March 10, 1944


On the orders of the day:


BPC

Maxime Raymond

Bloc populaire canadien

Mr. MAXIME RAYMOND (Beauharnois-Laprairie):

Mr. Speaker, at the last session

the special committee on social security made

Industrial Development Bank

a report to the house in which there were several recommendations, one of which read as follows:

That the government review the existing regulations governing old age pensions, pensions for the blind, and war veterans' allowances, and consider the advisability of adjusting the eligibility age to a lower level and of increasing the amount of pension.

Is it the intention of the government to give effect to this recommendation?

Topic:   SOCIAL SECURITY
Subtopic:   RECOMMENDATIONS OF SPECIAL COMMITTEE OF LAST SESSION
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INDUSTRIAL DEVELOPMENT BANK

PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL


The house resumed from Tuesday, March 7, consideration of the motion of the Minister of Finance for the second reading of Bill No. 7, to incorporate the industrial development bank.


PC

John George Diefenbaker

Progressive Conservative

Mr. J. G. DIEFENBAKER (Lake Centre):

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

Talk to the Minister of Finance; it is his bill.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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PC

John George Diefenbaker

Progressive Conservative

Mr. DIEFENBAKER:

-and in respect to which members have the right to have his hearing. This matter deals with his department and he might very well endeavour to follow the suggestions offered by the party in opposition.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

The few remarks of the hon. gentleman at the outset were so wholly fictitious that I did not think it worth while listening to the rest. He said that small industries had been discriminated against. I am prepared to give statistics to show that small industries have been made into big industries, and therefore there are no longer any small industries.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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PC

John George Diefenbaker

Progressive Conservative

Mr. DIEFENBAKER:

There have been occasions in the past when the minister has made a similar comment upon statements I have made but which turned out to be correct. The statistics I am about to quote do not come from the Department of Munitions and Supply; they were issued by the Dominion Bureau of Statistics.

Having indicated in general the situation in this regard, I wish now to deal in detail with the matter. So far as the minister's department is concerned, the attitude since the beginning of the war has been to neglect smaller industries, even though they could have contributed to the war effort, and to give orders in the main to the greater industries. If this bill represents a changed attitude in that regard, all I have to say is that with the approach of an election the government now wishes to place itself in the position of being able to say to the small industries:

Industrial Development Bank

We will now give you the chance which thus far has not been given to you during this period of war.

I realize that the difficulties of the transition period between war and peace will be greater than those of the transition period between peace and war. I commend to the membership of the house one of the finest reports that has been issued on the subject of peace and war and the adjustment policy in the United States. I refer to the report by Bernard M. Baruch and John M. Hancock, which deals, among other matters with postwar adjustments and with the question of financing small corporations. I quote:

It is an easier task to convert from peace to war than from war to peace. With the coming of war a sort of totalitarianism is asserted. The government tells each business what it is to contribute to the war programme -just what it has to make and where it is to get the stuff out of which to make it. Patriotism exercises a strong compulsion. With peace, the opposite becomes true. Each has the right to make what he pleases. Governmental direction and aid disappear. The markets become free and each individual is dependent upon his vision, his courage, his resourcefulness and his energy. Everyone has the privilege of building up, but no one has the right to pull down.

To return to the point I was making a little while ago; I had pointed out that the trend to which I referred, that of disregarding small industry, is clearly evidenced by the figures which I have from the Bureau of Statistics. They show that in 1940 the production of companies, 15,478 in number, producing under 825,000, was $138,000,000, in round figures; between $25,000 and $50,000 the production of 2,954 companies was $104.000,000. Taking the great corporations, which the minister said did not receive a preference, I find that there were 677 corporations in Canada producing between $5,000,000 and $10,000,000, and producing over $5,000,000 there were 123 corporations. In 1943 the trend towards the great corporations had been accentuated. In 1941, while the companies producing under $25,000 per annum sold a total of $121,000,000 worth, those between $25,000 and $50,000 sold $116,000,000 worth, the companies producing between $1,000,000 and $5,000,000 sold $1,755,000,000 worth, and those over $5,000,000, 198 in number, sold $2,459,000,000 worth.

