Former N.B. premier Frank McKenna says Canada will persevere through tariff, annexation threats
Frank McKenna says annexation should be taken seriously not literally
As a former premier of New Brunswick and Canadian ambassador to the United States, Frank McKenna has been through two free trade negotiations and countless tense moments.
But McKenna, now a business leader, said he's never seen this level of distrust of the United States government among Canadians.
"I think Canadians feel hurt, they feel betrayed by a best friend, perhaps I could put it that way, and they feel vulnerable and worried and all of the above," he said.
"Americans are still our friends, our allies, our neighbours, our cousins, and it's not Americans that we have an issue with here.
"But the government of the United States right now is betraying a relationship that has been a model for the world for the last 100 years."
U.S. President Donald Trump has threatened to impose 25 per cent tariffs on imports of Canadian goods.
And while that threat is currently on pause until March, a separate 25 per cent tariff on all steel and aluminum imports is scheduled to come into effect March 12.
U.S.
President Donald Trump has threatened to impose 25 per cent tariffs on
imports of Canadian goods. And he continues to call for Canada to become
America's '51st state.' (Alex Brandon/The Associated Press)
Last week, Canada's 13 premiers were in Washington D.C. to talk to U.S. officials about the ongoing tariff threat.
McKenna said the delegation was powerful, with 13 premiers all representing different perspectives coming together in solidarity.
Trump has also continued to repeat his call for Canada to be the United States's "51st state." He has also repeatedly referred to Prime Minister Justin Trudeau as "Governor Trudeau."
McKenna said the threat of annexation has to be taken seriously because it continues to be repeated by a serious elected official, the president, but he said it shouldn't be taken literally.
"I think it's not going to be a military threat that we need to fear, I think he feels that he can roll over us economically, and that's not going to happen," said McKenna.
"I think he knows that Canada is going through a political transition period now, so he sees us as being a bit vulnerable.
"What he doesn't realize is the extraordinary fight that we have in our country, the pride that we have in our country, and the ability that we have in the country to come together."
McKenna said he doesn't believe Trump represents the opinions of most Americans in respect to Canada.
McKenna said it was powerful to see Canada's premiers come together in solidarity for a recent delegation to Washington, D.C. (Ben Curtis/The Associated Press)
He said Trump and Elon Musk, a tech tycoon who has been appointed by Trump to cut government spending, are currently in a "honeymoon" stage.
But McKenna said this won't be the case forever as more and more people get hurt by, and push back against, the measures Trump is taking.
For example, Chuck Grassley, a senior Republican senator from Iowa, has already pleaded for an exemption for potash if Trump moves forward with the tariffs because "family farmers get most of our potash from Canada."
And McKenna said another example is Susan Collins, a senior Republican senator from Maine, who argued that certain tariffs would impose a significant burden, citing a statistic that 95 per cent of heating oil used by most Maine residents comes from refineries in Canada.
"That's just two out of dozens and even hundreds of legislators who will start weighing in when their constituents are affected," McKenna said.
"So inevitably, there will be a turning point in the United States, and there will be pushback from Americans."
McKenna
used Sen. Chuck Grassley and Sen. Susan Collins as examples when
talking about officials pushing back against things Trump was doing.
Both senators argued tariffs on certain products could hurt their
constituents. (Susan Walsh/Associated Press, John McDonnell/Associated Press)
McKenna said he thinks Canada is still developing a plan of attack, but he also said the government needs to be careful not to negotiate against itself since there isn't a lot of clarity on whether this battle is over fentanyl, immigrants at the border, military spending, digital taxation or unfair trade.
LISTEN | Former N.B. premier says U.S. underestimates Canada's pride:
Still, he said Canada needs to continue efforts at solidarity.
"We need a common message and we need people deployed into the United States speaking to the communities that President Trump listens to — Fox News, Sinclair Broadcasting Network, Joe Rogan, Newsmax, etc., and get our messages out."
McKenna said all of Canada's troops haven't been thrown into battle yet. He said it will include business leaders, trade unions and the entire public.
"I think we have to get to the point where the entire nation is mobilized behind this effort," he said.
"God, you know, we might have to end up relying on Justin Bieber and Avril Lavigne and Celine Dion … Wayne Gretzky and all of the other celebrities who live in the United States who are Canadians.
"But I think when all is said and done, Canadians will be prepared to rally and fight for our country and our level of intensity will be much higher than Americans, who don't understand even why they're in this fight."
