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From the Financial Times:

"Canada tightened mortgage lending rules yesterday with the aim of damping a housing boom fueled by low interest rates and fast-rising consumer debt.

"Jim Flaherty, finance minister, played down concerns that the surge in home prices had the makings of an unsustainable bubble, saying the market was healthy and stable."

When do you think that article was written? Was it in 2006, as the American housing bubble was getting ready to pop?

Actually, it was written last month. A 10-hour drive north from here is a land where banks are healthy and lending, unemployment is 8.2 percent and home prices rose 19 percent last year.

In St. Louis, housing prices were up 1.5 percent for the year ending in December, the first monthly rise after nine months of year-over-year declines, according to First American CoreLogic. Local consumers, scared by the area's 9.8 percent unemployment rate in January, are hunkered down and pinching pennies.

What's the difference between up there and down here? Mainly, it's that Canada got banking and financial regulation right, while we made a mess of it.

But there's also a real cultural difference, say people who know both countries. Canadians, according to the stereotype, are very nice and very dull. It turns out they're also very level-headed. Cowboy risk-taking is not in their northern blood.

"There's been much greater conservatism in Canadian lending practices over the years," says Doug Smith, a Canadian-American and professor of management at the University of Missouri-St. Louis. "As a culture, individuals are not nearly so oriented toward taking on large debt."

As a result, Canadian banks came through the recession healthy and ready to lend. There was no big bailout or rash of bank failures up north.

American banking is crazily competitive, with thousands of banks battling for business block by block. Canada is a banking oligopoly, with six big banks holding 90 percent of the business.

In some ways, oligopoly is bad for consumers.

"It means you pay more for service, more in fees, which is irritating," Smith says. "It's less consumer-friendly."

But the limited competition means that no bank is tempted to chop lending standards to bring in business.

"We never saw banks do the wild kind of lending," says Craig Fehr, an analyst at Edward Jones who follows Canadian and American banks.

Mortgage securitization never really caught on in Canada — which is one reason it avoided a housing price bubble and the subprime mortgage disaster. Canada has no Fannie Mae or Freddie Mac, which buy up mortgages from lenders, package them into securities and sell them to investors.

During the subprime mortgage boom, many American investment banks also got into the securitization business. The ability to pass off shaky loans to the next sucker led to shaky mortgages being made to people with limited ability to pay.

By contrast, Canadian lenders generally hold on to the mortgage loans they make. As a result, they make good ones. "They have a vested interest in getting paid back," Fehr says.

In 2006, when the American housing bubble was building, more than 20 percent of American mortgages were subprime. The figure in Canada was about 5 percent.

Canadian banks want a government guarantee for mortgages with less than a 20 percent down payment, and the government set high standards for its guarantees.

'We went amok'

In contrast, the Federal Reserve, which has the power to regulate mortgage lending, sat on its hands while American banks went bonkers.

"We went amok here. We were utterly irresponsible," Smith says.

Capital requirements for banks are higher up north. Canada also has a more centralized, encompassing system of government regulation for banks, investment banks and insurers.

American regulation is a mishmash of five federal agencies and more than 50 state ones, operating with different levels of zealousness. That's how AIG could run wild, running up billions in risky bets with no particular regulator paying much attention. That's less likely in Canada.

When the American housing bubble burst, Canadian prices dipped slightly, then started to rise again. Now, the Canadian government thinks they may be rising too fast and is moving to cool the market.

America can't duplicate the Canadian system: We're not going to merge thousands of banks into six. But there are some lessons to be learned.

One is that lenders should be forced to retain some liability for the loans they make, rather than simply passing them on. That's contained in some banking reform proposals now in Congress. "You want the lenders to have more skin in the game," Fehr says.

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