When is a bailout not a bailout?

[Smallc]

It's a bailout.

[GostHacked]

If you are giving the banks money to either correct problems or prevent problems ..... it's a bailout. Nice to see taxpayer money shoring up banks that COULD have faced a problem. And how will the taxpayer be rewarded?? We've seen this thread already.

[TimG]

A business transaction that saw billions of taxpayers' dollars go to the banks when they didn't need it.

They did not need it but what they would have done to protect the bank from collapse at that time would have hurt the economy. The government had two choices: do nothing and watch 1000s of business go under because they could not access credit or inject cash into the banks in return for assets.

I take it from your response letting 1000s if businesses go bankrupt would have been a better option because only evil people would give taxpayer money to the banks to protect the economy.

Edited May 1, 2012 by TimG

[punked]

It was the right move at the time. I am not against this decision by the government. Hindsight is 20/20 but 2009 was a scary scary year and this was not a mistake. That might be the first and last time I say this about the government.

[Jack Weber]

They did not need it but what they would have done to protect the bank from collapse at that time would have hurt the economy. The government had two choices: do nothing and watch 1000s of business go under because they could not access credit or inject cash into the banks in return for assets.

I take it from your response letting 1000s if businesses go bankrupt would have been a better option because only evil people would give taxpayer money to the banks to protect the economy.

What's your response to the potential hundred's of thousands who would have been unemployed had the auto companies not been bailed out?

Edited May 1, 2012 by Jack Weber

[Moonlight Graham]

No, it isn't even close to the same thing. They performed a business transaction to ensure the continuation of liquid credit. The banks would have been fine. Some of the rest of us wouldn't. This wasn't about helping banks.

Tell me then, how much profit from interest etc. did banks make from the money the gov lent them? Sounds like help to me.

Edited May 1, 2012 by Moonlight Graham

[The_Squid]

I'm not saying whether this as good or bad.... I don't know enough of the details because the gov't kept it on the down-low....

However, calling it something other than a bailout is purely semantics.

Also, I though the right-wingers were supposed to be "free enterprisers"! Free markets!! Free markets!! Less gov't!! Stay out of businesses!! It is amazing how quickly minds can change!! Now gov't intervention is great!

[capricorn]

The global credit market was pretty much frozen. What the Government of Canada did simply ensured that didn't happen here. There were no banks in danger of failing, but rather, there was a danger of increased damage to the economy.

Adding to this, a major objective of the program was to maintain a high level of confidence in Canadian banking institutions, a vital component to counteract the recession's impact.

"Despite conspiracy theories to the contrary, there was no 'secret bailout,'" said Flaherty spokesman Chisholm Pothier. "Even a cursory look at the facts, readily available and published many times, indicates this report is completely baseless."

To some extent, the report and the rebuttal to it are a matter of how the facts are interpreted.

Where MacDonald says "bailout," a finance ministry official says "liquidity support." While MacDonald said the government tried to hide the numbers even from Access to Information requests, the official said the bank funding was "clearly, publicly laid out - repeatedly."

MacDonald used public filings by banks, government agencies, and financial regulators to provide what he called a composite picture of the flow of money between financial institutions and the individual Canadian banks struggling in the midst of a global recession.

All of the loans provided by the government as part of its relief program for Canadian lenders have been paid back in full, said Pothier.

http://www.vancouversun.com/business/Taxpayers+told+secret+bank+bailout+report/6545149/story.html

Not only were all the loans repaid in full but the government actually made money as a result.

Let's just say that macro economics is not the forte of those who see something sinister in how this whole matter unfolded.

[cybercoma]

My issue isn't with the government bailing out the banks. My issue is with the government giving them billions of dollars, while their CEOs rake in these bonuses. Don't give me this crap about austerity for the workers, while CEOs are still raking in the cash. If you're going to take government funding there should be no bonuses paid out whatsoever. If you want to keep your bonuses, refuse government funding.

[punked]

I do wish the government that yelled about transparency when opposition is hiding more and more. Once a government reaches this point it is time to throw them out to teach them Canadians wont tolerate a government hides everything it does.

[Jack Weber]

My issue isn't with the government bailing out the banks. My issue is with the government giving them billions of dollars, while their CEOs rake in these bonuses. Don't give me this crap about austerity for the workers, while CEOs are still raking in the cash. If you're going to take government funding there should be no bonuses paid out whatsoever. If you want to keep your bonuses, refuse government funding.

