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Excellent move!

Someone finally understands that the CB demanding collateral from its own regulated banks is redundant for ‘local currency’ lending to member banks.

The Fed should have done this long ago and saved a year of financial turmoil, as I’ve been proposing for a long time.

This means bank failures will be due to solvency, and not liquidity.

Ottawa to guarantee inter-bank lending

By Kevin Doherty

OTTAWA — Canada’s government will guarantee the lending the country’s banks do with other financial institutions.

Finance Minister Jim Flaherty said Thursday the government is establishing the Canadian Lenders Assurance Facility on a temporary basis to backstop wholesale lending.

Mr. Flaherty said he is establishing the lending facility to ensure Canadian banks aren’t left at a competitive disadvantage. More than a dozen countries have pledged hundreds of billions of dollars to guarantee interbank lending.

Banks will access the insurance from the facility on commercial terms. Mr. Flaherty said there will be no cost to taxpayers.

“This is a proactive step,” Mr. Flaherty told reporters. “There is this concern that our institutions could be disadvantaged competitively.”


One Response

  1. “its own regulated banks ” There you go with that silly “regulated and supervised” meme again. I thought it has been made more than apparent that regulation and supervision is totally non-existant – and the few people who do see the big picture have taken actions to actually make things worse and more opaque. Why is one Hammerin Hank or Bernanke corrupt crony crook a better regulator (for the gubbment) than thousands of independent agents in a free transparent market. While we are still being lied too, I don’t see how any of your solutions are going to work.

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