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Arrow Introduction
Arrow Sessions

79th Annual Summer Conference, August 5–8, 2010

Watershed Moment: How did we get here?

Speakers: NICHOLAS LE PAN, Chair of the Canadian Public Accountability Board, member of the board of the Toronto Centre for Leadership in Financial Sector Supervision, and past Superintendent of Financial Institutions for Canada (2001–2006) (bio); ANGELA REDISH, Professor of Economics, UBC University of British Columbia and former Special Advisor to the Bank of Canada (bio)

Moderator: JOHN IVISON, Political Columist, National Post

Summary by Eugenia Duodu, CIPA Youth Scholarship Recipient

Both panelists today navigated through the question of how we arrived at the global financial crisis and discussed ways in which to move forward. As John Ivison introduced, both speakers grappled with the questions of whether we have found relief or just reprieve in the global economic crisis.


Redish opened with a look at the Great Depression of the 1930s and the similarities and differences surrounding that past economic crisis and the present one. The similarities lie in financial imbalances coming out of the WWI transitions and issues surrounding the stock market. The differences focus on the 10-year recovery period in the 1930s after the fall of the GDP and the rise in unemployment rate, which Redish feels was a different outcome from the present. The watershed moment of the 1930s was that by 1939 as the welfare state was rising, there was a change in attitudes towards the markets and the end of the gold standard. There was a lot of learning out of this time period and that we are not at the same place today because of international cooperation and learning from past mistakes.

In the present situation, Redish questions how we could have gotten to the point of the brink of financial disaster. Using the global imbalance as a backdrop, the rise of Asia and the outcomes of the Asian financial crisis along with the imbalance in American income inequality resulting in more borrowing to increase consumption all created an environment for a more fragile system. The lack of regulation ahead of financial innovation and its inability to keep up with the extent of interconnectedness of the market further weakened the system. Despite this, we are not in the times of the Great Depression and recovery for Canada should be quick and strong.

According to Redish, the bigger challenge lies not in the financial policy sector but in pushing the government to answer what the future plans are in the case of a bank failure and to move away from the notion of “too big to fail.”


Le Pan comes from a different approach by covering the essence of why financial crisis happened, why Canada was able to get through, and what future improvements can be made. According to Le Pan, the background is the need for a well-functioning financial sector where you know who you are in the markets and you have the right people to obtain optimal results. The present financial crisis is no different from the past because human failure has been the consistent theme throughout history and the fact that we know how we arrived there. Le Pan believes that the roots of all financial crises are excessive leverage and excessive concentrated risk. While at the present there is plenty of blame to be put, greed and hubris cannot be legislated away and supervision is the key.

Le Pan attests Canada’s ability to come out of the crisis to: good luck, good relations with regulators, the high quality of management, and good regulation – a single mandate with focused supervision. These things were able to occur primarily through continuity and the right people, which enabled trust, clarity of mandates, small working numbers and implicit choices of growth.

As Le Pan believes we cannot create a system free of crisis, we must move forward by doing the following:

1. Looking out for excessive leverage

2. Increasing the financial resiliency at the core of the system

3. Increasing the ability of regulators and central banks

4. Improving national preparedness

5. Increasing adult supervision – international peer assessment

By focusing on the basics, Canada will be able to make it through the next crisis and continue to improve its international reputation.