Mr. F. D. SHAW (Red Deer):

In approaching the subject of banks and banking practice I am not at all unmindful of the extraordinary human characteristic which renders it virtually impossible for some apparently reasonable human beings to approach a new idea without a good deal of prejudice and hostility. I think this unusual characteristic was very well dealt with by Sir Grafton Elliot Smith in his introduction to "Human History". I propose to read a short extract from his publication. It is as follows:

The vast majority of mankind thus accepts without question the guidance of tradition, and by sheer inertia loses the ability to observe or interpret evidence in any sense other than the conventional one that has been instilled into them by custom. Everyone who has ever called attention to facts, or inferences from them, that came into conflict with fashionable doctrines must have been made to realize how little influence the experience of the scientific developments of the last three centuries has had upon men's readiness to make even the simplest observation, or to admit the truth of the most obvious principles.

He goes on:

Most men, even without being consciously dishonest or wilfully stupid, seem to ibe unable to examine heterodox views with understanding and impartiality.

And one final sentence:

The inertia of tradition and the lack of courage to defy it when new evidence fails to conform to it seems to be potent to blind all to the most patent facts.

Bank Act-Mr. Shaw

Any approach to the consideration of financial policy must be made with a clear concept of the relationship of finance to the national activity and human welfare.

Early in his speech the hon. member for Vancouver-Burrard (Mr. McGeer) read several quotations, statements of persons whom I believe it is possible for us to look upon as experts in their field. It is my purpose to make reference to several other statements of leading statesmen with respect to the relationship of financial policy to the whole life of a community.

It was the Right Hon. Ramsay MacDonald, twice Prime Minister of Great Britain, who said:

Finance can command the sluices of every stream that runs to turn the wheels of industry, and can put fetters upon the feet of every government that is in existence.

President AVoodrow Wilson of the United States spoke in rather emphatic terms when he said:

The greatest monopoly in this country is the monopoly of big credits. A great industrial nation is controlled by its system of credits. The growth of the nation therefore and of all our activities are in the hands of a few men who chill and check and destroy genuine economic freedom.

Then, coming a little nearer to our own day, we have read of President Roosevelt saying:

He who controls the money wields sovereign power.

His Holiness Pope Pius XI asserted in even more emphatic terms:

Control of financial policy is control of the very life-blood of the entire economic body.

Then, as was pointed out last night, the Prime Minister of Canada (Mr. Mackenzie King) asserted in part:

Until the control of currency and credit is restored to the government and recognized as its most conspicuous responsibility, all talk of the sovereignty of parliament is idle and futile.

Those, added to the quotations of the hon. member for Vancouver-Burrard will, I believe, suffice to indicate to us the extreme importance of whatever type of financial system may be functioning at any given time in any country.

We have had one government succeeding another, here and elsewhere, and it is interesting to note the situations which confronted various governments upon their attaining office. First in this regard I may refer to Mr. Gladstone, a great statesman of other days, who said:

From the time I took office as chancellor I began to learn that the state held, in the face of the bank and city, an essentially fhlse position on finance.

The hinge of the whole situation, he said, was this:

The government itself was not to be a substantive power in matters of finance, but was to leave the money power supreme and unquestioned.

President Woodrow Wilson, referring to the situation with which he was confronted, asserted, in part, that he discovered that the banking system of his country, which was not engaged in the production of anything, wielded a tremendous power, in fact a power exceeding that of government.

Mr. Chesterton, the writer, commenting upon the situation from his point of view, is reported as having said:

The main mark of modern government is that we do not know who governs de facto any more than de jure. We see the politicians and not his backer, still less the backer of the backer; or-

What is most important of all.

-the banker of the backer.

He continues:

Throned above us all, in a manner without parallel in all the past, is veiled the prophet of finance, swaying all men's lives by a sort of magic and delivering oracles in a language not understanded of the people.

In Canada we did, in the early thirties, enter upon a depression. I know it has been argued in most vehement terms that banking policy and banking practice were neither responsible for nor had any influence upon those conditions. I hardly subscribe to that view. I think there is enough evidence for any man to draw sensible deductions. We know, for example, that between 1929 and 1933 the volume of purchasing power in Canada fell by approximately fifty per cent. In other words, credit and currency available to the Canadian people with which to purchase those things which they were capable of producing had vanished. I use the word "vanish" with considerable emphasis. It is true that very early in the thirties most of our banking institutions anticipated slumps. They were quite bold about making known that fact. Because of that anticipation they curtailed their loans drastically. All one had to do was to go out among the people who had not previously experienced any difficulty in borrowing. They were suddenly cut off. Is there anyone who will argue that when those institutions, in anticipation of such a situation, curtailed their lending policy it did not add immeasurably to the difficulties which were fast approaching? It is interesting to note what the late Hon. Michael J. Savage, former Prime Minister of New Zealand, had to say with respect to this. The annual report of

Bank Act-Mr. Shan>

the reserve bank of that country was being examined; certain projects of a national character had been advocated, and the reserve bank had recommended the holding up of public works in anticipation of an economic slump. Mr. Savage referred to that decision in the following words, in which I concur:

It is the orthodox point of view, but it is one which I do not hold. It is based on the theory that slumps are inevitable, but I prefer to think that bad times should only arise from famine or from some similar natural cause. There is no evidence that our production is breaking down.

