Bank of Canada governor David Dodge doesn't want the Government of Canada paying for the damage when the real estate gravy train derails:
OTTAWA (CP) —A just released letter from the governor of the Bank of Canada to the Canada Mortgage and Housing Corp. exposes a rift between the two over lending policies.
"I read with interest and dismay your press release of June 28 which indicated that CMHC would offer mortgage insurance for interest-only loans and for amortizations of up to 35 years," says the two-page letter from David Dodge to Karen Kinsley, president and CEO of the housing corporation.
"Particularly disturbing to me is the rationale you gave that `these innovative solutions will allow more Canadians to buy homes and to do so sooner'."
The corporation's actions are likely to drive up house prices and make homes less, not more, affordable, Dodge says in the blunt missive, uncharacteristic of the usually tempered language of the central bank.
"I would have thought that as a Crown corporation, you would feel a responsibility to consult with the Bank of Canada and the Department of Finance before taking actions which could make the macro management of the economy more difficult and which have implications for overall financial stability."
The June 30 letter was obtained by Canadian Press under the Access to Information Act.