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Quantifying The Big Five Canadian Banks' $114 Billion Bailout

Tyler Durden's picture




 

“…we have not had to put any taxpayers’ money into our financial system in Canada, nor do I anticipate that we’ll be obliged to do so.”

—Jim Flaherty, Minister of Finance

“Without wanting to appear arrogant or vain, which would be quite un-Canadian... while our system is not perfect, it has worked during this difficult time, I don’t want the government to be in the banking business in Canada.”

—Jim Flaherty, Minister of Finance

“It is true, we have the only banks in the western world that are not looking at bailouts or anything like that...and we haven’t got any TARP money.”

—Stephen Harper, Prime Minister

With such propaganda statements, bordering on patriotism, uttered by various Canadian politicians, it is no wonder that last summer Zero Hedge got into hot water with virtually every Canadian media outlet (see here and here) for daring to suggest that Canada's banks are not quite as stable and well capitalized as public rhetoric makes them seem. The narrative goes that Canadian banks were so rock-solid, they needed no public bailouts. Today, in an extended report by the Canadian Center for Policy Alternatives we get a slightly different perspective on what really happened in the 2008-2010 period.

From the report:

The official story of the 2008 financial crisis goes like this: American and international banks got caught placing bad bets on U.S. mortgages and had to be bailed out. But not in Canada. Through the financial crisis, Canadian banks were touted by the federal government and the banks themselves as being much more stable than other countries’ big banks. Canadian banks, we were assured, needed no such bailout.

 

However, in contrast to the official story Canada’s banks received $114 billion in cash and loan support between September 2008 and August 2010. They were double-dipping in not only two but three separate support programs, one of them American. They continued receiving this support for a protracted period while at the same time reaping considerable profits and providing raises to their CEOs, who were already among Canada’s highest paid. In fact, several banks drew government support whose value exceeded the bank’s actual value. Canadian banks were in hot water during the crisis and the Canadian government has remained resolutely secretive about the details.

 

It should be noted that the “Extraordinary Financing Framework” was prepared to spend up to $200 billion to aid the banks and other industries. In other words, while the sums reported in this report  are enormous, there were even more funds to be disbursed if the banks needed them.

In other words, just like US, European and ROW banks, Canadian banks were just as mortal, just as susceptible to bank runs, and just as fragile as everyone else in this globally interconnected financial regime. And the reality is that just as we disclosed last August when we pointed out to the abnormally low capitalization ratios of Canadian banks, which served as the initial domino for a firestorm of media criticism and vitriolic displaced patriotism, should the same Big 5 Canadian banks suffer impairments of more than just a few percent, their entire equity buffer would be impaired. No accounting gimmicks would mitigate this: no RWA assessment, no mark to myth - if the inbound cash flows on the left side of the balance sheet are impaired, the ability to fund outflows on the right side will be crippled as well.

This was the basis of our caution. The response however confirmed that far more than simple math, when it comes to Canadian banks there is almost an irrational patriotic component involved, which forces many to ignore the simple math and to hope (probably the closest word to describe the sentiment) that nothing wrong can happen to the local financial sector.

So in order to get some clarity, we have selected several excertps from the CCPA report, as well as some fact-based charts and diagrams for everyone's elucidation:

It was the collapse of Lehman Brothers that started the massive support for Canadian banks from both American and Canadian governments, as shown in Figure 1. Massive loans from the liquidity programs of the U.S. Federal Reserve and the Bank of Canada provided the bulk of the initial support for the big Canadian banks.

 

However, it was the third support from CMHC’s Insured Mortgage Purchase Program (IMPP) that did the heaviest lifting. In contrast to the loans of the first two programs, CMHC was providing direct cash infusions to Canada’s banks, although it took longer to ramp up. The program provided its first cash to the banks in October 2008.

 

Within four  months’ time, Canada’s big banks requested and received a whopping $50 billion in cash in exchange for mortgage-backed securities. By March 2009, government supports to Canada’s banks peaked at $114 billion. At this point, support for Canadian banks was equivalent to 7% of Canada’s 2009 GDP. That support represents a subsidy worth about $3,400 for every man, woman and child in Canada.

 

By late-2009, the U.S. Federal Reserve began to wind down its support for Canadian banks. The Bank of Canada’s support for Canadian banks continued until the spring of 2010. Interestingly, the global financial crisis subsided by the  end of 2009, but CMHC cash injections to Canada’s big banks didn’t wrap up until April 2010. The recession appeared to be behind us but Canada’s big banks were still taking cash from this federal program in the fall of 2010.

 

By February 2010 and July 2010, all of the U.S. Federal Reserve and Bank of Canada loans had been respectively repaid. While these funds were repaid in full, it is clear that the banks benefitted enormously from public financing when private funds were unavailable. In addition, had the rapid and enormous deployment of public funds not been available, most, if not all, Canadian banks would have encountered serious difficulty.

Visually:

 

And the best one:

Full report:

The Big Banks Big Secret - Canada open.pdf

h/t Ben Rabidoux

 

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Mon, 04/30/2012 - 11:49 | 2385186 niktamere
niktamere's picture

Canada susceptible to bank runs?

That's it. Im calling the Trash & Pail

Mon, 04/30/2012 - 11:50 | 2385192 Richard Chesler
Richard Chesler's picture

Cockroach banksters know no borders.

Mon, 04/30/2012 - 11:52 | 2385198 niktamere
niktamere's picture

Who is Richard Chesler and why should we care?

Mon, 04/30/2012 - 11:55 | 2385206 Buckaroo Banzai
Buckaroo Banzai's picture

wait WHAT? The politicians LIED??!?

Mon, 04/30/2012 - 11:58 | 2385214 Mark Carney
Mark Carney's picture

I got this, move along nothing to see here.......

Mon, 04/30/2012 - 12:01 | 2385220 niktamere
niktamere's picture

FSB duty kinda dull, eh?

Mon, 04/30/2012 - 12:16 | 2385254 Mark Carney
Mark Carney's picture

Im a squid, I got hands in all pockets, check your back pocket....IM IN THERE!

Mon, 04/30/2012 - 13:04 | 2385378 flacon
flacon's picture

...but at least the new polymer $100 smells like Maple Syrup. Taking the whole "you can't eat money" to a whole new level.