I think that was also quite true of Canada. He goes on:

Therefore the only way in which a slump can happen is through people being unable to buy what they are able to produce. With adequate purchasing power spread over the community and production maintained, there is no earthly reason why any section of the community should suffer distress.

I think we all witnessed that situation during the depression. Governments were drastically curtailing their activities, including public works. Men who had been employed found themselves without adequate incomes, in some cases without any. They discovered themselves unable to produce and the production of others was therefore curtailed or discontinued. And all the while the banking institutions, whose sole interest was the making of money out of their operations, were making no endeavour to pump money or credit into the stream of purchasing power to assist in alleviating the distress.

I have always laboured under the impression that the original intention of our medium of exchange was to assist in the movement of those things which we are capable of producing to those places where a demand exists. We fear that under the set-up as we know it, what I will call the monopolistic banking system, we have lost sight completely of the real function of our medium of exchange. Back in 1934 and the early days of 1935 there were established across this country relief camps in which boys were paid twenty cents a day. A government which was dependent upon taxation of an impoverished people or borrowings from the chartered banks could not find any more than twenty cents a day. At that the Conservative government was better able to handle the situation than the Liberal government, because when the Liberals came into power they closed the camps; they could not find the twenty cents a day.

Under the system of financing which we have known, not only have we failed to maintain a stable economy, not only have we failed to make provision for willing and capable

people to meet the demands for what they themselves are capable of producing, but we have built up a colossal debt, oftentimes referred to by myself as an eternal debt. I know it is true the governor of the Bank of Canada has gone on record as asserting that a national debt is an asset; I know Doctor Cyril James has gone on record as saying that the debt will go on increasing for a hundred years; I know the Minister of Finance has indicated that they have hidden somewhere a scientific scheme or plan for taking care of it, but I still say that I fear the growth of that debt. The previous speaker has indicated that the service charges on that debt will be the first claim against the treasury. If we are not intending to; if .we are not by force of circumstances placed in a position where we must disillusion the boys and girls of our services, then it is most essential that the finance minister make known that scientific scheme which is supposed to be lurking somewhere.

That debt is the real enemy of our future. I would go farther and say that it is the real robber of our economic freedom. Let us go back for years, to about 1880, and note the growth of our national debt. To-day it is in the neighbourhood of $11 billion. Let us consider what the interest charges alone on that debt will mean in taxation after the war. If we realize also that there will be certain other fixed charges to be met before we shall be able to provide, for the ordinary everyday responsibilities of government we shall have a picture of the taxation structure which will have to be maintained in this country after the cessation of hostilities.

I cannot subscribe to the idea that there will be a drastic reduction in taxation after this war. Every time that is suggested to me I reflect back upon the introduction of the income tax act and remember how it was presumed to have been an emergency measure to be dispensed with after it had served its purpose. In the way it has grown and multiplied and developed since it was first introduced would put bacteria to shame. As I say, I shall not try to delude anyone by suggesting that under the present system of financing there can be any drastic reduction in taxation after the war. The hon. member for Temiscouata (Mr. Pouliot) cautioned us against disillusioning the people in our services. The greatest disillusionment they can ever be faced with will be that disillusionment which will meet them when they come back and discover that the government cannot finance even those projects and rehabilitation measures which it has promised it will put into effect. Nothing, Mr. Speaker, will render that.

Bank Act-Mr. Shaw

programme null and void sooner than a continuation of the system of financing which we are and have been using. The hon. member for York-Sunbury (Mr. Hanson) indicated that the government had not offered in its proposed amendments very much more in the way of a revision of the Bank Act than was offered in 1934. Putting two and two together I would suggest, then, that we cannot hope for much more under this revision than we have had in the years from 1934 onwards.

I said in my opening remarks that one is always met with hostility when one undertakes to discuss those things which over a period of years have been made most mysterious. Those responsible for the present financial system have developed a strange kind of double talk; we know that. We are looked upon with a sort of sympathy when we dare to discuss the matter. I know that in Alberta, when we undertook in the early thirties to teach even the elementary truths of finance, we were ridiculed and condemned. I recall saying in 1934, for example, that the banks create credits. Even the banking institutions were ridiculing us for saying that. We stated that ninety per cent of a bank's business is done on credit of its own creation. Yesterday we voted on a subamendment in this house and no one rose in his place and said that the subamendment was out of order because the banks do not create credit. So that we see that one truth has now come to prevail.

I remember, too, declaring that to tie our money to gold was a fantastic procedure, and at that time the supporters of this type of orthodox finance went about the country saying to the people, " Ladies and gentlemen, if you take away gold from behind your money and credit it will of necessity become valueless." But we have seen that fallacy exploded. We have seen our gold reserves completely removed and placed apart from our financial system, unless of course you tie in your foreign exchange control board with the financial system; but so far as the relationship of gold to money is concerned, there is not even a forty-second cousin relationship.

