May 8, 1944

CCF

Thomas Clement (Tommy) Douglas

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

Mr. T. C. DOUGLAS (Weybum):

Mr. Speaker, the remarks I wish to make on this measure will be purely extemporaneous. I have not the advantage of the Minister of Finance (Mr. Usley) who read a carefully worded essay on to the record the other day. I do not know by whom it was prepared.

As was said this afternoon by the leader of this group we had intended to have merely one statement from this group in order to facilitate the passage of this measure to the banking and commerce committee as quickly as possible. But the minister took a strange attitude in introducing this important piece of legislation. He reminded me of nothing so much as of a man out on the butts doing bayonet practice on straw men. After having a little bayonet practice, the minister felt that he had succeeded in knocking down on the ground the three or four straw men that he set up.

He set up four basic arguments for the socialization of the banking system, and then proceeded to demolish them to his own satisfaction. I would ask the house to look at those four arguments.

First of all he said that those who urged the nationalization of the banking system did so on the ground that it would give more effective control of currency, credit and prices. The minister argued that since the country now owned the Bank of Canada we now had effective control of currency and credit, on the theory, as stated at page 2543

[Mr. Blackmore.1

of Hansard, that since the banks must base their loans on their cash reserves, and since these cash reserves are controlled by the central bank, the government has power, by either expanding or contracting those cash reserves, to control the amount of credit which is in existence at any given time.

What I would point out to the minister is that, while it is true that under the Bank Act the federal government has power to prevent undue expansion of credit, it has no power to prevent undue contraction of credit. That is, it has power to create extra cash reserves but it has no power nor the machinery to see to it that the extra credit is placed in the hands of the consuming public. So that while it is true that the Bank of Canada serves a useful function in being able to prevent undue expansion of credit, it has no power to prevent a rapid contraction of credit such as we had during the early thirties.

The minister argues on page 2543 of Hansard that what he calls "the spur of cost and self-interest" will force the banks to lend to the full capacity of their cash reserves. May I point out that the spur of cost and self-interest was present from 1929 to 1933 and that during that period there was a tremendous deflation in the Dominion of Canada, because there was nothing the government could do to prevent the banks from calling in their loans. It could prevent the banks from extending their credit beyond a certain point, but it had no power to prevent them from calling in their loans. The minister's argument is upset by his own remarks at page 2540 of Hansard, where he says:

The banks, of course, were not blameless, either in respect of the policies they followed in the boom years of the late twenties, policies which involved the granting of too much rather than too little credit, nor in the policies they followed with the onset of depression when faced with the necessity of saving their own institutions they may have aggravated the deflationary process which the antecedent inflationary boom had made inevitable.

Again, on the opposite page, 2541, dealing with the banks during the depression, the minister says:

The banks, however, were private, .profitmaking institutions and it was only natural that the automatic working of competitive, commercial forces should not always coincide perfectly with the broadest national interest.

There is the complete demolition of the minister's own argument. When the safety of the banking institutions was at stake as compared with the national interest, the minister says it was only natural that they should think in terms of their own safety and their own shareholders; and if the banks

Bank Act-Mr. Douglas (Weybum)

again find that, in order to safeguard their own interests, a period of deflation must take place, there is nothing in this bill and nothing the minister has suggested that would prevent such a deflationary process from taking place.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OF BANK CHARTERS
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Except the central bank.

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CCF

Thomas Clement (Tommy) Douglas

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

Mr. DOUGLAS (Weyburn):

The central bank has no power to prevent contraction of credit. It has power to make available to the chartered banks cash reserves, but there is no guarantee that they will use them except "the spur of cost and self-interest", and if that is not strong enough there is nothing at all to guarantee that the banks will make their cash reserves available.

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LIB

James Garfield Gardiner (Minister of Agriculture)

Liberal

Mr. GARDINER:

It is the only way in which they can make any profits.