 

 

New Canadian 100 Dollar Bills – Feel Like Plastic, Smell Like Maple Syrup

http://moneyjarbudget.com/2011/11/new-canadian-100-dollar-bills-feel-like-plastic-smell-like-maple-syrup/

 

..and it's "almost indistructible" (except by the central bank):

 

http://www.youtube.com/watch?feature=player_embedded&v=GvqjqRG6VnM

 

 

 

Mon, 04/30/2012 - 13:21 | 2385470 niktamere
niktamere's picture

Yeah They do smell like maple syrup

 

also saw news piece about a jew named Moses who managed to ruin one, called for monetary reform. or something.

http://montreal.ctv.ca/servlet/an/local/CTVNews/20120119/mtl_polymer_shrinkage_cash_110119/20120119/?hub=MontrealHome

Mon, 04/30/2012 - 14:07 | 2385724 A Nanny Moose
A Nanny Moose's picture

Good work. Now I can rest at ease and go back to basketb...err...hockey.

Mon, 04/30/2012 - 14:12 | 2385745 The.Oracle
The.Oracle's picture

Oh yes, great central planner +1

Mon, 04/30/2012 - 11:52 | 2385199 Future Tense
Future Tense's picture

There's no where to hide. Every fiat currency is structurally unstable. The last hope for any sanity, Switzerland, tied their boat to a shinking ship in the euro. It feels like under every rock there is a black swan waiting. I think the most surprising, yet the most obvious, is the coming rise in the US 30 year treasury bond. It is the only "guarantee not happen" left in the system that will happen. Good discussion on that topic here:

http://www.ftense.com/2012/04/us-treasury-bonds-lets-play-musical.html

Mon, 04/30/2012 - 12:23 | 2385266 strannick
strannick's picture

only good thing bout the swissie was its link to gold which it cut in 2001. why not just get gold?

Mon, 04/30/2012 - 17:21 | 2386497 DrunkenPleb
DrunkenPleb's picture

Crazy nationalists that they are, the SVP understands the value of stable money and has a volksinitiative underway to restore that link:

http://www.admin.ch/ch/d/pore/vi/vis415t.html

Mon, 04/30/2012 - 11:49 | 2385188 Stoploss
Stoploss's picture

Famous last words..

Mon, 04/30/2012 - 11:50 | 2385194 HoofHearted
HoofHearted's picture

Nobody could have predicted this. Nobo...nevermind, the Tylers were on it once again.

Mon, 04/30/2012 - 11:50 | 2385195 alangreedspank
alangreedspank's picture

Bailout, eh ?

Mon, 04/30/2012 - 13:05 | 2385392 Spitzer
Spitzer's picture

ZeroHedge hit piece on Canada's BNN last year.. By a professor of course hahahaha

http://www.youtube.com/watch?v=rAD0hLjJLKo&feature=plcp

Mon, 04/30/2012 - 13:19 | 2385453 Miss Expectations
Miss Expectations's picture

Did Campbell Harvey (banking expert from Duke University) actually call ZeroHedge "Gutter Journalism"?

Good catch, Spitzer.

Mon, 04/30/2012 - 11:50 | 2385196 WALLST8MY8BALL
WALLST8MY8BALL's picture

Slap Shot through the 5 hole! Eh Hosers!

Mon, 04/30/2012 - 11:53 | 2385197 GOSPLAN HERO
GOSPLAN HERO's picture

O Canada!

Mon, 04/30/2012 - 12:58 | 2385364 Spitzer
Spitzer's picture

Speaking of Canadian banks... ScotiaBank is feeling the pain of its bailout inflation right now.

http://freegoldobserver.blogspot.ca/2012/04/federal-reserve-bullion-bank...

Mon, 04/30/2012 - 11:53 | 2385200 Gene Parmesan
Gene Parmesan's picture

Lies. We will continue to get lies and misdirection for as long as the MSM lets them remain unchallenged and unaccountable.

Mon, 04/30/2012 - 12:17 | 2385252 j0nx
j0nx's picture

As long as the MSM continues to be owned by one or two people/conglomerates who have vested interests then that timeframe for remaining unchallenged and unaccountable would be indefinitely.

Mon, 04/30/2012 - 15:15 | 2386015 marathonman
marathonman's picture

The MSM benefits from this corruption.  They care about the banks that hold their financing.

Mon, 04/30/2012 - 11:59 | 2385213 canuck0hedge
canuck0hedge's picture

Why the discrepancy between the performance of Canadian banks and their US counterparts?

Mon, 04/30/2012 - 12:02 | 2385222 Seize Mars
Seize Mars's picture

I think it was Assange who said that he wanted to "expose world leaders as the murderous liars that they are."

Well this is just one more data point.

Mon, 04/30/2012 - 12:01 | 2385223 CryingBear
CryingBear's picture

are the tylers considered MSM now?

Mon, 04/30/2012 - 12:02 | 2385226 CryingBear
CryingBear's picture

i like to think alot

Mon, 04/30/2012 - 12:03 | 2385227 lolmao500
lolmao500's picture

Yeah if you count that in GDP/bailout money, the Canadian government gave more to the banks than the US government did... yet, ask anyone here and they'll tell you that the Canadian government is not a puppet of the banks.

Fucking please.

Mon, 04/30/2012 - 12:35 | 2385303 Canaduh
Canaduh's picture

The level of stupidity/sheepleness/denial is much stronger up here, where people think because we've had a 'conservative' government, we breezed right through the financial crisis. Stephen Harper for global Prez!

Mon, 04/30/2012 - 12:05 | 2385230 Anton LaVey
Anton LaVey's picture

To which, one can only reply: BLAME CANADA!

 

http://www.youtube.com/watch?v=5JX4gWcWRAo&feature=related

Mon, 04/30/2012 - 12:05 | 2385231 chet
chet's picture

Banks weaker than thought with a housing bubble about to burst.  The median detached home in Vancouver is now $1 million plus.  The pop is going to be spectacular.

Mon, 04/30/2012 - 12:19 | 2385262 j0nx
j0nx's picture

But it's the PNW. It can't happen there!

Mon, 04/30/2012 - 12:59 | 2385373 chet
chet's picture

"It's different here!" 

