April 14, 1926

LAB

James Shaver Woodsworth

Labour

Mr. WOODSWORTH:

How much private enterprise is possible in a financial world to-day where ten banks control the whole situation?

Topic:   QUESTIONS
Subtopic:   NATIONAL SYSTEM OF BANKING
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CON

Robert James Manion

Conservative (1867-1942)

Mr. MANION:

If there is no private

enterprise possible when ten banks control the banking system, how much enterprise is possible when one government controls it? It would be just one-tenth of that amount. A logical argument was put up by one of my hon. friends behind me, who asked if it was not a monopoly to hand the banking system over to the government. Certainly it would be a monopoly. It is not a' monopoly to-day. We have ten different banking systems all competing with each other.

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LAB

James Shaver Woodsworth

Labour

Mr. WOODSWORTH:

One system.

Mr.. M ANION: Ten different organizations, ten competitors competing with each other for the business of the country, and they' do compete. Any man who has dealings with the banks knows that sometimes he will be refused credit by one bank and receive credit from another, in order possibly to get his business. So that there is competition. There would be no competition if the government obtained control of it, except the competition between the government's friends and the government's enemies.

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PRO

Henry Elvins Spencer

Progressive

Mr. SPENCER:

Would it not be just as fair to say that the government-owned railway might refuse to carry people not friendly

to them?

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CON

Robert James Manion

Conservative (1867-1942)

Mr. MANION:

No, but all government

railways carry a lot of people they should not carry. I have noticed that. I have been struck veiy often by the number of deadheads, including myself, on the government trains.

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LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

Is the hon. member

suggesting that the railway companies break the law?

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Subtopic:   NATIONAL SYSTEM OF BANKING
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CON

Robert James Manion

Conservative (1867-1942)

Mr. MANION:

I do not know whether

they break the law or not but the Minister of Railways will have a good opportunity to look into that, and I feel sure, judging from the thoroughness and thrift which was shown by that great Saskatchewan political machine of his, he will be able to clean up any irregularity in that respect.

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LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

I was not trying to invite any partisan discussion, but the hon. member was speaking of the railways and the methods they adopted in regard to transportation, and I really think the statement he made which might carry the inference that

they are not complying with the provisions of the law should be withdrawn, or information given with regard to it.

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CON

Robert James Manion

Conservative (1867-1942)

Mr. MANION:

I would advise my hon.

friend to look into the matter.

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LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

I am glad my hon.

friend has withdrawn the inference.

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CON

Robert James Manion

Conservative (1867-1942)

Mr. MANION:

I did not withdraw anything. My hon. friend from Regina (Mr. Dunning) does not seem to know whether I was speaking of the past or the present, and I did not say whether I was referring to the past or present events; but as a matter of fact I was speaking of the past. However that is another issue and I do not want to be dragged into a discussion of it. But I know-and I repeat to the Minister of Railways-that there are people carried on government railways as well, perhaps, a3 private railways who have no right to that privilege. It is, however, up to the Minister of Railways to look into that.

Doubtless there are weaknesses in our present banking system. I will admit that; I am not defending the banks at all; I am not going even so far as the Minister of Finance (Mr. Robb) did in defending them. I think we can improve them by controlling them, by seeing that they serve the people as they should. For example, the rural credit scheme which, I believe, is to be put into force this year, although the legislation has not been brought down yet, is for the purpose of implementing the work of the banks. .

I have noticed that those governments are, generally speaking, the most efficient which undertake the least. The more you hand over to a government to handle, the less likely you are to get efficient government. We have at the present time governmental problems enough without handing them over the whole banking system of the country. We have, indeed, a national railway problem which is perhaps the greatest problem we have in Canada to-day, and I am sure the energies of my good friend the Minister of Railways will be well taken up if he is to get us out of the muddle into which the people and governments of the past have got us in the National railway system.

I did not wish to take up so much time, but my friends as usual made half my speech for me. I submit, in closing, that by government control, that is by suitable legislation put upon the banks, we can improve the banking system of Canada. But I object to any more government ownership or government management than we have at present.

National Banking System

We have enough government ownership in other matters to manage without taking over the banks of this country and attempting to manage them; I would agree, therefore, with the Minister of Finance that this resolution might be sent to the Banking and Commerce committee to play with it if they will, but I object to any expense being incurred by the people of this country in bringing witnesses before that committee. That would be my attitude and I would be very much disappointed if the House did endorse the motion of my hon. friend.

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PRO

Edward Joseph Garland

Progressive

Mr. E. J. GARLAND (Bow River):

Mr. Speaker, we must feel that a considerable step forward has been made by protagonists of changes or reforms in the banking system when we find that both the Minister of Finance and the hon. member for Fort William (Mr. Manion) are now willing to discuss this question before the Banking and Commerce committee. I have in mind the debate that took place last year, and may I say at this point that although this question has been discussed by - this House for three years and discussed in the Banking and Commerce committee during one year, it has never yet been made a specific question for discussion and recommendation by any committee of this House or by the House itself.

The time has now come, I believe, when a suggestion such as has been offered by the hon. member for Winnipeg No-rth Centre (Mr. Woodsworth) should meet with the approval of the House, and an examination of a possible alteration or evolution of the system that now exists should take place with a view to improving that system. Like the hon. member for Fort William, I am not going at this moment to advocate any theoretical, revolutionary modifications or changes in our system, but I am going to urge that something should be done to coordinate several of the different branches of the present system into one central force, with perhaps certain effects which I will deal with later.

