1931-05-13

[Stage Direction]
First report of the select standing committee on banking and commerce-Mr. Matthews.
Second report of the select standing committee on railways and canals-Mr. Harris.

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

Mr. RALSTON:: 1.	Is it true that the Post Office Department are sending communications to postmasters asking them to prove themselves innocent by signing an affidavit denying political partisanship, and that failure to sign and return the affidavit will result in dismissal?
2.	If any communications relating to the matter of making affidavits are being put out,
Questions

will the Postmaster General lay on the table of the house a copy of the letter which is being dispatched?
3.	To how many postmasters has this been
sent?


Mr. SAUVE:: Dropped.


Mr. CASGRAIN:: The hon. member who put that question, is not in the house. In his absence I think the question should not be dropped, unless some arrangement has been made between him and the minister.


Arthur Sauvé: The question is dropped because I understand the hon. member has asked that it should be.


Joseph Philippe Baby Casgrain: Very well, that is all right.


Mr. SPEAKER:: Dropped.


POINTE-AU-PIC, QUE., SUPERINTENDENT OF PUBLIC WORKS
Mr. CASGRAIN:: 1.	Was Mr. Joseph Villeneuve, superintendent of the public works at Pointe-au-Pic, Charlevoix county, dismissed from his duties?
2.	If so, why?
3.	By whom was he replaced?
4.	By whom was he recommended?


Mr. STEWART (-Leeds):: 1.	No, services terminated on completion of work.
2 and 3. Answered by No. 1.
4.	Appointed by the Civil Service Commission.


ABOLITION OF CUSTOMS PORTS
Mr. EULER:: 1.	How many customs ports or outports have been abolished since July 28, 1930?
2.	What are the names of such ports or outports?


Mr. CAHAN:: 1.	Ports, nil; outports, 4; preventive stations, 6.
2.	New Campbellton, N.S., Port Dalhousie, Ont., Souris, Man., Virden, Man., Lingan, N.S., Port Dufferin, N.S., Vogler's Cove, NS., Sonora, N.S., Mowbray, Man., Sybouts, Sask.


POLITICAL PARTISANSHIP INQUIRY COMMISSIONERS
Sir EUGENE FISET:: 1.	Are all commissioners nominated to inquire into charges of political partisanship appointed by or through the Department of Justice, or independently by each department?
2.	Are these commissioners given a blanket authority to inquire into any case of alleged partisanship, as they think fit, or have they to wait for instructions either from the Department of Justice or any other department, before taking action?

3.	Are their emoluments and all other expenses paid by each department concerned or by the Department of Justice, or are their accounts simply assessed by the Department of Justice and then paid by the departments concerned?


Mr. CAHAN:: 1.	The commissioners are appointed by orders in council upon the recommendation of various ministers.
2.	The instructions to the commissioners are given in their commissions, and vary to some extent. They have to wait instructions from each department in cases concerning that department.
3.	The Department of Justice does not tax or pay the accounts of commissioners for other departments. They are paid by each department separately.
ST. ZACnARIE, QUE., CUSTOMS EXCISE OFFICER


Mr. LACROIX:: 1.	Was Edouard Groleau, customs excise enforcement officer, at St. Zacharie, Quebec, dismissed from the service of the Department of National Revenue?
2.	If so. on what grounds, and on whose recommendation ?
3.	Who was appointed in his stead?
4.	On whose recommendation?


Mr. CAHAN:: 1.	Yes.
2.	On a charge in writing of a member of parliament that to his personal knowledge the officer had been guilty of active political partisanship.
3.	Thomas Chabot.
4.	Appointed by the honourable the minister for a period of thirty days pending an appointment by the Civil Service Commission.


CLORIDORME, QUE., UNEMPLOYMENT RELIEF
Mr. BRASSET:: 1.	What amount was allotted out of the unemployment fund for the municipality of Cloridorme, county of Gaspe?
2.	How many men were employed and for what work?
3.	Is the government aware that the payroll has not yet been paid, although the work was completed in December last?
4.	Will the government give the necessary instructions to have the cheques issued?


Mr. GORDON:: 1.	Cloridorme township $2,800.
2.	388. Road improvements and clearing along river.
3.	Payroll received by Department of Labour April 15th.
4.	Payment of Dominion proportion $2,799.59 mailed to provincial government May 8th.

Questions


QUEBEC-BLANC SABLON, TELEGRAPH SUPERINTENDENT
Mr. LARUE:: 1.	What is the name of the federal government superintendent of telegraphs on the north shore of the St. Lawrence river, from Quebec to Blanc Sablon?
2.	When was he appointed, by whom recommended, and what is his salary?


Mr. STEWART (Leeds):: 1.	J. A. Bilodeau.
2.	(a) February 18, 1929; (b) Appointed by Civil Service Commission following public advertisement for applicants; (c) $3,480 per annum.


MATANE QUE., POST OFFICE CARETAKER
Mr. LARUE:: 1.	When was Louis Gauthier, former caretaker of the post office building at Matane, dismissed?
2.	Was an inquiry held before his dismissal?
3.	If not. why was he dismissed without an inquiry, and at whose request?


Mr. STEWART (Leeds):: 1.	Mav 31, 1924.
2.	Yes.
3.	Answered by No. 2.


THOMAS MARSHALL
Mr. BLAIR:: 1.	Is Thomas Marshall employed by the Dominion government?
2.	If so, in what department, in what capacity, and at what salary?
3.	Was he appointed by the Civil Service Commission, and were examinations held after public advertisement, and an eligible list established in connection with the position which he now occupies?
4.	Was the said Thomas Marshall secretary of the Temiskaming South Conservative Association?


Mr. GORDON:: 1.	Yes.
2.	By the Department of Mines, to assist in a survey of the Canadian coal mining industry being made by the Dominion Fuel Board. Salary $225.00 a month.
3.	No. The appointment was made under the provisions of order in council of November 25th, 1922 (P.C. 2381) and approved by order in council of November 29, 1930 (P.C. 63/2766).
4.	No information.


IMMIGRATION AND MINES EMPLOYEES
Mr. BLAIR:: What are the names, duties and salaries of any employees added to the Department of Immigration and Colonization or the Department of Mines, since August 7, 1930?


Mr. GORDON:: Department of Mines Names-Duties-Salaries
1.	Under Civil Service Act:
L.	M. Kelly, typist, Grade 1	$ 720
*C. E. Best, typist, Grade 1	 720
E.	L. Nichol, typist, Grade 1	 720
J.	R. Kirkconnell, engineer, Mines
Branch, Grade 2	2,220
W. E. White, engineer, Mines Branch,
Grade 1	1,800
A. E. Reardon, stenographer, Grade 2.. 1,080
M.	Saulter, library assistant	1,080
H. W. Warner, stenographer, Grade 2 1,080
L.	S. Russell, Assistant Invertebrate
Palaeontologist	1,080
M.	D. McClure, stenographer, Grade 2. 1,080 M. Y. Crevier, stenographer, Grade 2. 1,080
T. J. Clarke, typist, Grade 2	1,080
*H. B. Moore, clerk, Grade 2	1,080
D. M. Burke, stenographer, Grade 2... 1,080 *J. Caron, stenographer, Grade 2.. .. 1,080 M. S. McCullough, library assistant... 1,080
*J. T. Cody, clerk, Grade 1	 720
*E. A. Trevor, principal clerk	1,920
H. H. Bleakney, engineer, Mines
Branch, Grade 3	2,820
R.	H. Lake, laboratory assistant	1,140
M. W. Currie, clerk, Grade 2	1,080
G.	E. Rickwood, laboratory helper.. ..	720
J. J. R. Cannon, laboratory helper.. .	720
F. J. L. Casey, laboratory helper.. .. 720
S. R. G. Webb, laboratory helper.. .. 720 A. H. Seaton, laboratory helper		720
J.	S. C. Perry, laboratory helper	720K.	G. Honeyman, laboratory helper..	720
J. R. Cox, engineer, Mines Branch,
Grade 3	2,820
W. Monson, office boy	 420
W. J. Egan, office boy	 420
2.	Exempt from Civil Service Act:
J. M. Sarsfield, clerk, Grade 4	$1,620
*L. A. Kennedy, private secretary.. .. 2,700 M. D. McLean, special investigator.. . 4,440
T.	Marshall, special investigator (a
month)	 225
G.	E. Fairbairn, labourer	50	an	hourR. F. Dale, labourer	50	"	"C. A. Derry, labourer	50	"	"C. Poapst, labourer	50	"	"J. S. Quinn, machinist	80	"	"*M. Buskard, labourer	50	"	"R. H. Bray, labourer	50	"	"'[DOT]'Note:	Employees marked * have been
separated from the Department of Mines by resignation, transfer, or death, prior to May 9, 1931.
Questions

Department of Immigration and Colonization Name-Duty-Place-Salary per annum
Miss M. Poulin, charwoman, Quebec,
P.Q	S 480
Mrs. Geo. Ampleman, charwoman, Quebec, P.Q	 480
Mrs. A. Vallerand, charwoman, Quebec,
P.Q	  480
Mrs. Henri Roy, charwoman, Quebec,
P.Q	 480
Albert Shield, Immigration guard, Quebec, P.Q	 900
Alphonse Pouliot, Immigration board,
Quebec, P.Q	 900
Arthur Pageau, Immigration board, Quebec, P.Q	 900
L.	Pascale, Immigration board, Montreal, P.Q	 900
J. Quigley, cleaner and helper, Montreal, P.Q	 900
Mrs. M. G. Starke, senior matron, Montreal, P.Q	 900
C. Lauziere, Immigration inspector,
Philipsburg, P.Q	1,500
P. L. Baldwin, Immigration inspector,
Stanhope, P.Q	1,500
Miss M. Smith, clerk, Ottawa, Ont. .. 1,680
H.	C. Kennedy, stenographer, Toronto,
Ont	1,080
0.	Cromar, Immigration inspector, Windsor, Ont	1,500
J. M. Madden, Immigration inspector,
Windsor, Ont	1,500
H.	Maw, Immigration inspector, Windsor, Ont	1,500J.	A.	Alton,	Immigration	inspector,Windsor, Ont	
1,5001.	B.	Potvin,	Immigration	inspector,Windsor, Ont	1,500L.	T.	Young,	Immigration	inspector,Windsor, Ont	
1,500
W. L. O'Neil, Immigration inspector,
Windsor, Ont	1,500
A.	L.	Brown,	Immigration	inspector,
Windsor, Ont	1,500
H. Mansfiield, Immigration inspector,
Windsor, Ont	1,500
L.	H.	Marley,	Immigration	inspector,
Windsor, Ont	1,500
L. C. Goddard, Immigration inspector,
Windsor, Ont	1,500
F.	C.	Walker,	Immigration	inspector,
Windsor, Ont	1,500
Miss F. L. Litchfield, stenographer, Winnipeg, Man	1,080
T. W. Pickersgill, fireman, Winnipeg,
Man	1,140
R. Dutton, stenographer, Calgary, Alta. 1,080 Miss M. Page, stenographer, Calgary,
Alta	 720

H. J. Daney, caretaker, Edmonton, Alta. 1,200 W. H. Browness, Immigration inspector.
Kingsgate, B.C	1,500
Miss D. M. Blackburn, stenographer,
Vancouver, B.C	1,080
Miss E. G. Rose, stenographer, Vancouver, B.C	 720
All of the above appointments at Windsor are due to the opening of the new tunnel. All the other appointments referred to are replacements with but five exceptions.



ST. LUC-STE. GERMAINE MAIL CONTRACT

Mr. BOULANGER:: 1.	Is the carrying of mail from St. Luc to Ste. Germaine, in the county of Dorchester, given by contract?
2.	If so, when does the present contract expire ?
3.	Does the government intend to renew said contract with the present holder?
4.	If not, have tenders been called . and
received ?
5.	What are the names of the tenderers and the amount of each tender?
6.	To whom ivas the contract granted?


Mr. SAUVE:: 1.	Yes.
2.	20th May, 1931.
3.	No.
4.	Yes.
5.	Adelard Cote, Lac Etchemin, $600; Alfred Mercier, Dijon, S750; Napoleon Gosselin, Dijon, $780; Vve. Frangois Laflamme, Dijon, $850; Camille Pouliot, Dijon, $870; J. Ludger Audet, St. Luc, Dijon, $875; Rosaire Bolduc, Lac Etchemin, $1,000; Philemon Lecler-c, Lac Etchemin, $1,150; R. Choinard, $750.
6.	Adelard Cote.



WATERHEN LAKE DRAINAGE

Mr. MOTHERWELL:: 1.	When was the contract let for draining Waterhen lake in northern Saskatchewan?
2.	Who w as the contractor and what was the
cost ?
3.	What was the acreage reclaimed?


Mr. MURPHY:: 1.	October 26, 1920.
2.	(a) Lount Engineering Company; (b) $186,911.21.
3.	13,880 acres were dewatered.



