1944-05-09

[Stage Direction]
Hon. L. S. ST. LAURENT (Acting Secretary of State for External Affairs): Mr. Speaker, I wish to table some notes recently exchanged between the governments of the United States and Canada with respect to diversion of water at Niagara for power purposes, and to make a short explanation to the house with regard to the present state of Niagara diversion arrangements.
Notes between the Canadian government and the government of the United States were exchanged at Washington as of May 3, to provide for an additional diversion of 4,000 cubic feet per second of water at Niagara for power purposes. Prior arrangements providing for the production of additional hydroelectric energy at Niagara for war purposes are embodied in a series of agreements which were evidenced by exchanges of notes.
The earlier notes thus exchanged were tabled in this house from time to time. All these increased diversions of water are subject to reconsideration on the first day of October in each year. The previous arrangements also provided for the construction of remedial works. Accordingly the United States-St. Lawrence advisory committee and the Canadian temporary Great Lakes-St. Lawrence basin committee prepared recommendations, which were approved by both governments, regarding the exact nature and design of the remedial works.
The Canadian government arranged with the Hydro-Electric Power Commission of Ontario for the latter to do the actual construction work, and it is now nearing completion. It has been even more effective than had been expected, both in adding to the efficiency of the power developments and in preserving and improving the scenic beauty of the falls. The new exchange provides that this additional diversion, for power purposes, of 4,000 cubic feet per second shall be made on the Canadian side of the Niagara river. Most of the additional energy will however become available for use in the United States. There is no new question of export of power involved, as this additional electrical energy will come under the provisions of the previous arrangements.
The new diversion arises out of a request from the United States government, but, as the diversion is on the Canadian side, the ar-

rangement takes the form of a note from the Canadian Ambassador to the Secretary of State and a reply constituting an agreement.
Copies of the notes exchanged in English and in French are now tabled for the information of the members of the house.
Mr. HANSON (York-Sunbury):: I should like to ask the minister why a major portion of the power is going to the United States, and just what is the executive authority to enter into an agreement of this nature without the consent of parliament.
Mr. ST. LAURENT: There is no agreement entered into by this government with the government of the United States with respect to the use of power. As a matter of fact the power is developed by the Ontario hydro-electric power commission. It has export permits for power-not continuous power, but power that is not being used on the Canadian side.


Richard Burpee Hanson: For off-peak load.
Mr. ST. LAURENT: The situation on the American side is that they have steam plants wherein they produce power by the use of coal; but they can at any time use whatever electrical energy is available, and thus conserve coal. Under the arrangements evidenced by the notes, the government of the United States will make no objection to the diversion of 4,000 additional cubic feet per second of water which will flow through the machines of the Ontario hydro-electric power commission.


Richard Burpee Hanson: And they get the power.
Mr. ST. LAURENT: It will make the power available, and if it is in excess of what is actually being used on the Canadian side it will be absorbed in the boilers on the American side. The only pecuniary or financial interest of the federal government is in the fees paid for the export permits on the measured quantity of power that goes out.


Richard Burpee Hanson: That is only a bagatelle.
Mr. ST. LAURENT: That is only a bagatelle. Whatever financial benefit there is will be derived by the Ontario hydro-electric power commission as vendors of the power not actually in use on this side.


Mr. MacNICOL:: I am glad to notice that the minister seems to know a great deal about diversions. Is this 4,000 cubic feet per second in addition to the previous 5,000 cubic feet

Private Bills
per second allowed the Ontario hydro-electric power commission as a result of the diversion of waters from the Ogoki river?
Mr. ST. LAURENT: It is in addition to the quantity already being used by the hydroelectric development to compensate for additional water brought from the Hudson bay basin to the great lakes basin.


John Ritchie MacNicol: Before we were allowed to divert that, we permitted the United States to divert an additional 5,000 cubic feet, so that they are going to get 5,000 and 4,000 cubic feet?
Mr. ST. LAURENT: They will not get an additional diversion. The additional diversion will flow through. the hydro-electric plant on the Canadian side.


John Ritchie MacNicol: That is the 4,000 cubic feet per second?
Mr. ST. LAURENT: Out of that they will get such power as is not absorbed by whatever load the hydro in Ontario may have on its system. They get this, sometimes for very short periods and sometimes for longer periods. When I say "very short periods" I refer to the fact that during the lunch hour they would get power not being required for the operation of the Toronto tramways system. That off-peak power flows into the boilers and saves other fuel.



PRIVATE BILLS


[Stage Direction]
Mr. THOMAS REID (New Westminster) moved the first reading of bill No. 102, respecting Vancouver, Victoria and Eastern Railway and Navigation Company, the Nelson and Fort Sheppard Railway Company and Great Northern Railway Company.
Mr. GRAYDON:: We ought to have an explanation.


Mr. REID:: This bill arises out of an agreement entered into between the Vancouver, Victoria and Eastern Railway and Navigation Company and the Nelson and Fort Sheppard Railway Company and Great Northern Railway Company. The Vancouver, Victoria and Eastern Railway and Navigation Company and the Nelson and Fort Sheppard Railway Company were set up under provincial charters long years ago. Following that they were declared to be works for the general advantage of Canada and so came under dominion statutes or regulations of the federal parliament. That was back in 1893 and 1897.
Following that the Great Northern Railway Company obtained a ninety-nine year lease from both these other railroad companies, as well as some running rights over the Canadian National and Canadian Pacific railways. Later on they acquired and now own all the shares of both the first mentioned railroads. The bill proposes to ratify the leases and to allow the Great Northern Railway Company the right to effect total ownership. The bill also provides for an agreement covering running rights over some small sections of railroad belonging to the Canadian National and Canadian Pacific Railways.
Motion agreed to and bill read the first time.



FIRST READINGS-SENATE BILLS

[Stage Direction]
Bill No. 103, for the relief of Margaret Millar Short.-Mr. Mellraith.
Bill No. 104, for the relief of Mary Annesley Iverson.-Mr. Factor.
Bill No. 105, for the relief of Annie Drewniak Sonberg.-Mr. Macdonald (Brantford City).
Bill No. 106, for the relief of Celia Zlatkes Azeff.-Mr. Mellraith.
Bill No. 107, for the relief of Louisa O'Tool Shelley.-Mr. Factor.
Bill No. 108, for the relief of Miriam Schwartz Silcoff.-Mr. Macdonald (Brantford City).


[Stage Direction]
On the orders of the day:
Mr. JAMES SINCLAIR (Vancouver North):: Mr. Speaker, I should like to address a question to the Minister of National Defence for Air or his parliamentary assistant. This question is of immediate importance to quite a number of very gallant airmen who are now on operational leave in this country. One of the most gallant of these is Wing Commander Bill Swetman, D.S.O., D.F.C., a veteran of over sixty operational flights over Germany. He is now making speeches in the Toronto area in connection with the victory loan campaign, and he is reported yesterday as having said that "he wasn't trained to give fancy speeches but to fight. When he and others like him came home on leave after a tour of operations-they get thirty days-they wanted to spend it with relatives-not making speeches to persuade people to buy bonds." If people have to be persuaded to buy victory bonds perhaps it is better that we use men like this, who have fought actual battles in the air over Germany, rather than painted actors and actresses who fight their battles on the
Internatinal Finance

screen or in the divorce courts. I should like to know from the minister or his parliamentary assistant if men like this who are home on operational leave and who speak in victory loan campaigns will get extra leave to make up for the time they give.


Hon. CYRUS MACMILLAN (Parliamentary Assistant to the Minister of National Defence for Air):: An airman's leave period is not curtailed by reason of the fact that he gives some time to victory loan committees or to other patriotic services. His regular leave period is extended by the length of time given to such services.


Hon. J. L. ILSLEY (Minister of Finance):: May I just say one word about actors and actresses? The impression given in the paper was that these ladies and gentlemen receive pay for their services in Canada. That is not the case. They give their services free, and so far as my experience goes they are more than anxious to do something to assist the war effort.


James Sinclair: So they should.


James Lorimer Ilsley: I deplore any remarks that depreciate their services, because they are voluntarily given, in a way in which they can best contribute to helping the war effort of the united nations.



INTERNATIONAL FINANCE


[Stage Direction]
On the orders of the day:
James Lorimer Ilsley: 

BANK ACT AMENDMENT


[Stage Direction]
The house resumed from Monday, May 8, consideration of the motion of Mr. Ilsley for the second reading of bill No. 91, respecting banks and banking, and the amendment thereto of Mr. Coldwell.
Mr. A. M. NICHOLSON (Mackenzie):: Mr. Speaker, I think it was unfortunate that the Minister of Finance (Mr. Ilsley) made the type of speech which he did when introducing this bill a week ago. The member for York-Sunbury (Mr. Hanson) attached some blame to the minister's parliamentary assistant for advice that was given, but I was inclined to think that possibly the minister's associations with friends south of the border while he was on holiday might have been responsible for his change of attitude. I think I speak for members of the house when I say that no member of the government has grown in stature to the same extent as the minister has since taking over his very important responsibilities, and certainly no minister of finance has ever been able to capture the imagination of the Canadian people to the same extent that the present minister has done. I think all he needed to have said last week was that his government had not been elected to socialize the banks; that if the people of Canada wanted to have legislation of that sort enacted they must elect a C.C.F. government in this dominion, but that until that time came he proposed to follow the traditional methods. Then he could have proceeded to outline the unimportant changes that are to be brought about by this bill. But for him to take time out to speak as he did, in the midst of the victory loan campaign, did not in my opinion serve any useful purpose or the public interest.

Bank Act-Mr. Nicholson
There are many people in this country who certainly do not share the views which the minister expressed last Tuesday.
The Minister of Finance has introduced some very unorthodox ideas in war finance since the war started, and I think he was right in doing so. Price controls, rationing, priorities, the foreign exchange control regulations are all very unorthodox. Those who believe in free enterprise would not expect that a free enterprise government would interfere with personal liberties as the Minister of Finance has done. I know that he had to overcome a good deal of opposition before he could put some of these measures into operation. Let me remind the house of the views that were expressed by the Right Hon. Arthur Meighen when he was leader of the Conservative party in the other chamber. He was complaining of the excess profits tax, and said:
Human nature is the same in war time as in peace, and instead of helping the war effort you are defeating it by stripping people of the stimulus to toil and run their business right. Leave the incentive and make the reward greater, the greater the toil and the greater the success. You do not do it under this bill.
Then listen to this:
I do not exaggerate at all when I say that I have had business men by the dozen tell me that they are leaning on their oars; they have nothing to work for. They say: "We might just as well take it a little easier now, for we are only working for taxes anyway."
But in spite of this opposition the Minister of Finance felt that if Canada was to make her greatest contribution in prosecuting the war, the opinions of Mr. Meighen and his friends must be ignored. I think it would be a great calamity if at this stage the minister should soften and decide that those who would like to make greater profits should be given greater freedom, that we should have no price controls, that the sky should be the limit. So that having already introduced unorthodox methods in the carrying on of the work of his department I think it w7as unfortunate that the minister made some of the remarks he made the other day. His attack on the bureaucrats will, I am sure, give to a great many people the idea that in the wartime prices and trade board political pressures were being brought to bear to get special consideration. I think it would be unfortunate to let that impression get abroad, or the impression that after the minister has tried his best to get the Canadian people to cooperate in maintaining the price ceiling and avoiding black markets, in the administration of these controls political affiliations are taken into consideration by men selected by this administration. It would be unfortunate if the impression should get abroad
that when a letter comes to the board from, let us say, Swift Current, Donald Gordon has to ask the Minister of Finance whether the writer is a Liberal, or a Conservative. I am sure that that does not happen, and it was unfortunate that the minister should imply that if we were to have public ownership and control of the banks in this country we could not expect to have them administered in a way that would be in the best interests of the largest number of people.
A good deal of time was taken by the minister in attempting to defend the banking system in this country. He pointed out at page 2540 of Hansard that it was a travesty of economic interpretation to place responsibility for the great depression upon the Canadian banking system. I do not think anyone in this house has ever placed the blame on the Canadian banking system. But I think it also is obvious that the banking system that was in operation in Canada was not able to prevent the depression, and that the governments in office at that time in Canada were not able during the depression years to organize our economic life so that every able-bodied person would have a chance to work and so that the resources of the country could be developed by the people.
More recently the minister has announced- and this is a revolutionary theory so far as governments in this country are concerned- that as long as the war lasts, whatever is physically possible is going to remain financially possible. I think to a very large extent that policy has been acted upon. But before the war neither Liberals nor Conservatives were able or walling to carry out that sort of policy. In passing, I should like to hear from the Progressive Conservative party some more constructive suggestions than w'ere heard yesterday from the hon. member for York-Sunbury (Mr. Hanson). He spoke at considerable length, but I think few members of the house had any clear picture when he finished as to what might be expected from the Progressive Conservatives if they were in office. Possibly they are hoping that they can ride into office, with John Bracken milking cows across the country, on the unpopularity of the present administration, but I think they misjudge public opinion if they expect to get back into office on the mistakes of the present government in war time.
As prime minister during-the early thirties we had the Right Hon. R. B. Bennett, a man who had made an outstanding success in business and professional fields, and in Saskatchewan, where I lived, we had a Conservative administration; but we found it impossible in those early thirties to get the
Bank Act-Mr. Nicholson

banks to make available currency and credit so that we could have full employment. We found it impossible to get our governments to launch policies which would make sure that those who wanted to do useful work should have the chance to do it.
I have some returns which were supplied to me by the Department of Labour on June 26, 1940, showing the amount of credit which was made available to some of the farmers who went north while Mr. Bennett was prime minister of this country. Federal and provincial funds were tjsed, anc[ the banks were asked to cooperate in solving this unemployment problem. I have selected the cases of three men because they happen to be veterans of the last war, men who fought for freedom. They had committed no crime. They happened to be carpenters, living in the city of Regina, who did not wish to be on relief, and they were encouraged to go north. The total expenditures which could be made by Mr. Bennett's government and the Anderson government to reestablish a family in one year were S300. One of these settlers has also served in the present war, having gone overseas twice in his lifetime. He was obliged to live in a house which cost $47.85. The items are broken down here: $5.45 for the windows; $5.85 building material, $31.55 lumber, $5.27 for tar paper. His groceries for a year cost $10 per month. As for his stock and implements, he was given a mower and rake which cost $25, fifteen hens costing $7.50, a horse, $25; and three bales of hay, $2.25. During the entire year this veteran of the last war received from federal and provincial funds and the chartered banks of Canada $265.15. Another returned soldier got $285. Another one, with a larger family, did a little better; he received $308. I should have thought it would have been recognized in the early thirties that it was in the public interest to feed, clothe and shelter the citizens in all parts of this country. Two of the boys who were living on the allowance of ten dollars per month are now in the armed services. It is not any wonder that since they joined the army, dentists had to be assigned to them to put their teeth in order, and that they had to have extra food so that they might be built up to do their job.
I mention these cases to indicate that during the thirties the banks of this country were unable or unwilling to make credit available to enable settlement programmes to be carried out so that the people participating would have proper houses, decent food and medical and health services.
So that in peace time it was proved pretty conclusively, I think, that there was something radically wrong with a system which 
should be expected to make available to people currency and credit so that they could have goods produced and services performed. In war time, also, our banking system did not meet the test. It was not until the federal government was prepared to guarantee the banks against any loss that they were willing to make large loans to companies which were prepared to go into the production of ships and tanks and guns and planes. Those who believe in free enterprise should have argued that those who were going to make these tanks and guns and other commodities of war should take the risks, but those who were manufacturing thought otherwise, and the government of the day made it clear that those who would take contracts on government account could not lose money; they were guaranteed that they would have every cent they invested and profits on their investments.
The C.C.F. feel that, such large payments having been made to the chartered banks of this country, the time has come when the banks should be taken over and owned, controlled and operated as a public utility. We have never given the impression that we can solve our problems by taking over the banks and printing and circulating large quantities of money. I have never told the house before, but I had the experience of being a millionaire at one time.


Mr. CRUICKSHANK:: Shame.


Alexander Malcolm Nicholson: It was really a very
simple matter. Any person who had a Canadian dollar could become a millionaire in Austria when I was there, after the last war. When I cashed a $20 traveller's cheque I became a multimillionaire, possessing the equivalent of twenty million dollars. But one million had to go for my breakfast the first morning, and by the time I left Vienna I had quite a large volume of money but it would not have bought me a fountain pen. The people of Austria found themselves at that time in a very difficult position.
The members of this group sympathize with the Minister of Finance in his efforts to try to save the people of Canada from the confusion and distress which were occasioned through various parts of Europe during that inflationary period. An old couple who had saved and saved for a lifetime, and who had perhaps five or ten thousand dollars put away for the evening of life, found, when inflation had done its work, that the accumulations of their lifetime would not buy a toothpick. We have been anxious to avoid in Canada any policy which would result in those who work for their wages having to buy in a very uncertain market and having to sell their labour to those who would be able, through inside

Bank Act-Mr. Nicholson
information available to them, to anticipate demand. We have always urged that the, government should have complete control of our currency and credit so that at all times we would have sufficient available to produce the goods necessary for civilian consumption m Canada, for the prosecution of our war effort, and to exchange in the markets of the world for goods which we want but which we cannot secure here.
It has been said by those who have criticized our policy that under a system of government control of currency and credit there would be no guarantee that savings would _be safe. I ask you, what greater degree of security could you expect than the security offered by the entire country? For a number of years I have kept a small amount of money in the post office savings bank. I do not think anyone can argue that your money would be safer in the Bank of Commerce or in the Bank of Montreal. The post office savings bank gives you a better service for savings than any of the chartered banks. You can withdraw or deposit money in practically any post office in Canada between eight o'clock in the morning and six o'clock at night without any identification papers, without payment of exchange, and without any stamp on your cheque. All you do is to present your post office savings book with your signature and your registration card and you are given the money you wish to withdraw. If you deposit money you receive an official receipt in due course by mail. It would be quite a simple matter to extend the service which is now being given by the post office to serve adequately the savings requirements of the entire country.
The hon. member for Rosedale (Mr. Jackman) asks about the poor bank clerks. The hon. member for Cape Breton South (Mr. Gillis) will say something about them; otherwise I would take time to do so. The poor bank clerks have not shared in the prosperity of the banking institutions. The banks of Canada have been able to show very favourable balances at all times. They have been able to build expensive head offices and branch offices; in nearly every community in Canada the most expensive building is the bank. Take the bank of Commerce, with a paid-up capital of 830,000,000. They were able to pay dividends of eight per cent, according to the last return I have, and even during the depression years, in 1932 and 1933, they paid ten per cent, and from 1929 to 1932, thirteen per cent. The Bank of Nova Scotia did a little better, because during the depression they paid fourteen per cent and twelve per cent. The Royal
bank did very well during those years, having paid fourteen per cent before the depression and twelve per cent up to 1932.
The bank clerks, however, did not fare so well. I recall- a conversation I had with an air force officer some time ago. When he found that I was a member of this house he was curious to know what plans were being made so that when the war is over he might have a chance to do useful work in society. He told me that when he finished high school he wished to be a civil engineer, and he tried to borrow money, but the banks were not interested in lending money to enable a student to go to university. However, he found employment in a bank, and after a considerable period he received S80 a month. Then he wanted to marry, but the bank regulations would not allow him to do so until he received S100 a month. Since he has joined the air force; the taxpayers of the country have spent 825,000 training him to be a pilot, and he is now receiving over 8200 a month. He told me he could not understand how it was possible for the taxpayers . to raise $25,000 to train him to be a pilot when a few years ago he could not get enough money to go to university to become a civil engineer.
I think the minister might have taken time to offer some justification for the low salaries which have prevailed in the lower brackets among bank employees. He did take time to defend the bank directors of the chartered banks in Canada, and he said that it would be an unfortunate thing if the successful men of the country should be barred from taking part in directorates. I have the Financial Post directoiy of Canadian directors for 1944, and it is really difficult for me to understand how some of the gentlemen listed here can take an active interest in the different companies they are supposed to direct. Here is Morris Wilson who is:
President and managing director, Royal Bank of Canada; vice president and member of executive of the Montreal Trust Company; director and member of the executive of the Canadian Pacific Railway Company; director of: Sun Life Assurance Company of Canada, Ogilvie Flour Mills, Limited, Dominion Bridge Company, Limited, Dominion Engineering Works Limited, Consolidated Mining and Smelting Company of Canada Limited, British Columbia Power Corporation Limited, Canada Cement Company Limited, Consolidated Bakeries of Canada Limited, Canadian General Electric Company Limited, Beauharnois Light, Heat and Power Company, Shawinigan Water and Power Company; chancellor of McGill University.
How can any one person give careful consideration to the very complex problems that are considered by so many of these companies?
Bank Act-Mr. Nicholson

Here is Leighton McCarthy, our ambassador at Washington, who is a director of the Bank of Nova Scotia, among other things. One would imagine he would have a full-time job in Washington, but it does not appear so, because in 1944 he is listed as:
Member McCarthy and McCarthy, barristers; chairman of the Canada Life Assurance Company; National Trust Company Limited; vice president and director of: General Canada Loan and Savings Co., Toronto Savings and Loan Company, Aluminium Limited, Saguenay Power Company Limited, Union Carbide Company of Canada Limited, Canadian National Carbon Company Limited, Prest-O-Li.te Company of Canada Limited, Dominion Oxygen Company Limited, Electro Metallurgical Company of Canada Limited; director of the Bank of Nova Scotia, British American Assurance Company, Western Assurance Company; member of: Board of Governors, University of Toronto, Board of Trustees, Toronto General Hospital, Board of Governors, Ridley College; trustee: the National Foundation for Infantile Paralysis of the United States of America, the Georgia Warm Springs Foundation.
There are a number of others whose names might be mentioned. Let me cite, the president of the Canadian Pacific Railway Company. He is:
Chairman, president and member exec. comm. Canadian Pacific Railway Company; chairman of: Associated Screen News, Canadian Pacific Air Lines Limited, Canadian Pacific Steamships Limited, chairman exec. comm, and dir. Consolidated Mining and Smelting Company of Canada Limited; president of: Canadian Airways Limited, Canadian Australasian Line Limited; Quebec Salvage and Wrecking Company Limited, Scottish Trust Company, Seigniory Club Community Assoc., Limited; vice pres. Toronto, Hamilton and Buffalo Railways; (alternately) pres, and vice-pres. of: Northern Alberta Railways Company, Toronto Terminals Railway Co., Vancouver Hotel Company; director of: Bank of Montreal, Canadian Arena Company, Canadian Pacific Express Company, Metropolitan Life Insurance Company, Minneapolis, St. Paul and Sault Ste. Marie Railway Company; member Canadian comm. Hudson's Bay Company; chairman executive comm. Bishop's University; governor of McGill University, Montreal General Hospital, Royal Victoria Hospital, Notre Dame Hospital.
I think that many of these well-known Canadians must be used as window dressing for many of these companies. Take a farmer from Saskatchewan like Charles Dunning-and by the way, I think the cruelest barb of all hurled at the minister yesterday came from the member for York-Sunbury (Mr. Hanson) when he expressed-the fear that the Minister of Finance was going the way of Charles Dunning.