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CCF

Thomas Clement (Tommy) Douglas

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

Mr. DOUGLAS (Weyburn):

The Minister of Agriculture says it is the only way in which they can make profits, but they may prefer to make less profit as they did during the early years of the depression, or they may prefer to make no profit at all rather than to take the steps which may be necessary at a particular time when deflation is threatened.

At page 2556 of Hansard the minister says:

The most common complaint is that the banks have been unduly restrictive in their lending policy, particularly during periods of difficulty such as were experienced during the drought and depression years of the thirties.

Here we have the same story. The minister himself admits that the complaint laid against the banks during the year of drought and depression was that they followed a deflationary policy. There is nothing in this bill to guarantee that the same deflationary policy will not be repeated.

The second argument the minister set up in order to knock down was that those of us who argue for nationalization of banking do so on the ground of greater economy; whereupon the minister waxed eloquent on the efficiency and economy of the banking system. It all depends on what the minister means by "efficiency " and by " economy." If the minister looks upon the banking system as an institution for the purpose of treating credit as a commodity, something to be kept scarce so that its value will be high, something to be loaned out when its value is low and to be called in when its value is high, something on which to make a profit; if the minister is thinking of the banking system in terms of a commercial institution engaged in selling credit as a commodity for the purpose of making a profit, then there can be very little improvement in the efficiency and in the economy of the banking system. Perhaps it is operated, as the minister said, safely and soundly in the

interests of the shareholders and of the depositors.

But is that all that a banking system is for? From our point of view the banking system is to provide, not credit as a commodity, but fcredit as a medium of exchange whereby it is possible for people to exchange goods and services. We look upon a financial system not merely as an institution for the purpose of making profit out of selling credit as a commodity; we say that a banking system ought to be geared to our economy in such a way that whenever we create a dollars' worth of goods we create the purchasing power with which to buy those goods, or, in other words, . that a banking system ought to function as a medium of exchange by which the goods created by the people of a nation may be consumed by those people or so that they may consume goods which they get in exchange for goods they have produced.

The minister's own quotation on page 2541 of Hansard-is the worst indictment he could possibly have made of his own argument, when he quotes Professors Thorp and Mitchell to the effect that from 1888 to 1924 Canada had 1-86 years of prosperity for each year of depression. Remember that is before the great depression. Add to that ten years of depression from 1929 to 1939 and see what the ratio is. The best that the minister can say for an economic system which is capable of producing the tremendous abundance of good things of life made possible by the ingenuity of man and the inventions of science is that it gives people about one year and ten months of so-called prosperity for every year of depression. If that is what the minister means by efficiency and soundness, then the banking system is sound and efficient. We believe that the banking system has a much higher function, namely that it ought to be geared as an instrument of national policy to our economy in such a way as to enable the Canadian people to exchange the goods which they have helped to create.

Another argument which the minister put up and then proceeded to knock down was when he said that we wanted the banks nationalized because they constitute a monopoly. The minister went on to say, of course, that they were not a monopoly, and that even if they were a monopoly there was nothing to prove that the directors of those banks who are also directors of corporations showed any particular favouritism to their own firms. Then, I thought, the minister for a few moments let the mask slip and uttered a little wistful plea. He said, at page 2545 of Hansard:

I often wish that the banks and other business corporations would search more intently for

Bank Act-Mr. Douglas (Weyburn)

suitable directorship material in other walks of life-such as in small business, agriculture and labour-and also that the banks would use to a greater extent the device of regional advisory committees. ...

