April 19, 1932

LIB

John Vallance

Liberal

Mr. JOHN VALLANCE (South Battle-ford) :

In view of the announcement appearing in the western press, particularly in the Saskatoon Star of April 15, which in big red letters says "government to create marketing board," I would like to ask the Prime Minister or the Minister of Agriculture if it is the intention of the government to bring down legislation this session for the creation of such a board.

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Right Hon. R. B. BENNETT (Prime Minister) :

The matter is under consideration.

TECHNICAL EDUCATION On the orders of the day:

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LAB

James Shaver Woodsworth

Labour

Mr. J. S. WOODSWORTH (Winnipeg North Centre):

I would like _ to ask the

Minister of Labour whether it is the intention of the government to implement legislation Of last year with regard to grants to the provinces on account of technical education.

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CON

Wesley Ashton Gordon (Minister of Immigration and Colonization; Minister of Labour; Minister of Mines)

Conservative (1867-1942)

Hon. W. A. GORDON (Minister of Labour):

The question of appropriating moneys for that purpose is under consideration and the provision that may or may not be made will be made known, I expect, in a very short time.

MANITOBA SAVINGS OFFICE On the orders of the day:

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Right Hon. R. B. BENNETT (Prime Minister) :

I intimated, Mr. Speaker, to the hon. member for Winnipeg North Centre (Mr. Woodsworth) that I would endeavour to-day to communicate to him such information as I had with respect to the Manitoba savings office and the difficulties that were experi-

enced in connection with the payment of depositors.

I was absent during the early part of the month of December last, but so far as I can ascertain, on the sixth day of December last Mr. Bracken, the premier of Manitoba, with Mr. Pearson, one of his officials, saw the Acting Minister of Finance (Mr. Rhodes). And I am informed that on the succeeding day Mr. Bracken and Mr. Pearson saw the general manager of the Royal Bank of Canada in Montreal.

Of my personal knowledge, on my return to Canada a few days before Christmas, on the twenty-second day of December, I saw Mr. Bracken and Mr. Pearson. So far as my memory serves me, it was the first occasion upon which I knew of the serious position of the savings office in Manitoba. It was explained to me at some length; I was told of the number of depositors, the extent of the liabilities and the assets with which claims could be met. My memory is that the Premier of Manitoba concluded to remain in eastern Canada over the Christmas season. On December 28, having returned to Ottawa I again saw the premier and we discussed certain obligations of the province of Manitoba which were about due or shortly would be due in New York, and arranged for a renewal by the payment of a million dollars which we agreed to advance to the province of Manitoba. _

On January 18 I addressed a communication to the premier of Manitoba which I shall read. This is one of the personal letters concerning which privilege has been removed: Ottawa, January 18, 1932. Hon. John Bracken, M.L.A.,

Premier of Manitoba,

Winnipeg, Manitoba.

Hear Mr. Bracken:

Referring to our many discussions regarding deposits in your savings office, our departmental officials have directed attention to the advertisement that has been appearing in the press, looking towards the increase of these savings. In view of the statements of yourself and Mr. Pearson when you were here, I would think this might lead to ia very complicated situation.

Yours faithfully,

R. B. Bennett.

The advertisement in question reads as follows:

The Province of Manitoba Savings Office Invites you to open a Savings Account and offers

Safety, Security and 3i per cent compounded half-yearly.

One Dollar opens an account Hours: 10 a.m. to 6 p.m;

Saturday 9.30 a.m. to 1 p.m.

Manitoba Savings Office

Offices: Donald and Ellice, Winnipeg,

984 Main Street, Winnipeg,

23 Tenth Street, Brandon,

Portage la Prairie, Carmen,

Dauphin, Ethelbert and Stonewall.

Mr. Bracken sent a reply dated January 21, 1932, as follows:

Dear Mr. Bennett:

I have your letter of the 18th instant in reference to provincial savings office. I appreciate the thought which prompted you in writing me about it.