Last year the Banking and Commerce committee, appointed to discuss rural credits and some other matters, decided that there ought to come within its scope the question of a national bank or central bank or bank of rediscount, and so that committee, in spite of the opposition of its chairman, recommended to the House that the scope of the committee should be widened to include that question. That recommendation was carried by the committee and sent forward to the House on May 21. Unfortunately, owing to processes of which I know not and influences that have 14011-155

never been explained, that report was not presented to the House for discussion until July 2, a short time prior to prorogation, with the result that although a debate took place, the resolution widening the scope of the committee and allowing this investigation was voted down. On that occasion, however, the Minister of Finance took exception to the scope of the committee being widened for a discussion of this question. He did so on two grounds; first, that the Finance Act now provided rediscount facilities as they were required by the present system and supplied an elastic currency which would satisfy every need for credits in this country. The second objection he took was, of course, on the orthodox ground that you must not interfere with the revision of the Bank Act that had taken place for ten years and that we should let it go at that. That ground was taken by my hon. friends to my right, with the exception of the hon. member for Vancouver South (Mr. Ladner), who has always been a strong supporter of centralizing the various banking functions that exist to-day.

Perhaps I had better approach this question by making one or two fairly general statements. First of all. that there is something wrong not alone in this country, but in most countries in connection with the financial system must be apparent to anyone who will study the question. Let us note that during the whole history of nations, so far as I have been able to study them, there has been only one'period in Canada and one in Great Britain since the Napoleonic wars during which the whole productive capacity of the nation was used to its limit. That was during the past war. We ask ourselves why. The explanation is at once forthcoming when we study the changes that took place instantaneously both in this country and in Great Britain at the outbreak of the war- it took place also in other countries, but I do not wish to refer to 'them-which placed beneath the whole banking structure all the public credit, all the power of public credit; placed it definitely under a private banking structure and so gave it that great power of credit inflation which enabled the peak production to be reached without any difficult}'. There was no unemployment; there were no wretched conditions either in Great Britain or in this country during that otherwise wretched period. After that war was over we found that the interests that prior to then had controlled currency, coinage, everything in the way of credit, decided to contract that credit and to reassert their previous domination. They did that by a process of violent

National Banking System

deflation, of forced contraction of credit, with the result that during the period 1920 to 1921 there was an increase in private debt, agricultural, municipal, provincial and even federal debt, to the extent of about 100 per cent. In other words, our debts, national and provincial, were doubled in that period. That matter has been discussed at least temporarily by the committee, and I do not wish to dwell further upon it, except to say that it is almost hopeless to expect that in a House of this kind or in any House, even out in the country, we can get the great bulk of the people at this moment to accept any reform which may yet in itself be for their benefit. They are not ready for it. The best we can hope to do in the meantime, therefore, is to educate them, to point out certain truths that exist, and to get the people to apply them to present conditions. Imagine if you will that here we have bootless sons of unemployed shoemakers! Did you ever hear ot anything so utterly absurd? You have a nation like Canada capable of vast expansion in productive enterprise, but our industries are working at low efolb. This is not, due to any lack of protection by any means.

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Subtopic:   NATIONAL SYSTEM OF BANKING
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CON

Charles Hazlitt Cahan

Conservative (1867-1942)

Mr. CAHAN:

It is not due to lack of

credit, either.

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PRO
PRO

Henry Elvins Spencer

Progressive

Mr. SPENCER:

Was it not a majority

of the directors?

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PRO

Edward Joseph Garland

Progressive

Mr. GARLAND (Bow River):

No, I think it was unanimous consent. I must say in fairness to him that the right hon. leader of the opposition (Mr. Meighen) supported us in that amendment; he was just as anxious as we were to see that this vast power which is still vested in these directors should be controlled. Now, when we recognize that fact we see the truth of every statement I have made previously about the vast control which rests in the hands of these private individuals.

There are further reasons why to-day the interest rates in this country are unquestionably bad; in western Canada they are exceedingly bad. They are not really governed by the law. for although the Bank Act says seven per cent is the maximum, the banks in western Canada cleverly get around that limitation on every occasion. Only the other day I received a renewal note for a small amount with the notification, ' 8 per cent before and after maturity.We tried to have inserted in the Bank Act a fixed legal rate of interest above which the banks could not go. That motion was defeated by the committee. Why, no good reason has ever been given. Why there should not be a limit to the amount of interest to be charged by a bank is something beyond my comprehension, There should be a legal limit. To-day there is really no limit; for although, as I say, the Bank Act contains a limitation of seven per cent, there is no penalty provided for any infraction of that limitation.

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CON

Ambrose Upton Gledstanes Bury

Conservative (1867-1942)

Mr. BURY:

May I call the attention of

the hon. member to this penalty-if he refuses to pay the bank will only get five per cent?

24.30

National Banking System

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PRO

Edward Joseph Garland

Progressive

Mr. GARLAND (Bow River):

Then he

would have a mighty hard time when he went back to the bank for further credit.

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CON
PRO

Edward Joseph Garland

Progressive

Mr. GARLAND (Bow River):

The hon.

gentleman perhaps knows that in western Canada the banks have adopted the practice of -collecting the interest in advance-discounting in advance.

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Subtopic:   NATIONAL SYSTEM OF BANKING
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April 14, 1926