Tuesday, December 18, 2007

TD - Standing Proud, Standing Alone - But Why?

By: Ross Hendin, Hendin Consultants

The Globe and Mail contributes an important fact and insight in today's article on the ABCP issue: TD breaks ranks on frozen ABCP. It's an article worth reading.

Standing Proud, Standing Alone

Ed Clark, head of the TD Bank, has signaled that he is going to stand tall on the ABCP issue, and not expose his bank or shareholders to any ABCP risk. As he stood alone and didn't reap the benefits of the ABCP products when they were rolling well, he now stands alone as the one person who is not on the hook to run with the Crawford Committee's request for liquidity. I'm sure both his clients and his shareholders will breathe a sigh of relief. I'm also sure that the other heads of the banks, and the Committee, realize it means more investment and more risk than the other banks want to provide.

TD has been in the best position of all banks, but in saying that this can't be an easy time for any of them. I applaud Mr. Clark for making this choice and having the conviction to do it properly and from the outset while there must be a very strong lobby to have him change course. I can't help but wonder though if this decision has something to do with TD's international posture, even more than their domestic profile...

I still believe that most of the banks probably will sign on to support this accord. It's better to win friends in Ottawa and win the affection of clients than to save a few dollars for shareholders in the short term. Now that there is a potential financial incentive through a truce of lawsuits, what the Committee has offered banks really makes the Accord much more attractive. The banks now have strong legal, PR and financial incentives to risk the money and provide liquidity.
It makes me wonder just how high the risk to the banks really is if they won't sign onto this Accord even with all of these incentives... if the other bank's CEO's are keeping quiet because they know they are heading for litigation and they STILL aren't signing on the dotted line, the market should take note of that. The banks not signing on, combines with the lack of transparency in the Accord's progress, to signal something very bad. It makes me think that there are issues much bigger than the market expects that may come to light if the data room is opened and transparency is given. If that's the case, as I've said before, it's better to face the music now than keep the world in suspense.


Coming back to why TD would take this stand, the obvious answer is the one I am sure they will give to the market. But nobody has exposed or discussed the new, international element of the ABCP situation, and I think it's a critical insight into this TD decision and what the other banks may do in the days to come.

The world markets and savvy investors have been quietly following the story for months, but the world's major and most respected media are noticing this and giving their readers what they want - a close account of the situation in terms of trading the ABCP, and more and more the political fallout that is coming from the way the situation is being managed in terms of PR (everyone I know agrees that Mr. Crawford is doing nothing short of making miracles, and everyone agrees that if the Accord fails or not, he has done an outstanding job of trying to find the Win-Win situation). The situation is becoming increasingly radioactive by the day. With the world watching, everyone needs to be on their best behavior as they can't get away with what they could have otherwise.

TD has a number of companies outside of Canada that it needs to consider in all of this. TD Asset Management, TD Waterhouse, TD Ameritrade and TD Banknorth are probably the most important ones. There is a TD Waterhouse on High Holborn in London just a block away from an office I used to work in. With TD's global ambitions and the potential for disaster that they have seen and continue to see in the market, steering clear of ABCP may lose TD popularity at home with the other banks, but they no longer need to worry that their clients abroad will hear that they had anything to do with this. They must be concerned with their global image, not just their Canadian image, and that image will look much cleaner if they can take the high road on a looming political and financial disaster.

Ross Hendin is CEO of Hendin Consultants, and is a Senior Advisor to the Canadian office of a leading multi-national PR firm. With strategic communication experience in more than 20 countries around the world, Ross specializes in litigation, financial and political strategic communication. He has worked in the ABCP niche since 2006. Hendin Consultants is in Toronto and London, UK, and is on the web at http://www.rsmediacorp.com/. Email Ross at mailto:rhendin@rsmediacorp.com.

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