What Makes Canada Different?

Here is a post by Meghan McArdle that tries to pin down the ineffable...

Canada is one of the few countries without a major banking crisis. Weirdly, this was also true in 1930. I've seen this list of the success factors for Canadian banks in several places. I want to believe it, but . . .

..it doesn't seem to be as simple as "Canadian banks are more tightly-regulated".


1. We never had restrictions on interstate banking, so Canadian banks spread their assets and liabilities across Canada. (So it doesn't matter if a local housing market goes bust).

2. We don't have Glass-Steagal. The investment banks joined the retail banks some years ago.

3. We don't have mortgage interest deductibility from taxes. So paying down your mortgage is a tax-free investment. So most people want to pay down their mortgages.

4. (Except in Alberta), mortgages are fully recourse. You can't just walk away from a negative equity home and hand the keys to the bank; the bank will come after you for the difference.

I wouldn't describe those differences as "Canada is more regulated".

But we do have higher capital requirements. And mortgages over 80% must be insured (mostly by the government-owned CMHC).

I dunno... seems like a good guess to me.