1944-05-08

[Stage Direction]
Bill No. 109, to incorporate the Alberta Provincial Bank.-Mr. Blackmore.

Mr. LIGUORI LACOMBE (Laval-Two Mountains (Translation):: Mr. Speaker, I
wish to raise a question of privilege. In its edition of to-day, May 8, 1944, the newspaper Le Canada, has the following caption:
Mr. Victor Trepanier states that Mr. Maxime Raymond is a yes-man, a rubber stamp and a haggler.
The same newspaper also quotes Mr. Trepanier as follows:
Mr. Trepanier has condemned the 65 yes-men, the 65 rubber stamps, the 65 hagglers we have in Ottawa, and he has added that they were no longer "fit to represent the people."
I protest against the statement of Mr. Trepanier, who sweepingly impugns the reputation and the stand of the 65 members from the province of Quebec.
I,	for one, am neither a "yes-man," a "rubber stamp" nor a "haggler." I was the only member from the province of Quebec, with the exception of the hon. member for Quebec-Montmorency (Mr. LaCroix), to oppose, through amendments, our participation in the war and the mobilization act.



SELECTIVE SERVICE


[Stage Direction]
Mr. J. SASSEVILLE ROY (Gaspe) moved for leave to introduce bill No. 110, to amend certain instructions of the national selective service of the Department of Labour.
Mr. POULIOT:: Explain.


Mr. ROY:: The paragraph to be amended at present reads as follows:
1.	Definition of employer: For this purpose, every person, partnership, company, firm or corporation in Canada, employing any male person normally regarded as a full-time employee, regardless of the method of payment of such employee for his services, comes under the definition of "employer." The dominion government, the governments of the provinces, as well as municipal institutions are employers for this purpose. The term employer includes also any farmer operating a farm, who has working for him a male employee, even though such employee be a son or other relative.
The purpose of the amendment is to strike out the definition of employer, a "farmer operating a farm," so that a farmer would not be compelled to act as informer against his son or other relative.
Motion agreed to and bill read the first time.

Questions



QUESTIONS

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

Mr. DIEFENBAKER:: 1.	How many major-generals, brigadiers and colonels are there now on the active list, (a) overseas; (b) in Canada?
2.	How many were there at the beginning of the war?
3.	How many were there on the 11th of November, 1918?


Mr. MACDONALD (Halifax):: 1.	As of 30th April, 1944:
Major-
Generals Brigadiers Colonels
Overseas 	9	72	99In Canada 	17	56	143Employed with other government departments or agencies 	5	5	5On leave pending retirement 	3	2	62. On 1st September, 1939:	Major-Generals,	
7; Brigadiers, 14; Colonels, 24.
3. Canada and Overseas: Major-Generals,
29; Brigadier-Generals, 59; Colonels, 148.


EXPORT AND IMPORT OF HORSES
Mr. HANSELL:: 1.	How many horses were exported to the United States during 1943?
2.	Through what ports did these horses pass, and how many through each port?
3.	How many horses were imported into Canada from the United States in 1943?


Mr. MacKINNON (Edmonton West):: 1 and 2.
Exports of Horses to the United States, calendar year 1943.
Province	No.
New Brunswick	 900
Quebec	 6,593
Ontario	 4,167
Manitoba	 68
Saskatchewan	 726
Alberta	 4,380
British Columbia	 180
Total	 17,014
Exports by ports not available.
3. Imports of horses from the United States: Calendar year 1943-331.


EMPLOYMENT OF WOMEN IN WAR CHEMICAL PLANTS
Mr. GAUTHIER:: How many women province of Canada, in	are employed, in each war chemical plants?


Mr. MITCHELL:: Employment as	at April 1,	1944
	Total	Women
	employees	employees
Quebec 	.. 17,148	6,049Ontario 	.. 12,886	5,142Manitoba 	.. 2,337	493Alberta 	.. 407	42British Columbia	.. 133	6Total 	.. 32,911	11,732


CANADIAN ARMY-GRANTS AND ALLOWANCES ON DISCHARGE
Mr. IIAZEN:: 1.	What clothing allowance is paid to officers of the Canadian army on discharge?
2.	What rehabilitation grant is made to officers of the permanent force?
3.	Are such grants in addition to the pension of such officers of the permanent force?
4.	What rehabilitation grant is made to the officers of the Canadian army who are honourably discharged as being over age?
5.	What rehabilitation grant is made to the officers of the Canadian army who are honourably discharged on grounds of medical unfitness?
G. What rehabilitation grant is paid to such officers who are honourably discharged for any other reason?


Mr. MACDONALD (Halifax):: 1.	None, except those officers of the force who have been cashiered or dismissed from the service and who are entirely without funds, and who have no balance of pay standing to their credit which may be used for the purpose of purchasing civilian clothing, who may, on the specific authority of the district officer commanding, be given a grant of $65 for such purpose.
2.	Thirty days' pay of rank or appointment and one month's dependents' allowance, provided they have completed 183 days continuous service. Dependents' allowance is paid to the dependent of the officer concerned.
3.	Yes.
4.	5 and 6. See answer to 2 above.


UNEMPLOYMENT
Mr. COLD WELL:: What was the total number of persons registered as seeking employment under the selective service, but not actually placed in employment, as of April 1, 1944, (a) in Canada; (b) by provinces?
Questions

Total applicants referred to jobs	Net registrations in process of placement	Requests for employees in process of being filledMarch 30,1944	March 30,1944	March 30,194491	128	199802	1,296	5,956850	752	3,71312,220	13,517	42,41010,290	9,135	64,162935	2,678	5,879445	1,399	3,389982	2,261	5,1172,982	4,531	11,65729,597	35,697	142,482


Humphrey Mitchell: Number of persons registered as seeking employment at employment and selective service offices but not actually placed in employment March 30,1944
Prince Edward Island	219
Nova Scotia	 2,098
New Brunswick	 1,602
Quebec	 25,737
Ontario	 19,425
Manitoba	 3,613
Saskatchewan	 1,844
Alberta	 3,243
British Columbia ....	7,513
Total	 65,294


PATROL CRAFT-PALMER AND WILLIAMS, SUMMERSIDE
Mr. FRASER (Peterborough West):: 1.	Has the firm of Palmer and Williams Limited, of Summerside, P.E.I., a contract for the construction of .patrol craft for the government ?
2.	If so, how many of these patrol craft were turned out iby the Palmer and Williams company during the years 1941, 1942, and 1943?
3.	What is the amount which was paid for each of the said patrol craft so constructed?
4.	What was the nature of the contract with the Palmer and Williams company; was it, (a) a contract by competitive bid; (b) a cost-plus contract?


Mr. HOWE:: 1.	Yes.
2.	1941, none; 1942, partial work on nine iraft transferred from E. A. Chappell; 1943, ten.
3.	The prices paid to Palmer and Williams Limited for the completion of the nine craft transferred from E. A. Chappell varied in accordance with the amount of work which remained to be done on each craft. They were as follows (sales tax extra): one at $1,700; one at SI,750; two at SI,755; one at $4,450; four at S4,625. The prices paid to Palmer and Williams Limited for complete work on an additional ten patrol craft were as follows (sales tax included): seven at $8,000 each; three at 89,450 each.
4.	None of the contracts were cost-plus. Two were let on a competitive basis and four were negotiated.


CANADIAN FORCES-ENLISTMENT OF ALIENS
Mr. ROY:: 1. In what Canadian regiments and units have United Kingdom subjects who were not nationals of Canada, and aliens in general, enlisted?

2.	What are the figures for each regiment and unit?


Mr. MACDONALD (Halifax):: This information is not available. It is only recently that attestation papers called for answers which would furnish any part of this information.


CANADLAN FORCES
Mr. ROY:: 1.	How many subjects of the United Kingdom who were not Canadian nationals have enlisted in the three Canadian armed services, and how many in each service?
2.	How many aliens of every origin have enlisted in the three Canadian armed services, and how many in each service?


William Chisholm Macdonald: So far as the army is concerned, this information is not available.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. RAYMOND:: 1.	Since the 10th day of December, 1943, how many persons were granted a -permit by the government under the provisions of order in council 9440 concerning the status of immigrant refugees?
2.	Among the persons who obtained such permit, have any been employed by the dominion government or commissions or undertakings of said government since their arrival in this country, or are any employed at present by the dominion government or commissions or undertakings of said government?
3.	If so, (a) what number; (b) -what are their names; (c) what were or are their duties; (d) what amounts did they or do they receive?

Motions jor Papers


NATIONAL COUNCIL FOR CANADIAN-SOVIET FRIENDSHIP
Mr. DORION:: 1.	What is the set-up of the "National Council for Canadian Soviet Friendship"?
2.	Has this council been legally organized? If so, how, and when?
3.	Is this council controlled by the government? If so, in what manner?
4.	Has this council obtained from the government the authorization to import from U.S.S.R. soviet films, photographs of life in the U.S.S.R., posters being used in soviet factories, books and pamphlets about all aspects of life in the Soviet Union? If so, has it been authorized to deliver to Canadian labour unions these films, photographs, books, etc.?



HON. J. G. TAGGART

Mr. NICHOLSON:: What has been the total amount paid to Honourable J. G. Taggart by the federal government since the outbreak of war?



LABOUR CONDITIONS-FIXING OF SALARIES OR WAGE RATES FOLLOWING DISPUTES OR STRIKES

Mr. RAYMOND:: 1.	Since December 16, 1940, has the government passed orders in council fixing salary rates in specified industries or concerning specified classes of workers following industrial disputes or strikes?
2.	If so, (a) how many; (ib) on what date was each of such orders in council passed; (c) what industries and classes of workers were affected by such orders in council?


Humphrey Mitchell: Return tabled.



MOTIONS FOR PAPERS

[Stage Direction]
MOBILIZATION ACT-DIVISION "e", MONTREAL
Liguori Lacombe: For a copy of all telegrams, correspondence and other documents exchanged between all persons and the registrar for division "E", Montreal, since the first day of August, 1940, as to persons in the county of Laval-Two Mountains called under the mobilization act.


Humphrey Mitchell: I would ask that this motion be dropped, because it is not possible to supply the material asked. The files of the registrar's office are noted in numerical sequence, and according to their call-up number. There is no grouping or recording by electoral districts. However, if the hon. member wishes information respecting any particular case I shall be glad to make an effort to get such correspondence.


Liguori Lacombe: I will submit to the
minister particular cases.


Mr. SPEAKER:: Dropped.



BARRIEFIELD MILITARY CAMP-BILINGUAL SECTION

Jean-François Pouliot: For a copy of all letters, memoranda and reports, (a) for the establishment, and (b) for the abolition of the bilingual section at A-21, C.O.C.T.C., Barriefield, since September, 1941.


William Chisholm Macdonald: No recommendations have been made and no submissions received at National Defence headquarters for the establishment of a bilingual section at A-21, C.O.C.T.C. Barriefield.


Thomas Vien: Dropped.


Jean-François Pouliot: Might I be allowed to amend the motion by substituting the words "a course in French" for the words "the bilingual section"?


Thomas Vien: The motion can stand, and the hon. member can take it up with the parliamentary assistant.
Motion stands.



PUBLIC RELATIONS OFFICERS, ETC.

Mr. CHURCH:: For a return showing the total number of persons employed by each government department and all outside boards and control boards and government commissions in what is known as, (a) public relations officers; (ib) press agents; (c) liaison officers; the return to show the total number of such persons in, (i) civil work; (ii) war work, so engaged.



RADIO BROADCASTING-MISS CLAIRE WALLACE

Mr. ROSS (Souris):: For a copy of the contract between the war finance committee and/or the C.B.C. and Miss Claire Wallace, together with all correspondence relating thereto, and a report on discussions regarding salary or stipend for broadcasting by the said Claire Wallace on behalf of the war finance committee; also a statement showing the total amount of money paid as salary or stipend, and any and all expenses, including travelling, hotel expenses, honorariums, etc., during the year 1943 and down to date in 1944.


Jean-François Pouliot: Mr. Justice McTague'a
order.



GASPE OIL-BEARING FIELDS

Joseph Sasseville Roy: For a copy of all letters, memorandum, telegrams and other documents exchanged between the dominion government and the government of the province of Quebec since 1940 concerning the oil prospects of the Gaspe oilibearing fields and matters related thereto.



FREIGHT CHARGES ON WESTERN WHEAT TO QUEBEC FARMERS

Pierre Gauthier: For a copy of all correspondence exchanged between the government of the province of Quebec and the dominion government or the

Motions for Papers

federal Department of Agriculture concerning the payment of part of the freight charges on-western wheat to farmers in the province of Quebec, from 1935 to 1944 inclusive.



FARM LOAN BOARD-S. T. SHABBITS

Alexander Malcolm Nicholson: For a copy of all letters, telegrams and other documents in possession of the government in connection with the resignation of S. T. Shabbits, an employee of the Canadian farm loan board, in 1944.



WESTMINSTER HOSPITAL, LONDON, ONTARIO- DISMISSAL OF HERBERT SIMPSON

Mr. NOSEWORTHY:: For a copy of all correspondence between the Department of Pensions and National Health and Westminster hospital regarding the dismissal of one Herbert Simpson, together with a copy of any reports of any investigation held in connection with said dismissal.


Mr. MACKENZIE (Vancouver Centre):: I take objection to this motion. Mr. Simpson, who had been employed by Westminster Hospital, London, Ontario, was dismissed for cause. Westminster hospital is a departmental institution, and its staff are members of the Department of Pensions and National Health. It is not the practice, and it would not be in the public interest, to table any correspondence or report from departmental employees to their superior officers in the same department.


Thomas Vien: Dropped.



CANADA STEAMSHIP LINES


[Stage Direction]
On the orders of the day.
Mr. GORDON GRAYDON (Leader of the Opposition):: I have a question I should like to ask the Minister of Justice, under whose jurisdiction comes the Royal Canadian Mounted Police, Is an inquiry being instituted into the cause of last Friday's costly fire which damaged the freight sheds of the Canada Steamship Lines on Montreal's waterfront, with the object of ascertaining whether or not factors of sabotage entered into the matter? One reason for asking the question, in addition to that of public interest, was that one eyewitness was alleged to have stated that the fire seemed to have started at three different places at the same time.
Hon. L. S. ST. LAURENT (Minister of Justice): Notwithstanding the fact that these freight sheds were private property, and under the control and in the custody of Canada Steamship Lines, as the owners thereof, because of the extent of the damage and the nature of some of the commodities destroyed, the

inspector of the Royal Canadian Mounted Police at Montreal immediately initiated a full investigation of the circumstances surrounding the fire. He has reported to the commissioner that there is no evidence whatsoever that would be grounds for suspicion of sabotage.


Gordon Graydon: Does the minister know
whether inquiries have been instituted by either the municipal or the provincial authorities?
Mr. ST. LAURENT: I did not inquire as to that. This was an investigation conducted by the inspector of the Royal Canadian Mounted Police at Montreal. He reported that he investigated all clues or indications and that there were no grounds for any suspicion of sabotage.



INTERNATIONAL FINANCE


[Stage Direction]
On the orders of the day:
Gordon Graydon: I should like to direct a question to the Minister of Finance. The Montreal Gazette in its news columns to-day reports:
War or no- war, the Bank for International Settlements will hold its 14th annual meeting on May 22 at its headquarters in Switzerland.
The report states that representatives of the allied nations will attend the meeting, as well as banking representatives of the axis group. I desire to, inquire of the government if the Bank of Canada is a member of the Bank for International Settlements and, if so, is it the policy of the government to have the Bank of Canada, under the present circumstances, represented at this meeting. I would further like to know if the Canadian government or the Bank of Canada has any deposits or any financial interest of any kind in the Bank for International Settlements.


Hon. J. L. ILSLEY (Minister of Finance):: I would like to ask my hon. friend to let this question stand and I will give him an answer to-morrow.



CANADIAN FORCES


[Stage Direction]
On the orders of the day-:
Mr. RALPH MAYBANK (Winnipeg South Centre):: Mr. Speaker, I should like to direct
a question to the Minister of National Defence, and in order to do this I should like to

II ousing-Winnipeg
give some information which has been sent to me by way of telegram. I have received a number of telegrams to-day from Winnipeg alleging that serious assaults have been perpetrated upon persons in military district No. 10, at the Fort Osborne barracks. The persons alleged to have been assaulted are said to be conscientious objectors of the sect known as Jehovah's Witnesses. I would ask the minister if he is already informed as to these allegations and whether he can at the moment make any statement with respect to them. If he is not informed, will an investigation be made and a statement given later?


Hon. J. L. RALSTON (Minister of National Defence):: I may say that I have had
several communications, probably from the same sources as those from which the communications to my hon. friend emanated. I think several of the telegrams referred to the same individuals. I immediately gave instructions to the adjutant general to have a full inquiry made, to work by telephone if necessary, and to carry on whatever investigation might be required in order to probe to the bottom the allegations which were made in these communications.



MOUNTED POLICE


[Stage Direction]
On the orders of the day:
Mr. JEAN-FRANCOIS POULIOT (Temis-couata): Mr. Speaker, this -morning a news item appeared in all the papers to the effect that a draftee or conscript was killed by a member of the mounted police in the county of Levis, near Quebec city. I should like to know if the government has been informed whether this conscript was armed at the time he was shot and, if so, what was his weapon? If the government cannot give this information to-day, I shall be thankful if they will give it to-morrow.
Hon. L. S. ST. LAURENT (Minister of Justice): As soon as this matter was brought to my attention I asked for information from the commissioner of the mounted police and I was informed that this man was being pursued because he had been charged with conspiring to commit an indictable offence under section 573 of the criminal code. They had been searching for him for several months and having obtained information that he was in the vicinity of St. Lambert, a patrol was sent out to locate him at 3 a.m. yesterday. Upon arrival at the spot it was found that he was not there, but when the patrol returned about 5.30 yesterday morning he was found in bed. When they proceeded to the chamber he 100-1701
jumped out through a window and started to run away. The constables pursued him and fired four or five shots in the air without his slowing down his pace at all. They then fired twice at the ground to one side of the fleeing man, and they saw him fall. They ran up to him and found that unfortunately a bullet had richocheted and struck him. They immediately called for' transportation to take him to the hospital but before they reached the hospital he died.
Jean-François Pouliot: But he was carrying no weapon at that time?
Mr. ST. LAURENT: I did not inquire into that point. I presume that had he been found in possession of a weapon it would have been mentioned in the report. There was nothing in the report to indicate that he was carrying a weapon.


Jean-François Pouliot: Will the minister be kind enough to secure that information?
Mr. ST. LAURENT: Certainly.



HOUSING


[Stage Direction]
On the orders of the day:
Mr. S. H. KNOWLES (Winnipeg North Centre):: Mr. Speaker, I should like to ask a question of the Minister of Finance, of which I gave notice earlier to-day. In view of the telegram sent to the minister on Saturday by the clerk of the council of the city of Winnipeg will the minister indicate whether a plan for the construction of low rent dwellings, such as has been announced for Montreal and Toronto, will be available for Winnipeg? Will the minister see to it that details of the Montreal and Toronto plans are furnished to the Winnipeg city council?


James Lorimer Ilsley: I know of no plan whieh has been worked out in Toronto. However, a plan has been worked out in Montreal by a group of public spirited citizens there. If a similar group in Winnipeg will do the same thing and make such suggestions as they see fit to the Department of Finance, they would of course be considered. I want to say that it is hard to answer yes or no to the question asked by the hon. gentleman because the Montreal plan is adapted to conditions in Montreal and it might be very misleading if I were to say that if exactly the same plan were suggested for Winnipeg the reaction of the Department of Finance would be favourable. Certainly a plan following the general principle of the Montreal plan would receive consideration, I would hope favourable consideration, but it would depend upon the particulars of the plan itself.
Winnipeg Packing Plants

With regard to the particulars of the plan, I may say that I received the telegram from the city clerk of Winnipeg referred to by the hon. gentleman. I have prepared a somewhat long letter which I propose to send which gives or directs him to all the necessary information about the Montreal plan.



HO.GS CONGESTION AT WINNIPEG PACKING PLANTS

[Stage Direction]
On the orders of the day:
Mr. WILLIAM BRYCE (Selkirk):: I should like to ask a question of the Minister of Agriculture which affects the production of food in Canada. Our farmers are striving to produce the best select hogs, but the present congestion at the Winnipeg packing plants forces the farmers to hold back their hogs with a serious loss in grade due to overweight. What steps are being taken to overcome this difficulty?


