What happened to "Canada has universal healthcare, a budget surplus, no war, and financially sound banks, not to mention Canadian Bacon. Who's the moron now, America, eh?"

"A bank bailout if necessary, but not necessarily a bailout of banks."

PenguinTheRed: What happened to "Canada has universal healthcare, a budget surplus, no war, and financially sound banks, not to mention Canadian Bacon. Who's the moron now, America, eh?"

Nothing, it's right there, you just linked to it. Sheesh.

and this isn't very good toilet paper either

It's actually not a terrible thing. They're buying the mortgages which are performing as expected.

I'm a simple fellow. I just want a Snorg Tees girl. Frozen.

PenguinTheRed: Canada has universal healthcare, a budget surplus, no war, and financially sound banks, not to mention Canadian Bacon. Who's the moron now, America, eh?"

Nothing. We still have all those awesome things, and a bunch you didn't even mention.

We'll be fine.

WTF? Where is this money coming from?

We don't have $25 billion to spare in the budget. The overall projected surplus for 2010 (from the 2008 budget) was only 0.1 billion dollars. Yeah. That's $100 million dollars. This year's contingency reserve was, I think, somewhere between 1.5 and 1.7 billion dollars.

How the flying f$#% are we going to pay for this? Is there just going to be no debt reduction? That was only going to be about 2-3 billion this fiscal year (2009) and then only about 1 billion next year (2010.)

So unless Stephen Harper has $25 bill hidden in the walls of 24 Sussex, our government just went into a 25 billion deficit?? Or, if they are running a surplus currently (which was supposed to be much lower than expected), maybe 23, 24 billion?

You have got to be kidding me. I think this is the first deficit since sometime in the mid-90s. And Harper was saying the Liberal Party's economic plan would result in a 12 billion dollar deficit. He just went and doubled that.

bobbette: You have got to be kidding me. I think this is the first deficit since sometime in the mid-90s. And Harper was saying the Liberal Party's economic plan would result in a 12 billion dollar deficit. He just went and doubled that.

I think that's the irony, the Conservatives run deficits (while cutting funding) and the Liberals ran large surpluses (while increasing funding).

The PC also took a $13 billion suplus and shrank it to a $1 billion surplus, with tax cuts and the cut to the GST. You know, that 7% GST (and associated surpluses) are looking pretty good right now.

Harper could have kept the GST at 7% took the surplus and started large infrastrcture projects and gained some political capital. Instead he does sweet fark all and now we're screwed. Thanks Harper.

/sorry feeling slightly bitter today.

The money is essentially coming from Canada Mortgage and Housing Company funds. The government is not actually spending any money, as no spending bill need be passed. This will NOT result in a deficit and is essentially accounting paperwork. In fact, the government may actually earn a return on these.

This isn't analogous to what is happening in the United States, because these assets are actually worth $25 billion. These are good assets in no danger of default. The reason this is being done is to free up liquidity amongst the banks so that the can continue making loans, to preemptively prevent banks lending abilities from dwindling.

John McCallum, Liberal Finance critic, said in an interview today that he did not disagree with the move.

bobbette: So unless Stephen Harper has $25 bill hidden in the walls of 24 Sussex, our government just went into a 25 billion deficit??

That, or some Enron-style accounting magic.

/Can't wait till Tuesday.

And Paulson just laid on the big one. We've just lost our sovereignty to the global socialists. I hope you guys don't miss it. It's a dark day for America, America is Kaput!!

GaryPDX: And Paulson just laid on the big one. We've just lost our sovereignty to the global socialists. I hope you guys don't miss it. It's a dark day for America, America is Kaput!!

what was that? what happened?

PenguinTheRed: What happened to "Canada has universal healthcare, a budget surplus, no war, and financially sound banks, not to mention Canadian Bacon. Who's the moron now, America, eh?"

Ya, ours is only 25 billion. Sadly proving we just can't screw up nearly as effectively as the US.

Well, if you compare Canada's overall debt compared to the United States, we are in a much better position to afford this bump. We have better regulations and oversight in our financial systems, not perfect, but better.

