Sunday Morning Links

This and that for your Sunday reading.

- Scott Sinclair discusses how CETA could create extreme and unnecessary risk in Canada's banking and financial system:

The failure of a single company (such as Lehman Brothers in October 2008) or unchecked growth in markets for high-risk financial products (such as sub-prime mortgages) can quickly cascade out of control, threatening the integrity of the entire system. Especially during a crisis, financial regulators need to act decisively, without worrying about expensive lawsuits from disgruntled foreign investors. But that’s precisely the toxic ingredient the CETA negotiations have introduced into the mix.

The EU insists that foreign investors must have unimpeded rights to challenge banking and other financial regulations through investor-state dispute settlement. The Canadian Department of Finance is arguing that financial sector regulation is of such critical importance to the economy that regulatory measures must be shielded from direct challenge by foreign investors.

Negotiators reportedly are at an impasse and this issue is now on the list to be resolved by politicians. Given the intense pressure to close a deal, politicians could overrule Finance officials and undermine the ability of regulators to avert or stem future financial crises.
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Ironically, Europeans are learning the folly of this approach the hard way. Foreign investors have turned to investor-state arbitration to try to recover losses from Europe’s seemingly interminable financial crisis. In the first investor-state case ever by a Chinese mainland investor, a Chinese financial services company is suing Belgium under a 2005 Belgium-China investment protection treaty. Ping An, the largest single shareholder in the Belgian-Dutch bank Fortis, allegedly lost $2.3 billion USD when government authorities, who stepped in to rescue the financial giant, subsequently sold off assets over the objections of minority shareholders. Foreign investors have also filed investor-state claims against both Greece and Cyprus to recover losses incurred under financial restructuring programs.

While the risk of an investor-state dispute is highest during a crisis, under Europe’s proposed CETA approach, more routine financial regulations could also be vulnerable. For example, the Canadian government has tightened mortgage regulations four times since 2008. Canadian officials have publicly confirmed that these are just the sort of regulations that the Europeans want to see exposed to challenge.

- And Matt Taibbi exposes the dirty truth behind the ratings agencies whose word has been relied upon as the basis for far too many economic decisions:

Ratings agencies are the glue that ostensibly holds the entire financial industry together. These gigantic companies – also known as Nationally Recognized Statistical Rating Organizations, or NRSROs – have teams of examiners who analyze companies, cities, towns, countries, mortgage borrowers, anybody or anything that takes on debt or creates an investment vehicle.

Their primary function is to help define what's safe to buy, and what isn't. A triple-A rating is to the financial world what the USDA seal of approval is to a meat-eater, or virginity is to a Catholic. It's supposed to be sacrosanct, inviolable: According to Moody's own reports, AAA investments "should survive the equivalent of the U.S. Great Depression."

It's not a stretch to say the whole financial industry revolves around the compass point of the absolutely safe AAA rating. But the financial crisis happened because AAA ratings stopped being something that had to be earned and turned into something that could be paid for.

- Mike de Souza reports on the latest revelations about the Cons using public money to do PR work for the oil sector - explicitly working to "support" the Northern Gateway pipeline even as they claim to be carrying out an unbiased regulatory process. But Barbara Yaffe notes that British Columbians aren't buying the spin - and yet another Enbridge spill won't do much to help the impression that the Cons' oil-industry funders are far more concerned with papering over serious concerns about health and the environment than actually operating safely. 

- Meanwhile, in the department of policies the public actually wants to see Canada's government working on, Steve Morgan discusses EKOS' polling showing 78% popular support for public funding for needed prescription drugs:

Canadians have good reasons to want such reform. Every developed country with a universal healthcare system provides universal coverage of prescription drugs… except Canada.

Drug coverage is provided in all comparable healthcare systems because, when prescribed and used appropriately, prescription drugs can be among the most cost-effective forms of providing healthcare. The architects of these other systems know that charging patients for prescriptions will impede the use of essential medicines – which can cost the healthcare system in other ways, such as increased hospitalizations.

In Canada, many patients cannot afford to take medicines prescribed by their doctors. The recent poll by EKOS suggests that, in the past five years, about one in five Canadians (23%) have chosen not to fill a prescription because of out-of-pocket costs. That’s a lot of missed prescriptions.

Such access problems are prevented when medically necessary prescriptions are covered as part of the healthcare system. Countries with such access – every other developed country with universal healthcare – also spend considerably less on pharmaceuticals than Canada does. This is because healthcare systems that purchase medicines on behalf of entire populations have significant bargaining power in price negotiations with drug manufacturers.

- Finally, Andrew Coyne offers a handy guide to the rights and wrongs involved in Justin Trudeau's massive speaking fees and the Cons' publicly-funded response.