Main menu:

History of RPE Thought

Posts by Tag

RSS New from the CCPA

  • Kate McInturff's Prebudget Presentation to FINA, 2017 July 30, 2018
    Canadian Centre for Policy Alternatives
  • In loving memory of Kate McInturff July 30, 2018
    On July 27, 2018, CCPA Senior Researcher Kate McInturff passed away. The CCPA mourns the devastating loss of our colleague and friend. Kate will be remembered as a feminist trailblazer in public policy and gender-based research. Our hearts go out to her family. Kate’s colleagues, collaborators, and countless organizations across Canada are stronger because of her […]
    Canadian Centre for Policy Alternatives
  • Debunking myths about proportional representation July 25, 2018
    This fall, British Columbians will get to vote on whether we want a new electoral system for our province. What an incredible opportunity. Between October 22 and November 30, BC voters will be able to vote in a mail-in referendum. The ballot will look something like this: We at the CCPA-BC are big fans of […]
    Canadian Centre for Policy Alternatives
  • Canada’s fossil-fuelled pensions June 22, 2018
    The British Columbia Investment Management Corporation is the steward of BC’s public pensions, but bankrolls companies whose current business models exceed the climate change targets agreed to in the Paris Agreement to which Canada is a signatory. The pensions of over 500,000 British Columbians and assets worth $135 billion are managed by the Corporation—-one of Canada's largest […]
    Canadian Centre for Policy Alternatives
  • Imagine a Winnipeg...2018 Alternative Municipal Budget June 18, 2018
    Climate change; stagnant global economic growth; political polarization; growing inequality.  Our city finds itself dealing with all these issues, and more at once. The 2018 Alternative Municipal Budget (AMB) is a community response that shows how the city can deal with all these issues and balance the budget.
    Canadian Centre for Policy Alternatives
Progressive Bloggers

Meta

Recent Blog Posts

Posts by Author

Recent Blog Comments

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 ?

Enjoy and share:

Write a comment





Related articles