May 8, 1944

NAT

Richard Burpee Hanson

National Government

Mr. HANSON (York-Sunbury):

No, I am not currying favour. Who said that, anyway? I suggest to the young gentleman, whoever he is, that he just keep his peace while I am trying to make an argument.

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LIB

James Garfield Gardiner (Minister of Agriculture)

Liberal

Mr. GARDINER:

He is-not in the house at the moment.

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NAT

Richard Burpee Hanson

National Government

Mr. HANSON (York-Sunbury):

I do not pretend to be in the confidence of the banks. I believe they are quite capable of defending their own position if given the opportunity to do so, but I do say that it is our duty to see that they get that opportunity at the proper time and place, and that is in the banking and commerce committee. Why deliberately raise an issue over the banks in this house which may conceivably, probably will, in the days to come, become a political issue?

I recall with some degree of satisfaction the position in 1934, when I had the responsibility of presiding over the deliberations of the banking committee, when the act was last revised In those days there were the usual charges of monopoly and abuse and all the other charges that were heaped upon the banks. Some of those charges were made in the house, but chiefly before the committee. The case against the banks at that time, if it could be called a ease, was made by the same opponents and the banks had full and free opportunity te make their defence. That is the place they should have allotted to them to make their defence, and they should be given that opportunity. I believe that 1934 was the first time in our history that they had a . full and free opportunity to make their defence. They did so, and I think it was the universal opinion that they made a defence that was convincing at all events, and they came through with their colours flying.

That ought to be the position taken to-day. But by reason of the ineptitude of the minister and his advisers, the banks to-day are put on the defensive in this house without having anybody to speak for them, except possibly by proxy. The minister's defence and his championship of the banks was ill-timed and uncalled for, and will undoubtedly have repercussions which he has not foreseen. I could page the hon. member for Vancouver-Burrard (Mr. McGeer) at this point, but he will speak for himself.

I desire to refer for a moment to one of the questions to which the minister referred, namely, the proposal put forward by our socialist friends to nationalize the banks and other financial institutions.

I desire to express my views as a proponent of the principle of free enterprise. I do not think that the policy of our socialist friends is

either sound or wise. I prefer the present system, controlled and guided as experience and the wisdom that comes from experience will dictate. I believe that the proposals of the socialists carry with them the most sinister threat to individual freedom and liberty, and therefore to the privilege of democratic living in a free country. Why do I say that? For the reason that commercial banking in Canada permeates every section of business activity and affects practically every form of economic endeavour. Government control of loans- that is what it would come to, and we may expect that if the socialists gain their way- could be used as a weapon of political patronage by a political party to enforce compliance with its doctrines. Does anybody challenge that position? If my premise is correct, such political control over loans would deny to many the privilege of exercising their franchise from conviction. If a man is threatened with the loss of his loan, dare he vote otherwise than as the lender suggests? In my humble view it would be to all intents and purposes a system of coercion. Let us be frank. We all know political conditions in Canada. We have political patronage even in war time. Does anyone believe that the socialists would not use that weapon if they were once in a position to do so? I do not believe anyone thinks that they would not. Does anyone imagine that if the banks of this country were brought under government ownership they would be administered free of political control, in the best interests of the business community and the nation as a whole? To contend otherwise, Mr. Speaker, is to be intellectually dishonest, especially in the light of present conditions.

I know our friends assume a very lofty, holier-than-thou-attitude. I have seen it on many occasions; it has been exhibited towards myself. But I suggest that they are not free from guile or political strategy. Often their strategy misfires; I admit that on their behalf. But evidences multiply that they are very worldly-wise. They seek to employ and do employ many of the methods used by the rest of us in the old political parties whom they deride and seek to hold up to scorn. But their holier-than-thou attitude deceives no one but themselves. It is as hypocritical as Uriah Heep or any other charlatan of history or fiction, that one may summon to memory.

Business often depends upon bank loans for the financing of its operations. It is quite evident, to myself at all events, that the threat of withholding loans at a crucial time could be used to coerce borrowers into falling in line with the views, political or other, of the controllers of the banks. That has been the position in Germany; it has even been true

2716 COMMONS

Bank Act-Mr. Hanson (York-Sunbury)

in Russia, where there is only one political party. In these countries, and in this country if the socialists have their way, you will support the dominant political party, or else! Make no mistake about that. Is that democracy? Is that the freedom for which we are fighting and giving our treasure, for which our sons, perhaps, are dying?

I cannot pause to follow this thought further. The battle will probably have to be fought in Canada, but not to-day. Personally I have no fear of the result. There were as of October 1, 1943, 4,462,100 separate saving bank depositors, and S2,000 millions of notice deposits. I do not think that the people of Canada who are represented in that huge accumulation are going to vote for revolution. I have great faith in our people. I do not believe they will do anything to impair their position; they are too much satisfied with the security they have to-day to intrigue with things they know not of.

I do not desire to take very much more time, but I want to deal a little more with the minister's statement. I suggest that the historical part of the narrative he read may be found in any textbook on banking. I have no doubt that the various ghost writers- whoever they were, and I think I could name some of them-made full use of the well-authenticated material dished up to us by the minister on Tuesday last, and which is available to anybody who knows where to look for it. Go to any of the editions of Maclaren on Banks and Banking, and you will find it. The whole symposium had a reminiscent sound, at any rate to my mind, and it is over forty years since I first read that textbook. In any event there was nothing new in what he said about the banking history of Canada. He failed, and markedly, to give any credit for the advances which were made in this respect in this house in 1934.

