March 23, 1927


Motion agreed to.


FARMERS BANK FAILURE

MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS

CON

John Wesley Edwards

Conservative (1867-1942)

Hon. J. W. EDWARDS (Frontenac-Addington) moved:

That, in the opinion of this House, it is advisable that the same measure of relief should be granted to those who suffered loss through the failure of the Farmers Bank as has been granted to those who lost through the failure of the Home Bank.

He said: Mr. Speaker, I hold in my hand a tabulated statement of some twenty-four bank failures which have occurred in Canada between 1868 and 1910, giving in each case the date of suspension, the amount owing to the

Farmers Bank Failure

public, and the percentage paid to the depositors, also the amount lost in each case, if any. The aggregate liabilities, the amount owing to the public, in these twenty-five banks-I am including the Home Bank-was about $77,000,000. The amount lost was $6,774,665, not including the loss in the Home Bank case. Out of those twenty-five cases of failures, in fourteen cases the depositors received the full amount they had on deposit: in six cases they received respectively 57| per cent, 59i per cent, 66 J per cent, 75| per cent, 96i per cent, and 99i per cent of the amounts they had on deposit. In one case they received 11 per cent, and in another 17i per cent of the amount they had on deposit. In two cases only of all in this list the depositors received nothing whatever. One of those cases was the Bank of Acadia, which suspended in April, 1873, and where the amount involved was only $106,914. The other case was that of the Farmers Bank, which suspended in December, 1910, and where the amount involved was about $2,000,000.

I wish to point out that during the last fifty years or more there has been no case of a bank failure where the depositors have lost all that they had in the bank, except the case of the Farmers Bank. I want to state also this, that so far as my information goes, and I believe it is correct, the only case in the history of Canada where the certificate was granted to a bank in violation of the provisions of the Bank Act was in connection with the Farmers Bank.

Earlier in the session I placed on the order paper certain questions which in due course were answered by the hon. Minister of Finance (Mr. Robb). One of these questions read as follows:

Did parliament vote money for the relief of Home Bank depositors in recognition of any legal or moral claim of such depositors on the government?

The answer to that question was as follows:

The act stands on the statutes as a relief measure. It will be recalled that the House adopted a report of the banking and commerce committee to the effect that it considered the investigation established "a moral claim in equity for compensation."

The Home Banklopened its doors for business on the 2nd of January, 1906, and suspended on t'he 17th of August, 1923. The Farmers Bank opened its doors on the 2nd of January, 1907, and suspended 'ou the 19th of December, 1910. The Home Bank was therefore in operation for 17 years and 7| months, while the Farmers Bank was in operation for less than four years. When the Home Bank

failed there was on deposit in savings and current account a little over $15,000,000. When the Farmers Bank failed there was on deposit about $2,000,000. In the case of the Home Bank the depositors received 25 per cent from the liquidator, and I am informed, whether correctly or otherwise, that there is a likelihood of their receiving eight or ten per cent more, which I hope may be the case; but in addition to what they received, and may receive, from the liquidator, the depositors were granted under the legislation that was put through parliament by the government an additional 35 per cent, so that these depositors have been recouped to the extent of 60 per cent, whereas, as I stated before, the Farmers Bank depositors have received nothing whatever,

When the Home Bank failed representations were made to the government asking for an investigation, and in February, 1924, Mr. Justice McKeown was appointed to investigate the Home Bank failure. He made his report to parliament in June of that year, and in July of the same year, 1924, the banking and commerce committee made its report, which was approved by parliament. In June, 1925, the Finance minister moved the House into committee on a resolution to pay $5,450000 to the creditors of the Home Bank for moneys on deposit or in current account. He said that this would provide for a partial pajunent of 35 per cent of deposits, and was in pursuance of the approval by the House of the report of the banking and commerce committee, which was influenced by the report of Mr. Justice McKeown that the depositors had a moral claim, or to use the exact phraseology of the Minister of Finance, "a moral claim in equity" against the government.

What is the basis of that moral claim? It can rest, it seems to me on only one foundation. The basis of the moral claim placing moral responsibility upon the government for loss must necessarily rest upon error of judgment or negligence on the part of the Finance minister or of the Treasury Board. That is the basis, and the sole basis, it seems to me of the moral claim and of the government's responsibility. My resolution asks for the same measure of relief to be granted to those who lost through the failure of the Farmers Bank as has been granted to those who lost through the failure of the Home Bank. It is therefore up to me to establish an equally strong basis of moral claim, and to do so I must establish it on the same foundation, in fact, on the only foundation there is, namely upon an error of judgment or negligence on the part of the Minister of Finance or the Treasury Board.

Farmers Bank Failure

What constitutes negligence?? An act may not be a negligent act at one time under certain circumstances which would certainly be an act of negligence under different circumstances. A person may be driving along the road at a moderate rate of speed, unaware of certain danger, or unaware of the fact that a certain part of the road is unsafe. He meets with an accident. That person is not guilty of negligence, but if that same individual driving at the same rate of speed has been made aware, not by one warning or two warnings, but by half a dozen warnings, that this particular spot is dangerous, and then meets with an accident, I think if he sued for damages any court would say that he had contributed, by his negligence, to the accident which had occurred. Looking at it in that light, I want to place before the House certain facts which I think should be considered in regard to this matter. There are, it seems to me, certain reasons why the Minister of Finance, the Hon. Mr. Fielding, should have been particularly careful before issuing the certificate to the Farmers Bank. As I said a moment ago, a certain number of failures had taken place. Some of these were of recent occurrence. Some half a dozen had occurred between 1896 and 1906. Mr. H. C. McLeod, general manager of the Bank of Nova Scotia, said:

Most if not all of these failures were fraudulent, and it is now plainly evident that a few hours' examination by a skilled banker would have disclosed an insolvent condition in any one of those banks years before they collapsed.

There were a number of failures which had occurred in recent years. For instance, there was the failure of the Banque Ville Marie, which occurred in 1899, but it was only wound up in 1905. Then there was the failure of the Bank of Yarmouth in 1905. This was pretty close to the time when the certificate was given to the Farmers Bank. Then the Ontario Bank closed its doors or suspended in October, 1906, the very month when Travers was making overtures for a certificate. It seems to me that these failures, occurring so recently, should have been a warning to the minister to be especially careful. Another matter of importance is this: the Farmers Bank was incorporated in 1904. The promoters started to work to get the money necessary to obtain the certificate. They failed and came back in 1905 asking for a renewal of their charter. Again they worked for a year and failed, and came back again in 1906, and at that time the Hon. Mr. Fielding 32649-94

expressed his opposition to the granting of the charter, and what reason did he give? He said:

My view was that the fact that they had not been able to organize promptly indicated that they were having difficulty, and I confess that from the beginning I did not quite like the name "The Farmers Bank".

The impression which he had at that time certainly was not very favourable; to the granting of a certificate to this bank, and his own impression, it seems to me, should have warned him to be particularly careful, in view of the fact that Travers and those connected with him had been working for two years and had failed to find the necessary money which would have enabled them to obtain a certificate.