LITTLE CASCAPEDIA, QTJE., POSTMASTERSHIP

Mr. MARCIL:: 1.	Hns an investigation been held in the Little Cascapedia post office, county of Bona-venture?
2.	If so, by whom, and with what result?

Motions for Papers


Mr. SAUVE:: 1.	Yes.
2.	By commissioner Gerard Simard who found the postmaster guilty of active political partisanship.



BONAV'ENTURE, QUE., POSTMASTERSHIP

Mr. MARCIL:: 1.	Has the postmaster of Bonaventure, Quebec, been dismissed, and if so, for what reason?
2.	If an investigation was held, by whom was it held and what was the result?
3.	Has an appointment been made? If so. who recommended the new postmaster?


Mr. SAUVE:: 1.	The postmaster's dismissal on account of active political partisanship has been authorized by council but not effected yet.
2.	An investigation was held by commissioner Gerard Simard who found the complaints founded.
3.	No.



MATAPEDIA INTERPROVINCIAL BRIDGE

Mr. MARCIL:: 1.	How much was expended on the Matapedia interprovincial bridge during the fiscal year 1930-1931, for materials and wages, respectively?
2.	What was the amount paid the foremen of this work, who were they and what amount was received by each?


Mr. STEWART (Leeds):: 1.	Materials, S6,194.57; wages, $6,420.25.
2.	John A. Adams, $290; Alexander Pratt,



$200. NATIONAL DEBT

Mr. MACKENZIE (Vancouver Centre):: 1.	What was the national debt of Canada as at Decemer 31, 1930?
2.	How much of this sum is owing to Canadian organizations, corporations or individuals?
3.	How much is owing to other portions of the British Empire?
4.	How much is owing to foreign countries?


Mr. BENNETT:: 1.	Funded debt of Canada, $2,354,705,224.46.
2,	3 and 4. Funded debt is payable as follows: in Canada, $1,777,123,188.07; in London, $311,668,136.39; in New York, $265,913,900.



UNOPPOSED MOTIONS FOR PAPERS


Mr. TETRAULT:: For a copy of all documents, letters and correspondence, in connection -with indemnities to be paid by the federal government for slaughtered animals in the province of Quebec,
under the system of reserved zones, since the establishment of said system; also a return showing the number and the average indemnity of the slaughtered animals by counties, and the average indemnity per head of cattle ranging from the age of one, two, three and over, for registered animals and cross-breeds.


Pierre Édouard Blondin: Dropped.



DEPORTATION OF AUGUST GADERT

Mr. HEPBURN:: For a copy of all correspondence, reports, other documents, on file in the Department of Immigration dealing with the deportation by United States authorities of one August Gabert, formerly of Toronto and Welland, to Germany, and with the pending deportation of his wife, Bertha, to the same country by the Canadian authorities.



DOMINION CENSUS

Mr. TOTZKE:: For a copy of all schedules, portfolios, instruction books, and generally all the formulae and instructions issued by or to the Dominion Statistician, the census commissioners and census enumerators in connection with the taking of the decennial census of 1931, together with schedule of fees payable to commissioners and enumerators.



ROUYN MINES RAILWAY COMPANY

Mr. NICHOLSON:: For a copy of all orders in council, agreements, and other documents, relating to or in any way connected with the organization of the Rouyn Mines Railway Company, the construction and operation of the said railway and the leasing of the same by the government of Canada from the Rouyn Mines Railway Company and to the Canadian National Railway Company;
Also a copy of all correspondence between the Prime Minister of Canada or any member of the government and the promoters, directors or officers of the Rouyn Mines Railway Company or the executive or any officer of the Canadian National Railway Company in any way relating to the financing, construction and operation of the said railway;
Also a copy of correspondence, letters and telegrams between the government of Canada and the government of the province of Quebec, the Noranda Mining Company or any other person or persons relating to the subsidizing or bonusing of the above railway.



MOTIONS FOR PAPERS


Mr. McINTOSH (for Mr. Howard):: For a copy of all correspondence and other communications between the Minister of Immigration, Ottawa, or his officials, and the immigration officials at Lake Megantic, in the county of Compton, Quebec, regarding the deportation of Robert Campbell from Lake Megantic to Glasgow, Scotland;
Also a return showing upon whose recommendation this man was deported and who lodged the complaint against him.
Privilege-Mr. Young


George Gordon: Mr. Speaker, I have no
objection to tabling the papers in connection with this motion, except as to the last part, namely:
Also a return showing upon -whose recommendation this man was deported and who lodged the complaint against him.
I do not think it is advisable in the public interest that information of this character should be published, because in many cases if the informant knew that his name would be made public the information would not be given. Therefore in regard to the latter part of the motion I take the position that the return will not be made.


Mr. POWER:: The member in whose name the motion stands is not here, but I happen to know something of this particular case, having had some correspondence on it myself. I do not think the minister is correct in taking sucih a stand. The deportation of a British subject is a serious matter, and all the circumstances of the case should be developed in the house.


Pierre Édouard Blondin: Is it the pleasure of the house to adopt the motion?


Mr. BENNETT:: Not unless it is amended. The mover is not here anyway.


Pierre Édouard Blondin: In the absence of the
mover the resolution will be allowed to stand.
Motion stands.



BLACK LAKE, QUE., PUBLIC BUILDING

Mr. ROBERGE:: For a copy of all orders, correspondence, reports, memoranda and other documents in the possession of the government or any member thereof, written by any member of parliament, minister of the crown or any other person, regarding the decision of the Minister of Public Works preventing the construction of a public building at Black Lake, Quebec, for which a sum of $26,000 was voted in the estimates of the year 1930-1931.


Richard Bedford Bennett: Mr. Speaker, this motion can hardly be said to conform to the rules of the house. It assumes that letters have been written for the purpose of preventing the construction of a certain public building. If my hon. friend would change bis motion to read, "relating to the construction of a public building at Black Lake, Quebec," I think he will make his motion entirely in order; but as it stands it assumes something as a fact that has not been established.


Pierre Édouard Blondin: Shall the resolution as
amended carry?
Motion as amended agreed to.

PRIVILEGE-Mr. YOUNG


Mr. E. J. YOUNG (Weybum):: Mr. Speaker, I rise to a question of privilege. In votes and proceedings on Monday the 27th of April, at page 125, the following resolution appears:
Order of the house for a copy of all correspondence exchanged between any or all of the Canadian oil refining companies and any department of the government, since May 1, 1930, in regard to the importation of oil or oil products.
That resolution was accepted by the government and passed unanimously by this house. Yesterday we received an answer from the Commissioner of Customs which I will read:
No period is stated, but in any case, it is contrary to the established policy of the Department of National Revenue to give information which would disclose the customs transactions of individual concerns.
Here we 'have, Mr. Speaker, an order of this house, passed unanimously, instructing the officers of the crown to supply us with certain information, and we find a civil servant, sitting in his castle over in the customs building, snapping his fingers in the face of parliament and defying its order.


Mr. HARRIS:: I ask the indulgence of the house to revert to the order of presenting reports.


Edward James Young: Mr. Speaker, I should like
to ask the Prime Minister (Mr. Bennett) if he wiill take the matter up and see that the information is supplied to the house.


Richard Bedford Bennett: Mr. Speaker, under the rules no debate is possible at this time with respect to this matter. I would assume that the hon. gentleman knew this, and I doubt whether he should have brought it up. There is a time and place for it, and I do not propose to debate it now. Observance of the rules of the house, as the right hon. leader of the opposition (Mr. Mackenzie King) observed the other day, is somewhat important, and there is a responsibility resting upon whoever is for the moment the leader of the house to see that the rules are observed, and when in opposition I ventured to point out the desirability of that practice being observed. There is a tendency, as may be noticed, to disregard the rules. I shall endeavour as long as I am here to see that the rules are observed. If the house desires, by unanimous consent, to depart from them, that of course is within the discretion of the house, the rules being made merely for the purpose of expediting the transaction of business. In this instance

National Bank-Mr. Coote
my hon. friend from Weyburn (Mr. Young) has raised a question of very serious concern, it touches the whole conduct of public business, and I prefer to deal with it in the manner prescribed by the rules.



NATIONAL CENTRAL BANK


Mr. G. G. COOTE (MacLeod) moved:: That, in the opinion of this house, there should be established in Canada a nationally owned central bank.
He said: Mr. Speaker, the question of establishing a central bank in Canada has been before the country and before this house for the past twelve years. As long ago as 1918 the then, president of the Royal Bank was reported as being strongly in favour of the establishment of such a bank. The Canadian Bankers' Association, I believe, have always been opposed to this proposal officially, and have thrown cold water on it, so that it has not made much headway in this house. But I believe there is a large and growing body of opinion in Canada in favour of the establishment of such a bank, and that the present would be a very opportune time to raise the question.
Of late some financial papers have been urging the establishment of a central bank, and some of our eminent economists have also been urging this in leading articles in the press. Both Professor Day of McGill and Professor Curtis of Queen's university have written some very interesting articles dealing with this question, and recently I had the pleasure of reading an article by Miss
M.	L. Savage, of McGill university, dealing with the question of credit control in Canada, in which she strongly urged the establishment of a central bank. I should like to quote the foreword to this article by Miss Savage. It says:
It is estimated that at least ninety per cent of the business of Canada and the United States is carried on by means of credit and credit instruments. For this reason credit is sometimes described as the life blood sustaining the business body. Decrease its flow through one member and it languishes; divert it and it dies. A good system of creating _ and distributing credit is therefore of prime importance in the economic development of the country.
The creation, control and distribution of [DOT]credit are the most important factors in our modem business life, and credit no longer should be left to take care of itself; it should be intelligently and scientifically controlled. The responsibility of providing adequate credit facilities in Canada rests on this parliament.
The chartered banks of Canada, which are established under an act of parliament, until 1914 were practically the sole source of credit for business in this country, but in that year the Finance Act made available to the banks the full credit of the country and furnished for the first time in Canada what amounted to a rediscounting agency for our chartered banks.
I should like to quote the words of Sir Thomas White, who introduced the Finance Act of 1914, in a speech in explanation of the reason for the introduction of the measure. This quotation is taken from Hansard of 1924, at page 3936. Sir Thomas said:
We said to the banks: The Dominion government will loan you in dominion notes, which are legal tender, twenty-five, fifty million dollars; we put no limit, if you need it, you probably will not, but if you do, we will loan without limit on securities approved by the minister. You bring in high class securities, or commodity bills, because they represent their full value in goods, and we will lend to you at 5 per cent dominion notes that will make you liquid, and you need not worry about your reserves. There was mo more panic after that announcement was made. From that day to this there has been the utmost confidence in the Canadian banking situation, no sign of panic. That gave flexibility to our banking system, made our bankers Confident that they could meet any situation that could arise, and, of course, they could give the public very much more extensive credits than they otherwise would have got.
In order to give the house an idea of the extent to wihich the facilities afforded under this act have been used by the banks, I should like to place on Hansard a statement of t'he amount of advances under this act to the chartered banks, outstanding on the 30th of November of each year from 1914 to 1930.
If a central bank were established in Canada I presume it would take over many of the duties which are now carried on by the Department of Finance, including the administration of the Finance Act. The bank also could assume the duties now carried on by the trustees of the central gold reserve, and provide a more efficient system of inspection of banks. This bank could act as the fiscal agent of the government and the officials of the bank would be able to advise the government at all times with regard to financial matters. Such a bank would provide us with a national bank note issue and might possibly take charge of the issue of Dominion notes for the government. It would also take over the administration of the post office savings bank. The control of this bank should be vested in a board representative of the various industries in Canada, on which board the government should be represented as well. Such a bank

National Bank-Mr. Coote
would enable us to mobilize all our credit resources in Canada to a greater extent than has been possible in the past, and should provide intelligent and effective control of credit in the interests of the people of Canada.
The principal business of the central bank, of course, would be to take over the administration of the Finance Act. It is a matter of extreme importance to the people of Canada that rediscounting under this act should be under the most careful and intelligent control, and that any board entrusted with that control should be served by the best experts obtainable. The official attitude of the banks towards this question, I think, always has been that the Finance Act made it unnecessary for us to have a central bank in Canada, but our bankers are overlooking the most essential service which such a central bank could render to this country. In a book published recently, entitled "Central Banks," by Kisch and Elkin, the foreword for which is written by Sir Montagu Norman, the chairman of the Bank of England, who I suppose is regarded as one of the greatest authorities in the world on financial matters, I find these words, at page 149:
The preservation of stable prices in association with the maintenance of stable foreign exchange is the great service which the world hopes to receive from a sound central banking policy conceived and carried out in concert between the central banks.
I am quite sure that anyone who has examined the workings of the Finance Act since 1914 will agree that in the operation of the act, no effort has been made to secure stability of the price level. How can Canada do her share in achieving this stable price level for the world unless she has a central bank to represent her? In the article by Miss Savage, which I have already mentioned, dealing with the question of credit -control and price levels, she points out that such control cannot be exercised without a careful analysis of the price level, and that no attempt is being made to exercise such intelligent control by either the bankers' association or the Department of Finance. She refers to the evidence given before the banking committee in 1924, and I think I cannot do better than quote briefly from that evidence. This will be found in the journals of the House of Commons for 1928, at page 54, and the journals for 1924, at page 296.


