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Friday, 10 October 2008

Credit crisis hits Canada

By Rob Gillies, Associated Press Writer
Canadian finance minister looking for ways to keep credit flowing

TORONTO (AP) -- The global credit crisis is starting to restrict the ability of Canadians to obtain loans for mortgages, cars and investments, Canada's finance minister said Thursday.

Finance Minister Jim Flaherty said he is looking to increase liquidity in the market but declined to release details.

In an indication of the uncertainty in the markets, Canada's private banks declined to pass on to consumers the full half percentage point cut in interest rates announced by central banks around the world.

The banks cut interest a quarter of a point instead, the first time since the Asian financial crisis in 1997 that they haven't followed what Canada's central bank has done.

Flaherty pointed out that Australia's banks only passed along 80 of the 100 basis point cut their central bank made this week.

"What I've said to the banks is do as much as possible in the present circumstances," Flaherty said.

Flaherty said they are not looking at a rescue package or bailout of the Canadian banks. He said he has "absolutely no concern about the health of our Canadian financial institutions. I have concerns about the availability of credit."

Flaherty called the news conference in advance of his meetings with other G7 ministers in Washington -- meetings he called the most important he's attended since becoming finance minister.

"We have to ensure that credit continues to be available," Flaherty said. "I'm concerned about that. I know many Canadians are because it affects the costs of mortgages, it affects the costs of car loans, it affects loans to small business, the ability of business to invest and reinvest."

Prime Minister Stephen Harper has maintained that Canada will avoid the mortgage meltdown and banking crisis that are hitting the United States and Europe hard.

Harper's Conservative party has been sliding in the polls since he said during an election debate last week that Canadians weren't concerned about their jobs or their mortgages.

Harper said Tuesday the stock market was overreacting to bad news and that stocks were cheap.

The prime minister called early elections for Oct. 14 in hopes his party can increase its numbers in the 308-seat Parliament.

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