1936-06-01

QUESTIONS

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

Mr. ELLIOTT (Kindersley):: 1.	What was the total amount of bank deposits in the chartered banks of Canada on December 31, 1935?
2.	Is it true all bank deposits are created by loans?
3.	If not, what portion of bank deposits in Canada on December 31, 1935, was created by bank loans?
4.	What portion of the total bank deposits consisted of people's savings placed in the banks to draw interest, December 31, 1935?


Mr. DUNNING:: 1.	$2,558,966,233.
2 and 3. These questions relate to matters of monetary theory and do not form a proper subject of enquiry of the ministry.
4. Deposits by the public payable after notice or on a fixed day in Canada, amounted to $1,485,977,174.


LEAGUE OF NATIONS-ADVISORY DRUG COMMITTEE
Mr. HARTIGAN:: 1.	Who is the Canadian government representative on the advisory drug committee of the League of Nations?
2.	W7hat was his previous occupation?
3.	When was he appointed to this position?
4.	How long has the committee had habitforming properties of codeine under advisement?
5.	Who was the Secretary of State for External Affairs when the present representative was appointed?


Mr. MACKENZIE KING:: 1.	Colonel C. H. L. Sharman, C.M.G., C.B.E,. chief of the narcotics division of the Department of Pensions and National Health.
2.	Chief of the narcotics division of the Department of Pensions and National Health since the 1st April, 1927.
3.	Appointed representative of the government of Canada on the League of Nations advisory committee on opium and other dangerous drugs February 1, 1934.
4.	The opium advisory committee requested the health committee of the League of Nations to investigate the question of codeine addiction the 23rd November, 1934.
5.	The Right Honourable R. B. Bennett.


FEDERAL BORROWINGS
Mr. PELLETIER:: 1.	Has the federal government ever been obliged to borrow from any source whatever in order to make a loan to a province?
Questions

2.	Is there any arrangement between the federal government and any banking or financial concern to supply the government with credit without recourse to the issue of bonds or treasury bills?
3.	'When the government borrows money for any purpose from any bank or financial concern, does the government receive actual cash or currency?
4.	When has actual cash or currency representing an advance, ever been handed to the government ?
5.	Has the government ever requested actual ;ash or currency?
6.	If so, from whom and for what amount?
7. Where does the government obtain the necessary funds to loan to provinces when the expenditures of the dominion exceed its revenues?
8.	When the federal government makes a loan to a province does it give the amount of loan to the province in actual cash and currency?
9.	When has the government ever given cash and currency to a province representing an advance?
10.	What was the amount?


Mr. DUNNING:: 1,	3 to 6, 8 to 10. Borrowings are not earmarked for specific purposes. Proceeds of loans are credited to consolidated revenue fund from which all disbursements are made. Proceeds of loans are received in the form of bank drafts or marked cheques which are deposited in banks to credit of the receiver general. Disbursements, including loans to provinces, are made by the issue of cheques drawn against bank deposits. Any such cheque drawn in favour of a province and representing a loan from the dominion government would entail the payment of legal tender if required by the payee.
2.	No, except for limited amount of ways and means advances from Bank of Canada.
7. From borrowings.


BIGGAR, SASK., MAIL SERVICE
Mr. COLDWELL:: 1.	What amount is paid for carrying the mail to and from the Canadian National railway station and the post office at Biggar, Saskatchewan ?
2.	Has a new contract been awarded recently for the carrying of this mail?
3.	Who is the present contractor?
4.	What remuneration does he receive for carrying the mail?
5.	Was his predecessor's application refused, if so, why?
6.	How long had his predecessor held the
contract?
7.	W7hat remuneration did he receive for this service?


Mr. ELLIOTT (Middlesex):: 1.	$315.
2.	No.
3.	H. M. Dunbar.
[Mr. Pdietier.l
4.	Answered by No. 1.
5.	Contract awarded to lowest competent tenderer.
6.	October 1, 1929, to January 31, 1933.
7.	$444.44 with variations at certain periods according to change in frequency.


EXPORTS TO THE UNITED STATES
Mr. MULLINS:: 1.	What amount of cheese was exported to
the	United	States	from	Canada	from
January 1, 1935, to May i, 1935?
2.	What amount of cheese was exported to
the	United	States	from	Canada	from
January 1, 1936, to May 1, 1936?
3.	What	amount	of	maple	sugar	was
exported to the United States from Canada from January 1, 1935, to May 1, 1935?
4.	What	amount	of	maple	sugar	was
exported to the United States from Canada from January 1, 1936, to May 1, 1936?
5.	What number of horses were exported to
the	United	States	from	Canada	from
January 1, 1935, to May 1, 1935?
6.	What number of horses were exported to
the	United	States	from	Canada	from
January 1, 1936, to May 1, 1936?
7.	What amount of grain was exported to
the	United	States	from	Canada	from
January 1, 1935, to May 1, 1935?
8.	W7hat amount of grain was exported to
the	United	States	from	Canada	from
January 1, 1936, to May 1, 1936?


Mr. EULER:: 1.	1,137 hundredweight-$20,928.
2.	30,944 hundredweight-$407,358.
3.	362,366 pounds-$46,822.
4.	2,743,488 pounds-$491,616.
5.	1,627-8199,309.
6.	8,711-$1,025,304.
7.	2,587,158 bushels-$1,633,059.
8.	1,527,056 bushels-$997,895.
the king's birthday


Mr. CHURCH:: 1.	What steps are being taken by the government for a national and proper observance of His Majesty the King's birthday on June 23rd?
2.	Will a proclamation be issued asking for general observance of the day?


Mr. MACKENZIE KING:: The day fixed
by proclamation for the celebration of the birthday of the king is a statutory holiday, and the steps to be taken with respect to the observance of the birthday of King Edward VIII will be similar in all particulars to those taken formerly with respect to other British sovereigns.


ST. LAWRENCE RIVER DREDGING
Mr. GARIEPY:: 1.	Will the government have the St. Lawrence river dredged between Montreal and Three Rivers?

Questions as Orders jor Returns
2.	Will tlie government have dams and embankments constructed between the two cities, especially approaching lake St. Pierre?
3.	If so, what will be the approximate depth of the improved channel?
4.	When is it expected such depth will be reached?
5.	What will be the approximate cost of the proposed works?
6.	At what points will the proposed dams and retention walls be constructed, and when will they be built, and what will be the approximate cost?


Mr. HOWE:: It seems to me that this
question is entirely out of order. It refers to future government policy, and I do not think it can 'be answered.
Question dropped.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. MAYBANK:: 1.	Has the payment of a sum of money to the Canadian Wheat Board out of consolidated revenue fund been authorized by the governor in council under authority of section 3 of the 1930 Wheat Crop Equalization Payments Act?
2.	If so, what is the amount of such sum of money ?
3.	Was the authorization by order in council, and when was it passed, and what is its number?
4.	Has such a payment been actually made, and if so when?
5.	How much of such payment was for durum growers and how much for growers other than durum growers?
6.	Were any agencies for distribution of such moneys approved by the governor in council in accordance with the terms of section 3 of said act?
7.	If so, was such approval by order in council, and when was it passed, and what is its number?
8.	What are such agencies?
9.	To what extent was each such agency authorized to distribute i.e. how much money was entrusted to it?
10.	How much of such money was payable respecting-
(a)	Non-durum wheat.
(b)	Durum wheat, in-
(a) Manitoba; (b) Saskatchewan; fcl Alberta ?
11.	Were written instructions respecting such payments given by the government to the Canadian Wheat Board?
12.	If so, on what date or dates were such instructions given?
13.	Were written instructions respecting such payments given by the Canadian Wheat Board or by the government to distribution agencies approved by the government?
14.	If so, on what date or dates were such instructions given?
15.	Has the Canadian Wheat Board paid out such moneys either partly or wholly, and if so, to what extent, to whom, and at what time or times?
16.	Has any agency of the Canadian Wheat Board paid put such moneys, either partly or wholly, and if so, to what extent, and at what time or times, and how much has been paid out by each such agency and to what number of recipients?
17.	Were regulations made under the authority of said act respecting the manner of proof by an assignee of a primary producer of the right of such primary producer to receive additional payment in respect of 1930-31 wheat?
18.	If so, when were such regulations made and by whom, and if by order in council, what is the number of same?
19.	Were any such regulations published, and if so, where and when?
20.	Have any of such moneys been paid out by Canadian Wheat Board or any agency of it or of the government of Canada to assignees of primary producers of wheat?
21.	If so, what is the total amount of such payments to such assignees in-
(a) Manitoba;	(b)	Saskatchewan;	(c)
Alberta?
22.	How many payments over $100 have been made to any such assignee in-
(a) Manitoba;	(b)	Saskatchewan;	(e)
Alberta?
23.	What have been the ten largest of such payments to assignees, giving the amount of each such payment and the name, and where possible the address of each such recipient?


Mr. EULER:: As it would be impossible to obtain this information for at least two weeks, and as the reply will be lengthy, I would ask that this question stand as an order for return.


PROVINCIAL INDEBTEDNESS TO FEDERAL GOVERNMENT
Mr. PELLETIER:: 1.	What amounts are owed the federal government by each Canadian province?
2.	Under what authority were these loans granted?
3.	For what purpose?
4.	At what rate of interest in each case?
5.	What guarantees have been given by Canada in respect to loans to provinces?
6.	What amount do these guarantees represent in the case of each province?
7.	What evidence of debt does Canada hold from the provinces that have received guarantees ?
8.	Under what authority were the guarantees given?
9.	To whom were these guarantees given?


LEVEL CROSSINGS APPROPRIATION
Mr. CHURCH:: 1.	How was the one million dollars appropriated for level crossings spent in 1935, and for what purpose?
2.	What amount of this fund was spent in each province?


DELEGATES TO LEAGUE OF NATIONS
Mr. CHURCH:: 1. Who are the delegates to the League of Nations for 1936, and when were they appointed?

Questions as Orders for Returns
2.	Who selected them?
3.	What are their duties?
4.	How many years have they been going there in each ease?
5.	Do they travel on Canadian or British ships, or American?
6.	What expenses and other allowances are they given?
7.	Whom they report to and are their reports tabled?
8.	(a) How many delegates are there for 1936; (b) how many advisors; (c) how many delegates are not accompanied by advisors; (d) what are the duties of these advisors?
9.	When was their appointment reported in the house?
10.	Were any requests received by the government to stop these expenditures for 1936?
11.	What experience have these delegates, technical or non-technical, in diplomacy and international statesmanship ?
12 (a) Are any of the delegates returned soldiers; and (b) are these delegates instructed as to what Canada's foreign policy is, if any?


Mr. CHURCH:: 1.	What are the names of the outside delegates to the League of Nations, other than members of the Senate or House of Commons, from 1920 to date, including technical advisors?
2.	What were the expenses of each of such persons by years?



RAILWAY COMMISSION RULINGS-CLOSING OF QUEBEC LINES

[Stage Direction]
Mr. GAR1EPY:
1.	Has the government been made aware of the majority and minority rulings of the Board of Railway Commissioners of April 1, 1936, and March 30, 1936, virtually ordering the closing of the railway lines between (a) Nicolet and St. Leonard d'Aston; and (b) Parisville and St. Jean des Chaillons?
2.	Will the government delay the operation of these two orders of the railway commission?
3.	Will the government suspend the execution of these orders affecting the branch lines mentioned above, at any rate until the new legislation dealing with the Canadian National Railways and the creation of a board of trustees becomes effective?

Mr. GARIEPY:: 1.	Will the government take the necessary steps to see that level crossings between Montreal, Three Rivers and Quebec, on the provincial highway, are eliminated during 1936, under the provisions of the special unemployment vote or other subsidy?
2.	Will the government, in any agreement with the government of Quebec arising out of the legislation of the present session, and as one of the conditions of the financial contributions to the province, insist upon the early removal of the level crossings referred to?



MOTION FOR PAPERS


Mr.   MAYRANK@: For a copy of the report of Price Waterhouse and Company, Union Trust building,

Winnipeg, Manitoba, dated January 25, 1936, being an audit and a special review of the accounts of Canadian Cooperative_ Wheat Producers Limited in respect of their operations dealing with the crop of 1930 pools, including the stabilizing operations from September 1, 1930, to October 31, 1935.



GOVERNMENT HOLIDAYS


[Stage Direction]
On the orders of the day:
Mr. J. S. WOODSWORTH (Winnipeg North Centre):: Mr. Speaker, since it is a very great hardship for men employed on a day labour basis at an hourly rate of pay to be expected to forego a day's work, will the government consider the advisability, in making proclamation of a holiday for any purpose, of providing that such holiday shall be with pay? Otherwise the proceeding bears very heavily upon a certain section of the community.


William Lyon Mackenzie King: Mr. Speaker the government has not given special consideration to the point mentioned by my hon. friend beyond that which it has received at different times. We shall be glad however further to consider the suggestion.



CANADIAN NATIONAL RAILWAYS

[Stage Direction]
CLAIMS OF FIRST AND SECOND GRAND TRUNK '	PREFERENCE SHAREHOLDERS
On the orders of the day:
Hon. H. H. STEVENS (Kootenay Bast):: About six weeks ago I directed a question to the Minister of Railways (Mr. Howe) and to the government regarding the attitude that the government might take towards the first and second preference stockholders of the Grand Trunk Railway and their claims, or alleged claims. It was pointed out at that time by the Minister of Railways (Mr. Howe) that the matter was before the privy council, and, to quote his words:
As far as I know the decision has not been handed down.
The minister continued:
I am of the opinion that the matter is still sub judice.
The minister added that he would look into it. At that time the matter was before the privy council, but since then the privy council has rendered a decision, so that it is no longer sub judice. I should like to direct to the ministry and to the Minister of Railways in particular the questions I submitted previously: first, whether the claims advanced by the junior and senior preference stock-

Bank of Canada
holders of the Grand Trunk Railway are receiving the attention of the government, and if so, what action is proposed in regard thereto; and second, would the government consider the advisability of submitting this matter to a committee of the house.


Clarence Decatur Howe: Mr. Speaker, the hon. member
was good enough to give me notice of these questions. His statement that the matter has been disposed of by the recent privy council decision is hardly correct. The Grand Trunk action was directed against the crown and also against the Canadian National Railways as successors to the former Grand Trunk. Two points were involved: one, that the names of the former shareholders should be put back on the registry and the name of the Minister , of Finance removed as owner of the stocks, and two, an action for damages for having been deprived of the shares. Inferentially, the validity of the arbitration and acquisition was in question. The judgment held that the petitioners could not proceed against the crown in the matter at issue except by petition of right and the granting of a fiat. However, there was nothing to prevent their proceeding in an action for damages, if any, as against the Canadian National Railways as successors to the former Grand Trunk, and the matter is therefore still in litigation and thus sub judice;


Henry Herbert Stevens: The minister says the
matter is still in litigation. What action is pending?


Clarence Decatur Howe: The shareholders have been
granted the right to take action against the Canadian National Railways for damages. That action can be begun at any time.


Henry Herbert Stevens: With all due respect, I
submit that is not an action that is "at present pending."



CARRIAGE OF GOODS BY WATER

[Stage Direction]
Hon. C. D. HOWE (Minister of Marine) moved the third reading of Bill No. 68, respecting the carriage of goods by water.
Motion agreed to and bill read the third time and passed.


[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved that the house go into committee to consider the following proposed resolution:
That it is expedient to bring in a measure to amend the Bank of Canada Act so as to increase the capital stock of the bank, to provide that certain shares thereof shall be purchased by the Minister of Finance out of the consolidated revenue fund in order to assure ownership of a majority of the shares by the government, to increase the number of directors, and to provide for election and appointment of directors in such manner as to assure voting control of the board by directors appointed by the government.
Motion agreed to and the house went into committee, Mr. Sanderson in the chair.
Charles Avery Dunning: Mr. Chairman, this resolution precedes the introduction of a bill which will provide for certain important amendments to the Bank of Canada Act, in order to implement the announcement made in the speech from the throne that parliament would be asked to make such changes in the ownership and control of the Bank of Canada as may be necessary to give to the government a predominant interest in the ownership as well as effective control of the bank.
The bill which this resolution seeks authority to introduce provides among other things for two important and significant changes in the constitution of the Bank of Canada. These changes are: First, the issue of an additional
85,100,000	of capital stock of the bank, to be purchased by the Minister of Finance and held by him on behalf of the Dominion of Canada. This will ensure a predominance of public ownership in the shares of our central bank. Second, the appointment by the government of additional directors of the bank with sufficient voting power to give the government a majority control of the board of directors both immediately and permanently.
There are other changes of lesser importance in the bill to be introduced. Most of these are consequent upon the changes in the capital stock and in the directorate to which I have just referred, but others are being made to clear up ambiguities in the wording of the present act or to provide for changes which experience has shown to be desirable. I might call special attention to one other amendment, which provides that Bank of Canada notes in future will be bilingual instead of some being printed in the English language and some in the French language, as at present.
I should like now to discuss the factors which have led the government to propose amendments to the constitution of the bank providing for a predominant interest by the public in the ownership and also voting control of the bank. In the first place, the fundamental consideration is that the primary function of a central bank is to regulate the volume of currency and credit in use, and this

Bank of Canada

institutions free from effective government control. The Bank of France is in fact subject to-day to a degree of such control.


Mr. BENNETT:: So is the Bank of Canada.


Charles Avery Dunning: Yes. Finally, the matter of public ownership is in my opinion much less important than that of governmental control. If we study the constitution of central banks from this aspect we shall find ample precedent for the attempt which we are making to give the government adequate control over the Bank of Canada.
It is not possible or necessary to consider all the precedents. I wish however to draw attention to the constitution of a number of typical important central banks, and particularly to those in some of the other British dominions.
The Bank of England is of course not only privately owned, but also completely free from formal governmental control. The board, consisting of the governor, deputy governor and twenty-four directors, is elected annually by the shareholders. The English statute was passed at a time when individualism was the guiding doctrine in political and economic theory, and to have given the government control over the bank would have been in complete conflict with all the teachings of that day. Nevertheless, as Kisch and Elkin point out:
There can be little doubt that in practice there is at all times close and continuous cooperation between the bank and the government, and in exceptional periods of stress there is even more than this.
The Reichsbank, the central bank of Germany, is under its present constitution the only other important instance of a leading central bank which, at least on paper is, independent of its central government. The original Reichsbank, which dates back to the founding of the German empire, w'as subject to a high degree of governmental control. The supervisory powers of the state were exercised by a board appointed by the emperor and the federal council-Bundersrat or Senate-whose chairman ex-officio, was the imperial chancellor. The general management of the bank was entrusted to the chancellor, to whom the board of directors was subordinate. The members of the board were appointed by the emperor on the recommendation of the federal council.
Following upon the post-war inflation the Reichsbank was reorganized in 1924, and this reorganization was, to quote Kisch and Elkin:
Part and parcel of a scheme for the payment .of reparations and of the financial rehabilitation
of Germany devised by foreign experts at a time when the financial policy of the German government was politically suspect and had proved to be economically unsound.
The act as a result shows a distrust of government influence which would probably not have been so manifest had the reorganization come from entirely within Germany, instead of partly from outside. In the case of the Bank of France the general council consists of the governor, two deputy governors, fifteen regents and three auditors. The regents and auditors are elected by the general assembly consisting of the two hundred largest shareholders, chosen from certain specified economic classes. The governor and deputy governors are appointed and removable by the President of France on the recommendation of the Minister of Finance. No decision of the general council may be executed unless it bears the signature of the governor. In the final analysis it is the government-appointed governor who directs all the bank's business and exercises the final power.


Richard Bedford Bennett: That is so here, too.


Charles Avery Dunning: One might differ from my right hon. friend.


Richard Bedford Bennett: One cannot differ; it is
so.


Charles Avery Dunning: My right hon. friend's capacity for differing is infinite. Probably he would credit me with some capacity along the same line.


Richard Bedford Bennett: I am talking about what the statute says.


