1933-05-01

[Stage Direction]
Mr. A. U. G. BURY (East Edmonton) presented the second report of the select standing committe on standing orders.
He said: By leave of the house I beg to move:
That the second report of the select standing committee on standing orders relative to the suspension of standing order 92 be concurred in.
Mr. BENNETT:: We shall take that as a notice of motion and deal with it to-morrow.


Mr. SPEAKER:: Stands as notice of motion to be considered at the next sitting.
fMr. Duranleau.l



UNEMPLOYMENT AND FARM RELIEF

Hon. W. A. GORDON (Minister of Labour):: I beg to lay on the table a number of orders in council passed pursuant to the relief legislation.



RAILWAY ACT AMENDMENT


[Stage Direction]
Hon. R. J. MANION (Minister of Railways and Canals) moved for leave to introduce Bill No 80, to amend the Railway Act.
Some hon. MEMBERS:: Explain.


Mr. MANION:: This bill is an amendment to the Railway Act to require the railway companies, before abandoning the operation of any line of railway, to get the approval of the Board of Railway Commissioners. It puts the matter in accord with the measure with which we are dealing at the present time, Bill No. 37.
Motion agreed to and bill read the first time.



INTEREST ACT AMENDMENT

[Stage Direction]
Mr. G. G. COOTE (Macleod) moved for leave to introduce Bill No. 81, to amend the-Interest Act.
Some hon. MEMBERS:: Explain.


Mr. COOTE:: Lender the British North America Act the matter of interest rates was left in the jurisdiction of this parliament. The present Interest Act states:
Except as otherwise provided by this or by any other act of the parliament of Canada, any person may stipulate for, allow and exact, on any contract or agreement whatsoever, any rate of interest or discount which is agreed upon.
I think it is desirable, under present financial conditions, that a maximum rate of 5 per cent should be established by this parliament, and that is -the purpose of the bill which I am now introducing.
Motion agreed to and bill read the first, time.



OATHS OF ALLEGIANCE

[Stage Direction]
Hon. ERNEST LAPOINTE (Quebec East) moved for leave to introduce Bill No. 82, to amend the Oaths of Allegiance Act.
Some hon. MEMBERS:: Explain.


Mr. LAPOINTE:: This bill is to make the form of the oath of allegiance as contained in the revised statutes of Canada conform with the recent developments and more particularly with the Westminster statute. The

Washington Conference
form is the same as was used under the old colonial status. The main change is to strike out the words referring to the Dominion of Canada:
Dependent on and belonging to the said kingdom.
Of course Canada does not belong to and is not dependent on any other part of the British Commonwealth.


Richard Bedford Bennett: This is not the time to discuss the
matter, but I would ask the hon. gentleman whether he has considered the question that arises in connection with the act relating to allegiance, because we have a common oath that was established by arrangement. This matter has engaged the attention of some of the law officers of the crown and it is thought we should have a conference with respect to the whole situation of the nations affected because in 1911 we agreed, in connection with naturalization, to accept a certain form. I quite appreciate the point the hon. gentleman has made, but I ask him to consider the matter from that angle.


Ernest Lapointe: I have no objection to
the mode by which the change is to be effected, but I for one would not desire to have this form maintained in the revised statutes of Canada.
Motion agreed to and bill read the first time.



WASHINGTON CONFERENCE


[Stage Direction]
On the orders of the day:
Richard Bedford Bennett: Before the orders of the day are
proceeded with, it is perhaps desirable that I should make a short statement. The President of the United States invited the dominion to send a representative to the conference which is being held at Washington with many of the nations of the world. I arrived in Washington on Monday and I left on Saturday. Before leaving, the following joint statement was agreed upon between the president and myself and given to the press:
Our conversations have been eminently satisfactory in establishing a common ground of approach to the principal problems of the world monetary and economic conference. We are agreed that our primary need is to ensure an increase in the general level of commodity prices. To this end simultaneous action must be taken both in the economic and in the monetary fields. Economic and monetary policies must be adjusted to permit a freer international exchange of commodities.
It is recognized that as soon as practicable an international monetary standard must be restored, with arrangements which will ensure
a more satisfactory operation of monetary relationships. We have examined a series of proposals for the more effective employment of silver.
No one of these problems can be profitably dealt with in isolation from the others, nor can any single country accomplish a satisfactory solution.	We therefore recognize the vital
importance to mankind of the world economic conference and the necessity of reaching, in the weeks which remain before it is convened, as great a measure of mutual understanding as possible.
We have also discussed the problems peculiar to the United States and Canada. We have agreed to begin a search for means to increase the exchange of commodities between our two countries, and thereby promote not only economic betterment on the North American continent, but also the general improvement of world conditions.
I can only say further that on behalf of this dominion I thanked the President of the United States with great sincerity for his courtesy and kindness extended to the Canadian representative. I might read to this chamber the words that I uttered over the radio on Saturday at a quarter to three as I was leaving Washington:
I have come to speak a few words of farewell this afternoon before I return to Canada. We Canadians do not feel that we are strangers in your hospitable country, nor I hope do the people of the United States feel themselves to be _ strangers when they come as welcome visitors to Canada. We are friendly neighbours and speak to one another as such. This is natural and proper. But I am nevertheless deeply impressed with the warm welcome and generous hospitality which I have received from your president, your secretary of state and his assistants, and from all those with whom I have come in contact. I will carry with me many pleasant memories which I shall long cherish.
I concluded my observations as to the future attitude of this dominion with respect to the matters under consideration with these words:
Acknowledging your president's wide vision and unselfish purpose, his steady courage and sincerity, his rare patience and determination, I promise that Canada will play its part in the task of seeking world recovery through cooperation with the United States and all the other nations of the world.


Mr. POULIOT:: I promise you action and not only consideration.



PRIVATE BILL


[Stage Direction]
The house resumed from Tuesday, April 11, consideration in committee of Bill No. 41, to incorporate the Sarnia-Port Huron Vehicular Tunnel Company-Mr. Gray-Mr. Gagnon in the ohair.
On section 19-R.S. c. 170, to apply to the company.
Samia-Port Huron Tunnel
Mr. GRAY:: Sections 19 and 22 were allowed to stand, Mr. Chairman, section 19 at the instance of the right hon. the Prime Minister, and section 22 at the instance of the Minister of Labour. Section 19 has been amended with the help of the Justice department in order to meet two objections, first that raised by the hon. member for East Essex (Mr. Morand) that instead of "value" the word "cost" of the undertaking should be substituted, and that raised by the right hon. the Prime Minister that we could only deal with that part of the undertaking lying within the Dominion of Canada, so that the arbitrators appointed to consider the cost of the undertaking and the price at which it might be taken over by the municipalities Should deal only with that part of the undertaking lying within this dominion. Section 19 as now amended provides for that, and at the same time does away with some of what were deemed unnecessary provisions with respect to the property being taken over at the end of twenty years, forty years and so forth, at a certain price. I therefore move, Mr. Chairman, that section 19 as before the committee be deleted and the following substituted therefor:
19. Immediately after the said subway or tunnel has been in operation for a period of two years, a board of arbitration shall determine the cost of that part of the said subway or tunnel situate in the Dominion of Canada. Such determination shall be filed with the department of the Secretary of State. The board shall consist of three members; one to be nominated by the municipality or municipalities within the Dominion of Canada in which the said subway or tunnel is located, the second by the company and the third by the governor in council. The municipality or municipalities within which the said subway or tunnel is located shall be entitled to acquire that portion of the same which is situate within the Dominion of Canada at any time after the expiration of the two year period of operation hereinbefore referred to at the cost hereinbefore mentioned, less such allowance for depreciation as a board of arbitration constituted as aforesaid shall then determine. Provided, however, that when the said subway or tunnel has been in operation for a period of sixty years, the municipality or municipalities within which the said subway or tunnel is located shall be entitled to acquire that portion of the same which is situate within the Dominion of Canada without payment of any consideration therefor.
(2) The company shall not commence construction until the governor in council has been satisfied that the competent authority in the United States has made provision similar to that contained in subsection one of this section, for the acquisition of the American section of the subway or tunnel by the municipalities within which the same is situate.
[Mr. Pouliot.l
I am sending a copy of the amendment over to the Prime Minister although I believe he has already received it.


Richard Bedford Bennett: The hon. gentleman has
fairly met the difficulties that I pointed out, that the municipalities would be compelled to pay far too large a sum in the event of taking over the property, except that the period of time at which the property shall be vested in the municipalities is rather long. If they take it over at any time after the expiration of two years they have to pay the cost less depreciation. I think that meets the difficulty except that sixty years seems to be a long period of time, because at the end of sixty years the property by any known method of depreciation would stand on the books at nothing. That is the purpose to be aimed at, of course, that the depreciation reserves will have exhausted the capital cost of the property. As to the depreciation allowance one cannot tell without knowing exactly the kind of structure to be created but if it followed the ordinary rule the depreciation would be somewhere between two and a half and three per cent per year. Then, sixty years on a three per cent basis would mean 180 per cent of the cost that had been returned to the owners by reason of the operation of depreciation funds and sinking funds, and they would have had their interest also. I am just suggesting to the hon. member that sixty years seems to be a very long period. I should think half of that would be sufficient.


Ross Wilfred Gray: I was going to suggest forty.


Richard Bedford Bennett: I think forty would not
be too long.


Ross Wilfred Gray: Then, if the chairman would
substitute forty for sixty I would move that it be amended accordingly.
Section as amended agreed to.
On section 22- Labour and materials.


Ross Wilfred Gray: Objection has been raised by
the Minister of Labour that we could not properly deal with other than the Canadian section of the subway or tunnel. That objection has been met by redrafting the section. I understand the minister has seen the change and it has met with his approval. I therefore move seconded by Mr. Young that section 22 be deleted and the following substituted therefor:
The employment of labour in the construction, maintenance and supervision of that portion of the said subway or tunnel so far as the same is situate within the Dominion of Canada, shall for the purpose of this act, be deemed to be subject to the terms and con-

Sarnia-Port Huron Tunnel
ditions of the Fair Wages and Eight Hour Day-Act, 1930, and amendments thereto. And so far as the said subway or tunnel is situate within the Dominion of Canada, so far as it may be practicable to do so, Canadian labour and materials shall be used in the construction of the said subway or tunnel and a certified statement shall be sent weekly to the Department of Labour giving the names and addresses of firms supplying materials and the quantity thereof.


Richard Bedford Bennett: I believe it might be
well to add after the word "materials" the words "specifying the addresses of firms supplying." The word "materials" does not indicate that there would be any necessity of stating what materials were supplied and the quantities thereof. We should have not only the names and addresses of firms supplying materials, but the material should be specified and quantities named. As the word materials is in the plural probably the plural form of the word "quantity" should be used. Then, after the word "materials" should be the words "specifying same" so as to indicate whether stone, gravel, cement or some other material was supplied. There is nothing in the amendment as it now stands calling for such information.


Ross Wilfred Gray: I should be happy to accede
to the suggestion of the Prime Minister and add after the word "materials" in the last line the words "specifying same." I so move.


Richard Bedford Bennett: Yes, and the word
"quantity" should be "quantities."


Ross Wilfred Gray: I believe that is correct, and
would be content to accept that suggestion, making the necessary motion.
Section as amended agreed to.


Mr. GARDINER:: I should like to say a
few words concerning the general character of this particular bill. A few evenings ago when the hon. member introduced the bill for the purpose of moving it into committee the Prime Minister took exception to some of the clauses, and asked- the hon. member if he would be good enough to let the matter stand over in order that some arrangements might be made. The remarks of the Prime Minister at that time had to do more particularly with the common stock or financing of this concern. I cannot see that in the reprinted bill any improvement has been made, from that standpoint. I can see no greater protection than there was before for the public who have invested their money in the enterprise. I wish merely to call the attention of the commit-53719-280
tee to clause 6 of the bill which provides for capital stock and which states:
The capital stock of the company shall consist of one hundred thousand shares without nominal or par value.


Ross Wilfred Gray: I should like to interrupt
the hon. member by stating that he is reading from the bill before it was amended. A protecting clause has been inserted.


Robert Gardiner: I have the reprinted
bill before me.


Richard Bedford Bennett: That was again
amended.


Robert Gardiner: I do not know the
nature of the amendment, so far as that is concerned, but I have on my file what purports to be a reprinted bill. Naturally, I am speaking from the information I have before me. The point I emphasize is -this, that there is no specified amount of capital, so far as this company is concerned. So many shares of no par-value stock can be issued. There is no statement as to the amount for which it may be sold. There is provision however for the borrowing powers. It is stated that the company may borrow up to an amount not exceeding $5,000,000.
In my judgment the objection raised by the Prime Minister the other evening was quite proper. Particularly so when we take into consideration what has happened in Canada during the last few years in connection with the financing of companies such as the one now under consideration. I submit that after our experience the capital stock of the company should be specified in the bill. There should be no no-par-value stock, but stock of a certain nominal value. Other than that I submit that in order to protect the bondholders who may be induced to invest their money in this concern, the borrowing powers of the company should not be more than forty per cent as against sixty per -cent of the capital stock invested. If the shareholders who expect to profit from this concern have money in it to an amount greater than the bondholders, then I am satisfied that under those conditions the bondholders would have at least a reasonable security for their investment.
The bill before me does not make the situation better than it was prior to the amendment. I take this opportunity of stating that so far as I am concerned I am going to oppose every piece of legislation of this type until such time as the house makes up its mind that the capital stock of a company must be properly stated, and furthermore that the borrowing powers will not exceed the total capital stock paid up.

Questions


Richard Bedford Bennett: There is a limitation
imposed. It is not my purpose in any way to defend this matter, but first, the par value is fixed for the shares, and secondly, there is a provision that the securities cannot be sold unless they have been approved by the authority administering the Security Frauds Prevention Act of the province of Ontario. And that applies equally to securities on the [DOT]other end that may be sold in Ontario. As our other provinces have the same statute in like terms I think the public is reasonably safeguarded. I am bound to say that I did not think the protection was sufficient at first. But the promoter of the bill has been perfectly reasonable in the matter, and says he has no desire to put through parliament a bill that does not protect those who may put their money in the project, because of the difficulties that arose at Detroit. If the statute, which has been held to be constitutional by the privy council on the appeal of the province of Alberta, provides the safeguards which I think it does, I can see little opportunity for difficulties, because in order to secure approval of the sale of securities they have to satisfy the authorities of the province that the issue bears a proper relation to the cost.


Robert Gardiner: Did I understand the
Prime Minister to say that the shares were to be of par value? In this bill that the hon. member has sent across to me they are without nominal or par value.
Mr. BE'NNETT:	My recollection is that
they shall be not less than $5.


Ross Wilfred Gray: Fifty thousand shares, par
value of $10.
Bill as amended reported.



QUESTIONS

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

Mr. GOULET:: 1.	Who is the acting superintendent of the Chambly canal?
2.	Who is the official superintendent of the above-named canal?
3.	Where is the latter's office located and what work does he perform?
4.	What salary is paid to the official superintendent and to the acting superintendent?


Mr. MANION:: 1.	No acting superintendent.
2.	Mr. J. H. Cantin.
3.	Chambly Basin, P.Q. This officer is responsible for the operation and maintenance of the Chambly canal.
4.	He is paid $1,920 per annum.


PENSIONS DEPARTMENT-MARRIED AND SINGLE MEN ON STAFF
Mr. CHEVRIER:: 1.	How many pension advocates in the veterans bureau of the Department of Pensions and National Health are single men?
2.	How many men on the veterans bureau staff, Ottawa, are single men?
3.	What is the proportion between married and single men?
4.	Are married men given a preference?
5.	If so, is there any reorganization contemplated in which this preference is to be disturbed?


Mr. MacLAREN:: 1.	Five.
2.	Eight.
3.	All offices-75 per cent married, 25 per cent single; Ottawa-60 per cent married, 40 per cent single.
4.	There is no settled policy.
5.	The matter is not under consideration at the present time.


ESCUMINAC NORTH, QUEBEC, POSTMASTER
Mr. MARCIL:: 1.	Have any complaints been received by the Post Office Department against the postmaster of Eseuminac North, Bonaventure county, Quebec?
2.	If so, from whom, and wbat was the nature of these complaints?
3.	Were these complaints investigated, and what was the result?
4.	Was an application received for a change of site of the post office at Eseuminac North?
5.	If so, from whom?


Mr. SAUVE:: 1.	Yes.
2 (a) Hon. Dr. E. Paquet and Abraham Flanagan; (b) Active political partisanship.
3. Yes. Commissioner's report found postmaster guilty.
4 and 5. The transfer of the office to a new incumbent, when effected, will no doubt involve a change of site.


LE GIRAUDAIS, QUE., POSTMASTER
Mr. MARCIL:: 1.	Were complaints received by the Post Office Department against the postmaster at Le Giraudais, county of Bonaventure, Quebec?
2.	If so, what were they?
3.	"Who recommended the changing of the site of Le Giraudais post office from the property of Joseph I. Pitre to that of Mrs. F. Paquet?


Mr. SAUVE:: 1.	Yes.
2.	Mismanagement and active political partisanship.
3.	Postmaster was dismissed for active political partisanship following an investigation. The transfer to Mrs. Wilfrid Paquet was recommended by the Hon. Dr. E. Paquet.

Bank Act-Mr. Mackenzie King


WINDSOR MILLS, QUE., POSTMASTERS
Mr. LAFLECHE:: 1.	What are the names of the postmasters or postmistresses of Windsor Mills since 1867?
2.	What was the total sum paid to each such person during his or her incumbency?


Mr. SAUVE:: 1 and 2. C. E. Wurtle, $893.21; J. A. E. McCabe, $14,246.53; Mde. A. McCabe, $41,414.75; Auguste Provencher, $10,945,775;
J. A. Roy, $5,290.24 to March 31, 1933.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. RHEAUME:: What is the number of ex-service men in Canada drawing from the Canadian government yearly war pensions (a) of $400;	(b)
of $800; (c) of $1,000; (d) of $1,500; (e) of $2,000;	(f) over $2,000, who are (1) in the
employ of the Canadian government; (2) not in the employ of the government?
Mr. LAFLECHE;
1.	What is the number of post offices in the province of Quebec with an annual revenue of less than $100?
2.	What is the maintenance cost of each such post office?


MOTIONS FOR PAPERS
Mr. CASGRAIN:: For a copy of all correspondence, letters, telegrams, petitions and other documents, in connection with the ferry boat service between Ile-aux-Coudres and Les Eboulements, in the county of Charlevoix, since the 22nd of August, ' 1932, to date.


DISMISSAL OF R. W. SQUAREBRIGGS
Mr. MacLEAN:: For a full copy of all correspondence, letters, telegrams, and other documents, which passed between any person, persons, or organization in Prince Edward Island and the Department of Fisheries, the deputy minister, or any of the acting ministers, regarding the dismissal of E. Wesley Squarebriggs, as fishery officer in Prince county, Prince Edward Island, and the appointment of Neil McLeod in his place.


BACHE PENINSULA EXPEDITIONS
Mr. CHEVRIER:: For a copy of all correspondence, telegrams, cables, communications, reports and other documents in the possession of the government, respecting the last four Canadian government expeditions to Bache peninsula.
53719-280 J


DUTY ON REPAIR PARTS-AGRICULTURAL IMPLEMENTS
Mr. BROWN:: For a copy of all orders in council and regulations issued by any department of the
fovernment between March 1,	1932, and
lovember 1, 1932, dealing with the duty on repair parts for agricultural implements.


RADIO STATION CHLP
Joseph Philippe Baby Casgrain: For a copy of all documents, correspondence, letters, petitions, and telegrams received by the Department of Marine or the Minister of Marine, and any officials of the radio commission, with reference to broadcasting done through radio station CHLP at Montreal, from January 1, 1933, to date.


BANK ACT AMENDMENT
[Stage Direction]
Hon. E. N. RHODES (Minister of Finance) moved the second reading of Bill No. 27, to amend the Bank Act.
Right Hon. W. L. MACKENZIE KING (Leader of the Opposition):: Mr. Speaker, the purpose of this bill is to postpone for a year the obligation which is placed upon parliament by statute to revise the Bank Act once in every ten years. There must be very strong reasons for taking a course such as this.
At this stage of the session I am not going to take exception to postponement of the revision of the Bank Act until next session, but I wish to take very strong exception to the government having decided at the outset to postpone the revision for another year. I do not think that the reasons given by the administration in the speech from the throne and by the Prime Minister at the time of the debate on the address, are sufficient to justify the action which the government decided at the outset to take of postponing the revision for another year. There are no more important questions at the present time facing this country in common with other countries than those arising out of matters pertaining to banking, credit and currency. It is a misfortune that members of this parliament have not had opportunity, in the banking committee, to discuss these questions very fully and to make at this present session, if thought advisable as a result of the discussion, the amendments that should be made to the Bank Act at this time. I am inclined to think that the government's action was merely a failure to grapple concretely and immediately with this most urgent and pressing of our problems.

