Today, the Honourable Jim Flaherty, Canadian Minister of Finance, announced that the Government of Canada has "[a]greed to partner with the governments of Quebec and Ontario in the provision of a senior funding facility to support a restructuring of non-bank asset backed commercial paper." The creation of the funding facility stems from the Canadian Government's support of the Montreal Accord restructuring plan for non-bank sponsored asset-backed commercial paper (ABCP), originally developed in late 2007 following a liquidity disruption in the Canadian ABCP market, whereby various investors and issuers of ABCP and liquidity provider banks, agreed to, among other things: (i) a 60 day standstill agreement effectively freezing any trading in ABCP; and (ii) that all affected ABCP (worth approximately C$32 billion) would be restructured and converted to long-term floating notes. As a result of several objections to the restructuring plan by retail ABCP investors, the standstill agreement was subject to numerous extensions, however the Ontario Superior Court of Justice finally approved the restructuring plan on June 5, 2008.
With the provision of the ABCP funding facility, the Canadian government continues to focus on and implement various domestic measures in response to the global financial crisis, including among other actions, the recent creation of the temporary Canadian Lenders Assurance Facility to provide insurance on wholesale term borrowings by federally regulated deposit-taking institutions, as well as the development of the program to purchase insured mortgage pools from Canadian lenders through the Canada Mortgage and Housing Corporation. Yesterday, the Canadian Minister of Finance also announced the establishment of an Economic Advisory Council, composed of various Canadian business and academic leaders who will provide advice to the Government on the 2009 Canadian budget and "on an ongoing basis afterward," and periodically advice on various other economic matters. The establishment of the Council follows Wednesday's meetings in Saskatoon, of Canadian provincial and territorial Finance Ministers which included discussions involving matters related to:
- accelerating infrastructure investments;
- strengthening financial market regulation;
- improving competitiveness; and
- ensuring labour market preparedness and flexibility.
The meetings were "[g]uided by the understanding that Finance Ministers have a responsibility to work together in common purpose to support our economy against the unprecedented financial turbulence sweeping the globe," and that "[p]rovincial and territorial governments are facing many of the same challenges as the federal government."
Separately, the Honourable Tony Clement, Canadian Minister of Industry, described last week during a speech to the Brampton, Ontario Board of Trade, the importance and "integrated nature" of the Canadian and North American auto industries, stating that "[a]ny potential action taken by our government takes into account U.S. government aid for the industry." Mr. Clement went on to state that his officials are "[c]urrently reviewing the restructuring plans of the Detroit Three to ensure that they contain solutions that sustain the industry in Canada," and stressed that "We will not let our Canadian automotive industry be left behind." "However, we have to do what is in our best interest, and that means no blank cheques." Mr. Clement also briefly outlined an automotive strategy to ensure that Canada remains well positioned by focusing on:
- sustaining sound fiscal and economic policies;
- supporting integration of the North American auto sector;
- investing in research and development; and
- creating the Automotive Innovation Fund to support strategic, large-scale research and development projects to build innovative, greener and more fuel-efficient vehicles.
Prior to today's White House announcement that the Bush administration will provide aid to the automakers, it had been reported in various news sources that the Canadian federal government and Ontario had reached a deal to offer proportional funds to Canada's auto industry amounting to approximately 20 per cent of any U.S. proposal, a number that would match the Canadian subsidiaries' share of their parent companies' annual North American vehicle production. A formal announcement of any specific aid package from the Canadian Government to the Canadian auto industry is expected sometime over the weekend.