June 1, 1936

CON

James Earl Lawson

Conservative (1867-1942)

Mr. LAWSON:

I shall be delighted to have the minister do so.

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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

By the terms of the bill the relative voting strength on the board in each of the immediately succeeding years will be:

Govern- Private ment shareholders

1936- 37

10 71937- 38

10 71938- 39

10 61939- 40

10 41940- 41 and thereafter.. 6 3

That will be the actual voting strength; therefore to say there will be a majority of one is an inaccurate statement.

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CON

James Earl Lawson

Conservative (1867-1942)

Mr. LAWSON:

Then as I understand it from the statement now made by the minister, my previous statement is correct. When this

bill goes through parliament and becomes law, and you appoint your four directors, qua directors you will have one more vote than the privately elected directors.

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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

That is not right either.

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CON

James Earl Lawson

Conservative (1867-1942)

Mr. LAWSON:

Just a moment. In order to get your ten vote? you include and count as government votes those of the governor and deputy governor of the bank, who already are appointed by the government, who always have been appointed by the government under the privately owned central bank and whose votes shall be always counted as government votes, working on that principle. Now let us make no mistake. Qua the board of directors, when this bill goes through this parliament you will have one more vote on that board, increasing it, it is true, after a certain number of years, than have the privately elected directors.

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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

I must differ entirely.

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CON

James Earl Lawson

Conservative (1867-1942)

Mr. LAWSON:

All right; my hon. friend has the privilege of differing. Now, Mr. Chairman, I ask you. Where is the absolute public ownership moved for by the present Minister of National Defence on behalf of the Liberal opposition? Is it a case of absolute public ownership while in opposition and some form of compromise when in government? I say to you, sir, and through you to the members of this committee and the people of this country, that having regard to the statements made by the present Prime Minister throughout the country during the election campaign when he asked the people for votes based on those statements, this measure is a subterfuge and a delusion, and out of the mouth of the present Prime Minister I shall attempt to prove that it is a breach of the pledge he gave to the people. First I should like to refer to a report appearing in Ottawa Citizen of August 3, 19'35, reporting a speech made by the present Prime Minister. I quote now what appeared in that newspaper in quotation marks, as being the words of the right hon. gentleman:

"The Liberal party stands for the immediate establishment of a properly constituted national central bank to perform the function of rediscounts and the control of currency issue considered in terms of public need."

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?

Some hon. MEMBERS:

Hear, hear.

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CON

James Earl Lawson

Conservative (1867-1942)

Mr. LAWSON:

Keep right on. I will soon get to a point where you will not shout "hear, hear."

"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 sovereignty of parliament and of democracy is idle and futile. To regain for the nation what has thus been lost will continue to be the first objective of Liberal effort."

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?

Some hon. MEMBERS:

Hear, heai

Bank oj Canada

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CON

James Earl Lawson

Conservative (1867-1942)

Mr. LAWSON:

Well, Mr. Chairman, does this measure restore to the government its most conspicuous and sacred responsibility, the control and issue of currency and credit? Here we are to have a board of directors, one-half but one, to start with, elected by private interests-

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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

That is not correct.

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CON

James Earl Lawson

Conservative (1867-1942)

Mr. LAWSON:

One-half plus one, to start with chosen by the government. I will add the governor and the deputy governor, chosen by the government, who are already in existence. Now let us assume that after the bill comes into effect there is an opinion as to the expansion of credit among the privately elected directors which is not the view of the publicly appointed directors, or vice versa. I ask, are the government-appointed directors to exercise any freedom of opinion, or are they not. If they are to exercise freedom of opinion then they cannot be carrying out the policy of this or any other particular government. But if their job is to carry out the policy of this government, then I ask, why the private directors and the private shareholders? Where is the government discharging "its most conspicuous and sacred responsibility"? If the board of directors of the bank is to obey the dictates of the government in office for the time being, then why not honestly and fearlessly stand by the policy which I hope to show was enunciated during the election campaign: "Give back to the private shareholders the money they put into this bank; get rid of the private directors." If we are to have complete and absolute government control, why not do it in the right way, and not by some measure which is more or less a compromise between contending factions?

I would like to direct the attention of the committee to the next utterance of the right hon. gentleman, the present Prime Minister, during the election campaign. Again I quote from the Ottawa Citizen, this time of August 8, 1935-Mr. Mackenzie King speaking at Kingston; and again I give the words which the newspaper puts in quotation marks:

"He (Mr. Bennett) had taken the gold reserves from the federal treasury, the backing for the country's currency, and turned them over to a private corporation."