Mr. GEARY:: Would the hon. member
mind telling me to what act he is referring in 1914? Surely he means the Dominion Notes Act and not the Finance Act.


George Gibson Coote: No, I mean the Finance
Act. The deputy minister was being examined before the committee, and he said:
Q. Do you have a special knowledge of the problems, for example, of inflation or deflation?-A. I do not consider myself an expert, but I naturally have a little experience and knowledge of it.
Q. Do you recognize the interest rate, that is, the raising and the lowering of the interest rate, as an effective instrument, not perhaps thorough, but an effective instrument to cause deflation or to assist inflation?-A. Not in that light, no. It has always been considered as meeting the needs of the banks in their commercial business and work outside in the business world.
The assistant deputy Minister of Finance, before the same committee, in 1928, said:
The Finance Act has been used very little by the banks in the last few years, and any change in rate made by the treasury board I do not think would have any effect on the speculators.
To show how badly mistaken the assistant deputy minister was at that time, may I say that the advances under the Finance Act increased from 1927 to 1928 by practically $50,000,000, and from 1928 to 1929 by another $50,000,000, or an increase of $100,000,000 in those two years.


Richard Bedford Bennett: What years did the hon. gentleman mention?


George Gibson Coote: From 1927 to 1928 and from 1928 to 1929, taken as of November 30 in each case.


Mr. CHAPLIN:: What was it in 1930?


George Gibson Coote: It dropped to S38,700,000.
Another of our leading bankers before the committee in 1924 was questioned as follows:
Q. I understand that you disclaim any power on the part of the bankers' association to control credit in respect to inflation and deflation?-A. That is so.
Q. Would you say that it is better that we have an uncontrolled credit system?-A. I would say so.
Apparently it is entirely uncontrolled. Then the question was asked:
Q. Just left anyway it wants to be?

A. The bankers, as bankers, must exercise their intelligence.
The past president of the same association voiced practically the same sentiments in- respect to the control of credit, when he appeared before the banking and commerce committee, in 1928.
The question naturally arises whether the bankers are using their intelligence to increase the profits of the shareholders of the banks or whether they are acting in the best

National Bank-Mr. Coote
interests of the people of Canada. As Miss Savage says:
They base their contentions on the old Smithsonian argument that the bankers, in acting according to their best interests, are incidentally acting for the best interests of all.
Conditions during the past year, however, seem to disprove this contention. I would think that when the banks were acting according to the interests of their clients they would be incidentally acting in their own best interests. There is always a danger that with such a system as we have in Canada, where a few large banks control most of the banking business, the adoption of an unwise policy by one of these banks might be followed by serious consequences to the whole banking system. It would surely be in the best interests of Canada to establish a central bank which could exercise some measure of control over the policy of banks chartered under authority of this parliament. The situation at present seems to be that the Finance Act is meeting the rediscounting requirements of the chartered banks, but not sufficient consideration is being given to the effect of such rediscounting operations. Miss Savage, in referring to this act, says:
Its operations in this respect have apparently necessitated the suspension of the gold standard in Canada.
Under such circumstances, it is vitally important that somebody should be responsible for the intelligent application of some recognized policy of general currency control, both in the present emergency, and in case the same situation should recur in the future. The Finance Act completely fails to provide for such control, or even to suggest its desirability. Moreover, all evidence seems to show that nobody in the banking system has, on his. own initiative, undertaken to apply any general control policy.
It is quite natural, under these circumstances, that thoughtful people, even though they may have the utmost confidence in the excellent abilities of Canadian bankers themselves, are beginning to realize that there is something lacking in our present banking system.
Another matter which is emphasized by so many economists at the present time is the need of cooperation among the central banks of the world to effect economy in the use of gold. Some of the leading authorities who have made a study of the gold situation agree that estimates of the world's gold production indicate that unless the banking institutions institute economy in the use of gold, there will not be sufficient gold to maintain the present price level.	,
Mr. Gustave Cassels states that an adequate restriction of the demand of the central banks for gold reserves is a very important part of the policy which must be pursued if stable monetary conditions are to be restored to the world. He says:
If for the future gold is to attain any stability of value, it is absolutely essential that the central banks should cooperate with one another in suitably limiting the demands for gold reserve.
To those who are interested in this matter I would suggest that they read the interim report of the gold delegation of the League of Nations issued at Geneva in 1930. This committee of the league seem to be quite positive that we may anticipate a reduction in the world's output of gold to take place in the near future.
I do not intend to deal with the question of whether or not Canada should adhere to the gold standard. Whether we do or not, I believe it would be to our advantage in either Case to have a central bank in Canada. If we are to remain on the gold standard, we should have a central bank to take care of all our gold holdings and, particularly, to represent Canada at any meeting of the central banks of the world which may be held to endeavour to arrange a common policy in economizing on the use of gold, and to endeavour to arrange for the free movement of gold.
If time permitted I would like to quote from Professor Curtis, who points out the desirability of a stable price level. He expresses the opinion that some control over the price level might 'be effected through intelligent operation of the Finance Act, and recommends that a central bank should be established to handle the rediscounting which is now done by the Finance Act.
In referring to the operation of this act during the period of inflation in Canada, the peak of which was reached in 1929, Professor Curtis says:
Such a condition Was precisely what developed in 1929, with the result that Canada extralegally, but effectively abandoned the gold standard.
After referring to the fact that apparently no attempt had been made to prevent the inflation, he says:
Another less drastic means of control would have been to increase the rate charged on advances.
Then he goes on to deal with the large increase in loans which took place in Canada in the years following 1926. There is a chart in connection with this article, giving current loans in Canada and call loans in Canada and elsewhere. Professor Curtis proceeds:

National Bank-Mr. Coote

An examination of this chart shows that until the end of 1923 there was a great increase in all of these and then a very sharp reduction. Current loans in Canada were well below the billion dollar mark in 1925, and these increased to a maximum of $1,473,000,000 in 1929. Call loans in Canada, which in 1925 were running around the $100,000,000 mark, increased to $280,000,000 in 1929. Call loans elsewhere than in Canada, which in 1925 and 1924 were below the $200,000,000 mark, increased to $330,000,000.
From this it can be seen that there was a large absolute growth in all classes, with a tremendous percentage growth. There can be little doubt that this extension was brought about by reserves, and it caused a substantial price inflation in Canada and a virtual abandonment of the gold standard. In Canada the maximum rediscountings were ten times that of the Canadian borrowings, which seems to be out of proportion. Clearly some restriction upon the obtaining of reserves is very much needed in Canada.
I anticipate it will be said that I am taking up the time of this house to discuss a purely academic question when I am dealing at such length with the question of price levels and the stability of price levels. Anticipating such criticism, I should like to quote Sir Josiah Stamp, as reported in Commerce of the Nation, February 1931:
A stable price level is the most bitterly practical of all questions.
I could not get anything more practical than that. And Owen D. Young, a prominent financier of the United States says:
Price stability is one of the most important factors facing the capitalistic system.
The Right Hon. Reginald McKenna, former Chancellor of the Exchequer and chairman of the Midland Bank Limited of London, has this to say:
A stable price level is a thing to be desired second only to international and domestic peace.
I do not need further to emphasize the importance of this question. Now I should like
1,0	quote a Canadian banker, and I am glad to be able to offer the testimony of Mr. C. E. Neill, vice president and managing director of the Royal Bank of Canada. Here I wish to compliment Mr. Neill on the speech which he delivered at the last annual meeting of the Royal Bank of Canada in Montreal. It was certainly a very great improvement upon the speeches generally heard at annual meetings of Canadian banks. At this meeting Mr. Neill said:
If on the collapse of the stock market boom the principal central banks of the' world had decided that drastic contraction of currency and credit was not to be permitted, a drastic fall in the price level oould not have occurred.
What has caused all this trouble through which we are now passing but a drastic fall in the price level? He goes on:

Thus the countries with fiat currencies, such as Argentina, Uruguay and Spain are not suffering anything like as acutely as the gold countries.


Mr. GARLAND (Bow River):: Page the Minister of Trade and Commerce.


George Gibson Coote: The quotation continues:
If the central banks of all the countries on a gold basis should deliberately adopt a common policy they could within a certain time lag, raise or lower the price level almost at will. Without a common policy, movements of gold would in due course arrest action of one country not in harmony with the policies of others, although the United States, with a huge stock of gold, could probably afford to loose a quantity which no country or group of countries would be willing to receive. On the other hand, she has during the period of 1921-25 received gold on an unprecedented scale without allowing such receipts to creat inflation.
For the future it is absolutely essential that means should be devised to prevent the drastic changes in the price level which have been characteristic of the period since the close of the war. Such changes in their effect are not much less damaging to civilization than those produced by war.
I do not think a stronger statement could be made to this house than that as to the necessity of preventing these drastic changes. The quotation continues:
To change the present situation permanently it may be necessary to revise the charters of all the principal central banks and to come to some clear understanding regarding cooperation. The object to be attained is quite clear-
I want to emphasize these words-[DOT]
-namely, stability. The artificial exhilaration of inflation, and the agony of deflation must be avoided at all costs. If we go on as we are ait present, prospects over a long period point to further reductions in the price level, depressions and unemployment, such as were characteristic of the period of 1870-1896, but accentuated in the proportion that volume and tempo of business has increased.
That is not a very pleasant prospect, but Mr. Neill suggests a way out through cooperation among the central banks of the world. The quotation continues:
I am well aware that the question of central bank policy and its influence on prices is a much debated one; even in recent times, for example, many bankers in the United States have expressed the opinion that the federal reserve system exercises no dominant influence in the price field. Followed to their logical conclusion on a world-wide basis, these opinions indicate a belief that the stability of the world's medium of exchange is practically at the mercy of the elements; that man is incapable of controlling an instrument of his own devising; and that the instability which for generations has caused untold losses to business and suffering to workers must continue to exert its evil influence as chance dictates. I cannot subscribe to any such views. The situation can be remedied. It must be remedied.
The wisdom of that view must commend itself to all who have given, earnest thought

National Bank-Mr. Coote
155!
to this question. I agree absolutely with Mr. Neill that the situation must be remedied. I believe Mr. Neill would favour the establishment of such a bank, and how else can Canada cooperate in this movement which he suggests unless through such a bank? There is a disposition on the part of many hon. members of this house, and perhaps the majority, to say that the present depression is due to world^wide conditions over which we have no control and, therefore, we must wait until they improve. It seems to me it would be only common sense for us to say that we will do our .part to restore these conditions to their former state, and how else and in what better way can we do that than by the establishment of a central bank in Canada to cooperate with the central banks throughout the world in an endeavour to bring about a remedy for the situation? Canada is almost the only country in the world without a central bank. I have not a complete list, but the following will give an idea of those countries which have central banks:
Australia, Austria, Belgium, Bulgaria, Chile, Columbia, Czechoslovakia, Denmark, England, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Japan, Latvia, Lithuania, Netherlands, Norway, Poland, Russia, South Africa, Spain, Sweden, Switzerland, United States.


Richard Bedford Bennett: Would the Bank of England be regarded as a central reserve bank?


George Gibson Coote: It is generally regarded as
such, and I am treating it in that way; the book from which I took this list treats it in that manner. It is well known that many New York bankers refer to Canada as the thirteenth federal reserve district, and I think there is more truth than poetry in that statement. That does not help us to carry out t'he policy of Canada first about which our Prime Minister is so enthusiastic at the present time.


Richard Bedford Bennett: I did not catch my hon.
friend's last sentence; w'hat is it I am enthusiastic about?


George Gibson Coote: The Canada first policy.


Richard Bedford Bennett: And I will continue to
be.


George Gibson Coote: I hope the Prime Minister
will continue to be enthusiastic, but I think if he would establish a central bank in Canada he would be helping to further that object. Anyone who has made a study of t'he administration of the Finance Act must realize that the present method of control is not very satisfactory. There seems to be no intelligent control over the granting of advances or con-22110- 99J
sideration of the effect which such advances may have upon the general business situation, particularly with regard to price levels.


Richard Bedford Bennett: It is no use for the hon. gentleman to say that a central reserve bank would be better than something else unless he shows wherein it would be better. I should like to know just wherein a central reserve bank would at this time better serve our conditions than the present Finance Act


George Gibson Coote: I will endeavour to do that
in just a moment.


James Dew Chaplin: My hon. friend asks the
government to establish such a bank; will he tell us how to do so?


George Gibson Coote: I do not know whether my
time will permit my dealing with that question, but I will do the best I can. I doubt very much if any attempt is made by those administering the act to ascertain for what purpose the money is loaned and for what purpose it is to be used.


Richard Bedford Bennett: That is always covered
by the' character of the security given to obtain the advance.


