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James Coyne (http://www.bankofcanada.ca/)
James Coyne (http://www.bankofcanada.ca/)

James Coyne: A father, Rhodes scholar and Bank of Canada governor Add to ...

James Coyne, who died Friday night in Winnipeg at the age of 102, will always be remembered as the man who won a Pyrrhic victory against former prime minister John Diefenbaker in what has come to be known as The Coyne Affair.

As Governor of The Bank of Canada, Mr. Coyne was highly critical of the prime minister’s monetary and fiscal policy and said so frequently in speeches about the need for “sound money” policies. For his part, Mr. Diefenbaker considered Mr. Coyne “inflexible,” “arrogant” and an “unregenerate Grit.”

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Nobody emerged unscathed from their confrontation: Mr. Coyne lost his job in 1961, but won a moral victory in the Liberal dominated Senate; both Mr. Diefenbaker and minister of finance Donald Fleming had their reputations tarnished. Still, as a result of this tempest, the relationship between the government and the governor of the Bank of Canada was clarified.

As for Mr. Coyne, his tumultuous tenure at the bank was only one entry on a curriculum vitae that included a Rhodes Scholarship, a call to the bar in Britain and Manitoba, public-policy making in the recovery efforts after the Depression and during the Second World War and his final and private role as a husband and the father of five children.

“He had a natural gift for it,” said his youngest son, Andrew Coyne, a journalist for the National Post. “Dogs and little children gravitated towards him and loved his mixture of gruffness and warmth.”

Quirky and eccentric, Mr. Coyne was not “kissy huggy, but he was there at crucial moments and he was a very important moral and intellectual guide.”

Susan Coyne, his younger daughter, drew a deft portrait of her father in Kingfisher Days , her 2001 memoir of her childhood. “My father at this time had recently retired from public office, after a highly publicized and principled battle, to which he never referred. The exact nature of his present occupation remained one of the great unsolved mysteries of our childhood. There was always some inviolable corner of the house to which he would retire after breakfast to pore over his important papers. From time to time we would hear him whistling some ancient air from his youth. Later in the day, he would sit in his chair on the porch and do the cryptic crosswords, or read thick books on science and mathematics.”

The Coynes were a prominent Ontario family until James Bowes Coyne, moved to Winnipeg in 1905 (after Upper Canada College, the University of Toronto and Osgoode Hall) to become a partner in the law firm Aikins, Robertson Fullerton and Coyne. He married Margaret Elliott, and later served as a judge on the Manitoba Court of Appeal from 1946-1959.

James Elliott Coyne, the eldest of their three children, was born July 17, 1910 in Winnipeg. He went to local schools and then studied history and mathematics at the University of Manitoba, graduating cum laude with a bachelor degree in 1931, and winning a Rhodes Scholarship to Oxford the following year.

George V. Ferguson, who subsequently became editor of the now defunct Montreal Star, was on the selection committee. He told journalist Peter C. Newman that Mr. Coyne was so far ahead of the other candidates that the meeting was one of the shortest in the committee’s history.

At Oxford, Mr. Coyne studied law, played on the Oxford Blues hockey team (as had Lester Pearson and Roland Michener before him) and was called to the English bar in 1934. He returned to Winnipeg to practise law in his father’s firm, which by then was called Coyne and Coyne. It proved a short-term association, for two years later, J.L. Ralston, counsel for the Turgeon Royal Commission that was investigating the effects of the Depression on the wheat trade, hired Mr. Coyne as his assistant.

As the royal commission toured the West, holding its hearings, the staff often ended up in the same prairie hotels as a research team from the Bank of Canada, which had been founded in 1934 as a private corporation. Long discussions on the Depression and how to solve the country’s economic problems ensued and gradually Mr. Coyne realized that he was more interested in making economic public policy than practising law.

In 1938, the year the bank became a Crown corporation, he abandoned his burgeoning law practice for a job as a clerk in the research department of the Bank of Canada at a salary of $150 a month. Later, he described arriving in Ottawa in January, 1938 and finding an apartment on Metcalfe Street with a bedroom and a kitchen for $45 a month.