This has been the trend throughout Canada, and the bill now before the house will not stop it. The small entrepreneur in Canada has been at the mercy of the various boards set up by government. The proposed legislation will not be of particular benefit to the small business man, or enable the returned

soldier to establish himself in business, unless the type of business in which he may engage is widened.

As the bill now provides, the only businesses that can be assisted are manufacturing concerns, or enterprises engaged in processing, power development, and the like. The statement to which I have referred, giving the viewpoint of the United States and the recommendation with regard to small business, is of particular application to Canada. It states that small business is:

The broad backbone of enterprise, that as production controls are relaxed particular care should be taken to protect the competitive positions of small business as far as practicable within the needs of the war. Cancellations of war contracts can be guided to permit the earliest releasing of small concerns which can convert back to peace-time production; also certain nuisance production controls involving only a limited amount of resources which press heavily on small concerns can be relaxed sooner than broader production controls.

The Baruch report, which is of profound interest to Canada, has recommended that so far as small industiy is concerned, restricted and curtailed as it has been during the war in the switch from war-time to peace-time reduction, cash should be available to renovate plants and to tide over existing companies to permit other businesses to do things by which civilian goods can be produced. Under this bill loans can be made only to corporations engaged in manufacturing, and to power companies. It does not cover many other small concerns to which soldiers returning to the country will wish to devote themselves. Agriculture is not included. Agriculture, we are told, will be included in a subsequent bill,,, but as it stands to-day, the hope that this bill will to any great extent contribute to the establishment of businesses by returning soldiers is unjustified.

The recommendations in the United States are that so far as war production is concerned the lending authorities should be restricted t.o the Smaller War Plants Corporation. For permanent risks which the banks cannot assume, the federal banking system should be given authority to make industrial loans.

One other matter that I think should be considered by the government at this time is the whole question of taxation. No one objects to taxation in time of war. No one resists the veiy high taxes which we have for corporations, for individuals and for all; but when peace comes, in order to build up industrial development, those who intend to engage in industry should have some indication now from the government as to the policy it intends to adopt in the transition period.

Industrial Development Bank

In the United States the Baruch report states that taxes have not been too high for war time; if anything they have been too low. That is admitted, but it is pointed out two of the first problems that must be faced in the period of transition to peace is the encouragement of new industry and the determent of monopoly, both of which can be effectuated by the removal of excessively high taxes. It recommends that the government of the United States should indicate now the nature of its taxation plans; for unless taxation is to be reduced in a measure when the war is over, the returning soldier desiring to enter small enterprise will find himself unable to pay off any loans he may have negotiated; in the words of the report, "he will be chained like a galley slave to a loan he can never repay." Our whole tax system should be part and parcel of the picture of rehabilitation after the war. We have heard nothing at all about the plans of the government. There are wrongs in the present taxation system, and one of them is this: it allows officials in the tax department a discretionary power which is contrary to the principles of parliamentary government. We had an example yesterday of how a board acts toward the representatives of the people. Yesterday the hon. member for Lambton-Kent (Mr. MacKenzie) asked a question, as reported at page 1297 of Hansard, with regard to the present remuneration of certain individuals in the employ of the Canadian Broadcasting Corporation. The answer given by the minister was:

This information has not been made public in the past, as it was not deemed in the public interest to do so.

This shows the attitude of some boards and some controllers. It shows a' disregard of the rights of parliament. Would an answer to this question with regard to salaries hurt the war effort? Could there be anything in it that would be beneficial to the enemy? Time and time again we are told in this house that we cannot get information because the government or the board set up by the government takes refuge behind the statement: "It is not in the public interest."

