May 11, 1944

NAT

Gordon Knapman Fraser

National Government

Mr. FRASER (Peterborough West):

"Surely", the hon. member for Cape Breton South says. I have looked up the definition of "model" in the dictionary and I find that it means an imitation of the real thing.

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

John Mouat Turner

Liberal

Mr. J. M. TURNER (Springfield):

Mr. Speaker, I wish to say a few words with respect to bill No. 91 now under discussion, which deals with banks and banking. But before I do so I should like to join with the member for Rosthern (Mr. Tucker) in saying that I think all Canada should be justly proud of the outstanding address delivered to-day by our Prime Minister (Mr. Mackenzie King) to the members of both houses of parliament in Great Britain. In my judgment it was a masterpiece that will be remembered and appreciated for many years to come.

May I congratulate our Minister of Finance (Mr. Ilsley) upon his able presentation, on the second reading, of all matters and phases to be dealt with by this bill. This government is to be congratulated upon its financing and upon the banking course that it is following. It is sticking strictly to Liberal policies in that regard by putting through banking legislation of one kind or another designed to help the farmer, the fisherman, the labourer, and the little man. This is Liberal policy in the truest sense and I know it will be welcomed by that great army of people right across Canada generally, particularly by the small man in all branches of our industrial and business life.

I believe, sir, that everybody in this house knows that I am not a financial expert, nor do

Bunk Act-Mr. Turner

I ever hope to be one; neither am I a mechanical expert and I do not ever expect to be. Perhaps all I know about finance is that a dollar has 100 cents. Nevertheless, when I get in my car in the morning to start to drive I can immediately detect if there is something wrong, although I may not know what it is. That is the way I feel when talking on finance. There is something radically wrong with our whole financial system. The way it is set up it is like a gigantic octopus, choking the very life out of our Canadian nation through the interest system we have adopted. This certainly has to be changed.

Just as an illustration, I hold in my hand a copy of a brief prepared in February of this year by the city of Winnipeg to be presented to Hon. Stuart S. Garson, our premier. Attached to this brief is a statement of the interest paid on debentures by the city of Winnipeg from the year 1930 to 1943, a period of fourteen years, and the staggering interest total for that period is $40,319,694.20. This figure does not include the interest on the greater Winnipeg water district, which happens to run right through my constituency. The interest on this alone amounts to $800,000 a year. Now, Mr. Speaker, if I were to stand here to-day and tell the people of Winnipeg that between now and 1957 they are going to hand out again to the money-lenders an amount close to fifty million dollars for interest, they would think I was not stating the facts. Nevertheless, that did happen before and it can happen again. That city is urgently in need of slum clearance, new homes, hospitals, parks and other public projects, and if we could save only half that amount, say $20 millions or $25 millions, for those purposes, I am sure it would be welcome news not only to Mayor Coulter, but to all the citizens of Winnipeg.

The figures I have given for Winnipeg can, in proportion to population, be duplicated in almost every province, city, town and municipality in Canada. Interest has a strangle-hold on governments of all kinds and acts as a hydraulic brake against any district progressing to its fullest extent. How can they be expected to progress, carrying this terrific load?

Let us take a look at our own financial set-up in the dominion. Before the war this nation's debt as of March 31, 1939 was $3,710,610,592.87 and interest charges on same were $127,995,616.75; to-day our national debt is $9,228,252,012.03, as of March 31, 1943, the interest charges being $188,556,249.39, better than $15 millions a month, an increase of over $60 millions a year, or roughly five million dollars a month. That is a staggering figure, and who can tell to-day that the war may not 100-178

last for two or three years yet and the debt will be just that much greater? We are getting in deeper all the time.

I said before that I am not a financial expert, but I know there is something positively wrong with this whole business, and I envisaged the Bank of Canada as being set up to step in and lend money to public corporations, as I have already indicated, without any interest, but with just an operating charge or a bookkeeping cost. The present system cannot go on indefinitely. We should, therefore, be prepared to try another kind, and force the big banking houses to get out of government business entirely and operate in their own field, namely that of commerce and industry. They are paying too much attention to government financing, and not enough to the commercial field, which, if they did, would stimulate business rather than retard it. I believe that the Bank of Canada is not operating to the fullest extent in the important matter of financing public debt and public corporations.

Is it not a fact, Mr. Speaker, that the largest and wealthiest corporation in Canada is the Dominion of Canada itself? It has some eleven and one-half million shareholders: it has billions of dollars of unseen wealth below the ground, in gas, oil, radium and other minerals, and it has billions of dollars of wealth above the ground. For instance, we own the Canadian National Railways, a corporation worth anywhere from one to two billions dollars, with between seventy-five and one hundred thousand employees. We own the Trans-Canada Air Lines. We own the Bank of Canada and other big public corporations, including twenty-five crown companies which have been set up since this war began. We own some five hundred to six hundred fighting and merchant vessels; in addition, we own some five or six hundred million bushels of wheat in storage in the elevator bins of this country, and in the short space of three months or better we hope to have another four or five hundred million bushels of wheat. We shall own it all, and without it I doubt if this war can be won.

According to the hon. member for Parry Sound (Mr. Slaght), the total paid-up capital of all the banks is $145 millions, an insignificant amount as compared with our own wealth and resources-those of the Dominion of Canada.

The question I should like to ask is simply this: why then should it be necessary for us to put on a bombastic flag-flying display, supported by acrobats, comedians, movie actresses and bands, in order to induce corporations and ethers to lend us money who obviously are less

Bank Act-Mr. Turner

wealthy than, we are, whose resources in fact are insignificant compared with our own? That point has never been cleared up in this House of Commons to my satisfaction. I for one have never believed that a man or corporation is doing an outstanding patriotic service by investing a certain amount of money in victory bonds. What he is really doing is buying insurance and at the same time collecting a little premium. The really patriotic citizen of this country is wearing a uniform, flying over Europe or existing in foxholes in Italy, fighting the submarines on the seas, or risking his life elsewhere in the war. That is what I call real patriotism, and I have yet to be shown that I am wrong.