George Gibson Coote: I would draw the attention
of the house to section 6 of the act:
Such securities shall be desposited with the minister or with an assistant receiver general; and the minister may request the trustees of the central gold reserves to make a valuation of and recommendation as to the amount which in the judgment of the trustees may properly be advanced on any securities offered in pledge under this part.
Some time ago I was advised that these trustees were t'he Bank of Montreal, the Royal Bank of Canada, the Canadian Bank of Commerce and the Royal Trust Company, the latter being a subsidiary of the Bank of Montreal.


Richard Bedford Bennett: No, not a subsidiary.


George Gibson Coote: These banks are the heaviest borrowers under the act, and it was a very frank admission bv the minister at the time this act was passed that no proper machinery was available for the handling of the administration of the Finance Act; there was no one in the department qualified to place a valuation on the securities which were brought to them and for that reason this section was placed in the act whereby the trustees of the central gold reserve would give this advice. The treasury board is charged with the administration of this act, and the secretary of the treasury board is the real administrative head. If I am wrong in that statement I have no doubt the minister will correct me.
National Bank-Mr. Coote


Edward Joseph Garland: What is his name?


George Gibson Coote: The treasury board is composed of cabinet ministers, who I presume do not claim to be banking experts-as a matter of fact I have heard some of them admit that they were not experts.


Richard Bedford Bennett: May I tell my hon.
friend how this is done in practice. Suppose a bank desires an advance of a million dollars. It lodges with the receiver general's office a million dollars' worth of security and receives a like advance in Montreal or Toronto. As a matter of fact this act has been little used during the past year, but occasionally banks require a million dollars or so, sometimes five millions, and they take the very securities which I urged this country to issue, namely, four per cent treasury bills, and deposit them with the receiver general, whereupon, as I have said, they get a corresponding advance of legal tender to enable them to carry on, and upon which they pay interest. What more than that could a central reserve bank do?


George Gibson Coote: According to the records of
the committee the former deputy minister admitted that he did not know very much about this matter. For many years we have been without a deputy minister.


Richard Bedford Bennett: No, we have not.


George Gibson Coote: The former assistant deputy minister is serving a term in the penitentiary for defalcations from the department. The present method of administering the act is certainly not very satisfactory. No bank would think of running its affairs in the manner in which we administer the Finance Act.


Richard Bedford Bennett: I take strong exception to that statement. I think my hon. friend cannot know how the act is administered. It is done with great precision and the utmost care. If my hon. friend will come with me to-morrow morning, I shall take him to the Finance department and show him how an advance, if one is made,-I do not know if one will be-is made of half a million or a million dollars. The banks as yet are borrowing very little under the act.


George Gibson Coote: I quite realize they are borrowing very little under the act, but possibly in 1908 and 1929 they borrowed too much under the act.


Richard Bedford Bennett: How much did they borrow?


George Gibson Coote: The borrowings amounted to $66,000,000, in November, 1928, and $112,000,000 at the end of November, 1929. I do not know whether that is the greatest amount advanced or not. My idea is that if we had a central bank established in Canada, that bank would be staffed with a few experts just as capable as the experts now in the employ of the chartered banks of Canada. One man said to me: When the banks come to the Department of Finance for a loan under the Finance Act, the department has no experts to advise as to whether the loan should be made or not. I suggest they always have the experts of the banks to advise them. It is clear that is the intention under the Finance Act, namely, that the trustees of the central gold reserve shall advise the Department of Finance at least in regard to the value of a certain class of securities. The act is administered something like a machine. The banks, if they want advances, bring bonds or securities to the department and they receive the advances. I doubt whether in 1928 and 1929 sufficient thought was given to the propriety of making those advances to the banks. I do not wish in any way to be regarded as criticising the banks in Canada generally. I do not know the individual borrowings of the different banks. I know one bank never made use of the Finance Act at all until 1926. Some banks have made more use of it than others. ^ I am not blaming the banks at all. If there is any blame in this connection-and possibly there is none-it would lie with the treasury board. Again I say that the treasury board is not composed of banking experts. The present Minister of Finance (Mr. Bennett), of course, has the advantage over some of his predecessors, in that he knows something more about banking.


Richard Bedford Bennett: May I interrupt my hon. friend? I do not want to curtail his time, but the question he has just asked is a very important one, that is, as to whether or not an inquiry is made as to the use to which the advance is to be put. Is it suggested that under the Central Reserve Act of the United States, if a member bank deposits securities, there is a discretion on the part of the reserve bank to decline to make the advance?


George Gibson Coote: I think there is. It is quite clear there is.


Richard Bedford Bennett: It is never used.


Edward Joseph Garland: It certainly should be.


Richard Bedford Bennett: Why?

National Bank-Mr. Coote


George Gibson Coote: The evidence given by John Skelton Williams, a former comptroller of the treasury in the United States, I think in 1923 or 1924, made that very clear.


Richard Bedford Bennett: That the reason there are so many failures in the United States is because of that discretion?


George Gibson Coote: Bank failures in the United States are due to the business depression through which they are passing in that country. I was interrupted before I got through completing by last point.


Richard Bedford Bennett: I trust my hon. friend will accept my apology for interrupting him.
I had no intention of reducing his time.


George Gibson Coote: Certainly I shall. As far
as we can study the operation of that act superficially from the outside, I think the banks come for the advances when they want them. Of course if they do not want them, they do not come. No thought has been given to this aspect of the oase: Will the granting of this advance affect the amount of credit outstanding in Canada to the extent' of causing an inflation of prices? Will it make possible too much speculation on the stock exhange? I am not giving my own opinion when I say this, but I have been told it by men who, I think, know more about the case than I do, that the stock speculation which took place in Canada in 1928 and 1929 would not have been possible to such an extent if we had not had these borrowings under the Finance Act.
No doubt someone will oppose my proposal because of the cost. Of course it will cost the government of the country something to start a central bank; but it certainly would be money well spent. I think the money which it would cost the government to run this institution would be easily saved if the bank acted as the fiscal agent of the government. Over a billion dollars of our bonded debt matures in the next five years. The refunding of these loans could be handled by this central bank, if it is established, and there is no doubt in my mind that a considerable saving could be effected ii this were done. During the last seven or eight years, no attempt was made by the government to place their bonds in the hands of the small investors of Canada as was done during the war. That is very much to be regretted, and if an effort had been made to place these bonds in the hands of small investors, possibly these people would not have been so apt to speculate with their money.
The average annual income from the Finance Act since its inception has been approximately $1,300,000, and in one year it reached the figure of $3,500,000. It appears to me that the advantages to be gained from the establishment of such a bank far outweigh the comparatively small cost involved. We know that in some other countries the central banks have made very handsome profits. I have not time to give the house an idea of what they are except to state the total earnings of the federal reserve banks in the United States in the year 1927, the last year for which I could find a report of the Federal Reserve board. The total net earnings of all federal reserve banks in 1927 amounted to $593,000,000, divided, in round figures, as follows:
Boston		... $ 40,000,000
i\ew York		. .. 197,000,000
Philadelphia		. .. 52,000,000
Cleveland		. .. 58,000,000
Richmond		. .. 23.000,000
Atlanta		,. .. 22,000,000
Chicago		,. . . 77.000,000
St. Louis		. .. 22,000,000
Minneapolis		. . . 12.000,000
Kansas City		. .. 21,000,000
	. . . 17,000,000
San Francisco.. ..	.. . . 47,000,000
The earnings of the Minneapolis reserve bank amount to $12,000,000, the smallest in the list. I would not suggest that our earnings would in any wray compare with those of the federal reserve banks in the United States, but certainly in the earnings of the Minneapolis reserve bank, there is an indication that a reserve bank in Canada would pay very handsome profits. That is one reason why I would urge that, if such a bank is established, it should be owned by and operated for the benefit of the people of Canada, so that the profits might return to the people who really created them.
I should like to refer to the Bank of International Settlements which was established primarily to facilitate the payment of reparations. I think it is likely to become a clearing house for the whole world. I understand provision is made for a board of governors tc be selected from representatives of central banks of all countries. Canada should have a central bank so that she may be represented at the time when these governors are being selected. It has recently been announced that the British government has been able, because of an arrangement with this bank, to withdraw from New York $100,000,000 in gold which it had been holding in that city. To secure some voice in the affairs of this international bank would be an additional reason for the establishment of a central bank in Canada.
National Bank-Mr. Coote

May I quote again just a paragraph from this book on Central Banks, by Kisch and Elkin? They say:
The contribution that a sound policy on the part of central banks, cooperating all the world over, can make towards creating and maintaining stable conditions for industry and employment is immense. This power is perhaps second only to that of government in the broadest sense, which according as it is directed, wisely or not, affects for good or ill the destiny of whole communities.
In conclusion, I would urge that we immediately set about the task of establishing a central bank here and place Canada in the position where she can do her part towards creating and maintaining stable conditions for industry and employment, the need for which is so apparent to-day.


George Reginald Geary: I would like my hon. friend to clear my mind on one or two points. First, is it the plan that the rediscounting operations to be carried on by the central bank would not be dependent in any way on the maintenance of enough gold to give the required credit against the issue of new Dominion notes?


George Gibson Coote: That would be a matter
of policy. At the present time I am not suggesting any change except that advances under the Finance Act should be administered by a central bank rather than by officials of the civil service as is done at the present time.


George Reginald Geary: My hon. friend's point is
that instead of a board, as we have at the present time, there should be a bank. The bank would perform the same function the board is now performing?


George Gibson Coote: Yes, of course it would have other functions as well. In regard to the Finance Act however, that is correct.


Mr. HACKETT:: Would the hon. gentleman define the word "subsidiary." He has used that word, stating that the trust companies are subsidiaries of the banks. I was not aware of any provision in the Bank Act that provided for subsidiaries of that character?


George Gibson Coote: I simply said that I understood this trust company was a subsidiary of one of the banks. I think the trust company really is owned by the bank; at least certainly it is controlled by it.


Mr. LAWSON:: My interest in the subject matter under discussion prompts me to ask for some information which undoubtedly my hon. friend has. In view of the fact that an 8 per cent rediscount rate with the federal 
reserve bank in the United States, resulting in a call loan rate of at least 4 per cent in excess of that amount, at times did not restrain the orgy of speculation in the United States, on what ground does the hon. gentleman urge that the control of the rediscount rate by a central bank in Canada would in the year 1929 have had that effect?


George Gibson Coote: I think Mr. Neill's statement would almost answer the question by my hon. friend. It was quite within the power of the treasury board to have refused at any time to give advances. Whether by making these loans they were making it possible for speculation to continue and to increase would be a matter for them to determine. .


James Earl Lawson: Then, the hon. member is advocating a control of credit by the present treasury board and not the establishment of a central finance bank for that purpose.


George Gibson Coote: I am advocating the establishment of a bank to do that very thing.


John Thomas Hackett: Does the hon. gentleman think-


Pierre Édouard Blondin: I must remind the house that we are not in committee, and that hon. members are confined to one speech each on the subject before the house. Is the house ready for the question?


George Reginald Geary: Mr. Speaker.


Some hon. MEMBERS:: Order.


George Reginald Geary: The question was not put;
am I in order?


An hon. MEMBER:: With the indulgence
of the house.


Pierre Édouard Blondin: The hon. member has
already spoken on the subject.


Mr. MACKENZIE (Vancouver):: With
unanimous consent I think the hon. member ' might speak.


George Reginald Geary: I did ask a question, but it has been the practice of the house to allow questions during a speech. I do not think a question should be construed as a speech.


Ian Alistair Mackenzie: Unanimous consent.


Pierre Édouard Blondin: I do not rule the hon.
member for South Toronto out of order.


George Reginald Geary: I
may be to some extent trespassing on the good nature of my hon. friend from Macleod (Mr. Coote). I really would have liked to ask him further questions, because I seek

National Bank-Mr. Geary
information; I do not propose to give it. While my hon. friend quotes from Mr. Neill, with whose speech I am quite familiar, he does not draw from Mr. Neill's speech anything indicative of his opinion that the Dominion of Canada should establish a central reserve bank. Mr. Neill has made the statement that all central banks in combination might have some influence, that they might even have an absolute influence on price levels throughout the world. There is nothing incompatible however in that declaration with th(? situation we have at the present time. In effect we have a central bank for all purposes. The treasury board in the Dominion of Canada is in effect a central bank. My hon. friend now seeks to substitute for that treasury board a central bank operated along certain principles which he thinks are not the principles in use by the treasury board and armed with certain powers which he thinks are not the powers of that board. I take issue with my hon. friend because the federal treasury board has as much power as that with which my hon. friend would like to endow the proposed central banks. The only question is: How are those powers being used? I think my hon. friend will agree with me that despite his objection to the gold standard being used in Canada, the fact remains that during the years with which he has dealt we were not under a gold standard at all. As a matter of fact we were nominally under such a standard, but in 1929, according to the London Times, Canada was struck from the list of countries holding to the gold standard. Under the pressure of the war in 1914, the Finance Act was passed, and the passing of that act allowed certain operations which became known as rediscounting. That is, instead of adhering to a gold reserve for the issue of notes we established a procedure by which advances could be made to the banks not on the deposit of gold but on the deposit of securities with the Treasury Board of the Dominion. In the year 1923, those temporary provisions made for the first time in 1914 at the time of the war were to some extent built into our financial structure. They have been acted upon ever since. Since that time rediscounting has been done by the treasury board to the extent indicated by my hon. friend. Are we to establish an institution called the central bank to perform the same functions as those now performed by the treasury board but which is directed to make advances in such fashion or with such care as to ensure the amount of credit so advanced being used in a particular way? I think probably that is the object my hon. friend has
in mind. Over and above all other considerations he would like a credit so created by a deposit of other securities with the central banks to be admitted in certain defined channels, and in no other way. If my hon. friend seeks to that extent to guide the credit used by banks I think he is embarking on a rather perilous journey. I hope this matter receives the careful consideration of not only my hon. friend but of other hon. members in the house or in committee before we attempt to consider what might be done through the creation of a central bank.


