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Apr-03-2013 17:46printcomments

Open on Sundays: You Can Take it to the Bank... TD Means Touchdown

I never saw a city boy yet who was worth a damn. - Ernest Hemingway

TD bank

(DAYTONA BEACH, FL) - Ed Clark is CEO of the TD (Formerly Toronto-Dominion) Bank Group, which lately has been scoring big time in the American banking game. That's been happening for a couple of reasons. First, you need a bit of background, because contrary to popular wisdom, Canada is not just a junior, 10% version of the U.S. of A. It's just different. Vive la difference.

For starters, Canada has a parliamentary system. The best way to explain that is to say that if America had a parliamentary system, John Boehner would be the Prime Minister and Barack Obama would be just a figurehead Governor General (responsible for nothing but cutting ribbons on ceremonial occasions and entertaining foreign dignitaries).

As if that isn't bad enough, under a parliamentary system, Mitch McConnell would be a doddering old man, appointed for life and fast asleep in the Senate - unless he retired, which isn't likely. So there are three good reasons why we shouldn't adopt a parliamentary system, right there.

Now for the banking system. In Canada, the opposite number of the Federal Reserve is the Bank of Canada, which does interest rates and money supply and the business cycle pretty well the way the Prime Minister calls it. (Remember, we're talking Boehner as Prime Minister if we had a parliamentary system.) The PM tells the Finance Minister what to do and he tells the Governor of the Bank of Canada what to do. If the Governor doesn't listen, he stops governing, as was the case in 1960 when James Coyne (an appropriate name, since he ran the money) was fired by Donald Fleming.

Wow, you're going to say, is that ever big government. You can see how our system is different and less socialistic.

Getting back to Ed Clark, he dished into the American market shortly after the U.S. Banks were bailed out because they were too big to fail. The TD has done pretty well ever since, partly because they're open on Sunday, and partly because they weren't loaded down with crap mortgages clustered together in mortgage-backed securities (which everybody made money on except the crap mortgagors). In fact the U.S. banks also bet against their own success (which isn't legal anywhere but Vegas) and so made money both ways, but managed to go bankrupt anyway, something nobody has figured out since except maybe Paulson and Geithner.

It's kind of like how the Ford Motor Company almost failed selling F-150s at $30,000 a pop, but later was very successful selling them at $15,000. It's got something to do with Corp Finance 101, or MSRP (Manufacturer's Suggested Retail Price.) What happens in the closing room stays in the closing room.

Recently Ed Clark consented to a rare interview.

"The Toronto-Dominion Bank has just come off one of its most profitable years," said the ace reporter. (From the Financial Post, so he really knows his stuff). "So low interest rates must be good for banks, right?"

Clark responds: "Are you kidding? We're supposed to be spread lenders. And besides, it’s very hard to run an economy with very low interest rates and not have asset bubbles."

"Asset bubbles. I'm not going to touch that one."

"Right," says the TD boss. "It's what we call inflation in Canada. I mean, if you’re not going to have asset bubbles, you have to tighten up the rules to offset the low interest rate environment."

"But," says the perplexed FP guy, "you get the money from depositors for nothing, or an average of about 0.02%. That's if they're preferred accounts."

"Yeah, but we have a lot of overhead."

Which brings up the subject of executive compensation, and here the Canadian system is pretty bad. I mean, Ed Clark only pulls down like ten mill a year in salary, bonuses, stock options and coach class accommodation on Air Canada. None of this Gulf Stream crap in Canadian banking.

Is Ed Clark a loser, CEO-wise? I know of hockey players who make more than that. Like Burnaby Joe Sacich, when he played for Colorado because, although he was a Vancouver boy, the Canucks couldn't afford him.

Like, don't tell me Lloyd Blankfein of Goldman Sachs is worth ten times what Honest Ed takes home. But the FP guy doesn't ask. Instead -

"How about the housing market?"

