Masthead graphic based on a painting by Gudrun Thriemer.

Wednesday, December 17, 2008

Kevin Carmichael, "Canada may backstop ABCP rescue: Flaherty," Report on Business, Demember 17, 2008.

[ABCP has been frozen since August 2007, coincidentally around the same time the housing bubble burst; Quebec investors hold more than half the paper, which is reported to be essentially worthless. Jean Charest's newly re-elected government faces "a potential firestorm," if he can't cut a deal to salvage the market. Analyst Henry C K Liu points out that banks' reluctance to lend short-term money to each other for fear of counterparty default is only part of the global credit crunch. Another aspect of the "general tightening" is that "banks have been hoarding cash to respond to the frozen asset-backed commercial paper market" (ATol Jul 30 08). While the high profile posturing takes center stage in our media, investors who had to eat their losses in the income trust intervention (without anything like a bailout) are justifiably pissed. Some commenters call ABCP "junk" and wonder what the RCMP commercial crime unit is doing after its pie break. -jlt]

  ...the financial crisis is taking a toll on the parties of the agreement to swap the essentially worthless ABCP for new notes...

SASKATOON — Finance Minister Jim Flaherty acknowledged for the first time that he's open to using public funds to backstop a private effort to restructure $32-billion of frozen asset-backed commercial paper.

Mr. Flaherty told reporters in Saskatoon Wednesday that he is discussing the issue with some provincial governments and that he might conclude on a rescue before the end of the day.

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