The selloff begins

The Globe and Mail reports that the Cons may look to use jurisdictional excuses as a basis to privatize the Canada Mortgage and Housing Corporation:

The federal government is quietly testing the waters about privatizing the national housing agency, Canada Mortgage and Housing Corp. — a move that could bring billions of dollars into Ottawa's coffers but would also upset social-housing advocates and possibly cause upheaval in the bond market...

CMHC, a Crown corporation charged with making housing more affordable and accessible, is making about $1-billion a year in profit and is sitting on a $5-billion reserve of retained profits.

Those reserves are expected to rise to $9.5-billion within four years, according to the agency's corporate plan...

(T)he federal government has signalled it wants out of the housing business altogether, arguing that it's a provincial responsibility.

The solution to these pressures, sources say, could be privatization: selling the commercial parts of the agency to the private sector and keeping the social-housing parts of the corporation within government for now.

“Trial balloons are being floated around” and can be traced back to Finance Minister Jim Flaherty's office, one Bay Street source said...

(T)here are several key reasons that privatization of CMHC could well be rejected as a viable option.

For one, capital markets are hooked on the agency's bonds. While proponents of privatization argue that the markets will just have to learn to live with fewer government-backed securities and make do with the ample supply of corporate bonds, there are signs that the Bank of Canada and the federal government wish to keep the government bond market highly liquid.

Plus, there's no guarantee that a sale of CMHC would be as successful as hoped. An auction would have to bring Ottawa a lump sum that more than makes up for CMHC's substantial revenue stream.

Privatizing CMHC would also be politically sensitive. Social-housing advocates fear that government support for affordable housing would get short shrift. “Behind this maze of commercialization, cost-cutting, downloading and competition are some very important questions about social housing,” says Michael Shapcott, a senior fellow at Toronto's Wellesley Institute.

CMHC's president, Karen Kinsley, argues in defence of her agency. About one-third of CMHC's insurance customers are people or organizations that the private-sector — Genworth, for now — won't touch, she said.

It's downright amazing that the current status of the CMHC would be seen as a problem. Surely a Crown corporation which generates profits, offers needed services to more people than would be served by the private sector, and also provides a means to address social issues should be seen as an example to be emulated rather than a flaw to be "fixed" through privatization.

But for the Cons, the prospect of a one-time payout (with its concurrent destruction of a federal government role) is apparently seen as more useful than the ongoing profit stream. And with the profitable side of CMHC thrown out the window and the payout presumably burned on yet more random tax credits, the Cons would be able to cry poverty themselves when needed social housing is brought up as an issue.

It's not clear from the article what type of process would need to be followed to allow for privatization, and it's hard to see why any of the opposition parties would be willing to play along. But if Flaherty is already floating trial balloons even in a minority situation, there can be no doubt that a majority Con government would be quick to sell off the CMHC...and that the next election may be the only chance for Canadians to keep that from happening.