The statement naturally divided itself into four or five main divisions: (1) the historical review (2) the defence of our present system (3) the attacks on the socialist position and the Social Credit theories (4) an analysis of the proposed changes-which after all are by no means radical or revolutionary and are really not of great or major importance.

The banks have lost nothing in this revision; make no mistake about that. It is fair to characterize all these proposed changes as extensions of present principles and policy. The banks have lost no major powers, save the two points to which I have already alluded, namely, the note issue-which they were going to lose anyway-and the switching of the unclaimed balances.

The minister's statement must have been disappointing to some of his friends across the way who hold advanced views on this subject. I mentioned a moment ago the hon. member for Yancouver-Burrard. I cannot but think that he will be greatly, disappointed with the minister's statement. I will not pause here to anticipate his feelings or the language he will use. Rather I await with interest the expression of his views. I think we all do, including the minister.

This bill is a far cry from the views on monetary reform advocated so unctuously by the present Prime Minister in the election campaign of 1935. I have no doubt that hon. members from western Canada remember the views expressed by the Prime Minister at that time.

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SC

John Horne Blackmore

Social Credit

Mr. BLACKMORE:

Noble hero!

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NAT

Richard Burpee Hanson

National Government

Mr. HANSON (York-Sunbury):

How short the memories of some people are! How short the memory of the Prime Minister is! Then we were to have real monetary reform, dressed up to suit the people of western Canada- and if my memory serves me aright, he was aided by the present hon. member for Van-couver-Burrard. Yes; we were to have real monetary reform-whatever that connotes. It did not connote much in the mind of the Prime Minister, for what did we witness. It helped win the election. Once he came back from the west and was comfortably settled in the old quarters in the east block, he conveniently put his fervid promises into cold storage, and there they have remained ever since. There are many other observations I could make in regard to this bill, but I prefer to wait until the bill goes to the committee. I do not propose to offer any amendment at this time, but while we do not now propose an amendment, I do not want this house or the country to take the view that we are giving a blanket endorsation to all the provisions of the bill. Far from it. We think the bill can be improved by constructive suggestions in committee.

I expressed the hope that the minister's mind is not so inflexible that he will refuse to consider constructive proposals from whatever source they may emanate. This bill as presented will leave the fundamentals of our banking laws very much where we left them in 1934. No new or radical principles have been introduced. There has certainly been no revolution. On the contrary, this bill is in the main a reaffirmation of legislation of previous years, particularly that of 1934, refined and extended if you will, and improved as experience, changing conditions of commercial life, and the trend of events indicate as desirable.

Bank Act-Mr. Coldwell

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CCF

Major James William Coldwell

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

Mr. M. J. COLDWELL (Rosetown-Biggar):

I do not propose this afternoon to enter into a controversy with the hon. member for York-Sunbury (Mr. Hanson). I think his references to us will be dealt with by some other member of our group. I have not unlimited time, as the hon. member for York-Sunbury has, in replying to the statement made to the house by the minister, but I want to say to the minister at the outset of my remarks that his speech was both provocative and political. To that extent I agree with the hon. member for York-Sunbury. May I remind the minister of a piece of advice that was given a good many years ago by one great jurist to another, Sir Francis Bacon to Sir Edward Coke, when he said, "one should not so much labour what to speak as to find what to leave unspoken." That was a piece of advice the minister might have taken before this debate began, because I believe we were all ready to facilitate the sending of this bill to the banking and commerce committee. We did not anticipate the kind of debate which the minister introduced, but since he has seen fit to introduce a debate of this description into the house, and to open attack, as he did, we shall not let the statements the minister made go unchallenged.

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SC

Charles Edward Johnston

Social Credit

Mr. JOHNSTON (Bow River):

That is what he wants.

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CCF

Major James William Coldwell

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

Mr. COLDWELL:

I presume the statement the minister read in the house, as the hon. member for York-Sunbury said, was made in cooperation with persons whose principal effort seemed to be to defend the present financial system rather than to justify the minor changes proposed in the Bank Act. I shall therefore this afternoon devote my attention to the argument advanced by the minister, and I shall reserve constructive proposals in relation to the Bank Act and to financial policy until the bill is in the committee, where we can consider it and, when necessary, amend it clause by clause.

Even if we agreed that the present banking system is safe, sound, prudently managed, and all that the minister claimed it be in these respects, we would not be content with it. From the viewpoint of broad national interest, the banking system must be judged by its ability to provide a national economy with the financial arrangements needed to maintain the real income, capital equipment, and material welfare of the Canadian people. This it has not done in the past. Its failures are made apparent by the war, which has proved beyond all doubt that what is physically possible ought to be at the same time financially possible.

It is, then, on these fundamental grounds that we criticize our banking system. Our banks have not done the job which they were supposed to do and which provides them with the only justification for seeking renewals of their charters. For fifteen years at least, from 1929 until war-time necessity established full employment and a high national income, we suffered depression, unemployment and excessive loss and wastage of human labour. To some degree the blame for this situation lies with the banks themselves.

As the minister himself pointed out, they decided what credits were to be extended and to whom, and thus had the power to expand or contract the volume of purchasing power, or, in other words, to carry out a policy approved by the Bank of Canada, or, equally important, to nullify that policy.

