1936-06-11

[Stage Direction]
Fourth report of the standing committee on miscellaneous private bills-Mr. McPhee.
Fourth and final report of the special committee on elections and franchise acts- Mr. Bothwell.

[Stage Direction]
Mr. W. G. WEIR (Macdonald) presented the third report of the standing committee on agriculture and colonization, and moved that the report be concurred in.
Right Hon. R. B. BENNETT (Leader of the Opposition):: Mr. Speaker, in two of the reports that have been presented reference

Combines Investigation Act
is made to the printing of certain documents. My memory is that some years ago the house provided for a special committee to consider what documents should be printed in the journals of the house, and as these recommendations contravene the provisions of that standing rule I suggest that some little consideration be given the matter before action is taken. At times every committee has the idea that it is highly desirable that the result of its deliberations should be printed, though I am bound to say that on careful consideration it does not always follow that an independent body reviewing those results would hold the same opinion. It was because of the vast expenditure that occurred in times past that the provision to which I refer was made. Under the circumstances I think it might be well that all these matters should stand before concurrence is asked, so that they may appear upon the order paper to-morrow and it may be clear just what is involved.
Motion stands.



WHEAT AND OTHER GRAINS

[Stage Direction]
Hon. W. D. EULER (Minister of Trade and Commerce) presented the second, final and unanimous report of the special committee appointed to investigate and report upon the marketing of wheat and other grains and upon all matters pertaining thereto, and moved that the report be concurred in.
Richard Bedford Bennett: The report was not read, and I think the motion should stand.
Hon. H. H. STEVENS, (Kootenay East): Mr. Speaker, the report was not read. Personally I have not the faintest idea as to what is in it, and it seems to me at least we should have the ordinary rule carried out and the report read before we are asked to concur in it.


Mr. EULER:: I quite appreciate the justice of the remarks of my hon. friends. In explanation I might say that the report was unanimous; there was no dissent by any member of the committee. I took it for granted that the report would be read when it was presented to the house, but some hon. members asked that it be taken as read. In the circumstances I am quite prepared to let the motion stand and move concurrence tomorrow.
Motion stands.



CRIMINAL CODE AMENDMENT

[Stage Direction]
Hon. ERNEST LAPOINTE (Minister of Justice) moved for leave to introduce Bill No. 96, to amend the criminal code.
He said: The purpose of this bill is to amend twenty-two sections of the criminal code. Ten of the amendments relate to crimes and offences in a general way, and the other twelve relate to procedure.
Motion agreed to and bill read the first time.

[Stage Direction]
Right Hon. W. L. MACKENZIE KING (Prime Minister) moved for leave to introduce bill No. 97, to amend the Combines Investigation Act.
He said: When the Combines Investigation Act was amended at the last session of parliament it was provided that not only evidence given orally but also any documents produced in a preliminary investigation might not be used in subsequent criminal proceedings. The purpose of the proposed amendment is to restore the act in this particular to what it was prior to the amendment of last year, so that documents which are produced in the course of an investigation will not be exempted from use in criminal proceedings.
There is one other minor amendment, the substitution of the word "or" for "and" in reference to the penalty. In the act as it now stands the clause reads "fine and imprisonment," which is clearly an error.
Motion agreed to and bill read the first time.

[Stage Direction]
(Questions answered orally are indicated by an asterisk).
three RIVERS, QTTE., BRIDGE ACROSS ST. LAWRENCE

Mr. CAMERON (Cape Breton-North Victoria) :: 1.	Is there a bait freezer or cold storage plant established at Petit de Grat, Nova Scotia?
Questions

2.	If so, did the government assist in building such bait freezer or cold storage plant, and at what date?
3.	Did the fishermen contribute towards the cost of erecting such freezer, either in cash or materials or labour?
i.	Is the plant now in operation?
5.	If so. is its operation satisfactory and economical ?
6.	What is the capacity and cost of operation for a year?


Mr. MICHAUD:: 1.	Yes.
2.	Yes, in 1934-35 under the provisions of the fishermen's bait freezer regulations.
3.	Yes, in cash.
4.	Yes.
5.	The plant is owned and operated by the Richmond Shorefish, Limited, a cooperative fishermen's organization. No complaint has been made to the department that it is not operating satisfactorily.
6.	Its storage capacity is twenty tons. The yearly cost of operation is not in the department.
fishermen's loan act


Mr. REID:: 1.	How many fishermen have obtained loans under the Fishermen's Loan Act since the act went into effect and up to the present time?
2.	What is the total amount loaned so far?
3.	What is the average individual loan?
4.	What amounts have been loaned in the various provinces respectively?


Mr. DUNNING:: 1.	None.
2,	3 and 4. Answered by 1.


ERNESTTOWN, ONT., TAX COLLECTOR
Mr. WERMENLINGER:: 1.	Was Mr. Stuart Simmons (referred to in question on the order paper under date of June 5, 1036) for some time tax collector for the township of Ernesttown?
2.	If so, was there a shortage in Mr. Simmons' returns of the taxes_ collected by him, and was that shortage admitted both by Mr. Simmons and his bondsmen?
3.	What was the amount of that shortage?


Mr. DUNNING:: 1.	No information.
2.	No information.
3.	No information.


QUESTION PASSED AS ORDER FOR RETURN
Mr. BOULANGER:: How much money has the dominion government expended for seed grain, by provinces, during the past five years?


TORONTO POST OFFICE
[Stage Direction]
On the orders of the day:
Mr. T. L. CHURCH (Broadview):: I should like to ask a question of the Postmaster General (Mr. Elliott). I have received complaints in connection with the Toronto post office, some of them from men who formerly worked full time there-married men, some of them soldiers, some with families, getting only $5, $6, $8 and $10 a week. Would the hon. gentleman please look into these complaints? I have sent him a letter and I will send him some more.


Hon. J. C. ELLIOTT (Postmaster General) :: My hon. friend was good enough to intimate to me that he intended to ask this question. The number of men employed on part time work, to whom he refers, depends of course upon the volume of mail at the peak load. That is usually about five o'clock in the afternoon, and it lasts for varying periods, according to the volume each day, from perhaps two to three hours. They are paid fortyffive cents an hour for whatever time they work. They are appointed by the civil service commission, and returned soldiers have the preference.


BANK OF CANADA
[Stage Direction]
The house resumed from Wednesday, June 10, consideration in committee of Bill No. 82, to amend the Bank of Canada Act-Mr. Dunning-Mr. Sanderson in the chair.
The CHAIRMAN:: We are on clause 8.
Sections 8 and 9 agreed to.
On section 10-Capital.


Richard Bedford Bennett: What knowledge has the government or the minister as to the ability of the bank to employ advantageously this additional capital? Obviously it is not asked for by the bank; it is unnecessary for it to have the additional capital to carry on its business. The general view was that the government proposed, in the light of the statements made by the Prime Minister when in opposition, and by others, to acquire the outstanding capital stock of the bank, $5,000,000. This creation of an additional $5,100,000 doubles the capital of the bank. There has been no suggestion that there was any shortage, of the capital necessary to enable the bank to carry on its business.
I should like to ask the minister on what basis he found it desirable to increase the

Bank of Canada
capital of this institution in order to attain the ends he has in view. I cannot but think that the general conception of what was meant by the statements made was that the bank's capital of 85,000,000 was to be taken over by the crown. Of course many people believed that the bank was to be a publicly operated institution, run as a department of government, and would be available for the discount of bills and for public credit for all those who desired to do business with it. That is the conception which many people formed, in opposition to the views expressed by ourselves at that time. The important thing is, on what basis does the government suggest that it was desirable to have another 85,100,000 capital for this institution?


Mr. DUNNING:: The answer is very
simple. To justify control by the government majority, and the appointment by the government of the majority of the board of directors, it was deemed desirable that a majority of the capital stock should be acquired by the government.


Richard Bedford Bennett: The minister will at once admit that it is competent for the bill to provide that out of the seven directors to be elected four shall be named by the government, and that the shareholders elect only three. There was never any difficulty about that. For instance it is provided at the moment that the Deputy Minister of Finance shall sit on the board but not vote; the governor is not a director, neither is the deputy governor, but he becomes a member of the board. There never has been any difficulty with respect to this parliament by appropriate action providing that the governor in council may appoint four directors out of the seven. It was not necessary to increase the capital stock to accomplish that end. The power of parliament to take that action is unquestioned, and is best evidenced by the fact that the governor and deputy governor are members of the board but not directors of the bank. All that is necessary is to provide that four persons be named by the government to be directors of the institution. To double the capital stock and add $100,000 more to accomplish that strikes me as a very strange anomaly, because it is provided that these same people, holding 85,100,000 worth of stock, cannot vote at shareholders' meetings for the election of directors. The capital stock is now $10,100,000 and only $5,000,000 can vote to elect directors. The other $5,100,000 must remain silent and not vote, because the government proposes to appoint four directors with eight votes. If that is not putting the cart before the horse, I cannot understand the ordinary significance
of a transaction of this kind. Here it is provided that you double the capital of the bank and then add another $100,000, and the minister says that doing that will give the government control of the directors. The government does not propose to acquire the outstanding capital stock, as they have a right to do, in the same way as they would acquire a piece of land or any other commodity they might wish to possess-either by appropriation proceedings, by arbitrations or by reference to the exchequer court to fix the value and take them over. No; to accomplish the desired end the government has said: "We are going to increase the capital stock by doubling it and adding $100,000 more to it, and then we will not give them a vote." These four directors need not be men who possess the qualifications of holders of class "A" shares; they are merely named without any powers, and the government has no power to participate in the election of the three that are to be elected. I must confess I do not understand it.


Charles Avery Dunning: There is a consequential amendment which I shall ask the Prime Minister to move. My right hon. friend has suggested the word "registered" should precede the word "holder." That becomes necessary in this section.


Mr. MACKENZIE KING:: I move:
That section 10 of the bill be amended by inserting the word "registered" before the word "holder" at line 10 on page 5 of the bill.


[Stage Direction]
Amendment agreed to.
Richard Bedford Bennett: There is another question I should like to ask, since I succeeded in getting no answer to the last one. What effect will this have upon the dividends on class "A" shares? The section states:
The class "B" shares issued to the minister hereunder shall carry with them the same rights and obligations as class "A" shares of the capital of the bank, except that the holder thereof shall not be entitled to vote at the election of directors.
That is the class of share that is to be issued to the crown. It has no voting power, but it has all the rights and other obligations of shareholders. What they are I should like to know. The next question is: What effect is it contemplated those will have upon the dividend policy of the institution with respect to class "A" shares, and will "A" shares and "B" shares both be entitled to receive, as I assume they will, the four and a half per cent dividend? Will the use of this additional capital, the $5,100,000, in any sense, in view of the knowledge the government must possess in the matter, affect the dividend payments on the "A" shares?
Bank of Canada


Charles Avery Dunning: With respect to dividends, my right hon. friend is correct when he says that the "B" shares and "A" shares will rank alike. As far as my knowledge and information goes, the expectation of the "A" shares in regard to dividend will not be impaired by what is done here.


Mr. HEAPS:: How will this capital be
raised?


Charles Avery Dunning: It will be part of our
general financial operations to raise money and to invest it in this manner.


Abraham Albert Heaps: Will the government borrow the money to buy these shares?


Charles Avery Dunning: Well, when a condition
of deficit exists the government must borrow money for any expenditures in excess of its revenues, and of course this is an expenditure. I would point out to my hon. friend, however, that in connection with this matter, viewed purely as an investment, the rate of interest payable upon the shares is a little greater than the present cost of money to the federal government.


Abraham Albert Heaps: Would it not be as well if
the government made a bookkeeping entry? Would it not be the same thing?


Charles Avery Dunning: Probably my hon. friend is a more expert bookkeeper than I am.


Abraham Albert Heaps: I am not a bookkeeper at
all.


Charles Avery Dunning: I could not do it just
in that way. That is the only answer I can make.


Abraham Albert Heaps: Is it not a fact that in this transaction the government are going to obtain majority control of the shares of the Bank of Canada? It would be interesting to know how this money by which they are going to obtain majority control will be raised. The government has a right to create money, and I think in this particular matter the logical procedure on the part of the government would be to buy out the existing shareholders. Evidently they have not thought fit to do that. They want a bank partly privately and partly publicly owned. All I am trying to ascertain is by what method the government will raise the money to obtain control of the Bank of Canada, which at present they do not possess.


Charles Avery Dunning: There is in Canada what is known as the consolidated revenue fund, which, by law, represents all the money going into the treasury, from whatever source. In this instance we have an investment which

will yield a certain return. The provision at page 5 of the bill indicates that the minister may pay for the shares acquired out of the consolidated revenue fund. That increases the dominion's investment account by that amount of money. It is not merely a bookkeeping entry; it is an investment, and one which will yield more than or at least as much as the money costs. I cannot tell my hon. friend precisely what will be the cost of any particular sum of money out of the consolidated revenue fund. I cannot do that, because the borrowing operations of the government cover a great variety of requirements at a great variety of periods. At the present time, for instance, there are outstanding something like $120,000,000 of three months treasury bills, in respect of which the effective rate is below one per cent per annum, but there are also outstanding issues of securities with varying terms. If my hon. friend were to ask me what rate I would be paying and what terms I would be offering two or three months from now I could not tell him; I would have to endeavour to make the best possible arrangement under the financial conditions then prevailing, which might be more favourable to short term and less favourable to long term, or the reverse of that. Matters of this kind require continuous close attention, study and determination in the light of circumstances prevailing at the time money is secured to replenish the consolidated revenue fund.


Abraham Albert Heaps: Then, is it the intention of the minister to borrow money to obtain this $5,100,000 worth of shares in the Bank of Canada?


Charles Avery Dunning: At the moment I can answer my hon. friend in this way: We do not require to.


Richard Bedford Bennett: Mr. Chairman, no answer such as that can be regarded as satisfactory.


Charles Avery Dunning: I am sorry if it cannot. I have answered it to the best of my knowledge. My right hon. friend might probably do better; he may try.


Richard Bedford Bennett: I am bound to say the irritability of the minister does not enhance his reputation or assist in the passage of his bill.


Charles Avery Dunning: No?


Richard Bedford Bennett: We have a right to ask certain questions with respect to the matter.


Charles Avery Dunning: But you are not a schoolmaster.


Richard Bedford Bennett: No, probably not. If the Minister of Finance thinks that is a clever observation-

Bank oj Canada


Charles Avery Dunning: I do not think it is clever.


Richard Bedford Bennett: -he is quite welcome to receive any benefit he wishes to receive from it. I can only say to him that his answer is not adequate; that is all. I propose to ask him further questions upon it.


Charles Avery Dunning: That is quite all right.


Richard Bedford Bennett: As I have a right to do.


Charles Avery Dunning: Absolutely.


Richard Bedford Bennett: His irritability will not assist him in passing his bill, and neither will his cheap observations of the character to wrhich I have just Listened.


Charles Avery Dunning: Nor your schoolmaster tactics.


Richard Bedford Bennett: I am addressing the Chair. There are no such tactics as those assumed by the minister. I am desirous of obtaining information, and that information I propose to get. Here is a bank created by the parliament of Canada, with a capital of $5,000,000. It pays 4J per cent on that investment. Its capital is being doubled now, without any request from the bank or suggestion that it found itself short of capital, and the minister said that the reason for it was the desire to obtain control for the government of the institution. Instead of proceeding to expropriate the shares, as he has the right to do, and as normally would be done, by taking the proper steps to expropriate $5,000,000 of shares, and have their value fixed by the exchequer court or by arbitration, the minister increased the capital of the bank by $5,100,000, making the total capital $10,100,000, and the statute says that the money necessary to pay for them shall be paid out of corn-solidated revenue. It does not leave it a question of option, but says they "shall" be paid for out of the consolidated revenue fund. We know from the statement made by the finance minister on the budget that this country has made no provision for that payment. Therefore the money must be borrowed, and the very proper question was asked, whether or not it would be borrowed. To that question the minister replied that if we had to pay it now we would not have to borrow, which means that there is $5,000,000 in the treasury that might be used for that purpose. That was no answer to the question. The question was, will this money have to be borrowed? The minister clothed [DOT]his answer in many words, as to its being an investment. It is an investment in the bank, and according to the statement made by the minister on the budget-and certainly the revenues of the country so far
as customs are concerned have not increased beyond his expectations-the money will have to be borrowed.
The point I was endeavouring to make was why we should proceed by this method to risk our ability to pay what we promised to pay with respect to the "A" class of shares, by doubling the capital and borrowing the money, and running the risk of leaving in the hands of the bank, not in the hands of the government, an investment of $10,000,000 upon which 4J per cent interest is to be paid. What we really have done by this bill is to provide for borrowing $5,100,000 of money, and banding it over to the bank to invest in such a way as we hope will bring us a net return of 4J per cent. That is the situation as far as I can see it. That may be the tactics of a schoolmaster, as the minister says, but I am endeavouring to be enlightened, and I would like to have some further information on that point. I never have been able since I saw the bill to understand why any government found it necessary to double the capital of the bank for the purpose of being able to name four directors with two votes each. The only thing that need be done is to expropriate the $5,000,000 of shares outstanding. That was even discussed in this chamber on one occasion; the now Minister of National Defence (Mr. Mackenzie) made some references to that method when discussing the report that came from the banking committee.


Mr. MACKENZIE (Vancouver):: I moved an amendment in committee .to that effect.


Richard Bedford Bennett: as we must if the budget expectations are realized, the money for the purpose of enabling the bank to have an additional $5,000,000 to invest-because that additional amount is not required for the purposes of the bank-and, on the other hand, the necessity of maintaining the payment of a dividend of per cent on the entire $10,000,000, when if additional money were required by the bank for temporary purposes it could be borrowed for less than one per cent, according to the statement just made by the minister.


Charles Avery Dunning: Mr. Chairman, if I am
clear as to the question-and I am not precisely clear-it is why the government did not proceed by way of expropriation of the existing shares; and that question was related to the other one, how would the money be raised? If the government had proceeded by way of expropriation of the existing shares, obviously money would be required for that purpose, and so I think that disposes of the question between those two methods.
With respect to the other point, the government believed that ownership normally in this country is represented by authority and control, and that it would be fairer to everybody concerned for the government to be an investor along with the other investors if it proposed to take control of the institution. That is to say, the government takes control of the institution not by force majeure but by an actual investment by the country in excess of the investment of private investors, thus justifying the government in assuming complete control of the institution by majority control and ownership.


Mr. QUELCH:: This bill will give the
government greater control over the bank's policy, and therefore when we vote on this bill we will be voting on the question whether we are in favour of the government being given greater control. In view of that fact, could the minister tell us briefly what the policy of the government will be in the matter, whether it will differ materially from the present policy, and if so in what way?


Charles Avery Dunning: I think I attempted, Mr. Chairman, in the address I made on the resolution preceding the bill to outline the factors which enter into considerations such as those now expressed by my hon. friend. I can tell him quite frankly that in justice to the great interests of the people which must be served in this matter I should be doing them a disservice if to-day I indicated to this House of Commons what the present policy of the bank is with respect to its day to day transactions. I should be doing those great interests a disservice if I indicated what

the policy of the government would be in connection with the major policies of the bank. If, for instance, just as an illustration, I indicated that it was the policy of the government, and therefore the policy of the bank, steadily to expand the volume of currency and credit, such statement by me from this place would be taken by everyone as an invitation to speculate in commodities and stocks because there would be the maximum possible assurance of a rising price level, depending upon the extent to which that policy was followed. There must be from day to day, from week to week and from month to month, by the experts in the employ of the bank, by the executive board of the bank, and particularly by the governor and deputy governor, and communicated to the Minister of Finance from time to time in order that he may be informed, continuous study of all the factors that have to do with the economics of this country in so far as they can be affected by monetary policy. I am not one of those who believe that monetary policy is the only factor in the economic welfare of the people. Many tend to exaggerate its importance, but at the same time I do not want to minimize its importance. When we have, as we have in Canada to-day, a managed currency, managed by the Bank of Canada, which obviously becomes a definite instrument of government policy, that materially increases the responsibility with regard to a declaration of policy. 1 can say in broad terms that I should regard a policy of deflation as utterly out of the question under the conditions which prevail to-day, but as to the extent to which any policy opposed to deflation may be applied, it must be a question of continuous study of all the factors entering into the problem on the part of those who are trained to assess their value and their effect, along with other factors, upon the economic life of the nation. I do not think I should be asked to go further -than that in this matter.


Mr. COLDWELL:: I was going to raise another point. Do I understand that any other powers than are to be found in clause 13 of this bill amending the principal .act are conferred anywhere in this bill? If so-


Charles Avery Dunning: What section?


Major James William Coldwell: Section 13.


Charles Avery Dunning: We are not there yet.


Major James William Coldwell: No, but that point was raised. The question of power and policy was brought up and I could find nothing in the act other than this section dealing with the powers or policy of the bank. Consequently-

Bank of Canada


Charles Avery Dunning: Has my hon. friend read, not the amending bill, but the act itself?


Major James William Coldwell: Yes, I have; but we are discussing new policies. Is there anything giving the bank a wider policy now

anything wider than is to be found in the old act?


Charles Avery Dunning: Not with regard to the matters about which the hon. gentleman was asking.


