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May 30, 2021
6:43 pm
canadian.100
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Bill said
Cool, thanks Kidd, I'd never paid attention to that before. Nice of Canadians to elect govt's that profit us bank shareholders, I guess.  

Ditto for me too. Loving my big bank shares even more now - and a bit more appreciation of the govt.

May 30, 2021
6:52 pm
AltaRed
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Bill said
Cool, thanks Kidd, I'd never paid attention to that before. Nice of Canadians to elect govt's that profit us bank shareholders, I guess.  

I don't see how that does much for banks or shareholders. It simply means the banks have to find others to lend the cash they get from selling the mortgages to the gov't. In times of troubled uninsured mortgages that could make sense but otherwise how can that be good?

May 31, 2021
6:01 am
savemoresaveoften
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Kidd said
Hi Bill.

"The Canadian government plans to triple the amount of mortgage debt it’s buying from banks in an effort to pump money into the economy.

Canada will purchase $150 billion ($137 billion) in insured mortgage backed securities from financial institutions, the agency said Thursday. That’s triple the initially planned $50 billion, and represents about 80 per cent of the value of government-guaranteed mortgage backed securities on bank balance sheets."

excerpt from link found below

https://www.bnnbloomberg.ca/cmhc-triples-planned-purchases-of-mortgage-securities-1.1412797  

That move helps the bank to free up capital so they have a bigger lending ability, not propping up the banks. But then it can be twisted by the bank haters and becomes "govt bailing out banks".

I guess bank haters hate the bank and thus dont own any bank shares, ends up hating banks even more as they see the healthy return of bank shareholders. It is a vicious cycle...

May 31, 2021
6:04 am
savemoresaveoften
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Vatox said

Actually, you said no matter how high real inflation gets. You are saying that if we get 6% inflation or higher that they won’t raise say 50 or 75 bps. They will do it if inflation gets out of hand. Don’t say they can’t or won’t no matter how high inflation gets.  

So lets say we do see 6% inflation, I will agree o/n rate will be higher than 3%, except the yield curve will be inverted.
I should say govt will ensure the curve is inverted when the time comes. Most mortgages and govt funding will not be impacted as much.

May 31, 2021
6:28 am
AltaRed
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savemoresaveoften said

That move helps the bank to free up capital so they have a bigger lending ability, not propping up the banks. But then it can be twisted by the bank haters and becomes "govt bailing out banks".

I guess bank haters hate the bank and thus dont own any bank shares, ends up hating banks even more as they see the healthy return of bank shareholders. It is a vicious cycle...  

Well said. It's simply another way for gov't to get more money into the system.

May 31, 2021
6:31 am
Norman1
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AltaRed said

I don't see how that does much for banks or shareholders. It simply means the banks have to find others to lend the cash they get from selling the mortgages to the gov't. In times of troubled uninsured mortgages that could make sense but otherwise how can that be good?

It didn't.

Government was ready to purchase up to $150 billion of insured mortgages. The financial institutions only sold about $5.8 billion to the government, according to CMHC: Insured Mortgage Purchase Program:

Under this program, the government stood ready to purchase up to $150 billion of insured mortgage pools through CMHC. From March to December 2020, CMHC purchased from financial institutions over $5.8 billion of insured mortgages pooled into National Housing Act Mortgage Backed Securities (NHA MBS).

What was Royal Bank's profit for the quarter ended April 30, 2021? $4 billion!

The Big Banks, like Royal Bank, actually prefer to keep their prime mortgages. It's only the alternative lenders, like Home Trust and Equitable Bank, that want to get rid of them as soon as they can.

May 31, 2021
7:56 am
Vatox
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savemoresaveoften said

So lets say we do see 6% inflation, I will agree o/n rate will be higher than 3%, except the yield curve will be inverted.
I should say govt will ensure the curve is inverted when the time comes. Most mortgages and govt funding will not be impacted as much.  

Perhaps you would like to explain how the government will ensure an inverted yield curve!

May 31, 2021
8:14 am
Kidd
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Save more Save often.

