The Government of Canada is proud to announce that in an attempt to lighten the mood during the economic recovery, our minister of finance, "Diamond Jim" Flaherty will be hosting his own game show on Parliament Hill.
It will be called: "Canadian-Stein's Money" and contestants will be presented with Flaherty double-speak, and must crack the code to win.
The first episode has been taped and is ready for viewing, but if your TV set has been repossessed, transcripts of the show follow.
"Hi, I'm your host Diiiiiamond Jim Flaherty and I'd like to introduce our contestants.
First we have Mary I'llBelieveAnything, a housewife and author of comments in the National Post. Hi Mary
"Next we have Donald IJustWantToOwnaGun, a chicken feather plucker from Kalamazoo. Hi Donald.
"And finally AnyoneWithHalfaBrain, who clearly shouldn't be here. Now let's get started"
"In May of 2006, in my first budget, I announced that this government was committed to helping more people buy homes. What did I mean by that? "
Mary: "That you really wanted to help the homeless"
Donald: "What was the question again?"
AnyoneWithHalfaBrain has called a friend Ellen Gould:
[You] invited "new players" -- that is, U.S financial corporations -- into Canada's mortgage insurance market and doubled the amount of government money available to back up private insurers from $100 billion to $200 billion. [ 2006 budget states that] "These changes will result in greater choice and innovation in the market for mortgage insurance, benefiting consumers and promoting home ownership."And Ellen called two friends Jacquie Mcnish and Greg McArthur:
New York Times columnist Paul Krugman has observed that "financial innovation" are two words that should henceforth strike terror into the hearts of investors. With the entrance of new private mortgage insurers into Canada after the Flaherty budget, Canada saw a dramatic weakening in the standards for mortgage insurance. This enabled Canadians to get into homes they otherwise couldn't have -- and in many cases shouldn't have. (1)
In the first half of this year, as the subprime mortgage crisis was exploding in the United States, a contagion of U.S.-style lending practices quietly crossed the border and infected Canada's previously prudent mortgage regime.Then everyone got on the phone with Chris Gallant from Forbes:
New mortgage borrowers signed up for an estimated $56-billion of risky 40-year mortgages, more than half of the total new mortgages approved by banks, trust companies and other lenders during that time, according to banking and insurance sources. Those sources estimated that 10 per cent of the mortgages, worth about $10-billion, were taken out with no money down. (2)
For all the recent bravado claiming that Canada's supposedly boring yet prudent financial regulations have steered it permanently clear of housing bubble territory, the simple truth is that key causes of the U.S. housing bubble have been sufficiently replicated in Canada.
CMHC: Fannie and Freddie's Canadian Cousin - For example, while it is technically true that Canada does not have its own publicly-traded GSEs such as Fannie Mae .. and Freddie Mac .. to artificially inflate its housing market, it has the next best thing. The Canadian Mortgage and Housing Corporation (CMHC) is Canada's national housing agency used to provide mortgage insurance, which is fully integrated by the federal government ....
(Uh) Oh, Canada! - Since 2007, when the first effects of the credit crunch began to be felt, the Canadian government postponed the housing bubble's burst by dramatically loosening lending standards, allowing CMHC to insure mortgages with 40-year amortizations and 0% down-payments for the first time in history. This of course flooded the market with new, high-risk borrowers, propping up already historically high prices with unsustainable, artificial demand. From 2007 to early 2009, the total dollar value of CMHC's outstanding MBSs grew from $138 billion to $265 billion, an increase of 92%. During this same time, the total mortgage credit outstanding on the collective books of Canadian banks increased by only 1% to $447 billion.
In other words, all the market demand that has been propping up Canadian house prices can be attributed to Canada's version of subprime loans that the free market was not willing to bear the risk of. (3)
"Next question. On the international stage, I became a major proponent of financial liberalization. What did I mean by that?"
Mary: "You wanted to do karaoke"
Donald: "What was the question?"