The time has come when there should be a declaration of policy on the part of the government with regard to small businesses. We do not know what the post-war picture will be. We do not know what the plans of the government are. They give them to us haphazardly, in piecemeal and indefinite fashion. They place before the house a bill with regard to loans, but do they give us the picture? Do they say what they are going to do to assist small industry to reconvert after the war? According to the Baruch report in the United

States the first consideration of the government should be the early release of small industrial plants from war production in order to encourage small industry. That recommendation applies particularly to industries that can be readily converted, and where there are cancellations of industrial production, smaller enterprises should be permitted to return to production first. There is not an hon. member in this house who has any conception of what the plan is of the minister. If he has a plan, so far it has not been placed before the people.

During the past four years the prairie provinces, and to a lesser degree the maritime provinces, have been discriminated against or deliberately ignored in the development of war industry. There has been a tremendous exodus of people from the western provinces, many of whom will desire to return. This proposed legislation, if it is to be effective, must be made effective now. It must be more than a scheme to da-ngle before the eyes of those who desire to go into industry. It must have teeth in it. When I see the situation in the three western provinces, the failure of the government to develop industry there during war time as it should have been developed, I fear for the future in the post-war period with respect to the use to which moneys will be placed by this corporation. My own province of Saskatchewan produces twelve million bushels of flax. The sunflower seed crop is nine million pounds. The oilcake derived therefrom is required for our stock by our dairy men. AVhile our province produces fifty per cent of the flax crop in the prairie provinces, and requires this cake for protein supplement, the production has gone ahead in other provinces and the live stock producers in Saskatchewan have to pay top prices.

The hon. member for Moose Jaw (Mr. Ross) has been particularly advanced in his ideas in this regard and has pressed his ideas on the government. There are hon. members on both sides of the house who have done the same thing, but for some reason the western provinces have not received consideration in the matter of war development and war plants. Two plants have been set up in the last two years in the east to process oilseed, one in Hamilton and the other in Toronto. I should like to ask the minister under whose control this matter comes while the war is on. What is the government going to do to assure that a fair portion of the moneys available for small enterprise under this measure will be available in the maritime provinces and in the prairie provinces?

If Canadian economy is to be built up on the basis of Canadian unity, an effort must be made now to bring about decentralization of

Industrial Development Bank

industry. True, some of our western provinces have not the same facilities, but each province should, according to availability of raw products, be given an opportunity to build up a diversification in industry. That is of the essence of the rebuilding planned in the United States. The national resources planning board in the United States have been viewing the situation that confronts the people there, and their report sets out the whole position in a very few words. I quote:

One of the aims of post-war conversion should be to achieve a better regional distribution of manufacturing activity. The desifabfi'ty greater industrial decentralization has long been apparent. There is considerable room for such decentralization despite the opposing advantages of regional specialization. Manufacturing activity could bring to agricultural regions a higher income, and a more balanced and diversified economy. In many instances, decentralization would reduce cross-hauling of raw materials and manufactured goods, and thereby considerably reduce distribution costs. In addition to such economic and social gains, there would be important advantages for our future national defence.

Before this bill goes to the committee the government should give us a picture of what it intends to do with reference to the decentralization of industry in this country. We are trying to assure ourselves now that there shall not be unemployment after the war. Pious expressions of hope without action will be ineffectual. The transition to peace will be difficult-more difficult, as I have already said, than was the transition from peace to war. I hope this legislation works. It can be made to work, but not, as I see it, on the basis of the generalities set forth in the bill as presented.

This type of legislation is a novelty in Canada, though it is not new in the United States. Just because it is new some people may oppose it. I have always believed that political parties, no less than individuals, must not worship the past; their membership must not suffer from neophobia, the fear of new things. Everything must be tested, not on the basis of its tradition or its novelty but on the basis of whether or not it will be workable. To that end I suggest, in order to assure that little enterprises across Canada shall receive consideration, that certain steps should be taken in connection with this measure.

