Canadian Bank Bailouts

[Topaz]

Harper keeps saying that the Canada Banks never received any bailout money from the government but did they? ALL the money the government has comes from taxes which come from the taxpayers. The following articles says that Harper did help out with the banks, first with the mortgages and then later, to the tune of 75 Billion. So after reding the article, did he? http://www.pacificfreepress.com/news/1/6148-ottawa-misleads-on-canadian-bank-bailouts.html

[Bryan]

No. Canadian Banks did not receive a bailout.

[Shady]

Harper keeps saying that the Canada Banks never received any bailout money from the government but did they? ALL the money the government has comes from taxes which come from the taxpayers. The following articles says that Harper did help out with the banks, first with the mortgages and then later, to the tune of 75 Billion. So after reding the article, did he? http://www.pacificfreepress.com/news/1/6148-ottawa-misleads-on-canadian-bank-bailouts.html

You've already posted this topic before. You're a liar. There were no Canadian bank bailouts. Stop lying.

[M.Dancer]

Dear Chairman; it is now being said publicly that Canada’s banks were never given “bailout” help by the Federal Government. As recently as this morning on a CBC Early Edition interview out of Vancouver, a guest made this assertion and Mr. Cluff let it go unchallenged.

On October of 2008 Prime Minister Harper publicly announced that “Canada Mortgage and Housing (CMHC) will purchase up to $25 billion in insured mortgage pools as part of the Government of Canada’s plan, announced today, to maintain the availability of longer-term credit in Canada.”

On November 12, 2008, another $50 billion allocation was announced. The official text was; “The Honourable Jim Flaherty, Minister of Finance, today announced the Government will purchase up to an additional $50 billion of insured mortgage pools by the end of the fiscal year as part of its ongoing efforts to maintain the availability of longer-term credit in Canada.

This action will increase to $75 billion the maximum value of securities purchased through CMHC under this program”.

It only looks like bailout money to the willfully stupid.

[madmax]

It only looks like bailout money to the willfully stupid.

It wasn't a bailout. It was a gift.

[Keepitsimple]

Harper keeps saying that the Canada Banks never received any bailout money from the government but did they? ALL the money the government has comes from taxes which come from the taxpayers. The following articles says that Harper did help out with the banks, first with the mortgages and then later, to the tune of 75 Billion. So after reding the article, did he? http://www.pacificfreepress.com/news/1/6148-ottawa-misleads-on-canadian-bank-bailouts.html

No he did not. Topaz - the definition of insanity is "doing the same thing over and over agian - expecting different results". You've made the same claim numerous times and been bludgeoned with the truth each time. And anyway, who the heck is Erik Anderson?

[Yesterday]

Like law, reality is open to personal interpretation? Bail-out, gift, future stability investment....

[Smallc]

It wasn't a bailout. It was a gift.

It was an action to ensure liquidity in the Canadian market.

[Topaz]

You've already posted this topic before. You're a liar. There were no Canadian bank bailouts. Stop lying.

How did I lie? I didn't say Harper was a liar , I asked if he was lying because of the article. So you say the banks never got a bailout, fine, but did they get help in anyway to avoid future problems????

[Smallc]

How did I lie? I didn't say Harper was a liar , I asked if he was lying because of the article. So you say the banks never got a bailout, fine, but did they get help in anyway to avoid future problems????

The government intervened to ensure liquidity in the market. One of the biggest problems in 2008 and 2009 was that the global credit markets began to freeze. The thing is, the government didn't but the mortgages to help the banks, they bought them to help Canadians.

[Leafless]

It wasn't a bailout. It was a gift.

Here is an article that says it was a bailout:

Believe it or not, we did bail out our banks

By Murray Dobbin, Special to the Sun May 31, 2010

The sorry spectacle of Conservative cabinet ministers flying around the world defending banks from a tax to cover their next, inevitable, meltdown is bad enough. What is perhaps worse is that it is being largely justified by the perpetuation of the myth that Canada did not have to bail out its banks.

Wrong.

We are, according to the IMF, the third worst of the G7 countries, behind the U.S. and Britain, in terms of financial stabilization costs.

First, we put up $75 billion to buy up iffy mortgages from the Big Five banks, through the Canada Mortgage and Housing Corporation, taking them off the banks' balance sheets. That is almost the exact equivalent of the U.S. bailout -it spent 10 times as much, $700 billion, and its economy is about 10 times as large.

