1926-04-14

Mr. J. S. WOODSWORTH (Centre Winnipeg) :: Mr. Speaker, may we have the petition from the blind persons in the city of Winnipeg, presented yesterday read to the House?


Mr. SPEAKER:: The Examiner of Petitions has reported that the petition does not contain matter in breach of the privileges of the House, and it may be read by the Clerk of the House.
The petition was read, as follows:
To the honourable the House of Commons in parliament assembled:
The 18th day of January, A.D. 1926.
The petition of the undersigned blind persons representing themselves and other blind persons in the city of Winnipeg and throughout the province of Manitoba, humbly showeth:
1.	That among such blind persons there are a number who are aged and have no means whatever of their own and because of their age and blindness are absolutely incapable of maintaining themselves and their dependents.
2.	That there are among such blind persons a considerable number over fifty years of age who have no means of their own and are incapable because of their blindness to maintain themselves and their dependents.
3.	That there	are	in this province	a	considerable
number of blind persons fifty years of age or under without means who, because of their blindness, are unable to earn sufficient to maintain themselves and their dependents.
4.	That there	are	in this province	a	considerable
number of blind persons under fifty years of age who are without means of their own and who, by reason of their blindness and other disabilities, are absolutely incapable of earning anything whatever for the support of themselves and their dependents.
5.	That such blind persons being without and unable
to earn their own livelihood or support themselves and their dependents	are	either living in	dire	poverty orhave been and	are	dependent upon	the	charity of
others and as a result such unfortunate persons are finding it exceedingly difficult to live, and the lives of many are being considerably shortened.
6.	That different countries have enacted measures involving the expenditure of moneys for the purpose of maintaining the unfortunate, and are providing assistance in the form of old age pensions and mothers* allowances.
7.	That the obligation of the state to guarantee to. those of its unfortunate members who have become incapable of maintaining for themselves and their dependents a reasonable standard of living now appears to be generally recognized.
Your petitioners most respectfully therefore prayt That your honourable House will at once enact legislation which will provide for a system of pensiona to such blind persons in the Dominion of Canada who are incapable of maintaining themselves and their dependents, with the end in view of enabling such persons and their dependents to enjoy a reasonable standard of living.
And your petitioners will ever pray.



QUESTIONS

[Stage Direction]
(Questions answered orally are indicated by an asterisk.)

Mr. DELISLE:: 1.	Is Lt.-Colonel J. S. O'Meara, residing in the city of Quebec, in receipt of a government pension?
2.	If so, on what date was said pension granted and for what reason ?
3.	What does said pension amount to?


Hon. Mr. LAPOINTE:: 1. No.
2 and 3. Answered by No. 1.


QUESTION PASSED AS ORDER FOR RETURN
Mr. JONES:: What are the amounts of subsidy under each head, paid to each province of the Dominion in each year eince confederation?
241G
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UNOPPOSED MOTIONS FOR PAPERS
Mr. LUCAS:: For a return showing a list of the election officials, together with the amount of remuneration paid to each, and the kind of service performed, in the constituency of Athabaska.


PAYMENT OF ELECTION OFFICIALS IN ATHABASKA
William Thomas Lucas: For a copy of all correspondence, letters, telegrams, and other documents passing between the chief electoral officer and any other person or persons relative to the payment of election officials in the constituency of Athabaska.


RICHIBUCTO COLLECTOR OF CUSTOMS
Mr. DOUCET:: For a copy of all correspondence, reports and other documents, regarding the retirement of John D. McMinn as collector of Customs and Excise .of the port of Richibuoto, and his subsequent superannuation.


NATIONAL SYSTEM OF BANKING
James Shaver Woodsworth: That, in the opinion of this House, the time has come for the establishment of a national system of banking.
He said:	Mr. Speaker, last year I introduced a motion of similar purport to this though it was put in rather the negative form:
That, in the opinion of this House, it is not in the interests of the country at large that the privilege of .issuing currency and of controlling financial credit should be granted to private corporations.
In connection with my presentation of the case at that time I discussed at some length the accepted theory of money, and it is not my purpose to go over in any detail the ground covered then. However, since this is more or less a new House, I should like to outline very briefly the position then taken.
We have to-day three principal kinds of money: First, gold money, which is practically not in use in this country; second, money which we call bank note money, and third, cheque money. About ninety-six per cent of the entire business of Canada is carried on by means of the cheque system. The bankers are very hesitant about admitting that cheques constitute real money, for a reason that I shall give in a few minutes, but in classifying cheques as money I have the authority of no less a person than the Right Hon. Reginald McKenna who said:
Let me define the sense in which I shall use the word "money.1' I understand by it all currency in circulation among the public and all bank deposits drawable by cheque.
IMr. Jones.]
So that cheque money is just as much money as gold or bank notes. We come to the second point: What determines the value or purchasing power of money in this country, we will say of the individual dollar? I tried to point out last year that the accepted theory of the economists is that the value of money varies inversely to the quantity in circulation. As Professor Taussig in his Principles of Economics puts it:
Double the quantity of money, and, other things being equal, prices will be twice as high as before and the value of money one-half. Halve the quantity of money, and, other things being equal, prices will be one-half of w'hat they were before and the value of money double.
It then becomes obvious that those who control the quantity of money in circulation, whether of gold, bank notes or credit, control the value of all other things since all other things are measured in terms of money. The only way of increasing the quantity of gold is by digging it out of the earth. The quantity of bank notes may be increased by putting the printing presses to work, but either directly or indirectly the government control the quantity of bank note money in circulation. It is, however, an altogether different matter with credit money, which is, according to ,the Right Hon. Reginald McKenna, "bank deposits drawable by cheque." To a very large extent the control of the amount of this class of money that is in circulation is in the hands of the banks, and this without any supervision or regulation whatever by the government. In that sense then, it may be said that we have handed over to private corporations the right to make money or to destroy money. In the old days, what was termed "coining" was regarded as a most serious offence. It is still a serious offence as regards producing gold or subsidiary coins, but to-day we have actually turned over the privilege of the "coining" of the newer kinds of money to private corporations.	.
In my presentation of the case last year I ventured to summarize what seemed to me to be the privileges which, under our Bank Act, are granted to private corporations. First of all, to a considerable extent, banks control the savings of the people. This is a most important function. Second, they have the very important franchise of issuing currency, a franchise that incidentally brings considerable profit to themselves. But much more important than either of these is the control of credit which, as I said a few minutes ago, is almost entirely in the hands of the banks and without any regulation by any governmental authority. In the fourth place, private banks to a considerable extent do the financ-

ing for the government itself. This means that we have these private corporations placed in a position where they can practically dictate financial policy for the whole country. Through interlocking directorates, to which reference was made on the floor of this House during the time of the Bank Act revision, banks are able to have a very large control over other corporations, such as insurance companies, trust and loan companies, as well as commercial and industrial organizations. My conclusion of last year, therefore, is this:
My thought is not that we should attempt to break this monopoly that we have to-day, this money monopoly, but rather that in some way the people themselves should assume the direction or control of the monopoly, and use it not in the interests of a few but administer it in the interests of the whole of the people of Canada.
I am very glad to say that although the financial papers ridiculed my motion of last year a very considerable number of people throughout the country have endorsed the ideas which were therein put forth. At a meeting of the Farmers' Union of Canada held at Saskatoon on July 21 and 22, 1925, a long resolution was passed concluding as follows:
Therefore be it resolved that we, the Farmers' Union of Canada, in convention assembled, do hereby endorse the motion aforesaid moved by J. S. Woods-worth in the House of Commons, and call upon every citizen, irrespective of party, and in the general interest and welfare as we do ourselves hereby agree, to vote for only those federal nominees who will pledge themselves to support by voice, work and vote at Ottawa the principles embodied in the Woodsworth motion.
That organization of some 20,000 members has thus definitely placed itself behind the principles embodied in that motion. The organization may possibly not count for very much in certain circles in eastern Canada, but I can assure the House that the influence which it exerts in western Canada is by no means negligible. We have also along somewhat similar lines a resolution passed recently by the United Farmers of Alberta at their convention. It was recommended:
"That suitable steps be taken to establish and put into operation a central bank for Canada, the policy of this bank to be controlled by and in the interests of the people of Canada." The convention also urged upon the Alberta government the desirability of making a thorough investigation into the present system of financing, and if the principle is found feasible, that they "urge the Dominion government to pass legislation to make a change from our present system of financing to that of a treasury bill." The resolution described the present system as "a debt creating and not a debt paying system."-U.F.A., February 15, 1926.
Not only are the farmers' organizations taking action in this direction, 'but the fact is apparent that at least some of our businessmen are not quite so assured as they were two 14011-154
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or three years ago that our present Canadian banking system is the last word in financial efficiency. Let me quote a few paragraphs from the Petroleum and Mines Journal published in Vancouver. The following appears in its issue of July, 1925:
Federalizing of industries, state control of commercial institutions, or unique interference with the trade and commercial activities of a civilized people will not be conceded by any true economist.
Evidently this journal is not particularly socialistic in its outlook.
But there are certain institutions which statesmen in their vision do arrogate to the state, the right to monopolize. In Australia, railways, street car systems, telephones, telegraphs and post offices, know no private stockholders. The po3t office is in every country a monopoly of the state. The others are not always so. Of late the Australian federation has partially interfered in the banking system and converted the Post Office Savings Bank into a strong federal bank of issue. Grave suspicions are afloat that it as the thin edge of the wedge to monopolize the whole.
Again:
There are many who believe that the banking system of Canada lends no aid to the development of the country's latent resources, that the monopoly of the country's currency by private corporations is beneficial to traders in Belgian francs and Cuban sugar, victory bonds and shares, but of little use to the hardy pioneer of native development-that the system finances speculation but leaves the government to finance getting in the country's harvest. A system which lends itself to developing the native resources of the country-regardless of cost-indifferent to minor risks, uses the credit of the nation as its basis of finance is asked for-a system applied in the art of war but which stupid statesmen seem to think inapplicable to the arts of peace.
The author goes on to answer certain objections which had been raised to the effect that the federalization of the banking system would ruin the country while fraudulent politicians had influence. He says:
Dishonest administration is no answer to sound principles. The whole financial world recently financed on the credit of their respective nations and they are still carrying on business at the old stand. The money borrowed was not for production either. It was for destruction-not only for centuries of savings but of millions of human beings as well. Destruction financing is scientific, but production financing, no! This is the fetish of modern finance. To feed the living is unbusinesslike, but to kill-well! the money is forthcoming.
In this connection I want to give one other quotation from one who is, I think, more or less recognized as having the right to express opinions upon public questions. This statement, which is familiar to most of us, was made at the time of the recent election. I am not particularly concerned with ita political significance but I am interested in the statement itself. Sir Clifford Sifton said:
We are rapidly approaching that condition in which two, or at least three banks will be doing the whole

