Carney to Canadian companies sitting on cash: give it back to shareholders

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TORONTO — Bank of Canada governor Mark Carney has some blunt advice for Canadian companies sitting on piles of cash _ give it back to shareholders.

While companies might be holding on to cash because of global economic instability, those funds amount to ``dead money'' for the economy, the country's top central banker said Wednesday.

``Their job is to put money to work,'' Carney said following a speech to the Canadian Auto Workers' union.

``If they can't think of what to do with it they should give it back to their shareholders.''

The bank governor was responding to a question about a previously released Canadian Labour Congress study that suggests Canadian businesses are sitting on some $500 billion in cash assets.

And Prime Minister Stephen Harper has said, on a global scale, there is ``money sitting on the sidelines'' that can revive the world economy.

In July, the Bank of Canada kept its benchmark interest rate at one per cent until at least the next policy meeting in September. The bank says business investment and consumer spending, supported by super-low interest rates, remain the chief support systems for the recovery.

But business investment is expected to be less robust than previously thought due to concerns about the global economy.

``The point we make to Canadian business is, having the best financial system in the world is only really a value if it's also there in the tough times _ we expect it to be there if there are tough times,'' said Carney.

``So the level of caution could be viewed as excessive.''

The head of the Canadian Auto Workers' union said the money ``can be reinvested in technology, reinvested in the workplace, reinvested in productivity, reinvested in workers in terms of training them for the kind of work that we need in the future.''

``So absolutely, you can't sit on this pile of cash and expect the economy to move,'' said Ken Lewenza.

``You've got to spend that cash to move the economy.''

Organizations: Bank of Canada, Canadian Auto Workers, Canadian Labour Congress

Geographic location: TORONTO

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  • Bill Kays
    August 23, 2012 - 08:11

    Everyone with a brain can see that an economic collapse worldwide is a definite possibility. So of course these corps(es) are sitting back waiting for the economy to get worse so that then they can swoop in, claim to save us from ruin, but end up buying our assets for pennies on the dollar. This is how the rich get richer and the poor keep getting shafted and it has been going on for centuries.

  • Andy Adams
    Andy Adams
    August 23, 2012 - 07:12

    Just make the banks pay a minimum interest rate on deposits of 8% instead of giving the banks the entire deposit base of the Canadian public to use for their exclusive use FOR FREE! Banks are owned by the public and are licensed to operate under the "Bank Act" which is approved by the Canadian Public. And, no loan, for any purpose, can be greater than 10%. Roll back banking fees to 1990 levels effective, September 1. You can't image the wealth and financial capacity that would immediately revert to the Canadian public! Any talk of a recession would immediately disappear! Such carte-blanch power given to our banks, as that power transferred to them in the past 20 years, is obscene.