Last week we were all angry about the lunacy of the BC Ferries Corp buying boxes at Canuck games and paying untold amounts to be a Canuck's major sponsor...and to what end?
Is there another Ferry corp that they are competing against? Do we have a choice? We have the helicopters and sea-planes and all their capacity will fill half a ferry without cars. So why are they spending OUR money this way. When we see the Ferry Corp logo on the TV are we going to run and book a ferry crossing to Victoria?
Well it seems that this self-serving type of advertising is not restricted to just provincially owned corps. I was browsing some international financial sites and lo and behold, there was an ad from the CMHC! It said something like ..'keeping Canada's housing market stable' or some such drivel.
In my very very humble opinion I think that is misleading advertising. How is helping facilitate a bubble keeping things stable? BTW - I won't bore you with how again, the CMHC is garnering a veritable army of on-call critics and Ben here is one of the best at exposing their many flaws.
Anyway back to the ad. Not only is the ad not true BUT why is it even there??
Presumably they are paying good money to have the ad there. Why? Will we rush out and get a CMHC insured mortgage after reading it? I doubt it, since their mortgage insurance is peddled by Mortgage Brokers.
Maybe it is a self-serving way to counter the many critics, including the Government, which is trying to reign in the monster it helped create. Better keep their money for when the time comes to pay the policy holders (banks).
Because the government not only owns the Canadian Mortgage and Housing Corporation (CMHC), which accounts for more than two-thirds of the mortgage insurance in force, but also provides a 90 per cent guarantee on private mortgage insurance obligations, policymakers play a major role in the evolution of underwriting standards and can thus contain potential excesses.
The government may well exert a strong influence on underwriting standards on paper but, in reality, the government-backed guarantees have introduced moral hazard through the transfer of default risk from bank shareholders to taxpayers.
Bank managements are incentivised to play hard and fast with the written rules and, should a negative shock arise, the CHMC has little room to absorb the losses. The government-owned company currently insures $536 billion in mortgages and has just $11 billion in equity: just 2 per cent equity against its total exposure. It’s easy to envisage a scenario in which the taxpayer is left holding the bag.
When this bubble bursts and we are deep in it, the analysts and the Government and the CMHC will be saying 'who-coulda-known'. We must not let them get away with it. We have ample, well written info in bear blogs, for years now, saying that such a high level of risk is not acceptable.
