May 26, 1939 (18th Parliament, 4th Session)


Malcolm McLean


Mr. McLEAN (Melfort):

I am sure the
country will appreciate his receiving from McGill university the degree of Doctor of Laws, just as the house, by its applause, has indicated its own appreciation. It is particularly appropriate that a measure such as this should be introduced by the minister, not

Central Mortgage Bank
only because he is Minister of Finance but also because of his long experience with and interest in legislation of this kind, which has taught him to beware of pitfalls and to include the necessary provisions to make such legislation successful. In briefly running over the features of this bill that appeal to me and dealing with the difficulties that may exist,
I have in mind the long experience of the minister in dealing with such matters.
This bill is an outstanding contribution to the solution of the problem with which it deals. It is the most far reaching piece of legislation to be proposed in this house for a long time, in regard not only to what it is likely to accomplish immediately, but also in the long range effect it will have on this and related problems that we may have to consider in this country. In this bill we are providing public credit in terms of the needs of a great many of our people in a simpler, more practical and safer way than has ever been suggested before, and in that sense I believe this is a most practical piece of legislation. I hope, and feel confident, that hon. members will approach its study without any desire to delay or hinder the passage of this measure. I hope the attitude hinted at the other day by a few hon. members who suggested that the bill would require lengthy consideration, for reasons they suggested, will not be too manifest. After all in this country we have had a great deal of experience in such matters, and that experience should be readily available.
The features of the bill of which I most approve are few and simple. In the first place it ensures that the interest on all mortgages on farm lands, and on homes where the amount of the mortgage does hot exceed $7,000, will be reduced to five per cent per annum; for as the lending companies that come under this scheme will have to reduce their interest charges to five per cent, it will be necessary for other companies to follow suit, and as a result five per cent will be the rate in effect. At this time, when money is plentiful and good investments not so easy to find, probably five per cent is a fair return. Then, interest arrears will be reduced so that not more than two years' interest can be included in the adjusted mortgage, and finally, the mortgages are to be rewritten to not exceed eighty per cent of the present value of the property, which will benefit a great many people. One outstanding defect of past legislation has been that city and town homes have been neglected. I admit at once that the first consideration of governments past and present, and quite rightly, was to keep on the
land those engaged in agriculture in order that they might continue to produce wealth and so that the economic system of the country might not be disturbed too greatly. But the time has come when some consideration should be shown home owners in cities, towns and villages, and I believe this legislation will take care of their problem.
In connection with farm mortgages the thought has been expressed by some hon. members that it will be impossible for farmers to pay even at the reduced rates. I find from the explanation of the minister, however, and from the bill itself that crop share payments may be made on these mortgages. That is the way farm lands in many parts of Canada have been paid for. Some hon. members did not believe monthly payments on city homes would be practicable. As a matter of fact that system is being followed now in many cases. In some cities taxes are paid in that way; it is done under the home improvement plan in connection with advances from the banks; it is done under the national housing scheme, and I think it can be taken for granted that it wiil work out equally well under this plan.
The other day some hon. members expressed the belief that the lending companies were going to get advantages under this legislation. I do not know to what extent that may be so, but I would say that the lending companies, composed of life insurance policyholders and other investors of that kind, are entitled to a square deal just as much as any other class of the community. If these companies suffer, the burden is sure to be reflected immediately upon individual citizens. On the other hand the hon. member for St. Paul's (Mr. Ross) thought the lending companies would be penalized, and went so far as to say that the only people who would suffer as a result of this legislation would be the life insurance policyholders. After declaring himself in favour of the general principle of this bill, at page 4402 of Hansard; after saying there was no doubt that legislation of this kind was necessary, the hon. member went on to disagree with the bill on minor points. However, after sizing up what were the likely company gains and company losses apparently he came to the conclusion, at page 4403, that the particular company he was taking as an example could not afford to become a member of this bank, and went on to say that the policyholders of the life insurance companies were going to be stuck.
I mention this to indicate that there are two opinions on this matter, as there are on almost everything. Some hon. members thought the companies were responsible for this legislation; the hon. member for St.
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Lawrence-St. George (Mr. Cahan) asked who had demanded this bill, which of these companies had asked for it, to which the minister replied that none of them had requested it. But even if it tends, as I hope it will, to improve the position of the companies generally, that is not an unreasonable thing to do as long as it does not mean an unfair loss to the treasury of Canada. When such rigorous terms are imposed as to provide that companies operating in the lending business, after they become members of this discount bank, have to administer their business on a margin of from one and a half per cent to two per cent over and above the rate at which they can secure the money from the 'bank, and when they have to state a maximum interest rate on mortgages to be given of not more than two per cent over the current rate for longterm dominion securities, I think there is reasonable assurance that borrowers will not suffer much from too high interest rates. It will be such an improvement over present and past conditions that it will be welcomed throughout the country.
To me, one of the hopeful and signficant things with respect to the legislation is that it will remedy some conditions which have arisen from the time of the depression, and the adoption of restrictive legislation. I have heard hon. members from central Canada, and particularly from Ontario, say that it would not be of any advantage to them because in Ontario individual lending has been the custom in the past. No doubt that is true. The other day the leader of the opposition (Mr. Manion) referred to it as having been the rule in western Canada in years gone by. That was about the only investment open to the small investor in the cities, towns and villages of the west. There was a time when such mortgage loans could be made readily at eight per cent, and the security was counted to be as good as gold-and in those days that meant as good as wheat. But the situation has changed, and that change has been brought about by the depression and by restrictive legislation. I do not believe many private investors are willing to put money into mortgage loans to-day. The result is that we find idle deposits in the banks, but plenty of money available for the purchase of dominion securities, when such are offered on the market. Meantime there is a dearth of new money for investment in mortgages on homes or farms, and I can see no hope of any immediate loosening up of private money in investments of the kind in the near future.
That condition is not to be wondered at. If hon. members had money to invest would

they care to put it into securities which are liable to interference before the ink on the signature is dry. They would hesitate to put it into securities liable to interference from provincial authorities, from dominion authorities and perhaps even from local authorities. So that, so far as I can see, the outlook for the continuance and increase of loans by private parties is not very hopeful.
All right; how are we going to get over the difficulty, if not through a measure such as the one now before us? If private investors are to be able to purchase government securities only, then the next course is that government securities, or the money obtained from the sale thereof, should be available where necessary to do the business the private investors used to do. And so long as this trend of investment continues, we shall have to follow a course such as the one suggested in the measure. I am not quite sure but that even in the province of Ontario, where in the past few years private lenders have been discouraged, this legislation will be found useful.
Some hon. members are inclined to complain about the country absorbing part of the written down losses of the lending companies. My view is that it is time we were getting away from the emergency measures of the last few years and getting down to something that will be more equitable, more evenly distributed and more fruitful of results. This bill promises to do that very thing by providing that the people who insist on writing down losses-that is, the country as a whole- shall absorb part of them. The effect will be more beneficial than has any legislation of the past few years under which the creditor alone absorbed the loss, and neither the state that imposed that loss upon him, nor any other authority, shared any part of it- although in many cases the creditor was perfectly willing to take over the property or the security on which he had lent his money. It is only fair that the state which imposes restrictive legislation should absorb part of the loss thereby entailed.

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