Charles Avery Dunning: The Bank of Russia, as one would suspect, is a complete state bank managed by a board of directors appointed by the government and supervised by the People's Commissary of Finances. So also is the Bank of Finland, which carries on its business under the guarantee and supervision of the diet. The state owned central bank of Sweden is managed by a board of directors appointed by the king or the riksdag, the one director appointed by the king acting as the president of the bank, and these directors are responsible to the riksdag, its parliamentary committee on banking, and its auditors alone. In the case of Norway, the central bank is privately owned but the private shareholders have no control of the administration and no provision is made for general meetings. Three members of the board of directors and the members of the supervisory council are nominated by parliament, while the governor and vice governor are nominated by the king. In Spain the appointment of the members of the council has always required state approval,

Bank oj Canada
and since 1931 the council has included three government appointees, to represent the general interest of the national economy. The governor, who is executive head of the bank, is nominated by the government and is given power to suspend any decision of the council that he considers contrary to the laws and report it to the finance minister. The Swiss National Bank has a council of forty members, of which twenty-five including the president and vice president, are government appointees, nominated by the federal council.
But government control is not limited to the appointment of governors or of a proportion of the directors. Kisch and Elkin, the authorities on the structure and functioning of central banks, cite a number of instances where more direct supervision may be exercised by the state in certain circumstances. Thus in Italy the finance minister, in addition to supervising the note issue, may annul any decision of the general meeting of the administrative council which he considers contrary to the laws and statutes, acting on his own initiative or on the report of a government official designated by him to attend the meetings of these bodies. In the charters of a number of European central banks, including those of Austria, Poland. Greece, Hungary, Holland and Denmark, there is provision for the appointment of a government or royal commissioner, with supervisory powers. Generally the duties of these commissioners are limited to seeing that the bank's business is carried on in accordance with the law and statutes of the bank. On any disputed point, the commissioner has a suspensory veto until the matter is settled by agreement between the bank and the government. In Denmark, the finance ministry must be notified when the bank's managers wish to change the rate of discount; the minister is entitled to participate personally or by deputy in the discussion but without the right to vote. In Poland, the president of the bank, who is appointed by the president of the republic, has a right of suspensory veto in respect of decisions of the bank council which are, in his opinion, contrary to the laws of the country, the articles of association of the bank or the interests of the state. When he exercises this right of veto, the question is referred to the finance minister, and the contemplated action is not carried out if the president's veto is endorsed by the minister within three days.
In Czechoslovakia, a government commissioner, chosen from officials of the finance ministry, has the right of suspensory veto over any resolution of the bank's managerial bodies if they appear in conflict with the
laws, statutes or state interests. Failing agreement between the bank and the government, the matter must be referred to a committee of arbitration. In Roumania, the government commissioner has the right of intervention in regard to any decision by the bank's executive which he considers inimical to state interests. In Japan, government control of the central bank goes to great lengths. Comptrollers acting under direction of the finance minister supervise all matters connected with the Bank of Japan. Wide powers of intervention are reserved to the government, and the decisions of the administrative board are subject, in various important instances, to government approval before they become effective. The bank's by-laws provide that "the government shall control all the operations of the bank and shall prevent not only any operation which conflicts with the act and by-laws, but also any measure that the government may deem disadvantageous to the state."	*
We may now turn to the central banks of the British dominions. Perhaps these have more lessons to teach Canada because of their comparatively recent establishment, their freedom from accidental developments due to war or other historical circumstances, and also of course the broad similarity of prevailing political and economic philosophies and conditions with those of our own country.
The oldest of these institutions is the Commonwealth Bank of Australia. Founded in 1912, this bank is wholly government owned and operates under government guarantee. The board consists of the governor and seven other directors, including the secretary to the treasury. The governor, deputy governor and directors are all appointed by the government.
The Reserve Bank of South Africa, organized in 1920, is owned in part by the commercial banks and in part by private shareholders. Its board consists of the governor and deputy governor, both appointed by the government, and of nine other directors of whom three are appointed by the government and six are elected by the shareholders.
The Reserve Bank of New Zealand, which commenced operations only a few months before the Bank of Canada, is a privately owned bank but with government representation on its board. The board consists of the governor, the deputy governor, the secretary to the treasury (without the power to vote), and seven other directors. As in the case of the Bank of Canada, the first governor and deputy governor are appointed by the government, while later governors and deputy
Bank oj Canada

governors are appointed by the government on the recommendation of the board of directors. Of the seven other directors three are government appointees, while the remaining four are elected by the shareholders, except the initial four who also were appointed by the government. It will thus be seen that the first board of this bank is entirely composed of government appointees. Under the present legislation, however, the board would ultimately consist of two governors approved by the government, the secretary to the treasury, three government appointed directors and four directors elected by shareholders. As hon. members of the committee are aware, the present government of New Zealand has announced its intention of introducing a greater measure of government control of the bank.
The constitution of the new Reserve Bank of India provides for a central board consisting of the governor, four government nominees [DOT]representative of territorial, economic or agricultural interests, and eight directors elected from the elected members of the local boards of the five reserve banking areas in certain proportions. Deputy governors and one government official will also be on the central board but without voting rights. The central board can be superseded by another agency for direction of the bank's affairs under government orders, in the event, of the bank failing to carry out any of the obligations imposed on it. The governor and deputy governors are appointed by the government, on advice of the central board.
It is of interest to note that government control extends farther in each of these empire central banks than at present in Canada, and in some cases, substantially farther.
So much for the argument based on history and the experience of other countries. The brief review which I have given should be sufficient to show that ample sound precedent exists for the amendments to the present Bank of Canada Act, now under consideration.
A second type of argument used by my predecessor in advocating the present constitution of the Bank of Canada was that based on the opinions of monetary experts or the resolutions passed by international conferences. I do not propose to call experts to rebut experts, although that would not be difficult to do. Someone has said that "where five economists are gathered together there will be found six opinions, and two of them wiil belong to Mr. Keynes." It is sufficient to say that the examples of government ownership and control of central banks which I have cited above must rest on adequate expert opinion and on the bedrock of experi-

ence of other countries and nations. However, considerable stress was laid on a resolution passed at the international financial conference held at Brussels in 1920, and reiterated in a later international conference, and it may be well to say a word with regard to that. The resolution is as follows:
Banks, and especially banks of issue, should be freed from political pressure and should be conducted solely on the lines of prudent finance.
It is desirable to consider the setting in which this resolution was drawn. It was passed just after the war at a time of monetary chaos and currency depreciation when central banks of many countries, whether government owned or government controlled or not, were stiff busy turning out paper money and inflating bank credit under the direction of their respective governments. The admonition which it gave against influences and against imprudent financing is a natural one and fully warranted under the circumstances then prevailing. But surely we do not need to be warned to-day of the utter folly of printing press methods of finance. I have already shown, I think, that the historical record shows no coincidence between the prudently versus imprudently managed central banks on the one hand and the privately owned and controlled versus government owned and. controlled central banks on the other.
This brings me to the third argument of my predecessor, Hon. Mr. Rhodes, namely, the charge that a central bank under government control would be subject to political influence, to the puff and the pressure of this group or that, to political interference in its day to day operations, and to partisan influence in appointments. I might make two comments in regard to that argument.
In the first place there is a type of influence, using the word in its broadest and best sense, to which the Bank of Canada should be subject. I have already shown that the bank is required to perform one of the most important functions of government. The wise and efficient carrying out of that function is of vital concern to every citizen. Under some other form of government we might be content with a privately owned and controlled institution acting as a benevolent despot, answerable to no authority but itself, unresponsive to public opinion, giving the public not what they want but what the experts think is right for them. But that attitude is not possible in a democratic country. The bank may and should resist temporary gusts of public fancy, but in the long run it must show responsiveness to public opinion. In the long run the bank in the performance of a vital sovereign

function must be responsible to the sovereign will expressed through governments. There cannot be two sovereigns in a single state. In that connection nothing I think could be clearer than the statement of the present Prime Minister, then leader of the opposition (Mr. Mackenzie King), taken from Hansard of June 22, 1934, page 4227:
I want to make this fact clear: no one could have had the responsibility of being the head of an administration for any time without realizing all that it meant when one speaks of political pressure. I think I would be the first to sympathize with the Prime Minister in his desire so to frame an act that what is termed political pressure would not be permitted to interfere with the successful and independent working of a great financial institution. May I say we may give a wholly wrong meaning to the word ' political" in speaking of political pressure. A political influence or point of view is not necessarily something that is contrary to the national interest; a political point of view is one which arises from an endeavour to give expression to public feeling and public opinion, and I submit that in all democratic countries public opinion is the one great factor for which all governments must have consideration. There are times when it is necessary and vital that every institution in the land should be subject to the public opinion of the nation, and this is always the case when it is expressed in a constitutional way in parliament. I do not believe powers should be given any institution that would enable it to put itself in a position of opposition to a government that has been entrusted with great responsibilities of enforcing particular policies.
In the same speech on the same day, Hansard, page 4228, the right hon. gentleman (Mr. Mackenzie King) said:
What I should like to ask is:	Are the
institutions created by governments themselves to be made by their very constitutions so powerful that in the matter of national policies they can regard themselves as wholly beyond the direction of a government, where those policies are the result of the will of the people as expressed by their representatives in parliament? In no way could it be possible to have more clearly defined the difference between the right hon. gentleman opposite and myself. The Prime Minister will notice that at the moment, I am not suggesting the government should own the bank. I am not at the moment discussing the question of ownership, at all. As I said last night, I think the question of ownership is debatable. I am however discussing the question of control of policy, and I do say that with respect to policies, whether they relate to trade, to shipping, to marketing, to finance, to defence, or to any other phase of a country's economy, those policies, if they are the expression of view of a government representative of the people, should be capable of being carried out without interference from any institution whatever, but rather with the sympathetic cooperation of all institutions. That is the only way in which in a country we can have either democratic or responsible government.
In the second place, the criticism in so far as it relates to partisan interference in appointments and political interference in day
Bank oj Canada
to day operations, and in so far as it is meant to apply to the Bank of Canada, is wholly beside the point. No one proposes that the government should concern itself with minor appointments or with the routine of daily operations. The first governor and deputy governor are, in the present act and in the act as it will be amended, appointed by the governor in council; later appointments to these two positions will be made by the board of directors subject to the approval of the governor in council. I am sure no member of the committee need have any fear that such appointments will be subject to political pressure or to partisan influences. We may safely assume, in my opinion, that these two officials, who are the chief executive officers of the bank and responsible for its detailed, day to day administration, will be appointed on grounds of merit only, particularly with the safeguard provided by the act that they in future are to be nominated by the board of directors and approved by the governor in council.
There remain the government-appointed directors. The bill which it is proposed to introduce will provide for four such directors. For the next four years these government directors will have two votes each. If the government is to secure an immediate majority control of the board, this dual voting provision is necessary, because it is not intended to disturb the present elected directors, numbering seven, until their terms ^ of office expire. As their terms of office expire, they will drop out and not be replaced, except that the private shareholders shall always have the right to elect three directors. After the annual general meeting in 1940 the board will consist of these three elected directors, four government-appointed directors (each with a single vote), the governor and deputy governor (both government-appointed or approved), and the Deputy Minister of Finance (without the power to vote).
This type of board, it is submitted, will achieve the objectives which the government desires without being open to the objections which have been directed against the constitution of the present board. It will, for instance, provide for a predominant interest by the government in the general administration of an institution which is charged with responsibility for performing a vital national function. It will not mean that the government will be concerned with the daily routine management of the bank, but rather that the government will be assured that the direction of the bank is in the hands of men in whose judgment it has confidence. Since the appointments of directors are for limited terms only, a long
Bank of Canada

continuance of a policy that might conflict with the government's view becomes impossible.
Moreover, it will prevent the sort of fiasco which took place at the time of the first election of directors. It will be remembered that the act placed on the shareholders a task which in my opinion was exceedingly difficult, if not impossible, for them to carry out. Seven directors were to be elected by an unorganized group of over 12,000 shareholders scattered throughout the whole of Canada. Moreover, these directors were to be "selected from diversified occupations," and, while the act did not so state, it was essential in the national interest that they should also be reasonably representative of the various geographic sections of the country as well as of the two chief racial groups. What in fact happened, as you well know, was that the Canadian Chamber of Commerce, an organized business group, intervened in the election and submitted a slate of nominees bearing its recommendation. The result was that every nominee on this slate was elected. Please understand that I am not criticizing the personnel of the present board of directors. On the contrary, I believe that the country is fortunate in securing the services of those now acting in this capacity. What I am pointing out, and criticizing most severely, is legislation which in practice permits a private business association in effect to name the directors of our central bank. That is, in my opinion, an intolerable situation.


Richard Bedford Bennett: That is not accurate.


Charles Avery Dunning: We can debate it.


Richard Bedford Bennett: It is not debatable. The answer is that 12,000 people voted.	[DOT]


Charles Avery Dunning: That is, in my opinion, an intolerable situation, and the amendments which we propose will make it no longer possible. Under the proposed amendments the private shareholders will not have to elect more than one director in any one year and, having in mind the occupations and geographic sections represented by these directors, the government will be able to select its four appointed directors in such a manner as to provide a board which is reasonably representative of all the important national interests which the Bank of Canada has to serve.
It seems to me also that the presence on the board of two types of directors-those appointed by the government and those elected by the shareholders-will have distinct advantages. In developing this argument, I can do no better than quote from a statement made by the present Prime Minister, then leader of the opposition, on June 22, 1934, in this house, 
on the second reading of the Bank of Canada bill. This statement appears on page 4228 of Hansard of that year, and reads:
I say that power of influence of governments and defiance of governments by the money power is being created by this act in the form in which it is at present, and the only way in which that possibility can be avoided is for the government to see to it that, on the board of directors who are to direct this institution, there are representatives of the government, who will not own any of the shares, but who will be the appointees of the government placed there solely to watch and safeguard the public interest. I think my right hon. friend must agree that in these matters of large finance, check and counter check is -wholly advisable. It is advisable in financial transactions of a limited size, and it is more necessary as well as advisable in those of considerable size. But here are financial transactions of the greatest magnitude conceivable, and check and counter check are imperative. I do think the directorate of the bank ought to be so formed that, whether the pressure is upon the bank from the government on the one side, or upon the government from the financial interests and through the bank on the other, there should be on the board of directors some one or more persons who will be quick to sense the situation, give the danger signal, and arouse the country to the pressure which is being brought to bear. There is the danger of a government bringing too much in the way of pressure to bear on a central bank. On the other hand, there is equal danger of the financial interests that are allied with the banks bringing influence to bear upon a government. There will be both these dangers always, and the only way in which that possibility can be lessened is by making sure that both powers, the money power and the power of government, are represented on a common board so that one or the other will be in a position to direct the attention of the people at large to the dangers which they may see developing in the affairs of an institution which is or ought to be a great national trust.
As I have stated already, the amendments proposed are not such as to involve interference by the government in the daily routine administration of the bank, or the possibility of partisan influence in minor appointments. According to the act, the government, "shall be the chief executive officer and shall on behalf of the board have the direction and control of the business of the bank, with authority to act in connection with the conduct of the business in all matters which are not by this act or by the by-laws of the bank specifically reserved to be done by the board or by the executive committee, or by a meeting of shareholders."


Richard Bedford Bennett: What change is that from the present law?


Charles Avery Dunning: There is no change. I am just quoting the authority of the governor as I remember it. I have not the number of the section.

Bank of Canada


Richard Bedford Bennett: As I remember, that is the law as it now stands.


Charles Avery Dunning: I am now coming to the change. I recited the powers of the governor in order to emphasize the change which is being made. The governor, or in his absence or incapacity, the deputy governor, moreover, is given the power of veto over any action or decision of the board or of the executive committee. That is the present law. This veto power of the governor we propose to retain, but an amendment will provide that the governor shall be required to submit a report in writing to the Minister of Finance within seven days after any veto is given. The minister is required to submit the veto to the governor in council, who may confirm or disallow. Dissenting members of the -board or the executive committee may also submit in writing their views in regard to the action or decision which has been vetoed.


Richard Bedford Bennett: What is the extent of the modification of the present arrangement?


Charles Avery Dunning: I have just stated it, the report to the minister - and the power in the governor in council to disallow the veto. There is also the provision for the dissenting members of the board to submit in writing their views to the Minister of Finance for presentation to the government.
The effect of these provisions is to give the governor very wide powers over the management of the bank. In my opinion, this is as it should be. Central banking is a very technical matter and the management of the bank should be given as free a hand as possible in selection of personnel and general administration, provided that satisfactory safeguards exist for the protection of the national interest in matters of major policy.
That is about as far as I desire to go at this stage. I thought it best to open the discussion with a general statement of a fairly broad character in the hope that possibly the committee might see its way clear to pass the resolution and thus enable the bill to be submitted, at which stage it would be much more convenient to discuss the detailed provisions.


Hon. J. E. LAWSON (York South):: central bank. I believe the then Minister of Finance, speaking in support of the measure, epitomized one of the strongest arguments which could be made in its favour when he said:
Clearly, however, the bank should not be subject to dictation by the government for, at times, the exigencies of the people financed might not be wholly in harmony with the banking policies that might be considered wise and essential in the public interest.
I have said that the government determined upon a privately owned central bank, but I think it should be made clear that it was not a privately owned bank in the ordinary sense of the words "privately owned." This bank was subject to many limitations. For the moment I shall recall but three. One was that neither the commercial banks of the country nor any of their officers or servants or employees could be shareholders, nor could anyone be a shareholder in trust or on their behalf. Another limitation was that the dividends payable to shareholders should be limited to 4J per cent. In other words, no matter how much profit the so-called privately owned central bank might make in any one year, only an amount equal to a 4^ per cent return on the capital invested could be paid to the private investors, the balance of the profits going to the consolidated revenue fund of Canada. It may be well in passing to point out that in the first ten months of the operation of the new central bank, after providing for the necessary rest and reserves and all other matters of the kind, there was paid into the consolidated revenue fund of the dominion as profit from the operation of the bank the sum of $346,184.33.
The third limitation to which I wish to call attention is that which provided a veto power to the governor of the central bank in respect of any matter of policy previously determined by the board of directors. Therefore, Mr. Chairman, I invite your attention to the fact that you had represented on that oanlc that which the Minister of Finance today intimates is so desirable, namely a viewpoint not solely that of the government; combined with it, and more effective, because of the veto power, than the opinion of the privately elected directors, was the opinion of the governor of the bank, and by a combination of the two a balance was obtained. If for any reason the privately elected directors of the central bank should determine upon a policy with which the governor did not agree, that policy could not be put into effect. May we not assume that if the governor of the central bank was appointed by the government, as he now is, he would have the 
government viewpoint in respect of policy just as effectually as some director who may
now be appointed by the government? And if he has, then he has a veto power in respect of the decision on matters of policy of the privately elected directors. With what result? That the ultimate supreme authority, namely this parliament, must decide on any matter of policy where the governor of the central bank and the privately elected directors were not ad idem. The only change you are making at this time is to give the governor in council power to set aside the veto of the governor of the central bank; in other words you are conferring upon executive authority another great power of the kind which hon. gentlemen -apposite, when they were in opposition, have been so wont to say should be exercised only by the parliament of Canada.
When this central bank bill was before parliament for discussion the then opposition, now the government, declared in favour of a policy of a nationally owned central bank, that is, a bank owned, operated and controlled by the government-no private shareholders, no privately elected directors; all appointed by the government. May I recall to the attention of this house the amendment moved by the present Minister of National Defence, then speaking as the responsible and accredited representative of the Liberal opposition, when the central bank bill was before this house in 1934. That amendment read:
The capital shall be divided into shares of fifty dollars each, represented by share certificates, which shall be held by the minister, who shall subscribe for such shares, and payment for the same shall be made out of the consolidated revenue fund.
Speaking in support of that amendment the hon. gentleman said:
I do submit, however, that to-day the sentiment of the people of Canada is in favour of absolute public ownership of the greatest asset, the greatest monopoly there is in the Dominion of Canada to-day, namely our national credit and currency.
Well, Mr. Chairman, what is the effect of this measure? Here we have introduced in parliament, I assume as a measure which is to give absolute public ownership of the greatest asset in Canada, the following resolution:
. . . "it is expedient to bring in a measure to amend the Bank of Canada Act so as to". . .
First:
. . . "increase the capital stock of the bank, to provide that certain shares thereof" . . .

Bank of Canada
A predominant number of shares-
. . . "shall be purchased by the Minister of Finance out of the consolidated revenue fund in order to assure ownership of a majority of the shares by the government" . . .
And second:
. . . "to increase the number of directors, and to provide for election and appointment of directors in such manner as to assure voting control of the board by directors appointed by the government."
The effect of the bill, as intimated by the Minister of Finance to-day, will be this: After the bill is carried by parliament and put into effect the minister will hold approximately one per cent more of the capital stock of this bank than is held by private shareholders and will have not one more member but one more vote upon the board of directors than the number of votes possessed by the privately elected directors.


Charles Avery Dunning: My hon. friend is wrong there.


James Earl Lawson: Well, let me see if I am wrong. I understand that we now have seven directors of the central bank, each one elected by the private shareholders, who for convenience I am calling privately elected directors. If I understood the Minister of Finance correctly this afternoon he said the government would immediately appoint four more directors, each of whom would have two votes. Twice four is eight; subtract seven from eight and you have one, so I say my statement, that the government will have one more vote upon the board of directors than the privately elected directors will have, is absolutely correct.


Charles Avery Dunning: That simply is not so, and if my hon. friend will permit me to do so perhaps I should put this on Hansard now, so that there may be no later misunderstanding.


James Earl Lawson: I shall be delighted to have the minister do so.


Charles Avery Dunning: By the terms of the bill the relative voting strength on the board in each of the immediately succeeding years will be:
Govern- Private ment shareholders
1936-	37	
10	71937-	38	
10	71938-	39	
10	61939-	40	
10	41940-	41 and thereafter.. 6	3
That will be the actual voting strength; therefore to say there will be a majority of one is an inaccurate statement.


James Earl Lawson: Then as I understand it from the statement now made by the minister, my previous statement is correct. When this
bill goes through parliament and becomes law, and you appoint your four directors, qua directors you will have one more vote than the privately elected directors.


Charles Avery Dunning: That is not right either.


James Earl Lawson: Just a moment. In order to get your ten vote? you include and count as government votes those of the governor and deputy governor of the bank, who already are appointed by the government, who always have been appointed by the government under the privately owned central bank and whose votes shall be always counted as government votes, working on that principle. Now let us make no mistake. Qua the board of directors, when this bill goes through this parliament you will have one more vote on that board, increasing it, it is true, after a certain number of years, than have the privately elected directors.


Charles Avery Dunning: I must differ entirely.


James Earl Lawson: All right; my hon. friend has the privilege of differing. Now, Mr. Chairman, I ask you. Where is the absolute public ownership moved for by the present Minister of National Defence on behalf of the Liberal opposition? Is it a case of absolute public ownership while in opposition and some form of compromise when in government? I say to you, sir, and through you to the members of this committee and the people of this country, that having regard to the statements made by the present Prime Minister throughout the country during the election campaign when he asked the people for votes based on those statements, this measure is a subterfuge and a delusion, and out of the mouth of the present Prime Minister I shall attempt to prove that it is a breach of the pledge he gave to the people. First I should like to refer to a report appearing in Ottawa Citizen of August 3, 19'35, reporting a speech made by the present Prime Minister. I quote now what appeared in that newspaper in quotation marks, as being the words of the right hon. gentleman:
"The Liberal party stands for the immediate establishment of a properly constituted national central bank to perform the function of rediscounts and the control of currency issue considered in terms of public need."


Some hon. MEMBERS:: Hear, hear.


James Earl Lawson: Keep right on. I will soon get to a point where you will not shout "hear, hear."
"Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of sovereignty of parliament and of democracy is idle and futile. To regain for the nation what has thus been lost will continue to be the first objective of Liberal effort."


Some hon. MEMBERS:: Hear, heai
Bank oj Canada


James Earl Lawson: Well, Mr. Chairman, does this measure restore to the government its most conspicuous and sacred responsibility, the control and issue of currency and credit? Here we are to have a board of directors, one-half but one, to start with, elected by private interests-


Charles Avery Dunning: That is not correct.


