Friday, January 23, 2009

TD Bank's CEO proffers up government backstop to investors, that doesn't actually exist?

Toronto-Dominion CEO ‘Wrong’ to Suggest Aid Guarantee

By Theophilos Argitis and Sean B. Pasternak

Jan. 23 (Bloomberg) -- Toronto-Dominion Bank Chief Executive Officer Ed Clark was “absolutely wrong” to suggest the bank had the implicit promise of a bailout under any circumstances, a senior Canadian government official said.

There are “no guarantees” for companies that make “stupid decisions,” said the official yesterday in Ottawa, who spoke on condition he not be identified.

Clark said Jan. 8 that preferred shares the bank was planning to sell were attractive because investors considered them effectively backed by a government guarantee. “Maybe not explicitly, but what are the chances that TD Bank is not going to be bailed out if it did something stupid?” Clark told investors at a conference in Toronto sponsored by RBC Capital Markets.

The government official’s response to Clark’s comments came just five days before Finance Minister Jim Flaherty releases his budget, which will include stimulus spending and measures to bolster the availability of credit to jolt the economy out of recession. The plan will include new powers for the government to inject capital into banks if necessary, Flaherty has said.

Flaherty has said access to credit is the No. 1 concern of business owners and last month blamed banks for not doing enough to increase lending.

New measures might include efforts to revive Canada’s market for short-term corporate debt and bolster credit for car purchases, Flaherty told reporters this month.

Already, the government is providing guarantees on more than C$200 billion ($162 billion) of bank debt and has pledged to buy as much as C$75 billion in mortgages from banks to free up cash for loans to consumers and businesses.

Clark told the conference this month that Canadian banks may stand alone among global lenders in not requiring government help.

“The base point Ed was making is that Canadian banks are in a position of strength, and he clearly credits the role the government has played in how the banks have fared on a global basis,” bank spokesman Simon Townsend in Toronto said in an e- mailed comment.

The government official said the financial support is aimed at industries “facing challenges,” and not intended as an “insurance policy” for badly managed companies.

Canadian banks have raised about C$9 billion in capital since the end of October through stock sales to bolster balance sheets amid the recession. The average profit at Canada’s six main lenders declined 37 percent for the year ended Oct. 31, driven lower by about C$14 billion in combined debt writedowns.

Toronto-Dominion has raised C$2.93 billion selling preferred shares, common shares and capital trust notes since October. The bank said it will raise as much as C$375 million from a preferred share sale announced yesterday.

Toronto-Dominion, Canada’s second-largest bank, fell 84 cents, or 2.1 percent, to C$38.83 at 4:16 p.m. in Toronto Stock Exchange trading. The stock has fallen 43 percent in the last 12 months.

To contact the reporters on this story: Theophilos Argitis in Ottawa at; Sean B. Pasternak in Toronto at
Last Updated: January 23, 2009 16:19 EST


Anonymous said...

What a glib and flippant comment from the CEO of one of Canada's largest chartered banks....indicative of the same smug and arrogant attitude that caused this global financial meltdown in the first place.

Anonymous said...

Geez, give 'em enough rope eh!..

O'Flaherty and his kin should all walk the plank..


Anonymous said...

Nice backpeddling Ed. Sure, we believe you, as your comments are dripping with false sentiment.

"“The base point Ed was making is that Canadian banks are in a position of strength, and he clearly credits the role the government has played in how the banks have fared on a global basis,” bank spokesman Simon Townsend in Toronto said in an e- mailed comment."

Anonymous said...

Thain behaviour

Published: January 23 2009 | Financial Times

What is it that bankers don’t get? Unable to own up to a collective failure, some still display a sense of entitlement that bears no relation to their current status as wards of the state supported by the taxpayer. Step forward John Thain.

[Step forward Ed Clark?]

Dr Mike said...

Got to love Canada a place where the crooks & shysters get the rewards & honest everyday investors get the shaft.

It boggles the mind & makes you wonder at times why bother.

Dr Mike.

James Bowie said...

Good post. Hopefully we can dispel this silly notion that any company is too big to die.

WesternGrit said...

Our government needs to nationalize all the big banks, use their assets to pay off any loans that clients owe them...

That's right - forgive all consumer debts, and allow Canadians to stand up on their own. Government funds could then be used to restructure the banks into credit unions, and re-start themselves from scratch.

... Great dream... then I woke up. Like a Conservative government will ever truly embrace the needs of it's people.