February 4, 1935

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) :

Before we proceed to the next order I should like to inform the house that it is my purpose in order that business may be expedited to have printed after each of the resolutions standing in my name on page 12 of the order paper the conventions to which the resolutions refer so that they will appear on the order paper to-morrow with the conventions. I find that only a few copies remain for distribution. This will render it possible for all the members to read the conventions to which reference is made in the resolutions.

Topic:   BUSINESS OF THE HOUSE
Subtopic:   TEXT OF GENEVA CONVENTIONS TO BE PLACED ON ORDER PAPER
Permalink

NATIONALIZATION OF BANKS

PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT

UFA

William Irvine

United Farmers of Alberta

Mr. WILLIAM IRVINE (Wetaskiwin) moved:

That, in the opinion of this house, all banking facilities, including both the chartered banks and the central bank, should be nationalized as speedily as possible.

Nationalization oj Banks

He said: Mr. Speaker, this question of nationalizing the banking facilities of Canada has been put forward in this corner of the house for many years. In fact, I think it was in the first speech that I was ever privileged to make here that I offered the suggestion. Since that date it has been moved or discussed at almost every session since 1922. Perhaps the most notable attempt to have the house adopt this principle was in 1932 when on April 27 of that year a resolution moved from this section was voted upon. I shall have occasion to draw the attention of the house to that discussion later, but my object in making mention of the number of times this question has been discussed is merely to say that I do not propose to cover the old ground of argument. It is sufficient I think to draw the attention of hon. members once more to the main principle involved in the resolution and to seek the endorsation of the house for that principle. The principle of the resolution is that the financial instruments of the nation and the social credit by and through which such instruments operate should not be controlled by individuals for private ends but that currency and credit should be in the hands of the government and administered by a body responsible to the government and to parliament. This principle I venture to suggest is growing in favour.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
CON

Pierre Édouard Blondin (Speaker of the Senate)

Conservative (1867-1942)

Mr. SPEAKER:

Order. I find it just the least bit difficult to hear at this end of the chamber.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
UFA

William Irvine

United Farmers of Alberta

Mr. IRVINE:

The pressure of the tragic effects of the past few years has made some limping minds make haste in regard to their consideration of this question. My conviction is that the Canadian people would very readily endorse this principle were they given an opportunity to vote on it directly. Unfortunately all questions such as this, being included in the programs of the various parties, when they go to the people are entangled by partisan considerations and it is seldom if ever that the people have an opportunity of voting directly on a measure that they might otherwise endorse. If this question were submitted to the people by referendum I would be surprised if this question were submitted to them by referendum if it were not carried by a tremendous majority.

The government of the day has to some extent acknowledged the principle of national ownership. If we take note of the central bank act which was passed last session we shall find that a considerable number of restrictions are placed there against private

operators doing what they please with the national credit, principles of restriction which we do not find in any other bank act which has ever been passed in Canada. This would seem to indicate that the government is well aware that it is not safe to entrust to private corporations without any control by the government, the whole financial structure and facilities of the country. But I would draw the attention of the house to a direct statement made by the Minister of Finance (Mr. Rhodes) when discussing the bill on its second reading. I am quoting from Hansard of 1934, page 826 where the minister, having described the functions of the central bank, made this statement:

It cannot be too strongly emphasized that the exercise of these functions lies outside the power of any single commercial institution or groups of commercial institutions. No purely profit-making institution operating in a competitive system can afford to place social interests before its own in regard to credit policy.

That statement embodies the whole question at issue in the discussion of this resolution. It is frankly there admitted that the very pressure of competition would preclude a private enterprise from taking an unbiased view of certain financial issues. When with that we consider the fact that those who control our banking facilities are in the business for their private profit, we have there an additional reason why they should not be entrusted with the powers which they to-day have both in the central bank and in the chartered banks.

