by David Akin
It sounds like a wonderful conspiracy theory: Banks get secret bailout worth $114 billion during the 2008 recession!
Bailout discovered by the Canadian Centre for Policy Alternatives.
In fact, this is all hooey. There was no bailout of our banks. The government did, in 2008, set aside $200 billion to help all Canadian businesses and households hit by the global credit crunch and banks were the tool the government used to help us all out.
Taxpayer money was never at risk of being lost and, in fact, taxpayers are making a tidy profit with the credit crunch assistance program.
And secret? Well, it was announced in the glare of the 2008 federal election campaign and Parliament has since voted on these deals in at least two federal budgets — all of which was widely reported in our largest-circulation newspapers.
So why float this conspiracy theory now? On that question, it is very hard to ignore the links between the CCPA, the political left in Canada and the May Day Occupy protests which were to get going Tuesday.
A secret conspiracy to give bankers billions, you say?
Perfect propaganda for the Occupy crowd but lousy research from a think tank which has, in the past, done very credible work analyzing, for example, Canadian and provincial budgets from a progressive perspective.
As Laval University economist Stephen Gordon noted on Twitter, the CCPA “took a low-grade Internet conspiracy, worked it up to a 25-page ‘study’ and managed to get the media to report it as news.”
In fact, what happened in 2008 was, businesses large and small across Canada could not get the cash from their banks they needed to carry on everyday activities. The banks were literally cash-stripped as their own lines of credit froze up.
The federal government’s response to this problem was to find ways to get cash into the hands of banks so banks could do what they are supposed to do and lend it to businesses and households.
One way this happened was in exchange for Ottawa’s cash, the banks would sign over a pile of mortgages held by those banks.
The mortgages, virtually all of which were already insured by the federal taxpayer through the Canada Mortgage and Housing Corp., would go on the government’s books and act as collateral for the billions lent to the banks.
On top of these virtually risk-free loans, the government charged the banks “commercial rates” for the privilege.
The banks paid up, got the cash and lent it to businesses to meet their payrolls and carry on doing the work they were doing.
This is not, by any definition of the word, a bailout. A bailout implies Canada’s banks, like banks in Europe, the U.S., or like GM and Chrysler, were about to go under without federal cash. Not true.
None of Canada’s banks were ever, at any time, at risk of going under.
Banks in the U.S. and in Europe needed governments there to bail them out by actually buying risky ownership stakes in those banks with public funds.
But our banks would have survived without the federal government’s actions in 2008.
What might not have survived, on the other hand, is hundreds or even thousands of Canadian businesses which were literally running out of money they needed to carry on.
Perhaps that’s something for the Occupy crowd to consider this week — how small businesses depend on a healthy, functioning banking system.
Categories: Contributor Columns