Credit delinquencies up 24% in June August 9, 2009
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In June, 1.56 per cent of Canadian credit accounts were more than 90 days overdue on payment, credit monitoring agency Equifax says.(Nick Ut/Associated Press)
Credit monitoring company Equifax revealed data on Thursday indicating more Canadians are falling behind on their credit repayment.
Nationally, 1.56 per cent of credit facilities were delinquent ? more than 90 days overdue without making any payment ? in June. That’s a three per cent increase over May and 24 per cent higher than where the rate was in June 2008.
Rates are increasing fastest in Alberta and B.C., by 32 and 30 per cent, respectively. In Calgary, 1.36 per cent of accounts were delinquent, in Edmonton the rate was 1.45 per cent, and in Vancouver, it was 1.21 per cent.
The Calgary figure is 35 per cent higher than the rate during the same period in 2008.
The city with the highest delinquency rate in the country was Toronto, where 2.03 per cent of all credit accounts were more than three months behind on payment.
Provincially, Nova Scotia’s delinquency rate was the highest in the country, at 2.09 per cent. Saskatchewan’s 1.24 per cent was the lowest in the country.
The average delinquency rate is calculated by comparing the number of delinquent accounts to the total number of credit accounts.
Corrections and ClarificationsThe story originally stated that more Canadians were falling behind in credit card payments. In fact, the increase in delinquency is for all credit accounts, not just credit cards. Aug. 6 | 2:35 p.m. ET (more…)
No hard cap on rates in Tories’ new credit card rules May 22, 2009
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The federal government unveiled a set of new regulations for credit card companies on Thursday.(Nick Ut/Associated Press)
Finance Minister Jim Flaherty unveiled a slew of new regulations for the credit card industry on Thursday, including a minimum 21-day interest-free period on all new transactions.
But despite expectations that the Conservatives might impose some sort of firm limit on how much credit card companies are allowed to charge consumers for purchases, the moves stop short of any sort of over-arching hard cap on rates.
At a press conference in Toronto, Flaherty announced nine new proposed regulations designed to make the industry more transparent and fairer to consumers. The changes to the cost-of-borrowing regulations would have to be approved in Parliament to become law.
The main change would be the mandated minimum 21-day interest-free grace period on all new transactions when consumers pay their balance in full by the due date. Currently, there is no mandatory grace period.
“This is a major change that was resisted by financial institutions,” Flaherty said. “It will cost them tens of millions of dollars a year.”
The new regulations would also require card issuers to clearly display information about grace periods and interest rates in a summary box on bills.
Finance Minister Jim Flaherty makes an announcement for new credit card regulations at the Sheraton Hotel in Toronto on Thursday, May 21, 2009.(Jim Ross/Canadian Press)
In addition, the regulations would require bills to give a clear indication of how long it would take people to pay off their balances in full if they only made the minimum payments every month.
“A lot of people think if they pay their minimum balance, things are OK,” Flaherty said. “But things are not OK. It can take you more than a decade to pay it off [that way] and we just want to make sure people are aware of that.”
Card issuers would be required to give advance notice if interest rates were going to increase during the next payment period, and consumers would be informed in advance if a rate was set to expire or if a penalty for missed payments was to be imposed.
Card issuers would also be forbidden from increasing credit limits without expressed written consent of cardholders.
‘Increasing the font size on a credit card contracts doesn’t help Canadian families who are hurting right now.’—NDP MP Glenn Thibeault
The new rules would require payments on outstanding balances to be allocated “in a way that is advantageous to consumers,” Flaherty said.
He offered the example of a consumer with multiple purchases on one bill, with two sets of interest rates. Consumer payments would have to be assigned to the balance with the higher rate, or spread between the two based on the relative size of the balance.
The federal government also moved to prohibit over-the-limit fees solely arising from holds placed by merchants, and to limit debt collection practices that financial institutions use in contacting a consumer to collect on a debt. Financial institutions would no longer be allowed to contact customers outside specific hours on weekdays and weekends, for example, Flaherty said.
Though Flaherty called the moves significant, reporters asked him why the government didn’t put a limit on how high card interest rates could go.
“[This government] believes in consumer choice. We are not interested, like some parties, in nationalizing banks,” Flaherty said. “If someone wants a lower interest rate on a card, then they have choices and they can do that.”
