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A person walks past a sign for TD Canada Trust in Toronto, Ontario.
TD needs a new plan
As ConocoPhillips invested in Canada, Toronto Dominion, one of Canada’s biggest banks, struggled to outline a new expansion strategy after its planned acquisition of Tennessee-based First Horizon fell through amid reports of regulatory difficulties. Instead of expanding all at once by buying First Horizon, TD plans to open more branches in the United States, 150 by 2027.
The failed acquisition looks like a setback for TD, since they will expand in the US more slowly than planned. But overall the Canadian banking sector, which is dominated by five big players, looks stable when compared with the creeping crisis in the United States, where three banks — First Republic Bank, Silicon Valley Bank, and Signature (representing about $559 billion in assets) — have failed this year.
The fallout from US bank failures has had an impact on Canadian banks, pushing them to be more cautious about lending amid fears of a recession. Canada has not had a bank failure since 1996 and was spared the worst of the financial crisis of 2008 because there are a smaller number of more heavily regulated banks than in the United States.
SVB political fallout ... not as dramatic as you think
Jon Lieber, head of Eurasia Group's coverage of political and policy developments in Washington, DC shares his perspective on US politics:
Who does Washington blame for the Silicon Valley Bank collapse?
After the largest bank failure in the US since the 2008 Financial Crisis, fears of a wider financial system failure prompted the Federal Reserve and the FDIC to take dramatic measures to contain more potential bank runs last weekend. This will have broad implications of the future of bank oversight, including capital requirements and what to do about uninsured deposits that will not be fully understood for years.
But it seems like the political consequences could likely already be over. Congressional lawmakers do not want to deal with another financial crisis, and have given federal regulators wide latitude to take whatever steps they think are necessary to backstop the financial sector. Much of these authorities were created on a bipartisan basis by Congress after the Financial Crisis in 2010, giving regulators the power to insure uninsured deposits while wiping out management and shareholders of the two failed banks, and creating a new liquidity facility for banks more generally.
And the response from Congress has largely been pretty positive. Some Republican lawmakers have even encouraged regulators to go further than they did and cover all uninsured deposits, which is probably unlikely. And there is, of course, the traditional blame game happening in Washington, with Democrats blaming a deregulatory effort that happened during the Trump administration and Republicans blaming both the management of the bank for being what they say is too woke and the economic conditions that created high inflation and rising interest rates under President Biden.
But the interesting thing here is that by the middle of this week, the Washington outrage machine had largely moved on to other issues, with conservative media focused instead on a new effort at gun control by the Biden administration and other media talking about the war in Russia and an ongoing political dispute between former President Donald Trump and current Florida Governor Ron DeSantis.
While some on both sides of the aisle will continue to criticize the Biden bailout for politically connected venture capitalists and tech pros, in the absence of further market disruptions, while there could be some longer term policy reforms to prevent these problems from happening again, nearer term, the fact that regulators saved Congress from having to pass another financial rescue like they did in 2008 is welcome news for most politicians in Washington. And this incident seems likely to sink into the swamp almost as quickly as it popped up.
Silicon Valley Bank collapse: Not 2008 all over again
Ian Bremmer shares his insights on global politics this week on World In :60.
With the Silicon Valley Bank collapse, is it 2008 all over again?
There's one very clear way that it's not, which is that it's not a big enough crisis for people to come together. And remember, after 2008, everyone understood that we needed to do everything possible to get the markets functioning, get trust in the system again, and avoid a great depression. Nobody's saying that right now. And it's not just because the US political system is more divided, it's also because people feel like it's fine to go after the "woke" banks. It's fine to go after the Trump era deregulation around the medium size banks. And everyone can point at their favorite villain while you don't really need to do a hell of a lot beyond the bazooka that Secretary Yellen threw at SVB and Signature Bank this weekend. So no, in that regard, it's very much not 2008 all over again. In some ways I'm happy about that and other ways I'm not.
As China reopens to tourism, is COVID finally behind us?
Well yeah, in the sense that we can travel everywhere. I mean, the fact that you haven't been able to go to China for three years now. First because of COVID, then because of zero-COVID policies is a real problem. I mean, engaging with Chinese policy leaders, corporate leaders on a Zoom, you're just not getting a lot of information. And Munich Security Conference was the first time I met with a senior Chinese delegation face-to-face, aside from China's then ambassador, now foreign minister to Washington in three years. So I mean, just my level of understanding of what the hell is going on in China is significantly less than I need it to be. And now that we can all start going to China again, that's a really big deal. So I think that makes COVID behind us. Of course, long COVID isn't behind us. And this is a permanent disease that, in terms of COVID's reality, people are still going to die from this thing, but in terms of treating it like a pandemic, yeah, I think it's pretty clear that that we are over and done with and I'm glad to say it.
Will the AUKUS deal shift the balance of power in the Indo-Pacific region?
No, I don't think so. I mean, it's a big deal for the Americans to be sharing advanced nuclear technology and hardware with the Australians, something the Americans wouldn't have done before. That is in part a growing concern about China. By the way, it's also potentially an intelligence risk because Australian level of security around their intelligence and information and their susceptibility to espionage from Beijing is a lot higher than that of the United Kingdom, than that of the United States. So there is a risk on board with that, but no, I think the important thing is that the Americans are continuing to focus on what is really a pivot towards Asia, more military equipment, more economic engagement, and of course, more concern of American allies and partners all across the region that they need the Americans from the security perspective, even as China becomes the critical economic partner. So that I think is important incrementally, strategically, but I wouldn't say AUKUS is the big mover, this week's San Diego meeting notwithstanding.
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