I am glad that the Minister of Finance (Mr. Rhodes) was so explicit in his statement regarding this principle. I regret of course, as I said last year, that the Bank of Canada was not socially or nationally owned at its inception, but although it was not taken over by the government last year I know no good reason why it should not be taken over this year, if the house has changed its opinion. I hope that both the hon. gentlemen to your right, Mr. Speaker, as well as hon. gentlemen to your left, will rise in their seats and vote for this resolution when the time comes. I know that the principle of financial control and ownership by the government has been very strongly advocated by certain left-wing Liberals; I have been much cheered by hearing them advocate it, in the west especially, in the last four years. These left-wing Liberals have advocated the nationalization of finance, and have stated over and over again that that is part of the Liberal policy at this time. I hope that is true. If it is then of course we are going to receive for this resolution to-day

Nationalization oj Banks

much greater support than it has received at any other time in this house. I should like to see this resolution accepted, I hope the government will accept it, but if the government does not accept it I hope that at any rate every hon. member to your left, sir, will support it when the vote is taken.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
LIB

Wilfred Hanbury

Liberal

Mr. HANBURY:

We will not.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
UFA

William Irvine

United Farmers of Alberta

Mr. IRVINE:

An hon. gentleman says he will not. I wish he would write a letter to Mr. Gerry McGeer and tell him that. I wish he would inform the hon. member for Vancouver Centre (Mr. Mackenzie) that he will not vote for this. Then we should at least know where we are and whether the Liberal party does or does not stand for this principle. If nationalization of banking has become a part of the Liberal policy it has been adopted quite recently. Of course, there is no harm in that; I do not see why the Liberal party should not have the privilege of changing its mind, but I refer back to the debate which took place on this very question on June 27, 1932, to which I referred in my opening remarks. At that time the C.C.F. had moved for the nationalization of our banking facilities and the right hon. leader of the opposition (Mr. Mackenzie King), the leader of the Liberal party, had this to say on the subject:

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 what 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 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 to-morrow that this House of Commons had attempted any such task as the one indicated in the subamendment?

That was the position taken in 1932, and I have not heard any statement from the leader of the Liberal party in this house contrary to the position he took then. I know he made a statement last year on this issue, which was not as clear as it might have been,

and he quoted it a few days ago in a debate in this house. I shall quote it again. He said:

Liberalism 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 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.

In the first part of that statement it seems that the right hon. leader of the opposition was leaning towards the principle of socialization of finance, but I must query the meaning of " a properly constituted national bank." If my memory serves me right the right hon. gentleman gave some explanation last year of what he meant by a national bank, namely, that it should be national in the sense that all stock should be owned by Canadians. That, it is true, is one kind of national bank. Another kind of national bank is one that is just called a national bank. Another kind is a private corporation such as we have in the Bank of Canada, which has been given by this parliament statutory authority to deal with the credit policy of this country. What I would like to know is whether the leader of the opposition meant by this statement that the Liberal party stands for properly con-situted, nationally-owned and nationally-controlled banking and credit facilities in Canada. That is what I should like to be sure about. It seems, I say, that the Liberal party is coming towards the acceptance of that view, and I sincerely hope it is. I know that the left-wingers have come to it. The statement of the leader of the opposition a few days ago, which I have just quoted, would seem to indicate that he has some inclination that way. I am glad to have the opportunity of putting this question before the house in the hope that the Liberal party will rise and vote for this resolution and make it a real issue in Canada. In view of the very general endorsement which the principle has received from the people themselves, in view of the fact that the government in some small measure has recognized the principle involved in this resolution in the restrictions imposed upon the central bank, and in view of the statements of Liberals on the hustings and the rather veiled statement of the leader of the opposition, it would appear that the principle is pretty well accepted that no individual or private

FEBRUARY 4, 193d

Nationalization of Banks

corporation should be entrusted with the management, ownership and control of banking and credit facilities in Canada. If that principle has been as universally adopted as certain statements would indicate, then I see no reason why we should hesitate to take action commensurate with our acceptance of the principle.

