August 12, 2013

By Margaret H. Johnson

Today’s headlines – “CMHC cap on mortgage-backed securities to raise home costs cool market.”

Here we go again. More government intervention. I don’t get it. Aren’t conservatives supposed to believe in a free market economy? So, why do they continually intervene into the marketplace and regulate, regulate, regulate. Whatever happened to the priority of market forces like supply and demand?

Historically, liberal governments have been the regulators and would receive the full intensity of vicious rebuttals from conservatives that hated all government interference. Now, we see a conservative government rushing into the marketplace to interfere, interrupt, and protect – Why? Who are they protecting?

That is a good question. Their last regulatory intervention in 2012 with insured CMHC mortgages created an artificial slowdown in the economy – that hurt countless businesses, home buyers and retailers. Even so, their policy failed to stifle the immutable power of supply and demand.

Don’t get me wrong. I am not a conservative, liberal or NDP supporter. I am a businesswoman who understands the importance of owning a home for young people and the pejorative effects of debt – both consumer and mortgage debt. This is the untold story – how debt over the last 40 years has been allowed to flourish and compound, unfettered by governments, until a catastrophe like the U.S. credit crunch of 2007 – 08.

Today, governments wave the flag of what is now considered an indisputable truth – that debt is worrisome and governments should do something about it.

Yes….yes…yes. Governments should do something about the troublesome levels of debt – but how does slowing down the economy, lowering the equity in homes and preventing young people and those with limited incomes from accessing the single biggest asset that most families will every have…help? And, of course, who does it help?

Is it the banks and condo developers that might suffer losses in certain markets because they were too aggressive or built too many units? Should they not bear the burden of the unforgivable market forces? Why do consumers – individuals and families - face all of the consequences?

At the end of the day, the intervention allows the banks to increase interest rates without any public disdain. After all, they are just passing along the risks following the government’s regulation. It’s not the banks fault?

Meanwhile, the $512 billion of consumer debt goes unmentioned and untouched by government regulation. The unspoken credit card interest rates sail quietly and smoothly into the future.

It seems to me that some decisive steps should be taken against the consumer-debt side of the equation to help individuals and families become debt free.

We also need to realize that middle and lower incomes that have not kept up with inflation and taxation are a huge part of the affordable housing problem. Wouldn’t it be nice to see some government intervention here?