Canadian bankers are celebrating their most profitable year yet by giving themselves $18.8 billion in bonuses. Meanwhile, most Canadians are being crushed by record inflation as wages are quickly being eroded. These bank bonuses expose the real abundance in society. For this wealth to be used for society’s benefit, it must be taken out of the hands of the capitalists.
2021 was the best year in history for the big six Canadian banks, with $57.4 billion in profits. In fact, Canadian banks made some of the highest profits in the world! Early in the pandemic, the banks hoarded funds and laid off workers, explaining that they were going to struggle like everyone else. So how did the banks manage to not only survive but thrive in a pandemic that left millions struggling? It is at the expense of these millions that the banks were saved.
During the pandemic, over $700 billion was given to corporations by the Federal Liberal government. The massive taxpayer-funded bailout was instrumental in keeping the capitalist system going. Paid out in the name of keeping workers employed, these handouts have since been clearly revealed to be merely a direct transfer of wealth from the government into the pockets of the capitalists. Companies like Air Canada and Leons laid off their workers anyways, and just kept the money for themselves. This money didn’t create jobs, provide pandemic protections, or fulfil any social needs. Instead, the funds were flooding into housing speculation. As the housing market is one of the biggest sources of profit for the banks, the increased speculation allowed them to make record profits.
Prior to the pandemic, Canadian banks themselves were recipients of bailouts. Between 2008 and 2010, $115 billion was shelled out of public coffers to the top five banks in Canada as a response to the 2008 financial crisis. These bailouts allowed the bank CEOs to join the top 100 wealthiest in Canada. Scandalously, Canadian banks pay the lowest tax rates out of all the G7 countries. That is, if they pay any taxes at all. As the Pandora Papers revealed, the capitalists easily avoid taxes by using offshore tax havens in Barbados, Ireland, and beyond.
To avoid a social revolt prompted by widespread unemployment and loss of income, the Trudeau Liberals provided a smaller pool of funds to the working class during the pandemic. This took the form of the Canada Emergency Response Benefit (CERB) which provided direct aid of $2000/month to millions of workers. So far, over eight million Canadians have accessed CERB and the total cost of this program has topped $80 billion. CERB was a lifeline for millions, mainly because it helped them pay off their landlords…and the banks! Approximately a third of all CERB payments went into debt repayment. What we saw in 2008 and have seen again during the pandemic is a huge transfer of wealth, from the Canadian working class to the capitalist bankers.
Cuts and hikes
Another method by which the Canadian banks have increased their stockpile of wealth for bonuses is laying off their staff. Despite making record profits, thousands have lost their jobs as the banks have cut their workforce by 4.4 per cent in the last year. CIBC executives have stated these cuts are a necessary part of modernizing the workforce and embracing streamlining technology. What are the results of this modernization? CIBC has hoarded $800 million over the past five years, a large part of which has gone straight into the pockets of executives.
Yet another method the banks have used to squeeze wealth out of the working class is increasing fees. In the middle of the pandemic, TD, CIBC, BMO, and RBC raised the minimum required bank balance from $2000 to $5000. If someone dropped below $5000 in their bank account, every transaction they made would charge them a fee of $2. Overdraft fees have also increased. As one person put it: “It’s a whole shopping cart of money grabs, just increase to increase to increase. And the only people who’re going to suffer are people who need overdraft because their CERB doesn’t cover their pay or their rent and their heating and their food.” Canadian bank fees are some of the highest in the world. When millions of Canadians were barely making ends meet with only $2000 from CERB, maintaining a higher bank balance proved impossible.
The increased fees have made traditional banking inaccessible for many, forcing them to turn to payday loan agencies for funds. These payday lenders charge exorbitant interest rates on loans ranging from 442 to 600 per cent! It creates a crippling cycle of debt that forces millions to continue taking out loans. In fact, this is how the majority of profits are generated for payday lenders, by repeat borrowers who cannot escape their debt. The banks, big and small, have become richer because the majority of society has become poorer.
Their best year is our worst
While 2020 was probably the worst year most Canadians have ever faced, 2021 is hardly better. In many ways, the situation has only gotten worse. As the pandemic supports have come to an end, nearly half of Canadians are $200 or less away from not being able to pay for their basic monthly expenses like rent. A quarter of Canadians are already finding they do not have enough at the end of the month to cover their bills—forcing them into deeper debt. Currently, total household debt has hit a new record of $2.5 trillion.