The house will note that the resolution calls for the nationalization of financial facilities, which include not only the central bank but the chartered banks of Canada as well. The chartered banks, of course, are the means by which the policy of the central bank may become effective. There is no other machinery and there are no other facilities by means of which the central bank can effect its purpose in the control of credit, and I think the house will agree when I say that the chartered banks have it within their power, if they so desire, to render futile any policy of a nationally owned central bank, so that it would be entirely inadequate and indeed, I would say, foolish for this parliament to stop short of nationalizing the whole financial system. It is not sufficient that we should advocate the socialization of the central bank alone; we must have the socialization of all the facilities that are essential in the handling of our financial system.

We in this corner of the house believe that both the central bank and the chartered banks should be nationally owned and controlled. I am not advocating the taking over of the chartered banks with their capital stocks and their huge, palatial buildings on the most expensive comers of the various cities. I am advocating the nationalization of the facilities, the taking from the bank of the power they now have of dispensing credit. That power was granted to them by an act of this parliament; that power can be taken from them in the same way. As to the details of dealing with them in the taking over process that is a matter of comparatively little consequence. I do not see why the property of the banks should not be treated as the property of any other corporation is treated, which has been superseded by a more effective institution or which has become defunct for any reason whatever. Of course the equipment of the banks may be taken over, if the government needs it, at the replacement value, and probably the banks would be very glad to make any arrangement of that sort. I merely want to indicate that any difficulty which might be encountered with the banks after we had taken out of their hands the facilities which they now administer would be a small matter compared 92582-29

to the great question of the control of credit by the nation in the interests of the people.

Now I should like to spend a few moments on the main object of the nationalization of finance. To nationalize our banking system and to go no further would not help us at all. It will be clear that we could nationalize the banking system and continue the same system that we have now, under national control. That is not the objective we have in view, of course. We ask for the nationalization of our financial facilities because finance must be reorganized on the exclusive basis of public service, and while these institutions are in private hands we are not allowed to reorganize them on that basis. But when we have nationalized them we will have an opportunity to regain access to the social or national credit in order that it may be used properly, scientifically and safely in the interests of the people as a whole. In the next place, if we secure control of these institutions we will be free to reorganize the whole financial structure on a goods and services basis instead of a theoretical metallic basis, which, although largely discarded throughout the world, still limits the operation of finance in this country. I think no one will deny that to-day finance is the most important instrument of reform that the government may find at its hand. Our financial instruments have been and still are handled in a manner which has very effectively defeated the object of industry. Those of us who last year read time and again of the vast quantities of goods destroyed by capitalistic administrators throughout the world, while on the other hand in all those countries there were millions of people in dire need of the very goods so wantonly destroyed realize just how important money is to the economic life of the people. I do not think anyone will deny that if the people had money in their pockets it would not be necessary to destroy much of our goods. I do not think anyone will deny that this is economic waste; it is worse, it is economic insanity for an industrial concern to engage in the production of goods and then proceed to destroy those goods instead of having them go to the consumers, which was the only reason for their production.

I have said that we hope to regain access to social credit. That social credit is the belief in the power of the people of Canada to produce the goods and services that are necessary for the well being of the Canadian people, and the willingness to finance both production and distribution to the extent of our capacity to produce these goods and services. If that financing principle is adopted very soon we

Nationalization of Banks

will find little difficulty with our distribution. To-day our difficulties centre largely around this question of distribution. Behind all financing, is social credit which to-day the banks have sole authority to use t.o any extent they desire or which they may refuse to use if they are so disposed, and for which they do not hesitate to charge the people of Canada a high rate of interest whether it is required for personal use or for social use. That social credit we want to get control of, to take out of the hands of private bankers, whether administered by a central bank or by chartered banks, and to use particularly in the solution of the distribution problem. I believe that there is a tremendous source from which we may draw financial assistance in the distribution of goods. Everyone realizes there is no use in having a well equipped system of production, one capable of producing immense quantities of goods, unless the people are permitted to use it. Whatever theory of economics we may hold I believe all of us must agree that if people have money in their pockets, and if goods are on the shelves of the warehouses of our country, those people will not starve. If we have access to social credit and are in a position to monetize the real wealth created, and find an adequate means by which that may be distributed to the consumer, then we have at least in part solved the greatest and most difficult problem which modern civilization presents. I shall not develop that point any further, for the moment, more than to say that it is with a view to creating a condition whereby the social credit resources of this country may be available to the people themselves, without restrictions imposed either as a result of superstition, the lust for profit or the incapacity of private corporations, that this resolution is moved.