I find myself, therefore, in agreement with the principle put forth by the hon. member for Rosthern (Mr. Tucker), the hon. member for Parry Sound (Mr. Slaght) and the hon. member for Vancouver-Burrard (Mr. McGeer). As a matter of fact, I told the hon. member for Rosthern, when he spoke in this house away back in 1936 or 1937 on financing public debt-he will remember the incident-that I was of the same opinion in this regard at that time.

I hope the government will give special attention to this important matter of financing public debt and public institutions and projects, before it is too late.

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

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

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

Mr. S. H. KNOWLES (Winnipeg North Centre):

I welcome the opportunity of hearing a few words from the hon. member for Springfield (Mr. Turner). I feel that to-night he has epitomized the position of the Liberal members of this house so far as this debate is concerned. He began by expressing his approval of the policies of the government, and then launched an attack in which he showed the results of those policies gave evidence that there should be drastic changes.

It has been said a number of times during this debate that the Minister of Finance (Mr. Ilsley) made a most provocative speech if it were the desire of the government to keep this debate short. I might say, on the other hand, that the chances are it is a good thing that the minister made that kind of speech, because by so doing he has produced a longer debate and one in which, I feel, fairly clear statements have been made indicating where the various groups in this house stand. It took some little time to get very much said by the members of the Progressive Conservative party, except for their first spokesman, who started off on Monday, but at least they have said enough to make it clear that they

are prepared to defend to the limit the private ownership of the chartered banks of this country.

The position of the Liberal party as it has already been made evident by the hon. member for Springfield is one of definite division. We have the Minister of Finance stating the official policy of .the government, which is for a continuance of the present status of the banks with the minor changes which are proposed in the amending bill now before us. The minister in his speech of last week expressed his view that his party and the country as a whole would be with him in the stand he was taking. But during the course of this debate we have had the very interesting speeches of the hon. member for Vancouver-Burrard (Mr. McGeer), the hon. member for Parry Sound (Mr. Slaght), the hon. member for Rosthern (Mr. Tucker), and now, the hon. member for Springfield. If I have overlooked any others who have been rebellious in their remarks I offer my apologies to them; but it has been made quite clear that the Liberal members of this house do not agree in their views on banking policy. There is one thing on which they seem to be agreed, namely, that they are not going to vote for our amendment, but among themselves there is a wide divergence of opinion.

If I may say so with respect to our hon. friends of the immediate left, the Social Credit group, I feel they have stated their position a little more clearly in this debate than they have done on previous occasions. They were able to express their views in a subamendment which, despite the fact that it did not go far enough, came very close to our position and was such that we were able to vote for their subamendment when that vote was taken the other evening. With the assistance of the hon. member for Parry Sound, I would say that the Social Credit group has made its position a little clearer in the course of this debate. I hope that the house will agree that we in this group likewise have made our position quite clear. We feel that such an important function in our economic life as our banking system should be under complete public ownership and public control so that it might be operated in the interests of the country and the people as a whole.

A good deal of time has been taken already in dealing with some of the arguments put froward the other day by the Minister of Finance, but I should like to make a few comments on some of his arguments, some of which have been supported since by other members of his party.

There is one argument which he made, on page 2546 of Hansard of May 2, which I am

Bank Act-Mr. Knowles

sure he will not try to substantiate further when he speaks later on to-night, if he gets the opportunity. I refer to these words which he used:

But a far more important point is 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 interested not in the political or other views of the borrow-er but solely in his ability and trustworthiness as a debtor.

As other speakers in this group have pointed out, if that were to be the case with banks owned and operated by the people of Canada through their government, then one would expect the same to be the case with respect to the Bank of Canada, with respect to the industrial development bank that is to be set up, and with respect to other matters that are under the control of the government; but this is not so. One feels like asking this question: Does the minister's argument mean that departments of government, such as the Department of National Revenue, deal with cases that come before them on the basis of political interest? Does it mean that the war contracts depreciation board make their decisions on a political basis, on applications for huge depreciation allowances, which have been submitted to them during the course of the war? Does it mean that the government itself, when it has some special application for depreciation, such as that of the Aluminum Company of Canada, deal with it on a political or partisan basis? What about the. annuities branch of the Department of Labour? I have a copy of a pamphlet which the annuities branch publishes, urging people to take on this form of protection for their old age. I see nothing in it that indicates anything of a partisan political nature. I see nothing to suggest that there is any regimentation involved or any danger or insecurity if one protects one's old age by purchasing a Canadian government annuity. Rather I find it an attractive booklet, with a picture of the parliament buildings on the cover, and underneath the slogan, "Backed by the whole resources of the dominion".

One might think of other matters of a financial nature which the government handles. Take housing. We had an extensive statement this afternoon by the minister as to further government plans to make possible the building of homes in this country. This kind of thing involves the government stepping in and channelling credit into certain forms of economic activity so that socially desirable goods will be produced. The government does not apologize for these things. It claims credit for 100-178J

them. It insists not only that they are nonpolitical and non-partisan, but that they are marks of the progress that has been achieved while this government has been in power. In fact, I find it interesting to read the minister's speech and find him at one point complaining about the entering wedge of socialism., and at other points claiming credit for the fact that the government have put in the thin end of that wedge. As reported at page 2547 of Hansard the minister says:

We are providing a publicly owned institution to provide credit for useful and desirable industrial projects which the private institutions are-unable or unwilling to finance.

