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  • Pharmacare consensus principles released today September 24, 2018
    A diverse coalition representing health care providers, non-profit organizations, workers, seniors, patients and academics has come together to issue a statement of consensus principles for the establishment of National Pharmacare in Canada. Our coalition believes that National Pharmacare should be a seamless extension of the existing universal health care system in Canada, which covers medically […]
    Canadian Centre for Policy Alternatives
  • Kate McInturff Fellowship in Gender Justice September 19, 2018
    The CCPA is pleased to announce the creation of the Kate McInturff Fellowship in Gender Justice.This Fellowship is created to honour the legacy of senior researcher Kate McInturff who passed away in July 2018. Kate was a feminist trailblazer in public policy and gender-based research and achieved national acclaim for researching, writing, and producing CCPA’s […]
    Canadian Centre for Policy Alternatives
  • The buck-a-beer challenge Ontario deserves September 6, 2018
    Ricardo Tranjan proposes an alternate plan to Doug Ford's buck-a-beer challenge in the Toronto Star.
    Canadian Centre for Policy Alternatives
  • Growing number of professionals face job insecurity, study finds September 6, 2018
    The Toronto Star's Sara Mojtehedzadeh discusses the findings of the CCPA Ontario's report, No Safe Harbour and gathers firsthand accounts from precariously employed professionals who live and work in Ontario.
    Canadian Centre for Policy Alternatives
  • Our Schools/Our Selves: The view from West Virginia September 4, 2018
    Our latests publication, Lesson Here, digs in to the West Viriginia teachers' strike.  Read the firsthand accounts of the work stoppage here.
    Canadian Centre for Policy Alternatives
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The Progressive Economics Forum

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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