Skip to main content

Finance Minister Jim Flaherty takes part in a press conference after meeting with private sector economist in Ottawa on Friday March 8, 2013.

Sean Kilpatrick/THE CANADIAN PRESS

Finance Minister Jim Flaherty is seeking a minimum income for large mortgage lenders. Not in those terms, of course, but he has singled out both Bank of Montreal and Manulife Financial Corp. for offering five-year fixed mortgage rates under three per cent. The Finance Minister has decided that consumers should be paying more for their mortgages and it would be inappropriate for financial institutions to earn any less.

Interestingly, Minister Flaherty is not using the power of regulation to prevent consumers and lenders from negotiating sub 3-per-cent deals. Rather, he is using moral suasion, or his "bully pulpit", as one observer has noted, to shame companies into acting in a manner that he finds appropriate. I am left to wonder if this will set a precedent for future policy. Instead of raising the minimum wage, can we expect Ontario's labour minister to instead issue a press release shaming workers who are offering too little for their services?

Perhaps the most galling part of the minister's actions is in the arbitrary use of his bully pulpit. Sub 3-per-cent mortgage rates are not a recent phenomenon. Last December my wife and I purchased a new house and negotiated a rate of 2.86 per cent on a five-year fixed mortgage from a well-known Canadian lender. Despite this lender offering these low rates for over three months, Mr. Flaherty has not once mentioned them publicly. Rules and regulations, when done well, are applied uniformly. Mr. Flaherty is arbitrarily calling some companies out publicly while turning a blind eye to others. What criteria is the minister using in deciding who will be shamed and who will not?

Story continues below advertisement

Mr. Flaherty's concerns appear to be that consumers are piling on too much debt and the CMHC is at risk if there are a wave of defaults. If these are the concerns, then why not simply revise lending standards and CMHC insurance rates? Mr. Flaherty's jawboning up of interest rates affects insured and non-insured mortgages alike. It affects families with low debt-to-income and high debt-to-income families alike. What possible justification can there be for Mr. Flaherty to keep mortgage rates artificially high for lenders with strong balance sheets paying large down payments?

This autocratic and arbitrary singling out of financial institutions needs to end. Mr. Flaherty's concerns on the size of the CMHC's balance sheet may be legitimate, but he has much better tools with which to address the situation.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter