May 23, 1939

CENTRAL MORTGAGE BANK

PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.


Hon. CHARLES A. DUNNING (Minister of Finance) moved the second reading of Bill No. 132, to incorporate the central mortgage bank. He said: Mr. Speaker, I find that it is not necessary for m© to spend much time discussing the motion for the second reading of this bill, for the reason that on the resolution I went much more extensively into the principle than I thought I had done, and in Hansard of May 6, at page 3665, hon. members will find a reasonably complete discussion of the principle involved. There has been some criticism of the lateness in bringing down this measure. In that connection I desire to point out that the financial resolution, after standing on the order paper for some time, was dealt with on May 6 and the bill produced immediately thereafter. I confess to the house that at that time I had the idea that a month's adjournment of parliament was very likely, and that consequently there would be considerable time during which all interests affected across Canada would have full opportunity to study the provisions of the bill. However, we are here on the 23rd day of May and a sufficient time has, I think, elapsed to enable those who are interested in this type of legislation to gain an adequate conception of what is contemplated by the bill. Briefly, the principle involved is the use of the national credit in adjusting the mortgage burden and in providing facilities for refinancing mortgages in the future. The bill offers to the farmer mortgage debtor, and the home mortgage debtor, below 87,000 in principal amount, a reduction in the load, which was assumed in many cases years ago undel more favourable circumstances than now prevail. The companies which become members of the bank will be obligated to write off all arrears of interest with respect to such mortgages in excess of two years' interest. Second, the debtor will be relieved in cases where the mortgage debt exceeds eighty per cent of the value of the mortgaged property by the writing off of the excess over eighty per cent. Third, the debtor will be relieved by the adjustment of the future rate of interest on his mortgage in those two classes I have mentioned to five per cent per annum, and an adjustment in the length of the term of the mortgage. To the mortgage company becoming a member the plan involves that the dominion shall share over the next twenty years to the extent of one-half of the losses involved in writing off the arrears of interest and in writing down the principal, where necessary, to the eighty per cent limit. The debentures of the mortgage bank will be given to the member company, bearing interest at three per cent and running for twenty years, to the extent of one-half the losses involved in the write-down provided for by the bill. With respect to future refinancing of mortgages by member companies, to the extent that the member company takes advantage of the refinancing facilities afforded by the bill for the future, the member company must accept the conditions laid down by the mortgage bank with respect to maximum interest rates and conditions as set forth in the bill. To the provinces this bill offers an opportunity. For a number of years past-probably for ten years-many of our provinces have felt compelled to legislate interfering with the terms of mortgage contracts. I do not believe that any provincial government has done so willingly; it has felt compelled to do Central Mortgage Bank



so by the stress of conditions which have prevailed during the past number of years. This bill offers to such provinces an opportunity to end undue interference with mortgage contracts as adjusted under the terms of this act. The bill is designed to warrant the provincial governments or provincial legislatures in exempting mortgages adjusted under this legislation from their provincial legislation which would have the effect of interfering with a contract which had been refinanced by the dominion. Obviously when the dominion credit is used in this manner it cannot be made subject to the possibility of a province impairing the dominion's security. I am certain that the provinces, after studying this legislation, will do their utmost to cooperate in giving effect to its terms, because no one is more anxious than provincial legislators, wiho by virtue of their constitutional power have been closest to matters of debt adjustment and mortgage difficulty, to get the situation regularized, adjusted and improved for the future. Since this measure became public there has been criticism-strong criticism-from the financial press. I do not know to what extent the financial press may be said to speak for the financial organizations which are invited by this legislation to cooperate. I incline very much to the view, following more than twenty-five years' close association with various aspects of the mortgage problem, that we must move in this matter, and that the way open to us, a country governed by a federal constitution, to move must be through the channel of the voluntary action contemplated by this bill. It will be seen at a glance that this bill exercises no compulsion upon any province. It exercises no compulsion upon any mortgage lending institution-and this, frankly, for the reason that the authority so to do does not rest with this parliament. Matters of property and civil rights, matters affecting mortgages and their terms and so on, are entirely provincial. In my judgment, therefore, we can approach this matter only through the medium of making available the national credit in terms of public need for what is generally recognized as a great national problem, not only in this country but also in the country to the south. I do not think I can go much further in dealing with the principle of the bill. Hon. members have done me the honour, I know, of studying it, because many of them have spoken to me about it. I do not pretend that it is an easy matter, but I believe that within the four corners of this bill we have the opportunity to remedy very largely the confused, difficult and burdensome situation which exists across Canada with respect to mortgage credit. I am thinking to-day not merely of those who have found it impossible to meet their obligations in the terms of the obligations, and who have been compelled to rely for protection upon various provincial enactments or upon the operation of the Farmers' Creditors Arrangement Act; I am thinking as well of those who undertook a burden in more prosperous times and have struggled and are struggling to-day to carry that burden although it is beyond their economic strength so to do. I know from my correspondence how many hundreds of thousands of our home owners and farm owners look with hopefulness upon the measure which is now before the house for second reading, not as a means of evading their just obligations, but as a means of adjusting their honest burden to the back in a manner which will enable them the more easily to bear it.


CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Hon. R. J. MANION (Leader of the Opposition) :

Mr. Speaker, my remarks on this occasion will be very brief indeed. I said a few-a very few-words at the time the resolution was introduced by the Minister of Finance (Mr. Dunning). At that time I pointed out that this bill did not do anything for the individual lender or the individual borrower.

Mr. DUNNING; If my hon. friend will permit me-not for the individual lender; but it does, of course, for the individual borrower.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

I mean, the two combined, in the case of the individual borrower from the individual lender. I pointed out at that time, or in some remarks since then, that a great proportion of the lending in the province of Quebec, for example, is done by individuals rather than companies. The same is true of a great proportion of the lending in other provinces. Well do I remember the time when the people of Canada had not become educated, as they did during the war, to the buying of government bonds, when the only form of investment in the small cities of the west was by way of mortgages on farms or buildings or the homes in the small cities and towns. I believe that condition still obtains to a large extent throughout the country. This legislation offers no help either to the individual who has lent the money or to the person who has borrowed it from the individual lender in that type of case; and as a consequence it is, I think, onesided. True, if the legislation is accepted by a number of good companies, if they attempt to

Central Mortgage Bank

carry out the ideas suggested by the Minister of Finance, it will give relief to certain classes of borrowers. But my information at the present time, which I have obtained largely from the press, is that most of the companies will not agree to go into this deal, at least until the legislation is whipped into better shape.

I have here half a dozen clippings from various newspapers. I do not intend to read them all; I will merely cite the heading in the Toronto Globe and Mail:

Dominion government should hold back bill for mortgage rediscount bank until Canadians everywhere have chance to study the proposals.

I regard that as a fair suggestion. The writers in all these newspapers support, as I support, the principle of getting the lowest interest that can be obtained for borrowers throughout the country. Certainly I am not speaking on behalf of the financial companies. I advocate putting the legislation into such shape that it will be useful; and I submit that at this stage in the session there is no possibility of doing so. I said this privately to some of my hon. friends opposite yesterday when they were arguing, and to my mind rightly, that we should be able to finish the business of the session this week. The minister shakes his head. He did not argue that, but some of his friends did, and I agree with them. By the end of this week the session will have lasted well on towards five months, and I believe that it will be reasonable to adjourn within the next few days if we can clean up the legislation before the house- that is, if it can be dealt with in a dignified and proper manner. But I do suggest that it cannot be done if at this stage there is any attempt to force this legislation through the commons and the other house.

I submit that if this legislation goes to the banking and commerce committee, as it certainly should, it will probably take a month to deal with it there. In my opinion we should have representatives not only of the financial institutions-for whom, let me repeat, I am not speaking-who understand the form of legislation of this kind, 'but also of individuals, if, as is our duty, we are earnestly to attempt to make this legislation useful to all Canadians who have borrowed and who have loaned, to the individual borrower and the individual lender as between themselves, as well as to finance corporations. If this legislation is to be of any real value it must include a number of these corporations. I repeat that my opinion is that in its present form it will not achieve this object.

The fact that our party favours low interest rates is proved by the existence of the Farmers' 7H92-276

Creditors Arrangement Act, which we enacted when we were in power. I entirely agree that within reason we should attempt to bring down interest rates for those who have unfortunately borrowed in the past at times when the products of, say, .the farmers were at a much higher price than they are to-day. Everybody realizes that the farmer Who borrowed money when wheat was selling at SI .50 to S2 a bushel, and now has to pay it back in bushels of wheat selling at 60 to SO cents, is certainly not in the same position to meet his obligations as he was under the price levels which prevailed at the time he borrowed the money. Every one realizes that, we do not need to be told that by hon. members from the third and fourth parties. We also sympathize with the desire. I believe that Mr. Bennett, as leader of the party, promised at the last election that if we were returned to power we would bring in legislation favouring the man in city or town with a mortgage on his home, showing that we also sympathize with the dwellers in the cities and towns who require relief. There is no argument, so far as I know, as to all sections of this house favouring the cutting of interest on mortgages. I say that unqualifiedly, without any hidden thought against it or anything of that sort. I am entirely for it, within reason, so long as we do not demand of loan companies that they operate at a rate upon which they cannot subsist. But I repeat that we cannot in the short time now left make this bill into legislation that will be workable. Suppose it goes to the banking and commerce committee, as it certainly should to be whipped into shape, to have the corrections made in it that legislation frequently does need. I imagine that at the very least it would take a month to hear representatives of corporations and individuals who would come forward, or who should come forward, with propositions to make this legislation useful in its application to the individual lender and the borrower from the individual lender, as well as to the financial institutions and their borrowers.