Bank Act-Mr. Mackenzie King
I know the reason given has been that there is to be a world monetary and economic conference which will have to consider these matters. May I point out to my hon. friends opposite that while the same conference is going to be equally concerned with currency and credit problems of other countries, the fact that the conference was in contemplation did not in anyway prevent the United States congress, even immediately following a general election, with many very pressing problems before it, from taking immediate action with respect to certain features of its banking legislation. If it were possible for that country in so short a time to meet to consider what was necessary in the way of revision of its banking laws, there was equally strong reason why we in Canada should have taken a similar course especially where the obligation was imposed upon us by statute.
May I say also that I think the government was under a misaprehension as to what had taken place with respect to previous revisions. Speaking on the address in reply to the speech from the throne the Prime Minister stated that there had been several postponements of the revision of the Bank Act, and that on the last occasion there had been two if not three such postponements. I do not think in making that statement that my right hon. friend, speaking from memory, had any intention of in any way misrepresenting the situation, but certainly he was quite wide of the mark in what he said. I should like to read the remarks of the Prime Minister, which appear in Hansard for October 10, 1932:
. . . several times in the past bank charters have been renewed for a year only. When was the last revision? After the war they were extended because the chaotic conditions had not yet righted themselves and in the light of the additional knowledge obtained and secured by reason of what was going on in the world at the time it was believed that our domestic problems would be best dealt with by such an extension. The present Bank Act was not passed when the previous act had reached the end of its ten year period. My memory does not serve me at the moment but I think two, if not three extensions were granted before the final revision was made.
I know that sometimes, in speaking from memory and on the spur of the moment, one is apt to have in his mind, and unintentionally to convey, an impression which may be inaccurate. The Prime Minister quite evidently had in mind that there had been a postponement at one time, but he was mistaken in assuming it was the last time the Bank Act was revised. As a matter of fact there was very strong opposition to any postponement of the 1923 revision. An effort was made by some hon. members in the far corner of the
1Mr. Mackenzie King.]
house to bring about such a postponement. The Right Hon. W. S. Fielding was Minister of Finance at the time. He strongly opposed any postponement. Hon. A. K. Maclean, now a judge of the exchequer court, was chairman of the banking and commerce committee at that time, and during the meetings of that committee he took an equally strong stand against any postponement. Right Hon. Arthur Meighen, who at the time was leading the opposition, took the same position. I shall not take up the time of the house to give the reasons advanced by those hon. gentlemen as to why there should be no postponement, but those reasons would be equally applicable at the present time. The main reason was the importance of settling, at the time contemplated by parliament, all questions that might arise with respect to the banking situation.
The first complete Bank Act was enacted in 1871. It was revised in 1881, again in 1891 and again in 1901. It was with regard to the 1911 revision that a postponement was made, for the reason that 1911 was the year of the coronation of His Majesty King George, and an imperial conference was being held in London which Sir Wilfrid Laurier, then Prime Minister, was expected to attend. It was found necessary to adjourn parliament for a couple of months in order to permit Sir Wilfrid Laurier to go to London to attend the conference and be present at the coronation, and in those circumstances, it being doubtful whether after the coronation there would be time to have the revision effected, Mr. Fielding arranged for a postponement for a year. Before the end of the year the government of Sir Wilfrid Laurier was defeated, and a new administration headed by Sir Robert Borden came into office. That government asked for a further postponement of a year .on the ground that they had just come into office and that there were some important matters in connection with the banking situation in Canada which the Minister of Finance, Sir Thomas White, wished to consider. So a postponement was made for another year. That was the only other time at which a postponement was made. The reasons, in both instances, were quite exceptional, but so far as I can see no such reasons exist at the present time.
I submit, Mr. Speaker, that the government is simply postponing grappling with this among a good many other important questions. Last session we had every reason to hope that there would be a full consideration of the currency question by some committee of this

Bank Act-Mr. Pouliot
house, but the Minister of Trade and Commerce (Mr. Stevens) pleaded very eloquently for a postponement of that consideration until after the Imperial conference had been held in Canada; he said that the question would be taken up at that conference, and that in the light of the discussion there we would be in a better position to act than by going ahead at the time. When the conference was held this matter received very little discussion, and as a result there was nothing to report afterwards to this parliament. Then there was the question of unemployment insurance. Hon. gentlemen opposite suggested that it would be well to postpone consideration of that question until a dominion-provincial conference was held, but when that conference was held the matter was not discussed at any length, and again there was nothing to report to the house. Again, a few days ago we were discussing the all-important question of reciprocity. We were asked to drop that discussion again because of a pending world conference though an opportunity it was said would be given a little later to discuss it more fully. In the meantime, however, the government received an invitation from the United States, and apparently at the instance of the United States they have begun to take up that question.
It seems to me that here again we have very much the same thing, an effort to get away from dealing with the question at the instance of or by our own parliament, by postponing it to another session. Since the speech from the throne was delivered the government has announced to parliament that it intends to appoint a royal commission to deal with monetary questions, evidently to sit between now and the next session of parliament. I have no doubt that this will be urged as an additional reason why we should not proceed at the present time with this matter, though that was not one of the reasons advanced at the outset.
I should like to make just one remark with reference to that royal commission and what its relation to this revision of the Bank Act may be. Undoubtedly the house will be pleased to see such full consideration of montetary and banking questions as a well qualified royal commission may be prepared to give, but I think it should be distinctly understood that the royal commission in no sense will be a substitute for parliament, and in particular for this House of Commons, in the discussion and ultimate decision on what may be best in banking, currency and other financial matters. Let the commission obtain
as much as possible in the way of relevant information to be placed at the disposal of hon. members, but let it be distinctly understood that when it comes to the revision of the Bank Act itself it will be the judgment of hon. members of this house, in the light of all the information that can be placed before them, rather than the recommendations of any royal commission that will govern parliament in dealing with the matter.


Jean-François Pouliot: This is another case of the government shifting responsibility. If the government has a policy on banking we should know it, but they have no policy and that is why they want to postpone the revision of the Bank Act. I strongly object to their lack of policy. All we have is words. I have here a copy of the Border Cities Star of Saturday last, containing the report of a speech delivered by the right hon. Prime Minister (Mr. Bennett) in Washington.


Mr. GOTT:: Where did you get that?


Jean-François Pouliot: That newspaper, which
comes from Essex, is better than the hon. member who represents that constituency. During his remarks the right hon. gentleman made some reference to lack of confidence. We have a lack of confidence because he is the leader of the government; as soon as he leaves his job confidence will return. Now we hear about another conference, the world economic conference. This afternoon the right hon. gentleman made a statement with regard to his trip to Washington. During the election he said, "Mr. King promises conferences; I promise action. Which do you like best." He has shown no signs of action since he has been Prime Minister. He goes to Washington for a conference; he returns and says a few words in this house; a few of his supporters cheer him, but people still suffer.


Eccles James Gott: The people cheer him.


Jean-François Pouliot: When my hon. friend says that he does not represent his constituents. When he does not say what he thinks he should not interrupt those who do. Here we have another conference. We hear members on the other side speaking of supermen-


Pierre Édouard Blondin: The motion is for the
second reading of the bill.


Jean-François Pouliot: Yes, sir.


Pierre Édouard Blondin: On a motion for the
Speaker to leave the chair for the house to go
Bank Act-Mr. Coote

into committee of supply or of ways and means, the hon. member would be in order, but I would ask him now to confine his remarks to the motion.


Jean-François Pouliot: Very well, Mr. Speaker.
I shall have something to say when the bill comes down.


George Gibson Coote: This bill
deals with one of the most important matters affecting the Dominion of Canada, and I naturally expected that the Minister of Finance would have had something to say in support of it. Seeing, however, that apparently he is not going to speak, or has not spoken so far, I shall have to precede him.
I was quite interested in the account given by the leader of the opposition (Mr. Mackenzie King) of the various revisions of the Bank Act since confederation, particularly with respect to the investigation which was held in 1923, with the revision that took place at that time; and I was also interested in what the right hon. gentleman had to say regarding the attempt made by members in this corner on that occasion to have the revision postponed for a year. The reason we asked for a postponement was that we felt that no adequate investigation had been held into the needs of Canada so far as the banking system was concerned, or as to what reforms might be brought about in that system to make it more adaptable to our requirements at that time. That was the reason we asked for a postponement for a year.


William Lyon Mackenzie King: Was it not on the score of legislation with respect to rural credits, which my hon. friends wished to have considered first?


George Gibson Coote: I do not think it was with
regard to legislation affecting rural credits particularly, because that was a separate matter. The experience of Canada during the last ten years has proved, I think, that it would have been a very good step for the government in 1923 to have had a thorough investigation into the question of credits, banking and currency, foreign exchange and all related matters. The result might have been beneficial to us at this time. During the last two or three years we have been drifting along in financial and monetary difficulties. I do not think the world has ever, at least in modern times, experienced such a severe economic depression as we have had in the last few years. It has affected Canada much more seriously than it has some other countries-much more seriously, for example, than it has affected Sweden or Australia or some other places I could name.
[Mr. Speaker.!
The Prime Minister gave us this afternoon an account of bis recent visit to Washington. He told us that monetary as well as economic action is contemplated by the President of the United States, and, as I understood him, he seemed to be in agreement with the president that these two questions must be grappled with together. I suppose that if we are to have any benefit from monetary action with a view to raising price levels it will be granted by every hon. member that this means a measure of inflation, controlled inflation it is true, which is something we in this comer of the house 'have been advocating for a number of years. So far we have not received very much support from the Prime Minister or his followers, and only a year ago the leader of the opposition suggested, with respect to our amendment along this line, that we should wait and see. Well, we have waited and the President of the United States has finally taken action. It seems to me that Canada should be quite prepared to back up the President of the United States and to take the same sort of action here as has been taken in that country.
If we are to have controlled inflation to raise price levels, that certainly suggests some instrument of control. Now, what instrument has Canada whereby to control inflation? I have discussed this matter with economists during the last few years on more than one occasion and have been told that Canada has no proper machinery for controlling inflation to raise price levels to the desired point. It can be done, they said, through controlled inflation, but we have not the proper machinery. If that is true it is not the fault of members in this corner, because in 1924 we endeavoured to have an investigation made into the question of a central bank for Canada. The matter was brought up in 1926 on a motion made from this comer, again in 1928, and in 1931 I myself placed before the house a resolution asking for a central bank in this country. The Prime Minister, if I remember rightly, said in 1931, that the time might come when Canada would need a central bank but that that time had not yet arrived. In my opinion the time had arrived in 1931, and I believed the Prime Minister should then have set to work to establish a central bank. Had this been done we should now have the proper machinery to give us inflation and to control it, in order to raise price levels. It is essential that someone should control it.
I regret that we have not before this established a central bank in this country, but I do not want to be understood now as

Bank Act-Mr. Coote
opposing measures for controlled inflation to raise price levels, even though we have not a central bank; I think we should embark upon that program even in the absence of such a bank.	We should not
however wait any longer. We should establish a central bank now. We can of course have a measure of inflation through the further issue of dominion notes, but this is difficult because of the provisions of the Dominion Notes Act under which we should be obliged to place an additional dollar of gold in the treasury for every additional dollar's worth of notes issued, unless they were issued under the Finance Act which would permit such issue without more gold behind the notes. If, however, we are to have inflation through the Finance Act it can be done only through the chartered banks, and our banks, according to their public statements, do not approve of inflation. I have not yet seen a public utterance of one of our bankers in favour of it, but I have seen a great many public utterances in which they are absolutely opposed to inflation, whether controlled or uncontrolled. Of course, they may change their minds as they have done before.
All through this depression I have been struck by this fact, that our banks have not suggested any way out of the difficulty, at least so far as I know. I am in hearty agreement with the hon. member for East Essex (Mr. Morand), who is reported as having said at Windsor last winter:
A number of our guardians of wealth-for that is what they really are-have made statements in the last few months, and in the last few weeks especially, and I have searched in vain through all their statements, whether of banks or individuals, for one single positive lead. They have simply taken upon themselves the task of giving negative information. They have told us. "Don't do this," and "Don't do that," but I have not been able to find in a single instance a ray of hope that they were trying to work out some solution of our problem.
Inasmuch as our financial leaders are apparently sterile of thought, the some of us who are not financial leaders will have to try and evolve for ourselves some means of getting out of this morass.
One is not entitled to call another man's medicine nostrums and quackery if one hasn't a remedy of his own. It looks to me that our financial leaders are devoting their efforts to finding fault.
I thank the minister for the statement he made on that occasion-or rather the hon. member; I think he is a minister too. Has he not been a minister at some time?


An hon. MEMBER:: He should be.


George Gibson Coote: Yes, indeed, and if it were not for the high regard in which I hold the present Minister of Finance I would suggest that the hon. member for East Essex should not have been overlooked.


Mr. MORAND:: Speak for yourself.


George Gibson Coote: I do not wish to indict the bankers; it would not be fair. There are some bankers who do not agree with what I might call the orthodox attitude of the banks towards the depression, but the great majority of them have not come forward with any solution, nor have they given any reason why this depression should continue for three or four years. I remember reading two years ago a report of the proceedings of the annual meeting of one of the Canadian banks. As near as I can remember the matter, the first official who spoke attributed the depression to over-production. The gentleman who followed him said that the way out was to work harder. It is no wonder, if that is the advice we have followed, we have not succeeded in getting out of the depression, and if we follow the advice of orthodox bankers, we shall never get out of it. The bankers want us to pay our debts, but. they do not realize that unless they keep on making loans to some people, the public will not have any money with which to pay their debts. Whether debts can be paid depends upon price levels; debts must be paid out of production and, as I say, whether they can be paid depends on the price which the producers receive for their products. That is simply common sense. The amount of money available in Canada is the chief determining factor in fixing price levels. I know some bankers will not agree with me when I say that the amount of money we have available depends on the action of the banks, but in this regard I shall quote the Right Hon. Reginald McKenna, former Chancellor of the Exchequer and at present chairman of the Midland Bank of London. He says:
The amount of money varies only with the action of the hanks in increasing or diminishing deposits. We know how this is effected. Every bank loan and every bank purchase of securities creates a deposit and every repayment of a bank loan and every bank sale destroys one. . . . Bank loans and their repayment, bank purchases and sales are in substance the sole causes of variation in the amount of our money.
I find that opinion corroborated by a writer in the financial


Pierre Édouard Blondin: I would point out that
this is a motion for the second reading of a bill to continue bank charters for a year, and as such it does not permit a general discussion of banking or how banks should be run.
Bank Act-Mr. Coote


George Gibson Coote: With all due respect, sir,
we are now considering a bill to continue bank charters for a period of one year, and I am discussing the attitude and actions of the banks during the past ten years. Surely that should be a determining factor whether this bill should be passed renewing bank charters for another year. I cannot see that I am out of order.


Pierre Édouard Blondin: It is out of order to quote opinions from various people as to whether the Canadian system of banking is correct or not, as the question is whether this bill should be passed extending for one year the charters of the banks.


George Gibson Coote: The gentleman whom I
quoted was not criticising the banks, but even if he were, I think I should be quite in order in quoting him in a debate as to whether bank charters should be renewed for a year. If that is not in order, what would be in order in discussing this bill?
The point I want to make is that the amount of money which we have in Canada determines price levels and the amount of money which we are going to, have depends upon the action of the banks. Surely that is a point which may be discussed when we are deciding whether we shall renew bank charters for a year. If that is out of order, I shall not have anything further to say, because I cannot see that anything else has any more bearing on the matter of whether the charters should be renewed.
A writer in the financial section of the New York Times-and I shall quote only two sentences from him-says in regard to the question where the amount of money comes from and bank deposits:
These include the sums in the ordinary checking accounts of individuals and firms and also include deposits of municipalities, states and counties. They are in part created by making loans; when a bank makes a loan to a customer it does not ordinarily pass out cash, but rather credits the customer with a deposit equal to the loan. In brief, contrary to the common understanding, the bank does not loan out deposits; it loans them in.
I would say that that is contrary to the opinion of many of our leading Canadian bankers and that is one reason I might be justified in expressing concern about renewing their charters for a year, when they do not know any more about the system they are running than is shown by some of their statements on this matter.
The money available for the people of Canada to transact their business with, which money, as I say, is the main factor in determining price levels in this country, has been
[Mr Speaker.]
reduced in the last three years; in other words, bank loans have been reduced from $1,856,000,000 to $1,278,000,000. That shows a reduction of approximately one-third. The reason I am bringing this to the attention of the house is that the bankers themselves-and I think I could quote some of their statements if I had them at hand-claim that has nothing to do with prices. In fact, one writer, in criticizing me, says that the drop in prices is responsible for the deflation of money in Canada. Searoely a week passes but some outstanding banker takes it upon himself to deliver a lecture to our statesmen, our politicians, our various governments, to tell them that they should practise economy, balance their budgets and reduce their expenditures to where it is within their income. It is too bad that the expenditures of our banks are not given the same publicity as are those of our governments. We do not know what happens in Canada, but we have recently had an illustration of what happens in the United States and we are accustomed nowadays to go there for a number of our ideas. I noticed in the New York Times yesterday a dispatch from New York which states:
The income tax authorities in the United States claim that Mr. Mitchell, the ex-president of the National City Bank of New York had a gross income of $3,649,623 in 1929, of which $1,872,861 was in salaries from the National City Bank and the National City Company.
Surely no one man can earn that amount of money from his services to one institution. It is too bad that some of our banks do not practise economy in their head offices and that some of them do not tell us the salaries they are paying there.
The Rank Act should be considered in conjunction with the Finance Act, because our banks rely very largely upon the operations of the Finance Act. All hon. members are, I think, familiar with the fact that the government may advance to the banks without limit against almost any class of security, making the advance in the form of dominion notes. The trustees of the central gold reserve may make a valuation of those securities for the treasury board and the trustees are the three big banks plus the Royal Trust Company which is a subsidiary of one of the banks. In this way the banks have a very powerful influence in the matter of monetary policy and for that reason I am rather concerned that the Bank Act should be renewed for one year without our knowing Whether the banks are willing to cooperate with the government in bringing in a measure of controlled inflation to raise price levels, a thing

Bank Act-Mr. Coote
which the Prime Minister told us this afternoon was so necessary.
I have not time to go into the question of a central bank. I do not want to delay the house too long, because the question has been discussed here before. We should have a central bank to enable us to control inflation for the definite purpose of raising and then stabilizing price levels. Presidents of the Bankers' Association on two occasioans admitted before our committee that they never took that matter into consideration when they were granting credits. To-day it is generally admitted that the amount ^ of credit available is the greatest determining factor in raising or lowering price levels. I would suggest that anyone who is interested should read the evidence given before the banking committee and particularly in 1928 when the president of the Bankers' Association made a very frank admission that they had given no consideration to the effect of their credit policy on price levels.	_
Just before I sit down, I should like to point out to the house that Mr. Roosevelt's action at Washington stands out, I think, in very broad contrast to the action and the attitude which this government has exhibited during the last two years. He has swung his country off the gold standard; he has come out frankly for a policy of controlled inflation. It is worth noting that the main measure under which this inflation _ is imposed is an amendment to the farm relief bill. We have suggested for two or three years that the way to help the farmer is to have a measure of controlled inflation, and we have been told that that would not conform to this country's policy of sound money. How is the sound money policy of this government going to be affected by this policy of the United States? Is our money still going to be sound, or may we not now frankly adopt the same measures which have been proposed by President Roosevelt in the United States. The president has been authorized to issue three billions of new currency, printing press money, and the people of the United States will be glad to get it. The Canadian people during the last two or three years would also have been glad to use two or three hundred million of printing press money, just as the people of the United States -will be glad to use this printing press money in that country.	_
It is proposed under another bill in the United States to issue three billion dollars of government bonds to finance public works, and under another measure to grant five hundred million dollars direct to the
different states for unemployment relief, those funds to be an outright federal donation to the various states. There is a complete justification, I submit, of the financial measures which we have been suggesting from this comer of the house during the last two years for the relief of agriculture and for dealing with the problem of unemployment.
I am not going to take up the time of the house any longer except to say that I do regret that the government has not held an investigation during either of the last two years and by now it could have been prepared to bring down a Bank Act in conformity with the needs of Canada. We brought in a resolution last year asking for an investigation by the banking committee of this house. That committee might very well have been set to work last year and have brought in a report to the house upon which a new act could have been based and introduced this year, or a commission might very well have been appointed last year.
I am very glad that the government has annnounced that they will appoint a royal commission. I hope that when that commission is appointed it will be composed of men who will make a thorough study of the question, that it will not be composed, as I said before, of orthodox Canadian bankers or of some of their hired economists because, if it is, the money spent on it will be thrown away. It is time that we had an investigation by men who, so far as the money and banking end of it is concerned, are free and not directly interested. I should like to see on that commission persons who really represent the people who are most affected by our banking policy. Ir. Canada unfortunately we have left all financial policy in the hands of the banks. If they decide to create more money and more credit we shall have more to do our business with, and there will be more business and better prices. On the other hand if they decide to contract, it is just too bad for the people, but it will happen nevertheless. I do hope that when the commission is appointed men will be chosen who are independent in the sense I have mentioned, and that the government will appoint some men who are outstanding in the field of economics in the old country and in Canada as well.
I am not going to oppose this bill in any way. At this late stage I suppose we must pass the bill as it is presented, but I do hope that the commission which the government will appoint will be such that their work
Bank Act-Mr. Coote

will be of real value and will enable us to improve our banking system and to provide purchasing power sufficient to enable us to make better use of our resources and thereby improve our standard of living. That is the great problem of business to-day, and it is not going to be solved by the world economic conference, because that is a domestic problem. The work of the banks is chiefly domestic. The matter of controlling foreign exchange I submit should be in the hands of a central bank, and I was very glad to notice that in the speech which the Prime Minister made in Toronto some time ago he rather indicated that the time had arrived when we should at least consider the establishment of a central bank in Canada. I hope that he is favourably inclined to that suggestion, and that he will give to the appointment of this royal commission the very greatest care.
Just one other thought which comes to me, and which I should like to express before I sit down. I hope the rumour which I have heard is not correct, that after this commission has done its work and presented its report it is the intention of the government to have the new Bank Act brought in by way of the Senate and referred to a Senate committee, so that it will not be necessary to refer it to a committee of the House of Commons. That is a practice which is becoming altogether too common. I do not like it at all. It was done last year in connection with the Insurance Act. It was done this year in connection with the Railway Act and the Shipping Act, all very important bills. I do not, think the House of Commons should allow that practice to grow, and especially when it comes to the Bank Act the elected representatives of the people should compose the committee to which- the bill will be referred before it comes up for consideration by this house.


