VERITAS: TOUCHDOWN - GENTLEMAN JIM FLAHERTY

This week's perspective from Joe Chidley:

Something has clearly happened to Jim Flaherty, the tough and once-unlovable federal finance minister who shocked the financial services industry and millions of pensioners three years ago when he announced surprise changes to the tax rules on income trusts —on Halloween, no less. That nightmare is long past. Lately, Flaherty seems to have been replaced with a kinder, gentler avatar — who has a far superior sense of timing big announcements. Consider Flaherty’s Feb. 16 unveiling of new mortgage rules: James Cameron could not have more successfully staged the rollout. These rules had been anticipated for a while now, of course, as speculation among the economic cognoscenti about a housing bubble in Canada mounted, along with the expectation that Flaherty would have to do something about it. The bare fact, on the other hand, is that nobody knows if it’s a bubble or not, and Canada’s robust housing market is one of the bragging points for this government on the international stage (along, of course, with the Best Banking System in the World™). So Flaherty had two messages: Don’t panic, and we’re doing something serious about this thing you shouldn’t be panicking about.
He pulled it off. One way was in the actual changes to the mortgage rules (making some mortgages harder to get, basically), which for the vast majority of homebuyers will be meaningless, but might take some of the air out of any bubble — if one exists, and Flaherty wasn’t saying that it did. In fact, in his news conference the minister emphasized repeatedly that there are no sure signs of a housing bubble, but that the government was changing the rules in order to be “prudent and proactive” (the two P’s of Finance-speak) to make sure homeowners don’t get walloped when higher interest rates arrive. After a rather brief address, he left the answering of detailed questions to his staff — ensuring that the announcement would be off the morning TV news cycle after about five minutes. Overall message: “Nothing to worry about (probably), but we’re on it anyway.”
Unsurprisingly, news media picked up on the two P’s, and didn’t question much whether a) these moves were sufficient or b) these moves were overkill—which seems to be just what the minister wanted. It didn’t hurt that Flaherty’s announcement came on the same morning that the Vanier Institute for the Family released its much-covered annual report on Canadian household finances, which included lots of scary stats about rising debt levels, increasingly frequent missed mortgage payments and credit-card balance nightmares—all of which helped to buttress the minister’s call for prudent, proactive moves. That was either superb timing or unbelievably lucky timing. Either way, it wasn’t the nightmare it could have been.