The View From the Outside

Apparently, we aren't doing so bad. Key grafs:

Guess which country, alone in the industrialized world, has not faced a single bank failure, calls for bailouts or government intervention in the financial or mortgage sectors. Yup, it's Canada. In 2008, the World Economic Forum ranked Canada's banking system the healthiest in the world. America's ranked 40th, Britain's 44th.

So what accounts for the genius of the Canadians? Common sense. Over the past 15 years, as the United States and Europe loosened regulations on their financial industries, the Canadians refused to follow suit, seeing the old rules as useful shock absorbers. Canadian banks are typically leveraged at 18 to 1—compared with U.S. banks at 26 to 1 and European banks at a frightening 61 to 1. Partly this reflects Canada's more risk-averse business culture, but it is also a product of old-fashioned rules on banking.

Canada has also been shielded from the worst aspects of this crisis because its housing prices have not fluctuated as wildly as those in the United States. Home prices are down 25 percent in the United States, but only half as much in Canada. Why? Well, the Canadian tax code does not provide the massive incentive for overconsumption that the U.S. code does: interest on your mortgage isn't deductible up north. In addition, home loans in the United States are "non-recourse," which basically means that if you go belly up on a bad mortgage, it's mostly the bank's problem. In Canada, it's yours. Ah, but you've heard American politicians wax eloquent on the need for these expensive programs—interest deductibility alone costs the federal government $100 billion a year—because they allow the average Joe to fulfill the American Dream of owning a home. Sixty-eight percent of Americans own their own homes. And the rate of Canadian homeownership? It's 68.4 percent.

And, for Ben:

I could go on. The U.S. currently has a brain-dead immigration system. We issue a small number of work visas and green cards, turning away from our shores thousands of talented students who want to stay and work here. Canada, by contrast, has no limit on the number of skilled migrants who can move to the country. They can apply on their own for a Canadian Skilled Worker Visa, which allows them to become perfectly legal "permanent residents" in Canada—no need for a sponsoring employer, or even a job. Visas are awarded based on education level, work experience, age and language abilities. If a prospective immigrant earns 67 points out of 100 total (holding a Ph.D. is worth 25 points, for instance), he or she can become a full-time, legal resident of Canada.

Alright, so as nice as it is to have Fareed Zakaria fellate our fine country in the pages of Newsweek, the whole thing (which you should read, even if I gloatingly blockquoted the majority of it here anyway) is a little over-the-top. For one, it wasn't "common sense" that led to our maintaining of strict, sane banking regulations - we had a liberal government with a super-competent finance minister for years that worked diligently to get us where we are. If we'd had conservatives in power for the last however many years, and they had the parliamentary majority necessary to Americanize our financial structures, they probably would have. Secondly, he glosses over the massive dependence that we have on the American economy - for markets, for capital, for pretty much everything - as well as the whole collapse-of-the-Alberta-economy thing. Anyway, the article is obviously not meant to accurately assess the health of the Canadian economy as it is to quietly suggest to an American audience that regulation is not such a horrible thing, and I can definitely get behind that.

The thing I wanted to note, though, was the suggestion Zakaria makes (I'll spare you all another blockquote) that Canadian banks are now in a position to expand dramatically as American banks struggle to deleverage and sell off their worthless assets. TD Bank, apparently, is now the 5th largest bank in North America (!), when it was 15th a year ago. It may come to pass that, as the US stumbles through a year or two of slow-moving credit and occasional unpleasant toxic-CDO valuation shocks, Canadian banks step in and start offering the necessary capital to keep the country alive, giving Canadians yet another reason to get drunk and self-righteously lecture Americans on how you guys should get your shit together. I, for one, can't wait.