Again, about ten years ago, we pointed out that the chartered banks were primarily concerned with improving and strengthening their own positions regardless of the welfare of the people. These same institutions, through the Canadian Bankers' Association-then hired one by the name of Vernon Knowles-I do not know whether he is related to the hon. member for Winnipeg North Centre-to travel back and forth across western Canada telling the farm people how poverty stricken those banking institutions were. He did not tell the people that the banks which had moved out

of those non-profit areas moved out because there were no profits left. The people's welfare did not matter. He did not tell the truth to the people in those communities: We cannot make enough out of you any more, and that is why we are leaving. But he ma.naged to concoct some other explanation for it. At the same time the bankers carried full-page advertisements in all our newspapers telling the people how poverty stricken they were, h rom that day to this the banks have been on the air with little playlets like "John Farmer and his Wife": John Farmer got a loan and thus has been able to do this and do that, and improve his status materially. I am almost tempted to ask them to base their next ten serials upon what happened when most John Farmers did not get loans.

In 1940 the Canadian Bankers' association became so fearful of the growing feeling among our Canadian people from coast to coast that there must be something wrong with our financial system, that it became active in politics. Oh, not openly, I grant you, but I am reasonably certain, at least certain to my own satisfaction, that in 1940 that organization poured substantial sums of money into the "Independent" coffers in Alberta after bringing about a wedding of the Liberals and Conservatives as an "Independent" organization to oppose the government which had enlightened the people of Alberta on monetary matters.

I was surprised that my friends of the Progressive Conservative party voted as they did last night on the subamendment. I quite understand that that was their prerogative. Yet they have come out before the country as progressives, and there was a possibility of a number of seats in Canada for them. But after last night I must withdraw any suggestion of that possibility so far as the western half of Canada is concerned. But there the people have become a little enlightened with respect to the machinations of the present financial set-up.

It is not my purpose even to try to go into details upon the second reading of this bill. The measure will go before the banking and commerce committee, where I am sure our Social Credit representatives on the committee will have a great deal to say about the lack of consideration which the government has given to necessary amendments.

As to the amendment which we are now debating I must express this view. If we undertake to unite the government and the present financial system, the present financial system will swallow the government. My personal feeling is that it is most essential that

Bank Act-Mr. Shaw

we make basic changes now in this revision of the Bank Act. But if the Bank Act is left almost intact, practically as it is now after this revision, a government coming into power within the next two or three years and determined to put into effect a democratic financial system will find itself confronted with a situation where, if it endeavours to take over the banking institutions, the banking institutions will swallow that government. I contend that it is most essential that we concentrate our attention upon the most necessary changes in the act at the present time. There is plenty of time to take other steps should further action become necessary. We never know what to-morrow holds.

Last evening the hon. member for Cartier (Mr. Rose) referred to our party. I am sorry he is not in his place at the moment. I thought it was just too bad that a man who is presumed to have a good deal of understanding and who represents such a fine constituency gave evidence of such colossal misunderstanding of the matter of money. As he spoke last evening I could not help thinking how he and his party have been playing to the government for the past year. I should like to ask him, and maybe, if he reads Hansard, he will answer me, why is that party playing to the government, particularly when in 1940, alluding to the same government with whom they are endeavouring to work up a romance, they referred to them as "dictators", "robbers and plunderers", "capitalist war-mongers", "Canadian imperialists", "bare-faced liars"-I am only reading, Mr. Speaker, from one of their own publications-"violators of solemn treaties"-

Mr. TUCKER:

What is the hon. member reading from?

Mr. SHAW:

I am reading from the 1940 election manifesto of the communist party. They were "war profiteers", they were "parasitical ruling classes", they were "supporters of a bloody criminal war, a ghastly crime against humanity, plunderers and killers of the common people", and to end up, "thieves".

Mr. TUCKER:

Is that all?

Mr. SHAW:

That is all; and if that is not found in this publication I will condescend to eat the platform, although I am sure it would give me violent indigestion.

Mr. JOHNSTON (Bow River):

That

pretty well covers it, though.

Mr. SHAW:

I merely point out to the hon. member who assails us that throughout the session he and his party have supported a government which only four years ago they

(Mr. Shaw.]

characterized as being any one or more of these fourteen or fifteen things. Is there a subtle purpose?

I have practically concluded my remarks. I had one or two other things to say with respect to this situation, but the hon. member for Bow River (Mr. Johnston) and the hon. member for Cape Breton South (Mr. Gillis) have intimated by inference that my statements would not be parliamentary, and therefore I shall not say what. I was going to say.

After the last war the Right Hon. David Lloyd George, in speaking of the conference which settled the Dawes reparation pact, made this statement:

The international bankers-

In a moment I am going to make this read "national" bankers.

-swept statesmen, politicians, journalists and jurists all on one side, and issued their orders with the imperiousness of absolute monarchs who knew that there was no appeal against their ruthless decrees.

I wonder whether after this war we shall have to face the people of Canada, including our boys and girls of the service personnel, men of the merchant marine and all those associated with war industry, and confess that "we have failed in granting to you those things for which you have been prepared to make the supreme sacrifice, all because our national bankers have swept our statesmen, politicians, journalists and jurists aside", in making decisions which rendered impossible the doing of those things which I think we all feel in our own hearts that our fighting personnel and others have earned for themselves.