Mr. IRVINE:: May I ask a question?


George Reginald Geary: Yes, but it will probably
be a hard one.


William Irvine: Does my hon. friend think
there is a relation between the volume of credit in circulation at any time and the price level at such time?


George Reginald Geary: No.


William Irvine: There is no relation?


George Reginald Geary: No.


William Irvine: Well then, there is no need of a bank of this kind?


George Reginald Geary: I would not want to go so far as to throw my case away by answering my hon. friend without very careful consideration. My remarks should not be dignified by the term "argument." It was called to the attention of hon. members that we could not continue asking more questions because we were not in committee. So in this cursory manner I have spoken shortly to the house on some of the points which arose in my mind while listening to my hon. friend. It does not seem to me that we should think of boldly passing a resolution which might involve us in the actual creation of a central bank without being able to see the path which would lie before us after the establishment of such a bank. I should be very much pleased if some opportunity were given to increase my store of knowledge from that possessed by my hon. friend and others who have given this subject careful study. It seems to me that having introduced this motion he has done that which at the outset should be done, called attention to what in his mind is a great need, and that he would agree that it might be discussed in some other place at some other time. But that of course is at his option.


James Dew Chaplin: Mr. Speaker, during the course of the address by the member for Macleod (Mr. Coote) I asked him a question as to how he proposed
National Bank-Mr. Chaplin

to have this central bank established. I took it from his speech that he expected the government of Canada would go into the banking business. I can say right off as my own opinion that I do not want to see the government of Canada go into the banking business any further than it is in it at present.


Ian Alistair Mackenzie: It is in it now.


James Dew Chaplin: It is in it now quite enough. I do not want any manager of a government bank to decide who is going to be its creditor. I do not think that is a good thing for us to have in this country. I am opposed to the government going any further into the banking business. Who is going to run such a bank? Who is going to be the manager? Who are going to be the officials? Are the appointments to be political? What else can they be? If, on the other hand, the capital is to come from the general public, then I ask: How long is it going to be before the bankers' association or some of its members control this bank? Why, then, the need of it as far as Canada is concerned? I must confess that I have not given the matter a great deal of study, but I am judging it more from what I heard the hon. member say than anything else. Certainly he has given us no clear idea of how the bank itself is to be established; and that I think is the main and the practical thing in connection with the matter.
There is another point. Who is to control the policy of the bank? I asked a minute ago who was to control the giving of credit by a government bank as applied to Canada with the other banks in competition. I assume from what the member for Macleod said that the issue of all paper money would be in the hands of this hank. What effect would that have upon the other banks? Would it tend to make a lower rate of interest, or a lower rate of discount to people who would be borrowers of money? I do not know. I am inclined to think that it would not, but that it would add to the general expenses of the banks at present without doing any good whatever to anyone.


Mr. R. C. MATTHEWS (Toronto East Centre):: Mr. Speaker, I was interested in the address of the hon. member for Macleod (Mr. Coote). At one stage of it I was about to ask him a question, but I decided to abstain because he had already been interrupted, and I did not wish to make any further encroachment upon his time. When he was speaking of the examination of securities offered by banks for rediscount, he made a 
statement to the effect that in Canada in the Finance department there appeared to be no one who was competent to pass upon the value of the securities offered, and the inference to be drawn was that in a country with a central bank that difficulty would not arise. One would naturally conclude that in the United States, for example, where they have experts in charge of the central banking system, that difficulty would not arise. While the hon. member was speaking I happened to be reading an article in The Banker on American banking during 1930. The folfcw-ing paragraph is on the very point that he was dealing with, and that is why I was about to interject a question:
In practice, many of the reserve banks have paid little attention to this question of liquidity,

That is of the securities offered to obtain loans.
-and have devoted themselves entirely to the getting of collateral security to protect the paper they discounted. Indeed, they might as well have made direct loans to the member banks on the notes of the latter supported by collateral, and without any inquiry into the use to be made of the funds by the banks which received them.
That was the very question that the hon. gentleman was discussing. He said that probably the Finance department in Canada made no inquiries as to the use to be made of the funds by the banks that received them. This article says that the United States member banks are open to that very charge. Let me continue the quotation:
As a consequence, the various banks have gone on doing practically as they pleased, with the result that at the opening of the panic they were, perhaps, in an unprecedently "frozen" condition. Thus a situation had arisen which cannot be regarded as other than most regrettable from the standpoint of the central banking system of the country.
It is just on that one point that I have risen to take part in this debate. Without knowing much about it, I would venture to say that the loans made by the Finance department of Canada to the chartered banks would compare favourably, from the standards of security and liquidity, with the loans made by the central reserve system in the United States.


Richard Bedford Bennett: Mr. Speaker, I do not propose to
make any extended observations this afternoon on this question, except to say that I trust the hon. member who has introduced the motion (Mr. Coote) will regard the discussion which has taken place as sufficient for his purposes, for it is a matter that

National Bank-Mr. Bennett
necessarily engages the attention of all governments-governments that are anxious to provide facilities of the very best that it is possible for a country to provide for its citizens.
We have a banking system in this country of which I think we may be fairly proud. That banking system is predicated upon the assumption that the amount of money borrowed from the people-who are the depositors-by the banks will enable the banks to so use it as to have it safe for the depositors when they require it and furnish a maximum of service to the people who are served by the banks. Can anyone say that in a broad and general way that is not the Canadian experience? I think not. In other words, the chartered banks of Canada, deriving their corporate existence from this parliament, and exercising the functions conferred upon them by law, are borrowing money day by day from those who deposit their money with them at their several branches, and that money is in turn being loaned to those who are able to satisfy the banks that there is a likelihood of their paying the money they borrow back to the banks that lend it. I need hardly point out that sometimes there has been a tendency to induce people to believe that banks should lend money regardless of security. How can banks lend money without regard for security if what they lend is only what they borrow?-for the capital of the banks is utilized almost entirely in the legal tenders which they acquire under the statutes and in bank premises. It therefore follows that if Canadian banks were to lend money under such circumstances as would place the loan in jeopardy, or under such conditions as would ensure that the loan would not be repaid, the credit would be frozen and the bank would not be able to meet the demands of its depositors and would fail.
That is what has happened in the United States. That is what happened in the instance to which the hon. member for South Toronto (Mr. Geary) has just directed attention. Do we want that condition in this country, or do we not? That is the real question at the very threshold of any inquiry we may make, and all this complicated discussion which sometimes takes place with respect to banks and their place in the community in my judgment must always resolve itself in the end into this simple, single inquiry:	Has the bank, through its management, had due regard in lending money to the fact that it may be called upon to repay that money to the source from which it was borrowed?
That is the problem, Mr. Speaker, and the whole science of banking is the maintenance of an equilibrium between time deposits and time loans on the one hand and demand loans and demand deposits on the other, and if for a single moment you disturb that equilibrium to the point that you over-loan on the demand side, it is obvious that you cannot meet the demands of the depositors. It is equally obvious that if you make loans for longer periods of time than the life of the deposits you will find yourself in a similar position. Our banking system has defects; no one will deny that. If you are hypercritical you may be able to say that pur system has not done all that we would like it to do, yet our system of branch banks, with the mobility that is possible in the * movement of credit from one portion of the country to the other, makes possible loans being made on a large scale by a branch with very indifferent deposits, insured by the easy mobility of credits from a point where there may be an excess of deposits and very limited loans to the point where there is a demand for loans with limited deposits. That is the strength of our branch bank system.
I need hardly point out that during recent years a strong agitation was carried on in the United States for the establishment of a central reserve or federal reserve bank. The result was that, under conditions which need not be referred to now, a very distinguished financier in the senate of the United States evolved the plan which has taken concrete form in what is known as the federal reserve banks of the United States. Mr. Harding, who oame here at the instance I think of the hon. member for Macleod, pointed out that he did not believe a regional system of reserve banks could be made serviceable to the community in Canada. I suppose perhaps it is for that reason, among others, that the hon. gentleman's resolution provides for a nationally owned central bank for Canada. That looks like one bank. I will not further discuss the branch bank system, except to say that in the United States there is now a growing tendency to have branch banks established; I will do no more than say that in Great Britain, where they have a great concentration of banking power in joint stock banks, which in turn carry on rediscount operations to some extent either through sales to bill brokers on the street or through the bank of England, they have a very large number of branch banks, more numerous even than they are in Canada. The branch bank system, which has worked so well there and, I submit, so well in Canada, from what
National Bank-Mr. Bennett

I have read and from my own view of the situation will I believe be extended in the United States beyond the extent which it now reaches. But in that regard I think it is well to point out that in the year 1930 no less than 1,345 banks suspended payment in the United States of America, and that during the month of January of this year 197 banks suspended. During the year 1929 there were 642 banks suspended.


Ian Alistair Mackenzie: Suspended by whom?


Richard Bedford Bennett: Suspended payment;
that is, they were unable to meet the demands made upon them by their depositors , because of the fact that they had loaned money without having due regard to the relationship between time deposits and time loans and demand loans and demand deposits. During the nine-year period which elapsed between 1921 and 1930 inclusive, a total of 5,642 banks suspended payment in the United States, involving deposits amounting to more than $1,700,000,000.
The history of this country, as compared with that of the United States, I submit has been singularly fortunate, and I can only refer hon. gentlemen who are so doubtful as to the steps we have taken to provide for the contingencies which have been mentioned to a book written by the assistant professor of banking at Columbia university, Professor B. H. Beckhart, in collaboration with Mr. Parker Willis, entitled "Foreign Banking Systems." That book contains these words:
While we know little regarding the policies of the Canadian banks and the methods they employ in exercising credit control, in the sense of lending stability to business, we do know that they support the business man in periods of recession, which, according to Walter Bagehot. is the correct method of crisis financing. We do know that to do this the banks call home their foreign loans and deposits and put pressure, if need be, on the large business man. We do know that the chartered banks have a more or less mechanistic concept of the proportion of cash they ought to maintain to liabilities and that this acts as a check on overexpansion as effectively as would legal minimum cash reserves. Then we know that each bank follows the balance sheets of the others and so develops what might be termed a "balance sheet" concept of credit control. Then at times it seems apparent that the government and the banks have reached a common understanding on loans and investments as during the war period. However, all things considered, we know little compared with our knowledge of the policies followed by the federal reserve banks. But we do know that Canada, whether because or in spite of the stabilizing influence of her banking system, has had more years of prosperity per years of depression than any other nation.
[Mr. Bennett.l
That is the considered judgment of two gentlemen writing an authoritative book upon foreign banking systems. I commend that conclusion to the judgment of the house. But of course, human plans are imperfect, and the establishment of the credit of a people is something more than the mere putting of money into a bank, the withdrawing of it by cheque and the lending of it in the meantime to someone whom you feel certain will return it. I have always thought the sentence uttered by President Hoover not long ago was one which might be well remembered. He said:
It is not possible for the debtor to borrow himself out of debt.
Could a more pregnant sentence be uttered? We have always had in mind in this country the necessity of making provision for expanding credit. How have we done it? We have established the principle of a central gold reserve, a central reserve bank. We have placed the Finance Act upon the statute books. And what are the essential provisions of that act? We have provided by that act that the banks o'f this country that are compelled to provide for the demands of their depositors, and have therefore invested your deposit and mine in sound securities by lending it to their customers, or purchasing bonds, may be able to come to the Finance department and, by depositing those securities, obtain an advance from the Dominion of Canada of its notes, its national notes, its promises to pay-what we call legal tenders. With what result? Let me give an illustration that must suggest itself to most hon. members. A few years ago the Minister of Finance of the day required $45,000,000 with which to meet an obligation of Canada. He did not desire at that moment to make an issue on securities. What he did was to borrow from the banks of this country at 4 per cent and give them the promises of this Dominion to repay in five years. When the banks required additional credit for their customers they deposited those treasury bills at the receiver general's office in any one of the provinces of this Dominion and at once had released to them credit dollar for dollar with the deposit so made. Could anything be more elastic? Could anything better serve the purpose of the customers of the institutions that have credit to grant. During the days when the grain rvas moving and large credits were required, the banks continuously expanded their credit facilities by just such operations as I have referred to.
My hon. friend from Macleod thinks that the Department of Finance has not a proper appreciation of how to conduct business. Well, all I can say is this: that while during

