"Get Onside"

From the desk of:

Shoobedoowa
Calgary, Alberta
http://whatisgoingonincanada.blogspot.com/


To:

Diane Ablonczy (MP)
Calgary Nose Hill

1107 17th Ave North West
Calgary, Alberta
T2M 0P7

duplicate to:
House of Commons
Ottawa, Ontario
K1A 0A6


January 10th, 2009

Re: GET ONSIDE ???


Hello Again Ms. Ablonczy:

I am now writing to you and others regarding the attached investigative report by Jacquie McNish and Greg McArthur of the Globe and Mail, referenced here:

Special investigation: How high-risk mortgages crept north – Dec 12th, 2008

http://www.theglobeandmail.com/servlet/story/RTGAM.20081212.wmortgage13/BNStory/Front/home

This article portrays you in a particularly interesting light with your “suggestion” to “get onside”. This also enlightens me somewhat to the many possible reasons that you have not responded to my two previous letters of December 20, 2007 and November 12, 2008, which I believe tie directly into this revelation, and what has been going on.

This letter is peppered with many open ended questions, and I encourage you to respond.

“Get onside” ??? Is this a summary of the process by which our democratically elected government gets things done? Please enlighten me.

As we were already seeing at the time referenced in this article, in the United States, top financial professionals were proving that they couldn’t hold things together with excessive leverage ratios......your solution?.......zero down mortgages! Why not let amateurs have access to INFINITE leverage for what is for most, the largest investment in their life? Nice!

For starters, your so-called “Conservative” government has acted as the least “Conservative” government in a long time. Your government, upon taking office, immediately increased overall spending to the highest level of any in history. The only reason that Canada has experienced a narrow budget surplus, has been due to the unprecedented increase in revenues, which now seems to have been only temporary, and I would argue on many points.......quite fleeting. Many commodities have been experiencing, not just a correction, but an outright crash. Much of the world is now arguably in recession, with the very real possibility of falling into an outright depression. As I explained to you before the last election, contrary to many biased “experts”, my own expectation has been for much tougher times to come, in many ways as a result of your governmental actions. Since that discussion of ours, your party seems to have been taken by surprise with how significantly and quickly our economy has turned for the worse......while I have not. Kondratieff winter is arriving, and spring is a long way off.

The problem around much of the globe, and indeed here in Canada, is too much debt and spending. Our government’s words and actions suggest that the answer to the problems now encroaching on our economy, is to......INCREASE SPENDING AND DEBT ? How ineptly Keynesian of you! Anyone who paid attention to grade 10 math would instinctively know that the further our nation continues down this path of increased “stimulus”, spending and debt, the worse the eventual catastrophe will be.

“There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.”
- Ludwig von Mises

My suspicion is that this credit boom, along with the “perceived” economic expansion (based more on increases of overall leverage as opposed to true organic growth), the housing boom, and so on, has been an intentional bubble built in no small way on some form of ponzi scheme. The appointment of a Goldman Sachs crony, namely Mark Carney, to the position of Governor of the Bank of Canada, has certainly provided me no reassurance that this has not been the case. I find this all very reminiscent of what is unfolding south of our border.

As per my letter of December 20th, 2007, although there was no mention of any involvement of foreign banks or other foreign entities at the time, my suspicion was that foreign entities were definitely big participants in the ABCP situation.

As per the following article referenced here: (also attached)....

Deutsche Bank, Citigroup Threaten Canada Debt Plan – Dec 18th, 2008

http://www.bloomberg.com/apps/news?pid=20601082&refer=Canada&sid=aIWKXz.eL0u0

......it would seem that foreign banks have indeed been involved, and as of the date of the article (December 18, 2008) from as far back as 16 months ago! This is exactly what I had expected as per the aforementioned letter.

Why is this information not being disclosed in a proper and timely manner? Why is it being uncovered only through investigative journalism, rather than by our government? What is going on here? What really are these assets, and who are the true beneficiaries of these back room deals? I have some pretty good ideas of what is going on, but our government is not disclosing much in the way of pertinent information. I fear that when it comes to government, only scoundrels work in secret.

Has the last few years of pushing increasing leverage been a massive unsustainable bubble, intentionally blown for the benefit of the banks and foreign interests to reap wealth from our nation, leaving the immense offsetting losses to come, to be suffered by the future obligations of the tax payers?

And now you are using taxpayer money, to the tune of $8 billion, to backstop interbank lending. This announced the day after our own government assured us that Canadian banks are the safest and best capitalized in the world. Why? Do our own banks not trust each other enough to lend to each other? Who would know better whether a bank is trust worthy than another bank? After all, we are not privy to pertinent information to truly assess whether a Canadian bank is “healthy” or not. Unlike other publicly traded entities in Canada, our banks are allowed to be quite secretive of the machinations of their operations.

