June 27, 1934


On the orders of the day:


LIB

Vincent Dupuis

Liberal

Mr. VINCENT DUPUIS (Laprairie-Napierville) (Translation):

Mr. Speaker, the

"Devoir" of Montreal, dated June 26, 1934, publishes a report of the evening celebration of the St. Jean Baptiste society, in the course of which the hon. Minister of Marine (Mr. Duranleau) spoke. The report states that certain persons in the audience at Park Lafontaine wanted to know why the Minister of Marine had not voted on the amendment with reference to bilingual currency. Hecklers prevented him from replying. I offer him an opportunity to reply in the house, does he accept?

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CON

Alfred Duranleau (Minister of Fisheries; Minister of Marine)

Conservative (1867-1942)

Hon. Mr. DURANLEAU (Minister of Marine) (Translation):

Mr. Speaker, my

views on the question are well known, since I am a member of the government, and that the bill, such as approved by the committee, constitutes a government measure. My hon. friend is perfectly aware why I was unable to be present; I was called elsewhere on business, and I may add that the part of the report to which he refers is not in accordance with the facts.

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BANK OF CANADA


Right Hon. R. B. BENNETT (Prime Minister) (for the Minister of Finance) moved the third reading of Bill No. 19, to incorporate the Bank of Canada. Hon. IAN MACKENZIE (Vancouver Centre): Mr. Speaker, before the house passes upon the third reading of what is to my mind the most important legislation of the present session, and having due regard for the desire manifested to expedite the business of the house, I wish to state as briefly, as concisely and as succinctly as I can the reasons why I believe this bill should be referred back to the committee of the whole house in order to amend it in certain vital, essential and fundamental ways. Before I enter upon the consideration of the vital objections which I have to this bill as it now stands, I desire to make a few observations from the report of that great economic body, the Macmillan committee on finance Bank of Canada-Mr. Mackenzie and industry which sat in Great Britain in 1931. The following appears on page 240 of the report of that committee: -we are convinced that the Bank of England ought to be transformed into a public corporation. My next quotation is from section 280, as follows: The monetary system of this country must be a managed system- And again: -by individuals placed in a position of unchallengeable independence. The next is from section 316, as follows: In this case also the vicious circle is now complete. And again: The decline of new enterprise has reacted adversely on profits and prices, and the low level of profits, and prices stands in the way of new enterprise. It is for this reason that some of us think that in the domestic field it may be necessary to invoke governmental enterprise to break the vicious circle. And again from section 148: In the third place, it is not necessary that the volume of note issues should continue to be regulated, as it is now, by reference to the amount of gold held in reserve. In sections 71 to 74 inclusive the committee states that since the bankers as a whole under banking practice maintain a cash proportion of the profit of roughly ten per cent of the cash held in reserve, the bulk of the bank deposits arise out of the actions of the banks themselves, for by granting loans, allowing overdrafts and purchasing securities, a bank creates a credit in its books which is treated as the equivalent of a deposit of money. My next quotation is from section 47 of the addendum, which is to be found on page 203. It reads: The theory that governmental expenditure in the promotion of public enterprise and' social service is restricted by the accumulated savings available for investment is erroneous. When governments distribute wages by financing public enterprise with national currency and credit, the volume of capital for investment is increased. My next reference is to section 24, which states that if governments pursue an inflationary policy, i.e., meet expenditures not out of revenue or loans, but by the issue of paper money, or the creation of credit in a national banking system, forces are set in motion increasing profits and wages and additional spending arises. I shall now proceed very briefly to a consideration of the fundamental principles which may underlie central banking. One could easily quote the principles as given by Kisch and Elkin, by Ireton, by Sprague or any of the other great authorities on central banking. I should like to refer very briefly to what was said by the Prime Minister when speaking in this house on February 22, as reported on page 838 of Hansard. He said: The central bank cannot accept deposits for interest. It will be the repository of the reserves of the chartered banks. In the very nature of things it will discharge the functions of the financial or fiscal agent of the Dominion of Canada; it will be the note issuing authority of the dominion; it will create and issue legal tender; it will determine the extent to which rediscount shall take place; it will determine the rediscount rate from time to time. If at moments there is the thought that the creation of this institution is intended to destroy the chartered banks of Canada, that is an erroneous view, for the chartered banks will still be the depository of the savings of the people and the central bank is not intended to transact that class of business. Along with that statement I should like to place upon Hansard some extracts from the report of our own Macmillan commission. These have been referred to already and are to be found on page 4186 of Hansard. The first is: In the first place, from a national point of view, the central bank, within the limits imposed by law and by its capacities, should endeavour to regulate credit and currency in the best interests of the economic life of the nation and should so far as possible control and defend the external value of the national monetary unit. In the second' place, from the international point of view, the central bank by wise and timely cooperation with similar institutions in other countries, should seek, so far as may lie within the scope of monetary action, to mitigate by its influence fluctuations in the general level of economic activity. ... The next is from paragraph 207 of the report, and reads: A central bank is at the same time an instrument and a force. As an instrument it is the means by which the state-which must necessarily retain ultimate sovereignty in matters affecting the currency-can give effect to the national policy. . .. The principles which underlie or are supposed to underlie the legislation contained in Bill No. 19 are set out in the preamble of the bill, and these were referred to the other day by my hon. friend from Quebec East (Mr. Lapointe) when he was speaking on one of the amendments moved from this side. May I very briefly recapitulate the essential principles of the preamble of this legislation. I do not believe that there is a single member of this house who will quarrel with the preamble; there may not be in it such extensive provisions as some of us might desire, but as