Mr. FREDERIC DORION (Charlevoix-Saguenay):

I should like to say a few words in order to make as clear as possible the reasons why I am going to support the amendment moved by the leader of the Canadian Commonwealth Federation party. I will admit very frankly that I am not at all an expert in financial matters, but during my twenty-three Vvears of law practice I have seen so many cases in which the banks were involved in one way or another, that I think it my duty to say that I am in favour of the nationalization of the banks.

I sometimes wonder why the banking system is practically the only thing which has not been the object of direct control by the government since the outbreak of the war. Boards and commissions of all kinds have been created to control almost every kind of production, but we have not yet seen any board to control the production of credit. Must we come to the conclusion that finance

Bank Act-Mr. Dorian

is something sacrosanct, that it is above all human beings, that it is so strong that no government can touch it, that it is so powerful that no government dares to control it? Would it not be true then that we are only the serfs of finance, that we are only permitted to pay tribute to it? The manpower of this country is under the direct control of the government. Every means is taken to ascertain that all our young men are called under arms. We even see orders which oblige fathers to hand their sons over to the country, to denounce them. Why do we act altogether differently when we need money? Why not submit this money power to the will and the needs of the government, as we do, for the manpower. We know that at this very moment, on the eve of a most gigantic struggle, which will cost thousands of lives and the greatest suffering humanity has ever known, in Switzerland financiers of high rank representing United States, British and German finance are quietly seated at a table studying methods of bettering the position of international finance. Must we resign ourselves to the conclusion that we cannot get rid of this powerful organization? Must we understand that all our miseries, all our sacrifices, are only a tribute to satisfy the appetite of this monster? I believe, Mr. Speaker, that it is our duty as representatives of the people to do our utmost to correct this state of affairs, and one of the means would be the nationalization of the banks and their control by the representatives of the people. There may be better means, but I do not know of them.

Every day we hear about reconstruction, rehabilitation, social services, and the rest. My contention is that we shall never do anything good unless the government gets absolute control of the financial system. We often hear, as we did this afternoon, about tremendous public works which should be undertaken after the war. But where are we to get the necessary money to execute these works under the present financial system? Are we to continue borrowing millions and millions every year? This is possible at the present time because the people who lend their money want to get the war over as soon as possible, but after the war will they be ready to lend their money to the government as they do now? And even if they do, can the public debt continue going up at the rate of over two billions a year? Everyone must admit that the taxpayers are overtaxed. Can we expect to be able to draw from them so much money every year without any hope of any reduction?

Let this question of credit be settled and a great many of our problems will be solved at 100-174

once. Let me remind you, Mr. Speaker, that during the depression period, from 1929 to 1939, hundreds of bankruptcies were forced by the banks. I could give you a great number of names of merchants and businessmen who could have survived if the banks had not forced them to reimburse at once and on very short notice the moneys that had been advanced to them. I think the saying is quite true that the banks make loans when business is good and refuse to do so when business is not so good. The people demand that this system be corrected. The banking system is essentially a public service and should be dealt with accordingly.

Mrs. DORISE W. NIELSEN (North Battle-ford) : Mr. Speaker, speaking on the bill now

before the house, I must admit that my chief interest is, of course, as you would expect it to be, in the proposed changes in the Bank Act dealing with the question of agricultural credits. When I spoke in the debate on the address in reply to the speech from the throne I was one of those, I believe I was one of the first of those who rose to speak, who mentioned the necessity of legislation being brought down during this session to provide for our agricultural needs facilities such as were to be provided by the industrial development bank. The proposals we find embodied in this, bill do not in my opinion meet with any degree of adequacy the needs of our farming people.

I shall be able to deal with the proposals later when the bill is under consideration clause by clause. At the moment it is enough for me to say that the proposals, first of all, to allow farm implements and equipment to be used as security for loans issued by the chartered banks, and, second, with regard to the passing of a farm improvement loan act similar to the home improvement act by which the government will guarantee loss on such loans up to ten per cent, as a measure to provide intermediate credits to the farming people, cannot in my opinion possibly fulfil the requirements.

As the bill stands, I would feel it incumbent upon me to vote against it, but fortunately it is not at present before us in such a form as necessitates a definite vote against it. It will be going before the committee, where I sin-serely hope the members of the committee from farming communities will do their utmost to see to it that under the act a different form of bank credits will be set up to deal with the farm situation. As the measure now stands, I think it leaves the farmers completely at the mercy of the chartered banks, as they have been for many years. In fact, throughout the whole period of western

276S

Bank Act-Mrs. Nielsen

development, particularly during the last decade, western farmers have learned to their great cost and sorrow what it means to have no other resource than the chartered banks when they are in need of loans for carrying on their farming business, which is their means of livelihood.

This bill definitely does not go far enough to meet the credit needs of the west. There is need for farm credit. I would go so far as to say that the production of food has been marvellous when we consider the fact that we have lost so many people from our farms. In the neighbourhood of 350,000 people have left our farms, and yet the production of food has gone up forty per cent. That is a marvellous achievement. But had the farmers of the west been able to have their agricultural credit or loan requirements satisfied for the purpose of equipping themselves with the various things which are necessary to enable them to increase their food production, we should have had an even more marvellous production than under the present circumstances.

