Inquiring minds in Canada managed to slog through a massive 433 page budget proposal and discovered Depositor Haircut Bail-In Provisions For Systemically Important Banks.
Sure enough. Right on page 145 (PDF page 155) of the Canada Economic Action Plan for 2013 We see …“The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail- in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants.”
In case you are unfamiliar with bank parlance, deposits are not “assets” they are “liabilities”. A plan that would turn “certain bank liabilities” into regulatory capital is a plan to confiscate deposits.
h/t lots of you.
Why not legislate the banks to rip off the depositors? They’re pretty much powerless as long as their money is in someone else’s hands. Deposit guarantees? Don’t make me laugh.
Fiat currency plus fractional reserve banking = eventual bust. A crack-up boom along with a boom of crack.
Live by the 4 G theory: Gold, Guns, Goats and a Get-Away plan.
Yes, a deposit is a “liability” and a loan an “asset.” While I understand the tortured logic of it all (one accrues interest on a loan, while one has to pay out interest to depositors) still banks actually make $ both ways, as they nightly bundle all deposits and loan them out on “overnight repos” to commercial banks, etc., at very handsome rates. What we have here is the socialization of risk, pure and simple.
I recommend all Canadians copy and paste this article and send it to their MP asking what the Hell is going on, and why should I pay my savings to the bank for their mistakes.?
I solved this dilemma by only keeping “assets” in the bank. My “liabilities” are somewhere else, like under the mattress or with the ammo. Given the interest rates these days, your cash would be safer in the bank safety deposit box than in an account.
Several issues should be dealt with:
[1] Break up banks that are “too big to fail” as being that large encourages bad behaviour.
[2] Mandatory 10+ year Jail Terms for poor / reckless management of banks.
[3] Encourage the growth of smaller financial institutions suchs as credit unions and trust companies.
Problem is banks go thru boom / bust cycles every 10-15 years due to reckless behaviour placing all of ones eggs in one or two baskets.
Reform the corporate bonus system as it appears to reward reckless behaviour for excessive short term profits at the expense of long term corporate health / viability.
Kate I think you broke the server dealing with the second link 🙂
Sounds like what would be useful to us, as depositors, now, would be a sober assessment of the health of the various Canadian chartered banks.
While I don’t think any of the big Canadian banks is in imminent danger of failure, maybe it would be a good idea for us to spread our savings out amongst several different banks. If you put your RRSP funds into five banks, equally, even a total loss from one bank would amount to only a 20% haircut. Tough enough, but a hell of a lot better than having your whole nest egg in the bank that goes bust.
This is still better than a TARP-style bank bailout. Depositors should feel the pain of leaving their money with an irresponsible institution. Of course this wouldn’t be necessary if the government would stop subsidizing risk a la the CMHC, depositor insurance, and low interest rates by fiat. It would also be less necessary if it weren’t impossible for a foreign company or even a domestic one to buy a bad Canadian bank. But that’s not going to happen because Harper hates capitalism.
There are other types of bank liabilities that can be converted into regulatory capital, such as bonds. Just as with a deposit, a bond is a liability, but if the bondholders lose their repayment rights, the money they lent the bank (in the form of buying a bond) can be converted into some type of equity interest (which may or may not ultimately be worth anything). In short, their money is seized.
It’s highly unlikely that Canada would ever permit insured bank deposits to be used this way.
Also stockholders can be wiped out. There are usually a number of investors ahead of the depositors in such schemes.
However now is the time for commercial depositors, who often have working capital in large bank deposits, to pay more attention to bank soundness.
Oh, and you might want to buy up some Bitcoins.
The main problem with this conduct…”taxing” deposits is that not only will individuals hold cash but will move a step further….convert their treasure to assets which can be eaten, worn or used to defend the other assets.
This results in capital de facto fleeing the economy….and a crash.
But then the individual must place his own security/welfare ahead of anything else.
taking depositors money is not new..
its as olde as banking
small banks fail faster…or more often…take your pick
and when they fail, they take the deposits ,until liabilities are paid off.
some managers even raid the safety deposit boxes
illegal??…yup..