Opposition dismisses move
NDP Leader Jack Layton addresses the media after Flaherty’s announcement on credit card regulations in Toronto, Thursday. (Jim Ross/Canadian Press)
The NDP immediately dismissed the moves as half-measures, saying Prime Minister Stephen Harper and his Conservatives didn’t go far enough to address the central issue of usurious rates.
“The Harper government still doesn’t get it,” said NDP Leader Jack Layton.
“Increasing the font size on a credit card contracts doesn’t help Canadian families who are hurting right now,” said New Democrat MP and consumer protection critic Glenn Thibeault.
“Interest rates are at an all-time low, yet credit interest rates remain at an all-time high.”
But Flaherty dismissed the NDP accusations that the Harper government had not done enough to help consumers, noting that the NDP voted against the recent federal budget, which Flaherty said contained a host of motions designed to help everyday Canadians.
Although they welcomed certain aspects of the proposed legislation, Liberals were quick to note that the regulations do nothing to offer retailers relief from rising interchange fees — fees merchants pay to the financial firms that operate customer cards every time a transaction is made. In some cases, such fees have nearly doubled in the last two years, Liberal MP and consumer affairs critic Dan McTeague noted.
“Like with so many other files, they are throwing the public a few bones,” he said. “But [they] are ignoring other very important aspects of this issue, hoping the other glaring problems will simply disappear.”
At the press conference, Flaherty stressed the Conservative party’s belief that the proposed legislation arms consumers with the power to control their financial future.
“By being better informed, Canadian consumers will be in a better position to make good financial decisions,” Flaherty said.
“But only if they are equipped properly to do so.”
Similar measures introduced in U.S.
The movement on credit cards in Canada comes on the heels of similar measures in the United States this week.
Under a new law awaiting President Barack Obama’s signature, credit card companies will be prohibited from giving cards to people under 21 unless they can prove they have the means to repay the debt or a parent or guardian co-signs for the loan.
Congress passed the bill this week, and Obama is expected to sign it into law on Friday. The changes will go into effect in nine months.
In addition to curbing the number of young people who can obtain a card, the U.S. legislation would set new limits on when and how banks charge fees.
For example, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance. Even then, the lender would be required to restore the previous, lower rate if the cardholder paid the minimum balance on time for six months.
Consumers also would have to receive 45 days of notice and an explanation before their interest rate was increased.
With files from The Associated Press
Regulators investigating credit card industry March 27, 2009
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The federal Competition Bureau is investigating the credit card industry, a top official told a Senate committee Wednesday.
The agency is looking into whether the card companies breached the Competition Act by abusing their dominant position in the industry, the Retail Council of Canada said. It has been monitoring a Senate hearing into credit cards.
According to the council, the bureau’s deputy commissioner, Richard Taylor, revealed the investigation in Wednesday’s hearing.
Diane J. Brisebois, president and CEO of the council, welcomed the bureau’s investigation. Retailers have made many complaints about the credit card companies’ fees, she said in a news release.
“As merchants across the country are struggling to survive, VISA and MasterCard have used their dominance in Canada to drive up the fees merchants and consumers pay to use the cards.”
MasterCard Canada has been defending the industry. “The many benefits Canadian merchants receive from card acceptance continue to be downplayed,” president Kevin Stanton said in a release Wednesday.
The company has a website, InterchangeTruth, where it rebuts complaints about the interchange fee, the amount retailers pay card companies for accepting card payments.
As well as her Retail Council position, Brisebois chairs the StopStickingItToUs Coalition, led by the council. Its website said “consumers paid over $4.5 billion in hidden credit card fees last year alone ? fees we all pay at the checkout to cover the cost of lavish incentive programs and corporate credit card benefits, even if you don?t have one!
“Now these companies want to raise these skyrocketing hidden fees. With their plan, you pay more, your local retailer pays more and the only ones getting rich are the big credit card companies.”
But InterchangeTruth said interchange “is a small fee” which covers part of the card issuer’s risks and costs incurred to maintain cardholder accounts.
“Recent information produced by retail lobbyists contains inaccurate, incorrect, and partial information which seriously misrepresents the reality of the payments market,” the site said.
It rejects the idea that the company gets money from the fees. “MasterCard does not receive any revenue from interchange or merchant fees. The retail lobbyists? statements are wrong,” the website said.
Australian fee cut hurt consumers
It also attacks the Australian cap on credit card fees banks can charge businesses and consumers.
The idea has received some support in Canada, but MasterCard said it was a mistake because “retailers pocketed the reductions and prices didn?t come down.”