On November 30, 1906, the very day that Travers came for the certificate, Mr. Fielding had a talk with him and brought up the matter of the Bank Act being evaded by taking notes of subscribers and getting them cashed. Mr. Travers assured him that nothing of that kind had been done. On the assurance of Mr. Travers that there was nothing in the rumour so far as the Farmers Bank was concerned, Fielding handed over to Travers the certificate, asking him at the same time to write him, putting in the form of a letter the assurance which he had given him verbally. Travers goes out of the office with the certificate in his pocket, goes to an hotel and writes a letter along the line of the conversation he had just had with the Minister of Finance. When the Farmers Rank failed representations were made from various parts of the country asking for an investigation. On January 7, 1911, a large number of shareholders demanded that a royal commission be appointed to investigate the affairs of the Farmers' Bank. On January 23 of that year Sir George Foster, speaking in the House said:

The Treasury Board had an application before it. The fundamental conditions were the subscription of $500,000, and the putting up and paying in of $250,000 of actual cash.

Neither the one nor the other was done, and the only way that the $250,000 came to be paid in at last was that some men, the bank not being in existence, not having running power, borrowed the money. On February 18, 1911, Mr. Travers was taken from prison to give evidence before the court, and on that occasion he swore that the chief Liberal whip, Mr. Calvert, had gone with him to the Finance minister to urge the granting of the certificate, and on his intervention had been successful. On the 23rd November, 1911, the government refused the request for a royal

Farmers Bank Failure

commission to investigate. On the 15th March, 1911, Mr. David Henderson, member of parliament for Halton, which county was hit the hardest of any, moved for a royal commission to investigate. This motion was voted down on a straight party vote of 97 to 62. In that debate Mr. Fielding said:

Undoubtedly that certificate, as has since been ascertained, was obtained fraudulently. The minister was deceived, the Treasury Board was deceived, the whole country was deceived by the whole proceedings of the Farmers Bank.

Then on the 7th May, 1911, Mr. Haughton Lennox, a member of parliament, moved the following resolution:

This House regrets that in permitting the Farmers Bank to commence and to continue in business the Minister of Finance and the Treasury Board failed to exercise such proper care and to take such reasonable precautions as were necessary to prevent evasion of the law and to protect the public interest.

That motion was defeated by a vote of 97 to 63. Then in the election of 1911 the Liberal party issued a pamphlet in regard to this Farmers Bank matter, and in that' pamphlet they gave this as one of the reasons why the certificate was granted: that at the time of the application some $40,000 had been spent in promotion and if the certificate had been refused the shareholders would have lost a part of that money. They also said-and I put this on record, because it is exactly in line with the expression of opinion given by Mr. Fielding before the House-that if the government had refused to grant the certificate to the Farmers Bank their political opponents would have charged them with treating farmers more unfairly than other people. So that it appears there was a political reason for the granting of the certificate.

I pass now to what took place after 1911, when the Borden government came into power. Sir Robert Borden introduced a government bill for the relief of the Farmers Bank depositors. That bill passed the House of Commons. At that time the majority in the Senate was Liberal. The Senate saw fit to defeat the bill. May I say in connection with the bill iput through very recently in regard to the Home Bank depositors that the Conservatives were in a majority in the Senate, and if they had taken the same course as the Liberal majority did in connection with the Farmers Bank bill that bill would never have become law.

In 1912 the Borden government appointed the late Sir William Meredith, then Chief Justice of Ontario, to investigate the failure of the Farmers Bank. In his report Sir William said:

That the Treasury Board was induced to give its certificate by false and fraudulent representations on the part of Travers;

That as to the representations made to the Finance minister by E. B. Osier and others, it was in my opinion, incumbent on the Treasury Board to have investigated the charges that had been made before coming to a conclusion as to whether or not the certificate should be given.

His findings show conclusively that the conditions prescribed by the Bank Act as precedent to the issuance of the certificate by the Treasury Board had not been complied with, that the certificate had been obtained by fraud and dishonesty, and that the Treasury Board was negligent in issuing it. It will be observed that he said in his report:

It was incumbent upon the Treasury Board.

That means it was the duty of the Treasury Board, which duty was not fulfilled. I submit, Sir, that a duty unfulfilled constitutes negligence, especially if that failure of duty is in the face of repeated warnings.

Let me quote a remark made by Sir Wilfrid Laurier to which I would direct the particular attention of all hon. members. It will be found in Hansard of 1911 at page 5400:

This country is broad enough and rich enough to correct an error of the government, if an error has been committed.

That, Mr. Speaker, is a good principle to follow, for no party and no individual gains anything by refusing to correct a manifest fault. But while Sir Wilfrid Laurier admitted the principle that the country should make good where error was shown, he refused to permit an investigation to find out whether or not an error had been committed. Sir William Meredith followed explicitly, almost literally, what Sir Wilfrid Laurier had said. Sir Wilfrid then said that he would admit moral responsibility if negligence could be shown. Let me quote his own words, that they may impress themselves upon hon. members. They will be found in Hansard of 1911 at page 3659:

If there was negligence on the part of Mr. Fielding, the question of how far the government would be responsible would be u very different question. The government would be morally responsible, if not otherwise. If a minister of the crown has made an error of judgment, it is simply a question of his having made a mistake, which has no legal or moral consequences. It is always a serious charge that there has been an error of judgment, but we are all liable to mistakes; and after all-

I entirely concur with this, as I am sure the House will.

-and after all if the only charge that can be

made against a minister of the crown who has been fifteen years in office is that upon a certain occasion he committed an error of judgment, the charge is but a minor one.

Farmers Bank Failure

I would ask hon. members to note particularly the first sentence, because Sir Wilfrid Laurier there admits the responsibility- if negligence on the part of the Finance minister or the Treasury Board can be shown. I direct attention to that sentence because it was the basis of the action taken by the Borden government. And necessarily it is the basis of this resolution that negligence should be shown.

Now let us examine the facts a little more in detail. I have already quoted Mr. Fielding's admission that he was deceived. I will add some words from Sir Wilfrid Laurier to the same effect. He stated from his place in the House:

That the Minister of Finance and the Treasury Board have been deceived was admitted long ago. When Mr. Travers declared that the shareholders had put into the treasury of the bank $250,000, that was deceit to the extent of about $80,000. That is admitted.

These words of Sir Wilfrid Laurier are the basis for the general admission by himself and his followers of what they are pleased to call an " error of judgment" on the part of Mr. Fielding. But the right hon. gentleman argued that that bad nothing whatever to do with the subsequent loss. In that regard I wish to quote what was stated by Sir Robert Borden, as recorded in Hansard of 1911 at page 5397:

The Prime Minister having put a very relevant question as to whether or not this fraud had anything to do with the subsequent loss, I would ask him: Does he consider the

Department of Finance or the government was doing its duty when it permitted the man, who according to statements of the president of the Canadian Bankers Association had perpetrated a fraud, by means of perjury, upon the department, to remain at large and to continue his operations among the various communities of this country and no investigation instituted. Had that nothing to do with the loss?

That question, by the way, was not answered by Sir Wilfrid Laurier.

