Flaherty influcencing financial lenders/markets.

[GostHacked]

http://www.cbc.ca/news/business/story/2013/03/19/business-manulife-mortgage.html

I screwed up on the title spelling mistake .. damn..

Manulife has rescinded a promotional offer it had been offering
consumers of a record-low five-year mortgage rate after Finance Minister
Jim Flaherty indicated his displeasure with the lender's decision.

On Tuesday, Manulife Bank dropped its posted interest rate for a
five-year fixed-rate mortgage to 2.89 per cent. That's the lowest posted
rate for that time frame the company has ever offered. But in an
about-face later in the day, the company pulled the offering and
reverted to its former rate above three per cent.

Kind of a weird situation. Low interest rates and direct/indirect manipulation of markets south of the border along with deregulation allowed the housing crisis to come about.

Now from guys that I like , like Gerald Celente, is indicating that interest rates to need to be high in order to prevent the same thing happening here. Not that I like the finance minister to directly get involved with the banks business, it's kind of a nice thing to see the government take some pre-emptive action in order to prevent a crisis.

I think the difference here is that overall it's been touted that Canada's bank regulations are better. But then last year we saw the bailout that was not a bailout.

So are Canadian banks at risk of a mortgage style crisis like in the USA, and are we at risk to seeing the same things we are seeing in the EU....?? I don't really know how I feel about this.

Edited March 19, 2013 by GostHacked

[RNG]

The big fear is that the US is artificially holding down it's interest rates with the massive quantitative easing. (Love those euphimizms, like undocumented workers when you mean illegal aliens.) At some point they are going to have to quit printing money and when that happens there will be high rates and rampant inflation. One of the many things Flaherty and the BoC are trying to juggle is keeping our interest rates realistic and moderating the high personal debt levels being seen in Canada. A tough balancing act. And due to our regulations our banks did way better than those in the US and most of Europe.

Remember the shock when Martin disallowed the merger of two of the Canadian big banks? There was lots of shock, but in the end it was probably a good thing.

Edited March 19, 2013 by RNG

[GostHacked]

RNG, I do agree that it was a good thing to prevent the merger of the two big ones.

[shortlived]

http://www.cbc.ca/news/business/story/2013/03/19/business-manulife-mortgage.html

I screwed up on the title spelling mistake .. damn..

Kind of a weird situation. Low interest rates and direct/indirect manipulation of markets south of the border along with deregulation allowed the housing crisis to come about.

Now from guys that I like , like Gerald Celente, is indicating that interest rates to need to be high in order to prevent the same thing happening here. Not that I like the finance minister to directly get involved with the banks business, it's kind of a nice thing to see the government take some pre-emptive action in order to prevent a crisis.

I think the difference here is that overall it's been touted that Canada's bank regulations are better. But then last year we saw the bailout that was not a bailout.

So are Canadian banks at risk of a mortgage style crisis like in the USA, and are we at risk to seeing the same things we are seeing in the EU....?? I don't really know how I feel about this.

Board directors have been conservative MPs. The bonds may be tight.

[TimG]

Not that I like the finance minister to directly get involved with the banks business, it's kind of a nice thing to see the government take some pre-emptive action in order to prevent a crisis.

It is certainly better than having the government pass a law regulating mortgage rates or, worse yet, an across the board increase in the BOC rate.

The government has been doing many things to deflate the bubble in real estate before the BOC steps in and raises rates which would hurt everyone. Steps like the Manulife intervention only hurt people seeking to take on new debt.

[WWWTT]

Once again the consumer is taking a kick in the crotch from the conservative government!

Its up to the middle class to pull our economy up(because those corporate tax cuts are just not working).

But for some reason now the conservatives think we got it to good???

WWWTT

[hitops]

Flaherty is a smart guy and almost all of his ideas have been good ones. It was a good move to tighten the mortgage restrictions last year, and this was probably good as well.

The root of the problem is the existence of the CMHC. It was founded to help war veterans get homes. Now it just serves to insure $300,000 mortgage to kids just out of high school. This drives up the cost of homes for everyone, and there will be massive defaults in the interest rates go up. Get rid of it, and banks will naturally be more restrictive in lending.

Once again the consumer is taking a kick in the crotch from the conservative government!

Are you kidding? This is a move to protect consumers, from themselves if nobody else.

Edited March 20, 2013 by hitops

[RNG]

Ah, yes. The CMHC, our version of Freddie and Fanny.