The Senate committee on banking, trade and commerce announced March 3 that it would study the credit and debit card systems “and their relative rates and fees.”
The Commons standing committee on industry, science and technology is looking into a proposed change to the Interac debit card system.
Interac is consulting with the Competition Bureau about changing from a not-for-profit structure to a for-profit operation, and the committee wants to look at the impact on debit card fees paid by retailers.
It will also consider credit card fees paid by retailers, but won’t be studying the rates and fees card companies charge consumers.
Tight credit market opens up new territory for scam loans March 16, 2009
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Online scammers are taking advantage of the tight credit market by preying on those who are being turned away for loans by traditional banks, a CBC Marketplace investigation has found.
Phony online loan companies are preying on unsuspecting customers by requesting a “security deposit” before providing the loan, claiming the deposit is required because of the client’s supposed bad credit. The loan money is never received.
In Canada, it is illegal to ask for any kind of deposit for a personal loan.
Durham police Det. James Lamothe says advance-fee loan scams are increasing as conventional lenders tighten credit.(CBC)
Det. James Lamothe, who works with the fraud unit of the Durham Regional Police Service east of Toronto, said there’s been an increase of reported loan scams in recent months.
“People are desperate.? [For] a lot of people, this is their last chance at securing a loan somewhere,” Lamothe said. “So they will rely on the internet and that, in conjunction with the fact that scammers make this so believable. People think they?re doing the right thing.”
How to protect yourself
Never send money to get money. It?s illegal in Canada to ask for upfront payment to secure a loan.
Do an internet search for the company you are dealing with and the words “scam” or “fraud.? If others have been caught, they might have written about it online.
If in doubt, call the anti-fraud call centre PhoneBusters or the Better Business Bureau to ask whether they?ve had any complaints about the company.
The detective was part of a months-long investigation that in July unearthed what is alleged to have been a fraud loan network operating in Ontario’s Durham region. Sixteen people were arrested.
The people accused in the scam were working out of ordinary-looking houses and apartments and claiming to be more that 20 different companies located in the U.S.
Lamothe estimated the operation had already taken $2 million before police busted it. The case is still before the courts.
PhoneBusters, an anti-fraud call centre, estimates Canadians lost $60 million in advance-fee loan scams in 2008.
Floyd Girouard, from Abbotsford, B.C., lost $3,000 when Cadex National asked for a ’security deposit’ to obtain a loan. Such fees are illegal in Canada.(CBC)
Floyd Girouard, a truck driver from Abbotsford, B.C., fell prey to one of the scams in October.
He needed a loan for $30,000 to clear up some family debts, and though he’s been dealing with the same bank for more than a decade and has never defaulted on past loans, the bank turned him down, he said.
“I don?t own my own house, and so without any collateral, they didn?t even want to look at me,” Girouard said.
The bank said economic conditions were too unstable for him to qualify for a loan, Girouard told CBC, so he turned to the internet. There, he found Cadex National, a company claiming to be based in Toronto?s financial district.
There was one catch: The company told Girouard that because he had bad credit and was a risk, he would have to send a $3,000 security deposit to Cadex.
Girouard reluctantly agreed to send the money and told Cadex: “I’m going to send the money, but I said, ‘This money has, was supposed to go on bills…. I?m not, I?m not rich, or else I wouldn?t be even talking to you.’ “
He was told to wire the deposit through MoneyGram International or Western Union and the loan would be transferred into his bank account within 24 hours. Once he’d sent the money, Girouard said, Cadex stopped returning his calls and he never got the loan.
When CBC Marketplace visited Cadex’s address, no one in the building had heard of the company, and the floor it was supposed to be on had been empty and locked for years, according to building staff.
Fake person approved for $10,000 ‘loan’
As a test, the CBC?s investigative consumer show applied for loans on nine websites with the hallmarks of fraudulent companies: promises to loan money to people with bad credit and minimum loan amounts people can apply for. By the end of the investigation, seven of the sites were no longer online.
The Marketplace applications for a $5,000 loan were made with a false identity, one without a credit rating ? Jennifer Macs. One company, Edison Financial, responded and approved Macs for a loan of $10,000.
Canadians lost $60 million to advance-fee loan scams in 2008, according to PhoneBusters, an anti-fraud call centre. Scammers use false names and locations when setting up a website, and are difficult to catch.(CBC)
Edison requested that a security deposit of $1,475 be wired through MoneyGram or Western Union to secure the loan.