In the heyday of the twenties they made loans to stockbrokers whose securities were sometimes so questionable that, when the crash came, government action was taken to prevent the undermining of public confidence in at least one of our great chartered banks. On March 21, 1933, the present Minister of National Defence for Air (Mr. Power) questioned an order in council, No. 2693, passed on October 27, 1931. This order in council enabled the chartered banks to publish incorrect statements as to the value of their securities, and in reply to that question Mr. Bennett said this:

There was a run on one of the chartered banks in Canada. It was .a run predicated entirely upon the failure of one of the great brokerage firms of this country. It was thought by many people that the bank might be a failure; ten million dollars in deposits were withdrawn. No assistance was given by other banks, and there was no question of the government being asked for assistance.

The bank to which this reference was made was of course the Royal Bank of Canada. It is also true that a similar order in council, No. 3871, was passed on December 31, 1931, to prevent the public from knowing the great loss in value of stocks in which a great insurance company had placed its policyholders' savings. Of this order in council the present Minister of Finance (Mr. Ilsley) said, on March 8, 1932, as reported at page 939 of Hansard-and I quote it from the record- that it:

. . . enabled the life insurance companies of Canada to place a false valuation upon their investments, so that there would be no danger of two or three of our insurance companies being declared insolvent.

But apparently the minister himself had forgotten something. There was an interchange between us-and incidentally, my mem-

Bank Act-Mr. Coldwell

ory was not altogether correct either-and the minister, on January 31 of this year, overlooked this order in council enabling the banks to do what he had said the insurance companies were permitted to do. Hence we contend that a banking and financial system owned and controlled by the nation and supported by all the resources of Canada would give greater safety to the savings of the Canadian people than institutions whose self-perpetuating directors are responsible to none but their own Shareholders, whose associations have sometimes in the past jeopardized the savings of the people, and whose policies on occasion have brought to the verge of ruin thousands of farmers, workers and business men. No man can foresee the future, but the causes which brought about the crash in 1929 are inherent in the present system, which, as long as it continues, may be subject to the same kind of disastrous fluctuations. Such a system cannot, in my opinion, be accurately described as completely safe, completely sound or completely prudent.

But criticism of our banking system rests also on other and perhaps broader grounds. We criticize it because its deficiencies are so closely associated with the failures of the system miscalled free enterprise; and we link with that, criticism of the present Liberal and past Conservative administrations for their failure to take steps from time to time to provide for economic expansion and employment until, as was admitted this afternoon at least by inference by the hon. member for York-Sunbury, they were forced to do so by the necessities of war. Neither in this bill for the renewal of the charters, with its minor amendments-which incidentally, we welcome-nor in other legislation proposed by the government or urged by the official opposition do we see anything sufficiently comprehensive to indicate that the conditions we knew in the thirties will not bedevil our people again sometime during the post-war years. Adequate expansion, nation-wide employment, require a planned use of our resources, our human power, our capital equipment and our financial instruments. In such a setting the nation's banks should accurately reflect the nation's demand for credits and for funds. Where private enterprise and governments both fail to use the financial resources available, the economic structure verges almost permanently on a state of entire collapse. A publicly owned central bank alone cannot prevent this, for the actual granting of credits-again as the hon. member for York-Sunbury indicated-rests with privately owned, profit-motivated institutions

It is on these grounds, then, that we call for the national ownership and control of the financial system, and particularly the banks; not, as the minister suggested, on some doctrinaire theory that their socialization will destroy the present system. We urge the nationalization of the chartered banks on exactly the same grounds as those advanced by the minister himself as the justification for the establishment of the central Bank of Canada. On May 2 of this year, at page 2542 of Hansard, the minister spoke of:

. . . the failure of public policy to provide an institution charged with responsibility for regulating the volume of money and credit solely in the public interest. Such a function

That is what I want to bring to your attention:

-could only be performed by a public body interested not in the making of profits but solely in the performance of a public duty.

We say it is equally true that the day-today provision of credits for desirable public policies, such as the maintenance of full employment and of purchasing power, can be performed only by public institutions interested not in the making of profits but solely in, the performance of a public duty. The case for socialization could rest there, for it could not be put much better than in the minister's own phraseology'. Because of this I wish to move the following amendment:

That all the words after the word "that" in the said motion be struck out -and the following substituted therefor:

"this bill be not now read a second time but that it be resolved that consideration be given to the national ownership and complete public control of the chartered banks with a view to the promotion of the peace, order and good government of the people of Canada."

That amendment expresses a desire and a policy in sharp contrast with the bill and the principle of the bill. It deals with no details of the bill, but suggests an alternative principle upon which our banking system should be organized.

The minister criticized the Cooperative Commonwealth Federation on other grounds. He denied that the banks exercised a monopoly because, he said, they competed for loans. But who will deny that the present Bank Act gives power to a comparatively small group of bank directors to control institutions which this very act safeguards against competition from private initiative, except under conditions so difficult to fulfil that no new bank has been given a charter for very many years? It is true that they may compete in the lending of money, but they pay the same rate of in-

Bank Act-Mr. Coldwell

terest on deposits; they charge the same rates of interest to the same classes of 'borrowers, and the same bankers' association lays down the general rules to which they all adhere. They even agree to prevent competition by closing competing branches in many parts of the country, and thus in many respects conduct themselves as though they were indeed one instead of ten. We do not argue, as the minister charged us with having argued, that because banks have directorates which are interlocked with certain business firms, they deliberately favour such firms or prevent possible competitors from getting funds. We do not say that; but, as a part of the system, they have driven some pretty hard bargains to get rid of publicly owned institutions which they dislike or fear. With the compliance of a federal Conservative government, of which the hon. member for York-Sunbury was a member at the time; with the weak acquiescence of a former provincial premier, Mr. Bracken, who now leads the Progressive Conservative party, and with the help of a carefully planned scare campaign, the Manitoba savings offices were closed in 1932. Nor do we, particularly those those of us from the western prairies, forget this: that, having given the western wheat pools certain advice in 1930, they drove such a bargain subsequently, that but for the guarantees given by the prairie governments this great co-operative venture might have been brought to ruin.

