Evidence of meeting #40 for Finance in the 40th Parliament, 3rd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was bank.
A recording is available from Parliament.
Conservative
Ted Menzies Conservative Macleod, AB
I would like some comment from Mr. Macklem, because I know he has played a very pivotal role in all of this.
Tiff Macklem Senior Deputy Governor, Bank of Canada
Sure. First of all, I'm very pleased to be here and I'm glad I'm missed. It's always good to be missed.
A couple of comments.... Going back to Toronto, the Toronto summit of the G-20 was really the first place where this framework for a strong, sustained, balanced growth was put to the test. It's worth underlining that a great deal was achieved in Toronto. First of all, just in the lead-up to Toronto, there were a number of important announcements. The Chinese announced they were moving back to a more flexible exchange rate--certainly a positive development. We would have liked to see a little more flexibility than we've seen, but certainly a step in the right direction, and a number of other steps were taken.
It was a comprehensive agreement, including sustainable fiscal policies on the part of advanced countries, efforts and policies to boost internal demand in emerging market economies, and importantly, supported by more flexible exchange rates as well as structural adjustments that we all need to undertake to support growth. If you go back and look at the action plan, it's really quite a detailed action plan, but there is a considerable amount of work to do to implement it.
I think you want to take the steps achieved this weekend in Korea as evidence that this is moving forward. Starting to look at things like putting down specific indicators of sustainable current account imbalances is a way to implement those commitments and to make it measurable, make it real. In Toronto there were specific numerical agreements around what it meant to have sustainable fiscal policies for advanced countries. The next step now is looking at specific indicators around sustainable current account imbalances.
Certainly Canada is continuing to put a lot into this. As the governor said the other day, we need to be relentless, and I think we are looking forward to more progress.
October 26th, 2010 / 3:55 p.m.
Conservative
Ted Menzies Conservative Macleod, AB
Perhaps we can switch gears to something that my colleague Mr. Wallace and I have often discussed in sidebar conversations, which we get in trouble for, of course, but we do this after a committee, of course.
Governor, you talked about an inflation control target. We picked 2%. Are we going to take a look at whether that's relevant today? I think that language was yours, inflation control target.
Governor of the Bank of Canada
Yes, absolutely. I'll answer very briefly, Chair, and perhaps members want to expand.
The inflation control target agreement, as many members know, is a five-year agreement. It matures at the end of 2011 and is part of the preparation for discussions about whether the government should extend the agreement verbatim, effectively as is. The bank is looking, and has been looking over the course of the last four years, at a variety of issues.
There are three main ones. The first one is whether the rate of inflation should be lower. What is targeted is lower than 2%. What's magical about 2%? We can expand on that, if you'd like. The second issue is whether there's merit in moving the price-level targeting. I won't explain it, given the time, but I will, if asked. The third one is about the important issue that we began to discuss, Mr. Brison's question about the relationship between monetary policy and financial stability, and the aspects of that and whether that has any bearing on future agreements.
Those are the three aspects, so your question is very on point.
Conservative
NDP
Thomas Mulcair NDP Outremont, QC
Thank you, Mr. Chairman.
It is always a pleasure having the Governor of the Bank of Canada here, a person who, in my view, has greatly contributed to maintaining stability through what has been one of the biggest crises in the history of our country.
I am going to ask some technical questions, but also some about the institution. It will come as no surprise to Mr. Carney that I would like to discuss the appointment of Mr. Hodgson. I had occasion to comment publicly on that over the summer.
I would like to begin by saying that when you appoint an individual, you have to make sure that people do not think the individual is under any accusations. Mr. Hodgson has an extraordinary track record, just like Mr. Carney, in point of fact. The fact that he worked for Goldman Sachs does not make him damaged goods that have to be rejected. The question is how can you appoint Mr. Hodgson, who was chief executive officer at Goldman Sachs Canada, and give him a key role in developing our reforms, when he says from the outset that he will only be there for an 18-month term.
This issue of revolving doors is of concern to all parliamentarians. There are some very strict rules that apply to us and our staff, as well as parliamentary secretaries and ministers, especially. So we see a problem with this situation, a problem of perception, of course, but there could also be an underlying problem.
I would ask Mr. Carney to explain to us how he can accept this appointment for such a short time—18 months in the life of an institution like the Bank of Canada is very short—and allow Mr. Hodgson to return to the private sector after gaining in-depth knowledge of all of the internal aspects of the architecture and projects of the Bank of Canada. I have to admit that the situation raises substantive issues in my mind about the stewardship of our institutions.
Governor of the Bank of Canada
I am a bit disappointed by that question. Mr. Hodgson is an extraordinary banker. He wants to serve our country however he can. The Bank of Canada has special advisers to the governor positions. They are temporary positions, precisely for the purpose of recruiting a theorist—a professor, a businessman or a businesswoman—to work at the bank and help the bank to achieve specific goals.
NDP
Thomas Mulcair NDP Outremont, QC
Mr. Chairman, since my time is limited, I would like to clarify the question for the governor.
NDP
NDP
NDP
Thomas Mulcair NDP Outremont, QC
I got the beginning of an answer and I would like to clarify the question.
Conservative
The Chair Conservative James Rajotte
Order. Let's go one at a time.
Mr. Mulcair, if you would pose your question, please, we'll have Mr. Carney respond.
NDP
Governor of the Bank of Canada
It is an 18-month commitment because of a very important mandate for our economy, for our financial system, and that is transitioning the OTC derivatives market to an official trading market, the central counterparty. It is a very complex operation that has to be performed. We have to get it done in 18 months. It is a G20 commitment. It is the Prime Minister of Canada's commitment to the G20. So it has to be done quickly. Mr. Hodgson severed all ties with his former employer and all of his assets have been put in a blind trust—
NDP
Thomas Mulcair NDP Outremont, QC
Mr. Chairman, I appreciate Mr. Carney's attempt to avoid answering the question, but I will clarify it again. He has expressed his disappointment with respect to this question, and I will express my disappointment regarding his attempt to dodge it.
I did in fact begin my question by saying that I had absolutely no doubts whatsoever about the competence of Mr. Hodgson, quite the opposite. However, Mr. Carney is avoiding the issue by claiming that Mr. Hodgson is serving the public and has put his assets in a blind trust. That has nothing to do with the matter. Moreover, he is certainly no theorist or professor. This is somebody who has come from the private sector, who is going to have an intimate knowledge about this new structure, he is going to have designed it, and he will be able to go back to the private sector through a revolving door, unless I have misunderstood. If the Governor of the Bank of Canada is telling us that I am mistaken, that Mr. Hodgson will not be going back to work in the private sector, I will offer him an abject apology, but I understood from the beginning that he would be spending 18 months with the Bank of Canada and that he could then go back to the private sector. That is what concerns me, as far as perception goes, Mr. Chairman.
Governor of the Bank of Canada
Yes, but your question is not clear. If you feel that no one can work for the Government of Canada, for Canadian agencies, without then becoming... What should you do afterward?