Born in the Great Depression, tested and proven in the Great Recession, the Bank of Canada is home to the most powerful unelected officials in the country. Formed in the 1930s, it is young by global standards, compared to the Bank of England’s beginnings in the late 1600s, the Bundesbank’s in the late 1800s and the Federal Reserve’s in the early 1900s. Eight men have held the influential position of governor since it opened in March 1935
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The pioneer: Graham Towers, 1934-1954. Mr. Towers was very much a man about town when, at 37, he was named the world’s youngest central bank chief and set about to build the Bank of Canada from scratch. With his wife Molly, he lived the high life in Ottawa as part of the establishment. Born in September, 1897, he studied economics at McGill University, served as a supply officer in the First World War and, on the advice of Stephen Leacock, was hired by Royal Bank of Canada. From there, he was tapped as the first governor of the Bank of Canada, whose shares at the time were owned by the public, though it would be nationalized during his tenure, which ran until early 1955, almost the end of three terms. These were different times. Central banking was new to Canada, the bank’s policy rate was fixed, and commercial bank lending rates were capped. Thus, there was trouble in trying to strike a grand vision. It was the war effort that helped pull Canada out of its economic malaise.
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The rebel: James Coyne, 1955-1961. He’s known as the man whose pitched battle with the Diefenbaker government led to the system of effective central bank independence we have today. Mr. Coyne had been a Rhodes scholar when he joined the Bank of Canada’s research staff in 1938, followed by stints at other agencies. He was brilliant, sophisticated, a man with a sense of humour, handsome, and, at the time, deemed to be the most eligible bachelor in Ottawa. He was committed to his battles, which included inflation, foreign ownership and government policy. Under Mr. Coyne, interest rates rose sharply, prompting several economists to seek his ouster. He was restrictive in his policy, while the government of the day wanted something looser, though it chose to attack him, and eventually force him out, over the misguided and unfair pretext of his pension. Mr. Coyne engaged in a war with the government that would lead to his resignation in 1961 after what became known as the “Coyne Affair.”
STF/THE CANADIAN PRESS
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The healer: Louis Rasminsky, 1961-1973. A story is told of Mr. Rasminsky that, while no doubt apocryphal, is a lovely tale about a lovely man. When, at 22, he scored a job in Geneva, he wired Lyla Rotenberg, his “sweetheart” in Toronto, proposing marriage and advising he’d be earning 13,700 Swiss francs. She wired back, wanting to know the exchange rate on the franc. Born in Montreal in 1908 he won a scholarship to the University of Toronto and then went on to the London School of Economics. Having to rebuild morale at the Bank of Canada on his appointment, he devised the system of bank independence, knowing it would be an issue: In the case of a disagreement the government can issue a directive outlining the policy it wants followed. Otherwise, the central bank is responsible for monetary policy in the normal course. He was wise in his approach, telling an interviewer a central bank must be answerable in a democracy, but monetary policy could not be set by the minister of finance.
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The scientist: Gerald Bouey, 1973-1987. Mr. Bouey once said “there’s a certain amount of science” in the art-and-science combination of monetary policy. For Mr. Bouey, and the nation, neither the art nor the science worked particularly well. Having grown up on the prairies in the Depression, Mr. Bouey joined an RBC branch in Saskatchewan at 16, then the Royal Canadian Air Force, and then headed for Queen’s University, winning the Economics Medal on graduating in the late 1940s. From there, it was to the research department of the Bank of Canada and, eventually, senior deputy under Mr. Rasminsky. His era as governor was marked by rampant inflation. It was an era driven by Paul Volcker, named Fed chief in 1979 and whose crusade against inflation sparked the ugly recession in the early 1980s. The Bank of Canada followed Mr. Volcker, with a recession that would push prime lending rates to 22.75 per cent, leading to crippling unemployment and homeowners losing their properties as mortgage rates rose.
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The zealot: John Crow, 1987-1994. If anti-inflation were a religion, Mr. Crow would be its high priest. Born in 1937 in a poor London area, he did two years of service in the Royal Air Force, then headed to Oxford and later to the IMF in Washington. The year Mr. Bouey became governor, Mr. Crow joined the bank as research department deputy chief. Soon, he was chief, then an adviser to Mr. Bouey, then deputy governor and, finally, senior deputy before taking the top job. His era, too, was marked by recession amid his quest for zero inflation, as the prime commercial rate hit 14.75 per cent and unemployment about 12 per cent. He was supported by Prime Minister Brian Mulroney and Finance Minister Michael Wilson, whose Tories would be destroyed in the 1993 election. Mr. Crow also ushered in the era of inflation targets, in a 1991 deal with Mr. Wilson for a target of 2 per cent by the end of 1995, and a band of 1 to 3 per cent. He could not reach an understanding with Mr. Wilson’s successor, Liberal Paul Martin, and was soon gone.
J.P. MOCZULSKI/The Globe and Mail
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The steward: Gordon Thiessen, 1994-2001. Mr. Thiessen, in turn, could reach an understanding with Mr. Martin, and they agreed to extend the same target, rather than cut it further. The quiet Mr. Thiessen studied at the University of Saskatchewan, lectured for a while, then joined the Bank of Canada’s research department in 1963. With some time out for a PhD at the London School of Economics, and later as a visiting economist at Australia’s central bank, he was named senior deputy under Mr. Crow, . By the time Mr. Thiessen took the helm, interest rates and inflation were more stable and the country’s wounds were healing. But unemployment was still above 11 per cent and, just a week into the job, Alan Greenspan’s Fed was fretting about inflation and hiked rates for the first time in five years. That would be just the first move, and Mr. Thiessen was loath to take a heavy hand. To his credit, he tried to resist the Fed’s pull. In time, though, and as the dollar dipped, his hand was forced.
Fred Lum/The Globe and Mail Newspaper
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The professor: David Dodge, 2001-2008. By the time he got to the governor’s desk, Mr. Dodge was steeped in the ways of Ottawa, with an impressive track record of having helped Mr. Martin slay the deficit. Born in 1943, he studied economics at Queen’s, going on to a PhD at Princeton, then to teach at Queen’s, and later Johns Hopkins. He found his way to the Finance Department, becoming deputy minister in the early 1990s, and later deputy health minister. Mr. Dodge, well known for his pipe, helped fight the credit crunch that preceded the last recession, though the main battle would be waged by his successor. He’s frank, and he has a winning style, once responding to questions about the strong dollar that Canadian shoppers should seize the day and demand lower prices from retailers. As his term wound down, he wondered, in an interview with The Economist, whether he should have been “driving those rates harder than we did” before the crisis.
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The rock star: Mark Carney, 2008-2013. One wonders if even Mrs. Carney isn’t rolling her eyes by now at all the talk about her celebrated husband being a “rock star” and the “Wayne Gretzky” of central banking. That’s not to suggest he’s not, only that it got somewhat thick this week after Mr. Carney was tapped as the next governor of the Bank of England. Mr. Carney was born in Fort Smith, NWT, raised in Edmonton and, in time, studied at Harvard and then for a PhD in economics at Oxford, where he met his British-born wife. He travelled the world, with Goldman Sachs Group Inc. in London, New York and Toronto. He steered Canada through the financial crisis and recession, which, in fact, was milder than the recessions during Mr. Bouey’s and Mr. Crow’s terms. He is credited with having had a strong hand on the tiller, slashing interest rates to emergency lows and admonishing Canadians for taking on too much debt.