Hon. J. G. GARDINER (Minister of Agriculture) :: Mr. Speaker, the question has to do with the present heavy run of hogs and beef cattle to packing plants. The statement made by the hon. member for Selkirk would suggest that there is some difficulty in getting these hogs and cattle through our packing plants, and there is.
For the information of the house, the number on the payroll at the packing plants in Winnipeg on January 1, 1944 was 3,450, and on April 22, 1944, the number was 3,684. In other words there were over 200 more employees in the packing plants at Winnipeg on April 22 than there were on January 1 of this year. That is a very unusual condition. In the past it has been usual for hog deliveries to be low at this time of the year as compared with the earlier period. But as a result of the great production of live stock upon farms th'is year as compared with any previous year, the run through the plants both of hogs and cattle is unprecedented. There were about seventy-five per cent more hogs going through the plants weekly in February and March of this year than were going through the plants a year ago, and they are still running about forty per cent over the same period a year ago. While we were not processing any beef for export a year ago, we have up to date purchased for export what would amount to about 105,000 head of cattle, to be processed and shipped to Britain. That will give some idea of the increase in the food production and in live stock from the farms and of the greatly increased work which the processing plants have had to do in getting this meat through the plants and on its way to Britain. The Labour department was appealed to some weeks ago to assist in pro-

viding labour for these plants, and the Department of Labour and the Department of Agriculture have been in contact with the farm organizations of western Canada and the western governments and have at present the cooperation of the three western governments and the farm organizations of the west in securing all the labour possible for these plants.
It would appear that this is not a temporary condition but one which will continue to exist, owing to the very high deliveries of live stock to the plants. An attempt is therefore being made, and I think successfully, by the labour department to secure the necessary labour to keep the live stock moving through the plants just as rapidly as possible.


Mr. PERLEY:: May I follow up with a question the minister's statement that there is difficulty in the marketing and processing of live stock. Is he considering setting up a board of live stock commissioners? I think there is a need for it. Would he make a statement on that?


James Garfield Gardiner: The last question refers to a matter of government policy. The matter has been under consideration for some time and is still under consideration.


Mr. CASTLEDEN:: The minister admits
that there is congestion at Winnipeg. Has consideration been given to increasing temporarily the weight limits on hogs and cattle to prevent a loss to the farmer as a result of this congestion?


James Garfield Gardiner: There are no weight
limits on cattle. There are, of course, weight limits on hogs that enter into the production of bacon and ham. I do not think it would be wise to change the limits. As a matter fact, we are making an effort to get the hogs through the plants at the present weight limits, and we are hopeful that we shall be able to do that in due course.


George Hugh Castleden: In the meantime the farmer is taking a loss.



CANADIAN NATIONAL RAILWAYS


[Stage Direction]
On the orders of the day:
Liguori Lacombe: Mr. Speaker, I
wish to direct a question to the Minister of Transport (Mr. Michaud). Recently I asked him the following questions as reported at 2594 of Hansard for May 4, 1944:

Bank Act-Mr. Hanson (York-Sunbury)
1.	Have the Canadian National Railways leased to one Alphonse Ledoux a property in the Oka district, county of Two Mountains, province of Quebec?
2.	If so, what is the amount of annual rent paid by Ledoux?
The hon. the minister answered as follows:
1.	Yes.
2.	This concerns a detail of railway administration which is not of public interest.
Will the minister tell me why that question is not of public interest?



BANK ACT AMENDMENT


[Stage Direction]
The house resumed from Tuesday, May 2, consideration of the motion of Mr. Ilsley for the second1 reading of bill No. 91, respecting banks and banking.
Hon. R. B. HANSON (York-Sunbury):: Air. Speaker, aside from the budget the bill now under discussion is the most important nonwar measure to come before parliament at this session. In fact I would say that any bill relating to the decennial revision of the Bank Act is an important measure and therefore demands from the members of the house and from parliament the best consideration that we can give to it.
There has been banking legislation before parliament since the early days of confederation. The first general Bank Act after confederation was passed in 1871, and thereafter at regular intervals, not always adhered to rigidly, there has been a revision of the banking laws of this country. From the very earliest times, from 1871 down, very large powers have been granted to the chartered banks, and those powers were extended from time to time until, shall I say, the revision of 1923, when a change of policy took place. Because of a series of events more or less unrelated to present-day conditions, public opinion and the wisdom that comes from experience in operation then indicated that more limitations on the powers granted to the banks were necessary in the public interest, and that has been the trend of banking legislation from that time down. The most drastic of these limitations came in the revision of 1934. In that year the principle of a central bank and of central control of credit and currency was adopted by parliament. The revision and limitations then imposed were of a nature consequential upon and in a degree co-extensive with the establishment of the Bank of Canada.
Prior to the 1934 revision and the establishment of the Bank of Canada there had been set up in Canada a royal commission on the
banking situation in this country known as the Macmillan commission. Hon. gentlemen are familiar with the findings of that commission, which were referred to briefly by the minister in his statement the other day. I commend to any intelligent student of our banking system a reading of the report of the Macmillan commission. I do not propose to repeat any of its findings now. Suffice it to say that the commission found, and I agree, that assuming that we are to continue the established capitalist system of commercial banking in Canada under private ownership, our banking system had served the country reasonably well. I concur in the minister's observation that during the rapid development of Canada the system has served Canada reasonably well. I do not imply, nor I suppose does the minister, that it is by any means perfect; nothing is perfect in this world of ours. But the system amply demonstrated its strength and stability in the hectic days of 1933. There was no bank holiday in Canada then; and there were two reasons for that. The first was the strength of our financial institutions themselves, and the second was the fact that in that time of financial stress and strain this nation had great leadership, leadership of strength and courage, the kind of courage necessary to meet emergencies. As a result the people's savings were held secure, and I may say that the achievement was a matter of pride to the people of Canada. Contrast that with the situation which was exhibited in the United States, of the actual suffering which took place as a result of the closing of so many of the smaller financial institutions. The banks themselves, I think, gave a reasonable degree of leadership at that time.
What I have to say about this bill to-day will be, I hope, of a constructive character. Whatever criticism I make, both of the subject matter and of the minister himself, is not motivated, I assure the house, by malice. I desire to approach the whole position in as judicial a spirit as I can summon. That does not mean that I shall not have some political allusions to make in the course of my remarks. I hope to be forgiven if I do that. But speaking generally, I trust the debate will be conducted in a judicial spirit, to the end that, when the bill finally passes this house, there will emerge a measure calculated to give the people of Canada a law tending to create a high standard of living, to preserve freedom of enterprise, conserve the people's savings, and redounding to the lasting benefit of the public, and especially the commercial life of the nation.
2708	COMMONS
Bank Act-Mr. Hanson (York-Sunbury)
At the same time the banks, along with individual enterprise, supported by wise government policies and active assistance on the part of the government, must see to it that there shall be no return to the conditions which prevailed in 1933, so far as that is humanly possible. We all have responsibilities in that regard. I am satisfied that there is not an hon. member in this house, of any party, who seeks to shirk these responsibilities. The banks themselves have a large measure of responsibility in that regard, because they enjoy great advantages. The very statement of that fact brings with it the corollary of the proposition: because they enjoy great advantages there is upon them a large measure of responsibility for preventing depression in the future. The control of credit and currency is in the Bank of Canada, but the control of the practical application of credit itself is in the hands of the chartered banks, and it must be used wisely and in the national interest.
Having said that, may I now direct your attention to the bill itself and to the minister's statements. It is impossible, in the short space of time which I desire to take up this afternoon, to go into any degree of detail with respect to either. The bill is voluminous; I have not yet completed the first reading of it, and I doubt if many hon. members have. Before discussing it, however, I must say to the minister that his statement of Tuesday last was exactly what I feared it would be-not a factual, objective statement, but rather a passionate piece of propaganda calculated to stir up debate and invite reprisals. Then, there is the delay in introducing the measure. We are now on the eighth day of May, well into the fourth month of this session. This bill is of major importance, and I suggest to the minister, as I did the other day, that notwithstanding difficulties which of course I appreciate must have stood in the way, this bill should have been brought down long before. It ought to have been brought down, at latest, concurrently with the introduction of the bill to incorporate the industrial development bank.
May I now for a moment refer to the minister's statement of May 1 when he was moving for leave to introduce the bill. In that statement he indicated that the bill constitutes three important things: first, the basis of the decennial revision of the Bank Act; second, the extensions of the charters of the banks for another ten years or until July 1, 1954; third, generally speaking, it provides for such changes in the present act as the administration has decided are advisable, governing the operations of the banks, their powers, and the limitations

of the controls to which they are subject. The statement of the minister and a subsequent statement indicated that the changes are numerous. That is correct. But I do not think they are very important. In principle there is nothing revolutionary about them; they do not establish any principles which are not already embodied in the legislation now on the statute book. I suggest that this is a better description-that they are an extension of existing policies and principles.
First, there is the change in the right to issue notes on the part of the chartered banks. That is not a new principle; it is a principle which was established in the act of 1934 and was consonant with the establishment of the Bank of Canada and the rights given to that central institution. Of course it is important in a limited sense, because it takes away from the banks one important function and a very valuable franchise. I may say in passing that there are not many provisions in this bill which impair the powers of the banks. I believe that hon. members, particularly a few who sit on the right of you, Mr. Speaker, will be disappointed, upon an examination of this bill, in the character of the changes. However, that is merely an expression of my personal opinion, and I have no doubt that they will be vocal enough when the proper time arrives to express their own views in that regard. The banks have been left pretty well alone so far as shearing them of important powers is concerned. The function of the note issue was given to the commercial banks of Canada a long time ago. It served a useful purpose, and since it was not transferred to the state until 1934, it was an important function in the commercial and business operations of the country. Of course I agree, as we all do, that it was a profitable function to the banks, upon which the various governments from time to time in the past have imposed taxation and received for the public revenues a substantial increment.
I know of only one argument against completely taking away from the chartered banks the right of the issuing of notes, and it is this. Because the function has been profitable in the past, it has greatly assisted, in my view at all events, for what it is worth, the establishment of a chain of branch banks which covers the country from east to west; I doubt very much if many of the branches which were established in rural communities in days gone by, and which served the public, well or ill, according to one's opinion and experience, would ever have been established had it not been for the fact that the banks enjoyed this profitable franchise. Well, it has been taken away in large measure, and while

Bank Act-Mr. Hanson (York-Sunbury)
it is not the only cause for the closing of many small branch banks, I do suggest to the minister and the house that it has been a substantial contributing factor to the closing of branches.
My understanding of the position is that in order to make a branch bank pay it is necessary that it receive substantial deposits, and on those funds, employed in the branch or elsewhere as the case may be, mostly elsewhere I think, the banks, together with the franchise of note issue, have been able to maintain these branches. But since 1934 we have seen a change, which in part at least, I suggest, has been brought about by the restriction imposed upon the banks in connection with the note issue. Take my own community, for instance. In 1934 we had four branches, one for each of the big banks, in the city of Fredericton, and we had in the rural communities eight or ten, I think ten, branch banks in the two counties of York and Sunbury. To-day there are only six.


Mr. MacNICOL:: Altogether?


Richard Burpee Hanson: Six branch banks outside the city of Fredericton in the two counties, and it cannot be said that the people are overserviced with banking accommodation in that community. I do not say they are underserviced, but the closing of four, perhaps only two, in that period of time has not been of advantage at least to these particular communities, but rather the reverse. And so, with that principle, there comes some reaction. I think this position could be illustrated in almost every constituency in Canada from east to west. Right in the minister's own constituency there was closed not so long ago a branch bank in the little town of Middleton, which has had a bank for some considerable time.
So that these things happen, and although I am not dogmatic about the cause, it seems to me that the taking away of the right to issue notes has had a substantial effect upon the service to the community by the banks. That may not be correct, but that is my belief at all events.
The second important principle to which the minister alluded-I may not have them in their right order-is the provision of making the Bank of Canada the exclusive agency for the redemption of notes, both of defunct banks and, by 1950, of existing banks. I suggest that is not revolutionary by any means. It is merely a change' in existing machinery to perform a function that has been performed hitherto by provisions under the Bank Act. And I do not see-any harm in it. I think it is a useful provision for centralizing
in the Bank of Canada this function, which may or may not be important. But it is a natural evolution following the establishment of the Bank of Canada by a Conservative government in 1935, and, I suggest, one of that government's greatest accomplishments was the establishment of the Bank of Canada.
Then there is a third suggestion or provision which may stir up some controversy, and that is the transfer of unclaimed balances, and liability to pay them, to the Bank of Canada after ten years. This is not a new thought by any means. Those who were present at the bank revision of 1934 will recall that Mr. Irvine, then member for Westaskiwin, had a resolution before the banking and commerce committee-an amendment, I believe it was; I have not been able to look up the citation-calling upon the powers that be to declare that seventy-five per cent of these unclaimed balances should be transferred to the crown in the right of the dominion. The Minister of Finance of that day, Mr. Rhodes, rejected the suggestion. I have here a reference to it in the Canadian Bar Review, Volume 21, No. 7, page 546, of August and September, 1943. In an article entitled "Some Legal Problems on Banking," the author of which is Mr. Arthur W. Rogers,
K.C., who is to-day the secretary of the Canadian Bankers' Association, a man very well versed, I should judge, in banking problems and the legal problems of banking, he has the following to say in reference to that suggestion:
On the occasion of the last revision o.f the Bank Act one of the members of the banking and commerce committee suggested that provision should be made to vest these unclaimed balances in the crown in the right of the dominion. The Minister of Finance, however, stated that such a step would be unconstitutional on the ground that the provinces were entitled under section 109 of the British North America Act to such of these unclaimed balances as were really ownerless and therefore bona vacantia-
That is what is known in Quebec, I believe, as vacant property; is that right?
-coming within the meaning of the term "royalties" in the above section.
I looked up section 109 of the British North America Act and I really do not think it could be justified on that ground. But I suggest to the minister that it is a violation of provincial rights, that it is a violation of the British North America Act, section 92, which provides that property and civil rights function only within the jurisdiction of the provinces; and I suggest to the house and the country that the proposal savours of confiscation on the part of the crown in the -right of
2710	COMMONS
Bank Act-Mr. Hanson (York-Sunbury)
the dominion. I believe there is good authority for that suggestion. I hold the view that this provision is unconstitutional; the matter is at present the subject of litigation. The matter is sub judice.
I want to return to that aspect of the matter in a moment, but to me this looks like the legal violation of a contract on the part of this parliament; and just why the move is made is not quite clear to me. This is either in one jurisdiction or the other. I am informed that during recent years a suit was taken by the provincial authorities of Quebec against the Bank of Montreal, I believe as a test case; the Minister of Justice (Mr. St. Laurent) will know much more about this than I do. If I am correctly informed, and I must confess that I have not been able to get hold of the report of the court of appeal, the superior court declared that these unclaimed balances were vacant property within the meaning of the laws of that province, and the court of appeal sustained that decision, which in effect, I suggest, is an affirmation of provincial rights under the constitution, in relation to property and civil rights. I believe my hon. friend the Minister of Justice has intervened in that litigation, which is on its way to the privy council, where there will be a contest over the constitutional issue raised. The matter is sub judice, and I suggest that such legislation as this should not be introduced until the matter is finally decided by the highest judicial authority. Then I believe, though I have not been able to get the report, that in a recent case in Manitoba involving somewhat the same principle, or so I am informed, the provincial courts have upheld the right of the crown in the right of the province with respect to certain matters of property and civil rights-I am not sure just what the rights were, because I have not read the report-and that the decision was appealed to the Supreme Court of Canada, which reaffirmed it. A friend of mine communicated with the clerk of the Supreme Court of Canada, but I understand the report has not yet been printed, so that I do not speak dogmatically as to what that court actually found.
I ask the minister this question. On the basis of the theory or principle of "pith and substance"-which must have a familiar ring to some hon. members of this house who have read the privy council decisions on the litigation relating to the so-called new deal-this is not banking and commerce at all; it is property and civil rights and, as such, this is an attempt "on the part of the federal authority to change something which in my
CMr. R. B. HansQn.]
view, at all events, for whatever it may be worth, should be left as it is. Those of us who are lawyers know the law of the land in connection with what they term vacant property. I believe that is dealt with in the province of Quebec under a special act, and in the other provinces under the common law. When a man dies intestate, without issue, heirs at law or next of kin, the crown in the right of the province takes the property I remember in my very young days as counsel being startled when I heard of the case of a man in my own practice who was in that position. Unfortunately he did not make a will; he had no next of kin, and the crown walked in and took over several thousand dollars in bank deposits. That was the law of New Brunswick, as I believe it is in all the common law provinces. These unclaimed balances are vacant property. They are property; they are there by virtue of a contract between the bank and an individual or corporation, as the case may be. Under what principle should the federal authority step in and claim those unpaid balances?


Mr. McGEER:: Piracy.


Richard Burpee Hanson: Well, I
call it confiscation; that is not quite so strong a term. I suggest to the minister that this legislation is premature, at all events, until the decision of the privy council has been handed down. That will decide the issue, and his legislation may be good; but he would look pretty silly if the privy council should decide against him. I think he is taking a long chance. I know the minister has an inflexible mind; he always thinks he is right and that no one else is ever right.


James Lorimer Ilsley: No, but I have a good
answer.


Richard Burpee Hanson: Well, perhaps you have, but the answer will not be given by my hon. friend but by the privy council. It is fortunate in these days of regulations and controls that we still have access to the courts.


Mr. DIEFENBAKER:: Have we?


Richard Burpee Hanson: That is a point; the hon. member for Lake Centre asks, "Have we?" Even that has been taken away from the citizenship of this country, in some measure at least, of course with the approval of my hon. friend the Minister of Finance.
Now I pass from that to the proposed amendment to section 91, reducing the maximum rate of interest and discount to six per cent. That is an old friend. I recall that substantial efforts were made to have this done in 1934, and I shall be perfectly honest

Bank Act-Mr. Hanson (York-Sunbury)
and say that perhaps it should have been done at that time. It is proposed also to limit the rate on instalment loans to five per cent. I doubt very much if instalment loans can be operated on a five per cent basis, but that is not my funeral, and if they cannot, it will not be my loss. The banks will be able to speak for themselves. But in this connection I should like to refer the house to the minister's statement at page 2555 of Hansard. I never before thought the minister was so egotistical; I do not know how many times he used the pronoun "I". It was reminiscent of the days of an old Nova Scotia statesman.


Ian Alistair Mackenzie: Bennett.


Richard Burpee Hanson: No, older than he. I hope I may not be guilty of the same thing.


Mr. ABBOTT:: This is not a case of the pot calling the kettle black, is it?


Richard Burpee Hanson: I do not think so. I think the parliamentary assistant had better keep his seat, because if I understand the situation correctly he was responsible for a tactical error made by the minister on Tuesday last, when he made a vicious attack on my hon. friends to my left, I suppose in the hope that he would curry a little favour with St. James street. Well, let me tell him that was a vain hope, because he is sitting in this house for the last time. That ought to hold him for a while.


Douglas Charles Abbott: I am completely cowed.


Richard Burpee Hanson: Well, I suggest that the parliamentary assistant should not interrupt me when I am trying to make a reasoned argument; that is all.


An hon. MEMBER:: Oh.


Richard Burpee Hanson: Who said that? Some other man who has not an idea in the world, I suppose.


Mr. MACDONALD (Kingston City):: There is no greater interrupter in the house than my hon. friend.


