Home Politics The irony of the bank mortgage truce

The irony of the bank mortgage truce

Leave it to the Globe and Mail’s Boyd Erman to point out such a brutal irony to me. I just finished his article about the passive way that Canadians reacted to Finance Minister Jim Flaherty’s embrace of the Canadian banks that didn’t follow Bank of Montreal with a mortgage rate cut last week.

Since 2007, I’ve tried to get the Government’s lending arm at the Business Development Bank of Canada to cease their predatory pricing and direct competition against our firm. Although the BDC’s own Act of 1995 states that BDC must fill in gaps and “complement” the services offered by private sector lenders, BDC CEO Jean-Rene Halde takes that to mean that BDC can compete on any loan transaction it likes. So long as the Crown Corporation “complements” the services offered by the private sector from the view of the borrower, and then, on a macro basis.

I’d love to meet the BDC lawyer who came up with that twisted logic.

So, here we have Canadian homeowners unable to get the lowest possible mortgage rates from RBC or BNS, for example, at the Federal government’s request, while at the same time the government itself (via BDC) provides commercial borrowers with rock bottom deals using the Crown’s ultra-low cost of capital. Backed by the taxpayer when the deals go sour.

Back in 2007, Mr. Halde told his government masters that only our firm was suffering from BDC’s competitive overtures. In 2008, one bank arm complained personally to Minister Diane Ablonczy’s office about BDC’s actions, too. And by 2011, the Canadian Bankers Association couldn’t take it anymore when BMO, RBC and BNS all added their voice to the issue. In January, a CBA delegation met with Jean-Rene Halde to take him to task for the BDC’s bad behaviour over the years. This was the third meeting between the CBA and BDC over the past eight months on the topic.

According to the briefing notes Mr. Halde prepared for his late 2010 appearance before the Senate of Canada Standing Committee on Banking, Trade and Commerce, no one had an issue with BDC’s predatory pricing and competitive zeal beyond our firm. How wrong they were, and they knew it at the time. That’s why they objected to me appearing as a witness before the Committee and prevailed on then Committee Chair Michael Meighen to ensure that nothing undercut their spin (see prior post “BDC snows the Senate part 6” Mar 25-11).

The irony that the government wants prices to stay higher than they need to be in the mortgage market, while at the same time breaking the law as the lowest cost provider in the commercial lending arena, isn’t lost on those of us who have lost business to the government since 2007; $25 million of deals in a single year in our case. Nor those Canadians who are paying more for their mortgages than warranted.

When will the double standard end?

(disclosure: this post, like all blogs, is an Opinion Piece and a personal view and in no way reflective of the iews of the TPA, its staff or Board)

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