WHO’S BANKING ON CARNEY?
“It is true, we have the only banks in the western world that are not looking at bailouts or anything like that.” Stephen Harper, Canadian Prime Minister, 23rd February 2009.1
Mark Carney’s appointment as the new Governor of the Bank of England (BOE) was, we have been told, based mainly on how successful he has been as the Governor of the Bank of Canada (Canada’s central bank). He had navigated the Canadian economy through the choppy waters of the financial crisis and central to his success has been the claim that no Canadian banks had needed to be bailed out.
This is disputed in a report by the Canadian Centre for Policy Alternatives.2. It states that during the period October 2008 to July 2010, all the main Canadian banks were bailed out by the Bank of Canada, the US Federal Reserve and the Canadian Mortgage and Housing Corporation (CMHC, the Canadian Government’s Housing Agency) The CMHC did not technically ‘lend’ to the Canadian banks, but bought a total of 69 billion Canadian Dollars worth of mortgages from the banks.
The lending peaked in March 2009, when the total lent to the Canadian Banks was 114 billion Canadian Dollars. This represented 7% of the Canadian economy in 2009, and was the equivalent of 3,400 Canadian Dollars for every man, woman and child in Canada. The Canadian Imperial Bank of Commerce (CIBC), the Bank of Montreal (BOM) and Scotiabank all received financial support in excess of their stock market valuation. In plain English – they were bust, and were bailed out.
At the time, the Canadian Government and the Bank of Canada described the CMHC mortgage purchase as “Providing liquidity to the Canadian Banking System”2. In other words, if it sounds like a bail-out, smells like a bail-out and looks like a bail-out, then it probably is a bail-out!!
Policy Alternatives2 (page 7) points out that: “A healthy and resilient banking sector cannot be based on secrecy; it must be based on transparency and a willingness to learn from the past. Details of Canada’s massive support from 2008 to 2010 should to be released by CMHC and the Bank of Canada in the name of transparency and accountability.”
The Policy Alternatives report was published on 30th April 2012, while Carney was still Governor of the Bank of Canada. The Canadian Broadcasting Corporation and other Canadian media covered the report, but there was precious little media coverage in the UK, even after Carney began to be touted as the next Governor of the Bank of England.
Any ordinary punter charged with appointing a new governor for the Bank of England would surely make a quick search of the Internet, to assure themselves that Mark Carney was an honest Canadian citizen, with nothing to hide. There, they would have found the Policy Alternatives report, which offers a thoroughly-researched account that shows a vastly different picture than the one painted by the British media and the British establishment.
When questioned by the Treasury Select Committee on 7th February 20134, Carney supported transparency on a number of occasions. But it is obvious that transparency was bottom of his priorities while he was in charge of the Bank of Canada. It appears that Carney was involved in covering up the bail-out of the Canadian banks and, if this is true, he should never have been appointed as the Governor of the Bank of England. If his defence is that he didn’t know about the bail-out, then he shouldn’t even be left in charge of a piggy bank!!
So who is at fault here, and why? Is the British government totally incompetent, or does Carney’s appointment mean there is another agenda? Could Carney’s real brief be to create an economic boom that allows the Tories to win the 2015 general election, and to hell with the consequences?
1CNBC, Interview on the Kudlow Report, February 23rd, 2009. http://video.cnbc.com/ gallery/?video=1043703424