Mr. C. G. POWER (Quebec South):: I
should like to say a word before the second reading carries by way of concurring in the observations made by the last speaker (Mr. Coote).


An hon. MEMBER:: Are you joining up?


Charles Gavan Power: I have no objection to joining up on that particular principle, whatever objections I might have on other principles. It appears to me that there is nothing more important to the people of this country than the postponement of the revision of the Bank Act. The operations of the banks are so mixed up with business generally that I do not believe there is any possibility of our business 
rising from the depressed state in which it is unless there is some reform of the abuses with which our Bank Act teems. Every business in Canada directly or indirectly is connected with the banks. In fact, I have heard it stated with some degree of authority that from fifty to seventy-five per cent of our business enterprises and our commerce are in the hands of the banks; so that if we propose to revive business the first step should be taken by going to the fountainhead, the banks themselves. The workers, the farmers and the business men of this country are all concerned in the Bank Act of Canada to a greater or less degree because owing to the ramifications of this act or to the manoeuvres of those who operate it they may be face to face with starvation or with a loss of their employment. I do not think it is going too far to say that a great deal of the distress which exists in Canada to-day is due to the harsh and ruthless policy of deflation which has been followed by the banks. I would suggest that the policy of governments to-day should be to reverse the process which we have been undergoing, and instead of carrying on the inflation of the banks and the deflation of the public, we should inflate the public and deflate the banks just as the public have been deflated.
The Bank Act was instituted and certain privileges were given to the banks in order that they might be of service to the people. But the contrary has been the case. Instead of becoming the servants of the people the banks have become their masters. There is hardly anyone in this country who is not in some way or other working for the banks. I leave it to any business man in this house, to any professional man, almost to any labour man, if he is not working for the banks, and I might almost add that the government and the House of Commons are working for the banks.


An hon. MEMBER:: And getting paid
nothing for it.


Charles Gavan Power: At the present time we are working for nothing, and may quite possibly thank the banks who will not let the government pay us any money. I suggest that a great many matters which come before us for ratification, such as orders in council, are passed directly in the interests of the banks.
I suggest that if the government, through orders in council, has guaranteed certain loans to the wheat pools it was in the interests of the banks. I suggest that if the Manitoba savings office losses were guaranteed, it was in the interest of the banks. I suggest that if at the present time we find ourselves in an unfortunate position, so far as our railway com-

Bank Act-Mr. Power
parties are concerned, it is because this country went into the railway business in order to save the credit of the banks. I suggest we have gone to the assistance of the dominion of Newfoundland-which was none of our business-in order to assist two or three Canadian banks. I am not sufficiently familiar with banking and its ramifications to be able to say, as has been said, that we have the finest banking system in the world. I am not attacking the soundness of our banks, because I do not know whether or not they are sound. I believe that under our legislation it would be impossible in any case for the banks to fail and, that at the present time they have their coffers filled with documents, which the Prime Minister called promissory notes, of municipalities, provinces and possibly of the dominion.
Not very long ago the attention of hon. members was' directed to the monthly commercial letter of the Canadian Bank of Commerce dated May, 1932. Since that time may I add that the situation has changed, not for the better but for the worse. The following table will serve to show the composition of loans in Canada of the Canadian Bank of Commerce in the autumn of 1929 and at February 1932:
Percentage of increase or decrease
Governments and municipalities....	28.0*
Public utilities, insurance companies, trust companies, automobile finance
companies, et cetera	 8.3f
Farmers and ranchers	 18.7f
Grain, flour, meats, et cetera	 52.6f
Manufacturers-Agricultural implements, iron and steel, mining, automobiles, textiles, wearing
apparel, et cetera	 26.8f
General stores and sundry wholesalers and retailers	 51.4f
Lumbering industry, including pulp
and paper	 30.8f
Contractors, builders, et cetera..	..	28.6f
Call loans, loans on securities to security houses, underwriters, et
cetera	 40. Of
Sundry dealers and traders, and individual customers^ of the bank throughout the dominion.. ..	..	33.3f
Trade paper discounted, sterling and
foreign bills of exchange purchased	52.4f
* Increase. t Decrease.
Hon. members will note that the loans to general stores, sundry wholesalers and retailers, those people who carry on the business which represents the life blood of Canadian commerce, have been decreased by'51-5 per cent. Those are the figures as of February 1932. Since that time I say the situation has been greatly aggravated. I have not the figures before me, and I do not know whether
or not as yet they have been analyzed. The statement I have read deals only with the Canadian Bank of Commerce. But I would say that the loans to public institutions must have increased by May 1933 by at least thirty-five or forty per cent, and the decrease in loans to ordinary businesses, to traders, to the lumbering industry and to every other primary industry of Canada must have been enormous.
For those reasons I believe there should have been initiated at this session a complete study of our whole banking situation. I have no objection to the appointment of a royal commission. Such a commission could have supplemented the efforts of a committee of the house, and no doubt would have been of great assistance in giving technical advice.
I fear, however, as does the hon. member who has just spoken, that in the composition of the royal commission those people most vitally interested in the banking situation will not be represented. The farmers, the small merchants, the workers-all these have suffered through a policy of excessive deflation carried on by Canadian banks. I fear that those people will not be represented, and further, that they will be unable to make their representations to the commission. It is very difficult for a man, who has hanging over his neck the threat that the bank can close him up next day, to appear before a commission and explain the situation as he sees it. I fear that the commission may tour the country from one end to the other and that those who are really in need of assistance through a revision of the Bank Act will not be heard, will be unable to have their views placed before and dealt with by the commission. Having made this statement, with the reservation that when the report comes in next year I hope hon. members will be permitted to use their own judgment and discretion as to the manner in which they will deal with it, and as to whether or not they will accept its recommendations, I desire to protest again against the postponement of the revision of the Bank Act.


Mr. H. E. SPENCER (Battle River):: Mr. Speaker, I have been deeply interested in the remarks of the hon. members for Macleod (Mr. Coote) and Quebec South (Mr. Power). I do not rise at this time to object to the bill, because I believe we have gone too far in the session to be in a position to take any action whatsoever with regard to the revision of the Bank Act.
I should like to remind the house, however, that in 1923 when the present member for
Bank Act-Mr. Spencer

Wetaskiwin (Mr. Irvine) introduced a resolution asking for an investigation into the basis of credit, its function and control and its relation to trade, we had a very interesting and valuable investigation. After the investigation had taken place many hon. members from this corner of the house together with other hon. members who sat on the committee, did their best to have the revision of the Bank Act postponed for one year, so that we would have an opportunity of going into the evidence which had been submitted not only by important witnesses from different parts of Canada, but by witnesses from the United States and Great Britain. We tried to secure a postponement at that time because we realized that a great deal of valuable information had been given, and that we would not be in a position to make proper use of it unless we had an opportunity for study. We were not given that opportunity. The committee was forced to go on with the revision of the Bank Act, and to say the least that revision was forced through as fast as possible.
Now that the government has decided to have a royal commission to investigate the problem of banking and finance I hope the same condition will not arise. I trust we will not be asked to go on with the revision of the Bank Act as soon as the report is presented. I hope the commission will get to work at an early date, that they will do their work thoroughly and that the report will be in the hands of the members in time to give ample opportunity to study it before we take up the revision of the Bank Act in 1934. If it is possible to have the report in our hands before parliament meets, all the better. If not I submit we should have it very early in the session, and that members of the banking and commerce committee at least will be given an opportunity to study that report before we go on to the next part of our business in connection with the Bank Act.
In studying the Bank Act next year I think not only should particular consideration be given to the problems of financing railways, fisheries, forestry, mining and industries generally, but I would point out that as far as the basic industry of this country is concerned, agriculture; the present banking system is about the poorest form of financing that industry could possibly have. I do not particularly blame these private institutions for not wanting to have much to do with agriculture, at the present time particularly, but the fact remains that, the industry has to be financed. If we have a banking system that

prides itself on making only short term lqans for two, three and four months, when agriculture needs loans for at least six to twelve months and sometimes two or three years, and as the private banking system charges that industry the highest rate of interest, eight or nine per cent and sometimes more, it stands to reason that the industry has no chance to succeed. Therefore when the Bank Act comes up for revision we should see that arrangements are made that the banking system will finance agriculture suitably, or if it cannot we should find other ways and means of financing it. It is not necessary for me to go over the wide field covered so well by the hon. member for Macleod (Mr. Coote). I would only repeat in regard to deflation that whenever we deflate by a certain amount we increase debts to an equal amount. Otherwise, in halving prices we double debts.
Banks to-day are too inflexible. We had some very interesting information given us in 192S when we had an investigation in the banking and commerce committee on that point. Banks may inflate or deflate against the interests of the country. We have to recognize that our monetary system is made up of three parts largely; the minted money, the printed money and the written money. We all recognize to-day that the written money, that based on ledger entries, and drawable by cheque, is over 90 per cent of the money we use. As the hon. member for Macleod reminded us, this money is brought into being through the action of the banks in making loans, which in turn increase deposits. I have in my hand a statement showing that deposits in 1922 amounted to $1,192,000,000. The actual cash at that time in subsidiary coin and notes was $229,000,000. In a speech made by Mr. Jackson Dodds, general manager of the Bank of Montreal before the board of trade in Winnipeg in March last, he stated that they made their loans from preexisting savings deposits, I wonder how he got that understanding. We find that, although we only had $1,192,000,000 in 1922, we increased that by 1929 to $1,480,000,000, and we also increased the amount of notes and subsidiary cash from $229,000,000 to $247,000,000 in the same time. Apparently he has another guess coming. We all know that in good times the banks compete in making loans; in bad times they compete in forcing collections and destroying purchasing power. Yet they say competition is the life of trade. I would remind hon. members of the truth we all know so well, that directly we start to curtail credit, which curtailment is brought about by the banking system, we at once have a crash in

Bank Act-Mr. Bennett
prices, and that at once reacts on unemployment and the army of the unemployed begins to grow.
It is not necessary I think for me to refer at length to the Finance Act, that also has been touched upon. However, I would like to remind hon. members that the Finance Act is more or less like a slot machine. When a bank brings securities to it, it gets dominion notes on a safe margin, and I have yet to find any limitation. We have been told until we are tired of hearing it that Canada's banking system is the soundest in the world. If it is not it ought to be, when it has the government of Canada behind it. If the banks of this country, being private institutions, can at any time bring securities to the treasury board under the Finance Act and get dominion notes for them, surely the country supports the banks. Therefore if the country is sound the banking system ought to be sound also.
If, when the commission does sit, inquiry is made of it as to the advisability of starting a central bank, it will recommend that a central bank be formed, as has been suggested so many times from different parts of this house. I see no reason why a central bank should not do a great deal of good in taking care of all government business. Why should it not take over the work carried on to-day by the treasury board? Why should it not take over the work of the central gold reserve? Why should it not buy and sell securities and so help to regulate the price level? Why should it not buy and sell foreign exchange? Why should it not have a monopoly of note issue? Is there any other business in Canada that as soon as it is given a licence to live has the huge privilege of being able to double its capital at the cost of printing and paper, a privilege we give the banking institutions? Lastly why should not the central bank be a depository for the total amount of money in our post office savings offices? These are some things that it seems to me that a central bank might do. Therefore in saying these few words in regard to this bill I hope that when investigation is made into this whole problem the members of this parliament, and particularly the members of the banking and commerce committee, will be given full opportunity and plenty of time to study the report before being asked to review the Bank Act in 1934.


Richard Bedford Bennett: Mr. Speaker, one has to go away from home to realize fully the value of the institutions of one's own country. As I listened this afternoon I did not intend to participate in this debate. But when I heard the attack
made on our institutions, heard them held up to scorn as they were, I recalled a conversation of, I think, five days ago in which I was assured that if the banking institutions of the great republic beside us had been similar to our own they would not have experienced the difficulties that they have.
I was rather surprised at the statement of the right hon. gentleman who leads the opposition (Mr. Mackenzie King) that we as a government had not taken the initiative in connection with these matters as had been done by the President of the United States. Well, Mr. Speaker, the United States had no option. Their banks all closed; they had to, because the system was defective for this reason:	They could lend money without limitation as to the character of the security upon which it was loaned. Having loaned money upon real estate in large amounts these depositors-who were not paper depositors or transfer ledger depositors, to whom the hon. gentleman has referred so often that it would be amusing if it were not so tragic-wanted their money, but when they drew their cheques for the money the banks could not meet those cheques because they had put the money into real estate mortgages. It became so serious that in the end every bank in the United States was closed.
I confess to being one of those who did not think the time would ever come when all the banks in the city of New York would close. When the governor of Michigan closed the banks in that state it became inevitable that the banks in the central west would close also, because in a general way we knew the character of the securities they held for their deposits, but I did not think the banks in New York would close. However, they did close. Who will compare for a moment at this time and under those circumstances the financial institutions of our country with those of the richest country in the world? I can assure this house-and I agree with the hon. gentleman who made the statement- that while one does not desire to talk about Canada having the finest banking institutions in the world, I do say that we have come thus far through a great crisis with singular credit to Canadian banking institutions. I will go that far. I may say also in reply to the right hon. gentleman, who suggested that we have been dilatory in dealing with thtse questions of banking, credit and currency, that in the early fall, when the session was to be called to deal with the agreements, the government discussed the matter very carefully not only among its members but with others as well, trying in a large sense to
Bank Act-Mr. Bennett

Bank Act-Mr. Bennett

opposite will have an opportunity to make their statement. It is no use quoting what Reginald McKenna or somebody else in London says about conditions in Canada. This country has peculiar problems, questions that are quite different from those of most countries. Here we have half a continent inhabited by about 10,000,000 people, and when you think they are carrying on operations so that they ocupy the fifth or sixth trading position in the world, you begin to realize the magnitude of the problem with which we have to deal. It is important too- and I trust every member of parliament will see to this-that the representations made to that commission will be made by those who have an intimate knowledge of the concrete working of our banking system. It is no use saying that banks charge 8 per cent when they should charge only 7 per cent. That only shows that this is a departure from the provisions of the statute. That is not the point. The point is whether or not we have taken by our legislation appropriate steps, shall I say, to safeguard, not only the interests of the depositors-and the shareholders-they of course have little or no stake in that phase of the matter because their -money is locked up in bank premises and the specie that is held by the bank; if you will take the trouble to ascertain, you will see that-but the business of Canada. Banking in a large way is the business of Canadians. I have given much attention myself and so have my colleagues as to the personnel of that commission. If I were in a position to announce it to the house now, when we are seeking an extension of the Bank Act for another year, I would do so. It is perfectly clear that we must not confine it entirely to Canadians; that is obvious. On the other hand, it is important that its personnel should be such as would ensure knowledge on the part of the commission as a whole of the practical workings of our banking system. In other words, I think the banking interests should be represented at least for that purpose. Then you must have representation for those who are concerned in the working of the banking system as the users of it, not the makers of it, and above all we must endeavour, and shall endeavour, to ensure that those who direct the commission will see to it that an opportunity is given to everybody who so desires to speak with respect to banking from the standpoint of the country as a whole.
I think perhaps it is not fair to say that in any sense have we endeavoured to escape the responsibility that rests upon us because, barring accidents, in all probability the same government would be here in 1934, and they

would have to accept the responsibility. So it was not for the purpose of escaping responsibility at all that the -revision of the Bank Act was postponed but for the reasons that I have given to the house-an earnest desire to do what we conceived might be the best for the purposes of this country as a whole.
When -the ho-n. gentleman referred to the assistance that was given by the dominion to enable the wheat -pools and the savings banks of Manitoba or Newfoundland to function, when an hon. gentleman said, for instance, that when we gave o-ur guarantee -in connection with the savings bank o-f Manitoba we gave it i-n the interests of the banks, may I hasten to assure -him that we declined absolutely to consider the proposition until there were 40,000 depositors who had in their possession books under which -they were entitled, by custom rather than by the strict word of the contract, to write a cheque against that savings bank in Manitoba and against which there was not a single -thing left in the till except the rattle of -the I.O.U's. That was the position that induced us to take the step we did.
I am not going to go over the ground again with respect to the wheat pool operations. On Friday last the United States farm board, which had been dealing with the wheat problem, closed out their business after -they had made a loss of $160,000,000, an-d had given twenty-eight million bushels of wheat to the Red -Cross for distribution. Their loss on cotton is well known to this house. I shall not do more than say, with respect to our loans to provinces, that on Friday last the state o-f New York received from the Reconstruction Finance Corporation $9,000,000, bringing its total loans to $29,000,000, and Missouri and California were in the same position. What we have been doing the United States is only just beginning to do. With respect to the $500,000,000, to which the bon. member for Macleod referred, I do not think it has yet been settled that that is to -be a gift, but just for the purpose of aiding employment in the states. That is the -method that is to be -pursued for -the purpose of maintaining the autonomous position of the states, just as we have done of the provinces. Such assistance is being given by -reason of the national character of the disaster in ord-er to ensure that all shall be in some small way protected.
I trust that in giving the second reading to this bill to extend the period within which the -bank charters will operate for another yea-r the house will realize that the govern-

Bank Act-Mr. Ralston
ment does it with a full sense of the responsibility that rests upon it and with an earnest desire on the part of the administration to provide facilities by which the Canadian people, speaking as a whole through the commission, may have an opportunity upon the evidence there adduced to report to those best able, best able I say, to make such recommendations to this house as will clothe the members of this house with that knowledge which is essential to arrive at a sound judgment or conclusion with respect to this matter.
May I, without being offensive, suggest that moderation in matters of this kind is desirable. When sometimes our statements made in this house with respect to our institutions are carried abroad, and our people are denounced in the terms in which they sometimes are, it must be remembered that the banks of this country are controlled in the end by the people who deposit their moneys with them. In other words, it is confidence that is entirely behind the maintenance of the structure of our banks. I said the other evening something about confidence plus being the important thing. The real fact is that since then the nations of the world are endeavouring to discover how they may be able to establish some method for controlling international exchange, using the word in the broadest possible sense, including moneys and commodities, and with respect to the one, when the hon. gentleman referred to the history of the United States in connection with its so-called inflation, the truth is that that republic is so rich, holding nearly half the gold of the world, that no method so far yet practised has reduced the value of its paper below one hundred cents on the dollar, nor is it apt to. You cannot quite say that with respect to anything else except perhaps the gold franc at something less than four cents. You have there an illustration of the value of confidence. They have the backbone of assets, real assets, assets of gold, which is the international medium or measure. On the other hand you have other communities, strong, vigorous, with great futures before them, but they have not the same assets immediately available for the purpose of giving that confidence which is essential in international transactions.
I can only ask this house and every member of it to look upon this measure for the revision of the Bank Act as something far greater than any mere party question. Any suggestion that may be made for permitting the representations of various members to be 53719-281 j
heard before that commission in order that every school of thought may find adequate expression will certainly not only be favourably considered by the administration but every effort will be made to see that those views are thus expressed.


