1913-05-20

OF TIIE

[Stage Direction]
DEBATES	.
[Stage Direction]
. )


[Stage Direction]
House of Commons Debates

[Stage Direction]
Tuesday, May 20, 1913.

[Stage Direction]
Bill No. 214, respecting the Hudson Bay Insurance Company.-Mr. Knowles.
Bill No. 215, to incorporate the Roman Catholic Episcopal Corporation of Mackenzie.-Mr. Proulx.
Bill No. 216, to incorporate the Ruthenian Greek Catholic Episcopal Corporation of Canada.-Mr. Macdonald.
Bill No. 217, to incorporate the Canadian Northwestern Railway Company.-Mr. McKay.
Bill No. 218, respecting the Empire Life Insurance Company of Canada.-Mr. Bradbury.
Bill 'No. 219, respecting the Casualty Company of Canada.-Sir Edmund Osier.
Bill No. 220, to enable the city of Winnipeg to get water outside the province of Manitoba.-Mr. Bradbury.
Bill No. 221, to amend the Petroleum and Naphtha Inspection Act.-Mr. Nantel.
Bill No. 222, to amend the Adulteration Act.-Mr. Nantel.
Bill No. 223, to vest in the Van Buren Bridge Company the charter rights of the Restigouche and Western Railway Company to construct and maintain a railway bridge across the Saint John river.-Mr. Carvell.

["The hon. member for Westmorland (Mr. Emmerson) made a suggestion that we should insert the words ' certified cheque ' in line 40, page 57 of the reprinted Bill after the word ' balance.' The purpose is to make the term slightly more complete.\t-\t[DOT]"]
Mr. BRADBURY:: By permission of the House, I move that Bill No. 220, to enable the city of Winnipeg to get water outside the province of Manitoba, be now read a second time. The matter is very urgent, and it is desirable that operations be proceeded with immediately.


Mr. SPEAKER:: This can be done only
with the unanimous consent of the House.


George Henry Bradbury: I ask for the unanimous consent of the House.


[Stage Direction]
Motion agreed to, and Bill read the second time.

[Stage Direction]
Consideration in committee of Bill No. 36, respecting Banks and Banking-Hon. W. T. White (Minister of Finance)-resumed from May 16. (Mr. Deputy Speaker in the Chair.)
On section 43-transfer and transmission of shares:
Mr. WHITE:: This is the section which was under discussion at the instance of my hon. friend from Carleton, N.B. (Mr. Carvell). It provides that a person making a transfer of bank shares must leave enough to discharge his debts to the bank. I explained to the committee on Friday when this matter was under discussion in the Banking and Commerce Committee and that, after hearing the evidence on this point, the committee came to the conclusion that .this legislation was ,in favour of the shareholders rather than of the banks themselves. Under the Bank Act, a bank is not permitted to loan upon the security of its own stock or of the stock of any other bank. But it is often found very convenient for shareholders to be able to obtain an advance from the bank which they would not otherwise be able to obtain really upon the security of their own shares under the authority of this, legislation. In times of money stringency it is of very considerable advantage to shareholders, because the only alternative would be to sell the shares or to obtain a loan elsewhere, and at such a time a loan might be difficult to obtain. The committee, after hearing the evidence from bankers and others, I think, very generally came to the conclusion that the section should be allowed to stand as in the existing Bank Act. I said on Friday that it did appear at first blush that the exceptions taken by my hon. friend from Carleton were justified and that this was an anomaly not found in legislation affecting joint-stock companies, and so was



a special privilege to the banks. But I think the burden of the evidence went to show that the legislation was in favour of the shareholders and not of the banks.


Mr. CARVELL:: Was there any evidence on this point before the Banking and Commerce Conjmittee except from the bankers themselves?


William Thomas White: I think it was all from
the bankers, but I think they showed to the satisfaction of the committee that this legislation was in favour of the shareholders and I think it was not shown that there had been any abuse of it. Bunk shares being what are known as ' book ' shares, that is, transferable only on the books of the bank, the shareholder who obtains a loan from the bank would not be able to hypothecate his stock to obtain another loan outside without actually making the transfer into the name of the lender upon the books of the bank, nor to sell without giving a power of attorney to transfer into the name of the purchaser. So, I think the legislation is not liable to abuse, and oases of abuse have not been brought to my attention.


Frank Broadstreet Carvell: I have no strong feeling in this matter, nor have I any particular interest, for I do not own bank stock and I do not suppose I ever shall. I do not know to what extent the banks use this power. But everybody knows that bank stock is considered good security, and it seems unreasonable that the value of it should be reduced by a clause which allows a bank to have a first lien 'upon it for a debt which the owner might owe to the bank, I have never even heard of a case in which this right was abused except one, in which there was danger of doss to the bank lending on its shares. It may be a great advantage to the holder of bank stock to be able to borrow without giving security. It is a sort of underhand transaction, but the minister meets it so fairly that I cannot but admire his honesty, and I suppose the banks put it as fairly before the committee. As I say, I have no strong feeling upon the subject, and if the committee think it well to allow- this clause to stand, I have no fault to find.


Mr. AMES:: Before the Banking and
Commerce Committee the evidence was given by four or five bankers each of whom stated that this right had not been abused. One said that he had never heard of a case, and another said that in an experience of forty years he had known of but one case. The bankers seemed to assume a rather indifferent attitude as to the retention of this clause. It is not for them it was put in, but really for the sake of the shareholders. The shareholders of a bank number, quite commonly, three, four or five thousand people scattered throughout Mr. WHITE (Leeds).
the country. It is a great convenience to these shareholders to be able to negotiate small loans with the bank without collateral security. It tends to popularize bank shares, which is -a good thing for the country, because we find it difficult to secure banking capital enough for Canada's commercial expansion. This is an attraction in bank shares which offsets to a certain extent the disadvantage of the double liability. I know how the shareholder feels in this matter, because I come into constant contact with them. I know it is a great convenience to a Shareholder to be able to go to the bank and borrow to cover an overdraft without giving collateral security which he has to endorse over to and leave with the bank.


Mr. OLIVER:: Is it not a fact that every bank disaster that has taken place has been caused by shareholders securing too great a share of the funds of the bank? Would it not greatly secure the deposits placed in our banks if shareholders were absolutely debarred from borrowing money from the banks in which they hold shares?


Herbert Brown Ames: That would certainly be a
drastic measure. No more effective way could be taken to make the securing of shareholders an absolute impossibility.
Sir WILFRID LAURIERI do not
exactly understand the whole of this subsection. This part of it is clear:
Unless the person making the transfer has, if required by. the bank, previously discharged all his debts or liabilities to the bank-
But what is the meaning of the rest of the clause?
-which exceed in amount the remaining stock, if any, belonging to such person, valued at the then current rate.
I think it should be stated without qualification that no person should be allowed to transfer stock unless he has discharged the full amount of his liability to the bank.


William Thomas White: Section 77, which is connected with this particular matter, reads in part as follows:
The bank shall have a privileged lien, for any debt, or liability to the bank, on the shares of its own capital stock, and on any unpaid dividends of the debtor or person liable, and may decline to allow any transfer of the shares of 6uch debtor or person until the debt is paid.
Sub-section b of section 43, to which my hon. friend has referred, says that no transfer of the shares of the capital stock of the bank shall be valid unless:
The person making the transfer has, if re* quired by the bank, previously discharged all his debts or liabilities to the bank which exceed in amount the remaining stock, if any,

belonging to sucli person, valued at the then current rate.
If a stockholder has fifty shares and desires to transfer twenty-five, before he can make that transfer he must previously have discharged all his indebtedness or liabilities to the bank, which exceed in amount the remaining stock, namely twenty-five shares. The theory is that the bank should be entitled to retain a lien upon sufficient stock to cover the liability of the shareholder to the bank. .


Sir WILFRID LAURIER:: It is not unfair to the shareholder, when he desires to transfer his stock, to be told without qualification or restriction: You must discharge all your liability to the bank; but some complications may arise if you allow the clause to remain as it is.


William Thomas White: No change has been made in this particular clause, and I think it will work out in the future, as it has done in the past, satisfactorily. It simply puts the bank in a position to say: You owe us $5,000: you propose to transfer all your shares, and we object to that. We will allow you to transfer a number of your shares, but you must allow a sufficient number to remain in your name to give us a continuing lien to cover the amount of your indebtedness.


Frank Oliver: I asked the hon. member for St. Antoine (Mr. Ames) a moment ago if it was not a fact that in all cases the wrecking of banks has been caused by the borrowing of money from the banks by the shareholders?


Herbert Brown Ames: By no means.


Frank Oliver: Have not a large majority of the wrecks occurred as a result of that condition?


Herbert Brown Ames: No.


Frank Oliver: Have any bank wrecks occurred for that reason?


Herbert Brown Ames: Yes.


[Stage Direction]
Section agreed to.
On section 146-managers or agents engaging in insurance business:
Mr. TURGEON:: I have had several letters from managers of banks in the small country towns in northern New Brunswick, who claim that they should be allowed to retain the privilege of engaging in insurance business. I believe that as a rule a great deal of the insurance business in our small towns has been carried on by th6 bank managers, as our merchants have not the time to devote to it. A single individual cannot carry on the business with any reasonable degree of profit, and it naturally falls into the hands of the bank managers,
325J
who have time to devote to the business. I would move, therefore, that section 146 be amended by striking out sub-section 2 thereof.


Frank Oliver: I would make the suggestion that the banks pay their managers a sufficient salary, so that they will not require to engage in other business.


Mr. SHARPE (North Ontario):: When
this clause was under discussion in the Banking and Commerce Committee, the-amendment offered by the hon. member for Carleton (Mr. Carvel!) was flung rather hurriedly upon the committee; it was not discussed for a very great length of time, and the bankers and bank representatives lid not oppose it very strongly. It struck me during the discussion that, while the banks were very jealous of all their rights, when it came to small managers in small districts, they were willing to let them suffer.
I am free to confess that I voted for the amendment embodied in sub-section 2, but upon reconsideration of the matter I think it would not be in the best interests of the bank managers who are drawing small salaries in some of the outlying districts.
I do not know 'that any persons in my constituency would be affected by its application, but I have had a number of-communications from men outside of my constituency in reference to the matter. One of them is to the effect that one of the bank managers has built up an insurance business that means more to him than his salary as. manager. Although he has been with the bank for twenty-two or twenty-three years, he would under the operation of the Act, and because the insurance is the best portion of his business,., have to give up his managership, sacrifice his right to the pension fund, and continue the insurance portion of his occupation. This letter, which is dated May 13, 1913, says in part:
Banks like the little Western, which could' not pay big salaries, let their agents act as agents for insurance, and some of them have built up very substantial offices. One of them writes me that he will have to give up the bank, as the insurance is the best end, and that means a loss of salary and 28 years' service with the institution and the pensions that go with it.
I think it is a fact that there are very few bank managers throughout the country who are engaged in the insurance business, but it seems to me it would be a great hardship to deprive them of the opportunity of adding to their incomes in this regard. I think some good results would be obtained if the banks wrote to their managers at the local centres and asked them for a report with regard to the insurance business they were carrying on. The Finance Minister might ask the.

bank to make a special report in connection with the matter, with a view to rectifying any abuse which may exist. Upon reconsideration, I am disposed to support the motion to strike out this clause.


William Thomas White: Personally, I think the
principle underlying this legislation is sound, although I believe it is drastic, having regard to the conditions which exist, and to which I shall refer a little later on. The complaints that have been made are, in substance, this: A bank manager is the trustee of the bank's funds, having under his control the making of loans to customers. Of course that puts him in a position to compel a customer to effect insurance in the company with which he is connected, and that constitutes a very valuable franchise in his hands. If he were loaning his own money as a private banker, I think it would be proper for him to say: Now I will make you a loan, but only on the condition that you place your insurance with the company which I represent. But he is not in that position. He is in the position of loaning the funds of a bank. In other words, he is a trustee or agent. Now, some of the banks have absolutely prohibited their managers from engaging in the collateral business of insurance, and as I have said, I think that is a sound policy for the banks to adopt.


Frank Broadstreet Carvell: Can the minister give
me the name of any bank which is doing that?


William Thomas White: According to the evidence given in the committee, the Bank of Commerce has prohibited its managers from engaging in any kind of insurance business. I think that the banks of this country, making the money they do, might very well afford to put their bank managers in such a financial position by the salaries paid to them that it would not be necessary for them to engage in the business of insurance. The principle that underlies this subsection is, in my opinion, a sound one. In addition to what has been mentioned by my hon. friend from North Ontario (Mr. Sharpe), there is the further consideration that, in some districts in the West, the bank manager, as insurance agent, serves a very useful _ purpose to the community, because there is no one else engaged in the business within easy distance. Having regard to the fact that these branches have existed for many years, and that vested rights so to speak, although that is not a particularly happy expression, have been acquired in agencies of insurance by many (bank managers; having regard also to the amount of revenue which such an agency yieHs them, and to the other consequence which, as men-'
Mr. SHARPE (North Ontar-W
tioned by the hon. member for North Ontario, would flow from this legislation, I am of the opinion that this clause should be struck out of the Act. If we were commencing anew, that is to say, if there were no bank managers actually engaged in the business of insurance, I think this would be desirable legislation, but I have had representations made to me that it is going to work hardship. I would therefore suggest that the clause be struck out, and I will take up the matter with the Bankers' Association, and, so far as the future is concerned, see if they cannot adopt the policy, now adopted by some banks, of prohibiting their managers from engaging in fire or other insurance. That conclusion I have reached in view of the representations that have reached me from the outside, and from many hon. members of this House.


Frank Oliver: I would like to give my
view of the conditions in the West. However enterprising the banks have been in establishing branches in small places, I have not seen yet a place, having a bank branch where there was not somebody prepared to do insurance business outside of the bank. The insurance agent is just as pushing in the matter of business as a bank, perhaps a little more so, as he has not to carry so much baggage.


Frank Broadstreet Carvell: Before this clause is
voted out of existence, I should like to say a little more about it. It seems to me that the very fact that such pressure has been brought to bear upon the Minister of Finance, and evidently upon other members of the House, for I see that the hon. member for Gloucester (Mr. Turgeon) has fallen under this evil influence as well as the hon. member for North Ontario (Mr. Sharpe), indicates that the system must be *more prevalent than hon. members thought it was. I have been somewhat surprised at the correspondence I have received since the matter went through the committee. I am bound to say that my correspondence has been all on the other side; it has been congratulatory. I have had letters from the provinces of Quebec, Ontario, New Brunswick and Nova Scotia, congratulating me on the stand I have taken, and the only fault found with me in the letters is that I did not go far enough. One gentleman in the western portion of Ontario claims that a bank manager should be prohibited from going into the business of real estate. Another man writes to me that there is a bank in his town in which it is almost impossible to do business, because the manager is in the bank office all the time putting through real estate transactions, or something of that kind. In my own county, so far as I know, no bank has ever inter-

fered with the insurance business, but I do know of a place in New Biunswick where the thing has almost reached a scandal, that is about the mildest word with which I can characterize it. I know of cases where bank managers, who are insurance agents, are compelling people to insure for more than their properties are worth, or for more than it is necessary to carry under reasonable conditions. There is one estate, for which I am the solicitor, a lumber business, that has been insured almost out of existence, simply because the estate is unfortunate enough to owe the bank, and the bank manager runs the insurance end of it. It is a case of policy after policy without our consent or advice; we do not know anything about it, and we are paying thousands of dollars a year on insurance. That is a condition of affairs of which I know something. I do not want to take the bread out of any man's mouth; I would be the last man in the world to interfere with any man's legitimate business. I quite agree with what has been said by the Minister of Finance, it might be a hardship in many cases. But surely the great banking institutions of this country can affoTd to pay their managers a sufficient salary on which to live without taking away the legitimate business of other people, because every bank manager doing insurance business is taking away business from other men. It is just as necessary to have an insurance agent in the town as it is to have a bank; we cannot get along without insurance, and I think the legitimate insurance business should be encouraged, not only by everybody throughout the country but by Parliament as well. Our ordinary business intelligence teaches us that the bank manager carrying on insurance business has an enormous advantage over the other insurance agents in the town. I do not say that many of them carry it on to such an extent, but they can practically control the insurance business in the town, and force it into their own hands. Three or four banks acting as insurance agents in one town could absolutely corral all the insurance business of that town. However, I have not much feeling in regard to this matter, and I do not care personally whether the clause is stricken out or not. The matter was put up to me by the people from different provinces, and I thought it my duty to bring it before the committee, because it seemed, to me a reasonable proposition. It was so reasonable, that only three or four members of the committee voted against it, and the Minister of Finance was the strongest advocate of the amended ^clause. I see that the bank managers have been getting busy since.


Frank Oliver: They have got their
second wind.


Frank Broadstreet Carvell: Evidently they have been getting busy all round. They have not confined themselves to the Minister of Finance, they have been directing their energies to this side of the House as well as to the other. I will not feel it very badly if the proposed legislation is defeated, but I think it should not be defeated, because 1 think it is right in principle. I believe those bank managers should not be allowed to do insurance business, because they are taking away the business from other people who are entitled to it, and in several cases they are in a position to exercise an undue influence on the business affairs of the community. So far as I am concerned, I will vote for the retention of the sub-sec tion.


Mr. NICKLE:: When the hon. member
for Carleton introduced this amendment in the committee, I was particularly struck with the logic of his argument, and though I had no previous conviction in regard to the matter, the tendency I had, after the hon. member for Carleton, N.B., had spoken, was accentuated on my hearing the argument, of the Minister of Finance in favour of the insertion of this clause in the Bill. If, as the Minister of Finance says, the principle of this sub-section is right, I fail to see why we should hesitate to interfere with a so-called vested interest. If this committee and this House are going to take the stand that wherever a vested interest is affected, no matter what unfortunate situation might exist, we shall not pass any legislation at all, I think that Parliament might as well abrogate its functions. If I understand ,the functions of this House and of this committee, they are to remove an error if an error exists, and for that reason I am with the hon. member for Carleton in the opinion that this clause, inserted almost unanimously in the committee, should be retained.


Frank Oliver: The matter resolves itself into something like this, that the banks of Canada are able to relieve themselves of a portion of the proper charges of carrying on their business by the privilege given to their managers of entering into a side business. If the managers are prevented from doing outside business such as insurance, the banks will surely have to raise the salaries of those bank managers. There is no reason why the banking institutions of Canada should not pay a living wage to the men who are carrying on their business. This privilege relieves them of that responsibility, and I do not think the purpose of Parliament is fulfilled by that course.


Mr. WARNOCK:: Now that so much attention has been drawn to this matter, I

think that the banks themselves should take steps to stop the practice, because, undoubtedly, it is injurious to the business of the bank. I know many cases in the West where bank managers are interested in insurance business and I have often heard depositors and business men dealing with the bank say that if there were a competing bank they would transfer their business, because they were pestered by the bank managers asking them to withdraw their business from other insurance companies and to do business with the companies which they represented.


Mr. BORDEN:: I think that in recent
years there has been a distinct change in policy on the part of banks in regard to such matters. My earliest recollection of the business of banking in Nova Scotia [DOT]is of a time when men did not devote their whole attention to the business of carrying on a branch or such agency of a bank. I can remember when a very prominent firm of solicitors in the western part of Nova Scotia were agents or managers of the Bank of Nova Scotia. They carried on their business as solicitors, and also managed an agency of the bank. If I am not mistaken, a very prominent firm of merchants in the county of Pictou also ' acted as managers for one of the banks. The policy of the banks in later years has been to do away with that system, and to have managers who entirely confine themselves to the actual duties of carrying on the banking business. Although that may not be so in all cases, it seems to me to be a matter for regulation by the banks 'themselves. The principle to which the Minister of Finance has alluded may be a very proper principle, [DOT]and I do not dispute it. But if you are going to regulate matters of this kind, it seems to me you should go further and prescribe the regulation of the duties of the manager of a bank in other matters than in respect to this particular business. Why should we set out in the Statutes of Canada that a bank manager shall not carry on a particular business so long as he is a bank manager, and leave it absolutely open to him to carry on every other kind of business? We ought to do either the one thing or the other; we. should say he shall not carry on any other business, or leave it entirely to the regulation of the banks themselves. It seems to me that it would be perfectly safe to leave a matter *of that kind to the regulation of the banks, because if we undertook to regulate the administration of a bank in respect to one matter, the result would necessarily be that we must undertake to regulate it in a great [DOT]many other respects.


Frank Oliver: I think perhaps that the parallel my right hon. friend suggests is hardly exact. There is a relationship between the proper business of a bank,
assuming it to be the loaning of money, and insurance, both life and fire, which possibly does not exist between the loaning of money and any other line of business. It is because the two work together so naturally and so conveniently that so many bank managers have gone into the insurance business. It is because they so naturally fall together that objections are raised to the condition, not- only by men who are competing in that line of business, but also by the customers of the banks, who think, perhaps, they are not getting a square deal in the matter of their banking business by reason of the pressure exercised upon them in respect to insurance,


William Thomas White: As I stated before, the
principle underlying this clause is sound, but I think that legislators generally when introducing new legislation have regard to existing conditions and try, as far as possible, not to do any damage to those who, under preceding legislation, have built up their business. As I have stated, I think that the banks of Canada should pay their bank managers a sufficient salary to make it unnecessary for them to engage in any side line. At the same time it has been impressed upon me that to put through this legislation, in this particular shape, and at this particular time, would have a very serious effect upon a number of people. I think, therefore, that as the practice has been recognized by existing legislation, it would serve the purpose the committee had in view if I took the matter up with the different banks, or with the Bankers' Association, and stated to them that there was a general opinion in Parliament, and in the committee, that these insurance agencies were greatly to the disadvantage of other citizens of Canada, that it gave to the bank manager an advantage over them in obtaining business, and that it was a practice which should be stopped, at all events so far as the future is concerned. I thought, and I still think, that the banks should change their policy, and instruct their managers that in the future they are not to do business of this kind, and try to bring about a discontinuance of the practice within a reasonable time. That, it seems to me, would have this advantage, through the action of the -banks, it would ultimately bring about, what I take to be the desire of Parliament and of the committee in this matter, and at the same time have a reasonable regard for existing interests. In other words, we should do the minimum of damage, and at the same time accomplish within a reasonable time what we have in view.


Frank Oliver: I would agree with
my hon. friend in the desirability of not interfering with vested interests.
Mr. WARNOCK

No person wishes to do damage in dealing with this matter. What is wanted, I understand, is to do good. My hon. friend's proposition is a fair one. It is good as far as it goes, but let me point out that we are now providing legislation on the principle that it shall not be interfered with for ten years. We are passing legislation, and while Parliament, of course, will have the right to interfere with it, it is generally understood that it is for the good of business that, having once settled upon the provisions of the Bill governing the operations of banking, that legislation shall stand for ten years. It does not have to stand for ten years and Parliament can deal with the ' question whenever it wants to. Will my hon. friend agree to this proposition? When he discusses this matter with the banking interests, if they are unable or unwilling to come to the view which he has expressed and which he believes is in the mind of Parliament, might we expect then that at a later date, without waiting for the expiration of the ten years' term, he would be willing to make legislative provision for compelling the banks to do what they should do without being compelled and which we are very glad to leave to them to do so long as they do not need to be compelled to do it?


William Thomas White: That strikes me as a fair
proposition. After I talk it over, as I intend to do, with the bankers, if they fail to carry out that policy, I think it would be very proper for me to introduce legislation which would compel its adoption.


Mr. DOUGLAS:: There is one point that has not been mentioned and it is the fact that a man who borrows money from a bank, usually a business man, has to deposit his insurance policy with the bank manager. This gives the bank manager an undue knowledge of where this man is placing his insurance business. It gives the bank manager an advantage that he should not have because he is placed in a position to bring pressure upon that man to place his insurance with the companies represented by the bank manager. This is rather a serious question to a man who is borrowing money and depending on the good will of the bank manager to get that money. Therefore, this clause should remain in the Bank Act. Any reputable bank prohibits is employees from soliciting for insurance, dealing in real estate, or engaging in other speculative transactions, and if a bank is not sufficiently alive to its interests to force its managers to keep out of business that interferes with the business of its customers then Parliament should enact legislation compelling it to do so. ,
Amendment (Mr. Turgeon) agreed to: yeas, 41; nays, 17.
Section as amended agreed to.
On section 56-shareholders audit; selection of persons competent to be auditors:


Frank Oliver: I assume from the fact
that no amendment has, up to the moment, been offered to this section, that the Banking and Commerce Committee decided that it was satisfied with a shareholders audit rather than an audit on Government responsibility.


William Thomas White: Yes, I believe that was so. Very full evidence was taken on that before the committee and I think it was shown that inspection by the government would be practically impossible in the case of a banking system such as Canada has with three thousand branches scattered over the continent and in various parts of the world unless that inspection were carried out as thoroughly in regard to all the offices of the several banks as the system in vogue and operation by the banks themselves. The main question then as to audit was how to qualify the auditor if he was appointed by the shareholders. My hon. friend will recollect that when the matter was in the House, and he will have observed also that when it was before the committee, it was pointed out that the directors might control the appointment of an auditor and that consequently his audit might not be thorough, especially if he fell under any evil influence from the board of directors or from the management. It was pointed out in evidence, I think by Mr. Clarkson, who was the liquidator of the Farmers' Bank, that if wa could be sure that the auditor was a man of high standing and integrity it would not make very much difference by whom he was appointed. In view of the evidence, especially of Mr. McLeod, late general manager of the Bank of Nova Scotia, who has given a very great deal of attention to this question and who was the first bank manager in Canada to introduce a system of audit, the conclusion was reached, fairly unanimously by this committee, that if the general managers of the several chartered banks in Canada acted together and by ballot, so as to 1 remove them from the possibility of mflu-' ence on the part of the association as an 1 association, the result would be the selec-' tion of a list of auditors from whom the ' shareholders might choose with a certainty : of getting reputable and trustworthy men.
' There is an amendment of a minor character suggested by the hon. member for : Kingston (Mr. Nickle) for the purpose of [DOT] particularizing the duties of the auditor.
E Mr. SHARPE (North Ontario): Can an t auditor be appointed year after year, as long as the bank so desires? It seems to . me it would be desirable to restrict his ' time as auditor to a term of years. Under this clause is the auditor restricted to auditing once a year at specified times,

or may he go into a bank at any time? During his investigation or audit, if he discovers any violation of the Act or any fraud, is it hi3 duty to report to the Minister of Finance and the shareholders at once?


William Thomas White: It was thought inadvisable to limit the appointment of an auditor to a definite term of years because a man doing his duty faithfully for four or five years might find himself minus his position as auditor at the end of that time as some of the other banks might not select him. I have never known of any legislation that has gone the length of saying that an auditor should be appointed for only a limited time. The check is that in the event of any complaint as to the auditor, the shareholders need not appoint him, and in the second place the minister may disapprove of the appointment of an auditor at any time as to particular banks. What 1 had in view in that was, that a man] who had been many years an official of a particular bank might be an excellent auditor, but I should not like to see him. appointed for that bank, although he might be an excellent auditor for any other bank. This audit clause has been drafted having regard to the provisions of the English Act and to the decisions of the English courts as to the dutv of an auditor, and I am inclined to think it is as full as it can be made, if the principle of audit is adopted.


Frank Oliver: I do not wish to offer any amendment to tne clause at the moment. The Banking Committee has had the matter under full consideration and I am willing to leave the responsibility there. I am not sufficiently familiar with banking matters to offer any amendment or even any serious obiection, but it appears to me that the result of this provision as it is, while it may have some value and it may be the best way of getting at the conditions, yet, I see in this section, as in other sections of the Bill, an abdication of that right to control by the people through their Government that I think is absolutely necessary for the wellbeing of the state. I have nothing whatever to say against the principle of the banking law, but there is no doubt that our banking interests to-day have become a great power in the state. They have arrived at such a pitch of power that it seems to me it is necessary that the supremacy of the state, that the propriety of control by the state, that the authority of the state, should be asserted in this Act, The passing of the Acf, is an assertion of that authority, but the provisions of the Act one after the other as I read them are an abdication of that authority, so far as it can be abdicated. That is the criticism I desire to make. I am not in a position to make any suggestion contrary to the
Mr. SHARPE (North Ontario).
provision that is contained in this clause. But it seems to me that the matter of ensuring that the money of the people to the amount of over a billion dollars is being properly handled is a responsibility that, in the nature of things, should rest upon the government of the country. To abdicate that responsibility to any authority, and especially to that authority which has a private rather than a public interest in the matter, is not, on the face of it, such legislation as in these days we should look for. There have arisen in the commercial life of the world new conditions which require to be dealt with. There is legislation re-, quired to-day; there is assertion of public control or governmental authority required to-day that was not required in years gone by. I am sorry that in this revision of the Bank Act, which is supposed to stand for ten years, there is not that progress towards that assertion of control by the public through the Government, which I think would be for the good of the state, and which I do not think would be bad for commercial or financial interests immediately concerned in this Bill.