James Earl Lawson: One-half plus one, to start with chosen by the government. I will add the governor and the deputy governor, chosen by the government, who are already in existence. Now let us assume that after the bill comes into effect there is an opinion as to the expansion of credit among the privately elected directors which is not the view of the publicly appointed directors, or vice versa. I ask, are the government-appointed directors to exercise any freedom of opinion, or are they not. If they are to exercise freedom of opinion then they cannot be carrying out the policy of this or any other particular government. But if their job is to carry out the policy of this government, then I ask, why the private directors and the private shareholders? Where is the government discharging "its most conspicuous and sacred responsibility"? If the board of directors of the bank is to obey the dictates of the government in office for the time being, then why not honestly and fearlessly stand by the policy which I hope to show was enunciated during the election campaign: "Give back to the private shareholders the money they put into this bank; get rid of the private directors." If we are to have complete and absolute government control, why not do it in the right way, and not by some measure which is more or less a compromise between contending factions?
I would like to direct the attention of the committee to the next utterance of the right hon. gentleman, the present Prime Minister, during the election campaign. Again I quote from the Ottawa Citizen, this time of August 8, 1935-Mr. Mackenzie King speaking at Kingston; and again I give the words which the newspaper puts in quotation marks:
"He (Mr. Bennett) had taken the gold reserves from the federal treasury, the backing for the country's currency, and turned them over to a private corporation."
And as the right hon. gentleman travelled west he waxed even more eloquent in that regard, because I observe that according to a report appearing in the Vancouver Sun of September 30, 1935, he had this to say:
Criticizing Mr. Bennett's bank, he said it was owned and controlled by private stockholders. . It had been given by the government $60,000,000 gold reserve and the vast number

of securities held by the government from the private banks. These were the property of the people of Canada. To-day they belong to the private shareholders of the Bank of Canada, he said.
Now let us see. This "Bennett bank," so-called by the leader of the government took the gold reserves and the securities from the treasury of Canada and did the iniquitous act of handing them over to private interests. May I ask the right hon. gentleman if in principle it is any less iniquitous for him today to leave half of them in the possession of private interests? Where is the difference?


William Lyon Mackenzie King: We are not leaving half of the reserves and securities in the possession of private interests; we are putting back the whole under public control.


James Earl Lawson: Oh yes, he is. If I correctly understand the Minister of Finance he is now going to subscribe for $5,100,000 worth of stock in the bank. Already you have another $5,000,000 of private money represented by private shareholders. It does not require a lawyers' argument to convince any man who knows anything of business that if I hold half the stock of the company I own half of everything that company has.


Mr. McLEAN (Melfort):: You are not going to own half.


James Earl Lawson: When are you going to take out the private shareholders? There is not a suggestion of it in this resolution. If it was iniquitous to turn over that gold and those securities to the privately owned central bank, then at least it is half as iniquitous to leave half of it in the ownership of private persons. But, Mr. Chairman, the statement was not correct. I shall let the Prime Minister tell the committee whether or not he had knowledge as to the correctness of the statement.
I now turn to the report of the Bank of Canada at the first annual general meeting of shareholders, in which I read:
"The Bank of Canada opened its doors for business on March 11 last. On the date of opening we assumed responsibility for the redemption of all dominion notes issued and outstanding."
Not one word from the Prime Minister about "Bennett's bank" doing that. Continuing the report:
"To cover that liability, which then amounted to $185,455,439, the dominion government transferred to the bank the following assets:
Gold, valued at	$ 69,455,439
Silver, valued at	 986,363
Dominion of Canada 3 per cent bonds maturing 1940 of a . par value of	115.013,637
Total

Bank of Canada
In plain words, Mr. Chairman, the former governtnent transferred to the central bank an amount exactly equal to the liabilities which they required the central bank to assume, and equal only so long as the bonds of Canada transferred were worth one hundred cents on the dollar.
Speaking on this same subject the right hon. gentleman again used a figure:	he said
"Bennett had"-he did not use the words "given away"-"Bennett had turned over to this central bank some $69,000,000 in gold." Well, Mr. Chairman, if you turn to the last page of the report of the Bank of Canada and look at its statement of assets and liabilities you will find that to-day instead of the amount turned over being $185,000,000, what is being left to the ownership of private interests ii one-half of $307.655,151.86,-in other words the assets of the Bank of Canada-on the principle on which the right hon. gentleman proceeds, for which those private interests have subscribed the enormous sum of $5,000,000.
I should like to go a step further. Let me point out how the right hon. gentleman indicated he was going to discharge "the most conspicuous and sacred responsibility of government." I turn to a report of a speech of the right hon. gentleman contained in the Vancouver Sun of September 30, 1935. I imagine most hon. members of this committee are familiar with the fact that the Cooperative Commonwealth Federation was pretty well in its stride in Vancouver, and is reported so to be in British Columbia. Out there the right hon. gentleman had this to say:
"We believe that credit should be a social service to serve the needs of the people."
"Credit is not the concern of the bankers only but is of concern to you and me."
Credit is to-day controlled by the great international money power. The first step, then, is to establish a national central bank -not another private bank as has been done -but a government bank able to control credit according to the will of the government in matters of great national concern.
The Liberal party believes it is a public matter of direct concern to the average citizen to have a national bank to control currency and credit so that they may serve the public needs.
The first objective is to get back the control that was taken from us. The next is to see that the bank is made national in the truest sense of the word."
Now in fulfilment of that pledge and obligation the government headed by the right hon. gentleman brings forward this anaemic measure providing for a half nationally and half privately-owned central bank w'hieh is to discharge "the most conspicuous and sacred responsibilities of government."
Then the right hon. gentleman went to Alberta where the social credit group appears
to have been in its stride. According to a report in the Calgary Daily Herald of October 1, 1935, the right hon. gentleman said:
"A central bank is necessary to determine the supply of currency in relation to domestic, social and industrial requirements of the Canadian people, and also to deal with problems of international commerce and exchange."
So far the leader of the social credit group might have been making the speech. The right hon. gentleman continued:
"That was a clear statement"-
He was referring to a statement he had made previously.
-"that what we wanted at Ottawa was a central bank, or wanted in Canada, was a central national bank which would enable private banks to be controlled by the central institution in a manner which would make credit be considered more from the point of public need, domestic requirements, social requirements, and the like, than from the point of view of the interests of capital investors and private bankers oniy."
Then he went on.
"Then the government policy, if it were one of extension of credit, would be in a position to put that policy into effect"-
That must be a misprint, because I doubt whether the right hon. gentleman would have repeated the word "policy." I continue:
-"through having a central bank which would give more in the way of credit at the time when the need for more in the way of credit was uppermost. It would regulate credit in a manner which would serve the needs of the country, prevent excessive speculation on the one hand, and on the other hand help serve to increase the currency and the facilities for credit when need for increased currency and increased credit facilities were required."
And then this last touch, which I think is sublime.
"We have in the federal field the great issue of monetary reform. I have merely indicated what I have thought was the first step, and if that first is not won then all our efforts at further financial reform so far as the federal field is concerned will be materially impaired."
"Equally"-
Says the right hon. gentleman to the electors of Alberta.
-"if they are materially impaired it will have a very serious effect as far as I see it upon the efforts of any province to improve financial conditions there, so I hope when Monday fortnight comes you will think not only what is important to you locally and in a provincial way, but that you will think even more deeply of what is going to be of vital concern to our country with respect to our policy during the next five years."
I leave it to the judgment of hon. members of the committee and the people of the country
Bank of Canada

whether the present proposal for a nationally owned central bank, which is neither meat nor fish, flesh nor fowl, is the first step in a great monetary reform in Canada.
I am not sure whether the right hon. gentleman went back to Vancouver, but in any event he made another speech which was fully reported in the Vancouver Province of September 21, 1935. In that speech he said:
"Canada is faced with a great battle between the money power and the power of the people *-a battle which will be waged in the next parliament. He pleaded for a sweeping liberal majority in order to carry out his policy of public control of currency and credit, nationalization of the Bank of Canada and monetary reform."
I suppose monetary reform is bo follow this half measure of nationalization. The right hon. gentleman went on to say:
The battle whieh would be fought in parliament would decide whether "we are going to have the money power bend to the will of the people."
He finished his observation by saying:
"Until the control and issue of currency and credit is restored to the government and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty of parliament and democracy is idle and futile."
Well, the people gave the right hon. gentleman a sweeping Liberal majority, and we are here to-day in the arena ready for the great monetary battle. The right hon. gentleman says he is the gladiator who will champion the cause of the people, that he recognizes the control of currency as the most conspicuous and sacred responsibility of government. But where is the money power with which he is going to do battle? It was the private interests which owned the central bank. Are those private interests, with which the right hon. gentleman was going to do battle, wiped out by this measure? Oh, no! I suggest he is a prudent man. Instead of having them do battle in the arena of parliament he compromises by saying, We will permit you to keep your stock in the central bank; we will continue to pay you four and a half per cent dividend, the maximum amount you can receive if the bank makes money; we will avoid pitched battle in parliament, and by your ownership of forty-nine per cent of the stock of the central bank you are still in possession of forty-nine per cent of the assets. Is it any wonder the electors of Canada were misled? And not only the electors; is it any wonder the hon. member for Rosthern (Mr. Tucker) believed he was supporting a party which had a policy embracing his ideas? How well I remember that gentleman coming as a new member to this parliament, with 
high hopes for the government he was supporting and with that great confidence and faith which led him to stand in his place and say:
"The government must have time to adopt policies which will enable them to provide the money before we can expect them to bring in such legislation."
Then, after proposing that the Bank of Canada should advance whatever money the country may need against dominion, municipal and provincial bonds, he said:
"I venture to stand in my place to-day and make these suggestions as a Liberal because our great leader has taken the attitude that people of all shades of opinion will be welcome within the ranks of the Liberal party."
Mr. Chairman, can you blame the hon. member for Rosthern for drawing any such conclusion in view of the utterances of his leader upon the stump in this country during the last campaign? But he still had faith, this hon. member for Rosthern, and several others like him in the Liberal fold in this house, because speaking later, at page 552 of Hansard for this session, he enunciated just what most of the electorate believed, that what the Liberal party was advocating was an absolute and complete nationally owned central bank, as stated by the Minister of National Defence in this house in 1934; because the hon. member for Rosthern stood up in his place this session and said, "I am one hundred per cent in favour of a one hundred per cent ownership and control of the Bank of Canada by the Canadian people through our government." No room for mistake in that; and then he finished up by saying: "That, in short, Mr. Speaker, is the view I think of at least fifty per cent of the Liberal voters in this country." I ask again, does this measure, half private, half public ownership, meet their views? Will the hon. gentleman and all the others like him who sit in the ranks of the Liberal party in this house get up on their feet in this discussion and tell us whether they believed that their leader was standing for a one hundred per cent publicly owned central bank when he came down here and enunciated his views and his theories? And will they tell us they consider that this measure is discharging "that most conspicuous and sacred responsibility" to which the right hon. gentleman so frequently referred when he was seeking the franchise of the people of this country?


James Shaver Woodsworth: Mr. Chairman, I must congratulate the hon. member for York South (Mr. Lawson) on his very able speech. He has said many things that I had it in my own mind to say, and I do not need to repeat them. There are, however, certain aspects upon which he did not touch.

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I would congratulate the Minister of Finance (Mr. Dunning) upon his very clear statement, and also the government upon having taken a position that is in advance of that which now exists, namely, the banking policy of the Conservative party, and which also represents somewhat of an advance upon any definite position hitherto taken by the Liberal party. I say the latter although I recognize clearly that a number of members of the Liberal party have gone much further than this legislation goes.
It seems to me there are several questions with regard to public finance that have been before the people of this country. One is, should there be a central bank? For a long time both the old parties were very skeptical with regard to the necessity of a central bank, and even went so far as to denounce anything of that nature. The second is, how should this central bank be owned and controlled? It was on that point that we had a good deal of difference of opinion when the present act was introduced.
There is a third consideration upon which the old parties seem agreed, and on which we in this comer differ from both, and that is we favour the nationalization of our financial institutions, including both the central bank and the chartered banks. Again and again we have introduced resolutions along that line only to be defeated by a joint vote of both the two old parties.
May I call attention to the position that we in this comer have taken throughout the years? As early as 1923 I emphasized the monopolistic character of the banking system of this country, and I pointed out that by virtue of the private ownership of this monopoly, financial control and credit are used in disregard of social considerations, prices can be and are manipulated by the control of quantity purchasing power, and finally I said that we must find a remedy in the public control of currency and credit. You will find my speech in Hansard of 1923, page 4018.
In 1925 I ventured to bring forward this motion:
That, in the opinion of this house, it is not in the interests of the country at large that the privilege of issuing currency and of controlling financial credit should be granted to private corporations.
When I listened to the finance minister to-day I began to feel that some of us in this comer had not altogether wasted our energies. In those days we had comparatively little support from those who now occupy the government benches or from those who now occupy the position of official
opposition. We feel that the Minister of Finance is right when he recognizes the influence of public opinion. Undoubtedly public opinion has been driving the Liberal party.
In that same year, speaking of the quantity of money, after quoting Professor Taussig, I said:
How is that regulated to-day? It is regulated by the banks. . . . They do so either directly through the giving or withholding of credit or in their control over government policy. ... I urge that the large measures of control of currency and credit by private corporations now existing must not continue. It is not safe to leave such power in private, and shall I say, without offence, irresponsible hands, that is, in the hands of those without responsibility to the people at large.
I continued:
Is it wise to leave this power in the hands of private individuals who can exercise their control in their own economic and political interests, disregarding the effect on the welfare of the general population? Why shouldn't the government democratically control this money situation rather than allow a group of a dozen men who are not responsible to our people to do so? We now have government supervision and inspection. We have had the advocacy of government guarantee of deposits. . . . From all over the country demands are coming in that the government should go much farther than it has in the past. Why not take the next step and effectively control our currency and credit?
The minister now says that that is necessary and he proposes this resolution as the forerunner of a bill which he thinks will make that possible. I might add that we in our group again and again moved resolutions for the establishment of a national system of banking. I myself introduced one in 1925 and down through the years we have tried to emphasize the need of a national banking system.
When the present act was up for discussion the Liberals were by no means certain of their position. They did unite to criticize the measure, but the present Prime Minister (Mr. Mackenzie King) said it was rather debatable whether or not the bank should be publicly owned and controlled. Some of his followers had no such hesitation. It will be remembered that some of them came out very strongly for an absolutely publicly owned and publicly controlled bank. Hon. members will recall that famous amendment to the effect that the bank should be either publicly owned and privately controlled, privately owned and publicly controlled, or, publicly owned and publicly controlled. As it was considered that the mover of that resolution represented the Liberal party, I say that the government has been very vacillating and
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very temporizing. I was much interested in noting the position once taken by the present Minister of Trade and Commerce (Mr. Euler). We find the following on page 453 of Hansard of 1935:
As the house knows very well, and as I think the country knows, though the people may just as well be reminded of the fact for fear of misrepresentation afterwards, we on this side of the house were last year almost entirely in favour of a publicly owned central bank, though we may not be inclined, at least now-I am speaking for myself

to go as far as the nationalization of the chartered banks of Canada.
The Minister of Trade and Commerce felt that Liberals were almost entirely in favour of a publicly owned central bank. I do not think there is the slightest doubt that the hon. member for York South is correct when he says that was the impression given by the majority of Liberal speakers during the last campaign. The Minister of Trade and Commerce is also reported on page 454 as follows:
I did not intend to take up so much of the time of the house and did so for only two reasons: first, the aspersion-and I think I may call it that, which was cast by the Prime Minister and again by the Minister of Finance upon the integrity and strength of character that ought to animate any government that has the interests of the people at heart, in suggesting that they could not properly and honestly administer the functions that naturally belong to a central bank. In the second place I want to put myself on record that I have not retreated and I do not think those on this side have retreated from the position we took last year that we are entirely in favour of a publicly owned and controlled central bank of Canada.
Surely that is a pretty clear statement. I said a few moments ago that I did not think the Liberal speakers gave the impression to the people that they were going to get any such legislation as this. On the contrary, the people generally understood that they were to have a thoroughgoing	publicly	owned and	publicly
controlled bank. In this connection I should like to quote from the Regina-Leader Post of May 18, which reports a meeting of the Young Liberal executive of Saskatoon, as follows:
Dealing	specifically with the central bank
question,	the	Young Liberal	executivestressed that one of the chief planks in the platform on which the Liberal party was elected to power at Ottawa was the establishment of	"a	properly	constituted	national
central bank of Canada to perform the function of rediscount and to control the issue of currency." Further, Mr. King in a statement following his election, had voiced the oelief that the people of Canada had given an unmistakable verdict against a privately owned and privately controlled central bank.
The resolution reads:
Therefore, this executive of the Saskatoon Young Men's Liberal Club, expresses its

disappointment with indication both in the speech from the throne and in the remarks of leading Liberals in parliament, that legislation to be brought down will modify only the present private ownership of the central bank instead of substituting a nationally owned central bank such as the public was given to understand would be done, and this executive, feeling that the honour of the Liberal party is involved, urges again that the government reconsider its action.
I submit that resolution of the Young Liberal party to the government. They feel that the honour of the Liberal party is at stake. There is no doubt whatever that the understanding of the Young Liberal party and of the majority of the people, not only of Saskatchewan but across the west, was that the present government was pledged to introduce thoroughgoing legislation providing for a publicly owned and publicly controlled national bank.
The question then really is whether this present legislation is fulfilling the pledges of the Liberal party. The minister stated to-day that the naming of tfie directors of the central bank by private individuals was intolerable, but I should like to ask him whether it is any better that the dividends of our central bank should go to private individuals. I cannot see that it is. If it is intolerable that the directors should be named by private individuals, why should it not be more intolerable that dividends to the extent of something like
8225,000	should go to private individuals? I should like to ask the minister why he proposes this very awkward arrangement. Why could not the government have simply bought out the shareholders of the central bank? That has never been explained; it was not explained to-day by the minister. The best he can say is that he thinks. there will be some advantage in having government directors to watch the private directors and in having private directors to watch the government directors. I submit that under that type of reasoning he might as well ask that half the people in the different departments be nominated by private individuals to watch the other departmental officials. Is that our idea of efficiency?


Charles Avery Dunning: Something like this parliament.


James Shaver Woodsworth: Oh, no.


Charles Avery Dunning: You are watching us.


James Shaver Woodsworth: It is a good thing there are a few people to do it; I quite admit that. I do not think the minister will seriously say that this parliament at all corresponds with a board that has direction of the policy of a bank.


Charles Avery Dunning: That is quite right.

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James Shaver Woodsworth: I think Canada
should have an out and out publicly owned and controlled bank, and for that reason I move the following amendment:
That the words after the word "act" ending with the word "bank" in line two of the resolution, be deleted.
That the word "certain" in line three, be deleted and the word "all" substituted therefor.
That the words "a majority of" in line 4, be deleted.
That the words "to increase the number of directors" in line 5, be deleted.
That the words "election and" in line 6, be deleted and the words "by directors appointed" in line 7, be deleted-
So that the amended resolution would read:
That it is expedient to bring in a measure to amend the Bank of Canada Act to provide that all shares thereof shall be purchased by the Minister of Finance out of the consolidated revenue fund in order to assure ownership of the shares by the government, and to provide for appointment of directors in such manner as to assure control of the board by the government.
A situation such as confronts Canada recently confronted the government of New Zealand. In that country they did not take the vacillating and temporizing position which is being taken by the present government. They introduced a bill intituled An Act to amend the Reserve Bank of New Zealand Act. I should like to give the committee a few of the clauses of this bill.
Section 2 reads:
2. (1) On the commencement of this act all shares in the capital of the reserve bank shall be deemed to be cancelled, and thereupon the several registered shareholders of the bank, as on the thirty-first day of March, nineteen hundred and thirty-six, shall, in respect of the shares held by them on that date, be entitled, at their option, to receive for every such share either the sum of six pounds five shillings in cash or a like amount in New Zealand government stock.
Subsection 3 reads:
(3)	Any cash payable by the bank under the provisions of subsection one hereof shall be paid by the bank out of its funds.
Subsection 4 reads:
(4)	All stock issued under subsection one hereof shall be created and issued subject to the following special conditions, namely:-
(a)	It shall be redeemable at par either on the first day of April, nineteen hundred and forty-six, or, at the option of the registered holder, on any earlier date that may be fixed by him on giving to the registrar of stock not less than fourteen days' notice in writing of his intention to require redemption of such stock on the date so fixed;
(b)	During the currency of such stock it shall bear interest at the rate of four per centum per annum, to be payable half-yearly, on the first day of April and the first day of October, in each and every year;
(c)	No transfer of any such stock shall be registered and no stock certificates shall at any time be issued in respect thereof.
Another section which, I think, is of interest to us in Canada is section 4:
4. Notwithstanding the cancellation of its shares in accordance with the foregoing provisions of this act, the bank, on and after the commencement of this act, shall be and shall continue to be the same body corporate as that which was constituted by section seven of the principal act (being a body corporate with perpetual succession and a common seal, and being capable of holding real and personal property, of suing and being sued, and of doing and suffering all such other acts and things as bodies corporate may lawfully do and suffer).
Here are some miscellaneous amendments of existing acts:
10. (1) It shall be the general function of the reserve bank, within the limits of its powers, to give effect as far as may be to the monetary policy of the government, as communicated to it from time to time by the minister of finance. For this purpose, and to the end that the economic and social welfare of New Zealand may be promoted and maintained, the bank shall regulate and control credit and currency in New Zealand, the transfer of moneys to or from New Zealand, and the disposal of moneys that are derived from the sale of any New Zealand products and for the time being are held overseas.
(3) All regulations made under the authority of this section shall be laid before parliament within twenty-eight days after the making thereof if parliament is then in session, and if not, then within twenty-eight days after the commencement of the next ensuing session thereof.
Iu this New Zealand legislation we have an act which the government of this country might very well study with care, and which with certain modifications might be of great value to us.
In submitting the amendment which I have moved, we are simply trying to place before the committee what, it seems to us, would be the carrying out of the promises made at the last election by the Liberal party to the Canadian people, and what, it seems to us, is desirable if we are to have a thoroughgoing control of our currency and credit. I do not think anything short of that will answer the purpose or indeed constitute the setting up of a truly national bank.
Mr. C, E. JOHNSTON (Bow River): There has been a great dieial of contention, andi justly so, in respect of this bill. In my opinion it is one of the most important measures which has come before this house, and for the life of me I cannot understand why it has been left until the end of the session. The closing days are about here now.


