‘Sitting on a detailed proposal’: Ceci reveals Scotiabank interest in Alberta’s ATB Financial

CALGARY – Bank of Nova Scotia previously offered to buy, and may still be interested in, Alberta’s provincially owned ATB Financial, finance minister Joe Ceci said Thursday.

Ceci, whose NDP government has called an election for next month, said in a news release aimed at United Conservative Party leader Jason Kenney that Scotiabank is interested in purchasing ATB Financial from the Alberta government.

Neither Scotiabank or ATB Financial have confirmed the existence of such a proposal.

In an interview, Ceci said that when he was appointed finance minister in Rachel Notley’s NDP government he turned down a “detailed proposal” submitted by Scotiabank to purchase ATB, which provides small business loans in the province and operates a network of banking branches, offering personal banking and business banking accounts.

“The previous government said this (proposal) is something that is there, do you want to follow up with it?” Ceci said.

Ceci, as finance minister, “is accountable to the legislature for ATB” according to ATB’s own roles and mandate documents. He is also able to issue ministerial orders requiring ATB to maintain specific capital requirements.

Ceci’s release said that Scotiabank is “sitting on a detailed proposal to privatize ATB” but did not indicate whether that was a new proposal, which would indicate the bank is still interested in an acquisition, or the four-year-old proposal.

He could not provide the offer price from Scotiabank for ATB Financial. He couldn’t say whether he or the finance department was bound by a confidentiality agreement with Scotiabank over the proposal.

He said the offer was made before the NDP took power from the previous Progressive Conservative government. Alberta’s economy has seen multiple years of recession since that offer was allegedly made.

“As a Crown corporation, ATB Financial does not comment on the government, its decisions or the platform of any political party,” ATB spokesperson Karin Poldaas said in an email. She did not confirm or deny whether a proposal had been received.

“Whether ATB remains a Crown corporation is up to the government of Alberta,” she said, adding ATB is the only financial institution in over 100 communities in the province.

UCP leader Jason Kenney said on Thursday that ATB Financial would remain a Crown corporation if the UCP formed government.

Scotiabank did not respond to a request for comment on the proposal or if it was still interested in buying ATB. Scotiabank already has most exposure to the province’s energy sector of all the big banks.

“We’ll be open to consulting with Albertans on how to grow ATB in the future,” Kenney said Thursday adding that he “wouldn’t be the least bit surprised that Canadian chartered banks were interested in ATB” but it would remain a Crown corporation if the UCP formed government.

He called Ceci’s assertion that he would privatize ATB an attempt to draw banks into the election campaign.

A former Alberta government minister, speaking on condition of anonymity, said it’s unusual but not unprecedented for a minister like Ceci “to reveal policies that were reviewed but never pursued.”

The person said that ministers aren’t normally bound by confidentiality agreements — so Ceci likely didn’t breach one — because they have too many other obligations, including to cabinet.

The person said that previous governments at various times had considered privatizing ATB Financial, which was founded in the Depression of the 1930s and has grown into one of the province’s largest Crown corporations, but had decided it was an important asset for maintaining capital availability in the province’s business sector.

“Alberta has a long history of not trusting the central Canadian banks,” they said.

ATB Financial’s last annual report, released March 2018, shows its net income increased 82 per cent to $275 million in 2018 from $151 million in 2017.

The bank’s assets declined 9 per cent over the same period, falling to $285 million in 2018 from $314 million in 2017.

• Email: gmorgan@nationalpost.com | Twitter:

Persistent deficits and higher spending raising Canada’s economic ‘vulnerability’: Fitch

The Liberal government’s preference for continued deficits and increasing program spending “could increase the vulnerability of public finances to a faster economic slowdown or sudden shock,” according to Fitch Ratings.

Canada has the second largest gross government debt of ‘AAA’ rated countries after the United States, which is ‘incompatible’ with its gold-plated rating, according to the ratings agency.

While the credit agency concedes that increased spending and projected deficits in Canada’s latest budget remain consistent with a falling federal debt burden, the forecast assumes the economy will avoid a recession.

