Category Archives: Economy

Reining in Canada’s Financial Giants – Are Consumers Getting a Fair Break?

While arm’s-length regulators at both the provincial and federal levels do the heavy lifting when it comes to regulating Canada’s financial services, it is ultimately politicians such as Ontario Finance Minister Charles Sousa and Federal Finance Minister Bill Morneau, who are accountable for protecting the interests of consumers in their dealings with Canada’s banks and other  financial institutions.

Introduction

In an important piece in the July 31 issue of the New Yorker Magazine on the decline in the prosecution of white collar crime in the U.S., author Patrick Radden Keefe cites a telling 2002 incident involving ex-FBI director James Comey. Keefe relies on the description of the incident contained in the journalist Jesse Eisinger’s recently published book, “The Chickenshit Club”.

Keefe writes:

When James Comey took over as the U.S. Attorney for the Southern District of New York, in 2002, Eisinger tells us, he summoned his young prosecutors for a pep talk. For graduates of top law schools, a job as a federal prosecutor is a brass ring, and the Southern District of New York, which has jurisdiction over Wall Street, is the most selective office of them all. Addressing this ferociously competitive cohort, Comey asked, “Who here has never had an acquittal or a hung jury?” Several go-getters, proud of their unblemished records, raised their hands.

But Comey, with his trademark altar-boy probity, had a surprise for them. “You are members of what we like to call the Chickenshit Club,” he said.

What Comey was saying, of course, was that avoiding risky prosecutions aimed at reining in Wall St. might have been seen as career enhancing under the previous U.S. Attorney responsible for keeping an eye on Wall St. but with Comey as boss, such an approach was going to be a career killer.

This post is the first of a series of Canada Fact Check investigations asking the question: does Canada have a Chickenshit Club problem when it comes to the development and enforcement of financial services regulation?

The answer for impatient readers? The next 12 – 18 months will tell and Canada Fact Check will be there to tell the inside story.

Here’s what we know now.

Finance Minister Morneau’s response to CBC investigations of hyper-aggressive bank sales practices

On March 6, the CBC’s Erica Johnston broke the first of a number of CBC stories on shady sales practices in Canada’s banking industry. The CBC reports revealed a constant pattern amongst big banks and credit unions of signing consumers up for products or services without providing all the required information, particularly about fees, costs and penalties related to the products. In many cases, bank employees were signing people up for products without even notifying them.

On March 15, in response to the CBC reports, Finance Minister Morneau turned to the Financial Consumer Agency of Canada (FCAC) and announced that the Agency would be conducting a separate industry review to examine Canada’s financial institutions’ sales practices. The FCAC has the primary mandate to represent the interests of consumers on “systemic” policy matters effecting federally regulated financial institutions such as banks, trust companies, life insurance companies and property and casualty (auto, property, etc.) insurance companies.

The FCAC has indicated that it expects to publish its initial findings by the end of 2017. Furthermore, FCAC officials expect to conclude the review of bank sales practices in June, 2018 and will publish a final report soon after. Finally, FCAC may conduct additional specific investigations flowing from the industry review. For example, if a FCAC  follow-up investigation determines that a specific violation has occurred, the Commissioner may make public the nature of the violation, which financial institution committed it, and the amount of any monetary penalty levied by the FCAC on the financial institution. Continue reading

Federal News Highlights and Parliamentary Business for October 26

parliament-daily-news-updateTrudeau holds out hope for CETA but is a change in strategy called for?

 

 

 

Prime Minister Justin Trudeau is holding out hope for a last-minute breakthrough that will allow Canada’s trade deal with the European Union to be signed, despite objections from Belgium that have put the agreement in doubt.

But the signing ceremony planned for Thursday appears in jeopardy as Belgium appears to be unable to endorse the trade agreement because of ongoing objections by the regional government of Wallonia.

Belgium is the single holdout among the 28-nation union, but the country’s inability to ratify the deal effectively puts the trade pact on hold.

International Trade Minister Chrystia Freeland is making it clear that the Canadian government  believes that it’s up to the Europeans — not Canadians — to engage in last minute bargaining to resolve the concerns that have stalled the agreement.

However, putting the ball back in Europe’s court may prove to be short sighted given that Canada has an obvious way out of the impasse – it could offer to drop the controversial Investor State Dispute Settlement (ISDS) provision in CETA entirely. The ISDS provision allows large corporations to sue government’s if they think their economic interests are hurt by government legislation.

Why this might save the deal is that the main objection of the economically hard-hit Wallonia province in Belgium that is single-handedly holding things up, is precisely the controversial ISDS provisions.

A bold move by the Trudeau government to drop the ISDS provisions from a high profile deal like CETA would also signal a return to the original intentions of trade deals – the lowering of protectionist tariffs. It is the expansion of trade negotiations from agreements that once focused primarily on tariff reductions to far broader agreements that require governments to change local laws and establish dispute-resolution systems such as ISDS, that have undermined support for trade agreements worldwide. This enlarged approach to trade deals, which is a staple of trade agreement like NAFTA and the proposed Trans-Pacific Partnership, run the risk of surrendering domestic policy choices to other countries (or more precisely, the corporate interests of other countries).