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of the business of the Dominion and you will have the spectacle of about three men sitting on the whole of the funds of the people of Canada, deposited in the banks, and deciding to whom they will loan these funds.
Sir Clifford Sifton does not seem to exercise the reserve which even a soap-box orator must cultivate, for he says:
If anything will justify armed rebellion against the established condition of affairs, I think such a consummation of our banking system is the one thing that would justify it.
He concludes:
I declare the fight in this election is not primarily about the tariff. The issue is monopoly or no monopoly: Monopoly of the money power, monopoly of transportation on laud, monopoly of transportation on sea, control of the government by half a dozen plutocrats in Montreal instead of the people.
Personally I do not care very much whether the plutocrats are located in Montreal or whether this is just a fractional fight between the plutocrats of Toronto and those of Montreal. The fact is that to-day our financing is undoubtedly becoming highly centralized.
Let me now refer to a statement made a few months ago before the Academy of Political Science by Professor W. Z. Ripley of Harvard. Ripley notes especially the divorce of property ownership from direct accountability for its prudent and efficient management and the assumption of irresponsible control by bankers. According to him these tendencies, because they enthrone the bankers, menace alike the welfare of private owners and of the working class, because the possession of uncontrolled power is always certain to entail abuse. I quote his exact words:
The present transformation is merely in respect of the seat of power. All kinds of private businesses are being bought up by banking houses and new corporations are being substituted in order that the purchase price (and more) may be recovered by the sale of shares to the general public. But the significant change is that the new stock that is thus sold is entirely bereft of any voting power, except in the case of bankruptcy.
So great is the opposition that is steadily growing to the banking monopoly that the Financial Post in its issue of January 8 of this year asks rather naively:
Will Canadian banks be forced to take steps to guide opinion?
The Financial Post apparently is oblivious to the fact that it became known to the whole country at the time of the revision of the Bank Act that the Bankers Association spent $100,000 in their effort to "guide opinion" -and they seemed to be able to guide it fairly effectively so far as the majority of the members of the Banking and Commerce committee was concerned.


Mr. McGIBBON:: If I might ask the hon. member a question:	Is the inference to be
drawn that the Bankers Association spent the money on the Banking and Commerce committee?


James Shaver Woodsworth: The inference to be drawn is that the Bankers Association spent $100,000 in connection with the revision of the Bank Act. I presume most of it was spent in retaining a large number of very highly priced lawyers whom we saw around the committee room throughout the whole time the Bank Act was under discussion.
I submit, Mr. Speaker, that only the federal authorities should be permitted to make or destroy money. Mr. McKenna, whom I have already quoted, said a year or so ago in an address to the Midland Bank shareholders:
I am afraid the ordinary citizen will not like to be told that the banka or the Bank of England can create
or destroy money.
The bankers are not anxious to have the public informed with regard to that matter. It is very true. In this country to a very large extent the private corporations have it in their own hands to make or destroy money.


Mr. CAHAN:: What does the hon. gentleman mean exactly by that?


James Shaver Woodsworth: I have already suggested my meaning. I shall be glad to elaborate it. I have said there were really three kinds of money to-day-gold money, banknote money, and money that is drawable by cheque.


Charles Hazlitt Cahan: And which of those do they destroy?


James Shaver Woodsworth: As I said, they do not destroy gold money, nor do they destroy bank-note money; but they do control the amount of credit,-


Charles Hazlitt Cahan: And do they destroy cheques?


James Shaver Woodsworth: -and in that way they have the power of creating or destroying money.


Charles Hazlitt Cahan: Will the hon. gentleman allow me? I can well understand that a cheque on a bank which is met by a credit is destroyed or becomes non-effective when it is paid; and possibly the manipulation of destroyed cheques may be in the hands of the bank or of the drawers of the cheques; but I ask:	How do banks destroy money by
paying cheques, or liquidating cheques, or by giving credit on cheques?

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James Shaver Woodsworth: Mr. Speaker, I am sure the hon. gentleman gives me credit for understanding a little bit more about money than would be suggested by his question.


Charles Hazlitt Cahan: I suggest to the hon. gentleman that he give us a little more credit than he seems to do in his explanation.


James Shaver Woodsworth: I am not suggesting at all the actual destruction or creation of the credit instruments as the way in which money itself is made or destroyed. What I am suggesting is that credit itself may be extended or contracted, and that the very expansion of credit-which we call inflation-or its contraction-which we call deflation-is in effect the making or the destroying of money.


Charles Hazlitt Cahan: May I ask another question?


James Shaver Woodsworth: Certainly.


Charles Hazlitt Cahan: When the credit of the country is enlarged every year for the purpose of transporting wheat from the west to foreign markets, does the expansion of that credit depress wheat prices or in any way destroy money?


James Shaver Woodsworth: No, because in that particular instance the larger amount of money is needed to do a particular work, and when that work is done the money is recalled; but that is not inflation.


Charles Hazlitt Cahan: May I ask another question? Is there any time in the history of banking when extensions of credit to merchants or manufacturers or others are not given for a particular purpose in commerce or manufacture or industry, whether growing fruit or wheat or producing any manufactured article?


James Shaver Woodsworth: Very often, as a
matter of fact, credit is so given. But I am not talking of the giving of credit in one particular instance, I am talking about enlarging the whole volume of credit.


Charles Hazlitt Cahan: The hon. gentleman must
admit that the total volume is always made up of particular instances.


James Shaver Woodsworth: 
Charles Hazlitt Cahan: If the hon. gentleman would allow another interruption-is there any other application to that case than that it is inopportune to go to sleep for some twenty or thirty years?


An hon. MEMBER:: Better not wake up!


James Shaver Woodsworth: I take it, Mr. Speaker, that even although a man should go to sleep for twenty or thirty years, if money is as stable as we have been informed it is, his money would be there when he awoke. That is the point. To-day his money has vanished. If money is as unstable as that, we need to know what group of people is sending money up or down in value. I should like to quote another paragraph for the benefit of my hon. friend from a pamphlet by Professor Irving Fisher entitled "Ethics in the Monetary System." This is along the very lines that he gave us before the Banking and Commerce committee three years ago. Professor Fisher altogether exonerates any individual from responsibility for the vanishing of these dollars, but he points out that the dollars do vanish and that the system is responsible.
The robber dollar does the stealing, the social injustice. The extent of this subtle robbing is prodigious. Professor W. I. King, one of the best statisticians I know, when appearing in favour of a bill in congress on this subject a year or so ago, said that as nearly as he could reckon it, there had been a sort of pocket-picking to the tune of forty billions of dollars in the United States during the last half dozen years. What would we in America do if we realized that fact to-day? Supposing there had been a forty billion dollar robbery, or a (tenth
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thereof, a four billion dollar robbery, such a robbery would be on the front page of every newspaper. And yet a forty billion dollar robbery, which you could not personify and localize, and which is due to our unstable monetary system, is something which as such we do not think anything about, because we do not realize it.


Charles Hazlitt Cahan: What is the date of that,
please? Mr. Fisher changes his opinion so frequently that one would like to know the date of that announcement.


James Shaver Woodsworth: The pamphlet is
not dated, but Mr. Fisher gave evidence of this character before the Banking and Commerce committee three years ago.


Charles Hazlitt Cahan: No man in America changes his opinion more frequently than does Professor Fisher.


James Shaver Woodsworth: I should like for a moment to refer to the question of the gold standard, simply because there are gentlemen in this House and throughout the country who still believe that it is the gold standard which gives something like stability to the value of our money. Let me again quote Mr. McKenna, the chairman of the Midland Bank. I do not know whether he changes his opinions, but he said:
A managed currency has been kept more stable than one based on gold.
But he remarks somewhat cynically:
So long as nine people ouit of ten in every country think the gold standard is the best, it is the best.
I should also like to quote the opinion of Mr. John A. Hobson on the gold standard, as published in The Nation of April 29, 1925:
Stability of the internal level of prices is to be achieved by a "managed money" independent of the vagaries of gold values.
And again:
It is at least significant that neither Britain nor America is regulating her money system on the previously accepted goto basis. Not only is gold no longer used for internal currency in either country but the credit issue and general volume of purchasing .powers are not regulated by relation to quantity of gold.
And again:
For experience and statistical research have made at evident that the old notion that quantity of gold regulated the total volume of money and so -the level of prices, by a reliable automatic operation, was never true, and that the acceptance of the falsehood was responsible for grave errors in banking policy reflected in needless fluctuations of prices and industrial activity'.


Charles Hazlitt Cahan: May I interrupt my hon. friend for a moment?


James Shaver Woodsworth: Just a moment.
Again Mr. Hobson says:
There is a new and strong argument that money can and should be managed by national financial

controls, with as much international co-operation as can be got, and that this control will involve, to a [DOT] constantly diminishing extent, the use of gold, either as a store of values or as a standard.
In quoting Mr. Hobson it mi^ht be well to give the following:
A protective policy which undertakes to stop payment, by adjusting the tariff to meet every cheapening of fore.gn goods seeking to enter the American market, removes the natural check upon the efflux of gold which seeks to correct a falling exchange by stimulation of exports.


Charles Hazlitt Cahan: I was going to ask the hon. gentleman whether that statement, which is destructive of the quantitative theory of money, is not equally destructive of the premises with which the hon. gentleman opened his argument.


James Shaver Woodsworth: Not at all; this
statement is not destructive of the quantitative theory of money.


Charles Hazlitt Cahan: It says it was not a theory that was ever true.


