June 9, 1944

CCF

Clarence Gillis

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

Mr. GILLIS:

[DOT] The minister says he will be.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

All finance ministers have

been.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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CCF

Clarence Gillis

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

Mr. GILLIS:

Well, none of us is sure he

will be here to-morrow. As I read this bill,

I may be suspicious, and perhaps my suspicion is based on experience, since I am a graduate from the school of hard knocks. At any rate, it seems to me that it is not a bad bill on the eve of an election, though I cannot see any solution for the farmer who requires money under it. The minister is in a position, after the election is over, to curtail or restrict or change or terminate this thing completely.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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NAT

John Ritchie MacNicol

National Government

Mr. MacNICOL:

There may be a change of ministers.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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CCF

Clarence Gillis

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

Mr. GILLIS:

I am not a prophet but I am taking this bill as it reads. Personally I cannot see any redress for the farmer under the bill, though I have read it carefully. What is the experience in Norway, Sweden, Finland and France in connection with agricultural credits? They have endeavoured to solve the problem, and I know the machinery now being set up, both in the field of industrial development and in the field of agricultural credits, is not new. It was tried in the countries I have mentioned. The idea is merely to endeavour to extend and to build for the future on a machine which in my opinion has crashed and is beyond repair. That is why I do not want to pin our post-war plans in either field on this kind of machinery. You are not making any changes. You are still vesting in the chartered banks the right to issue or to withhold loans if they so desire. On the other hand, the government is going to accept a certain percentage of risk on the aggregate loans. As I heard the matter discussed here, I was led to believe by some members that the government would accept ten per cent of the individual loan. According to the bill, it is the aggregate loan. I presume at the end of the year the banks would file a stat# ment with the minister that the aggregate loans under the measure, in their particular branch, amounted to so much. They may have defaulted to the extent of such and such an amount and the department then assumes ten per cent of the liability of the total loans outstanding in that branch. Well, that might run into a condderable amount of money. However, I am not concerned about that. What I am thinking about is this, that the government guarantees the loan and does so with the taxpayers' money; and if the taxpayers' money is to assume the risk either under the Industrial Development bank bill or under this legislation, then I think they should expect to receive some benefits from it.

My Tory friends to the right and some of the Conservative members on the other side are very much concerned when one speaks about government control or the socialization of finance. They get all hot and bothered about that. The solution of the problem of

Farm Credit-Mr. Gillis

reconstruction and rehabilitation has been handed to the minister and the government. Industry says, "You accept the risk and allow us to make profits." There is nothing that smacks so much of that so-called enterprise as that. That is not a system, because if the system under which we have lived in the past has lacked anything it has lacked system. It is the most haphazard, grab-as-you-go system that has ever been or could be evolved. Their reason for existing and for wanting to perpetuate their future is that they take risk in the field of investment. Neither in the field of industry nor in the field of agriculture are they going to assume any risk in the future.

As I see it, what we have here and what we are evolving is a managerial form of society with the government managing the country, taking the risk, providing the services and guaranteeing the profits to the fellow who is not obliged to do even the thinking in his own private enterprise.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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NAT

Gordon Knapman Fraser

National Government

Mr. FRASER (Peterborough West):

If we had that it would be a terrible country.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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CCF

Clarence Gillis

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

Mr. GILLIS:

That is exactly what we have. If the hon. member cannot see it that is not my fault. That is exactly what we are building up. We are not so far away from it.

I said I was not an expert on banking or finance. I read these things and I try to apply some common sense to them. What I am afraid of is that we may do this in a hurry and make a mess of it. When the Industrial Development bank bill was before the house I said that we of this party want to see the people of Canada benefited by the future activities of our government. I have Reiterated time and time again that the thing we quarrel with is not what somebody else owns; that is immaterial. We have quarreled with the fact that the control exercised by the banks and industries of this country is complete control over the initiative and the wealth-creating means of the people themselves. Because of that control they are restricted. It is that control we want to unharness. We are not concerned with what the banks and industries have, but it is a fact that they can hold back the creative energies of the people in developing the country's resources for themselves.

