Will the banks have to bail out the CMHC?

Banks in Canada get a lot of protection.

One thing that helps drive profit is CMHC mortgage insurance.

Wouldn’t it be great to make an investment where you got the profit and somebody else took over the risk?

The unfortunate side effect of this economic boosting is the the spectre of taxpayer liability for housing bubble fallout.

But what if the banks bailed out the CMHC after being bailed out by the CMHC?

Sounds a bit like a perpetual motion machine but that’s what BMO analyst John Reucassel is suggesting could happen if the CMHC went bust:

“It appears to us that the CMHC is reasonably well capitalized and positioned to meet the challenges from a housing slowdown.  However, investors may be concerned that, in a severe downturn, Canadian banks may either a) need to recapitalize the CMHC; or b) absorb some of the losses.”

Read the full article over at the Financial Post.

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7 years ago

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medicare supplemental
7 years ago

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aa4
aa4
7 years ago

Hi Patriotz.. your critique of the point about the convention center creating jobs, (or any of the hundreds of government offices filled with staff that don’t seem to have much if any impact on the outside world). You argued that if money is taken from one person in taxation and given to someone else it doesn’t on net create any jobs. Which is exactly right, and one of the failures of the NDP tax the rich argument. But realize this form of taxation is not so dominating today as it was in decades past. Today the big revenues come from things like resource royalties and printed stimulus money from national governments. Some mines by themselves generate 300 million a year in royalties. While the total income tax take in BC is 6 billion. So governments take those royalties and stimulus… Read more »

Anonymous
Anonymous
7 years ago

“What makes you think businesses are not already paying for it through their taxes?”

Why not argue the point that those closest to an economic benefit should have some skin in the game?

T
T
7 years ago

@110 Anon

Wow that place is actually a deal compared to some of the rents being charged on W 4th and W Broadway.
$35 Base + $12.5 Additional at a few places I’ve checked.

Joe Mainlander
Joe Mainlander
7 years ago

He missed the point as he does not say who’s going to buy the boomers homes. You don’t mention that in your perpetual motion example either.

Anonymous
Anonymous
7 years ago

Joe Mainlander: “Boomers sell houses give money to kids to buy houses. Rennie’s perpetual motion theory of the market misses a key link; that someone has to buy the boomer’s homes, at the prices they expect.”

Your right but Rennie didn’t miss the point. His point is sell your house now (value dropping) and buy 2 condos (value going up). Rennie sells condos not houses. His words are carefully scripted for the audience.

Joe Mainlander
Joe Mainlander
7 years ago

Thanks for #104, Many Franks.

Boomers sell houses give money to kids to buy houses. Rennie’s perpetual motion theory of the market misses a key link; that someone has to buy the boomer’s homes, at the prices they expect.

Anonymous
Anonymous
7 years ago

Tony: “what is the other Italian Restaurant Umberto that closed after 30 years and it was obvious main reason was the rent.”

Umberto Menghi owns the property so he doesn’t pay rent. He does have to pay taxes on it which would be in the 6 digits for sure.

http://hiredbelly.com/umberto-menghi-to-close-celebrated-il-giardino-after-37-years/4643

“Menghi— who will continue to operate his Whistler restaurants–has been trying to develop the property with a different concept for several years now. However, in the end, he decided to sell the building and land at the corner of Hornby and Pacific to a developer who will build condominiums.”

Anonymous
Anonymous
7 years ago

Tony: “So BC residents reelected a candidate that is clearly bought by RE developers. So whoever voted for the that scum lady should not complain about RE developers running the show in the city.”

Developers didn’t cause the bubble. In fact building does the oposite. You can blame those in charge of lending and maybe the real estate agents/brokers for the bubble. Rennie is a real estate broker not a developer.

tony
tony
7 years ago

“No small restaurant will stay in business with that kind of extortion by the city.”

well Dix restaurant did not make it. a what is the other Italian Restaurant Umberto that closed after 30 years and it was obvious main reason was the rent.

tony
tony
7 years ago

So BC residents reelected a candidate that is clearly bought by RE developers. So whoever voted for the that scum lady should not complain about RE developers running the show in the city.

“Rennie’s speech was interrupted by a visit from Premier Christy Clark, who also addressed the audience and thanked Rennie and developer Peter Wall for their support.”

Read more: http://www.vancouversun.com/business/Boomers+will+finance+kids+housing+purchases+Vancouver+condo+king+says/8397869/story.html#ixzz2TWRpgAva

Anonymous
Anonymous
7 years ago

Jesse: “My point was, if the convention centre is such a benefit to local businesses, why not get those directly benefiting from it to directly foot some of the bill as an investment?”

