ABCP Smackdown: Mark Carney vs Jim Flaherty

CAITI Online Poll On Asset Backed Commercial Paper (ABCP) Bailouts.

Bank of Canada Governor Mark Carney:

The response to the recent turbulence in financial markets should reaffirm that market participants are fundamentally responsible for their actions. For example, investors must understand the price dynamics and liquidity risks of the products they buy, rather than relying solely on credit-rating agencies. The market is beginning to lead many of the necessary changes, as institutions are improving their liquidity management and credit discipline and as originators and distributors of new loans are beginning to adjust their products to standardize terms and, importantly, align incentives. At the same time, accurate and timely information about underlying risks is essential for the market to differentiate and properly price risk. Thus, as Governor Dodge highlighted in September, enhanced disclosure and transparency remain crucial. Standing Committee on Finance December 5, 2007

In comments following an address to a business luncheon in Toronto on Wednesday, Mark Carney said the Canadian economy is strong enough to withstand the collapse of the massive restructuring, which has come under huge pressure as a result of the financial crisis. National Post December 17, 2008

Conservative Finance Minister Jim Flaherty:

Finance Minister Jim Flaherty said in Saskatoon that he and some of his provincial counterparts are discussing a plea from the investor committee overseeing the restructuring for as much as $9.5-billion in backstop credit lines, but no decision had been made.

The fact that Mr. Flaherty is even considering the request is a significant development, given that until recently his position was hands-off. Globe and Mail December 18, 2008

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BoC Governor Mark Carney said "There was not going to be any public money put behind any of this [ABCP rescue plan] because these are decisions of financial market participants." Jim Flaherty now proposes to rescue these same financial market participants.

Energy trust tax: dumb and dumber by Diane Francis

National Post
Posted: March 19, 2008, 6:03 PM

There remains trouble in Toryland over finance minister Jim Flaherty’s non-sensical tax on energy trusts and the income trust debacle cost the party a byelection in B.C. this week. Its candidate cited income trusts as the major concern in the election. It is an issue that simply will not go away because it should not. Prime Minister Stephen Harper, at Flaherty's urging, reneged on a firm promise which is good leadership.

The issue is the single biggest reason why the Tories have not, and cannot, get a majority in the polls. Their foolish and flawed flip flop against trusts devastated and alienated their base. Some $35 billion in value disappeared overnight, affecting two million Canadian investors.

Taxing the energy trusts too, when other countries do not, has been a major policy blunder and Albertans are determined to prove how foolish it all has been with an initiative announced last week.

Energy trusts have joined the Liberals who have asked the Auditor General of Canada to investigate Flaherty’s claims that taxing the trusts was necessary to staunch tax leakage.

It was nonsense then and still is.

“$110 a barrel oil prices have camouflaged what is a big mistake in policy,” said Sue Riddell Rose in a phone interview with me last week. She is CEO of Paramount Energy Trust and the Coalition for Energy Trusts spokesperson.

Trusts used everywhere else

Trust structures are used, and recognized, around the world as a more efficient means of managing commodity companies which find planning difficult due to price fluctuations. Flaherty exempted real estate trusts but not energy trusts, a damaging inconsistency.

About 20% of the country’s 33 energy trusts (which pay considerably more taxes than all the foreign-owned oil companies combined) have been swallowed up by foreigners or other entities.

Ottawa’s attack has ruined the junior oil sector too since October 2006 despite soaring oil prices, she said.

“The junior oil sector is no longer vibrant. There is no exit strategy which was to sell oil and gas assets to trusts,” she said. Put another way, if oil prices had remained the same as when Flaherty made his tax announcement on Oct. 31, 2006, the oil patch would be in “dire” straits.

“They did not do their homework. They did not understand the industry and they have deceived the Canadian public,” she said.

Trusts really dumb idea

Flaherty’s leakage excuse was debunked in a report by accounting giant Deloitte weeks ago in a study that showed that the reverse has happened: where there was no leakage there is not massive leakage.

The mistake, or omission, made by him and Mark Carney – author of the scheme and rewarded by becoming Governor of the Bank of Canada -- was to exclude the massive downstream income trusts flowed to unitholders who paid top taxation rates.

It was amateur hour and the harm has been ongoing and will worsen, Riddell explained.

“In 2006, there was no leakage at all and revenues were enhanced by the trust structure,” she said. “We’ve tried to get breakdowns from government as to the percentage of its cash surpluses that are coming from this but cannot get anywhere.”

She said a rough guess is that Flaherty’s folly has cost governments at least $1 billion in tax revenues, but only the Auditor General, with her special access, can do the analysis needed for taxpayers.

“It’s a big number,” she said. “There are two things we would like them to do: Go through their analysis re the actual, downstream revenue and then to analyze what has been foregone as a result of the changes.”
Why isn’t she and others giving up?