ABOUT THE AUTHOR
With files from Information Morning Fredericton
TD Bank fined $3B US after pleading guilty in historic U.S. money-laundering case
U.S. attorney general says penalty the largest under the country's Bank Secrecy Act
Toronto-Dominion Bank has been ordered to pay a total of $3.09 billion US in fines after pleading guilty to multiple charges, including conspiracy to violate the Bank Secrecy Act and commit money laundering.
The bank has also received a cease-and-desist order and non-financial sanctions from the Office of the Comptroller of the Currency (OCC), including an asset cap that put limits on its growth in the U.S. after it was found that TD had "significant, systemic breakdowns in its transaction monitoring program."
U.S. Attorney General Merrick Garland said TD created an environment "that allowed financial crime to flourish."
"By making its services convenient for criminals, it became one," he said in a press conference Thursday. "Today, TD Bank became the largest bank in U.S. history to plead guilty to Bank Secrecy Act program failures, and the first bank in history to plead guilty to conspiracy to commit money laundering."
He said TD admitted in its plea agreement it allowed three money-laundering networks to transfer more than $670 million US through TD Bank accounts over a six-year period, actions which many employees were aware of, yet went unaddressed.
TD Bank pleads guilty, fined $3 billion in historic U.S. money-laundering caseAt least one of those schemes involved five TD Bank employees laundering drug proceeds.
The sweeping penalties announced on Thursday include consequences meted out by several regulators, including the OCC and the U.S. Department of Justice (DOJ), with the combined fines adding up to just over $3 billion US.
As part of this, TD Bank has agreed to pay more than $1.8 billion US to the DOJ in penalties for criminal charges.
Bharat Masrani, CEO of TD Bank Group, said in a statement that the bank has "taken full responsibility," and will be making "the investments, changes and enhancements required to deliver on our commitments."
"This is a difficult chapter in our bank's history. These failures took place on my watch as CEO and I apologize to all our stakeholders."
Bharat
Masrani, chief executive officer of TD Bank, apologized to shareholders
on a call Thursday, saying the bank is taking full responsibility. (Chris Young/The Canadian Press)
Enormous deposits, years of suspicious activity, little action
For years, TD Bank "willfully" failed to monitor transactions properly, leaving gaping holes that allowed millions of dollars to flow through the bank, the DOJ revealed.
One money-laundering network "dumped piles of cash on the bank's counters," while another another "allegedly withdrew amounts from ATMs 40 to 50 times higher than the daily limit for personal accounts," U.S. Attorney Philip R. Sellinger for the District of New Jersey said in a statement.
In another money-laundering scheme, one TD Bank employee, identified as "David," moved more than $470 million dollars in illicit funds through TD Bank branches in the U.S. This individual, who has separately pled guilty to laundering drug proceeds through the bank, Garland said, found that "TD Bank had the most permissive policies and procedures, and so chose to launder most of his funds there."
According
to the U.S. Department of Justice, three money-laundering schemes moved
millions of dollars through TD Bank over a period of years. (Matt Slocum/The Associated Press)
On one occasion, David deposited more than $1 million US in cash in a single day, then moved the funds out of the bank using official bank cheques and wire transfers. More than $57,000 US in gift cards was provided to other bank employees as bribes.
Many employees were aware of the probable illegality of these actions.
In August 2021, a TD Bank store manager sent an email to another store manager, commenting, "You guys really need to shut this down. Lol," Garland said. On another occasion, a store manager implored their supervisor to do something, stating that their tellers didn't feel comfortable handling the suspicious transactions.
TD Bank's own internal audit group repeatedly highlighted concerns about the bank's transaction monitoring program between 2014 and 2022, according to the DOJ, but the program remained largely stagnant nonetheless, suffering with chronic underfunding and understaffing.
How a fentanyl crime ring used a Canadian bank to do business | About ThatIn the case involving five TD Bank employees, the DOJ stated that employees issued dozens of ATM cards to money-launderers, allowing for the laundering of approximately $39 million US. More than two dozen individuals have been charged by the Justice Department in connection with these schemes so far, including two TD bank employees.
TD Bank to restructure, undergo monitoring
The bank has agreed to a major restructuring of their anti-money-laundering program, as well as three years of monitoring and five years of probation. The implementation of any new programs or services in their U.S. branches will have to go through more stringent approval processes as well, as ordered by the OCC.
The asset cap placed on TD Bank by the Office of the Comptroller of the Currency will not apply to any of the bank's business in Canada or other countries. But it will curtail growth within the U.S., where TD is the 10th largest bank.
Richard Powers, an associate professor at the Rotman School of Management at the University of Toronto, told CBC News prior to the ruling's announcement that approximately 25 per cent of TD's revenue comes from its U.S. operations.
