As Canadians go to the polls, the Conservatives have privately told the country's biggest banks they are ready to step in and guarantee new borrowing because of fears financial institutions will be frozen out of international credit markets for "months," according to people familiar with the discussions.
The extraordinary pledge was made behind closed doors after Canada's banks disclosed they were being starved of desperately-needed financing and could not continue to fund normal operations without government help, despite signs of a rebound in stock markets.
Confirmed on the eve of the election, the implicit public guarantee of private debt by the Conservatives represents a historic departure from free-market principles and signals a profound loss of confidence in the global banking system.
It means Ottawa is prepared to publicly guarantee repayment of any new money banks borrow from each other and from foreign banks, to make sure Canada's financial institutions do not fall behind their peers.
Stephen Harper, the Conservative leader, is reluctant to officially declare this policy, but is likely to do so if Washington moves first because of the detrimental impact a U.S.-only guarantee could have on Canada's financial institutions.
Before pulling the trigger, the Conservatives first aim to try and meet the funding needs of Bay Street directly by aggressively expanding a scheme to buy up mortgages from banks.
After initially putting up $25 billion of public money to buy mortgages, the Department of Finance is prepared to increase that limit as needed up to $225 billion, at which point the risk of taxpayer losses starts to rise sharply.
After spending weeks trying to reassure Canadians that "the fundamentals of the economy are solid", it's obvious that Stephen Harper has completely misjudged the impact of the global economic meltdown in our country and has lied to us about the state of our financial institutions. The fact that he and his incompetent finance minister Flaherty have chosen to use vague, lofty and nasty rhetoric to fool Canadians into believing that the Conservatives are best suited to handle this crisis is an absolute sham.
Unfortunately, the news of this secret bailout deal comes on a day when we're headed to the polls with virtually no time for fiscal, free market conservatives to examine how this might affect their support of a federal government that is violating, in their estimation, core conservative principles. It's also an insult to swing voters who've moved towards the Conservative party after being told that every other party is bound to destroy our economy.
Just one more slap in the face brought to you by Harper and the Conservatives. Whether this is a necessary move or not is debatable. What isn't, however, is the fact that this has been dropped in our laps on election day by way of leaks to the media.
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