William Thomas White: My hon. friend has hardly had his attention directed to certain sections of the Bill, or he would not say that substantial progress had not been made towards safeguarding, so far as legislative enactments can safeguard, the interests of depositors and others doing business with the chartered banks of Canada. Without going into the merits or demerits of inspection, I desire simply to say that this legislation is in advance of any legislation in the Empire to-day, so far as restriction upon the operation of banks is concerned.
I wish to say again, what I said in this House and in the committee, that in the last analysis, no matter what legislative enactments you may have, the safety of the public will depend upon the integrity and ability of the men who administer the banks. Unless the' Government actually takes over the business of the banks, so that it would be responsible for the making of the loans, it will not be in a position to guarantee the public that a bank is absolutely safe, because the question of whether loans are good or bad must depend upon the judgment of the directors and the managers of banks, and because, whether there will be fraud or not will depend in large measure on the integrity of the management. We have sought to embody in our legislation this principle that the Government should, to the best of its ability, safeguard the interests of the depositors by providing for external audit or inspection of banks by auditors occupying an independent position, not officials of the banks appointed by the proprietors for the shareholders. We have gone further

than that. Not only have we made audit compulsory; but we have provided that, in the event of shareholders representing one-third of the paid-up capital of a bank informing the minister that they are dissatisfied with an appointment made by a majority of the shareholders at an annual meeting, they:
May make application to the minister to have the person or persons so appointed superseded, and the minister may, after such inquiry as he may deem necessary, select an auditor or auditors instead of the auditor or auditors appointed at the annual general meeting, and the auditors so appointed shall thereupon cease to be the auditors of the bank
In addition to that, we have provided that the auditors shall be selected by the^men who are probably most interested in the safe and honourable conduct of banks in Canada, namely: the general managers of all the banks acting jointly. In addition to that, section 56-A, which is a very important one, and which goes a very long distance along the lines which my hon. friend has in view, says :
The minister may direct and require any auditor appointed under the next preceding section of this Act, or any other auditor whom he may select, to examine and inquire specially into any of the affairs or business of the bank, and the auditor so appointed or selected, as the ease may be, shall, at the conclusion of his examination and inquiry, report fully to the minister the results thereof.
That means that, upon the minister receiving notice that the business of a bank is being conducted improperly, he can ask the auditor appointed by the shareholders to make an investigation into the affairs of the bank and report to him. The reason why I introduced that clause was because it was brought to my attention that under the present Act, if a Minister of Finance had notice as to an irregularity in a bank, he was powerless to make any inquiry with regard to it. In 1891, an attempt was made to introduce an external audit; and, in response to the remonstrance of members on both sides of the House, it was dropped as being unfeasible. My predecessor thought it would be impracticable to introduce audit or inspection. When my hon. friend recalls these facts, he will agree that we have made very substantial progress. We all recognize that the banking organization of Canada is probably as important an organization as exists. We want to be fair to that organization and to the public, to safeguard its interests in every possible way. I think we have made a long step forward in that direction. More may be done in the future; but, for the present, the committee almost unanimously have reached the conclusion
that this legislation is as advanced as it can be at the present time, having regard to the distribution of the branches and offices of Canadian banks throughout this Dominion and other parts of the world.


[Stage Direction]
Section agreed to.
On section 76-business and powers of bank:
Samuel Simpson Sharpe: The other day I suggested an amendment which I should like to discuss shortly. This is an amendment to section 76, sub-section 2, to which it is proposed to add as follows:
(d) Lend money or make advances in excess of ten per cent of its paid-up capital to any one foreign person, company, or corporation or upon the securities of any such foreign person, company or corporation.
In the immortal words of the hon. member for South York (Mr. Maclean) I think that the people of this country think that there is not enough money to go round. Therefore, without absolutely prohibiting the banks from lending money to foreign corporations, I think there should be some reasonable restriction upon the sending out of money that is needed in Canada to be loaned abroad. I have here a letter from a Winnipeg business man, which says:
We had a line of credit with this bank, personally and as a firm of $10,000. They have asked us to pay hack all the money advanced to us on loan, which we were compelled to do, and have done. It appears to us that they are hard up themselves, and have no money to loan to their customers, and that they are making all who can, pay up, and only carry the parties who cannot pay.
He goes on:	.
We think that before the hill finally passes it might be well to call the attention of the House to a few facts in connection with the way that the banks treat the people. When times are good and people can get along without the money, they are anxious to loan. When people really require the money in' order to carry on their business then they refuse to loan. Further, the custom of the banks generally is to extend large credits to railway corporations and large manufacturing and mercantile interests, and to do little or nothing for the farmer and the smaller business man and merchant. In fact, at the present time, it appears to be a fact that the former class have absorbed all the available funds of the banks, and there is nothing left for the little fellow at all. These large railroad corporations and other large concerns are all depending upon the farmer, and without the success of the farmer there would be no need of either the large railroad corporations or the large manufacturing concerns.
He goes on to discuss the difficulty which the small ordinary business man

has in getting funds. I think this evil in part at least arises from the tendency of the banks to lend money to foreign individuals and corporations on transactions outside of Canada. I contend that the exigencies of the business situation in Canada call for some restriction on the banks loaning money abroad. The expansion of such loans may be dangerous to the country. I believe that the failure of some of the banks can be traced directly to their over-expansion of loans to foreign interests. Take the Sovereign bank, for instance, they loaned money to the extent of twice their capital to the Milwaukee and Chicago Railway Company and to a railway company in Alaska. The Farmers' Bank was involved in loans to a person having his domicile in New York state, a person associated with Travers and others interested in the bank. He was outside the jurisdiction of our courts and hard to get at. In my opinion that is a dangerous principle.


Frank Oliver: Was this amendment
considered by the Banking and Commerce Committee ?


Samuel Simpson Sharpe: It was defeated by only three votes-seventeen to fourteen.


Herbert Brown Ames: Generally speaking, banks may be trusted to be extremely careful as to how much they shall loan and what proportion of their assets and capital they shall loan to any one person or corporation. They are as anxious to keep liquid and solvent as can be expected of them. Anything that tends to a limitation of the doing of a legitimate business by the banks tends to making banking more unprofitable and undesirable :as a business investment. Banks find it necessary to have money in New York on call loan, and we know by experience that these call loans are of great advantage to the country in times of stress. When there is a great demand for money in Canada at certain times, it is possible to recall this money which is on call loan without having to ask Canadian borrowers to reimburse their loans. In the stringency of 1907, from $24,000,000 to $25,000,000. was brought back from New York and rendered available in Canada to keep faith with our Canadian borrowers. Take a concrete instance. We have a bank here, the Bank of Ottawa, with a capital of $3,900,000. You are going to say to that bank: You shall not loan more than $390,000 to any single customer outside of Canada. But it might be a very profitable thing for the Bank of Ottawa to have an agency in New York through which they could make call loans. Suppose that a perfectly solvent customer wanted half a million dollars on call. That Mr. SHARPE (North Ontario).
money could be recalled at any time on twenty-four hours' notice. Everybody knows that it is difficult to get call loan money in Canada, but in New York a transaction of half a million dollars is a mere bagatelle, many concerns being able to handle it. The Bank of Ottawa has total assets of about $50,000,000.. If it were given power to loan even one per cent of its total assets to a foreign borrower it would be able to loan a larger sum than under the limitation here proposed. Some of our banks do business in Cuba and the West Indies. We learned in the Banking and Commerce Committee that that business was very profitable for Canada in two ways:	Canadian
merchants who are pushing into that field find it extremely valuable to have their banking connections there to help them in giving credit; and it is found that the deposits in Cuba and elsewhere far exceed the loans, thus making it possible for a large sum of money, their surplus of deposits over loans, to be placed in New York and available for the call loan market and to be withdrawn in case of stringency in Canada. There are always large enterprises that have to be temporarily financed. In the case of a big 'bank like the Bank of Ottawa with a assets of $50,000,000, to say that it could not finance an enterprise to the amount of more than $400,000 at one time would curtail unnecessarily the enterprise of that bank.


Frank Broadstreet Carvell: My hon. friend from St. Antoine (Mr. AmesJ has presented the case from the bankers' standpoint, I admit, in a fair way and with a good deal of logic, I do not see how the committee can adopt the amendment of the hon. member for North Ontario (Mr. Sharpe) as it stands, because we know that the Royal Bank, and I think the Bank of Nova Scotia and some others, have branches in Cuba and the British West India Islands, and I do not think it would be right to say that they cannot loan more than ten per cent of their capital even though they might be doing more than ten per cent of their business there. But in principle I believe the hon. member for North Ontario is right, notwithstanding the very able argument to the contrary of the member for St. Antoine. The member for St. Antoine says that it is of great advantage to Canada to have money on call loan in New York. We had this argument advanced in the Banking and Commerce Committee, we have heard it in this House, and we read it in the newspapers-that every time that money gets tight it is advantageous to have money in New York to draw on. But I find that the time when we in Canada want the money is the very time when the banks want the money to send to New York. It is of no advantage to us to have money in New York when our bona fide business is strained for want of it. I have a clear recollection of the conditions in 1907.

What happened in that year? The banks simply demanded that borrowers pay up, and because they could not pay up, they increased the interest one per cent and made them pay the interest once a month. If a man could pay, they made him pay the money, and then sent it off to New York, ostensibly to create a liquid fund which they could call upon in case of trouble, but really to make some money out of it.


Herbert Brown Ames: I think the hon. gentleman will find that the shrinkage in call loans( in New York at that time was very much greater than the shrinkage in Canadian, call loans.


Frank Broadstreet Carvell: At any rate, in 1907 in the maritime provinces it was practically impossible to get money, and every man who could possibly pay his liabilities to the bank was called upon to do so. That money was taken somewhere; according to the argument of my hon. friend, it was taken to New York; according to his assertion it was not taken to New York, and I shall leave it to the committee to judge which is right, his argument or his statement. But it is not necessary to go back as far as 1907; take the months of November, December and January last. At that time it was almost impossible to get $100 in the maritime provinces, let ailone $1,000 or $10,000. I do not say that firms carrying on a manufacturing business and who had a line of credit were unable to make use of that credit, but the ordinary borrower, the man in the country who is really the backbone of the banking business ; the mar. without whom the banks uf Canada could not exist-for we know that three-quarters of the capital which is being loaned by the banks in Canada to-day comes from the small depositors-could not get even $100. I think that in times of stringency the ordinary small borrower in the countrv who wants $100 should have a right to get it. But in times of stringency the banks say:	We must have liquid
assets in the form of call loans; therefore not only can we not make advances to you, but we must make you pay what we have already advanced. During the months of November, December and January, many cases of real hardship came under my own personal observation. 1 myself was compelled to loan money which I really could not afford to let out, simply because the borrowers would go to the wall if they could not get it, and they could not' get it from the banks. In the months of December and January, not on my own account, but oq behalf of a friend, I went to a bank, with absolutely gilt-edged security, for the loan of a small sum of money, but I was told that their instructions were that no money should be loaned, and we could not get it. In order to keep the man from going to the
wall, I had to advance the money, which I could ill afford to do. [DOT] It is probable that these local managers were carrying out their instructions, but I think that banks ought not to be allowed to loan their capital outside of Canada. They get their eapi-tahfrom the people of Canada, by the legislation of this Parliament, and I may add that if this Parliament did not choose to * grant them a charter for the carrying on of business and the making of loans, they could not do it, because the people would not deposit their savings with private banks as freely as they do in chartered banks. I do not find any fault with the chartered banks; I always advise my clients to deposit with them rather than with the savings banks. I would rather encourage the three banking institutions in my county, the Bank of Montreal, the Bank of Nova Scotia and the Eoyal Bank, than the Government Savings Banks, because they are absolutely safe and sound, and are fully as reliable as the government post office savings bank. When the people put their money in those banks, I think that that money should be kept in Canada for the benefit of the people, and not be sent out of the country just at the time when it is most needed. At ordinary times, it makes no difference where the banks send the money, but when -a time of stringency comes; when the banks are closing down on everybody, contending that they must have liquid assets, something should be done to remedy the conditions. I think my hon. friend should be willing to amend his amendment to some extent to meet the conditions under which Lhe banks are doing business m tne West Indies, and if he would do so, I feel like voting for it, because I think it involves the proper principle.


William Thomas White: The argument of the hon. member for Cdrleton proceeds upon a misconception which is widely prevalent in Canada. His idea appears to be that the money which the banks loan in New York and in Canada should be loaned out to relieve the stringency which has existed now for many months. I might say to my hon. friend that if money were not carried on call in New York, it would be lying in the vaults of the banks, and would not be loaned out in Canada. In other words, if a bank loaned out all its money, the institution would be heading straight for insolvency. A bank must either keep gold, or other legal tender on hand to meet its demand liabilities, or it must be in a position to obtain the money over night. The result is that banks do not loan all their money to commercial concerns, farmers and merchants in Canada; they keep from thirty to forty per cent in a liquid condition. What is that liquid condition? It must be either in the form of cash, or

upon call, so as to be immediately convertible into cash, or upon securities which ean be quickly liquidated. If the banks of Canada would loan all their capital and all their deposits, especially in times of stringency, to the borrowers throughout Canada, they would become insolvent, because they would not be able to meet any unexpected run or demand' upon their funds. I changed my own view in this regard a few years ago, because I happened to learn what the policy of the banks was, and why they adopted it. The banks must either hold their reserve in the vaults in the form of cash to the extent of a certain proportion of their liabilities, or they must loan that money where they can turn it into gold and make it cash over night. The only market on this continent in which that can be done is New York, just as the only market in England where it can be done is London; they are both international money markets. The interest paid upon call loans in New York is much less than that paid for call loans in Canada. Call loans in Canada pay six or seven per cent, and call loans in the United States pay two or three per cent, because there are so many bankers in the world doing practically the same thing, namely, loaning their money in New York for the purpose of keeping it in liquid form. The difference between a call loan in New York and a call loan in Canada, speaking of a time of stringency, because a call loan in Canada as a general thing is available when money conditions are not particularly stringent, is this: As the New York market is an international market, a call loan there is strictly a call loan, convertible into cash by the bank in Canada having a line of call loans and drawing low rates of interest and any bank is able to make a call for gold to-day, to-morrow or the next day in the city of Montreal or the city of Toronto. What is the advantage to the bank? The bank must either carry its reserve in the form of gold here and not loan it out, or carry it in the form of call loans in the only international money market on this continent, namely, New York, where they get for it a rate of from two to four per cent. The advantage to the banks is that they derive this comparatively small rate of interest in New York whereas, if they were to keep it in their vaults, they would derive no rate of interest at all and in neither case would they be able to loan it out to the commercial community. That is the reason vhy the Canadian banks loan in New Xork just as the British banks loan in London. They loan money in London upon bills and other securities at a lower rate of interest than the discount rates prevailing in Great Britain and just as the banks in England would not be justified in loaning all their money by way of discounts to the commer-Mr. WHITE (Leeds'
cial community, so also the banks in Canada would not be justified in loaning to the commercial community to the extent of all their available resources because they would be heading straight for insolvency if they did. The banks in England make 25 to 40 per cent of their loans in London just as our banks carry about 20 to 30 per cent of their loans in New York with all the liquidity which such loans possess and which represents the reserve they would otherwise have to maintain by keeping gold in their vaults here. The point I make is that even if there were no call loans made in New York the borrowing community in Canada would not be in any better position because the banks would have to hold the specie or legal tender which they are bound to carry in order to maintain their position as strong, solvent institutions. I think I may say that the committee came to the conclusion, in view of all the evidence presented, that the loaning of money in London and New York is a practice in accordance with the best principles of sound banking and indispen-sible for the carrying on of the proper banking business, and that they adopt the policy of carrying their reserves in gold.
With regard to the amendment of my hon. friend from North Ontario (Mr. Sharpe), I think it is not a sound principle in banking to argue that because in a particular case evil results have followed from the making of a certain class of loans; legislation should be introduced prohibiting or restricting that class. We are apt to overlook the fact that in thousands and tens of thousands of cases these loans are made with effects that are beneficial to the entire community. We are apt, as they are in the United States, to fix our vision upon the exceptions and in favour of legislation of this kind instead of considering the general course of banking and seeing what are the facts and what is the best course to pursue in legislating, having regard to existing conditions. When this amendment was before the Committee on Banking and Commerce it was pointed out by one of the makers there that one of the very best classes of business that banks could carry on was the making of loans upon grain. There is no better security, there are no assets that are quicker in character than grain. A banker would be perfectly safe in making a loan of from $2,000,000 to $5,000,000 upon wheat Id a partnership or corporation whethei foreign or domestic, for the reason that the - security is of an ascertainable value from day to day and very liquid in its nature. It can be instantly sold.
The result is that an enormous business is done by our banks upon the security of train, particularly wheat from our owr northwest. Some of our banks have agen-

cies in Chicago and they all have branches in Winnipeg. There are foreign corporations engaged in the grain trade in the West. Let us take the case of a bank having a million of capital and having assest of $30,000,000 altogether. It would mean, if this amendment is adopted as it stands, that the banks could not make a loan of more than $100,000 upon grain although it would be perfectly safe for them to make a loan of from $1,000,000 to $2,000,000 upon grain, in fact, safer than the making of a loan of $50,000 to an individual without security upon his general standing in the community as is done every day by banks throughout Canada. . it would prevent a bank with a million dollars of capital and $40,000,000 of assets altogether, while carrying on a call loan business in New York, from making a loan to the strongest firm there. It would prevent them from making a loan to J. B. Morgan and Company, even upon the security of the Canadian Pacific Railway Company stock, or upon the 'best collateral security in New York, of more than $100,000.
While I realize the principle that my hon. friend has in view and while I recognize that he is trying to prevent some of the abuses that have happened in connection with Canadian banking, I think that we are prone to overlook the manifold advantages which have been enjoyed by the banks and by the community as a whole from having business carried on in the usual and ordinary manner. Is the reason given a sufficient justification for amending the law in the way proposed? English legislation, I think, knows no restriction. They say there that each case must be dealt with on its merits. It may be unsafe to loan $50,000 to one individual and by consequence ten such loans to individuals who may fail would involve a loss of several hundred thousand dollars while it might be perfectly safe to loan $2,000,000 upon wheat or other collateral that would absolutely secure the loan. We are concerned really with the ordinary carrying on of business in the ordinary way as recognized throughout the English speaking world.
I do not intend to make any special plea, but I do not think that the Committee on
Banking and Commerce had before it, nor do I think this committee has before it, evidence upon which it can say arbitrarily you must not loan more than ten per cent. Why ten per cent, why not fifteen per cent, or why not five per cent? What I am afraid of in regard to an amendment of this kind is that we have not evidence enough before us to justify us in saying that it is not going to be a harmful amendment. I have the greatest respect for the motive of my hon. friend from North Ontario who, I know, desires only to prevent a recurrence of some of the practices which have occasioned very heavy losses to depositors and others in Canada, but I would submit that until we have before us evidence as to the operations of banks in foreign countries and as to the transactions which they carry on there it would be injurious for us to lay down the hard and fast rule that they must not loan more than a certain percentage to a foreign corporation.


Frank Broadstreet Carvell: It is a great pity that my hon. friend the Minister of Finance did not spend ten years of his life in practising law instead of devoting his time to making money. If he had, he would have known that there are always two sides to a case. He would have known that you can get splendid evidence on one side and that you can have an excellent case until the evidence on the other side is produced. Unfortunately, with reference to this particular feature of the banking law, you can only get evidence on one side. We have only been able to get the evidence of the bankers and of course the bankers have given evidence which seems to have satisfied my hon. friend. I am not saying that there is not a great deal of difficulty in getting evidence upon the other side of the case, but we should exercise a little of the common sense which the Almighty has endowed us with and when a man has practised law for ten years, after he sees what the evidence is on one side of the case, he naturally tries to investigate the matter and find out what it is upon the other side and when he does he usually finds that it is not so infallible but that he can pick a hole in it. In this case the minister thoroughly believes that the money must be loaned in New York, where you can keep your assets in a liquid form and at the same time get some interest, or you must keep it in your vaults. The hon. gentleman attempts to justify it by reference to -the English practice, but he fails to realize that there is a great difference between banking in Canada and banking in England. In England they have more money than they know what to do with; the idea of the investor in England is to invest his money, usually outside of England, but we in Canada are all the time trying to get funds here. Our Government is not borrowing money from the people in large quantities, and when you ask them to increase the rate of interest in the savings banks they frankly say: if we want ten millions and we raise the rate of interest to four per cent we will get it from the people of Canada, but if we take ten million dollars out of the people of Canada we are reducing the amount of money in the country to that extent; it is better for us to go abroad and borrow

our money and leave the ten millions for the banks to handle. 1 repeat that what would be good policy in Britain might not be good policy in Canada. We want our money kept in Canada to develop the country. We are passing legislation giving the banks the right to receive the money and to issue dollar for dollar of their capital in paper money. If a bank has a capital of five million dollars, then it can issue five millions in paper and it has its own five million dollars capital in addition. We are giving valuable privileges to the banks of Canada, and in return we have the right to demand that the banks will keep their money in Canada and do business in Canada. The Minister of Finance may believe it is necessary to pile up forty per cent of the banks' assets and not loan them in Canada, but I do not 'believe it. I look upon the bank as very much like a business man, and it would be foolish for a business man, especially in time of stringency, to divest himself of his ready cash, but when I am told I have to keep forty per cent of ail I am worth in ready cash in my safe, I do not believe it.


William Thomas White: It is to be carried in the form of cash or readily available assets; in bonds that can be readily sold.


Frank Broadstreet Carvell: It amounts to the same
thing. If the Minister of Finance says I should keep forty per cent of all I am worth in some sort of a liquid asset on which I can realize in a day or two, I say it is not necessary.	.


Mr. CLARK (Red Deer):: Does the hon. gentleman think that the banks, under the conditions he has described, do pile up the capital?


Frank Broadstreet Carvell: I do not believe they
do. They take it to New York because they can' make more money out of it. That may be a violent assumption on my part, but I would like to see some evidence to the contrary before 1 would feel that the banks are justified in taking this enormous amount of money from the people of Canada at a time when the people of Canada need it.
At one o'clock, House resumed, and then took recess.
At three o'clock, House resumed and again went into committee.
On section 76-business and powers of banks:


Frank Broadstreet Carvell: I trust the Minister of Finance will see his way clear to accept the amendment moved by my hon. friend from North Ontario (Mr. Sharpe), with such changes as may be necessary in the case of banks doing business outside of Canada.
Mr. CARVELL.
Amendment negatived.


[Stage Direction]
Section agreed to.
On section 88-loans upon live or dead stock:
William Thomas White: With regard to this seo-tion, I have a rather important suggestion to make, arising out of the discussion of Friday last. Upon that occasion I stated that the Bank Act, under section 88, expressly recognizes the principle of giving bankers a lien upon the products dealt in by wholesalers. Section 88 provides:
The bank may lend money to any -wholesale purchaser or shipper of or dealer m products of agriculture, the forest, quarry and mine, or the sea, lakes and rivers, or to any wholesale purchaser or shipper of or dealer in live stock or dead stock or the products thereof, upon the security of such products, or of such live stock or dead stock or the products thereof.
I pointed out that it had been the practice of the banks in the West, under the authority of this section, to make loans upon the security of live stock to parties engaged in the wholesale rearing of cattle, that is to say, ranchers in the .sense in which I understand that term, namely: men who are engaged in rearing cattle on a large scale as their principal occupation, and whose farming operations would be .subsidiary to that. Some doubt was cast upon the validity of such a lien by a judgment of Chief Justice Sifton in the Supreme Court of Alberta. It was in order to make it perfectly clear that a bank might make a loan under the authority of this section to ranchers that I inserted sub-section 3, which reads as follows:
The bank may lend money to a rancher upon the security of bis cattle.
In other words, the legislation of the new Act was intended not to be of an enlarging character but to be declaratory, namely: to declare that the law was as it had been understood to be by bankers. It has been pointed out to me by the hon. member for Calgary (Mr. Bennett) and other lawyers in the West that there appears to be no reasonable doubt that the banks, under the existing Bank Act, can make a loan to a rancher, that is, iit the sense in which I understand the term, and can validly take back a lien upon his cattle, under the provisions of section 88 which I have just read, and especially under this provision:
The bank may lend money to any wholesale purchaser or shipper of or dealer in live
stock.
I am assured therefore, by eminent legal authority that the banks to-day can legally do under the existing Bank Act what I had in mind to make perfectly clear that

they could do. Therefore, I desire to amend this section by striking out sub-section 3, not only for the reasons which I have given, but for this additional reason, and largely on account of the fact drawn to my attention the other evening by my right hon. friend the leader of the Opposition (Sir Wilfrid Laurier), and the definition [DOT]which he read. The American Standard Dictionary defines a 'ranch' as follows:
An establishment for rearing or grazing cattle and other stock in large herds; as a sheep ranch; a cattle ranch.
That was the meaning I had in view when this sub-section was drafted, and I think that is the generally accepted meaning of the word 'ranch.' There is .another meaning which the word has taken on which is synonymous with 'farm,' because the second meaning given by the American Standard Dictionary is 'a farm'. That is the original meaning, probably from the word ' rancho,' which I think is from the Spanish word. Therefore it is perfectly clear that the word ' ranchef ' is ambiguous. It has always meant to me a man engaged in the rearing of cattle and other stock in large herds; and, if he is engaged in farming, it would only be incidental to his main occupation. From this definition it is clear that the word 'rancher' may mean a farmer engaged in mixed farming. It was not the intention of this legislation that we should extend to bankers the right to take a lien upon the live stock of farmers throughout Canada, for two reasons. In the first place, it is not necessary. The evidence before the committee showed conclusively that any farmer of good standing and reputation, who is entitled to a loan by virtue of his credit, is able to obtain all the advances he requires without specifically hypothecating his live stock to the bank. As I pointed out on Friday last, it has always been the principle underlying the Bank Act that banks should loan upon the personal credit, of individuals rather than upon collateral security so as to become the pledgees of chattel property throughout Canada. I think that is a sound principle. The second reason, which is a very important one is this: if a bank is to be permitted to take liens from farmers throughout Canada upon the security of their live stock, then without question, having regard to the vights of creditors and landlords who are able to distrain for rent, I think it would follow that the lien must be registered so as to give public notice. That is in accordance with the principle underlying the provincial legislation of all the provinces with one exception, which is a very important one indeed, namely the province of Quebec. In that province the chattel mortgage is unknown. I think the theory of the civil law of Quebec is that a man is deemed to he the owner
of property of which he is in visible ownership or possession. So far as outsiders are concerned, they have the right to treat him as the owner of chattel property in his possession. Therefore it is not legal to give a chattel mortgage in the province of Quebec. It accordingly follows that there is no machinery in that province for the registration of chattel mortgages. Consequently it is not possible in the province of Quebec to register a lien which might be taken by a banker from a mixed farmer upon the security of his stock. For these reasons it has appeared advisable that sub-section 3 should be struck out. We think that mixed farmers in Canada will be able to obtain such accommodation as they require without hypothecating or pledging their stock as security to the bank. That will dispense with the necessity of having the last sections providing for registration which were added by the committee to section 88. The section would then be left in this way; that, so far as threshed grain is concerned, the banker would be allowed to take a Hen without the necessity of registration; that so far as cattle are concerned, the law would remain precisely as it is. 1 am assured that those who raise cattle in the West on a large scale and who, properly I think, are called ranchers, according to the more popular definition at all events, would continue to be able to get from the banks the accommodation which they require. Members of the legal profession have assured me that that right of banks was undoubted. On these grounds I think it will clarify the situation and get over some of the. difficulties that were adverted to in the discussion of Friday last, if we strike out subsection 3; and further, if the committee so approve and subject to discussion of it, subsections 9 and 10. I therefore move that sub-sections 3, 9 and 10 be struck out.


Wilfrid Laurier: For my part I have always thought that this attempted legislation was not in the right direction. My opinion, however, is not shared by a good many people. They argue that it is proper to give the small farmer the privilege of borrowing upon his movable property. My hon. friend will not allow the farmer to give a pledge upon his cattle, but he will allow him to give a pledge upon his grain. What is the reason of the difference as between one and the other?


William Thomas White: My right hon. friend asked me that question on Friday, and I am afraid I did not make it clear to him. I think he and I would probably agree-at least I gather from his opening remarks, that we should agree-that legislation should not he passed to permit the banks to become chattel mortgagees for either farmers or retailers. Let us commence from that. Now, whether wisely or unwisely- and there is much to be said against the change to which I shall refer-we have da

cided, having regard to the particular situation that exists in the West as to transportation and storage of grain, to permit the bank to loan to farmers taking as security a lien upon threshed wheat remaining in the possession of the borrower. That is a rather radical departure from the principle in the existing Bank Act. The advantages to the farmer will, I think, be not inconsiderable. A great deal of evidence was taken before the committee, and while many doubted whether the banks would make many more advances, or greater advances than they would have made had this legislation not been enacted, at the same time, I think I am stating it fairly when I say that the opinion was that this would be of advantage to the farmer of the West, particularly by reason of the difficulty which he has on account of lack of transportation and comparative shortness of the market season-that the banks would probably lend more money or lend the money more readily, and that by reason of the advances so made the farmer would not be obliged to sacrifice his grain by throwing it on the market when all others were doing the same. That is the reason for the departure from the principle that the banks shall not be the pledgees of borrowers all over the country. With regard to registration of such liens, when the Bill was first introduced there was no provision made for the registration. I think it was largely on account of sub-section 3 which it is now proposed to strike out that the committee decided, and I think wisely, that the lien should be registered, because in the case of cattle especially very serious questions arose as to landlords and creditors being prejudiced by making these liens without provision for registration. Again, the difficulties about registration are insuperable in the province of Quebec, whose population is from one-fourth to one-third of the whole population of Canada. These are the considerations which appealed to me in making the difference between threshed grain and cattle. I do not know whether they will appeal to my hon. friend, at any rate they are what influenced me in my proposal.


[Stage Direction]
Amendment agreed to.
Frank Oliver: I desire to say a word
with regard to sub-section 3 which my hon. friend has decided to strike out, I do not wish especially to take issue on the first point; I am willing to say that there is a great difference between the case of the threshed grain and the live stock. As long as sub-section 3 did not apply to the holder of live stock who operates as a mixed farmer, from my point of view there is no reason why it should be here at all. If the Government's policy from the start was that this section should not apply to the live stock of what might be called a mixed farmer, then I think its presence in the Mr. WHITE (Leeds).
Act was undoubtedly objectionable, and it was much better to take it out. But while I admit that there is an important difference between the grain and the live stock, I wish to go on record as saying I cannot see any good reason why the man who is raising live stock should not have the advantage that this section on its face would have given him subject to the registration that is provided under sections 8 and 9. It is true that there are special conditions surrounding the raising of grain, they have not been enlarged upon, it is unnecessary; the section is agreed to. But there are conditions surrounding the raising of live stock particularly in the West which have been spoken of so repeatedly that I will not touch upon that again. The desirability of the people of the West going into mixed farming, going into the raising of live stock in connection with their grain operations, is so plain that it seems to me very re->
markable that, having in hand the amendment of this Act, having in view the desirability of aiding the man who is exclusively raising gram, we deliberately refuse to consider the case of the man who is doing, or trying to do, the very thing that everybody agrees he ought to do, and therefore ought to be encouraged in doing.


