1956-03-08

COMMITTEES OF THE HOUSE


[Stage Direction]
Mr. Charles Cannon (Iles-de-la-Madeleine)
presented the first report of the standing committee on public accounts, and moved that the report be concurred in.
Motion agreed to.


[Stage Direction]
Mr. W. J. Henderson (Kingston) presented the first, second and third reports of the standing committee on miscellaneous private bills, and moved that the first report be concurred in.
Motion agreed to.


Right Hon. L. S. St. Laurent (Prime Minister):: Mr. Speaker, when speaking yesterday in connection with the remainder of the uncompleted order for Harvard training aircraft which had been approved last July I said that consideration was being given to whether there should be any interference by the government with the completion of this order and that a statement would be given to the house when a decision had been reached. I wish to inform the house that we have come to the conclusion that under circumstances as they exist the government would not be justified in interfering with the completion of this order.


Hon. George A. Drew (Leader of the Opposition):: Mr. Speaker, in reference to what the Prime Minister has just said, will the Prime Minister not give consideration to the possibility that, at a time when the situation is so tense and the question of shipment to that troubled area could conceivably be interpreted in a different way than would ordinarily be the case, reconsideration might be given to shipment of
aircraft to Egypt at this time, which definitely could be of use in the event of any disturbance arising there?


Louis Stephen St-Laurent: We have given consideration to all those factors and we have come to the conclusion that under the circumstances the government would not be justified in interfering with the shipment which was cleared through customs on February 20.


Mr. Alistair Stewart (Winnipeg North):: May I ask a supplementary question? Is the Prime Minister aware at all of the situation that prevails in the Middle East?


Louis Stephen St-Laurent: I think I am, Mr. Speaker.


Mr. J. G. Diefenbaker (Prince Albert):: May
I ask a supplementary question of the Prime Minister? In view of the announced decision, what is the attitude of the government going to be with respect to the request of Israel? Does it intend to endeavour to equalize the supply of arms or does it intend to intensify the situation in so far as the Arab nations are concerned in relation to Israel?


Louis Stephen St-Laurent: Consideration will be given to all applications as they come forward.


Mr. G. R. Pearkes (Esquimalt-Saanich):: Might I address a supplementary question to the Prime Minister? Is there any change in the situation regarding the export of the 25-pounder ammunition to Israel?


Louis Stephen St-Laurent: No, Mr. Speaker. No decision has yet been made in that regard.


George Alexander Drew: May I direct a supplementary question to the Prime Minister? Can he explain to the house why, in view of the circumstances which have arisen in the past few days, more favourable treatment in regard to the shipment of military equipment should be extended to Egypt than to Israel?


Louis Stephen St-Laurent: There is no outstanding permit for the shipment of equipment to Israel. There was a permit which was in force for the shipment of the balance of this order of Harvard trainers and we felt there would be no justification for the government to interfere with the shipment of what was included in that permit.
1916	HOUSE OF COMMONS
Inquiries of the Ministry


George Alexander Drew: Is it not correct that a permit Mr. Si. Laurent (Quebec East): The permit was issued in connection with the shipment was to the Canadian Car and Foundry, the of 25-pounder shells to Israel?	suppliers of the equipment.


Louis Stephen St-Laurent: There had been no completion of that proposed transaction. The 25-pounder shells were to come from government supplies, and when the matter came before treasury board, as it had to do before it could be completed, the situation was such, because of the activities at that time of the security council, that it was felt that the treasury board minute authorizing the sale should not be passed. Since that time I have made a commitment to the house that there would be no further permits issued until there seemed to be some easing in the international situation.


Mr. Fleming:: Would the Prime Minister give the date of the decision not to approve the issue of the permit by treasury board?


Louis Stephen St-Laurent: I have not that date in mind, but I could secure it for the hon. member.


John George Diefenbaker: Would the Prime Minister say that the decision that was made to allow these Harvard trainers to go forward into this very incendiary region was based on the fact that the government did not want to interfere with contractual relations?


Louis Stephen St-Laurent: No, it was
not that the government did not want to interfere with contractual relations but the government had committed itself to a permit for the export of these Harvard trainers, which we did not feel were military equipment at all, and that being the case we came to the conclusion that we could find no justification for cancelling the permit at this time.


George Randolph Pearkes: May I ask one further question? Are these Harvards addressed to the Egyptian air force?