This burden of debt is set to increase as inflation continues to skyrocket. A recent report on inflation summarized the situation as “2022 will likely be a very difficult year for most Canadian families”. Food prices are forecasted to rise by five to seven per cent on average, hitting a 12-year high. The Canadian Dairy Commission announced they will be increasing the cost of necessities like milk and butter by an astounding eight to 12 per cent! Wages are quickly being eroded as they have barely increased, if at all. In Ontario, the Progressive Conservative government has frozen public sector worker wages to one per cent increases. While the bankers are getting bonuses, most working people are facing four to 10 per cent cuts to their relative wage!
What the bonuses are really worth
While the bank executives can think of no other way to use their record-hitting profit of $57.4 billion than to line their pockets, here are some better uses of the funds:
A national pharmacare program would cost $3.5 billion, less than 20 per cent of the $18.8 billion taken by bank executives as bonuses. A recent Globe and Mail article showed that “Canadians spent a whopping $34-billion on prescription medicines in 2018 and pay more for drugs on a per capita basis than comparator countries except for the U.S. and Switzerland, according to the federal government.” With the rising cost of living and precarious employment, many cannot afford their prescriptions at all. 20 per cent of Canadians, three million people, don’t fill their prescriptions because of affordability.
Another desperate social need that could be met with the bank bonuses is clean drinking water for Indigenous communities. Thousands of Indigenous people on reserves have never had clean drinking water, with boil water advisories dating back to the 1990s. It is scandalous that in one of the richest countries in the world, people are unable to meet their most basic human need of clean drinking water. The cost to end boil water advisories is $3.2 billion.
For decades, critics of free post-secondary education have said that it would be too expensive. The bonuses of a few bankers in this year alone could cover the $13 billion cost to introduce free education. Canadian students are graduating with close to $30,000 in loan debt, which takes on average nine to 15 years to pay off (with interest on top). As government loan programs have seen their funding cut in the last few years, many students have been forced to turn to private loans from banks where they face significantly higher interest rates. With the prospects of a good paying job upon graduation shrinking, students inevitably sink into deeper debt.
Other necessary programs from universal childcare to living wages could easily be funded if we consider not only the 2021 bonuses but also the $1.5 trillion in uninvested dead money sitting in the bank vaults.
Nationalize under workers democratic control
As the capitalists collect bonuses, the majority of Canadians are told that they have no choice but to stretch their shrinking wages for basic necessities such as food. Chief Investment Officer Todd Johnson, whose job is to invest into banks, explained the hardship facing banks as “it is very difficult to grow revenue.” This “difficulty to grow” has been used as an excuse for bailouts, layoffs, and fee hikes. These are the results: record profits and bonuses for banks while society drowns in debt.
Over and over again, the banks have enriched themselves off the backs of working class Canadians. The choice we face today is to either allow the abundance in society to be used on the lavish lifestyles of the rich few, or to use this wealth to meet the vital needs of the majority. This is a choice between capitalism or socialism. So long as this abundance remains in the hands of the banking capitalists, it will be used directly against society. Aside from lining the pockets of the executives, banks have spent this wealth on fueling the speculation in the housing market, which has fanned the flames of the affordable housing crisis. Another investment they’ve made is pipelines. RBC is a key investor into the Coastal Gaslink (CGL) pipeline, alongside BMO, CIBC, and TD. In defense of this private investment, people of Wet’suwet’en nation in British Columbia have faced a violent attack from the RCMP. Not only does this pipeline threaten the livelihood of Indigenous communities but it is also a threat to the environment in general, as shown by the recent report on CGL refusing to fix nearly two dozen sediment and erosion problems.
As the old saying goes, we cannot plan what we do not control and we do not control what we do not own. For the abundance in the banks to be used for society’s benefits, they must be nationalized and placed under democratic worker’s control. The working class has already paid more than enough through bailouts to take the banks into collective ownership. Through nationalization and democratic control, the working class will be able to own and plan for the wealth in the banks to be used for the benefit of the many rather than the profits of a few.