Mr. Munro:

Mr. Chairman, on a question of privilege, I think it should be noted that during the debate in this chamber on an important subject such as this not one Member of the New Democratic Party is present in his seat.

Mr. Winkler:

It is interesting to see that

you are back.

Mr. Pelers:

Mr. Chairman, on the question of privilege I should like to remind you that the statement made by the hon. Member is incorrect. As usual the hon. Member is misinformed.

The Chairman:

Order, please.

Mr. Winkler:

You should have said you were happy to see him back.

The Chairman:

Order, please.

Mr. Pelers:

But I am not happy to see him back.

Mr. Thompson:

Mr. Chairman, we found the statement of the Minister of Finance in relation to the revision to the Bank Act of

May 6, 1965

Bank Act

great interest, and we now await with greater interest the bill to follow, which the Minister has suggested will be a complicated one. Until we are able to study the detail of the new legislation as it will appear in such a bill, it is difficult to speak at any great length on this resolution, except to outline certain basic fundamentals which relate to banking, and to refer to several points the Minister has made.

In Canada banking is big business. In a nation as large as Canada big business is necessary, and I am not opposed to the fact that some of our nation's businesses fall within that category. However, I am concerned with and opposed to big business when it does not serve the best interests of all Canadians, or when it uses the force of its size and privileges solely for its personal interests, instead of for the general welfare of Canada. Therefore it is of great importance to consider seriously any legislation which relates to the banking system of Canada.

The bill that will be introduced in this chamber following our debate on this resolution is one of great importance. It is perhaps the most important piece of legislation we will have to deal with during this entire session. It has been noted with much interest that reference has been made to the recommendations of the Royal Commission on Banking and Finance. The members of that Commission deserve our commendation and gratitude for a very important job, done rather efficiently and effectively, in that they have reported concisely and without too much detail the situation as they found it. It is also interesting to note that the cost of that Royal Commission was comparatively less than the cost of other royal commissions which have been appointed in recent years. The Royal Commission on Banking and Finance certainly used discretion and caution in the expenditure of public funds.

I should like to make a few comments regarding one or two of the points made by the Minister. He acknowledged a recommendation of the Commission to the effect that coverage of the Bank Act should be broadened so as to include institutions other than chartered banks which accept deposits. This seems to mean that institutions not covered by the Bank Act will not be able to engage in the business of banking. This is a sound principle.

Obviously the fact that many near banks have developed in recent years is proof

enough that the Bank Act as it now functions does not adequately cover commercial operations requiring banking service, or operations closely related to banking business. The Bank Act should be broadened to cover these institutions, but it must be remembered that the fact that these institutions have developed is also proof that the Bank Act and our banking institutions operating under that Act have not been adequate to meet the over-all needs of the economy. If that were not so, I do not think many of these banking institutions, or near banks, would have developed as they have.

However, Mr. Chairman, there is a word of caution to be said in this regard. The Minister has a very great responsibility in the expansion of the Bank Act regulations, to include and cover some of the near banking operations, to see that they are not so restrictive as to prevent these institutions from carrying on a very important job. I think it is obvious that we require more competition in the banking field, and any expansion of the Bank Act which would permit more competition is a good expansion. The Minister must exercise caution in this regard so as not to defeat the very purpose which I think is intended by the decennial revision of the Bank Act, with which we are now dealing.

Any change in the Bank Act should not be such as to interfere with operations like the Treasury Branches in Alberta, or credit unions in Canada. There is a very genuine service rendered by these institutions. However, these services should logically be covered in some measure by the Bank Act, but not to the point where these institutions and the services they provide are restricted.

The Minister also has a great responsibility in relation to the powers of the Federal Government over the entire banking picture in Canada. I agree that banking policy, and general policy in relation to money and the money supply within our economy, must in some way come under a central authority. At the same time it is important that this policy be not misused, or abused, to the point where it interferes with provincial or local governments carrying on a legitimate business, a right which is theirs under the autonomy ascribed to them by the British North America Act.

Mr. Chairman, I note that it is six o'clock.

At six o'clock the Committee took recess.

