Quebec, Alberta spurn
Restructuring committee seeks $9.5-billion
in government guarantees to backstop plan; provinces say it's Ottawa's
SHAWN MCCARTHY AND KONRAD YAKABUSKI
December 15, 2008
OTTAWA and MONTREAL — The Quebec and Alberta governments are balking at
suggestions from Ottawa that they participate in talks aimed at
restoring the health of a key component of Canada's financial system.
Quebec believes the issue involving asset-backed commercial paper could
rear its head as early as Wednesday, when federal and provincial finance
ministers meet in Saskatoon.
Quebec has much at stake. If a deal to salvage the $32-billion market
for non-bank-sponsored ABCP collapses, the newly re-elected government
of Premier Jean Charest faces a potential firestorm, as Quebec investors
hold more than half of the paper.
Quebec's huge pension fund, the Caisse de dépôt et placement du Québec,
holds $12.6-billion, while other government agencies and non-government
financial institutions have billions riding on the outcome of the rescue
A committee headed by lawyer Purdy Crawford has been working since April
to try to work out a restructuring plan.
Last week, the committee said it was taking further steps to improve the
plan, including a moratorium on calling collateral, and that it was
seeking an additional $9.5-billion in guarantees from "external
sources." Sources told The Globe and Mail the committee is looking for
government backstopping, which would only be called on as a last resort,
if credit markets essentially collapsed.
Faced with calls to guarantee as much as $9.5-billion in collateral,
federal officials say the provinces need to be part of the solution to
protect their heavily invested institutions.
Finance Minister Jim Flaherty has refused to comment on possible federal
participation in the deal. But he has said the government wants to see a
A Finance spokesman said yesterday it would be in the provinces'
interest to be at the table, given the potential impact on provincial
institutions. "The minister has consistently said a market-led
restructuring is a preferred course of action for investors and capital
markets in Canada, one that does not depend on taxpayer dollars,"
Chisholm Pothier said.
He added, however, that the federal government remains committed to
"protecting financial stability and ensuring the health of Canada's
capital markets." Asked whether the provinces should be involved in the
ABCP restructuring, Mr. Pothier said: "Some affected parties fall under
provincial jurisdiction, so it is in their interest to be engaged."
A spokeswoman for Quebec Finance Minister Monique Jérôme-Forget said
yesterday the province has done its part, since the Caisse and others
are already responsible for much of the $39-billion in funding
facilities and collateral put up in the initial round of the rescue
plan. "The Quebec government has no intention of getting involved in
[providing] any eventual guarantees," Catherine Poulin said. Given the
high exposure of institutions in the province to the paper, "it would
not be desirable to further expose taxpayers" to additional risk, she
Ms. Poulin said the committee overseeing the ABCP restructuring has not
directly approached Quebec for aid. But she suggested the topic is
likely to come up at Wednesday's meeting, and Quebec intends to stand
its ground. "We feel the federal government has the tools and is the
best-positioned with the Bank of Canada" to help out, she said.
The Alberta government is also refusing to get involved with additional
guarantees, despite the exposure of its provincially-owned ATB
"We feel that the federal government is ultimately responsible for the
soundness and stability of Canada's financial system," Alberta Finance
Department spokesman Bart Johnson said yesterday.
He said the province has "already stepped up" and supported ATB
Financial by providing it with $550-million in additional collateral.
"Alberta taxpayers have backstopped this and done their share," he said.
"Federally regulated banks had a major role in the origins of this
problem, so we think it's really one for the federal government to
A spokesman for the Caisse said the pension fund had no comment. Nor
would he say whether the Caisse would like the province to join in the
rescue. An ATB official could not be reached.
With files from reporters Katherine O'Neill in Edmonton and Steven
Chase in Ottawa
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