Richard Burpee Hanson: Which
way did Dunning go?


Alexander Malcolm Nicholson: I will tell you in a minute. He is:
President' Ogilvie Flour Mills Company Limited; chairman Allied War Supplies Corpora-
tion; member Canadian Comm. Hudson's Bay Company; dir. of Canadian Investment Fund, Consolidated Paper Corp., Consolidated Bakeries of Canada Ltd., Steel Company of Canada Limited, Bank of Montreal, National Liverpool Insurance Company, Liverpool and London and Globe Insurance Company Ltd., Liver.pool-Manitoba Assurance Company, Globe Indemnity Company of Canada, the Consolidated Mining & Smelting Company of Canada Limited, the Royal Trust Company, the Bell Telephone Company of Canada, Sun Life Assurance Company of Canada, Canadian Pacific Railway Company, chancellor Queens university.
I do not think it is very convincing to say that because Mr. Dunning is a director of all these companies we have the best possible banking system that can be devised by Canadians. I suggest that the minister would be better advised to carry on along the general line he has been following in his department with a view to having those policies acted on in Canada which will guarantee the greatest production of consumer goods in peace time as in war time.
In the report of the Bank of Canada for the present year the governor of the bank outlines views that scarcely coincide with those advanced by the minister in his argument the other day. In discussing the adjustments which must be faced in the immediate future the governor of the bank points out that in 1939 we had about 4,000,000 Canadians gainfully occupied, and that at least 300,000 who were available for work were not employed. He goes on to say:
By the end of 1943 the gainfully occupied population had risen to approximately 5,100,000 but about 1,900,000 of these were engaged in the -armed forces, in supplying the weapons of war, or in producing the food required for special war time exports. The number available to meet civilian needs had therefore fallen to about 3,200,000, but at the same time the average standard of living had risen materially and. was probably higher than it had ever been. This increased output of consumption goods by a smaller working force can be accounted for in part by longer hours of work, favourable crop conditions and the -abnormally small number now employed in private capital development and maintenance work.
After the war, some of those who are now employed will voluntarily withdraw from the working force, and the armed services may -be maintained at a level considerably above their pre-war strength. It seems likely, however, that at least 4,700,000 workers will be available for employment in civilian jobs, or at least 1,500,000 more than the number employed in that sector of the economy at the present time.
The question that all Canadians must be worrying about these days is this: Have we the machinery to guarantee that the nearly two million who are now in the armed services and war industry can come back and find useful employment? It is our opinion that we cannot give any such guarantee unless we

Bank Act-Mr. McGeer
are prepared in peace time as in war time to plan our production so that the resources which are here will be developed as a part of a national plan.
I have been told that a company like Canadian Industries Limited employed about 4,500 in the pre-war years. They have been employing about 45,000 during these war years; but their reconstruction plans call for the employment of about 6,000. That will mean they will be employing about one-third more than they did in the pre-war years; but what of the 39,000 who have been employed and who will be turned into the ranks of the unemployed? Similar figures may be cited to describe what will happen in the shipbuilding industry and aircraft production in a great many industrial areas in this country. I hope the minister will, if he is in charge of his department when the war is over, be willing to have as his slogan, "Whatever is physically possible must be made financially possible."
It has been suggested by some who have taken part in the debate that we cannot look for prosperity in Canada unless we have a very large export trade. The members of the C.C.F. party look forward to international relationships so that the nations of the world will trade extensively; but I submit that Canada can provide a higher standard of living for her people than we ever had before, regardless of her foreign trade. Therefore I think it is imperative that the resolution moved by the leader of this group be supported by the house so that we shall have plans afoot when the war is over to enable the government of this country to be in a position to control the development of our resources, and have available at all times the currency and credit necessary to guarantee full employment and to maintain the highest possible standard of living.


Mr. G. G. McGEER (Vancouver-Burrard):: them as freely and with the same spirit as against Hitler, we shall really be making progress.
I know that the remarks I shall make will not find a happy echo in either St. James street or Bay street. But I do feel rather happy to be able to travel in the company of the men I have quoted this afternoon.
We live, Mr. Speaker, in grim but inspiring times. Our day of decision in this parliament must follow and be complementary to the D-day of invasion. For upon our decisions in parliament will depend, not the success of the invasion that is coming, but the success of the fruits of the victory which we hope is not far off. The great crisis of the war for us is close at hand. The day nears when the weight of the fighting power of the United States and the British empire, accumulated in years of determined preparation, will be thrown in all its force against the enemy.
We have good reason to be confident that the declining strength of nazism may be soon overwhelmed. Germany, we trust, will not be able to survive another winter of war. Japan has already lost control on the seas and in the air. Before this summer passes no ship flying the flag of Japan will be able to move with safety on any part of all the seven seas. Many now competent to express an authoritative opinion are predicting that the Japanese war machine may collapse in a welter of hara kiri, even before the disillusioned and defeated nazis throw down their broken arms.
We await anxiously the day of the grand attack, and when it comes we regret that the shadow of sorrow will pass over the doorstep of many more Canadian homes. But the day of unconditional surrender will not be denied. Let us hope that we at home, in safety, have already been given the light to appreciate the nobility of the character which the fighting men and fighting youth of our generation proved was theirs in the darkest days of freedom's danger. Let all of us, particularly those of us who are in our war parliament, remember that our men on the seas and in the fighting lines, and the boys in the air who are crusading as youth never crusaded before, are fighting for the institutions that have flourished under the flag they love. They have gone forth with daring and courage, and with dauntless hearts and matchless fortitude not to conquer but to save. Fighting to protect the security of their homes and loved ones, and to preserve free enterprise as the greatest of all their liberties, in victory they will gladly offer all the liberties which they enjoy and cherish to enslaved mankind, wherever oppression and aggression rule. They are adding new lustre to the glorious traditions of our race;
[Mr. McGeer.)
they are writing new pages in the records of our long and valiant service in the cause of freedom. No reckless ambitious pride or buccaneering selfishness tarnishes the escutcheon of the armies of liberty that they are bearing with unconquerable valour. When men struggle in the clash of arms in that spirit, their war is holy. The blood spilled in that cause is sacred. The lives laid down in sacrifice on that altar of service are forever consecrated to immortal glory. Ours is not only the justifiable pride of those closely associated with the heroes who are enacting the greatest episode in our glorious history. Ours is not only the tender memory of the loved and lost. Ours is the solemn duty so to fulfil the purpose and opportunities of our lives that the victory they fought and died to secure will not have been won in vain. It is for us to dedicate our lives to the preservation and advancement of all they gave their lives to save. Out of their sacrifice so freely offered and gladly given, and out of the welter of human carnage which has drenched so many lands with the blood of innocent millions, may there come to us new understanding. Yes; may we be given the understanding that will bring us under the guidance of the golden rule and release us forever from the alluring selfishness of the rule of gold.
Until we in parliament win that great battle against the selfishness of privileged monopoly, all the tragedies of revolution and war will be repeated over and over again. Wars are won on the battlefields, but they are bom of the misguided action of men in parliaments. Until parliament dominates and subdues the blind greediness of privileged monopoly, the lot of our own and future generations will be but a repetition of the dismal past, its envies and its hatreds continuing, its false gods prevailing, its poverty, squalor and misery enduring, its revolutions and its wars beclouding the future and turning every horizon that beckons mankind onward and upward into the bitter anguish of illusion and disappointment.
It is ten terrible years since parliament approached the revision of the banking laws- ten years of depression and of war. And while I know it is easy to say that things are so bad they cannot be worse, I have always believed it was better to remember that things can never be so good but what they might be better.
I remember appearing before the banking and commerce committee back in 1934, advocating some very heretical doctrines against orthodox finance. I came under the guidance of the like of Lincoln, and I laid down his programme with regard to the approach to national currency, when he said back in 1839:

Bank Act-Mr. McGeer
We say that no duty is more imperative on the national government than the duty it owes the people of furnishing them a sound and uniform currency.
To achieve that, as our objective, we went before the banking and commerce committee; and the Liberal party coined the great expression, "Liberalism stands for the issue of currency and credit in terms of public need, not private gain." My hon. friends do not think that we have gone far enough, but let me say that the picture to-day is very different from what it was then. Liberalism has achieved much.
In 1934 we advocated a publicly-owned national bank that would become the centre of Canada's greatest public utility, her monetary system. That has been accomplished. We advocated the removal of the gold reserve limitation in the issue of full legal tender and national paper currency. That has been accomplished. Some of my hon. friends will laugh when I say that we have ownership of the Bank of Canada. Not only have we ownership of that bank; to-day there is in issue from that bank 81,400,000,000 of national currency serving this nation in war. We advocated the control and regulation of the international movement of currency, credit and investment. That has been accomplished. Our foreign exchange control board has proved to be an institution of tremendous power and invaluable service to the nation in this crisis.
We advocated then, not the rigid regimentation and controls necessary in war time, but that wages and prices and production and distribution and rents should be kept within the bounds of reason. We have proved that with the cooperation of the people these things can be controlled, and those controls are now in operation. AVe advocated also the use of taxation to aid in the regulation and circulation of the medium of exchange and to avoid inflation. It has been proved that that is a practical administrative power of government. All these reforms have taken place under a Liberal administration, and I venture to say that there are few nations to-day in the world that have a sounder foundation of finance upon which to approach the period after the war than Canada has under Liberal government.
Let me go just a little further and point to some of the other lessons that we have learned as a result of our experience in this war. AVe were always told that once we were a young country, and had not accumulated the money wealth that older civilizations possessed with which to build railways, canals, harbours, cities, villages and industries, we must conform to the rate of progress and the standards of government expenditure and
taxation that would satisfy the money lenders in Berlin, Paris and London. It was there and there alone that money for capital investment was available. AVe were told that we must keep our credit good in the lending financial centres of the world. Well, we borrowed; we went into debt for everything we did, and we came out of the last war the most heavily indebted people in the world in proportion to our wealth and population. We carried an international debt which was proportionately greater than that of Germany.
AVhat happened in this war? Of course our financial experts told us that we could finance only a hundred million-dollar war at the start. When we took on the British empire training scheme we were told we would have to cut down a portion of our other war work. Because of that bad advice by the financial experts of this country the preliminary war effort was crippled beyond measure. Following the retreat from Dunkirk, the collapse of France and the terrifying exposure of England's weakness, we came to the conclusion that Canada must defend herself, and our government wisely declared that no monetary consideration would stand in the way, that no limit would be placed upon the resources and energies of the people of Canada in this war effort.
What happened? We lifted our war budget from a hundred million to nearly a billion, then to two billion, then to three billion, and this year and last year it ranged in the vicinity of five thousand million dollars. AVhat about these older centres that were supposed to possess the money wealth that we did not have? We lent England seven hundred million dollars and then found a billion dollar's worth of goods and services which were created by Canadian finance and energy. We did not borrow in Berlin because they had closed their door, and the Bank of France crowd in Paris had collapsed. We could not borrow in London because London did not have anything to lend us. Is anybody going to say that out of that experience Canada has not found her financial independence? Are we to go crawling to some international banker for money to put our people to work after this war for a better Canada? I think that would be just as ridiculous as to suggest that we might finance this war by issuing the five and a half per cent tax-free bonds that came from that banker Minister of Finance, Sir Thomas AA'hite, during the first war. That practice was during the years when the orthodox financiers ruled and it was said to be the soundest money that Canada ever issued; certainly the most expensive.
Bank Act-Mr. McGeer

That kind of nonsense will never be repeated. Let us hope that no government will ever say that we have to borrow abroad to finance Canada's development when this war is over.
I am disturbed however because I am not so sure that what I think is excellent advice by our chief fiscal adviser, the governor of the Bank of Canada, has found the right kind of hearing in the ears of our Department of Finance. Let me quote what Mr. Towers has said to this government, which will be found in his annual report covering the work of the bank last year. He said:
I do not wish to suggest that public debt could be increased at the present rate for an indefinite period without placing intolerable strain on our economy. I do feel, however, that the war debt, and the increases which will inevitably take place for a time after the war ends, can be handled without serious embarrassment.
The governor is taking in a fairly wide range of territory, because no one can predict with certainty when this war will end or what its repercussions will be when it does end, or what their cost will be. If we are able to handle an increase in our debt of anywhere from seven to ten billion dollars, why was it that we could not handle a debt of four billion dollars without bankruptcy and unemployment in 1935 and 1939? He goes on to say:
A vastly increased volume of consumption and capital development will be necessary if this output is going to be fully absorbed and high employment maintained.
But here is the warning:
The adjustments required wrill clearly be of unprecedented magnitude, and bold planning on the part of labour, farm and business organizations, as well as governments, is urgently needed.
Just why he left out the banks I do not know; for it does seem to me that their responsibility is just as great as that of the others mentioned.
Let me put the problem as I see it. We now face a world with tremendously improved capacity to produce consumers' goods. We now face a nation with a burden of debt unprecedented in history. Our cities are overtaxed and moving with difficulty under a debt load of one billion dollars; our provincial governments are carrying another debt load of two billion dollars; our federal government carries already a debt of eleven billion dollars, making a total of fourteen thousand million dollars of debt, which is the first fixed charge upon the payment of the taxpayers' money into the consolidated revenue. I have no hesitation in saying that if we are going to sustain full employment or high employment after the war and avoid the disastrous consequences

of a post-war depression, government spending must continue on almost as large a scale in the period of adjustment as during the war years.
What are the programmes so far put forward? There is the $25,000,000 industrial development bank. I disagree with that, because I do not believe that a bank of that kind should be formed to go into competition with our commercial banks or private financing organizations. I do believe that we can repeat the experience of the United States in the establishment of a government agency- not a government bank-like the Reconstruction Finance Corporation which can give to this dominion the same tremendous assistance that the Reconstruction Finance Corporation has given to the United States. When I look over the unprecedented changes in our proposed revision of the Bank Act to-day, the only fundamental change, Mr. Speaker, that I can find is the raising of the rate of interest to small borrowers from 7 to 91 per cent. Here again you have the old doctrine of making the poor pay for the service of the rich. If that provision comes out of the banking and commerce committee, it will come out only after I have given to it all the opposition that I can give. These provisions of finance fail to conceive, fail to apprehend and fail to present to parliament financial adjustments described in the language of the governor of the Bank of Canada as of unprecedented magnitude.
Let me indicate some of the things which we might do to meet the coming situation. There is a causeway to build across the straits of Canso, connecting the great industrial area of Cape Breton with Nova Scotia, There is a canal to build between the bay of Fundy and the gulf of the St. Lawrence. There is a tunnel to build between New Brunswick and Prince Edward Island. There is a great St. Lawrence river to develop. There is Beauharnois already in action, and not supplying the needs. The St. Lawrence waterway and the powers of the Ottawa river have been crying for decades for development. Down our Canadian rivers flow in waste countless thousands of horse-power energy. Yes, Mr. Speaker, we can electrify our railway system and from that electrification distribute electricity to the rural areas. In the electrification of our railways, in the streamlining of our tracks, in the rebuilding of our railway equipment, obsolete for years, we can find employment for that vast army of highly trained technicians and artisans who have made a contribution in this war that

