1923-06-19

REPORTS

[Stage Direction]
Sixth report of the Special Committee appointed to inquire into Agricultural Conditions; also seventh report of the same, with evidence and other documents.-Mr. Mc-Master.

Mr. W. G. McQUARRIE (New Westminster) :: Mr. Speaker, may I be permitted again to present the petition of W. J. Bartlett and a number of other residents of British Columbia in regard to the naturalization of Japanese and also in regard to the further immigration of Japanese into this country? You will remember there were some irregularities on the former occasion; I think the petition is now in order.



PRIVATE BILL FIRST READING

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Bill No. 224 (from the Senate), for the relief of John Samuel McDonnell.-Mr. Jacobs.

[Stage Direction]
On the Orders of the Day:
Mr. T. L. CHURCH (North Toronto):: Have the government decided to close Euclid Hall, Toronto,, and Brant House, Burlington, soldiers' hospitals? If so, who recommended it and why, and when will the hospitals be closed? I would ask the government whether arrangements could not bo made to have Euclid Hall and Brant House continued as convalescent homes. It is no economy to close them.


Hon. H. S. BELAND (Minister of Soldiers' Civil Re-establishment):: The question of closing Brant House is under consideration. It had been the intention of the department to close the hospital very shortly, but in view of some representations made by delegations who waited upon some of my colleagues and myself a few days ago, we have decided to defer definite action until I can personally visit the place.
Privileges oj the Home


Thomas Langton Church: I think it should be kept open until September at least, when the warm weather is over. Many of the patients in that institution are incurable cases.


Henri Sévérin Béland: The matter does deserve serious and sympathetic consideration.



RULING OF MR. SPEAKER NON-DEBATABLE MOTION-EFFECT OF PROCEDURE UPON THE PRIVILEGES OF THE HOUSE

[Stage Direction]
On the Orders of the Day:
Right Hon. ARTHUR MEIGHEN (Leader of the Opposition):: Mr. Speaker, I desire to take occasion to call attention to a ruling made by you yesterday, a ruling to which I did not take exception at the time, as I could clearly see it followed a ruling similar in every respect made by Hon. Mr. Rhodes, the previous Speaker of this House. I have given some attention to the subject, because I think if the ruling is to stand it is very serious, and because I believe the ruling not to be right. It was given upon the calling of an order of the day, numbered, I think, 45. The order merely read, "House in Committee of the Whole" on a certain bill, namely, the bill to amend the Bank Act. The ruling was-*


Mr. SPEAKER:: Of course, there is nothing before the Chair at the present moment. The right hon. member, I am sure, is not appealing from yesterday's decision.


Arthur Meighen: No.


Hewitt Bostock: He desires to call the
attention of the House to the ruling and its consequences.


Arthur Meighen: Yes, Mr. Speaker.


Hewitt Bostock: By unanimous consent
that might be allowed.


Mr. FIELDING:: I submit, Mr. Speaker,
that we can appeal from your ruling if we do not like it, but I do not think we have a right to call it in question the day following.


Arthur Meighen: I am not asking for an
appeal. My reason for bringing the matter up on the Orders of the Day is that I think it is as appropriate as any other matter on the Orders of the Day; it is a matter that concerns the privileges of the House.


Hewitt Bostock: Does the right hon.
gentleman make it a question of privilege, a matter affecting the privileges of the House?


Arthur Meighen: The privileges of the
House.


Hewitt Bostock: Then, I think he is in
order.


Arthur Meighen: I am not making it in
any spirit of complaint against the ruling, because I realize it is fully in accord with the precedent quoted by Your Honour in giving the ruling. As I stated, it was upon the calling of an order which merely read, "House in Committee of the Whole" on a certain bill. It was held there could not be debate upon a motion which was called from the Chair as appertaining to that order, the motion being that the Speaker do leave the Chair for the House to resolve itself into Committee of the Whole on that bill.


Mr. VIEN:: I rise to a point of order, Mr. Speaker. If the right hon. gentleman (Mr. Meighen) were appealing from your decision of yesterday, he would be out of order, as he himself admits. Otherwise it would be a question of changing the rules of the House. Either Your Honour's decision was right or it was not. If your decision was right, then the right hon. gentleman can only move to change the rules of the House; if it was wrong, then he had the right of appeal from it yesterday. If the right hon. gentleman wishes to amend the rules of the House he may proceed in the ordinary course, but I do not believe he is entitled to take that matter up on the Orders of the Day. Moreover, there is in the point raised no question of infringement of the privileges of the House. It is only when there has been such an infringement that the privileges of the House may be brought up in this way; otherwise, I do not believe the question can be raised at this stage. Therefore I respectfully submit that my right hon. friend is not in order.


Arthur Meighen: I do not propose to
argue the point of order, Mr. Speaker. I thought it was as convenient to bring the matter to the attention of yourself and of the House now as at any other time. If hon. members feel they do not want to have the discussion now, I will wait until a time when the decision may come again, and then I can discuss it. I do not know what the House is going to gain by the delay. I had hoped that by having the matter presented now we might avoid a precedent which I think would be serious later.


William Stevens Fielding: Will there not be a
more serious precedent if my right hon. friend claims the right to discuss a matter which was decided by the Speaker on a previous day? I think that would be a very awkward precedent to establish.

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Mr. SHAW:: In order to settle the controversy, may I suggest that the House will be going into Committee of the Whole in a few moments, and the same question may then be raised?


Hewitt Bostock: I was going to suggest
that the right hon. gentleman make his objections or representations when a similar motion comes before the House in the course of the regular proceedings to-day. I quite agree that the right hon. gentleman is not appealing to-day from the decision that was rendered yesterday. I gather from his remarks that he more particularly refers to another ruling which was given the other day on a notice of motion that the House do resolve itself into Committee of the Whole. There was on that occasion a little discussion about the right to debate the question before the Speaker left the Chair, and I think that is the phase of the question which the right hon. gentleman wishes to make clear to-day. He will, however, have an opportunity to raise the question again when a similar motion comes regularly before the House.
HINDU FRANCHISE On the Orders of the Day:


Mr. S. W. JACOBS (George Etienne Cartier):: There is a resolution standing in my name on the order paper respecting Hindu franchise, and I am unable to proceed with it owing to the fact that private members' day has been taken away. That being so, I should like to know if the government would be prepared to fix a day upon which this question might be discussed. I understand that this matter is likely to come before the Imperial Conference in London next October, and inasmuch as the Prime Minister, who I understand is going to be present at the conference, might want to have his hand strengthened by a decision from this House on the question, I was wondering if we could not have a. day or part of a day set aside for the discussion of this important question.


Mr. NEILL:: Christmas Day.


Right Hon. W. L. MACKENZIE KING (Prime Minister):: I would think that the most appropriate time to discuss this matter would be when the Franchise Act itself is up for consideration. Of course, it is not possible that this measure will be discussed this session, but if my hon. friend wishes to touch upon any aspect of the coming Imperial Conference, this among others he will be free to do so when we have that item under consideration.
GREAT LAKES SHIPPING COMBINE On the Orders of the Day:


Mr. R. A. HOEY (Springfield):: I should like to embrace this opportunity to ask the government if it is their intention in the immediate future to take action, criminal or otherwise, against the men who together constituted the Great Lakes shipping combine. It is some weeks since the report of the commission was tabled. The people of Canada are deeply interested in this question. I do rot know that proceedings could be taken under the Anti-Combines Act that we passed this session, but I know that any action taken would be in complete accord with the spirit of that legislation which we have passed.


William Lyon Mackenzie King: The government is presenting to the House legislation which it is hoped will deal with the matters that are referred to by my hon. friend. Just as to whether any prosecutions should be instituted for actions that are past will depend, I think, pretty much upon the law as it stands at the moment.



BANK ACT AMENDMENT

[Stage Direction]
The House again in committee on Bill No. 83 respecting banks and banking, Mr. Gordon in the chair.
Mr. COOTE:: Mr. Chairman, I asked last night that this clause might be allowed to stand over as it was my intention to submit an amendment. I have decided, however, not to bring that amendment forward as I am of the opinion that it would not receive the support of the committee. I would like to say a few words in regard to this section.
I think it is a mistake for this committee to say that people should not be allowed to start a bank in this country unless and until the new organization has a subscribed capital of S500,000. I would urge upon the minister the desirability of making it somewhat easier for any group of individuals in this country to get together and start a bank if they so desire. At the present time the banking business in this country is in the hands of a very small group of individuals, and I do not see that there is any possibility of relief from the present situation unless the act is amended to allow banks to start with a smaller capitalization. The reason I am not moving an amendment is that I do not know just what figure to suggest that might meet with the approval of this committee, but I do want to point out that by this legislation we are making it impossible for the people in
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any town or village to start a bank even if they desire to do so and have money sufficient for the purpose. I do not think it is right for this parliament to say that these people should not be allowed to start a bank. Surely, that is carrying the prohibition too far. I would respectfully urge upon the Minister of Finance to take this matter into his most serious consideration and see whether it would not be wise to allow the banks to be started with a smaller subscribed capital than is here provided. The banking system in the United States has been built up through the formation of very small banks in the main. There are many banks in the United States which started with a capital of $25,000 and which have now a paid up capital of $1,000,000 or more, and it does seem to me that it would be possible for us to build up some banks in Canada under that same system, particularly as we now have upon the statute books the War Finance Act which allows banks to re-discount their securities with the Finance Department. Without discussing the matter at any greater length I would earnestly urge this upon the Minister of Finance for his consideration.


William Stevens Fielding: The question referred to by my hon. friend is undoubtedly one of much interest and importance. It has been well considered by the department, and I think I may say it was pretty carefully considered by the committee. There is certainly something to be said in favour of the hon. member's suggestion. On the other hand, there aie several reasons which I think can be properly urged against it. To begin with, in these days of big things a small enterprise in any line of business will have trouble in competing with the larger concern. A small bank will have a great difficulty in competing with a larger institution. There are certain expenses incidental to management which have to apply to a small bank and also to a large one, and it is only because these expenses can be distributed over a large area in the case of the larger institution that the cost of the organization and management may be deemed reasonable. That in itself is the reason why, I think, a small bank would have, from the very beginning, great difficulty in holding its own.
Then there is another consideration. The argument for a small bank is that it appeals to the local feeling, appeals to the local pride. There is certainly force in that. But that which is an argument at one moment in its favour is really a good argument against it. The tendency of the small bank, appealing to tMr. Coote.l
local feeling, appealing to local pride, is to become so identified with local affairs that it, so to speak, puts all its eggs into one basket, and when trouble occurs the small bank, dependent upon local business, has an exceedingly difficult task to exist. I think, take it all in all, that any bank which is organized in Canada at a smaller capital than that which i3 required under the existing law would have a poor chance of success. I doubt whether any honourable member who thinks it out would do well to advise anybody to put money into a small bank in Canada with the expectation that it could compete successfully against the larger institutions.


Mr. GARLAND (Bow River):: The minister has said that the danger in connection with the small local banks is that they are apt to become localized in their activities and, having put all their eggs in one basket, to use the illustration he mentioned, would have greater difficulty in existing when trouble came. Does he not think that a rediscounting system in connection with the local bank would overcome the danger which he anticipates?


William Stevens Fielding: That raises another
question. I think the activities of the small bank would be localized. Even though it might utilize a system of rediscounting in the way suggested to my hon. friend it would still be a local institution. The danger is that it would become so local and so interested in a few local enterprises that, I think the experience has shown in Canada- I do not want to discuss the American system-the small bank would be a menace to the financial situation, and would not tend to promote that stability in financial affairs which, I am sure, hon. gentlemen opposite are as anxious to maintain as I am.


Mr. GOOD:: I would like to question the
argument of the Minister of Finance when he refers to the alleged difficulty the small banks might have in competing wtih the larger banks. As a matter of fact in the United States they have developed a vast number of smaller banks. These banks, it is true, have failed in a number of cases, but I think the statistics given in the committee on Banking and Commerce showed that the proportion of failures was considerably less than in Canada. Now, these are facts, and while everyone would admit the existence of certain difficulties the small banks would have to face, those who look at the matter fairly must also admit that there are certain very distinct advantages, not only from the standpoint of utility to the neighbourhood, to the community, but from the standpoint of

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actual efficiency and operation-for example the low overhead expenses. We ought, I think, as a matter of principle, to allow free competition between the large branch bank systems such as we have in Canada and the local bank system. Nobody knows which is the best? How can you tell if you do not try? If the legislation practically prohibits the formation of any small banks the argument surely is not valid that the small bank cannot compete against its larger competitor and is of no use. I submit that in the United States, a country very like our own, the small bank has proven entirely satisfactory, particularly since it has been linked up with the federal reserve system of that country. I feel that this is a matter which must receive consideration sooner or later, and we might as well face the situation now. The experience in Canada has been referred to by the Minister of Finance. I presume he refers to a number of failures of small banks years ago; but we have had a number of failures of larger banks, and I do not know that any evidence has been submitted in the standing committee or in the Committee of the Whole which would show that the proportion of failures in small banks has been any greater in volume than the proportion in our larger banks. I quite agree with the hon. member for Macleod (Mr. Coote) that there is not much prospect of getting anything like this system in operation, particularly as it was turned down in the Banking and Commerce committee. However, I would like to place myself on record as stating that in my opinion we ought to allow a fair field and no favours and not prohibit the smaller bank, which has been very useful elsewhere, from getting a start in Canada. I think it may be particularly useful and particularly stable when we link it up with the federal reserve system, or with the Treasury Board under our Finance Act.


Mr. LOGAN:: I believe that the capitalization of the banks at the present time is entirely too large. The Minister of Finance has referred to the disadvantage of localizing banks. In the Maritime provinces we are suffering from the disadvantages of centralization. Twenty years ago, Mr. Chairman, we had, if I remember rightly, fourteen banks with their head offices in those provinces. We had fourteen boards of directors, comprising the leading and best business minds of the Maritime provinces, sitting around the boards of those respective banks and considering the needs and necessities of the Maritime provinces to a large extent. They knew our difficulties, they sympathized with our ambitions,
and we were able at that time to secure banking accommodation in a rather liberal way. Now, Mr. Chairman, we have not a single bank with bank directors sitting round the board in the Maritime provinces; and it has been said by someone, and I guess it is probably true, that there is no individual, and no board of directors in these provinces having the real right to-day to advance even $20,000 on a credit without the matter being referred to the head office in Montreal or Toronto. Now, I am not attacking the bank directors in Montreal and Toronto, nor am I attacking the banking system as it exists today. I think, taking it all in all, that it was, in its inception at any rate, a very great banking system. But there may be, and I think there is necessity to-day for some amendments. Nevertheless, the fact is, Mr. Chairman, that the man in the Maritime provinces in order to get credit must first go to a local bank manager. This manager may not understand very many of our difficulties, but the system is to report to the head office, and the board of directors in the head office will issue or deny that credit, depending largely upon the recommendation of the local manager. The local manager may so report as to cause the application to be received with considerable favour. He may be a local banker in whom the head office has very great confidence, and his recommendation may receive more consideration than that of some other bank manager.


Thomas Vien: Has not the Bank of Nova
Scotia its head office in Halifax?


William Stevens Fielding: Nominally.


Hance James Logan: Nominally it has its head
office in the city of Halifax where you would think the head office of the Bank of Nova Scotia should be; but practically the head office of that bank is one thousand miles away from the province from which it derives its name.


Thomas Vien: How does my hon. friend explain the disappearance of thes-e small banks and the location of the headquarters elsewhere?


William Stevens Fielding: It is not a small bank,
it is a large bank.


Thomas Vien: It is a large bank, yes. Moreover, how would my hon. friend prevent the same thing occurring to the small banks of which he advocates the creation?


Hance James Logan: I presume the reason for the change of head office to Montreal and Toronto lies in the tendency in Canada towards centralization along all lines. I am not asking that
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Bank Act

legislation be passed here to compel the formation of banks in the Maritime provinces; but what I do say is that we should not shut the door against the formation of new banks, even though we may lose later on. I know of individual cases of clients of mine who have suffered very serious injury through a lack of knowledge on the part of the local bank manager, on one hand, and, on the other, a lack of knowledge on the part of the directors sitting a thousand miles away considering the case. It is natural that men in Nova Scotia or in the Maritime provinces should know more about that part of the country, the men, the character of borrowers, than any body of men can possibly know sitting a thousand miles away. I was not a member of the committee on Banking and Commerce; in fact, I was not here during the greater part of the session. But I have taken the trouble to read the minutes of the proceedings of that committee, and I find that a motion was made there to reduce the amount to $50,000. I would vote against that, because I think the amount is too small. On the other hand, however, I certainly think that $500,000 is too large a sum to fix as the minimum in this day; we might very well reduce it to $150,000 or $250,000 in order that it might be easier for men in the outlying parts of the Dominion to form banks to deal with local affairs. People ask, what is the matter with the Maritime provinces, and why is it that we are losing our population? Well, there are several reasons, one being of course the high cost of transportation. But among the several reasons that may be offered for this condition, one of the most outstanding is the fact that we have lost our money control in the Maritime provinces, so that it is exceedingly difficult to secure for local enterprises sufficient capital to carry on when we have to appeal to a board a thousand miles away who very often know us not.


Mr. MACLEAN (Halifax):: If the question of small local banks were possible and practical I would very heartily endorse it; I fancy that nobody, in principle, is opposed to smaller local banks operating within a limited area. Indeed, the present Canadian act is not against small banks because it expressly provides that a bank with a capitalization of $500,000 may start business. The hon. member for Cumberland (Mr. Logan) deprecates the fact that in the Maritime provinces we have no small banks. I might say to him, however, that in the city of Halifax as well as in St. John, there would not be the slightest difficulty whatever in securing $500,000 of capital with which to start a bank and operate it locally if the people thought that it could exist and successfully continue in business.


Hance James Logan: You have not tried it.


Alexander Kenneth Maclean: It has been tried in Nova Scotia, but without success. Now, hon. members refer to the experience of the banking system of the United States. In banking, as in a great many other enterprises, if a system is once instituted it is difficult to abandon it and immediately inaugurate a new one. The branch bank system of Canada is as old as confederation. I am not saying whether it is best or not, but I do say that it has fairly well provided for the necessities of the country in the past; in fact, I do not know what other kind of banking system could have prevailed in Canada. When one reflects that we have in this country a population of eight or nine millions occupying vast stretches of territory, one is forced to ask where the capital would have come from to establish in the cities and the towns and villages of Canada the banking offices that exist to-day, were it not for the branch bank system. I do not think it would have been possible; and whatever the defects of the system may be-and I presume it has defects-I say, nevertheless, that it has served Canada well.
The Minister of Finance (Mr. Fielding) has referred to the experience of small banks in the country. I remember in my own time, in the province of Nova Scotia, there were two local banks, which, I think, had not a single agency. Within the last twenty years they have gone out of business. And I might refer to other banks much more substantial, such for example as the Northern Crown, of Winnipeg. That bank merged with the Royal Bank either in 1918 or 1919. It was in a fairly liquid position, yet they found they could not safely loan their resources and protect their depositors and shareholders. They therefore had to go out of business. Nothing was said about the matter at the time; that particular merger was not criticized. But in banks, as in every other business institution, there is likely to come a time when the shareholders decide that they must liquidate or sell. And that very substantial bank, the Northern Crown, was obliged to do that. Or take the case of the Bank of Ottawa-a very strong institution, well entrenched in the Ottawa valley and with a splendid body of directors. A few years ago that bank found its position was in danger; at least, it could not sustain its position unless it spread out through the various provinces of Canada, which it had neglected to do in previous years. It was a bank in which a few persons were the principal shareholders, who thought they could not get additional capital by appealing to the public. And so

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40S1
they declined to put further capital into the enterprise and in the end decided that it was better to merge with the Bank of Nova Scotia. The same thing happened in the case of the Bank of British North America, which was largely a Canadian bank without the shareholders' double liability. They had not established agencies throughout Canada in many places and they found the competition of the stronger banks, which had established themselves freely in all the provinces, so keen that they were obliged to sell.
There is one thing that may be said of the branch bank system which perhaps may be regarded as somewhat in the way of criticism: It makes it difficult for the small local bank to succeed. As the Minister of Finance has pointed out, however, we know very well that the small bank with local directors unfortunately succumbs to local influences, and too soon its resources are held by a few borrowers in the locality. And that is the difficulty. Under good management this might be avoided; but unfortunately our experience in the past only confirms this opinion.
Now, in these days, is $500,000 too much capital to require of a bank starting in business? It is no more than the equivalent of $200,000 or $250,000 ten years ago. A bank with just that volume of assets could not engage in a very heavy banking business even in a small locality. There might be considerable to say for the reduction of this minimum of $500,000; but the question arises, at what sum will you fix the minimum? Furthermore, is it wise to take the responsibility in view of the history of banking in Canada, and our experience in the past?
Again, there is the difficulty of obtaining good bank managers in Canada to-day. The present banks complain-they complained before the committee on Banking and Commerce-of this very matter. Further, I would point out that the small local bank will not receive deposits against the stronger banks doing business throughout Canada, and that is another consideration.


Mr. MILLAR:: Would the hon. member
admit that the experience of the Weybum Securities Bank is an exception?-it has succeeded against the larger banks.


Alexander Kenneth Maclean: I am very glad to say that it is an exception. It is a small bank with seventeen branches.


Mr. STEVENS:: It is operating under this
act.


Alexander Kenneth Maclean: Yes, it had the minimum capital of $500,000.


John Millar: It is a small bank.


Alexander Kenneth Maclean: Yes, and I am glad to see that it is developing and becoming stronger. I only wish there were a great number of such institutions in the West. But there is this to be remembered in connection with the Weyburn Securities, it is a bank the shares of which are held by just two or three people, and I am informed that frequently they have had to come to the assistance of the bank. Then, the general manager has had an experience which peculiarly fits him for operating in the particular territory in which that bank conducts its business. That bank has great difficulty in earning dividends, and it is very important for a bank to earn dividends. Some hon. gentlemen across the way last night deplored the fact that in these days banks were paying dividends. As soon as a bank ceases to pay dividends, it ceases to do a banking business. You cannot compare a bank with an ordinary commercial business. Ordinary commercial corporations may suspend indefinitely the payment of dividends; but as soon as a bank fails to earn its dividends, its shareholders require the liquidation of the company in order to avoid the double liability; depositors will leave them, and for these and other reasons it is very important that banks earn dividends. I am glad, however, to express the hope that the Weybum Securities Bank will continue to do business in the West. It would be very desirable if it could be brought about that other banks of that size could be established in that area.
The hon. member for Brant (Mr. Good) suggested that possibly with a discount system in Canada, local banks might have an easier course to travel. There may be something in that, and probably the day will come when we shall have a rediscount bank in Canada, Then the establishment of local banks will perhaps, become a practical question. But there will always be this difficulty, that the small local bank will not be likely to have the kind of security which will be acceptable to rediscount banks; the better classes of securities will go to the stronger banks. I am not saying that in an absolute or dogmatic fashion. I might be wrong in that respect; but I think when we have functioning in this country an organized rediscount banking system, it is' just possible that local banks may successfully venture into the local banking business. The whole question is whether, in these days particularly when capital is timid, is it worth while to authorize the inauguration of banking business by banking companies with a smaller capital than $500,000. Personally, I do not believe that within the next five or ten years you could get
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capital to engage in a purely local banking business anyway, except, perhaps, under exceptional circumstances such as prevailed when the gentlemen came over from the United States and started the Weyburn Securities.


Mr. IRVINE:: There is a good deal of
force in the argument which the hon. member for Halifax (Mr. Maclean) has just put forward, as well as in that of the Minister of Finance (Mr. Fielding). I think the committee will realize and agree that in the past there has been a decided tendency towards mergers. I do not think any legislation that we can make will successfully combat that, because it seems to me a natural response to conditions generally. I agree also
4 p.m. that the present branch bank system has been peculiarly fitted to the conditions of a new country, and it is doing a very great service. I see also the force of the argument of the Minister of Finance that a small bank would, perhaps', have a great deal more difficulty in maintaining itself against the competition of larger institutions. But, at the same time, I do not think it is entirely wise for us to shut out small banks from making the attempt. In view of all these things, it is not likely that many will make the attempt -I think that is true. And so I would like to ask the Minister of Finance this question. In his opinion, what possible harm could come by reducing the amount required to start a bank, say, to $250,000? If no serious harm could be foreseen, would the minister entertain the idea of reducing the initial amount of capital stock?


William Stevens Fielding: I would not think it was wise to induce people to put their money into a small bank. I think any money that is put into a small bank is not wisely invested, for the chances are that it will not be a successful institution. I think the amount of 8500,000 is not an excessive sum. May I say with regard to the remarks of the hon. member for Cumberland (Mr. Logan) that I deplore, as he does, the fact that so many of our Nova Scotia banks have moved their headquarters to Montreal or Toronto? But I do not see how that can be prevented. I do not see anything in the Bank Act which created that situation, and I do not know of any provision in the Bank Act which could prevent it. It is one of the results of what I might call evolution under confederation. Many institutions which were prosperous in the Maritime provinces in the days before confederation are complaining to-day. I do not want to discuss the question of confederation; I simply state a fact. I remember when there were twenty wholesale houses

in Halifax all doing a prosperous business; to-day there is hardly one of them left. They have all been driven out by Montreal. As regards the banks which we had in Nova Scotia, the shareholders who built up the banks in that province found it convenient to sell their stock to other people. I have never found any complaint coming from the Maritime provinces as to this particular part of the act. There have been suggestions from other parts of the country that they would establish banks if they had the opportunity; but I never had any complaint from the lower provinces. And if they had an opportunity, I do not think any banks would be established in the lower provinces with a capital of less than $500,000, because their knowledge and experience of banking would satisfy them that the smaller institution could not have a fail chance in the competition for business.