There is and will be in the post-war years need to have easy credit for farmers, because all members will agree that, great as are the demands on the nation for the production of food during the war, those demands will not cease with the cessation of hostilities, and the continued increase in food production will be one of the most gigantic tasks that will face the country. .Definitely, therefore, our farmers will have to have help in this direction.

In the discussion of a bill such as this, I have to be guided in my attitude by certain factors. First of all, Mr. Speaker, I must impress upon you that I represent in this house very broad sections of people from the North Battleford riding. I do not represent any one small narrow section of people there. In fact, I would remind you that roughly about 11,000 of those people in that northern riding sent me to this house to uphold first, of course, democratic principles and then to work on their behalf for all measures, whoever might advocate them or give them to the people, which would increase the living standards of Canadians, particularly of our farmers and those in the small towns and villages who depend upon the farmers for their living.

My duty-and I view my work in this house very seriously and honestly-is to vote for such concrete measures of reform as the great majority of the people in North Battleford are ready and willing to work for and to support, and I would say this again to the members of the house that in my opinion no society can move forward more rapidly than the majority of its people are prepared to

move. That must be the guiding principle to those of us who are in the position of guiding and directing the policy and legislation of the country.

One thing I must make clear and it is this. Those who voted for reform and for progressive measures to make better the living conditions of the farming community belong to various political parties. People of all shades of political opinion supported the farm programme which was my guide when I came here. I, too, have ideas of my own. I myself do not hesitate at all, nor have I ever hesitated, to say that I am a socialist, and I believe that socialism will be the successor of capitalism just as capitalism was the successor of feudalism, but only as the people understand socialism, and when the great majority of them are ready to adopt it. Public ownership of banks will be a necessary part of the socialism of this country when the people are prepared and ready for it. I am one of those who believe definitely that no minority of any country can impose socialism upon the majority who are not ready for it; for that definitely would mean civil war. It would mean chaos; it might mean bloodshed, and no one who is interested in the welfare of the people can hope that social advancement has to come by suffering in that way. Suffering is something which all of us who have seen it through the years of depression would hope to prevent, not to bring about.

The majority of the people will be ready to accept socialism only when capitalism shows definite^ that it is not capable of providing them further with the necessities and comforts of living which they desire.

Mr. WRIGHT:

What happened in 1930?

Mrs. NIELSEN:

When capitalism fails to provide employment, when it can no longer provide a living, that is the time when people begin to turn to other means and to find a way out and a solution. We have already had a period in which capitalism did show such signs of a break-down. That was during the years of depression when capitalism did not provide employment, when it did not give even the necessities of life to thousands. But it is wrong for us to-day to base our arguments upon the premise which existed in the years of depression. I would say we are foolish, and we are more than foolish, we are blind if we refuse to acknowledge and to accept the fact that this war of such gigantic and global proportions has changed the picture of the world. This war has made its impact upon all countries. It has strengthened capitalism in Canada. I do not know how anyone would disagree with me over that.

Bank Act-Mrs. Nielsen

Here we are emerging after those years of war, not as a somewhat small and backward country relying almost entirely upon agriculture, but as a great industrial country. We are emerging as the third world trading nation and the fourth largest producer of the united nations war supplies.

Some people who want to socialize Canada may perhaps feel, in seeing this changed condition in Canada, that their hopes are receding; but there is emerging from this war one other factor, which those of us who are realists will have to acknowledge. We have to see that emerging from this war is something new in world relationships, something which is vast and far-reaching in consequence, a condition which might yet sound perhaps to many people as being unbelievable. There is now a recognition by the great powers that a new alignment of world forces has taken place, which may possibly continue, namely, an alignment between the capitalist nations of the world and the one great socialist state of the world, in which they not only fight unitedly against a common enemy, but where they say definitely that there is a prospect and a new horizon where they ean work and cooperate together in the future for the good of them all.

At six o'clock the house took recess.

After Recess

The house resumed at eight o'clock.

Mrs. NIELSEN:

Mr. Speaker, before recess I was speaking about the changing pattern of international relationships brought about by the war. The three great leaders of the united nations have agreed that they, and the nations for whom they speak, are, as they put it, friends-in fact, in spirit and in purpose. This is something of great significance to the peoples of the world.

I once heard a man try to describe a giraffe to a little boy who had never seen one. After the man had tried to describe the animal to the boy, he looked up and said, "Why, there is no such animal." And so it is with this new world concept of socialism and capitalism living in peace together. Many people say that it will not work. But, Mr. Speaker, my contention is that it does work, and that it is working right now. We are fighting together, fighting for our very lives, and the blood of our boys will mingle with that of Red army boys, British boys, Tito's men, boys from the United States, Chinese-in fact men of all the nations and all peoples who are fighting with us to destroy fascism.