[hitops]

Ah, yes. The CMHC, our version of Freddie and Fanny.

Exactly. And almost as bad. To be fair they turn a profit, but that's probably because our bubble hasn't burst. If it does, it will of course be the taxpayers who has to back them.

[Mighty AC]

Flaherty and the Harper government encouraged Canadians to borrow like crazy. They added 35 and 40 year amortizations, 0% down payments and shifted lending risk from the banks to taxpayers with their "secret" $100+ billion bailout program. Since, they are responsible for increasing debt loads, I'm glad to see they are now trying to correct their mistakes and warn Canadians to pay down their debt soon. Unfortunately, many will still suffer when they default on mortgages they never should have qualified for in the first place.

[TimG]

shifted lending risk from the banks to taxpayers with their "secret" $100+ billion bailout program.

This is a complete falsehood - taxpayers already were 100% responsible for all of the mortgages purchased because of the CHMC - shifting the assets to the CHMC was a short term move that allowed banks to keep their reserve ratios up without freezing lending. The alternative would have hurt everyone who had a real need to borrow money from businesses to people buying cars or houses. i.e. the banks would have survived fine without the help - they got the help because the government realized that banks would be forced to take measures that hurt the economy as a whole to protect their balance sheets.

Frankly, your entire 'people who take mortgages they can't afford are helpless victims' narratives is nonsense because there are plenty of people who take out loans up to their limit and are able to manage and eventually better their lives. Treating these people who take these loans as victims rather than informed people who took chances is insulting.

Edited March 20, 2013 by TimG

[hitops]

Flaherty and the Harper government encouraged Canadians to borrow like crazy. They added 35 and 40 year amortizations, 0% down payments and shifted lending risk from the banks to taxpayers with their "secret" $100+ billion bailout program. Since, they are responsible for increasing debt loads, I'm glad to see they are now trying to correct their mistakes and warn Canadians to pay down their debt soon. Unfortunately, many will still suffer when they default on mortgages they never should have qualified for in the first place.

Somewhat true, but the real problem is the CMHC, not 40 year mortgages, although both are bad. Get rid of the CMHC (which existed for many decades before this government or the last one), and you will find banks will lend appropriate to the risk. It's when they know their lending is backed by the taxpayer that they take stupid chances, which is exactly what happened in the US.

[Boges]

Last year I renewed at 3.10%. I thought I was getting in really low. Now you can get a 5-year fixed at sub 3%!!!!

I think this is a good compromise. If the BoC raised rates a half a percent people would freak out. This is government intervention BUT!!! so is preventing 40-year mortgages and not allowing people to borrow 100% of the loan plus the closing costs.

These are measures to protect people from themselves.

[Boges]

Somewhat true, but the real problem is the CMHC, not 40 year mortgages, although both are bad. Get rid of the CMHC (which existed for many decades before this government or the last one), and you will find banks will lend appropriate to the risk. It's when they know their lending is backed by the taxpayer that they take stupid chances, which is exactly what happened in the US.

You pay for CMHC insurance if you can't come up with 20%. Nothing wrong with that.

[shortlived]

The government shouldn't be involved in private business transactions such as real estate transactions.

What does the government know about sound fiscal policy and debt reduction.

It is a joke. You don't let the worst money managers manage your money is absurdity.

The guy went in debt under his financial planning 175 Billion and he is worried about other peoples household debt?

If he is allowed a race to the bottom why not the banks and individuals too. Or is lending money to the government the only good money flushing available?

Edited March 20, 2013 by shortlived

[Boges]

The government shouldn't be involved in private business transactions such as real estate transactions.

What does the government know about sound fiscal policy and debt reduction.

It is a joke. You don't let the worst money managers manage your money is absurdity.

The guy went in debt under his financial planning 175 Billion and he is worried about other peoples household debt?

If he is allowed a race to the bottom why not the banks and individuals too.

Except when private enterprise like banks and idiots who take on more debt when they can handle fail where do they turn? The gubiment!

The Feds are protecting their future interests.

If 2008 didn't happen and banks pretty much blackmailed the public inorder to bail them out perhaps you'd have a point that the government should stay away from private transactions.

Edited March 20, 2013 by Boges

[shortlived]

If the government wants to play lender it should set up its own bank (which I strongly advocate for), not tell other people how to transact their lawful business.

Money isn't a resource, if people go in debt so much.

If turning to the government is an issue just stop government programs.

And no a lower rate doesn't lead to failure, it reduces failure.