The attitude of the minister is surely inconsistent with respect to the social ownership of the banking system. He deplores the lack of representation on the boards of directors of the banks of the small business man, the farmer and the industrial worker. We deplore that, too; but instead of indulging in pious wishes, as the minister did and does, we propose something. We propose social ownership of these institutions, in order that just such people as the minister named, through their owm chosen representatives, shall have some say in the vital financial and economic policies of this nation. That is what we mean by socialization-that those in control of financial policy shall not be merely the representatives of big business or the directors of powerful, privately owmed, monopolistic institutions, some of which are parts of great international cartels.

The minister recognized the existence-he did not recognize the evil-of interlocking directorates among banks and other institutions when he said that no doubt they would be criticized on that account in this debate. When most of the savings of the people of Canada are channelled into the hands of the chartered banks and insurance companies, we

certainly have an obligation here to appraise their influence upon our entire economy. Four banks-the Royal Bank of Canada, the Canadian Bank of Commerce, the Bank of Montreal and the Bank of Nova Scotia-control more than seventy per cent of all the bank assets in this country. Indeed four banks and six insurance companies-Canada Life, Sun Life, Great West Life, London Life, Manufacturers' Life and Mutual Life-control over seventy per cent of all the banking and insurance assets in Canada.

And who controls these banks and insurance companies, whose assets play such a vital role in the life of this country? The seventy-two directors of the six insurance companies hold a total of 356 directorates in dozens of corporations in all the principal fields of industry and commerce in Canada. Similarly, ninety-four officers of the three leading banks, namely the Royal Bank, the Bank of Montreal and the Bank of Commerce, hold a total of 799 directorates in 484 corporations in dozens of our major industries, including such giants as nickel, aluminum, cement, chemicals, steel, oil, railways, electrical concerns, packing plants, processing plants and a host of others. Consciously or unconsciously the policies of industry and of the chartered banks were governed by the same anti-social considerations in the highly speculative period of the late twenties and the depressed period of the thirties. Their policies, let me remind the minister, were not those of institutions actuated solely in the performance of a public duty but, as our own price spreads report stated, they tended to follow the same path of economic restriction.

And may I suggest to hon. members that from time to time we should look into the price spreads report, which was tabled in the house, because it gives one a clearer view of the economy of the country as it was and, indeed, warns one that we are reaching still greater depths of control, and by comparatively few organizations, than obtained even when that report was prepared.

The report stated that their policies tended to follow the same path of restriction of output in order to maintain their prices and to maximize their profits. Thus, during the depression we had virtual starvation in this country in the midst of potential and, indeed, often actual plenty. But the minister pictured the nationalization of the banking system as involving, to use his own words-echoed this afternoon by the hon. member for York-Sunbury (Mr. Hanson):

. . . the undesirability of having the credit of each of us and of every business throughout the country assessed by civil servants working under political control for a government banking monopoly, rather than by bank managers

Bank Act-Mr. Coldwell

interested not in the political or other views of the borrower but solely in his ability and trustworthiness as a debtor.

Those are the minister's words. Are we to understand from them that the nationally owned Bank of Canada is now run by persons working under political control? Does it guide its activities by the political or other views of the borrowers-in these cases the banks, which, as we have known from their statements published in the newspapers, have political views?

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CCF

Thomas Clement (Tommy) Douglas

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

Mr. DOUGLAS (Weybum):

And from their broadcasts.

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CCF

Major James William Coldwell

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

Mr. COLDWELL:

And from their broadcasts, delivered almost daily, which, incidentally, are so ludicrous, because of the past record of the banks, that they bring a smile to the faces of people who listen to them.

Are we to understand from the minister that the proposed Industrial Development bank, the agricultural bank-if it is set up- the farm loan improvement bank, and the mortgage bank are to be run by the present government on some such discriminatory principles? And, incidentally, all these proposals in connection with the setting up of these various financial- institutions and banks, publicly owned, are testimony of the failure of the private institutions to meet our current and expected needs.

In fairness to the minister I think he would be the first to deny that there is any political control in the Bank of Canada. He will be the first to deny that any political control is contemplated in the other organizations I have named. But his opinion regarding the desirability of wider public representation on directorates of the banks indicates that, despite what he has said, he feels that wider public control is possible, without discriminatory political control. And may I just say to him and to the house, that if I, too, did not believe that I would not be making this speech this afternoon.

Socialization of the banking system involves two main steps: First, control over the direction of credits and the investment of bank funds-and this is already occurring, in actual fact, as I shall show in a minute; for private enterprise has failed to provide outlets for the investment of bank funds. Consequently banks invest more and more in government loans and government securities.

Second, the directorates should be based on the principle of public representation, and not upon stock ownership. The minister has approved this principle. And when he approves it why does he consume the major portion of his address in attacking the C.C.F.,

because we propose the principle which he accepts? I can only conclude that as a member of a capitalist government his obligation is to defend the capitalists when they are under attack. But the minister says that he opposes any suggestion of socializing the banking system because, to use his own words:

We do not want a socialized banking system to deaden the initiative of our system of free enterprise.