And what about the acquisition by our government of $75 billion of so-called “assets” purchased from Canadian banks? Why are the details of what these are, not disclosed? Is this not a significant enough amount of money to bother with details? Who are the true beneficiaries of this deal? Are they foreign banks that need to get bailed out with the future obligations of our taxpayers? Please………do tell.

How can these massive deals be done so quickly, and so secret? What is going on behind the closed doors of this government?

I know enough about the nature of how this all works to be quite sure that there will be massive losses on whatever “possibly highly suspect” assets you are taking off of whoever’s hands. I suspect that this will certainly turn out to be much worse than the government’s brilliant “investment” of our CPP money into ABCP announced back in December of 2007. Do you remember that secret deal where we were assured of a good profit from our CPP holdings? Unfortunately, I suspected in my original letter of December 20th, 2007, and turned out to be very correct, in that our CPP fund has taken a substantial hit to it’s value lately, as addressed in my second letter of November 13, 2008. Better us citizens and future generations than the government’s buddies in international finance, I suppose. Yep, the government has been doing a bang up job in managing this situation. A terrible situation by the way, which, upon learning more, it is beginning to appear to me, that you and your cohorts may have been quite involved in creating.

What will be next? Please enlighten us, rather than surprising us again in handing more fruits of our country’s future over to others, while sticking us with the remaining refuse.

Please be aware that this time I am copying this entire correspondence to a host of pertinent organizations, publications and other miscellaneous relevant entities.

MORE NEED TO BE LOOKING INTO WHAT YOU PEOPLE ARE UP TO !!!!

I will be passing copies of the body of this letter to other constituents within your riding (door to door) as time permits, and encouraging them to learn and spread awareness of what is going on.

I beg others to search and push for more information about what our government is doing to our country, and how this can all be happening. For some on this “cc” list, I consider it their professional obligation, and for many others, their patriotic duty.

With Sincerity,

Shoobedoowa
Calgary

Attachment: Reference to Globe and Mail article, dated Dec 12, 2008

Attachment: Reference to Bloomberg article, dated Dec 18, 2008

cc: Stephen Harper
Office of the Auditor General of Canada
National Citizens Coalition
Canadian Taxpayers Federation
The National Post
The Globe and Mail
CBC News
CTV Television Network
Liberal Party of Canada
Canada’s NDP
Green Party of Canada
Calgary Herald
Calgary Sun
Taxpayer’s Ombudsman
CBC Ombudsman
Alberta Ombudsman


For those who would like to see past letters and reference articles, please visit my blog at:

http://whatisgoingonincanada.blogspot.com/



****************
Attachment #1:


http://www.theglobeandmail.com/servlet/story/RTGAM.20081212.wmortgage13/BNStory/Front/home

Special investigation: How high-risk mortgages crept north

The untold story of how elements of the first Conservative budget in 2006 encouraged big U.S. players such as AIG to make a push into Canada, creating our version of subprime mortgages