The Edison representative instructed Macs when wiring the money to refrain from stating that it was for a loan, otherwise a “loan tax fee” would be charged. Money transfer services are educated in how to spot a scam and to warn clients.
“If they ask you what your purpose of business is, you might want to say ‘personal’ or um ’sending to a family member or friend,’ because if they charge you the loan tax, there?s an extra thousand dollars, OK?” said the Edison employee, who called himself Chris Stephens.
MoneyGram and Western Union both said there is no such “loan tax? to send money.
Queried why a potential borrower’s red flags wouldn?t go up when they’re asked for a deposit, Det. Lamothe said the scammers are very good at looking legitimate.
“If they make it seem real by providing you with legitimate looking documentation, you will buy into the fact that it?s a real financial institution. You?ll send money to get money,” Lamothe said in an interview.
While investigators like Lamothe can contact a site’s internet service providers and attempt to shut it down, there?s no guarantee it won?t go up again under another name.
Because scammers can use fake ID and stolen credit cards, and never have to truly identify themselves to get a website or a 1-800 number, it?s hard to trace who they really are, Lamothe said.
“Not everything can be investigated, unfortunately,” he said.
Marketplace airs on the main CBC network Fridays at 8:30 p.m. local time, 9 p.m. in Newfoundland.
Retailers welcome hearings on credit card and debit fees March 9, 2009
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Groups representing companies that pay credit and debit card fees are welcoming separate decisions by parliamentary and Senate committees to look into Canada’s card businesses.
Catherine Swift, president of the Canadian Federation of Independent Business (CFIB), said Friday that “unprecedented” jumps in credit card fees “are an enormous extra cost” paid by small- and medium-sized businesses struggling to deal with the recession.
“Our members are not opposed to paying fees, but these costs need to reflect the services provided,” she said in a news release.
The Senate committee on banking, trade and commerce announced March 3 that it would study the credit and debit card systems “and their relative rates and fees,” starting on March 25.
The Commons standing committee on industry, science and technology weighed in March 5, but it is focusing on a proposed change to the Interac debit card system, said committee vice-chairman Anthony Rota, a Liberal MP.
Interac is in talks with the Competition Bureau of Canada about changing from a not-for-profit structure to a for-profit operation, and the committee wants to look at the impact on debit card fees paid by retailers.
It will also consider credit card fees paid by retailers, but won’t be studying the rates and fees card companies charge consumers, he said.
“I’m not going in with a preconceived notion,” Rota added.
The Commons committee announcement is a victory for Canadian retailers and their customers, said Diane Brisebois, president and CEO of the Retail Council of Canada (RCC).
The council is particularly worried about the proposed Interac restructuring.
“We must not allow debit card services to end up like the credit card market, where rates are jacked up to provide ever-more profit for the card issuers and the card companies,” Brisebois said in a news release.
The Canadian Council of Grocery Distributors and the Canadian Federation of Independent Grocers welcomed the hearings.
“Costs associated with credit card fees have been dramatically increasing over the course of the last 18 months,” said Nick Jennery, president and CEO of the group representing distributors.
The new premium or Infinity credit cards companies have been mailing to consumers cost merchants more every time a shopper uses them, he said. Those charges are passed on to customers.
System is defended
MasterCard president Kevin Stanton defended the card system.
“The many benefits Canadian merchants receive from card acceptance continue to be downplayed,” he said.
Cards provide credit for consumers and are a secure, reliable, guaranteed payment system for merchants. Competition in the business is vigorous, and there are continual product improvements, Stanton said.
Mastercard said it is looking forward to a “full and fair discussion” before the Senate committee.
The two announcements follow mounting pressure from politicians, consumer and business groups.
New Brunswick Senator Pierrette Ringuette has repeatedly called for a study of the card business.
Ringuette has said she’d like Canada to adopt a cap on fees banks can charge businesses and consumers, similar to legislation already adopted in Australia which sets fees based on actual costs and a reasonable return.
Swift said the Australian system may be worth a look to see whether it would be relevant for Canada.
Canwest considers divesting assets as credit line tightens February 3, 2009
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The financial screws appear to be tightening on Canwest Global Communications.
The company says its Canwest Media division may not be able to comply with debt obligations for its fiscal second quarter, which runs from December through February.
The Winnipeg-based owner of the Global television network, the National Post and an array of big-city Canadian daily newspapers says it believes it will be able to continue to operate normally through the present quarter.
In a statement, however, Canwest says it will “actively pursue opportunities to divest of non-core operations and assets.”