The really big shame is how the chrisis in the US has affected the global markets. Yay Reagonomics!

Hobodeluxe: GaryPDX: And Paulson just laid on the big one. We've just lost our sovereignty to the global socialists. I hope you guys don't miss it. It's a dark day for America, America is Kaput!!

what was that? what happened?

Paulson just announced the new global socialism plan, actually buying into the banks. He just spoke on the news. (new window)

Law Talkin' Guy: The money is essentially coming from Canada Mortgage and Housing Company funds. The government is not actually spending any money, as no spending bill need be passed. This will NOT result in a deficit and is essentially accounting paperwork. In fact, the government may actually earn a return on these.

This isn't analogous to what is happening in the United States, because these assets are actually worth $25 billion. These are good assets in no danger of default. The reason this is being done is to free up liquidity amongst the banks so that the can continue making loans, to preemptively prevent banks lending abilities from dwindling.

John McCallum, Liberal Finance critic, said in an interview today that he did not disagree with the move.

Ugh. I have to wonder why Flaherty is announcing this instead of Monte Solberg then. Also, even if the assets are worth $25 billion, I'm uncomfortable with the government mass-purchasing (through a Crown Corporation, but that is still the Crown) mortgages, whether they insure them or not. I'm still curious as to where the money comes from to "exchange the assets" as Harper worded it...

Canada Mortgage and Housing Corp, the agency that buys mortgages from financial institutions and resells the loans as securities with the backing of the government, will purchase C$25 bln in high-quality mortgage assets from the banks

http://www.reuters.com/article/marketsNews/idUSN1051577520081010

http://en.wikipedia.org/wiki/Canada_Mortgage_and_Housing_Corporation#Importance_ in_Canadian_public_sector

The CMHC is the second largest crown corporation after Canada Post in terms of revenue with some $4.6 billion in 2004. It is the largest crown corporation in terms of assets with some $26 billion in holdings. The CMHC influenced the development of Canadian housing projects (see below). Furthermore, the federal Government of Canada often uses the CMHC as a financial agent

does america have crown corporations.

Relax, hosers. You just have to look at your government in 3-B.

Three beers and it looks good, eh ;)

Link (new window)

the crown corporations financial statement for 2007

looks like the decision is tied to the g7 meeting

http://www.cbc.ca/money/story/2008/10/10/us-bush.html

/no keyboard, yo

Law Talkin' Guy: The money is essentially coming from Canada Mortgage and Housing Company funds. The government is not actually spending any money, as no spending bill need be passed. This will NOT result in a deficit and is essentially accounting paperwork. In fact, the government may actually earn a return on these.

This isn't analogous to what is happening in the United States, because these assets are actually worth $25 billion. These are good assets in no danger of default. The reason this is being done is to free up liquidity amongst the banks so that the can continue making loans, to preemptively prevent banks lending abilities from dwindling.

John McCallum, Liberal Finance critic, said in an interview today that he did not disagree with the move.

Ok. You made me do some research. The CMHC a crown corporation. It's job is to insure loans to home buyers in case of defaults. If Wikipedia^ is to be believed, it's total holdings are $26 billion.

So if Flaherty just raided $25 of the $26 billion to buy mortgages (taking the risk directly), doesn't that just create a huge risk for govt. while shuffling money around. If there is a rash of foreclosures (live say if jobs suddenly dry up in Alberta because the price of oil crashed), isn't the government going to have to borrow to cover it?

I guess my question is, did the banks really need this? It seems like shady accounting and shifting risk directly to the government. Plus I lived through the Mike Harris years and don't trust Flaherty for a split second.

whereisian

the money is coming from new bonds

Under the proposal, Ottawa plans to sell a combination of government bonds and other public debt instruments to raise the $25 billion. Then CMHC will ask the banks and other financial institutions to ascertain how much debt they would like to sell to the agency, using a process known as a reverse auction.

Conceptually speaking, the financial companies will offer CMHC the debt at a discount to its face value. Starting with the bids containing the largest discounts, the housing corporation will buy these instruments from the financial institutions until the agency uses up the $25 billion.