Hon. J. L. RALSTON (Shelbume-Yar-mouth):: I rise, Mr. Speaker, to make a very few observations and to bring the house back to what is after all the question before the chair, and that is whether the charters of the banks shall be renewed for another year, notwithstanding the provision of the Bank Act which requires that every ten years there shall be a revision.
My right hon. friend the Prime Minister has wandered a considerable distance, but I have no doubt he was dealing with what has been said from different parts of the house this afternoon. We want to discuss this matter in moderation, and to meet his suggestion that the discussion be without party bias. But after all the real question is whether or not the government are justified in proposing at this time that the charters of the banks shall be extended for another year notwithstanding the provisions of the Bank Act. Searching my right hon. friend's speech for arguments in support of the proposition I for one, Mr. Speaker, find that he has almost overproved his case; in other words, that he has shown that the banking situation is so sound in this country and the integrity of the banks so unimpeachable, compared with the United States, that there should be no difficulty whatever in proceeding as usual with a revision of the Bank Act instead of postponing it for another year. I am not speaking in a sarcastic manner at all; I mean what I say. The Prime Minister has given every evidence that during his visit to the United States last week he heard such testimonials with respect to our banking system that we would be led to expect there would be no reason in the world why a revision should not be proceeded with in the ordinary way. No reason has been given by the Minister of Finance, and the only reason given by the Prime Minister was the statement at the close of his address that the government- and he took full personal responsibility-having regard to the chaotic conditions in the world, and the disturbance which would be created in our banking institutions, felt it would be inadvisable to revise the Bank Act this year. He did not tell us-and so far as I know it is not so,-that the banks have asked that the postponement be made. This is purely a move on the part of the government, because they feel a little timorous, if I
Bank Act-Mr. Ralston

may express it that way, as to the results, the effects or the possibilities of an inquiry such as would be had before the banking and commerce committee. I do not suggest that the government feel these institutions would not come out quite all right, but at the same time they feel conditions are so distressing that such an inquiry should not be launched. I wish to present the other side of the shield, and to say to the Prime Minister that if the banks of Canada are in the position he suggests-and I have no reason to believe they are not; I would be the last to question the standing of our banking institutions-if the banking institutions are in this position, is it hot the part of reason, wisdom, common sense and orderly administration to go ahead and do business as usual with regard to the Bank Act, and have the revision at the time and in the manner prescribed as has been regularly done in the past. Is it not better to do that, than to postpone revision for another year, on the ground that chaotic conditions and possible dislocations or disturbances to the banking institutions make it unwise to proceed. That is the point which appeals to some hon. members on this side of the house. When the Prime Minister suggests that a royal commission is to be appointed, I remind him, as my right hon. leader has already done, that a royal commission cannot take the place of an inquiry by representatives sent here by the people of Canada, men representing all shades of opinion and all classes. They should examine the monetary, financial and currency questions faoing the country.
I say this to my right hon. friend and his government, that if there were no other reason for proceeding with a revision this year, than to afford a forum where members of this house and where the public could get information and could come face to face with the business leaders, financial men and bankers, a revision of the Bank Act would be justified. At a time like this, when economic conferences are being held in every club and every smoking car, every place where men congregate, when economic questions are constantly under discussion, a revision of the Bank Act would have been very proper and very useful. A great deal of information exchanged is, undoubtedly, misinformation; men are very much misinformed. I believe the world is reaching the point where nobody will boast of having much understanding in connection with these problems, but by meeting men who are expert in these matters and discussing with them economic questions, much good would be gained.
Just at this time, when the revision of the Bank Act is due, in accordance with the ten

year provision, economists the world over are saying that even tariffs and debt settlements must take secondary place to a revision of monetary systems, in order that conditions may be stabilized. The Prime Minister speaks of the situation in the United States and the inflational or reflational action taken by the government of that country. He knows such action has not been taken only because of the situation which arose in connection with banking institutions. He knows it has been taken because of an international situation as well, and because of the position in which the United States found herself on account of her unit of currency being so different from and out of line with the parities in the rest of the world.
Monetary and currency questions are coming to be regarded as an important first step towards a revival of world trade. I submit there could have been no better place for a discussion of those problems, the presentation of all views with respect to them and for the crystallization of ideas and the possible emerging of some definite policies, than in the banking and commerce committee of the House of Commons, assisted, as it would be, by experts who would come before it to give evidence. I submit that by not having that done, the government is losing a great opportunity.
My complaint about the royal commission, outside of the fact that it is not as representative as would be a committee of the House of Commons, is that it is about a year too late. This matter has been before the countries of the world for some time. Men have begun to realize that monetary problems are very important so far as the rehabilitation of the world is concerned. Yet at this time the government does not propose to revise the Bank Act or to take any definite action with respect to the monetary situation; it only proposes to appoint a commission before which people may appear. This, in spite of the fact that in the country to the south of us most drastic and far-reaching action is being taken. I quite admit that those measures may not actually be put into effect, but at least the president of the republic is given power to act along the broadest lines, by way of deflation, or degradation of the gold dollar; by way of the issue, if necessary, of paper currency; by way of the redemption of treasury notes, and so on. Those are measures which would have shocked the world twelve months ago but are being provided for in the country to the south of us at the present time.

Bank Act-Mr. Mackenzie (Vancouver)
At this time therefore I rise to join with other hon. members on this side of the house in protesting against the attitude of the government with regard to the Bank Act. We take our position not because we are criticizing these institutions, but because we believe that by proceeding with the revision there would have been an opportunity for this House of Commons to do real work in connection with education and information, and perhaps evolving policies which would have been for the benefit of Canada in the crisis through which she is passing.


Hon. IAN MACKENZIE (Vancouver Centre):: [DOT] Mr. Speaker, I wish to make one or two observations on the second reading of the bill. I agree with previous speakers who have said that this is one of the most important measures we have had before us during the present session of parliament. This afternoon the Prime Minister (Mr. Bennett) repeated practically in detail an address which he delivered in this House of Commons in February, 1932. Having a somewhat tenacious memory, during the right hon. gentleman's observations I had the pleasure of reviewing what occurred upon that occasion. To-day we heard the same old shibboleths, the same old time-worn theories as we heard then. We have heard the defence of sound money outlined once again, and the gold mentality, Which is absolutely inseparable from the right hon. gentleman, was once more apparent, as it was in February, 1932. The golden calf was once more trotted out for exhibition before the wondering gaze of the Canadian people.
What were the two objections of the Prime Minister to our daring to criticize the Canadian banking system? He told us in the first place that had the United States had the system Canada has had during the last few years she would not have had the same financial troubles.


Richard Bedford Bennett: I said that opinion was
expressed to me. I did not say what my opinion was.


Ian Alistair Mackenzie: Bank Act-Mr. Mackenzie (Vancouver)
Where, then, is the argument adduced by the right hon. gentleman that the deposits in the banks to-day under our banking system are actual money placed there by the Canadian public? They are nothing of the kind; they are a structure of credit raised up under the greatest monopoly ever given to financial institutions in this or any other country.


Mr. YOUNG:: 
Ian Alistair Mackenzie: 
Hon. E. N. RHODES (Minister of Finance):: I do not wish for a moment to be a party to the needless delay of the passage of the measure in which I am interested; in the ordinary course, following the remarks of my right hon. leader I should not have said a word. I do so now merely to deal with one point. Before proceeding, however, I must say that it was rather refreshing to hear my hon. friend from Vancouver Centre (Mr. Mackenzie), who presents his views with such vehemence, give his opinion with regard to the merits of our banking system, the gold standard, money lenders, money changers and so on immediately after his associate to his
left said that the debate had been more or less out of order and that we should get down to the question whether or not we should continue the bank charters for one year.
In his objection to this procedure my right hon. friend the leader of the opposition (Mr. Mackenzie King) took as his first point the ground that the government ought not to have brought down a measure to extend bank charters for one year. I could not quite see the force of his objection. Of necessity it is incumbent upon the government to initiate a measure of this kind.


William Lyon Mackenzie King: The statute
has placed on parliament the duty of revising the act every ten years.


Edgar Nelson Rhodes: The duty was upon parliament to revise the act in 1911, but the Liberal government of that day brought down a measure to extend bank charters for one year.


William Lyon Mackenzie King: For the reasons I mentioned.


Edgar Nelson Rhodes: Quite so. My right hon. friend thought it was quite fit and proper to extend the bank charters then, since the Minister of Finance and the Prime Minister were going to an imperial conference in London, but he thinks that we should not ask that the bank charters be continued for one year now in view of the fact that this year during the most interesting economic and financial period in the history of the world, a great monetary conference is to be held in London.


William Lyon Mackenzie King: But the difference is this, that in 1911 parliament had to adjourn in order to permit the Canadian ministers to attend the conference in London, and there was no opportunity to take up the question.


Edgar Nelson Rhodes: I am quite ready to admit that what my right hon. friend has said is true, but he says that it was quite all right for a Liberal government to bring down a measure to extend bank charters for one year because they wanted Canada to be represented at an imperial conference, but it is quite another thing when a Conservative administration brings down a similar proposal with regard to world conference during the worst crisis in the history of the world. The speech from the throne made the situation very clear; it said:
You will be invited to extend Canadian bank charters for one year in order that parliament may be informed of the results of the proposed world economic and financial conference, to be called to consider financial, economic and monetary problems, before undertaking the decennial revision of the Bank Act.


Mr. VALLANCE:: What date was that?
Bank Act-Mr. Rhodes


Edgar Nelson Rhodes: That was in the speech from the throne. I have only this to say, Mr. Speaker: I do not profess for a moment to be competent to give an expert or even a fair, average opinion as to what ought or ought not to be done with this or that phase of the proposals with regard to banking and monetary questions. I do submit, however, what has been pointed out by the Prime Minister (Mr. Bennett) that we have in Canada, whatever imperfections it may have, a banking system that has stood the test of the greatest financial storms known dm the history of the world. We must not forget that fact.


Mr. GARLAND (Bow River):: May I suggest to the hon. gentleman that all he is now saying is that Canada stood the storm and the shocks. All Canada is now behind the banks; we are in the banking business but we have no direct control.


Edgar Nelson Rhodes: My hon. friend has succeeded in having his opinion placed upon Hansard in the form of a question. I do not object; if he wishes to insert the word Canada I will agree. Canada 'and its financial and banking institutions have weathered the storm. However, I am not going to attempt to discuss the merits of the question. I venture to say that if the government had proceeded in the ordinary course and revised the Bank Aot we would have been subjected to very great criticism for dashing into that revision at a time when we did not have the advantage of the findings of the world economic conference. My hon. friend from Vancouver Centre said he pointed out last year that we should have a royal commission; he agrees that this should be done, but the point he makes is that it is a year late. I will meet that argument by saying to my hon. friend that we have had the benefit of a year's experience, and we are in a much better position to deal with financial affairs in the light of that experience than we would have been a year ago. I am sure the people in the great republic to our south will approach these subjects in a much more chastened frame of mind than would have been the case twelve months ago.
In closing this debate, Mr. Speaker, I merely rose for the purpose of dealing with the question of the propriety of our asking that bank charters should be renewed for a period of one year. I am in perfect accord with the suggestion of the hon. member for Shelbume-Yarmouth (Mr. Ralston) that this is the sole subject that should be discussed on the motion for second reading. Having said that much I do not propose to be responsible for delaying the second reading of this bill a moment longer.

Motion agreed to on division, bill read the second time and the house went into committee thereon, Mr. Gagnon in the chair.
On section 1-Bank charters continued to July 1, 1934.


Jean-François Pouliot: I have only a few words
to say, Mr. Chairman, because my hon. friend from Quebec South expressed in much better language than my own some of the thoughts I had entertained in regard to this matter. The right hon. Prime Minister spoke of moderation, and I think this is the first time 1 have heard him mention that word in this house. He spoke also about attacks made by the opposition on our financial institutions. May I point out that in the House of Commons members of the opposition may not attack members of the government and vice versa, but regarding matters outside the house any member is at liberty to pass judgment on individuals who have served the government in any capacity; or on institutions, and in doing so he is not attacking anyone but merely exercising his right as a member of parliament to express his views conscientiously on all questions that come before the house.
There are two questions to be considered under this bill; first there is the postponement of the revision of the Bank Aot, and secondly the manner in'which the whole subject is to be investigated in the interval. As regards the postponement of the revision of the act, it seems to me that if the govenment had a strong policy on banking it could very well submit that policy right now. There are two ways of studying this matter; there is a regular way and an irregular. I thank the hon. member for Shelburne-Yarmouth (Mr. Ralston) for his support of my view, which is the view of many other hon. members. I think that the whole question should be submitted to a special committee of the house who could hear witnesses and pass judgment on their evidence. That is the regular course, which I think should be adopted. The irregular course is to appoint a royal commission. Who will be appointed no one knows. As my hon. friend from Quebec South has pointed out, it is difficult to select representatives from among the farmers and the small town and village merchants.
Mention has been made to-day of conferences. We have heard that the leader of the government is a superman. Now, those who will meet at the conference in London will be mere men, so that the superman will be very much above them. I remember that after the hon. member for Renfrew had said that Mr. Ferguson was so admirable the hon.

Bank Act
member for St. Ann observed that it was an honour for Mussolini to be compared with the Prime Minister. Well, if the Prime Minister is such an outstanding figure I do not see why he will take the trouble to cross the ocean to attend the world conference; he will meet only pygmies there. It reminds me of the Big Endeins and the Little Enders; he is the Big Ender and he will meet the Little Enders. If he is the superman what is the use of his spending the money of this country to cross the ocean merely in order to meet narrowminded people in London? He can give his views right now from Ottawa. I am sure they would be accepted the world over, and they would not only reflect great credit on himself but would establish his supremacy as the superman.
As regards inflation, I was much interested in the discussion that took place between the hon. member forWevburn (Mr. Young) and my hon. friend from Vancouver Centre (Mr. Mackenzie). I believe these gentlemen should settle their difficulties between themselves. May I say once more, however, in the presence of the hon. member for Macleod (Mr. Coote) who is an expert on inflation, that the statement was made by him, in answer to a question I asked some time ago, that if the tariff barriers were lowered there would be no use for inflation. So that if the difficulties in connection with our present monetary and currency system are due to the tariff policy that has been adopted everywhere, it would seem to me that the moment every nation came to its senses and lowered its tariff barriers we ought to hear no more about inflation. If that were brought about I am sure my hon. friend from Macleod would realize how right he was when he answered so conscientiously the question I put to him on that occasion to which I have referred.


George Gibson Coote: I do not think my hon. friend has quoted me correctly. Although we might have free trade, I think this country has been deflated to such a point tha-t we must have inflation to correct the situation. I was in error if I gave the answer which the hon. gentleman attributes to me.


Mr. POITLIOT:: Hansard is there and can be referred to at any time to show what the hon. gentleman said. I asked the question whether, if tariffs were lowered, there was any necessity for inflation, and the hon. member replied that there would be no necessity for it. The statement was made during the discussion on the estimates of the Department of Trade and Commerce. He said, "I believe that as soon as tariffs are lowered reasonably there
will be no necessity for inflation." We have the proof of that in the fact that when trade was normal owing to a normal tariff we never heard a word about inflation.


George Gibson Coote: I am sure that before we get free trade in Canada we shall have inflation.


Jean-François Pouliot: That may be so, but I have quoted what the hon. gentleman said a month ago as found in Hansard.


George Gibson Coote: The Prime Minister spoke of the terrific losses of the banks in western Canada. I am sorry to hear that. If it is true, I would lay the responsibility directly on the shoulders of the administration who, by their monetary policy, have endeavoured to keep us as near to world gold prices as possible. Their policy has kept prices of the products of the west to the point where the farmers are unable to pay back the loans made by the banks. Had the debt-paying power of wheat been as great in the west during the last two years as in Australia, the farmers would have been able to pay back to the banks a great many millions of dollars which they have been unable to return.


Edgar Nelson Rhodes: I must raise a point of order. I regret to have to do so in the case of my hon. friend for Macleod, but I would have done it in the case of the hon. member for Temiscouata, who was entirely out of order. I must point out that the hon. gentleman is not in order, now that the committee is considering the bill, in replying to anything said in the debate on the second reading. I must raise the point of order if we are not to have a second, third or fourth debate in committee of the whole. The discussion must be confined strictly to the question before us, which has nothing whatever to do with the gold standard.


The CHAIRMAN (Mr. Gagnon):: The point raised by the minister is well taken. It is now six o'clock and I trust that when the committee resumes hon. members will endeavour to be in order.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight oclock.


George Gibson Coote: There are one or two questions I should like to ask the minister in regard to this bill which is to renew the Bank Act for a period of a year. Section 91 of the present act sets a limit of 7 per cent on the rate of interest which a bank may charge.
Bank Act

I just wanted to ask the minister whether he is aware that on many bank loans rates much in excess of 7 per cent are being charged, whether the inspector general of banks ever reports to him in connection with that matter, whether he has heard anything about it and, whether he does not think, before this bill is passed out of committee, some amendment should be made to section 91 so that banks will be compelled to comply with what is admittedly the intention of that section.


Edgar Nelson Rhodes: Whatever merits the suggestion of my hon. friend may have-and I am not for a moment intimating that there are no merits in it-the fact remains that in a renewal of bank charters for a period of a year we are not attempting in any way to revise the Bank Act. If we started in on the question of amending this, that or the other section of the Bank Act, we would be attempting in committee of the whole house to revise the act without the matter going to the banking and commerce committee; so that his suggestion is not one which we could properly entertain in connection with a bill of this kind.


George Gibson Coote: When this matter was before the house either last year or the year before-and I think it was last year-the statement was made on more than one occasion by more than one member that the Bank Act would be up for revision this year. Many members admitted that section 91 should be revised so that banks would be compelled to remain within the limit of 7 per cent on loans made by them. Perhaps if I brought to the attention of the minister some of the rates they are charging, he might take more interest in the matter. The rates which I am going to mention are contained in a return which was recently brought down, a return which the banks make under a certain section of the act. In this return the banks are required to show the maximum rates of interest charged on the different classes of loans. They divide these loans into four classes: A, B, C and D. As I remember the matter, class A loans are for any amount up to $250; class B, for amounts from $250 to $1,000; class C, loans from S1.000 to $25,000, and class D, loans over $25,000.
On page 15 of the return brought down there is a class C loan, that is a loan between $1,000 and $25,000, which shows 10 per cent interest being charged on an overdraft. On page 16 of the return, the discount rate charged on a class B loan, that is on an amount between $250 and $1,000, for a period of one month, is shown at 9 per cent. On 
page 17 of the return a rate of 12 per cent is shown on a class B loan, a rate of 10 per cent on a class C loan and a rate of 8 per cent on a class D, that is for an amount over $25,000. On page 18, the return shows a discount rate of 10 per cent on a class B loan, that is an amount between $250 and $1,000, for a period of ninety days and a rate of 10 per cent on a class C loan, that is an amount between $1,000 and $25,000, for a period of ninety-one days. The rates which are shown in this return show clearly the need for revising that section of the act at this session of parliament. The business men and farmers of Canada cannot stand such rates of interest. The banks are taking an unfair advantage -of their customers in charging such rates and that is the reason I am bringing the matter to the attention of the house.


Mr. HANSON (York-Sunbury):: Does the
return show whether those rates were for loans made in Canada?
Mr. COOTE. I am speaking from memory and I shall have to speak subject to correction, but so far as I remember all the loans I have mentioned were in Canada. I would like to ask the minister whether these rates have been brought to his attention and now that I have brought them to his notice, whether he will not consider amending this one section of the act. Many members, if not a majority of the house, felt last year that a general revision of the act would take place at this session and accordingly the matter was allowed to go over for a year.


Edgar Nelson Rhodes: I can only point out again to my hon. friend that we are not amending the Bank Act except to renew the charters for a period of one year. I know quite well that on perusal of the return which my hon. friend received, he would be able to find instances showing a much higher percentage than those he has mentioned, but in most oases they have reference to loans for only a short period, some for only a few days, and the service charge, which is a proper one, I believe, in most cases at least, is included in the rate, thus making it a figure which, without examination, would appear almost fantastic. But I do not think this is the place or the time to enter into a discussion of that or any other aspect of the merits of the Bank Act as such.


George Gibson Coote: Surely this cannot be referred to in any way as a service charge, nor can it be regarded as fantastic, the rate is 10 per cent on a class B loan, that is a loan from $250 to $1,000, for ninety days. That is a

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fair sized loan and for as long a period of time as most banks, according to their own statement, will lend money, yet they are charging 10 per cent when they should be charging only 7 per cent. Something should be done about this matter.
Let me draw the minister's attention to another one. On a loan of over $25,000, a rate of 8 per cent is being charged. On a demand loan of over $1,000 ten per cent is being charged. The instances which I have cited should convince the minister that, in spite of what he says about this not being a revision of the Bank Act but simply an extension, when we are in committee would be a good time to revise section 91. These rates are very unfair. If the minister will not do anything about the matter, I can only express my regret and assure him that I believe a majority of the people of Canada feel he should do something about it.


Henry Elvins Spencer: Supporting the hon.
member for Macleod, I should like to remind the Minister of Finance that is 1932 I introduced into this house a bill to penalize banks which were charging more than the legal rate of interest of 7 per cent. At that time the committee turned it down with the excuse that the Bank Act was coming up for revision in 1933 and therefore the matter could be dealt with this year. The revision has now been put off for another year and I think the hon. member for MacLeod is quite in order in bringing the matter up on the floor of the house at this time.
I would like to ask the Minister of Finance whether he can give us a definite answer with respect to the question asked him by the hon. member for Macleod; that is, does the inspector general of banks draw his attention to bank charges where there are those exorbitant figures above 7 per cent quoted by the bon. member?


Edgar Nelson Rhodes: When the reply was made last year that the Bank Act would come up for revision this year, that was the ordinary expectation, and but for unusual conditions prevailing at the moment the Bank Act would no doubt now be up for revision. The representations made by the hon. member for Macleod and the hon. member for Battle River would very properly be considered at such a .time. I may say to my hon. friend that while nothing can be done so far as amendment is concerned until the Bank Act itself is up for revision, I shall be very happy to draw the attention of the banks to 'the remarks of my hon. friends.