Afterwards, we who wish to see a better world rise out of the ashes of the old, will 100-1744

continue this cooperation that we have achieved during the war. Why? Because it is apparent to all of us that it is to our mutual advantage. The Soviet Union, China, the European countries, India, those countries which have borne the brunt of war to a greater degree than we have, will need to be rebuilt. They will do it more quickly if they have materials from us. Of course we should understand that the Soviet Union can rebuild her economy alone. It would take her longer to do it, but she is not nearly so dependent upon us as we are upon her. That is a fact which Canadians should remember. We need the cooperation of the Soviet Union. We know that the Soviet Union will be one of the greatest buying nations in the world after the war, and it is imperative for us that we have markets in order that our farmers can continue, and even increase the production of food; so that we can have increased employment on our farms, and better living conditions on them; so that industrial workers and returned men can have employment, and so that our national income can be kept at high levels, or even increased. This is the changing pattern of world relationships in which Canada has a place and where, for the sake of our own future, we must be one of a family of world nations.

It may be that in such a world as this i't will take much longer than some of us have thought previously to achieve socialism for Canada. But it will be a world where the nations are at peace, where peace is something which we can hope will continue for many years into the future, a world where we can all within the democratic framework work for more and better reforms, a rising standard of living and an increase of home markets. For the first time in the history of the world there is the possibility now before us, a perspective of achieving socialism, slowly perhaps, but peacefully, though over a longer period of time.

I want to see social advances achieved peacefully. I disagree with those who to-day persist in saying that socialism is the economy we must have now, or immediately after the war. I disagree with those who say that immediate socialization or nationalization of the banks is imperative, and has to be brought about. If socialism is made an issue now, the forces of reaction in this country-and they still exist and are very active-will take up the challenge. Large numbers of people in Canada fear socialism because they do not understand it, and they will turn to the support of a party which leads in its denunciation of socialism, namely, the Progressive Conservative party. But if reaction in Canada-and I do not necessarily mean all those

Bank Act-Mrs. Nielsen

who are members of the Progressive Conservative party, but refer rather to a group headed by the old Tory gang-ever gets into the saddle again, it means imperialist policies once more for Canada. It means power blocs being once again formed in the world; it means once again that trade will be limited to within the confines of the British empire, or perhaps a small periphery of nations around it. And, despite Mr. Bracken's clever hedging on the question, we would then necessarily have unemployment; we would have a lack of markets for the product of our farms; we would have stagnation and, finally and inevitably, we would come to world war No. 3.

If the leaders of the Cooperative Commonwealth Federation persist in making socialism an issue now, and refuse to see the changing pattern of the world, they would lead the people into the arms of such a catastrophe and would have much to answer for as time goes on. I have lived and worked among people who belong to the C.C.F. They are friends of mine. I know that all those who belong to the C.C.F. do not agree with this idea of insisting upon socialism now, under changed world conditions.

I should like to quote from some of the Gallup polls recently brought to my attention. I am not going to say that a Gallup poll is 100 per cent correct; it is not. But it is an indication of public feeling, and possibly is accurate within a margin of four per cent one way or the other. For that reason I believe it is a fairly safe indication. A while ago a Gallup poll was taken in Canada, and the result was published in the Montreal Star of February 23. The question asked was this:

Which of these men do yon think would do the best job of representing Canada at the peace table-Mackenzie King, John Bracken, M. J. Coldwell or some other?

I direct the attention of the house to the fact that of those people who were part and parcel of the ranks of the C.CJ'. only sixty-two per cent wished to see the leader of the C.C.F. party (Mr. Coldwell) at the peace table. In my opinion they are afraid of the tendency which he is now showing, one which is not necessary and not right. We find that thirty-eight per cent of the rank and file of the C.C.F. wanted some other person. Some wanted Mr. King; some wanted Mr. Bracken, and some wanted somebody else.

Mr. SPEAKER:

I have allowed the hon. member to go far afield, but I must call her attention to the fact that we are discussing the Bank Act. I hope she will confine her remarks to that subject.

Mrs. NIELSEN:

I am sorry, Mr. Speaker, that you have thought I am going too far

from the Bank Act, but I must point out that we are discussing an amendment offered by the C.C.F. to the measure now before the house. I would add further that the C.C.F. are asking for the nationalization or government control of the banks. I am against that, and I want to make it clear why I am against it. I must ask Your Honour's leniency in this matter, and would point out that a Gallup poll was published recently on this very question, which I believe is relevant to the debate. This is an actual question which was asked of the people.

Mr. SPEAKER:

I am afraid the Gallup poll has nothing to do with the Bank Act.

Mrs. NIELSEN:

I would point out that the question was, "Do you think the government should own or operate the banks of Canada, or should we continue with the present system?"

Carry on.

Mrs. NIELSEN:

Among those Canadians who say that they would vote for the C.C.F., not quite half agree to government-owned or, shall we say, socialized banks in Canada. The actual figure of those C.C.F. people who want government-owned and controlled banks stood at forty-nine per cent. Those supporting the present system totalled forty per cent, and there were eleven per cent undecided.

When I consider as to how I am going to vote on this question I find that not even all members of the C.C.F. support their leader's proposals. And I have far wider sections of my people at home to consider. Not only members of the C.C.F. sent me here.

I want to make this very clear. I am not against the socialization of the banks now because I am satisfied with the banking system as it exists. I am not. There has been too much exploitation of our farmers for me to be in complete agreement with this bill as it stands. The banks have failed dismally in time of need to provide credits for our farm people.

