Harper says Canadians can breathe a bit easier after G20 agrees on plan of attack
· TSX -296.82pts (Reuters) ending another rough week on a sour note, as investors took profits from Thursday's 400 point rally and embraced tighter their fears that recession will cut oil demand and starve earnings in the oil sands.
· DOW -337.94pts
· Dollar -.94c to $81.16US.
· Oil -1.20 to $57.04US per barrel. A record drop in U.S. retail sales in October refreshed concerns that a prolonged recession will curb demand for oil.
· Gold +32.50 to $742.40US per ounce In one record-setting day, gold shot out of its funk and reasserted itself as the ultimate safe haven while the U. S. financial sector crumbles all around it.
WASHINGTON At least 110 banks have requested about $220 billion US from the U.S. Treasury Department’s rescue fund, and many more are expected to submit applications. The figures, from the banks’ own statements, indicate the requests are closing in on the $250 billion the Treasury set aside from the $700- billion fund to purchase stock in banks
G20 leaders head home with plan to fight mutual foe: the economic meltdown By Lee-Anne Goodman, The Canadian Press
WASHINGTON - The emergency G20 summit this past weekend brought together leaders from nations that have spent centuries as far apart politically and philosophically as they are geographically.
Yet former foes that include the United States, Russia, India and China are uniting in the face of a common enemy - a global economic meltdown that's threatening to plunge the world into a depression.
That doesn't mean, however, that there weren't tough pills to swallow and tensions along the way as the leaders of the far-flung G20 nations, including Prime Minister Stephen Harper, formulated a broad action plan aimed at combatting their mutual menace on numerous fronts.
The magnitude of the crisis is such that Harper emerged from the summit to suggest he would cast aside his longtime aversion to deficit spending and dole out whatever cash was necessary if it was for the good of the world's financial health.
"Look, if there is a worldwide agreement, then we will engage in sufficient stimulus to do our part in carrying global economic demand," Harper said.
"We will fulfil our part of that agreement."
Discussions were reportedly pointed at times behind the scenes at the summit, with French President Nicolas Sarkozy apparently causing some of the biggest frustrations.
Diplomats present at the summit told the Washington Post on Sunday that Sarkozy was the slowest to commit to a moratorium on protectionist measures and a reaffirmation of free trade at an extravagant White House dinner on Friday night.
His stance irked some of the developing world leaders whose countries have been brutalized by a decrease in exports in the face of the global economic crisis, and who would be further harmed by protectionist trade policies.
Sarkozy's calls for broad global regulation also prompted Harper to reiterate his argument that even in regulation-friendly Canada, the idea would be seen as trouncing on national sovereignty.
Senior Bush officials were also forced to play down a number of remarks Sarkozy made at his news conference following the summit, including his boast that Europeans got "virtually everything" they sought at the table.
Each country is expected to implement a series of reforms by the end of March aimed at easing the crisis and stimulating their economies. The G20 meets again on April 30, three months after the inauguration of president-elect Barack Obama.
While Obama wasn't at the summit, his presence nonetheless loomed large as his representatives - former secretary of state Madeleine Albright and one-time Republican congressman Jim Leach - met with officials of 17 of the G20 nations.
Canada was among them. A senior government official wouldn't reveal what was specifically discussed during the meeting.
But when the House of Commons resumes sitting on Tuesday for the first time since Harper's re-election last month, the prime minister is certain to be asked about the type of relationship he'll try to forge with Obama amid the economic meltdown.
He'll also likely face tough questions about the health of the Canadian economy.
Canada is still hoping to balance its budget, Harper said in Washington this weekend, and he assured Canadians that Ottawa was prepared to do whatever necessary to lessen the impact of the crisis.
"There are going to be very tough adjustments that will have very real effects in the Canadian economy but we will continue to be pragmatic and flexible while maintaining good, long-run economic policies."
Finance Minister Jim Flaherty is tabling a mini-budget at the end of this month, several weeks earlier than usual due to the crisis. He's suggested the government will announce new spending aimed at stimulating the economy.
Harper didn't rule out a bailout package for Canada's Big Three automakers on the weekend, a debate that was raging furiously in the United States as Washington decided whether to go ahead with a proposed US$25 billion lifeline for the car manufacturers.
Canada has to "ultimately undertake our own actions and be convinced that those actions are not just in the interests of the auto sector but in the best interests of the Canadian economy and Canadian taxpayers," he said.
