Ottawa had a few levers to try to cushion the drop. The real estate market was one of them. Mr. Flaherty and his mandarins realized that CMHC could play a useful role. By using its balance sheet, it could ensure that banks had the money so they would keep lending during the crisis.
So in early October – the week before his new mortgage rules took effect – Mr. Flaherty placed a call to a high-ranking CMHC official to deliver a command. The Crown corporation would need to start buying tens of billions of dollars in mortgages from Canada’s banks, giving those banks cash to make new loans.
Under those orders, CMHC bought $69-billion worth of mortgages. It was a strategic move by the government: The banks continued to lend, Canadians continued to borrow, and after a short downturn, housing prices began to snap back in early 2009, helping to lead the country out of recession.