One-on-One with Mark Carney
He works behind the scenes. Most Canadians don’t recognize him. But as governor of The Bank of Canada, Mark Carney steered us through the global financial crisis. Meet our man of the year.
Mark Carney: Most Trusted Canadian
The governor of the Bank of Canada doesn’t take himself too seriously. When Mark Carney learns he’s the winner of Reader’s Digest’s inaugural Editor’s Choice Award as the Most Trusted Canadian, he chuckles. “It’s hard to say that without laughing, isn’t it?” he asks. But as the man who oversees the economic and financial welfare of Canadians, Carney’s responsibilities are no laughing matter. Neither are his accomplishments.
A Harvard- and Oxford-trained economist, Carney spent much of his career as an executive in the private sector outside Canada. In February 2008, after only five years in Ottawa, he was catapulted into his current seven-year posting in the top spot at the nation’s central bank. Only 42 at the time of his appointment, he became the youngest and least experienced central-bank governor among the G8 nations-and he faced what was arguably the worst global financial crisis since the Great Depression.
Many wondered whether the Bank of Canada made a mistake in opting for youth over experience. But Carney-with his movie-star grin and a self-assurance that some say borders on arrogance-successfully kept Canada from getting sucked into the banking failures that ravaged other economies, and he emerged from the recession as a leading figure on the international stage. In 2009 the Financial Times named him one of “50 who will frame a way forward”-and he was the only Canadian on the list that year.
Aside from averting crises, Carney’s principal task as bank governor is keeping inflation under control by making eight interest-rate decisions annually. He leads the bank through a disciplined process of analysis-modelling the global and domestic economies, meeting with businesses in all major industries in Canada and, over a period of weeks, discerning the appropriate path for monetary policy. He also aims to ensure Canada is borrowing money at the best rates possible.
Now in the fourth year of his term, Carney faces additional challenges as Canadians struggle with record levels of household debt. Come summer, when interest rates are expected to rise, many of these households will have trouble paying down their debts, leaving some to wonder whether Carney will be able to keep up his good work. Others, however, believe he could eventually make another unprecedented leap-to 24 Sussex Drive.
Today, Carney makes light of his “Most Trusted” title, but friends insist he’s been waiting his entire adult life to get here. One Harvard roommate, Peter Chiarelli, now the general manager of the Boston Bruins, explains: “Carney is Canadian, through and through. He left Wall Street and Bay Street, where he was making oodles of money, because even back in university, he wanted to make his mark in public service.”
Photo: Tony Fouhse / Stylist: Samantha Caldwell
The Early Days
Mark Carney was born on March 16, 1965, in Fort Smith, N.W.T., the third of four children. His family lived in a yellow house near the high school where his father, Bob, was principal. His mother, Verlie, stayed home with the children, making fur-lined parkas to keep them warm. When Carney was six, his family left the North and settled in Edmonton. Bob got a job as a public servant in Indian and Northern Affairs with the Alberta government, and later as a professor of education history at the University of Alberta. When Mark was ten, Verlie went back to university to redo her degree in teaching and then returned to the classroom. “Our house was filled with books,” the governor recalls, “and there was lots of discussion on the issues of the day.”
In 1984 Carney’s life took on a more global direction. At the age of 18 he left Edmonton and headed to Cambridge, Mass., on a partial scholarship at Harvard University. He intended to study English literature and math. But while attending lectures by the Canadian-born economist John Kenneth Galbraith, he found a new interest and eventually majored in economics, graduating with high honours.
In his downtime at Harvard, he played hockey on the university team (though “not particularly well,” he says) and continued to read widely. Known around campus as an extremely bright and disciplined student, Carney was also “very good with money,” his former roommate remembers. “He was on financial aid,” says Chiarelli, “and he’d watch his pennies, always worrying about maintaining his grades for his scholarship.” In the summers, when other classmates would travel to France or Italy, the Edmontonian would return to his parents’ house and work as a landscaper for a local hospital. He also took a semester off from his degree so he could work full-time to build up his tuition fund.
This financial acumen shaped his path after graduation: Though he had planned to pursue an academic life like his father and continue on to grad school in economics, the tab he had rung up for his American education led him to finance. “I felt it would be better to work for a few years and pay that off,” he explains of the “exorbitant amount of money” he owed. Just how much? “That’s a bit personal. But I paid it off-I’m very trustworthy,” he says, with a smile.
After graduation, Carney took a job with Goldman Sachs in London, England, and then Tokyo, working in progressively senior positions. But by 1991 the ivory towers of academia beckoned. Carney left the investment bank to earn his Ph.D. in economics at the University of Oxford in the U.K. There, he met his wife, Diana Fox, a British economist specializing in Third World development. They married in 1995, and while Carney was finishing his thesis-which he had planned to parlay into a job in policy-Goldman Sachs came calling again.
Carney was offered a position as co-head of sovereign risk for Europe, Africa and the Middle East, a role that would see him advising countries on their credit ratings and entry to international capital markets. It was an opportunity he couldn’t refuse.
In 1998 Carney was ready to return to North America, and got a transfer to New York, where he stayed until 2000 before asking to be moved to Toronto, since he wanted to start his family in Canada. (He now has four daughters, all under the age of ten, and guards their privacy ferociously.)
After a few years on Bay Street-a culture, he claims, that was ultimately too materialistic for his liking-he caught the eye of David Dodge, then Bank of Canada governor. Carney had no experience in central banking, but Dodge was impressed by the 38-year-old academic and businessman and reportedly even told a friend, “I just hired my successor.” In 2003 Carney joined the Bank of Canada as deputy governor.
Taking the post meant giving up a multi-million-dollar annual salary for a job that paid under $400,000. But this was the opportunity Carney had been preparing for most of his life. “From my father I learned the value of education and hard work,” he says. “Those virtues come in handy, particularly if you’re a public servant and have to work through difficult times.” Those virtues were tested almost immediately. In the fall of 2007, just as Carney was appointed to his current post, the global economic system began to unravel. As Don Drummond, economics advisor and former chief economist at TD Bank, put it, “There’s usually not an awful lot of noise at the bank. Things go along at a leisurely pace. During the crisis, however, people were working seven days a week, getting up at 6 a.m. on a Sunday.”
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.”