Bank Act-Mr. Pouliot
has given us an industrial revolution we could not otherwise have achieved in probably a hundred years of peace.
If we are to move forward and live in this new world that is to come, it is the financing of expansions of that type, of unprecedented magnitude, that our Department of Finance and our monetary system will be called upon to do.
I want to say this in conclusion. When we were before the banking and commerce committee we advocated, in addition to the things that have been accomplished, something more. We advocated that the Bank of Canada should be the national bank, that it should be responsible for financing the federal government; but we also advocated that a suborganization of that bank should be established in every province, and that the responsibility of that suborganization would be the financing of our provincial and municipal governments. We did not propose to take over commercial banking or to socialize private finance, but we did ask for a complete segregation as between public finance, the financing of public enterprise, and the financing of private enterprise and acting as custodian for private money.
We have made, of course, great progress. But we can go farther. We can finance the building of a Canada that will stand out as one of the foremost nations of the world, because our twelve million people, Mr. Speaker, are I believe the richest twelve million people anywhere in the world. We have more in our possession and more work to do than any other people in the world, and unless we allow ourselves to be hobbled and fettered as we have been in the past by the bad advice of our financial experts and by the misguided theories of orthodox finance, we can not only give a lead to our own people but make Canada an example for the whole world to follow, and make it one of the brightest parts of the world of English-speaking people.
Let me say, on social services and taxation, that with a proper management of our national currency and our monetary system we can give the government more power and we can impose less taxes on the people. We must have peace with progress; we must have peace with progress and prosperity. We can do away with things like the cost of living sales tax. We can eliminate the need for taxing wage earners to the point where they have not enough left to maintain a decent standard of living. We can raise the wages of our school teachers. We can raise the wages of our postmen and of our policemen.
Yes; we can finance these things with the same ease with which we have financed the war; we can bring about progress and prosperity for Canada through the budgets of our federal, provincial and municipal governments, and keep our economy moving forward on an even keel. It is along these lines, Mr. Speaker, that I feel we can approach with safety the revision of our Bank Act and monetary laws.
I do not think that I have by any means all the answers, but I believe the answers are there to be found, and that if we approach this great problem freed from the spirit of partnership, and uniting together, not in any spirit of critical antagonism to the Department of Finance, but more in the spirit of cooperative good will, we shall find the answers, we shall produce solutions, and we can look fonvai'd to the avoidance of that pitiable disruption which has swept over so much of the world in which we live.
But let me give you this warning. This land has no special dispensation against revolution or class conflict. Its seeds are already here. We have to face a world which is on the march forward, and if democracy as we know it is to survive, it will only be because it serves mankind as well as if not better than any other system of government.
Mr. JEAN-FRANCOIS POULIOT (Temis-couata): I congratulate the hon. member for Vancouver-Burrard (Mr. McGeer) upon his very fine speech, and I should like to say a few words about this bill. Looking at it, one sees that the proposed changes are not numerous. It is not so long ago that the Liberal party included in its platform the proposal to establish a national central bank to control rediscount, currency and credit. Some time afterwards the then prime minister, Mr. Bennett, stole that plank from the platform of the Liberal party and himself established a central bank, which was the Bank of Canada. The leader of the opposition at that time, the leader of the Liberal party, complained that Mr. Bennett had stolen the banking programme of the party. Mr. Bennett was gifted as a speaker, and his imagination gave him lots of opportunity to find rich metaphors of speech, but when it came to constructive ideas for the building of this country or the improvement of business he often fell short. When the matter came before the Liberal party I was opposed to it, but finally I bowed to the majority of my colleagues who were in favour of that bank.
So many views have been expressed about credit that it is time to say what is usually meant by the word. Credit is not money,
Bank Act-Mr. Pouliot

though money is often called credit; nor is it currency. Both money and currency are not principals; they are accessories to a transaction which is no less than a barrier. In the old times when there was no money, rich men exchanged camels, cattle, et cetera, for services or goods. Afterwards carved stones or other objects came into use, but there was something to offer in exchange for goods or services rendered. So many things have been said on this subject that people are under the impression that there is a spontaneous generation of credit, and that, for instance, when a man goes to the bank to secure a loan, an entry is made in the books and it is called credit, when in fact it is a debt of the bank to the individual, and the asset which the bank has to cover that debt is the guarantee which is given by the customer for the amount that is advanced to him by the bank. Therefore there is a transaction which is made by the bank in favour of a customer; but it cannot be extended indefinitely. It is done in certain cases.
One thing to be praised in banking is the decentralization of responsibility. There are managers located in various places, and they know the people; they know what their needs are, and they try to help them as much as they can. I will never say that the banking institutions which we have now are perfect, but they can be compared favourably with those of any other country, particularly with the banking system of the United States.
1 have here a quotation from what was said by the Prime Minister (Mr. Mackenzie King) not so long ago, on March 3 of last year:
There is no doubt that society as it is organized to-day does enable those who are economically strong to become stronger, and at the same time does have the effect of causing the economically weak in many of the great struggles of life to become weaker. While the wealth of the world has vastly increased, its distribution has become increasingly disproportionate.
On the same occasion the same gentleman spoke as follows:
And if, as a result of the institution of private property, whether it be ownership of Jand or of capital, a special condition may develop which is inimical to the community as a whole, that institution has either to be modified in some particulars, controlled in some dealings, or make way for some other system.
On February 21, 1941, I mentioned in the house that there was considerable intrigue to bring about a union government in order that the rich might become richer and the poor be poorer. Two years later the Prime Minister declared that society as it is organized to-day does enable those who are economically strong, et cetera, to become' stronger and has the effect of causing the economically weak

to become weaker. The raison d'etre of the Bank of Canada was to control rediscount, currency and credit. Was it not established ten years ago? If it failed of its purpose, why is it not abolished?
Here I have some remarks to make about the right of ownership and the distribution of wealth. It will be very difficult to establish a proportionate distribution of wealth, but the suggestion that wealth should be distributed in a certain proportion to all necessarily implies the right of all to ownership. It is clear that if no one has the right to own, no one would have the right to own any proportion of -wealth, and if it is true that the distribution of wealth has become increasingly disproportionate, it is not because the wealth of the world has vastly increased, but precisely because the wealth of the few has vastly increased. Such a condition is due not to society as it is organized to-day but to society as it is disorganized to-day. Society as a whole should not be impeached for the excessive greed and unruly ambition of a few. If society is so much disorganized to-day, who is responsible for the fact that the greed and ambition of a few have not been checked1 in time? Who also is responsible for the fact that the strong became stronger and the economically weak, weaker, and if it was society that enabled them to become respectively stronger and weaker, how was it done? What was the length of the process in each case?
It is not the institution of private property, whether it be ownership of land or ownership of capital, which might develop into a social condition inimical to the community as a -whole. It is the abuse of the institution of private property by the few which could do it. Therefore it would be illogical and unjust to conclude that the institution of private property must "be modified in some particulars, controlled in some directions, and should make way for some other system." The matter is too serious. It cannot be left like that. One should be ready to answer other pertinent questions with regard to the institution of private property, whether it be the ownership of land or of capital. First, in what particulars should it be modified and by whom? Second, in what direction should it be controlled and by whom? Third, for what other system should it make way?
There should be no mental reservations, no demagogic appeals. Social security will never be artificially established, it will never exist unless the causes of social insecurity are suppressed. This is a most important point. If there is something wrong in our banking system, what is it? It cannot be only the increase of interest on small loans. That is

Bank Act-Mr. Pouliot
unfortunate, and I hope it will be corrected, as my hon. friend who has just spoken said. But there are other things. We must go to the source of the evil. We must see what is the best that can be done with regard to banking.	.
At the present time the Bank of Canada is apparently independent of the Minister of Finance as well as the House of Commons. When the question was up before, the Minister of Finance said, on June 2, 1941-time passes very quickly-that the Bank of Canada is independent of the finance department and of the House of Commons. Sir, I regret very much that I cannot agree with such a theory.
I find it unsound, and for the information of the minister I will quote Hansard, page 3376, 1941:
Mr. Blaekmore:	Do I understand the minister to say that the Bank of Canada is not directly under the control of the Department of Finance?
Mr. Ilsley: Correct.
Mr. Blaekmore: That it is independent of the finance department, and therefore independent of this house?
Mr. Ilsley: Correct.


James Lorimer Ilsley: But I modified that later in a very careful statement. I answered Mr. Blaekmore a little hastily that day.


Mr. POULIOT:: Yes. But on the other hand, when I asked the minister's predecessor-not his immediate predecessor, but the one before, Mr. Dunning-for some information on the Bank of Canada, I was denied that information. I was told that it was none of my business to know about the expenses of a Bank of Canada doorman who travelled around the world. I do not know what are the relations between the Minister of Finance and the Bank of Canada. It is impossible for a member of parliament to attend all the sittings of the house and to read Hansard from the first page to the last, but there was something abnormal in the condition under which the Bank of Canada was created and left on an ivory tower.
I hope the minister will make clear what are the relations between himself and the Bank of Canada, but at the present time he should not be the only intermediary between the Bank of Canada and the House of Commons. He should have control over the Bank of Canada and he should submit to the control of the House of Commons.
We hear about the nationalization of banks. It is often mentioned in public that our banking system should be nationalized. W hen the Bank of Canada was created, it was created under private ownership and Mr. Bennett gave the reason for establishing it in a way-contrary to the system that had been operating for years. The capital was privately
owned, and the policy of this government afterwards was different; they made it publicly owned. The government purchased the shares and we were told that the Bank of Canada was a public, a national institution. It is a mushroom. It is impossible to know what is going on there, and those people are not in contact with the House of Commons at all. We" must have certain information from them, and also from the Minister of Finance, but in the present stage it is impossible to get information. How many times did I ask questions about the Bank of Canada and was told that, as in the case of the railways, the government did not have to answer? This is the old story. So long as the capital stock of the Bank of Canada was privately owned, while there was not exactly a raison d'etre there was something like a raison d'etre for establishing it; but as soon as the government bought the private stock and made it government owned, then the Bank of Canada had no longer a raison d'etre and we should have dispensed with it. It could be easily done. It is done in other countries. The government has control over banking in other countries. The position of the Chancellor of the Exchequer with the Bank of England is an example to follow in this dominion. In England they would never stand for a sy-stem such as the one w-e have here. Their policies are not made by experts; they are made by the government. This government may consider the suggestions that are made to them by the experts of the various departments, but, sir, is it not essential that the policy itself be made not by these experts but by the government? At the present time we can see where it differs from the past. In the old days when a member went to see the minister, the minister used to call the official in charge and ask him what was his answer to the complaint of the member, and then the minister decided what had to be done. But now conditions are entirety different. The same official is called and the minister asks him to decide what to do. The minister is there just as an intermediary between the member and the department, and the one w-ho is always right and makes no mistake is the official in charge. I do not believe that the Bank of Canada will serve any purpose so long as we have that system of irresponsibility.
I should like to have the gift of speech of my friend the hon. member for Vancouver-Burrard (Mr. McGeer) to describe the future as I should like it to be for the boys and the girls in the armed services, as well as for all our fellow citizens. But there were two things he said that seemed to be contradictory. He said that we have a burden of debt unprece-
Bank Act-Mr. Pouliot

dented in this country, which is true. He then expressed the desire that we should impose less taxes in the future. How can it be done with such a heavy burden of debt? Then he said that the Bank of Canada should be a national bank. So long as it is constituted as it is now, the Bank of Canada will never be a national bank. Even if the Bank of Canada is an international bank, our credit should be controlled by the nation. That is why it is important that the Minister of Finance should iiave a check on the Bank of Canada, and that he should be responsible to parliament for the general policies that are followed by that organization.
It would be a great mistake to put into the heads of our fellow citizens the thought that they will be given as much credit as Santa Claus distributes in Christmas gifts if a certain party comes into power. Those things are most dangerous. We should not expose our fellow citizens to disillusion. I recognize the sincerity of all my colleagues, although I do not agree with many of them. They want the redressment of wrongs. Wrongs will be redressed when the supremacy of parliament is recognized as the medium to correct the evils. Canadian citizens have a right to petition parliament for the redressment of a wrong. How can they petition parliament for the redressment of a wrong done by the Bank of Canada when there is no link between parliament and that bank? There may have been mistakes in judgment, and even mistakes of policy, on the part of some banks at certain times; but what is the remedy? It is easy to say to anybody: we will see to it that you will get unlimited credit. It was done in France. It was done at the time of the French revolution, and assignat fell down to nothing. It was done in Germany after the war, and the mark fell to next to nothing. It was easy to be a millionaire in Germany, to have a million marks. You could get them for a few cents. We shall not expose our country to such depreciation of money.
I may have some questions to ask when the committee sits, and I shall ask my good friend, the hon. member for Ontario (Mr. Moore), who is the chairman of the committee, to afford me the opportunity of asking some questions of the witnesses when they appear. But let us be very careful about making a change in what has been going rather well. When there are not too many complaints it is dangerous to make a change. It was dangerous to change the rules of the house. Would it not be dangerous to make too many changes in the banking system?
Let us not forget, sir, that the so-called prosperity which the Canadian people are
[Mr. Pouliot.j
enjoying is superficial. There are expenditures in large brackets, but sooner or later it will have to be paid. It cannot go on like that all the time. There are high wages paid and contracts are let here and there, but we are in a very precarious situation. There are many people who worry about the future, and who ask themselves what will happen when the war is over. It is time to think of that and to be very careful about the adoption of new schemes, whether they are proposed by financial wizards or others. When I speak of "financial wizards" I speak of the experts who are the advisers of the government. Sooner or later the day will come when the huge amount of taxation that is increasing will have to be paid, and it will not be a service to render to the boys who are fighting now in all corners of the world to welcome them with financial embarrassments as soon as they are discharged from the army. That is a matter for serious consideration, and I hope, sir, that no one will forget that the burden of taxation will be harder to decrease so long as the Canadian people are not told the truth in very simple language.


Mr. F. D. SHAW (Red Deer):: In approaching the subject of banks and banking practice I am not at all unmindful of the extraordinary human characteristic which renders it virtually impossible for some apparently reasonable human beings to approach a new idea without a good deal of prejudice and hostility. I think this unusual characteristic was very well dealt with by Sir Grafton Elliot Smith in his introduction to "Human History". I propose to read a short extract from his publication. It is as follows:
The vast majority of mankind thus accepts without question the guidance of tradition, and by sheer inertia loses the ability to observe or interpret evidence in any sense other than the conventional one that has been instilled into them by custom. Everyone who has ever called attention to facts, or inferences from them, that came into conflict with fashionable doctrines must have been made to realize how little influence the experience of the scientific developments of the last three centuries has had upon men's readiness to make even the simplest observation, or to admit the truth of the most obvious principles.
He goes on:
Most men, even without being consciously dishonest or wilfully stupid, seem to ibe unable to examine heterodox views with understanding and impartiality.
And one final sentence:
The inertia of tradition and the lack of courage to defy it when new evidence fails to conform to it seems to be potent to blind all to the most patent facts.

Bank Act-Mr. Shaw
Any approach to the consideration of financial policy must be made with a clear concept of the relationship of finance to the national activity and human welfare.
Early in his speech the hon. member for Vancouver-Burrard (Mr. McGeer) read several quotations, statements of persons whom I believe it is possible for us to look upon as experts in their field. It is my purpose to make reference to several other statements of leading statesmen with respect to the relationship of financial policy to the whole life of a community.
It was the Right Hon. Ramsay MacDonald, twice Prime Minister of Great Britain, who said:
Finance can command the sluices of every stream that runs to turn the wheels of industry, and can put fetters upon the feet of every government that is in existence.
President AVoodrow Wilson of the United States spoke in rather emphatic terms when he said:
The greatest monopoly in this country is the monopoly of big credits. A great industrial nation is controlled by its system of credits. The growth of the nation therefore and of all our activities are in the hands of a few men who chill and check and destroy genuine economic freedom.
Then, coming a little nearer to our own day, we have read of President Roosevelt saying:
He who controls the money wields sovereign power.
His Holiness Pope Pius XI asserted in even more emphatic terms:
Control of financial policy is control of the very life-blood of the entire economic body.
Then, as was pointed out last night, the Prime Minister of Canada (Mr. Mackenzie King) asserted in part:
Until the control of currency and credit is restored to the government and recognized as its most conspicuous responsibility, all talk of the sovereignty of parliament is idle and futile.
Those, added to the quotations of the hon. member for Vancouver-Burrard will, I believe, suffice to indicate to us the extreme importance of whatever type of financial system may be functioning at any given time in any country.
We have had one government succeeding another, here and elsewhere, and it is interesting to note the situations which confronted various governments upon their attaining office. First in this regard I may refer to Mr. Gladstone, a great statesman of other days, who said:
From the time I took office as chancellor I began to learn that the state held, in the face of the bank and city, an essentially fhlse position on finance.
The hinge of the whole situation, he said, was this:
The government itself was not to be a substantive power in matters of finance, but was to leave the money power supreme and unquestioned.
President Woodrow Wilson, referring to the situation with which he was confronted, asserted, in part, that he discovered that the banking system of his country, which was not engaged in the production of anything, wielded a tremendous power, in fact a power exceeding that of government.
Mr. Chesterton, the writer, commenting upon the situation from his point of view, is reported as having said:
The main mark of modern government is that we do not know who governs de facto any more than de jure. We see the politicians and not his backer, still less the backer of the backer; or-
What is most important of all.
-the banker of the backer.
He continues:
Throned above us all, in a manner without parallel in all the past, is veiled the prophet of finance, swaying all men's lives by a sort of magic and delivering oracles in a language not understanded of the people.
In Canada we did, in the early thirties, enter upon a depression. I know it has been argued in most vehement terms that banking policy and banking practice were neither responsible for nor had any influence upon those conditions. I hardly subscribe to that view. I think there is enough evidence for any man to draw sensible deductions. We know, for example, that between 1929 and 1933 the volume of purchasing power in Canada fell by approximately fifty per cent. In other words, credit and currency available to the Canadian people with which to purchase those things which they were capable of producing had vanished. I use the word "vanish" with considerable emphasis. It is true that very early in the thirties most of our banking institutions anticipated slumps. They were quite bold about making known that fact. Because of that anticipation they curtailed their loans drastically. All one had to do was to go out among the people who had not previously experienced any difficulty in borrowing. They were suddenly cut off. Is there anyone who will argue that when those institutions, in anticipation of such a situation, curtailed their lending policy it did not add immeasurably to the difficulties which were fast approaching? It is interesting to note what the late Hon. Michael J. Savage, former Prime Minister of New Zealand, had to say with respect to this. The annual report of
Bank Act-Mr. Shan>
the reserve bank of that country was being examined; certain projects of a national character had been advocated, and the reserve bank had recommended the holding up of public works in anticipation of an economic slump. Mr. Savage referred to that decision in the following words, in which I concur:
It is the orthodox point of view, but it is one which I do not hold. It is based on the theory that slumps are inevitable, but I prefer to think that bad times should only arise from famine or from some similar natural cause. There is no evidence that our production is breaking down.
I think that was also quite true of Canada. He goes on:
Therefore the only way in which a slump can happen is through people being unable to buy what they are able to produce. With adequate purchasing power spread over the community and production maintained, there is no earthly reason why any section of the community should suffer distress.
I think we all witnessed that situation during the depression. Governments were drastically curtailing their activities, including public works. Men who had been employed found themselves without adequate incomes, in some cases without any. They discovered themselves unable to produce and the production of others was therefore curtailed or discontinued. And all the while the banking institutions, whose sole interest was the making of money out of their operations, were making no endeavour to pump money or credit into the stream of purchasing power to assist in alleviating the distress.
I have always laboured under the impression that the original intention of our medium of exchange was to assist in the movement of those things which we are capable of producing to those places where a demand exists. We fear that under the set-up as we know it, what I will call the monopolistic banking system, we have lost sight completely of the real function of our medium of exchange. Back in 1934 and the early days of 1935 there were established across this country relief camps in which boys were paid twenty cents a day. A government which was dependent upon taxation of an impoverished people or borrowings from the chartered banks could not find any more than twenty cents a day. At that the Conservative government was better able to handle the situation than the Liberal government, because when the Liberals came into power they closed the camps; they could not find the twenty cents a day.
Under the system of financing which we have known, not only have we failed to maintain a stable economy, not only have we failed to make provision for willing and capable

people to meet the demands for what they themselves are capable of producing, but we have built up a colossal debt, oftentimes referred to by myself as an eternal debt. I know it is true the governor of the Bank of Canada has gone on record as asserting that a national debt is an asset; I know Doctor Cyril James has gone on record as saying that the debt will go on increasing for a hundred years; I know the Minister of Finance has indicated that they have hidden somewhere a scientific scheme or plan for taking care of it, but I still say that I fear the growth of that debt. The previous speaker has indicated that the service charges on that debt will be the first claim against the treasury. If we are not intending to; if .we are not by force of circumstances placed in a position where we must disillusion the boys and girls of our services, then it is most essential that the finance minister make known that scientific scheme which is supposed to be lurking somewhere.
That debt is the real enemy of our future. I would go farther and say that it is the real robber of our economic freedom. Let us go back for years, to about 1880, and note the growth of our national debt. To-day it is in the neighbourhood of $11 billion. Let us consider what the interest charges alone on that debt will mean in taxation after the war. If we realize also that there will be certain other fixed charges to be met before we shall be able to provide, for the ordinary everyday responsibilities of government we shall have a picture of the taxation structure which will have to be maintained in this country after the cessation of hostilities.
I cannot subscribe to the idea that there will be a drastic reduction in taxation after this war. Every time that is suggested to me I reflect back upon the introduction of the income tax act and remember how it was presumed to have been an emergency measure to be dispensed with after it had served its purpose. In the way it has grown and multiplied and developed since it was first introduced would put bacteria to shame. As I say, I shall not try to delude anyone by suggesting that under the present system of financing there can be any drastic reduction in taxation after the war. The hon. member for Temiscouata (Mr. Pouliot) cautioned us against disillusioning the people in our services. The greatest disillusionment they can ever be faced with will be that disillusionment which will meet them when they come back and discover that the government cannot finance even those projects and rehabilitation measures which it has promised it will put into effect. Nothing, Mr. Speaker, will render that.