George Gibson Coote: I should like to say just one word in reply to a point raised by the hon. member for Halifax (Mr. Maclean), that is about the Northern Crown Bank being amal- * gamated with another bank. I do not remember the particulars, but I understand this was a profitable venture for the people who founded that bank and afterwards found it wise to amalgamate. I suppose the same thing would apply to the Bank of Ottawa, and if I mistake not, the same thing would apply to the Bank of British North America.


Alexander Kenneth Maclean: I do not think it was a profitable sale for the Northern Crown because they had lost a great deal of their capital, and they had to furnish additional capital. The amalgamation was made after they found they could not succeed. It seems to me the hon. member for South Winnipeg (Mr. Hudson) had something to do with that bank, and he might inform us upon that point.


Mr. HUDSON:: I do not recollect the particulars altogether; but in a general way the shareholders of the Northern Crown, when they transferred their stock, as they did under the amalgamation agreement, got out just about what they put in. I think some of them may have lost a little in the way of premiums which they paid on their stock, but they certainly got out as much as they put in, apart from any question of premiums.


George Gibson Coote: Just a word, Mr. Chairman, in regard to how this capitalization should be fixed. A lot of communities in Canada might be able to start a bank to take care of their local needs. Possibly none would

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40S3
want to do so, but I do not think we should by this act forbid any community from embarking on such an undertaking. It seems to me less money has been lost in bank stocks in Canada in proportion to the total investment than in any other line. Possibly one of these small banks would fail once ;n a while, but I do not think such a failure would entail nearly as much hardship as the failure of one of our large banks. I do not think it is right for this committee to arbitrarily fix an amount of half a million dollars as the capital which must be subscribed. If any set of people want to invest their money in a bank with a smaller capitalization, I do not see why we should take it upon ourselves to prevent their doing so.


Alexander Kenneth Maclean: I cannot recall the particular section, but is it not a fact that a bank can start business with a paid up capital of $250,000?


William Stevens Fielding: That is section 13.


George Gibson Coote: Yes, but if I remember rightly the subscribed capital must be half a million dollars.


William Stevens Fielding: There must be subscribers for half a million dollars, and they are liable to be called upon, but the bank can start iu business on $250,000. Surely that is low enough. It is hardly fair to speak of half a million dollars being necessary.


George Gibson Coote: I trust the Minister of Finance (Mr. Fielding) does not forget that there is a double liability clause attached to the stock.


William Stevens Fielding: That would be so in a small bank too.


George Gibson Coote: Certainly, and if a smaller amount were fixed it would be that much easier to start the bank. I think the minister is a little too determined to prevent people starting a bank if they want to. That is the point in my mind. I think he is taking a wrong view. He might think that even a quarter of a million dollars is not a very large amount, but, as I said before, it might be really more than was necessary for a bank to function in some particular locality.


Mr. MacLEAN (Prince):: In regard to small banks, down in our province there is such competition for business among the chartered banks that as soon as it is thought the conditions warrant a branch is established in any village. I could cite cases where branches were established by the larger institutions for the benefit of the locality and the business offered was not sufficient to meet expenses, but the banks were willing to lose money in order to cater to the needs of the people. Where the banks are willing to meet every reasonable demand of the borrower, and also to take care of the deposits entrusted to them, I cannot see that any great advantage would be gained by the establishment of small, local banks, as there would be a greater risk to the depositors and the borrower would not get any cheaper money.


Mr. SPENCER:: Criticism has been made in regard to the smaller banks because the managers and directors often get to know their clientele too well. I am afraid that this criticism does not apply to the present system of branch banks. I know of one locality where there have been six managers of the branch bank in the last ten years. It will be readily understood that under these circumstances, and with the directors residing about three thousand miles away, the bank has very little in common indeed with the localities where their branches are established. A few weeks ago we passed a Combines, Monopolies, Trusts and Mergers Act. It seems to me, Mr. Chairman, that if we prevent competition by forbidding the establishment of smaller banks we are encouraging such combinations among the banking fraternity. The hon. member for Halifax (Mr. Maclean) referred to a sudden changing of the system. But the change would be very gradual indeed and business would not be upset in the slightest degree. It is simply a case of asking for a fair field and no favour. The criticism has often been made that more branch banks are not established because there are not sufficient local deposits to warrant their establishment. I should like to see that criticism confirmed by figures showing what deposits are placed in the banks in the Maritime provinces, the prairie provinces and British Columbia. We do not seem to have those figures given to us very readily. I think probably they would disclose that vast deposits are placed in the banks in those parts of Canada.
There is one other argument, and I think it takes some answering. We have two countries side by side, the United States with an independent banking system, Canada with a branch bank system. Both countries have many things in common, including vast-stretches of thinly populated country. One, however, has developed very fast indeed, the other has practically stood still. And, in the words of the hon. member for Brant (Mr. Good), the banking system in the United
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States has had less failure on a percentage basis than the much-vaunted system of branch banks in Canada.


[Stage Direction]
Section agreed to.
On section 22-Who shall be directors.
William Charles Good: I beg to move that this section be amended by inserting after the word "election" in the second line the words, "but not less than a majority of the votes cast."


William Stevens Fielding: Would the hon. gentleman explain that?


William Charles Good: This House some months ago endorsed the proposition that members of the House be elected by a majority vote, and I think it is customary for the directors of any concern also to be elected by a majority vote. I simply ask by the amendment that what is generally recognized as good practice should be incorporated in this clause. I do not know whether or not there is any particular need for it, but the clause as it is leaves it quite open for the directors to be elected by minority votes. I do not think any possible harm can come from requiring the shareholders of a bank to see to it that they elect their directors by a majority.


Edward Joseph Garland: A fair and equitable principle is involved in the proposal of the hon. member for Brant (Mr. Good), and I think it should meet with the approval of the committee and of the minister. No harm can be done by it; much good might result from it.


William Stevens Fielding: I have never heard of any trouble arising under this clause, and I do not think we need look round for any.


The CHAIRMAN:: The question is on the amendment.


William Charles Good: I think we ought to have a better reason than that.
Amendment (Mr. Good) negatived; Yeas, 23; Nays, 38.


[Stage Direction]
Section agreed to.
On section 30-Appointment of officers, etc.
Mr. WOODSWORTH:: I should like to move that section 30 be amended by adding thereto, as subsection 4, the following:
4. Such officers, clerks and servants shall have and be deemed to have the right of association for all lawful purposes.
Under the Treaty of Versailles all employed persons are guaranteed the right to organize. Canada and this government are
[Mr. Spencer.
definitely committed to the principle of that clause of the treaty. The phraseology here is, I may say, taken direct from the tijeaty. In connection with a great many other institutions and organizations the right of employees to organize is specially recognized, and it seems to me it should be in this connection. We are here providing for various things- that the directors may appoint these officers and employees, may require of them certain bonds, and so on, and it is reasonable that the employees should be definitely guaranteed their natural rights. In this act we are giving special privileges to certain corporations. We are definitely recognizing the Bankers' Association, which is, of course, an association of employers. We are recognizing professional associations such as that of the accountants. There seems to be no reason whatever why we should not recognize that the employees should have the right to organize. At the present time the employees of the bank are absolutely at the mercy of their employers. If they should wish at any time to ask for an increase in their wages or a betterment of their condition their case is almost hopeless. I know that theoretically they Imay organize, but whenever that has been attempted it has been frowned down upon by the bankers, and the men who have attempted to effect the organization have been thrown out of their positions or transferre,d to other positions or prevented from receiving promotion. This is what actually takes place. I have had various representations made to me from bank men both in the West and in the East in regard to this matter.
Take the question of wages. I am informed that in some of the leading banks a great many of the clerks are receiving, to start with, some $350 a year. Sometimes that is supplemented by living quarters, and in other cases it is not. I am informed that in a great many cases the wages of bank employees amount to only $500, $600, or $700 a year. I received a rather pathetic communication the other day, since introducing this matter, from a young man who stated his position. He is an employee in a bank, married, with children, and is receiving only some $1,500 a year and finds it very, very difficult indeed to manage on' that.
Take, again, the question of marriage, and the conditions under which the bank clerks must live. We have the banks stipulating that a bank clerk may not marry until he has such-and-such a salary. That works out in practice, I am given to understand, that certain employees who have special friends among the bankers are able to obtain this privilege, while others are not able to do so. It seems as if any employer is going a very long way

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indeed when he undertakes to dictate to his employee what his social condition shall be, whether or not he shall have the right to exercise legitimately the normal functions of manhood. These things are vital, and these conditions are very difficult to improve or alter unless you allow the employees the primary rights of freedom of speech and of association. I cannot see any good argument against such a clause being inserted. This was proposed in the Banking committee, and I am glad to know that the Finance Minister is favourable to its incorporation. I feel quite confident that a great many members of the House, irrespective of party, will feel in favour of definitely ensuring to the bank clerks that which all other people are supposed to enjoy.
Amendment negatived: Yeas, 23; Nays, 42.


[Stage Direction]
Section agreed to.
On section 32-One vote for each share.
William Charles Good: Before this clause carries, I would like to have an expression of opinion from the Minister of Finance as to the propriety of returning to a system of voting which, I understand, was in vogue in the banks some years ago, that is that there should be a limitation upon the principle of one share one vote. I think it is generally recognized among all co-operative organizations that the principle of one man one vote ought to prevail. The principle that is adopted in most joint stock companies is one share one vote. I have been informed that some years ago some of the Canadian banks voluntarily adopted a sort of compromise between the two principles so that some recognition would be given to manhood whether or not it was accompanied by dollars. I would like to have an expression of opinion from the Minister of Finance on this question.


William Stevens Fielding: Whatever might be said in favour of the principle of one man one vote in the political sense, I think when it comes to money matters the old phrase "money talks" has to be recognized. I do not think it is reasonable to say that the man who owns only one share in a bank should have the same say as the man who has two. I think that is too chimerical.


William Charles Good: I think my hon. friend has misunderstood me. I did not suggest that we should adopt the principle of one man one vote, but if a man had one hundred shares say, he should not be allowed voting power beyond that amount. There should be some limitation upon his voting power.


William Stevens Fielding: I do not think that can be done.


[Stage Direction]
Section agreed to.
On section 54-Statement to be laid before annual meeting; liabilities; assets; other particulars; profit and loss account, etc.
Henry Elvins Spencer: I notice that in the
draft of the original bill the minister had two paragraphs, one called "appropriation account" and the other "contingent reserves, including undistributed profits." Would the minister explain why these two clauses were withdrawn?


William Stevens Fielding: After the bill was introduced we had many criticisms from all quarters. Whenever any suggestion was made that seemed to be reasonable I was very happy to concur in it. The suggestions made in regard to these paragraphs seemed to me to be reasonable. We discussed the matter in committee and the committee agreed to the changes as herein made.


Henry Elvins Spencer: May 1 ask the minister
if "from all quarters" included anybody but the Bankers' Association themselves?


William Stevens Fielding: Oh, yes. I had letters
and suggestions from various members of parliament, from outside citizens, suggestions came to me in a variety of ways. I think even the public press undertook to give me some advice in the matter.


George Gibson Coote: Would the minister be good
enough to tell us why these amendments were put in the draft bill as first brought down? Was there not some good reason for having them inserted there?


William Stevens Fielding: It seemed to me at that time, in the best light we had, that the way there proposed was the best way to deal with them. Better light came to us and we acted accordingly.


George Gibson Coote: I was just wondering if
the minister would tell us where the light came from?


William Stevens Fielding: I get light from various sources, occasionally from my hon. friends, and I am very glad to avail myself of it.


James Shaver Woodsworth: It seems to me
there should be a provision requiring an accurate statement to be made with regard to the value of bank premises. There is no such requirement in this clause. I should like to call attention to the evidence given by Sir Edmund Walker before the committee on Banking and Commerce.
He was asked:
Q. Are the figures that are given in the returns made to the Minister of Finance, showing the value of the ibank premises, exactly correct and complete?
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He replied:
A. We tell our shareholders almost every year that our bank premises are entered at half their value, we tell them that our bank premises are worth twice as much as they are stated at in our statement in the first place, they are $7,236,000, in the last statement, those are the premises that the bank owns directly, the bank owns premises through a realty company as well-that is about half of the value of those particular premises.
Q. That is the value of the premises held by the Bank of Commerce is some 15 millions?
A. About 14 or 15 million.
Q. What was the purpose of holding bank premises in the name of a holding company?
A. We had to replace the landlord that I spoke of as existing throughout Ontario, but did not exist in the West. We created a realty company, and as we built our buildings we provided out of our currency profits for half the cost of the building, and took that in stock in the realty company, and wrote that stock off. This realty company mortgaged the premises of the bank for the other 50 per cent, and the bank rented offices from the realty company at a rental which in 20 years would amortize the last of the debt.
Q. What would be t^ie value of the holdings of your subsidiary realty company?
A. 8 or 10 millions. I think 10 millions.


George Newcombe Gordon: I would call the hon.
member's attention to section 147b which provides for neglecting to make a return for the value of property. This seems to be a provision of the kind the hon. member has referred to.


Alexander Kenneth Maclean: And section
79 which calls for a return to the minister in regard to the value of real and immovable property.


George Newcombe Gordon: There is section 147b
and section 79. In the former a penalty is provided for neglecting to comply with the terms of the section.


James Shaver Woodsworth: In paragraph (r)
of the clause we are now considering the statement of assets is required to show:
"bank premises, at not more than cost, less amounts (if any) written off."
It seems to me that, in some way, a fair valuation of the bank premises should be definitely required in this statement. If the statement is worth anything it should show the exact value both of the real estate held directly and that held through any holding company.


William Stevens Fielding: Paragraph (r) provides
for a return of the bank premises.


George Newcombe Gordon: That is the one under discussion now.


William Charles Good: It seems to me this matter
is one of very great importance. There was a good deal of discussion about it in the committee on Banking and Commerce and I understand the Minister of Finance took the

position then that so long as the real estate assets were not over valued no harm was done. I should like to dissent from that view. The banks are essentially public service corporations, and if the value of their real estate assets are written down, it is possible to conceal a very large amount of profits in those assets.


Alexander Kenneth Maclean: There is this
exception: Under section 79 the bank must every year make a return to the minister showing the fair market value of its real estate and property.


William Charles Good: Yes, Mr. Chairman, I am
very glad the hon. member called my attention to that. There is that provision, but I think the House should also make provision for return in another place. Why should we not provide in the item in the clause we are now discussing that there should be a statement of the fair market value of the assets, and not have the banks possibly writing them down to a very small fraction of the real value?
I might call the attention of the committee to the other paragraphs, (m) and (n), which were withdrawn by the minister during the course of the consideration of the bill m committee. They are now hidden under a new (m) and (n)-"other current loans and discounts in Canada, after making full provision for all bad and doubtful debts," and "other current loans and discounts elsewhere than in Canada, after making full provision for all bad and doubtful debts." The point is whether or not the banks should be permitted to conceal the amounts which they have appropriated for bad and doubtful debts. I want to place myself on record as being somewhat doubtful of the decision which the committee reached in that respect, and of the propriety of following the suggestion made by the Minister of Finance in the first place that these appropriations should be disclosed in the statements.


George Gibson Coote: It would be only fair to the shareholders to have the bank premises shown in the annual statement at their fair market value rather than as it is shown at present. This statement as it is made out now is misleading. I think the shareholders are entitled to know how much of the bank's money, capital or accumulated profits, has been put mto bank premises. I have here a statement issued by Dickinson & Walbank, of Montreal, in regard to the merger of the Merchants Bank with the Bank of Montreal, in which the following statement appears:

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It is evident from the government reports and statements made at the meeting in February, that the entire capital of the Merchants Bank was in premises of the bank. In that case, the shareholders' equity, as shown above at $12,826,189 and $12,041,761, in December and January respectively, has against it a bonded liability on bank premises account, approximating $5,000,000 which must consequently be deducted, thus bringing the total book-value down to $7,041,761 or $67 per share, at the end of January.
In the bank returns of February 28 I observed that one bank with a paid-up capital of $15,000,000 gave its bank premises as being valued at $7,000,000, and the general manager of the bank, I believe, made the statement that the value shown is only 50 per cent of the cost of the premises. A lot of the profits or of the capital of the bank has been invested in bank premises and it is not shown in their annual statement, as it ought to be. This is misleading, and the Minister of Finance should amend paragraph (r) so as to show bank premises at their actual value or their fair market value.


[Stage Direction]
Section agreed to.
On section 56-Shareholders' audit.
James Shaver Woodsworth: I have an amendment to offer. I move that section 56 be amended by adding thereto the following subsections:
(17)	Ths Governor in Council shall appoint a competent person who shall be an officer of the government with the title of Government Auditor, whose duty shall be to examine all reports of auditors made under this act and require all such auditors to report to him upon the adequacy of the procedure adopted by the bank for the safety of its creditors and shareholders, and as to the sufficiency of their own procedure in auditing the affairs of the bank, and he may enlarge or extend the scope of the audit, or direct that any other or particular examination be made or procedure established in any particular case, as the public interest may seem to require.
(18)	The Government Auditor shall have all the powers of inquiry with respect to the duties to be performed by him conferred upon commissioners appointed under the Inquiries Act.
(19)	The Government Auditor shall annually make report in writing to the minister of all examinations and inquiries made by and directed to be made by him and his finding and recommendations in respect thereto, and such report shall be laid before parliament within twenty-one days from .the commencement of each session thereof.
After the near-failure of the Merchants Bank there was a very general request by the public as voiced through nearly all our newspapers, that there should be some more definite government audit or inspection. The amendment submitted does not look to the appointment of auditors who will go over the entire work of all the banks. That would seem to me to be quite unnecessary, and of course it would involve an enormous expenditure. That is not contemplated at all. It
is proposed, though, that some one should be expressly charged with the responsibility of supervising the various bank audits and of seeing that they are standardized and are sufficiently wide in scope to cover all requirements and to bring to the notice of the minister, and subsequently of parliament, all the essential facts in the case. It has been objected by the bankers that the government is not in a position to audit the accounts of the banks, because it is not able to command the services of any one sufficiently competent for the purpose. I cannot see the validity of that objection, for the government of the country, charged with the responsibility of safeguarding the interests of the public and of the bank shareholders, should undoubtedly be able to secure the services of competent-men. Further than that, it has been objected that if the government undertook such an inspection it would assume a certain responsibility. Well, that is precisely the reason why such an inspection should be made. The government cannot avoid a very considerable measure of responsibility with regard to the banks. Under this bill which we are passing the banks are given special privileges. They have almost a monopoly of the credit system of the country and, besides, they enjoy the very valuable franchise of issuing currency. Under these conditions the public have a vital interest in all that transpires in the banks.


Thomas Vien: How can the hon. member say the banks have a monopoly when any group of persons with $500,000 can organize a bank?


James Shaver Woodsworth: If another group entered, the number of such organizations would be increased from seventeen to eighteen, and those eighteen groups would still have that monopoly.


Thomas Vien: And why not fifty or sixty groups? There is no monopoly when it is open to any other group to come in. There is no restriction to the number of banks that may be organized.


James Shaver Woodsworth: Since the hon. member raises this question I may point out that as a matter of fact, within -the last few years, instead of banks multiplying they have been reduced in number from thirty-four to seventeen; and that is a sufficient indication of the likelihood of other groups breaking into the ring. I repeat, there is virtually a monopoly on the part of the banks of giving credits to the people, and there is the further valuable franchise of the issuance of currency. Under these circumstances the government cannot escape its responsi-

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bility, and it would seem that the best way of meeting the situation would be to appoint some one definitely who shall be given the responsibility of supervising the auditors. I fancy if this were done and if there was any weakness in any bank, it would be brought to the attention of the minister >n time to save the situation.
One other objection that I have heard alleged against this amendment, is that the business of a bank is private in character. Surely, sufficient evidence was produced in the Banking committee and on the floor of this House last night to show that essentially the banks of to-day are in the nature of public utility corporations. Their concerns are not entirely private. With the special privileges they are granted, with the franchises and charters they are given, they can no longer be considered as carrying on a private business. The public Is interested to a great extent; a section of the public as shareholders, another and larger section of the public as depositors, another and still larger section of the public as borrowers-those who technically make deposits and are given checking privileges;-these large sections of the public are tremendously interested in what is taking place. For these reasons, it is highly desirable that we should have an officer charged with keeping in close touch with the affairs of the bank, who would bring this information to the minister and to parliament.


William Stevens Fielding: We had a very full discussion of this matter before the committee. The clauses which we have already passed or which we are about to pass give adequate powers and protection to the public in the matter of audit, and I do not think it is wise to ask us to go any further.


William Charles Good: When this matter was under consideration in the committee, Mr. Edwards gave us some information about associations of auditors who met together from time to time to discuss methods, to standardize methods, and to confer over their work. He gave it as his opinion-and I think his
5 pan. opinion is certainly worth while noting-that this collaboration and conferring amongst auditors was very useful for them. It occurs to me that if a government auditor were appointed, as has been suggested in this amendment, he could very well function as a sort of presiding officer over those bank auditors who had been selected by the various banks to audit their affairs, and that in that capacity, as president or chairman, he would not in any way dominate the auditors, but he would bring them together to confer over their methods and he would

also, in his position of government auditor, be able to examine their methods and to report upon them regularly to the minister. In that respect too, he should be able to convey information to the department of any incipient difficulties that might be discovered in the banks' affairs.
There seem to me to be two advantages in this proposal, one the advantage of regularly reporting to the minister and to parliament, and the other, that of regular conferences- "get-togethers"-amongst the auditors. The latter advantage would, I think, very largely ensure better auditing methods, so that what has happened in the past to the Merchants Bank, as far as we have been permitted to get information on that affair, would be less likely to occur. The auditors who confer together amongst themselves and discuss their work are in a much better position to do good work than those who work in an isolated fashion. I think the suggestion is well worth considering. It would be comparatively inexpensive, and it is well worth while. I want, in conclusion, to call the attention of the committee to what the minister said in defence of turning down this proposal in the select standing committee. It has reference to the next clause 56A where it is provided that:
The minister may direct and require any auditor appointed under the next proceeding 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 case may be, shall, at the conclusion of his examination and inquiry, report fully to the minister the results thereof.
I should like to submit to the committee and to the minister that this is very inadequate, because the minister will not order a special inquiry until he receives some information of a serious or threatening character. He will not be on his guard unless he is receiving the information regularly. The door will be shut after the horse is stolen, and the expense will have to be incurred when it is too late to correct the difficulties and mistakes. By providing for a government auditor, one who may function as president of the bank auditors at regular conferences, you are going not only to get better service on the part of the auditors but also to ensure that regularly, once in every six months or once a year, the department shall be in receipt of a report from this government auditor upon the auditing methods. It seems to me very obvious that this is a wise provision. As I said, it is not an expensive provision at all; it probably would cost very little more than the special inquiries which the minister is empowered to make at any time.

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William Irvine: Before this innocent amendment moved b'y the hon. member for Centre Winnipeg (Mr. Woodsworth) is finally slaughtered, I should like to say a word or two about it. It asks for government inspection of banks. The only thing that I do not like about it is that it asks the government to do anything. I am not very much enamoured of any proposal that places more responsibility upon government. I am in favour of government being asked to do just as little as possible: for two reasons. First, you are likely to get little from a government; second, no organized body is less capable of carrying things out in a practical way-I am not referring to the present government, I am speaking of all governments. However, this is one of the capacities in which the government might be able to act, namely, that of a policeman to walk up and down the country and club people when they violate a certain law. That is about all that is involved in this clause which is sought to be amended by my hon. friend. This has been the practice ever since governments were organized. I am in favour of the amendment. As to the right of the government to do this, there can be no question at all. As the hon. member for Centre Winnipeg (Mr. Woodsworth) said, this is one of the powers which the government, as the representative of the people, must exercise in its supervision of our banking system. Therefore, the government having the right to inspect the institution to see that it is doing what it was intended by the law to do, and being, as I believe, eminently fitted to act in the capacity of a policeman, I am in favour of this amendment.


Joseph Tweed Shaw: Mr. Chairman, I think the proposal contained in the amendment cannot be as lightly dismissed as perhaps the Minister of Finance (Mr. Fielding) would suggest. It seems to me that in the existing regulations of the Bank Act the government recognizes its responsibility in this matter by the minister being empowered, when he sees fit, to employ an auditor to investigate any bank. This amendment does not ask for a full-fledged system of government inspection, but for the appointment of a particular individual whose duty will be to do continuously what otherwise the minister under the statute can do from time to time- in the past always too late; a government auditor whose duty it is to examine the reports as they come in, as only an auditor can examine them, to ascertain any discrepancies there may be between these and former state-
261 i
ments, to keep, as it were, a watch on the bank's affairs from time to time through the medium of its statements and otherwise from information he can obtain under the powers committed to him by the proposed section- he is an eminently desirable official. In other words, you would have a watchdog on guard all the time comparing these various financial statements, dissecting them, calling for further statements if necessary, and so relieving the minister of that burden and perhaps, in some cases, ascertaining unfortunate circumstances before any harm was done. For instance, the Merchants Bank, of which we have heard so much, issued statements from month to month, all of which were false and fraudulent. That situation existed for a period of at least six or seven months. But how can you expect any employees in the Finance department to scientifically dissect a bank's financial statements and discover whether or not they contain any discrepancy, and whether or not any investigation should be made? It may be that a government auditor appointed in the manner suggested by the member for Centre Winnipeg would be able to disclose such a situation as existed in the Merchants Bank long before the failure took place, and the minister was called in as an undertaker to look after its affairs.


