Canada to buy up to $25 bln in insured mortgages

Fri Oct 10, 2008 4:12pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Ka Yan Ng

TORONTO (Reuters) - Canada plans to buy up to C$25 billion ($21 billion) in insured residential mortgages to help cushion banks from the global financial crisis and address a "scarcity" of private-sector lending, Finance Minister Jim Flaherty said on Friday.

While details of the plan were slim, Flaherty stressed the program is not a bank bailout because the government is not buying equity, and that the mortgages are "high-quality assets" that are already insured by the Canada Mortgage and Housing Corp. (CMHC), a government-owned agency.

The plan differs from the $700 billion rescue plan in the United States in which the government announced it would purchase toxic assets from financial institutions.

"Our mortgage system is sound," Flaherty said at a news conference in Ottawa. He said the "severe and protracted" credit crunch is beginning to affect the availability of mortgage loans and other types of credit.

The plan was announced days before voters go to the polls on October 14 to decide whether to return the ruling Conservatives to power. Prime Minister Stephen Harper has faced growing criticism about his response to the financial crisis, with his opponents accusing him of being complacent while Canadians grow increasingly anxious about their financial futures.

The prime minister, maintaining a lead in the polls, told reporters the move represented no cost to government.

"This is a market transaction that will cost the government nothing ... we are simply exchanging assets that we already hold the insurance on and the reason we are doing this is to get out in front," he told reporters in Brantford, Ontario.

"We have a range of measures that we can take, that we have been taking, and we will continue to take," he said, declining to give further details.   Continued...

<p>Canada's Finance Minister Jim Flaherty listens to a journalist's question during a news conference on Parliament Hill in Ottawa, October 10, 2008. REUTERS/Christopher Pike</p>