Canadian Banking System Exposed

Despite what is commonly understood, the Canadian banking system is NOT as strong and resilient as most people might assume. According to the World Economic Forum, Canada is ranked #1 in the world for “the most sound banking system in the world”. I am not sure what world they live in, though. The Canadian banking system is no different than most of its counterparts, and Canada’s economic crisis is just as inevitable.
Key Arguments about the Canadian Banking System’s unsound economics: 

• Canadian banks received a bailout in 2009 from the Fed, BoC, and CMHC;
• The key reason underlying this bailout was that Canadian banks are actually under-capitized;
• Canadian banks operate under a fractional reserve system, with 0% reserve requirement;
• The Canadian Deposit Insurance Corporation does not hold enough cash on hand;
• Canadian banks hold the majority of their balance sheets on non-productive assets;
• The Bank of Canada has virtually no gold left to back their monetary system

Canada’s Secret Bank Bailout and the CMHC

Although conventional wisdom tells us that the US banks received a bank bailout and the Canadian ones did not, Canadian banks did in fact receive a bank bailout. If Canadian banks are as strong as the media portrays them to be, then why did they need to be rescued in 2008? And why did they get rescued by the combination of the US FED, Bank of Canada and the CMHC in that and the following year? The exact details of these bailouts are not even accessible to the public, even though, quite ironically, Canadians paid for it through their taxes. The Canadian Centre for Policy Alternatives, however, did release a report with some estimates on the publicly available data from the Canadian Mortgage Housing Corporation (CMHC, the Freddie Mac of Canada).
To prevent a US-style housing catastrophe, the US Fed and the BoC offered short-term collateralized loans to Canadian banks, and the Canadian Mortgage Housing Corporation (owned by the Canadian federal government) bought $69 billion worth of mortgages off Canadian Chartered Banks. Does this sound familiar? Of course it does–the US FED is doing the same with their quantitative easing programs.
At its peak, support Canadian banks received reached $114 Billion. That is 7% of the entire Canadian economy in 2009 or $3,400 per Canadian.  (more)