JACQUIE MCNISH AND GREG MCARTHUR
From Saturday's Globe and Mail
December 12, 2008 at 11:54 PM EST
In the first half of this year, as the subprime mortgage crisis was exploding in the United States, a contagion of U.S.-style lending practices quietly crossed the border and infected Canada's previously prudent mortgage regime.
New mortgage borrowers signed up for an estimated $56-billion of risky 40-year mortgages, more than half of the total new mortgages approved by banks, trust companies and other lenders during that time, according to banking and insurance sources. Those sources estimated that 10 per cent of the mortgages, worth about $10-billion, were taken out with no money down.
The mushrooming of a Canadian version of subprime mortgages has gone largely unnoticed. The Conservative government finally banned the practice last summer, after repeated warnings from frustrated senior officials and bankers that the country's financial system was being exposed to far too much risk as the housing market weakened.
Just yesterday, Finance Minister Jim Flaherty repeated the mantra that the government acted early to get rid of risky mortgages. What he and Prime Minister Stephen Harper do not explain, however, is that the expansion of zero-down, 40-year mortgages began with measures contained in the first Conservative budget in May of 2006.
At the time, Mr. Flaherty announced that the government was opening up the market to more private insurers.
“These changes will result in greater choice and innovation in the market for mortgage insurance, benefiting consumers and promoting home ownership,” Mr. Flaherty said.
The new rules encouraged the entry of such U.S. players as American International Group – the world's largest insurance company – and Triad Guarantee Inc. of Winston-Salem, N.C. Former Triad chief executive officer Mark Tonnesen, who spearheaded his company's aborted push into Canada, said the proliferation of high-risk mortgages could have been mitigated if Ottawa had been more watchful.
“There was a lack of regulation around the expansion of increased risk,” he said.
Virtually unavailable in Canada two years ago, high-risk mortgages proliferated in 2007 and early 2008 and must now be shouldered by thousands of consumers at a time when the economy is sinking quickly and real-estate prices are swooning. Long-term mortgages – designed to help newcomers get into the housing market sooner – are the most expensive in terms of interest costs, and least flexible when mortgage-holders cannot meet their payments and need extensions.
The Bank of Canada this week warned that the perilous economy could lead to a doubling of so-called “vulnerable households” – those unable to meet their debts – and perhaps cost thousands of Canadians their homes. The central bank, which is always cautious with its words, said in a report that there is the potential for “a substantial increase in default rates on household debt.”
The federal government waited until June of this year to slam the regulatory door on 40-year mortgages. In October, as the global financial crisis erupted, Mr. Harper lauded his government for its “early” response to the mortgage dangers.
“In the U.S., they are still responding to the fallout of the subprime mortgage mess. In Canada, we acted early over the past year,” Mr. Harper said in a speech to the Empire Club in Toronto.
He didn't say that, not only did his own government open the sheltered Canadian mortgage market to U.S. insurers, but it also doubled to $200-billion the pool of federal money it would commit to guarantee their business. The foreigners unleashed what one U.S. insurance executive described as a fierce “dogfight for market share” that prompted rivals, including the giant federal agency Canada Mortgage and Housing Corporation, to aggressively push such risky U.S.-style lending.
An investigation by The Globe and Mail found:
– AIG's Greensboro, N.C., mortgage subsidiary launched a quiet lobbying campaign in 2004 with senior U.S. executives and a former CMHC official to push open the doors to Canada's mortgage insurance market, where some of the world's highest insurance rates are charged. Two years later, on May 1, 2006, AIG's mortgage insurance division registered with the lobbying commissioner's office. It was the day before the federal budget revealed new players would be allowed into Canada.
– Banking and insurance officials were so concerned about the alarming rush to 40-year mortgages at the beginning of 2008 that one bank executive warned the Bank of Canada's chief financial stability officer, Mark Zelmer, in a meeting that “the government has got to put an end to this.”
– Critics, including former Bank of Canada governor David Dodge, say the lax mortgage policies only further stoked soaring house prices. As for mortgage insurance premiums, industry officials say rates remain virtually unchanged and could potentially rise as troubled U.S. players begin to retreat from Canada.
The story of how the U.S. housing crisis spread to Canada is a tale of carefully orchestrated U.S. corporate lobbying, failed public-policy promises and government inaction to numerous private and public warnings about reckless mortgage practices.
Few of these consequences appear to have been anticipated by either the government or the financial institutions pushing high-risk mortgages on the public.
“Quite honestly I was surprised [the 40-year mortgage] was seized upon so eagerly by the Canadian banks and borrowers,” said a U.S. insurance executive who asked not to be named. “You hear all the usual excuses: ‘It's a cash-flow management tool, people will pay off their mortgage ahead of time.' But in reality it just becomes a mechanism for borrowing more than you probably should have.”
A FOOT IN THE DOOR
How did the staid world of mortgage insurance become the cradle of so much financial risk in the Canadian housing sector? It started almost by accident.
For nearly 40 years after CMHC was founded in 1954, the business of mortgage insurance was about as exciting as an actuarial table. The agency was set up by the federal government as a kind of financial cushion to encourage the country's conservative financial institutions to open their vaults and lend more money to homeowners.