And as the right hon. gentleman travelled west he waxed even more eloquent in that regard, because I observe that according to a report appearing in the Vancouver Sun of September 30, 1935, he had this to say:

Criticizing Mr. Bennett's bank, he said it was owned and controlled by private stockholders. . It had been given by the government $60,000,000 gold reserve and the vast number

of securities held by the government from the private banks. These were the property of the people of Canada. To-day they belong to the private shareholders of the Bank of Canada, he said.

Now let us see. This "Bennett bank," so-called by the leader of the government took the gold reserves and the securities from the treasury of Canada and did the iniquitous act of handing them over to private interests. May I ask the right hon. gentleman if in principle it is any less iniquitous for him today to leave half of them in the possession of private interests? Where is the difference?

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LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Mr. MACKENZIE KING:

We are not leaving half of the reserves and securities in the possession of private interests; we are putting back the whole under public control.

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CON

James Earl Lawson

Conservative (1867-1942)

Mr. LAWSON:

Oh yes, he is. If I correctly understand the Minister of Finance he is now going to subscribe for $5,100,000 worth of stock in the bank. Already you have another $5,000,000 of private money represented by private shareholders. It does not require a lawyers' argument to convince any man who knows anything of business that if I hold half the stock of the company I own half of everything that company has.

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LIB

Malcolm McLean

Liberal

Mr. McLEAN (Melfort):

You are not going to own half.

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CON

James Earl Lawson

Conservative (1867-1942)

Mr. LAWSON:

When are you going to take out the private shareholders? There is not a suggestion of it in this resolution. If it was iniquitous to turn over that gold and those securities to the privately owned central bank, then at least it is half as iniquitous to leave half of it in the ownership of private persons. But, Mr. Chairman, the statement was not correct. I shall let the Prime Minister tell the committee whether or not he had knowledge as to the correctness of the statement.

I now turn to the report of the Bank of Canada at the first annual general meeting of shareholders, in which I read:

"The Bank of Canada opened its doors for business on March 11 last. On the date of opening we assumed responsibility for the redemption of all dominion notes issued and outstanding."

Not one word from the Prime Minister about "Bennett's bank" doing that. Continuing the report:

"To cover that liability, which then amounted to $185,455,439, the dominion government transferred to the bank the following assets:

Gold, valued at $ 69,455,439

Silver, valued at 986,363

Dominion of Canada 3 per cent bonds maturing 1940 of a . par value of 115.013,637

Total

Bank of Canada

In plain words, Mr. Chairman, the former governtnent transferred to the central bank an amount exactly equal to the liabilities which they required the central bank to assume, and equal only so long as the bonds of Canada transferred were worth one hundred cents on the dollar.

Speaking on this same subject the right hon. gentleman again used a figure: he said

"Bennett had"-he did not use the words "given away"-"Bennett had turned over to this central bank some $69,000,000 in gold." Well, Mr. Chairman, if you turn to the last page of the report of the Bank of Canada and look at its statement of assets and liabilities you will find that to-day instead of the amount turned over being $185,000,000, what is being left to the ownership of private interests ii one-half of $307.655,151.86,-in other words the assets of the Bank of Canada-on the principle on which the right hon. gentleman proceeds, for which those private interests have subscribed the enormous sum of $5,000,000.

I should like to go a step further. Let me point out how the right hon. gentleman indicated he was going to discharge "the most conspicuous and sacred responsibility of government." I turn to a report of a speech of the right hon. gentleman contained in the Vancouver Sun of September 30, 1935. I imagine most hon. members of this committee are familiar with the fact that the Cooperative Commonwealth Federation was pretty well in its stride in Vancouver, and is reported so to be in British Columbia. Out there the right hon. gentleman had this to say:

"We believe that credit should be a social service to serve the needs of the people."

"Credit is not the concern of the bankers only but is of concern to you and me."

Credit is to-day controlled by the great international money power. The first step, then, is to establish a national central bank -not another private bank as has been done -but a government bank able to control credit according to the will of the government in matters of great national concern.

The Liberal party believes it is a public matter of direct concern to the average citizen to have a national bank to control currency and credit so that they may serve the public needs.

The first objective is to get back the control that was taken from us. The next is to see that the bank is made national in the truest sense of the word."