Bank of Canada-Mr. Mackenzie far as they go I think they will meet with the commendation of every member of the house. The principles are these, first: To regulate credit and currency in the best interests of the economic life of the nation. My first submission is that this legislation, which transfers to a private profit-making corporation, the complete control, with very slight governmental control, over the credit and currency of the nation, is not such as is likely to regulate that credit and currency in the best interests of the economic life of the nation. The second principle is: To control and protect the external value of the national monetary unit. It might be assumed by hon. members that this institution would be helpful in assisting us to extend the value of the national monetary unit, but my personal conviction is that when we transfer to this private organization, this private corporation which possibly may consist only of 2,000 Canadian citizens, assets which I shall describe, we are not doing anything that will enhance the value of our national monetary unit in other countries. The third principle set out in the preamble is: To mitigate by its influence fluctuations in the general level of production, trade, prices and employment. Again, I doubt whether the organization of a private, profit-making central bank can achieve these results. The general question of dealing with production, the general question of dealing with trade, the general question of dealing with prices, the general question of dealing with employment is deliberately avoided by this legislation, as it was deliberately avoided by the Canadian Macmillan commission, and I submit this afternoon that, despite the brilliant report which was produced in England in 1931 under the chairmanship of that distinguished Scottish jurist Lord Macmillan, the Canadian Macmillan commission's report was a most disappointing one to the majority of Canadians. There was in that report no comprehensive effort to review our industrial fabric, our financial fabric, our economic fabric, and the only true conclusions of the report were in the first place to advocate a central bank in Canada, which we had already determined to do before the commission was ever appointed, and in the second place the suggestion with regard to legislation affecting rural credits. To be fair, there is in the preamble a reservation: -so far as may be possible within the scope of monetary action. Then the last principle of the preamble is this, and it is very important, because I must steadfastly submit that it is not being carried out by this legislation: Generally to promote the economic and financial welfare of the dominion. I believe that this legislation will do something in that regard; I said so the other day. I believe that if we accept the principle of private ownership this legislation may be an improvement on the financial organization we have had in the last twenty years under the Finance Act. But I do believe that a system of directing, controlling and operating the credit of Canada for the public need and not for private profit would be much more advantageous than the bill which is before us this afternoon for third reading. Now, without delaying the house I wish very briefly to review the history of this legislation since it has been before us for consideration. On February 22nd the Minister of Finance (Mr. Rhodes) moved the following resolution: Resolved, that it is expedient to introduce a measure to incorporate a central bank in Canada, and to provide for the appointment and salaries of the officers and staff of the bank and the appointment and fees of the directors. - I wish very briefly, in justice to the other side of the question, to review the arguments which were used by the Minister of Finance when he submitted to the house the resolution preceding the bill and, in the second place, when he submitted the bill itself. As reported at page 825 of Hansard, he said: Admitting this fact however, is not to be taken as implying that our banking structure has deteriorated in recent years, making it necessary to supplement it. And again: Coming to the main features of the bill itself. I shall indicate them as briefly as possible. As at present proposed the Bank of Canada is to be a privately owned institution. .. . At page 827 he is reported as follows: Clearly, however, the bank should not be subject to dictation by the government, for at times the exigencies of public finance might not be wholly in harmony with banking policies that might be considered wise and essential in the general public interest. He quotes from the Macmillan report at page 98-and I am trying now to repeat to the house the argument used by the Minister of Finance and subsequently repeated by the Prime Minister himself in favour of private ownership as against public ownership or Bank of Canada-Mr. Mackenzie control. As reported at page 829 of Hansard, the Minister of Finance quoted from the Macmillan report as follows: . A central bank is responsible for the control of the volume of credit and the maintenance of the stability of the value of the currency. This responsibility connotes that the bank should be granted the sole right of issuing currency (other than coin) for it would be intolerable that a central bank's policy should be hampered by the action of other issuing authorities in a country. The experience of other countries has shown conclusively that the right of issue is not indispensable in assuring adequate profits to commercial banks. In that same debate-and at the moment I wish to emphasize this point-my right hon. leader (Mr. Mackenzie King), in his contribution to the discussion, laid down what has been the policy of hon. gentlemen on this side of the house and which he enunciated on February 27, 1933. I wish to place on Hansard the reference made on that occasion to central banking, so as to indicate to the house that the amendment which I propose to move on this occasion is paralleled by the statement made by the leader of the Liberal party at that time in the House of Commons. He said: The Liberal party believes that credit is a public matter, not of interest to bankers only, but of direct concern to the average citizen. It stands for the immediate establishment- And this was before the commission ever came here. -of a properly constituted national central bank, to perform the functions of rediscount, and the control of currency issue, considered in terms of public need. A central bank is necessary to determine the supply of currency in relation to the domestic, social and industrial requirements of the Canadian people; and also to deal with the problems of international commerce and exchange. My submission, to the house this afternoon is that the legislation which we are now about to pass and send to another place for consideration does not carry out the fundamental principles of a central bank as outlined by my leader on February 27, 1933. I wish to follow very briefly the Temarks made by the Minister of Finance when the measure was up for second reading on March 8 of the present year. He referred to the resolutions at Genoa in 1932 and at Brussels in 1920, in support of his own plea for private ownership. Let me quote the resolution which he read to the house, passed at the International Financial Conference held at Brussels in 1920: Banks, and especially banks of issue, should be freed from political pressure and should be conducted solely on the lines of prudent finance. On January 22 the International Economic conference reported as follows: Banks, and' especially banks of issue, should be free from political pressure and should be conducted solely on lines of prudent finance. In countries where there is no central bank of issue one should be established. And again: The conference considers it essential in order to provide an international gold standard with the necessary mechanism for satisfactory working, that independent central banks, with the requisite powers and freedom to carry out an appropriate currency and credit policy, should be created in such developed countries as have not at present an adequate central banking institution. Then the minister quoted from Kisch and Elkin and several other authorities in support of his contention. Let me give one or two quotations from his observations. As reported on page 1297 of Hansard of this year the Minister of Finance said: Furthermore, a bank controlled by the government would inevitably be subject to sectional pressure and influence, a pull and haul from different parts of the country for certain special consideration and treatment. Again he said: Now, there is one other objection. I know that many hon. gentlemen will not agree with me, but I wish to say with all the seriousness at my command that it is my firm conviction that we cannot successfully operate a government central bank in Canada which is subject to patronage. Later on in the same debate, during the evening he is' reported on page 1299 in these words: In its most extreme form this weakness or danger of public ownership is, in my judgment. illustrated by the case of a government which, unable or unwilling to finance itself by other methods, leans too heavily upon the central bank, forcing the latter to make excessive advances and usually bringing about financial disaster both for the bank and for the community. Then he outlines the three fundamental objections to private ownership, the first being this: If it is to have the sole right to issue and control legal tender paper currency it is felt that it would be inappropriate to give such right to an institution not owned by the state. The second is this, as reported on page 1300: The second objection is based on the undesirability of allowing excessive profits to accrue to private shareholders. And the third is as follows: The final and perhaps the greatest objection which can be lodged against private management is that the bank might be dominated by bankers and their interests or by other financial interests.



