Ripped from the headlines:

“I think Canada has shown itself to be a pretty good manager of the financial system in the economy in ways that we haven’t always been here in the United States.” ~ Barack Obama

“The Canadian institutions have benefited from vast and stable retail networks and a more conservative approach to lending than their U.S, counterparts, especially in the housing sector.” ~ Financial Times

“What I’m arguing for looks more like the Canadian system than the American system.” ~ Paul Volker, Former head of the U.S. Federal Reserve

“Ireland’s new financial system will build on best international practice similar to the Canadian model.” ~ Brian Cowen, Prime Minister of Ireland

 

Makes our banks look pretty good, and they are, by comparison with almost everybody else’s.  But let’s remember why.

It’s not because our bankers are smarter, or more careful, or more prudent.  They may be a teeny bit more practical than others, but many of our bankers would, had they been permitted, have run down the same slippery spiral staircase that most of their British and American counterparts did.  In fact a few times they asked Parliament if they could, please, follow the examples set by their bigger badder foreign counterparts.

Some of them said that if they were going to compete – in fact, if they were to survive in the high-flying world of big-time finance, they had to play the game – the big merger-and-acquisition-and-expansion-and-less-restrictive-as-to-reserves-and-all-that-regulatory-nonsense game.  “Because,” they argued, “how can we be sharks if we can’t swim with the sharks? And the sharks are all giant international players, and we have to be tentaculately connected. We have to get bigger and badder, just like those guys over there.”

What saved them from a fate worse than Zimbabwe?  Was it prudence?  Social conscience?  It is to laugh.

What saved them from their desire to rush headlong into the world financial meat grinder was good ol’ C.C.C.   Careful Canadian Control.  Regulation.  Legal restrictions.  It was prudence all right, but it was imposed prudence.

We have already gone a long way down the road from the much-more-restrictive statutory constraints on financial institutions that prevailed in our country as recently as fifty years ago.  Those constraints, the ones that established our once-Rock-of-Gibraltar-like system of banks and trust companies, have been considerably loosened. 

But at one point we slowed down that movement toward deregulation, and then we almost stopped it.   I expect it will be awhile now before there’s a movement afoot toward further deregulation of banks and other financial institutions. We must, in the meantime, be careful not to let the pendulum swing too far the other way, as is being urged by some European central bankers and governments. 

Maybe we have found the perfectly-balanced place, at least for now.

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