Ottawa to buy another $50B in residential mortgages

[jdobbin]

http://www.ctv.ca/servlet/ArticleNews/stor...?hub=TopStories

he federal government is purchasing another $50 billion in residential mortgages in a continuation of efforts to stabilize the lending industry and encourage lower interest rates, Finance Minister Jim Flaherty announced Wednesday.

The announcement follows a similar move last month in which Ottawa bought $25 billion in mortgages.

The combined mortgage debt, both purchased through the Canadian Mortgage and Housing Corp. (CMHC), will bring the maximum value of bought securities to $75 billion.

I'm sure we haven't seen the last of the government jumping in on mortgages.

[Moonbox]

not to mention incoming auto-industry bailouts.....

[Technocrat]

correct me if im wrong but I don't exactly understand where the feds are coming up with 50B$. That is alot of cash, for banks, who if I am not mistaken are still very profitable. Perhaps their profits should go towards maintaining their liquidity rather then their shareholders until the 'credit crunch' is over with.

For being financial management institutions, they are doing a piss poor job of managing their own finances.

I know the governement 'should' be able to make money of this in the long run, it just seem that for the amount that they are proposing to pony up, that money could be used to upgrade some of out crumbling infrastructure. I would like to see the numbers on exactly how this proposed bail out is supposed to generate a return.

Interesting change from the tory election line though.

[M.Dancer]

correct me if im wrong but I don't exactly understand where the feds are coming up with 50B$. That is alot of cash, for banks, who if I am not mistaken are still very profitable. Perhaps their profits should go towards maintaining their liquidity rather then their shareholders until the 'credit crunch' is over with.

If they don't maitain their "Shareholders" there won't be any profits....

Still, you don't imagine that bank profits sit around idle do you? Lets say at any given time a banks (hypothetical bank) assets are 1 billion dollars.....you can be sure that one billion plus plus dollars is out in the market circulating....much of it in loans and mortgages...

What happens if a bank, even though profitable can not borrow money...or has very little money to lend? Well first off the bank's profits will decrease, but that's the least of our worries. More importantly, loans that are used for all kinds of things, from home building to home buying become harder to get and more expensive and our economy (if we are lucky) slows to a snail's pace. Worse is when businesses who need bridge financing to complete a projest or a deal start laying off...or when mortage renew and the pressure on rates forces the home owner to sell.

We are already seeing some of this now. Buying insured mortgages will give the banks more money to lend ...to get it into cirulation so the Joe Blow Inc can fullfil his orders and Mr and Mrs Ordinary can renegotiate their mortgage...

[Vancouver King]

What happens if a bank, even though profitable can not borrow money...

And yet the Libor rate, the interest rate charged by banks to one another for loans, has steadily declined to near precrash levels, a sure indication that liquidity is improving not declining.

What special problems does our 'best financial system in the world' have that the public is unaware of?

This latest bailout, and the auto, etc. relief to come, demands that parliamentary oversight be intense on the terms and performance of this colossal relief.

Frankly, I don't trust Harper's govt to act in the public interest when the current financial chaos gives them extraordinary opportunity to service their highest priority: transferring vast amounts of wealth to big business and the rich at the expense of working Canadians.

[M.Dancer]

Frankly, I don't trust Harper's govt to act in the public interest when the current financial chaos gives them extraordinary opportunity to service their highest priority: transferring vast amounts of wealth to big business and the rich at the expense of working Canadians.

Yes I'm sure. Somewhere in the Smokey back rooms of Conservative Headquarters strategists are saying "How can we ensure a majority?...."

And the consensus is that by transferring vast amounts of wealth to big business rich at the expense of working Canadians will get them the popular vote.

Meanwhile quietly the Dark Forces of the Left are amassing stock piles of tin foil to hand out to the paranoid classes to shield them from the debilitating effects of common sense.

[Argus]

Frankly, I don't trust Harper's govt to act in the public interest when the current financial chaos gives them extraordinary opportunity to service their highest priority: transferring vast amounts of wealth to big business and the rich at the expense of working Canadians.

