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“That’s basically what Siddall wrote, but, he didn’t (mention) CMHC’s drop in service levels, the fact they abandoned bank customers, that they’re going to make things better in the future.
“No, they use some bizarre language to try to convince banks randomly that they need to move this business back from the private sector to the public sector after they materially dropped them. I know there’s a collective raising of eyebrows of bank executives saying ‘thanks for your bizarre letter but sorry, we’re busy, and we’re moving on with our lives.’ ”
Prudence guides the private insurers, who have no back-up to failure.
“If CMHC gets into financial trouble, the Canadian taxpayer bails them out. Not that that has happened, because Canadian housing has been strong for decades, but if CMHC has problems, that’s what happens,” says Soper. “If a private company gets into trouble, they go out of business or their shareholders abandon them. There is no bailout for private companies, so the underwriting rigour in the private sector is very, very good, because they don’t want to write bad policies.”
Another Soper metaphor.
“Take Canada Post, which delivers mail to Coronach, Saskatchewan, or Balzac, Alberta, for the same price as they do between Calgary and Edmonton and it’s a public service,” he says. “CMHC, in this bizarre approach to the market, said ‘we want to write the low-risk, high-margin business and get out of the service-to-Canadian-homeowners business,’ which is why the agency was created in the first place, and they got surprised, because the private sector said, ‘no that can be done safely and profitably’ and the banks, in return, gave the private insurers the higher-risk business that CMHC walked away from and more of the regular lower-risk, higher-margin business as well.”
Source: – Calgary Sun