George Gibson Coote: I am sorry if that is all the minister is going to do about the matter. I have of course no doubt the banks will be duly advised by their friends in the house or the press gallery of the House of Commons of any remarks which I may make. The minister will not do anything about the rate of interest. I would draw the minister's attention to subsection 4 of section 91 of the Bank Act, which says:
No bank shall directly or indirectly charge or receive any sum whatsoever for the keeping of any account unless such charge is made by express agreement between the bank and the customer.
It has been drawn to my attention that a great many banks in western Canada-I do not know about the east-are insisting that the great majority of their customers should sign such a form. I have recently received a communication from a gentleman in Banff in which he says that the bank manager presented to him the following form and asked him to sign it. The form is addressed ito the Imperial Bank of Canada, and reads:
In consideration of your keeping (at your discretion) a current account in your books in name of the undersigned, I-We hereby authorize you to debit such account with a
monthly charge of $	 See schedule below.
Dated at Banff this 10th day of March, 1933.
Them it says:
Balance under $100 allowed 5 cheques per month.
Balance under $200 allowed 10 cheques per month.
Balance under $300 allowed 15 cheques per month.
Over that number 5 cents per cheque with minimum of 50 cents.
That makes a very heavy charge against an account, five cents for the cheque and three cents for the government stamp, or eight cents for every cheque that is drawn. The customer is compelled to sign that form or have his account discontinued. It might fairly be said that this is a matter to be settled between the bank and the customer. I have no objection to that statement except that the banks on every occasion on which they have been before our committee have said: We are giving to the people in many parts of Canada a good many services, and for those services we should be allowed the privilege of note issue. They also say that they should be allowed to exceed the rate of seven per cent, which is stipulated in section 91. The banks are certainly not giving to the people any very great privileges at the present time. They are lending so little
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money that they find it difficult to make their branches pay, and a great many of their customers are forced to pay this charge which I have mentioned.


Richard Bedford Bennett: Does the hon. gentleman say that that is general?


George Gibson Coote: I have seen enough of it to say it is general in the particular province in which I live.


Richard Bedford Bennett: I have evidence of it in only one pilace.


George Gibson Coote: I have had dozens of men protest to me against it, mostly small retailers in the town who are issuing a great many cheques. They have drafts coming due which they cannot meet, a good many of them, and they will pay $25 or $30. on these drafts, and the draft is sent back to the head office in Toronto or wherever it may be. The firm in Toronto makes out a new draft for another month, and the customer accepts it and when it becomes due pays off another $25 or $30. That process goes on every month, and these business men feel it a very considerable burden. One man told me, "I have discontinued my account at the bank, and I am keeping my cash, what I have, in the safe, and as my bills come due I go down to the bank and pay them." The banks are not fulfilling the function which they were intended to fulfil, and which I believe the majority of the members think they are fulfilling. They are making the customers pay these charges which they have put on in an endeavour to make their country branches pay their way. It seems to me that if the banks are going to continue to have the privilege of note issue and be allowed to charge rates in excess of seven per cent, and apparently they are for at least this year, they are not treating their customers fairly when they insist on this very high charge for keeping a current account. The result will be that they will educate the people to do without banks after a while. They have closed many banks in western Canada. A case in point is at Lundbreclc. Some farmers who were dealing with the bank at Lundbreck will now have to go to Pincher Creek, which will be in a few cases as much as thirty-five miles from their home. When I took up this . matter with the general manger of the bank in question he said, "These men have nearly all got automobiles, and it will not take them very long to go to Pincher Creek and see their banker once in a while, to renew their notes." But other bankers have told me that many farmers could not afford to run their cars any longer. Few of them have buggies

in these days, and if they have to make a trip of thirty-five miles in a lumber wagon to their bank to renew their notes once a month, they are going to spend quite a lot of time on the road. I do not want to be unfair to the banks, but some of the banks are not very fair to the people in what I think are very small matters. The banks in a sense are semi-public institutions and should perform a public service; if they wish to do that, there are one or two things in which they might be a little more liberal in their treatment of the general public, particularly in the rate of interest charged, the service charges they are making, and the branches -which they are closing.


Richard Bedford Bennett: I took the matter up with the 'banks as soon as the circular to which the hon. gentleman refers was brought to my attention. I am told it is not of general circulation, and that in fact it has been withdrawn. I do not know whether that is so in all cases or not, but certainly it came as a surprise to me, and I took the steps that I have indicated.
So far as the closing of branches is concerned, I just put this question to the hon. gentleman: Does he not believe that in the province in which we both live there have been entirely too many branch banks opened and that there has been nothing to warrant the continuance of many of them? The fact is that many of them have 'lost money, some of them substantial sums, because there were too many banks in the same community. If they make an arrangement by which they leave a particular territory to one bank, the bank is then charged with having a monopoly. The result is that no bank makes any money and all in the end get out, and if the service is to be given some arrangement has to be arrived at.
I share the views of the hon. member for Maoleod in this: I have expressed myself very clearly and plainly that there is no warrant for banks in these days of depression doing other them making the greatest possible effort to serve the communities in which they are; I have personally taken such action as I could on several occasions to try to ensure that, and I shall continue to do so. You cannot, however, prevent freedom of contract, and sometimes the instances to which the hon. gentleman refers in which high rates of interest have been charged have reference to transactions outside of Canada altogether, as he knows. I had a case in mind the other day in which I had been told that a very high rate of interest had been paid. I found that $1 had been charged for the use of $50 for one month.

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Obviousty the rate of interest in that case would be $12 per annum on $50, or 24 per cent. That looks to be a scandalous transaction, but in point of fact $1 did not pay the bank. I took the trouble to investigate just what was involved. A promissory note was provided by the bank. The office was maintained at which the note was signed. Then an entry was made in the ledger by the discount olerk; cheques were provided free, and if the measurement of service can be approximated, as was done by the late H. C. McLeod of the Bank of Nova Scotia by a method that he himself established, it will -be found that the bank made no profit on that transaction, leaving out any profit that might arise from circulation. I mean that the exact cost of the services rendered did not represent a profit, and the minimum charge of $1 is not regarded I believe as an unreasonable charge under those circumstances, although it shows a rate which I agree with the hon. gentleman is one that is calculated to bring distrust to many people. But you could not expect any bank to lend $50 at the rate of seven per cent for thirty days. That would amount to only thirty cents for the service which, of course, would mean a great loss.


George Gibson Coote: I was very careful, in selecting the few examples I gave to the committee, not to take any of the minimum charges which the Prime Minister has mentioned.


Richard Bedford Bennett: I understand that.


George Gibson Coote: If he would just allow me
to repeat onie or two of the illustrations he would see that I was very careful-


Richard Bedford Bennett: The Minister of Finance himself said that there were cases worse than the ones to which he referred. I agree he did not take minimum service charges, but I merely used those figures as an illustration which is sometimes used upon public platforms and elsewhere.


George Gibson Coote: I remember that ten years
ago I found it very difficult to convince the chairman of the banking and commerce committee that banks were charging rates of 10 per cent and upwards. At that time I asked for a copy of a return under the section I now have before me, and we found where one bank was charging 15 per cent on a ninety day loan of an amount over $250. I dare say there are worse cases than the ones I have mentioned. But I was very careful to take the illustrations from the returns actually brought down in the house, so that no one would question the rate I was quoting. To the best of my recollection I would say these were all cases of loans in Canada.


Edward Joseph Garland: Following
up the matter of interest may I ask the Prime Minister a question regarding two notes I now have in my possession? I am sure they will cause him the same concern they have caused everybody who has seen them. The Royal Bank entered upon an agreement with a man named Anderberg for the loan to him. of the sum of $20. The original note was made out on June 16, was payable October 19, and had on the face of it provision for 8 per cent. At the end of the three months the man was still unable to pay and asked for an extension. Seventy-five cents was marked under the $20, and was carried forward in the new note. Another one was made out on October 10 running to December 5, and the account was paid in full on December 11. Seventy-five cents was charged in each case, or $1.50 for five months on a $20 loan, the note bearing 8 per cent interest. If hon. members will take the trouble to figure out the $1.50 for five months on $20 they will find that the rate was between 16 per cent and 18 per cent, despite the fact that the note was carrying 8 per cent. That is the sort of thing which people are suffering under certain conditions, at the hands of our banks in the west.
I have in mind another instance where a man had consigned 6,000 pounds of alfalfa seed to an association. He had a loan at the bank, and was unable to pay it in full. Finally, when the sale of the seed was completed the payment money was deposited in the bank, whereupon the manager simply seized the moneys without even consulting the person on whose behalf payment had been made. A protest was registered, but the customer was told that under the Bank Act the manager had a perfect right to take that course. Those are two illustrations which must indicate to the Prime Minister that his opinion with regard to some transactions is more than well founded.


Richard Burpee Hanson: He has
already said that.


Edward Joseph Garland: Yes, I know.


George Gibson Coote: I should like to reply to the Prime Alinister concerning a question he directed to me about general practice in regard to charging customers on cheques. In the town from which I come at least twenty-five or thirty men mentioned this matter to me when I was home during the Christmas holidays. I am quite satisfied that at least in that part of the province the practice is general, and so far as I know practically everybody who does not keep a balance over $300 is being asked to sign these forms.
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Mr. MacINNIS:: I believe the Prime Minister stated, if I heard him correctly, that he did not think banks generally had adopted the practice of making charges for operating accounts. I have had several complaints from the city from which I come about this matter. I believe the situation in Vancouver in reference to charges is worse than that outlined by the hon. member for Macleod. A statement before me from one of the banks in Vancouver discloses the following charges:
Balances-	Cheques free	Charge for each additional cheque
Below $200		7 cents
$200 to $299	10	7 cents$300 to $399	20	7 cents$400 to $499	30	7 centsI am told these	charges have	been made
for the past two years, and in many cases without any express agreement between banker and client. It seems to me that banks should not expect a profit on every account. During the last two or three years, despite the depression, bank statements show profitable business. Further than that, in their charters they have received very substantial privileges for which they are supposed to give public service. At this time when their business is much better than other lines of business I do not believe it is proper to oppress the people further by these charges.


Mr. NEILL:: I have had complaints similar to those mentioned by other hon. members. May I ask the Prime Minister if it was only recently that the banks indicated to him they would discontinue the practice?


Richard Bedford Bennett: If my memory serves me correctly the matter was first brought to my attention just before the turn of the year. I did communicate with the representative of the bankers' association, and my understanding was that steps were being taken to accommodate the situation to existing conditions. I believe that would be some time since the middle of January, but I cannot fix the exact date.


George Gibson Coote: I do not wish to delay the committee, and will take only two or three more minutes. One reason why some of my constituents feel the minister should exercise greater control over the banks, and bring them down to a rate of seven per cent is that financially the banks seem to be doing much better than any other concerns in Canada. Until very recently their dividends have been high. Some of our bigger banks have

been paying all the way from twelve per cent to sixteen per cent during the last year. And when customers who are driven to the most extraordinary limits to keep themselves solvent at all find that banks are still able to pay these handsome dividends, they do object. Again I wish to say that the minister is making a mistake in not taking some action, particularly in regard to interest rates under section 91. It is quite within the competence of parliament to change that section of the act, and this is the year when it should be changed. I do not believe the banks would really have any reason to object to a change in that section.


Edgar Nelson Rhodes: If we were reviewing the
act the request of the hon. member for Macleod would be worthy of consideration. But we are continuing the charters of the banks for one year, not reviewing 'the act at all. If my hon. friend says the banks are earning 12 and 14 and 16 per cent, his statement is in effect not accurate. I am quite prepared to admit that it appears in the press that certain banks declared dividends at the rate of 10 and 12 per cent, but as a matter of fact I think it is unfortunate that the banks give publicity to statements of that character, because such rates relate only to the capital stock, without reference to reserve. A great portion of the reserves of the banks has been paid in in actual cash by shareholders, who also are subject at all times to the double liability clause, which is a real limiting factor on the rise in value of bank shares. As a matter of fact most of the banks make less than 6 per cent, even the banks Which are reputed to be paying dividends at the rate of 12 per cent. I am dealing of course, with the dividend rates of some years ago; since that time they have been much less. I rise merely to correct the impression which seems to be more or less widespread throughout the country that the banks are making inordinate profits. They certainly are not as far as their total capital is concerned.


Henry Elvins Spencer: If there is a misunderstanding in regard to what the banks pay I think they themselves are to blame, because they take great care to advertise to the public how strong they are by being able to pay these rates of 12 and 16 per cent. I rise merely to remind the Finance minister that in his very polite way he did not answer the question that the hon. member for Macleod and myself asked a short time ago, but talked around the point. We would like to know if it is the duty of the inspector general

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of banks, Who was appointed, I think, in 1924, to bring it to the attention of the Finance minister when he finds the banks charging exorbitant rates above the legal rate.


Edward Joseph Garland: If the minister would kindly answer?


Edgar Nelson Rhodes: I did not mean to be
impolite to my hon. friends; I did not purposely avoid answering the question, but the acoustic properties here are no better than my hon. friend finds them down there, because we are equal distances apart. I may say that the inspector general of banks has not specifically directed my attention to anything of that character. It is true I have discussed with him the return as submitted to the house at the instance of my hon. friend for Macleod, but there has never been any report to me as Minister of Finance of inordinate charges in that respect.


Edward Joseph Garland: In view of
the recent announcement that the banks are reducing their rate of interest on savings deposits, would it not be well for the government to take into consideration the use of moral suasion to induce the banks to reduce the rate of interest on loans? It would surely be in keeping with an intelligent monetary policy, and not a departure in any degree from the statement this afternoon in connection with the general world monetary situation as described by the Prime Minister. Section 1 of this bill, in spite of the thought in the mind of the Minister of Finance, gives power to parliament to consider and review the whole act. There is no question that we can review the entire act under this bill. I think the government owes it to the Canadian people to give at this time some definite assurance that it will do more than merely mention to the banks what has been said in this house about the question of interest and service charges.


Edgar Nelson Rhodes: My hon. friend will realize that the reduction in the interest rate takes effect only as of to-day; he will find that a corresponding reduction in interest charges will be made in keeping with the reduction in interest on deposits. It will obtain in practically all cases immediately. I can quite understand that the banks in connection with certain accounts which would be expensive even at any reasonable rate of interest might have some hesitancy in reducing the rate. But on all provincial, municipal and other accounts where the conditions warrant it, comparable and even greater reductions will be made as of May 1.


Edward Joseph Garland: Is the
minister intimating that the reduction will take place on an account carrying say five per cent, and that the reduction will be one half per cent?


Edgar Nelson Rhodes: I am not in a position to go into details as to individual rates. I said a comparable reduction would be made, in line with the reduction in interest on deposits.


Edward Joseph Garland: Will it apply on personal accounts?


Edgar Nelson Rhodes: I have already said it will apply where these accounts are of a class on which reduction is warranted. I have intimated that there would be some accounts that would be expensive even at a very high rate of interest.


Henry Elvins Spencer: May I ask what authority is going to see that these reductions are made?


Edgar Nelson Rhodes: The banks themselves.


George Gibson Coote: I suggest that it would be
much more effective and satisfactory if a slight amendment were to be made to section 91 imposing some penalty on the banks when they charge in excess of 7 per cent, except, if you like, in the case of small loans where a service charge might be allowed. From past experience, not only with banks but with other institutions, I think it would be much more effective to make an amendment in the act than to depend on moral suasion.


Richard Bedford Bennett: I do not wish to take up time, but the hon. member knows that the late Minister of Finance, Hon. Mr. Robb, endeavoured to deal with this matter, and he knows the result. The question of contract is governed by provincial laws; where the individual makes a contract for payment of a higher rate than that provided for by the statute it is held not necessarily to be illegal, and that the money could not be recovered by the borrower if it had been paid. That was the decision of the privy council in the Union bank case. Since then successive ministers have endeavoured to grapple with the question. The dual jurisdiction in connection with interest is a matter hon. gentlemen will have to deal with in connection with the bill introduced to-day. The question of contract is not within the jurisdiction of this house. The fixing of a rate beyond which a further charge cannot be made is. The opening words of the section to which he directed attention are placed there because of very definite constitutional inhibitions with respect to which I think the hon. gentleman is fully aware.
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George Gibson Coote: May I ask a question on
that? Seeing that the banks operate under a charter granted by the dominion, woultd it not be possible to insert in the act a provision which would in effect make it necessary for the banks to comply with any rate of interest which parliament in its wisdom might set?


Richard Bedford Bennett: I am only speaking offhand. In the case of the Union bank versus Tennant the privy council held that this parliament had the authority to do everything that might be incidental to the exercise of its paramount authority over banks and banking, and therefore could provide for security in form E of the Bank Act instead of taking chattel mortgages. Since then it will be remembered the house has provided that there must be registration books kept for that purpose. My answer to the inquiry would be that it is a legal question; my personal view-I am only giving it for what it may be worth-would be that this parliament has authority as incidental to the exercise of its control under the specific subsection of section 91 under which we legislate, to make such declaration as might be necessary in the premises.
Mr. SPEAKMANOne point in connection with interest. I am sorry I had not known that this question would arise or I would have brought down with me to the chamber the report I have in mind. But in connection with the inquiry being carried on by the banking and commerce committee- and I shall make no further reference to it than this-we found it necessary to establish as definitely as possible the relative jurisdictions of the two governments, federal and provincial, in relation to the question of interest. So far as we could ascertain from every authority with whom we could consult in the matter we found that the federal parliament had almost complete jurisdiction over matters of interest. That seemed to be agreed upon by practically every legal authority whom we consulted. It was felt that we had almost complete authority over such matters as the rate of interest to be charged, the conditions under which interest could be paid and the times and places at which interest payments should be made. It seemed the consensus of opinion among those authorities that the authority of this parliament in that regard extended even to contracts made in the past under provincial law, whether mortgages or other forms of obligations. So far as we have gone-and I am not prepared to say that the final word has been uttered-there seems

almost complete agreement with the idea that the entire jurisdiction rests with the federal parliament in relation to all matters of interest. If the committee can only succeed in having that one point established perhaps the inquiry might be of some value.


Mr. WOODSWORTH:: Mr. Chairman, it seems to me a very extraordinary thing that we cannot get very far in any of these matters without coming up against this constitutional difficulty. Might I suggest that it is comparatively easy to get around legal and constitutional questions when the government so desires, and I think we would be on much better ground if we confessed frankly that economic power is a great deal stronger in this country than legally constituted authority. For example, when we came to the question of the savings bank in Manitoba we found it was quite possible for the banks to dictate the terms under which they would loan money to the government. We find that the banks actually told the premier of Manitoba when he was to summon parliament. According to the constitution, as I understand it, the calling of parliament is a royal prerogative, but in practice in this country it is within the power of the banks.
So I do not think we need worry very much about purely constitutional questions under circumstances such as those. Further than that, in regard to that very incident only this afternoon the Prime Minister said that he gave this help to Manitoba because of the desperate position in which the depositors found themselves. It is quite true that the depositors could not have gone in a body and secured their deposits, but on the other hand it is also true that the Prime Minister could have guaranteed the province, which he refused to do though he gave the same guarantee to the banks. Constitutional difficulties did not enter there at all, or if they did were seemingly swept aside.
Take the situation we face in my own province at the present time. The Prime Minister has warned, or threatened-I am not quite sure which word I should use-the provincial government that unless it balances its budget no further aid will be granted.	He does
not take into account all the sacrifices that this may involve, which may include the closing of our university or even our public schools, and possibly the cutting down of the old age pensions, which I thought was a matter fixed by statute some years ago. Whatever the sacrifices, however, it seems that we must balance our budget, and the threat is that a comptroller will be put in if that is not done. From my standpoint

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that is clearly an invasion of provincial rights as guaranteed by our constitution, and I think this is most serious. If in effect we are to be told by the Dominion government whether or not we may have schools, whether or not we may continue to keep our hospitals open, whether or not we can provide for various charitable institutions, whether we are to have highways and all that kind of thing, it is very serious. Constitutionally all that sort of thing comes within the range of provincial authority, but practically the provincial government is told what it must do.
The Prime Minister may say in reply that it is the creditor who is in a position to determine under what conditions loans may continue to be extended, and in that way he may shield himself behind the banks. I do not see why we should permit that situation to continue indefinitely. It seems to me that if we had a Prime Miinster who had at heart the interests of the great masses of the people he would be able to tell the banks very definitely what they should do in such matters, and I do not think the constitutional question would enter very much. So I say it seems in this country that economic power is much more fundamental than legal or constitutional power, which can be readily swept aside when it is desired that this should be done.
I do not see how the Minister of Finance can very well dissociate the revision of the Bank Act and the granting of these charters; the two go together. The charters are exercised under certain conditions. A few years ago when we introduced amendments to the Bank Act we were told that we should postpone any such amendments until the decennial revision, that this was only two or three years away and that then we would be given a chance to go into the Bank Act. Now we are told that for another year we must continue to suffer under the present act, with all that it involves. I know the Prime Minister can say, and I have no doubt he sincerely thinks, that we must maintain what he calls our Canadian institutions for fear of disastrous consequences, but I submit that these institutions were set up to serve the people, and I do not think it can be said that they are serving the masses of the people to-day. If the banks had been doing the right thing we would not have had all these speculative disasters; we would not have had all the losses on the part of thousands of people through certain investment houses, through speculative enterprises, through the overcapitalization of certain pulp and paper companies and other corporations, the failure of which has taken place in the last few 53719-282
years. Now the banks are to be continued in a position in which they may exploit the people in this way; they have that power. The Prime Minister seems to think things should continue as at present, that only a few cranks venture to criticize the banks. As a matter of fact a great many people across this country, business people as well as those so called cranks, are criticizing the banks to-day in private at least, and they would criticize them in public if they dared do so. We are all acquainted with the fact that many business men, indeed men in all walks of life, are so tied up with the banks that they hardly dare come out and criticize them as they would like. In spite of this we are asked to continue this sort of thing for another year.
It is very easy for the Prime Minister to tell us that our banks are in a sounder position than the banks of the United States. I am not sure that the Canadian people generally are so much better off than the -people in that country, and even if we are better off it is admitted that conditions to-day are anything but satisfactory. As a matter of fact the banks have a monopoly of the most important functions existing in our country. The bankers are entirely irresponsible, and I use that word in its correct sense: they are not responsible to the people. They can do as they please, and apparently this government refuses to exercise any coercive power over the banks. I think it is pretty generally recognized that the government itself, in financial matters, very largely founds it policies on the recommendations of the banks. It has been so for years, and I am not blaming this administration for it. That this has been the situation anyone will recognize who has followed the various banking committees we have had in the past and the various government policies in so far as they have related to finance. I take it then that, under the Bank Act, by means of these charters we have placed the financial system, which is fundamental to the whole business life of the country, under the control of an irresponsible group of people. They have not even the traditional ideals of responsibility as the Bank of England.
And I come now to another point. These bankers are not dissociated from particular business enterprises, as we in this comer have again and again pointed out; we have shown something of the interlocking directorates that prevail to-day. I do not think it is necessary to take up the time of the committee going over this again, but we all know that the men who are in control have their own personal interests at stake. The outstanding example is Sir Herbert Holt. I remember