Bank oj Canada-Mr. Mackenzie The last quotation which has already been, referred to in these debates and which I wish to place on Hansard is one from Sir Thomas White which will be found in the report of the Macmillan commission. This is what he said: It was suggested during the course of our hearings that political influence might possibly affect unfavourably the administration of the I1 inance Act because the Treasury Board which authorizes advances and fixes rates of interest payable thereon is composed of members of the government. _ With regard to this I have only to say that if by "political influence" is meant partisan or improper influence not a shred of evidence has been adduced before the commission in support of such a suggestion. This bill after its second reading was referred to the select standing committee on banking and commerce, and in that committee several amendments were moved by my hon. friends to my left and several by those of us who belong to the Liberal party. May I very briefly recapitulate the amendments which we moved there and which we subsequently moved in committee of the whole house? I had the honour personally of moving: That before the committee considers a single clause or detail of Bill No. 19, the committee record itself as being of opinion that this bank should be owned and controlled by and for the people of the Dominion of Canada. That motion the committee oh banking and commerce in its wisdom rejected. Subsequently I moved a resolution which gave to the Minister of Finance authority to call in shares at a valuation not exceeding par; in other words, our second amendment was a contingent public ownership in the discretion of the administration of the day. Then the hon. member for Shelburne-Yarmouth (Mr. Ralston) moved a very comprehensive amendment giving to the government, to the Canadian people, absolute and definite control, not necessarily with ownership, over the new Bank of Canada, but the committee on banking and commerce, once again, rejected that amendment. Then the hon. member for Shelburne-Yarmouth moved that the deputy minister of finance who, at his instigation and suggestion, was made one of the directors, without voting power, it is true, be given the privilege of suspensory veto over the proceedings, deliberations and conduct of the privately appointed directorate. Then the hon. member for Beauharnois (Mr. Raymond) moved a resolution, which I had great pleasure in supporting, appointing a Canadian national as governor of this new Bank of Canada. At that time the Prime Minister asked the bankers who were present with, as somebody said, their backs to the wall, whether they thought Canadian bankers were competent to regulate and manage the Bank of Canada. I think only one answered. Since the Prime Minister spoke in the house the other day when we were considering this very question of public control, and of a Canadian governor, Sir John Aird, who has been fairly close to some members of the administration, has come out with a public statement repudiating the assertion of the Prime Minister that no Canadian is fit for the exalted position of governor of the Bank of Canada. I wish in a word, without elaboration, to endorse the argument so well advanced the other day by the hon. member for Beauharnois and to repeat what I said then that we need to have a Canadian as governor of this Bank of Canada. We need a Canadian who knows the complexities of our life, the peculiar problems of the province of British Columbia and of the spacious prairies that are facing tremendous agricultural questions at the present time, who knows old Ontario, the grand old province of Quebec and the peculiar problems of the provinces down by the sea. I suggest with emphasis and earnestness to the Prime Minister that no man coming from any other land, no matter how well qualified he may be in the technicalities of central banking, can provide the proper and adequate service in our own central bank that one of our own Canadian citizens could do. I repeat: So far as we on this side are concerned we shall offer no objection to the introduction of all the technical advisers considered necessary from the Bank of England or the Bank of France or any other central bank to advise the Canadian government for one year, or, if necessary, for two years in the intricacies and technicalities of central banking. Then there was an amendment, in which I heartily concur, moved by the hon. member for Quebec East (Mr. Lapointe) both in the committee on banking and commerce and on the floor of this house. I can do no more than support the glowing and inspiring address given in this chamber the other evening by the hon. member for Labelle (Mr. Bourassa) when he said that we should maintain not only our sovereignty in regard to credit in this our native land, but the sovereignty of the French and English speaking peoples in every nook and corner of this dominion. As a comparatively newcomer to Canada, only twenty years ago now, I have the greatest veneration for its early and romantic history and when we consider the first one hundred and fifty years of our splendid pioneers; when we consider the celebration we are to Bank of Canada-Mr. Mackenzie have in a few weeks time, it is only fit that there should be in every mind in Canada the splendid efforts and worthy endeavours of those pioneers in settlement and in government who have given us the house in which to-day in this country we dwell. Then we come to the question of control. When I moved in this house the other day for public ownership, the Prime Minister made the following objection. He said that in the first place this is against the experience of the world. Well, I am not so very certain that the experience of the world is a safe guiding factor at this time. If he is going to go by the experience of the world in regard to control of banking institutions, is he going to go by the experience of the world in regard to those crazy dictatorships which are being set up in every country in Europe? I suggest that we should preserve for the Canadian people full control over credit, over currency and over note issue; that is the proper course to follow, instead of taking the experience of some crazy nations of Europe which have gone wrong in matters of finance as well as in matters of government. Then the right hon. gentleman repeated the point with regard to political control. I think Sir Thomas White has answered that, and I think I have answered it sufficiently. He went on to say that under this legislation the profits accrue to the people. Mr. Speaker, under the bill as drawn up at present we have a capitalization of $5,000,000 and an interest rate of four and a half per cent, which means an ostensible profit of $225,000. But may I point out, as I did once before, that when you support this legislation you support the transfer, in the first place, of $70,000,000 worth of Finance Act gold which at the present moment belongs to the people of the Dominion of Canada, to a privately owned, profit making corporation. In the second place you are going to transfer later on $40,000,000 worth of bank gold, less the amount the banks require for external obligations; that is to be transferred to a privately owned, profit making corporation. Then, on the day this bank opens its doors for business, you are going to create $63,000,000 worth of new, three per cent securities; you are going to hand these over to this new, privately owned, profit making institution, and the taxpayers of the Dominion of Canada every year will have to pay $1,800,000 in interest. Bigger than all these things, however, is the sovereign control over note issue, which belongs to parliament and to the people, and you are handing that over to a privately owned, profit making corporation under the legislation which we are asked to support at the present time. Our resolution with regard to public ownership has been rejected. Our resolution with regard to public control has been rejected, and this afternoon I submit in the strongest possible way that this government, repudiated and rejected, inferentially if not actually, by the people, has not a moral right or a moral mandate in the eleventh hour of its life to pass this legislation, which will bring about a complete transformation of the financial organization of the Dominion of Canada. I say the government have no right to do that on the basis of private ownership without first of all having the principle of private ownership endorsed by the free will of the Canadian people. So, Mr. Speaker, this afternoon I am endeavouring to give expression, in the first place to those who believe in the principle of public ownership, and in the second place to those who believe without debating the merits or demerits of public ownership, that a rigid, definite and well defined public control is necessary in regard to this institution. Therefore I submit the following amendment: That the bill be not now read a third time but that it be referred back to the committee of the whole with instructions that they have power so to amend it as to provide that the Bank of Canada shall be either,- (a) Government owned and controlled; (b) Government owned: or (c) Government controlled. That is seconded by the hon. member for Quebec South (Mr. Power). Under this amendment, when the bill is referred back to the committee of the whole, we will have the right to reconsider sections 9 and 17, which deal in the first place with the principle of public ownership and in the second place with the principle of public control of this bank. When I review this legislation as it now stands I am reminded of a quotation from the 32nd chapter of Isaiah, as follows: The instruments also of the churl are evil; he deviseth wicked devices to destroy the poor with lying words, even when the needy speaketh right. _ But the liberal deviseth liberal things, and by liberal things shall he stand. Believing as I do, Mr. Speaker, in public ownership and control of this great national financial institution I am pleading with this house this afternoon to devise liberal things, and so far as we on this side of the house are concerned, by liberal things we shall stand.


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) :

Just why once more, in dealing with

a matter of profound importance to the Canadian people, it is thought desirable to interject a note of pure politics into the discussion on the third reading, Mr. Speaker, I cannot

Bank of Canada-Mr. Bennett

say. The hon. gentleman himself must be best able to answer that. Everything that he said this afternoon he has said at least three times before this session. In most cases this is the fourth time he has brought forward his arguments, and in one instance it is the fifth time to my knowledge that he has made the statement.

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LIB
CON

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

Conservative (1867-1942)

Mr. BENNETT:

It is suggested that

repetition makes for success, but that is a theory that has been exploded long since.

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LIB
CON

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

Conservative (1867-1942)

Mr. BENNETT:

It was found to be so

by those who met their fate at the end of a rope.

I do not propose, therefore, to traverse what has been said this afternoon, but I do desire to point to the second observation made by the hon. gentleman. He quoted from the Macmillan report in England, and the last quotation he commended to us was that the institution should be of unquestioned independence.

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LIB
CON

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

Conservative (1867-1942)

Mr. BENNETT:

Who, listening to the

speech this afternoon, would think that any Bank of Canada could be independent that was under the control of a government of which the hon. gentleman was a member? All you had to do was listen to the extreme statements that were expressed and then ask yourselves whether the Canadian people dare trust their central bank to such control. That is the answer, together with what has taken place in this house since this bill came back from the committee.

I have said that I commenced my study of this problem from the standpoint of believing that it would be desirable to have the bank publicly owned. When I studied the matter; when I observed what had been written with respect to other countries, notably in Kisch's book; when I realized and recognized what has transpired in this country with respect to political considerations; when I reviewed, as I did carefully, the appointments that have been made to the various commissions of this country; when I saw patronage in all activities with respect to our publicly owned institutions; when I saw the effect of such appointments, and when I saw the governmental intervention with respect to some matters of business that were dealt with by commissions in this coun-

try, I determined that if we were to preserve the unchallenged independence of this bank we must do something more than merely leave it to public ownership. Then, having decided that this was the correct thing to do, the next problem was to ensure governmental control. If one looks at the amendment that has been proposed one finds these words:

-with instructions that they have power so to amend it as to provide that the Bank of Canada shall be either (a) government owned and controlled; (b) government owned, or (c) government controlled.

I have pointed out to this house, as I did to the committee-and I will not take time to do so further-that in the very inception of this bank it comes into being with provisional directors. Then it must appoint a governor, a deputy governor and an assistant deputy governor. Those are to be selected by the governor in council, in order that governmental control may be ensured with respect to the management and adminstration of the bank. In order to promote political views certain objections were taken to this provision. They were purely political objections, narrowing and limiting the power to appoint beyond that which is usual in such cases. They would not be thought of otherwise; they were merely an endeavour to create prejudice and passion with respect to these appointments. Every man who has read the debates, every man who has read what transpired in this house knows that to be so.

