Any Albertan who pays attention to our local political world has likely been mesmerized by the antics of the NDP government and the Wild Rose and Progressive Conservative opposition here in Alberta. For that reason, it would be easy to miss what is going on in the national arena, especially with Prime Minister Justin Trudeau and his Liberal government. In fact, I would assume that Trudeau is counting on Canadians being distracted, otherwise the latest move in his new budget defies explanation.
On page 223 of this budget, the prime minister introduces us to his new “bail-in” program. The government’s description of this program is both hilarious and frightening at the same time. The explanation tells us that the government is worried about Canadian taxpayers being forced to “pay up” should a Canadian chartered bank go into bankruptcy.
Now, I cannot find any explanation as to why taxpayers should be forced to pay for the errors of a public traded company. Normally, when a company goes bankrupt, it is the owners of the organization that suffer the economic damage. Why Canadian taxpayers (who receive no benefit when the bank is profitable) should be required to face economic pain when a bank goes broke is apparently viewed as a fact so logical that it requires no explanation from the government.
The Liberals justify this program by saying they want to protect Canadian taxpayers, (when a government says it wants to protect taxpayers, be afraid, be very afraid)! The Liberals have introduced their “bail in” (the opposite of bail out) program. In essence, should a Canadian bank go into default, it will be free to seize all monies on deposit with the bank. YES, THIS MEANS YOUR BANK ACCOUNT. Because you have money in your bank account, the government views you as a “creditor” to the bank, and creditors may also suffer in a bankruptcy. Of course, the government claims there is good news in this plan as well. Because the bank has seized all your money, they will be required to issue you shares in the bank to compensate you for the money they just “took.” Now, personally, I would rather have the cash than a bunch of worthless shares in a worthless bank that just went bankrupt, but maybe I’m just being unreasonable.
As bad as this idea is, the Liberals cannot take the credit for devising this strategy. Instead, credit is due to the European Economic Union and the nation of Cyprus. A few years ago, at the urging of this same European Economic Union, the banks in Cyprus made a number of loans to Greece. Of course, Greece was an economic basket case and defaulted on the loans, causing the government of Cyprus to get into a whole mess of financial trouble. But, when this Cypriot government asked the European Economic Union for help, the Union demanded that the Cypriot banks first seize all of money held in their various banks. Cyprus agreed, and regular citizens saw their bank accounts vanish. Naturally, an economic fiasco occurred in this island nation, with citizens being restricted to taking out only a few Euros each day (apparently, Cyprus did not feel that food, medicine, shelter, or electricity are really a daily necessity).
As regular Canadians, should we agree to hold onto someone’s money for safekeeping and then refuse to return the funds, we would be charged with theft and sent to prison. For Canadian bankers, doing so is not only a sound business strategy, but it just might help the bank manager earn dinner with the chairman of the board. Life is good for Canadian bankers and it’s made even better for Canadian bankers when they also own the national government.
Brian McLeod is a long time resident of St. Albert and now does his banking in his backyard.
