OTTAWA – Whether as a rising star on the world stage or a central banker under scrutiny amid suggestions of political impropriety at home, it was hard to ignore Mark Carney in 2012.
Canada’s omnipresent Bank of Canada governor was constantly making headlines.
If he wasn’t hectoring households for not saving enough, he was blasting business leaders for saving too much, or weighing in on the contentious issue of whether Canada’s economy was showing symptoms of Dutch disease.
As well, he continued to press global financial institutions to reform in the wake of the carnage they caused in triggering the crisis of 2008, warning that as head of the Swiss-based Financial Stability Board he intends to use all his powers to make sure they do.
And then there was that head-turning job switch — the first non-Brit to be named governor of the Bank of England in the storied institution’s 318-year history. The Chancellor of the Exchequer George Osborne called the Canadian the “outstanding central banker of his generation.”
Even admirers back home wondered if Mark Carney was worth such adulation.
Recent revelations that he may have entertained thoughts of dumping one of the more exalted and non-partisan public offices to jump into the ring as a Liberal leadership contestant have elicited a different kind of head-turning, and raised questions about his judgment.
Even before that recent media splash, the central banker was the clear choice in the annual survey of editors and broadcasters for The Canadian Press Business Newsmaker of the Year.
The governor pulled in 59 per cent of votes, compared to Finance Minister Jim Flaherty’s eight, and nine for Pierre Duhaime, the disgraced former head of SNC-Lavalin. Second spot, at 17 per cent of the votes, wasn’t even a person, per se. It went to “The Canadian in Debt.”
“Canada’s top exports: Lumber, oil, water, wheat, and Mark Carney,” explained Rick Hughes, business editor of the Hamilton Spectator, for his choice.
“His role as bank governor is noted for his good counsel and stability, and Britain’s banking system will be well-served under his leadership. He offers the best that Canada’s develops: stability, democracy, and one other thing … he’s a hockey player.”
While Daniel Tencer, business editor at The Huffington Post Canada, opined that “Carney’s contribution to Canada’s relatively strong economic performance in recent years is probably overblown,” he was nevertheless compelled to cast his vote for the central banker.
“It’s so rare for a central bank governor (especially a Canadian one) to become an international household name that that alone makes Carney’s ‘achievement’ significant.”
And Richard Dettman of Vancouver’s CKWX News1130 saw the honour as one rightfully shared with Carney and the fiscal and monetary policies of the Bank of Canada and the federal Finance Department.
The annual survey also named personal debt as the top Business Story of 2012 — not surprising in a year when the household-debt-to-income ratio rose to a record high of 164.6 per cent.
While personal debt garnered 24 per cent of the vote, CNOOC buying Calgary’s Nexen for $15.1 billion came in at a close 20, and Research In Motion’s bumpy ride to releasing the BlackBerry 10 operating system and devices in January garnered 19 per cent.
Carney, for his part, kept personal debt in the headlines with his repeated warnings to Canadians that cheap money won’t last forever — interest rates will eventually rise.
The shine surrounding Carney throughout 2012 was at threat of being tarnished, however, with the late year surfacing of tales of political courtship.
Carney was cleared of conflict of interest in accepting to stay at Liberal finance critic Scott Brison’s Nova Scotia summer house, by the bank’s own general counsel. But he has more than disappointed — in some cases angered — senior people in the Harper government.
The silence from Flaherty, who had called Carney “my friend” in November during the Bank of England announcement, spoke volumes.
Given repeated chances to defend the man he hand-picked in 2008 for one of the country’s most exalted public offices, Flaherty held his tongue. “I have no comment on any of that,” he told reporters, more than once, “and I usually have comments on everything.”
Some in London also are wondering if they got the man they bargained for.
“He’ll have to be far more careful over here — no riding with (Prime Minister David) Cameron or skiing with Osborne,” Liberal Democrat treasury spokesman Matthew Oakeshott told British media. Others said Carney would get a rough ride on Feb. 7 at the parliamentary confirmation hearings.
Many bank watchers believe the Teflon coat that Carney has worn since becoming governor in February of 2008 has been dented, if not pierced.
Carney may not have technically crossed the line, but, “here’s a case where, in my view, there’s a clear apparent conflict of interest,” said Mike Moffatt, assistant professor at the University of Western Ontario’s Richard Ivey School of Business.
He notes that Carney delivered a much-publicized dismantling of the Dutch disease diagnosis favoured by NDP Leader Tom Mulcair, who had cited Alberta’s oil boom and subsequent appreciation of the Canadian dollar for much of the troubles experienced by manufacturers in central Canada.
The speech was delivered on Sept. 7, at the time Carney was being wooed by the Liberals.
“We’re now having to look at monetary policy and the speeches he makes through a political lens. That’s a question you never want to ask about the Bank of Canada, they should be above politics.”
Carney retains many high-powered supporters, including Roger Martin, dean of the Rotman School of Management at the University of Toronto, and Glen Hodgson, senior vice-president of the Conference Board of Canada.
Hodgson believes Carney should be ranked along with Ben Bernanke of the U.S. Federal Reserve and Mario Draghi, the head of the European Central Bank, among the best examples of central bankers.
“(These) central bankers were essentially the heroes of the recession,” he said. “Mark stepping in, unlocking the whole commercial paper market was an example of where he had a really sharp pencil.”
Martin says he was an admirer of Carney’s predecessor David Dodge and believes the current governor has performed as admirably under more difficult circumstances.
“David Dodge wasn’t put in the really nasty situation that Mark Carney was, so you don’t know what he would have done. (But) Carney was and he acted in a way people would say in retrospect was pretty exemplary — he was firm, acted rather than hoped things would be fine, and Canada has fared quite well.”
Martin hasn’t reappraised Carney since the controversy, and says there is no need to.
That Liberal operatives should have courted Carney for the leadership is an indication that he is “good,” he said. “We don’t know whether he was serious at all or merely pleasant in saying you can talk to me.”
For his part, Carney has said he has been courted by other parties as well, and did not actively pursue the offers.
One reason such issues have arisen with Carney, says Martin, is that he is extremely young for a central banker — 47 — and expects to have an active career after leaving the Bank of Canada, or now the Bank of England. For most of his older predecessors, being named governor was the crowning achievement of their long careers.
Aside from the political flirtation — and the jury is still out on how serious it was — Carney’s year was productive and praiseworthy, but not necessarily perfect, some analysts say.
Bank of Montreal deputy chief economist Doug Porter says Carney “deserves the plaudits” he is getting, with a few quibbles, including his overly rosy reading of the Canadian economy and the signal in March he was readying to raise rates. He has since backtracked on both counts, although many consider his forecasts still too optimistic.
But Carney’s year has been about much more than just monetary policy. He has spoken out on all the major issues of the economy, Canadian and global, in a way perhaps only Dodge felt comfortable doing.
“Where he made news, aside from his career change, were in some of the key speeches this year; hectoring households to control their debt, or agitating businesses to get off the cash hordes, or pooh-poohing Dutch disease,” said Porter.
“He had a pretty active year on the economic front.”
Some of Carnery’s comments have drawn fire, but as Martin pointed out, you don’t have an impact by playing it safe.
With Carney due to take over the Bank of England next July, there is little chance his profile will diminish.
Moffatt believes the Canadian is even more suited for the England challenge than what he faced in Canada.
“He’s done a very strong job at the FSB (Financial Stability Board), and that’s more what the Bank of England needs. What England needs right now is to reform their entire financial system … and Carney is the obvious choice to fix that.”