Most Canadians know by now about the recent changes made to the Canada Mortgage and Housing Corporation that were made last week; the changes that involve CMHC now being taken over by the Office of the Superintendent of Financial Institutions (OSFI.) When the change occurred, we asked you to weigh in on whether or not you thought this would help Canada’s economy, and whether or not it would have any effect on Calgary mortgages, Oakville mortgages, and mortgages around the country. The fact is that while it most likely will reduce the amount of insured mortgages that are available (as CMHC reaches its ceiling and was much of the reason for the change,) some think that it might not help the economy as much as Finance Minister Jim Flaherty is hoping.
John Greenwood, columnist at the Financial Post is unsure about the changes. While he doesn’t come right out and say that it will be detrimental to the economy, he does wonder if the new changes will have any effect, seeing as how the OSFI is already so overloaded. And Greenwood does make some pretty good points, but do they really point to the fact that the OSFI simply won’t be able to handle CMHC?
First, Greenwood lays out all the institutions that the OSFI is currently responsible for – and with over 60 of them, it’s a lot. Domestic and foreign banks, pension funds, and insurance companies are just some of the organizations listed by Greenwood and that the OSFI is currently responsible for. He goes on to say, “Over the past three years [OSFI] has gone from a barely visible arm of the Department of Finance to the country’s top financial cop with a highly visible presence, not just in Canada but also internationally. It’s been bulking up on staff and making greater demands on firms it oversees. That’s an enormous evolutionary jump.”
Greenwood goes on to speak about the financial problems in Europe, and the trillions of dollars of debt the United States is still trying to get themselves out of, and the fact that Canada’s housing market is currently in a bubble. But the question is, what does any of that have to do with CMHC or the OSFI? Of course different parts of our economy all need to work together to keep things sailing smoothly. And CMHC definitely has a hand in, and will feel the repercussions, of the bubble bursting if it ever does. But will the OSFI be unable to handle that pop, as Greenwood suggests it will?
It’s highly unlikely that the OSFI would not know how to handle it. As Greenwood said himself, this organization is especially skilled at overseeing many, many financial institutions; and they’re most likely just as well equipped to handle CMHC. As for our bubble popping, it might and as interest rate remain low and prices stay high, it does continue to look as though that may happen. If it does, we should all be thankful that CMHC is now under better (and proper) oversight, rather than being handled by the department of Human Resource and Development in Canada.
After all, if a housing crisis does occur, don’t we want someone in charge who’s actually involved in finance and housing, as the OSFI is? Rather than someone who specializes in jobs and social programs, like the Minister of Human Resources?
