The Value of a "Coyne": The Diefenbaker Government and the 1961 Coyne Affair.

Abstract

This study explores the political aspects of the 1961 Coyne Affair, which saw the Governor of the Bank of Canada, James Coyne, promote restrictionist economic policies that were at odds with the expansionist monetary approach of the Diefenbaker government. The situation was complicated by unclear governmental responsibilities regarding the Bank and a contentious pension issue, leading to the Progressive Conservative cabinet’s request for the governor’s resignation, a demand he refused. The Affair became a public controversy involving opposition parties and the Canadian media, and personal animosities clouded the judgment of both the Tory government, led by Prime Minister John Diefenbaker and Minister of Finance Donald Fleming, and Coyne. However, the Progressive Conservative’s attempt to force Coyne’s resignation was ultimately justified due to his contrary economic policies and the extent to which he overstepped his position as governor and engaged in political machinations. The Coyne Affair led to the restructuring of the relationship between the Bank and the federal government and contributed to the fall of the Diefenbaker government, Senate reform, and economic nationalism.