I have said, Sir, that it is incumbent upon me to establish negligence on the part of the Treasury Board or of the Minister of Finance, all the more so because of the statement of Sir Wilfrid Laurier that if negligence could be shown he would admit the government's responsibility. The Farmers Bank was incorporated in 1904. By acts passed in 1906 and 1996 the time for issuing the certificate was fixed at not later than January 18, 1907. Therefore there was no good reason for unusual haste in issuing the certificate on November 30, two or three days after the application for it had been made. I refer to section 13. of the Bank Act, which requires 32649-94J

$500,000 to be subscribed. I would ask hon members to mark these words:

To be bona fide subscribed before the meeting of the subscribers is called.

Before the meeting of the subscribers is called, the act requires that $500,000 shall be bona fide subscribed. Notice of the meeting which took place on November 27 appeared first in the Toronto Globe of October 22. Therefore, according to the Bank Act, previous to or by October 22, $500,000 should have been bona fide subscribed. I put these questions to all reasonably minded members: Was section 13 of the Bank Act complied with? There is only one answer: section 13 was not complied with. Whose duty was it to see that section 13 was being complied with? There is only one answer: It was manifestly the duty of the Finance minister and the Treasury Board. If, then, that duty was not performed, was there negligence? Do not the circumstances indicate that there was negligence? Sir William Meredith says that if October 22 was the determining date, then the $500,000 was not bona fide subscribed. Whose business was it to determine the date? Can any person deny negligence in that regard? The application of Travers on November 27 for the certificate was accompanied by what purported to be a list of shareholders together with a statutory declaration of Travers in which, referring to the list of shareholders, he states that it is a list of the subscribers to the capital stock of the bank, correctly setting forth as to each subscription the name of the subscriber, his address, the number of shares subscribed for by him, the amount of such shares, and the amount paid in thereon. He also declares that each of the subscriptions is a bona fide subscription to the capital stock of the bank. Was that list true or was it false? That is a fair question. There is no doubt about it, the list was false; and if it was false the certificate could not issue. Whose duty was it to determine whether the list was true or false? Again, I say, that duty devolved undoubtedly on the Minister of Finance and the Treasury Board. Was there negligence? I maintain there was.

Consider for a moment the $250,000 deposit. On October 6, the provisional directors gave Travers a power of attorney, and on October 9, Travers borrowed from the Trust and Guarantee Company $80,000, repayable in a month, on the security of promissory notes of subscribers amounting in the aggregate to $100,955, agreeing to pay interest on the loan at the rate of 10 per cent per annum and a bonus of $1,000, and on October 23, the day

Farmers Bank Failure

after the issue of the notice calling the meeting, he borrowed from the same company $20,000 repayable on demand on the security of promissory notes of subscribers amounting to $26,500 and certain shares of loan companies, valued at $20,500, which had been transferred to the bank in payment of subscriptions, agreeing to pay the same rate of interest and a bonus of $500. Again, I ask, was this in accordance with the Bank Act? The answer most positively is no. Whose duty was it to look into this matter? I say it was the duty of the Treasury Board and of the Minister of Finance. Was that duty performed or was it not? The answer is, it was not performed. If that duty devolved upon them and it was not discharged, I ask, was there negligence? I again establish that there was.

What had transpired that- should have caused the Hon. Mr. Fielding to exercise special care? He said himself, as recorded in Hansard of 1911, at page 2679:

There was gossip abroad concerning the Farmers Bank. I was well aware of it.

But, Sir, I submit there was a good deal more than gossip. The Monetary Times says that the Finance department had received six different warnings. Certain it is-this is not and never has been disputed-that on October 8, 1906, Mr. Leighton McCarthy wrote to Mr. Fielding that a number of subscribers for shares in the Farmers Bank would dispute the bona fides of the subscriptions. He said:

Grave conditions have arisen which require careful consideration before the Treasury Board grants the certificate to the organizing of the bank.

On October 11 he sent a telegram again warning the Minister of Finance, and on October 19 Mr. McCarthy wrote the minister formally, asking that the Treasury Board stay action on the application of the Farmers Bank for a certificate. There are three distinct warnings, not one of which has ever for a moment been disputed by any person at any time, and all of these before the certificate was issued. We have evidence too that Mr. Henderson of Halton went to the Minister of Finance and warned him that the provisional directors were not carrying out the spirit and intent of the Bank Act. He had himself seen notes which were endorsed by provisional directors for the purpose of raising money, presumably to provide the $250,000. Later the Minister of Finance said1 to Mr. Henderson: "Henderson, I don't see why you should worry over this. You are not responsible. Besides, you did warn the government." I also call the attention of the House to an-

other warning, and I quote from Hansard of 1911 at page 10,472.

Mr. Osier said:

After the deposit had been made with the Receiver General and before the certificate had been issued, I met the Minister of Finance and had a talk with him about the Farmers Bank. I told him that it was a fraud, that the people connected with it were not worthy, and that the method taken for obtaining the necessary deposit was absolutely illegal. I knew that of my own personal knowledge, because I knew where application had been made to borrow the money on these endorsed notes; I did not know at the time from whom. I saw that the Finance minister was under a good deal of anxiety about the condition of affairs. The matter ended there so far as I was concerned until some time afterwards, when I learned that a certificate had been issued, and I again spoke to the minister, and said I was exceedingly sorry that the government had issued the certificate.

Further on he observes:

It was notorious that the men at the head of the bank were not worthy .... Further than that, I may say that I had a conversation with my hon. friend from Halton (Mr Henderson), and he told me he had made the same represenation to the Finance minister.

Surely words like these coming from a man of the standing of Mr. Osier cannot be set aside. They constitute a warning which the minister should have heeded, and in failing to take cognizance of such a warning he was guilty of negligence. Mr. Fielding wrote Travers who assured him that everything was all right. Of course Travers would say so; he was a crook and he would not hesitate to give that assurance. Let me now quote from a statement of Sir William Meredith:

That in thus dealing with these notes the provisional directors and Travers were guilty of a breach of trust does not, I think, admit of doubt, and for the manner in which the money borrowed was applied there was neither justification nor excuse.

Mark these words;

I very much doubt whether in the circumstances it would have been right to have depended on the word of Travers, even if he had given the assurance for which the minister had asked. The information which had been conveyed to the minister had come from gentlemen of standing, and if it was accurate the declaration of Travers had made was untrue and it would seem to have been almost an idle thing to ask for an assurance that there was no foundation for the statements that had been made to the minister from the very man whose honesty was in question. . . . It is true that, as Mr. Fielding stated in evidence, Travers, so far as he knew, was a reputable banker; but that was not in my opinion, a sufficient reason for not haying instituted an inqury as to the matters which had been called to his attention. Such an inquiry could easily have been made, and the delay .occasioned by it would have been inconsiderable, and such an inquiry would, un-

Farmers Bank Failure

doubtedly, have resulted in the discovery of the manner in which the $100,000 had been raised and in the refusal of the Treasury Board to give the certificate.

I quote further from Sir William:

I do not suggest that the minister would have been justified because of the information conveyed to him in recommending that the certificate should not be granted or that the Treasury Board because of it would have been justified in refusing to grant it. But having received the information it was in my opinion incumbent on the Treasury Board to have investigated the charges that had been made before coming to a conclusion as to whether or not the certificate should have been given.

