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Janet Yellen or Larry Summers at Federal Reserve? (Better still, get a Canadian, scholar says) Add to ...

These are stories Report on Business is following Monday, July 29, 2013.

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Who should succeed Bernanke?
Desperate times call for desperate measures.

And so, as one U.S. scholar puts it, why not skirt the Yellen vs. Summers debate over who should succeed Ben Bernanke at the Federal Reserve, and get a Canadian? Everyone else is.

Stephen Williamson is, of course, half-joking in suggesting this on his blog. But only half, in that he cites Tiff Macklem as an excellent choice for the U.S. central bank.

“If you were to ask me (not that anyone is), I would advise following the lead of the Bank of England,” he writes.

“Appoint a Canadian! As everyone knows, Canadians have superior leadership abilities, are excellent economists, and understand financial stability really well.”

The Canadian-born economist, the Robert S. Brookings Distinguished Professor in Arts and Sciences at Washington University in St. Louis., who has also held positions at the Fed since the late 1980s, was referring to the fact that the British government stole Mark Carney from the Bank of Canada to head the Bank of England.

That set in motion the race for Bank of Canada governor, one which Mr. Macklem, Mr. Carney’s senior deputy, lost to Stephen Poloz.

“The fact that he’s not a U.S. citizen could put the kibosh on that idea, but maybe he’s a secret American – his mother took a trip to Plattsburgh to give birth, or some such,” said Professor Williamson.

Jokes aside, he believes Mr. Macklem is well qualified for the position of Fed chairman, and that “it’s unfortunate that he was passed over (twice) for the governor’s job in Canada.”

The race for Fed chair is said to have come down to a choice of Janet Yellen, the current vice-chair, and former Treasury chief Larry Summers, whom many Democrats don’t want.

Mr. Bernanke has not yet said whether he’ll leave when his term expires, but it’s widely believed that he will. And President Barack Obama is said to favour Mr. Summers.

“My guess is that power politics is pushing Obama to choose Summers,” Professor Williamson said in an e-mail exchange. “Summers has many friends in high places.”

Breakfast at Tiffany’s, lunch at Target, dinner at Saks
Canada is headed for a “retail renaissance” that promises to leave some blood on the floor among the industry players.

As The Globe and Mail’s Marina Strauss reports, Hudson’s Bay Co. today struck a deal to buy Saks Inc., which includes bringing the U.S. luxury chain to Canada.

The $16-a-share deal is valued at $2.9-billion (U.S.), including debt.

HBC chief Richard Baker is looking at opening up to seven Saks stores in Canada, and up to 25 Saks Off Fifth discount shops.

Saks operations could be added to existing Hudson’s Bay outlets or replace some Bay shops, Mr. Baker said. Or, they could be completely new stores.

Saks will join Holt Renfrew and, next year, Nordstrom Inc. on the luxury end of the spectrum in Canada, with the likes of Wal-Mart Canada Corp. and the recent Target Corp. outlets on the less expensive side.

“Canada’s market is the size of California and when you consider our demographics you will end up with just a handful of premium department stores all competing for the same base of consumers,” said George Minakakis, chief executive officer of Inception Retail Group and author of Last Retailer Standing, noting the financial pressures on some.

“And to win in this game you will have to base it again on the total experience (fashion, service and a marketing strategy that attracts customers),” Mr. Minakakis told Ms. Strauss.

“With Saks, HBC, Holt Renfrew and Nordstrom's competing in one segment and Target and Wal-Mart pursuing the middle class you can't help but wonder where the fallout will be,” he added.

“In my opinion other Canadian retailers (chains and independents) in the apparel sector are going to feel the increased level of competition especially those that are already vulnerable. It is clear to me that many the apparel sector will have to rethink their leadership and cultural structures to remain competitive. Ultimately Canadian consumers are the benefactors they are about to experience quite a retail renaissance and perhaps with more fun in shopping with all of these choices.”

Perrigo strikes deal for Elan
With today’s HBC move on Saks, and yesterday’s deal between Publicis Groupe and Omnicom, it’s turning out to be Merger Monday.

U.S.-based Perrigo Co., a manufacturer of generic drugs, today struck an $8.6-billion (U.S.) deal for Ireland’s Elan Corp., which had been the target of a hostile bid from a rival firm.

The deal is worth $6.25 a share in cash, and $10.25 in stock.

Not only will Michigan’s Perrigo get royalty rights to Tysabri, a multiple sclerosis treatment, but it also gets to take advantage of Ireland’s tax regime.

“We believe this transaction is compelling for Elan shareholders and fully takes into account the value of Elan’s assets, including a large cash balance and a double-digit royalty claim on Tysabri, a blockbuster product that generated revenues of $1.6-billion last year and has been growing at a compound annual growth rate of 19 per cent,” said Perrigo chief executive officer Joseph Papa.

“We believe the combination of Perrigo and Elan will create an industry-leading global healthcare company with the balance sheet liquidity and operational structure to accelerate our growth and capitalize on international market opportunities.”

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