True, he went on to say:

But we do not want to create a huge government monopoly of the banking business.

The minister warns against the socialist wedge, as he calls it, but takes credit for the thin edge of the wedge for which the government is responsible. Similarly, in another passage, at page 2544, he says:

It requires only socialization of central banking-and that of course we have already-achieved.

"Socialization" is a terrible thing in many purple passages in the minister's speech; but when it comes to something like central banking, when it comes to other measures which the government has instituted in the economic life of the country, such as those to which I have referred, the minister is not only proud of the things the government has done, and claims credit for them, but he does not hesitate to use the very word "socialization" which is suposed to have such dire results.

Similarly, I was interested in listening to the remarks of the hon. member for Rosthern. He started off with one of his chronic attacks on the position of the C.C.F. and quoted from our literature, which we print in as great abundance as we can and make aavilable for Liberals and others to read that they might learn thereby. He quoted to show that we believe the banks and financial institutions of the country should be brought under public control, and then he launched into a great tirade to suggest that public control, as advocated by the C.C.F., would involve dictatorship, loss of democracy and all that kind of thing. When he finished his attack on the C.C.F. and got down to business, dealing with the Bank Act, he, being of the school of the hon. member for Parry Sound, the hon. member for Vancouver-Burrard, the hon. member for New Westminster, and some others, found some fault with the bill as proposed by the minister. He insisted that the time had come when we must let the banks know that they must be responsible to a public authority.

2S34

Bank Act-Mr. Knowles

I would point out that he used the very same words, "public authority", when he asserted what we must have, speaking for the rebel Liberals, as he used when trying to attack the position of the C.C.F. He made some other references to the wealth made in the mining industry and to ways and means whereby that 'wealth is taken out of the country, and he asserted that there must be established ways of preventing this. The "public authority" must step in to protect the interest of the people of the country as a whole. What I am trying to point out is that the hon. member for Rosthern and the Minister of Finance as well, if they will read their speeches closely will see that they have themselves laid down the basic principles which we really want to incorporate into our banking set-up. In that very interesting passage in the minister's speech, to which the hon. member for Weyburn (Mr. Douglas) directed the attention of the house, where the minister said that it was his wish-and of course he was expressing only his own personal opinion-that the banks would call to their directorates men from a much wider field of our national life, including farmers, industrial workers and the like, he was laying down one *of the basic principles which underlies our [DOT]whole position. In other words, our contention is that the banking set-up, the financial [DOT]machinery of this country, is basic to the well-ibeing of Canada and her people, that because of that fact it ought not to be under the autocratic and dictatorial control of a few ipeople not responsible to the parliament of Canada and to the people as a whole, but rather that it ought to be specifically and directly under our control in parliament.

I wish again, as I have done before, to deprecate the many speeches made in this house deploring parliamentary control in the economic life of our country. The idea is handed out time and again by hon. members that that involves dictatorship and a loss of democracy. But these hon. members do not seem to face up to the alternative. The alternative to public control by the people through parliament, such as we are advocating, is what we had through the great depression-private control of the things which affect the lives of our people, control of those things by a few individuals outside parliament, and not responsible to this democratically elected body.

I find it hard to understand how hon. members who seek election to the House of Commons to represent their people, and to play some part on behalf of those people in the affairs of their country, can rise in their

(Mr. Knowles.]

places in the house and say, "We do not want to run things here; we want to turn the basic and the important things in our Canadian life over to private individuals outside parliament."

In his remarks the other day the minister had a good deal to say about the profits of the banks, and endeavoured to give the impression, and to substantiate that impression with figures, that those profits were not large, and that therefore the claim of this party that the banks should be nationalized must fall to the ground. It seems to me that in arguing about the profits of the chartered banks in that fashion he misses the central point of our whole contention. Our interest in the function of the banks is directed, not only to the fact that they make profit on their banking operations, but primarily to the fact that they are in a position to control production in this country, to determine what kind of production will take place, and what the extent of our economic activity will be. And it is because we want the people, through their parliament, their democratically elected representatives, to have a say in how much production there will be and a say in what kind of economic activity we shall have, that we contend that the basic function of finance should be under the control of the people of Canada, through their parliament.

As I see it-with one drawback to which I shall refer in a moment

we have done that, for the purposes of war. This evening the hon. member for Rosedale (Mr. Jackman) made some references to the fact that the banking system seemed to be functioning fairly well in this time of war, in that it had made possible a high rate of production of war goods, and a high level of economic activity in the country as a whole. May I point out to him, the minister, and the house, that in this time of war the government has really stepped into the whole picture of channelling credit, and of determining where credit is to be made available. True, the government has borrowed the money in various ways from the people and from the chartered banks and, to some extent, from the Bank of Canada; but the government has taken away from the banks and from private industry the power to determine what kind of production is to be effected. The government has stepped in, through the various war departments, the Department of Munitions and Supply, in particular, and has said, "Air training stations must be built, whether economically or not, in various parts of Canada." They have said, "Munitions, aircraft, ships, guns, uniforms-all these things must be produced. We are going to see to it

Bank Act-Mr. Knowles

that credit is made available and channelled in the right direction, so that these goods will be produced for the needs of the war."

In other words, with the one exception to which I shall refer in a minute, in this time ol war the government has superimposed upon the private credit machinery of the country a publicly directed system of channelling credit. The only thing wrong with what the government has done-although I want to make it clear that we commend the government for the position it has taken, namely, that goods had to be produced, and that what was physically possible and necessary for the war effort had to be made financially possible -is that much of this credit has been made possible through the old procedure of borrowing at high rates of interest. Under that process it is clear that after the war is over, and in the years that lie ahead, while we may not pay off this increase in the national debt, still we shall have to take out a portion of the wealth we produce in the first decade and in the second decade after the war, and so on indefinitely, and give that portion of wealth to certain people who have a claim against the government, owing to the fact that a large portion of the national debt has been placed in their hands.

