As Washington works to bail out firms laden with bad debts, discussions begin on preventing a recurrence.
Some Canadians are feeling a bit smug about their nation's relative economic calm – there's no housing bubble bursting or financial giants failing, and the Canadian dollar is strong.
But the financial mess in the United States has caught the attention of our neighbors to the north. "Canadians are terrified that the US mortgage malaise will cross the border," notes Fred Langan, host of CBC's Newsworld Business News, a cable show in Toronto.
Their fear is probably unjustified. Canada's home-mortgage system differs widely from the US system. Its banks are well-regulated and far less troubled by risky mortgage-backed securities.
Those securities were the primary reason for the dramatic negotiations in Washington last week between the Bush Administration and Congress over a gigantic $700 billion bailout proposal. That money would buy up broken mortgage-backed securities and hopefully thaw frozen US credit markets. Without available credit, the US economy could plunge to greater depths.
Such a major recession would be a real concern for Canadians. The US is Canada's biggest customer. For one thing, Ontario factories make a lot of cars sold south of the border.
Because the US financial crisis is often blamed on the current mortgage-financing system, there is already talk, beyond the rescue package, of reforming the system to prevent a future crisis.
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