tag:blogger.com,1999:blog-5228675828988846905.post2961964918602923626..comments2023-04-10T03:04:23.685-05:00Comments on The Pursuit of Financial Happiness: Is Canada Better Regulated?Michael J. Schusselehttp://www.blogger.com/profile/05843439166040743124noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-5228675828988846905.post-72883503747998689502010-04-04T15:07:47.299-05:002010-04-04T15:07:47.299-05:00As a Canadian, I feel it necessary to say a few th...As a Canadian, I feel it necessary to say a few things: 1) There is a definite housing bubble in the major Canadian cities, look at the demographica housing report, it is now more expensive to live in Vancouver than London (using income) and most people cannot afford a decent home in the major cities (Calgary, Toronto, Van, Ottawa), where virtually all our population lives; 2) Also, Canadians may be forced to buy insurance if they don't have a 20% downpayment, but look at the CMHC(our fannie/freddie) website, they do securitize and sell of bundles of mortgages, and even more worrying, virtually all the Canadian banks demanded that people take out mortgage insurance and that the gov't implicity back the debt, otherwise they wouldn't lend to them; and 3) A lot of the difference is cultural, while no doubt Bay Street bankers are a greedy bunch, just look at what Gord Nixon (CEO of RBC bank) made the last couple of years, its not even the pocket change from a mid level nobody at Goldman or Hedge Fund.TysonfromCanadanoreply@blogger.comtag:blogger.com,1999:blog-5228675828988846905.post-51317771494200206652010-04-04T14:11:15.340-05:002010-04-04T14:11:15.340-05:00In Canada federal election campaigns are largely f...In Canada federal election campaigns are largely financed by the state. Although private campaign donations are allowed they can only be made by a voter and not by unions or corporations. There is a low limit on private donations and on overall spending. As a result our politicians are not quite as ready to sell the public interest down the river in return for campaign contributions from lobbyists.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5228675828988846905.post-30830480742112159192010-04-04T11:55:10.093-05:002010-04-04T11:55:10.093-05:00What about CMHC and it's build up of debt to f...What about CMHC and it's build up of debt to fuel the housing bubble? <br /><br />Risk of loss severe there if real estate slumps, and taxpayers will have to cover the losses.<br /><br />I don't see a lot of difference to the US from a high altitude - both had Government and systemic Banking support blowing up the bubble and taxpayers get the bill. Different roads came to the same end.<br /><br />It's all relative of course, compared to other nations, like currencies. Too many other nations ahead of Canada at the credit slaughterhouse at the moment, and little room to advance. Go Canada.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5228675828988846905.post-86666533703408367492010-04-03T19:36:30.057-05:002010-04-03T19:36:30.057-05:00Interesting post. At the risk of over simplifying...Interesting post. At the risk of over simplifying, I think Canada (along with Australia) evaded the US's problems for one reason: it never developed a 'shadow banking system'; so, the banks were never driven to take on greater credit risk in the face of falling margins.CrocodileChuckhttps://www.blogger.com/profile/10762442097044797842noreply@blogger.comtag:blogger.com,1999:blog-5228675828988846905.post-69890201494713696562010-04-03T05:54:47.152-05:002010-04-03T05:54:47.152-05:00Minor point: I think that in Alberta residential f...Minor point: I think that in Alberta residential firt mortgages are non-recourse [the lender can only repocess the property, but not take action against the mortgagee, unless there is fraud]. So [at least in Alberta] a morgator is even more stongly motivated to make sure that the underlying assets have adequate value, and the morgatee has the character and capacity to service the debt.Kevin Smithhttp://www.smithlaser.comnoreply@blogger.comtag:blogger.com,1999:blog-5228675828988846905.post-40249077650955648742010-04-03T03:38:01.159-05:002010-04-03T03:38:01.159-05:00Simon Johnson's report on Canadian banks was s...Simon Johnson's report on Canadian banks was somewhat misleading. You may want to look at the BofC Financial System Review which I had then consulted, since at the time I was only able to access Canadian data from the OSFI. See below on page 24 (Box 3). <br />http://www.bankofcanada.ca/en/fsr/2008/fsr_1208.pdf<br /> <br />What they stated was very clear. Capital adequacy ratios were significantly higher in Canada than the US, the UK and Euro zone during most of the 2000s. On the other hand, the leverage ratios in Canada were higher than the US commercial banking ratios, as Johnson argues, BUT as the review said, this latter indicator is a bit misleading, since the standard measure of the leverage ratio does not include the total of off-balance-sheet assets which were very much higher in the US commercial banking sector. It is the latter which is more useful to recognize and not the narrow leverage ratio, especially since the whole problem of securitization was much more serious in the US than in Canada revealing all the high stakes risk problem faced by US banks.<br /> <br />This is why what Boone and Johnson say is a bit misleading. However, I do agree that our oligopolistic banking sector has not served us well as consumers of their services! But the fact Canada banks were making oligopolistic profits was probably also a factor (as I said) which did not pressure them to engage in securitization à outrance! Hence, the tradeoff was one of high monopoly profits or high-risk securitization! It's not clear to me that our system is better and certainly at no time would I say that US banking regulators should follow Canada by making the system more concentrated! That would be folly! But, still it did save us from the worst effects of securitization.Marshall Auerbackhttp://www.newdeal20.orgnoreply@blogger.com