To the Contrary, Canada DID Bail Out Her Banks

Canada bailed out its banks.

What!?, you say. Us? But we have 'regulated banks'; and didn't Mr. Harper say that we didn't have to “bail out the banks?”

He said it alright. It's also true that we have no bill passed in parliament that is comparable to TARP.

So how did we do it?

$75 billion in government allocated money went to the Canadian Mortgage and Housing Corporation (CMHC) to purchase mortgages from the banks in the fall of 2008. The CMHC is a crown corporation akin in purpose and function to Fannie Mae and Freddie Mac. The allocations increased government borrowing to $89.5 billion in 2008-2009 (compared to $13.6 billion in 2007-2008)

What's more, the CMHC increasingly insures high-risk mortgages with money borrowed from the banks themselves—meaning the taxpayer takes all the risk by way of the CMHC. Combining mortgage insurance and mortgage backed securities owned by the CMHC (fancy terms meaning if the people find themselves unable to pay en masse, the government would have to pay for the crown corp's shortfall) rings up to over—wait for it—$500 billion. This is substantially up from the CMHC's $100 billion in securitization back in 2006.

Other significant actions by the CMHC in recent years have been to reduce the required down payment to 0%, and increase amortization (how long one has to repay a mortgage) to 40 years! This makes it far easier for people to purchase houses they simply won't be able to afford.

So what really happened dear reader? We effectively bailed out our banks by purchasing mortgages through a crown corp. What's worse: the foundations have been laid for a future crisis to be even worse.

I feel it's crucial you know and understand these fac ts. This is what is going on under the Conservatives. The crisis that should have been the death bell for unsustainable real estate finance seems more like its C-section birth.

Further Your Knowledge AND PLEASE COMMENT!:

“Canada's Good Bank Myth”, Murray Dobbin, The CCPA Monitor Volume 17 No. 3, July/August 2010

“CMHC Growth Fuels Worry Over Risk” By Boyd Erman and Tara Perkins, The Globe and Mail, October 16, 2009

“CMHC Annual Report” http://www.cmhc-schl.gc.ca/en/corp/about/anrecopl/upload/CMHC_AR2009.pdf

“Canada's $75 Billion Bank Bailout” by Michel Chossudovsky, Centre for Research on Globalization, January 25, 2009 http://www.globalresearch.ca/index.php?context=va&aid=12007

Wikipedia: http://en.wikipedia.org/wiki/Canada_Mortgage_and_Housing_Corporation