Richard Bedford Bennett: In view of the answer made by the minister, I have only to point out that it was not necessary even to expropriate the $5,000,000, because $3,000,000 would have secured control of the bank- sixty per cent. The statement made by the minister that we in this country have a conception of ownership such as he has indicated does not apply to myself. But again, I may be entirely wrong. If anyone should tell me that the right of ownership to a share of stock in a joint stock company was such as the minister has suggested, then he would have to overrule several decisions of the courts of this country. Minorities have rights in joint stock companies, and no majority holder of shares, whoever he may be, even the crown itself, can exercise his rights in such a way as to impair the rights of the minority. The decisions of the courts are clear on that point, so long as they act within the sphere of their rights. All that was necessary was to expropriate fifty-one per cent, or, as I suggest, sixty per cent of the $5,000,000 of shares, representing $3,000,000, and a single section would have given the government the right to acquire by expropriation or negotiation, at a, price that might be agreed upon, the sixty per cent of shares in the concern. And having acquired them they would then have the power to elect the four of the directors. But, as brutally put by the minister, the ownership of an interest in a joint stock company being of the type that he has indicated, I think there is some question about it. But once more, that may be merely the schoolmaster's view and not that of one who has knowledge of the subject.


Charles Avery Dunning: It is the lawyer talking now.


Richard Bedford Bennett: No, it is one who is trying to lecture the minister and who is performing the functions of the schoolmaster -perhaps that is the minister's belief. I have not been able however, nor am I yet able, notwithstanding the explanation given, to understand why the doubling of the shares of this bank was done in that way, when we know that $5,000,000 is not necessary for any purpose of the bank; and the minister has declared the reason why it was done.
What I have never been able to understand, since the minister made his statement when he introduced the bill, is why the acquisition of sixty per cent of the shares of the bank would not have served the purpose. To assert the holders of shares in the bank had a misconception or a misunderstanding of their position is entirely beside the question. They all knew that they had made an investment that would give a four and a half per cent return, and they knew that the bank was under the control of the government, indirectly and not directly. What is changed is the method or form by which that control is being effected; and to increase these shares by borrowing an additional $5,100,000 to put in the hands of the bank to endeavour to secure the whole $10,000,000 at four and a half per cent, when money can be borrowed at as low as less than one per cent-that is, short term money, treasury bills-is something that I have never been able to understand. The minister's statement is that this is the policy of the government, and that has always been a complete answer, to say that it is what the government wishes to do.


Mr. GRAY:: They were forewarned.


Richard Bedford Bennett: Forewarned?


Ross Wilfred Gray: Yes, by the present government when in opposition.


Richard Bedford Bennett: The hon. gentleman has
now strengthened the argument I was making. The existing shareholders were forewarned that their shares might be taken away by expropriation. But that is not what the government did, and that is exactly the point. As the Minister of National Defence has said, he moved an amendment that indicated what the opposition's views were, and as the hon. member (Mr. Gray) now says, they were forewarned that their shares might be expropriated. That made a good case for expropriation and destroys the case now made for borrowing an additional $5,000,000 to hand to the bank for the purpose of investment, when it is admitted that the bank does not require additional capital to carry on its functions.


[Stage Direction]
Section agreed to.
On section 11-Transfer or disposal of shares carried in excess of fifty or by person ineligible.
Richard Bedford Bennett: The only change is the
use of the words "class A"?


Charles Avery Dunning: It is consequential, entirely.


[Stage Direction]
Section agreed to.
Bank of Canada
[Stage Direction]
On section 12-Commencement of business.
Charles Avery Dunning: This is no	longer
required.


Richard Bedford Bennett: Once more I find it
difficult to understand why this provision should be taken out of the act. The act was to provide for the incorporation of a bank, and this is one of the most important sections of all, because it provided that the bank should come into being whenever the capital stock had been subscribed and payment made. That has happened now, but the section is being taken out of the act. Speaking once more as schoolmaster, I find it extremely difficult to understand why, after you have passed an act that incorporates a bank, you take from it the section that has to do with its right to carry on. It has never been done at all at any time.


Ross Wilfred Gray: It is an entity now; it has
been created.


Richard Bedford Bennett: Yes, but when you look
at the statute hereafter you will find that there is nothing left to show that that was done.


Charles Avery Dunning: Oh, yes.


Richard Bedford Bennett: Section 20, which is
being repealed, reads:
(1)	Whenever the capital stock of the bank has been subscribed and payment in money made to the amount of twelve dollars and fifty cents per share, or such larger amount as the minister determines, the minister, when authorized by the governor in council, may issue a certificate authorizing the bank to commence business on a date to be fixed therein.
(2)	The bank shall not issue notes or otherwise engage in business until the date fixed in such certificate except to do what is necessary or advisable to enable it to commence business on the said date.
What we did was to take a number of the officials and make them provisional directors, and they carried out all the antecedent prerequisites of a corporate organization to enable the bank to function; and this section is one of the conditions prerequisite to its functioning. Now it is being taken out of the statute so that when you refer to the consolidation of the Bank of Canada Act you will find this section gone and no section providing in any way for what is in that section provided for. It is always customary to leave in a statute everything that has to do with the organization of an institution. If anyone other than I were saying this, it would be regarded almost as an axiom that you would never do such a thing. However, I am not endeavouring to lecture the minister with respect to it; if I were to use the harsh

word that is in my mind with respect to it, it would but do justice to the occasion. It is almost absurd to think that this section should be taken out-absurd, that is, to any practising lawyer.


Charles Avery Dunning: Would my right hon. friend like me to tell him why it was taken out?


Richard Bedford Bennett: I should be glad to hear the explanation.


Charles Avery Dunning: As a matter of fact no question of policy at all is involved in the repeal of the section. The lawyers of the Department of Justice indicated to the Department of Finance that the section was no longer necessary, and for that reason it is being removed. They did suggest, and we have already passed a provision back on page 2 of the bill, that "The bank is and shall continue to be a body politic and corporate." The advice I have from the legal advisers, to whom I must listen, is that that section is no longer required. My right hon. friend may be right, but when I come to a bill amending another act and have advice from the law officers of the crown that a section of the original act is entirely unnecessary, I follow that advice. That is the reason and the only reason why it is taken out.


Richard Bedford Bennett: There is just one question that my hon. friend from St. Lawrence-St. George (Mr. Cahan) has put to me. What authority is there in this act to carry on business at all?


Charles Avery Dunning: "The bank is and shall continue to be a body politic and corporate."


Richard Bedford Bennett: That does not answer the question.


Charles Avery Dunning: And the remaining
powers of the bank are stated in various sections.


Mr. WHITE:: What harm will be done by leaving section 20 in the act?


Charles Avery Dunning: I do not wish to get into a legal argument. The Minister of Justice (Mr. Lapointe) is my legal adviser; he can handle it.


Frederick George Sanderson: Is the section carried?


Richard Bedford Bennett: I protest against this being repealed.


Richard Smeaton White: Why not leave it in? No harm will be done.


Charles Avery Dunning: There is no harm in it any way.


[Stage Direction]
Section agreed to.

Bank of Canada
On section 13-Exchange.
Mr. STEVENS:: I have been waiting
patiently until we should come to section 13, which is, if I may use the expression, the operative clause of the act. I have not been very much concerned about the change in the set-up of t'he bank, for the very simple reason that the directorate, whether it consists of seven or fifteen or any other number, amounts to very little because no action of the directors can override the decision and the will of the governor or, in his absence, the deputy governor; and that is virtually the situation. I mention that because I was not much concerned about this discussion as to the change in the set-up of the bank. I do not think very much change has been made, except in form. What does concern me was contained in a question asked a few moments ago by the hon. member for Acadia (Mr. Quelch), regarding the matter of policy. The minister replied that in his opinion it would be inimical to the best interests of the bank and the country for him to enlarge in a statement on what the policy of the government or of the newly government-controlled organization, the Bank of Canada, would be.
I asked the minister when we were on the resolution-I think, in ample time-if on the second reading of the bill he would be prepared to make a statement with respect to that matter. No statement was made on the second reading, and no discussion at all occurred. Now, while I respect the delicacy of the situation, and, perhaps, the difficulty the minister finds himself in, I submit to him and to the committee that if we are sincere in what we are doing to give effect to what was said regarding this matter in the speech from the throne, and if we are to have confidence in the declarations of members of the government, including the Prime Minister and the Minister of Finance, who have spoken on this matter, we must recognize that the government is taking new and definite control of this bank. That is the only excuse for the presence of the bill. I still question the adequacy, shall I say, of the method, but that has been adopted by a majority of the house, and I bow to the will of the majority. If therefore the government is stepping into this picture in a new way, exercising what it claims to be adequate authority, and, as the speech from the throne says, taking effective control of the bank, I submit the committee is certainly entitled to a larger measure of confidence from the government as to its intentions in the future. In his reply to the hon. member for Acadia the minister used an adjective with which I agree; he said he would not make any statement regarding the "day to day" operations of the bank. It
would be ridiculous to suggest that the minister or any officer of the bank or other person should make a public statement as to the detailed or day to day routine operations of the bank. Now on the question of broad policy-


Charles Avery Dunning: What phase of it?


Henry Herbert Stevens: That is the object of my remarks, though perhaps it will take a few paragraphs to state it; as to the broad policy of the bank I think the committee is entitled to a greater measure of confidence from the government.
In order that I may not be considered presumptuous in making the suggestion I shall read a few extracts from the speech of the governor at the first annual meeting, on February 25, 1936, of the shareholders of the Bank of Canada. I pause to make the statement that the country and the bank are fortunate in having as governor and deputy governor of the bank two gentlemen who without question are clothed with ability and experience quite adequate for the positions they hold, and it is my opinion that during the time the bank has been in operation, within the limits of their powers, and, I might add, the policy behind the bank's operations, these gentlemen have discharged their duties in a manner commendable to themselves and commensurate with the task they undertook. Further, the bank has been in operation only a little more than a year, so that I am not expecting to see any very startling results up to the present. I think the experience we have had indicates that the central bank in its initial stages has been reasonably satisfactory, but I also believe, as the government, too, must have in mind, that we have now come to a stage in the development of the central bank where a larger measure of public interest in the institution should obtain. It is upon that assumption that I proceed with my remarks, and quote from the address of the governor. I hope the minister will note the language, in view of the fact that we are requesting him to give us some information as to the government's attitude and. policy. The governor says:
A policy of cheap and abundant money is the orthodox contribution of a banking system toward recovery from a depression. '
That is a very singular statement. We are still in a depression. Unemployment is still rampant throughout the country. We are still confronted with many problems

fundamental problems, in my opinion-regarding the causes of the depression, and I submit we have not yet directed sufficient attention to the removal of those fundamental causes. So that when the governor of the Bank of Canada makes a

Bank of Canada

statement of that kind, parliament at least should take more than ordinary notice of it. I repeat it:
A policy of cheap and abundant money is the orthodox contribution of a banking system towards recovery from a depression. Such a policy undoubtedly contributes, firstly, to a relaxation of the pressure to liquidate and, secondly, to a recovery of business and to the reestablishment of government finances, which are sure to be adversely affected at such times through relief expenditures and other unavoidable commitments; but if the policy is pursued too far the situation may become unmanageable when a revival develops.
Without indulging for the moment in any speculation as to what should be done or to what extent the government should use the resources and services of the bank in a contribution towards recovery from the depression, I cite this paragraph as indicative of what must have been in the mind of the governor of the bank, and it is more or less a challenge at this time for a statement by the government of the country, which is now assuming control of the bank, as to what is its attitude. I know of no place, Mr. Chairman, where this should be stated other than in this house; this is the place.


Charles Avery Dunning: I thought I said it a
few minutes ago.


Henry Herbert Stevens: While I recognize that
the minister feels he is in a delicate position, that delicate position cannot excuse him from taking the house into his confidence to the fullest extent possible, if necessary even to the point of having a private session of the house, which has been done under conditions not more serious than those obtaining in Canada at the present time. Since I have been a member of the house we have had on at least two occasions, I think, secret sessions. I am not suggesting that this should be done; I am prepared to have any discussion of this kind wide open, but I do say the minister cannot shield himself behind the statement that if he were to make any declaration on the subject it might prejudice the interests of the bank or of the country.
That is one statement I wish to direct to his attention. Then on the next page the governor makes a further statement, referring to advisory functions. I pause at this point to suggest that apparently the governor considered his duties largely advisory, but it must be remembered that this assumption was based upon the act as it was originally passed and the bank as it was originally organized. According to the speech from the throne and the declarations of the Prime Minister, however, we are making a change in that situation, and the government now

is to control the bank. In other words all the statements made by members of the government during the election campaign and in their criticisms of the original act two years ago, as well as the inference contained in the speech from the throne, indicate that they were not satisfied with the organization as it was originally introduced. Therefore I am justified in assuming that while the governor may have taken the position that his chief function was an advisory one in his relation to the government, if we are to be logical something must be added to this advisory function now. In that respect the governor has this to say:
Nevertheless, we have every inducement to be impartial. Advice must often, perhaps usually, be the chief form of assistance which we can render to the governments of Canada, inasmuch as our necessary concern for the cash basis does not permit us to make large advances of a kind which we cannot offset if that policy were requisite. It should not be inferred, however, that we are unable to furnish temporary accommodation at appropriate times.
The suggestion that occurs to me, from the language I have just quoted, is that under the old organization the governor of the bank considered that it was his duty to be extremely careful as to the extent he might go in regard to advances to the government or, as he says, in furnishing temporary accommodation; that he must be restricted because under the old set-up he conceived his duty to be largely of an advisory character.
Now I turn to another more practical and to my mind very much more vital part of the address, which I think is peculiarly appropriate to this particular section. Before I read it I will invite the committee to observe that section 13 amends the original provision that gave the bank power to do certain things, or in other words very largely defined the functions of the bank. I am not going into a detailed analysis of those functions; I merely invite the committee to consider the facts as they are outlined in that section. It will serve my purpose to cite just a few of these clauses. Paragraph (d) indicates that the bank may buy and sell securities issued or guaranteed by the Dominion of Canada, and now an amendment has been introduced changing the former limitation.


Charles Avery Dunning: Expanding it.


Henry Herbert Stevens: ... buy and sell or rediscount bills of exchange and promissory notes endorsed by a chartered bank drawn or issued in connection with the production or marketing of goods, wares and merchandise as defined in The Bank Act, excepting those mentioned in paragraph (h) of this subsection, and having a maturity not exceeding ninety days, excluding days of grace, from the date of acquisition by the bank.
Before that paragraph passes I think the committee should consider whether sufficient latitude is permitted to the Bank of Canada in the powers of rediscount therein granted. Again I say it is a question of opinion, but I invite the minister and the committee to give consideration to that feature, because this is one of the powers which will enable the bank to enhance greatly the powers of the chartered banks in the discount market.
I wish now to read what the governor of the bank had to say on the subject to which that subparagraph relates. I quote from his speech of February 25. The heading is "Treasury Bill Market."
It is universally recognized that a central bank is hampered in its operations where an active bill market does not exist. Few countries, however, have the bill market they would like. Under present conditions a fairly satisfactory market can be established, if there is a sufficient volume of treasury bills, if there is a good institutional distribution of these, *md, in particular, if it is the commercial banks policy to hold treasury bills as their secondary reserve. The mere existence of a central bank at once widens and strengthens the market for first class bills, since the central bank itself will be a large holder and will 9nSage in purchases and sales in pursuance of its open market policy, and for other reasons. In so doing, it is likely to have the effect of
Bank of Canada

steadying the rate. The Bank of Canada can, I feel, claim that it has been of assistance in both these respects.
Canada has been handicapped, as the governor points out, by the absence of a fairly extensive bill market. We have not and cannot expect to have a bill market such as they have in London or New York, but the government can greatly assist if its policy is gradually to extend the bill market in Canada. The government could very well declare, without in the slightest degree impairing the present banking situation, or without any danger of encouraging wild speculation, as the minister puts it, that its policy will be not only to encourage the establishment of a bill market but to do everything in its power in cooperation with the Bank of Canada to secure the use of all the facilities that can exist in Canada for the encouragement of the buying and selling of bills. I shall not go into an analysis of the practice elsewhere, but I assume it is known to all that, for instance, in London a bill of sixty days or three or four months may pass through a dozen different hands during the period of its currency. I have seen bills that were endorsed so often that they had to stick on additional paper on which to write the endorsements. That is an active bill market; and a very small margin of profit, running to three or four decimals, is sufficient for the purposes of such a market. Nothing of the kind exists in Canada, but I can readily see how there could be built up in Canada an active bill market not only for government bills but also for commercial bills such as those indicated here. That leads me to suggest that possibly it might have been better if in this section the term of maturity had been made four months instead of ninety days.


Charles Avery Dunning: The next section covers
certain classes.


Henry Herbert Stevens: Yes, but not the ordinary class.


Charles Avery Dunning: Yes-"(p) do any other banking business-" There is provision for up to one hundred and eighty days with respect to paper connected with the production or marketing of products of agriculture, the forest, the quarry and mine, or the sea, lakes and rivers.


Henry Herbert Stevens: I am glad the minister mentioned that, because I intended to refer to it. These, however, are what are known as active commercial bills dealt with in section (g) to which I have referred. The reason there was an enlargement of time in respect to the class of bills to which the minister refers

was this: Take for instance live stock. It was found it was not possible to merchandise live stock within ninety days. Frequently those who were handling live stock on credit through the banks found that they were forced to liquidate prior to the time that the stock was fit to sell. Your market might on a certain day or certain week or weeks be so low that it would be unprofitable to market. And so it was found that so far as live stock and some other products of that class were concerned a larger period should obtain. However I am speaking .of rediscount, bills of exchange, promissory notes and the like. They are more along the line of what might be called ordinary commercial paper. I suggest therefore that the minister would be quite within his rights and would not in any way jeopardize the interests of the bank or of the. country if he made clear to the house what is to be the attitude of the government in regard to these and indeed other matters which in my opinion are vital to the operation of the Bank of Canada and its relation to the government and the problems of the country.
Another point I might very properly raise has reference to the production of gold. In this connection I shall give the figures for the last seven years. The production of fine ounces of gold for each year during the period 1929 to 1935 was as follows:
Fine
ounces
1929		 2,238,452
1930		 1,079.504
1931		 2,344,281
1932		 2,653.326
1933		 2,789,285
1934		 3.160,390
1935		 2,871,845
Total
17,137,083
Canada is one of the largest producers of gold; I believe it is now in second place, although in the last year or two Russia has challenged our position in that respect. However it is safe to say that in the production of gold we are one of the first three countries. The question which occurs to me is this: What is to be the government's policy as to its control of the Bank of Canada in regard to the holding of a larger quantity of gold? In the disposal of gold what form or general policy will be adopted? If we are simply to take gold and use it as a commodity, exporting it as it is produced to the markets in New York and London, and occasionally in Paris, are we exhausting our possibilities under a system of finance operating through the Bank of Canada? The question might be asked: Has the government considered the advisability of retaining in Canada a larger portion of gold produced?-because I find

Bank oj Canada
that the export of gold in the seven year period I have indicated almost equals the total production. Although I have not the figures under my hand, may I say that by checking I found that the export of gold practically equalled the production. Is it advisable to consider increasing Canada's reserve of gold and under existing laws making use of that reserve? I am quite aware that there is a distinct cleavage of opinion, but I do submit to the minister that with respect to these matters to which I have referred, and perhaps other matters to which I have not had time to refer, he might reasonably give the house a statement of government policy. While, I repeat, I respect the minister's sense of delicacy in dealing with these matters, surely if the government of Canada is to acquire and exercise control over the Bank of Canada, parliament has a right to know at least the broad general lines of policy of that bank operating through the new control, namely the government of Canada.


