Complete details of 2008-09 Bank Support
Readers of this blog will have hopefully read my report “The big banks big secret”Â which examines the $114 billion that Canada’s banks received during the 2008-09 financial crisis. Â Its major finding was that at some point three of Canada’s fiveÂ big banks had received support worth more than their market capitalization, or the value of all the stock, at around $20-25 billion per bank.
As I noted in the report both the Bank of Canada and CMHC have refused to release the secret details of their support programs including how much each bank got, when they got it and what they put as collateral. Â Canadians are still not allowed to know how much each bank got.
Some researchers have requested the full dataset that stood behind the report. Â I also wanted to make it publicly available hereÂ so others could freely use it in their own research on bank supports during the crisis. Â Hopefully it can lead to determining why some banks needed so much more relative support than others and how we might improve the banking system in the future.
Next time I hope we listen to Steve Keen and deleverage the borrowers rather than pander to the lenders.
At the time, Canadian borrowers wheren’t in any particular difficulty, so there was no one to deleverage. The Canadian bank’s problems where largely due to irrational fear and problems that they didn’t cause.
About a year ago I asked my banker how many no money down 40 year mortgages they had issued. I know him, and we get along well. He laughed. “It does not matter,” he proclaimed, “because CMHC guarantees all such mortgages.”
David: This is a paper that appears to study the same stuff in the USA (Felkerson 2011).They got a lot of pushback, just as you did with your initial report.
As for the data, unfortunately these says, facts seem to have very little sway on opinions.
I’ve heard it argued that the banks “could not” get money so we had to provide liquidity. Is that really true, or is it a matter of “could not get at a rate which allowed us to make profit”?
At a high level, it seems to me that, as you have said, we should be concerned about a banking system that needs so much help and as JWW says above, one that relies so heavily on a public risk backstop to generate their profits.