There’s a key difference which everyone seems to have missed. What’s in the doument are provisions for using deposits over the insured amount to bail out the bank. What was done in Cyprus was to raid deposits to pay of government sovereign debt. If you have an account in a bank, take your choice:
1. You can sacrifice some money over the insured amount to save the rest,
2. You can lose everything when the bank fails.
And for those whining about the joys of small banks, as embutler noted they fail much more frequently. What none of you seem to understand is risk assessment. You have a choice:
1. Stick it in a bank and accept the risk of bank failure or confiscation;
2. Stick it in your mattress and accept the risk of losing everything when your house is robbed.
1. E-mail your MP declaring your opposition to this theft from our accounts.
2. State clearly that shareholders, then bondholders, then preferred shareholders, then unsecured creditors should be the first to take a haircut, in that order. Taxpayers are already on the hook for bailouts via CHMC mortages, and that is MORE than enough, thank you!
3. State clearly that mankind didn’t have this problem until banks were allowed to become “too big to fail”, and over leverage themselves criminally; more than 100 to 1 in Luxemberg, 14-17 to 1 in U.S. That’s how much they lend out compared to assets to back up the loans! No wonder there’s so much money floating around, pushing up stock and commodity prices.
4. Close by stating that Canada should return to the “four pillar” financial system when banks just did banking, brokerage firms did brokerage, trust did trust, and investment houses did M&A and other market-making activities. Now that the banks do all of this, having been allowed to gobble up the other three pillars (plus insurance), no wonder they are “too big to fail”. Solution, down-size them, rather than putting all the risks (and bailouts) on citizens, who are already getting gouged by the “too big to fail” Big-6 monopoly in Canada, whose CEOs are now paid more than Jamie Dimon in the U.S.
Of course, you can also close your e-mail by insisting your vote in the next election will go to the party that implements these sane policies, rather than foist legal theft on the citizens of Canada.
The document clearly states that a big bank failure is deemed unlikely but if a bank became so irresponsible as to put its balance sheet at risk, then the depositors and investors (and hopefully the directors) of that bank shall take the risk, not the taxpayer.
It effectively puts the bank on notice that they are not too big to fail, while recognizing that the world economy is an increasingly dangerous place so we must plan for the worst while hoping for the best. Consider what would happen if swooning Canadian voters elected JT and the LPC back into power? Or scarier still, a minority NDP/LPC government. What kind of damage could they wreak on our economy and prosperity?
It must be said repeatedly until it breaks through zombie defense rationalizations –
NEVER PUT ANYTHING IN A BANK YOU CAN’T AFFORD TO LOSE!
Someone should start a Facebook Page called Canada Bank Run Day, and advise all Canadians to send a warning to the old Fabian Socialist masquerading as a Conservative Jim Flaherty that on such and such a date, soon hopefully that hopefully millions of us will give the Banks a Holiday. We will start a run on the Bank and withdraw all of our savings if he persists with his planned theft. After working all my life and paying millions in taxes like the rest of the sheep, ripping off my Bank Account like a Nigerian Scam is one step too far. I would prefer to take my own chances with my money under my control than have it ripped off for sure by Government Decree. Rise up my sheep. There is still time for the Ewes to turn and fight even as they push you up the ramp onto the truck for the trip to the packing house. BBBBAaaaaaaaa
Close by stating that Canada should return to the “four pillar” financial system when banks just did banking, brokerage firms did brokerage, trust did trust, and investment houses did M&A and other market-making activities.
Wrong wrong wrong. Mulroney knocked down a bunch of these arbitrary limits in the ’80s and that’s a huge reason our banks are better off today. They can move capital between businesses and between provinces. American banks, with the straight-jackets on moving capital and competing between states, can’t do this. The big reason America had such problems in 2009 was more due to too many small banks that too few big ones. The small banks couldn’t take the punishment and many have folded. Free markets never make mistakes.
This story keeps getting worse. The bills to pay off the socialist debt
are finally coming home. Everyone is pissed at the Banks and rightly so,
but what about some attention on the sleazy socialist politicians that
sold everyone on the scams and borrowed the money to run the socialist
scams. And of course the greed of the average voter who wanted the free
lunch.
http://www.zerohedge.com/contributed/2013-03-28/10-40-now-80-confiscation-scheme
The Occupy movement will tell you it’s not the government that’s the problem, but that big business runs the USA.
As evidence … the bank (Wall Street stockbrokers) bailout, GM, Chrysler and various other corporate welfare schemes.
More evidence, from our perspective, to fight against the corporate welfare that crept into the recent Canadian budget.