I confess, i AM a bank hater but truth be told, i hate humanity in its entirety.

When the likes of RBC can bleed 1 BILLION IN PROFITs out of the economy every 30 days, I find that disgustingly wrong. YES, RBC pay income tax, we've had that debate before. RBC abide by the Canadian tax laws they helped write. Paul Martin's off shore shipping company (our old federal finance minister) also abided by those same outlandish Canadian tax laws.

The notion of... buy bank shares, join in the profits, is a terrible way to look at their eye gouging. Another thread here, complained about bank service fees, I voiced my objections in that thread as well, concerning the TD bank.

It's a well known fact, there are 2 camps here in this forum. The camp I'm in is in the minority but we have spirit, and we hold out hope that one day the tide will change, that our (sane) voices will be heard. Empires have fallen before and they will without doubt fall again. So lap up your gravy while you can...

May 31, 2021
8:20 am
Bud
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savemoresaveoften said
That move helps the bank to free up capital so they have a bigger lending ability

It is a vicious cycle...

Most banks prime mortgages aren't so prime price without mortgage welfare. Majority of prime borrowers couldn't borrow at those rates without gov assistance. Prime haha 10-20% down on artificially inflated assets in a heavily subsidized economy. Many jobs propped up e.g. sunshine list, cews etc

It's a house of cards when they lose their money they cry n run to government to be bailed out

I don't have a problem with banks staying strong to protect depositors I have a problem with bailing out shareholders and taxpayer funded dividends.

May 31, 2021
9:49 am
AltaRed
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Nonsense. The only argument you can make is CMHC being an insurer of mortgages reducing the risk to banks.

Mortgage insurance is available in other countries too, albeit not necessarily backstopped by gov't. That said, a US bailout did happen in the 2008 financial crisis when they had to rescue Fannie Mae and Freddie Mac. I don't recall Ottawa having to bail out CMHC or Genworth but I may be mistaken.

All this about the Canadian taxpayer subsidizing bank shareholders is almost exclusively misinformation, or worse, disinformation. That said, post-crisis, the government did introduce higher Tier 1 capital ratios, NVCC prefs convertible to common equity on the direction of OSFI should common equity shares fall to $5, all to make all classes of shareholders truly pay before bailout of last resort from the taxpayer.

Bank bashers need to get their facts straight.

May 31, 2021
10:45 am
Norman1
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Bud said

Most banks prime mortgages aren't so prime price without mortgage welfare. Majority of prime borrowers couldn't borrow at those rates without gov assistance. Prime haha 10-20% down on artificially inflated assets in a heavily subsidized economy. Many jobs propped up e.g. sunshine list, cews etc

You clearly don't know what you are talking about.

CHMC charges insurance premiums that cover losses and then some. CMHC started with $25 million of seed money from the federal government. With the net profits from insurance, it now has $14 billion.

It is quite a profitable business at the rates that CMHC charges. So much so that there are now two private mortgage insurers, Genworth Financial and Canada Guaranty.

May 31, 2021
6:10 pm
Bud
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"Several other critics, including economists, realtors, lawyers and analysts contacted by Maclean’s, say they have also been the target of attack. One bank economist who once publicly raised fears about a housing bubble says he didn’t dare openly criticize the CMHC because of the agency’s reputation for snuffing out dissent—an allegation the CMHC denies. The economist spoke on the condition his name not be used."

Real Canadian Bank Bailout
https://www.google.com/amp/s/www.macleans.ca/economy/business/the-real-canadian-bank-bailout/amp/

CMHC mortgage guarantee puts taxpayers at risk: OECD
https://www.google.com/amp/s/www.thestar.com/amp/business/real_estate/2014/06/11/cmhc_mortgage_guarantee_puts_taxpayers_at_risk_oecd.html

CMHC Mortgage agency puts huge risks on taxpayer
https://www.fraserinstitute.org/article/we-should-privatize-cmhc-mortgage-agency-puts-huge-risks-taxpayer

"The government also said it would allow lenders to add previously uninsured mortgages into the pool of securities eligible to be bought by the government." Bloomberg March 26/20

May 31, 2021
6:43 pm
Norman1
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Yes, CMHC will snuff you out too if you start spreading lies as well!

