Happy Victoria Day!

Fete de la Reine -- it's a holiday today in Canada -- Victoria Day. All schools and most businesses are closed throughout the country. The day is celebrated in honor of the birthday of Queen Victoria and the current monarch of Canada. Also known as May Two-four and May Long Weekend, this statutory holiday falls on the Monday preceding May 24. In Quebec, where we live, it's also known as National Patriots Day to commemorate the Patriots of the Lower Canadian Rebellion in 1837 -- the name given to the armed conflict between the rebels of Lower Canada, now Quebec and the British colonial power of the province.

Like Memorial Day in the U.S., this holiday officially kicks off the summer and the flower planting season. These photos were from the Ottawa Tulip festival earlier this week.

Things not seen in the US #6

We're in Toronto to see our White Sox play the Blue Jays. It was a good game today even though the Sox lost. For each person who commented our our Sox shirts, we wanted to say "how are you liking the Stanley Cup playoffs, eh?"

Okay....the first person who spots the TWO reasons why this screen would not been seen in a U.S. ball park gets an Alex Rios bobblehead we're supposed to get at tomorrow's game. Make a comment below or email kish.pisani@gmail.com. Since there were only 14,000 Blue Jays fans at today's game, we're thinking we'll get our bobbleheads. Those 14,000 fans made a lot of noise though. Helps to have a winning team.  For some reason the fans don't like Dye. We're trying to figure that out.

We'll have more about Toronto in a later post. Nice, clean city with recycling stations next to all the sidewalk garbage cans. What a concept.

Don't blame Canada

Thanks to our friend Larry Weithers for sending this article. We can concur. When we were applying for a mortgage this fall, it was as if we were being vetted for a Cabinet position. The fact that we were coming from the U.S. housing market as everything was hitting the fan, did not help. We had to produce more paperwork than you can imagine. But, throughout the process we kept saying to ourselves, "why don't they do this in the U.S.?" Now we know why and now we know why the banks in Canada are not in trouble and are in fact profitable. And it's not because they charge high interest rates -- we're paying less than ever in interest. You'll note from the article that there are only five banks to choose from in Canada. There's an idea.

May 14th 2009
From The Economist print edition

A country that got things right
“IT IS the only time I feel like royalty,” says the boss of a big Canadian bank, describing the reception he now gets in America. He is not the only one basking in acclaim. All of Canada’s main banks were profitable in the quarter ending January 31st, when market conditions were at their worst. None has needed government investment. The country’s financial system has been praised by Barack Obama.

Trouble is, some differences between the two countries are culturally ingrained. “The United States has an inherently higher risk appetite,” says a banker familiar with both sides of the fence. It is hard to find pre-crisis equivalents in America of the decision by Toronto-Dominion (TD) to exit its structured products business in 2005, or the 20-30% band that RBC imposes on the share of earnings that its capital-markets business can contribute.

Structural differences matter too. The Canadian system is an oligopoly of five dominant banks. That dampens price competition: independent brokers originate less than one-third of the mortgages in Canada, compared with up to 70% in America during the bubble. It also makes it easier for Canadian banks to pull back when things are getting too risky.

Having a few banks that are clearly too big to fail has led to more stringent supervision, including imposing a maximum leverage ratio and a single regulatory regime for commercial and investment bankers. Laxer and more fragmented capital regimes allowed the balance-sheets of banks elsewhere to balloon (see chart 4).

Perhaps the most striking divergence between Canada and America is in their regulation of mortgages. Interest paid on home loans is tax-deductible in America, encouraging people to borrow more; not so in Canada. American mortgages are non-recourse in many states, making it harder for lenders to pursue defaulting borrowers; not in most of Canada. (Then again, Britain is like Canada in these respects but still has soaring defaults).

Canadians taking out mortgages with a loan-to-value ratio over 80% must also take out insurance on them from a federal agency called the Canada Mortgage and Housing Corporation (CMHC). The banks insure the rest of their portfolios with the CMHC, which keeps them honest by applying strict standards to the mortgages they guarantee. Taking out insurance also brings the risk weighting that regulators apply to these mortgages down to zero, which means that the banks derive no capital advantage from funding them through securitisation. Some argue that Freddie Mac and Fannie Mae, America’s housing-finance giants, should likewise guarantee mortgages but not buy them.

Air time

Our Chicago Blackhawks flag has never seen so much light. Traditionally, it’s been flying in the heart of winter, not in the middle of spring. If the Hawks keep moving through (oops, when the Hawks keep moving through) the playoffs, we’re going to need to purchase a replacement flag as it’s showing the wear and tear.

It’s an interesting time in Canada to be a Blackhawks fan, considering the fact they took out the last of the Canadian teams. Most of the hockey fans we’ve encountered in the last couple of days have been happy for Chicago, ironically. Even the striking union members at Paul’s company have made positive comments about the Blackhawks as he has passed by the picket line. That’s an entirely different blog entry we’ll address when the strike is over. Let's just say for now that Paul has learned a lot about Canadian labour unions in the last couple of months.

Paul had to fly to Vancouver this morning for a meeting. With his Blackhawks shirt of course.

Representing Chicago...

Today was Louis' basketball team party celebrating the end of the season. Paul did a good job representing the teams in Chicago. Fortunately, this evening we're able to watch the Bulls, Blackhawks and Sox all at one time. 

Paul is pictured here with two of his players. As they do in the U.S., moms of the players collect money for a coach's gift. Most of the time in Naperville coaches receive a gift card to a local restaurant or sports store. What you can't see in side the green box in Paul's right hand is the bottle of Cuban Rum both coaches received from the team. 

It was a long season but a lot of fun. We were recalling when Paul showed up to the first game after being in the country five days and was appointed the coach "because he looked like a coach," -- in other words, he had some sort of sports team shirt and cap on we're sure. We were living in a hotel for the weekend and didn't even have our own beds, but sports were already in full swing for both kids.

It's been quite a ride! But tonight, we're cheering for Chicago.