In my opinion the greatest need of this nation to-day is for unity to win the war. That should be the overriding consideration of everyone; nothing should come before that. Unity to win the war is our first duty, and then there should be a unity of all forward thinking people after the war to build the good life for Canadians, to give jobs and security on the land and to provide peace. The issue of socialism now splits and divides our people and prevents that national unity which is necessary for the winning of the war and the peace.

Bank Act-Mr. Slaght

Suggestions with regard to an agricultural bank have been made to the minister in the past by certain bodies, which I imagine he regards as being made up of responsible people. I should like to quote from the report of the royal commission on banking and currency in Canada which sat in 1933, the so-called Macmillan report. I do this in order to show that away back in 1933 it was considered that certain changes with regard to agricultural credits were necessary. I quote from paragraph 241 of the report as follows:

In the first place, the fact that the provincial governments decided to engage in these experiments (e.g. making loans to farmers through provincial institutions) may well be taken as indicating the necessity of agricultural credit at lower rates of interest than prudent banking practice might seem to warrant, particularly in certain areas where agricultural production is attended by certain hazards or requires loans of a length which militates against the affording of credit by commercial banks.

And paragraph 242:

The following is an extract from the evidence submitted on behalf of the united farmers of Ontario, as to the problem of short term credit in Ontario-"Generally speaking, within the last two years the banks have ceased to function in regard to Canadian agriculture. Agriculture is taken to be an activity, or an industry, that is not worthy of credit, and from the banking point of view I am not blaming them."

And again from paragraph 245:

A memorandum on rural credit submitted to us by the Canadian bankers' association referred to the matter of intermediate credit in the following terms: "Assuming that the need for credit in this form is clearly a matter of sufficient national importance to warrant some action being taken by the authorities, consideration should be given to the creation of an institution financed on the public credit and to the placing upon it of the responsibility for meeting all legitimate demands."

I would stress again the farmers' need for credit. Credit should be provided for agriculture the same as it is being provided for small business enterprises. I cannot under any consideration support the proposal put forward in this bill for agricultural credits as it now stands. .

When this bill goes before the banking and commerce committee I would strongly urge that that committee consider agricultural credits in the light of what has been said regarding this matter and recommend the setting up of an agricultural bank similar to the industrial development bank which is already a part of the legislation before this house. I would suggest that the committee on banking and commerce have before it delegations from farm organizations. I am of the opinion that those farm delegations would be overwhelmingly in favour of such a bank in' preference to extending the coverage and power of the chartered banks as is proposed by this bill.

This is definitely the place where the government can step in in the interests of the Canadian people. Private and commercial banks have been playing a far from active role in the economy of this country. We have had to have other government agencies provide credit when the banks have failed to do so. We have already had to set up such bodies as the farm loan board, the provincial credit institutions and the central mortgage bank. The setting up of an agricultural development bank would be just one step further. This is an immediate and concrete issue upon which I believe every western member and all western people can agree. I do not think the question of the nationalization of banks is a correct matter to be discussed at this time because it tends to split and divide the unity of the people. But as we go forward I shall under changing conditions be prepared to fight for further changes, possibly when the time comes to fight and press for complete government control of the banks. I shall have plenty more to say when the bill comes before the house after having been to the committee, but at present I think this is all I shall say.

Mr, A. G. SLAGHT (Parry Sound): Mr. Speaker, I have on earlier occasions made my voice amply clear with regard to the problem of the so-called socialization of our chartered banks, the nationalization of our chartered banks as it is called, or, as I choose to put it to my hon. friends across the way, if they had their way it would mean the C.C.F.-erizing of the banks of Canada. That, to my mind, would be nothing short of calamity.

I did not have the privilege of hearing the Minister of Finance (Mr. Ilsley), which I regret, but I have read his recent address. It may not be a secret to him that in some respects I differ with the views he put forward with regard to the government borrowing of money for government needs. He indicated more than once in his remarks to this house that he desired the committee on banking and commerce to look very closely into several of the problems involved in the bill. He invited a close scrutiny and, as I understood him, the friendly criticism of members of that committee, of which I am one. I propose to avail myself of that invitation and endeavour briefly to give to the house, for the consideration of the committee, two or three constructive suggestions, which I believe or which I am hopeful he may succumb to if he is not watched too closely by his expert advisers behind the scene. I believe these suggestions would be greatly to the good of Canada and our economic system.

Bank Act-Mr. Slaght

My first proposal is that the right to issue currency and credit shall be revested in the Canadian people and not in the chartered banks where it at present rests. The second proposal is that the Minister of Finance and the government of Canada shall not borrow for government needs by the use of debt-bearing securities sold by them to the chartered banks. In other words, new money which requires to be created, as is the case when the minister goes to the chartered banks with bonds or loans, should be spent into existence and not borrowed into existence with the debt burden incident thereto.

The minister, apparently in advance of criticism which might be offered in this debate, deprecated the course that I have just outlined. As I understood him, he was solicitous about the small or meagre profits the chartered banks have been enjoying in the past. Let me here say that I have no fight with the banks. My advocacy in this proposal is that the banks render good service and are entitled to a fair profit. My proposal is in favour of the private banks and is to help them to remain private. Because of the monopoly they enjoy at the expense of the taxpayers, it may turn the people of Canada C.C.F.-wards, and they may have the feeling that the only relief is to nationalize the banks and take them over.

