Canadian Banks are NOT being 'bailed out'

[jdobbin]

Did anyone cry for the guys at Lehman Brothers?

Lehman Brothers should have waited another week if they could have. They probably would have been bailed out.

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!

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).

I think it is a bit of a reach to blame all of this on the unions.

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.

I don't know how you figure that since the deal they talking about is for American manufacturing.

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.

Perhaps Harper can end Employment Insurance while he is at it. It will just make people wait too long before accepting that they should take whatever they can for employment.

The Tories have declared war on wage earners. They are responsible for the downturn.

[Sir Bandelot]

Post deleted, sorry for bad language.

Edited November 19, 2008 by Sir Bandelot

[Vancouver King]

Geoffrey made a career in this forum savaging all who questioned the banks unalterable right to function without regulation and oversight. He cheered on American policy that removed the last vestige of oversight in investment banking resulting in the poisoned derivatives that now choke global institutions.

Money changers, speculators and con artists of his ilk are directly responsible for the financial wreckage that now lies around the globe. His scorn and arrogance are disquieting reminders of just how far we've sunk.

[White Doors]

I fail to see why you get so emotional over it, and downright insulting. Tell you what, why don't you just go fuck off, ok?

"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!"

Yeah, they're losing money, poor banks. See the link I provided. And while your at it...

Go fuck off, you arrogant clown

kisses!

[Sir Bandelot]

kisses!

I see you're back for more, eh... that must have hurt

[drewski]

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.

as distasteful as it would be, bailing out the auto sector is a necessary evil. It is too ingrained in the US economy to let it fail, they directly or indirectly employ over 3 million people and represent $150 BILLION in income. What we are going through will be nothing compared to what will happen to our economies if they failed.

IMO both the union with it ridiculous wage & benefit demands and managements poor decisions are partially to blame, but this hasnt' exactly been a fair fight either.

Japanese cars can be provided at a a lower cost, but why? Well one BIG reason is the Japanese government has kept the Yen artificially low for years which has allowed Toyota, Honda et al to sell their Japanese made product in the US at a low cost while still reaping TONS of profit and essentially restricting sales of American cars out of the market, all the while the US government sat back and said, oh well. Not too mention, they are still l new to American manufacturing sector so they don't have the legacy costs of things like retirement benefits...YET.

[White Doors]

Japanese cars can be provided at a a lower cost, but why? Well one BIG reason is the Japanese government has kept the Yen artificially low for years which has allowed Toyota, Honda et al to sell their Japanese made product in the US at a low cost while still reaping TONS of profit and essentially restricting sales of American cars out of the market, all the while the US government sat back and said, oh well. Not too mention, they are still l new to American manufacturing sector so they don't have the legacy costs of things like retirement benefits...YET.

Incorrect assumptions on three levels:

1) Japanese cars made in Japan (or at least not in NA) are subject to duties.

2) Japanese automakers generally do not have unions so 'retirement benefits' have no direct costs to them

3) A significant portion of 'Japanese' vehicles are made in NA.

[drewski]

1)Japanese cars made in Japan (or at least not in NA) are subject to duties.

duties are tiny (2.5% for cars) compared to the profit made from the devalued Yen

2) Japanese automakers generally do not have unions so 'retirement benefits' have no direct costs to them

you're right in that they dont' have unions but you're wrong about no direct costs. in the US they still have pension and health care obligations, which are small right now, retired workers are in the hundreds

3) A significant portion of 'Japanese' vehicles are made in NA.

thats only a relatively recent occurrence, as they've built their market share (with help from previous profits from Japanese build cars) they've built their manufacturing presence, and even then there are still a number of vehicles brought over. All Lexus' except for the RH are made in Japan because they can't build to the

[Vancouver King]

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

Lower than Geoffrey's 1.75% mortgage rate? What is the much lower rate you refer to? Do you have a link for this claim?

I thought not.....

[M.Dancer]

Lower than Geoffrey's 1.75% mortgage rate? What is the much lower rate you refer to? Do you have a link for this claim?

I thought not.....

Re read his post. His mortgage isn't 1.75%.