Henry Herbert Stevens: There would be a great
deal of force in the proposal of the hon. member for Centre Winnipeg and in the arguments of those supporting his amendment if no amendment had been made to the provisions of the old act. But this clause which we have under consideration is almost new. There have been some vital amendments made in it, and I consider that clause 56 is perhaps the most important and significant in the whole act so far as it relates to the practice of banking in this country, and having particular reference to the Merchants Bank case. As a matter of fact, the changes now presented to the committee in this bill cover completely the discrepancies in the old act. Let me just cite one or two. Under the old act there was one auditor under the control of the banks, without any limitation. In this amended clause we have two independent auditors appointed with a very strict limitation, and in addition, in subsection 9 of clause 56 and also in clause 56A, we have the minister specifically empowered to do exactly what this amendment asks to have done. The only difference between the amendment of the hon. member and the two provisions* to which I have referred is that his amendment calls for the setting up of an officer, while in these clauses the minister is
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empowered to do all that the hon. member asks to have done.
Now, what I wish to impress on the committee is this-and it has certainly been very forcibly impressed upon my own mind-that by adopting the amendment proposed by the hon. member there is a danger that you make the minister, or the government, responsible for the accuracy of the bank audit. I do not think we are prepared to go that far. But under the provisions as they now stand are contained all the powers that are in this proposed amendment, only the sign of approval of the minister upon the audit to the public is not given. This is a difference and a distinction which I think is to the advantage of the public. Besides, the auditors report to the directors, and a copy of their report is then sent to the shareholders. All of this is more or less new. So I consider, Mr. Chairman, that in the amendment made by the committee to the clause as it stands we have safeguarded the various points raised in this dis^ cussion.
Amendment (Mr. Woodsworth) negatived.


George Gibson Coote: Mr. Chairman, before the
clause carries I would refer the committee to subsection 9, where it says:
The minister may from time to time require that the auditors of a bank shall report to him upon the adequacy of the procedure adopted by tihe bank for the safety of its creditors and shareholders, and as to the sufficiency of their own procedure in auditing the affairs of the bank; and the minister may at his discretion enlarge or extend the scope of the audit, or direct that any other or particular examination be made or procedure established in the particular case as the public interest may seem to require.
It will be noticed that the minister himself is here proposing procedure under which he will incur this moral responsibility which on most occasions he apparently desires to evade as far as possible. It does seem to me that if the minister is going to have the auditors inquire into the affairs of the bank the inquiry should be made regularly before the bank comes under suspicion. I would move that subsection 9 be amended by prefixing thereto the following words:
The auditors shall report to the minister at least once in each year upon all loans exceeding five per cent of the paid up capital of the bank, and shall state specifically whether or not in their judgment such loans are adequately secured.
It does seem to me that if the shareholders' auditor would forward to the Minister of Finance a statement covering the loans exceeding five per cent of the paid up capital of the bank and state specifically whether or not in his opinion these loans are adequately

secured, we shall have taken a step toward safeguarding the interests of the banks.


Alexander Kenneth Maclean: How often
would that be done?


George Gibson Coote: At least once a year.


Alexander Kenneth Maclean: What would
be the good of it if it was not done daily or weekly?


George Gibson Coote: As a rule, loans run for
more than six months before they become bad. I will not attempt to urge that it is possible to safeguard a bank from bad management. But in the case of the Merchants Bank I think it could be demonstrated, if we had any investigation, that some of these loans had been bad for four years but were allowed to run on as current loans. If the auditor in the case of the Merchants Bank had been required to make a return of this kind to the minister it is possible that some of these loans would have been looked into before they got into such bad shape. There are a good many people in Canada who believe that the governments are behind the banks and that their deposits are guaranteed. That belief was expressed to me by a very intelligent woman about a week ago. I would not say that that opinion is prevalent, but it is held by some. I do not see why the Finance Minister should try so hard to evade responsibility. I think the people would like him to assume some responsibility if it would in any way help to secure the position of the banks and in that way, of course, to secure the depositors.


Alexander Kenneth Maclean: The hon.
member has stated that quite a few people feel that the government has something to do with the banks. Well, that opinion will grow if the view expressed by some members of this committee is repeated, here or outside; and that would be unfortunate. The banks have been referred to several times today as public institutions. In one sense that is quite correct, but if by that term is meant that the state have some interest in the assets of the bank or in its control, then I say it is not correct, and that it is an unfortunate term to employ. Now, what is a bank?


George Gibson Coote: Did I use the term that the hon. member has suggested? If I did, I do not remember doing so.


Alexander Kenneth Maclean: No, I was not complaining so much about any expression used by my hon. friend as about those used by some other members of the committee.

Bank Act


Joseph Tweed Shaw: Sir Edmund Walker in his
evidence indicated clearly that a bank is a public service corporation. Is that not so?


Alexander Kenneth Maclean: I suppose it
is a public service corporation, but I do not think it is one which must be controlled in all its operations by the state. Some hon. gentlemen seek to develop that idea, and I say it is not in the interests of the state or of good banking. The first thing we know some people will begin to think the state is the shareholder and the depositor. The shareholders own the capital; the business is done largely on the depositors' money. The shareholders are all free individuals; they may dispose of their stock at any time; the depositor may withdraw his deposits. So, provided that we set up every safeguard we can devise for the protection of the public in their relation to the banking corporation in all its activities, we have done about all we can. What good could be served by having a bank auditor make an annual statement to the Finance department setting forth a list of the loans equal to or exceeding five per cent of the capital stock of the bank? It would be of no value, because the condition of a borrower's loan with the bank changes in some cases every week or every month-at least every three months. Why not put the responsibility upon the directors and the manager? They are following the transactions of the bank daily; they are intimately acquainted with every detail of its operations. Now, a very important clause which forms part of this section is in the act for the first time.
It reads:
It shall be the duty of the auditors to report individually or jointly as to them may seem fit to the general manager and to the directors in writing any transactions or conditions affecting the well-being of the bank which are not satisfactory to them, and which in their opinion require rectification-
And so on. I submit that no better safeguard than that could be devised; the shareholders' auditors are required to sumbit in writing to all the directors any information respecting any account the condition of which they think may affect the welfare of the banking institution. After all, it is only those who audit frequently and who become intimately associated with the bank's methods of business who can audit properly. So I think the clause which I have read affords more protection than the amendment proposed by the hon. member for Macleod (Mr. Coote). I further submit that it is not necessary, at least at the present time, to interject any government official into the auditing of the banks' affairs.


George Gibson Coote: Just a word in reply to the hon. member for Halifax. I would not like the committee to get the idea from what he has said that I was proposing in any way to interfere with what was proposed under subsection 10, providing for a report of the auditors to the directorate. I was simply trying to enlarge on that idea a little bit and am proposing that the return go to the minister. If the hon. member for Halifax were logical it does seem to me that he would object to subsection 9, as well as to my amendment, because under subsection 9 the minister is given power to have these auditors make a report and is assuming some responsibility in connection with the affairs of the bank. The reason, I think, that we attempt by legislation to exercise some control over the banks and their actions is because we give them very special privileges, and when we do that it seems quite proper that we should exercise some legislative control over them.
Amendment (Mr. Coote) negatived,


[Stage Direction]
Section agreed to.
On section 60-Cash reserves in Dominion notes.
George Gibson Coote: I would like the Finance
Minister to be good enough to explain the reason for requiring the bank to hold in Dominion notes not less than forty per cent of the cash reserves which it has in Canada.


William Stevens Fielding: That is a very old provision in the Bank Act. It really amounts to a loan which the banks make to the government; that is really the effect of it.


George Gibson Coote: I do not know whether I am asking the minister for something which he is not prepared to give. I asked him if he could give us the reason why it is there. Perhaps that is asking too much.


William Stevens Fielding: I am not old enough to remember.


Edward Joseph Garland: May I then press the question and ask the minister if he is not old enough to remember why it was originally put there, can he tell us why it is there to-day?


William Stevens Fielding: It is one of the little things which we exact from the banks. The banks to that extent loan that amount of money. They have to get that amount of Dominion notes, which is equivalent to loaning the money to the Dominion government. I think my hon. friend is not anxious to give the banks greater privileges.


[Stage Direction]
Section agreed to.

Bank Act
[Stage Direction]
On section 61-Issue of notes.
George Gibson Coote: 
Alexander Kenneth Maclean: Just what
would be the advantage to the country?


George Gibson Coote: The first advantage would be that the holder of a Dominion government note would know that the money it represented was as good as his country. A bank note, on the other hand, is of questionable value, or it might be. The next advantage would be that this country would secure an additional revenue of I think five or six million dollars a year if the banks were charged a rate of only three per cent. On what ground can the giving of this privilege to a bank be defended? In Australia the privilege of issuing notes has been retained by the government since the year 1910, and the banks in Australia seem to be able to function and to furnish the people with money at as low a rate of interest, and probably lower, than the 
banks charge in this country. I do not think that our banks are in any way making a return to us for this special privilege which they enjoy. I think some reason should be given, if there is any, why the banks should have this privilege of issuing notes. I might quote briefly from a pamphlet issued by Mr. Ward, of Winnipeg. He says:
A bank note is simply a promise to pay. If you want to borrow money from the bank and draw the cash you hand the banker your note, which is your promise to pay, and in exchange he hands you his notes, which are also promises to pay. The chief difference between them is that you have to pay interest on your note, but he pays none on his.
Exactly how much profit the banks make on their note circulation cannot be determined, as their method of accounting does not show this, but according to the figures furnished by the Commonwealth Bank of Australia, that bank has made something over two per cent profit on its circulation.


Henry Elvins Spencer: Has the Minister of Finance ever given consideration to the idea of the government issuing all the notes of the country?


William Stevens Fielding: I have given no particular consideration to that theory. I think the present system is working very well, and while I give consideration, perhaps not as much as I should, to all these financial propositions, I cannot say that I have ever thought it would be at all a desirable thing to deprive the banks of this privilege.


Alexander Kenneth Maclean: I should like to refer to a point or two, although I do not profess to understand very thoroughly the advantages to the state in issuing its currency as against its being issued by a bank, as in this country, I think that originally the right of note issue was given to the bank for good reasons. In the early days in Canada it was desirable that bank branches should be opened in the interest of the development of the whole country. If a bank's capital had to be invested in bonds, as is required in the United States, and they had not the right of note issue, they could hardly open up agencies. And the capital was not in this country at that time to carry on business in any other way. There is no doubt in the world that the right of note issue is of some advantage to a bank. At the same time it is of some advantage to the country, because our Canadian banks could not otherwise have had anything like the present number of agencies that they have opened throughout Canada.


George Gibson Coote: Does the hon. member think we would be better off if there were fewer agencies opened?

Bank Act


Alexander Kenneth Maclean: That is another question altogether; possibly we would. However, we can never settle that question here, and I do not know where it can be settled. Ten years ago many of the representatives of the people in parliament were complaining that there were not enough banking facilities in Canada. Strange to say, with the passage of the last decade the complaint now is that we have too many banking agencies or offices, and there is some truth in it. But I do say that in the past, and at the present time as well, it has been of some advantage to communities to have branch banking offices opened as we have them to-day, and I do not believe it would have been possible without giving to the banks their present right of note issue. I admit it is of some advantage to them. Now, my hon. friend says it would be of some advantage to the state to issue notes. At the present time the country issues the one-dollar bill, the two-dollar bill, and the four-dollar bill, and up to the extent of $50,000,000 without requiring it to be covered by gold. In addition to that, we issue the copper and silver coin. Well, that is some advantage to the state, because we must always have till money and pocket money in circulation, and redemption is never demanded for this currency issued by the government; it is always outstanding, it can be issued freely without any fear of a demand for redemption ever being made. Above an issue of $50,000,000 our Dominion Bank Note Act requires there be dollar for dollar in gold, so if we took from the banks, say, the right of note issue of the $5 bill, under the terms of the Dominion Bank Note Act as it stands, we would have to put up gold to the extent of dollar for dollar. That is, the treasury would have to go out and buy $5 worth of gold, and against that they would issue the note and sell it to the bank. There may be some profit in it, but I do not quite see where it lies.


Henry Elvins Spencer: It what way would they buy?


Alexander Kenneth Maclean: They would
buy the gold in the gold market of the world where you can buy bullion or coin.


George Gibson Coote: Does my hon. friend refer to the issue of notes under the Finance Act of 1914?


Alexander Kenneth Maclean: I am referring to the Dominion Bank Note Act which requires that all notes issued by the government, outside of $50,000,000, must be covered by gold, dollar for dollar. Of course, that provision has been modified by the Finance Act of 1914.


[Stage Direction]
Section agreed to.
On section 64-Bank circulation redemption fund continued.
George Gibson Coote: In regard to subsection 6, which provides that the circulation fund shall bear interest at the rate of 3 per cent per annum, it does seem to me rather an imposition to ask this country to pay interest on the circulation redemption fund. I would therefore move that subsection 6 be struck out. For this reason, Mr. Chairman: The banks are given the privilege of issuing notes to the amount of their paid-up capital. The privilege that they get there is surely worth the little bit of interest, they would lose on the money deposited with the government.


Alexander Kenneth Maclean: That is a cheaper rate than the rate at which the government can borrow money from the banks.


George Gibson Coote: Yes, but the advantage to the banks of being able to issue their own notes will compensate for any loss they may sustain in this connection.


Edward Joseph Garland: I wish to support the amendment. We have given the banks sufficient privileges without adding this one to the number. The circulation fund might well rest with the government without paying any such interest to the banks.


William Irvine: I shall support the amendment and will not occupy time unnecessarily by speaking in its favour.
Amendment negatived.


[Stage Direction]
Section agreed to.
On section 76-Business and powers of the Bank.
Edward Joseph Garland: I move an amendment to paragraph (d) of subsection 2 of section 76 by inserting after the word "bank" in the third line of the paragraph the following words:
Or any agent or other person acting on behalf of the aforementioned officers, managers, clerks or servants of the bank.
The intention is to safeguard as fully as possible the principle involved in the amendment which was carried by the committee. Owing possibly to an oversight in the committee and in the drafting of the original amendment, adequate provision does not seem to have been made for what I conceive to
Bank Act

be a legal possibility of brokers or agents of the managers or clerks securing these loans. That is the reason for the amendment I offer, which in no way affects the section.


Mr. BAXTER:: I would ask the hon. member this: If any one lends to the agent of a man does he not lend to the man himself? The amendment is only an addition of words that in my judgment are absolutely unnecessary.


Edward Joseph Garland: The words may not be absolutely necessary, but as they do not in any way alter the principle involved they can do no possible harm, while I think they may do some good.


Mr. PARENT:: The hon. member might
suggest the words "directly or indirectly." They would probably convey the same meaning, while they have the merit of brevity.


Joseph Tweed Shaw: That refers only to security.


Alexander Kenneth Maclean: I do not think the words proposed by my hon. friend (Mr. Garland) are needed. As the hon. member for St. John (Mr. Baxter) has pointed out, the section as it stands now would cover any application for a loan or any loan actually made.


John Babington Macaulay Baxter: Further, how is the bank
to know in all cases that it is lending to an agent for a principal?


Alexander Kenneth Maclean: I think this
is only another example of the futility of trying to legislate against all possible evasions of an act, and such meticulous nicety can get you nowhere.


Edward Joseph Garland: The hon.
member, I think, is imagining futility before he has proof of it. I suggest that we allow the words to be inserted, because, as I have stated, they can do no harm and they may do some good. I am ready to accept the suggestion of my hon. friend (Mr. Parent), and I would propose the words "directly or indirectly" in substitution for what I have already submitted.


John Babington Macaulay Baxter: On the principle suggested by the hon. member there would be no reason why the Ten Commandments should not also be inserted: they can do no possible harm and they might conceivably do some good.


Alexander Kenneth Maclean: Would the
words "directly or indirectly" be satisfactory to my hon. friend (Mr. Garland)?


Edward Joseph Garland: Yes, provided they are inserted in the proper place.


Alexander Kenneth Maclean: Will the hon. member answer my question first? Is he satisfied with the words "directly or indirectly?"


Edward Joseph Garland: Yes.


Alexander Kenneth Maclean: Well, they are there now.


Edward Joseph Garland: Where?


Alexander Kenneth Maclean: At the top of the subsection:
Except as authorized by this act, the bank shall not, either directly or indirectly.


Edward Joseph Garland: Yes, but
they are not included in subsection (d).


Alexander Kenneth Maclean: Oh, yes; you
read them into subsection (d).


George Newcombe Gordon: Does the hon. member desire to drop his amendment?


Edward Joseph Garland: Yes, Mr. Chairman, I might as well. I desire to move a further amendment to the subsection 3. The subsection now reads:
3. No agent or manager of any bank shall act as agent for any insurance company or for any person in the placing of insurance, nor shall any bank exercise pressure upon any borrower to place insurance for the security of such bank in any particular insurance agency, but nothing herein contained shall prevent such bank from requiring such insurance to be placed with an insurance company which it may approve.
I move to amend this by adding after the word "bank" in the third line the words, "nor any officer or employee of any bank." In the last line of the subsection I would have all the words deleted after the word "placed." The intention of the first insertion is obvious. The deletion of the last words I recommend' to the committee because otherwise there would continue a practice that now prevails of discrimination against the mutual insurance companies; and we know only too well in western Canada that a grave injustice has been done to these companies in this regard. When you go into a bank to secure a loan, we admit, the bank is right in asking you to take out insurance upon your crop or upon whatever the loan may be given. But we do not admit the right of the bank to state in what company the loan insurance shall be placed. You are giving them that full right in this, to the detriment, I say, of the mutual insurance companies.


Alexander Kenneth Maclean: Supposing a
bank was interested in an insurance policy to be placed by way of security against a loan,

Bank Act
or insurance against loss of property pledged as security for a loan, surely the lending party, in this case the bank, would have the right of saying, for instance, that they would not allow that insurance to be placed in a company the solvency of which was very much doubted. That is the purport of this clause.


Edward Joseph Garland: I would not object to that idea in the least, but I say that this clause, as at present drafted and under the present practice of banks in western Canada, will react against the interest of the mutual insurance companies. We are very anxious to develop the mutual insurance companies, and this will work an injustice upon them.


Mr. GARDINER:: I have had a little experience with this proposal as outlined by the hon. member for Bow River (Mr. Garland). I remember some years ago when I was doing business with a bank, that if I went into the bank in the spring and asked for a loan, the manager of the bank would say to me:	"Yes, I . will give you a
loan, but you must put hail insurance on your crop." The effect of that was that the manager acted as agent and he collected the commission. If you were not willing to put on hail insurance through the particular company that he was representing, the manager would invariably turn down your application for a loan, no matter in what financial circumstances you might be. I could give the committee many cases where-


Henry Herbert Stevens: This is exactly what the Banking committee wrestled with and corrected in this clause. If the hon. member will read the first part of the clause, he wiil see that it covers all this.
At six o'clock the Speaker resumed the chair and the House took recess.
After Recess
The House resumed at eight o'clock.



PRIVATE BILLS


[Stage Direction]
Bill No. 208 (from the Senate), for the relief of Jane Edna Near.-Mr. Guthrie.
Bill No. 221 (from the Senate), respecting The Calgary and Fernie Railway Company.- Mr.' Hudson.

[Stage Direction]
House again in committee on Bill No. 83 respecting banks and banking, Mr. Gordon in the chair.
George Newcombe Gordon: Section 76, subsection
3. The question is on the amendment moved by the hon. member for Bow River (Mr. Garland).


William Stevens Fielding: I think it has been shown by the discussion, Mr. Chairman, that what the mover of the amendment is aiming at is already covered by the section as it stands.


Robert Gardiner: When we ros,e at six
o'clock, Mr. Speaker, I was discussing the amendment proposed by the hon. member for Bow River (Mr. Garland) and was attempting to point out certain restrictions that I believe should be imposed on branch bank managers acting as agents for insurance companies. I have some information in regard to this particular matter that I know to be correct. Some five or six years ago branch bank managers used to act as agents for hail insurance companies, and many farmers desiring to get loans had to place their hail insurance with the company represented by the bank manager before any accommodation was granted them. A year or two later the bank accountant took the place of the manager as insurance agent. Under these conditions we can well understand that it is not in the best interests of the banks themselves that this practice should continue, for I know of many farmers who because they placed their hail insurance as required by the bank's officials received loans which they were not entitled to, while other farmers, not desiring to place their hail insurance through the particular company represented by the manager or accountant of the bank, were refused the accommodation that they were justly entitled to. Therefore it is necessary to include in this particular section any employee of the bank, otherwise some employee will merely become agent for the manager, and I think this part of the amendment should be accepted.
With regard to the latter part of the amendment, to delete all the words, "with an insurance company which it may approve," I think this also should be accepted. We find that many managers of branch banks in the West discriminate against mutual insurance companies. We have some very fine mutual companies in western Canada, and the branch bank managers, usually being interested in one of the ordinary line companies, refuse to accept insurance in these mutual companies.


Alexander Kenneth Maclean: Is it not a
fair condition for anyone to require that an insurance policy shall not be carried in a mutual company? Many people do not desire that insurance in which they are interested
409b
Bank Act

shall be taken out in a mutual company. Surely it is not fair to force them to accept #uch insurance? i There are many strong mutual companies, but on the other hand many of them are doubtful-some are not even that.


Robert Gardiner: In reply to the hon. member, I would say that we have many sound mutual companies in western Canada. But whether they are sound or not makes no difference to the branch managers, they object to the insurance being placed through these companies. The municipal Hail Insurance Company of the province of Alberta is to all intents and purposes a mutual company, and it is one of the strongest hail insurance companies in the province. This organization is really composed of the rural municipalities in Alberta. It carries about 55 per cent of the hail insurance in that province, and the rates are much lower than those charged by the ordinary line companies. Its operations have been very successful. Moreover, this organization gives its insurance on time; the rate is not set until the losses are known in the fall. The rate is applied as a tax on the land, consequently the security is of the best. Our branch managers, of course, object very strongly to that class of insurance, notwithstanding the fact that it enables the farmer who cannot pay for insurance on his crop in the spring to get the insurance on time, and to get it at cost, the rate being considerably less than that at which the line companies can carry the risk. I therefore suggest that the amendment proposed by the member for Bow River should be accepted. It would be in the interests of the banks themselves, and I am satisfied that it would be in the interests of the farmers of western Canada.


Mr. LEWIS:: I think the amendment
should receive the support of the committee.
I happen to be secretary-manager of a mutual hail insurance company in Saskatchewan. In fact, I, in company with a few others in Saskatchewan, jvas the first to start a mutual hail insurance company in that province.
I believe there are two such companies in existence now. Some years ago the banks were quite willing to accept our insurance as collateral security, but during the past few years some bank managers or accountants have become agents for various other companies and have refused to accept our insurance; they will only lend money to the farmers to buy insurance in the companies they represent. To that extent it seems to me they are catering to the capitalistic com-
panies and, in another respect, are endeavouring to destroy any mutual arrangement we may make among ourselves for our own protection. We need to encourage co-operation among the farmers, and this is but one instance of co-operation. I may give a little history in regard to our company: Where the line companies have a 6 per cent rate or an 8 per cent rate where there is a note, during the last six years the company I represent has paid every loss in full and has at no time charged a higher average rate than 3 per cent. In one year when we had a heavy loss we charged 4 per cent, but in other years we have charged as low as li per cent. We have carried that insurance; we have paid all losses. It does seem to me that this clause gives the banks and their agents an opportunity to discriminate against mutual insurance. I feel sure that in this regard we should have the support of the hon. Minister of Agriculture (Mr. Motherwell), who believes in co-operation. I trust that this amendment will pass, not simply because it comes from this side, but because it will give a fair deal to our mutual insurance societies in the West. I hope the committee will see to it that there is no discrimination against any mutual hail insurance company organized among the farmers for their own protection.


Mr. McBRIDE:: I am fully in sympathy with this amendment. The mutual insurance companies out West are certainly doing good business, and they are making it possible for a great many people in the rural districts to carry insurance that otherwise could not afford to carry insurance. No one should be under an obligation to insure with the banks; in fact, it should be against the law for the banks to require that to be done. However, it was not on that point that I rose to say a few words. I think this government would be well advised to appoint a commission of. say, three persons to look after the bank interests and banking generally in this country. I would suggest that one member of the commission be appointed by the government, one by the banks themselves, and the third possibly by the prairie farmers. As it was brought out in the evidence before the Banking committee, that it is by them that credit is most needed, I think a commission of that kind could do good work. They might be empowered to prevent the duplication of banks in small villages and thus go a long way toward reducing the costs of the banking system. I know certain locations where there are three banks but not enough work for one. If the banks and branches were charged a

Bank Act
license, such a commission as I suggest could exercise control by being able to cancel the license at any time when in their opinion there were too many banks, or to prevent a bank being started in a place where one was not needed. If it is possible in this way to reduce the expenses of the banks in the outlying districts, the banks would be given a chance to make loans at a lower rate. I am not moving an amendment to this effect, but I think it is something that ought to be considered by the government.


