Tiff Macklem will be Bank of Canada governor after all.
Macklem, once the runaway favourite to replace Mark Carney in 2013 before falling short of the mark, will instead take over from Stephen Poloz when the current governor retires on June 2.
“Governor-designate Macklem brings a deep knowledge of the economy and financial markets,” Finance Minister Bill Morneau, who oversaw the selection process, said at a press conference in Ottawa on May 1. “He was one of Canada’s leading economic stewards during the 2008 financial crisis, expertise that will serve Canada well as we work to deal with the COVID-19 crisis.”
The timing of the announcement will strike some as odd. Morneau cleared space in his calendar this week to put a Liberal stamp on one of the country’s most important institutions even though he is in the middle of fighting one of the most severe economic calamities the country has ever witnessed.
Morneau, or his boss, Prime Minister Justin Trudeau, might have asked Poloz to extend his term for a few months, but the government opted to stick to its pre-crisis timeline of deciding on a new governor by the end of April.
A shortlist of two names survived a three-month search led by the outside members of the Bank of Canada’s board of directors: Macklem, a former central banker who is currently dean of the University of Toronto’s Rotman School of Management, and Carolyn Wilkins, the central bank’s senior deputy governor.
Trudeau had the final say, as the governor of the Bank of Canada is a cabinet decision by law.
“I’m looking forward to getting into the Bank of Canada,” Macklem said at the press conference. “Rejoining the bank, a seamless transition is going to be a first priority and I’m confident that we will be able to accomplish that.”
The Financial Post identified Macklem and Wilkins as the front-runners to replace Poloz when he announced in December that he would retire at the end of his seven-year term. (No Bank of Canada governor has served consecutive mandates since Gerald Bouey, whose 14-year tenure ended in 1987.)
Still, Trudeau’s choice ranks as a surprise, if only because the chattering classes of Ottawa and Bay Street were pretty sure that Macklem was too happy at Rotman, which signed him up for a second five-year term in November 2018, extending his first job outside Ottawa since the 1980s, when he joined the Bank of Canada as a hotshot economist out of the University of Western Ontario in London.
“He was always viewed as a natural central banker,” said Pierre Siklos, an economics professor at Wilfrid Laurier University in Waterloo, Ont., and one of Canada’s leading experts on monetary policy.
“He’s brilliant,” said Craig Wright, chief economist at Royal Bank of Canada, who has known Macklem for decades. “You can tell that he’s spinning a macro-model in his head while he’s talking to you. He’ll be a great governor.”
Macklem overcame the current government’s desire to use every opportunity to correct the gender imbalance in the country’s halls of power. It was widely assumed that Trudeau, who describes himself as a feminist, would take advantage of Wilkins’ emergence to end the reign of white, anglophone men at Canada’s central bank, which is in its 85th year of existence.
Wilkins is probably the most visible senior deputy in the Bank of Canada’s history, earning the admiration of officials such as European Central Bank president Christine Lagarde as she climbed into the top ranks of global policy-making from a staff position she took at the Canadian central bank in 2001. That followed stints at Finance and the Privy Council Office during the 1990s.
For the past couple of months, Wilkins has been leading the country into the unknown, overseeing the design of the Bank of Canada’s efforts to tame extremely volatile credit markets by creating hundreds of billions of dollars and becoming the buyer of last resort of federal and provincial bonds, corporate debt and other financial assets.
Wilkins was merely picking up from where she left off after the Great Recession, when she was responsible for some of the initial grunt work in figuring out what the central bank could do next if it turned out that dropping interest rates to near-zero proved to be insufficient. Carney’s team set up some relatively minor programs, none of which required policy-makers to create money, a strategy known as quantitative easing, or QE.
“Carolyn Wilkins was in a trench developing new capital arrangements, new collateral arrangements, new lanes to help the situation under Governor Carney and there she is today doing exactly the same thing behind the scenes,” Poloz told reporters at an early stage of the coronavirus crisis last month. “That sort of thing gives me a lot of confidence.”
After Mark Carney, in the international economic-and-financial world, he is the most known and respected Canadian
economist Jöerg Asmussen
But while Wilkins was in the trenches a decade ago, Macklem was with the generals. He made a name for himself as a savvy technician both in Ottawa and abroad, first as a deputy minister of finance during the 2008 financial crisis, and then as senior deputy governor at the Bank of Canada from 2010 to 2014.
“He has a deep knowledge,” Jöerg Asmussen, an economist who served as senior German finance official and a member of the European Central Bank’s executive board, told the Globe and Mail in 2013. “After Mark Carney, in the international economic-and-financial world, he is the most known and respected Canadian.”
Macklem’s talents in 2013 weren’t enough to offset the curse that now marks Wilkins’s failed candidacy. The Bank of Canada operates with a great deal of independence, but the governor is ultimately a political appointment, and elected officials have tended to use the opportunity to remind the institution who is boss. Morneau described the selection process as “robust” and declined to say why specifically he chose Macklem over Wilkins. “I won’t be talking about the individual candidates,” he said.
The previous three governors — Poloz, Carney and David Dodge — all arrived from outside the central bank, each of them blocking the ascent of the internal heirs apparent. Macklem’s selection appears to turn that trend into a rule: if you are an ambitious staffer at the Bank of Canada, you will only be taken seriously for the top job if you leave the institution. The last governor to rise from within the central bank’s ranks was Gordon Thiessen, who Paul Martin, the finance minister at the time in 1994, chose over the sitting governor, John Crow.
Assuming Wilkins sticks around for a while, the decision to go with Macklem avoids the added disruption of having to fill an opening at the Governing Council, the policy-setting body that includes the governor and his five deputies. The group that Macklem inherits will lack diversity — five white men and one woman — but it will feature three crisis fighters hardened by the events surrounding the Great Recession: Macklem, Wilkins and Timothy Lane, a former International Monetary Fund economist who was named a deputy governor in February 2009.
There will be raw feelings, but it’s unlikely those will interfere with the job at hand. The COVID-19 crisis won’t afford any of the Bank of Canada’s leaders time for bruised egos. Macklem said history shows there is a “need to try to overwhelm a crisis,” suggesting that he will continue with the whatever-it-takes approach that Poloz and Wilkins have been following since early March.
“You need to think beyond the normal responses,” he said. “You need to restore confidence. When you look at what the Bank of Canada has done so far, when you look at the actions that the Government of Canada has taken to provide a bridge to the other side of this, these are bold, unconventional policy responses that really have embraced this idea that you’ve got to think beyond the normal responses. This is an unprecedented situation and it calls for an unprecedented response.”