THUNDER BAY, ON - March 20, 2009 - When it comes to personal finance, I’ve long concluded that banks are not your friends. Banking services like food are a necessary part of modern life. Banking extends not only to our personal finances, but it is involved with the places where we work, and also with the pensions that we have earned. On a larger scale banking policies can determine the economic policy of a country and even groups of like minded countries.

The power of banks to assume ownership of your hard earned cash must be a difficult thing for them to resist. Often it is banking policies that create a crisis for the very people who helped them become so large and powerful. Let’s look at a couple of local companies that have been part of the Northwest’s economic fabric for years. Terrace Bay pulp has had to cease operations mostly due to the fact that they cannot secure adequate financing to continue operations. By with-holding financing the banks can force the company to liquidate their assets, often for pennies on the dollar. In the process the people who have worked for these companies for generations will find their pensions are part of their company’s unsecured debt. If the company you worked for goes bankrupt, then you could loose part or your entire pension!

A disconnect exists between the banking sector and their social responsibility to assist grow and build a solid economy.  When banks and insurance companies can find it in their hearts to pay their hard-working executives million dollar bonuses while their company is drowning in bad debts I must ask the question, “Who do you have to kill to be worth that much money”?  We have trusted the banks with huge sums of money, to manage it in a safe and responsible manner. To date the management is more bent on deriving the highest management fees and executive bonuses. There is nothing more frustrating than looking at you RRSP statement each month and realizing that these guys will have the audacity to charge you a nice fee for loosing 40% of you pension savings!!

The time will come when our financial institutions will have to face the outrage of the public for their indifference to public need. If banks fail to meet the financial requirements of our companies like Terrace Bay Pulp, and now Abitibi-Bowater, then it is the banks that have failed the community as much as any company. If you deny a person credit to purchase a car, then how is it possible for auto manufacturers to build new cars?

There are some who think that the banks are restricting credit on purpose, so that they can force the US government to bail out every bit of bad debt that they own. The banks Abitibi-Bowater deal with are American, and their greed reaches all the way to Thunder Bay, where refusal to finance could force the company into bankruptcy protection. With the carnage that brings, who is responsible for the losses and damage. Tough times create the conditions for change? Could public outrage about greed, and contempt for the economic security of pensioners, companies and communities lead to new government controls over this industry? Throwing whole communities out of work creates the kind of outrage that can change governments who might have the heart to better regulate banking practices. Certainly the behavior by some that led to the economic demise in the US, should invite them to do some time in the crowbar hotel, but in the land of equal opportunity there is not the strength to imagine a law for theft this large. It might be best to forgive and forget because fighting over who is responsible is not constructive behavior. We are in a time when we need all the constructive behavior we can get.

Regulations should be changed so that management fees are approved by the shareholders and unit holders. Good managers need to be fairly rewarded, but the days of multi-million dollar compensation packages should be stopped, no one is worth that kind of cash, especially if their compensation is paid for with money owned by people who have no say in these compensation packages. Really are these guys worth more than our doctors?

So here is the challenge for our politicians. There is one mill running in the city, and its future in doubt. Is there a Canadian bank that can finance this operation? If Canadian banks are so sound is there one that is willing to restructure the financing of Terrace Bay Pulp?

If the first rule of personal finance is banks are not your friends, my second rule would be, “The more people that have their hands in your back pocket, the less will be left for you”.

We need banks, but there must be a healthy balance between good business practice and social responsibility. There is no room for greed in this model, and there is no room for larcenous behavior. Public outrage has the ability to create change. If banks are not careful some of that change could be applied to them.

 

 

 

Opinion by:  Lake Superior News  Editorial Board