Rocco Galati challenges Bank of Canada to offer interest-free loans

The lawyer best known for stopping the Supreme Court appointment of Judge Marc Nadon has turned his sights on the Bank of Canada. Rocco Galati explains why the central bank should be handing out interest-free money for infrastructure.

Maverick lawyer argues central bank should provide interest-free money for infrastructure

The case against Bank of Canada

9 years ago
Duration 18:40
Rocco Galati is one of the country's leading lawyers with a taste for quixotic cases

The lawyer best known for stopping the Supreme Court appointment of Judge Marc Nadon has turned his sights on the Bank of Canada.

Rocco Galati has taken on a case for a group called the Committee for Monetary and Economic Reform, or COMER, which wants the central bank to return to the practice of lending federal and provincial governments interest-free money for infrastructure.

"They felt it was important in the face of the financial sector meltdown in 2008, the banking meltdown, and the drastic reduction and elimination of human capital infrastructure such as health care, universities and basically the stuff that the Bank of Canada from 1938 to 1974 funded," Galati said in an interview with CBC's The Exchange with Amanda Lang.

His clients have been dismissed as conspiracy theorists, but Galati argues the law is there to support their case.

The Bank of Canada was set up in 1935 in the wake of the Great Depression to provide a means for settling international accounts and to provide interest-free loans to government to finance infrastructure investments.

History of infrastructure funding

Projects like the St. Lawrence Seaway and the Trans-Canada highway were funded in this way, and the central bank also underwrote Canada's Second World War effort as well as the building of hospitals and universities.

But in 1974, the central bank stopped providing interest-free loans to government so it could join the Bank for International Settlements, a kind of central bank of central banks.

Galati argues that from then on private banks became government's lender, contravening the act that established the central bank.

He has launched legal action, beginning in 2011, to rule on the constitutionality of the central bank's current role. His argument is that private banks are dictating the terms of Canadian debt, usurping the role of the Bank of Canada.

Is government bound by original act?

"My hope is that the court declare that the government is bound by the legislation and cannot simply hand over that decision-making to foreign private bankers," Galati said.

"What the government then does is up to the government, but they can't simply arbitrarily say 'no never again' when the law is there and the history of the reason for creating the Bank of Canada is there."

The Committee for Monetary and Economic Reform takes the view that having the Bank of Canada provide funding would eliminate interest payments on the national debt — a huge burden for the Canadian taxpayer.

Galati agrees the case is a strange and quixotic one, but he's built a career on holding the government to the law.

"It wasn't arcane for me, it's in the law," he said.

And he acknowledged it will probably earn him few friends. He'll never be made a judge or even sit on a law faculty. And it will be a long fight.

"Well, most struggles to enforce the law are. I mean, often, I've had cases that have gone 12 years, successfully at the end of the day, because the government simply wants to ignore the law," he said.

"That's the system we have, and when they do, the only people that can force them to abide by the law are the courts."

Marc Nadon case

Last year when Prime Minister Stephen Harper nominated Nadon to the Supreme Court, Galati stepped in, saying the move broke the rules. Few expected him to win. But in a surprise decision, he did.

"I saw an attempt to pervert and subvert our independent judiciary, which is the last bastion of balancing the rights of the citizens against the rights of the government and making sure that the government doesn't turn into a dictatorship," he said. "If you can stack the court and corrupt the judiciary, well, that's it."

Galati said he believes Parliament has become ineffective in checking the power of government and the courts are the only recourse.