March 27, 1924

LIB

Edward Mortimer Macdonald (Minister of National Defence)

Liberal

Mr. MACDONALD (Pictou):

I assume my hon. friend does not want to be unfair, but every criticism he is making of this royal commission is a criticism of the assertions made by the depositors themselves, who came to the government setting out only these facts which we are investigating, and asked for a commission-the most impartial tribunal you could get in this country, consisting of the chief justice of a province where there are no Home Bank depositors, a learned jurist and a man who is not being paid for his services.

Topic:   HOME BANK INVESTIGATION
Subtopic:   MOTION BY MR. IRVINE FOR APPOINTMENT OF SPECIAL COMMITTEE
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LAB

William Irvine

Labour

Mr. IRVINE:

My hon. friend, being an able student of law, understands, I have no doubt, the reason for that presentation of the case by the Home Bank depositors just as well as I do. He understands that they cannot come to this parliament with a direct plea that they be reimbursed; but on the special ground that during war time and jn the public interest the finance minister of that day allowed this thing to go on, they want to make a compassionate plea to this government for reimbursement, and my hon. friend is aware of that. They had no other foothold than the one they took, but parliament has. We have another foothold, and I want to get that now; that is why I want this committee.

Now let us follow the argument just one step further. We want action at this session of parliament. The government cannot give U3 an assurance that the commission will be done with its sittings this session; indeed, it cannot assure us, perhaps, that the commission will be done next year. It has not assured us that there will be any report made when the commission has done its work. It may report this year, it may report next year, it may report never, and every day we are getting farther away from the tragedy and there will be less inclination on the part of parliament to do anything. This is the time, this is the moment for action, and I submit that the way of the royal commission is the way of death to the hopes of Home Bank depositors if we are not very careful. On the other hand, the parliamentary committee would get action immediately on the points that are of immediate interest.

It need not necessarily clash with the investigation which the commission is to make. I have pointed out the difference. Of course we want to know if our public men have

Home Bank Investigation

been culpably negligent, because it would serve us in good stead during an election, it would give us material for speeches; it would be "good stuff,"-so to speak we want that; but more than that, we want reimbursement of the Home Bank depositors, and more than that, we want the Bank Act so amended as to make this thing impossible in the future. Then the parliamentary committee would secure full co-operation.

I do not believe there is a party in this House that would dare, in a parliamentary committee of the character I am asking for in this resolution, to make political capital out of the situation; I do not believe that they would want to. I would like to see the government take parliament into its confidence in this matter of public interest, and give parliament a chance to co-operate. I believe it would work. I believe we would find a way out, and particularly would it be of advantage to the government, situated as it is in a minority, and perhaps forced, if it takes action at all, to take action which would constitute a precedent; it might be to the government's interest and advantage to have the full co-operation of parliament in anything that might be done. And so I would urge the government to accept my resolution. I urge it now in all sincerity. I urge it with the very best of motives. It may be that hon. members will show how badly mistaken I am in doing this, but at least grant that I am sincere, and I am just as assured that the government is sincere; and if they are sincere, as I believe they are, they will listen to my argument and they will see the advisability of appointing a committee in order that the action which is necessary may be taken immediately.

But if the government will not accept this resolution and will not support it, I have three questions that I want to put, and I hope that the Prime Minister or some other member of the government will give specific answers to them.

1. If the committee is not given, can the government guarantee that the commission will report to this session of parliament in time for parliament to deal with any recommendations which the commission may make?

2. Will the government promise that the depositors of the Home Bank will be reimbursed from some source, or in the event of the commission discovering negligence on the part of any government official at any time will the government promise on that ground to reimburse the Home Bank depositors?

47i

3. Will the government give a reasonable assurance that the Bank Act will be amended this year, either as I have suggested or in some other way that will meet the requirements more adequately?

Mr. E. C. ST. PERE (Hochelaga) (Translation) : Since, Mr. Speaker, the failure of the Home Bank, the Canadian and foreign press have never ceased commenting upon the unfortunate consequences of this financial disaster. Not only those most intent on being reimbursed but the public at large have shown considerable interest regarding the charges made and explanations given. Indeed, the failure of the Home Bank has been a national calamity. Those who are more directly concerned are mostly humble toilers, and, as sympathy is still deep-rooted in the Canadian soul it naturally extends to those who suffer after having endeavoured to economize. Therefore, all expect that this parliament, this government, and the bankers will find means of coming without delay to the rescue of the unfortunate depositors. I mention this parliament, Sir, for it is not to a party in particular that the losers, at present, direct their appeal. They submit this request to the whole House, for their common misfortune ignores party differences.

This banking disaster did not spare my constituency which, already, had felt the sad effects of a similar catastrophe when the run on the Yille-Marie Bank took place. At the time the Banque Nationale was established, the Hochelaga district was chosen for a branch office to carry on business, and following the merging of this bankfhg institution with the Home Bank, the latter made strenuous efforts and did much canvassing to establish a good connection with thrifty depositors. I lay stress, Sir, on " a connection with thrifty depositors" so as to bring out the kind of transactions carried on by the Home Bank in our midst. " No discount or very little " such were the instructions given to their local manager. A fine institution, an institution which obtained from our workmen all their savings, to have outsiders benefit by them! As "to helping" the local trade, no one gave it a thought, or, to express it better, they refused even to give it a thought.

More than 1,800 residents of the suburbs of Hochelaga and Prefontaine as well as the church wardens of the two Roman Catholic parishes of the same district saw their savings and parish revenues, to the amount of over $300,000, engulfed in this failure. It is, therefore, easy to under-

the humble and refuse to listen to the complaints of those who suffer? The depositors have a right to their money. Let us make an appeal to justice to render unto others what belongs to them. On the other hand, the Canadian people-and it would be such a trifle to them-would be performing such a worthy act of charity by giving what is theirs to the depositors.

The duties of charity and justice differ; but, if we must not confuse them let us beware of separating them, for they are closely linked together.

This re-imbursement would create a dangerous precedent. Not so, if we are to take the word of certain bankers conversant in the matter, who assure us that the new Bank Act will prevent false statements in the reports forwarded to the government, and consequently also prevent failures. Moreover, must not the first cares of a legislator be those of establishing the rightfulness of his orders by showing that they conform to the dictates of conscience? What beautiful and laudable precedents would we establish if they always agreed with them.

The Bank Act will be held in greater respect in the future, are we assured. So much the better! If not, we would be justified to apply to it Shakespeare's word:

...It is a custom

more honoured in the breach

than in the observance.

1 he Home Bank was not the only institution where depositors could place their savings. They lost; so much the worse for them. They should have chosen a sound bank. They are responsible for their actions. May Heaven come to their rescue! It is true, they were free to place their savings in a sound bank; but was it not preached to them in all possible manner and in all the newspapers that the Canadian banking system rested on - a sound basis? Has it ever been explained to church wardens, who are obliged according to law to deposit the parish funds in chartered banks, what institutions are covered by "this" or "these" sound banks? To choose a sound bank? Would the banks have dared to advise the public at large, previous to the Home Bank disaster, such a thing as to deposit in a sound bank? Certainly not, for they would by the fact have hinted to the depositors that there were some tottering ones among them, a statement which would have been in direct contradiction with their conception of soundness throughout the whole banking system, and, including all of its constituent units.

[Mr. St. Pire.1

Are the depositors responsible? No, for the failure of the Home Bank cannot be attributed to them. "But, might it not be said: they should have known that the

government did not guarantee and does not yet guarantee the deposits in banks. Civil justice makes no allowance for the plea of ignorance. To this we answer that a great number had no knowledge of the law, but had an unshakable faith in the soundness of banks, impressed upon them through the reports published in the official Gazette of Canada, in the name of the shareholders and by the statement of the highest integrity of the board of directors of banks. Now, that they have been wronged because they believed in the honesty of others, a sentiment which disposes us to trust in them, to confide to them even that which they might take advantage of to our detriment; because these people had this frame of mind of trusting in the constituted authority; because they shared this feeling of security, inspired by the great Canadian financiers and, what is more, by certain financial newspapers of high standing, which, commenting on the debates of the sittings of the banking committee of 1923, ridiculed and qualified as idiots and fanatics those among the members who insisted on more guarantees for the depositors, and a more thorough system of inspection, we now say to these people: "Be gone, you were wrong to believe in the truth taught in this maxim of Catena: "Confidence is the esteem of oneself extended to others." I ask, Sir, should not responsibility before the law be altered in favour of the depositors, in view of such a situation?