Richard Burpee Hanson: I direct the minister's attention to page 2555 of Hansard, the first column, where he is reported to have said:
I would like the benefit of very special consideration by the banking and commerce committee and this house. In my desire to keep maximum charges low I may easily have gone too far and I would like the committee to hear evidence from the banks as to whether it is really possible to do this type of business under the terms which I am here suggesting.
I pause here to say that before the minister put this provision in the statute the policy should have been thoroughly examined. That language does not indicate it. Then he goes on to say:
Furthermore, while in the interests of simplicity and for the purpose of avoiding an odd or fractional rate of interest, I have expressed the ceiling in terms of a five per cent discount, it may be that the committee may prefer to express the ceiling in terms of a maximum rate of interest per month or per year. I shall be prepared to welcome the guidance of the committee in this respect also.
That is the first time I ever heard the minister asking for an honest-to-God suggestion from anybody in the house, because his mind is so inflexible that he never accepts a suggestion.
I do say that a start was made in this direction in 1934, and it is the natural result and evolution of the easy money policy that was established in 1934, when we got the banks either voluntarily or involuntarily to reduce the rate of interest on savings deposits, which was a sine qua non to the policy of easy money and the downward revision of bank rates and bank discounts in Canada. A very good start was made then, which might have possibly gone further at that time.
Then, the minister has referred to the provisions of section 88, which, to every lawyer in the house, is of course an old friend. He says that the amendments are designed to make it possible for additional types of borrowers to obtain bank credit under this section, and to provide what is said to be a simplification of the procedure now necessary to take security for loans under this section. Well, that, is merely an extension of an already existing principle-and a great privilege to the banks; make no mistake about that. In no other jurisdiction in the world that I know of is there anything comparable to section 88. How long it will live I know not. I am not asking for its repeal to-day, because I know is is a valuable adjunct to our financial machinery. But it is not a new principle. The changes are designed to clarify the position, and perhaps to make it simpler. That ought to be welcomed by everybody. On the whole, while it is a special privilege-and have no doubt about that-let us admit that it has served a useful purpose.
But in days gone by these liens were secret. They were statutory liens created and authorized by the Bank Act. They were secret liens, and in principle that was bad and unjust to many parts of the commercial communtiy. It gave the banks preferred positions over ordinary creditors, and often, being secret and taken without notice, caused hardship and loss

2712	COMMONS
Bank Act-Mr. Hanson (York-Sunbury)
to the commercial public. I know something about that. I have been through this mill in days gone by. Let me illustrate. Up to 1923 the banks could take a lien as security for a loan on standing timber on freehold land, and nobody knew anything about it. They had a preferred first, secret mortgage, by the execution of section 88 hypothecation forms. No doubt that was a great advantage to the banks, because it placed them in a preferred position, and it may have been of some immediate advantage to the borrower. But once it was known it absolutely destroyed the credit of the borrower with all the rest of the commercial community It was inequitable, unjust and an abomination to the business community. It was the supplier of materials who usually got pinched. Standing timber might have been growing on granted land, a man might be operating that granted land, and might go to the bank and get an advance under a lien. At the same time he might buy from me, a wholesale grocer, his goods and supplies. As a result the grocer, the man who supplied food to feed the men, would wake up one day and find that there was a lien ahead of him. That is not a pleasant situation, but it has actually happened.
In 1923 I had the privilege of bringing this position before the banking committee. I must say I got a great deal of support from the then Minister of Finance, Mr. Fielding, and there was very little opposition from the banks, the position having been stated to them clearly. I succeeded in having a reform made. It was not all I could have wished, but at least there was some amelioration of what I considered a difficult and unjust situation. What was done then was that a form of notice had to be given-inadequate, I think, but still a form of notice. I ask the minister if the government has considered, in revising the Bank Act, whether any further action should be taken in connection with this matter of secret liens, because, per se, secret liens should not be tolerated in the commercial world. As I recall the act of 1923, and the slight amendment in 1934, notice of intention to borrow has to be given. But the notice in respect of granted lands-and in law it is described as a constructive notice, not an actual notice-does not have to be registered in a registry office, where the ordinary business man would naturally expect to find it.
Has consideration been given to strengthening that principle of constructive notice? I have no further observations to make on that point. When we come to the sections themselves in the banking committee, and after I have had an opportunity to study them, I

may be able to evolve some further suggestions in respect of reform in that regard. At that time I may ask that such changes be given consideration.
Then we are informed that sections 88 and 89 are to be amended, on the theory that more credit will be extended to farmers and fishermen. This is known as intermediate credit. I hope that the thought behind this gesture will mature into action. But I believe I may be pardoned if I express some degree of scepticism as to the results which would flow from these new proposed revisions. I do not see any long line of farmers and fishermen leaving the offices of the chartered banks with their pockets filled with money borrowed from those banks on a ten per cent guarantee. I should like to add that I do not think there will be any easy loans on that basis. However, I desire to make this observation, that a charitable and judicial view to take is to await clarification of the whole position before the committee. I do not condemn it at all; I am open to conviction, and I hope it will be successful-but I am just not at all sure about it. We would all like to see more credit extended to farmers and fishermen in times of stress. That has not been their position in the past. The position of farmers and fishermen in the maritimes has not been a very happy one. I happen to have been born among them on the bay of Fundy. I know that they have had periods of great prosperity, but they have also had periods of dire distress. I think that is true of any fishing community on the Atlantic coast. In my view these proposals might be strengthened. However, let us see what we shall see in the committee.
It seems to take a war to bring us to a realization of the plight of these two classes of our citizenship. To-day the position is reversed; there is no doubt about that. To-day the fisherman is getting a worth-while return, especially the man in the fresh fish trade in the maritime provinces. I am glad he is getting it. In a measure the same is true of the farmers of this country. At last they are getting something approaching parity in connection with their production. They are carrying on that production under the most adverse conditions. All praise to the farmers of Canada, who after all are thg backbone of this country. I have always believed that. Their position to-day. is due to the war and the war alone. We must see to it that they are not allowed to lapse into a position after the war which would be in any degree comparable with what they went through during the dark days of the depression. My view is that to-day the farmer does not want credit

Bank Act-Mr. Hanson (York-Sunbury)
so much as he wants to be left alone to work out his own salvation. That is what my farmers tell me. They want to be free from regimentation and controls. Above everything else the farmer is an individualist, although he is beginning to learn the value of cooperation in certain of his activities. But on the whole I think it is axiomatic that he desires to manage his own affairs and plan his own economy.
I was greatly struck the other day with an item in the Ottawa Journal which had been quoted from the Hamilton Spectator. It contained the utterances of a farmer of the province of Quebec. I am sorry I have lost it, but he gave expression to views somewhat like these. He said: I do not want to be told what I shall plant or sow, where I shall plant or sow and when I shall sell it; I want to be allowed to manage my own farm. I do not want subsidies or bonuses, but I do want a fair price for my products. Above all-I think this is in the mind of every farmer-I do not want some white-collared young man sitting behind a mahogany desk in Ottawa, a man who never worked on a farm or who perhaps never saw a farm, telling me how I shall reap and sow, how I shall manage my farm, and what I shall do with it.
That is the attitude to-day of the farmer of Canada. He resents a little group of white collared men in Ottawa sitting down with blue-prints and statistics and figures before them and telling him what he shall or shall not do. Those people do not know anything about his problems except what they can glean from statistics and charts and blueprints and figures.


Mr. GLADSTONE:: The farmer wants
markets and wider markets.


Richard Burpee Hanson: I agree with that; he wants to know where he is going to get them after the war. Shall he be able to find them in an improverished Europe which cannot even feed itself? He certainly wants outlets for his products because he has demonstrated that he can produce. I agree most heartily with that expression of opinion of the farmer in the province of Quebec, notwithstanding the fact that I personally recognize that some controls are necessary. But we should not have the huge system of controls and regimentation which has had such a mushroom growth in Canada during the immediate past years-founded not so much on reason as on expediency or on a hit-or-miss or trial and error system.
I now desire to turn briefly to the long and laborious statement which the minister read into the record on Tuesday last-and which he read very badly, may I say, or so it seemed 100-1714
to me. I cannot characterize that statement as a speech, because it was not a speech. To my mind it was an essay prepared by the group of economists and brain-trusters who surround the minister. I listened to it carefully and thoughtfully, and I later read it in Hansard, but I had a feeling of amazement- of course not at the whole speech.
I have listened to two ministers of finance introduce bills relating to the decennial revision of the Bank Act. I recall the judicial and unprejudiced speech of Mr. Fielding in 1923, and I recall the speech of Mr. Rhodes in 1934, which was characterized by dignity and fairness. As I recall them, both were models for such an occasion, and I recommend a rereading of those speches to the Minister of Finance and the membership of this house. Then hon, members can contrast those two judicial utterances with the platitudes uttered by my hon. friend on Tuesday last. On the one hand you have fair, impartial, judicial and dignified utterances, and on the other you have an almost passionate defence of the banks and the Canadian banking system by our present minister in this year of our Lord, nineteen hundred and forty-four.
My immediate reaction was that the bankers upon reflection will say: Deliver us from our self-constituted defender. My hon. friend is a king's counsel; he is a member of parliament; he is a privy councillor, and I now suggest that he add to his name some more initials, F.D., fidei dejensor, defender of the faith. Hon. members will remember that our old friend, Henry VIII, had a medal struck in his honour with those words on it.
For some reason best known to themselves, my hon. friend and his advisers went a long step out of their way to defend the banks and the banking system of Canada before they were under attack. Let me say to him that he wet his powder before the battle was even on. Portions of that speech were almost provocative and in my view were better left unsaid at this stage. They are bound, and it would appear to me that they were calculated, to bring reprisals from the two groups to my left. The minister expressed anxiety to get this bill to the committee with the least possible delay, but I suggest to him that his ill-timed observations will have just the opposite effect and will call for and produce a long debate in this chamber. Contrast that with what took place in 1934. The present Minister of National Defence (Mr. Ralston) was financial critic of the opposition in those days and as I recall it he made a speech just fifteen minutes long, in which he did not challenge the principle of the bill, but reserved the right to question many of its proposals.
2714	COMMONS
Bank Act-Mr. Hanson (York-Sunbury)
Personally I have a high opinion of our commercial banking institutions, but I do not imagine anyone will assert that they are immaculate or wholly free from fault and abuse. The bankers themselves, I am sure, will hardly lay claim to all the things that were said about them by my hon. friend. After all, the affairs of our commercial banks are being run by human beings. To err is human, and these gentlemen are neither perfect nor omniscient. They will admit that.
My memory of the political life of this country goes back for nearly fifty years. I recall as a boy in the year 1896 standing on the lawn of the courthouse at St. Andrews, New Brunswick, and listening to a political debate on nomination day and an indictment delivered against the Conservative party of that day by an ancient member of the Liberal party who a long time ago went to his heavenly reward. He was a friend of my family, the Hon. Arthur Hill Giilmor, whose name is still held in respect. The gravamen of his charge was that the Conservative party were the tools and servants of the big interests of Canada. How many times have we heard that from every platform in this country, on the hustings and in the party press of the Liberal party! It is a charge that has been always levelled against the Conservative party.


Joseph William Noseworthy: And now you are
being supplanted.


Richard Burpee Hanson: We have never been supplanted, because we never were the tools of the big interests of this country-I can tell you that. But all down through the years I have heard that charge iterated and reiterated by our political opponents. As I sat and listened to the Minister of Finance on Tuesday last I asked myself this question, and I ask this question of the house and of the country: Who are to-day the self-constituted champions of the big interests in Canada? The Minister of Finance ami his followers; and he is just following out the line of his illustrious predecessors. I well remember when the Hon. Charles Dunning came down here from Saskatchewan, the Napoleon from the west, the gentleman who was to take charge of things and become the heir apparent of the present Prime Minister (Mr. Mackenzie King). He was a vigorous personality-make no mistake about that-and a very able man; but where is he to-day? He has ingratiated himself into the seats of the mighty.	To-day he is the
president of the Ogilvie Milling company, a director of the Canadian Pacific Railway company, a director of the bank of Montreal, and God knows what he is not a

director of. Where are the principles that he brought with him down from Saskatchewan in the early nineteen-twenties? I look across the floor and I see my good friend- the Minister of National Defence. He, too, in the days that are gone by has smelt the fleshpots of Egypt

that is all he did, I think, just smell them. He went to Montreal under the aegis of his friend Mr. Dunning, but it was not very long before we found him in the employ of the federal government. I want to say this to the minister, that from the thousands of dollars that he put into his jeans as a result of his efforts on the wheat report, very little eventuated to the people of Canada. I am going to forgive him all that, because when duty and his leader called him he came back to give national service to the people of Canada. You may not approve everything he has done, but there is no doubt in my mind that he is a much poorer man to-day than he would have -been had he stayed in Montreal. I am just wondering if the hon-. Minister of Finance has it in his mind, after that gush that he dished out to us the other day, that he too, with the reputation he is seeking to establish, will some day ingratiate himself into the hearts and the pocket books of the so-called big interests.


James Lorimer Ilsley: I had not thought of it.


Richard Burpee Hanson: Then it is a new thought for the minister. I know he has an inflexible mind, but he may be receptive to that idea.
We of the Progressive Conservative -party believe in rational and orderly progress. I do not think that the Liberal party, represented by the Minister of Finance, should rush into the arena and passionately defend our financial institutions before -they have been actually attacked. I think we should take a judicial attitude towards this question, to do justice, -to do that which is in the national interest, rather than rush to the support of people who have not asked us to rush to their support. I cannot believe that the bank executives ever asked for the passionate recital of the virtues of the banking system that was given -to us by the minister, or even contemplated such a position.
The banks of this country for seventy years or more have had a position tried by experience which has proven reasonably useful and as good at least as systems in other capitalistic countries, and better than is to be found in some countries. I do not for a minute agree that, it is an ideal system. We should seek to attain the ideal.


An hon. MEMBER:: Currying favour now.

Bank Act-Mr. Hanson (York-Sunbury)


Richard Burpee Hanson: No, I am not currying favour. Who said that, anyway? I suggest to the young gentleman, whoever he is, that he just keep his peace while I am trying to make an argument.


James Garfield Gardiner: He is-not in the house at the moment.


Richard Burpee Hanson: I do not pretend to be in the confidence of the banks. I believe they are quite capable of defending their own position if given the opportunity to do so, but I do say that it is our duty to see that they get that opportunity at the proper time and place, and that is in the banking and commerce committee. Why deliberately raise an issue over the banks in this house which may conceivably, probably will, in the days to come, become a political issue?
I recall with some degree of satisfaction the position in 1934, when I had the responsibility of presiding over the deliberations of the banking committee, when the act was last revised In those days there were the usual charges of monopoly and abuse and all the other charges that were heaped upon the banks. Some of those charges were made in the house, but chiefly before the committee. The case against the banks at that time, if it could be called a ease, was made by the same opponents and the banks had full and free opportunity te make their defence. That is the place they should have allotted to them to make their defence, and they should be given that opportunity. I believe that 1934 was the first time in our history that they had a . full and free opportunity to make their defence. They did so, and I think it was the universal opinion that they made a defence that was convincing at all events, and they came through with their colours flying.
That ought to be the position taken to-day. But by reason of the ineptitude of the minister and his advisers, the banks to-day are put on the defensive in this house without having anybody to speak for them, except possibly by proxy. The minister's defence and his championship of the banks was ill-timed and uncalled for, and will undoubtedly have repercussions which he has not foreseen. I could page the hon. member for Vancouver-Burrard (Mr. McGeer) at this point, but he will speak for himself.
I desire to refer for a moment to one of the questions to which the minister referred, namely, the proposal put forward by our socialist friends to nationalize the banks and other financial institutions.
I desire to express my views as a proponent of the principle of free enterprise. I do not think that the policy of our socialist friends is
either sound or wise. I prefer the present system, controlled and guided as experience and the wisdom that comes from experience will dictate. I believe that the proposals of the socialists carry with them the most sinister threat to individual freedom and liberty, and therefore to the privilege of democratic living in a free country. Why do I say that? For the reason that commercial banking in Canada permeates every section of business activity and affects practically every form of economic endeavour. Government control of loans- that is what it would come to, and we may expect that if the socialists gain their way- could be used as a weapon of political patronage by a political party to enforce compliance with its doctrines. Does anybody challenge that position? If my premise is correct, such political control over loans would deny to many the privilege of exercising their franchise from conviction. If a man is threatened with the loss of his loan, dare he vote otherwise than as the lender suggests? In my humble view it would be to all intents and purposes a system of coercion. Let us be frank. We all know political conditions in Canada. We have political patronage even in war time. Does anyone believe that the socialists would not use that weapon if they were once in a position to do so? I do not believe anyone thinks that they would not. Does anyone imagine that if the banks of this country were brought under government ownership they would be administered free of political control, in the best interests of the business community and the nation as a whole? To contend otherwise, Mr. Speaker, is to be intellectually dishonest, especially in the light of present conditions.
I know our friends assume a very lofty, holier-than-thou-attitude. I have seen it on many occasions; it has been exhibited towards myself. But I suggest that they are not free from guile or political strategy. Often their strategy misfires; I admit that on their behalf. But evidences multiply that they are very worldly-wise. They seek to employ and do employ many of the methods used by the rest of us in the old political parties whom they deride and seek to hold up to scorn. But their holier-than-thou attitude deceives no one but themselves. It is as hypocritical as Uriah Heep or any other charlatan of history or fiction, that one may summon to memory.
Business often depends upon bank loans for the financing of its operations. It is quite evident, to myself at all events, that the threat of withholding loans at a crucial time could be used to coerce borrowers into falling in line with the views, political or other, of the controllers of the banks. That has been the position in Germany; it has even been true
2716	COMMONS
Bank Act-Mr. Hanson (York-Sunbury)
in Russia, where there is only one political party. In these countries, and in this country if the socialists have their way, you will support the dominant political party, or else! Make no mistake about that. Is that democracy? Is that the freedom for which we are fighting and giving our treasure, for which our sons, perhaps, are dying?
I cannot pause to follow this thought further. The battle will probably have to be fought in Canada, but not to-day. Personally I have no fear of the result. There were as of October 1, 1943, 4,462,100 separate saving bank depositors, and S2,000 millions of notice deposits. I do not think that the people of Canada who are represented in that huge accumulation are going to vote for revolution. I have great faith in our people. I do not believe they will do anything to impair their position; they are too much satisfied with the security they have to-day to intrigue with things they know not of.
I do not desire to take very much more time, but I want to deal a little more with the minister's statement. I suggest that the historical part of the narrative he read may be found in any textbook on banking. I have no doubt that the various ghost writers- whoever they were, and I think I could name some of them-made full use of the well-authenticated material dished up to us by the minister on Tuesday last, and which is available to anybody who knows where to look for it. Go to any of the editions of Maclaren on Banks and Banking, and you will find it. The whole symposium had a reminiscent sound, at any rate to my mind, and it is over forty years since I first read that textbook. In any event there was nothing new in what he said about the banking history of Canada. He failed, and markedly, to give any credit for the advances which were made in this respect in this house in 1934.
The statement naturally divided itself into four or five main divisions: (1) the historical review (2) the defence of our present system (3) the attacks on the socialist position and the Social Credit theories (4) an analysis of the proposed changes-which after all are by no means radical or revolutionary and are really not of great or major importance.
The banks have lost nothing in this revision; make no mistake about that. It is fair to characterize all these proposed changes as extensions of present principles and policy. The banks have lost no major powers, save the two points to which I have already alluded, namely, the note issue-which they were going to lose anyway-and the switching of the unclaimed balances.

The minister's statement must have been disappointing to some of his friends across the way who hold advanced views on this subject. I mentioned a moment ago the hon. member for Yancouver-Burrard. I cannot but think that he will be greatly, disappointed with the minister's statement. I will not pause here to anticipate his feelings or the language he will use. Rather I await with interest the expression of his views. I think we all do, including the minister.
This bill is a far cry from the views on monetary reform advocated so unctuously by the present Prime Minister in the election campaign of 1935. I have no doubt that hon. members from western Canada remember the views expressed by the Prime Minister at that time.


Mr. BLACKMORE:: Noble hero!


Richard Burpee Hanson: How short the memories of some people are! How short the memory of the Prime Minister is! Then we were to have real monetary reform, dressed up to suit the people of western Canada- and if my memory serves me aright, he was aided by the present hon. member for Van-couver-Burrard. Yes; we were to have real monetary reform-whatever that connotes. It did not connote much in the mind of the Prime Minister, for what did we witness. It helped win the election. Once he came back from the west and was comfortably settled in the old quarters in the east block, he conveniently put his fervid promises into cold storage, and there they have remained ever since. There are many other observations I could make in regard to this bill, but I prefer to wait until the bill goes to the committee. I do not propose to offer any amendment at this time, but while we do not now propose an amendment, I do not want this house or the country to take the view that we are giving a blanket endorsation to all the provisions of the bill. Far from it. We think the bill can be improved by constructive suggestions in committee.
I expressed the hope that the minister's mind is not so inflexible that he will refuse to consider constructive proposals from whatever source they may emanate. This bill as presented will leave the fundamentals of our banking laws very much where we left them in 1934. No new or radical principles have been introduced. There has certainly been no revolution. On the contrary, this bill is in the main a reaffirmation of legislation of previous years, particularly that of 1934, refined and extended if you will, and improved as experience, changing conditions of commercial life, and the trend of events indicate as desirable.