“Modest fiscal loosening and sustained deficits will increase the economy’s exposure to a downturn,” the ratings agency said in its post-budget analysis.

While the expanded federal deficits remain relatively modest at less than one per cent of GDP and are sufficiently low to keep debt-to-GDP ratio drifting lower over the medium term, the country’s gross general government debt, combining federal and provincial fiscal accounts, is higher than other similarly rated sovereigns, and the ratings agency notes that debt levels are “incompatible with (Canada’s) ‘AAA’ status.”

Fitch had issued a similar warning in 2017.

A raft of new spending items in the federal budget aims to stimulate an economy that’s lost momentum, with some analysts suggesting a recession may be around the corner. Canada’s GDP fell by 0.1 per cent in November and December, but the economy managed a marginal 0.4 per cent growth in the fourth quarter.

Earlier this month, the Organisation for Economic Co-operation and Development said it is now forecasting 1.5 per cent growth this year for Canada, compared to its previous call for GDP growth of 2.2 per cent.

On Wednesday, Finance Minister Bill Morneau disputed the notion that recession might rear its head.

“We’re expecting … that we will have a return to growth at expected levels in the second quarter (of 2019) and our long-term forecasts are positive,” Morneau said.

However, investors are becoming more cautious and more convinced that the next interest-rate move from the country’s previously hawkish central bank will be more dovish.

Local yields have fallen in recent weeks amid weakening economic data, a more downbeat assessment from the Bank of Canada and a global rally in bonds. Wednesday’s dovish shift by the U.S. Federal Reserve and the market’s more gloomy view on prospects for the U.S. buoyed sovereign bonds and supported the view that policy makers in Ottawa will need to cut rates.

With “the bulk of the curve being below the overnight rate, it really says that the BoC will be reluctantly led to cutting rates,” Ryan Goulding, a fixed-income manager at Vancouver-based Leith Wheeler Investment Counsel Ltd., which manages around $19 billion, told Bloomberg. But it may not happen until “after a long, disappointing wait” for capital spending to pick up, he said.

The annual deficit projections in Tuesday’s budget, which is set to reach as high as $19.8 billion, will be racked up as the government makes several large, one-time investments for 2018-19, including $2.2-billion worth of new infrastructure funding and $1 billion towards improving energy efficiency.

The budget also pledges up to $3.9 billion for supply managed dairy, egg and poultry farmers affected by recent trade deals with the Asia-Pacific and Europe. Other big-ticket items include a $300 million zero-emissions car incentive, and a $1.25 billion houses-for-votes program that provides interest-free loans to first-time home buyers through the Canada Mortgage and Housing Corp.

The election year budget was offered under a backdrop of disappointing growth over the last several months, according to CIBC Capital Market analysts Avery Shenfeld and Andrew Grantham.

“This was less a rain of largesse and more of a sprinkling of measures, aimed at winning-over targeted groups.”

There was an enhancement of the fiscal track since the fall statement, CIBC analysts wrote in a note to clients on Tuesday.

“With revenues running further ahead of plan, and spending undershooting,” they said.

Instead of aiming at a lower track for deficits than had been laid out last year, CIBC said the government used the extra room generated by the enhancements to announce a dissemination of new spending and tax benefits, “thereby giving the economy a modest dose of stimulus while leaving the deficit track little changed from the fall statement.”

• Email: jasnell@postmedia.com

With files from The Canadian Press and Bloomberg

These are some of the CEOs who may face higher taxes on future options thanks to the federal budget

Top brass at Canadian companies may see some of their wealth chipped away, thanks to stock-option changes in the latest federal budget.

Canada is reining in a tax break on employee stock options by introducing a cap that it expects will impact executives of major, established companies. The moves aren’t retroactive, so the changes would only apply to future options awards. Key details are still to be worked out, but based on past payouts at Canadian companies, it’s clear who could be most affected.

The list includes Hudson’s Bay Co. Chairman Richard Baker, Canadian Pacific Railway Co. Chief Executive Officer Keith Creel and Great Canadian Gaming Corp. CEO Rod Baker, based on compensation packages compiled by Bloomberg.

