This is an absurd use of taxpayer dollars

Why would the Liberals use my taxpayer dollars for an institutional investor bailout that buys immunity for the Big Bank's misdeeds?


"It is extremely important that financial market participants bear the consequences of their decisions." Mark Carney (in reference to any government involvement in ABCP bailout)

“The ultimate result of shielding man from the effects of folly is to people the world with fools” Herbert Spencer ( English philosopher; prominent classical liberal political theorist)


Ottawa should weigh in to ABCP rescue, McCallum says

John Greenwood and Jim Middlemiss,
Financial Post
December 15, 2008


The federal government should put its weight behind a proposal to restructure $32-billion of seized up asset-backed commercial paper, including kicking in an additional $9.5-billion in financial guarantees that came as a last-minute request from a committee overseeing the process, said the Liberals' top economic strategist and former finance critic.

"In the national interest this could well be the right thing to do," said John McCallum. Speaking in a telephone interview, the former economist at the Royal Bank of Canada said that the consequences of not helping the restructuring would be so negative for Canadian investors and businesses that Ottawa may have little choice but to come up with the money.

With the proposed restructuring under major stress from the turmoil in financial markets, a committee headed by Toronto lawyer Purdy Crawford has been forced to go to Ottawa in a last ditch bid to find additional loan guarantees to ensure the deal can survive.

Sources said the two sides have been in discussions for about a week but the Tory government of Stephen Harper is so far showing little appetite for getting involved.

"The minister has consistently said a market-led restructuring is a preferred course of action for investors and capital markets in Canada, one that does not depend on taxpayer dollars," Chisholm Pothier, a spokesman for Finance Minister Jim Flaherty, said in an e-mail.

But in a sign that the government is softening its stance, Mr. Pothier added that, "any actions taken by the government would reflect its ongoing commitment to protecting financial stability and ensuring the health of Canada's capital markets."

Because ownership of the stranded ABCP is concentrated in just three provinces, some including Quebec have been asked to contribute to the backstop facility, according to reports.

But a spokesperson for Quebec Finance Minister Monique Jérôme-Forget said the province has not been asked to get on board.

"There have been no discussions, said Catherine Poulin.

Nor should there be any discussions, according to Mr. McCallum. He argues that the problems that led to the collapse of the ABCP market back in August 2007 were largely the fault of Canada's banking regulator, the Office of the Superintendent of Financial Institutions, which comes under the responsibility of Ottawa. Because ultimate responsibility for the market meltdown lies with the federal government, it should be the one to provide the $9.5-billion in additional financing, Mr. McCallum said.

Meanwhile, the Dec. 11, 2008 letter from a lawyer representing retail holders of frozen ABCP to Mr. Flaherty has come under fire from a couple of fronts.

Henry Juroviesky called for a seat at the table in any talks between the federal government and the Crawford committee.

The letter states that any federal financial aid should be contingent on the retail investors getting paid out in full, either from the security dealers who sold them the paper or from the fresh funds. If they don't, but the feds still back-stop the deal, he calls for the elimination of the controversial legal releases prohibiting ABCP lawsuits.

That little grenade in the negotiations, brought a tough response from Mr. Crawford.

"It would not be productive or appropriate to respond to each of the inaccurate statements in your letter or to its unreasonable requests," he wrote, going on to criticize Mr. Juroviesky's position, noting "we have spent months litigating with your support. As we have said, there is no plan without the releases." He closed his letter with a warning to "think carefully about what is in the best interests of your clients."