I submit in all reason that failure to investigate under these circumstances constitutes negligence on the part of the Minister of Finance and of the Treasury Board. That brings us to November 30. On that date, the very day Travers obtained the certificate, Sir Edward Clouston, the president of the Canadian Bankers' Association, wrote the deputy minister as follows:

In connection with the application of the Farmers Bank of Canada for the usual certificate from the Treasury Board, I have reason to believe that the money lodged or to be lodged at Ottawa as stock subscriptions cannot be regarded as paid up capital, and that a large proportion of the amount necessary to the obtaining of a certificate is a loan made upon the promise of its payment when returned by your department.

Permit me to request, if only for the protection of the public, the Treasury Board will exercise its rights to refuse to issue the certificate if it thinks best so to do until a thorough investigation has been made into the circumstances stated herein.

Some person may say "Oh, but that was on November 30. and it is only reasonable to suppose that as this letter was dated November 30 the minister did not receive it until the next day, and the certificate was issued on November 30." Very well, let us accept that if you like. This, however, is true-that the bank did not open its doors or commence business until the second day of January, 1907, one month after this letter had been obtained from the president of the Bankers Association, and just at the time that the certificate had been handed out to Mr. Travers. Taking that in connection with the other warnings I submit that the Finance minister should have gone to the telephone, got into communication with Travers and said: "Hold on, I do not want you to go ahead until I have some further interview with you, I want to investigate this a little further. I have received certain representations from the head of the Bankers Association, and I ask you to return that certificate, or to suspend any action upon it until I have

had further time to investigate." If Mr. Travers then undertook to say: "I have the certificate and I am going ahead," then I submit the Minister of Finance had it within his power to tell Mr. Travers that he would take such steps to protect the public as were in his power, and he would have prevented the subsequent deplorable occurrences.

That brings us up to the time the bank had started business. Now I should like to refer to another matter a little later which shows that the government had further warning which should have caused action on the part of the Treasury Board and the government even after the bank started to do business. The bank opened on January 2nd, 1907 and on April 17, three months and a half after they had started to do business, the manager of its branch in the town of Milton, Mr. Vankoughnet, wrote as follows to the Deputy Minister of Finance:

Will you kindly give me your opinion as to the following: Our general manager (Mr. Travers) sends to the different branches lists of notes given in payment of our capital stock. These notes he makes the managers put through as discounts, crediting the amount to head office. This is figured in the government return as paid up capital and circulation issued to that amount. If I read the Bank Act correctly, section 76, he is asking us to do what is not right. As I do not wish to do anything contrary to the law, I should be much obliged if you give me the ruling on it.

In reply to this letter, Mr. T. C. Boville, Deputy Minister of Finance, writes as follows on May 1, 1907:

While it is not deemed expedient to enter into correspondence at this stage, the matter referred to by you is of sufficient importance to warrant further inquiry. This will shortly be made. I should like to have a copy of any of the notes.

On May 3rd Mr. Vankoughnet sent him one of the notes, and in the accompanying letter he declared that "the amount under discount at this office April 30th was about Sill,885".

Well, Mr. Travers was asked to make a return covering this point, and he not only wrote but gave his oath. He swore that this was the state of affairs:

The portion of the $375,473 paid up capital of the bank as per return of March 30th, 1907, represented by promisory notes of the shareholders held by the bank amounts to $59,110.

So that Travers swore that the total amount of these notes held anywhere in Ontario or in Canada was only $59,000, while the minister had under his hand a statement from the manager of one of the branch banks-and a small one at that-showing that in that particular branch alone there was $111,885. Had

Farmers Bank Failure

who had subscribed nothing at all, was put down as subscribing $10,000. All Mr. Fielding had to do was to look at the list of subscribers and he would have seen that these men figured on the list as bona fide subscribers of the bank.

Mr. Travers told Mr. Fielding that he was authorized to ask for the certificate. Why did the minister not ask Mr. Travers to produce his authorization? I think he neglected an opportunity when he did not ask for it. Had he asked for it Mr. Travers could not have shown it., because he never had any authorization to ask for the certificate. If Mr. Fielding had asked to see the minute book of the provisional directors, he would have found there enough evidence to stop the whole thing. If he had asked Mr. Travers to show him the stock list as signed by the subscribers-and surely that was an easy thing to do-and had compared it with the list which was presumed to be a copy of the original list, he would have found at once that Travers had placed in his hand a fake list. There is no doubt about that, and I contend that that is an indication of negligence on his part. The minute book would have shown the Minister of Finance that the directors had collected from subscribers $210,000 in cash, and had paid out $41,000 improperly for commissions and expenses. It would have shown that Travers had borrowed $80,000 on subscribers' notes, all in contravention of the Bank Act. The Treasury Board had most direct and positive notice of the frauds. They had Henderson's warning; they had E. B. Osier's warning; they had McCarthy's letters; they had McCarthy's suit before the high court; they had the warning of the Canadian Bankers' Association; they had Vankoughnet's letter of April, 1907, and they had the letters from Hotchkiss, the superintendent of insurance for New York state. Was there or was there not negligence in paying no attention to all these warnings and allowing the certificate to be handed out?

This parliament, Mr. Speaker, has at different times voted large sums of money for the relief of persons in distress. I remember that on one occasion this House voted a sum, the amount of which I now forget, for the relief of those who had suffered in Paris from the floods. We have also voted money to relieve those who suffered from disasters in Italy, in Newfoundland, and in San Francisco. Why did we do this? Those who had suffered in these different cases had no claim upon the parliament of Canada except the claim of common humanity and common citizenship in a broad sense, but we voted the money of this country to these people who had suffered

through no fault of their own. I am asking this House now to grant relief, not to people who live in other countries and have suffered loss through no fault of their own, but to farmers in various parts of the province of Ontario who through no fault of their own suffered loss through the failure of the Farmers Bank, and who feel embittered because they feel that in a measure at least the loss that they sustained was dtue to neglect upon the part of the government before the certificate was granted to the bank. I might add that only a short time ago parliament voted an annuity of $10,000 to the Hon. W. S. Fielding. There was no opposition to that. I was not a member of the House at the time, but I took occasion, as a former member of parliament, to write to the press in my part of the country at that time commending the government for this recognition of a man who had given such long and distinguished service to his country as Mr. Fielding had, but it is only natural that those who lost their all in the failure of the Farmers Bank, and in most oases the losses fell upon men in very moderate circumstances who could ill afford to lose, should have some little feeling of resentment or bitterness against the man who was at the head of the Treasury Board at that time. That feeling of bitterness I venture to say, would not be lessened by the fact that parliament saw fit to grant to him an annuity of $10,000 for the rest of his life.

