Carney’s accidental investment-banker’s training made him stand out from “the collection of lifers” he was working with. Unlike other central bankers, he had come from Goldman Sachs, the institution that basically invented the complex financial products-derivatives, credit default swaps-that were causing the global economy to teeter.
This insider’s view helped Carney understand what was happening more clearly than others. He became a key part of the conversation with governments affected by the crisis, helping to coordinate a global response. He recalls spending hours on the phone during that period, talking and planning with fellow central bankers, as well as with people in treasuries and departments of Finance around the world. “In the fall and summer, as things got worse, there were more and more of those conversations that would take place in the middle of the night, to be consistent with European time,” he says.
In Canada, Carney was lauded for taking a number of unprecedented steps to keep the economy on track so that “Canadian banks could continue to function, despite the financial tsunami that was coming from south of the border,” he says. When capital markets dried up, he found ways to support the banking system and increased the amount of funds available to borrowers through central-bank liquidity. He also cut interest rates to their lowest level in Canada’s history and in 2009 he created the conditional interest-rate guarantee, promising Canadians that interest rates would stay low for an extended period of time.
Critics say this encouraged Canadians to borrow more than they should have (the full implications of that debt are yet to be seen), but experts from other nations noted, not without some envy, that the global financial crisis seemed to bypass Canada.
Looking back now, Carney calls the Bank of Canada’s approach to the crisis uniquely Canadian, one that was “built up over decades” before he became governor. “It started with very basic fundamentals so that our banks had more capital than most banks around the world,” he says. There was a great deal of co-operation and communication between the bank and the Department of Finance. “Strangely enough,” Carney notes, “that wasn’t happening elsewhere in the world, to their detriment.”
Of course, Canada had a sensible mortgage system, unlike the structure of the U.S. mortgage market, where Americans were entangled in the subprime mortgage mess. Also dissimilar to other parts of the world, such as Europe, “bankers here were still bankers,” Carney says, “lending money, keeping the loans in their books and ensuring the initial lending was prudent.”
But something about Carney caused observers around the world to pay attention to him and to conflate Canada’s financial success during the meltdown with its new bank governor. Time magazine went so far as to include Carney on its list of the world’s most influential people of 2010.
“Central bankers aren’t often young, good-looking and charming,” praised the magazine, “but Mark Carney is all three-not to mention wicked smart.”
Economics advisor Drummond says Carney’s appeal may stem from the fact that the governor has developed a very public profile-a sea change compared with the Bank of Canada’s past dealings. “If you go back, you hardly ever heard public pronouncements from the Bank of Canada. These appearances have been increasing over the years, but Mark has tipped it up to another level, bringing a degree of public awareness about what he is doing that has never been there before.”
Carney also takes a direct approach with his audience. He introduces humour wherever possible and avoids the tactics of, say, Alan Greenspan, the former chairman of the Federal Reserve, who would perplex Americans with “fed speak.” Over the phone, in his smooth baritone, Carney talks about the economy in the same plain language he uses to discuss what he eats for breakfast. (Cereal when it’s warm outside; porridge when it’s cold. He explains the latter choice: “If my mother was making porridge, that meant it was colder than -25. For a while I developed a Pavlovian response to porridge because that meant it was cold.”)
The aphorism that got Carney through the global financial crisis is one that could apply to his personal life: “Complacency is really the enemy in finance,” he says. “Once you think you have everything figured out, once you rest on your laurels, the problems start to develop-and we won’t let that happen here in Canada.”
So what’s next for Governor Carney? First, with another possible recession on the horizon and record low interest rates due to rise, he’ll have to hold on to the confidence of Cana-dians-something he has now.
Beyond that, some have high hopes for Carney’s future. Former roommate Chiarelli, a fellow Canadian, remembers the time he and Carney got to meet visiting alum Pierre Trudeau at Harvard. Carney, says Chiarelli, has the wit and charm of a leader like Trudeau. “He is a very confident guy and he’ll do what he sets out to do.”
He adds, “When I met Mark, I remember saying to my friend, ‘That guy’s going to be the prime minister.’ I bug Mark about it every year. And it may come true because he just cares so genuinely about what he’s doing.”