James Shaver Woodsworth: The trouble is that the older economists, in applying the quantitative theory of money, thought only of gold because originally gold was the standard. Since that time a large quantity of new money, that is to say, bank note money, has also come into existence. Not only that, but still later we find a third kind of money, cheque money. According to my understanding, the quantitative theory must be taken in view as applying not merely to gold money but also to bank note money and cheque money.


Charles Hazlitt Cahan: Were not cheques and bank notes in existence when Taussig created his theory, from which the hon. gentleman has produced his premises?


James Shaver Woodsworth: 
Mr. HANNESSON:: Have they asked for
that?


James Shaver Woodsworth: I am suggesting
certain things that might be done. In this connection I might say that even in Great Britain, which is supposed to be very conservative, people's banks are being encouraged. There is, for example, in Birmingham a municipal bank. You can imagine the horror with which our people in this country would view the advocacy of the establishment of a municipal bank, and yet they have it in England.


Mr. GEARY:: Is there not one in Toronto at the present time? The Penny bank?


James Shaver Woodsworth: I do not know
whether you call the Penny bank a municipal bank.


George Reginald Geary: It is run by the municipality.


James Shaver Woodsworth: I have heard of
the Penny bank, but I am not sure how far that goes; *1 would be glad to hear more about it from the hon. gentleman when he speaks.


George Reginald Geary: It is a good start.


James Shaver Woodsworth: loaned to depositors for the purpose of buying their own houses, are loaned to the corporation at a rate of interest be-4 p.m. low that which the corporation would have to offer on the general money market for its loans, while still making a margin above the 3i per cent which is paid to depositors.
In the next place, I would urge that there be given larger facilities for co-operative credit. It would seem to me that there should be an amendment to the Finance Act, so that producers' organizations may secure advances on securities similar to those now accepted from the banks. Why should the wheat pool, for example, be forced to go to a private corporation in order to secure money to finance its operations? Why should it not go directly to the treasury, and deposit with the treasury the very selfsame securities which it now has to deposit with the bank, and which the bank, in turn, deposits with the Treasury board?


Mr. KAISER:: As long as they get the
money, what difference does it make where they get it?


James Shaver Woodsworth: One minor difference would be that from one to two per cent would be saved to the farmers.


Thomas Erlin Kaiser: Perhaps.


James Shaver Woodsworth: I think that is
probable.	*


Thomas Erlin Kaiser: It is a great big "perhaps."


Charles Hazlitt Cahan: Under present conditions an organization dealing in wheat, the wheat pool for instance, goes to a bank and gets credit on its notes, or sometimes by pledging its bills of lading and that sort of thing; it may also, under the Bank Act, get credit itself on its wheat. But, under the Bank Act, can any bank advancing credit on such assignments of bills of lading and securities of that kind get money from the Dominion government on those very same securities?


James Shaver Woodsworth: Money can be procured from the Dominion government, I think we all recognize, to help carry the wheat crop.


Charles Hazlitt Cahan: But what security do the
banks give?


Mr. COOTE:: Bills of lading.


James Shaver Woodsworth: Bills of lading, I
believe.


Charles Hazlitt Cahan: Direct to the government?


James Shaver Woodsworth: I think so. I
should be glad to hear from the Finance Minister on that point, but I am informed by
[Mr. Woodsworth.l
those who are in touch with the details of the business that -the security which the government demands is precisely the same as that which the farmers are able to advance, to the banks.


Charles Hazlitt Cahan: If the banks do put up that same sort of security, the government has, in addition, the security of the banks themselves.


James Shaver Woodsworth: It may have, but I am inclined to think that the wheat crop of the west is as good security as any government is likely to get.


Peter McGibbon: Would the hon. member carry his theory further and have the treasury of this country finance every industry?


James Shaver Woodsworth: I have not suggested that, but I see no reason whatever why there should be maintained a financial monopoly such as we have to-day. Why should not producers' organizations of all kinds be able to do their own financing? Why should they have to be dependent upon a group of some ten private banks?


Charles Hazlitt Cahan: Why should not the producers' organizations be permitted to issue their own money as they did one hundred
years ago?


James Shaver Woodsworth: I should say they
have every bit as much right to issue their own money as the bank has to issue its private money.


Charles Hazlitt Cahan: Would the hon. member suggest what would be the value of it, in -most cases, if issued?


James Shaver Woodsworth: It would be just as valuable, since -there would be the same security behind it as there is under the existing system. But I am not advocating that these producers' organizations should have the right to issue money. On the contrary I want to take away the right of issuing money from all except the government itself.


Thomas Erlin Kaiser: Would not that be creating a monopoly? There are ten banks at the present time, -and you want to do away with their power to issue money and centralize the whole power of issue in the government. What is the difference between having the power in the government or in our banking institutions?


James Shaver Woodsworth: The difference is
that the private institutions now receive their own profit, and if there is any money in the operation I think it should be secured by the government itself. I have no fear of a government monopoly.

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Thomas Erlin Kaiser: The government must decide who is to receive credit.


James Shaver Woodsworth: Oh no.


Thomas Erlin Kaiser: You want it so that everybody will get credit. The great difficulty is to get credit.


James Shaver Woodsworth: You have not got my meaning at all.


Charles Hazlitt Cahan: Presuming the government
had a monopoly of the issue of money, and the Conservative government were in office for instance, do you think the Liberals of this country would secure very much credit from them, or vice versa?


James Shaver Woodsworth: As the hon. member knows, the government has a monopoly in issuing gold money. It has a monopoly in issuing certain classes of notes. I do not see why the issuance of bank notes of higher denomination should be turned over to the banks. I do not see why it should not be with the government. I do not see why politics enters into it, although some hon. gentlemen would like to drag it into the discussion.
Last of all, I should like to see the creation of a central bank board, something along the lines of the Federal Reserve Board in the United States. This central bank board would do the work now done by the Treasury board, but further than that it would act as a federal reserve board. It alone would issue currency and it alone would control discount, and if there is any financial value either in the issuance of currency, as I have said before, or in the control of discounts, that financial advantage should be in the hands of the government and not in the hands of private corporations.
Mr. CAHiAN: Is the Federal Reserve Board of the United States not in the control of private corporations?


James Shaver Woodsworth: Yes, unfortunately.


Charles Hazlitt Cahan: Then why suggest an analogy with the Federal Reserve Board of the United States whose boards represent the directors of the individual banks who are members of it. They are controlled by the individual banks?


James Shaver Woodsworth: If the hon. member had waited a moment I was going to suggest instead of that board being a bankers' board it should be distinctly responsible to the government of this country. That is the difference between the central bank I should like to have and the existing Federal Reserve Board of the United States.


Charles Hazlitt Cahan: Something after the manner and method in which the board of the National Railways is responsible to the government, I suppose?


James Shaver Woodsworth: That is a matter
for consideration. I should like to place on record one or two paragraphs from a memorandum on currency and central banks from 1913 to 1924, as published by the League of Nations. I think probably hon. gentlemen will regard this as sufficiently authoritative. It is a huge work comprised in two volumes and containing some five or six hundred pages Referring to the Canadian system this book says:
The chartered banks are commercial banks; but, owing to the absence of a special central bank in Canada, they have assumed certain functions which in other countries are mainly exercised by such banks.
In Canada our chartered banks have assumed certain functions which in other countries are mainly assumed by such banks.


Charles Hazlitt Cahan: Like the Bank of England?


James Shaver Woodsworth: Yes, that is a central bank. With regard to the Federal Reserve Bank in the United States, I should like to quote a statement in this memorandum:
By the Federal Reserve Act (approved December 23rd, 1913) a regional reserve bank system was established in the United States. There are twelve federal reserve banks located in various sections of the country. Each such bank acts as a central bank for the commercial banks of its sections, the latter being the sole shareholders of the reserve bank. Although the various reserve banks are formally independent of each other, they are under the direction of a common central authority, the Federal Reserve Board in Washington. This board consists of two ex-officio members: the Secretary of the Treasury (Minister of Finance), who acts as the chairman of the board, and the Controller of the Currency; and, in addition, five members appointed for a period of ten years by the President of the United States on the advice and with the consent of the Senate. At least two of these five members must be "experienced in banking and finance". The Federal Reserve Board appoints three of the nine directors of each federal reserve bank, the six remaining directors being in each case elected by the member banks. There of these directors are representatives of the member banks, whereas the remaining three must be men who are actively engaged in their respective districts in agriculture, commerce and industry. The three directors appointed by the Federal Reserve Board cannot be officers, directors or stockholders in any bank, one of them being chairman of the board of directors of the Federal Reserve Bank and at the same time "Federal Reserve Agent" of the Federal Reserve district, another of these three directors being his substitute. The chairman of the board of directors is required to be a person of "tested banking experience".
Besides the Federal Reserve Board, there is a Federal Advisory Council consisting oif twelve members appointed by the boards of directors of the twelve federal reserve banks. This council is convoked by the Federal Reserve Board at least four times a year. As indicated by the name, it has only an advisory vote.
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The main function oif the Federal Reserve Board is to control the operations of the reserve banks and, in general, to see that the Federal Reserve Act is properly applied. It may "examine at its discretion the accounts, books and affairs of each federal reserve bank and of each	member	bank	and	require	suchstatements and reports as it may deem necessary.'' The Federal Reserve Board does not interfere in the details as regards the discount operations of the federal reserve banks, but	it lays	down	the	rules to be
followed by them and is given large powers in masters of general policy. The power of issuing federal reserve notes under the act is thus entirely in the hands of the board. In view oif the unified working and the strict centralization in all essential matters, the federal reserve organization as a whole corresponds closely to the central banks in other countries.
And I should also like to place on record a statement in this memorandum with regard to the situation	in Australia. I	think	this
suggests to us some of the lines along which we might well proceed:
The Commonwealth Bank was established under a special act dated December 22, 1911, as a state institution managed by a governor and a deputy-governor appointed by the Governor General of the Commonwealth. It	had no	basic	capital, but	the
Commonwealth government was and is still responsible for all moneys due by the bank. On the other hand, one-half of its net profits is credited to a special "redemption fund," which, though under the administration of the bank, could be used in paying off Commonwealth debts or state debts taken over by the Commonwealth.
The bank was not at first a bank of issue, the issue department of the treasury established under the Australian Notes Act of 1910 main taming the issue of Australian notes. In December, 1920, however, the. control of the Australian note issue was handed over to the Commonwealth Bank, a special issue department of the bank 'being established for this purpose. This department, to which the assets and liabilities of the note-issuing department of the treasury were transferred was under the management of a board appointed by the Governor General of the Commonwealth and included the governor and secretary of the bank, a leading treasury official, and two outside financial experts. It was provided that, in times of emergency, the note issue might be retransferred to the treasury by proclamation of the Governor General.
With a view to enabling the Commonwealth Bank to act as a proper central bank of note issue controlling the credit resources of the country and the economic policy of the other banks, the government proposed in July, 1924, an amendment to the Commonwealth Bank Act Which was passed on August 20 and came into force on October 10, 1924.
Under the new law the bank is to be managed by a board of directors consisting of the governor of the bank, the secretary to the Commonwealth treasury and six other persons, who are or have been actively engaged in agriculture, commerce, finance or industry. All the members of the board are to be appointed by the Governor General of the commonwealth for seven years. Reappointment at the end of the term is permitted. In addition there is a London board of advice consisting of three members appointed by the Governor General for four years and eligible for reappointment. A director or officer of any banking business may not be a member of either board. The special "Notes Board" is abolished and its functions are assumed by the board of directors.