Harper promised during his election campaign to put another $200 million into Canada's $250 million Auto Innovation Fund.
Obama, for his part, is in favour of rescuing the auto industry and its three million jobs.
"For the auto industry to completely collapse would be a disaster in this kind of environment," he said in an interview with "60 Minutes" scheduled to air Sunday night.
"So it's my belief that we need to provide assistance to the auto industry. But I think that it can't be a blank cheque."
Harper says Canadians can breathe a bit easier after G20 agrees on plan of attack Lee-Anne Goodman, The Canadian Press
WASHINGTON - Canadians can breathe a bit easier about the global economic meltdown after the world's most powerful countries agreed on a series of measures to help ease the crisis, Prime Minister Stephen Harper said Saturday.
"The declaration should give us all hope, and I would hope would give the markets some reassurance," Harper told a news conference, referring to the so-called G20 countries' communique following the end of their emergency summit.
Canada is in relatively good shape compared to other nations as it heads off the crisis, and will issue a financial update at the end the month.
The International Monetary Fund recently forecast that the Canadian economy will grow moderately over the next year and avoid falling into a recession.
Nonetheless Harper sounded a cautious tone Saturday as he addressed the media at the Canadian Embassy.
"There are going to be very tough adjustments that will have very real effects in the Canadian economy but we will continue to be pragmatic and flexible while maintaining good, long-run economic policies," said the prime minister, flanked by Finance Minister Jim Flaherty and Ambassador Michael Wilson.
"We will respond in a way that will minimize Canadians' exposure to these problems and maximize our ability to come out of this in a strong position."
Harper and 19 other world leaders, including President George W. Bush, emerged from the meeting to say they'd taken important first steps to deal with the financial meltdown that has the world economy on the brink of depression, and to prevent another from happening again.
Among other measures, they agreed to flag risky investing and regulatory weak spots in hopes of avoiding future financial meltdowns, and have endorsed broad goals to fend off any future crisis while reviving the global economy.
The plan endorses an early warning system for problems such as the speculation frenzy that fed the U.S. housing bubble. It also calls for the creation of "supervisory colleges" of financial regulators from many nations to better detect risky investing and other potential problems.
The G20 leaders, who meet again April 30 left Washington armed with a series of reforms to put in motion by the end of March.
"The big question is how do we establish good regulatory structure without destroying the incentive to innovate, without destroying the marketplace," Bush said Saturday outside the stately National Building Museum where the summit was held.
"Transparency is very important so that investors and regulators are able to know the truth."
Adding that the summit "is not going to solve the world's problems," Bush said: "There is more work to be done."
Bush called for the emergency summit a few weeks ago in the face of the worldwide economic meltdown. It's the largest meeting of its kind in more than a decade.
The meeting comes at an awkward time for Bush, a wildly unpopular lame-duck president who's leaving office in two months when Barack Obama is officially sworn in as America's 44th president.
Obama has made it clear since his historic election Nov. 4 that Bush is still the president, and must remain actively involved in dealing with the crisis in the next few weeks.
Nonetheless, many of the officials who descended upon Washington for the summit had been clamouring for access not to Bush and his people but to the man who holds the real power in the U.S. capital - Obama.
The president-elect appointed two emissaries - one-time secretary of state Madeleine Albright and former Republican congressman James Leach - to attend on his behalf, reluctant to be seen as interfering during the waning days of Bush's presidency.
Senior Canadian officials met with Albright and Leach early Friday, hours before Harper arrived in Washington to attend the extravagant White House dinner that kicked off the summit.
While the prime minister is opposed to a vast international regulatory system that would impose global rules on each country's banking systems, he has strongly advocated the notion of "peer review" of every G20 country's national financial regulations.
Harper said he was pleased to see that idea was embraced at the summit.
"There is an agreement to look at transparent assessments - independent transparent assessments - of financial regulatory systems, so that will happen," said Harper.
"Canada submitted to IMF assessments in the past, and as we told our American friends and others, we found those very useful in the past ... so that has been recognized in the declaration."
Not far from the summit, a handful of protesters carried neon yellow signs that read: "Money for people's needs, not bankers' greed" and "Money for jobs, not for war and occupation."
The countries represented at the summit were the U.S., Canada, Argentina, Australia, Brazil, Britain, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey.
Those countries and the European Union make up the so-called G20.