First, I should like to quarrel with the statement that we have a system of free enterprise. How free is the ordinary man to enter the banking business and own a bank? How free is the ordinary man to turn out the things which are monopolised by a few large business corporations of this country? As for a centralized banking system deadening initiative and our system of free enterprise, what the minister fails to see is that our system of free enterprise is deadened by its own policy. Indeed to-day our chartered banks depend upon socialized business, national business. It is not private enterprise but public borrowing and investment which has kept them going ever since 1929. I can place figures before the house to show-I have the figures and will be glad to use them in the banking and commerce committee-that in 1930 the percentage of loans to the general public was 64 per cent of the total assets of Canadian banks. By 1939, before the war, they were only 34 per cent, having dropped to almost one-half. In 1943 they were slightly less than 25 per cent. I should like to have my figures checked. I have taken them from the Bank of Canada statement for 1943, and from the Bank of Canada statements for each year since 1936. Other figures will be found in the "Canada Year Book" of 1941 at page 816.

The decline of bank loans to the general public in those days resulted from the breakdown of private enterprise. On the other hand, the banks' investment in long term government securities increased from 15 per cent in 1930 to 50 per cent in 1940. It is ironic that the chartered banks have become dependent upon long term investment in government securities for the major part of their income to keep them going and to pay their profits to their shareholders. May I say to the minister that when he places the profits of the banks before the house he should give those profits on the basis of the paid-up capital of those banks, the investments that have been made by the owners in the banks, and not on the pyramiding of profits that they have taken from the people: According to the minister's way of estimating, their profits

Bank Act-Mr. Coldwell

will have been figured at least twice in the computation if we count those additional profits as capital and then estimate their profits on that capital which they have extracted from the public. To my mind the only proper way under the present system for a business institution to expand is to go to the public and get the money for that expansion. Otherwise, what you do is to concentrate the power of the growing institution in a few hands and never distribute the ownership of that institution across the country itself.

Even in their dealings with private enterprise the banks have demanded and received public support. Talk about private enterprise; talk about the risks they run; in 1932, for example, the government guaranteed loans of $60,000,000 to the Canadian Pacific Railway Company, and later on the government itself made interest-free and low interest loans to the same company. This was done either because the banks could not or would not undertake to do so or because the government of the day was more friendly to the Canadian Pacific Railway company than to some other business interests.

In any event, free enterprise was unable to cope with conditions of its own making, as it has been unable to cope with war necessities or, as we believe, with postwar reconstruction. Our main case, therefore, against a renewal of the charters of the private banks-and that is the principle of this bill, with a few minor amendments-rests primarily upon our belief that only a socialized financial system can make possible effective control of currency and credit in terms of public need. Only such control can secure a proper balance and a proper relationship between the prices paid by our citizens for the things they use or the labour they render and the commodities they purchase. In other words, it is the only way, in our opinion, to secure proper parity and balance in our economy.

Second, we urge our policy on the ground of greater efficiency and public economy. The history of this country, indeed of all the capitalist world since 1929, indicates that governments, not private enterprise, both in peace and in war, have had to carry the ball in relation to financing such relief and econopiic expansion as has taken place. Banks and private business in general have had to be subsidized in many ways in order to survive. During this war we have seen the government setting up new institutions and spending hundreds of millions of dollars to do a job for the nation which private enterprise would not undertake, in fact I will say could not undertake. We have seen other hundreds

of millions of dollars written off in special and accelerated depreciations because private enterprise could not carry the load.

For the minister to say, as he did, that the C.C.F. alone among the democratic socialist parties in the world is urging socialization of banks and other financial institutions is quite incorrect. The British Labour party includes such a policy in its platform. True, the New Zealand government, the only Labour government except the more recently established one in Australia that has ever held power within the British commonwealth, has not socialized the so-called private banks in that country. But if you read their literature and talk to their people you will find that they have made up their minds to do so, at least when the war ends. But they are not finding the necessity that we find. Why? They have a much more complete control over their banking system than we have or than we contemplate by the Bank Act or by this amending bill. They have an efficient central bank, but in addition the government of New Zealand has majority representation on the board of directors of the largest of their so-called private banks, the Bank of New Zealand. The government of New Zealand appoints three of the five directors of that bank. They have done this for a good many years. They got the power to do this when the Bank of New Zealand came to the government because it was in such a bad state long before the Labour government took office. As I say, to-day the New Zealand government has a greater control over the financial system owing to its having not only an efficient central bank but also majority control of the greatest bank of that country, the Bank of New Zealand. So that the comparison made by the minister between our proposals and those of New Zealand obviously falls to the ground at that point.

There are many other phases of this question. with which my colleagues will deal. As I said to the minister at the outset, our original intention, which I expressed to the Acting Prime Minister (Mr. Ralston) when this bill was about to be introduced, was to make one or two short speeches and to facilitate the sending of the bill to the committee in order that it might be dealt with there as quickly as possible. But, as has been pointed out by the hon. member for York-Sunbury, an attack on our whole position has been made in this house and, as I once said, we never consider ourselves to be on the defensive; we are on the offensive, and when an attack of that sort is made we shall act upon the offensive so far as our opponents are concerned. Consequently, any understanding that we had with

Bank Act-Mr. Caldwell

the Acting Prime Minister that we would confine our remarks to one or two speeches is definitely off and we intend to give as good at least as we expect to receive.

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NAT

Gordon Graydon (Leader of the Official Opposition)

National Government

Mr. GRAYDON:

Do you expect to be any better off by that?

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CCF

Major James William Coldwell

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

Mr. COLDWELL:

Yes, I do.