Whether or not hon. members agree with many of the economic views expressed by my associates and myself, I conclude my remarks in the hope they will agree that the nationalization of finance is not only a necessary move but that now is the opportune time to make it, and that it is a move which has become so acceptable to the general public that we need not hesitate voting for its adoption.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Hon. E. N. RHODES (Minister of Finance):

Mr. Speaker, I trust the fact that nobody, except the mover, desires to speak upon the motion does not reflect the views respecting its merits held by hon. members at large. At

all events, I regard the motion as one of great importance, involving as it does an assertion of principle of great national import, and one which obligates me at least to make clear the attitude of the government with respect to it. The resolution in question reads:

That, in the opinion of this house, all hanking facilities, including both the chartered banks and the central bank should be nationalized as speedily as possible.

In other words it asserts the principle that the government of Canada should own, operate and control all our banking facilities. Although that is the most important, in fact the only principle contained in the resolution, the hon. member spent a considerable proportion of his time in a discussion of economics, and a discussion of various systems of banking and financial theories. May I suggest that while such discussion may be interesting, with all due deference it has no bearing upon the resolution. It has to be assumed that the system of banking adopted in this or any other country is that system best designed to serve the purposes of the country and at this stage any attempt to compare the relative merits of this financial or economic system with the merits of other systems is entirely beside the question. I should prefer to deal with the clear assertion of principle outlined in the resolution, namely the nationalization of banks and banking facilities in this country.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
LIB

Wilfred Hanbury

Liberal

Mr. HANBURY:

The socialization.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

I have noted one reference the hon. member made concerning my observations of last year when moving the resolution which preceded the introduction of the bill to incorporate the Bank of Canada. The words quoted, and to be found at page 826 of Hansard, are as follows:

It cannot be too strongly emphasized that the exercise of these functions lies outside the power of any single commercial institution or group of commercial institutions. No purely profitmaking institution operating in .a competitive system can afford to place social interests before its own in regard to credit policy.

Then, if you please, sir, the hon. member proceeded to draw the conclusion that it followed we must have national ownership and control.

Mr. fIRVINE: I should like to point out that I did not draw that conclusion from this statement. I quoted the minister to show that in that statement he had admitted the principle.

Nationalization oj Banks

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

I certainly accept the statement the hon. member makes, although I clearly drew the inference that he asserted my observation was proof that we must have national ownership and control. I will not admit that the contention of the hon. member is correct, or that he can properly make it. The assertion I made, which I have pleasure in reasserting, has reference to the fact that we required a central bank to exercise those functions, and the manner of the set-up of that bank, the policy adopted in setting it up, the legislation surrounding it and the safeguards with respect to it, are entirely different matters.

The main question is this: Is the central bank as set up capable of performing the functions outlined in the paragraph I have quoted, and to which reference was made by the hon. member. My contention is that all of those safeguards are to be found in the set-up of the central bank, as we have it to-day. I do not purpose covering the ground I traversed either on the occasion of the introduction of the resolution preceding the bill incorporating the Bank of Canada or upon the second reading of the bill. Hon. members who are interested will find my former remarks in volume 1 of Hansard for last session, beginning at page 823. My observations on second reading begin at page 1291 in the second volume.

What does the hon. member mean by nationalization? I take it beyond question that it means complete and unfettered ownership and control and operation.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
LIB

Wilfred Hanbury

Liberal

Mr. HANBURY:

Socialization.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

Socialization, in other

words, of our banking system, of our whole financial system, including the chartered banks. Let me say just here, lest I forget it, that my hon. friend in discussing the taking over of the chartered banks said this: I do

not mean that we should take over their enormous capital structure nor their palatial bank buildings; all I mean is that we who legislated these banks into existence shall take over these facilities. Does he mean that he proposes to take over the properties of the banks without compensation? Does he mean compensation or confiscation, because it follows that if his resolution were adopted and the method he proposes were followed we should add to the national debt of this country some hundreds of millions of dollars, and that circumstance must not be lost sight of.