Bank Act-Mr. Shaw
programme null and void sooner than a continuation of the system of financing which we are and have been using. The hon. member for York-Sunbury (Mr. Hanson) indicated that the government had not offered in its proposed amendments very much more in the way of a revision of the Bank Act than was offered in 1934. Putting two and two together I would suggest, then, that we cannot hope for much more under this revision than we have had in the years from 1934 onwards.
I said in my opening remarks that one is always met with hostility when one undertakes to discuss those things which over a period of years have been made most mysterious. Those responsible for the present financial system have developed a strange kind of double talk; we know that. We are looked upon with a sort of sympathy when we dare to discuss the matter. I know that in Alberta, when we undertook in the early thirties to teach even the elementary truths of finance, we were ridiculed and condemned. I recall saying in 1934, for example, that the banks create credits. Even the banking institutions were ridiculing us for saying that. We stated that ninety per cent of a bank's business is done on credit of its own creation. Yesterday we voted on a subamendment in this house and no one rose in his place and said that the subamendment was out of order because the banks do not create credit. So that we see that one truth has now come to prevail.
I remember, too, declaring that to tie our money to gold was a fantastic procedure, and at that time the supporters of this type of orthodox finance went about the country saying to the people, " Ladies and gentlemen, if you take away gold from behind your money and credit it will of necessity become valueless." But we have seen that fallacy exploded. We have seen our gold reserves completely removed and placed apart from our financial system, unless of course you tie in your foreign exchange control board with the financial system; but so far as the relationship of gold to money is concerned, there is not even a forty-second cousin relationship.
Again, about ten years ago, we pointed out that the chartered banks were primarily concerned with improving and strengthening their own positions regardless of the welfare of the people. These same institutions, through the Canadian Bankers' Association-then hired one by the name of Vernon Knowles-I do not know whether he is related to the hon. member for Winnipeg North Centre-to travel back and forth across western Canada telling the farm people how poverty stricken those banking institutions were. He did not tell the people that the banks which had moved out
of those non-profit areas moved out because there were no profits left. The people's welfare did not matter. He did not tell the truth to the people in those communities: We cannot make enough out of you any more, and that is why we are leaving. But he ma.naged to concoct some other explanation for it. At the same time the bankers carried full-page advertisements in all our newspapers telling the people how poverty stricken they were, h rom that day to this the banks have been on the air with little playlets like "John Farmer and his Wife": John Farmer got a loan and thus has been able to do this and do that, and improve his status materially. I am almost tempted to ask them to base their next ten serials upon what happened when most John Farmers did not get loans.
In 1940 the Canadian Bankers' association became so fearful of the growing feeling among our Canadian people from coast to coast that there must be something wrong with our financial system, that it became active in politics. Oh, not openly, I grant you, but I am reasonably certain, at least certain to my own satisfaction, that in 1940 that organization poured substantial sums of money into the "Independent" coffers in Alberta after bringing about a wedding of the Liberals and Conservatives as an "Independent" organization to oppose the government which had enlightened the people of Alberta on monetary matters.
I was surprised that my friends of the Progressive Conservative party voted as they did last night on the subamendment. I quite understand that that was their prerogative. Yet they have come out before the country as progressives, and there was a possibility of a number of seats in Canada for them. But after last night I must withdraw any suggestion of that possibility so far as the western half of Canada is concerned. But there the people have become a little enlightened with respect to the machinations of the present financial set-up.
It is not my purpose even to try to go into details upon the second reading of this bill. The measure will go before the banking and commerce committee, where I am sure our Social Credit representatives on the committee will have a great deal to say about the lack of consideration which the government has given to necessary amendments.
As to the amendment which we are now debating I must express this view. If we undertake to unite the government and the present financial system, the present financial system will swallow the government. My personal feeling is that it is most essential that
Bank Act-Mr. Shaw

we make basic changes now in this revision of the Bank Act. But if the Bank Act is left almost intact, practically as it is now after this revision, a government coming into power within the next two or three years and determined to put into effect a democratic financial system will find itself confronted with a situation where, if it endeavours to take over the banking institutions, the banking institutions will swallow that government. I contend that it is most essential that we concentrate our attention upon the most necessary changes in the act at the present time. There is plenty of time to take other steps should further action become necessary. We never know what to-morrow holds.
Last evening the hon. member for Cartier (Mr. Rose) referred to our party. I am sorry he is not in his place at the moment. I thought it was just too bad that a man who is presumed to have a good deal of understanding and who represents such a fine constituency gave evidence of such colossal misunderstanding of the matter of money. As he spoke last evening I could not help thinking how he and his party have been playing to the government for the past year. I should like to ask him, and maybe, if he reads Hansard, he will answer me, why is that party playing to the government, particularly when in 1940, alluding to the same government with whom they are endeavouring to work up a romance, they referred to them as "dictators", "robbers and plunderers", "capitalist war-mongers", "Canadian imperialists", "bare-faced liars"-I am only reading, Mr. Speaker, from one of their own publications-"violators of solemn treaties"-


Mr. TUCKER:: What is the hon. member reading from?


Frederick Davis Shaw: I am reading from the 1940 election manifesto of the communist party. They were "war profiteers", they were "parasitical ruling classes", they were "supporters of a bloody criminal war, a ghastly crime against humanity, plunderers and killers of the common people", and to end up, "thieves".


Walter Adam Tucker: Is that all?


Frederick Davis Shaw: That is all; and if that is not found in this publication I will condescend to eat the platform, although I am sure it would give me violent indigestion.


Mr. JOHNSTON (Bow River):: That
pretty well covers it, though.


Frederick Davis Shaw: I merely point out to the hon. member who assails us that throughout the session he and his party have supported a government which only four years ago they
(Mr. Shaw.]
characterized as being any one or more of these fourteen or fifteen things. Is there a subtle purpose?
I have practically concluded my remarks. I had one or two other things to say with respect to this situation, but the hon. member for Bow River (Mr. Johnston) and the hon. member for Cape Breton South (Mr. Gillis) have intimated by inference that my statements would not be parliamentary, and therefore I shall not say what. I was going to say.
After the last war the Right Hon. David Lloyd George, in speaking of the conference which settled the Dawes reparation pact, made this statement:
The international bankers-
In a moment I am going to make this read "national" bankers.
-swept statesmen, politicians, journalists and jurists all on one side, and issued their orders with the imperiousness of absolute monarchs who knew that there was no appeal against their ruthless decrees.
I wonder whether after this war we shall have to face the people of Canada, including our boys and girls of the service personnel, men of the merchant marine and all those associated with war industry, and confess that "we have failed in granting to you those things for which you have been prepared to make the supreme sacrifice, all because our national bankers have swept our statesmen, politicians, journalists and jurists aside", in making decisions which rendered impossible the doing of those things which I think we all feel in our own hearts that our fighting personnel and others have earned for themselves.


Mr. FREDERIC DORION (Charlevoix-Saguenay):: I should like to say a few words in order to make as clear as possible the reasons why I am going to support the amendment moved by the leader of the Canadian Commonwealth Federation party. I will admit very frankly that I am not at all an expert in financial matters, but during my twenty-three Vvears of law practice I have seen so many cases in which the banks were involved in one way or another, that I think it my duty to say that I am in favour of the nationalization of the banks.
I sometimes wonder why the banking system is practically the only thing which has not been the object of direct control by the government since the outbreak of the war. Boards and commissions of all kinds have been created to control almost every kind of production, but we have not yet seen any board to control the production of credit. Must we come to the conclusion that finance

Bank Act-Mr. Dorian
is something sacrosanct, that it is above all human beings, that it is so strong that no government can touch it, that it is so powerful that no government dares to control it? Would it not be true then that we are only the serfs of finance, that we are only permitted to pay tribute to it? The manpower of this country is under the direct control of the government. Every means is taken to ascertain that all our young men are called under arms. We even see orders which oblige fathers to hand their sons over to the country, to denounce them. Why do we act altogether differently when we need money? Why not submit this money power to the will and the needs of the government, as we do, for the manpower. We know that at this very moment, on the eve of a most gigantic struggle, which will cost thousands of lives and the greatest suffering humanity has ever known, in Switzerland financiers of high rank representing United States, British and German finance are quietly seated at a table studying methods of bettering the position of international finance. Must we resign ourselves to the conclusion that we cannot get rid of this powerful organization? Must we understand that all our miseries, all our sacrifices, are only a tribute to satisfy the appetite of this monster? I believe, Mr. Speaker, that it is our duty as representatives of the people to do our utmost to correct this state of affairs, and one of the means would be the nationalization of the banks and their control by the representatives of the people. There may be better means, but I do not know of them.
Every day we hear about reconstruction, rehabilitation, social services, and the rest. My contention is that we shall never do anything good unless the government gets absolute control of the financial system. We often hear, as we did this afternoon, about tremendous public works which should be undertaken after the war. But where are we to get the necessary money to execute these works under the present financial system? Are we to continue borrowing millions and millions every year? This is possible at the present time because the people who lend their money want to get the war over as soon as possible, but after the war will they be ready to lend their money to the government as they do now? And even if they do, can the public debt continue going up at the rate of over two billions a year? Everyone must admit that the taxpayers are overtaxed. Can we expect to be able to draw from them so much money every year without any hope of any reduction?
Let this question of credit be settled and a great many of our problems will be solved at 100-174
once. Let me remind you, Mr. Speaker, that during the depression period, from 1929 to 1939, hundreds of bankruptcies were forced by the banks. I could give you a great number of names of merchants and businessmen who could have survived if the banks had not forced them to reimburse at once and on very short notice the moneys that had been advanced to them. I think the saying is quite true that the banks make loans when business is good and refuse to do so when business is not so good. The people demand that this system be corrected. The banking system is essentially a public service and should be dealt with accordingly.
Mrs. DORISE W. NIELSEN (North Battle-ford) :	Mr. Speaker, speaking on the bill now
before the house, I must admit that my chief interest is, of course, as you would expect it to be, in the proposed changes in the Bank Act dealing with the question of agricultural credits. When I spoke in the debate on the address in reply to the speech from the throne I was one of those, I believe I was one of the first of those who rose to speak, who mentioned the necessity of legislation being brought down during this session to provide for our agricultural needs facilities such as were to be provided by the industrial development bank. The proposals we find embodied in this, bill do not in my opinion meet with any degree of adequacy the needs of our farming people.
I shall be able to deal with the proposals later when the bill is under consideration clause by clause. At the moment it is enough for me to say that the proposals, first of all, to allow farm implements and equipment to be used as security for loans issued by the chartered banks, and, second, with regard to the passing of a farm improvement loan act similar to the home improvement act by which the government will guarantee loss on such loans up to ten per cent, as a measure to provide intermediate credits to the farming people, cannot in my opinion possibly fulfil the requirements.
As the bill stands, I would feel it incumbent upon me to vote against it, but fortunately it is not at present before us in such a form as necessitates a definite vote against it. It will be going before the committee, where I sin-serely hope the members of the committee from farming communities will do their utmost to see to it that under the act a different form of bank credits will be set up to deal with the farm situation. As the measure now stands, I think it leaves the farmers completely at the mercy of the chartered banks, as they have been for many years. In fact, throughout the whole period of western

276S
Bank Act-Mrs. Nielsen

development, particularly during the last decade, western farmers have learned to their great cost and sorrow what it means to have no other resource than the chartered banks when they are in need of loans for carrying on their farming business, which is their means of livelihood.
This bill definitely does not go far enough to meet the credit needs of the west. There is need for farm credit. I would go so far as to say that the production of food has been marvellous when we consider the fact that we have lost so many people from our farms. In the neighbourhood of 350,000 people have left our farms, and yet the production of food has gone up forty per cent. That is a marvellous achievement. But had the farmers of the west been able to have their agricultural credit or loan requirements satisfied for the purpose of equipping themselves with the various things which are necessary to enable them to increase their food production, we should have had an even more marvellous production than under the present circumstances.
There is and will be in the post-war years need to have easy credit for farmers, because all members will agree that, great as are the demands on the nation for the production of food during the war, those demands will not cease with the cessation of hostilities, and the continued increase in food production will be one of the most gigantic tasks that will face the country. .Definitely, therefore, our farmers will have to have help in this direction.
In the discussion of a bill such as this, I have to be guided in my attitude by certain factors. First of all, Mr. Speaker, I must impress upon you that I represent in this house very broad sections of people from the North Battleford riding. I do not represent any one small narrow section of people there. In fact, I would remind you that roughly about 11,000 of those people in that northern riding sent me to this house to uphold first, of course, democratic principles and then to work on their behalf for all measures, whoever might advocate them or give them to the people, which would increase the living standards of Canadians, particularly of our farmers and those in the small towns and villages who depend upon the farmers for their living.
My duty-and I view my work in this house very seriously and honestly-is to vote for such concrete measures of reform as the great majority of the people in North Battleford are ready and willing to work for and to support, and I would say this again to the members of the house that in my opinion no society can move forward more rapidly than the majority of its people are prepared to

move. That must be the guiding principle to those of us who are in the position of guiding and directing the policy and legislation of the country.
One thing I must make clear and it is this. Those who voted for reform and for progressive measures to make better the living conditions of the farming community belong to various political parties. People of all shades of political opinion supported the farm programme which was my guide when I came here. I, too, have ideas of my own. I myself do not hesitate at all, nor have I ever hesitated, to say that I am a socialist, and I believe that socialism will be the successor of capitalism just as capitalism was the successor of feudalism, but only as the people understand socialism, and when the great majority of them are ready to adopt it. Public ownership of banks will be a necessary part of the socialism of this country when the people are prepared and ready for it. I am one of those who believe definitely that no minority of any country can impose socialism upon the majority who are not ready for it; for that definitely would mean civil war. It would mean chaos; it might mean bloodshed, and no one who is interested in the welfare of the people can hope that social advancement has to come by suffering in that way. Suffering is something which all of us who have seen it through the years of depression would hope to prevent, not to bring about.
The majority of the people will be ready to accept socialism only when capitalism shows definite^ that it is not capable of providing them further with the necessities and comforts of living which they desire.


Mr. WRIGHT:: What happened in 1930?


Mrs. NIELSEN:: When capitalism fails to provide employment, when it can no longer provide a living, that is the time when people begin to turn to other means and to find a way out and a solution. We have already had a period in which capitalism did show such signs of a break-down. That was during the years of depression when capitalism did not provide employment, when it did not give even the necessities of life to thousands. But it is wrong for us to-day to base our arguments upon the premise which existed in the years of depression. I would say we are foolish, and we are more than foolish, we are blind if we refuse to acknowledge and to accept the fact that this war of such gigantic and global proportions has changed the picture of the world. This war has made its impact upon all countries. It has strengthened capitalism in Canada. I do not know how anyone would disagree with me over that.

Bank Act-Mrs. Nielsen
Here we are emerging after those years of war, not as a somewhat small and backward country relying almost entirely upon agriculture, but as a great industrial country. We are emerging as the third world trading nation and the fourth largest producer of the united nations war supplies.
Some people who want to socialize Canada may perhaps feel, in seeing this changed condition in Canada, that their hopes are receding; but there is emerging from this war one other factor, which those of us who are realists will have to acknowledge. We have to see that emerging from this war is something new in world relationships, something which is vast and far-reaching in consequence, a condition which might yet sound perhaps to many people as being unbelievable. There is now a recognition by the great powers that a new alignment of world forces has taken place, which may possibly continue, namely, an alignment between the capitalist nations of the world and the one great socialist state of the world, in which they not only fight unitedly against a common enemy, but where they say definitely that there is a prospect and a new horizon where they ean work and cooperate together in the future for the good of them all.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.


Dorise Winifred Nielsen: Mr. Speaker, before recess I was speaking about the changing pattern of international relationships brought about by the war. The three great leaders of the united nations have agreed that they, and the nations for whom they speak, are, as they put it, friends-in fact, in spirit and in purpose. This is something of great significance to the peoples of the world.
I once heard a man try to describe a giraffe to a little boy who had never seen one. After the man had tried to describe the animal to the boy, he looked up and said, "Why, there is no such animal." And so it is with this new world concept of socialism and capitalism living in peace together. Many people say that it will not work. But, Mr. Speaker, my contention is that it does work, and that it is working right now. We are fighting together, fighting for our very lives, and the blood of our boys will mingle with that of Red army boys, British boys, Tito's men, boys from the United States, Chinese-in fact men of all the nations and all peoples who are fighting with us to destroy fascism.
Afterwards, we who wish to see a better world rise out of the ashes of the old, will 100-1744
continue this cooperation that we have achieved during the war. Why? Because it is apparent to all of us that it is to our mutual advantage. The Soviet Union, China, the European countries, India, those countries which have borne the brunt of war to a greater degree than we have, will need to be rebuilt. They will do it more quickly if they have materials from us. Of course we should understand that the Soviet Union can rebuild her economy alone. It would take her longer to do it, but she is not nearly so dependent upon us as we are upon her. That is a fact which Canadians should remember. We need the cooperation of the Soviet Union. We know that the Soviet Union will be one of the greatest buying nations in the world after the war, and it is imperative for us that we have markets in order that our farmers can continue, and even increase the production of food; so that we can have increased employment on our farms, and better living conditions on them; so that industrial workers and returned men can have employment, and so that our national income can be kept at high levels, or even increased. This is the changing pattern of world relationships in which Canada has a place and where, for the sake of our own future, we must be one of a family of world nations.
It may be that in such a world as this i't will take much longer than some of us have thought previously to achieve socialism for Canada. But it will be a world where the nations are at peace, where peace is something which we can hope will continue for many years into the future, a world where we can all within the democratic framework work for more and better reforms, a rising standard of living and an increase of home markets. For the first time in the history of the world there is the possibility now before us, a perspective of achieving socialism, slowly perhaps, but peacefully, though over a longer period of time.
I want to see social advances achieved peacefully. I disagree with those who to-day persist in saying that socialism is the economy we must have now, or immediately after the war. I disagree with those who say that immediate socialization or nationalization of the banks is imperative, and has to be brought about. If socialism is made an issue now, the forces of reaction in this country-and they still exist and are very active-will take up the challenge. Large numbers of people in Canada fear socialism because they do not understand it, and they will turn to the support of a party which leads in its denunciation of socialism, namely, the Progressive Conservative party. But if reaction in Canada-and I do not necessarily mean all those
Bank Act-Mrs. Nielsen

who are members of the Progressive Conservative party, but refer rather to a group headed by the old Tory gang-ever gets into the saddle again, it means imperialist policies once more for Canada. It means power blocs being once again formed in the world; it means once again that trade will be limited to within the confines of the British empire, or perhaps a small periphery of nations around it. And, despite Mr. Bracken's clever hedging on the question, we would then necessarily have unemployment; we would have a lack of markets for the product of our farms; we would have stagnation and, finally and inevitably, we would come to world war No. 3.
If the leaders of the Cooperative Commonwealth Federation persist in making socialism an issue now, and refuse to see the changing pattern of the world, they would lead the people into the arms of such a catastrophe and would have much to answer for as time goes on. I have lived and worked among people who belong to the C.C.F. They are friends of mine. I know that all those who belong to the C.C.F. do not agree with this idea of insisting upon socialism now, under changed world conditions.
I should like to quote from some of the Gallup polls recently brought to my attention. I am not going to say that a Gallup poll is 100 per cent correct; it is not. But it is an indication of public feeling, and possibly is accurate within a margin of four per cent one way or the other. For that reason I believe it is a fairly safe indication. A while ago a Gallup poll was taken in Canada, and the result was published in the Montreal Star of February 23. The question asked was this:
Which of these men do yon think would do the best job of representing Canada at the peace table-Mackenzie King, John Bracken, M. J. Coldwell or some other?
I direct the attention of the house to the fact that of those people who were part and parcel of the ranks of the C.CJ'. only sixty-two per cent wished to see the leader of the C.C.F. party (Mr. Coldwell) at the peace table. In my opinion they are afraid of the tendency which he is now showing, one which is not necessary and not right. We find that thirty-eight per cent of the rank and file of the C.C.F. wanted some other person. Some wanted Mr. King; some wanted Mr. Bracken, and some wanted somebody else.


Mr. SPEAKER:: I have allowed the hon. member to go far afield, but I must call her attention to the fact that we are discussing the Bank Act. I hope she will confine her remarks to that subject.


Dorise Winifred Nielsen: I am sorry, Mr. Speaker, that you have thought I am going too far

from the Bank Act, but I must point out that we are discussing an amendment offered by the C.C.F. to the measure now before the house. I would add further that the C.C.F. are asking for the nationalization or government control of the banks. I am against that, and I want to make it clear why I am against it. I must ask Your Honour's leniency in this matter, and would point out that a Gallup poll was published recently on this very question, which I believe is relevant to the debate. This is an actual question which was asked of the people.


Thomas Vien: I am afraid the Gallup poll has nothing to do with the Bank Act.


Dorise Winifred Nielsen: I would point out that the question was, "Do you think the government should own or operate the banks of Canada, or should we continue with the present system?"


Some hon. MEMBERS:: Carry on.