May I say in conclusion that we urge this policy because it is the right one. We urge it because we believe, in the memorable words of the Prime Minister (Mr. Mackenzie King), spoken, as the hon. member for York-Sun-bury said this afternoon, in western Canada, in Edmonton, Alberta, of course immediately before an election:

Once a nation parts with the control of its currency and credit, it matters not who makes the nation's laws. Usury once in control will wreck any nation. Until the control of the 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 is idle and futile.

It is because we believe in the sovereignty of the people, that we urge the restoration to parliament of the control of the nation's currency and credit. We urge the government to do what the Prime Minister promised to do in 1935. Since we believe with the lawyers of the house that possession is nine points of the law-

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?

An hon. MEMBER:

You are in bad company with the lawyers.

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CCF

Major James William Coldwell

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

Mr. COLDWELL:

Well, we may be in bad company, but I say that we believe with them-not that we are with them. So that we contend that the only effective method of control is that of the public ownership of this nation's banking and financial system. Accordingly, Mr. Speaker, we have moved the amendment in the words which you have before you.

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SC

John Horne Blackmore

Social Credit

Mr. J. H. BLACKMORE (Lethbridge):

Mr. Speaker, there is another way than by the nationalization of the banks whereby effective control over currency and credit can be established. I propose to deal with that other way with some measure of care.

Before I proceed farther may I refer to the minister's provocative remarks-I will not call them attacks-on social credit. Probably he put his finger on the two essentials of the contentions that social crediters would make at the present time when he said that in the first place we would advocate debt-free money. From the time that this group came into the house right up to the present moment it has never ceased to urge that it is possible for a government to create money debt free, and to

use that money in building up conditions which are conducive to the economic well-being of the land. This group has consistently urged, further, that the amount of such money which can be safely created depends directly upon the productive and consumptive capacity of the country which the government is governing at the time, and because it so depends on the productive and consumptive capacity, then the amount of money which is available to a government at any time depends upon something which may be governed, not by a dead thing like gold, not by an elusive thing like the amount of money which bankers are prepared to lend or individual men are prepared to borrow, but by a tangible thing which can be controlled and governed, namely, the production of the country, and the consumption of that production.

The minister, I think, meant to imply at one stage of his remarks that social crediters had in a way modified their stand since coming here. If in any degree it may appear that social crediters are not expounding the same doctrine which they did when they first came here it is because we ceased to stress the importance of debt-free money and the dangers of debt when the government and some of its menials all over the country began to whine and whimper that our contentions were impairing the effectiveness of the victory loans. That is the only reason.

Let us turn to the question of debt-free money. The all-important question that we need to ask ourselves is this: Is there a possibility of debt-free money? The minister spoke as though the only source of money in Canada to-day would be the Bank of Canada. What was the source of government money in 1933 and 1934 before the Bank of Canada was formed? We had in those days Dominion of Canada one dollar bills. That money was printed by a government agency, and to that agency it was unquestionably debt free. Granted, there' was supposed to be gold behind it to guarantee its value. But in 1933, on April 10, by order in council, the gold redemption clause was rescinded or suspended. What then gave value to Dominion of Canada money after that date? The Dominion of Canada money did not lose its value. That money was debt free and was created and issued by the treasury board, or an agency for the treasury board, with the Dominion of Canada exercising its supreme and unchallengeable right to coin money and to determine the value thereof.

May I use two or three illustrations? For centuries the king minted the money; it was the king's money. Will anyone say that the

Bank Act-Mr. Blackmore

king owed anybody for the money after he minted himself? Could the king in England, or let us say in this dominion, ever have owed anybody for the money which was created in his name by his government? Never! The major error that was made in the financial history of this nation and of the British people was that of allowing somebody else to print the king's money and causing the king to borrow his own money.

Take as an illustration to-day the fifty-cent piece in Canada. That is debt-free money. It costs something for the silver, something for the workmanship, but when that money is stamped by the Royal Canadian Mint, does it not belong to the Royal Canadian Mint, to the government of Canada? Who will contend for a moment that it does not. Suppose the money were gold coin; would that not be debt-free money? If coins are debt-free money, are not bills debt-free money just as well? Actually this nation printed $26 millions of bills during the last war and spent them for government purposes and they were unquestionably debt-free. They were supposed to be backed by gold, it is true, but all demand for the gold backing was rendered abortive by the suspension of the gold redemption clause. I wonder if the minister can find an answer to that?

Now, suppose a credit and currency commission were established in Canada to act much as the treasury board did before the Bank of Canada was formed, and that commission created the new money in Canada just as the Bank of Canada now does; it would own that money". Then, if it saw fit to put the money into the Bank of Canada to be recorded there, so that an account could be made and rendered to parliament, and a check established so that the people would know whether or not the government were exercising this power with probity and integrity; if, I say, the money were put into the Bank of Canada, recorded there, and taken out, the process would be debt-free both ways.

Let not the minister try to deceive the people of Canada into thinking we cannot have debt-free money.

The argument will be used, as I frequently find it used, that any money is a debt by the issuing body to the person who owns the money. If I. for example, have a

one dollar bill which was issued by the minister, the minister owes me one dollar because I hold a bill which was issued by him. just as, if he were the Bank of Canada, and I had the one dollar bill, the Bank of Canada would owe me the one dollar, and in that sense the money would be debt money; and when I came to ask that that money be redeemed, the

Bank of Canada or the minister-whichever case we are using-would have to redeem the one dollar bill.

