Financial Services and Regulation - Op Eds

Published in the Financial Post on November 8, 2013

By Finn Poschmann

Sometimes the road to Hell is so clearly paved and marked that it is difficult to believe that good intentions explain the route chosen.

So it is with recent proposals in the U.K., the Netherlands, and Italy, to introduce potentially massive, government-backed mortgage lending and insurance schemes.

In the U.S., a multi-headed beast stands as warning at the edge of Hades: Fannie Mae, Freddie Mac, and Ginnie Mae, among other agencies, collectively guarantee many trillions in mortgage debt. The implosion of the U.S. model, in 2008, sent financial shockwaves around the world, and the pieces are not yet put back together. Canada,…

Published in the Financial Post on October 2, 2013

By Finn Poschmann

Last Wednesday Scotiabank sold the first Canadian bonds backed by consumer lines of credit in 12 years. The highly rated issue sold at market, according to a Bloomberg report, at an impressive 78 basis points over similar-term Canadian government bonds.

Critics may worry that such events signal a continuing explosion in household debt and a return of the boom and bust “wild West,” U.S.-style marketplace.

But there is another way to see it. The bonds’ risks will be borne by the issuer and investors, not unwilling and unknowing taxpayers, who back most of the mortgage risk in Canadian and U.S. housing markets.

And change is afoot in the…

Published in the Financial Post on August 26, 2013

By Finn Poschmann

Japan’s tedious waking dream, the one where the economy drags in the doldrums for decades, introduced the world to the notion of zombie companies.

Japanese zombie companies marched ever onward, pretending to have profitable business plans, propped up by bank loans extended by financial institutions that pretended to be solvent, their lending in turn being prodded along by regulators who pretended not to be corrupt. Today, Japan’s Prime Minister Abe, while keeping them walking for now, is hoping to bring businesses back to real life by forcing the Bank of Japan to rain monetary stimulus on them. The idea just might work.

But keeping…

Published in the Financial Post on August 9, 2013

By Finn Poschmann

Business headlines flowed fast this week: Regulatory limits on government-backed mortgage security issuance kicked in and ruffled markets in Canada, and President Obama endorsed a Senate bill that would overturn housing finance mechanisms in the United States.

The U.S. first. The current in the U.S. represents fundamental reform proposals, in response to the housing bust there that Canada has, so far, avoided. Fannie Mae, Freddie Mac, and a flood of other federal agencies with funny nicknames, lend, insure and securitize trillions of dollars of home loans, and Congress and the President would like to change the system before they are…

Published in the Globe and Mail on February 3, 2013

By Finn Poschmann

Bankruptcy laws can be strict or loose. Strict jurisdictions impose onerous and long repayment requirements on debtors. Others set debtors free relatively quickly. Too strict, and you stifle entrepreneurship and productive risk-taking. Too loose – or worse, too uncertain – and capital becomes harder to borrow, with the same bad economic outcome.

Setting bankruptcy law and policy is a legislature’s job. And when conflicts and uncertainty arise, such as between federal bankruptcy law and provincial pension law, figuring out how a legislature might have intended to resolve them is the court’s job.

That’s what makes the Supreme Court of Canada’…