Founded in 1944 under a different name, the bank was located in Montreal. In 2009, it had about 1,800 employees in more than 100 business centres across Canada and served about 28,000 clients in both official languages. JEAN-RENE HALDE Halde joined BDC as president and CEO in 2005. With more than 30 years of management and entrepreneurial experience, he had previously served as CEO at Metro-Richelieu Inc., Culinar Inc. and Livingston Group Inc. He had been a director in a number of for-profit companies including CCL Industries Inc., Gaz Metropolitain Inc., Groupe Videotron Ltee and Provigo Inc. He had also served as a board member for numerous non-profit organizations and acted as chairman of the Montreal Heart Institute, the Grocery Products Manufacturers of Canada and the Association des MBA du Quebec. Halde earned a Master of Arts in Economics from the University of Western Ontario and an MBA from Harvard Business School. CROWN CORPORATIONS Crown corporations are distinct legal entities established by both the federal and provincial governments to accomplish particular policy goals. They operate-in many sectors of the Canadian economy, such as transportation (Via Rail), telecommunications (Stiiiiiel), mail and parcel delivery (Canada Post), banking (BDC) and electrical generation and distribution (Quebec. Hydro). Crown Corporations vary widely in size and in the level of financial support they receive from the government. In some cases, they are established whcn large capital investments are needed or to ensure that a service With SOcial benefits is provided where it might not be profitable for the private sector to do so. As of July 31, 2007, federal;CroWn corporations employed, some 90,000 people, managed more than $185 billion in assets and hadltifig;term liabilities of about $145 billion. During the 2006-07 fiscal year these corporations recei,vd a tatal-iif about S5 billion in parliamentary funding. While federal Crown corporations and federal deparmients were both established by Acts of Parliament and reported toyarliarnent through ministers, a . central feature of Crown corporations was that they operated at arrn'atleng,th from govcrturicnt. Crown cot potations the' efure enjoyed more autonomy than most other government entities, in part because they had commercial objectives as well as public policy objeCtives. (Crown corporation .budgets were also generally not debated by Parliament, and their employees could not be public servants for collective bargaining purposes.) An independent board of directors 'Oversaw the management of each corporation and held management responsible for the corporation's performance in the same way as in private- sector firms. The board of a Crown corporation was, in turn, accountable to Parliament through the responsible minister. Like other federal Crown corporations with a financial mandate, BDC had reporting relationships with two ministers: the minister of Finance (for financial matters resulting fr.

1. Founded in 1944 under a different name, the bank was located in Montreal. In 2009, it had about
1,800 employees in more than 100 business centres across Canada and served about 28,000
clients in both official languages.
JEAN-RENE HALDE
Halde joined BDC as president and CEO in 2005. With more than 30 years of management and
entrepreneurial experience, he had previously served as CEO at Metro-Richelieu Inc., Culinar
Inc. and Livingston Group Inc. He had been a director in a number of for-profit companies
including CCL Industries Inc., Gaz Metropolitain Inc., Groupe Videotron Ltee and Provigo Inc.
He had also served as a board member for numerous non-profit organizations and acted as
chairman of the Montreal Heart Institute, the Grocery Products Manufacturers of Canada and the
Association des MBA du Quebec.
Halde earned a Master of Arts in Economics from the University of Western Ontario and an
MBA from Harvard Business School.
CROWN CORPORATIONS
Crown corporations are distinct legal entities established by both the federal and provincial
governments to accomplish particular policy goals. They operate-in many sectors of the
Canadian economy, such as transportation (Via Rail), telecommunications (Stiiiiiel), mail and
parcel delivery (Canada Post), banking (BDC) and electrical generation and distribution
(Quebec. Hydro). Crown Corporations vary widely in size and in the level of financial support
they receive from the government. In some cases, they are established whcn large capital
investments are needed or to ensure that a service With SOcial benefits is provided where it
might not be profitable for the private sector to do so.
As of July 31, 2007, federal;CroWn corporations employed, some 90,000 people, managed more
than $185 billion in assets and hadltifig;term liabilities of about $145 billion. During the 2006-07
fiscal year these corporations recei,vd a tatal-iif about S5 billion in parliamentary funding. While
federal Crown corporations and federal deparmients were both established by Acts of Parliament
and reported toyarliarnent through ministers, a . central feature of Crown corporations was that
they operated at arrn'atleng,th from govcrturicnt. Crown cot potations the' efure enjoyed more
autonomy than most other government entities, in part because they had commercial objectives
as well as public policy objeCtives. (Crown corporation .budgets were also generally not debated
by Parliament, and their employees could not be public servants for collective bargaining
purposes.) An independent board of directors 'Oversaw the management of each corporation and
held management responsible for the corporation's performance in the same way as in private-
sector firms. The board of a Crown corporation was, in turn, accountable to Parliament through
the responsible minister. Like other federal Crown corporations with a financial mandate, BDC