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putting on the record years ago about one hundred and fifty companies, of each of which he was a director; and I say that a man who is a director of a large number of corporations, or even of a smaller number, cannot act distimterestedly when it comes to a question of banking policies. It is impossible for him to do so. Yet we are continuing to allow men, who before ten years are over will be regarded as little less than financial pirates, to maintain their monopoly. That is what in effect is being done by the extension of these charters.
There is another matter which I would point out. Although the bankers are in one sense irresponsible, and although they are interested individuals, we have given them a semi-public position. They have very great powers. The other day, when the Prime Minister was talking about gold coverage, he said nothing with regard to the powens that might be exercised under the Finance Act. I do not think he was in his place when subsequently I spoke aibout the power that was given under the Finance Act to loan money upon certain securities. The people who determine how much money shall be loaned, what the value of the securities dhall foe, are the trustees of the gold reserve, and the trustees of the gold reserve, I would point out, are the Royal Trust, the Bank of Montreal and the Royal bank. I think that if that one fact could get across to the people of Canada there would be something very much like a revolution among the business men of the country. Hon. gentlemen have talked frequently about the (danger of a revolution among the labouring classes, the people who are down and out, the unemployed, but I take it that one of these days there will be something of 'that kind among the business men of the country when they realize that certain people are privileged to go to the government and obtain money from them on loan at a very low rate of interest, and that the value of securities as well as the amount that can be given out is determined by the bankers, who themselves are interested parties in this matter.
That situation is out of keeping with the fundamental principles of justice and good government as generally recognized. It is permitted to continue simply because we have two or three different acts that are not directly related to one another, or do not appear to be directly related, so that in this way it is not quite apparent what is going on. It is a very serious thing when the government asks us to delay for another year *this much needed reform in monetary control, 
leaving in the meantime a particular group in the community in the saddle.
It may be said, and iit has been said, that on account of the extraordinary world situation this policy is necessary. I would point out that the extraordinary world situation has brought this country to the verge of bankruptcy. The extraordinary world situation has put 1,357,000 people on public relief and I do not know how many more under private charity. It is all very well to talk about tiding things over, but think of the price we are paying in order that we may do so! And why all this sacrifice? In the hope that the institutions as now established may be continued indefinitely. Well, about the only consolation we have is that this one year of delay may give us fuller opportunity to rally the forces so that that there may be a protest from one end of the country to the other, a protest that possibly may result in more far-reaching changes than would be possible if the Bank Act were revised this year. That is about the only satisfaction I can find in the present situation.
It seems to me that the situation in Canada, although it may have been very good for the banks, is disastrous for the country. I cannot think that the resolutions that may be passed at the world economic conference will be likely to change that situation materially so far as Canada is concerned. I cannot see why, as my colleagues have suggested with regard to certain matters that are pressing upon us very definitely, local matters such as the rate of interest, we should delay another year before having these things rectified. The fact that the government is standing pat is for me-this is an opinion if you like-another indication of how closely the government and the bankers are associated and how necessary it is that we should put up a strong fight right across the country in order that the common people might be delivered from what I regard as a tyranny, a tyranny not of some governmental body, not by one particular party, but a tyranny of financial interests. Unless there are modifications in the very near future I fear that the overthrowing of the tyranny may be disastrous to the welfare of the country for years to come.
Again I urge that the house should consider very seriously the consequences of permitting to continue for another year a policy which we know very well has already come near to the wrecking of the business life of the country.

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Richard Bedford Bennett: I must correct one ot
two misstatements on the part of the hon. member, whether deliberate or not I cannot say. He must have read the correspondence that took place between the federal government and the government of Manitoba. It was distinctly pointed out in the letter that if the province balanced the budget within a million dollars it would be thought that it was doing satisfactory work.


James Shaver Woodsworth: I do not hear the
right hon. gentleman.


Richard Bedford Bennett: The letter dispatched to Manitoba provided that if the budget was balanced within a million dollars it was regarded as being a fairly good result. The situation is not as it was put to the house a moment ago. In the second place, with respect to the appointment of a comptroller, it was pointed out that the province would have to appoint a comptroller and not the dominion. The legislature must take steps and not this parliament. There was no interference with the legislative jurisdiction of the provinces.


Alan Webster Neill: It has to be satisfactory to
the dominion.


Richard Bedford Bennett: Exactly; the hon. gentleman quite appreciates the point. I merely desired to make that correction, because it would be very injurious to the country as a whole that a statement of that kind should be made which is so wholly at variance with the facts. The other statement with regard to the placing of value upon the securities under the Finance Act I am also compelled to correct. The market price of securities that are available for that purpose is established. It is something that is established in the markets of the world. It is only the limited classes of security that are available. That part of the matter is not important. The question of commercial paper-and there is a limit upon the kind that may be used-may be open always to discussion and that is to be settled by the authorities set up under the act. That is a matter of very great importance, and that this country should be led to believe the statement just made is correct, would do, I suppose, just what the hon. gentleman has suggested, that is, arouse great indignation on the part of the Canadian people. I correct that statement also.
I am not going to traverse what has been said with respect to the other matters except to refer to the Manitoba savings bank. In the first place the law does not permit it to be called a bank; neither can the province of 53719-282i
Ontario call its savings institution a bank. I am not responsible for the constitution which in 1867 divided the jurisdiction between parliament on the one hand and the provincial legislatures on the other. The constitution says that the legislature shall deal with property and civil rights exclusively, but the parliament of Canada, under section 91 of the British North America Act, has exclusive jurisdiction to deal with banks and banking as well as with interest. It has not been decided by any case of which I know, despite what the hon. member for Red Deer has just said, that it would be competent for this parliament to declare that a man living in Alberta could not make a contract to pay to anyone who would lend him money, a rate of 8 or 10 per cent. There have been made by statute inhibitions with which the courts have had to deal, but the constitutional position to which the hon. gentleman so scoffingly refers is one that, I think, it is always well for us to keep in mind. Whether or not the federal system is good or bad is, as an hon. gentleman opposite said some weeks ago, not the issue. Whether you can nationalize everything and destroy by one stroke of the pen the federal jurisdiction and merge those of the provinces in a new body, is not for me to say, beyond this: that all domestic problems and questions, including contracts and the making of them and the instance of contractual relationships, are under our constitution vested in the provincial legislatures, and under the federal powers we make laws with respect to large matters affecting the nation as a whole.
I am not for a moment seeking to escape the question that was asked, whether constitutional considerations should be permitted to have importance when one is dealing with matters of this kind. My answer to that is: No consent on our part nor that of others can make invalid that which by our constitution is valid, and no consent on our part can make valid that which under our constitution is invalid. The question of validity or invalidity is one not for this parliament but for the courts, and when I indicate that the courts have decided that the real issue in a case of this kind is whether, in the exercise of its powers, the province has its exclusive authority encroached upon by a dominion statute or whether our exclusive dominion jurisdiction has been impugned by a provincial statute, the question always is, in the first analysis, as Lord Haldane once said, one of fact. After you have settled the character and type of legislation, you must determine the other questions that are involved, the extent to
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which there has been impinging upon provincial powers by the dominion parliament beyond the extent that may be necessary for the purpose of validly exercising exclusive federal powers. I am not going to traverse that, but I desire only to make these corrections of what has been said in order that revolution may not be predicated upon an improper conception of the fact.


James Shaver Woodsworth: I am very glad to accept those very mild corrections which do not in the least touch the main phases of my argument. May I venture, just in order that side by side with the Prime Minister's statement, there may be the wording of the act itself, to quote from section 6, part II of the Finance Act, as follows:
Such securities shall be deposited 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.
I think that is quite in keeping with the statement that I made. Let me further quote a statement made by the Right Hon. Arthur Meighen before the Bankers' Educational Association in Toronto on January 21, 1931:
Under the Finance Act of later years, our government was authorized to advance to banks against specially named classes of collateral government notes by way of temporary loans and no provision was made for a gold reserve against these notes. ... As to the money advanced under the Finance Act it is indefinite, consequently loans of unstated amounts, without limit, depending wholly upon the discretion of the Finance department, can be made without a gold reserve.
I think those words of Mr. Meighen are very clear.
As to the money advanced under the Finance Act it is indefinite, consequently loans of unstated amounts, without limit, depending wholly upon the discretion-
And so forth. Who are the trustees of the gold reserve? The other day the Prime Minister, as reported on page 3511 of Hansard, said:
The trustees are the Royal Trust Company, the Bank of Montreal and the Royal Bank of Canada.
With regard to the situation in Manitoba, it is true that the government was to be allowed a leeway of 81,000,000, but I think I am not very far wrong in saying that this is practically the balancing of the budget. May I call the attention of the committee to what

anything like balancing a budget really involves? I would like to read two or three paragraphs from the letter of Mr. Bracken:
The three provinces are therefore temporary victims of the demoralized revenues, almost wholly due to world conditions, but more serious in certain areas by other abnormal circumstances already fully recognized by your government.
Again:
At the same time the provinces are simply customers of our banking institutions, with distinct and definite credit limitations, at a time when we are advised that our provincial securities can probably not be sold at all, but if so only at prices which will impose abnormally large increases in public debt charges.
There is the situation to which I was was referring. We are existing under a monopoly and under conditions which are not due to the provincial authorities, but which are, at least in my judgment, greatly exaggerated by the policies of the Dominion government. There is the position in which we as a province find ourselves at the present time. Mr. Bracken goes on to refer particularly to the past immigration policies of the federal government. He says:
We definitely face the following alternatives:
(a)	To very seriously reduce our expenditures for schools, health institutions, old age pensions and mothers' allowance, or
(b)	To default on exchange payments of either exchange premiums, or interest, or both.
We respectfully suggest that the adoption of the first alternative to any substantial extent would involve not only grave social disturbances but disastrously affect the morale of our people, already at a low level. As the total capital debts of the provincial governments and urban municipalities total over six hundred millions of dollars, the latter alternative should be avoided if at all possible.
This was the request:
(a)	That the federal government advance us against treasury bills, the money required by municipalities and provincial governments, to meet expenditures for unemployment relief, at least until such time as our securities can be sold on a reasonable basis.
(b)	That the dominion proportion of direct relief costs should be at least 50 per cent rather than 33& per cent as at present.
This seems to me to be an eminently reasonable request.. Later on in another letter there is given some indication as to what the extreme economies insisted upon by the Dominion government would mean:
Realizing the necessity of maintaining our relief services and since the bank has advised that it will not extend further credit, there is at present no other alternative but to accept

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your conditions. We shall therefore, put into effect the further reductions in the estimates tabled in the house, as follows:
Road maintenance	$100,000
(Already reduced $450,000)
University grant	 50,000
(Already reduced $200,000)
Vocational training	 36,000
Members' indemnities. .	  7,000
(A second reduction)
Agricultural fairs.. ..	  37,000
(A second reduction)
Old age pensions	314,000
School for the deaf	 40,000
(A second reduction)
Mothers' allowances	 25,000
(Already reduced $80,000)
Miscellaneous reductions including the following items:	aids to
municipalities, agricultural representatives, employment service, costs of government house, forest protection and reductions in staffs of natural resources and attorney-general's departments..	41,000
Total	$ 650,000
It does seem extraordinary that the Dominion government is standing behind the banks in forcing Manitoba to retrench even in mothers' allowances. We are taking it out of the very food bill of the mothers and their children. That is an intolerable situation. Surely the province has the right to decide how we are to take care of the mothers and the families in our own community. But under these conditions we are handed over to the tender mercies of the banks, and the government conceives it to be its duty to stand behing the banks. In this way I urged that the provisions of the British North America Act are being practically ignored. I have no doubt that the Prime Minister would take very good care to see that the provisions of the British North American Act were technically and legally adhered to, but I say that practically he is ignoring the provisions of the British North America Act, and this government is interfering with the interests of the most helpless part of our population.
I do not quite know how the Prime Minister is going to account constitutionally for the reduction of old age pensions. I had thought that in this house we passed and Old Age Pensions Act with certain definite provisions, and that following the passing of that act agreements were entered into by the dominion government with the various provinces. I cannot quite see how it is constitutional for a province to alter the terms of that agreement, or even for this government to permit the variation of the terms of that agreement. Again I may point out in passing that at the
last election the present Prime Minister promised that the Dominion government would take over 100 per cent of the cost of old age pensions.


Mt. BURY:: I rise to a point of order, Mr. Chairman. For an hour and a half the members of this committee have been listening to a discussion that was absolutely out of order at the commencement. There is surely a limit. The members of the committee have rights that should be protected. I rise to protest that the hon. gentleman has been out of order almost since he commenced to speak, and that he is outrageously out of order now.


The CHAIRMAN:: On what ground?


Ambrose Upton Gledstanes Bury: Not merely is he not discussing the Bank Act, but still less is he discussing clause 1 which is before the committee.


James Shaver Woodsworth: I submit that I am in order, Mr. Chairman. I am trying to discuss the present Bank Act and its results. I would point out that Manitoba is paying six or seven million dollars in interest rates, and that it can no longer continue to pay those rates. I think I have a right to protest against the extension of the bank charters until such time as we have some understanding in regard to these matters. I think therefore I am perfectly in order.


Armand Renaud La Vergne: This is a bill to amend the Bank Act. Clause 1 is very wide in its scope. Its purpose is that the bank charters shall be continued to July 1, 1934. As I read the clause it is very wide, and I think all the provisions of the Bank Act could be discussed upon this clause.


Ambrose Upton Gledstanes Bury: Does the chairman hold that old age pensions, the attitude of the government on old age pensions and its present policy on old age pensions come properly under a discussion of the Bank Act?


Armand Renaud La Vergne: That is going pretty far. Certainly old age pensions would not be covered by section 1 of this bill.


James Shaver Woodsworth: I submit, Mr. Chairman, that I am not discussing the Old Age Pensions Act as such.


Ambrose Upton Gledstanes Bury: You were a few minutes ago.


James Shaver Woodsworth: I am not discussing it as such. I am referring to the present policies of the banks as they affect the government of Manitoba, and I think I have a right to give these illustrations. If the present conditions continue even for another year a large section of our population will find them-
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selves in a desperate plight. It was in that connection that I mentioned old age pensions.
If I might be permitted to finish what I was saying, I do not see how the Prime Minister can defend the position into which he is forcing the provincial government in regard to old age pensions. We passed an Old Age Pensions Act, and subsequently the Dominion government made certain regulations and entered into certain agreements with the provinces. At the time of the election a few years ago the Prime Minister promised that the Dominion government would pay 100 per cent of the cost of the old age pensions.
_ Mr. BURY: Do I understand that that is in order, Mr. Chairman?


Armand Renaud La Vergne: I am just waiting for the hon. member to finish his idea.


Mr. WOODS WORTH:: This government refused to implement that promise; the burden being on the provincial government it has to borrow from the banks; the banks refuse to continue to lend, and when the province makes an appeal to the Dominion government the Dominion government practically says to the province: You have to balance your budget or come within a certain distance of doing it, or we will put in a comptroller; or technically, as the Prime Minister says, we will ask you to put in a comptroller but he must be persona grata to us. That is the situation. Hence I say that we are facing a desperate situation if we continue the present banking policies.


Armand Renaud La Vergne: The hon. member must confine himself to a discussion of the provisions of the Bank Act, and bank charters.
Mr. WOODiSWORTH: The Prime Minister has suggested that I was not aoourate in stating the position of the government. In that connection I Should like to read one or two paragraphs from the Prime Minister's letter of March 9 to Mr. Bracken:
It becomes my absolute duty to say to you in the plainest terms, and I do so with all respect, that in case you anticipate making further requests for financial aid, either by loan or by guarantee or in any other form, favourable consideration cannot be given to such request unless your government is prepared to pledge itself to present a balanced budget by further _ reductions in proposed expenditures or by increased taxation, or by both; or if convincing evidence is adduced that under existing conditions such balanced budget is impossible-
May I state in passing that the Prime Minister used the term "balanced budget."
-then your government must adopt a definite prescribed plan whereby the maximum estimated deficit under your proposed budget shall be well under $1,000,000.
[Mr. Woodsworth.J


Armand Renaud La Vergne: I do not think that
is relevant at all.


James Shaver Woodsworth: That is the attitude taken by the Prime Minister. All this simply means that the ordinary safeguards which were supposed to be provided by the British North America Act are set aside, and the provincial government is brought under the control of the Dominion government even [DOT]in connection with matters which are supposed to come entirely within provincial jurisdiction.


Armand Renaud La Vergne: But that cannot be
the subject of discussion here.


James Shaver Woodsworth: Yes it is. This
whole matter is forced by the banks, and I submit that only the Dominion government can alter the Bank Act. If the Dominion government is serious it is quite within its power to revise the Bank Act wthen the renewal of charters is suggested. We have power to determine the conditions under which charters may be renewed, even for one year. So far as I can see, nothing which has been said by the Prime Minister in any way changes that position. As some of my colleagues have suggested, I believe we should proceed definitely to decrease interest rates, and in other ways to limit the powers of banks before renewing their charters.


Alan Webster Neill: I listened with great interest to the Prime Minister's clear cut definition of the respective jurisdiction of the dominion and the provinces. He drew a very clear line between the two jurisdictions, and said it was not even possible for one or the other body to divest itself of its responsibilities. No doubt in that statement he was quite correct. Unfortunately, however, we have established precedents to the contrary. I wish the Prime Minister had been 'here on Friday night and could have heard his colleague the Minister of Marine trying to defend order in council No. 206 which seeks deliberately to take away provincial jurisdiction. The only possible way in which a remedy could have been effected, namely, by concurrent legislation, had been definitely refused by the legislature of British Columbia. I wish I could interest the Prime Minister in the matter to the point where he would look into the situation. If he did so I believe he would take the proper steips to cancel the order in council.


Mr. SPEAKMAN:: I should like to say a word concerning the jurisdiction of this parliament over interest rates. I do not purpose making quotations from reports of committees which have not yet concluded their work.

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But in an endeavour to ascertain the jurisdiction of this parliament in relation to interest a questionnaire was prepared and sent to certain legal authorities. The matter was considered under three heads, the first question being:
Has the dominion parliament the power to fix a maximum rate of interest which may be charged on loans et cetera, granted by corporations created by dominion statute or letters patent where such corporations were (a) previously incorporated; (b) to be incorporated?
The answer from each of the bodies to which this questionnaire was submitted was, yes. The second question was:
Has the dominion parliament any power to prescribe the maximum rate of interest chargeable on loans generally made by (a) persons; (b) corporations-created by statute or letters patent other than dominion?
Again the answer was, yes. The third question was:
Has the dominion parliament the power (a) to fix: (b) to alter rates of interest in respect of bills of exchange and promissory notes?
Again the answer was, yes. The opinion of these legal authorities may not be conclusive; they may be incorrect. Yet they include the Department of Justice, and various provincial departments of attorneys general. In each case the answer was yes.
The questionnaire went on to deal with matters of reductions of principal. In this connection the answer was no-in other words that we had no power. But with respect to interest there was agreement amongst all the legal bodies and the departments of attorneys general. I submit that certainly a bank is a corporation incorporated under a dominion statute, and as such comes directly under the term of this reference. Naturally I am not posing as an authority. It was because I was not and others were not that we sought the opinions of authorities, and those opinions I have quoted.


Henry Elvins Spencer: I should like to ask a question with regard to the reduction of interest rates. The minister has informed us that the banks are going to look after a reduction of interest on their loans. Personally I think that is hardly the proper agency to be doing that work. The banks are no more honest or dishonest than other people, and I should think that the inspector general of banks should see that such reductions are carried out. Will the reduction of interest refer to loans already made, or only to loans to be made in the future?


Edgar Nelson Rhodes: To loans already in existence.