Now in fulfilment of that pledge and obligation the government headed by the right hon. gentleman brings forward this anaemic measure providing for a half nationally and half privately-owned central bank w'hieh is to discharge "the most conspicuous and sacred responsibilities of government."

Then the right hon. gentleman went to Alberta where the social credit group appears

to have been in its stride. According to a report in the Calgary Daily Herald of October 1, 1935, the right hon. gentleman said:

"A central bank is necessary to determine the supply of currency in relation to domestic, social and industrial requirements of the Canadian people, and also to deal with problems of international commerce and exchange."

So far the leader of the social credit group might have been making the speech. The right hon. gentleman continued:

"That was a clear statement"-

He was referring to a statement he had made previously.

-"that what we wanted at Ottawa was a central bank, or wanted in Canada, was a central national bank which would enable private banks to be controlled by the central institution in a manner which would make credit be considered more from the point of public need, domestic requirements, social requirements, and the like, than from the point of view of the interests of capital investors and private bankers oniy."

Then he went on.

"Then the government policy, if it were one of extension of credit, would be in a position to put that policy into effect"-

That must be a misprint, because I doubt whether the right hon. gentleman would have repeated the word "policy." I continue:

-"through having a central bank which would give more in the way of credit at the time when the need for more in the way of credit was uppermost. It would regulate credit in a manner which would serve the needs of the country, prevent excessive speculation on the one hand, and on the other hand help serve to increase the currency and the facilities for credit when need for increased currency and increased credit facilities were required."

And then this last touch, which I think is sublime.

"We have in the federal field the great issue of monetary reform. I have merely indicated what I have thought was the first step, and if that first is not won then all our efforts at further financial reform so far as the federal field is concerned will be materially impaired."

"Equally"-

Says the right hon. gentleman to the electors of Alberta.

-"if they are materially impaired it will have a very serious effect as far as I see it upon the efforts of any province to improve financial conditions there, so I hope when Monday fortnight comes you will think not only what is important to you locally and in a provincial way, but that you will think even more deeply of what is going to be of vital concern to our country with respect to our policy during the next five years."

I leave it to the judgment of hon. members of the committee and the people of the country

Bank of Canada

whether the present proposal for a nationally owned central bank, which is neither meat nor fish, flesh nor fowl, is the first step in a great monetary reform in Canada.

I am not sure whether the right hon. gentleman went back to Vancouver, but in any event he made another speech which was fully reported in the Vancouver Province of September 21, 1935. In that speech he said:

"Canada is faced with a great battle between the money power and the power of the people *-a battle which will be waged in the next parliament. He pleaded for a sweeping liberal majority in order to carry out his policy of public control of currency and credit, nationalization of the Bank of Canada and monetary reform."

I suppose monetary reform is bo follow this half measure of nationalization. The right hon. gentleman went on to say:

The battle whieh would be fought in parliament would decide whether "we are going to have the money power bend to the will of the people."

He finished his observation by saying:

"Until the control and issue of currency and credit is restored to the government and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty of parliament and democracy is idle and futile."

Well, the people gave the right hon. gentleman a sweeping Liberal majority, and we are here to-day in the arena ready for the great monetary battle. The right hon. gentleman says he is the gladiator who will champion the cause of the people, that he recognizes the control of currency as the most conspicuous and sacred responsibility of government. But where is the money power with which he is going to do battle? It was the private interests which owned the central bank. Are those private interests, with which the right hon. gentleman was going to do battle, wiped out by this measure? Oh, no! I suggest he is a prudent man. Instead of having them do battle in the arena of parliament he compromises by saying, We will permit you to keep your stock in the central bank; we will continue to pay you four and a half per cent dividend, the maximum amount you can receive if the bank makes money; we will avoid pitched battle in parliament, and by your ownership of forty-nine per cent of the stock of the central bank you are still in possession of forty-nine per cent of the assets. Is it any wonder the electors of Canada were misled? And not only the electors; is it any wonder the hon. member for Rosthern (Mr. Tucker) believed he was supporting a party which had a policy embracing his ideas? How well I remember that gentleman coming as a new member to this parliament, with

high hopes for the government he was supporting and with that great confidence and faith which led him to stand in his place and say:

"The government must have time to adopt policies which will enable them to provide the money before we can expect them to bring in such legislation."

Then, after proposing that the Bank of Canada should advance whatever money the country may need against dominion, municipal and provincial bonds, he said:

"I venture to stand in my place to-day and make these suggestions as a Liberal because our great leader has taken the attitude that people of all shades of opinion will be welcome within the ranks of the Liberal party."