1008 COMMONS

Bank Act AFTER RECESS

The Committee resumed at 8 p.m.

Mr. Thompson:

Mr. Chairman, without

going into all the details of the remarks made this afternoon by the Minister of Finance, I would say that there are a number of other points which he brought up which I believe are commendable, and it is a good thing they are being included in the revision of the Bank Act. It is in accordance with the recommendations of the Royal Commission on Banking that banks be allowed to make conventional mortgage loans. I note also the Minister has stated that the banks will receive the same rate of interest for those loans as is presently charged on national housing mortgages.

I note, too, that the Minister intends to retain the 6 per cent ceiling on interest rates.

I think this is a sound suggestion. As a matter of fact, I believe that as more competition comes into the banking business we can well expect that interest rates will come down even below this. It is probably good for an expanding economy such as we have, particularly at the moment, that the cash reserves of the chartered banks be lowered from the required 8 per cent to 7 per cent. I note with some interest the Minister's reference to the ratio of cash reserves to the different categories of deposits. We will have some remarks to make with regard to this provision later.

It is interesting also to note that the Government intends to permit the incorporation of new banks through letters patent, with the House of Commons having the right to annul such letters patent within a stated period of time. This seems to be a reasonable approach. So long as there are the requirements which any proposed bank must meet before it is permitted to be incorporated, then it should not be necessary to have that incorporation through Act of Parliament. However, there is a real danger here. There is a lesson to be noted from the present situation of banking in the United States, a warning on one hand but an indication of a freer policy in regard to banks on the other. During the last ten years in the United States there have been 614 new national banks come into being. In addition to that, there have been nearly twice as many state banks come into being. It has to be admitted that there have been a number of bank failures, although in comparison to the number of new bank charters the number of failures is small.

DEBATES May 8, 1965

I mention this to the House not only with regard to the fact that there will be this new policy for incorporation of new banks but also to suggest to the Minister, when he states so emphatically that banks must be kept definitely under the direct control of the Federal Government, that in the United States there are two types of banks. As long as they are both part of the federal reserve system, they apparently operate quite effectively. There are those incorporated under national charters and those incorporated under state charters. While agreeing in principle with the statement the Minister has made, certainly he should not become so rigid as to prevent certain types of near banks or provincial governments from carrying on a legitimate phase of banking, provided they come within the over-all framework.

There are just one or two more comments I should like to make very briefly as they relate to banking. When we are considering the revision of the Bank Act, we ought to be aware of the actual purpose and function of a bank. I went to a dictionary to find out just what was the definition of a bank. I did this because, as I went back to the Statutes of Canada, particularly to those referring to banking, I found that there were various descriptions, but I found it very difficult to get a definition of a bank. Webster's Dictionary, second edition, says that a bank is an establishment for the custody, loan, exchange or issue of money; for the extension of credit. According to the Statutes of Canada, volume I of the 1953-54 edition, chapter 48, which is the Act respecting banks and banking, section 2(c) defines a bank as a bank to which this Act applies. This is the sum total of the definition.

In the same volume, chapter 47, I found an Act respecting savings banks in the Province of Quebec. In section 2(a) I found that a bank is here defined as a bank to which this Act applies. This all seems rather confusing. If we were to go to the Statutes of Canada to determine just what the terms of reference of a bank are, or the responsibilities of a bank, I do not think we could find an answer. It is interesting to note that according to section 2(c) a bank cannot lend or invest money or make advances.

In reading a book from Britain entitled "The Theory and Practice of Banking" by one Mr. H. D. McLeod, I found a definition which stated this:

The essential and distinctive feature of a "bank" and a "banker" is to create and issue credit payable on demand, and this credit is intended to be

May 6, 1965

put into circulation and serve all the purposes of money. A bank, therefore, is not an office for borrowing and lending money, but a manufactory of credit.

Then I came across a statement by a former Chancellor of the Exchequer, Right Hon. Reginald McKenna, Chairman of the Midland Bank of London-the largest bank in the world-who said:

I am afraid the ordinary citizen will not like to be told that the banks can and do create and destroy money. The amount of money in existence varies only with the action of the banks in increasing and decreasing the bank deposits and bank purchases. Every loan, overdraft, or bank purchase creates a deposit, and every repayment of a loan, overdraft or bank sale destroys a deposit.