Here is the minister admitting what everyone knows, that the banks have become a series of closed corporations, that the great mass of the people of Canada-workers, farmers, small business men and professional men-have little or no voice in the councils which shape the economic destiny of this country. When the minister talks about having representation on these boards of directors, what does he think we mean when [DOT] we talk about nationalization? Just that. When we talk about nationalization we have two things in mind: one, that the banking system shall be geared to our economy so as properly to facilitate the exchange of goods and services; and, second, that farmers, workers, business men and professional people, people in all walks of life, shall have representation on the boards of directors that guide the economic destiny of the nation. After all, that is economic democracy. In this country we have political democracy. None of us, I am sure, would belittle it. Many of our forefathers laid down their lives that we might have the measure of political democracy which we now enjoy, and brave men across the seas are laying down their lives to preserve it in the world. What we are asking is that we shall move one step forward and shall add economic democracy to our political democracy, so that the workers through their trades unions, the farmers through their cooperatives, and the business men through their various business organizations, shall be given a place and a voice in the economic councils of the nation. That is something which the minister's statement admits we have not at the present time.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OF BANK CHARTERS
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NAT

Gordon Graydon (Leader of the Official Opposition)

National Government

Mr. GRAYDON:

Would that not approach the corporate state?

Topic:   BANK ACT AMENDMENT
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CCF

Thomas Clement (Tommy) Douglas

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

Mr. DOUGLAS (Weyburn):

No, it would not approach the corporate state. I would not think it would be corporatism for the workers and farmers of this country to have some representation on the directorates of this country. I am sure that would be a much more democratic approach than having the same men who sit on these boards of directors now and who think exclusively in terms of big business and vested interests.

The last argument which the minister puts up and then proceeds to push over is that we of this group want socialization of the banks not for any particular economic function that is beneficial to the community, but because it is a sinister way of destroying

private enterprise and bringing in the thin edge of socialism. I say to the minister that we do not believe in socializing anything just for the fun of socializing it. There can be only one criterion as to whether or not anything should be operated by the public, and that is whether it can thereby be operated to the better advantage of the community as a whole than by leaving it in private hands. What is the minister's objection to the public ownership of the banking system? On page 2556 of Hansard he says:

It seems to me, however, that the credit stringency-

I am reading from the wrong page.

Topic:   BANK ACT AMENDMENT
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LIB

James Angus MacKinnon (Minister of Trade and Commerce)

Liberal

Mr. MacKINNON (Edmonton West):

It doesn't matter.

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CCF

Thomas Clement (Tommy) Douglas

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

Mr. DOUGLAS (Weyburn):

Bank Act-Mr. Douglas (Weyburn)

At page 2557 of Hansard the minister cited all the things the farming population need: electrical equipment, buildings, fences, machinery, radios and so on, and I agree with him. But the minister has not made any case to show that this obsolescent banking system has been brought up to date sufficiently to meet the needs of this mass production and monopolistic age. As a matter of fact, if one takes the trouble to look at the patches which have been put on the banking system in the last few years, that in itself shows what a miserable failure it has been in meeting the needs of the situation. The minister mentioned the central mortgage bank; then there was the home improvement scheme, and the national housing scheme. Now we have the Industrial Development bank and the farm improvement loan scheme which the minister has outlined, to be followed later, I understand, by credits for the fishermen. Each of these schemes stands as an eloquent monument to the fact that the present banking system is not fulfilling the functions which a properly constituted system is intended to fulfil.

I want now to say just a word as to how this legislation affects the farming population. As I said before, I agree with what the minister has said as to the need for increased agricultural credit. I agree with the minister when he says that the farming population need money with which to improve their homes, to buy fixtures and utensils, just as soon as the war is over and we are back in peace-time production. Not only is that necessary for the farming population; it is necessary if the great industrial sections of Canada are to have markets for much of their production. How does the minister propose to make this credit available to the farming population? He proposes to do it through section 88 of this bill, and, I believe, through the farm loan improvement scheme. This is a long way from the agricultural bank which was moved at the Liberal convention in 1919 by the late Doctor Motherwell, and, I believe, adopted unanimously by. that convention. This is a long way from the industrial development bank recommended to parliament by the Oliver commission on which Hon. C. A. Dunning sat. This is a long way from the agricultural bank that has been promised repeatedly to the farmers of western Canada. When the minister was speaking the other day the leader of the opposition (Mr. Graydon) interrupted to ask a pertinent question, to which no direct answer was given. At page 2559 of Hansard the hon. gentleman asked:

-whether the existing lending institutions might conceivably be used for the purpose

envisaged by t'he industrial development bank in the same way the minister now proposes to do in the case of agriculture.

