Canadian Federal Government Buys Back $25 Billion Mortgages

Ottawa, Ontario (AHN) - To boost funds of Canadian banks available for lending and cut borrowing cost for consumers, the federal government will buy back $25 billion mortgages, Finance Minister Jim Flaherty said Friday.

In a new conference, Flaherty said the Canadian government was making the move as its way of addressing the credit crisis, but not by bailing out collapsing banks. The finance minister emphasized the mortgages it will purchase will be high quality assets, not like the worthless papers held by the U.S. banking system which led to the subprime mortgage crisis and eventually to the global credit crunch.

He stressed there were no Canadian banks at risk of failure. "It is important to underling that Canada's banks and other financial institutions are sound, well capitalized and less leveraged than their international peers," Flaherty said.

After his morning press conference, Flaherty left for Washington to head the Group of 7 Finance Ministers' meeting, where he is expected to push for more stringent regulations using the Canadian model of how to stay solvent amid a global crisis.