Then, Robert H. Hemphill, who is likewise a noted banking and financial authority, this time from the United States, also has something to say about this subject.

[DOT] (8:10 p.m.)

Writing in the foreword of a book on money by Irving Fisher he stated:

If all bank loans were paid, no one would have a bank deposit and there would not be a dollar of currency or coin in circulation. This is a staggering thought. We are completely dependant on commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money, we are prosperous; if not, we starve! We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible-but there it is. It

-said Mr. Hemphill-

-is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it is widely understood and the defects remedied very soon.

So, Mr. Chairman, according to these quotations we find that banking is a very vital and important part of our economy, and as we discuss the revisions to the Bank Act for the period ahead of us, it certainly behooves us to be very careful that we make sure of what we are doing.

In Canada our money supply is made up of Canadian currency plus bank deposits. Approximately 20 per cent of this, I believe, is created by the Bank of Canada, and the remainder by the chartered banks. That is why I appreciate the fact that the Minister at this time is simultaneously bringing in a bill which is intended to deal with the Bank of Canada itself.

It should be noted that it costs our banks very little to create our money supply. Most of it is nothing more than figures in a book, as is taught in many Canadian schools. A cer-

Bank Act

tain textbook defines it as being created out of thin air. The strange thing is that our money supply constitutes an interest bearing debt against the Canadian people. Canadians are paying hundreds of millions of dollars yearly in interest on borrowed money because of certain imperfections in our present Bank Act.

I would say that the two basic imperfections in our Canadian money and banking system are as follows. One concerns the manner in which our money supply comes into existence, the other the lack of a definite relationship, between the amount of money in circulation and the value of the production of goods and services within the country. When these two imperfections are taken out, our banking system will function much more effectively than at the present time, albeit I believe we have one of the finest banking systems anywhere in the world.

We in Social Credit do not for a moment suggest that the banking system as it presently functions should be destroyed; rather, it should be preserved and those things which can be regarded as imperfections should be corrected in order that money can function according to its intended purpose, acting as the medium of exchange so that the production of goods and services within the country can be distributed to the consumer for whom they are intended.

I was a little bit disturbed by the terminology used this afternoon by the Minister as he related the ratio of reserves to bank deposits. Actually banks do not lend their deposits. What they lend is bank credit, and this money appears as a deposit in the borrower's account without lowering any other deposits and without increasing the supply of money when a loan is made.

I was interested to note that Mr. Graham Towers, when he was Governor of the Bank of Canada, stated very clearly 11 years ago, when revisions to the Bank Act were being considered at that time, and when replying to a question as to whether or not banks lend their deposits:

The banks cannot, ol course, loan the money of their depositors. Now what the depositors do with these savings is something quite beyond the control of the banks.

That can be found on page 455 in the 1939 Banking and Commerce Report, which he was quoting at the time. Therefore, Mr. Chairman, I would say that our banking set up is something that we owe it to ourselves- certainly we owe it-

May 6, 1965

Bank Act

The Chairman:

Order. I regret to interrupt the hon. Member but his time has expired unless he has the unanimous agreement of the Committee to continue.

Mr. Thompson:

I wish to finish my sentence, Mr. Chairman. We owe it to ourselves and to the nation to come to grips with the real issue that is involved in our whole banking set-up. As we consider the revisions to the Bank Act, this lengthy and complicated Bank Act as the Minister himself has described it, we must concern ourselves with how we can make our banking system work more effectively, with greater competition, because certainly it is one of the greatest enterprises we have within our economy, and which I believe, must continue to operate, as far as possible on a private enterprise basis.

[DOT] (8:20 p.m.)

Mr. Perron:

Mr. Chairman, my remarks at this stage will be very brief and consist only in a few statements of principle. I will also try to replace in its context the conception that the members of my group have on the definition of banks.

