Flaherty wants to privatize the CMHC

Twitter reacts

The Globe and Mail is reporting that Ottawa would like to privatize the Canada Mortgage and Housing Corp. in the next five to 10 years, based on remarks made by Finance Minister Jim Flaherty in an interview. Here’s the initial reaction from the Twitterverse:





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Flaherty wants to privatize the CMHC

  1. Of course he does…..it’s worked out so well elsewhere, right?

    • Australia tried it. Seems to be working there. Private mortgage insurance is far from an untested concept.

      • Saudi Arabia tried beheading, and it’s working there. Maybe we should copy other countries on everything.

        Our global reputation as having a solid banking and financial sector is just another thing we can toss to the wind apparently.

  2. God bless him, but what problem is he trying to solve?

    • The fact that taxpayers are on the hook for most of the country’s mortgages. Why should I be insuring anybody’s mortgage?

      • Not to sound TOO cynical brother, but you think privatising the CMHC would result in the government NOT bailing it out if it tipped into crisis?

        • sshhhh you’re not supposed to point out reality to the “free” market dogmatists.

        • Can’t say, but it’d at least be a step in the right direction.

  3. Because after seeing how well the mortgage insurers like AIG did, investors will no doubt be lining up to purchase it, is that the reasoning, Jim?

    • The idea is to sell it to their friends (or their “blind trusts”) on the cheap. That’s the true goal of most government divestments.

  4. Great idea. Tax money should not be used for financing individual houses. There is no reason on earth why government should become a bank.

    • The CMHC was created to help first-time homeowners find suitable, affordable housing (an insurance agency, not a bank.) This can be beneficial to both society and the economy.

      However, the CMHC’s mandate went off the rails under the Harper Government. Banks were allowed to offload the risk of $243B worth of mortgages onto taxpayers. That was not the original purpose of the CMHC.

      Banking is a tricky issue. In order to prevent bank runs the government needs to insure bank accounts. But this means banks can make risky loans for which taxpayers are on the hook.

      In order to stop this, centrist banking regulations were put in place (in the mid-1930s) that prevented banks from gambling with taxpayer money. When banks in America and other countries cut this “red tape” the end result was a financial market meltdown.

      So in the end there is no simple ideological solution. Either governments stick their noses into the business of banks, or there are bank panics, bank runs and the resulting economic chaos.

    • Tax money’s not financing the individual houses. Tax money is providing the assurance that the private money financing the individual houses won’t just disappear.

      In my mind, that’s even worse.

      The argument for it is that there’s a societal benefit in providing such assurance in that it allows more people to be able to find the financing to build their homes which then serves to increase the economy — guys building houses have more money so buy more things giving people jobs building those things, and so on.

      Personally, I dunno which side is the right one. There’s risks, but there’s benefits as well. Will privatizing the CMHC mitigate the public risks? Given past performance (bail-outs, etc) probably not — but it might. Will it maintain or increase the benefits (cheaper mortgage insurance?) probably not — but it might. Basically, I simply don’t know enough to make a call on this issue.

      What I do know, however, is that if I don’t know enough, I’m pretty damned sure Flaherty doesn’t.

      • Well, I’m not in agreement with your wording, at least.

        “providing the assurance that the private money financing the individual houses”

        Actually, it provides mortgage insurance, which means that it assures lenders (ie the big banks) that they’ll get their money back. Yes, this might mean that lenders will then lend more.

        Regardless, there are private mortgage insurance companies in the USA. You don’t need government to do that.
        Of course, the existence of mortgage insurance in the USA did not prevent the housing bust in the USA, because of course (a) the banks did not ask for mortgage insurance anyway and (b) if all the shaky mortgages were insured all the mortgage insurance companies would have gone bankrupt, sort of like AIG did.
        Mortage insurance is not a panacea against making bad loans. When loans don’t get paid back, someone must make up the difference, and regardless of who pays, that’s money down the toilet.

  5. The big problem with privatizing the CMHC is that it has been deregulated under Harper. According to an earlier Maclean’s column titled “The REAL Canadian Bank Bailout,” banks have been allowed to purchase $243B in mortgage insurance which is nothing more than “a simple ploy to strengthen Canadian banks’ balance sheets by offloading risk to the Canadian taxpayers.”

    So when the Harper Government sells off the CMHC, Canadians can be rest assured it will be privatizing the profits while socializing the losses.

    The Conservatives pretend to be prudent managers of our banking system by tightening mortgage rules. But the fact is they were the ones who loosened them in the first place. In 2006 they imported American banking deregulation with 40-year no-money-down mortgages. This resulted in a $114B bank bailout and the CMHC paid out $69B for junk mortgages.

    http://www2.macleans.ca/2012/05/24/the-real-canadian-bank-bailout/

    • Indeed the reason Canadian banks didn’t suck us all under was because Harper hadn’t had the time or the votes to shaft the system completely. Not to mention previous non-conservative/reform governments insisting on regulating the yahoo out of the gamblers that occupy banking positions worldwide.
      Looks like the idiot savant and his gnome are intent on making up for lost time.

      • Yes the full credit for preventing a banking meltdown in Canada lies solely with the Chretien-Martin Liberals who said ‘no’ to American banking deregulation — which Harper (and bankers) was pushing for in opposition.

        Mark Carney has also been given far too much credit. He didn’t come onto the scene until 2008 when the crisis hit. Our financial system simply wasn’t facing a crisis like America’s was (and many other countries like Ireland, Greece, Spain, etc.)

        “Much of the country’s resilience stems from policies—such as bank regulation and sound public finances—which predate Mr Harper.” (The Economist)
        http://www.economist.com/node/16060113

  6. CMHC? How about we privatize the CBC?

    • That’d be great! Shows like The Current, As it Happens and Ideas could be replaced with radio that informs you of the oportunities to sell your gold jewelry and install LeafGuard on your gutters, punctuated with shouting demagogues, exhortations to ,join 99.2 The Moose on location at Bob’s Used Cars for a free hotdog, and reminders that you’re only ten minutes away from 8 uninterrupted minutes of Eagles’s hits….

      • All great radio that you mention.
        So, I`m sure any private broadcaster would be anxious to include them on his most-watched list.

      • This afternoon they were talking to “psychologists” and “philosophers”.
        Gawd, I just wanna know if I’ve still got time to test-drive a new Pontiac before all the great deals are gone and hear Sweet Home Alabama!

    • Send me your address and I fire off a cheque for $1.75 or whatever your share of the net cost of the CBC. Maybe I can send you $10 to cover off the next few years?

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