I wonder if they’re any more solid now. ~J
Source: Global News
Monday, April 30, 2012 12:36 PM
Big bank headquarters dominate Toronto’s skyline.
Photo Credit: Adrian Wyld , CP Photo
OTTAWA — Canada’s big banks weren’t the pillar of strength during the financial crisis we thought they were, according to a study by the Canadian Centre for Policy Alternatives (CCPA).
The centre’s senior economist – David Macdonald – analyzed data supplied by the Canada Mortgage and Housing Corporation (CMHC), the Office of the Superintendent of Financial Institutions, as well as the banks.
Macdonald estimates that support for the big banks reached $114 billion at its peak – or $3,400 for every man, woman and child in the country. That’s 10 times what the auto industry received in bailouts.
“At some point during the crisis, three of Canada’s banks—CIBC, BMO, and Scotiabank—were completely under water, with government support exceeding the market value of the company,” Macdonald said. “Without government supports to fall back on, Canadian banks would have been in serious trouble.”
The report found that between October 2008 and July 2010, Canada’s largest banks relied heavily on financial aid programs provided by the Bank of Canada, the CMHC, and the U.S. Federal Reserve.
Ottawa has said repeatedly that Canada has one of the soundest banking sectors in the world and the country’s banks did not require a bailout during the 2008-09 financial crisis.
However, the banks did receive help from Bank of Canada programs to make borrowing money easier and CMHC’s insured mortgage purchase program that helped the banks raise cash.
“CMHC was not providing loans that needed to be paid back, as was the case with the other two aid programs,” the report said.
“CMHC was buying mortgages and, as such, the banks did not need to pay this money back. The CMHC program was thus a straight cash infusion for Canada’s banks.”
“The federal government claims it was offering the banks ‘liquidity support’ but it looks an awful lot like a bailout to me,” Macdonald. “Whatever you call it, Canadian government aid for the country’s biggest banks was far more indispensable than the official line would suggest.”
The report notes that the banks reported $27 billion in total profits between them during the period of support and that the banks’ chief executives saw their pay increase by 19 per cent over that period.
Macdonald is calling on the Bank of Canada and CMHC to release the full details of how much support each Canadian bank received, when they received it, and what they put up as collateral.
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- Did Canadian banks receive a secret bailout? (business.financialpost.com)