“We continue to believe a proper analysis was not done and that the wrong decision was made to enable the efficient recovery of resources for Canadians,” she said. “I personally feel deceived by them because they misrepresented information to Canadians. Something else is driving these decisions and I think Canadians should know. I don’t.”

Mark Carney's fraudulent actions have cost the Canada Pension Plan $300 million and counting

"Mark Carney is widely credited as the key bureaucratic point man in Finance Minister Jim Flaherty's controversial decision to tax income trusts." Canadian Business, Jan 30 2008

$300 million in CPP income trust losses (spreadsheet attached). Perhaps it's time for the Auditor General to perform her stated role:

"Parliamentarians need objective fact based information on how well that government raises its funds (taxes)"

The following material is from Les Parsneau, a retired Canadian from Collingwood, Ontario who believes government should be transparent and accountable, rather than corrupt and misleading. He has major concerns about our rogue Finance Minister who puts Jerome Kerviel of Societe General to shame:

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Societe General's $7 billion loss is chump change when compared to the devastation that Flaherty has caused with his tax on the income trusts. A tax that was perpetrated using fraudulent numbers and untrue rationale. See the lies and the proof that they are lies below.

Where are you Mass Media?

The biggest ripoff in Canadian history!!!

Read the lies and read why they are lies from sources such as BMO, Deloitte and HLB Decision Economics.

No story there?

Since October 31, 2006:

• Over $37 billion in income trust losses.
  
• Over $300 million in CPP income trust losses.
  
• Over $1.4 billion in annual trust distributions and their annual taxes lost in perpetuity - the tax leakage Flaherty created
• Over $18 billion in oil and gas trust losses while the price of oil has increased nearly 50% to over $90 per barrel.
  

From the Ways and Means motion, November 2, 2006 and comments from Mr. Flaherty:

Government Lie 1: to eliminate the tax leakage caused by the income trusts ( the real tax leakage is 5% of the government's numbers)

Proof it is a lie:
HLB Decision Economics report - Independent economists discredit govt tax leakage claims

Government Lie 2: ensuring that taxes are not unfairly shifted onto the shoulders of Canadian taxpayers, especially Canadian families,

Proof it is a lie:
Deloitte report - Income trust buyouts: Lots of activity, little tax revenue

Government Lie 3: helping corporations make choices that are consistent with economic growth and competitiveness,

Proof it is a lie:
Price Waterhouse report - Income trusts are efficient at investing, growing

Government Lie 4: bringing Canada's approach to the taxation of trusts and partnerships back in line with other jurisdictions.

Proof it is a lie:
BMO report - Digging Deeper, a perspective on U.S. Flow-Through Structures

Les Parsneau
Collingwood, ON



CLICK FOR FULL SIZE IMAGE

Dr. Carney and Mr. Hide

Harper promises 'new era of accountability'
February 1, 2006
CBC News

Incoming prime minister Stephen Harper says his government's first act upon assuming power will be to table a federal accountability bill. No immediate changes to civil service, Harper says

However, Harper said his government would not move immediately to make major changes to the public service that were recommended in Gomery's second report.

Harper said they had "merit" but said his government would have enough to do elsewhere in the first few months of its transition into power.

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Mark Carney is an example of a completely unaccountable top ranking bureaucrat from the Department of Finance who thinks that a solemn election promise that was reversed at the cost of $35 billion in Canadian’s hard earned life savings can be simply justified on the strength of 18 pages of blacked out documents, and nothing else.

As Diane Francis, Editor at Large of the Financial Post has written; “prove the case or drop the tax”

You be the judge of whether Bank of Governor elect Mark Carney, meets your test of Stephen Harper’s promise of new Accountable and Transparent government.




Related:
Pump it up
The NDP are needlessly setting themselves up
There's a sucker born every minute
Harper, Carney, Flaherty income trust mistake: Deloitte - Diane Francis
Federal Conservatives' So-Called "Federal Accountability Act" and Related Decisions Earn a "D" Grade - Democracy Watch

The NDP are needlessly setting themselves up

By Brent Fullard

This evening [November 24] I attended an NDP public gathering in Hamilton hosted by four NDP MPs, which constitutes about 13% of the NDP’s caucus. The subject matter of the meeting was the Security and Prosperity Partnership. The NDP has been holding a number of similar meetings across the country on this matter and I learned they are planning to roll out their position on the SPP in a more prominent way in two weeks time. The NDP are to be applauded for giving the SPP greater visibility, since the self described modus operandi of the SPP is “evolution by stealth” and the supposedly innocuous jelly bean agenda, as Stephen Harper prefers to call it.