Incredibly, we managed to convince ourselves of that for a full year after the housing market tanked everywhere else in the country.  It still takes a while for the pony express to deliver us the news out here.

Mon, 04/30/2012 - 13:17 | 2385439 owensdrillin
owensdrillin's picture

I think we have seen the peak in the Vancouver prices and the crash will happen within the next year. Once the investors see that an NDP government (provincial) is going to take back power next year, the party will be over.

I do not favour either party in BC but the NDP absolutely kill business. Look for a 40% decline in prices in the lower mainland. Even after that they will still be unafordable and ridiculously high.

Prices have been dropping for the past 3-4 years in all other areas of BC. It's just the lower mainland and Victoria that have been rising during that same time.

Mon, 04/30/2012 - 14:07 | 2385723 chet
chet's picture

That's my take as well. I think it as already peaked or may peak briefly in the early summer this year.  I agree on the 40% to 50% down.  The bulls up there have all the same rationalizations we did down here, particularly about how the banks will fare okay because they've "passed on the risk" through federal home insurance.  But they still have plenty of mortgages and HELOCs on their books, and exposure to MBS, I believe.

Mon, 04/30/2012 - 14:37 | 2385860 The.Oracle
The.Oracle's picture

Yup, Canadians basically glossed over this several year economic downturn by taking equity out of their homes with HELOCS like you mentioned. Just read today that the Canadian economy actually shrunk during March--but I bet you household debt didn't. Everyone here thinks they own their house because they have a mortgage... This whole thing has been like watching a slow motion demolition

Mon, 04/30/2012 - 12:34 | 2385297 alangreedspank
alangreedspank's picture

And household debt 150% of median income, oh Canada!

Mon, 04/30/2012 - 13:34 | 2385560 Metalredneck
Metalredneck's picture

Our market here is ready to pop.  I have a low overhead & even lower expectations, so I'll be fine.

Mon, 04/30/2012 - 15:31 | 2386066 garypaul
garypaul's picture

We've been waiting so long for that "pop" that I'm thinking it might not even happen - i.e. we go straight into high inflation.

Mon, 04/30/2012 - 12:04 | 2385233 TradingJoe
TradingJoe's picture

Ben! it's Noon! WTF are you doing, eh?!

Mon, 04/30/2012 - 12:06 | 2385236 buzzsaw99
buzzsaw99's picture

They will eat those words in the future. The Canada PTB boast profusely that deposit-taking financial institutions hold the majority of the mortgages in Canada:

http://www.imf.org/external/pubs/ft/wp/2009/wp09130.pdf

 

IMO the housing bust has yet to begin in earnest in Canada and the coming bailouts will be enormous.

Mon, 04/30/2012 - 12:09 | 2385239 rosiescenario
rosiescenario's picture

.....and no one in the Canadian press mentioned the lies? Guess that investigative reporters are extinct worldwide....well, except for that feisty one in Ireland........

Mon, 04/30/2012 - 12:14 | 2385244 niktamere
niktamere's picture

freedom of the press, for those who own the press

Mon, 04/30/2012 - 13:02 | 2385385 Spitzer
Spitzer's picture

BNN had a hit piece about ZeroHedge last time this happened...

http://www.youtube.com/watch?v=rAD0hLjJLKo&feature=plcp

I will check The Lang & Oleary Echange show tonight..

I think Kevin O'Leary knew about this all along. Listen to him in this video

http://www.youtube.com/watch?v=EFqmvKn7Jao&feature=plcp

 

Mon, 04/30/2012 - 13:23 | 2385486 niktamere
niktamere's picture

Love kev

Ill be tuned in too

Mon, 04/30/2012 - 19:32 | 2386878 niktamere
niktamere's picture

wasnt bad

Mon, 04/30/2012 - 12:58 | 2385363 Herkimer Jerkimer
Herkimer Jerkimer's picture

Oh yeah, I've got to second that one. How many finance guys in our papers, sat on this one, or they wouldn't get another interview from a bank or financial institution, ever again, eh?

 

Herk

 

•J•
V-V

Mon, 04/30/2012 - 12:11 | 2385241 pods
pods's picture

Hmmm, more bankster frontmen have been found to be liars?  

Sounds about right.

Truth and politics do not really mix well.

pods

Mon, 04/30/2012 - 12:14 | 2385245 NotApplicable
NotApplicable's picture

Well, technically Flaherty wasn't lying, as Benron's digital bank notes are not "taxpayers' money."

Mon, 04/30/2012 - 12:16 | 2385250 skbull44
skbull44's picture

Keep up the great work ZH! Our housing bubble must be close to the tipping point--friends just sold their home in Unionville (just north of Toronto) for over $1.5 million, having purchased for $500,000 less than a decade ago. Our home, purchased at $209,000 in '95 could probably fetch $750,000-bloody ridiculous. I keep trying to warn folks, but they're deafened by the cacaphony of politicians singing the praises that 'this time is different' for Canada. Can't wait for that Black Swan to come in and swoop them all up...

Mon, 04/30/2012 - 12:21 | 2385257 SheepDog-One
SheepDog-One's picture

In Canada, Black Swans are called 'Shit Hawks'....big greasy bastards come swoopin down and put shit on you....then they drag you back to their shit nests. Ask Bubbles!

Trailer Park Boys Shit-Hawks - YouTube

Mon, 04/30/2012 - 12:47 | 2385332 web bot
web bot's picture

#uck... Mr. Leahy is made of sponge. I've knowne whiskey soaks but nothing like good old Jim leahy.

And yep - this is about the best that Canada can offer.

 

Mon, 04/30/2012 - 12:48 | 2385341 SheepDog-One
SheepDog-One's picture

Chugging $15 bottles of liquor...I dont know anyone who could afford to even attempt it!

Mon, 04/30/2012 - 13:06 | 2385375 Problem Is
Problem Is's picture

This Whole Canadian Housing Bubble, Bank Insolvency Thing

"It started as a little shit-spark from the old shit-flint. And then it turned into a shit-bonfire and driven by the winds of monumental ignorance and bankster greed, it turned into a raging shit-firestorm. And then it will unleash a shitnami tidal wave that'll engulf and extinguish these Canadian housing bubble price shit-flames forever."

