Financial Crisis

[jade_lee]

yeah ok, 2006 was an intersting time in our mortgage sector. Go read all about it, then let me hear you defend the Harper Government. The story he is putting out there along with his incompetent finance minister keeps changing but the results continue to be bad....bad, bad, bad.

 

[kEiThZ]

Jade_lee please put out your sources that show we have a mortgage crisis. Our default rates are not unusual for a recession. And this recession in particular is largely a result of the downturn in the states.

Has this government made mistakes? sure. I haven't agreed with every decision this government has made but I am not going to fault them for a global recession impacting Canada that did not originate here. At best, they might have done things that could have helped ameliorate the current turmoil. And for that they deserve a swift kick to the rear.

But your 'sky is falling and it's all the conservatives fault' routine is ridiculous. The sky is not falling. Our banks are still solvent and stable. And they are still lending. In fact, they are still profitable! If you have evidence to the contrary, put up or shut up.

I travel all over this country for work and all over the US. The difference is remarkable. And I am sick of folks like you trying to talk this country into the disaster that's happening south of the border. Do we have foreclosure signs on every fifth house on the street? Is it difficult to get student loans? Is it impossible to get a car loan here? The government has made mistakes but I am starting to wonder who has the greater fault here. Your kind actually wants Canadians to suffer deeply just so your political views can be justified. If and when the day comes where it gets that bad, it's starting to look like your ilk should get the greater share of the blame for goading Canadians to act like they are in a severe recession making it a self-fulfilling prophecy.

 

[afransen]

To be fair, I don't think the Conservatives can take any credit whatsoever for the resilience of our banking sector. All the changes they have made since coming into power aimed to reduce that resilience, particularly by introducing nothing down/40 year mortgages.

 

[kEiThZ]

To be fair, I don't think the Conservatives can take any credit whatsoever for the resilience of our banking sector. All the changes they have made since coming into power aimed to reduce that resilience, particularly by introducing nothing down/40 year mortgages.

There's no doubt that mistakes were made with the 40 year mortgages. But its rather disingenious to argue that this is the cause of the recession in Canada.

CMHC standards for 40 year mortgages were still fairly stringent compared to the fiasco south of the US. I am fairly sure that the default rates on these mortgages is bearing this down. I don't have a link handy but i have read before that the default rates for these mortgages is not any different from other amortization types. That would bear out CMHC's prudence. And our banks weren't doing their affordability calculations based on teaser rates on adjustable rate mortgages, etc. Even zero down mortgages in Canada were still paying down the principle, limiting the impact should interest rates rise. That's nothing like the interest only ARM fiasco south of the border. And our market never really over heated to the point where we had flippers as a significant market for home sales. Sure we had 40 year mortgages, but they were going to folks living in their house. They weren't going to a dude who was already carrying two other condos as investments. The situation in Canada is nowhere comparable to what is and has happened in the US. Our recession is by and large being caused by a slowdown in our largest export market and lower demand for our export products (natural resources, autos, airplanes, manufactured goods, etc.) not by a financial or credit crisis in this country.

Moreover, 40 year mortgages are still a relatively small portion of the overall mortgage portfolios of Canada's lender. Even if the default rate for this group skyrocketed the impact would still be fairly limited.

Now, I get that you're no fan of the Conservatives but you can't seriously be buying into the misguided hot air that jade_lee is spewing on here. Are you going to assert that jade_lee is right in the suggestion that we have a financial and credit crisis in Canada caused by the Conservatives?

 

[afransen]

There's no doubt that mistakes were made with the 40 year mortgages. But its rather disingenious to argue that this is the cause of the recession in Canada.

I sure hope you're not suggesting that is what I said. My point is solely that the CPC can take no credit for any strength Canada has going into this recession. Much of what they have done since their election weakened our ability to respond to this recession.

 

[kEiThZ]

^See my earlier post. It was a response to jade_lee. I will concede that some Conservative economic policies have been weak. But nowhere to what jade_lee asserts. Talk like that us dangerous. Folks like jade_lee could talk this country into a recession (or deepen it).

 

[Hydrogen]

I'd like to see how jade_lee manages to blame a global recession of the Conservative government in Canada.

 

[lordmandeep]

Cannot really blame our govts in power...


Really apart from Govt spending and (Keynesian policy) and influencing Monetary policy, what else can they do.

I think its real waste of time for govts to force certain companies to hire people and force them to stay open.

If a Business cannot survive, it needs to die...

 

[jade_lee]

Go read what McNish is writing in the globe Keithz, go read why the current conservative government quietly pulled their 40 year mortgage endorcement, go read who let AIG quietly into the mortgage insurance business here in Canada and who guaranteed their losses. All this information has been disclosed by our very own national paper the globe and elsewhere but I guess you don't read it.

It's dangerous that repeat what I have read? Even more dangerous that it's true I would suggest and dangerous that people like you continue to prop up these liars who claim all is ok here in Canada with our banks.

 

[cacruden]

40 Year mortgages are not a big problem, as long as the buyer can afford to make payments.

100% mortgages are not a problem, as long as the buyer can make payments and pay down the principal.

Rising unemployment is not a major problem, unless it rises substantially (i.e. 12%+ etc.), as long as the majority of buyers can afford payments.

Calgary and Vancouver going boom is not a major problem, if Ontario and Quebec are reasonably stable (or soft).