Then you proceed to the next point. Having created your organization, and having your directors provisionally appointed, they are called upon to select from among their numbers directors who will be permanent, retiring in rotation-so many at the end of two years, so many at the end of five and again at the end of seven years, in order that the continuity of policy may be maintained, and that the bank may function free from interference and free from objection by those who endeavour to discharge through it their ideas of political patronage. That being done, the next question is: How shall the bank function? The bank begins to function by taking over the issue of money, by taking over the obligations under the Finance Act, for each note issue, and receives a bond on which interest is paid. Hon. gentlemen opposite know well that these bonds are merely bookkeeping entries by which three per cent is paid to the bank, and by the bank back to the government. That is so well understood that one wonders just what extreme views are in the minds of hon. members who in their statements overlook making any

Bank of Canada-Mr. Bennett

observations of that character when speaking to this house. Further, when the bank has been established, and when the security has been put up to care for the note issue, and when it has taken over the gold from the Department of Finance, and when it has taken over the gold from the banks, why was it not indicated by hon. members that the purpose is not to enable the bank to do what it pleases? The bank has at once assumed, under this statute, the responsibility for the maintenance of a 25 per cent gold coverage for all note issues made by the bank, and not only for that which is covered but as well for that which is uncovered. That reserve must be kept in gold and silver; at least 25 per cent must be kept in gold. The effect of this legislation is to transfer to the central bank the custody of the gold which formerly was in the Department of Finance under the control of the minister and in the banks under their private control. Why is this done? In order that they may be able, when the gold standard is once more effective in this country to make transfers by bullion exchange, when there will no longer be free coinage of gold in this or any other country in the world. There will be that exchange of bullion gold for external purposes, and to the extent of not less than 14,000 units, to enable the controlling of foreign trade to be carried on. Is it better that that should be subject to political patronage, or under a control that is free from it?

When it was said by Sir Thomas White that there was no political patronage in connection with the Finance Act, I ask how could there be? How could there be? Every man who knows anything with respect to it knows that in the beginning of the year a resolution was passed which enabled the banks of this country to receive from the Department of Finance legal tender or dominion notes up to a certain margin of credit based upon the deposit of securities. In most instances the securities were the bonds of the Dominion of Canada, and in some instances those of the provinces. They were in known percentages of the advances made. That is why. How could there be any political interference there? One need only look at the bank returns issued from month to month, and particularly at the end of the months, to see the extent to which legal tenders were held under the Finance Act, and to realize that these were secured for window dressing purposes, and nothing else.

Then, having the construction of the bank, carrying on its business as I have indicated, to issue notes and to maintain external trade

and external balances to meet our obligations, the question is: To what extent is the action of the directors controlled by the governor of the bank? After all the governor of the bank is the principal official of the institution. He is the one who, under the statute,_ is primarily responsible for its administration. The act provides, as has been pointed out, that no resolution or no bylaw passed by the directors or by the executive shall have force or effect until it has been approved or concurred in by the governor or, in his absence, by the deputy governor. So we have removed the bank from purely directorial control, and we have placed it in the hands of the person who, by common consent with respect to central banks must always occupy the primary position and must be responsible for concurring in or agreeing with the action taken by the directors or the executive committee.

And more than that, the other day it was said that the government should be represented on the board. When the bill was introduced the minister indicated that amendments either in committee or during the progress of the bill through the house would be carefully considered, from whatever source they may be suggested, and that if they met with the approval of the government they would be incorporated in the bill. In other words, there was no pride of authorship^ to stand in the way of accepting suggestions which might be made which, in the opinion of the government, would improve the measure. At one time the government _ was of the opinion that it might meet the situation by having the Minister of Finance a member of the board of directors, without a vote. But on analysis it was realized that that would introduce a factor which might not be in the best interests of the country as a whole, whereupon the government accepted the amendment by the hon. member for Shelburne-Yarmouth (Mr. Ralston), whereby the deputy minister becomes a member of the board, without a vote. So that there will be continuous communication between the government on the one hand and the bank on the other. Public business will be conducted as it should be by the bank, as the fiscal agent of the dominion, in a manner that is satisfactory to the Department of Finance and to the government. On the other hand the government will be fully advised of the steps taken from time to time to deal with problems affecting the various industries of this country through credit control. In every particular there shall be that measure of cooperation between the bank and the government which will ensure its success. Again the governor is given further power.

Bank of Canada-Mr. Bennett

As we said the other day, he has the power of veto with respect to any transaction affecting the welfare of the institution.

I shall not further occupy the time of the house. I am not going in any eense to take up the time in these closing days of a session of parliament to discuss this matter further. The government has given the measure its best consideration and attention, and has looked into every phase of the central bank problem. We believe we are placing on the statute books a central bank bill which is as good as if not better than any such legislation in any other country of the world. It is not only my judgment that that is so, but that is the judgment of others as well. We have ensured that there shall be no political patronage, and that the bank is not liable to become a medium for political patronage. I am not now charging either one party or another party, but I am simply dealing with the frailties of human nature, the pressure which cannot be resisted, which never has been resisted, and which never will be resisted, namely to yield, for purposes all too apparent, to the glamour of their supporters or those who see in this particular course, something which would be of advantage to them.

Just think for a moment of what transpired in this country from 1922 until 1930. It happened that in those years hon. gentlemen opposite were in power-but that is not the point I am making. What I am about to describe was not as a result of their being in power. Look at the combinations of capital in this country [DOT] look at the mergers, every one of which has brought disaster to the country and loss to the investor. Why? Because you had a condition prevailing in which there was no credit control, none whatever. Everyone knows that. There was no credit control at all. Look at the borrowings under the Finance Act for the purpose of clearing up transactions at the end of the month. Look at what transpired in this country and the ruin that was brought on people who bought stocks in these amalgamated enterprises between 1922 and 1930. I am not blaming the government of the day for it. But I can say they saw it being done and did not stop it. And what effective control did the banks exercise?

But here we have the machinery at least whereby a sound governor, with proven experience in matters of finance, is appointed for the purpose of supervising the administration of the bank. What is more, the hon. gentleman said that he did not know about the experience of the world being of value.

He talked about the crazy countries of Europe. Well, the Bank of France is not crazy. Those who know the gentleman, Mr. de Retake, who has had control of the economic policies of that bank during the last few years, know that he is not crazy, and there are those who would not suggest that those responsible for the policies of the Bank of England were crazy, and they are part of Europe. Both those banks are privately owned but government controlled banks, and there has never been an occasion when the Bank of France or the Bank of England and the government have failed by cooperation to work out a common plan. It is true it cost $100,000,000 of the taxpayers' money in France to assist the Bank of France in connection with the transactions that took place after England went off the gold standard, but that is neither here nor there in connection with the general principle.

I can only submit as the last word, because the matter has been covered by the Minister of Finance and by others, and by discussions in the committee and discussions in the house, that we have here a measure which we submit to this country with pride. It is a measure which we believe will meet the very purpose described in the preamble. This institution will at least be free from that political control that has marred the efficiency of many publicly created bodies in Canada and elsewhere, and the difficulties that have been experienced in connection with publicly owned enterprises, and I could name them without number, here at least will be subjected to control.

One great thing we can say, that this institution with a body of shareholders, with a privately created directorate, will be controlled through government to an extent that no other privately owned central bank is controlled either in France or Great Britain or elsewhere. We confidently believe that freed from political control, freed from the evils of patronage and with the merit determined by experience of those who are engaged to manage the bank, it will function as an institution that will discharge the obligations for which it was created and thereby bring improved conditions to the Canadian people.

If I believed that there was any method by which you could create this bank and free it from the claims of the five factors that I mentioned the other day-politics, what is its politics?-race, what is its racial origin? -religion, what is its religion?-occupation? and where does it live?-are these to be the factors that govern and determine the fortunes of the central bank?

Bank of Canada-Mr. Mackenzie King

The hon. gentleman referred to the incidental effect of recent elections. I ask him if he has read the appeals that were made. Has he read them, and did he understand them? Is that the basis upon which a central bank is to function? Is it to function upon the question of religion. Is it to function upon the question of race? Is it to function upon the question of occupation? Is it to function upon the question of the residence of those who may be directing it? Is it to function on the question of politics? With that issue I am content for the public of this country to deal. But having studied the matter as long as I have, I could not in the present disturbed condition of public affairs, and with the appeals that have been made, venture to launch this institution on the stormy career that lies before it if it is to function successfully and bring credit to the Canadian people, and allow it to be subjected to the play of the forces to which I have just alluded.