J Lahey

Mon, 04/30/2012 - 14:26 | 2385809 BlackholeDivestment
BlackholeDivestment's picture

...belly laugh. Thanks for that one PI. LMAO. 

http://www.youtube.com/watch?v=4yMyV6RCS1g

Mon, 04/30/2012 - 12:48 | 2385343 FranSix
FranSix's picture

I couldn't take down that much iced tea in one go, let alone whiskey.

Mon, 04/30/2012 - 12:53 | 2385353 bobola
bobola's picture

sk,

Will you sell the house before the housing bubble bursts..??

 

Mon, 04/30/2012 - 17:26 | 2386512 smiler03
smiler03's picture

I was wondering that too. I assume there would be no capital gains tax on that nice little profit. Surely this is THE time to sell?

Mon, 04/30/2012 - 19:09 | 2386818 debtandtaxes
debtandtaxes's picture

sell - and move where?

I cannot AFFORD to buy anywhere within an hour of Toronto. Bought in downtown for $280 including renos. Estimates put it at 500k now. I'd love to cash out but work downtown and if I moved and had to commute I'd never see my kids!

But as soon as interest rates start to come up - I've told the hubby it's time to cash out and semi-retire to a small town. 

Mon, 04/30/2012 - 12:16 | 2385253 SheepDog-One
SheepDog-One's picture

Banksters and politicians lied? Simply cant be true!

Mon, 04/30/2012 - 12:18 | 2385256 ItsDanger
ItsDanger's picture

I knew immediately this was incorrect.  Of course, the banks received bailout loans.  Were they repaid?  I cant recall.  The CMHC cash injections as you call it.  What are those?  Loans?  Claims for losses on mortgages?  Cash injection can mean anything.    Of course any losses incurred would require a CMHC payout.  Thats what its for.  Seems rather large amounts though.  Need more detail please.

Mon, 04/30/2012 - 12:19 | 2385258 Piranhanoia
Piranhanoia's picture

Where's Charlie Farquharson when you need the truth about Canda?

Mon, 04/30/2012 - 13:22 | 2385476 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Where's Charlie Farquharson when you need the truth about Canda?

...or Stephen Abootman of the WGA (World Canadian Bureau)?

http://www.southparkstudios.com/clips/165188/im-stephen-abootman

 

Mon, 04/30/2012 - 12:21 | 2385265 goldfreak
goldfreak's picture

ZH right again!

MSM caught lying again

Mon, 04/30/2012 - 12:23 | 2385268 SeverinSlade
SeverinSlade's picture

Winning.

Mon, 04/30/2012 - 12:25 | 2385273 M48
M48's picture

It was public knowledge long ago that they received a stealth bailout. Nothing especially new here except that finally the mainstream Canadian media is covering it.

By the way, anyone know any good finance/economics blogs like Zero Hedge that focus on Canada?

Mon, 04/30/2012 - 12:34 | 2385296 WALLST8MY8BALL
WALLST8MY8BALL's picture

Hoser Hedge?

Mon, 04/30/2012 - 13:03 | 2385386 prains
prains's picture

Kooooo Loooooo koo koo

Kooooo Loooooo koo koo

Mon, 04/30/2012 - 12:42 | 2385320 web bot
web bot's picture

Ya - Zero Hedge.

Mon, 04/30/2012 - 13:27 | 2385514 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Nothing especially new here except that finally the mainstream Canadian media is covering it.

Wait! Here it is! Turn it up! We're on!

http://www.southparkstudios.com/clips/165194/the-canadians-of-europe

 

Mon, 04/30/2012 - 16:50 | 2385817 Renfield
Renfield's picture

Dear M48, I thought you would never ask:

http://canadabubble.com

http://www.greatponzi.com

They aren't as big as ZH nor updated as frequently, but still good on a smaller scale. Not everyone can be Zero Hedge.

Oh, and while I'm at it, from my bookmark collection, here are a few more articles on the stealth Canadian bailout (that only a regular news reader would know about, which apparently excludes a significant majority of the population):

http://business.financialpost.com/2012/04/30/did-canadian-banks-receive-a-secret-bailout

http://canadianpminwaiting.blogspot.ca/2010/02/our-dirty-little-secret-canadian-bank.html

http://www.wellingtonfund.com/blog/2010/12/02/canadian-bank-bailout-total-touches-186-billion/#axzz1tY7DSO5I

http://www.globalresearch.ca/index.php?context=va&aid=12007

http://canadabubble.com/bubble-watch/2048-the-cmhc-canadas-mortgage-monster.html#comment-804

Bon appetit, Hedgers. Let's put to death the Canadian "It's Different Here" myth today, shall we? 'Cause it ain't different here. It ain't different anywhere.

Mon, 04/30/2012 - 18:32 | 2386728 M48
M48's picture

Thanks a lot, looks very interesting. Hope to see more Canadian finance/economics blogs popping up in the future.

Mon, 04/30/2012 - 12:27 | 2385276 q99x2
q99x2's picture

Maybe they can get that Flaherty arrested for financial terrorism. Been trying to get the Bernank and buds busted but no go so far down here.

Mon, 04/30/2012 - 12:31 | 2385286 skbull44
skbull44's picture

I know, we need to get Rick Mercer on this!!

Mon, 04/30/2012 - 12:31 | 2385291 FranSix
FranSix's picture

Normally you would multiply by 10 to get an idea of the per capita proportion compared to let's say, the TARP bailout.  Surprise, you have a  massive housing bubble, which the banks are now positioned short.

Lots of articles in the press and political condemnations on lending to the retail sector, but the housing bubble just doesn't seem to blow.

But it goes further back to the ABCP scandal, which resulted in further de-regulation.  Just last year, a 'no down tick' rule was abolished, favouring delta hedging positions at the banks.  The mining sector is underperforming as a result.  

Not only do you have a housing bubble, but a banking sector bubble, where the banks are just past the top of an amazing bull run.  Yields are at historic lows on long term bonds, 2.5%, while yields on treasuries are 1%.  If anything yields should decline at the short end of the curve, but they don't, meaning either that demand for short term money has slacked off, or that Operation Twist is piecemeal in comparison.

Mon, 04/30/2012 - 12:33 | 2385294 Carl Spackler
Carl Spackler's picture

And to top it off, the devil in the details is that Canadian GAAP does not recognize credit impairment as aggressively as U.S. GAAP.

