It is important to reiterate that I write my comments on this blog strictly as a private citizen and that my title has been added by the Huffington Post simply as a matter of identifying me.
The federal minister of Finances, Mr. Jim Flaherty, made public comments and exerted pressures for Manulife Bank to withdraw its offer for a five-year-fixed mortgage rate of 2.89 per cent.
NPD leader Thomas Mulcair accused Mr. Flaherty of using his position of power inappropriately.
He's quoted saying: "That's Banana Republic behaviour (…) the minister has no business interfering with the free marketplace. That company is operating completely with full respect of the law, if they see an advantage in attracting clients at this rate, why shouldn't they go out to do that?". He added: "It's none of his business. It's the minister's opinion. It's nuts. We've never seen this before."
Granted, the real estate market is not exactly what you would call a free market devoid of government intervention. The Bank of Canada — a government creature — sets the overall interest rate for the economy; CMHC — another government creature with implicit credit backing from taxpayers — indirectly subsidizes mortgage loan insurance; the government determines loan lengths and other mortgage rules. But if these government interventions create distortions in the market that the minister doesn't like, such as a real estate bubble and the high level of indebtedness of Canadian households, he should fix them. Not add another layer of government diktat by telling banks how to conduct their business as if he were a Soviet commissar.
I couldn't have said it better myself. Way to go Thomas! A few more positions like this one, and I might actually join your official fan club!
Michel Kelly-Gagnon is President and CEO of the Montreal Economic Institute. The views reflected in this column are his own.