Alexander Kenneth Maclean: The purpose of the section as it now stands is to prevent any agent or manager of a bank from acting as an insurance agent; he is prohibited from collecting insurance. This is a new section. The principle involved is very doubtful, as was suggested by some hon. members in the committee. However, the committee decided to adopt the clause, and that, I presume, is satisfactory to hon. members here; at least, there is no objection to it.


Mr. JOHNSTON:: What is implied in the word "agent"?


Alexander Kenneth Maclean: A man who is carrying on or conducting a business at any place on behalf of a bank; a man who represents a bank as agent or manager. The latter part of the clause enables the bank to give its approval or disapproval of any insurance which has to be written and in which they are interested. Well, you cannot very well take that power from a bank. If I were lending money on real estate I would insist that the borrower insure the premises upon which the money was being lent. It is only fair to leave to the bank the right to insist that the insurance be placed in a solvent company. The mortgagor may want that insurance placed in a company which the public generally know to be insolvent or the solvency of which at least is doubtful. You cannot take that right away from a man, and it should not be taken away from a bank.
We have heard something about the mutual hail insurance companies in the West. I know nothing of them. Mutual insurance companies may be very strong to-day, but when they fail they are gone, they are no good, and they do frequently fail. I remember when I was a boy there were mutual marine insurance companies in the province of Nova Scotia. They were quite a common thing, but none are to be found to-day. So long as mutual insurance companies can pay their liabilities they are all right, but when they fail to do that, they are no good. They are not as good as the old line insurance companies as a rule, especially when those old line companies have built up a reserve. But what I say is that the first part of the section effects the intentions and desires of the special committee and apparently meets with the approval of this committee. The latter part of the clause leaves with the bank that is interested in any insurance that is to be placed the right of approving or disapproving of the company selected. Now can that right be fairly taken away from a bank? It cannot be taken away from the ordinary individual engaged in busniess, and if the principle is sound in the one case I think it is sound in the other. I think the committee should adhere to the section as it stands.


William Stevens Fielding: This is another case
where under the guise of restricting the bank you are in effect restricting the borrower, because if the borrower is not prepared to meet the terms of the bank regarding insurance he will not get the loan. So by placing such a restriction the borrower may not get his loan at all. That would be the effect of it.
Mr. GARLAND (Bow River) If the Minister of Finance and the committee decline to accept the amendment I venture to assert here that the result will be that you will deal a disastrous blow to the mutual insurance companies of western Canada, possibly of all Canada, but certainly of western Canada. Our experience out there is that the banks will not if it is possible to avoid it, allow the insurance to be taken out in mutual insurance companies. When we tell you that is a fact, and that we are anxious to develop these mutual companies, that it is in the interests of agriculture and of Canada that we should develop them, are you going to help us or not? The matter is really up to this committee. I think it will be a fatal mistake if this amendment is not accepted.


William Stevens Fielding: There is no discrimination against mutual insurance companies or any other companies. There is simply a recognition of the right of the lender to require that the property shall be insured in a company satisfactory to him. If you do not satisfy him he will say: Very well, gentlemen, if you cannot meet me in that way I do not want to lend you the money. Under the guise of aiming at restricting the bank you are in effect going to restrict the borrower and prevent him from getting a loan when the bank is ready to give it to him.


Mr. FORKE:: The argument of the minister sounds plausible but in actual practice
Bank Act

it does not work out that way. My know-t ledge of loan companies and banks is that they generally do their insurance business with certain companies, and no matter what the rates are those are the companies they deal with. I would be inclined to support this amendment even at the risk of the bor rower not being able to get the loan.


William Stevens Fielding: You are not the borrower


Robert Forke: I might be.


Henry Elvins Spencer: The Minister of Finance says that if the customer will not meet the banker's wishes in regard to taking out insurance with a certain company he may not get his loan. It would be just as well to point out here bow very serious the situation is. The client, whoever he may be, has only seventeen institutions in the whole of Canada to go to for a loan. Those seventeen institutions have a monopoly of the business, and it is putting a tremendous weapon in their hands to allow them to dictate to a customer the company he shall insure with.


Arthur John Lewis: I might point out that these mutual insurance companies are operating under provincial charter recognized by the provincial government. They have the legal right to insure, and certain conditions have to be met before they can be organized into a mutual company. It seems to me they have a right to be on the same footing as the other insurance companies.


William Charles Good: The farmers in my district in Ontario are almost entirely insured in mutual farmers' companies so far as fire, wind and weather are concerned. We have no hail insurance in Ontario, but I can assure the Minister of Finance that so far as I know, it is the almost universal practice in Ontario for the farmers to insure with the mutual companies. It seems to me that the passage of this clause as it stands would leave very considerable powers in the hands of the chartered banks if they wished to use them amiss. If there were no connection between the directorates of banks and the directorates of the larger insurance companies the danger would not be so great, but as has been pointed out more than once there are interlocking directorates, and for this reason it is not improbable that there may be a general understanding that a certain bank will insist on the property being insured in the company in which it is interested, and in that way discriminate most unfairly against a company that may be absolutely sound. I do not know what would be lost by leaving the

matter open and not stating specifically that the insurance shall be placed with an insurance company which the bank may approve If you leave that out, the other party to the transaction has an equal chance in the bargaining at all events. I would think it would be well worth doing.
Amendment negatived: Yeas,'28; Nays, 46.


George Gibson Coote: I would like to make just one remark in regard to paragraph (f) of section 76. This is a new subsection which I think was brought in by the Minister of Finance as the result of an amendment which I had offered previously and which was left over from one meeting to another for some improvement. The amendment as originally proposed I think required the unanimous approval of all the directors present at a special meeting called for the particular purpose of approving of the loan. So far as I can see the amendment which is now incorporated in this bill is practically useless so far as achieving the effect that was sought, because now the loan may be approved at a regular meeting of the board and it is possible that not more than three members out of a large board may bn present at this regular meeting. The other directors will have absolutely no notice of the meeting, will know, possibly, nothing of the loan and will be able to say, after the bank got into difficulty that they knew nothing about the matter. It seems to me that we have spoiled the whole effect of the amendment by omitting to require the notice which, in the amendment as originally proposed, was required to be given to all directors that this loan would be passed on at the meeting of the board. I should like to point that out to the Minister of Finance. I do not know whether the change in the clause was made at a meeting of the committee or not.


William Charles Good: When this matter was under consideration in the Banking and Commerce committee I submitted that some notice, at all events, of this particular business should go out to the directors before they could authorize the loan at the meeting called. As the clause now reads, you simply have to have a regular meeting or a special meeting, but there is nothing said about sending out notice to the directors that business of such and such a nature will be up for consideration at either meeting. I do not quite agree with the hon. member for McLeod, if I understood him rightly, in insisting that this business should be settled only at a special meeting, but I do think that the directors ought to be given notice of the particular kind

Bank Act
of business to be transacted. If a notice of that character were sent out I should think the worst feature of the present amendment would be eliminated. I should like to ask the Minister of Finance if he would not consider making that slight change, and require that notice of the particular business to be transacted should be sent out?


William Stevens Fielding: The point was considered in committee, but I really do not think the suggested change is necessary. We are bound to assume with this clause in the law that the directors will understand their responsibility, and as a rule it will be found that the directors are not going to be so negligent of their duty in the future as they have been in the past.' I really do not think, Mr. Chairman, that we can make this clause much more effective than it now is.


Henry Herbert Stevens: May I point out to the minister also that we have already passed a clause requiring the auditors to report to the directors where any loan exceeds one per cent of the paid-up capital of the bank.


[Stage Direction]
Section agreed to.
On section 80-Mortgages and hypotheques of realty and agreement of sale.
Mr. KELLNER:: In the Banking and Commerce committee I brought forward an amendment to the.effect that a chattel mortgage should not apply to any goods which were exempted under provincial statute, and I think it was the sense of the committee that the exemptions proposed went a little too far; I believe they would have accepted tne exemption simply of personal property. I changed the amendment to cover only personal property, but the chairman asked me to defer the amendment for the time being and it never came up again. I should like to move that amendment now.
That section 80 be amended by adding after the word "property" in the third line thereof the following:
"Provided however that no mortgage or hypotheque shall be taken, held or disposed of in respect to or be deemed to include any property which by any statutory provincial enactment is exempt from seizure under writs of execution."
I should like to make a little further explanation of that. The custom in the West has been-where a farmer, in particular, gives a mortgage on bis farm stock and implements -in the avent of having to foreclose, to take all he possessed, and there have been some men who have had to leave their farms without any equipment whatever. I should think it would be in the interest of the country to leave them at least this
small amount of stock in order to enable them to carry on. I do not think it is any material benefit to the bankers to have it, because 1 do not think they lend money on such a small amount of goods at all. In other words, in case this farmer made an application for a loan, and the banks were satisfied those goods were all he had I am quite satisfied he would not get a loan on them at the present time. I may say that I have consulted several men from the West in regard to this amendment and they have invariably supported the idea embodied therein. This amendment had favourable consideration in the committee on Banking and Commerce and, I think, is entitled to receive favourable consideration from this committee to-night.


Arthur John Lewis: I wish to say a few words in regard to a matter that was brought to my attention in the West some time ago. For example, a man received a very large loan from a bank and gave as security a great many farms that he happened to own. In consequence of not being able to pay this loan the bank took over and worked those farms themselves. They took everything the farms produced and then absolutely refused to pay the taxes. They had the farms, they had the produce which came from those farms, but they refused to pay the taxes. As a result the lands were sold for taxes at a tax sale, but the man who owned them had absolutely no chance to redeem them because the bank had taken absolutely everything those farms produced. I say the banks should not be allowed to enjoy this power. They should not be allowed to take a man's property and everything it produces and refuse to pay the taxes incurred.


Mr. ARCHAMBAULT:: How many farms did he own?


Arthur John Lewis: I understand he got a loan
of $50,000 and gave in security farms representing a value of $150,000. The bank had ample security but nevertheless acted in the manner I have described.


Joseph Archambault: How much cash
did this man pay to get these farms?


Arthur John Lewis: I understand the man owned the farms but he got a loan of $50,000 to carry on.


Joseph Archambault: Then he gambled in farming?


Arthur John Lewis: Perhaps he did, but there
are lots of hon. members opposite who gamble too.
Bank Act


Robert Forke: I do not think the hon.
member for Swift Current has strengthened the case by the example which he brought out.


Some hon. MEMBERS:: Hear, hear.


Robert Forke: The man to whom he refers was a pretty large speculator when he went into the business on the scale he did, and I think the case is- not going to have very much effect in influencing the committee. But I really have sympathy with the small farmer, the man who is farming on a small scale, who gets into difficulties and whose property is seized. I do not think it would work any great hardship to the banks if the small amount of personal property was exempted as as-ked for in the amendment.


Thomas Vien: Does not my hon. friend think that would work against the borrower more than against the bank? The bank does not lend except on security, and if you exclude such security as the borrower is in a position to offer, and which may happen to be unattachable under the law, does not the hon. member think that the borrower's credit will be accordingly restricted?


Robert Forke: I was not a member of the
committee on Banking and Commerce but I hazard the suggestion that this very objection has been raised a great many times. Of course, just as surely as you place a restriction on the scope of the bank's lending you limit to some little extent the possibility of the borrowers being able to secure loans. But in law and equity, and in legislating in the public interest, it is sometimes well for us to protept people even against themselves; and I really do not think that it would work any hardship whatever to provide that a few personal belongings of some man who is down and out should not be potential security against any loan he might wish to obtain. These few belongings would make no difference whatever to the bank; the bank would not consider them as security.


Alexander Kenneth Maclean: We should
no doubt all like to see transactions of the kind to which my hon. friend has referred dealt with in the fashion he suggests, but we must build our laws on a sound basis which will stand the test of reason. If we carelessly put into the statute enactments of one kind or another that are illogical and that have no sound basis, the inevitable result will be that our laws will become the laughing stock of the country. The case in point is that the bank loans money and takes a mortgage on movable personal property

The hon. member who proposes the amendment wishes to provide that when the debt becomes due the bank shall not be able to exercise its right under the mortgage; that is to say, it shall not foreclose on that part of the property of the borrower which is not subject to execution under judgment.


Some hon. MEMBERS:: No.


Alexander Kenneth Maclean: I understand
that to be the purport of the amendment. If I am wrong, then of course my remarks are irrelevant. That may be all right; but do not let us give the bank the power to loan money on the security of certain property and then say that it cannot exercise its right under that security. Let us go back to section 76 and incorporate a prohibition to the effect that loans shall not be made on the security of property which is not leviable under writ of execution.


Edward Joseph Garland: All right; hear, hear.


Joseph Tweed Shaw: Would not the proposed
amendment have exactly the same effect?


Alexander Kenneth Maclean: I think my hon. friend appreciates the point I make.


Thomas Vien: I think that the proposal which the chairman of the Banking committee (Mr. Maclean) has just suggested was fully discussed in committee and rejected for the simple reason that it did not in any way tend to injure the banks but would rather hurt the prospective borrower. In the province of Quebec there are certain personal effects which are declared unattachable under judgment- At first the courts decided that a tenant could not waive the unattachable privilege in respect of certain goods. But we found afterwards that tenants could not secure premises to rent because they had nothing to offer as a guarantee, and finally the system worked to the detriment of poor people who, wanting tenements were unable to secure them under this condition. I think the same thing applies to the proposed amendment. If you prevent a man from giving as security whatever he has, whether in the way of personal effects or otherwise, you restrict his borrowing power and thus impose a hardship upon him.


William Irvine: The hon. member might tell us what amount of property is exempted in his province, so that we might be able to gauge the extent to which the individual might be able to obtain credit if the proposed amendment were adopted.

Bank Act


Mr. BUREAU:: The hon. member will have to consult the court procedure of the province of Quebec to find out what exemption is made in regard to bed and bedding, and so forth.


William Irvine: I was asking the other
hon. member.


Thomas Vien: The exemption amounts to $50 in the case of personal effects and $200 in professional tools or the instruments by which a man earns his living. But I do not see that the question has any bearing on the subject before the Chair.


Alexander Kenneth Maclean: I may be
wrong, and if so hon. members opposite will correct me; but I think it came out in the committee that in the province of Alberta a quarter of a section of land in a larger block was not liable to seizure under execution; and that is a very strange provision of law which does not obtain anywhere else. The proposition is that if a man voluntarily gives, as additional security on a loan due the bank, a mortgage on a quarter of a section of land, he may say that the bank has no right to foreclose on that quarter section. That was the point that we had before the committee and it was objected to.


Donald Ferdinand Kellner: I remember that this was what defeated the amendment before the committee. But I would point out that I am leaving out the real property. Nothing is referred to except the horses or the oxen required to put in a crop, the seed necessary for the crop, the necessary clothing, furniture and household goods, food for the family during six months, to include grain and flour, harness, and two ploughs. I do not think that this amount of equipment would be of any great value to a bank, and I remember pointing out in detail to the member for Lotbiniere (Mr. Vien) in committee that we were not restricting the credit which a man might get. If what I have enumerated were all the assets which a man had to give to a bank in western Canada for a loan to-day, I think I may safely assert that he could not get the loan of a postage stamp.


William Stevens Fielding: I suggest that we let the section stand. We shall return to it later.
Sectioh stands.
On section 83-Property to be sold within certain time.


Joseph Tweed Shaw: Does the bank hold much property under this particular section for
which further extensions are required as provided for in the act?


William Stevens Fielding: I could not answer my hon. friend offhand. If it is desired I can get the returns. This is not a very common thing, The banks take these properties as securities for loans and if the market is unfavourable, they ask for an extension of time. There is no object to be gained by asking a bank to sell property at a sacrifice. Such transactions occur so seldom that I cannot say much offhand about them, but I shall be glad to get the information at a later stage.


Arthur John Lewis: Is it the usual procedure, when we are passing a bill of this magnitude through committee, that you. Sir, simply name the clause and say "carried," or have we time to read the clause and look into the matter? I have been in this House for two sessions, and I have seen certain bills passed through, but the Chairman has read the clauses.


George Newcombe Gordon: Does the hon. member say that the Chairman, as a rule, reads the clauses in committee of the whole?


Arthur John Lewis: I have heard them read.


George Newcombe Gordon: That is not and never has been the practice.


[Stage Direction]
Section agreed to.
On section 86-Warehouse receipts and bills of lading.
William Charles Good: Has the committee a right to ask the Chairman to read a clause?


George Newcombe Gordon: If the committee decides by vote that the Chairman shall read the clauses he will do so. He is only bound to read the marginal notes.


[Stage Direction]
Section agreed to.
On section 88, subsection 1-Loans to certain wholesale dealers.
Donald Ferdinand Kellner: What is the idea of having loans to wholesale dealers in subclause 1, then inserting subclause 2 in connection with loans to farmers upon grain, and then going back to the wholesaler in subclause 3?


Alexander Kenneth Maclean: Subclause 3 refers to the manufacturer, the man who converts the raw material into a manufactured article, and who desires a loan covering the period during which the manufactured process is going on.


[Stage Direction]
Subsection agreed to.
Bank Act
[Stage Direction]
On section 88, subsection 7-Same rights as upon warehouse receipts.
William Charles Good: I think, in the standing committee, there was a notice of motion for reconsideration in regard to part of subclause 7. I should like to know if the matter is to come up now or what is to be done with it?


Mr. CASGRAIN:: The notice of motion for reconsideration was ruled out of order by the chairman of the committee at the time, and the amendment as passed by the committee was allowed to stand as it stands now.


Edward Joseph Garland: I wonder if the hon. gentleman would be willing to give us the assurance that this amendment of his will not die in the Senate.


Joseph Philippe Baby Casgrain: Personally I wish that it should live. If I can do anything when it goes to the Senate, I will do so. If the Senate kills it, I am not responsible; I shall be no party to its being killed.


Joseph Tweed Shaw: I should like to ask the Minister of Finance or the chairman of the Banking committee if it is proposed that this should stand as it is found in the bill.


William Stevens Fielding: I would rather expedite the bill than have a debate on this matter. Therefore I am not going to oppose this subclause.


Joseph Tweed Shaw: Is the Minister of Finance
satisfied with this subclause?


William Stevens Fielding: Not entirely. If I had been voting on it in the committee, I would have voted against it. I do not, however, think it is a matter of vital importance, and I am not going to move to strike it out. If anyone else wants to raise the question, he is at liberty to do so.


Alexander Kenneth Maclean: The hop. member for Calgary West (Mr. Shaw) is very curious about the matter. It was suggested to me that possibly the Banking committee of the Senate might have an opportunity of bringing further evidence upon this question. I have not the slightest doubt in the world that the amendment should be struck out, and if anybody wishes to move that now, I will support such a motion. I think we really ought to do that.


William Stevens Fielding: I think we can safely let the subclause stand and let it go to the Senate. If they can get further information on the question, that is a perfectly proper thing for them to do. This bill has been so well coopered up that there is not much 
for the Senate to do. Therefore, I think we might allow it to go to the Senate and give them an opportunity of doing some work on it.


[Stage Direction]
Subsection agreed to.
Section agreed to.
On section 88, subsection 10-First lien upon seed grain and crop.
Arthur John Lewis: I am just wondering whether this is altogether in order, but it seems to me that if a person gets up on this side of the House he is immediately told that reason and logic are on the other side. As regards this subclause, I understand the bank does not have the first lien upon 9 p.m. threshed grain. The man who threshes the grain has the first charge against it. He has the preferential and first lien upon the crop after it is severed from the ground and threshed. According to the law in Saskatchewan, the man who threshes the grain has the first charge against it, and then the bank's lien comes second.


Alexander Kenneth Maclean: I think the
rights covered by this clause would prevail.


Arthur John Lewis: If they prevail, then no man will get his crop threshed. Supposing a man owns a crop and he wants another man to come and thresh it. Unless the man who is asked to thresh the grain is assured that he will have the first chance to get his pay, he will not thresh it. The man who threshes the grain has a claim before that of any bank.


Alexander Kenneth Maclean: I suppose for labour he would.


Mr. STEWART (Argenteuil):: I do not
think there is any change in this.


William Charles Good: Does that mean that the law
has been and is being violated? This matter ought to be cleared up.


Arthur John Lewis: I think any of the western
members even on the other side of the House will bear me out that the thresher's lien is the first lien.


Alexander Kenneth Maclean: Subclause 7
provides that the bank's lien shall prevail except as to wages, salaries or other remuneration unpaid for three months previously.


Arthur John Lewis: When we are speaking of
reason and logic, there is only one first and preferential claim. There are not two first claims. If there is an anomaly in this subclause, we can easily remove it.


Henry Elvins Spencer: I have in my hand the
result of a case that, I think, came up under

Bank Act
this very subolause in Provost the other day. In regard to Haan vs. Bank of Montreal I have the following:
A very interesting case was decided at the sitting of the district court which was held in Provost last Thursday before His Honor Judge Lees. The case was at the suit of Lambert Haan against the Bank of Montreal.
Haan alleged that the Provost manager of the defendant bank had agreed to pay his thresh bill on some 1,400 bushels of wheat which the bank had received. The bank denied making the agreement and claimed that for various reasons Haan's threshing lien was invalid. The court, however, held both that the agreement had been made and that Haan's threshing lien was in order and gave Haan judgment against the bank for the amount of his claim and costs.
I think that covers the point completely, Mr. Chairman.


[Stage Direction]
Subsection agreed to.
Section agreed to.
On section 88, subsection 12-Loan for live stock raising.
Mr. MACLEAN (Halifax!:	I would call
the attention of my hon. friend from East Edmonton (Mr. Kellner) to the fact that this subsection has something to do with the amendment which we were discussing a few moments ago. Does it meet his case in any degree?
Donald Ferdinand Kellner: The amendment in this
particular subsection is all right. The other amendment was slightly different.


[Stage Direction]
Subsection agreed to.
On section 89, subsection 2-Prior claim of bank over unpaid vendor.
William Charles Good: Is there any inconsistency between this and the other amendment in section 88 that was allowed to stand over?


Alexander Kenneth Maclean: No.


[Stage Direction]
Subsection agreed to.
On section 91, subsection 1-Interest at 7 per cent may be charged.
Joseph Tweed Shaw: This subsection received very
lengthy consideration in the special committee, but the matter is of such importance that I think it merits further consideration by this committee. The first question which naturally occurs to one when approaching a restrictive interest clause is whether or not it is proper to have such a clause in the act. I am frank to confess that if the law of supply and demand operated, and the forces of competition were actively at work, there would be little value in a section of this character. I recall that the hon. member for Vancouver Centre (Mr. Stevens) in the discussion of the principle of this clause before the special committee harked back to the Middle Ages in
order to get some comfort for his view that such a restriction should not be imposed. He called to his aid Bacon and, strange to say, he also placed great reliance on the remarks of Adam Smith, although just why he singled out that great political economist as an authority on this particular subsection alone is rather difficult to understand. However, it is perfectly clear that Bacon wrote long before the days of organized banking, and Adam Smith wrote many years before the industrial revolution in England changed the whole industrial and economic fabric, before the day of mergers, trusts and other combinations of capital which have largely resulted in monopoly.
There can be no doubt that at the present time our banking system is a monopoly. This parliament has created certain corporations to which are delegated the business of banking, and it has prohibited all others from engaging in the business except on compliance with certain conditions'. Unless a corporation has received the imprimatur of this' parliament and has complied with the provisions of the Bank Act it cannot carry on a banking business. I disagreed with the senior member for Halifax (Mr. Maclean) this afternoon when he practically suggested that a banking corporation stands in exactly the same position as any other corporation. A banking corporation is a public service institution. It was so stated by Sir Edmund Walker before the special committee, and he is perhaps one of the greatest of our authorities on banking. Such a corporation derives' large monopolistic and special privileges from the people of Canada, including the privilege of issuing bank notes, which is of great value to it from a financial point of view. A banking corporation, to my mind, is in substantially the same position as a railroad corporation. The latter must comply with the provisions- of the Railway Act in detail, and under that act the rates which it may charge for the transportation of passengers and freight are . egu-lated by our Board of Railway Commissioners. When one has in mind the monopolistic nature of the business and the conditions which exist to-day in the way of mergers and combinations of capital, it is reasonable to urge that a maximum interest rate should be fixed. I do not say that the rate chargeable on a particular transaction should be determined, but certainly a maximum controlling interest rate should be established. Parliament has recognized that principle for many years. Not only do we fix a maximum interest rate in the Bank Act, but in the Interest Act we fix what we call the legal rate; in the Pawnbrokers Act we fix the maximum interest charge which can be made by a pawnbroker, and similarly

Bank Act

in the Money Lenders Act. So I say that regardless of how we may view the principle, under the circumstances it is essential that a maximum rate be fixed. That brings me to a consideration of the present section in the Bank Act. This section has been in the Bank Act for many years in a similar form. One would think from a casual reading of the provision that it was very clear and very definite that the bank could not exact a higher rate of interest than 7 per cent. But the section as it stands is burdened by a decision of the Privy Council which gives an altogether different interpretation to it. The case I have in mind was decided, I think, in 1913, immediately prior to the last revision of the Bank Act; I believe it was referred to in the discussion at that time. In that case the Privy Council held that the bank might charge any rate that it could agree upon with the borrower, notwithstanding the provisions of section 91. They held also that as the borrower knew that the charging of an excessive rate was illegal, he was therefore estopped from recovering back any amount in excess of the , fixed rate. So that the section, although apparently clear in its wording, means something altogether different from what that wording indicates. The section has no teeth at all; it simply provides a smoke screen behind which the banks can charge excessive rates. In the case to which I refer it was also decided that if a bank charging a rate of interest in excess of the statutory rate, sought to recover, it would be able to recover only 5 per cent per annum, the legal rate. But the banks, in order to prevent any possibility of recovery back, and any possible loss, discounted the notes in advance so that the borrower was estopped from setting up any claim to the excess interest charged. Now, that is the situation in regard to the present section. It is ineffective for the purposes for which it was framed. It is useless; it is simply a deception; it is a camouflage which permits the banks to charge any rate upon which they can agree with the borrower.
Now, the section has been abused. As I suggest, the banks, in order to get round the section, have charged discount rates in advance. It was brought out in an investigation conducted in -Alberta a year or so ago that there was apparently some understanding among the banks with regard to this discount rate. Where previously there had been no arrangement regarding this practice, it appears that within the last year or so the banks have universally adopted the practice of discounting. That practice is very objectionable indeed to borrowers; it simply means that when a borrower goes to a bank for $100

and gives a note for that amount, he will probably get-I am speaking of Alberta at the present time-$91, and then at the end of the three months' period he will be called upon to pay the full $100. In other words, it simply means taking the interest in advance.