In the word of the late, great Ralph Klein: “Government is no longer in the business of business.” Equal treatment in the taxation system, no goodies for any company so they can ‘create jobs’ in your jurisdiction.
Unfortunately, corporate welfare is becoming all too prevalent on both sides of the border.
Have a book somewhere here published in nineties exposing Canadian banks –
Titled “Pillars of Gold, Feet of Clay.
Could this policy change cause interest rates to rise ?? Could this push (Cyprus, Europe, Canada, the world?.) to transfer bank default risk from taxpayers to bank customers be the spark that sets interest rates on fire ?? After all, the world has too much debt and too much insolvency – all brought on by interest rates that have been too low for too long.
But no politician anywhere would ever be caught pushing interest rates higher – electoral suicide.
However, if bank depositors are now newly liable instead of taxpayers (which I think is a good thing) would these same depositors now demand higher savings interest rates or the bank simply does not get your money? Consequently, the bank would have to charge higher lending interest rates as well.
Higher interest rates would change everything in the world’s economy. Asset devaluation (real and paper), falling bond values(rising yields), deleveraging in general(fire sale prices on everything).
Could it be that Money Will Talk Once Again?
A rebuttal. I don’t know if it is correct or not (and I have limited faith in the source).
http://www.greaterfool.ca/2013/03/28/hysteria/
The only people who should take a haircut are the bank shareholders. But it seems we have completely lost the will to live by the natural laws of economics.
The Canadian government has just proposed legalizing theft with a raodmap to making this an institutional procedure.
Even though the preceding statement in the document deals with increased capitalization requirements the writing is on the wall. It says that the gvernment will allow or force the banks to rob customers to cover failed loans and bank debt.
Funny how another government initiative over past years has been to incourage increased consumer saving.
Not like the opposition is going to be all over this, is it?
So, are there banks out there that are not “systemically important”?
No, eh.
The citizens have always ended up being responsible, having to pay for the mistakes of inept or corrupt government policies.
Who did you think pays?
I know it’s Easter, but no one else is going to die for your financial sins or those of your government, you’ll still have to pay.
That is why citizens have to pay attention to what the politicians are doing and hold them to account on financial matters as other things.
Note-A haircut isn’t fatal unless it’s so deep it actually takes off one’s head.
Ha ha ha. Ha ha ha ha.
Those prepared are already prepared.
The Garth Turner “rebuttal” suggests that the banks will issue new bonds that can be converted into cash in a SHTF event. Now THAT sounds like a robust strategy.
I have to wonder about my mother-in-law’s GIC that contains the proceeds from the sale of her townhouse. She trusts banks completely.
A GIC is a liability, a bank bond is a liability, a deposit is a liability. No amount of Garth Turner hair-splitting can change that.
Clarke and Dawe – Slight problem with the Cypriot Banking System
http://www.youtube.com/watch?feature=player_embedded&v=YiDDPMw8VO0#t=0s
Big Government: An Unnecessary Evil That Should Be Abolished
The Rape Of Cyprus
Even in the face of unmitigated government theft, I still hear the occasional rationalization of the Cyprus debacle. Defenders of the bailout measures (which the EU demanded) allowing the confiscation of private citizen savings to pay off government mismanaged debt, argue two things:
1) The banks that were targeted contained “Russian blood money” and hidden funds, so confiscation really amounted to a “punishment of rich criminals” rather than the Cyprus public.
2) It is “better” that the citizens go along with the confiscation of a percentage of their accounts, rather than lose everything through collapse.
http://www.alt-market.com/articles/1417-big-government-an-unnecessary-evil-that-should-be-abolished
When MF Global failed Kate predicted it would be HUGE. Reading the comments elsewhere there are those that think with the MF Global funds being “vaporized” and no one ever going to jail that is where the origins of the notion of theft of depositor money originates ala Too Big to Fail Bank “bail-ins”
As for Canadian banks…they are ALL exposed to risky European (soon to be worthless?)bonds…beware.
So banking systems and rules are so damn complicated I can’t really understand most of the financial jargon parlance that gets thrown around these days.
If the feds or Bank of Canada were to tax bank deposits, would it only qualify on ‘bank’ deposits? As in, are credit unions and ATB Financial (not legally a bank) unaffected, or do those get hit too?