Bank Act-Mr. Coldwell


Mr. M. J. COLDWELL (Rosetown-Biggar):: I do not propose this afternoon to enter into a controversy with the hon. member for York-Sunbury (Mr. Hanson). I think his references to us will be dealt with by some other member of our group. I have not unlimited time, as the hon. member for York-Sunbury has, in replying to the statement made to the house by the minister, but I want to say to the minister at the outset of my remarks that his speech was both provocative and political. To that extent I agree with the hon. member for York-Sunbury. May I remind the minister of a piece of advice that was given a good many years ago by one great jurist to another, Sir Francis Bacon to Sir Edward Coke, when he said, "one should not so much labour what to speak as to find what to leave unspoken." That was a piece of advice the minister might have taken before this debate began, because I believe we were all ready to facilitate the sending of this bill to the banking and commerce committee. We did not anticipate the kind of debate which the minister introduced, but since he has seen fit to introduce a debate of this description into the house, and to open attack, as he did, we shall not let the statements the minister made go unchallenged.


Mr. JOHNSTON (Bow River):: That is what he wants.


Major James William Coldwell: I presume the statement the minister read in the house, as the hon. member for York-Sunbury said, was made in cooperation with persons whose principal effort seemed to be to defend the present financial system rather than to justify the minor changes proposed in the Bank Act. I shall therefore this afternoon devote my attention to the argument advanced by the minister, and I shall reserve constructive proposals in relation to the Bank Act and to financial policy until the bill is in the committee, where we can consider it and, when necessary, amend it clause by clause.
Even if we agreed that the present banking system is safe, sound, prudently managed, and all that the minister claimed it be in these respects, we would not be content with it. From the viewpoint of broad national interest, the banking system must be judged by its ability to provide a national economy with the financial arrangements needed to maintain the real income, capital equipment, and material welfare of the Canadian people. This it has not done in the past. Its failures are made apparent by the war, which has proved beyond all doubt that what is physically possible ought to be at the same time financially possible.
It is, then, on these fundamental grounds that we criticize our banking system. Our banks have not done the job which they were supposed to do and which provides them with the only justification for seeking renewals of their charters. For fifteen years at least, from 1929 until war-time necessity established full employment and a high national income, we suffered depression, unemployment and excessive loss and wastage of human labour. To some degree the blame for this situation lies with the banks themselves.
As the minister himself pointed out, they decided what credits were to be extended and to whom, and thus had the power to expand or contract the volume of purchasing power, or, in other words, to carry out a policy approved by the Bank of Canada, or, equally important, to nullify that policy.
In the heyday of the twenties they made loans to stockbrokers whose securities were sometimes so questionable that, when the crash came, government action was taken to prevent the undermining of public confidence in at least one of our great chartered banks. On March 21, 1933, the present Minister of National Defence for Air (Mr. Power) questioned an order in council, No. 2693, passed on October 27, 1931. This order in council enabled the chartered banks to publish incorrect statements as to the value of their securities, and in reply to that question Mr. Bennett said this:
There was a run on one of the chartered banks in Canada. It was .a run predicated entirely upon the failure of one of the great brokerage firms of this country. It was thought by many people that the bank might be a failure; ten million dollars in deposits were withdrawn. No assistance was given by other banks, and there was no question of the government being asked for assistance.
The bank to which this reference was made was of course the Royal Bank of Canada. It is also true that a similar order in council, No. 3871, was passed on December 31, 1931, to prevent the public from knowing the great loss in value of stocks in which a great insurance company had placed its policyholders' savings. Of this order in council the present Minister of Finance (Mr. Ilsley) said, on March 8, 1932, as reported at page 939 of Hansard-and I quote it from the record- that it:
. . . enabled the life insurance companies of Canada to place a false valuation upon their investments, so that there would be no danger of two or three of our insurance companies being declared insolvent.
But apparently the minister himself had forgotten something. There was an interchange between us-and incidentally, my mem-
Bank Act-Mr. Coldwell

ory was not altogether correct either-and the minister, on January 31 of this year, overlooked this order in council enabling the banks to do what he had said the insurance companies were permitted to do. Hence we contend that a banking and financial system owned and controlled by the nation and supported by all the resources of Canada would give greater safety to the savings of the Canadian people than institutions whose self-perpetuating directors are responsible to none but their own Shareholders, whose associations have sometimes in the past jeopardized the savings of the people, and whose policies on occasion have brought to the verge of ruin thousands of farmers, workers and business men. No man can foresee the future, but the causes which brought about the crash in 1929 are inherent in the present system, which, as long as it continues, may be subject to the same kind of disastrous fluctuations. Such a system cannot, in my opinion, be accurately described as completely safe, completely sound or completely prudent.
But criticism of our banking system rests also on other and perhaps broader grounds. We criticize it because its deficiencies are so closely associated with the failures of the system miscalled free enterprise; and we link with that, criticism of the present Liberal and past Conservative administrations for their failure to take steps from time to time to provide for economic expansion and employment until, as was admitted this afternoon at least by inference by the hon. member for York-Sunbury, they were forced to do so by the necessities of war. Neither in this bill for the renewal of the charters, with its minor amendments-which incidentally, we welcome-nor in other legislation proposed by the government or urged by the official opposition do we see anything sufficiently comprehensive to indicate that the conditions we knew in the thirties will not bedevil our people again sometime during the post-war years. Adequate expansion, nation-wide employment, require a planned use of our resources, our human power, our capital equipment and our financial instruments. In such a setting the nation's banks should accurately reflect the nation's demand for credits and for funds. Where private enterprise and governments both fail to use the financial resources available, the economic structure verges almost permanently on a state of entire collapse. A publicly owned central bank alone cannot prevent this, for the actual granting of credits-again as the hon. member for York-Sunbury indicated-rests with privately owned, profit-motivated institutions

It is on these grounds, then, that we call for the national ownership and control of the financial system, and particularly the banks; not, as the minister suggested, on some doctrinaire theory that their socialization will destroy the present system. We urge the nationalization of the chartered banks on exactly the same grounds as those advanced by the minister himself as the justification for the establishment of the central Bank of Canada. On May 2 of this year, at page 2542 of Hansard, the minister spoke of:
. . . the failure of public policy to provide an institution charged with responsibility for regulating the volume of money and credit solely in the public interest. Such a function

That is what I want to bring to your attention:
-could only be performed by a public body interested not in the making of profits but solely in the performance of a public duty.
We say it is equally true that the day-today provision of credits for desirable public policies, such as the maintenance of full employment and of purchasing power, can be performed only by public institutions interested not in the making of profits but solely in, the performance of a public duty. The case for socialization could rest there, for it could not be put much better than in the minister's own phraseology'. Because of this I wish to move the following amendment:
That all the words after the word "that" in the said motion be struck out -and the following substituted therefor:
"this bill be not now read a second time but that it be resolved that consideration be given to the national ownership and complete public control of the chartered banks with a view to the promotion of the peace, order and good government of the people of Canada."
That amendment expresses a desire and a policy in sharp contrast with the bill and the principle of the bill. It deals with no details of the bill, but suggests an alternative principle upon which our banking system should be organized.
The minister criticized the Cooperative Commonwealth Federation on other grounds. He denied that the banks exercised a monopoly because, he said, they competed for loans. But who will deny that the present Bank Act gives power to a comparatively small group of bank directors to control institutions which this very act safeguards against competition from private initiative, except under conditions so difficult to fulfil that no new bank has been given a charter for very many years? It is true that they may compete in the lending of money, but they pay the same rate of in-

Bank Act-Mr. Coldwell
terest on deposits; they charge the same rates of interest to the same classes of 'borrowers, and the same bankers' association lays down the general rules to which they all adhere. They even agree to prevent competition by closing competing branches in many parts of the country, and thus in many respects conduct themselves as though they were indeed one instead of ten. We do not argue, as the minister charged us with having argued, that because banks have directorates which are interlocked with certain business firms, they deliberately favour such firms or prevent possible competitors from getting funds. We do not say that; but, as a part of the system, they have driven some pretty hard bargains to get rid of publicly owned institutions which they dislike or fear. With the compliance of a federal Conservative government, of which the hon. member for York-Sunbury was a member at the time; with the weak acquiescence of a former provincial premier, Mr. Bracken, who now leads the Progressive Conservative party, and with the help of a carefully planned scare campaign, the Manitoba savings offices were closed in 1932. Nor do we, particularly those those of us from the western prairies, forget this: that, having given the western wheat pools certain advice in 1930, they drove such a bargain subsequently, that but for the guarantees given by the prairie governments this great co-operative venture might have been brought to ruin.
The attitude of the minister is surely inconsistent with respect to the social ownership of the banking system. He deplores the lack of representation on the boards of directors of the banks of the small business man, the farmer and the industrial worker. We deplore that, too; but instead of indulging in pious wishes, as the minister did and does, we propose something. We propose social ownership of these institutions, in order that just such people as the minister named, through their owm chosen representatives, shall have some say in the vital financial and economic policies of this nation. That is what we mean by socialization-that those in control of financial policy shall not be merely the representatives of big business or the directors of powerful, privately owmed, monopolistic institutions, some of which are parts of great international cartels.
The minister recognized the existence-he did not recognize the evil-of interlocking directorates among banks and other institutions when he said that no doubt they would be criticized on that account in this debate. When most of the savings of the people of Canada are channelled into the hands of the chartered banks and insurance companies, we
certainly have an obligation here to appraise their influence upon our entire economy. Four banks-the Royal Bank of Canada, the Canadian Bank of Commerce, the Bank of Montreal and the Bank of Nova Scotia-control more than seventy per cent of all the bank assets in this country. Indeed four banks and six insurance companies-Canada Life, Sun Life, Great West Life, London Life, Manufacturers' Life and Mutual Life-control over seventy per cent of all the banking and insurance assets in Canada.
And who controls these banks and insurance companies, whose assets play such a vital role in the life of this country? The seventy-two directors of the six insurance companies hold a total of 356 directorates in dozens of corporations in all the principal fields of industry and commerce in Canada. Similarly, ninety-four officers of the three leading banks, namely the Royal Bank, the Bank of Montreal and the Bank of Commerce, hold a total of 799 directorates in 484 corporations in dozens of our major industries, including such giants as nickel, aluminum, cement, chemicals, steel, oil, railways, electrical concerns, packing plants, processing plants and a host of others. Consciously or unconsciously the policies of industry and of the chartered banks were governed by the same anti-social considerations in the highly speculative period of the late twenties and the depressed period of the thirties. Their policies, let me remind the minister, were not those of institutions actuated solely in the performance of a public duty but, as our own price spreads report stated, they tended to follow the same path of economic restriction.
And may I suggest to hon. members that from time to time we should look into the price spreads report, which was tabled in the house, because it gives one a clearer view of the economy of the country as it was and, indeed, warns one that we are reaching still greater depths of control, and by comparatively few organizations, than obtained even when that report was prepared.
The report stated that their policies tended to follow the same path of restriction of output in order to maintain their prices and to maximize their profits. Thus, during the depression we had virtual starvation in this country in the midst of potential and, indeed, often actual plenty. But the minister pictured the nationalization of the banking system as involving, to use his own words-echoed this afternoon by the hon. member for York-Sunbury (Mr. Hanson):
. . . the undesirability of having the credit of each of us and of every business throughout the country assessed by civil servants working under political control for a government banking monopoly, rather than by bank managers

Bank Act-Mr. Coldwell
interested not in the political or other views of the borrower but solely in his ability and trustworthiness as a debtor.
Those are the minister's words. Are we to understand from them that the nationally owned Bank of Canada is now run by persons working under political control? Does it guide its activities by the political or other views of the borrowers-in these cases the banks, which, as we have known from their statements published in the newspapers, have political views?


Mr. DOUGLAS (Weybum):: And from their broadcasts.


Major James William Coldwell: And from their broadcasts, delivered almost daily, which, incidentally, are so ludicrous, because of the past record of the banks, that they bring a smile to the faces of people who listen to them.
Are we to understand from the minister that the proposed Industrial Development bank, the agricultural bank-if it is set up- the farm loan improvement bank, and the mortgage bank are to be run by the present government on some such discriminatory principles? And, incidentally, all these proposals in connection with the setting up of these various financial- institutions and banks, publicly owned, are testimony of the failure of the private institutions to meet our current and expected needs.
In fairness to the minister I think he would be the first to deny that there is any political control in the Bank of Canada. He will be the first to deny that any political control is contemplated in the other organizations I have named. But his opinion regarding the desirability of wider public representation on directorates of the banks indicates that, despite what he has said, he feels that wider public control is possible, without discriminatory political control. And may I just say to him and to the house, that if I, too, did not believe that I would not be making this speech this afternoon.
Socialization of the banking system involves two main steps: First, control over the direction of credits and the investment of bank funds-and this is already occurring, in actual fact, as I shall show in a minute; for private enterprise has failed to provide outlets for the investment of bank funds. Consequently banks invest more and more in government loans and government securities.
Second, the directorates should be based on the principle of public representation, and not upon stock ownership. The minister has approved this principle. And when he approves it why does he consume the major portion of his address in attacking the C.C.F.,

because we propose the principle which he accepts? I can only conclude that as a member of a capitalist government his obligation is to defend the capitalists when they are under attack. But the minister says that he opposes any suggestion of socializing the banking system because, to use his own words:
We do not want a socialized banking system to deaden the initiative of our system of free enterprise.
First, I should like to quarrel with the statement that we have a system of free enterprise. How free is the ordinary man to enter the banking business and own a bank? How free is the ordinary man to turn out the things which are monopolised by a few large business corporations of this country? As for a centralized banking system deadening initiative and our system of free enterprise, what the minister fails to see is that our system of free enterprise is deadened by its own policy. Indeed to-day our chartered banks depend upon socialized business, national business. It is not private enterprise but public borrowing and investment which has kept them going ever since 1929. I can place figures before the house to show-I have the figures and will be glad to use them in the banking and commerce committee-that in 1930 the percentage of loans to the general public was 64 per cent of the total assets of Canadian banks. By 1939, before the war, they were only 34 per cent, having dropped to almost one-half. In 1943 they were slightly less than 25 per cent. I should like to have my figures checked. I have taken them from the Bank of Canada statement for 1943, and from the Bank of Canada statements for each year since 1936. Other figures will be found in the "Canada Year Book" of 1941 at page 816.
The decline of bank loans to the general public in those days resulted from the breakdown of private enterprise. On the other hand, the banks' investment in long term government securities increased from 15 per cent in 1930 to 50 per cent in 1940. It is ironic that the chartered banks have become dependent upon long term investment in government securities for the major part of their income to keep them going and to pay their profits to their shareholders. May I say to the minister that when he places the profits of the banks before the house he should give those profits on the basis of the paid-up capital of those banks, the investments that have been made by the owners in the banks, and not on the pyramiding of profits that they have taken from the people: According to the minister's way of estimating, their profits

Bank Act-Mr. Coldwell
will have been figured at least twice in the computation if we count those additional profits as capital and then estimate their profits on that capital which they have extracted from the public. To my mind the only proper way under the present system for a business institution to expand is to go to the public and get the money for that expansion. Otherwise, what you do is to concentrate the power of the growing institution in a few hands and never distribute the ownership of that institution across the country itself.
Even in their dealings with private enterprise the banks have demanded and received public support. Talk about private enterprise; talk about the risks they run; in 1932, for example, the government guaranteed loans of $60,000,000 to the Canadian Pacific Railway Company, and later on the government itself made interest-free and low interest loans to the same company. This was done either because the banks could not or would not undertake to do so or because the government of the day was more friendly to the Canadian Pacific Railway company than to some other business interests.
In any event, free enterprise was unable to cope with conditions of its own making, as it has been unable to cope with war necessities or, as we believe, with postwar reconstruction. Our main case, therefore, against a renewal of the charters of the private banks-and that is the principle of this bill, with a few minor amendments-rests primarily upon our belief that only a socialized financial system can make possible effective control of currency and credit in terms of public need. Only such control can secure a proper balance and a proper relationship between the prices paid by our citizens for the things they use or the labour they render and the commodities they purchase. In other words, it is the only way, in our opinion, to secure proper parity and balance in our economy.
Second, we urge our policy on the ground of greater efficiency and public economy. The history of this country, indeed of all the capitalist world since 1929, indicates that governments, not private enterprise, both in peace and in war, have had to carry the ball in relation to financing such relief and econopiic expansion as has taken place. Banks and private business in general have had to be subsidized in many ways in order to survive. During this war we have seen the government setting up new institutions and spending hundreds of millions of dollars to do a job for the nation which private enterprise would not undertake, in fact I will say could not undertake. We have seen other hundreds
of millions of dollars written off in special and accelerated depreciations because private enterprise could not carry the load.
For the minister to say, as he did, that the C.C.F. alone among the democratic socialist parties in the world is urging socialization of banks and other financial institutions is quite incorrect. The British Labour party includes such a policy in its platform. True, the New Zealand government, the only Labour government except the more recently established one in Australia that has ever held power within the British commonwealth, has not socialized the so-called private banks in that country. But if you read their literature and talk to their people you will find that they have made up their minds to do so, at least when the war ends. But they are not finding the necessity that we find. Why? They have a much more complete control over their banking system than we have or than we contemplate by the Bank Act or by this amending bill. They have an efficient central bank, but in addition the government of New Zealand has majority representation on the board of directors of the largest of their so-called private banks, the Bank of New Zealand. The government of New Zealand appoints three of the five directors of that bank. They have done this for a good many years. They got the power to do this when the Bank of New Zealand came to the government because it was in such a bad state long before the Labour government took office. As I say, to-day the New Zealand government has a greater control over the financial system owing to its having not only an efficient central bank but also majority control of the greatest bank of that country, the Bank of New Zealand. So that the comparison made by the minister between our proposals and those of New Zealand obviously falls to the ground at that point.
There are many other phases of this question. with which my colleagues will deal. As I said to the minister at the outset, our original intention, which I expressed to the Acting Prime Minister (Mr. Ralston) when this bill was about to be introduced, was to make one or two short speeches and to facilitate the sending of the bill to the committee in order that it might be dealt with there as quickly as possible. But, as has been pointed out by the hon. member for York-Sunbury, an attack on our whole position has been made in this house and, as I once said, we never consider ourselves to be on the defensive; we are on the offensive, and when an attack of that sort is made we shall act upon the offensive so far as our opponents are concerned. Consequently, any understanding that we had with
Bank Act-Mr. Caldwell

the Acting Prime Minister that we would confine our remarks to one or two speeches is definitely off and we intend to give as good at least as we expect to receive.


Gordon Graydon: Do you expect to be any better off by that?


Major James William Coldwell: Yes, I do.
May I say in conclusion that we urge this policy because it is the right one. We urge it because we believe, in the memorable words of the Prime Minister (Mr. Mackenzie King), spoken, as the hon. member for York-Sun-bury said this afternoon, in western Canada, in Edmonton, Alberta, of course immediately before an election:
Once a nation parts with the control of its currency and credit, it matters not who makes the nation's laws. Usury once in control will wreck any nation. Until the control of the issue of currency and credit is restored to the government, and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty of parliament is idle and futile.
It is because we believe in the sovereignty of the people, that we urge the restoration to parliament of the control of the nation's currency and credit. We urge the government to do what the Prime Minister promised to do in 1935. Since we believe with the lawyers of the house that possession is nine points of the law-


An hon. MEMBER:: You are in bad company with the lawyers.


Major James William Coldwell: Well, we may be in bad company, but I say that we believe with them-not that we are with them. So that we contend that the only effective method of control is that of the public ownership of this nation's banking and financial system. Accordingly, Mr. Speaker, we have moved the amendment in the words which you have before you.