A number of resolutions appear on the orders of the day. Nothing must be neglected in these days, for hardships prevail among a great number of families, merchants complain of delay in the collection of debts, finally, this failure has created a kind of panic in many provinces. To come to their rescue w'ould give the measure of the efficiency of such legislation in the shape of whatever results are secured, and it would be judged accordingly to the actual benefit derived from it.

The government has decided to hold an inquiry into the affairs of the Home Bank. Let it be thorough, even if we have to go back to the days when Mgr. Charbonel received as a deposit the first savings of the diocesans of Toronto. No one should be spared. Let it have a practical result.

In closing my remarks, Mr. Speaker, allow me to support the request for assistance and relief addressed to the government, parlia-

Home Bank Investigation

ment and the Bankers' Association, by the 400,000 afflicted, anxious of learning what will be our attitude, by the passage of this encyclical letter where it is Written: "that the rights wherever they may be found" must be religiously respected; and the state must guarantee them to all the citizens by preventing or by avenging their violation. However, in the protection of private rights, it must make special provisions for the failings of the poor. The wealthy class in a way make a rampart of their wealth and are less in need of public protection. The poor on the contrary, without means of guarding themselves against injustices, rely especially on the protection of the state. If the law of justice, Sir, does not provide for all men a sufficiency in all their wants, there will always remain, let us not forget, a wide field of auxiliary and sublime usefulness open to compassion and charity.

Topic:   HOME BANK INVESTIGATION
Subtopic:   MOTION BY MR. IRVINE FOR APPOINTMENT OF SPECIAL COMMITTEE
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PRO

Robert John Woods

Progressive

Mr. R. J. WOODS (Dufferin):

The hon.

member for East Calgary (Mr. Irvine) has so ably and fully covered the ground in his admirable presentation that there does not appear to be very much left to say. However. I wish to corroborate some of his statements, and, if possible, to present some new thoughts in connection with the banking system of Canada. Money as it circulates through the community may be regarded as the life blood of the country. Trade and commerce, all the varied enterprises of the nation, are dependent upon an efficient and stable currency. To my mind it is beyond question that our people generally have regarded the banks as safe places in which to deposit their money, and parliament in any legislation touching banks should do its utmost to protect the interests of the public. If parliament fails to do this, then it is undoubtedly lacking in that proper regard which it ought to have for the welfare of the people. We as members of parliament should thoroughly realize the responsibility that devolves upon us as legislators to do our utmost to protect the public interests in this respect. Canadians have been in the habit of depositing their money in banks, not as an investment but in order that it might be safe and available when they needed it for immediate use. In that respect deposits of savings are very different from deposits of money required for investment in industrial enterprises or for purposes of speculation. The people felt when they were making these deposits that the banks were perfectly safe, and that they could get their money at any time they needed it. The failure of the Home Bank came to them as a terrible shock. We have heard this afternoon what happened, by reason of that failure, to various classes in the community who had placed their savings in the Home Bank quite confident that the money was secure beyond all question. We have heard this afternoon of many people who have deposited money in this bank for safe keeping who have lost it all. We have heard about the labouring classes,

5 p.m. young men and young women, who deposited their money expecting to be able to withdraw it when they required it and who have been unable to do so. Alas, the failure came. Men and women, widows, hardworking men, old men and old women who desired to withdraw their money from this bank found the door closed, and a sign above it "No admittance". Some of these widows,

I believe, had deposited the life insurance of their deceased husbands which was probably their sole means of sustenance, and it was all lost. Old men who had retired had deposited in the bank the little bit of money they had saved, and these men were unable to obtain even a portion of their deposits. I believe many of them turned away in tears. The ones who are suffering most are not the wealthy class, or the ones who could well afford to lose a little money; but the greatest sufferers were those who depended on their deposits in the bank to sustain them in their old age when other things failed, and they were shut out. I think it is very important that the hard-earned money of the working men and women, upon which they are dependent for their old age, should be properly safeguarded, so that they would be assured of it when required for necessary use. In the locality where I live a great many have suffered. In a little town not a great distance from where I live, very close to $400,000 was deposited by people of that class. In another town quite close to my home over $100,000 was deposited by the same class of people.

It is very important that the people should have confidence in our financial and banking institutions of the country. Last year we revised the Bank Act. I am not going to say that there were not important amendments to the Bank Act placed on the statutes at that time, or that some of the amendments were qpt an improvement, but it appears to me they did not go far enough.

The 'hon. member for East Calgary (Mr. Irvine) has referred to bank inspections. One amendment in regard to inspection was urgently pressed before the committee last year, but the Bankers' Association was unfavourable to it. The bankers have their own audit system and appoint their own auditors to do the work. What for? Not primarily to safeguard

Home Bank Investigation

the interests of the public, but to safeguard the interests of the bankers and the shareholders of the bank. So far as the depositors and the general public are concerned, they have not that same safeguard of their interests as the bankers have. If an inspector or auditor who was independent of the banks, not appointed by the banks but by the government, were charged with the investigation of the banking system of this country, I cannot see why it would not to a great extent safeguard the interests of the depositors and those who did business with the banks.

With reference to the amendments which were made to the Bank Act, as I view it, as a member of that committee, I think the amendments went possibly as far, and no further in my opinion, than the Bankers' Association was willing to concede.

Topic:   HOME BANK INVESTIGATION
Subtopic:   MOTION BY MR. IRVINE FOR APPOINTMENT OF SPECIAL COMMITTEE
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LIB

Charles Alphonse Fournier

Liberal

Mr. FOURNIER:

Is it not a fact that the Home Bank suspended its operation before the revised Bank Act of last year came into operation? Is my hon. friend prepared to say that if that Bank Act had been revised many years ago as it was revised last year it would have prevented such a failure as that of the Home Bank?

Topic:   HOME BANK INVESTIGATION
Subtopic:   MOTION BY MR. IRVINE FOR APPOINTMENT OF SPECIAL COMMITTEE
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PRO

Robert John Woods

Progressive

Mr. WOODS:

I am not prepared to state tnat such a revision would have saved it, but the Home Bank was in a precarious condition many years ago-long before the revision of the Bank Act last session. As I have already said, the masses of the people of this Dominion believed that the Bank Act and the banking system were and had been in years gone by of such a character that there was no possibility of a bank failure and that their deposits would be absolutely safe. After the failure of the Home Bank, individuals came to me and referred to that, stating that they considered that the government was responsible to depositors for money deposited in a chartered bank. That was the general impression amongst the people; having that impression, they deposited their money with confidence, and the banking system has fallen down to such an extent that depositors have lost millions of dollars which they expected they would receive.

I said that the Bank Act was under revision and that in my opinion, a government inspector or auditor of banks would have in some way helped the situation. Some time ago, we listened to an address by the hon. member for Vancouver South (Mr. Ladner) ] who, to my mind, gave us a great deal to think about. He gave us some information regarding a federal reserve bank. But whatever system it is thought wise to adopt by the men who transact the affairs of this Do-[ Mr. Woods.]

minion and we have wise, capable men, men who have no peers, I believe, in any other country it is a fact, so we are informed, that government inspection and a federal reserve bank system have proved to be a good thing in the United States, and something should be done to lift the banking system of this country above what it is to cause the people to have confidence in our banks, and to make it impossible for men and women who deposit their money, not for speculation, but for investment and safekeeping, to lose it. The government should take hold of the situation and work out some scheme that will put the banking system of this Dominion in such a position that an occurrence like the Home Bank failure will be impossible in years to come.