Monday, November 17, 2008
Friday, November 14, 2008
Financial Update
TSX SOARS
· TSX +430.21pts (Reuters) up 5% with an enthusiastic surge in the final hours of trading as investors snapped up deals
· DOW +557.52 pts The 6.5% gains came despite a flurry of weak corporate earnings and dismal U.S. unemployment claims, which had left the markets fighting off weakness until the afternoon rally.
· Dollar +1.73c to $82.54US.
· Oil +$2.08 to $58.24US per barrel. Energy analysts have come to believe that demand, not supply, is in control of the market. OPEC slashed production quotas by 1.5 million barrels/day after meeting at the end of Oct. It had virtually no effect on tumbling crude prices.
· Gold -$13.30 to $705US per ounce
Flaherty offers crisis tips from ‘boring' Canada
Globe and Mail-Report on Business-Canadian Press
WINNIPEG — This is a guest column by Finance Minister Jim Flaherty in Thursday's Financial Times, posted on the Department of Finance's web site and titled ‘Boring' Canada's financial tips for the world:
The financial crisis that began 14 months ago in the U.S. has intensified and spread around the world, threatening to roll back economic progress that has been made over the past two decades. Governments have been responding in a co-ordinated fashion and will continue this work in the lead-up to the summit of the Group of 20 leading economies.
Few countries are as dependent on trade or as integrated into the global financial system as Canada. Yet our financial sector continues to weather the turbulence better than many other countries. This did not happen by chance. Canadians by nature are prudent and our financial system has been characterized as unexciting. Canada's regulatory regime ensures that stability and efficiency are balanced. As a result, Canadian taxpayers have not had their money put at risk in response to this crisis. If Canada's financial system is boring, perhaps the world needs to be more like Canada.
Before we examine grand designs for global regulatory regimes, we need to recognize that good regulation begins at home. Effective national regulatory regimes could have prevented this crisis and must be our first line of defence against any future one. We all need to draw lessons from those systems that worked well and apply them to our national regulatory regimes.
First, we need to regulate all pools of capital that rely on leverage. The crisis has demonstrated the devastating impact that unregulated entities can have. Transparency requirements must be the price of admission to global markets. Different financial services may have different regulatory requirements, but we need to bring them all under a regulatory umbrella.
Second, capital and liquidity buffers need to be large enough to handle big shocks. Moreover, regulators must restrain overall use of leverage. Some have criticised high Canadian capital requirements for banks as being too conservative. But the strong balance sheets of Canada's banks through this period speak for themselves.
Third, it is not enough for regulation to look at individual institutions. It needs to look at the system as a whole. Risks that may appear sensible in isolation can be unsustainable from a systemic perspective. This systemic vantage point must be used to mitigate any tendency to underestimate risk when times are good. This requires co-ordination across the government, central bank and regulatory agencies.
Fourth, we need to make market infrastructure more transparent and resilient. Non-transparent over-the-counter trades and naked short-selling reduced the stability of the system.
This crisis has demonstrated that even countries with strong financial systems can feel the effects of inadequate regulatory regimes elsewhere.
Countries may hesitate to impose new requirements on their own institutions if these measures will create a competitive disadvantage. This points to the importance of the fifth step:
strengthening international co-ordination, review and surveillance to create a better second line of defence. Canada was a pioneer of the joint International Monetary Fund-World Bank financial sector assessment program. This independent review of domestic financial systems should be mandatory and public. We need to strengthen the role of international colleges of supervisors to ensure better understanding of systemic risks and to co-ordinate national actions. We need IMF surveillance with teeth. Countries must live up to their responsibilities to support global financial stability and growth. Nowhere is this more important than in correcting global imbalances through appropriate exchange rate and macroeconomic policies to support growth.
The process of how we make decisions is equally important. In two decades of unprecedented growth, we have seen the emergence of dynamic new economic players that must be full participants at the global table. Canada took one of the largest share cuts of any country in the recent IMF reform exercise to ensure that emerging economies are better represented. This broader range of voices must be heard in other venues such as the Financial Stability Forum.
Together, these reforms must ensure that incentives are aligned to support stability and that resilience is built into the financial system.
The open market system did not fail in this crisis. However, some forgot Adam Smith's maxim that the invisible hand needs to be supported by an appropriate legal and regulatory framework. We need to work together to strengthen those frameworks, and that work must begin at home.”
