LONDON (AP) — It’s not often that central bank governors get compared to rock stars.
But for all the buzz being created about the new man taking over as governor of the venerable Bank of England, you would think his name is McCartney, rather than Mark Carney.
“He’s got that charisma,” said Paul Kavanagh, senior market strategist for Killik & Co. “People will warm to him.”
Carney, the former head of the Bank of Canada and the first non-Brit to run the 319-year-old bank, moves into the bank’s headquarters in the City of London on July 1. He faces a tough challenge: Helping rescue Britain’s economy, which has been foundering since the onset of the 2008 economic crisis. While he won’t do it alone, Britain’s leaders are hoping he can inject confidence and try new ideas to revive the country’s fortunes.
Carney, 48, will certainly be hoping for a calmer time of it than his predecessor, Mervyn King. In his 10 years on the job, King, 65, has had to steer the bank through the financial crisis of 2008, help rescue several major retail banks and try to revive the UK’s economy by bringing interest rates down to an all-time low of 0.5 percent and introducing a 375 billion pound ($572 billion) bond-buying program.
The new governor brings an impressive track record. Carney is credited with keeping money flowing through the Canadian economy by acting quickly in cutting interest rates to their lowest level ever of 1 percent, working with Canadian bankers to sustain lending through the crisis and, critically, letting the public know rates would remain low so they would keep borrowing. And it wasn’t just that he had good policies — he sold them to the public in a way everyone could understand.
However, he didn’t face the same challenges as Britain. Canadian banks were stronger and didn’t dabble in subprime mortgages. None of them needed a bailout. Demand for Canada’s energy and mineral exports also helped the country rebound faster than most industrial nations in Western Europe and the United States.
Canada recovered faster than many other countries from the 2008 financial crisis. During 2009, unemployment hit 8.7 percent and gross domestic product shrank 4.2 percent. But it came back.
The Canadian economy expanded 2.5 percent in the first three months of this year, the fastest pace since 2011. Unemployment is now around 7.1 percent.
In contrast, the UK economy grew at 0.3 percent in the same period and its unemployment is stuck at around 7.8 percent.
The new guy from Ottawa is getting hyped as a departure from the quiet, reserved King, who comes from the gray, serious world of central banking.
“If it is your view that central bankers are boring old people, he (Carney) was not.” said Benjamin Tal, the deputy chief economist at CIBC World Markets in Canada. “He looks differently. He has all his hair. He speaks in a way that it not typical.”
Whereas most central bankers keep analysts busy parsing what they say — much in the style of former U.S. Federal Reserve Chairman Alan Greenspan — Carney is known for his wit and informed clarity.
That’s considered a golden attribute at the moment, especially for the UK. Public confidence in the country’s financial sector has been undermined by scandals related to interest rate-rigging, rogue trading and a lack of accountability.
“We need honest appraisals of what is going on if the public is going to change their opinion,” said Cary Cooper, a professor at Lancaster University Management School. “(The public) need someone who is open and honest.”
Among those anxious for Carney to succeed is Treasury chief, Chancellor of the Exchequer George Osborne, a man so unpopular in Britain that he was booed by the crowds at the 2012 London Olympics. Osborne reportedly wooed the Canadian for more than a year, happy to bear the brunt of the acerbic British media, which would criticize Carney’s 874,000 pound ($1.3 million) pay and benefit package at a time when the average public sector employee received a 1 percent pay increase.
Carney’s newness to Britain is an advantage: He can play the outsider — replicating a common trait in business where a new face comes in to offer a fresh approach.
And for the UK, Carney is about as outside as you can get. He was born in Fort Smith, in Canada’s remote Northwest Territories. When he was 6, his family moved to Edmonton, where his mother taught school and his father became a professor of education history at the University of Alberta
He got a partial scholarship to Harvard, where he was the backup goalie on the hockey team. Influenced by John Kenneth Galbraith, who pioneered the popular notion that economics should be accessible to the masses, Carney took up economics
But Harvard left him in debt and he opted for a job at Goldman Sachs after graduation in 1988.
“I felt it would be better to work for a few years and pay that off,” he told Reader’s Digest Canada in 2011 of the “exorbitant amount of money” he owed. But when asked how much, he cheerily replied: “That’s a bit personal. But I paid it off —I’m very trustworthy.”
He went back to Goldman after studying at Oxford, where he met his British-born wife, Diana, who specializes in development. They have four young daughters.
Carney’s years at Goldman Sachs in London, Tokyo and New York left him comfortable with the Wall Street world — something that was particularly useful at the Bank of Canada. He understood how markets would respond, and wasn’t intimidated when financial titans tried to throw their weight around. His backers like to recall a run-in with JPMorgan Chase Chief Executive Jamie Dimon, who had a heated exchange with Carney after accusing him of pushing “anti-American” bank regulations.
“He more than held his ground,” former Canadian Prime Minister Paul Martin said of the exchange. “Mark won the day clearly.”
Carney also solidified his reputation by using “forward guidance,” or locking in the interest rate outlook for months in at a time — the idea being that if people knew rates would remain low they would be more likely to borrow. That helped stimulate spending and economic growth. The U.S. also uses this method, and analysts think Carney might try it in Britain.
But Canadians say it’s risky to make too much of Carney’s role, saying he’s more like Ringo Starr — someone who was in the right place at the right time. Talented, yes, but anyone would succeed with the Beatles — and Canada’s economy has proved resilient to the global economic downturn.
Canada’s conservative banks didn’t suffer from the same capital and subprime crises that U.S. and UK banks have — Carney has not had to rescue a bank during his five years at the Bank of Canada.
Tal, the CIBC economist, said that while Carney was a great central banker, a bit less hype might be in order.
“If there are any expectations of a knight on a white horse who coming to save the British economy, I suggest that they will be disappointed,” he said.
But Canadian observers also suggest Britain will note his style — the events, speeches and press conferences tinged with humor.
“I’m a member of a team, the governing council of the Bank of Canada,” Carney said at the University of Alberta in May. “If my legacy turns out to be bad, I’m taking them down with me.”
Analysts expect he’ll take it slow at first. Britain has a much larger financial sector and remains one of the world’s great money centers despite its woes. All that candor may not go over well in London.
“He had no fear about wading into any (economic) subject,” said Douglas Porter of BMO Capital Markets in Toronto. “(I) suspect he will be more cautious, at least initially, in England.”
Associated Press Writer Rob Gillies in Toronto contributed to this story.