In the first place we must assure that the small amount which is to be available, $75,000,000 to $100,000,000, is not distributed in large amounts to a few great corporations, thereby rendering small enterprises unable to obtain their fair share. If this legislation is designed in the main to support the small enterprise, then I suggest that some sort of

limitation or restriction should be imposed upon the amount that may be lent by this organization, as was suggested the other evening in the able speech of the hon. member for Queens-Lunenburg (Mr. Kinley). In the second place, to guard against any suggestion of political interference in connection with the various branches which are to be set up, loans should not be made without the approval of the central board of directors.

There should be some further restrictions. We are actually giving a number of individuals carte blanche to expend money, and this bill does not contain any provision limiting the powers of the board so far as loans are concerned. Private banks are limited; trust companies are limited. They lend the money of their shareholders. Is there any reason why similar limitations and controls should not be imposed upon the lending powers of a government institution? Otherwise, as I say, parliament will be giving this organization a blank cheque for the disbursement of the people's money.

I come now to the next and larger phase, that having to do with the war effort and rehabilitation scheme as a whole. As I see it, this bill brings into focus and sharp relief the whole question of the shift after the war to peace-time production. It is designed to make the road of reconversion easier. But what is the plan of the government? No one has ever heard it. We get it piecemeal; we get one act now and another act again. The time has come when this country should have placed before it the master plan which the government no doubt has and which will deal with such important matters as the unwinding of the war machine, the disposal of government owned or financed war plants, the cancellation of war contracts, and the allotment now to various industries of the production of civilian goods.

With reference to these matters this house and the country know little. In the United States a plan already is being evolved and placed before congress. Contract termination is the first step. The time has come, I believe, when the membership of this house and the country should be informed as to what production is to be cancelled this year, what industries are to be closed out, and what is to be done with such industries. In the United States, according to reliable information, the producers of ammunition, small arms, tanks and tank parts, as well as other munitions of war, have achieved such production as to necessitate the cancellation of any further orders. In that country a uniform cancellation clause has been established. If that has

Industrial Development Bank

been done in Canada, no one knows about it. The war assets corporation has been set up, another of the corporations independent of parliament. I have no objection to the setting up of corporations when they are to carry out the plans and decisions of the representatives of the people, but I believe we in this house have a right to full discussion of this subject, to have placed before us the government point of view with respect to rehabilitation in industry after the war, to the end that hon. members may be permitted to discharge their responsibility of placing before the government and the country the views of a large portion of our people.

I have been asked, where is the plan? This bill is not the plan; it is just one segment of the entire picture. We as members of this house, business people, those engaged in small enterprises, the men overseas who intend to return and establish small industries-all have a right to know the plan of the government. It may not be complete in detail, but it can be a comprehensive plan the details of which may be filled in subsequently. I repeat, what is being done in Canada? Is there a uniform cancellation system? Has a body been set up similar to the body in the United States, where some two hundred government contract officers are studying the whole question and will later go throughout the country advising industry as to how production may be reduced in one line and increased in others? I ask, does the government intend now to stop the freezing of small industries so far as the men returning from overseas are concerned? Those men are coming back now in small numbers. May they establish themselves in industry? May they open country stores? May they go into the types of business they followed before the war? Oh, no. That privilege should be guaranteed to them. They should be given permission by parliament; the wartime prices and trade board should immediately relax the freezing order in relation to the establishment of industries as applied to the ex-service men.

When there is a lessening in any branch of war production, I should like to know if the government has decided what civilian commodities will be produced and what businesses are to be taken out from the freezing order, in order that employment may be maintained. Has the government a plan as to what civilian production will come first? What of the surplus of army goods, the stocks of food on hand to-day, and so on? All these are parts of the whole picture, without which none of us can intelligently discuss the post-war problem as affecting industry, or the question of advancing money to assist industry. When the

transition period comes and we return to the production of civilian goods, new machinery will be required, repairs will be needed, plant alterations will be necessary, and so on. Is it not about time the Minister of Munitions and Supply and those associated with him, and the Minister of Finance, advised the country whether in the reestablishment of these business enterprises such expenditures will be deducted in arriving at net income for taxation purposes?