NDP Peter Julian described for the audience of 120 or so people the top ten things that Canadians need to know about the SPP. I only took note of the seven items described by Peter Julian that best serve to highlight the inherent contradiction between the NDP being against the SPP and being for the income trust tax:

(1) Policy is the product of the CCCE
(2) Absence of Public Consultation
(3) It is secret
(4) Blacked out documents released under Access to Information re SPP
(5) Censorship by government about SPP s greatest on issues relating to energy resource issues
(6) “Quality of life issues” are involved
(7) Energy sovereignty being threatened and compromised

Virtually every point that Peter Julian made in his presentation on the negative aspects of the SPP afforded me with a segue into the topic of income trusts. I waited to hear the questions that others in the room where asking first before asking my question. The questions were being asked in groups of five or so questions and then answered by Peter Julian. I asked my question immediately following a question from a gentleman who was pointing out the “faith based” nature of the Harper government and a question from another gentleman about the recent rash of foreign takeovers. I started off by making the point that a large portion of the takeovers, $65 billion in the last 12 months to be precise, can be explained by the faith based tax policies of the Conservative government that are, in fact, being supported by the NDP. I also pointed out that the NDP themselves are practicing their own brand of faith based policies, as bad as those of the Conservatives, because the NDP are writing letters to their constituents that read:

“I am confident that government estimates of future tax leakage are solid”

I then held up the 18 pages of blacked out documents provided under the Access to Information Act and asked the four NDP MPs in attendance where they derived their confidence from, if not simply blind faith. Blind faith on a matter that can be factually determined..

Peter Julian attempted to respond to my question in purely partisan terms, describing how this or that was either the fault of either the Liberal or the Conservatives. I told him he was wrong and that the blame he is trying to lay at the Liberals feet had nothing to do with the Liberals and everything to do with the alleged insider trading activity undertaken by Serge Nadeau, Director General of Tax Policy in the Department of Finance. I then pointed out that the Liberals are to be commended for doing what the NDP are condemning the Conservatives for not doing in the case of the SPP , namely Public Consultation. I pointed out to Peter Julian that had it not been for Ralph Goodale’s public consultation round in 2005, we would never have known that Mark Carney and Company in Finance were leaving out the 38% of taxes that are paid by average Canadians who hold their income trusts in RRSPs.

I indicated to the audience that the $65 billion in takeovers will be costing all Canadians, since it is all tax paying Canadians who will pay for the loss of $2 billion a year in taxes, a figure that will soon rise to $7.5 billion a year. On the point being made about the SPP and sovereignty I pointed out that the NDPs support of this income trust tax has left the 20% of Canada’s oil and gas production that is held in trusts and the 80% of Alberta’s energy infrastructure held in trust s highly vulnerable to foreign takeovers Witness Abu Dhabi’s purchase of Prime West for $5 billion. This, Peter Julian shamelessly or perhaps naively attempted to blame the Conservatives for.

All of this to make one simple point. This was a meeting that took place in Hamilton with a roomful of people who were predominantly Labour, as evidenced by the fact that everyone referred to one another as “brother”. During the evening about 25 questions were asked. Two received applause, one of which was my question. Many in attendance came up to me afterwards to learn more. Therefore the issue of income trusts is not going away and even die hard NDP supporters are receptive to others like myself when we raise completely valid questions such as “where is the NDP’s proof of tax leakage?”

As such, the NDP is setting itself up if it goes into the next election without answers to these questions, as they can be assured that they will be facing these most embarrassing questions in most every all candidates meeting that are held in ridings across the country. The NDP need not wear this egg on their face, since they need only point to the source of the false tax leakage information: Mark Carney and his compliant cohorts in the department of Finance. No reason why the NDP can't look smart by exposing the fraud taking place in the Department of Finance on behalf of the CCCE. Failure on the part of the NDP to do so will prove politically costly. Over to you Thomas Mulcair. You are operating with a blank slate. No need to feel bound by the superficial understanding of this issue that was brought to bear by former NDP Finance Critic Judy Wasylycia-Leis. Better to embarrass her than to embarrass yourself and your entire party in the process. In fact, no one needs to be embarrassed as the source of the misleading information insn’t Judy Wasylycia-Leis per se. But rather Mark Carney and his false methodology behind alleged ax leakage. Meanwhile, The 2.5 million income trust investors will prove a formidable challenge to your party’s ambitions. Keep in mind, there only were 2.5 million Canadians who voted NDP in the last election which was the NDPs best showing ever

PS: I gave Peter Julian his own set of 18 pages of blacked out documents and challenged him to come back to me with the NDPs proof of tax leakage. Before doing so he might want to read the attached report entitled “Tax Revenue Implications of Income Trusts" which showed no tax leakage, and that was before Harper reduced corporate tax rates from 22% to 15%, the effect of which Dennis Bruce of HLB Decision Economics has determined has now made income trusts responsible for $200 million in NEGATIVE tax leakage per annum