Mark Carney, governor of the Bank of England, is rightly admired for his handling of the global financial crisis. But perhaps the key fact is not that he is Mr Carney, but that he is Canadian, and the bank of which he was previously governor was the Bank of Canada. ….
The US had a uniquely fragmented and fragile retail banking structure, the product of a long-term alliance between community bankers and agrarian populists, made possible by a system jealous of states’ rights. This was replaced towards the end of the 20th century by a network of financial conglomerates controlled by deal makers and traders, who had a decisive hand in stimulating the subprime mortgage boom; a new, bizarre and disastrous play in the game of bank bargains.
Profs [Charles] Calomiris and [Stephen] Haber describe Canada’s mortgage market as displaying “enviable dullness”: but they might have applied the phrase to Canada’s financial system and some might extend it to the country itself.
Capital markets, regulatory institutions and the behaviour of people employed in the financial sector are neither predetermined nor universal, but rather the product of culture, history and the political system. That is a perspective developed effectively by Profs Calomiris and Haber.
John Kay, “Why banking crises happen in America but not in Canada“, Financial Times, 4 June 2014 (ungated link).
Mr Kay is reviewing Fragile by Design: The Political Origins of Banking Crises and Scarce Credit, by Charles W. Calomiris and Stephen H. Haber (Princeton University Press, 2014).