There are other phases of this matter that could be dealt with, but they can be covered when we are taking up the different sections of the bill. I ask the minister or his parliamentary assistant to place before this house and the country something of the picture, something of the plan. Sometimes I wonder whether there is a plan. To-day there is this piece of legislation; to-morrow there is another. No one can put together this bits-and-pieces post-war programme. I should like to see it reconstructed by those in authority, to the end that business may know its position and, above all, that the men and women returning from overseas service may not be denied, as they are to-day, the opportunity to go into small enterprises but will be given the opportunity to do so, and that the money to be made available under this bill shall be devoted mainly to the assistance of small enterprises.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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SC

Victor Quelch

Social Credit

Mr. VICTOR QUELCH (Acadia):

Mr. Speaker, I have read this measure with a great deal of interest, but the more I study it, the harder I find it to understand just exactly its purpose. I have listened to the statements of various members of this house. Some hon.- members have suggested that the purpose of the measure is to salvage investments of the chartered banks which have gone sour. Others have suggested that it is to take on business wffiich is too risky for the chartered banks to handle. The minister himself has suggested that its purpose is to fill in the gap that cannot be filled by the chartered banks.

We have no idea of what will be the rate of interest charged by this bank, neither do we know whether it will secure its funds from the Bank of Canada or by the sale of bonds to the public. We do not know what rate of interest those bonds will bear. In other words, it is a kind of pig in a poke; it is quite a bit like a blind .date. You do not know what you are going tc get, you do not know w-hether you will like it when you get it, and you do not know whether you will be able to discard it after you have it.

Industrial Development Bank

When we consider the expansion that has taken place during the war, an expansion which has increased the national income from around $4 billion to $8J or $9 billion, I doubt very much if this measure will be able to play a very important part. I doubt still more whether there will be any need for such a measure after the war. This measure provides a fund of only SlOO million, and, according to the parliamentary assistant to the Minister of Finance, the money will be lent out chiefly for long term purposes.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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LIB

Douglas Charles Abbott (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. ABBOTT:

Medium and long.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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SC

Victor Quelch

Social Credit

Mr. QUELCH:

Medium and long. The result will be you will not have a rapidly revolving fund and the amount of business the bank will be able to do will not be very great. When you think of a $9 billion economy it will be merely a drop in the bucket.

As I understand it, the bonds of this bank are not to be guaranteed by the government, but I think the minister will agree with me when I say that the government could not possibly allow this bank to go by default. If there were any danger of this bank going by default the government would have to be prepared to come to its assistance. On the other hand., as these bonds are not guaranteed by the government they will have to bear a higher rate of interest than dominion bonds. As the government will have to back them in the event of the bank getting into trouble, it seems to me they should take steps to see that the rate of interest to be paid is no higher than that paid on dominion bonds. Otherwise you will be compelling industry to pay unnecessarily high rates of interest.

The minister has stated that it is not intended that this bank shall compete with the chartered banks. Perhaps that is one reason why this bank is not to be a bank of issue. In other words, it is being shackled so that it cannot compete with the chartered banks. It is not a question of whether it wishes to compete; it is being placed in such a position that it cannot compete even though it desired to d,o so. Perhaps that is the reason why the bonds will likely be sold to the public or to the chartered banks rather than to the Bank of Canada. It seems to me that the government are deliberately creating a set-up which will bring about higher rates of interest on industrial loans.

The parliamentary assistant has stated that this bank is needed to fill a gap. I should like to quote what he said about that gap. On page 1059 of Hansard he is reported as follows:

The chartered banks are one source, of credit for industrial enterprises. But since the liabilities of these banks are mostly in the form of deposits withdrawable on demand or short notice, it has ahvays been thought desirable that they should keep their assets in rather liquid form-easily realizable in case of need.

And again:

For the reason I have just mentioned, the chartered banks for the most part have made short term loans to industry-loans which in the ordinary course of business can be paid off in full at least once a year. Accordingly, they have been most important as a source of working capital for industry rather than as suppliers of long term funds which might only be repaid over a period of several years.