The hon. member for East Calgary has referred to the action the government has taken in appointing a royal commission. Many questions have been asked about it. I hope that commission will make a thorough investigation into the whole system, as it has been appointed to do, and that its report will be laid before parliament before the close of this session.

I am not going to make any definite statement in regard to my attitude on the question of reimbursing the depositors further than to say this: If it is proved satisfactorily that a minister of finance, past or present, in years gone by or whenever the occasion was, was remiss in his duty, or that the government of that day neglected to investigate thoroughly the affairs of the Home Bank; if it is proven to be the case, as a minister of finance of the last government in a statement in the public press excused himself in th.at regard, that the investigation did not take place at the time because the war was on and because there was a danger of upsetting the financial system of the country and breaking the confidence of the people in our banks; if the then minister of finance neglected to undertake the duty of investigating the affairs of the Home Bank in 1915, 1916, or any other year, on the ground that this inaction was in the interest of the people of Canada; and if as a result of that inaction on the part of the minister, hundreds and thousands of the people of this country lost their little all, the little money they had in the banks, and citizens are suffering thereby,-then, in my opinion, the government and the people of the Dominion of Canada are bound to reimburse the men and women who have suffered in the public interest. ,

The ground has already been thoroughly covered, and I believe the attitude of the

Home Bank Investigation

great majority of hon. members is to do justice to the poor, the widows and children. If the poor people, widows and children, have suffered because of the public interest in 1915, and 1916, those same people should be reimbursed for their losses in that regard.

Topic:   HOME BANK INVESTIGATION
Subtopic:   MOTION BY MR. IRVINE FOR APPOINTMENT OF SPECIAL COMMITTEE
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UFO

Robert Henry Halbert

United Farmers of Ontario

Mr. R. H. HALBERT (North Ontario):

Mr. Speaker, I do not think it is necessary for me to take up much of the time of the House, because the situation has already been extremely well covered by the hon. member for East Calgary (Mr. Irvine). I should, however, like to put on record this petition:

We, the undersigned petitioners, being your constituents and depositors in the Home Bank of Canada, and the friends and neighbours of such depositors, respectfully submit as follows:

Whereas the Home Bank of Canada did at the time of suspension have on deposit by the citizens of North Ontario a sum upwards of three hundred and thirty-six thousand dollars, divided among approximately two thousand people, mostly of small means. .

And whereas the suspension and subsequent insolvency of the said bank has caused and is causing serious hardship among many people.

And whereas your petitioners are led to believe that the insolvent condition of the bank was known to the government for many years and that it was allowed to continue business because its closing might have occasioned a serious crisis in more difficult times.

We therefore your petitioners do hereby respectfully request you to use your utmost endeavour and your influence as a member of parliament at Ottawa to induce the government of Canada to take whatever action may be necessary to ensure the depositors full payment of their deposits.

And your petitoners will ever pray.

Now, Mr. Speaker, this petition is signed by William Brethour, R. C. Brandon and six hundred and seventeen other persons in my constituency. We have already heard of the many hardships resulting from the failure of the Home Bank. Allow me to stress the baneful consequences to many war and other widows in our small towns, where this bank had most of its branches. These widows sold their property in the country, moved into the small towns and villages because it was cheaper for them to live there, and many of them deposited the proceeds in the local branches of the Home Bank. But, worse still, many of these widows were induced, by the prospect of receiving higher interest, to become stockholders of the bank. The result is that not only have they lost their deposits, but they are also subject to double liability. This means that many a little home purchased in these small towns will have to be sold to meet that double liability.

Undoubtedly, as has been already stated, the impression prevailed generally throughout the country-although unfortunately it proved

not to be well founded-that money deposited in a chartered bank was practically safe as the Dominion government was, in a sense, behind the bank.

Now, to appoint a royal commission to investigate the failure of the Home Bank and apportion the blame upon the responsible parties with a view to their being sent to jail, will not help the widow and her small family. On the contrary, it will rather increase her burden, because the wreckers who are incarcerated will have to be maintained in jail by, among others, their victims. Then again, in some cases those in charge of the bank who speculated with the money of the depositors were guilty of even more than robbery. I would characterize their crime as practically murder in the first degree, because some of the unfortunate depositors who lost their all in the wreck have gone out of their minds. I hope this parliament and this government will see to it that justice is done to the innocent victims of the unscrupulous manipulators who were responsible for the Home Bank failure.

While it may not be possible under the present Bank Act for the government to reimburse the unhappy depositors, I think perhaps something might be done by way of an insurance scheme out of which some of the losses might be met. I think also that we might have a more extended government issue of currency instead of leaving this important privilege in the hands of our banks. I say this by way of protest against our present system of banking and the abuses which it sometimes leads to.

Topic:   HOME BANK INVESTIGATION
Subtopic:   MOTION BY MR. IRVINE FOR APPOINTMENT OF SPECIAL COMMITTEE
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PRO

Archibald M. Carmichael

Progressive

Mr. A. M. CARMICHAEL (Kindersley):

Mr. Speaker, I have been an interested listener to this debate. I have understood fairly well the addresses delivered by three of the four hon. members who have preceded me, but regarding the third hon. gentleman I must say, "Je ne vous comprends pas." His speech seemed to imply that there is a great responsibility resting upon this honourable body, to the extent of reimbursing some sixty thousand citizens who have suffered a severe financial loss. I am in agreement with many of the views enunciated, more especially those of the hon. member for East Calgary (Mr. Irvine). He presented the resolution in an admirable way and his facts were well marshalled. But I cannot say that I would accept all his facts and arguments nor agree with all his conclusions. I realize that the resolution calls for debate on a matter that is of great importance to the country. I agree that the financial business of the Dominion is something that interests all of us, because

Home Bank Investigation

not only is the confidence of the public in our banking system at stake, but also the very stability of the country itself. We are not so much concerned about the stability of our banks alone, but our very national existence is at stake in regard to financial matters. That is why every hon. member should be interested, and in fact every one throughout the country whose business brings him in touch with the banks-all are vitally interested in our banking system, for federal, provincial, municipal and private business is carried on through the facilities afforded by our banks.

The chartered banks of Canada control possibly $2,000,000,000 of the deposits of our people. We can scarcely realize the magnitude of this sum. To-day fifteen banks control these moneys. They have assets of something over $2,600,000,000, and their liabilities reach up almost to their assets, but not quite -I am relying on the statement issued by the Finance department on January 31, 1924. Intermingled with that banking business we had the Home Bank of Canada, operating seventy-eight branches throughout Canada from Quebec to British Columbia. The bank had been in existence for some eighteen years and had a president and a board of directors-who, by the way, did not direct very well. Its last annual report was issued on the 31st May, 1923. It may interest the House to hear one or two short extracts from this report, showing how the directors viewed their business. On page 12 we read:

In view of the somewhat depressed condition of industry in general during the past year, the affairs of the bank, as will be seen by the statement, may be considered very satisfactory.

Further on appears the following:

The net profits for the year, after providng for bad and doubtful debts, rebate of interest on unmatured bills under discount, payment of municipal taxes, cost of management, etc., amount to $232,539.17.

Then at the back of the report we have a motion, duly moved and seconded, to this effect:

That the thanks of the shareholders are due, and are hereby tendered, to the president, vice-president and directors for their careful attention to the affairs of the bank.

That was the summing up of the annual report as presented to the shareholders by the directors and general manager. Now, this bank had a capitalization of $2,000,000, with a rest or reserve account of $550,000, and it controlled interest-bearing deposits of the people of Canada to the amount of something over $17,000,000. People had their money in that bank, no doubt thinking that it was safe, but shortly after this glowing report appeared they came to the realization

that their money was mostly all gone. In fact, I think all they are going to recover is about 35 cents on the dollar, or a total of a little over $6,000,000, making a net loss to the depositors of something over $11,000,000. Now that has taken place in, and affected, six of the provinces, and it is only reasonable, natural and logical that this parliament should take cognizance of what has happened and that a debate of this kind should take place in reference to the matter.