The truth of the matter is that if CETA were limited to tariff reductions, it would be relatively uncontroversial in Europe. Again, the objections to the agreement lies in the mandated changes to domestic laws and the creation of a dispute settlement mechanism (ISDS) that place corporate concerns over local laws.

Regulatory provisions in CETA outside the ISDS mean that both Europe and Canada face the prospect of changing national laws to accommodate foreign businesses. For example, CETA requires Canada to expand patent protections, largely due to demands from European pharmaceutical companies such as Bayer. Over time, the required changes could potentially add billions to Canadian health-care costs by extending the term of protection for popular drugs.

Moreover, there are real issues related to the enforceability of ISDS provisions – particularly in the European context. The ISDS may be challenged on various grounds by European national and sub-national governments, all of which relate to the fact that its very design grants foreign investors a privileged legal status. Essentially, the whole purpose of the ISDS provisions is to grant corporate investors with enforceable legal rights that are superior to the rights available to everyone else under the current legal system. In other words, ISDS effectively places foreign investors above the law.

No doubt, a move by the Canadian government to drop the ISDS provisions would face fierce opposition from powerful corporate interests in both Canada and Europe who benefit from such mechanisms. Moreover, such a move by Canada would certainly delay ratification. But while the political temptation of  trying to somehow salvage the current deal is understandable, the long-term political interests of the Liberal government may very well be served by a change of tactics. At the very least, proposing to drop ISDS from CETA would earn kudos from Canada’s labour movement and other progressive groups, and further move the Liberals into political territory once owned by the NDP.

Over the past 35 years, governments have ignored the protests and concerns associated with trade agreements that have moved far beyond their original intention of reducing tariffs. But as opposition to these agreements steadily increases in the form of Brexit and the Trump  protest vote, ignoring concerns with trade agreements that many view as unfairly tilting the balance between the public good and corporate interests, is proving to be very dangerous and a serious threat to global economic and political stability.

____________________________________________________________________________________

Projected House Business for Wednesday, Oct. 26:

Main Chamber Business

The House is meeting between 2:00 – 7:00 p.m. today.

Projected  House Committee Business for Wednesday, Oct. 26

Search up-to-date Canada Fact Check databases for the full text, approval status, committee hearings and other details of all Federal bills and regulations from the current session here!

Bay Street and the Hydro One Sale

Of the many options available to the Ontario government to finance its $130 billion infrastructure plan, selling 60% of Hydro One is pretty much the worst.

Of the many options available to the Ontario government to finance its $130 billion infrastructure plan, selling 60% of Hydro One is pretty much the worst.

It is becoming increasingly clear that the Ontario government is making a serious mistake in its plan to sell off a majority interest in Hydro One. According to a report from Ontario’s new Financial Accountability Officer, the province will be in even worse financial shape after the planned sale of 60 per cent of Hydro One than it is now.

Even former TD Bank CEO Ed Clark, the driving force behind the sale, readily admits that there will be significant forgone revenue from the sale of Hydro One down the road. But he, like Ontario Premier Kathleen Wynne, dismisses this on the grounds that the  partial sale of Hydro One is needed to help pay for Ontario’s plan to spend $130.5 billion over 10 years on transit, bridges, highways and other infrastructure.

Unfortunately, while it is undoubtedly true that the planned investments in Ontario infrastructure are badly needed, it is also true that of the various options available to the province to pay for its ten-year, $130.5 billion infrastructure investment, selling 60% of Hydro One is pretty much the worst option.

So why is the Ontario government selling off one if its most valuable assets in what seems like a clear cut case of “short-term gain for long-term pain”?

The sell-off of Hydro One is yet another chapter in the ongoing saga of an Ontario government mesmerized by private sector promises that a healthy dose of private sector, market “discipline” will somehow translate into the public good.

The names are familiar: eHealth, Ornge, the Mississauga and Oakville private gas plants, and public-private hospitals and transit – to name just a few.

The problem? Each and everyone turned out to be a train wreck of truly monumental proportions.

And now Hydro One. Continue reading

Five Key Issues Facing the Trudeau Government

Trudeau

In its first few months, the newly elected Trudeau government will be facing a range of issues including infrastructure, pensions, and a middle class tax cut.

In this post, Canada Fact Check takes a look at five key issues facing the newly elected Trudeau government for the period leading up to, and including, the early-Spring budget.

Infrastructure

The new Liberal government’s top priority will be to quickly implement its high profile infrastructure program.

Trudeau says a Liberal government will run deficits for three straight years and will double spending on infrastructure to stimulate economic growth.

According to a Liberal policy paper, the Liberal fiscal plan would see “a modest short-term deficit” of less than $10 billion for each of the first three years and then a balanced budget by the 2019-2020 fiscal year.

The policy paper suggests that over the next decade the Liberals would spend $125 billion on new infrastructure investment — about twice the amount the Conservatives had committed for infrastructure. Much of this new infrastructure would be financed through a new Canada Infrastructure Development Bank.