I appeal to the government to do this act of justice, not only because it is an act of justice to those who suffered, but because it is due also, I think, to the Hon. W. S. Fielding, for fifteen years Finance minister and identified with the public service of this countiy for so long, in order to remove from the hearts of those who suffered the bitterness which it is only natural they should feel against those who were in charge of affairs at that time. I appeal also on the ground of compassion, because I take it that relief was granted to the Home Bank depositors on two grounds; first the moral claim in equity-I am not sufficiently versed in the law to know exactly what that means, but I know what you are driving at anyway, that there was a moral responsibility resting on the government 'because of negligence or error of judgment upon the part of Sir Thomas White and the Treasury Board in connection with the Home Bank, and that I believe was the main ground for the relief that was granted-and secondly, the compassionate ground. That would apply also to the loss through the failure of any bank. It applies with particular force in this case because, I repeat, of all the banks that have

Farmers Bank Failure

failed in Canada since more than fifty years, the Farmers Bank is the only one where the depositors have received nothing whatever from the liquidator winding up its affairs.

I therefore move this resolution, Mr. Speaker, and beg most earnestly that the government will give it their very serious and favourable consideration. The amount involved is very small. Following the line adopted in the case of the Home Bank and the restrictions placed on the relief granted in that case, I venture to say, without being in a position to speak positively that the amount involved would perhaps be not more than $300,000. I have placed this matter before the government and before parliament because I felt it my duty to do so. There were a number of losers in my county, where the loss amounted to about $125,000. That is sufficient warrant for me, as the representative of that constituency, in appealing for the favourable consideration of this resolution by parliament.

Topic:   FARMERS BANK FAILURE
Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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CON

Thomas Hubert Stinson

Conservative (1867-1942)

Mr. T. H. STINSON (Victoria, O.):

Mr. Speaker, I desire to support the resolution moved by the hon. member for Frontenac-Addington (Mr. Edwards), not that I think the principle is a sound one, but on the ground that we should hand out even justice to all. This House has granted relief to the depositors of the Home Bank, and that relief was granted on two grounds: first, to ameliorate the hardship which had been created by the failure of that bank, and secondly, on the ground that had the government acted earlier when rumblings were heard as to the unsatisfactory condition of the bank the loss to the depositors would not have been so great. Parliament, after due consideration, of both grounds, granted relief, and it was a godsend to many people in this country who had lost their all in the wreck and were at an age when their earning power was gone. If we were justified in 1925 in giving consideration to the depositors of the Home Bank, are we not justified in giving consideration to the depositors of another bank if similar conditions exist? In this case we claim that similar conditions do exist, on both grounds, on the compassionate ground, and on the ground of a moral claim for relief. If we treat one set of persons in Canada in a given way so far as the public treasury is concerned, are we not bound to treat another set of persons in identically the same way when conditions are the same?

Let us look for a few moments at the conditions surrounding the failure of the Farmers Bank. It suspended payment on the 19th day of December, 1910, with savings deposits amounting to $989,300. The bank was incorporated in 1904 by 4 Edward VII, Chapter 77, with a share capital of $1,000,000. Under section 16 of the Bank Act, unless it received its certificate to do business within one year, all its rights lapsed. The time for obtaining this certificate was extended in 1905, and again in 1906.

To obtain its certificate the bank must have $500,000 subscribed capital, of which $250,000 is paid up. This bank had great difficulty both in getting subscriptions and in getting payment for the part that was subscribed. Instead of collecting the $250,000 in cash, as it should have done under the provisions of the Bank Act, notes were taken from subscribers, and upon these notes moneys were raised to make the necessary deposit with the Dominion treasury. It was on the granting of that certificate allowing the bank to commence business that the obligation of the government rests.

A royal commission was appointed in 1913 to investigate the facts in connection with the organization and failure of the Farmers Bank. Sir William Ralph Meredith was appointed a commissioner and the commission directed him to investigate all material facts relevant to:

(a) The incorporation by act of parliament and the organization thereof.

(b) The application for and the giving by the Treasury Board of the certificate permitting the banls 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 subcribed and paid up, the causes of suspension and failure. the extent of the liabilities and the value of the assets.

A deposit, was made with the government on 23rd October, 1906, of $250,000. A meeting of the board of directors of the bank was held on the 22nd November, 1906, to pass resolutions authorizing them to apply for a certificate to commence business. The application was made on the next day to the Treasury Board. The Treasury Board met on the 30th November, 1906, and the certificate was authorized and issued the next day. The bank opened for business on 2nd January, 1907, and suspended payment on 19th December, 1910. The prospectus which was issued and filed in March, 1906, contained the names of various persons whom the promoters considered would act as directors if elected. Four of these men gave evidence before the royal commission and stated that no such consent had ever been given by them. The applications for stock provided for the payment of $10 down, $20 on allotment, and the remainder in seven monthly payments of $10

Farmers Bank Failure

each. In a number of cases promissory notes were given payable twelve months after date to-the Farmers Bank. In many cases no payments were made with the application or upon allotment. Chief Justice Meredith, at page 6 of his report, says:

It is not open to question that $500,000 of the capital stock had not then been subscribed, and that $250,000 had not been paid by the subscribers.

On the 9th day of October, 1906, Travers borrowed from the Trusts and Guarantee Company $80,000, repayable in a month, on the security of promissory notes of subscribers amounting in the aggregate to $100,000, upon which he agreed to pay interest at the rate of ten per cent and a bonus of $1,000. On the 23rd October, 1906, he borrowed from the same company a further $20,000, repayable on demand, on the security of promissory notes of subscribers, amounting in the aggregate to $26,500, agreeing to pay a bonus of $500.

Chief Justice Meredith further says that in dealing with these notes the provisional-directors and Travers were guilty of a breach of trust for the manner in which the money was borrowed and applied and that there was neither justification nor excuse for it. At page 8, he says:

. My conclusion on this branch of the inquiry is that the Treasury Board was induced to give its certificate by false and fraudulent representations on the part of Travers, and that if the facts I have mentioned as to the way in which the $250,000 was made up had been disclosed, the certificate of the Treasury Board would not have been given.

He further states that if the information which was given to the minister verbally by Sir Edmund Osier and Mr. David Henderson, to the effect that the money had been borrowed and had not been paid by subscribers had been disclosed to the Treasury Board, in his opinion the certificate would never have been granted.

Sir Edmund Osier was examined before the commission and I read the following from his evidence:

Q. What was your interview with him, what occurred during that interview?-A. I told Mr. fielding that I had knowledge that the money that was deposited there was practically obtained by false pretences, that it was not bona hde money obtained by stock subscripions.

Similar evidence was given by Mr. David Henderson, and by the letter which was read by my hon. friend from Frontenac, written by Leighton McCarthy, setting forth the full facts, a few days before the deposit was made. If the further information as given by Mr. McCarthy, who was acting in the

matter for certain disgruntled shareholders, or those who had given subscriptions, had been acted upon then the certificate would never have been granted. Chief Justice Meredith finds that the officials of the Department- of Finance appear to have treated Mr. McCarthy's letter as if it had never existed. He further states:

It is true that, as Mr. Fielding stated in evidence, Travers, so far as he knew, was a reputable banker, but that was not in my opinion a sufficient reason for not having instituted an inquiry as to the matters which had been called to his attention. Such an inquiry -could easily have been made, and the delay occasioned by it would have been inconsiderable, and such an inquiry would, undoubtedly, have resulted in the discovery of the manner in which the $100,000 had been raised and in the refusal of the Treasury Board to give the certificate.