Consequently, the Canadian banks may be in a weaker state, comparatively, than the large U.S. banks as the Canadians are sitting on bigger lending losses they have not yet had to write off.

 

 

Mon, 04/30/2012 - 12:34 | 2385299 Sudden Debt
Sudden Debt's picture

The allmight Looney!!...

Mon, 04/30/2012 - 12:43 | 2385321 orangegeek
orangegeek's picture

There will be bank failures in Canada just like everywhere else in the world.

Mon, 04/30/2012 - 12:45 | 2385326 ekm
ekm's picture

I have been saying here on ZH over and over and over that Canadian Banks were bailed out, I just didn't know how much.

The day that happened, 680news radio here in Toronto mentioned it very quickly in the morning news and then the news disappeared.

Mon, 04/30/2012 - 12:53 | 2385347 Problem Is
Problem Is's picture

Harper is a bigger corporate whore, British monetarist, bankster puppet douche hole than our Useful Idiot Teleprompterin' Moron-n-Chief Barry Soetoro....

A Bigger Bribed Crook Than Bullshit Barry???

Now, that is saying something...

Mon, 04/30/2012 - 12:58 | 2385367 bobola
bobola's picture

Official Canadian lie available here; http://canadianprofiteer.com/canada-avoids-bank-bailout/

 

Mon, 04/30/2012 - 12:58 | 2385368 firstdivision
firstdivision's picture

Lately I have found myself in awe with HGTV's house hunter show where people are buying houses in Toronto area.  The prices are freaking outrageous.  I laugh when I see what people are paying for there.  It's a monumental housing bubble waiting to pop. 

Mon, 04/30/2012 - 13:02 | 2385383 bobola
bobola's picture

Interesting that the Canadian housing bubble is still expanding with no apparent end in sight. 

If/when it pops, who could have seen it coming...??

Mon, 04/30/2012 - 13:30 | 2385533 FranSix
FranSix's picture

Housing prices, TO:

http://www.gettingtechnical.com/01_home/market_commentary/can_en.html

You can look up housing in TO via:

http://ow.ly/aBPNo

(There are so many houses for sale, you have to put in a fireplace to weed out the offers.  They're still building like crazy.)

Mon, 04/30/2012 - 13:08 | 2385408 Schacht Mat
Schacht Mat's picture

Interesting perspective, although having just finished reading the entire study, I see a lot of smoke, but not much fire.  This is not to say that the Canadian banks have been mythologized in the past 4 years, but hey, BS has been the trade mark of the financial sector since fractional reserve banking became the norm.  Looks to me like all of the loans from both our government and the Canadian BOC have been repaid in full, and the MBS’s bought by CMHC are above water and being fully serviced.  Yeah, Canada is still enjoying a real estate bubble, and that could go at any time / will go at some point in time.  The difference that I see in the Canadian situation as compared to ours is that a lot of their real estate pricing is being driven by oil and gas profits, which are not likely to disappear overnight, and by foreign investment, predominantly from East Asia, which is looking to “take their money and run”.  While Canada and the US get approximately equal numbers of such investors, the Canadian impact to real estate is 10 times larger than ours because they are 10 times smaller than us.  So, OK, their bubble will burst, but it is not likely to be anywhere near as dramatic as ours.  Long winded way of saying that those MBS’s are probably pretty good.  Full disclosure – I have been in the Canadian MBS market for years and have done quite well – just make sure you are buying quality.

 

Now let’s talk about the authors of this study – CCPA – here is what they say about themselves:  “The Canadian Centre for Policy Alternatives is an independent, non-partisan research institute concerned with issues of social, economic and environmental justice. Founded in 1980, the CCPA is one of Canada’s leading progressive voices in public policy debates.”  Here is a piece from their home page entitled Myth-Busting “The CCPA debunks myths—like the myth that an aging population will cripple public health care, or that meeting our climate change obligations is a job-killer. Our monthly magazine, The Monitor, is packed with facts and analysis that will help you untangle the spin.”  Enough said – remember this is Canada - where their conservatives are more liberal than our democrats.  These guys claim to be non partisan, but they are clearly far, far left of Krugman.  They remind me of the TV preacher who claimed that he did not favor any particular denomination, although he had a special interest in $50’s and $100’s.  These guys would love to show Obama how government spending is really done – full bore and more.  Hell, one of the guys reviewing this study was the Chief Economist of the Canadian Auto Workers.

Let’s not kid ourselves, the Canadian banks got caught up in bad loans, but their primary problem was lack of liquidity.  The first is a real problem, and I call BS on anyone who says that they have come fully clean on that one, but the big reason you move MBS’s on performing loans when the BOC rate is near zero is to provide liquidity to keep up with market velocity and draw.

Mon, 04/30/2012 - 13:42 | 2385605 M48
M48's picture

Great post - and you can see from the language in the report that they are clearly not without an agenda. For example, this sentence: "That support represents a subsidy worth about $3,400 for every man, woman and child in Canada." Not only is that not a fair comparison (since part of the money was from the Fed, which means quoting it in terms of the Canadian population is deliberately misleading) but it clearly misuses the word "subsidy" to imply that those amounts were directly given to the banks instead of lent or used to purchase assets. There are many strange misrepresentations going on throughout the report as a result of the authors' agenda.

Mon, 04/30/2012 - 13:45 | 2385615 ItsDanger
ItsDanger's picture

Getting accurate & detailed data for MBS is easier said than done.  Having been on the other side, investors are flying blind often.  Do you think a $400,000 house with 5% down a few yrs ago that is valued at $500,000 now represents a good mortgage for your portfolio?   Increase in rates, unemployment, drop in values will severely drop virtually all MBS. 

lack of liquidity?  How about downisizing the bloated branches and administration functions?  Bonuses for everyone?   No wonder there are liquidity issues!

Mon, 04/30/2012 - 13:12 | 2385419 nowhereman
nowhereman's picture

I've been trying to tell family, friends and anyone else that will listen, that the situation here is anything but rosy.

The response I get is that they'll keep playing until the music stops.  After all Canada has been socialist for several decades.  Our "conservatives" are far left of the US Democrats.  Free lunch for all.

