It was November, 2008, and the financial crisis was raging.
Prime Minister Stephen Harper had just swallowed his free-market leanings and ordered Industry Canada to work with the United States on a government bailout of General Motors and Chrysler.
It was a momentous decision, and one that quickly ran into a farcical hurdle: No one at Industry knew whom in Washington to call.
The problem wasn’t one of incompetence, exactly. The Treasury Department was leading the auto bailout, and Industry simply had few dealings with that branch of the U.S. government. In normal times, lines of communication easily could have been opened. But these weren’t normal times.
Taking a call from a stranger from Canada wasn’t a priority.
The seriousness of the situation shouldn’t be underestimated. The auto rescue was going ahead with or without Canada’s participation; the longer the federal government was left out of the planning, the less leverage it would have to keep GM and Chrysler plants in Ontario from closing. Hanging in the dead air between Ottawa and Washington was the threat of hundreds of lost Canadian jobs.
Then Tiff Macklem joined the fray. It wasn’t his assignment, but Mr. Macklem – then one of the top officials at the Finance Department and now the Bank of Canada’s senior deputy governor – had a long list of contacts around the world, including in Washington.
It wasn’t so much that Mr. Macklem knew who to call; it was that someone in Washington answered. Before long, Industry and the Treasury were talking. “Tiff was a great bridge,” says Paul Boothe, who was Canada’s lead negotiator on the auto bailout. “He used those relationships to make sure Canada was at the table.”
The episode – though just a footnote in the history of the financial crisis – says a great deal about Mr. Macklem, a public servant who has played a role in some of the most important economic policy decisions Canada has taken over the past two decades.
As a young researcher at the Bank of Canada, he helped formulate the intellectual basis for the central bank’s inflation target. More recently, he’s brought a Canadian touch to the overhaul of the global financial system as one the lead drafters of new banking regulations.
Yet Richard Tiffany Macklem, known to many simply as “Tiff,” is only now stepping into the spotlight. After several months of scrutiny, he remains the runaway favourite to become the next governor of the Bank of Canada, replacing Mark Carney, who in November accepted the British government’s offer to lead the Bank of England effective July 1.
“He’s an incredibly smart guy,” says Craig Alexander, chief economist at Toronto-Dominion Bank. “He’s the natural successor.”
Mr. Macklem will be among the final group of candidates that the Bank of Canada’s board of directors is set to interview next week during a two-day meeting that begins Tuesday. David Laidley, the board member who has been heading up the job search, then will present Finance Minister Jim Flaherty with a short list of “qualified candidates,” likely ranked in order of preference, according to a person familiar with the hiring process. Mr. Flaherty said in January that he intended to interview the final candidates himself. The final decision, by law, is made by cabinet.
Conversations with a dozen people who have worked with Mr. Macklem result in a portrait of a public servant who is respected by fellow economists and admired by peers and subordinates.
But Mr. Macklem’s trump card – the reason the selection of anyone else would be such a shock to financial markets – is the hard-to-find savvy he showed at that historic moment back in 2008. Mr. Flaherty likes to say that the financial crisis shows that Canada isn’t an island; no matter how well a country conducts its own affairs, no one is safe from havoc whipped up somewhere else. There is no other serious candidate to run the Bank of Canada who is better connected to what is going on in the global economy and international financial markets than Mr. Macklem.
He has been attending global economic gatherings for more than a decade, and has developed an expertise in financial regulation that can’t be learned in text books because it is being written in real time – and Mr. Macklem is one of the lead authors. After world leaders vowed to overhaul banking regulation, European Central Bank president Mario Draghi, who was at the time Italy’s top central banker and the head of the international Financial Stability Board, hand-picked Mr. Macklem to lead one of three committees responsible for sorting out technical impediments to the Group of 20’s broad goals of containing the biggest banks and for curbing the proliferation of exotic financial assets.