What U.S. could learn from Canada's banks (ranked the safest in the world) - REGULATE.

[JohnWxy]

In the U.S., some blame the financial debacle on the 1999 repeal of a Depression-era law that prohibited commercial banks from owning investment banks (The Glass-Steagall act repeal in 1999. The Corporate Lobbyist Party like's to point to this as the cause of the Deregulation Disaster. More important was the Commodities Futures Modernization Act which made trading in Credit Default Swaps legal AND UNREGULATED._JW). But Canada notably allowed such mergers for more than a decade without incident before the U.S. scrapped its Glass-Steagall law. Conservative management made the difference.


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Praise for the Canadian regulatory approach has come from former Federal Reserve Board chairman Paul Volcker as well as the head of the National Economic Council, Larry Summers. "Canada has come through this period with much less financial damage than we suffered. ... I think there are some lessons in financial regulation to be gained from what's happened in Canada," Summers told USA TODAY in a recent interview.

Indeed, Canada's experience is reflected in elements of the Obama administration's proposed revamp of financial industry regulation, the most sweeping set of changes since the 1930s. One example is an increase in the capital buffer required of financial institutions, especially those whose failure would threaten the entire system. Canadian banks must maintain high-quality capital reserves beyond international standards, thus limiting the banks' use of borrowed funds for investments. (Such leveraged financial bets magnify gains if they pay off — or losses if they don't.)
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Canada's Big 5 banks, which account for about 85% of industry assets, didn't make subprime loans to customers with weak or non-existent credit ratings. And rather than package their mortgages into securities for sale to other investors, as U.S. banks did, Canadian banks held onto the loans. Limits on the banks' use of borrowed money to goose their investment returns further insulated them from the woes suffered by their American counterparts.


heres the link to the article. A very good read. Print it out and show it around to others who are confused by how this REPUBLICAN DYSTOPIA happened.

http://www.usatoday.com/money/world/2009-07-01-canada-bank-regulation_N.htm

[alice silas]

1. People that could not afford homes were buying them for too much money.

If we had locked down loans to unqualified people we would be sitting pretty & pink just like Canada.

Reselling mortgages as investments was never a problem until the packages becamse populated by mortgages owed by people in homes they had paid too much for and had too little income to make the payments.

[Commie Pinko Dirtbag]

3. No, wait, let me guess:

They all were welfare queens in Cadillacs who oppress Christians and hate America, right?

[JohnWxy]

4. Wall street's demand for subPrime loans exploded after CDSs were made legal. The CDSs

enabled Wall Street banks to market high rate (i.e. composed of subprime loans) CDOs (Collaterized Debt Obligations) to institutional investors because they sold them CDSs along with them. They told the institutional invesors that the CDSs would protect the investor against loss due to default. OF course, the banks then went and bought CDSs from AIG to cover themselves against loss, should they have to pay off their customers in case of defaults. But they needed high rate CDOs to interest the investors. Ordinary low rate mortgage loans were of no interest (no pun intended).

It was this demand for the high rate (composed of subprime loans) CDOs from Wall street that pushed the predatory lenders to beat the bushes for suckers. Admittedly, many people signed up for loans they should have known better than to sign up for. Many, many people did think the pumped up houseing market (thanks to overly expansionist monetary policies at the Fed) would just keep on going up. And they thought the party would go on forever and they would, in a few years, sell their house or condo for more than they paid for it and get into something even more expensive. And they got in way over their heads.

The subprime market really took off after 2000 - about 2002 really. This was after the CFMA made CDSs legal and unregulated.

The Comptroller of the Currency stopped 50 states attorneys General from going after predatory lenders (using consumer protection laws) in 2004.

The Comptr of the Currency also went to court to stop Eliot Spitzer then attorney gen of state of New York from investigating (with intent to prosecute) predatory lenders in NY.

[whoneedstickets]

2. Banking, healthcare, gun laws, gay marriage.... just the tip of the iceberg..

..of things the US could learn from Canada.