Although his expertise was in the grain trade, he was soon assigned to the Rowell-Sirois Commission, which had been struck by former Liberal prime minister Mackenzie King to investigate constitutional and economic repercussions coming out of the devastation of the Depression. A year later, he was seconded to the Central Mortgage Bank, which had been formed by the federal government to help sustain private mortgage-holders on the prairies, but the prospect of war changed everything. Mr. Coyne ended up working for the Foreign Exchange Control Board, which was charged with ensuring that investments required for the war effort didn’t leave the country.

Later, Mr. Coyne was sent to Washington as the first financial attaché in the Canadian embassy, where he helped draft the secret Hyde Park Agreement covering the commercial and financial collaboration between Canada and the United States and their mutual relations with the United Kingdom. With the war fuelling inflation in Canada, Mr. King established the Wartime Prices and Trade Board to clamp down on spiralling costs. Donald Gordon, then deputy governor of the Bank of Canada was named chairman of the Board. Mr. Coyne returned to Canada as his assistant and later was promoted to deputy chairman of the Board, a senior appointment, especially for a man barely into his 30s.

Mr. Coyne wanted to join the Royal Canadian Air Force and finally persuaded his employers to release him for military service in 1942. He qualified as a pilot, earning top marks in his class, but was considered too old for combat. Frustratingly for him, he spent the war standing duty as a security guard at the Portage la Prairie air force base.

By contrast, his younger brother, Jack, (also a Rhodes Scholar, a lawyer and a pilot in the RCAF) was awarded the Distinguished Flying Cross for skill, courage and resolution in bombing missions off the coast of Norway against German shipping, and his sister, Sally, trained recruits and later worked in an administrative capacity at RCAF headquarters.

He returned to the Bank of Canada in 1944, as executive assistant to Graham Towers, the first governor of the Bank of Canada. Six years later, he was appointed deputy governor and then, on Jan. 1, 1955, he succeeded Mr. Towers as governor of the Bank and president of the Industrial Development Bank.

George Freeman, who rose through the ranks of the bank to deputy governor before he retired in 1982, was a clerk in the research department when Mr. Coyne was governor. Describing his boss as brilliant, Mr. Freeman wrote in the anniversary issue of Bank Notes that he “conducted all his own research, although he listened to what we said” and he quickly established himself as “a take-charge kind of guy because he had the ideas, and the drive, and the imagination.” On the other hand, Mr. Coyne had a “combative personal style,” he “didn’t suffer fools gladly” and he “made his points aggressively, where others might have been more diplomatic.”

Aside from his domineering personality, Mr. Coyne was both an ardent nationalist and a prudent spender, as befits somebody who came of age during the Depression. His salary as head of the Bank was $50,000, or $13,000 more than the prime minister of the day earned, but Mr. Coyne still favoured cardboard luggage, $3.95 vest-pocket watches and, when he travelled, packed his own iron to press his suits, according to Mr. Newman’s 1963 account in Renegade in Power: the Diefenbaker Years.

After a decade of Depression and six years of wartime restrictions, Mr. Coyne was concerned about the economic growth rate of the country (in terms of population, productivity and investment). In a speech to the Empire Club a little more than a year into his tenure as bank czar, Mr. Coyne warned that “investment has for several years exceeded saving in Canada” and pointed out that the “deficiency” was being made up by importing an excess of goods over exports and an inflow of foreign capital.

Two momentous events occurred the following year that would change the course of Mr. Coyne’s career and his life. On June 21, 1957, Mr. Diefenbaker was sworn in as prime minister of a minority Progressive Conservative government, having ousted the long-term Liberals. Five days later, at the age of 47, Mr. Coyne married Meribeth Riley, a Winnipeg widow, 17 years his junior who had three children under the age of seven, Sanford (Sandy), now a financial executive, Patrick, now a lawyer, and Nancy, now a music scholar and former lawyer. “He was a wonderful father – not overtly emotional, but very, very interested and concerned,” Sandy Riley said. “We were very lucky that he was the man my mother ended up with,” Mr. Riley said. “He got us at a very early age and we imprinted.” Susan (a writer and an actor) was born a year later and Andrew followed in 1960.