I have a sizable amount of money in my chequing account, I’ve decided to spend it all and pay off all my debt like my car loan. No point in saving for the future if the goberment can seize my savings.
Bitcoins are not a storage medium, they’re a transfer medium. And remember at that, that bitcoins too have had a couple of crashes as well. As a miner, using BTC’s as a storage medium is about the same as putting all your money in medium-highrisk stocks, or unless your bank is crashing in which case BTC’s are a safer bet.
I take it as read that, by “insured”, you mean “CDIC-insured”, and I’m certain you are correct.
The optics of this item, however, in light of Cyprus and Europe and TARP, etc., are unfortunate — and the lack of definition around some of the terms used (“distress or failure”, “systematically important banks”, “certain bank liabilities”, “regulatory capital”, “unlikely event”), etc., only breeds confusion, concern, tunneling of vision, and worse.
By way of tangential illustrative metaphor only, my dad, whose a pretty “systematically important” guy in my life, went into hospital about six weeks ago under severe “distress”, and the first thing the great doctor in charge of his care asked me was, “in the ‘unlikely event’ that his heart and lungs ‘fail’, what is your choice re: CPR?” Which none of my father’s previous caregivers had ever asked me before, despite his being seriously ill for about 20 years now. As it happens, he came home this week, in better shape than he’s been in 3 to 8 years.
The government owes Canadians — and those around the world who look to our banking system as a model — an explanation of the terms I mentioned, at least. Which I’m hoping they intend to do, as part of their stakeholder consultation process.
On the other hand, perspective can be helpful, IMO. As a general proposition, I’d rather we have this discussion now than when it’s too late — which it evidently is, and was, for Cyprus, et. al. And I would note that this particular slice of the pizza is but one of several, including:
– prohibition on securitization of mortgage liabilities backed by CMHC (a form of risk transference from our banks to entities unknown and probably not regulated by Canada — which sounds eerily familiar),
– testing the consistency of financial institution compliance with conflict of interest laws,
– increased regulatory oversight of derivative trading, and
– increased capitalization requirements, as deemed necessary, for our banks.
All of which should be helpful in holding our banks’ feet to the fire of financial soundness. I would know, as some others may not, that you are familiar with the idea of “regulatory capital”, which is entirely transitional in a crisis, and which the regulatory authorities essentially, at least by Canadian standards, guarantee.
CDIC-insured was indeed exactly what I meant. Yes, the optics are bad, but I agree entirely that it’s far better to address the issue now than to have it addressed for us as happened to Cyprus.
As for your list, I agree with those also. Mind you, bank shareholders will howl. All of these things will serve to reduce the net profit business areas of banks to some degree. Since banks are essentially dead money where share value is concerned, banks only can remain attractive by high dividend payments, and your list will affect them all to some degree.
So be it. There’s no such thing as “guaranteed anything” in this life, but I would very much prefer that our banks be the last ones standing after all the others have collapsed. If Canadians have to wait another 3-5 years before being eligible for a house mortgage, so be it.
I’d add one other thing to your list; banks must be kept firmly out of the business of owning stock market equities and be restricted on their access into the insurance business. Last thing I want is another Confederation Life dragging down a bank with it.
CDIC-insured was indeed exactly what I meant. Yes, the optics are bad, but I agree entirely that it’s far better to address the issue now than to have it addressed for us as happened to Cyprus.
As for your list, I agree with those also. Mind you, bank shareholders will howl. All of these things will serve to reduce the net profit business areas of banks to some degree. Since banks are essentially dead money where share value is concerned, banks only can remain attractive by high dividend payments, and your list will affect them all to some degree.
So be it. There’s no such thing as “guaranteed anything” in this life, but I would very much prefer that our banks be the last ones standing after all the others have collapsed. If Canadians have to wait another 3-5 years before being eligible for a house mortgage, so be it.
I’d add one other thing to your list; banks must be kept firmly out of the business of owning stock market equities and be restricted on their access into the in$urance business. Last thing I want is another Confederation Life dragging down a bank with it.
I don’t think that interest rates will rise. In a free market for money a high demand for a limited supply of money would push up interest rates. In a system where governments own (or controls) central banks interest rates will not rise because it would push those governments into bankruptcy.
Also, the reason banks are going broke is because they lent money to bankrupt governments. I believe in some cases banks have been forced to lend money to their bankrupt governments. When government bonds (Greek bonds in the case of Cyprus) the banks reserves evaporate.