If a home buyer couldn't pony up a 25-per-cent down payment on a house purchase, CMHC shouldered the risk of default by insuring the mortgage and charging the buyer an insurance premium. Backing CMHC's insurance policies was a 100-per-cent federal guarantee. In bad years, Ottawa piped money into CMHC; in good years, the agency added to the federal treasury by paying taxes.
The smooth working system hit a pothole in late 1988 when Canada's only other mortgage insurer at the time, Toronto-based MICC, was nearly wiped out by new international bank capital rules. The rules threatened to shutter MICC because they effectively made it cheaper for banks to use CMHC's government-guaranteed mortgage insurance.
Faced with the imminent collapse of Canada's only private-sector mortgage insurer, the then Conservative government went to a place that few other industrialized countries have gone by agreeing to guarantee the policies of a non-government mortgage insurer. According to people involved in the crisis, Ottawa “hesitantly” agreed to “taking on an enormous liability” of guaranteeing 90 per cent of MICC's insurance policies.
The government's worst fears about a massive liability materialized in 1995, when MICC's risky insurance bets in the construction sector threatened to torpedo the company. As Ottawa wrestled with the grim prospect of losing the insurer for millions of dollars in mortgages, the world's largest non-bank financial company came knocking with a rescue proposal.
The company was General Electric. The U.S. conglomerate was offering to take over MICC's mortgage insurance portfolio provided Ottawa met one condition: It would bless GE's planned new Canadian mortgage insurance subsidiary with a federal guarantee.
“It was a bit of a slam dunk,” recalls one former Ottawa official. “GE was one of the strongest companies in the world.”
Ottawa agreed to GE's offer, thereby shifting the federal government's 90-per- cent guarantee from a small Canadian mortgage insurer to a unit of a global giant with aggressive Canadian ambitions. GE's mortgage subsidiary, later spun off and renamed Genworth Mortgage Insurance Co., rapidly carved out a major presence in Canada, capturing about 30 per cent of the market and reporting $205-million of profits in 2005.
Other U.S. insurers took notice.
THE DOOR WIDENS
The days of a CMHC-Genworth duopoly were numbered. In the fall of 2005, a tiny paragraph buried in a 280-page federal government estimate of expenditures signalled a new era of competition in the industry.
The Finance Department's provision was considered so insignificant at the time that many staffers of the minister, Liberal MP Ralph Goodale, didn't recall it when contacted by The Globe. A current spokesman for the Saskatchewan MP insisted that the provision was not designed to open the market to riskier products.
Another federal official who declined to be identified said the wording of the provision was eased because Genworth's name had changed and the government wanted to leave room for additional switches.
Despite these explanations, executives and advisers to a number of U.S. insurers and Canadian players said the paragraph was widely interpreted as a signal that Ottawa was opening the country's mortgage insurance sector to outside competitors.
Intended or not, the shift followed years of mobilizing by U.S. insurance companies, all hungry for a piece of what is regarded as one of the most lucrative and the second-largest mortgage insurance market in the world. At the forefront of this movement was mammoth AIG, now in near ruins as a result of its role in the U.S. subprime crisis.
U.S. competitors had envied premium rates on Canadian mortgage insurance policies for years. With only two players competing in the space, Triad's Mr. Tonnesen said CMHC and Genworth were so profitable that they were “basically printing money.”
Eyeing the rich northern market, representatives from at least three U.S. insurers made regular trips to Ottawa for meetings with the Finance Department and Office of the Superintendent of Financial Institutions, the insurance regulator. But AIG created a strategic advantage by hiring Bill Mulvihill, a Canadian mortgage expert who had spent years as the chief financial officer at CMHC. Mr. Mulvihill, who is still a director of AIG's Canadian operation, declined to comment.
“The difference that Bill Mulvihill made was that he was able to connect into the policy folks with OSFI and at Finance and convince them that we were for real,” said a former AIG executive who asked not to be identified. Following in AIG's footsteps were such U.S. insurers as PMI Group Inc., Triad and the Milwaukee-based Mortgage Guaranty Insurance Company.
Ultimately, Parliament did not vote on the Finance Department's proposal, thanks to the 2006 federal election and the Conservatives' rise to office. But the U.S. insurers' efforts weren't for naught; the new Harper government quickly embraced the idea of them coming north.
On May 2, 2006, in his first budget, Mr. Flaherty announced that not only would Ottawa guarantee the business of U.S. insurers, it was doubling the guarantee to $200-billion.
Twenty-four hours before Mr. Flaherty's announcement, AIG's mortgage subsidiary first registered with Canada's lobbyist commissioner, according to a federal registry. At the time, companies who spent more than 20 per cent of their time lobbying the government for changes in policy were required, by law, to register. It is not known how much time AIG spent promoting its cause to the government.
In a statement, AIG's Canadian chief executive officer, Andy Charles, said the company began a “preliminary investigation” of Canadian opportunities years ago. He said the company “did not engage in discussions with elected officials until we became aware that our market entry was being debated.” Until that point, he said, the companies' “interactions were with the Department of Finance and Office of the Superintendent of Financial Institutions.”
The lobbyist AIG hired was John Capobianco, a former aide to various MPPs in the Ontario government of Mike Harris and a defeated candidate for the federal Tories in the 2006 election.