How 'bout the cash dividends thrown off to shareholders??

That's our damn money they're giving away!!!

Edited May 1, 2012 by Jack Weber

[cybercoma]

How 'bout the cash dividends thrown off to shareholders??

That's our damn money they're giving away!!!

Yes it is. And it's only going to a particular segment of society that gets paid dividends. It's a redistribution of income from the middle-class to the upper-class. Edited May 1, 2012 by cybercoma

[Smallc]

Tell me then, how much profit from interest etc. did banks make from the money the gov lent them? Sounds like help to me.

They would have been making money from the mortgage interest anyway.

[Smallc]

My issue isn't with the government bailing out the banks. My issue is with the government giving them billions of dollars, while their CEOs rake in these bonuses. Don't give me this crap about austerity for the workers, while CEOs are still raking in the cash.

Since this wasn't a bailout, I'm not sure I see your point.

[Keepitsimple]

Such silly comments, over and over. The government did not GIVE money to the banks....they BOUGHT mortgages - a sound investment. Then the banks used the cash (liquidity) to help finance small and medium businesses. When things settled down, the Government sold back the mortgages. What in heaven is so hard to understand? Cash for mortgages and then mortgages for cash. A simple trading of assets.

DUH!

[waldo]

A simple trading of assets.

DUH!

oh, really?

unintended consequences!!!

For instance, the liquidity injection enabled the banks to keep on lending but not all the new funding went into plain vanilla loans. A chunk went into the banks’ capital markets operations where players were able to take advantage of market disruptions caused by the crisis, providing outsize profits at a time when many non-financial companies were struggling to stay afloat.

Another worrisome consequence was the steep rise in housing prices that has taken place since 2009.

A key part of Ottawa’s liquidity boosting efforts centred on the Canada Mortgage and Housing Corp. One of the most important assets on Canadian bank balance sheets is CMHC insured residential home loans, much of which get parceled up into mortgage-backed securities that enjoy strong demand among investors around the world because they are effectively guaranteed by the Canadian government.

Critics argue that the increased availability of default insurance created irresistible incentive for lenders to take advantage by jacking up issuance of home loans without fear of losses.

Most economists will tell you that such supports were key in enabling the Canadian banks to ride out the financial storm. The emergency liquidity extended by the Bank of Canada and Ottawa was exactly that, they say, emergency liquidity.

But in the event the housing market takes a particularly bad tumble, that argument may become more difficult to make.

[Jack Weber]

Waldo...

"Emergency liquidity"...

Weren't GM and Chrysler afforded "emergency liquidity" to bail them out?

[Smallc]

Weren't GM and Chrysler afforded "emergency liquidity" to bail them out?

That was different. They wouldn't have survived without it (I supported that bailout, btw)/

[TimG]

My issue is with the government giving them billions of dollars, while their CEOs rake in these bonuses.

Sorry. the 'we should let 1000s of business go bankrupt because I'm jealous of CEO pay' argument is not very compelling. What part of 'the banks did not need the cash so the government had no leverage' don't you understand? Edited May 1, 2012 by TimG

[Jack Weber]

That was different. They wouldn't have survived without it (I supported that bailout, btw)/

Tim G is claiming the banks would not have survived either without the "emergency liquidity" that was also afforded GM and Chrysler...

So...

What gives??

[Smallc]

Tim G is claiming the banks would not have survived either

I haven't seen him claim that. If he has, he's wrong.

[Jack Weber]

I haven't seen him claim that. If he has, he's wrong.

He's claiming that without the "emergency liquidity",businesses would fail because the system dried up....And with that,the banks...

Undoubtedly,the banks turned a profit on the "free" money they were given to distribute...

But why didn't the government just directly infuse certain companies with cash like they did with the auto companies???

Of course,this brings up a questionable coziness with our elected officials and private/for profit financial institution...

Edited May 1, 2012 by Jack Weber

[TimG]

Tim G is claiming the banks would not have survived either without the "emergency liquidity"

That is exactly the opposite of what I said.

[Smallc]

But why didn't the government just directly infuse certain companies with cash like they did with the auto companies???

Because that wouldn't do anything to unlock the credit market.

[Jack Weber]

That is exactly the opposite of what I said.

Are you suggesting that in the nightmarish scenario you feel was upon us,the banks would have survived all the businesses going belly up and defaults on mortgages without the emergency liquidity (let's not call it a bailout...yet)?

Edited May 1, 2012 by Jack Weber