April 14, 1926

LIB

James Alexander Robb (Minister of Trade and Commerce; Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

I am not sure about that,

but I find that on page 778 of the 1923 proceedings Professor Swanson said:

I think we ought to make a very careful detailed and comprehensive study of the American system and exactly the results that have been secured therefrom before we make such an experiment in Canada.

Then later on, at page 784:

I do noit think it is required in Canada. Our banks have the resources right now. It is not the case that we have not the money. No federal reserve scheme superimposed on our banks could increase the credit to a much greater degree than the banks can increase their credit right now. When a bank says

it is not able to extend its loan in an individual case, often it is because the security or the character of the borrower, either one or the other, is not up to par.

That was his opinion, expressed before that committee in 1923. But the Banking and Commerce committee, not satisfied with the evidence of Canadian bankers and economists, called before them a gentleman who is a recognized authority in the United States- Mr. John W. Pole, chief national bank examiner of the United States. Mr. Pole's evidence can be found at page 136 of the 1924 proceedings of that committee. I am not going to tire the House any more than to read the following:

The federal reserve system is admirably adapted to the unit system of banking, but for a very email number of banks with a large number of branches to attempt to adjust themselves so as to fit into' such a scheme would appear to be highly impracticable.

That is the opinion of Mr. Pole, and he continues:

Under the provisions of the Finance Act it seems to be quite possible for any bank in Canada whose assets would be of such liquid character as to enable it to take advantage of any facilities offered by the reserve system, to avail itself of equal opportunity offered by the Finance Act, the operation of which is easy and inexpensive and, judging from the manner in which it has been functioning, effective.

It is upon evidence such as this that I submit to the House that we should not allow the idea to go out that Canada has not a good banking system, and one which is suited to the needs of our country.

The hon. member for Winnipeg North Centre referred to the Finance Act. For the information of the House it may be interesting to know to just what extent the Finance Act is required by the banks. I will place on Hansard a few figures to show the use of the Finance Act and to prove that it is not very much needed under our present banking system. The following table shows the maximum advances under the Finance Act in each of the years from 1918 to 1925 inclusive:

1918

$116,500,000 001919

112,957,000 001920

123,689,025 001921

108,707,960 75

Then we come to 1922, and I ask hon. gentlemen to notice the drop:

1922

$60,619,769 741923

40,020,000 001924

37,800,000 001925

30,400,000 00

According to the bank return of January 30, 1926, the advances totalled only $9,000,000, and that was during a period when there was some movement of crops.

National Banking System

Now, Sir, I do not wish to detain the House at any length, because I understand there are other speakers.

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
PRO

George Gibson Coote

Progressive

Mr. COOTE:

I would like to ask the

minister if he has the Finance Act at hand, and if he would be good enough to tell the House the class of securities on which money may be advanced.

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
LIB

James Alexander Robb (Minister of Trade and Commerce; Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

I have not the Finance Act

at hand, so I cannot give that information to my hon. friend, but he will understand from the figures just given that there has been no restraint in the banking facilities offered. The banks, we may suppose, had just as good security in 1924 and 1925 as in 1918, and had they required the money they would have got it, and at a lower rate of interest than they got in 1918. I will admit at once that the banking situation in Canada to-day gives less worry, at all events, to the Finance Minister and to the government, than it did in the years 1921, 1922 and 1923. The banks in Canada are in pretty good shape to-day, and we have improved the system to a degree by the introduction of the inspection system.

I am not one who objects at all to securing all the information that we can get brought before us in the Banking and Commerce committee. I admit at once that the information brought before the government and before the members in the last parliament enabled us to improve very considerably upon the inspection system of the banks, to the good, I believe, of all Canada, and for that reason, Mr. Speaker, I am willing to accept the suggestion which I understand the hon. member for Winnipeg North Centre (Mr. Woodsworth) has made, that this question be referred for study to the Banking and Commerce committee. I would like however to make this reservation: I appeal to my hon. friends

who have given study to this matter and who have advanced these ideas, I appeal also to every member of the Banking and Commerce committee, that in bringing -witnesses before that commitee they do not pay heavy travelling expenses to bring some person before them who knows nothing about the matter, or some person outside the country. I do not object to bringing gentlemen before the committee who are able to give us information that will be of any value, but as to our paying heavy travelling expenses for men who have simply theories to advance, and who come possibly from a long distance and have heavy accounts, I submit that the Banking and Commerce committee might very well pass upon that, and help the Finance Minister to keep down expenses. With that reservation, I accept the

suggestion that this question be referred for further study to the Banking and Commerce committee.

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
CON

Robert James Manion

Conservative (1867-1942)

Hon. R. J. MANION (Fort William):

I

do not intend to take up much of the time of the House in dealing with this question. I may say at the beginning that I have no brief whatever for the banks as they exist in Canada to-day. Like most professional men, I make my deposits, draw my cheques, and once in a while have the good luck to be able to borrow some money from the banks.