Mr. SCHAFFNER:: I understand that this Act when put into effect will permit the rancher, but not the mixed farmer, to obtain money on his cattle. If that is so, I must enter my emphatic protest. I would certainly be deemed to be derelict in my duty to my constituents if I allowed such a clause to pass without registering my objection to it. One of the difficulties experienced by the mixed farmer in raising cattle in the West, speaking for my part of the country, has been the competition of the ranchers. I have no objection to the ranchers having that privilege; I believe it is quite right; but there is no more reason why a farmer should not be permitted to go to the bank and give security upon his live stock than upon his grain. I regret very much that the minister has seen fit to extend this privilege to the ranchers, and to withhold it from the mixed farmers. We are doing our utmost in the West to go into mixed farming, and the best way to encourage mixed farming is to permit the farmer to obtain money from the banks by giving security upon his live stock.


[Stage Direction]
Section agreed to.
On section 99-purchase of the assets of a-bank:
Frank Oliver: I take it for granted that the matter of bank mergers was dealt with very fully by the committee, and that the mind of the committee is represented by

the clauses as they stand, which are of the same effect as the clause in the original Bill which provided that purchase of banks might take place with the consent of the Minister of Finance. The tendency of the present day is towards monopoly by combination in trade, transportation and finance. The banks are our great financial organizations. They control all the liquid assets of Canada; they hold in their hands billions of the dollars of the people, and upon their handling of [DOT]that money very largely depends the course of commerce and of business generally throughout the Dominion from year to year. It is recognized that in finance, as in trade or transportation, it is fot the good of the public at large that there should be competition, and, considering the number of banks that we have in Canada, it is presumed that we have a measurable or reasonable degree of competition in the handling of financial matters. As I have said, the tendency of the age is towards monopoly by combinations. There is evidence that that tendency exists in the financial world, in the banking world, and in the world of industry1, trade and transportation. I shall not go into details to prove the point, which is accepted by everybody, that competition is good and that monopoly is bad; therefore I need not delay in placing before'the committee the view that if it is desirable that there should be competition amongst banks, it is desirable that the elimination of competition by combination should be facilitiated by legislation of this Parliament. It is true that times occur and occasions arise when combination becomes desirable, and when it becomes impossible to prevent it without doing injury. Admitting that, for the sake of argument, I still maintain that whether or not a combination between two of these special and separately chartered and privileged institutions should take place should be in the hands of Parliament and of Parliament alone. There have been granted to each of these institutions, under the authority of Parliament, powers, privileges and rights to be exercised in the interests of the public as well as of the individuals immediately concerned. The interests of the public are, to a measurable degree, jeopardized by the combination of any two of these separately and specially chartered and empowered organizations. . It seems to me to be elimentary that that combination should not take place except on the responsibility and with the knowledge and authority of Parliament. I have already said in regard to the Bank Act, and particularly in regard to the Act as it comes before us in its present form, that the tendency is to relieve as much as 326
possible, those great financial institutions of government control, to create of those institutions, so to speak, an Empire within an Empire, to place upon them responsibility which, in my humble judgment, should not pass from the government which represents the people through Parliament. We have, I say, handed over to the banking institutions authority that should have been retained by Parliament, and the tendency of this measure is to still further hand over that authority to them. The result is that just in proportion as authority is placed in the hands of the combined banking organizations of the country, so that authority can be used for the purpose of elminating competition from time to time by closing out this, that, or the other bank, and amalgamating two or more existing banks. That being the case, and I do not think that any person can deny the proposition I have placed before the committee, the last thing this Parliament should do, if it recognizes the purpose of its existence as being the protection of the interests of the people at large, is to permit the elimination of competition under the control of banking companies without the sanction or authority or limitations that might reasonably be placed upon the banks by Parliament. I desire to place before the committee my view that, in so far as these sections of the present Act, or of the Act as it formerly existed, for it makes no difference to my argument, make provision for eliminating competition by establishing combinations without the special sanction, authority, and restrictions of this Parliament, they are contrary to the public interest and are, to that extent, objectionable.


[Stage Direction]
Section agreed to.
William Thomas White: I think we might now take up the clause in which my hon. friend from Westmorland (Mr. Emmerson) is interested.
On section 79-acquisition of real estate:


Mr. EMMERSON:: This section as it appears before us reads as follows:
The bank may acquire and hold real and immovable property for its actual use and occupation and the management of its business, and may sell or dispose of the same, and acquire other property in its stead for the same purpose.
Rightly or wrongly a very common impression prevails throughout the country that the banks have invested an excessive amount of their capital not merely in bank premises, but in real estate which they lease to others. I propose to place before the committee an amendment to the section as follows:
The bank shall not expend more than 5 per cent of its combined capital and reserve in real estate.
I shall also move that a further sub-section be added as follows:


REVISED
[Stage Direction]
The hank shall show in its monthly and annual statements the real value of _ its real and immovable property, giving detailed particulars.
I submit to the committee that there should be some limitation upon banks with respect to the percentage of capital that they may be permitted to invest in real estate for their own use. If they were to confine the use of real estate to their own purposes, perhaps it would not be so objectionable; it might be left to the discretion of the directors to decide as to the character of the offices required. But in many cities of Canada, if not in all, and in many of the large towns, private individuals have complained that the banks are in a position to acquire the very best sites, and to expend large sums of money in the construction of buildings, not merely .for their own use, but for leasing in competition with other real estate owners. Now, the banks are limited to the holding of real or immovable property for their actual use and occupation, but they defy the law. If we were to pass this section as proposed, they would violate it. We must recognize that at this moment they are violating the law, and investing in real estate beyond that required for their own use. We must recognize the conditions, and, recognizing them, we must apply a remedy in some form, we must legalize at least what the banks are doing to-day, or if deemed advisable, limit the percentage of expenditure of their capital and reserve on real estate. They are in the business to-day. I called the attention of the Banking and Commerce Committee to a letter which I received from a prominent gentleman in Charlottetown setting forth very strong complaints in that regard. I do not wish at this moment to move the amendment that I moved before the Banking and Commerce Committee, but it seems to me that the minister might fairly take into consideration these two points, first, as to whether the banks should not be limited in these investments and, secondly, as to whether, if they are permitted to mak^ these investments they should make a statement monthly to the minister as to the amount they have thus invested. I am not so urgent with respect to the first feature, although I think there is a wrong which requires a remedy. We all know that the bank statements to-day represent not a tithe of the amount that the banks have invested in real estate. Everybody knows that; the banks will admit it. Many banks merely put in their statements nominal sums in comparison with the amounts that they have invested in buildings throughout Canada. You eliminated the clause with respect to interest because you recognized that the banks are charging more than seven per cent in face of the declaration of Parliament prohibit-Mr. EMMERSON.
ing them from doing it. You wiped out that section because you did not wish the banks to be placed in the position of violating the law. Now, for the same reason, it seems to me that it is necessary to amend this 79th section in order to legalize what they are doing, but if you do not, then let the country know because we are giving them a franchise and the country has a right to know. Let there be a statement of the actual values, let publicity be given to the facts as they exist, let not this hypocrisy and deceit continue as it has continued for many years. I think I am speaking within the bounds when I make this statement and I would ask the minister simply to give consideration to these features and particularly with respect to publicity of the facts.
William Thomas White: The matter to which my hon. friend has drawn attention is one of very great importance and one very difficult to deal with. There is no doubt that under the present legislation it is the intention that the banks shall hold real estate only for their actual use and occupation. I think that the reason for that legislation is this: It is a sound principle of banking that banks should invest their money or loan it upon securities of a character and that they should not be permitted to invest their money in fixed capitals. They should invest it in circulating capital so that they would better serve the purposes of the commercial community. It would be an absolutely unsound principle that banks should be allowed to invest any considerable proportion of their total assets in real estate. That has been tried on some occasions in 'the financial history of the world and always with disastrous results. The banks should loan as much of their money as possible in liquid form and for short dates and as little as possible in the way of furnishing fixed capital or in real estate. Under this section 79, the banks have acquired sites throughout Canada


Henry Robert Emmerson: And the very best
available.


William Thomas White: I will come to that in a
moment. They have acquired sites throughout Canada, and in some cases they have erected buildings for their own use and occupation, and no portion of these buildings is rented to outsiders. The banks are very desirous of obtaining the choice corners because there is very active competition among the banks for business. It has often been said that there is a combination among the bankers, but I think nothing has been shown more clearly before the committee than that there is a very active competition among the banks for business. The result is that, as I have said, the banks compete amongst them-

selves for the best corners and the best sites in cities and towns. Take the corners of King and Yonge streets in Toronto where the Dominion Bank is erecting a large building; if the Dominion Bank paid last year $10,000 a foot front, because the property is worth that, for the corner of King and Yonge streets and erected, let us say, a building solely for their own use, that is what is called a single chamber building, the cost or rental which they would have to charge themselves with respect to that corner would be very large indeed. The valuation of $10,000 a foot is reached by taking into consideration the fact that a very high building can be; built there and that the upper storeys can be rented and the return from the upper storeys would help to pay the interest upon the cost of construction and the maintenance of the building and also return a rate of interest upon the $10,000 a foot value. Therefore, the banks have in many cases, I should think in most cases, erected buildings not only for their own actual use and occupation, but for the purpose of renting the upper storeys to tenants. It has been by reason of economic conditions that they have done so in order that their rental for the ground floor might be that much less to them.- It has been contended that by erecting these large buildings they have not only violated the spirit of this section 79, but they have locked up a very considerable amount of money in real estate to the detriment of commerce. I think it is only fair to the banks to say that it has been the policy of the chartered bank's to build up large reserves, and I think that their real estate investments have been comparatively within their reserves. The banks make answer, although it does not meet the objection that they are violating the Act:	Instead of distributing the assets
to our shareholders to whom they belong, because they have been accumulated either from premiums paid on stock by our shareholders or from profits over and above the amounts that we have distributed to our shareholders^ we have bought real estate well within our reserves and we do not think that the public have any right to complain of that. I must confess that I do not think that meets the situation. My own view is that with regard to what has been happening there has been an abuse in some cases under this section. If the banks had acquired sites for their own use and occupation, or even if they had erected a few additional storeys, no question would have been raised, but it is the sky-scraper and the locking up of public money in the sky-scraper that has caused this agitation. I think that the bankers would be well advised in the fu-3281
ture, if that change is made, although there are difficuleies in the way of making it, if they would keep their building operations within due bounds. Skyscrapers, as a matter of fact, having regard to depreciation and cost of maintenance, return a very small rate of interest upon the investment and are not profitable in places. I think the banks would be well advised if they would exercise moderation in the buildings they erect throughout Canada, and had they done so in the past these questions would not now arise. As to the amendment of my hon. friend (Mr. Emmerson), I would point out that it is very difficult indeed to fix a percentage which would be fair for the banks in this respect. I do not think the evidence we have heard would justify us in fixing any particular percentage. The Bank of Montreal has several hundred branches; it has its head office in Montreal with, I suppose, one million dollars' represented, and it has in way of investment in premises, and it has important offices in Toronto, Winnipeg, Vancouver, Victoria, London, Eng., New York, Chicago, and indeed all over the English-speaking world. I think, therefore, five per cent would be entirely inadequate to the requirements of the Bank of Montreal, even if the bank were to confine^ itself simply to the very letter of this section. My assistant deputy minister tells me that the Bank of Montreal uses the property which it owns solely'for its own use and occupation, but nevertheless five per cent would not be adequate to meet its requirements having regard to the area over which its operations extend. The returns of the Bank of Montreal show about four million dollars in real estate, but I think that is a very low valuation of the buildings occupied and owned by the bank. In connection with this question, Mr. McLeod gave evidence before the committee of a very interesting character, and I think the committee was very greatly impressed with everything Mr. McLeod said because it -was recognized he had been a pioneer in trying to	introduce reforms	into banking	in Canada.
Mr. McLeod believes that the banks should carry their real estate at a very low figure for the reason that the buildings did not represent immediately realizable assets; that the balance sheet of a bank should show a liquid condition, and that a bank should be able to readily convert its assets into cash for the purpose of meeting liabilites of a demand nature, such as deposits payable on demand, or on notice, which latter is seldom insisted upon by the banks. That leads to another consideration, which touches upon the .second part of the amendment of my hon friend and emphasizes the difficulty of dealing with this question of what is

the value of bank premises. Take a bank building such as that of the Bank of Montreal, and the Bank of Commerce on St. James street in Montreal. What is the fair value of these buildings? There is nothing more difficult than to value such buildings. It would not he fair to say the land is worth so much and the buildings cost so much and put the two together, because in connection with all buildings designed for a special purpose, you have to take into consideration the market for such. I can illustrate that in a simple way: a house that is valuable for the use of the ordinary class of citizen always finds a ready market because there are hundreds of citizens who are looking for that class of house, and it is well within their means; but if we have a house to sell that cost two or three hundred thousand dollars and which is built on a site worth one hundred thousand dollars more, then your market for that property is a very narrow market and you have to sell such a house at a great sacrifice in order to realize. If there happens to be some individual who wants that house, he will not pay more than he is obliged to pay, as competition in that case would determine the price. In buildings designed for a special purpose, there is usually a heavy depreciation when you come to sell. Let us apply that principle to bank buildings. Take a bank building used solely for the purposes of a bank, and built as they nearly all are, expensively- because the banks like to advertise their financial strength by a handsome building, to which within bounds I do not take exception as I think our civilization demands that; I like to see a certain taste end ornamentation and expense within bounds on the part of the large financial institutions in a country such as ours, and I think we will all agree as to that. But when you come to value a bank building suitable only for the purposes of a bank, then the only purchasei* for that building would be another bank, and if the other banks are provided for as most of them are you sometimes have to sell it for simply the value of the land; the building being suitable only for the one purpose it is not valuable to other parties who may desire the site for another class of building. Take the Bank of Montreal on St. James street, Montreal, which is a magnificent building of handsome architecture, pornhyrv nillars inside; an enormously expensive building, and ask yourself What would that sell for? That is a very difficult problem. It is, therefore, difficult to comply with the view of my hon. friend that a valuation should be made. The cost would be misleading. If the banks would show that the land and the buildings cost so much, that might be mis-
Mr. WHITE (Leeds).
leading as to their financial strength, because the premises are not immediately convertible into anything like the figure they would be set down at. Another thing, the -real estate is increasing in value all the time, while the building itself would be depreciating. I had a very great deal to do with valuations in the city of Toronto many years ago, and I know there is nothing more difficult to value than buildings erected for special purposes.


Mr. LEMIEUX:: Take for instance, a
church.


William Thomas White: Yes, a church is another example: It is extremely difficult to place a value on a church. I do not wish to magnify the difficulty; I suppose we are here to get over difficulties if we can. My hon. friend moved his amendment in the committee, and having regard to the evidence given and the returns, which are of the same class as the English returns covering the real estate, I think the committee reached the conclusion that they could not improve upon the clause as it stands. 1 think, however, we can say that it would be verv much in the interest of the banks themselves that they should take notice that there is a growing feeling in the community against their erecting large buildings such as have been erected in various parts of Canada, thus locking up considerable part of their available capital. Unless I am very much mistaken, the banks themselves have reached that conclusion. If my hon. friend (Mr. Emmerson) desires to press 'his amendment I would like to consider it, but having regard to the conclusion reached by the committee, I am rather of the opinion that it would be wise to accept their finding and allow the section to stand as it is.


Henry Robert Emmerson: I was not convinced
that the committee were at all unanimous, or that -there was a general feeling among the members of the committee that there should not be publicity. There was some question with respect to the getatableness of just the amount of money that was invested by banks in buildings, but if we let this clause stand as it is, we are in one sense simply saying that banks can only invest in buildings for their actual use. At the same time every hon. member knows that the banks are investing and expending large amounts in buildings which are not confined to their own use. My hon. friend's assertion as to the necessity of banks building sky-scrapers, in order that the rental -cost may be lessened is an argument against this section as it stands.


William Thomas White: I do not approve of banks building sky-scrapers.


Henry Robert Emmerson: Their assertion is:
We have expended large sums in certain

sections of the country in erecting large buildings; we are utilizing certain portions of the buildings for our office purposes and the rest are rented for the purpose of lessening the cost of our office rent. That is an argument against permitting this section to remain as it stands, because, if it is necessary that they shall invest in that way in order to lessen their operating charges, we should give them the power to do so. I am against legislating in a false, deceitful way, declaring that such and such shall not be the case and at the same time knowing that the law will be violated every day. It brings all sections of the Act into disrepute to pass one section of this character. I am not convinced by the arguments presented before the committee, and I do not believe that the committee are agreed that the section should remain as it is. It may be that five per cent of the combined capital in the reserve is too restricted a sum. I propose to test the opinion of the committee on that question^ later on.
There is one branch of the subject that I shall ask this committee to pass upon, and that is with respect to publicity. If the circumstances detailed by my hon. friend, the Minister of Finance, are to be regarded as a justification for the Act as it is, then it is right that publicity should be given to those facts. If the banks have invested in buildings and sky-scrapers, let us have a statement of their value. There will be no difficulty in getting at the real value. The Bank of Montreal is not a sinner in regard to expending money on buildings other than for their own use. Other banks have sinned in that respect.


William Thomas White: Is it possible to make section 79 any stricter than it is? I think the banks in erecting these large buildings are not complying with the Act. I do not think that section 79 could be drafted to show more clearly the idea that they are not to hold real estate beyond the requirements of their actual use.


Henry Robert Emmerson: I note what the minister says in that regard. I want to call the attention of the committee to conditions which prevail in the city of Ottawa. The hon. minister says that there is difficulty in getting at the real value of bank properties. If you go down Bank street, at every other corner you will find a bank building. The best corners are reserved for the use of banks. They are not violating this section in constructing these buildings that are for their own use, but they put a high valuation on property in the vicinity by reason of the fact that they can select the best quarters and pay the highest prices, utilizing their reserves for that purpose. They are holding the best sites as against the business public. It would be very much better for banks and for the business interests of the city of Ottawa if those sites were not used simply
for bank premises. If it were desired to get at the actual value of those premises, it would not be difficult to do so, and the value would not be an inflated one. The very circumstances detailed by the hon. minister could be taken into consideration in fixing the value of these bank properties throughout Canada. I think that should be done. At any rate I claim that w& should have a statement of the actual facts and that they should be given publicity, so that the shareholders and the public may know the actual conditions which prevail. To-day they do not know these conditions. There is not a statement of a bank in Canada that gives actual facts with respect to the amounts invested in real estate. It is not desirable that the banks should go into the business of real estate. I do not think that this Parliament would justify any such legislation, and I do not think we should allow them to go on in the way they are doing; there should be some limitation. If we permit them to go on in this way, let us have an expose of the conditions as they exist, and let us not exist in an atmosphere of deceit with respect to the whole matter.


Mr. F. B. McCURDY (Shelburne and Queens):: With the second part of the amendment of the hon. member for Westmorland (Mr. Emmerson), I am in accord. So far as the first section of the amendment is concerned, I see difficulties. I think the experience of everyone who has watched the operation of restrictions imposed upon banks is that they really constitute a tax upon the clients of the banks; the restrictions imposed upon the banks are passed along in the shape of higher rates charged for services rendered by them.
It is more particularly with regard to that aspect of the case that I wish to draw the attention of the committee not only to section 79, but to section 91, which is not yet passed, because to my mind these two sections are largely bound up in one another.
The old Bank Act sought to limit the rate of interest charged by banks. That attempt was found to be ineffective, and accordingly by a substantial majority in committee it was deleted from this Bill; but no one has paid attention to the fixing of the rate of interest allowed on deposits.
Different parts of the country are interested in different sections of this Act. In a certain portion of the counties which I have the honour to represent, with a thrifty population, and but little industrial activity, $20 is placed on deposit in the branch bank to every $1 that is borrowed. Naturally that district is more vitally concerned in the rate of interest on deposits than in the discount rate. In other communities the conditions are reversed, and so on.
Bankers claim that the fixing of rates of


Frank Oliver: I have not in mind the exact wording of the amendment proposed by the hon. member for Westmorland (Mr. Emmerson), but the question involved in the consideration of this section is one which may be considered without direct reference to that amendment. It may be assumed that the bank has a right to do as it pleases with its own property. This section says that the bank may hold real estate for its own use, and I assume that if that provision were not there the bank would not be entitled to hold real estate; in other words, the bank would not be entitled to do as it pleased with its own money. It is bound to be assumed that whoever drafted the first Bank Act; whoever drafted the provision that is contained in section 79 did so for reasons which at that time and afterwards were supposed to be good reasons for the existence of that provision. At any rate it is to be assumed that there exists the right to restrict the bank in the use of the funds under its control. When it is considered that something like three-quarters of the funds controlled by the bank do not belong to the banks, but to the people at large, it is easily seen that

any legislation authorizing the banks to do business and clothing them with authority to control this vast sum of money that does not belong to them, may very reasonably contain provisions restricting the banks in the use of such money. So I take it that that is the foundation reason for the provisions of section 79; that the banks not being the owners of the larger part of the money that they control, Parliament takes the right to say what they shall not do with this money which does not belong to them. That is to say, of the money which belongs to the people whom Parliament represents, Parliament has the right, and it is the duty of Parliament, to say how far a bank may go in its disposition. I take it that this section contemplated the possibility of such a condition as exists to-day, a condition in which the money of the people is used or liable to be used by the banks for purposes that are more in the interests of the banks than in the interests of the owners of the money. It was contemplated by those who framed the Bank Act that the banks would want to use the money of their depositors to construct buildings which would give them prestige in the eyes oi the public, and thereby assist in advancing their business, and it was considered by the framers of the Bank Act that that was not a proper use to which to put that money.
But I gathered from what my hon. friend the Minister of Finance said, that it is not the money of the depositors that is used for the erection of those buildings, that it is the money of the banks; that is to say, it is either the money of the shareholders or the profits of the shareholders that are employed in the purchase of those properties and in the erection of buildings. If that be the fact, and that fact is guaranteed, then the contention that the money of the depositor is being used for this purpose falls to the ground, and the interest of the depositor is sufficiently protected.
But there is nothing in the bank returns Which show conclusively whether it is the money of the depositors, or the profits of the bank that are being employed in the erection of those buildings. I maintain first of all, that such a statement should be produced by the bank from year to year, so that it would be known conclusively whether those properties were being acquired out of the money of the depositors, or out of the money of the shareholders. It is desirable that that should be known for this reason: My hon. friend the Minister of Finance has said that it is desirable that the bank should keep its funds in liquid form, because when money is placed on deposit with a bank, the bank is liable to be called upon to return that money at any time. Therefore, it is all the more necessary that money, which the bank is liable to be called upon to return at any time, should not be in Mr. OLIVER.
such a form that it cannot be returned at any time. Under any circumstances, money that belongs to the depositor should not be tied up in permanent form in real estate investments, at any rate, beyond the immediate necessities of the bank itself. That, I think, will be taken for granted. When such large investments are being made, it is right and proper that the Government, as trustees for the public, should have knowledge as to the use that is being made of that money. We will assume that none of the depositors' money is being used in that way. We will assume that those properties are purchased and buildings erected thereon out of the money paid in by shareholders, or out of the profits made by the management of the bank. If that be the case, if those buildings are built out of the bank's legitimate profits, there is no question that the buildings properly belong to the shareholders of the bank. On the face of it, they have a right to erect such buildings as they please, and to invest in such property as they please with. the profits that they have made. But then we come to the point made by my hon. friend from Queens and Shelburne (Mr. McCurdy), that if those properties are acquired and those buildings are erected out of the legitimate profits made by the banks, the banks are certainly making more money than they are entitled to make, and the fact that, instead of listing in their statement of assets those properties at cost, or at their present value, they list them at half or less than half, in fact at only a nominal value, is absolute evidence that if those buildings represent bank profits, the banks are afraid to state to the people of Canada what their profits are. They are deliberately carrying on business at a scale of profit which they are afraid to let the people of Canada know for fear that when the Bank Act comes up foT revision, as it comes up to-day, measures would be taken to bring the business more in line with the hints thrown out by the hon. member for Queens and Shelburne. It has been said that it is not possible to interfere with the law of supply and demand in the matter of over-paying interest on deposits or fixing a limit of interest to be paid on loans. But this whole Bank Act from beginning to end is an interference with the law of supply and demand. It is a special provision, giving special powers, under special limitations, for special purposes, and certainly if it is evident that under the privileges and powers given by Parliament to those financial organizations they are able to make such profits that they are afraid to give the facts to the public, I think it is a condition of affairs that calls for earnest consideration, and

-that Parliament is not justified in allowing the Bank Act to go through with that condition existing within its knowledge.
My hon. friend the Minister of Finance spoke of the advantage of the banks keeping a large amount of money in New York so that it would be available in liquid form to meet the demands from time to time. I was very greatly impressed with the view he then expressed, and not having heard at the moment from my hon. friend from Carleton (Mr. Carvell), I was rather inclined to support it, and I am still so inclined; but if there is any necessity for the banks to keep millions of money in New York in order that that money shall be in liquid form, there is just as much necessity for them not investing their money in assets upon which they cannot realize, and upon which, if they were compelled to realize, they could not get more than say fifty or twenty-five cents on the dollar. I say it is just as necessary that their capital held in Canada should be kept in liquid form as that the capital sent to New York should be kept in liquid form. The fact remains that the banks invest enormous sums in sites and buildings, and if the money so invested is the money of their depositors, they are using it improperly. If they make those investments out of their profits, their profits are unquestionably excessive. The admitted fact that the value of these investments is not disclosed in the returns which are made from time to time to the Government is evidence of an impropriety that certainly should not be permitted and this should not go through Parliament without a thorough sifting and without such legislation as will produce a satisfactory readjustment. With evidence before us that millions of money are invested in real estate and in buildings, it is right that the shareholders and the country should know how much money has been so invested. It is not a question of what the value of these buildings is today as going concerns or what would be their selling price in case the bank vacated them; the question is, how much of the money of the depositors and how much of the profits which have been taken from the borrowers have gone into the purchase of these properties or the erection of these buildings? It is admitted on all sides that an excessive amount of money has been so employed. I assert that it is not only the right, but that it is the duty of Parliament and of the Government, before this Bill is assented to, to find out just to what extent that condition exists and to make such provision in legislation as will prevent any^ impropriety that exists in connection with it at the present time being continued.


William Folger Nickle: Perhaps it would be only fair to say to the House that it was not for want of effort that the Act was not amended so that useful publicity would be given to the holding of real estate by the various banks of Canada. But we were met by the fact that no more lucid language could be used than that of section 79 as dTawn in the old Act and as drawn in the present Act. There could have been no more clear cut enunciation of the principle that the banks should not hold real estate than the wording of this section which reads as follows:
The Bank may acquire and hold real and immovable property for its actual use and occupation and the management of its business, and may sell or dispose of the same, and acquire other property in its stead for the same purpose.
Section 83 specifically makes a declaration against continuing loans being made by banks on real estate. The whole purport of the Act, is that the banking institutions should provide ready money for the commerce of Canada. But during the consideration of the Act before the committee we found that while the banking interests readily admitted that the declarations of the Act were against the holding of real estate, they were equally bold in their declaration that they had ignored the restrictions of the Act. Let me call the attention of the committee to the statement of Mr. Pease, general manager of the Royal Bank, who gave evidence before the committee. Clause 79 of the Act was read, and he was asked:
I was asking -whether you interpreted that clause to mean that the banks should not acquire or bold, real estate in excess of what they occupy?
To which he answered:
That is the intention of the clause and so far as the Royal Bank 'is concerned, _we have tried to live up to it, and I do not think that we have transgressed. We have one building of fifteen storeys which we inherited. We have five buildings of four storeys, twenty-six buildings of three; seventy-one of two; and sixteen of one, making 119 buildings in all. We occupy forty-three exclusively for our own nurposes.


Herbert Brown Ames: Or as tenants.


William Folger Nickle: Or as tenants in other
buildings. Then, in answer to the minister, Mr. Pease said:
I have a statement here showing the position of the banks in Canada as a whole. The proportion of bank premises to paid-up capital is 32.86, to capital and reserve 17.04, to total assets 2.55, and I have prepared a statement showing that in Scotland by comparison the proportion of bank premises to paid-up capital is 47.97 as against 32.86 in Canada. The proportion of capital and re-

serve is 26.26 as against 17.04, and in proportion to total assets 3.12 as against 2.55.


Frank Oliver: Was that the 'actual value or the value set down in the books of the banks?


William Folger Nickle: That is just what I was going to enlarge upon. The figures proved themselves of very little value, because, being addressed by the hon. member for Digby (Mr. Jameson), Mr. Pease said that these- did not represent the true value of the real estate but the value of the real estate as given in the returns, and he set out in his evidence that in the bank which he particular!;1, represented he thought their equity was between $4,000,000 and $5,000,000; in other words, that the real estate of the Royal Bank was undervalued in its statement to the Government by some $5,000,000 or that it was put in at about half its proper value. I quite agree with what the hon. member from Edmonton (Mr. Oliver) says that, if at the present time there is no section in the Act which compels the observance of this provision, it certainly is time that Parliament took such steps as would make the public aware of the amount of the-funds that are invested by banks in real estate, and what is the true value of this real estate so that the people may have some adequate idea of what the profits of the bank really are. If this system is allowed to continue, if values are to be written up and written down, the bank can make a stated rate of profit and the people at large, particularly the shareholders, have no means of accurately knowing whether the bank is 'being concerned in a businesslike, or in a lawless, manner and whether the banks are really becoming speculators in real estate.


