Cohen Praises Canada's Banks

Globe and Mail- 20th October, 2010
By Jeff Page
The man widely regarded as Wall Street’s No. 1 lawyer has nothing but praise for Canada’s banks and financial watchdogs for their deft avoidance of the meltdown that hit the United States. And he says the United States, as it seeks to reform its ailing mortgage institutions – Fannie Mae and Freddie Mac – should look north for advice.
“Luck always plays a role, but you also make your luck,” Rodgin Cohen said Tuesday at a Toronto breakfast speech of Canada’s performance. “I think there was good management. There was a good regulatory system.”
It was of course the collapse of the U.S. housing market that started the financial crisis. But if Canada’s mortgage regime had been in place in the U.S., much of the 2008 financial meltdown would have been avoided, Mr. Cohen said, praising the prudence of Canada’s shorter mortgages, and other stricter rules.
“Had we had the Canadian mortgage system, we never would have a had a serious problem,” he said during a question and answer session at a private breakfast with mostly Bay Street lawyers.
Mr. Cohen also said that U.S. financial reforms could diminish Wall Street and push some risky behaviour – such as trading in hard-to-understand derivatives – into Canada and other financial centres or worse, back into the United States’ unregulated “shadow banking system” of hedge funds and investment banks.
“If they can’t engage in transactions in the United States, they’re going to engage in transactions elsewhere,” he said. “And notwithstanding the penchant of the U.S. [financial regulators] for extra-territorial reach, it’s going to be hard to reach in to London, Singapore or for that matter, Toronto.”
Asked by a reporter if the constant refrain by Canadian officials that the country avoided the mistakes of Wall Street sounded smug, Mr. Cohen said Canada shouldn’t be shy about boasting of its success: “Smugness is never a good idea. But I don’t think pride is always a bad idea. And I think the Canadian banks and Canadian regulators have a right to be proud of what they avoided.”

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