Charles Avery Dunning: Mr. Chairman, I had not in mind quite the class of question the hon. member for Kootenay East (Mr. Stevens) has raised. I do not think the hon. member who asked the question about the broad policy to be adopted had in mind the matters to which the hon. member for Kootenay East has referred. I did not make note of his various questions as he proceeded to speak, because I expected each one would be the last, and up to a certain point I had succeeded in keeping his remarks in my mind. If in replying I do not cover all the points, perhaps the hon. member will come to my assistance. I had prepared some observations which I intended to use in reply to questions addressed to me a few days ago by the hon. member, and perhaps at this time it might be well to give expression to them.
The process of affecting our price level by monetary action is not nearly as simple as some would have us believe. Under certain conditions the price level will rise even if there is some decrease in the amount of cash in the country. Under other circumstances the price level will fall even though the cash is increased. Because of the introduction of greater weight, for the time being, of some other factors, conditions change from day to day. So that a policy in regard to cash which is proper in May may not be proper in June, even if the goal towards which we wish to move remains the same.
I believe it would be incorrect and improper for me to indicate my personal opinions or to appear to voice the opinion of the government with regard to the objective which we should attempt to attain in the matter of the price
level, or to indicate by what monetary policy I thought that objective should be attained. Such an indication would give individuals an opportunity to anticipate any action which might be taken, and to reap a profit and in fact would be a far more serious indiscretion than advance information on the budget. May I invite the attention of the hon. member who asked the question to the fact that by creating uncertainty and apprehension we might interfere with or at least impede the realization of any desired objective. As a matter of fact, to a certain extent that has occurred in the United States, due to announcements in advance of objectives. Immediately upon an announcement being made, forces were started in motion which tended to impede the very desirable objective it was sought to attain. I think however it is quite in order for me to say that any suggestion that a deflationary policy is being pursued is incorrect, and any suggestion that a deflationary policy should be pursued is contrary to common sense. The views in regard to price levels which have been embodied in the declaration of more than one conference, so far as I am aware are still held in this and other leading countries of the world. My hon. friend may recall that in speaking on the resolution preceding the bill I made certain statements as to the functions and duties of the bank. In so far as those words indicate a policy, I shall repeat them. At *that time I stated that when a boom is under way and getting out of hand it is the duty of the bank to put on the brakes by restricting credit, thus tending to cause a decline of prices, and to slow down the whole tempo of business and speculative activity. Conversely, in a time of depression, it is the duty of the bank to bring influences to bear in order to extend credit, thus tending to raise prices and quicken the tempo of business activity. The only criticism I make of my own words is that they might be taken to indicate that I share the views of those who believe that monetary policy is all important as an influence upon the economic life of a country and its people. I stated earlier this afternoon that I do not believe that. It is one of the major factors, it is true. Its importance changes from time to time, having regard to the weight for the moment of Other factors. There are periods when it is all important; there are other periods when it is of no importance at all, temporarily at all events.
With respect to the specific question of my hon. friend, which I think was the major question he asked, as to a treasury bill market, certainly the information contained in the weekly statements of the bank and in the report of the governor at the annual meeting,
Bank oj Canada

to which my hon. friend referred, indicate the increasing extent to which the government is making available treasury bills, and with the avowed purpose, as the governor has stated in his report, of building up that kind of market in Canada. The bank has the powers indicated by my hon. friend in paragraph (g) of the present act-not the present bill-with respect to the rediscounting of bills of exchange, and so forth. But my hon. friend will appreciate, I think, that the very fact that the banks are at present such large holders of the gilt-edged securities of the Dominion of Canada and its provinces operates to prevent the necessity on their part of presenting bills to the Bank of Canada for rediscount. Quite obviously they can secure necessary cash, if they wish to do so, by the much simpler expedient of depositing their dominion government securities. In a time of greatly increased business activity I hope, and I agree with my hon. friend in believing that it would be a good thing, for the development of an active bill market in Canada, but one must remember that not merely the Bank of Canada is required to accomplish that end.


Henry Herbert Stevens: No one would suggest that.


Charles Avery Dunning: A knowledge of and an interest in a bill market is necessary on the part of a great many individuals and corporations. I am gratified to be able to say to the house that in recent issues of treasury bills investment by other than banks of sums of varying amounts is growing, thus indicating an appreciation of the value of a short term bill market on the part of those who have idle funds and are content to take the very lowest rate of interest for short term money. I do not think any amendment of paragraph (g) as suggested by the hon. member for Kootenay East is necessary at the present time, for the reason that the chartered banks up to now are not finding it necessary to use paragraph (g) or paragraph (h) for the purpose of rediscounting trade paper with the Bank of Canada.
My hon. friend raised some other question-[DOT]


Henry Herbert Stevens: The question of gold.


Charles Avery Dunning: Yes, gold. My hon.
friend suggests that the government should consider increasing the volume of gold held within the country by the Bank of Canada. He did not suggest what advantage it would be to Canada to increase the gold holdings, and quite frankly I have been unable to convince myself that any advantage could accrue to the people of Canada at the present time from an increase in the gold holdings by the Bank of Canada on behalf of the people of

Canada. I cannot see any advantage. I do not say that international situations might not change and become such as to make it appear wise to increase our gold holdings, but at the present time I consider them adequate; in fact the best good of the country is served by exporting gold as a commodity to the extent it is being exported, rather than increasing the country's gold reserves. I cannot think of any practical good which would immediately follow such an increase.


Mr. WOODSWORTH:: May I ask the
minister to make a little clearer one statement? He suggested, if I heard him aright, that it would not be wise for this government to give to parliament its financial policy.


Charles Avery Dunning: No, no.


James Shaver Woodsworth: I should like to
have that made clearer. The minister suggested that were certain announcements made the government might be prevented from accomplishing the purpose it had in view, that there might be profiteering on the part of some who had advance knowledge; and the minister compared it with the evils of a leak in the budget. I can understand that it does not do to have a leak in the budget proposals, but after all the government does come down to the house and announce its budget. There comes a time when it has to announce its policy. Do I understand from the minister that it is too dangerous for the government to announce its policy in regard to inflation, deflation or reflation, if you like to call it that? The minister suggests that the government is not in favour of a policy of deflation, but surely there comes a time when parliament ought to know what the government's policy is, in a general way at least, in regard to financial affairs.


Charles Avery Dunning: This is not a matter
of financial affairs.


James Shaver Woodsworth: Well, financial
policy. I wish the minister would explain it a little, because otherwise it puts the government in the position of being very autocratic. A short time ago the Prime Minister said that we must not have any information in regard to the government's policy in international affairs, and now if another member of the government takes the position that parliament must not be given very much information with regard to monetary affairs-


William Lyon Mackenzie King: I have never
made the statement that the house should not have information on international affairs. What I did say was that there were times and seasons for all things, and that the time to consider international problems would come

Bank of Canada
a little later on in the session. I think subsequent events have borne out the wisdom of that attitude.


James Shaver Woodsworth: Without going into
that matter to-day, at least there were times and seasons a few weeks ago when the Prime Minister did not care to give to parliament the attitude of the government on international affairs, and what I would like to get at now is this: Can the minister tell us what would be the appropriate time for parliament to be informed with regard to the general financial policy of this government?


Charles Avery Dunning: My hon. friend confuses
terms so much that it is very difficult to answer him. The financial policy of the government with relation to the handling of governmental affairs and governmental business is and has been before the house, but what my hon. friend means, I think, is: What is the policy of the government in regard to affecting conditions in this country through the control of the Rank of Canada. Is not that what he means?


James Shaver Woodsworth: That is what I
call financial or monetary policy.


Charles Avery Dunning: There is a wide difference between the two meanings. However, I will attempt once more to indicate.


James Shaver Woodsworth: If I am confused,
having given some thought to this matter for fifteen years, then many people in this country may easily be confused by the minister's statement.


Charles Avery Dunning: I quite admit that. It is easy to understand how confusion may arise from information given by a layman-one who nevertheless has attempted over a period of a number of years to understand the subject, as I think my hon. friend himself has done-when experts who are constantly at his disposal themselves find it necessary to engage in much debate and study in order that they may be certain, if that is possible, that the conclusions of * to-day shall be the conclusions of to-morrow. It is much easier to foe on the other side of the fence than on the administrative side; it is much easier to foe on the showman's side, declaiming-


James Shaver Woodsworth: I do not think anything I have said merits a lecture from the minister.


Charles Avery Dunning: I was thinking of something entirely different.


James Shaver Woodsworth: I do not know what the minister's reference is to the showman's
side. I simply asked a straight question, wishing the minister to explain a little more fully.


Charles Avery Dunning: Will my hon. friend please accept my most abject apology. I had no reference to him, and I should not have made the reference in speaking. I hope he will accept that explanation.


James Shaver Woodsworth: Quite.


Charles Avery Dunning: I had in mind something entirely different and was about to go on to another point. My words would 'have explained themselves in a moment, but I shall not go further along that line. I want to try to satisfy, if I can, my hon. friend and to assert as plainly as I can that this government has nothing whatsoever to conceal in this matter. So far as the revelation of governmental policy with respect to the Bank of Canada is concerned, the policy is revealed, to those who study, by the weekly statements of the bank itself and by the annual statement of the governor of the bank, from which my hon. friend from Kootenay Bast was quoting so copiously a few moments ago-There are certain policies that can be revealed only by the event, and this is one of them. Why is that? A few moments ago I tried to show how the revealing in advance of an objective to be attained, through the management of currency, remember, lets loose forces which defeat the objective sought. Now, why is that? The answer is very simple. Immediately the objective is announced, if it be an objective of a higher price level, let us say, what happens? I possibly should not have compared it in respect of seriousness with a budget leak, because by comparing it with that I might be understood to be comparing it in character with a budget leak. It is an entirely different thing. I was comparing it in respect of seriousness; it is very much more serious because it advertises to everybody the advisability of following a certain course whereby a profit would be guaranteed by that announced policy. That has happened in some countries. My hon. friend, who has studied the matter, knows there are many instances in which that is so. It is in connection with policy of that description that I say we cannot make any announcement. I went as far as I could when I said that the policy of the bank and of the government is certainly not deflationary. I think parliament has every right to ask at this time, under the conditions which prevail and have prevailed during the depression, that our faces should be set against deflation. That would be the unanimous opinion of the
Bank oj Canada

house. But the extent to which we go in the other direction is inherent in this whole policy of managed currency under which we are now operating through the medium of the central bank under government control and must be, ias I have indicated several times, a matter of day to day and week to week study by experts, and constant consultation. To set an objective in a broad way would be, I believe, utterly to defeat the attainment of it 'because of forces which it would automatically let loose, and I hope that no one takes this as an indication that the government intends to follow a policy of inflation, because that would be untrue.


Mr. TAYLOR (Nanaimo):: To what extent is the bank implicated in the purchase of silver? It appears to have made, in the ten months of operation, a very serious loss, amounting to nearly $500,000.


Charles Avery Dunning: Subsection 4 of section
26 reads-and this is what parliament instructed the bank to do; it answers the question my hon. friend asks:
(4) The bank shall during the years 1935, 1936 and 1937 purchase and hold newly-mined Canadian silver as and when required so to do by the minister but the bank shall never be required to purchase more than 1,671,802 fine ounces in any year.
My hon. friend may know that there was a silver convention and an agreement among the nations with respect to silver. Under that arrangement Canada assumed certain obligations, and by section 26 of the act the Bank of Canada became the operative agent in the matter of carrying out Canada's commitments under the international convention,. The loss to which my hon. friend refers is, of course, the difference, as at the end of the bank's fiscal year, between the value at that time and the cost of the silver which the bank holds under this section.


James Samuel Taylor: That seems to be an operation of the government and not properly of the bank.


Charles Avery Dunning: My hon. friend might
debate that, but I suggest that perhaps I have helped in the discussion getting out of order. We are not on that section.


Victor Quelch: We are interested in the
question of ownership only inasmuch as it affects the policy of the bank. I quite agree with what the minister has said regarding deflation and inflation, and I am myself opposed to either. But I quite realize that there is a very wide divergence of opinion as to what exactly is meant by either of these two terms. The government will be taking

over a greater control of the issue of currency and credit, and I would ask the minister this question. I do not think it will embarrass the government in any way, and undoubtedly an answer would go a long way towards restoring confidence in industry at the present time. What will be the basis for determining the amount of money that should be in circulation at any given time? Mr. Jackson Dodds stated before the banking and commerce committee that there should be enough money in circulation to buy the goods which are moving. I do not think the minister would agree with that statement; I hope not. There should be enough money in circulation to buy the goods which are available for distribution and which the people need.


Charles Avery Dunning: What does my hon.
friend mean by money?


Victor Quelch: Effective purchasing power. I am not referring to deposits not available for the moving of goods.


Charles Avery Dunning: But what does my hon.
friend mean by money?


Victor Quelch: Credit and currency in
circulation.


Charles Avery Dunning: Including chequing?


Victor Quelch: Certainly. To go a little further. Would the minister agree that, if possible, there should be sufficient money in circulation to pay the total prices of ultimate products which are available for distribution and needed by the people? That would not necessarily entail inflation in any sense of the word. Would the minister agree with that?


Charles Avery Dunning: The statement is so very general that I doubt whether I could agree or disagree. The criteria set up are not to my mind complete criteria, and in some respects they go beyond what would be necessary. Certainly they are too vague for me to answer the question.


Victor Quelch: The general principle, then?


Charles Avery Dunning: I do not recognize any general principle in my hon. friend's question. I am trying to understand the question. The hon. gentleman sets up as one criterion the needs of the people. Was not that one of them?


Victor Quelch: Would the minister agree that there should be enough money in circulation at any given time to pay the total prices of ultimate goods available for distribution? It stands to reason that if there is not enough money in circulation to buy the total factory

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products available for distribution, this would necessitate industry curtailing its output, thus causing more unemployment.


Charles Avery Dunning: A great variety of factors enter into that question. My hon. friend speaks of total goods as if that were something static. Our business of production, distribution and consumption is not static but dynamic. Certain classes of goods are, in the nature of things, stored for periods. They are not immediately required but are required later on. As I say, there is such a variety of factors as to make it impossible for me to answer yes or no to my hon. friend's question. I cannot see that he is setting up a standard which is a practical standard for me to answer yes or no, with respect to the volume of currency; there are so many modifications of his generalization as to make yes or no an impossible answer.


Richard Bedford Bennett: There are three or four questions that I should like to direct attention to with respect to this particular clause. The clause, as it is proposed to amend it, indicates perhaps more clearly than any other the desirability of a new institution having an opportunity to demonstrate its usefulness before drastic amendments are made either in its powers or in the exercise of its ordinary functions. This bank has been in existence for a short time, and during that period it has given an excellent account of itself. It has had time to issue only one annual statement which has been published, and that statement has been referred to during the progress of the discussion this afternoon. Among other functions which the government imposed upon the bank was that of acquiring the silver which had been purchased under the provisions of the silver convention. The loss to which the hon. member for Nanaimo (Mr. Taylor) referred could not under any circumstances be a loss if the silver were utilized for coining purposes, for the profit upon coining would be more than equal to any loss that could occur by reason of the difference between the price at which the silver was bought and the price to which it had fallen; that difference is substantially less than the profit accruing to the government from the coinage of silver, as indicated the other day by the hon. member for Vancouver-Burrard (Mr. McGeer). But, as regards the question of the note issue of the bank, it will be observed that by section 13 it is now proposed to expand the powers of the bank by providing that it may-
(d) buy and sell securities issued or guaranteed by the Dominion of Canada or any province having a maturity exceeding two years from the date of acquisition by the bank, but the bank shall at no time hold such securities
having a par value in excess of fifty per cent of its outstanding note issue and deposit liabilities.
Its note issue at the date of the last annual statement, that is December 31, 1935, was roughly $100,000,000, plus its deposit liabilities, which on that particular date happened to be about $200,000,000, and the half of the two would make altogether, roughly $150,000,000. That is, the bank shall at no time hold such securities having a par value in excess of $150,000,000 on the 31st day of December, 1935-
... nor shall the bank at any time hold such securities maturing more than ten years from the date of acquisition of a par value in excess of three times the amount of the paid-up capital and rest fund of the bank.
The rest fund is $173,000-one can eliminate that for the present-and three times the present paid-up capital would be, roughly speaking, $30,000,000. I suggest to the committee that that departure from the provisions of the statute, to which great consideration was given, is one which might bring about great disaster to the bank if the powers were exercised, and I am one of those who hold that it is not desirable to clothe a new institution with powers unless we expect them to be used. As the statute stood before this amendment was suggested, it contained all the powers that, in my judgment, could reasonably be conferred upon the bank, having regard to later conditions which obtain or are likely to obtain in this country during any period of time that we can anticipate. The provision, therefore, with respect to investments should have some more adequate explanation than we have had so far. I do not know why it is thought desirable by the government to change that condition, to have the acquisition of securities of a certain type, namely those of the provinces and of the dominion, based upon some relation to the outstanding note issue and deposit liabilities, for I frankly fail to see the relation between the two, and to say that the bank shall at no time hold such securities which have a par value in excess of, as I have said, practically speaking, in terms of the last annual statement and of the new capital, $150,000,000. On December 31 last the bank held dominion securities amounting in all to $114,000,000; fifty per cent of its note issue at that time was $50,000,000, and fifty per cent of its deposit liabilities at that time would be another $100,000,000, making altogether a total of $150,000,000. But at that time the dominion banks had on deposit $18,000,000, and the chartered banks had their reserves deposited with the bank to the extent of $181,000,000,
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That is the position as shown by the statement, and I should like the minister to explain why it has been thought desirable, after but one annual statement has been issued by the institution, to modify in the manner indicated the provisions of this paragraph (d) of section 13.
There is another point, which has been alluded to by the hon. member for Kootenay East (Mr. Stevens)-he mentioned it the other day but he did not develop it-and which I had proposed to speak about at some length. I am clearly of opinion that this bank should acquire a greater holding of gold, and if I were asked the reason why, I would, as a schoolmaster, refer to the explanation given by the minister himself on the page opposite page 6 of the bill as printed:
This enlargement of the bank's power to hold securities with a maturity exceeding two years is necessary, partly because of the deletion of the words "exclusive of securities transferred to the bank under paragraph (c) of subsection three of section twenty-five," and partly because during the course of the next ten years the chartered banks will lose the right to issue approximately $100,000,000 of bank notes and the Bank of Canada's note issue will be expanded correspondingly. Other things being equal, the Bank of Canada must acquire an additional $100,000,000 in assets as an offset. In view of the scarcity of short term_ securities it would not be practicable to restrict the bank to the purchase of securities maturing within two years.
That calls for but two observations. One . is that the development in this country of a market for short term securities

the bill market, as it is familiarly known in England, or more particularly, in Lombard street-can come about only through this bank participating largely in the first instance in these operations. Second, the bank has power to issue four dollars in paper currency as against every dollar of gold that is held as coverage. Would it not occur to most people that, by acquiring another $50,00,000 or $75,000,000 of gold and paying for it with Canadian legal tenders, the bank would be enabled to take care of any situation which might develop, instead of having recourse to the provisions suggested in the accompanying note? If the bank is to function in the manner indicated, according to the powers which we have conferred upon it, not by this act but by another act, namely in the issuing of paper money-using the colloquial term one hears on the street-if it exercises those powers to the extent that in another statute we have provided, it must acquire the gold coverage to enable it to do so, and gold coverage acquired at $35 an ounce to the extent of an additional $75,000,000, or even $50,000,000. would confer upon the bank a power of issue that is limited only by the provisions of the statute.


Charles Avery Dunning: The bank has that power now.


Richard Bedford Bennett: That is what I am speaking about.


Charles Avery Dunning: I mean, it has the gold now.


Richard Bedford Bennett: I am obliged to the hon. gentleman for his information, but I may inform him I am quite well aware of that fact. I thank him for his generous exposition of his own knowledge for the purpose of assisting me, but I am already aware of that fact. Being aware of that fact, I am merely pointing out that it may be advisable to add to the gold reserves of the bank for the purpose I have indicated, and in that event the bank would accomplish that purpose without much difficulty.
At the appropriate time, when this section was under consideration, I intended to say that I was wholly in accord with what was said as a mere suggestion the other day by the hon. member for Kootenay East. I had intended to elaborate upon it, but I shall not take time to do so now. I think, however, the acquisition of an additional $50,000,000 of gold at this time would serve a very useful purpose. It would keep in Canada that much bullion which would be available for the purposes provided by the act, and at the same time the purchase of that gold would release in this dominion that amount of money in Bank of Canada bills, what is colloquially called paper money. If the Bank of Canada acquired a thousand ounces of gold it would pay $35,000 in Bank of Canada paper money or bills which, as hon. members have said so frequently in the house constitute legal tender in this country. Inasmuch as the government has complete control over the matter and no gold can be sold outside Canada unless a licence is issued for its export, while I do not suggest that it is desirable to acquire a very large quantity of gold at this particular moment or that, I do suggest that we should be constantly accumulating gold, for what was said yesterday by the hon. member for St. Lawrenee-St. George (Mr. Caban) is something which is not very frequently discussed.
The export from this country of $40,000,000 of our gold reserves by a former Minister of Finance had a most detrimental effect upon our whole financial structure. That, I think, is admitted by people who are students of the situation within or without Canada. So seriously did we regard the matter, Mr. Chairman, that at a caucus of the party with which I was then associated in opposition I asked members of my party not to make any reference to the matter at all, because I believed

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that it would not be in the interests of Canada that certain possibilities, which as a matter of fact later became actualities, should be developed. It was found that certain people outside the country took action, which I think it was well understood would be taken by certain astute gentlemen, and it was because we had incurred a risk, which risk had been realized by others, that we suggested that in the public interest nothing further should be said about the matter. Nevertheless, because of that action we were 840,000,000 of gold coin short in this country, and when I say "short" I mean that $40,000,000 of gold was utilized for the purpose of discharging a New York liability, which action lessened to that extent the amount of gold reserve held in this country. That could never be made up; as a matter of fact, in the early succeeding days after England went off the gold standard there was a diminution in our supply of gold coin and bullion until we could take the necessary action under the relief act to regulate the export of gold and provide that it should not be shipped out of Canada except under licence. For it must not be forgotten that Canadian banks, with head offices in Canada, are doing business in many countries. In the very nature of things the branches near at hand may 'depend upon the free movement of gold from the head office to meet any situation that may suddenly arise. When that right of free movement is changed it becomes necessary to consider every transaction in the light of meeting the difficulties that may arise in the country in which the bank may have the particular branch.
We had to deal with that question when we provided for the revaluation of gold coin at the time we took over the gold from the banks, and we provided that a certain portion of that gold should be treated as gold which was held for foreign reserves, using the word "foreign" as meaning all reserves or liabilities external to Canada. Under those circumstances I have thought, perhaps improperly, that we should add to our store of gold for the purpose not only of meeting the situation that must arise during the next few years in connection with the retirement of the paper money issued by the bank, but also of replenishing our stock of gold to something beyond the amount we held after there had been a diminution in our stock through the shipment of $40,000,000 of gold to New York. It is true that the revaluation of gold has increased the amount that appears after the dollar sign in the annual report of the bank. It is true also that we conferred upon the bank certain stabilizing powers with the profit which accrued through the revaluation from $20.67 to the current market rate on gold prevailing at the
time the changes were made. The act itself was never proclaimed, but in the annual report of the bank "other assets" appear at the very substantial sum of over $3,250,000 and "liabilities not otherwise disclosed" amount to something over $2,000,000. So I assume that there has been a utilization, to some extent, of the profit that does not appear in the balance sheet except under the two items I have mentioned. Of that, of course, I have no knowledge except such as might be derived from the reading of an ordinary balance sheet.
Those three points, therefore, I suggest should be considered: First, the question of silver, to which reference has been made, and which I think takes care of itself; second, the question as to investments, which I think, calls for some wider explanation than we have received. In the drafting of that section originally great care was exercised lest we should provide a credit condition which would be injurious to the bank itself, and the restrictions imposed were of a double character. First, we had regard to the fact that the bank now holds a substantial quantity of Canadian securities as assurance against its guarantee or liability when it took over the Dominion of Canada notes. The exact figure I do not carry in my mind, but it amounts to several millions of dollars of Canadian securities held by the Bank of Canada for the purpose of indemnifying it against any liability which may attach by reason of it having assumed the obligations of the Dominion of Canada in connection with what we used to call the old dominion legal tender, or the note issue of the dominion itself. That expansion of power I find it a little difficult to understand; certainly the enlargement of the power for the reasons given is hardly sound finance, because it involves the acquisition of securities for the purpose of taking care of this additional note issue when the effective and profitable way would be to acquire gold when it carries with it a right of issue such as that mentioned in the other statute to which I have referred. And with respect to the acquisition of gold, without developing the subject at greater length, I think by reference to leading authorities I oould give good reasons why we should gradually increase our holding. I shall not say more, because I do not desire to trespass too greatly upon the time of the committee in this regard.


