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Macklem manoeuvres money markets on world stage

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In September 2008, as the sub-prime mortgage crisis shook the pillars of global finance, Western alumnus Tiff Macklem, one of the federal government's most senior civil servants, played a key role in managing Canada's response to the upheaval.

"The world was on the precipice," he recalls. "My every waking moment was spent dealing with events."

Macklem, MA'84, PhD'89 (Economics) 48, had been appointed Associate Deputy Minister at the Department of Finance less than a year earlier. He serves as Finance's deputy at international forums such as the G-8 (the seven major industrialized countries plus Russia) and the G-20 (which embraces new economic powers such as China and India). It's his job to brief Prime Minister Stephen Harper for the G-8 and G-20 summits.

As the world's economic system began to buckle, Macklem and other G-8 deputies would hold a conference call every morning and then another one at 5:30 pm. At the peak of the crisis, he was on the phone evenings at the Westboro Village home where he, his wife Rosemary and their three teens live in Ottawa. "My personal life was on hold," he says. "I was even taking calls in the middle of the night." Macklem admits that the Western world's financial regulators initially underestimated the systemic risk. What at first appeared to be a problem of insufficient liquidity then was perceived as a matter of a few insolvent banks. Only belatedly did it become apparent that the global financial system was "undercapitalized and over-levered," and that a new Great Depression loomed.

"The policy tools we economists had learned were about how to support markets," says Macklem. "But as the crisis worsened, many [credit] markets were simply closed. It required governments to step in and make markets." (Ottawa provided temporary emergency liquidity, which peaked at $40 billion in December 2008, to stabilize short-term money markets.) "I had to use everything I had ever learned," says Macklem, "but there was no chapter in the textbooks on how to do this."

The Canadian banks weathered the storm better than most others, partly due to strict domestic regulation. So it's appropriate that Macklem is now co-chairing a G-20 working group that is trying to develop recommendations for improving regulation and transparency in the global banking system.

Richard Tiffany Macklem was born in Westmount, QC. (His parents named him Tiffany to honour the MD who delivered generations of Macklem babies. "It wasn't considered a girl's name when I was a child," he says. "My friends all called me Tiff.")

At Western, he earned an MA (1984) and a PhD (1989). He chose Western, he says, because it "had the country's strongest macro-economic faculty. The department was a real powerhouse, and professors such as David Laidler and Michael Parkin had a profound influence on me."

In between his two graduate degrees, Macklem spent a year at the Bank of Canada, Ottawa's most hallowed institution. He joined its department of monetary and financial analysis, having survived an on-campus interview and a gruelling day of interviews in Ottawa. ("They asked you harder and harder questions until you started to crack," he quips.)

When he joined the central bank, Macklem wasn't sure he wanted a doctorate; but once employed there, "I saw what you could do with a PhD other than become an academic. The Bank's research was driven by real-life issues that it had to take decisions on. It became something that, intellectually, I wanted to do." Macklem returned to the Bank in 1989 after completing his PhD. Two years later, the central bank announced a new policy of holding Canada's inflation rate to 2 per cent -- the midpoint of a 1 to 3 per cent target range.

"We were only the second country, after New Zealand, to announce inflation targeting," he says. "There was not much academic research on inflation targeting. This was a policy developed by practitioners.

It was an exciting time to be a young economist at the Bank, building economic models on how to run monetary policy with inflation targets." Usually the restrained mandarin, Macklem suddenly sounds gleeful as he reminisces about his role in initiating this bold new monetary policy. Serving under four very different Governors, Macklem climbed the Bank's hierarchy, becoming chief of the research department in 2000, and then Deputy Governor in 2004. As a member of the Bank's Governing Council and the Executive Management Committee, he shared responsibility for decisions on monetary policy.

His current job at Finance is, tellingly, the same post that Mark Carney held before his ascendancy to Governor of the Bank in 2008. Many observers expect Macklem to be named his successor in 2015 when Carney's seven-year term ends. (No Governor has served a second term since Gerald Bouey was reappointed in 1980). Macklem brushes off speculation that he is destined to become Canada's next top central banker. Significantly, however, he will be returning to the Bank this July with a promotion to Senior Deputy Governor, a post that makes him effectively the Chief Operating Officer.

Meanwhile, as the G-20 struggles to agree on a new global regime of financial regulation, he doesn't lack for challenges.

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