"They've been growing through acquisition," he said. "If that is put on hold or if that has restrictions put on it, how do they maintain that growth?"
Last month, the bank announced that Raymond Chun would replace Masrani upon his retirement next year. The outgoing chief executive said at the time that he took responsibility for shortcomings that occurred under his watch, and echoed those sentiments on a conference call with investors and media on Thursday.
"We should have done better," he said on the call. "We know what the issues are, we are fixing them as we move forward. We're ensuring that this never happens again."
ABOUT THE AUTHOR
With files from The Canadian Press
Mark Carney
Former Governor (2008 - 2013)
Mr. Carney was appointed Governor of the Bank of Canada, effective 1 February 2008, for a term of seven years.
After five and half years of service as Governor, Mr. Carney departed the Bank of Canada on 1 June 2013 to become the Governor of the Bank of England. He was appointed to this position on 26 November 2012, with an effective date of 1 July 2013.
Born in Fort Smith, Northwest Territories, Mr. Carney received a bachelor’s degree in economics from Harvard University in 1988. He received a master’s degree in economics in 1993 and a doctorate in economics in 1995, both from Oxford University. Mr. Carney was also awarded an Honorary Doctor of Laws from the University of Manitoba in April 2013.
Prior to joining the public service, Mr. Carney had a thirteen-year career with Goldman Sachs in its London, Tokyo, New York and Toronto offices. Mr. Carney was appointed Deputy Governor of the Bank of Canada in August 2003. In November 2004, he left the Bank to become Senior Associate Deputy Minister of Finance – a position he held until his appointment as Governor of the Bank.
While serving as Governor of the Bank of Canada, Mr. Carney was also appointed as Chairman of the Financial Stability Board (FSB) in November 2011 for a three year termMark Carney's appointment: the view from Canada
Former Canadian PM Paul Martin says he is 'very disappointed' to see new Bank of England governor leave
The surprise appointment of Bank of Canada governor, Mark Carney, to lead the Bank of England has been received as a compliment and a loss in Canada.
In September 2008, as interbank capital liquidity hoarding precipitated a financial tsunami from which Europe is still reeling, Carney ensured liquidity for borrowers through the central bank, cut interest rates to a historically low 0.25%, kept inflation under control, and ensured Canada borrowed at the best possible rates.
The 47-year-old Harvard and Oxford educated Canadian economist has a mission to reform the banking system so that taxpayers never again have to bail out "too big to fail" banks.
Former Canadian prime minister and minister of finance, Paul Martin, said that he was "very disappointed" to see Carney leave Canada "He has been an outstanding governor of the bank of Canada as well as a very progressive head of the financial stability board." The "silver lining", said Martin, is that Carney's appointment "bodes well for the economies in Canada, the United States, China and elsewhere".
"If what you're looking for is somebody who understands of the inner working of the banking system domestically, but at the same time its interconnections globally, and what has to be done globally, I think you've got a very, very strong person," said Martin.
Duncan Cameron, from the Centre for Global Political Economy at Simon Fraser University, said Carney "has demonstrated in the Canadian context a quite uncanny ability to get things done under difficult circumstances", adding that "as governor he hasn't made any wrong steps".
Following the collapse of Lehman Brothers in 2008, many Canadian banks and financial institutions held worthless mortgaged-backed bonds while other major players held none. Carney managed to negotiate a bailout settlement to share the losses.
Carney "turned his back on a very lucrative career in private banking to go into a public service job where his first job was to try and bang heads together and try and remedy an almost impossible situation", said Cameron.
"A lot of people wouldn't want to get up in the morning if they had to face that kind of situation and he seems to have thrived on it."
The Canadian banking system, which is made up of five large banks, has been ranked the most sound in the world five years in a row by the World Economic Forum, which praised it for being "well-capitalised, well-managed and well-regulated".
Canadian banks make loans on a case-by-case basis, depending on the creditor's ability to repay. Many of the high-risk and complex financial instruments that exacerbated the subprime mortgage fiasco in the US do not exist in Canada. This prudence has proven key to Canada's performance compared to its neighbour, which jumped on to the exotic, and ultimately toxic, trades bandwagon peddled by Wall Street and City of London.
While it is often boasted that after the 2008 financial crisis, Canadian banks didn't need a bailout, the Canadian Centre for Policy Alternatives has argued that Canadian banks profited from a secret bailout in the form if $114bn (7% of Canada's GDP) in emergency liquidity from the US Federal Reserve, the Bank of Canada and the Canada Mortgage and Housing Corporation, from October 2008 until well into 2010. The same thinktank has warned against excessive bragging about Canadian banks, calling it a "myth of Canadian exceptionalism" and insisting they are not "immune to the temptations and threats that compromised banks in Europe, the US and around the world".
