The CEO Poll: The ABCP debacle
Joe Castaldo
Canadian Business Online
April 17, 2008
There are an estimated 1,800 holders of frozen non-bank asset-backed commercial paper in Canada, and while much of the discussion revolves around just how much money these holders will get back from the now toxic investment, the issue raises further concerns about securities regulation. At the same time, Canada has a vital need for more oversight. That’s the opinion of 114 leaders of Canadian businesses who participated in a recent web poll conducted by COMPAS Inc.
The respondents recognized there will always be poor investments and buyers should be cautious. However, they were also in favour of more oversight, particularly when it comes to potential conflicts of interest between rating agencies and their customers, in order to prevent dubious investments from being mischaracterized as safe.
“Let’s punish those financial advisers who sold this stuff ‘as good as GICs,’” wrote one respondent. “It floors me that creative finance people can continue to create ‘new’ investment vehicles that are ridiculous and people continue to buy them, the perpetrators get away unscathed to make money again instead of being shunned, and the public has to pay the price for stabilizing the market.”
The majority of the CEOs also felt that given the fallout surrounding the ABCP fiasco, now is an appropriate time for the federal government to create a national securities regulator and empower it to oversee all aspects of banking, including the so-called shadow banking sector. The respondents were divided, however, on whether a national securities regulator could really have done much to prevent the debacle in the ABCP market. Many felt the sub-prime mortgage crisis was bound to spill over into Canada.
One respondent pointed to the failure of the U.S. Securities and Exchange Commission to prevent the crisis in the States as proof of the ineffectiveness of regulators. “To suggest a national regulator can save foolish investors from making bad decisions and aggressive financial people from making the most of an opportunity would be foolish, too,” the CEO wrote. “Macro economies are at play here, and as the money supply shrinks, the ride is going to be bumpy."
These are the key findings from the current web-survey of the panel of CEOs and business leaders undertaken for Canadian Business under sponsorship of BDO Dunwoody LLP.
To view complete results and additional polls, please click here.
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