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.

3 Responses

  1. Brent Fullard says:

    What part don’t you get? Maybe your son could help explain it to you, as he is well acquainted with my expertise in finance, having said very nice things about me and our working experience while working at BMO, and learning a great deal himself in the process, while working at BMO?

    As for conspiracy theories, which is reporter’s lame way to attempt to discredit a person who gets too close to the truth, what about your (being a member of Canada’s media) conspiracy theory about tax leakage? The faux and false argument used to justify taking this essential investment CHOICE away, and low and behold to Manulife’s serendipitous benefit, that was “proven” by way of 18 pages of blacked out documents? That conspiracy of yours?

    The one made only abundantly MORE obvious by the fact that the government revealed more than their simple mind intended, so they demanded that smoking gun back? That conspiracy theory of yours…..the canard conspiracy theory about tax leakage. The one that Jack Mintx promoted in public, but denied in person, when he wrote to me in November 2006; “I do want to point out that there is flaw in many of the analyses, on the treatment of RRSPs and pensions. Finance was WRONG to treat the impact as ZERO”

    No conspiracy there is there? Just the Minister of Finance LYING to Canadians for the heck of it.

    Wake up. Smell the reality. It’s a stench too obvious for even you to deny, deny as you might.

  2. Brent Fullard says:

    No ?conspiracy??

    Okay I’ll bite. Then how do you reconcile these irreconcilable accounts and seemingly two versions of parallel ?reality?? Are you suggesting that Dominic D’Alessandro (Vice Chair of the CCCE) had NO IDEA what Paul Desmarais Jr, ( the other Vice Chair of the CCCE) was doing, especially when they are in the same life insurance industry? How credible/not credible/incredible is that on either your part or his? Are you calling the Globe a liar?

    November 1, 2006 (Globe and Mail story entitled Income Trust crackdown: The inside story):

    ?High-profile directors and CEOs, meanwhile, had approached Mr. Flaherty personally to express their concerns: Many felt they were being pressed into trusts because of their duty to maximize shareholder value, despite their misgivings about the structure. Paul Desmarais Jr., the well-connected chairman of Power Corp. of Canada (owner of London Life and Great West Life, Investors Group, etc) even railed against trusts in a conversation with Prime Minister Stephen Harper during a trip to Mexico.?

    February 1, 2007, as recorded in Hansard, from the Finance Committee Hearings on Income Trusts

    Mr. Dominic D’Alessandro: (CEO of Manulife) ?The notion and the implication that somehow the government on this file is responding to initiatives that originated with corporations is not based on reality.?

  3. Brent Fullard says:

    Your article makes no sense, for the simple fact that your logic makes no sense.

    The events that Manulife lobbied to effect, were events that took place in October 2006, namely the trust tax. During the very week after the resultant tanking of income trusts, Manulife (to much fanfare launched Income Plus at a gala for 500 at Roy Thomson Hall), a product whose appeal was vastly improved by the death of the income trust market. That enhanced appeal for Income Plus in a post income trust marketplace is a irrefutable fact.

    Are you with me so far?

    Income Plus is what is generically referred to as a Variable Rate Annuity that provides a play om market based returns and with a gurantee on the downside. These products’ liabilities are seldom ever perfectly hedged, but hedged they are.
    Notwithstanding that practice of partial hedging, Warren Buffett (heard of him?) who is more than mildly knowledgeable about the insurance industry (ie General Reinsurance, Geico, etc) said these products are “Crazy” from the standpoint of the insurance issuer,

    Intent on going one step beyond “crazy” Manulife in a reckless attempt to drive eps, decided to adopt the practice of not hedging these risks. What do you suppose Warren Buffett’s assessment of that would be….”suicide”?

    If so he would have been right, as Manulife almost bought the farm in 2008/2009.

    To suggest that Flaherty’s malaise about bailing out Manulife in 2008/2009 in the middle of a Global Financial Meltdown, in which he was trying to maintain the charade that all was well in Canada relative to the ROW, has anything to prove or disprove that Flaherty did or didn’t kill income trusts for Manulife is a facile and vacuous argument on your part.

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