Creel is American and hasn’t benefitted from Canadian stock-option tax advantages, a representative for CP said in an email. The company also said it released its latest proxy on Wednesday, listing Creel’s options at $2.5 million.

The government plans to release more details on the tax measures before the summer, according to budget documents published Tuesday.

“The government is concerned with the disproportionate benefit of the preferential tax regime accruing to high-income individuals who often receive large percentages of their compensation through stock option benefits,” Canadian law firm Stikeman Elliott said in a note on the budget. Currently with stock options, only half the benefit is taxed as income, similar to capital gains. The government will cap the annual use of that benefit at $200,000 (US$150,000) for employees of “large, long- established, mature firms,” according to budget documents.

The budget didn’t define a “mature firm.” The move will align Canada’s system with that in the U.S., the government said.

The stock option benefits “disproportionately accrue to a very small number of high-income individuals,” according to the budget. Canada had 2,330 people with total income above $1 million who claimed stock option deductions in 2017, and the average claim was $577,000, the government said. The cap wouldn’t apply to startups, where stock options are a key tool for cash-starved firms to attract talent.

–With assistance from Josh Wingrove and Danielle Bochove.

Bloomberg.com

City of Baltimore sues Stronach Group in bid to keep Preakness at storied track

The City of Baltimore has filed a lawsuit seeking to seize control of one of the Stronach Group’s signature horse-racing tracks, alleging that the Canadian firm has underinvested in the facility and may be trying to move its most prestigious event to another venue.

The complaint filed in Baltimore Circuit Court on Tuesday by a group including Baltimore Mayor Catherine Pugh and the city council is attempting to block the Aurora, Ont.-based Stronach Group and other related entities from moving the Preakness Stakes — a nearly 150-year-old “Triple Crown” horse race — from its current home at the Stronach-owned Pimlico Race Course in Baltimore.

Under Maryland law, the race (also owned by Stronach Group) must stay at Pimlico unless a disaster or emergency arises that would force it to move to another track in the state, the lawsuit charges.

“Racing Defendants are openly planning to violate Maryland law by moving the Preakness to a different racetrack despite the absence of any disaster or emergency, except for the disaster that they are in the process of creating,” alleges the suit, whose claims have not been proven in court.

 

Baltimore is accusing the Stronach Group and the other entities of having “systematically underinvested” in the Pimlico track since around 2011. They have instead invested in a track located near Laurel, Md., the lawsuit claims, which is being eyed as the site of a future “super track.”

Citing a 2018 study from the Maryland Stadium Authority, the lawsuit says the Preakness generated US$34.4 million in direct spending and supports 620 jobs, but that the last major renovation at Pimlico was done in 1983. A study by the authority recommended a “major capital investment” to fix up Pimlico, the lawsuit said.

Baltimore is now asking the court to grant it, “by condemnation,” ownership of both Pimlico and the Preakness.

“No disaster or emergency requires transfer of the Preakness from Pimlico to Laurel, but systemic underinvestment in Pimlico, if allowed to continue and accelerate as the Racing Defendants have done, and as all Defendants plan to do, would endanger Pimlico’s ability to continue its historic role as the venue for the Preakness, and as major economic and jobs generator for the City,” alleges the lawsuit.

“Through the systemic divestment of Pimlico, Defendants could indeed manufacture an ’emergency or disaster’ to justify transfer of the Preakness to Laurel, as undermaintained infrastructure begins to fail and crowds attending Pimlico races and the horses racing there are endangered.”

A spokesperson for the Stronach Group said it “believes these actions are premature and unfounded” and added that it would not be commenting further at this time.

The Preakness is known as the “middle” or “second” jewel of horseracing’s Triple Crown, a series that includes the Kentucky Derby and the Belmont Stakes. The 144th running of the race will be held on May 18.

The Baltimore Sun has reported that Stronach Group officials previously vowed that the Preakness will remain at Pimlico through 2020.

