Canada Strong In Face Of Credit Crunch

The finance minister spoke at the annual meeting of the Canadian Chamber of Commerce, in Markham, Ont., a community just north of Toronto. The chamber is the country's biggest business lobby group with 170,000 members. Flaherty told a news conference afterwards that the government continues to monitor the credit crisis and that Canadians should maintain a "realistic'' perspective. "We've had greater financial growth than expected in terms of GDP growth in the first and second quarters in Canada,'' he said, noting that the government continues to monitor developments in the credit markets. "We have some tools that we can use. The best news in Canada is that we have strong economic fundamentals. The government is in a position of strength.'' Earlier this week, some of the chief executives of Canada's big banks said they expect the global credit turmoil to last until next spring at least. Flaherty agreed. "We will have to weather that storm in Canada,'' he said. "All of our governments are running surpluses in Canada -- provincial, territorial and federal -- so that we are in a strong position.'' Flaherty said in his speech that solid job growth, government budget surpluses and falling debt burden, as well as the country's role as an emerging energy superpower, have helped ease the economic stresses caused by the credit crunch. While part of Canada's asset-backed commercial paper market -- a system of short-term corporate lending -- has been frozen, the Canadian financial system has been generally functioning normally. A plan has been proposed to freeze and eventually restructure the $35 billion market for asset-backed commercial paper that is not sponsored by the big banks. The Bank of Canada and other central banks around the world have pumped billions of dollars into the financial system in recent weeks to help ease the credit turmoil. Nevertheless, troubles persist. In recent days, hundreds of customers lined up outside branches of a British mortgage bank, Northern Rock, to withdraw their savings after the bank asked for an emergency Bank of England loan. The British bank made the request because it relies heavily on wholesale money markets for cash, and had been unable to borrow the amounts it needed from other banks since money markets choked up last month. That was caused, in part, by U.S. banks making mortgage loans to Americans with poor credit histories. The fallout from that lending has led to rising foreclosures in the U.S. housing market, the near collapse of some U.S. mortgage lenders and the seizing up of financial markets linked to risky mortgage lending. http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20070916/flaherty_economy_070916/20070916?hub=CTVNewsAt11

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