Yesterday I alluded to the fact that things were getting better despite the big 6 banks. They hold their corporate meetings these days, and they use the latest figures to make themselves feel better. There is talk about bank mergers again, mergers that will, no doubt, make many of our bankers even richer. While I am not one to get sucked into the ‘hate the rich’ way of thinking, I do despise those who would climb to the top by burying those who are underneath them, and I am not talking in a corporate sense. I am talking about the men and women who work every day.
Bank presidents today will tell you that the rate spread between savings and credit is closing, and they are right. They tell you this in an attempt to make themselves and their corporations look charitable. The only reason that they spread is declining is because of increased competition. In 1999, legislation was passed allowing foreign banks to open branches in Canada without having to start up a Canadian subsidiary. Citibank, for example, started Citibank Canada to venture into Canada before the rules changed. This huge expense is no longer necessary.
We have seen banks such as ING Direct of France, HSBC from Hong Kong, and now ICICI of India open branches in our country since that legislation was passed, just to name a very few. They are very aggressively trying to capture market share, and are finally introducing true competition to Canada. The monopoly is collapsing, but is still very strong.
According to the Department of Finance Canada, as of July 2002, there were 14 domestic banks, 33 foreign bank subsidiaries, and 20 foreign bank branches operating in Canada, with combined assets of $1.7 trilliondollars. While headway is being made, strangleholds are loosened slowly. Of all those assets and all those banks, our big six controlled over 90% of those assets. Our banks have ventured outside of our borders as well. Their foreign operations now account for a third of their gross revenues.
The tremendous profits the banks have realized for the past few years are still not enough for the men at the top. Once again, we are hearing talks about bank mergers. Once again, Canadians are in peril. There is real jeopardy here, as the Martin government is looking for ‘partners’ in this decision. They are dying to give the banks even more power, but they don’t want to be on the hook alone when the disastrous results start to pour in. The big banks have always been big donors for the Liberal Party, and this bunch just may have the moxie to give the bankers what they want.
Prime Minister Martin should take heed to what one of his predecessors said. Here is a quote from Prime Minister William Lyon Mackenzie King:
“Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of sovereignty of Parliament and of democracy is idle and futile… Once a nation parts with control of its credit, it matters not who makes the nation’s laws… Usury once in control will wreck any nation.”
If you don’t like Liberal thinking, here is a quote from the late Thomas Jefferson:
“I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs.”
Isn’t it funny how some things never change?
For the first time in our entire lives, we are seeing competition in the banking sector. This is a sector that by its actions can determine the very quality of life we can have. With mortgage rates coming down over the last 10 years, how many of you find yourselves with more money at the end of the month? How many of you can finally breathe a little? While some of this has been market forces, it never hurts to have a guy across the street waving a cheaper rate in front of your mortgage manager.
What is the average Canadian supposed to make of all this? I wrote this series as a wake up call. Your bank wants your business. They are not, however, your good friend. Their goal is to extract as much of your life out of you as they can, through higher credit card and mortgage rates, reduced competition, lower savings returns, and exorbitant service fees.
What can you do about it? The next time you open up an account for anything, whether it is a car loan, mortgage, or to save, do yourself and your children a favor. Shop around. The only way to send a message is to start taking your money elsewhere.
There are credit unions, which are insured just like a bank against losses, so your money is as safe as anyone’s. Most credit unions have profit sharing. One that comes to mind is Duca. My kids save there, and their money does not shrink every month. We also reap the benefits of the credit union’s profits.
There are a myriad of other banks now. Seek them out. They want your business, and since they haven’t been sucking you dry for the past, oh, forever, you should at least look at them. Trust companies are great, and are very popular. Canada Trust got so big, that the banks bought it out. (This lessened the competition for them at the same time.) Until that happened, people liked the alternative to the banks. There are many trust companies to choose from.
If you are comfortable online, there are many internet banks that offer great rates as they have no branches. Take President’s Choice for one example. They have better rates than most of the big banks for many of their services and many have no fees. If you don’t like keeping more of your money, pass these one’s up.
Until Canadians vote with their money, things in this land will never get better. We have the biggest ballot of all, and that is our will. If we decide that we have had enough, we now have the opportunity to act.
As well, you can call or write your MP, and tell him or her under no circumstances do you favor bank mergers. If he or she asks you why, tell them that the competition of the last 6 years has been good and that you would miss it, and that having a choice is something that you could get used to.