I don’t recall everyones personal income taxes (or other taxes) going up due to the convention centre. What makes you think businesses are not already paying for it through their taxes? A strong economy benefits everyone IMO.

Anonymous
Anonymous
7 years ago

BPOM: “At almost $300 a day for property taxes that sounds outrageous and exaggerated.
No small restaurant will stay in business with that kind of extortion by the city.”

Here is vacant store front where the former Dix restaurant was. Additional rent which is 95% property taxes works out to $76,742 per year or ($210 per day) on this space. That is on top of the rent the landlord pockets of $192K per year. Higher end locations have higher taxes. 100K per year is not uncommon for a 5000 ft place in Downtown.

http://spacelist.ca/p/bc/vancouver/871_beatty_st/1

ANOVA
ANOVA
7 years ago

@89

>Here is another risk to home owners: anarchists buring houses down to oppose gentrification in east van:

http://www.vancouversun.com/news/Anarchists+claim+responsibility+torching+East+Vancouver+home/8394364/story.html

That is the house featured on this blog a year ago.
http://vancouvercondo.info/2012/04/offered-at-688000.html

If any house needs to be gentrified, this is the one.

Vote Down The Facts
Vote Down The Facts
7 years ago

Jesse, how would that work then? The government confiscates the funds of businesses outside of any tax legislation, and makes arbitrary decisions about which company pays what?

That new ice cream place on Cordova should be good for about $200million, right? It’s always got a line up outside, so obviously they benefit most.

Best place on meth
Best place on meth
7 years ago

” A small restaurant could pay 100K per year in property tax alone easily.”

At almost $300 a day for property taxes that sounds outrageous and exaggerated.

No small restaurant will stay in business with that kind of extortion by the city.

jesse
7 years ago

“I can only imagine how much a hotel would pay.”

I can only imagine it would decrease what they would pay for the rent.

My point was, if the convention centre is such a benefit to local businesses, why not get those directly benefiting from it to directly foot some of the bill as an investment?

Vote Down The Facts
Vote Down The Facts
7 years ago

Patriotz, I dont actually see that as a problem. The public sector is already too bloated in my opinion. I doubt $883m (1 x convention centre) buys many public sector jobs when you factor in a lifetime of short hours, generous vacation allowances, and gold-plated pensions.

Many Franks
7 years ago

Witness Bob Rennie inventing a new kind of math:

Boomers will finance kids’ housing purchases, Vancouver’s condo king says

Vancouver’s real estate market in the next 15 years will actually be two separate markets financed by one chequebook, real estate marketer and “condo king” Bob Rennie told an Urban Development Institute audience in Vancouver Thursday.

Those two markets will be downsizing, aging baby boomers on the one hand and their first-time-homebuyer kids and grandkids on the other hand. But in both cases, the purchases will be financed by the baby boomers, who will be selling their fully-paid-for single-family homes, Rennie predicted.

Where the boomers will be getting these fully-paid-for homes is unspecified; last I checked, the ones they had were mortgaged and HELOC’d beyond historical precedent.

Not that boomers aren’t *also* going into debt buying their kids houses…

McLosin
McLosin
7 years ago

Everyone I know who gets their income from the real estate sector is BELLYACHING about how bad it is.

I mean everyone.

It’s falling apart.

Anonymous
Anonymous
7 years ago

Jesse: “With one of the lowest corporate tax rates in the country, I’d think these businesses could throw one in the kitty like the rest of us.”

Yes but how about property taxes? Ever seen the tax bill for the average store front in Vancouver? A small restaurant could pay 100K per year in property tax alone easily. I can only imagine how much a hotel would pay.

jesse
7 years ago

“Businesses pay taxes too, you know?”

With one of the lowest corporate tax rates in the country, I’d think these businesses could throw one in the kitty like the rest of us.

Anonymous
Anonymous
7 years ago

Patriotz: “The problem with the “convention centres create jobs” arguments is that they neglect the fact that the money spent on them comes out of the taxpayers’ pockets and thus results in job losses in sectors that the taxpayers otherwise would have spent the money in. When they are built with borrowed money, this effect is compounded into the future.”

Goto love the lefties auguring against government spending money. I guess the only thing government should spend money on is union wages?

Vote Down The Facts
Vote Down The Facts
7 years ago

“If it’s such a winner, these businesses can all chip in and reap the benefits, just as parents have to do fundraising for their children’s schools.”

Businesses pay taxes too, you know?