92582-29J

I do not propose, as I said before, to traverse this subject at length, much less do I propose to traverse the whole ground covered in my speeches of last year, but I do desire to emphasize this circumstance, that there is a great deal of loose thought and confusion of mind in many quarters in distinguishing between national ownership, operation and control, on the one hand, and the using of a private instrument, if I may so term it, and setting up a quasi-ipublic trust for the purpose of accomplishing under government supervision the objects we have in mind in operating the Bank of Canada. On that point let me indicate this: While it is true that the capital for the Bank of Canada is provided by the public, it must foe borne in mind that if the government itself provided ail the capital, it in turn would have to borrow that capital from the public, so from that angle it matters not whether you issue bonds bearing 4^ per cent interest or offer stock upon which you pay 4J per cent interest. It is true that the rate of interest varies, but while the maximum amount which will ever be paid to the shareholders of the Bank of Canada is 4-V per cent, it must be borne in mind that we are not far removed from the day when the government itself in borrowing money had to pay more than that to the people of Canada from whom it borrowed it.

In the first place the shares of the Bank of Canada cannot be held directly or indirectly by a bank or any bank director, officer or employee. Second, the stock must be held by British subjects ordinarily resident in Canada, and the holdings under the statute are limited to 50 shares per person; whereas, as a matter of fact, the applications for the shares were so numerous that in order to divide the shares among upwards of 12,000 people who applied for them, the maximum holding is only a fraction of the original limitation imposed.

There is also no voting by proxy, as does take place in the ordinary banks, and which makes voting a perfunctory performance, the proxies being lodged in the hands of nominees prepared by the directors of those institutions. Not that I find fault with that practice; I am merely indicating that even in this respect eveiy safeguard was exercised, as all proxies must pass through the hands of the Minister of Finance who alone is responsible for voting at bank meetings for those who are not able to be present.

Again, the governor, the deputy governor and the assistant deputy governor are in the first instance appointed by the governor in

Nationalization oi Banks

council, and in the case of all subsequent appointments, the appointments must receive the approval of the governor in council.

Furthermore, it will be recalled that there were two important amendments introduced to the bill after it was brought into the house last year. One, which was brought in at the instance of my hon. friend, the financial critic of the opposition, the hon. member for Shel-burne-Yarmouth (Mr. Ralston), provided that the governor or, in his absence or incapacity, the deputy governor, shall have a veto power over any action or decision of the board. That places an enormous responsibility in the hands of the governor, but it does at the same time prevent an undue possibility of control which might not be in the public interest on the part of the board of directors, conceding that such a situation might arise.

The second important amendment adopted was this, that the Deiputy Minister of Finance is ex-officio a member of the board and of the executive committee. That certainly gives as close a contaot between the government and the Bank of Canada as it would be possible to provide, making the government of the day familiar with the whole proceedings and policies and practices of the institution itself.

Then as I have already pointed out it is provided that the returns to the shareholders of the Bank of Canada is limited to a maximum of 41 per cent, and that all profits in excess of that sum revert to the treasury of' the country as provided in the act.

Lastly, but of tremendous importance, is this circumstance, that the by-laws of the board of the Bank of Canada must in all cases before they become operative be approved by order in council.

Now I submit that under these circumstances there is as complete a measure of control as it is possible for a government to have over an institution of this character.

I am not going to traverse the ground that I covered last year indicating why it was that the government had come to the decision that this set-up of the Bank of Canada was preferable in the public interest, other than to say this, that by this method of control we have all the advantages of complete government operation, with none of those numerous disadvantages that would flow if the government attempted to operate a bank of this character subject to those influences, as it would be, I submit with all deference to those who may disagree with me, which I have not the slightest doubt in the world would wreck the institution from the start, if you attempted to run the bank

in the public interest and surrounded by all the deadly dangers which would flow, not so much from the small questions of patronage, but from the larger questions involving the government in questions of bank policy.