Let us consider this matter of redemption. Let us assume that the minister acting in his capacity as finance minister in Canada issues a one dollar bill. I get the one dollar bill, and I come to him asking him to redeem the one dollar bill for me; what will he say? "What do you want?" "Well," I say, "I want a dollar." "Well, you have one. What more do you want?" "All right," I say, "I want a one dollar bill." The minister says, "Very well"; he opens a drawer and brings out another bill. "Give me the one you have and I will give you this one. This is a nice clean one. If you want a dollar bill, there it is." Now the minister has redeemed the dollar financially, has he not? And every dollar bill issued by the Dominion of Canada agency can be so redeemed as the law now stands. It is impossible for anyone to obtain gold to-day in exchange for a dollar bill; consequently the only possible redemption of a dollar bill is another dollar bill.

Now suppose I say, "I am not satisfied with a dollar bill; I want a dollar of something else." The minister says, "What do you want? Coal? Or do you want sugar, or do you want oranges, or do you want a haircut, or a ride on a street-car?" If I say, "yes" to any one of these he says, "Hand me your dollar bill." He immediately turns the dollar bill over in payment for the particular commodity I want. I have the commodity; he has the dollar bill. The dollar bill is then redeemed in goods and services.

That simple process is an illustration of what can be done with debt-free money in a national way. Let this country learn that fact, and let the nations of this world learn that fact, for the whole success of the postwar world, the establishment of peace and amity among nations and freedom from want and fear, depend upon the simple fact of the use of debt-free money. If that fact is not understood we might as well prepare ourselves for another war, and start right now. That is a warning, and I want it sufficiently solemn.

The only thing which needs to deter the minister, acting for the Dominion of Canada, in redeeming the money which is issued, is this: are there enough goods in Canada; is there enough coal, or street-car rides, or theatre tickets, or whatever else people want, to redeem the dollar bill; that is, to buy with the dollar bill? I am using simple little childish illustrations. Some people need childish illustrations to get things into their heads. It is time these things were being

Bank Act-Mr. Blackmore

learned now by the members of the government. They have been taught long enough in this country, and we are suffering a terrible war because they were not learned by this government and several other governments similar to this one.

The important thing to remember is that the simple fact that the dominion has the power of legal tender, and the simple fact that there are plenty of goods being produced in Canada to supply a redemption for all the money which might be used, within reason, constitute the guarantee that the debt free money created can be redeemed.

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LIB

James Garfield Gardiner (Minister of Agriculture)

Liberal

Mr. GARDINER:

What caused the wars before there was any money?

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SC

John Horne Blackmore

Social Credit

Mr. BLACKMORE:

Well, we would have to know what war it was. Of course, if you are talking about the war in which Gustavus Adolphus was engaged you would say "religion?"

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LIB

James Garfield Gardiner (Minister of Agriculture)

Liberal

Mr. GARDINER:

Wars came first.

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SC

John Horne Blackmore

Social Credit

Mr. BLACKMORE:

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SC

John Horne Blackmore

Social Credit

Mr. BLACKMORE:

Before the house took recess, Mr. Speaker, I had been discussing the remarks of the minister in regard to social credit. He stated that social erediters believed in debt-free money, and I endeavoured to show that debt-free money was entirely sound and feasible. He suggested that social erediters believed in the 100 per cent system of reserves and would advocate such, and I pointed out that probably they would do so because every time social erediters advocated debt-free money the government insisted that this would cause inflation, and that the 100 per cent system was simply a means of avoiding inflation. I had turned to the question of whether or not social erediters are inflationists, and had said that they were not. As my reason for saying that I had given this simple fact, that social erediters believe that where there exists a surplus of goods not being consumed the state is at liberty to create debt-free money to the extent necessary to consume that surplus, and that such creation will not cause inflation because it will not cause a rise in prices.

May I say again that social erediters are neither inflationists nor deflationists. One thing that is most surprising to any one informed on the matter is that the orthodox government spokesmen never talk about deflationists. Hon, gentlemen who sit on the government benches to-day are deflationists, every single one of them; and deflation is a more disastrous thing than inflation. During the depression in the United States deflation, I have read, destroyed two hundred billion dollars worth of wealth; that is what deflation does. Social erediters are neither inflationists nor deflationists; they believe that an economy can be so managed that booms and depressions can be avoided, and they propose so to manage it as to accomplish that end. Social erediters believe that the record of orthodox finance in the matter of prosperity and depressions is simply reprehensible and wholly inexcusable. In the course of his speech, at page 2541 of Hansard, the minister quoted from an analysis prepared by the National Bureau of Economic Research of New York, to the effect that from 1888 to 1924 Canada had 1-86 years of prosperity for each year of depression, and he seemed to think that was a very good record. That is an absolute abomination to think of in a country like this-only 1-86 years of prosperity to one year of depression! It is one of the most preposterous things the mind of man could conceive. Any system that cannot manage an economy like Canada's

Bank Act-Mr. Blackmore.

any better than that certainly has discredited itself beyond any possibility of regaining the confidence of the people. The minister goes on to point out that in the United States during the same period only 1-79 yearn of prosperity had been enjoyed for each year of depression. By those figures the system in vogue in the United States and Canada must stand condemned in the mind of every reasonable man. Social credit maintains that it is not necessary to have a condition like this, that both booms and depressions can be avoided, and it proposes a method whereby that end may be achieved.

