I am talking about the realities of this situation. Unfortunately or fortunately I have been through many of these experiences in my time. I have been a director of a bank, and I know something of the reasons why many of our chartered banks have been absorbed. People talk about amalgamation; but I can tell the house that the government of that day had to take the responsibility of permitting the Merchants bank to be acquired by the Bank of Montreal or we would have had one of the most
amazing spectacles that could have been witnessed in this country. We would have had a situation that would have beggared description. Here was a bank with assets amounting to nearly $200,000,000, and there was this vast accumulation of cheques on Saturday which would be presented on Monday and which the bank could not pay.
That was taken over by the Imperial bank for the same reason. There was also the Northern Crown bank. We had this situation developing which I think every hon. member should understand clearly. When you go about and make the observation that every loan creates a deposit when there are not sufficient deposits to pay every cheque that comes in, you are inducing the people to have an entirely erroneous understanding of the whole situation. I use this illustration to indicate that when unfortunately loans have been frozen beyond the ability of the bank to produce the money to pay, then my deposit has passed from it. That is what I want to make clear. I want to make it clear that this statement so often made by so many people is misleading. Sometimes they think they are well informed, but they forget that the grim realities of the situation are these: Unless a bank is in a position to meet the cheque which is presented by its depositor, the bank is insolvent. It does not make any difference how much it has in loans, it must be able to pay your cheque. That is what it must be able to do because your cheque is payable on demand, unless you have a time deposit.
If it is not true with regard to an individual bank, it is not true with regard to the banking system. In other words, the Minister of Finance puts forth this strange doctrine, that this is true with respect to the system but it cannot be applied to the elements which go to make up the system.
I am taking the loans now. Please permit me to do one thing. The loans in Canada on December 31, 1921, were $91,000,000, while in the month before they were as I read, $102,857,000. Call and short loans outside Canada were $4,700,000, and they had fallen to $3,900,000; call and short loans in Canada, that is loans on demand, were practically $5,596,000 as against the $7,000,000 that existed at the end of the preceding month. In so far as the deposits are concerned, this was the story. Deposits payable on demand at the end of November amounted to $38,000,000. Demand deposits had fallen to $35,800,000-not a very large amount.