Charles Avery Dunning: Well, Mr. Chairman,
the observations and views of my right hon. friend with regard to the reasons which should actuate the bank and the government to increase the gold reserve I shall study carefully and bring to the attention of those whose business it is to advise me and consult with me on those matters. With all
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due deference I cannot agree at the moment with my right hon. friend's reasoning, because the acquisition of more gold would be the acquisition of something that is unproductive-


James Samuel Taylor: Hear, hear.


Charles Avery Dunning: [DOT]-whereas the method here provided is one which at least produces some activity. While saying that however, and speaking particularly to my hon. friend who applauded just now, might I say that I would not wish to convey any idea that the government do not believe in the necessity of maintaining adequate gold coverage. There may be different views as to what is adequate, but I may point out that at present the gold coverage is in the neighbourhood of sixty per cent of the outstanding currency and deposit liabilities. That, of course, is in excess of the minimum requirement agreed upon at the world economic conference, which minimum was twenty-five per cent. As to the wisdom of increasing our present sixty per cent margin in anticipation of the events to which the leader of the opposition referred, that is a matter for consideration. At the moment I cannot see the wisdom of doing as he suggests, but that does not mean that reflection and study may not bring me into agreement with the leader of the opposition in the matter.
With regard to the amendment to the section under discussion, it was prepared after serious consideration by and with the officers of the bank, who believe that this increase in relation to the powers of the bank to hold long term securities is the wisest manner of meeting a situation which will develop as the notes of the chartered banks are gradually, under the law, replaced by Bank of Canada bills. At the moment the increased power given may be summarized in this way, that at present the bank holds $130,000,000 of such securities. Under the amendment, so long as the liabilities of the bank remain the same, the increase would be $20,000,000. The limit of the power would be $150,000,000. My right hon. friend has some question in his mind about the yardstick which is used, that is the liabilities of the bank, the note issue and deposit liabilities, or in the other instance three times the amount of the paid-up capital and rest fund of the bank. That is debatable; I admit that at once, but the best judgment of those who have studied the matter and are advising me is that this section is necessary in the light of their present experience and that it should be passed, and can be adopted with safety.


Richard Bedford Bennett: The greatest failure of
a chartered bank in modern days arose from its disproportionate holding of long term obligations and its inability to meet the cheques drawn upon it in the clearing house on Monday morning. In the drafting of the original section, which was done without reference to the bank itself, but only with reference to those who had the well-being of the institution solely at heart, it was thought that the curtailment of the powers to the extent indicated was the best possible assurance against the acquisition of what might become not readily negotiable long term securities.
To leave that question for the moment- for if those charged with the responsibility for administration have convinced the minister that the change is desirable, obviously any further observations are unnecessary- there was a statement made-to which an hon. gentleman responded "hear, hear"-that gold would be unproductive. Now, there is nothing that the bank could hold which would be quite so productive.


James Samuel Taylor: I doubt it.


Richard Bedford Bennett: Why? Under the provisions of our issuing act, when the bank has acquired $1,000 worth of gold it may issue paper up to $4,000. If anything is more productive than that I should like to know what it is. The hon. member for Vancouver-Burrard (Mr. McGeer) predicated a considerable part of his argument yesterday upon parliament exercising those powers. But an issue of paper money, to use the colloquial term, covered by gold, is regulated by international agreement whereby the government would hold not less than twenty-five per cent of metallic coverage in gold as against the issue of paper. That was the minimum. It is true that at the moment we have sixty per cent coverage, but when I am asked to accede to the explanation given on the opposite page of this section that it is proposed to acquire long term securities to enable the Bank of Canada to provide paper money for the chartered banks to the extent of $100,000,000, I am bound to say that my intelligence refuses to accede to that test, because by the acquisition of exactly $25,000,000 of gold, paid for by legal tender, for which the bank now has money in hand, it could at once discharge the obligation of $100,000,000 to the chartered banks. Or even if forty per cent were applied, which is the usual rule, and regarded as a high margin of safety- between forty and fifty per cent has been regarded as high, and ours is very high for reasons that under present conditions are

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obvious to everyone-the bank could still do this. The explanation given in the bill does not call for more than a passing observation because it is so wholly inadequate to the matter in hand; it carries its own refutation.
Another matter having to do with this very question was mentioned by the hon. member for Kootenay East, and is one which, I think, is seriously engaging the attention of every Canadian who follows the monthly statements of the banks. We have the banks of this country owning much over a billion dollars worth of securities of the dominion and the provinces. The amount has been increased by nearly a billion during the last few years. In the very nature of things this central bank must discharge an ever-increasing respon11'-bility, if there is an improvement in commercial conditions, for the simple and obvious reason that the chartered banks cannot provide money for their customers and at the same time have it locked up in long term securities. The answer may be made that the chartered banks can take the securities to the Bank of Canada and obtain from that bank sufficient money to enable them to meet the requirements of their customers. That is a perfectly legitimate answer. But every thoughtful man realizes, and those outside this country realize, that it is placing too heavy a strain" on the financial structure of this country to compel the chartered banks-and it almost amounts to	compulsion-to	acquire with their
depositors' moneys and their own capital so large a sum of the country's securities. The provision that we have made to relieve them of the strain through the obtaining of money from the Bank of Canada on the deposit of these bonds will create a situation which will result in an agitation of the very kind to which this committee has listened during the past few days, and such an agitation in the very nature of things will be successful. It is for that reason that I view with some degree, not of apprehension, which is an old and hackneyed expression, or alarm, but of more than casual curiosity, what may be the result of these matters being carried on in the way in which they are.
I think the question of inducing other commercial institutions than the banks to buy short term treasury bills is but an indication in this country of lack of confidence in commercial ventures, that is brought about by two things, one being the fact that the chartered banks are no longer willing to pay a reasonable rate of interest on what may be called current deposits of their customers. The result, of course, has been that commercial enterprises having in hand $100,000, or more, and sometimes less than that, make bids for treasury bills which mature in the
succeeding two or three months, because they will not require money to pay dividend until after that time. In the meantime they would thus procure a sum of money by way of interest which would be in excess of what they would receive from the chartered banks. But that in itself has a restrictive effect upon the usefulness of chartered banks in connection with the commercial life of a country, for to the extent to which they are deprived of deposits which they formerly had available, and to the extent to which that money is utilized in the manner indicated, their ability to meet the demands of their commercial customers is lessened.. However, as was pointed out a few days ago, that question has not arisen, because the chartered banks have on hand a substantial sum of money for which they cannot at this time find reasonable and profitable employment. Hence it is that from an examination of the annual report of the Bank of Canada it will be observed that, so far as I can see, at that time there was not a single dollar advanced by that bank by way of rediscount or by way of advances made on the security of the bonds of the country to any of the chartered banks. That is the position as far as indicated, although it may be that one of those items covers some advances, though I think not.
The position is that no advances were made, because lack of effective demand on the chartered banks for loans by commercial enterprises has resulted in those banks having a surplus of funds which they have utilized in the acquisition of securities to the enormous extent of over a billion dollars. Speaking not as a schoolmaster I would say that in my opinion that is not a useful or desirable condition in Canada.


Charles Avery Dunning: I agree with the latter observations of the right hon. gentleman, and in case any incorrect impressions may go out from this chamber may I say that my right hon, friend's observations regarding the holdings of stock did not deal with what I had said. I said that if further gold were purchased under present conditions and deposited in the vaults it would be unproductive, and I was referring to the suggestion of the leader of the opposition that we purchase further gold. Of course gold can be made productive in the manner indicated by my right hon. friend, but the fact is that we do not require to issue further currency against our gold holdings, as we already hold such a large excess over the internationally accepted minimum. So any further acquisition of gold, so far as immediate
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conditions are concerned, would be unproductive; and it is in that sense I use the term.
With respect to my right 'hon. friend's remarks regarding long term securities I would point out that respecting the ten year securities the only change from the existing law is the addition of the words "and rest fund of the bank." That is the only addition with respect to long term securities. The other provisions apply to securities of less than ten years duration.


Richard Bedford Bennett: But the two go together.


Charles Avery Dunning: They must be combined, of course.


[Stage Direction]
Section agreed to.
Section 14 agreed to.
On section 15-Denominations.
Frederick George Sanderson: Is section 15 carried?


Richard Bedford Bennett: No. I wonder why this disputatious matter should have been thrown into the cauldron of politics at this particular time. Nothing has given me more concern than to find this provision in the bill at this time, having regard to the very difficult conditions under which we live. I do not propose to refer to the political side of the matter, and at this time I speak only for myself. It is not a matter which I regard as in any sense affecting those associated with me as a party. I have said quite freely that they may take any view they consider desirable. But speaking as a Canadian with as tolerant a point of view as any man in this chamber, and yielding to no man in my tolerance and my regard for the views and attitude of mind of every other Canadian, I find it difficult to understand why this question is now being precipitated into the debates of this chamber.
A short time ago we made a trial of what I thought was a not unreasonable suggestion, namely that all persons in Canada of French origin who so desired could obtain bills of the Bank of Canada printed or engraved in the French language. That in itself was a concession. It was admitted by everyone that it was a concession. My view is that very great changes, from the purely constitutional view, have been brought about by the tolerance, good will and kindly thought and appreciation of Canadians of one class who were content to accommodate themselves to the views of others. But when we enact in a statute that every bank bill in Canada shall be engraved in two languages we have created a situation which will involve in every session of parliament an effort being made to repeal.

That will happen as regularly as the sessions come; I am speaking as a result of experience. I must accept a large measure of responsibility for the provision of the law as it now stands. That provision stated that notes in either the English or the French language shall be available as required. I can point out only that the most strenuous supporters of the rights of our fellow French-Canadian citizens, as expressed by, for instance, the late Senator Belcourt, both in writing and in oral argument, rest upon the assumption that where an ethical group occupied a position in a country such as Canada before confederation or, in fact, before it became a part of the British empire, there was a common law right that they should speak their own tongue and be able to understand the business they had to transact written in their own language. The contention thus made is one which has found substantial agreement in the tolerant minds of their Anglo-Saxon fellow citizens, or those of other descent.
Let us look at the situation. The constitution deals with it in one way. But if I were in the province of Quebec to-day, before dissolution of the legislature, and I were to receive the orders of the day, I would not receive that document or the journals printed in the two languages side by side; I would have to take my choice. I would have freedom of choice. My fellow-member of French descent receives his orders of the day printed in French; my fellow-member speaking the English language and of British descent receives his in the English language.
In this parliament what is the position with respect to the statutes and journals? I am discussing a bill. I walk to the table and take from it a bill printed in either English or French. But the bill is not printed in columns, one English and the other French.
I take my choice, exercise my freedom of action. I have conceded, because the statute so provides, the right of my fellow-citizen who clings, as Senator Belcourt pointed out in one of his addresses, to his own language. He selects from that table his French copy; I, my English. The orders of the day, which we have before us for this day, are printed in both languages. My French fellow-member has in his hands Routine Proceedings and Orders of the Day, but he is using a document which is printed in French. I happen at the moment to be using one printed in English. I exercise my right; he exercises his. He chooses the one printed in French; I choose the one printed in English. The statutes are in exactly the same position.
But we have gone further. In a spirit of tolerance and mutual good will, when we cele-

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brated the anniversary of the founding of our confederation we placed on the stamps that were issued the word "postes" as a gesture, as an expression of good will, not because the law permitted it or required it-


Mr. LAPOINTE (Quebec East):: Nor prohibited it.


Richard Bedford Bennett: Nor, as my hon. friend says, prohibited it, not that the law either asked for it or prohibited it, not that the law contemplated it one way or the other; I think that is a fair way to put it. But as a gesture of good will towards our fellow-citizens of French descent we have the word "postes." Upon the van that picks up the mail in this city there are the words, "Bureau de Postes." There is no justification in law for this, or any prohibition against it. It represents a spirit of tolerance and good will, and a desire to make concessions and undertakings in order that friction may disappear and harmony prevail among the peoples of this country.


William Lyon Mackenzie King: If that is the case, why not follow it in this bill?


Richard Bedford Bennett: That is exactly what I am speaking of at the moment; that is exactly my point. In the bills we followed that course. We provided for freedom of choice on the part of those who wished to have their money printed in French, and for the first time in the history of this country as a gesture of good will and from a desire for a spirit of harmony we extended, not that privilege, not that right, but that gesture of good will in connection with our paper money so that a choice might be made by those who desired it to be printed in French as against those who desired to have it printed in English. I may say that even that concession brought about much criticism, and I should like to point out to this committee that the criticism went so far that in some cases we received letters with a mutilated bill, protesting, in language that I shall not repeat, against this action being taken. My answer in all instances such as that was this, that we had during a long series of years, in a spirit of the utmost good will and from a desire to conciliate differences and promote harmony, provided that a choice should be exercised by our fellow-Canadians of French origin and those of other origins, and that they might have bills, paper currency, printed in the language they desired, as their fellow-Canadians speaking other tongues might have bills printed in English. That freedom of choice was greatly resented in some quarters, and strong protests with respect to it were made to me personally from time to time. Now, Mr. Chairman, we are to be told that this gesture is to go to the extent of having all
paper money issued by the Bank of Canada printed in English and French; that each language shall appear upon the bill. Is that quite fair?


Ernest Lapointe: Yes.


Some hon. MEMBERS:: Yes.


Richard Bedford Bennett: Is that quite fair?


Mr. VIEN:: Why not?


Richard Bedford Bennett: Why not? For this reason-


Thomas Vien: Yes.


Richard Bedford Bennett: For this reason, that
freedom of choice is all that was asked heretofore by our fellow-Canadians. Mr. Fielding, when the matter was put to him with respect to bank notes, met it by saying that he saw no way at the moment of dealing with it, and succeeding governments managed not to deal with it. When we did deal with the Bank of Canada we extended the principle of choice. That is, I repeat again, my fellow-Canadian citizens speaking the French tongue and of French descent would have in their possession bills, paper money, which was printed or engraved in the French language, and equally, English-speaking citizens of British descent could have in their hands and in their pockets bills engraved or printed in the English language.
Let us go a step further. The majority have the rights which are provided by statute; the minority have the rights which are provided by statute, from a purely constitutional and legal standpoint. From a purely legal and constitutional standpoint we deal with only a limited number of matters. We deal with the province of Quebec; we deal with this parliament; we deal with official documents that have to do with this parliament; and if these bank notes were documents which had to be dealt with under the provisions that relate to the papers and documents placed on the table of this house they would be printed in English and French, but both languages would not be on the same document. That cannot be gainsaid. It is within the sight and within the knowledge of every member of the committee.
Now I put this to my friends who have pressed this so strongly: In the light of the development of a spirit of amity and good will, a tolerance and a desire for harmony, many concessions have been made. These concessions will continue to be made. There has been resentment expressed here and there, but in the main the general spirit of tolerance has prevailed. Nevertheless, if any minority in any country has endeavoured to press its
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will upon the majority, where it is a matter of freedom of choice, there has alwaj^s been one result, and the minority itself has suffered from that result.


William Lyon Mackenzie King: May I ask my right hon. friend one question?


Richard Bedford Bennett: Certainly.


William Lyon Mackenzie King: Speaking of freedom of choice, is there any freedom of choice on the part of individuals as respects money in circulation as to their desire to have a bill which is printed in English or a bill which is printed in French unless the bills are bilingual?


Richard Bedford Bennett: Yes, that is just the point exactly.


William Lyon Mackenzie King: In circulation.


Some hon. MEMBERS:: Bills in circulation.


Richard Bedford Bennett: Circulation is not the question. The question in the first instance is-


William Lyon Mackenzie King: My question was relating to freedom of choice when money is in circulation as legal tender.


Richard Bedford Bennett: So far as legal tender is concerned, we have provided that, if required, the money from the issuing power shall be printed in either English or French. What happens after has never been a matter for parliament or the legislature. Those who have followed, as many hon. members have, the judgments of the counts which dealt with the long struggle that originated in this city with respect to educational matters in Ontario, will get a clearer conception of what I am pointing out than they would otherwise obtain. Here we have endeavoured to provide a reasonable compromise; for it is unfair and incorrect to say that this is a bilingual country. The courts have said repeatedly that this is a country in which there are two official languages. The late Senator Belcourt pointed that out in one of his arguments, and I do not think there is any answer to it. There are two official languages in Canada, but this is not a 'bilingual country.


Mr. MARTIN:: What is the difference?


Richard Bedford Bennett: The difference is so
obvious that I know my hon. friend does not require an answer. There is a limitation with respect to the one and not to the other. The official language is provided for by section 133 of the British North America Act. That deals with constitutional rights, and the right creates the official language. But when you come to the question of official bilingual-

ism you find that it does not exist. In this country, I repeat, we have two languages. I am not unmindful of the fact that during the last ten years there has been great agitation in some parts of Canada in connection with this matter, and it has been urged that it should be dealt with as is now proposed. I am not unmindful of the fact that it has been made the football of politicians, and that is the reason I am refraining from making any political observations regarding this matter. I do not propose to do so however great may be the provocation. I point out, however, to my fellow countrymen who are of French origin and speak the French language that those who will take the evidence of history for what it may be worth-and it is fairly important-will find that wherever the granting of a privilege or a concession by a majority has by the minority been crystallized into a right, resulting in a pushing of the demand beyond those moderate and reasonable boundaries that have marked the maintenance of harmonious relations between majorities and minorities, the consequence has been harmful to the minority. I plead, uselessly I admit, with the government not to do this thing at this time. We have at the moment great differences in this country, differences which we all deplore, differences the outcome of which we are fearful of, differences which threaten the very fabric of our confederation. Why not give a fair trial to what now is on the statute books? It has been there only a year; why not give it a trial? Why not let the demand for a change come about by that gradual process which would ensure that those who are most affected, namely, the majority, who are of British descent and speak the English language, will feel, as they do not now feel, the desire to do something further in a spirit of amity and good will? Why not do that? Why force this at the present time upon the people of this country? Why force it through parliament with the government's majority? Why do that? I cannot understand it, because this step that was taken in the Bank of Canada Act was a step further in advance, so far as my fellow Canadians of French origin are concerned, than any step which has been taken since confederation. It gave them the opportunity which, as I have pointed out, is the basis of all arguments that have been made to secure their bills, currency, from the bank printed in French as well as in English.
Now, to say that the will of the minority shall prevail over the will of the majority of the people of Canada is to create as dangerous a condition as it is possible to

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create. I am not a prophet, but I venture to suggest that this provision will create such a situation that every session will see a demand for its repeal. Just as regularly as the session comes someone will rise in his place and move for leave to introduce a bill to repeal it. I say that in the light of the experience which came to the former government between the date of the passing of this statute and the time we left office. I say it seriously to my fellow Canadians. It has nothing at all to do with my relations to party. I have told my friends, as I repeat, friends having business with me in matters connected with the party, that my view has nothing to do with the party view or with the view they hold. I am giving, however, my own experience from the time we placed this provision on the statute books until the moment we left office, and I know whereof I speak. I say, in the best of good feeling and most seriously to my hon. friends: Do not do this thing. Do not do it now. I say that in view of communications which came to me personally, some abusive, some insulting, none commendatory. They indicated a condition in this dominion which I did not think existed. But if it brought about a resentment so great, criticism as harsh as that to which I have referred, because we provided for a free choice of language, either French or English, what will the situation be when we compel the majority to accept the decision that ultimately all the paper money of this country shall appear in the two languages? That is the issue. Never in my time have I been so much moved in my desire to prevent what I know will result from this action, and I am not guessing about it. It is a conviction in my heart of what is inevitable, from communications I have received, and from statements made to me. I know we are doing something that we shall deeply regret. I see that you are looking at me, Mr. Chairman; it is six o'clock.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