Henry Herbert Stevens: That would be at the rate of about 36 per cent. My hon. friend must mean 9 per cent per annum.


Joseph Tweed Shaw: Yes; I thank my hon. friend for calling my attention to that. I mean at the rate of 9 per cent per annum; the result would be that the borrower would get the amount he applied for, less $2.75. In addition, the banks have followed the practice of compounding the rates of interest. That is not particularly objectionable except when a high interest rate is charged, in which event, as hon. members will appreciate, the interest amounts to a very substantial sum indeed. The banks have charged very high rates of interest in the western provinces. I do not know what the situation is in eastern Canada. I understand that practically all loans there are made at the rate of 7 per cent or less, and that ample money is available to borrowers at that rate. In western Canada, within my memory at least, we have never been able to borrow money from the banks at less than 8 per cent per annum, unless, perhaps, in the case of a few choice and favoured borrowers. During the last two or three years, which have been years of considerable stress in the western provinces, the rates have increased. The rate of 9 per cent is very common; 10 per cent is by no means uncommon, and I am sure that hon. members from the western provinces can give many instances in which 12 per cent has been charged. There can be no question, therefore, that excessive interest charges are made in that part of the country to-day. It may be that eastern Canada is more or less indifferent as to this particular interest rate section. I readily appreciate that an easterner will not understand the situation, when he is called upon to pay only the maximum rate fixed by the act, or perhaps even less. But I suggest to the committee that in the West the burden of an excessive interest rate has been felt very heavily for many years. I am sure the committee will not tolerate a condition under which the West feels that it is suffering unduly through an economic exploitation, in this regard and in regard to other matters as well-an exploitation which seems to work in favour of the East alone. What is needed is an effective interest section in the Bank Act, a pro-

Bank Act
vision that will mean something to the borrower, a provision that will be a real safeguard to him and that will not allow the banks to exploit him at their pleasure. It is with that purpose in mind that I propose to move an amendment to this section. When in committee I moved an amendment somewhat more drastic in its character. I have tempered the amendment to some extent, and I trust that the members of this committee may give it favourable consideration. I do not propose to deal with subsection 2. The amendment which I propose and now move reads as follows :
That subsection 1 of section 91 be struck out and the following substituted therefor:
(1)	The bank may stipulate for, take, reserve, or exact any rate of interest or discount but not exceeding 7 per cent per annum and may receive and take in advance any such rate.
(2)	The rate of interest or discount charged by the bank shall appear on the face of the note, bill or other evidence of debt.
(3)	In the event that a greater rate than 7 per cent per annum has been paid to the bank, then the person by whom it dias been paid or his legal representative, may recover in any court the excess interest thus paid, provided such action is commenced within two years from the time such excess interest was paid.
(4)	In any suit, action or other proceeding concerning a bank loan wherein it is alleged that the amount of interest paid or claimed exceeds the rate of seven per centum per annum, the court may reopen the transaction and take an account between the parties, and may, notwithstanding any statement or settlement of account, or any contract purporting to close previous dealings and create a new obligation, reopen any account already taken between the parties, and relieve the person under obligation to pay from payment of any sum in excess of the legal rate of interest and if any such excess has been paid, or allowed in account, by the debtor, may order the bank to repay it, and may set aside either wholly or in part, or revise, or alter, any security given in respect of the transaction.
I would point out that the amendment does not affect subsection 2 of section 91 at all. In other words I have endeavoured to draft a clause Which I firmly believe is an effective controlling clause as far as the maximum interest rate is concerned. I have endeavoured to give to the borrower who has been charged an excessive rate of interest the right of action to recover back the excess charge, and I have also sought to give the court power in the event of a transaction being reopened to revise the transaction and adjust the rate of interest, at the legal rate which is five per cent per annum.


Mr. LADNER:: May I ask the hon. member, apart from the political aspect of such a proposal, does he think that on sound economic grounds it is practicable to fix a maximum rate of interest on capital or money in the
banks and leave the rate of interest on all other forms of money entirely unlimited?


Joseph Tweed Shaw: My hon. friend is not altogether right when he suggests that all other obligations are left unrestricted so far as the rate of interest is concerned. I have already indicated to the committee that restrictions .will be found in the Interest Act, in the Pawnbrokers' Act and in the Money Lenders' Act.


Leon Johnson Ladner: But those only apply to amounts of two or five hundred dollars and the like. That is to stop the sixty percenters. That is not in the ordinary course of business.


Joseph Tweed Shaw: I am not so sure that it js not done so frequently in the ordinary course of business. The legal rate of interest is fixed in the Interest Act, and that is a matter we are concerned with every day. As I say, Mr. Chairman, my object is to present to the committee an effective interest section. I am not wedded to the rate mentioned in the amendment, and if any reasonable argument can be advanced why that should be increased by a very moderate amount not over one per cent, I would be quite prepared after some consideration perhaps to agree to such an increase if the argument warranted it. But I think we should either have an effective section or no section at all.


Alexander Kenneth Maclean: I quite agree with the hon. gentleman who moves the amendment that this is a very important section. It was the occasion of a great deal of discussion and comment in the Banking committee, and I have no doubt that it is usually the subject of a great deal of discussion in the western provinces, where the discount rate is higher than it is in the East. That is not an unusual thing because in new countries the interest rate is always higher than in older countries.	You go to the
western states and you will find there a very much higher rate of interest than you do in the eastern states. You will also find in the American states that as they grow older and become more settled, as they advance in mixed farming and mixed products the rate of interest gradually falls. That, of course, is due to the fact that as the settlements become older there is an increase in accumulated wealth.
I agree also with the hon. member that the section is not in a very satisfactory state. Personally I do not like to see stated in a section that a given rate of interest shall be recovered, and yet it is possible for the banks by a system of discount, quite lawful, how-
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ever, to recover a greater rate of interest than that stated which may be recovered at law. However, a problem was confronting the legislators of the day who framed that section, and I suppose it represents the best that could be done at the time. Personally I think it would be better and sounder if there was no reference at all to the rate of interest in the Bank Act. After all money is much like everything else. It should carry its market value. If in 1919 the Canadian banks in the East had raised the rate of interest to eight or nine or ten or fifteen per cent at a certain time, we would have escaped a great deal of the deflation that occurred and would have avoided the effects of the deflation from which we afterwards suffered. The American banks have been criticized by the most eminent bankers and economists of that country for not increasing their rate of interest in 1919. The American Federal Reserve Bank in 1919 was charging only 4| per cent instead of charging 6 per cent and over, and had that higher rate been charged the United States would not have suffered from the great deflation which afterwards occurred, much to their detriment. The same thing occurred here. The leading economists of the world say that the best way to control the level of prices is to put up the interest rate when inflation is on and prices are rising, and to reduce it when the reverse is the condition. I believe that is sound doctrine. I could quote to the committee this evening, if time permitted, a statement from, I think, the most eminent economist of the world to-day who, writing upon the control of price levels, says that the only practical way of doing it is by putting up or lowering the interest rate.


Edward Joseph Garland: May I ask the name of the economist referred to?


Alexander Kenneth Maclean: Gustave Cas-sel, of Sweden. However, I am not going to propose that the clause in question be struck out; it would be very much resented, I suppose, by a very large section of the committee. The section in its present state is not perhaps quite acceptable to me; at least I do not care to see the provisions of the law stated in that way. However, it is perhaps better that there be some reference to the rate of interest which banks may charge.
The hon. member for Calgary West (Mr. Shaw) says there is no competition in banking. I say that statement is not correct. In money there is greater competition than anything in the world because there is absolute free trade in it. Millions of dollars come to Canada from the United States every year.

In normal times millions of dollars come from Great Britain. Money can flow into this country without any legal impediment, without any tax whatever; and if there is one thing in the world that is absolutely free from monopoly it is money.


Some hon. MEMBERS:: Oh, oh.


Alexander Kenneth Maclean: My hon.
friends laugh but I venture to say they cannot contradict that statement.


William Irvine: I think so.


Alexander Kenneth Maclean: The hon. member for Calgary West compares money with a railway, and he says the railway is a monopoly. Well, the railway is a monopoly. It always was, because it has not been the custom of the country to let people build railways anywhere and as they liked. The public must be protected. Therefore before any corporation can construct a railway they must receive permission in the form of a statute from the state. There is a monopoly in that, but I say again there is no monopoly in money, there is no semblance of it.
Mr. hon. friend (Mr. Shaw) seeks to affirm that there is a monopoly in banking because the rate of interest is the same in specified areas. That is true. Take the British market, the freest money market in the world. The rate all over England is the same any one day in the week, and that rate is effective among forty-five millions of people. The rate in Paris is the rate all over France on any given day. The rate in New York is probably the rate in the eastern sections of the United States for commercial loans. The Chicago rate may be the effective rate in the middle western states, or in a certain area, and on the other hand Seattle, Portland, and San Francisco may fix the current rate on the Pacific. The rate in the West, of course, is higher than it is in the East, and I suppose there is a reason for it. I suppose there is a reason for the city of Calgary to-day, by authority of a statute of the province of Alberta, charging interest on overdue taxes to the extent of two-thirds of one per cent compounded monthly. I do not know what that amounts to, but that is what they do in the very city from which my hon. friend comes, and by authority of the legislature of Alberta.


Joseph Tweed Shaw: My hon. friend will realize that is not an interest rate, that is a penalty.


Alexander Kenneth Maclean: Well, penalty rates are always well within interest rates.


Joseph Tweed Shaw: No.

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Alexander Kenneth Maclean: There is no use exacting penalty rates which will take the property away from the taxpayer.


Robert Forke: That is what is happening right along.


Alexander Kenneth Maclean: In the West today the rates on private loans, as between individuals, are, I am told, far in excess of the rates charged in the East as between private individuals. I venture to say that if any of the hon. members from Alberta across the way were money lenders in that province they would exact 8, 9 and 10 per cent, and once in a while for very proper reasons would exact probably 10 or 12 per cent. Mortgage corporations charge a higher interest rate in Alberta and Saskatchewan than they do in the eastern provinces. I need not argue the reasons for that, they are very obvious. As I said before in new districts where there are no accumulations of wealth, where investment capital must come from a distance, higher rates of interest will be charged. Now, there was before the committee on Banking and Commerce-


William Irvine: If, as my hon. friend suggests, money flows freely from one country to the other, or from one province to another, wherever the market for the money is good, how does it happen that it never flows sufficiently into the money market to equalize the interest rates between the East and the West? How does it happen that the interest rates in the western and middle states in the United States are always higher than they are in the eastern states if money flows freely? Will my hon. friend kindly explain that?


Alexander Kenneth Maclean: Money flows from Canada into the United States almost daily because there are attractive investments there. The interest rate is better than they can secure in the investment market in Canada, and the security is satisfactory to the investor. The reason why the rates are higher in the middle and western states and in western Canada is because the security offered for investment is not so satisfactory to lenders or to investors. There is no class of securities that can be quickly cashed, there is no market in which they can be sold daily, and that is the reason why investment rates are usually higher in the West than in the East.


William Irvine: In that case Mr. Cassel and the hon. gentleman had better remove their argument from interest to security.


An hon. MEMBER:: One governs the other.


Alexander Kenneth Maclean: I shall be quite content to stand by any opinion that Mr. Cassel expresses in preference to any view enunciated by my hon. friend.


William Irvine: May I interject here that I agree with the hon. gentleman in that regard, and I would much rather have the opinion of Mr. Cassel than that of my hon. friend.


Alexander Kenneth Maclean: I admit that is a very fair statement, and I am so modest that I would have made it myself without being encouraged to do so by my hon. friend. The interest rate in the West is, after all, a practical question. Reference was made to-day to the Weyburn Security Bank, a bank operating in the province of Saskatchewan, with seventeen agencies. The general manager of that bank is Mr. Powell. He appeared before the committee on Banking and Commerce and was asked as to what would be the effect if the bank interest rate was fixed at 7 per cent, and I want to read that portion of his evidence. The question was put to him by the hon. member for Vancouver Centre (Mr. Stevens):
I would like to ask you three or four questions as to matters which are in the bill now or on notice of motion. From your experience in the West, what would be the effect upon your business as a banker if the rate of interest was fixed by law at say 7 per cent?
A. We would go out of business.
Now, I say to this committee: The manager of the Weyburn Security Bank is a practical man, an experienced banker, and I should say * an honourable gentleman, and I do not think he would make that statement if he did not honestly believe it, and did not feel confident the actual situation justified the answer made. The same question was put to-


Edward Joseph Garland: May I interrupt to ask the hon. gentleman a question on that point? The hon. member ascribes to the manager of the Weyburn Security Bank certain attributes which I think are warrantable. Would he not ascribe similar attributes to those who presented the case for the western farmer? If he would, does it not then amount to a question as to whether agriculture is to be catered to, or the banks' interests are to be considered?


Alexander Kenneth Maclean: I do not quite apprehend the purport of the hon. member's question. Who particularly presented the case of the farmers before the committee apart from the members of the committee?


Edward Joseph Garland: Exactly.


Alexander Kenneth Maclean: I failed to observe any desire on the part of the members
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of the committee: from the western provinces to indicate by argument or by the presentation of facts, anything which would go to show that the banks could do business in western Canada under 7 per cent.


Edward Joseph Garland: The hon. member misunderstands me. We did not attempt to prove that the banks could do business under 7 per cent in western Canada. We did state, however, that under present conditions agriculture could not continue to exist in western Canada at 8 per cent and over. That is the point.


Alexander Kenneth Maclean: Hon. members talk about interest rates being 9 and 10 per cent in the West. I want to point out that the evidence before the committee was to the effect that these rates did not generally prevail. Many loans are raised at 6, 7 and 8 per cent.


George Gibson Coote: Did Mr. Powell state what the . average rate of interest charged by the bank was?


Alexander Kenneth Maclean: I think he did. He said that the average interest rate was about 9 per cent. That is what he said. Sir John Aird, the general manager of the Canadian Bank of Commerce, was also questioned upon this particular point. Probably there is no bank in Canada that has had so wide and extended an experience in the loaning of money in western provinces as has the Canadian Bank of . Commerce. This question was put to Sir John Aird by the hon member for Kindersley (Mr. Carmichael):
Q. That is a point I wish to get at. If the interest rate were kept strictly at seven per cent or below, you think your dividends would have to decrease to three per cent?-A. We would withdraw from a great many places in the West; we could not make money, because our margin of profit on small branches is very narrow, and being cut narrower every day by the action of provincial governments in introducing iniquitous legislation granting exemptions. I think they are realizing that now and that some of this iniquitous legislation is be ng repealed. I know of cases where first mortgages held by companies in the East have been wiped out by some of that iniquitous legislation. Again the governments are going into competition with us in opening banks. They pay a higher rate for deposits than we do. Well, we cannot do business if the provincial governments take our deposits. We either have to let them go or pay a higher rate.
In another portion of his testimony he gave reasons as to why the cost of doing business was higher in the western provinces than in the East. It is very easy to say that the West is over banked and that a great many of the existing institutions in that part of the country should be closed. But that was not the story ten or fifteen years ago and I do not know how you could very well

eliminate those banks; it could not be done very well by process of law. I have no doubt that many of the banking agencies in the West will be closed particularly in Alberta, and possibly in Saskatchewan, from now on. I doubt very much, however, whether that will be satisfactory to the people of the West. Let me say again that it is not a correct statement of the condition of affairs to say that there is no competition among the banks. The competition is not determined by the question as to whether or not the rate is uniform throughout a large area, or whether it is the same throughout a very large country at a given time. I should think it would be a quite serious matter for many sections of western Canada if these banking agencies were closed. They perform a public service . and are of great convenience to the communities which they serve. I for one, at any rate, am not going to assume the responsibility of altering the section. I think we should consider very carefully the wisdom of changing the section to fix a rate of interest at 7 per cent. That would be a very unwise course to adopt, and I trust the committee will decide that it is not advisable to accept the amendment.


Joseph Tweed Shaw: Is the hon. member prepared to wipe out the section altogether?


Alexander Kenneth Maclean: I am not speaking for the government. So far as I am concerned I think it would be a good way to have the law in reference to interest, but I fear it would meet with opposition from hon. members from the western provinces and I should not like to take the responsibility of saying it should be done.


Leon Johnson Ladner: I do not think that hon. members in this part of the House can be accused of monopolizing the discussion of the bill now before the committee.


Some hon. MEMBERS:: Hear, hear.


Leon Johnson Ladner: I am glad that the culprits concede that much. This is an exceedingly important section and to my mind it is an economic absurdity to provide in the Bank Act anything that purports to fix the rate of interest when it does not fix it. That is more than foolish. This question was thoroughly, considered in the committee when arguments pro and con were advanced, and the committee finally disposed of it by making some additions with respect to the question of discounts. As a matter of fact, I submit, it is impossible to fix the rate of interest on money or capital which is invested in a bank or used by a bank for advances to the com-

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munity, if you leave unlimited or unrestricted the rates of interest on all other forms of capital invested throughout the entire world. Money as it is represented in capital or in bonds and credit instruments, in bills or exchange and acceptances, is nothing more or less than a commodity, and in every money market in the world this commodity is given for exchange. It is bargained for, it is sold and purchased, and the rate of interest is adjusted accordingly. So that if, according to the arguments of the hon. member for Calgary West (Mr. Shaw), the rate of interest in connection with money in the banks were fixed at seven per cent, there would be no reason for the shareholders or other people to retain their money in that form of investment.	After all we must consider the
question from the point of view of the general public and not of any particular section, and if the rate were fixed at seven per cent, then the shareholders might as well invest their money in any other form or take it to foreign countries where the rate of interest would be higher. I cannot conceive how any hon. member can argue for a moment in support of such a theory.


John Millar: Will the hon. member
mention one of the countries where the interest is higher?


Leon Johnson Ladner: It may be higher at times in the western states. Money is, in fact, something that is essentially international. When rates are attractive here, it flows across from the States to this side. When they are attractive on the other side, the money flows there. Likewise it may go to Europe, and the credit facilities of banking institutions will deliver money or money credit in almost any part of the world. Nothing is more capable of distribution in small and great quantities than money.
There is no doubt that portions of the western provinces have a grievance as regards interest rates. We saw produced in the committee that considered this question promissory notes bearing 10 to 12 per cent rates of interest, mainly because they were from remote districts. Some hon. members opposite say that there is substantially keen competition in the banking world. I think that is so. That is the case in some towns in the WTest. I know in the little town of Ladner, British Columbia, there are the Royal Bank, the Bank of Commerce and the Bank of Montreal, and I have it on the best of authority that only one of those banks is actually paying, but the competition to get business is keen in the extreme. The presence of so many branch banks has largely brought
that about. I noticed the other day that, in 1890, we had 38 principal banks making returns to the government, with a total capital of some $60,000,000, and we had 402 branch banks. In 1900, we had 36 principal banks with a total capital of $67,000,000, and the number of branch banks had increased to 663. In 1910, we had 33 principal banks, with a total capital of $100,000,000 and the number of branches had increased to 2,368. In 1923, we have the number of principal banks reduced to 17, with a total capital of $125,000,000, but the number of branches has grown in the last thirteen years to 4,472. Every banker knows that these branches do not all pay. There is competition, but there is also the expense of maintaining those branches.
My main purpose in rising at this juncture of this question is to suggest to the members of the committee that the way to remedy the question of the rate of interest is not by non-economic principles, nor by legislation, but by the ordinary methods of demand and supply. I suggest to the committee that the remedying of this question will not take place in Canada, just as the remedying of a number of other questions cannot take place until we have in this country a federal reserve bank system. In the United States, Great Britain and, in fact, Spain and Italy, in all the principal commercial countries of the world, the federal reserve bank system is in existence. This is a centralized system. A bank of rediscount, in its practical operations in the United States, handles the question of high or unfair rates of interest in remote portions of the country by the system of open market operations. Let us say that in the remote district of Calgary, say ao out-of-the-way place, the rate of interest is 25 per cent, and it is necessary to correct that situation. Under the open market operations such as we have in a federal reserve bank system, the board of the federal reserve bank, which has an obligation to the government, to the people at large, as well as an obligation to the banks and other financial institutions, immediately takes steps to place its own money in that area in competition with the money of the ordinary banks, in order to force the rate of interest down. Let us say, in order to carry out the illustrations of the 25 per cent rate of interest in Calgary, that a federal reserve bank through its board would first notify the banks that were charging those excessive rates that the rates .were too high. If the banks did not see fit to correct those rates, the federal reserve board would take its own money, and through the agency
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which it has established in Calgary, it would go into that city and say to the people: "You can come to us and borrow money for 6 per cent." How long are any other banks going to lend money for 25 per cent, 10 per cent, or 8 per cent, when a competing institution will lend money at 6 per cent? In other words a federal reserve banking institution will correct an injustice of that kind by the ordinary, sound, economic principle of supply and demand just as it will assist the industrial and commercial community at large in times of stress through facilities of rediscounting paper, and just as in times of elasticity it will correct an undue increase or boom by utilizing the money rates to raise the rates of discount. I wish to lay before the committee the advantages of a federal reserve bank so far as it pertains to and is able to remedy such a question as rates of interest. The Chairman has properly ruled that the discussion must be confined strictly to the clause under consideration, and I hope I have followed his ruling in my remarks.


Mr. CARMICHAEL:: I wish to make just a few remarks to voice my objection to subclause 1 of section 91 as it stands in this bill. I notice there has been an addition to subclause 1, which is really a beneficial addition. It reads:
The rate of interest or discount charged by the bank shall appear on the face of the note.
That is one amendment that we were able to get through the committee. Out of the many amendments proposed, 10 p.m. that was one of the very few that received favourable consideration. I am quite aware that this matter of interest rates was debated at great length in the committee, and of course we did not accomplish anything in regard to setting a maximum rate. The hon. member for Halifax (Mr. Maclean) stated in his remarks that the interest rate in the West is a practical question. He uttered a truism when he made that statement. It is a practical question. People in the West run up against real, hard, practical facts in the matter of interest rates, and it is not only those who are in financial difficulties who have to pay high and what we might call exorbitant rates of interest. A rural municipality in western Canada with assets of between three and four million dollars must pay 7 per cent, or 7i per cent, or possibly 8 per cent interest. I think Mr. Powell, manager of the Weyburn Security-Bank stated that they charged 8 per cent interest to rural municipalities. No person will discount the * security offered by a rural municipality, and yet the rate charged by the

Weyburn Security Bank is 8 per cent. In our western country an agriculturist must be in exceptionally good circumstances to get money at 8 per cent. The majority pay 9 per cent and a large number pay 10 per cent interest on the money they borrow. If the banks were paying out a correspondingly high rate of interest for the use of the deposits made with them, possibly there would not be the same objection to the high rate which they charge on loans, but we find they pay but 3 per cent for the large bulk of the money that they loan out at 7, 8, 9, or 10 per cent.
I might here make an observation in regard to the Weyburn Security Bank. The hon. member for Halifax (Mr. Maclean) stated that if the interest rate were set at 7 per cent this bank would go out of business. Well, it is only fair to say that they pay 4 per cent on deposits; therefore a 7 per cent maximum rate would militate against this bank.
We find that the banks control something over two billion dollars of the people's money, for the use of which they pay 3 per cent. In our western country at least the banks turn that money over at a spread of 5 or 6 per cent and possibly more. Now, it has been argued in the special committee-I do not know to what effect-that if the banks were limited to 7 per cent they would go out of business. I do not believe it, Mr. Chairman; but I do believe that if they were limited to 7 per cent they would curtail some unnecessary expenses. In the town of Weyburn, Saskatchewan, with a population of 3,500 we have seven banks. That is altogether unnecessary. Two banks could handle the business there. In the small town of High River, Alberta, with a population of 1,200, we have five banks- another unnecessary expense. And I need not remind you, Mr. Chairman, that the banks do not do business in shacks or in the same class of buildings that the majority of agriculturists have to live in from whom the banks make their profit. I hope that is quite clear.
Now, it may be asked, have we any proof whether the banks could continue in business if the rate were set at a maximum of 7 per cent.