And again:

It is to fill this gap in our financial structure and to ensure that adequate financing is forthcoming for desirable projects that the government proposes to establish the Industrial Development Bank.

That would seem to be a desirable objective, but unfortunately the resources of this bank are going to be limited and it is doubtful whether it will be in a position adequately to fill the gap. It seems to me that if there are gaps, and undoubtedly there are, then the first, step w'e should take is to amend the Bank Act in such a way that these may be filled. We could very well let this measure stand until the Bank Act has been revised. When that has been done, and we have found out what gaps are left still to be filled, there would then be plenty of time for the government to bring down a measure to provide for the filling of them.

I want to consider briefly the situation referred to by the parliamentary assistant. I quote again from page 1059 as follows:

But since the liabilities of these banks are mostly in the form of deposits withdrawable on demand or short notice, it has always been thought desirable that they should keep their assets in rather liquid form.

In other words, it might be said that the chartered banks are lending something which they do not in reality possess. Because the chartered banks are able to create loans at the ratio of ten to one against their cash reserves, they are not in a very sound position to make long term loans. If there was a run upon the banks they would be in the unfortunate position of being able to pay only approximately ten cents on the dollar. Naturally they try to remain in as liquid a position as possible.

On previous occasions in this house we have discussed this matter. Members of this group and of other parties in the house have suggested that it might be well worth while for the government to consider making amendments to the Bank Act along the line of the

Industrial Development Bank

one hundred per cent system. I think the minister is familiar with the proposal as suggested by Professor Soddy and later taken up by Professor Irving Fisher and later endorsed by Babson's Incorporated. Briefly the proposal is to amend the Bank Act so that the chartered banks will be compelled to maintain one hundred per cent cash reserves to the full amount of their demand deposit liabilities. If that were done, the banks would be in a position at all times to satisfy any demand against their demand deposits. The proposal is that the government should buy from the chartered banks a sufficient quantity of government securities to provide the legal tender backing required on that basis. The Minister of Finance has on several occasions opposed such a suggestion on the ground that it would be, in other words, a tax on the profits of the chartered banks. But there is an alternative to that proposal by which the banks would not be in any way penalized. That proposal is made by Babson's. It is a slight modification of the suggestions made by Professor Irving Fisher and Professor Soddy. I should like to quote briefly from Babson's Reports dated March 20, 1939, in regard to this proposal. I shall quote only paragraphs 7 and 10. Paragraph 7 reads:

In order that our monetary policy may be made to conform to the new standard and become the means of attaining a high degree of prosperity and stability, legislation should be enacted, embodying the following features: (a) there should be constituted a "monetary authority" clothed with carefully defined powers oyer our monetary system, also control of the circulating medium.

And paragraph 10:

The simplest method for making transition from the fractional to one hundred per cent reserves would be to authorize the monetary authority to lend, without interest, sufficient cash (federal reserve notes, credit, United States notes, or other lawful money) to every bank or other agency carrying demand deposits to make the reserve of each bank equal to its demand deposits on a specified date.

If that recommendation were carried out rather than the proposal by Professor Irving Fisher, it could not be charged that you would be taxing the profits of the chartered banks, because instead of buying up the bonds held by the chartered banks and thereby depriving them of the interest thereon, you would lend to them as collateral legal tender without interest against their holdings of government securities, and if there were a run on the chartered banks they, would then be in the position of being able to meet all demands one hundred per cent. Moreover, it would be a great help to the government, because there would be no danger of inflation. The

government would be in the position of issuing national money wtihout any danger of the chartered banks using the money issued by the government as a basis for expanding their loans in the ratio of ten to one. The charge has been made repeatedly in this house by the Minister of Finance and the former minister of finance who have refused to issue new money on the ground that it would create inflation. But this proposal would take care of that danger.

