Lessons From the Recession: Lesson 2—Public Sector Financial Institutions Prove Their Worth

Public sector financial institutions play a critical role as a backstop for the global financial system and for specific countries. Failings in the private financial system were at the root of the financial crisis and recession. As the crisis began to choke off private credit to Canadian business, the federal government quickly realized that it could use its own financial institutions to address specific financial market failures.

These institutions have proven their collective value as policy tools for shoring up a severely weakened global financial system. It was extremely useful to have public sector institutions already in operation—globally and within Canada—that were able to ramp up their operations when the private market failed. This executive action briefing notes that they will be needed as active financial players for some time to come, filling the gaps that widened in the financial marketplace.