I will use the simple illustration that I used last year. We had a condition in 1929 when the world was mad with the imaginary millions it was making out of the inflationary boom which occurred on the stock exchanges of the world at that time. If we had had a Bank of Canada at that day it would have been the bounden duty of the bank to have started a year prior to that time to restrict credit and to curtail it so far as it lies within the power of the central bank to prevent such a perfect maelstrom of inflation and speculation as occurred at that time. What would happen if we had a Bank of Canada owned and operated and controlled by the government of the day in view of the fact that we are only a few months removed from a general election? On the one hand you have the plain duty of the government to apply the brakes. On the other hand, you have the government faced with a general election and faced with a choice which might jeopardize its political future.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
LIB

Wilfred Hanbury

Liberal

Mr. HANBURY:

You might speak for

your own political party.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

If my hon. friend will be

good enough to rise and ask any questions that he has, I shall endeavour to answer them as best I can. In the meantime, if my hon. friend cares to discuss the question I will listen to him courteously as I would ask him to listen to myself, only asserting the right of any member of parliament to express his views so long as he does so in parliamentary language. Let me say this, in view of his interjection, that when I spoke of government I had no reference to the government of that day; I used the word government in the larger sense, and if it will please the hon. gentleman I will say this to him. Governments are composed of men; they are individuals, they are only human, and there never was and never will be a perfect government in this or any other country in the world. We must take men as we find them, and there would be that irresistible temptation to the government of the day, whether Liberal, Conservative, Cooperative Commonwealth Federation or what not, and the major interests of the country would inevitably suffer under the circumstances I have related. That circumstance

Nationalization oj Banks

alone is sufficient to indicate the force of the argument which we used at that time for the setup of the bank as we find it to-day.

One other thought before I conclude, because I do not intend to discuss this matter at length. Let us assume for the sake of discussion that the Bank of Canada as we have it set up to-day is not the proper type of setup for an institution of that character in Canada. We are a young country, and we are embarking upon a new venture fraught with great possibilities of good, we hope, and possibly of ill, but nevertheless a tremendous venture having regard to the financial future of the country. Is it not the part of wisdom in these circumstances to profit by the experiences of other countries that have traversed the same ground during the last ten or fifteen years which we shall have to traverse in the next ten or twenty? We have not only the consensus of opinion of students of finance but the results of practical experience to teach us almost overwhelmingly the fact that the type of institution which we require is one similar in character to that found in the Bank of Canada-in other words, that we should get away from the type of government owned, controlled and operated institution. Be that as it may, however, we are profiting by the experience of other countries and other peoples in the way in which we have set up this bank. Next year, two years, three years, four years hence, we may find that we have been mistaken. I do not think we shall. But it would be'far wiser for us to profit first by the experience of other countries and secondly by our own experience here before embarking upon a radical policy which runs counter to the experience of other countries in relation to central banking institutions. I leave that thought with the house, whether, we are not wise, now that we have set up a central bank, with its present status approved by parliament, to give that bank a chance to operate, and then we shall have our experience to guide us in the future.

I propose to leave my remarks at that, except to say that for the reasons I have indicated, among numerous others which I might point out; and for the reasons I gave in much more extended form in the two speeches I made, first on the introduction of the resolution and again on the second reading of the bill last year, I would ask the house to reject the motion.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
LIB

William Daum Euler

Liberal

Hon. W. D. EULER (North Waterloo):

May I say at once that I had no intention of taking part in this particular debate but for

some of the statements made by the Minister of Finance (Mr. Rhodes).