"Comme ci, comme ca," Ed says, in the best bilingual tradition, " We haven't been doing subprime mortgages like the American banks, so we don't have a generation of Canadians under water (except in Winnipeg in the spring). You can only leverage society so far. Eventually, people and banks have to start paying it back. I've always observed the rule 'don't be the last to leave the party.' And if you're from Toronto, that's easy, because their idea of a cocktail party is scotch and soda. And maybe cheap Chardonnay."

"So what do you think of the Cyprus thing??"

"Well, take any small island, like Iceland or Cyprus, and set up a bank as a tax haven and pretty soon the offshore accounts total more than the island's GDP. So whoever is trying to govern the place has to compensate, either with taxing the deposits, or seizing the accounts or something.

"We considered setting up our own offshore tax haven in St. Pierre and Miquelon, which as you know are a couple of little islands 12 miles off Newfoundland, but they're owned by France, and we have enough problems in Quebec as it is. That's off the record, by the way, at least in your Montreal edition."

"My lips are sealed." said the reporter.

"Which reminds me, the Americans and the Brits came up with an even better idea recently."

"Don't they usually?" said the reporter.

"Right. Under a joint plan by the US Federal Deposit Insurance Corporation (FDIC) and the Bank of England (BOE), which was hatched in December, the banks will simply be given clear title to depositor's funds."

"Why am I not surprised?" said the FP guy.

"Yes, well, as you know bank deposits traditionally have been carried as liabilities on bank balance sheets because that's what they are - although they can be used in some sort of reserve ratio to backstop loans. This is a slight shift, in that now, if a bank fails, all depositors may have their savings confiscated to fund bank bail-outs, instead of making the tax-payers do it."

"Lovely," said the reporter.

"Legally, although depositors don't know it yet, the banks own depositors' funds, and the account holder becomes an unsecured creditor, like all other unsecured creditors."

"I thought that the FDIC guarantees all deposits up to $250,000 or something."

"That's the way it was originally. But it was the FDIC itself that dreamed up this idea. Along with the Bank of England, that has always been creative, money-wise. Now the bank gets the money and the depositor gets - well I was going to say the shaft, but I meant bank stock instead."

"Everybody becomes a bank shareholder whether they like it or not?" said the anxious reporter.

"Something like that. It's a great plan for the States, because the depositor gets to bail out the bank rather than the taxpayers - most of whom, apart from the 99%, are pretty rich. The alternative would be to nationalize the banks, and you know how that would go over in the U.S.

"In fact, President Obama acknowledged that bank nationalization had worked in Sweden. But Obama realized that Americans - even those on foodstamps - will not tolerate nationalization.”

"Perhaps," said the bright FP guy, "when Americans realize that the alternative is to have their ready cash transformed into 'bank stock' of questionable marketability, moving failed mega-banks into the public sector may start to have more appeal."

"Don't bet on it," said the TD boss. "If you look at why the Canadian banks do so well, certainly the Americans would say, well you had Central Mortgage and Housing (CMHC) in Canada, which was 100% government owned. Meanwhile, they went with this idea that you could have an agency that played a public policy role but was also privately owned, and with disastrous consequences."

"Right," said the reporter, "anything but socialism."

"In Canada, we're better off. We don't have that many billionaires or offshore accounts."

"We do it the hard way," said the FP reporter. "Like our football field is 110 yards by 55, we have twelve guys instead of eleven, and we only get three downs. And our players are mostly NFL cuts with about 10% of the pay scale down south."

"The same as bankers' compensation," said Honest Ed. "But then, we do get to open branches in the States. They love us there because we're open on Sundays."


Bill Annett grew up a writing brat; his father, Ross Annett, at a time when Scott Fitzgerald and P.G. Wodehouse were regular contributors, wrote the longest series of short stories in the Saturday Evening Post's history, with the sole exception of the unsinkable Tugboat Annie.