I would judge from the remarks I have heard from previous speakers that they are influenced to some extent by the fact that there were branches of the Home Bank in their respective constituencies. I do not know whether that is the case or not, but so far as I am concerned there was no branch of that bank in my constituency. I am here as the representative of some 45,000 citizens and taxpayers of Canada. I do not like the small parochial or even the provincial view; I prefer looking at matters from the Dominion viewpoint; I prefer that hon. members should approach all matters from the point of view of the good of Canada rather than that of narrow provincial or even constituency issues. It is true, nevertheless, that when we are putting forth our constituency viewpoint we are to some extent putting forth a Dominion viewpoint as well. I have been led to ask myself one question. What would the 45,000 citizens of Canada, whom I have the honour to represent wish me to do in this matter? Would they wish me to concur in the remarks of previous speakers to the effect that this parliament is financially liable to the extent of $11,000,000 in regard to the failure of the Home Bank, or would they not? Well now, I have a few suggestions to make.

While our Bank Act may not be all that we might wish it to be, the fact that one bank has become bankrupt does not justify our saying that the Bank Act is a useless scrap of paper or that it has utterly and completely fallen down. We cannot from the fact that one bank has failed conclude that our banking system is of no use, nor should we deem it a justification for putting the crowbar under our whole banking system and overturning it. We cannot prevent the people from depositing their money where they please. Those who put their money in the Home Bank did so in the belief that they were putting it in a safe place. I doubt whether we would be justified in reimbursing the lasers in the case of the Home Bank. I suppose it would be more popular to take the other view; one's remarks would perhaps meet with more general, favour if he argued that we should reimburse the depositors, because in addition to the 60,-

Home Bank Investigation

000 people who lost, there are sympathizers of these people in every province who feel that the poor children and the widows who lost all they had should be reimbursed. Nevertheless I fail to see the logic of the argument that this parliament is in duty bound to make good those losses. I might remind you that other losses have been suffered by people in this country. For instance, a great many people went into our western country, largely at the instigation of the Dominion government and took up homesteads; they branched out into the farming business and lost all they had. Nobody would suggest that the Dominion government should recoup the losers in that case. Moreover, out in the western country we have had in the past a vicious system of subdividing properties adjacent to small towns. I think I am safe in saying that hundreds and thousands of people have lost thousands of dollars there through (buying Up subdivision property. There may not have been in those cases the guarantee afforded by legislative machinery but legislative machinery permitted that kind of business to go on, and many people, some of them poor people too, lost large sums of money.

There is also a question in my mind as to how docile the representatives of the Maritime provinces would be if it were proposed to reimburse even 60,000 losers out of the taxes of the whole Canadian people. There were no branches of the Home Bank in Prince Edward Island, Nova Scotia and New Brunswick; would the people of these provinces view very favourably a proposal to pay out $11,000,000 to compensate for the loses incurred in this catastrophe? I doubt very much if they would. I also doubt very much if other portions of the country would be favourable to the paying out of Dominion money for this purpose. If the deserving people, such as widows who lost their all or old men who had all their earnings on deposit, could be separated from what I might call the less deserving people, it might be different-for we must remember that not all the 60.000 people who lost are children or widows or deserving poor; there were some corporations and there were some people who could afford to stand their loss. But if reimbursement were made at all, all would have to be treated alike.

I do not know, Mr. Speaker, that there is any legislative club by which people can be forced to deposit their money in any particular bank. We not only had the Home Bank in Canada doing business for the past eighteen years, but several others. In the city of Ottawa we had a branch of the Home Bank, but we had branches of other banks

as well. Now the people who deposited in the Home Bank, so to speak, said: Here, I trust the directors of the Home Bank to handle my money, and I am placing my $100 or my $1,000 in their care to handle for me and pay me 3 per cent interest. They had a perfect right to do that. But we might put forward the question: Why did they not put their money in some other place? They were not compelled to give their money to the Home Bank of Canada. In the city of Moose Jaw there was a branch of the Home Bank, but there were branches of other banks there as well. That may not apply to all points, but it does apply to some.

Also Mr. Speaker, it is not compulsory for people to put their money in any bank at all. We have a Post Office Savings Bank in Canada, connected with 1,307 post offices throughout the Dominion. Those 1,307 offices will accept the deposits of the people in any amounts from $1 up to $1,000 in any one year, and they will pay 3 per cent interest on the deposit. Was there anything to prevent the depositors of the Home Bank from putting their money in the post office, and thus giving to the country the benefit of the profits that might be made? There was absolutely nothing.

So far as the province of Ontario is concerned, they have a provincial savings bank that pays 4 per cent interest. Why did not the Home Bank depositors in the province of Ontario put their money in the Ontario Government Savings Bank, with the whole resources of the province behind it? They would have been almost sure that they would be repaid, and in addition they would get one per cent more interest than they got in the case of the Home Bank.

Out in the province from which I come, Saskatchewan, we have a Farm Loan Board that during the past several years has been very anxious to secure the money that the people have and cannot make use of. So anxious have they been to secure it, that they have been paying 5 per cent interest. Now, so far as Saskatchewan is concerned, why, let me ask, did not the depositors of the Home Bank put their money on deposit with the Saskatchewan Farm Loan Board and help out their own province and incidentally help themselves to the extent of an additional 2 per cent over and above what they got from the Home Bank? Or if any of those investments did not appeal to them, we have in Saskatchewan an admirable investment in the way of purchasing tax sale certificates. Every town, city, village and rural municipality in the province is compelled yearly to put up on

Home Bank Investigation

tax sale the property on which the taxes have not been paid, and any purchaser who has the money to invest will receive 10 per cent on the investment, and the investment, Mr. Speaker, is more secure than the investment in any bank. Now, we might ask, why did the people not put their money in any of these more safe investments?

But there are other reasons, Mr. Speaker. If the government of this country should find it incumbent upon them to reimburse the Home Bank depositors, would it not establish a precedent that would be very hard to get away from? Would they not be virtually saying that from now on they will guarantee all the deposits in all of the banks in Canada? In other words, they would be guaranteeing the sum of two billions of dollars. More than that; if they found it necessary to reimburse the losers in this case, would it not be necessary to make the action retroactive and reimburse losers in other cases, notably the depositors in the Farmers Bank, which failed some time ago?

Another reason why I would be opposed to reimbursing depositors, would be that it would tend to make the bankers more reckless than they are, if that is possible. It would tend to make them feel: The government of this country is standing back of us and will. pay the bill if we lose; so let us leap in and speculate. They would say; If we lose $11,000,000 or $20,000,000, what is the difference?-the government will come to our rescue. I do not feel, Mr. Speaker, that our government should compromise the country to that extent.

But there are some things that we may do. I cannot say that I am wholly in accord with the resolution. It asks for the appointment of a parliamentary committee immediately. I fail to see the necessity for appointing a parliamentary committee immediately or later. We have a Banking and Commerce committee, made up of ninety members of this honourable body, and I fail to see the need for any other committee than the one already appointed. I do not agree with that portion of the resolution. I have absolutely no objection to inquiring into the weaknesses in the Bank Act, but that should be done through the Banking and Commerce committee. I do not agree with that part of the resolution which asks for a recommendation for saving the Home Bank depositors from loss. Therefore, I could not vote for this resolution, but I would be in favour of referring the matter to the Banking and Commerce committee and suggesting to them that they should review,-not the entire Bank Act, because I do not think the entire Bank Act upon which we IMr. Carmichael.]

spent so many days and weeks, yes, months of time last year in reviewing and discussing, should be again ground up piecemeal and evidence taken in regard to it,-but I do think that possibly some sections of that act that bear more directly on the Home Bank case should be reviewed, and if possible amendments to such sections should be proposed. I would be in favour of reviewing more especially the sections dealing with the inspection of banks. I know that last year in the Banking and Commerce committee the hon. Minister of Finance (Mr. Fielding) took a stand against government inspection of banks on the ground that government inspection entailed government responsibility. He might be correct to a degree, but if government inspection is going to eliminate Home Bank failures and the like, then, Mr. Speaker, we should have government inspection and we should have it quick. I do not think that it is a physical possibility-well, it may be physically possible, but it is almost a financial impossibility-to inspect all the branches of all the banks in Canada, but we could adopt a system of government inspection whereby the head offices would be inspected, and possibly by so doing we would strengthen our banking system and overcome some of the weaknesses and some of the tendencies to failure.