Frank Stronach, former CEO of Magna International.

“There is no ‘Triple Crown’ without the Preakness Stakes and the Preakness Stakes belongs in Baltimore City at Pimlico,” said a statement from Baltimore City Solicitor Andre M. Davis. “And that is true by virtue of its long history and tradition as well as by state law.”

The Stronach Group owns several racetracks in the U.S., including Pimlico, which it acquired full control of in 2011. The group’s website says its operations enables it “to be the most dominant player in the Thoroughbred horse racing industry in the United States, with business relations around the globe.”

Baltimore’s legal action against the business also comes in the wake of a lawsuit launched last year by Stronach Group founder Frank Stronach against his daughter, Stronach Group chairman and president Belinda Stronach, and others. A statement of claim alleged there had been a “complete break-down” in the relationship between the two.

Frank Stronach founded Magna International Inc., and according to a statement of claim, it was under his leadership that the auto-parts giant got into the horse-racing business as well. Those interests were spun off and formerly Magna-owned racing and gaming assets now make up one of the Stronach Group’s core businesses, the suit claimed.

The full list of defendants in Baltimore’s lawsuit also includes the Maryland Economic Development Corporation. The city is seeking a declaration that says MEDCO cannot issue bonds “for the purpose of disinvesting from the Pimlico Race Course,” as well as from an area of urban renewal in Baltimore, to spur economic growth in Laurel and another area by moving the Preakness there.

• Email: gzochodne@nationalpost.com | Twitter:

Chasing cold cash: How icebergs became the field of dreams for believers and schemers

David Meyers, the chief executive of Canadian Iceberg Vodka, a spirit made with water harvested from icebergs off Newfoundland’s coast, was meeting with a colleague at his office in Toronto’s northeast end on a snowy February morning, when the phone rang.

John Batten, the company’s warehouse manager in Port Union, Nfld., was on the line. He sounded baffled and bewildered, beset by a crisis he didn’t have an answer for. He had been doing his rounds, he explained, checking on the facility’s 30,000-litre iceberg water storage tanks to ensure the pressure gauges were all at 50, indicating the water inside was still circulating, instead of frozen solid.

But one of the pumps was registering zero and one of the pipes was displaced. Upon further inspection, the tank was empty and some $12,000 worth of iceberg water was gone.

“It is not like the tank leaked out,” Meyers recalled recently. “One of the pipes was askew, a pipe that should have been connected to a pump, so it appears the thieves attached a hose to that and drained it out, somehow. To be honest, we’ve been scratching our heads around here ever since.”

Police in Newfoundland continue to investigate the iceberg water whodunit, a heist that made international headlines and went viral on social media, but have yet to produce any concrete leads. What makes the mystery so appealing is the substance that was stolen: a precious liquid, of sorts, tapped from massive hunks of floating ice that, in their immensity, exude an almost mythic quality.

Icebergs are ancient history, indeed. They come to Newfoundland and Labrador from a seemingly distant place (Greenland, actually), buoyed along by the ocean current, melting beneath the summer sun and bleeding away perceived riches — that is, 100-per-cent pure, pre-Industrial Age, no vitamins-or-minerals-added iceberg water — into the Atlantic.

An iceberg looms over Bonavista, Newfoundland. Nature’s frozen carvings drift through Iceberg Alley each spring and summer.

It is the iceberg’s size, length of journey, age (they are more than 10,000 years old), ever-shifting architecture and inevitable death that draws hundreds of thousands of vacationers to Newfoundland each summer to see them. They are a star attraction — right up there with whales, seabirds, lighthouses, hiking trails and the welcome-you-with-open-arms-and-distinct-accent Newfoundlanders — that drives a half-billion-dollar-a-year tourism industry.

But icebergs also serve a lesser-known purpose: as muse to a handful of hopers, billionaires and kooks, whose iceberg water-based concoctions — be they vodka, bottled water, age-defying face creams, craft beer, wine and whatever they might think of next — fuel an industry built upon the faith that berg water is the tip of a commercial iceberg, an imagined gateway to great riches.