Dorise Winifred Nielsen: Among those Canadians who say that they would vote for the C.C.F., not quite half agree to government-owned or, shall we say, socialized banks in Canada. The actual figure of those C.C.F. people who want government-owned and controlled banks stood at forty-nine per cent. Those supporting the present system totalled forty per cent, and there were eleven per cent undecided.
When I consider as to how I am going to vote on this question I find that not even all members of the C.C.F. support their leader's proposals. And I have far wider sections of my people at home to consider. Not only members of the C.C.F. sent me here.
I want to make this very clear. I am not against the socialization of the banks now because I am satisfied with the banking system as it exists. I am not. There has been too much exploitation of our farmers for me to be in complete agreement with this bill as it stands. The banks have failed dismally in time of need to provide credits for our farm people.
In my opinion the greatest need of this nation to-day is for unity to win the war. That should be the overriding consideration of everyone; nothing should come before that. Unity to win the war is our first duty, and then there should be a unity of all forward thinking people after the war to build the good life for Canadians, to give jobs and security on the land and to provide peace. The issue of socialism now splits and divides our people and prevents that national unity which is necessary for the winning of the war and the peace.

Bank Act-Mr. Slaght
Suggestions with regard to an agricultural bank have been made to the minister in the past by certain bodies, which I imagine he regards as being made up of responsible people. I should like to quote from the report of the royal commission on banking and currency in Canada which sat in 1933, the so-called Macmillan report. I do this in order to show that away back in 1933 it was considered that certain changes with regard to agricultural credits were necessary. I quote from paragraph 241 of the report as follows:
In the first place, the fact that the provincial governments decided to engage in these experiments (e.g. making loans to farmers through provincial institutions) may well be taken as indicating the necessity of agricultural credit at lower rates of interest than prudent banking practice might seem to warrant, particularly in certain areas where agricultural production is attended by certain hazards or requires loans of a length which militates against the affording of credit by commercial banks.
And paragraph 242:
The following is an extract from the evidence submitted on behalf of the united farmers of Ontario, as to the problem of short term credit in Ontario-"Generally speaking, within the last two years the banks have ceased to function in regard to Canadian agriculture. Agriculture is taken to be an activity, or an industry, that is not worthy of credit, and from the banking point of view I am not blaming them."
And again from paragraph 245:
A memorandum on rural credit submitted to us by the Canadian bankers' association referred to the matter of intermediate credit in the following terms: "Assuming that the need for credit in this form is clearly a matter of sufficient national importance to warrant some action being taken by the authorities, consideration should be given to the creation of an institution financed on the public credit and to the placing upon it of the responsibility for meeting all legitimate demands."
I would stress again the farmers' need for credit. Credit should be provided for agriculture the same as it is being provided for small business enterprises. I cannot under any consideration support the proposal put forward in this bill for agricultural credits as it now stands. .
When this bill goes before the banking and commerce committee I would strongly urge that that committee consider agricultural credits in the light of what has been said regarding this matter and recommend the setting up of an agricultural bank similar to the industrial development bank which is already a part of the legislation before this house. I would suggest that the committee on banking and commerce have before it delegations from farm organizations. I am of the opinion that those farm delegations would be overwhelmingly in favour of such a bank in' preference to extending the coverage and power of the chartered banks as is proposed by this bill.
This is definitely the place where the government can step in in the interests of the Canadian people. Private and commercial banks have been playing a far from active role in the economy of this country. We have had to have other government agencies provide credit when the banks have failed to do so. We have already had to set up such bodies as the farm loan board, the provincial credit institutions and the central mortgage bank. The setting up of an agricultural development bank would be just one step further. This is an immediate and concrete issue upon which I believe every western member and all western people can agree. I do not think the question of the nationalization of banks is a correct matter to be discussed at this time because it tends to split and divide the unity of the people. But as we go forward I shall under changing conditions be prepared to fight for further changes, possibly when the time comes to fight and press for complete government control of the banks. I shall have plenty more to say when the bill comes before the house after having been to the committee, but at present I think this is all I shall say.
Mr, A. G. SLAGHT (Parry Sound):	Mr. Speaker, I have on earlier occasions made my voice amply clear with regard to the problem of the so-called socialization of our chartered banks, the nationalization of our chartered banks as it is called, or, as I choose to put it to my hon. friends across the way, if they had their way it would mean the C.C.F.-erizing of the banks of Canada. That, to my mind, would be nothing short of calamity.
I did not have the privilege of hearing the Minister of Finance (Mr. Ilsley), which I regret, but I have read his recent address. It may not be a secret to him that in some respects I differ with the views he put forward with regard to the government borrowing of money for government needs. He indicated more than once in his remarks to this house that he desired the committee on banking and commerce to look very closely into several of the problems involved in the bill. He invited a close scrutiny and, as I understood him, the friendly criticism of members of that committee, of which I am one. I propose to avail myself of that invitation and endeavour briefly to give to the house, for the consideration of the committee, two or three constructive suggestions, which I believe or which I am hopeful he may succumb to if he is not watched too closely by his expert advisers behind the scene. I believe these suggestions would be greatly to the good of Canada and our economic system.
Bank Act-Mr. Slaght

My first proposal is that the right to issue currency and credit shall be revested in the Canadian people and not in the chartered banks where it at present rests. The second proposal is that the Minister of Finance and the government of Canada shall not borrow for government needs by the use of debt-bearing securities sold by them to the chartered banks. In other words, new money which requires to be created, as is the case when the minister goes to the chartered banks with bonds or loans, should be spent into existence and not borrowed into existence with the debt burden incident thereto.
The minister, apparently in advance of criticism which might be offered in this debate, deprecated the course that I have just outlined. As I understood him, he was solicitous about the small or meagre profits the chartered banks have been enjoying in the past. Let me here say that I have no fight with the banks. My advocacy in this proposal is that the banks render good service and are entitled to a fair profit. My proposal is in favour of the private banks and is to help them to remain private. Because of the monopoly they enjoy at the expense of the taxpayers, it may turn the people of Canada C.C.F.-wards, and they may have the feeling that the only relief is to nationalize the banks and take them over.
The bankers are doing a splendid patriotic job in our war effort. They are among the finest and best citizens in every community. Having said that, Mr. Speaker, I am sure you will feel that my quarrel is with the system and with the monopoly the bankers enjoy, and not with the banker as an individual.
Let there be no mistake about the fact that the business of our chartered banks is a profitable one. Going back over a period of ten years, from 1928 to 1938, the ten chartered banks paid dividends on their capital at rates of 14 per cent, 16 per cent, 13 per cent, 9 per cent, 13 per cent, 13 per cent, 14 per cent, 12 per cent, 10 per cent and 13 per cent. The rates differed slightly. These dividends have been decreasing gradually, until for the six-year period from 1937 to 1941 they were 8 per cent, 12 per cent, 10 per cent, 8 per cent, 8 per cent, 10 per cent, 8 per cent, 10 per cent and so on, and it will not be forgotten that two of those years were war years.


Mr. ROEBUCK:: Those are not profits, but dividends?


Mr. SLAGHT:: I so stated. They are the dividends paid, and as we know, the dividends are paid on the basis of the capital of the banks. I shall come to that in a moment.

Let us see what their capital is. The original capital invested in the ten chartered banks is 145i million dollars-no more.
I quote now from their own statements, from the statistics furnished each month from their statistical bureaux. These statistics show a reserve piled up, on top of their original capital, of 133 million dollars. They show further that the banks own, free from all charge and encumbrance, some 3,000 bank buildings spread across Canada, and their real property is valued by them at 70 million dollars. We also know that the banks enjoy the privilege of turning the crank and printing their own private bank currency. We have reduced that privilege gradually, down through the years, so that they have left now 40 million dollars of this type of their own money.
The total of these figures which I have just given is 388 million dollars, and it is my proposal that, of course, the banks should be entitled to lend and invest their capital, their original capital and their increment which they have piled up by careful management. Anybody who desires to interfere with that would be guilty of almost confiscation.
On top of that the banks borrowed from the people of Canada at what is thought to be li per cent, but I am told that it actually works out at something under one per cent. They borrowed $1,600,000,000 more, and that, with the $388,000,000 gives them in the neighbourhood of two billion dollars in real wealth, which I think they should be entitled to lend at five or six or seven per cent, according to the risk. But there, Mr. Speaker, I ask that we shall call a halt, because under section 59 of the Bank Act the chartered banks have enjoyed what I call a monopoly. There is no fancy term about that. Most bodies of men if they secured a monopoly fifty or sixty years ago would be loath to part with it. The monopoly the banks enjoy is a very simple one. If they have in their strong box or in their vaults or on deposit with the Bank of Canada a S5 Bank of Canada bill, they are then entitled to lend twenty times that amount, if they keep that $5 bill there. In other words, they are entitled to lend $100 which they do not possess at all. What I object to is that we should have given or that we should permit to stay given to a favoured body of people the right to lend on the basis, as the Minister of Finance put it in answer to a question of mine to which I shall refer in a moment, of ten times more money than they have. The minister said that the orthodox recognized business of private banking is to lend ten times more money than you have. Think of it! Take a man

Bank Act-Mr. Slaght
in the garage business with ten cars. He wants to arrange to let them out next Sunday. If he charges 100 people $2 apiece for the right to go to his garage and take away a hundred cars when he has only ten cars, you would not be surprised if he were almost indicted for fraud when you found that he walked away with money in that way. Lest my hon. friend the Minister of Finance may have forgotten what he said, may I, Mr. Speaker, indicate to you just what happened on that occasion. I quote from Hansard of July 15, 1942, when the minister said:
Everyone familiar with the working of the banking system knows that the moment the banks get their hands on additional cash-I mean by that Bank of Canada notes, or deposits by the Bank of Canada which are convertible into Bank of Canada notes-when the banks get those reserves in their hands *powerful forces are set in motion to get the banks to buy securities themselves, to make loans themselves, so that the deposits of the chartered banks will be seven, eight, nine or ten times as great as their cash reserves. That lies at the base of their whole profit-making activities; the way they make money is by lending more money than they have.
Let us ponder that.
What they have is their cash reserves; and unless a bank has out several times-six, seven, eight, nine or ten times-its cash reserves, it is not being profitably, or from a banking point of view, properly conducted.
Does that sound like a monopoly, almost a racket? I do not use the term "racket'1 Is it not a monopoly?
The total volume of money employed in Canada as a medium of exchange consists, of course, of credit and currency, copper and silver

no gold or very little now, some fifty or sixty million dollars. They have paper money running, a9 the hon. member for Yancouver-Burrard (Mr. McGeer) told us this afternoon, up to $1,200,000,000 or $1,300,000,000, issued to the people to do business with. That is Bank of Canada currency. Other new money by way of national currency is created by the banks themselves, although under the British North America Act, which is our constitution, by section 91 the dominion parliament was given jurisdiction over public debt and property, currency and coinage, banking and the issue of paper money. But we have peddled the privilege out to somebody else. We have made a concession of it, and we have done it in the Bank Act which is now to be revised.


Mr. KNOWLES:: It is not peddled out; it is given away.


Arthur Graeme Slaght: My hon. friend's phrase is perhaps more dignified. I should not have said "peddled" because, after all, there were
no competitors. A man came along for ten bank charters, and he must have smiled because he simply walked away with the ten charters and with this tremendous monopoly to do something that nobody else in any other kind of business can do, namely, take money for pretending to lend to somebody something that he has not to lend. That is the situation.
If the Minister of Finance wants to get $2,000,000 he has these courses open to him. He can walk down to Wellington street to the Bank of Montreal with a bond, a twenty-year bond with coupons at three per cent, which means $600,000 which the taxpayers will have to pay in interest before the bond is redeemed, put it through Mr. Spinney's wicket, and be credited in the Bank of Montreal with one million dollars. That is that transaction. Or he can go over to Mr. Graham Towers in the next block, take the same Canadian bond, put it through Mr. Towers' window and be credited with one million dollars. In the one case the taxpayers pay $600,000 over a period of twenty years; in the other case they pay nothing, because, as we know, the Bank of Canada, receiving interest, receives it for the people and the Dominion of Canada.
Somebody says, "That is so simple that surely it cannot be true." Of course it is true. There are only two reasons I have ever heard advanced why we ought to perpetuate that monopoly, and I will give them to the house one at a time. The first is, as I have said, that the Minister of Finance is solicitous about the revenue of the banks. He says, "Surely that is not too much money they are making." Well, I gave it to you, Mr. Speaker, that for ten years one bank was paying dividends on its capital amounting to sixteen per cent: in six years they got all their money back and had "velvet" for the rest of the time. Let that go if you like; but just take the minister's figures which he put on Hansard, at page 2550, in the statement of current operating earnings and expenses, and let me recall to the house what the banks' story for last year shows, and then see if we should be too solicitous about taking away this monopolistic privilege which never ought to have been given to them. The minister's statement shows that they earned or made in revenue last year $60 millions, because that is the intake they had on money they lent out to their customers-the commercial banking business earned $60 millions. The next and second item of revenue was $48 millions of interest on securities which they held, and that carries a good deal, because tucked away in the strong boxes are securities of the amount of $2,000 millions of the Dominion of Canada, and on those securities part of that
Bank Act-Mr. Slaght

revenue of $48 millions was received by the ten chartered banks. The third and only remaining item of revenue is $35 millions which they received, if you please, for commissions and service charges. Service charges and commissions! And wre have had a bugaboo put forward by the bankers' advocates, "Oh, if you take this God-given monopoly away from them they will begin to charge you service charges."
I had occasion to revise a little grocery business in a small town at the request of some friends; I had no financial interest in it. It is a small town and a small business, and that business had occasion, in order to carry on business, to borrow on good securities some $6,000, as liquid capital, on which they pay the bank seven per cent. For three years that business has been paying ten dollars a month, $120 a year for what are called service charges. I did not count the cheques; but I do not suppose that, including payments to their wholesale houses and their help, they have issued over twenty-five cheques a month; yet they pay $10 a month in service charges. That, in part, is how the item of $35 millions is made up in last year's banking business.
The total of those three sources of revenue is $144,500,000. That is gross revenue-just about, strange to say, the total capital of the banks-received by them in one year. But you say, "You cannot look only at that; you must see what it costs them to earn that money." Let me tell you that the profit on that revenue before taxation is $47 millions on a capital of $145,500,000. How is that made up? You will find from my hon. friend's own figures that their total expense of doing business last year, including $15 millions of taxes, was $114,900,000. Deduct that from $144,500,000, and you have a profit of about $29,500,000. But they paid our government in taxes $15 millions, and then there is a further $2 millions of revenue shown in the statement. So that if you add $29,500,000, $15,000,000 and $2,500,000-for the moment I want to see how they are doing in business before they meet the tax-gatherer

you have $47 millions of profitable revenue from the needy people of Canada on a capital of $145,500,000. I cannot shed any tears over a business which gets along at that rate of going. Now, $47 millions on $145 millions would be what? It would be about thirty or thirty-one per cent. And they are getting away with it.
I do not know about the taxation of banks; I have not studied the structure, but that is the straight picture of how these ten chartered banks carried on last year, and my authority for it is the Minister of Finance, at the page I have cited in Hansard.
[Mr. Slaght.!
I believe that, instead of having in their strong boxes $2,000 millions of good Canadian government interest-bearing securities, they ought not to have a dollar. I have shown you where they get the $2,000 millions: there is the $388 millions of their own and the $1,600 millions that they borrowed. Note that people who have saving accounts must give notice before they withdraw their deposits. I contend that the banks should not have a dollar of debt-bearing certificates. If you analyse their own statements you will find-I asked this on the 9th of March-that they do not disclose how much of provincial and how much of dominion securities they hold. The answer I received was, "We cannot tell you because they do not separate the provincial and dominion securities." But the minister will tell the house, I am sure, that the great bulk of the securities held by the chartered banks are dominion securities and that less than one-fourth are provincial securities. I have worked out the interest at three per cent on the long date securities. There are $700 millions of bonds over two years maturities. Three per cent on that is $21 millions. Then I have worked out on the balance at three-quarters of one per cent making $7 million. There is $24 millions rolling into the chartered banks last year because they took a pen and a ledger and made a bookkeeping entry in it. Nothing more or less did they do.
But my hon. friend the minister says, "Oh, you are forgetting; when I went to the chartered bank with my million-dollar bond and got a credit of a million dollars I immediately began to check that out to the John Inglis firm and the farmers and so on, using it for government needs, and then the people getting these cheques would go back to one or more of the ten chartered banks and deposit it in there, and the bank had to service that amount." My point is this. The banks should certainly receive remuneration for servicing accounts, but please do not let the taxpayers and the little fellows pay out of their taxes for the servicing of the accounts of great firms like the John Inglis or the T. Eaton or others with all this enormous checking business. I daresay that there are some people in Canada who never had a bank account in their lives, either savings or current, and I venture to say that the great majority of the people, farmers and industrial workers, do not go to the bank with cheques or use a checking account more than five or six times in a month. So that over the year the service the little follows get is very slender indeed. But they are paying the piper just the same through this monopoly.

Bank Act-Mr. Slaght
Let me endorse every word my good friend the hon. member for Vancouver-Burrard (Mr. McGeer) said to the house this afternoon about an optimism for the future. I agree with him and with the gifted lady (Mrs. Nielsen) who just sat down that the winning of this war is the important thing, first, last and always. But we have reached the stage in our economic picture where, if all our concern about looking to the future and raising the morale of our people is more than empty language, I think I may suggest that the small man in this country is grossly overtaxed. The unmarried man with an income of from S660 to SI ,200 has paid in practically $100 a year in taxes on the average. There are some 300,000 of them in last year's tax brackets who paid in a total of $32,000,000. These are approximate figures. There are 300,000 little fellows, not getting $100 a month, who paid in $32,000,000 in personal income tax of a total revenue of $882,000,000 which we derived from that source. I am leaving out the corporation taxes. That is to say, of $882,000,000 of personal income tax received last year, the little fellows, numbering 300,000 and receiving between $660 and $1,200, furnished $32,000,000.
Take the married man who earns from $1,200 to $1,800. He does not begin to pay, when married, until he receives $1,200. In that group there are 650,000 taxpayers, married men, who pay on incomes ranging from $1,200 to $1,800 a year, a total revenue of $55,000,000. So that there are two groups of small fellows, one group numbering 300,000 and the other numbering 650,000, or 950,000 altogether, from whom under our system we exact the amount of taxation I have indicated. Of all the wicked taxes-well, let me say that of all types of taxation that men resent most, this form of taxation is the hardest, although our Canadian people have had splendid fortitude and courage and have "taken it" because they regard it as necessary for war purposes. In the personal tax columns there are only 2,100,000 taxpayers, so that 950,000 small taxpayers, nearly half the total in Canada, contribute in personal income tax $87,000,000 to the treasury, out of a total of $882,000,000 paid in.
I beg the Minister of Finance to raise the morale of the people of Canada by cancelling all taxes in these brackets. He can do so if he will only finance through the Bank of Canada and not through the chartered banks with debtbearing securities. He can do it and lift the morale of the people and improve the financial position of the country in a way that will put fresh courage into everybody.
I have spoken longer than I intended and I must draw to a close.


Richard Burpee Hanson: The minister says that will be inflationary. What has the hon. gentleman to say to that?


Arthur Graeme Slaght: I am glad the hon. member asked that. I might have forgotten it. I will give the minister's own words. The minister has admitted, in Maclean's magazine, in November last, in a considered article, answer No. 16 of a number of answers, that if you take away this monopolistic privilege to which I have referred, the privilege of lending money you do not have, and just change one word in section 59 of the act making it 100 per cent of current account holdings instead of five per cent, there is no more inflationary effect in borrowing money from the Bank of Canada than there is in borrowing from the chartered banks. Let me put him on record now for that answer.


James Lorimer Ilsley: I admit it.


Arthur Graeme Slaght: That is refreshing. There were some doubting Thomases across the way. The minister, however, is too good a lawyer and too sound an economist to try to tell us anything else. But let me tell you, Mr. Speaker, that many people have gone up and down the country for many years trying to stuff us with the statement that if you borrowed money from the Bank of Canada you would boost prices until you blew the lid off. But what did he tell me two years ago from his seat in the house? I proposed on that occasion that we might borrow a billion dollars from the Bank of Canada, and we had outstanding then only $400,000,000 of Bank of Canada issue. "Oh", he said, "it would blow the lid off."


James Lorimer Ilsley: It certainly would with a five per cent ratio.