It would appear therefore that if the certificate had never been granted the depositors would not have lost their money, because the bank could never have started operations without a certificate.

The above facts have been substantiated by the sworn testimony taken before the commission. This House of Commons granted a measure of relief, but the bill was defeated in the Senate. If you consider the other phase of the matter, with reference to compassionate allowance, it may be said that this matter is now some sixteen years old and that it is too late to grant relief on that ground. But is that a sufficient answer to the claim? If there are a number of people in this country who lost their all in the wreck of the Farmers Bank who since that time have been reduced to a state of penury, and are still living in that condition, then is it too late for this parliament to grant relief? I say not. We are asking for just the same consideration for the depositors in the Farmers Bank as was meted out to the depositors in the Home Bank. I know a -man some sixty-eight or sixty-nine years of age who owned his home, and who sold out a little business two days before the suspension of the Farmers Bank. He deposited all his money in the Farmers Bank, and when the bank failed he had not a dollar left. His money was gone and his earning power was gone. Since that time he has tried to support himself by such little jobs as he could get, and his family are now taking care of him. Surely that case is worthy of consideration. I ask that relief be granted to those who are in straitened circumstances, to those deserving cases. If we take thirty-five -per cent of the total savings on deposit, $989,300, it will amount to $346,255. There

Farmers Bank Failure

are no doubt a great number in that class, who would not and could not make the application on the lines laid down by the legislation in regard to the Home Bank. The result would be that only a small sum would be required to take care of the needy cases and those in straitened circumstances.

The Farmers Bank was conceived in iniquity and born in sin and its very name appealed to citizens of limited means. The business man, the manufacturer, the professional man, had his bank arrangements made; the people who did patronize the bank were those of limited means and they should be given some consideration.

To commence with, a mistake was made in the granting of the certificate. That may be safely assumed without casting any aspersions on the Right Hon. Mr. Fielding. He was a very excellent minister of the crown and is greatly respected throughout the whole Dominion. But with the great pressure of business surrounding him he could easily make that mistake. The evidence does show that a mistake was made in the granting of the certificate, or at least that it was granted without sufficient investigation.

Now, it is never too late to right a wrong, and we are asking only for the same measure of relief in this case as was meted out to the depositors of the Home Bank. Therefore I strongly support the resolution of the hon. member for Frontenac (Mr. Edwards).

Topic:   FARMERS BANK FAILURE
Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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CON

Robert King Anderson

Conservative (1867-1942)

Mr. R. K. ANDERSON (Halton):

Mr. Speaker, as the facts in connection with the failure of the Farmers Bank have been placed before this House so well by the hon. member for Frontenac (Mr. Edwards), and as I drew them to the attention of the House in 1924, and as they were also presented to the House in 1925, I do not think it is incumbent upon me now to reiterate those facts. But I have them under my hand, and they are available to any member who will take the trouble to consult the report made by the commissioner, the late Sir William Meredith, who investigated the failure of the bank.

In my county of Halton a large number of depositors lost about a quarter of a million dollars by the failure of the Farmers Bank, and a good many shareholders also lost their investment and had to pay double liability. It was principally the men from that county who took action against Travers and the directors of the bank, charging them with fraud and misrepresentation in securing the bank's charter. I knew most of them personally. Persons subscribed for shares, although they could not pay for a single share, and they never did pay for the

shares allotted to them. Those who took action against Travers and the directors engaged Mr. Leighton McCarthy to conduct their case, and the Right Hon. Mr. Fielding was notified of the fact. The facts adduced before the commissioner, the late Sir William Meredith, who was appointed to investigate the failure, proved absolutely that the government, through the Treasury Board, had notice of misrepresentation and perjury in connection with, the application for a certificate, and it was acknowledged by that board. The Treasury Board is part of the government itself. The Minister of Finance for the time being is the chairman of the board, and consequently the representations made to it were made to the government itself. Therefore the government, through the Treasury Board, was responsible to the public in seeing that their interests were guarded in granting the promoters of the bank a certificate to carry on operations. It follows that the failure of the Treasury Board-the government-in this respect was negligence of the first degree.

As the charter was obtained by misrepresentation and fraud, it is not surprising that utter recklessness characterized the management of the bank. We know that dividends were paid out of capital. The directors were farmers, the majority of them from my own county-sound business men and successful farmers, but absolutely ignorant of banking, and they had to depend entirely on the advice of the general manager, Travers, who was proven to have perjured himself before the Treasury Board in securing the necessary certificate. The Treasury Board, having been warned of the misrepresentation and fraud practised by Travers, should have refused to grant the certificate.

In 1925 when the grant for a compassionate allowance to the depositors of the Home Bank was passed in this House Mr. Kennedy, the then member for Glengarry and Stormont, moved an amendment for the purpse of granting to the depositors of the Farmers Bank a similar measure of relief. The hon. member for Laprairie-Napierville (Mr. Lanctot) also moved an amendment requesting similar consideration for the depositors of La Banque du Peuple, La Banque Ville-Marie and La Banque de Saint-Jean. These two amendments, however, were voted down by a large majority. I voted against the resolution to grant relief to the depositors of the Home Bank because of the fact that the government had refused to consider the case of the unfortunate depositors in the defunct Farmers Bank.

Now, Mr. Speaker, in this democratic country all the people are supposed to be

Farmers Bank Failure

equal and the humblest subject is at liberty to seek redress at the foot of the throne. Well, parliament is the highest court in the land, and on the occasion to which I refer, had the case of the depositors in these two defunct banks been presented by a couple of members, I am satisfied that the government would not have said to one: "We will give you a certain measure of compassionate relief''; and to the other, "We will not grant you any compassionate relief at all." When members representing the interests of a large number of people come before parliament and present two cases which in every respect are of equal merit, those two cases should receive the same equitable treatment from the government. But the case of the Farmers Bank depositors is eminently stronger than that of the Home Bank depositors. It has been proven to the hilt that if by reason of negligence the government, through the Treasury Board, were responsible to the depositors of the Home Bank, they are in still greater measure responsible to the depositors of the Farmers Bank. On that ground I submit that the government should accept this resolution and give a like measure of relief to the depositors of the Farmers Bank.

There is one other matter that I wish to bring to the attention of the Minister of Finance. Although it is seventeen years since the failure of the Fa'rmers Bank, it is not yet wound up. At least in 1924 no return had been received by the Finance department from the liquidator with regard to the position of the liquidation proceedings, nor had any shareholder or depositor of the bank been notified. On two occasions I wrote the liquidator, but, receiving no answer, I took the matter up with the Minister of Finance, from whom I learned that there is still in the hands of the liquidator about $16,000 which has not been distributed. I would ask the Minister of Finance to look into the matter and request the liquidator, Mr. E. R. C. Clarkson, to have a final accounting made of the affairs of the Farmers Bank.