David, one thing I forgot to add. Is what the government proposing better than TARP? Yes, massively so. And much quicker to implement. And much more likely to prevent panic from spreading to other initially unaffected banks.
It’s good to see that some in the Finance Department have taken some serious thought about how to head off a fall 2008 bank stampede.
This is as it should be. Any deposit over the government insured amount should be part of a bail-in; after all, a deposit is a loan to the bank. Furthermore, with the security of government bailouts off the table, large investors will demand conservative banking practices which will translate into smaller returns, and more stability. Boring, tight-fisted banks are what is needed.
It could be argued that with a clear bail-in system in place for unwinding failed banks, risky practices would’ve been less common leading up to the 2008 collapse. I’d also like to see bonuses tied to long term performance, not quarterly results. How about you get paid in bank common stock, but can only cash it out over a period of 5 years. It’s the bonus system which leads to reckless risk taking, especially when bonuses are payable immediately.
LOL…I guess my fellow SDA readers must also spend a lot of time on AboveTopSecret. Kudos to all us nuts.
The time when you could cheerfully assume your money was 100% safe in the bank would seem to be drawing to a close. The time when you can assume your money -isn’t- safe has yet to arrive, in Canada anyway. So now we get to wait for the other shoe, I guess.
I have no idea how high finance works, but as things roll inexorably forward it seems that the Big Boys have screwed the pooch, and they want to take our stuff to make up the shortfall. Historically, happens every hundred years or so. Not the end of the world, but it may seem so at the time.
It would seem best to concentrate one’s treasure in such a way that theft by officials and banks is difficult. Small and portable has historically been the way to go.
Also, borrowing money in an inflating dollar environment seems a better bet than saving it. You pay off with inflated dollars that have had all the value sucked out of them. No doubt interest rates will rise to make up for that real soon now.
Probably that interest rate rise will be the true indicator that the sh1t has hit the fan for real. The rest is smoke and mirrors.
IMHO, of course. I am -not- a financier, by any measure.
The problem is not the banks, the problem is government.
There are too many people on government payrolls who not only do nothing productive but whose “jobs” reduce economic productivity. I’m thinking about most regulators, anyone who provides handouts to activist groups, subsidy bureaucrats who take money out of the right pocket and put it in the left, and those who shovel money so that some elite artiste bastard can make “Canadian” movies and TV shows that no one wants to watch. Among other examples.
A person on welfare may take (say) $10,000 and produce goods and services worth $0. But a regulatory bureaucrat might make a salary of (say) $100,000 and also cost the economy $ millions in reduced productivity. On the other hand, government employees who build and pave the roads, for example, are producing worthwhile goods and services. And the cops and justice department officials perform necessary functions. So I’m not pointing the finger at them.
These fake “action plans” are one of the worst things about the Harper Conservatives. The only valid economic action plan is FREEDOM, that is, the freedom of each individual to use his or her own resources to decide what to produce, what to trade, whom to trade with and for what and how much in return. There are no government “incentives” or “stimuli” that go into one taxpayer’s pocket that don’t come out of another first. There are usually one or two minor pro-freedom initiatives hidden within all the money-shuffling.
A proper “action plan” should do the following:
1. Streamline the tax system. Close most of the loopholes but keep the rates low. For private individuals, a personal exemption, a spousal and probably child exemptions, plus charitable donations. That’s about it. For businesses, a small flat tax on gross income, not profits. Your sales are $10,000,000, then your taxes are $200,000. QED.
2. Eliminate subsidies to business.
3. Stop funding “activist groups”. They are parasites.
4. Stop funding community initiatives like arenas, fraternal associations and so on. Eventually all infrastructure should be sold off, but it’s probably too complicated to do immediately.
5. Abolish regulations – let’s say most of them rather than all. We all agree that business must play by certain rules, but they’re far too complex these days. I can understand some environmental and safety rules for business generally, and undoubtedly some for financial institutions specifically, and perhaps a few other things. But “keep it simple, stupid” is the way to go. Plus, the Supreme Court of Canada has ruled separately that (1) regulatory bureaucrats cannot be held responsible if they foul up through incompetence, laziness or malfeasance, and (2) businesses can be held responsible for their actions if they cause problems despite being in compliance with regulations. The combined effect of these two rulings (Cooper v. Hobart, 2001, and St. Lawrence Cement, 2008) is that regulations are not necessary.