During his remarks this afternoon, the Minister of Finance (Mr. Gordon) described banks as institutions authorized to accept deposits and carry out transfers of those deposits. If this is the only definition that can be given of banks doing business in Canada, within our present banking system, I believe this is restricting and over-simplifying the question. Other banking authorities have given a quite different definition of the more important role fulfilled by banks within the Canadian banking system.

At this time, I would like to quote a few extracts from the report of the "Conseil d'ex-pansion economique incorpore de Quebec" which, in a pamphlet entitled "Our Chartered Banks" outlined the operation of our banking system and the creation of credit.

First, a definition of money is given.

The public are often under the impression that money is essentially a bank-note while actually, judging by the way Canadians make their payments, monetary operations are largely made by means of cheques or internal accounting operations at the banks (transfers of funds from one customers account to that of another customer).

Money as an instrument of payment or means of exchange may take various forms: coins, paper money, cheques, etc. On the other hand, money is used in many ways in the national economy.

What is money used for?

(a) As an instrument of payment, money is accepted by everybody by virtue of its legal value as an instrument to pay debts;

TMt. Thompson.]

(b) As a value standard, it allows each and everyone to deal with people in terms of prices without any difficulty;

(c) As a savings instrument, it ensures future purchasing power for a relatively long period.

Further on in this book there is a very-important statement by a person who knew all about the banking system of this country. In 1939, before the parliamentary committee on banking and commerce, the president of the Bank of Canada, Mr. Graham Towers, answered certain questions in this way:

He was asked:

Is it true that banks create a medium of exchange?

He answered:

That is correct. That is their function... it is their business just like a steel mill produces steel.

That can be seen at page 287 of the 1939 report of the committee on banking and commerce.

He went on:

Their manufacturing operation consists in making the necessary entries on a card or in a ledger with a machine or a pen.

That can be found at pages 76 and 238 of the same report. Further:

In general terms, any new money comes from a bank in the form of a loan.

This is found on page 561 of the report. Those were answers by Mr. Graham Towers, the then governor of the Bank of Canada.

To another question he gave the following answer, that the Minister of Finance should certainly heed:

Will you tell me why a government that has the power to create money should relinquish that power in the hands of a private monopoly from which it borrows what parliament can create, and borrows with an accumulation of interest which could lead to national bankruptcy?

Mr. Towers answered:

... we realize of course that the amount thus paid covers the operating cost of the banks plus the interest paid to depositors. However, if parliament should so desire, it certainly could change the way the banking system operates.

I was referring to page 394 of the report of the committee on banking and commerce.

As seen on page 12 of the publication of the economic council, those people highly trained in banking asked this question:

But is this how banks create money?

Answer:

Obviously, it is a manner of speaking. By opening a credit, the banker has made available to his customer $10,000 of new money (in account: bank money).

But if the bank can create money, how is it interested in receiving savings?

May 6. 1965

Here we revert to the principle of savings. They are merely cash reserves which, as my colleague from Lapointe (Mr. Gregoire) said this afternoon, make it possible, under the Bank Act, to multiply by 12, and even sometimes by 14| if the cash reserve is lowered from 8 to 7 per cent. That is giving the chartered banks a greater possibility than the one they already have to create more money and get 6 per cent interest on loans extended through mere consent, and even more if the right of banks to lend on mortgages is extended.

This multiplication of credit is striking when one considers that it necessarily results in the piling up of debts.

This afternoon, the hon. member for Edmonton West (Mr. Lambert) was proud to mention that Canada has the best banking system in the world. Perhaps it would be wise for him to look at the situation of consumers and Canadian wage earners to whom chartered banks refuse loans which they need to get immediately the things they cannot pay for with the savings they would have accumulated one, two or five years before, if they had not been so heavily taxed, which compelled them to buy on the instalment plan.

I have here the report on general indebtedness of the Canadian people:

At the end of April 1963, Canadian consumers owed $745 million to finance companies for consumer goods; $393 million for purchases of commercial goods; $580 million to small loan companies; $36 million for goods bought on the instalment plan; $366 million to departmental stores; $181 million to stores selling furniture and electrical appliances; $1,544 million to banks for personal loans.

Such was the situation of the little people, who buy the things they need in chain stores and small local stores and who must get loans from finance companies.

