We should all get out more. Like Steve and his family. They’re in Vegas this long weekend, where his bother just go hitched (I wonder if it was in an Elvis Church?), and they decided to rent a three-bedroom condo for the extended stay.
“Being the faithful blog dog that I am,” Steve reports, “I decided to Google the hood and see what a place like this sells for in the desert sun of Vegas.” So he did. And here is what you get for $83,000 in a northern burb of the city.
This unit was built in 2006, has three bedrooms, a one-car garage, balcony and comes with community amenities including spa and pool. The property taxes are $707 (that’s per year, not month) and with 20% down ($16,500) plus a 4% mortgage guaranteed never to increase for 30 years, the monthly is $432.
By the way, it was foreclosed on two years ago. That’s when it was worth $241,753.
“The people of Vancouver and Toronto are delirious if they think a small 1 br condo is worth upwards of half a million when a 3 br condo down here goes for $80k,” says our Vegas dog. “Everywhere down here homeowners are desperate to sell their sinking ships, while the supply clearly outweighs the demand. Take all of those condos being built in TO and eventually the economics of supply and demand will hit home there too. People will realize that it is in no way different there. The poor saps who are underwater here in Vegas must look at TO and Vancouver while shaking their heads.”
But, of course, we’re special. Here, things only go up.
* * *
What follows may be boring. And technical. It may hurt your head a little. But you need to read it, as much as I must write it.
On Friday of the long weekend, at 4:41 pm Ottawa time, after the Parliamentary Press Gallery had gone home and reporters for all major media across the country were (like the rest of us) screwing off, the feds let loose with a major announcement. Three days later no Canadian media has reported the story – only New York-based Bloomberg was awake enough to give it a little ink.
This is how it looked in my email in-box.
The following News Releases or Speeches has just been posted on the Finance Canada Site.
Government Launches Public Consultation on a Taxpayer Protection and Bank Recapitalization Regime
Who would imagine anything important lurked here? Don’t worry. Have another brewski.
On the surface, the story is that Joe Owe has launched a consultation process on bank bail-ins. The announcement was clearly designed so nobody would actually hear it, and the entire consult period will last a scant month, winding up just after Labour Day, when most people become sentient again. It begs a question: what’s he hiding? And if I were a doomer, I’d be all over this.
As you recall, it was a ‘bail-in’ process that rescued failing banks in Cyprus over a year ago when monetary authorities ordered that depositors’ money be siphoned off and used to prop them up. The outrage was universal. No wonder. Nobody saw it coming. And even though the theft came from the deposits of Russian oligarchs who probably stole it in the first place, the action scared a lot of people.
So a ‘bail-in’ is the opposite of a ‘bail-out,’ in which governments use taxpayer dollars to prevent the collapse of a financial institution – as was done during the crisis of 2008-9. The idea is that the risk should not be borne by the public, which is cool. But what happens in a country like Canada where we have but five major banks, who own everything except tat parlors and dog-walking agencies? The economy as we know it probably couldn’t survive the collapse of RBC or BeeMo.
So here we are. The feds have finally (18 months later) released the rules for bail-ins that might be needed here, in a country with ‘systemically-important banks.’ Here are the highlights:
- If a Canadian bank starts to wobble, the feds can ask CDIC (which provides deposit insurance) to set up a ‘good bank’ and transfer over to it all of the viable assets of the failing bank, including deposits. This state-owned bank could run for five years.
- The remaining assets would stay in the ‘bad bank’, which would be liquidated.
- Ottawa would cancel all of the outstanding shares of the troubled bank. Yes, cancel them. Poof.
- People owning bonds issued by the bank could also have their assets cancelled, and converted into common shares.
- This would include new ‘bail-in’ bonds, which are now being offered or designed, by the banks
- Deposits (including those insured to $100,000) would be excluded. Good. But, “the Government plans to undertake a broad review of Canada’s deposit insurance framework by examining the appropriate level, nature, and pricing of protection provided to deposits and depositors.” Let’s see what that comes up with.
So, no Cyprus-style theft of your money if Scotiabank goes paws-up. But the implications for those owning bank securities are not so clear – which is a big deal, since there’s hardly an RRSP or pension plan in the land that does not have exposure to the Fat Five.
Bail-ins are better than bail-outs. And the feds have to do this or break ranks with the global financial regulatory structure. But to sneak all this stuff out on a hot Friday afternoon when people are more concerned about whether to choose trunks or the Speedo? C’mon, Joe. Grow a set.
If you’re still awake and want to know more, the consultation announcement is here. The bail-in proposals are here, and there’s a backgrounder here. As well, here are some FAQs that the Finance Department has turned out.
No, it’ll never happen. But your leaders hope you never read this.