the BC law every day with shady consumer lending practices that involve threats, deceit and outright

blackmail. Beneath those six-piece serge suits, there beats the avarice of used car salesmen in loud checks.

Mair, detailing the slippery dealings that defy six separate BC laws, says, “In terms of the nature of violations, the Bank of Nova Scotia is worst. The Canadian Imperial Bank of Commerce is second because it’s biggest in BC and affects most people.” This is the same Scotiabank that has refused to join other members of the cozy cartel in killing those seducing “red

convertible” come-on ads that so encourage Canadians to rush into debt. The Scotiabank, we know, was a vehicle in the Gulf Oil bribery scandals, laundering Gulf money through a phony Nassau account with the result that such delightful people as South Korea’s Park Chung Hee could be bribed with one million dollars in Gulf bribes. It was arranged through the late William K. Whiteford, who came to Gulf from Toronto, where he had been a Scotiabank director for 15 years.

The moan of the banks in answer to the BC charges, is, of course, that they are above provincial law because they are federally chartered. They are wise, naturally, to huddle under the Ottawa umbrella, because that is where they flourish and have been allowed to develop their encrusted monolithic nature.

Despite Pierre Trudeau’s comments that those same bankers are “the worst bitchers of all” and that he is “ashamed” of the profits they’ve been making (in the year ended October 31, while the rest of the economy was in trouble, bank profits were

up 10.4% to $732 million), he does little about it.

Typically, Consumer and Corporate Affairs apparently had no part in writing the proposed revisions to the Bank Act: that was left to the Department of Finance and the Bank of Canada. The banks have little to fear. That was clear when the Liberals released their white paper on their proposed changes. “There were not many surprises,” languidly responded Allen Lambert, the guru of the Toronto-Dominion who in spare moments advises Ottawa on how top civil servants salaries should be increased. “The paper followed fairly closely the recommendations of the Canadian Bankers’ Association.” The day after the white paper, the stock market shares of the Big Five shot to the biggest gains in two years.

The cartel’s grip on Ottawa is consistent. As a result of the 1967 revisions to the Bank Act, the chartered banks now control 60% of all consumer lending. There are 15,000 banks in the United States (strictly controlled as to where they can set up branches) but there are still only 12 banks in Canada: in essence only five, since those giants now control 90% of all banking assets.

These are the same people whose staff is 72% women—with less than 2% of women in management—with the same service charge increases and lobbying tactics. And who through the sugar daddy system, which has on that shameless Senate Banking Committee a clutch of Liberal-appointed Senate members, are hunkered down in the same interlocking directorship system that the bank boards have established to control this country. In the United States the obvious conflict-ofinterest would be exploded. In Canada, it’s exploited.

Eleven years ago, Montreal investment dealer R. G. D. Lafferty told a Commons finance committee that Canadian banking was “a nationwide monolithic structure with participants being governed by manuals and regulations designed to mold the system into a cohesive form that responds to a narrow management structure surrounded by interlocking directorates, a banking machine that responds to the policies of the hierarchy and not the desires of the consumer.” It’s still true today. Ask Rafe Mair. Ask the consumer.