Ho hum....

By Pierre Lemieux

Former Liberal finance minister John Manley is all excited: He believes that the new government program to buy home mortgages from banks is a financial free lunch — even if he didn’t use this specific dithyramb in his comments to The Globe and Mail. The program has the Canada Mortgage and Housing Corporation (CMHC) purchasing home mortgages from banks, starting with a chunk of $5-billion last Thursday and eventually going up to $25-billion and perhaps more. Since the state borrows at lower cost than private institutions, it can buy the mortgages at prices that profit both the banks and the taxpayers.

http://network.nationalpost.com/np/blogs/f...cial-lunch.aspx

Edited November 14, 2008 by M.Dancer

[Sir Bandelot]

If its so profitable for government to buy up these mortgages, why don't the banks just keep it for themselves then. Or sell to other financial groups who can do the same thing. Why should the government be involved at all. Does the bank ever give its money away? Naa. If there's a profit in something, financial companies don't want to snap it up? Naa.

Tell you why, if it goes tits-up, thats the government money being lost, not their money so they are protected. theres no way that banks ever lose in any transaction. This is like a surety, in which the government uses the peoples money as collateral to absolve banks fo all risk.

You think housing prices are guaranteed to rise? Maybe, but not certainly. Look at the US market. The price of houses was over-inflated. Now those prices are in free-fall, and people have mortgages higher than the market value of their house. Now look at whats happened to the price of houses in the greater Toronto area over the past 6 years. Houses have almost doubled. If the market collapses, people stop buying and the price of those homes could fall in the same way. Default mortgages are bound to happen.But the banks don't need to worry about it because the government is buying those mortgages.

It's a pre-emptive buyout.

[OddSox]

If its so profitable for government to buy up these mortgages, why don't the banks just keep it for themselves then. Or sell to other financial groups who can do the same thing. Why should the government be involved at all. Does the bank ever give its money away? Naa. If there's a profit in something, financial companies don't want to snap it up? Naa.

Listen closely: The banks are short of cash - which is why they are selling the mortgages to get cash. Then they can lend the cash to other banks and also to companies who need cash to pay their employees and to run their businesses.

Tell you why, if it goes tits-up, thats the government money being lost, not their money so they are protected. theres no way that banks ever lose in any transaction. This is like a surety, in which the government uses the peoples money as collateral to absolve banks fo all risk.

Listen closely: These loans are already guaranteed by CMHC. There is no risk of government money being lost.

You think housing prices are guaranteed to rise? Maybe, but not certainly. Look at the US market. The price of houses was over-inflated. Now those prices are in free-fall, and people have mortgages higher than the market value of their house. Now look at whats happened to the price of houses in the greater Toronto area over the past 6 years. Houses have almost doubled. If the market collapses, people stop buying and the price of those homes could fall in the same way. Default mortgages are bound to happen.But the banks don't need to worry about it because the government is buying those mortgages.

It's a pre-emptive buyout.

Huh?

[Vancouver King]

Listen closely: The banks are short of cash - which is why they are selling the mortgages to get cash.

Thank you for confirming our Canadian bank relief is Wikipedia's exact definition of a bailout.

[M.Dancer]

If its so profitable for government to buy up these mortgages, why don't the banks just keep it for themselves then. Or sell to other financial groups who can do the same thing. Why should the government be involved at all. Does the bank ever give its money away? Naa. If there's a profit in something, financial companies don't want to snap it up? Naa.

You should read more and babble less....

1)The banks could keep them and the would still be short of hard cash. I doubt that the banks are sellling all their notes...

2) Other finacial firms would buy them, and some do....but you may have heard abouty a credit crunch? Why ottawa is doing this in the first place? Do try to keep up.

3) The goverment is involved because they have funds to do it and to ensure that little things like the economy doesn't get sucked down a vacuum.

[M.Dancer]

Thank you for confirming our Canadian bank relief is Wikipedia's exact definition of a bailout.

Thanks for confirming you are clueless.

The banks are not short of assets, earnings or earning potential, they are short of hard cash. No one has given them anything without getting value back.