Peter McGibbon: What application has the Federal Reserve Bank to my hon. friend's argument?


James Shaver Woodsworth: I think I shall have to leave that for the moment. I should like to-


Thomas Erlin Kaiser: We are wondering where the hon. member sees a comparison between the United States federal banking system and what he has termed in this resolution a national banking system for Canada.


James Shaver Woodsworth: I do not know that it is necessary for me to recapitulate what I have been trying to say for the last' hourt I am suggesting that we ought to have a central bank such as exists in most countries, the functions of which in this country are assumed largely by a small group of chartered banks-a bank that will be given the exclusive authority of note issue and of rediscounting. As an example of a central bank I have instanced the Federal Reserve Bank, which true does not comply exactly with what I think we should adopt to the best advantage, and I have also just been instancing the Commonwealth Bank of Australia.


Peter McGibbon: Is a federal reserve
bank not simply a bank of rediscount?


James Shaver Woodsworth: 
Mr. WHITE (Mount Royal):: Will the hon. gentleman state how the resources of the Commonwealth Bank are invested, that is to. say, what percentage is invested in ordinary commercial loans?


James Shaver Woodsworth: The investments
are not in ordinary commercial loans, although during the war various producers' organizations were financed by the bank. With regard to the details I would refer the hon. gentleman to this memorandum, in which the whole matter is dealt with very exhaustively.


Charles Hazlitt Cahan: Will the hon. member identify the memorandum so that we can find it in the library?


James Shaver Woodsworth: League of Nations Memorandum on Currency and Central Banks, 1913-14, published at Geneva, 1925, to be found in the Library of Parliament.
I do not intend to make any plea whatever for the various suggestions which I have advanced. I know there are other gentlemen from the west and, I think, some from the east as well who are ready to take part in this debate. I wish simply to suggest that since other countries are moving along these lines and are finding success in various directions, there is no earthly reason why we in Canada should still be held in bondage to the old idea that we have a banking system which is the last word in the financial arrangements of the world. I know this is too great a subject to be disposed of in one debate. My hope is that the Minister of Finance (Mr. Robb) will see his way to refer this matter to the committee on Banking and Commerce, where we shall have an opportunity for much fuller discussion. I am sure the committee after consideration could bring in recommendations which would be much more valuable than those I have tried to lay before the House.


Mr. H. E. SPENCER (Battle River):: Mr. Speaker, I take great pleasure in supporting the resolution that is before the House. This is the fifth year, to my knowledge, that this all-important subject has been brought before the House and discussed very extensively. It is pleasing indeed to me to find that each year hon. members are taking a greater interest in it, the reason no doubt being that the subject has become one of some moment from one end of the country to the other.
The hon. member who introduced the resolution read one passed by a very large organization in Saskatchewan. I have in my hand a resolution passed by a similar organization in Alberta. It reads:
Whereas, it is desirable to secure decentralization in the private control of credit, and to this end smaller banks should be established, and Whereas, all currency should be issued by the government in the interest of the public, and Whereas, these and other desirable objects can be best achieved through the creation of a central bank;
Resolved, that this convention recommend that suitable steps be taken to establish and put into operation a central bank for Canada, and to provide that the policy of this bank may be controlled by, and in the interests of the people of Canada.
I understand that there is an organization called the Monetary Reform League in the city of Toronto, and that several eminent men who live in the city of Montreal are also lecturing on the subject. So we see that each year the subject is becoming more and more discussed, and it is only right that it should be brought before this House for discussion so that in time we may expect to have legislation passed with regard to it.
The hon. member who introduced the resolution said that the medium of exchange had made various changes from the time of barter, developing into coinage and then into notes, and later on very largely into what we call cheque money, based on credit, created as the result of security being lodged, with the banks, and used in 96 per cent of the cases in Canada-to facilitate the transfer of goods from the producer to the consumer. This is very well set out by Professor Soddy of Oxford University, who outlines the situation in the following words, which are endorsed by the Right Hon. Reginald McKenna and Major C. H. Douglas of London, England:
Another and most important fact to be emphasized, is that virtually all the money in the hands (or banking accounts) of the community originally came into existence in the form of loans from the banking system. It can come from nowhere else, nor otherwise than as loans. This fact, which reverses all the old concepts of loans as money taken out of pre-existing deposits, is demonstrated fully in Major Douglas's works, and, in fact, has since been endorsed by Mr. McKenna, the chairman of the Midland Bank. The order of procedure is as follows:
(1)	Money is printed or written into existence by the banks:
(2)	It enters circulation as a loan to somebody:
(3)	It is then spent, and then becomes a "deposit" in the name of the receiver.
As loans are repaid a similar amount of deposits must be cancelled. It has been mentioned this afternoon that during the last twenty years or so there has been a vast absorption of various banks in this country until the thirty-four institutions which we had twenty-three years ago have been reduced to eleven. Of these eleven all except one, a small concern, have their head office in Montreal or in Toronto. This is not in the best interests of the Dominion. We have seen what absentee landlordism did for many years in Ireland, and we are witnessing what
National Banking System

absentee financial ism is doing for Canada. We find that the far eastern section of this country and the great west have suffered very largely from stagnation of business owing to this centralization of the control of credit. It would not be so bad if those who are interested in banking institutions were not also interested in other business, but unfortunately for the business welfare of Canada we find that apart from the officials of the bank, those who control these institutions-the directors-are interested in all of the country's industries except possibly agriculture, which I may say they certainly control. That being so, it can readily be seen that where there are interlocking directorates between the banks and other business concerns it is quite simple and easy as well as natural for the banks to feed certain businesses with credit while they starve Others in which they are not so closely associated. I have before me a chart showing the names of fifteen directors of banks, and so on, who are interlocked in sixteen corporations. This chart was placed before the House in 1022 by the then member for Brome. The businesses of these corporations include insurance, banking, implement manufacturing, textile, railways, light, heat and power companies, water-power, paper and cotton, and in all they control investments to the extent of $4,285,000,000.
The branch bank system has given a good deal of satisfaction in small, thickly settled countries such as Great Britain, but I have to admit that in Canada, with its vast territories and its thin population, the system has been a failure. You need, however, only compare the United States and Canada, one with a banking system providing for branches to meet local interests and the other with our highly centralized system, to see how great a development has taken place on the one hand and what stagnation there has been on the other. Banks are just commercial concerns like any other business. They are out for profit. That is their business and naturally they do not want competition. It is perfectly natural, also, that if individuals desire to get together and start any business of the type in which the various directors of these banks happen to be interested, it would be the part of wisdom, from the point of view of these directors, to prohibit credit being given to these pioneers. And that is being done every day. That is one of the main reasons why we claim it is unfair that the control of the major portion of the private credit of the country should be in the hands of private financial institutions. This control of credit is in my opinion by far the greatest power that exists, for governments themselves have not been exempt from its influence. I

will say further that there is not a man, there is not a member here, who can call himself free if he is indebted to these institutions. Whatever his security may be, if he has to go to a bank to get a line of credit on their terms, credit which can be cancelled any time they choose, then he is not a free man.
The second clause of the resolution I read calls for a monopoly of the issues of currency by the government as outlined by the hon. member who has moved the motion. Other countries have decided to monopolize the issue of currency through government control, but Canada is backward in this respect. I will not go into the details of this question inasmuch as the speaker who preceded me dealt with it fully. Private banking institutions in Canada-and they are the only type of banks we have here-are the only concerns I know of which as soon as they get their charter have the right to double their assets by the simple process of printing paper. They are the only people I know of who have the great privilege of charging interest on their debts. To put it another way, when they take a note, or a bill, or " a promise to pay," which is a debt, and pass it across the counter to the public, interest is charged thereon. Now, why should not this privilege be retained by the government itself, and the resultant profit devoted to lessening the burden of taxation?
I have before me some rather interesting figures with regard to our note issues. I will give only those for the month of January, 1926. The information is taken from the Canada Gazette of February 13, 1926. Dominion notes then in circulation amounted to $214,058,885, but of this total I find that the huge sum of $177,675,000 represented "legals" -notes of large denomination used between the banks. This leaves a balance of only $36,383,885, representing the note issue used by the public.


Mr. GARLAND (Bow River):: Will the
hon. member give the quantity of gold behind that issue?


Henry Elvins Spencer: I shall be very glad to
do so in a moment. With regard to the relative stability of a government bank and a private bank, there is no comparison in case of a financial panic due to war or other crisis. We know perfectly well) that the private bank cannot withstand a run on it by the public, such as occurred in 1914. On the other hand a government (bank has the prerogative of issuing notes which are legal tender, based on the assets of the whole country, and therefore it could meet all emergencies.

National Banking System


Charles Hazlitt Cahan: Was not the greatest run
in history made	on the	Reich Bank	of	Germany, and did	it not	issue	notes	in	such
profusion that at last they were worthless?