Mr. Capobianco said in an interview he wasn't familiar with any of AIG's negotiations with the federal government before he was retained in May. He was brought aboard to promote AIG's argument that more competition was good for consumers and massage the proposed policy through the finance committees of the House of Commons and Senate.
By the time he was hired, Mr. Capobianco said, “the rubber was on the road.”
LENDERS STEP THROUGH
Although new U.S. insurers didn't generate any press coverage or public concern from the opposition parties, there was at least one lawmaker who had misgivings.
Garth Turner, the former financial journalist turned politician who has bounced between the Conservative and Liberal parties, urged the finance committee to hold a day of hearings on the new U.S. insurers. He was a Conservative MP at the time, but was wary of his party's proposal.
“We had a fairly stable market at a time when the American market was already starting to go to hell,” Mr. Turner said in an interview. “I was quite concerned that mucking around with our mortgage fundamentals would have the potential for chaos.”
During a day of hearings, executives from the new U.S. insurers all pledged to make home ownership more affordable for people on the cusp of being approved by a traditional lender. AIG's new Canadian mortgage insurance chief, Mr. Charles, promised to service the neediest – immigrants, the self-employed and those with blemishes on their credit scores – who were mostly ignored by CMHC and Genworth.
Peter Vukanovich, Genworth's Canadian chief, fought to protect his profitable turf during the hearings and warned the government that it hadn't conducted any studies about the threat of disruption posed by new competitors.
Shortly after the hearing, Mr. Turner said he was approached by Mr. Flaherty's parliamentary secretary, Diane Ablonczy, in the House of Commons. “She came to my desk where I was computing away on my laptop,” Mr. Turner said, recalling that she told him to “get onside.”
In the end, no one raised a single question about the prospect of 40-year or zero-down mortgages. The bill sailed through the committee – including a vote of support from Mr. Turner.
“At the end of the day I sadly acquiesced,” he said, adding that he regrets voting the way he did. “At the time it was politically difficult.”
(He has since written and published a book, The Greater Fool, predicting a Canadian real-estate market crash similar to the one in the United States.) The provision later passed through the Senate committee, but not without one ominous exchange.
Senator Terry Stratton, a Conservative, had a prophetic inquiry about the potential that AIG might engage “higher risk” mortgage insurance practices, “thereby increasing the potential for forfeiture, which would place an additional burden on the federal government.”
Mr. Charles, AIG's top executive in Canada, waved off the concerns. “In terms of exposure to the government, the practical likelihood of AIG, an organization with $800-billion in assets, ever coming to the government for anything as it relates to a claim is not nil, but it is as close to nil as it possibly could be.”
Two years later, Washington has had to pump $150-billion into AIG after its business was shattered by reckless financial gambles.
A STEP TOO FAR
In February, 2006, as AIG was still trying to establish itself in Canada, CMHC moved to protect its coveted spot and announced a pilot project to insure 30-year mortgages.
For the industry, it was a declaration of war.
Two weeks later, Genworth announced it would do the Crown corporation one better, saying it would insure 35-year mortgages. CMHC matched that with its own 35-year product and raised the stakes by announcing it would insure interest-only loans that effectively required no down payment. The aggressive new mortgage products alarmed Mr. Dodge, the Bank of Canada governor, who scolded the president of CMHC, Karen Kinsley, in a letter for “very unhelpful” mortgages that he said would inflate prices and ultimately make homes less affordable.
In October, Genworth struck again, announcing Canada's first 40-year mortgage insurance policy. AIG and CMHC later added their own 40-year insurance products.
Industry officials repeatedly said in interviews that they were shocked at the frenzied escalation of risk. “It was fast and furious,” said one AIG executive.
Mr. Vukanovich, the head of Genworth, declined repeated interview requests. In a statement, Genworth said it introduced 40-year mortgage insurance policies “as a continuation of global lending practices and trends at that time.” The company added the policies were “prudently underwritten and not used to bring unqualified borrowers into the housing market.”
In an interview yesterday, CMHC vice-president Pierre Serré repeatedly pointed to the behaviour of his competitors when asked about the agency's riskier products, explaining that CMHC's rivals were the first to introduce the 40-year products.
Asked if he thought that the new U.S. insurers pushed CMHC into riskier policies, Mr. Serré paused. “It' s a tough one for me to answer. In retrospect you can look at all the individual things happening and you can link them together, but it's a hard one to tell.”
“We think we've done a prudent job of introducing these products and managing these products,” he added, declining to explain how many 40-year and zero-down mortgages the public agency now has on its books. Unlike in the United States, such figures are not made publicly available in Canada.
Two-and-a-half years after Ottawa launched its mortgage insurance initiative, the promise of increased competition has all but died. Three of the entrants, PMI, Triad and Mortgage Guaranty Insurance Co., have retreated. Genworth and AIG are still operating, but, as financial woes mount for their U.S. parents, their future in Canada remains uncertain. Industry sources said most banks have become so cautious in the wake of global financial crisis that they have sharply reduced their use of private insurance in Canada.
The retreat by international insurers means that CMHC's dominant grip on the mortgage insurance market is expanding again, possibly beyond the 70-per-cent market share it enjoyed prior to the arrival of the bigger U.S. competitors.
An adviser to one of the U.S. insurers, who declined to be identified, summed it up this way: “It's a failed experiment.”


