The Globe and Mail Drops the Ball on Subprime

Last night I was surfing through Twitter and one tweet caught my eye. Mostly it was because it was in ALL CAPS which annoys me to no end, but the word ‘canada’ made me mildly curious.

The title of the article is “Canada’s dirty subprime secret” and while I was considering a subscription before, this is making me rethink my decision. If I had one, I’d be contemplating canceling my subscription, because they’re writing stories to drum up subscriptions and traffic to their site, and not reporting the news.

The biggest reason they’re jumping at shadows (and by doing so, are having a bigger impact on the economy than the issue they’re pretending to be investigating) is the numbers alone have no meaning. It’s only in the context of the North American and Global market that we can see what impact might be expected.

They do make an effort to cite Benjamin Tal, whose name has made an appearance here before. I’m not surprised that he declined to be interviewed for this article though.

In 2006, Mr. Tal estimated more than 85,000 Canadian homeowners had subprime loans.

When you put that in to perspective, there were  1.8 million homes in 2006. That’s 4.7% of loans…compared to 61% in the US. I don’t care how you try to cook those numbers, they’re not even in the same ballpark.

The Globe and Mail appear to be pretty good at finding individuals with sad stories, or isolated cases of sub-par lending practices, but a handful of people does not make for a crisis. Shame on you Geg and Jackie. You’re inciting panic when there’s nothing to panic about.

I think that Stephen Gordon is probably right….

I can’t understand how this non-story became the main item of a Saturday edition of Canada’s Newspaper of Record. Now that I’ve wasted a perfectly good Saturday morning, I’m in a sufficiently snarky mood to suggest that the Globe has succumbed to a nasty case of Headline Envy. “Look at all these eye-catching stories coming out of the US! We wants them, we wants them, we must have them!”

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  • Quote ” because they’re writing stories to drum up subscriptions and traffic to their site, and not reporting the news.”

    Another banters about the term depression like in the dirty 30’s

    Lets really scare people into running to hide in the mountains, They won’t need tv, Magazines, Newspapers, internet, houses, or even electricity.

    This is reckless journalism at its best.

    Shame on you, Media.

  • Chris,

    That 61% figure is not toal outstanding US mortgages

    “The proportion of subprime ARM loans made to people with credit scores high enough to qualify for conventional mortgages with better terms increased from 41% in 2000 to 61% by 2006.”

    Subprime only made up 6.8% of total outstanding mortgages in the US

    “The value of USA subprime mortgages was estimated at $1.3 trillion as of March 2007, [11] with over 7.5 million first-lien subprime mortgages outstanding.[12] Between 2004-2006 the share of subprime mortgages relative to total originations ranged from 18%-21%, versus less than 10% in 2001-2003 and during 2007.[13][14] In the third quarter of 2007, subprime ARMs making up only 6.8% of USA mortgages outstanding also accounted for 43% of the foreclosures which began during that quarter.[15] By October 2007, approximately 16% of subprime adjustable rate mortgages (ARM) were either 90-days delinquent or the lender had begun foreclosure proceedings, roughly triple the rate of 2005.[16] By January 2008, the delinquency rate had risen to 21%.[17] and by May 2008 it was 25%.[18]”