I don't suppose you'd care to speculate as to WHY big business and the rich would be their highest priority? Because they certainly aren't getting any major component of their donations from big business - which is no longer allowed to donate money to political campaigns - or the rich, now that the limit has been reduced to $1000. In fact, according to public documents available from Elections Canada, the Liberals have always been the party which pulled in by far the lions share of the big donations from the rich and from corporate Canada.

Not that facts will stand in your way, of course.

[Argus]

correct me if im wrong but I don't exactly understand where the feds are coming up with 50B$.

It's not really a matter of paying anyone $50b, it's more of an assumption of liabilities on paper. And it's not like they're buying anything. In fact, given the interest rates the mortgage owners are paying, and the interest rates government can get for its own borrowing, it will likely actually make money on the deal.

[Vancouver King]

...and your witty explanation for why our banks need additional bailouts while the global banking system recovers, is? No oversight required on these mammoth bailouts?

I know reality has a built in liberal bias, but try your best to address the above.

[M.Dancer]

...and your witty explanation for why our banks need additional bailouts while the global banking system recovers, is? No oversight required on these mammoth bailouts?

I know reality has a built in liberal bias, but try your best to address the above.

See, that's the problem. You don't understand the question let alone the answer.

The banks haven't been bailed out. No mammoth bailouts, no masterdon bail out either.

[Alta4ever]

...and your witty explanation for why our banks need additional bailouts while the global banking system recovers, is? No oversight required on these mammoth bailouts?

I know reality has a built in liberal bias, but try your best to address the above.

No cash has been handed to the bank.

[RB]

http://www.ctv.ca/servlet/ArticleNews/stor...?hub=TopStories

I'm sure we haven't seen the last of the government jumping in on mortgages.

This is such a joke. I was looking at some property between Ottawa and Montreal - not bad at all - my guage is if people are working, why are we bailing the banks. What sort of mortgage crisis are they speaking of in Ottawa.

The only crises I see in the housing is the incredible inflation the local municipal is imposing on the people. So I called them to say I would like to sell my property to them immediately at "their" value of my property.

[eyeball]

Why do we even need banks if the money they loan comes from us in the first place? Deliberately creating middlemen seems like the very antithisis of economic efficiency. I think banks are a symptom of irrational perceptions about where wealth really comes from, much of which derives from the natural capital of the planet we live on.

I think its a good idea that governments become mortgagees to mortgagors, its more real and more direct. This would allow for unconventional terms on which a loan could be based or repaid. We need more flexability that reflects natural upturns and downturns in our economy so when times are hard for example people could perform in-kind public services in lieu of cash mortage payments. As the Age of Bailouts looms ever larger, its clear the government is who eventually has to pick up the pieces no matter who drops them or where they fall. I notice the US is now proposing to rescue individuals from forclosure, I guess it was that or face the guillotines eh? The clothes on the Emporer are pretty much being ripped off right before our eyes.

One thing the government could easily do is allow for the repayment of mortages through the restoration of natural systems such as forests, wetlands and other sources of natural capital that have been long overdrawn. Establishing a means for people to earn wealth for themselves on the basis of nurturing growth in our planet's natural capital would de-externalize our environment with regards to our economy, to a far greater extent than any carbon-tax would. It would truely base our economy in reality for a change. Like nationalizing our lending system does.

Edited November 12, 2008 by eyeball

[M.Dancer]

One thing the government could easily do is allow for the repayment of mortages through the restoration of natural systems such as forests, wetlands and other sources of natural capital that have been long overdrawn. Establishing a means for people to earn wealth for themselves on the basis of nurturing growth in our planet's natural capital would de-externalize our environment with regards to our economy, to a far greater extent than any carbon-tax would. It would truely base our economy in reality for a change. Like nationalizing our lending system does.

Great idea. To repay my loan on a house in Toronto, I'll flood my back yard. That will create so uch more wealth, the next pwerson who needs a loan can have some mud....