This way, Ottawa injects money into a cash-strapped market. In return, the government gets a series of securities with a rate of return well in excess of the rate Ottawa would pay on the $25 billion it borrows in the first place.

http://www.cbc.ca/money/story/2008/10/10/flaherty-banks.html

BoozePenguin: Link (new window)

the crown corporations financial statement for 2007

looks like the decision is tied to the g7 meeting

http://www.cbc.ca/money/story/2008/10/10/us-bush.html

/no keyboard, yo

Well that makes a bit more sense. But how does this not put us on the path to deficit spending? I presume the coffers of the CMHC will need to be refilled.

http://en.wikipedia.org/wiki/Bond_(finance)

basically money borrowed from private investors.

still a 2 faced move

BoozePenguin: whereisian

the money is coming from new bonds

Under the proposal, Ottawa plans to sell a combination of government bonds and other public debt instruments to raise the $25 billion. Then CMHC will ask the banks and other financial institutions to ascertain how much debt they would like to sell to the agency, using a process known as a reverse auction.

Conceptually speaking, the financial companies will offer CMHC the debt at a discount to its face value. Starting with the bids containing the largest discounts, the housing corporation will buy these instruments from the financial institutions until the agency uses up the $25 billion.

This way, Ottawa injects money into a cash-strapped market. In return, the government gets a series of securities with a rate of return well in excess of the rate Ottawa would pay on the $25 billion it borrows in the first place.

http://www.cbc.ca/money/story/2008/10/10/flaherty-banks.html

Your second link worries me. This seems highly risky. Care to speculate on how a steep downturn of oil production in Alberta would affect all this? I'm kind of assuming that's going to happen given the price of oil and the cost to extract. It seems like a large round of layoffs would precipitate a whole lot of people not being able to pay for their newly built house causing a whole lot of missed payments which cause a run on the CMHC which would necessitate deficit spending. I guess I'm saying that the Alberta oil bubble is about to burst and this decision is going to make it hard to swallow.

BoozePenguin: whereisian

the money is coming from new bonds

Under the proposal, Ottawa plans to sell a combination of government bonds and other public debt instruments to raise the $25 billion. Then CMHC will ask the banks and other financial institutions to ascertain how much debt they would like to sell to the agency, using a process known as a reverse auction.

Conceptually speaking, the financial companies will offer CMHC the debt at a discount to its face value. Starting with the bids containing the largest discounts, the housing corporation will buy these instruments from the financial institutions until the agency uses up the $25 billion.

This way, Ottawa injects money into a cash-strapped market. In return, the government gets a series of securities with a rate of return well in excess of the rate Ottawa would pay on the $25 billion it borrows in the first place.

http://www.cbc.ca/money/story/2008/10/10/flaherty-banks.html

Ah, excellent link, thank you.

No deficit, directly to debt, then, fantastic. At least our accounting gimmickry seems more likely to be profitable in the long-term.

I have to question why, if our banks are so crunched for credit that they do need a government rescue like this, Stephen Harper has been doing his best to assure Canadians that everything is a-OK, then.

Monday: We're good, Canada's economic foundations are strong.
Tuesday: Oh, um, well, I guess I need a platform so... here it is! And with some of that stuff on economy, like you asked for. Everything's cool! I have a kitten.
Wednesday: We're good. See, didn't you see my half-assed platform? I talked about it to Mansbridge and everything.
Thursday: Thumbs up on the economy, this is just America's problem. Go Canada!
Friday: OK, it's the end of the week and the reporters might be already out drinking. So, um, we're gonna bail out the banks to the tune of $25 billion. K?

Uh, just to clarify since I auto-break everyone's sarcasm meter, that "fantastic" about $25b of new government debt was indeed sarcasm.

bobbette: Friday: OK, it's the end of the week and the reporters might be already out drinking. So, um, we're gonna bail out the banks to the tune of $25 billion. K?

Nail.

Head.

TOTALLY.