Henry Elvins Spencer: So long as a bank issues
notes only to the amount of the deposits placed with it, those notes, will be perfectly good.


Charles Hazlitt Cahan: Then	you	must impose alimit, and the moment	you	do so	do	you
not restrict the bank's operations?


Henry Elvins Spencer: Any bank can be called
upon to pay in gold the last dollar deposited with it. That is impossible under our present banking system, because our chartered banks have not the wherewithal to pay their depositors in gold,.
The question, will probably 'be asked: What about the gold basis? I am not going to spend much time on that, except to quote a well known writer on financial reform. I refer to Mr. Arthur Kitson, who is chairman of the Banking Reform League of Great Britain. He has written many books on the subject. He is also a manufacturer in a very large way in both Great Britain and United States. Writing to the London Clarion on November 27, 1914, he-said:
Our bank rate jumped to 10 per cent in one day- higher than it has been in France, Germany or Austria just before or since the war. Every bank suspended payment, the gold basis collapsed, and, but for the common sense of the Chancellor in supporting the banks with the national credit-
I ask the House to note that, because we did the same thing and saved our banks at that time.
-the whole financial and industrial structure would have come tumbling down in the mire. Possibly we may to-day be able to create some public interest where we have hitherto failed; at any rate, it is well worth the effort. The lesson to drive into the heads of the community from what has happened is the fact that the so-called gold basis is a delusion and a snare -a legalized fraud, used to enable the financial classes to control and tax the industrial classes.
In my opinion, that information is just as important, if not more important, to the great manufacturing interests as to those toiling with their hands. For the benefit of the hon. member who sits near me and asked me a question a few moments ago (Mr. Garland) I would point out that according to the Canada Gazette of February 13, 1926, gold held by the Dominion in January, 1926, amounted to $127,380,217; and according to the Canada Gazette of March 13, 1926, gold held by our banks in the same month of January amounted to $43,154,000, or a total of $170,534,217. This reserve of gold was held against notes and financial credits to the tune
of $2,827,488,885-or a deficit in gold of $2,656,954,668.


Charles Hazlitt Cahan: Does the hon. gentleman
even in the wildest flight of his fancy suggest that those are the only gold assets available?


Henry Elvins Spencer: I should like to know
what other gold assets there are.


Charles Hazlitt Cahan: As to the chartered banks, take the entire loans in New York, for instance, callable within twenty-four hours and payable in gold.


Hewitt Bostock: Order.


Henry Elvins Spencer: I do not think that answers the question. I am sorry, Mr. Speaker, that the day is so short for this all-important subject. I have discussed it somewhat rapidly, and as I know other hon. members want to take part in the debate, I will conclude by saying that I shall be very glad to give my hearty support to the resolution before the House.


Hon. J. A. ROBB (Minister of Finance):: Mr. Speaker, the resolution now before the House carries an implication that I should not like to go out to the world. In saying that I believe I voice the opinion of every hon. member, even that of the mover himself. He implies that Canada has not now a national banking system. I submit, Mr. Speaker, that we have a national banking system, that it is a good system, and that it meets the requirements of the country. As every hon. member knows, we are on a gold basis, and to-day our money is as good as the money of any other country. Indeed, only a few days ago the Canadian dollar was quoted at a premium in New York. The bank notes of any bank in Canada pass at par in any of our provinces, so I say we have a good banking system.
To those who were in the last parliament the question introduced and discussed to-day by the hon. member for Winnipeg North Centre (Mr. Woodsworth) is not a new one. This question was debated at considerable length in 1923 and again in 1924, not only in this chamber but also before the Banking and Commerce committee. Experienced bankers, both Canadian and those from other countries, were brought before the Banking and Commerce committee to give evidence, and I propose to place on record very briefly the opinions of some of those gentlemen. I have in mind Sir Frederick Williams-Taylor, general manager of the Bank of Montreal. I have never met a banker, either from Canada, the United States or the Mother Country, who has not acknowledged that Sir Frederick
National Banking System

Williams-Taylor is recognized as a good banker who understands well the systems of banking not only in our country but in the other countries of the world. The opinions of Sir Frederick Williams-Taylor will be found, if any hon. gentleman desires to look them up, at page 297 of the proceedings of the investigation of 1923. His opinion was that the system as it exists now in Canada meets our requirements and is very much better suited to those requirements than would be the federal reserve bank system of the United States.
That view was also shared by another eminent banker, Sir John Aird, who is not only a good banker with considerable experience, but is also generally recognized as an economist, and a gentleman with wide experience in the business, commercial and industrial life of Canada. No man understands better than does Sir John Aird the requirements of Canada, both for the moving of the crops and the providing of money for the carrying on of our industrial affairs. If hon. gentlemen will refer to page 363 of the report of the 1923 proceedings the evidence of Sir John Aird will be found.
We had before that committee still another gentleman, who is recognized as an economist and a man supposed to pronounce the views of western Canada upon this question. I refer to Professor Swanson of the University of Saskatchewan. Professor Swanson was more interested, I believe, in sound economics than in helping any theories. His evidence is found at pages 783 and 784, and I am going to quote it, because I propose in a few moments to accept a suggestion made by my hon. friend. [DOT] Professor Swanson also thought that the banking system of Canada was quite suited to our requirements.


Henry Elvins Spencer: Is the minister aware
that Professor Swanson criticized the gold basis some years ago, before an open convention in Calgary, as readily as have some of the hon. members of the House to-day?


James Alexander Robb: I am not sure about that,
but I find that on page 778 of the 1923 proceedings Professor Swanson said:
I think we ought to make a very careful detailed and comprehensive study of the American system and exactly the results that have been secured therefrom before we make such an experiment in Canada.
Then later on, at page 784:
I do noit think it is required in Canada. Our banks have the resources right now. It is not the case that we have not the money. No federal reserve scheme superimposed on our banks could increase the credit to a much greater degree than the banks can increase their credit right now. When a bank says 
it is not able to extend its loan in an individual case, often it is because the security or the character of the borrower, either one or the other, is not up to par.
That was his opinion, expressed before that committee in 1923. But the Banking and Commerce committee, not satisfied with the evidence of Canadian bankers and economists, called before them a gentleman who is a recognized authority in the United States- Mr. John W. Pole, chief national bank examiner of the United States. Mr. Pole's evidence can be found at page 136 of the 1924 proceedings of that committee. I am not going to tire the House any more than to read the following:
The federal reserve system is admirably adapted to the unit system of banking, but for a very email number of banks with a large number of branches to attempt to adjust themselves so as to fit into' such a scheme would appear to be highly impracticable.
That is the opinion of Mr. Pole, and he continues:
Under the provisions of the Finance Act it seems to be quite possible for any bank in Canada whose assets would be of such liquid character as to enable it to take advantage of any facilities offered by the reserve system, to avail itself of equal opportunity offered by the Finance Act, the operation of which is easy and inexpensive and, judging from the manner in which it has been functioning, effective.
It is upon evidence such as this that I submit to the House that we should not allow the idea to go out that Canada has not a good banking system, and one which is suited to the needs of our country.
The hon. member for Winnipeg North Centre referred to the Finance Act. For the information of the House it may be interesting to know to just what extent the Finance Act is required by the banks. I will place on Hansard a few figures to show the use of the Finance Act and to prove that it is not very much needed under our present banking system. The following table shows the maximum advances under the Finance Act in each of the years from 1918 to 1925 inclusive:
1918	
$116,500,000	001919	
112,957,000	001920	
123,689,025	001921	
108,707,960	75
Then we come to 1922, and I ask hon. gentlemen to notice the drop:
1922	
$60,619,769	741923	
40,020,000	001924	
37,800,000	001925	
30,400,000	00
According to the bank return of January 30, 1926, the advances totalled only $9,000,000, and that was during a period when there was some movement of crops.

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Now, Sir, I do not wish to detain the House at any length, because I understand there are other speakers.


George Gibson Coote: I would like to ask the
minister if he has the Finance Act at hand, and if he would be good enough to tell the House the class of securities on which money may be advanced.


James Alexander Robb: I have not the Finance Act
at hand, so I cannot give that information to my hon. friend, but he will understand from the figures just given that there has been no restraint in the banking facilities offered. The banks, we may suppose, had just as good security in 1924 and 1925 as in 1918, and had they required the money they would have got it, and at a lower rate of interest than they got in 1918. I will admit at once that the banking situation in Canada to-day gives less worry, at all events, to the Finance Minister and to the government, than it did in the years 1921, 1922 and 1923. The banks in Canada are in pretty good shape to-day, and we have improved the system to a degree by the introduction of the inspection system.
I am not one who objects at all to securing all the information that we can get brought before us in the Banking and Commerce committee. I admit at once that the information brought before the government and before the members in the last parliament enabled us to improve very considerably upon the inspection system of the banks, to the good, I believe, of all Canada, and for that reason, Mr. Speaker, I am willing to accept the suggestion which I understand the hon. member for Winnipeg North Centre (Mr. Woodsworth) has made, that this question be referred for study to the Banking and Commerce committee. I would like however to make this reservation:	I appeal to my hon. friends
who have given study to this matter and who have advanced these ideas, I appeal also to every member of the Banking and Commerce committee, that in bringing -witnesses before that commitee they do not pay heavy travelling expenses to bring some person before them who knows nothing about the matter, or some person outside the country. I do not object to bringing gentlemen before the committee who are able to give us information that will be of any value, but as to our paying heavy travelling expenses for men who have simply theories to advance, and who come possibly from a long distance and have heavy accounts, I submit that the Banking and Commerce committee might very well pass upon that, and help the Finance Minister to keep down expenses. With that reservation, I accept the
suggestion that this question be referred for further study to the Banking and Commerce committee.


Hon. R. J. MANION (Fort William):: I
do not intend to take up much of the time of the House in dealing with this question. I may say at the beginning that I have no brief whatever for the banks as they exist in Canada to-day. Like most professional men, I make my deposits, draw my cheques, and once in a while have the good luck to be able to borrow some money from the banks.


James Alexander Robb: Lucky man!


