CAITI bar the door
I love a conspiracy theory as much as the next guy, but the one propounded over the weekend by the Canadian Association of Income Trust Investors (CAITI) is a bridge too far. I look at the group’s website from time to time and am amazed how long they’ve managed to maintain their fervor against the federal government for ending income trusts in 2006.
Among the group’s dark contentions is that Ottawa killed income trusts so that the life insurance industry, including Manulife, would have a clear field to sell retirement plans.
That’s quite stretch but nothing like CAITI’s recent claim that NDP finance critic Thomas Mulcair “is completely unaware of that event that almost saw Manulife go ‘too big to fail’ on Canadian taxpayers.”
That statement is a bit awkwardly put, but I assume CAITI means that Manulife almost neeed a bailout by Ottawa. As someone who closely studied Manulife during the period in question, let me say that nothing could be further from the truth.
When the stock market crashed in 2008, Manulife lobbied for help from the regulators and the minister of finance. If Ottawa had been favoring the firm as CAITI claims, you’d think the powers-that-be might have acquiesced. Instead, Ottawa made matters worse for Manulife by demanding that the firm add $11 billion to capital when others in similarly besieged circumstances needed to find only $600 million.
That’s why Manulife took out a bank loan, issued equity, cut the dividend and saw the share price collapse from $39 to $9.
Other than that, it’s a heck of a theory.