BoozePenguin: whereisian

the money is coming from new bonds

Under the proposal, Ottawa plans to sell a combination of government bonds and other public debt instruments to raise the $25 billion. Then CMHC will ask the banks and other financial institutions to ascertain how much debt they would like to sell to the agency, using a process known as a reverse auction.

Please correct me if I'm wrong, but isn't that something along the lines of the government saying to the financial companies,

"Hey, if you guys are hiding any crappy mortgages in your portfolios, feel free to sell them to us before the market figures out how crappy they really are and you all go tits up. It's no biggie, since people are so terrified of the crumbling economy, they'll grab on to whatever bonds we put up for auction like drowning men clinging to flotsam. And the taxpayers are only going to be the ones paying out these bonds, *when they mature, years from now*, so really it's kinda like they're not paying for it at all, because that's all going to happen, like, in the future, and stuff, like, such as"?

Conceptually speaking, the financial companies will offer CMHC the debt at a discount to its face value. Starting with the bids containing the largest discounts, the housing corporation will buy these instruments from the financial institutions until the agency uses up the $25 billion.

What measures are in place to prevent the financial companies from colluding? What measures are in place to ensure that they haven't *already* colluded with the government to put this scheme into action in the first place?

This way, Ottawa injects money into a cash-strapped market. In return, the government gets a series of securities with a rate of return well in excess of the rate Ottawa would pay on the $25 billion it borrows in the first place.

I don't understand, if these securities are going to yield such a high rate of return (higher than the interest rates on the bonds the government is going to be issuing), why don't the financial companies just hold on to them?

The other thing that bothers me about this is that $25 billion to us is a lot different than $25 billion to the Americans.

There are 10 times as many of them as us. So for the purposes of comparison, proportionally, this is the equivalent of a $250 billion dollar American bailout.

October Surprise!

These points have have been made above but couldn't hurt to have them repeated:

Seeing as how the mortgages purchased were already guaranteed by the government, there is no additional risk being taken on by canadian taxpayers. These are all mortgages insured by Canadian Mortgage Housing Corporation which is a 100% crown corporation.

Also, by purchasing the mortgages the government has provided banks with a little more liquidity so they can keep their own costs of borrowing down. Definately not a bail out for the banks, if anything it's a bailout for the general population as it allows the banks to lower their own prime rates further (as already seen this afternoon)

bobbette: WTF? Where is this money coming from?


Relax. I heard it explained on CBC radio this evening. We're not in any trouble. We also have the strongest banking sector in the world, which is a freaking surprise, but hey, that's cool. Harper is evil, but I our economic backbone is fine, in terms of money.

However, since he has increased homelessness and decreased health, we are kind of screwed if he gets in again...

Law Talkin' Guy: The money is essentially coming from Canada Mortgage and Housing Company funds. The government is not actually spending any money, as no spending bill need be passed. This will NOT result in a deficit and is essentially accounting paperwork. In fact, the government may actually earn a return on these.

This isn't analogous to what is happening in the United States, because these assets are actually worth $25 billion. These are good assets in no danger of default. The reason this is being done is to free up liquidity amongst the banks so that the can continue making loans, to preemptively prevent banks lending abilities from dwindling.

John McCallum, Liberal Finance critic, said in an interview today that he did not disagree with the move.

Thank you! Reading FTW.

This is not a bailout. Canadian banks are nowhere near insolvency. The problem is that banks have tightened up on loans, which has consequences for the entire economy. The government simply wants to get things moving again. Without loans companies don't have access to the capital they need to perform basic business functions.

Is it really that farking difficult to read the article?

Hamster Lover:
This is not a bailout. Canadian banks are nowhere near insolvency. The problem is that banks have tightened up on loans, which has consequences for the entire economy. The government simply wants to get things moving again. Without loans companies don't have access to the capital they need to perform basic business functions.

Is it really that farking difficult to read the article?

Funny, I agree with everything you've written above, except for the part about it not being a bailout. If a crown corporation holds a reverse auction of mortgage-backed securities, funded by taxpayers, how is that *not* a bailout? If the market value of these assets is so rock-solid, they should easily be able to sell them to anyone, and not have to resort to this measure at all.