Robert James Manion: Generally speaking, at the
basis of all resolutions of this kind, there is a suggestion, it seems to me, that the ordinary credit facilities of our banking system are not adequate for the needs of the country. That probably is correct in some special lines of credit, such perhaps as might be dealt with by the rural credits scheme, or something of that sort, but on the whole I
5 p.m. think that one of the greatest curses of Canada in the past, in some periods at all events, has been the giving of too much credit. I well remember, for example, that between 1910 and 1912 in the western country, from the head of the lakes clear through to Vancouver, there was so much credit, and thoughtless credit, issued by the banks, almost anybody being able to borrow five or ten thousand dollars to invest in real estate, that as a consequence we had a real estate boom which ruined nearly all the people through the west, and did actually ruin very, very many of them.


Mr. CAMPBELL:: -Does not the very condition the hon. member speaks of show something wrong with the system?


Robert James Manion: I am * not going to defend the present banking system at all. I do not suggest that it is perfect or anything of that sort; on the contrary, I think there is plenty of room probably for improvement in the system, but I was simply discussing credit.
I am not going to discuss banking, the gold standard, or the different types of money. In fact, and I say this without any reflection on my hon. friend, I have the idea that a debate of this sort is absolutely useless in the House at the present time. The very fact that during this debate there is a very small attendance in the House shows that certainly the idea is not accepted by the House generally that any great change from the system of private banking to national banking is necessary
National Banking System

The Minister of Finance, who has just sat down, says he has no objection to this question being referred to the Banking and Commerce committee. Neither have I, but I have objection, which the Finance Minister apparently has not, to this question being investigated again now after we have just had two years of the same type of investigation. I do not see any reason why at the present time the people of Canada should be saddled with the expense of bringing before the Banking and Commerce committee, from a long distance, and at heavy expense, witnesses who in very many cases have nothing but a superficial, theoretic knowledge of banking, or of any other problem I have heard many of them discuss, simply to expound in many cases futile theories. I well remember a couple of years ago a witness who was brought before that committee, at great expense, whose theories were so thick that nobody could understand them at all, and I do not think even he had any idea of what they meant himself.
What I am opposing is the nationalization of banking. I am not upholding the banking system as it exists in Canada to-day, nor saying that it cannot be improved; I willingly admit it can, but I am opposing the idea of nationalization of our banking system, or, for the matter of that, the nationalization of anything else that we have not already nationalized in this country. The function of government is to govern, not to trade, whether the trade is in money or in goods of any kind. I think we have too much government at the present time. We are continually passing legislation much of which is useless. Somebody is continually proposing that we should nationalize this or that. My good friend who has moved this resolution (Mr. Woodsworth).has another resolution on the order paper to nationalize coal mines. I have no doubt that if we nationalized the banks, and then the coal mines, my good friend from Winnipeg North Centre would go on nationalizing until finally he had nationalized every line of endeavour in this country. Russia tried that; in fact they did it, and they made a pretty rotten mess of the whole job, so far as we are able to find out. There are certain lines of endeavour which a government alone can properly handle -the mails for instance, hygienic and sanitary questions, the supplying of cities and towns with a safe water supply, and other lines of endeavour of that nature affecting the whole community of a city or province or the citizens of the who!; country, and which can
[Mr. Manion.J
be properly dealt with only by a government. But there are other lines of endeavour which should be left to private initiative. Most of us believe, and I am sure the hon. member for Winnipeg North Centre will agree with this, that practically everything that is done by governments is done more extravagantly than if the same service were performed by a private corporation. That is true, I believe, from a municipal, provincial, and Dominion standpoint-


Mr. HEARS:: Does the hon. member apply that to the hydro-electric enterprise in this country?


Robert James Manion: I probably would have
said the same of that enterprise if I had been asked before the thing was done, but that is now done.


Abraham Albert Heaps: The hon. member stated that governments are more extravagant than private concerns, and-1 was asking whether that was true in regard to the development of electrical energy under public ownership and private enterprise.


Robert James Manion: I have no doubt whatever
that the building of hydro-electric plants under public ownership has cost very much more than if those same plants had been built under private ownership, I have no doubt of it whatever, and I could give instances to prove it.


Abraham Albert Heaps: Do not the people of Ontario pay much less for their energy, under public ownership, than do the people of Quebec, where the enterprise is under private ownership ?


Robert James Manion: That is not the question
my hon. friend asked before. He asked me if it cost more to develop the hydro-electric enterprise under public ownership than it would have under private ownership, and I answered that question. However, I am not criticizing the hydro-electric development which has taken place in Ontario. What I am maintaining is that we have enough nationalization at the present time and until we can get out of some of the difficulties .we are in, we should do no more, and even then I will have to be shown some good and plain reason for nationalizing anything further.


Abraham Albert Heaps: Does not the mess which the hon. gentleman has referred to arise out of the failure of private ownership?


Robert James Manion: What mess is that?


Abraham Albert Heaps: In regard to the National
Railways?

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Robert James Manion: No, it did not arise out
of the failure of private ownership. It arose partly out of that, but mainly out of the overbuilding of railways on the part of the government.
I do not wish to enter into a discussion of the railway situation or of the hydro-electric question, but I repeat that we have nationalized enough things in this country-surely the railway situation is proof enough of that -without wishing to nationalize the banking system.
Not only is a government more extravagant in construction and operation, but as a rule the efficiency is not so good in any nationally-operated enterprise as in private operation. In England the telephone and the telegraph *were at one time in the hands of private companies, but were taken over by the government, with the result that the government is out millions of dollars annually on the operation of the system and the service is not nearly so good. I have observed the same thing in other parts of the world. I have travelled on the Italian railways, and if there are any wTorse railways in the world II do not know where they could possibly be found. The French government railways are in nearly as bad a condition. The Australian railways, I am told, though I have not travelled on them, are operated by the government, and they have gone so far as to have different gauges; so that in the middle of the night you have to get off one sleeping car and get into another, because the gauges of the roads are different. The operation has not been satisfactory there. There has been only one line of publicly-operated railway in the world which has really given satisfaction-those in Germany. I have travelled on the trains in that country myself, and they were very satisfactory. But the Germans are a different people from the English speaking and the French speaking people in the countries in which we live. The German people are apparently willing to be governed by bureaucrats. They are willing to be docile enough to permit the higher officers to compel them to do as they wish. I remember well a thing that struck me on the German railways, in fact you will find it all ovef Germany, and that was that the word "ver-boten" which means forbidden was written all over the walls in the public places and on the railway trains. The German people are willing to be forbidden to do anything which the bureaucrats desire to forbid. The Anglo-Saxon people of England and of Canada are not satisfied to be forbidden to do this, that and the other. In thinking the matter over, I came to the conclusion that the
German railways, though government owned, made a success, in contradistinction to the railways of the other countries, because of the national characteristics of the German people.
Another reason why I object to the nationalization of enterprises is that it leads to business methods being replaced by favouritism and politics. It has been suggested that some political friends would be favoured. I think the hon. gentleman from St. 'Lawrence-St. George (Mr. Cahan) made the suggestion that if the government was in control of the banking system favouritism would be shown.	I have no doubt that
statement is absolutely correct, whether it be a Conservative, Liberal, or even a Progressive government. I have an idea that if my Progressive friends controlled the banking system they would give all the money to the farmers of the prairie provinces.


George Gibson Coote: Would the hon. member
insinuate that, in the administration of the Finance Act, in regard to the loans referred to a few minutes ago by the Finance Minister. there has been any favouritism shown to one bank or another because of the politics of the bank?


Robert James Manion: I do not know. I have
never been Finance Minister. Tlhe Finance Minister could probably answer that question, but I cannot. If there was opportunity for a government to favour one bank more than another, and a particular bank was friendly to them, I have no doubt they would favour it. I think that is true of all governments. Governments are made up of human beings, they are naturally going to favour their friends and generally speaking they are pretty nearly right in favouring them, but I do not wish to put the whole banking system of this country into the hands of any government, whether it be the party sitting on this side of the House or the Liberal party on the other side of the House. I should not care to put the banking system into their hands and allow them to favour their friends by giving loans to those to whom they chose to give them. I consider if you go on nationalizing enterprises you take away the personal incentive and initiative needed to build up the country. Not only that, but you paralyse to a certain extent private enterprise, which after all, under our present system-although it can be improved in many ways-is the stimulus which makes the wheels of industry go round and tends to make the country prosper.
National Banking System


James Shaver Woodsworth: How much private enterprise is possible in a financial world to-day where ten banks control the whole situation?


Robert James Manion: If there is no private
enterprise possible when ten banks control the banking system, how much enterprise is possible when one government controls it? It would be just one-tenth of that amount. A logical argument was put up by one of my hon. friends behind me, who asked if it was not a monopoly to hand the banking system over to the government. Certainly it would be a monopoly. It is not a' monopoly to-day. We have ten different banking systems all competing with each other.


James Shaver Woodsworth: One system.
Mr.. M ANION:	Ten different organizations, ten competitors competing with each other for the business of the country, and they' do compete. Any man who has dealings with the banks knows that sometimes he will be refused credit by one bank and receive credit from another, in order possibly to get his business. So that there is competition. There would be no competition if the government obtained control of it, except the competition between the government's friends and the government's enemies.


Henry Elvins Spencer: Would it not be just as fair to say that the government-owned railway might refuse to carry people not friendly
to them?


Robert James Manion: No, but all government
railways carry a lot of people they should not carry. I have noticed that. I have been struck veiy often by the number of deadheads, including myself, on the government trains.


Mr. DUNNING:: Is the hon. member
suggesting that the railway companies break the law?


Robert James Manion: I do not know whether
they break the law or not but the Minister of Railways will have a good opportunity to look into that, and I feel sure, judging from the thoroughness and thrift which was shown by that great Saskatchewan political machine of his, he will be able to clean up any irregularity in that respect.


Charles Avery Dunning: I was not trying to invite any partisan discussion, but the hon. member was speaking of the railways and the methods they adopted in regard to transportation, and I really think the statement he made which might carry the inference that

they are not complying with the provisions of the law should be withdrawn, or information given with regard to it.


Robert James Manion: I would advise my hon.
friend to look into the matter.