[Stage Direction]
Section agreed to.
On section 2-Act continues to apply for purposes of winding up.
Edgar Nelson Rhodes: I have an amendment to move to this section. The law officers of the crown gave it a meaning entirely different from that which should have been given. Section 7 of chapter 12 of the revised statutes of 1927 reads as follows:
The provisions of this act shall continue to aipply to the banks named in the schedule to chapter 9 of the acts of the year one thousand nine hundred and thirteen, intituled an Act respecting banks and banking, and not named in schedule A to this act, ^ but only in so_ far as may be necessary to wind up the business of said banks respectively.
As this reads it would make the section applicable to the list of banks contained in the schedule of the revised statutes, which is the list of banks intended to be continued for a period of ten years. I move therefore:
That the words "chapter 12 of the revised statutes of Canada, 1927," in lines two and three of section 2 be struck out and the following substituted therefor: "chapter 9 of the acts of the year one thousand nine hundred and thirteen."
The effect of this amendment if carried will be to continue the present position, namely to renew the charters of the ten banks whose names appear in the schedule attached to this bill, and to make applicable the provisions of the act only for the purpose of winding up the banks whose names do not appear on the list.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
George Gibson Coote: I wonder if I might have
leave for a moment. The remarks I have to make could be made on the motion for third reading, but I prefer to make them now.


Armand Renaud La Vergne: I think the hon. member would be more in order on the third reading.
Bill reported.
Mr. RHODES moved the third reading of the bill.


George Gibson Coote: There are
two or three remarks that I would like to make, because of statements made by the Prime Minister (Mr. Bennett) this afternoon with reference to the question whether there is any shortage of credit in Canada. I have
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no doubt that the banks oan advance credit to borrowers if they find borrowers who can offer them what the banks feel is a proper amount of collateral. This naturally brings me to the case of Australia to which the Prime Minister referred this afternoon. I find that bank loans in Canada are 31 per cent less than three years ago, but in Australia, according to a chart which I saw in the Melbourne Herald recently, bank loans are down only 7 per cent compared with three years ago. The reason for that, I think, is the different money policy that has been followed in Australia . The Australian wholesale price level stood at an index figure of 80 in December, 1932. As a matter of fact it has stood at approximately that figure for the years 1931 and 1932. During those two years the wholesale price index in Canada had dropped from about 80 at the beginning of 1931 to approximately 63 at the end of 1932. I think this shows how much better off the producers in Australia are than those in Canada. It is true that the producers in Canada and Australia were selling their wheat for practically the same price in the old country, but when the Australian producer converted his proceeds into Australian funds he got more per bushel for his wheat than the Canadian producer got when he converted sterling into Canadian funds. That is one reason why conditions in Australia to-day are much better than they are in Canada. That is one reason why a great many people in western Canada feel that the money policy of the Dominion government is responsible for the very difficult financial position that the western provinces and cities are in to-day. They are unable to collect enough taxes to balance their budgets because the price level in Canadian currency of the products exported by their producers is so low. I want that statement to appear in the same issue of Hansard as the statement the Prime Minister made this afternoon.
Then the Prime Minister said that a country of 10.000.000 people could not do certain things in a financial way, that we have to be governed by international action of international financiers. That is rather a strange attitude for the Prime Minister to take, he being the head of the red-blooded Canadian party. I cannot understand why this nation of 10,000,000 people dare not take as adventurous action as the Australian nation, which I think has a population of six or seven million people. Canada has lost a great deal in the last two years by sticking to the sound money policy of the United States rather than maintaining her currency in the markets of the world at a level more in
CMr. Coote.]
line with Australian currency and more in keeping with our own internal needs. Although the bankers may not be responsible for this money policy, they certainly have sponsored it almost one hundred per cent; it has resulted in many frozen bank loans and I think is responsible for some of the losses which the Prime Minister said the banks had suffered in the provinces between Winnipeg and the Rockies when he referred to them this afternoon. I think it is only fair that that statement should be made before the bill is passed.
Motion agreed to and bill read the third time and passed.


QUEBEC SAYINGS BANKS
[Stage Direction]
Hon. E. N. RHODES (Minister of Finance) moved the second reading of Bill No. 28, to amend the Quebec Savings Bank Act.
Motion agreed to on division, bill read the second time, considered in committee, reported, read the third time on division and passed.


[Stage Direction]
On the order for the second reading of Bill No. 70, respecting the Income War Tax Act (declarations on returns):
Edgar Nelson Rhodes: Mr. Speaker, it is not proposed to
proceed with this bill. It is not in the form in which it would appear finally in any event, and it is too late now to be dealt with in connection with the returns of this year. Therefore I would move that the order be discharged.


[Stage Direction]
Motion agreed to.

[Stage Direction]
The house in committee on Bill No. 22, regarding the inspection and grading of hay and straw-Mr. Weir (Melfort)-Mr. Ross in the chair.
On the preamble:
Alan Webster Neill: I should like to ask the
minister to explain why section 2 is necessary.


Hon. ROBERT WEIR (Minister of Agriculture) :: In case anyone wishes his hay
inspected or graded.


The CHAIRMAN (Mr. Ross):: Section 2
has been carried.

Special War Revenue Act


Alan Webster Neill: No, it has not been carried.


Arthur Edward Ross: Yes, all
the sections were carried previously. We are now on the preamble.


[Stage Direction]
Preamble agreed to.
Rill reported, read the third time and passed.


[Stage Direction]
The house in committee of ways and means, Mr. Gobeil in the chair.
9. That schedule II to the said act be amended by adding thereto the following articles and imposing thereon an excise tax at the rate set opposite the respective article:-
(i)	Sugar, as enumerated in customs tariff item No. 134, 2 cents per pound.
(ii)	Unfermented wort (sweet wort), 25 cents per gallon.
(iii)	Malt syrup, or malt syrup powder, extracts of malt, fluid or not, or any other malt product intended for the brewing of beer, 50 cents per pound.
Edgar Nelson Rhodes: There is an amendment before the committee and I have an amendment to the amendment.


Edward James Young: Is this a third amendment
or the second? Is it to be found in Wednesday's Hansard?


Edgar Nelson Rhodes: The amendment to the
amendment reads:
Provided that the tax hereby imposed under subclause (i) shall not apply to the materials enumerated in customs tariff items 139 and 140, when sold in packages containing not more than five pounds each.
That is to say, there would be no tax imposed upon articles enumerated in items 139 and 140 of the Customs Tariff Act, namely: Glucose, or grape sugar, glucose syrup and corn syrup, or any syrups containing an admixture thereof; syrups and molasses of all kinds, the product of the sugar cane or beet, and all imitations thereof or substitutes therefor. In other words, none of these commodities if put up in packages of five pounds or less shall be subject to the tax; it is only the bulk commodity that will be subject.


Edward James Young: Does that mean that a man who buys a can of molasses will pay no tax, while a man who buys a barrel will?


Edgar Nelson Rhodes: Molasses is exempt.


Edward James Young: No, it is included.


Edgar Nelson Rhodes: If a man buys a larger
quantity of com syrup or glucose or any of these syrups he will pay the tax of 2 cents per pound.


Albert Joseph Brown: That does not mean that
the consumer escapes the tax; the tax is already paid by the man who buys wholesale.


Edgar Nelson Rhodes: Not on the small packages; packages of five pounds or less are exempt.


Edward James Young: Item 140 of the tariff reads:
Syrups and molasses of all kinds, the product of the sugar cane or beet.
That is to be exempt if sold in packages of five pounds or less. If a man buys a tin containing two, three or four pounds, he does not pay the tax, but if he buys a barrel for cattle feed he has to pay 2 cents per pound, because it says molasses of all kinds.


Edgar Nelson Rhodes: The hon. member should
keep before him the amendment of Wednesday last, which exempts molasses.


Edward James Young: The original amendment
applied only to sugar described in item 134 of the tariff, which reads:
All sugar above number sixteen Dutch standard in colour, and all refined sugars of whatever kinds, grades or standards, not covered by tariff item No. 135. . . .
That is the consumers' item, refined sugar. Now you take in item 135, which reads:
Sugar above number sixteen Dutch standard in colour when imported or purchased in bond in Canada by a recognized sugar refiner, for refining purposes only, under regulations by the minister; and sugar, n.o.p., not above number sixteen Dutch standard in colour, sugar drainings or pumpings drained in transit-
And so on. In addition to that, No. 139 is taken in. Will the minister explain how this wall operate? Raw sugar comes under 135, which is taxable under the amendment, and it is taxable again when refined under 134. Is the tax to be imposed twice?


Edgar Nelson Rhodes: No.


Edward James Young: At what stage will it be
imposed?


Edgar Nelson Rhodes: In the finished form, when the refiner disposes of it as refined sugar.


Edward James Young: How will it apply to 135,
then? That is included in the amendment of Wednesday last.


Edgar Nelson Rhodes: If it were imported by a
person other than the refiner it would be subject to the duty, but this provides that when it is imported by the refiner he pays the duty only when he sells in the form of refined sugar.


Edward James Young: Where does beet sugar from Canadian beets come in? Where will it be taxed?
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Edgar Nelson Rhodes: The same relative position with respect to beets is maintained.


Edward James Young: It will pay 2 cents?


Edgar Nelson Rhodes: Yes.


James Layton Ralston: Is not the effect of including 135, and therefore imposing an excise duty on raw sugar, to give further substantial protection to the refiners? It is imposing exactly the same duty on raw sugar as on refined sugar. Representations have been made to me recently to the effect that raw sugar could be used to a considerable extent by manufacturers, and indeed would be used in preference to refined sugar, if it were free from the tax, and this would result in a substantial reduction to the consumer on articles in which raw sugar could be used. As it stands now, by the amendment, raw sugar will have the same excise tax as refined sugar, with the result that anyone who might use raw sugar, not being able to afford refined sugar, will pay the same penalty, so that the refiners get the benefit by having equal taxation imposed on raw sugar.


Edgar Nelson Rhodes: 
James Layton Ralston: I think it is the effect,
but it goes further. At the present time there is no excise tax on either refined ot raw. The refiner therefore has no advantage and if raws can be used by the manufacturer they will be used. But the moment a man has to pay 2 cents on raw sugar and only 2 cents on refined sugar, the obvious result will be that the refiner will increase his business while the man who has been using raw sugar will use less. Incidentally, if you like, but inevitably there is a substantial protection with 
an increased benefit to the refiner as a result of the amendment which is now proposed, and I am wondering whether this amendment has not been promoted, if I may use that word, just as much by the refining interests as by the taxation authorities, because I do not think my hon. friend will find that there is a great increase of revenue from the 2 cents excise on raw sugar.


Edgar Nelson Rhodes: But conversely there would be a considerable loss of revenue to the extent that raw sugar might be substituted for refined sugar. If 100 pounds of raw sugar made 100 pounds of refined sugar, there would be nothing in the argument of my hon. friend, but the difference between raw and refined sugar is very slight, in fact so much so that it would be impossible to devise a fraction which we could impose upon raw sugar to make it exactly comparable with refined sugar, because 107 pounds of the raw makes 100 pounds of the refined. There is that fraction.


Mr. MALCOLM:: The value of the refined sugar is more than would be indicated by the fractional difference in weight.


Edgar Nelson Rhodes: Quite so, but practically
all the raw sugar is to-day imported by refiners and they will continue to import it. Nobody else is affected. If we permitted raw sugar to be imported by others, it could be imported in very large quantities by them and converted to uses which at present are supplied by the refined sugar. If that condition were allowed to be brought about, we would lose a tremendous amount of revenue.


James Layton Ralston: When my hon. friend
speaks about not being able to devise a fraction, may I point out that the proportion about which I am speaking is that which two cents bears to the actual value of refined sugar as compared with the proportion which two cents bears to the actual value of raw sugar. That is not measured just by the difference between 107 and 100 pounds. In addition to that, there are the refining costs. Therefore the ad valorem excise tax on refined sugar is considerably less than the ad valorem excise tax on raw sugar. What is the proportion of raw sugar that is not imported by refiners?


Edgar Nelson Rhodes: I am sorry I have not
those figures before me, nor can I obtain them at the moment, but I shall get them before the committee rises; they should be here.


James Layton Ralston: My hon. friend understands that they are material in deciding whether section 135 should come under the Excise Act, and what the effect will be.

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Edgar Nelson Rhodes: Quite so.


James Layton Ralston: Might I ask the minister
a question with regard to the point brought up tihe other night by the hon. member for Sherbrooke? Has he taken steps towards a rigid investigation of the circumstances under which the news of the proposed excise tax on sugar leaked out, in order to ascertain whether it is possible to recoup to the treasury a substantial amount of money which was made by people who speculated on that advance news?


Edgar Nelson Rhodes: I do not know that I can enlarge on the reply I made to the hon. member for Sherbrooke when we were in committee at the last sitting. I have yet to have submitted to me any evidence that there was a leak, so far as the application of the sugar tax was concerned.


James Layton Ralston: I am sure the minister
will not have it submitted to him.


Edgar Nelson Rhodes: Perhaps so, but I asked the hon. member for Sherbrooke and I have asked all members; I have inquired widely and beyond the confines of this house. I shall welcome any evidence which can be given to me that there was anything in the nature of a leak. I have yet to find the slightest evidence that such was the case. It is true that there was the situation which arose at Vancouver and I referred to that the other day, but to the statement that there has been a leak my answer that, in my judgment, there has been none, will be found in Hansard and I do not know that I can enlarge upon it. I instanced the case of tea and coffee where precisely the same procedure took place as in the case of sugar, and for two reasons. In the first place the press had been for some considerable period of time forecasting that there would be sugar taxes and taxes upon tea and coffee, and in the second place there was the usual shrewd guess of those in the trade, and perhaps some who were not in the trade, that the government would be compelled to resort to new forms of taxation. Certainly the man who took advantage of the situation with respect to sugar was the gainer, but the man who endeavoured to anticipate the budget and took delivery from bond of large quantities of tea and coffee, was the loser. I do not know that there is anything more I can say. If some method could be devised whereby in the first place forestalling could be prevented and whereby, in the second place, if it did occur, we could recoup to the treasury the amount that it had lost thereby, I should be delighted; but up to this moment I have yet to learn of a device of that character.


Ernest Lapointe: I am sure the minister would welcome any evidence that might be submitted to him, but who can submit such evidence? The public would be better satisfied if my hon. friend would take steps to investigate the conditions under which the information seems to have leaked out. This tax on sugar is obnoxious, very unpopular; it bears heavily on the poor people, and the fact is that the labouring class in my city of Quebec believe some persons have made vast sums of money because they took the precaution to accumulate large quantities of sugar just before the budget was announced. They mention names of firms there. Of course you cannot expect those people to make any investigation, but surely the government, which is able to appoint investigators to find out whether public employees have been committing acts of offensive partisanship and to dismiss them, could appoint some commissioner to discover the real situation as to how that leak occurred. Certainly the public is not satisfied with the way in which some individuals have used the misfortunes of the people to make money.


Mr. SANDERSON:: When this item was up last week, I mentioned to the minister a rumour in conection with a certain brokerage firm in the city of Toronto which had apparently, according to the rumour, purchased large quantities of sugar and had obtained a line of credit from their bank by making to it certain commitments based on what they said was inside information from Ottawa. Has the minister done anything in regard to trying to find out whether that rumour was correct or not? Is the minister listening to me?


Edgar Nelson Rhodes: I hope so.


Frederick George Sanderson: I have an idea that if he would diligently attempt to run down that rumour in Toronto, he would get the facts without very much trouble. When an old brokerage firm-and when I say "brokerage", I mean stock brokers-went into sugar buying and borrowed money from a bank under conditions such as we have at present in Canada, they must have known what they were doing and must have had information which was authentic. I do not see why the minister cannot find out something about the matter. The government have many officials; they have the Royal Canadian Mounted Police, the secret service, any number of officials who evidently could find out something about it. If the rumour is not correct; if it is only a rumour, well and good; but I think the people
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of Canada would like to know whether the minister will do his duty throughly in attempting to discover whether this is a fact.


Edgar Nelson Rhodes: I would not have any
hesitancy in saying to my hon. friend that we are quite prepared to take any step that may be suggested as reasonable which would enable us to trace an act at all similar to the one to which he refers. The investigations hitherto made departmentally have not disclosed that there was any transaction of that character, but I have no hesitation in saying to my hon. friend that The government is quite prepared to take all necessary steps to investigate the matter and to ascertain whether there is any ground for an assertion of that kind. The only point upon which I can see that an investigation might be of any value would be to determine whether information was given in advance to certain individuals. That I do not believe was the case; nevertheless I am prepared to undertake that there will be an investigation to disclose if there was any information of that kind to be obtained. Even if there had been no leak, no information given in an underground or in any other manner, hon. gentlemen know perfectly well that in view of the publicity which was given to this matter and the statement which was made in the press there certainly would have been a certain amount of buying of sugar as was the case with tea and coffee.


Albert Joseph Brown: No doubt the matter we
have been discussing has caused a good deal of anxiety in the mind of the public. For my part I am not prepared to mete out any censure to the government because this thing happened. I am quite prepared to believe that in the temper of the public mind people might have acted on what has been described as a hunch. But if the minister can do anything to throw further light upon the subject and secure a return to the treasury of the revenue that was lost I am sure that the public would welcome such action. While we may not be able to criticize the government on that score, I think we can criticize it because nothing was done to prevent the purchases of sugar that were made after the budget was delivered. The difference in time between here and the Pacific coast allowed a good many hours in which the people could take advantage of the opportunity to purchase sugar, and on that score I think the government is open to censure. I think we can accept the statement made by the Minister of Finance a few days ago that it would be in the public interest that such a situation should never occur again.

I do not think the minister strengthened his case an regard to the sugar duty and its effect upon the people when he compared the prices that prevail to-day for sugar with the prices that have prevailed during past years. He seemed to resent the remarks that were made from this side of the house that we were not as well able to buy now as we were then.


Edgar Nelson Rhodes: No, I did not.


Albert Joseph Brown: Perhaps I misunderstood.
I think the comparison was not in place anyway. The fact is that the tax is a very heavy burden on the people of Canada, and the magnitude of that burden can be to some extent appreciated when I recall 'the fact I mentioned in the budget debate that about fifty million 'bushels is the amount of wheat that is consumed by the people of Canada. At fifty cents a bushel that would mean 825,000,000, and I believe the estimated revenue from the sugar tax is 820,000,000, or only 85,000,000 short of the total value of the wheat consumed by the people of Canada. That comparison shows the magnitude of the burden that is imposed upon the consumer by this sugar tax. It may be true that in times past we were paying very high prices for sugar as compared with the price to-day, but for my part I would rather pay 25 cents a pound for sugar, as we were paying in war time, when I could sell hides for about 25 cents a pound and wheat for 82.50 a bushel, than pay six or seven cents a pound for sugar to-day when I can hardly give away a beef hide and wheat is netting the farmer even at present prices not more than forty or forty-five cents a bushel. After all, these things are relative, and in estimating the burden that is thrown upon the people by this tax we must of necessity take into consideration the ability of the people to bear it. I can only repeat that this is a tremendously heavy burden upon the people.
While I shall not be disposed to criticize the government in the matter I first mentioned, there is another matter upon which I promise the minister and all his supporters that I shall criticize the government before the electors, and that is that while the government has seen fit to impose a tax of two cents a pound on sugar it has reduced the duty on intoxicating liquor, on whisky, by $2 a gallon. I can promise hon. gentlemen opposite that one of the heaviest burdens they will have to bear is that fact Which I shall proclaim from every platform throughout the country, and I know that it will make an appeal to the poor people all through the western provinces.

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Raymond Ducharme Morand: Come into my county.


Albert Joseph Brown: I know that it will appeal
to the poor people of the western provinces when I point out that $2 a gallon has been taken off the excise tax on whisky while the poor people are called upon to bear a tax of two cents a pound on sugar.


Mr. DONNELLY:: When this sugar tax was under discussion the other night the Minister of Finance referred to the fact that through this supposed leakage the government had lost in revenue somewhere about ten per cent, or two million dollars.


Edgar Nelson Rhodes: Not more than that.


James J. Donnelly: I wonder if the committee realizes just what that means. Two million dollars represents one million bags of sugar of one hundred pounds each. That means that thirty trainloads of sugar went out before the sugar tax came into effect. This thirty trainloads of sugar it should be able to trace in some way. Some hon. gentlemen have spoken of a trainload of sugar going out from Toronto or Montreal. But there must have been more than one trainload. There must have been several trainloads, for thirty trainloads of sugar got out into the hands of the ordinary consumer. That is what one million bags of sugar amount to, thirty trainloads. There should be some method of tracing such a large shipment as that.
Let me refer to another incident that happened in the house the other day. The hon. member for Charlevoix-Saguenay put this question to the minister, at page 4260 of Hansard:
I noticed in the Montreal Star that the hon. member for West York (Mr. Lawson) was reported to have said, at a meeting in Toronto, that the tax on malt extract used in making home brew would be withdrawn or drastically reduced. Ts there any foundation for that statement ?
The Minister of Finance replied:
So far as I am concerned the statement is without warrant whatever.
Then the very next day the Minister of Finance got up and said that the duty on malt syrup, or malt syrup powder, extracts of malt, fluid or not, or any other malt product intended for the brewing of beer would be 20 cents a pound instead of 50 cents a pound as originally proposed. The hon. member for West York was quite correct. The excise tax on mailt extract was reduced from 50 cents to 20 cents. The minister can very easily find out from the hon. member for West York where he got that information, or whether he was guessing at it. Was he doing the same as the public was doing,
or did he have some inside information? Surely it would not be difficult to find out from him where he got it. There seems to have been some leakage there also; can we blame the public for saying that there has been leakage? When we suspect it with regard to sugar, and with regard to the excise tax on malt, can we blame the public for saying that there has been a leakage? In some way information was gained that the tax was going to be put on sugar and reduced on malt extract.
I should like to join with the hon. member for Lisgar in his remarks with regard to the reduction of $2 a gallon on spirits. Then, last year the government reduced the excise tax on cigarettes to something like $2 a thousand. This year to make up the loss they have placed the tax at two cents a pound on sugar. I should like to learn from the minister how much less alcohol has come into the country since he has reduced the excise tax; has any less come in? Has there been an appreciable increase in it? We were told that the excise taxes on alcohol and on cigarettes were so great that they were prevented from coming into the country. We were told that if we would reduce those taxes more would come into the country and that we would receive a greater amount in taxation. Are we receiving more alcohol and more cigarettes or have receipts from importations of that type gone down the same as they have in connection with a great many other imports? I suggest again to the minister that he should look into the matter of the reduction of the tax on malt extract mentioned by the hon. member for West York.


