Goldman Sachs Hire at Bank of Canada Followed Guidelines, Flaherty Says
Canadian Finance Minister Jim Flaherty said the country’s central bank followed conflict of interest guidelines when it hired an adviser from Goldman Sachs Group Inc.
Bloc Quebecois lawmaker Daniel Paille and Thomas Mulcair of the New Democratic Party both asked about the hiring of Timothy Hodgson for an 18-month term. Flaherty said in response that the bank makes its own staffing decisions and that Hodgson has “severed” his ties to the private sector.
Governor Mark Carney and Hodgson worked together at Goldman Sachs in New York from 1998-2000, and Hodgson was hired by the central bank this year to work on developing rules for trading repurchase agreements and over-the-counter derivatives, and regulations to ensure banks have enough capital. Carney told opposition lawmakers during committee testimony yesterday employees are bound by a code of conduct and a conflict of interest policy.
“It’s a question of the revolving door back to the private sector,” Mulcair said today while asking questions of Flaherty, adding that Hodgson’s contract has no “cooling-off period.”
“Any appearance of conflict of interest in our democratic institutions undermines the public’s trust,” Mulcair said.
Flaherty replied by saying “the person in question has severed his ties with the private sector” and “the Bank of Canada makes its own hiring decisions.”
Bank of Canada spokesman Jeremy Harrison said that Hodgson “has resigned from Goldman Sachs, severed all ties, divested himself of all his holdings of Goldman Sachs stock and placed his other investments in a blind trust.”
“The bank’s conflict-of-interest policy will appropriately limit his activities upon his departure,” Harrison said.
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President Obama's appointment of Summers as his chief economic advisor made the administration's overall response to the crisis predictable. (Robert Kuttner gives a detailed explanation of the policies that Rubin's protégés championed in his new book, A Presidency in Peril.) The response would follow the disastrous Japanese model that has harmed their economy and damaged their integrity. The dominant characteristics can be summarized quickly: (1) the government would act for the benefit of the largest financial firms and their CEOs, even when they directed massive frauds, by (2) engineering a cover up of the banks' losses and the CEO's misconduct; (3) the administration would use the fictional reports generated to conduct the cover up to declare victory (due to their brilliance); and (4) the same strategy would impair the recovery. (For more on the cover up, see here and here.)
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