National Bank-Mr. Bennett
the last few months tihe requirements under the Finance Act by the banks have been very limited, there was a time, \yithin the last ten days, when one of the banks of this country required S5.030.900. It merely went to the receiver general's office in Montreal and deposited 85,000.000 of these treasury bills, which it had bought with depositors' money, and obtained release of 85,000,000 of credit of the legal tenders of this country. What could a central reserve bank do more than that? Could it do it as effectively? Could it do it more rapidly, with more expedition, with more certainty, or with greater service to the country as a whole?
Now let us go a step further, because it will be observed that in that case neither the country nor the bank took any risk. The bank had invested depositors' money in the promise to pay of the Dominion of Canada- the collective credit of this country. And that collective credit in the hands of the bank was released the moment it was required, by the deposit of these securities with the receiver general as a pledge against the release of 85,000,000 of legal tender with which the bank could then expand its credit.
My hon\ friend refers to the extent to which this power may be used. Every year the Department of Finance determines the extent to which advances will be made to the chartered banks of this country under the provisions of the act. There is a fixed regulation indicating the extent to which advances will be made on given kinds of security. It is 100 per cent on the treasury bills of this country; it is 90 per cent on Canadian guaranteed securities; it is only 65 per cent on other forms of security about which no question may arise; it is a 20 per cent margin on some forms of industrial bonds. But the regulations-I will not go through them this afternoon-are clear-cut and exact. They provide, for instance, that bills with respect to grain or meat or agricultural products may be rediscounted at that central reserve institution under the Finance Act for the purpose of ensuring a continuous flow of credit at the time it is most required. Thus it is that at the beginning of this year the banks of this country were entitled, if they so desired, upon the determination of those responsible for the conduct of treasury affairs, to $200,000,000 of credit. That is to say, if the various chartered banks of this country had so desired, and had lodged proper securities, the Department of Finance had fixed maxima to which it was considered the banks were justly entitled-in the case of the largest, $40,000,000, and in the case of the smallest,
$700,000, that bank having since been absorbed by another.
So that you had available, through the operations of the Finance Act and through the Department of Finance, over $200,000,000 of credit if it was required. But what is the extent to which it has been used? My hon. friend gave the figures for a number of years. I will 'supplement them, giving round figures in every case. They are:
1918		 $116,000,000
1919		 112,000,000
1920		 123,000,000
1921		 108,000,000
1922		 60,000,000
1923		 40,000.000
1924		 37,000,000
1925		 30,000.000
1926		 28,000.000
1927		 32,000,000
1928		 73,000,000
1929		 112,000,000
1930		 56,000,000
And in 1931 the maximum to date is something less than $15,000,000-$12,500,000, I
believe.


An hon. MEMBER:: Are those the peak figures for each year?


Richard Bedford Bennett: Yes; those are peak figures. Now, why was the peak figure $142,000,000 in 1929? Because western Canada required additional credit and it was there for the asking. There was a large grain crop, demanding additional credit. The tying-up of the movement of grain necessitated that additional credit and it was available under the act to enable the banks to meet the requirements of their customers. The very purpose which my hon. friend from Macleod desires to serve was served by the banks through the operation of that statute. They borrowed this huge sum of $112,000,000, putting up security-not makeshift security but substantial security which the department itself had fixed and determined should be adequate for the purposes intended. Those securities are either, on the one hand, the securities of the country or, on the other hand, first class securities which the bank itself acquired.
You have, therefore, a continuous revolving credit. Look at the operation: acquirement of securities by the bank; deposit of securities with the Finance department; release of credit for an amount varying from 100 per cent down to 65 per cent of the value of the securities deposited. What could be more complete? It may well be that the time will come in this country when it is deemed desirable to expand our present system. I am not saying it will not. I am one of those who believe that you cannot
National Bank-Mr. Bennett


Mr. SPENCER:: Was that the case with the Home bank?


Richard Bedford Bennett: Yes. My hon. friend will admit that this parliament paid certain moneys to Home bank depositors because of the very inspection which I mention. That inspection disclosed a state of affairs which caused the commission to state that it would have been the proper thing to have taken steps to wind up that bank instead of permitting it to go on. Does my hon. friend remember that famous phrase: "a moral claim in equity"? That was the basis of the action taken, and the reason thereof.
But, as I said before, there is still another supervision, a supervision for which perhaps the hon. gentlemen who sit opposite and to my right were to no inconsiderable extent responsible, and for which I think they are to be congratulated, that is, the supervision by the inspector general of banks. I think in fairness it should be said that to no incon-

National Bank-Mr. Bennett
siderable extent the action resulting in that appointment was strongly urged by them upon this parliament. It will be remembered that the general manager of one of our great banks constantly urged that auditors should be appointed-some hon. members will recall that gentleman; he was a Nova Scotian but has now gone to his reward-but that suggestion did not meet with immediate approval, although later on it was adopted. Hon. members opposite urged because of what had transpired that it was desirable that there should be a constant investigation, by some person moving to and fro, of the securities of the banks, and so we have the inspector general. He is constantly on the go and it was largely upon his report, as will be recalled, that the Weyburn Security Bank concluded that they could no longer continue to function because their credits were frozen. In other words, no fresh deposits were coming in and their immediate deposits being invested in loans which could not be collected, they either had to obtain fresh capital from other sources or say to their depositors when they came for their money: We have not got it. After the. inspector general had given his advice, rhey concluded that the best thing to do would be to link up their fortunes with an older established bank able to supply the requisite capital to enable them to continue to serve their customers through that older bank.
There is no lack of supervision of the operations of banks in this country. The inspector general would report to the minister anything out of the ordinary, and the minister, sensible of his responsibility, would take immediate action if it was disclosed that there was such a condition in a particular bank as to cause apprehension on the part, of those whose fortunes were linked up with it, namely, the depositors. Most hon. members of this house will realize that neither the inspector general nor the auditors are greatly concerned with the shareholders; that is not a matter of great public concern, which is purely a question of safeguarding the interests of the depositors. The hon. member for Battle River (Mr. Spencer) has referred to an incident which became so exigent and pressing upon this house that action was taken to provide part of the loss which the depositors had sustained in the Home bank.


Mr. EULER:: How often are these inspections made?


Richard Bedford Bennett: The Inspector General
is continuously engaged in checking the securities of the banks.


William Daum Euler: Could the Minister of Finance say whether there is any definite period of time that should elapse between inspections?


Richard Bedford Bennett: As far as I know the
Inspector General endeavours to see to it that his inspections are made so that there is no longer period of time between them than the average length of commercial paper that is outstanding. The hon. gentleman knows the average length is less than three months because there are so many short date loans. In the course of time the efforts of the Inspector General will have to be supplemented by others. I do not like to take up too much of the time of the house in dealing with this matter, but I might add that with the large number of branch banks, obviously the supervision is exercised not by visiting the branch banks themselves, but by checking the reports of the managers of the banks at the head office. Then the head office operations are of course scrutinized by him in person as well as the character of the securities which are held and the extent to which the deposits of the debtors of the bank are invested in reliable securities so that they may be at all times available to meet the demands of the demand or time creditors of the bank. That is the position. I think it would serve no useful purpose if I were to take up time to elaborate that.
All 1 can say to my hon. friend and the house is this: that without stating for a single minute that the system is perfect, I claim for it the following: First, that for a population of ten million people we enjoy the privileges of a banking system that gives as great security to depositors as it is reasonably possible to have-and unless you have security for depositors, you have no banking system at all and there is no development of the country; that is clear-secondly, that the use to which the banks may put the. securities required for the protection of depositors ensures such an expansion of credit as enables our banks to meet every demand that, has been- made upon them; and never has a request been made for more than 60 per cent of (he amount which,, under the Finance Act we could; advance. I have had some knowledge, secondhand, from those who had learned much of the operations of central reserve banks in other parts of the world. When we talk about state- banks, We are talking about something entirely different from the system that prevails in Canada. A state bank if set up in Canada would not be analogous to the state bank of Finland or-of Jugoslavia or of Greece.
National Bank-Mr. Bennett

My hon. friend I am sure knows that to set up a reserve or central bank such as has been set up in some other countries, would not do a single thing beyond what we are doing now through the operations of the Finance Act without maintaining a bank at all.
I am not, however, closing the door to convictions which may come to my mind with respect to the matter. I want the hon. member for Macleod and the house generally to realize that. I am conscious of the fact that for the last one hundred years the great desire of people on the American continent has been to secure a stable and safe banking system. Think what this means to a country! Think what has happened to the United States in that regard! No theorists' lectures on credits will get away from the simple, single fact that we have had a more stable and safe banking system than most other peoples in the world and the tribute to it which I have just read to the house should convince us we have some reasons for the faith within us with respect to the present system.
One step more and I shall have concluded. As population increases, as the centre of population changes, as the centres of wealth change, it may well be that the system we now have may not be found to work as conveniently as is desired. When that time comes, time has come for a change; but in the very nature of things a Conservative does not believe in change for the sake of change, nor does he believe that it is essential to make a change merely because you may alter a name. I think most of us believe with Tennyson;
That man's the true Conservative
Who lops the moulder'd branch away.
And there is no suggestion of our Finance Act and the operations under it being properly designated as a mouldered branch. Effective and efficient, vital, a part of the organization of the financial structure of this country, it serves the people of Canada steadily and well, and if there be opportunities, as there will be, to improve from time to time the personnel of those who are charged with the responsibility of the Finance department -and I hope to make a change myself at a not distant date-I am sure the house will agree that those changes will always be forthcoming and the necessary action taken. But I ask my hon. friend not to press his motion to a vote at this time because this country is not prepared to make the change that his motion involves, and until it is apparent it is, there is no good reason why the action should be taken. But I assure my hon. friend I am sufficiently alive to human progress to

realize that time may come, and if when it comes, we are here, as we probably shall be half a century hence, that action will be taken.


Mr. CAMPBELL:: The Prime Minister
gave an illustration of the federal treasury borrowing $40,000,000 from the banks on treasury bills. Then I think he said that the banks came back to the government under the Finance Act and secured 100 per cent back again. I wonder just what difference it would make in the system if you cut out the third party to the transaction altogether, and if the government itself secured it by coming to parliament in a particular case of this kind without having the bank in the picture at all. Would that make any particular difference?


Richard Bedford Bennett: I had expected someone would ask some such question as that, and it involves a discussion that perhaps is not entirely pertinent to the resolution under consideration.


Milton Neil Campbell: I realize that.


Richard Bedford Bennett: Possibly when the Finance estimates are under consideration I shall take some time and give my hon. friend a complete answer to the question as I understand it. I think that would suit him better. I have under my hand the figures which would enable me to give the answer, but in view of the fact that my hon. friend would desire, as I go along, to ask questions and because he could not well do that with the Speaker in the chair, if he will defer the matter for the moment until the estimates of the Finance department are under consideration, I shall give him the answer then, if that is satisfactory.


Milton Neil Campbell: That will be quite satisfactory.


Henry Elvins Spencer: Mr. Speaker, first of all I wish to congratulate the hon. member for Macleod (Mr. Coote) on the able address he delivered this afternoon stating the reasons why a central bank should be established in Canada. I was delighted to see the keen interest he invoked among the various members of the house, and particularly on the government side, with regard to his address. I must congratulate him also on having drawn out the Prime Minister (Mr. Bennett) by this address to make certain statements which, although we may not entirely agree with [DOT]:hem, are at least interesting. The Prime Minister, in referring to the address of the hon. member for Macleod, laid a good deal

National Bank-Mr. Spencer
of stress on the issue from the treasury board under the Finance Act. He spoke at length regarding the failure of various banks in the United States, but he did not say a single word about the most important point of the address of the hon. member for Macleod, regarding some action to control price levels, which I think, was the kernel of his address this afternoon. He wanted to avoid the continued drawback of extraordinary inflation and deflation, and with that idea in mind he suggested the formation of a central bank of rediscount in Canada so that by the businesslike regulation of currency and credit such a condition as we have at the present time could be avoided.
There seem to be two distinct and basic schools of thought with regard to this money question. At least some hon. members on this side of the house in connection with our banking system of to-day-which in reality is a system of bookkeeping-say that the loan creates the deposit. According to the Prime Minister however, and some who agree with him, the deposit creates the loan. I will have more to say in that regard later. For a moment I would like to refer to a book written by Sir Thomas White entitled "Wartime Finance" wherein he stated that during the war years Canada not only surprised herself, but surprised the world when her people subscribed in war loans twice as much money as all the money in Canada and then had ample money to carry on her growing business. I wonder how that was done if only savings deposits were loaned.