The industry has attracted a Saudi prince, failed politicians and former beach bums despite having just one certainty: the natural resource it relies upon disappears by September 1, only to return anew the following year, when another batch of bergs, typically 400 to 800 a season, drifts down Newfoundland’s coast for tourists to behold — and dreamers and schemers to try to profit from.

Money, mind you, is not a factor in Steve Bruneau’s fascination with icebergs. He’s an engineering professor at Memorial University in St. John’s, and a world-renowned expert on Arctic ships and structures — such as oil drilling platforms — which means he thinks a lot about ice and icebergs.

Bruneau has tested iceberg water, and can attest to its purity and the relative accuracy of the hyperbole often adopted by those trying to sell it.

“Ice was hard to come by in Newfoundland 200 and 300 years ago, and so icebergs were used quite regularly as a source of ice for packing fish and preservation,” he said.

“What is new about it today is that people are going after iceberg ice strictly for the novelty aspect of it. It sounds good, the optics are pretty cool and you got these big old blocks of ice cracking off the glacier — and we can say that the water is as pure as the driven snow and unaffected by modern civilization, and all that stuff, and that’s all pretty well true. But make no mistake: it is a novelty, and people like that.”

Unlike other Newfoundland novelties, such as being screeched in at the pub, the iceberg industry is not for the financially or physically faint of heart.

Harvesting ice from an iceberg requires a heavy-duty, reinforced-steel-hulled boat, and a spirit of derring-do to pull up alongside a hunk of ice that can split or unexpectedly flip, and often features sharp, spiny underwater fingers of ice, capable of punching holes through unsuspecting watercraft. (Remember the Titanic?)

The White Star Liner Titanic collided with an iceberg off Newfoundland on its maiden voyage from Southampton to New York on the night of the 14th/15th April 1912. More than 1,500 of the 2,229 people on board lost their lives.

In this regard, Ed Kean numbers among the elder statesmen of the iceberg industry, a veteran of 30-plus summers of harvesting ice. He has a break-your-hand-in-two-handshake grip, and he got into the iceberg business because his family business was built upon a fishery that collapsed. Kean didn’t want to leave Newfoundland for someplace else, so he had to find something new to fish for.

Icebergs were it.

“This is a very small industry,” Kean said from the mountains of western Newfoundland, where he was snowmobiling. “It is costly to get into, and you’ve got to harvest enough ice in two months to last the rest of the year.”

In the olden days, Kean cracked ice chunks off larger icebergs by blasting them with a rifle, or hacking into them with an axe, then scooping up the pieces with a net. His system is more advanced now.

Kean harvests about 1,000 tons of ice a summer — Iceberg Vodka is by far his largest client — using a 100-foot-long custom barge, aptly named the Ice Harvester, outfitted with a grappling hook. The grapple breaks off ice chunks, which are fed into an ice grinder and then stored in tanks. The ideal iceberg for harvesting is about the size of a medium-sized house.

“I am starting to do my own iceberg water now,” said Kean, one of six individuals/companies licensed by the province to harvest icebergs. “I am hoping that it is going to be bigger than the vodka, bigger than the beer — and everything else.”

Ed Kean numbers among the elder statesmen of the iceberg industry, a veteran of 30-plus summers of harvesting ice.

Hopes and dreams are the underpinnings of an industry that was always supposed to be bigger than what it has actually become.

The idea of monetizing iceberg water first cropped up in the late 1940s, thanks to John Dove Isaacs III, an American scientist and academic.

Isaacs’ career arc took him from being present at nuclear test sites and studying blast waves, to hypothesizing that towing Antarctic icebergs up the Pacific Coast and anchoring them off Catalina Island might solve California’s chronic water scarcity problem in the agro-industrial sector.

His theory was completely wacky, and resided on the scientific margins until the 1970s, when Saudi Prince Mohammed bin Faisal Al Saud became interested in icebergs as a possible answer to his country’s drinking water problems.

With Saudi money to be made in icebergs, university professors started cranking out papers and convening academic conferences. Entrepreneurs took note.

