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Mark Carney's nose is clean, but Liberal courtship ill-advised

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

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Nothing inappropriate, central bank says
The Bank of Canada moved today to squash a budding controversy over Governor Mark Carney's summer visit to Liberal MP Scott Brison's vacation home. Now, it's the Liberal Party's turn to answer some questions.

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There was nothing inappropriate about the visit by Mr. Carney and his family, the central bank said, noting that the governor and Mr. Brison have been friends for about 10 years.

Even though Mr. Brison is the Liberal finance critic, I agree there's nothing untoward about the visit given that their friendship spans a decade. I still, however, question the wisdom of a small group of Liberals who tried to recruit Mr. Carney for a Liberal leadership bid.

"The Bank of Canada's general counsel, who is responsible for enforcing the bank's conflict of interest policy, has assessed that this visit does not breach the Bank's Conflict of Interest guidelines in any way," a spokesman for the central bank said in a statement.

"Neither the Bank of Canada, nor Governor Carney, have an actual or potential commercial or business relationship with Mr. Brison," he added.

"Mr. Carney's acceptance of hospitality provided by a personal friend does not arise out of 'activities associated with official bank duties.' Nor can it be defined as partisan or political activity."

The central bank's comments followed a story in The Globe and Mail on how a small group of Liberals courted Mr. Carney over the possibility of a Liberal leadership bid against Justin Trudeau.

The issue, of course, is the separation of monetary policy from politics, and Mr. Carney has said he did nothing to prompt the Liberty effort

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But the decision among some in the party to court Mr. Carney to run against Mr. Trudeau seems rather dumb, despite the central banker's obvious attractiveness to voters. And questions remain over why he doesn't appear to have nipped the Liberal courtship in the bud.

He is leaving his current job early to take the position of governor of the Bank of England, but you've got to wonder how the country would have embraced him had he jumped from the central bank to politics before his term was up, and upon learning that he'd been flirting with politics while conducting monetary policy.

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.

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"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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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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