John Horne Blackmore: Mr. Speaker, there is another way than by the nationalization of the banks whereby effective control over currency and credit can be established. I propose to deal with that other way with some measure of care.
Before I proceed farther may I refer to the minister's provocative remarks-I will not call them attacks-on social credit. Probably he put his finger on the two essentials of the contentions that social crediters would make at the present time when he said that in the first place we would advocate debt-free money. From the time that this group came into the house right up to the present moment it has never ceased to urge that it is possible for a government to create money debt free, and to

use that money in building up conditions which are conducive to the economic well-being of the land. This group has consistently urged, further, that the amount of such money which can be safely created depends directly upon the productive and consumptive capacity of the country which the government is governing at the time, and because it so depends on the productive and consumptive capacity, then the amount of money which is available to a government at any time depends upon something which may be governed, not by a dead thing like gold, not by an elusive thing like the amount of money which bankers are prepared to lend or individual men are prepared to borrow, but by a tangible thing which can be controlled and governed, namely, the production of the country, and the consumption of that production.
The minister, I think, meant to imply at one stage of his remarks that social crediters had in a way modified their stand since coming here. If in any degree it may appear that social crediters are not expounding the same doctrine which they did when they first came here it is because we ceased to stress the importance of debt-free money and the dangers of debt when the government and some of its menials all over the country began to whine and whimper that our contentions were impairing the effectiveness of the victory loans. That is the only reason.
Let us turn to the question of debt-free money. The all-important question that we need to ask ourselves is this: Is there a possibility of debt-free money? The minister spoke as though the only source of money in Canada to-day would be the Bank of Canada. What was the source of government money in 1933 and 1934 before the Bank of Canada was formed? We had in those days Dominion of Canada one dollar bills. That money was printed by a government agency, and to that agency it was unquestionably debt free. Granted, there' was supposed to be gold behind it to guarantee its value. But in 1933, on April 10, by order in council, the gold redemption clause was rescinded or suspended. What then gave value to Dominion of Canada money after that date? The Dominion of Canada money did not lose its value. That money was debt free and was created and issued by the treasury board, or an agency for the treasury board, with the Dominion of Canada exercising its supreme and unchallengeable right to coin money and to determine the value thereof.
May I use two or three illustrations? For centuries the king minted the money; it was the king's money. Will anyone say that the

Bank Act-Mr. Blackmore
king owed anybody for the money after he minted himself? Could the king in England, or let us say in this dominion, ever have owed anybody for the money which was created in his name by his government? Never! The major error that was made in the financial history of this nation and of the British people was that of allowing somebody else to print the king's money and causing the king to borrow his own money.
Take as an illustration to-day the fifty-cent piece in Canada. That is debt-free money. It costs something for the silver, something for the workmanship, but when that money is stamped by the Royal Canadian Mint, does it not belong to the Royal Canadian Mint, to the government of Canada? Who will contend for a moment that it does not. Suppose the money were gold coin; would that not be debt-free money? If coins are debt-free money, are not bills debt-free money just as well? Actually this nation printed $26 millions of bills during the last war and spent them for government purposes and they were unquestionably debt-free. They were supposed to be backed by gold, it is true, but all demand for the gold backing was rendered abortive by the suspension of the gold redemption clause. I wonder if the minister can find an answer to that?
Now, suppose a credit and currency commission were established in Canada to act much as the treasury board did before the Bank of Canada was formed, and that commission created the new money in Canada just as the Bank of Canada now does; it would own that money". Then, if it saw fit to put the money into the Bank of Canada to be recorded there, so that an account could be made and rendered to parliament, and a check established so that the people would know whether or not the government were exercising this power with probity and integrity; if, I say, the money were put into the Bank of Canada, recorded there, and taken out, the process would be debt-free both ways.
Let not the minister try to deceive the people of Canada into thinking we cannot have debt-free money.
The argument will be used, as I frequently find it used, that any money is a debt by the issuing body to the person who owns the money. If I. for example,	have a
one dollar bill which was issued by the minister, the minister owes me one dollar because I hold a bill which was issued by him. just as, if he were the Bank of Canada, and I had the one dollar bill, the Bank of Canada would owe me the one dollar, and in that sense the money would be debt money; and when I came to ask that that money be redeemed, the
Bank of Canada or the minister-whichever case we are using-would have to redeem the one dollar bill.
Let us consider this matter of redemption. Let us assume that the minister acting in his capacity as finance minister in Canada issues a one dollar bill. I get the one dollar bill, and I come to him asking him to redeem the one dollar bill for me; what will he say? "What do you want?" "Well," I say, "I want a dollar." "Well, you have one. What more do you want?" "All right," I say, "I want a one dollar bill." The minister says, "Very well"; he opens a drawer and brings out another bill. "Give me the one you have and I will give you this one. This is a nice clean one. If you want a dollar bill, there it is." Now the minister has redeemed the dollar financially, has he not? And every dollar bill issued by the Dominion of Canada agency can be so redeemed as the law now stands. It is impossible for anyone to obtain gold to-day in exchange for a dollar bill; consequently the only possible redemption of a dollar bill is another dollar bill.
Now suppose I say, "I am not satisfied with a dollar bill; I want a dollar of something else." The minister says, "What do you want? Coal? Or do you want sugar, or do you want oranges, or do you want a haircut, or a ride on a street-car?" If I say, "yes" to any one of these he says, "Hand me your dollar bill." He immediately turns the dollar bill over in payment for the particular commodity I want. I have the commodity; he has the dollar bill. The dollar bill is then redeemed in goods and services.
That simple process is an illustration of what can be done with debt-free money in a national way. Let this country learn that fact, and let the nations of this world learn that fact, for the whole success of the postwar world, the establishment of peace and amity among nations and freedom from want and fear, depend upon the simple fact of the use of debt-free money. If that fact is not understood we might as well prepare ourselves for another war, and start right now. That is a warning, and I want it sufficiently solemn.
The only thing which needs to deter the minister, acting for the Dominion of Canada, in redeeming the money which is issued, is this: are there enough goods in Canada; is there enough coal, or street-car rides, or theatre tickets, or whatever else people want, to redeem the dollar bill; that is, to buy with the dollar bill? I am using simple little childish illustrations. Some people need childish illustrations to get things into their heads. It is time these things were being
Bank Act-Mr. Blackmore

learned now by the members of the government. They have been taught long enough in this country, and we are suffering a terrible war because they were not learned by this government and several other governments similar to this one.
The important thing to remember is that the simple fact that the dominion has the power of legal tender, and the simple fact that there are plenty of goods being produced in Canada to supply a redemption for all the money which might be used, within reason, constitute the guarantee that the debt free money created can be redeemed.


James Garfield Gardiner: What caused the wars before there was any money?


John Horne Blackmore: Well, we would have to know what war it was. Of course, if you are talking about the war in which Gustavus Adolphus was engaged you would say "religion?"


James Garfield Gardiner: Wars came first.


John Horne Blackmore: 
John Horne Blackmore: Before the house took recess, Mr. Speaker, I had been discussing the remarks of the minister in regard to social credit. He stated that social erediters believed in debt-free money, and I endeavoured to show that debt-free money was entirely sound and feasible. He suggested that social erediters believed in the 100 per cent system of reserves and would advocate such, and I pointed out that probably they would do so because every time social erediters advocated debt-free money the government insisted that this would cause inflation, and that the 100 per cent system was simply a means of avoiding inflation. I had turned to the question of whether or not social erediters are inflationists, and had said that they were not. As my reason for saying that I had given this simple fact, that social erediters believe that where there exists a surplus of goods not being consumed the state is at liberty to create debt-free money to the extent necessary to consume that surplus, and that such creation will not cause inflation because it will not cause a rise in prices.
May I say again that social erediters are neither inflationists nor deflationists. One thing that is most surprising to any one informed on the matter is that the orthodox government spokesmen never talk about deflationists. Hon, gentlemen who sit on the government benches to-day are deflationists, every single one of them; and deflation is a more disastrous thing than inflation. During the depression in the United States deflation, I have read, destroyed two hundred billion dollars worth of wealth; that is what deflation does. Social erediters are neither inflationists nor deflationists; they believe that an economy can be so managed that booms and depressions can be avoided, and they propose so to manage it as to accomplish that end. Social erediters believe that the record of orthodox finance in the matter of prosperity and depressions is simply reprehensible and wholly inexcusable. In the course of his speech, at page 2541 of Hansard, the minister quoted from an analysis prepared by the National Bureau of Economic Research of New York, to the effect that from 1888 to 1924 Canada had 1-86 years of prosperity for each year of depression, and he seemed to think that was a very good record. That is an absolute abomination to think of in a country like this-only 1-86 years of prosperity to one year of depression! It is one of the most preposterous things the mind of man could conceive. Any system that cannot manage an economy like Canada's
Bank Act-Mr. Blackmore.

any better than that certainly has discredited itself beyond any possibility of regaining the confidence of the people. The minister goes on to point out that in the United States during the same period only 1-79 yearn of prosperity had been enjoyed for each year of depression. By those figures the system in vogue in the United States and Canada must stand condemned in the mind of every reasonable man. Social credit maintains that it is not necessary to have a condition like this, that both booms and depressions can be avoided, and it proposes a method whereby that end may be achieved.
Then the minister went on to cay, at page 2546 of Hansard, that the house would agree that when the changes proposed by the minister were introduced Canada would have a fairly well rounded, effective and satisfactory financial system. I am unable to turn to the exact words, but if my summary did not convey the minister's meaning he will correct me. I am going to ask two questions in this connection. What is the purpose of a financial system? Why do we have a financial and economic system in a country? There is only one answer. We have a financial system in Canada, or in any other country, first of all to bring about enough production, and second to have that production consumed. Any financial system which provides only for production and does not provide adequately for consumption is faulty and ineffective. The financial system of Canada is to be condemned right on this point. We have a banking system which provides for production, and the minister is devising other financial methods of bringing about more production. His industrial development bank bill and various other measures are all designed to increase production; but in all the measures proposed by the government this year one seeks in vain for a single measure designed to increase consumption, to increase markets within the country or to increase distribution. The fundamental flaw in the economic Bystem all over the world is that it has not learned how to distribute the goods. Obviously, then, the government is simply going about the problem wrong end first.
Production requires that people be able to get the money with which to produce. Men have always borrowed in order to produce. We expect them to use the banking system in order to produce. They require security of the right kind to enable them to borrow money; they require interest rates such that they may manage them, and they require long term loans in order that they may carry on. All this is perhaps fairly well provided in the bank measures. Consumption requires

that people be able to get the money with which to buy. For consumption it is all important that prices be right, that wages or fees be right, and that there be an adequate effective demand or market for goods. These are vital matters. The financial system must enable people to get money with which both to produce and to consume.
Where does the minister propose to get the money to put into the hands of the people to enable them to consume? That is the vital question for the minister to answer. That is the question the Dominion of Canada has a right to expect him to answer at this session of parliament. There is no hint of an answer. Where is the minister to get the money with which to provide fair prices for agricultural products and for manufactured products? If farmers cannot be assured in the post-war period of fair prices both for the things they sell and the things they buy they cannot carry on; and if farmers cannot carry on, the rest of Canada cannot carry on. .
The minister has not shown us where the money is coming from to provide such prices. Where is he to get the money to give Canadians a fair return for the goods they produce? Where is he to get the money to put in the people's hands to enable them to consume? Where is he to get the money to enable them to buy the great output of Canadian post-war industry? He will reply that he will not need money for such purposes Does he not realize that depressions are the result of a shortage of purchasing power, of underconsumption? In other words, the Dominion of Canada could have only 1-8 years of prosperity for every year of depression because it was not able, through its financial system, to get enough money into the hands of the people to enable them to buy the goods which industry was prepared to produce. That shortage of purchasing power is the fundamental evil; yet all the proposals of the minister are designed to increase production. Not a word is said about increasing consumption.
I maintain, Mr. Speaker, it is utterly impossible for the minister to carry on and do the things which he dreams of doing, to make this country have a stable and prosperous time after the war unless there is a fundamental change in the financial system.
I therefore beg to move a subamendment as follows:
That all the words after the word therefore be struck out and the following be substituted therefor: That the bill be not now read a second time, but, that this house is of the opinion that the government should bring down such measures as will take from the chartered

Bank Act-Mr. Blackmore
banks their .power of creation of currency and credit, and restore those powers solely to parliament.
Mr. Speaker, the minister will urge that the banking system is not responsible for the depression. He said that on page 2541 of Hansard, in passages which I shall not take the trouble to read. I contend that the banking systems are solely responsible for depressions. I will not say the Canadian banking system alone is, but the Canadian system as one of the banking systems of the world undoubtedly was jointly responsible for the depression; because the depression was the result of a shortage of purchasing power, and purchasing power under the present system comes only out of banks. If there is a shortage of purchasing power the banks are unquestionably to blame.
All orthodox banks of the world have virtually the same ideas as Canadian banks have, and all of them are just as faulty as Canada's are. The minister lists the causes of depression, and among them he mentions two rather vague causes. One of those is unbalanced economy. I do not know what the minister means by "unbalanced economy." He speaks about resurgence of economic nationalism. I am going to point out to the minister that he has entirely omitted the main cause of this last depression, which was machines. They introduced plenty with a shortage of labour for men and greatly decreased amounts of wages going out into the hands of the people. As a result of the introduction of machines the shortage of purchasing power which has been existent in our system for perhaps fifty years or more, was greatly aggravated in our time and thus brought on the disastrous depression of the thirties.
If the minister will only learn and ponder the fact that the depression did not commence to lift until 1933, just exactly when the world began to rearm, he will begin to realize that there was a fundamental fallacy somewhere, a fundamental weakness in our economic system, which only war could set right. After the nations began to rearm, money was put into circulation; ready markets were found for many of the goods which were produced. Let him bear in mind that we were still virtually in a depression in Canada when the *war broke out in 1939. Around 500,000 men were unemployed; wages were low; prices of primary products were low. Only war restored prosperity. Why did war restore prosperity? First of all, because war put money into circulation, because it provided plenty of markets at remunerative prices for manufactured goods, and reasonably good prices for primary products. Wages became fairly good.
These are the four elements that are necessary to restore prosperity, but there was an
appalling debt being created as well. We must learn how to bring about the four conditions of prosperity without the debt and the war. We must have money in circulation; we must have markets; we must have reasonable prices; we must have good wages for all. These must be accomplished without debt. I maintain that it is absolutely impossible to bring about these conditions which I have indicated, these four essentials to prosperity, without the use of debt-free money.
Let everyone remember that the choice now before the Canadian people is not the choice of the old laissez-faire way of doing things before the war; it is not a choice between that method of doing things and socialism. The Liberals are going rapidly to socialism. They will not need to talk of a socialist government if they continue in office for two more terms. Every move they are making is socialistic, which indicates clearly that the country is being driven to socialism. There is only one alternative. There is only one way of guaranteeing security with freedom, and that is through the use of debt-free money as advocated by social crediters.


Thomas Clement (Tommy) Douglas: Mr. Speaker, the remarks I wish to make on this measure will be purely extemporaneous. I have not the advantage of the Minister of Finance (Mr. Usley) who read a carefully worded essay on to the record the other day. I do not know by whom it was prepared.
As was said this afternoon by the leader of this group we had intended to have merely one statement from this group in order to facilitate the passage of this measure to the banking and commerce committee as quickly as possible. But the minister took a strange attitude in introducing this important piece of legislation. He reminded me of nothing so much as of a man out on the butts doing bayonet practice on straw men. After having a little bayonet practice, the minister felt that he had succeeded in knocking down on the ground the three or four straw men that he set up.
He set up four basic arguments for the socialization of the banking system, and then proceeded to demolish them to his own satisfaction. I would ask the house to look at those four arguments.
First of all he said that those who urged the nationalization of the banking system did so on the ground that it would give more effective control of currency, credit and prices. The minister argued that since the country now owned the Bank of Canada we now had effective control of currency and credit, on the theory, as stated at page 2543
[Mr. Blackmore.1
of Hansard, that since the banks must base their loans on their cash reserves, and since these cash reserves are controlled by the central bank, the government has power, by either expanding or contracting those cash reserves, to control the amount of credit which is in existence at any given time.
What I would point out to the minister is that, while it is true that under the Bank Act the federal government has power to prevent undue expansion of credit, it has no power to prevent undue contraction of credit. That is, it has power to create extra cash reserves but it has no power nor the machinery to see to it that the extra credit is placed in the hands of the consuming public. So that while it is true that the Bank of Canada serves a useful function in being able to prevent undue expansion of credit, it has no power to prevent a rapid contraction of credit such as we had during the early thirties.
The minister argues on page 2543 of Hansard that what he calls "the spur of cost and self-interest" will force the banks to lend to the full capacity of their cash reserves. May I point out that the spur of cost and self-interest was present from 1929 to 1933 and that during that period there was a tremendous deflation in the Dominion of Canada, because there was nothing the government could do to prevent the banks from calling in their loans. It could prevent the banks from extending their credit beyond a certain point, but it had no power to prevent them from calling in their loans. The minister's argument is upset by his own remarks at page 2540 of Hansard, where he says:
The banks, of course, were not blameless, either in respect of the policies they followed in the boom years of the late twenties, policies which involved the granting of too much rather than too little credit, nor in the policies they followed with the onset of depression when faced with the necessity of saving their own institutions they may have aggravated the deflationary process which the antecedent inflationary boom had made inevitable.
Again, on the opposite page, 2541, dealing with the banks during the depression, the minister says:
The banks, however, were private, .profitmaking institutions and it was only natural that the automatic working of competitive, commercial forces should not always coincide perfectly with the broadest national interest.
There is the complete demolition of the minister's own argument. When the safety of the banking institutions was at stake as compared with the national interest, the minister says it was only natural that they should think in terms of their own safety and their own shareholders; and if the banks

Bank Act-Mr. Douglas (Weybum)
again find that, in order to safeguard their own interests, a period of deflation must take place, there is nothing in this bill and nothing the minister has suggested that would prevent such a deflationary process from taking place.


James Lorimer Ilsley: Except the central bank.


Thomas Clement (Tommy) Douglas: The central bank has no power to prevent contraction of credit. It has power to make available to the chartered banks cash reserves, but there is no guarantee that they will use them except "the spur of cost and self-interest", and if that is not strong enough there is nothing at all to guarantee that the banks will make their cash reserves available.


James Garfield Gardiner: It is the only way in which they can make any profits.


Thomas Clement (Tommy) Douglas: The Minister of Agriculture says it is the only way in which they can make profits, but they may prefer to make less profit as they did during the early years of the depression, or they may prefer to make no profit at all rather than to take the steps which may be necessary at a particular time when deflation is threatened.
At page 2556 of Hansard the minister says:
The most common complaint is that the banks have been unduly restrictive in their lending policy, particularly during periods of difficulty such as were experienced during the drought and depression years of the thirties.
Here we have the same story. The minister himself admits that the complaint laid against the banks during the year of drought and depression was that they followed a deflationary policy. There is nothing in this bill to guarantee that the same deflationary policy will not be repeated.
The second argument the minister set up in order to knock down was that those of us who argue for nationalization of banking do so on the ground of greater economy; whereupon the minister waxed eloquent on the efficiency and economy of the banking system. It all depends on what the minister means by "efficiency " and by " economy." If the minister looks upon the banking system as an institution for the purpose of treating credit as a commodity, something to be kept scarce so that its value will be high, something to be loaned out when its value is low and to be called in when its value is high, something on which to make a profit; if the minister is thinking of the banking system in terms of a commercial institution engaged in selling credit as a commodity for the purpose of making a profit, then there can be very little improvement in the efficiency and in the economy of the banking system. Perhaps it is operated, as the minister said, safely and soundly in the
interests of the shareholders and of the depositors.
But is that all that a banking system is for? From our point of view the banking system is to provide, not credit as a commodity, but fcredit as a medium of exchange whereby it is possible for people to exchange goods and services. We look upon a financial system not merely as an institution for the purpose of making profit out of selling credit as a commodity; we say that a banking system ought to be geared to our economy in such a way that whenever we create a dollars' worth of goods we create the purchasing power with which to buy those goods, or, in other words, . that a banking system ought to function as a medium of exchange by which the goods created by the people of a nation may be consumed by those people or so that they may consume goods which they get in exchange for goods they have produced.
The minister's own quotation on page 2541 of Hansard-is the worst indictment he could possibly have made of his own argument, when he quotes Professors Thorp and Mitchell to the effect that from 1888 to 1924 Canada had 1-86 years of prosperity for each year of depression. Remember that is before the great depression. Add to that ten years of depression from 1929 to 1939 and see what the ratio is. The best that the minister can say for an economic system which is capable of producing the tremendous abundance of good things of life made possible by the ingenuity of man and the inventions of science is that it gives people about one year and ten months of so-called prosperity for every year of depression. If that is what the minister means by efficiency and soundness, then the banking system is sound and efficient. We believe that the banking system has a much higher function, namely that it ought to be geared as an instrument of national policy to our economy in such a way as to enable the Canadian people to exchange the goods which they have helped to create.
Another argument which the minister put up and then proceeded to knock down was when he said that we wanted the banks nationalized because they constitute a monopoly. The minister went on to say, of course, that they were not a monopoly, and that even if they were a monopoly there was nothing to prove that the directors of those banks who are also directors of corporations showed any particular favouritism to their own firms. Then, I thought, the minister for a few moments let the mask slip and uttered a little wistful plea. He said, at page 2545 of Hansard:
I often wish that the banks and other business corporations would search more intently for

Bank Act-Mr. Douglas (Weyburn)
suitable directorship material in other walks of life-such as in small business, agriculture and labour-and also that the banks would use to a greater extent the device of regional advisory committees. ...
Here is the minister admitting what everyone knows, that the banks have become a series of closed corporations, that the great mass of the people of Canada-workers, farmers, small business men and professional men-have little or no voice in the councils which shape the economic destiny of this country. When the minister talks about having representation on these boards of directors, what does he think we mean when [DOT] we talk about nationalization? Just that. When we talk about nationalization we have two things in mind: one, that the banking system shall be geared to our economy so as properly to facilitate the exchange of goods and services; and, second, that farmers, workers, business men and professional people, people in all walks of life, shall have representation on the boards of directors that guide the economic destiny of the nation. After all, that is economic democracy. In this country we have political democracy. None of us, I am sure, would belittle it. Many of our forefathers laid down their lives that we might have the measure of political democracy which we now enjoy, and brave men across the seas are laying down their lives to preserve it in the world. What we are asking is that we shall move one step forward and shall add economic democracy to our political democracy, so that the workers through their trades unions, the farmers through their cooperatives, and the business men through their various business organizations, shall be given a place and a voice in the economic councils of the nation. That is something which the minister's statement admits we have not at the present time.