· TSX +430.21pts (Reuters) up 5% with an enthusiastic surge in the final hours of trading as investors snapped up deals
· DOW +557.52 pts The 6.5% gains came despite a flurry of weak corporate earnings and dismal U.S. unemployment claims, which had left the markets fighting off weakness until the afternoon rally.
· Dollar +1.73c to $82.54US.
· Oil +$2.08 to $58.24US per barrel. Energy analysts have come to believe that demand, not supply, is in control of the market. OPEC slashed production quotas by 1.5 million barrels/day after meeting at the end of Oct. It had virtually no effect on tumbling crude prices.
· Gold -$13.30 to $705US per ounce
Flaherty offers crisis tips from ‘boring' Canada
Globe and Mail-Report on Business-Canadian Press
WINNIPEG — This is a guest column by Finance Minister Jim Flaherty in Thursday's Financial Times, posted on the Department of Finance's web site and titled ‘Boring' Canada's financial tips for the world:
The financial crisis that began 14 months ago in the U.S. has intensified and spread around the world, threatening to roll back economic progress that has been made over the past two decades. Governments have been responding in a co-ordinated fashion and will continue this work in the lead-up to the summit of the Group of 20 leading economies.
Few countries are as dependent on trade or as integrated into the global financial system as Canada. Yet our financial sector continues to weather the turbulence better than many other countries. This did not happen by chance. Canadians by nature are prudent and our financial system has been characterized as unexciting. Canada's regulatory regime ensures that stability and efficiency are balanced. As a result, Canadian taxpayers have not had their money put at risk in response to this crisis. If Canada's financial system is boring, perhaps the world needs to be more like Canada.
Before we examine grand designs for global regulatory regimes, we need to recognize that good regulation begins at home. Effective national regulatory regimes could have prevented this crisis and must be our first line of defence against any future one. We all need to draw lessons from those systems that worked well and apply them to our national regulatory regimes.
First, we need to regulate all pools of capital that rely on leverage. The crisis has demonstrated the devastating impact that unregulated entities can have. Transparency requirements must be the price of admission to global markets. Different financial services may have different regulatory requirements, but we need to bring them all under a regulatory umbrella.
Second, capital and liquidity buffers need to be large enough to handle big shocks. Moreover, regulators must restrain overall use of leverage. Some have criticised high Canadian capital requirements for banks as being too conservative. But the strong balance sheets of Canada's banks through this period speak for themselves.
Third, it is not enough for regulation to look at individual institutions. It needs to look at the system as a whole. Risks that may appear sensible in isolation can be unsustainable from a systemic perspective. This systemic vantage point must be used to mitigate any tendency to underestimate risk when times are good. This requires co-ordination across the government, central bank and regulatory agencies.
Fourth, we need to make market infrastructure more transparent and resilient. Non-transparent over-the-counter trades and naked short-selling reduced the stability of the system.
This crisis has demonstrated that even countries with strong financial systems can feel the effects of inadequate regulatory regimes elsewhere.
Countries may hesitate to impose new requirements on their own institutions if these measures will create a competitive disadvantage. This points to the importance of the fifth step:
strengthening international co-ordination, review and surveillance to create a better second line of defence. Canada was a pioneer of the joint International Monetary Fund-World Bank financial sector assessment program. This independent review of domestic financial systems should be mandatory and public. We need to strengthen the role of international colleges of supervisors to ensure better understanding of systemic risks and to co-ordinate national actions. We need IMF surveillance with teeth. Countries must live up to their responsibilities to support global financial stability and growth. Nowhere is this more important than in correcting global imbalances through appropriate exchange rate and macroeconomic policies to support growth.
The process of how we make decisions is equally important. In two decades of unprecedented growth, we have seen the emergence of dynamic new economic players that must be full participants at the global table. Canada took one of the largest share cuts of any country in the recent IMF reform exercise to ensure that emerging economies are better represented. This broader range of voices must be heard in other venues such as the Financial Stability Forum.
Together, these reforms must ensure that incentives are aligned to support stability and that resilience is built into the financial system.
The open market system did not fail in this crisis. However, some forgot Adam Smith's maxim that the invisible hand needs to be supported by an appropriate legal and regulatory framework. We need to work together to strengthen those frameworks, and that work must begin at home.”