When the advertisement to which you refer came to my notice I immediately got in touch with the trustees. Apparently a number of malicious rumours were being circulated, and having come to their notice the trustees thought the advertisement might have the effect of stopping them. On my suggestion at the time, the advertisement was discontinued.

Yours sincerely,

John Bracken.

On January 26 of this year Mr. Bracken, accompanied by E. K. Williams, K.C., who was acting as his legal adviser, visited the city of Montreal and saw the general manager of the Royal Bank of Canada. I know that from what they told me, because on the succeeding day, namely, January 27, Messrs. Bracken and Williams visited me in the office of the Minister of Finance in the east block of the government buildings. Both made statements regarding the savings offices. They stated they had concluded that under present economic conditions they would close the offices. I must say in view of the information they gave to me I told them I heartily agreed with the action they were taking. They explained to me that all the assets they had with which to meet depositors' claims consisted of exchequer bills and bonds of the province of Manitoba, some bonds of the city of Winnipeg, some Dominion of Canada bonds which were no longer in their .possession but which had been hypothecated by way of option sale to the Canadian Bank of Commerce, with which the account was being carried. They also intimated to me the resources in cash borrowed on Dominion bonds which they had on deposit in the bank with which to meet the claims of those who had made deposits in the savings office. They expressed the fear that a situation might develop which would require action being taken very speedily on their part. They explained that .the banks would lend the money to the Dominion of Canada if we in turn would lend it to them to enable them to meet the claims of depositors which might 'be made. 'I declined to consider that suggestion at the moment, but suggested that they return to Winnipeg; and I have a clear recollection of indicating the character of the statement which I thought

they might well make, first indicating that the serious economic conditions prevailing warranted action being taken to close the offices, and secondly that they would take advantage of the provision of their law which enabled them to ask for notice before payment. I suggested that thirty days' notice should be asked. They both expressed the fear that such action might precipitate calls being made unduly upon the deposits of the office. However as a result of our discussion, which was somewhat extended, no final or decisive action was taken. It was open to them either to make the statements I have suggested or to take such other action as might be desired.

The records indicate that on January 29 Premier Bracken saw Mr. Rhodes whom I had called in at one of the discussions, because he had been acting Minister of Finance and it was fairly clear that he would succeed me in that department. On the same day instructions were given to send S500,000 for the relief works to the province of Manitoba, and if vouchers came in quickly it was intimated that the government would send another $500,000. On January 30, Mr. Bracken wrote a letter to Mr. Rhodes and among other things stated that the savings office matter was giving him much cause for consideration and worry, and he trusted that the matter would not be overlooked. In consequence of a return requested by the hon. member for Lisgar (Mr. Brown) that letter has been placed upon the records. However, in order to make the record complete, I shall read that paragraph of Mr. Bracken's letter to Mr. Rhodes which has reference to the savings office.

1. Provincial Savings Office: In view of certain rumours being circulated that this institution is unsafe, there may develop such a demand for deposits as cannot be met at once. To allay any possibility of this happening, the banks have advised that they are prepared to loan to the dominion any amount of money that may be necessary in this connection, providing the Dominion will reloan it to the province. This will enable the province to assure depositors that their deposits are fully available at any time, and thus avoid a possible "run" on this institution. If something like this is not done, a difficult situation may arise, one that might be embarrassing not only to the savings office but to trust companies and banks, as well as to the general credit structure.

This matter has been the subject of discussion with the banks and with Mr. Bennett during the past few weeks.

Yours very truly,

John Bracken.

P.S.-While the above matters are all more or

less pressing, No. 1-

Manitoba Savings Office

And many others-

-are of immediate concern.

Hon. members will observe that that communication is dated January 30, 1932. Then, on February 4 I received an urgent message reading as follows:

Confidential message being transmitted to you through Bank of Montreal. Would appreciate sympathetic reconsideration of matter referred to.

John Bracken.

