There is a lot of blame to go around with regards to the financial mess we have found ourselves in over the past year or so.
Greed on the part of many in the banking/financial industry for sure. And, if what they have already done is not bad enough, some are continuing to rub salt in the wounds by paying out – and receiving – extremely large bonuses. For what? Bringing us all close to financial ruin?
Are these people living on the same planet as the rest of us? Don’t they read the newspapers or watch the news on television? Don’t they realize how much their actions – or lack thereof – have hurt millions of ordinary people?
The latest episode in the ongoing financial nightmare is the news that struggling U.S. insurance giant, AIG, has pledged to pay out $165 million in bonuses to some of its executives in its financial products unit. These are the same people who were responsible in large part for the firm’s near collapse.
What were they thinking?
But they are not alone. It is estimated that in the United States over 100 more banks will close their doors before this is all over.
That ill-conceived, trillion-dollar war in Iraq didn’t help either.
On this side of the border, things are not as bad, but we are experiencing significant job losses, especially manufacturing jobs here in Ontario. And it is already having an impact. If people don’t have jobs, or if they are fearful of losing their jobs, they are not going to be spending on anything but necessities.
The good news is that our banks continue to be, if not robust, at least able to hold their own. Four Canadian banks now rate among the 10 largest banks in North America, with the Royal Bank in the number seven spot, followed by TD, Bank of Nova Scotia and Bank of Montreal. It was reassuring to hear that they might not have to depend on the government for financial assistance.
Some years ago, when the banks went to the government to seek permission to merge and form much larger entities in order to be able to compete with the big U.S. and other international banks, the then Liberal government resisted. Former Prime Minister, Jean Chrétien, in a recent television interview, semi-modestly took credit for this, as he should. He did stand up to them and was pilloried in some quarters.
Our banks felt that they would have been better able to compete in the North American – and international – market if they were larger. Had the government given in to them, they might have all been in trouble now. Instead, our banking system is being hailed as one of the best in the world.
The big question for some time now has been what to do about the Big Three automakers. Should the government bail them out or allow them to fold? The overwhelming reason among those who urge a bailout is the loss of the many thousands of jobs and the impact of those losses on the economy. It has also been suggested that the automakers themselves were not at fault and that they are the victims of a bad economy. But they should have seen the trends and built automobiles more suited to the changing marketplace, such as smaller, more fuel-efficient vehicles. The other companies did. Maybe that’s why they are not as hard-hit as the Big Three.
We have been through recessions before. In the eighties and nineties, not only did we have higher jobless rates and higher inflation, but interest rates went into double digits. Many people lost their homes because they couldn’t afford to renew their mortgages.
This time, with a prime rate under three per cent, a five-year mortgage can be had for just over four per cent. Even some credit card companies are offering lower, fixed rates previously unheard of. Also, for the past week-and-a-half, the markets have been showing some upward movement.
Of course, none of this matters if one doesn’t have a job, so it is imperative that the government act quickly to turn things around.
For our part, we must not be complacent. But panicking is not helpful. We will get through this.