A Canadian Banker Washington Could Grow to Love

Photograph by Everett Collection

James Stewart, Donna Reed, and Thomas Mitchell in 'It's a Wonderful Life.'

The last real bank is in Canada.

While he’s not specifically referring to JPMorgan and the $2 billion loss that’s the talk of New York and Washington, Edmund Clark at Toronto-Dominion Bank says banks should be “old-fashioned.”

“What fundamentally happened in the mid-90s is that banks — particularly the ones that were securities dealers — started to drift away from saying ‘I’m here to help my clients,’ to saying ‘Geez, I can make money taking deposits and investing them and speculating with them and get proprietary profits’,” Toronto-Dominion CEO Clark told Bloomberg TV’s Erik Schatzker a day before the JPMorgan loss was announced. “I think it’s a very unfortunate drift.”

Clark says banks should stick to things like lending money. He says his Toronto-Dominion has a consumer bank focus that puts clients’ needs before those of bankers and short-term investors. The bank exited a structured-products business in 2005 that included collateralized debt obligations because Clark said he didn’t understand the risks associated with it.

He should know. His bank had fewer writedowns than peers during the crisis and didn’t need a government bailout, according to Schatzker and Bloomberg’s Sean Pasternak in Toronto. Toronto-Dominion was named the fourth-strongest bank in the world in a ranking by Bloomberg Markets magazine. JPMorgan, the largest and most profitable U.S. bank, was ranked 13th.

He’s also in favor of the world’s largest banks paying capital surcharges
as a cushion against potential drops.

“It makes me a little unpopular with my colleagues,” said Clark. “I do think we have to recognize that as you get bigger and bigger and more complex — and I think that most people would say it’s the complexity that’s the issue less than pure size — the consequences of you getting it wrong for society are larger.”

That makes Clark a banker that Washington — which is looking at JPMorgan’s woes as a reason to revive efforts to tighten financial regulation — could grow to love.

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