Louis Stephen St-Laurent: In giving an answer to that, I shall have to rely on what I have read in the newspapers. This was a transaction between a commercial corporation and its purchaser. The permit was for the export of these Harvard trainers to the Egyptian air force. I would assume that they would be addressed to the Egyptian air force, but I have not seen the crates. I saw the report in the newspapers that that was the manner in which they were labelled on the crates that contained the dismounted parts.


George Randolph Pearkes: But the permit was to the Egyptian air force; is that correct?


George Randolph Pearkes: For permission to ship to the Egyptian air force? Did the Prime Minister say that a minute ago?


Louis Stephen St-Laurent: Well, that is my impression. I do not have it in my memory. I do not visualize the terms of the permit; I have seen them; that is my impression.


Mr. Macdonnell:: May I ask the Prime Minister whether it is correct to infer that the decision of the government was made on the basis of some undertaking given to a Canadian citizen some time ago, rather than on the tense state of international affairs at the present time?


Louis Stephen St-Laurent: Well, Mr. Speaker, I think the hon. gentleman will have to draw his own conclusions. Here there have been a large number of commercial transactions between Canadian firms and foreign importers. There was a permit for those Harvard trainers issued last July, and they were made ready for shipment. The government came to the conclusion that it would not be justified at this time in interfering with the completion of the shipment of that order which had been approved last July; this further shipment being something which, according to my information, was cleared through customs for export on February 20.


George Alexander Drew: I have a supplementary question. Does the Prime Minister suggest that a shipment of serviceable planes to the Egyptian air force is outside of the scope of the policy of the government in regard to the shipment of military equipment to a very critical area?


Louis Stephen St-Laurent: No, Mr. Speaker.


John George Diefenbaker: I should like to direct a question to the Secretary of State for External Affairs. He has not had an opportunity yet to explain anything. Will he tell the house whether in his opinion at the present moment the situation in the Middle East-


Mr. Speaker:: Order. I think this matter has been more than fully dealt with within the ambit of what we consider question time.


INQUIRY AS TO REQUEST FOR VISAS BY U.S.S.R. DELEGATION
[Stage Direction]
On the orders of the day:
Mr. J. Wilfrid Dufresne (Quebec West):: Mr. Speaker, I should like to ask the Secretary of State for External Affairs if he is in a

position to answer the question I asked yesterday regarding visas for a U.S.S.R. delegation.


Hon. L. B. Pearson (Secretary of State for External Affairs):: Mr. Speaker, we are in touch with our embassy in Moscow to inquire whether visas have been requested on behalf of the Soviet citizens to whom my hon. friend referred yesterday but have received no reply as yet.


APPOINTMENT OF SPECIAL AMBASSADOR TO THE HOLY SEE
[Stage Direction]
On the orders of the day:
Mr. R. H. Small (Danforth):: Mr. Speaker, I should like to direct a question to the Prime Minister. In view of the announcement that Mr. Pierre Dupuy has been designated a special ambassador to the Holy See for certain ceremonies to be held this month, does that decision by the Prime Minister indicate that he has changed his opinion and view as indicated some time ago that anything which might create religious controversy and dissension or disturb the religious conscience of the people should be avoided?


Louis Stephen St-Laurent: No, and I would not imagine that the presence of someone from Canada to express congratulations to His Holiness on the occasion of his eightieth birthday would create any controversy in Canada.


Robert Hardy Small: A supplementary question, as that is not the question I asked. I asked the Prime Minister whether he has changed his opinion previously indicated to the house.


Louis Stephen St-Laurent: I think my answer implies that there has been no change in my opinion because I do not think that this is anything that comes within the purview of the reference the hon. gentleman has made.



UNEMPLOYMENT INSURANCE


[Stage Direction]
On the orders of the day:
Mr. Bona Arsenault (Bonaveniure):: Mr. Speaker, I wish to direct a question to the Minister of Labour. Would the Minister of Labour make a statement to the house, following the representations made to him by a delegation of members of parliament from the province of Quebec on March 1 last, with respect to matters pertaining to the administration of the Unemployment Insurance Act and also, further, to a statement issued yesterday by Mr. Samuel Audette, director of the forestry service of the U.C.C. farmers' union, on the same subject?
Inquiries of the Ministry


