Where the Free Alberta strategy on Canada’s banking system is wrong

What is the Free Alberta Strategy, the joint creation of two lawyers and a Calgary political scientist? And with a provincial election on the horizon this spring in Alberta, what will the sovereignty strategy mean for voters?

bill 1, the Alberta Sovereignty within a United Canada Act, is the centerpiece of the Free Alberta Strategy. It was introduced late last year by Premier Danielle Smith in another barrage in the ongoing constitutional battle between Alberta and the federal government.

Let’s review the origin of the concept and focus on one of the least examined components of the Free Alberta Strategy: the proposed Independent Banking Act.

History

Alberta separatism in the 21st century began to rear its head when Ralph Klein was prime minister. The so-called firewall letter, a two-page missive to Klein, was published in the National mail in January 2001.

It was signed by future Prime Minister Stephen Harper, then chairman of the National Citizens Coalition, a well-funded conservative advocacy group, and other signatories including University of Calgary political scientists Ted Morton, Tom Flanagan and Rainer Knopff, Andrew Crooks of the Canadian Federation of Taxpayers and Ken Boessenkool, former political adviser to Stockwell Day, leader of the Canadian Alliance.

Many of the letter’s recommendations would reappear almost identically in 2020, in the findings of the Fair Deal Panel under Prime Minister Jason Kenney. He proposed establishing a provincial police force, withdrawing from the Canada Pension Plan and effectively expanding the Alberta Revenue’s mandate to collect personal income taxes.

When Harper was elected prime minister, Western separatism calmed down. But the election of Justin Trudeau’s Liberals and Rachel Notley’s NDP in 2015 appeared to fuel dissent among some conservative elements in Alberta.

This resulted in the right-wing forces merging with the Kenney-led United Conservative Party establishment. Kenney easily won the 2019 election because the Conservative vote was not split.

buffalo statement

In February 2020, the Buffalo statement was released. The 13-page letter argued that the Confederation is not working for Alberta. It was signed by four Alberta MPs, led by Michelle Rempel Garner. He opened with a list of alleged historical injustices inflicted on Alberta and its sister province, Saskatchewan.

Supposed causes of the crisis included the National Power Program from 1980 to 1985, a “malicious” attack on Alberta’s resource sector, according to the statement.

Policy recommendations included recognition of Alberta as “a culturally distinct region within the Confederation”, better representation in Parliament, and an acknowledgment of the “devastation” of the National Power Program.

It also demanded changes to the equalization program and approval of the Teck Frontier mining project.

Meanwhile, Kenney was proving unable to control anti-Ottawa sentiment in Alberta, and his handling of the COVID-19 pandemic threatened party unity. He ultimately lost a leadership vote in 2022 and resigned.

A year earlier, former Wildrose MLA Rob Anderson, libertarian Derek From, and University of Calgary political scientist Barry Cooper launched the Free Alberta Strategy.

The strategy, with the Alberta Sovereignty Act at its centerpiece, was championed by Smith in his successful leadership campaign. Meanwhile, Kenney and many of the opponents of Smith’s leadership strongly criticized the concept.

Kenney and Travis Toews, Alberta’s finance minister, expressed concern about capital flight from the province.

Alberta Independent Banking Act

Largely unnoticed in the Free Alberta Strategy recommendations is the creation of an independent provincial banking system.

Given my experience as an executive at ATB Financial, the government’s wholly owned full-service “bank,” I understand the difficulties of creating a private Alberta-regulated financial system.

A functioning banking system is critical to Alberta’s economic well-being. Banking, however, is under exclusive federal jurisdiction, including currency and the issuance of paper money.

The Free Alberta Strategy, however, purports to allow Alberta to incorporate and regulate banks, which is clearly unconstitutional. There is no mention that this proposal is outside the powers of the provincial legislature.

Few Albertans probably remember former Albertan Premier William Aberhart’s attempts during the Great Depression to tax and regulate banks in an effort to prevent foreclosures that were disrupting the lives of thousands of Albertans.

These efforts failed due to courts siding with the federal government and the federal government’s use of rarely used reservation or denial powers.

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Read more: Avoiding the use of the notwithstanding clause is a bad idea, and unnecessary

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The idea of ​​using a provincial banking system to thwart federal agencies or federally regulated banks is therefore nothing new. Aberhart tried, even using provincial powers over property and civil rights, taxes, and court proceedings. These laws were eventually annulled.

When Alberta couldn’t fight the banks, she decided to join them. The Alberta Branches of the Treasury, now ATB Financial, is the main surviving relic of Aberhart’s commitment to helping Albertans during the Depression.

Court of Payments Canada

The authors of the Free Alberta Strategy, however, are not acknowledging the impracticalities of Alberta going ahead with its own banking system.

All banks, or quasi-banks such as credit unions, ATB Financial, and trust companies, participate in the neural network of the Canadian financial system known as Payments Canada. All banking institutions transfer value to their customers by delivering cash and offering debit and credit card services.

In the unlikely event that Smith introduced legislation to incorporate banks, Canada’s federal finance minister would be quick to point out that ATB and credit unions would not have access to the payment system if the bill proceeded.

This would also mean that ATB or credit unions would not be able to access lender of last resort services at the Bank of Canada. The lender of last resort can provide liquidity or cash resources to troubled financial institutions to avoid a run on the bank.

Without access to payment systems and the central bank, ATB and credit unions would be unable to meet clients’ needs for cash, payroll services, or close real estate or securities transactions.

The Free Alberta Strategy is, in effect, a roadmap for Alberta’s sovereignty, touching on the most essential compartment of sovereignty: banking and currency.

Canadian bankers and finance ministers need to understand that some Alberta sovereignists in positions of influence know the inner workings of banking and central banking well, and that the constitution is only an obstacle if Alberta remains part of Canada.