Canada’s central bank governor certainly showed leadership through the crisis. In April, 2009, Mr. Carney’s central bank pledged to leave interest rates near zero for a year, so long as inflation stayed calm. It was an extraordinary move, and the U.S. Federal Reserve eventually adopted a similar policy, not the other way around. And plenty of economists would say Mr. Carney deserves credit for restraint, avoiding the multibillion-dollar bond-buying schemes deployed in the United States, Japan and Europe.
Paul Martin, the former prime minister and finance minister, says the question of whether Mr. Carney actually did anything that another central bank governor wouldn’t have done during an epic financial crisis is moot.
“That’s like asking, `What did Eisenhower do?’ ” Mr. Martin said in an interview, referring to Dwight Eisenhower, the supreme commander of the Allied Forces in Europe during the Second World War who went on to become the 34th president of the United States. “It’s a non-question. Mark Carney played the cards he was dealt as well as they could have been played.”
A STAR IS BORN
The myth of Mark Carney, policy maker, begins with a wanted ad in The Economist magazine for the senior deputy governor’s position at the Bank of Canada in 2003. Mr. Carney, a high-flying investment banker with Goldman Sachs Group Inc., was stirred to set money-making aside and try public policy. He didn’t get the senior deputy’s job, but Governor David Dodge found a spot for him on the bank’s governing council.
“We needed someone both to cover the international side of the work of the bank and to begin to strengthen our capital markets capacity,” Mr. Dodge said in an interview. “The fit was wonderful.”
But Mr. Dodge didn’t get to keep him around for very long. That’s because Mr. Martin’s Liberal government took notice of the Oxford-and-Harvard-educated economist in its midst. “We convinced Mark that some experience in the Department of Finance would be good for him,” said Ralph Goodale, who was minister at the time.
Mr. Carney won instant admiration in government, if only because he walked away from a seven-figure paycheque to take up public service. It wasn’t long before Mr. Carney was able to show his new colleagues why he used to get paid the big bucks.
In 2004, the government decided to sell its remaining 18.6 per cent stake in Petro-Canada. Mr. Carney – who, as an investment banker at Goldman Sachs, had worked on the attempted privatization of the Ontario government’s Hydro One – was handed responsibility for getting Ottawa out of the oil business.
“He was focused, he understood the issues and he wanted his advisers to address the issues,” said Kirby Gavelin, head of equity capital markets at RBC Dominion Securities, which was one of three investment banks the government hired to round up buyers for its Petrocan shares.
Selling shares in an oil company amid a global economic boom always was going to be profitable, but Mr. Carney embraced a strategy that probably netted Canadian taxpayers hundreds of millions of dollars extra in proceeds. The safest path was simply to sell the shares to the banks, which happily would have purchased them at a slight discount from the market price, and then sell them later for a profit.
That approach is called a “bought deal.” The investment banks actually advised a riskier path, something called a “marketed offering,” which involves management hitting the road on a sales effort, yielding information the investment bankers use to come up with a price. The risk is that price could end up being lower than what the investment banks would have been willing to pay at the outset.
Many called the decision to go with a marketed offering “dumb” because it risked giving away some family jewels at fire sale prices, Mr. Goodale said.