The incredible Mark Carney.....as in, NOT credible

Paul Jenkins was the Bank of Canada’s selection for the Governor of the Bank of Canada by its Board of Directors, before Jim Flaherty stepped in to overrule them and install someone more to his liking, namely Mark Carney.

Jim Flaherty thought that some one who worked "on Wall Street" for 14 years at Goldman Sachs was more suited to run the Bank of Canada, than someone who had worked at the Bank of Canada for over 20 years and had worked his way up the ranks to the point where he had earned the confidence of its Board of Directors.

That is the way, ie meritocracy, in which leaders of important institutions are supposed be selected, instead of Finance Ministers indiscriminately installing people of their own choosing through a system known as reciprocity or nepotism.

You scratch my back, and I’ll scratch yours. Why do you think there is such he backlash over the appointment of Michael Sabia as head of the Caisse, if nepotism/reciprocity/back scratching was the better way to go?

Mark Carney’s installation by Jim Flaherty to head the BoC, has led to the politicization of the Bank of Canada and an emasculation of its Board of Directors and the entire organization to become the instrument of a partisan political organization....the CONs.

Meanwhile, Canadians have the privilege of living with the incredible Mark Carney. So let’s put Mark Carney’s credibility to the test. You be the judge:

1. How credible was it for Mark Carney to have promised that taxpayer money would never be used to bail out ABCP investors, only for that very thing to occur? Or were Canadians simply being gamed by Mark Carney?

February 18, 2008: "It was absolutely clear from moment one that there was not going to be any public money put behind any of this [ABCP] because these are decisions of financial market participants," Carney said.

As we all know, that was an empty promise of false hope proffered up by Mark carney because the eventual deal involving ABCP DID involve several billion in a taxpayer bailout. Strike One to Carmey's credibility.

2. How credible was it for Mark Carney to say that Canada’s recession would be very short lived and that the economy would rebound to a growth of 3.5% by the fourth quarter of this year? Or were Canadians simply being gamed by Mark Carney?

February 9, 2009: “The Bank of Canada said the "anticipated normalization" of the global financial system, together with stimuli from both monetary and fiscal policy, would help drive growth starting in the latter half of this year - with fourth-growth output hitting 3.5%, then 3.8% for 2010.

As we all know, that was a politically motivate forecast that probably 9 out of 10 Canadians on the street would never happen. Not surprisingly, Mark had to revise thse forecasts of false promises. Strike Two to Carney's credibility.

3. How credible was it for Mark Carney to say that the purpose of his income trust tax was to stop the loss of taxes and to put income trusts on a level playing field with corporations? Or were Canadians once again being gamed by Mark Carney.? This is not a trivial question. Canadians must trust that the Governor of the Bank of Canada is acting in their interests and not serving some other agenda, or group of interests.

What would an investment banker who spent his whole career working for Goldman Sachs know about Canadians saving for retirement? What is his background distinguishes him in that regard? Advising Russian oligarchs, as he did, on how to rip off the Russian people? Meanwhile it needs to be understood that Goldman Sachs does not have single client that is a Canadian saving for retirement.

Goldman Sachs, does however have many large pension funds who are clients who would benefit from the carve out that Mark Carney drafted into the income trust tax legislation that allows them to own income trusts and not pay the 31.5% tax. Isn’t that strange, but certainly not coincidental?

Goldman Sachs also has many private equity clients who would benefit from the takeover of his income trust tax that were made vulnerable by that very legislation. Isn’t that strange, but certainly not coincidental?

Goldman Sachs does have many corporations who would directly benefit from removing competing users of capital from the scene so that they could dominate the landscape which is exactly the testimony provided by the CEO of Manulife, a client of Goldman Sachs. Isn’t that strange, but certainly not coincidental?

Goldman Sachs, themselves became active investors in the devalued income trusts that followed Mark Carneys legislation. Isn’t that strange, but certainly not coincidental?

Goldman Sachs was able to secure some highly lucrative assignments in the immediate aftermath of Mark Carneys income trust tax, such as the $48 million fee that they would have earned on the BCE deal, if it hadn’t cratered. Isn’t that strange, but certainly not coincidental?

So who do you really think Mark Carney is working for? Is it credible to think that he is working for Canadians, or simply gaming Canadians? Is he working for Canadians or Goldman Sachs and the clients of Goldman Sachs, none of whom, by definition, can be considered as average Canadians

This question concerning Mark Carney’s loyalty to the country he ostensibly serves can easily be put to the test, and be resolved once and for all.

Mark Carney claimed that income trusts needed to be eliminated in order to stop the loss of taxes. We all agree that investment vehicles should not be subsidized with taxpayer money (even though that’s exactly what Flaherty has done with ABCP). We also, all agree that transparency/disclosure is absolutely essential to both financial markets and government accountability. Therefore, to quote Diane Francis: “Prove the case or drop the tax”

Proving the case should be very simple. We know the work was done, Otherwise there would not have been 18 pages to circulate, all of which were blacked out. What is the big secret? What are the numbers? Mark, this isn’t Russia, it is Canada.

Is Mark Carney trying to hide the fact that his analysis was rigged to generate a faux tax leakage argument by leaving out the taxes collected from RRSPs? If so, Mark Carney left out 38% of the good, in his good/bad analysis. Hoe can Mark Carney justify such a move? Ignoring the deferred taxes collected from RRSPs in making tax policy decisions only serves to completely negate the reason why RRSPs were established in the first place, namely to confer a benefit to people in order to ensure a good societal outcome, i.e. so that people would have adequate resources for their retirement. Meanwhile deferring taxes costs the government nothing in economic terms, since the present value of these deferred taxes, exceeds the present value of these taxes had they been paid today.

Who working for Goldman Sachs’, past or present, doesn’t understand that economic principle? If they don’t understand something as rudimentary as that, they would have been fired from Goldman Sachs a long time ago. Come to think of it, that’s exactly how Mark Carney ended up in Ottawa. He was downsized from the Toronto office of Goldman Sachs in 2003, after the failed IPO of Ontario Hydro. Which was the very deal on which I first met Mark Carney.......incredible. He was trying to sell Ontario Hydro from the Ontario government to Goldman’s US institutional investors first and foremost, and I was trying to sell Ontario Hydro to individual Ontario tax payers, Canadian investors, and only if there was any stock enough left over, to the rest of the world. Mind you I never thought the deal made much sense for Ontario taxpayers in the first place and wasn’t unhappy to see it pulled.

Meanwhile Mark’s reaction to that outcome was another thing indeed.....briefcases flying into awaiting elevators.....incredible. Just like the man himself. Unfortunately that elevator ride took him to where he is today......gaming Canadians.