Second, the Harper government established a fund of $200 billion to backstop the banks -money they could borrow if they needed it. The government had to borrow billions -mostly from the banks -to do it. It's euphemistically called the Emergency Financing Framework -implying that our impeccable banks might actually face an emergency. It is effectively a line of low-interest credit and while it has not all been accessed, it's there to be used. Could it help explain why credit has not dried up here as much as it has in the U.S.?

Third, the government now insures 100 per cent of virtually all mortgages through CMHC eliminating risk for the banks -and opening the door to the ridiculous flood of housing loans we have seen over the past few years. The result: housing has become unaffordable for tens of thousands of Canadians and new rental housing has dried up.

More:

http://www.vancouversun.com/opinion/Believe+bail+banks/3091428/story.html

[Yesterday]

This is an interesting article http://andrewhammel.typepad.com/german_joys/2008/11/the-reckoning---from-midwest-to-mta-pain-from-global-gamble---series---nytimescom.html

I have to wonder if Canada's supposed lack of exposure has more to do with non-transparency than involvement. Along side of interpretation. Navigating through the miriad of possibilities can be daunting in determining what a person views as the truth. I thank every one for taking the time to explain yourselves and your views. I am learning so much.

[bjre]

A report by Bloomberg dated January 23, 2009, indicated the government had pledged as much as $200 billion in this matter.

That is $6000 from every Canadian, that is robbery, that decision should be made after vote (on this particular matter). That money should be return to the people who created it. The greedy banks should not take that, they already take away too much. When the money give to every Canadian, that will enough to generate purchase power to save many really productions in Canada. I believe that behaviour is the most qualified thing to be defined as a crime, much more than play a copied game that cost only several ten dollars.

Edited June 4, 2010 by bjre

[August1991]

How did I lie? I didn't say Harper was a liar , I asked if he was lying because of the article. So you say the banks never got a bailout, fine, but did they get help in anyway to avoid future problems????

If a house in your city is burning down and the firemen show up to stop the fire, did you receive any assistance from the firemen?

[kimmy]

It only looks like bailout money to the willfully stupid.

I dunno, Morris, back in 2008 when I looked around the city I live in and saw folks earning around what I'm earning moving into these $400,000+ homes, I questioned the sense of lending these people the money to do it.

And when I heard the government was buying $50 billion in risky mortgages off the banks, it made me question the sense of protecting the people who lent those people from the consequences of that decision.

And now I look around and the housing prices are back up as high as they were before the "global economic meltdown" and people are still getting mortgages that would take them several lifetimes to pay off.

Think we sent the wrong message? Think that showing the banks we'd protect them from risky mortgages just encouraged them to write up a bunch more risky mortgages?

Housing prices keep going up and everybody wins! Realtors win! Banks win! People who sell property win! People who buy property don't win right now, but they win next year because property prices just keep inflating, right? Everybody wins! Except for whoever gets left holding the bag when the bubble bursts... and it sounds like that's the taxpayers of Canada. I don't see why taxpayers should be in the business of protecting banks from the big fat bubble they're building. I think we're getting scammed, Morris.

-k

[AcuteAngst]

It was a BAILOUT a "gift" to the friends of our elected officials.

[Argus]

How did I lie? I didn't say Harper was a liar , I asked if he was lying because of the article. So you say the banks never got a bailout, fine, but did they get help in anyway to avoid future problems????

Buying mortgages is buying an investment. It only costs money if they fail. The world liquidity crisis, caused by so many huge banks and other financial institutions being in trouble was making everything freeze up. Even our banks, which weren't heavily exposed to the crisis, were caught up in it because nobody wanted to lend large sums to other institutions for fear THEY were caught up in it, somehow. The government took billions in mortgage debt off the books of the Canadian banks mostly to reassure other institutions, especially international institutions, and to encourage our banks to lend money. After all, it wasn't like they were going to be earning anything from those mortgages they no longer owned, so they better get back in the business of loaning out money again, right?

Now some of these mortgages might have been "iffy" but I believe most were pretty solid. Presumably, the government will actually earn a profit on them if that's the case, thus there should ultimately be no cost to this.

[msj]

Buying mortgages is buying an investment. It only costs money if they fail. The world liquidity crisis, caused by so many huge banks and other financial institutions being in trouble was making everything freeze up. Even our banks, which weren't heavily exposed to the crisis, were caught up in it because nobody wanted to lend large sums to other institutions for fear THEY were caught up in it, somehow. The government took billions in mortgage debt off the books of the Canadian banks mostly to reassure other institutions, especially international institutions, and to encourage our banks to lend money. After all, it wasn't like they were going to be earning anything from those mortgages they no longer owned, so they better get back in the business of loaning out money again, right?