It seems to me that the clauses relating to urban and rural mortgages require greater separation and clarification than exists at present. I mention that merely as an illustration of what may be required before the banking and commerce committee in dealing with an important matter such as this. I heard some murmurs from hon. members on the other side when I said that the legislation should go before the banking and commerce committee. But if not that committee, before what committee should it go?

Central Mortgage Bank

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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LIB

Malcolm McLean

Liberal

Mr. McLEAN (Melfort):

The committee of the whole house.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

The committee of the

whole house is not in a position to deal with legislation of this kind.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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LIB

Malcolm McLean

Liberal

Mr. McLEAN (Melfort):

My hon. friend has not been attending the meetings of the banking and commerce committee very much this year, or I think he would not make that suggestion.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

I have done what my hon. friend probably has not done; I have read nearly every page of the evidence before the banking and commerce committee.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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LIB

Malcolm McLean

Liberal

Mr. McLEAN (Melfort):

I compliment

my hon. friend on his diligence and industry.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

The hon. member said that I have not attended the committee; as a matter of fact I have-not regularly, because I frankly admit that in my position I have not the time; but I did attend it fairly frequently and I have read every page of the evidence except for the last two or three days.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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LIB

Malcolm McLean

Liberal

Mr. McLEAN (Melfort):

Good work!

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

I was going to point out that we have to-day before the banking and commerce committee probably the best informed man in Canada on such legislation as this, the man who is going to be in charge of it; I refer to Mr. Towers, the governor of the Bank of Canada. No better guide could we have for legislation such as this than Mr. Towers. I submit that with him there and the Minister of Finance present with his deputy minister and his officers, familiar with this subject, the banking and commerce committee is the only proper place w'here this legislation can be properly dealt with.

Now I may say something which possibly is touching on a subject upon which I should not touch. I do not believe that the Minister of Finance expects this legislation to get through parliament at all this session.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

Oh, well, Mr. Speaker, I must protest. This legislation is dearer to me than anything I have brought before this house this session.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

All right; I accept the hon. gentleman's word that this legislation is dear to him, but I submit it got dear to him pretty late in the session. If the hon. gentleman was so anxious to get it here I do not question his word, but I do not believe that he expects to get it through this session.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

Certainly I do.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

Certainly it will not get through as far as I am concerned without

proper consideration before the banking and commerce committee or the committee of the whole house. I think it should be the banking and commerce committee, because we cannot hear witnesses before the committee of the whole house. This is probably the most important legislation before the house this session, I doubt if there is anything more important.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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LIB-PRO

Joseph Thorarinn Thorson

Liberal Progressive

Mr. THORSON:

We will stay here a month if necessary.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

All right; do not worry, we can stay as long as my hon. friend. We have not been hurrying at all; it is my hon. friends opposite who have been trying to hurry. If this legislation goes before the banking and commerce committee, as far as I am concerned all the witnesses who should be called must be heard before that committee and the matter dealt with properly. I am not going to take much more time, but I say that a piece of legislation which includes the guaranteeing by the Dominion of Canada of debentures to the extent of $200,000,000 is of far too great importance for us to attempt to deal with it in what are likely to be the dying days of the session.

In his closing words the minister said that there is to be no compulsion on any of these companies. I know that the legislation does not compel any company to go into it. But if a great many of these companies do not go into it, the legislation will be of no use to the vast majority of borrowers. It will not serve the purpose which the government has in view until it brings in practically all the companies that lend money throughout the dominion.

My submission is that this legislation having been introduced by the minister, having been given a chance to be discussed in the interim, should be held over until it can be thoroughly considered at the beginning of the next session. The very fact that the minister himself, in his opening remarks, when he introduced it, said that he thought there would be a month's adjournment, during which time it could be studied, demonstrates how well he himself realizes the necessity for devoting a great deal more time to the consideration of all the details involved in the measure than the house is now in a position to give it. While standing by the principle of obtaining for all the people of the country, whether on the farms or in our cities and towns, lower rates of interest-I am entirely in favour of that- at the same time I do not believe that there is any advantage in bringing in the legislation at this late hour. If it goes through it will be dealt with in a slipshod manner; for certainly it cannot be properly considered at

Central Mortgage Bank

this stage. I submit that it would be far better to take a little longer time considering the whole matter and for that reason I suggest that the bill should be held over until the beginning of the next session.

Topic:   CENTRAL MORTGAGE BANK
Subtopic:   PROVISION FOR INCORPORATION, PURCHASE OF SHARES, GUARANTEE OF DEBENTURES, ETC.
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May 23, 1939