Investors Scrutinizing the Regulators

Home Page


Securities Regulation In CanadA

Fox Guarding the Hen House




Fell castigates credit-crunch culprits

Ex-RBC Capital Boss

Theresa Tedesco

Wednesday, April 23, 2008

The current "credit debacle" crippling the world's financial markets was caused by a combination of "greed run amok," regulatory failure and a "flawed" rating-agency system, according to Anthony Fell.

Barely four months into official retirement, the dean of Canadian investment bankers spared few during a recent lecture in which he delivered a "stinging indictment" of the financial industry, where he carved a prestigious career over five decades.

"It was greed run amok and it will take years or perhaps a decade or longer for the financial industry to regain its credibility in the minds of investors and in the community at large," Mr. Fell told a crowd of Bay Street money managers, corporate lawyers and federal government officials who attended the fourth annual David Dodge lecture at Humber College in Toronto.

"When you reflect on it all, it is indeed a sad commentary," the 68-year-old former chairman of RBC Capital Markets said in his customary blunt fashion.

During his lengthy lecture, which, according to Mr. Fell, was "his first, and his last," the senior Bay Street financier talked about the precedents for the current credit crisis, which he described as "a huge embarrassment for the global banking business."

On the top of Mr. Fell's list of culprits are banks and investment dealers on Wall Street and Bay Street for not being aware of the risks of the U.S. housing bubble, for not understanding them, and for ultimately failing to "control risk in their own businesses."

Regulatory failure is another factor which Mr. Fell said contributed to the credit crisis, particularly the Federal Reserve for electing to "forego" its responsibility to use its powers to regulate the residential-mortgage industry in the United States.

Making matters worse, he said, the central bank kept interest rates too low for too long.

He blamed rating agencies, which gave many of the sub-prime instruments and asset-backed commercial paper in Canada triple-A ratings, for failing to protect investors.

"In my view, the rating agencies have now lost all credibility," Mr. Fell said.

During his 50 years in capital markets, Mr. Fell developed a sterling reputation for integrity, despite his legendary toughness and fierce competitiveness. He was chairman of RBC Capital from 1992 to December, 2007, and now sits as a director of Bell Canada, CAE Inc. and Loblaw Cos. Ltd.

When asked yesterday to elaborate on his speech, he demurred, saying, "I think I'll let the comments speak for themselves. You've got to more or less tell it like it is, it happened, it's happening."