Earlier this week Tory chancellor George Osborne named the new governor of the Bank of England—the Canadian banker Mark Carney, who will take over from Mervyn King.
The British establishment responded with lavish praise for Carney. He is credited with guiding Canada’s banks through the financial crisis and enabling them to survive without a bailout.
Osborne said Carney “has done a brilliant job for the Canadian economy as its central bank governor, avoiding big bailouts and securing growth”.
Former Labour chancellor Alastair Darling hailed Carney as a “new broom” with “a clear grasp of what had gone wrong and what to do”.
The truth about Carney’s record is very different. He is unashamedly a banker for the 1 percent. And his new salary of £624,000 a year—plus a relocation and accommodation package—is indicative of his approach to economics.
Carney worked for 13 years as an investment banker with Goldman Sachs—including advising Russia during its 1998 financial crisis at the same time as the bank was betting against the country’s ability to repay its debt.
From 2004 to 2007, Carney worked with the Canadian Department of Finance, at the tail end of a Liberal government that had slashed billions of dollars from social programmes and corporate taxes. This was effectively a pre-emptive bailout before the economic crisis hit.
And the bailouts didn’t stop there. The World Economic Forum praises Canadian banks for being “well capitalised, well managed and well regulated”. But they have been repeatedly “well capitalised” from public funds—from tax cuts through the 1990s to bailouts during the crisis.
Canada’s Conservatives came to power in 2006 and named Mark Carney governor of the Bank of Canada in 2008. Carney recently recalled, “It was a good thing we didn’t press pause when we provided over $30 billion (£19 billion) of liquidity to the Canadian banking system.”
This “provision of liquidity” amounted to a massive bailout of Canada’s banks from three sources. By December 2008, Canadian banks had received loans from both the Bank of Canada and the US Federal Reserve. While these were repaid, the fact that they were required in the first place indicates how unstable Canadian banks actually were.
But more important than loans were direct cash injections from the Canada Mortgage and Housing Corporation (CMHC). Through the CMHC, the Canadian government bought $69 billion (£43 billion) in mortgages from Canadian banks—a direct bailout that continued beyond the official “end” of the recession in 2009.
So Canadian banks didn’t sail serenely through the crisis—they nearly sank. As the Canadian Centre for Policy Alternatives put it, “Three of Canada’s banks—CIBC, BMO, and Scotiabank—were at some point completely under water, with government support exceeding the value of the company.
“By March 2009, government support for Canada’s banks peaked at $114 billion (£72 billion)… That support represents a subsidy worth about $3,400 (£2,100) for every man, woman and child in Canada.”
This was a transfer of wealth from the 99 percent to the 1 percent. During this period the banks reported billions of dollars in profits, while their chief executives grabbed big bonuses.
Carney occasionally criticises the financial sector, but he still believes that “by restoring capitalism to the capitalists, discipline in the system will increase and, with time, systemic risks will be reduced”.
But faced with an economic crisis caused by the long term problems of profitability in capitalism, Carney participated in bailing out banks while ordinary people’s jobs and services were slashed. The perspective Carney brings is not new and fresh—it is old and rotten.
Jesse McLaren is the editor of Socialist Worker (Canada)