Iceberg water is touted for its purity.

“Previous discussions of iceberg water had stressed its application to irrigation and agro-industrial complexes, schemes that could not afford high-priced water — and demanded delivery of very large icebergs,” American geophysicist W.F. Weeks noted to his peers at a gathering of the International Glaciological Society in Cambridge, England, in April 1980.

“Water delivered to Saudi Arabia, however, would be used for human consumption and high technology, and could command far greater prices.”

Saudi iceberg interest also caught the eye of Ron Stamp, a former owner of a hovercraft rental business in the Cayman Islands and a St. John’s native. He just couldn’t understand why the Saudis wouldn’t just melt the iceberg wherever it was, bottle the water and ship it home, ready to drink, rather than towing an iceberg to the desert — which never actually happened.

“Commercially, the prince was looking at the most expensive ice cube on the planet,” he said. “And that always stuck in my head.”

Ron Stamp, who says he’s Canada’s original iceberg water entrepreneur, stands on Topsail Beach just outside St. John’s.

Stamp fancies himself Canada’s original iceberg water entrepreneur. As he tells the story, he was drinking beers with some buddies, circa 1982, when they started talking about that iceberg-obsessed Saudi prince.

Stamp had left home at 17 to drive a truck in Toronto, before realizing that what he was really good at was talking, and so he switched to sales before leaving sales to be a beach bum in Jamaica.

Next came the hovercrafts and, ultimately, a trip home to visit his parents, where he started a new venture: selling Newfoundland fish to Europe. It was a fine idea, until the cod all but disappeared and the government declared a moratorium on the fishery.

All the while, Stamp said, he never forgot about the Saudis, or the image of a giant iceberg melting away, which served as inspiration for his first iceberg-related business idea: iceberg ice cubes.

Pure, hard and slow to melt, iceberg ice cubes had an origin story he felt a connoisseur of fine Scotch would swallow, and pay a premium for. But the idea never took off. Instead, vodka was the answer.

“I was the first person to make a vodka out of an iceberg or bottled water out of an iceberg, and that can’t be taken back from me,” Stamp said.

His vodka-making days date back to about 1993, and are long past now, though his latest creation — Borealis, an iceberg beer — has him telling stories again. The beer has been test-marketed in several Asian markets to, its creator claims, rave reviews.

“I’ve been looking at icebergs all my life,” Stamp said. “It’s a funny thing, because no matter how often you see them — if you are driving along the coast and you pop around a corner and there is an iceberg — it’ll make you stop. They are off-kilter, because it will be summer, and then here is this chunk of ice, hanging on the horizon. They are an amazing thing.”

Which is why some Newfoundlanders would prefer that the iceberg harvesting crowd simply left the icebergs alone.

Bottles of Iceberg Vodka at the offices of CEO David Meyers.

“Getting into a conflict with the harvesters — that kind of a scenario — it is real,” said Cecil Stockley, who operates MV Iceberg Alley, an iceberg/whale-watching vessel out of Twillingate, Nfld. “My opinion was, and always has been, that we should allow an iceberg to break down naturally. Tourists, especially in a place like Twillingate, the last thing you want to see is the harvesters crunching up an iceberg with all their machinery.”

In years past, tensions flared between the harvesters and the preservationists. Shouts and insults were exchanged between boats. Things, Stockley admits, could easily have escalated.

To keep the peace, the Newfoundland government stepped in, adopting a series of iceberg/whale-watching industry-friendly measures, including stipulating that all iceberg “harvesting activities shall not interfere with tour boat operations or other recreational activities …

“Also, harvesting activities or collection of bergy bits shall not be carried out within visible distance from known locations frequented by tourists, including, but not limited to, Cape Bonavista, Cape Spear, Twillingate and other locations …”

For now, the iceberg détente remains, and the icebergs continue to attract new dreamers to the industry.

One such dreamer is Marek Krol, a Polish-Canadian entrepreneur famous around Newfoundland, in the utmost small-c celebrity way, for starring in his own, short-lived reality television series called Living Wild, about living off the land with his family.