As well as those suggestions, Mr. Speaker, as soon as this country has come to realize the success of public ownership, which it is coming to realize more and more every day in every way, as soon as it realizes to the full extent that public ownership is not only a feasible but a profitable proposition, I would suggest that at that time there is the possibility of the government of Canada going into the banking business in a similar way to that in which the Commonwealth of Australia has gone into it, not by tearing up our banks and throwing them overboard, not by adopting some scheme that is more or less wild and weird, but by starting in the banking business alongside of our present banking institutions. I am quite sure that if the Dominion government should venture on such a scheme they would be just as successful as the Commonwealth of Australia, which has made over $18,000,000 in some ten years of business, and which has kept the rates of interest down near the earth, and has the resources of the countiy back of every deposit. Just think, Mr. Speaker, with what confidence a person could put his deposit in a bank owned and controlled by the Dominion of Canada. I understand the total wealth of our country is placed at some

Home Bank Investigation

twenty-two billions of dollars. Such being the case, a depositor could put his money in such a bank and feel perfectly safe. I am well aware that this suggestion is possibly a little premature, and I do not look for action to be taken in regard to it in the immediate future. But I feel quite convinced that action could be taken in the years to come along this line, and that such a proceeding would be perfectly safe. I do not feel that I can support the resolution as it is worded, and therefore I shall have to vote against it.

At six o'clock the House took recess.

After Recess

The House resumed at eight o'clock.

Topic:   HOME BANK INVESTIGATION
Subtopic:   MOTION BY MR. IRVINE FOR APPOINTMENT OF SPECIAL COMMITTEE
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CON

Robert King Anderson

Conservative (1867-1942)

Mr. R. K. ANDERSON (Halton):

In rising to address the House on the motion proposed by the hon. member for East Calgary I might say that I find myself in accord with at least a considerable part of the resolution. The resolution says:

That, in the opinion of this House, a Parliamentary committee should be appointed immediately to investigate the Home Bank failure, with a view to discovering any weaknesses in the Bank Act which may be amended to prevent a similar occurrence; to devise some means of protecting depositors generally.

I can endorse that part of the resolution; but with regard to the latter part I am not quite so sure. I do not intend at the present moment, until I hear further discussion, to say whether or not I should be willing to go to the extent of saying that the government should make itself liable for the loss of the depositors of any bank. I am well aware the Bank Act which was revised last year might possibly be made better than it is, but I do not think it is possible for any government to pass an act which will completely prevent fraud and dishonesty on the part of the managers of any bank or any other private or public corporation. The Bank Act as it stands is fairly effective, and if its provisions are enforced I think it is almost sufficient to guarantee the deposits of the people who put their money in a bank. So far as the government are concerned, and its responsibility to see that the managers perform their duty to the depositors and shareholders, it is possible that they might be more active in that regard. The hon. Minister of Finance (Mr. Fielding) has said that inspection by the government adds responsibility. I would be in favour of a greater inspection of banks, not so much by the government as by an independent audit. The government might appoint an audit board. Such board could be paid

by making their salaries a- charge upon the banks, and that could be supplemented by the government. That independent audit board could go through the records of the bank at any time if they thought there was need, and make a report, not only to the Bankers' Association, but to the government and to the directors of the bank. I believe, Mr. Speaker, that in most cases banks have succumbed to failure because of inefficiency and lack of knowledge of banking institutions and banking procedure on the part of the directors. Chief Justice Meredith, when acting as commissioner for the Farmers' Bank, made such a statement. He said it was significant that the directors of the Farmers' Bank had no experience whatever in banking or in large business of a financial character of any kind. He attributed the failure of that bank largely to that cause. I understand, and I believe it can be substantiated, that the directors of the Home Bank under discussion to-night had no experience in banking. They had no knowledge of banking procedure, and I am confident that the failure was the direct result of inefficiency on the part of the directors, and possible dishonesty on the part of the management. Even if you have an inspection by a government auditor, it is possible that such defalcations on the part of the bank might not be discovered.

In reference to the Home Bank, I think its condition has been precarious for a number of years, and I believe that Sir Thomas White did make an investigation of some sort, and it is somewhat significant with regard to that investigation that the gentleman who was appointed to look into the condition of the bank was in some way taken into the employ of the bank itself. That is a significant fact which will bear investigation-as to why it was that Mr. Lash, appointed by the Finance department to look into the affairs of the bank and make a report, was almost immediately afterwards taken on as the solicitor for the Home Bank.

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Subtopic:   MOTION BY MR. IRVINE FOR APPOINTMENT OF SPECIAL COMMITTEE
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PRO

Henry Elvins Spencer

Progressive

Mr. SPENCER:

Is it not true that Mr. Lash was solicitor for the bank before he was appointed by the Finance department.

Topic:   HOME BANK INVESTIGATION
Subtopic:   MOTION BY MR. IRVINE FOR APPOINTMENT OF SPECIAL COMMITTEE
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CON

Robert King Anderson

Conservative (1867-1942)

Mr. ANDERSON:

I believe he had done

some independent temporary work for the bank previous to that, but I think that it was after his report was made that he was taken on as permanent solicitor, not in a temporary capacity, but that he was not in that position at the time he made the investigation.

With regard to revision of the Bank Act, I think it is possible also that certain pro-

Home Bank Investigation

visions might be made to give a greater security to the depositors. I find myself in agreement with the hon. member for Kindersley (Mr. Carmichael), that as the government has no direct control over the affairs of the bank; that as those who place their money in the bank do not seek information from the government, that they are in no way responsible for the action of the management of the bank; and that it would be thoroughly unjust to say that, while the bank is in a good working position and is making dividends for its shareholders, and paying interest to the depositors, the government should have no interest in it but that immediately it becomes a failure and the money of the depositors and shareholders is lost, the government should step in and say: "We will take all the loss." At the present time when the country is in such need of economy, when we have such a large indebtedness and a great amount of money to raise each year, it would be unfair to ask the government and the treasury of the country to become responsible for defalcations in banks. That would be establishing a precedent which might lead to very grave conditions in the future. Nobody knows where it would stop, as it would need to be retroactive, because it would be impossible to select the depositors of the Home Bank and say to them: "You will be a select few whom the government of this country will reimburse for your losses," and not do the same thing for others.

I want to state emphatically that if the government should take that attitude, they must then reconsider giving recompense to the depositors of the defunct Farmers' Bank and other banks as well that have failed in the last few years. You cannot say that the depositors of one particular bank shall have a claim on the bounty of the government and that the depositors of another bank shall not.

Topic:   HOME BANK INVESTIGATION
Subtopic:   MOTION BY MR. IRVINE FOR APPOINTMENT OF SPECIAL COMMITTEE
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CON

Thomas Langton Church

Conservative (1867-1942)

Mr. CHURCH:

Why should there not be

created some reserve fund ear-marked for the protection of depositors similar to the present redemption fund for the protection of noteholders? Are they not equally creditors and do they not have an equal priority?

Topic:   HOME BANK INVESTIGATION
Subtopic:   MOTION BY MR. IRVINE FOR APPOINTMENT OF SPECIAL COMMITTEE
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CON

Robert King Anderson

Conservative (1867-1942)

Mr. ANDERSON:

goes without saying that the failure is due to lax and inefficient, if not dishonest management.