Thursday, November 13, 2008
Financial Update
Loonie falls like a stone with biggest one day drop on record
Ottawa boosts effort to fight spreading global credit crisis-adds another $50B to mortgage purchase program
· TSX -501.53pts (Reuters)
· DOW -411.30pts The tumbling markets are a combination of overall concerns about the slowing global economy and some of the economic developments and weak retail sales coming out of the United States, said Norman Raschkowan, chief investment officer at Mackenzie Financial Corp
· Dollar -2.77c to $80.81US. the biggest one-day drop on record at the Bank of Canada and surpassed the 2.69-cent fall on Oct. 10. Currency watchers say the loonie and other resource-linked currencies are being driven down by falling prices for commodities such as oil, metals and minerals and by global economic uncertainty
· Oil -$3.17 to $56.16US per barrel.
· Gold -$14.50 to $718.30US per ounce
(Reuters) U.S. Treasury Secretary Henry Paulson announced changes to the US$700-billion rescue plan for troubled financial firms. The markets may be "expressing its disappointment" that the treasury department appears to be moving away from the initial intent of relief program. Paulson said the program will not be used to purchase troubled mortgages and other assets from banks as originally planned, but the U.S. government will continue to invest banking companies to provide them with the capital they require to weather the credit crunch.
"So it sort of begs the question of how we're going to establish a market for these distressed assets and that may be contributing to some nervousness," Steve Malyon a Scotia Capital currency strategist said.
Ottawa boosts effort to fight spreading global credit crisis
RICHARD BLACKWELL AND HEATHER SCOFFIELD Globe and Mail Update
TORONTO — Ottawa has announced three new aggressive measures to get Canada's credit markets back in working order.
Finance Minister Jim Flaherty said Wednesday in Toronto the government would add $50-billion to its mortgage purchase program. He has also agreed to slash the price the government is charging to Canadian banks to insure their wholesale lending.
At the same time, the Bank of Canada is injecting another $8-billion into money markets over the next few weeks, in one-month money, through a new Canadian-dollar term lending facility it is setting up.
“Canada has stepped up to the plate in a major way this morning, announcing three major new actions today, all designed to crack the nute that is the credit crunch,” commented Eric Lascelles, chief economic strategist at TD Securities.
Ottawa “has introduced programs that should contribute to a notable narrowing in financial institution credit spreads, and possibly in credit spreads overall,” he said in a note to clients.
Mr. Flaherty's announcement means the government will now buy up to $75-billion of insured mortgage pools from the major banks, up from $25-billion.
He told reporters he made the move because he now expects an “extended period of stress in global credit markets.”
In addition to increasing the amount of money available to buy mortgage debt, the Department of Finance also slashed the price it will charge banks for guaranteeing their loans.
Commercial banks have complained loudly that the loan guarantee program designed by Ottawa a few weeks ago was too expensive to be of much use.
While other countries' banks could buy what amounts to insurance at a low price, Canadian banks were paying higher rates. The program was only useful for banks in dire trouble, and was putting the Canadian financial institutions at a competitive disadvantage globally.
In Ottawa, the Bank of Canada said it will put an additional $8-billion into one-month money markets, spread out in four auctions over the next few weeks, through a newly created Canadian-dollar term loan facility.
The Bank of Canada has hinted heavily in recent weeks that it had further measures in store, to make sure financial institutions have cash on hand to finance their transactions.
Financial institutions can post almost any kind of loan on their books as collateral, in order to take part in the auctions, the bank said.
“By providing greater flexibility for liquidity provision with respect to eligible collateral, the [new facility] will facilitate further improvement in money and credit markets.”
Canadian banks have been pressuring Ottawa to boost their help for the sector, and all countries have been urged, in a series of international meetings, to do much more in order to get the global economy back on track.
While lending spreads in some markets have edged down gradually in the past few weeks, Canada's key spreads have not moved much for a month, suggesting a lingering risk aversion among banks in Canada.
“At a time of considerable uncertainty in global financial markets, this action will provide Canada's financial institutions with significant and stable access to longer-term funding,” Mr. Flaherty said in a statement. “This extension of the program to purchase insured mortgages will further support the availability of credit, which will benefit Canadian households, businesses and the economy. In addition, it will earn a modest rate of return for the government with no additional risk to the taxpayer.”
Mr. Flaherty indicated last weekend that he understood the banks' complaints, and would consider acting. But Bank of Canada Governor Mark Carney said in an interview Ottawa had carefully designed the program, and suggested Canadian banks weren't at a global disadvantage because they are in far better shape than other banks around the world.
