Finance Minister Jim Flaherty’s plan — announced Thursday — to enhance oversight of the Canada Mortgage and Housing Corporation (CMHC) and issue new rules for covered bonds, is a good first step. But it doesn’t go far enough in protecting Canadians from the growing amount of risk the government is backstopping.
The CMHC, a Crown corporation backed by the full faith and credit of the federal government, has grown into one of the largest financial institutions in the country — which should give Canadians pause. It now insures close to half of all the outstanding residential mortgage debt in Canada.
That’s why the added oversight was necessary: The CMHC has become too big to be permitted to operate without the same type of scrutiny under which its private-sector mortgage insurer competitors must work. This move also greatly diminshes the role the Human Resources Ministry will have in CMHC, which never made a whole lot of sense.