Samuel Simpson Sharpe: Before
the minister replies to what has been said by the hon. member for Kingston (Mr. Nickle) and the hon. member for Edmonton (Mr. Oliver); I would like to say a word. I paid particular attention to the evidence given before the Banking and Commerce Committee relative to this question and from the evidence that was adduced there it was apparent that clause 79 of the Act was a dead letter. Every bank in existence is violating the terms of .that section. There was an amendment moved by the hon. member for Queens and Shelburne (Mr. McCurdy), I think, requiring the banks to make a return of the- assessed value, in addition to the nominal value of real estate held by them. But the committee, in its wisdom, voted that down. There was much evidence given that the value of real estate as put in the bank's returns was not indicative of the real value and, as pointed out by my hon. friend from Kingston, this is a grave injustice to the shareholders of the Mr. NICKLE.
bank excepting those who are on the inside. Only the board of directors, with the statement as it is now, know what the real value of the real estate is; consequently they have an advantage in buying and holding the stock of the bank oyer other shareholders. It is a great injustice to the shareholders or to any person who desires to purchase the stock. I agree with hon. members who have supported the contention that there should be some limitation to the right of banks to speculate in real estate and compete in that regard with individuals. The banks are strong financial institutions and there is no reason why -they should invest the money of the depositors in the purchase of expensive corners and the erection of sky-scrapers. A corrective of this would be a provision by which the minister would be empowered to compel the banks to make a return at stated intervals of the real value of their real estate holdings. The minister might use his influence to compel that return to be made perhaps once a year and also to compel the banks to correct this grave evil in connection with our banking system.


William Thomas White: As has been stated, the
committee had before it an amendment providing that a return should be made of the assessed value of the several offices of the banks throughout the Dominion. I think it was felt that the assessed value was not a good criterion of the real value, because the assessor is very apt to take the value of the land and add to it the value of the building having regard to its cost. That would not be a proper way of estimating the value of bank premises. I have given the matter a good deal of thought, and I am in favour of a return which *would not be misleading in character, and yet would give a general idea to the public of the value of the premises held by banks in the Dominion. I have an amendment along the lines of the amendment moved by my hon. friend from Westmorland (Mr. Emmerson) and by my hon. friend from Queens-Shelburne (Mr. McCurdy) in the committee. My hon. friend from Edmonton (Mr. Oliver) seemed to think it would be better, instead of having a valuation of the premises as of to-day, to have a return showing how much money had gone into the bank premises; but I submit for his consideration that that would be misleading, for the reason that the banks have been in operation in Canada for many yearsj, the Bank of Mpntreal almost a hundred years, and many properties acquired years ago at a very low cost have become extremely valuable. I should more highly value a return, so far as it can be ascertained, of the fair valuation of bank premises to-day. I will give an illustration to my hon. friend (Mr. Oliver)

from his own city. I remember purchasing the corner of Jasper and First avenues in Edmonton for a financial institution I represented at $350 a foot; but afterwards building in another place and not needing the property, it was sold at $2,000 a foot, and I suppose it is now worth $2,500 or $3,000 a foot. I submit that so far as a return by the - institution holding that particular comer is concerned, it would be more to the interest of the public that the fair valuation of that corner should be incorporated in the return. What I have in mind is that the banks should indicate to the public what their holdings of real estate are worth on a fair valuation, so far as it can be ascertained by the exercise of good judgment. The English financial system inclines to the view endorsed by Mr. McLeod that the banks should show their holdings of real estate at a low figure. I have in my hand a return of one of the principal banks in London, and I find this wording:
Bank premises, chiefly freehold, at cost or under.
In other words, if they had written off half the cost, then only half the cost would appear as the valuation. The English practice has been to consider it meritorious to show the valuation of bank premises under and not in excess of cost. The financial position of the Bank of Montreal was, judged to be extremely sound, and the bank had a very high standing, because, among other reasons it showed its entire premises which were worth perhaps several million dollars at only $600,000. The reason that opinion prevails is that the financial community likes to see a bank's balance sheet liquid; it does not like to see too much money locked^ up in real estate, because it is not immediately realizable and available for the purpose of meeting demand liabilities. The committee had in view that it is possible for the banks under the returns now made to show a condition that is misleading inasmuch as the bank may have very valuable bank premises written down to one-third or one-half their real value. I would submit for the consideration of the committee what I had in mind when the Bill was before the Banking and Commerce Committee but did not submit because the committee decided that the making of a_re-turn on assessed values might be misleading; and of course banks are a fair mark for municipalities who desire to obtain the full taxation therefrom. I would submit, as an amendment to clause 79, the following:
The bank shall annually, during the month of January, make to the minister a return showing in detail the fair market value of its real and immovable property held under this section.
I do not believe that the clause referring to the actual use and occupation of the bank could be strengthened, and this amendment will provide for the fair valuation of the premises of the bank which can be checked by any person who desires to check it. In that way we will have the fair market value of the premises which may be subject to such comment as the public may desire to make on it. I do not believe the banks will (Suffer at all in public estimation if their balance sheets show in respect to their real estate about its exact value.


Henry Robert Emmerson: The amendment of
the minister covers the point as to publicity which I had view. I can appreciate the difficulties with respect to exposing the banks to an admission of their false position in the past if we were to limit their holdings to five per cent of the combined capital and reserve, because if we did so evidently it would be out of proportion to existing conditions. Apparently, if it were possible to get at the real value of bank premises throughout Canada it would be found that probably nearly twenty-five per cent of the combined capital and reserve of the Canadian banks was invested in real estate, ostensibly for their own use but in reality in many instances for the use of their tenants. I would not wish to move an amendment to clause 79 without the approval of the minister, but in leaving that section as it is we are in a way placing the banks in the position of being real estate dealers.


Frank Oliver: While the hon. minister's proposal for publicity is very good, he does not touch the point that I think the country should have information on, and that is the amount of money that is being invested by the banks in these properties from year to year. I am not asking for information in reference to what has taken place in the past. If we are to know what profits the banks are making, we must know what amount of money they are investing in real estate from year to year. It would be satisfactory to the shareholders, after knowing what amount of money went into real estate, to know what value that real estate had from year to year afterwards.


William Thomas White: There will be a difference each year. I think we ought to be able to get that information.


Frank Oliver: There is no information
as to how much money was invested originally, and I think that is something the shareholders are entitled to know. With regard to the section .as it stands, and this amendment, I venture to make a suggestion. The law is on the statute-book. The Government is responsible for seeing that that law is carried out. As long as this section remains as it is, it is the Minister of

Finance who is in question as well as the banks, if the banks do not live within the terms of the section.


William Thomas White: I intend to have a heart
to heart talk with the Bankers' Association in regard to these and other matters.


Frank Broadstreet Carvell: They will stand a lot
of that.


William Thomas White: As I read section 79, I
agree that banks are absolutely prohibited from holding real estate beyond what is required for their actual use. We have not changed- the law in that respect. I think the matter should be drawn to the attention of the banks.


[Stage Direction]
Amendment agreed to.
Section agreed to.
On section 91-interest which may be charged:
Samuel Simpson Sharpe: I do not think this clause was given the consideration that it was entitled to in the committee. According to the section as it stands, a bank can charge any rate of interest, and it would be an extraordinary condition of affairs to permit a bank to over-ride the ordinary usury laws and to charge any rate of interest, no matter how necessitous a customer might be. I would respectfully suggest to the hon. Minister of Finance that he should revert to the old section. While it is objectionable inasmuch as it is being violated as other sections in the_ Act, still in its original form it is not so objectionable as in the present form. In the original section there is a stipulation by which banks cannot charge more than seven per cent; that acts as a corrective.


William Thomas White: My hon. friend from North Ontario (Mr. Sharpe) will recall that when this section was under consideration by the committee, I stated that it was entirely acceptable to myself that the section should remain as it was. Other members of the committee, however, were of the view that the section on its face permitted a rate of interest to the banks not exceeding seven per cent. That certainly appears to be the case. I shall read the section as it was originally, that is to say, in the revision of 1901:
The bank may stipulate for, take, reserve or exact any rate of interest or discount, not exceeding seven per centum per annum, and may receive and take in advance, any such rate, but no higher rate of interest shall be recoverable by the bank.
It seems to me that is as clear a statement that the bank is -limited to maximum seven per cent as it is possible to make it in a statute. Notwithstanding that section 91 and the plain language therein contained, the banks have been taking rates of interest in excess of seven per cent and Mr. OLIVER.
have been taking those rates in advance, following their usual practice. If a man borrows a hundred dollars from a bank for a year at eight per cent, the bank would not give him $100 at the time the loan was negotiated and then take his note for $100 at eight per cent, but would give him $92 and take his note for $100. The banks' practice in taking a' higher rate of interest than seven per cent has been sanctioned by a judgment of the Judicial Committee of the Privy Council delivered by Lord Moulton on the 17th of February, 1913, in the case of McHugh versus the Union Bank. I shall only read one section of that decision which seems to confirm the right of the bank to take such rates of interest as may be stipulated for, provided it is taken in advance. This is the quotation:
The plaintiff must be taken to have known that the bank had no right to stipulate for and no power to recover interest at eight per cent, but he voluntarily assented to that which was equivalent to payment of interest at that rate, and he has no right to recover back any excess which he thus voluntarily paid.
That finding surprised me, for this reason. It proceeds upon the principle of estoppel. If a man agrees with a bank that he will pay eight per cent, he cannot be heard to say that that is not a binding agreement between him and the bank. I should have thought it would be argued in contravention of that that it was ultra vires of the bank to take more than seven per cent. That either was not argued or was regarded as not arguable by the Judicial Committee. The effect of the finding is that a bank may take any rate of interest that is stipulated for, provided it takes it by way of discount and deducts it at the time the loan is made. Take the case of seven per cent under that decision. Suppose that a bank made a loan to a man of $100 with interest at eight per cent, and did not deduct it in advance, and then sought to recover it by action. I think without question, under that decision, the bank would be limited to seven per cent interest. The decision goes further and holds that, if the loan has gone past maturity, only the legal rate of interest of five per cent can be recovered for the period after maturity. If we sum all that up, because the law 'is not only this section but this decision under it, the law to-day is as follows:	If a bank makes its bargain with a man who borrows the money at 8 or 10 or 12 or 20 or 30 per cent, and deducts it at the time the loan is made, the bank's action in doing so is legal under the decision which I have quoted; but, if the bank loans the money upon a note bearing interest at 8 per cent or 15 per cent or 20 per cent, and does not deduct the amount of interest at the time the loan is made, then the bank cannot recover by

process of law interest at a higher rate than five per cent. Further, if the loan goes past maturity, the bank under the McHugh case, is limited to the legal rate of interest of five per cent for such period after maturity. It was pointed out by the committee that the test of the law to-day and the practice of the banks, to which I have referred, are in contravention of what appear at all events to be the plain terms of section 91, and it was thought advisable that the anomaly should be removed if possible. I stated at the time that the government was entirely willing that the section . should stand as it was or that it should be made so as to show the law as it exists to-day. Consequently the section was amended by the committee to read as follows:
The bank may stipulate for, take, reserve or exact such rate of interest or discount per annum as may he agreed upon, and may receive and take in advance any such rate, but no higher rate of interest than seven per cent shall be recoverable by the bank.
That, as I understand it, represents the law as it is to-day; but, having regard to the reasons put forth by my hon. friend from North Ontario that the section should ' be allowed to remain as it is, I am entirely agreeable to that course. Because, when you have a section which has stood for a number of years and a decision under it has been given, there is always a danger that a new clause, no matter how carefully drafted, may be given a different meaning by the courts from that which the draftsman intended. Therefore, as I say, as the intention in drafting this new clause was only to embody the law as it is to-day, it might possibly be better, if the committee agree with my hon. friend from North Ontario, to allow the clause to stand as it is.
The question may be asked: why not limit the rate of interest to seven per cent? 1 think the evidence before the committee on that point satisfied all the members that such a provision would recoil on the public which it was the intention to benefit, namely, the borrowing community, and especially the small borrower. The evidence given showed that in the West the prevailing rates were eight and nine per cent; and on the other hand it was known that rates of interest were known as high as sixteen and even twenty-four per cent. But these higher rates were in cases of this kind: A man borrows $25 for three months and gives his note. The bank charges him $1 as a minimum charge. That would be at the rate of $4 a year for $25, which is sixteen per cent. The evidence showed that it would hardly be possible for the bank to make a loan at a charge of less than $1, because there is as much trouble in making a loan of $25 as in making one of $200. It is known also that the amount
of loans in the West are very many times in excess of the deposits of the districts in which they are made, and therefore the banks have to obtain a higher rate of interest than they would have to obtain from discount business in districts where, in addition to making the loans, they receive the funds from which the loans are made.


Frank Oliver: I am not able to propose an amendment to the clause as it is in the Bill, nor am I able to accept the pro posal that my hon. friend from North Ontario has made to replace the clause formerly in the Act, if that clause has the same effect that the minister has specified. I take it, as in the ease of the section that we were discussing a while ago, that whoever framed the Bank Act in the first place, and whoever framed the section corresponding to this in regard to the rate of interest, had the intention of limiting the rate of interest. I take for granted, in view of what has been said by the minister and by the hon. member for North Ontario, as well as from my own reading of it, that it was the intent that the rate of interest should be limited. Now, I know it is asserted that the rate of interest cannot be limited, that it must be governed by the law of supply and demand. And to a certain extent, I am willing to agree that that is a fact. Allow me to suggest that there are other elements entering into this question than the mere question of supply and demand. It has been mentioned before and I mention it again, this Bank Act is a special provision, it is an attempt to legislate upon supply and demand. At every point from beginning to end, it governs, or assumes to govern, both supply and demand. There are reasons why that should be so. The banks are handling the money of the people. Their own money would give them but a small part of their profit; it is out of the money that does not belong to them, but belongs to the people who are especially under the protection of this Parliament, that the banks make their money. And it is because of that fact that the Bank Act from beginning to end contains restrictions as well as empowering clauses. Now, it is a well-known rule that if you have high interest you must take great risk, the risk corresponding to the interest. I say that, considering the source from which the banks derive the money that they loan, they should not take such risks as warrant these high rates of interest. It is contrary to the whole principle of the Bank Act from beginning to end, it is contrary to the welfare of every interest that the Bank Act was supposed to conserve, that the banks should be allowed to take excessive interest, because that means they are taking ex-

cessive risks. Now, it is said, if they are not allowed to take excessive interest they will not do business. From my point of view, having regard to the basic principles of the Bank Act, that is the proper course; if they have to take a big Tisk they should refuse to do the business. It is no part of the business of the chartered bank to take such risks for the sake of high interest. It is not the purpose for which they are created; it is not the purpose for which they are empowered. While the evil has not been carried to any great extent up to the present time-I will admit that; the evil at the present time is only serious^ to the person who is borrowing at the high rate of interest, and, of course possibly his security is in proportion to the rate, but if the bank be authorized and empowered by Parliament, if it is to be permitted that they can go into the# business of charging excessive rates of interest, I maintain that, while the bank profits may be maintained, the risks of bank losses are correspondingly increased and danger to depositors is increased equally.
As regards the conditions in the West, there is no reason why the bank interest in the West should be higher than it is in the East. The fact that money is not deposited in! the West makes no difference. For what purpose do we endorse a system of centralized and branch banks, except to give the benefit of having the money of depositors in one place to be loaned out at another place? Banks are anxious to do business in the West; they come there in large numbers; they spread their branches over the prairies; they build their buildings and pay high rates for property. There is no reason why the borrower on the western prairie should pay to the bank a rate of interest that will enable the bank to pay fancy prices for property and put up magnificient buildings that are not necessary for the bank's business. There is no reason why interest in the West should be higher than it is anywhere else, and, as a western man, I desire to protest absolutely against the contention that it should be. The Bank Act should limit the rates that the companies should be entitled to pay or to collect. There is no reason why the banks should be nominally restricted but actually allowed to enter into the business of usury, and that is what some of the banks in the West are doing to-day. I am not able to propose an amendment, but I want to affirm the principle that there should be no distinction in the rates of interest in the West and the 'East, and that there is no sufficient ground for any such difference in the rates of interest. Reputable banks in the West are not charging usurious interest; it is the banks that are not reputable who are charging those excessive rates, and there is no Mr. OLIVER.
reason why banks who want to go into the business of usury should be permitted to do so as competitors of those who do not want to go into that business. The original intent of the framers of the Bank Act, as shown in the clause as it formerly stood -namely that it was right and proper that there should be a limit to the rate of interest charged-was a proper principle, and if it was not effectively embodied in the Act as it formerly stood, it should, in the light of present knowledge and of present conditions, be effectively embodied in the Act as it passes through Parliament to-day. I do not say that the figure should be seven per cent, eight per cent, nine per cent or ten per cent, but I do say that there should be fixed whatever maximum the sense of Parliament should agree to be proper, and that the law should be so framed and administered that a bank that desired to go into the business of usury should not be permitted to do so, and if it did*- it should be punished.


Mr. SEXSMITH:: I took objection to this clause in the Banking and Commerce Committee, and I wish to register my protest again. For my part I cannot see why we should allow a corporate body to charge any rate of interest they choose; we have laws at present in nearly every province of Canada prohibiting an individual from doing so. I do not say that the banks have been charging usurious rates, but. there is nothing to prevent them from doing so, and the principle involved in this clause is that, if any individual goes to a bank desiring to obtain a loan of from $25, $50, $100 or even $5,000, and if he is sufficiently hard-pressed to pay 25 per cent or 50 per cent upon the loan, the bank is legally entitled to take it. In reading over the two clauses, the old section and the one proposed under the present Bill, I agree with the hon. member for North Ontario (Mr. Sharpe), but if the interpretation asserted by the hon. Minister of finance to have been put upon that clause by the courts is correct, then I would take objection to that also, and would agree with the hon. member for Edmonton (Mr. Oliver) that the clause should be so worded as to place the banks on equal terms with individuals who may be in the money business.


Mr. KYTE :: I also desire to protest
against the provisions of this section as pointed out by the hon. member for North Ontario (Mr. Sharpe). There is a law on the Statute Book at the present time which regulates the rate of interest which other persons shall charge for the use of money, and I cannot see why this Parliament should accord to the banking institutions of this country privileges which are denied to ordinary individuals. During the discussion on the second reading of this Bill I

pointed out that the tendency towards merging financial institutions in this country has resulted in an increased rate of interest to the small borrower. The Minister of Finance has said that at the present time when small loans are put through the bank there is a minimum rate of 75 cents or $1 which is, as a matter of fact, sometimes 15 per cent of the loan, according to the amount. A minimum rate of 75 cents or $1 is of course a very small rate for the borrower to pay. If a man goes into a bank and borrows $25, and the bank charges him $1 for putting the loan through, there is not much to quarrel about, but if the . borrower desires to obtain $100 or $500, the bank manager, under the provisions of this section, if it is allowed to remain in the Act, and if the necessities of. the borrower are sufficiently great, may exact a rate of 15 per cent, which would be a very considerable tax upon the borrower. I think that if no better protection or safeguard can be made for the small borrower in hi3 transactions with the bank under the section which has been substituted for the clause in the present Act, 1 think the present Act ought to prevail. Atall events the provisions of the old law do not legalize the exaction of extortion, as this section would do. The hon. Minister of Finance stated that the hanks were heretofore improperly imposing illegal rates of interest upon the borrower; yet under this section we propose to legalize what it is illegal for the banks to do at the present time.


William Thomas White: Allow me to correct my
hon. friend; I am afraid I have not made myself sufficiently clear. Section 91 of the present law apparently limits the rate to 7 per cent, but I pointed out that the decision in the McHugh case was that if the rate of interest were stipulated in advance- and that has been done for years-the bank could legally take the rate of interest so stipulated. So that the profits of the banks have been quite legal, although apparently contrary not only to the spirit but to the letter of section 91. I would like to say further that when this Act was originally drafted, Canada was, of course, a different country from what it is to-day. Evidence was given before the committee to show that at the time of the gold rush in the Yukon territory, which is a part of Canada, rates of interest were as high as from 24 per cent to 36 per cent, 2 per cent or 3 per cent a month; and it was also shown that the expenses of carrying on the business of the banks at that time in Dawson city were enormous. The banks said they would never repeat the experiment. It was pointed out that a plate of pork and beans cost, I think, $5, and it was stated that the cheapest thing in Dawson at that time was money. We, therefore, must have regard to the fact that we have a country the size of
Europe, with different conditions prevailing in its different sections.
My hon. friend from Edmonton (Mr. Oliver) contended for an equalization of rates. I think that would be very desirable if we could accomplish it without denying hank accommodation to sections of the community in which he is particularly interested. I do not believe you will ever be able to put legislation on the statute hook that will compel banks which, like others, after all, are pursuing their vocation, for the sake of gain, to go into a particular district remote from the central communities, unless they think that the opening of that branch will immediately or prospectively result in gain. The evidence before the committee showed that banks would not go into new sections of the country if confined to a rate of interest of say seven per cent. In fact, evidence was given, and some members of the committee may dilate upon this, to show that it would be very unprofitable for the banks to do that, and that as a matter of fact it would result in depriving many communities of banking accommodation which they very greatly need, and for which they would be willing to pay eight, ten or even twelve per cent. In other words, the law of supply and demand would govern. If we limited the rates of interest absolutely to seven per cent, in other words, if we changed section 91 so as to give legal effect to what was obviously in the mind of its original drafter, instead of benefiting the borrower, we should take a step that would recoil to his disadvantage. There are districts in the Northwest and in the Yukon and other parts of Canada where the banks are under exceptional expense in opening up their branches. That being the ease, and in order to remove the anomaly, the committee decided upon the clause which appears in the Act now before the committee, but in view of the request of my hon. friend from North Ontario (Mr. Sharpe), and of other members of the committee, who were, I think, quite properly of the view that the decision of the Privy Council to which I have referred permitted the banks to take in advance the rate stipulated for, and when they sought to recover by a process of law, limited them to the maximum rate of seven per cent before maturity and five per cent after maturity, and in view of the further fact that it is impossible to forecast what legal decision might be given on a new wording, I have said to this committee, as I said to the Banking and Commerce Committee, that I am entirely willing to restore clause 91 as it appears in the present Act. In other words, not to disturb the wording, the banks will he in whatever position they were in under the express wording of section 91, which appears to limit the rate to seven per

cent. It is only fair to the committee _ to say that according to the McHugh decision they have the right to a higher rate if taken in advance.


George William Kyte: We must not forget that we are legislating for the whole of Canada. While it may be said that conditions as regards banking, and the value of money, were unusual in the Yukon some years ago, those conditions do not prevail to the same extent at the present time. If this section passes, it will not only enable a bank manager in the Yukon to charge a rate of interest according to the necessities of the borrower, but it will result in increasing the rate of interest all over Canada. The advantage of the section that exists under the present law at all events is that it indicates that it was in the mind of Parliament that banks should have no right to exact a larger rate of interest than seven per cent. That circumstance had the effect of operating upon the consciences of some bank managers in eastern Canada.


Frank Oliver: Upon what?


George William Kyte: Some bank managers have consciences.


William Thomas White: I have handed in an amendment- under which clause 65 will be restored.


George William Kyte: I would prefer the former clause.


The CHAIRMAN:: Mr. White moves:
That clause 91 be struck out, and that the following be substituted therefor: ' The bank may stipulate for, take, reserve or exact any rate of interest not exceeding seven per centum per annum and may receive and take in advance any such rate, But no higher rate of interest shall be recoverable by the bank.


Fleming Blanchard McCurdy: The hon. member for Edmonton (Mr. Oliver) was not, I think, present at the sittings of the Banking and Commerce Committee. The evidence produced there was to the effect that the operating cost of a branch in western Canada was some two per cent on the total volume of business in excess of the cost of operating a branch in eastern Canada. I think it was Mr. Henderson who produced those figures, and he explained that his bank therefore charged on an average two per cent more interest for similar business in a large centre in the East. In other words, the reason given by that banker for the higher rates was the higher operating cost. We all know that there is a very large demand from the West for money. The West is prosperous, and we all rejoice in that. But the fact remains that, under our banking system to-day-and it is particularly true at the present moment- the West can only be supplied with the Mr. WHITE (Leeds).
money it needs by draining the East dry. Some three or four years ago, in 1909, the National Monetary Commission of the United States was investigatisg the banking systems of different countries with the idea of making a report to Congress. They sent to this country Mr. Joseph French Johnson who, in April, 1910, reported to the National Monetary Commission. I have here in his published reports his conclusions regarding the Canadian banking system, and with your permission, Mr. Chairman, I would like to read one bearing on the point raised by my hon. friend from Edmonton.
Mr. Johnston makes the statement that when making his investigation of the Canadian system in 1909, he had access to information of the most reliable kind. On page 92 of his report he says:
This transference of funds from sluggish to active communities is the inevitable result of a system of branch banking, and is the cause of the tendency of the rate of interest toward uniformity in all parts of Canada. Whatever may be said against a system of branch banks, there can be no question that it does bring about a more even distribution of capital in a country than is possible under a system of independent local banks. Canadian bank managers are anxious to put out their money where it is most wanted, for there they get the best possible rate of interest and obtain paper of the best quality. No matter where a manager's headquarters may be he is most deeply concerned in three questions :	(1) Where is idle money accumulating? (2) How can he best draw it into his bank? (3) In what parts of the Dominion is money most needed? In localities of both kinds he establishes branches; in the one the branches accumulate deposits often much in excess of their loans, in the others the loans exceed the deposits.
Thus it happens that the savings of the eastern provinces, where the growth of industry and trade' is slow and the demand for new capital is not increasing, are sent westward and loaned out to merchants and manufacturers and farmers of the new territories. The people of the East supply the capital for the development of the West, though many of them perhaps are entirely ignorant of the useful purpose their savings are made to perform. In the western cities of Canada one hears no talk among business men about the scarcity of capital.
That was written in 1909. There are complaints at the present time, but the present money stringency is world wide.


Frank Oliver: If my hon. friend will take a trip out there now, he will hear something different.


Fleming Blanchard McCurdy: I do not have to go so far as that for complaints regarding money scarcity to-day; but that will pass. (Reading):
A merchant or manufacturer in Manitoba gets the money he needs as easily as does a

merchant or manufacturer in Toronto or Montreal.
J ustifiable as the bank's policy is from a national point of view, one cannot help believing that the branch banking system has really checked development of business and industry in the maritime provinces. If Canada during the last thirty years had depended, like the United States, upon independent local banks, there would have been a plethora of capital in the Bast, and Montreal, Quebec and Halifax, like Boston, New York, and Philadelphia, would years ago have had 4 and 5 per cent money, while Winnipeg and other western citie3, less populous than now, would still be paying one .per cent a month. The relative cheapness of capital undoubtedly helped build up the prosperous industries of Massachusetts. The same cause operating in the maritime provinces of Canada .would doubtless have led to the establishment there of industries of which the people under existing conditions have not ventured to dream.


Mr. THOMSON (Qu'Appelle):: I wish to register my protest, along with that of the hon. member for East Peterborough (Mr. Sexsmith), against this clause in either shape. Something has been said about suggesting another amendment. I would like to make a suggestion to the minister as to how an amendment might be made. He has referred to a decision in England that, when the interest is charged in advance, and when it is a discount, the law does not apply. I do not think the law will- apply at all under the section as it was before and as it appears now because it is drafted so that it shall not apply.


William Thomas White: The decision was given under section 91 of the present Act, which, I say, we are restoring.


Levi Thomson: The decision will be exactly the same under the present Act.


William Thomas White: No doubt.


Levi Thomson: If the law applies now to prevent a banker from recovering interest after the date of payment it can be made to apply to the discount as well and if so I see no reason why we should not say so. If that is one of the difficulties in the way it is very easy to overcome it. I would make the suggestion to the minister, so that he can remove any doubt that there is at present, that he insert, after the words ' per cent ' in the final line, the -words ' either by way of interest, discount or otherwise" Would not that cover it?


William Thomas White: That would limit the rate absolutely to seven per cent would it not?


Levi Thomson: I am only dealing with this one difficulty now which the minister has raised and I think the minister will be willing to confess that the insertion of these words will do away with this difficulty.


William Thomas White: Yes.


Levi Thomson: Then, one of the difficulties that has been placed before us is removed. If these words will not remove it the minister can very easily provide words that will. So long as he makes the enactment clear the judges are bound to enforce it. Another objection has been raised by the minister and that is that in the case of a small amount loaned for a short- time the interest recoverable is very small. That is very easily overcome. If we were to make an exception where the minimum amount of interest does not amount to one dollar, it would overcome the difficulty. Thus, there are two difficulties which seem to have been wiped off the slate. I am not dealing with the question as to whether the rate of interest shall be limited to seven per cent. If seven per cent is too low make it higher. But if we are going to have a rate of interest let us enforce that rate. If you say that a certain amount of interest shall be charged and that only, let us provide machinery which will ensure the enforcement of that law. I must confess that I doubt very much if the present machinery will enforce it. I made the suggestion when the matter was before the House on the second reading of the Bill that the only way of making that provision effective was by Government inspection or by having some Government official to deal with it. The borrower is not going to enforce it because, as a matter of fact, he dare not enforce it. If he is a regular borrower and if he refuses to pay more than the rate of interest'that the law allows the banker can easily say:	If you do that, all right, we
shall not"lend you any more money. Notwithstanding all that has been said about competition between the banks I believe that there is enough close corporation among them that if a man were shut out of one bank he would be shut out of other banks too. The borrowers feel that and therefore such an enactment would have to be enforced by the Government. I am not asking the minister to state any particular rate of interest, but that the Government enforce the rate that is decided upon. We are told that there should be a higher rate of interest in the Yukon and in western Canada than in eastern Canada. I do not like the idea of zones, but if it is really* necessary you could provide zones and you could say that a certain rate of interest shall be charged in a certain locality and another rate could be fixed for another locality. I think there is a good deal more said about the necessity for high interest in the West than is justified. I do not believe that the cost of carrying on the operations of the banks in the West will exceed the cost in the East by more than two per cent. I do not believe some of the things that these men tell us and I doubt very much if the men who say them believe them. We have heard a great deal about



the fact that the rate of interest in the West should be higher because there is very little money placed in the banks on deposit in the West. That works both ways. There is apparently enough money generally for the purposes of the country. If there is less deposited in the West than is borrowed there must be more deposited in the East but the people in the East are not prepared to borrow it and therefore it is an advantage to the East to have the West borrowing more than it is depositing. If the East is depositing more money than it is borrowing then, it is necessary to have the West borrow that money; otherwise the East will be losing the interest on the money. So, I think that it is about as broad as it is long. I do not know if I make myself dear to the minister. If the East is depositing more money than the West, and no doubt it is, as a matter of fact there are sufficient deposits in Canada as a rule to meet legitimate requirements. Then, the West is as much advantage to the East as the East is to the West; we borrow the surplus. And with the East and the West working together, we claim we aTe as much advantage to the East as the East is to us.