Henry Herbert Stevens: Before my hon. friend
leaves that part of his remarks dealing with Weyburn, would he tell me how it is that the Weyburn Security Bank, which pays 4 per cent interest on deposits, or 1 per cent higher than any of the other banks pay, has not attracted the deposits which go into the other six banks, if there is no such thing as competition in the banking business?


Archibald M. Carmichael: I think the Weyburn Security Bank did get a large amount

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of western money before they opened up a banking business, that is, when they carried on a mortgage business. At that time they paid 4 per cent on deposits. When they launched into the banking business they continued to pay the same rate of interest. Whether they will be able to continue to do so in competition with the other banks I am not prepared to say.
Now, Mr. Chairman, the spread between what the banks pay on deposits and what they realize on loans is to my mind exorbitant. I do not know whether it would be wise to set the maximum at 7 per cent throughout Canada, for the reason that in western Canada possibly the risks during the past years have been greater than in eastern Canada on account of crop conditions. But according to reports from the West at the present time, risks out there will be fewer in the future possibly than they have been in eastern Canada.
Looking across the Pacific to the island-continent of Australia, we have what to my mind is an ideal system for controlling bank rates of interest. There they have established a government banking system known as the Australian Commonwealth Bank. I stated in the special committee that the bank started without capital and has not issued any since. The statement was challenged and it was asserted that the bank did raise or levy a certain amount of capital. In the absence of any further information I am not prepared to admit or refute the statement. But the information I had was that the bank commenced business on deposits taken from the post office and from the people, and has been able to carry on business for ten years by paying from 3 to 4 per cent on deposits and charging a maximum of 6 per cent on loans. And in the decade it has made a profit of something over $18,000,000. Now, it seems to me that if we are not going to be able to set a maximum rate of interest in the Bank Act, we shall have to resort to other ways and means to regulate the bank rate, and I think one good way to effect this regulation is to set up a competitive system that will operate alongside of our present banking system, and so control its rates.


Alexander Kenneth Maclean: I assume my hon. friend was in the West about 1900. Was there any fall in the average interest rate, say, between 1900 and 1914?


Archibald M. Carmichael: I am prepared to admit that when crops and prices are good and the people in general prosperous, interest lates are low; but when we run up against adverse conditions, as we have for the past
few years, interest rates are high. That is, our financial institutions unduly penalize the country at a time when it is suffering from depression. They should not be permitted to do this.
I would be quite prepared to vote for the amendment, but I am not optimistic enough to hope that the committee is likely to accept it. It seems to me that we are just talking here for the sake of putting forth what we think, and that we hope to attain nothing in the way of any very drastic relief from our present banking system.


Mr. CARROLL:: Does the hon. member really mean that?


Archibald M. Carmichael: Yes, I do.


John Millar: Mr. Chairman, not having been a member of the Banking committee I have taken very little part in the discussion, nor do I intend to, but I want to make a few observations on interest rates-a subject that appeals to me very strongly. I notice that in the discussion remarks are frequently made to the effect that this committee sympathises with the difficulties the West is passing through at the present time and would like to give some relief. But unfortunately that sympathy seems to fall short of reaching the point where it might bring relief. In fact, it is rather a passive sympathy. I have listened to the discussion with a great deal of interest, and I may say at the outset that I believe we have a good banking system. Indeed, I am not in favour of upsetting those institutions which have served us well in the past and have weathered the years of trial successfully, without feeling absolutely certain that we have something better to put in their place. For myself, I am willing to go to the extent of supporting only those amendments to the Bank Act that would seem to be almost beyond doubt a benefit. With regard to the high rate charged in the West -the hon, senior member for Halifax (Mr. Maclean) referred to that-I would point out that during the years when we had cheap land, virgin soil which could be conveniently and cheaply cultivated; when weeds were entirely absent and when the farmers, owing to the increase in the value of their land, were growing fairly wealthy without the crop-in those days it was quite natural that the banks and other institutions should charge high rates in the West, because the trade would stand it; and having secured these higher rates they are now very reluctant to give them up. I have thought this matter over carefully, and I have failed to see why in the West, where the security is certain-
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in many cases being victory bonds; in many cases wealthy men borrowing small amounts -where, in fact the security was almost as good as the bank itself and the losses of the banks in interest were nil-I have failed to see why a bank in the West doing a good business could not profitably lend money at 7 per cent as they are doing in the East.
Let me make a comparison. Walking the streets of Ottawa I was struck by the great number of bank branches that we have here. One sees a branch of the Bank of Montreal on one corner; he walks a few blocks and sees another branch of the same bank, and so it is with the Bank of Nova Scotia, the Union Bank and others. If it is possible, at the rates of and 7 per cent charged here, for the banks to keep up so many branches within a few blocks of each other, built on land for which a very high price is paid, carried on at great expense, it seems to me that in the comparatively small institutions maintained in western Canada, where there is no loss year after year and where even over a considerable period of years the aggregate loss would be very slight-it seems to me that in those districts the banks could be made to pay at the same rate of interest charged in the East. I believe it is true that in many cases, as the bankers say, they have lost money in the West. Why is that so? They loaned too freely in the arid districts, where the risk was great. They made the same mistake in lending too freely that the farmer made, in many cases, of borrowing too freely. But there is just this difference: in the case of the banks they are assured against loss resulting from their bad judgment, resulting from their lending money where they should not have loaned it.
It was argued in the Banking committee and it has been argued in this committee-if it was not specifically stated, it was implied- that because of these losses the banks in the West should be allowed to charge higher rates of interest. In other words, those who are paying their debts are penalized in order to ensure the banks against the results of their bad judgment. The farmer who made the mistake of borrowing too much must carry his own burden, and he is asked also to carry the burden of the banks where they have used poor judgment in the lending of money. I am inclined to think that what Mr. Powell and others have said is partly true-that if the rates in the West were reduced to 7 per cent the banks would quit business. I say that is partly true. They would quit business in towns where there are twice as many banks as there should be; they would quit business in arid districts 
where the crop fails four and five years in succession. I would be sorry to see the people in those districts subjected to any hardship, but in some parts of the country it does seem to me there is necessity for a clean-up in this connection. The banks and the government cannot continue forever to carry the people in an arid district, and I see no reason why those who live in districts that are not arid should, because of the conditions in the arid districts, be penalized so far as the rate of interest is concerned. I think it is unfair and unjust.
Reference has been made to the charge of two-thirds of one per cent imposed after taxes become due. Let me point out that that is not a rate of interest; that is a penalty which is imposed in order to induce people to pay their taxes when they are due. In fact, in our own municipality higher than two-thirds of one per cent per month is charged; the rate is one per cent per month, yet we have not looked upon it as a rate of interest and it cannot fairly be so considered.
It has been suggested that the law of supply and demand should regulate the interest charge* and the hon. senior member for Halifax has pointed to the fact that so far as deposits are concerned there was competition in Weyburn, for instance, in the matter of interest rates. But that competition affects very few people; it gives no relief. It is the interest on money loaned that is the important thing. It is true that there is a great deal of competition in an effort to get the business, but that competition does not reach the rate of interest on borrowed money. The rate of interest charged by two or three banks in the same town will be exactly the same-that is, the rate they will charge for money loaned, What good would it do if in a town forty or fifty miles away from where the borrower lives some of the banks were charging a lower rate of interest? What relief rvould that give? I cannot go fifty miles away, present my credentials at a bank in that place, and borrow money. They would say, "Why do you not borrow at home?" The only bank from which I can borrow money is the bank that is close to me that knows my financial standing, that keeps track of my business.
It has been stated by the hon. member for Vancouver South (Mr. Ladner) that it is impossible, ridiculous-I think he used the word "absurd"-to think of controlling the rates of interest charged by the banks while you allow money lent by other institutions -I suppose he meant mortgage companies and other institutions of that character-to go untrammeled and uncontrolled. I admit that I have a doubt whether a reduction to

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a rate of 7 per cent in the West might not be too great a cut, but I believe that a move in that direction might well be made. It is just possible that if the banks lent money at a lower rate of interest their competition would compel the loan companies and the private lenders also to lower their rates. Is it not just as reasonable to expect that that will be the effect as that such a change is impracticable? Is it not quite as reasonable to believe that the other concerns will be compelled to come to the 7 or 7^ per cent rate in order to meet the competition as to believe that it is impossible to control the rate of interest charged by the banks while no control is exercised over the rate charged by other institutions? Very few changes have been made in the Bank Act-I am sorry that more were not made-but I think the committee would be well advised to take this suggestion into their serious consideration. If it is thought that a reduction to 7 per cent is too great a cut, at least it could be made For my part, if it comes to a vote I would take the risk of voting for the 7 per cent. I know the conditions pretty well in the West, and I feel that while the banks would have . to make some readjustments, while they would cease business in certain places and a little hardship might be caused, the change might not be such as to compel them to withdraw from business. I have no doubt that for the most part they would continue as they are, and I am sure that the benefit would very much more than compensate for the loss. It is difficult to get any great reform without some little loss, but I say that in this case the benefits would undoubtedly more than outweigh the loss.
There is a general tendency towards monopoly, and a general tendency so far as the government goes to control monopoly. Recently we had a report handed in by the commission that investigated the Great Lakes freight rates, and one of their recommendations was that a maximum price be set for the carrying of grain upon the Great Lakes. We have never done that in the past. They have in the United States in a partial way, but we have not in Canada. That is a step forward that we have not yet accepted, but I have not very much doubt that when that matter comes before this committee we shall take that step forward in regard to the rates on the Great Lakes, and I believe it will be a wise step. When we control the rates on the railways, and we are going further in that direction every day of necessity because we must do so to protect ourselves, why is it such a disastrous thing to take such a step
in connection with our banks? Surely when we consider the accumulation of money in so few hands we must realize that our banks are becoming more and more monopolistic every day. I hope the committee will look upon this amendment quite seriously. While the Banking committee have thought, I be-live, that too many theories have been presented before it and perhaps have been a little frightened lest too drastic changes should be made, I feel that perhaps the tendency will be to close the door too tight and prevent such reforms as would be in the interest of Canada as a whole. We all know that there have been strong objections to reforms from time immemorial, and it sometimes takes considerable discussion and a lot of educational work before the country can be brought to that stage where they are willing to try something new. As I have said before I am not sure that the risk is too great, and if it comes to a vote I shall vote for the amendment.


Mr. JELLIFF:: I do not wish to prolong
this debate unnecessarily. I know this committee is tired and that perhaps this particular phase of the discussion has been carried on too long already, but this subject is one that particularly appeals to me from a practical standpoint. I do not look at it from a theoretical standpoint at all. I have in view when I consider this question of the interest rate, the practical needs of this country and its condition at the present day and hour.
I must confess, Mr. Chairman, to a very keen sense of disappointment in some ways [DOT] over the outcome of the revision of this act and the form in which it has come before parliament at this time. I was in hopes when the act was referred to the select standing committee on Banking and Commerce, of which I was a member, when it was fully considered there, when all the conditions prevailing throughout this country were laid bare so fully and completely, and when it was reported back to this House that we would have had something more in the way of a detailed statement either from my hon. friend the Minister of Finance or from the chairman of the Banking committee setting forth in brief at least what had been covered in the investigations of that committee, what they had found as to the conditions of the country, together with some concrete suggestions as to how they were going to meet the situation in the West. I felt all through that hearing that these gentlemen had a large sympathy with and interest in the people of the West under prevailing conditions, and I repeat, I am somewhat disappointed that
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they did not go into that phase of the question and have some suggestions to make when this act was reported back to this House.
In regard to this interest clause, I am heartily in sympathy with the amendment submitted by the hon. member for Calgary West (Mr. Shaw). I do not believe that this country in any part of it is in a condition to-day to pay a higher rate of interest than seven per cent. I know that in my part of the West we have piled up in the banks thousands upon thousands of dollars in notes and securities of farmers which are bearing very high rates of interest, eight, nine and ten per cent, and if those notes in the hands of the banks continue to accumulate at the rates of interest they are now bearing I do not see how our farmers are going to lift the load and get on their feet. The only practical thing that can be done by this act to help them is to reduce the interest rate, and even that will help to only a limited extent, but to my mind, Mr. Chairman, it is the one essential thing. It will open the road, it will implant a feeling of hope and confidence in the minds of the fanners of the West, and if there is anything that is needed above that in this country I hardly know how to express it.
The hon. Minister of Finance said to-day that we had in prospect a very good crop in the West. The reports to that effect I think are true. I have had similar reports, and of course a good crop will have some effect upon the situation, but I cannot see how it can carry us to any very great extent to-* wards the liquidation of the debts that are upon that country. My feeling after carefully canvassing the matter is that not only one good crop will be needed to even help move that load, but seven or eight or nine or ten good crops will be required to accomplish the object which he is hopeful we shall attain. I wish I could be as hopeful of the situation as he is, and I am a man of hope myself. I appreciate the fact that he feels even a little encouragement over the present situation. But suppose this rate is reduced to seven per cent? Is the disaster to the banking institutions of this country that has been apprehended going to occur? I do not believe it.
I believe on the other hand it will result in good to the banks.
I believe that the banks need to have faith and confidence in our great West to a greater extent to-day than even the farmers. I came from the state of Illinois. In that state, from the days of my birth, they have had a maximum rate of interest of 7 per cent. Did that rate of interest ever injure the state of Illinois? Did it ever wreck its banking system, its [Mr. JelliffJ
great commercial institutions or its great factories? But in the last sixty years Illinois has risen from a young state to one of the greatest states in the whole world. Her manufacturing institutions alone turn out each year three billion dollars worth of manufactured goods; more than does the entire Dominion of Canada. Within the last sixty years of the existence of the live stock markets in Chicago over 750 million animals have passed through that market. The Chicago grain market is also one of the great grain markets of the world. Is there any evidence to show that the limitation of the rate of interest to 7 per cent has done any harm there? Can you point to an instance where there has been greater general development, or greater improvement in the welfare of the people?
The same is true of a number of other states. The state of Michigan has had a maximum rate of 7 per cent for a great many years, and it is to-day one of the greatest states in the Union. One of its cities alone has produced a manufacturer who has made greater use of his wealth than possibly any other individual on the American continent to-day. In the state of New York the same beneficial results have been witnessed. There they have had an even lower maximum rate for their general loans, 6 per cent, for many years; and in many other states a low maximum rate of interest has been the rule. Has that low rate of interest ruined those states? Has it injured the state of New York? Do we not go to New York when we want to get the millions that are sometimes necessary to tide us over our own difficulties here? I cannot help but conclude when I look this situation squarely in the face, that neither our banks, nor our financial institutions of any kind, nor any class of our people, have the least reason to fear the fixing of the maximum rate of interest at 7 per cent.
I know what it means to the men out on the farm if we continue the existing rate; if they have to go up against the burden of accumulated indebtedness in our banks at existing rates. It will mean the continual and further crowding down on the perspiring brow of the husbandman of this country a crown of thorns; the man who, by his industry, is producing year after year not only the food for his own family but for the families of those engaged in other occupations, and for the hungry and needy across the seas; the man by whose industry a new stream of golden wealth is produced each year to vitalize and keep up our transportation systems, and to bring strength and prosperity into all the avenues of our commercial and in-

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dustrial life. We must take these things into consideration. We must do all we can, when revising this Bank Act, to bring needed relief to our people. They are looking for that relief and they will be disappointed if they do not get it. I picked up and put into my pocket this evening a little volume from which I desire to read a brief extract. It is from the speech which a great American, Abraham Lincoln, whom the world has always loved and admired, made on the subject of slavery -I will merely read this fragment from the speech:
Free labour has the inspiration of hope; pure slavery has no hope. The power of hope upon human exertion and happiness is wonderful. The slave-master h.imself has a conception of it, and hence the system of tasks among slaves. The slave whom you cannot drive with the lash to break seventy-five pounds of hemp in a day, if you will task him to break a hundred, and promise him pay for all he does over, he will break you a hundred and fifty. You have substituted hope for the rod. And yet perhaps it does not occur to you that to the extent of your gain in the case, you have given up the slave system and adopted the free system of labour.
That -is what I believe we should all do at this time in regard to our country if we have in mind its future development. Implant hope and confidence in our people and with it will come prosperity and happiness. Let us do this much in the way of limiting this burden; restrict this interest rate to seven per cent, help the people out of this difficulty, and throw light upon their future pathway. I do hope, Mr. Chairman, this amendment will be accepted.


Mr. CALDWELL:: I do not desire to delay the House at any great length, but I wish to put myself on record as being in favour of the amendment now being considered. We have at present in the Bank Act a clause which pretends to make the maximum rate of interest 7 per cent, but it has never been effective. I think, in view of the evidence that has been adduced this session before different committees of the House, we cannot help but believe that the banks can do business on a 7 per cent rate of interest. Wo have the evidence of different rural credit associations in Canada who are doing business on a spread of one per cent in interest between what their money cost them and the rate at which they loan it, and they are making surpluses on that margin of one pe: cent. At the same time we have banks, or bankers coming before different committees of the House and plainly stating that they cannot do business on a spread of less than 5 and 6 per cent. Now, Mr. Chairman, if the present banking system is as efficient as our leading bankers would lead us to believe,
why is it that they cannot do business as cheaply as amateur organizations, as you might call the rural credit associations of Canada? Because, when these rural credit associations were first started it was said by ihe banks and the bankers that they could not function at that cheap rate of interest, they could not carry on their business on a spread of one per cent, but they have proved conclusively that this is possible.
There is another feature that would look to be in favour of the banks. The turnover of the rural credit associations is slow, it is on long terms; the turnover is once in thirty 3rears. If they can do business on a turnover cf one per cent, it does not look logical to me that the banks cannot do business on a spread of less than 5 and 6 per cent on their turnover, especially when they turn their capital over several times during the year.
As I said, I do not wish to detain the committee, but these are some of the thoughts ihat have occurred to me. It has been said that if the maximum rate of interest is made lew, and the banks are compelled to live up to it, that a good number of the branch banks in the West will cease to do business. Personally, Mr. Chairman, from the information I have, I think it would be a good thing for the country if some of the branch banks did cease to do business in some of the towns, not only in western Canada but m eastern Canada. We have the spectacle of three or four branch banks in a town, surrounded possibly, by a good farming community where there is only about business enough for one branch bank. We thus have two, or three, or four branch banks competing for the business, which means that the people who patronize these banks must pay the overhead expense of four banks when there should only be one. I think the fact that there are too many branch banks is one of the reasons why the banks have been charging a rate of interest that is not justified by actual practice in other lines.
There is another feature which was very well brought out in the committee investigations this session, and that is the fact that agriculturists pay a higher rate of interest than people engaged in any other industry in Canada, and also higher than those in any other country one might mention. Nearly every other country has an extended rural credit scheme whereby the farmer can get cheap capital; and I hope that the government will see fit to institute in the very near future, some form of rural credits financed federally. The report submitted today by the special committee on agriculture
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will, I presume, be under discussion later on when I shall have something to say in this connection. I quite realize that anything I might say on the question now would be out of order. I do not wish to take up the time of the committee, but I must go on record as being in favour of the amendment.


Arthur John Lewis: I, too, want to go on record on this subject, and I want at the same time to deal with two matters referred to by the senior member for Halifax (Mr. Maclean). Speaking with regard to a certain economist, that hon. gentleman said that in practice there was such a thing as putting the rate up under certain conditions, while it came down on other occasions. So far as we are concerned, I want to say that we have never known the rate to come down; it has always gone up in the West. Another thing that seemed rather peculiar to me was the fact that while the hon. member would have the banks charge seven per cent, he would also allow them to charge a much greater rate; and we have it on record that the average rate in the case of the Weybum Security Bank is 9 per cent. The hon. member for Halifax quoted the manager of the Weyburn Security Bank and observed that we all considered him honest in his statements. The question is, however, did he submit any facts? Did he produce his books to show that his institution could not continue in business on a seven per cent basis? It was simply a matter of evidence, and before a man makes a statement of that kind he should be able to back it up with facts. This gentleman should have been able to prove that his bank would go out of business under different circumstances. We have it on the authority of western members that many of the farmers are going out of existence because a higher rate than seven per cent is being charged. The senior member for Halifax said that there was competition among the banks. Well, if there is I have not had the pleasure of seeing very much of it. I believe there is competition in the United States because the banks are very easily multiplied there. But it is difficult to multiply the banking institutions in this country. The trouble is that on the contrary, they are reduced in number here until to-day they have a monopoly of the credit situation in Canada.
The hon. member continually referred to the issuance on the part of the banks as money. I do not altogether agree with that. It is a matter of credit;' and Siegel of the United States says, in regard to interest, that the credit of a bank is valuable only when

it can be changed for real money. We have not the gold standard in Canada, and I do not think you could go to an ordinary bank to-day and get real money for the credit they offer you. Yet, notwithstanding that they are privileged to extend credit, they are given the further privilege of monopolizing the interest rate. I for one protest against this; and I say that if the government make regulations in regard to banking in this country they ought to have the same authority in the matter of rates and should be able to stipulate what should be the legal rate for the banks in the West to charge the farmers who borrow money from them.
The hon. member for Halifax also declared that as we became an older country and entered a little more extensively into mixed farming the time would come when we should have a cheaper rate, as in the East. By that time, however, many of us will be under the sod. No; what we want is something that will help us in our present situation. We are not looking so much to the future; we are very much concerned about what' can be done to remedy the evils that exist under present circumstances. Now that there is deflation in the West and conditions are not optimistic, it does seem to me that the present time is most opportune to lower the rate, as suggested; and for that reason I am heartily in support of the proposed amendment. I believe it is quite within the authority of parliament to enact that 7 or 7i per cent shall be the maximum rate legally chargeable by any bank which is given a charter by federal legislation.


William Irvine: The only hon. member on the government side of the House who has spoken against the amendment is the hon. member for Halifax (Mr. Maclean). It is rather unfortunate that we should find it necessary to bombard one hon. member all the time, but as he has avowed himself the protagonist of the Bank Act and-shall I say?-the apologist of the bankers in this regard, there is nothing left for us but to deal with the arguments he has presented to the committee. In opposing the amendment moved by the hon. member for Calgary West (Mr. Shaw) the hon. member for Halifax said that money was much like anything else; and upon that basis he proceeded to build up an argument. Now, as a matter of fact, money is in no respect like anything else, and that is where the hon. member erred. On that false hypothesis he argued that interest could not be fixed because money flows to points where the highest rates are

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paid. In other words, he placed money on the basis of ordinary commodities which rise and fall with the demand. If this were absolutely true, money would flow to the highest interest point in such volume as to reduce the rate of interest to the lowest possible minimum. That is what happens in the case of potatoes or in the case of clothing: the commodity flows in such quantities to the place of greatest demand,-which is naturally the place where the highest price is offered-but as the demand is satisfied there ensues a reaction. The price drops, and the commodity must find some other outlet. This is not true in regard to money. In order to refute the theory used as argument one may refer to the hon. member's own statements. He showed that the rate of interest in New York was different from that in Chicago or in the western states of the American union. It is true in Canada that the interest rates are low in the East as compared with the West. If money flowed, as the hon. member says, to the point where interest rates are highest, it should flow in such volume that in western Canada one would find it at reduced rates of interest, in a short time and ultimately at the minimum. But as the hon. member for Swift Current (Mr. Lewis) has pointed out, we have no experience of any falling of rates in the West. The only thing we know about them is that they are climbing up.
Take the case of Great Britain as compared with Canada. Money is a free trade commodity, and it flows from one country to another declares the hon. member for Halifax. Now this is clearly not true. Interest rates in Great Britain are much lower than they are in Canada. Therefore, if his argument were sound, money ought to flow from Great Britain into Canada just like the Gulf stream going the opposite way, and ultimately we would have as low and even a lower rate of interest at times in Canada than they have in Great Britain. But that is not so. There must be something wrong then with the basis of the hon. gentleman's argument. While he accepted this principle, it seems to me that he departed from it before he finished with his argument, because he said in reply to a question which I put to him in this connection, that this flow did not continue in a volume sufficient to reduce the rate of interest to western Canada because the security was not good. This argument then must be applied to Canada as a whole in relation to Great Britain which is to say that Canadian security is not good enough to attract money from Great Britain. But that this form of
reasoning means that my hon. friend either does not think the rate of interest is the important thing or else that he is confused in his thinking, for he virtually abandons his first contention and says now that the security for money, not the rate of interest, is the important thing. Therefore, it is the security of the investment, more than interest rates, that guides the price level. If that is so, then the whole argument of the hon. member for Halifax (Mr. Maclean) falls to the ground, and it cannot be applied to the present debate.
He also referred to the statement of Professor Gustav Cassel to the effect that price levels are controlled by interest charges. But after accepting this, the hon. member for Halifax proved that securities controlled interest, and therefore securities must control price levels. Therefore, he is not in agreement with Professor Cassel as he declared himself to be; he is in opposition to him. But let me for the moment accept the statement of Professor Cassel, although I have no more reverence for that professor than I have for a hundred others, and simply because he says it, is not a conclusive argument to my mind that it is so. I am prepared to admit, for the sake of argument, that there is something in the statement of the professor, namely, that the rate of interest may have some relation to prices. Even so, it can still continue, for the proposal of the hon. member for Calgary West (Mr. Shaw) fixes only the maximum rate of interest. There is a great range from 7 per cent to 1 per cent; that leaves plenty of room for the affecting of price levels. So even accepting the statement of Professor Cassel as being sound economics, we still may utilize the truth of that after having passed the amendment which has been moved.
I am not prepared to admit that the rate of interest is even an important factor in fixing prices. Let me give you a parallel to this. It used to be believed that profits were regulated by the prices charged for goods, and those who handled goods naturally supposed that the higher the price they charged the more profit they would make. But after a while they found that turnover was more important than high prices; they found that if they could cut their prices just a little above the cost of production and overhead, they could double or redouble their sales, and they could make more money than by charging high prices. That is just as true when you apply it to money, since money is used as a commodity, as it would be in the case of any other commodity in the market. If you cut
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the price of money b.y reducing interest charges, you have immediately the effect of increasing the loans, and by increasing the loans that are made, you increase the business that will be done by the banks. There is no loss; in fact, there might be an increase of the interest charges on the whole, and thus the price levels would still be affected in a similar fashion providing of course that interest rates do affect prices.
But the chief point to be considered in this argument is that while the hon. member for Halifax argues strenuously that interest rates cannot be fixed, and I think the hon. member for Vancouver (Mr. Ladner) said that the proposal was an economic absurdity, yet against all these the fact remains that interest rates are fixed in Canada to-day. They are fixed in Great Britain; they are fixed in New York, according to the statement of the hon. gentleman for Halifax. If they are fixed by the banks, why cannot they be fixed by this government in the interest of the people? If these hon. gentlemen are to be logical in their argument, they must face their own logic. After proving to us in one part of the argument that interest rates could not be fixed at all, they quietly tell us that interest rates are fixed now; that they are the same throughout Great Britain at any one given time; that they are the same in New York; that they are the same in eastern Canada. If they are fixed already by the Bankers' Association of this country, by the financial associations of other countries, they are fixed by them in their own interest.