The bankers are doing a splendid patriotic job in our war effort. They are among the finest and best citizens in every community. Having said that, Mr. Speaker, I am sure you will feel that my quarrel is with the system and with the monopoly the bankers enjoy, and not with the banker as an individual.

Let there be no mistake about the fact that the business of our chartered banks is a profitable one. Going back over a period of ten years, from 1928 to 1938, the ten chartered banks paid dividends on their capital at rates of 14 per cent, 16 per cent, 13 per cent, 9 per cent, 13 per cent, 13 per cent, 14 per cent, 12 per cent, 10 per cent and 13 per cent. The rates differed slightly. These dividends have been decreasing gradually, until for the six-year period from 1937 to 1941 they were 8 per cent, 12 per cent, 10 per cent, 8 per cent, 8 per cent, 10 per cent, 8 per cent, 10 per cent and so on, and it will not be forgotten that two of those years were war years.

Mr. ROEBUCK:

Those are not profits, but dividends?

Mr. SLAGHT:

I so stated. They are the dividends paid, and as we know, the dividends are paid on the basis of the capital of the banks. I shall come to that in a moment.

Let us see what their capital is. The original capital invested in the ten chartered banks is 145i million dollars-no more.

I quote now from their own statements, from the statistics furnished each month from their statistical bureaux. These statistics show a reserve piled up, on top of their original capital, of 133 million dollars. They show further that the banks own, free from all charge and encumbrance, some 3,000 bank buildings spread across Canada, and their real property is valued by them at 70 million dollars. We also know that the banks enjoy the privilege of turning the crank and printing their own private bank currency. We have reduced that privilege gradually, down through the years, so that they have left now 40 million dollars of this type of their own money.

The total of these figures which I have just given is 388 million dollars, and it is my proposal that, of course, the banks should be entitled to lend and invest their capital, their original capital and their increment which they have piled up by careful management. Anybody who desires to interfere with that would be guilty of almost confiscation.

On top of that the banks borrowed from the people of Canada at what is thought to be li per cent, but I am told that it actually works out at something under one per cent. They borrowed $1,600,000,000 more, and that, with the $388,000,000 gives them in the neighbourhood of two billion dollars in real wealth, which I think they should be entitled to lend at five or six or seven per cent, according to the risk. But there, Mr. Speaker, I ask that we shall call a halt, because under section 59 of the Bank Act the chartered banks have enjoyed what I call a monopoly. There is no fancy term about that. Most bodies of men if they secured a monopoly fifty or sixty years ago would be loath to part with it. The monopoly the banks enjoy is a very simple one. If they have in their strong box or in their vaults or on deposit with the Bank of Canada a S5 Bank of Canada bill, they are then entitled to lend twenty times that amount, if they keep that $5 bill there. In other words, they are entitled to lend $100 which they do not possess at all. What I object to is that we should have given or that we should permit to stay given to a favoured body of people the right to lend on the basis, as the Minister of Finance put it in answer to a question of mine to which I shall refer in a moment, of ten times more money than they have. The minister said that the orthodox recognized business of private banking is to lend ten times more money than you have. Think of it! Take a man

Bank Act-Mr. Slaght

in the garage business with ten cars. He wants to arrange to let them out next Sunday. If he charges 100 people $2 apiece for the right to go to his garage and take away a hundred cars when he has only ten cars, you would not be surprised if he were almost indicted for fraud when you found that he walked away with money in that way. Lest my hon. friend the Minister of Finance may have forgotten what he said, may I, Mr. Speaker, indicate to you just what happened on that occasion. I quote from Hansard of July 15, 1942, when the minister said:

Everyone familiar with the working of the banking system knows that the moment the banks get their hands on additional cash-I mean by that Bank of Canada notes, or deposits by the Bank of Canada which are convertible into Bank of Canada notes-when the banks get those reserves in their hands *powerful forces are set in motion to get the banks to buy securities themselves, to make loans themselves, so that the deposits of the chartered banks will be seven, eight, nine or ten times as great as their cash reserves. That lies at the base of their whole profit-making activities; the way they make money is by lending more money than they have.

Let us ponder that.

What they have is their cash reserves; and unless a bank has out several times-six, seven, eight, nine or ten times-its cash reserves, it is not being profitably, or from a banking point of view, properly conducted.

Does that sound like a monopoly, almost a racket? I do not use the term "racket'1 Is it not a monopoly?

The total volume of money employed in Canada as a medium of exchange consists, of course, of credit and currency, copper and silver

no gold or very little now, some fifty or sixty million dollars. They have paper money running, a9 the hon. member for Yancouver-Burrard (Mr. McGeer) told us this afternoon, up to $1,200,000,000 or $1,300,000,000, issued to the people to do business with. That is Bank of Canada currency. Other new money by way of national currency is created by the banks themselves, although under the British North America Act, which is our constitution, by section 91 the dominion parliament was given jurisdiction over public debt and property, currency and coinage, banking and the issue of paper money. But we have peddled the privilege out to somebody else. We have made a concession of it, and we have done it in the Bank Act which is now to be revised.

Mr. KNOWLES:

It is not peddled out; it is given away.