Edward James Young: How was it done?


Henry Elvins Spencer: I will tell you later. My hon. friend from Macleod referred to the fact that so far as 'banking is concerned the treasury board did not do a great deal. As a government and a country-except in a small way- we 'have small banking facilities through the treasury board under the Finance Act. In my opinion the banks come into this picture rather largely. So largely in fact do they appear that they are all-powerful, and it is because they are all-powerful that a great many of the public characterize them as the unseen government. We know full well that when a person goes to a private bank he is very much at its mercy if he wishes to make use of his credit. So, to a certain extent, is a country, if it has no banking facilities and has .to go to those same 'banking concerns from time to time to secure various lines of credit. When all is said and done the banking institutions of this country are of a private nature. I admit, and I am very glad to admit,
that our banks are in some respects very wonderful. They are probably as good as banks anywhere in the world as far as their interests are concerned. I will not say as much however when I consider the interests of the public. If in dealing with governmental or state affairs the banks find private and public interests clash, then certainly their private interests will not be neglected. Canada's business turnover, in round figures, amount to about 8400,000,000. Surely the handling of such an amount should be through a bank of our own. Bankers are not in business for their health; they are there for the profit which can foe derived from their operations, and there is no reason why we could not do our own banking through a central bank. My hon. friend from Lincoln (Mr. Chaplin) said he would foe afraid to go to such an institution to obtain a line of credit. I do not suggest for a moment that a central bank should give credit to an individual, but as a county and a state I think the time has arrived when we should do our own banking. Money is largely a matter of created credit; it is drawable by cheque. In 1923 Sir Edmund Walker speaking before the banking and commerce committee stated that ninety-six per cent of our transactions in Canada were carried out by the chequing system. Credit is largely created against securities which are lodged as collateral. For the benefit of the hon. member who asked a question a minute ago I might say that credit is secured in the following way: A friend of mine went to a branch bank some years ago, during war time, and wanted to buy certain victory bonds. If necessary he offered to put up extra collateral to cover the loan. He was a wealthy man, but had no cash. The banker said, "That is perfectly all right; we will take your extra collateral. However, the minute you buy those bonds turn them over to us as security and we will see that you get the loan." The purchase of the victory bonds was made possible by the fact that he had security to put up to get a loan backed by the victory bonds themselves. Until the loan was repaid the bonds were not his and if repayment was not made they were sold and the loan liquidated in that way. In my opinion it was not necessary to have a savings deposit ready to make it possible for that particular man to buy his bonds. As I have said, credit is created largely against securities lodged as collateral. All federal securities are gilt-edged. There is no possibility of loss. The cost of bookkeeping which, as I have said, describes our banking system, is less than half of one per cent. To-day even on treasury bills we are
National Bank-Mr. Spencer

paying seven or eight times that amount. The Prime Minister referred to a time in 1928 when the government of the day, through the Minister of Finance, gave treasury bills to the extent of $45,000,000 to the banks in Canada. In turn they charged 4 per cent for their bookkeeping. As the Prime Minister said they had the opportunity of bringing those treasury bills back and having Dominion notes advanced to them.


Richard Bedford Bennett: For which, I should have added, they paid interest.


Henry Elvins Spencer: 
Richard Bedford Bennett: The treasury board is
composed of members of the cabinet.


Henry Elvins Spencer: Yes, I understand that.
Here again, without being in the least critical of cabinet ministers, I question whether any of them have ever made a study of this problem, and they certainly cannot do so after they become ministers, because then they are far too busy. As the hon. member for Macleod said, under the Finance Act the treasury board is authorized to ask the advice of the trustees of the gold reserves as to what value it shall put on certain securities. Now, of the trustees of the gold reserve a majority are representatives of the chartered banks, and as the hon. member who introduced this subject said, the banks with members on that board at the time he mentioned were the largest borrowers under the act. Therefore they were in many cases putting a value on their own securities. That being so, it seems to me the treasury board is relegated to second place more or less in relation to the bankers association, and I for one object to this. No matter what party is in power, the government represents the whole country, and I object to the government taking second place to any private institution, even though it be the Bankers' Association of Canada.

National Bank-Mr. Spencer


Richard Bedford Bennett: Perhaps my hon. friend
would not mind saying just what he means by that.


Henry Elvins Spencer: Section 3 of the Finance
Act makes it possible for the minister to request-
-the trustees of the central gold reserves to make a valuation of and recommendation as to the amount which in the judgment of the trustees may properly be advanced on any securities offered in pledge under this act.
I understand-I shall be glad to be corrected if I am wrong-that a majority of the men now acting as trustees of the gold reserves are representatives of the chartered banks. That being so, when they put a value on securities they are in effect valuing securities that they themselves are pledging to the treasury board.


Richard Bedford Bennett: My hon. friend from
Battle River has hardly done justice to himself. That is only in the event of any difficulty arising, because the transaction has long been completed before that. The minister may ask the trustees to value the securities, but the rules and regulations fix the margin to 'be maintained before the advances are made. That is only an additional assistance to the minister if he desires to use it. I am taking up a little of the hon. member's time.


Henry Elvins Spencer: It is all right.


Richard Bedford Bennett: It is just as though the
banks sent an inspector to see a lot of cattle to determine whether or not they are really worth what has been suggested by their owner. So in this case where we have fixed rules as to market values, we also have the expert opinion of those who know these securities as to whether or not the minister's judgment is right. That is all.


Henry Elvins Spencer: 1 am glad to get the information from the Prime Minister, but I hardly imagine that any of the banks whose securities were brought to the treasury board would put the value of those securities any lower than the value that had been placed upon them by the treasury board.
It does seem to me-and I am supporting the hon. member for Macleod entirely in this -that the government of Canada might well have a monopoly of all note issues. First of all, because it is a government prerogative; secondly, the issue of private bank currency is unfair against the savings bank depositors. I say this because in the case of the failure of a bank the notes are a first call on the assets of the bank, and the depositors rank about fourth or fifth with respect to their
claims. Now, there is a clause in the Bank Act as to double liability of the shareholders, and this is supposed to provide ample protection to depositors; but that double liability does not always sufficiently protect 'them, as hon. members will find by referring to an answer that appeared in Hansard a few days ago in reply to a question of mine respecting the Home bank. The shareholders of that bank did not come through by a long way with their double liability. There is also a note circulation redemption fund which is supposed to take care of such an emergency. But the note circulation redemption fund, which I believe sometime ago amounted to over $6,000,000, can be drawn upon by a bank only to the extent of the money put into it by the individual bank. I believe I am correct in that statement.


Richard Bedford Bennett: No, the whole fund is
available for the redemption of those notes. I am glad my hon. friend brought up this matter; I may say to him that in fifty years not a single dollar has been lost in this way. It does not matter if the bank fails; the bank note is payable at one hundred cents on the dollar.


Henry Elvins Spencer: Then I understand that
the whole note circulation fund may be drawn upon, if need be, to redeem the notes of a bank which has failed. I am very glad to get that information, because in the commitee of 1923 we were led to believe that was not so.


Richard Bedford Bennett: That is my understanding of it. The point arose only in the case of one bank, and my hon. friend will remember that its capital stock was something over $6,000,000 and the circulation at that time about the same. The notes were taken out of circulation without regard to the redemption fund. It never has been called upon to any extent, as a matter of fact. My appreciation of the language of the statute is that the whole fund is available to make good any deficiency in the bank notes.


Henry Elvins Spencer: I am very glad to hear
that statement. Now, Mr. Speaker, I should like to say a few words in regard to loans,_ and their effect on the price level. This angle of the subject is by far the most important we have to face. In my opinion the control of credit means very largely the control of prices; if money is increased or decreased to any great extent without taking into consideration the alteration in the production or consumption of goods, naturally you will have



National Bank-Mr. Spencer
an alteration in prices. Here is an absolute necessity for something to be done. I agree entirely with the hon. member for Macleod in his reference to certain statements made before the banking and commerce committee in 1923, and also in 1928. The bankers oame before us and admitted that there was no concerted action at all in regard to the extension of credit or the making of loans in an effort to prevent either inflation or deflation. In both years they said, "Oh, we do this as individual banks, as well as we can and as far as we are able." The result, of course, is absolute chaos at times. If hon. members think for a moment that control of currency and credit has nothing to do with the extraordinary upsetting of the price level at the present time, with the troubles which have resulted, I should like some suggestion as to [DOT] what they think is the reason. I quote again from Mr. H. D. MacLeod, who said:
They (the banks) issue credit payable on demand, and this credit may be put in circulation and serve as money.
There is the statement again that the banks have the power to create credit, and he says nothing about lending savings deposits.
I was glad to hear the hon. member for Macleod refer to the most excellent statement made by Mr. C. E. Neill, of the Royal Bank.
I am not going to take up the time of the house in repeating what he said, but I should like to quote this time a statement by Mr. T. B. Macaulay, president of the Sun Life, taken from the Montreal Gazette of November 15, 1930. Referring to monetary control Mr. Macaulay said:
Finally, we have those whose outlook is that "We always have had periodical depressions and they have passed away; we need not worry unduly, for this one will also pass away in time." May I suggest that we are not content to allow epidemics slowly to burn themselves out. We rejoice over every medical discovery which can prevent or cut short such scourges. Economists have now discovered a remedy for depressions as effective as a vaccine. Why should we not endeavour to cut short financial epidemics?
If this central bank were established there is no reason why one of its duties should not be to take over the funds of the post office savings bank. I should like to direct attention to the fact that under the act the rate of interest that can be allowed on these small deposits is four per cent, but under pressure brought to bear on a former minister of finance the rate was cut down to three per cent. On the one hand we give the private banking corporations four per cent, as we did in 1928 against treasury bills, but we give

these very small depositors who put money in our post office saving banks only three per cent. The result is that the business has lagged very badly and it is not developing. I think it is something to which we might give more attention.
In conclusion I wish to place on record a resolution passed by the United Farmers of Alberta at their convention last January. I do this because, wherever we sit in this house, we each represent a particular part of the country, and I think it is our duty to put forward the expressed views of the people whom we represent. The resolution reads as follows:
That we as delegates assembled, recognizing the inadequacy of the existent credit system in meeting present economic stringency, and believing that adequate distribution of credit is absolutely essential to the carrying on of the agricultural industry, recommend:
(1)	That this organization continue to advocate at all times the complete nationalization of our credit system.
(2)	That as an intermediate measure the federal government take steps to organize a federal reserve bank of issue and discount which bank shall be entirely under government control and shall provide credit at a reasonable rate of interest for all necessary productive and comercial enterprises.
We are convinced that the above proposal is imperative in order to get away from the present intolerable position in which the credit requirements of the public in general are sacrificed to the professed necessity of the charter banks to protect to the utmost their savings deposits.
(3)	We specifically recommend that the directors of the wheat pool should thoroughly canvass the possibility of their financing the marketing of their grain through utilization and extension of our present Finance Act.
In putting that on record I wish to refer for a moment to the fact that under the Finance Act one of the various securities which our private banks can take to the treasury board and get discounted is provincial bonds, yet the provincial governments are not given the same privilege. The provincial governments have not the same chance to take these same bonds to the same treasury board, and get the same service that is given to private banking interests.