Some people object to the one hundred per cent idea on the ground, with a good deal of justification perhaps, that while the one hundred per cent system would prevent the banks from inflating the money in circulation, it would not, on the other hand, prevent the chartered banks from curtailing the issue of money, and therefore they say that other steps would have to be taken. I do not think it is quite fair to make that charge unless it has been proven. In other words, the government in power might decide to adopt the one hundred per cent system. They would seek the cooperation of the chartered banks and if they were unable to obtain the cooperation of the chartered banks they could adopt the alternative of nationalizing the whole banking system.

It is interesting to note this fact, that in New Zealand there is a government that was pledged to nationalize the chartered banks. That government has been in power for eight or nine years, and yet it has not nationalized the banking system of that country. It has been suggested that the reason why the banks have not been nationalized in New Zealand is that the government has never been able to get hold of enough money to buy the capital stock of the banks. But if the banks were nationalized, all that the government would be required to do would be to write a cheque against the bank itself to pay for the capital stock.

Some may say that that would be inflation. But remember, the capital stock of those banks is always readily saleable and if people wanted to obtain money for their bank stoek they could obtain it readily. The fact that the people have not sold their bank stock shows that they do not want the cash, but rather an investment. If the banks in New Zealand were nationalized I do not believe one need worry that the people on receipt of money in payment of their bank stock would at once go out to buy other goods and thereby cause inflation. Rather they would immediately look for another forth of investment. I just mention that fact to show that even though a nationalized banking system may

Industrial Development Bank

seem very desirable, as it seemed desirable in New Zealand, yet in spite of the fact that a farmer-labour government has been in power in New Zealand for about nine years they have never taken the step of nationalizing the banks there. They figure that they can control the banking system without nationalization. One can argue all one likes about the proposal, but it would be necessary to wait and see just what sort of cooperation you would obtain from the banks. If you could obtain the desired cooperation, there would be nothing to gain by nationalization so long as you had the one hundred per cent system in operation. On the other hand if they refused to cooperate, immediate steps could be taken to take them over.

As I understand it, the Bank Act is to be revised some time during tne session. There will be plenty of opportunity therefore to investigate the Bank Act and its operations. If there are any gaps which the Bank Act does not fill, surely that will be the time to bring forward the necessary amendments in order to fill the gaps. If we find that we cannot fill the gaps by amendments, surely that will be the time for the government to bring down a measure to take care of the situation. Therefore, Mr. Speaker, I move, seconded by the hon. member for Lethbridge (Mr. Blackmore), the following motion:

That this bill, No. 7, be not now read a second time but that the second reading be postponed until after the Bank Act shall have been reviewed and by parliament revised.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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LIB

Ian Alistair Mackenzie (Minister of Pensions and National Health)

Liberal

Mr. MACKENZIE (Vancouver Centre):

Mr. Speaker, I rise to a point of order, although I am not asking Your Honour to rule upon it now. Beauchesne's Third Edition, Speakers' Decisions, page 495, says:

The house resumed the adjourned debate on the proposed motion of Mr. Manion: That the Bill No. 37 (Letter A of the Senate), intituled: "An Act respecting the Canadian National Railways and to provide for cooperation with the Canadian Pacific Railway System, and for other purposes," be now read the second time, and the proposed motion of Mr. Mackenzie King in amendment thereto:

That all the words after "That" to the end of the question be left out in order to insert the following instead thereof: "the second reading of this Bill be postponed until this house have declared that nothing therein shall be taken to authorize any amalgamation of the Canadian National Railways with the Canadian Pacific Company; or to divest parliament of its rights; or to take from the House of Commons its primary duty to control expenditures of public moneys and the taxes required to meet the same; and that the provisions of said bill shall be read in the light of this declaration, and be construed so as to conform therewith, and that in so far as any of its provisions may be inconsistent therewith they shall be amended accordingly,

"and that the adoption of this amendment by this house shall constitute the declaration of its intention and purposes as set forth herein."