When this fiasco blows, there is going to dead bodies strewn everywhere.   The sheeple will be sputtering, "but, but, we're Canadian, it's supposed to be different here!"

Famous last words.

Mon, 04/30/2012 - 13:21 | 2385456 SumGuy
SumGuy's picture

Thu Apr 26, 2012
Falling home prices drag new buyers under water

More than 1 million Americans who have taken out mortgages in the past two years now owe more on their loans than their homes are worth, and Federal Housing Administration loans that require only a tiny down payment are partly to blame.

April 26, 2012
U.S. Homeownership Hits Decade Low

The 62% of Americans who say they own their own home marks a new low since Gallup began tracking self-reported homeownership in 2001.

The current level of homeownership marks a decline from 68% in 2011. For most of the prior decade, roughly seven in 10 Americans reported owning their own home. While the recession and financial crisis took place in 2008-2009, homeownership rates didn't begin to reflect the bursting of the housing bubble until 2010, when 65% of Americans reported owning their own home -- the lowest level recorded before this year.

April 23, 2009
Most Canadians pay down mortgage
 
Canadians continue to have more than two-thirds more equity in their home than Americans, according to a new survey.  The study for the Canadian Association of Accredited Mortgage Professionals shows Canadian homeowners have, on average, 72% equity in their house, compared with 43% for Americans.  "It is a very positive part of the Canadian housing story," said Jim Murphy, chief executive of Toronto-based CAAMP. "Canadians pay down their mortgages. Canadians are just more conservative than Americans."

The study also found that Canadians have dramatically reduced the amount of equity they are taking out of their home. A year ago 22% of Canadians had accessed the equity in their home through measures such as lines of credit. Today that is down to 15%.

November 17, 2011
Mortgage-free eventually: RBC poll finds majority of Canadians hope to pay off their homes by retirement.  Among Canadian homeowners, the number of mortgage-free Canadians has increased slightly to 41 per cent in the fourth quarter from 38 per cent
in the first quarter, and the highest level since 2006.

==============

Home ownership in Canada currently is somewhere between 68% - 70% (compared to 62% of Americans).  About 41% of home-owners in Canada are mortgage-free (compared to about 30% to 34% in the US).

The American Dream.

Alive and well -> in Canada.

Mon, 04/30/2012 - 14:24 | 2385804 lizzy36
lizzy36's picture

Just a couple of points.

1) Canadian's are the most indebted people in the developed world. Running at about 150 debt to income level.

2) The problem as many Yanks found out in using the equity level that homwowners have is the number is NOT fixed. Unlike the debt part of this ratio which is fixed. So as prices go up you will have more equity, and when prices go down, you will have LESS. 

3) Further, when one looks at average homeowner equity in Canada Vs. the US one shouldn't use a conflicted report of mortgage brokers but Flow of Funds data:

home owner equity position canada united states

Canada has always has higher home equity, mostly due to different tax regimes. PLEASE not the high level of owner equity in the US (60% pre crash) did NOT prevent the massive housing correction in the US.

4What people say they will do and what they do are two different things.People may deisre to pay down their mortgages, but they are not being incentivized to do so. 2.99% - 4 yr money at BMO is pretty hard to say not to. And most people aren't saying no.

5) More Canadians are mortgage free 47% than those in the US 35%. However looking at this chart one wonders, how many of those mortgage free individuals have a a HELOC?

The growth in lines of credit is shocking. Perhaps masking the true equity position of home owners.

There is American Dream is debt fuelled nightmare. Unfortunately, all numbers point to it being alive in Canada. When the bubble bursts, the blowback will not be pretty. It never is. 

Mon, 04/30/2012 - 14:35 | 2385847 Renfield
Renfield's picture

A nitpick: Aussies are actually more indebted, 165 debt-to-income and climbing when we left in late 2010.

http://www.whocrashedtheeconomy.com/blog/intro/household-debt/

But I get your point! It's pretty damn bad up here....

 

 

Mon, 04/30/2012 - 13:13 | 2385422 SumGuy
SumGuy's picture

As usual, Goldhedge (er - I mean Zerohedge) has it wrong.

The reader will note that no Canadian banks have failed.  Not in the past year, or even the past decade.  Contrast this with dozens of US banks (which are closed on friday - always a friday.  Friday is known as "Bank Closing Day" in the USA.

So the Canadian banks got some cash to hold for a year or two.  big deal.  Nobody on both sides of the border wanted to borrow anything from the banks anyways.  Corporations were flush with cash.

And very little of the trillions in so-called new US gov't debt have circulated in the real economy.

Someone go and show me a graph of US money supply per capita over the past 10 or 20 years.

 

 

 

Mon, 04/30/2012 - 14:57 | 2385933 FranSix
FranSix's picture

First they get bailed out, then they get bought out.  Cannacord Capital was bailed out after ABCP, then bought out.

Mon, 04/30/2012 - 17:55 | 2386607 smiler03
smiler03's picture

SumGuy, I think you have a very good point there. I did a little research and found two useful Wikipedia Entries:

http://en.wikipedia.org/wiki/List_of_acquired_or_bankrupt_banks_in_the_late_2000s_financial_crisis

Now the interesting part is that because of the sheer number of US banks that were bankrupt, filed for pankruptcy protection or closed and received by the FDIC is so large they have created a separate entry for them:

http://en.wikipedia.org/wiki/List_of_acquired_or_bankrupt_United_States_banks_in_the_late_2000s_financial_crisis

A much neater list though of failed US banks is compiled by the FDIC:

http://www.fdic.gov/bank/individual/failed/banklist.html

 

Mon, 04/30/2012 - 13:16 | 2385429 asteroids
asteroids's picture

As ZH and other have noted housing in Canada is in a bubble. The "bailout" money was obviously used to inflate this bubble. The banks have taken out a LOT insurance with CMHC knowing one day the bubble would collapse. CMHC is a quasi-governmental organization so private debt will be transfered to the public coffers. Just like the US!  Well, the Canadian government has said no-mas. What comes next? Interest rates WILL rise. People will become bankrupt (my own brother has) and the banks will collect on the insurance. Canadian debt will rise. The Looney will fall. If interest rates rise slowly, then it may not be bad. If they rise quickly then it'll be a fucking catastrophe. The province of Ontario has more debt per capita then California. This will not end well.