Henry Robert Emmerson: Provided there is
equilibrium.


Levi Thomson: It is said the banks
will not loan to some people unless the rates are high; but to my mind these extraordinary loans are something like gambling; that is all you can call them. Let us put the maximum rate of interest as high as necessary, and if it goes beyond that on loans the chances are these loans are not in the interest of the country, are not in the interests of the bank, are not even in the interests of the man borrowing. I know of many men who are getting money 'who would be benefited if they were refused. If a man is paying too high a rate of interest it is because he is too hopeful, and the chances are he will lose. Money is worth just so much; sometimes we think it ds worth more than it really is, and because a man by paying a higher rate of interest is getting money when he would not get it otherwise, that results in a disadvantage all around. I think the minister will overcome the difficulties he has mentioned by adopting the two suggestions I have made. If we are to have a rate of interest fixed let us enforce it and not make a mockery of it. If the rate is too low, let us increase it, but do not let us shirk our responsibilities, let us face them like men.


William Thomas White: I desire to move that the committee rise and report progress and ask leave to sit again this day, the Teason being that it will enable me to present the Mr. THOMSON (Qu'Appelle).
supplementary estimates so that the members of the press gallery may get them, as otherwise they would have to wait until after midnight.	[DOT]


[Stage Direction]
Motion agreed to, and progress reported.

[Stage Direction]
A message from His Excellency the Administrator, transmitting supplementary estimates for the year ending MaTch 31, 1914, was presented by Hon. W. T. White (Minister of Finance), read by Mr. Speaker to the House, and referred to the Committee of Supply.
At six o'clock, House took recess.
After Recess.
House resumed at eight o'clock.

[Stage Direction]
Bill No. 207, respecting a Patent of the Commercial Acetylene Company of New Jersey.-Mr. Maclean (South York).

[Stage Direction]
House resumed consideration in Committee of Bill No. 36, respecting Banks and Banking.-Hon. W. T. White (Minister of Finance). (Mr. Deputy Speaker in the Chair.)
On section 91-interest which may be charged.
Henry Robert Emmerson: When the committee rose, I was going to make some observations with respect to this section. In my judgment, the section as amended by the committee is directly at variance^ with previous legislation passed by this House, and with the principle which Parliament has recognized for many years. As the amendment of the committee reads, it leaves the door wide open; the banks may charge any rate of interest. I am not going to assume that banks would do so; but I know that it has been done in some sections of the Dominion, as has been demonstrated in trials of important cases in the Supreme Court, notably that of Barretts vs. the Bank of Commrrce, a Yukon case. The bank there charged as high as twenty-four per cent on loans and renewals. It was held in that case that where the party had voluntarily paid the amount, he could not recover the excess beyond the seven per cent. We have on the statute-book of Canada the Money Lenders' Act, chapter 122 of the Revised Statutes. Section 6 reads as follows:
Notwithstanding the provisions of the Interest Act, no money-lender shall stipulate for, allow or exact on any negotiable instrument, contract or agreement, concerning a loan of

money, the principal of which is under five hundred dollars, a rate of interest or discount greater than twelve per centum per annum ; and the said rate of interest shall ba reduced to the rate of five per centum per annum from the date of judgment in any suit, action or other proceeding for the recovery of the amount due.


William Thomas White: Has my hon. friend had
his attention called to the definition of money-lender there?


Henry Robert Emmerson: Yes, hut that was a principle which was adopted by this Parliament. It' was recognized that certain individuals should be restrained. Seeing that it has been demonstrated in the courts of the country that banks have been offenders in this respect and that they have charged as high as twenty-four per cent, this Parliament should put some restriction upon them. My proposition would he to restore the section as it was originally. I would make the rate even higher, if seven per cent is not sufficient. I would have a maximum rate of a certain amount beyond which the banks could not go, that is, that they could not accept or retain any rate beyond that. Of course that would not apply in cases where the interest did not exceed one dollar. Section 4 of the Money Lenders' Act reads:
This Act shall not apply to any loan or' transaction in which the whole interest or discount charged or collected in connection therewith does not exceed the sum of fifty cents.
I would say: 'the sum of one dollar.' Where the bank did accept or retain, even with the consent of the party who secured the loan, the excess amount beyond the limitation which we had fixed, it should be recoverable in any court of competent jurisdiction. I would also have a provision that each bank shall furnish a statement monthly to the Minister of Finance showing the maximum and minimum rates of interest or discount charged or retained on loans by such bank at its head office or at any of its branch offices, such statement not to include percentage rates or minimum charges on small loans less than fifty dollars. That would seem to obviate one difficulty with respect to a bank showing a very high rate of interest on a loan of say twenty dollars for a month, where it had charged its minimum charge of fifty or seventy-five cents or a dollar, as the case might be. I would not require banks to make statements as to such small loans; but, if we fixed for them a rate of interest beyond which they must not go, then we should tie them down so that they shall be obliged to return any excess, if the party brings suit against them in any court of competent jurisdiction. Seven per cent ' as a maximum amount is perhaps too small under present conditions. I do not think
327i
banks in the East usually go beyond that; but, in the West they charge as much as-eight or twelve per cent, and in this case from the Yukon, they charged a rate as high as twenty-four per cent. Tinder those circumstances I think we should limit the rate to perhaps 8 ner cent, the 8 per cent not to apply to small loans in regard to which a minimum charge is made by the bank. I think if you make the maximum rate higher, the banka, should be obliged to refund any excess of that charge, providing the borrower seeks it. In addition to that I would require that this statement be made to the minister monthly, so that publicity should be given as to the minimum and maximum rates charged by the banks of the country.


William Thomas White: Does my hon. friend propose to offer an amendment?


Henry Robert Emmerson: I was going to propose an amendment with respect to the monthly statement.


William Thomas White: I think it would be a
mistake to raise the rate-of interest from 7 per cent to 8 per cent, even if we made the 8 per cent absolute. In those districts of Canada in which the prevailing rate is now less than 8 per cent, there would be a tendency on the part of the banks to feel a justification that they do not now feel in raising the rate to1 8 per cent. I am impressed with the suggestion put forward in the committee that the provision for a 7 per cent rate is an indication to the banks on the part of Parliament, notwithstanding the decision of the Privy Council, that the rates of interest should be moderate, bo far as the coast communities are concerned, in which the rates of interest are at present 7 per cent or under, I think the fixing of the rate at 8 per cent would have an adverse influence. Let us take the case of a western community, particularly those parts of the country in which a higher rate than 8 per cent prevails. It was shown to the satisfaction of the committee that the bankers discriminate as to loans; they always have and always will. A gets a better rate than B, because his account is larger, his credit better or his standing higher in the community. A borrower in a particular community where the deposits are large and where there is particularly keen competition will receive more favourable rates than a borrower in a community where there are no depositors, where the deposits are small, or where there is no competition on the part of the banks. The hon. member has mentioned the case of the Yukon. I have no hesitation in saying that if you had had an 8 per cent or 9 per cent maximum rate in the Yukon, fixed by the Bank Act, the business community of that territory would

EQt have received any banking accommodation at all, because the carrying on of the banking business would not have paid. I do not believe that it is feasible to impose legislation that would compel the banks to make loans in any particular community. The banks, so far as the Yukon is concerned at the time of the gold rush, would not have entered the field at all if they had been limited to an 8 per cent or 9 per cent rate. I know that there prevails in _ the community in general a very considerable sentiment in favour of strictly limiting the rates of interest, but I submit that we must face all the conditions that exist in such a large country as Canada. As legislators, it is our duty to do what we regard to be the proper thing in the interests of the community as a whole, and I am perfectly satisfied that any legislation, so far as western communities are concerned, seeking strictly to limit the rate of interest to eight per cent would defeat the very purpose of those who are desirous of bringing about that condition. I think that banking accommodation would be denied to a large number of borrowers who would be willing to pay eight per cent or ten per cent, especially upon small loans, to their own great advantage. I think that view was amply confirmed by evidence that was taken before the committee. We are all in sympathy with the principle of obtaining as low a rate of interest as we can for the borrowing community, but two things must be borne in mind. In the first place, banking, just like any other business, is engaged in for purposes of gain, and, so long as there is no combination affecting the rates of interest there is, undoubtedly, competition, not only among banks, but between the banks and private lenders of money, for there is a great deal of money loaned in the country by institutions other than the chartered and private banks. It is desirable that bank captial should flow into this country, and if we adopt a rate of discount which will affect or restrict the profits of the bank unduly, I think the whole country would feel the ill-effects of it, because the money would simply cease to flew into that capital. Undoubtedly you will injure the borrowing community if you adopt restrictions that might be too harsh. Evidence was given by the manager of the Weyburn Bank, who produced a statement with regard to his institution-a very carefully managed bank, at least so far as we oould judge. It was a bank operating in Saskatchewan, a purely western institution not doing any business in the East at all. His evidence was confirmed by figures which he laid before the committee as to the net earnings Mr. WHITE (Leeds).
of the bank and the rates of discount charged, and it was clearly shown to the satisfaction of the committee that a reduction to seven per cent of the rate of interest which they obtained upon loans would close the doors of the bank. During the course of his examination, I asked him:
Q. I want you to make a little calculation for me. According to the bank statement your current loans and discounts amount to $894,000?-A. Did you take in the past due?
The Chairman.-It is about $910,000.
The Witness.-About $910,000.
By Hon. Mr. White:
Q. How much interest would you lose on these if they were on a 7 per cent basis? What is your average?-A. I would say our average is 9 per cent.
Q. Then you would lose 2 per cent?-A.
Q. What is 2 per cent on $900,000?-A. $18,000.
Q. How much per cent is that on your capital?-A. About 6 per cent.
Q. How much dividend do you pay?-A. 5 per cent, well, now we make more than that.
Q. If a 2 per cent reduction in interest were made, what in your opinion, would be the effect?-A. It would wipe out our profit on the loaning business. You might as well go out of the banking business.
Here is a man who gave his evidence very sincerely and impressively before that committee, and I think it establishes the fact that so far as the hanking business in the western community is concerned by banks operating there solely-and that is a fair test-having regard to the amount of deposits that they can get now at any rate 

I look forward to a great increase in deposits there, because I have the greatest faith in the West-to compel the banks to limit their interests to seven per cent would defeat the very purpose that hon. gentlemen have in view who advocate that course. I understand that my hon. friend from Westmorland does not differ on that point. There was a suggestion made in the committee, I think by my hon. friend from Westmorland and concurred in by myself and many other members of the committee, and I think favourably received by the committee, though there was some difficulties that arose or were suggested as likely to arise in its carrying out because of difficulty in obtaining returns to comply with the requirements of the amendment. I agreed in principle with the amendment that was suggested, for this reason, that I believe that the best result will be obtained by not limiting the rate of interest, and it will not be limited when we restore that section 91, because as I pointed out before the House rose, the decision under that section enables the bank to charge such rate of interest as may be agreed upon, provided it is taken at the time the loan is made and is not recovered

by legal protest. I believe that it is better to leave the situation exactly as it is. But I am a great believer, as are many other members of both sides of the House- in fact, I have no doubt, all members on both sides, because we are legislators-in publicity as a check upon anything that might be against the interests of the community. Therefore, I suggested as an amendment to the amendment in the committee-or I am not sure that I suggested it to the committee, but I had it drafted- that a return should be made by the banks at least once a year-because there is great difficulty in making returns monthly- whereby the maximum rate of interest charged by the banks throughout Canada should be made a subject of return to the Finance Department, so that if an extortionate rate of interest were being charged, the bank could be asked why it was necessary to charge this rate, what the circumstances are which made necessary a rate so much in excess of the rate mentioned in the Bank Act as being fair. Therefore, I shall propose an amendment to section 91, though I have only been able to consider it very cursorily, because it has been comparatively hurriedly drafted by'my assistant deputy who has been a good legal advisor throughout this Bill as all the members of the committee know. The amendment is as follows:
The hank shall make a quarterly return-*
Because that will give them time.
-to the. minister as of the last juridical day of the months of March, June, September and December in each year, giving such particulars as will be prescribed by regulations made by the Treasury Board of the interest and discount rates charged by the bank.
I have it in mind that the Treasury Board can make regulations as to loans up to a certain amount, loans in certain districts and so on, so that it would not be of a general character and yet would be fair to the banks. Sub-section 3 is also a part of the amendment:
Such returns shall be made up and sent in within the first thirty days of the respective last juridical days aforesaid, and shall be signed by the same persons as are required to sign the monthly returns made to the minister under section 112 of this Act.
The effect of section 91 on the amendment will be that the banks will be reluctant to go into new districts and get such a rate of interest as they may be able to get, and that may be fair having regard to the conditions. On the other hand, they would be compelled to make a return to the Finance Department so that, if it should appear that an undue advantage is taken of the borrowing community, attention would be drawn to it and the matter may be taken up between the department and the
bank. It seems to me this is as good a reason as we can get on this question.


Henry Robert Emmerson: I am very thoroughly in accord with the suggestion made by the Minister of Finance. Bearing in mind the fact that the minister has made provision for a return to be given in the month of January as to the value of bank premises, I was going to suggest the following:
All banks shall furnish a statement on the first day of January in each year to the minister showing the maximum and minimum rates of interest or discount paid to, charged or retained by such bank at its head office or at any of its branch offices during the preceding year on loans-this not to apply to any loan or transaction in which the whole interest or discount charged or collected in connection therewith does not exceed the sum of one dollar.


William Thomas White: I would point out to my hon. friend that the provision for regulations of the Treasury Board, I think, cover the situation better than his amendment, as giving more flexibility.


Henry Robert Emmerson: I had accepted the suggested amendment of the hon. minister. I was going to explain to him that I had in mind offering this amendment for the consideration of the committee. But, in view of the step the minister has taken, I will certainly not interject my amendment.


Frank Broadstreet Carvell: Would the minister say what amendment is before the committee? I understood him to move an amendment before dinner, another was suggested and the minister has moved another one still.


William Thomas White: My hon. friend has before him, no doubt, the Bill as it came from the committee. I propose to strike out section 91 as it appears in the Bill and to restore section 91 as it exists in the present Act. Again, there is the amendment which I have just suggested with regard to returns concerning rates of interest and discount.


Frank Broadstreet Carvell: I think the minister is right in restoring section 91 to the Bill. It is pretty hard to regulate what a man shall charge for his money. Although I know the banks are recipients of very great favours at the hands of Parliament, yet I presume that there are cases in which they might have the right to charge more than in other cases, although I must say I can hardly follow the argument that it costs two per cent more to do business in the West than in the East. It may be true; I am not an authority. I wanted to say a word on behalf of the banks. I do not think they have ever been guilty of usury so far as the eastern portion of Canada is concerned;

at least I have never known of a case. I have never known of a bank in eastern Canada asking for more than seven per cent interest during the last ten or twelve years, [DOT]although it may be possible that they have *done so. I know that a very large amount of money is loaned at six per cent, but so Jar as our portion of Canada is concerned, 1 do not think there is very much fault to find with the amount of interest charged by the banks. I think it would be better to leave that seven per cent in the Act. While the minister does not think it is of much legal value, and probably, in view of the decision of the Privy Council, it is not, I would rather see it left that way than have a maximum of eight per cent provided,_ for I fear that if we fix the maximum at eight per cent, in many cases the banks would say, if we are compelled to do business fpr less than it costs us in the West we will have to make it up in the East, and probably the borrowers in the East would suffer. Between the two evils I would choose the least, and therefore I think it would be better to leave the section as it was *originally.


Michael Clark: I am very
[DOT]sorry to take up any of the time of the [DOT]committee on a matter which has been -discussed so much, but I have certain opinions which I voiced on the second Teading, and which I feel impelled to repeat now. Throughout my life, ever since I could do any thinking, I have considered that it-was a misfortune to have any law upon the statute book of a civilized country which was not respected and enforced, I do not care against wrhat class of society that law is directed, or against what proceeding of society. Now the original clause reads in part:
The bank may take any interest not exceeding seven per cent, but no higher rate of interest shall be recoverable by the bank.
If that clause has any object, it is to assert that the law of Canada, as applied to banks, is that they shall get seven per cent interest upon money as the maximum. What are the facts, Mr. Chairman? In the province of Alberta, if a man goes to the bank, it is not a case of collecting interest before hand; he is presented with a note. If his credit is good his own name will be accepted on the note, if not, he is required to have the signature of another citizen of xepute. On that note he promises to pay eight per cent, and the banks invariably collect that eight per cent. I say it is a misfortune that in a country in the British Empire we should, with our eyes open, enact this clause and have this proceeding go on. I do not wonder that a^ lawyer of the eminence and repute of Chief Justice Moulton should have given the decision he [DOT]did, because by that decision I think he
Mr. CARVELL.
inferentially expressed his absolute contempt for that clause as a piece of legislation. I have not his private opinion, but I am perfectly certain that if I got it, it would be what I am expressing at the nre-sent moment. I would he surprised if it were otherwise. I do not know what answer my hon. friend the Minister of Finance and other hon. gentlemen on the other side of the House may make to what I am stating. It may be said that when a man signs a note at the bank to pay interest of eight per cent in six months, he does so with eyes open, and makes a contract. I quite agree, but he cannot help himself. He needs the money. The point is that the law of the land says that you shall not take more than seven , per cent, and the banks proceed incontinently to take eight per cent. I do not know how this assembly can respect itself if it knows the facts and enacts this clause. I can only explain the fact that more borrowers do not take advantage of this clause on two grounds. One may be that they do not know anything about the clause, and I think that is true of the great majority of them. The other may be that they are so upright, that when they sign a contract they feel like standing by it. Suppose the latter is the explanation. It would be so in my own case; no man can be surer of another man's uprightness than he can be of his own. Suppose the latter explanation is the true one, what conclusion must we draw? Why, it is that the morality of the ordinary borrower in the province of Alberta is higher than that of the Parliament of Canada, because Parliament enacts a clause which extends an invitation to financial immorality on the part of the borrower, who can sign a note saying:	I
promise to pay eight per cent but who, if __ he knows enough, may say at the end of six months, you can whistle for your eight per cent for all you are going to get is seven per cent. If Mr. Justice Moulton had a poor opinion of the original clause,
I would not like to think what his opinion would be of the amendment. But as the minister has dropped it, I do not want to criticise it. I never lick a dead foal. I do not favour any clause, I could not favour any clause, -Which says that the banks cannot take more than seven per cent and which yet allows them to take eight per cent. I could not do that and respect my intelligence and common sense. I hope the minister and the committee understand where I am at. I am certain that the people of Alberta do. One thing the people of Alberta do not understand is why they should pay eight per cent while the people of Saskatchewan pay only seven per cent. But if he cannot make better legislation, I suppose we will have to go on paying the extra one per cent.


Frank Oliver: I agree with what the
hon. member for Red Deer has said, and I suggest to the Minister of Finance that every argument he used in favour of the clause as he proposed to have it, was an argument that there should be no clause at all. I quite agree with the hon. member for Red Deer that if the clause in regard to interest is not to be respected, it should not be there.


Michael Clark: It should be penal.


Frank Oliver: What I urge is what was urged by my hon. friend from Qu'Appelle (Mr. Thomson) and by other members, that whatever may be considered as a maximum rate of interest should be fixed as the maximum.


Samuel Simpson Sharpe: What
is the hon. member's suggestion?


Frank Oliver: I am not making a suggestion at the moment; it is not my business.


Samuel Simpson Sharpe: You represent the West.


Frank Oliver: Let my hon. friend represent North Ontario a little more honestly than he does, and it will be better for North Ontario and for the rest of us. All I want to say is that if a purely western bank, such as the Weyburn Bank, can do business, and does do business, on an average rate of interest of nine per cent, there is either nothing in the contention that our system of banking with branches all over the country is superior, or else the system is not being carried out fairly.


William Thomas White: Might I call my hon.
friend's attention to the fact that the Weyburn Bank's rates were eight per cent, ten per cent and twelve per cent, but the average was nine per cent?


Frank Oliver: The Weyburn Bank is a purely western bank, dependent on western capital and western deposits, but its average rate of interest was nine per cent. That is to say if the Weyburn Bank charged all its customers nine per cent, it would get just the same revenue as it gets to-day. It suits the Weyburn Bank, being an American institution, run by people from the United States, according to United States principles, to vary their rate of interest. The average rate is nine per cent. If the Weyburn bank, depending entirely on western capital and on western business, can do business at nine per cent, our chartered banks having their headquarters in the East ought to be able to do business in western Canada at a lower rate than nine per cent. If they are not, there is no benefit in the system of branch banks. My hon. friend seems to think that it is a
splendid arrangement whereby there is to be left on the face of the Act a provision, as he says, suggesting to the banks that they ought not to charge more than seven per cent but at the same time leaving them free to charge whatever they please. He says that will work beautifully because in eastern Canada they will only charge seven per cent and in western Canada they may charge whatever they want to. If my hon. friend will take the section out of the Act altogether and will hold out to the country that his Bank Act, put through Parliament this year of grace, 1913, takes no account of the crime of usury when practised by a bank upon the western people, he will be honest anyway in his legislation. But to put a section in the Act which holds out to western, as well as eastern, people, the idea that the banks are limited to a charge of seven per cent and yet allows them to charge what they like is not honest legislation, it is not fair and it is not decent, and I protest against it and protest very strongly. My hon. friend made the suggestion that a fixed rate of seven per cent would close the banks operating in the West.


William Thomas White: I said that in the case of the Weyburn bank the manager showed that it would, but that in regard to other banks, my view was that they would not go into new districts to the same extent as they otherwise would and that probably they would draw out from some that they are now in.


Frank Oliver: Precisely. Neither myself nor my hon. friend from Qu'Appelle, nor any of the men from the West, urged that the rate be limited to seven per cent. What we are asking to be protected against is the usurious rates which are being charged, which my hon. friend knows are being charged and which he cannot justify.. My hon. friend from Regina (Mr. Martin) stated to this House that in the course of his business he had collected accounts for banks where the interest was twelve per cent. It is nothing more nor less than a scandal, .and it should not be permitted under the legislation of this Parliament. It is a disgrace to the banking system of Canada. We know that the reputable banks of Canada do not do that sort of business, but there are some banks which are run in that way, they are doing that kind of business, they are doing it in the West, and my hon. friend stands up and says that it is all right so long as they do it in the WeiSt. I object most strenuously to that proposition. I do not ask that a low maximum rate be fixed, but let us have protection against usury in the West under the provisions of this Act, or else let my hon. friend say that he _ will not , give any protection and that, while other

institutions and persons are prevented from practising usury, the 'banks shall have free and full liberty to do it so long as they do it west of lake Superior.


William Folger Nickle: When this matter came
before the Banking and Commerce Committee, we found ourselves confronted with this difficulty. The law, as it stood in the old Act, was made up of the original section plus a decision of the Judicial Committee of the Privy Council, the net result of which was that if a bank took their charge by way of discount they were entitled to charge any amount they cared to levy, but if they did not make the charge by way of discount but by way of interest, they were not entitled to charge an amount in excess of seven per cent. If the instrument called for the payment of a rate of interest in excess of seven per cent it was ultra vires as to any rate in excess of the legal rate of five per cent. Part of the law was not exactly as the hon. member for Red Deer (Mr. Clark) has stated. It was this: If the rate of interest was in excess of seven per cent the borrower had a right to say: ' I will- pay five per cent/ and the banks could not collect beyond that amount. In the consideration of the situation considerable evidence was given by western representatives and, if I remember correctly, one Mr. Chipman gave evidence and produced some two hundred or three hundred notes of various banks by which he amply proved that the ordinary rate of interest in the West did not, except in odd cases, exceed ten per cent. Further evidence was given by Mr. Henderson, representing the Bankers' Association, by which he showed that the expense of carrying on business in the West was 2-58 per cent higher than in the East, and that the average rate of increase in interest was two and a half per cent in the West as compared with the rate in the East. He read extracts from the statements of various men in authority who went the length of saying that if this Parliament tried to fix a rate of interest of less than seven per cent the net result would be that the supply of money to the West would be restricted and there would be a dearth. The committee therefore found itself confronted by these difficulties. If they fixed a rate of seven per cent, or less, then the West was going to suffer from the closing up of branch banks because the cost of doing a small business was necessarily proportionately larger in the West than that of doing a larger business in the East. There were no deposits there and nothing like the proportion of loans made by the banks as compared with the amount of business done in the East. The net result was that section 91 as it stands in the Bill as presented to Mr. OLIVER.
the House to-day was drafted and carried in the committee, togetner with a subsection that monthly the banks must present to the Minister of Finance a statement showing what the rate of interest was on all loans of over one hundred dollars. The committee in dealing with section 91, drafted as it appears in the Act now under consideration, together with this sub-section, thought they would effectively block any attempt on the part of any bank to charge usurious rates. But the committee, at a subsequent sitting, cancelled the sub-section, and left section 91 as it appears in the Bill now before the committee. Under the present clause a bank may collect by way of discount any rate it pleases, but in case it charges a higher rate of interest than seven per cent, it can collect only seven per cent. It differs from the original section in the old Act in this, that a rate of seven per cent could not be collected if a rate in excess of this were charged as interest, but only a rate of five per cent. 1 quite agree with the opinion of the hon. member for Red Deer that it is most unfortunate that this Parliament should enact a law that practically means nothing. I am with him in this, that whatever we intend to be the law, we should state clearly and fully and that we should if necessary put in some penalty to insure that the provision shall be observed. J am sorry to say that I do not agree with my hon. friend the Minister of Finance in thinking the old section better than the present. It seems to me that the wisest provision we could make	is not to restore the
-old section, but to leave the present section 91 as ia the reprinted Bill, and put in an amendment or sub-section to the effect that monthly or quarterly returns of all loans over one hundred dollars shall be made to the minister. The publicity incidental to that notice would prevent, through shame, usurious rates, and section 91 in the amended Bill is consistent with the intention of the committee.


George William Kyte: There was evidence produced in the Banking Committee to show that it costs two per cent more to conduct banking business in the West than in the East and consequently the banks insisted on the privilege of charging nine per cent. According to that, any rate beyond seven per cent in the East is too high and should not be permitted. In Nova Scotia some branch banks are charging eight per cent for loans, a fact which cannot be denied. They are not doing it in cities and the larger towns where there are two or three banks doing business, but I do know they are charging eight per cent in certain places in Nova Scotia where they have bought out the competing banks and have a mo-

nopoly. If it was the intention of this Parliament when the Bank Act was revised in 1901 that banks should absolutely be debarred from charging more than seven per cent, and if it turns out that a flaw has been discovered, as indicated by the decision of the Privy Council, and that banks are permitted to charge more than seven per cent, it is our duty to so amend the existing section of the Act that the courts cannot get around the intention of Parliament. Surely language can be found to explain definitely what the intention of Parliament is, so that there will be no danger of a decision of the Privy Council or any other court giving a different interpretation to the clause.
The financial conditions existing in the West and in the Yukon were more pressing in 1901 when the Bank Act was last revised than they are to-day, and with, a full knowledge of these conditions as regards the high cost of money in the West and in the Yukon, Parliament deliberately asserted that banks should not have the right to charge more than seven per cent. Therefore, I think the situation existing in the West to-day is not such as to induce Parliament to modify the Act in this particular. My hon. friend from Kingston (Mr. Nickle) points out that unless the banks charge their interest by way of discount, and deduct it from the proceeds of the note, by agreement forced upon the borrower, they could not charge more than seven per cent. I know that banks will be sure to take advantage of the interpretation of the statute that will enable them to collect the highest amount of interest by way of discount. There is not much danger that a bank manager will permit the borrower to place upon the face of the note the rate of interest he is paying, but rather he will discount the note and collect his discount before he passes the balance over to the borrower. My hon. friend from Kingston says that if that note runs beyond the time for which a higher rate of interest than seven per cent is mentioned, the higher rate cannot be collected. In the West, as I understand the hon. member for Red Deer, banks advance money upon a note signed by the maker without requiring an endorser when the maker is in good financial standing. That practice does not prevail in Nova Scotia. It is absolutely impossible for the maker of a note, no matter how wealthy he may be and how good his financial standing is, to get a loan of five dollars unless he has an endorser.


Mr. MACLEAN (Halifax):: Oh, no.


George William Kyte: I am speaking now of the
smaller communities. My hon. friend from Halifax (Mr. Maclean) may have had a different experience.


Frank Broadstreet Carvell: And in pretty big communities too.


George William Kyte: 
Mr. AIKINS:: I quite agree with what
has been stated by the hon. member (Mr. Kyte), that it is better to restore the clause as it was and as it does exist in the present Act.


George William Kyte: I was going to add also: in view of the amendment proposed by the Minister of Finance, which I think further strengthens it.


James Albert Manning Aikins: My reason for saying so
is that the section as it now exists suggests seven per cent to the country as a reasonable rate of interest generally. I think it would be improper to increase that suggested rate of interest because it would give an indication to the country that this House of Commons thought a larger rate of interest would be reasonable. The next reason why I think it should be retained just as it is in the present Act is because it has	been	there	for a long
time; it has	become honoured in
usage, and there has been no general outcry in the country against it. I think, in the way in which it has been generally exercised, it has proved satisfactory to the country, although it may not have proved satisfactory to some customers. The third reason is because it has received judicial interpretation. I think that recent judicial interpretation shows clearly the exact meaning of that section, which is this, that if the parties [DOT] agree upon a rate of interest and it is paid, at once it becomes a settled and closed account; a person who does so pay does it voluntarily with eyes open, knowing what is being done. The hon. member for Calgary (Mr. Bennett) says: They usually cannot help themselves. I submit that the customer is in no worse a position than if a fixed rate of interest was put in the Act, say seven or eight per cent, because the bank would decide not to lend in that particular district at that rate and so the customer would"not get the benefit. Therefore it seems to me, when it is left as a matter of agreement, and people ordinarily understand how to protect themselves, it is the more reasonable way of doing it. If the payment is left executory, that is, if the agreement is simply that the interest is to be paid, then the Bank must stick to the seven per cent, because otherwise it would be an illegal agreement and then the only interest that could be charged would be five per cent. Under these circumstances I quite agree with the hon. minister that the old section should be retained, and I also agree with him in respect to the rider that should be attached to it.


