Delay casts suspense over Bank of Canada governor selection
With the announcement due in days, the overwhelming odds remain that second-in-command Tiff Macklem will be appointed the next governor of the Bank of Canada.
Yet the nearer the date approaches to Mark Carney's June 1 departure for London, questions are being asked about what is taking Finance Minister Jim Flaherty so long to confirm what markets and economists have long considered a near slam dunk.
It's been a full five months since Flaherty has known his first appointee to the central bank was taking his leave early, and even though the finance minister said there would be no shortcuts in the search for a successor, few expected it would take this long.
"Handicapping this is like trying to handicap a Harlem Globetrotters game. I'd give it about 85 per cent probability," says Bank of Montreal chief economist Doug Porter.
But, he then adds: "I will say the fact it's dragged out this long makes me wonder if there is an issue, here. Why has it taken five months?"
Many in the Bank of Canada, who are said to be pulling strongly for the likable Macklem, are on pins and needles about the delay, according to insiders.
Adding to the suspense — and doubts — is the fact that the last time Flaherty had a choice to make about the governor, he plucked a relative dark horse out of his department rather than do as expected by promoting then senior deputy Paul Jenkins.
The search process has been run by a separate board of directors of the central bank in secrecy so tight that until Macklem himself surprisingly let it be known at a committee meeting last week that "If asked, I will serve," nobody outside the inner circle even knew for certain who had applied. It is believed that Flaherty got a short list of the potential candidates a few weeks ago and has completed the interviews.
Still, the rumour mill has the 51-year-old senior deputy, who's full name is Richard Tiffany Macklem, the prohibitive favourite.
Macklem tops list
A recent Reuters poll of 16 analysts unanimously named Macklem a front-runner. Well back in second was Stephen Poloz, the head of Export Development Canada with seven votes and Jean Boivin, a former deputy governor currently at Finance in third with four. Others who made the list were deputy governors Timothy Lane and Agathe Cote, Andrew Spence, managing director at the Toronto-based OMERS pension fund, Bill Robson of the C.D. Howe Institute, and Darrell Duffie, an influential economist professor at Stanford University.
There are likely other candidates, such as respected McGill University economist Christopher Ragan, but few know for certain and the individuals themselves are not saying.
"If you think about all the qualities you are looking for in a governor of the Bank of Canada, Tiff Macklem has a check in every box. There are very few candidates you would be able to say that about," says Craig Alexander, chief economist at the TD Bank.
By qualifications, Alexander rhymes off: Strong economist, good understanding of monetary policy as it applies to the real world, effective leader and manager, and an understanding and experience of how Ottawa works. The only hole in the resume — private sector experience — is a desired not necessary qualification, he says. Besides, few past governors with the exception of Carney could have checked that box.
As well, Macklem would appear to have been groomed to the post.
Plenty of experience
Joining the bank immediately after graduating in 1984, he steadily worked his way up the ladder. He was twice seconded to Finance, including in 2007 as associate deputy minister, where he took over Carney's role of point-man for the G20, putting him at the centre of the response to the economic crisis of 2008. Importantly, that role would have put him in close proximity with Flaherty, whose choice will likely be accepted by the prime minister.
Macklem returned to the bank as second-in command and chief operating officer running a staff of 1,200 in July of 2010.
He has spoken out on a number of issues, including being the first at the bank to flag the poor record of investment by Canada's business community. Carney got all the attention, however, because of his use of the headline-friendly "dead money" phrase.
Those who know both men say that is typical and telling of the differences between them. If Carney is a media super-star and whip smart, as he has been called, Macklem may be able to match up in brain-power but not sizzle. The most common adjective used to describe him is "studious."
Porter, who studied economics for one year with Macklem at the University of Western Ontario, describes him as being at the top of the class, but remembers him specifically for one thing.
"What I remember about him is he sat at the very front of every class and was quite keen," he says.
Analysts say they see no light, or detected any different approaches in private conversations, between how Macklem is likely to conduct monetary policy and how Carney handled the task, or their views on the economy.
But although Macklem often flies under the radar, Porter believes Macklem would continue Carney's legacy of speaking out on important economic issues of the day, even if they are not directly related to monetary policy.
It remains to be seen if the Harper government, which has been widely accused of muzzling public servants and engaging in protracted battles with those who wouldn't be silenced — such as recently retired Parliamentary Budget Officer Kevin Page — wants such a voice at the Bank of Canada.