Just yesterday we received the report of the operations of small loans companies and money lenders for the year ended December 31, 1963. We noticed that the number of loans granted increased considerably, because those small companies opened new branches throughout the country. The increases are rather heavy for the few years covered by the report: from 1961 to 1963 the number of borrowers whose loans did not or practically not exceed 1,500 amounted to 1,169,699 out of a population of 20 million Canadians. If you take out the old people and children under 20, I assure you that you get quite a high percentage of heads of families who are obliged to seek help from those loan sharks.

Bank Act

In 1963 the number increased rather considerably since 1,380,000 people borrowed from these companies a total of $769,648,673. And these are not loans at 5, 6 or 7 per cent interest, but loans at 12, 18, 24 per cent and sometimes even more.

How many small businesses are denied loans by banking institutions, which, nevertheless, increase their assets at approximately the same ratio as the increase in public and private debts in Canada.

For the enlightment of those who, in a few years from now, will read Hansard and see how our wise administrators, the Minister of Finance and his supporters, could boast on May 6, 1965, that the Canadian banking system is the best in the world, I shall give an account of the federal financial situation for the year ended on March 31, 1961.

I have here a table showing the federal financial situation from 1868, that is, the first balance sheet after confederation, up to 1961. It is very interesting to note the increase of debts.

At the end of the year 1868 the net debt amounted to $75,757,135, whereas in 1961 it had reached $12,437,115,095.

Let us look at the per capita debt. This is something rather interesting, because we see that as this country develops, as it gets better in the field of productivity, as science progresses for the benefit of humanity, debts are increasing under the best banking system in the world.

[DOT] (8:30 p.m.)

A fine progression indeed. In 1868, the per capita debt was $21.58. It increased to $47.18 in 1911, to $773.59 in 1952, and, in 1961, it had reached $684.56. Quite a nice progression in the field of per capita debt. Under this system, the government, instead of using its sovereign authority on its own institutions, the Bank of Canada continues in 1965 its revision of the Bank Act, whereas such revision should have normally taken place in 1964, but we had to wait for the report of the Porter Commission to establish future data and future guidance.

Instead of using its authority, according to the resolution now under consideration, the government seemed to favour this system which they are fond of considering as the best banking system in the world. However, the power to impose interest, this scourge of contemporary society-an ever increasing power-belongs to a small clique, whose financial influence becomes stronger and who

May 6. 1965

Bank Act

controls the economic and social life of the nation; as well as the life of an ethnic group in the country, and even family life to such an extent that most of the time, the main victims of this exploitation are compelled to have their purses emptied even more rapidly in resorting again to finance companies, which are but the emanation and the end result of this banking system that has been praised.

We are coming now to the interest item, of which the Minister of Finance is proud. Here is the per capita progression. In 1868, the earnings per capita, that is the income, were $3.95, in 1911, $9.81 and in 1952, $284.17. The debts have increased at the same rate as the cost of living. Such is the system about which we hear so much praise.

Another point that I should like to bring to the attention of the house at this stage has always been the object of great praise also. This afternoon, I heard members on the government side applaud one of their own who spoke right after the hon. member for Lapointe. The speaker in question stated that it behove the federal government to reassert its authority in the field of banking.

Cheers went up from the Liberal benches but, a few minutes later, the same member mentioned that the exchange rate in New York had greater effect on our means of exchange than the Bank of Canada itself. It is sought to strengthen Canada's banking system through a revision of the bank act, while government circles already recognize that the rate of exchange in New York has greater influence over the control and stability of the Canadian dollar than the Bank of Canada.

Is that not making fools of the Canadian people? Speaking precisely of the reasserting of federal authority in the field of banking, the issue under consideration, the hon. member for Edmonton West mentioned the Quebec savings banks and advocated closer control over Alberta's treasury house and Quebec's caisses populaires, in accordance with this need for reaffirming the federal government's policy.