Mr. Chairman, can you blame the hon. member for Rosthern for drawing any such conclusion in view of the utterances of his leader upon the stump in this country during the last campaign? But he still had faith, this hon. member for Rosthern, and several others like him in the Liberal fold in this house, because speaking later, at page 552 of Hansard for this session, he enunciated just what most of the electorate believed, that what the Liberal party was advocating was an absolute and complete nationally owned central bank, as stated by the Minister of National Defence in this house in 1934; because the hon. member for Rosthern stood up in his place this session and said, "I am one hundred per cent in favour of a one hundred per cent ownership and control of the Bank of Canada by the Canadian people through our government." No room for mistake in that; and then he finished up by saying: "That, in short, Mr. Speaker, is the view I think of at least fifty per cent of the Liberal voters in this country." I ask again, does this measure, half private, half public ownership, meet their views? Will the hon. gentleman and all the others like him who sit in the ranks of the Liberal party in this house get up on their feet in this discussion and tell us whether they believed that their leader was standing for a one hundred per cent publicly owned central bank when he came down here and enunciated his views and his theories? And will they tell us they consider that this measure is discharging "that most conspicuous and sacred responsibility" to which the right hon. gentleman so frequently referred when he was seeking the franchise of the people of this country?

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CCF

James Shaver Woodsworth

Co-operative Commonwealth Federation (C.C.F.)

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

Mr. Chairman, I must congratulate the hon. member for York South (Mr. Lawson) on his very able speech. He has said many things that I had it in my own mind to say, and I do not need to repeat them. There are, however, certain aspects upon which he did not touch.

Bank oj Canada

I would congratulate the Minister of Finance (Mr. Dunning) upon his very clear statement, and also the government upon having taken a position that is in advance of that which now exists, namely, the banking policy of the Conservative party, and which also represents somewhat of an advance upon any definite position hitherto taken by the Liberal party. I say the latter although I recognize clearly that a number of members of the Liberal party have gone much further than this legislation goes.

It seems to me there are several questions with regard to public finance that have been before the people of this country. One is, should there be a central bank? For a long time both the old parties were very skeptical with regard to the necessity of a central bank, and even went so far as to denounce anything of that nature. The second is, how should this central bank be owned and controlled? It was on that point that we had a good deal of difference of opinion when the present act was introduced.

There is a third consideration upon which the old parties seem agreed, and on which we in this comer differ from both, and that is we favour the nationalization of our financial institutions, including both the central bank and the chartered banks. Again and again we have introduced resolutions along that line only to be defeated by a joint vote of both the two old parties.

May I call attention to the position that we in this comer have taken throughout the years? As early as 1923 I emphasized the monopolistic character of the banking system of this country, and I pointed out that by virtue of the private ownership of this monopoly, financial control and credit are used in disregard of social considerations, prices can be and are manipulated by the control of quantity purchasing power, and finally I said that we must find a remedy in the public control of currency and credit. You will find my speech in Hansard of 1923, page 4018.

In 1925 I ventured to bring forward this motion:

That, in the opinion of this house, it is not in the interests of the country at large that the privilege of issuing currency and of controlling financial credit should be granted to private corporations.

When I listened to the finance minister to-day I began to feel that some of us in this comer had not altogether wasted our energies. In those days we had comparatively little support from those who now occupy the government benches or from those who now occupy the position of official

opposition. We feel that the Minister of Finance is right when he recognizes the influence of public opinion. Undoubtedly public opinion has been driving the Liberal party.

In that same year, speaking of the quantity of money, after quoting Professor Taussig, I said:

How is that regulated to-day? It is regulated by the banks. . . . They do so either directly through the giving or withholding of credit or in their control over government policy. ... I urge that the large measures of control of currency and credit by private corporations now existing must not continue. It is not safe to leave such power in private, and shall I say, without offence, irresponsible hands, that is, in the hands of those without responsibility to the people at large.

I continued:

Is it wise to leave this power in the hands of private individuals who can exercise their control in their own economic and political interests, disregarding the effect on the welfare of the general population? Why shouldn't the government democratically control this money situation rather than allow a group of a dozen men who are not responsible to our people to do so? We now have government supervision and inspection. We have had the advocacy of government guarantee of deposits. . . . From all over the country demands are coming in that the government should go much farther than it has in the past. Why not take the next step and effectively control our currency and credit?

