Canadian Conservatives on the Subprime Bandwagon
From the Canadian newspaper of record, the Globe and Mail, the Saturday, Dec 13 edition. Apparently, like Mary and her little lamb, wherever neo-conservatives go, subprime is sure to follow. Emphases are mine:
How high-risk mortgages crept north
JACQUIE MCNISH AND GREG MCARTHUR
December 13, 2008
The untold story of how elements of the first Conservative budget in 2006 encouraged the entry into Canada of such big U.S. players as AIG, creating our version of subprime mortgages
…Just yesterday, Finance Minister Jim Flaherty repeated the mantra that the government acted early to get rid of risky mortgages. What he and Prime Minister Stephen Harper do not explain, however, is that the expansion of zero-down, 40-year mortgages began with measures contained in the first Conservative budget in May of 2006.
At the time, Mr. Flaherty announced that the government was opening up the market to more private insurers.
“These changes will result in greater choice and innovation in the market for mortgage insurance, benefiting consumers and promoting home ownership,” Mr. Flaherty said.
The new rules encouraged the entry of U.S. players such as American International Group – the world’s largest insurance company – and Triad Guarantee Inc. of Winston-Salem, N.C. Former Triad chief executive officer Mark Tonnesen, who spearheaded his company’s aborted push into Canada, said the proliferation of high-risk mortgages could have been mitigated if Ottawa had been more watchful.
“There was a lack of regulation around the expansion of increased risk,” he said.
Virtually unavailable in Canada two years ago, high-risk mortgages proliferated in 2007 and early 2008 and must now be shouldered by thousands of consumers at a time when the economy is sinking quickly and real-estate prices are swooning. Long-term mortgages – designed to help newcomers get into the housing market sooner – are the most expensive in terms of interest costs, and least flexible when mortgage-holders cannot meet their payments and need extensions.
The Bank of Canada this week warned that the perilous economy could lead to a doubling of so-called “vulnerable households” – those unable to meet their debts – and perhaps cost thousands of Canadians their homes. The central bank, which is always cautious with its words, said in a report that there is the potential for “a substantial increase in default rates on household debt.”…
Harper became Canada’s Prime Minister after his party won a minority government in the January 2006 federal election. By May, he was running to catch up with the Americans.
The entire article, far longer and more detailed, is here: