Sarkozy's pet, Charest's pain: A tale of two Caisses

L'affaire de la CDPQ — le scandale

MONTREAL -- No public sector financial institution needs to "find itself" as continually as the Caisse. Its motto might as well be: "What am I?" Should I put profits ahead of patriotism? Should I protect domestic champions instead of investing in foreign ones? I'm so confused.
We're not talking about the trauma-racked Caisse de dépôt et placement du Québec, which is once again looking for a new chief executive. No, the existential crisis of Canada's biggest institutional investor has only being going on for four decades or so. That's nothing compared with its French inspiration - La Caisse des dépôts et consignations (CDC) - which has been on the couch since before Jean-Paul Sartre even knew he had an id. For 193 years, in fact.
Like its Quebec counterpart, the 220-billion ($358.5-billion) CDC is a favourite football of the politicians who ultimately control it. But while Premier Jean Charest likes to trumpet his hands-off approach toward the Quebec Caisse, French President Nicolas Sarkozy revels in meddling in the affairs of his.
The latest example is the hyperactive Mr. Sarkozy's creation last month of a sovereign wealth fund to protect French "national champions," with an initial 20-billion coming jointly from the government and the CDC. That move came only days after Sarko called on the CDC to cough up 2-billion to help recapitalize Dexia, the French-Belgian bank.
Mr. Sarkozy promises the new CDC-managed fund will "not only protect our most strategic companies from the covetousness of predators attracted by weak stock prices, but also provide those companies that need it with capital without having to rely on foreign funds that are mostly preoccupied with gaining control of their technological secrets and emptying them of their substance." (Yes, Sarko talks like that.) Coming from the first French president Americans actually like, it's quite an indictment of global capitalism.
All of this has the head of the CDC, Augustin de Romanet, turning as red as the darkest Merlot. Even members from Mr. Sarkozy's own right-of-centre Union pour un Mouvement Populaire (UMP) party protest that such interventionism promises to create a royal mess down the road.
"Nobody forced our hand in creating this fund," Mr. de Romanet insisted last month. Almost no one believes him, especially since Sarko never holds back from publicly issuing veiled directives to the CDC boss, appointed by Mr. Sarkozy's predecessor and rival, Jacques Chirac. "I wish," Mr. Sarkozy says, "the Caisse was more dynamic."
That "dynamism" includes forcing the CDC to place more than 7-billion worth of equity stakes it holds in leading French companies into the new sovereign wealth fund and provide it with another 3-billion in liquidity.
Though Mr. Sarkozy's interventionist moves have so far gone unnoticed in Quebec, they could provide fodder for the long-running debate in the province about the proper mandate of the $155-billion Caisse. Mr. Charest goes to lengths to stress he has "depoliticized" the pension fund manager, though such claims belie his government's, um, active interest in what goes on at Quebec's premier financial institution.
Opposition politicians have always gotten a Trans-Canada Highway's worth of mileage out the Caisse's travails and the pension fund manager is providing the current crop of pretenders to the premier's throne with more than enough material to ensure Mr. Charest will get no peace.
With billions in additional losses expected by the Caisse on its $12-billion in third-party asset-backed commercial paper, and rumours that its heavy reliance on risky derivatives has exploded in its face, Mr. Charest will face a hard time justifying the returns-before-nationalism policy championed by the pension fund manager during the five-year reign of the now departed Henri-Paul Rousseau.
The Action Démocratique has accused Mr. Charest of leaving the Caisse in the hands of speculators. Parti Québécois Leader Pauline Marois has called the Caisse's heavy weighting in ABCP pure and simple gambling. Both parties condemn the Caisse for abandoning its long tradition of putting Quebec entrepreneurs first in its quest to make a name for itself on the now detritus-littered playing field of global finance.
Mr. Sarkozy's moves provide the opposition with more weaponry.
The French Caisse, of course, has a broader array of depositors than its Quebec cousin. The CDC manages the pension savings of 10 million current and retired public sector employees. But it also, for instance, invests the more than 100-billion that French depositors hold in their tax-free savings accounts. (The French had TFSAs long before Finance Minister Jim Flaherty was a glimmer in his great-great-great-grandmother's eye.) Those funds are used to finance the construction of social housing, hospitals and universities.
Still, as this tale of two Caisses shows, both share a common denominator: politics. No wonder they're so mixed up.

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