At 18, Bill's first short story was included in the anthology “Canadian Short Stories.” Alarmed, his father enrolled Bill in law school in Manitoba to ensure his going straight. For a time, it worked, although Bill did an arabesque into an English major, followed, logically, by corporation finance, investment banking and business administration at NYU and the Wharton School. He added G.I. education in the Army's CID at Fort Dix, New Jersey during the Korean altercation.

He also contributed to The American Banker and Venture in New York, INC. in Boston, the International Mining Journal in London, Hong Kong Business, Financial Times and Financial Post in Toronto.

Bill has written six books, including a page-turner on mutual funds, a send-up on the securities industry, three corporate histories and a novel, the latter no doubt inspired by his current occupation in Daytona Beach as a law-abiding beach comber.

You can write to Bill Annett at this address:


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victor April 6, 2013 12:20 pm (Pacific time)

Hi Mr Annett, I note the name of the little archipelago I live in which leads me to bring a short contribution. After the downfall of industrial fishing which was bringing a living to about a quarter of the local work force - we were in 1992 - local officials saw the probability of creating a kind of tax heaven here.A real autonomy as far as taxes on revenue and customs duties are concerned allowed them to prospect in that sense. But very quickly Paris pointed out that it was impossible due to the existence of special conventions between France and our north american neighbours.

northern anonymous April 5, 2013 8:46 am (Pacific time)

Mr. Annett: You've been away to long and become too much enamored by the mythology of American Exceptionalism. Your comparison of the U.S. government to Canada's parliamentary system is way off base. For example, in your analogy, Boehner would not be Prime Minister. Compared to Harper, our PM, Boehner is so far away  to the right that the two could not see each other with binoculars. Someone like Boehner could never be elected up here (except perhaps rural Alberta). Even Harper, who has the majority of seats, did not get the majority of votes. And Obama doesn't fit into the analogy at all, because the Governor General is appointed, not elected and constitutionally (as you noted) has no power in the governmental system at all. Obama, who is probably more popular up here than he is in the U.S. would more likely be the PM, although he might be a little too much to the right for many. One other detail. CMHC is Canada Mortgage and Housing Corporation, not Central.

D. Gilmore April 4, 2013 10:24 am (Pacific time)

May I also add: today's headline " Goldman Refuses To Give Up Its Grip On Canada: Goldman Partner To Be Next US Ambassador To Canada"...Goldman Sachs and the queen are tied at the hip, the queen runs the canadian central bank (even noted on wikipedia), Canada is under the same tyrannical/terrorist economic system as the U.S. The queen/vatican/D.C./goldman sachs/jp morgan are in total control of most countries, and the ones they do not control they have much influence over. This has been going on for a couple hundred years. Its called a world bank, and their efforts are about to be realized in a town near you, very soon, and it wont be fun. The wars in the middle east, including Iraq, were not for our safety, nor humanitarian reasons..The leaders of the countries being bombed would not go along with central banking from the above entities mentioned. Resources were also a part of it, but not going along with the central bankers is the main reason. Its obvious. We all need to do what Iceland did, kick out the government that went along with this, and jail the bankers. Its the only thing that will work.

D. Gilmore April 4, 2013 9:54 am (Pacific time)

There are many top notch economists that I have learned to trust over the last two decades that would disagree with most of this article. I am talking economists that predicted the 2007/2008 crash years before it happened, economists that said get into gold when it was 300 an ounce, etc etc..economists that have made me financially ok. My belief is that Canada is in a housing bubble, and its kinda weird that the Canadian Central bank is controlled by the queen. I also know, when the U.S. falls, Canada will fall. Canada has not gotten out of the deratives yet either, altho Canada Central banks are doing better than most. You also forgot to show a very important difference between Iceland and Cypress..It is MAJOR. Iceland put the bankers in jail, and fired most of their government. Iceland is now doing great in the world economy. Cypress will continue to fester and die. THE WHOLE WORLD should be looking at what Iceland did, because it is the ONLY answer that will fix our economy. Look at the canadian debt clock. How ya gonna pay it back? Its impossible. I think this author listens to too much mainstream tv economists, who have been proven to be wrong over and over.

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