Government shouldn’t gamble

The Klondike Visitors Association is currently on the hunt for a casino manager. Perhaps Dennis Fentie should apply.

The Klondike Visitors Association is currently on the hunt for a casino manager.

Perhaps Dennis Fentie should apply.

Fentie, the Yukon’s finance minister, is clearly a gambler.

In August, his department became ensnared in the global collapse of the asset-backed financial paper market.

In English, that means he approved $36.5 million for a high-risk, 30-day investment. And the investment evaporated.

The Yukon’s Finance department wasn’t the only investor caught.

In fact, hundreds are tangled in the collapse.

Saskatoon-based uranium giant Cameco Corp. had money tied up in the things.  So did the Ontario Teachers’ Pension Plan.

Closer to home, Vancouver-based Redcorp Ventures Ltd., which is developing a mine near Atlin, sunk $102.2 million in asset-backed financial papers.

But Fentie’s is the only government, according to economists interviewed on CBC North.

The whole affair suggests Fentie’s Finance department is a high roller. That it is comfortable with risk.

Most governments aren’t.

They protect their public trust, investing in solid, low-yield investments.

It’s safer — there’s less chance of political fallout.

Because, if millions sunk into a shadowy, complicated, high-risk investment were to vanish, the public might ask questions.

It might even get angry.

Angry that money that could have offset taxes had been lost.

Angry that cash that could have funded a new high school had been lost.

The money could have covered the cost of a new jail. That expenditure would have improved safety to jail guards and inmates and lengthened sentences handed our most violent offenders (currently, they get generous credit for time served in our Third World-like prison.)

The money could have funded a homeless shelter for youth. A food bank. Social housing. A world-class cold-climate resource centre. A bandwidth-boosting fibre-optic link to the South, which would have improved Yukon business opportunities.

Nurses could have been hired. Doctors lured north. Day care could have been bolstered. Social assistance rates raised.

Heck, Fentie could have even covered half the cost of a bridge across the Yukon River in Dawson.

Now, experts who follow such things suggest there’s a better-than-average chance most of the money is gone.

Sure, Fentie pooh-poohs that notion. But, by his own admission, Fentie doesn’t even know what his salary is.

Financial analysts paint a gloomier picture.

In September, when the story broke, The Financial Post reported investor losses could be extreme.

“The vast majority of about $35 billion of non-bank asset-backed commercial paper is backed by risky bets on credit default rates that are so far underwater that investors could be looking at losses as high as 50 cents on the dollar,” reported the Post, citing Edward Devlin, a portfolio manager for California-based Pacific Investment Management Co. LLC.

“‘You’ve got to think people are not going to be pleased about that,’” he told the Post.

In Canada, some investors may not get any money back, he added.

That’s because, in Canada, there was a lack of disclosure about what assets the investment was based on.

That is, Canadian investors often didn’t know what they were buying.

When the bottom fell out, Redcorp, a public company, immediately held a news conference announcing that its investment was in trouble.

Its shares tumbled to half their value on the news.

The Yukon’s public government, which had placed more than one-third of its surplus in jeopardy, said nothing.

Fentie, who was in the middle of community consultations, didn’t even tell constituents it had happened.

He soft-pedaled the loss on page 81 of the public accounts.

He insists that’s the proper approach.


When you take an exceptional and unprecedented chance with an extraordinary amount of public money — remember, contrary to Fentie’s public assertions, the Yukon may be the only government in Canada that invested in this sort of dubious investment — when you gamble and lose, the Yukon’s finance minister has an obligation to come forward, admit it and provide information to the public.

He should explain what the government’s comfort zone with risk is. That is, whether the department will gamble again.

He should explain what the government’s exposure is. The ramifications — best case and worst case.

He should outline the impact the worst-case loss will have.

So far, Fentie has done none of this.

He said he’s not worried.

Of course, it’s not his money.

Instead, Fentie has boasted about his department’s stock market wins — $4 million two years ago, $7 million last year and $5 million this year, wins that amount to less than half  the money currently entangled in this mess.

It’s akin to a gambler shrugging and bragging that he’s won $16 million in the face of a $36.5 million loss.

If he likes gambling and wants to play with the house money, he should apply for the casino job.

Otherwise, he should focus on running the government. (RM)