The fact is that we are waging war out of current production, out of goods and services we are producing right now. We are using the raw materials we secure to-day, and we apply to-day to those raw materials the power of labour. We cannot wage this war out of work which will be done ten years from now. But because of the system of borrowing from the chartered banks the huge sums of money we need for government purposes, at the rates of interest we have to pay, in the decades after . the war, or as long as the present system lasts, we shall have to keep on taking portions from the wealth we produce to pay tribute to those who, as a result of the war, have the national debt in their hands.

Speaking the other day, the hon. member for Vancouver-Burrard implied that this would be fairly easy, that we had achieved our financial independence, and have shown that it is no longer necessary for us to go into the money markets of the world. He implied that we have shown we can achieve a high level of production and, if I understood him correctly, his contention was that so long as we maintained this high level of production we shall be able to pay the interest on the national debt, and keep on going, provided that the government is prepared to continue the policy of huge government spending. I would point out to the hon. member for Vancouver-Burrard, and to others who think along those lines, that if after the war we are to have

to borrow more money, so that the government can spend it to maintain our economic activity so that we can pay the interest on the war debt, without its affecting our future economy too drastically, and if in this process we continue the creation of interest-bearing debt, it simply means that the proportion of the national wealth which will have to go to those who hold the national debt will keep on increasing as the years come and go to the detriment of the people as a whole. It seems to me, therefore, that there is no argument at all for delay in this matter. I think those who have emphasized the fact that we get a chance to revise the Bank Act only once in ten years, and therefore should realize the importance of this bill in this year 1944, have done well in emphasizing that point. Bearing in mind the developments of the next ten years, we should be taking steps right now to see to it that we put a stop to this constant increase in the proportion of the wealth we produce that has to go to those who hold our national debt.

Now for a moment I should like to look at another argument advanced by the minister, also appearing at page 2546 of Hansard for May 2, where he spoke about the personal relationship between the potential borrower and his chosen banker. The passage reads very well, unless you stop to consider it for a moment and realize that not all the eleven and a half million people in this country are looking for a financial set-up in which it will be possible for each of us to have a personal banker for the purpose of borrowing money. The other day the hon. member for Parry Sound emphasized that not very many individuals in Canada make extensive use of bank accounts and chequing facilities, which is quite true. If you look a little further and ask how many individuals in Canada ever go in and sit down across the desk from a banker to float a loan and establish this personal relationship the minister talks about, you will realize that really very few are involved in that way. The great majority of the Canadian people want national policies that will result in full employment, in the distribution of goods and services to provide a high standard of living, in the guarantee of social security, protection in times of sickness, accident and old age. As I say, the great majority of people are more concerned about things of that kind than about having a personal relationship with a particular banker who would be very friendly and understanding. Certainly; let us have that kind of relationship in the banks of this country under government ownership as well, but we have a greater task than that, and the purpose of bringing the banks under public ownership is to achieve

Bank Act-Mr. Knowles

policies for the control of credit, for directing credit into the production of goods and services that we need, so that there will be a high level of production, full employment, security and a good standard of living for our people.

Actually we have had more than a debate on the banking system itself. The discussion has developed-and I do not regret it; perhaps it is logical and right

into an argument between the ways of life represented by the [DOT]various groups in this house. Most of the *other parties seem wedded to the idea that private enterprise, despite all its failures in the past, despite the low level of living it has forced upon millions of our people, still is the system to which we should hold. We take the position that in this modern age, with all 'the technological advances we have had, with the tremendous capacity we have for producing wealth, with the way in which economic power has become concentrated in the hands of a few, the only course to follow is to see to it that those things which potentially are so valuable and so important should be in the hands of the people so that the wealth we produce can be made available to us all.

I am satisfied that the people of this country, and those who are fighting our battles overseas, are tremendously anxious that we should really make headway when this struggle is over, that we should really move into the kind of economy under which we shall be able to live a better life, under which we shall be able to have jobs continuously, and under which we shall be able to enjoy the productivity of which we are capable; and beyond everything, to move in the direction of cooperation, wider public control, extending the principle of democracy from the political into the economic sphere. I cannot help deploring .the attempts made in this house to hold back the waves; the speeches made again and again in which the people of Canada, who want a better day with the basic things they are counting on-cooperation, public control, continuance of the high level of production we have achieved through the government stepping in as it has-are told that these things must not be, that we must go back to private enterprise and all that it gave us during the thirties.

I am going to draw my remarks to a conclusion, Mr. Speaker; I understand there is still hope that this debate may be wound up to-night, though quite frankly I feel that it ihas been interesting and worth while. Before I sit down, however, I want to say that when the vote is taken on our amendment, if it is beaten-and from what has been said I assume that it does not stand a very good

