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ABCP decision up to government: BoC's Carney


By John Greenwood and Paul Vieira

December 17, 2008

 

Canada can afford to see the failure of a proposed rescue of $32-billion of asset-backed commercial paper that has been frozen for 16 month, said the governor of the Bank of Canada.

 

  In comments following an address to a business luncheon in Toronto on Wednesday, Mark Carney said the Canadian economy is strong enough to withstand the collapse of the massive restructuring, which has come under huge pressure as a result of the financial crisis.

"We have resilient markets in Canada," said Mr. Carney, adding he is not suggesting that it should be allowed to fail.

That "would not be a welcome development," he said.

Photograph by : Brett Gundlock/National Post

Canadian Finance Minister Jim Flaherty.

 


At a press conference, Mr. Carney stressed that the decision is not for the Bank of Canada to make.

"These are decisions of the government," he said. "These are decisions of the parties involved.

"I would defer entirely to [the Finance Minister] in terms of the government’s decision.

"We do have discussions with the government in terms of what the options are. But it is entirely the decision of the government’s so I am not going to comment further."

The comments come amid discussions between federal and provincial governments regarding whether they will contribute $10-billion in additional funding to ensure the success of the restructuring, which would be the largest ever in Canada if it goes ahead.

First mapped out in the fall of 2007, the rescue plan started off as a private-sector undertaking. But in the face of unprecedented market turbulence, a committee spearheading the plan came forward earlier this month with a last-minute request to the government to supply $9.5-billion of additional funding for a backstop facility.

Until recently, Federal Finance Minister Jim Flaherty has insisted that taxpayers money will not be used to fix what he regards as a private sector problem. However, in the face of increasing distress in financial markets over the past few weeks, Mr. Flaherty has softened his position, saying he is seriously considering the request.

Observers say the restructuring will unravel unless the government comes forward with the additional funding.

Mr. Flaherty said Wednesday he is discussing the request with his provincial counterparts at a meeting in Saskatoon.

In comments to media, he said he expects talk more about the restructuring later Wednesday.

 

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