Thursday, May 21, 2009

What is Ed Clark’s track record of success on public policy?

What inherent conflicts and contradictions exist?

As an Associate Member of Liberal Party at the federal level in the Whitby-Oshawa riding, and as someone interested in economic and financial public policy, I was very disappointed to learn today that according to Brian Laghi and Jane Taber of the Globe Liberal Leader Michael Ignatieff is apparently taking financial policy advice from Ed Clark, former Ottawa bureaucrat and today the CEO of TD Bank.

Is Michael Ignatieff not aware of Ed Clark’s past performance on matters of public policy and his inherent conflicts and contradictions on matters of public policy, in his present day capacity as the CEO of TD Bank?

I am, so let me review them:

Ed Clark is someone I know quite well from the three years that he and I worked closely together while both employed at Merrill Lynch Canada.

Ed Clark came to Merrill Lynch Canada after his foray in government and after the key role he played in the development and roll out of the National Energy Program (NEP) under the Trudeau Liberals in the early 80’s. At that point in time which I worked in Corporate Planning and Economics at Dome Petroleum and witnessed the damage of Ed Clark’s NEP policy on the affairs of Alberta’s energy patch. The NEP was the policy that forever lost the West in terms of supporting the Liberal Party and was the disenfranchisement of the West that political opportunists like Stephen Harper rode to eventual power.

So why is the Liberal Party taking advice from Ed Clark, the architect of the NEP? Do they have some type of masochistic death wish? The better way to answer this question is to evaluate Ed Clark’s track record of success on various major public policy matters and assess what conflicts of interest might serve to explain the inconsistencies in his public policy positions. Something which hopefully the Liberal Party and Michael Ignatieff are ever mindful of?

NEP: Ostensible purpose was to increase the Canadians ownership of the Canadian energy patch, through measures such as the Canadian ownership levy to assist in financing the acquisition of the Canadian operations of one or more multinational oil companies, with the objective of achieving at least 50 per cent Canadian ownership of oil and gas production by 1990, Canadian control of a significant number of the major oil and gas corporations, and an early increase in the share of the oil and gas sector owned by the Government of Canada.

Outcome: The NEP was an unmitigated failure and cost the Liberals immensely in terms of alienating the West from the East

Inherent contradictions: None, as the NEP was consistent with Ed Clark’s PhD thesis about the nationalization of the energy sector in an African country

Possible conflicts of interest: None, as Ed Clark was a paid employee of the Government of Canada

Bank Mergers: Ed Clark was highly supportive of Bank Mergers and was using the example of Canada Trusts’ merger with TD Bank ( of which Ed Clark was then the CEO of Canada Trust) as an example of why other larger bank mergers should be allowed in comments before Parliament in 2003 and in previous speeches while the CEO of TD Bank in 2001

Outcome: Others like me, when I was at the bank of Montreal, were speaking against Bank Mergers using all the same arguments that I would use today, and which have become vastly more obvious in light of the events of the last nine months and the realization that risk should not be pooled into fewer hands and that we should not be creating systemic risk by creating entities that are too big to fail, and hence requiring government bailouts at taxpayer expense in order that they not fail.

Inherent contradictions: Counter to good risk management models to pool more risk in fewer hands.

Possible conflicts of interest: Very high, as Ed Clark is speaking as a CEO of a Bank whose duty is to maximize shareholder value and whose compensation is highly geared to that outcome through a bank merger.

ABCP Bailout:
While on the topic of government bailouts, it is interesting to note that Ed Clark was not willing to commit any funds on the part of TD Bank to the bailout of ABCP, citing his shareholders interests as the sole rationale and the fact that Ed Clark and TD Bank had wisely passed on being involved in the scheme known as ABCP. Who in their right mind would have been involved in the schene known as ABCP. Ed Clark is to be congratulated for doing what none of the other 5 banks did, which was to walk away from such a scheme.

Outcome: ABCP was bailed out by the government. This the completely wrong outcome for all participants, including most of all, taxpayers. If Ed Clark was wise enough to have seen the inherent risks of ABCP, and other people like me, then why is the government bailing out something that was a known identifiable risk at the outset? Why are taxpayers bailing out the known risks taken on by the banks, when felloe banks like TD are washing their hands of it, citing their shareholders interests as the sole rationale?

Inherent contradictions: Significant. Bad for TD Shareholders, but good for taxpayers at large?

Possible conflicts of interest: Very revealing. By citing his shareholders’ interests as the rationale for not participating in the bank bailout of ABCP, reveals whose interests are foremost in Ed Clarks’ mind when it comes to matters of public policy (Liberals take note), Ed Clark stated on December 17 , 2007: “The bank will be willing to consider measures that are in the best interests of TD shareholders and could provide liquidity to the market if it does not involve taking on risk”

Income Trusts:
TD bank was virtually no where in the income trust underwriting business, for the simple fact that income trusts are a retail product sold primarily through the Canadian banks’ proprietary full service retail networks and TD Bank has virtually no (full service) retail brokerage network. By comparison TD Bank is a larger player in the institutionally driven market for common shares and common share underwiting by virtue of having acquired Newcrest back in November 2000. Prior to that TD Bank was a non player in the new issue underwriting market place and was a complete also-ran

Outcome: This policy caused tax leakage where none otherwise existed. It was the breaking of a solemn election promise by Stephen Harper. It’s rationale of tax leakage was totally bogus and fake. TD benefited immensely from the killing of income trusts, even though many of its retail clients did not, because they were at a competitive disadvantage with income trusts vis-a-vis their platform for common share underwriting for corporations. TD Bank used the following self serving logic, while completely skirting around, yet conflating, the issue of tax leakage, to sell the idea of this policy to their clients who were adversely affected:

Dear Mr. Marshall,

Thank you for your recent email addressed to Mr. Ed Clark regarding the
Federal Government’s income trusts proposal and the Tax Fairness Plan.
I understand your concern about the changes affecting income trust
investments, as this is an issue that has been raised by others as well.