I support the resolution introduced by the hon. member for Frontenac-Addington (Mr. Edwards). It is one which I think should receive the very sympathetic consideration of the government. We have established the precedent that the depositors of a bank that lias failed because of negligence on the part of the Treasury Board shall receive a compassionate allowance or, as the resolution puts it, that their claim in equity shall be accepted and considered by the government. The government has now an opportunity of doing what is nothing but justice to the depositors

of the defunct Farmers Bank. Although some of them are in their graves they have left dependents who should receive consideration. I know that many of these people were hard hit by the failure of that bank. There was considerable suffering in consequence and I know that in one case at least the man who lost his money lost his reason. I also know that members of the directorate of the Farmers Bank were stripped of every dollar they owned. Men advanced in years have been compelled to work for their daily bread because of the total loss of their funds in the destruction of that bank. These particular depositors would not come in for consideration under this resolution. Having large sums invested in the bank in the way of stock, their double liability consumed the remainder of their capital; and their deposits would be too large to come under such legislation as was passed in this House in connection with the Home Bank failure. I again ask the Minister of Finance to take the matter into serious consideration.

Topic:   FARMERS BANK FAILURE
Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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CON

Hugh Alexander Stewart

Conservative (1867-1942)

Mr. H. A. STEWART (Leeds):

I desire

in the first place to congratulate the hon. member for Frontenac-Addington (Mr. Edwards) on the very able, concise, fair and complete manner in which he has presented the case to this the highest court in Canada. He has done it in a manner worthy of any advocate, although he is not a member of the legal profession. Starting at the beginning he has given only facts established by courts through investigation and set forth in the records, and I am sure that all who have heard his address must admit its convincing character and the strength of the case he has made out. So complete has been his review of the situation that little can be added, and it is therefore unnecessary for me to repeat anything he has said.

It is perfectly clear that the Minister of Finance and the Treasury Board are charged with a peculiar duty in connection with the incorporation of a bank, and we must, I think, come to the conclusion, on the undisputed facts as they have been disclosed by investigation, that in relation to the Farmers Bank that measure of care was not taken which the circumstances required, which the warnings that were given to the Minister of Finance demanded, and which it was undoubtedly his duty to exercise. This bank was certainly not regularly incorporated; it never had a real legal existence; and the irregularity of its existence was brought at a very early date to the attention of the Minister of Finance. But, strange to say, there was no investigation at that time, either by the min-

Farmers Bank Failure

ister or by any official of his department. An investigation would undoubtedly have disci osed that these warnings were substantially true and should have led to such action as would have prevented loss on the part of the depositors. The matter has slept during all these years and is now revived because of the action of the government in connection with the Home Bank; and every fact that can be relied on and cited as a justification for the action of this parliament in relation to the Home Bank exists in this case and applies perhaps with greater force to the Farmers Bank.

It is said that this claim is a moral one.

I do not know of any higher claim than one based on moral grounds. Again, the claim is based on the ground of hardship, and undoubtedly the failure of a bank brings hardship to its depositors. Certainly in this case hardship resulted to a class of depositors who could ill afford to lose their money. The amendment introduced in committee in connection with the Home Bank proposal did not submit to the House, in as full and complete a manner as we have heard unfolded to-day, the situation to be remedied. In fact, the case was not then well made out. Today, however, after listening to the hon. member for Frontenac-Addington I am sure we must all be convinced that he has presented a stronger case for the relief of the depositors of the Farmers Bank than was made out for the relief of the Home Bank depositors. I hope that this matter will reach a- division, if that is necessary, although I should hope that the Minister of Finance would admit the logic of the case and announce on behalf of the government its readiness to grant the same measure of relief to the Farmers Bank depositors as was extended to those of the Home Bank. I am anxious that the question should be disposed of before six o'clock, and for that reason I shall not further take up the time of the House. I shall support the resolution, confident that a stronger case has been made out for these depositors than was submitted in the case of the Home Bank.

Topic:   FARMERS BANK FAILURE
Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Hon. J. A. ROBB (Minister of Finance):

My hon. friend from Frontenac-Addington (Mr. Edwards) who introduced the resolution asked us to consider it fairly and squarely. I think we are all disposed in this House to face issues fairly and squarely, but listening to the hon. gentleman's speech I felt-perhaps it was unintentional on his part, and perhaps I was somewhat sensitive in the matter-that he was not altogether fair to my predecessor, who, as everyone knows has been ill at home in bed for a long time. He is

not here to defend himself, and I did think that my hon. friend was going a little too far in his attack on the Right Hon. Mr. Fielding when he tried to prove to a House composed of members who know very little of this old Farmers Bank question-because it is an old question-negligence on the part of the Minister of Finance of that day. I submit to my hon. friend that a fair reading of the records will go to show that whoever was to blame for the issuing of the charter to the Farmers Bank, it was not the former Minister of Finance, the Right Hon. Mr. Fielding. Why do I say this? Because the records show that on many occasions Mr. Fielding had absolutely refused to give a charter to this bank. Finally the matter was brought before the banking and commerce committee, and notwithstanding the objections of the then Finance minister, Right Hon. Mr. Fielding, the committee decided that there should be an extension of time in connection with the charter of the Farmers Bank. Mr. Fielding pointed out, and very properly so, that he objected, first to this company going on and doing business because he thought the name was intended to mislead people. He objected in the second place to renewing the charter because during the period the company had held it, they had never been able to come up to the necessary requirements. This I propose to prove conclusively to the House a little later. Now a gentleman who was appointed by the government of Sir Robert Borden, a gentleman who for many years was the leader of the Conservative party in the province of Ontario, a gentleman who was recognized as one of the leading jurists of that province, after going very carefully into the questions connected with the failure of the Farmers Bank and very carefully looking up the record, said in the report which I have here under [DOT] my hand that the Treasury Board did all they could do and were in no way responsible for the failure of the Home Bank, nor for giving it a charter.

Topic:   FARMERS BANK FAILURE
Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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CON

Robert King Anderson

Conservative (1867-1942)

Mr. ANDERSON (Halton):

Is it usual

to submit the application for a certificate to the banking and commerce committee, and does that relieve the Treasury Board of responsibility?

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Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB :

I am emphasizing this point

because we are dealing with a familiar story. Sometimes we are told that ministers are a bit aggressive and that they are not quite fair. Sometimes people come before the banking and commerce committee and attempt to overrule the judgment of the Minister of Finance who has all the facts

Farmers Bank Failure

before him and the records go to show that in this case the banking and commerce committee, composed of the representatives of different parties, overruled the Minister of Finance.

Now 1 said a moment ago that I proposed to submit to the House conclusive evidence from Sir William Meredith, and hon. gentlemen can find in sessional paper 153A, the report of this gentleman who was appointed to investigate the affairs of the Farmers Bank. I agree with my hon. friend who moved this resolution, and with the other speakers, that Travers, who was at the head of the bank, was incompetent and dishonest. The records go to show that that statement is correct. But when my hon. friends say there was negligence on the part of the Treasury Board and on the part of the Minister of Finance of that day, the report of Sir William Meredith, appointed by the government they themselves supported, is against any such contention. At page 10 of that report Sir William Meredith says:

I am unable to find that in this there was any neglect of duty on the part of the department, or to see that anything more than was done could have been done.

That is not the statement of a partisan; that is the statement of an independent commissioner, Sir William Meredith, Chief Justice of the province of Ontario, who was appointed to investigate this matter.

Now what is the history of this Farmers Bank?