Mon, 04/30/2012 - 13:25 | 2385494 SumGuy
SumGuy's picture

Canada's real estate market is not in a bubble.  Vancouver's home prices are being inflated by rich immigrants from asia - that's all.  When you can't put down anything less than 5% down, and when you have to take out federal CMHC mortgage insurance for anything less then 25% down, you're not going to have the crazy speculation that you had in the US back in 2004 through 2008.

 

Mon, 04/30/2012 - 13:33 | 2385554 TheFourthStooge-ing
Mon, 04/30/2012 - 14:41 | 2385861 Renfield
Renfield's picture

I already schooled SumGuy on this, here:

http://www.zerohedge.com/news/goldman-path-complete-world-domination-mark-carney-his-way-head-bank-england

Now he's back trolling the exact same bullshit. He's a moron who never supports his assertions and can safely be ignored.

Mon, 04/30/2012 - 18:00 | 2386626 smiler03
smiler03's picture

Nice one Renfield, your link doesn't go straight to your comment though, this is your full link. Hope it helps ;O)

http://www.zerohedge.com/news/goldman-path-complete-world-domination-mark-carney-his-way-head-bank-england#comment-2353359

Mon, 04/30/2012 - 13:17 | 2385447 monmick
monmick's picture

Yikes! It's not a good idea to tie yourself to CCPA research...

Mon, 04/30/2012 - 13:31 | 2385535 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Paging all righteous Canadian Bank apologists to Zero Hedge.  Please sign in and confirm you have read the article.  Thank you.

Mon, 04/30/2012 - 14:49 | 2385906 ZeroPower
ZeroPower's picture

The article is a fucking joke. Let's forget about the CCPA's clear agenda while producing the article (a commenter also noticed this above, though i'm sure anyone else is smart enough to figure out in a few minutes...). The banks that received some form of Fed support (not ALL Cad banks btw) are the ones with large cap markets operations. I.e. It wasn't RBC receving help for their local mortgages or loans to SMEs, it was RBC CM, same goes for CIBC WM, etc etc. The divisions which held ABCPs and whatever other toxic shit that was already written down.

Yes Canadian banks held way more risk than they should during the crisis - what bank didn't? Why this is being brought up now, with the crisis over (although yes some still "look forward" to the double dip coming back across the Atlantic, though latest figures don't support this) is beyond me. Again, probably because this "non-profit" has an agenda behind the printing of this article.

Of course ZH will catch on to this since it supports their anti-Cad-bank thesis which they started a while ago, but this should be of no surprise to anyone.

As to the issue in and of itself, for the last time, THERE ARE 2 VERY DISTINCT housing markets in Canada which skew the whole damn average out of whack for home prices. Vancouver is just full of 'we pay cash' Asians, while Toronto is just as much of a "bubble" as NYC is. Do you see NYC going down like FL, NV, CA? No, obviously not. So you can forget about Toronto prices going down to earth too.

Mon, 04/30/2012 - 15:33 | 2386071 prains
prains's picture

ZeroP you might know the numbers for CMHC, i don't ususally pay attention to the details, spend more time looking for the end game.BUt does this sound about right...

CMHC balance sheet in the last ten or so years has gone form carrying 30Billion to over 500 billion. If so, when the jobs dry up this thing just goes fannie may. And what is this thing about 1967 i keep hearing about and some guy named Bill B.

Mon, 04/30/2012 - 15:42 | 2386103 lizzy36
lizzy36's picture

I will argue on just a couple of points. Because I agree that the CCPA is better known at the Canadian Centre For Alternatives To GOOD Policy.

However, on the housing market i am worried.

Housing prices to income is 4.9x. That is well above the 30 year average of 3.75x. US peaked at 5.1x in 2005. Granted that number gets skewed by Vancouver, and Toronto, but those two housing markets have always priced well above the rest of Canada, so would be taken into account in the 30 year average.

Out here in Calgary we have started bidding wars. House last week, listed for $5m, went for $6m. That is second time in last 10 days that has happened. 

Capital flight from Asia looking for a home, and using housing in Vancouver as a starting point somehow does not make me feel better.  If capital is leaving China, there is a reason. Hugh Hendry made some very interesting points on this matter yesterday. 

Finally, there is no doubt Carney is in a tough spot. He is aware of percolating debt levels in Canada. Mortgage debt included. If he raises rates, while US embraces ZIRP, our dollar flies and Ontario suffers. If he doesn't raise rates, he really risks letting a hot hot real estate market, get bubblecious.

Mon, 04/30/2012 - 13:38 | 2385557 earleflorida
earleflorida's picture

from the frb > aig > tbtf's, swollowed up by a squid, that grew so old, it decomposed {alittle harry [metaphorically speaking] nilsson in there 'the point']}

where's AIG's poor mr. hanky?

Mon, 04/30/2012 - 14:19 | 2385614 FinalCollapse
FinalCollapse's picture

The Canadian RE bubble is bursting now. Only Toronto experiences the last moments of blow off top. The rest of Canadian RE market is in serious decline. Try to sell house in Victoria these days.

No - it is not Asian investors. In what it was super hot Vancouver market the Asian investors were less than 5% of sales. One greedy realtor packed local Chinese into helicopter, asked media to film it and went flying above most expensive hoods. The TV story was that Vancouver is being swarmed by Chinese billionaires. The Vancouver RE is in decline already.

It will be fun watching all these HELOCs going to hell. From what I know from 90s these Canadian banking CEOs are the dumbest managers in the world.

Mon, 04/30/2012 - 14:06 | 2385710 Jreb
Jreb's picture

Oh Canada - to blind to see who will stand on guard for thee?

http://www.youtube.com/watch?v=iiHC-sRD_t4

Sold out slave society?

Yes indeed.

Mon, 04/30/2012 - 14:10 | 2385732 XtraBullish
XtraBullish's picture

no freakin' WAY the Canadian banksters are dumb - they read books and went to school and learnt ta play hockey in primary skool. Banksters are banksters irrespective of nationality...

