With an impressive résumé and a trail of successes in his wake, the first non-British Governor of the Bank of England, the Canadian Mark Carney, will be under incredible pressure to turn around the UK’s banking system when he takes up his post in July. But as a firm believer in the power of consumer spending and a strong advocate for tougher regulation, Carney may be just the man to push through much needed changes.
Bank of England Governor-in-waiting, Mark Carney, has been choosing his words carefully since his surprise appointment back in November. But knowing the financial world is suddenly hanging on to his every word, he chose his first speech after the announcement to drop a few hints – not by saying what he intends do at Threadneedle Street in London but emphasising what he has done on Wellington Street in Ottawa, home of his current employer, the Bank of Canada.
“Much is made in Canada that we didn’t have bank failures and we didn’t have other issues,” he told a 13 December meeting of the Chartered Financial Analysts Society in Toronto. “In part, we didn’t have those because we made tough decisions in a timely fashion. The first thing is transparency. You have to level with people on the scale of problems. It does no good to try to spin your way out of a crisis.”
If translation from Canada to England and Europe is needed, Carney’s message is this: central banks are players in a cooperative financial community that very much includes the average Joe consumer and operating in mysterious ways behind closed doors is no longer an option – at least not for him.
Banks, he has said many times, are not in business only for themselves but for the health of the economy and the financial wellbeing of all.
Some financial analysts have predicted that the Canadian and his championing of long-term low interest rates will lead to a clash with the Bank of England establishment, but Carney’s reasoning is simple: keep consumers spending and the economy will keep ticking over.
But there’s a downside that has led him to publicly warn Canadians about the amount of household debt they are carrying. Carney has no magic wand to waft from the helm of the Bank of England but among other things, he has confidence, an engaging personality and a belief that banks need to be regulated to protect themselves, and the world’s economies, from their worst instincts.
So while the 47-year-old former Goldman Sachs wunderkind won’t be lifting the skirt of the old grey lady of Threadneedle Street, there is little doubt he will be raising the hemline, exposing a little cleavage and insisting on a new hairstyle. In short, his record is not one of shying away from bold decisions, and nobody should be surprised if he takes to the talk show circuit to explain himself.
As a trusted senior adviser to current Canadian Finance Minister Jim Flaherty, Carney recommended an end to generous corporate tax shelters known as Income Trusts. It was bitterly controversial and a dilemma for Flaherty’s Conservative government because it not only broke a campaign promise but also flew in the face of their own pro-business ideology.
In addition, Carney played a significant role selling Canadian government interests in the oil and gas company PetroCanada in 2004, and netted government coffers hundreds of millions of dollars more than anyone had predicted possible.
The two deals convinced Flaherty to recommend Carney for the top job at the Bank of Canada, a role he assumed in February 2008 when the world economy was plunging into recession.
Those who have travelled in Carney’s circle as he has methodically established himself as a megastar on the world financial stage have observed a cross between a tough-minded banker and a natural born politician.
“At Davos and other global meetings, he works the room and seems to know everybody,” says one former aide. “In meetings he’ll take on all comers. It doesn’t matter who they are or what their job is. He can be very prickly and has a huge ego which is something I guess goes with the territory.”
Carney has attacked Canadian corporations for holding too much “dead money” instead of circulating it back into the economy, and in the autumn of 2011 famously clashed at a bankers’ meeting in Washington with Jamie Dimon, CEO of JP Morgan Chase (net worth US$400 million; annual salary US$27 million), over Carney’s insistence that the world’s larger banks should be forced to keep a cushion of extra capital. According to those willing to speak publicly after the meeting, Dimon shouted angrily at Carney, claiming that the policy was anti-American. Carney, less loud but equally passionate, stood his ground.
While it’s undeniable that Carney was a key figure in steering the Canadian economy through the rough financial waters of the recession, it’s important to note that the ship was already in excellent condition.
“Carney was very lucky,” said the former aide who still moves in Canadian financial circles and asked not to be identified “He was in the right place at the right time… Canada’s economy was in better shape than just about anywhere, and when the meltdown happened he could lecture other countries at G20 and IMF meetings and say ‘don’t bail out Europe’ or whatever.”
Credit for that pre-Carney stability belongs to former Liberal Finance Minister Paul Martin, who years before Carney arrived on the scene had fortuitously slapped down Canadian banks that had demanded – and lobbied fiercely for – the regulatory ability to merge, grow bigger and become more diverse – copies, essentially, of counterparts elsewhere.
In August last year, Carney became the first Bank of Canada Governor to speak at a major union convention – an event that brought him positive headlines and much praise from union leaders.
So the financial package that is Mark Carney is as complex as it is comprehensive but the conundrum of why he played hard to get when British Chancellor of the Exchequer George Osborne so clearly wanted him, might lie in his own political ambition.
It’s no secret that the federal Liberal party has courted Carney as a potential new leader to replace its current interim, Bob Rae. With his fluent French, easy charm and quick wit, few doubt Carney would be a formidable challenger to the dour Prime Minister Stephen Harper. But before becoming Liberal leader, Carney would have to go through the gruelling process of prevailing over several other party candidates – most notably Justin Trudeau, the 41-year-old son of the late iconic Canadian Prime Minister Pierre Trudeau, who entered the race relatively late and, for many reasons, is likely unbeatable by a central banker with no prior party affiliation or formal political experience.
It’s all speculation, of course, but the timing works – as does Carney’s next five years at the Bank of England – a shorter period than he was offered and one that tees him up nicely for the banker’s dream job at the International Monetary Fund – or even that run at Canadian politics if Harper beats Trudeau and the Liberals need a new leader.
Carney will have none of it, and says he was finally persuaded to move to London by the challenge of both the Bank of England job and his continuing chairmanship of the Financial Stability Board, the international financial watchdog based in Basel, Switzerland.
“This is a critical time for the British, European and global economies, a decisive period for reform of the global financial system including its leading financial centre, the City of London; and a crucial point in the Bank of England’s history as it accepts vital new responsibilities,” Carney said at the news conference announcing his departure from the Bank of Canada. The tipping point, he said, came when he weighed the relatively healthy state of the Canadian financial system and the “challenges” facing the British economy.
And while the job satisfaction might be high, so is the compensation. The Bank of England job more than doubles Carney’s CAD400,000 salary and doubtless comes with perks and prestige foreign to the Canadian experience (The Bank of Canada Governor is Canada’s highest paid public servant – earning about CAD100,000 more than the prime minister).
In what was likely a pre-emptive strike against criticism of him being a foreigner, Carney said at his news conference that he would take British citizenship – a path that might bring him the offer of a knighthood – an offer he would likely reject if, indeed, he sees a political future for himself in Canada.
But between now and 2018, he has a tough, turbulent job to do and, in the UK a more fierce, probing press to cope with. It will be a monumental achievement if today’s international financial megastar is still shining as brightly in five years time.
The Mark Joseph Carney File
Born: March 16, 1965, Fort Smith, North West Territories, Canada.
Educated: Harvard University, St Peter’s College and Nuffield College, Oxford.
Business: Thirteen years with Goldman Sachs in London, Tokyo, New York and Toronto.
Canada: Deputy Governor of the Bank of Canada from August 2003. Appointed Associate Deputy Minister of Finance in November 2004 and Governor of the Bank of Canada on 1 February 2008.
International: Chairman of the Financial Stability Board.
Personal: Married to British-born economist Diane Fox with whom he has four daughters.