I am afraid that faced with this drive for decentralization under which economic regionalism is getting stronger, the provincial governments, conscious of their responsibilities under the Canadian constitution, will want to take themselves the necessary means to remedy a situation which has been lasting for too long, the control of the federal government to which we had to surrender our rights little by little. We are also conscious

of the fact that Canada's banking system has impoverished families in years of plenty and that it works well only in periods of world slaughter or on the eve of an economic depression which might be worse than that we experienced from 1929 to 1939.

This devaluation or lowering to 7 instead of 8 per cent of the amount of the liquid reserve is nothing but a way to enable banks to keep until 1967, for private borrowers, this state of fictitious prosperity in which we have been living for some years, and then go back to the 1962 situation when, under pressure from our southern neighbors, we had to devaluate the Canadian dollar. It is only to maintain this situation until 1967 in order to continue this fictitious prosperity, and I say fictitious because I maintain that, with the present banking system in Canada, we cannot do anything but create debts, that is all.

This act, once passed, will allow banks to take over production means, to control the economic and political life of this country through this control of the banking system. We have made suggestions and many proposals; we have suggested that the government use the Bank of Canada and create a national credit office which would monetize part of the national credit to enable consumers to buy the production. Let us spend fewer billions for Sputniks and a little more for the Canadian consumers.

This office could even direct production toward consumption. It is this new credit, created through the national credit office that could correct this situation and should enable people to profit by the wealth to the extent of the production capacity made available by science and progress.

It is no use re-asserting the federal control in the banking field such as that of the Bank of Canada, if we prevent provincial institutions from obtaining controls allowing them to develop so that-

The Chairman:

I regret I have to interrupt the hon. member, but his time has expired.

Mr. Green:

Mr. Chairman, I would like to take this opportunity to say a few words in respect of this resolution. I am particularly pleased to do so, not only because of the fact that I had the honour of being a member of the Banking and Commerce Committee during the last session, but particularly in respect of the work we have done to date on the Joint

May 6, 1965

Committee on Consumer Credit, of which I have the honour to be a joint chairman. I do not believe that Committee or any of the work of that Committee, or any of the aspects of credit as brought before that Committee, have been discussed before this House; and inasmuch as the question of banking is integrally involved in any question of consumer credit, I think it might not be inappropriate to discuss at this time on this resolution some of the things we have found before that Committee.

First of all I would point out those memorable and immortal words of Polonius in his precepts to his son, in Scene 3 of Act 1 of Hamlet. We all recall that Polonius said:

Neither a borrower nor a lender be: For loans oft loses both itself and friend, And borrowing dulls the edge of husbandry.

If such be the case, Mr. Chairman, then I have no doubt that Canadians have very few friends left, and they are indeed a very dull crew; because the statistics indicate that the extent of borrowing, and of consumer borrowing in particular, in the last few years has increased to a very, very great degree. Singularly enough, in the year immediately following the Second World War the total of consumer borrowing in Canada was something like half a billion dollars. In 1963, the last year for which we have authentic statistics, that borrowing had increased to the extent of some $5 billion. I think those figures indicate something of the importance of this question of borrowing and of consumer credit, which is wound up in the question of the Bank Act, and to its importance to our economy.

[DOT] (8:40 p.m.)

I might point out that during this period, at any time when there has been a regression in the quantum of consumer borrowing there has been a concomitant relapse in the economy. Such industries as the retail trade and the car industry, in all its various areas from manufacturing to sales, would certainly suffer immeasurably if the quantum of credit and the extension of credit over the years did not continue to grow and expand. It has been notable before our Committee that the many briefs which we heard from many institutions and representatives of those institutions have been largely presented by the producers of consumer credit, by those who sell consumer credit, rather than by the consumers of the credit, the borrowers themselves. Accordingly it may be that I have obtained a somewhat slanted view of this entire subject, having heard more from the producers than from the

Bank Act

consumers. However, I would point out that in this entire area there are very grave problems, essential problems, problems which I suggest may affect the life of each Canadian, his home and his family, a great deal more possibly than some of the loftier topics which we sometimes discuss in this House, such as external affairs and other matters, which are possibly of greater moment but of less immediate concern to the average Canadian homeowner.