Edgar Nelson Rhodes: May I say the hon. member for Lisgar was in error when he assumed that I resented any statements made by hon. members opposite. I did nothing of the kind. Hon. gentlemen were perfectly within their rights, and if I gave the slightest indication that I felt any resentment, I am exceedingly sorry. I had no feelings of that kind whatsoever.


Albert Joseph Brown: I think your words in
Hansard will show you did.


Edgar Nelson Rhodes: I am sorry if the hon.
memlber feels that way, because I can assure the committee that that is not right.


Ernest Lapointe: Hear, hear; we have
no grounds for complaint.


Edgar Nelson Rhodes: The hon. member for
Lisgar has put in a very attractive political juxtaposition, shall I say, owing to the fact that on one hand we tax sugar and on the other we. lower the tax on alcohol.
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Charles Gavan Power: On the poor naan's liquor.


Edgar Nelson Rhodes: I was going to say on the rich man's liquor. There would be a point in the argument of the hon. member for Lisgar if he made it appear that by reducing the tax by $2 per gallon upon liquor we thereby lost one-fifth of the receipts we would otherwise have received. But the hon. member knows very well there is a point beyond which if you tax you will receive far less revenue.


Ernest Lapointe: Hear, hear.


Edgar Nelson Rhodes: The hon. member for
Weyburn was delighted to hear me make that statement the other day. He immediately spoke about tariffs, and I was not prepared to quarrel with him. I say to my hon. friend that it is just a question in my mind as to whether or not the whisky tax ought not to be lower still; probably the hon. member will be glad to carry my remarks to his constituents. When I say that, of course I am speaking entirely as Minister of Finance, and from the viewpoint of revenue.


Charles Gavan Power: I thought you were being
sympathetic towards the consumer.


Edgar Nelson Rhodes: Because undoubtedly there is a point where we can obtain a far greater return to the treasury by a lower tax than by a higher. The hon. member for Willow Bunch referred to cigarettes. We had the classic example under Mr. Fielding-and I am not criticizing. He had the idea he could enhance the revenue by increasing the duty on cigarettes, but he soon found out that by inioneasing the duty he obtained far less return than when the duty was lower. It is a question in my mind, I may say to my hon. friend, whether the tax on cigarettes is not yet too high, despite the fact that it has been reduced-and I speak solely from the viewpoint of revenue. To the hon. member for Lisgar I would say that if I had any criticism to offer from the standpoint of taxation it would be that we ought to have made the tax upon liquor still lower.


Mr. STEWART (Edmonton):: I am sorry
the textile schedules have been passed.


Edgar Nelson Rhodes: If there is anything to be said in favour of that viewpoint-and I submit there is-the hon. member cannot take any political comfort from the fact that we are placing two cents per pound upon sugar. The government is under no illusion as to the character of the tax, or as to its popularity. As I said the other day we have a duty to perform, we have certain revenues to raise, and under unusual conditions we have to resort to unusual methods of taxation.

The hon. member for Willow Bunch has referred to a statement which appeared in a Toronto newspaper and which was attributed to an hon. member of this house, who, I regret to say, is not in his seat to-night. He will say that the report which appeared in the press is not a proper report of what he said on that occasion. I say to the hon. member that so far as the tax upon malt is concerned, I would be in a position to have particular knowledge. Representations in plenty were made to me, but on no occasion either to deputations or to hon. members was anything stated other than that representations would be taken into careful consideration. I have every confidence in my staff and in the efficiency of the excise department. I should be very much surprised if there had been anything in the nature of a leakage concerning the reduction of the taxation upon malt, or the placing of a tax upon sugar. How that could be alleged, when the press of the country forecast, days before any definite decision had been reached, that there would be a tax upon sugar, is more than I can understand. 1 can only say to the committee that I should be very glad to probe the matter from every possible angle to ascertain whether there is any shadow of accuracy in the suggestion that there was an improper leakage with respect to these forms of taxation.


Mr. MITCHELL:: I am not going to discuss at length the tax on sugar because I believe the ground has been fairly well covered. I must say, however, that it represents a taxation upon every man, woman and child in Canada, and places a further burden upon the 1,300,000 people drawing relief. Sugar is one of the major items of consumption which go to make up the diet of the average family. When the hon. member for Willow Bunch spoke concerning a profit of $2,000,000 which some people were able to make on sugar transactions prior to the delivery of the budget, he stated that he had a hunch. Recently when we were discussing the sweepstakes bill, for hours at a time hon. members stood and spoke in righteous indignation about the legalization of sweepstakes for the benefit of hospitals, but any sweepstake that we might have in this country would pale into insignificance compared with the gamble that took place in sugar in this connection. You cannot have two codes of morality, one for the chap who is willing to gamble fifty cents on a lottery ticket and another for a group of individuals who will clean up two million dollars on the anticipation of sugar being

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taxed in the budget. In my judgment that 82,000,000 belongs either to the treasury of this country or to 'the consumers of sugar. I believe it is the absolute duty of the ministry to see to it that if possible and practicable that money shall go where it rightfully belongs. The minister said that you could tax a thing until the revenue decreases, and he mentioned malt. I would say, and this is from my own practical experience, that the end in view will be defeated by the one hundred per cent tax that has been placed on malt. As long as the sun shines and grass grows and water flows you can always get a substitute for malt.


An hon. MEMBER:: Dandelions!


Humphrey Mitchell: You will find that people who have been in the habit of making this home brew will find some substitute. It is no great problem to sprout your own barley.


Ernest Lapointe: How do you do it?


Humphrey Mitchell: Come outside and I will give you the recipe; I have been long in the business. But what I want to point out is the impracticability of that tax. I think the position taken by the Minister of Finance is absolutely sound. I believe the tax that was first imposed was for the purpose of preventing the brewing of beer in the homes of the people. The present tax, doubling the average price of malt, will have the effect of driving the people to the use of substitutes for the malt they used previously.


Alfred Speakman: I would just like to say one word on this question, but instead of using my own language I will give you the words of a farm woman with a family of seven. She wrote me in the French language and I had it translated.


Ernest Lapointe: Why?


Alfred Speakman: Unfortunately I had to because I do not understand that beautiful language myself. She first described the farm, going into some detail as to the income, and she summed up the farm income after balancing costs against receipts by saying:
After all our only means of subsistence comes from a few cows which bring us about $1 weekly; from this sum we someimes deduct the repair cost of an indispensable tool. This will show on what we have lived for a long time- seven persons with less than $1 weekly.
They have five children under seven years old. Then she comes to sugar:
Sugar is taxed two cents per pound, while at the same time cream is lowered one cent. This is the way they are tightening the screw-vice. I protest against this overtax on sugar.
Instead of that, they should impose taxes on moving pictures and other amusements; pianos, radios, sport materials and luxuries, etc., because these things are not indispensable to life, while sugar is a first necessity. Why do they not add a little tax to bachelors in addition to the revenue tax? It is always fathers and mothers who are obliged to carry the heavy burden. It is logical to think that it requires more sugar for a family of seven persons than for one alone.
There is a lot of truth in that that bachelor premiers and leaders of the opposition sometimes forget.
Then, Mr. Bennett believes without doubt that he is doing something marvellous for the government. We were consuming very little sugar, and we shall consume still less for we would not find the money to buy it. If we were the only unhappy ones, the government would not lose much, but how many people will be obliged to do as we? The sugar sellers will see their profit diminish; this will probably cause the loss of many positions which will add as many to the unemployed. How much more will the government receive? Surely less than he expects. This is the way the government is going more and more to tbe bottom.
I think, Mr. Chairman, I cannot express the situation better than that French woman has done, speaking as the mother of five little children. That is the point of view taken by the people who will feel it most. I am not going to read the rest of the letter; it is a very moving letter. It does not require another word from me. That puts the situation as the mothers of large families with small incomes view it.


John Vallance: Didn't you vote for the budget?	*


Albert Joseph Brown: I cannot allow it to appear on Hansard that the Finance minister has been giving us a lecture on these very simple facts of taxation of which he assumes we are ignorant-


Edgar Nelson Rhodes: Oh no, no.


Albert Joseph Brown: I am happy to have emphasized now what I have been emphasizing all these years, that it is possible to obtain more revenue from a lower scale of taxation. At different times I have appeared before tariff commissions touring the country and when I would plead for a lower tariff they would say: But where will you get the revenue? Invariably we would answer that lower taxation would probably produce more revenue. Let there be no mistake, we are perfectly familiar with that very sound argument advanced by the Minister of Finance, that the revenue may be adversely affected by unduly raising the tariff.
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Edgar Nelson Rhodes: The hon. member must
remember that I was referring to taxation. The other day I was referring to the tariff which is an entirely different matter.


Albert Joseph Brown: No, the same principle
holds.


Edgar Nelson Rhodes: Provided your tariff is for revenue. There are other purposes for which tariffs are imposed.


Mr BROWN:: But as far as revenue is
concerned the same principle holds, no matter what form the taxation may assume. So we are agreed on that. I referred to the fact that the taxation on liquors had been reduced. Looking at it only from the standpoint of revenue-and that for the moment is the only standpoint I am going to consider, though there are others-we might gain by further reducing the tariff and excise. But it will be recalled that last fall when the conference agreements were being considered it was stated that the revenue would be adversely affected I think to the amount of $7,000,000, by the reduction in liquor taxes.


Edgar Nelson Rhodes: That was as a matter of
mathematics only.


Albert Joseph Brown: Well, I do not understand
the reference. If it is simply a matter of mathematics it is the same in regard to this $20,000,000 we are going to get from sugar. However that was the statement made, that there would be a reduction in revenue to the amount of about $7,000,000. Whether that included both customs tariff and excise I am not in a position to say at the moment. But I would like to know now, in view of the statement of the minister that he thinks we might further reduce customs tariff and excise with advantage to the revenue, whether since last fall he has obtained new information or whether the trade returns warrant the statement he has made.


Edgar Nelson Rhodes: I do not for one moment subscribe to the point of view that the statement made last year by the Minister of National Revenue was that the revenue was actually diminished to the extent of $7,000,000. It was that on a basis of mathematics, having regard to the amount of liquor brought in the year before, the reduction would be about that figure. That was the statement made by the Minister of National Revenue. My hon. friend has put the question as to how it has worked out in practice. I submit that the figures would mean nothing, because we are living in abnormal times. If business were approaching normal a very accurate answer could be given, but to-day the people cannot afford to buy.


Ernest Lapointe: But there is less revenue.


Edgar Nelson Rhodes: Without looking into the figures at all I would assume that to be unquestionably so, but the point I am endeavouring to make is that it does not necessarily follow that this is so because we have reduced the customs and excise duties upon liquor. In normal times the answer to my hon. friend's question would be accurate, but at the moment the answer would be no answer at all.


Mr. SPENCE:: I do not share the views of the hon. member opposite; with the exception of Vancouver, where they may have had three or four hours because of the difference in time, I do not think anyone obtained an advantage. Men in the business world are looking for every opportunity to make an honest dollar; for years they have watched the budget in an endeavour to anticipate what it might contain. The small profits being made to-day are not sufficient to keep firms in business, and if they do not get a chance to make a few dollars extra they cannot remain in business. Anyone who knows anything about the sugar business knows that sugar was a very low commodity, lower than it has been for many years. For a long period the average cost of sugar ran from 9 cents to 11 cents, and anyone with ordinary judgment would assume that sugar would bear a duty of at least a half cent a pound. That induced many people to buy that commodity before the budget was brought down.


Some hon. MEMBERS:: Oh, oh.


James Houston Spence: It is all very well for hon. members to laugh and suggest nothing; that is all they are good for. There is always an incentive to a man in business to gamble, and let me say that if you do not gamble you do not make any money, and sometimes when you do gamble you lose. Some people-and particularly those with a suspicious mind-1 are always ridiculing the other fellow and saying he is doing wrong. I wonder how many hon. gentlemen opposite would not have taken an opportunity to make some money on sugar if they had known what was going to happen.


Some hon. MEMBERS:: Oh, oh.


James Houston Spence: I say none of you had sufficient judgment to gamble in sugar.


John Vallance: How much did you
make?


James Houston Spence: I did not make anything;
I am not in the sugar business, but if I had been I would have expected some duty to be put on sugar. If the hon. member will just keep quiet a moment I will tell him some-

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thing more. Just a few days before the budget came down there were twelve carloads of bulk tea delivered to the city of Toronto; dealers figured that there would be a duty of 10 cents a pound on tea They missed out, however. You do not pity them at all; you ridicule (the man who happened to have sufficient judgment to buy sugar. That is the whole trouble with hon. gentleman opposite. They are sore if a man makes money and they say he is no good if he does not make it, so what is a man to do? I think the people in the Department of Finance are just (as honourable as other men in this country, and I am satisfied that there has not been a leak. You cannot stop men from using their brains, however; if we do not use our brains in this house those in the outside world must do so or we cannot exist.


James Layton Ralston: I should like to reiterate what has been said previously, to bring to a head the matter in connection with which the minister has promised an investigation. The attitude of those on this side who have been referring to this matter in which we fear there has been a leak is this:	We feel
that there is a duty on the part of the minister and the department to investigate the whole situation. We feel that the minister should not take the attitude which he took in the beginning of the discussion this evening, namely that no evidence had been laid before him. We feel that he should be and is as anxious as anyone may be to ascertain whether there has been any leakage and whether any money which properly belongs to the treasury of Canada has not been paid in. The minister has said that he will make this investigation, and we accept his assurance in that regard.
The minister saad he would investigate to see whether any leakage had occurred. If I may say so, that sounds as though he has in mind calling in the officers of his department and asking whether any information was given out. May I suggest what I am sure is obvious to him, that a much better way would be to start at the other end and ascertain whether or not there were abnormal sales by the refineries, shortly .before (the budget was brought down, and to whom those sales were made. Then the minister might extend that investigation to the jobbers, to find out whether any information was received by them, and from whom it was received. I quite agree that it is possible that there was a wave of speculation and that people may have guessed correctly with respect to the market, but it does seem a little difficult to 53719-283
believe that men would guess to the extent of fifty thousand tons, and that is the amount of sugar involved.


James Houston Spence: That is nothing in the
sugar business.


James Layton Ralston: That was the figure given fcy the Minister of Finance as the amount that must have changed hands in order to make the loss to the treasury $2,000,000. That represents twenty-five pounds for every family in this country; that is a substantial amount, and it does not seem like a normal trade guess as to the probabilities of the budget. We have not had this situation in Canada very often; I believe the minister will realize that it is abnormal, and the very size of the transaction makes us feel that something is wrong with regard to this particular item in the budget. So I believe if the minister makes an investigation in the way suggested we would be even more satisfied than we are with the assurance of the hon. member for Parkdale that there has been no leakage. I know the hon. member is quite sincere in that assurance, but at the same time we would rather see the investigation conducted and have the finding made by someone having the facts actually before him.


Edgar Nelson Rhodes: I do not think my hon.
friend could have been here when we dealt with this matter the last time we were in committee. If he had been here he would have heard me say that already we have investigated the sales made by every refinery in Canada for the month prior to the delivery of the budget. We know just how large they were and to whom they were made. They were not so great as the figure mentioned by my hon. friend, though even that is a fantastic figure. Let me point out that even that huge figure means less than five weeks consumption for the Canadian people.


James Layton Ralston: That is a pretty large
amount.


Edgar Nelson Rhodes: Quite so; I am just trying to give the figure its relative place. We know each transaction, and the amount of each transaction. Undoubtedly large purchases were made, but they were made by those who hitherto have been regular purchasers of sugar, in all cases. When my hon. friend referred to the suggestion I made that I would welcome any information which would give me any knowledge as to there having been a leak he rather took the point of view that I was imposing an obligation on hon. gentlemen opposite. I wish to assure my hon. friend and the committee that I meant nothing of the

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kind. I merely meant that I would welcome all information. That had reference solely to the question of there being a leak, and that is what I meant so far as an investigation at this time is concerned, because we have already full data with respect to the amount of sales made for the full period of a month in every refinery in Canada. I do not know of any method short of retroactive legislation, which we should have difficulty in administering, whereby we could recover to the treasury the amount of the profit gained by those who were fortunate enough to guess rightly.


Edward James Young: Syrups of all kinds, the
product of the sugar cane or beet, and all imitations thereof and substitutes therefor, if put up in small containers, pay no tax but if put up in large containers they do pay the tax. If an individual or merchant brings in these commodities from the United States, he does not pay a tax on them, but if a wholesaler brings them in in bulk and cans them in the country he has to pay the tax. That is my understanding of the amendment brought in to-night.


Edgar Nelson Rhodes: The effect of the amendment brought in to-night is to exempt this food product when in packages of five pounds or less, and place it on the same basis as molasses. Surely my hon. friend does not take exception to that exemption.


Edward James Young: No, I do not take exception to it, but the minister is placing it in the same class as molasses, while he is striking molasses out. He is striking out molasses and leaving syrups in. If they are brought in in small containers they escape the 2 cent tax but if in bulk, if in barrels and so on, the tax is paid. In other words, only a portion of it is being exempted.


Raymond Ducharme Morand: It is made in Canada.


Edward James Young: I am talking about importations.


Raymond Ducharme Morand: But it is made in Canada.


Edward James Young: There are lots of things
made in Canada which we import.


Raymond Ducharme Morand: You should not.


James J. Donnelly: The minister, speaking about 'the excise tax on liquor, said that last fall when the statement was made with regard to the figure of $7,000,000, that was only an estimate. When speaking a little while ago I asked him whether there had been any falling off in the quantity of liquor that had gone out and on which the excise tax had been paid and I gathered that there had been a falling off between last fall and the present

time. Surely the minister is not suggesting that times are worse now than they were last fall, for we have been told that conditions have been improving. Does he suggest that conditions are so bad that between last fall and the present time less liquor has been used? Another thing I want to refer to is the opportunity which this tax on sugar affords for the exploitation of the public in so many ways. Sugar enters into the manufacture of a good many articles, and the manufacturers are taking advantage of this 2 cents a pound to increase their prices. They are increasing the tax manyfold. This was brought to my attention strikingly the other day. I went into a grocery store where I saw on sale, at 39 cents a pound, certain biscuits known as Creamo. These biscuits had been selling at 35 cents a pound and after the budget, owing to the tax of 2 cents on sugar, the price was raised to 39 cents. There might have been one-^eighth of a pound of sugar in the biscuits, and yet the manufacturers were taking advantage of the tax to put on an extra 4 cents per pound. I noticed another variety called chocolate fig bars. These biscuits sold at 27 cents per pound before the budget came down and afterwards the price was increased to 29 cents. I suppose there would be less than one-eighth of a pound of sugar in each pound of this variety. Here we find the manufacturers taking advantage of the tax to increase the price to the consumer by 4 cents per pound in one instance and 2 cents in the other. All along the line you will find the same thing prevailing; the manufacturers are taking advantage of the tax to exploit the consumer to the extent of two or three times the amount of the imposition on sugar.


Mr. McINTOSH:: I shall not take more than a minute because I do not want to delay the committee. The minister made the statement that the reduction in connection with liquor was $2 a gallon and that in future there would be a greater reduction.


Edgar Nelson Rhodes: No, I did not.


Cameron Ross McIntosh: Well, then, further reductions.


Edgar Nelson Rhodes: No.


Cameron Ross McIntosh: Well, you anticipated
that there would be a reduction.


Edgar Nelson Rhodes: No.


Cameron Ross McIntosh: Well, you said there
should be.


Edgar Nelson Rhodes: No.

Beauhamois Power Project


Cameron Ross McIntosh: Then what did you say?


Edgar Nelson Rhodes: Hansard will disclose that I said none of the things which my hon. friend has attributed to me.


Cameron Ross McIntosh: I wouldn't want to hurt the minister for a moment.


Edgar Nelson Rhodes: What I was discussing was the yield of tax and in connection with the objection taken by my hon. friend from Lisgar I said that, speaking from the point of view of revenue, a still lower reduction would give a greater return.


Cameron Ross McIntosh: Then if the minister
wants more revenue he will have to bring about a reduction.
The minister made another statement in regard to certain daily newspapers, that they made a bullseye in connection with the tax -that they diagnosed government opinion quite accurately, so much so that they were able to tell beforehand that there would be a tax on sugar.


Edgar Nelson Rhodes: They made a miss about tea and coffee.


Cameron Ross McIntosh: I am talking about sugar. I am glad that the minister has a good word to say for the daily newspapers of Canada. He is in a different category from the Prime Minister-


Armand Renaud La Vergne: Order.


An hon. MEMBER:: We are not discussing that to-night.


Cameron Ross McIntosh: I am. We will finish it
some other time.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Tuesday, May 2, 1933