A newly released briefing note shows Christopher Ragan's proposal to strengthen oversight of the Canadian economy went all the way to Stephen Harper, himself a former economist.
Ragan's warning, published by the C.D. Howe Institute in late January, said Canada may be ill-prepared for the next global financial crisis because a key oversight body has blind spots.
The distinguished economist said a high-level Finance Department group, known as the senior advisory committee, needs to be restructured to give the governor of the Bank of Canada more input and to ensure the Canada Mortgage and Housing Corp. is a permanent member.
Ragan says the non-legislated body served Canada well during the 2008-2009 global meltdown, but may be blind to the next financial disaster — and the country should not become complacent because of past success.
A Feb. 22 memo to Harper shows the suggestion was given serious consideration — but ultimately rejected in favour of the status quo.
The group "already fulfils the functions Professor Ragan is looking to address, and has a strong track record in both facilitating co-ordination between the relevant parties in Canada's financial regulatory system, as well as serving as an important vehicle for advice to government on policy decisions," says the memo.
The heavily censored four-page document was released to The Canadian Press under the Access to Information Act.
Ragan's paper for the C.D. Howe think-tank garnered media attention in January, but the Harper administration — which prides itself on astute management of the economy — remained publicly silent about the proposals.
The McGill professor says he's not surprised about the government's inaction, given that Canada survived the 2008-2009 crisis in relatively good shape.
"I'm concerned about the potential in a world that's a lot uglier than what we went through," he said in an interview from Montreal.
"What I worry about is 10 years down the road, when there's been the creation of new and funky we-can't-even-imagine financial instruments."
The high-level senior advisory committee is currently chaired by the deputy minister of finance, and does not include the CMHC, whose financial arm has the pulse of the housing market.
The governor of the Bank of Canada is also a mere member. Ragan would elevate the governor to co-chair to provide more leadership alongside the deputy minister of finance, though in the end the minister of finance would still make any final policy decisions.
Ragan would also formalize the committee through backing legislation, require minutes be taken, and add the safeguarding of financial stability to its mandate.
After discussion with Finance officials, advisers in the Privy Council Office — Harper's own department — dismissed those and other suggestions.
Ragan, who has been a visiting economist at both Finance Canada and the Bank of Canada, says he's "pretty happy" his proposals got an airing in the halls of government, but remains convinced Canada's oversight of financial stability needs fixing because 2008-2009 was not a one-time event.
"If you actually go through life thinking there won't be a financial crisis, then you're just an idiot."
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