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
LIB

James Alexander Robb (Minister of Trade and Commerce; Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

Lucky man!

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
CON

Robert James Manion

Conservative (1867-1942)

Mr. M ANION:

Generally speaking, at the

basis of all resolutions of this kind, there is a suggestion, it seems to me, that the ordinary credit facilities of our banking system are not adequate for the needs of the country. That probably is correct in some special lines of credit, such perhaps as might be dealt with by the rural credits scheme, or something of that sort, but on the whole I

5 p.m. think that one of the greatest curses of Canada in the past, in some periods at all events, has been the giving of too much credit. I well remember, for example, that between 1910 and 1912 in the western country, from the head of the lakes clear through to Vancouver, there was so much credit, and thoughtless credit, issued by the banks, almost anybody being able to borrow five or ten thousand dollars to invest in real estate, that as a consequence we had a real estate boom which ruined nearly all the people through the west, and did actually ruin very, very many of them.

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
PRO

Milton Neil Campbell

Progressive

Mr. CAMPBELL:

-Does not the very condition the hon. member speaks of show something wrong with the system?

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
CON

Robert James Manion

Conservative (1867-1942)

Mr. MANION:

I am * not going to defend the present banking system at all. I do not suggest that it is perfect or anything of that sort; on the contrary, I think there is plenty of room probably for improvement in the system, but I was simply discussing credit.

I am not going to discuss banking, the gold standard, or the different types of money. In fact, and I say this without any reflection on my hon. friend, I have the idea that a debate of this sort is absolutely useless in the House at the present time. The very fact that during this debate there is a very small attendance in the House shows that certainly the idea is not accepted by the House generally that any great change from the system of private banking to national banking is necessary

National Banking System

The Minister of Finance, who has just sat down, says he has no objection to this question being referred to the Banking and Commerce committee. Neither have I, but I have objection, which the Finance Minister apparently has not, to this question being investigated again now after we have just had two years of the same type of investigation. I do not see any reason why at the present time the people of Canada should be saddled with the expense of bringing before the Banking and Commerce committee, from a long distance, and at heavy expense, witnesses who in very many cases have nothing but a superficial, theoretic knowledge of banking, or of any other problem I have heard many of them discuss, simply to expound in many cases futile theories. I well remember a couple of years ago a witness who was brought before that committee, at great expense, whose theories were so thick that nobody could understand them at all, and I do not think even he had any idea of what they meant himself.

What I am opposing is the nationalization of banking. I am not upholding the banking system as it exists in Canada to-day, nor saying that it cannot be improved; I willingly admit it can, but I am opposing the idea of nationalization of our banking system, or, for the matter of that, the nationalization of anything else that we have not already nationalized in this country. The function of government is to govern, not to trade, whether the trade is in money or in goods of any kind. I think we have too much government at the present time. We are continually passing legislation much of which is useless. Somebody is continually proposing that we should nationalize this or that. My good friend who has moved this resolution (Mr. Woodsworth).has another resolution on the order paper to nationalize coal mines. I have no doubt that if we nationalized the banks, and then the coal mines, my good friend from Winnipeg North Centre would go on nationalizing until finally he had nationalized every line of endeavour in this country. Russia tried that; in fact they did it, and they made a pretty rotten mess of the whole job, so far as we are able to find out. There are certain lines of endeavour which a government alone can properly handle -the mails for instance, hygienic and sanitary questions, the supplying of cities and towns with a safe water supply, and other lines of endeavour of that nature affecting the whole community of a city or province or the citizens of the who!; country, and which can

[Mr. Manion.J

be properly dealt with only by a government. But there are other lines of endeavour which should be left to private initiative. Most of us believe, and I am sure the hon. member for Winnipeg North Centre will agree with this, that practically everything that is done by governments is done more extravagantly than if the same service were performed by a private corporation. That is true, I believe, from a municipal, provincial, and Dominion standpoint-

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
LAB

Abraham Albert Heaps

Labour

Mr. HEARS:

Does the hon. member apply that to the hydro-electric enterprise in this country?

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
CON

Robert James Manion

Conservative (1867-1942)

Mr. MANION:

I probably would have

said the same of that enterprise if I had been asked before the thing was done, but that is now done.

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
LAB

Abraham Albert Heaps

Labour

Mr. HEARS:

The hon. member stated that governments are more extravagant than private concerns, and-1 was asking whether that was true in regard to the development of electrical energy under public ownership and private enterprise.

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
CON

Robert James Manion

Conservative (1867-1942)

Mr. MANION:

I have no doubt whatever

that the building of hydro-electric plants under public ownership has cost very much more than if those same plants had been built under private ownership, I have no doubt of it whatever, and I could give instances to prove it.