So now instead of 2.83% they have 3% how does that make failure less likely?

Exact opposite.

Manulife probably has better economic engines than the federal government.

They have been way more successful at making profit than the government.

Edited March 20, 2013 by shortlived

[Boges]

If the government wants to play lender it should set up its own bank (which I strongly advocate for), not tell other people how to transact their lawful business.

Money isn't a resource, if people go in debt so much.

If turning to the government is an issue just stop government programs.

And no a lower rate doesn't lead to failure, it reduces failure.

So now instead of 2.83% they have 3% how does that make failure less likely?

Exact opposite.

Manulife probably has better economic engines than the federal government.

They have been way more successful at making profit than the government.

You don't see how a ridiculously low rate makes failure more likely? If you can get 2.7% and buy what you can afford based on that rate then when and if rates do have to go up again suddenly you'll find people going into default.

It's happened before.

On most mortgages you'll be renewing 3-5 times for the house is paid off anyway.

I took a mortgage in 2008 at plus 5%, now the 3% loan is a nice relief but I know I can afford a higher rate in 4 years when I have to renew again. I don't think you can say that about everyone that takes on a mortgage.

Edited March 20, 2013 by Boges

[shortlived]

You don't see how a ridiculously low rate makes failure more likely? If you can get 2.7% and buy what you can afford based on that rate then when and if rates do have to go up again suddenly you'll find people going into default.

So they will go into default, its not like governments don't default on the ridiculous amounts of money they borrow. Just don't bail them out. The system manages itself. Its their business, if the government wants to run them, they should buy majority stock.

It's happened before.

On most mortgages you'll be renewing 3-5 times for the house is paid off anyway.

I took a mortgage in 2008 at plus 5%, now the 3% loan is a nice relief but I know I can afford a higher rate in 4 years when I have to renew again. I don't think you can say that about everyone that takes on a mortgage.

Don't bail out failed businesses and individuals, why give more money to people who can't manage it in the first place?

I borrowed from family and avoided the banks completely, and now it is accounted for, and I have my home. Live within your means. My purchase was arranged to be completed within 2-3 years. My recent purchase of a camper has a 4 month to 1 year repayment period.

People should be able to manage their own affairs, government shouldn't be telling people how to run their business.

People are buying things that are way beyond their needs, but that is their business. People are allowed to fail.

The government needs to run its own business, not other peoples. It is in a very bad position to be telling people how to be successful. Apparently all you have to do is be all mafioso and extort people from their money to be successful.

Edited March 20, 2013 by shortlived

[Boges]

BTW Flaherty didn't pass down an edict saying Manulife was not allowed to offer that rate. He just made it clear he wasn't happy with it.

Manulife knew that they may want to stay on the government's good side regarding setting rates. Because the government can set rates with the BoC rate. So they took it back.

[guyser]

The government shouldn't be involved in private business transactions such as real estate transactions.

What does the government know about sound fiscal policy and debt reduction.

It is a joke. You don't let the worst money managers manage your money is absurdity.

Except for this right?

http://www.mapleleafweb.com/forums//index.php?showforum=3

[RNG]

I'd be perfectly happy to have Flaherty et al completely out of this and other business decisions IF no one screams for bailouts and taxpayer support for failed banks and people who have their house repossessed when the interest rates skyrocket, as is inevitable given the current degree of US money printing quantitative easing.

[Topaz]

If the feds are so worried about consumers debt than why haven't they done more for the credit card rates? I would think more people have credit cards than mortgages, and I would like to see a lowering of the rates for at least five years. I, also, thinkt the banks wouldn't allow a person to get a mortgage without knowing for sure they can handle one. There was a time, when the bank send everyone a form to fill out for a credit card in their mail.

[Canuckistani]

Lowering credit card interest will just encourage people to pile on even more debt. Anybody that carries credit card interest is an idiot. I don't agree with Flaherty discouraging low mortgage rates, just do what he's already done - tighten up requirements to get that mortgage. If the bank thinks it can make money on a low rate, no harm done as long as the borrowers are solid. I'm sure to get this rate you would have had to make a substantial downpayment.

[Argus]

An alternative for the government is to direct CMHC to refuse to insure mortgages where the interest rate is unrealistically low for fear that when it shoots up the owners will not be able to pay and stick CMHC with the cost. BMO can lower its rates as low as it wants to then, and if the homeowner can't pay then BMO can recover what it can on its own.