This hasn’t been reported about often, but it’s worth noting. It is now conventional wisdom to say that Canada managed to avoid the mortgage crisis that afflicts the United States thanks to the stricter regulations we imposed on our banks. Risky, sub-prime-style mortgages where mortgagees paid zero down for forty-year terms weren’t a part of our equation the way it was south of the border.
Turns out, the only reason why this was the case was because the Conservatives weren’t in power until 2006. And the fact that they came to power in 2006 is one reason why the government is on the hook for $75 billion in risky mortgage stock. While Harper and Flaherty can take credit for banning the risky practises, that credit is slightly diminished when they instituted that practise to begin with.
Just yesterday, Finance Minister Jim Flaherty repeated the mantra that the government acted early to get rid of risky mortgages. What he and Prime Minister Stephen Harper do not explain, however, is that the expansion of zero-down, 40-year mortgages began with measures contained in the first Conservative budget in May of 2006.
At the time, Mr. Flaherty announced that the government was opening up the market to more private insurers.
“These changes will result in greater choice and innovation in the market for mortgage insurance, benefiting consumers and promoting home ownership,” Mr. Flaherty said.
More and more it seems that Conservative economic values, be they the “big-c” values of Harper or the “compassionate” variety of George W. Bush, are an anathema to a stable capitalist system. Tory times are tough times indeed.
It should be noted that the Liberals don’t get off scott free from this article either, as the history of the government guarantee of private mortgage insurance has roots in the Mulroney and Martin administrations, and they didn’t really seem to challenge the initiatives as they were brought forward in 2006, but it’s still Flaherty’s first budget in 2006 which really gets the ball rolling:
On May 2, 2006, in his first budget, Mr. Flaherty announced that not only would Ottawa guarantee the business of U.S. insurers, it was doubling the guarantee to $200-billion.
Twenty-four hours before Mr. Flaherty’s announcement, AIG’s mortgage subsidiary first registered with Canada’s lobbyist commissioner, according to a federal registry. At the time, companies who spent more than 20 per cent of their time lobbying the government for changes in policy were required, by law, to register. It is not known how much time AIG spent promoting its cause to the government.
Hat tip to Just Another Willy Loman.
This week has been something of a write-off. Vivian came down with stomach flu on Tuesday and, just in time for her recovery, Erin, Nora and I followed suit on Thursday. The good news: the vomiting was cleared up in under twelve hours. The bad news: the pulled muscles resulting from said vomiting seem set to last a while. Thank goodness my mother-in-law is in town and seems to have avoided the worst of the plague. Thank goodness also that my parents have been on hand to do some babysitting.
Anyway, as a result, I’ve been too busy to post, and not really inclined to, but I hope to have stuff to post tomorrow and into this week. My mind is working ahead on The Night Girl and anticipating the finale of Battlestar Galactica, and you know I’ll have things to say about that, so stay tuned.