Bud said

Real Canadian Bank Bailout
https://www.google.com/amp/s/www.macleans.ca/economy/business/the-real-canadian-bank-bailout/amp/


"The government also said it would allow lenders to add previously uninsured mortgages into the pool of securities eligible to be bought by the government." Bloomberg March 26/20

Yes, if the previously-uninsured mortgage qualifies and the lender pays for the CMHC mortgage insurance, then the mortgage becomes an insured mortgage.

It is irrelevant who pays for the CMHC insurance as long as someone does!

There was no bailout.

As I wrote before, the federal government's $25 million initial investment in CMHC in 1946 has become $14+ billion. Any losses have been more than made up by the insurance premiums.

May 31, 2021
7:10 pm
AltaRed
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Bud's links all refer to a big 'what if' huge amounts of insured mortgages fail and CHMC does not have the resources to cover them.

Firstly, a huge amount of housing would have to go into foreclosure and secondly, recovery would only be a few cents on the dollar rather than maybe 80 cents on the dollar for CMHC to run out of resources. That is a big 'what if'. Bud is being suckered in to think tanks with ideological agendas. It is fearmongering.

A more productive discussion could be around whether CMHC charges enough for its insurance and maybe build reserves to 5-10% of its total exposure.

As Norman has said, there has been no bailout by the taxpayer.

May 31, 2021
7:21 pm
Bud
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Canada Bank Bailout: Yes, There Was One, And Here's Why It's Important To Remember That
https://www.google.com/amp/s/www.huffingtonpost.ca/amp/entry/canada-bank-bailout_n_1466219/

"Without government supports to fall back on, Canadian banks would have been in serious trouble."
https://www.cbc.ca/news/business/banks-got-114b-from-governments-during-recession-1.1145997

May 31, 2021
8:35 pm
Norman1
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No, there was not a bailout.

You can stop posting that garbage from CCPA. We're not falling for it.

We can read and can see that it is the same CCPA garbage being quoted by all of them: Macleans, the Huffington Post, and CBC. Just because one says something three times doesn't make any more correct.

June 1, 2021
4:03 am
Bud
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This was a wrong assumption on the decks of the Titanic, a wrong assumption after 2008, and a criminally wrong assumption now.
https://www.google.com/amp/s/www.rollingstone.com/politics/politics-features/taibbi-covid-19-bailout-wall-street-997342/amp/

The Coronavirus bailout
https://www.washingtonpost.com/graphics/2020/business/coronavirus-bailout-spending/

June 1, 2021
4:56 am
savemoresaveoften
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Vatox said

Perhaps you would like to explain how the government will ensure an inverted yield curve!  

Just go back to history my friend, during the first stage of most rate rising cycle, the yield curve went inverted on its own even without govt "intervention". Its simply the market's expectation of short rates rising fasting then long rates that result in a inverted yield curve.
the govt can also simply buying long bonds to ensure those rates are in check, so they can continue to borrow at more favorable rates.
The world has moved beyond simple rate hike/ease to adjust / fine tune the economy. This is necessary as rates go to zero and easing is not effective anymore. Quantitative easing/hiking willbe deployed if needed depends on which beast you are trying to combat.

June 1, 2021
5:24 am
savemoresaveoften
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Bud said

savemoresaveoften said
That move helps the bank to free up capital so they have a bigger lending ability

I don't have a problem with banks staying strong to protect depositors I have a problem with bailing out shareholders and taxpayer funded dividends.  

One can always twist the meaning of a word and use it to suit one's agenda.
In this case, the word is "bail"...

June 1, 2021
7:19 am
Bill
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Thanks Norman1 & AltaRed for exposing fake news here, I don't follow this stuff that closely (e.g. what's CCPA?) so it's very helpful to me.

I'll just never understand why people would rather complain about big banks, gov't, etc vs accepting it is what it is and investing to their own financial (and happiness!) benefit, but that "is what it is" too, I suppose.

Please write your comments in the forum.