chance in this chamber-and the way is then clear, I hope some of the Liberal members who have indicated their dissatisfaction with the principles underlying the bill now before us will move another amendment. I am hoping that the hon. member for Parry Sound, or, if he is not here, the hon. member for Vancouver-Burrard, or perhaps the hon. member for Ros-thern, or the hon. member for New Westminster (Mr. Reid), or the hon. member for Fraser Valley (Mr. Cruickshank), or the hon. member for Springfield, who preceded me, will move another amendment. Someone behind me suggests that perhaps the Progressive Conservatives might move an amendment, but I do not suppose they have any alternative to the bill before us. However, the hon. members whom I have named have made one specific suggestion repeatedly; that is, that the necessary changes should be made so that the government could do all its borrowing from the Bank of Canada. The hon. member for Parry Sound suggested that the five per cent ratio provision should be changed to read 100 per cent in order that the minister's objection to inflation might be ruled out of court. I do not see why one of these hon. members should not move such an amendment. By their speeches they have indicated that they feel free to disagree with their own government on this matter. As a matter of fact, on Tuesday evening I was on the list of speakers, but I was frozen out by others who caught the Speaker's eye; and when it developed into a battle among several Liberals, who was I to interfere? As far as I was concerned it could go on all evening. But I was wondering why we did not get from some of those hon. gentlemen to whom I have referred an amendment to the motion for second reading of the bill, expressing their point of view. It would be less than we are asking; it would be only a step, but it would be a step in the right direction and would give hon. members a chance to express themselves on the idea of making at least that much of a change. No doubt, some will say they are going to wait until the bill gets to the banking and commerce committee, where they will try to argue for these changes. If we wait until the bill reaches the committee, those who want the bill to remain as it is will be able to say that the house voted down our amendment, and voted for the second reading, endorsing the principle of the bill as it is without any change. There will not be much chance to do anything in the committee. I suggest that if we had an amendment embodying the specific proposals of the hon. member for Parry Sound, which have received the support of so many Liberals, it would act as an instruction to the committee so that it

Bank Act-Mr. Church

2S37

would have something to work on. I wonder if the reason why hon. members are refraining from moving such an amendment is a fear that it might carry. As a matter of fact, I believe it would.

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

George Alexander Cruickshank

Liberal

Mr. CRUICKSHANK:

Why do not you move it?

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

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

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

Mr. KNOWLES:

The hon. member for

Fraser Valley would like to trap us into moving something which would be less than the position we take. I believe he agrees with the hon. member for Vancouver-Burrard and the hon. member for Parry Sound. He knows how to move an amendment. After this vote has been taken, should our amendment be defeated, I hope that he, or some other hon. member, will move such an amendment as I have suggested, so that we may have a division and know where the house stands on this question.

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

Thomas Langton Church

National Government

Mr. T. L. CHURCH (Broadview):

Mr. Speaker, I gave up my time last night so that a vote would be taken, but it was not. I am sportsman enough to allow hon. gentlemen who want to catch the train to get away. I had hoped to make a few remarks on behalf of the industrial workers, but I am willing to waive my right to speak at this time because I do not want to prevent hon. gentlemen from keeping important engagements which they have to-morrow. I wanted to say something about the functions of money and the basis of credit as affecting the industrial workers of this country. I hope when the bill goes to committee their case will be considered. There were other matters to which I wished to refer, but it is now after ten o'clock. I had intended to be absent tomorrow, but I cancelled my reservation and I was ready to wait until the bill came up again, in order to let hon. gentlemen catch their trains. With the understanding that I shall have the right to say, on the preamble of the bill when it comes from the committee, what I had intended to say, I shall take up no more time of the house at the moment.

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

Gaspard Fauteux

Liberal

Mr. GASPARD FAUTEUX (Sainte-Marie) (Translation):

Mr. Speaker, I do not wish to delay the debate longer ....

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

Thomas Langton Church

National Government

Mr. CHURCH:

If other members are to speak, I should like to continue with my remarks. I gave way on the understanding that I was to be the last speaker. I think it is only fair that the hon. gentleman who has attempted to follow me should accept my suggestion. If this debate is to continue until to-morrow I wish to say a few words which I think would be of great importance to the industrial district I represent. I did not know the hon. gentleman was on the list of speakers.

Topic:   BANK ACT AMENDMENT
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LIB

James Joseph McCann

Liberal

The ACTING SPEAKER (Mr. McCann):

The hon. gentleman has the floor and if he desires to exercise his privilege, he may speak.

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NAT

Thomas Langton Church

National Government

Mr. CHURCH:

This is the most important piece of legislation we have had all session. This bill comes before us once every ten years. I am opposed to the nationalization of banks and insurance companies, but I realize that war-time conditions have changed the business of banking. I think the minister has acted fairly with the house in connection with this bill. He said he wanted to have the utmost investigation before the committee, and this puts me in mind of the statement made in order in council 1562, which was passed on July 31, 1933, to appoint the Macmillan commission. The exact text of the reference is:

That such examination should also include a study of the entire monetary system of Canada, including credit, currency and coinage, particularly in their relation to commodity price movements and fluctuations in international exchange;

That it is also advisable to consider whether and in what respects the banking institutions and the monetary system of Canada may be modified, extended or developed for the purpose of facilitating intra-imperial and international cooperation in public policies designed to promote the revival of domestic and foreign trade and enterprise and the general increase of employment, and to ensure a greater measure of stability in respect thereto.

I think the committee might consider that report in all its phases and the text of the reference in detail. As I say, very little has been done in the Bank Act and other legislation for the industrial workers. The farmers and fishermen have been considered in different pieces of legislation, but the industrial worker and the small retailer, wholesaler and manufacturer are still left at the mercy of the existing shark loan companies. There are no shark loan companies preying upon farmers and fishermen. This bill has sections to deal with the inspection of our banks. This inspection has not been what it should be, as is illustrated by the Home bank and Farmers' bank failures.

Section 82 deals with loans on real estate, but the fact is that the banks are doing a commercial business in real estate. They have driven a coach and four through the whole section with the active consent of the treasury board. They have built skyscrapers in all the large cities of Canada. They have got around the provisions of this section by appointing holding companies, and I suggest that the necessary words should be added to prevent this, that they shall not directly or indirectly deal in real estate, or it shall, the act says, revert to the crown.