Arthur Graeme Slaght: But it is the minister's
government and they can strike that five per cent ratio out to-morrow morning with the aid of the banking and commerce committee, and that is what I want done. I appeal not only to hon. members opposite, but to the government of which I am a supporter, to do that. What is the harm in doing it? Let the minister tell us when he replies to me. Of course, the banks would lose a little money; but do you not think they will wiggle along on the figures I have given you?
Inflation is a bogey that has helped to keep this monopoly linked around the neck of the taxpayer of Canada all too long and I think we ought to explode it. I propose to join with my hon. friend in the banking and commerce committee if we have to stay

Bank Act-Mr. Slaght.

here all summer to try to see to it that that bogey goes down the Rideau canal where it belongs.


Charles Edward Johnston: And all those who oppose that effort.


Arthur Graeme Slaght: My hon. friend is bloodthirsty.
One more quotation and I am through. I had a little difference-well, not a difference, because my hon. friend could not say anything to me to make me really differ from him, but in 1942 we had a friendly agreement to differ in discussing this topic. I was urging him then, rather against a stone wall, to do his borrowing from the Bank of Canada and leave Mr. Spinney's bank alone, for government purposes. He said, "No, we will not do that because it might cause inflation"; and he says to-night that if this government were ready to strike out the five per cent and put in 100 per cent it would not cause more inflation in borrowing from the Bank of Canada than in borrowing from the Bank of Montreal.	.
A strange miasma conies over financial experts. I do not think it has come over the brow of the minister, but I think some of those behind him possibly have become so wedded to banks and bankers and a bad banking system that they cannot give it up, because this is what the minister told the house on July 15. 1942, as reported at page 4606 of Hansard:
We would borrow from the chartered banks before we would borrow from the Bank of Canada even though we had to pay a little interest to the chartered banks but not to the Bank of Canada, or if we did pay interest to the Bank of Canada we would be paying interest to ourselves.
Let him tell us why. That is a courtship of the chartered banks that I do not understand in the Minister of Finance. There is no rhyme or reason behind it. He told me that it would blow' the lid off if we borrowed a billion dollars. The lid has not even quivered. He has had splendid controls in his price control and his foreign exchange control. He has done a magnificent job, putting Canada, as my hon. friend said, in the first rank of nations in that regard. But should we be fools any longer and submit to a monopoly of this kind when we could show' the people of Canada how to create new money when we have to? War causes us to have to create new money, and I think in peace time we shall have to create some new money too. I beg of you all to examine into this question. Somebody says, "funny money". There is no funny money about this proposition. That is another red herring 
that is drawn across the trail. I would ask you to look into it, examine it; and then I do suggest that when we meet in the banking and commerce committee we shall take the scales from our eyes at least on this bugaboo of inflation. If we do that we can use the national credit of Canada as the Prime Minister, the leader of my party (Mr. Mackenzie King), said in 1933 it should be used, for the public need and not for bankers' greed.


Mr. HOWDEN:: Before the hon. member sits down I should like to ask him a question to elucidate the problem. Would the hon. member for Parry Sound follow through the million dollar transaction to its ultimate end?


Arthur Graeme Slaght: Certainly. There were two. I w'ill take 'the one of the chartered bank first, the bank of Montreal. They lock up the bonds. The principal was $1,000,000, with $600,000 in coupons over twenty years.


John Power Howden: What happens to the principal?


Arthur Graeme Slaght: The principal is never
repaid, has not been since confederation. A new bond is issued for twenty years. When that new issue comes out the old bond is turned in and a fresh one is taken with a fresh set of coupons for another twenty years.


John Power Howden: That is an outstanding debt?


Arthur Graeme Slaght: That is an outstanding debt against the government.


John Power Howden: You have to pay it some day.


Arthur Graeme Slaght: Of course it ought to be paid some day, but I may tell my hon. friend that it has not been paid since confederation. We have had a steady increase in our debt. It is now $14,000,000,000 when you add the provincial and municipal debts.


John Power Howden: What I want to know is this: that million dollars stands as a debt against the dominion?


Arthur Graeme Slaght: Yes.


John Power Howden: For all time, until it is paid?


Arthur Graeme Slaght: Certainly.


John Power Howden: When it is paid the banks receive one million dollars for which they have given nothing but service transactions?


Mr. JAQUES:: When it is paid there will not be any money.

Bank Act-Mr. Slaght


Arthur Graeme Slaght: May I say to the hon. member for St. Boniface (Mr. Howden) that his statement is not correct. When they credit the account of the finance minister with one million dollars he cheques against it all around, as I indicated, and ultimately those cheques all come flowing back into that particular bank, or nine others, and therefore the banks as a whole. We have to look at the ten of them as one, for this purpose at least. The banks as a whole have on their books a promise to pay another million dollars, and that is an obligation of the bank. Therefore they have done something. They have agreed to pay, and if it was ten dollars and you walked in with a cheque they would cash your cheque and you would go away with the money-the same would apply to a thousand-


Gerald Grattan McGeer: You never do that.


Arthur Graeme Slaght: I do sometimes, I am afraid. Does the hon. member wish me to follow the second transaction?


John Power Howden: No. It was the first transaction I had in mind.	.


Arthur Graeme Slaght: It creates an obligation. Suppose the finance minister chequed that whole borrowing of one million dollars to the one firm, the John Inglis company, and they dealt with the bank of Montreal, and that cheque is chequed in the next day and deposited in their current account in the bank of Montreal; the finance minister is then debited with the million dollars. He has nothing, but the bank owes one million dollars to the John Inglis company, and they could come in and take that in currency if they wanted to. That is the transaction.


John Power Howden: I should like to ask another question. The bond is taken to the bank and exchanged for an entry in the books of the bank for one million dollars-


Arthur Graeme Slaght: And they give you a little passbook too.


John Power Howden: Who owns that money?


Arthur Graeme Slaght: The bank owns the money. The bank has given you as their customer nothing more than a promise by them to pay you a million dollars when you come and ask for it, and they pool your million dollars with everybody's else million; it goes into one pot, and you do not own it any more. You have exchanged your million for a promise from the chartered bank to pay you a million dollars the minute you come in and ask for it. That is all there is to it.
100-175J


Richard Burpee Hanson: They give you credit.


Arthur Graeme Slaght: It is bank credit; and ninety-five per cent of the business of this country is transacted with cheque money, bank credits, just in that way.
One word more; I thought I had finished. The owners of the stock of the chartered banks-


Thomas Vien: The hon. member's time has expired.


Some hon. MEMBERS:: Go on.


Arthur Graeme Slaght: Thank you. I will not trespass. I shall be but a moment. It is an interesting reflection to know that the owners of the stock of the ten chartered banks of this country numbered on December 31, 1942- I have not the figures for last December- 51,071. That is the number of individual shareholders, corporations and different shareholders. Fifty-one thousand shareholders owned all the stock of the ten chartered banks and, as hon. members will see, that number constituted one-quarter of one per cent of the people of Canada. The other 99} per cent of the people of Canada have not and probably never did have in their lives a bank certificate or a share of bank stock. I venture to say that if a poll of the House of Commons were taken on how many hon. members owned a share of bank stock in their lives, not more than six men would stand.


Mr. JACKMAN:: Who wants one?


Arthur Graeme Slaght: Therefore, one quarter of one per cent of the people of this country is in possession of that tremendous monopoly and the taxpayers of the country are paying the shot.


Mr. HANSON (York-Sunbuiy):: Does my hon. friend suggest that the stockholders of the bank paid only par for their shares when he is figuring out the money? I suggest that the present shareholders of the chartered banks paid very much more than that.


Arthur Graeme Slaght: That may well be so. I am taking the picture of a business that has a certain amount of real money in it, and the rest is gravy or velvet, or whatever you want to call it. The only real money in the chartered banks that anybody ever put in there is $145,500,000.


Richard Burpee Hanson: No; some paid a premium of 100 per cent to the banks after they started or before they started.


Arthur Graeme Slaght: I would be glad to know the figures of some of them, and who they are.
Bank Act-Mr. Abbott


Richard Burpee Hanson: I shall try to get them.


Arthur Graeme Slaght: That being so, my statement would have to be amended to that effect.


Mr. COLDWELL:: And just to that effect?


Arthur Graeme Slaght: And just to that effect.


Harry Rutherford Jackman: Plus reserves.


Arthur Graeme Slaght: But, I suggest, you will not get the amount of $145,500,000 up to anything like the figure of two billion dollars.


Mr. D. C. ABBOTT (Parliamentary Assistant to the Minister of Finance):: I think I will follow the tradition established by many of the speakers who preceded me and preface what I have to say by stating that I really had no intention of taking part in this debate, but I cannot resist the temptation of making a few comments on the views which have been expressed by my good friend the hon. member for Parry Sound (Mr. Slaght). I shall not be able to do so in the picturesque and colourful manner in which he has presented his views, but I am going to try to set forth as well as I can what I conceive to be the true basis on which the banking system of this and most other countries that I know of operate.
I do not want to offend my hon. friend, but I wish to say at the outset that, in my opinion at any rate, the views which he has expressed as to the function of a commercial bank and the way in which it operates are complete nonsense.


Richard Burpee Hanson: Not quite as bad as that.


Arthur Graeme Slaght: Forgive him; I do.


Douglas Charles Abbott: Thank you. I am going to try to set out how I believe a commercial bank operates. In the first place, when a commercial bank brings new money into existence by granting a loan or by making a new investment, either of which automatically creates a new deposit, it does not acquire any ownership in the deposit. It merely increases the volume of money which is owed by one section of the community, the borrowers, to another section of the community, the depositors. That, I think, is a statement which cannot validly be contradicted. That, I submit, Mr. Speaker, is true. When a bank makes a loan, brings into existence new money by making a loan or by making an investment, either of which, of course, automatically increases it's deposits, it does not own the new money; it merely in creases the volume of money owed by one section of the community, namely the bor-

rower, to another section of the community, namely the depositor.
The whole banking system is subject to the same laws as those to which any other business operation is subj ect. Its transactions yield a margin of profit over and above its cost of operation. The bank, in fact, is not any different from the merchant who makes a profit on the sale of goods or merchandise. What the bank deals in is money or credit. Its net profit is the difference between what it receives on its loans, or on its investments, and what it pays in interest on its deposits, or what it incurs for expenses and overhead charges.
The contention is made that the public cannot create credit for itself, but that the banks can and do create credit, and having created it they lend it to the public at terms which involve repayment to the banking system. That is not true. That overlooks the fact that the banks cannot create credit for themselves, although they can, and of course do create it for the service of the public.


Arthur Graeme Slaght: Will the hon. member permit a question? I will read to him what Mr. Graham Towers said on that subject-and it is covered in eight lines. At page 238 of the report of the banking and commerce committee .for 1939 this is what we find:
Question: When $1,000,000 worth of bonds is presented (by the government) to the bank, a million dollars of new money or the equivalent is created?
Mr. Towers: Yes.


Douglas Charles Abbott: I said that. The volume of money in circulation is increased. What happens with the case which my hon. friend has given is this: A commercial bank buys a million dollars worth of securities from the government. It then acquires an asset in the form of a million-dollar bond. It pays for that bond by issuing its cheque on itself to the government, or by placing to the credit of the government in its books a credit of a million dollars. Therefore the liability on the one side is a million dollars to the government, which it has placed to its credit, and on the asset side of the ledger is the million-dollar bond which it purchased.
What happens to the million dollars which is placed to the credit of the government? The government takes it out to meet payments-payment of our indemnities, or possibly to pay a contractor. And what happens to that money when it is received by the contractor? It goes back into the banking system again, as a deposit, that is to say as a liability of the bank. The only effect of that transaction is that the bank's creditor then becomes you or I, or some other hundred or thousand people, to whom proceeds are paid

Bank Act-Mr. Abbott
out, instead of the government. In other words, there is always a liability for the asset which the bank has. The bank in that case is merely acting as middleman to enable the government to borrow a million dollars from the public.


Mr. BLACKMORE:: Would the hon. member permit a question? Will he concede that the million dollars that is used is new money?


Douglas Charles Abbott: I am endeavouring to make as brief a presentation as I can, of what I consider to be the operations of a commercial bank.


John Horne Blackmore: The hon. member is trying not to be confounded,


Douglas Charles Abbott: I would be glad to answer any questions after I have finished.
I wish to illustrate the point I have made by tracing the life history of a simple bank loan. I shall not talk about large amounts, like my hon. friend, but shall take just the ordinary cage of a borrower who wishes to borrow a thousand dollars from a bank. I have in mind the small business man who has to borrow a thousand dollars. His credit is good, and he says to his banker, "I want to borrow a thousand dollars." His banker says, "I am prepared to lend it to you."
What happens when that transaction takes place? The borrower gives his note to the bank for a thousand dollars. It then becomes an asset of the bank, and of course a liability of the borrower. At the same time the bank places to the credit of the borrower in its books the sum of a thousand dollars, against which he may draw cheques. Now, if the transaction did not go any farther than that the position of the bank would be simply this: Its profit would be the difference between the interest which it received from the borrower on his note for a thousand dollars, and the interest which it paid to him if he put it in a savings account, and the general cost involved in overhead.
But of course that is not what happens in the ordinary transaction. What happens is this, that the borrower makes use of his credit-to the extent of a thousand dollars to pay accounts, or payrolls, or to purchase materials which he wishes to acquire. Let us take a simple case: Supposing this man, Jones, pays a thousand dollars to the man Smith, to whom he owes a thousand dollars because of purchasing materials or supplies. What is the position of the bank at that time? The bank still has the asset in the shape of Jones' note for a thousand dollars, representing the loan which it has made. And its creditor is now Smith, instead of Jones, to whom the loan
has been made. In other words, it is acting as a middleman between Jones as the borrower and Smith as the lender. Instead of the bank being the lender, in effect Smith, to whom the cheque has been made, and who has deposited the proceeds of the cheque either in the same bank or in another bank, then becomes the creditor. Of course, what actually happens in practice is that instead of checking out the whole proceeds of the loan to one creditor, the borrower will issue perhaps ten or twenty or a hundred cheques to different persons to whom he owes money, and from whom he wishes to obtain credit. Those cheques in payment go into the banking system, and the persons who receive them become depositors with the banking system, and are thus substituted as creditors in place of Smith, the original borrower.
The reason, of course, why the banks insist upon adequate security for their loans is that they have to assure themselves that the borrower is going to be able to complete the circuit of the deposit, and pay back his loan when it becomes due. What actually happens in connection with the sample loan I have been describing is that in due course the borrower-Smith, if you wish-who has borrowed the money from the bank in order to pay Jones, Brown and Robinson, eventually collects from some of his own debtors to whom he sold goods, or otherwise, and brings the proceeds back to his bank. He then extinguishes the debt of a thousand dollars which he has contracted towards the bank.
In other words, one can look on each bank loan as . having a positive and negative element. The negative element is the liability of the borrower to the bank for the amount of the loan, and the positive element is -the deposit credit which the bank gives him for the proceeds of the loan. When the negative and the positive come together again the loan is extinguished, and the money which was circulating up to that time passes out of the flow, out of circulation. That, briefly and sketchily is the history of a small bank loan.
The next point I wish to -make is that neither by bringing a unit of credit money into existence nor by cancelling it does a banking system ever gain or lose an asset which is not balanced by a liability similarly gained or lost. I think I demonstrated that point by the example I gave a moment ago. Throughout our banking transaction, the banker benefits only from the circumstance that as a dealer in credit he charges more for the loan which he makes than he pays to his client for the amount which he borrows from that client by way of deposits, or which he has to pay out for his salarial or other overhead charges.
Bank Act-Mr. Abbott

The difference between the amount he receives as middleman on the loans which he makes, and the interest which he pays on his deposit liability-because, remember that every loan means an equivalent deposit-is the difference between what he charges on a loan which he makes, and which he has to pay on his deposit, and what he has to pay out for the cost of operating his bank, or for other purposes.
It seems to me that the clear conclusion to be drawn from that is that the action of the commercial banks in issuing and in retiring credit money does not create any community debt except the one which is owed to the community itself. The balance of assets and liabilities, both on the side of the banking system and equally on the side of the public, remains undisturbed. The only effect of this operation is to increase or decrease the total volume of money which is circulating in the community. The real fact of the matter is that the only justifiable criticism which can be levelled against the banks in this matter of creating new credit is that they are able to increase their business with little or no additional use of their own capital. As has been so often pointed out in this house by the Minister of Finance and others, the central bank is in a position to control the extent to which the banks are able to increase the amount of loans and therefore the amount of deposits which they are able to carry.


Richard Burpee Hanson: What about this debt-free money from the Bank of Canada? Let us hear you on that.


Douglas Charles Abbott: I will come to that in a minute. I am just trying to outline the general process of commercial banking, and that leads me to the point I was just going to make. At any given moment the debts which are owed by the community as a whole to the banks are exactly balanced by the claims which the community has against the banks. The function which the banks perform in effect is nothing more than a recording of claims by one part of the community as creditors against another part of the community as debtors. [DOT]
The hon. member for Parry Sound (Mr. Slaght) dealt with the purchase of securities by the banks. I touched on that a moment ago. It is sometimes urged that the banks obtain securities for nothing. Of course they do not do anything of the kind. When they purchase securities and pay for them by cheques drawn on themselves, as is done in ordinary cases, those cheques return to the banking system as deposits, and the system as a whole has gained an asset, the investment, but has incurred a liability, the amount of the deposit.


Gerald Grattan McGeer: There is the toll-gate of interest.


Douglas Charles Abbott: There is a difference in interest, in what the bank receives on the investment and what it pays on the deposit, or what it incurs in operating its services as a bank in the way of payment of salaries and so on, I do not think the hon. member for Vancouver-Burrard will challenge that statement.


Gerald Grattan McGeer: I say that is the toll-gate.


Douglas Charles Abbott: It boils down to the question of whether the profit which is earned by the bank is excessive. I think the minister demonstrated pretty satisfactorily in his statement the other day that that margin of profit is not excessive. If it were excessive then I ask myself why it is that the banks have not paid larger dividends than they have, or why they have found it necessary to reduce their dividends as they did not so long ago.


Richard Burpee Hanson: That is easily answered; because of taxation.


Douglas Charles Abbott: If the banks could manufacture money, manufacture cash as some people seem to suggest, they would be completely independent of the central bank. They would not have to provide themselves even with shareholders' capital. They would be able to secure whatever profit they desired, regardless of what their business losses might be. Our common sense tells us that that is not the ease. I repeat what I said at the outset of my remarks, that the operation of a bank is in its essence no different from the operation of any other business. They are dealing in money, in credit, and they make a charge for their services, which charge is somewhat greater than they are obliged to pay in operating expenses or in interest on their liabilities. The difference between those two items represents their margin of profit.
I want to conclude after this rather brief summary of what I conceive to be the ordinary operation of a commercial bank with some reference to this question of borrowing from the Bank of Canada, what the hon. member for York-Sunbury (Mr. Hanson) referred to as debt-free money.


Richard Burpee Hanson: So-called; I did not call it debt-free money.


John Horne Blackmore: Who called it debtfree money?


Some hon. MEMBERS:: Order.


Douglas Charles Abbott: The hon. member for
Parry Sound put forward the suggestion that the government should borrow a million

Dank Act-Mr. Abbott
dollars or $100 million or whatever it needed from the Bank of Canada instead of borrowing from the commercial banks. Let us see just what that would involve. The government would go to the Bank of Canada and would hand the Bank of Canada a treasury bill or a promissory note or whatever you like for the $100 million. The Bank of Canada would place S100 million to the credit of the government. The government would proceed to draw cheques on it and pay it out to various people, contractors, farmers and others throughout the country. As my hon. friend suggested, that $100 million would in very short order be deposited in the various chartered banks.
It would then become a liability of those banks and either they would have to pay interest on it, or if it went into current account, which does not carry interest, they would have to provide all the services which go to the operation of the account, including chequing privileges and the like. As I understood his argument, it seems to me that he suggested that there should be pretty close to 100 per cent reserve, that with respect to this government borrowing the bank should be required to hold 100 per cent reserve against it. When they received cheques on the Bank of Canada from their various customers throughout the country and deposited them with the Bank of Canada they would then receive a credit on the Bank of Canada's books on which they would get no interest. Therefore they would earn nothing on that asset, although if it all went into savings account they would have to pay back interest at the present rate of one and a half per cent. Obviously there would be no inducement to the banks to accept deposits of that kind.
Under the existing system, with that $100 million deposit with the Bank of Canada their cash reserve would be increased by that amount, which would enable them to lend and thereby create additional deposit liabilities legally up to twenty times, but in practice ten times. The result would be that they could expand their loans and their corresponding deposit liabilities by one billion dollars, upon which they would earn whatever rate of interest they might be entitled to receive, two, three or four per cent. That would be the ordinary operation.
As I understand him, my hon. friend suggests that instead of doing that they should be required to maintain that $100 million in Bank of Canada money upon which they would earn no return. He says that that is perfectly all right because the banks are making so much that they can afford to do that anyway.