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LIB

William Lyon Mackenzie King (Leader of the Official Opposition)

Liberal

Right Hon. W. L. MACKENZIE KING (Leader of the Opposition):

Mr. Speaker, the Prime Minister (Mr. Bennett) in his reply to the very able, lucid and convincing address of the hon. member for Vancouver Centre (Mr. Mackenzie), who has presented the amendment, began his remarks by saying that the hon. member had said over and over again, he said I think for the third, fourth or fifth time, some of -the things which had been said in the initial stages of the debate on this question. That is perfectly true, but it is also equally true that notwithstanding these allimportant things have been said so often, the government have paid no heed to them, and the strength of the argument remains what it has always been. I purpose at the moment therefore to say once again some of the things that have been said over and over again from this side of the house with respect to this bill in the hope that before it passes, even now at the eleventh hour, the government will consider the very reasonable amendment which has been proposed, namely, to refer this bill back to committee of the whole, giving the committee power so to amend its provisions as to constitute this bank one either publicly owned and controlled, or at least publicly owned or publicly controlled, which ever may appear most advisable to members of the committee.

May I say at once, Mr. Speaker, that I know there has been a good deal -of searching of heart on the part of some hon. members on this side, as well as is the case with the Prime Minister and his followers with respect to what really is most in the public interest

with regard to the constitution of this great financial institution, as to whether public ownership of a great central bank was the most desirable thing, as to whether public control was the most desirable thing, or as to whether both public ownership and control was most desirable. With respect to a new institution like a great central bank it is obvious that considerations which are all important should have to be weighed very carefully pro and con.

Speaking for myself, may I repeat that I can see wherein the question of public ownership of a state bank may well be a debatable question. I regard it as debatable for the reason that there is much to be said on both sides. Unfortunately it is not a choice between perfection on the one side, and what is unmixed evil on the other. It is a choice between which is the better of alternatives, each of which has some certain very obvious definite limitations.

The objection that I see, so far as it can be named an objection, to public ownership of a central bank is that it may raise in the minds of the people of the country many expectations which may not be capable of ever being realized. Many will believe that because the state owns the central bank it will be able to meet each and every disorder that may arise in the country from any financial cause. We here all know that a state owned institution, any more than a privately owned institution, will not be able to do anything of the kind. At the same time there would be occasioned the thought in the minds of many people that having set up a publicly owned institution we had discovered a public remedy for all social and financial ills. I do not think it is advisable, or in the public interest at any time for parliament to create in the minds of the people at large expectations which are not capable of being realized.

In the second place, I believe there is always a possible danger to the position of the state itself in the event of anything untoward happening to a bank which is owned by the state. There may quickly arise in the public mind confusion between what may be a matter confined in its effects to the bank, and what may be assumed to concern the very life of the state itself. This may not happen so much within the bounds of the country where the situation may be known and understood as beyond its confines, and in the minds of peoples of other nations. One will recall that only a few months ago a very serious national crisis arose in France because simply of what was regarded as the intimate relations of the

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Bank of Canada*-Mr. Mackenzie King

government with an institution with which it had to do to the extent only of granting licences. If a condition of that kind were to arise with respect, not to some institution simply licensed by the government but to a government owned bank, through some fault of management resulting in personal and public loss, I can see where conceivably there might be created something in the nature of a panic in the state owing to the confusion which might arise in the public mind through the identification of the state itself with the institution. Anyone who has had the responsibility of government must realize that in connection with state affairs it is all important that at all times the soundness of the position of the state itself and of the position of the state in the mind of the public should be one which admits of no doubt whatever.

These are simply contingencies and they must be considered as against other contingencies. Against them it is to be said that that situation has never arisen in connection with any government owned institution in this country. It is to be said further that having a knowledge of our people and having a knowledge of the character of the -persons likely to be in charge of the administration of this country's affairs there is little or no probability of that situation arising. To the alternative of a publicly owned and controlled institution, there has to be considered the pros and cons of a privately owned and controlled institution and the alternatives which lie in between these two extremes. The government has apparently decided wholly in favour of a purely privately owned institution, not one privately owned only but one privately controlled as well.

I want to take very strong exception to what the government is doing. Because the Prime Minister (Mr. Bennett) has decided in his own mind against the idea of a publicly owned institution, he and his colleagues and his supporters are now going to the other extreme of private ownership and private control and are deciding against any kind of effective public control. They are declaring for a privately owned and a privately controlled bank. That is going to an extreme which it seems to me, when its probable effects are carefully considered, will be found to be very much against the public interest. The amendment moved by the hon. member for Vancouver Centre makes it clear that in seeking to find what is most in the public interest this house should not be restricted to a consideration only of extremes and called upon to reach a decision in accordance with the

one extreme or the other. The amendment suggests, seeing that views are so divergent that a place may be found within the two extremes, which may avoid what might be in the nature of dangers in either. We believe that with extremes ruled out this can be found in providing at least a sufficient amount of public control to insure that the control of this bank will be in the hands of the state and not in private hands. The amendment simply asks this house, in view of the fact that the government is going to the extreme, to reconsider this matter before it is too late and see by reference back to the committee whether it is not advisable and possible to adopt something short of the extreme measure which is being proposed and something which will ensure no uncertain measure of public control.

Having been one who right along has strongly advocated the establishment of a central bank, I wish at this time to make clear the grounds upon which I personally have advocated the institution of a central bank and the grounds upon which the Liberal party has made the institution of a public bank a part of its policy. The hon. member for Vancouver Centre has referred already to what I said when speaking in this house on February 27, 1933, in outlining the position of the Liberal party on the central bank. I should like to read again the words quoted by the hon. member for Vancouver Centre. Referring to the control of credit and stating the position of the party with respect to the control of credit, I said:

The Liberal party believes that credit is a public matter, not of interest to bankers only, but of direct concern to the average citizen. It stand's for the immediate establishment of a properly constituted national central bank, to perform the functions of rediscount, and the control of currency issue, considered in terms of public need. A central bank is necessary to determine the supply of currency in relation to the domestic, social and industrial requirements of the Canadian people; and also to deal with the problems of international commerce and exchange.

I desire to direct special attention to these words:

[DOT]-a properly constituted national central bank-

Also:

To perform the functions of rediscount, and the control of currency issue, considered in terms of public need.

Note "in terms of public need" not possible private gain.

When this bill came up for second reading very careful consideration was given by this

Bank of Canada-Mr. Mackenzie King

side of the house as to whether or not the bill should be allowed to pass its second reading, without division, inasmuch as, in the form in which it was drafted, it appeared to be a bill for a privately owned and privately controlled central bank. It was only when the Minister of Finance gave the house the assurance that the questions of ownership and control were to be left open and might be very fully discussed in the committee to which the bill was to be referred, and that the question of private ownership and control was not to be considered as being in any way the principle of the bill, that the only principle involved was that of the establishment of a central bank, that we as a party decided to allow the bill to go to committee without division. Had we believed that there was a mental or any other reservation on the part of the Minister of Finance or of the Prime Minister with respect to the greatest freedom being permitted the committee in the consideration of the question of public ownership and control, I may state quite frankly that we would have been a unit against allowing the bill to pass without division.

This afternoon the Prime Minister has referred to one or two factors which he claims are in the nature of control by the government. One is the appointment of the deputy minister of finance as a member of the board of directors, although without any right to vote. Another is the power of veto given to the governor in certain contingencies. These amendments which inserted an element of control were proposed by hon. members of the committee who are on this side of the house. However, those amendments are insignificant in comparison with the other amendments moved from this side and which were very substantial and in our belief absolutely necessary. Those one or two small amendments were all that we were able to secure after a very strenuous battle. They are not sufficient, however, to have it for one moment assumed that in this bill there is such a thing as effective government control. The Prime Minister has referred to the right of the government to appoint the governor and the deputy governor, but that is a right which relates only to the inception of the measure. We are passing a bill which is to be upon our statutes for years to come and which it has been stated can only be amended or repealed with the consent of both houses of parliament and the bill states that the governor and deputy governor appointed by the

government hold office only for a stated number of years. Thereafter the governor and the deputy governor are to be appointed by the shareholders.