Then the minister went on to cay, at page 2546 of Hansard, that the house would agree that when the changes proposed by the minister were introduced Canada would have a fairly well rounded, effective and satisfactory financial system. I am unable to turn to the exact words, but if my summary did not convey the minister's meaning he will correct me. I am going to ask two questions in this connection. What is the purpose of a financial system? Why do we have a financial and economic system in a country? There is only one answer. We have a financial system in Canada, or in any other country, first of all to bring about enough production, and second to have that production consumed. Any financial system which provides only for production and does not provide adequately for consumption is faulty and ineffective. The financial system of Canada is to be condemned right on this point. We have a banking system which provides for production, and the minister is devising other financial methods of bringing about more production. His industrial development bank bill and various other measures are all designed to increase production; but in all the measures proposed by the government this year one seeks in vain for a single measure designed to increase consumption, to increase markets within the country or to increase distribution. The fundamental flaw in the economic Bystem all over the world is that it has not learned how to distribute the goods. Obviously, then, the government is simply going about the problem wrong end first.

Production requires that people be able to get the money with which to produce. Men have always borrowed in order to produce. We expect them to use the banking system in order to produce. They require security of the right kind to enable them to borrow money; they require interest rates such that they may manage them, and they require long term loans in order that they may carry on. All this is perhaps fairly well provided in the bank measures. Consumption requires

that people be able to get the money with which to buy. For consumption it is all important that prices be right, that wages or fees be right, and that there be an adequate effective demand or market for goods. These are vital matters. The financial system must enable people to get money with which both to produce and to consume.

Where does the minister propose to get the money to put into the hands of the people to enable them to consume? That is the vital question for the minister to answer. That is the question the Dominion of Canada has a right to expect him to answer at this session of parliament. There is no hint of an answer. Where is the minister to get the money with which to provide fair prices for agricultural products and for manufactured products? If farmers cannot be assured in the post-war period of fair prices both for the things they sell and the things they buy they cannot carry on; and if farmers cannot carry on, the rest of Canada cannot carry on. .

The minister has not shown us where the money is coming from to provide such prices. Where is he to get the money to give Canadians a fair return for the goods they produce? Where is he to get the money to put in the people's hands to enable them to consume? Where is he to get the money to enable them to buy the great output of Canadian post-war industry? He will reply that he will not need money for such purposes Does he not realize that depressions are the result of a shortage of purchasing power, of underconsumption? In other words, the Dominion of Canada could have only 1-8 years of prosperity for every year of depression because it was not able, through its financial system, to get enough money into the hands of the people to enable them to buy the goods which industry was prepared to produce. That shortage of purchasing power is the fundamental evil; yet all the proposals of the minister are designed to increase production. Not a word is said about increasing consumption.

I maintain, Mr. Speaker, it is utterly impossible for the minister to carry on and do the things which he dreams of doing, to make this country have a stable and prosperous time after the war unless there is a fundamental change in the financial system.

I therefore beg to move a subamendment as follows:

That all the words after the word therefore be struck out and the following be substituted therefor: That the bill be not now read a second time, but, that this house is of the opinion that the government should bring down such measures as will take from the chartered

Bank Act-Mr. Blackmore

banks their .power of creation of currency and credit, and restore those powers solely to parliament.

Mr. Speaker, the minister will urge that the banking system is not responsible for the depression. He said that on page 2541 of Hansard, in passages which I shall not take the trouble to read. I contend that the banking systems are solely responsible for depressions. I will not say the Canadian banking system alone is, but the Canadian system as one of the banking systems of the world undoubtedly was jointly responsible for the depression; because the depression was the result of a shortage of purchasing power, and purchasing power under the present system comes only out of banks. If there is a shortage of purchasing power the banks are unquestionably to blame.

All orthodox banks of the world have virtually the same ideas as Canadian banks have, and all of them are just as faulty as Canada's are. The minister lists the causes of depression, and among them he mentions two rather vague causes. One of those is unbalanced economy. I do not know what the minister means by "unbalanced economy." He speaks about resurgence of economic nationalism. I am going to point out to the minister that he has entirely omitted the main cause of this last depression, which was machines. They introduced plenty with a shortage of labour for men and greatly decreased amounts of wages going out into the hands of the people. As a result of the introduction of machines the shortage of purchasing power which has been existent in our system for perhaps fifty years or more, was greatly aggravated in our time and thus brought on the disastrous depression of the thirties.

If the minister will only learn and ponder the fact that the depression did not commence to lift until 1933, just exactly when the world began to rearm, he will begin to realize that there was a fundamental fallacy somewhere, a fundamental weakness in our economic system, which only war could set right. After the nations began to rearm, money was put into circulation; ready markets were found for many of the goods which were produced. Let him bear in mind that we were still virtually in a depression in Canada when the *war broke out in 1939. Around 500,000 men were unemployed; wages were low; prices of primary products were low. Only war restored prosperity. Why did war restore prosperity? First of all, because war put money into circulation, because it provided plenty of markets at remunerative prices for manufactured goods, and reasonably good prices for primary products. Wages became fairly good.

These are the four elements that are necessary to restore prosperity, but there was an

appalling debt being created as well. We must learn how to bring about the four conditions of prosperity without the debt and the war. We must have money in circulation; we must have markets; we must have reasonable prices; we must have good wages for all. These must be accomplished without debt. I maintain that it is absolutely impossible to bring about these conditions which I have indicated, these four essentials to prosperity, without the use of debt-free money.

Let everyone remember that the choice now before the Canadian people is not the choice of the old laissez-faire way of doing things before the war; it is not a choice between that method of doing things and socialism. The Liberals are going rapidly to socialism. They will not need to talk of a socialist government if they continue in office for two more terms. Every move they are making is socialistic, which indicates clearly that the country is being driven to socialism. There is only one alternative. There is only one way of guaranteeing security with freedom, and that is through the use of debt-free money as advocated by social crediters.

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Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OF BANK CHARTERS
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May 8, 1944