[eyeball]

Great idea. To repay my loan on a house in Toronto, I'll flood my back yard. That will create so uch more wealth, the next pwerson who needs a loan can have some mud....

It was a good idea when it was called the New Deal.

Your suggestion to deliberately degrade the environment on the other hand should land you a criminal charge and a stiff fine if not prison time. For repeat offences of a similar nature I'd probably sieze your house.

[M.Dancer]

It was a good idea when it was called the New Deal.

Your suggestion to deliberately degrade the environment on the other hand should land you a criminal charge and a stiff fine if not prison time. For repeat offences of a similar nature I'd probably sieze your house.

Umm...where did I suggest I deliberately degrade the environment? I simply suggested following your advice and create wetlands....

Oh...btw, I don't think you really understand what the New Deal was if you are suggesting it is somehow applicable now.

[jdobbin]

not to mention incoming auto-industry bailouts.....

Certainly the money isn't doing anything for the spiralling downward economy.

[msj]

And yet the Libor rate, the interest rate charged by banks to one another for loans, has steadily declined to near precrash levels, a sure indication that liquidity is improving not declining.

Libor has declined from its October peak of 4.818% to around 2.13% today.

A huge improvement for sure, but this is still higher than normal levels:

Credit Crisis Indicators: A little Progress

[eyeball]

Umm...where did I suggest I deliberately degrade the environment? I simply suggested following your advice and create wetlands....

I said restore actually, what you're suggesting is more akin to an unemployed fire-fighter starting a fire for the sake of a paycheck.

Oh...btw, I don't think you really understand what the New Deal was if you are suggesting it is somehow applicable now.

Sure its applicable now. The New Deal had a lot to do with reforming the financial system and programs like the WPA planted trees and restored forests amongst other things.

[Alta4ever]

I said restore actually, what you're suggesting is more akin to an unemployed fire-fighter starting a fire for the sake of a paycheck.

Sure its applicable now. The New Deal had a lot to do with reforming the financial system and programs like the WPA planted trees and restored forests amongst other things.

The New Deal did nothing but drag the bad recession into a depression that lasted for ten years. What brought the world out of it was war. Is this something you would like to repeat?

[M.Dancer]

Sure its applicable now. The New Deal had a lot to do with reforming the financial system and programs like the WPA planted trees and restored forests amongst other things.

So you think make work projects are what we need? All we need though are the legions of homeless men in hobo towns to apply. Unfortunately the NDP dedn't get elected so economic collapse is less likely.

[eyeball]

As I said...who needs banks when its obvious they're simply the discharge outlet for the liquidity the goverment pumps out - the money they print that is?

I think its a good idea that governments become mortgagees to mortgagors, its more real and more direct. This would allow for unconventional terms on which a loan could be based or repaid. We need more flexability that reflects natural upturns and downturns in our economy so when times are hard for example people could perform in-kind public services in lieu of cash mortage payments.

Please note that restoring degraded ecosystems pretty much falls under the heading public service but I doubt if a banker could ever get their head around the idea.

Am I to believe its banks that are performing a public service here? Is this in lieu of something else perhaps? What am I missing here?

[Alta4ever]

As I said...who needs banks when its obvious they're simply the discharge outlet for the liquidity the goverment pumps out - the money they print that is?

Please note that restoring degraded ecosystems pretty much falls under the heading public service but I doubt if a banker could ever get their head around the idea.

Am I to believe its banks that are performing a public service here? Is this in lieu of something else perhaps? What am I missing here?

So who then determines in kind value for service and how do you tax it?

Or should we allow the other canadian currency? Do you want to pay your morgage in pelts?

Edited November 12, 2008 by Alta4ever

[kengs333]

So who then determines in kind value for service and how do you tax it?

Or should we allow the other canadian currency? Do you want to pay your morgage in pelts?

Actually, when this is all said an done, we may be reduced to the barter system.

[kengs333]

Certainly the money isn't doing anything for the spiralling downward economy.

Of course not, it's meant to componsate the wealthy and elites.