Bank Act-Mr. Church

Bank Act-Mr. Fauteux

exchange of goods. When the volume of traffic in goods diminishes paper currency flows back to the Bank of England and is destroyed. Thus each note represents the true value of goods of some description. . . . Behind the issue stands not only the redemption fund, which is a mere cog in the wheel, but the whole wealth of the country in its truest sense. This may include not only gold and silver bullion, but every commodity. Surely you have here a currency of infinitely greater value than that based upon a single metal, gold, which is always coveted, and liable to be spirited away by some foreign buyer. . . .

As we know, the United States took nearly all the gold of the world between the two wars and in this one when they had what was also called the cash-and-carry policy.

There is a future for gold. That future will not lie in any such basis of value as currency that it had in the past since there will be an international bank; gold will prosper in a better future in the arts and in industry, for which ninety-five per cent of it is being used to-day, and in connection with which there is a tremendous future for the gold mining industry of this country.

In conclusion, I wish to state that I will support any measures taken by the dominion and provincial governments to aid the mining industry, and to give the commercial banks fair play, but some reform is needed.

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LIB

Gaspard Fauteux

Liberal

Mr. GASPARD FAUTEUX (St, Mary) (Translation):

Mr. Speaker, I do not wish to lengthen this debate, but I should feel remiss in my duty if I did not comment briefly on the remarks made yesterday by an hon. member of this house about the salaries paid by a certain bank in the province of Quebec. I may say at the outset that I am in complete agreement with the numerous hon. members who spoke in favour of this bill and that I shall consider it a pleasure as well as a duty to vote for this measure. I wish to take this opportunity to congratulate the hon. members who delivered splendid speeches in which they referred quite aptly to the good work performed by the banks in this country. As was stated many times during this debate, we have before us a bill which will empower the government to renew the charters of our banks. It has been said time and again that a privilege is thus conferred on those financial institutions. I wish to point out in this connection, to those institutions that every privilege implies some obligation, and that it should be part of their responsibility to pay at least reasonable salaries to their employees. The attention of the house was called to the salaries that a certain bank had paid in the province of Quebec, namely S8

a week, for instance, to young clerks who were starting in the employ of that bank. Tellers were paid $17.50 a week even after nine years of service. It has also been stated that assistant accountants of thirteen years standing were receiving $22 a week and accountants, after fifteen years, enjoyed a weekly salary of $26.

I wish to raise my voice in this house to protest against the starvation wages these institutions are shamelessly paying their employees. It would be wise for the banking committee and the Minister of Finance (Mr. Ilsley) to force these financial organizations, who enjoy a privilege granted by the government to pay better salaries to their employees. If the banks, as many other financial institutions, fear that, in view of the radical movements which seem to make some headway in our country undesirable reforms may be enacted, I feel that there would be less cause to take alarm were such powerful organizations as the bank already mentioned to set the example for others, for commercial and industrial firms in general, in the field of reasonable salaries. Thus, they would promote in Canada the cause of order and economic stability, which have been our claims to greatness in the past.

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LIB

Joseph Jean (Parliamentary Assistant to the Minister of Justice and Attorney General)

Liberal

Mr. JEAN:

Mr. Speaker, I was paired with the hon. member for Charlevoix-Saguenay (Mr. Dorion). Had I voted I would have voted against the amendment.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Hon. J. L. ILSLEY (Minister of Finance):

Mr. Speaker, I am not sure whether I can finish to-night before eleven o'clock, but I do not think I should move the adjournment of the debate now, because we still have twenty minutes to go. Therefore, probably I had better begin, even if I have to divide my speech into two parts, delivering part to-night and part to-morrow afternoon.

The debate which has taken place on the motion for second reading, and on the two amendments which have been moved, has been to my mind a very interesting and valuable one. It must be borne in mind that the principle of the bill is a simple one, namely, that the bank charters be renewed for another ten years. When renewal is moved, of course the government has certain amendments to the Bank Act to suggest. This year those amendments have been somewhat extensive, although they have been by no means radical or revolutionary.

100-179J

In this debate it became necessary of course for us to consider certain very important proposals that have been before this house and before the country for a number of years. In the debate I have been criticized because I made what was called a provocative speech. Indeed the hon. member for York-Sunbury (Mr. Hanson) referred to it as a piece of passionate propaganda. I did not intend to make a provocative or propagandist speech, but I intended to examine what it was my duty to examine, namely, first, the proposal of the Cooperative Commonwealth Federation party to nationalize the banks and, second, the proposal of the Social Credit party that any borrowing the government of Canada has to make from the banks be made from the Bank of Canada, which would be coupled with an alteration of the five per cent ratio provision to a 100 per cent ratio provision. Those were the very gravamen of the issue. They went to the very heart of the question as to what we should do with the Bank Act in this year 1944. I would have been derelict in my duty had I not met those issues head-on at the outset, and considered and discussed them. If we should nationalize the banks we should' not extend their charters, nor should I be introducing this kind of bill. If as a government we should cease to borrow anything from the chartered banks-and I certainly do not wish to borrow any more than can be avoided-and if we were to substitute the Bank of Canada for the chartered banks, as a source of money we need over and above the money we get from the public, and couple with that the 100 per cent ratio provision, it would mean a radical amendment to section 59 of the Bank Act. That is something which should also be considered in the debate on second reading. ;

Therefore the debate came on in that way, and it has been a valuable one. The C.C.F. party took exactly the position which I said they would take, and which everybody knew they would take, both in the house and out of it. They put their position forward frankly; and 1 think for the most part- perhaps altogether-their speeches have been fair and direct arguments in support of the position of that party. Thfeir position is that the government should go into the ownership' and operation of the commercial banks of Canada.