Why you can rely on the Guardian not to bow to Trump – or anyone
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The Mark Carney bubble
It takes guts to stand up in a room full of distinguished men and women and tell them their opinions are ridiculous. This is not a problem for Bank of Canada governor Mark Carney.
In late September, he stood in just such a room at Washington’s Institute of International Finance and publicly criticized the organization’s own report contending that reforms to the financial system were hampering economic growth. Carney offered a sarcastic, “Really?” then pointed out that new regulations won’t take effect for another two years. “If some institutions feel pressure today,” he said, “it is because they have done too little for too long, rather than because they are being asked to do too much, too soon.”
The speech makes obvious Carney’s appeal. He’s intelligent, never lapses into econo-babble, and is a vocal advocate for regulation to lessen the chances and damage of another financial crisis. But while plenty of officials and politicians fit that description, Carney has developed an unusually high profile. In 2009, the Financial Times named him one of 50 who will “frame a way forward.”
Last year, Time called him one of the world’s 25 most influential leaders. (He’s also “smart and sexy,” according to the magazine, a descriptor surely never before applied to a Canadian central banker.) And in May, Reader’s Digest declared him the most trusted Canadian. Beyond the media infatuation, Carney has earned his share of professional accolades, too. Most recently, his name has been floated as the next head of the Financial Stability Board, an international body of regulators and central bankers crafting financial market reforms.
So what is it about Mark Carney? At 46 years old, he is accomplished, to be sure. His resumé—boasting a PhD in economics from Oxford and 13 years at Goldman Sachs—puts most of ours to shame. But Carney has also benefited from circumstance. The Canadian financial system and economy fared better than most during the recession, and he wasn’t forced to respond as dramatically as were other central bankers. Compared to the problems faced by Ben Bernanke at the U.S. Federal Reserve and outgoing European Central Bank president Jean-Claude Trichet, Carney’s tenure has been a cakewalk. “Any governor of the Bank of Canada during this confluence of circumstances would have looked good, simply because the Canadian economy and banks looked good,” says Rotman School of Management professor Laurence Booth.
In a way, Carney has become the living embodiment of decades of Canadian financial prudence—partly through his own actions, and partly for reasons he had nothing to do with. But as his influence grows, so too do the challenges that will ultimately determine his reputation.
When Carney succeeded David Dodge in February 2008, he was relatively young and inexperienced for a central bank governor. He had left Goldman to become a deputy governor at the central bank in 2003, and moved to the Department of Finance a year later. He grasped politics better than some of his colleagues, and understood how the public would react to policy. “He had a well-informed view that wasn’t simply the product of advanced courses in econometrics,” says Karl Littler, who served as an adviser to former prime minister Paul Martin.
His appointment to head the Bank of Canada, however, was something of a surprise since Paul Jenkins, Dodge’s senior deputy governor since 2003, was a strong contender. Carney had also become known for being blunt and impatient with those who couldn’t immediately understand concepts. “A few people there had found him somewhat difficult to work with,” says Rotman professor Paul Masson, who served as a special adviser to the central bank between 2007 and 2008. But while an e-mail sent by the U.S. Embassy in Ottawa to the Federal Reserve at the time of his appointment (unearthed by WikiLeaks) noted Carney had been described as “arrogant” in the press, it countered, “we have found Carney to be not only approachable, but also extremely competent and effective at public outreach.”
He’s put to rest concerns about his youth and demeanour. When the financial crisis hit in 2008, he provided unprecedented liquidity to the banks and cut interest rates to the lowest levels in Canadian history. “His actions contributed materially to helping the financial system through its difficult time,” says Craig Alexander, chief economist at TD Bank Financial Group.
When it comes to forecasting, the central bank’s record under Carney hasn’t been any better or worse than the private sector. Carney’s growth projections in early 2009 were more optimistic than most, which raised questions during a meeting of the House of Commons standing committee on finance. Carney retorted, “We don’t do optimism. We don’t do pessimism. We do realism at the Bank of Canada.” The projections proved too bullish, however, and the central bank revised its estimates downward. It has also pushed back its timeline for raising rates. Still, the past few years have been difficult for forecasters, and markets look to the Bank of Canada for an indication of where interest rates are headed, not specific GDP growth estimates. On that front, Carney has delivered.