The hon. member for Macdonald (Mr. Weir) talked of being afraid of the approach of the city banker to the problem of the farmer who may require credit in a hurry. I absolutely agree with him, because you do not have to go back very far into history in so far as the banking field is concerned to see that. The province of Nova Scotia

is a very good illustration. Not so many years ago we had our own banks there. They were owned and managed by Nova Scotians to do Nova Scotia business. We had no difficulties. Then they were merged into a central institution, and to-day if you want to start a small factory or get a loan over $500 you have to go to some central headquarters and clearly define the purposes for which you require the loan. If you are starting something that comes in competition with something that is already tied in with that centre you do not get the money. You have lost control.

When I spoke on the Industrial Development bank bill I tried to focus attention on the possibilities of supporting and developing the credit union organizations across Canada. I think the hon. member for Macdonald struck the nail on the head when he expressed his fear. If there is any institution in Canada that could come to the rescue of the farmer it is the credit union institution, which has been established on a community basis. If the government of this country are prepared to use the taxpayers' money to subsidize or guarantee the loans of the chartered banks in this field, what is the matter with giving some assistance to a movement that is already established in the field?

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

We have no control over them.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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CCF

Clarence Gillis

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

Mr. GILLIS:

No; you have no control over them, but you have no control over the chartered banks.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Oh yes.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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CCF

Clarence Gillis

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

Mr. GILLIS:

Yes, in theory.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

And in practice.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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CCF

Clarence Gillis

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

Mr. GILLIS:

Not in practice.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

We certainly have.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
Permalink
CCF

Clarence Gillis

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

Mr. GILLIS:

I am not going to argue with the minister. The institution to which I refer is already well developed. Thousands and thousands of members have studied the movement. The farmer will require his immediate credits on a community basis. Short-term or intermediate credits are not the solutions of the fanner's problems. That is what has hamstrung him in the past. What he requires is long-term mortgage credit. If short-term and intermediate credit were the solution hundreds of farmers across the country would not have lost their properties. They lost their properties during the depression because they had short-term credits. If the government can protect them I think it should have protected the soldier settlers. It is only two weeks ago that we had a delegation from Manitoba and

Farm Credit-Mr. Gillis

Saskatchewan in this city pointing out to the Minister of Mines and Resources (Mr. Crerar) that since the outbreak of this war approximately 606 soldier settlers a year for the four war years in those provinces have lost their properties because of their inability to meet their payments. That has happened during this war. If there was a solution of the credit needs of the farmers of Canada the loss of property by farmers across the country would not have taken place. What the farmer needs is long-term and mortgage credit, not shortterm and intermediate credit, which has been the evil of the system in the past.

Many people think credit unions are small. They are not. Those unions consist of a large number of members, and the movement is a national one. There are 129 credit unions in Alberta, 108 in British Columbia, 78 in Manitoba, 146 in New Brunswick, 204 in Nova Scotia, 163 in Ontario, 47 in Prince Edward Island, 749 in Quebec and 128 in Saskatchewan, making a total of 1,759 across the country. These are only branches. There are thousands of members in this association pooling their resources on a community basis. To-day they control considerable finance across the country, and they have developed the field of credit to a very great extent. They have linked up the industrial worker and the rural worker on that basis. They meet together. They iron out their problems together. They are beginning to understand each other's problems.

What militates against that movement today is the lack of some central tie-up with the different provinces. It is tied up to some extent in Nova Scotia. It is coordinated with a credit union league, but it is not functioning to lend money on long-term loans or on mortgages. I emphasize the necessity of a national organization that would not only utilize the finances they have now but make use of the brains and the stamina that have been given by those who have voluntarily developed that organization across Canada in a completely new field.

They are not looking for anything for their services. The whole movement is voluntary. It aims at uplifting the intelligence of the people and solving this community credit problem which developed as a result of the failure of the banks to do anything about the matter back in the thirties. This organization has made wonderful progress, and I would suggest that when the banking and commerce committee come to study this bill they get the statistics which are available in connection with this movement and1 call in the people at the head of it to see if this organization cannot be utilized on a national basis for the

purpose of providing long-term mortgage credits for the farmers of this country. If the movement is not large enough to take care of the whole problem on a national scale it could be assisted and developed.

No money will be lost under this movement.