Alexander Kenneth Maclean: When I said that the market rates for money were fixed at certain centres, I did not say that they were fixed by bankers or by law. I meant that they were fixed by market conditions.


William Irvine: As a matter of fact, they are not fixed by market conditions, as I have shown to hon. members, because in that case we would have the same rate of interest all over this country, or at least the rates would be at some time lower in the West than in the East, caused by the flow of money to the highest market, but this never happens. The rate of interest in this country is 11 p.m. fixed by the Bankers' Association.
Therefore, the very point that is characterized by an hon. member as an economic absurdity is now in practice in Canada, and the very point which the hon. member for Halifax says would, perhaps, result in the destruction of the banking system, although he did not say that in those terms, is already in practice in Canada. The point is, if the Bankers' Association, having a virtual mono-

poly in this country, has already fixed interest charges both east and west, fixed them on the loans they make, on the deposits they take from the people, fixed them in their interest in order to make profits for the bank, it is highly desirable and practicable that this committee and this parliament should fix the rate of interest so as to take care of the well-being of the people.
Let me say that I would be in favour of no restriction whatsoever if the banks did not have a monopoly. Break up your monopoly, and we do not need any such restrictions. Ordinarily we should have a clean-cut competition in banking, and if that were so interest rates would depend upon the amount of money available for loans. But in a country where there are seventeen banks meeting in one association, fixing interest rates in each community at the same rate in every bank, then as regards interest rates we have a monopoly, and the only possible protection that the people have against such a monopoly is such a restriction as is proposed in the amendment under consideration.


Mr. CAMPBELL:: Many hon. gentlemen in this House to our right and on the treasury benches seem to take it for granted that the only problems in western Canada are those of poor crops and they refer repeatedly to the drouth districts in the south and southwest. I live in the northeastern part of Saskatchewan where we always have good crops, where in twenty years we have not had an actual crop failure, where we have abundance of rain, where we have the best of soil -in a word, where nature has indeed been most kind to us. Yet we have problems so acute there that whole districts are being deserted. If you were to ask the average citizen there to-day as to what these problems were, he would in all probability summarize them under four heads: tariff, transportation rates, markets, interest. And if I were asked to put my finger on the most urgent need of the community and on its most vital problem I would say, without a moment's hesitation, interest. Hon. gentlemen who come from the old settled parts of the Dominion perhaps do not appreciate the difficulties in a newly settled country. Your farmers as I know them in the Maritime provinces, and to a lesser extent in Ontario, are in a great many eases either on inherited farms or farms that they paid for years ago, so that the interest problem does not enter into their production costs at all. But in a new country it is generally the poorer classes of men who come to carve out a home in the wilderness, and interest with them is a

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very vital problem. Indeed, I think there is nothing that would put western Canada mo-e quickly on the map to-day than a reduction in the rate of interest. Our hon. friends on the government benches and on our right are boosting immigration, and some very hard things have been said against hon. gentlemen in this section of the House because we have pointed out the fallacy of any such policy at the present time. To hon. gentlemen to our right and to hon. gentlemen on the treasury benches I would say that if they are really sincere and want to attract immigrants, if they want to re-establish the farmers of Canada to-day, they can do this in no better way than by assisting us in securing a reduction of interest. The interest paid by the average farmer in the West to-day is crushing out his economic life an! is driving tens of thousands off the land. I am not entirely clear in my own mind whether this question should be dealt with through the Bank Act or under a rural credit scheme. But if nothing can be done here-and I take it for granted that our friends are not seriously considering this amendment-then in all seriousness I say: If you are sincere and want to see people come into the country to help in its development and to share our financial burdens, then by all means assist us to get some form of rural credits that will cut the interest rates which are so burdensome on our western farmers to-day. Tens of thousands of these men are plodding along in such poor financial shape that they can see no possible chance of getting through. The rate of interest every year means to them more perhaps than the whole profit on their crop under the most favourable circumstances. But if some scheme can be devised for the reduction of the interest rate, and their indebtedness spread over a long period of years, I can assure hon. members opposite and on our right that they will no longer hear the bitter complaints from western Canada that they are hearing to-day, for they will have solved one of the greatest problems of the West. To our good protectionists-and I refer to my hon. friends on the treasury benches, because they are just as much protectionists as hon. members to our right-I say if you want to hear less about the tariff from us and to get us to accept it under protest, help us to reduce this interest rate. We will never be favourable to the tariff, but we will be prepared to accept it under protest, as well as a good many other things, for the sake of peace and harmony if you assist us in tins one vital, urgent need of the western country to-day.
2C3
Amendment, (Mr. Shaw) negatived: Yeas, 38; Nays, 64.
On section 91, subsection 2-Return to minister.


George Gibson Coote: Mr. Chairman, I regret very much that this amendment has been defeated, but I think it is an amendment that is very necessary for-


Some hon. MEMBERS:: Order.
Mr. COOTE. Mr. Chairman, am I in order or not?


The CHAIRMAN (Mr. Marcil, Bonaven-ture):: The hon. member cannot reflect on a
vote of the committee, if that is what he intends! doing. Or does he intend moving another amendment. Subsection 2 is now before the committee.


George Gibson Coote: I want to speak to the motion, Mr. Chairman, and I wish to move another amendment.


Charles Marcil: All right, that is in order.


George Gibson Coote: I want to bring to the attention of hon. members some figures that they may not be familiar with, showing the rate of interest that is being charged by the chartered banks of Canada to-day. This is from a return brought down by the government a few weeks ago. The first return shows a 90-day loan on an amount between 81,000 and $25,000, drawing 10 per cent interest. The same bank shows a loan of the same amount in another part of Canada at 8 per cent interest, and another in still another part of Canada at 5 per cent. The next return I have here shows that on an amount between $250 and $1,000 this bank is charging 12 per cent on a loan for a period of three months made in one part of Canada while at another of their offices they are charging on a loan of the same amount for the same length of time, 5 per cent. They also show that at three different branches the rate was 10 per cent while at another it was 12 per cent. The next return shows a charge on notes for three months of 12, 11 and 10 per cent at offices located in western Canada, and at three offices in eastern Canada, on loans of the same amount, a rate of 5 per cent.


Thomas Vien: Will my hon. friend tell us
what were the securities offered for these loans?


George Gibson Coote: I am sorry, but the return
does not show the securities offered. I have no doubt that the security was all right, or they would not have made the loans.

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Mr. ROBICHAUD:: My hon. friend says
that loans of the same amount were made in one part of Canada at 12 per cent and in another part of Canada at 5 per cent. Were these loans made under similar circumstances?


George Gibson Coote: They are shown under the
same heading in the return. The return shows on the first line loans between $50 and $250; on the next line loans between $250 and $1,000; on the next line, loans between $1,000 and $25,000; on the next line, loans of $25,000 and over. The term of the loan is the same in most cases, or practically the same, and the amounts are the same. The next return shows the maximum rates of interest to be as follows:	Three at 10 per
cent; one at 8 per cent; and the minimum rates: Two at 5 per cent; two at 6 per cent. The next return shows that on loans of over $1,000 for three months a rate charged in a western office is 10 per cent while on the same amount in a town of eastern Canada its rate is 5 per cent. The next return shows a very fair comparative rate. It is 8 per cent in one case; the maximum rate in the next line is given at 7 per cent and the minimum as 6 per cent. I am glad to say that that is what we generally term a French bank. The next return shows loans running from 8 per cent down to 4J. per cent; all these loans are in Canada. It is shown that in Toronto they have money lent at 3 per cent, on overdraft. The next return shows loans ranging from 4 per cent in eastern Canada to 10 per cent in Manitoba. There is one item here which I hope the hon. member for Halifax will take note of: It is a loan of over $250 for a period of seven- months, on which the rate of interest was 13 per cent.


William Stevens Fielding: Is my hon. friend giving the averages in each case, or only in special cases? The return shows the average.


George Gibson Coote: I shall be glad to give the
averages too. The maximum rate is 13 per cent as shown in the return.


William Stevens Fielding: And the average?


George Gibson Coote: The average is 7.18.


William Stevens Fielding: That is not so bad.


George Gibson Coote: The minimum rate is 5 per cent.


Thomas Vien: May I ask whether the interest rates are given according to the territory in which the loan was made?


George Gibson Coote: The one I just quoted was
made at Three Hills, Alberta, and one of the same size was made at Winnipeg, at 5 per
[ Mr. Coote.l
cent. There were three in eastern Canada at 5 per cent. I may say here that I would be quite satisfied if the committee would set the maximum rate of interest at the average rate shown by these returns.
The next bank shows an average rate earned of 7.06 per cent and it shows loans at all the way from 5 to 10 per cent. I may say that some higher rates are shown here, but they are on loans for very short periods, and I have tried not to cite the figures for any loan of that kind. In the next return I find that the rate on a loan between $1,000 and $25,000 for a period of one month was 10 per cent, while several loans of the same amount were made elsewhere at 5J per cent. Now, these returns are pretty much alike, and I do not know that anything is to be gained by reading anything more from them. But I would like to give the average rate of interest shown in each of these returns. They are as follows: 7.27; 6.5; 7.39; 7.20; 7\; 7.06; 7.18; 6.596; 6.20; 7.57; 6.69; 7.17; 7; 6.8; 7.44.


Thomas Vien: Will my hon. friend admit
that the rate of interest varies according to the territory in which the loan is made and also according to the security offered? For instance, the rate of interest will be much smaller against government guarantees than against personal security. In a territory where the cost of management is very high owing to the small volume of business transacted, the rate of interest increases. Does my hon. friend object to the rate varying according to the cost of management and to the kind of security offered?


George Gibson Coote: That question is too complicated for me; I cannot answer it all at once. But my hon. friend asks whether the rate varies according to the security offered. I would simply tell him that we have to pay eight per cent interest on a loan against a victory bond. I do not know what better security than that could be offered. I do not see why in western Canada I cannot borrow money against a victory bond at seven per cent if it can be borrowed in eastern Canada at six per cent.


Mr. DUFF:: Sell the bonds.


George Gibson Coote: Well, I am afraid that next
year the bank might change its mind and not give me any credit, and I would then have to have the bonds to fall back on to keep the wolf from the door. If the members of this committee absolutely refuse to limit the rate of interest charged I want them to do it with their eyes open. I have shown something of the rate of interest charged by these banks, and now I should like to give the dividends some of them are earning.

Bank Act


Thomas Vien: Will my hon. friend say that
it is a general rule out west to charge eight per cent on a note secured by victory bonds as collateral, that that is the common practice?


George Gibson Coote: To the best of my knowledge in the small branches at any rate in western Canada-I do not know anything about the larger ones-there is no money loaned on the security of victory bonds at anything less than eight per cent, and in addition to that you cannot usually borrow for more than three months. I do not know if they feel that the bond is liable to be no good at the end of three months or not.
I have here a little circular put out by Aemilius Jarvis Company regarding bank stocks and recommending the purchase ot these stocks as a good investment. The first bank which appears on this circular is the Bank of Nova Scotia. It shows profits amounting to $2,000,000 odd earned in 1922 after making provision for everything. During the seven year period from 1916 to 1922, its earnings averaged 20-49 per cent per annum on the capital stock. I should say in all fairness that this is the highest rate of dividend paid by any chartered bank. Dividends of 10 per cent per annum were paid from 1903 to 1905 inclusive.


William Stevens Fielding: And it has the highest
reserve of any bank.


George Gibson Coote: The rate of dividend has
steadily increased until now 16 per cent is being paid.


Mr. MARLER:: Is the hon. member aware that the Bank of Nova Scotia has a larger reserve than its capital, and that the earning power of its capital represents also what its reserve earns? It means that as regards the whole capital and reserve the earning power is very likely to be not more than eight per cent. I think my hon. friend does not mean to be unfair.


George Gibson Coote: I do not wish to be unfair
at all, but I would point out right here what a splendid opportunity there is for a bank in Canada that is managed properly when the Bank of Nova Scotia can show such a result. I think the Bank of Nova Scotia has been the best managed bank in Canada for a great many years. It just shows the possible earning power if the bank is properly managed.


Herbert Meredith Marler: Is the hon. gentleman also aware that the Bank of Nova Scotia's reserve has been built up by sale of stock at a premium? I only throw out these suggestions.
263J


George Gibson Coote: I will admit what the hon, member says. A part of its reserve is built up out of premiums on sale of stock, but the whole reserve was not built up from that. If the bank had not been making splendid earnings there would have been no premium on the stock. There is no reason why some of the other banks in Canada should not show just as good a record as the Bank of Nova Scotia, if they had been just a little more careful of the loans which they made. Just so that the members of the committee will not run away with the idea that that is the only bank in Canada making good profits 1 will take one or two others. Here are the figures for the Dominion Bank. I have not looked to see what earnings they made but I am satisfied that the dividends will be large enough. Dividends at the rate of 12 per cent per annum have been paid each year from 1906 to 1922 and a bonus of 2 per cent was paid in the years 1913 and 1914, and 1 per cent in 1920, 1921 and 1922. During the past seven years the earnings on the capital stock averaged 17.56 annually. For the current year a dividend of 12 per cent per annum was paid, with a bonus of 1 per cent.
Now I will give one of the small banks, a bank which some years ago I believe was on the point of being merged with one of our other banks, but the Finance Minister, quite wisely I think, prevented that amalgamation. I refer to the Bank of Hamilton. The last financial statement shows that for the twelve months ending February 28, 1922, the bank showed a net profit of $850,672. Its earnings for that year were at the rate of 17.01 per cent on the capital stock, while the earnings for the past ten years have been in excess of 17.30 per cent. The bank's dividend record shows 10 per cent per annum paid from 1905 to 1910 inclusive, 11 per cent per annum in 1911 and 1912, and 12 per cent per annum from 1913 to 1922 inclusive. The current dividend rate is 12 per cent per annum.
I will simply quote one more and that is the Royal, one of the large banks. Its earnings last year were equivalent to 16.95 per cent on the capital stock, while for the eight-year period from 1915 to 1922 its earnings averaged 18.80 per cent annually. At the present time the balance to the credit of profit and loss account is $1,007,514. The current rate of dividend is 12 per cent per annum with a bonus of 2 per cent. I want to remark right here that the men in whose interests we are asking for a limitation of the rate of interest are not paying dividends on their business, neither dividends nor bonus. Furthermore, I would like to point out to the government particularly that they are spend-
412"
Bank Act

ing something like $3,000,000 this year on an immigration policy, and the larger part of it is to be devoted to bringing farmers to this country. Most of these farmers will need a little banking accommodation, and I am sure that in the lands from which they come they have not been paying 13 per cent interest. When they want a little banking accommodation in this country and are asked to pay that rate there will be as much dissatisfaction among them as among the Hebrideans whose case we discussed in the House a few days ago.
There is one other thing I would like to mention as a justification for limiting the rate of interest charged by the banks, and that is that they have a very special privilege granted to them in being able to issue notes. That is a privilege which other corporations or private parties who may charge a higher rate of interest do not have and surely we have a right to expect some return from the banks for this very special privilege. The hon. member for Halifax referred to the statement of Mr. Powell of the Weyburn Security Bank that if the rate of interest were limited to 7 per cent they would go out of business. I want to say that a great many farmers in western Canada, I think the majority of them, would come to this House if they had the opportunity and tell hon. members that at the present prices they receive for their products 'and the present cost of production, if they have to pay more than 7 per cent they will go out of business. It may be a case of choosing whether you want banks or whether you want farmers in western Canada. I do not think the banks will produce anything that will furnish traffic for the railroads to enable them to earn the dividends of which we have heard so much, but the farmers, if they are considered in this matter, will produce something for these railroads to haul. I think in this House we should try to be fair to all parties.
The general manager of the Bank of Commerce, Sir John Aird, when he was before the Banking committee when this very subject was under discussion-I think that was the time-gave as one excuse for the high rates of interest which they charged in the West the high cost of doing business there. And one of the reasons which he gave for their high cost of operation was that they had opened branches in western Canada to provide positions for returned men. Now, Mr. Chairman, I want to put this up to the members of the committee very squarely: Is it a fair proposition to place upon the producers in western Canada this task of furnishing positions for returned men? If the

banks want to furnish positions for these returned men, and I think they should, they might do it in some other part of the country that can stand the expense better than western Canada can.
The banks in western Canada are charging this high rate of interest because of the mad rush of the banks there to establish branches. In the year 1919 there were approximately 900 branch banks opened in Canada. Does any hon. member of this committee think that the banks were justified in opening that number of new branches? I have not the figures here, and I am sorry that I have not, showing the increase in population in Canada in that year. I do not think it was very great, and I cannot for the life of me see that there was any good reason for the opening of 900 branches in the Dominion in that year. Why the banks, should attempt to saddle on the people the result of their own-I think I may say-foolish action in this case is more than I can "understand. I maintain, Mr. Chairman, that if the majority of our Canadian banks had been as well managed as they should have been-as well managed for instance as the Bank of Nova Scotia-they would all be able to return a very handsome dividend if the maximum rate of interest they were allowed to charge had been 7 per cent.
Now, in connection with the expenses which the banks have in western Canada I want to show how they spend some of their money. I have here "A Farm News Letter" issued by the Canadian Bank of Commerce. It tells "How to grow sweet clover." "When to sow vegetables," "Managing a dairy herd," "Experience with Siberian alfalfa," and "Improved method of summer fallow." There is an article on "The Olds School of Agriculture" and another on "Why a bank charges commission when cashing an out-of-town cheque." It does seem to me rather a serious reflection on the Minister of Agriculture. Some may think the minister is not doing his duty, but I want to say right away that possibly the Bank of Commerce is in error. I think the Minister of Agriculture is keeping the people well supplied with these publications, and their issue by the Bank of Commerce is an error in judgment on the part of that institution. An hon. member suggests to me that possibly the minister and the Bank of Commerce have been in consultation. Well, perhaps so, co-operation is a fine thing; and if they are going to continue issuing these pamphlets they would do well to consult with each other so that there will not be needless duplication. To use an expression which, I

Bank Act
think ,was used last session, they should "synchronize" their efforts.
Now, Mr. Chairman, this is only one of the many publications which some of our banks in Canada are issuing. I should like to see some limitation on the rate of interest if for no other reason than to stop the banks from publishing so much information gratis. The people of this country are burdened with advice. If the farmers read all these pamphlets, circulars, and publications of one kind and another that come to them I am afraid they would not have time to get their work done. I really think the Bank of Commerce would show better judgment if they would cease the publication of their "Farm News Letter," and a great deal of other literature which they circulate among the public free of charge. They issue every year what I think they call a year book; they issue an annual statement containing a very carefully prepared address by the general manager, and I think, by the president. They issue, I think, a weekly commercial letter and several other publications. The Bank of Commerce is not the only bank which pursues this practice, but I just happened to have its publications in my possession to-night. I hope no hon. member will think I am reflecting on the Bank of Commerce particularly, but I happen to know more about its publications-at any rate more of them come to me. I think, Mr. Chairman, if our banks were managed even as efficiently as our farms they could operate and do so very safely and get a very handsome return on a maximum rate of 7 per cent.
Now, I am sure the statement, made, I think by the hon. member for Halifax (Mr. Maclean), that the rate of interest on money loaned was regulated by the law of supply and demand-is not borne out by the facts of the case because away back in 1906, I think, or 1907, I can remember that the rate of interest, in the locality where I live at any rate, was exactly the same as it was two or three years ago when the banks were urging us to borrow money. In 1907,-or was it 1908?-the banks said that money was very tight, but as I remember it the rate of interest was just the same as it is now.
In regard to what the hon. member for Halifax said about competition, regulating the rate of interest I want to quote if I shall not be wearying the committee by talking at too great a length,-I do not want to do that,-a little from the report of Professor McGibbon which will enable my hon. friend to see how much competition there is between the banks. I will select the particular part which I want so that I will not make the quotation too lengthy. There was before Professor McGibbon the superintendent of the Alberta branches of the Bank of Commerce and towards the close of the evidence the report says:
A. That arose there perhaps from the fact that some clerk, to save him trouble, found it easier to put it through that way.
He is referring to the practice of discounting as opposed to the practice of charging interest.
These are checked up by our auditors every year and if they find that it has been done they draw attention to it. The desire is to maintain a uniform practice.
Then this question by Professor McGibbon:
Q. Going back to the Winnipeg arrangement, there was a general understanding?
A. I would not say that. On that question you cited you have the evidence of a bank manager and (at) another point that all the time he was stationed there he never discounted a farmer's note.
Q. It was an understanding as far as you were concerned ?
A. So far as we were concerned we decided it was a wrong practice to depart from the old custom.
Q. You discussed it?
A. We discussed it with the other banks, Yes. Those things come up at the meeting of the men interested in that business the same as in any other business.
Q. And the bankers naturally discuss very-discussed various aspects of that with a view to deciding upon a general policy?
A. Yes, that I presume was the purpose of the Canadian Bankers' Association.
Q. I understood it was a meeting in Winnipeg, it was the Canadian Bankers' Association was it?
A. No, but I say that w*as the purpose. No doubt the purpose of the (for which) Canadian Banker's Association was organized. There is a subsection of the organization in Winnipeg.
Q. And it was in that section that it was discussed?
A. Yes, I think so.
Then over on the next page the evidence of the supervisor of the Royal Bank for Alberta, who was being examined by this commissioner, is given. The question put was:
Q. Now, with regard to the compounding of interest, do you consider that equally vital to a review of the loan?
A. In our institution it is founded on practice entirely, it has never been objected to by a very large proportion of our desirable farmers.
Q. And in a general way you actively began to insist upon that within the last year or year and a half?
A. Yes, in a general way as the result of the understanding.
It goes on to state that the effect of the agreement is to impose a higher rate of charges on the clients of the bank. Now, as the result of a good number of years' experience
Bank Act

in western Canada, I make the statement that there is very little competition among the banks in the matter of interest. There is some competition in service, of course. For instance, the banks like to get your business if your account is good, but they endeavour to secure it through courtesy and attention, just the same as one grocer hopes to attract, by means of a better service, the custom that goes to his rival. I do not think there is anything new in the statement I am making, that there is no competition among the banks so far as the rate of interest is concerned. As a matter of history you can find the same thing stated in the evidence of Mr. McLeod before the banking committee ten years ago.
Now, I think I have taken up about all the time I should, but I trust that at least I have given the committee some information of which it was not possessed before. It may well be, of course, that I have not; but in that event I should be disappointed. Before I sit down however I want to read to hon. members some of the rates of interest paid by our banks last year, which of course was, we are told, a bad year for every one, banks included. The lowest rate of dividend paid was 6 per cent; then I find two at 7 per cent; one at 8 per cent; one at 9 per cent; two at ten per cent; 7 at 12 per cent; one at 14 per cent; and, I think, 1 at 16 per cent.


Alexander Kenneth Maclean: When the hon. member finds bank stock paying 12 per cent -and I have in mind one that does pay that rate-he must bear in mind that in a good many cases the shares are worth $200 each, and that much and more in some cases was paid for such shares so that a dividend of 14 per cent would as a matter of fact be only 7 per cent. It is not fair for the hon. member to put the statement in the way he has submitted it to the committee without a further explanation.


