Blame Obama

In a sure sign that things are far worse in Canada than we had been led to believe, Finance Minister Jim Flaherty and his apparently less than independent Bank of Canada Governor Mark Carney are blaming the Obama Administration for being somewhat slow off the mark in showering banks with obscene amounts of money while requiring no meaningful reforms.

Canada has of course done much better, funneling up to $200 billion to the banks through the EFF, with no oversight by Parliament or opposition parties. Not surprisingly, for this and other nefarious reasons, our banks are in far better shape.

Yet our economy is not, as the energy sector is in free-fall and our auto industry is heading into bankruptcy protection. GDP is declining at almost 8% per year -- near depression rates. And unlike Obama, who faces real, if delusional, opposition, the Harper government faces an opposition far more concerned with political manuevering than with holding this government to account at a crucial time in our history.

Meanwhile in Canada . . .

CBC's The Current this morning interviewed Stanley Hartt, the chair of the Advisory Committee on Financing. Finance Minister Flaherty describes the role of the committee this way:

Specifically, the ACF will provide expert advice to the Government on financing conditions and on the design, scope and scale of initiatives under the Extraordinary Financing Framework (EFF) and advise the Minister of Finance on their implementation and effectiveness. The EFF consists of up to $200 billion in existing and new measures to support the extension of financing to Canadian businesses and consumers during these exceptional times.

In the interview, Hartt, a former deputy minister of finance, indicated that what for him are very important questions remain to be answered, includng:

• how much of the $200 billion has been rolled out;
• what gaps does this leave (presumably in bank capitalization);
• and how and through what institutional mechanisms is it to be rolled out.

In other words, there appears to be little or no accountability on the part of the Federal government for this vast sum. And it appears to be making up implementation as it goes along.

If our banks are in such wonderful shape, why do they even need this.

And where is the opposition on this. In February, I spoke to the NDP Finance critics office about EFF and they appeared to have little interest in this. And the Liberals have been silent. This amount represents a seventh of our GDP. We deserve so much better than this.

Yglesias on the Banks

Some solid common sense from Matthew Yglesias on bank bailouts, in response to a WSJ piece. Key quote:

You don’t rescue banks by “tak[ing] distressed assets off the balance sheet of Citigroup or other troubled financial institutions.” The problem isn’t the assets, it’s the debts. You can deal with the problem by giving the banks vast sums of money in exchange for their toxic assets but in this case what’s solved the problem isn’t that the assets came off the balance sheet, it’s that the money you gave them got on the balance sheet.

And the key lesson for Canada? You are either paying more than market value for the assets or you aren't doing much to help the banks.