Canadian Banks are NOT being 'bailed out'

[Moonbox]

Why Canada's Banks Don't Need Help

An interesting article from Time.com

If you're too lazy to read basically what's being said is that while Canadian Banks are in no danger of collapse like everywhere else in the world, now that foreign banks are being backed by their governments Canadian Banks are at a huge disadvantage competitively without federal help.

[Sir Bandelot]

That is my suspicion exactly as to why we are now doing this- Since other countries are jumping in, giving tax money to the banks to keep them in the black, our Canadian banks want their "cut" now too.

So much for "fiscal responibility", working hard to keep the national debt down by collecting large amounts of tax from the Canadian people, to help keep our economy healthy. Those countries that are less responsible have to bail out the banks with the peoples money. In the end, Canada still has to do the same.

Edited November 13, 2008 by Charles Anthony
deleted re-copied Opening Post

[Moonbox]

You totally missed the point of the article...

and you totally don't understand how the deals between our Federal Government and the banks work.

[Sir Bandelot]

What do you mean, I "totally" don't understand. Your post says this-

"now that foreign banks are being backed by their governments Canadian Banks are at a huge disadvantage competitively without federal help"

How is that "totally" different from what I just said, that our banks want the same deal as whats happening elsewhere.

Edited November 13, 2008 by Charles Anthony
deleted re-copied Opening Post

[eyeball]

It all seems so socialist doesn't it? Viewed another way this could weaken our banks by bringing them down to the same level as the weakest bank. What's to stop our banks from taking more risks now that they know their Nanny will be there to break their fall? Oh right, Nanny will also be there to make sure they keep their noses clean.

I suspect Ayn Rand is spinning like a top right about now.

Edited November 13, 2008 by Charles Anthony
deleted re-copied Opening Post

[OddSox]

That is my suspicion exactly as to why we are now doing this- Since other countries are jumping in, giving tax money to the banks to keep them in the black, our Canadian banks want their "cut" now too.

So much for "fiscal responibility", working hard to keep the national debt down by collecting large amounts of tax from the Canadian people, to help keep our economy healthy. Those countries that are less responsible have to bail out the banks with the peoples money. In the end, Canada still has to do the same.

Um Hello? Read the title of the thread "Canadian Banks are NOT being bailed out". There is no tax money being given to the banks.

[Vancouver King]

Wikipedia definition of bailout:

"Often a bailout is in response to a short-term cash flow crunch, where an entity with illiquid, but sufficient assets, is given funds to "tide it over" until short term problems are resolved."

Change 'given funds' to 'sell outstanding loans to govt' and you have a term that seems to describe the current situation: a bailout.

[M.Dancer]

Wikipedia definition of bailout:

"Often a bailout is in response to a short-term cash flow crunch, where an entity with illiquid, but sufficient assets, is given funds to "tide it over" until short term problems are resolved."

Change 'given funds' to 'sell outstanding loans to govt' and you have a term that seems to describe the current situation: a bailout.

And indeed you would have to change what the gov't did...ie give instead of buy to make it a bail out. Sort of like if you change the colour of the sienna paint to orange, it would be orange.

So in other words, it's not a bail out no matter how hard you bang square definition into a round reality.

[Vancouver King]

If only Tories could shut down Wikipedia....

[M.Dancer]

If only Tories could shut down Wikipedia....

Or to get people to think in a logical manner..

[Moonbox]

What do you mean, I "totally" don't understand. Your post says this-

"now that foreign banks are being backed by their governments Canadian Banks are at a huge disadvantage competitively without federal help"

How is that "totally" different from what I just said, that our banks want the same deal as whats happening elsewhere.

I don't think you understood why Canadian banks are making deals with the government.

You've put a hugely negative spin on what the government and the Canadian banks are doing when in reality our banks and government have performed admirably compared to the rest of the world recently.

Why should Canadian banks be hurt by worldwide subsidation of foreign financial industries?

[Moonbox]

If only Tories could shut down Wikipedia....

Now there's a post full of dazzling intellect.

Another person who doesn't understand why the deal was made.

The 'bailout' was made to free up liquidity in a cash-starved Canadian economy. The banks weren't in trouble, but if they kept their lending tight to protect themselves then any potential recession is magnified.

The banks, Canadians and their government all want to avoid that.

[Vancouver King]

You might consider joining Dancer in her night economics class.

[M.Dancer]

You might consider joining Dancer in her night economics class.

right after you complete a course in simple logic.

To sum up your argument, A Bike is a trike, if you simply add a wheel, it is a trike.

Or how about this one?

Death by natural causes is murder, simply subsitute gunshot for natural causes...

[Vancouver King]

if you simply add a wheel ...

...if, if, if.....if my aunt had balls she would be my uncle.

[M.Dancer]

...if, if, if.....if my aunt had balls she would be my uncle.

And then you could call her a bail out...

[Sir Bandelot]

I don't think you understood why Canadian banks are making deals with the government.

You've put a hugely negative spin on what the government and the Canadian banks are doing when in reality our banks and government have performed admirably compared to the rest of the world recently.

Why should Canadian banks be hurt by worldwide subsidation of foreign financial industries?

Which bank is hurting? Why should we use any money to increase their profits when they don't seem to give people a break on interest rates. And explain to me where the money comes from, if not ultimately from the taxpayer somehow. I didn't read the article so please tell me.

Even if its surplus money used to make investments, how can they find that money to help banks that already make a windfall profit every year, while cities infrastructure is failing, some hospitals are so old they should be torn down, while the number of children living in poverty is still so high. But for the banks the Government can find money? Thats why I don't approve of the idea.

http://www.cbc.ca/news/interactives/who-bank-profits/

Edited November 13, 2008 by Sir Bandelot

[M.Dancer]

And explain to me where the money comes from, if not ultimately from the taxpayer somehow.