Looking back at his performance, though, it’s hard not to wonder if any central bank governor would have acted differently. It’s impossible to say definitively, of course. Glen Hodgson, chief economist at the Conference Board of Canada, points out there is no comparison to what’s happened recently. “What you saw was a collective response of the senior management team at the bank to really exceptional circumstances,” he says, adding that Carney’s private-sector experience and knowledge of financial markets did give him an edge past governors wouldn’t have had. But in talking to economists about Carney, the phrase that often comes up is that “he did everything he was supposed to do.” His actions are simply what we expect from central bankers, partly because he’s the latest in a competent line.
The Bank of Canada underwent a significant change in 1991 when it implemented inflation-targeting to combat the double-digit interest rates that plagued the country during the 1980s. Since then, it has maintained the rate of inflation between 1% and 3%. “Much of the heavy lifting in gaining credibility was done in the 1990s, when the bank didn’t have that much,” says Rotman’s Booth.
The federal government brought down its deficit over roughly the same time period, putting Canada on solid fiscal ground. The banking sector, meanwhile, was tightly regulated by the Office of the Superintendent of Financial Institutions, ensuring our banks didn’t take the risks that American and European institutions did. For all of these reasons, the Canadian financial system and the economy prevailed during the recession. While the crisis was still a trial by fire that Carney handled deftly, Booth likens it to a “little minor campfire…it just hasn’t been as bad a situation as it has elsewhere.”
Nonetheless, other countries took note of Canada’s relative strength, translating into a bigger role for the country internationally, whether at G20 meetings or when Prime Minister Stephen Harper goes on a foreign media blitz to champion Canada.
That golden image has rubbed off on Carney, too—and he wears it well. Paul Martin, now an adviser to the International Monetary Fund, says it’s nearly impossible to do such work and not have Carney’s name come up. Both Trichet and his successor at the ECB, Mario Draghi, have spoken highly of him in private conversations without any prompting from Martin. Unlike finance ministers who come and go based on the whims of the electorate, central bankers are in place for a long time and tend to form an exclusive club on the international scene. “To break into that closed circle as quickly as he has done is a real indication of the high regard in which he is held,” Martin says.
His knowledge and experience with financial markets—which many central bankers lack—and his ability to talk about complex issues in a way people understand help explain why Finance Minister Jim Flaherty stated publicly his desire to see Carney take over the FSB in November when current chair Draghi leaves. Should he take the post, Carney faces a number of challenges. Some are calling for the organization to be given more teeth. Guidelines for issues such as bank stress tests have to be developed and enforced, a complicated process when dealing with more than 20 countries. And there is opposition to reform from the banks. Carney got a taste of it when JPMorgan Chase CEO Jamie Dimon lashed out at him over regulations during a September meeting, allegedly prompting Carney to storm out.
“There is a list of issues as long as your arm the new head is going to have to deal with,” Martin says, adding that strengthening the FSB is “one of the most important things we can do to prevent these kinds of crises.” But it’s questionable whether Carney could complete the work on a part-time basis, as Flaherty suggested would be the case, and still serve his term as governor.
There are challenges at home, too, principally household debt. Low interest rates are encouraging Canadians to borrow at worrying levels, and contributing to a hot housing market. The longer rates stay low, the more debt Canadians pile on, and the bigger the eventual shock when rates rise. Should there be a real estate correction or another obstacle to households paying down debt in the coming years, it will be easy to ask with the benefit of hindsight why rates were kept so low for so long. (Alan Greenspan, the now-reviled former head of the Federal Reserve, found himself in that situation.)
Unlike Greenspan, Carney is clearly concerned and has repeatedly warned Canadians not to borrow more than they can afford. However, “It seemed a little unusual to be keeping interest rates at extraordinarily low levels, and then chastising Canadians for turning around and accepting those very low interest rates,” says Doug Porter, deputy chief economist at BMO Capital Markets. Alexander at TD likens it to providing an open bar at a wedding and warning guests not to overindulge.
But as both acknowledge, Carney’s hands are tied. Interest rates need to be kept low to encourage business lending and bolster the economy in general. Turning off the credit spigot too early could have severe consequences. Few, if any, Canadian economists are advocating for an immediate rate hike. Even the C.D. Howe Institute, which had been calling for an increase as recently as July, reversed course.
The irony is that Carney has built his sterling reputation in part by doing exactly what circumstances required of him—the same approach that may eventually see his reputation suffer a correction, if low interest rates ultimately cause problems. The effects of those low rates won’t fully be felt for some time, however, and for now, Carney’s star remains on the rise. Says Booth, “He’s the right person in the right job at the right point in time.”
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