Sen. Yuen Pau Woo, facilitator of the Independent Senators Group, speaks to reporters on Parliament Hill in Ottawa on Tuesday, June 19, 2018.Justin Tang/The Canadian Press
A prominent leader in Canada’s Senate says the Canadian government should be prepared to take more aggressive steps to steer the economy out of the pandemic by purchasing stakes in companies and encouraging banks to waive debt repayments by businesses.
Yuen Pau Woo, the head of the Independent Senators Group – the largest bloc in the Senate – also said Ottawa should also consider a “temporary guaranteed livable income for all adult Canadians.”
He said the goal must be to keep the Canadian economy in a “state of suspended animation” so workers and households can meet their basic needs and that companies can remain solvent “until such time as the health crisis is over and we can restart the economy” in this country.
The Senate leader said buying stakes in companies could help preserve Canada’s production capacity during an economic downturn caused by the impact of the novel coronavirus.
He cited industries such as airlines, transportation companies and the food sector. “This is where we will hear more and more calls for help.”
Mr. Woo is an economist by training and profession and once worked as a central banker in Singapore. Before he was appointed to the Senate he headed the Asia Pacific Foundation of Canada.
“My own view is that taking a direct stake in industries and companies are distressed is probably the best approach because it enables the government to strike the balance between meeting the needs of shareholders, executives and, more importantly, workers.”
There are recent precedents for Canadian governments buying shares in companies to preserve their operations in this country.
In 2009, after a global financial crisis, the federal and Ontario governments injected $13.7-billion in Canada’s auto sector by contributing to the bailout of Chrysler Group LLC and General Motors Co. in 2009. Ottawa and Queen’s Park received shares in return for its support that it later sold off.
Mr. Woo said one of the biggest challenges right now will be businesses servicing their debts.
He said Ottawa should encourage financial institutions to waive interest and principal payments on outstanding loans to businesses for a period of time.
He acknowledged this is a controversial idea but, he added, “I guarantee you this conversation is going to pick up.”
The senator noted that lenders have already allowed deferral of loan repayments, but this doesn’t address the fact that interest on these loans will continue to accumulate.
Mr. Woo said would help staunch the outflow of cash from many businesses and help freeze the business “in a state of suspended animation so that it can be brought back to life when conditions improve.”
What is happening now is not a financial crisis, he said. It’s a health crisis.
He said Canada’s banks should do more to help.
“We have very a well-capitalized, very well-run and very profitable banks,” Mr. Woo said.
“We need to see the financial institutions step up a well and provide solutions on debt servicing.”