Ottawa boosts effort to fight spreading global credit crisis-adds another $50B to mortgage purchase program
· TSX -501.53pts (Reuters)
· DOW -411.30pts The tumbling markets are a combination of overall concerns about the slowing global economy and some of the economic developments and weak retail sales coming out of the United States, said Norman Raschkowan, chief investment officer at Mackenzie Financial Corp
· Dollar -2.77c to $80.81US. the biggest one-day drop on record at the Bank of Canada and surpassed the 2.69-cent fall on Oct. 10. Currency watchers say the loonie and other resource-linked currencies are being driven down by falling prices for commodities such as oil, metals and minerals and by global economic uncertainty
· Oil -$3.17 to $56.16US per barrel.
· Gold -$14.50 to $718.30US per ounce
(Reuters) U.S. Treasury Secretary Henry Paulson announced changes to the US$700-billion rescue plan for troubled financial firms. The markets may be "expressing its disappointment" that the treasury department appears to be moving away from the initial intent of relief program. Paulson said the program will not be used to purchase troubled mortgages and other assets from banks as originally planned, but the U.S. government will continue to invest banking companies to provide them with the capital they require to weather the credit crunch.
"So it sort of begs the question of how we're going to establish a market for these distressed assets and that may be contributing to some nervousness," Steve Malyon a Scotia Capital currency strategist said.
Ottawa boosts effort to fight spreading global credit crisis
RICHARD BLACKWELL AND HEATHER SCOFFIELD Globe and Mail Update
TORONTO — Ottawa has announced three new aggressive measures to get Canada's credit markets back in working order.
Finance Minister Jim Flaherty said Wednesday in Toronto the government would add $50-billion to its mortgage purchase program. He has also agreed to slash the price the government is charging to Canadian banks to insure their wholesale lending.
At the same time, the Bank of Canada is injecting another $8-billion into money markets over the next few weeks, in one-month money, through a new Canadian-dollar term lending facility it is setting up.
“Canada has stepped up to the plate in a major way this morning, announcing three major new actions today, all designed to crack the nute that is the credit crunch,” commented Eric Lascelles, chief economic strategist at TD Securities.
Ottawa “has introduced programs that should contribute to a notable narrowing in financial institution credit spreads, and possibly in credit spreads overall,” he said in a note to clients.
Mr. Flaherty's announcement means the government will now buy up to $75-billion of insured mortgage pools from the major banks, up from $25-billion.
He told reporters he made the move because he now expects an “extended period of stress in global credit markets.”
In addition to increasing the amount of money available to buy mortgage debt, the Department of Finance also slashed the price it will charge banks for guaranteeing their loans.
Commercial banks have complained loudly that the loan guarantee program designed by Ottawa a few weeks ago was too expensive to be of much use.
While other countries' banks could buy what amounts to insurance at a low price, Canadian banks were paying higher rates. The program was only useful for banks in dire trouble, and was putting the Canadian financial institutions at a competitive disadvantage globally.
In Ottawa, the Bank of Canada said it will put an additional $8-billion into one-month money markets, spread out in four auctions over the next few weeks, through a newly created Canadian-dollar term loan facility.
The Bank of Canada has hinted heavily in recent weeks that it had further measures in store, to make sure financial institutions have cash on hand to finance their transactions.
Financial institutions can post almost any kind of loan on their books as collateral, in order to take part in the auctions, the bank said.
“By providing greater flexibility for liquidity provision with respect to eligible collateral, the [new facility] will facilitate further improvement in money and credit markets.”
Canadian banks have been pressuring Ottawa to boost their help for the sector, and all countries have been urged, in a series of international meetings, to do much more in order to get the global economy back on track.
While lending spreads in some markets have edged down gradually in the past few weeks, Canada's key spreads have not moved much for a month, suggesting a lingering risk aversion among banks in Canada.
“At a time of considerable uncertainty in global financial markets, this action will provide Canada's financial institutions with significant and stable access to longer-term funding,” Mr. Flaherty said in a statement. “This extension of the program to purchase insured mortgages will further support the availability of credit, which will benefit Canadian households, businesses and the economy. In addition, it will earn a modest rate of return for the government with no additional risk to the taxpayer.”
Mr. Flaherty indicated last weekend that he understood the banks' complaints, and would consider acting. But Bank of Canada Governor Mark Carney said in an interview Ottawa had carefully designed the program, and suggested Canadian banks weren't at a global disadvantage because they are in far better shape than other banks around the world.
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