Edward Joseph Garland: Mr. Speaker, I had not intended to take part in this debate, but I am encouraged to do so because of the attitude taken by the house in the matter. I observe that the hon. member for Macleod (Mr. Coote) has aroused the interest of all sides on a question which undoubtedly to-day is one of the most important, if not the most important, facing all countries.
In his closing remarks the Prime Minister (Mr. Bennett) emphatically asked us to try

National Bank-Mr. Garland (Bow River)
the system, as in court of law, in the light of known facts. I am afraid that if we were to do that there would be nothing but general condemnation for the system which is largely responsible for the condition in which the people find themselves, not only in Canada but throughout the entire world. Using one of those glittering generalities to which the right hon. gentleman took exception, may I quote the words of the Right Hon. Ramsay MacDonald, as given in the New Age of January 8, 1931. Mr. MacDonald on that occasion said:
A few financiers in New York, in London, or in Paris, pursuing their own ends and looking after their own fortunes, are able to destroy the fruits of good harvests and the productive accomplishments of human energy.
That is the fruit of an uncontrolled monetary system left in the hands of private individuals, whether it be in Canada or in any other country, operated by private interests for private profit. And that is the case throughout the world to-day.
There is no truly nationally-owned system anywhere, and in this regard I take exception to the suggestion of the hon. member for Macleod. I do not think he has made out a strong case for a central bank on the ground that other countries have central banks; because in other countries, we find, the central banks created there have not only failed to remedy the condition and prevent a recurrence of periods of financial and business depression, but have actually been a party to them. I remember not so long ago seeing one of the most effective cartoons I have ever come across in my life. It appeared in that well known international London publication, Punch, and was by a famous cartoonist. It depicted a dear old lady crossing the street, very much to the . obstruction of traffic, while the policeman shouted, "Hurry up, ma'am!" The woman was the Bank of England. That was an accurate picture. Punch was right. And economic authorities in England were equally right in the view that the Bank of England, in precipitately restoring the gold standard, thus curtailing credits and making for deflation, was responsible for a condition of depression which has not lifted since the day that standard was re-established.
The other day there occurred a revolution in Spain; and one of the first rumours I have heard in connection with that occurrence is that a primary cause of the upheaval, apart from distrust of and dislike for the monarchy, was the attempt on the part of that country to restore the gold standard and, so bring about deflation, with all the horrible effects that 22110-1005
follow that unwise policy. Let me not be misunderstood: I regard an unwise policy of inflation as an evil second only to deflation in its effects. But here you have this system we are asked to try upon its merits. In the spring of 1929 in this very city I was watbhing the call money issues as daily reported and I found call money quoted day after day at li, If and 2 per cent-an encouragement to speculation. First, there was a borrowing of money at this rate, the lowest possible rate of interest commensurate with business dealings, enormously facilitating speculation. Then suddenly we find the policy reversed: almost over night-according to the federal reserve board in the United States and other authorities the call money rate begins to advance rapidly, going to 5, 6, 8 and 10 per cent. Before the peak is reached there is a pause, and presently more money is forthcoming.
Mitchell, of the National City Bank of New York, broke away from the federal reserve board and rejecting its policy, threw tens of millions of dollars into the call money market. Then more cash money was forthcoming. The high rate of interest encouraged other cash reserves to make their appearance upon the market. What hapened was this. The cash reserves of great corporations were used-probably most illegally, but nevertheless effectively-to bolster up a market which it was the bankers' policy to deflate. That there was self-interest behind the action, there is no doubt; because, through that flood of new money coming into the call money market, in spite of curtailment of bank loans, and in spite of the persistent advance of money rates, from 15 to 18 and finally 20 per cent for call money, the price level of many stocks was raised above the price level of 1928, reaching in some instances new highs. And it was not until the fall of 1929, when these cash reserves were just as suddenly withdrawn, that the whole bottom fell out of the market and the cataclysm was upon us.
Hon. gentlemen opposite, and indeed to my right, have in times past contended that the bankers could not affect price levels and that they did not bring about deflation. To-day we have witnesses, fortunately among the bankers themselves, to the fact that our allegations back in 1923 and 1924 were correct, and that it is the banking policy that brings about periods of deflation. All you need do is turn to the report of Mr. Neill as quoted to-day. You have only to turn to the report of the president, Sir Herbert Holt, and a dozen other reports of bankers not only in this country but in the United States, to find that they charge now that it was a deliberate policy of
1568	COMMONS
National Bank-Mr. Garland (Bow River)
deflation, emphasized by high interest rates, that was primarily responsible for t'he present depression. That is the policy of private bankers. Let me give a quotation to buttress this statement. Sir Herbert Holt says:
There can he no doubt that the abnormal credit conditions during 1928 and 1929 must be held primarily responsible for initiating the present world-wide depression. High money rates had their inevitable effect of depressing business and paralysing development.
These are very effective words. I turn now to Mr. Neill:
This year the primary difficulties with which this country is confronted-	.
Not some other country, but this.
-are world-wide in character and find their origin in disruption of the international
financial structure	 It would seem that
the outstanding cause of the present worldwide depression was high interest rates.
Not long ago I had the great privilege of having a conference with one of the eminent bankers in this country, and in the course of the discussion I asked him what was the outlook for the future. He astonished me by admitting at once that the first thing we might expect would be an all-round, general reduction in the wage level. But, I said, that means, inevitably, smaller purchasing power, a lessening demand for goods. He said, yes; but it is inevitable. I said that that would be followed by a lower price level. He said, yes. How long will it continue-I asked. He said, "I cannot say; it may be for a generation." That, Mr. Speaker, is the fruit of this much boasted banking system-the possibility of a generation of low price levels, a lower standard of living, and a reduction in wages. Proceeding, I asked him: Is there nothing we can do in this country? Cannot your banks do something? He said, "No. As ordinary commercial institutions, we have neither voice nor effect in regard to general money policies throughout the world. And as this depression that visits us is in part due to world depression, we are ineffective in bringing about any modification in the conditions." I asked, further: What about trying to adjust matters in this country? How about a little inflation? Would it not be possible to reduce the rates to your own borrowers in Canada and thus let out more money? He said, "That would mean going off the gold standard." And so the dear old fetish, the gold standard, was once more appealed to- that piece of superstition which is more evil in its effects, more effete to-day, than the most time-worn and despised medieval superstition. That fetish of a gold standard is brought in to rescue an eminent banker who is unable to offer any other solution for the
[Mr. E. J. Garland.1
present- problem, than the drift to lower living and wage standards, and which calls urgently for some intelligent international action to regulate the monetary system. Consider his position, that failing international action we drift in depression; for there is jonfronting us our inability to take any action as private commercial banking interests in Canada. It is alleged then that our own banks cannot affect or remedy the situation in Canada. I disagree with this position and I agree with the hon. member for Macleod that an intelligent application in this country of an inflation policy carefully regulated and controlled would improve our present condition and tide us over the period of adjustment of the world depressions. However, he says that we must not do this because it would mean going off the gold standard. Most people, except the hon. members in this corner of the house, say that we must not go off the gold standard. The other proposition is that we must have international regulation of money. As Mr. Neill indicates in his report, the best way to overcome deflation is by an antideflation policy, and an anti-deflation policy can mean only one thing-an inflation policy, carefully regulated and intelligently adjusted. At the bottom of the second page of his report, Mr. Neill says:
When all financial centres feel that business does not require more money, then is the time to increase the supply, just as truly as it is time to reduce supply at the moment when inflation begins to appear. If on the collapse of the stock market boom the principal central banks of the world had decided that drastic contraction of currency and credit was not to be permitted, a drastic fall in the price level could not have occurred.
It must be remembered that this is a banker who is speaking, not a theorist, a crank, a faddist or any of those things which we in this corner of the house are sometimes called. I wish to emphasize these words:
Thus the countries with fiat currencies, such as Argentina, Uruguay and Spain,-[DOT]
He might have included Australia.
-are not suffering anything like as acutely as the gold countries.
That is only too true. I am not urging at this stage that we should not have some basis of currency; we must have some basis of regulation of currency, but the gold basis has become altogether too narrow-as was pointed out by the hon member for Macleod -especially when we find that the volume of gold is not only diminishing but is being concentrated to a greater extent every year in two countries. The two countries controlling the gold situation are France and the United

National Bank-Mr. Garland (Bow River)
States, with England still retaining a measure of control but not nearly as effective as the two mentioned. Of all the countries of the world, the United States is the one to which we should be able to look for intelligent action because of the position she occupies and because of the vast reservoir of gold held by her. However, I do not think that is possible because, although they have a national bank of a kind, the federal reserve bank, I do not think there is any doubt but that the policy of that bank is dictated not by the best policy for the industries of the country but by the political interests of the party which may at the time have jurisdiction over the board. I agree with the hon. member for Lincoln that any national bank to be created in this country should not have the slightest taint of politics about it if it is at all possible to avoid it. One great curse in connection with the federal reserve board of the United States is the fact that the secretary of the treasury is the ex-officio chairman of the board and as such can exercise-I do not say that he always does, but he has the power-a tremendous influence upon the policies of that board.
We find the bankers of this country agreeing almost unanimously that the present depression could have been avoided and should have been avoided by the federal reserve board taking intelligent action in 1927 to prevent further inflation. It is claimed that that action was not taken because of political reasons. The whole machine got out of hand and when the time to deflate had come, the crisis had been reached and the calamity followed. That is not intelligent action, and yet that is the system, or one equally ill-controlled, prevailing in all countries I know of on a gold basis or that have central banks. Therefore, a resolution moved for the purpose of simply setting up a central bank does not appeal to me. If. however, by the setting up of a central bank is meant the creation of an intelligently organized and controlled machine which could be used for the purpose of adjusting the volume of currency in a country to meet the requirements of business both in and out of that country, to cooperate with similar central banks in other countries for the regulation of the monetary standard and volume throughout the world, then I say that that thing is only too sadly needed; we have needed it for many years and we have never needed it so much before. We have bankers, economists and politicians stating that this depression is due to deflation. Others say it is due to the demonetization of silver; that we must remonetize silver. Others say it is due to a mistaken federal reserve policy, while
others say it is due to this, that and the other thing. If the world is in such chaos as a result of an unintelligently operated private banking system in every country, surely the time has come when in the national interest it is the duty of the government to study the problem and find out if it is possible to create, first, a national banking system which will before everything else take recognition of the necessity for keeping the volume of currency always in proportion to the value of goods to be consumed; second, to see that neither inflation nor deflation occurs; and, third, to undertake cooperation with other national banks throughout the world in order to retain the stability of money and price levels.
We are making an intelligent request. May I say to the hon. member for Lincoln that I have discussed this matter with the hon. member for Macleod. He is not dogmatic on the question, he does not insist on any particular form of national bank, but what we really seek at this time is a discussion of the problem in an endeavour to find out if some system can be evolved by which the present wrong conditions may be adjusted.
I hope the hon. members of the Liberal party caught the significance of the generous remark of the leader of the government (Mr. Bennett) when he said that under the present banking system, the country has been carried on to periods of greater prosperity than had been enjoyed by any other country in the world.


Richard Bedford Bennett: The hon. gentleman
knows perfectly well I did not say that.


Edward Joseph Garland: I am very sorry because I would be the last to do any injustice to the right hon. gentleman. I happened to take a note as the words were uttered because they interested me considerably. I noticed that shortly afterwards the hon. gentleman suggested something to the effect that we could not get rid of debt by continuing to borrow. That was a most significant statement.


Richard Bedford Bennett: I was quoting President
Hoover's observation.


Edward Joseph Garland: Quite right, but I presume the hon. gentleman made the quotation his own.


Richard Bedford Bennett: I am not in the habit
of making quotations my own; the hon. gentleman is a past master at that.


Edward Joseph Garland: Then I
cannot understand the purpose of making quotations in a speech unless it be for the purpose either of accepting or rejecting the
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National Bank-Mr. Garland (Bow River)
philosophy or argument contained therein. In this instance, the quotation was uttered as though the right hon. gentleman completely approved of it.


Richard Bedford Bennett: So I do.


Edward Joseph Garland: I am glad to hear that. We have in our world banking system a debt creating structure unequalled in its ferocity and effect. The mind of man has never devised anything which could so satisfactorily involve the people in debt and keep them there. I would like to quote from the Monthly Review of the Bank of Nova Scotia, one of the best written works we have on current affairs, as follows:
The completion of these adjustments (for the problem is world-wide) would, of course, be considerably hastened by a better distribution of the total available purchasing power, among the countries of the world; for the creditor countries are not lending to the debtor countries as they were lending during the years of prosperity, and must again lend, if their own export trade is to revive; and some of the debtor countries, lacking the loans which previously fortified their purchasing power, can scarcely do more, at the present time, than pay their current obligations.
The conclusion inevitably to be drawn from this statement is that unless the creditor nations proceed to assist the debtor nations to go further into debt, international trade cannot be restored. Of course it cannot. Mr. Neill in his report says much the same thing. He referred to the whole problem and suggested that it was largely because "long before the 1929 collapse high money rates had almost entirely shut off new loans to borrowing countries and with them the concomitant ability to purchase foreign goods."
So we have something that the Prime Minister quite properly objected to and yet supported, namely, a monetary system which compels us to go into debt if we are to continue under the system. Nations to-day under this condition of affairs cannot continue to buy from other nations if they happen to be debtor nations, unless there is some regulation of the whole monetary machine throughout the world, some adjustment of international debts, some modification of the present method of supplying credits. There you have the statements of an economist and a banker, Professor Jackson and Mr. Neill, both of them intimating that until the creditor countries lend more money to the debtor countries, international trade cannot be revived. Is it necessary to say anything further in regard to the shortcomings of a system of that kind?
The Prime Minister said either too much or too little, when he told us the story of the bank that recently-I think he said within a

few days-had come to the treasury board or rather, to the office in Montreal, had deposited there treasury bills which had been purchased with depositors' money and had secured in return $5,000,000 in Canadian currency.


Richard Bedford Bennett: I may say that this has
been paid off.


Edward Joseph Garland: That is very satisfactory and relieves me of obligation of further comment at this time. But we are in a tangle; I dislike the idea of this resolution being hastily dealt with, and I would prefer to see it go to a committee for further consideration. All members in the house have signified their willingness to consider it further, even the Prime Minister who was good enough to say he had not a closed mind. I therefore move:
That the motion be amended by striking out all the words after "house" in the second line and substituting therefor the following:
"the question of establishing a nationally-owned central bank should be referred to the committee on banking and commerce for consideration and report."


[Stage Direction]
At six o'clock the house adjourned, without question put, pursuant to standing order.
Thursday, May 14, 1931