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.


  1. IMO they shouldn't insure any investment property.

    at all.

  2. They probably can't bankrupt us yet, but they definitely will put us in the hock. Canada's federal financial situation seemed quite strong going into the crisis aside from CMHC liabilities. I have no idea what other crap the government has off balance sheet though (EDC anyone?), and some provinces are simply black holes.

  3. Why CHMC insures rental investments is the real question. Taking on public liability to allow someone to make a few bucks!

  4. i was suprised that the spin on CMHC was look how prudent we are not to do this any more instead of absolute outrage they were doing in the first place.

    After reading the report with CMHC liabilites at 40 percent of GDP I was extremely concerned. When you add together provincial and federal debt Canada is at about 80 percent of GDP debt right now. Adding anything to this and we start to head into the Greece/Ireland/England danger zone really quickly. This isn't counting the 50 billion we're off budget every year so far.

    Basically any idea that we're prudent Canadians is a myth. Maybe we look better because others are in deeper doo doo but we are in serious danger.

  5. Up until recently the CMHC was insuring SPECULATORS just like everybody else so we're on the hook for all of the gambling that has been going on too.