Hon. Milton F. Gregg (Minister of Labour):: The hon. member was kind enough to give me notice of the question. This question was also referred to by the hon. member for Three Rivers (Mr. Balcer) last Thursday. The hon. member for Bonaventure and a number of other members made representations to me on March 1 on this subject, which is again brought to light in the item referred to in the question as given this morning in the newspaper by Mr. Audette of the U.C.C. farmers' union. Perhaps I may be permitted to summarize that, because it clarifies the situation for all concerned.
Mr. Audette stated in this article that lumberjacks who turned down various job offers by the unemployment insurance commission had seen their payments of benefits discontinued. He also said that the jobs were turned down because the lumberjacks did not have the money to travel to localities where work was available or because the wages were below the average woodcutting pay. That is an outline of the general problem, and I can assure you that it is a problem.
When the delegation met me and the matter was brought to my attention, I asked the unemployment insurance commission to carry out an investigation to see whether any unwarranted interpretation was being made of the act against the workers, and that study and survey are being carried on.
I am assured by the commission that they hope to be able to give me ,a more complete statement on this very important matter which I may present to the house next week. In the meantime, all of the cases that are being complained about are being reviewed by the commission to make sure that the intention and the spirit of the Unemployment Insurance Act are being complied with.


J.-Wilfrid Dufresne: Mr. Speaker, has the Minister of Labour been informed that many workers other than lumberjacks in Quebec city have been disqualified for unemployment insurance for refusing work too far away from their own homes? If so, what will be done in this regard?


Milton Fowler Gregg: Mr. Speaker, I think that question bears upon one aspect of the one that I answered in an interim fashion just a few moments ago.



INQUIRY AS TO PAYMENT OF RAIL FARE OF UNEMPLOYED

Mr. J. W. Murphy (Lamblon Wesi):: May
I direct a supplementary question to the Minister of Labour in view of the answer he gave a few minutes ago respecting the situation in some parts of Quebec? Has it

Inquiries of the Ministry been the practice of the government to assume the payment of rail fare or part of the rail fare of those unemployed people who move to other parts of Canada where employment may be obtained?


Milton Fowler Gregg: No, it has not been the general practice. It has been the practice in former winters in areas that were, I will not use the word depressed but where industries were slack at that particular time, to see if the situation could be improved, in co-operation with the province concerned, by assisting workers to move from that area into an area where they could get jobs. This winter we have not had occasion so far to use that method.


Joseph Warner Murphy: I wonder if the minister would clarify the one point I had in mind? He spoke of assistance and would that mean the payment of train fare or part of the train fare in co-operation with the provincial government to move these people?


Milton Fowler Gregg: Yes.



TELEVISION


[Stage Direction]
On the orders of the day:
Donald Methuen Fleming: Mr. Speaker, may I ask the Prime Minister and the Minister of National Revenue if they have received notice of a resolution passed by the legislature of Manitoba on March 6 urging competition in the television broadcasting field in the greater Winnipeg area and the establishment of television stations in other parts of the province of Manitoba? If so, what action is proposed to be taken on this resolution, which I am told was passed by a vote of 47 to 5, with only four C.C.F. and one communist member dissenting?


Hon. J. J. McCann (Minisier of National Revenue):: Mr. Speaker, this is the first information I have had with reference to the recommendation about which the hon. member has been speaking. In accordance with the government's policy, when the policy with reference to the establishment of stations where C.B.C. stations now exist is changed it will be announced. If it is any consolation to the hon. gentleman, I would say that there is not likely to be an announcement in that regard until we hear from the commission that is investigating matters with reference to the C.B.C.



HOUSING


[Stage Direction]
On the orders of the day:
Mr. Claude Richardson (St. Lawrence-Sl. George):: I should like to direct a question to the Minister of Public Works. May I ask the minister, recalling his remarks of January 19, if the joint committee dealing with the so-called Dozois plan in Montreal for housing redevelopment has made a report. If the report has been made, has the minister received a copy and would he care to comment on it to the house?


Hon. Robert H. Winters (Minisier of Public Works):: Mr. Speaker, I have received a copy of the report of the joint advisory committee composed of representatives of the Central Mortgage and Housing Corporation and the city of Montreal. The report is concerned with the clearing of a blighted residential area in Montreal and the construction of a low rental housing project.
The report contemplates federal financial assistance for the housing project under the terms of section 23 of the National Housing Act, which provides for grants to municipalities for the clearance of blighted areas, and section 36, which provides for joint federal-provincial financing of low rental projects.
We are giving this report very careful study just as I presume the government of Quebec and the city of Montreal will. If as a result of the report the municipality and the province now wish to proceed with a project, the federal government will be glad to give sympathetic consideration to their proposals.



