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Canada’s ‘Bailout’ Plan
Tuesday, January 27, 2009
Canada has announced it will be buying up to 25 billion dollars worth of mortgages from the country’s big banks in an effort to free up credit availability.
Federal finance minister Jim Flaherty says the Canada Mortgage and Housing Corporation will buy $25 billion in residential mortgages from the banks. He says it will give banks additional cash to issue loans and mortgages.
So is this a good thing for the Canadian financial system? Duncan Hood, Senior Editor at Maclean’s Magazine says, this is a good thing for banks and says its giving banks what they really need - which is cash.
"They are sitting on it and not trading it with each other and the international banking system has almost ground to halt. What the Canadian government is doing is trying to swap mortgages with cash which is what they really need," says Hood.
The minister assured Canadian's that the government is not bailing out the banks, as has occurred in the U.S.
Is this a bailout?
But says Hood; "the government has said outright that this is not a bailout but in a way it kind of is because this is not the sort of thing that would normally happen. Couple of years ago if the banks had gone to the government and said would you buy $25 billion dollars worth of mortgages it would have been a non starter."
Hood says although the government has said many times there is no financial crisis here in Canada, our country certainly will not get off scot free.
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