Monday’s announcement follows Canwest’s mid-January disclosure that Canwest Media was in danger of violating its debt obligations.
“Since that announcement, there has been a further deterioration in the Canadian economy, including in the retail sector, which has negatively affected some of the company’s business units beyond what was originally forecast,” Canwest stated.
It says, however, that it’s reached a deal with its lenders to waive certain borrowing conditions, but also to limit borrowing on a line of credit to $20 million until Feb. 27.
All maxed out? Budget measures would improve credit access January 28, 2009
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Help and education promised for credit-happy consumers. (Canadian Press)
Canadian consumers and businesses in these cash-strapped times would have less fears of being maxed out on credit under measures in the federal budget tabled Tuesday in Ottawa.
But they also would be guided not to go spending crazy ? if budget promises to educate Canadians on ?financial literacy,? and protect them from confusing, unreasonable credit-card requirements are put in place.
Following what the Harper government is calling ?an unprecedented consultative effort,? Finance Minister Jim Flaherty?s 2009 budget would provide up to $200 billion ? in existing and new measures – through an ?Extraordinary Financing Framework.?
With the help of an advisory committee of users and suppliers of financing as well as other expert that would manage the EFF, the government would make it easier for consumers to get credit for that new house or boat, for instance, and allow businesses to get the funding they need ?to invest, grow and create new jobs.?
To put the EFF in place, the government would borrow more, meaning it would increase its debt sold through financial markets. However, the budget adds, since this debt would be ?matched with sound assets,? the EFF would not result in an increase in federal debt.
Boosting ?financial literacy? a goal
How would that translate into giving that credit boost to Canadians?
Take a lobster fisherman in Prince Edward Island who supplies upscale restaurants along the eastern seaboard, as noted in the budget, titled ?Canada?s Economic Action Plan.?
With sales dropping because of the U.S. economic crisis and some customers not making their payments, the fisherman is relying more on a line of credit with a bank to keep the business going. As a result, the fisherman sought ? but was turned down for – a credit-line increase because of the bank?s limited financial resources.
But through one aspect of the EFF called the business credit availability program, the bank would be able to get support from a financial Crown corporation that would result in the fisherman being able to also be helped financially.
What about Canadians who hope to get into the mortgage game or want to finally take that expensive trip overseas, but worry about not being approved for financing because of the uncertain economic times?
The budget offers to help Canadians get access to ?fair and transparent? credit ? by strengthening disclosure requirements on lending institutions that issue credit cards ? so ?consumers are better equipped to make informed decisions.?
And to help consumers brush up on their financial savvy, the government would establish an independent task force ? made up of representatives from business, education, volunteer organizations and academic sectors – to make recommendations for a national strategy on ?financial literacy.?
Securing mortgages a priority
On another front, the government would beef up the insured mortgage purchase program (IMPP) ? a plan that basically assures ?stable long-term financing? to lenders so they can continue meeting the needs of consumers and businesses ? to allow the purchase of up to $50 billion more in insured mortgages in the first half of 2009-2010. This would be in addition to the $75 billion, announced earlier, to be purchased in 2008-09.
Other new government measures included in the budget that would fall under the EFF would:
Provide $13 billion in incremental financing to financial Crown corporations, to allow Export Development Canada and the Business Development Bank of Canada to extend additional financing to Canadian businesses and allow Canada Mortgage and Housing Corporation to support low-cost loans to municipalities. At least $5 billion of the $13 billion would be delivered through the business credit availability program, involving co-operation between the Crown corporations and private-sector financial institutions.Further help small businesses by increasing the maximum eligible loan amount under the Canada Small Business Financing Program for loans made after March 31 this year, changes that could boost lending by about $300 million a year.Provide up to $12 billion for a new Canadian Secured Credit Facility to purchase term asset-backed securities by loans and leases on vehicles and equipment. The facility would help consumers and businesses access financing for such items. (more…)
BMO picks up High Liner’s Icelandic credit line January 21, 2009
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High Liner Foods Inc. said Tuesday that the Bank of Montreal will take over that portion of the fish company’s credit facility that had previously been controlled by a bankrupt Icelandic bank.
High Liner, based in Lunenburg, N.S., said BMO will lend up to $40 million to High Liner’s U.S. subsidiary as a part of a previous arrangement with a syndicate of banks, one of which was Landsbanki, a huge Icelandic bank that slipped into receivership in October.
Effectively, the move means that High Liner, which posted negative cash flow in its latest financial results, will get access to the money necessary to stay in operation.
