If anyone can understand the disappointment Carolyn Wilkins must feel about failing for the highest position at the Bank of Canada, it is Tiff Macklem, the man who just beat her.
Macklem was the suspected point guard in 2013, when he was Mark Carney’s first assistant, only to lose to a stranger himself – the current governor, Stephen Poloz. In fact, an insider has not been appointed since 1994 when a new government promoted Gordon Thiessen in the middle of a dispute over the control that legislators should have over monetary policy.
The lesson from the modern history of the Bank of Canada is that the Minister of Finance always has his choice – all men so far – regardless of who is favored by insiders or the board in his “independent” research process .
Finance Minister Bill Morneau had been considering Macklem for the job for two years when the subject of transition began to come up in departmental discussions, according to someone familiar with the minister’s thinking at the time. The two were not friends, but the Minister of Finance was impressed by a resume including executive positions at the Bank of Canada and government, as well as his experience as a crisis manager.
However, it was unclear whether Macklem still wanted the job. he felt humiliated by his rejection years earlier, and had told his friends just a few weeks ago that he was happy with theUniversity of Toronto, having recently signed an extension as dean of his business school.
At the start of the process, Morneau’s instructions to the board of directors were to undertake a comprehensive search for a governor. By the end of February, the selection committee had invited a short list of candidates for interviews in Ottawa – including at least two current board members, according to people familiar with the process.
The crisis strikes
The list was thenreduced to two, who were invited to make presentations to the entire council.
Aa letter published 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, said one person, just as the Ottawa official began to be seized by the coronavirus pandemic. On March 13, the Bank of Canada made its first emergency interest rate cut since the 2008-2009 crisis in a coordinated action with the government, which announced the first page of its plan stimulus against viruses.
The crisis delayed deliberations for weeks, including a critical meeting between Morneau and Claire Kennedy, the board member who heads the research. As early as April 10, Prime Minister Justin Trudeau told reporters that no decision had been made.
Wilkins had donors in the Prime Minister’s office, who at first were unconvinced that Morneau was defending Macklem, according to three people familiar with the discussions. Wilkins, the most qualified woman to run for the job, also had the support of Poloz, who had been preparing his senior assistant for the job for years – just as Carney had looked after Macklem.
Wilkins’ vital role in the central bank’s response to the crisis – which occurred after his last meeting with the board of directors – helped her. She won praise from the Liberal government and Bay Street. The markets saw it as the first.
A government official involved in the deliberations said that, although there had been “in-depth” discussions between Morneau and officials from the Prime Minister’s office, a consensus had emerged around Macklem. However, three former officials described the result as a victory for Morneau.
Macklem said he was informed that he had obtained the job on Thursday. Friday morning, he was with Morneau at his introductory press conference in the capital.
Although Macklem and Morneau are not known to be close friends, they have been racing in the same Toronto circles for years. After his 2013 defeat, Macklem became dean of the Rotman School of Management, while Morneau became a member of Trudeau’s first cabinet in 2015 as Minister of Finance, responsible for Canadian banks based mainly in Toronto.
Their professional life began to intersect. Morneau appointed Macklem, who sits on the boardBank of Nova Scotia, to chair a panel on sustainable finance in 2018. That same year, Macklemmark a C$ 25 million government investment in a seed start-up program run by its business school.
Macklem also had prominent champions in Ottawa and in Canadian business. None were bigger than Carney, who remains influential in government circles. In a BNN Bloomberg television email, Carney said, “It is great that he is serving our country during this critical time. “
Macklem’s position at Scotiabank, where he heads his powerful risk committee, gave him first-hand knowledge of how the industry works.
“Tiff has a deep understanding and expertise in monetary policy and the essential role the Bank of Canada plays in promoting the economic well-being of our country and in maintaining the strength of our financial system,” Dave McKay , President and CEO of Royal Bank of Canada, said in a message on LinkedIn.
Although finance ministers have always downplayed their involvement in the selection of a governor, it has become a tradition in Ottawa that they have the final say. Poloz got the job in 2013 despite reports that the central bank’s board of directors actually preferred Macklem. The government felt he had a more compelling story about how monetary policy should be more growth-friendly, a compelling argument for then-finance minister Jim Flaherty.
The policy surrounding governor appointments may be the natural result of a fiercely independent central bank. Elected legislators have only one chance every seven years to make their mark on an institution that makes critical decisions that affect the well-being of all Canadians.
But there is also a personal element. Ottawa can be a lonely place for finance ministers, who are often forced to postpone funding requests from other ministers. They see the governors of central banks as objective allies who often validate their positions.
Over the next few years, Morneau and Macklem will get to know each other even better.
It’s not just the crisis that will bind them. With the growing importance of fiscal policy and central bank financing of public debt, the biggest change of the Macklem era could be the deepening of the bank-government relationship. It is a political minefield that the next governor will have to navigate and will require a versatile set of skills.
Macklem will need to be politically savvy enough to dialogue with government officials while avoiding taking sides in political debates outside the central bank’s area of competence.
Macklem was an accomplished economist long before he climbed the management ladder at the Bank of Canada. Based on his remarks on Friday, he plans to continue to build on his technical strengths to meet the central bank’s 2% inflation target as the anchor for the independence of the Bank of Canada. .
“We will use our tools as needed in a way that respects our mandate and I am confident that the government will respect our independence,” said Macklem, in French.
– With the help of Josh Wingrove