Jump to content

Canadian Bank Bailouts


Recommended Posts

There is a lot of artistic license being used in the interpretation of how the federal government spent the money.

1. A "bailout" is "A rescue from financial difficulties". Even a loan can be considered a bailout if the borrower needs the money. In that sense when a consumer takes a mortage from the bank (assuming he needed the money to finance the house purchase), you can consider that the bank has provided the consumer with a bailout. It is worthwhile to examine if this "bailout" is a "handout". The value of the "handout" can be determined if the federal government overpaid for the mortgages purchased. The specfic value of the handout would not the the aggerate purchase price of the mortgages but rather the DIFFERENCE between the purchase price and the market value of the mortgage. The market value of the mortgage depends upon the risk of the borrower defaulting without addequate assets to secure the loan. Given that value of property has not collapsed and has even increased, the risk of the loan not being repaid is quite small even if the borrower defaults. In essence the federal govenment bought some assets. Did they overpay? There doesn't seem to be enough detail to tell definitively but market indications suggest it is unlikely they overpaid.

2. The insured mortages which were purchased were from CMHC, a federal agency. If they mortgages went into default and couldn't be repaid from the asset sale, it would not be the banks who would be out of pocket, it would be CMHC which would be on the hook to make up the difference. The rules followed for those insured mortgages were the rules that CMHC and federal govt laid out, not the banks. If anyone was bailed out, it was the the federal govt bailing out its own agency in the same way that the US govt bailed out Freddie Mac and Fannie Mae.

3. The reason for the "bailout" was not some love of the banks or to increase their profitabiliy. It was to introduce liquitidy into the system by freeing capital for credit. It ended up working and credit and liquidity flowed back into the system. That banks profited from extending credit, should be no surprise. Thats what banks do!!!

Link to comment
Share on other sites

  • Replies 78
  • Created
  • Last Reply

Top Posters In This Topic

There is a lot of artistic license being used in the interpretation of how the federal government spent the money.

1. A "bailout" is "A rescue from financial difficulties". Even a loan can be considered a bailout if the borrower needs the money. In that sense when a consumer takes a mortage from the bank (assuming he needed the money to finance the house purchase), you can consider that the bank has provided the consumer with a bailout. It is worthwhile to examine if this "bailout" is a "handout". The value of the "handout" can be determined if the federal government overpaid for the mortgages purchased. The specfic value of the handout would not the the aggerate purchase price of the mortgages but rather the DIFFERENCE between the purchase price and the market value of the mortgage. The market value of the mortgage depends upon the risk of the borrower defaulting without addequate assets to secure the loan. Given that value of property has not collapsed and has even increased, the risk of the loan not being repaid is quite small even if the borrower defaults. In essence the federal govenment bought some assets. Did they overpay? There doesn't seem to be enough detail to tell definitively but market indications suggest it is unlikely they overpaid.

2. The insured mortages which were purchased were from CMHC, a federal agency. If they mortgages went into default and couldn't be repaid from the asset sale, it would not be the banks who would be out of pocket, it would be CMHC which would be on the hook to make up the difference. The rules followed for those insured mortgages were the rules that CMHC and federal govt laid out, not the banks. If anyone was bailed out, it was the the federal govt bailing out its own agency in the same way that the US govt bailed out Freddie Mac and Fannie Mae.

3. The reason for the "bailout" was not some love of the banks or to increase their profitabiliy. It was to introduce liquitidy into the system by freeing capital for credit. It ended up working and credit and liquidity flowed back into the system. That banks profited from extending credit, should be no surprise. Thats what banks do!!!

I can see how important this buy up for liquidity was for dealings with Russia (I think), I do also however think there was at least a small problem with over extension with the 5% mortgage and our housing markets seems to still be sketchy in projections for the next year or so and in the US, RBC got themselves into CDO trouble but I am not aware of whether or not that situation spilled back over the border into Canada. Our situation was kept very quiet compared to our larger siblings in view of the fact that Harper and friends wanted to secure/enhance our international reputation. All being said, 108 billion is piddly compared to what has happened elsewhere. Good for us? I hope so.

Link to comment
Share on other sites

  • 1 year later...

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

Are you and the rest that are calling anyone who points out that the emporer has no clothes LIARS seriously so arrogant to think that no none in Canada noticed how ha-ha-Harper and flatulent Flaherty actually did hand their buddies in the Canadian Banks a boatload of money OR are you simply as utterly STUPID as you think the MAJORITY of Canadians, THAT NEVER DID AND NEVER WILL BE SO RETARDED AS TO VOTE for the Conservative Reform Aliance Party (A.K.A CRAP) are?

I bet you don't know that the H in the HST doesn't stand for "harmonized" it actually stands for HARPER.

The money was put into the hands of the Banks and they are not responsible to pay it back and it was called a "liquidity increase"...in the end it comes out of the pockets of Canadians...ipso facto the banks got Billions in bailout money from Canadian tax payers...

Link to comment
Share on other sites

Why, then, extend an estimated $125-billion bailout package to these behemoths? Remember that this is the amount that Ottawa has earmarked for the chartered banks in the past 6 months through its scheme to purchase “secure” bank mortgages called the Insured Mortgage Purchase Program(IMPP). Although this transaction, implemented through the CMHC, is not taking the form of a direct injection of capital or buyout of toxic assets as government bailout programs in the USA or the UK have done, it is nonetheless a massive handout to the local financial sector. [3] Furthermore, it is seen as such by the relevant international institutions. Quoting a study published on February 18 by the International Monetary Fund (IMF), the French weekly Point calculated that Canada ranks third in the world in terms of percentage of GNP allocated in public aid to national banks. Canada's program amounts to 8.6% of GNP ahead of the USA which is at 6.3% and well behind the UK which has sunk no less than 19.8% of its GNP into various bank bailout schemes.

Disguised as a market transaction, the Canadian aid package is nonetheless a form of government bank bailout, and by international standards, a huge one at that.

http://www.socialistproject.ca/bullet/bullet210.html

I've seen varying estimates, but apparently Harper authorized up to $500b.

I believe he's buying up US banks.

He obviously doesn't want us to know.

Edited by jacee
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Unfortunately, your content contains terms that we do not allow. Please edit your content to remove the highlighted words below.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Tell a friend

    Love Repolitics.com - Political Discussion Forums? Tell a friend!
  • Member Statistics

    • Total Members
      10,712
    • Most Online
      1,403

    Newest Member
    nyralucas
    Joined
  • Recent Achievements

    • Jeary earned a badge
      One Month Later
    • Venandi went up a rank
      Apprentice
    • Gaétan earned a badge
      Very Popular
    • Dictatords earned a badge
      First Post
    • babetteteets earned a badge
      One Year In
  • Recently Browsing

    • No registered users viewing this page.
×
×
  • Create New...