In less than four years the Farmers' Bank was utterly wrecked. Mr. Travers invested something over half a million dollars in the Keeley mine and other unprotected loans, and this tying up of its assets was the principal cause of the failure. For instance, the Keeley mine was afterwards sold for the comparative]}'' insignificant sum of $141,000. Sir W. R. Meredith, in summing up the causes of the bank's failure, said:

The subsequent management of the affairs of the bank was characterized by gross extravagance, recklessness, incompetency, dishonesty and fraud, and has resulted in the entire loss of the paid-up capital and the whole of the deposits, and that after allowing for all that can be extracted from the shareholders on their double liability a loss amounting to no less than $1,806,437, making a record unparalleled in the history of any bank in Canada, or, as far as I am aware, in any other country.

Subject to deductions in respect of some of the times of sums amounting in the aggregate to $42,377, during the short career of the bank, the bad debts amounted to $598,565; the operating losses, including the cost of printing bank notes and stationery, to $281,119; the organization expenses to $87,279; the sums stolen by officers of the bank, after deducting what has been and is expected to be recovered from sureties, to $134,118; the dividends paid, to $50,772; the losses on expenditures on bank premises, fixtures and furniture, to $108,801; the loss on the purchase of the Keeley mine, to $509,886, from which, however, is to be deducted what may ultimately be realized from the sale of it; loss on the purchase of stock in the Keeley Mine Company, $15,000; besides other losses amounting in the aggregate to approximately $63,274.

And that in the short period of three years or a little over! How could any bank act prevent the failure of a bank that was run like that? How would it be possible to make an act of such a character that it would prevent defalcation of that kind when the manager of the bank had no idea of his responsibilities to the public, had no regard for what their losses might be so long as he himself was retained in his position? The directors of that bank guaranteed Mr. Travers $5,000 for the first year and an increase of $1,000 in salary for four years, making a total of $9,000, and if at any time he was deprived of his position in the bank he was to be given a pension of $1,500 a year for life, so that he was to be well looked after. When the provisional directors severed their connection with the bank and the regular directors were appointed, $20,000 of the bank's funds were distributed amongst the provisional directors for their work in connection with the organization of the bank.

The matter of this bank has now been before the public for something like ten years,

and a statement to the shareholders of that bank from the liquidators has not been submitted. The shareholders employed a liquidator to look after their interests in the liquidation of the bank, and they have a right to know what the assets of the bank were, how its debts were paid and what returns might be expected to depositors and shareholders. Such a statement has not been forthcoming, or was not forthcoming up to a short time ago. Last January I made an application to Mr. Clarkson, the liquidator, for a statement in the interests of the shareholders, mentioning that I myself was a shareholder. I received no reply to my letter. Other men had asked for a similar statement but did not receive any. When I came to Ottawa at the opening of the session I took the matter up with the Finance department, and I must say that the Finance department acted very promptly; they wrote Mr. Clarkson asking him for a statement of the bank's affairs, showing what had been done with the assets and what amount of debts had been paid. I wish to read Mr. Clarkson's reply, addressed to Mr. J. C. Saunders, the Deputy Minister of Finance, Ottawa, under date of March 4, 1924:

Re Farmers' Bank of Canada

I am in receipt of yours of the 29th ult., and in reply thereto would say that in April, 1923, I had an extract of the accounts of the Farmers' Bank made with the intention of whipping the matter into shape to give you the statement then asked for. Thereafter, however, I gained the understanding that the necessity for the statement had passed when revision of the Bank Act had been disposed of, and consequently I did not complete it.

That was rather a peculiar reason for not giving the statement.

In order that you may understand the conditon of affairs, I wish to say that in dealing with the affairs of the Farmers' Bank we adopted the only policy open to us which would admit of our passing accounts before the court from time to time and as receipts and disbursements were made. To do this statements were prepared of every individual receipt and every individual disbursement, the latter bo that vouchers for every expenditure could be placed before the court. This meant that while all receipts and all disbursements were passed no statements were prepared or asked for by the court which required the subdivision of receipts and disbursements under headings which would allow of a comprehensive statement being presented.

I may say that I had given the headings under which I wanted the statements presented with regard to the disbursement of the assets of the bank. The letter continues:

Under the above circumstances when you ask me for a statement it now means that I have got to take the accounts passed by the court and extract every individual item of receipts and disbursements under

Home Bank Investigation

headings so as to show what was realized from receivables, interest, double liability, collections, securities, real estate and fixtures and furniture, while on the other hand I have got to divide the expenditures to show payments of circulation, salaries and preferred claims, wages, branch expenses, liens, preferred accounts, set-offs, bank collections, legal fees, liquidator's remuneration, court costs and other charges. Having regard to the fact that there are thousands of entries involved and the liquidation spread over a period of more than ten years you will see what your request means. The extraction and the allocation of the items is now under way, and I would say that we ought within one week to be able to supply you with the information. This I trust will be satisfactory.

Mr. Clarkson sent me a copy of the letter he wrote to the Deputy Minister of Finance, and I must say that in a week a statement did come to hand. I wish to put that statement on Hansard as being the only one that has been issued with regard to the liquidation of the Farmers' Bank, although that bank failed fourteen years ago. The shareholders have had no knowledge whatever of what was done with their money, of what became of the assets of the bank, although they had a right to know. The statement is as follows:

In the matter of the Farmers' Bank of Canada

Statement of Estate Receipts and Disbursements for period between December 19, 1910 and March 12, 1924

Receipts-

General collections and realizations as passed in detail by Court-

Head Office items $ 37,651 89

Toronto branch items.. .. 165,697 92

Branch items (26 branches). 267,495 87

Bank balances 4,699 30

Special claims, accounts and securities

realized therefrom 420,402 82

Real Estate, fixtures and furniture.. .. 41,742 27

United States claims-collected therefrom $35,713 49

Less Costs of United States

Attorneys 9,356 96

26,356 53

Recovered from double liability $314,880 66Returned dividends

4,225 00

319,105 66

Interest receipts

13,270 13Sundries

45 44Recoveries in respect of defalcations,misfeasances and illegal preferences.. 74,003 61

Payments-

Circulation outstanding.. .. $536,020 00

Interest thereon to dates of

$606,984 77

Trusts and Guarantee Company-advances against receivables-with interst

thereon 231,953 55

Claims secured upon items receivable

and collections 73,633 61

Current and Savings balances applied by debtors in liquidation of obligations.. 30,592 19

Deposits after suspension repaid.. .. 1,14175

Collections of items held in trust-repaid 1,052 18Preferred wage claims

5,403 00Advances in respect of special accounts and in discharge of liens and mortgages

195,141 20Court and Court Stenographer costs.. 7,507 86

Costs of Creditors and Debtors required

to be paid by Estate 7,491 97

Shareholders Test Case-costs allocated

against Estate

3,500 00Branch general expenses

4,901 28

Rentals, postage, printing and sundry

expenses 17,687 38

Salaries and wages of employees.... 8,089 39

Remuneration of Curator and salary allowance to Liquidator for period December 19, 1910, to October 31st, . 1916 (including services of employees in

investigations)-as allowed by Court.. 61,250 00 Law Costs-including costs during Cura-torship-general Estate costs-misfeasance actions-double liability actions-Test cases-and in respect of

special accounts 98,189 96

Balance on hand 15,951 37

$1,370,471 44 $1,370,471 44

With reference to the item "Shareholders' Test Case-costs allocated against estate,

13,500", I might say that the shareholders contested their obligation to pay double liability, and the case was fought in the courts of Ontario and in the federal court, and the shareholders lost out. I might add that the commissioner who was appointed to investigate the affairs of the Farmers' Bank was givei^ every means by the government of the day for investigating the whole proceedings of the bank. He was empowered as follows:

Topic:   HOME BANK INVESTIGATION
Subtopic:   MOTION BY MR. IRVINE FOR APPOINTMENT OF SPECIAL COMMITTEE
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REVISED


In pursuance of the Commission of Your Royal Highness, dated the twelfth day of February, one thousand nine hundred and twelve, by which I was appointed a commissioiner to make investigation into all material and relevant facts in relation to: (a) The incorporation by Act of Parliament of the Farmers' Bank of Canada and the organization thereof; (b) The application for and the giving by the Treasury Board of the certificate permitting the bank to issue notes and to commence the business of banking; (c) The conduct and operation of the business of the bank, the amount of capital subscribed and paid up, the causes of the suspension and failure, and the extent of the liabilities and the value of the assets thereof.


