Canada's central bank clashes with critics and comes of age under its most controversial governor.
William McChesney Martin, former chairman of the US Federal Reserve, famously quipped that a central bank's role is to "take away the punch bowl just when the party gets going." This role has often led to a difficult relationship between a central bank and the government.
Nowhere is this difficulty better exemplified than in the turbulent relationship between the Bank of Canada of James Coyne and the Conservative government of John Diefenbaker. In The Bank of Canada of James Elliott Coyne, James Powell examines the views of Canada's most controversial central bank governor and assesses the central bank's clashes with the government, Canadian economists, and financial institutions that culminated in the "Coyne Affair" and Coyne's resignation in 1961. The author also examines the impact of the Coyne years on the Bank of Canada as an institution.
Powell argues that the dispute between the Bank and the Diefenbaker government was not over monetary policy, as widely believed, but rather over Coyne's outspoken criticism of the government's economic policy. Coyne's term as governor marked an important stage in the development of the Bank of Canada as a modern central bank, one that is independent, transparent, and accountable.