As you already know, the Minister of Finance’s plan is based on the
assertion that the federal treasury has lost millions in tax revenue,
and the belief that the growing popularity of income trusts would likely
result in greater future losses of tax revenue to the federal treasury.
As I’m sure you are aware, the Government of Canada began a review of
the income trust sector in September, 2005, leading to a great deal of
uncertainty on this issue. TDBFG considers the fact that there is now a
greater measure of certainty in the marketplace on this issue as being

I would like to thank you for taking the time to share your perspective
with us.


Sarah Kendall
Manager, Executive Response Team

Inherent contradictions: Immense. How could someone who in an earlier life have been responsible for the NEP, whose intent was to increase Canadian ownership of the energy sector, namely Ed Clark and the NEP, be supportive of a policy whose clear outcome was going to be a major reversal in the Canadian ownership of the energu sector given that the US has MLPs (income trust equivalent) and 20% of Canada’s energy production is held in trusts as well as 80% of Alberta’s energy infrastructure and that many, like me, were warning that these trusts were vulnerable to foreign takeover? Which is exactly what happened when Abu Dhabiu Energy bought devalued Prime West Energy with the resultant loss and displacement of average taxable Canadians investors with a tax stripping LBO and the same exercise with the opportinictic and trust tax driven foreign takeover of TransAlta Power by Hong Kong billionnaire Li Ka Shing?

Possible conflicts of interest: Immense for the reasons cited above

HST: TD Bank’s Ed Clark is reported to be the main driver behind Dalton McGuinty’s HST

Outcome: Ed Clark’s HST has the potential to be for Dalton McGuinty what Ed Clark’s NEP was for Pierre Trudeau, at least it deserves to since it pits corporation against consumer in the same way that the NEP pitted East against West, and simply represents a shifting of $2 billion in annual tax burden from corporations onto consumers, with the government being the broker in this “trade”.

Inherent contradictions: Significant. TD Bank is primarily an Ontario based retail banking franchise. What TD retail client is going to like this policy and will be comforted by knowinh their bank was instrumental in its introduction? The income trust tax was (falsely) sold as being a tax to prevent the shifting of tax burden from corporations to average taxpayers, even though no such shifting was taking place. Any one who bought that line of logic in accepting the income trust tax as good, should by definition not like the HST. To like the income trust tax (as Ed Clark does) is to hate the HST (which Ed Clark does not)?

Possible conflicts of interest; Immense, given that TD Bank’s retail customers are paying for this and TD bank itself is the beneficiary. How much in taxes does TD Bank expect to save from the HST?


Anonymous said...

Seems like everyone is wrong, everyone is stupid, everyone is not the right person or whatever with you.

CAITI said...


Deep penetrating comment from usual.

Did you even read the piece?

Which parts do you agree/disagree with and for what reasons?

I await your insightful views with bated breath.

Anonymous said...

Very insightful post. Curious why there was no mention of the other 2 at the dinner? Or maybe that is later today?

David Dodge and the Fortin dude have been mentioned on this forum in other postings. Both usually complimented for their work and abilities in the financial industry. Mr. Fortin wrote a very long paper on Income Trusts in 2006. From what I understand, his paper should have been REQUIRED READING for every single MP in Canada regardless of political party.
While I wasn't pleased to read about Mr. Clark's presence, I did find it very interesting the other 2 present are supporters of the Income Trust cause. Supporters could be an incorrect term, but both at least understand the issue and all the arguments.

I found it equally interesting Mr. McCallum wasn't there.

Maybe to shut this other anonymous up or prove them wrong on the chronic negativity point, while being helpful for followers who still need info gaps filled in, perhaps something about David Dodge and Mr. Fortin are in order? Thanks in advance for considering.

CAITI said...


That is a different Fortin that we think highly of....Yves Fortin.

David Dodge is two faced on the income trust matter. There is what he said immediately before October 31, 2006 of his own volition (good) and then there is what he said after, when told to do so (bad)

Bottom line: jerk

Anonymous said...

Bottom line: Lame.

Transcanada said...

To Anonymous:

Your comment: Lame.

My comment: You?

Anonymous said...

Thanks for clarifying about David Dodge and Yves Fortin. Much appreciated.
No wonder I was confused and actually feeling stupidly optimistic after reading that Globe article this morning ...

CAITI said...


I took Anonymous' comment to mean that Ed Clark's track record of success on public policy is LAME.

Anonymous said...

At what point do you think Iggy will clue in and actually trust his support base to form his policies? Ever?

Seriously, if I were a Liberal supporter right now, I'd be pretty pissed.