The Social Credit party also took exactly the position that was foreshadowed in the speech I made on second reading. Their position is that any borrowing which we do from the banks should be from the Bank of Canada; that is, debt-free money, or the creation of new money. And they for the

2S42

Bank Act-Mr. llsley

first time I think in this house, together with the hon. member for Parry Sound (Mr. Slaght)-and probably some other members- have implicitly, if not expressly, accepted the argument I have been making for years, that if we were to substitute borrowing from the Bank of Canada for borrowing from the chartered banks, and leave the five per cent ratio provision as it is, the effect would be so tremendously inflationary that it should not be tolerated. Therefore they have done exactly what I knew they must eventually do; they must be driven to the 100 per cent ratio proposal. The hon. member for Lethbridge (Mr. Blackmore) said that if the 100 per cent ratio proposal placed the banks in a position where they would undergo great loss, then the government should pay the loss. That meant that we would be substituting interest in another form for the interest which we are now paying the chartered banks, and the position so far as the taxpayers of Canada are [DOT]concerned would be precisely as it is to-day.

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

Very much less.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

No. And I would kindly ask hon. members to let me conclude the debate.

Let us take a few of the arguments advanced, and a few of the objections which have been made. Since I have only forty minutes in which to conclude the debate, I can select only some of the more striking arguments, some of those which have made the greatest impression upon the house.

Applying that principle I do not think it is necessary for me to say very much about the speech of the official critic of the Progressive Conservative opposition, because his speech was a very curious performance. I had made no attack upon him. I had made no attack upon his party. I had made no attack upon his party's policy. His party had no amendment to suggest. His party had no criticism to my bill, except a very minor criticism related to bona vacantia, which we can discuss in committee. Yet we had a long speech from the hon. member for York-Sunbury (Mr. Hanson), which consisted in an attack upon me, and the manner of my presentation of my case to the house.

With regard to the lessons in taste which the hon. member sought to teach me, I am greatly obliged to him for them, and perhaps will derive some benefit therefrom. But with regard to his attack upon the method of my presentation to the house I contend to him that I had to do exactly what I did in my [DOT]opening speech, namely, to examine the position of the C.C.F. party and the Social Credit party.

I shall not refer to any other speakers by name, although I may perhaps say something

about the speech of the hon. member for Parry Sound, which possibly impressed some hon. members, because of the picturesqueness of the language rather than the soundness of the argument. But I do wish to take up, in the few minutes remaining to me to-night, a few of the arguments which have been advanced against the bill.

In the first place, the most important provision of the bill, that providing a guarantee of loans to farmers and fishermen, has not received the amount of attention in the house which I think it deserves. True, it has been discussed by a few speakers-the hon. member for Qu'Appelle (Mr. Perley), the hon. member for Rosthem (Mr. Tucker) and the hon. member for North Battleford (Mrs. Nielsen)-but very few speakers have dealt with that important provision in the legislation. To the hon. member for Rosthem, who made the suggestion that the rate should be three per cent instead of five per cent, I would say that is a matter that can be considered either at the time the farm loan improvement bill is before the house, or in committee on this bill; but my personal opinion-and I give this for what it is worth-is that if the rate is made three per cent instead of five per cent we shall defeat the purpose of the bill and the loans will not be made. We must remember always that we cannot, simply by putting down interest rates, ensure that loans will be made in volume at those low rates. My opinion is that this would be an impracticable proposal.

With regard to the advantage of this provision for credits, some have expressed scepticism as to whether these loans would be made in volume, but my expectation and belief is that any honest farmer who can use the money for fruitful and productive purposes will be able to get a loan under the provisions we have inserted in the Bank Act, and under the provisions of the farm loan improvement bill. That matter can be fully discussed in committee, and by the time that discussion ends I think hon. members will be satisfied that this provision will really result in the extension of useful credit on very reasonable terms to large numbers of the primary producers of the Dominion of Canada.

I have been asked in this debate why we are giving the farmers merely a modified home improvement loan plan while we are giving the industrialists an industrial development bank. The criticisms of our position fall under two heads. It was suggested by the leader of the opposition (Mr. Graydon), though I must say not advocated, that we might have provided for our industrial loans in the same way that we have in this bill provided for agricultural loans; that is, that

Bank Act-Mr. Ilsley

they should be made by the chartered banks under a guarantee by the dominion government. I want to give a few reasons why I think that would have been inadvisable. In the case of intermediate credit loans for farmers and fishermen, there is a vast number of loans all of a more or less uniform character, and also of the type which the banks are equipped to make. The insurance principle is therefore applicable to them. In other words, it is easy to lump all these similar loans together and apply a guarantee to them based on a stipulated percentage of the total amount of loans made by any one bank. The same thing applies to home improvement loans; there will be a very large number of relatively small loans of a very similar type. But the type of loan that will have to be made by the industrial development bank will be entirely different. The amount of the loan in each case presumably will be a great deal larger than in the case of agricultural intermediate credit loans or home improvement loans, and the number of loans will be relatively small. Each of these loans will present its own special problems; each will be a special case and will have to be considered on its merits. For these reasons the insurance principle is entirely inapplicable.

There are other reasons as well. Partly for the reason just mentioned-that is, the high degree of variability in the character of the loans-it would be extremely difficult to fix a percentage of guarantee that would be suitable. If the percentage were placed at a relatively low figure, such as ten or fifteen per cent, the government could be sure that there would be many loans that never would be made by the banks. A banker might be concerned with the possibility of loss on the particular loan before him, and might not feel that his loss on this loan would be offset by the bank's experience in a multitude of other loans. In practice, as already pointed out, there would not be a multitude of other loans. In the case of any one bank, particularly a small bank, the number of loans made in the course of one or two years probably would be relatively small, and not enough to give the diversification of risk upon which the pool or insurance principle is based. Then the Bank of Canada should exercise an active rather than a wholly passive influence in the type of loan concerned with the initiation of a new enterprise or the expansion of a small enterprise. Loans of this type which are desirable in the national interest, particularly if Canada is to carry out an expansionist policy in the years after the war, might never be made, and the government's guarantee never asked for under the insurance principle; and

many of the loans the industrial development bank will be making are not of the type that commercial banks have made in the past, and perhaps in most cases of the type they are not equipped to make.

