Monday, March 31, 2008

Kill the Montreal Accord

Today, a number of Canadian financial institutions as well as about 8000 private investors are going to vote on what's been called the Montréal Accord, an attempt to refinance about $33 billion of subprime mortgage back securities. The concept is that they will be swapped for government backed paper. Basically, the banks get cut a break. But for the small time investor who believed they were buying government paper in the first place and not playing the market as turned out to be the case, well they'll get their money back.

Eight years hence.

This is one of the rare cases where, as CBC Radio reported this morning (as usual, no link to the web story yet -- won't be for hours), the little guy could take out the big ones. I hope they do, and force the loanees and big loaners to go back to the drawing board. Why should the Big Six and Caisse Desjardins be rewarded for their bad behaviour while the rest of the class gets punished? It's not their fault the US housing market tanked. They bought what they thought was ABCP -- Asset Based Commercial Paper -- with good quality scores, in good faith. They deserve a better deal. Maybe not their money back right away, but a shorter time frame -- say four years.

It would also remind Americans that anyone in the world, not just Americans, can play the US market and cause another crisis. It'd be nice to see John McCain explain this one to the voters down there. He can try to run as his own man but as the GOP nominee for President he's obligated to defend Dubya's record.

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