Gerald Grattan McGeer: Or pay a service charge.


Douglas Charles Abbott: I can see no difference
between paying a service charge and paying interest, as we are doing with treasury bills to-day, of three-quarters of one per cent.


Gerald Grattan McGeer: The people who get the
service would pay for it; the rich man would not receive services paid for by the poor.


Douglas Charles Abbott: Who would pay the service charge?


Gerald Grattan McGeer: The man who got the
service.


Douglas Charles Abbott: My hon. friend is suggesting. I suppose, that the banks could charge twenty-five cents for each cheque that is cashed.


Gerald Grattan McGeer: Why twenty-five cents?


Douglas Charles Abbott: The hon. member for Parry-Sound did not suggest any service charge. I am simply pointing out that his suggestion was that $100 million should be retained by the bank as a non-earning asset as a deposit with the Bank of Canada. That is nothing more than saying that we are asking the banks, their depositors, shareholders and the people who are using them to make a forced loan to the government of that amount, That is all it is; it is a forced loan for that amount from a particular class of the population. If we are going to make forced loans-


Walter Adam Tucker: Just to clear up that point, I should like to ask one question.


Douglas Charles Abbott: I wonder if my hon. friend would let me finish and then I will try to answer him.


Walter Adam Tucker: If my hon. friend does not want to answer it now, all right, but I think he is proceeding on false premises. The 100 per cent reserve presupposes that you can lend the amount you have. If you have $100 you can lend S100 and no more. Is that correct?


Douglas Charles Abbott: I do not want to get into a ring-around-a-rosie discussion on lending $100. But, for example, start with a $100 credit with the Bank of Canada. That is checked out to my hon. friend the member for Rosthem, we will say. He receives a cheque from the government on the Bank of Canada for $100 and he then takes it to his own bank, whichever it may' be, and deposits the cheque with that bank. Let us say it is the Royal Bank of Canada. The Royal Bank of Canada then becomes the holder of the $100 cheque on the Bank of Canada. It presents that cheque to the Bank of Canada and is credited on the Bank of Canada books with $100. What is the

Bank Act-Mr. Abbott
position of the Royal Bank at that moment? It has an asset in the form of a $100 credit with the Bank of Canada, and it has a liability to the hon. member for Rosthern in the form of his deposit of $100. The transaction must stop there. The bank cannot lend to somebody else the $100 deposit which it has in the Bank of Canada because it needs that $100 to offset its liability to the hon. member for Rosthem. So that if that is all there is to it, the transaction must stop there. It has a liability to the hon. member for Rosthem of $100 on which it may be paying him one and a half per cent interest in a savings account, and it has a corresponding asset of 8100 with the Bank of Canada on which it would be earning nothing. That is the way I see it.
I think I have concluded what I had to say. I was saying that the suggestion which has been made of borrowing from the Bank of Canada our credit needs and allowing that to go out into the banking system, with the banking system holding that credit with the Bank of Canada and not able to use it, would be nothing more or less than asking the shareholders of the banks, the depositors of the banks and the borrowers from the banks to make a forced loan to the government of Canada, and I was going on to say that if we are going to ask for a forced loan, let us ask it of all classes in the community. My belief is that since the burden has to be borne by somebody, that is better done by a system of taxation where you can impose the burden on the basis of an approximate equality, in accordance with ability to pay. That is my view. This system of asking the banks to receive a non-earning asset, and yet on the other side of the balance sheet to have to incur liabilities either for interest or otherwise, I can see no justification for on any basis you want to take it, and that is exactly what this proposition means. It may be because of four or five generations of New England Yankee ancestry behind me that I am always suspicious of the idea of getting something for nothing. I have usually found that you get it at the expense of somebody else, and this proposition seems to me just one way of trying to get something for nothing.


Norman Jaques: Mr. Speaker, during the course of his speech the Minister of Finance (Mr. Usley) remarked that we did not hear much about social credit these days. But after listening to the speeches of some hon. members during this debate, I think the members of this group have every reason to be proud of their pupils in this house.
Last winter it was my privilege and pleasure to spend two or three weeks in Scotland with the founder of social credit, and during the course of our conversations I jotted down a number of his remarks with regard to social credit. Among other things he said:
Our opponents always try to label social credit as a "funny money" stunt. We reply that social credit is the enemy of monopoly. We are builders, not wreckers. We aim to establish every man in his own right. This is the antithesis of the totalitarian state.
We hold that the state is not above the individual. The Left take the line that if they get control they will have divine right. We did not dispose of the divine right of kings in order to set up the divine right of an abstraction called the state, and it is of no use to set up to do 'better with a totalitarian policy.
This fallacy is illustrated by a story of McKenna. "If he was to be the governor of the Bank of England he wanted the powers of the governor to be strengthened. If not, he wanted the governor to be deposed."
Political power never disappears. If I lose it, somebody else gets it. Power is also transferred to the centre, and if you get a state of affairs where all power is transferred, then you have only to get control of one sanction and you can appoint an administrative bureaucracy outside of which nobody counts at all. There is only one way of dealing with that. We have got to decentralize power, to get back to the point where the individual is the focus of policy. All are to have enough power to prevent the individual next to them from taking it away from them.
Broadly speaking, we are not planning a new world but to confirm everybody in what they have got and want and like. Present financial policy is to transfer from private to so-called public holdings. By a stroke of the pen all private possessions could be taken away. Social credit defends profit but attacks interest- usufruct against pen and ledger. We want a dividend of facts not of figures. The conflict is not new, it is very old indeed. Kings having been disposed of, big business is planning to get control of bed, board and clothes and make no mistake about it, by a system of crown leases, the internationalization of big industry, and a pseudoibureaucraey of big business officialdom. There is to be no competition, but -a system of rigid control. As Lord Lothian said. "Peace comes from overwhelming law supported by overwhelming power."
It is commonly said that the government is going to do this, that and the other thing. Fundamentally that is not social credit, which is to place at the disposal of the individual the power to chose one thing at a time. Here in Scotland there is complete freezing of building; fifty licences are required to try to get done what is in practice refused. We believe that if a man has a good proposition, and you agree with it, let him have the money to carry it out, but-you cannot do business collectively. We social crediters are anti-centralization and anti-supreme state.
These are some of the remarks which I jotted down, and I think are worth recording, since they are the words of the founder of social credit himself.

Bank Act-Mr. Jagues
While I was in England last winter I attended several sessions of the House of Commons and talked with a number of members of the house, mostly Conservative. I think it would do some of the Conservative members of this house good to hear what Conservative members of the British house had to say about the necessity of monetary reform. To-day, standing in the central lobby at Westminster one can look through a glass window at what was formerly the chamber of the House of Commons before the blitz. All that remains to-day are the bare walls: there is no ceiling, no roof, and no floor. While I was speaking to some of the members, they remarked to me that the rebuilding of the chamber would be a simple problem; the danger wTas to the preservation of the House of Commons itself, in view of the threat of totalitarianism which is being exerted and felt everywhere in the world.
The Minister of Finance in his speech the other day referred to the treasury branches in Alberta and used them as an example of the cost of banking, comparing them unfavourably with the chartered banks. I received this evening a statement on this question from the premier of Alberta which I should like to put on Hansard. It is as follows:
The Minister of Finance is reported in the press to have held up the treasury branches of Alberta in his defence in parliament of the present banking and financial system. He quoted the cost of operating the treasury branches specifically to prove that the banks do not make excessive profits for their shareholders.
In quoting the Alberta treasury branches in support of his argument, Mr. Ilsley omitted to mention some important points relevant to the matter. These are:
(a) The Alberta treasury branches are limited in their operations to lending only a portion of their deposits; whereas the chartered banks create the money or credit they lend. This means that the treasury branches cannot increase the volume of money or credit in existence. It means also that whereas the banks obtain revenue from practically the entire amount of their deposit liabilities-which are merely the result of the loans they make or their purchases of securities with the money they create-the treasury branches derive revenue from only the proportion of the deposits which they lend.
(ib) The so-called "loss'' of the Alberta treasury branches represents the cost of these services to the people of Alberta after the individuals using them have each contributed a fair payment for the services they receive. For the balance of the cost borne out of public revenue taxpayers not using _ the treasury branches are receiving more efficient service at reduced charges from the banks than they were getting before these institutions had to meet the competition of the treasury branches.
(c) Normally a bank, with all the advantages it enjoys, would expect a branch to operate at a loss for a period of seven or eight years.
The Alberta treasury branches have been in operation for less than six years, and the entire province-wide network of branches and agencies had to be built up from scratch. Despite this fact the treasury branch services are already nearing the point where their earnings at reduced rates to the public will cover the entire cost of their administration and maintenance.
However, the real issue is not whether the banks make excessive profits for their shareholders or not. Mr. Ilsley knows perfectly well that the threefold issue on which Social Crediters have taken a stand for more than the past ten years in Canada is:
First, the sovereign power to control monetary policy and through this all economic activity, which is exercised by the private banking corporations through their power to issue and withdraw money, in the form of financial credit, in a manner which places the nation in perpetual pawn to them and their satellite financial institutions. This is a sovereign power which, in a democracy, should be under the effective control of the people themselves through parliament.
Second, the operation by the banks of a financial system which is inherently defective in that it results in a chronic insufficiency of purchasing power in the hands of the consuming public, with consequent trade stagnation, economic insecurity, mass unemployment, social unrest and international friction, leading to recurring wars and revolutions.
Third, the degradation, on the one hand, of democratic governments in having to go cap in hand and place the nation in perpetual pawn to the private financial corporations in order to finance public services; and on the other hand, of the constitutionally sovereign people in having to submit to the dictates of a minority group under a system of wage slavery which forces them, under the threat of destitution, to accept the standards of living and working conditions imposed upon them.
These are the features which stamp our present financial system, of which Mr. Ilsley appears to be such a staunch champion, as vicious, undemocratic, and a menace to the future of our nation. Moreover, Mr. Ilsley's assertion that the government now exercises effective control over monetary policy, when the private banking institutions have the power to issue some ninety per cent of the nation's money as they please, is so ludicrous that he cannot expect anybody to treat it seriously.
The Minister of Finance cannot side-step these issues either by putting up straw men for the purpose of knocking them down, or by any questionable argument such as he advances when he attempts to show that if the Bank of Canada created the money for financing government expenditure, it would impoverish the banks by leaving them without any revenue with which to pay interest on their deposit liabilities. He argued further that it was much fairer to the banks for the government to borrow from them and tax the people to pay the interest.
The following simple action by parliament would soon reveal whether the banks are in danger of being impoverished. The banks should be required to surrender all hidden reserves as at December 31 last to the federal government. This would constitute no hardship as these represent acquisitions over and above the profits both distributed to shareholders and placed to their disclosed reserve funds. These hidden reserves should then be monetized by the Bank of Canada and the proceeds used to
27S4
Bank Act-Mr. Jagues


Mr. CLARENCE GILLIS (Cape Breton South):: I should like to facilitate the passage of the bill to enable the minister to get it to the banking and -.commerce committee, but there are a few7 remarks that I feel I must make. Like many others who have preceded me I do not pose as an authority on banking and currency. As I see the matter now, after this long debate-and I have learned something from listening to it-the question before the house is whether the membership thereof is prepared to accept the bill and the construction placed on it by the Minister of Finance (Mr. Usley); or whether they are prepared to take one step to amend it as proposed by the Social Credit party. However, that has been disposed of as the house voted against it.
The matter that is immediately before the house is the amendment to the main motion, which was proposed by the Cooperative Commonwealth Federation party. Many opinions have been expressed. As one member of this group, who has spent the last twenty years in Canada struggling to get along, I am personally of the opinion that the banking system of this country requires revision. I shall not go into the mechanics of it because I believe the hon. member for Rosetown-Biggar (Mr. Coldwell) did a first-class job on that in a general way. He made the main criticism of the minister's arguments, followed by the hon. member for Weyburn (Mr. Douglas). I think they made the position of this group crystal clear with regard to the proposal now before the house.
The thing that I am concerned about-and I think the thing that most members are overlooking-is the fact that once this bill
goes to the banking and commerce committee -and the principle of the bill is accepted when it gets second reading-there is no doubt about what will happen to it in that committee. Most of us are overlooking the fact that this is the only time for the next ten years that the members of this house will have an opportunity to amend the Bank Act. In listening to most of the discussion, particularly from this side of the house, one would be led to believe that this is something that can be done every afternoon when the house meets.
I am concerned with not only the mechanics of banking, the purpose it serves and all those angles of the question, but with those who are employed by the banks. I think they have a definite place in the picture in so far as the members of this house are concerned. I do not suppose that there is a class of workers in the Dominion of Canada who have the same disabilities as the employees of the banks. For example, the statistical branch of the Department of Labour has absolutely no statistics on the wages, incomes and so forth of the employees of the banks. Second, while the great majority of the other workers of this country have machinery and the privilege of organizing themselves and bargaining through government machinery to increase their standard of living, those rights are denied the employees of the banking institutions. As administered to-day, in my opinion it is anything but a democratic institution.
Most of the members of the house will recall that in 1941, two years after the outbreak of war, there was difficulty with the Banque Canadienne Nationale set up in Quebec. The employees of that bank were forced to strike; and when employees of the chartered banks are forced to take that action there is something radically wrong with the institution that is supposed to give them the means of livelihood. About the only statistics one can get on the set-up with respect to their conditions are some which were compiled by the employees themselves, through the medium of a union formed at that time. For the information of hon. members I should like to place some of this on the record, because I suggest that we should be thinking in terms of bank employees when we are talking about amending the Bank Act.
What I am about to read1 is set out in a little pamphlet prepared by their union representatives at that time. This is to be found at page 3, in connection with wages:
They made a survey of the actual salaries, position and years of experience of employees in the majority of the Banque Candienne Rationale's sixty-five branches in Montreal. For the year 1941, two years after the war began, two years in which the cost of living index had
Bank Act-Mr. Gillis

risen 14-6 per cent, they found that junior clerks and stenographers were starting in the Banque Canadienne Nationale at the munificent sum of $8 a week.
Remember, this is 1941.
Tellers handling thousands, often hundreds of thousands of cash daily earned a weekly wage of $17.50 per week. After an average of nine years' service assistant accountants, averaging thirteen years' service received $22 a week.
Some in another group received $26.
Some stenographers with fifteen years' service received only $700 a year. An accountant of twenty years' experience earned $25 a week.
Those are the wage rates in a section of the bank set up in the province of Quebec, concerning which I have been able to get statistics.
In his speech the minister criticized severely the C.C.F. for suggesting that there should be some measure of government control over institutions of that kind. I suggest to him that this is an angle of the problem which should be given consideration. If we guarantee certain profits to the chartered banks; if we are going to set up an industrial development bank; if we are going to guarantee profits, then I say there should be an examination of the standard of living provided to the employees of these banking institutions. There is a good deal of information in this little pamphlet, and it certainly does not show a very nice record, nor does it reflect much credit on the organization to which it applies, so far as its relationship with its employees is concerned.
I shall not discuss the matter further. I have made this short quotation simply because I think it will be the duty of the committee on banking and commerce, when considering a revision of the Bank Act, also to consider some regulations. which would extend the principle of democracy to employees of the banking institutions, to the degree enjoyed by other sections of labour in Canada.
The hon. member for York-Sunbury (Mr. Hanson) expressed the fear that the steps now being taken by the minister would eventually add up to the corporate state. I also have that fear. I have said time and again that the state supreme was not my idea of a solution of the problems of the people of Canada. Unless the people themselves are fully utilized and work into the whole fabric of the country, there is a danger that we may be marching in the wrong direction. When we are dealing with the banking institutions of Canada we are dealing with the whole economic set-up. As was pointed out this afternoon by the hon. member for Mackenzie (Mr. Nicholson), in view of the interlocking directorates which exist to-day in banks and in industry, the banks are really driven by those who control

industry. The set-up behind the scenes, including war-time boards, are largely staffed by the same people who occupy positions on the directorates in both industry and the banking institutions. In my opinion we have just about arrived at the corporate state.
I am afraid that when we place complete control in the hands of one group, and that group represents financial capital, we are heading for the very situation against which our boys overseas are fighting. There is only one way to off-set that situation, only one way to balance it. There is only one way to obtain democracy, namely, by giving the different sections of the population equal representation on the controls.
In his speech the minister deprecated the fact that more regional controls were not developed in connection with the banking set-up. I believe he is correct in that regard. If wg are to have a democratic society, then in my view every section must have the same representation and the same say in the machinery which is directing the economic forces of the country. Otherwise we shall have a straight financial approach to everything and, by virtue of the power exercised by these groups, we shall have direction from the top and eventual dictatorship. Certainly it leads in that direction; there is no doubt in my mind about that.
Anyone to-day who fears the development of ' the corporate state in Canada should examine very carefully the machinery which is now developed under the pressure of war. Under that pressure there can be no doubt that it has been overlooked. The minister and others have tried to make a case for the banks by saying that it was easy to get money in the twenties and the thirties. Well, I know that is not true. In the section of the country in which I lived it was just impossible to get money in those years. By and large the workers in Canada were not working sufficient time to have credit from the chartered banks. As the minister well knows, we attempted to solve that problem among ourselves. In the thirties we developed a system to take care of our own community needs. We had to do that. Our action took the form of local credit unions. And in the small loan field to-day I believe that the average fisherman, farmer or industrial worker in that province is taking care of his own credit needs, possibly to the extent of building a home. We were forced to take that action because the chartered banks were not in that field, and had no desire to enter it. I am reasonably sure it was pressure from that movement which forced the chartered banks

Bank Act-Mr. Gillis
to introduce the home improvement plan. It is my view that they feared complete loss among the income groups which were beginning to form around credit union organizations.
As one who never had very much money, and never expects to have much, I can say that the chartered banks in my lifetime, in the community in which I lived, never meant a thing to the group or section of society , to which I belonged, except that they did force us to take the action necessary to solve our own community credit problem, through the credit union movement.
My hon. friends to my left, the Labour-Progressive party, rather surprised me last evening when they rose in their places and voted against the proposal of the Social Credit party to take one step forward, at least to pull the teeth of the banking institutions. The important thing about that amendment is that it was not advocating any bureaucracy set-up outside the house. Parliament was to control the credit and finances of this country. They were asking that that power be taken back by the federal government, that the House of Commons be made supreme in this field, that the elected representatives of the people be the ones to determine the credit needs of the country and to issue currency. My hon. friends to my left were not prepared to take that step and they endeavoured to salve their consciences for the position they have taken. They rose in their places and made an attack on the C.C.F. party and on the Social Credit party.
I speak from memory, but, as I remember, the hon. member for Cartier (Mr. Rose) made the statement that no sensible person in the labour movement of Canada would take the position at this time of wanting to socialize the banks. I want to tell him that there are 14,000 organized miners in Nova Scotia who have taken that stand officially, and some of them are fairly sensible. There are some 9,000 steel workers in that province who have also taken that stand. There are some 22,000 organized trade unionists in Ontario who have officially taken that stand. These people have taken this stand through their local units; it was not fastened on them from the top. They discussed it; they examined it and they understood the step they were taking. In addition, the Canadian Congress of Labour at its last convention in Montreal, a convention headed by people who sit on government war boards, advised their constituent locals to take that step. They were people with long experience in the labour movement of this country.
Our hon. friends base their case on the necessity for jobs for returned soldiers in the aftermath of the war. If we are to have employment in the aftermath of the war, control and responsibility on the part of the elected representatives in this house constitute one prerequisite to having those jobs available. I should like to make one remark which the hon. member for Regina City (Mr. McNiven) may not like. I want to show how this will work out when we come to think in terms of employment in the aftermath of the war. The Premier of Saskatchewan made a presentation to the reconstruction committee on behalf of his government. It was a good presentation; it was a realistic presentation. He pointed out that some 70,000 people from his province were in the armed services. A survey had been made of all possible employment conditions in the aftermath of the war, and it was found that with present employment conditions there would be some 30,000 for whom employment would not be available.