EDITION


Home Bank Investigation



The commissioner was given a free hand to investigate every aspect of the Farmers' Bank from its inception up to the time of its liquidation, and I would recommend this government to do the same thing with regard to the Home Bank. The government has said that they wish to get the opinions of members of the House with regard to what shall be done, whether the inquiry should be by a commission or by a parliamentary committee. I would prefer a parliamentary committee, and that it should be given as free a hand as the commissioner was given in respect of the Farmers' Bank, to inquire into everything in relation to the bank from its incorporation to the time of closing its doors, and after, so that the committee could look into the matters of liquidation and see that they were carried out properly, and see that all persons who owe money to the bank pay their liabilities in order that the depositors may receive everything that is coming to them. The depositors have a right to expect that everything will be done in that regard. When a bank fails I think it should be the duty of some person, either the attorney general of the province or the Minister of Justice for the Dominion, to see to it that action is taken to inquire into the causes for the failure, and to ascertain who is to blame. If the manager or the president or a director is responsible, if he has been fraudulent in his acts, if he was dishonest in the incorporation of the bank, he should be brought before the Courts and properly punished. Too many of our bank managers and bank presidents) who wreck banks get off too easily. They are not prosecuted as they should be, and the consequence is that there is every incentive on the part of dishonest men to make an effort to get rich at the expense of the depositors and shareholders. I want again to impress upon the government the advisability of looking into every matter concerned with this bank. I would prefer a parliamentary committee, if possible, but the inquiry should be made either by a parliamentary committee or by a commission -by some competent authority-and every attempt should be made to see that justice is done. Mr. 0. R. GOULD (Assiniboia) : I was quite unable to hear the remarks of the hon. gentleman who has just taken his seat (Mr. Anderson)-


?

Some hon. MEMBERS:

Louder.

Topic:   EDITION
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PRO

Oliver Robert Gould

Progressive

Mr. GOULD:

It is very seldom that it

has been necessary for hon. members in this chamber to call "Louder" to me.

Like the hon. member for Kindersley (Mr. Carmichael) who addressed the House this afternoon, I can say that I do not speak for the depositors of the Home Bank resident in the electoral district which I represent. I regard this as a national question, and I shall be intentionally brief in the few remarks I shall make to-night because of the clearness of the resolution itself, and more particularly because of the clear and able presentation of the case by the hon. member (Mr. Irvine) in whose name the resolution stands.

The resolution contains three clauses, all very specific and needing very little elucidation, and in my humble opinion they are such that no one in the Chamber should object to their fulfilment. The first asks for a parliamentary committee to be appointed "with a view to discovering any weaknesses in the Bank Act which may be amended to prevent a similar occurrence" to the failure of the Home Bank; the second seeks "to devise some means of protecting depositors generally;" and the third clause reads "to make recommendation as to the possibility of saving the Home Bank depositors from loss." I think each of these three clauses very laudable; and again I say, I do not see why any hon. member of this Chamber should object to a committee being appointed for the purpose of proceeding along the lines indicated in the resolution.

I might state that while there are no depositors of the Home Bank in my constituency, and no branches of that bank, yet I was interested enough in this matter to appear in the city of Moose Jaw during the month of January last and listen to a presentation of the case by a committee who spoke for the depositors in the province of Saskatchewan.

I had the opportunity of addressing that committee for a few minutes, and in my remarks I first of all expressed my sympathy for the depositors, and secondly I stated that I would do all in my power to assist them in recovering the losses they had sustained. That remark was qualified by the statement that I should be glad to assist if there would be no added burden thrown upon the already overburdened taxpayers of the Dominion of Canada. Since I have listened to the presentation of the case here to-day, and having since the occasion to which I have referred, met many of the depositors personally, and having received many recommendations from various organizations throughout Canada setting forth the case more clearly than I had seen it 'presented up to that time, I may say that to-night I have no occasion whatever to change the sentiments I expressed in the city of Moose Jaw; in fact, I am prepared

Home Bank Investigation

to state that the sentiments I then expressed have been intensified since.

I think the resolution as it stands to-day, in its three clauses certainly points the way whereby the ends there outlined may be attained. We have to look at this question, firstly, from a more or less psychological point of view, because people who deposit money in our chartered banks in Canada are what might be termed the best class of our citizens. They are not extravagant people or the wasters; they are the people who have conserved the money they have made and deposited it in our institutions in the firm belief-and that belief has been taught them from their youth -that these institutions were safe and sound. But we have had many cases, and particularly the grievous failure of the Home Bank, which have shattered the faith of many people in this country in our banking institutions, and particularly those who have had money deposited in them. Not only that, I believe I am safe in assuming that many people who have money deposited in the other chartered banks of Canada entertain a doubt at times as to whether the foundations upon which those institutions rest are as secure as they have been led to believe. That is a very serious thing to say with respect to our financial institutions.

It seems to me that if a former minister of finance is rightly credited with the assertion that he knew of the workings of the Home Bank many years ago, the question at issue hinges upon two things: First, whether it was known at that time that the Home Bank was an almost shattered institution; second, whether the peop'e of Canada benefited by allowing it to continue. If, because of the silence of the finance minister of that time, the people of Canada derived a benefit, a committee appointed now might endeavour to find out what the extent of that benefit was. The question naturally arises also: If that former finance minister

was aware of the actual circumstances, is it not fair to assume that succeeding finance ministers likewise knew of the condition of the Home Bank during and following the war period? These are questions that are being asked and the people have a right to receive replies to them. If it is established as a fact that the people of Canada did so benefit then I state my opinion most positively that they are under an obligation to the depositors of the Home Bank. I am prepared to state my belief that Canada did benefit as a result of the silence maintained from 1916, which was during the war period, until the crash came. I believe the people 48i

of the district that I represent would not object to paying their fair share or fair proportion of the loss sustained by the depositors, under some plan that would enable them to meet the burden without difficulty, providing it can be clearly established that Canada did profit as a result of the silence in question.

It may be that the ex-minister to whom the statement referred to is attributed is not culpable. If his culpability is established, our duty is all the more manifest, and the people at large, in my opinion will gladly reimburse those who have lost their deposits, in accordance with some suitable plan upon which a committee may report after due investigation.

The question may naturally be asked-and I think is being asked at the present time:- did not succeeding governments accept the income taxes which the Home Bank continuously paid into the Dominion treasury? These taxes certainly must have been accepted, at any rate the statement is made in an explanation issued in connection with the bank's affairs. The government should have been as diligent in watching the affairs of the Home Bank as they are in scrutinizing the transactions of other institutions. Had they maintained such a keen scrutiny the actual condition of the bank could hardly have escaped their notice. A short time ago Canada covered itself with glory when it rushed to the assistance of Japan, following the terrific earthquake which devastated portions of that empire, Because of the aid then rendered Canada has been lauded internationally. And yet, although we rendered such assistance, Japan was collecting a duty on our imports of wheat. It seems to me that if Canada did the right thing in going so promptly to the assistance of the people of a foreign state, it would be even more justified in moving in the interest of those who have suffered from a calamity such as the failure of the Home Bank.

I could recite many distressing tales of the results of that failure, but I refrain from narrating such pathetic experiences. I simply rose to give expression to my earnest convictions in this matter. I am quite in sympathy with the resolution, and I see no reason why every hon. gentleman should not support the appointment of the committee asked for.

Topic:   EDITION
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PRO

John Millar

Progressive

Mr. JOHN MILLAR (Qu'Appelle):

At

times the good things of life are close to our hands. As we are engaged in trying to find a remedy for the existing banking troubles

Home Bank Investigation

my good friend the member for Macdonald (Mr. Lovie) hands to me a newspaper clipping advocating a remedy which, however, I think would be very far-reaching. The clipping in question, which is from the Brandon Sun says:

There are few bank failures in China. When a bank fails there the official responsible is beheaded.