Workers harvest pieces of an iceberg off the coast of Newfoundland.

The 52-year-old leveraged his celebrity to try his hand at politics, standing as a Conservative candidate in St. John’s in the 2015 federal election against Liberal star, Seamus O’Regan. Krol got crushed, earning just 4.5 per cent of the vote.

“Politics didn’t work out so well for me,” he said, laughing.

Next up: iceberg vodka, perhaps iceberg water and, who knows, maybe iceberg water-derived medicine of some sort.

Krol claims he is on the cusp of patenting a new technology that will dramatically increase the volumes and efficiencies involved in iceberg harvesting. He is also engineering a new vodka bottle — no sneak previews allowed — that he expects will be on liquor store shelves across Newfoundland this fall.

“Success starts with a dream,” he said. “Amazing people who become billionaires, they have a dream and they pursue it, and I am not afraid to take a risk, to dream big and to make things happen.”

Back at Canadian Iceberg Vodka HQ in Toronto, another week has past without any new breaks in the case of the missing iceberg water.

CEO David Meyers has his own working theory, believing that the thieves must have thought they were stealing vodka when they emptied the storage tank, before disappearing without a trace.

“Thirty thousand litres of vodka, that would have substantial value,” he said. “But there is no black market for iceberg water. What you do with 30,000 litres of stolen iceberg water in Newfoundland, I just don’t know.”

But maybe the thieves do know, and maybe they have known along. They wouldn’t be the first to look at an iceberg and see a 100-per-cent pure opportunity frozen inside.

• Email: joconnor@nationalpost.com | Twitter: oconnorwrites

‘Desperate governments do dumb things’: The Liberals’ very political budget

Columnists Chris Selley and Andrew Coyne discuss the federal budget amidst the fallout from the SNC Lavalin scandal and before the national election

SNC-Lavalin CEO says job losses were never cited in push for remediation agreement

TORONTO — The chief executive of SNC-Lavalin Group Inc. says he never cited the protection of 9,000 Canadian jobs as a reason it should be granted a remediation agreement to avoid a criminal trial on allegations the company paid millions of dollars in bribes to obtain government business in Libya.

In an interview with The Canadian Press, Neil Bruce said Wednesday if the engineering firm is convicted and barred from bidding on federal contracts here at home its workers would end up working for the Montreal-based company’s foreign rivals.

“There would be a reduction with us but these are talented folks. They’ll get a job,” Bruce said.

“This thing that somehow they’re going to be unemployed is not true because they are highly qualified, highly experienced people.”

Bruce’s comments come as a political storm in Ottawa continues over allegations that Prime Minister Justin Trudeau, his senior staff and others improperly pressured former attorney general Jody Wilson-Raybould to end a criminal prosecution of SNC-Lavalin.

Trudeau and his staff have said their only concern was for SNC-Lavalin’s 9,000 jobs, which might be at risk if the company were convicted and then barred from bidding on federal contracts for up to 10 years
The affair has so far cost Trudeau two cabinet ministers, his principal secretary and the country’s top public servant, although he continues to insist no one did anything wrong.

Bruce said about 75 per cent of the company’s rivals have concluded deferred prosecution agreements in their host countries and are free to work in Canada.

Meanwhile, Bruce said he still doesn’t know why the director of the Public Prosecution Service of Canada and former attorney general Jody Wilson-Raybould were not open to granting a remediation agreement.

He said SNC-Lavalin employees feel bruised and battered by the last six weeks since a report surfaced that government officials pressured the former attorney general to grant the company a deferred prosecution agreement.

“And I think fundamentally that’s unfair on our employees who had nothing to do with what went on seven to 20 years ago.”

While he’s not surprised that politicians would make hay out of this issue during an election year, Bruce said he’s concerned that policy-makers haven’t been as willing as other countries to defend home-grown companies and their workers.

He said there’s no plans to move the company’s headquarters from Montreal, adding competitors are envious of its shareholder base that is 82 per cent Canadian and led by the Caisse de depot which has helped fund its acquisition of British engineering firm Atkins.

