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Bill Morneau, center, Stephen Poloz, right, and Tiff Macklem arrive for a press conference on Parliament Hill in Ottawa, May 1.
Photo credit: David Kawai / Bloomberg
Photo credit: David Kawai / Bloomberg
If anyone can empathize with the disappointment Carolyn Wilkins must be feeling at being ignored for the top job at the Bank of Canada, it’s Tiff Macklem, the man who simply hit her.
Macklem was the alleged favorite in 2013, when he was Mark Carney’s top deputy, only to lose to a stranger: the current governor, Stephen Poloz. In fact, an insider has not been given the position since 1994, when a new government promoted Gordon Thiessen amid a dispute over how much control legislators should have over monetary policy.
The lesson in the modern history of the Bank of Canada is that the finance minister is always his choice, every man so far, no matter who the insider or board favors in his “independent” search process.
Finance Minister Bill Morneau had been considering Macklem for the job for two years, when the issue of transition began to come up in discussions in the department, according to a person familiar with the minister’s thinking at the time. The two men were not friends, but the finance minister was impressed with a resume that included periods of senior management at both the Bank of Canada and the government, along with his experience as a crisis manager.
However, it was not clear if Macklem still wanted the job. The He felt humiliated by his rejection years before, and had been telling his friends a few weeks ago that he was happy with the University of Toronto, having recently signed an extension as dean of their business school.
Early in the process, Morneau’s instructions to the board were to undertake an exhaustive search for a governor. In late February, the selection committee had invited a short list of candidates for interviews in Ottawa, including at least two current members of the governing council, according to people familiar with the process.
The crisis blows
The list was then it was reduced to two, who were asked to make presentations to the full board.
A The letter released Friday by the head of the selection committee suggests that Macklem was one of the two finalists. The other was Wilkins, according to people familiar with the events. The interviews took place around March 10, one person said, just as the coronavirus pandemic was beginning to take hold in Ottawa. On March 13, the Bank of Canada made its first emergency interest rate cut since the 2008-2009 crisis in a coordinated move with the government, which announced the first bulletin in its virus stimulus package.
The crisis delayed deliberations for weeks, including a critical meeting between Morneau and Claire Kennedy, the board member who led the search. Recently, on April 10, Prime Minister Justin Trudeau told reporters that a decision had not been made.
Wilkins had sponsors within the prime minister’s office, who were not convinced at first that Morneau defended Macklem, according to three people familiar with the discussions. Wilkins, the most qualified woman to compete for the position, also had the support of Poloz, who had been preparing his top deputy for the job for years, just as Carney had prepared Macklem.
Wilkins’ critical role in the central bank’s response to the crisis, which occurred after his final interview with the board, helped her. She earned praise from both the liberal government and Bay Street. The markets saw her as the favorite.
A government official involved in the deliberations said that while there were “comprehensive” discussions between Morneau and officials from the prime minister’s office, a consensus emerged around Macklem. Still, three former officials described the result as a victory for Morneau.
Macklem said he was informed he got the job Thursday. By Friday morning, he was at Morneau’s side at his introductory press conference in the capital.
Carney’s endorsement
While Macklem and Morneau are not known to be close friends, they have been racing in the same Toronto circles for years. Following his defeat in 2013, Macklem landed as dean of the Rotman School of Management, while Morneau became part of Trudeau’s first cabinet in 2015 as minister of finance, responsible for mostly Toronto-based Canadian banks.
Their professional lives began to intersect. Morneau appointed Macklem, who is on the board of directors of the Bank of Nova Scotia will chair a panel on sustainable finance in 2018. That same year, Macklem write a C$ 25 million government investment for a seed startup program run by your business school.
Macklem also had outstanding champions in Ottawa and in corporate Canada. None was greater than Carney, who remains influential in government circles. In an email to BNN Bloomberg television, Carney said: “It is tremendous that you serve our country during this critical time.”
Macklem’s position at Scotiabank, where he chairs its powerful risk committee, gave him first-hand insight into how the industry works.
“Tiff has in-depth knowledge and experience in monetary policy and the integral role that the Bank of Canada plays in promoting the economic well-being of our country and maintaining the strength of our financial system,” Dave McKay, CEO from Royal Bank of Canada, said in a LinkedIn post.
Political minefield
While finance ministers have always downplayed their participation in the selection of a governor, it has become a tradition in Ottawa to have the last word. Poloz got the job in 2013 despite reports at the time that the central bank’s board really preferred Macklem. Government He felt He had a more compelling story of how monetary policy should be more growth-friendly, an attractive speech to then-Finance Minister Jim Flaherty.
The policy surrounding governor appointments is perhaps a natural result of having a fiercely independent central bank. Elected legislators only have one opportunity every seven years to put their stamp on an institution that makes critical decisions that affect the well-being of all Canadians.
But it also has a personal element. Ottawa can be a lonely place for finance ministers, who are often forced to reject funding demands from other ministers. They view central bank governors as objective-minded allies who often validate their positions.
In the coming years, Morneau and Macklem will get to know each other even better.
It is not only the crisis that will unite them. Given the growing importance of fiscal policy and central bank financing of public debt, the biggest change of the Macklem era may be the deepening of the relationship between the bank and the government. It is a political minefield that the next governor will need to navigate and will require a versatile set of skills.
Macklem will need to be politically intelligent enough to engage with government officials and avoid taking sides in policy debates outside the scope of the central bank.
Macklem was an accomplished economist long before moving up the management ranks at the Bank of Canada. Based on his comments on Friday, he plans to continue to rely on his technical skills to meet the central bank’s 2% inflation target as the anchor of Bank of Canada independence.
“We will use our tools as necessary in a way that respects our mandate and I am confident that the government will respect our independence,” said Macklem, in French.
– With assistance from Josh Wingrove