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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:

With the approval of the governor in council.

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LIB

William Lyon Mackenzie King (Leader of the Official Opposition)

Liberal

Mr. MACKENZIE KING:

Yes, but the appointment is by the shareholders, the governors become appointees of the private interests; so that the bank in the course of a very short time becomes representative entirely of private interests. Now that, it seems to me, is a very serious matter faced as we are in times like the present with what appears to be the most formidable of all conflicts of perhaps any age, namely, that of the money power versus the power of government as represented by the people in their houses of parliament. That is the issue, as I see it, the crux of the whole situation

whether this parliament, representing the people of Canada, is to create a great financial institution which is to control the credit and currency of the country, place that institution in private hands, both as to ownership and control, hand over to this privately-owned and controlled institution many of the functions and powers which the government itself at the present time is exercising, part in large measure with what the government now possess in the way of control of credit, part with what it possesses at the present time in the matter of the right of issuing currency, and hand over gold reserves and securities which are at the present moment in its possession-all this to be handed over to an institution which is to be privately-owned and controlled, or whether the institution to which these rights, powers, possessions and privileges are to be given is to be subject to an effective measure of government control. That, I think is a very serious situation, and there is no argument, it seems to me, which it is possible to bring forward that can really defend action of that kind on the part of this parliament. If it were of necessity a choice solely between the extreme of absolute government ownership and government control on the one hand, and on the other complete private ownership and private control, I could understand that there might be many who would find it difficult to decide one way or the other, there being no possibility of a middle course which would help to avoid what would be regarded as the dangers in either extreme. But there is a middle course, and it is that middle course which the government is apparently unwilling even to consider at the present time. That middle course would be to enable the gov-

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Bank of Canada-Mr. Mackenzie King

eminent to appoint a certain number of directors, a number sufficient to give the government control of the central bank, directors who would not own shares but would represent the government, and who would sit along with the directors who were the nominees of those who owned the shares. Short of complete government ownership and control, could there be anything in the interests of all classes generally which obviously would serve the common interest better than that? One group of directors would be watching the actions of the bank from the point of view of investors, and the other group would be watching the actions of the bank from the point of view of the interests of the public at large; and these two in conference from day to day would undoubtedly be able to prevent many extreme actions being taken which might be contrary to the public interest, and they would also be able to bring about that unity and continuity in the affairs of the bank which the Prime Minister regards as so all-important. It is because we feel that even yet there might be a chance of saving the situation in some such way that the hon. member for Vancouver Centre has brought forward the amendment he has.

When the bill was in committee I spoke of the dangers which I feared might arise in the way of conflict between the government and the bank. In a word I indicated that they might develop to the point where in the public mind they would become a conflict between those in authority, as the government of the day, and the money power in the land; and that if that conflict ever arose we should have the most serious situation with which it is possible for a country to be faced. I think that possibility ought to be avoided at every cost. I do not think we ought to pass in this house a measure which is liable some day to create a conflict of that sort. The Prime Minister the other evening stated his position in these words. They appear in Hansard of June 21, at page 4195:

What we wish to secure is a policy based' upon the economic conditions of the country, not a policy of the bank based upon policies of a government. That is what the right hon. gentleman desires.

Now all parties wish to have a policy based upon the economic conditions of the country. The Prime Minister was not stating the matter quite fairly, because we know all parties wish to have a policy based on the economic conditions of the country. What the Prime Minister wants, what he meant, is a policy of the bank based upon the will of the financial

interests, policies of the money power, and he made that quite clear when he said in the earlier part of the same statement:

If the government were in complete control of the bank it would mean that if you had one government succeeded by another the bank would naturally change its policy, assuming that the policy was as the right hon. gentleman suggested. Then you would have governments controlling policies without continuity.

In other words, the Prime Minister does not wish that the government should in any way control the policy of the bank, but rather that the policy of the bank should be controlled in accordance with the views of the bank itself, the bank representing financial interests. In support of his position the Prime Minister raises this bogey of political pressure. Now it is necessary to keep in mind the distinction between what is meant by political pressure in the sense of a government being subject to pressure from its own followers and supporters in the country and what is meant by obeying the will of the people with respect to large national policies as expressed by the people themselves in the manner in which the constitution enables them to express their views. As regards there being danger of political pressure on a Prime Minister and government with respect to matters relating to a central bank, I question very much whether it need be greatly feared. There are undoubtedly considerations of sectional, racial and religious interests that arise in all matters of government, but they are not the determining factors. What any leader of an administration seeks to do as far as he can, what any government seeks to do as far as it can, is to harmonize different, and often conflicting, interests in the country; but always I venture to say, in any important appointment, the first consideration will be the fitness of the man for the position and the rightness of the position itself. When these things can be equally effected by adding to them further considerations, of what may help to keep the country united, be they economic or racial or religious, then I think it is altogether desirable that these other considerations should be taken account of. But it is absurd to talk about these considerations as controlling the situation with respect to any matters of government of a major character. On the other hand, questions of the policies which are to control in matters of government are all-important. Every parliament should be careful not to enact any measure which will create an institution that at any time may be indifferent to, to say nothing of being defiant of, the policies of a government as expressed by the people

Bank of Canada-Mr. Mackenzie King

through their representatives in parliament. To permit anything of the kind is to create a power which is greater than parliament itself. It is especially dangerous when the power is that of financial interests, the money power so-called. A central bank is an institution to which the state delegates a certain very important function, the control of the monetary system, but this function has definite social and public aspects and must be regarded as such. The report on which this bill is based at paragraph 207 says that the state "must necessarily retain ultimate sovereignty in matters affecting the currency." The important point is that the central bank is a social function. It is, to say the least, questionable whether a created private organization should have this power delegated to it. There can be no question that it is the duty of the central bank to stand out against the pressure of governmental policies which the bank believes to be injurious to the public good. But if a government decides that a certain monetary policy-using the term in its broad sense-is desirable, and if it is prepared to follow it at all costs and to be responsible to the public for it, then it must be, under a democratic scheme of government, the duty of the central bank to carry out that policy. That, I think, is sound and will be appreciated as lying at the essence of democratic control on the part of the state of all that relates to the affairs of the people themselves.

I touched on all this at some length the other evening. I spoke as well of something else, and that is the danger of this institution which we are creating, establishing policies that will be in direct opposition to those of the government of the day, and policies which may be able to set at defiance or wholly to defeat those of the administration of the day. As I have said over and over again, I believe the Prime Minister is interested in furthering imperial policies with respect to trade, shipping, finance, defence and all other aspects of our economic life. So far as hon. members on this side of the house are concerned we believe in national policies which will retain freedom to our parliament at all times with respect to carrying out the will of the people as it may be expressed in regard to any of these questions, whether they be trade, shipping, finance or defence. We believe so far as Canada and other parts of the empire are concerned, that any step which lends itself to the development of imperial policies in a way that may bring about a conflict between an imperial and a national point of view in matters of government is going to be the first 74726- 276

step towards the dismemberment of the empire itself. For that reason we are very strongly opposed to any measure in which we see a danger of that kind.

The present legislation, establishing the Bank of Canada, is a definite step in the establishment of an imperial policy of finance, under which the financial destiny of Canada is placed under persons independent of parliament, who can maintain, through the Bank of England and the other central banks of empire nations, a definite and positive control of empire currency, credit and trade. That being the case, I feel very strongly that this measure ought to be reconsidered before we are asked to vote upon it.

The Bank of Canada, as constituted by this proposed enactment, will undoubtedly be the means of vesting in the Bank of England the management and control of Canada's foreign exchange and Canada's internal credit administration. As I said the other evening, once a nation parts with the control of its currency and credit, it matters not who makes the nation's laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile. Those are strong words; they constitute a strong argument and they are words of which this house ought to take full account before it is too late.

