Canadians were never told the true cost of a $114-billion "secret bailout" for the country's biggest banks during the financial crisis, says a report from the Canadian Centre for Policy Alternatives. "We've had a false sense of security," said study author and CCPA economist David MacDonald.
"Ever since the global financial crisis struck in 2008, Canadians have been subjected to a constant refrain: Canada has the 'most sound banking system in the world,'" MacDonald writes in the report. "During the worst of the crisis - 2008 to 2010 - the official line was that Canada's banks did not require the extraordinary bailout measures that were being offered in other countries, particularly in the U.S.
"At its peak in March 2009, support for Canadian banks reached $114 billion. To put that into perspective, that would have made up seven per cent of the Canadian economy in 2009 and was worth $3,400 for every man, woman and child in Canada."
A spokesman for Finance Minster Jim Flaherty said MacDonald got it wrong.
"Despite conspiracy theories to the contrary, there was no 'secret bailout,'" said Flaherty spokesperson Chisholm Pothier. "Even a cursory look at the facts, readily available and published many times, indicates this report is completely baseless."
To some extent, the report and the rebuttal to it are a matter of how the facts are interpreted.
Where MacDonald says "bailout," a finance ministry official says "liquidity support." While MacDonald said the government tried to hide the numbers even from Access to Information requests, the official said the bank funding was "clearly, publicly laid out - repeatedly."
MacDonald used public filings by banks, government agencies, and financial regulators to provide what he called a composite picture of the flow of money between financial institutions and the individual Canadian banks struggling in the midst of a global recession.
All of the loans provided by the government as part of its relief program for Canadian lenders have been paid back in full, said Pothier.
The problems for the banks began when the credit crunch in the United States put the squeeze on Canadian lenders in late 2007.
The Harper government stepped in and used a number of measures to free up money for Canada's banks during the financial crisis - including buying mortgage-backed securities and providing short-term loans.
All told, the study counts $114 billion worth of guarantees and financial aid for Canada's big banks from October 2008 to July 2010 by the Bank of Canada, the United States Federal Reserve, and the Canada Mortgage and Housing Corp.
But it's not the amount of money that's at the centre of the dispute - MacDonald claims the government wasn't honest or transparent about its spending.
"The federal government claims it was offering the banks 'liquidity support,' but it looks an awful lot like a bailout to me," says MacDonald. "Whatever you call it, government aid for the country's biggest banks was far more substantial than the official line would suggest."
MacDonald study says that, at one point, three of the country's biggest banks - CIBC, Bank of Montreal and Scotiabank - were receiving government support that was equal to or more than the value of the company's shares.
"Government programs could have just purchased every single share in those banks instead of providing support," he said. "That's not the story Canadians were told. There was a massive failure in the private-sector market."
A spokeswoman for the Canadian Bankers Association said government support was meant to help banks lend to small business, not to protect the banks from failure.
"Not one bank in Canada was in danger of going bankrupt or required the government to buy an equity stake under taxpayer-funded bailouts," said Rachel Swiednicki.
Swiednicki said comparing the value of a bank's shares and their participation in a government program the banks say was aimed at boosting small-business lending is like comparing apples to oranges.
Similar efforts were made by central banks around the world when private credit markets froze in 2008 and 2009.
"Not only did these measures play an important role in supporting Canadian business during the credit crunch, they also made money for Canadian taxpayers," said Pothier.
The CMHC's purchase of $69 billion in home loans in 2008 and 2009 is expected to net the government $2.5 billion by 2015, according to projections in the 2012 budget.
Pothier said the government laid out its plans to support the banks in a number of public documents, most recently in the 2012 budget.