That time the prime minister squared off against the central banker

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In his later years, long after resigning from his post as Bank of Canada governor when a sitting prime minister tried to fire him, James Coyne’s children would ask their decidedly eccentric headline-making father why he rarely strayed from his trademark dark grey suit in favour of more colourful threads.

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“I don’t want to seem like a flashy Joe,” he would say.

A Rhodes scholar, lawyer, hockey player, ex-military officer, public servant and Winnipegger, Coyne drank his coffee cold. He may not have wanted to come off as flashy, but his star was bright, and his career has recently circled back into view.

Pierre Poilievre, the Conservative party leadership candidate, has been taking some public swipes at Bank of Canada governor Tiff Macklem, pledging to fire him should he someday be elected prime minister.

Coyne, were he alive today — and he died a decade ago at the age of 102 — would surely, as the saying goes, relate. He was the leading man in a banking drama referred to by historians as the “Coyne Affair,” alongside his antagonist, Conservative prime minister, John Diefenbaker.

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“Coyne was a man of strong conviction,” James Powell, a retired senior Bank of Canada official and Ottawa historian, said.

Coyne was a man of strong conviction

James Powell

Legend has it Coyne’s colleagues once considered gifting him an icicle, wrapped in blue, because of his cool exterior.

The central bank’s second-ever governor was appointed in 1955, when the economy was booming and foreign investment was piling in. Canada had only recently decoupled itself from a fixed exchange rate in favour of a floating model that could better reflect market conditions.

This was pretty heady stuff back then. Coyne, on the cutting edge of a floating-rate revolution, was also a believer in low, stable inflation as the bedrock of sound monetary policy. He also loved to talk.

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That may be part of Tiff Macklem’s job description today, but governors did not talk publicly in Coyne’s time, until, that is, he began giving speeches from coast to coast, beginning in Calgary in October 1959.

The messaging out of Ottawa from Diefenbaker’s crew — the largest Parliamentary majority in Canadian history — was that the economy was on a roll. Coyne’s interpretation was somewhat less upbeat.

To paraphrase: the country, particularly its resources, was being sold out to American investment and lurching beneath an unhealthy trade deficit. The very idea of “Canadianism” was under mortal threat. Meanwhile, Joe and Jane Canuck were so busy buying stuff — bigger houses, cars, televisions — that household savings were next to nil.

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Canada’s books need balancing, Coyne said, or else.

The Conservatives were not too keen on that interpretation and notified him that his seven-year term as governor would not be renewed when it expired. That might have been the end of it, had Diefenbaker, a politician with a proclivity for being paranoid, not learned about the $25,000 annual pension awaiting the banker once he hit the exits.

It did not matter that Coyne did not establish the pension amount, nor that he had recused himself from all talks related to it, which involved the central bank’s directors, predominantly made up of Conservative appointees. The rationale behind the hefty pension was to ensure governors would be free to do their job without being financially beholden to whatever party was in power at a given date.

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Diefenbaker didn’t care for the details. He wanted Coyne’s head.

The actual decision to fire Coyne was not over a policy decision…It was over a pension. It was petty

James Powell

“The actual decision to fire Coyne was not over a policy decision,” Powell said. “It was over a pension. It was petty.”

It was downright messy, too, and included plenty of name-calling, even in the House of Commons, where the banker was labelled an “anarchist.” Coyne, no shrinking violet, fired back that Diefenbaker was an “evil genius.”

The Conservative majority in the House hustled through a bill stating the governor’s position was vacant. The Senate saw things differently, and defeated the bill, while 400 senior bank staffers presented Coyne, who officially resigned from his job, with a gold medal inscribed with a message, thanking him for “his courage and integrity in defending the position of governor of the Bank of Canada.”

Today, Coyne is considered a pioneer, a guy who got some of the big things right, such as floating rates, and did not back down from a dust-up with a prime minister who — Pierre Poilievre might want to note — lost his Parliamentary majority the following year.

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