May I, just before I conclude, draw attention to the nature of the struggle there has been in Great Britain itself between the government of that country and the money power there as represented by the Bank of England. What I wish to point out is that for years, for decades, for almost a century past the government of England has been trying more and more to free itself from the control of the banks and the financial interests as represented by the Bank of England in particular. They have been seeking to get the control of credit more and more into the hands of the state, into the hands of those who represent the wishes and the will of the people. This has been a long and very hard struggle. At the present time the whole trend of discussion on financial matters in Great Britain is to bring about in Britain itself a larger measure of state control of the banking system and of credit. What are we doing? We to-day are deliberately seeking to part with what measure of control we now have, and to make the financial interests even more independent of parliament than they have been heretofore.

4366 COMMONS

Bank oj Canada-Mr. Mackenzie King

I do not know that I can better emphasize what I have been saying about the situation in England than to refer to a record which Mr. Gladstone has left of the position that he encountered when as Chancellor of the Exchequer he began to try to introduce certain financial reforms. It throws a good deal of light on the significance of what by this measure is being done by the present administration in Canada. In the Life of Gladstone by John Morley, volume I, at page 519, Lord Morley refers to "the controversies on currency that thrive so lustily in the atmos-sphere of the Bank Charter Act." He deals with Mr. Gladstone's effort "to readjust the banking relations, properly so called, between the bank and the state." It was in connection with Mr. Gladstone's effort to readjust those relations that Mr. Gladstone himself drew up a memorandum which is referred to as an "undated fragment" and which Lord Morley has included in the appendix of volume I under the heading of "Mr. Gladstone and the bank." I read this passage to hon. members and ask them to consider it very carefully. This is Mr. Gladstone speaking:

From the time I took office as Chancellor of the Exchequer I began to learn that the state held in the face of the hank and the city an essentially false position as to finance. When those relations began, the state was justly in ill order as a fraudulent bankrupt who was ready on occasion to add force to fraud. After the revolution it adopted better methods though often for unwise purposes, and in order to induce monied men to be lenders it came forward under the countenance of the bank as its sponsor. Hence a position of subserviency which, as the idea of public faith grew up and gradually attained' to solidity, it became the interest of the bank and the city to prolong. This was done by amicable and accommodating measures towards the government, whose position was thus cushioned and made easy in order that it might be willing to give it a continued acquiescence. The hinge of the whole situation was this: The government itself was not to be a substantive power in matters of finance, but w-as to leave the money pow-er supreme and unquestioned. In the conditions of that situation I was reluctant to acquiesce, and I began to fight against it by financial self-assertion from the first, though it was only by the establishment by the post office savings banks and their great progressive development that the finance minister has been provided with an instrument sufficiently powerful to make him independent of the bank and the city power when he has occasion for sums in seven figures. I w-as tenaciously opposed by the governor and deputy governor of the bank, who had seats in parliament, and I had the city for an antagonist on almost every occasion.

I ask the house to listen to what Mr. Gladstone referred to as "the hinge of the whole situation." It is not less the hinge of

the whole situation in Canada to-day as it will be with respect to the Bank of Canada after this act is passed, than it was in Great Britain as respects the Bank of England in Mr. Gladstone's day as regards the relations of the government and of the bank, or to express the same thing in its rightful proportions the relations of parliament and the money power:

-the government itself was not to be a substantive pow-er in matters of finance but w-as to leave the money pow-er supreme and unquestioned.

That is exactly what the government proposes to see is done by this bill in its present form. In matters of finance it makes the bank supreme; it makes the bank the body that will determine the monetary policy of the country, that will have the power to enforce that policy and to resist any monetary policy that may run counter to it. This privately owned and privately controlled institution is to be permitted to do that. The government itself is not to be a substantive power. That is a pretty serious situation, Mr. Speaker. As I see it what we are doing in following the government amounts pretty much to this: We are handing over to an institution that is our own creation supreme power in the matter of financial policy, in the matter of the control of social credit and in the issue of currency. We are parting with all these things to this institution, allowing it to go its way and we leave ourselves as the representatives of the people, in a position where, once the bank is instituted, and free to pursue its own course, w-e no longer will have any real control over it.

Hon. members of this house have witnessed, no doubt frequently, one of our great ocean liners about to leave port. First it takes on board the passengers and cargo; the crew are already aboard, then come the officers and the captain. Finally, the gangway is pulled up; the fastenings are loosened, and little by little the vessel moves away from the shore. Once out into the harbour it may lie at anchor for a short time. Then it draws up anchor and proceeds to sea, absolutely free from any relationship with the port it has just left or with those who have been responsible for giving it the powers, the passengers and the cargo it possesses. As I see it that is exactly what we are doing with this Bank of Canada. We are creating a bank that is to control the credit, to issue the currency and to hold the gold reserves of the country. In this new banking venture, we are loading the new vessel

Bank of Canada-Mr. Irvine

of state-the Bank of Canada-that is being created by the state with the gold reserves out of our treasury, together with our securities, and we are giving it all powers with regard to the issue of currency and the control of credit. Having done this the Prime Minister appoints the captain and first officer and tells them to go aboard. We have already provided that the passengers are to be the private shareholders, so they are already on board. It having been provided that the passengers and the captain and officers are to have full possession of the entire precious cargo, this house then begins to release the vessel from her moorings. The Prime Minister gives orders that the gangplank is to be drawn up, no subsequent governor or deputy governor is to be appointed by the government, and no directors. This House of Commons is to have no further opportunity save by the sanction of the other house of parliament, to get aboard the vessel, or to say what is to be done either in relation to its cargo or in regard to the direction in which it is to go.

The bill goes from here to the other house, and what happens? The next step is there taken; the fastenings are further, almost completely loosened, and when the bill passes that house, the new ship, the Bank of Canada, gets a little further out on its own. It may lie at anchor for a short time until His Excellency the Governor General comes to give the bill assent. Then the anchor is drawn up and what is the position? The Bank of Canada starts out on its own, in the world of finance, free to do as it pleases with respect to the policies it seeks to put into force, and with the powers which have been given to it, and this House of Commons, save in so far as the other 'house approves, has no power or control whatever over this institution.

I put that picture forward in a very simple and, I am afraid, haphazard sort of fashion, but it is one which should bring to the minds of everyone a very clear realization of the position this House of Commons is going to be in from now on in relation to this new Central Bank, unless one further provision is made; that is, the provision that there shall be a link between the government and the bank in the nature of a majority of directors to be appointed by the government which will assure some immediate and direct relationship between the two. It is to be hoped that policies of the bank and of the government may not conflict, but where there is a conflict of policy on a matter of major concern to the 74726-2781

people, we should see to it that provision is made whereby the will of the people should be made to prevail. This can only be effected as matters now stand by some provision which will ensure representation of the government in a majority control on the board of directors of the bank.

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UFA

William Irvine

United Farmers of Alberta

Mr. WILLIAM IRVINE (Wetaskiwin):

Mr. Speaker, I am sure it is not necessary for me to explain, either from my personal point of view or from that of the group in this corner, that we believe sincerely that the financial institutions of this country should be publicly or socially owned. For upward of twelve or thirteen years in this house we have urged that position from time to time, so in speaking a word for that principle now I need make no apology whatever.

I am rather sorry that the amendment moved by the hon. member for Vancouver Centre (Mr. Mackenzie) is so ambiguous as to be very difficult to follow, and indeed as to make it practically impossible for anyone believing in public ownership to support. I do not wish to be unkind in referring to this amendment but really it is the most peculiar piece of construction I have ever seen in my experience in the House of Commons. The hon. gentleman concluded his argument by quoting something that was a "liberal thing," and I would say this amendment certainly is a liberal thing. It begins by asking for a government owned and controlled bank. Then it asks for a government owned bank, and then for a government controlled bank. In God's name what sort of bank do they want? I presume there are some people who want government owned banks in Canada; therefore the Liberals can say, "We asked for a government owned bank." Undoubtedly there are some people who are very much afraid of government control of anything and they may say, "Well, we asked for a government owned bank without having government control." Then there may be some people who believe in government control without government ownership, and the Liberals may say, "Well, we asked for that too."

