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Blog > Economy > Conservatives secretly bailout Canadian banks for $114 billion
May 02

Conservatives secretly bailout Canadian banks for $114 billion

Hon. Céline Hervieux-Payette: Honourable senators, let us continue with financial matters. We might wonder if the government should take remedial Math 101.

This morning, as I was studying a report by the Canadian Centre for Policy Alternatives, I read the following:

The Conservative government secretly lent more than $114 billion to Canadian banks, although the Prime Minister and the Minister of Finance boasted around the world that the federal government did not have to bail out Canadian banks at the beginning of the financial crisis.

I have raised the issue a number of times but without mentioning the amount of $114 billion, which includes amounts from the United States and various other sources. This secret loan represents almost $3,400 per Canadian, which amounts to more money per taxpayer than the U.S. provided to American banks.

In the U.S., the figures were made available to journalists and the public whereas in Canada many documents had to be closely examined and studied in detail in order to arrive at this conclusion.

How can the government expect Canadians to believe that the financial system does not need reform and oversight when it secretly lends money to banks to prevent their bankruptcy? How can this government continue to pay millions of dollars annually to the CEOs of Canadian banks?

Hon. Marjory LeBreton (Leader of the Government): I am aware of the report and the organization that prepared it. I look at reports like that and consider the source. I did see that.

I have no knowledge whatsoever as to what the basis of that report is, so I will take the honourable senator’s question as notice.

Senator Hervieux-Payette: The minister has access to all the data. She should go through the same exercise and seek information from several sources. All these people with doctorates in economics can at least give us the figures that the government is not providing. I will continue with the following:

The Bank of Canada has stated that Canadian homes are overvalued by 35 per cent. The Canadian debt-to-income ratio is close to 153 per cent. I raise that regularly because it is going up. The Canadian job market is far from being in good shape.

The Conservative government even went so far as to allow the Canada Mortgage and Housing Corporation to purchase $69 billion of mortgage policies from Canadian banks, effectively transferring the risks banks took with unsustainable mortgages onto the backs of Canadian taxpayers. I was dumbfounded to read that the Minister of Finance was tasking the Office of the Superintendent of Financial Institutions last week to oversee CMHC to prevent it from insuring risky mortgages and putting the organization at risk as well as the government. However, the Minister of Finance and his department have promoted this risky behaviour and changed the rules in order for CMHC to do that.

Why is the Conservative government trying to shift the responsibility onto OSFI when it is the Minister of Finance and his own department who are responsible for putting the Canadian housing market at risk?

Senator LeBreton: Actually, that is not true. Just as in the honourable senator’s previous question, she accepts the word of a left-wing policy institution, the Canadian Centre for Policy Alternatives, that claims that there have been bailouts of our banks. There is no basis for those claims at all. With the honourable senator’s financial background, she would certainly have known if that were the case.

With regard to the new code of conduct on mortgage prepayment information, the Minister of Finance has stepped quite regularly into the housing market. We have previously strengthened mortgage rules to protect Canadians buying homes, reduced the maximum mortgage period to 30 years, significantly reduced interest payments that families can make on their mortgages, and are lowering to 85 per cent the maximum amount lenders can provide when refinancing mortgages.

We have introduced Bill C-28 to provide for the appointment of a financial literacy leader; we have introduced credit card reforms to ensure Canadians have the information they need; our code of conduct is welcomed by consumer groups and especially small businesses; and we continue to monitor compliance, with any possible violations being investigated. With regard to Canada Mortgage and Housing Corporation, the minister has now taken additional steps.

All of this is intended to continue to secure Canada’s leading role in the world with regard to the financial health of our country. The Minister of Finance is to be commended because he and Canada are recognized around the world, with all leading economies, as being a leader on the whole issue of financial management.

Senator Hervieux-Payette: The Leader of the Government in the Senate was the one who introduced bills about accountability and also talked about transparency. I want her to be transparent and look into the figures she has with the Minister of Finance. CIBC received a government bailout of $21 billion representing 148 per cent support of the bank’s value; in fact, we could have bought the shares and owned the bank. At least we would not have paid the president millions of dollars. BMO received a bailout worth $17 billion representing 118 per cent and Scotiabank a bailout worth $25 billion representing 100 per cent of its value. That means that these banks were almost bankrupt, if not bankrupt, technically.

Find the figures and contradict them rather than criticizing this organization that did excellent work. I encourage honourable senators on both sides of the Senate to read the report and see where Canada is in terms of financial difficulty and what we can expect in the future if we have a recession.

Senator LeBreton: First, the honourable senator would know that the government did take timely and effective actions supporting lending to Canadian households and businesses through the Extraordinary Financing Framework, which was publicly and repeatedly laid out from the very start. There is no big secret here. That most recently includes the last budget.

To suggest, honourable senator, that this has not been clear to Canadians is incorrect. As publicly noted, the Insured Mortgage Purchase Program will have generated an estimated $2.5 billion in net revenue for taxpayers. The government has taken the proper steps in securing our housing market and ensuring that we are and continue to be concerned about Canadian household debt. We believe we are on the right track in addressing these issues.

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