Thomas Langton Church: I wish to say a word or two about this particular section, inasmuch as I mentioned the matter in connection with the second reading of the bill. The history of the world, in my opinion, has been the history of minorities, but the history of Canada has been the history of compromises. Majorities seem to have no rights and can 12739-231
get nowhere in this country. The principle of compromise was effected by confederation, section 133, on the bilingual question, and was distinctly set out in the British North America Act, and there has been no change in this respect in any of the decennial revisions of the bank acts that we have had from 1867 down to the introduction of this section 15. The law distinctly sets out what are the rights of minorities to the French language; they are governed by the British North America Act. Confederation was a compromise. I have a great admiration for the qualities of the French nation, for all they did in the great war. The untold privations and human sufferings, the trials and tribulations, the anguish and suffering they endured for the good of humanity will stand in the future among the brightest pages of the most sublime patriotism in the history of the world. As I say, confederation was a compromise on this question. What was that compromise? It will be found in section 133 of the British North America Act, and the end of it was to be there without any extension, as follows:
133. Either the English or the French language may be used by any person in the debates of the houses of the parliament of Canada and of the houses of the legislature of Quebec; and both those languages shall be used in the respective records and journals of those houses; and either of those languages may be used by any person or in any pleading or process in or issuing from any court of Canada established under this act, and in or from all or any of the courts of Quebec.
The acts of the parliament of Canada and of the legislature of Quebec shall be printed and published in both those languages.
My views on the second reading of this bill will be found in Hansard of June 2.
We had no banking legislation in this country, from 1867 on, other than in accordance with the provision for the revision of the bank acts every ten years which was silent on that point. Section 60 of the Bank Act on note circulation is more or less overridden by this new provision contained in section 15 of the present bill. For all these years we have been getting along very well together, and I might' point out that there was no objection when the banks, for their own purposes, and purely as a banking measure in certain communities which were largely French, made a certain issue of bilingual notes according to the population and the business done at those branches. Had I been here I would have opposed that concession then. But now it is proposed to write that into the law of Canada and make legal all notes in French of the Bank of Canada. There is only one way to go about this thing if it is to be done legally. I contend that section 15 of this bill is a violation of the letter and spirit of confederation as set

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out in section 133 of the British North America Act. Indeed there is no doubt about it. Section 133 lays down the law. Section 15 of this bill, I contend, is unconstitutional, and I am opposed to any extension of the principle it involves and of any compromise already made, but I believe the proper way for those who support this measure to go about the matter is to apply for an amendment of section 133 of the British North America Act, and then by way of the Bank of Canada Act, and I am opposed to any such amendment. I might point out that since the law was passed we have had the following innovations: one, federal blue book issued in two languages; two, our postal stamps were changed bilingually; three, bilingualism has secured a foothold even in the Ontario public school system, and a concession or compromise was permitted to allow a few notes in French for the use of branches in Quebec, in practice. And now parliament, by section 15 of this bill, is asked to issue notes in the French and English language. You cannot compromise on a great public principle. No doubt one side of a ten dollar note of this bank will be French and the other side will be English.
My stand on this matter is that I am absolutely opposed to any extension of the British North America Act along these lines. I have not an ounce of bigotry. I speak in this parliament sincerely and honestly what I conscientiously believe to be the truth and the whole, truth, and I never change my views! I support principles, and they are fixed and admit of no compromise.
In conclusion, I contend that this section is against the spirit and letter of the British North America Act and the purposes of the fathers of confederation; everything that was done by them along these lines we are now going to undo. The matter came up in 1934 in connection with a French bill, before the banking and commerce committee, and this parliament laid down that section 133 was the law. The various finance ministers since confederation at every decennial revision of the bank acts were opposed to any change in the direction of introducing a bilingual note, until section 15 of the Bank of Canada bill was here introduced. The Liberal party headed by Mr. Fielding was opposed to a bilingual bank note, and various finance ministers on both sides since confederation took the same stand; they were absolutely against the principle of this bilingual section. It is going to lead to untold confusion in connection with the circulation of these notes, some of them internationally. Further, there is no demand for such legislation. The matter was not discussed in the last election. I never heard it mentioned anywhere in
[Mr. Church.)
Ontario. I know the views of the people of Ontario. This note circulation clause of the Bank of Canada bill is copied from section 60 of the consolidated act of 1934 regarding banks and banking; the principle of that section is copied into the Bank of Canada bill with the bilingual feature added. I am not speaking for all the people of Ontario, but I believe I speak for some of the people of Ontario who are opposed to any bilingual extension of the British North America Act along the lines indicated, especially when it is recalled that Mr. Fielding, a former Liberal finance minister, and the banldng and commerce committee a few years ago took a very strong stand against any innovations or changes to make bilingual notes legal tender. The Prime Minister last Thursday night laid down a rule for minorities which he expressed in the following words:
The principle I am laying down is that there is no minority which is superior to the majority when that majority is the people of the country as a whole; and the people of the country as a whole have sent this present House of Commons to legislate.
They did not send this House of Commons to legislate to change the British North America Act and to have bilingual notes foisted on the people over their heads, and to upset the views held by all the finance ministers since confederation. I wish to protest against this dangerous change. It was never discussed in the constituency I represent. I have always argued sincerely and honestly along these lines; I shall continue to do so, and I believe I am taking the right stand in strongly opposing this innovation that is getting into our banking system, in the way I referred to it on the second reading of the bill on Tuesday, June 2. We have the Macmillan report; it is silent on this bilingual question. The various commissions took it for granted that this matter had been settled at confederation forever. I would have opposed any recent concession had I been here, and if necessary alone. I refer to the Royal Commission on Banking and Currency; I see there no reference whatever to bilingualism in their report. I have read the report three times; I studied the findings and the dissenting judgments given by one or more of the commissioners, and examined the index, and I could find no reference to or suggestion of any demand for bilingual notes in Canada. Why not leave things alone? As matters stand, those who need bilingual notes can get them at the French branches by applying to the branch office of the various chartered banks. I have consulted four or five bankers and they all tell me that there is no necessity for this bill; it is more of a political bill for

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political purposes than it is a banking or economic bill. For that reason I am strongly opposed to it, and I believe the people of Ontario and the English-speaking majority are strongly opposed to it and to any extension under confederation of section 133 of the British North America Act, which was a contract made with the people of the old provinces of Canada. To any extension of that principle I am strongly opposed, and I will vote and speak against it at every stage of this bill, because it is against the letter and spirit of confederation.


Mr. TUCKER (Translation):: Mr. Chairman, as a mark of my high regard for my Canadian fellow citizens of French origin, I wish to say a few words, as well as I can, in their own language.


Mr. LAPOINTE (Translation):: Hear, hear.


Walter Adam Tucker: I only wish I could speak French with the same fluency as our French Canadian members speak English. Since parliament has assembled most of them have delivered splendid addresses in English. I should like to return the compliment, if I could.
Some hon. MEMBERS (Translation): Hear, hear.


Walter Adam Tucker: One of the things which makes me proud to be a Canadian is that I believe that in Canada we have gone farther than any other people in rising above racial and religious prejudices.


Some hon. MEMBERS:: Hear, hear.


Walter Adam Tucker: In the constituency of Rosthern, which it is my privilege to represent in this house, there are large numbers of people belonging to various races who all have become excellent Canadian citizens. Rarely does one hear any mention there of religion or race. A man is accepted for what he is-a good citizen or a bad one. I look forward to the day when that spirit will prevail throughout Canada, from the Atlantic to the Pacific.
On my way back from the war, I beheld, when passing through the city of Quebec, a sight the recollection of which always gives me deep pleasure. On the battlefield of the Plains of Abraham, Canadian citizens have erected a single monument to the leaders of the English and French armies, Wolfe and Montcalm, who both fought and fell there. This is typical of .the feeling of the Canadian people.
We are just as proud of Montcalm as of Wolfe. They are two of the great heroes in our national history.
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Some hon. MEMBERS (Translation): Hear, hear.


Walter Adam Tucker: In concluding these few remarks in French, may I express the wish that the spirit in which we honour these two heroes may continue to grow in Canada so that we may work together, irrespective of race or creed, to make of Canada a land worthy of our heroic forebears whatever their origin, who were the pioneers of our country.
I will support this particular section of the bill.	i


Arthur-Joseph Lapointe: Mr. Chairman, before proceeding with the few remarks I intend to make, I wish to congratulate and thank my hon. friend from Rosthern (Mr. Tucker) for the kind words he has just uttered. He spoke as a true Canadian! I hope and trust that the views he has expressed- will grow and spread throughout the Dominion of Canada.
(Text) I shall try to make my few remarks in answer to the speech of my right hon. friend this afternoon as moderate as I can, and I must congratulate the right hon. gentleman on the moderation of the language he used in discussing this matter. I shall even say that I believe my right hon. friend to be sincere, but he is desperately and dangerously wrong in the sentiments he has expressed. My right hon. friend is sorry that this matter is being, as he said, precipitated into the political field. Will he pardon me if I say that he is the man who is precipitating this matter into the political field? I shall even say that I am sorry my right hon. friend said that he expects this matter will come up at every session in the future, and that there will be motions for repeal, and so on. These words, coming from him, are almost a threat; at the least they are an invitation to do the very thing which he deplores.
I do not believe this will happen. If you look at the matter, Mr. Chairman, I think it is very simple. Before this Bank of Canada Act was introduced by my right hon. friend there were banks in Canada issuing their bills in both languages. The Banque Canadienne Nationale has branches not only in the province of Quebec but all over Canada; the Banque Provinciate du Canada has branches not only in the province of Quebec but throughout Canada, and the notes of those two banks are and always have been bilingual. I have in my pocket a five dollar bill of that type, but I shall not show it in these dangerous times. The parliament of Canada has taken away from these various banking institutions the right to issue notes. Under
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the act as it stands this is to be done gradually, but in a few years there will be in this country no other bank notes in Canada than those of the Bank of Canada. I ask every fair-minded man in this committee whether it is right that the French population of this dominion, who have always had their bank notes printed in their own language, should be deprived of that right by the parliament of Canada.


Some hon. MEMBERS:: You are not
deprived of it.


Ernest Lapointe: I am
coming to that, and probably that is the very reason why my right hon. friend and his government did what they did. That was not a concession, as my right hon. friend has said so many times. I come back to that word "concession," which I do not like. We are not conceded the right to live or to breathe the air of this country. We have that right. It was not a concession. There always have been bilingual bank notes in Canada, as my good friend from St. Antoine-Westmount (Mr. White) said the other day in his fine Canadian language. He showed that even before confederation there were these bilingual bank notes, and my good friend, who is as broad-minded as they make them, said that he was in favour of the change proposed by this bill. But mind you, Mr. Chairman, there was something else to justify making it compulsory that there be notes in both languages. Under section 133 of the British North America Act both languages are official in this parliament in the federal courts and in the courts of the province of Quebec. These bank notes are legal tender. As such they will be deposited in the federal courts and in the courts of Quebec where both languages have a right to exist. Surely it is right that these bank notes should be in both languages. I said in 1934, when I proposed the very amendment which is now embodied in this bill, that I was congratulating my right hon. friend on recognizing and acknowledging that this was to be done. What I was criticizing at the time, and what I criticize to-day in his attitude, is the method by which it was done. The moment you concede the thing should be done I cannot understand why there should be two opinions about the right method.
My right hon. friend speaks of the rights of the majority. First, let me tell him he is wrong in assuming to himself the right of speaking for the majority. In this house a majority of the English-speaking population of Canada is represented on your right, Mr. Chairman, and there is also a majority of the French-speaking population represented

on your right. In what way could the rights of the majority be infringed by this amendment? I tell my hon. friends on this side of the house or on the other side, when anybody in Canada, whether during an election campaign or otherwise, blames them for the stand they are going to take in this matter, to ask those who criticize them if they prefer to have a bank note all in French if they are English-speaking, or all in English if they are French-speaking, or to have their own language on one side and the other language on the other side. After all, the bank notes issued under my right hon. friend's legislation are legal tender everywhere in Canada. You can pay a $10 debt in Ontario or Saskatchewan with a $10 bank note in French; no one can refuse it. But would not any man be better pleased to have a note with his own language that he can read on one side of it, if he cannot read the other side? I repeat that I cannot find any ground for the objections which are being set forth against this proposal. They are absurd.
In other countries there are some wise people too. I challenge anyone in this committee or elsewhere to show me a bank note of a country in which the language conditions are as they are in Canada, which bank note is not bilingual or even trilingual. Take Belgium; the bank notes there are printed in French and Flemish; in Switzerland there are three languages on the bank notes, French, German and Italian, and it is not so bad after all. In our commonwealth of nations there is South Africa where they have the same condition as in Canada, the bank notes are in Dutch and English. In the Irish Free State they have the two languages of the country on the bank notes. In no country of the world have they two sets of notes, one set in one language and the other set in the other language. Why should we have this stupid thing in this fine Canada of ours? I cannot believe tnat there are people in my country who are so narrow as not to see that it is better to have a bilingual bank note than to have two issues, one in English and one in French.
My right hon. friend says that under our constitution there must be two different sorts of documents. It has always been so, he said; you have the documents of the house in French and English, giving you the right of selection. If you prefer them in French you take the French, or if you prefer the English you take the English. This is so as a matter Of convenience, because the document is less bulky, and for considerations of that kind. But is it so because of the constitution? I have imder my hand the rules of this parliament as issued from time to time since

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confederation. The first book of rules was issued in 1868, and in it one sees exactly what nay right hon. friend said is not done in Canada. From the beginning they had one page in French and the alternate page in English, throughout the book. I have the books of 1876, showing exactly the same thing, and in 1896 the same thing. Since then it has been thought more advisable to have one book all in French and another all in English. But this was done not because of the law of the land, not because of any constitutional provision, but merely as a matter of convenience. I have before me similar books from the Irish Free State.
Let me say also how awkward it is for the banks to have to keep two sets of bank notes in their various branches where they have customers who ask for French notes or for English notes. To do so complicates the business of the banks for no good reason whatsoever.
Now, let me refer to what my hon. friend said, and dwelt upon for quite some time, that Canada has two official languages but is not bilingual. My hon. friend the member for Essex East (Mr. Martin) asked him a question which he disregarded but which was very proper. May I read to my right hon. friend the words of a man who has left his mark on the history of Canada, a man who was the leader of the party which is now led by my right hon. friend. Let me read to my right hon. friend the words of the greatest Conservative leader of all time in Canada, Sir John A. Macdonald, and I shall ask my right hon. friend to compare the words of that great leader with those the right hon. gentleman uttered this afternoon. Those words are found in the debates of the House of Commons for 1890, column 745:
I have no accord with the desire expressed in some quarters that by any mode whatever there should be an attempt made to oppress the one language or to render it inferior to the other; I believe that would be impossible if it were tried, and it would be foolish and wicked if it were possible. The statement that has been made so often that this is a conquered country is a propos de rien. Whether it was conquered or ceded, we have a constitution now under which all British subjects are in a position of absolute equality, having equal rights of every kind-of language, of religion, of property and of person. There is no paramount race in this country; there is no conquered race in this country; we are all British subjects, and those who are not English are none the less British subjects on that account.
I commend those words to every Canadian, in this year 1936. They are as true to-day as they were at that time. I note with pride that my hon. friends opposite are laying
wreaths at the base of the monument to Sir John A. Macdonald in Kingston. All I wish is that his ideas may grow and germinate in this Canada of ours, and that all - those who claim that they are his disciples; that they learned their political views and ideas from what he taught them in days gone by, may adhere to the views he then expressed, and stand by the principles which he said should prevail in all the Canadian provinces.
I believe I might be permitted to relate an incident in my life. Some years ago I had the honour to represent Canada on the assembly of the League of Nations in Geneva. At that time a question of minorities which had been annexed to other countries after the treaty of Versailles was being discussed and debated. One gentleman, a prominent delegate in the assembly and at that time president of the confederation of Switzerland, Monsieur Motta, said this to the delegates of the world there assembled:
In Switzerland we have no minority problem. We are three races living here side by side. I belong to the race which is less populous, namely the Italian race. One of the two other languages I do not speak. I have been elected twice as president of this republic, even by men whose language I do not know. We have no minority question; we are all equal. No person in Switzerland believes that there is one controlling or dominating race or language, and I cannot see why those problems are discussed in other countries constituted as is Switzerland.
I wish that in Canada there may be no minority problem and that we should all act towards, live with and treat- others as Canadians, purely and simply.
I will tell my right hon. friend that at this time in my own province I have read speeches made by young people who advocate the separation of Quebec from confederation, and the creation of a new French country. They claim that they cannot have their rights recognized in -the Canadian federation. They are wrong; I have told everybody that they are wrong. From my seat in this house to-night I tell them that they are wrong. Even if their plans were carried out they could not achieve what we have achieved in confederation in building up a great free country. The same advice I give to those who think that people of my race should form a party of their own, and should not join one or the other of the great parties which divide public opinion in Canada. They, too, are wrong. Let us adhere to that party the prevailing ideas and principles of which are nearer to those held by us. It is desirable that no political party should be based on racial lines. The view which is sometimes expressed reminds me of the Roman Emperor
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Caligula who used to say that he wished that all the Romans would have only one head so that he might cut them off with one stroke. I do. not think that is desirable for any minority or any part of a country.
We should continue as we are. We should plead with our friends, our brethren from the other provinces in Canada, to join hands and hearts for the greater development of our country. My right hon. friend has pleaded with me; I plead with him when I say that I do not think it is wrong on the part of those people who speak my language to want to have bank notes with words in their language appearing thereon. I do not think that is wrong. Surely I cannot be branded as a narrow-minded nationalist. When I came to this house I could not speak a word of English; that was many years ago. Had I shared the views of some of my fellow-citizens in Canada I would not have undertaken the drudgery of acquiring that little knowledge I have of a language which at that time was so strange to me. It meant work to acquire that language. I thought I was acting as a good Canadian when I undertook to study it. Surely my hon. friends from my native province who are sitting here to-night are in the same position. It cannot be asked that they be considered only as people who are having concessions handed to them, as my right hon. friend has said. I plead with him not to use that word "concessions" any more either here, or anywhere else in Canada. We do not want any concessions. We do not need any concessions. We do not ask even privileges, we ask simply the right to live as we have lived. There are nine generations of my family buried in this country. I do not need concessions in Canada or anywhere else, and I believe no man or woman in Canada will accuse us of asking too much when we ask what is embodied in this amendment to the Bank of Canada Act.


Mr. HOWARD:: Mr. Chairman, after listening to the wonderful speech delivered by our good friend from Quebec East (Mr. Lapointe), I hesitate to speak. On the other hand, as an English-speaking Canadian I should like to express my opinion on this subject because I took a stand upon it in the banking and commerce committee when the former government introduced its legislation dealing with the Bank of Canada.
I do not think that in this Canada of ours we should be going backwards, nor do I think any member of this house or any of the people of this country wish that. I have in my hand a piece of money coined in 1837.

On one side is engraved "Province du Bas Canada-deux sous," and on the other side "Bank token-one penny," and the coin carries the coat of arms of the city of Montreal back in 1837.
I have another one before me, and on one side of it are the words "Province du Bas Canada-deux sous"; and on the other side "Bank token-one penny." This coin also carries the coat of arms of the city of Montreal, and is dated 1837.
I have before me another one, and on one side appear the words "Province du Bas Canada-un sou," and on the other side "Bank token-halfpenny, 1837." This also carries the coat of arms of the city of Montreal.
Another coin I hold in my hand has on one side the words "Lower Canada," in English, and on the other side in French "Un sou, 1837, Agriculture Bas Canada."
I have before me another coin, and on one side appear the words in English, "Quebec bank token, halfpenny," and on the other side in French, "Province du Canada, 1 sou, 1852," and bearing the coat of arms of the city of Quebec.
Another coin I have in my hand has on one side the words in French, "Province du Canada, deux sous"; and on the other side in English, "Quebec bank token, 1 penny, 1852."
When you go into other countries you find that in Belgium, for instance, the coinage is printed in French and in Flemish; in Japan you find an entirely different situation from Canada as to nationalities; yet the Japanese currency is printed in both the English and the Japanese languages. I find the two languages on this Japanese coin, one yen, and its English equivalent.
In China there are many languages, and their coins nearly all carry the English language as well as the Chinese.
In German West Africa, where we find German, Arabic and Dutch people, we find two languages printed on their coins.
On the coinage of British North Borneo we find the English and Bornese languages used.
In East India the coins are printed in both English and Hindustani. In India itself, where they have four principal languages, and in several other countries we find about the same principle carried out in the coinage.
But here we are to-night in the parliament of Canada making almost an issue of the use of the French and English languages on the paper currency of Canada, and after what I have said, Mr. Chairman, of the practice in other countries I am, to say. the least, very much surprised at the discussion that has taken place on this clause. I considered my French-Canadian fellow-citizens as heirs and

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joint heirs with me in the development of this country of ours. I consider them neither my inferiors nor my superiors, and all I ask is that we go forward hand in hand together to develop and make this Canada of ours what we all wish it to be. Some people may think this is a very small matter, some may think it is a large matter; but I would say that nothing is too small to create animosities and hard feelings which may prove a very serious hindrance in the development of this country.
May I give to my English-speaking fellow-members an outstanding example of how the two great races in this country can get along together in amity? In the city of Sherbrooke, in the county of Sherbrooke, back in 1881, the first French-Canadian mayor was elected for the city. At that time the population of the city of Sherbrooke was very largely Englishspeaking Canadians, about eighty per cent English to twenty per cent French-Canadian. In the municipal council there was one French-Canadian and all the rest were English-Cana-dians; yet with a couneil so overwhelmingly English a French-Canadian mayor was elected for the city. What has been the result of that act- of equality and of generosity, not of any concession, which was the term used by the leader of the opposition? The result was that two years later an English mayor was elected, and when his term had expired a French-Canadian mayor was again elected. To-day the city of Sherbrooke is eighty per cent French-Canadian and twenty per cent English-Canadian, but that same tradition has been carried down through all the years, an Englishspeaking mayor for two years and then a French-Canadian mayor for two years. I quote that example because it shows the sense of justice and fair play that has animated the two great races in this country in the city of Sherbrooke since 1881, and I hope the practice which has prevailed ever since will always continue.
I shall not delay the committee further beyond giving one more example along the same line. Only two years ago a French-Canadian mayor of the city of Sherbrooke who had filled his two-year term of office, in view of the change in populations, decided that he would seek a second term. A great discussion took place, and finally an English-speaking citizen ran against the French-Canadian mayor whose term of office had expired, and to the honour of the citizens of Sherbrooke, when the ballots were counted in every single French polling division in the city a majority was given to the English-speaking mayor, showing the great sense of justice and fair play that animates our people. That is the reason why I am so keen that we do not call this "concessions." Our French-speaking fellow-citizens do not want concessions, and so in conclusion I would say: Let us play the game fairly and squarely; let us join hands one with the other whether French or English-speaking; let us have bilingual currency in this country of ours and show that we want to play the game fairly regardless of race, religion or nationality.