Now some of these mortgages might have been "iffy" but I believe most were pretty solid. Presumably, the government will actually earn a profit on them if that's the case, thus there should ultimately be no cost to this.

Just so that we are clear: if the government loses money by backstopping mortgages then it is a "bailout" but if they make money then it's an "investment?" It all comes down to where the chips fall?

[Leafless]

Just so that we are clear: if the government loses money by backstopping mortgages then it is a "bailout" but if they make money then it's an "investment?" It all comes down to where the chips fall?

Canadian homes are overpriced. The Canadian economy depends on the American economy and currently their economy is not doing so well. If it worsens, no doubt the bubble will burst and Canadian tax payers will be on the hook.

The feds should never have gotten involved with the banks with the end result being the creation of an artificial economy.

[Bryan]

Just so that we are clear: if the government loses money by backstopping mortgages then it is a "bailout" but if they make money then it's an "investment?" It all comes down to where the chips fall?

That isn't the issue at all. The banks themselves were not in any financial trouble. Canadian Banks were still recording record profits, even in the middle of the "great recession". The issue that the government wanted to avoid was liquid capital being in short supply for consumers and businesses. That is not semantics, it's a profound difference. No liquid capital MIGHT have impacted our banks financially a bit, but they were fine either way. Where it would have caused serious pain is when businesses and individuals could not continue to contribute to the greater economy.

[Smallc]

And when I heard the government was buying $50 billion in risky mortgages off the banks,

I never heard anything about them buying risky assets.

[Pliny]

I dunno, Morris, back in 2008 when I looked around the city I live in and saw folks earning around what I'm earning moving into these $400,000+ homes, I questioned the sense of lending these people the money to do it.

And when I heard the government was buying $50 billion in risky mortgages off the banks, it made me question the sense of protecting the people who lent those people from the consequences of that decision.

And now I look around and the housing prices are back up as high as they were before the "global economic meltdown" and people are still getting mortgages that would take them several lifetimes to pay off.

Think we sent the wrong message? Think that showing the banks we'd protect them from risky mortgages just encouraged them to write up a bunch more risky mortgages?

Housing prices keep going up and everybody wins! Realtors win! Banks win! People who sell property win! People who buy property don't win right now, but they win next year because property prices just keep inflating, right? Everybody wins! Except for whoever gets left holding the bag when the bubble bursts... and it sounds like that's the taxpayers of Canada. I don't see why taxpayers should be in the business of protecting banks from the big fat bubble they're building. I think we're getting scammed, Morris.

-k

Here's what the President of the Canadian Bankers Association said:

President of the CBA

He is right about Canadian prudence, moderation and policy in banking and government policy.

What happened in the US is the Government pursued a policy of easy credit. WE didn't. Even though you believe those $400,000 and $500,000 mortgages were given to people who couldn't afford them

there were more stringent guidelines than there were in the US where community activists picketed banks who wouldn't make loans to people who couldn't afford them.

We are somewhat out on a limb in that if interest rates go too high more than a few people will default on their mortgages. I think Canada and the US are going to have to follow Japan's policy of low interest rates for the next decade with very little economic growth. I note Canada has raised the interest rate last week.

Get ready for some stagflation.

[eyeball]

It was an action to ensure liquidity in the Canadian market.

So it was more like a bail-in, not a bail-out.

[kimmy]

I never heard anything about them buying risky assets.

Did you, uh, actually read any of this thread?

After all, it wasn't like they were going to be earning anything from those mortgages they no longer owned, so they better get back in the business of loaning out money again, right?

Now some of these mortgages might have been "iffy" but I believe most were pretty solid. Presumably, the government will actually earn a profit on them if that's the case, thus there should ultimately be no cost to this.

So actually the banks were helping out the government by providing this excellent investment opportunity! What a swell bunch of guys!

If these mortgages were such a swell investment, it puzzles me that the banks were willing to give them up at all.

-k

[Smallc]

Did you, uh, actually read any of this thread?

Like I said, I haven't heard anything about them taking risky mortgages. All I see in this thread is a bunch of opinion pieces. At the time, media outlets and governments both called the mortgages good mortgages. Because the mortgages were insured by the government, they had to meet CMHC approval. I don't know many people who would consider such mortgages to be risky.

Edited June 5, 2010 by Smallc