Charles Avery Dunning: I am glad my hon.
friend has withdrawn the inference.


Robert James Manion: I did not withdraw anything. My hon. friend from Regina (Mr. Dunning) does not seem to know whether I was speaking of the past or the present, and I did not say whether I was referring to the past or present events; but as a matter of fact I was speaking of the past. However that is another issue and I do not want to be dragged into a discussion of it. But I know-and I repeat to the Minister of Railways-that there are people carried on government railways as well, perhaps, a3 private railways who have no right to that privilege. It is, however, up to the Minister of Railways to look into that.
Doubtless there are weaknesses in our present banking system. I will admit that; I am not defending the banks at all; I am not going even so far as the Minister of Finance (Mr. Robb) did in defending them. I think we can improve them by controlling them, by seeing that they serve the people as they should. For example, the rural credit scheme which, I believe, is to be put into force this year, although the legislation has not been brought down yet, is for the purpose of implementing the work of the banks.	.
I have noticed that those governments are, generally speaking, the most efficient which undertake the least. The more you hand over to a government to handle, the less likely you are to get efficient government. We have at the present time governmental problems enough without handing them over the whole banking system of the country. We have, indeed, a national railway problem which is perhaps the greatest problem we have in Canada to-day, and I am sure the energies of my good friend the Minister of Railways will be well taken up if he is to get us out of the muddle into which the people and governments of the past have got us in the National railway system.
I did not wish to take up so much time, but my friends as usual made half my speech for me. I submit, in closing, that by government control, that is by suitable legislation put upon the banks, we can improve the banking system of Canada. But I object to any more government ownership or government management than we have at present.

National Banking System
We have enough government ownership in other matters to manage without taking over the banks of this country and attempting to manage them; I would agree, therefore, with the Minister of Finance that this resolution might be sent to the Banking and Commerce committee to play with it if they will, but I object to any expense being incurred by the people of this country in bringing witnesses before that committee. That would be my attitude and I would be very much disappointed if the House did endorse the motion of my hon. friend.


Edward Joseph Garland: Mr. Speaker, we must feel that a considerable step forward has been made by protagonists of changes or reforms in the banking system when we find that both the Minister of Finance and the hon. member for Fort William (Mr. Manion) are now willing to discuss this question before the Banking and Commerce committee. I have in mind the debate that took place last year, and may I say at this point that although this question has been discussed by - this House for three years and discussed in the Banking and Commerce committee during one year, it has never yet been made a specific question for discussion and recommendation by any committee of this House or by the House itself.
The time has now come, I believe, when a suggestion such as has been offered by the hon. member for Winnipeg No-rth Centre (Mr. Woodsworth) should meet with the approval of the House, and an examination of a possible alteration or evolution of the system that now exists should take place with a view to improving that system. Like the hon. member for Fort William, I am not going at this moment to advocate any theoretical, revolutionary modifications or changes in our system, but I am going to urge that something should be done to coordinate several of the different branches of the present system into one central force, with perhaps certain effects which I will deal with later.
Last year the Banking and Commerce committee, appointed to discuss rural credits and some other matters, decided that there ought to come within its scope the question of a national bank or central bank or bank of rediscount, and so that committee, in spite of the opposition of its chairman, recommended to the House that the scope of the committee should be widened to include that question. That recommendation was carried by the committee and sent forward to the House on May 21. Unfortunately, owing to processes of which I know not and influences that have 14011-155
never been explained, that report was not presented to the House for discussion until July 2, a short time prior to prorogation, with the result that although a debate took place, the resolution widening the scope of the committee and allowing this investigation was voted down. On that occasion, however, the Minister of Finance took exception to the scope of the committee being widened for a discussion of this question. He did so on two grounds; first, that the Finance Act now provided rediscount facilities as they were required by the present system and supplied an elastic currency which would satisfy every need for credits in this country. The second objection he took was, of course, on the orthodox ground that you must not interfere with the revision of the Bank Act that had taken place for ten years and that we should let it go at that. That ground was taken by my hon. friends to my right, with the exception of the hon. member for Vancouver South (Mr. Ladner), who has always been a strong supporter of centralizing the various banking functions that exist to-day.
Perhaps I had better approach this question by making one or two fairly general statements. First of all. that there is something wrong not alone in this country, but in most countries in connection with the financial system must be apparent to anyone who will study the question. Let us note that during the whole history of nations, so far as I have been able to study them, there has been only one'period in Canada and one in Great Britain since the Napoleonic wars during which the whole productive capacity of the nation was used to its limit. That was during the past war. We ask ourselves why. The explanation is at once forthcoming when we study the changes that took place instantaneously both in this country and in Great Britain at the outbreak of the war- it took place also in other countries, but I do not wish to refer to 'them-which placed beneath the whole banking structure all the public credit, all the power of public credit; placed it definitely under a private banking structure and so gave it that great power of credit inflation which enabled the peak production to be reached without any difficult}'. There was no unemployment; there were no wretched conditions either in Great Britain or in this country during that otherwise wretched period. After that war was over we found that the interests that prior to then had controlled currency, coinage, everything in the way of credit, decided to contract that credit and to reassert their previous domination. They did that by a process of violent



National Banking System
deflation, of forced contraction of credit, with the result that during the period 1920 to 1921 there was an increase in private debt, agricultural, municipal, provincial and even federal debt, to the extent of about 100 per cent. In other words, our debts, national and provincial, were doubled in that period. That matter has been discussed at least temporarily by the committee, and I do not wish to dwell further upon it, except to say that it is almost hopeless to expect that in a House of this kind or in any House, even out in the country, we can get the great bulk of the people at this moment to accept any reform which may yet in itself be for their benefit. They are not ready for it. The best we can hope to do in the meantime, therefore, is to educate them, to point out certain truths that exist, and to get the people to apply them to present conditions. Imagine if you will that here we have bootless sons of unemployed shoemakers! Did you ever hear ot anything so utterly absurd? You have a nation like Canada capable of vast expansion in productive enterprise, but our industries are working at low efolb. This is not, due to any lack of protection by any means.


Charles Hazlitt Cahan: It is not due to lack of
credit, either.


Edward Joseph Garland: 
Henry Elvins Spencer: Was it not a majority
of the directors?


Edward Joseph Garland: No, I think it was unanimous consent. I must say in fairness to him that the right hon. leader of the opposition (Mr. Meighen) supported us in that amendment; he was just as anxious as we were to see that this vast power which is still vested in these directors should be controlled. Now, when we recognize that fact we see the truth of every statement I have made previously about the vast control which rests in the hands of these private individuals.
There are further reasons why to-day the interest rates in this country are unquestionably bad; in western Canada they are exceedingly bad. They are not really governed by the law. for although the Bank Act says seven per cent is the maximum, the banks in western Canada cleverly get around that limitation on every occasion. Only the other day I received a renewal note for a small amount with the notification, ' 8 per cent before and after maturity.We tried to have inserted in the Bank Act a fixed legal rate of interest above which the banks could not go. That motion was defeated by the committee. Why, no good reason has ever been given. Why there should not be a limit to the amount of interest to be charged by a bank is something beyond my comprehension, There should be a legal limit. To-day there is really no limit; for although, as I say, the Bank Act contains a limitation of seven per cent, there is no penalty provided for any infraction of that limitation.


Mr. BURY:: May I call the attention of
the hon. member to this penalty-if he refuses to pay the bank will only get five per cent?
24.30
National Banking System


Edward Joseph Garland: Then he
would have a mighty hard time when he went back to the bank for further credit.


Ambrose Upton Gledstanes Bury: Surely.


Edward Joseph Garland: The hon.
gentleman perhaps knows that in western Canada the banks have adopted the practice of -collecting the interest in advance-discounting in advance.


Ambrose Upton Gledstanes Bury: Surely.


Edward Joseph Garland: So the banks for private profit very cleverly use their power under this vast monopoly to defeat the intention and spirit of the act itself. Is that fair or right?


Mr. McMILLAN:: That is what the banks try to do here, but we will not pay the interest in advance.


Edward Joseph Garland: There you see . the spirit which is being developed as a result of this oppressive action by the banks. That spirit will grow more and more among business men and manufacturing interests as [DOT]they feel the steadily growing pressure of this practice. The great industrialists are begin-ing to realize it. There was a time, you know, when the captains of industry-they were called capitalists-exercised great control over money and industry, but to-day that power has passed beyond them to a few men. Financial power, concentrated and tremendously effective, controls industry itself, and rapidly our business men are realizing that to-day. The interest rate is practically in the hands of the bankers themselves. It is wrong that that should be so. It is wrong that they should be charging to us in western Canada as high as ten per cent on renewal loans in bad years. Therefore I urge the establishment of some central co-ordinating agency which by competition would prevent any further exploitation of our people in that way. It has been completely successful in Australia, where the Commonwealth Bank has succeeded in reducing the general level of the rate of bank interest.
I simply cite these cases in passing, not urging upon the House, or the committee subsequently, the adoption of any one of these specific plans. I do not like the federal reserve system of the United States any more than other members here do. My chief objection to it is that, although it appears to be sound, it is a bankers' reserve system and is not for the people. There is no doubt that a central bank or some central co-ordinating agency, call it what you may, having the state's interest at heart will have a greater

and wider outlook upon the prosperity and development of this country than have our chartered banks, and would be in a much better position to meet the necessary credit requirements in any district.
Let me ask hon. gentlemen this question In western Canada, particularly the province from which my distinguished friend from East Edmonton (Mr. Bury) comes, we have vast resources available for the development of industry; we have markets for that industry close at hand-we are close to the Pacific seaboard, we are close to the vast market along the western coast of America and in the Orient; we have right under our feet coal in tremendous quantities, we have petroleum, we have gas, we have wood. Why has industrial development not taken place out there to a greater extent? This question I know the hon. member for East Edmonton has asked himself repeatedly. It is natural he should do so. I also have pondered the question. Why has not industrial development been more rapid in those prairie provinces? There are just two reasons: one is, the recent industrial development of eastern Canada; the other is, the banking system of this country. These two factors with their interlocking directorates have resulted in the concentration in two provinces of the Dominion of the vast power of industry and the vast power of finance, with the result that just as soon as a little plant or manufacturing concern starts up in a place like Medicine Hat or Calgary or Edmonton, that industry if not absolutely natural to the district itself, and frequently even if it is, is quickly crushed out by the contraction of credit.
Now, M'r. Speaker, if there is one thing that offends my sense of justice more than another it is that those vast resources which are lying there available to the people of this country are to remain dormant, undeveloped, unprogressive, and we unprosperous, simply because of the concentrated control, under our branch bank system, of that vast power in Toronto and Montreal. The sooner we get away from that the better. The other day we had an excellent debate, and I congratulate hon. members from the Maritimes on their militant, logical and powerful arguments. But they perhaps overlooked this aspect of the matter; the Hon. F. B. McCurdy did not overlook it. The fact of the matter is that in the Maritime provinces just as in the west, their condition to-day is unquestionably very largely due to the fact that they are longdistance customers of our bankers. Let me quote from Mr. McCurdy's pamphlet:
When even the wealthiest banking customer in Nova Scotia to-day applies for a loan, even though fortified