INQUIRY AS TO DATE OF FINAL PAYMENT

[Stage Direction]
on 1954-55 crop
On the orders of the day:
John George Diefenbaker: should like to direct a question to the Minister of Trade and Commerce. In view of his warmly extended invitation yesterday to ask a question as soon as the wheat bills had become law, is he now able to advise the house what is the position with respect to the final payment on the 1954-1955 wheat crop?


Right Hon. C. D. Howe (Minisier of Trade and Commerce):: Mr. Speaker, now that the wheat board is in a position to know the extent of financial help that can be expected outside present sources of revenue, I will ask the board to consider the position with

respect to a final payment. My hon. friend will appreciate that the wheat board act requires that a recommendation be obtained from the wheat board before the government can give consideration to a payment. After the board has advised the government as to when the payment can be made I will be glad to advise the house.
I might point out that on the 29th of last month the board finished the payment of $22 million and a fraction by way of interim distribution on the same pool.


John George Diefenbaker: Could the minister give the anticipated date when this may be looked forward to?


Clarence Decatur Howe: That is a matter for the board to recommend. We are not in a position to consider any date until we have a recommendation from the board.



REQUEST FOR GRADE ACCEPTANCE WHEN


[Stage Direction]
On the orders of the day:
Mr. J. A. Byrne (Kootenay East):: Mr. Speaker, I should like to direct a question to the Minister of Trade and Commerce. Would the minister give consideration to a request by southeastern British Columbia wheat producers for an exception to the wheat board regulation which prevents them marketing their wheat on the Pacific coast when shipped by truck?


Clarence Decatur Howe: Mr. Speaker, I do not know of any regulation of the wheat board which prevents the farmers of British Columbia marketing their wheat within British Columbia in any way they like. The problem is to give a grade certificate for wheat that is in a truck. The inspector can know what the grade is when it leaves the grading point but there is no way of being sure of what wheat is in a truck when it reaches its destination. Therefore the wheat board has decided that it cannot give a grade certificate for wheat in a truck.



HUMBER VALLEY


[Stage Direction]
On the orders of the day:
Mr. John B. Hamilton (York West):: I should like to direct a question to the Minister of Northern Affairs and National Resources. In view of the present serious threat of flood in the Humber valley, the area which suffered the worst damage and loss of life during "Hurricane Hazel" a year and a half ago, would the minister take the lead in approaching the
Inquiries oj the Ministry provincial and metropolitan Toronto conservation authorities to try to speed up an over-all plan of flood control and conservation?


Hon. Jean Lesage (Minister of Northern Affairs and National Resources):: Mr. Speaker, last year the provincial government of Ontario had forwarded to me a request for assistance under the Canada Water Conservation Act. This request was withdrawn some weeks ago.


John Borden Hamilton: I should like to ask a supplementary question. I wonder whether the minister would answer my request that he take the lead in approaching these authorities?


Jean Lesage: If the hon. member would take a look at the act, he would know that the initiative must come from the province. The initiative was taken by the province last year but the request has been withdrawn. I believe that is all I can say.



STEEL-REFERENCE TO PRESS REPORTS OF GREY MARKET

[Stage Direction]
On the orders of the day:
Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, may I direct a question to the Minister of Trade and Commerce. Will the minister comment on, or have an investigation made into, the reports of a grey market in steel which appear in today's press?


Clarence Decatur Howe: Mr. Speaker, I know there is a grey market in steel in the United States, and I know that market is being made use of by certain of our builders. However, I am quite sure that there is in Canada no grey market in steel which is dealing in steel manufactured in Canada.



INTERNATIONAL WHEAT AGREEMENT-EFFECT ON CANADA OF REPORTED MEMBERSHIP OF ARGENTINA

[Stage Direction]
On the orders of the day:
Mr. O. C. Trainor (Winnipeg South):: Mr. Speaker, I should like to direct a question to the Minister of Trade and Commerce. In view of the announced intention of Argentina to join the international wheat agreement, with the consequent inevitable lowering of the Canadian quota under this agreement, will it have any effect on Canada's participation in the international wheat agreement?


Clarence Decatur Howe: Mr. Speaker, the question under discussion at Geneva is whether there will be a renewal of the present wheat
1920	HOUSE OF
Inquiries of the Ministry agreement. My hon. friend is aware that the United Kingdom is not a member of the present wheat agreement. Whether the agreement will be renewed or not is still a matter of discussion. My associate deputy minister, Mr. Sharp, left for Geneva this morning and will return, I hope, next week. By that time we should have a clear idea as to whether the agreement will or will not be renewed.