Gordon Graydon: Would that not approach the corporate state?


Thomas Clement (Tommy) Douglas: No, it would not approach the corporate state. I would not think it would be corporatism for the workers and farmers of this country to have some representation on the directorates of this country. I am sure that would be a much more democratic approach than having the same men who sit on these boards of directors now and who think exclusively in terms of big business and vested interests.
The last argument which the minister puts up and then proceeds to push over is that we of this group want socialization of the banks not for any particular economic function that is beneficial to the community, but because it is a sinister way of destroying 
private enterprise and bringing in the thin edge of socialism. I say to the minister that we do not believe in socializing anything just for the fun of socializing it. There can be only one criterion as to whether or not anything should be operated by the public, and that is whether it can thereby be operated to the better advantage of the community as a whole than by leaving it in private hands. What is the minister's objection to the public ownership of the banking system? On page 2556 of Hansard he says:
It seems to me, however, that the credit stringency-
I am reading from the wrong page.


James Angus MacKinnon: It doesn't matter.


Thomas Clement (Tommy) Douglas: Bank Act-Mr. Douglas (Weyburn)
At page 2557 of Hansard the minister cited all the things the farming population need: electrical equipment, buildings, fences, machinery, radios and so on, and I agree with him. But the minister has not made any case to show that this obsolescent banking system has been brought up to date sufficiently to meet the needs of this mass production and monopolistic age. As a matter of fact, if one takes the trouble to look at the patches which have been put on the banking system in the last few years, that in itself shows what a miserable failure it has been in meeting the needs of the situation. The minister mentioned the central mortgage bank; then there was the home improvement scheme, and the national housing scheme. Now we have the Industrial Development bank and the farm improvement loan scheme which the minister has outlined, to be followed later, I understand, by credits for the fishermen. Each of these schemes stands as an eloquent monument to the fact that the present banking system is not fulfilling the functions which a properly constituted system is intended to fulfil.
I want now to say just a word as to how this legislation affects the farming population. As I said before, I agree with what the minister has said as to the need for increased agricultural credit. I agree with the minister when he says that the farming population need money with which to improve their homes, to buy fixtures and utensils, just as soon as the war is over and we are back in peace-time production. Not only is that necessary for the farming population; it is necessary if the great industrial sections of Canada are to have markets for much of their production. How does the minister propose to make this credit available to the farming population? He proposes to do it through section 88 of this bill, and, I believe, through the farm loan improvement scheme. This is a long way from the agricultural bank which was moved at the Liberal convention in 1919 by the late Doctor Motherwell, and, I believe, adopted unanimously by. that convention. This is a long way from the industrial development bank recommended to parliament by the Oliver commission on which Hon. C. A. Dunning sat. This is a long way from the agricultural bank that has been promised repeatedly to the farmers of western Canada. When the minister was speaking the other day the leader of the opposition (Mr. Graydon) interrupted to ask a pertinent question, to which no direct answer was given. At page 2559 of Hansard the hon. gentleman asked:
-whether the existing lending institutions might conceivably be used for the purpose

envisaged by t'he industrial development bank in the same way the minister now proposes to do in the case of agriculture.
I imagine the leader of the opposition was thinking from the opposite side of the question. He is wondering, I imagine-and he will correct me if I am wrong-why the Industrial Development bank cannot be handled in the same manner that the minister proposes to handle these farm loans.


Gordon Graydon: I was just seeking information, not attempting to express an opinion.


Thomas Clement (Tommy) Douglas: I am interested in the matter from the opposite side; I want to know why the farm loans cannot be handled in the same manner as the Industrial Development bank. Why is there to be different treatment for agriculture from that for industry? This is not to be a government bank for farmers; let us not delude ourselves. This is merely to be a scheme under which the banks will lend their money at five per cent interest-which is a very good rate of interest these days-the government will guarantee the losses, and the banks will make the profits. That is what it amounts to. This scheme is very similar to the home improvement scheme, under which a man could go to a bank and, if he could convince the manager that he was a good risk, he could borrow the money. The government guaranteed the losses of the banks up to a certain percentage.


Mr. McNIVEN:: Was it not a good
scheme?


Thomas Clement (Tommy) Douglas: I would ask
the hon. member for Regina City how many farmers he knows in Saskatchewan who came under the benefits of that legislation?


Donald Alexander McNiven: Well, $50,000,000 was
lent under it.


Thomas Clement (Tommy) Douglas: That is not
an answer to my question; I am asking how many farmers in Saskatchewan came under it. I know $50,000,000 was lent, during two or three years, spread over the entire Dominion of Canada. That was a mere bagatelle. It did not begin to meet the situation. In a speech just before Christmas the Minister of Labour (Mr. Mitchell) was reported in the press as having said that we needed 1,200,000 homes in Canada. Are they to be procured under a $50,000,000 home improvement scheme?


Donald Alexander McNiven: We are still financing the war.


Thomas Clement (Tommy) Douglas: But the
$50,000,000 was spent before the war, as the

Bank Act-Mr. Lacombe
hon. member knows very well. The home improvement scheme was introduced before the war, at a time when the government could have put out $500,000,000 instead of $50,000,000; when it could have employed many of the four hundred thousand men who were wandering around this country looking for jobs; when it could have employed some of the farmers on the prairies who were on relief, and who were only too anxious to earn some money.


Mr. EVANS:: Were they carpenters?


Thomas Clement (Tommy) Douglas: Many of
them were very good carpenters if one may judge from the work they have done on their own farms. The government could have trained them as carpenters, if they were not carpenters already. It would have been a good deal cheaper to train them as carpenters than to have them doing nothing at all. I noticed, when the war broke out, how quickly we were able to train men to be carpenters, electricians, machinists and everything we needed, but during the period before the war we could not train them at all. The home improvement plan operated on exactly the same principle as the plan now before us; and it touched only the fringe of the problem. It was another case of the government guaranteeing the losses and the banks taking the profits, and now that policy is being applied in the case of the farmers. What will happen under this scheme is exactly what happened in the case of the home improvement scheme. The man who will be able to get a loan under this scheme will be the man whose credit is good enough to get a loan anyway; the man who cannot get a loan now is not going to be able to get it under this scheme; make no mistake about that.
If we are going to discuss the question of regimentation, I would suggest that any hon. member who is interested should look at subsection 3 of section 88, which is on page 47 of this bill. Here is a provision which will allow the banks to go on a man's farm, take away his crop and thresh it for him, or take away his live stock or equipment. We talk about the dead hand of bureaucracy; just read what the very live hand of the banks is going to be doing to the farmers who come under this scheme. Therefore I say to the minister that if section 88 is all he has to offer the farmers of Canada as a solution of their credit needs after the war, it is indeed a lamentable disappointment.
I wish to say in closing that we in this group stand for the nationalization of the banking system. We supported the subamendment of our hon. friends to the left, because in our opinion if you take from the
chartered banks their power to create currency and credit and restore it to this parliament, as their sub-amendment suggested, you have nationalization of banks. We contend that you cannot take the power to create currency and credit from the banks without nationalizing the banks. In our opinion, the only way you can have social credit is out of a socialized banking system. The government of course, with its great majority, will pass this bill. The government will renew the charters of the ten chartered banks; but Canada will rue the day that this decision was made by parliament.
The hon. member for Lethbridge (Mr. Blackmore) said that the government was becoming a socialist government. I am sure his fears are quite unwarranted, but the fact does remain that the inevitable logic of economies is forcing the government more and more into public ownership and control of those things that are essential to the welfare of the country. Before another ten years go by, whatever government is in power at that time or before that time, will be compelled to take over the ownership and control of the banking system of Canada, first of all, to finance consumption and to make it possible for the people of Canada to consume the goods and services which they create; and, secondly, to give to the common people of Canada some voice in their own economic destiny.


Liguori Lacombe: Mr. Speaker, I
have voted in support of the amendment to the amendment, but I shall vote against the amendment. I am opposed to the establishment of any monopoly, and the worst one is the putting of our public utilities under state control. We already have state control in the case of radio and spirituous liquors, which is the underlying cause of the worst abuses and the most glaring discrimination. Public opinion as voiced through the press and expressed in protest meetings and resolutions, has many times condemned state control, which is a form of objectionable socialism. Let us have facts showing the so-called advantages of state control. Who will claim that the setting up of the Canadian Broadcasting Corporation and the liquor control has been a boon and an act of justice? The Canadian Broadcasting Corporation is an all-powerful bureaucracy in the hands of the party in power, and so it will be in the hands of any government. The same thing may be said about state control over the sale of liquors. In both cases, people who enjoy the favour of the party in power are invariably those who reap the benefit.
Bank Act-Mr. Quelch

Besides, it is already enough that we should have the Bank of Canada, the twin of the Bank of England.
The advocates of state ownership should tell us what has become of our chartered banks' gold reserve, which the Bank of Canada has taken over. Where is our gold? Where has it gone? We have produced billions of dollars worth of that metal during the last thirty years. It has taken the same direction as the annual billion-dollar gifts. Has the nationalization of the Bank of Brazil been a success? Yes, for high finance, but not for the people, whose money was devalorized by more than 500 per cent. Finally, if the chartered banks were to be put under state ownership the lion's share of victory loans would no longer be taken by wealthy people, companies and great industrial and financial institutions, but the workers and farmers would have to assume a still larger share of them.
(Text)


Mr. VICTOR QUELCH (Acadia):: The Minister of Finance (Mr. Usley) in moving the second reading of this banking bill is asking the house to endorse the principle of a debt-creating system. Before that is done, I think we should consider very carefully the consequences of this system on the economy of Canada in the past, and what the actual consequences will be in the future.
The minister, in his remarks, emphasized the fact that in his opinion the banks had operated efficiently in the past. I would ask, efficiently from whose point of view? If we regard the banks as manufacturing money, lending money at a substantial rate of interest, returning to their shareholders a substantial profit, then no doubt from the point of view of the shareholders we may say that the banks have operated efficiently in the past. And when one remembers that during the depression years, when practically every other concern was showing a loss, the banks were still able to pay an average return of around eleven to twelve per cent on their paid-up capital, then they did not do so badly. If, on the other hand, we regard the banks as institutions to serve the people in order to maintain the optimum development of the resources of the nation, then L do not think it can be said that the banks have operated efficiently in the past, so far as the people of this country are concerned.
It is true the minister has said that in the past the banks were hampered by certain limitations. To a certain extent some of those limitations were removed when the Bank of Canada was instituted. Many people believe that there are still limitations that should be removed. Therefore I feel at this time, before this bill is passed, that the necessary changes

should be made so that the banks may serve the people efficiently in the future.
The minister has said that it is not fair to blame the Canadian banks for the depression that was of a world-wide nature. I would agree that it is not fair to blame the Canadian banks for the depression throughout the world; but I do think that the banks of all countries alike, with international finance, will have to take a very large responsibility for the conditions that existed in this country and in the world in general from 1930 to 1939. I would say that the financial policies carried out in the various countries of the world during that period were largely to blame for that situation.
It will be remembered that during the years 1926, 1927, 1928 and 1929 there was a fair degree of prosperity throughout the world. By 1929 some of those prosperous nations had started to have an unfavourable balance of payments. From 1923 to 1928 Canada had a favourable balance of payments, but in 1929 Canada had an unfavourable balance of payments of 865,000,000. In 1930 that unfavourable balance of payments had increased to 8159,000,000. It was then decided, apparently, to impose a deflationary policy, not only in Canada, but in other countries that were in the same condition. For instance, we have the example of the Otto Niemeyer mission that was sent to Australia in order to try to bring about a balance of payments in that country. An ultimatum was placed before the Australian government, demanding that they take the necessary action to bring about a balance. They were urged to balance their budget and to curtail their general expenditures, and that largely was the policy which was adopted in this country. In other words, we attempted to bring about a balance of payments by a policy of restriction. Fortunately, I think it is generally realized to-day that when there is an unbalance of payments, a balance should be brought about by a policy of expansion. That is to say, we should try to expand the production of the debtor nations and expand the consumption of the creditor nations instead of doing as we have in the past, reduce the consumption of the debtor nations and reduce the production of the creditor nations. In view of the fact that that seems to be generally understood to-day I was surprised when the Minister of Finance criticized the chartered banks for not having put on the brakes sooner than they did, criticized them for waiting until 1929 before they started to restrict credit. I suggest to the Minister of Finance that had the banks started to put on the brakes prior to 1929 the only difference would have been that we would have gone into the depression in 1926, 1927 or

Bank Act-Mr. Quelch
The Minister of Finance has also suggested that part of the problem that arose during 1930 to 1934 was owing to the fact that there was no central bank in Canada. An interesting point to note is that Australia had a central bank and their depression was every bit as serious, as the depression in Canada. England had a central bank also. Central banks were not able to prevent the depression, and I doubt very much whether it would have made any difference to Canada if we had one. Probably the only difference would have been that through the services of a central bank we would have been able to organize our deflationary policy a little quicker than we did.
In 1936 the government established majority control over the Bank of Canada. We were told then most emphatically by various ministers of the government that we had established in this country effective control over the issue of currency and credit. The people expected that the government would then put into operation the policy that had been declared by the Prime Minister during the election- campaign of 1935 when he stated that a nationally and publicly controlled central bank was needed in order to maintain the issue of currency and credit in terms of public need to meet the domestic and social requirements of the Canadian people.
I doubt very much if the Minister of Finance would try to argue that from 1935 to 1939 that policy was maintained.	The
minister surely will not try to argue that currency and credit were made available in terms of public need during those years. It is only necessary to remind the house that during those years we had in the neighbourhood of half a million unemployed and a million people on relief. Industry was operating at less than fifty per cent of its capacity and at the same time we had an average favourable balance of payments of $218,000,000.
The minister will also recall how during that period the members of this group continuously urged upon the government the necessity and desirability of issuing money for the purpose of maintaining and developing the resources of this nation in order to give employment so that the money paid out in that employment would help to create demand against the goods that could be produced by industry working at full capacity; or, on the other hand, the money could have been used in payment for the imports that could have been brought into this country, using our favourable balance of payments abroad. I do not think it is necessary for me to remind the Minister of Finance of the kind of criticism we ran into during that period. We were always told by the former Minister of Finance, 100-172
the Hon. Charles Dunning, that no money was available for the purpose. When we suggested that national money should be issued we were told that such a policy would be inflation. I have here an extract from Hansard of 1938, and I shall quote the words of the then Minister of Finance so that no one will be able to say that I am trying to distort them. We were discussing the action that should be taken to develop the natural resources, and when it was proposed that a certain amount of national money should be issued for that purpose the then minister had this is say on March 8, 1938, as reported on page 1152 of Hansard:
Inflation may look like a scheme by which governments can get something out of nothing. It is not so. The mind of man has not yet solved that particular problem, and never will. Governments have only one source for the funds which they use, and that is the pockets of their people.
Does the minister agree with that statement? During the period 1935 to 1939 the resources of this country were systematically sabotaged while Germany was aggressively preparing for war. That was especially so in 1938 when the then Minister of Finance made that statement. We allowed men to remain unemployed, we allowed our resources to remain undeveloped, and we made no attempt to build up the defences of the country. Why? Because the then Minister of Finance told the country that there was no money available to put the unemployed to work. We are told that finance is largely a matter for experts to deal with, that it is impossible for a layman to understand the intricate details of finance. I think our past experience demonstrates clearly that in the future the people will have to be more interested in the financial policy of this country than they have been in the past. I do not think I am exaggerating at all when I say that had the people who were responsible for the financial policy of Canada during that period been the paid servants of Germany they could not have maintained a policy which would have been of greater benefit to that country.
Then came the war and, strangely enough, we had a very quick change in the attitude of the government on this question of money. Where as the pleadings of the people had failed to get the government to issue the money that was needed to maintain full employment, a new motive was able to spur on the government. That motive was fear. I have seen a man run faster than he ever ran before when machine gun bullets played around him, and the same motive caused this government to act when the pleadings of the people in the past had had no effect.

273e
Bank Act-Mr. Quelch

What happened? Within six weeks of the declaration of war the government hired the chartered banks to create $200,000,000 of money for the purpose-let me quote the present Minister of Finance who was then Acting Minister of Finance as to why it was necessary to have- a certain amount of credit expansion as soon as war was declared. I quote from a speech made by the minister on September 12, 1939, as reported on page 140 of Hansard, as follows:
All this is not to say that a small and carefully regulated amount of credit expansion may not be desirable in the early stages of the war in order to assist the increase of production and employment. It must be small and carefully controlled because its effects which may not appear immediately are cumulative and otherwise might get out of hand. If at the beginning of the war there are unemployed resources, some credit expansion may give an impetus to their prompt utilization. If it is carefully controlled, the expansion of production may prevent any abnormal rise in prices, confidence may be maintained and the initial impetus may be carried on and accelerated by the insistent demand that exists for supplies.
I could agree with a great deal of that statement. What puzzles me, however, is this. If six weeks after the declaration of war it was necessary to have monetary expansion in order to provide full employment so that we might develop the resources of the country, why was it not just as sound to have that expansion two months before war was declared when we had exactly the same situation? Why was it not possible to have that credit expansion in 1938, 1937 or 1936 when we had large undeveloped resources in this Dominion? We had to wait for war before the government would make a move.
During the fall and winter of 1939 there was not very great activity in Canada. It took Dunkirk to really waken this government. Fear then became more prevalent throughout the country, fear as to what might happen if we did not wake up. We then had a declaration from the government that no financial restrictions would be allowed to impede our war effort, that the only limit to our war effort would be the men and materials necessary to produce a total war. On several occasions we have asked the government to make a similar declaration regarding the post-war period, but so far that declaration has not been made. I think the Canadian people have a right to ask that this government shall assure to them at the conclusion of hostilities whatever money is needed to maintain the full development of the resources of this country. We have been able to find it in waT time and there is no reason why we cannot find it in peace time.

