The Canadian Centre for Policy Alternatives (CCPA) recently lobbed a grenade at the Canadian government and banking industry after uncovering some $114 billion in cash-and-loan support to prop our vaunted national banks, a bailout of sorts that everybody in banking insists was not a bailout.
Does it matter?
The banks have reportedly paid back the low-interest loans from the Bank of Canada and U.S. Federal Reserve. Canadians were on the hook for $69 billion in mortgage backed securities that were sold off to the Canadian Mortgage and Housing Corporation, but the CMHC insured those mortgages anyway and the lack of defaults and foreclosures means the CMHC came out ahead on the deal.
The Canadian "bailout" was probably also the right thing to do. In the face of the biggest financial crisis since the Depression, the biggest priority was to keep our banks shored up with capital, and making loans and investments to keep the gears of the economy turning.
When credit dries up, awful things can happen. Homes don't get built or bought. Workers get laid off. Demand for goods and services plummets, and with it consumer confidence.
Truth is, history will show that the banks — and Canadians — are better off because of these loans and guarantees.
But it still wasn't all right, even if no harm came of it. We, the taxpayers, are the underwriters of everything our government does or fails to do, and we have a right to know when there's a chance we could get stuck with a large tab.
And the lies. Oh, the lies! Canadian politicians actually stood on the world stage and bragged about our great banking industry and strong economy. We boasted about our tough laws and regulations, our restrictions on mortgages, and the fact that we posted the highest economic growth of any country in the OECD during the downturn. These things are true on paper, but slightly less true if you consider the CCPA report.
Prime Minister Stephen Harper made the economy the centerpiece of his campaign, and all the discussion about the strength of our banks and financial sector probably had some kind of impact on the election in 2011. It's impossible to say how much, but I do think the debates and public discussions would have been a little different if Canadians knew the truth about the vulnerability of our financial institutions in the crisis.
Canada's banking industry and government was so lauded for its apparently exaggerated economic success that the Canadian dollar even became a refuge currency for other nations looking to bolster their own falling currencies and stave off inflation. That kept our dollar higher than it probably should have been, and while that's a good thing for Canadians looking to spend weekends in Vegas or trolling the outlet malls south of the Peace Arch, a high dollar is not as good for tourism, Whistler's industry, or exports. If it weren't for China buying up our resources to feed their economy, our own economic growth probably would have gone backwards.