Monday, March 29, 2010

Could the CHMC bankrupt us?

There is some good analysis coming out of the net warning of the liabilities that we will all face should this long-awaited correction happen and leave CHMC's large dangling liabilities covered by fairly skimpy assets.

There are a few interesting facts I have been able to glean from the net:

The CHMC liabilities are probably not far shy of $500 Billion or about 40% of the total GDP of Canada.

This come from this excellent report which I would encourage everyone to read. At least read page 21-27 on the CHMC. You can find it on this site- about half way down, March 22nd,
Canadian Housing Bubble Trouble looms.

(hat-tip to Hosuing Analysis)

The CHMC is insuring 90% of all insured (and therefore high risk) mortgages. Why are we in the business of insuring mortgages again? Could someone remind me.

Our total debt is $700 Billion:

So as you can see it wouldn't take much of a correction for the feds to have to step in and soak it up for the CHMC losses.

Meanhwile Mish has some comparisons between near-bankrupt California and solvent Ontario which makes the fomer look better!

As for our banks, no wonder they are doing so well, when the CHMC is underwiting the risk. this is from the NYT no less!:

This is not a bash-Canada post. I am a patriot, that's why I want strong accountable insitutions, sustainability and common sense.

We have already seen the US shoot themselves in the head, by allowing Freddie and Fannie to pile on the debt and liability and then transfer that to the tax-payer. Meanwhile the executives and all the bank CEOs all got huge bonuses
like they were all doing a good job- did anyone pay them back?

Why are we doing the same thing? Didn't we learn anything? The problem is transferring private debt and liability to the public sector, when the profits were all enjoyed by the private sector. That isn't capitalism or even socialism, it is just bad public policy.