Some hon. MEMBERS:: Oh, oh.
BF.VTSEIJ Ktlirion
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Mr. JOHNSTON (Bow River):: It seems that everything that has been, done in this house up to date has rested entirely upon this monetary question. Such momentous questions as pensions for the blind, relief of the unemployment situation, and public works inevitably revert to the problem of money; yet we allow this debate to be the last or one of the last matters brought up in the house. I think it is time that this subject should be taken up fully. I commend the other speakers, especially the leader of the Cooperative Commonwealth Federation (Mr. Woodsworth) for their constructive ideas, because the true purpose of parliamentary debate is to provide constructive criticism.
I desire to make plain in the following language the position taken by the group with which I am associated, on the question of the nationalization of the central bank. We have no objection to the public ownership of this bank. However we realize that this is not a question of paramount importance. What is vital and necessary is a change of policy so that, first, an increase in our ability to create real wealth should be reflected by an increase in purchasing power; second, goods and services should be distributed to individuals in proportion to the capacity of the nation to produce such goods and services; and third, the control of policy is the most important factor, and our financial policy should be designed to serve industrial and national requirements. I think the right hon. leader of the government (Mr. Mackenzie King) should have no objection to a statement of that kind, because he has said on several occasions that the paramount question is control of policy; that he was not so sure as to the nationalization problem. I think that was referred to as a debatable question. We do not take quite that stand. It may or may not be debatable, but in our estimation that is not the question which is so vitally important. The important question is the control of policy; yet that is one of the points evaded in the resolution. Oh, yes, I know it indicates that some additional directors are to be placed on the board so as to obtain control, but twice in this house I have been told by the leaders of the two great parties that parliament was supreme in every sense of the word. So I ask you, Mr. Chairman, why it is necessary to buy or sell more shares or do anything like that in order to secure control of policy. Why can we not pass legislation here which will give us absolute control? We are not so much concerned with the management of the bank, though we would have no objection whatever if the government thought it necessary to make some change there. That is beside the point. If it is necessary, go ahead

and do it; we would support any measure of that kind. But why in the world can we not, without buying or selling any more shares, pass legislation here in order to obtain complete control of the policy of the bank?
This banking question has been held up as a very mysterious affair, and down through the ages we have been taught to believe that it was something sacred, of which we should not speak at any great length. Another of the theories that have been propounded for many years is that there is and can be only so much sound money. I think everyone is now of the opinion that the so-called sound money theory has been pretty well washed out. Another of the old ideas was that if any more money were created by the government it would be unsound, but that private individuals, private banks, might go ahead and create as much as they saw fit and that would be quite sound. Then, for many years it was considered that the amount of money Canada should have should be regulated by the amount of gold in the country. That was the old gold standard. That theory has now been abandoned, and we believe that the test of the amount of money in circulation should be not only gold but the natural wealth or assets of the country as a whole. If you are going to base money upon something that is necessarily scarce, such as gold, naturally you will have scarce money at all times, and when you leave the issuance of this credit and currency in the care of a few individuals who are solely concerned with the idea of profit, you are bound to have a condition of depression such as we have to-day. So-called depressions are entirely artificial; so are periods of prosperity, because both depressions and periods of prosperity are controlled by the financiers. That is not a question of management; it is a question of the control of policy, and if in this house we devoted our energies more towards securing control of policy I think we would be doing a greater service to the country.
Another old theory, which I think has been well exploded, is that, banks do not create money. They do create it, in every sense of the word. If we had control of policy, and if in this house we considered that the .policy of allowing private individuals to create money should be changed, we could make that change without altering the daily routine of the technical part of banking operations. I believe we are all agreed that the banking industry is very efficiently managed. It is a carefully organized business, and we would not need to interfere at all

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with the technique of carrying on that business, All we are concerned with is the question of policy.
I do not wish to take up too much time, but at this point I think it would be well to quote a well known authority for what I have just said. This quotation has been given at other times, but I think it well worth putting on Hansard! again to show that some of these old fallacies are outworn. I quote from the remarks of Right Hon. Reginald McKenna, chairman of the Midland Bank and a former chancellor of the British exchequer, and I do so because he is a recognized banker and financial authority. These are his words:
I am afraid the ordinary citizen will not like to be told that the banks can and do create and destroy money. The amount of money in existence varies only with the action of the banks in increasing or decreasing deposits .. . they who control the credit of a nation direct the policy of governments and hold in the hollow of their hands the destiny of the people.
I contend that such a statement made by a man of the standing of Mr. McKenna should carry a great deal of authority. He says that those who control the credit of a nation direct the policy of government, and that is the point with which we should be concerned. We in this corner believe that the government should take over the control of currency and credit, and until such time as that is done I do not think conditions will greatly improve. The old system is entirely outworn. From the very first it was a debt creating system, and until we change that system we shall have the same conditions existing in this country. As long as we allow these individuals to issue money which starts out as a debt owed by the nation I do not see how we are going to get anywhere. In my opinion money must be issued interest free or at least the necessary amount of money must be issued afterwards to take the place of interest. For instance, if you allow the banks to issue credit to the amount of $100 and at the end of the year 7 per cent interest is charged, that makes a total of $107 which the public is required to pay back. When it is remembered that only $100 was issued to start with can anyone tell me where the $7 interest is to come from?


Malcolm McLean: From the production of the land or the business.


Charles Edward Johnston: But it has to be paid back in currency. The banks do not want your wheat. If they want wheat the farmers will give them any amount of it.


Malcolm McLean: Oh, no, they will not.


Charles Edward Johnston: The banks would not take it. You give the farmers a fair price and they will give you the wheat, but that is beside the point. When you put a proposition like that up to the public and tell them that they must pay back $7 in currency which does not exist, it becomes an absurdity. It is a mathematical impossibility; it cannot be done. The policy is wrong and the policy must be changed. There is no other way out. If you like to call this resolution one step in that direction all well and good, but you must go further than that.
I was pleased that the hon. member for York South (Mr. Lawson) referred to some of the election promises. I intended to deal with those also, but I believe the leader of the Cooperative Commonwealth Federation has covered that matter very well. As the hon. gentleman was quoting from the speech delivered by the Prime Minister in Alberta, in which speech he advised the people to vote Liberal if they wanted financial security, I just wondered whether the treatment received by Alberta was her punishment for not having voted Liberal. Perhaps that was the case, though I would not suggest it.


Charles Avery Dunning: To what treatment is my hon. friend referring?


Charles Edward Johnston: I am referring to the treatment of Alberta in regard to the loan.


Charles Avery Dunning: From whom?


Charles Edward Johnston: From the dominion government.


Charles Avery Dunning: Is my hon. friend speaking now for the province of Alberta?


Charles Edward Johnston: No; I am just putting forward that question. Perhaps it will be answered better at the next election. The Liberals got one member in the last election; perhaps they will not get even one next time.
I would like to mention what I consider a properly constituted national bank. I do this in all sincerity; I do not wish to criticize; I desire to offer some suggestions that might be helpful. I do not think there can be any doubt what a nationally owned bank means; it means owned not fifty-one per cent, but one hundred per cent by the people. I believe everyone in Alberta, at least everywhere that I heard any Liberal speeches, understood that the bank was to be publicly owned, and there was no condition attached. One of the main

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election cries in Alberta was: Why do you want social credit? And by the way social credit is progressing in Alberta. Of course social credit promised monetary reform. The people were told by the Liberal party that they were to get a nationally owned bank. The Liberals said: Why do you want social credit? We are going to give you monetary reform.


Malcolm McLean: What about the $25 a month?


Charles Edward Johnston: And the Liberals got some support on that promise of monetary reform. But now when the people see the kind of monetary reform that is offered them they are going to be just as much disappointed in Alberta as in other parts of Canada.


Malcolm McLean: What about the $25 a month?


Charles Edward Johnston: Don't you worry about the $25.


Malcolm McLean: A lot of people in Alberta are worrying about it.


Charles Edward Johnston: Now I might refer again to the speech of the Minister of Trade and Commerce (Mr. Euler) as reported in Hansard, ait page 453. I will read only a section, as thie bon. leader of the Cooperative Commonwealth Federation referred to this, buit I think it is worth while drawing it to the attention of the committee again:
As the house knows very well, and as I think the country knows, though the people may just as well be reminded of the fact for fear of misrepresentation afterwards-
That is why I am reading it again:
-we on this side of the house were last year almost entirely in favour of a publicly owned central bank. ...
Now there cannot be any doubt of that. I think the minister was quite right when he expressed that opinion. Surely that is what the people expected, and that is what some hon. members expected. The statement I have quoted shows that one of the ministers expected it. We had on this side another Liberal expecting it, when he said the other day, as reported in Hansard, that that was one of the main things he considered they were coming to Ottawa for. I believe, in all sincerity, the people are looking to the government to-day not to do that thing partly, not to take a small step in that direction, but to go ahead and do it as it should be done. If this is to be a publicly owned bank operated in the interests of the people one of the essentials is to cut out interest entirely.

If you wish to add something for overhead, with some technical means of recovering it, there would be no objection to that. That would be a nationally owned bank, in keeping with the election promises.
Another principle of a nationally owned bank would be that money should be issued on the real wealth of the people, instead of allowing a privately organized company, such as the chartered banks or the central bank, to issue money on their own behalf. One of the great evils in our financial system is allowing these individuals or corporations to monetize the real wealth of the people and create an utterly impossible situation for them to meet.
Another essential for a nationally owned bank is that as real wealth increases money should increase. It seems to me to be obvious that as wealth increases money should increase, but during the regime of privately owned banks the system has worked in just the opposite way; as wealth increased they feared for their loans, so they began to call in these loans and thus created the so-called depression. Money should increase as wealth increases; there should be a balanced equation there; purchasing power should at all times equal production, and until that situation is brought about I cannot see that we are going to get very far. Another point for a nationally owned bank is the absolute control of policy by legislation, not merely by buying shares. That seems to me to be paramount.
Now, may rve consider for a moment what the advantages would be to the people of Canada by having a publicly controlled or national central bank. One of the first things that would occur is that it would restore the sovereignty over money to its rightful possessors, namely the people of Canada, through parliament. That is where the control of money should be. This would ensure the lastingness of political freedom. It would make possible the attainment of a just annual living wage for the worker and production at a profit for the farmer. That could be easily done with a properly nationalized bank. Confiscation of the honestly acquired property and savings of the people could be prevented, which is not the case under the present system. I think of some of the farmers, not only in Alberta, but in Ontario and all over the dominion, who toiled sixteen hours a day to get together a little bit of property and then were forced to lose it. As I say, properly constituted policy would prevent confiscation of the honestly acquired property and savings of the people. Again, it would ensure lasting peace among the nations, whose governments would be able' to legislate independently of

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the intervention of money changers. The next thing it would do would be to make possible the real freedom of the press and the teaching of the truth in all schools, freed once and for all from the domination of the creators of money; and to ensure independence for industry, which to-day is dominated by finance. That would be one of the great boons. It would also rectify conditions for those who are finding themselves in difficulty in the primary industries. It would ensure equitable credit for all manufacturers who are willing to pay a just living wage for the production of good products, enabling every manufacturer to pay a just living wage annually, free from the competition necessitated by the private control of money. It would eliminate the existence of non-productive bonds, such as victory bonds, which originated in the borrowing of money for digging shell holes and killing soldiers. Money would be backed by real wealth, and, as I suggested a moment ago, as wealth increases so should money, and as wealth decreases so should money, but things which are not productive should not have an earning power.
I think one of the most important features is that it would lessen the burden of taxation. We hear cries everywhere about the increasing burden of taxation, mostly needed for the purpose of taking care of the interest on debt in one form or another, or to carry on public works or to provide pensions for the blind and so on. This would be eliminated to a great degree. It would devise suitable means to distribute purchasing power into the hands of the consumer. You may call that a national dividend, or anything else you wish; it might be put out in that form or another, but sooner or later we are bound to come to that.
If these suggestions are helpful and are carried out the result would mean absolute control of policy; you would not need ownership in any sense of the word but you would have control of policy.
Now hon. members might say that this cannot be done. Again I say that, because it already has been done to some extent, it could be done here in this country. I have before me an article under date of April 3, from a New Zealand newspaper. It reads as follows:
_ The labour government of New Zealand introduced Thursday in the house of representatives a new reserve bank bill, providing for elimination of state capital and the transfer of the bank into an entirely state concern.
The bill also provided for alterations in the machinery of the bank designed to make it more useful. Placing the bank under full state control was a platform of the labour government elected last November.
Shareholders will receive the full market value of their shares, plus an accrued dividend of five shillings (about $1.20) a share.
The bank will regulate and control credit and currency in New Zealand, transfer moneys to or from the island and control the disposal of moneys derived from the sale of any New Zealand products and which for the time being are held overseas.
If New Zealand can do that, why can we not do it? There seems to be no logical reason why we should not do that very thing. The Liberal government, if it did that, would be fulfilling only that which it promised to do for the people of Canada. I say that because I am positive people in this country are expecting the Liberal party to carry out their promises. No longer ago than this morning I received through the mail some editorial comments in The Saskatchewan Liberal of May 28, and from it I shall quote a few lines to show what the people are still expecting.
In view of the disappointment manifest-
As I would like hon. members to take note of the observation, I shall repeat it:
In view of the disappointment manifest in Liberal ranks in Saskatchewan over the decision of the King government not to eliminate private shareholders from the Bank of Canada, but instead, to take control of the bank by the issue of new majority stock to he owned by the government, it is of special interest to note that the new labour government of New Zealand is following the other plan of buying out the shareholders,-the plan which was thought by the rank and file would be followed in Canada.


Malcolm McLean: Whose writing is that?


Charles Edward Johnston: It is a Liberal paper.


Malcolm McLean: The hon. member is quoting it; who is writing in the Liberal
paper?


Charles Edward Johnston: I do not know.
Mr.	McLEAN	(Melfort):	No,	the	hon.
member does not know.


Charles Edward Johnston: It is an editorial headed:
State Control of Banking and Currency in New Zealand.
Mr.	McLEAN	(Melfort):	Yet	the	hon.
member does not know who the writer was.


Charles Edward Johnston: It is from
the Saskatchewan Liberal.


Malcolm McLean: Is it an extract from another paper?


Charles Edward Johnston: No; get the paper and look it up. I know it is hard for the hon. member to believe that Liberals
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in Canada expect what I have read. The hon. member probably does not know anything about it, but the next time he comes before the electors he will know something about it.


Malcolm McLean: And a lot of others will know, too.


Charles Edward Johnston: 
Charles Avery Dunning: Who said that?


Charles Edward Johnston: The present Minister of Trade and Commerce (Mr. Euler) said it in 1935. Why not do it at once; why spread it over a number of years?
A moment ago I said that hon. members in this section of the house would have no objection to one hundred per cent nationalization of the central bank, and in that stand we are in accord with the majority of hon. members in the chamber, including Liberals. I believe that is the opinion they hold. To show what people in Canada and the majority of hon. members expect, may I quote from the report of the banking and commerce committee of March 6, 1934. These are the observations of Mr. Irvine who was a member of the Cooperative Commonwealth Federation group in the last parliament.
I am quite in agreement with you there, that the bank should be government controlled in all instances.
That is the statement of a man from the Cooperative Commonwealth Federation. I want to say that every party would support a policy of this kind.
But the mere ownership by the government of a banking institution or any institution whatsoever will not in itself effect the cure we desire, that is my point.
I want the difference in policy, not a matter of administration, because all that we are doing

Bank oj Canada
if we go from a private corporation to the public, we have only altered the method of administration, we have not altered the policy, and what I want to get at is the essential difference in policy between what you propose and what is now being done.
I think that is what we are all concerned with. The hon. member for Vancouver-Bur-rard (Mr. McGeer), appearing before the banking and commerce committee in 1934, said, as reported at page 703 of the evidence:
1 would not socialize your banks or take away your right to carry on a merchant banking business, if you .wanted to.
There we have a Liberal member emphasizing the control of policy. I believe it was the Minister of Finance (Mr. Dunning) who said the other day, and very justly, when the subject of nationalization was up, that the government could not go into business, and I think he was right. Why change that attitude now? What we desire is an absolute control of policy.
I should like to give one more quotation so as to make the position of the social credit party quite clear and to show that there would be no objection to doing anything of this nature. Major Douglas, speaking before the same banking and commerce committee, said:
So far as I have views, I am all in favour of letting the existing banks run the business. What is fundamentally at stake is the assumption that this monetization which the banks do undoubtedly carry on-the creation of purchasing power-is a creation of purchasing power in their own favour solely, and, as I see it, they do not want to turn it over to the government or hand it over to the public except on their own terms. The result of that assumption and that state of affairs is, that quite beyond all discussion, the assumption is made that all production belongs to the banks since they alone create the effective demand which will cause that production to be delivered, and they claim the ownership of the effective demand which they create.
As I look over the resolution once more, I see that it provides that certain shares shall be purchased by the Minister of Finance out of consolidated revenue fund in order to secure ownership of a majority of the shares by the government, and there is also to be an increase in the number of directors. I could not help wondering just what was in the minds of the government, if it was not to create a few more soft jobs for some people because if the banking business is not being run efficiently I do not know what business is. So far as management is concerned, banking is, beyond comparison, the most efficient business. Why, then, do we want to interfere with it? Why do we want more directors and to 3pend more public money?


The CHAIRMAN:: If the hon. member
will permit me it has been moved in amendment by Mr. Woodsworth:
That the words after the word "act" ending with the word "bank" in line two of the resolution, be deleted.
That the word "certain" in line three, be deleted and the word "all" substituted therefor.
That the words "a majority of" in line 4, be deleted.
That the words "to increase the number of directors" in line 5, be deleted.
That the words "election and" in line 6, be deleted and the words "by directors appointed" in line 7, be deleted.
So that the amended resolution would read:
That it is expedient to bring in a measure to amend the Bank of Canada Act to provide that all shares thereof shall be purchased by the Minister of Finance out of the consolidated revenue fund in order to assure ownership of the shares by the government, and to provide for appointment of directors in such manner as to assure control of the board by the government.
May I say that I would like to look up the authorities and give a ruling to the committee at eight o'clock.


Henry Herbert Stevens: Before giving your ruling, Mr. Chairman, would you permit a discussion of the point of order, a discussion of the question whether the amendment is in order?


William Lyon Mackenzie King: As I understand it, the chairman said that he would have to consider the matter, and therefore I assume he is quite prepared to listen to argument before ruling.	I was going to
raise the point that the amendment is contrary to section 54 of the British North America Act, which reads as follows:
It shall not be lawful for the House of Commons to adopt or pass any vote, resolution, address or bill for the appropriation of any part of the public revenue, or of any tax or impost, to any purpose that has not been first recommended to that house by a message of the governor general in the session in which such vote, resolution, address, or bill is proposed.
I draw attention to the words: not lawful for the House of Commons to pass any resolution for the appropriation of any revenue-I quote:
to any purpose that has not been first recommended to that house by a message of the governor general.
The house has before it a resolution of the Minister of Finance, a minister of the crown who preceded his resolution by a recommendation from His Excellency the Governor General, that a measure be introduced to ensure ownership of a majority of the shares of the Bank of Canada by the government. The purpose of the measure is
32S0
Bank of Canada

not, as the hon. member for York South (Mr. Lawson) pointed out a few moments igo, to acquire all the shares, which would amount to complete government ownership. That was the exception taken by the hon. member to the resolution.
My hon. friend's amendment is that the resolution should be amended to provide that all shares of the Bank of Canada shall be purchased by the Minister of Finance. Quite a different purpose. To be in order the amendment would have to be introduced in the house in the first instance in the form of a resolution by a minister of the crown and be recommended to the house by His Excellency the Governor General. May I dlnaw attention to what May says, at page 461:
The committee is not bound by the terms of the provisions which the ministers of the crown have inserted in the bill; and any member may propose to increase the grants specified in these clauses or to extend the application of the provisions of the bill, whatever may be the cost resulting therefrom, so long as the power conferred by the royal recommendation is not exceeded.
The question whether an additional expenditure is involved or not is not the point at issue in this case. It is a question whether the power conferred by the royal recommendation is being exceeded, and all that the royal recommendation has granted, as the hon. member for York South has pointed out, is power to purchase a majority of the shares, but not power to purchase all the shares. The hon. member's amendment is to purchase all the shares.
May I also cite May, 13th edition, at page 546:
An amendment proposing to substitute for the resolution an argumentative justification for the refusal of that demand is out of order, as are also amendments proposed with a view to submitting an alternative scheme to that proposed with the royal recommendation.
The criticism of the government by those who are opposing this resolution as worded is that we have not adopted the alternative scheme which is being proposed by the hon. member for Winnipeg North Centre (Mr. Woodsworth). Inasmuch as the amendment proposes an alternative scheme, I submit, Mr. Chairman, that it is out of order.