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

Naturally.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
LIB

William Daum Euler

Liberal

Mr. EULER:

Sometimes, indeed rather

frequently, resolutions are brought up in this house with parts of which we may agree and with other parts of which we may not entirely concur, and this is a resolution of that kind. The resolution calls for the nationalization of the Bank of Canada and also for the nationalization of the chartered banks of the country. As the house knows very well, and as I think the country knows, though the people may just as well be reminded of the fact for fear of misrepresentation afterwards, we on this side of the house were last year almost entirely in favour of a publicly owned central bank, though we may not be inclined, at least now-I am speaking for myself-to go as far as the nationalization of the chartered banks of Canada.

In the banking and commerce committee last year, when the renewal of the bank charters was under consideration, and also the formation of a central bank, I heard the Prime Minister say that originally he was in favour of a publicly owned central bank but that upon consideration he felt it was not in the public interest to have a publicly owned institution of that kind. The reasons he gave for that view were startling to myself, because it was a reflection not only upon himself but upon his government, upon members of parliament and upon governments in general. He gave as his reason why the central bank should not be publicly owned the suggestion that it was too dangerous, that governments could not be trusted to administer the affairs of a central bank if it were publicly owned.

With that view I wish to take issue entirely, as I did at the time. We have fifteen or sixteen ministers in charge of portfolios, charged with the responsibility of spending hundreds of millions of dollars each year. I do not think the public is particularly alarmed at any thought that members of parliament, members of the cabinet, are not to be trusted in the administration of the country's business, and I for one wish to take distinct issue with the casting of reflection on governments, even this government, and the suggestion that it could not properly carry out the duties that would devolve upon officials of a central bank merely because a general election was in sight. I am quite willing that the Prime Minister should speak for himself and his government but as an actual fact it is not a fair criticism to make of governments in Canada in general,

Nationalization of Banks

and certainly it is not borne out by the history of governments in this country in the past, no matter what party they represented.

A moment ago I referred to the fact that the bank charters were renewed last year, and this thought occurs to me. Now that we are entering upon certain reform policies, with most of which I am in entire agreement, inasmuch as they accord pretty well with what I have said in the last two years in this house- what I sometimes call my socialistic speeches -and now that there has been a change of heart on the part of this government and more particularly of the Prime Minister, in view of the fact that the government is now practically nationalizing the loan companies in the legislation that has just been brought down and will be brought down, I am wondering whether, if they had experienced this change of heart a year ago, they might not have been in favour of the resolution which is now before us. So much for the central bank.

I w'ant to put myself on record, and I speak for most of my colleagues on this side, that we are still in favour of a publicly owned central bank. I have no such fears as the Minister of Finance has expressed, and other fears perhaps ill founded, that though we have given to what is after all still a privately-owned bank such tremendous powers as we have handed over to the central bank we could not give those powers to a publicly owned bank. I need not refer to all the arguments that have been advanced in this regard. We are handing over all our own gold and all the gold of the chartered banks to this privately-owned bank and the privilege of issuing currency, though not as much as they should have; moreover they have the control of credit in their hands. I for one do not think that power should remain in the hands of a privately-owned bank. I might point out this, as it was done last year I believe more particularly by the hon. member for West Edmonton (Mr. Stewart), that through the creation of a privately-owned central bank we are now actually subtracting from the powers that were formerly exercised by the government of this country. In former days we had under the Finance Act to some extent the credit-issuing power through the treasury board which is really a committee of the cabinet. That power has been taken away from us and been given to a privately-owned central bank.

So far as the chartered banks are concerned may I say this:-I have said it in the house and before the banking committee last year-

the power to issue currency should not remain with the chartered banks and I am sorry that the government, instead of taking only a portion of that authority away from the chartered banks, has not taken the whole of it. As the matter now stands, the chartered banks will be deprived of the privilege-and it is a privilege-of issuing currency during a period of some ten years, but even then they will still have the power to issue currency to the extent of 25 per cent. I would ask the Minister of Finance if I am right.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink
CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

Yes.

Topic:   NATIONALIZATION OF BANKS
Subtopic:   PROPOSAL THAT CREDIT AND CURRENCY SHALL BE CONTROLLED AND ADMINISTERED BY GOVERNMENT
Permalink

February 4, 1935