James Shaver Woodsworth: This is not a matter on which I wish to speak at any length, Mr. Chairman, but in case there is a vote I wish to place my own personal position before the committee.
Two years ago when the legislation setting up the Bank of Canada was before the house the bill was reported from the committee and at the last moment there was introduced an amendment, as I recall it, along the lines of the clause now before us. I voted against that amendment, not so much on the merits of the case, I must confess, but because I resented an amendment of that kind being introduced at the last moment when it could not be adequately discussed and because it was dealing with a matter that was so likely to arouse a good deal of discussion and perhaps bitterness.
I must say that as between the two plans, the one of having a bilingual currency and the other of having two sets of notes, as at present, my judgment is that the bilingual currency is preferable, and for that reason I personally shall have to support the legislation as it is before us to-night, even though I voted against an amendment along this line previously introduced. And yet, in saying that, I regret that the government has seen fit to make the change at this time. I listened to and was very greatly impressed, as we all were, by the eloquent speech of the Minister of Justice (Mr. Lapointe). But I do not think that in matters of this kind the question can be settled simply as one of right or wrong; it is much more complicated than that. The English-speaking people of Ontario, or at least a great many of them, start from one set of premises; the Frenchspeaking people and even the English who reside in Quebec start from an altogether different set of premises, and there is no point at which these two sets of arguments meet. After all, the problem resolves itself largely into a conflict of fundamental ideas which people hold to most tenaciously. I think there was something in what the leader of the opposition (Mr. Bennett) said, though I regret his use of the word "concessions," that unless we are very careful in Canada we may easily introduce matters which will prove very inflammable indeed, and for my part I would say that our French-Canadian friends will have to exercise just a little bit of care
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not to be too aggressive in pushing their particular point of view, just as I feel very strongly that the English speaking-population have sometimes been prejudiced with regard to these matters of language and so on. For my part it is a matter of indifference whether we have bills printed in both languages or not; it is not important at all from my standpoint. I say, however, that if we are going to carry out the spirit for which the Minister of Justice pleads we shall 'have to recognize a little more clearly than we do the point of view of others in Canada and not to press too aggressively our own viewpoint. I know that is a little vague and it is an ideal which it is very difficult to attain, but I felt that to-night I ought to give my own point of view. That some of my colleagues may not think as I do merely emphasizes the fact that such questions provoke personal reactions and that a good deal depends upon how we weight this or that factor in the problem.
Mr. DUNNING; Naturally, a number of considerations were in the mind of the government in dealing with this matter and in drafting this particular section. I take the view that the question of principle, in so far as there is a principle, was adopted in the year 1934 by the parliament which preceded this one, but the principle was applied in a manner calculated, as experience has proved, to produce rather than to allay the kind of friction to which reference has been made. There is a marked difference between printing separately in each language the routine proceedings of this house-which any one of us may accept or reject-and printing separately in each language legal tender which passes from hand to hand. We have plenty of evidence of the objection to the present method. Frequently protests come to me, as my right hon. friend admitted they came to him, from English-speaking parts of Canada. Why? Because French bills had turned up there. There is no means whereby the turning up of English bills in Quebec or of French bills in other parts of Canada can be prevented, and there is complaint on that score. I say that a more intelligent method of dealing with the matter is to put both languages on the same bill. The parliament and the government of Canada during the course of many years have recognized the desirability of this method in matters of currency. For example, I have in my hand a Canadian postal note, the kind of postal note that has circulated in Canada these many years, printed in both languages on its face. I have before me a Canadian postal money order circulated in these terms in Canada these many years, printed in both languages.

I have personal reason to know that prejudice can be aroused by these documents. I am one of those who have suffered politically because of my belief in this matter. In 1930 the candidate supporting my right hon. friend made the most, and in the most public manner, of what is called the French language issue and promised without qualification that if his party were returned to power French on these postal notes and post office orders would be removed. This did not happen. But I say that if we were right in 1934 in providing for French separately in connection with currency we ought consistently at the same time to have provided for separate English and French postal notes and postal money orders.
Now, with regard to the purely practical aspect, may I point out that the method at present in use is expensive to the bank. It involves two separate sets of plates for every note. If that can be reduced to one, there is a saving of $29,000 in connection with any new note. The existence of the two different sets of notes involves, of course, separate sorting of the stock and the turn-over. Think of it-and the turn-over. Although the demand for French notes is experienced chiefly in Quebec and Ontario, it is necessary to keep a stock of both at all the agencies of the Bank of Canada right across the country, because we are required to make the notes available in either language throughout the dominion. The need to sort the notes as they are paid in nearly doubles the labour of sorting in the important agency of Montreal and considerably increases it in Ottawa and Toronto. This is indeed the chief extra cost which is incurred.	Both	English	and French bankstend to pay into the central bank notes which do not suit their requirements as to language, and it therefore follows that the total receipts and reissues of notes are greatly increased above what would normally be the case if the notes were bilingual. It is my opinion that the	cost	of the	work	of sortingthe notes of	a single type	would bemuch less than half the cost now involved. The existence of two kinds of notes also involves a double set of books with respect to the currency issue, and, of course, larger space in	vaults, which	is not	possibly a
material factor. In connection with expense, it is bound to increase steadily by reason of the diminution of the chartered banks' issue. Expenses due to the present system will necessarily increase steadily. In connection with the sorting alone I believe it is fair to say that between $9,000 and $10,000 per annum could be saved by the substitution of a single note for each denomination in the place of the two which are now issued. There are

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other considerations of a minor kind, but in the main this is, I subniit, the proper thing to do. It is the practical application of the principle which the parliament of Canada accepted in 1934.
Section agreed to on division.
On section 16-Gold and securities to be turned over to bank.


Richard Bedford Bennett: I have to remark that here, again, the draftsman has departed from the usual rule, for anyone picking up the statute after it has been amended by this committee will find it difficult to discover how the Bank of Canada came into being at all, having regard to the disappearance of the section that deals with the certificate, and now the government is eliminating from the record the provisions that deal with the bank assuming the liability it did with respect to dominion notes and the turning over of the gold which the bank held. I am only going to point out, that in no previous statute which I can recall that had to do with the creation of even an ordinary corporation did the sections which had to deal with the antecedent conditions of its coming into being disappear because certain amendments were made. I content myself with making that observation.


Charles Avery Dunning: I think my right hon. friend has a point there. Even I as a layman can see that the retaining of a proviso which relates to a non-existent section in so far as the statute is concerned after it is amended does appear to be an error. Perhaps the Minister of Justice (Mr. Lapointe) will be good enough to move that section 16 of the bill be struck out.


Richard Bedford Bennett: Well, it may be necessary to maintain it because of certain changes which were made in another section. It will be recalled that, in the power which is now conferred upon the bank to acquire securities, reference is no longer made to excluding the securities that were given to the bank to ensure it against loss in connection with its assumption of the obligation connected with the issue of dominion notes, and the two sections, of course, have a close relation the one to the other. This old section 16 was the one which enabled the Bank of Canada to take over the gold held by the country as well as by the chartered banks, and which enabled the new bank to receive from the crown, that is from the dominion, certain securities bearing rate at three per cent per annum for the purpose of being an effective and efficient guarantee against loss on the part of the bank because it had assumed
responsibility for the note issue by the Dominion of Canada. If we repeal, as we are doing, subsections three, five and six, and then say-
Provided that the authority to pay the principal of and interest on securities issued to the bank under the aforesaid subsections three and six shall continue.
-six and three both being repealed, we certainly have a condition to which even I, in my capacity as schoolmaster, might direct attention. '


Ernest Lapointe: Suppose we cancel section 16 altogether.


Charles Avery Dunning: That is the suggestion.


Richard Bedford Bennett: All right; I think you
will find some more difficulties.


Charles Avery Dunning: Well, my right hon.
friend can see difficulties I-


Richard Bedford Bennett: I have no intention of
obtruding them on the notice of those who have no desire to see them.


Charles Avery Dunning: I was accepting what I
thought was a valuable suggestion by my right hon. friend, and proposing that section 16 of the bill might be struck out. As I understand it, that would have the effect of leaving in the act the subsections noted in small print on the opposite page. I am trying to find out what difficulty would be created by leaving them in the act, but inasmuch as they relate to what shall be done on the day on which the bank shall be authorized to commence business-that is the whole point, I think-I thought my right hon. friend would look at it in his capacity as a lawyer.


Richard Bedford Bennett: He has no advice to
offer. I have been endeavouring, Mr. Chairman, to present suggestions which I hoped would be helpful. Having had them designated in the form they were, I address myself to the chair and leave myself entirely in the hands of the committee.


[Stage Direction]
Section agreed to.
On section 17-Reserve defined.
Mr. REID:: Before that section is carried there are some matters I should like to speak about, and it is my intention to move an amendment to section 26 of the act. It will be remembered that last year and again this year I introduced into the house a bill to amend the Bank of Canada Act in respect of the remonetization or greater use of silver. On both those occasions this bill was thrown out by the Speaker as not being in order, but on both occasions only fifty per cent of the proposed measure was criticized by the
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Speaker. The particular matter I have in mind this evening is in connection with subsection 4 of section 26, which is the clause relating to the agreement signed by Canada in London, in 1933. The present clause in the bill reads thus:
(4) The bank shall during the years 1935, 1936 and 1937 purchase and hold newly-mined Canadian silver as and when required so to do by the minister, but the bank shall never be required to purchase more than 1,671,802 fine ounces in any year.
In my opinion this should not have been placed in the Bank of Canada Act at all. This was in accordance with an agreement signed in London in 1933, when, I believe, some twenty-six countries attended. At that gathering a resolution introduced by the United States for the greater use and the adoption of silver was finally disposed of by certain nations agreeing to do certain things within the next few years. The United States, Canada, Australia, Mexico and Peru agreed to purchase between them 35,000.000 ounces of silver during the years 1935, 1936 and 1937, and other countries, including India and Spain, agreed not to sell over a certain amount of silver during those same years. This was introduced into the house, and, as I said, should have been in a special bill and not have been placed in the Bank of Canada Act. Of the 35,000,000 ounces, the United States agreed to purchase 24,421,410 ounces; Canada agreed, as I have pointed out, to purchase 1,671,802 ounces, and the other countries I have mentioned agreed to purchase the balance. Briefly, that is the history of the London conference agreement, but I want to draw particular attention to one word in the Bank of Canada Act which I do not believe exists in any other statute of this country, and that is the word "never." It says in the Bank of Canada Act that the bank shall "never" during those years purchase more than that.


Charles Avery Dunning: It does not say "never."


Thomas Reid: The act says that the bank shall "never" during the years mentioned be required to purchase more than 1,671,802 ounces. When the matter was before the house I endeavoured to have that word "never" taken out. I asked for an explanation, and I think it is pertinent to the amendment I am offering to read the remarks of the then Prime Minister (Mr. Bennett) as they appear at page 4262 of Hansard for June 25, 1934:
The word "never" is probably an undesirable word to use in a statute, but it was put in this bill for a definite purpose, namely to prevent false hopes being created in the hearts of those who might be concerned. During the currency of the world's agreement it will be observed by the hon. gentleman that every-
TMr. Reid.]
thing depends upon the agreement being kept. And India, being tha key to the situation and having agreed as she did agree, we have added these words to indicate what our position will be. because we will have more silver than we will know just what to do with.
Right there, Mr. Chairman, the right hon. gentleman was in error in stating that we would have more silver than we would know what to do with. In the mint at that time they had between three and four million ounces of silver which was being used for the issuing of coins, but at that time none had been purchased under the agreement. During the past few days we have heard a great deal about living in the days of ox carts, but I wonder how many members realize that in spite of the up to dateness of our so-called monetary system in connection with the issuing of cheques and credit, the faith of the people of the world still clings to the precious metals. When I mentioned that of silver I want to point out that sixty per cent of the population of the entire world still use silver in their everyday transactions and still look upon it as real wealth.
I realize, in advocating this change, that most people fear that the printing press will be turned on, but in the short time I am going to take up I am going to try to show that we have here something that will act as a kind of a brake and a stabilizer, if I can use that word, against the issuing of unlimited paper money. Confidence is the one thing the people must have in their currency if we are to cany on without panic or disaster, and we must also have discernible limitations. I am going to endeavour to show that silver is one of those discernible limitations, and I maintain that we should add it to gold in connection with the further issue of paper currency.
The present valuation of our gold, which is roughly $180,000,000, has been brought about by the action of the United States, which raised the price from $20.67 per ounce to, roughly $35 per ounce. In this country we are getting the benefit of that action. No one can say how long that arbitrary value will remain; it may drop or rise again to-morrow. I listened with a great deal of attention to the hon. member for St. Lawrence-St. George (Mr. Cahan) when he spoke of uncontrolled inflation and mentioned what happened in Germany. I should like to point out to the hon. gentleman that the value of the United States dollar in the markets of the world has not been reduced by the issuance of millions of paper silver certificates. It is true that when gold was revalued at $35 an ounce the dollar dropped to about sixty cents, but after the issuance of silver certificates by the United States the value remains

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at about the same figure. The policy of the United States is worth noting. They have undertaken by statute to purchase silver until the silver reserve amounts to twenty-five per cent of the gold held by that country, and they are paying for the silver without going to the banks and borrowing money on which interest must be paid. It must be borne in mind that the silver certificates, one of which I hold in my hand, are just as valuable as the Canadian dollar, if not more valuable. On its face the silver certificate says, "one dollar in silver payable to the bearer on demand;'' while if one looks at our bills one finds that all one can do is to exchange one piece of paper for another. So, if it comes to having something tangible, the United States dollar may have the edge on ours, and in a case of a panic it might be in greater demand because it is backed by a precious metal.
What has Canada done in regard to silver? I should like to point out, first, that Canada is the third largest producer of silver in the world, with the United States the leading nation. In 1935 Canada produced 10,000,000 ounces of silver, so this country has a great deal to gain by recognizing this metal. We are trying to extend our trade with the United States, but in my opinion we slapped the United States in the face when we inserted the word "never" in this act, saying that we were not going to raise false hopes in the hearts of people with regard to silver. It may be that no leadership is going to come out of Europe and that by turning to the orient and South America the United States is going to take the lead in the Pacific as far as trading is concerned. If so her silver policy will play an important part. To carry out her policy she will still have to buy well over a billion ounces of silver, and I may say that at the moment she is buying practically all the newly-mined silver produced in Canada. Last year I believe the United States made a profit of some $19,000,000 on the newly-mined Canadian silver. When the hon. member for Vancouver-Burrard, (Mr. McGeer) was -speaking the other evening he endeavoured to outline the profit that was accruing to this country in regard to silver and the silver dollar. He was not quite correct, nor was the Minister of Finance correct when he stated that we were making no such profit. My information comes from the master of the mint, and it may interest many hon. members to learn that on every silver dollar issued we make a profit of between sixty and seventy cents.


Richard Bedford Bennett: That is a gross profit.


Thomas Reid: Yes. So far we have issued approximately $500,000 in silver, and on every one hundred thousand silver dollars issued by the mint this country makes a profit of between sixty and seventy thousand dollars.


Charles Avery Dunning: Net or gross?


Thomas Reid: Gross. As has been pointed out, in Canada silver coins are eight-tenths fine, and there are three-fifths of an ounce in each dollar. Each ounce contains 480 grains. If the silver in our dollar were pure each dollar would contain 360 grains, but it is only -800 fine. Until 1921 our silver coins were -925 fine, but in 1921 the act was changed and we reduced the percentage of silver in our coins until now they are -800 fine. So a silver dollar actually contains only 288 grains or six-tenths of an ounce of silver. If silver is bought on the world market at forty cents an ounce, as it has been bought at times, the actual cost of the silver dollar is only twenty-four cents. But, irrespective of the price of silver, every ounce of silver minted makes $1.60 in coin, so that if an ounce of silver costs forty cents there is a gross profit of $1.20 on every ounce minted.
At one time this country produced as high as 30,000,000 ounces of silver a year. In 1910 there were produced 32,869 264 ounces, and it might interest the committee to know that there were at that time engaged in the industry approximately 15,000 men. Last year the production was not as great; we produced only some 16,000,000 ounces, and there were engaged in the industry only some 1.500 men. To-day we are looking for employment for our people, and right here is something which we can produce in abundance and which is in world demand. Here we have in our hills, especially in British Columbia, a product which is in demand in most countries of the world and will certainly be in demand in most countries of the world for some time to come by our neighbour to the south, which country has to buy well over a billion ounces if they fulfil their agreement or statutory requirements. Of course our bankers do not like that idea, as we would be making money or currency without any interest and naturally they would be against that. Those who trade in money are the ones who grow rich; the others grow poor, and the United States, by giving the lead in silver may well, as I say, become the leading trader in the orient and Pacific countries. We at least should have supported the United States in her silver buying policy.
Many countries to-day are turning to silver. One notices when a panic takes place, as has taken place in France, that the first thing
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the people do is to get hold of either gold or silver and hide it or take it out of the country. Some day there may be in the world a perfect system under which all business can be done with paper money, but until that time comes we have to do business with the world as other countries want us to do it. I repeat: There are over 1,200,000,000 people in the world who use silver or live in silver using countries. It may be said that we might disrupt the world if we went on a silver basis. I realize that if the economic affairs of a country are changed too quickly, this might lead to confusion, but I noticed the other day in this connection that experts are now claiming that if Great Britain paid her debt now to the United States this might create havoc in that country. It is questionable, of course, whether that debt will ever be paid. I am advocating, however, that greater consideration should be given to this silver question. The trade of the world, it should be noted, can be paid for in only two ways, either in goods or in some currency acceptable to the country which is selling the goods. It was when barriers were raised by each country against others, and countries were forced off gold, that the tragic circumstances of unemployment with its consequent distress which we have witnessed during the past few years took place. There is not enough gold in the world to finance the world's trade. Three countries practically control it all. I believe the United States is up against the financiers of the old world, who are endeavouring to cling to the gold fetish, but it may well be that the United States by her silver policy will compel those nations to come back to the old system and again use silver along with gold. In Canada we could well use all our silver. The leader of the opposition this afternoon talked about gold going out of this country, pointing out that it might be well to keep that gold here-


Richard Bedford Bennett: Some of it.


Thomas Reid: 
Richard Bedford Bennett: Did we not have silver in the vaults?


Thomas Reid: The information I have is that there was none in the vaults; that all the silver was held in the mint. There may have been some held in the vaults for the mint.

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Richard Bedford Bennett: Part of it had been purchased as far back as the time of Sir Henry Drayton as Minister of Finance, shortly after the war. I was wondering if the hon. member was saying that the amount which was included in the vaults of the Department of Finance was there for the mint, because it was all to go there ultimately.


Thomas Reid: It was held for the mint by the Minister of Finance, but it was held for coinage purposes. There was no silver held at that time for the redemption of dominion notes. That did not come about until we procured it under the London agreement. Subsection 2 (a) refers to silver bullion received under the next preceding section. There was no silver held for the redemption of notes, so no silver could be taken over under the bank reserve.
I am proposing an amendment to take out the word "never" and to make the amount mentioned in the London agreement, namely
1.671.802	fine ounces the minimum amount instead of the maximum amount as at present. I move in amendment:
That subsection 4 of section 26 be deleted and the following substituted therefor:
(4) The bank shall purchase and hold newly-mined Canadian silver as and when required so to do by the minister, provided that during the years 1935, 1936 and 1937 the bank shall be required to purchase and hold not less than
1.671.802	fine ounces in any year.
Before the amendment is put I should like to say one word more. I know the statement will be made that the bank is not prohibited from purchasing silver, but if hon. members will read the act as it stands to-day I think they will agree that this is a prohibitory clause, and that the bank cannot purchase unless the minister says so. When we examine the present clause we find it states that the bank shall during the years 1935, 1936 and 1937, purchase and hold newly-mined Canadian silver as and when required so to do by the minister. Stopping at that point one would conclude that the minister could order the bank to purchase more silver. Then, if one reads the balance he will find that the act actually prohibits or precludes the minister from ordering the bank to purchase more, because it states that the bank "shall never be required" by the minister to purchase more than 1,671,802 fine ounces. My amendment does not interfere with the first paragraph; it permits the minister to purchase silver as and when he requires to do so, and it makes the London agreement amount the minimum rather than, as at present, the maximum. This will be at least a gesture towards our neighbour to the south who is endeavouring to cut a new path and to bring
about, if possible, stabilization of world currency, if I may use that expression. I would ask the minister's very favourable consideration of that which I have now placed before the committee.


