VZCZCXRO8439
PP RUEHGA RUEHHA RUEHQU RUEHRN RUEHVC
DE RUEHOT #0761 1161856
ZNR UUUUU ZZH
P 261856Z APR 07
FM AMEMBASSY OTTAWA
TO RUEATRS/DEPT OF TREASURY WASH DC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 5495
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE PRIORITY
RUEHSS/OECD POSTS COLLECTIVE PRIORITY

UNCLAS OTTAWA 000761 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS FEDERAL RESERVE 
STATE FOR WHA/CAN AND EEB/IFD/OMA 
TREASURY FOR OFFICE OF INTERNATIONAL AFFAIRS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV CA
SUBJECT: BANK OF CANADA GOVERNOR DODGE RETIRING NEXT JANUARY 
 
 
¶1. (U) Summary: The Governor of the Bank of Canada (BOC), 
David Dodge, will step down at the end of January 2008 at the 
end of his seven-year term.  The news was a surprise.  Dodge 
is widely regarded as an extremely effective Governor who has 
kept Canada's inflation under control while presiding over 
one of Canada's longest periods of economic expansion since 
World War II.  Dodge has also been seen as more public than 
his six predecessors as Canada's central banker, giving 
numerous speeches to business and economic groups in Canada 
and around the world.  He has been as visible in Canadian 
financial markets as was Alan Greenspan in U.S. markets 
during his tenure as Fed chairman.  Senior BOC and government 
officials and economists at Canada's top banks are seen as 
possible successors.  The new Governor will be chosen by the 
Bank's board of directors, with the approval of the Finance 
Minister and the Cabinet.  End Summary. 
 
¶2. (U) Dodge, 63, announced on April 25 that he would not 
seek another seven-year term.  He said he was revealing his 
plans well in advance to "facilitate the selection and 
appointment of his successor."   Although the announcement 
gave no reasons for Dodge's unexpected decision, there was 
speculation that his age was a factor in his not seeking 
another seven-year term.  The last Bank Governor to serve two 
full terms was Gerald Bouey between 1973 and 1987. 
 
¶3. (U) There has been no indication of any philosophical 
disagreements or personal issues between Dodge and 
Conservative Finance Minister Flaherty.  Indeed, Flaherty 
praised Dodge's tenure in a press release: "Governor Dodge 
has served Canada in the finest tradition of central bankers, 
and his influence has been felt not only here, but around the 
world.  In particular, his strong leadership during the 
turbulent post-9/11 period has helped Canada lead the Group 
of Seven countries in economic growth." 
 
¶4. (U) A Toronto native and Princeton graduate, Dodge joined 
the BOC in 2001 after having been Deputy Finance Minister and 
Deputy Minister of Health.  At Finance, he convinced then 
Minister Paul Martin to combat Canada's huge budget deficit 
in the mid-1990s.  Martin became Prime Minister in 2003, in 
part because of popularity he won in balancing Canada's books 
while GDP and employment sustained healthy growth. 
 
¶5. (U) Governor Dodge may be a hard act to follow.  He has 
helped steer the Canadian economy through one of its longest 
expansionary periods after World War II, cutting interest 
rates when exports weakened in 2001 to lift Canada out of a 
possible recession and helping keep the inflation rate within 
the BOC's one- to three-percent target range.  Canada's 
mortgage rates and unemployment rate have also fallen to 
their lowest levels in decades since Dodge became governor in 
February 2001.  However, there was criticism of Dodge's 
relative inaction against the phenomenal appreciation of the 
"loonie" (Canadian dollar) between January 2002 and May 2006, 
which slowed Canada's exports and hurt manufacturing. 
 
¶6. (U) Analysts believe that BOC Senior Deputy Governor Paul 
Jenkins may have the inside track as the logical replacement 
since most past Governors got their appointments after many 
years as understudies to the job.  Dodge, on the other hand, 
was the rare outsider to head the Bank.  BOC Deputy Governor 
Tiff Macklem has also been mentioned as a candidate to 
replace Dodge.  Outside candidates may include Senior 
Qreplace Dodge.  Outside candidates may include Senior 
Associate Deputy Minister of Finance Mark Carney, who is a 
former BOC Deputy Governor and Goldman Sachs Group investment 
banker, and Toronto-Dominion Bank chief economist Don 
Drummond.  The Globe and Mail mentioned Clerk of the Privy 
Council Kevin Lynch as a possible Governor.  Currently 
Canada's top bureaucrat, Lynch has been Canada's 
representative at the IMF and also served, like Dodge, as 
Deputy Finance Minister. 
 
¶7. (U) The BOC board of directors said that it would soon 
form a special committee to recruit a successor.  Governors 
are appointed by the independent directors, subject to the 
approval of the Finance Minister and the Federal Cabinet. 
The selection process for the new governor is expected to be 
completed by fall. 
 
 
 
Visit Canada's Classified Web Site at 
http://www.state.sgov.gov/p/wha/ottawa 
 
WILKINS