Mr. HEAPS:: May I suggest, Mr. Chairman, that you also look at paragraph 558 of Beauchesne's Parliamentary Rules and Forms?
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


Abraham Albert Heaps: Mr. Chairman, at six o'clock the Prime Minister (Mr. Mackenzie King) was discussing whether or not the amendment moved by the hon. member for Winnipeg North Centre (Mr. Woodsworth) was in order, and apparently you had made up your mind that you were going to give a ruling at eight o'clock. I hope that your mind is not as yet made up. The Prime Minister tried to point out that the amendment was out of order because it conflicted with the recommendations made by the governor in council. I would point out that if that interpretation is to be placed upon the rules of the house, an amendment moved by any hon. member to any bill could be in order. Every amendment to a measure proposed by the government would always be ruled out of order on that ground alone. If your mind is not made up, Mr. Chairman, I should like you to look at paragraph 558 and 559 of Beauchesne's Parliamentary Rules and Forms, and apply those to the resolution of the Minister of Finance (Mr. Dunning). Paragraph 558 reads:
Motions advocating public expenditure, or the imposition of a charge, if the motion be framed in sufficiently abstract or general terms, can be entertained and agreed to by the house. Resolutions of this nature are permissible because, having no operative effect, no grant is made or burthen imposed by their adoption.
Paragraph 559 reads:
The constitutional principle which vests in the crown the sole responsibility of incurring national expenditure, forbids an increase by the commons of a sum demanded on behalf of the crown for the service of the state. This principle, however, is apparently disregarded when the recommendation of the crown is given to a resolution empowering the expenditure of public money which, framed in general terms, places no limitation on the amount of expenditure to be authorized by the resolution.
I claim that the resolution moved by the Minister of Finance does not state any specific amount. The resolution, reads:
That it is expedient to bring in a measure to amend the Bank of Canada Act so as to increase the capital stock of the bank, to provide that certain shares thereof shall be purchased by the Minister of Finance out of the consolidated revenue fund in order to assure ownership of a majority of the shares by the government, to increase the number of directors, and to provide for election and appointment of directors in such manner as to assure voting control of the board by directors appointed by the government.
I claim that the amendment is exactly in accordance with paragraphs 558 and 559. May I go a little further than that? In the first

Bank oj Canada
place there is no actual increased expenditure implied by the amendment of the hon. member for Winnipeg North Centre. In fact, I would argue that actually it means a decrease. The government proposes an expenditure that would be equivalent to the value of about fifty-one per cent of the stock owned by the private shareholders of the present Bank of Canada. My hon. friend suggests that instead of the government taking funds and applying them to the purchase of new shares to number more than the total owned by private investors in the bank, these funds should be utilized for the purpose of buying up what would ultimately be the minority of the shareholders of the bank. In that way I claim the amendment actually means a decrease and not an increase in the expenditure proposed. Second, the amendment moved by my hon. friend is in exact conformity with paragraphs 558 and 559, and I respectfully submit that the amendment is absolutely in order.


Henry Herbert Stevens: Mr. Chairman, I should like ho direct a, few remarks to the Prime Minis,ter (Mr. Mackenzie King). I merely wish ,to say that if this amendimenit is ruled out of order because of the reasons given by the Prime Minister in his observations prior to six o'clock, a precedent will be laid down that no member shall be permitted to suggest any amendment to or interfere in any way with a resolution introduced by the government and preceding a bill. If such a decision is made, I submit that it will be extremely serious. I appreciate the point raised by the Prime Minister, but I still believe it is covered by the rules. In addition to the paragraphs cited by the hon. member for Winnipeg North (Mr. Heaps) I think attention should be directed to paragraph 555 of Beauchesne's Rules and Forms, which reads:
No increase can be considered either of an existing, or of a new or temporary tax for the service of the year, except on the initiative of a minister acting on behalf of the crown.
Of course, that is a well known and well accepted rule. I now direct attention to paragraph 556, which reads:
The house can make amendments which dimmish the amount of reduction of taxation, or postpone the day when the reduction takes place, although the amendment may increase to that extent the charges proposed to be levied upon the people.
It may be argued that those rules refer to taxation, but after all the principle involved is this: It is not competent for a private member to introduce a measure which imposes a charge upon the public revenue. That
is the broad principle. It does not matter whether that principle is applicable to estimates or to a bill of a specific kind involving the expenditure of public money. It may be argued-and I think this is the point raised by the Prime Minister-that inasmuch as this is a resolution preceding a bill introduced by the government, therefore it is not competent for a private member to move an amendment. But estimates are also resolutions submitted to His Excellency the Governor General in exactly the same way as was this resolution. Having received his approval, they are offered to the house for its approval. Although such a measure contains the express view of the government and has been submitted to His Excellency the Governor General, under the rules the house may make amendments as long as they do not offer or purport to increase the amount.
In this instance the resolution has been submitted in very general terms, as has been indicated by the hon. member for Winnipeg North. The terms are broad; no specific amount is mentioned, nor is the exact manner in which the shares are to be acquired stated; the resolution simply says that it is expedient to bring in a measure so as to increase capital stock of the bank, to provide that certain shares thereof-it does not say what shares-shall be purchased by the Minister of Finance. I submit that the minister could very well argue, when this resolution and the bill to be founded upon it are passed, that he is empowered to buy all the shares of the Bank of Canada, the new issue and the old issue, if he so desires. Those being the general powers of the resolution, I do not see that an amendment suggesting a slight modification and limitation of the original motion should be regarded as out of order and not competent for a private member to move.
The Prime Minister has always been, very properly, a great champion of the rights of individual members of the house. I appeal to him that, before it is asked that this amend-nent should be ruled out of order, careful consideration should be given to the possible jffect in the future of a precedent of this kind. I know he does not wish to lay down a rule of principle or practice that would curb the rights of private members. There have been occasions before in this session and previous ones when I have noticed the government taking an attitude towards members' amendments which I felt was probably unwarranted, and restrictive of what I believe to be the rights of private members. That is the feature I wish to emphasize, and while it would be most distasteful to me to differ from or challenge a ruling of the chair, I strongly
Bank of Canada

urge a reconsideration of this matter and that, in view of the desire of, I think, every one in this house to preserve the rights of private members, this amendment be permitted.


William Lyon Mackenzie King: My hon.
friend said that he wished to direct his remarks particularly to me. May I say that I appreciate the manner in which he has done so, particularly his having said that I would not wish in any way to seek to curb the powers of private members with respect to any measure, because I favour as full powers as may be possible being given to every hon. member of the house. On the other hand, I think hon. members will agree that it is important to observe the rules of the house where they relate to the essentials of any particular course of proceeding. The question we are discussing at the moment does not relate so much to any additional expenditure involved by the amendment proposed but rather to the change it would effect in the purport of the original resolution. My contention is that the government cannot be chastised for something and at the same time be expected to support the very thing for which chastisement is being administered. My hon. friend the member for York South (Mr. Lawson), who this afternoon is apparently acting as financial critic on behalf of the opposition, directed his criticism against the Minister of Finance on the score that this resolution was not a resolution for complete government ownership of the bank. He said that, therefore, we were not implementing the pledges we made in the general election. Had I spoken immediately following my hon. friend, I would have thanked him for having made clear to the house-and I should like to do so now, and thank as well my hon. friend the member for Winnipeg North Centre (Mr. Woodsworth) and other hon. members-for having brought out so clearly the entire consistency of the course which was followed by myself in the statements I made in the recent campaign and previously in the House of Commons with regard to the government's policy and position on this matter of a properly constituted Central National Bank.


Some hon. MEMBERS:: Oh, oh.


William Lyon Mackenzie King: Let me repeat what was said. Quotations were read by the Minister of Finance from speeches I delivered in this house, in which, speaking as leader of the party, I said that so far as I was concerned, it had always seemed to me that the question of government ownership was a debatable question, but that the question of government control was not debatable, that the control of the bank should be with the government and not with private interests.


Henry Herbert Stevens: I did not direct a single criticism against the government regarding that phase of the matter. I spoke merely to the point of order, not to the resolution.


William Lyon Mackenzie King: I know. I am not finding fault with my hon. friend there. I am just giving the reason why I believe the amendment is out of order. It is because it provides something fundamentally different from what is intended by the resolution before the committee.


James Shaver Woodsworth: No, it does not.


William Lyon Mackenzie King: Let me repeat, and I think hon. members will agree with this, that the Minister of Finance made it clear that in this house, speaking on this question, I stated over and over again that the question of government ownership was not the real question involved in the proper constitution of a national bank, that the essential thing was the control rather than the ownership. If we had not provided for the control, and effective control, on the part of the government, I would say that we were liable to be criticized for not having carried out what we stood for, both in this house and in the campaign.
Coming to the campaign, my hon. friend from York South read to us extracts from different papers in the country.


James Shaver Woodsworth: I do not like to interrupt the Prime Minister, but are we on the point of order or not?


William Lyon Mackenzie King: Yes, we are, and I am now dealing with my hon. friend's amendment, the very essence of it. The hon. member for York South (Mr. Lawson) read extracts from papers at Vancouver, at Calgary, and in other provinces 'to have it appear if possible that I was shading my remarks towards one view in one place and another view in another. But every extract he read made it perfectly clear that I had never varied in any particular from the position taken throughout on the importance of having government control, and in not stressing government ownership.
What is the essence of the resolution moved by the Minister of Finance? It is that there shall be given to him or the government power to purchase out of the consolidated revenue fund sufficient shares, for what purpose? To assume ownership by the government of a majority of the shares. The hon. member for Winnipeg North Centre asks that that be amended so as to provide that all the shares of the Bank shall be purchased by the Minister of Finance.


Abraham Albert Heaps: Is it not a question of degree?

Bank of Canada


William Lyon Mackenzie King: It is not a question of degree, but of the difference between absolute ownership-
Mr. HEAPS -and majority ownership.


William Lyon Mackenzie King: -and majority ownership of the shares,-two different things. We are being criticized for accepting the latter. We are quite prepared to stand by what w'e have done. We believe it is sufficient. We believe it is in the public interest. When my horn, friend suggests that we should accept his amendment, he asks that we accept an alternative proposal this, as May has pointed out in the paragraph I cited, cannot be done by way of an amendment. This is an alternative proposal, it is hot an amendment that is in order. It is a very clear alternative. I made no point whatever about my hon. friend's amendment involving a little more in the way of expenditure. I took care to give a citation which made it clear that there might be additional expenditure without an amendment being out of order. The citation I made will be found in May, page 461.


Henry Herbert Stevens: What edition is that?


William Lyon Mackenzie King: This is the twelfth edition.
The committee is not bound by the terms of the provisions which the ministers of the crown have inserted in the bill, and any member may propose to increase the grants specified in these clauses or to extend the application of the provisions of the bill, whatever may be the cost resulting therefrom,-
But here is the essential condition:
-so long as the power conferred by the royal recommendation is not exceeded.
Now the power conferred by the royal recommendation in this resolution limits the purchase of shares to a majority of shares. The amendment of my hon. friend exceeds the power which was granted by the royal recommendation, and that is why his amendment is out of order. There is this further citation from page 546; thirteenth edition.
An amendment proposing to substitute for the resolution an argumentative justification for the refusal of that demand is out of order, as are also amendments proposed with a view to substituting an alternative scheme to that proposed with the royal recommendation.
In other words the royal recommendation with respect to all bills involving the payment of public moneys is necessary in order that at the very outset the purpose of a measure may be made clear, not merely the amount of the expenditure involved but also the purpose of the power that is being granted. All that was asked for in the royal recommendation was power to purchase a
majority of the shares, not all the shares, and the amendment exceeds that power and offers an alternative scheme. For both these reasons I submit that the amendment is out of order.


James Shaver Woodsworth: On the point of
order, Mr. Chairman, may I say that where we have no specific rule it seems to me that we must go on analogy, and, as my hon. friend from Kootenay East (Mr. Stevens) pointed out, the same principle underlies taxation, where we must have the recommendation of the governor general. In paragraph 569 of Reauehesne's Parliamentary Rules and Forms we have what is possible with regard to taxation:
No motion therefore can be made to impose a tax, save by a minister of the crown, unless such tax be in substitution, by way of equivalent. . . .
The inference there is very clearly that something may be substituted, even in the case of taxation. I submit that if this is true with regard to taxation it is equally true in regard to a matter of this kind. The Prime Minister concedes that there will be no additional expenditure involved, so we can leave that to one side. But he also says that the amendment I have proposed would take over all shares whereas the original resolution speaks of taking over only a majority of shares. Well, surely the Prime Minister recognizes that all the present shares will be less than the majority of the shares if this resolution is adopted. I do not think he can possibly press that point, because if we take over all the present shares we shall not have to take over as many shares as we would if we acquired a majority under the resolution of the Minister of Finance. It is ridiculous that my motion should be ruled out of order because it proposes to take over fewer shares than would have to be taken over under the resolution.


An hon. MEMBER:: That is not the
point.


James Shaver Woodsworth: That is very
decidedly the point the Prime Minister makes; that is one of his main points, and in any ruling that may be given by the chair I think that point should be answered.
The Prime Minister's main objection is that this alternative motion has not the recommendation of the governor general. May I point out what it would really amount to if this were declared out of order. Based upon this resolution a bill will be brought into the house. That bill must be founded upon this resolution; as I understand it the
Bank oj Canada

principle of the bill cannot be different from the principle of the resolution. It must be exactly the same, otherwise we would be disregarding the governor general; once we got the resolution through we would be introducing another idea altogether, another proposal. So if to-day it is ruled that we cannot introduce an amendment to the resolution it means that we cannot introduce an amendment to the bill, which would reduce this house to a nullity, a mere debating society.
That is a stronger position than was taken by the previous government in connection with the original bill setting up the Bank of Canada. Some of the older members will recall that we on this side-and I am still on the side I was on in those days-attempted to introduce an amendment on second reading. The Speaker of that time would not permit us to do so. I quote from page 4374 of Hansard of 1934:
Mr. Rhodes: That is the only principle. The point whether this bank should he publicly or privately owned as well as questions respecting the numerous other details incidental to the bill are matters of detail which can be dealt with by way of amendment in the regular course as we proceed in committee on banking and commerce, or in committee of the whole house, or upon motion on the third reading of the bill.
Notwithstanding this, when the third reading of the bill did come, we were prohibited from introducing any amendment. The Liberals, who were then in opposition, also tried to introduce an amendment, but we were both ruled out of order. That meant that we could not introduce any change on the second reading or on the third reading, and I submit that if the government presses this matter and upholds the principle that we cannot introduce an amendment of this kind it completely rules out the possibility of this house really having control of legislation. The Prime Minister emphasized the need of the government being consulted in this matter, and so on. Well, I can remember back in 1925 when the Prime Minister took the ground very strongly that the governor general could not interfere in any way with the decision of his ministers; that the decision of the ministers ought to be final. The Prime Minister took a strong stand on that occasion in connection with the position of the governor general. Now it would seem that he is switching round completely and saying that until the governor general consents to every detail of money legislation, this house is helpless. That is an impossible situation. Surely this parliament has rights, just as much as in those days the government had rights. I

supported the government in those days; little did I think the time would come when that very government, appealing for support because of its Liberal principles, would attempt to deprive parliament of its right to control legislation. I protest against any decision which would take away those rights and powers.


William Lyon Mackenzie King: When my hon. friend speaks of depriving parliament of the rights it has in connection with legislation I hope he will not dispute that these rights are set out within the four corners of the British North America Act. At the moment I should like to direct the attention of the committee to one of the provisions of the British North America Act which is most specific with regard to matters of legislation. It is section 54 of the British North America Act, which reads as follows:
It shall not be lawful for the House of Commons to adopt or pass any vote, resolution, address, or bill for the appropriation of any part of the public revenue, or of any tax or impost, to any purpose that has not been first recommended to that house by message of the governor general in the session in which such vote, resolution, address, or bill is proposed.
That is the situation. There has been no recommendation presented to this house by any minister of the crown carrying the recommendation of His Excellency the Governor General, in accordance with the terms of the constitution, which ask powers for the government to acquire all shares in order to obtain complete ownership of the Bank of Canada. There having been no such request made on the intiative of any minister of the crown on the recommendation of the governor general, I submit that it is impossible lawfully so to pass the resolution. The power requested by the resolution is less than that which is asked for by the amendment, and the bill is one pertaining to public expenditure.


James Shaver Woodsworth: May I point out to the Prime Minister that the rights of parliament antedate the British North America Act. Our rights are very clearly set out in the clause that was read by my hon. friend from Winnipeg North (Mr. Heaps) where it says:
... if the motion be framed in sufficiently abstract or general terms, can be entertained, and agreed to by the house. Resolutions of this nature are permissible because, having no operative effect, no grant is made or burthen imposed by their adoption.


William Lyon Mackenzie King: That is all right, if the resolution were sufficiently abstract, but my hon. friend's amendment is anything but abstract. It is to provide that

Bank of Canada
"all shares thereof shall be purchased by the Minister of Finance." That is as concrete as anything can be. It is a concrete amendment, demanding that this house shall make provision. to purchase all shares, to a resolution which asks only for permission to purchase a majority of the shares; an entirely different thing.


James Shaver Woodsworth: A smaller number of shares.


William Lyon Mackenzie King: My hon. friend says the house is losing its control of legislation. He seems to forget that he is not bound to accept this legislation of the government, he may vote against it if he wishes. He may also vote in support of it, or support an amendment which is in order. As long as he has the power to vote for or against a resolution or an amendment which is in order, he is not surrendering his right to exercise [DOT]control in the matter of legislation. It is, however, absolutely essential, unless we are going to depart from rules that are fundamental, that we observe the rules laid down.


James Shaver Woodsworth: "Take it or leave it."


Henry Herbert Stevens: The Prime Minister has invoked an argument which I was about to apply to himself. He says those who do not like this motion can vote against it. That is precisely what can be done with the amendment. What the Prime Minister is doing is confusing his rights and powers as a government with a majority to vote on something that is proposed with the right of a private member to introduce any amendment to such a resolution. Let me draw the attention of the committee to section 54 of the British North America Act:
It shall not be lawful for the House of Commons to adopt or pass any vote, resolution, address, or bill for the appropriation of any part of the public revenue, or of any tax or impost, to any purpose that has not been first recommended to that house by message of the governor general. . . .
What does that mean? It means that this house cannot on its own initiative pass an appropriation of the public revenue. That has nothing at all to do with the question before us; it is not the point at issue. The point at issue is: Can this house, having received at the hands of the government a certain motion which has been submitted to His Excellency the Governor General, consider that motion and, if it deems it advisable, amend it? I submit that the adoption of the view of the Prime Minister would establish a precedent which would seriously curb the rights of hon. members and limit the usefulness of the House of Commons in the
consideration of legislation. Section 54 of the British North America is not applicable to this instance at all.
I simply content myself with pointing this out, because certainly the question will have to come to an issue some day. This may not be a sufficiently important matter on which to bring it to an issue, but sooner or later the issue is bound to rise: Shall the members of this house, as members, have rights or shall they not? I warn the Prime Minister that the course he is pursuing amounts to this, that if a government, it does not matter what government, chooses to come to the house with a certain proposal, they can say, that is our proposal, we will not entertain any suggestions in regard to it. That would be a very dangerous precedent to establish.


William Lyon Mackenzie King: Since my hon. friend has spoken on the point, may I quote what he said, speaking in this house on April 21, 1936, as reported at page 2051 of Hansard when a similar question was up. My hon. friend in reference to the harbours' bill then under discussion concluded by saying:
The bill was preceded by the resolution, part of which I have read. It was submitted to His Excellency the Governor General, received his approval and was submitted to the house. Following that a bill was introduced to set up one harbour board. As I said before, there may be a question in my mind as to the advisability of that action, but in so far as the point of order is concerned may I suggest that it is raised upon the point that the amendment departs from the principle enunciated in the resolution which preceded the bill, and is indeed a definite alteration in the principle of the bill.
Exactly the same point.


Henry Herbert Stevens: But this amendment is not a departure from the principle.


William Lyon Mackenzie King: Oh yes, it is.


Mr. TAYLOR (Nanaimo):: I would ask the Prime Minister if he has not been confusing terms in his argument. Has he taken into consideration the fact that the amendment involves the purchase of five hundred thousand shares whereas the resolution involves the purchase of five hundred and one thou-stand-or rather I should say that the amendment calls for the purchase of five million shares, whereas the resolution involves the purchase of five million one hundred thousand.


William Lyon Mackenzie King: I was very careful to avoid discussing figures, for fear I might get tangled up just as has my hon. friend. I was careful to point out that the whole significance of the point of order lay in the fact that we could not have one principle governing at one time and another prin-
Bank of Canada

ciple governing at another time, and that an amendment which altered the principle of the resolution was out of order, particularly if it related to a matter of public expenditure, which had not been brought to the attention of the house by a minister of the crown with the consent of His Excellency the Governor General in advance.


Mr. MITCHELL:: The government is quite supreme in this matter-


William Lyon Mackenzie King: No; the house is.


Archibald Hugh Mitchell: The government at the moment is protesting against or about to ask the chairman to rale out of order an amendment. This may be done, or it may not be done; we shall hear that shortly from the chairman. There have been good arguments presented on both sides of the matter, and I suggest that with the powerful majority the government have in the house, if they do not want to see the Bank of Canada Act amended as the amendment proposes, they allow the amendment to go to a vote. Or is there some reason why they do not want that to happen?


William Lyon Mackenzie King: May I make perfectly clear to my hon. friend, so that no insinuation may be allowed to pass, that part of the duty of the government is to see that the rules of the house are observed, and to draw the attention of hon. members to those rules. In this matter the government is not exercising any powers other than may be exercised by every hon. member of the House of Commons. My hon. friend has just as much power as I have in the matter of what shall be done in regard to this question, because it is one which affects the procedure and the rules of the House of Commons, and the House of Commons alone controls its rules and procedure, not the government.


Henry Herbert Stevens: The right hon. gentleman quoted me a moment ago. I wish he had finished the quotation. Referring to whether this point of order was well taken, I said further:
I do not believe it is advisable for the house always to accept a point of order raised in connection with a money bill, because I believe we are getting too much into the habit of ruling amendments out of order simply because a bill may refer to the expenditure of money. I suggest that a great deal of care should be exercised in curtailing the privileges of a member in that regard. -On the other ground however I think the amendment unfortunately is out of order.
The point I was getting at then and what I am getting at now is that great caution should

be exercised in the use of the power of a government with a majority-I am not saying that in any offensive way-in influencing the ruling out of order of amendments.


Frederick George Sanderson: I may say to hon.
members of the committee that since the committee rose at six o'clock I have given the amendment of the hon. member for Winnipeg North Centre (Mr. Woodsworth) very careful attention, and I have also listened attentively to the arguments advanced by all hon. members who have spoken since eight o'clock.
This is not a motion for appropriation of public moneys. It is a proposed resolution under standing order 60 for a charge upon the people to be voted upon another occasion and it is required in order that a bill to amend the Bank of Canada Act, a bill involving an expenditure, be introduced. The 'fundamental terms of the resolution submitted to the house with the governor general's recommendation, upon which this committee was appointed, cannot be amended. Amendments will be in order only if they fall within the terms of the resolution. May, 13th edition, page 546, says that the procedure in committees on money resolutions follows in principle the procedure of the committee of supply, and that amendments are out of order if they are proposed with a view to substituting an alternative scheme to that proposed with the royal recommendation. The point was decided by Mr. Whitley, then chairman of committees in the British House of Commons, on October 22, 1917. I therefore rule that the amendment is out of order.