Owen C. Trainor: Probably the minister misunderstood my question. I said: In the light of the announced intention of Argentina, not the United Kingdom, to join this agreement, with consequent lessening in Canada's quota under the agreement, would that have an effect on Canada's participation?


Clarence Decatur Howe: Mr. Speaker, Argentina has never been a member of the international wheat agreement. There is some possibility that that country may wish to join the present agreement-at least I have a dispatch on my desk at the moment which indicates accordingly-but no conclusion can be reached as to the extension of the agreement until we have more information from Geneva.
As I told hon. members earlier, we intend to rely very largely on the advice from our farm advisers at Geneva, who are the heads of the principal farm organizations of the prairie provinces. We have not had that advice as yet and I am not in a position to say whether Canada will or will not be a member of a renewal of the agreement.



FISHERIES


[Stage Direction]
On the orders of the day:
Mr. E. D. Fulton (Kamloops):: Mr. Speaker, may I ask the Minister of Fisheries a question in the light of statements made as reported in the press in Toronto yesterday by Dr. Warren of the University of British Columbia in connection with the possibility of the construction of the Moran dam on the Fraser river. In the light of this statement of the tremendous industrial development envisaged, may I ask the minister whether any further discussions are taking place between his department and representatives of the company with regard to research with a view to reconciling the interests of power and fisheries in that area?


Hon. James Sinclair (Minister of Fisheries):: The engineers of this proposed dam-I refer to the Moran dam-met with the engineers of my department earlier this year. The engineers of my department pointed out the requirements which would have to be met by 

such a dam before any approval could be given. So far the engineers of the Moran proposal have not come back with any concrete suggestion as to how to move fish over a dam that high.



ST. LAWRENCE SEAWAY PROTECTION OF CANADIAN PROPERTY AGAINST CHANGE IN WATER LEVELS

[Stage Direction]
On the orders of the day:
Lester Bowles Pearson: Mr. Speaker, on February 28 the hon. member for Lambton West (Mr. Murphy) raised a question concerning the effect of the diversion of streams into lake Superior upon the high levels of the upper lakes and whether more water could be diverted through the Chicago drainage canal.
I am informed that the range of fluctuations in the monthly average levels of the great lakes from year to year is between 4 and 6 feet. Periods of extremely high and extremely low levels do occur but not at regular intervals. Both the normal fluctuations and the extreme fluctuations are a result of natural conditions, since engineers have calculated that diversions or man-made control works in the' upper lakes influence these levels in the order of a few inches and require approximately ten years to produce their ultimate effect. Neither the water inflow at Ogoki nor any likely increased outflow at Chicago would, therefore, have any significant effect on the high levels themselves. In times of low levels, however, a matter of a few inches may be significant and, for this reason, an increase in the outflow at Chicago would reduce the general amount of water available in the lakes with results which might be prejudicial to Canadian and United States domestic and sanitary uses of water as well as to navigation interests and result in a not inconsiderable loss of electric power to both countries.



AIR TRANSPORT


[Stage Direction]
On the orders of the day:
John Borden Hamilton: Mr. Speaker, may I direct a question to the Minister of Transport. In view of the report in the press this morning that a fourth European air line is about to apply to add Montreal as a port of call on its transAtlantic service, is the minister considering licensing a second Canadian air line for this service?

Industrial Development Bank Act


Hon. George C. Marler (Minister of Transport):: I have not seen the report in this morning's paper and am not able to reply to the hon. gentleman's question.



NATURAL GAS


[Stage Direction]
On the orders of the day:
Stanley Howard Knowles: Mr. Speaker, may I direct a question to the Minister of Trade and Commerce. Is the minister aware of the fact that the federal power commission examiner has rejected Panhandle's application for the export of United States gas to eastern Canada? Will this not make necessary a review of the government's natural gas policy?


Clarence Decatur Howe: Mr. Speaker, I have not seen the reference. The application for the import of Panhandle gas into Windsor was for a small quantity and for a short period, and I do not think any opinion will be changed if that is the decision of the federal power commission.



REPORTED OUTBREAK IN SOUTHERN ONTARIO

[Stage Direction]
On the orders of the day:
Mr. J. A. Charlton (Brant-Haldimand):: Mr. Speaker, I wonder if the Minister of Agriculture is prepared to answer the question I asked yesterday regarding the outbreak of rabies in Ontario?


Right Hon. J. G. Gardiner (Minister of Agriculture):: I have not yet received an answer to the question.



