It is not every day a government loses $100 million of taxpayers’ money and says don’t worry, it could be worse -- but the Ontario Liberals are doing this and getting away with it.
Premier Dalton McGuinty and his administration were revealed just before Christmas to have lost the money because, like many others, they invested in risky sub-prime mortgages. These were mortgages foisted by initially low interest rates and high-pressure selling on house buyers in the United States who could not afford to keep them, and lost value when house prices plunged.
The province’s loss has been one of the most under-reported stories in years. Toronto newspapers barely noted it, and then only on their financial pages, but all residents will have to pay for the loss.
It also is a sharp reminder politicians who boast of their prudence and their financial advisers sometimes can be no smarter than the average punter buying a few penny stocks.
Banks, brokerages and other institutions had been reporting huge losses for several months and a reporter naturally asked Finance Minister Dwight Duncan if the province had lost. Duncan then acknowledged Ontario would be forced to ‘write down’ the value of its investment in the mortgages, a more palatable term for admitting a loss, but had not yet determined how much. The Progressive Conservative leader in the legislature, Bob Runciman, asked the next day what the loss would be and Duncan insisted it would be ‘under $100 million’ and the province invested ‘less than 10 per cent of our cash holdings,’ attempting to downplay it. The finance minister said to questions over several days many private institutions, including most of the big banks, had lost more.
McGuinty, when questioned, took the tack hundreds and probably thousands of companies who invested lost money. He said the government’s experts on investing had recommended other investments that were profitable and in this case ‘did use good judgment, but something happened they didn’t anticipate.’ McGuinty at least offered a sort of apology, although offered no specific new safeguards to prevent future losses, by saying ‘we will do our very best to ensure it does not happen again.’
Both refused to order an investigation by the auditor general, who has shown some independence in assessing government spending.
The government has not answered some key concerns. A government should not be placing hard-earned taxpayers’ money in risky investments, although some private investors are willing to take large risks in hopes of windfall gains. A steep decline in U.S. house prices had been predicted in Canadian news media for at least a year and no-one needed to have been a financial expert to expect this. The Ontario government should have sold up and got out and let the private investors hang in if they wanted.
Many senior executives in banks and other financial institutions in the U.S. and Canada also have been fired from their jobs because they failed to protect investors from sub-prime losses. But those responsible for the loss to Ontario taxpayers still sit in their cozy offices around the legislature contemplating where they will next misdirect taxpayers’ money — shouldn’t someone be made to pay a penalty?
Eric Dowd is a veteran member of the Queen’s Park press gallery.