Charles Avery Dunning: The change involved in the amendment is that the minister's power to require the bank to purchase newly-mined silver is extended indefinitely. By the subsection now existing the minister's power extends to the years 1935, 1936 and 1937, the language of the statute being:
The bank shall during the years 1935, 1936 and 1937 purchase and hold newly-mined Canadian silver as and when required so to do by the minister ...
And for the time being I shall stop at that point. The amendment is that:
The bank shall purchase and hold newly-mined silver as and when required so to by the minister-
Without any limitation on the minister's power to require the bank so to do to the three years involved under the present law. Then, the proviso is changed, because the law as it stands at present is:
. .. the bank shall never be required to purchase more than 1,671,802 fine ounces in any year.
The amendment is:
. .. provided that during the years 1935, 1936 and 1937 the bank shall be required to purchase and hold not less than 1,671,802 fine ounces in any one year.
I am inclined to the view that on both these counts the amendment is out of order. The first suggestion enlarges the minister's power to require beyond the year 1937, and the change from "never be required to purchase and hold not less than" to "shall be required to purchase and hold not less than," is out of order as a measure which could be introduced only by a member of the government and with the approval of his excellency.
Mr, REID: Before the question is put, may I say that I am sorry the minister has taken that attitude. When I put my views before the house on a previous occasion this part of the proposed change was never touched upon. Exception was taken to the first part. It was pointed out that no member could introduce legislation involving an expenditure of money. I contend that it looks now very much like quibbling on words. I am endeavouring to give the minister power, but I am still permitting the Bank of Canada in the years 1935, 1936 and 1937, to purchase 1,671,802 fine ounces of silver. That is the real gist of the amendment. At the present time the bank cannot purchase one ounce more, and if hon. members will take the trouble to look
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at the last statement of the Bank of Canada they will find that it has only two years' supply on hand. She cannot purchase more because of the prohibitory clause in the Bank of Canada Act, and to-day we are allowing our silver to cross the line, where the United States are making millions of dollars out of it. We shall before long find ourselves on the short end of the stick, if some action is not taken. If the amendment is not worded correctly, perhaps the minister would word it in a manner which would take it outside the prohibitory rule.


Charles Avery Dunning: Mr. Chairman, while you are considering the point of order on the main question involved, may I call the hon. member's attention to the fact that the present act merely puts a limit upon the amount of silver which the minister may require the bank to purchase. It does not mean that the bank of its own volition could not acquire a larger amount of silver. Paragraph (a) of subsection 1 of section 21 of the act empowers the bank to buy and sell gold, silver, nickel and bronze coin and gold and silver bullion. The limitation in the section of the act now, under discussion is simply a limitation upon the minister's power to require the bank to do so and so. I point out that under another section of the act the bank has power to acquire silver. The limitation in this instance is upon the minister's power to require the bank to do so.
I cannot say anything further on the point, but possibly I might be permitted to give some general information on the silver situation as it applies to the Bank of Canada. It must be remembered that silver is a commodity subject to fluctuation, and indeed wide fluctuation in price. Last year the price of silver fluctuated from less than forty-five cents to about eighty cents per fine ounce.
Even the very small holdings of the Bank of Canada resulted in a loss of S489,368 to the bank between March 11 and December 31 of last year. The dominion government, of course, through the Royal Canadian Mint, and not the Bank of Canada, is the coinage authority of the country. The dominion government is at all times prepared to coin and make available to the public such supplies of silver coins as the public demand will absorb. Last year the silver dollar was issued for the first time, and so far 428,200 of these coins have been put into circulation. The 1936 silver dollar is now being coined; so far 205,200 of these coins have been put into circulation and the government has undertaken to coin as many silver dollars as the public will absorb. I should add that the Royal Canadian Mint has on hand a stock

of silver bullion amounting to approximately 3,000,000 fine ounces, which, based upon the average for the last ten years, is sufficient to take care of our normal coinage requirements for about ten years. That information I thought the committee should have with respect to the present coinage situation.


Richard Bedford Bennett: I wish to answer just
one point that was raised by the hon. member for New Westminster (Mr. Reid) who directed attention to the fact that I pointed out last year that we did not know what to do with silver on hand. As a matter of fact we had practically ten years' supply of silver on hand. That is what I meant to say, and we did not know what to do with it because, with the demand being as it was, we could not usefully coin it into dollars, quarters and dimes. That is the reason for the observation I then made. I had the same information on the subject as the Minister of Finance has given to the committee. I have thought-and I supported the thought by such action as we could take-of increasing the use of the silver dollar. There is in British Columbia an organization that has been urging very strongly the issuing in increasing numbers of the silver dollars. The special silver dollar that was issued last year met with a very considerable demand, but unfortunately not for currency purposes. Very few of these dollars were used, as a matter of fact, in the ordinary commercial channels, but they were put away as souvenirs. The coinage of a new dollar this year to the extent of $200,000 must add something to the circulation of silver dollars, but for some reason best known perhaps to those who are familiar with the psychological resentment against having heavy pieces of coin in one's pocket, the silver dollar except among the Chinese and others from the orient has not had a very wide circulation. As a matter of fact, I have never personally received in this country in recent years a silver dollar in change.
I think the hon. gentleman overlooked the fact that under what he was good enough to refer to as the London agreement there was a purchase of silver prior to the Bank of Canada Act coming into force, and the provision in the Bank of Canada Act that the bank should be the agent for the minister in acquiring the silver for those three years was introduced so that the bank authorities, those who had to deal with gold and silver bullion, should themselves make the purchases rather than the minister. I say that to the hon. gentleman because there was some silver that had been acquired by the Minister of Finance under the London agreement and that was

Bank of Canada
available for redemption purposes. That was what was meant by that provision of the section to which the hon. gentleman has referred. As to the larger question, of course, I have nothing to say.


Thomas Reid: I should like to add just one word, and to ask the Minister of Finance two questions. I should like to know definitely if the bank is now empowered to buy or could buy all the silver it wanted.


Charles Avery Dunning: There is no question of that, as I understand the law.


Thomas Reid: If we are just going to put out silver dollars we shall never make any great headway. When I think of British Columbia and all its idle silver mines, which could put thousands of our people to work as they were at work in 1910, when 15,000 were employed in the silver mines; when I think that we could take over the product of those mines and pay for it without any cost to the country and strengthen the confidence of our people for they would know that behind the issuance of the silver certificates would be a precious metal which had an intrinsic market value apart from any monetary value placed upon it, and in view of the fact that the United States is going ahead and will purchase more than one billion ounces of newly-mined silver at the world market price, I think we could well consider what could be done in this country by taking our newly-mined silver at a guaranteed price and, as I said, without any cost to us at all. If we are looking forward to putting our people at work, this is one way in which we can do it, and it may be that the United States is giving a lead to the world. I believe she is bucking the gold bloc of financiers who are determined to keep the world on the gold basis. There are only three countries in the world to-day which have the gold to trade with, and the trade of the world has in consequence become stagnant- This is a question which the people can understand. It is as old as the hills, and as long as the people have faith in precious metals, as they have at the present time, we should look to our mines, take the silver we have and issue silver money or currency without cost to the government.


Richard Bedford Bennett: In view of what the hon. gentleman said in the earlier part of his observations respecting the attitude taken at the time the bill was introduced, I would point out that he has overlooked one fact, and that is that in 1910 India had not been put upon the gold standard, and silver then had a value in India, from the standpoint of
acquisition, which it does not now possess. The Indian situation is the one that complicates the whole question of silver. The accumulations of silver in India, as I pointed out in 1934, when the bill was in the form in which it was, are very large, and it was because India agreed to the terms of the London convention that it became effective at all. The hon. gentleman will remember that Senator Pittman is the great protagonist of the silver theory in the United States, and he was chairman of the committee that brought about the signature of the London agreement, but to do so he had to effect an arrangement with India, which arrangement was based upon certain restrictions that are indicated in the agreement which was tabled.
There is one other question apart altogether from the Indian situation, and that is that the policy resorted to by the United States has perhaps fallen down-perhaps that is not an unfair way to put it-because the price of silver, which was as high, I think, as eighty cents an ounce, certainly somewhere over seventy cents within the last fifteen months, has now dropped until it has reached the figure of, I think, twenty-two pence an ounce in London, and the price in America is the world price. That is the reason that in 1934 the provisions in the act were as they are. It will be recalled by the hon. member that the first function which the bank possesses is to buy and sell gold and silver bullion. That is one of its general powers. This was, so far as we are concerned, merely a matter of convenience when we put it into the statute to enable the Bank of Canada to discharge a duty which, under the agreement, rested upon the Minister of Finance.


Frederick George Sanderson: I quote from Bourinot, 4th edition, page 407, chapter 13:
No eases can be found of any private member in the Canadian commons receiving the authority of the crown, through a minister, to propose a motion involving the expenditure of public money. No principle is better understood than the constitutional obligation that rests upon the executive government, of alone initiating measures imposing charges upon the public exchequer. On one occasion, in the English commons the consent of the crown was given to certain formal resolutions proposed by a private member with reference to charges in courts of law to be defrayed out of the consolidated fund. It was thought, however, that any resolution placing a charge on the consolidated fund should be moved by a minister of the crown, and the more regular procedure was thereupon carried out. It was distinctly affirmed, however, that the member who proposed the motion involving the charge was within his right when he had the sanction
Bank of Canada

of the crown, but it was generally admitted at the same time that it was better, as a matter of policy, that the proposition should emanate from a responsible adviser of the sovereign.
Under section 17 of the bill the minister is restricted in the purchase of silver, but in this amendment there is no restriction. I therefore rule the amendment out of order.


Richard Bedford Bennett: Perhaps the minister will now explain the reasons why the changes have been made with respect to foreign exchanges which the bank may hold.


Charles Avery Dunning: I can add very little to the explanation opposite the section in the bill. From the standpoint of administration the amendments are meant to make clear the intention of the original paragraph:
Under the old wording the "balances" held m the central banks mentioned might be balances in any currency. The new wording restricts the balances held as reserves to balances held in the form of pounds sterling, United States of America dollars and currencies which by law or in fact are convertible on demand into exportable gold.
The same change is made in regard to bills of exchange.


Richard Bedford Bennett: I really cannot understand how the author of the note can speak with such authority as to the intention in connection with this matter. It was quite the opposite so far as I am concerned. We were giving power to this bank to hold exchanges that were exchangeable in law and in fact for exportable gold. That was the whole point, and we did not restrict them to the limitations now imposed1. The section provided:
(b) foreign exchange, which shall mean-
(1) balances with the Bank of England, the Bank for International Settlements, the Federal Reserve Bank of New York, and a central bank m any country whose currency by law and m fact is convertible on demand at a fixed price into exportable gold.
That was done with malice aforethought, so to speak. It was intended that if it were desirable in the public interest to acquire either Belgian or Holland exchange, that might be done; especially was that true with respect to Holland exchange at that time. The effect of the amendment is that the definition of foreign exchanges is limited to balances in pounds sterling. I have some little difficulty about that, because some of the Scandinavian countries have so arranged their monetary system as, to use the colloquial language of the street, to tie themselves to the pound. It may be that the limitations
[The Chairman.]
at the end will remedy any difficulty in that regard, because it says:
-which by law and in fact are convertible on demand at a fixed price into exportable gold held in the Bank of England, the Federal Reserve Bank of New York, the Bank for International Settlements or a central bank in any country the currency of which is convertible as hereinbefore described.
What is the difference between the two? That is my difficulty: It turns the sentence around, but at the end of it it meets the difficulty to which I refer. When the hon. gentleman says that it was the intention of parliament to do so and so, I point out that the new section also provides for foreign exchange of the "central bank in any country the currency of which is convertible as hereinbefore described." It no longer applies to Belgium, but it certainly does to Holland, and that is what the original statute provided for, namely, any exchange that was convertible by law and in fact into exportable gold. There is, for instance, a limitation as to the minimum quantity that can be drawn. I believe that in some countries it is the equivalent of $4,000, and it is drawn in bullion and not in coin. But it is in law and in fact convertible into exportable gold. Reading the two sections, I should like to know, as a matter of information, just what the difference is.


Charles Avery Dunning: I am advised that under the section as it stands it would have been possible to hold a balance in the Bank of England in terms of Chinese yen or of Brazilian milreis.	The intention of the
amendment is to make it clear that the balances must be in pounds sterling, United States of America dollars and currencies which by law and in fact are convertible on demand, and so on.


Richard Bedford Bennett: If there is any doubt
about it I cannot see it. However I do not want to stand in the way.


[Stage Direction]
Section agreed to.
On section 18-Inspection.
Charles Avery Dunning: This explains itself.


Richard Bedford Bennett: I doubt the desirability
of the inspector general of chartered banks being the man. He is a servant of the chartered banks and is paid by them. It must not be forgotten that he is paid by the chartered banks.


Charles Avery Dunning: He is not their servant.


Richard Bedford Bennett: He is not their servant
in the sense that they can tell him what to do, but he is their servant in the sense

Bank oj Canada
that they provide the money to pay him. I do not think this section as it stands, entrusting that power to the inspector general -and I speak in the light of experience-is desirable, because it is the very thing which, in fact, I consider undesirable, inasmuch as it places the destiny of that phase of banking operations entirely in the hands of one who is paid by the chartered banks themselves. That I regard as very unsound, in the light of the experience I had when I was in the Department of Finance.


Charles Avery Dunning: I do not know what the experience in question was, but I may point out that the original section was:
For the purpose of this section the bank may authorize the inspector general of banks or one of its own officers ...
And so on.


Richard Bedford Bennett: I know that.


Charles Avery Dunning: If there is any serious idea that the inspector general of banks, on the ground that the banks are required to pay him, is in any sense not the servant of the minister and subject to the minister's instructions, then I should prefer to change that provision, but it seems that, as a matter of convenience in determining that the return required by subsection 2 of this section is correct, in connection with the inspector general's normal duties, it is more convenient for him to do this work than for anyone else to do it; and making it a requirement instead of being optional on the part of the central bank that the inspector general shall do it, clarifies the situation completely in that regard. I frankly confess that I had not thought of the point raised by my right hon. friend, that the fact that the inspector general of banks is appointed by the chartered banks involves in any sense a responsibility on the part of the inspector general to the chartered banks. The requirements of the law is that the chartered banks shall pay, but the law also provides that he is an officer of the Department of Finance and takes his instructions from the minister.


Mr. NEILL:: May I ask what way he is paid, whether by fees charged for his services, or amongst the banks themselves by arrangement, or how?


Charles Avery Dunning: The expenses of his office are made by law a charge upon the chartered banks, and they are assessed for the cost.


Richard Bedford Bennett: Paid by the banks through the Canadian Bankers' Association as a matter of convenience, I think. This question engaged the attention of the late government, and the inspector general was put forward as
being a suitable person, but we did not leave it at that; we provided that one of the officers of the Department of Finance might be required to make inspections. I well recall the appointment.


Charles Avery Dunning: One of the officers of the bank, not of the Department of Finance.


Richard Bedford Bennett: Well, of the central bank. He now becomes an officer of the crown. This officer of the central bank has to make the investigation, and the investigation is one of very considerable importance. Personally, if I had to do it over again, I would eliminate the clause which provides for the inspector general to make the investigation, and would provide that it should be done by an officer of the bank, and I may say, in the light of more mature knowledge, that the provision for the appointment of an inspector general is wholly useless, being in practice without value. I well remember when Mr. Robb dealt with the matter in the way he did. I was not then in the house. I think it was nothing more than a bit of window-dressing. My considered opinion is that it serves no purpose and is wholly without value.


[Stage Direction]
Section agreed to.
Section 19 agreed to.
On section 20-Appointment of auditors.
Richard Bedford Bennett: This is an extraordinary section. It takes away from the shareholders the right to appoint the auditors and vests it in the governor in council, which, I think, is highly undesirable. Inasmuch as the Minister of Finance is made a shareholder for all purposes except one, and that one the election of directors, and that the ordinary right of shareholders still obtains with respect to class "A" shareholders, the appointment of the auditor should come from the shareholders and not from the governor in council. I can conceive of nothing that would be less calculated to inspire confidence than a set-up of that kind, by which the governor general in council is to name the auditors. That matter also was discussed considerably in committee. The auditors for, the present year have been appointed; it is provided that the governor in council shall make the appointment not later than January 31 in each year. This year the auditors have been appointed by the shareholders in accordance with the provisions of the law. I take it that this section would not be applicable until next year; then, when the shareholders meet, as they will, to deal with the report of the governor and the directors of the bank, they should be asked, I submit, to appoint the auditor, and the list or panel from which they shall make their

Bank oj Canada

choice is limited to the type of men who are auditors of chartered banks. Is it quite right to say that the governor in council shall name the auditors when you still continue to provide ownership with respect to class "A" shares, and class "B" shares, you have said, shall have all the rights and privileges which are incidental to ownership of shares except one, namely the right to vote for the election of directors? Should not the shareholders and not the governor in council elect the auditors?


Charles Avery Dunning: My right hon. friend is quite correct. There is no intention of changing the auditors selected last January, but it is thought that, having regard to the completely changed set-up and to the government control, the appointment of auditors should be the function of the governor general in council in such a case. It is a difference of view so far as my right hon. friend and I are concerned, but the government has considered the matter and desires to appoint the auditors of the bank, subject to the limitations contained in the section, which are that the auditor must be eligible to be appointed as the auditor of a chartered bank, and no person shall be eligible for appointment if he or any member of his firm has been auditor for two successive years during the three next preceding years. Provision is there for the changing of auditors in order that the audit shall not become stereotyped in character or get into a rut, but it is thought that the power to appoint should be vested in the governor general in council.


Richard Bedford Bennett: Of course there is no function exercised by shareholders that has been more jealously guarded and more determinedly held than the right of shareholders to elect auditors. Directors have at times endeavoured to exercise that power, but the right of shareholders to determine who shall audit the accounts has been conceded, I think, in practically every case nowadays. It will be recalled that when Mr. McLeod of the Bank of Nova Scotia first set up the claim that there should be an independent audit of the banks, the banks objected to it and said that it was impossible to do it, but ultimately the right of the shareholders prevailed, and the banks are now subject to an independent audit. In the section we passed this afternoon we provided that shares issued to the minister shall carry with them the same rights and obligations as class "A" of the capital of the bank except that the holders shall not be entitled to vote at the election of directors. I am quite content to leave the section as it is, but never before in my time has the governor in council been 
clothed so frequently with the powers of parliament. If you take the statutes and read over, as I shall do presently, the number of cases in which this has been done, you will find that the governor in council is appearing more frequently than in any set of statutes we have passed in recent years. We are now taking away from the shareholders the right to elect their auditors and putting it into the hands of the governor in council, which cannot but be the very negation of modern practice with respect to banks.


[Stage Direction]
Section agreed to.
Sections 21 and 22 agreed to.
Title agreed to.
Bill reported.
Mr. SPEAKER:: When shall the bill be read a third time?


Charles Avery Dunning: At the next sitting of the house.


Richard Bedford Bennett: I think the bill should be reprinted, in view of the very substantial changes that have been made in it in connection with the set-up, and of the fact that we were not favoured with having them in the votes and proceedings antecedently to their being moved; they have appeared only from time to time. The bill will have to be reprinted for the senate, anyway. It might be desirable to reprint the bill; I should think it could be done to-night without any great difficulty, and I think this would expedite business in the senate as well. There are two sections in particular that, I believe, should be reprinted as a whole.


William Lyon Mackenzie King: The bill will be reprinted, and we shall not proceed with it to-morrow.


CANADIAN NATIONAL RAILWAYS
[Stage Direction]
Hon. C. D. HOWE (Minister of Railways) moved the second reading of Bill No. 90, respecting the construction of a Canadian National railway line from Sennetema to Rouyn, in the province of Quebec.
Motion agreed to and bill read the second time.
Mr. FINN:: Mr. Speaker-
Mr. HOWE moved that the bill be referred to the special select committee on railways, canals and telegraph lines.


Richard Bedford Bennett: The minister will remember that the final report of one of the rail-

C .N .11.-R e funding
way committees has been made. Is it intended to refer this bill to the special committee that had to deal with the Canadian National Railways or the ordinary railway committee?


Mr. HOWE:: I should have said the standing committee on railways, canals and telegraph lines.


[Stage Direction]
Motion agreed to.