James Shaver Woodsworth: Mr. Chairman, I regret that I must challenge your ruling.
Mr. Speaker resumed the chair, and the chairman of the committee made the following report:
In the course of the debate on the resolution respecting a measure to amend the Bank of Canada Act an amendment was moved by the hon. member for Winnipeg North Centre (Mr. Woodsworth). The chairman having ruled the amendment out of order, an appeal is made from the chairman's ruling.


Frederick George Sanderson: The question is on the main motion.


Charles Edward Johnston: Speaking to the main motion, I have already stated, Mr. Chairman, that we were not opposing the complete nationalization of the Bank of Canada, but rather that we were more in favour of complete government control, and judging by the Prime Minister's remarks a little while ago he also is in favour of that idea. The main point, so far as the Bank of Canada is concerned, is that we should have control. The means to be taken to secure that control is another question. The government proposes to issue enough new stock to get control. We contend that that is not necessary; that the government could get control outright by legislation. Control is the predominating question, and on this question that control is an essential factor I should like to quote from an authority, Reverend Charles E. Coughlin, to show how the central bank could control all other phases of banking. He has published a little book entitled Money, which deals with the subject in the form of question and answer, and while it has reference to the federal government in the United States it should be applicable to the federal government in this country. The first question is this:
1.	Who should own all the local banks?
The answer to that is:
Local banks should be owned by privately owned corporations chartered by the respective states wherein they are located. The federal government should coin and regulate all money, but private banks should lend money owned by private citizens.
That brings out clearly that control should lie with the central bank, and that control can be secured by legislation. The next question is this:
2. Should these banks just described be controlled in any manner by the government?
That again brings up the question of government control. The answer to that question is:
Since these privately owned banks are state chartered, they should be controlled by the state.
For "state" read "dominion government." It goes on:
It should be the duty of the state government to set up equitable rules and regulations under which these banks must operate.
Bank of Canada

That is the point I wish to emphasize, that we in this parliament should secure control by means of legislation without the necessity of owning a single share. The next question is this:
3.	With what kind of money would the banks do business?
The answer to that is:
These banks would do business only with United States-
Read "Canadian" for "United States":
-legal tender which private individuals or corporations actually brought to the banks.
I should now like to quote from a little pamphlet which I was amused to pick up in one of the banks the other day, and which is entitled, The Public and The Ranks, by James Muir. It deals with some of the misleading ideas that are being broadcast to-day. It says:
You may be interested to learn that the banks operate nearly five million deposit accounts in Canada. Surely, when so much confidence has been shown in us, it is absolutely essential and obligatory that the banks should be keenly aware of their duties to these millions of people. All of which means that banks must be kept at all times in condition to meet, at a moment's notice, a depositor's request for his money.


Charles Avery Dunning: Mr. Chairman, I hesitate to raise another point of order, but there^ is before the committee a specific matter which relates to the Bank of Canada and the control of credit by the Bank of Canada under conditions which will ensure the government having a predominant interest and control. I submit that the chartered banking system is not at issue on this resolution, and therefore such a discussion cannot be in order. I do not want to limit the discussion, but I would like to see it confined to the subject matter of the resolution rather than take in the broader field of the operation of the chartered banks which in no sense enters into either the resolution or the bill.


Charles Edward Johnston: I was just trying to draw a comparison.


Frederick George Sanderson: The point raised by the Minister of Finance (Mr. Dunning) is well taken and I ask the hon. member to confine his remarks to the resolution before the committee.


Charles Edward Johnston: I do not wish to violate the rules of the house, but I was just trying to point out how these banks could be controlled by legislation through the central bank; that this all could be done by legislation. If that is ruled out of order, I will just dispense with it.
fMr C. E. Johnston.]


Henry Herbert Stevens: On the same principle, I submit that a substantial portion of the speech made this afternoon by the Minister of Finance would be out of order.


Frederick George Sanderson: I am inclined to think the hon. member for Kootenay East (Mr. Stevens) was also out of order.


Henry Herbert Stevens: I got my interjection in.


Charles Avery Dunning: My remarks this afternoon bore at every stage dlireotly and pointedly upon this resolution.


Henry Herbert Stevens: Mr. Chairman, you have ruled on the point of order and perhaps it will be difficult for me to make any observation. The ruling was made before any chance was offered to speak on the point of order. However I submit to the Minister of Finance that the debate on one of the most vital matters before the house this session should not be so limited that an hon. member cannot refer to the general system of banking when the Bank of Canada Act states that it is to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of the dominion. This resolution is directed to an adjustment of the Bank of Canada Act to make that more possible. The hon. gentleman was referring in a general way to the control of credit, but on the suggestion of the Minister of Finance, he is ruled out of order. If that is to be the precedent, then there will be no possibility of an adequate discussion of this very important matter. In saying what I say now, I only say what I was going to say when I rose to speak on this resolution. I have no desire to criticize this resolution; I am going to wait until the bill comes down, but, good gracious, if we are to be curbed and circumscribed in this manner, there will be no possibility of discussing in this house legislation of this type. While I sympathize with the minister in his desire to get this resolution through-in a moment or two I shall have a few sentences to utter which will be uttered for the very purpose of assisting him to get it through-I am startled at the ruling just given. The hon. member is new to this house and he cannot have a complete knowledge of the rules, but he is abruptly ruled out of order, when I submit that he was distinctly in order. I do not wish to reflect on the ruling of the chair, but I must say that I do not think the debate should be circumscribed in this way.

Bank of Canada


Charles Avery Dunning: The hon. member was quoting from a pamphlet which deals with the relations of the chartered banks to the deposits of their depositors.


Henry Herbert Stevens: Why not?


Charles Avery Dunning: I submit that that is completely foreign to what we now have before us. I am quite familiar with the pamphlet from which the hon. gentleman was reading and I know that the further along he goes the more out of order he will be. I have every sympathy with new members, but I submit that a new member can best learn the rules by being told by the chairman when he is out of order. That is the way I had to learn them.


Henry Herbert Stevens: That is quite all right; it is a different thing to be kept in order by the chairman. I agree entirely with that, but I do not agree with the point upon which the ruling was made.


Charles Edward Johnston: I think we are learning very fast the routine business of parliament and how parliament does business. I may say that my conception to-day is quite different from what it was when I first came to Ottawa, and it is changing all the time. I do not suppose I had better refer to that pamphlet again because apparently it is mostly all wrong. What I was trying to show by quoting from that pamphlet was how banking could be controlled entirely through legislation. All these misrepresentations that are being circulated could be rectified right here in this house.
I want to refer again to this resolution and the control of policy. During the election we heard a great cry about the wonderful monetaiy reforms which were to be brought about, how it was going to benefit the people if they voted Liberal and got these monetary reforms. As I pointed out a little while ago. one of the essential features of a nationally owned bank should be the reduction, or perhaps the complete elimination of interest rates. Not long ago I listened to some remarks by the hon. member for Jasper-Edson (Mr. Ivuhl), and I should like to refer again to them. The hon. member was speaking about the principle which should be laid down by the government in this banking measure. He is reported at page 1835 of Hansard of April 6, as follows:
Mr. Kuhl: May I ask the Prime Minister a question? Is it necessary for the dominion government to go into debt for any public works projects, no matter Lo what extent?
Mr. Mackenzie King: If I were to judge by the past, I should say that apparently it 12739-210
has not been thought so, because the public debt is pretty large as a consequence of many projects.
Mr. Kuhl: Is it necessary?
Mr. Mackenzie King: I am inclined to think it is with respect to many projects, yes. Does my hon. friend think otherwise? If so, can he tell us how to escape debt if we go into mlimited expenditure?
I think that is one of the main principles which should be brought down in legislation. The government is going to get control by the purchase of additional shares; yet I doubt if there is to be any material change in policy. According to the Prime Minister, there would seem to be some truth in the rumour that we are still to borrow money from, I assume, the banks and go still further into debt. I tried to point out a while ago that the purpose of a nationally owned bank should be to reduce debt expenditures and thereby reduce taxation. It seems to me more evident as I go along that the point we should stress in parliament, as the Prime Minister said a moment ago, is a change of policy, and that policy should be brought down right now. As I look over the resolution I cannot see that by the proposed change the central bank is going to be anything more than a privately owned bank. We are to have the government in business, holding a majority of the shares. That is true enough; yet all the other obligations of this 49 per cent of shareholders will have to be met. It will be just a privately owned bank, with the government as one of the shareholders. The other 49 per cent must be paid their dividend according to the act, and the interest must be paid. The measure still permits, to a degree at least, the monetization of the real wealth of the people rather than having it controlled entirely by the government. One thing I notice is lacking. I may be called out of order for making this observation; nevertheless it seems to me to be in order; and it is, that in this Bank of Canada Act there is no mention whatever of the control of the chartered banks. I think one of the evils which required attention lay in the conduct of the chartered banks; there should be some control of them, and it should be provided for at once.
As I have said, one of the promises made by the Liberals during the election was a monetary change, and if I may be permitted to refer to Hansard, ait page 1982, I will show the committee exactly what the people expected. It is contained in the speech of a Liberal who, I see, is not in his place to-day, but from whom I expected to hear a great deal on the bank question, because I listened to him on the platform in Alberta, and I expected that as a Liberal he would take a

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similar stand in this house. For some mysterious reason, however, he is not in the chamber to-day. This is what he said:
Now, let me say one further word. The right hon. Prime Minister asked some member on the other side of the house what industries this government should take over. Well, speaking as a Liberal,-
I should like hon. members to note that.
-I thought we came here to take over from the Bank of Canada the industry of manufacturing Canadian capital. I want to go further and say that until such time as we are prepared to vest in the government of this dominion the power to create, issue and regulate currency and credit in terms of public need, there will be no solution of either the tax, the debt or the unemployment problems in the Dominion of Canada.
Unless Liberals take heed to some of the suggestions that have been given them to-day and carry out some of the election promises they made all over the dominion not long ago, they are surely building a cross upon which they themselves will 'be crucified at the next election, if not before.


William Lyon Mackenzie King: Now that my hon. friend has concluded his remarks, may I say that the last of them were completely out of order. He was quoting from a previous debate in the present .session, and that is against the rules of the house.


Henry Herbert Stevens: Which the right hon. gentleman did a few moments ago.


William Lyon Mackenzie King: And he was out of order if he did, unless, as was the case, it was on a point of order.


Miss MACPHAIL:: We shall soon not be able to debate at all.


Henry Herbert Stevens: As I intimated a few
moments ago, it is not my intention to debate this resolution at any length. I wish, however, to address a request to the minister and to make one or two observations in connection with the resolution. Personally I am not very much concerned whether the Bank of Canada Act is amended or not. I do not think it requires amendment to enable the government and parliament to make very wide and extensive use of the powers of the present Bank of Canada as set forth in the existing statute. What is of importance, I believe, to this country is: what is the purpose behind it all? What is the intention of the government? What is this policy that is to be put into operation after the Bank of Canada Act has been amended? A few moments ago, when we were discussing the point of order, I read a section of the preamble of the act. Perhaps I might repeat

that, merely to emphasize what I desire to request of the minister. The preamble of the existing act declares that the purpose of the act is, among other things:

to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generaly to promote the economic and financial welfare of the dominion.
That is an indication of the purpose of the creation of the Bank of Canada. It will still remain, I assume, as the general declaration of the purpose of the bank. I should like to ask the minister whether on the second reading of the bill to be founded upon this resolution he would be good enough to make a statement of the policy of the government, having in mind these broad declarations of intention as to the use of this bank, and having also in mind the needs of the country at the present time. It is my intention, when this bill comes forward for second reading, to discuss at greater length certain matters appertaining to it. One other request I make of the minister is this: Would he delay the second reading for, say three days to give us an opportunity to read the printed bill and give it a reasonable amount of study? I suggest this because the bill amending the Bank of Canada Act is, in my opinion, the most important piece of legislation suggested to the house this session, and it is not unreasonable, I think, to ask that we be given two or three days to study a bill which we have not yet seen.
While I am on my feet, and just to complete my observations, may I say that the minister, in presenting his resolution, made an excellent resume of the functions of central banks, and the history of them in various countries. It is a most useful statement and one, I believe, that met with the approval of the house generally. But I suggest that on the second reading of the bill we are entitled to know the policy of the government. To the right hon. the Prime Minister I would say that I have no desire to drag in election speeches or election promises, because I recall a very eminent Liberal statesman quite a number of years ago saying in this house cm one 'occasion that election promises were like the platform of a pullman oar, made to get in on-


James Earl Lawson: Something to get out on, too.


Henry Herbert Stevens: -and I have never forgotten that trite observation by a very eminent Liberal authority; consequently I am

not inclined to hold the Prime Minister to task for utterances he may have made during the period of the election. If we can have a statement of the government's intention as to how they purpose using this reconstructed bank after the bill becomes law, it will be of value in the debate.


Mr. W. A. TUCKER (Rosthern):: At the
outset I must object to the suggestion that the political morality of this country has sunk to the level indicated by the hon. member for Kootenay East (Mr. Stevens). So far as the Liberal party is concerned, as I understand its political platform, it is made for far mone than to get in on.


Henry Herbert Stevens: I was merely quoting the statement of a very eminent Liberal statesman. The hon. member will find it in Hansard if he chooses to look it up.
Mr. TUCKER; The reason I referred to it was that I took it that the hon. member for Kootenay East quoted it with approval, and as far as I am concerned I want to repudiate it on behalf of the Liberal party, in so far as I may speak in a humble way for that party. Like the hon. member who has just spoken, I consider that the measure before the house is one of the most important that has come before parliament at this session. Like him I agree that it should be the wish and the will of this parliament to give all the time necessary to the discussion of this very important question.
It seems to me that as far as the Liberal party is concerned we take the attitude that we have, as it were, two main lines of attack on our present problems. The first is to lower the obstacles to trade in order that Canada may exchange her surplus products, of which she has no need, for the surplus pioducts of other lands in order to increase the total amount of wealth available for distribution among the Canadian people. That is the primary policy of the Liberal parly, the policy of freer trade among the nations of the world. The second line of attack has become increasingly important. It was enunciated by the leader of the Liberal party, the present Prime Minister, in this Hou-e of Commons on February 27, 1933, as follows:
The Liberal party recognizes that the problem of distribution has become more important than that of production. It believes that personality is more sacred than property. In all its policies it has been guided by that principle, above everything else. It will continue to devote itself to finding ways and means of effecting a fair and just distribution of wealth with increasing regard to human need, to the furtherance of social justice and to the promotion of the common good.
12739-210$
Bank of Canada
As far as I am concerned, I consider that we have come to the point, in the words of that statement of policy, where the problem of the production of wealth within the country and its exchange with other countries is not as important as the problem of the distribution of that wealth among the people of Canada. So I take this attitude: We have spent many days on the very important problem of lowering the tariffs in order to increase the wealth available for distribution among our people, and we should be willing to go in great detail into what I regard as the first great approach to the problem of a more equitable distribution of our wealth among our people. I may be wrong, but as I see it this is the first important legislation to be brought down designed to make a definite attack upon that problem of the distribution of wealth. I think this government has gone very far, in its first session, in carrying out its promise to lower the tariff. In my opinion in this bill the government is going a considerable distance toward monetary reform.
Some hon. members who have spoken previously have suggested that this legislation does not go the full length of one hundred per cent ownership and control of the Bank of Canada. As far as I am concerned, if it were a question of government ownership or government control I should say that the important thing was government control. That is the all important thing, because, after all, when you consider the question of ownership you have at the same time to consider certain incidental rights. If you cut down those rights to the point where mere legal ownership carries no rights whatever, then your ownership practically vanishes, and it seems to me that as far as the shareholders of the Bank of Canada are concerned in all respects but one we are approaching that point. We are saying to them: "We will leave you the possession and ownership of your shares but we will take away from you the right to control the policy of the institution. We vest that right in a brand new set of people of whom you had no knowledge when you invested in those shares, and they can, if they wish, guide and direct the destinies of that institution without regard to your wishes. The only right we leave with you is the right to draw 4J per cent per year in dividends if, under the guidance and control of that new body, the bank manages to earn such dividends." Therefore I submit, Mr. Chairman, that in effect we have taken over one hundred per cent control of this institution. We are taking actual ownership to the extent of fifty-one
Bank of Canada

per cent, and by virtue of taking over complete control we have deprived the people who still retain the technical ownership of their shares, of most of the rights incidental to such ownership. So I take it that we have proceeded, to the extent of somewhere between seventy-five per cent and one hundred per cent, to assume complete ownership of the Bank of Canada.
As far as I am concerned I should like to make it clear that if in the first session of this parliament, having this bill before us with the ability to pass it through this house, hoping and expecting that it will go through both houses of parliament, we can proceed from seventy-five per cent to one hundred per cent along the road to complete ownership and control of the central bank, it seems to me that is something worth while, which should receive enthusiastic support in this house and throughout the country. I do not suggest that I would not have liked to see this bill provide for the government taking over every share owned by private interests. Personally I would have been gratified to have seen that, but I am not one of those who, because they cannot get their own way entirely, will not go seventy-five per cent of the way, which at the moment is as far as my fellows in the same party are prepared to go. After all, the only person in any country in the world, under any system of government, who can get his own way at all times is a man like Mussolini, and we want no Mussolinis in Canada. I do not fancy that any single member of parliament thinks he should have the rights that Mussolini has.
I should like to suggest to the Minister of Finance, however, that one of the rights we do leave these shareholders is the right to draw 4i per cent on the money they have invested, and incidentally we have practically guaranteed that dividend. The hon. member for York South (Mr. Lawson) the leading financial critic of the opposition, suggested that when the gold was turned over to the Bank of Canada good value was given for it. I suggest that such was not the case, and that by virtue of that little deal the previous government absolutely guaranteed those shareholders earnings several times in excess of the dividend they are supposed to get. What did the government do? They turned over to that bank $69,000,000 of gold, in round figures, and $986,000 of silver, and they provided that for every dollar of gold held by the Bank of Canada it could issue $4 in printed paper money. So. by turning over to that bank $69,000,000 in gold, we put it within the power of that institution to print, in round figures, $277,821,000 of paper money, which we declared to be legal tender. But, the last

government said, because the Bank of Canada has to redeem $185,000,000 worth of Dominion of Canada notes, in addition to the gold which we have given it, we are going to give it $115,000,000 in government bonds, bearing interest at 3 per cent, carrying an annual income of $3,450,000, payable in cash in 1940. In order, forsooth, that the Bank of Canada can redeem $185,000,000 worth of dominion government notes we have given them gold whereby they can issue legal tender to almost $100,000 000 more (than the amount they have to redeem); yet we have to give them our bonds on top of that. What kind of sound finance is that? It is costing the people of this country, by virtue of setting up the Bank of Canada, $3,450,000 annually until 1940, an out and out gift to the Bank of Canada, and we are going to hand them the money, $115,000,000, in 1940. There is the situation. By what manner of means can that be justified? If you went to the Bank of Canada to-day with a dominion government note and said: Under the Bank of Canada Act you must redeem that note; you have already been paid for it; what would they give you? They would give you another note, printed by themselves, issued against the gold they have already received from the government. And because they do that they are actually going to be paid $115,000,000 in 1940 and in the meantime be paid $3,450,000 annually. That means that we have guaranteed the Bank of Canada -they cannot possibly lose that much surely- an income of four and a half per cent to these people who have invested in that stock.
There are two points I suggest in regard to that. The first is that in my humble judgment the time has come that this dominion should not pay a bit more than one per cent for its money. And we should not perpetuate the condition of anybody drawing four and a half per cent as a result of government operations in finance. Some people who invested in Bank of Canada stock may take the attitude that the government should not cut down their rate of interest. In view of the fact that the banks to-day are paying depositors only one and a half per cent, when they formerly paid three per cent, if the banks have the right to cut down the rate of interest to the extent of fifty per cent, I suggest that we should cut down the rate of dividend payable on these shares to at least the same rate which the banks pay to their depositors. Then I would say to these shareholders: If any of you are not satisfied with one and a half per cent, we will take your shares over at the actual market value. I make that suggestion to the Minister of Finance as a fair and equitable arrangement. It is not a fair or equitable arrange-

Bank of Canada
ment to put a charge on the people of this country of four and a half per cent on $5,000,000 indefinitely.


Mr. MACDONALD (Brantford):: Is there a guarantee of four and a half per cent?


Walter Adam Tucker: Well, I sought to show
how it is guaranteed. If we actually pay the Bank of Canada $3,450,000 annually until 1940 and at that time actually hand over to them $115,000,000, having made that donation to these people who only put $5,000,000 into the proposition, if they cannot pay four and a half per cent during our lifetime they are not the clever people they were represented to be. It is a most amazing thing. We pay the Bank of Canada that amount of interest, and I know some people boast about the wonderful success that attended the operation of the Bank of Canada last year. According to their annual report, having drawn from us that amount in interest, they turned over to the receiver general of Canada, $346,000. It is true they transferred $173,000 to rest account. But apparently it took quite a bit to operate the central bank. I suggest that having given them those rights we should have absolute control of that institution.
One reason why I suggest that we should have absolute control of the Bank of Canada is in view of its power over the prices that prevail in the country. It is suggested in the preamble to the Bank of Canada Act that a properly constituted central bank will have an influence on price levels. Some people seem to have the idea that prices are pretty well governed by supply and demand and that monetary action has nothing to do with the level of prices. I suggest that we should take control of the central bank because I think it is very important to operate upon our general price level so that the burden of debt, of interest and of fixed charges in this country will be decreased. In western Canada- and the same is true in eastern Canada, but I speak of western Canada because I know something of conditions there-we have had the Farmers' Creditors Arrangement Act operating, and I do not think any board has worked harder or more sincerely or more anxiously to try to meet the difficulties of the farming community than the board of review and the different officers operating the Farmers' Creditors Arrangement Act in Saskatchewan. But what has happened is this- I think I am in order, and perhaps I should justify myself before I am called to order -people went to western Canada, many from the old province of Ontario; they went
out there thirty or forty years ago; they worked and their families worked and they saved. I know some hon. members suggest that the farmers have been extravagant; that they bought a Ford car perhaps, or after twenty years of work took a trip to California. But when a family in western Canada and their children worked and deprived themselves of what they needed for twenty or thirty years, were they not entitled to a cheap car and to possibly one trip away during that time? I submit that is not extravagance. I submit this-and every hon. member knows it is true-that there is no equal number of people on the face of the globe who in the same period of time have produced so much real wealth as the people living in western Canada. But what do we find to-day? We find that the majority of people in western Canada actually owe more than they own.