The minister now says that that is necessary and he proposes this resolution as the forerunner of a bill which he thinks will make that possible. I might add that we in our group again and again moved resolutions for the establishment of a national system of banking. I myself introduced one in 1925 and down through the years we have tried to emphasize the need of a national banking system.

When the present act was up for discussion the Liberals were by no means certain of their position. They did unite to criticize the measure, but the present Prime Minister (Mr. Mackenzie King) said it was rather debatable whether or not the bank should be publicly owned and controlled. Some of his followers had no such hesitation. It will be remembered that some of them came out very strongly for an absolutely publicly owned and publicly controlled bank. Hon. members will recall that famous amendment to the effect that the bank should be either publicly owned and privately controlled, privately owned and publicly controlled, or, publicly owned and publicly controlled. As it was considered that the mover of that resolution represented the Liberal party, I say that the government has been very vacillating and

Bank oj Canada

very temporizing. I was much interested in noting the position once taken by the present Minister of Trade and Commerce (Mr. Euler). We find the following on page 453 of Hansard of 1935:

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.

The Minister of Trade and Commerce felt that Liberals were almost entirely in favour of a publicly owned central bank. I do not think there is the slightest doubt that the hon. member for York South is correct when he says that was the impression given by the majority of Liberal speakers during the last campaign. The Minister of Trade and Commerce is also reported on page 454 as follows:

I did not intend to take up so much of the time of the house and did so for only two reasons: first, the aspersion-and I think I may call it that, which was cast by the Prime Minister and again by the Minister of Finance upon the integrity and strength of character that ought to animate any government that has the interests of the people at heart, in suggesting that they could not properly and honestly administer the functions that naturally belong to a central bank. In the second place I want to put myself on record that I have not retreated and I do not think those on this side have retreated from the position we took last year that we are entirely in favour of a publicly owned and controlled central bank of Canada.

Surely that is a pretty clear statement. I said a few moments ago that I did not think the Liberal speakers gave the impression to the people that they were going to get any such legislation as this. On the contrary, the people generally understood that they were to have a thoroughgoing publicly owned and publicly

controlled bank. In this connection I should like to quote from the Regina-Leader Post of May 18, which reports a meeting of the Young Liberal executive of Saskatoon, as follows:

Dealing specifically with the central bank

question, the Young Liberal executivestressed that one of the chief planks in the platform on which the Liberal party was elected to power at Ottawa was the establishment of "a properly constituted national

central bank of Canada to perform the function of rediscount and to control the issue of currency." Further, Mr. King in a statement following his election, had voiced the oelief that the people of Canada had given an unmistakable verdict against a privately owned and privately controlled central bank.

The resolution reads:

Therefore, this executive of the Saskatoon Young Men's Liberal Club, expresses its

disappointment with indication both in the speech from the throne and in the remarks of leading Liberals in parliament, that legislation to be brought down will modify only the present private ownership of the central bank instead of substituting a nationally owned central bank such as the public was given to understand would be done, and this executive, feeling that the honour of the Liberal party is involved, urges again that the government reconsider its action.

I submit that resolution of the Young Liberal party to the government. They feel that the honour of the Liberal party is at stake. There is no doubt whatever that the understanding of the Young Liberal party and of the majority of the people, not only of Saskatchewan but across the west, was that the present government was pledged to introduce thoroughgoing legislation providing for a publicly owned and publicly controlled national bank.

The question then really is whether this present legislation is fulfilling the pledges of the Liberal party. The minister stated to-day that the naming of tfie directors of the central bank by private individuals was intolerable, but I should like to ask him whether it is any better that the dividends of our central bank should go to private individuals. I cannot see that it is. If it is intolerable that the directors should be named by private individuals, why should it not be more intolerable that dividends to the extent of something like

8225,000 should go to private individuals? I should like to ask the minister why he proposes this very awkward arrangement. Why could not the government have simply bought out the shareholders of the central bank? That has never been explained; it was not explained to-day by the minister. The best he can say is that he thinks. there will be some advantage in having government directors to watch the private directors and in having private directors to watch the government directors. I submit that under that type of reasoning he might as well ask that half the people in the different departments be nominated by private individuals to watch the other departmental officials. Is that our idea of efficiency?

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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

Something like this parliament.

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CCF

James Shaver Woodsworth

Co-operative Commonwealth Federation (C.C.F.)

Mr. WOODSWORTH:

Oh, no.

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June 1, 1936