Nice little bank you've got here...
His comments follow criticism from the opposition-- and even a fellow member of Prime Minister Stephen Harper’s cabinet -- that Flaherty overstepped his bounds after his office asked Manulife Financial to reverse its decision to lower its five-year mortgage rate from 3.09 per cent down to 2.98 per cent. The bank quickly complied.
In a statement, Manulife said it had restored the higher rate "after consulting with the Department of Finance."
Ah, yes. That all purpose word "consulting." Sort of in the same way that people make other people offers they can't refuse. This is behaviour one expects from street hoodlums and Leftist politicians. Apparently the Harperized Conservative Party has no problem telling large financial institutions that they are offering their clients too good a deal. For decades solemn figures on the Left have told us that, without the firm hand of government, large corporations would gouge ordinary Canadians. Here is an instance of the firm hand of government ensuring that large financial institutions continue to charge their customers higher prices.
Ever since Stephen Harper told libertarians to grow up, I've had a sneaking suspicion that the Tories aren't so much pragmatists who limp to the Right, as statist with pro-market pretensions. I don't think that Stephen Harper, MA in Economics, actually gets how a free market works. The lessons that he and Big Jim Flaherty have taken from the American housing meltdown are exactly the wrong ones. In the Harper narrative it was reckless private banks and mortgage companies, combined with gullible or dishonest consumers, that created a housing bubble that burst and took down the world economy.
Which gets it exactly wrong. The housing market bubble was a product of easy money from the Federal Reserve and lax borrowing standards imposed by Congress on private firms. Any hesitancy that private lenders might have had were eased by a promise, through Freddie and Fannie, that the federal government would be ready and able to bail them out. This is a product of government meddling in the housing market. Did we mention that Canada has its very own government backed ticking time bomb? It's called The Canada Mortgage and Housing Corporation.
Perhaps Jimmy should give them a call.
If Jim Flaherty thinks that private lenders are being too generous, then he can formally change the rules. The Minister of Finance has the power to adjust lending requirements, something that Big Jim has done in the past. Apparently seven years in power has made the fellow a bit lazy. Rather than issuing the appropriate directives or orders-in-council, Jimmy just decided to have one of his flunkies make a call. So much easier than this whole rule of law stuff.
In fairness to Jimmy this sort of behaviour isn't without precedent. When John A Macdonald was serving as PM he was also president of two insurance companies, including the one that Flaherty was bullying this week. The incestuous relationship between finance and meddlesome government pre-dates Confederation. Politicians were telling banks how to run their affairs when Canada was little more than a string of fur trading posts and a few farms. This is more than just political empire building, it's an approach built on a certain understanding of finance and banking.
To early Canadian political leaders the American banking system was a financial wild west. Small banks would appear out of nowhere, fleece their depositors and vanish into the hills. This was a crude and simplistic understanding of early American finance, yet it fit into a wider Canadian bias that Americans are loud mouth cowboys with more attitude than sense. We were Britannia's sensible eldest daughter and the Yanks were Sam Slick. To ensure that Canada did not degenerate to American standards of recklessness the firm, though discrete, hand of the state was required.
This terribly Victorian Tory view of the world persists in our financial regulations. Bankers are wild men who will lend with reckless abandon, unless the wise Ottawa Mandarins tug on the leash. The difference between Big Jim and his predecessors, including the now beatified Paul Martin, is that they threatened discretely. In a scene out of comic opera the minister was trying on a new pair of shoes, with a government logo no less, while off-handedly commenting that he'd been bullying Bay Street suits.
For power to be effective it must be respected. It's hard to respect Jim Flaherty today.
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