GUEST OPINION: Top executives 'banking' on bonuses
Alex Atamanenko is the member of Parliament for B.C. Southern Interior
Christmas has come early for the executives of Canada’s chartered banks, while some of their consumers are being left with nothing more than a lump of coal in their stockings.
An article in the Dec. 10 edition of the Globe and Mail reported that “bonuses at the country’s six largest banks will reach a record $8.3 billion for fiscal 2009, an increase of 18 per cent from last year and about 4 per cent higher than 2007.”
Some banks, including the Royal Bank of Canada and Canadian Imperial Bank of Commerce, have also reported 2009 fourth-quarter profits that show gains in net income of between 10 and 48 per cent, compared to the same period last year. Earnings from Canadian consumer lending was one of the factors that drove the record increases.
These inflated payouts and profits come at a time when the recession has hit families and individuals right where it hurts most: in their pocketbooks. One of the choices people make to get them through thin times is to rely more on personal loans, charge cards and lines of credit. That choice comes with a cost attached, the service charges and interest rates that we all pay in order to do business with the banks.
The United States government has already stepped in to put controls on executive compensation while their corporations are receiving public help. And recently the British government introduced a one-time, 50-per cent tax on all bankers’ bonuses above 25,000 pounds ($42,790).
New Democratic Party (NDP) Industry Critic Brian Masse has criticized the payouts. “Now is the time to reign in executive bonuses that have received public assistance from hardworking Canadians,” he said. “Governments in the United States and the U.K. have already stepped up and brought in restrictions on this type of compensation. Now the Harper Conservatives need to do the same.”
Just what has the Canadian government proposed in order to put a lid on executive bonuses?
Nothing apparently, and to make matters worse, although much has been made of the huge bailouts that American banks received following the credit crunch in the fall of 2008, there have not been many headlines pointing to the Harper Conservatives’ $75 billion bank bailout program for Canada’s banks.
In October and November 2008, the government allocated $75 million to purchase bank-held mortgages through the Canada Mortgage and Housing Corporation (CMHC). However, Prime Minister Harper stated that “this is not a bailout . . . it will cost the government nothing” (CBC News, October 10, 2008), while Finance Minister Jim Flaherty said that “this program is an efficient, cost-effective and safe way to support lending in Canada that comes at no fiscal cost to taxpayers.” (CBC News, October 10, 2008).
While the Canadian bailout procedures differ from those of the U.S. Treasury, they essentially serve the same purpose. Both programs contribute to bank centralization and the concentration of financial wealth. But unlike the American bank bailout, which was the object of debate and legislation in the Congress, the granting of $75 billion to Canada’s chartered banks was implemented at the height of an election campaign, without duly informing the Canadian public. The bailout money was used by Canadian banks to consolidate their position as well as finance the acquisition of several “troubled” financial institutions in the United States.
The federal deficit for 2008–09, which has come in at a whopping $463.7 billion, has financed the bank bailout, while consumers continue to pay double duty: fees, interest and service charges to feed the banks, and taxes to cover government fiscal mismanagement. The Harper government’s policies clearly favour the big guys, and leave us little folks in the dust.