“We see ourselves as Team Canada. We are a global champion, one of few. There’s not many and we’re proud to be Canadian.”

Fed sees no 2019 rate hikes, plans September end to asset drawdown

Federal Reserve officials scaled back their projected interest-rate increases this year to zero and said they would end the drawdown of the central bank’s bond holdings in September after holding policy steady on Wednesday.

The median rate projection of Fed officials compared with two hikes in the December forecasts, which spooked investors at the time. In its statement following a two-day meeting in Washington, the Federal Open Market Committee repeated January language that it will be “patient” amid “global economic and financial developments and muted inflation pressures.”

The Fed’s signal that it will keep interest rates on hold for the full year reflects concerns that economic growth is slowing, lower energy prices are weighing on inflation and risks from abroad are dimming the outlook. The projections go further than the one-hike forecast analysts had expected in a Bloomberg survey.

In a separate statement Wednesday, the Fed said it would start slowing the shrinking of its balance sheet in May and halt the drawdown altogether at the end of September. After that, the Fed will likely hold the size of the portfolio “roughly constant for a time,” which will allow reserve balances to gradually decline.

Beginning in October, the Fed will roll its maturing holdings of mortgage-backed securities into Treasuries, using a cap of US$20 billion per month. The initial investment in new Treasury maturities will “roughly match the maturity composition of Treasury securities outstanding,” the Fed said. The central bank is still deliberating the longer-run composition of its portfolio and said “limited sales of agency MBS might be warranted in the longer run.”

The 10-0 decision held the target range of the federal funds rate steady at 2.25 per cent to 2.5 per cent. Powell is scheduled to begin a press conference at 2:30 p.m.

While the central bank is very close to its twin goals of low and stable inflation and full employment, Chairman Jerome Powell and his colleagues must contend with risks from abroad, including slowing growth in Europe and China and possible spillovers from Britain’s exit from the European Union.

Those headwinds contributed to sharp financial-market volatility late last year. U.S. stocks recorded their steepest December losses since the Great Depression as President Donald Trump publicly hammered Powell to stop raising rates and investors saw the Fed’s projected hikes as a policy mistake.

Stocks have rebounded since the Fed made a dovish pivot in January, replacing a reference to further gradual rate increases with a pledge for patience. Wednesday marked policy makers’ first opportunity since December to lay out in quarterly forecasts the extent to which their projections for hikes have changed.

Economic growth “has slowed from its solid rate in the fourth quarter,” the FOMC said in its statement. “Job gains have been solid, on average, in recent months” despite “little changed” payrolls in February. “Overall inflation has declined,” though excluding food and energy it “remains near 2 per cent,” the central bank said.

Policymakers also lowered economic-growth projections for this year and next, giving a 2.1 per cent median estimate for 2019, a full percentage point below last year’s pace.

The less upbeat assessment in the statement compared with January’s language saying growth was solid, consumer spending was strong and business investment had moderated.

The projections showed 11 of 17 officials saw no hikes this year, while four expected one rate increase and two people projected two hikes. Policymakers expect to lift rates once in 2020, to 2.6 per cent by the end of that year, and hold them steady in 2021.

That compares with a December projection for a 3.1 per cent rate in 2020 and 2021, with borrowing costs converging to 2.75 per cent in the longer run, according to the median path. That long-run estimate was unchanged in Wednesday’s forecasts.

The Fed formally adopted its 2 per cent inflation goal in 2012, and price gains have mostly come in on the low side since then.

Policymakers slightly lowered their expectations for inflation relative to their last set of economic projections. After 1.8 per cent headline inflation in 2019, they see price gains of 2 per cent on both the main and core indexes for the next two years, eliminating the overshoot they had previously projected.

Officials see unemployment at 3.7 per cent by year-end, higher than their previous estimate of 3.5 per cent. At the same time, they lowered their long-run jobless rate projection to 4.3 per cent, suggesting the labour market is running less hot than they previously thought.

Bloomberg.com