The FSB chairman relies on persuasion and influence to effect change. And that is why many say Mr. Carney, who would keep his position at the Bank of Canada, is the right man for the job.
The former Goldman Sachs Group Inc. investment banker holds a doctorate in economics from Oxford University and worked in every major financial capital on the planet, giving him a combination of credibility on Wall Street and an intellectual foundation that is rare among central bankers, most of whom are lifelong economists or bureaucrats with little hands-on experience in the private sector. Ben Bernanke, the head of the U.S. Federal Reserve, is an academic, for example.
That mix of theory and practice has earned Mr. Carney respect among the bankers whose behaviour policy makers now seek to rein in.
“Mark is one of the few senior public officials who has real experience, important experience, on both the financial side and the policy side,” said John Lipsky, a special adviser to the International Monetary Fund’s new managing director, Christine Lagarde. “There is a need for new thinking.”
Mr. Carney stands out because he can address bankers and traders in their own language. His second speech as Bank of Canada Governor, in early 2008, was devoted exclusively to the problems he saw in credit markets. In it, he attacked the notion that risk could be minimized by parcelling mortgages and selling them as separate financial assets, and criticized pay structures at financial firms that rewarded big bets more than wise ones.
“Through the financial crisis, I think he showed remarkable skill in terms of a combination of toughness and yet understanding the right thing to do,” said Gordon Nixon, chief executive officer at Royal Bank of Canada. “He became someone that – not just in Canada – we benefited from, somebody that a lot of others around the world leaned on in terms of the different directions to take.’’
Perhaps most important for a chairman of the FSB – who attends all G20 leaders’ summits – Mr. Carney has consistently shown that he is unafraid, even eager, to speak the truth to the most powerful figures in the industry where he spent much of his adult life. His confrontation with Mr. Dimon is but the latest example.
In response to the tongue-lashing by Mr. Dimon, Mr. Carney gave a passionate defence of the G20’s efforts to create rules designed to reduce the risk of another crisis, according to a person familiar with what happened. And days later, Mr. Carney gave a speech at a gathering hosted by the financial lobby, in which he pointedly rejected Mr. Dimon’s claims.
“Having someone like Mark, who can withstand pressure from the banks, at the head of the FSB is going to be very important,” said Eswar Prasad, a senior fellow at the Washington-based Brookings Institution and a former head of the financial studies and China divisions at the International Monetary Fund. “Many senior people in the G20 would like to see him get it.”
Mr. Carney’s well-connected associates and friends describe him as a highly intelligent participant in policy debates who is often a couple of steps ahead of everyone else at the table. Tim Adams, a managing director at Lindsey Group, a Fairfax, Va.-based consultancy, was the U.S. Treasury Department’s top international official when Mr. Carney held similar responsibilities at the Finance Department. Even though Mr. Carney was only in his early 40s, Mr. Adams says, “when he stopped to talk, people stopped to listen.”
Indeed, you would have to think a lot of someone’s judgment to let them take you jogging in the frigid February cold of Iqaluit, even a northerner like Mr. Carney (who hails from Fort Smith, NWT, and grew up in Edmonton). Last year, when finance ministers and central bankers of the Group of Seven club of rich countries gathered in Nunavut’s capital, Mr. Carney got World Bank president Robert Zoellick to join him on his sacred daily early-morning run.