I happen to belong to this organization, which I helped set up in Nova Scotia. I have here a note from the manager of the credit union to which I belong. In the ten years during which the movement has been in operation in Nova Scotia it has not had one bad loan, and loans of up to $3,000 have been made by the local branches. This is just one branch, located in one ward of the town of Glace Bay, and the manager states that at the present time their assets amount to $60,000; that they have a savings account of $52,000, a loan balance of $41,000 and victory bonds to the extent of $8,200. This was just a note to let me know how the thing was going, since I was a member of the board of directors until I came here. As I say, this is just one small branch in one section of that community, and there are many others. In my opinion this offers a solution of the problem of farm credit in Canada. Under this set-up the farmer is dealing with his own people. If he meets adverse conditions and cannot live up to the terms of his agreement 100 per cent, he is not called in by a banker who is responsible to a board of directors in some distant city. Whether or not the bank manager is sympathetic-as I believe most of them are-he has no alternative but to squeeze the borrower, for the terms of a loan with a bank cannot be altered. Under this set-up, however, a man deals with his own people, who are not subject to a board of directors in Montreal or Toronto. His board of directors lives right in the community; they know him personally, and can extend his loan and perhaps waive his interest, simply because they are not paying salaries to people whose only function is to scrutinize the balance sheet at the end of the year.

Loans made through this medium are also protected by insurance. These unions insure their loan balance and share capital. According to this letter, which I am not going to bother reading but which I can show to the minister at any time he cares to look at it, their share capital is insured for sixty-five cents a hundred dollars and their loan balance for seventy-five cents a hundred dollars. The way it works, and the way it would work for the farmer, is this. If a man had $500 of share capital and wanted to take out that money as a loan, he would do so. Then he would make his purchase for cash, which means a saving of up to perhaps fifteen per

Farm Credit-Mr. Gillis

cent. Supposing something happens in the meantime; the man dies. That $500 is outstanding, but while he used that money that amount remains to his credit as share capital. In Nova Scotia at any rate that loan balance and share capital are insured through the Cuna Mutual Cooperative Insurance Company, which now has offices in Canada and is well established in the United States. That company pays off the loan balance and doubles the share capital to the beneficiary of the person involved in that loan. Many of the insurance companies cannot understand how they do it, but they do; we have had such cases ourselves. Under a set-up like that, with some assistance and encouragement from the federal government, a national organization could be developed to take care of the credit needs of farmers across Canada on a community basis. With this protection by insurance you cannot lose anything, but you will bring about a brand new economic reform in Canada in the field of finance and credit, while each individual member of the organization will benefit.

I am not going to discuss this matter longer; I am sorry to have taken up so much of the time of the house. I only want to emphasize that in view of the unsettled international situation, which is reflected in the situation of each country, with such important questions coming up for discussion as the renewal of the charters of the banks, the development of some form of credit for the farmers, the Industrial Development bank in connection with industry, all looking to the post-war period, it is my opinion that with the picture as confused as it is at present the banking and commerce committee would be well advised to take a year or so to study the set-up and bring in necessary reforms to the whole banking and credit structure, rather than make decisions now while the situation is in such turmoil. In my view this measure does not touch the problem at all; it will not do anything for the farmer as far as his credit needs are concerned. In the first place, short-term and intermediate credit caused many farmers to be dispossessed of their land in days gone by. What they require-and this is not my opinion but the opinion of men who have studied this matter-is long-term and mortgage credit if they are to be given an opportunity to utilize any lending institution in order to rehabilitate and maintain their farms. Short-term and intermediate credit is not the answer; it must be long-term and mortgage credit. There is a possibility of developing that field through the credit union set-up which now is organized nationally, and which has given this question a great deal of study.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Just for information, would the hon. gentleman tell me what rate of interest the credit unions charge?

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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CCF

Clarence Gillis

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

Mr. GILLIS:

The rate of interest works out at six per cent per annum. It is one per cent a month on the unpaid balance. If you carry your loan for twelve months it works out at six per cent, but if you pay off the loan sooner you may get your money for two per cent.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

But it is at the rate of six per cent per annum? .

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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CCF

Clarence Gillis

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

Mr. GILLIS:

Yes, but of course the answer is that you are paying it to yourself. At the end of the year they declare a dividend, and you may get three or four per cent on your share capital. You pay six per cent on your loan but you may get back three or four per cent.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

If you borrow from yourself you are lending to yourself.

Topic:   FARM CREDIT
Subtopic:   LIMITED GUARANTEE OF BANK LOANS FOR IMPROVEMENT AND DEVELOPMENT OF FARMS
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June 9, 1944