[Sir Bandelot]

Huh?

Here's what I mean... you listen closely

MLS home sales plunge to weakest level since 2002

Fri. Nov. 14 2008

The Canadian Press

TORONTO -- The number of homes sold through the Canadian multiple listing service plunged 14 per cent last month to the weakest level since July 2002.

It was the steepest month-to-month decline since June 1994, the Canadian Real Estate Association said Friday.

The association added that the impact was heaviest in big cities -- notably Toronto, which accounted for one-third of the national decline.

The average MLS home sale price was $281,133, a reduction of 9.9 per cent from October of last year.

BMO's Porter "there is no doubt that Canada's housing market continues to soften markedly. We look for a further decline in sales and some further correction in prices in the year ahead, especially in the cities that had the biggest booms in recent years."

[OddSox]

See above - These loans are already guaranteed by CMHC.

[Sir Bandelot]

So?

"Canada Mortgage and Housing Corporation (CMHC) is a Crown corporation owned by the Government of Canada."

If the individual receiving the loan goes bankrupt then the bank who gave the loan would not lose money, but instead would be reimbursed by the government.

In other words, we bought it, not the banks! tada

[OddSox]

So?

"Canada Mortgage and Housing Corporation (CMHC) is a Crown corporation owned by the Government of Canada."

If the individual receiving the loan goes bankrupt then the bank who gave the loan would not lose money, but instead would be reimbursed by the government.

In other words, we bought it, not the banks! tada

Please try to think this through.

1. The bank holds a mortgage loan.

2. The homeowner owes the bank money on the loan.

3. If the homeowner does not pay, the loan is paid off by CMHC, who insured it.

...

4. The government buys the mortage loan from the bank. Now the government owns it.

5. Just like before, the homeowner owes money on the loan, but now they are paying the government who owns the loan.

6. Just like before, if the homeowner does not pay, the loan is paid off by CMHC, who insured it.

How is this bad for the government and/or the taxpayer?

[Sir Bandelot]

How is this bad for the government and/or the taxpayer?

Because it is not good for the government or taxpayer. I don't believe this will achieve anything. Interest rates are so low now, the banks do not want to loan money. That is why they are not lending, not because they are "strapped for cash" from having issued too many loans. There's no money to be made in lending at such low rates. Yet they can't raise the rates either. People are not spending, thats the problem. The economy is grinding to a halt, and it's a viscous cycle. but this will not help to solve that problem.

Several Canadian banks operate in the United States and are involved in the mortgage crisis there, but the US plan does not include money to help foreign banks. Those Canadian banks are holding bad loans in the US are not going to get any help unless Canada steps in and gives them some money. I think this has more to do with the problems in US than in Canada. Rather than call it a bail-out of bad US mortgages the government is using this scheme. Thats why Harper said our banks do not need a bailout, and then they announced they have to do this one.

Edited November 16, 2008 by Sir Bandelot

[Smallc]

Nothing is being bailed out. This is to ensure continued liquidity. It hurts no one and benefits everyone.

[Sir Bandelot]

Nothing is being bailed out. This is to ensure continued liquidity. It hurts no one and benefits everyone.

It benefits no one other than the banks, who risk seeing a dip in their profits due to their financial connection to bad US loans. This solves nothing in terms of boosting consumer spending.

Thats what gives Flaherty means by levelling the playing field. His Flatulence is full of gas

Edited November 16, 2008 by Sir Bandelot

[Smallc]

It benefits no one other than the banks, who risk seeing a dip in their profits due to their financial connection to bad US loans.

No, your wrong. plain and simple. The banks benefit because they have more money to lend. The people and the government benefit because they take on no increase in risk and will most likely make a profit on this whole thing.

[Leafless]

Nothing is being bailed out. This is to ensure continued liquidity. It hurts no one and benefits everyone.

It is the next thing to a bailout to create a policy to make credit available in order to provide funds for loans.

Edited November 16, 2008 by Leafless

[Smallc]

It is the next thing to a bailout

Where I went to school, the next thing to a bailout, still wasn't a bailout.