Frank Oliver: I just want to call the attention of my hon. friend to the way in which this section, which has been found so useful, has operated in the past. I Mr. KYTE.
have here a statement of the proceedings of the Banking and Commerce Committee which sets out that the Bank of British North America has placed certain loans. There are thirty or forty of them and none of them at a late less than ten per cent. The rates charged by the Dominion Bank vary from eight to eleven per cent; by the Canadian Bank-of Commerce, from eight to twelve per cent; by the Union Bank, from eight to twelve per cent; by the Merchants' Bank, from eight to twelve per cent; by the Northern Crown Bank, from eight to twelve per cent; by the Bank of Hamilton, from eight to twelve per cent; by the Weybum Bank, from eight to ten to twelve per cent; by the Bank of Toronto from eight to ten per cent; by the Quebec Bank, from nine to ten per cent; by the Bank of Ottawa, from eight to twelve per cent. The rate charged by the Royal Bank stands at eight per cent. In view of this evidence before the committee as to the regard that has been paid to that section of the Act, unless the hon. minister is going to make the section have some effect, the proper course would be to strike it out. It has discredited our legislation, or it has discredited our administration, because no regard has apparently been paid to it. I certainly think that such legislation shovdd not remain on the Statute Book unless the Government is prepared to say that the interests of the people are to be protected by the intent of that section being carried out.


William Folger Nickle: Which section do you
mean, the old or the new?


Frank Oliver: I mean that neither of
them should remain. The new section has the merit of being honest. It simply authorizes the banks to practice usury without restriction. That is honest and fair, but I object to it. I do not think it would be for the credit of Parliament to allow such a section as that to pass into permanent legislation. As for the old section, while on its face it has an appearance of value, as a matter of fact, on the word of the minister and on the evidence before the committee, it has no value. It is not the intention of the minister to give it value. Therefore, I say it should not appear on the statute-book. The business of Parliament and of the Government is to provide in this Act against the charging of usurious rates of interest by a bank.


Alexander Kenneth Maclean: I have not yet heard this evening from any hon. member a sound reason for departing from the section as we find it in the reprinted Bill. All the hon. gentlemen who have suggested that we revert to the section in the Bill as originally introduced have not accompanied their remarks with any argument, any reasoning, any logic, which appeals to me in the

slightest degree. I quite agree with the hon. member for Edmonton (Mr. Oliver) that Parliament should say what it means and should mean what it savs. There are many difficulties in the way, and I quite easily perceive motives which may prompt hon. gentlemen to suggest the restoration of the old section. At the same time, I feel that the people of this country would be better satisfied if the section in the Bill as reprinted were left and were enacted as our final judgment rather than if we were to restore the old section which reallv means nothing, and which I do not think has any value by reason of the judicial interpretation given to it by the Supreme Court of Canada, because I believe that, in view of the judgment o'f the Privy, Council in the McHugh case, on the first occasion when the section of the old Bill ever reaches the Privy Council for internre-tation they would decide that the Canadian banks could not recover more than seven per cent even by taking that rate of interest either at the time of discount or at any other time.


Mr. BENNETT (Calgary):: That was a
decision of the Privy Council.


Alexander Kenneth Maclean: No, they have not so
decided. That question did not come up in the McHugh case at all.
I believe the rate of interest, with the competition we have in this country, will adjust itself usually to the proper rate. Neither our friends in the West nor people in the East can expect cheap money and high priced land, or cheap money and high priced other commodities. Whether my hon. friend from Bed Deer would believe me to be a free trader or not. in the matter of money I am at one with him; and I would prefer very much, though it is a matter of indifference to me personally, that we should leave the section in the reprinted Bill as it is.


George William Kyte: Does the hon. gentleman
know the rate charged by the banks in the city of Halifax?


Alexander Kenneth Maclean: I suppose it is seven
or' eight per cent at the present time, and that on small notes of $25 or $50 the rates would be higher. I do not blame a bank for charging more than seven per cent in such eases.


George William Kyte: My information is that the banks are charging eight per cent in communities which have only one bank.


Mr. COCBSHUTT:: There is no clause to which the committee gave more serious attention than the one under discussion. We received evidence from many quarters and endeavoured to assimilate that evidence. I concur wholly with what the hon. junior member for Halifax (Mr. Maclean) has
said, that the clause really should remain in the Bill. While I agree with the hon. member for Bed Deer that we should not put legislation on our statute-book that is not to be carried out, still I think that this clause is such that it can be carried out. That is my view. It should be carried out in the spirit which the Finance Minister intended it should be, that is that the rates contracted for in the first place shall be the amount collected and if the note becomes the subject of a process of law for collection, the interest shall not be greater than seven per cent. That is perfectly practical legislation, and while there is no penalty attached to the breaking of it, still the plain statement the Minister of Finance has given as to what he wishes the hanks to understand to be the law, I think, will correct any overcharge in the long run, if such there be. The hon. member for Edmonton I think could hardly be sincere when he says that bank interest should be uniform throughout Canada.


Frank Oliver: No, I did not say any such thing.


William Foster Cockshutt: The hon. member objected that the West is paying more than the East.


Frank Oliver: I say that the West is
certainly paying more than the East, but I did not say we were legislating to compel it to pay more than the East. What I said was that I wanted legislation to prevent usurious rates of interest in the West.


William Foster Cockshutt: The tenor of the
hon. gentleman's remarks was that the East was exacting more interest from the West than was legitimate.


Frank Oliver: I beg the hon. gentleman's pardon, I will not submit to being put in a position of segregating West and East. It was the Finance Minister who pointed out the necessity of charging-more in the West than in the East.
Mr, COCBSHUTT:	I do not wish to
misrepresent my hon. friend. I understood that to be the basis of his argument. I want to point out that there are sections even in his own province that on a business basis should be charged more than others. My hon. friend will not deny it.


Frank Oliver: I do not denjr_ it. To make it clear I may say that irf^Edmonton, I think they charge no more than one per cent more than in Toronto and perhaps not any more.


William Foster Cockshutt: There are whole
districts in which new towns are just established, where immediate success is doubtful and where the business trans-

acted is very limited. It is not reasonable to expect that a bank will go into such a district and lend money at the same rate as in a settled community. The bankers who gave evidence before the committee made it clear that they should not take up business on that basis. They would not go into a new community and take the risk of the expense in order to do business there and charge the same rates of interest as in a community in one of the established parts of Canada. It is not only in the West that high interest rates are charged. In the clay belt-which I believe the hon. gentleman spoke of as a myth-just as high rates are charged. The new districts whether East or West must pay relatively high rates of interest, which is perfectly right. I have no brief to speak' foT the banks, but let me give to my hon. friend the statement of the manager of the bank at Weyburn, who, I think, he will accept as an authority on such a matter. This manager was asked whether similar credit was any better in the. United States than in Canada, whether banking facilities were better and money cheaper. His reply was to the effect that where a man in Saskatchewan or Alberta could borrow two thousand dollars at nine per cent, in the western states similarly situated he could only get one thousand dollars at twelve per cent, if we are to compare ourselves with others across the line -and the hon. gentleman has often been anxious to make such a comparison-we have the evidence of this bank manager at Weyburn that a man in Canada would get double the amount at twenty-five per cent less interest than one similarly situated in the United States. That shows that our banks are reasonable. I would point out to the committee that if you are going to put too much limitation on banks, if you are going to reduce their credits, you are going to make it more difficult to get capital into banking institutions. You cannot encourage capital to go into banking institutions with a club. The only thing to be done is to make the revenue so inviting that it will tempt the investment of capital. The evidence given to the committee shows that the return on banking capital in Canada, so far as the shareholders are concerned, is less than five and a half per cent, and in addition to that they have the double liability. Surely, nobody will say that when the profits of the shareholders are less than five and a half per cent, with a double liability, the banks are overcharging the people. I think that the Finance Minister has in that clause a very wise provision. I agree with the hon. junior member for Halifax that it is better to keep the present wording, be-Mr. COCKSHUTT.
cause it is the result of mature thought, and I believe that it will justify itself in the working out. I trust that before the committee reverts to the old clause they will consider the wording we have here, believing that it will work out to the advantage of both East and West, North and South. Before I sit down, let me say I believe this country is fortunate in that it has in the financial chair of this House a gentleman of the experience of the Hon. Mr. White. He has been a man among a million on this measure, both in his patience and in the wisdom and tact he has brought to bear upon this Bill. The more closely you follow what he has laid out, I believe, the nearer you will be to promoting the general advantage of Canada through this measure.
Mr. BENNETT (Calgary: It is a very simple question that is before the committee: Shall or shall not Parliament impose a restriction on the rate of interest the banks may charge ? That question has been solved in two ways. By the late Parliament it was solved by a section which -was a gold brick.
This section proposes to make perfectly certain what we are going to do. An excellent argument may be advanced to this committee why we should not limit the rate of interest which the bank charges its customer. I am not going to discuss that at the present moment further than to say that I think there should be a restriction. As to what this first section under the old Act means, I do not think Parliament had any knowledge as to that when they passed it. When Parliament passed that section it was intended unquestionably to impose a restriction upon the rate of interest the banks should take from their customers, and it was intended that fire rate should be seven per cent. As a matter of fact, the courts in the province of British Columbia in a Rossland case, which was decided many years ago, held that a bank might discount a bill which came into its hands at any rate of interest it pleased, and so long as the customer paid that rate of interest, he could not recover it back again. When a man goes to a bank to get a note discounted, he usually wants the money so badly that he is not going to inquire whether the rate of interest is eight per cent or ten per cent; he usually pays just what the bank charges him. There was a certain case decided by the Privy Council in February of this year, and my hon. friend from Halifax (Mr. Maclean) cannot have read it, or if he has read it, he has not understood it, because the judgment distinctly decides that if a customer goes to a bank and discounts his note, and the bank takes

the discount and treats it as nart of its profits, customer cannot recover it back under any circumstances. These are the words of the judgment of the Privy Council in that regard:
The plaintiff must be taken to have known that the bank had no right to stipulate for and no power to recover interest at eight per cent, but he voluntarily assented to that which was equivalent to payment of interest at that rate, and he has no right to recover back any excess which he thus voluntarily paid.
The customer is estopped, by reason of his conduct, from recovering the difference between seven per cent and the rate of interest which the bank takes from him in discounting his paper. The second point decided ini that case was that as in the 'contract between the bank and its customer, contained in one of the paragraphs of a chattel mortgage, the rate reserved was eight per cent, which was one per cent in excess of the sum stipulated by the Bank Act, the bank could not recover either eight or seven per cent, but was thrown hack upon the rate usually paid when no rate of interest is stipulated, five per cent. In other words, the contract to pay eight per cent was illegal, and, being illegal, the customer was entitled to recover only five per cent. The facts of the case were these:	Large
ranchers were carrying on business; they had dealings from time to time with the bank, and paid eight, nine, and in one case ten per cent interest for their money. Their account had continued for a period of not less than ten years, and suddenly they brought an action against the bank, claiming that the accounts of the bank were incorrectly kept, that the rate of interest charged was in excess of the amount provided for by the law, and that they were entitled to an order for an accounting and for a rectification of the accounts between them. The court held that they had a right to the correction of what you might call arithmetical computations and the right to have the accounts rectified so far as the dealings between the two parties were concerned. But in a chattel mortgage given by these customers to the bank for their indebtedness, there was a statement that the rate of interest should be eight per cent, and on that state of facts the Privy Council held that the bank could only recover five per cent, because any contract with the bank, whether by way of chattel mortgage, note or other security, providing for a rate of interest in excess of eight per cent was illegal, and the bank was driven to resort to the statutory allowance of five per cent. If seven per cent had been inserted in the document as the rate of interest, it would have been all right, but, the rate being eight per cent, the contract was illegal, and only
five per cent could be collected. This is the language of the judgment dealing with that matter:
The statutory provisions applicable to the case are to be found in the Bank Act, 1906, which enacts, section 91, as follows:
The bank may stipulate for, take, reserve, or exact any rate of interest or discount not exceeding seven >per centum per annum, and may receive and take in advance any such rate, but no higher rate of interest shall be recoverable by the bank.
Their Lordships are of opinion that the express ju'ovisions of the first portion of this clause rendered it ultra vires on the part of the bank to insert in the chattel mortgage of 28th May, 1907, the stipulation that interest should be payable at the rate of eight per cent, and that therefore that stipulation is inoperative. They are of opinion, therefore, that the contention on behalf of the plaintiff in this respect is right, and that the interest under that mortgage must be calculated at the rate of hve per cent per annum.
When the Banking and Commerce Committee was face to face with this consideration, what did they do? The committee had to decide whether or not we should place a restriction upon the rate the bank should recover, or whether we should leave the old section as it stood. This old section has been properly described as a golct-brick, nothing more nor less, and the new section unquestionably has the effect mentioned by the hon. member for Edmonton. It is a perfectly honest section in so far as phraseology is concerned, and it stipulates what the rate of interest may be, but it also implies that the banks may take any amount they like. As the hon. member for Edmonton has well said, this might be a usurious rate of interest, the taking of which, I think, should be prevented. I have no hesitation in saying, so far as I am personally concerned, that I do not think this is a question as between the East and the West. It is simply a auestion whether or not this Parliament shall impose a limitation or restriction upon the rate of interest the banks may charge their customers. My own personal view is that we should fix the rate at 8 per cent. I am told on excellent authority that this would work a very great hardship, and that in the Yukon, for instance, owing to the conditions there, the rates of interest could not be restricted to 8 per cent. In that district the rates were sometimes as high as 20 per c-ent, and that rate was. not regarded as high in that .part of the country as 6 per cent might be regarded here. In the Cobalt district the rate of interest is hign, and in some remote sections of the wqstem provinces new branches could not possibly open up if the rate of interest were fixed at 8 per cent. I therefore think that the committee should strike out this section in its entirety, or make some provision by which tire bank should by publicity be, if I

may use the word, shamed into charging only a reasonable rate of interest. If we cannot impose a restriction by limiting the rate to 8 per cent, let us by some method of publicity prevent those evils which are real and not imaginary, and which by thi^legislation we will give a direct incentive and inducement to become greater. However much you may argue as to the authority or influence of individual managers, it is the individual manager who has to deal with' these transactions, not the general manager at the head office. A young manager is, as a rule, anxious to make the largest passible profits in connection with a new branch; in some instances where a man has given the bank a $100 note and has received $95, he thought he was doing a very good thing, hut the rate charged was really 20 per cent. That is the reason why I think this committee should not pass this section of the Bill.


William Thomas White: 
Frank Broadstreet Carvell: Do you mean as it stands reprinted in the Bill?


William Thomas White: As it is in the old Act.


George William Kyte: It appears to me that the
only effect of the change that has been introduced in the new section is to salve the consciences of good Christian bank directors. That is how it appears to me. As the law stands at present, it states specifically that banks shall not charge more than seven per cent. However, they have been able to get round it by virtue of the decision of the Privy Council.


Richard Bedford Bennett: They did it
long before that.


George William Kyte: They prefer to have the
sanction of law for getting round it, and this amendment is introduced, not with that intention-I do not want to attribute that to the Minister of Finance-but it has the effect of easing the consciences of those hank directors who do not like to stand before the world as wanton violators of any public statute.


Frank Oliver: I desire to suggest to those who favour the reprinted section that after the word 'upon' in the last line on the top of page 49, there be inserted the words, 'not in any case to exceed' such and such an amount-eight, nine, ten, fifteen per cent, or whatever the committee think fit to fix. It seems to me that if we can impose a limit which shall be as high as the committee sees fit to make it. it will protect us against usurious interest and will have the effect of showing on its face what Parliament means.


Richard Bedford Bennett: You cannot
do that. You might put something in at the end of the clause stating that when a Bill is discounted it shall show upon its face what the rate is. If upon the face of every Bill taken by a bank for discount
there shall appear: Being at the rate of.... per cent per annum, I thank a great deal of the difficulty would be overcome.


Frank Oliver: That would not be controlling the matter: that would be merely giving information.


Richard Bedford Bennett: But if the information
is given in a great many cases the conscience hardly exists to charge twenty per cent per annum.


Frank Oliver: I would like to suggest to the minister the placing of these words in the present section, and if that is not acceptable I desire to move specifically 'that the section be stricken out.


Samuel Simpson Sharpe: With
reference to the suggestion of my hon. friend the Minister of Finance that this section should be accepted by the committee, it seems to me that it is a question in effect and practice as to whether the wording of the old section or the new section Is the more acceptable. The position I take is simply this. If we increase the rate, or if we allow a bank to stipulate for any rate it may agree upon with the customer, we will have critics, like the hon. member for Edmonton (Mr. Oliver), going before the electors and saying that the bank, under the old Act, was bound to charge not more than seven per cent, but the Government have opened the gates and allowed the bank to make any rate it likes.


Frank Oliver: No, the hon. member for Edmonton does not talk any such nonsense as that. It is in North Ontario that that kind of thing is heard.


Samuel Simpson Sharpe: We have had a lot of
criticism from the hon. member for Edmonton to-night, but we have not had any constructive suggestion from him. The hon. gentleman lacks the courage to state .what the rate should be. He has never stated to the committee what, in his opinion, the rate should be in the West. The onus will be upon the Government if they change this clause and make it different from the provision contained in the old section. My reason for stating that is pimply that the Government will be open to criticism for increasing the rate if they adopt the suggestion of the hon. member for Edmonton, who has not the courage to state what he thinks would be a fair and reasonable rate.


Frank Oliver: The hon. gentleman is
using expressions that he is not entitled to use.


Samuel Simpson Sharpe: I do not want to be discourteous to the hon. gentleman. I asked him a question a while ago which he an-

swered in what I considered to be an unbecoming manner-in a manner that I might characterize as my right hon. friend the Prime Minister (Mr. Borden) characterized his attitude a few days ago. I do not wish to repeat the language of the Prime Minister with respect to the hon. gentleman. I am simply discussing this question in the interest of the Government and I desire to say that if these two clauses mean the same thing, we should revert to the old clause in the old Act, and that if the Government allow the rate to be increased they will be open to criticism in that they have allowed the bankers to raise the rate of interest. If they allow an open rate so that the banker may stipulate for any rate he likes with the customer, the Government will be open to the criticism of rempv-ing the restriction of seven per cent and allowing the bankers to demand any rate they may care to charge. Consequently, it will be in the interest of the Government to revert to the old clause in place of the newly amended clause.


Frank Oliver: The proposition that I
desired to make to my hon. friend from North Ontario (Mr. Sharpe)- was that if the Government will not accept the suggestion to fix a maximum rate I will be responsible for stating the figure.


Samuel Simpson Sharpe: What rate will you say?


Pierre Édouard Blondin: Mr. White moves a sub-amendment to section 91 as follows:
The bank shall make a quarterly return to the minister as of the last juridical day of the months of March, June, September and December in each year, giving such particulars as will be prescribed by regulations made by the Treasury Board of the interest and discount rates charged by the bank.
3. Such returns shall be made up and sent in within the first thirty days of the respective last juridical days aforesaid, and shall be signed by the same persons as are required to sign the monthly returns made to the minister under section 112 of this Act.


Rodolphe Lemieux: Will that information
be published in the bank returns?


William Thomas White: It would be made public just as the bank returns are.


George William Kyte: Does that amend the section of the old Act?


William Thomas White: That is by way of a subamendment to the amendment I moved that the old clause should be restored in place of this section in the printed Bill.


Mr. MARCIL:: Will these returns be published in the Canada Gazette as the bank returns are?


William Thomas White: The bank returns are published although I believe there is no provision in the Bank Act completing their publication. Consequently, these returns can Mr. SHARPE (North Ontario).
be published as the bank returns are published to-day.


Charles Marcil: Unless provision is made to have them published in the Canada Gazette the public will have no notice of them.


Mr. GRAHAM:: I am not sure that the public would have much notice of them from the Canada Gazette. Is there any clause in this Act prescribing a penalty if the banks decline to furnish the returns?


William Thomas White: It would be an offence
against the Act and a penalty would be incurred if they failed to supply the returns -under the penalty clauses which are final clauses in the Act. But they would not refuse. The banks could not afford to be placed in a position of antagonism to Parliament by refusing to make these returns.


George Perry Graham: I know that in some
cases where departments asked for certain returns from certain companies it was almost impossible to get those returns and there was no penalty provided in case of their neglect or refusal. We found a great deal of difficulty in getting returns from companies for what is known as the statistical branch of the Department of Railways and Canals. That branch was established and certain returns were required under the Act. As time went on certain transportation companies were added to- those which must send returns to- the department. 1 do not know how it is now, but I experienced considerable difficulty in getting companies -to make returns and I had not any means of compelling them to do so.


Richard Bedford Bennett: What the
hon. gentleman said is quite true. Failure to supply these returns might be declared to be an offence under the Act.


Henry Robert Emmerson: You retain section
91 as it was in the old Act and not the section as it appears in the Bill reported by the committee?


William Thomas White: In answer to my hon.
friend from South Renfrew (Mr. Graham), I might say that my deputy tells me that it will be an offence against the law in that it will be -a failure to comply with the requirements of a public statute. I do not anticipate any difficulty in getting the returns, and as I desire to get this Bill advanced on account of the late date of the session, I would ask my hon. friend not to press his suggestion. If there should be any difficulty, I will try to remedy it by legislation.


George Perry Graham: I merely asked foT information based on my own experience. I will not press the matter if it requires many changes, but I call the attention of the minister to it.


Henry Robert Emmerson: The following
amendment was placed by me before the committee and it was bowled out very summarily:
That the said section 91 be amended by adding thereto the following:
' And all payments made by or on behalf of any borrower, whether paid voluntarily or otherwise, and all moneys accepted or retained by or on behalf of any bank under the provisions of this section for interest or discount charges in excess of said rate of seven per cent shall be recoverable by the person, firm, or corporation so making such payment or from whom such interest or discount is exacted or retained, in an action in any court of competent jurisdiction/
When that was disposed of, I then proposed the amendment as to the monthly statement and that was accepted, but at a later date it was also thrown out. I call attention to the fact that this amendment was offered in the Banking and Commerce Committee.


[Stage Direction]
Amendment agreed to.
On section 64-bank circulation redemption fund:
William Thomas White: I wish to suggest an amendment to section 64 which is of some importance. Section 64 refers to the circulation redemption fund, and members of the committee are doubtless aware that all the banks have to contribute an amount equal to five per cent of the average note circulation to that fund, which constitutes a security for the note circulation of the banks. We are providing a gold reserve against which the banks may issue notes in excess of the amount of note circulation which they may now issue against their paid-up capital and against the fifteen per cent of the paid-up capital in reserve in the emergency period. Mr. McLeod, who appeared before the committee, wrote to me about this from London, and I think he is entirely correct in his views. He says that it is not necessary for the banks to contribute five per cent in respe'ct to the note circulation which is issued against gold. In other words, it is the note circulation, which is issued against paid-up capital, and the so-called emergency circulation that should be safeguarded by the contributions of the banks. Therefore, in order to give effect to that recommendation and suggestion, which I have said is a very pertinent and good one, I move that section 64, sub-section 8, be amended by inserting, after deleting the period, after the word ' relates,' the following:
Provided, however, that in determining the average note circulation of a bank under this sub-section the daily average for each month of the amount of the bank's deposit, (if any) in the central gold reserves, which has not
been withdrawn or deemed to be withdrawn within the meaning of this Act, shall be deducted from the greatest amount of the notes of the bank in circulation at any time during the month.
That means that the banks shall contribute five per cent of the balance. As regards the note circulation secured by gold, that is absolutely secured. That leaves it precisely as it is at present so far as the constitution of the banks is concerned towards a guarantee of the note circulation of the banks. In so far as the note circulation of the banks is safeguarded dollar for dollar by gold deposited under the provisions of the new Act, it is not necessary to contribute for that.


George Perry Graham: If it had not been for the provisions of the new Act in adding to the gold security, this would not have been necessary.


William Thomas White: Quite so.


[Stage Direction]
Amendment agreed to.
On section 114-annual returns for unpaid dividends and balances:
William Thomas White: The hon. member for Westmorland (Mr. Emmerson) made a suggestion that we should insert the words ' certified cheque ' in line 40, page 57 of the reprinted Bill after the word ' balance.' The purpose is to make the term slightly more complete.	-	[DOT]


[Stage Direction]
Amendment agreed to.
Bill reported.

[Stage Direction]
House in Committee of Supply. (Mr. Deputy Speaker in the Chair.)
Arts, agriculture and statistics-exhibitions, $375,000.
['It should be borne in\nmind that, upon any material imported to be used in the construction of these ships, the shipbuilders would have to pay to the Government a certain amount of duty, and that when the ships are built in England or Scotland and brought over in completed form, no duty is paid. This should be taken into consideration when a comparison of the cost of construction in the different countries is made.\nProgress reported.\nOn motion of Mr. Rogers, House adjourned at 12.32 a.m. Wednesday.\nMr. BURRELL.', 'Wednesday, May 21, 1913.']
George Perry Graham: Last night we passed this item which we did not discuss at all. The hon. minister said that we could ask any questions concerning it at a future session of the committee. It would perhaps save time and a lot of questions if he would just give us a little idea of these exhibitions; what work he is carrying on; if this vote has anything to do with the vote for the Toronto exhibition; what is included in it; who is in charge of the exhibits; what are the exhibits; what success we	are	having,	and if	weare getting	any	returns	that	he	can
see directly or if they are indirect. Exhibitions properly conducted are the best advertising we can have for Canada. What are included in the exhibits-manufactured products or natural products? A few explanations would be acceptable, so that we may know what the money is for.


Hon. MARTIN BURRELL (Minister of Agriculture):: This special vote is confined to large internal exhibitions, and is not for exhibitions in Canada itself. There is a vote for exhibitions every year. There is in the main estimates a vote of $50,000 for the Dominion exhibition which goes from province to province in turn. There are occasionally special votes. Last year there was a vote of $100,000 towards the ioTonto National Exhibition, to pay for a building to house the exhibits of all the provinces. As I have said this vote has nothing to do with exhibitions of that kind, but it is to be confined to what we may call international exhibitions where Canada exhibits on a very large scale her natural resources and products. The first of these exhibitions was held in Stockholm in 1897. Since that time, fifteen or twenty exhibitions have been held, the last being the Festival of Empire in London. The money of this vote is largely to be for the exhibits at the International Exhibition in Ghent, in Belgium. The same man is in charge who has been in charge for many years, Colonel Hutchison, who is well qualified for the work and has a natural genius for exhibition work. A considerable sum will also be necessary for preliminary expenses in connection with the Panama Exhibition in 1915, for which we shall have to begin to get ready before the end of the present year. The Ghent Exhibition is just opening.


Rodolphe Lemieux: I hope the names of the two commissioners published are correct, Mr. Lafontaine and Mr. Plante.


Martin Burrell: Nothing has been decided on 'that point. No assistants have been sent as yet. In regard to that, the only object in sending anybody from this side was not to represent Canada but to strengthen the staff in Belgium of Frenchspeaking people.


Rodolphe Lemieux: I do not know what the particular qualifications of Mr. Lafontaine may be, but as regards Mr. Plante, if my hon. friend will appoint him, I am sure he will find in him a man most conversant with the resources of our country and quite a creditable representative of Canada. At the time we had the exhibition at Brus-sells three years ago, Canada was never so well advertised in Europe as by our exhibit there. If my hon. friend could only reproduce what we had at Brussels-and I think he could improve on that-he would confer a great benefit on this country. I must say that in Mr. Hutchinson, and his immediate staff, Mr. Hains, for instance, we have most competent officers. At Brussels, I myself visited the exposition, and it was really a matter of pride for Canadians who were present to see the enormous crowds that were struggling from morning until evening Mr. GRAHAM.
to see the exhibits of Canada. It was practically a farmers' exhibit, a representation of the life on our Canadian farms, an exhibition of our fur-bearing animals, a display of the fruits of Canada and or the products of our forests and of our mines. It was a most extraordinary fact that so many people from that wealthy country came to see what Canada had to exhibit. I am quite sure that with the literature which was distributed there, Canada derived great benefit from that exposition. I congratulate the minister on his decision to have our exhibit this year at Ghent, and I hope Mr. Hutchinson will be given a free hand, as he has had a free hand in the past, because he has a real genius for such organization. Might I suggest to the minister _ to be generous-I do not say in salaries, because I know he will pay good salaries to our officers-but to be generous in the printing of pamphlets, booklets, atlases and other literature in French. There is in Belgium, as my hon. friend knows,- a large French population, and it is from that country that we expect, more than from France, to receive immigrants. The population of Belgium, in contradistinction to that of France, increases every year. The territory of Belgium is rather limited, and there is no country in, the world where the population is so dense. They are well-to-do farmers, they have large families and they emigrate, while the French peasants do not emigrate. Especially will that be the case this year, for the new law which is being enforced in France for service in the army will make immigration more restricted than ever. From Belgium we may expect an excellent class of farmers and gardeners, and I am quite sure that if the statistics are consulted since the exhibition of Brussels, it will be found that there has been quite an increase in the immigration from Belgium into Canada. If French and Flemish literature is being distributed, it will certainly result in a numerous class of desirable immigrants.


Martin Burrell: The hon. gentleman can rest assured that no pains will be spared to make the exposition at Ghent worthy of Canada. I agree with what he says concerning Belgium. We have a certain population from Belgium in the far West-in my own province especially. These people are most thrifty and their methods of intensive farming are a revelation to us. We could not get a better class of immigrants. We have made provision for a large distribution of suitable literature.


Mr. SINCLAIR:: This item is largely increased this year as compared with last. The minister gave us a general outline of what he intended to do with the money, but it would be interesting to have items of the expenditure of this $200,000, so that

we may know how he intends to expend so large an amount.


Martin Burrell: I can only say, as I have already said, that a large proportion of this money is to be spent in connection with the exposition in Ghent. That exposition will close about October or November. But before the expiry of the fiscal year, we shall have to incur fairly heavy expense in getting ready for the Panama exposition to be held at San Francisco in 1915. As my hon. friend knows, if he has seen these expositions, there is enormous expense in sending the exhibits and otherwise. I think he will find that for this expenditure, large as it is, the country will get a very excellent return in final result.