I would point out, Mr. Chairman, that the consumer of credit is in the position of being continually sold the idea of credit and the need for credit, and the fact that he should borrow day after day and hour after hour. By means of the media of communications with all their effectiveness today he is told that he can borrow, that he can buy anything he wants just by walking in the door. He is told to take it now, pay later. That is the philosophy to which he is subjected almost continually during his waking hours.

I think this is demonstrated to some degree by the statistics covering consumer credit, which I should like to read into the record of the House at this time. These figures are broken down between the various types of institutions which provide what we call consumer credit. The largest of these is the chartered banks, of course, with which we are concerned at the present time in this resolution. However, the growth of other types of institutions which provide consumer credit is also indicated by these statistics. I merely point out the statistics themselves and the indicated growth between the years 1955 and 1963.

Instalment finance companies in 1955 provided some $599 million worth of credit to the Canadian consumer; and in 1963 this had grown to $873 million. Consumer loan companies providing instalment credit provided $215 million worth in 1955 and $808 million in 1963. Chartered banks provided $351 million in 1955 and $1,432 million in 1963. From that ratio, Mr. Chairman, we can see that the chartered banks have invaded this field of consumer credit to the extent that they have shown the largest increase of any of these institutions in that area supplying consumer credit during that period. I think it was the hon. Member for Medicine Hat who in his address charged the chartered banks with failing to accept the needs of the consumer, and in the early days that was quite patently true. But they certainly have demonstrated, since they have decided to enter the field,

May 6. 1965

Bank Act

that they have been very effective in gamering unto themselves a very good share of the market. To complete the statistics, credit unions and caisses populaires during this period grew from $151 million in 1955 to $640 million in 1963. The total growth during that period showed an increase in consumer credit of from $2,136 million in 1955 to $5,292 million in 1963.

I have placed these statistics on the record, Mr. Chairman, to indicate the very vast problem that exists and the very great growth in this area of consumer credit during that period, some very substantial proportion of which is taken up by the chartered banks in this country.

Also in connection with the evidence we have heard before the Consumer Credit Committee, the great need for legislation, not only specifically qua credit in respect to the consumer but for various other wider ambits of consumer legislation, has been demonstrated. This legislation is needed to protect the consumer as a consumer of credit as well as a consumer in other ways. I pointed out earlier that so few of the very able representations which we have heard emanated from the consumers themselves, and it is by the very nature of things that the producers, the sellers, are well organized and usually very capable financial institutions, whereas the consumer as such is an individual, to a very large degree unorganized, and to the same degree not able in a collective fashion to bring forth his views in any voluble or professional manner. Such organizations as the consumers organizations attempt to do this, but by and large, Mr. Chairman, I suggest that the consumer as such, in this corporate age in which we live, is very much left to the tender mercies of the well organized and well heeled collective bodies of our society. I suggest that his greatest and only protection is right here in this House in the consideration which the elected representatives must have for the consumer as such.

The grave difficulty in aiding the consumer in his problem as a consumer with respect of credit, as well as in other areas such as packaging and disclosure, and so on, is very plain under our constitution. The Minister quite properly pointed out in his statement to the House today the difficulty of embodying into the revisions to the Bank Act the lofty concepts of the Royal Commission regarding pervasive legislation which will cover banking in all its aspects. I think this same problem exists with regard to legis-

[Mr. Green.1

lating on behalf of the consumer for consumer credit and other things.

I think the area of banking and interest is very clearly within the ambit of federal legislation, and I think the revisions to the Bank Act will no doubt bring forth measures which will be of some help to the consumer of credit. But this is only one aspect of the entire problem. We have noted in our work in the Consumer Credit Committee that many of the provinces are very much concerned with these problems facing the consumer at the present time, and it is our great hope that this is one area where this new approach to confederation which the Prime Minister has ably brought forth, this idea of co-operative federalism, can be used between federal and provincial agencies so that the consumer of credit and the consumer, as a consumer in so many other ways, may be protected. I think co-operative federalism, joint legislation, overlapping legislation covering the entire constitutional field, is the area of great hope in this regard, o (8:50 p.m.)