The message decoded and forwarded to me by the Bank of Montreal, read as follows:

Please say to Prime Minister of Canada from Premier Bracken-"Unusual demand for money borrowed by province of Manitoba under Province of Manitoba Savings Act makes it necessary to raise by way of loan under Provincial Loans Act amount needed to meet demand. Will be compelled to make public announcement to this effect and also to require notice of desire to withdraw funds which at present is fixed at 30 days but that period will likely be extended from time to time until loans can be raised at best terms possible. We are doing this very reluctantly but no other way is now available. Banks still agreeable to lend the province of Manitoba money to meet this demand but only on additional security of Dominion government which you felt could not be given. Urge your government reconsider situation as we must act by February 6th noon at latest. If joint action of banks and Dominion government could make it possible to issue statement that depositors can be paid in full the present unusual demand would at once cease. Believe if it becomes necessary to take stand above indicated not only credit of province of Manitoba but of other provinces and the Dominion government and many loan and trust companies will be adversely affected. From January 23rd to yesterday inclusive 527 accounts were closed 207 opened with net loss of deposits of over $200,000 only partly offset by revenues from investments received at first of month. Eighty-eight were closed yesterday and withdrawals are continuing to-day.

John Bracken."

The manager of the bank intimated his willingness to send in cipher any reply that I might desire. I immediately replied in these words:

Message received. Have been in communication with banks. No action should be taken until Monday. Meantime advise number of current accounts; total deposits, with full statement of securities held against same.

Immediately upon receipt of the message and before I sent the reply, I communicated with the banks by telephone and realized that the position was one of very great difficulty and calling for immediate action if we were not to precipitate a situation which was certainly undesirable at this time. I received a reply to my telegram dated the next day, namely the 6th of February. 'It was received

through the Bank of Montreal in cipher, decoded, and sent forward to me. It read as follows:

Say to Prime Minister of Canada: "Message received. Will delay action until Monday as per your request. As of yesterday's date number of accounts 42,168 demand deposits $12,736,968 plus interest from December 1st last. Securities held follow: province of Manitoba exchequer bonds and treasury bills at par $8,463,470, province of Manitoba debentures and registered stocks at par $3,084,203, city of Winnipeg debentures and registered stocks at par $532,392, other municipal debentures at par $73,558, Dominion of Canada direct obligation at par $119,000. Stocks and bonds guaranteed by Dominion of Canada at par $2,473,130. Total at par $14,745,755. The total of last two items is pledged for a loan of $2,000,000 of which $1,700,000 has been used. If more details desired will gladly furnish. Would appreciate decision early as possible.

John Bracken."

A message asking for further delay having been sent, Mr. Bracken on the 8th of February wired:

Message received. Quite willing to accede to your request. No improvement in situation.

During the intervening hours-because time was running very rapidly-I took this matter up as best I could through the banks, advised them that the securities were as I indicated, which corresponded with the records of the banks in that regard, and found that the only available securities were those of the province of Manitoba and of the city of Winnipeg and of other municipalities of the province to meet these demands, which were increasing in number.

I disliked assuming responsibility in the matter. The saving offices had ho cash beyond what they had borrowed from the Bank of Commerce on the $2,000,000 of Dominion government securities, direct and guaranteed, which sum had been practically exhausted on the night of the 9th. But the banks intimated that if we would assume ultimate responsibility they would supply the necessary funds to enable the province to meet the claims of the depositors, and on the 9th day of February I sent to Mr. Bracken this message:

You will be advised by code telegram tomorrow the terms on which your proposals will be accepted.