Frederick George Sanderson: Order.


Walter Adam Tucker: I submit I am in order
in this. It is proposed by the government to take over control of the Bank of Canada with a view to regulating the level of prices. I submit that we should take it over, and that we should use it to raise the level of prices in order to decrease the burden of debt, and I submit that I am absolutely in order when I ask the right to continue the debate as I am doing.


Agnes Campbell Macphail: Being a Liberal you will probably be able to do it.


Frederick George Sanderson: Order.


Walter Adam Tucker: I submit I am in order.
If you rule me out of order I will gladly submit to your ruling.


Frederick George Sanderson: The hon. member for Southeast Grey is out of order with her remark. I should like to ask that it be withdrawn.


Agnes Campbell Macphail: May I point out that I am the member for Grey-Bruce.


Frederick George Sanderson: Then I should like the hon. member for Grey-Bruce to withdraw her words.


Agnes Campbell Macphail: To withdraw what?


Frederick George Sanderson: You know.


Agnes Campbell Macphail: I?


Frederick George Sanderson: Yes.


Agnes Campbell Macphail: No, I don't know. I simply stated that because the hon. member who spoke was a Liberal he would be able to continue.
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Frederick George Sanderson: It is a reflection upon the chair, and I should like to ask the hon. member to withdraw.


Agnes Campbell Macphail: I have no desire to cast any reflection on the chair. I cannot see how my remark does cast any reflection upon the chair, because a few minutes ago-


Mr. REID:: I was stopped in my remarks.


Agnes Campbell Macphail: A few minutes ago the Minister of Finance stated that the hon. member for Bow River (Mr. Johnston) was not in order, when he was quite evidently as near to being in order as the hon. member who was speaking when I made my remark. The hon. member for Rosthern (Mr. Tucker) was saying that he hoped he would be allowed to continue, and I said that I thought he would, because he was a Liberal. But if the remark is offensive to the chair, I withdraw it.


Thomas Reid: It is wrong, because I was stopped in my remarks.


Frederick George Sanderson: I do not wish to be insistent upon it, but I should like to ask the hon. member for Grey-Bruce to withdraw without any qualification.


Abraham Albert Heaps: Mr. Chairman, I think you ought to be fair to the hon. member who has just spoken. She withdrew her remarks, and gave satisfaction to the hon. member in question. I suggest that you should not insist upon a new kind of withdrawal.


Frederick George Sanderson: Order.


Abraham Albert Heaps: I do not think everybody should be ruled out of order as soon as he **rises to speak. Is that a new procedure with which we will be faced?


Frederick George Sanderson: I must insist that the hon. member for Grey-Bruce withdraw her remarks, without qualification.


Agnes Campbell Macphail: I now rise to say, then, [DOT]that the hon. member will not be given special privilege because he is a Liberal. And in order that the chair may be pleased, I withdraw any statement I made which might be considered disrespectful to the chair.


Charles Avery Dunning: Qualified again.


Frederick George Sanderson: Proceed.


Walter Adam Tucker: I do not wish to be out of order, but I have listened to debates concerning the tariff which were of great importance, and I must say that this debate which affects the burden of debt, of fixed charges, is of equal importance. I intend to argue that during the last year the Bank of Canada has not operated so as to effect a levelling upwards of prices. The level of prices has
(Miss Macphail.3
been left stationary. I intend to argue that it is time that we took control of the Bank of Canada in order that it may begin to operate as it was intended to. I do not intend to take more than a moment to speak concerning the debt of Canada.
The attitude of boards of review has been that if a person applying for adjustment did not receive what he considered reasonable he always had the right to go into bankruptcy. It was always considered that he should be ordered to pay a little more than he would have paid if he had gone into bankruptcy. In other words the situation has been that our farmers in western Canada have been ordered to pay all their assets would permit, and a little more because they are told: Well, if you went into bankruptcy you would not have to pay these unsecured debts, but as you are not doing that you should pay something extra. The result is that in spite of the operations of the Farmers' Creditors Arrangement Act western Canada is now in a position-


Frederick George Sanderson: I must insist that the hon. member confine his remarks to the resolution before the committee.


Walter Adam Tucker: I would like to say that I did not participate in the budget debate, on the understanding that at some time I would be permitted to give an expression of my views on these matters. There was a definite understanding to that effect. If it comes down to that, I expect to have that right honoured.


Frederick George Sanderson: I would say to the
hon. member that he probably will have that chance, but not to-night under this discussion.


Walter Adam Tucker: This is the time I would like to discuss these matters, and I do not see any particular reason why, when an arrangement is made, it should not be carried out. I am saying that it exists now, and in fairness to the people I represent I wish to claim the right to speak. If I cannot rely upon, an undertaking that is given, henceforth when I think I should speak in justice to the people who sent me here, I will speak.


Frederick George Sanderson: Is the committee ready for the question?


Walter Adam Tucker: Mr. Chairman, the resolution is not carried yet. I just sat down to see if you had changed your ruling, but as apparently you do not intend to change it I shall continue.
I was arguing as to the necessity of the central bank being used to effect a levelling

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upwards of prices. That is one of the purposes for which I hope we are taking control of the bank. In connection with the fact that the central bank should operate on the level of prices I shall argue first of all that it is very important that it be government owned and controlled.
I have in my hand the report of the committee on finance and industry, known as the British Macmillan report. Paragraph 31 reads as follows:
It follows that the functions of a central bank and the obligations resting upon it are of a very special character, calling for skill, experience and judgment of a kind different from those which must be possessed by commercial bankers. No banker can neglect the rules of prudence and of safety, but the object of a commercial banker is to make a profit. The situation of the Central Bank is such that it must often undertake operations which are not only not profitable, but result in losses. Its aim must be the safety of the financial system and the economic welfare of the country.
In view of the words in the British Macmillan report I argue that as the central bank must often undertake operations resulting in losses, the less profit interest there is involved which is inevitably concerned with losses on capital investment, the more likely are the best interests of the country to be served, and the less likely it is that too much consideration will be given to the earning of profits.
In connection with the purpose of a central bank I should like first of all to read from the resolutions passed at the imperial conference at Ottawa, and in connection therewith I shall read in the first place from the statement by the present leader of the opposition (Mr. Bennett), the then Prime Minister, to the conference:
Canada, like all other countries, has suffered severely from the calamitous fall in commodity prices.	Since August. 1929, our index of
wholesale prices has fallen 32 per cent and is now only 4 per cent above the pre-war level. This means that the dollar has increased in purchasing power by 48 per cent. As a result of this rapid and persistent decline in the general price level and the inevitable disparities created between different kinds of prices, normal business relationships have been disrupted. profit margins have disappeared in many cases, enterprise has been discouraged, unemployment has steadily increased, the fiscal problems of all our public bodies have been greatly aggravated, and the burden of fixed charges is exerting an almost intolerable pressure upon some of the strategic elements in our national economy.
Interest charges represent the most important of the fixed or semi-rigid -elements in our cost structure. If prices remain on their present level, such charges will constitute an intolerable or almost intolerable burden in many cases. Even if it can be borne, the fortuitous gain to the creditor of 40 to 48 per cent in general purchasing power above what he contracted for appears to be a grave injustice.
That was the situation as explained by -the then leader of the Canadian delegation at the imperial conference as to the necessity of restoring the level of prices so that the burden of interest, debt and fixed charges would not be intolerable.
I should like to quote from the statement of the Right Hon. S. M. Bruce, leader of the Australian delegation at that conference, and I do so because I think it is very important that this country should be fully seized of the fact that we can by operating through the central bank restore, if we so desire, the level of prices, and in order that the Canadian people may know where to place the blame if the price level is left where it is and the burden of debt in its present intolerable load is left around the necks of our people. I wish to go into this with some considerable degree of care. As I said at the outset, the question of the tariff is important, 'but this question is equally important and the members of this parliament should in my opinion be prepared to give it their serious attention.
In passing, I regret that the right hon. leader of the opposition is not in his seat tonight. Young member as I am of this house I have given some study to the work he did following the Imperial Economic Conference, and particularly what he did along those lines in this country. After this statement was given to the Imperial Economic Conference by the present leader of the opposition, then Prime Minister, we find him coming back from the conference and expanding the actual currency of Canada by $53,000,000. He also put through a transaction whereby treasury bills were discounted with the banks, resulting in $35,000,000 more of currency being put into circulation. In other words, following the economic conference, the Prime Minister of Canada and his government put into circulation over $80,000,000 of new currency, and I submit that had he courageously continued to follow that policy the situation would be different to-day. Prices began to rise; farmers began to get more for their wheat and other products; people in the factories got more for what they had to sell, and business conditions generally were being restored through the placing in circulation of an adequate supply of money. I can show that by giving the rise in the level of prices if I have time. Having taken that action, instead of continuing in it, the then Prime Minister set up a privately owned central bank and gave them control of the situation, and since then, so far as I can see there has been not a thing done in the way of putting out more purchasing power. There has been, on the contrary, deflation, and it is time that we took control of the central bank to reverse that
Bank oj Canada

process. That is the question to which I wish to direct my remarks to-night, and which I submit should engage the attention of this house.
The Right Hon. Stanley Bruce, leader of the Australian delegation, said:
There is no question of greater interest to Australia at the present conference than that of action to bring about a higher price level and stability of exchange. Unless an increase in commodity prices can be achieved it is difficult to see how the present financial and economic system of the world can be maintained. In relation to this conference of British countries it is obvious that any reciprocal tariff arrangements that are arrived at can be of little benefit unless the paralysis of trade is stayed and the price level is raised.
The peoples of the world have shown remarkable patience in submitting to the severe adjustments already made. But they have not been enough. As to the further action needed, one school of thought maintains that the only way out is that we should go on reducing down to the point that will allow profitable production on the basis of the present price level. Another school maintains that it is impossible to bring about the necessary further reductions and that a solution can be found only by an increase in commodity prices and the stabilizing of exchange.
He goes on:
Australia subscribes to the second view.
I could read more as to the action that should be taken in the opinion of Mr. Bruce, but time will not permit.
I wish to quote now from the statement of Hon. N. C. Havenga, leader of the South African delegation:
We are all oppressed by the phenomenally low level of commodity prices. We all desire higher prices, but what we mean is not that cheapness, or in other words, plenty, is an economic evil, but that having made all our dispositions on the level of values of say 1928, we find that all our machinery is out of gear when we have to sell at the prices of 1932.
But must we act on the assumption that this state of affairs will continue indefinitely? What are the great economic factors in the world to-day?
We have plenty of commodities, and the power of producing much more if need be.
We have millions of people desiring those commodities but lacking in an effective demand for them. We have millions of money, seeking safe investment, and unwilling to assume the risk of carrying out its normal function, which is to link up the commodities with the people requiring them.
But we lack the gear-lever which will link up the machinery of production through universal joints to the differential of consumption which will set in motion the wheels of progress.
There Mr. Havenga puts his finger on what I submit our party had in mind when it said that the problem of distribution had become of more importance than that of production. That is a question to which I think every
	*
member of parliament should give the best possible attention.
I have Iquoted Mr. Havenga because nobody would suggest that he was identified with any party in this house. I should also like to quote a sentence or two from the statement of Sir Henry Strakosch, one of the delegates from India:
The fall in prices and the consequent process of economic disintegration has already reached so advanced a stage that there is no time to lose. If we are to avoid troubles far more acute and far more dangerous than those we have already experienced, quick and determined action is necessary.
I should like now to read the resolutions which were adopted at the imperial conference held in Ottawa in 1932. and I do so because they represent the considered judgment of the leading statesmen of the empire. I submit and urge that we should give some consideration to carrying out what these leading statesmen of the empire stated was necessary in order to restore a reasonable measure of economic adjustment for the peoples of the empire. This is from the first resolution:
A rise throughout the world in the general levels of wholesale prices is in the highest degree desirable. The evil of falling prices must be attacked by government and individual action in all its causes whether political, economic, financial or monetary.
There is a definite recommendation. A further resolution states:
In the monetary sphere the primary line of action towards a rise in prices should be the creation and maintenance, within the limits of sound finance, of such conditions as will assist in the revival of enterprise and trade.


Frederick George Sanderson: I do not like to interrupt, but the hon. member has spoken forty minutes.


Walter Adam Tucker: I think I should be allowed, Mr. Chairman, the time taken up in interruptions.


Mr. T. C. DOUGLAS (Weyburn):: Mr. Chairman, it seems to me that we have had a splendid example to-day on the part of the government of what the Japanese call "saving face," for no matter how much the Prime Minister may attempt to differentiate between public control and public ownership; no matter how much the government may care to indulge in verbal casuistry, the fact of the matter remains that the rank and file of the Liberal party both in the west and the east, but particularly in the west, were of the opinion that the Liberal party stood for a publicly owned and publicly controlled central bank.


An hon. MEMBER:: Speak for yourself.


Thomas Clement (Tommy) Douglas: The hon. member says, to speak for myself, but I prefer to let the

Bank of Canada
authorities speak. I should like to direct the attention of the committee to some things which speak more eloquently than I can. I have in my hand the report of the committee on banking and commerce which sat in 1934, and I quote from pages 88 and 89, in connection with the consideration of a motion presented by the hon. member for Vancouver Centre (Mr. Mackenzie) on March 15, as follows:
That before proceeding with the discussion, clause by clause, of Bill No. 19, an act to incorporate the Bank of Canada, the select standing committee on banking and commerce is of opinion that the proposed Bank of Canada should be owned and controlled by the Dominion of Canada and that the provisions of the said bill should be altered accordingly.
Those in favour were:
Messrs. Bothwell, Casgrain, Coote, Donnelly, Duff, Euler, Howard, Lapointe, Mackenzie (Vancouver Centre), Power, Raymond, Sanderson and Spencer.
With the exception of Mr. Spencer and Mr. Coote, the rest were members of the Liberal party, some now being members of the cabinet. The motion which they supported was not only for control; it was that the central bank should be owned and controlled by the Dominion of Canada. I submit that if that was a good motion to make and support in 1934 with a Conservative government in power, it is a good motion to make and support in 1936, with a Liberal government in power. The gentlemen who supported that motion are saying nothing about it to-day. We must either assume that they supported it to embarrass the government of that day, or that they have since changed their minds with reference to the ownership and control of the Bank of Canada.
In Saskatchewan we have heard the opinions of members of the Liberal party as to a central bank. I hold in my hand the report of the Agricultural Credit Commission of that province, appointed in 1913. This report gives a very fine summary of conditions in the province at that time, when they were not good for the agriculturist. Those who signed that report were: J. H. Haslam, Charles A. Dunning and Edmund H. Oliver. After reviewing the conditions which existed, they made some very fine recommendations.


Charles Avery Dunning: I am very proud of that report.


Thomas Clement (Tommy) Douglas: I think the Minister of Finance has good reason to be proud of it as it is a comprehensive document. Resolution No. 2 of the report is as follows:
That legislation be enacted to provide for the establishment of a cooperative mortgage association for the raising of funds on mortgage bonds and the granting of loans to farmers on
mortgage security for approved agricultural productive or improvement purposes only; such legislation to embody the features hereinafter mentioned.
Without wearying the committee, I should like to quote recommendation No. 17, which reads:
That the Saskatchewan Cooperative Farm Mortgage Association establish as soon after its foundation as is feasible a bank with headquarters within the province to conduct a regular banking business both through branches of its own and, wherever possible, with and through the locals, and officers of the association.
As I read that I submit that the Minister of Finance has moved a long way from the position he then held.


Charles Avery Dunning: Oh, no.


Thomas Clement (Tommy) Douglas: I am reminded of the lines of Dorothy Parker, who said:
When I was young and bold and strong, Then right was right and wrong was wrong; With plume on high and flag unfurled I went forth to fight the world.
"Come out and fight, you dogs," said I,
And wept there was but once to die.
Now I am old, and good and bad Are woven in a crazy plaid.
I sit and say "The world is so And he is wise who lets it go.
A victory lost a victory won
The difference is so small, my son."
Thus inertia rides and riddles me,
The which is called philosophy.
An hon. gentleman opposite said that I should speak for myself, but I should like to give the stand of the Liberal party on this question. I have before me some of the campaign literature which was circulated in my constituency. For instance, I have the platform resolutions of the Saskatchewan Liberal party adopted at Moose Jaw, June 15-16, 1931. On page 5 I find the following:
Monetary and Banking Reform
The Liberal party, while recognizing that the monetary and banking system is a matter coming wholly within the jurisdiction of the federal parliament, pledges itself:
1.	To encourage and support the establishment of a central bank of rediscount under absolute government control, which central bank should issue all currency.
2.	To advocate the granting to provincial and municipal governments of the right, upon deposit of sound securities, to apply direct to such central bank for currency, the same to be issued to such governments at cost or a minimum rate of interest.
3.	To urge amendment of The Bank Act to provide for the imposition of a penalty on any bank charging more than the legal rate of interest stated in The Bank Act.
4.	To urge that the Canadian dollar be brought to a parity with the British pound sterling.
Of course those were resolutions, but they were circulated among the people of Saskatchewan, who were given the impression
Bank of Canada

that that was the policy of the Liberal party. I have before me another pamphlet which states at the back that the paragraphs therein have been extracted from the official report of the Prime Minister's (Mr. Mackenzie King) speech in the House of Commons on February 27, 1933. Under the heading, "Control of credit," I find the following:
The Liberal party believes that credit is a public matter, not of interest to bankers only, but of direct concern to the average citizen. It stands for the immediate establishment of a properly constituted national central bank, to perform the functions of rediscount, and the control of currency issue, considered in terms of public need. A central bank is necessary to determine the supply of currency in relation to the domestic, social and industrial requirements of the Canadian people; and also to deal with problems of international commerce and exchange.


William Lyon Mackenzie King: What is wrong with that?


Thomas Clement (Tommy) Douglas: There is nothing wrong with it. What we are asking for now is legislation to implement that.


Charles Avery Dunning: It is before the committee.


Thomas Clement (Tommy) Douglas: I have before me another one to which I do not think hon. members opposite will say, "hear, hear." This is headed, "Supplementary platform resolutions of the Saskatchewan Liberal party." They were adopted by the council of the party on January 9-11, 1934. This one states:
Resolved, that this council of the Liberal party of Saskatchewan strongly objects to the capital for the proposed central bank being privately subscribed, and believes that the interests of the people of Canada can best be served by a central bank the capital of which is fully owned and controlled by the government.
I direct the attention of the committee to the words "fully owned." This resolution was circulated throughout the province and the people were given the impression that it constituted the policy and the program of the Liberal party. Not only were these resolutions passed by the rank and file of the Liberal party, but the same idea was encouraged by members of the Liberal party who were acting in a more official capacity. I remember in 1934 when the hon. member for Vancouver-Burrard (Mr. McGeer) came into my riding and told the people that they were going to nationalize the Bank of Canada. Last year the Minister of National Defence (Mr. Mackenzie) came into our fair city, where we were very glad to greet him, and substantiated the remarks of the hon. member for Vancouver-Burrard.

That was true not only outside but inside the house. I am not going to read all the extracts that were cited this afternoon, but one phrase of the hon. member for Waterloo North (Mr. Euler), now Minister of Trade and Commerce, is particularly notable. As reported at page 454 of Hansard of 1935 he made this statement:
We are banding over all our own gold and all the gold of the chartered banks to this privately owned bank and the privilege of issuing currency, though not as much as they should have; moreover they have the control of credit in their hands. I for one do not think that power should remain in the hands of a privately owned bank.
Hon. Charles Stewart, then member for Edmonton West, as reported at page 463 of Hansard of the same year made a similar statement:
We will stand, as the hon. member for North Waterloo has indicated, for public ownership and control of this central bank.
Of course, it may be said that these were expressions of private opinion.. But the fact of the matter is that no attempt was made to tell the public that this was not what the party meant. These expressions were sent through the country broadcast, with the result that, although the Prime Minister may be perfectly correct in his differentiation between terms, there will be a great deal of disappointment in the rank and file of the Liberal party if the resolution as now drawn up is passed as the monetary policy of the government.
With reference to the Prime Minister himself I need hardly waste the time of the house -and I mean that in no derogatory sense- in quoting what most hon. members have already read. In the Vancouver Sun of September 30, 1935, appeared the following:
Mr. Mackenzie King told Vancouver in the Arena, Saturday night, what the Liberal party stands for in this election.
Then there are enumerated ten items. I do not think it is necessary for me to read them;
I will do so if the committee wishes; but number 3 deserves particular notice:
Removal of barriers that prevent credit from serving needs of the people, primarily by nationalizing the central bank.
Number 10 is also very interesting, though, like the hon. member for Rosthern (Mr. Tucker) I may suspect myself to be out of order:
Reduction or abolition of the sales tax on the necessaries of life.


An hon. MEMBER:: Order.

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Thomas Clement (Tommy) Douglas: May I point out that
throughout this session of the house the same impression has persisted? The hon. member for York South (Mr. Lawson) quoted this afternoon the hon. member for Rosthern.
I am not going to do that; I think he has been quoted enough; all I will say is that I admire his courage and I trust it will not fail him. But I remember that the hon. member for Saskatoon (Mr. Young) said, as reported at page 555 of Hansard of this year:
I think I can say, with equal accuracy, that the position of the Liberal party is well known as being in favour of a nationally owned and controlled bank.
Again the words "owned and controlled." He says:
I see before me my genial friend the Minister of National Defence (Mr. Mackenzie), and I am quite sure he will not disagree with that statement.
The hon. member for Fort William (Mr. Mclvor), speaking to the resolution of the hon. member for Rosetown-Biggar (Mr. Coldwell) asking for the nationalization of the central bank and the chartered banks, said:
If the mover would cut the tail of this resolution I would support it because, as the hon. member for Saskatoon (Mr. Young) has said, we campaigned on the issue of a national bank, nationally owned and controlled, and as far as 1 am concerned I am prepared to put into effect the platform on which we went to the country.
Has the hon. Minister of Finance any objection?


