Mr. R. S. WHITE (St. Amtoine-West-mount):
As one who is open to reproach from some quarters as being orthodox in money matters I desire to say a few words respecting the resolution now under consideration. I do not intend to touch at all the point made by the hon. member for South York yesterday, namely, the apparent inconsistency of the government in the legislation which it is proposed to have passed. That is a matter which the father of the Liberal party, the Prime Minister of Canada, can settle with his own family. My own view is that the proposal of the government is worthy of commendation, and I for one give it my hearty approval.
I have not been a devotee of a central bank in Canada. Many a time in Montreal I have spoken publicly against the setting up of such an institution. I am not yet convinced that it is required in this country at this time. But I cannot fail to recognize the fact that the parliament of Canada has placed on the statute books a law setting up a central bank, that it is there for good or for ill, and that no hostile words or attitude on my part can in the slightest degree affect the situation. If hon. gentlemen who prate about the importance of complete ownership by the government of a national bank or central bank will reflect for a moment or two, I am satisfied they possess sufficient logical powers to realize that this very resolution, with the bill about to be introduced, gives the government of the country, not absolute ownership, it is true, but absolute control of that bank to as great a degree as if every share in it were the property of the crown. I am satisfied that the view taken by the electors of this country during the last two or three or more years when this matter has been under discussion was that the central bank would be a bank of discount, a bank to which individuals, business firms, commercial corporations could go and borrow money; in other words, a bank that would discharge the ordinary func-
Bank of Canada
tions of a commercial bank. No advantage I can conceive of will accrue or could accrue to the people from the total possession of the share capital by the crown, that will not be extended by the measure now under consideration. I have always thought, and I always will believe, that most grave danger to the financial stability and the credit of this country would be caused if the central bank became a bank of ordinary commercial discount. It is said of Blucher after Waterloo, Mr. Chairman, as you will remember, that when visiting London and looking about, he exclaimed, "What a city to sack!" If we had in this country a central bank under the control-of the government, engaged in the making of loans upon such paper as the manager might think sufficiently secure for the purpose of the loan, well might the politicians supporting the ministry of the day exclaim on the eve of an election, "What a magnificent bank to loot!"
A good deal has been said of a condemnatory character in criticism of our chartered banks. I am not here to defend them or to say other than that they have served this country well. Representations have been made that the chartered banks are or have been sweating the blood out of the people, that they have been making exorbitant profits by high rates of interest. Is it known to hon. gentlemen that the leading bank and the largest in this country, to wit the Bank of Montreal, in its last financial year, 1935. earned a bare four per cent upon the capital investment of the shareholders? I submit that no one can possibly claim that four per cent profit is an exorbitant rate for a bank to earn and pay its shareholders upon their invested capital.
The policy of the banks is said to have caused the debacle of 1929 and subsequent years. If any will take the trouble to look at the figures they will find that the decline in prices and the recession in trade preceded the reduction in loans, and that the revival in trade that has occurred in the last three years-not it is true to a very great extent, yet more or less substantial renewal-has occurred in the face of a further reduction in the commercial loans of the chartered banks. So I contend it is impossible to attribute to the withdrawal of credit by the banks the debacle in business, and certainly it cannot be contended that a revival of trade has been in any way retarded by lack of commercial credit extended by the banks. Certain members of the house, namely the group in the left corner, trot out from time to time, as a convincing argument for something, a statement said to have been made on one occasion 12739-212
by the Right Hon. Reginald McKenna, an eminent public man in Great Britain in his day, and a very prominent banker whose opinion I dare not think is worthy of other than great respect, the statement of Mr. McKenna being that every loan is followed by or coincident with a deposit. A more unfounded statement than that could not possibly be made. I venture to say there is not an hon. member who is unaware of the fact that the proceeds of many loans obtained from banks on the discount of paper are carried out by the borrowers in their pockets, and never appear as deposits at all. Again-[DOT] and see the absurdity of Mr. McKenna's statement-when you borrow from a bank you pay five per cent, six per cent or, as the rate was at one time, seven per cent. Call it five per cent, if you like.
Subtopic: MAJORITY CONTROL BY GOVERNMENT OF CAPITAL STOCK AND BOARD OF DIRECTORS