By John Greenwood and Paul Vieira
December 17, 2008
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
Canadian Finance Minister
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
"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 comments to media, he said he
expects talk more about the
restructuring later Wednesday.