The Liberal practice of announcing massive emergency programs without much detail jumped the shark on Monday, when the government declared itself the lender for companies that can’t get loans, without much explanation of how it will work.
The LEEFF, as the latest lending program is called, is a fig leaf. It is in part designed to help Prime Minister Justin Trudeau’s government to get around a tricky political problem: They had to help out the beleaguered oil sector without upsetting Liberal voters who don’t want government to bail out the oil sector.
Once upon a time, eight weeks ago, Finance Minister Bill Morneau and the mandarins of the Finance Department were working on “sectoral” bailout plans to send a lifeline to hard-hit industries such as airlines, tourism, retail and oil and gas. But that would have meant a day of announcements about an oil bailout that would alienate some green-conscious voters.
Instead, there will now be an all-sectors plan to lend to any kind of large company that can’t get a loan from anyone else, under terms and conditions that weren’t made entirely clear.
What was clear – in what has gone from emergency practice to standard practice – was that the announcement was built around a marketing plan, with business plan to follow.
That was understandable in March, when the government scrambled together emergency benefits for Canadians forced to stay home. When the Liberals flip-flopped to offer a 75-per-cent wage subsidy, the Prime Minister announced it on a Friday but left Finance Department officials to work out the program during the weekend – but the earlier announcement might have forestalled some layoffs.
But now, six weeks after the government was supposed to have aid programs for industrial sectors, it still didn’t have much to tell Canadians about its major new program.
Instead, there were now-familiar slogans uttered by both Mr. Morneau and Innovation Minister Navdeep Bains at a press conference on Monday morning: “We Have Your Back.” That’s part of the marketing of the COVID-19 Economic Response Plan (trademark) – a title reminiscent of the Economic Action Plan label that Stephen Harper’s Conservatives plugged onto every budget item after the 2008 financial crisis.
The sales job, not urgency, now seems to be the driver of these details-later announcements.
The big-business lending program is a big deal. The basic idea is to lend troubled companies money to stay in business until things bounce back. Great. But the basic mechanism is that the government will provide loans of $60-million or more to companies that can’t get loans from banks. That’s got to be risky business and could leave taxpayers on the hook for billions and billions. It would be good to hear how it will work.
Yet the announcement was driven by what it isn’t. First, what was left unsaid: It isn’t a bailout for the oil patch. The politics around bailing out the oil sands without appearing to do so was critical to program design.
Other things were said about what it isn’t. “These aren’t bailouts,” Mr. Trudeau insisted Monday. “They’re bridge loans.”
They’re bailouts. So what? If they work to keep otherwise-doomed large employers alive, that’s good. But bailing out big companies isn’t as popular as lending to small business, so Mr. Trudeau sold the plan with caveats first. Recipients will have to honour union agreements and maintain jobs, file unspecified reports on climate-change goals, interest rates will not be low, the money won’t go to companies that have been convicted of tax evasion and the loans can’t be used for excessive pay to executives – although Mr. Trudeau wouldn’t say how much is too much.
But there was a lot missing about risk, accountability and, well, business. How much money will be lent? No figures. Will the government disclose who gets it? Mr. Morneau said vaguely that there would be transparency. Will Ottawa stop foreign takeovers of companies that get the money? No real answer. How long will the loans last? Don’t know.
The terms are still to come. What about the risk of not getting paid back? Mr. Morneau said the loans will not go to companies that were going bankrupt before the COVID-19 crisis, but didn’t explain how, or if, the government will judge if a company is unsavable now.
Making announcements, with major explanations to follow, is now standard. Six weeks ago, it was a byproduct of emergency response. Now, it is part of the sales plan.