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Mark Carney and the Liberals need to clear the air Add to ...

These are stories Report on Business is following Monday, Dec. 17, 2012.

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Clear the air
Certain members of the Liberal Party and the governor of the Bank of Canada need to account for their actions lest the revelations of The Globe and Mail fast become the Carney Affair.

I'm not outraged at this point by the flirtations of the Liberals and Mark Carney, as are other observers, but I do believe they need to be aired publicly before the Bank of Canada is tainted, and with it the next governor of the Bank of England.

If it was harmless, let's hear it, rather than get all wrapped up in issues about the impartiality of public servants and the quasi-independence of the central bank.

To recap, as reported by The Globe and Mail's Daniel Leblanc, Steven Chase and Jane Taber, Mr. Carney was courted by some members of the Liberal Party last summer as an alternative to Justin Trudeau as leader.

The effort was led by Toronto lawyer Tim Murphy, former Prime Minister Paul Martin's chief of staff.

Mr. Carney and his family also stayed for almost a week last summer at the Nova Scotia home of Liberal Scott Brison - oops, who happens to be the party's finance critic - though whatever relationship they may have apparently dates back to when the central bank chief was a bureaucrat and the politician was public works minister.

Mr. Carney stressed that he didn't prompt the Liberal effort.

Questions are being raised because at issue is the central bank's quasi-independence, which is sacrosanct and is a superb model in that it does not allow the government to play with the bank, nor an unaccountable governor to go rogue.

Monetary policy has certainly affected politics in the past, in terms of fallout.

Witness the 1993 rout of the Tories amid the terrible recession during John Crow's tenure, or, more importantly where this story is concerned, the majority win of Stephen Harper's Conservative under Mr. Carney's admirable stewardship of the economy during the financial crisis and subsequent slump.

But politics is not supposed to play a role in monetary policy, or be seen to be playing a role.

Hence, the little scandal that threatens to become something more.

Canadians need to know the full extent of what went on between Mr. Carney and the Liberals, and, for that matter, the extent of his relationship with Mr. Brison.

If there's a long-time great friendship there, what's to argue?

We also need to hear about his relationship and discussions with Liberal MP John McCallum, who said he did talk about it all with Mr. Carney, and who, as a former banking economist, cannot plead ignorance where the optics are concerned.

I can understand why the Liberals would want Mr. Carney, but this does not appear to have been particularly well thought out.

One is left to wonder how the country would have embraced him, having learned he'd been flirting with politics while conducting monetary policy.

I won't go as far as some others did this weekend in reading anything into why he spoke to a Canadian Auto Workers union convention, or why he dashed the NDP's argument over Dutch Disease.

Mr. Carney is unlike his predecessors, and that's a good thing.

And I don't for a moment believe any Liberal has affected the course of monetary policy under the current governor.

But I do want to know what happened here. So should all Canadians.  Mr. Carney says we should take everything with "a grain of salt."

If that's the case, let's have it out and put it behind us. If this was the ill-conceived idea of one Liberal, let's hear that.

And if Mr. Carney tried to nip it in the bud, let's hear that too, because that it would be acceptable.

The governor is leaving and the Liberals are a spent force, but we still must protect the sterling reputation of the Bank of Canada, which Mr. Carney himself helped build.

Yen slips amid pressure on central bank
Observers are wondering today just how far Japan’s new government will go in pressuring the country’s central bank.

Victor Shinzo Abe had promised to push the Bank of Japan to act more forcefully as the country fights its fifth recession in 15 years.

Japan is battling inflation and a high yen, which slipped today in the wake of Sunday’s election.

“This weekend’s landslide election victory for the Japanese LDP could well be the precursor to a much more interventionist policy with respect to monetary policy from the new Japanese government,” said senior analyst Michael Hewson of CMC Markets.

“The nature of this weekend’s victory makes it much more likely that the new incumbent Shinzo Abe will be able to follow through on his pledges, pre-election to push the Bank of Japan to be much more aggressive in its policies to fight deflation, and promote economic growth, he said in a research note.

“Part of the LDP’s election manifesto was the setting of a clear inflation target of 2 per cent and to work towards that by means of aggressive monetary easing with the help of the Bank of Japan. With the U.S. Federal Reserve already in full easing mode it seems likely that to make a dent in the high value of the yen the Bank of Japan will have to be much more aggressive than it currently has been in stemming the yen’s strength.”

Indeed, Mr. Abe wasted little time today in suggesting the central bank move at its next meeting, which is scheduled for this week.

“It is very unusual for monetary policy to be a focus of attention in an election," Mr. Abe said, according to the Financial Times.

"But there was strong public support for our calls to beat deflation. I hope the Bank of Japan takes that into account."

Sun Life sells unit
Canada’s Sun Life Financial Inc. is retreating from the U.S. annuity business, selling its operations to a subsidiary of Guggenheim Partners for $1.35-billion (U.S.).

“This transaction represents a transformational change for Sun Life,” chief executive officer Dean Connor said today as he announced the deal with Delaware Life Holdings.

“It significantly advances our strategy of reducing Sun Life's risk profile and earnings volatility, focuses our U.S. operations on our areas of greatest strength and opportunity, and crystallizes future earnings and capital releases that will further support our growth and shareholder value creation.”

As The Globe and Mail’s Bertrand Marotte reports, Mr. Connor has put the focus on plans to invest in its U.S. employee benefits and voluntary benefits businesses.

Home sales slip
Home sales in Canada plunged 11.9 per cent in November from a year earlier as the real estate market continued to cool, The Globe and Mail’s Tara Perkins reports.

On a month-to-month basis, sales slipped 1.7 per cent from October, the Canadian Real Estate Association said today.

Demand has been slowing since August, the group said, after the latest mortgage restrictions brought in in July by Finance Minister Jim Flaherty.

Sales, it added, have been running about 8 per cent below the levels of the first six months of the year.

The national average price for sales slipped 0.8 per cent over the year, while the MLS home price index registered a gain of 3.5 per cent, the smallest increase since May of 2011.

New listings slipped 0.9 per cent from October.

The group also said it expects sales will be “less volatile” in 2013, slipping 2 per cent to 447,400.

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