Thursday, February 24, 2011

Jim Flaherty and Goldman Sachs: The "Cooling Off" period

This is the next in my series on Jim Flaherty's Canadian financial crisis, and how we got there. Since it's not registering that Canada had a massive bank bailout and we are now the proud owners of $125 billion worth of rotten paper, I went back to the beginning, so you can see how we got here from there.

Stephen Harper has always supported bank deregulation and often chided the Liberal government for being too cautious. It's a good thing they were. As Trish Hennessey says in her piece: The Quiet Erosion of Canada’s Regulation System

Canada’s economy was shel­tered from the worst of the 2008 global economic meltdown because our bank regulations are tougher than they are in competing jurisdictions like the U.S. Fol­lowing our own high standards paid off, and protected Canadians from the eco­nomic devastation that brought entire nations such as Iceland and the U.S. to the brink of ruin.

Yet our federal government continues to quietly deregulate Canada. Our own Prime Minister, Stephen Harper, is warn­ing against strong regulatory practices. In a speech to the G20 in January 20102, Harper warned other nations against ‘ex­cessive’ financial regulations — a coun­terintuitive message, given strong regulations saved Canadians from the economic devastation our American counterparts are experiencing today.

Given that deregulation in the United States paved the way for Goldman Sachs to almost destroy the global economy, we might want to ask why our finance minister has made a Goldman Sachs employee, the Governor of the Bank of Canada, who has become a cheerleader for Harper's policies.

And he's brought along another Goldman Sachs employee to act as an advisor. We simply aren't tearing down our safety net fast enough. And this new Goldman Sachs employee, Timothy Hodgson, will be handling derivatives, like the ones that help to bring on the economic crisis?

Matt Taibbi wrote for the Rolling Stone, a piece called, Wall Street's Bailout Hustle, as he reveals the con game played by Wall Street and Goldman Sachs. He calls the current period the "Cool off", which in the grifter world is the calming down period. Get your mark to trust you again.

But given that Wall Street, bailed out by the taxpayer, is again engaging in reckless behaviour, he believes that we are heading toward another meltdown.
The bottom line is that banks like Goldman have learned absolutely nothing from the global economic meltdown. In fact, they're back conniving and playing speculative long shots in force — only this time with the full financial support of the U.S. government. In the process, they're rapidly re-creating the conditions for another crash, with the same actors once again playing the same crazy games of financial chicken with the same toxic assets as before. (2)
Only this time Canada's safety net is full of big gaping holes and Wall Street has paved it's way to Parliament Hill.

Stephen Harper, Jim Flaherty and Their Cooling Off Period

The first "cool off" for Steve and Jim came in the fall of 2008, when they announced with much fanfare that they were closing the door on 40-year, no down payment mortgages. What they didn't mention was that the only reason Canada had mortgages like that was because Steve and Jim allowed AIG, Goldman Sachs and other American gamblers to bring them to Canada.

But economists and bankers were sounding the alarm, sending letter after letter to the federal finance department, asking them to quit. But it was only after news began spreading over the sub-prime meltdown south of the border, that these two decided they'd better cool it for a bit.

AIG didn't lose a dime, because Flaherty had already put up $200 billion Canadian tax dollars to make sure they didn't. But CMHC cried foul, our banks just cried, and Jimbo came to the rescue, buying the junk back so they could get them off the books before the mainstream media caught on. Too late though.

The cat was out of the bag.

So Steve and Jim went public, with "we're going to put a stop to this" and most in the media hailed them as heroes. Kinda like a bank robbery when one criminal helps to apprehend the others but still manages to make off with the dough.

And when they bought this junk back they tried to say it wasn't a "bank bailout", but that was, well ... a lie:
Harper called the recent CMHC deal "simply a market intervention ... to ensure our credit markets are functioning strongly." But Grinspun [York University political economist Ricardo] dismisses that interpretation: "Taxpayers are assuming risky assets and giving away safe ones." The problem, says Grinspun, is Harper and Flaherty haven't addressed the issues that exacerbated the crisis, including lack of transparency, greater deregulation and a philosophy the markets know best. (3)
A few people made a lot of money off our mini housing boom, and the only ones left with nothing but garbage, were the Canadian taxpayers. And can we withstand another meltdown with this toxic debt still on our books?

The new "cool off" of calming down the marks (us) is being helped along with millions of tax dollars going to sell us on the myth that this government piloted us through the recession. Unfortunately the ship is the Titanic and the iceberg may be just up ahead.


1. It's Time to Have a Serious Conversation About Jim Flaherty and Goldman Sachs

2. Jim Flaherty, Goldman Sachs and the Foxes in the Henhouse

3. Jim Flaherty, Goldman Sachs and "The Swoop and Squat"

4. Jim Flaherty, Goldman Sachs and AIG Comes Calling


1. Disaster in the Making: The Quiet Erosion of Canada’s Regulation System, By Trish Hennessy, Canadian Centre for Policy Alternatives, February 22, 2011

2. Wall Street's Bailout Hustle, By Matt Taibbi, Rolling Stone, February 17, 2010

3. Deficit not 'dirty' word experts warn Tories, By Linda Liebel, Toronto Star, October 27, 2008

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