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  • Towards Justice: Tackling Indigenous Child Poverty in Canada July 9, 2019
    CCPA senior economist David Macdonald co-authored a new report, Towards Justice: Tackling Indigenous Child Poverty in Canada­—released by Upstream Institute in partnership with the Assembly of First Nations (AFN) and the Canadian Centre for Policy Alternatives (CCPA)—tracks child poverty rates using Census 2006, the 2011 National Household Survey and Census 2016. The report is available for […]
    Canadian Centre for Policy Alternatives
  • Fossil-Power Top 50 launched July 3, 2019
    What do Suncor, Encana, the Royal Bank of Canada, the Fraser Institute and 46 other companies and organizations have in common? They are among the entities that make up the most influential fossil fuel industry players in Canada. Today, the Corporate Mapping Project (CMP) is drawing attention to these powerful corporations and organizations with the […]
    Canadian Centre for Policy Alternatives
  • Tickets available for Errol Black Chair Fundraising Brunch 2019 June 26, 2019
    You are invited to CCPA-MB’s annual fundraising brunch in support of the Errol Black Chair in Labour Issues.  Please join us to honour: Honoured Guest: John Loxley is Professor of Economics at the University of Manitoba and a Fellow of the Royal Society of Canada. Guest Speaker:  Jim Stanford is Economist and Director of the Centre […]
    Canadian Centre for Policy Alternatives
  • The fight against ISDS in Romania June 24, 2019
    CCPA is proud to co-sponsor this terrific video from our colleagues at Corporate Europe Observatory. It chronicles grassroots resistance to efforts by Canadian mining company Gabriel Resources to build Europe’s largest open-pit gold mine in a culturally rich and environmentally sensitive region of Romania. After this unimaginably destructive project was refused by the Romanian public and courts, the […]
    Canadian Centre for Policy Alternatives
  • A critical look at BC’s new tax breaks and subsidies for LNG May 7, 2019
    The BC government has offered much more to the LNG industry than the previous government. Read the report by senior economist Marc Lee.  
    Canadian Centre for Policy Alternatives
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The Caisse and the mysterious life of market makers

The political crisis around the Caisse’s dismal performance continues to haunt the political scene in Québec. Urged to explain how up to 40 billion dollars might have been lost during his management Caisse ex-director Henri Paul Rousseau largely blamed the economic and financial crisis, factors beyond his control. Asked why and how the Caisse ended up with so much ABCP in its books in the weeks leading up to the credit crunch (more than half  of non bank ABCP) Rousseau replied that it remains “one of the mysteries of life”. 

Some mysteries are more easily solved then others.

When Rousseau was called to the helm of the Caisse by PQ Prime minister Bernard Landry (and self-styled third way social democrat) he explicitly underscored his desire to change the Caisse’s dual mandate from the active pursuit of economic development and financial returns to a new mandate inspired by financial market efficiency theory: what’s good for financial markets must be good for economic development. Armed with this new mantra Rousseau asked that the Caisse’s operations and investment decisions by “neutralised” politically and that the mandate to develop Québec’s economy and protect “Québec INC’s interests” be scrapped. It took a provincial election and the rise to power of the (neo) liberal party of Jean Charest for the mandate to be changed. Progressives and left wing nationalists have argued since that the Caisse has not only deserted Québec’s economy as a major investor, but that it has tacitly supported neoliberal policies such as P3’s. 

What does this have to do with ABCP ? I’ve argued in the francophone press (an op-ed piece in the Devoir)  and media that in fact the Caisse did have a new mandate of economic “development”. Given it’s size in Québec’s economy and in Canada’s financial system, a decision to limit the Caisse’s investment strategy to the pursuit of highest possible financial returns condemned the Caisse to develop Canada’s …. financial markets. The Caisse owned at least a 10% stake in Coventry, a major provider of non bank ABCP, it also controlled the Montreal exchange, who’s derivative activity is intimately tied to the development of non bank ABCP, and it  works closely with National Bank, a major reseller and broker in the non bank ABCP market in Canada back in the good old days when these constructs where assimilated to highly liquid, highly secure, highly profitable “money market” instruments. All the evidence I’ve stumbled on seems to point to the Caisse acting as “market maker” in this situation, why ? Because developing this new segment was highly profitable in a context of low returns on stock, because it supported the Montreal exchange’s bid to become an important player in the derivatives scene, because it dovetailed with the National bank’s strategy, and on the whole the Caisse seemed, back then, to help Montreal’s insignificant financial district become a significant player again. 

Progressives in Québec are arguing that in times of economic crisis and crunched credit markets the Caisse should be available as a policy tool to help our beleaguered manufacturing sector weather the storm and more importantly lead with a public investment strategy our economy towards greener and more socially sustainable growth. Instead the current government is thinking of having the Caisse finance P3’s that the private sector can’t fund and has named the head of the Montreal exchange as president of the Caisse’s administrative council…. more of the same to come ?

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