Quote:
Originally Posted by freedogger
We bought bad mortgages from them paid for by an increased deficit that we all owe. What part did I miss?
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No where does it say they were "bad" mortgages
Quote:
Originally Posted by freedogger
They were mortgage backed securities, basically a basket of crappy mortgages. It doesn't matter if you don't understand this part, just realize that our debt went up to put the banks in a better spot. We were the buyer of last resort for these assets and now we Canadians will take the loss if our housing market takes a dive.
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They were CMHC backed mortgages. In other words, if there was a default CMHC was going to cover the loss anyways.
So before the purchase: CMHC (a crown corporation) is on the hook for defaults
After the purchase: the Canadian Gov't is on the hook for defaults.
It is pretty much the same thing - you and I are on the hook in the case of a default.
This transaction was made so that the banks would no longer have $75 Billion tied up. They now had an additional $75 Billion to loan so that helped free up the constriction in the lending markets. Now the Canadian Government gets the money back as the mortgages are paid off.
It was not a "bail-out". The Canadian government did not accept any bad debt beyond what they were already on the hook for.