What could cause problems:
- ultra-high unemployment
- prolonged period of deflation
- surging interest rates

The Canadian system was still much stricter when it came to determining whether individuals could finance the mortgage - i.e. income verification. As long as people can service their debt, and pay the mortgage - the less likelyhood there is of a US style implosion.... since even in poor economic times the average wage does go up based on inflation .... while the principal goes down (assuming your making payments) - which means that if you were on the edge this year for being able to afford the mortgage, you will be well within the range within 3 to 5 years. Of course hyper-inflation, surging unemployment, etc could change the equation -- but if that happens - we have more to worry about.

 

[cacruden]

Betting on the world to end is not a good bet, no matter what the odds are, since if it does come to pass -- you cannot collect on the winnings anyways

 

[kEiThZ]

Go read what McNish is writing in the globe Keithz, go read why the current conservative government quietly pulled their 40 year mortgage endorcement, go read who let AIG quietly into the mortgage insurance business here in Canada and who guaranteed their losses. All this information has been disclosed by our very own national paper the globe and elsewhere but I guess you don't read it.

I have never defended the 40 year mortgage although I don't think it's as disastrous a policy as people think. They do have 100 year mortgages in Europe for a generation now after all and they haven't been falling apart for a while. Regardless, perhaps they should have had more stringent conditions attached. However, as Cacruden as pointed out, they are not as bad as people think. And you have still to furnish stats showing that 40 year mortgages are wreaking havoc on our system. The only reason they were stopped was because they got far to popular, well outside the scope of what anyone anticipated. It was supposed to be a product only 1-2% of buyers took up. And that didn't happen so the government put the kibosh on it. They are still, however, a small fraction of our overall mortgage portfolio. I refuse to concede that we have anything like the US ARM set waiting for us. You have yet to furnish any evidence showing that is the case.

Folks on here have already answered you're AIG point. So what if AIG is involved in our mortgage insurance market? Our government (even under the Liberals) made a point of insuring the mortgage insurers. So AIG received the same treatment. Moreover, if AIG fails it's still not an issue, their portfolio of Canadian mortgages will simply get transferred to somebody else...after all, Canadian mortgages are still safer than half the stuff that's out there. In fact, the Canadian taxpayer is fairing well right now while the US government bails out an insurer operating in this country. But again, if AIG fails so what? Show me how that's bad? The only scenario that turns out poorly for the taxpayer is if Canadian mortgages start failing. As Cacruden pointed out, we are nowhere to the point where foreclosures are anything like that south of the border.

It's dangerous that repeat what I have read? Even more dangerous that it's true I would suggest and dangerous that people like you continue to prop up these liars who claim all is ok here in Canada with our banks.

Yes, you are dangerous. Some poor sap out there, a friend or relative of yours might actually take the stuff you spew on here as a sign of intelligence, knowledge and critical analysis and god forbid, might actually make decisions on that advice. This is what I mean when I say that folks like you might well talk Canadians into a depression. Yet again, in the very quote above you mischaracterize the situation in Canada. Care to show me a single Canadian bank that has failed?

 

[lordmandeep]

Betting on the world to end is not a good bet, no matter what the odds are, since if it does come to pass -- you cannot collect on the winnings anyways

Those are some real wise words...

I will remember that ^^^^^


Also do not forget most people now will face lower mortgage interest rates now due to the decline in the rates.

So any chance of millions of foreclosures will not happen.

 

[MisterF]

As U.S. rivals shrink, 4 Canadian banks crack North American top 10

Royal, TD, Scotia and BMO ranked among continent's largest

Canada's banks, which have long hankered to merge to become big enough to compete on a world scale, now find themselves among North America's largest with some of their U.S. rivals on federal life-support.

The CBC's Marivel Taruc reported Tuesday that the Canadian banking system is being called the world's soundest in the wake of a credit crisis that began with junk mortgages in California and mutant debt securities on Wall Street.

"So the U.S. banks' loss is very much the Canadian banks' gain," Taruc said, "and this is going to add to the praise, right around the world, of the solid banking sector that Canada has."

A new ranking by Bloomberg News puts four Canadian banks among North American's top 10 as measured by assets, with Royal Bank of Canada in seventh place.

Toronto-Dominion Bank, Bank of Nova Scotia and Bank of Montreal are eighth, ninth and 10th, respectively. A year ago, only Royal made the list.

Canada’s six largest banks made money in the latest quarter while big U.S. banks such as Citigroup, Wells Fargo and Bank of America lost billions, Bloomberg said Tuesday in a report on its website.

"Canadian banks have remained profitable, outperforming their peers, because of tighter government restrictions on lending and capital requirements," it said.

"The country’s six biggest lenders reported less than $20 billion Cdn ($15.7 billion US) in debt-related writedowns since the credit crisis began in 2007, about two per cent of the $887.1 billion recorded by banks and brokerages worldwide."

Stayed closer to home
Canadian banks have long chafed at Ottawa's reluctance to let them merge, saying they need to achieve sufficient size to compete internationally. But they were lucky this time to have stayed closer to home than major overseas banks now humbled by bad mortgage-related bets in the United States.

The Canadians, not immune to the temptation, took their lumps on such bets too — as they did in past decades in lending to Third World dictators, real estate promoters and rogue energy traders.

But they didn't lose their shirts.

The Globe and Mail reported Tuesday that they are beginning to turn down some of the funding Ottawa is making available to them, a sign they are recuperating from the financial crisis.

The banks have stopped selling the government the full amount of mortgages they could under a $125-billion mortgage purchase program, the centrepiece of the federal government's plan to help the industry, the newspaper said, quoting an unnamed banker.

http://www.cbc.ca/money/story/2009/03/17/canada-banks.html

 

[lordmandeep]

Sure our banks rob money from us, but in the end it pays off...