I might also point out that one of the very grave problems in respect of consumer credit, as we have observed it, relates not only to usurious interest rates, to which earlier speakers have referred, to interest rates on short-term loans as high as 154 per cent, which is rather shocking. The only way these things can be prevented is, as I have said, by joint legislation.

The second grave problem in respect of consumer borrowing relates to the fact that most of the time it is the consumer who is paying these usurious rates who has very little protection, if any, by way of information regarding the rate of interest he must pay. There is no law, either provincial or federal, at this time which requires a disclosure of interest rates in simple annual terms so that a consumer of credit may know the rates he must pay, and may realize exactly what he is getting into.

I suggest with the greatest respect that it might be appropriate for the Federal Government in respect of the Bank Act to set an example for other lending institutions in this area, by amendments which would make it compulsory for chartered banks to show interest rates in terms of simple annual interest rates. I have in mind consumer loans in respect of which banks are now charging interest rates in excess of the 6 per cent rate provided for by the Bank Act, which is accomplished by monthly interest charges, costs of loans, and in other ways. People are

May 6, 1965

paying more than 6 per cent on loans from chartered banks, and I respectfully suggest that it would be a singular example to the other and sometimes more usurious institutions if the Bank Act were amended so that under the Bank Act interest rates on loans made by chartered banks would have to show the simple annual terms of the interest rates. I hope the Minister will consider this respectful submission.

I would certainly commend the Minister, as I know all hon. Members on this side of the House will, for the forthright, clear and unequivocal position he has taken in respect of the ownership of shares of chartered banks by provincial governments. In this regard I find the position taken by the New Democratic Party to be a rather anomalous one. The hon. Member for Burnaby-Rich-mond and the hon. Member for Nanaimo-Cowichan-The Islands have taken the position that it is quite in order, and that no harm is done, if provinces own, and even control, federally chartered banks. On the other side of the New Democratic Party coin we have Members such as the hon. Member for Greenwood, who talk about the formula for revising the constitution which will create havoc, with the need for strict central fiscal powers. They suggest that powers to control the flow of the economy, and for other necessary economic measures, should be centred at the federal level. There seems to me to be a rather striking contradiction between these views.

I should like to relate a grade school anecdote which seems to be apropos of this striking contradiction between the positions taken by various Members of the New Democratic Party. I realize that the majority of the Members of that Party started their education at the university or postgraduate level, and probably did not go to the humble grade school at all, as the rest of us did. I hope these intellectually elevated gentlemen will forgive me for drawing this very humble anecdote to their attention. I think it has some bearing on this contradiction between the views taken by the various Members of that Party, who seem to adopt whatever stand looks good politically, on whatever measure comes before this House. Consistency is the least of their worries.

The anecdote I wish to relate is about the birds and the animals, and a strange creature known as a bat, which is neither bird nor animal. This bat would fly with the birds one day and run with the animals the

Bank Act

next day. It was having a ball, going whichever way happened to be good on a particular day. Suddenly the birds and the animals got wise to the bat and realized that the bat was not one of them. That was the end of the bat.

Let me suggest to hon. Members of the N.D.P. that the Canadian elector is a pretty wise old bird. One day he will get wise to the N.D.P. bat, and that may be the end of that Party. Let me also suggest to those gentlemen that they get together and decide whether they are in favour of a strong federal fiscal authority, or for the control of the federal banks, which have played such an important part in the control of our economy, and certainly in the flow of money, by provincial governments. The position of that Party is anomalous, contradictory and typical of very many of the stands it has taken on various issues. It seems to me they adopt whatever is popular today, whatever will catch a few votes in British Columbia, or somewhere else, without worrying about adopting a consistent philosophy until some later date.

Again I commend the Minister for the strong stand that he has taken in this matter, and I should like to-

The Chairman:

Order, please. I am sorry, but I must remind the hon. Member that his time has expired.

Carry on.

Mr. Olson:

May I direct a question to the hon. Member?

No.

The Chairman:

The hon. Member's time has expired, and apparently the hon. Member for Medicine Hat does not have the unanimous agreement of the Committee to ask a question at this time, a (9:00 p.m.)

Mr. Caoueile:

Mr. Chairman, the proposal of the Minister of Finance (Mr. Gordon) -