The money is borrowed at a rate much lower than the mortgage. We make money on the deal.

[M.Dancer]

Even if its surplus money used to make investments, how can they find that money to help banks that already make a windfall profit every year, while cities infrastructure is failing, some hospitals are so old they should be torn down, while the number of children living in poverty is still so high. But for the banks the Government can find money? Thats why I don't approve of the idea.

Because there's a difference between making an investment for all Canadians and giving cities who have mismanged their finances so they can mismanage there finances more. I'm all for bailing out hospitals....it's a provincial reponsibility, just like city infastructures....it's the responsibility of the cities.

This might seem like blasphemy for the Jack Layton clique, but when banks don't make profits, we're all screwed.

[Smallc]

Well, its obvious that two of you understand whats going on here. A couple of you though, seem to have no clue.

[jdobbin]

If you're too lazy to read basically what's being said is that while Canadian Banks are in no danger of collapse like everywhere else in the world, now that foreign banks are being backed by their governments Canadian Banks are at a huge disadvantage competitively without federal help.

I guess our auto industry will be at a disadvantage if the U.S. goes through a bail out. Or does that sound impossible?

[geoffrey]

Change 'given funds' to 'sell outstanding loans to govt' and you have a term that seems to describe the current situation: a bailout.

If I buy your house, have I bailed you out? No, I purchased an asset.

Buying these mortgages is like purchasing assets. The government even earns a return and paid less that what these things will be worth 5 years from now when risk premiums are lower.

Great investment, good job to the government.

Banks are happy, taxpayers should be happy.

Which bank is hurting? Why should we use any money to increase their profits when they don't seem to give people a break on interest rates.

Prime rate is 3.75% at national banks and 1-Yr LIBOR is 2.85%. What the hell are you talking about no break on interest rates?!?! Your a clueless fool. Banks are operating at slim margins on variable ST debt. Long-term debt is so unpredictable right now that LT mortgage rates need to price uncertainty. Good luck selling a 5 year mortgage at anything less than 6% to the market. No one will buy it!

The cost of money has increased dramatically and your whining about the bank not cutting your mortgage ENOUGH?!? God help us. There really are some that just don't get it.

On my mortgage right now, I am paying less in interest (1.75%) than the bank pays on the debt used to finance it. Huh. Go figure. They are losing money because they've given me such a break!

You have no idea how the financial sector works and it's apparent. Don't be critical of policies and decisions that are just beyond your level of understanding. Just because you don't get it, doesn't make it wrong.

Plus, buying mortgages off banks at a discount decreases their profit (loss on sale of assets). But you'd know that being the financial wizard you are, wouldn't you!?

I guess our auto industry will be at a disadvantage if the U.S. goes through a bail out. Or does that sound impossible?

Oh please. The US is stupid to bail out the auto industry too.

Just let it die already. Kill of the wasteful union jobs ($100k/year door screwer-on'ers) and let innovative Japanese manufacturers make better product at lower cost. Seriously. Why do we need GM? It's a big hulking union ship that will constantly be sinking under the weight of it's crew.

The difference with banks is we are helping great instituions weather a storm where they are at a disadvantage to their peers due to government intervention.

The auto industry was a failure from day one, not because of the credit crisis but because it's just in terrible shape. GM is one of the worst managed large companies in the world. We shouldn't support that crap. We should support strong industry leaders, not foolish union shops that will never be profitable on their own ever.

[jdobbin]

Oh please. The US is stupid to bail out the auto industry too.

Don't think I mentioned it was the brightest move although they are probably weighing the costs of 2 1/2 million unemployed for each car company that goes belly up.

Just let it die already. Kill of the wasteful union jobs ($100k/year door screwer-on'ers) and let innovative Japanese manufacturers make better product at lower cost. Seriously. Why do we need GM? It's a big hulking union ship that will constantly be sinking under the weight of it's crew.

I don't know if the union is 100% to blame. I seem to remember all three companies making decisions on their product line, marketing and financing.

The difference with banks is we are helping great instituions weather a storm where they are at a disadvantage to their peers due to government intervention.

The auto industry was a failure from day one, not because of the credit crisis but because it's just in terrible shape. GM is one of the worst managed large companies in the world. We shouldn't support that crap. We should support strong industry leaders, not foolish union shops that will never be profitable on their own ever.

By all accounts, the American can plants in Canada are among the best in the industry. Won't they be at a disadvantage if the U.S. bails their American plants out?

[geoffrey]

Don't think I mentioned it was the brightest move although they are probably weighing the costs of 2 1/2 million unemployed for each car company that goes belly up.

Did anyone cry for the guys at Lehman Brothers?

I'd just call it a necessary correction. These people make unreasonable money. They are going to get to know how much their skills are worth really quick!

I don't know if the union is 100% to blame. I seem to remember all three companies making decisions on their product line, marketing and financing.

The cost component is no longer competitive and that's the union's fault.

Many of the companies have their hands tied on parts and some parts of their lineups due to union contracts (Ford trucks must be built here, etc).

By all accounts, the American can plants in Canada are among the best in the industry. Won't they be at a disadvantage if the U.S. bails their American plants out?

I think they are bailing the companies out, not the plants dobbin. And those companies directly hold 100% of the ownership of their Canadian subsiduaries. A US bailout is a bailout for Canadian manufacturers as well.

The bottom line is less people are going to buy cars and people will lose their overprice jobs until the market balances. A bail out is just delaying that a huge taxpayer cost.

[craiger]

When a home drops $100,000 meaning I can work 10 less years to pay it off.

Gas drops 40 cents/litre at the pump = 1 less day a week i need to work

these are the best of times