The negotiations between the banks and Mr. Bracken were not carried on through the government or any member of it, they were carried on directly in Winnipeg through the western supervisors of the banks doing business in that city, who were in direct contact with their principals at Toronto and Montreal. In due course we were advised of the conclusions at which they had arrived, and it

Manitoba Savings Office

was dependent entirely upon our action as to whether or not they would provide the money to meet the depositors' claims. On the 17th day of February therefore, it having taken some time to get the information in detail, the following letter was sent to the general managers of the chartered banks doing business in the city of Winnipeg:

Dear Sirs:

Referring to the proposals from the government of Manitoba (as per copy attached)which I understand the banks are ready toaccept and under which the chartered banks doing business in Winnipeg are about to assume the deposit liabilities arising under The Provincial Savings Act, 1924, of the province of Manitoba, and amendments thereto, the government of Canada agrees with the banks, inconsideration of the assumption of such liabilities, to indemnify them from all loss in connection therewith; and on the other hand the

banks, in consideration of the agreement to indemnify, agree to transfer to the government of Canada the treasury bills received from the province of Manitoba and all collateral securities received by the banks from the province, pari passu with the making of advances of cash by the government of Canada, or giving of its treasury bills by the government of Canada as hereinafter provided.

The government of Canada hereby further agrees, because of the assumption of such liabilities by the banks to place a deposit in cash in each bank in Winnipeg to meet any withdrawals of deposits so assumed, and upon exhaustion of such cash deposits as may be made from time to time, to recoup the banks in lieu of cash, at the option of the government of Canada, for such withdrawals and interest thereon, and interim interest on any uncovered advances made by the banks, by the giving of one year treasury bills of the government of Canada bearing interest at the current rate, not to exceed 5 per cent per annum, payable half yearly, the liability of the government of Canada to supply cash or its treasury bills to continue until the deposit liabilities assumed by the banks as herein mentioned and all interest thereon are completely discharged.

Yours faithfully,

R. B. Bennett,

Prime Minister.

The copy of the letter referred to is dated Winnipeg, Manitoba, February 16, 1932. It is directed by the premier, Mr. Bracken to:

S. H. Logan, Esq. (representing the chartered banks in Winnipeg).

General manager of the Canadian Bank of Commerce, Toronto, Ontario.

Dear Sir:

For some time, as you know, the government of the province of Manitoba has been giving careful consideration to the position of the provincial savings offices. We have now reached the conclusion that if adequate provision is made for the taking over of all deposit liabilities in connection with the provincial savings offices operated under chapter 174 of the Consolidated Amendments of Manitoba and amending acts, the public interest and the interest of the depositors, under existing conditions, would

be best served by the closing of the offices. On behalf of the government I therefore submit the following proposal:'-

If the chartered banks represented in Winnipeg are willing to take over all outstanding accounts of depositors in the offices operated under the provisions of said chapter 174, the government of the province of Manitoba will at once issue to the banks treasury bills of the province, payable one year after date and bearing interest at the rate of 5J per cent per annum, payable semi-annually, to the extent of such liabilities, and will ratify same at the ensuing session of the legislature.

Pending such ratification by the legislature such bills will be issued by the province to an amount equal to such liabilities as and when assumed and will be delivered, together with, as collateral security, all securities now held by the said savings offices to such chartered banks, these collateral securities to be held, less any realizations therefrom, until the treasury bills are paid, and any realizations therefrom to be applied in reduction of the treasury bills.

If this proposal is accepted by the banks the government will discontinue receipt of deposits in such or any other offices.

Yours very truly,

(Signed) John Bracken, Premier and Provincial Treasurer.

The transaction ended there so far as we were concerned. We were not at the moment called upon to place any cash in the hanks, and as I understand the matter the accounts of depositors were divided among the chartered banks doing business in Winnipeg. I have merely this further observation to make in answer to the question that was propounded by an hon. member upon the orders of the day. The province of Manitoba having concluded, for reasons in my judgment good and sufficient, to discontinue its savings offices, I was not anxious that we should assume responsibility for the accounts which it had itself taken and for which it had acquired the securities that I have indicated. The banks pointed out that they had already too many Manitoba securities in their portfolios to enable them unprotected and unsupported to deal with the situation alone. In view of that circumstance I gave, of course with the concurrence of my colleagues, the letter which I have just read. I am entirely in the judgment of the house with respect to it, but one of two things had to take place: Either a situation that had developed was to become very much worse by reason of the continued pressure of depositors for their money, or something had to be done that would support the situation to an extent that would prevent further demands being made. In view of the fact that the province had concluded to withdraw from the business, I decided that the request indicated, being the only method that was available, should be acceded to for the purpose of saving the situation which had

Manitoba Savings Office

become very acute and the repercussions of which would be injurious not only to the province itself but to the other provinces of the dominion as well as to the credit of Canada.