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Attachment #2:

http://www.bloomberg.com/apps/news?pid=20601082&refer=Canada&sid=aIWKXz.eL0u0

Deutsche Bank, Citigroup Threaten Canada Debt Plan

By Joe Schneider
Dec. 18 (Bloomberg) -- Deutsche Bank AG, Citigroup Inc. and other banks backing a plan to convert C$32 billion ($27 billion) of insolvent Canadian commercial paper said they will walk away from the deal unless it’s completed tomorrow.
The non-Canadian banks, which include Bank of America Corp. and HSBC Holdings Plc, agreed last year not to demand collateral tied to the paper while holders worked out a restructuring. Peter Howard, who represents the banks, told an Ontario judge today that his clients won’t extend the accord past tomorrow.
“The asset providers are ready to close the deal,” Howard told Ontario Superior Court Judge Colin Campbell at a hearing in Toronto. “Others are seeking enhancements.”
Ending the agreement would free the banks to make margin calls on trusts that own the paper, scuttling plans to swap the short-term debt for longer-term notes and making the paper almost worthless. Caisse de depot et Placement du Québec, the province’s pension plan, holds paper originally valued at C$13 billion. National Bank of Canada’s holdings were originally worth C$2.2 billion and ATB Financial, the Alberta government- owned bank, owns paper once valued at C$1.2 billion.
National Bank fell C$2.28, or 8.2 percent, to C$25.62 at 4:16 p.m. in trading on the Toronto Stock Exchange. The shares have fallen 51 percent this year.
The banks’ stance puts “guns to our heads,” Campbell said. Referring to the first business day after the deadline, he asked, “What happens on the 22nd” of December?
“The unthinkable,” is an option, Howard said.
‘External Sources’
A committee of 17 institutions, including National and Caisse de Depot, said it needs C$9.5 billion in further guarantees from “external sources” to complete the debt conversion. The committee is also attempting to change the credit spreads in the agreements that would trigger margin calls, to give the noteholders more leeway.
“The spreads today are at near-record levels,” Fred Myers, a lawyer representing the committee, told the judge. He said the changes will require further negotiations and asked that bankruptcy protection for trusts holding the asset-backed commercial paper, or ABCP, be extended to Jan. 16.
Campbell granted the request. That doesn’t affect tomorrow’s deadline set out by the banks on the standstill agreement.
Under the plan, in the works for about 16 months, insolvent 30- to 90-day debt would be converted into new notes maturing in about eight years. The asset-backed paper hasn’t traded since August 2007, when investors began to shun the debt because of concerns about ties to high-risk mortgage loans in the U.S.
A collapse of the agreement would leave about 1,800 individual investors, including farmers, students and retirees, with potential losses of their life savings. Under the restructuring, those investors would be fully repaid by Canaccord Capital Inc. and Credential Securities Inc., two Vancouver-based brokerages that sold them the debt.
‘Do-or-Die’
The banks’ threat may be a message to the federal government to backstop the deal with the C$9.5 billion guarantee, Colin Kilgour, a consultant to investors in the frozen debt, said in a telephone interview today.
Howard is “basically saying ‘this is our direct and best shot to the government, threatening that, if you’re not here, this deal is going to go down,” Kilgour said. “This is basically a do-or-die situation.”
Canadian Finance Minister Jim Flaherty said yesterday, following a meeting with his provincial counterparts in Saskatoon, Saskatchewan, that they had some discussions about assisting the plan. Several ministers are reviewing proposals, he said.
The government shouldn’t provide the guarantees, said Eric Sprott, chief executive officer of hedge-fund manager Sprott Inc., which has about C$5.6 billion under management.
“ABCP in this country is worthless,” Sprott said today in an interview. “The money is gone. It’s dead.”
The case is In the Matter of Metcalfe & Mansfield Alternative Investments, C48969, Court of Appeal for Ontario (Toronto).
To contact the reporters on this story: Joe Schneider in Toronto at jschneider5@bloomberg.net.
Last Updated: December 18, 2008 16:44 EST

CPP Losses Nov 13, 2008

From the desk of:

Shoobedoowa
Calgary
http://whatisgoingonincanada.blogspot.com/
To:

Diane Ablonczy (MP)
Calgary Nose Hill

1107 17th Ave North West
Calgary, Alberta
T2M 0P7

November 13th, 2008

Hello Ms. Ablonczy:

Given that your office did not reply to my (now seemingly) very relevant letter of Dec 20, 2007, I intend to hand out copies of this update quite liberally.

I am attaching an article addressing yesterday’s news of a $10 billion dollar loss to the Canada Pension Plan.

http://ca.news.yahoo.com/s/capress/081112/national/cpp_board_1

What are you crooks doing there? Why not get another good deal on some more of that “great value” ASSET BACKED COMMERCIAL PAPER?? hehe

Better yet………..what about those fantastic Canadian banks? You know….the ones which, by the words of your party, are “well capitalized”…….safest in the world…..all that good stuff ! What? $25 billion wasn’t enough? Another $50 billion now? I’m sure that the assets being taken off the bank’s hands are nothing less than top notch !!!

Sounds like your party, along with our friendly Goldman Sachs representative as the governor of the Bank of Canada, are doing a bang up job in getting the taxpayers money to where it needs to be. Are you going to be issuing a list of the foreign banks who are net beneficiaries of the Canadian version of “LET’S RAPE THE NATION”?

As we now know via developments in America……. the big heist is underway.

I guess we’ll just have to wait to see just how badly you are going to screw us.

