Monday, October 20, 2008

Canada's banks- Financial crisis, or NAU standardization ??

Canada's banks were supposed to be in good shape? Canada's banks were supposed to have been insulated from the "credit" crisis? So these last few news reports leave me a tad concerned.
Why these bailouts? Why the accounting changes to bring Canada's banks in line with "elsewhere"? Is there something else, coming down the pipeline? I have a sneaking suspicion there is more here then meets the eye.

The first news story that grabbed me was: Canada takes 25 billion dollars in mortgages off the books of the banks

Canada is buying 25 billion dollars in insured mortgage pools to help the country's banks, plagued by the widening global financial crisis, raise long-term funds to loan to Canadians, Finance Minister Jim Flaherty said Friday.

Whose mortgages are contained in these pools? From the articles I read, I don't get the impression these are necessarily Canadian citizens mortgages. I haven't yet noted any news of a mortgage crisis in Canada. Then Finance Minister Jim Flaherty says
the "relief" would not cost taxpayers.
He says this because, the mortgages in this mortgage pool, are already backed by the Canadian government.

And since the mortgages are already backed by the Canadian government, there is no additional risk to taxpayers.

So , if the mortgages were already backed by the government, why give the banks 25 billion dollars for them? What did the banks have to worry about witht these mortgages, they were insured and were going to get paid? Or was this just a way to give banks money? Similar to the way the US is buying "stocks" in US banks. That is a major joke, at the taxpayers expense.

Then shortly after this questionable bail-out, that won't cost taxpayers anything, right after PM Harper told Canadians , "don't worry , be happy" this news saw the light of day.
Accounting rules eased for banks

The timing of that seems suspicious. 25 Billion dollar bail-out, and now the ability to use creative accounting practices by easing rules for banks.

Canada's accounting watchdog confirmed Friday it is changing rules that govern how financial institutions value poorly performing assets on their balance sheets.

These accounting rules will bring Canada's rules in line with standards "elsewhere".
Elsewhere? Like where elsewhere, the US elsewhere?

the Accounting Standards Board (AcSB) is amending its rules to make them consistent with accounting standards elsewhere in the world.
This is a bonus for the banks.

Essentially, the new rules mean banks postpone reporting losses on assets that have slipped below their market value but are not likely to be sold in the near future.
Now that is interesting. Getting to fudge the losses, by postponing reporting them, isn't that what brought the financial crisis on? Read on fearless reader, read on!

But there are also fears that easing up on so-called mark-to-market rules will lead to the same risky lending that brought large investment banks around the world to their knees over the past year.

Scratching your head yet? Perplexed? Join the club. What comes to mind is the definition of insanity. Doing the same thing over and over and expecting different results?

Moving along to today: Ottawa poised to bolster bank lending

Ottawa is poised to guarantee loans Canada's banks extend to other financial institutions, a dramatic step aimed at ensuring the raft of multibillion-dollar bailouts around the world don't leave the banks at a competitive disadvantage.
The pledge to backstop interbank lending would cost the government nothing immediately, and the risk of ever being called on to bail out any of the banks is minimal because Canada's lenders have plenty of cash in reserve

So, here is Ottawa, being so generous with taxpayers dollars and so enamoured of changing rules of ACCOUNTABILITY, for the banks. What is going on? This is NOT the time to throw money, at newly unaccountable banks. And this utter nonsense, this will cost the government nothing to do, unless the banks require bailing? How soon before the news reads, the banks need bailing? This is confidence inspiring?

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