Keeping the cash coming
In December 2007, Landsbanki, one of that country’s biggest financial institutions and one heavily leveraged in the fishing industry, Royal Bank of Canada and CIT Business Credit Canada Inc. made a deal whereby High Liner could get access to as much as $120 million in a revolving credit facility.
High Liner needed the cash to pay suppliers and buy equipment.
But the September-October credit crunch severely hurt Iceland and crippled its banking industry, sending Landsbanki among others into receivership.
3-month stock chart for High Liner Foods Inc.
As a result, Landsbanki initially balked at providing High Liner with any further cash under the terms of the credit facility.
That left High Liner quietly pondering for a source of additional liquidity to replace the Icelandic bank.
Eventually, Landsbanki agreed to provide money under the credit facility.
But, High Liner still had concerns.
“Our primary source of working capital are cash flows from operations and borrowings under our credit facilities. The current weakness of global credit markets and the economic downturn affecting many parts of the economy … could be a significant negative effect on our ability to borrow funds to meet our anticipated cash needs,” High Liner said in its latest quarterly figures.
By assuming Landsbanki’s share of the credit consortium, BMO will guarantee High Liner’s access to at least another $40 million in cash.
High Liner said that, of the $120 million in total available credit, the company still has $60 million it has not yet touched.
South Korea to guarantee maturing foreign loans amid credit crisis October 20, 2008
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South Korea announced measures Sunday to shore up its banks by guaranteeing their external debt and pumping more money into the banking sector amid the global financial crisis.
The government said it will provide up to $100 billion US to secure banks’ maturing foreign currency debt for three years on loans taken out from Oct. 20 to June 30, 2009.
Minister of Strategy and Finance Kang Man-soo, Financial Services Commission chairman Jun Kwang-woo and Bank of Korea governor Lee Seong-tae made the announcement in a joint statement.
The government and Bank of Korea will also provide additional liquidity equivalent to $30 billion US to the banking sector by using foreign exchange reserves, the statement said.
The announcement came as analysts have questioned South Korean banks’ ability to raise dollars to pay off maturing foreign loans amid the global credit crunch.
“Despite the recent credit crisis, [South] Korea’s real economy and its financial sector are sound,” the statement said, reiterating the government’s position that fears about South Korea being vulnerable to the crisis were overblown.
The government has said its $240 billion US in foreign currency reserves is more than sufficient to see the country through the global liquidity crisis.
Bush urges patience for credit market recovery October 19, 2008
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U.S. President George W. Bush speaks about the economy at the U.S. Chamber of Commerce in Washington on Friday morning. (Larry Downing/Reuters)
U.S. President George W. Bush cautioned there will be no immediate fix of the credit market crisis as he defended the government’s intervention as a measure of “last resort.”
“It took a while for the credit markets to freeze up, and it’s going to take a while for the credit system to thaw,” Bush said in 20 minutes of remarks delivered across the street from the White House at the U.S. Chamber of Commerce building.
Bush said the U.S. is dealing with a “serious financial crisis” but that he realized Americans are concerned about the government’s activist response.
He acknowledged that the government has taken “aggressive measures” that are “big enough and bold enough to work,” and suggested the government had no choice.
Among the major steps taken in the last month was a Treasury Department announcement that it would inject up to $250 billion in U.S. banks in return for partial ownership stakes.
The Federal Deposit Insurance Corp. also has promised to temporarily guarantee new issues of bank debt and to provide unlimited deposit insurance for non-interest bearing accounts, mainly used by small businesses.
Despite massive infusions of government cash, the markets have swung wildly and mostly downward.
But Bush said the steps will help banks get money flowing and ensure big businesses don’t shut down operations.
He said the actions are “an extraordinary response to an extraordinary crisis.”
“As a strong believer in free markets, I would oppose such measures under ordinary circumstances. But these are not ordinary circumstances. We took these measures as a last resort.”
Had the government not acted, Bush said, the “hole in our financial system would have grown larger” and the government would have had to respond with more “drastic and costly measures later on.”
Bush insisted the moves are not the first steps toward nationalizing banks, saying government involvement will be limited in size, scope and duration.
He said that in the past, the government has taken control over private companies in the banking industry during a financial crisis, but relinquished that control when the crisis ended.
“And we will do so again,” he said.
The purpose is not to “weaken the free market” but to “preserve the free market,” Bush said.
With files from the Associated Press (more…)