National Banking System
by ample collateral, he is politely apprised that in the ordinary course of the hank's routine his application will be submitted for adjudication to an office several thousand miles away.
Now, is that not enough to arrest the development of any province? The same thing exactly obtains in western Canada. The branch bank managers in Nova Scotia, Prince Edward Island or New Brunswick have a certain discretionary limit, just as they have in the prairie provinces and British Columbia, a discretionary limit within the jurisdiction of gentlemen in Toronto and Montreal. I have a branch bank manager in my own little town, and two years ago he had a discretionary limit of $300. Could anything be more absurd?


Mr. STEWART (Leeds):: Does not the
hon. gentleman know that the same limit applies in Ontario?


Edward Joseph Garland: Yes, but
you are in a different situation, you have the head office immediately at your hand; we have not. You have the personal contact of the head offices in Toronto and Montreal with the individual requirements of industry in Quebec and Ontario, but if you are separated by vast miles of rocks and Christmas trees as we are in the prairies, or by a vast stretch of territory as you are in the Mari times, what is to be done with the situation? The fact of the matter is that the present branch bank system is successful in crushing out individual initiative-that very thing which the hon. member for Fort William spoke of-initiative of men who would gladly take up the banking business in districts like Nova Scotia, New Brunswick, Prince Edward Island and the western provinces. The sooner we recognize these facts the better it is going to be for the country.
The hour is getting late and I know the hon. member for St. Lawrence-St. George (Mr. Cahan) has something to say. I have many other arguments I could use, but I do not wish to inflict them all on the hon. member; I want to see him contribute his quota to the debate. But may I say this in conclusion? Should we in our wisdom reach the stage where we decide that some national banking institution is necessary, the question will at once arise in our minds, what about capital? I made inquiry the other day, and I find that we would have instantly available for the use of any national bank which might be established not only those privileges of

note issue and other matters which are now exploited by the present system, but also some $97,710,189, made up as follows:
Post office savings bank deposits, 1924.. $24,330,486
Dominion government savings	 9,185,377
Other savings banks	 64,194,32$
In addition to that there would be the' provincial government business and that of' the municipalities, which would make an: enormous amount of business for such a bank.
In conclusion let me suggest that at present we have a Department of Finance which receives from the banks annual and semiannual statements. These annual statements have not served any good purpose as yet. The Department of Finance was aware for eight years that the Home Bank, for example, was in an insolvent condition; they had reports to that effect, yet they took no action. Then we have a central gold reserve, which is under the direction of four trustees-and here again we see the control of the banks. One trustee is appointed by the government and the other three are appointed by the Canadian Bankers' Association. We then have the Finance Act, which was probably the most evolutionary and best development which has taken place in our banking system over a period of years. Unfortunately that act was brought in by a Conservative government in an entirely illegal manner. I think they were justified in so doing under those conditions, but the fact should be borne in mind that the very verboten, autocratic and bureaucratic methods condemned by the hon. member for Fort William were used most effectively by a minister of his own government. This is an act for the bankers only; it allows discount privileges to no one else, and should be-amended. We will discuss that question, however, at greater length on a future occasion.
Then we have a treasury board, consisting of the five Privy Councillors, which for some time set an inflexible rate of interest of 5 per cent. A peculiar situation developed then, by which we were paying to the bankers 5J per cent for the money we had borrowed, but we were lending them money at 5 per cent. That was an amazing situation which, I am glad to say, no longer exists. We have also a bankers' association, incorporated by the Dominion and possessing certain supervisory powers, and lastly that new institution whose functions have not yet been examined thoroughly and whose usefulness has not been properly determined, the Inspector of Banking.
National Banking System

My suggestion at this moment is that we should consider the grouping together of these separate functions under the control of a single commission or board, completely free from political influence. The board should be appointed for a number of years and should be enabled to hold office irrespective of what political party may be in power. If that suggestion is followed there is no danger of political interference in this most important matter. That method has been followed succesfully in Australia whei'e, although there have been four changes of government, practically no change in policy has taken place. In the meantime it was found in Australia that the system did not lend itself to proper commercial loans, with the result that they have adopted the idea of the advisory board.
Let me in closing, Mr. Speaker, say that I hope the words of the late Mr. Woodrow Wilson, ex-president of the United States, will be borne in mind by hon. members in discussing this question. Writing in the New Freedom, after relinquishing the presidency, Woodrow Wilson said:
Seme of the biggest men -in the United States, in the fields of commence and -manulfaotnre, are afraid of somebody, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so pervasive, -tha-t they had better not speak above their breath when they speak in condemnation. The "control of credit'' has -become dangerously centralized. It is the mere truth to say that the financial resources of this country are not at the command of those who do not submit to the dictation and domination of small groups of capitalists. The great monopoly in this country is -the monopoly of "big credits."
Mr. C. -H. CAHAN (St. Lawrence-St. George): At this Late hour Mr. Speaker, as it is impossible for this motion to be voted upon, I will not press so strongly as I otherwise intended that the Minister of Finance (Mr. Robb) should not refer it under present conditions to the committee on Ranking and Commerce. We have this session a number of very important measures coming before the House, to which we believe -we can devote a great deal of time and attention in order to expedite the work of the session and secure prorogation at an early date, but I suggest that there is no real reason why this motion should be referred to the com-mitte on Banking and Commerce, and compel us there to listen to such wild and irrelevant propaganda as we have heard this afternoon in this House.

If you will dissect the statements ol alleged fact presented by hon. members you will find that they are very partial and incomplete, or entirely erroneous. Let us take, for example, the federal reserve bank system of the United States. I have had, both in my professional and in a business capacity, to study that system. It is not a national banking system any more than the banking system of Canada is a national system. It is a national banking system simply because its constitution depends upon the legislation of the congress of the United States.


James Shaver Woodsworth: May I suggest-


Charles Hazlitt Cahan: I have only three minutes
left; please let me finish.


James Shaver Woodsworth: I did not suggest
that it was a national banking system.


Charles Hazlitt Cahan: I have heard it suggested in the House that it was a national banking system and according to my notes, the hon. member suggested that that was one of the objects we ought to attain by legislation which might be introduced under the terms of this resolution. The federal reserve boards of the United States are constituted by federal legislation; the banks of Canada are constituted and organized under federal legislation. But every dollar of the capital of the federal banks of the United States is advanced by the banks which have membership in that system. The entire banking capital is provided from private sources.
Then. I think the Federal Reserve Board, appointed as my hon. friend suggested, is a board of supervision; it has no administrative capacity whatsoever and is simply a federal authority supervising the federal system, to see that the federal reserve acts are strictly complied with. As to the boards of the various districts, they are also nominated and appointed, in the majority, by the different banks of the United States. That system has advantages in that country to the south of us where there are some tens of thousands of state banks, and national banks, to the number of thousands.
The resources, on February 1st last, of the federal reserve banking system were SI 18,250,000 of capital paid in, but all privately owned, and it had deposits amounting to $2,270,000,000, but they were all the deposits of the member banks. The United States government, as a government, did not

Questions
own or control a single dollar of those deposits, with the exception of the fact that the United States government temporarily had on deposit $30,000,000 of that $2270,-
000.000 of deposits held by the member banks.
Hon. gentlemen have referred to the Finance Act as if that act, under present conditions, conferred great advantages upon the banking system of Canada. It does in a crisis, but under present conditions there is no lack of credit in Canada. According to the last return of the chartered banks of Canada, dated February 27, 1926, the entire eleven banks of Canada had only $2,000,000 of loans from the government under the Finance Act, $1,000,000 by one bank which I need not name, and $1,000,000 by another bank, two of the smaller banks of the country. But there was no need for larger loans.
Furthermore, hon. gentlemen say that because the banks have the right to issue their own notes, therefore there is a clear gain of the interest upon the entire amount of notes issued by the banks of Canada.


Edward Joseph Garland: We did not say any such thing.


Charles Hazlitt Cahan: Not the hon. member, but
the hon. member who sat beside him, the hon. member for Battle River (Mr. Spencer), suggested in his argument that the act conferred upon the banks of Canada the right to issue money on which they did not pay one cent of interest.


Edward Joseph Garland: Oh no, one per cent per annum is paid.


Charles Hazlitt Cahan: I am not referring to what
the hon. member for Bow River said, but to the argument of the hon. member for Battle River.


Edward Joseph Garland: I do not
think he said that; he knows much better.


Charles Hazlitt Cahan: I should think hon. gentlemen would have known very much better than to have said many of the things which they have said this afternoon, but there is no limit sometimes to ignorance.
The total amount of notes in circulation by the banks in Canada, according to the return of February 27, 1926, was $163,617,467, but at the same time the banks of Canada held of Dominion legal notes, upon which they were receiving no interest whatever,
$164,023,820. Where in that situation do the banks of Canada receive a great advantage by the issuance of their own notes, when at the same time for carrying on their business they have to hold in hand an equal amount practically, within a few dollars, of Dominion legals on which they receive no interest whatever.
As it is six o'clock, Mr. Speaker, I would move the adjournment of the debate.
Motion agreed to and debate adjourned.
At six o'clock the House adjourned, without question being put, pursuant to rule.
Thursday, April 15, 1926.