The Secret

Few foreclosures, no bank failures: Canada offers lessons

Not a single Canadian bank failed during the Great Depression, and not a single one failed during the recent U.S. crisis now dubbed the Great Recession. Fewer than 1 percent of all Canadian mortgages are in arrears.

That's notable given that the recent U.S. economic turmoil was triggered by a meltdown in mortgage finance, forcing an unprecedented government rescue of Wall Street investment banks and the collapse of more than 300 smaller banks as the housing sector went bust.

How'd Canada avoid all that?

"This sounds very simple, but one of our CEOs has said we are in the business of making loans to people who will pay them back," said Terry Campbell, vice president of policy for the Canadian Bankers Association in Ottawa.

Sounds fairly fundamental, but it isn't so simple when you add into the mix a delusional Democrat social agenda, fronted by the likes of Chris Dodd and Barney Frank, an agenda that said societal fairness requires that every family should own a home regardless of ability to afford it. So the Community Reinvestment Act was used to put US lenders under Government threat to make those bad loans or else face regulatory reprisals. Shazam! People were put into houses they couldn't afford, the doomed loans were guaranteed by Freddie, securitized and marketed as AAA investment quality.

Then the completely unsustainable housing bubble this created began to weaken, the underlying loans slid into default as under-qualified homeowners couldn't make their payments, and the whole rotten mess collapsed, taking the rest of the economy with it. So here we are. Like King Canute, who thought he could command the tides, maybe the Democrats have a plan to fix it all by passing some new laws of economics...

Byron