Topic:   FARMERS BANK FAILURE
Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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CON

Alexander McKay Edwards

Conservative (1867-1942)

Mr. EDWARDS (Frontenac):

Will my hon. friend permit me? What has he to say regarding the quotation I gave from Sir William Meredith's report that it was incumbent upon the Treasury Board to investigate these facts before issuing a certificate?

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Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

Well, I have quoted from the report, and I wish to emphasize the point I am now dealing with in answer to my hon. friend's repeated statements this afternoon, that Mr. Fielding and the Treasury Board were to blame. Against that assertion there is the report of this independent commissioner.

Now what is the story with respect to the Farmers Bank? Its recital may take a little time, but for the information of hon. members who were not in the House then-and there are probably many who have quite forgotten the occurrence-I propose to put on record a statement of the events leading up to the organization of the Farmers Bank. Right here may I say that it was only this after-

noon, listening to hon. gentlemen who were presenting the case, that I realized that one-fourth of the total loss in deposits occurred in one county alone. The Farmers Bank was incorporated by act of parliament in 1904. In 1905 its charter was extended by parliament up to the end of a period of two years from July IS, 1904. In 1906 the charter was further extended by parliament for six months from July 18. The certificate of the Treasury Board permitting the bank to issue notes and commence business was issued on November 30, 1906.

The Farmers Bank suspended payment on December 19, 1910. In answer to my hon. friend from Halton (Mr. Anderson) may I say that E. R. C. Clarkson & Sons were appointed liquidators, and their statement goes to show the State of affairs of the bank as at December 19, 1910. At that time the assets were $2,000,250.05, the liabilities, $2,436,291.98, and the nominal deficiency $436,011.93. From a statement received from the liquidator showing receipts and disbursements for the period between December 10, 1910, and October 31, 1926, the following appears:

Receipts $1,372,829 22Disbursements

1,360,918 48Balance $ 11,910 74In addition to this balance there are assets consisting of $2,117 in the circulation fund and a property under option for $15,000' as to which there is uncertainty that the option will be taken up. The statement issued showed there would be no dividend to general creditors. My hon. friend from Halton says that although it is seventeen years since this bank failed there has been no accounting. I have a memorandum here which shows that on

December 20 last, the liquidator, G. T. Clarkson, received his discharge from the Supreme Court of Ontario, all assets of the Farmers Bank having been realized upon and accounted for. So I imagine the matter has been cleaned up. If there was any other information in the department I should be very glad to give it to my hon. friend.

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Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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CON

Robert King Anderson

Conservative (1867-1942)

Mr. ANDERSON (Halton):

I have a report which shows that in 1924 the balance was $15,951.37. If any statement made since then is in the possession of the minister I should be pleased to have a copy.

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Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

I have no statement under my hand, but I imagine there must be such a statement because of the discharge of Mr. Clarkson with the announcement that all assets of the Farmers Bank have been realized upon and accounted for.

Farmers Bank Failure

In addition to what I have already stated I may say that in 1911, on motion for committee of ways and means, Mr. Henderson, who was then member for Halton, moved in amendment:

That a royal commission should be appointed to investigate the incorporation and organization of the bank, the granting of a certificate by the Treasury Board, and generally to investigate the operation and efficiency of the [DOT] Bank Act.

That amendment was negatived. The trend of the argument was that the Treasury Board should not have issued the certificate, for the reason that the then Minister of Finance had been warned that subscribers were not paying cash, but giving notes in respect of their subscriptions. It was further stated that after the certificate had been issued, the department was warned by the manager of one of the branches of the bank that notes which had been given in reference to subscriptions for shares were being discounted at the various branches of the bank and the proceeds credited to head office.

Mr. Fielding, in speaking to the amendment on the 15th March, 1911, maintained that the time to have stopped proceedings was when the application for the charter was up before the banking and commerce committee. The bank was incorporated in 1904 and received extensions of its charter in 1905 and 1906, notwithstanding the objections of Mr. Fielding. In the latter year Mr. Fielding had opposed the granting of the charter, but the banking and commerce committee permitted a six months' extension, to which Mr. Fielding said that he had probably assented. Certainly if .the banking and commerce committee were unanimous Mr. Fielding was not going to resist it, particularly as it was then represented that the committee were probably influenced by the argument that the country needed more banking capital; that there was a feeling in the country that the old banks had a monopoly of the business, and that if parliament opposed "the efforts of the farmers to have a share of the banking business of the country, you will be met by the cry that parliament is giving the old banks a monopoly." Mr. Fielding took the position, therefore, that:

Parliament is responsible for the granting of the charter and I do not think that any reasonable ground of objection can be taken to the incorporation of the new bank in face of the fact that the incorporation of^ new banks is still regarded as generally desirable.

That was the position taken by Mr. Fielding at that time and I do not .think that can be disputed. Mr. Fielding was in the House at the time and had access to the records.

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Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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CON

Peter McGibbon

Conservative (1867-1942)

Mr. McGIBBON:

Does the minister take

the same attitude towards issuing the certificate as he is taking towards issuing the charter?

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Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

At present I am defending the position which Mr. Fielding took. Mr. David Henderson, who was then the member for Halton and also chief Conservative whip, was a very estimable gentleman. I was in the House with him. It is no wonder that Mr. Henderson was then doing all he could for the depositors in his constituency, because we have the statement to-day from the present member for Halton (Mr. Anderson) that .the deposits in the county of Halton amounted to about $250,000. Mr. Henderson then made the statement that he had warned the minister against issuing the certificate. Mr. Fielding took issue with Mr. Henderson on this, stating that he had searched the file and that no such warning appeared in the record. It was emphasized this afternoon that Mr. Leighton McCarthy had warned the minister that there were irregularities and that a certificate should not be granted to the bank. It is true that Mr. Leighton McCarthy did at one time advise the minister to go carefully; but the records show that Mr. Leighton McCarthy had communicated with the department on behalf of his clients, objecting .to the issue of a certificate on the .ground that notes had been given in respect of subscriptions. Mr. McCarthy's letters were dated October 18 and 19, and on the second of November Mr. McCarthy withdrew his objection.

Topic:   FARMERS BANK FAILURE
Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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CON

Alexander McKay Edwards

Conservative (1867-1942)

Mr. EDWARDS (Frontenac):

Why?

Topic:   FARMERS BANK FAILURE
Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

I have not got the letter.

Topic:   FARMERS BANK FAILURE
Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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CON

Alexander McKay Edwards

Conservative (1867-1942)

Mr. EDWARDS (Frontenac):

The hon.

gentleman will pardon me. He could easily find out. Mr. McCarthy was acting as a lawyer on behalf of certain clients who, because of fraud, were asking to be relieved from their signatures as subscribers. Once he had got his clients relieved, his duty as a lawyer ended. He said: Yes, I do not object now, on behalf of my clients, to your issuing the certificate. I was objecting to it before.

Topic:   FARMERS BANK FAILURE
Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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CON

Robert King Anderson

Conservative (1867-1942)

Mr. ANDERSON (Halton):

He never

withdrew his charge of fraud.

Topic:   FARMERS BANK FAILURE
Subtopic:   MOTION PROPOSING RELIEF FOR THOSE WHO SUFFERED LOSS
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March 23, 1927