And now this. Note the article suggest that the $800mm quiet bailout might not be the end, either.
In any other province a government throwing money around like that might create a some waves. Not in Alberta though.
Cracks show in people's bank
Finance minister fumes over investment woes of Alberta Treasury Branch
Tuesday, November 27 2007
By NEIL WAUGH, EDMONTON SUN
ATB Financial's CEO Dave Mowat calls it a "major bump in the road."
Alberta Finance Minister Lyle Oberg - who should be Mowat's boss, but isn't allowed to be under some goofy Alberta Tory legislation - is a little less optimistic.
He branded the $1.2-billion hole in the government-owned financial institution's books revealed this week as a "liquidity crisis".
And as such, Alberta finance has quietly pumped in $800 million to paper over the cracks in the people's bank, which is a holdover from the old Social Credit funny money days.
While Mowat insists the provincial government "has full confidence in ATB's board of directors and management," it's pretty clear that Oberg is not a happy camper.
Especially when he confessed how Alberta Treasury Branches brass got themselves into such a mess with our money by investing in dubious financial instruments called "asset-backed commercial paper."
"This is all part of the subprime," Oberg said about the U.S. real estate crash and the financial meltdown it's creating in its wake.
"It's wrapped up in the commercial paper."
And while management told Oberg that the junk paper, which presently has no market, is "some of the best," ATB is part of a group called the Montreal Accord that has agreed to a "standstill period" until Dec. 14 while they try to figure out what to do with the stuff.
"I questioned them significantly exactly where they are at," Oberg said after ATB took a $79.6 million write-down, which Mowat described as a "serious financial event."
"I don't want them coming back and saying we've had to do another write-down."
IS HE LOW-BALLING?
Even though the depositors' losses that ATB are admitting to so far are only 6.9%, Oberg fears Mowat may be low-balling the red ink after some Canadian banks made provision for write-offs of 25%.
"We have a relatively clean set of holdings," the ATB report insisted. Which are "almost entirely free" of subprime content.
Instead, Mowat and his Tory-appointed board sunk the peoples' money into "third-party" paper for car loans, credit card receivables and credit default swaps.
Now that's blue chip.
And ATB brass admitted they did it because the paper had the "added benefit" of higher returns than bank-backed commercial paper.
I wonder why?
"I wouldn't say I was alarmed," Oberg winced. "But I was surprised."
And then there's the Alberta Treasury Branches' own "principle of diversification."
Mowat's question-and-answer discussion admits that would "contradict investment advice ATB would give to its own clients."
That's considering that "a third of ATB's liquid assets" are tied up in this fiasco.
"What was not anticipated was that the entire market for ABCP (asset-backed commercial paper) would cease trading," the ATB document sputtered.
Of course, ATB is also about to take an unspecified financial bath in the Ranchers Beef collapse, which was propped up with $100 million in loans, mostly from government agencies, in what former president Tony Martinez described as a "government policy."
'AN EXCELLENT YEAR'
"ATB Financial continues to have an excellent year," Mowat blustered in his second quarter financial report.
Alberta NDP leader Brian Mason isn't about to take the CEO's word for it.
Mason spat, "It smells like we've got a number of problems coming home to roost.
"As a result of the patronage appointments of the Conservatives to the board exposed the ATB very substantially."
"There's maybe over a billion dollars of exposure here," he continued.
"I think it would be worthwhile for the auditor general to take a look at this situation."
Mason described the ATB as a "wonderful organization."
But he reminded Oberg: "It was built with the hard work and sweat of Albertans, not by Tory patronage appointments.
"People put their hard-earned money into the treasury branch," he continued.
"Like any financial institution, they deserve the very best stewardship of that money.
"I would like to have a second opinion," Mason winked.
It's time for Alberta's favourite fireman - Auditor General Fred "Get 'er" Dunn - to pay a little visit to the ATB Tower.
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