Wednesday, October 14, 2009

return of Alberta Capital Bonds? Say it ain't so.

Watching the premier claim on YouTube tonight that "[o]ur savings during the good years were substantial," I felt indulgent: he's entitled to one lie. But when he went on to repeat the claim and insist that "we were well prepared going into this recession," I could only think where is Joe Wilson when you need him?

The biggest head shaker of in-the-red-Ed's teleprompted performance, however, was his declaration that "[t]his is a good time to bring back Alberta Capital Bonds." Persons interested in a second opinion may wish to contact my brother, Kevin Dell CFA, who manages the City of Edmonton's debt portfolio, or either the chief of the Domestic Debt Management Section of Finance Canada's Financial Markets Division or her highly capable boss, Wayne Foster, who is Division Director and who happens to be my former section chief. But given that these people are all current government employees, they may be uninclined to speak freely. So allow me to be frank: this is a taxpayer boondoggle. Yes, I know: you're shocked that such a thing could come from this government. Just take a deep breath!

In 2004 Cap Gemini Ernst and Young delivered its independent review of Canada's retail debt program to the Department of Finance. CGEY noted that between 1997 and 2003 the Canada Savings Bond program cost $1 billion, and concluded that, going forward, winding down the program would save Canadian taxpayers $650 million over 9 years. "This conclusion is supported by research and analysis that assessed franchise value, value to government, value to investors, environment, organization, and design."

The premier says that a relaunch of Alberta's retail bond program "will be a real way of showing your support for our communities and our faith in the future." How about showing your support for our private sector, Premier Ed, by not introducing a government product to crowd out the private sector's offerings and, most importantly, conserving taxpayer dollars by sticking with the lowest cost option for debt financing? Here's what your own Finance Department has to say:
In 1996, the name was changed from Alberta Capital Bonds to Alberta Savings Certificates. By 1997, ... we stopped selling the certificates because we developed even more cost-effective ways to raise money.

Federal Finance Minister Ralph Goodale rejected the independent recommendation to wind down the retail debt program because he was aware of polling that indicated that Canadians liked their CSBs. This dubious rationale has apparently now migrated to Alberta, and is especially galling for me since the primary reason I left Ottawa to return to Alberta is because I reckoned Albertans would be more open to the sort of sound, fiscally prudent, corporate friendly policy that the civil servants at Finance Canada wanted to pursue.

1 comment:

Eleanor said...

Good analysis Brian.