Mr. Diefenbaker went back to the electorate in 1958 and won the biggest parliamentary majority in Canadian history at that time. Mr. Coyne began to get into trouble with a series of speeches during the election campaign in which he said that Canadians were living beyond their means, a theme that undermined a Conservative campaign assertion that tight money under the previous Liberal government had dried up economic expansion.

Late in 1959, Mr. Coyne’s speeches urged that the flow of U.S. capital into Canada should be slowed so Canadians would have more control over their economy. Mr. Fleming said the governor’s speeches contained “strong political overtones.” Mr. Fleming, the finance minister, said the government could not “continue to stand idly by when the governor is espousing policies which [do not conform] with the public interest.”

Certainly, the Bank of Canada’s policy of restricting money was offsetting the government’s intent of boosting the economy through budgetary deficits. Such a conflict might have been ironed out privately and if that was impossible, then the governor could have resigned.

But the Conservatives chose not to take this course. Instead, Mr. Fleming argued that Mr. Coyne should have brought a proposed $13,000 increase in his pension to the attention of the government. Mr. Coyne countered that Mr. Fleming had a representative at the meeting where the bank’s board authorized the increase and he should have known about Mr. Coyne’s pension.

The prime minister argued that Mr. Coyne had a moral obligation to veto the pension increase, so the Tories introduced Bill C-114 to the Commons on June 23, 1961. It had but one sentence: “The office of Governor of the Bank of Canada shall be deemed to have been vacant immediately upon the coming into force of this act.”

During the debate, Mr. Diefenbaker rose in the House to say that personal attacks were not his style but is it “impugning a man’s integrity to say that he sat, knew, listened and took?”

He also mentioned the pension of former prime minister Louis St. Laurent “who gave devoted service to his country for the greater part of nine years as prime minister.” He, Mr. Diefenbaker noted, was receiving a pension of less than $3,000 a year compared to Mr. Coyne’s $25,000.

“How many people in public life receive a pension of that size? I have been in public life longer than Mr. Coyne. When I retire, no matter how many years from now it may be, I will be in the same position as Mr. St. Laurent.” (Mr. Diefenbaker never retired and served as a member of Parliament until he died in 1979.) The Tory-dominated Commons approved the bill but the Liberal-dominated Senate referred it to a committee where Mr. Coyne got a hearing. Although acknowledging that he had been a troublesome governor, the Senate rejected the bill and Mr. Coyne resigned.

When asked how important it was to his father that the bill declaring his father dishonourable failed in the Senate, Andrew Coyne replied: “The biggest mistake that Mr. Diefenbaker made was to go after my dad’s integrity – a losing proposition to begin with – and if he ever wanted to get my dad’s back up, that was the way to do it. He was the most fundamentally honest person I have ever met in my entire life and that is integral to understanding him.”

The Coyne children were too young at the time of The Coyne Affair to understand its political machinations. What they did absorb, either by osmosis or genetics, was the significance of morality as a guiding human principle. “One of the things I was aware of at a very, very early age was that on questions of principle it was a fine and honourable thing to stand your ground,” said Andrew Coyne.

“What I learned from him, is that the truth matters at all costs,” said Susan Coyne. “It is a primary value. My father certainly lived his life by that principle and paid some costs for it as well.”

Mr. Coyne resigned from the bank on July 13, 1961. He and his family left Ottawa in December and moved to Toronto because Mr. Coyne had been hired by Sinclair Stevens (then a self-made financial whiz kid on Bay Street in Toronto with an investment empire that at one time was said to be worth $130-million and who later served as a cabinet minister for Brian Mulroney in the 1980s) to work as chairman of the board of York Trust, a company he had established in 1962 with funds from his investment company British International Finance (Canada) Ltd. Mr. Coyne joined the following year.

Mr. Steven’s company York Trust had its first office at the corner of Danforth and Pape, in the eastern end of Toronto and away from Bay Street, the city’s traditional financial and corporate canyon.

The two men had also developed a plan to launch the Bank of Western Canada or Westbank, based on Mr. Coyne’s reputation and connections in the west and Mr. Stevens’s financial resources and his ability to raise money in Toronto.