Liberal infrastructure investments would focus on three areas: public transit, social infrastructure such as affordable housing and child care, and environmental projects like clean energy.

Projects funded would reflect the priorities of the provinces and municipalities. Continue reading

What you need to know about the Trans-Pacific Partnership (TPP)

15-10-11 TPP

Current rules under the North American free-trade agreement (NAFTA) require that 62.5 per cent of auto parts come from North America in order to avoid tariffs. Under the TPP, content requirements are lower and this may cost Canadian jobs. A 45-per-cent level will be  required to be considered duty-free for some parts and 40 per cent for other components.

 

 

What is the Trans-Pacific Partnership (TPP) ?

Canada, U.S. and Mexico have long had special access to each other’s markets under NAFTA.

Instead of a group of three as under NAFTA, twelve countries would share in the advantages of TPP membership. Broadly speaking, the Trans-Pacific Partnership (TPP) is similar to NAFTA in that it involves pledges to reduce or eliminate tariffs on a wide range of goods and services. It also sets out rules for resolving disputes and provides a modest attempt to set some minimum employment standards in the twelve member countries.

Could anything stop the implementation of the TPP?

The TPP deal still requires the approval of the U.S. Congress and many Democrats and some Republicans are expressing strong reservations about the deal.

For example, just days after the signing, leading Democratic Presidential candidate Hillary Clinton said she couldn’t support the TPP. Continue reading

Trudeau and Mulcair spar on deficits

trudeau mulcair

Trudeau and Mulcair sparring on the deficit partly reflects tactical positioning and partly reflects real policy differences.

With at least one poll suggesting Tom Mulcair’s New Democratic Party is within reach of securing a historic NDP majority government, the debate between the two opposition parties over fiscal policy has become considerably more pointed.

In this post, Canada Fact Check takes a look at the latest polling numbers and then assesses the fiscal positions being staked out by the Liberals and NDP.

First, the most recent polling numbers.

The latest polls

A Forum Research poll for the Toronto Star shows the NDP with enough support to win 174 seats – a slim majority in the expanded 338 seat house. The Liberals now sit in second place with 30 per cent support, while the Conservatives are slipping and have the backing of just 23 per cent.

Regionally, the Forum poll shows the NDP well ahead in four provinces with 54 per cent support in Quebec, 41 per cent in Manitoba and Saskatchewan, and 39 per cent in British Columbia.

In Ontario, the race appears to be quite a bit tighter with Forum showing the New Democrats leading with 36 per cent, the Liberals in second with 33 per cent and Harper’s Tories at 26 per cent support.

The Liberals lead in the Maritimes and the Conservatives remain ahead in Alberta.

In contrast to the Forum poll, other recent polls have not shown the NDP with sufficient support to secure a majority government. That said, all recently published polls have shown the NDP with at least a slight lead over rival parties. Continue reading

Harper Energy Policies Fail to Create Sustainable Economic Growth

Harper economy platform election

The collapse in world oil prices and the resultant stock market correction, have badly undermined Prime Minister Harper’s plans to turn Canada into an “energy super power”.

In a previous post, Canada Fact Check took a look at the Harper government economic record and began an examination of the three economic legs of the Conservative economic plan: 1) reduced corporate taxes; 2) Canada as an “energy superpower”; and 3) an aggressive approach to balancing the budget rooted in curtailing government spending.

In today’s post, Canada Fact Check assesses the economic impact of the Conservative government’s policies aimed at turning Canada into an “energy super power”.

Canada as an “energy super power”: success or failure?

As Canada’s main stock market dropped more than 2% on Thursday and likely another 2% on Friday, Prime Minister Harper’s dream of making Canada an “energy super power” continued to fade.

How is the stock market correction related to Harper’s Canada as an “energy superpower” project?

Some history may help. Continue reading

Harper Claims On The Economy Not Backed Up By the Numbers

Harper economy

A close look at the numbers reveals that Prime Minister Harper’s economic policies have been largely ineffectual and have contributed to a more polarized labour market.

 

 

 

 

 

 

 

 

 

 

Last Friday, Statistics Canada released its jobs report for July, 2015 – the first such release during the election period. Employment was up a bit in July as compared to June (+6,600) and the unemployment rate stayed at 6.8% for the sixth straight month.

Compared with a year earlier, employment had increased by 161,000 (or 0.9%), primarily because of the growth in full-time work.

Provincially, employment in Ontario was virtually unchanged in July. Compared with 12 months earlier, employment in the province was up by 67,000 (+1.0%) and the unemployment rate fell 1.1 percentage points to 6.4%, the lowest rate since September 2008.

In contrast, in Alberta the unemployment rate increased by 0.3 percentage points to 6.0% in July. Since January of this year, the unemployment rate in the resource dependent province had increased by 1.5 percentage points.

Bottom line: not surprisingly, mainly due to the oil price collapse, central Canada is doing somewhat better than resource-based western Canada on the jobs front. But overall, the Canadian labour market remains sluggish and is performing at a far weaker level than its U. S. counterpart. Continue reading