Yesterday, I questioned the Leader of the Government in the Senate about the looming mortgage crisis in Canada. Please find attached the transcript of my questions and her answers.

Hon. Céline Hervieux-Payette: Honourable senators, my question is for the Leader of the Government in the Senate. Canadians’ ratio of debt to net income now sits at approximately 146 per cent. This figure clearly indicates that we are headed towards a financial crisis that could equal the 2008 crisis in the U.S.

New mortgage rules announced by the Minister of Finance, Jim Flaherty, went into effect yesterday in order to reduce the number of Canadians tempted by low interest rates and rising housing prices and who commit to a mortgage that they may no longer have the means to pay should interest rates increase.

The Conservative government has attempted on a number of occasions to persuade the Canadian public, wrongly, that the housing bubble was not about to burst and has made no tangible efforts to prevent Canadians from going into debt in such a volatile area. What additional measures has this government taken to force financial institutions to exercise more caution when providing mortgages guaranteed by the government?

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[English]

Hon. Marjory LeBreton (Leader of the Government): The honourable senator underscored in her question the problem that the government acknowledged. Changes were made to avoid a situation like that which occurred in the United States with regard to the mortgage market and problems created by people taking on mortgages they could not afford, thereby starting the whole financial meltdown.

The government has taken a number of measures to help consumers, as the honourable senator knows. These include protecting consumers in regard to debit and credit cards.

There are many suggestions as to how government can encourage banks and consumers to be more fiscally responsible. However, we live in a free economy, honourable senators. The government has taken measures in the banking and mortgage industries over the last two years, culminating in the changes that came into effect yesterday.

Based on reports I have seen, experts do not believe Canada is yet in a position — and hopefully never will be, as was the case in the United States — where people are so overextended that they cannot afford to pay their bills to keep themselves in the homes they have purchased.

Senator Hervieux-Payette: Honourable senators, I wish to salute our colleague, Senator Pierrette Ringuette, for the work she has done on credit cards. I am happy the minister recognized this work and made some changes. It is a good step in the right direction.

However, in his 51-page report, Alexandre Pestov, of the Schulich School of Business, said:

According to the CMHC financial statements, the corporation has only $8 billion equity backing $200 billion in assets. Once defaults rise, the Canadian government will have no choice, but to bail out CMHC. The scale of bailout will likely dwarf all other financial emergency responses done by the Canadian government in the history of Canada. Higher national debt, increased taxes and reduced social services will be the direct result of the Harper government’s intervention to maintain an illusion of the Canadian housing market health.

What steps will this government take to prevent CMHC from the need to be bailed out with the hard-earned money of Canadian taxpayers once mortgage rates start to increase and Canadians default on their mortgage payments?

Senator LeBreton: The honourable senator is reading the opinion of one person that is not shared by others. She is running around like Henny Penny crying that the sky is falling. Other experts believe that, although there is concern, Canada is in no way in the same position as was the United States. The Department of Finance Canada and the minister will closely monitor the situation.

To go as far as to say it will be necessary to bail out CMHC is the opinion of one particular individual quoted by the honourable senator. I will refer the statement to the Ministry of Finance and ask if they wish to comment on it. I will be happy to table their reply as a delayed answer.

[Translation]