2. had reporting relationships with two ministers: the minister of Finance (for financial matters
resulting from the Financial Administration Act) and the minister of Industry (for policy and
administrative matters resulting from the BDC Act). In practice, the senio management of BDC
maintained open lines of communications with senior officials in both departments (see Exhibit
1).
THE GOVERNMENT'S RESPONSE
The government began its response in the November 2008 Economic and Fiscal Statement.
BDC was provided with a $350 million capital injection to increase term financing and for a
new, time-limited Operating Line of Credit Guarantee. The impact of the $350 million was
estimated to amount to $1.5 billion in additional financing. BDC also introduced a Working
Capital Support program where it assumed greater risk to allow Canadian firms to sustain their
operations during the recession. Its paid-in capital ceiling was raised to $3 billion to
accommodate the capital injection.
Budget 2009 announced aggressive measures to deal with the disruption to credit markets.
Through its Extraordinary Financing Framework, the government offered to provide up to $200
billion to improve access to financing in Canada. The largest single measure was the Insured
Mortgage" Purchase Program that allocated $150 billion to purchase mortgages insured by the
Canada Mottgage and Housing Corporation (CMHC) from Canadian chartered banks, thus
bolstering their balane sheets. Financial Crown corporations were given the capacity to deliver
$13 billion in additional financing. Further, the budget announced that BDC would launch the
Canadian Secured Credit Facility to provide up to $12 billion to support financing of vehicles
and heavy equipment and restart the ABS market.
ASSET-BACKED SECURITIES, FLOOR PLAN FINANCING AND VEHICLE LEASING
The auto industry in the United States and Canada was particularly hard hit by the financial and
economic crisis. First, sharply rising unemployment, particularly in the United States, led, to a
precipitous drop in the demand for new vehicles. Second, the disruption of financial markets and
perceived growth of counter-party risk, largely based on the U.S. sub-prime mortgage crisis and,
in Canada, the ABCP crisis, led to ballooning spreads in the market for ABS..Indeed, dealer bids
for the product ranged from 600 to 1,000 bps. Thus, it became extremely difficult for
automakers' financial subsidiaries such as the General Motors Acceptance Corporation (GMAC)
and Chrysler Financial to finance either dealer floor plans or car leases or car loans. Finally, the
likely bankruptcies of General Motors and Chrysler were having an impact on parts makers and
their suppliers; ultimately threatening to turn a deep recession into a depression.
LAUNCHING THE NEW LINE OF BUSINESS

3. Halde began to collect his thoughts as he stared out of the window into the winter night. What
did he and his keamneed to learn about this unfamiliar market and what steps would BDC need
to take to launch this new line'.. of buSiness? How quickly could this money flow into the hands
of those needing it? As a Crown corporation, what approvals would be needed and by whom? As
the financial and economic crisis deepened; lie knew that BpC, would have to launch the new
business line quickly if the targeted firms were to survive.
Questions for Case :
1. What are the key uncertainties that Mr. Halde faces? How can he improve his information
base?
2. What role might corporate culture and the incentive system play in internal acceptance of this
new endeavor for BDC?