Mr. Speaker: There is in our journals one precedent of an amendment moved on the second reading of a bill which proposed that 'further consideration of the bill be deferred until the Tariff Bill has been disposed of.

It was a declaration of principle covering not only the second reading, but also the third reading and the final adoption of the bill, and it was moved, as a disapproval of the measure.

But the present amendment is different inasmuch as it proposes a postponement of the second reading pending a definite declaration of the house.

It does not purport to be adverse to the bill, but it makes suggestions for adding to its provisions by amendments which can only be moved after the adoption of the second reading.

May at page 390 says:

And the quotation is found at page 496. Then Mr. Speaker continued:

As this amendment has not the effect of disagreeing with the principle of the bill, it does not come within the class of amendments referred to by May.

"The allegation that nothing in the bill should be taken to divest parliament of its rights or to take from the house its primary duty to control expenditures is a declaration of general principles which can be moved as a reason for not agreeing to the second reading of a bill dealing with the constitutional rights of parliament, but which is beyond the scope of, and therefore irrelevant, to the present bill. May says at page 391 that the principle of relevancy in an amendment governs every such proposed resolution."

At page 391, May says further:

"Such an amendment may not deal with the provisions of the bill upon which it is moved nor anticipate amendments thereto which may be moved in committee."

The words "nothing therein shall be taken to authorize any amalgamation of the Canadian National Railways with the Canadian Pacific Company" anticipates an amendment w-hieh may be moved in committee.

The propostion that the bill shall be read in the light of certain declarations and be construed in a certain manner, and that its provisions shall be amended accordingly is in the nature of an instruction to the committee which cannot be moved as an amendment to the second reading.

For these reasons, the amendment is out of order.

See May 15th edition, page 391; Bourinot, page 509; Redlich, Vol. 3, page 89.

From this decision Mr. Mackenzie King appealed to the house.

And the question being put by Mr. Speaker: Shall the ruling of the Chair he sustained?- it was decided in the affirmative.

Debates, House of Commons, 1932-33, vol. 3, pages 2895-6.

Journals, House of Commons, vol. 71, pages 297, 298, 299.

I would ask Your Honour to give consideration to the arguments advanced at that time.

Industrial Development Bank

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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SC

John Horne Blackmore

Social Credit

Mr. BLACKMORE:

Mr. Speaker, it seems to me that the cases cited by the Minister of Pensions and National Health (Mr. Mackenzie) are not analogous to the situation we have here confronting us in respect of the present amendment. My submission is that the present amendment is completely in order.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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LIB

Thomas Vien (Speaker of the Senate)

Liberal

Mr. SPEAKER:

I shall deal with that matter a little later. An amendment has been moved to the main motion, and the debate should now take place upon the amendment. I shall deal with it later. Is the house ready for the question?

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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NAT

Howard Charles Green

National Government

Mr. H. C. GREEN (Vancouver South):

Mr. Speaker, this bill setting up an industrial development bank is a very important one. I believe it may be of great help to Canada at the present time, and also that it may be of much assistance in dealing with our post-war problems, which, as all hon. members must know, will be very difficult ones. There are several thoughts, however, which I should like to express in connection with the bill, and which I would place before the ministry and before hon. members in the hope that they will be of some help to the banking and commerce committee when it considers the bill section by section, and will also be of some help to hon. members when the bill returns from that committee.

It does seem to me that this bank might easily become a political one. It could be used for political purposes. I am not for a moment suggesting that that would be done, but it is a thought which should be kept in mind not only by the present government, but more particularly by members of my own party, the Progressive Conservative party. I say that because I believe that they are the people who will have to administer this measure in the very near future.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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?

Some hon. MEMBERS:

Oh, oh.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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NAT

Howard Charles Green

National Government

Mr. GREEN:

I mean that, and I would ask hon. members in my own party to keep that thought seriously in mind.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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NAT

Gordon Graydon (Leader of the Official Opposition)

National Government

Mr. GRAYDON:

The hon. member never said anything truer in his life. .

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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March 10, 1944