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LIB-PRO

Arthur-Lucien Beaubien

Liberal Progressive

Mr. BEAUBIEN:

For information, may I ask the right hon. gentleman a question? Did not Premier Bracken come to the conclusion to close the provincial office after the Dominion government had refused to guarantee the deposits,. which guarantee the government gave to the chartered banks afterwards?

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

That is not my understanding of the situation. Premier Bracken and Mr. Williams attended at my office and the statement they made clearly indicated that they concluded it was not wise under existing economic conditions to continue their savings offices.

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LIB-PRO

Arthur-Lucien Beaubien

Liberal Progressive

Mr. BEAUBIEN:

They had no alternative. The government refused to give them the guarantee.

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LIB-PRO

John Livingstone Brown

Liberal Progressive

Mr. BROWN:

Do I understand the Prime Minister to say that it was not through him the terms were sent to Premier Bracken that they were to call the legislature within a certain time and to repeal the statute under which the savings office was formed?

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

I have read to the hon. gentleman the documents that passed between Premier Bracken and myself. As regards the agreement with the banks, that was a matter of negotiation between the banks and Mr. Bracken.

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LIB-PRO

Arthur-Lucien Beaubien

Liberal Progressive

Mr. BEAUBIEN:

After the federal government had refused assistance.

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

As I understand the

matter, Premier Bracken was in Winnipeg and they were in Toronto. The inspector general of banks informed me that an agreement had been reached and he told me in a general way what the arrangement was. As a matter of fact, if my memory serves me aright, no such agreement was arrived at as that suggested by the hon. member for Lisgar (Mr. Brown). I do not think there was in the agreement-and I have read it here to-day as I received it-anything that would indicate that the legislature was to be summoned. That is not in this document that I have read.

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LIB-PRO

John Livingstone Brown

Liberal Progressive

Mr. BROWN:

Those terms were certainly submitted to Premier Bracken by the government or directly from the banks.

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

I assure- the hon. gentleman it was from the banks direct; it was not

from the government. Might I, without being thought censorious, say this: It does seem rather hard, when pressed on every side with problems of great magnitude, when this dominion was not only providing money for the obligations of the province of Manitoba maturing in New York, but advancing money to enable it to meet its obligations to municipalities and cities as well as its own as a government, that when the steps I have indicated were taken, we should be the subject of abuse and the target for criticism in our effort to improve the situation. This is something I find rather difficult to understand.

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LIB-PRO

Arthur-Lucien Beaubien

Liberal Progressive

Mr. BEAUBIEN:

May I ask the Prime

Minister if he is laying this correspondence on the table of the house?

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

I have put it on Hansard.

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LIB

Ernest Lapointe

Liberal

Mr. LAPOINTE:

May I ask my right hon. friend whether any orders in council were passed to ratify those guarantees or undertakings?

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

No order in council has

yet been passed and perhaps my hon. friend will realize just why that is the case. When one has a problem of this magnitude to deal with, involving nearly $13,000,000, it is not desirable, until the appropriate time comes, that being the necessities of the time limit, to advertise by order in council or otherwise that the situation has reached the point that it has. In any event the action taken was only as against ultimate loss, as the hon. gentleman will observe.

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LIB

Ernest Lapointe

Liberal

Mr. LAPOINTE:

Is there anything binding on the government at the present time?

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

The good faith of this

administration.

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April 19, 1932