Let me continue the quotation of the remarks of the Minister of Finance on September 12, 1939, as follows:
However, as soon as the expansion of employment and production gets well under way and certainly before it approaches its limits, further expansion of the supply of money and credit must be stopped if the danger of progressive inflation is to be avoided. With an economy at full production and employment, the only result of expanding money and credit is to raise prices without increasing production.
The minister must have changed his ideas to-day, because we know that last year employment was at a very high level and we were told that we were rapidly approaching the full development of the resources of the nation and that our main difficulty was to find the people required to develop them. In spite of that fact we created $980,000,000 of new money last year through the chartered banks and the Bank of Canada. Yet in his speech in September the minister stated that as soon as we approach full employment no more money must be created because it would not expand production. Last year, although we were warned that we had reached the peak of the development of the resources of the nation, nevertheless we created $980,000,000 of new money. Why? To maintain a total war effort. I suggest that in the future, even when peace time comes, if we are to maintain the full development of the resources of the nation it will always be necessary from time to time to have an expansion of money. I think this is endorsed by the governor of the Bank of Canada. Last year, on April 4, 1943, I participated in a broadcast with Mr. Graham Towers and asked him this question:
After the war the need will be to encourage private spending. Heavy taxes and public borrowing will be contrary to the public welfare. Will the government finance all desirable public projects by credit expansion when necessary?
Mr. Towers replied:
In circumstances such as Mr. Qijelch describes, I would say there would be grounds for government not meeting the entire cost of its programmes by taxing and drawing on public sayings. The desire would be to encourage private spending and make government investment -more of a residual item. If part of the necessary money had to come from credit expansion-and the projects were sound and in the public interest-then I should say go ahead.
Mind you, the governor of the Bank of Canada does not say that the only money that can be obtained for the government is out of the people's pockets. He says that money can be created. Yet in 1938 we were told that the government had only one source for its funds. I think that after the war the minister will agree that it will be necessary from time to time to create new money in order to maintain the full development of the resources of

Bank Act-Mr. Quelch
this country. The question then becomes mainly one of, where shall the money be obtained from? Will it be obtained from a national agency or from a private money monopoly, the chartered banks? This group has always urged and insisted that the money should be made available through some form of national agency, and then no debt need be incurred, or if it is incurred it will be a debt to ourselves and will never have to be repaid.
The minister has argued in the past that money issued by a national agency will expand the reserves of the chartered banks and thereby make it possible for them to bring about inflation. That merely proves that up to the present time we have not established effective control over the issue of currency and credit. The minister says that we have controls by which the amount of money in circulation can be regulated. But when these controls are put into operation, the result is that the country goes farther into debt. You cannot call that type of control an effective one, when its result is an increse in debt.
Of course I realize that the minister may pride himself on being a student of what some people call the modem school of thought, that school of thought which argues that the national debt is a national asset and the greater the debt the greater.the asset; so why worry about the size of the debt? I do not know whether the minister agrees with that or not, but it is the stand that has been taken by the governor of the Bank of Canada in the past. I do not want to be accused of misrepresenting what he said so that I will quote his words. Before the banking and commerce committee in 1939 Mr. Graham Towers, at page 80 of the committees' report, was asked this question:
Is it possible for you to imagine any way by which we are ever going to pay the debt we have got?
Mr. Towers replied:
As the debts of the government are an asset of the Canadian people, I do not see much point in the thing; except that, to the extent that the government thinks that the distribution of those assets of the Canadian people-which are its debt-is unsatisfactory, it may take steps to remedy that distribution in any way that lies within the legislative power; in fact, in any way, I suppose-by income tax or succession duties or any other action it cares to take.
Further on, at page 235, he said:
So that all I can say would be this, that in a country where the sum total of public and private debt was decreasing you have a country which is going backward and which is becoming more poverty stricken. Generally speaking, in a country where you find there is no public and private debt you have a country resembling darkest Africa; there is nothing else.
That apparently is the idea of the governor of the bank of Canada, that we do not need 100-172J
to worry about the debt because it is a debt owed to the people of this country; we need not worry about it so long as it is not owed externally. I mentioned the fact that the people who support that philosophy like to look upon themselves as belonging to a modern school of thought. But I would point out that there is nothing modern in it at all. It is very, very old. It is a type of philosophy that has been propagated throughout the world by banking institutions for centuries. Just to show you how old it is, I should like to quote a statement made in 1813 by Thomas Jefferson.
It is to be found in a booklet entitled, "Out of Debt, Out of Danger," by Jerry Voorhis, where at page 15 I find this:
The American people would have avoided a great deal of misery and difficulty had they taken to heart Thomas Jefferson's exposure of the "art and mystery of banks." Here is what he wrote on one occasion.
This was in a letter written to John W. Eppes, November 6, 1813. I continue the quotation, giving what Jefferson wrote:
At the time we were funding our national debt, we heard much about "a public debt being a public blessing"; that the stock representing it was a creation of active capital for the aliment of commerce, manufactures and agriculture. This paradox was well adapted to the minds of believers in dreams, and the gulls of that size entered bona fide into it.
It looks as though to-day we have plenty of gulls, gullible enough to believe in that type of philosophy which is deliberately propagated by banking institutions to-day. I must congratulate the Minister of Finance upon following that philosophy energetically, for in the last year we have an increase of two and a half billion dollars in the national debt and if the war lasts much longer we shall have a ' national debt of from fifteen to sixteen billion dollars, which will require $450,000,000 to $480,000,000 in interest charges alone.
I do not agree with some people who say that we can never have prosperity so long as we continue under the present financial system.
I believe that even if we continue under the present system it would be possible to maintain prosperity just so long as we absolutely ignore the size of the national debt and then borrow from the chartered banks the money necessary to pay the interest on that debt. If we are willing to do that, we can pile up the debt to astronomical figures, to the point where ultimately the debt charges will be greater than the total revenue of the nation. But long before that time comes the confidence of the people of the country would be destroyed, and once the confidence of the people starts to waver it would be impossible to maintain
Bank Act

Mr. Quelch

full employment and prosperity in this nation. I believe that there is a sound alternative to that dangerous type of policy.
I should like to quote from a book written by Stuart Chase entitled, "Where's the Money Coming From?", in which he states at page 105:
If the government borrowed solely from its own central bank without interest, there need be no interest burden at all. There would be amortization of the principal, and the fundamental prohibition not to pump too many new dollars into the system would still stand. The national resources planning board has said, "Should the day arrive when the carrying charge on the federal debt becomes oppressive, serious thought should be given to the creation by our modern banking and treasury institutions of non-interest-bearing debt."
What seems strange to me is, why wait until you reach a crisis before adopting an alternative which may save the situation.? The national resources planning board says, "When the crisis has developed we may have to use non-interest bearing debt." Surely, whefi you see you are heading for a precipice you do not wait until your front wheels are over it before you change your course; you change your course long before you reach there. And when you realize, as all people who study the economic system to-day must realize, that a continuation of the present method of financing can lead only to disaster, surely it is time to adopt a policy of utilizing non-interest-bearing debt; I would say, non-interest-bearing debt in the sense that money could be borrowed from the national institution, the Bank of Canada, without any obligation to repay it.
This group has always stressed that it is necessary to maintain absolute and effective control over the banking system. In the past we have suggested that one way to bring this about would be the 100 per cent reserve system. I want to emphasize the fact that the Social Credit group has never stated that the 100 per cent system is the only way by which such effective control can be established. In view of the fact that our amendment has been voted on and disposed of, I suppose it would be hardly in order to continue that line of discussion at the present time. But, without referring to the 100 per cent system since it has been already dealt with on the amendment, I might deal with one of the statements which the minister made in that regard. He stated that it would be altogether too great a tax on the chartered banks if such a system were adopted; if over a period of time several hundred million dollars were issued, that money would eventually become deposited in the char-

tered banks, with the result that the chartered banks would have to service it without any compensation.
I think the minister's own statement which he placed before the house the other day showed that it would be no great handicap on the banks if they had to do it. On page 2550 of Hansard we find this statement regarding the chartered banks: during their operation for the fifteen-year period from 1929 to 1943 their current operating expenses amounted to 112-3 million dollars, and in 1943 those operating expenses had risen to 114-9 million dollars, an increase of 2-6 million dollars. Then we find that during the fifteen-year period the average of the amount deposit liabilities was 2,936-9 million dollars. In 1943 the amount of the deposits had increased to 4,606-9 million dollars, or an increase of 1,660 million dollars. So that concurrently with an increase in deposits of 1,660. million dollars you have an increase of only 2-6 million dollars in operating expenses. It is true that there was a reduction in operating costs owing to the fact that the interest payments had been reduced; but if the actual cost of issuing credit was in reality around two or three per cent, as was suggested by the governor of the Bank of Canada before the banking - committee in 1939, when he said that it was three per cent including interest payments on deposits and1 two per cent without them, you would have had an increased operating expenditure of $48 millions, so that even with a decrease of expenses of $10 millions representing interest payments, you would still have had an increase of $38 millions in operating expenses, yet all you had w-as an increase of 2-6 million dollars. I mention that fact to prove that evidently there is a very large fixed overhead cost in banking; therefore you can increase or decrease the amount of deposits without altering very much the operating expenses of the banks. It would be possible, for instance, to increase deposits by $500 millions without involving any great increase of expense on the part of the banks, because they have had surplus capacity for taking care of increased business. I think the minister's statement proves that conclusively, showing as it does an increase of $1,600 millions in deposits with an increase' of only $2,600,000 in operating expenses.
The minister made another point. He showed that the shareholders' net income amounted to only 5-09 per cent of their total equity on the average of the fifteen year period 1929-43, and 6-03 per cent in the year 1943. Personally I do not think that is a fair basis. I think the only fair basis is to

Bank Act-Mr. Quelch
take the paid-up capital. For instance, if I bought a S100 bond bearing an interest rate of four per cent, and I purchased it for $60, the interest rate on that bond would still be four per cent. The interest on my investment, it is true, would be more than that, but the interest rate on the bond would remain at four per cent. The same would apply if I paid more than $100 for it. I think this principle applies to the paid-up capital of a bank. The actual dividend is declared on the paid-up capital. In 1941 the dividend of the Bank of Toronto was twenty-five per cent. True, there is a big variation in the dividends of various banks. For instance, we find that in 1941, the percentage of net profits to paid up capital, after deductions for income taxes and appropriations for bank premises, pension funds and other published allocations, was 8-16 for the Bank of Montreal, 12-34 for t'he Bank of Nova Scotia-, 1S-69 for the Bank of Toronto, 6-04 for the Provincial bank, 8-03 for the Bank of Commerce, and 10-06 few the Dominion bank. These, I think, can certainly be regarded as substantial profits.


Mr. JACKMAN:: The hon. member might check that Bank of Toronto figure.


Victor Quelch: I gave the figure after allowance had been made for taxation, pension funds and bank premises, as 18-69.


Harry Rutherford Jackman: Earnings or dividends?


Victor Quelch: This is the net profits, after published provision for dominion taxes shown in column one and payment for pensions and bank premises. If you take the net profits after the published provision for merely taxes you have a dividend of 25-6 per cent. So that I think the minister has given a totally wrong figure when he quotes 6-5 per cent.
I would point out to the minister that if, in the early days of the operation of the banks, before their shares had, risen, the government had allowed only a profit of five per cent and had made the banks turn over the balance of their profits to the government to be set aside as a reserve to take care of possible losses in the future, I do not think the value of bank shares to-day would be anything like the value they are. The only reason they are at such a high value is on account of the profits which they have made in the past.
I have pointed out on other occasions that I believe that the 100 per cent system would work effectively, provided the banks cooperated fully with the government. Unquestionably this system will take care of inflation. I have never been satisfied that it will effectively take care of deflation. You can prevent the
banks from inflating, but you cannot force the banks to issue money so long as they are privately owned. That is why I have stated on many occasions in the past that I feel that in order to have absolute and effective control over the banking system, the only sound way would be to nationalize the banking system.
I want to point out to those monetary reformers and some social crediters who do not agree with that viewpoint, that the social credit movement has never taken a stand against the nationalization of the banks; they have merely pointed out that nationalization in itself means nothing unless you are going to change the policy.
Just to straighten some people out on this matter, I should like to quote from a pamphlet written by Major Douglas, entitled, "The Use of Money". I do not want to be charged with having extracted a sentence from its context, and therefore I will read a paragraph or two:
There are two ways by which the problem can be attacked, and one of those ways has to do with the fact-which I honestly believe- that 95 per cent of the personnel of the banking system are just ordinary, every-day hard-working business people like anybody else. You can make it clear to that 95 per cent that they are engaged in a very anti-social business as carried on at the present time, and you can-and I say this with a full appreciation of the implications to be put upon it-drive a wedge between the 95 per cent and the irreclaimable 5 per cent (not situated in New- Zealand).
That has been done to my certain knowledge in many countries of the world, and there is no doubt at all about it that this cleavage in opinion in regard to this vital question is penetrating into the very highest quarters of financial circles at the present time, and a great deal of pressure is being placed in very high places indeed to get that 5 per cent to see sense.
I speak with some knowledge of what I am talking about: but I do not believe they will ever make that irreclaimable 5 per cent see sense. Then the answer is that they have got to be put out.
If they cannot be put out by the pressure of their ow-n associates and subordinates, backed up by an increasingly firm and powerful public opinion, then they have got to be put out by constitutional means: by which I mean they have got to be put out by bringing the powers of politics to bear upon them. That I put second amongst the methods by which this matter can be achieved. But I would like to sav in regard to this second method that it has a vital bearing on the inadvisability of pressing too quickly for the nationalization of banking. I do not say that something like the nationalization of banking w-ill not have to come. I think it probably may have to come. But what I am perfectly certain of is that if you unite the powers of governments with the powers of banking before you have changed the banking system, you have got a problem w-hich is doubly difficult to solve. So that what yor have to do, if necessary, is to set the government against the banks.
Bank Act-Mr. Noseworthy

I agree that if you nationalized the banking system to-day, with the present type of government remaining in power, the public would not benefit very much by the transaction. But this bill we have before us is for the next ten years and an election is not very far away. Before the end of that ten-year period there will likely have been two elections; I am optimistic enough to hope and to believe that long before the end of those ten years the present type of reactionary government will have been put out and a more progressive type of government put in, and when the progressive government do come to power I should like to see them with a Bank Act at their disposal which will make it possible for them to introduce a financial policy that will serve the needs of the country.


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


Joseph William Noseworthy: As I am a member of the banking and commerce committee and shall have an opportunity of discussing the bill in that committee I shall not speak at great length to-night. In fact, I had not intended saying anything on the second .reading of the bill. I would not have done so but for the nature of the minister's speech delivered in the house a few days ago. That speech in defence of the present banking system must, I am sure, have gladdened the hearts of the members of the bankers' association. It would have done credit to any bank president or to the president of the association itself, and I am quite sure that the speech should stand the minister and his party in good stead when they come to bid for the support of the bankers' association in the next federal election.
The minister in his speech gave us a number of apparent contradictions. He deplores, for instance, the public criticism of the banks for their share of responsibility in the depression. He tries to exonerate the banks by saying:
In the first place it is a travesty of economic interpretation to place responsibility for the great depression upon the Canadian banking system.
He goes on to blame the statesmen of the great nations of the world.
Certainly the statesmanship of the leading nations in the twenties showed neither the courage nor the imagination to solve them.
He refers to these problems. I presume he does not include Canada as one of the great nations of the world and consequently does not include such statesmanship as was to be found in the Liberal party at that time. He does, however, in another sentence say, at page 2540 of Hansard:

The banks, of course, were not blameless, either in respect of the policies they followed in the boom years of the late twenties, (policies which involved the granting of too much rather than too little credit, nor in the policies they followed with the onset of depression, when faced with the necessity of saving their own institutions they may have aggravated the deflationary process which the antecedent inflationary boom had made inevitable.
In other words, in one breath he exonerates the banks and blames statesmen for the depression, and in the next he includes the banks in his condemnation. He eulogizes the banks for their strength, their flexibility, their efficiency, their economic operation; and I believe that no one, certainly no one in the Cooperative Commonwealth Federation, has ever criticized these particular features of the banking business. I have no doubt that a government operating the banks might find it difficult to operate a banking system at a lower cost than the present banks are doing it, for one reason. Any government operating a banking system to-day would be under some public obligation to pay the employees of these banks wages that would give them a standard of living commensurate with that in the general economic life of the country. It is, I think, notorious that bank employees throughout the years have been among the lowest paid employees of any group shouldered with the responsibilities and the type of work that bank employees are called upon to undertake.
The minister pointed out in his speech that this efficiency, this strength, this flexibility on the part of the banks are not creditable to the banks themselves but, as he points out in his speech, are based on restrictive measures which parliament over the years has placed upon the banks. It is that very control exercised by parliament, which he deplores in government-owned banks, that he admits has made our banking system as efficient as it is to-day. He assumes the position that the central bank is now meeting all the deficiencies that existed previously in our banking system. It has been pointed out already that many deficiencies still exist in that system which are not met by a central bank. As the minister has pointed out, and as every hon. member knows, a central bank does not lend directly to the public. Apart from loans to the government, it lends only to the chartered banks. This means that it can make credit or money available to the chartered banks, but it has no control whatever over those banks to see that they in turn lend that money, or over borrowers to see that they borrow it. There have been times in our history, and not so far distant at that, when the chartered banks were afraid to lend the funds they had and

Bank Act-Mr. Noseworthy
borrowers were afraid to borrow them, even at fairly low interest rates. That condition actually prevailed in the thirties. The central bank has no control over the direction of the money which it makes available, even if that money actually is lent by the chartered banks to industry. Quite properly, in their own interests, the chartered banks will lend that money where it is most profitable to do so. Private profit and public interest do not necessarily coincide. They often conflict. What may be profitable from the point of view of the community and the national need may be unprofitable and undesirable to the private capitalist or bank with money to lend.
Furthermore, as has been pointed out in this debate, no central bank in any country has ever been able to stop a boom except by starting a depression. The reconstruction committee of this house has had numerous briefs presented by various privately owned industries. They all recognize that neither the central bank nor the chartered banks, nor the two together, can be depended upon when the war is over to create full employment. In all their briefs they call upon the government to be ready to spend vast sums of public money to augment the sums which private enterprise will spend in the post-war years. If the minister will read the debate which took place in April, 1934, when certain members of this house proposed that the central bank should be publicly owned as well as publicly controlled, as it is to-day, he will find that many hon. members were opposed to the public ownership of that bank, and that they advanced exactly the same arguments that have been advanced by the minister against the public ownership of the chartered banks, including the argument of political patronage. The bank presidents who opposed the establishment of a publicly owned central bank, and the members of this house who joined with them, are the men who to-day try to tell us that the central bank, publicly owned and controlled, is sufficient to meet all the needs of our economy.
It is probably true that a minister of a Liberal government-and I presume it would be equally true of a minister of a Conservative government-cannot conceive of a government enterprise operated without political patronage. Over the years in this country it has been the practice that when a Conservative government goes out of office, practically every position that is at the disposal of the government reverts to a Liberal, and vice versa. We are seeing that happen in Ontario every day. Under a new Conservative regime all available positions at the disposal of the
government are being taken from those of Liberal affiliation and passed over to Conservatives.


Mr. FRASER (Peterborough West):: Have you proof of that?


Joseph William Noseworthy: Yes, I have.


Gordon Knapman Fraser: I think you are absolutely wrong; in fact I know you are.


Charles Edward Johnston: Can you disprove it?


Gordon Knapman Fraser: I certainly can.


Joseph William Noseworthy: You will have your chance to do so later on. That is the history of both the Liberal and Conservative parties in this country through the years. It is known all across the country; it is no secret. It would appear to be the opinion of the minister that any government, Cooperative Commonwealth Federation or otherwise, operating a . system of government-owned banks, would staff those banks with political appointees. Any government that followed this procedure would be committing political suicide; and I believe any government, C.C.F. or not, that undertook the operation of a government-owned banking system would be sufficiently intelligent to see that a procedure which might be followed when dealing with the appointment of a game warden or a dog-catcher would not apply in the appointment of officials to run a bank. I noted that the minister did not condescend to use the argument which I have heard used by others against a publicly-owned banking system; that is, that the money of the depositors would not be secure in a government-owned bank. I do not think that argument is worthy of consideration in this parliament, and I was pleased that the minister did not use it.
In his eagerness to support the present banking system, in my opinion the minister went out of his way to undermine the confidence of the public in much of the work being done to-day by some of his own departments. His tirade against government control, against government bureaucracy, cannot assist the officials of many of the departments that the minister is entrusted with administering, cannot assist them in the administration of their duties and serve any good purpose except to undermine public confidence in the work of these officials of his own department.
I think the minister's speech, and the provisions which the government proposes to bring into effect, show much more clearly than I can those spheres in which our present banking system have failed society. As has
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already been pointed out, the government now finds it necessary to institute an Industrial Development bank. The government finds it necessary to go to the aid of the farmer, the fisherman, the exporter and other classes of society, who for one reason or another, will not be able to find funds available from the banks and other lending institutions. It looks very much as though the taxpayers are to be saddled with all the unprofitable part of the money-lending business and that the banks, under the minister's department and direction, are to be left with the profitable part of that business. I wish to assure the minister that the people of this country are not half as much concerned about maintaining the profitable part of their business under the control of the banks as he himself appears to be.	[DOT]
The hon. member for Rosetown-Biggar (Mr. Coldwell) dwelt at some length upon the extent to which the profitable part of the banking business is now the lending of money to various governments, federal, provincial and municipal. If the minister is determined to maintain the present banking system, and if he is proposing to introduce certain amendments, in order to provide means whereby credit can be made available to new industries, to fishermen, farmers, exporters and others, might I suggest that he consider at the same time making credit available at a lower rate of interest to the municipalities. The municipalities have beep fleeced by the banks and financial institutions for many generations. Many of our municipal laws are such that they work to the advantage of the banking system. For instance, we have municipalities which have funds available in one department, but they cannot use those funds to cover the expenses of another department. They must borrow from the banks to finance those obligations until such time as current taxes are collected.


Mr. ROEBUCK:: Is that not provincial law?


Joseph William Noseworthy: If the municipalities are to bear their share of reconstruction and embark upon housing and other programmes there is need for the federal government to make funds available to them at the interest rate at which the federal government can borrow, without requiring the particular municipality to pay twice the rate at which the federal government can secure those funds. Some such adjustment is needed.
In conclusion, I wish to say that the test of a successful banking and financial system, as I see it, is not solely the test that the minister gave. When the war ends, our financial structure must become an instrument for

waging total war in this country against poverty, insecurity and fear. I am satisfied that even under the Bank Act, with amendments proposed by the minister, that function will not be served, cannot be served, without the nationalization or the socialization of the banks.


