I'd like to thank the committee for inviting me. I'd also like to thank Mr. Pagé and his able staff for supporting me at the last minute with translation.
I am the MBA program director at the Sprott School of Business. However, throughout the seventies and early eighties I was the loan manager, mortgage manager, and commercial credit officer directly across the street from the West Block in the Bank of Montreal building. It was the fourth largest branch of the Bank of Montreal. At the time, we had $200 million in mortgages. I lent millions of dollars in conventional and high-ratio mortgages across this city.
The PowerPoint presentation that I'm going to give is based on an article I have almost completed and have partially presented at a couple of academic conferences.
Before I go into the proposals I'm going to recommend today, I really want to give you their context.
I am arguing in this article that the housing bubble, housing collapse, and financial crisis were due to a government and policy failure in the U.S. Congress. The Congress micro-managed the banks, but did not provide oversight and supervision. They refused to regulate the shadow banking system, and as a consequence, I'm arguing—and I don't know anyone else who has made this argument—commercial banks, populated by highly intelligent people, understood they were being forced by Fannie Mae and Freddie Mac to make a lot of bad mortgages. So they used securitization to dump those junk mortgages on other people to get the mortgages off their books. This lead to the housing bubble and collapse and the financial crisis. There is massive empirical documentation for this.
Most of my slides are graphs, so I can go quite quickly.
This slide shows the percentage of low-documentation or no-documentation mortgages. You can see that by 2005, 2006, and 2007, over half of all mortgages in the United States of America were low-doc or no-doc ones, popularly called NINJA mortgages: no income, no job, no assets.