With Sincerity,


Shoobedoowa
Calgary

CPP Fund loses $10 billion of value in its investments in latest quarter to $117.4B
Wed Nov 12, 3:03 PM
By Kristine Owram, The Canadian Press
TORONTO - The Canada Pension Plan fund said Wednesday it ended the second quarter of fiscal 2009 with a loss of more than $10 billion in the value of its assets, primarily becaue of the stock market turmoil that has battered share prices around the world.
The fund said Wednesday it had a negative 7.5 per cent overall investment rate of return over the previous quarter. The board had assets of $117.4 billion at the end of the period ended Sept. 30, a decrease of $10.3 billion from the previous quarter.
The decline was the result of a negative investment return of 8.5 per cent, or $10.8 billion, and a net inflow of $500 million in CPP contributions from Canadians.
The Canada Pension Plan Investment Board said its four-year annualized investment rate of return was 6.6 per cent.
While the CPP Board's latest losses can be made up with future growth in the markets, if such red ink continues for years it would raise the spectre of possible rising contributions for workers or lower payments to retirees in the future.
The board invests the surpluses generated in the federal pension plan, which pays benefits to 17 million Canadians when they retire. The board operates separately and is managed independently from the plan, which administers the retirement benefits.
Other pension funds, ranging from the Ontario Teachers and OMERS plans in Ontario to Quebec's Caisse de depot, have also recently announced losses on their stock portfolios.
Last week, Canada's largest pension fund manager, the Caisse de depot et placement du Quebec, said it will following a more cautious investment strategy to cope with a squeeze on its returns because of the global financial crisis.
The fund said it currently has enough cash to meet its commitments to depositors and business partners, and deposits will exceed withdrawals for many years.
But like all institutional investors, the pension fund has lost money on the stock market in recent months and said it must take a more cautious approach to its investments to preserve its financial health.
The Wall Street financial meltdown earlier this year has spilled around the world and battered stock and credit markets, intensifying fears of a global recession. The Toronto Stock Exchange, for example, has lost 35 per cent of its value since a mid-June record high, a loss of more than $600 billion in stock value of the companies listed on the senior Canadian market.
At the end of 2007, the Caisse had net assets of more than $155 billion, with about 36 per cent invested in the stock market, approximately 29 per cent in bonds and currencies and around 35 per cent in private equity and real estate.
In a related report this week, Desjardins Securities says Canada's corporate pension plan funding levels have hit an all-time low thanks to plunging stock markets.
The firm released a report that said company plans have assets worth just 72 per cent of their obligations.
Desjardins' review of companies in Canada's benchmark S&P/TSX composite index concludes that a typical pension fund has seen the value of its assets decline an estimated 15 to 20 per cent this year as markets hammered stocks and bonds in pension investment portfolios.
Most companies have not yet reported their pension data for year-end 2008, but the report estimates a typical pension fund could now have assets worth between 70 and 75 per cent of obligations, including obligations for pensions and post-retirement benefits.
That would be worse than the previous low funding level hit by Canadian companies in 2006, when a typical pension plan was 77 per cent funded.

CPP Dec 20th 2007

From the desk of:

Shoobedoowa
Calgary
http://whatisgoingonincanada.blogspot.com/

To:

Diane Ablonczy (MP)
Calgary Nose Hill

1107 17th Ave North West
Calgary, Alberta
T2M 0P7

December 20th, 2007

Dear Ms. Ablonczy:

I am one of your constituents. I am writing to you not only as a voter, but as an angry Canadian citizen who is feeling quite betrayed not only for myself, but on behalf of all Canadian citizens.

I was shocked to read the article attached below from the Globe and Mail, regarding the use of CPP funds to bail out various institutions by providing funding, for what is known as ABCP, which is used to underwrite assets that are incomprehensible, poorly documented, and very likely in default.

I am astonished that money being safe guarded for Canadians against their need in retirement is being applied to bail out financial institutions that speculated in risky assets. I do not recall the Federal Government being given a mandate to squander their citizen’s future in such a manner.

I am well aware of the nature of these assets, commonly referred to as securitized assets with various simplified labels such as CMO, CDO, CLO, MBS, and so forth. I would expect that someone charged with the prudent stewardship of our retirement money, CPP, would also be aware of this. There are multiple reasons why no institutions or investors are willing to fund these assets.

The ABCP market has frozen up. It is because the assets backed by that commercial paper are suspect. They are often securitized loans and mortgages that were, in many instances deceivingly, given a AAA rating using a non-disclosed black box model, but are now revealed to consist of non-existent cash flows from loans in default.

No financial institution, nor knowledgeable investor, wants to fund these assets since their actual creditworthiness is in question and suspect. Further, no holder of these assets appears willing to disclose exactly what they are using the ABCP to fund, nor what the actual status is of the underlying cash flows from the securitized assets.

If major financial institutions and private investors do not want to put their money at risk in this situation, why should I? Why should any Canadian? Our government has seen fit to take money that I, and every other working Canadian, has provided as a backstop for our collective futures, and “invest it in” (spend it on) this toxic waste of securitized products.

Furthermore, to hear some bureaucrat tell me, via this article, that these instruments are transparent and safe is a lie. Nothing less than a BLATANT LIE. The ABCP, which is distinct from commercial paper issued by manufacturers, is funding assets that are so risky that no one in their right mind, including our very own banks, wants to lend against.

