The coming financial crisis

[Cerevant]

Ok, if you guys are going to bust my balls about living in Canada, here's some coming back at ya...

In the midst of the worst financial crisis since the Great Depression, Canada has joined the ranks of governments that in recent weeks stepped up to help banks cope with more fallout from bad U.S. subprime mortgages. In Canada's case, however, the reason for the assistance is a little different from some of its G-7 partners. Unlike banks in the U.S., Britain and Germany, which needed to be bailed out with hundreds of billions of dollars in new capital, Canada's major banks are solid and solvent. They don't need any help to work through their subprime exposure.

So why did Ottawa agree to insure the money they routinely borrow from other banks, a practice that keeps their credit operations liquid? Ironically, the troubled non-Canadian institutions that received capital injections and loan guarantees in other countries now carry a government seal of approval that tilts the playing field in their favor when it comes to borrowing. That leaves Canada's big banks, including Scotiabank, TD Bank Financial Group, RBC Royal Bank and CIBC, at a competitive disadvantage. So the government acted to level the field, not to aid troubled banks. (See pictures of the global financial crisis.)

Why has Canada withstood the subprime tornado better than other countries, and should the Canadian banking system be a model for G-7 and G-20 leaders when they gather in Washington on Nov. 15? Consider that the Geneva-based World Economic Forum, an influential think tank whose annual conference attracts the likes of Bill Gates and Tony Blair, earlier this month ranked Canada's banking system as the soundest in the world. The U.S. came in at No. 40, and Germany and Britain ranked 39 and 44, respectively. (Switzerland was No. 16, just ahead of Namibia.) "For Canadian banks, having higher capital ratios than anyone else in the world is a source of pride," says analyst Mario Mendonca with Toronto-based investment bank Genuity Capital Markets. (Read "Four Steps to Ending the Foreclosure Crisis.")

The average capital reserves for Canada's Big Six banks — defined as Tier 1 capital (common shares, retained earnings and non-cumulative preferred shares) to risk-adjusted assets — is 9.8%, several percentage points above the 7% required by Canada's federal bank regulator. That's a little better than major U.S. commercial banks like Bank of America, but significantly higher than an average capital ratio of about 4% for U.S. investment banks and 3.3% for European commercial banks.

Another factor that helped make Canada the new gold standard in banking was Ottawa's decision in the late 1980s to allow commercials banks to acquire investment dealers on Toronto's Bay Street, the country's financial hub. As a result, these institutions are subject to the same strict rules as commercial banks, while U.S. investment dealers are subject to only light supervision from the Securities and Exchange Commission. Morgan Stanley and Goldman Sachs, of course, will now be under the U.S. Federal Reserve's supervision since they have been chartered as bank-holding companies.

Canada's banks make bad investments on occasion. When Toronto-based CIBC, Canada's most aggressive big bank, took $3.5 billion in charges against the U.S. subprime debacle, federal regulators quickly arrived on the scene. But here's the difference: CIBC ended up selling $2.94 billion worth of its own shares in the first quarter of this year to shore up capital reserves. "The relationship between government and banks is a positive one," says Minister of Finance Jim Flaherty. "We have a lot of discussions and regular meetings. The common goal is a sound financial system."

There is, of course, a flip side to Canada's regulatory system. When the global economy was flying high, Canadian banks complained about not being allowed to merge to become more significant international players. "In hindsight, that decision may have saved Canada from having a Royal Bank of Scotland on its hands," says Lawrence Booth, a finance specialist at the University of Toronto's Rotman School of Management, referring to the overly ambitious bank's bailout earlier this month by the British government.

Says FFlaherty: "The credit crisis we're facing is the result of unbridled greed. We need to bridle greed." Perhaps when world leaders sit down in Washington to forge a 21st-century New Deal for the global financial system, it may have more than a smattering of Canadian banking know-how.

[reese125]

I just printed this out

thanks Cerevant

[Father Demon]

I think we were talking about the InBev purchase of Anheuser-Busch in this thread.  Well, it became official today, and the new company is Anheuser-Busch InBev.

Old Logo:


New Logo:


farging horrible looking.

[Tomahawk]

No worries - it'll look better after a twelve pack

[Phanatic]

Rah Rah new logo...

As long as I have a job...

[ATV]

As technology increases the quality of design of everything has decreased. This is yet another example. It's in pretty much everything around us.

We once made buildings like this....



Now we make buildings like this....



We once had hand graved stamps like this....



Now we have stamps like this....



Our money used to look like this....



Now our money looks like this....



We used to shop at places like this.....



Now we shop at places like this....



We used to live in places like this....



Now we live in shteinburg developments like this....



Sorry if I depress you, but we've clearly become the United States of clown farts.

[Seabiscuit36]

please kill yourself

[Tomahawk]

Advances in building technology allow the glass and steel skyscraper to be built whereas the first building in your post could never achieve such heights. Both are "neat"

I've never seen a stamp for either $5 or $9.95.

Why's the older fin so much cooler?

Not many people alive have ever shopped at a place like that first place and it's not like Wal Mart is the only place people shop. I haven't been there in years

People still live in both types of houses.

[ice grillin you]

they used to make uniforms like this




now they make them like this

[ATV]

Advances in building technology allow the glass and steel skyscraper to be built whereas the first building in your post could never achieve such heights. Both are "neat"

Wrong. The Wrigley building was a steel skyscraper. It was clad with ceramics or terra cotta, which can still be sued to clad buildings of all types today. The reason it's not used is because it's not as cheap.

I've never seen a stamp for either $5 or $9.95.

My argument has nothing to do with the particular denomination of a stamp. Take this one, for example...

Why's the older fin so much cooler?

What?

Not many people alive have ever shopped at a place like that first place and it's not like Wal Mart is the only place people shop. I haven't been there in years.

Your argument is that the old place wasn't better because not many people alive shopped at such a place? Or that because you haven't been at Walmart in years that this form of sprawl hasn't become the overwhelming form of commerce in this country?

People still live in both types of houses.

Some do still live in places like that, but the vast majority are outside of gentrified areas where "white flight" took hold. Most, but not all, of them are unkept leftovers for lower income minorities. Many are dangerous places. The point is, though, that these sorts of beautiful streetscapes are by and large not being built anymore. The vast majority of people view their dream house as instead being a McMansion.

[rjs246]

Please go away.

[Cerevant]

2nd.  All in favor?

[PoopyfaceMcGee]

2nd.  All in favor?

Yay.

[Father Demon]

2nd.  All in favor?

Yay.

3rd.

[ATV]

...say the Repubelicans.