Rhéal Séguin of the Globe and Mail reports that opposition parties are accusing the government of Quebec of smothering the hearings into the Caisse losses:
Opposition parties are accusing Quebec Premier Jean Charest of stifling debate in order to cover up facts behind the $39.8-billion debacle at the Caisse de dépôt et placement du Québec after the government cancelled committee hearings into the pension fund's record losses.
“They want to smother the whole affair, cover it up… and are acting in bad faith,” Parti Québécois House Leader Stéphane Bédard said Wednesday. “The government wants to avoid answering questions, they want to avoid getting to the bottom of the affair.”
Finance Minister Monique Jérôme-Forget said it was time to move on. “I'm in the solution mode right now. I've crossed that point. My government has to choose a chairman of the board, renew and appoint new board members, identify a president as soon as possible,” she said Wednesday before the cabinet meeting.
But Mr. Charest said the government is in no hurry to make changes at the Caisse. “We will take the time it takes to do it right. There are no delays. There won't be any changes today,” he said.
With the special hearings canceled, former Caisse president Henri-Paul Rousseau chose to explain his handling of the pension fund in a speech before the Montreal Chamber of Commerce on Monday. His choice of venue angered the Action Démocratique du Québec.
“It's ridiculous to have to pay $100 a plate to listen to Mr. Rousseau's explanation,” ADQ finance critic François Bonnardel said. “It is a scandal that he is not doing it before a National Assembly committee. … It looks like this is all part of a government marketing strategy.”
The opposition parties are convinced Mr. Charest has known about the Caisse's troubles since last fall – when he called an election – but refuses to admit it. They also contend that the pension fund's problems are rooted in the changes to the Caisse governance rules adopted by Mr. Charest's Liberals in December of 2003, which encouraged managers to take greater risks in order to improve benefits.
The opposition contends those changes opened the door to risky investments such as a heavy stake in asset-backed commercial paper that contributed to the Caisse's record losses.
“The Caisse lost $40-billion. How much more does it have to lose to justify special committee hearings?” Mr. Bédard asked. “If a member doesn't have time to examine something like this, then they don't deserve to be in the National Assembly.”
He added that his party was willing to drop its demand that Mr. Charest appear as a condition for the hearing but said the Finance Minister should be ordered to testify.
The opposition parties have only themselves to blame for bungling the hearings up. Instead of focusing on the key players, they wanted to go after the Premier and the Finance Minister.
I even wrote about who they should ask to testify in last week's commentary, the Caisse's $40 billion train wreck:
As far as ABCP, I think several people should testify, including Henri-Paul Rousseau, Richard Guay, Gordon Fyfe, the President & CEO of PSP Investments and former President of World Markets at CDP. Last but not least, the politicians should invite Luc Verville, the vice-president with responsibility for money markets at the Caisse when the ABCP back box exploded.
They should ask Mr. Verville who was responsible for taking leveraged positions on ABCP and why for so long nobody asked him whether he was taking on too much risk relative to the T-bills benchmark that governed his activities. Who was overseeing his activities and why didn't they pull the plug earlier, before the credit crisis hit? Didn't they realize that taking leveraged positions in illiquid securities is flirting with disaster?
The answer is that as long as everybody was making money beating a bogus benchmark, everyone kept their mouths shut. Now that the music has stopped, they have some serious explaining to do.
I think it's time the public finds out exactly what happened at the Caisse. Once the truth is exposed, the new board should implement sound governance policies to make sure that this type of reckless risk-taking never occurs again (go back to read my entry on Clearing the Pensions Fog).
But politicians are politicians, which means they will exploit any disaster if it can help them get elected. Where were these same politicians when the Caisse was reporting stellar returns? Why weren't they checking the Caisse's governance back then?
And what do you expect Mr. Rousseau to talk about at the Montreal Chamber of Commerce on Monday? Do you really expect him to say "we were investing in ABCP because it allowed us to easily beat our T-bills benchmark for many years and we got paid huge bonuses so we all kept quiet, hoping nobody would notice"? Do you expect him to talk about how pension fund managers are paid too much?
It's pathetic but so is Quebec politics, including the politics at the Caisse and other Quebec Crown corporations. It's all one big club of politicians scratching each other's back.
I agree with Premier Charest that they need to take their time to make the right changes. However, it's not just about finding the right board members and the next president. It's also about hiring independent consultants to overhaul the governance at the Caisse.
One thing I mentioned last week that is worth noting again:
Fernand Perreault, acting chief executive, said the Caisse had increased its holdings of liquid assets, pushing the share of equity investments down from 36 to 22 per cent, while increasing its exposure to fixed income investments from 30 to 44 per cent.
That was the smartest move the Caisse made and it will help them weather the storm ahead. They reduced risk across the board and are being more cautious. You can be cynical about the timing of this move, but I think it was needed and very wise.
There is no cover-up at the Caisse, just gross incompetence that cost them billions of dollars. Did Premier Charest know about the losses during the elections? Maybe he did and maybe he didn't. But more importantly, who cares? The Caisse should never be a potical issue during elections or at any other time.
The probe into the Caisse's losses could have been very constructive, exposing some serious governance gaps. Instead, the opposition parties wanted a political witch-hunt. They got what they deserve, screwing Quebecers once again.
This is just another sad chapter of Caisse Sera Sera. Plus ca change...
[Note: I do not know Mr. Bertrand, but I have met Réal Desrochers and he is an outstanding candidate with incredible leadership skills.]
***New Chairman of the Board
The Globe and Mail reports that former Gaz Métro head Robert Tessier has been named the new chairman of the Caisse de dépôt et placement du Québec. According to the article, the pension fund manager also is replacing most of the members of its board of directors as their mandates expire.