I imagine the leader of the opposition was thinking from the opposite side of the question. He is wondering, I imagine-and he will correct me if I am wrong-why the Industrial Development bank cannot be handled in the same manner that the minister proposes to handle these farm loans.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OF BANK CHARTERS
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NAT

Gordon Graydon (Leader of the Official Opposition)

National Government

Mr. GRAYDON:

I was just seeking information, not attempting to express an opinion.

Topic:   BANK ACT AMENDMENT
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CCF

Thomas Clement (Tommy) Douglas

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

Mr. DOUGLAS (Weyburn):

I am interested in the matter from the opposite side; I want to know why the farm loans cannot be handled in the same manner as the Industrial Development bank. Why is there to be different treatment for agriculture from that for industry? This is not to be a government bank for farmers; let us not delude ourselves. This is merely to be a scheme under which the banks will lend their money at five per cent interest-which is a very good rate of interest these days-the government will guarantee the losses, and the banks will make the profits. That is what it amounts to. This scheme is very similar to the home improvement scheme, under which a man could go to a bank and, if he could convince the manager that he was a good risk, he could borrow the money. The government guaranteed the losses of the banks up to a certain percentage.

Topic:   BANK ACT AMENDMENT
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LIB

Donald Alexander McNiven

Liberal

Mr. McNIVEN:

Was it not a good

scheme?

Topic:   BANK ACT AMENDMENT
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CCF

Thomas Clement (Tommy) Douglas

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

Mr. DOUGLAS (Weyburn):

I would ask

the hon. member for Regina City how many farmers he knows in Saskatchewan who came under the benefits of that legislation?

Topic:   BANK ACT AMENDMENT
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LIB

Donald Alexander McNiven

Liberal

Mr. McNIVEN:

Well, $50,000,000 was

lent under it.

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CCF

Thomas Clement (Tommy) Douglas

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

Mr. DOUGLAS (Weyburn):

That is not

an answer to my question; I am asking how many farmers in Saskatchewan came under it. I know $50,000,000 was lent, during two or three years, spread over the entire Dominion of Canada. That was a mere bagatelle. It did not begin to meet the situation. In a speech just before Christmas the Minister of Labour (Mr. Mitchell) was reported in the press as having said that we needed 1,200,000 homes in Canada. Are they to be procured under a $50,000,000 home improvement scheme?

Topic:   BANK ACT AMENDMENT
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LIB

Donald Alexander McNiven

Liberal

Mr. McNIVEN:

We are still financing the war.

Topic:   BANK ACT AMENDMENT
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CCF

Thomas Clement (Tommy) Douglas

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

Mr. DOUGLAS (Weyburn):

But the

$50,000,000 was spent before the war, as the

Bank Act-Mr. Lacombe

hon. member knows very well. The home improvement scheme was introduced before the war, at a time when the government could have put out $500,000,000 instead of $50,000,000; when it could have employed many of the four hundred thousand men who were wandering around this country looking for jobs; when it could have employed some of the farmers on the prairies who were on relief, and who were only too anxious to earn some money.

Topic:   BANK ACT AMENDMENT
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LIB

Charles Robert Evans

Liberal

Mr. EVANS:

Were they carpenters?