AnyoneWithHalfaBrain called Ellen again:
At the WTO, Canada heads a group of delegations pressing developing countries to open their economies to the supposedly superior services of foreign financial institutions. The world's major financial conglomerates are claimed to have sophisticated risk management capabilities that can stabilize economies. You might think these days such a claim would not pass the laugh test, but that did not stop financial liberalization from being pushed at the WTO ministerial meeting held in July 2008.----------
The enormity of what's at stake in the WTO financial sector negotiations is revealed in a February 2006 bargaining request sent from Canada's Department of Finance to developing countries. Canada asked that foreign financial institutions be guaranteed rights to "establish new and acquire existing companies" in all financial sectors. This would mean among other things that countries would have to allow 100 per cent foreign ownership of their banks and insurance companies. (1)
"OK. Final Question. I said I was in favour of open trading on exchanges. What did I mean?"
Mary: "You could exchange your shirt for a bigger size."
Donald: "What was the question?"
AnyoneWithHalfaBrain called Andrew Mayeda:
"We are in favour of open trading on exchanges, yes. We've been advocating that," Flaherty told reporters Wednesday, when asked if Canada supports the trading of derivatives on open exchanges.
This week, the U.S. Securities and Exchange Commission rocked the financial world by filing a civil lawsuit accusing Wall Street investment bank Goldman Sachs of misleading investors about derivatives known as collateralized debt obligations (CDOs).
The SEC has accused Goldman of hiding the fact that hedge fund Paulson & Co. influenced the creation of a CDO marketed by Goldman. Paulson planned to bet that the value of the CDO would fall through -- a transaction known as "short selling," but Goldman did not disclose that to other investors, the regulator alleges.(4)
And Arnaud de Borchgrave at the Washington Times:
Even the world's most savvy stock-market giants (e.g., Warren E. Buffett) have warned over the past decade that derivatives are the fiscal equivalent of a weapon of mass destruction (WMD) - potentially lethal. And the consequences of such an explosion would make the recent global financial and economic crisis seem like penny ante. But generously lubricated lobbyists for the unrestricted, unsupervised derivatives markets tell congressional committees and government regulators to butt out. (5)And friend Ellen Gould:
Canada has also asked that companies be given WTO enforceable rights to trade in derivatives, which has been described as a high-octane form of financial speculation similar to gambling. Warren Buffett famously called derivatives "financial weapons of mass destruction," destruction that is being witnessed on a daily basis on the world's stock exchanges.
... the unfolding financial crisis might have suggested now is the time to show a little caution and back off these WTO negotiating demands. Yet a WTO submission from Canada dated Dec. 5, 2007, berates other WTO members for their lack of "ambition" in the financial services negotiations. On behalf of the co-sponsors of the submission, Canada claimed: "further liberalization of financial services will help promote economic growth and improved standards of living for all WTO Members…"
It makes one wonder. Just how bad would things have to get before the Harper government realizes further liberalizing the world's financial markets is not such a great idea? (1)
"And the first prize goes to Donald IJustWantToOwnaGun, who wins this beautiful dining room suite made from the lumber of Canada Action Plan signs. Who said they were good for nothing?
"And second place winner is Mary I'llBeleiveAnything, who takes home a lifetime supply of paper kites made from ten million dollars worth of ten percenters - no strings attached.
"But our third contestant must go home empty handed because AnyoneWithHalfaBrain would never listen to anything I have to say in the first place.
"And that's all for now. This is Diiiiamond Jim Flaherty, saying until next time on Canadian-Stein's money. Just kiss it Ba-Bye!"
Source Link List:
1. How Harper Gov't Pushed Financial Deregulation Here, Abroad Way cleared for US mortgage firms and easy credit, insured by Canadian taxpayers, By Ellen Gould, Oct 8, 2008, The Tyee
2. Special investigation: How high-risk mortgages crept north: The untold story of how elements of the first Conservative budget in 2006 encouraged big U.S. players such as AIG to make a push into Canada, creating our version of subprime mortgages, By: Jacquie McNish and Greg McArthur, Globe and Mail, March 31, 2009
3. Short The Canadian Housing Bubble, by Chris Gallant, Investipedia, Forbes Magazine, May 11, 2010
4.Canada backs open trading of derivatives, By Andrew Mayeda, Canwest News Service April 22, 2010
5. Stock market time bomb? By Arnaud de Borchgrave, Washington Times, May 11, 2010