Mr. Raymond’s deceiving claim that “All of the Big Five banks in Canada now provide global liquidity” must not be considering TD bank to be one of the “Big Five”. This week, TD bank refused to be involved in the latest scam….er…..scheme.

This organization has taken an action that would NEVER be taken by a knowledgeable and prudent investor. Why do we not have laws against such action?

I also resent that most of the banks in the consortium trying to straight arm the Canadian financial establishment into bailing themselves out are foreign banks who took unnecessary risks. They were greedy, and they speculated. Let them pay the price. Unless I am personally receiving some of their outrageous bonuses for their deceptive achievement of abnormally high returns on these risky assets, MY MONEY SHOULD NOT BE USED TO BAIL THEM OUT. Why are you privatizing profits and socializing losses?

How dare our Federal Government!? Shame on you all for the slimy back room deals that are being put together with money that does not belong to you!

With all of the fraud and deception that seems to be surfacing, it may be time that some of us rank and file citizens start passing some serious questions around about how our financial systems are being run these days. I should expect that we can rely on our elected representatives to be taken to task in their fiduciary duty to do so.

With Sincerity,



Shoobedoowa
Calgary


Attachment: Reference to Globe and Mail article, dated December 19th, 2007.

Below is the article in Globe and Mail, dated December 19th, 2007:

http://www.globeinvestor.com/servlet/story/RTGAM.20071219.wabcp_cpp1220/GIStory/

Pension fund snaps up $6-billion in ABCP
LORI McLEOD AND BOYD ERMAN
Wednesday, December 19, 2007
Canada's biggest pension fund is giving bank-sponsored asset-backed commercial paper a big vote of confidence. The Canada Pension Plan Investment Board has bought $6-billion of the short-term debt based on a view that confusion in the marketplace has created an attractive opportunity.
Canada's market for asset-backed commercial paper (ABCP) has been in turmoil since August, when $33-billion of the paper created by non-bank institutions such as Coventree Inc. ended up frozen when investors refused to buy the paper because of concern that it was backed by U.S. subprime mortgages.
More than $80-billion of ABCP issued by the country's big banks kept trading in the fall, but at a huge discount. With yields soaring, the CPPIB began accumulating ABCP in September, but is sticking to the more solid bank-backed paper.
“They are actually incredibly safe investments with lots of transparency, and, at this point in time, offering a higher yield because of the confusion between them and their next of kin,” said Don Raymond, senior vice-president of public market investments at the CPPIB. “Traditional investors who have gotten into the non-bank side have now been restricted from investing in the bank-sponsored ABCP. So the whole market has been treated as one, while they are really very different instruments.”
Thirty-day, bank-sponsored paper, for example, is trading at about 60 basis points above the rate on banker's acceptances, a much wider spread than the three to four basis points above that rate before the crisis took hold. (A basis point is 1/100th of a percentage point.) In the world of short-term investments, where returns are often just a few percentage points, an extra half percentage point is a huge pickup in yield.
The $121.3-billion pension plan decided to reveal its ABCP investments because of their size, and because of the widespread knowledge of its investment activities among market participants. The CPPIB also stressed that it made the investment solely on its merits, and has not been asked by outside parties to help provide liquidity to the ABCP market in Canada.
ABCP is a short-term investment vehicle backed by assets including home and car loans. Some paper is also backed by derivatives and other financial instruments, but the CPPIB is avoiding that, Mr. Raymond said.
Bank-sponsored ABCP is actually a safer investment than it was this summer owing to changes largely driven by market demand, Mr. Raymond added.
Investors have pushed the banks for global liquidity standards, which provide better safeguards for investors than were required by Canadian-style liquidity provisions. All of the Big Five banks in Canada now provide global liquidity, Mr. Raymond said.
The CPPIB also receives monthly reports showing how the receivables in its investments are performing, when just months ago that information wasn't provided to investors in many cases, he said.
“This has created an opportunity for investors like ourselves, who have the ability and the capabilities to understand the underlying assets within these securities, and offers attractive yields for what in fact are very solid assets.”
Moody's Investors Service Inc. is rating Canadian ABCP for the first time. The ratings company gave almost $20-billion of paper issued by Royal Bank of Canada and Bank of Nova Scotia its top rating of Prime-1.
The banks asked Moody's to rate the paper, so that it would have grades from two ratings companies. Before the credit crunch, DBRS Ltd. was the only company to rate Canadian ABCP.
By getting a second rating for their paper, Scotiabank and RBC are likely trying to boost investor confidence which would lower interest rates on the paper, improving profits for the banks.
“Maybe people will be more confident buying it, and maybe the spreads will come in, which would be a big benefit for the banks,” said Charles Gamm, vice-president and senior credit officer at Moody's.
Ironically, RBC and Scotiabank paper always had global style liquidity, and would have qualified for a rating from Moody's had the banks asked for one.
Moody's is now discussing rating paper from the other big banks, since they too have switched to global-style liquidity backup.
© The Globe and Mail