Topic:   BANK ACT AMENDMENT
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CCF

Thomas Clement (Tommy) Douglas

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

Mr. DOUGLAS (Weyburn):

Many of

them were very good carpenters if one may judge from the work they have done on their own farms. The government could have trained them as carpenters, if they were not carpenters already. It would have been a good deal cheaper to train them as carpenters than to have them doing nothing at all. I noticed, when the war broke out, how quickly we were able to train men to be carpenters, electricians, machinists and everything we needed, but during the period before the war we could not train them at all. The home improvement plan operated on exactly the same principle as the plan now before us; and it touched only the fringe of the problem. It was another case of the government guaranteeing the losses and the banks taking the profits, and now that policy is being applied in the case of the farmers. What will happen under this scheme is exactly what happened in the case of the home improvement scheme. The man who will be able to get a loan under this scheme will be the man whose credit is good enough to get a loan anyway; the man who cannot get a loan now is not going to be able to get it under this scheme; make no mistake about that.

If we are going to discuss the question of regimentation, I would suggest that any hon. member who is interested should look at subsection 3 of section 88, which is on page 47 of this bill. Here is a provision which will allow the banks to go on a man's farm, take away his crop and thresh it for him, or take away his live stock or equipment. We talk about the dead hand of bureaucracy; just read what the very live hand of the banks is going to be doing to the farmers who come under this scheme. Therefore I say to the minister that if section 88 is all he has to offer the farmers of Canada as a solution of their credit needs after the war, it is indeed a lamentable disappointment.

I wish to say in closing that we in this group stand for the nationalization of the banking system. We supported the subamendment of our hon. friends to the left, because in our opinion if you take from the

chartered banks their power to create currency and credit and restore it to this parliament, as their sub-amendment suggested, you have nationalization of banks. We contend that you cannot take the power to create currency and credit from the banks without nationalizing the banks. In our opinion, the only way you can have social credit is out of a socialized banking system. The government of course, with its great majority, will pass this bill. The government will renew the charters of the ten chartered banks; but Canada will rue the day that this decision was made by parliament.

The hon. member for Lethbridge (Mr. Blackmore) said that the government was becoming a socialist government. I am sure his fears are quite unwarranted, but the fact does remain that the inevitable logic of economies is forcing the government more and more into public ownership and control of those things that are essential to the welfare of the country. Before another ten years go by, whatever government is in power at that time or before that time, will be compelled to take over the ownership and control of the banking system of Canada, first of all, to finance consumption and to make it possible for the people of Canada to consume the goods and services which they create; and, secondly, to give to the common people of Canada some voice in their own economic destiny.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OF BANK CHARTERS
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IND

Liguori Lacombe

Independent Liberal

Mr. LIGUORI LACOMBE (Laval-Two Mountains (Translation):

Mr. Speaker, I

have voted in support of the amendment to the amendment, but I shall vote against the amendment. I am opposed to the establishment of any monopoly, and the worst one is the putting of our public utilities under state control. We already have state control in the case of radio and spirituous liquors, which is the underlying cause of the worst abuses and the most glaring discrimination. Public opinion as voiced through the press and expressed in protest meetings and resolutions, has many times condemned state control, which is a form of objectionable socialism. Let us have facts showing the so-called advantages of state control. Who will claim that the setting up of the Canadian Broadcasting Corporation and the liquor control has been a boon and an act of justice? The Canadian Broadcasting Corporation is an all-powerful bureaucracy in the hands of the party in power, and so it will be in the hands of any government. The same thing may be said about state control over the sale of liquors. In both cases, people who enjoy the favour of the party in power are invariably those who reap the benefit.

Bank Act-Mr. Quelch

Besides, it is already enough that we should have the Bank of Canada, the twin of the Bank of England.

The advocates of state ownership should tell us what has become of our chartered banks' gold reserve, which the Bank of Canada has taken over. Where is our gold? Where has it gone? We have produced billions of dollars worth of that metal during the last thirty years. It has taken the same direction as the annual billion-dollar gifts. Has the nationalization of the Bank of Brazil been a success? Yes, for high finance, but not for the people, whose money was devalorized by more than 500 per cent. Finally, if the chartered banks were to be put under state ownership the lion's share of victory loans would no longer be taken by wealthy people, companies and great industrial and financial institutions, but the workers and farmers would have to assume a still larger share of them.

(Text)

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