The counterfeit motives and false claims of Mark Carney
Counterfeit motive: altruism
False claim: tax leakage
A classic Globe & Mail article from February 2005 featured a photo of Mark Carney and profiled the new members in the Department of Finance. Mark Carney was held out to be some kind of altruistic boy wonder -- who gave up the comfortable life of Wall Street and his job at Goldman Sachs to “do good” for Canada in the Department of Finance.
How selfless of him!
Subsequent events, such as interaction with many executives in the income trust industry and his testimony at the public hearings at Flaherty’s side, have cast serious doubt on whether Mark’s career move was anything remotely resembling altruism. It seems that it was rather a career move, a trade-off between getting rich the slow and predictable way at Goldman Sachs or foregoing the immediacy of today’s payday and “investing in the long term” by entering the civil service and making the wheels of government do his Machiavellian bidding. all the while catapulting him to levels unthinkable as just another everyday intermediate level Goldman Sachs investment banker.
That trade-off made was made rather obvious by the G&M article, in which the altruistic spin on Mark’s career move was in complete disharmony with his compensation musings of:
“Several thoughts flashed through Carney's mind. He was due to take over as senior associate deputy minister of finance (No. 3 in the department hierarchy) in a few weeks, and the Petrocan windfall was a lot bigger than expected. Yet he also knew there would be about $15 in new spending requests for each dollar raised. He briefly imagined some new tanks for the military, or saving a plant full of workers, but he also realized he would never see details of any requests, just the total dollar figures. The 39-year-old former investment banker with Goldman Sachs did a quick mental calculation as well: At his public service salary, he'd have to work about 250 years to earn the equivalent of the $56 million in fees paid to the investment banks that acted as underwriters on the Petrocan deal. "I don't think there are many transactions in Canadian Capital Market history that have worked out better for the client," said one investment banker involved in the sale. "And Carney was the engineer behind the deal." (Globe and Mail, February 2005)
Doesn’t sound very altruistic to me. More like selfish remorse and second thoughts about his career move decision.
It is also oddly coincidental that this same article reported that tax leakage from income trusts was costing the government $50 million a year (according to Deputy Minister of Finance Ian Bennett). Funny that after Mark Carney took over the file, he had found a way to pump up that bogus number by ten fold to $500 million a year. You'd think the income trust market had grown by tenfold from February 2005 to February 2007. It hadn't. But that didn't stop Flaherty and Carney from “talking up” that inflated and thoroughly fanciful figure at the Public hearings into Income Trusts in 2006 and “pumping it up” to the press. See http://caiti-online.blogspot.com/2007/10/pump-it-up.html
Here is the relevant passage:
“Income trusts are another headache. Companies that convert themselves into trusts are allowed to pay out the lion's share of their cash flow to investors very tax efficiently. There has been a deluge of trust conversions over the past few years, and more than 15% of the issues on the Toronto Stock Exchange are now trusts of one form or another. In total, they cost Ottawa about $50 million a year in lost revenue. That's modest, but what if every business in the country converted itself? Of course I worry about these things," says Bennett.”
We are simply left to ponder the ultimate end game behind the counterfeit motives and artifice claims of Mark Carney. He must have pleased his new employers though, because he catapulted over the several others who were in line to head the Bank of Canada.
Step right up folks!
Here is the full text of the article.
Monday, November 12, 2007
Posted by Fillibluster at 3:03 PM