This is most decidedly and characteristically a Liberal amendment. The right hon. gentleman who has just taken his seat (Mr. Mackenzie King) has spoken to it admirably; no man in this house knows what sort of a bank he spoke in favour of. I would almost say that I doubt whether, at the moment, he knows himself.

Topic:   BANK OF CANADA
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Some hon. MEMBERS:

Order.

Bank of Canada-Mr. Irvine

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UFA

William Irvine

United Farmers of Alberta

Mr. IRVINE:

I am not seeking to reflect on the unquestionable integrity of the right hon. gentleman, nor on his undoubted intellectual ability; I want my hon. friends to understand that. But the right hon. gentleman did say that the question was a very debatable one, and if that means anything at all it means that he was in doubt-and the right hon. gentleman is perfectly right to be in doubt about any issue-at this moment as to whether that bank should be government owned or privately owned. When the hon. member for Vancouver Centre began his remarks he took some time in trying to establish that the amendment he was moving was in accordance with the position taken in previous debates by his right hon. leader. Thus he made it appear that in moving the amendment he was speaking for the entire Liberal party. It is unfortunate I think that the right hon. leader of the opposition should have so clearly revealed in his address that the policy indicated in the amendment with respect to public ownership is not the policy of the Liberal party.

Under (b) of the amendment what sort of bank would we have, if it were government owned without being government controlled? Who is going to control a government owned bank?-a private institution? And if it does not mean that it is possible to have a government owned bank without being government controlled, then it means absolutely nothing at all. Then, paragraph (c) of the amendment indicates that the Liberal opposition would be content with a government controlled bank which was not government owned, while (b) indicates that they would be content with a government owned bank which was not government controlled. Paragraph (a) indicates that they would like to have both at the same time.

What I am about to point out may be regarded as having a political intent. I do not as a rule seek to establish any particular rights, from our point of view. I usually speak on the issue for what it is worth. But when the hon. member for Vancouver Centre tries to establish that a policy of a government owned and controlled bank is what the Liberal party stands for and calls upon the house to adopt, then I must take issue with him and indicate that if that has become the Liberal policy it is because the group in this corner of the house have popularized it in the minds of the Canadian people, and because at the next general election it is quite possible that those who stand for a publicly owned bank will have a considerable following. Here

rMr. Irvine.]

is a fact wdiich I believe will substantiate the point I am making, namely that the Liberal party in the mouth of its leader has never declared for public ownership of the financial facilities in this country. In this connection I ask hon. members to look at Hansard for April 26, 1932, upon which occasion the right hon. leader of the opposition was speaking in the budget debate in reply to an amendment which had been moved by an hon. member in this corner of the house. Before referring to the amendment the right hon. gentleman said:

May I come back now to the other part of the subamendment of the Progressive party? It is as follows:

"That in the opinion of this house, as a first step towards general economic reconstruction, our financial system should be nationalized, and provision be made to issue immediately sufficient money to bring the value of the dollar as speedily as possible to that point at which the major portion of our debts were incurred during the -war; stabilize the dollar at this point internally and thereafter manage credit and currency issue to secure and maintain a stable price level within Canada."

You will observe, Mr. Speaker, that We were asking in that subamendment for the nationalization of the banks. We asked also for a measure of inflation or, if you like, the issue of sufficient money to carry on the business of the country and to reduce debts by the amount they were increased by deflation. We asked also for a stabilization of the dollar at that point internally, and for the management of the credit of the nation.

May I point out that in the legislation of this session there has been a decided move towards at least two of the principles included in that motion. Let us see what the right hon. leader of the opposition had to say at that time about nationalization. These are his words:

That is the substance of the subamendment. It suggests two things: First, the nationalization of our financial system and, second, the direct adoption of a policy of inflation. May I in the first instance ask this question of those who have moved this subamendment: If our financial system is to be nationalized, whom are you going to entrust with that work? Are you going to entrust the government opposite with it? Are you going to entrust hon. gentlemen opposite, who have dealt with the tariff in the manner in which they have, under the freedom which has been given them, to nationalize the finances of this country? Yet that is wrhat this amendment is suggesting, because it is addressed to parliament as it exists at the present time. May I ask another question? Were a Liberal administration in office would you entrust a Liberal administration with that task? May I ask still another question? Were you in office yourselves,-

Bank of Canada-Point of Order

Speaking of hon. members in this comer of the chamber-

-would you undertake the work of nationalizing the finances of the country? I do not believe that any group of persons who have given thought to these matters would attempt a task of that kind in Canada at this time. And, if we ourselves would not undertake a scheme such as this, what would be thought of Canada by other countries if it were announced ts-morrow that this House of Commons had attempted any such task as the one indicated in the subamendment?

There is a very clear and distinct declaration made over two years ago, namely in 1932, by the right hon. leader of the opposition, that they would not countenance this parliament or this government taking charge of the financial institutions of this country. He was clearly, unmistakably and unequivocally stating the position of the Liberal party, and so far as I can make out from the statement made to-day by the right hon. gentleman that position has not altered. On two occasions he has stated very clearly, and only a few moments ago repeated the statement, that the whole matter as to whether or not the financial institutions of Canada should be owned and controlled by the government or should be controlled and owned by private institutions is a matter for debate. So, while I have no doubt that the hon. member for Vancouver Centre stands very sincerely for the socialization of finance, I am afraid he cannot speak for the whole Liberal party in making any such amendment.

Let me add, further, that this corner of the house does not think the matter is now open for debate. We are quite certain that the time for debating this matter was in the last century; we feel it has been debated and redebated, and that it has been settled in the minds of those who pay any attention to debate, that no private institution should take control of the finances of any country whatsoever. The issuing of currency, the managing of credit and the control of the whole financial institution are peculiarly functions of the state. That is the position hon. members in this corner have held consistently and now hold. As I say, I cannot vote for the amendment because it does not mean anything. As I pointed out earlier in my remarks, it is a sort of omnibus, which is on an eternal and circuitous road leading nowhere. I move, Mr. Speaker, seconded by the hon. member for Winnipeg North Centre (Mr. Woodsworth), that all the words after "be" in the fifth line of the amendment be struck out and the following words added, "government owned and controlled." That removes

all doubt. Those who vote for that unequivocally stand for government ownership of this central bank and the country will know exactly what we mean.

In concluding I desire to say that while the government has no doubt excellent reasons from their point of view for the position which they have so firmly held in this regard, and while the argument which the Prime Minister made this afternoon and on previous occasions with regard to the unhealthy influence which politics as they exist in Canada to-day may have on a government controlled institution, I still think that his argument is more of a condemnation of the weakness of our own parliamentary system than it is an argument against the socialization of the financial institutions of the country, and I believe that we should endeavour at this session of parliament and at this moment to secure complete government ownership and control of the central bank.

If there is a vote to be taken on the main motion I shall then have something to say on the merits of the bill on the basis on which it is drawn and the advantages which, in spite of the fact that it is not socially owned, the new central bank does give over anything which we have previously known in this country, but for the moment I shall have nothing further to say beyond referring to the closing remarks of the right hon. leader of the opposition when he emphasized that we are now making the central bank supreme in Canada. The fact of the matter is that even when the right hon. gentleman was in power himself the chartered banks of this country were supreme, and were more supreme than this central bank will ever be, for there are restrictions here while there were no restrictions to the powers of the chartered banks before in the matter of the control of credit. So there is no need for us to blink the issue. We in this corner want outright social ownership and control, but if this parliament votes that down then unquestionably the new central bank will be a great improvement on the financial institutions of this country.

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June 27, 1934