Within five years, Mr. Coyne was back in the news because of another very public ethical dispute – this time with his business colleague rather than his prime minister. Later, Mr. Stevens said that Mr. Coyne was a very bright man, perhaps a genius, who had a tendency to “walk into a buzz saw rather than change his position.” And that refusal to “mellow,” according to Mr. Stevens, left him, like Mr. Diefenbaker before him, “a victim” of Mr. Coyne’s “inflexibility.”

After the split, Mr. Coyne and his family moved back to Winnipeg in 1965. The next year, Westbank obtained a federal charter, with Mr. Coyne as president and Mr. Stevens as chairman, although later Mr. Stevens insists the roles were reversed. Other disputed areas included Mr. Stevens’s contention that the bank was always national in scope (despite its name), versus Mr. Coyne’s view that it was going to be based in the west with its head office in Winnipeg, and Mr. Stevens’s desire to operate as a wide-ranging investment bank while Mr. Coyne wanted to service smaller accounts. Newspaper reports from the time suggest the two men fell out after Mr. Stevens ran into liquidity problems and attempted to solve them by bringing in new investors who didn’t share the original vision, and then tried to have Westbank operate under different terms from the provisions set out in the charter.

Mr. Coyne accused his chairman of trying to obtain credit for his own investment company from Westbank, contrary to assurances that had been given to Parliament when the bank’s charter was granted. At least five western directors of the bank lined up behind Mr. Coyne, but the fuss ended up in Parliament when the House of Commons Finance Committee opened an investigation in Feb. 1967. A furious Mr. Coyne, who had some experience with finance committees, appeared before the committee to outline his charges that Mr. Sinclair and his eastern backers had “forsaken principle for expediency.”

Mr. Stevens denied the charges and then Liberal finance minister, Mitchell Sharp, tried to dampen the furor by saying that the conflict was an internal matter to be settled in the bank’s boardroom. But Mr. Coyne’s allegations had the desired effect – Mr. Stevens resigned as chairman on Feb. 17, 1967, saying Mr. Coyne was “irresponsible” for making the dispute public. He remained a member of the board, but agreed to sell enough of his eastern group’s holdings to reduce their share of voting stock from 51 per cent to 30. The western directors were given 30 days to come up with the money to buy control of the bank, but the negative publicity had dried up investment money.

In May, 1967, The Globe and Mail reported that Mr. Coyne had refused to resign as president, despite a demand that he do so by the new majority shareholder, Marc Masson Bienvenu. In July, Mr. Coyne was ousted by the board of directors. As for Westbank, it earned a place in Canadian history as the only bank to close before it opened.

After that, Mr. Coyne lived a very private life in Winnipeg actively following the stock market, collecting paintings by Emily Carr and David Milne, spending summers at the family cottage in Lake of the Woods and devoting himself to his family.

“My father’s life divides into two parts,” said his daughter Susan, pointing out that Mr. Coyne was a bachelor until he was 47 and then spent the next 50 years as a father and grandfather. She asked her father once: “Who was Diefenbaker?” and he replied: “He was a kook dear.” And that was the last time they discussed the Coyne affair until she was grown up and her father went over the whole business one day while they were driving home from the cottage.

As a child, her father was omnipresent. “I always had the sense that it [family] was at least as important as anything else he did in life,” Ms. Coyne said. She remembers her father being home when she got back from school – her mother had gone back to university to take a fine-arts degree and then a teaching qualification and is now an artist and a teacher – and always being able to answer even the most arcane philosophical and scientific questions. “He really valued being a parent,” she said, and that included his three stepchildren. “He was an advocate for all of us.”

A man with a dry sense of humour, he announced at his 90th birthday that he wanted it written on his tombstone that “I raised five children and none of them smoked.” An avid nutritionist, a fiendish bridge player, a voracious reader and a fanatical follower of economic and political affairs, he lived his life with discipline, anticipation and curiosity. His family all expected him to live to be a hundred. And he exceeded that goal by two years.

James Elliott Coyne is survived by his wife, Meribeth, five children and several grandchildren.

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