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
LAB

Abraham Albert Heaps

Labour

Mr. HEAPS:

Do not the people of Ontario pay much less for their energy, under public ownership, than do the people of Quebec, where the enterprise is under private ownership ?

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
CON

Robert James Manion

Conservative (1867-1942)

Mr. MANION:

That is not the question

my hon. friend asked before. He asked me if it cost more to develop the hydro-electric enterprise under public ownership than it would have under private ownership, and I answered that question. However, I am not criticizing the hydro-electric development which has taken place in Ontario. What I am maintaining is that we have enough nationalization at the present time and until we can get out of some of the difficulties .we are in, we should do no more, and even then I will have to be shown some good and plain reason for nationalizing anything further.

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
LAB

Abraham Albert Heaps

Labour

Mr. HEAPS:

Does not the mess which the hon. gentleman has referred to arise out of the failure of private ownership?

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
CON
LAB

Abraham Albert Heaps

Labour

Mr. HEAPS:

In regard to the National

Railways?

National Banking System

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
CON

Robert James Manion

Conservative (1867-1942)

Mr. MANION:

No, it did not arise out

of the failure of private ownership. It arose partly out of that, but mainly out of the overbuilding of railways on the part of the government.

I do not wish to enter into a discussion of the railway situation or of the hydro-electric question, but I repeat that we have nationalized enough things in this country-surely the railway situation is proof enough of that -without wishing to nationalize the banking system.

Not only is a government more extravagant in construction and operation, but as a rule the efficiency is not so good in any nationally-operated enterprise as in private operation. In England the telephone and the telegraph *were at one time in the hands of private companies, but were taken over by the government, with the result that the government is out millions of dollars annually on the operation of the system and the service is not nearly so good. I have observed the same thing in other parts of the world. I have travelled on the Italian railways, and if there are any wTorse railways in the world II do not know where they could possibly be found. The French government railways are in nearly as bad a condition. The Australian railways, I am told, though I have not travelled on them, are operated by the government, and they have gone so far as to have different gauges; so that in the middle of the night you have to get off one sleeping car and get into another, because the gauges of the roads are different. The operation has not been satisfactory there. There has been only one line of publicly-operated railway in the world which has really given satisfaction-those in Germany. I have travelled on the trains in that country myself, and they were very satisfactory. But the Germans are a different people from the English speaking and the French speaking people in the countries in which we live. The German people are apparently willing to be governed by bureaucrats. They are willing to be docile enough to permit the higher officers to compel them to do as they wish. I remember well a thing that struck me on the German railways, in fact you will find it all ovef Germany, and that was that the word "ver-boten" which means forbidden was written all over the walls in the public places and on the railway trains. The German people are willing to be forbidden to do anything which the bureaucrats desire to forbid. The Anglo-Saxon people of England and of Canada are not satisfied to be forbidden to do this, that and the other. In thinking the matter over, I came to the conclusion that the

German railways, though government owned, made a success, in contradistinction to the railways of the other countries, because of the national characteristics of the German people.

Another reason why I object to the nationalization of enterprises is that it leads to business methods being replaced by favouritism and politics. It has been suggested that some political friends would be favoured. I think the hon. gentleman from St. 'Lawrence-St. George (Mr. Cahan) made the suggestion that if the government was in control of the banking system favouritism would be shown. I have no doubt that

statement is absolutely correct, whether it be a Conservative, Liberal, or even a Progressive government. I have an idea that if my Progressive friends controlled the banking system they would give all the money to the farmers of the prairie provinces.

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
PRO

George Gibson Coote

Progressive

Mr. COOTE:

Would the hon. member

insinuate that, in the administration of the Finance Act, in regard to the loans referred to a few minutes ago by the Finance Minister. there has been any favouritism shown to one bank or another because of the politics of the bank?

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink
CON

Robert James Manion

Conservative (1867-1942)

Mr. MANION:

I do not know. I have

never been Finance Minister. Tlhe Finance Minister could probably answer that question, but I cannot. If there was opportunity for a government to favour one bank more than another, and a particular bank was friendly to them, I have no doubt they would favour it. I think that is true of all governments. Governments are made up of human beings, they are naturally going to favour their friends and generally speaking they are pretty nearly right in favouring them, but I do not wish to put the whole banking system of this country into the hands of any government, whether it be the party sitting on this side of the House or the Liberal party on the other side of the House. I should not care to put the banking system into their hands and allow them to favour their friends by giving loans to those to whom they chose to give them. I consider if you go on nationalizing enterprises you take away the personal incentive and initiative needed to build up the country. Not only that, but you paralyse to a certain extent private enterprise, which after all, under our present system-although it can be improved in many ways-is the stimulus which makes the wheels of industry go round and tends to make the country prosper.

National Banking System

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
Permalink

April 14, 1926