Charles Avery Dunning: I just remarked that it was out of order to quote from a previous debate in the same session.


Thomas Clement (Tommy) Douglas: I had a sneaking idea that I might be out of order; I watched the hon. member for York South (Mr. Lawson), a former cabinet minister, and I saw him quoting from Hansard, so I thought I must be right; then I saw the right hon. Prime Minister quoting from this year's Hansard, and I was sure I was right.


Charles Avery Dunning: It was on a point of order.


Thomas Clement (Tommy) Douglas: But since a point of order is raised I will not read these extracts, except to say that there are extracts from speeches .made by the hon. member for Portage la Prairie (Mr. Leader) and the hon. member for Kamloops (Mr. O'Neill), and it will not hurt for me to state the pages at which they are reported, namely 611 and 613 of this year's unrevised Hansard, and to mention that in their statements they stated that they were elected because they campaigned for a publicly owned and publicly controlled bank.
Let us see what others said about the legislation being brought down by the government. This is taken from the Financial Post of March 21, 1936:
With the announcement of the government's legislation to "nationalize" the Bank of Canada, all danger of important change in the existing set-up of this institution evaporates.
To all practical purposes, the government's legislation is eyewash and it is a safe forecast that opposition groups, who believe in outright nationalization, will easily identify it as such.
I have no wish to labour this point. I am sure it is perfectly apparent to the committee that the Liberal party have, in Hansard, in committee, and in the country at large, given the impression-at least certain members have-
An bon. MEMBER: Ah.


Thomas Clement (Tommy) Douglas: -that their party stands for and is prepared to initiate a policy of a publicly owned and publicly controlled Bank of Canada. What I want to know is why those members who admit that they were elected on that program have had nothing to say to-day. I have been wondering about that for some time. I hope the solution is not to be found in an article which appeared in the Vancouver Province, April 27, 1936, written by Mr. Charles Bishop. I cannot vouch for the authenticity of this, but Mr. Bishop is noted across Canada as a journalist.


William Lyon Mackenzie King: I assume my hon. friend knows that to read any articles from newspapers commenting on proceedings in the house is out of order. I draw his attention to that fact before I hear even what he has to say. If it is an article from the press that reflects upon the proceedings of this house or the words of any member of this house, it is out of order. I will give my hon. friehd the citation:
It is not in order to read articles in newspapers, letters or communications emanating from persons outside the house and referring to, or commenting on, or denying anything said by a member or expressing any opinion reflecting on proceedings within the house.


Thomas Clement (Tommy) Douglas: Mr. Chairman, I am
sure you must be grateful for the valuable assistance you have had to-day. This article is not concerning the house, but concerning a caucus of one of the parties of the house. If you rule it out of order I will not read it. I have no wish to violate the rules of the house.


An hon. MEMBER:: Well, then, do not
do it.


Thomas Clement (Tommy) Douglas: I will read it. and.if you wish to stop me I am quite willing to stop.
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The Canadian National and Bank of Canada bills will be contentious. Matters might be considerably facilitated if the government could select a day to bring down the bank bill when Messrs. McGeer and Tucker, the Liberal monetary reformers, happen to be absent from the house.


Some hon. MEMBERS:: Order.


Frederick George Sanderson: The hon. member is
out of order.


Thomas Clement (Tommy) Douglas: I think, however, Mr. Chairman, it is hardly necessary for me to read the quotation. The statement made by the hon. member for Rosthern to-night clarifies the issue considerably. The whole matter boils down to this, then, whether or not all that could be expected from a publicly owned and a publicly controlled bank can be secured through the legislation now being suggested by the Minister of Finance. In other words, if a central bank in which the majority of the shares are held by the government can give the same satisfaction as a publicly owned and publicly controlled central bank, then the people who supported the government on that basis ought to be satisfied. I submit that this will not be the case. The Minister of Finance presented this afternoon an excellent case for a public bank as opposed to a private bank. He pointed out very forcibly that the power of issuing currency and credit was too great to be left in the hands of a few private individuals, or he used words to that effect, and he will correct me if I am not quoting him exactly. Then I maintain that if this power is too great to be left in the hands of a group of private individuals it is also too great to be left in the hands of some individuals appointed by private interests and others appointed by the government.


Charles Avery Dunning: It is not so intended.


Thomas Clement (Tommy) Douglas: Well, let us see. I turn to Hansard for 1934, at page 826. The Minister of Finance of that day, Mr. Rhodes, said:
It cannot be too strongly emphasized that the exercise of these functions lies outside the power of any single commercial institution or group of commercial institutions. No purely profit-making institution operating in a competitive system can afford to place social interests before its own in regard to credit policy. This, I think, is obvious. Nor can the management of such a body be expected to regard the maintenance of the monetary standard, for example, as a duty prior to its obligations to the stockholders.
My contention is this: The suggestion of the Minister of Finance is that we should have a board of directors, seven of them private individuals now appointed by the shareholders and fouT with -two votes each to be appointed

by the government, or in other words a voting strength of eight to seven.


Charles Avery Dunning: No, ten to seven and ultimately six to three. I gave that once before.


Thomas Clement (Tommy) Douglas: It means that if a time should come when there is a difference between the policy of the government and the policy of those interested in private banks, let us say, a difficult situation may be created. That is quite possible, because I notice in Hansard of February 22, 1934, that Mr. Irvine asked what would happen if there should be a clash between bank policy and government policy. Mr. Rhodes answered:
Unquestionably the authority of the governor and the board of directors of the bank would prevail.
In other words it would seem to me that if enough of the directors appointed by the government could be persuaded to be of the same mind as those appointed by the shareholders there would be a situation in which the policy of the bank would not necessarily be in the interests of the people and the government of the Dominion of Canada. That is quite possible. I notice in the May, 1936, letter of the Royal Bank of Canada, this statement:
Thus, experience gives a measure of proof to the contention which we have repeatedly put forward in these letters, that the violence of the recent depression was due primarily to a deflationary monetary policy and that recovery has been greatly aided by a reversal of that policy.
In the same letter I find this statement:
The real initiative is with the central bank.
In other words with this board of directors lies very largely the welfare of the people of Canada, by reason of the fact that they control the flow of currency and credit which, to use a trite expression, is "the life-blood of the body politic." It seems to me that, if what the Minister of Finance said this afternoon is true-and I believe it is-that those powers are too great to be left in the hands of private individuals privately elected, it is not quite as great a menace, but almost as great, to leave part of that power in the hands of such individuals.


Charles Avery Dunning: We do not leave any
of the power. We leave the voice but no power.


Thomas Clement (Tommy) Douglas: We leave them a vote, and having shares naturally they possess part of the assets. What the Minister of Finance and the government are trying to do is to bring two contentious groups together, whose interests admittedly do not coincide, and they are trying to make them work in the

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same harness. The government are endeavouring to make the lion and the lamb lie down together, and it simply cannot be done. If it is done the probabilities are that the lamb will be inside the lion.


Charles Avery Dunning: Which is the lion?


Thomas Clement (Tommy) Douglas: The Minister of Finance, in all probability.


Charles Avery Dunning: And which is the Iamb?


Thomas Clement (Tommy) Douglas: I would suggest that the lamb has been shorn so frequently that it can be picked out quite easily.
I do not wish to prolong the debate, so I simply suggest to the government that across the Dominion of Canada groups within the Liberal party, groups without the Liberal party and people sympathetic to the government are expressing these views. There was a quotation read this morning from the Saskatchewan Liberal. A resolution was read that was passed by a young Liberal club in Saskatoon, all to the same effect. So I ask the government to consider this matter very seriously. To pass the legislation as it is now presented to this house in my opinion will constitute one of the greatest breaches of public faith since confederation. The people of Canada are looking to the government to implement the promises they believe were made, namely to set up a central bank publicly owned and publicly controlled.


Walter Adam Tucker: Mr. Chairman, I was asked by the hon. member sitting directly to my left how a central bank could affect the level of prices, and I told him I would explain later on. As far as may be humanly possible I like to be a man of my word, and I feel called upon to speak again in order to explain that point. In doing so I should like to quote from a very eminent banker, the Right Hon. Reginald McKenna, who has been heard of before in this house. I need not give his record; I will simply quote him:
Nothing in monetary practice is more certain than that contraction in the volume of money or even failure to secure an adequate increase tends both directly and indirectly to put a brake upon business of every kind and to produce the very troubles-unemployment, unremunerative commodity prices, unbalanced budgets and general depression-which have been apparent in almost every country in the world in the past four years. With expanding population and production we need some expansion in the supply of money or it will inevitably follow that consumption will not keep pace with production. There may in any circumstances be temporary maladjustment between production and consumption of individual commodities, but if the supply of money is adequate the price level of all commodities taken together will be kept approximately
stable, and general consumption will be maintained. It follows, then, that the policy of the Bank of England is of the utmost concern to everyone, for no one escapes the effects of general depression and not one of us fails to benefit from sustained prosperity.
That is the way, in the opinion of one of the most eminent bankers in the world, in which the Bank of England operates to raise the level of prices and, as I said a few moments ago, since the Bank of Canada has been set up it has not been operating to raise the level of prices. I think this is sufficiently important to bring to the attention of this house; the Bank of Canada has not been so operating, and it is high time that the government took control of it and made it operate . in that way.
Now I should like to quote the opinion of one of the leading statesmen of the British empire as to one of the causes of the present depression. I wish to read from the considered statement of the Right Hon. Neville Chamberlain to the World Economic Conference which met in London in June, 1933. I read this in order to show that the depression with which we are struggling to-day was deliberately brought about by the financiers of England in order to get back on the gold standard. Probably this quotation is familiar to every member of this house, but I should like to read it again because there may be people who read Hansard to whom it may not be familiar; I think this is something that everyone from one end of Canada to the other should know:
After the termination of the war, we in this country, taking, as it proved, too hopeful a view of world tendencies, set ourselves to restore the pre-war situation. We reestablished budgetary equilibrium and by a long and stern process of deflation we struggled to put sterling back to its pre-war gold parity: at the same time we made every effort to reestablish peaceful relations in Europe and to restore the international gold standard in the countries whose currencies had broken down. In the early part of 1925 Great Britain together with the British empire and certain other countries returned to the gold standard-
I wish hon. members to note that this was apparently decided on without consulting parliament. I mention that because it is time our people realized that these steps in the monetary field sometimes affect them a good deal more than things we spend weeks debating in parliament,


Charles Avery Dunning: Does my hon. friend say that Great Britain returned to gold without consulting parliament?


Walter Adam Tucker: I said that we returned to gold apparently without consulting parliament.


Charles Avery Dunning: Who is "we"?
Bank of Canada


Walter Adam Tucker: The people of Canada. I may be wrong in that.


Charles Avery Dunning: The hon. member is quite wrong.


Walter Adam Tucker: When I read that Great Britain returned, with the rest of the empire, to gold, my mind went back to try to discover when parliament had ever authorized that, and I could not think of any time when it was even debated.


Henry Herbert Stevens: It never was.


Walter Adam Tucker: That shows the importance of considering it now. Mr Chamberlain continues:
[DOT]-and although in fact this step entailed further heavy sacrifices for our people in the shape of prolonged unemployment and depression for our industries-
In the face of that strong statement of the Right Hon. Neville Chamberlain that the attempt to deflate, to return to gold, caused further unemployment and further depression to the people of England, can anyone say that this is not important? I ask hon. members to consider what significance that has for us in charting our course for the next four or five years. The question we have to decide is: Are we going to try to do what England did in 1925, try to deflate even more, or are we going to try to introduce an era of easy money and get back to a measure of prosperity?
I wish to read one or two further extracts from this statement to the World Economic Conference which, I think, merit our attention:
The inevitable result of the economic conditions that actually prevailed was to bring about a progressive appreciation of the value of gold, or in other words, a fall in the price of commodities. In certain industrial countries, such as Great Britain and Germany, unemployment became a serious problem.
I ask hon. members who are interested in the primary industries of Western Canada to consider this:
Even more drastic was the effect on countries engaged in primary production, since the fall in price of foodstuffs and raw materials far outstripped the fall in the price of manufactured articles. The situation in the primary producing countries was soon reflected in London as a result of our world-wide trading interests.
The return of England to the gold standard affected the grain farmer in western Canada; it affected the sheep grower in Austrlia, the man raising cattle in western Canada; it affected everyone. They did not know what had happened, but the bankers of England had decided to go back to gold, and every producer of primary products the world over suffered.

There is the statement to the British section of the World Economic Conference. It proceeds later:
It is essential to bring about recovery in the world level of wholesale commodity prices sufficient to yield an economic return to the producers of primary commodities and to restore equilibrium between costs and prices of production generally. It is clear that the present lack of equilibrium between prices and costs can only be remedied either by a further drastic reduction of wages and other costs and by widespread bankruptcies, or by a sufficient recovery in the level of wholesale prices.
That is something for members of parliament to decide: Are they in favour of restoration of the level of prices of say 1928, or are they in favour of further pressing down the primary producers of this country, further bankruptcies, further reductions in wages? It has been suggested to this house already that some wages are too high. Members of parliament have to face that issue. I will not take time to read from the May letter of the Royal Bank of Canada, but in that letter it is stated in so many words that Canada has to face that issue. Is it going in for further deflation or for a period of reflation and easy money and cheap, plentiful credit which will restore industry to the position that it held in 1920-29?
This statement by the British Chancellor continues:
In the opinion of the United Kingdom delefation an attempt to attain equilibrium by urther large reductions of cost would be attended by intolerable suffering, and holds out no hope of success.


William Lyon Mackenzie King: Hear, hear.


Walter Adam Tucker: No doubt it would be possible to restore equilibrium between prices and costs by reducing costs if only prices would remain steady. Under present conditions that does not happen but on the contrary an all round reduction in costs produces further deflationary effects on prices, so that costs and prices chase each other downwards without ever getting to equilibrium. Moreover, there is one all-important entity in each country which finds it peculiarly difficult to reduce its own costs-
I direct the attention of the Minister of Finance particularly to this:
-I mean the central government. Every finance minister in the world knows only too well how tremendously resistant public expenditure is to reduction, if only for the reason that so many of its obligations are fixed in terms of money. A policy of reducing costs and prices has the inevitable effect of very greatly reducing the national income with the consequence that in order to balance its accounts the government must take by taxation a larger and larger proportion of the income of the country. Sooner or later, usually sooner, this process is found to be intolerable, and countries bent on securing heavy reductions in costs and prices find that they

Bank of Canada
have merely secured an unbalanced budget for which no practical cure can be found. In the view of the British delegation, therefore, a solution of our present difficulties must be found by means of a recovery in the wholesale price level.
I could go on and quote the opinions of people whose views must carry weight, but I do not intend to take the time to do that. I just wish to indicate that since the Bank of Canada was established we have not followed a policy of easy money; we have followed not a policy of reflation, as they call it in the United States, but rather the opposite.
I wish to give some figures for the consideration of the committee in reference to this. In 1929. in round figures, there was $301.000 000 of legal tender in Canada; in 1936 there was $165,000,000 of legal tender, a reduction of almost fifty per cent. There was also a decrease in bank notes. In 1929. in round figures, there was $142,000,000 worth of bank notes; in 1936, $123,000,000: a reduction of $19 000.000. More important than that, there was a reduction in the amount of credit given to industry, corporations and private individuals with which to carry on business. I am sure hon. members will be amazed, as I was, if they have not looked into this question, to learn that from 1929 to the present time the banks have contracted their loans to corporations and private individuals by the amount of $756,000,000. a contraction of loans to the business world in Canada of 45J per cent from 1929 to 1936. Is it any wonder that we have a depression with such a contraction of the actual money with which people do business? Mr. Jackson Dodds, speaking on November 14. 1935. said:
From a low of $940,000,000 in January, 1926. these current loans steadily rose to $1.588 000 000. in October. 1929. That is an increase of $648,000,000 in forty-five months, or $14.400 000 per month.
The decline from that high point has been much more gradual than the rise, for loans did not recede to $940,000,000 until July of this year. 1935. some sixty-nine months later. Although bank loans are necessarily made for short terms only, it is clear that the banks permitted borrowers to repay these excess loans slowly during a period of five and three-quarter years over 50 per cent longer than their expansion.
What I am trying to indicate is that by virtue of the attempt to bring England back on to gold in 1925. the price level started to topple; as a result banks all over the world began to draw in credit, and as they drew it in, prices toppled still further. It is high time that we took charge of the banking system which under private control has had such disastrous effects upon the whole civilized world, including Canada.
I wish to speak for a moment or so concerning the effect of the curtailment of purchasing power upon prices, and to bear out my observations I shall refer to an extract which contains the figures one would expect, having in mind the contraction in purchasing power. At page 462 of the Labour Gazette of Canada for May, 1936, I find this:
In wholesale prices the index number calculated by the dominion bureau of statistics and based upon prices in 1926 as 190, again showed little change week by week during April as compared with March. This index number was 72-1 for the week ended May 1 as compared with 72-3 the preceding week, and 72-2 for the week ended March 27.
This is the point to which I direct particular attention of hon. members:
On a monthly basis the figures for March, the latest available, are 72-4 as compared with 72-5 for April 1935; 71-3 for April 1934; 63-5 for February 1933, the lowest point in recent years.
It is to be noted that there is a rise from 1933 when the figure stood at 63-5 to 71-3 in April. 1934 and 72-5 in April, 1935, while it stood at 72-4 in March, 1936. In other words, in the last year there has been no gain in the price level. In 1930 it stood at 91-2; it was 98-14 in April of 1922; it was 164-3 in May. 1920. and 64 in April, 1914. These are the figures indicating the price levels as given by the bureau of statistics. When the circulation was increased by the $53,000,000 and the $35.000 000. there was a rise of ten points. During the last year that rise has been absent. On the contrary we have had a slight recession.
should like now to refer to some prices with which some hon. members will be most familiar. Taking the 1926 price of vegetable products as 100 we find that in December, 1932, the figure stood at 50-1; December, 1933, 6J-4; December. 1934, 66-7; December, 1935, 67, or an increase of three-tenths of one point. At that rate we are getting back pretty slowly to the 100 mark. Then, referring to animals and animal products, again taking the 1926 figure as 100. we find the figure for December, 1932, as 57-4; December, 1933, 63-7; December, 1934, 66-2, and December, 1935, 72-9. In the last year it would seem that in connection with animal products there has been a rise of slightly over six points, but we have still eighteen points to go to get back to the level of 1926.
To sum up. I submit that by control of the Bank of Canada, by the use of monetary action and by putting out the requisite amount of money we can affect the level of prices in Canada. The time has long since arrived when the government should take control of the Bank of Canada and without in any way dislocating our economic set-up, by
Bank of Canada

careful monetary action restore the level of wholesale prices in accordance with the recommendations of the Imperial Economic Conference at Ottawa, and the British section of the World Economic Conference at London, and in accordance with the judgments of leading bankers who have made a study of the question.
It is time we broke away from the policy that the only way to create money is to save it. If every hon. member began saving and if we were to cut down consumption to the level adopted by Mr. Ghandi of India, who lives on a little rice and goat's milk and dresses in a loin cloth, our economic set-up would not last very long. It would tumble within six months.


Charles Avery Dunning: We would all be raising goats.


Walter Adam Tucker: We would not last long in our winter weather, anyway. I submit that our automobile and furniture factories would be closed. All business to the extent it prevails in Canada would be closed up, and yet the basis adopted by the orthodox economist is that we must save and thereby retain the old virtues of thrift and so on. Those old virtues were all right in days when the country was being opened up and when there was a real scarcity of goods, but the situation to-day is different with a plentiful supply of goods. Saving is not as a result so socially beneficial. I submit that we must use the central bank so that the level of prices may be raised, and so that people engaged in industry may have enough money to buy what they have produced.
I have not touched upon another point I suggested earlier in the session. In closing, may I indicate that since coming to this house and further studying monetary questions, with all the intelligence I can bring to bear, I am still of the opinion that in Canada we should support a government bank doing the governmental banking, and that we should set up a branch of the central bank to finance our governments. We should thereupon through it refinance our governmental debt. We could charge interest, if we wished, but such interest would come back to the people in profits of the government bank, thereby cutting down the tremendous burden our people shoulder at this time when they pay interest on their own credit. In this way we would divorce public finance from private finance. Private bankers would continue to do business with business men, but the rate of interest to private business would be cut down, because governments would not be competing

with private business for credit from private banks. I submit that if the private banks can create credit, then our own bank, through a separate department, could create and loan the necessary credit needed to finance our government. In this way we could equate consumption and production and set the wheels of industry turning. As a people we have the greatest chance of any country to produce wealth. We have a people as industrious and skilled as any in the world. We have unparalleled natural resources; we have the factories necessary to produce the wealth, and having those opportunities I submit that it is up to us to use our ability as a people to produce the good things of life and make full use of them by distributing these good things among the people who need them. In other words, to come back to the last word in the Liberal fourteen points, distribution has become more important than production, and it is only just and proper that the Liberal party should bring this measure into parliament. Once we get control of the central bank I hope that it will be only a beginning, and that we shall go forward in the days to come striking off the shackles of economic insecurity from the people of Canada and restoring to them that security and happiness and economic wellbeing to which they as a people are entitled.


James Samuel Taylor: Mr. Chairman, I desire to speak to this resolution but it is now almost eleven o'clock.


Some hon. MEMBERS:: Go on.


James Samuel Taylor: This resolution seeks to increase the bank's capital stock, and in such case to purchase the bank's shares in order to ensure a majority holding by the government; also to increase the number of directors and to ensure voting control by the government through its own elected directors. In other words, the resolution seeks to provide the government with the cheap and nasty methods of obtaining control of a successful business which are universally accepted as the peak of ingenious attainment of this object by big business interests. Because big business often uses the public and its employees as suckers is no reason why the government should do the same thing. These are strong words, and I will .admit that I have cast my objection suddenly into the deep end of this matter when I might have approached it with a little more care and gradualness. But I believe the government will realize that I

Housing Act
do this not with malice aforethought but to point the moral and adorn the tale more effectively.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Tuesday, June 2, 1936