These are some of the reasons why I think the pool guarantee principle should not be applied to the kind of operations envisaged for the industrial development bank. But then from the other side, from the C.C.F. and perhaps others of the smaller groups, we had the suggestion that instead of providing for guarantees of the loans by commercial banks to farmers and fishermen, we should set up an agricultural development bank; and we were asked why we wdre not doing that. Well, there is a very practical reason; there are-several reasons for not doing it, but one is very practical. It is that an agricultural development bank would mean a bank with perhaps a thousand or two thousand branches. It would mean duplicating existing banking facilities wherever there are farmers and fishermen, and that takes in most of Canada. It would mean great personnel problems; it would mean problems of labour and materials, and. in addition, it would get us into something like commercial banking, which I do not believe and the government does not believe is a suitable field for government enterprise.

Hon. members have attempted to say that we are in an inconsistent position; that we say the government should not go into the field of commercial banking for various reasons, one of which is -that political influences might prevail, but that at the same time we are going into the field of industrial development banking, and one hon. member says we cannot have our cake and eat it. I want to point out the difference between the very limited type of banking or loaning that we propose to do in the industrial development bank and the kind of business we would be in if the government went into commercial banking. To begin with, the commercial banks have about thirty thousand employees; the industrial development bank, after it gets going, will have perhaps fifty or a hundred. I presume the commercial banks make several hundred thousand loans a year; the industrial development bank, comparatively speaking, would make only a few.

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NAT

Gordon Graydon (Leader of the Official Opposition)

National Government

Mr. GRAYDON:

I do not want to interrupt the minister; but if that is the case, the whole object of the industrial development bank, as we understood it, which was to help the small people throughout the country, will be negatived, because if you are not going to have more than the number of loans suggested you are not meeting that objective.

2&14

Bank Act-Mr. llsley

Mr. II.SLEY: In his speech to-night the

hon. member for Rosedale (Mr. Jackman) said that perhaps the industrial development bank would have a thousand customers while the commercial banks have a million. I do not know whether those figures were evolved from some discussion that took place in the committee while I was absent; but while such figures cannot be at all exact, at any- rate the *difference in magnitude and ramifications and contacts, particularly public contacts, between the industrial development bank and the chartered banks is tremendous. The chartered banks have 3,077 branches in Canada. The industrial development bank at the outset will have no branches; it will have nothing but a head office. After that there will be some branches, perhaps one in each province. You have two entirely different kinds of institution. It is the multiplicity of these contacts, these hundreds of thousands, perhaps millions of contacts, that create the political dangers in an institution, the dangers of political pressure, political control and so on. It is where large numbers of people are affected, as every hon. member knows. Not always is that the case. There are public utilities which deal with the public on a standardized basis where the danger is negligible, but in this case thousands of government employees will have to pass upon the honesty and character .of the people they deal with. They will have *to deal with A to-day on one basis, and with IB to-morrow on a different basis. That is the .-situation in which the impropriety of govern-.anent operation emerges, in my opinion and -in the opinioi of the government.

The C.C.F. have attacked that one argument I have made against the socialization of the banks, but they have left the others pretty well alone. I challenge any member of this house, after hearing the eloquent and able speeches by members of the C.C.F., to put in a sentence what the utility would be of nationalizing the banks of Canada. They say, "Oh, well they would deal out credit in terms of public need." Does that mean that loans are to be made on the basis of what would be helpful to the person applying for money, regardless of whether or not the money is to be repaid? I have thought this thing over after hearing the hon. member for Weyburn (Mr. Douglas) the hon. member for Rosetown-Biggar (Mr. Coldwell) and other hon. members, and I cannot see what difference there would be in this thing unless they propose to go in for bad loans on a large scale.

On the question of the volume of credit, the loosening up of credit in times of depression and the contraction of credit in times of boom,

may I say that that is controlled by the Bank of Canada, as I explained in my earlier speech. One of the speakers for the C.C.F. said, "Oh, yes, the Bank of Canada can force reserves on the chartered banks, but they cannot make them grant loans, or if they do, they cannot prevent the banks from calling the loans in." The profit motive ensures that they will lend if they can safely do so, and it ensures that they will not call the loans in if they can safely let them stay out.

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?

An hon. MEMBER:

Oh, no.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Oh, yes; it certainly does. If the C.C.F. proposes that their government commercial banks are to be run without regard to profit and loss, then they are in for a gigantic system of bad loans on the part of the government. Probably in a great many cases they will have to be granted under mass pressure. Perhaps they will say that that is democracy, but that is what would happen if they are going to change the operation of the commercial banks in the way which they propose.

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CCF

Major James William Coldwell

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

Mr. COLDWELL:

Since the minister has asked a number of rhetorical questions, may I say that we regard the banking system as part of the whole economic system.

Mr. ILSLEY": My hon. friend says that he regards the banking system as part of the whole economic system. I think the hon. member for Rosthern proved to the house in his speech this afternoon that the reason why the C.C.F. desires the nationalization of the banks is that that is essential to the socialization of the whole system. In other words, the fourth argument, if hon. members will recall, in my speech which was referred to by the hon. member for Weyburn, is a sound argument. That is the basis and crux of the socialist position in connection with the nationalization of the banks. I should like to move the adjournment of the debate.

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?

Some hon. MEMBERS:

Go ahead.

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May 11, 1944