Mr. McNIVEN:: Excluding the farms.


Clarence Gillis: Just a minute. He brought in a long programme of public works and stated that if those public works were made available possibly that situation would be cured. But the point was that the public works programme as presented by his government, and by each of the provincial governments, was contingent upon the federal government making available the necessary finances. If the chartered banks have control in the field of finance and credit; if they serve the purpose the minister says they serve or thinks they serve, why should the provincial governments not go to the banking institutions and present their public works programmes for the aftermath of the war and arrange for the financing of those programmes in order to guarantee employment?
The banks of this country are not prepared to take any risks to establish new industry or to carry on necessary public works in order to provide employment. If the federal government is to have the responsibility for the development of industrial enterprises and the carrying on of public works programmes in order to create employment, there is no reason why the control of currency and credit should not be taken back under the thumbs of the House of Commons and the people of Canada benefit by the initiative and ingenuity of their elected representatives through the proper development of this country in the future. Apparently the banking system is not prepared to do anything.
I think every member of that committee was interested in trying to arrive at the premise upon which my hon. friend of the L.P. party built his case last night when he salved his conscience by voting for the banking institutions of this dominion by giving
Bank Act-Mr. Gillis

them control for another ten years. I think I have given proof positive that if jobs are to be provided in the future for our returning service personnel and those who will be let out from war industry, this is where control in this field must be if we are to develop Canada in the future. I cannot see how the people who allowed us to wallow in the depression of the ten years prior to this war are to solve our problem in the future. Now is the time to examine this question because, as I said when I started, we shall not have another chance for another ten years.
I cannot understand our two hon. friends to my left. I have had a considerable association with that kind of people in the past and I have been listening to them for twenty-five years. They have so many lines it is pretty hard to know where to draw the line. I should like to draw to the attention of the house some of the arguments advanced this afternoon by the hon. member for North Battleford (Mrs. Nielsen) with respect to the establishment of socialism. I have in my hand the election manifesto which that party issued in 1940. and I should like to read a brief paragraph on page three, because it relates specifically to the remarks of the hon. member this afternoon. They pose here as social reformers, but this is what they had to say in their election manifesto in 1940:
Again, as in 1914-18, the leaders of the "reform" parliamentary parties have deserted the people and joined the imperialist war camp, lining up with the monopolists, bankers, militarists and war profiteers. The ruling class relies upon these lackeys in the C.C.P., in the Social Credit party and in the trade union movement to help lead the masses to the slaughter under the fraudulent slogan that this is a "just war". Their role is the most despicable one.
That was the opinion in 1940; there was no possibility of reforming the system. All through that manifesto runs the statement that capitalism had decayed and was dead, without any possibility of reviving it. To-day the lady shows a great fear of socialism. The capitalist system that was dead in 1940 is now going to solve the problems of the future. One would be led to suppose that if the C.C.F. part were elected at the next federal election, then immediately everything as it exists in Ottawa now would be thrown out. The banking system would be destroyed; everything would be uprooted, and all that kind of nonsense.
I came into the C.C.F. party in 1938. I came into it after about twenty-five years of experience in the labour movement, where it was my business, because I had to earn my bread and butter, to examine carefully everything that anybody had to offer me. We

examined the C.C.F. very closely before we came into it and we did not come into it as individuals. When the C.C.F. came into Nova Scotia, it had absorbed a labour party that was a going concern and it took in the entire miners' organization. Many of these bodies had had many years of experience and were composed of sensible men. We believed that the C.C.F. was and is the solution of the problems of the people of Canada. There is no doubt in my mind about that. If there is one thing that our hon. friends to the left are wrong in, and 100 per cent wrong, it is in their new adherence to the capitalist system as being able to solve the problems of the future.


John Horne Blackmore: To whom is my hon. friend referring?


Clarence Gillis: I mean our L.P.P. friends. One thing I am convinced of is this. The war in Europe exemplifies the last struggle of a dying system. I am certain of that, and you will not be able to save it by any transfusions. Fundamental changes are required in this order of society in which we are now living. If we are to be realistic and have something for the boys when they return from this war, the boys who are fighting against the conditions which they left behind them here in Canada, fundamental changes are necessary. Thinking in terms of maintaining the present system as it is, with all its ramifications, can lead only in one direction; I am convinced of that. You cannot reform a rotten egg, and you cannot reform this order of society, because it is dead. I am honest about this, as I think every member of the house is. The difference between us is simply a matter of not studying the problem with the same degree of care or of having interests that do not require changes to be made in the future. Unless we are prepared to sit down and honestly discuss the whole set-up, examine its disabilities and endeavour now to correct them, then when this war is over somebody is going to correct them for us in a way that we shall not like; I am convinced of that. I cannot visualize the programme and policy that. I have heard mapped out by different people in a leading position in the field of employment-in Canada for the period when this war is over ending up in anything but chaos and upheaval. When provincial governments present their reconstruction programmes they are all contingent upon the money being made available. Where is the money coming from? The federal government. They all come back to that. They want the federal government to give them the money, guarantee the contracts, set them to work and let them make a profit.

Bank Act-Mr. Gill's
27S9


Walter Adam Tucker: Is there anything wrong with that?


Clarence Gillis: Why do they not do something
themselves?


Walter Adam Tucker: Because the federal government has control of banking and currency and credit. That is why the provinces look for help to the federal government.


Clarence Gillis: You have the only chance now that you will have in ten years of getting the necessary control.
As I said, they all want the federal government to provide the money. You see, the industrialists do not believe in government control. Instead of getting busy and doing something to rehabilitate this country, they come here and throw the whole load on the lap of the federal government and expect the taxpayers of Canada to guarantee them their profits. The people of this country are not going to stand for that. When you question the industrialists as to their plans in the profitable field which they dominate, they have only one, namely, that when the war is over, every crown agency must cease production and the whole field be thrown open to private enterprise. Those were the conditions in 1939. Private enterprise had the field to itself then-and there were one and a half million people on relief. What is to happen to our 800,000 service personnel when the war is over, and to the 40,000 girls who are in the service and are now experiencing a little security for the first time in their lives? What is to happen to the million and a half workers in the war industry? Ask the industrialists and they will tell you that this is not their problem, but the government's. But they want to dictate to you what the economy of this country shall be immediately upon the cessation of hostilities. That is their field, the profit field. They want you to accept their lead when the war is over and to guarantee them profits in any new projects, with the taxpayers paying the bills. I would be a private enterprise myself on that basis.
Take the case of the premier of Saskatchewan. I am not blaming him individually because he is caught in a trap. The only thing I would blame him for is that he has not the courage to fight it out. He claims to have sent out over 2,000 questionnaires to private industrial firms in Saskatchewan asking what they could do in the field of employment when the war was over. Fifty per cent replied to the questionnaire and the other fifty per cent did not acknowledge it at all.


Donald Alexander McNiven: Give the complete explanation if you are going to mention it at all.


Clarence Gillis: I did.


Donald Alexander McNiven: Not by any means.


Clarence Gillis: That was in his brief.


Donald Alexander McNiven: Not by any means.


Clarence Gillis: I will tell it over again. The premier of Saskatchewan sent out a questionnaire to over 2,000 private enterprise firms in that province. From fifty per cent of these firms he received a reply to the questionnaire, and from fifty per cent of them he did not receive a reply. That is what he said when he presented his brief here about a month ago.


Donald Alexander McNiven: Mr. Speaker-


Clarence Gillis: You can make your speech after I am through.


Donald Alexander McNiven: If the hon. member is going to give an explanation of what occurred in the reconstruction committee, let him give the whole of that explanation.


Clarence Gillis: If the hon. member had waited a moment he probably would have got it. But he has heard it already. He knows the statement which the premier of Saskatchewan made in the reconstruction committee, but if he wants me to take up the time of the house I will read it to him. I do not want to occupy the time of the house in reading that into the record. The premier of Saskatchewan received a reply from fifty per cent, and from fifty per cent he received no reply. The point I want to make is this, as it was made in the brief by himself-


Walter Adam Tucker: Will the hon. member explain why the premier of Saskatchewan said that he had to have assistance from the federal government to carry out his plans?


An hon. MEMBER:: Order. Make your own speech.


Walter Adam Tucker: I submit that the hon. member is out of order in repeating what was said in the reconstruction committee, but since this matter has been brought up we have the right to explain why the premier of Saskatchewan took that view. He took the view that the recommendation of the Sirois commission should be carried out, namely, that the provinces should receive the financial help necessary to discharge their constitutional obligations to their people.


Some hon. MEMBERS:: Order.


Mr. MACKENZIE (Vancouver Centre):: The hon. member for Rosthern (Mr. Tucker)
Bank Act-Mr. Gillis

is speaking on a point of order, and the point of order is that no member of the house has a right to divulge the proceedings of a committee.


Thomas Vien: The hon. member for Cape Breton South (Mr. Gillis) is referring to proceedings before a committee, and that is clearly out of order.


Clarence Gillis: Far be it from me, Mr. Speaker, to quarrel with a decision given by yourself. But this report is public. The reconstruction committee's report has been sent all over Canada.


Thomas Vien: It is not a report which is before the house.


Clarence Gillis: I realize that. At the same time it has a bearing on the question we are discussing at the present time, the control of currency and credit in this country. This is the last chance we shall get to discuss it for the next ten years, or at any rate the last chance there will be to do anything about it. It involves the possibilities of financing your reconstruction programme, which is very important to all the citizens of Canada. I merely wanted to mention an example, and I thought it was a good one, where the premier of a province-


Mr. DOUGLAS (Weyburn):: It is too good for them.


Ian Alistair Mackenzie: I rise to a point of order. No hon. member may discuss the proceedings of a committee until the report of the committee is before the house.


Thomas Vien: I think the hon. member for Cape Breton South knows that, and I will ask him not to refer again to it.


Clarence Gillis: Oh, yes, it has been published. I have read it myself in half a dozen newspapers.


An hon. MEMBER:: That does not make it in order.


Thomas Vien: Order.


Clarence Gillis: I am through with it. I am rather sorry, however. We sit here for hours on end and we take everything that is thrown at us, but we are at least courteous enough to remain in our seats while others are speaking and to make our debate when we rise in our places.


Donald Alexander McNiven: Since when?


Walter Adam Tucker: And you never attack anybody else!


Clarence Gillis: The minister, during the course of his remarks-


Thomas Vien: The hon. member's time
has expired.


Thomas Clement (Tommy) Douglas: Is that your time or their time?


Clarence Gillis: Their time.


Mr. E. E. PERLEY (Qu'Appelle):: I have listened for three or four days to this debate, and the other day I listened to the minister when he read his long brief to the house. To-day I listened to speeches made from the government side by the hon. member for Vancouver-Burrard (Mr. McGeer) and the hon. member for Parry Sound (Mr. Slaght), and if anything I think one is more confused than he was right after the minister made his statement.
I have not taken up much of the time of the house this session. It seems to me that a great deal of time is wasted in debate on some of the questions which have been under review, and I intend to occupy only a few minutes in making a few observations and putting a question or two to the minister.
The purpose of this bill is, of course, to extend for another ten years the charters of the banks, and it is understandable that there should be a few amendments, because when a bill of this kind is revised only once every ten years conditions arise, especially in these changing times, which make certain amendments necessary.
I was a member of the banking and commerce committee in 1934 and I have the honour of being on that committee again this year. The bill will go in due course to that committee, and I shall say very little about it at this time, reserving to myself the right when it comes before the committee to discuss in some detail the questions it raises and the information we may get from some of the witnesses who will be called. On the previous occasion we had some splendid witnesses. The general managers of the different banks attended, as I assume they will do again, in order to explain their points of view.
As I say, when the bill goes to committee I may present a few amendments which seem to me worth while. I made an amendment or two on the last occasion and supported some amendments of other hon. members, but we could not get them adopted at that time, and I venture to say that we shall have no better success this year. The bill is the same as the measure we had in 1934. The then government was strong enough to put it through in the form they wished, and this government is strong enough to do the same. We shall

Bank Act-Mr. Perley
have to acquiesce and I venture to say that some of the amendments will not get very far.
The revision is more or less routine. The changes are not of much importance, and they do not go so far in certain respects as I should like.
I wish briefly to review the banking situation as it has prevailed in western Canada from 1900 to the present time. I divided it into three periods of fifteen years.
First, the period from 1900 to 1915. It is during that time that the banks opened up, one may say, in western Canada. The country was new and the banks rushed in and established themselves. Their main offices were in the bigger cities, such as Winnipeg and Regina. Considerable competition took place in opening branches in the towns and even in some of the villages, and they were really after business. While apparently there was plenty of money to lend, in many cases the interest rate was exorbitant, and beyond all reason. I might mention a little experience of my own. I got my first loan from the bank in 1900, when I had taken up a homestead and preemption, and, wanting some money to buy horses in the spring of the year, I went to the bank and got my loan on a basis of ten per cent, discounted. Before I got through paying that loan, renewing it every three months, I had paid between twelve and thirteen per cent.
We then come to the period from 1915 to 1930. At the close of the last war there was a depression with respect to prices and serious conditions prevailed in western Canada. The banks were in some difficulty; they were not free to lend money, and that part of their business was taken over by the loan companies. It was later in that period, in 1927, that we had the farm loan board established, which has been referred to in this debate. It was established because the government found it necessary to come to the rescue of some of the loan companies and provide a certain class of loans which neither the loan companies nor the banks would touch.
Then we had the period from 1930 up to the present time. We have a situation to which it is hardly necessary to refer. In recent years land values have declined. The loan companies will not make loans to the, same extent that they did formerly; the banks have tightened up, and now the minister is proposing amendments to the act to meet the conditions that have been referred to in this discussion. The minister himself admits that changes are necessary and is endeavouring to meet the changing conditions by certain amendments which he is proposing, but I do not think those amendments meet the situation.
There is certainly nothing in this measure which in any way forces the banks to do anything different from what they have done practically since their establishment in western Canada. They are still allowed to be their own judge with respect to loans, and I have no fault to find with that. I think they should have that right. But they are given greater powers than before, because they are empowered to take certain security which they have not been allowed to do up to the present time,
Under this bill ten per cent of certain loans will be guaranteed under certain conditions and the interest rates are reduced by this amendment. There is a reduction from seven per cent to six per cent, and I am in accord with that. I think it should have been a little more. If you will look up the records for 1934, when the Bank Act was before the committee, you will find that the hon. member for Moose Jaw (Mr. Ross) at that time made a motion that interest rates be lowered to six per cent. I recall that some of the members sitting in the house at that time opposed us when we tried to put that through. I supported the motion. The hon. member who moved that motion proposed that the banks should not be allowed to charge more than that, and that if they did so the borrower would not be liable for principal. I propose to move something similar in connection with this bill, but of course I cannot do so to-night, this not being the proper place.
There is nothing in the amendments proposed by the minister that further assists in the marketing of the crop. I have opposed the system with respect to interest, which reacts unfavourably on the farmer in connection with the marketing of the crops in the west. Before the wheat board came into operation and took over the whole situation so far as crops are concerned, the elevators were doing business and I was in the elevator business myself, as I have been since 1906. I know, therefore, something about this matter. I know what advances were made to the farmers. The elevator companies charged a good rate of interest. In many cases it was eight per cent and sometimes a little more, but in recent years they have been charging seven per cent. The banks financed the elevator companies. They advanced that money to them at a much lower rate than the elevator companies charged the farmers, and we had the banks guaranteeing elevator accounts. Now the wheat board is handling the matter and the government backs the board in financing the elevators.
Bank Act-Mr. Perley

We have, therefore, an exorbitant charge in that respect, and there is no provision in this bill to take care of the situation when the war is over and we get back to what some hope will be a normal state of affairs in connection with the marketing of crops. The Bank of Canada should finance the wheat board, and through it we should have full control of all marketing and financing and do away with the method that I have indicated.
The banks have not taken any risks. They have always been able to pay nice dividends. They have set up reserves, and we have listened this afternoon and evening to a discussion with respect to matters of that kind. I will not go into details at this late hour, but there is one point to which I should like to refer, which was mentioned by the leader of the C.C.F. party. The provincial governments in 1930 had to guarantee the accounts of the wheat pool in Saskatchewan. The hon. gentleman was right in saying that they did that. Prices had dropped considerably in 1930 and the wheat pool was in difficulties. They had made advances to farmers. The price was very good when they made the advances, but there was a severe drop and the provincial governments had to come to the assistance of the banks. The banks refused to carry that load when it got below the advances that had been made and security was not so good. True enough, as the hon. member for Rosetown-Biggar (Mr. Coldwell) said, the provincial governments guaranteed the account, but they in turn, when they were expected to come through, refused to do so and came to Ottawa to get the government here to take over that guarantee. I am going to say that if any one person is more responsible than another for the fact that the wheat pool is in business to-day and is in a good financial position-and it is to its credit that it has been taking on a considerable amount of the victory loan-that person is the Right Hon. R. B. Bennett, as he was then. He does not happen to be in this country now, but he is the one who is responsible for the fact that that concern is doing business now. The credit goes to Viscount Bennett. I can recall when they came to get the government of that day to take over the account, which the government did. some of the members opposite me, who at that time were sitting over here, opposed the move and made trouble for the Bennett government in making that guarantee. Mr. Bennett, however, did have it made, though they endeavoured in every way possible to raise every difficulty in his way. I know for a fact that the elevator companies thought matters had gone so far that the wheat pool would become insolvent and the elevators
TMr. Perley.]
would be divided up among the other elevator companies. I was close to a number of elevator companies at that time and I knew what was going on. They practically sat down at the table to divide up the pool elevators, and it is to the credit of the government of that day that they took over the guarantee which the provincial governments could not carry through in order to keep the company in business. Prices came back, and eventually there was not a loss but a profit when the present government took over in 1935. They tried to carry on and sell the 560,000,000 bushels that had accumulated. They tried to sell at a loss. We have heard of the fire sale, and they could not sell it fast enough.
I am proud of the fact that I was one of the members from western Canada who, in the face of great difficulties, persuaded our colleagues in the east, on our side of the house, to support the Right Hon. R. B. Bennett in what he did at that time. There is nothing in this bill that will assist very much in that regard. However, as I have said, we shall have interesting witnesses before the committee.
I wish to ask the minister one or two questions. Why did he not introduce the farm improvement loan bill at the time he introduced the industrial development bank bill? In reply to the leader of the opposition (Mr. Graydon) the minister said to-day that the bill was ready to be introduced and would be introduced as soon as possible and be sent to the committee. I wish to ask the minister why he did not introduce the bill at the same time if it was ready?


James Lorimer Ilsley: It was not ready then.


Ernest Edward Perley: Quite a lot of time has elapsed since the industrial development bank bill was introduced. If the farm improvement loan bill is ready now, the minister certainly could have given us some indication of what the bill contained at the time he spoke of the amendments to this bill.


James Lorimer Ilsley: I did.


Ernest Edward Perley: The minister did not go far enough. I think we should have that measure now, and we should know what is in it in order to make a fair appraisal of the value of the amendments to the Bank Act and to make a comparison. I say that because if the other bill does not go a lot farther and do more for the western farmers than the amendments to this bill the minister will have quite a lot of trouble when the bill is brought down to get it through. I warn the minister that if the bill when it is brought down is not what we think it should be and what we hope it will be, then 'he is going to have a little difficulty.

The late Eugene Durocher
There will be some criticism and possibly some amendments made by hon. members on this side of the house. I was glad to hear the minister in reply to the leader of the opposition to-day say that he was going to bring the bill down as soon as he could. I warn the minister to-night that it must be something worth while and that it must go a lot farther in the way of assistance to the farmers of western Canada than the amendments to the Bank Act that we are now considering. I agree with the statements made by some who have spoken, that the winning of the war is the all-important thing. That is the one thing we must consider now. We know the difficulties the government may have with that. We are all possessed of that idea. We all believe that the winning of the war is the main thing and we should approach all these questions from that angle. In the few remarks that I made to-night that is what I wanted to express. But I reserve the right to go a little more fully into it when this bill is before the committee. There is not time to do that now. I hope the bill to which the minister has referred will meet the requirements and conditions of the people of western Canada.
On motion of Mr. Hlynka the debate was adjourned.


[Stage Direction]
At 10.58 p.m. o'clock the house adjourned until Thursday, at three o'clock p.m., pursuant to special order made Monday, February 21, 1944.
Thursday, May 11, 1944