Mr. FRED ROSE (Cartier):: I had not intended speaking on this bill-


James Arthur Ross: You do not have to.


Fred Rose: -but somehow it has been speeded up a bit. I shall therefore make a few remarks in order to explain why I voted the way I did. I voted against the subamendment for the plain and simple reason that I believe to place all the ills of the world on money is a bit childish. We are told that the crisis of 1930 was due to money. Everything is money. All that we have to do is to allow a lot of paper to flow and we shall be all right. Some hon. members spoke very nicely about international finance, a phrase which some of them borrowed from Major Douglas, who, of late, has improved the phrase of "international finance" and now calls it "international Jewish finance." I would say, therefore, that no responsible person in the labour movement could try to solve all of the problems of Canada with money.


Charles Edward Johnston: Because of what you have just stated?


Fred Rose: Just a moment. We had a crisis because capitalism failed; there was overproduction and people had nothing, and could not buy goods.


John Horne Blackmore: They needed more
money.


Fred Rose: Just a moment.


Charles Edward Johnston: You are getting in a bad spot.


Fred Rose: No, I am not. The people could not buy because there was no work anywhere. There were no international markets.


John Horne Blackmore: They had no money.


Fred Rose: I shall come to that. There was nothing. They had no work at home. I would agree with a number of speakers who put the issue squarely before the house. They said that we must have jobs. I agree. We must have jobs guaranteed to everybody after the war. That is problem No. 1. The workers say: "Give me a job." The worker does not give a hoot where the money comes from. He does not care whether it comes from a private bank or from a central bank. He wants a job and he wants it at decent wages. That is

Bank Act-Mr. Rose
problem No. 1. Let us not try to run away from that problem by finding some magic solution, by playing around with money, paper money or any other money.
We come now to problem No. 2. One of the hon. members used the phrase, "Nationalization of banks"; another hon. member used the phrase, " Socialization of banks." Let us not play with phrases. On the basis of those phrases people are supposed to stand up and vote. When I did not stand up to vote a neighbour to my right turned to me and said in effect, "What has happened to you?" I am no abstract dogmatist. I contend that jobs come first, and that is the big problem. To use the issue of socialization of banks at this time is all wrong when the vast majority of the Canadian people have indicated by a recent Gallup poll that they are not willing to accept such banks.
The key issue at the present stage of the war is not to play into the hands of those who want to make an issue of socialism in order to oppose reform. Let us stand up for reform in this house; let us collaborate. That is the issue to place before the people. The issue is not socialism or the socialization and nationalization of banks; it is a question of reform.


An hon. MEMBER:: Is that not a reform?


Fred Rose: That is a drastic one. The Labour party of Great Britain have been speaking of the nationalization of mines for how many years? They have still to nationalize the mines. I would say that the problem of the socialization of banks is somewhat similar to the nationalization of mines as it was promised by the British Labour party. The fact is that they have not gone very far.
Reference has been made to New Zealand. That country does not have a very highly developed capitalist system. It has a population of about a million and a half people. They have not as yet nationalized the banks' and the fact that some of the people there are saying that they will do something does not mean that they will. Let us be realistic about the problems.
If there is something wrong with bill No. 91, I should like to see my hon. friends of the Cooperative Commonwealth Federation show where improvements can be made. That would be a much healthier approach to the problem. Instead of talking about farm loans, we should have a bank for agricultural loans. If that were suggested, I would be one of the first to vote with my hon. friends to my right. If they will bring forward a concrete proposal in connection with the industrial bank I will support it. In that bill on the industrial bank it is suggested that loans will be given to shipbuilders, but I do not consider 100-173
them as being small industrialists. Loans should be available for small storekeepers. It should be possible for men in the army to come back and open up little stores. I would be 100 per cent for that. I have heard nothing said about how these men will be able to get easier credit. To put out propaganda slogans about socialization of banks at this time will in the long run tend to divide the people.
Some will say where are you to get the jobs? I admit it is going to be a hard problem. Others will ask, where will you sell the goods? I should like to refer to a clipping which I had in my office.


An hon. MEMBER:: What is it, more propaganda?


Fred Rose: It is much more realistic than talk of easy money. This clipping is from the Montreal Gazette of Saturday, and it contains a story written to the New York Times by C. Daniel, pointing out that the United States bank had underwritten 2\ billion of goods to be sold to the Soviet Union. That is a lot of money. I believe that the yearly total of United States exports before the war were valued at about S3 billion, and here are 2\ billion being underwritten by private banks to one country. If they want to do that, let them go ahead.


Thomas Clement (Tommy) Douglas: Who is
guaranteeing it? It is the working people of the United States.


Fred Rose: Have you any objection? It is the men who will get the jobs and they have no objection.


Thomas Clement (Tommy) Douglas: I object to your giving credit 'to the banks under this new party line.


Fred Rose: The party line is a different problem and we will discuss that later. The article says that the British are also interested. Where do we come in? Here is what War and the Working Class, a Soviet journal, has to say:
Trade with the Soviet Union can doubtlessly be profitable for England, the United States, Canada and other countries.
Yes; we can do something. I need not mention only the Soviet Union. What about China? Let us help to industrialize China. There was a labour representative from India at the International Labour Office convention at Philadelphia. He said, "Help us to industrialize ourselves; help us to gain freedom, and you will see what it will mean to you from the point of view of work for your people." Let us be realistic; let us not run away on the question of the issue of money.

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I do not vote on the basis of catch-phrases or propaganda slogans; I vote on the basis of what is realistic. If there were an amendment that would bring about improvements, I would be in favour of it, but when you talk only of socialized banks or national banks I am not prepared to vote.


An hon. MEMBER:: What is your alternative?


Fred Rose: If the bankers want to carry-on, let them carry on. But if they fail, let the government step in. The government has started with an industrial bank and we should have other similar banks to make credit easier in order that the people may carry on. That is a problem. If private enterprise fails, let the government step in. The government should not be merely a passive by-stander. The people are not prepared for socialization of banks at this time, and they can be scared by slogans used by reactionaries and be turned against those who mean well. People like Gladstone Murray- and others can still turn the people against those who may mean well, and the result will be that the people will go to the other extreme.
I did not vote either for or against the subamendment because I could not understand this sudden wedding of two parties. The one had just got up and attacked socialism while the other wanted socialism. If it is merely a question of opposition for the sake of opposition, then I say that is not in the best interests of the people at the present time, nor is it in the best interests of the people in the near luture.


Mr. E. G. HAXSELL (Macleod):: Mr. Speaker, it is refreshing to know that the Liberal party are gaining some support.


Fred Rose: Why- should the Conservative party have a monopoly?


Thomas Clement (Tommy) Douglas: Also the banking monopoly.


Ernest George Hansell: The hon. member for Wey-burn says, "Also the banking monopoly". I had not intended speaking to-night and many of us seem to be riding in the same boat. This debate which promised to be lengthy is apparently on the verge of folding up. I was not rushing myself in preparing for this, thinking there would be other long-winded speakers desiring to speak between now and the end of the week, and I would, therefore, have plenty of time to gather my notes together. But here I am having to explain myself extemporaneously with a few little pieces of scrap notes.
I feel it is necessary for me to say something before the amendment is voted on. I should

like to say something which my hon. friend who has just preceded me may think rather illogical. To all intents and purposes I do not believe in nationalism, but I am going to vote with my hon. friends of the Cooperative Commonw-ealth Federation. I think it was the speech of the hon. member for Weyburn that convinced me that he was gradually-becoming a pretty- good social crediter.


Donald Alexander McNiven: He was in 1935.


Ernest George Hansell: I understand that the hon. member for Weyburn was rather charmed with the social credit philosophy a few years ago. I have always maintained that when once a man becomes a social crediter by conviction, he will alway-s remain a social crediter. It is something that gets within his blood and becomes not merely an economic philosophy but a philosophy of life.
I said that I was going to vote for the amendment, Mr. Speaker, because, as I said last year, I really do not believe that it matters very much who owns the banks. The big question is, who is to control the banks? The passing of the ownership from one party to another or from one corporation to another or from the hands of the bankers to the government does not alter the policies of the banking system, and it is the policies of the banking sy-stem that we need to change. Therefore it would seem to make no particular difference to me personally whether the banking system is nationalized or not. What I want is effective control over the banking system for the issuance of currency and credit in terms of public need. That is something which our Prime Minister (Mr. Mackenzie King) promised a few years ago but which he has never seen fit to accomplish. I am going to quote Major Douglas in connection with the nationalization of the banks. He made a speech at Oslo, Norway, in 1935, in which he said:
The institution and keeping of the national credit account does not require any nationalization of the banks. As a matter of fact, such nationalization would be a great mistake. I am not myself, for instance, an advocate of the nationalization of banks. I believe this again to foe one of those misapprehensions so common in regard to these matters, for the nationalization of banks is merely an administrative change: it does not mean a change in policy-, and a mere administrative change cannot foe expected to produce any result whatever in regard to this matter. A change in monetary-policy can be made without interferring with the administration or ownership of a single bank in the world.
I regard Major Douglas, notwithstanding what the hon. gentleman who preceded me said, as one of the greatest economic minds of the age. As the hon. member for Acadia

Bank Act-Mr. Hansell
(Mr. Queleh) said to-night in quoting Major Douglas, he did say that the day may come when it may be necessary to nationalize the banks, but he suggested that before they are nationalized there must be a change in the banking system itself and in the policy of banking. That is quite reasonable because, if there is no change in the policy of banking, it does not make any difference who owns the banks. The chief function which I believe is required of the banking institutions of a nation is to see that the national income, or shall I say the money in the hands and the pockets of the people, is sufficient that it is able at all times to buy all the goods and services that are available in the nation. The thing I want to know in connection with the banking institutions, and what concerns me in connection with their nationalization, is this: Are we to have any more money? That is the thing. I will answer in a moment the hon. gentleman who preceded me and said that nobody wants a lot of paper floating around as money. But what I am pointing out now is that we want to know whether the banks are going to provide the nation with money enough to buy all that the nation produces. The nationalization of the banks is the same as the nationalization of anything else. A gentleman asked me on one occasion why we did not nationalize the oil fields out in Alberta. The important thing I told him was: Are we to be able to buy the gas and oil when the oil fields are nationalized? Let me picture it for you, I said. A man who believes in nationalizing or socializing the oil fields comes along and says: "We will socialize all the oil fields. I am a good socialist and it will be an extremely fine thing to know that the people own the oil fields." So the oil fields are nationalized. He comes along and sees the oil men drilling for oil and says, "It is great to know that the wells belong to the people." Then later on he sees the oil going to the refinery which has been built out of the people's money, and perhaps he had to pay a little in taxation for the building of the l'efinery. He sees the oil being refined and the oil and gas coming out and transported to a gasoline station. He says, "That is great. Just think; all this belongs to the people!" The next day he drives his car to a gasoline station and says to the attendant, "Fill her up. It is great to know that all this gas and oil belongs to the people." The attendant fills the car with gas and the man starts to drive away, but the attendant shouts after him, "Hi, mister, come back here; you have forgotten something." "What did I forget?" asked the man. "You forgot to pay for your gas", said the 100-1734
attendant. "Oh", said the man, "why should I pay for it? I thought it belonged to the people."
I give that only as an illustration. The point is that it does not make any particular
difference to me particularly who owns the means of production or who owns the banking institutions. What we want is the wherewithal to buy what the nation produces. What we want is the wherewithal, which can only come from the banking institutions. We claim, and I think rightly so, that we must have consumers' purchasing power if we are to consume all the goods that our nation is able to produce.
My hon. friend talked about the false philosophy of printing money. He may, if he wishes, disagree with the logic of some hon. members, but I am going to suggest that when he comes to deal with monetary technique he certainly has need to study it more deeply. I am going to read something from a book published by Major Douglas, entitled, "Warning Democracy", in which he says at page 133:
There is such a remedy. It is not the easy one which might at first occur to you of merely printing more bank notes, since unfortunately that is a method which defeats its own end. The method is a technical one. Jt consists in a simple adjustment, by the use of the technique of credit, of the relation between the average price level and the available purchasing power; and, under existing conditions, the responsibility for making this adjustment most undoubtedly rests with the banking system.
I quote that to my hon. friend to show that the highest authority perhaps on the philosophy of social credit does not advocate the printing of more money. What he says is that there must be a credit relation between the average price level and the available purchasing power. He further says that under the present banking sj'stem the banks have that responsibility.
I say to the Minister of Finance (Mr. Ilsley) that I see no great change in the new bank bill. I agree with the hon. member for York-Sunbury (Mr. Hanson) when he stated this afternoon that the bill includes no vital change. If that is so, the responsibility of equating consumption with production by issuing enough money and putting it into the pockets of the people must rest with the present banking system.
A year or so ago I was at a meeting at which representative social creditors of Alberta were present, including the members of the legislature and the ten members of parliament, and we devised a series of resolutions which we thought would give us a picture of our post-war needs. For the purpose of financing post-war reconstruction we passed a resolution from which I will read. For the sake of
Bank Act-Mr. Hansell

brevity, I will omit the "whereases", the description of the present system and the failure of the banks. The declaratory portion of the resolution was as follows:
Therefore he it resolved that the entire programme of post-war reconstruction, covering all spheres of the national life, should be financed in accordance with the following provisions:
(a)	The control of the monetary system and the issue of all currency and credit shall ibe vested in a national monetary commission responsible to the people through parliament.
I claim that if that proposal were adopted it would not be necessary to nationalize the banking system.
(b)	All government expenditures, whether for capital development, social services, security measures or any other purpose shall be financed by the issue of money by the national monetary commission without debt to the nation. Taxation shall be used for the sole purpose of withdrawing surplus purchasing power.
May I digress to say that, even though this bank bill should pass, and we know it will, no fundamental change will be made in the present banking system. I say to the Minister of Finance-and he knows the truth of what I am going to say, for a schoolboy could say it-that so long as a high rate of income taxes and, if you will, corporation taxes exists, there will be less money in the people's pockets wherewith to buy the goods which are available. That is one reason why in that section of the resolution we claim that taxation should be used for the sole purpose of withdrawing surplus purchasing power.
(c)	Adequate monetary supplies shall be made available for financing construction programmes, with due regard to maintaining a proper relationship between capital production and the production of consumers' goods.
(d)	Proper and scientifically adjusted safeguards shall be instituted to avoid both deflation and inflation, to ensure an orderly price structure, and to provide an adequate and equitable distribution of purchasing power.
(e)	All the foregoing shall be carried out without interference with the freedom of the individual citizen.
It seems to me that if that were adopted the banking institutions would not have to be nationalized, but they would have to be willing to take instructions from what is known here as the monetary, or credit, commission, which would investigate yearly and report to parliament all the intricacies of the financial system as it is operating from day to day.
According to the law the revision of the Bank Act takes place only once every ten years. A lot can happen in ten years, especially while we are moving in a very fast, progressive age. If a monetary commission were set up to deal with monetary matters, hearing at all times and any time cases which
came to them from any financial expert who wished to give evidence., the necessary instructions could be issued from time to time. That would keep the banking system in such a state that it would progress with the general progress of the years. Personally I believe that would be a far better proposal than the nationalization of the banks.
My hon. friend who preceded me suggested that we were inclined to 'blame money for everything, and. said that the one thing which is essential is that everybody shall have a job. I do not criticize the idea of everybody having a job; I like to see people doing the things they wish to do, but there is one fundamental principle of monetary technique of which my friend is evidently not aware. It is this, that out of the process of production, from the time the raw materials are gathered together until the finished article is on the shelves for sale, there is never enough money coming into the hands of consumers to buy back all the goods at the prices at which they are for sale. Even though there were no profit there still would not be sufficient money, because there are production loans fed to the producer which have to be paid back. He has to pay depreciation costs, certain taxes, interest, and a lot of other things, and by the time all these are paid there is not enough money coming from the process of production to buy back all the goods produced. It does not make any difference, therefore, if everybody has a job; if that is the only way you [DOT] have of putting money into the people's pockets, eventually your goods will pile up and people will be thrown out of work again. That is the particular technique which my friend did. not realize.
When the hon. member for Lethbridge (Mr. Blackmore) kept telling him that you had to sell your goods and that you could not sell them unless people had money in their pockets, my hon. friend said, "I will tell you where to sell your goods. You will be able to sell them to a foreign country", and he cited Russia. No one wishes more than I do to have an equitable balance of trade with Russia, with China and with any other country. But my hon. friend evidently thinks that when you export a couple of billion dollars' worth of goods to another country that country immediately sends us a couple of billion dollars which we can then spend to buy our own production. That is not so. My hon. friend must know that the only way in which one country can pay another for the goods it receives is to ship goods in return. If goods are received by us in payment, some of our own people are going to be out of work. So that his philosophy of jobs is a wrong

Bank Act-Mr. Hansell
philosophy. I should like to see everyone at work, but in addition to that you must put into the pockets of everybody a further amount of purchasing power to buy back all that you are able to produce. If that social credit technique were followed you would have the highest standard of living it is possible for a nation to have, the highest standard of living that your productive capacity is able to give you.
The other day I was talking with a gentleman who was in the banking business-well, I should not say that he was in the banking business; he worked in a bank. I asked him one question: What is the purpose of an economic system? Well, he stumbled for a while. I do not suppose he had ever asked himself that question. I said, "It is very easy to answer that question. The purpose of an economic system is that people may live, and the purpose of a right economic system is to give people the highest standard of living.'5 He said, "What do you mean?" I said, "Is there any reason why people should not own their own homes?" At once he replied, "You do not mean that every one should own his own home, do you?" I said, "Why not?" He said, "Do you mean that we should give everyone enough money to buy his own home?" I said, "I did not suggest that we should hand it out exactly in that way, but if there were an additional amount of purchasing power coming to all workers, to the aged, the sick or whoever it might be who was in need, there would be that additional purchasing power which would give us the highest standard of living, homes and everything else." He did not understand that it was possible for everybody to have his own home and, in fact, anything that the country is able to produce.
That is the purpose of an economic system. Why should we live in scarcity, with thousands of people in the bread-line; why should we live in apparent poverty, all because we do not manage properly our economic system, all because we do not bring proper arrangements to bear upon our banking system, all because we do not say to the banker, " This is your responsibility and if you do not meet it we shall have to change the system"? That is something that our governmen seems reluctant to do. The Minister of Finance, when speaking the other day-I have not the exact words, but I think I am quoting him correctly -said that the depression of the thirties was the result of the last war.
Let us see if that is so. I do not know whether he can answer that point to satisfy me; but with this nation's shelves stocked high with goods, with storekeepers standing at their doors waiting for customers to come in, not
being able to sell their goods, and with thousands of people in Canada going to the relief offices, and if they wanted an extra pair of shoes going to the Red Cross, are you going to tell me that a peculiar anomaly of this sort was the result of the war? Personally, I cannot see that it is.
It seems to me to be a very simple problem. What these people wanted is money. We all recognize this, and it has- been mentioned a good many times, that when this war broke out there was money. Why should not money have been produced before, in order that people might be able to buy the goods on the shelves? To tell me that it was the result of the last war seems perfectly futile. If the depression of the thirties was the result of the last war, the minister comes along now and does not change the Bank Act materially, and therefore the question arises, what is going to happen after this war? Surely if the condition I have described was the result of the last war, and if the system is not changed, the same thing will be true following this war. Indeed, as the hon. member for Vegreville (Mr. Hlynka) and the hon. member for Cape Breton South (Mr. Gillis) say, it will be four times worse. It cannot help being four times worse.
These are the things we have to face. This parliament is here to change the legislation. We know it is of no use for any private member or any group in the opposition to bring down legislation, because it has not the ghost of a chance of being passed. The government is the only body of people that can bring down legislation, and it is the responsibility of the government to change the existing legislation, so that the banking system will fit into that new legislation in order to bring about the desired effect. If the government is not going to change the legislation, then the banking institution will go on as it has done throughout the years.
There is the alternative which my hon. friends of the C.C.F. propose, namely, to nationalize the banks. It does not make any difference who owns the banks; the government could simply say, "We are going to control the policy of the banks and set up a commission in order that the policy of banking in Canada shall be such that this Canadian people will get the results they desire."
I am going to vote for the amendment, although under existing conditions the government is responsible for the entire monetary policy of Canada.
On motion of Mr. Nicholson the debate was adjourned.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Water Diversion at Niagara
[Stage Direction]
Tuesday, May 9, 1944