Mon, 04/30/2012 - 14:16 | 2385769 msamour
msamour's picture

Housing in Canada is arguably in a bubble. The argument that could be had is that the situation is not as clear cut as in the U.S. We have a wage bubble in Canada, I would say. The wages have been stagnant for the last 30 years now, and the price of everything has gone up. The extent of the price increase depends on which sector you look at. The big 3 important ones like housing, food, and energy have increased the most. I do not have the figures exactly, but I will tell you that the price of gasoline has more than doubled since 2003, and the price of food has gone up by at least 20%.

With stagnant wages, and an ever increasing cost of living, no one here needs to be a genius to know that something will break at some point. A friend of mine as a saying:We are only 9 meals away from anarchy. It is increasingly looking like we are getting to the point where people will start to go hungry. That is what i am preparing myself for. Everything else simply doesn't matter at this point.

Mon, 04/30/2012 - 14:42 | 2385873 alfred b.
alfred b.'s picture

 

       Canadian Press and most of bnn, much like in the US are always in awe and on their knees when handling politicians and members of the banking cartel....they see themselves as part of the elite group while, they're really being used as water carriers!

      Can't trust any of those lap dogs.

 

 

Mon, 04/30/2012 - 14:44 | 2385890 EmileLargo
EmileLargo's picture

If Canada's banks need a trillion dollar bail-out, the Canadians can simply "mortgage" 10 billion barrels of crude oil and borrow a trillion against it (10 bbl being not even 5 percent of their recoverable oil reserves). 

I wouldn't worry too much about Canada. Yes the banks could have a lot of crap on their balance sheets. But the government has natural resources worth tens of trillions and they aren't going to run out any time soon. 

Mon, 04/30/2012 - 14:46 | 2385901 peekcrackers
peekcrackers's picture

Tyler .. Thank you a 1000 times for having the balls to show  the truth!

From a Canadian

 

Mon, 04/30/2012 - 14:47 | 2385908 GCT
GCT's picture

Glad to see some Canadians do not spout the pundit/party line and see what is going on.  On the other side of the coin we have some Canadian sheeple here telling us as usual their problem is different and they do not have a bubble. Only time will tell.  One poster even states there is no speculation going on in one line only to state foreigners are raising their prices.  Duh what is that then! 

The real question is will GloBe and Mail formally off an apology to Zero Hedge for being correct.  I followed the drama at GLobe and Mail and it sure caused a ruckus with some of its writers and the Minister of Banking.  Tough to eat crow from time to time. 

Mon, 04/30/2012 - 15:40 | 2386097 SumGuy
SumGuy's picture

I live in the 10'th largest city in Canada.  I bought my house in 1999 for $182k (2 storey, with basement, 2-car garage, about .3 acre lot on a 6-house circular court).  Today, based on recent sales of similar homes in my neighborhood, my house would sell for about $300k.  Three years ago it would probably sell for $285k.

Based on these numbers, which moron among you is still going to say that there is a real estate bubble in Canada?

 

Mon, 04/30/2012 - 15:57 | 2386180 niktamere
niktamere's picture

0/10

also lol

Mon, 04/30/2012 - 18:53 | 2386764 smiler03
smiler03's picture

SumGuy, maybe in your little city there isn't much of a bubble, that doesn't mean that there isn't in Canada as a whole. Indeed, the Bank of Canada Governor Mark Carney commented on it last Tuesday:

"Nationally, prices were 6.1 per cent higher than a year ago. In January, prices were 6.5 per cent higher.

The data is likely to show up on the radar of Bank of Canada governor Mark Carney, who has repeatedly warned that Canadians are piling on too much debt as they buy homes whose prices keep rising.

At a House of Commons finance committee meeting Tuesday, Carney warned that house prices in relation to income levels are now running 35 per cent above historical norms."

http://www.vancouversun.com/business/real-estate/Vancouver+home+prices+fall+fifth+consecutive+month/6517076/story.html

Hamilton, Ontario, population 500K?

Mon, 04/30/2012 - 16:36 | 2386322 FinalCollapse
FinalCollapse's picture

You need to learn RE basics like price-to-income and price-to-rent ratios. The historically normal (in Canada too) price 2 income ratio is between 2 and 4. In some places (big cities like Toronto or Vancouver) in Canada it is 10 to 15 - and you call it business as usual? C'mon. This is a bubble of humongous proportions! The absolute price is meaningless and needs to be related to location and demographics. Don't call others morons when you clearly look like one!

You live in second tier or third tier city. It is perfectly normal that some lesser cities (2,3 tier) are not experiencing bubble. There are cities in USA or China that never saw a bubble. That does not change the big picture that Canada is in terrible RE bubble and there will be plenty of tears (hopefully not blood) on the other side of the hill.

Stay in your shack somewhere in the 10th largest city and hope you are not run over by an eighteen wheel truck. 

Mon, 04/30/2012 - 15:02 | 2385956 FranSix
FranSix's picture

The irony in the Canadian housing bubble, is that if you voted conservative, you were basically intentionally choosing the party to inflate your housing asset price.

Now the press is choked with articles decrying leverage, while the conservatives are tut-tutting anyone on borrowing.  So the conservatives are going to blame their own constituents for voting for them.

Mon, 04/30/2012 - 15:38 | 2386090 vamoose1
vamoose1's picture

MAJOR KUDOS TO TYLER

  I remember my tub thumping Canucks descending on his head for questioning the ironclad Canadian banks.

   Horseshit then,  and  now documented horseshit today.

   Canada does 70  percent of its export business with  a bankrupt southern  neighbour,  that  would be you. And when  your customer goes tits  up? Kindly be serious,   its cold up  here!!  thats why we did furs big time way back  when.

    Fort Drum  hosts a fully mechanized division poised an hours jeep  drve from the Canadian  border,   it would be over in  an  hour,  most of Canadas remaining military  military collect welfare on their impoverished bases...  FOOD STAMPS YOU SAY???SOLD!!

Tue, 05/01/2012 - 00:21 | 2387427 jackinrichmond
jackinrichmond's picture

another story about canada's impending crash.. i've been reading these stories/predictions since 2008.. usually about 1 or 2 per month.. i guess if you say something will happen long enough, you might eventually get it right... but being too early is the same as being wrong, so i would say that the canadian economy has made fools out of the authors of these stories.. and they're still wrong..
if you need to write a story about canada, make yourself useful and look into what happened to their 1000 tons of gold..

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