[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved the second reading of Bill No. 84, respecting the Canadian National Railways and to authorize the provision of moneys to meet certain expenditures made and indebtedness incurred during the calendar year 1936.
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Sanderson in the chair.
Sections 1 to 4 inclusive agreed to.
On the title.
Richard Bedford Bennett: Mr. Chairman, the bill to which we have just given second reading and referred to the standing committee on railways, canals and telegraph lines contemplates an expenditure of approximately $6,000,000 for the construction of a branch line, which is to be a capital charge of the Canadian National Railways. This bill traverses the same ground in part, namely in paragraph (b) of section 2, which reads:
Construction and betterments, including coordinations; acquisition of real or personal property, and working capital, not exceeding $2,500,000.
Then the section proceeds:
Provided, however, that for such purposes the aggregate principal amount at any one time outstanding of the notes which the national company is hereby authorized to issue from time to time shall not exceed the sum of $9,959,000, being the total of the items hereinbefore set out.
That makes it perfectly clear that unless some provision is made to deal with the additional expenditure this statute will be *inconsistent with the provisions of the previous statute which it is proposed to pass. In other words, when that statute has been passed, authorizing this construction, the two statutes will be inconsistent, because the maximum that can be issued by the railway company during the year is provided by this statute.
That maximum is now to be increased by nearly 16,000,000, and there should be a corresponding entry made in at least one of the two statutes.


Clarence Decatur Howe: I may say that while the
branch line bill to which reference has been made calls for a total expenditure of some $6,000,000, only a small portion of that amount will be spent this year. I think it will take most of the season to make the surveys. The railway estimates that considerably less than $1,000,000 will be involved this year.


Richard Bedford Bennett: That should be provided for in some way in this statute, I should think.


Charles Avery Dunning: I think the previous bill is the usual one providing for the issue of securities with respect to a specific matter, and it does not affect this bill.


Richard Bedford Bennett: Due to the rapidity with which the previous bill was passed I did not look that up, but I expected it to be so. This statute provides, however, that for such purposes, among those purposes being construction and betterments-
-the aggregate principal amount of any one time outstanding of the notes which the national company is hereby authorized to issue from time to time shall not exceed the sum of $9,959,000 ...
I was only suggesting that some general words should be added which would provide for this added expenditure. Possibly the other bill could be amended to read, "notwithstanding anything contained in the Canadian National Railways Loan Act of 1936" or something like that. I thought it well to point out that there is an inconsistency between the two bills.


Charles Avery Dunning: Before the bill with
respect to the construction of the branch line proceeds through its final stages, consideration can be given by the law officers to that point. My hon. friend the Minister of Transport (Mr. Howe) will see that that is done.


[Stage Direction]
Title agreed to.
Bill reported, 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 the governor in council be authorized to raise by way of loan under the provisions of The Consolidated Revenue and Audit Act, 1931, an amount not to exceed in the whole the sum of seven hundred and fifty million dollars for paying or redeeming the whole or any portion of loans or obligations of Canada
Refunding Loan
[Stage Direction]
and also for purchasing and withdrawing from circulation unmatured securities of Canada and for public works and general purposes.
Motion agreed to and the house went into committee, Mr. Sanderson in the chair.
Charles Avery Dunning: The reason for the resolution now before the committee is to renew the general borrowing authority to the government. The last statute enacted1 in this connection, in 1934 or 1935, provided for an authority of $750,000,000. That sum will be exhausted by July of this year. Exhaustion is fairly rapid, partly by virtue of the use of treasury bills, which under the terms of this type of act increase the amount every time short term bills are issued, even for renewal of existing issues. The authority sought is similar to that which has been given on former occasions.


Richard Bedford Bennett: Were there provisions in respect to public works and general purposes in the last act?


Charles Avery Dunning: Yes.


Richard Bedford Bennett: I was not quite sure.
Resolution reported, read the second time and concurred in. Mr. Dunning thereupon moved for leave to introduce Bill No. 98, to authorize the raising, by way of loan, of certain sums of money for the public service.
Motion agreed to and bill read the first time.


CANADA SHIPPING ACT, 1934
[Stage Direction]
Hon. C. D. HOWE (Minister of Marine) moved the second reading of Bill No. 53, to amend the Canada Shipping Act, 1934.
Richard Bedford Bennett: I desire to point out that we must reserve certain rights as to the principle contained in the portion of the bill relating to sheltered waters. As long as our rights are reserved to discuss that in committee, I have no objection to proceeding with the second reading.


Charles Avery Dunning: That is understood.


Robert Emmett Finn: I should like to ask the minister whether or not there can be discussed under this bill the question of the sale of the ten ships-nine now, as one has been lost-and the contract that has been entered into with the English company?


Clarence Decatur Howe: This bill has to do with amending the Canada Shipping Act of 1934, and has nothing to do with the sale of the ships mentioned by my hon. friend, so I hardly think this would be the occasion to discuss that matter.
	Ll._
Mr. (FINN: I might say that all I could hear of what was said was the word "shipping." I am satisfied that this bill has nothing to do with the matter I mentioned, as the minister says. But I could not hear; the articulation of some hon. members of the government is of such a kind that you cannot hear what is said and the only way you can find out is to rise to your feet. You do not make a mistake, but they think you do.
Motion agreed to and the house went into committee, Mr. Sanderson in the chair.
On section 1-Definitions.


Thomas Langton Church: This includes the great lakes. I had intended at this session to introduce a bill to place shipping on the lakes, which is in a precarious position, under the control of the board of railway commissioners. I understood the minister was going to bring down a bill. There exist on the lakes conditions which are not creditable. Men are working on these ships for a few cents an hour. Besides that, labour conditions are bad and in breach of the health laws of the provinces. I think the minister should give some undertaking that something will be done during the coming navigation season. What is shipping coming to? A number of the boats are tied up. There should be some regulation. We know that there were armed gunboats on lakes Ontario, Erie and Huron, in breach of the Rush-Bagot treaty, smuggling stuff into a friendly country. The shipping industry needs some government support to try to revive it.
I hope that during the recess the minister may see fit to look into the working conditions on these lake boats.


Richard Bedford Bennett: This section is objectionable for a reason that has been frequently urged in this chamber. It gives the minister power to determine what are sheltered waters on the sea coasts of Canada. Such a power is not usually granted by any statute. It is a very important matter. Paragraph 55 of section 2 reads:
"Minor waters of Canada" means all inland waters of Canada other than lakes Ontario, Erie,	Huron	(including Georgian	bay),
Superior and Winnipeg, and includes all bays^ inlets and harbours of or on the said lakes and said Georgian bay.
It is now proposed to modify that by a new definition reading:
"Minor waters of Canada" means all inland waters of Canada other than lakes Ontario, Erie,	Huron	(including	Georgian	bay),
Superior and Winnipeg, and includes all bays, inlets, and harbours of or on the said lakes and said Georgian bay, and such sheltered waters on the sea coasts of Canada as the minister may specify.

Canada Shipping Act
That is, it clothes one man with authority to decide what are minor waters of Canada, on both Atlantic and Pacific sea coasts, regardless of any other consideration. I think that is an intolerable condition, if I may use language which sounds harsh. It is intolerable that in a country such as this one man may be clothed with that power, having regard to the purpose for which it is to be exercised. The purpose is abundantly clear in the explanatory note, which reads:
The object of this amendment is to give power to the minister to include under the expression "minor waters of Canada" as defined in the Canada Shipping Act, 1934, such waters on the coasts of Canada as he may consider comparable with the minor waters described in the said act. This will allow the masters of ships working in such waters to be men holding certificates for minor waters and in some cases temporary certificates. The only change in the paragraph is the addition of the words underlined.
The real crux is contained in this sentence:
This will allow the masters of ships working in such waters to be men holding certificates for minor waters and in some cases temporary certificates.
In other words, the minister has the authority to determine whether or not a given bay or inlet on the coast of British Columbia or on the Atlantic coast of Canada is a minor water. The same would apply to Hudson bay. Assuming that he decides a certain body of water is a minor water, as he alone may determine, he then has the right to accede to the request made that a man holding a certificate for minor waters, one who is not a navigator at all in the broad sense in which the term is used in the Shipping Act, or a man holding a temporary certificate, may take command of a ship that sails to and fro in those waters.
To a substantial degree that would cover *the coastal trade of New Brunswick, Nova Scotia, Prince Edward Island and Quebec. As the paragraph now reads, without any limitation, it would cover the coastal trade on the Pacific coast. I protest against conferring such a power upon any man, however eminent he may be. So far as I know I have not seen any such power as is here contemplated conferred upon any minister. Just think what it means! One man is to determine that the inlets on the Pacific coast of British Columbia are minor waters. John Smith, a man with no certificate for deep water sailing, comes to the minister and says, "I have a minor water certificate. I am going to sail a ship and become master of a boat which has to do with trade in those waters." Or a man with a temporary certificate may approach a member or a supporter of the government, and that member or supporter
may say, ''Yes, I can fix you up," and in turn would say to the minister, "All you have to do is to declare that this is a minor water." The provision is supplemented that even with a temporary certificate one may operate a vessel in those waters, some of which are most dangerous. Nevertheless, that power is to be given. Had the former government attempted to do such a thing I believe I would have heard some hon. members now sitting in front of me speaking, from their then places in the house, about autocratic and dictatorial powers. This power does not cease to become that because it is exercised by a Liberal government; it is just as vicious in the one instance as in the other. To clothe one man with that authority is, I believe, a negation of the whole theory upon which the shipping act is based. After all, it deals with technical matters, with the lives as well as the problems of many people. When we clothe one man with authority to declare that a bay or an inlet on either the Atlantic or the Pacific coast is a minor water, and when in another section we confer upon him further power to clothe-putting it within the terms of the act-only reasonably qualified persons with power to be masters of ships going to and fro on those waters, the government are carrying their power to an extent which is not usual, and which I should assume very few men would seek to exercise.


Clarence Decatur Howe: There is no sinister purpose
behind the provision.


Richard Bedford Bennett: I do not suggest that
there is.


Clarence Decatur Howe: This is a power exercised by the secretary of commerce in the United States and by the board of trade in England. The effect of the act as drawn is that a man running a ferry across Burrard inlet is acting illegally because he has not deep sea papers. Similarly a man running a ferry at Sydney is acting illegally.


Richard Bedford Bennett: We have dealt with
that in another section.


Clarence Decatur Howe: Nevertheless it is a fact that a man navigating a vessel on Burrard inlet must have deep sea papers. Surely that is not the intention. In England the board of trade have similar regulations, but they refer to smooth waters, rather than inland waters. We have the anomaly that the St. Lawrence river at Father Point comes under the provisions of the minor waters regulations, despite the fact that at that point the river is thirty miles wide. Yet any inlet on our Atlantic or Pacific coasts, or any harbours
Canada Shipping Act

thereof, is a major water, and a man going across is on the deep sea, according to the Canada Shipping Act.
Surely we are making only a necessary provision. As I say, one man will exercise power here, and by the law of the United States one man exercises power in that country. But they would not exercise it without obtaining the expert opinion of their shipping experts.


Richard Bedford Bennett: One man does not
exercise this power in Great Britain, and any one familiar with the manner in which the board of trade exercises its power in this regard will realize that it has magnificent machinery to deal with the matter. I suggest that when the minister states that the condition in England is comparable with the exercise of power by one man he is making an unfair comparison. That is equally true with respect to the United States. The minister has said that the secretary of commerce can exercise a similar power, but I would say it would be almost as bad there as it is here.
When the minister speaks about deep sea navigators he forgets that we had an extensive discussion in this chamber when section 118 of the act was passed, at which time we discussed the "requirements for certificates of service as masters and mates." We declared that:
Every British subject who (1) served as a master or mate of a foreign-going or home-trade sailing ship of over seventy-five tons, gross tonnage, before the first day of January, one thousand nine hundred and thirty-one, for a full period of twelve months within ten years immediately preceding the date of his application for certificate of service-
-could be a master or mate. That subsection caused a great deal of discussion. It must not be forgotten that while we are an autonomous community exercising our rights to the full, so far as this parliament is concerned, nevertheless the shipping act stands in a position different from that of other legislation of this house. Representatives of one government under the same 'premiership as the present one, and those of the successor to that government endeavoured so far as possible to secure uniformity in the shipping laws of the British empire.
I am objecting to the power being exercised by one man, whoever he may be. My objection has nothing to do with the present minister, but has to do with the question of power being exercised by a single individual.


Clarence Decatur Howe: We are not departing from
English practice. All powers of the British

board of trade are concentrated in the chairman of the board. The other members simply advise. The chairman of the British board of trade, the secretary of commerce in the United States and the Minister of Transport in Canada have the same power, in their own territories.


Richard Bedford Bennett: It is the president of
the board of trade in England.


Alan Webster Neill: There is one point the leader of the opposition has not appreciated. In 1934, when the shipping act was being amended, I was one who again and again begged the then Minister of Marine, the Hon. Mr. Duranleau, to permit the bill to go before the committee dealing with marine and shipping matters. It was a large bill, indeed, one of the largest ever placed before the house. The minister would not accede to my suggestion, but expressed his determination to jam it through in committee of the whole house, where no adequate debate could take place among those familiar -with the subject. The result was that there were surprisingly few blunders that have to be corrected this year, but this is one of them.
The leader of the opposition states that this is a technical matter and1 he does not like to see the power placed in the hands of the minister, but just because it is a technical matter it will be dealt with not by the minister alone but by his experts, men who from long years of experience out on the coast as inspectors, surveyors, and in positions of that kind are in a position to judge, men whose reputation and livelihood are at stake and who are not going to allow themselves to be used for any political purposes the minister might have for the moment. The minister cannot possibly make the decision himself in these matters because it is of so technical a character.


Richard Bedford Bennett: He is the man who
does it just the same.


Alan Webster Neill: Yes, in the same way that he does a great many other things, on the advice of his responsible officers.
The situation was this. It is a dual one. It was not altogether the fault of the last act, but the situation was this. Under the act that was in force before the act of 1934 the minister had power to grant what were called temporary certificates, and it was highly desirable that he should do so. The leader of the opposition talked about an intolerable position, but there has been an intolerable position created by our failure to adjust these

Canada Shipping Act
things in the act of 1934. In the act prior to 1934 the minister was not given power, although we thought he was, to give temporary certificates, the character of which I shall deal with in a moment. For many, many years, partly from laissez-faire or a desire not to open the act, it was always interpreted that the minister had that power under that section, and for many years the practice was for the minister to grant these temporary certificates. In the act of 1934 we more or less copied the same language, but the act was not to come into force until it was proclaimed. Then in virtue of that, as the act was not proclaimed, we kept on working under the old act subsequently to that date, under which we thought the minister had the power, and which in practice he had for many years. Then some smart man in the department perhaps took it to the Justice department and suddenly discovered what was very palpable, that the wording of the old act in no way justified the minister granting any temporary certificates at all, and those who were entitled to them were then left utterly up in the air. The result was that the order went out that no more would be granted. The act of 1934 did not help it any, and this is an attempt to remedy that situation.
Now I speak of the necessity of these things. Perhaps the leader of the opposition has the picture in his mind of some man who has very little marine knowledge taking a big steamer through some narrow passage, but that is not the picture at all.


Richard Bedford Bennett: No; that is not what
I have in mind.


Alan Webster Neill: Picture a bay, a mile and a half across, and somebody taking an eighteen foot launch across. It goes just above the five ton limit. If it is under five tons he can put forty people into it, and go to Jamaica, and there is no one to say him nay, but if it is over five tons, and therefore a larger and more comfortable, bigger engined and safer boat, but especially a safer boat-and a great deal depends, not upon the length of the boat, but upon the housing on it-then according to the act of 1934 he must have a certificate that would entitle him to take the boat through the Panama canal if he wished. He cannot afford to get a ticket like that; he cannot afford a master's certificate, and therefore the public are greatly inconvenienced because they do want to get across this bay. The result is this, and I have seen it happen more than once: He cannot afford a master's certificate; he cannot afford to hire a man with a master's ticket, and so he says: I shall have to cut down the boat so that it comes just to 4-99 tons,
just under the five ton limit, and then he can take all the people that he can crowd on board, in utter defiance of all rules of safety. There were some rules about having a life belt for each person, but he did not need to know anything about running a boat or about the rules of the road or anything of that kind. You may say: Why didn't he go and get a master's certificate or get a man with a master's certificate? Well, the work won't stand that, and if they have to do that it simply means that they will fall back on a smaller boat under five tons, where there are no restrictions and much less safety.
I understand that the department has in contemplation-I forget whether it is provided in this act or in the regulations-that these men who are applying for temporary certificates shall have some reasonable qualifications. They will have to pass a test for sight and hearing, know the rules of the road and the elementary rules of signalling, which will make it reasonably safe. For my part I infinitely prefer to cross these comparatively sheltered waters, or semi-sheltered, waters in a boat that is run by a man who has not much deep sea knowledge but who does know the waters. That is the all-important thing. A man with the deep sea knowledge to take a boat from here to China has not the knowledge of the local waters that the local man has, and that is why it is desirable to give a temporary certificate, renewable from year to year, to the man with local knowledge, because local knowledge is infinitely more valuable for the purpose than the deep sea knowledge that would enable a man to take the Queen Mary to England.
I remember on one occasion being stormbound up the coast. Something had happened to the steamer; I think the propeller had dropped off, and I proposed to go down by means of Indian canoe. There was a bishop stranded in the same way, and having a kindly feeling for the cloth I offered to take him along, but, no, he would go on his own. I started off next morning with the Indians I had selected, and went half way on my journey; then I discharged those Indians and took on another bunch for the remainder of the distance, some fifty miles, local Indians who would know the local currents and how to navigate the local waters, and as a result I succeeded in getting home in two or three days. The bishop, strong in his religious convictions, took a bunch of Indians and they went all the way through, but not having the local knowledge required for the latter part of the journey they upset in running across a current coming out of some side river, and the bishop would have been drowned if it had not been for somebody coming along
Canada Shipping Act

with a launch. I mention that only as an illustration. One Indian was just as good as another, and possibly the bishop's bunch was better than mine spiritually, but they had not the local knowledge that brought me safely home-I hope for the advantage of Canada. It is the local knowledge that counts. Give me a man who can run an engine and has the local knowledge of the waters, a man who can pass a test for sight, hearing, colour, and elementary signalling, and he will not endanger the lives of anybody. That is what I want to impress on the leader of the opposition, that the very fact that we can get these men with temporary certificates makes it so much safer to travel. Otherwise we are compelled to go in a boat that measures 4-99 tons where there are no restrictions whatever. It is really an advantage. There is no danger of their exceeding what is reasonable, because a government employee whose job depends upon his vigilance will see to it that no one who is not entitled receives a ticket to cross unsafe waters; for if any accident happens both his reputation and his job are gone. I admit that as the leader of the opposition put it, it would seem that too great a power was being placed in the hands of the minister. Hut this is once that we can trust it to him, not because of his personality but because m the very nature of things, this being a technical matter, he will get technical advice and see that a wise use is made of the regulations.
_ Mr. FINN:	No one in this house or outside it knows exactly where we stand1 in connection with the shipping laws of Canada. There is a shipping act which has been passed but which has not yet been proclaimed; it is to be proclaimed in August next. This is an amendment to an act which is supposed to be on the statute books, the Canada Shipping Act of 1934. Would one be right in assuming that the act has been proclaimed?
I have looked at the sections at the back of the bill and I do not see anything about the proclamation, so that I would gather from that fact that the act is already in force.


Clarence Decatur Howe: No; the act has not been
proclaimed.


Robert Emmett Finn: This act of 1934 has not been proclaimed?


Clarence Decatur Howe: No; but it is the intention
to proclaim it as of August 1 of this year.


Robert Emmett Finn: I submit, then, that the
amendment which has been offered by the minister is not valid. The act has not been proclaimed; it is not law, and therefore it 
cannot be amended, because you cannot amend an act that is not in force unless it is specifically stated that you are amending an act which is to be proclaimed. This amendment presupposes that the act is already on the statute books, but as a matter of fact the act is not on the statute books in so far as its being operative is concerned. It has no force and effect and-I speak subject to correction-I do not think we can amend something that is not an act but merely an enactment which will be proclaimed in August. Perhaps the law officers of the crown will be able to inform me whether or not the point I take is correct.


Clarence Decatur Howe: I took the question up
seriously with the law officers of the crown and they assured me that an act is an act from the time it is enacted, whether it is operative or not. The act is part of the statutes of Canada and can be amended.


Robert Emmett Finn: Then, if it is an act, it must
be in force.


Clarence Decatur Howe: No, not necessarily.


Robert Emmett Finn: If it is not in force it is not
an act; it is merely something that is on the statute books. If it is of no force or effect it is not an act and cannot be until it is proclaimed. I submit, therefore, that you are amending something that is not an act, as we understand that word, that is, an enactment which is operative as a law of the country. However, if the law officers of the crown have so advised, then the responsibility rests with them. This is a voluminous act, and it seems to me that the proper thing to have done was to amend the interpretation clause, setting out what these waters in question are. What is the number of the bill?


Frederick George Sanderson: Number 53.


Robert Emmett Finn: In the interpretation clause
of the act there will be found a definition of every term used: "foreign voyage," "home trade voyage," "home trade ships," and so on. Then we come to the minor waters of Canada, which means all inland waters of Canada other than lakes Ontario, Erie, Huron, including Georgian bay, Superior and Winnipeg, and all bays, inlets and harbours of or on the said lakes and Georgian bay.


Frederick George Sanderson: It is eleven o'clock. Progress reported.


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

Customs Tariff
Friday, June 12, 1936