George Gibson Coote: The present market price of Bank of Commerce stock is $199, yielding 6-53 per cent; the present price of Royal Bank stock is $218, yielding about 6-42 per cent; the present market price of Bank of Hamilton stock is $170, yielding 7-06 per cent; the price of Imperial Bank stock is $188, yielding about 6-91 per cent; the price of Standard Bank Is $212, yielding 6-60 per cent; Dominion Bank is $200, yielding 61 per cent; the price of Bank of Montreal stock is $240, yielding 5-83 per cent. I am simply trying to show the splendid earnings which these banks in Canada have made, indicating the sound position

they are in. I am sure that if our banks were carefully managed, so that they did not incur the loss of so many million dollars, as was shown in the oase of the Merchants Bank and some other banks that I will not mention-some of these losses having been incurred outside Canada-they could return a very good rate of interest even at the present market price of these stocks, and even if they were limited to 7 per cent.


Thomas Vien: Does the hon. member think that the Canadian banks can do better in Canada than the United States banks can do over there? And does he think that we should limit the Canadian banks to 7 per cent when the Federal Reserve Bank of the United States charges from 6 to 10 per cent interest, according to the districts in which they do business?


George Gibson Coote: I am not aware that the Federal Reserve Bank is charging 10 per cent. I am sorry I have not the information here but the statement was sent to me a few days ago by a man-


Thomas Vien: The hon. member was in the committee when the documents were read and when that particular information was given.


George Gibson Coote: I do not remember these figures having been given to the committee; if they were they must have been wrong, because I am informed by an hon. member that that bank is limited by statute to 7 per cent.


Thomas Vien: I would remind the hon. member that when the hon. member for Vancouver spoke on the question of interest he gave the rates charged by the Federal Reserve Bank in the United States, varying from 6 to 10 per cent according to the district.


Leon Johnson Ladner: The hon. member was mistaken.


Some hon. MEMBERS:: Hear, hear.


Leon Johnson Ladner: The maximum rate is 7 per cent.


Thomas Vien: When I referred to the membei for Vancouver I had in mind the hon. member for Vancouver Centre (Mr. Stevens).


George Gibson Coote: I assure the committee I am glad to have the support of my hon. friend trom Vancouver South (Mr. Ladner).


Henry Herbert Stevens: With the permission of the hon. member I may straighten this little dispute because it is really of importance. The document I quoted from was the Federal

Bank Act
Reserve report for April of this year; if I remember rightly it was dated April 15th. It gave the rates of interest charged in some 12 or 15 leading American cities, ranging from (5 per cent to 10 per cent. These were the . rates charged by the commercial banks of the country throughout the United States for prime commercial paper.


George Gibson Coote: Is the hon. member stating that 10 per cent was charged by the Federal Reserve Bank?


Henry Herbert Stevens: I thought I had made it plain. I said that these were, the rates charged by the commercial banks of the United States for prime commercial paper.


George Gibson Coote: Possibly we have it straight now. I move in amendment that subsection l of section 91 be struck out and the following Mibstituted therefor:
(1)	The bank may stipulate for, take, reserve, or exact any rate of interest or discount but not exceeding 8 per cent per annum and may receive and take in advance any set rate.
(2)	The rate of interest or discount charged by the bank shall appear on the face of the note, bill or other evidence of debt.
(3)	In the event that a greater rate than 8 per *cent per annum has been paid to the Bank, then the person by whom it has been paid or his legal representative, may recover in any court the excess interest thus paid, provided such action is commenced within two years from the time such excess interest was paid.
(4)	In any suit, action or other proceeding concerning a bank loan wherein it is alleged that the amount [DOT]of interest paid or claimed exceeds the rate of eight per centum per annum, the court may reopen the transaction and take an account between the parties, and may, notwithstanding any statement of settlement of account, or any contract purporting to close previous dealings and create a new obligation, reopen any account already taken between the parties, and relieve the person under obligation to pay from payment of any sum in excess of the legal rate of interest and if any such excess has been paid, or allowed in account, by the debtor, may order the bank to repay it, and may set aside either wholly or in part, or revise, or alter, any security given in respect of the transaction.
The latter part of the amendment is the same as that moved by the hon. member for Calgary West (Mr. Shaw). I hope this amendment will receive the support of the committee. Surely we have met any-reasonable objections which hon. members might have to the amendment which was moved previously. I think most hon. members will admit that 8 per cent is the limit which any man should pay if he has security to entitle him to a loan. If he is not entitled to a loan on account of the security which he has to offer unless he is willing to pay 12 or 13 per cent, I feel exactly like Professor McGibbon who said in his report that it would be better
for that man if he did not get a loan. I hope that this amendment will meet a better fate than the one moved by the hon. member for Calgary West.


William Irvine: Before we enter upon a discussion of the new amendment, I would like to ask the Minister of Finance if it is his intention that we should sit as late as we did last night. It is now nearly midnight, and I should like to ask if the intention is to keep the committee in session for an indefinite time?


William Stevens Fielding: My hon. friend is mistaken. We have not been keeping the House in session.


William Irvine: Then I move that the Chairman do now leave the chair.


William Stevens Fielding: All right. That motion is always in order.
Motion (Mr. Irvine) negatived.


Edward Joseph Garland: Possibly the hon. member for Macleod (Mr. Coote) was under the impression that if we raised the ante one point, the committee might consider his amendment more favourably, and I have no doubt in the world that if someone would move that the rate of interest should be raised to 25 per cent, everybody on the opposite side of the House
12 m. would vote in favour of that. May I, however, before opening my remarks on the amendment, express my regret that the Minister of Finance cannot see his way to accede to the request of the hon. member for Calgary East (Mr. Irvine) to allow this debate to continue to-morrow? You will have noted that to-day every facility has been given on this side of the House, until this very important clause came up, to the passage of amendments as well as clauses. We have progressed very well, as well as we have done on any other important bill, and again I say that it is with regret that I find myself compelled to continue debating this clause at this late hour. As far as observation can show me, it is practically futile for any hon. member in this corner of the House to try to present arguments, good, bad or indifferent, that will have any influence whatever on hon. members, both opposite and to my right. To some extent their position may be governed-I do not say that it is, but it is a probability-by the extraordinary attitude of a part of the press. For example I find in the Standard of Montreal a long editorial, rather scurrilous in character, dealing with the Bank Act. It is headed: "Put the Bank Act through." And it ends up with this
Bank Act

paragraph. Hon. members are entitled to know this if they have not already read it, and I am surprised that some of the hon. members in either of the two historic parties have not taken exception to it.


Charles Marcil: I do not think the hon. member
would be in order to read a newspaper extract discrediting or written in a manner to discredit the proceedings of this House.


Edward Joseph Garland: It is not discrediting to those who adhere to partisanship. The editorial-and I need not read it; I can give the important part very briefly to you-ends up with a paragraph somewhat to this effect, that now is the time for the two historic parties to bury the hatchet and to unite in order to force through the Bank Act at this session. It is sad to say that there are only too many of such editorials and such articles appearing in the free press of Canada at this time.


George Gibson Coote: Get them to unite and
bring down the rate of interest.


Edward Joseph Garland: Hopeless.
This question of interest rates is, without doubt, the most vital one facing western Canada to-day. Because of a series of bad years in places, because of low prices for the crops that were raised in other places, because of a general process of deflation involving live stock, grain and other produce of all kinds, because, to a large extent, of the Fordney tariff practically prohibiting the entry of cattle from Canada into the United States, because of the tariff which this country has imposed and which bears heavily upon the people of western Canada, because of the high transportation rates and combines, but especially because of high interest rates, the condition of the farmers of western Canada is reduced to a state of almost insolvency. You find to-day by far the greater majority of the farmers of western Canada carrying great accumulated amounts of debt, upon which they are paying interest rates that have been increasing during the last two years and that are now at a point that the farmers cannot continue to pay them and stay in the farming business. AVhat is the use of filling up that country with immigrants if they cannot live when they come there? We cannot contend that this is not a national question, and it is a sad sight to me to see hon. members opposite dealing with the matter in the most perfunctory manner, disregarding every argument brought to bear on it from this side. It seems utterly useless to endeavour to influence their minds in this matter, and we 
have no hope of being able to. Hon. members have no proposals before the committee for a rural credit scheme, and I venture to say that it is impossible that they will have one at this session. Therefore, there is no hope. We will come back next year-at least some may; we cannot tell what may happen -and there may be another discussion, but we have no guarantee that there will be a discussion of this question.
May I for a moment endeavour to intimate to hon. members who will listen- and some ought to listen-the manner m which loans are taken out in western Canada? A farmer may happen to require a loan in the spring to carry on the year's farming operations. He goes to the bank manager, and he makes out a statement. He states to him every asset he has, the amount of the stock and its value, the amount of the improvements and their value, the amount of his land and its value, and if he does not own it all, his equity in the land, the number of buildings he has and so on. In short he gives him a regular bank statement of all his assets. The bank manager will then say to him: "I will refer this matter to the office at Calgary"-or Saskatoon or Winnipeg, as the case may be-"and I will let you know the result in a week or ten days." At the end of that time the fanner goes in, and if he. is very fortunate, the manager extends the loan at a rate of eight per cent. That is the general procedure until, as I say, recent years. With the rate of eight per cent the farmer is about to leave satisfied, but on reading the note he discovers that it is made out for three months and he tells the manager that he cannot pay it in three months; that that will be in the midst of his summer operations, *and he will have nothing to sell at that time of the year. The reply is that that is a mere formality, and that the farmer can come in at the end of the three months and renew the note. At the end of three months the farmer goes back to have that note renewed, and the bank manager generally informs him that unfortunately, conditions are not as good as they were when he issued the note, or he gives some other excuse. He may say that money is tightening. He has got to call in the loan. If the farmer cannot pay now he is told, "Well, we will renew the loan all right, but you will have to give us additional security and perhaps an increased rate of interest or both." However, it has not been the general practice of the banks to increase the rate of interest until the end of the year. At that time, if it has been impossible for the farmer to pay his full indebtedness-and I may say that owing to present conditions

Bank Act
there have been very few who have been able to pay their debts in full in western Canada-the procedure is to increase the rate of interest and, whenever possible, obtain all additional security.
The banks go further. If the farmer has any liquid assets, such as live stock, then, disregarding entirely market conditions, he is absolutely obliged to put them up for sale. My constituency is about 12,000 square miles in area and is situated in the most densely populated portion of Alberta. My hon. friend from Battle River (Mr. Spencer) represents a constituency which runs into the north country and is entirely a mixed farming district. The southern half of my constituency happens to be devoted to grain growing entirely, but the northern portion is like that of my friend from Battle River a mixed farming district. We sent out a questionnaire to our constituents some time ago, and the answers we received indicate that wherever stock-raising was engaged in a few years ago the banks encouraged the farmers to purchase more stock. I can give the committee my own practical experience in this respect. I happened to attend a stock sale at the Pat Burns Imperial ranch at Rumsey a few years ago and the manager of the local bank was also present. As a matter of fact he was sitting on the top rail of the corral beside me. I happened to have plenty of feed that year and I said to him, "Do you think this stock would be a safe investment?" He said, "You cannot make any mistake in such an investment." I asked him, "Will you advance me the necessary money to purchase some of this stock if you think it is all right?" "Certainly," he said, "you can have as much credit as is necessary to stock your farm." I accepted the offer and was encouraged to purchase stock at $75 to $85 a head. I admit that I should not have been so foolish, but I took it for granted that the bank manager knew conditions, and so I followed his advice. That kind of advice has been followed unfortunately by all too many farmers in western Canada. Credit has also been urged upon them by a system of propaganda something like this:	Do not put
all your eggs into one basket-go in for mixed farming-if you want to go in for hogs come and see your branch manager-if you want to go in for cattle come and see your branch manager-we advise you to go into dairying, see your bank manager. We were encouraged, we went to see our bank manager, and as a result we invested in these things-many of us to our great regret. After having held that live stock for two or three years the market, as you know, fell to pieces when the Fordney tariff was put into effect. But no mercy was
shown by the banks. Our stock was there, our productive capacity was there, but owing to causes over which we had no control the price of cattle broke badly. Did the banks of western Canada help the farmers to tide over that period? Did they say to us, "We will not press you, we will help you to carry on until conditions improve and you can find a market for your stock?" I mentioned to one bank manager the possibility of the removal of the British embargo on cattle. He laughed at me and said, "That is simply a political football; it will never be removed." And the farmers were forced to sell their cattle. I use the word "forced" advisedly. A farmer who had a poor crop and could get little or nothing for it was compelled to sell his other liquid assets to meet his bank loan. In many cases after such forced sales the farmers still owed money to the banks. Many of these farmers had to give additional mortgages at 9 per cent. At the present time I am paying 9 per cent on a ten-year mortgage.
We cannot any longer pay that rate either to the mortgage companies or to the banks, and if this committee does not take some steps to restrict the profiteering banks I cannot without hesitation tell hon. members what will happen. Certainly I hate to think of the future condition of western Canada. After all, this is a national question. Our prosperity out there will influence conditions in the East. If we ever get out of this morass of debt, not only will the country generally be improved immensely through productive development by hopeful farmers, but this prosperity will have a reflex effect on the business of eastern Canda. If hon. members will discuss the present situation with any business men in this city, they will be answered as I was answered the other day. I asked one business man what he thought were the prospects for the fall trade, and he replied, "They do not look good." But I said, "We are going to have a good crop in western Canada this year." He said, "Yes, but I am afraid you cannot pay your debts." And it was only too true.
Now, Mr. Chairman, I wish to place on record one or two examples, not at great length, of the oppressive character of banking practice in western Canada. This is a letter concluding answers to the questionnaire received from Mr. C- A. Wynn of Carmangay, Alberta, and is typical. He writes:
This particular district was settled up by people from eastern Canada and the States some eighteen years ago. They have built up comfortable homes here only to find themselves faced with the situation where it will take practically all their crop to pay the interest on their loans. So for this reason quite a num-
Bank Act

ber are contemplating leaving the country almost at once, crop or no crop, unless there is some relief in sight.
Here are a few of the questions set out on the questionnaire with the answers received :
14.	Has your bank requested payment of their clients' liabilities in full with the promise of extension of credit?
A. Yes.
15.	Has your bank ever broken its promise to reissue credit as per previous question?
A. Yes.
16.	If so, in about what percentage of cases?
A. Could not say definitely, but perhaps 25 per cent.
1 think, Mr. Chairman, that those bankers who may read some part of these proceedings would be well advised to take to heart this admonition: Do not encourage or permit local branch managers to urge a farmer to liquidate a debt regardless of cost at the end of the year on the promise of a renewal of credit for the coming years' operations unless the bank is willing to extend the line of credit. Only too many cases have arisen where the banker has encouraged liquidation at all costs and promised a renewal of credit, but has afterward broken his pledge. That is not going to improve conditions in western Canada, nor is it going to increase the confidence of our farmers in the banking system.
Touching briefly on the answers to the questionnaire I sent out, I would say that the term of a note to the farmer in western Canada is three months. Hon. members can well undestand that that is altogether too short. The interest charge in all districts is never lower than 8 per cent, and in most of the 12,000 square miles-and my hon. friend from Battle River has exactly similar answers covering another 12,000 square miles corroborating in every degree the answers I have received from the southern part of the province-it is 8 per cent compounded, or over. Now, that situation cannot continue. In by far the great majority of cases, all notes are discounted, at time of issue. But it is not a constant practice; there are a few cases reported where a farmer, observing that the hanker is discounting the note at the time of issue protests so vigorously that the banker has been known not to insist on the discount. But too few farmers have the courage to insist, and I do not know whether they would be successful if they insisted as a whole.
Every one of these reports-and I have roughly one hundred of them-indicates that it is impossible under present conditions in western Canada to carry on at 8 per cent or over. A large number of these reports deal with caveats filed by the bank against grain, f.Mr. E. J. Garland.]
so that as soon as a farmer has hauled his grain to the elevator the elevator company makes the cash ticket out to the bank instead of to the farmer. I do not know whether in most of these oases there was collusion with the elevator companies, but I had a letter from Mr. H. W. Leonard, secretary of the Constituency Association at Tudor, Alberta, near Rockyford, in which he stated that an attempt had been made by the bank manager there-I believe it was the Bank of Commerce-to get the elevators to act as collectors for the banks last year at harvest time when the grain was coming in; but fortunately the elevators refused to act. The depletion of the population due to the condition out there is so appalling that I hesitate to give the facts to the committee. But reverting for a moment to the question of interest rates, may I say that in respect to those 12,000 square miles I have received reports from twenty-seven large districts in which the interest is 8 per cent compounded, 9 per cent, 10 per cent, and, in some eases 12 per cent. For example, in the district ol Morrin notes are issued compounded every three months at 8 per cent. In the district of Craigmyle, the rate is 9 per cent, Royal Bank; Big Valley, 9 per cent, Royal Bank and Imperial Bank; Delia, 9 per cent, Bank of Montreal and Bank of Commerce; Hanna, from 8 to 10 per cent and in some cases 12 per cent, Bank of Toronto, Bank of Commerce, Union Bank. In the district of Pa'T the average is 9 per cenh-and by the way, in case a question may be asked me, I would inform the hon. senior member for Halifax that these are averages; they are not isolated instances. The average at Parr is 9 per cent; that is the average for the whole district. At Richdale, it is 10 per cent, Bank of Toronto; at Gleichen, 8 per cent, Bank of Commerce and Royal Bank; at Sunnynook, 8 per cent, Union Bank and Bank of Toronto; at Pandora, 9 per cent, Bank of Toronto; Lonebutte, 9 per cent, Union Bank and Bank of Commerce; Carolside, 9 per cent, Union Bank and Bank of Toronto; Cessford, 10 per cent, Bank of Toronto; Clivale, 8 and 9 per cent, Bank of Commerce and Union Bank; Halb'-day, 9 per cent, Union Bank; Carmangay, 8 per cent, Bank of Commerce; Vulcan, 9 per cent, Bank of Hamilton, and so on. That will give hon. members a fairly accurate idea of the situation there and the rates of interest we have been charged. The hon. senior member for Halifax refers to the costs of operating branch banks, of the expansion of operations of the banks, as one of the causes for the higher rates of interest in the West.

Bank Act
May I remind him in that connection that efforts were made in the committee on Banking and Commerce to recall the bankers in order to ask them specifically for that information. We had no evidence before the committee on Banking and Commerce that would justify the hon. member for Halifax in making that statement-not one tittle of evidence to that effect was adduced. We had simply the bald statements of two bankers, but no evidence. We made an effort to secure that evidence, but the request was refused by the committee; we who asked for it were voted down.
I need not deal further with the question of competition; it has been gone into ver. fully by the hon. member for Macleod (Mr. Coote). But I would like to touch on the other aspect of the western Canadian banking conditions that have led to high interest rates, and ask the question, is it our fault, or is it the banks' fault? I wish to quote from page 88 of a book bj' Mr. William Long Baker entitled "Money Monopoly vs. the Community Dollar." Mr. Baker was formerly supervisor of branches for the Standard Bank of Canada, but he left that position to endeavour to form and secure a charter for a commonwealth bank in this country. He says:
It was remarked at the beginning of the preceding chapter that while the banks act in concert in matters furthering their own interests, such as interest rate, legislation and all subjects and phases likely to culminate in organized opposition, yet they are engaged with one another in a struggle for supremacy in business and we have seen a contest between two banks for leading place as Canada's greatest bank. Every bank is trying to show larger totals, larger business than its class competitor. This has led to one of the most insane practices imaginable, that of opening branches where they are not required.
Now, that is only too true, I will not delay the committee in going into the aspect of the question, Mr. Chairman, but you have heard the statements of hon. members around me. The hon. member for Kindersley (Mr. Carmichael) dealt with that point; he mentioned High River as an example, as well as some other towns. I could mention dozens of places where two or more banks are operating but where there is not business enough for one. I quote further from Mr. Baker's work:
It seems hardly possible that men who preach economy, efficiency and avoidance of unnecessary expansion-
And that is the advice we have from bankers.
-would themselves practise the very reverse. Two banks have been known to open their offices in a village on the same day, in fact this may be said to be a common occurrence. Bank A and Bank B may
each have a branch at X. A few miles away is a small fanning locality where Bank A has deposits of $100,000 lodged at their X office. Bank B conceives the idea of opening a branch at the smaller locality and Bank A jumps in immediately to protect its business. There is not enough business to warrant one branch but the fight for business, no, for deposits, goes on, at the expense of the public, and at the expense of derks who eke out a bare existence on half pay. An analysis of Canada's branches made some time ago, showed the following:
I would ask hon. members of the committee to listen to this statement of fact:
970 places		with		
515	"	" .	115	a	
3 "42	"	a	
4 "18	"	" 	
5 "16	"	
6 "6	II	" 	
7 "8	II	" 	
8 "3	"	" .	
9 "5	" .	
10 "1	"	" .	
11 "2	"	
12 "3	"	
13 "2	
14 "1	"	
17 "1	"	
18 "1	"	"	2	"	"	
24 "1	"	" .	
26 "1	
39 "1	
43 "1	"	" 	
45 "1	" .	
55 "1	" .	
82 "1	"	" .	
87 "1	"	" 	
220 "Of	the	branches located	in points where there
is only one bank, there are probably 300 which could be closed with profit to the bank and without serious inconvenience to the people.
I wish to support that statement.
Five hundred and fifteen offices at two-branch points-
" Two-branch points "-points where there are two branch banks.
-could be closed, as there are no towns with only two banks where one could not do the work. It is not necessary to deal with each class, but anyone may estimate that 1,600 branches could be closed releasing probably $7,000,000 or $8,000,000 of capital- and making an annual saving of $12,000,000. This would be allowing an average of less than $8,000 for salaries of manager and staff, rents and all incidental expenses. Additional staff might be required at many points to handle the increased business and there would naturally be some additional expense, but in the majority of cases it would be found that no extra staff would be required. Think of it! Wasting, we shall say, eight or ten million dollars each year in a race for supremacy, in a mad scramble for deposits while bank clerks live or try to live on starvation salaries.
That alone is not the whole story. Not only did they expand into these places where they are not needed, not only did they double and treble the number of branches at places where the business would justify but one, but they built as one hon. gentleman has said, the most expensive buildings in the town. They
Bank Act

fitted them with the most expensive furnishings, and filled them with the most luxurious flowers and ferns and creeping plants so that you enter a most gorgeous palace when you go into the bank, hat in hand, and go down on your knees to borrow money. When I came a homesteader to my present town nearly eighteen years ago, there was no bank, but there came to it two years later an assistant bank manager from a town in that district. He came up by train twice a week to a little shack about twelve by sixteen with a counter in it, and he performed all the functions of a bank in that district admirably. But that was not good enough. Just as soon as the bank could get around to it a contract for a store-shaped building was made and a large frame structure secured. Into it were placed most expensive fittings, with elaborate counters, swivel chairs and costly furniture of all kinds. But still that was not enough. Within eighteen years they had jumped from a shack to a one-storey frame shack, to a two-storey frame building with solid oak partitions *jetween the offices and the outer public hall and with a specially built floor, and as I said, the inside was festooned with green creeping things in order to harmonize with the green things that came in there to borrow money.
That is not an isolated case by any means, Mr. Chairman. It is a common everyday sight in the West. Sixteen miles to the south of that town there are two large banks, one of them a large two-storey brick building and the other an expensively-built frame building. One of these banks of half the size could accommodate all the business that is to be done in that town, but there you have two immense banks with all these expensive fittings. That is one of the reasons possibly why the rate of interest is so high. The other reason may be because it is necessary to pay the large and persistent dividends. That deals with the waste and extravagance, and that may be the answer to the manager of the Weyburn Security Bank and to Sir John Aird and all the others who told us they could not carry on in western Canada if the rate of interest was reduced to 7 or 8 per cent. Their argument holds no water. No evidence has been adduced by them in support of it. We asked for someone to come before the committee and give evidence as to the average cost of managing a bank in western Canada, and we did not get them before that committee.
I have one last suggestion to make. If the hon. members of this House do not see fit to pass the amendment offered now by the hon. member for Macleod I would ask them to be logical and strike out something that is useless. If you will not pass the amendment to

this section, strike the section out. It is a camouflage, or worse, a futile falsehood. It does not guarantee anything to anybody, but the section is in the act in order to give confidence to the people. "There is a rate of interest fixed in Canada, and the banks cannot charge any more than the legal rate," is the false message conveyed. That is an utter farce, Mr. Chairman. Why perpetuate it? Cut it out, and let us be honest with ourselves and with the people who borrow money from the banks of Canada.


Joseph Tweed Shaw: 
William Charles Good: I had expected yesterday to
speak at considerable length on this question of the interest rate, but I do not want to speak to-night and I do not think anybody here wants me to speak. I would think the Minister of Finance would be courteous to the House if he would permit it to adjourn the debate until to-morrow. If not, it simply means that he is exercising the power which he has to suppress discussion.


Some hon. MEMBERS:: Order.


Some hon. MEMBERS:: Go on.


William Charles Good: I do not propose, Mr. Chairman, to speak to-night under the circumstances. I simply give expression to this view that we ought after last night's experience to have a little chance of debating this matter to-morrow.


William Stevens Fielding: It is always possible for
a minority to insist that they are right and that everybody else is wrong. May I suggest to my hon. friend there is just a possibility that those who differ from him may be right. That is all.


William Charles Good: I am not questioning that at
all. I simply say that under the circumstances I do not feel justified in saying what I would under ordinary circumstances feel obligated to say.
Amendment negatived:	Yeas 24, Nays SO.


[Stage Direction]
Section agreed to.
Progress reported.
On motion of Mr. Mackenzie King the House adjourned at 12.35 a.m. (Wednesday).
Wednesday, June 20, 1923