All of this will require federal-provincial cooperation and probably municipal too. But the idiot politicians will go down with the ship too if they don’t pay heed and if the economy does collapse.
So the problem is not the banks, the problem is government. However, I do wish the banks would stop pretending that their little consumer programs can guarantee their customers a comfortable lifestyle and/or retirement. Unless and until government stops strangling the economy, it won’t happen.
Put the shoe on the other foot.
Let’s use the annual government budget for an example. They are required to operate a balanced budget, when they over spend, ie run a deficit, it places the government on bad financial footing.
How about we reach into the pension funds, controlled by the government, of every current and former employee to make up the amount the budget falls short.
After all, can’t have the taxpayers on the hook for poor fiscal management, not when there are “certain liabilities” that could be very quickly converted into working capital.
One year of present and former government employees taking a cut to balance the federal budget would do wonders for the efficiency of the public service.
And just curious, but when/if this happens in Canada, does it come with all the Cyprus trimmings?
You know, the armed guards in front of the banks to “preserve order”, the imposed daily withdraw limits, the border forces looking for and confiscating cash over the “approved limits” before you can leave the country?
That sort of thing.
The principle to remember, is this: He who makes the choice, takes the risk and accepts the loss.
Burpnrun (@12:25 PM, point #2) laid out the basics. The first and largest loss goes to the owners (shareholders), next the large creditor or bondholder, then the contractors, the secured creditor (that’s you), and employees. Those are the risks, now act accordingly.
Governments jumping in and saving people from their losses sounds nice but it just means that a different person gets hosed, one who didn’t choose to take the risk.
What is new (new to me, anyway) is that we don’t finish step #1 before moving to #2: shareholders are not wiped out, but merely take a “haircut” before the creditors suffer. Maybe that is for the best, as well (eg. owners lose 90%, lenders lose 40%, contractors 40% and employees lose 10%), but let’s all be clear on the rules.
We are entering a world where bad things are going to happen. I want to know what will happen, when and to whom. The scandal in Cypress is not that people lost money, it is that people who were assured one level of risk when they made the deposit were forced into a different level of risk. The innovation in Cypress is that bank depositors, compared to German taxpayers, had more choice and deserve a bigger loss. By all means, let’s make it official.
Kate, that’s some impressive handle your comment system assigns me. You can call me TmprmmpE, for short. I feel like a Prince.
-Pete E
Some of the comments in this thread answer a question I had as to how sheep can stand on the leeward side of a stone fence in a snowstorm until they are buried, seeing the blind trust in our government it looks like some people share the same traits as the sheep.
It also explains why banks aren’t burning in Cyprus, and instead grandfathers and grandmothers just entering retirement are wondering what happened to their life savings, and how it could happen. Buts that’s okay everyone else kept their money and the banking system survived……
I’ll just hope there is some integrity left at the top and people here have just a little bit of fight left in them left.
Owners have already lost 99.99 percent. Shares that used to be worth 25 dollars are now worth 25 cents. They have effectively lost 100 percent. The only people still trading the shares are gamblers.
The bank burning comes later, when Grandma and Grandpa get kicked out into the street and their kids have to feed them, because the bank seized all their savings.
Money is just money. Until you get hungry. Or cold, as Brits discovered this year.
Of course it’s better than TARP — and that point needs to be underscored. Incidentally, just to be clear, the list of items I noted in my 6:41 p.m. post last evening is not “my” list — it’s actually the list of items on the subject of financial services industry financial soundness which is included in the same section of the budget papers as the particular item we’re discussing here (this item was just one item on the list of 4 or 5, as indicated).
The prohibition on securitization of CMHC-backed mortgage liabilities stands to prevent a banking liquidity crisis and a uncontrollable sub-prime housing bubble, right there. Flaherty’s is a bit of a high-wire act: he doesn’t want people to stop people buying houses, but he’s rightly doing his level best to discourage dangerous unaffordable speculative behaviour, being fueled as it is by the banks going after business which can only have marginal profitability of close to zero, if that — a point on which he was unjustly and erroneously ridiculed by Andrew Coyne the other day.
As to the banks’ shareholders howling, so be it, as you say. Try running better banks.