Loss at JPMorgan: the conservatives are still opposed to reforming the financial system

Hon. Céline Hervieux-Payette: Honourable senators, my question is for the Leader of the Government in the Senate. You have certainly heard the recent news of JPMorgan posting over $2 billion in losses in two weeks after speculating on credit derivatives.

After that debacle, U.S. President Barack Obama said that this incident only underscores why it was so important to reform the rules that apply to Wall Street and all financial sectors, and why those rules need to be fully enforced, not just on an ad hoc basis.

A few weeks ago, I asked a question about the fact that Canadian banks had received secret loans totalling billions of dollars in order to prevent some of them from going bankrupt at the beginning of the crisis in 2008.

When will the Prime Minister work with President Obama — for once, I believe that we, on this side, agree that they should work together — in order to regulate the financial system and prohibit Canadian banks from making any speculative investments, considering that the banks are funded for the most part by Canadians’ pension funds?

Hon. Marjory LeBreton (Leader of the Government): Honourable senators, as was the case in the past and is still the case, the situation with regard to the banking system in the United States is quite different from the situation in Canada. It would not be prudent for the Prime Minister to interfere with a situation that is clearly the responsibility of the United States government.

The honourable senator did question me a few weeks ago about so-called secret bank bailouts. I did point out, I believe, that despite the conspiracy theories of left-wing think tanks like the Canadian Centre for Policy Alternatives, there was no secret bailout. The government took timely and effective action to support lending and to Canadian households and businesses through the Extraordinary Financing Framework. This was made clear to Parliament. This was publicly and repeatedly laid out for all to see. It was very clear from the beginning that this is what it was intended for, including as recently as Budget 2012.

As the honourable senator knows, and this has been acknowledged by business, this support ensured that the global credit crunch did not cripple Canada or the Canadian economy, allowing credit to flow to Canadians and Canadian businesses when they needed it most.

Honourable senators, it was very clear, despite the misinformation being perpetrated by the Canadian Centre for Policy Alternatives, that there were no bank bailouts in Canada.

Senator Hervieux-Payette: The honourable senator must remember that some banks lost billions of dollars on sub-prime loans, and this money has never been recovered. This comes mostly from pension funds. I speak with concern because $40 billion were lost by the Quebec pension fund, the one that provides us with a pension.

If things were so good, first, I question why the government wants to raise the retirement age from 65 to 67. On one side we have experts saying that the pension system is well funded. On the other side we are told that we have to raise the age of retirement. We will see from your evidence what side you are on, but there is a strong correlation between the stability of pension funds and banks.

What measures has the Conservative government taken to ensure that our banks’ high-risk investments are separated from their regular operations so they can continue to lend to Canadian entrepreneurs, who stimulate economic growth? As a correlation, I must say that not long ago — and they just stopped this practice — some European governments prevented their banks from operating with hedge funds. In fact, this prevented them from going deeper into debt and lowered their losses.

Is the government prepared to look at this? I am sure the members of our committee would be happy to look at this. If the serious problems in Greece have a domino effect in Europe, will our banks be protected by investing their money in the right places?

Senator LeBreton: Honourable senators, I think it is obvious that Canada is not Greece, Canada is not Europe and Canada is not the United States. As I mentioned a moment ago, there were provisions in Budget 2012 with regard to the extraordinary financing framework.

The honourable senator mentioned Old Age Security and pensions. The opposition parties — and I include the opposition here in the Senate as well — are missing the point with regard to the government’s plans for Old Age Security. This is not about savings. These changes are about the future and will put Old Age Security on a sustainable path so that it will be there when it is needed by those Canadians in the future.

Of course, we all know, and it is clearly stated in the budget and in the Budget Implementation Act, that these changes — which are changes that are happening all over the world, by the way — do not come into effect until the year 2023, which is 11 years from now, and are phased in over the following six years, from 2023 to 2029.