John Howard Sinclair: From an answer given to a question which I asked in the House some time ago, I understood that the Government did not intend to participate in the Panama Exposition.


Martin Burrell: I think my hon. friend is confusing the Panama Exposition with the San Diego Exposition. It was not thought advisable to take part in the latter, as the San Francisco Exposition is probably the more important.


George Perry Graham: Can the minister tell us to what extent Canada intends to take part in the Panama Exposition?


Martin Burrell: I could not give my
hon. friend any definite information, but speaking personally, for it is somewhat early to take the matter up officially, my own feeling is that at the Panama Exposition Canada would be justified in making one of the strongest exhibitions that she has ever made. It is of immense importance that on that occasion we should be worthily represented, and that our great natural resources should be given due prominence.


George Perry Graham: Have representations been made to the Government by the manufacturers of Canada with regard to their being represented at one of these' great expositions?


Martin Burrell: I have not any in mind.


George Perry Graham: I see no reason why the manufacturers should not endeavour to exhibit their products at these great fairs so that the people of the world would understand not only that we are a great agricultural country, but also that we have important manufacturing industries as well. I say this to impress on the manufacturers of Canada what I have often said to them privately: that they are missing a great opportunity in not coming to the front and endeavouring to get their products to these great expositions with a view to showing
the people of the world that we are a manufacturing as well as an agricultural country.
Agricultural development of dairying and fruit industries; improvement in transportation, sale and trade in fruit and other agricultural products, $190,000.


Martin Burrell: The items compos-in(r
this amount are: expenses in connection with headquarters, $15,000; expenses connected with the various dairying branches, $62,000; fruit division, $70,000; markets division, $22,790; cold -storage, $18,900; a total of $190,000 and an increase of over last year's estimates of $50,000,


Frank Oliver: What, generally speaking, are the dairying operations of the department?


Martin Burrell: We are taking up various kinds of work. One of the important activities in which we are engaged is the extension of a system of what we call dairy record centres. Under this system we plaoa an expert, who thoroughly understands the use of a Babcock test, in charge of a certain district, and whose duty it is, within a certain radius to test the cows, the products of which are going to the creameries. The results of his tests are made known among the farmers who own the herds, in order that they may be instructed in the best methods of feeding and caring for their animals, and they may be enabled to tell which animals are paying and which are not. We have now nearly twenty of these centres.


John Howard Sinclair: Where are these centres located?


Martin Burrell: There are nine or ten centres in various parts of the province of Ontario, and three or four in Quebec. We are establishing two or three in the maritime provinces; so far we have not gone into the western parts at all, except in one of the smaller districts of British Columbia.


John Howard Sinclair: In what portions of the maritime provinces have these centres been established?


Martin Burrell: In the maritime provinces we have not done very much as yet. There is a station at Clifton, New Brunswick; and we have one in Prince Edward Island, we are establishing a centre in the French Acadian portion of New Brunswick, and propose to extend the system during this, or certainly during next year.


Mr. MACDONALD:: What about Nova Scotia?


Martin Burrell: We have many of these points under consideration, so far as the expenditure which we propose

"to make to enable us to do the work this year.


John Howard Sinclair: Are these officers permanent? Do they remain the whole year in one locality?


Martin Burrell: The officer works the whole year round, and by using the Babcock test he is enabled to tell the farmer the exact amount of butterfat contained in the product of each cow.


William John Macdonald: Does he travel over a certain district, or is he permanently located in one place?


Martin Burrell: He works within a certain radius, sometimes within a circle of twelve, fifteen or twenty miles.


William John Macdonald: If it is the intention to establish a station in Nova Scotia, it would be desirable to have it located in the centre of the province. The hon. member referred to Yarmouth, and, while I have no objection to the establishment of one of these centres in the Yarmouth district, it is at the extreme end of the province.


Martin Burrell: I was speaking only
generally; it is not decided in what particular part of the province the centre will be located, but I know we are making arrangements to establish one in Nova Scotia.


Mr. LOGGIE:: Has any arrangement
been made for the establishment of one of these centres in the north-eastern part of the province of New Brunswick?


Martin Burrell: We are making arrangements to start work in that part of the country, I think in the county-of Kent.


William Stewart Loggie: That district is perhaps . the best farming portion of north-eastern New Brunswick.


Martin Burrell: It is not always advisable to start these things in the best sections. It is sometimes advisable to start them in the sections that are not so far advanced, so as to give better education to the people.


Frank Oliver: What are the prospects of am extension of this work in the prairie provinces?


Martin Burrell: I cannot answer my
hon. friend offhand. We have developed the work to a very considerable extent. We started four or five years ago with two centres I think, and we have gradually developed until we have seventeen or eighteen. It is quite obvious that we cannot extend the work to every portion of the country, otherwise we would commit ourselves to an enormous expenditure. The result of the work has -been so satisfactory that whereas one firm which had been Mr. BURRELL.
in the habit of selling fifty Babcock testers three years ago, sold during the pasf year one thousand for the use of individual fanners because the farmers knew the results of the tests we had been carrying on and knew what would be profitable and what would not. The work was initiated by my1 predecessor, and we have tried to develop it, and nothing has done more good to the dairy industry than those cow tests.


John Howard Sinclair: What does it cost?


Martin Burrell: We pay the men from $1,000 to $1,200 a year, and there are not very many other expenses connected with it.


Frank Oliver: The minister did not say anything very definite about extending the work in the prairie provinces.


Martin Burrell: I cannot very well say offhand, but if we are justified in extending the work to other portions of the West I shall be glad to give the matter every consideration.


Frank Oliver: Is there any prospect of
extension in the prairie provinces?


Martin Burrell: I would not say this
year, but I do not see why it should not be done' at an early date.


George Perry Graham: I observe that the word ' transportation ' is mentioned. That opens up a big avenue for improvement as well as for profit in the province -oi Ontario. I imagine there is no overlapping between the department at Toronto and the department at Ottawa in the matter of improving the quality and increasing the quantity, particularly of cheese. It was stated last night that the province of Quebec produced the greatest amount of butter. I think that is true, -but no one will suggest that the province of Quebec, or any other province, equals Ontario in the production of cheese. Both as regards quantity and quality, the cheese that Ontario produces is as good as any to be found in the world. The Ontario provincial work has been very successful. If my memory serves me rightly, they have inspectors who go from factory to factory consulting with the makers, and in addition there are, I think, two dairy schools, one of them at Kingston. An endeavour is being made constantly to raise the standard of production, and it -would be unwise for the two departments to clash. There is work for them both to do, and I know that the work of testing has been very .beneficial. When I was connected with the press we took great pleasure In publishing the results of those tests, and that created -an interest. I imagine that the press can help the Department of Agriculture a great deal in that respect. In regard to transportation,

what improvement does the minister propose? The facilities for the transportation of dairy products and of fruit have been greatly improved in recent years, but I imagine they are not yet perfect. It is possible to approximate, at least, to the condition that the product will be in as good a condition when it reaches the consumer as when it leaves the producer. That means that the price is enhanced, and any money expended wisely in that direction means money in the pockets of the farmer. It would be very interesting if the minister could state whether he has any particular improvement in mind in the way of increasing the number of refrigerator cars, or of imposing more exacting demands on the railway companies to provide them, or upon steamship companies to provide better cold storage facilities.


Martin Burrell: We are trying all the
time to improve that portion of the service. So far as the transportation and marketing go, we are keeping up a refrigerator car service, not only for butter but for cheese. It is largely from Quebec and Ontario points to Montreal and subsequently for export. Up till 1908, there was practically no arrangement for the provision of refrigerator cars or of cool chambers on vessels. The shipments were so few that the vessels would not retain cool chambers. Now the Government guarantees a certain amount of space on, I think, six steamers. These are reserved for fruit, and I may point out that the facilities have been taken advantage of for the shipment of some tender fruits like peaches. Whereas in 1910, 3,000 cases of peaches were shipped in Ihose cool chambers, in 1912, in the guaranteed space in the vessels, nearly 9,000 cases were shipped. In regard to the refrigerator car service, we guarantee every year a minimum of two-thirds of a full car, and the shipper is allowed to avail himself of the broken carload rate, regardless of the ice storage for which jwe pay. In return for our guarantee, if when the car reaches its destination the ice is gone, we refuse to pay and we aTe enabled in that way to keep the railways up to the mark. I think we are doing as good work in keeping the companies up to the mark as is probably being done in any other country.


George Perry Graham: In what condition does
our fruit arrive in the West?


Martin Burrell: Very good as a general rule. My hon. friend will be surprised to know that eastern Canada sent 11,000,000 poupds of butter to western points last year, largely to the prairies and a considerable amount to British Columbia.


George Perry Graham: Alberta will stop that
after a bit.


Martin Burrell: In two prairie provinces last year nearly half a million dollars worth of dairy products were put on the market produced by the western dairy farmers.


John Howard Sinclair: Does the minister say that he guarantees two thirds of the car load and does that enable the shipper of the food to get carload rates for his goods?


Martin Burrell: No.


John Howard Sinclair: Suppose a car is sent
out that is only half filled and the Government pay the difference between the half and the two-thirds, what rate does the shipper pay?


Martin Burrell: Each year from about
the middle of May to the middle of October, iced .refrigerator cars are run regularly over certain routes in the provinces of Ontario and Quebec for the carriage of butter to Toronto and Montreal. These cars are run weekly or fortnightly, according to the requirements of the route, on an advertised schedule so that shippers can deliver their butter to the stations with the least possible exposure to heat. A shipper may forward any quantity, from one package upwards, and pay only the regular less than carload rate without extra charge for the icing. The Government guarantees a revenue each trip equal to two-thirds of the minimum carload earnings from starting point to destination plus $4 per car for icing. This guarantee only holds if the car arrives in good shape with the ice not exhausted. It gives an opportunity to the shipper to get his goods forwarded in refrigerator cars that he would not otherwise have.


John Howard Sinclair: It looks like a good
thing for the railway company.


Martin Burrell: Although we give this guarantee, we do not pay the freight if the freight in the car pays for itself.


John Howard Sinclair: You pay if it falls
short?


Martin Burrell: If it falls below twothirds we pay it but if the car pays of itself we do not pay it, and it very often happens that we do not have to pay anything.


Charles Marcil: I would nke to call the attention of the hon. Minister of Agriculture to a section of the country which I am sorry to say he is probably not as familiar with as he ought to be. I was not here the other evening when the matter was taken up concerning experimental farms, but I might say that during the present session I have obtained important documents, one of which I would like to read to the committee as emanating from a former member for the constituency of Bonaventure, Mr. L. J. Riopel, who represented that constituency

in this House for many years and who wrote a letter on the 26th of March 1912 to the Deputy Minister of Agriculture calling special attention to the conditions existing in the countv of Bonaventure and in the Gaspesian peninsula generally, a matter which was alluded to last night by my hon. colleague from Rimouski (Mr. Boulay). With the permission of the committee I will read this letter which summarises well the position in which the farmers of the country find themselves:
Quebec, March 26th, 1912. G. O'Halloran, Esq.,
Deputy Minister of Agriculture,
Ottawa, Canada.
Dear Sir,-With further reference to the suggestion which I laid before you in the absence of the Hon. Mr. Burrell, I beg to submit the following remarks in connection with the establishment of an agricultural school at New Carlisle for the benefit of the Gaspe Peninsula.
That section of the province of Quebec, comprising the counties of Bonaventure, Matane and Gaspe has suffered great drawbacks on account of its isolated situation.
Its population, now being nearly 100,000 was originally composed largely, of fishermen and lumberers; although during the past twenty-five years, they have made fair progress in agricultural pursuits.
The institution of a model farm would greatly promote the welfare of those people, who as a rule, are lacking experience in that paramount industry.
The soil of the Gaspd Peninsula is generally well adapted to farming and is most suitable for growing all sorts of vegetables.
As I have mentioned to you, sir, the large farm of the late Lieutenant Governor, Hon. Thdodore Robitaille, New Carlisle, the Shire-town of the county of Bonaventure, is in every respect suitable foT the purpose in view'.
It comprises nearly one hundred acres of land all under cultivation, with a frontage of five acres on the Baie des Chaleurs, and is provided with all buildings required for a Government farm of moderate dimensions.
A wood lot of sixteen acres, about three miles distant from the farm Mould also be secured.	;
The farm is conveniently situated within a few acres of the New Carlisle Government wharf, and of the railway station; and it commands a magnificent view of the Paspebiae harbour, and also of the shore of New Brunswick, about twenty miles across the Baie des Chaleurs.
It may be noted here that the counties of Restigouche and Gloucester in New Brunswick could share the advantages of such an undertaking, as it would he easy of access to the people of that shore.
The proposition now submitted to the consideration of the Hon. Minister of Agriculture was suggested to me through the announcement of the policy of the present Government promising to take measures for the encouragement and promotion of Agricultural pursuits.
Seeing that there are only two model farms in the province of Quebec, and those institutions are beyond the reach of the Gaspe population, it is obvious that an Agricultural Mr. MARCIL (Bonaventure).
school, or model farm would be most beneficial to the inhabitants of that large section of the country.
With the hope that the proposition may be earnestly considered.
I beg to remain,
Dear Sir,
Yours truly,
(Sgd.) L. J. Riopel.
This was followed by an acknowledgement and subsequent correspondence, but up to the 9th day of May last when the papers were laid before Parliament nothing seems to have been done for the purpose of affording to this large population some of the benefits of the Department of Agriculture at Ottawa. Under very trying circumstances, during the last ten years, one of the devoted priests of the constituency, Rev. Jacob Gagne, who is well known to the Department of Agriculture, has at great trouble and inconvenience to himself, established a number of butter and cheese factories throughout the constituency and has assisted the farmers very materially in that respect. The country is one admirably adapted to the raising of cattle and the production of cheese and butter. But owing to the policy which has been pursued in regard to Tailway communication the butter and cheese output has to be carried many a hundred miles before it reaches the Intercolonial railway at Matapedia. There are a great many drawbacks which must be overcome. The population has been increasing in the three constituencies, but I am sorry to say not as largely as it would have done if better farming and transportation facilities had been given to the people. A large proportion of the population have had to emigrate, many of them to New Brunswick, some to other parts of Quebec and others to the United States. But there is an area 10,000 miles square, an immense field for the activities of a great agricultural population. I hope that, having called his attention to the subject, my hon. friend the Minister of Agriculture will take it in hand and see that some of the benefits of his administration are extended to the population of that constituency. The letter I have read comes from Mr. Riopel, who for nearly twelve years sat in this House, who occupies a high position in the ranks of the Conservative party and whose word is to be accepted as being quite reliable. I should like to see the minister send some of his best men down to the constituencies of Bonaventure, Rimouski and Gaspe to make an examination and report. Rimouski, of course, being on the Intercolonial railway, is not handicapped as the other constituencies are. The minister should send a good man to investigate the conditions in order that something may be done for these enter-

prising people who are mostly French-Can-adians, although at New Richmond, Port Daniel West and New Carlisle, there are three important English-speaking agricultural parishes. During the past ten years these people have made an effort to give up fishing as being unprofitable and go into farming, but they have been handicapped for want of transportation to the markets and lack of experimental stations and agricultural instruction. The people are energetic, the soil productive, the season short but fruitful, and with ordinary assistance from the department they would be placed in a position to become prosperous and happy. Should an experimental station be erected by the Government no better point could be selected than New Carlisle, which is the shire town of the constituency and is situated about one hundred miles from Matapedia and one hundred miles from Gaspe Basin, being about half way across the peninsula. If facilities were given to these people to pursue the agricultural industry any expenditure in that direction would repay the department and repay the country one hundredfold. There is in that district a field for the minister to do abundant good work.


Martin Burrell: I have had a talk with Mr. Riopel and I have also met a deputation from that district, and I quite appreciate the argument advanced by the hon. member (Mr. Marcil). I have abundant sympathy with the large sections of the country which are not sharing the advantages that other parts receive, but it is difficult to supply facilities for the entire Dominion at once. I do not see why some of the benefits that may be derived by farmers from the new Agricultural Aid Bill recently passed could not be shared by the people of that district. I am sure the influence of my hon. friend from Bonaventure would be considerable and I would advise him to make a strong appeal to the Quebec Government, and if anything can be done to make advances to that district to assist agricultural development through educational means, say the establishment of a school in New Carlisle, I shall be only too glad to look at it sympathetically. '


John Albert Sexsmith: It is specified in the
item in the estimates that this vote of $190,000 is for the development of the dairying and fruit industries and the improvement in transportation, sale and trade in fruit and other agricultural products. It seems to me that a vote of $190,000 is very small for the purposes for which this vote is destined. Especially is that the fact when we realize that the dairy products of our country last year were worth over $100,000,000 and that while the production of butter has increased, the production of cheese has
somewhat declined. I am glad to hear the Minister of Agriculture say he intends to establish a great many more dairy record centres. One of the first of them was established in my district and it has done a great deal of good to the farmers in that community. The farmer sends his milk to he tested and has the record sent back to him and at the end of the year he knows what cows are worth keeping. I know a farmer who had his herd tested and he found quite a number of them were only boarders and he discarded them and in three or four years he had practically doubled his production. I strongly advocate tfie establishment of these dairy record centres in the dairying sections of the Dominion. Then, as to the fruit industry, we had evidence before us last year of the great difficulties the fruit people encountered in getting their fruit to the market, and I would suggest to the minister that probably the best way to help the fruit industry now is to stimulate co-operation in the packing and marketing of fruit. Again I repeat that this vote of $190,000 is small for the objects it is to be devoted to. I hope by the time the minister develops his policy he will be able to come to Parliament and ask Parliament to vote at least half a million dollars to assist the dairying and fruit industries of the Dominion. I do not want to take the position that the farmers of Canada are asking Parliament to be spoon-fed, but at the same time I do not think the Government could spend money in any better way than in educating the people in the different branches of farming. The provincial governments are doing a great deal, but there is still a wide field of usefulness for the federal Government and it can work in co-operation with the provincial governments to stimulate the most important industry in the country. I 'trust the minister will next year take the larger vote for this purpose and extend the work.
Agriculture-to enforce tlie Seed Act, to test seeds for farmers and seed merchants, to encourage the production and use of superior seeds, and to encourage the production of farm and garden crops, $180,000.


George William Kyte: Can the hon. minister say
where these tests are made? Are there particular stations where seeds are tested, and how are they tested and distributed?


Martin Burrell: The great portion of
the seed testing is done at our central laboratory in Ottawa. In the far West, we have a station at Calgary where we are doing seed testing. I am not sure at present whether we have any other branch or not. We have a staff of inspectors covering the different provinces who are doing what this item says. They are not only enforcing the Seed Act; but they are testing seeds for farmers and merchants; they are keeping

track of merchants who sell seed below the standards set in the Act, that is in the way of germination, quality, impurities, weed seeds and so on. In addition to that, we are giving subventions to the different provinces in respect to seed space, in proportion to the amount of acreage they have under crop. We give $1,000 for every million acres under crop, amounting on the whole to $35,000 on that item alone. In addition to that, we are making grants to the seed growers' associations, which are doing good work.
Mr, MACDONALD: I want to call the attention of the hon. minister to a condition of affairs that arose last year in my county. The farmers purchased seed grain from Winnipeg. I do not know what method of seed inspection there is in that part of the country, but an enormous loss was caused to the farmers of my county through having purchased that seed. None of it germinated and a great many farmers lost their whole crops. I would like the minister to explain, if he can, how such a large quantity of seed came through without inspection.


Martin Burrell: I do not think we would have power under the Act to deal with that. This year a good many complaints of that sort were made, especially in Quebec and the eastern provinces, where the farmers were short of seed and of money to buy it. In many cases we offered to give the assistance of our inspectors to advise the farmers as to the quality of the seeds they were buying. We would certainly be justified in extending that work as far as we can. We dealt with it in another way this year. My hon. friend the Minister of the Interior distributed a large amount of seed grain in connection with the unpatented land in the West. We got the minister to co-operate with our department and not to allow any of that seed to go out until it had passed our inspectors.


George William Kyte: My object in asking the
question was to lead up to the very point. Farmers in my own county and other counties in eastern Nova Scotia had the same experience. A very considerable quantity of seed oats arrived in eastern Nova Scotia last spring from the province of Manitoba, and none of it germinated, which caused very great loss to the farmers. I had an idea that the Seed Act provided that no person should advertise	seed	of	any	kind for sale,
unless he had a certificate of inspection or some guarantee to offer intending purchasers that it was proper grain for seed purposes. Seed inspection ought to be provided for in the different provinces. It is a great disadvantage to farmers to sow seed oats which are not of such a character as should be used for seed. The hon. min-Mr. BURRELL.
ister might extend the operations of the Seed Act so as to have inspectors placed in different sections of the provinces to guarantee that the proper kind of seed is placed on the market.


Mr. SUTHERLAND:: The observations that have just been made in regard to impure seed are of such importance to the farmers of Canada that I think we might continue the discussion foT a little longer. There is nothing to prevent a farmer from going to a feed store and purchasing grain, that has been imported, for instance, from western Canada, and using that grain for seed. It may not have been imported for that purpose. How you could lay down any law that would prevent a farmer from purchasing and using that seed is something pretty hard to imagine. The complaints made by the hon. member for Pietou (Mr. Macdonald) and others have been general not only in the maritime provinces, but in the other provinces. Last year many farmers in Ontario suffered through the very same cause. A farmer must realize that he is taking big chances when he purchases from a feed store, grain which has possibly been imported to be used as feed, and uses it for seed. I quite agree that the Department of Agriculture might, with advantage to the farmers, exercise some control over all grains used for seed; but there is a greater danger than the loss suffered through sowing such grain as he has described. The weed nuisance in the country has spread to such an extent that it should cause the very gravest concern. I do not think there is anything else causing the farmers so great a loss as the spread of noxious weeds. We have the Conservation Commission considering ways and means of conserving the resources of our country. The weeds that have spread during the past few years, for instance over Ontario, have caused a greater loss possibly than anything else. Last session a Bill was put through this House with regard to what is known as the Grain Act. It provided for the cleaning of grain at the elevators. At that time I took exception on several occasions to the fact that screenings from the elevators were, permitted to be sent- out and sold to anyone who would purchase them. As a matter of fact, immense quantities of those screenings have been shipped into every province, and as a consequence weeds have spread all over Canada. Great care is exercised to see that the small seeds, for instance clover and timothy, are cleaned thoroughly and that as small a percentage of weed seeds is left in them as possible. The farmer takes particular pride in purchasing the very best and purest seeds that he can. He may be at

the same time purchasing from the West large quantities of damaged grain which he is grinding up for feed. In a bushel of that mill feed there may be millions of foul weed seeds. I think nrovision ought to he made that the 'Screenings from these elevators should not be sent throughout the country but destroyed at the elevator. The item is not a very large one, and I quite approve of the increase which is about twenty per cent. But I think that if the item were a great deal larger and precautions were taken that weed seeds separated from the grain should be destroyed at the elevator it would be much better. These screenings are sold to a great many people who are not interested very much in agriculture who use them for feed and the weed seeds finally find their way back to the soil. Travelling through some agricultural districts of Ontario at harvest time, one is astonished to think that these valuable lands are being taken up by the weeds. This, I believe is one of the most serious things that confront the people of the rural districts. Some heroic treatment will certainly have to be resorted to in order to overcome this nuisance. There is not a person who is familiar with farming conditions but must realise that there many sections of this country that are absolutely, you might say, useless, for agricultural purposes through the spread of weeds. If anything can be done to overcome this nuisance, it ought to be done. I do not think this item will go a great way towards overcoming this great nuisance.


John Howard Sinclair: The hon. member for
South Oxford (Mr. Sutherland) approves of this increase. I think we would all approve of it if we thought it was going to be put to any useful purpose. But the minister has not shown us that he is doing any good with this money. There are nothing but complaints on both sides as to the results. In my own province nothing has been done, so far as I can learn, to better conditions. If the work of this Government is to be confined to the experimental farm at Ottawa and only the people who send their seeds here are to have them tested, I do not think it will ever amount to very much as a benefit to the farmers of the country. Is not there some system the minister can devise by which dealers will be made responsible for the seeds they sell to farmers? Cannot he license them or provide other means by which they can be controlled and prevented from selling inferior seed? This is a matter of the greatest importance to the farmers, and as my colleagues from Nova Scotia have said, it was a great loss to the farmers of that province last year. And that loss is constantly going on. I see that a part of this money is to be spent to enforce the Seed Act. If I remember rightly that Act contains a provision imposing penalties upon seedsmen who sell useless or injurious seeds to farmers. What has the minister done to enforce the Seed Act?


Martin Burrell: I am sorry I have not the details of a number of prosecutions. But I am surprised to hear the hon. member say that nothing has been done to show value received for this expenditure. As a matter of fact there is a great deal of machinery in connection with the Seed Control Act with which, I suppose, the hon. gentleman is more or less familiar. We have the following inspectors: British Columbia, Alfred Eastham; Alberta, A. D. Campbell; Manitoba and Saskatchewan, F. H. Reid; western Ontario, W. J. Lennox; maritime provinces, S. J. Moore; eastern Quebec, J. A. Sdmard; Eastern Townships of Quebec, Carl Sweet; Prince Edward Island, Garnet LeLacheur. All these men are highly qualified, not only graduating from the agricultural colleges but having taken special work in the seed divisions of those colleges, and subsequently having been trained to some extent in our central laboratory. The hon. member thinks that nothing is being done, but dozens of prosecutions for violation of the Seed Act are going on all the time. I agree with the hon. member for South Oxford that nothing has been done of greater value-to the farming community than the work of the Seed Control Act, for to that Act is due the greater purity of the seed sold to farmers all over the country. I shall be glad to give my hon. friend a list of the prosecutions carried on by the department against dealers for violation of this Act. It is true these have been largely in connection with clover, timothy, alsike and alfalfa and have not extended to cases mentioned bv the hon. members for Richmond and Pictou.


John Howard Sinclair: The hon. minister says he had heard that the sale of these inferior* Manitoba oats in Nova Scotia had caused great loss to the people. Did he make investigation or prosecution?


Martin Burrell: Speaking offhand I
am not sure that under the Act we have power to deal with this particular case. The Act is confined largely to the grass and cloveT seeds I mentioned, and besides, there is the provision under the Seed Act that a farmer may sell his own oats whether dirty or clean. The Act is merely confined to the seed bought and sold by merchants and to certain seeds. I shali be glad to go into the matter of amending the Act, though there will probably be difficulties that hon. members of the House do not suspect. I would not like the hon. gentleman to think the

money is not being wisely spent, or that it is not accomplishing great good. This vote, while a fairly substantial one, must be increased. But in the year before I took hold of the department, this appropriation was $50,000; it has been increased until this year it is $100,000. The vote for dairying in 1910-11 was $100,000 and we have increased that to $190,000, and with the amount in the supplementary estimates about $210,000. If you include all branches of agricultural work, the amount in 1910-11 was $1,143,000, whereas this year it will be $2,633,000. So, though the hon. gentleman contends that we are not going fast enough. I think that he will see that the doubling of the expenditure in two years is considerable. And there is danger in going too fast, because you cannot maintain efficient administration in this line of work if too great haste is made. It is my hope, and I think that of everybody, to see a far more generous expenditure on agriculture than has been made in the past. I believe the country would favour that. We are going fairly fast, but we must avoid the danger of going too fast, and not keeping up the efficiency of our administration.


Mr. WEBSTER:: In many cases where
farmers in certain communities have received poor seed, it is not the fault of the seed merchants or the Government. Supposing some gentleman writes to a friend of his in the West and asks him to ship a carload of oats or wheat for seed. Se receives it; it has never been inspected either by the Government of Manitoba or the officials of the experimental farm, and he is able to take advantage of this condition of affairs. He gets the oats for 5, 10, and sometimes 20 cents a bushel less than he would have to pay for No. 1 seed purchased from the seed merchants. In some cases the seed grain is bought from persons in the West who, although it is not at all the best, represent it to be of first-class quality, with the result that when it is sold it fails to germinate, and the loss must fall upon the purchaser. In that regard, of course, the minister is not to blame; the farmer who buys an inferior article and sows it, not knowing whether or not it has been tested, is entirely responsible for his own loss. A specific case came under my observaticn on Saturday last. In the Grain Growers' Guide this winter there appeared an advertisement stating that all seed oats or seed grain shipped from Manitoba would be carried by Canadian railways at half price. One of my constituents, seeing that advertisement, ordered a carload of oats for seed. It was billed to him as seed oats, hut I saw the oats myself on Saturday last, and 1 know that as it had been injured by the frost, not more than 30 per cent of it will Mr. BURRELL.
ever germinate. The railway did not forget to charge full freight rates for the grain, and the purchaser naturally felt very much aggrieved, considering that the Government has not taken the interests of the farmer into consideration in this respect. Of course that farmer was to blame for that transaction, not the Government or anybody else.


Mr. ROBB:: The hon. member for Brock-ville (Mr. Webster) has placed Ms finger on the weak spot in the Seed Act. The hon. minister, as he has said, is powerless under the Act, because the Act permits the farmer to sell this seed grain and not become liable to its penalties. I quite agree with the hon. member for Brockvilje in his assertion that much of the seed that is sold throughout the country is distributed by irresponsible dealers who have no interest in the producing of a good crop. There is no person more interested in getting a good crop within the district in which the seed is sold than the responsible seed merchant or dealer, because he knows that if the :3eed grows well and produces a good crop, he will have additional sales in the fall. I think the minister should take into consideration, if not this session, then during the next, the advisability of amending the Seed Act so that the farmer who sells inferior seed will incur the same penalties as the merchants and dealers.
Agriculture-encouragement of establishment of cold storage warehouse, $200,000.


George William Kyte: Does that include cold storage for fishermen in the maritime
provinces?


Martin Burrell: Some of the cold storage warehouses dealing only with fish are under 'the control of the Marine and Fisheries Department. Under this Act, we really deal with the encouragement and establishment of cold storage warehouses for the better preservation and handling of all food products. It does include fish ito a certain extent, for in some of these warehouses fish is stored. This vote is necessary to pay the instalments, spread over a term of years, towards the maintenance of a number of warehouses that have been established. Altogether the number of warehouses completed is twenty-six, those under construction two; further contracts entered into, two.