I wish to refer very briefly to the resolution before the House. There were $225,000 of deposits in the Home Bank in the district I have the honour to represent. Now, I do not wish to claim that because some of the people of my constituency have had bad crops, or are poor, or have suffered greatly, or have lost all they had, through this bank failure, that that is any reason why we should act regardless of justice and set a precedent that would be dangerous. I do maintain, however, that it is a reason why we should be very careful to give these sufferers justice to the extent of one hundred per cent. I have received many letters from Home Bank depositors, and also petitions some of them containing over one hundred signatures, asking that consideration be given to the depositors, and that the government undertake to make good their entire loss. As yet I have an open mind on the subject, although I am free to admit that my heart is with the losers. I have heard it stated that a member who had branches of the Home Bank in his own constituency is not competent to act impartially. I do not admit that would be true of myself, and yet my sympathies are strongly with those who were depositors and shareholders and have lost everything they had. I might just refer to the case of one depositor, a man who was hard working, who had a little more funds and a little more backing financially perhaps than most of the other depositors

9 p.m. and yet who earned his money laboriously. He placed in one of these branches, a few days before it closed its doors, $7,000, the return from his last year's crop. Perhaps he is not so much to be pitied as some others who had not t'he $7,000 to deposit, and yet it seems very hard indeed that a man should, within a few days of the failure of this bank, place in trust $7,000 hard-earned money, when those who are collecting this money in this way look upon it not as a sacred trust to be invested where the security is only of the very best, but rather look upon it as an unlimited fund with which to engage in wild-cat schemes, and that is the way it is treated. Our Bank Act I believe is a good act, but it certainly has its weak-

nesses. This I think has been amply shown. I think if we had some measures of protection such as they have in the United States it would be an improvement. They have found in that country that a reserve fund bank is very useful-a bank to which other banks can resort in case they require funds, where they can have their paper discounted. Those who have studied the banks of the United States carefully believe that at one time there would have been a serious crash if it had not been for the federal reserve bank; but through the efforts of that federal reserve bank other banks that were in financial difficulties, not because they were insolvent but because of pressure at the moment, were able to resort to that bank and have their paper rediscounted; and thus were able to carry on. I fancy that if we had some scheme similar to the federal reserve bank of the United States, by which somebody would be appointed who would be able to arrange a rediscount, a bank in Canada would not find it necessary to close its doors in case of financial pressure. One difficulty with our banks in the past has been that when times were good they were too ready to loan, they had plenty of money, the depositors were numerous and the borrowers few. Then when times became bad, those who had plenty of security and who had a right to expect that they would be able to borrow money, and those who would receive money under a proper banking system were not able to obtain that accommodation. I have known men to go out with Victory bonds of considerable amounts and find themselves unable to borrow one dollar on them. That state of affairs should not exist. It has been said that even in the United States where they have government inspection, banks fail. It is true that such things occur; and yet I am inclined to think that a proper inspection by the government-not such an audit as we have had in the past, which seems to me to have been entirely ineffective, but an inspection that would examine very carefully the reports from the various banks, and have a nose for trouble the same as a newspaper man has for news-would have discovered something wrong with the returns from the bank which has caused us so much trouble. If such banks as these were inspected more carefully, and the loans the bank had made examined thoroughly, such a disaster as has occurred would not be repeated. I am inclined to think the banks are standing in their own light. This failure has shattered confidence in our banking system, and, I think the banks by standing together, by not adopting such measures

Home Bank Investigation

as will prevent such a catastrophe as this, have done themselves a very great deal of harm. It seems to me the claims of the depositors rest to a very large extent on this point: It is claimed by some that Sir Thomas White, when Minister of Finance, being notified of the condition in which this bank stood, withheld his hand in the interests of the public good, and that Canada at large benefited thereby. I think, if that be proven, I have found a very strong claim and a very good reason why the country at large should bear the loss. I am watching these matters very carefully. I hope the investigation will be thorough. I am glad that it extends from the time the bank was created up to the time it closed its doors.

I would like to refer to a remark made by the mover of the resolution (Mr. Irvine), that I think, was rather unfortunate. I feel that I cannot let it pass without a reference. It was to the effect that the commissioners usually write reports that nobody reads, run up large bills of expense, and that their reports are very seldom translated into legislation. I think if the hon. member (Mr. Irvine) had thought seriously he surely would not have made that statement. I have gone back carefully in my memory over the commissions I have known, and of the men who have been employed on these commissions, and I can find no justification for any such statement. A clipping was read from a newspaper, supposed to be a statement from a newspaper reporter, to the effect that having sat three years in the gallery he knew of no case where the report of the commission had been translated into legislation. I have in mind at present such men as are working on these commissions even now, and coming from Winnipeg, on my way to Ottawa a short time ago, I met the Grain Commission, and when I saw these men and talked with them I found they had just returned from Fort William and Port Arthur, and I can well say that their solicitor was worked to the last pound of his strength. He had done all that any man could possibly do. He is a man of great ability and high attainments. Surely such ridicule should not be heaped upon such men as Chief Justice Turgeon, such men as Dean Rutherford or Mr. Scott of Winnipeg, or such men as Professor Gibbon. These are not men of the stamp that are wasting their time and public money writing reports that nobody reads. I can assure the hon. member for East Calgary that there are men all over the country who are deeply interested in this matter of the grain trade, and they will read with the greatest care the reports that

have been issued. It may be-and I believe it is the case-that three-fourths of the people are not interested in that matter and do not read the reports. Why should those who are interested be deprived of the benefit of the reports because some people will not read them? I desire to refer to two or three commissions of which I have actual knowledge. How did we get the co-operative elevator companies? It was because the report of the commission was translated into legislation. The Royal Grain Commission of 1906 and 1907 made twenty-six recommendations, and twenty-four of these recommendations were accepted by the organized farmers of western Canada, and were incorporated into the Canada Grain Act of to-day. I am asked, do we get any results? Let me read to the House two or three paragraphs which will be good reading at any time in this connection or in any other connection. I read from the Regina Leader of April 27, 1910:

In the matter of the Port Arthur elevator and the Empire elevator, the charges were taken up and on investigation were all sustained and the department at Ottawa instructed their counsel here to prosecute and the case came up befoi'e Police Magistrate Daly on Friday, April, 1923. The Port Arthur elevator was proven guilty on five charges of false statement and fined $500 for each offence. The Empire elevator was found guilty on six charges of a similar character and fined $500 for each offence.

Just one other short paragraph, because I have heard many slurs cast on the work of commissions from time to time, therefore, I dwell for a moment on this question. A question was asked as to the result of the Grain Commission. Let me read two or three lines from a clipping from the Farmers' Advocate of November 17, 1909. This shows the result of measures put into effect on the strength of the report of that commission:

In 1908, the shortage on out-turns totalled 50,000 bushels, a loss of course which indirectly affected the price paid for grain at Fort William.

I will now give the returns after the remedial measures were put into effect.

Bill of Net

Lading Out-turn shortage

Bushels Bushels Bushels

Wheat

8,470,287 8,463,925 5,956Oats

2,377,311 2,375,096 2,214

I think that is as far as I need to go in regard to this matter. When commissions are working hard on very important work and are doing as faithful and honest service as members of this House, it is a grave mistake to undermine their work, to leave the impression that it is useless, that their report will not be translated into legislation. Let me close by asking this question: Does any member amongst the 235 in this House be-

Home Bank Investigation

lieve for one moment that the report of the present Grain Commission will not be translated into legislation? I think there is not one.

I believe it will be better to refer the resolution to a committee of the House rather than to a commission; but I feel just a little undecided at the present time whether it will be better to refer it to a special committee than to the Banking and Commerce committee. I hope, however, wherever it goes, it will be dealt with in a very effective manner, so that such disastrous failures as we have had in the past will not occur in the future.

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March 27, 1924