Too early to judge bank plan

TORONTO — A U.S. government plan to buy up toxic banking assets and provide a boost to lending could rejuvenate both the American and Canadian economies, according to economists and banking industry observers.

President Barack Obama

TORONTO — A U.S. government plan to buy up toxic banking assets and provide a boost to lending could rejuvenate both the American and Canadian economies, according to economists and banking industry observers.

But they also cautioned Monday that it’s still too early to judge the effectiveness of the Obama administration’s plan, which calls for the U.S. government and the private sector to buy up to US$1 trillion worth of bad debt on the books of American banks.

Prime Minister Stephen Harper has said recently that a recovery in the Canadian economy can’t occur until the U.S. banking system also picks itself up, and lending to Canadian businesses and consumers is rebooted.

However, TD Bank chief economist Don Drummond remained cautiously optimistic about the plan’s overall impact on the economies in both countries.

“I don’t think you can necessarily break out the champagne and say it’s going to work,” Drummond said, while also noting that the toxic asset plan was “the missing ingredient and now at least we have something in that space.”

Drummond said he believes several steps are required to save the Canadian economy including: the bottom of the U.S. housing market, which he thinks is near; faster stimulation from monetary authorities; and larger government stimulus packages.

After it’s all in place, the ball will start rolling for a recovery, he suggested.

On Monday, U.S. Treasury Secretary Timothy Geithner unveiled the government’s plan, which will draw upon and bolster an existing $700-billion rescue package for the financial system.

The bad debts have weighed down the U.S. banking sector and made many financial services companies reluctant or unable to lend, reducing the ability of businesses and consumers to borrow.

The plan would break a transaction amount into fractions. For example, if $100 in bad mortgages was bought from a bank the private sector would pay $7, the government would match the $7, and then the other $86 would be paid for through a government loan provided in many cases by the Federal Deposit Insurance Corp.

Just Posted

Parenting: Every woman will have a different pregnancy experience

Wife whose hormones are unbalanced can be unpleasant experience

Men posing as repo men attempt to steal vehicle in Red Deer County

Two men attempted to steal a utility vehicle from a Red Deer… Continue reading

Red Deerian spreads kindness with one card at a time

One Red Deerian wants to combat bullying by spreading kindness in the… Continue reading

Bowden baby in need of surgery

“Help for Alexis” Go Fund Me account

PHOTO: First Rider bus safety in Red Deer

Central Alberta students learned bus safety in the Notre Dame High School… Continue reading

WATCH: Annual Family Picnic at Central Spray and Play

Blue Grass Sod Farms Ltd. held the Annual Family Picnic at the… Continue reading

Woman has finger ripped off at West Edmonton Mall waterslide

SASKATOON — A Saskatchewan woman says she lost a finger after her… Continue reading

Uncertainty looms over Canada’s cannabis tourism, but ambitions are high

TORONTO — Longtime marijuana advocate Neev Tapiero is ready for the cannabis-driven… Continue reading

Feds mulling safeguards to prevent ‘surge’ of cheap steel imports into Canada

OTTAWA — The federal government extended an olive branch of sorts to… Continue reading

Ontario govt caps off summer session by passing bill to cut Toronto council size

TORONTO — The Ontario government passed a controversial bill to slash the… Continue reading

Updated:Italian bridge collapse sends cars plunging, killing 26

MILAN — A 51-year-old highway bridge in the Italian port city of… Continue reading

Saudi Arabia spat affecting Canadians embarking on hajj, community members say

TORONTO — Members of Canada’s Muslim community say recent tensions between Ottawa… Continue reading

Tug carrying up to 22,000 litres of fuel capsizes in Fraser River off Vancouver

VANCOUVER — The smell of diesel filled the air as crews worked… Continue reading

Nebraska executes first inmate using fentanyl

LINCOLN, Neb. — Nebraska carried out its first execution in more than… Continue reading

Most Read

Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month