John Howard Sinclair: Can the hon. minister
give us the names of the places in Nova Scotia where these warehouses are located?


Martin Burrell: Halifax Cold Storage
Company, Port Hawkesbury, Nova Scotia; Lockeport Cold Storage Company, Locke-port, Nova Scotia.


Frank Broadstreet Carvell: And in New Brunswick?


Martin Burrell: New Brunswick Cold
Storage Company, St. John, and Cold Storage Limited, YVoodstock. These are the only two in New Brunswick; the others are scattered all over the country. We give a bonus or subsidy of thirty per cent on the cost of construction, the terms being that the warehouse shall be constructed according to lines laid down by the department, and that the rates shall be subject to control by the Department of Agriculture.


George William Kyte: Does the department receive any report from these cold storage companies as to the work they are doing?


Martin Burrell: Yes, we receive reports from time to time and take a note of their operations.


George William Kyte: Is there any condition imposed upon these companies as to the class of product they are to store in the warehouses, or are they entitled to the bonus even if the space is entirely devoted to the storage of their own products?


Martin Burrell: One of the conditions is that they are obliged to take such products as are offered by the public, because it is a public utility. We would not think for one moment of granting a subsidy to a firm that would simply build a warehouse for its own use.


John Howard Sinclair: Are there any new
warehouses projected under this vote?


Martin Burrell: We have two under consideration, and I think one or two have been applied for. Contracts have been entered into for the payment of subsidies to the Acadia Cold Storage Company, Halifax, the Edmonton Produce Company, Edmonton, the Algoma Produce Company, Sault Ste. Marie, and the Tillsonburg Cold Storage Company, Tillsonburg, Ontario.
Agriculture-development of live stock industry, $200,000.


James Alexander Robb: Will the minister explain
how this money is to be spent?


Martin Burrell: It is spent in a great
variety of ways, chiefly for the encouragement of the live stock industry. We do a great deal in the way of supplying judges for live stock fairs held throughout Canada, and we also contribute a certain amount towards winter fairs and various other exhibitions of live stock held throughout the country. In connection with this we give grants to various poultry and live stock associations. We are now contemplating the purchasing and supplying of stallions, bulls, boars and rams to all districts, especially the newer districts of the West and the East, which are in need of first-class animals for the improvement of the live ^tock industry under certain conditions laid down by the department, and we are ready
*to receive applications for these from any such district through our live stock branch, the stipulation being that we will buy and own the animals, and that the associations which will be formed for the purpose will undertake their proper maintenance, control the amount of the service fee, and so on, we reserving the right to see that the animals are kept in proper shape and are transferred from point to point. A very considerable portion of this vote will go in that direction.


James Alexander Robb: Any particular breed of horses and cattle?


Martin Burrell: We lay down no condition. We simply leave it to the associations to say what breeds they shall prefer, making the condition that they shall not introduce into any one section animals of a breed which is represented by animals of private owners in that particular section.


James Alexander Robb: I notice from the Auditor
General's report that a considerable amount of money has been devoted in the past to the breeders of thoroughbred stock. I cannot find anywhere that the breeding of heavy draught or serviceable horses has been encouraged. It seems to me that considerable encouragement has been given to racing horses. I hope that in the enlargement of this policy the minister is not going to be carried away by the lobby that was put up last Parliament and during this Parliament by certain breeders of racing horses for the encouragement of the breeding of that stock at the expense of the general public. There is a considerable demand for good heavy horses. That is the best class of horse for a farmer to breed. If you start a farmer breeding racing stock, it will be absolutely useless on the farm, and it will be bad for the boys starting out in life. I would like the minister to make a statement to-night as to whether the policy of encouraging the breeding of racing stock in this country is to be enlarged.


Mr. SMITH (South Ontario):: When was that policy started?


James Alexander Robb: It was started, unfortunately, under the last Government.


Martin Burrell: I do not know what my hon. friend means when he speaks of the policy being enlarged. I do not think he puts it quite rightly when he says that the idea was to encourage the breeding of purely racing stock. It was felt, and possibly felt rightly, that although the heavy draught horses occupy a very valuable place, after all the lighter horse industry was not getting the attention it deserved, especially in regard to the remount question, which, according to the people in his country whose opinions are worth something, is of importance. For that purpose a bonus was given

to the thoroughbreds which met certain requirements laid down by the Veterinary Department. The bonus is $250 a year, certain conditions being imposed as to the service fee, the number of mares served, and so on. I do not think it is well to discontinue that bonus. We are continuing it this year, but my hon. friend may rest assured that under the policy, to which I have just referred, not only an equal, but probably a much greater proportion of help will be given to other types of horses than thoroughbreds. As probably he knows, we have separated our Veterinary Department and placed the live stock branch in charge of Mr. John Bright, a well-known breeder, who knows the heavy horse side well. I think my hon. friend may rest assured that the horses to which he refers will get ample consideration.


John Webster: My hon. friend from Huntingdon made a statement with which I cannot agree. While I am free to admit that heavy draught horses are to-day selling at higher prices than we have ever seen in Canada, possibly it might not pay the individual farmer to breed them. If the individual farmer has a mare that will cross well with a standard bred or thoroughbred and that will not cross well with the heavy draught, he must breed to the horse that will mate best with his mare. Last week we saw in Ottawa a pair of horses for which the lady who owned them refused $20,000, and you can buy a lot of heavy draught horses for $20,000. To-day a good carriage horse is worth the price of two heavy draughts, and if the individual farmer has a mare that will produce one of that class, that is the kind he should breed to to get the-best results. With regard to the thoroughbred, I agree with my hon. friend from Huntingdon. I am not a lover of the thoroughbred. I do not know what use they are outside of race horses. I know that for getting remounts, the United States Government have practically discarded them for the heavy-weight standard bred. I noticed that the United States Government have bought three stallions in New York within the last year for that purpose, and they were sent to the remount station. If our Minister of Militia gets busy in regard to remounts, he had better drop the thoroughbred and get into the heavy class standard bred; he will get a more adaptable horse for ordinary remount purposes.


James Alexander Robb: I differ from my hon. friend (Mr. Webster). I am an admirer and lover of the thoroughbred. While a lady refused $20,000 for a pair of horses shown here last week, the point is that for one person looking for a $1,000 driving horse, there are fifty people looking for a heavy draught horse. The heavy draught horses Mr. BURRELL
are the most serviceable for a farmer to raise. The raising of the thoroughbreds is a business. You cannot raise them on the farm, because if you do, the boys are going to make them unsound before they are marketable at four years of age.


Donald Sutherland: I was glad to hear the minister state that the animals which they were purchasing were to be owned and practically controlled by the department. I do not see why any difference should be made between the thoroughbred and the other classes of pure bred stock. This system, as has been remarked by my hon. friend (Mr. Robb), was adopted some years ago. In looking over the Auditor General's report, I find that apparently some people are making a business of taking advantage of the bonus that is now being paid not only to the owners but to the controllers of thoroughbred stallions. It is not even necessary tor a man to own one so long as he can get control of him. Horses worth one hundred dollars, and many of them are not worth one hundred dollars and would not bring fifty dollars, are drawing two hundred and fifty dollars from the Government of Canada. I think that the sooner that system is stopped the better it will be for all concerned. If we are in such desperate straits to breed remounts, we ought to adopt some sane policy. When horses of that class command a superior price, the farmers in this country will go into the breeding of them. For instance, a horse is worth we shall say one hundred dollars, and some one gets control of him and farms him out to a number of farmers. He not only gets two hundred and fifty dollars a year from the Government, but collects a fee of three dollars, I believe, for every mare served. I believe there is in existence not far from this city a group of individuals who have a number of horses and who received thousands of dollars last year for the horses that were sent out through the country. I believe that a great many of these horses would not even pass inspection. If the breeding of thoroughbred horses was put on the same basis that has been adopted with regard to other pure breeds it would be better for the country and all concerned. How many hon. gentlemen present, during their lifetime, have seen a demand in this country for remounts? I can only recollect that once during my, lifetime was there a demand for army remounts and that was during the South African war. I do not know whether it was very satisfactory or not, but I know that as a matter of fact it was not the farmer who reaped the benefits so much -as the middlemen who were purchasing for the Government in this country. Many of them made immense

fortunes out of this business at that time. But I believe that the farmers reaped a great advantage in getting rid of the class of horses they had at that time. It has been remarked by the hon. member for Bjockville (Mr. Webster) that the heavy standardbred horse is a better horse for army purposes^ and many other purposes than the thoroughbred. I quite agree with him, and yet you may raise as perfect a standardbred horse as it is possible to conceive of and reap no advantage under this Act. But on some freak that has been bred for racing purposes and is registered as a thoroughbred you can receive $250 a year from the Government. It was an Act which was hard to defend when it was put into effect, and I think the actions of certain parties in reaping the benefit of the Act have shown that it should no longer be continued. If it is desirable to give a bounty for breeding remounts then give it to parties who are raising horses, and not to those who are farming out horses among the people of Canada.


John Howard Sinclair: I think the minister ought to give some explanation in regard to this item especially after the speech we have heard from the hon. member for South Oxford (Mr. Sutherland), who has told us that in his opinion money is being paid by the minister for the support of horses that would not pass inspection. I would be very much surprised to learn that the business is being managed in such a careless way as that, and therefore I think this item is one on which we should have some explanation.


Martin Burrell: My hon. friend (Mr. Sinclair) need not alarm himself very seriously. I am sorry to say that whilst I must agree with some of the remarks made by my hon. friend from South Oxford, 1 cannot agree with all. It is perfectly true that, while I am the responsible minister, I did not originate the policy of giving a subsidy for thoroughbred horses, but while something may be said against it, there is a good deal to be said for it. I have a good deal of respect for Dr. Rutherford, who was Live Stock Commissioner and Veterinary Director General when I came into office. We lost his services, but I need not go into that. I must say that I entertained a very strong feeling of regard for Dr. Rutherford's ability and judgment, and he had a fairly strong opinion on this point. I would like to say that the whole of the figures as to the amount, that has been expended were put on 'Hansard' .some time ago in response to a question by my hon. friend (Mr. Sutherland). My hon. friend from Guysborough can get the figures, but I want to assure him that there are no bonuses paid on those animals that
do not pass inspection, but that, on the contrary, there is a very rigid inspection before those who breed animals can receive these subsidies. These subsidies are open to the owner of a thoroughbred horse whether he comes from one province or another and they are being paid to gentlemen all over the country. If I had known this subject was coming up I could have brought quite a number of letters from men whose opinions I regard very highly. For instance, Mr. Hubbard, who was secretary of the Department of Agriculture in the province of New Brunswick, and who is now in charge of our new experimental farm there, justifies the good work being done in that connection. I could also quote Mr. Carruthers, of Montreal, a very well known man. I could also bring the testimony of Mr. Clifford Sifton, who is certainly a good judge of things of this kind, who feels very strongly on the question, and who realizes that good work has been done along that line. I do not think that it is quite right to say, as my hon. friend (Mr. Sutherland) states, that any freak which has figured as a racehorse can receive that subsidy. It should be borne in mind that a great many extraordinarily valuable horses that may have served their uses as racers may render great service in the way of breeders and sires. While I do not want to enter into a disquisition upon horse breeding and racing, I think that any man who knows anything about the horse business will admit that there is a good deal of truth in the statement that a horse that has finished its best racing days may be capable of some splendid service when he comes to be used as a sire. All these animals which are justified in considering as sires are subjected to a rigid examination as to health, conformation and so on before these subsidies can be received. Whatever may be thought best in the future, I must confess that I do not see any reason for discontinuing the subsidies during the present yeaT.


Frank Broadstreet Carvell: Mr. Chairman, I would not have entered into this discussion if my. hon. friend had not mentioned Mr. Hubbard of New Brunswick as an authority with regard to the value of this class of horses. Mr. Hubbard's evidence, in my judgment, is not very good along that line. I do not mean to say that Mr. Hubbard does not know a good deal about the breeding of horses and agriculture in general, but some three or four years ago the Government of New Brunswick, acting under Ips instructions, when he was Deputy Minister of Agriculture, made an importation of twenty-five or thirty of these spider-legged horses from Kentucky, brought them to New Brunswick, and auctioned them off to the farmers. The farmers paid a portion down, gave a

note for the balance and in many cases they refused to pay the balance and the Government had to take the horses back. One or Wo of these horses were absolutely useless. But 1 have no hesitation in saying, and I am speaking not so much from my personal knowledge as from what I have heard from my neighbours and farmers generally, that perhaps nothing ever happened so detrimental to the horse industry in New Brunswick as the importation of these Kentucky race horses. I suppose that a race horse from Kentucky is about the same class of cur as you get from any place else. He is ail right for the man who has lots of money and wants to spend it, such as the Hon. Mr. Sifton. It is ail right for the Hon. Clifford Sifton, if he wants to spend $25,000 or $30,000 a year on race horses; that is his own affair, but that is not the kind of horse that the ordinary farmers should produce if we want to do something to assist the general welfare of the country. I find that the difficulty in reference to the purebred horse is that there is a continual deterioration. The great difficulty seems to be to keep them up to the standard that we would like to have maintained. Take thoroughbred Clydes and Percherons, cross them with smaller animals and there is a constant deterioration.


William Smith: Surely you do not believe that?


Frank Broadstreet Carvell: I do believe it and I
have pretty good reason for believing it too. If you cross any standard animal, Clyde or Peroheron, with these purebreds, there will be a deterioration in value. You may get a good animal out of them once in a while, but as a rule you are getting an article that will not sell for money and after all what the fanner ought to have is sometliing that he can sell for money. I object to the attempts to cross with these racing horses which are of no benefit to the farmer. If the minister devotes the money towards draught horses he will always get a saleable animal. I think the minister would do well to quit the practice entirely.


William Smith: When we consider the
high price of live stock to-day, it appears to me the position taken by the minister is a sound one to place in certain sections of this country purebred animals, bred in Canada and not imported. I think the minister is taking a forward step to help the breeders and farmers of Canada in doing that. The other policy referred to was started some years ago, not by the present Minister of Agriculture, but by Mr. Sydney Fisher


Frank Broadstreet Carvell: We know that all right.
Mr CARVELL


William Smith: I am telling you again. I understand that the policy was commenced upon the advice of the late veterinary director, Dr. Rutherford. No man in this House or in this country has a warmer admiration for Dr. Rutherford than I have, but I unhesitatingly say that when he gave this advice he made a mistake. I think it was hardly wise, perhaps, on the part of the present Minister of Agriculture, that that mistake should be continued. I want to place myself on record that in my opinion, at the end of the year 1913, that grant should cease. I cannot for a moment understand how the hon. member for Carleton, as I understood him, should have made the statement that when you are using a pure-bred sire the animals must deteriorate.


Frank Broadstreet Carvell: I did not say that.


William Smith: What did you say?


Frank Broadstreet Carvell: I said that in my judgment the stock is continually degenerating, and if you cross your stock with a small animal, such as these racing horses, you are not improving the stock. I would like to see every farmer use thoroughbred or pure-bred or standard stock, but I object to trying to breed animals that have no size and no value except for fancy racing purposes.


William Smith: After some practical knowledge of farm life, I say to the hon. member that he is wrong, and that these animals should be pure-bred and of a certain size and certain character, and having to undergo the inspection these animals have to Undergo, the hon.^ gentleman is making a statement that is not correct. Whilst I do not agree that any great practical results can come from this, neither do I believe that the ordinary farmer will grow rich from pursuing this course. It is true that some good may have come out of it, but I believe it has gone far enough and the minister will be wise in the time to come to see that these grants are not continued. These animals that have been used, have been inspected bv most reliable men from the department, and so far as I know the animals that have been used have done in some ways good service to the breeders of Canada. I do not believe that the further use of these animals will advance very much the interests of the farmers and in that way I believe it might be wise if the grant should stop.	Every breed of animal
has a certain place to fill and they are required in different parts of the country for different purposes. We must have these remounts and how they shall be bred it is scarcely for me to say to-night, but I think everyone will agree with me that a4i

the bottom there is nothing like a thoroughbred.


James Alexander Robb: While we on this side agree with the hon. member for South Ontario (Mr. Smith) it is remarkable that the Minister of Agriculture for Canada should officially defend the grant that apparently the majority of the House, as at present composed, is opposed to-


Martin Burrell: There was a special
grant given the last year or two over and above the subsidy, and this special grant last year, I may say frankly, I gave under the advice of the late veterinary director general. This year I have not given a special grant and this particular subsidy is open to everybody all over the country, apart from the firm which was principally in evidence, namely, the Bureau of National Breeding in Montreal. It is open to every man possessing a thoroughbred and I do not see any reason for discontinuing it.


James Alexander Robb: Who are the president and directors of the National Breeding Association in Montreal?


Martin Burrell: I cannot say now but
I will be very glad to get the list.


James Alexander Robb: It is not necessary. My hon. friend beside me has made reference to the Hon. Clifford Sifton, who we all know is raising stock that have won much advertisement for him. The other authority mentioned, my good friend James Carru-thers of Montreal, is also associated with a racing outfit, and it is quite natural he would approve of that policy, but the point is that the present Minister and the past Minister of Agriculture have been encouraging the breeding of racing stock and bonusing it and inducing farmers to abandon the breeding of stock that is really profitable to the farmer and to the country.


Martin Burrell: I would not like my
hon. friend to go so' far as to say that. I do not think my hon. friend will accuse me of being a racing man. So far as any encouragement of the thorougbred horse is concerned, any influence that has moved me in the direction of keeping up this subsidy has been entirely in connection with the recommendation of not only Dr. Rutherford but a great many prominent men in this country, who have given sufficient information to justify the little that has been done in that direction, and it has not been very much. It has not been in connection with racing but entirely in connection with the remount question.


John Webster: In reply to the hon.
member for Carleton, I would just say that the trouble lies in the fact that your farmers in that section lack proper brood mares to cross with thoroughbred stallions from
Kentucky. With thoroughbred stallions you must have proper brood mares in order to
obtain from them the desired results. You might just as well cross a Jersey bull with a Hereford heifer and expect to get a milch cow.


Frank Broadstreet Carvell: We have got a very poor result.


John Webster: We want in this country to-day drivers or carriage horses just as much as heavy horses. What is the result to-day? If you go to the country and look for a good driver or carriage horse, he is not to be found. Any man wbo has got one asks two prices for him. It is in the interest of the hon. minister to encourage the breeding of good standard breeds in order to get good horses.


Donald Sutherland: I would .not like
anyone to think I had not a very high regard for the thoroughbred horse. I believe it is the finest animal in the animal kingdom. I would not say a word that might cause anyone to think that the thoroughbred horse is not what it really is. What I object to is the system under whicn this vote of money is being paid. If the same policy were pursued with regard to the thoroughbred that is now being pursued by the hon. minister with regard to other pure breds, it would have a much more satisfactory result. I notice, in the return that was brought down to the House, that in the year 1911, of $8,250 that was paid for this purpose $5,250 was paid to the National Bureau of Breeding. This past year a large proportion went to the same association. We had an exhibition in the city of Ottawa last week that we should all feel particularly proud of, as it showed what a fine class of horses we have in this country. We can realize that the gentlemen who make a business of showing their horses there are very, anxious indeed that they should be bred in large numbers throughout the country, so that they will have a larger number to select from. So far as granting a bonus of $250 per annum and a service fee being collected by the owner or controller are concerned, I do not think it is good business, and I do not think it is going to build up the breed as we would like to see it built up. Let the Government select pure-bred animals of a good type, if they wish to spend money in that direction, and have them placed and owned and controlled as the pure-breds are, and I believe you will have much more satisfaction.


[Stage Direction]
Item agreed to.
Agriculture-health of animals, $450,000.
['I would .not like\nanyone to think I had not a very high regard for the thoroughbred horse. I believe it is the finest animal in the animal kingdom. I would not say a word that might cause anyone to think that the thoroughbred horse is not what it really is. What I object to is the system under whicn this vote of money is being paid. If the same policy were pursued with regard to the thoroughbred that is now being pursued by the hon. minister with regard to other pure breds, it would have a much more satisfactory result. I notice, in the return that was brought down to the House, that in the year 1911, of $8,250 that was paid for this purpose $5,250 was paid to the National Bureau of Breeding. This past year a large proportion went to the same association. We had an exhibition in the city of Ottawa last week that we should all feel particularly proud of, as it showed what a fine class of horses we have in this country. We can realize that the gentlemen who make a business of showing their horses there are very, anxious indeed that they should be bred in large numbers throughout the country, so that they will have a larger number to select from. So far as granting a bonus of $250 per annum and a service fee being collected by the owner or controller are concerned, I do not think it is good business, and I do not think it is going to build up the breed as we would like to see it built up. Let the Government select pure-bred animals of a good type, if they wish to spend money in that direction, and have them placed and owned and controlled as the pure-breds are, and I believe you will have much more satisfaction.']
Mr. FOSTER (Kings, N.S.):: I did not
have an opportunity to speak on item 51. I would like to say a word in regard to the

1040B
health of animals, which is a subject of great importance to the people of Nova Scotia at this particular time, especially in the county that I have the honour to represent. For the last three or four years in that province, according to investigations recently brought to light, we have had shipped over the province from the Government Experimental Farm at Truro-some six or seven coming into my own county-animals which have been shown conclusively to be tubercular. There is not the slightest doubt in my mind that tuberculosis has been spread in various sections of the province through that cause. I would like to ask the hon. minister what steps are being taken at the present tome to meet so dire a scourge, emanating directly from the experimental farm, which has been under the eye no't only of the local government, but, as it was attempted to be shown, of an official of the Dominion Government. I may not be within my rights in bringing a local matter to the attention of this Government, but I was informed a few days ago that the local authorities had turned the whole matter over to the Dominion Government.
I also wish to draw the attention of this House to a very important matter, that is the appointment of official veterinaries who might be available in the various provinces. I presume you have them in Ontario, Quebec and possibly New Brunswick. We have not one in Nova Scotia, that we can call on a't any time that disease is found to have broken out on any breeding or other animal. It would be a great blessing to the farmers to have such an official at their call, either at the experimental farm at Truro, or at the new experimental station at Kent-ville. I have had letters from farmers complaining in this regard. I trust that the matter will also receive attention.
With regard to the encouragement not only of the health of animals, but of the live stock industry, there is a large section of country in the county of Kings and in the province of Nova Scotia that is admirably suited to the raising of live stock. During the last couple of years we have endeavoured to bring Scotch settlers into that part of the country. The difficulty is that they are not able to get the breed of cattle to which they are used. A certain Scotchman coming in brought with him three Clydesdale horses. He had to pay $320 duty on them on arrival at Halifax.


William Smith: Are you not mistaken in
the amount of duty?


George Eulas Foster: I am absolutely sure, because the amount of duty was afterwards refunded.


William Smith: Were they pure-breds?


George Eulas Foster: I understand that purebreds come in free up to a certain number.
Mr. FOSTER (Kings, N.S.)


Martin Burrell: They all come in free.


George Eulas Foster: The difficulty is thaJt in
Scotland there are horses and cattle that are exactly as good to all intents and purposes, so far as marketing or breeding is concerned, as the pure-bred animal. The only difference is that the pedigree has not been kept and registered. This class of animal is debarred. The horses while not coming under the description of pure-breds were in reality as fine animals as pure-breds. This man paid the duty on them, but he was unable to bring in cattle unless absolutely pure-bred, for which he would have to pay a very high price in Scotland, whereas he could get the other kind at a very reasonable figure. I think the customs law should be modified so as to facilitate immigrants into the Maritime provinces and other parts of Canada bringing in as settlers effects such cattle, sheep and horses as will enable them to start business on the farm when they arrive.


David Warnock: I notice there is an
'increase of $90,000 in this item. Is that to cover the proposed increase of compensation?


Martin Burrell: That is partly to cover
the increase in the compensation, owing to the larger amounts we have had to pay both for hog cholera and for glanders; and it is partly for the extension of the service and increase of salaries. It was brought to our attention that many of our veterinary surgeons in the West were not paid in proportion to the cost of living in the West. We gave an additional amount of $200 to those west of the lakes. A good many officers were finding other employment while others were mixing up their private affairs with their duties as inspectors.


David Warnock: I am glad to hear the minister say he has increased the salaries of these veterinary inspectors. Theirs is very hard and dangerous work, and I think our veterinary inspectors should be as well paid as those in the bureaus of animal industries n the United States-from $1,200 to $1,800 according to qualification and length of service.


Martin Burrell: We are doing the same thing now.


David Warnock: I am glad that is being done. I understand that the amount required for compensation during last year was less owing to the decrease of diseases among our animals especially in the West.


Martin Burrell: But there was very
much more in hog cholera.


David Warnock: How about glanders
and dourine?


Martin Burrell: That is slightly less.


John Howard Sinclair: How many inspectors
are there?
. Mr. BURRELL:	About 123 in the meat
and canned food branch, and in the health of animals branch from ninety to one hundred.


John Howard Sinclair: ATe they confined to
the West?


Martin Burrell: No, they are all over
the country.


John Howard Sinclair: Are there some in Nova Scotia?


Martin Burrell: Yes.


James Alexander Robb: Has the minister considered the question of placing a permanent veterinary .surgeon in the district of'Beau-harnois? He has Dr. McCormick at Ormstown who inspects animals coming into the country. But there is a considerable export from that part of the country of animals to the United States, South Africa and even Japan. They have to pass a veterinary inspection, and shippers often have to wait for a man to come down from Ottawa to make this inspection. I understand that representations have been made to the minister to meet the demands of that industry.


Martin Burrell: I cannot recall any
particular application. I do not receive every name in such cases, for it is a bfg service. We would do in the case referred to as we do in the West. At many points we do not pay a permanent inspector, the shipments not being very large. We employ a veterinary at fees, or give him a retaining fee of $200. If the hon. gentleman will kindly write me, I shall be glad to look into the case he refers to.


David Warnock: Has the minister
heard from the inspector he sent to Lethbridge in regard to .the inspection of meat? We discussed that on the supplement-aries.


Martin Burrell: Not to take up time
with that now, I may say generally that the report was very satisfactory and everybody in the district was fairly well satisfied. If the hon. gentleman will call my attention to it, I will see that he gets a copy of the report.


George William Kyte: What special qualifications are these inspectors supposed to possess before appointment-these inspectors of food?


Martin Burrell: The food part of it is comparatively small. We have what is called the Meat and Canned Food Act. The great bulk of inspectors under that Act are concerned with the inspection of meat in the abattoir. No meat is allowed to be



[Stage Direction]
shipped out of the country or from province to province unless the animals have been killed under the supervision of one of our inspectors and handled in the abattoirs and stamped 'Canada Approved'-pretty much the American system. We have four or five inspectors who deal with canning factories largely to see that sanitary conditions are right and things put up in good shape. We do not go into it analytically- ' that belongs to the Inland Revenue Department.
George William Kyte: The inspectors I have in mind are probably appointed by the Department of Inland Revenue.


Martin Burrell: Probably.


William Smith: Has the
minister ever heard from the jobbers, especially of the province of Ontario of any grievance with regard to the disposing of their stock in Montreal?


Martin Burrell: No, I have not heard
of it.
To encourage the production and sale of Canadian tobacco, $30,000.


George Perry Graham: How much tobacco was raised in Canada last year?


Martin Burrell: I am afraid I cannot give the hon. gentleman the amount at this moment. We have a station at Harrow, one at Farnham, and one at St. Jacques l'Achigan in Quebec. Various lines of experimental work are carried on with different strains of tobacco and in methods of curing, and so on.
For experiments in cold storage for fruit, $28,500.


George Perry Graham: What is that?


Martin Burrell: It is a special vote put in last year and revoted this year for experiments in connection with fruit cooling. We have not done anything yet, but I think along some lines of experimental work we may do something this year.
Grant to Dominion exhibition, $50,000.


John Howard Sinclair: Where is that exhibi lion to be this year?


Martin Burrell: In the province of Manitoba, in the city of Brandon.
For the administration and enforcement of the Destructive Insect and l'est Act, $30,000.


John Howard Sinclair: How is that money
spent?


Martin Burrell: In connection with the entomological work we carry on throughout Canada. We are carrying on a special work in the maritime provinces in connection with the brown-tailed moth, which has been such a scourge in the eastern states that over $6,000,000 have been spent


EDITION
[Stage Direction]
there to eradicate it. We are trying to prevent it obtaining a foothold in Canada. In certain places in Nova Scotia and New Brunswick it has appeared, and we have a staff of inspectors in connection with this and with other entomological work.
Quarantine, $273,000.
Martin Burrell: This is the ordinary
vote for quarantine stations at Grosso Isle, St. John, Halifax and Victoria.


George Perry Graham: Why is my hon. friend getting this steamer? '


Martin Burrell: The service has been
unsatisfactory for many years, and we have come to the conclusion that at St. John we ought to do what we have at Grosse Isle, Halifax and Victoria-that is have a steamer belonging to the department, and not be hiring a boat for the service.


John Howard Sinclair: I understand that the Government are having a large number of ferry boats and steamers built outside of Canada. I would like to impress upon the minister the importance of having these steamers built in Canada, even if the cost should be greater than li they were constructed in England or Scotland. The Government in having these steamers built elsewhere, seem to lose sight of the fact that they could be a very good customer of the shipyards of Canada. I am told that some twenty-seven steamboats of one class or another are projected by the Government and proposed to be built across the water-enough to keep a large shipyard busy for the greater part of the year if the boats were built in Canada. This matter has often been discussed in Parliament, but the Government, finding that the ships can be built a little cheaper somewhere else, apparently take no steps to ensure their construction in this country. I hope that the Minister will see that these vessel -, are in future built in Canada, and that the work be given to our own shipyards.


Martin Burrell: I have a great deal of sympathy with the suggestion of my hon. friend.


George Perry Graham: It should be borne in
mind that, upon any material imported to be used in the construction of these ships, the shipbuilders would have to pay to the Government a certain amount of duty, and that when the ships are built in England or Scotland and brought over in completed form, no duty is paid. This should be taken into consideration when a comparison of the cost of construction in the different countries is made.
Progress reported.
On motion of Mr. Rogers, House adjourned at 12.32 a.m. Wednesday.
Mr. BURRELL.

Wednesday, May 21, 1913.