INDUSTRIAL DEVELOPMENT BANK ACT


Hon. W. E. Harris (Minister of Finance) moved: that the house go into committee to consider the following resolution:
That it is expedient to introduce a measure to amend the Industrial Development Bank Act to enlarge the classes of loans that may he made under the act; to raise the limit on the aggregate amount of loans exceeding two hundred thousand dollars from fifty million dollars to seventy-five million dollars; and to make certain changes in connection with the administration of the act.
Motion agreed to and the house went into committee, Mr. Robinson (Simcoe East) in the chair.
He said:	Mr. Chairman, the industrial
development bank has been most active on
behalf of the government and the business community since its incorporation. I should like on this occasion to put on the record some figures involved in the business of the bank and explain the proposed amendment. As I have said already, it is our intention to refer this to the committee on banking and commerce and I do not propose to engage in a debate on second reading.
The industrial development bank was established under the authority of the Industrial Development Bank Act of 1944. The purpose was to supplement the operations of existing financial institutions in providing medium and longer term credits for eligible industries when financial assistance was not available elsewhere on reasonable terms and conditions provided that the investment in the industry by others was such as to afford reasonable protection.
It was generally acknowledged that businesses, whether they were large or small, provided that they were credit worthy, had been able to raise money from their chartered bank connections for their reasonable short term or working capital requirements, and that the larger and better known businesses had not too much difficulty in raising long term funds from investors in the security markets.
It was recognized, however, that there was a gap in the lending field in that it was often difficult and sometimes impossible for small or medium-sized businesses to obtain term loans to commence or to expand their operations. The loans required tended to be too long in term to make it appropriate for the chartered banks to provide them and too small in amount to make it feasible for the borrower to go to the market with a public security issue. The government's concern was to fill this gap for an important segment of the business community and to ensure that the growth of credit-worthy manufacturing firms and certain other specified types of enterprise of small and medium size would not be impeded by the lack of facilities for adequate financing.
Section 12 (2) of the Industrial Development Bank Act required the Bank of Canada to subscribe for the authorized capital of $25 millions, all of which has been paid up. In addition, industrial development bank was authorized to issue and sell debentures not exceeding three times the amount of its paid-up capital and the reserve fund. Under this latter provision the bank had outstanding on December 31, 1955, debentures totalling $10,200,000, all of which were sold to and are held by the Bank of Canada under the provisions of the act.

Industrial Development Bank Act
The bank was authorized to make or guarantee loans or enter into underwriting agreements to acquire securities of a corporation with a view to the re-sale thereof but only if the borrower was engaged or about to engage in an industrial enterprise. A limit of $15 million was imposed on the aggregate of the amounts of all commitments which individually exceeded $200,000. This limit has been twice changed and is now $50 million. An industrial enterprise was defined to mean:
A business in which the manufacture, processing or refrigeration of goods, wares and merchandise, or the building, alteration or repair of ships or vessels, or the generating or distributing of electricity, is carried on.
Difficulties arose in many cases in the interpretation of what was and what was not an industrial enterprise, and to avoid the possibility that the bank and the board of directors might become responsible in respect of loans where the eligibility of the enterprise might be questioned and which only the courts could decide were intra vires or ultra vires, section 15(1) of the act was amended at the second session of parliament in 1949. The act now permits, and requires, the board to exercise an opinion as to the eligibility of a prospective borrower within the meaning of the definition.
From the commencement of business on November 1, 1944, to December 31, 1955, there have been 1,499 loans, investments and guarantees authorized, totalling $127,633,383, of which 254 authorizations were cancelled at the instance of the applicants before the amounts had been disbursed. These cancellations, together with reductions in the amounts of other credits before disbursements, totalled $21,011,768, leaving a net number of 1,245 authorizations totalling $106,622,115. Over the same period the disbursements in respect of loans and investments (not including guarantees where disbursements are not involved) have amounted to $99,120,538, and repayments received from borrowers have totalled $53,851,251. These repayments, with net write-offs amounting to $352,161 over the whole period, resulted in an outstanding amount of loans and investments of $44,917,126 on December 31 last. At the same date guarantees outstanding amounted to $184,237, and amounts involved in "Property Held for Sale" totalled $201,366.
Five hundred and forty-seven accounts totalling $39,901,580 have been repaid in full, and $14,722,319 has been received in partial repayment on loans which are current. These repayments, together with the write-offs for losses of $352,161, which I have mentioned, make up the aggregate of $54,976,060 by which the original authorizations have been

reduced. The remaining net authorizations on December 31, 1955, numbered 698 and amounted to $51,646,055. The difference of $6,343,326 between these net authorizations and the aggregate of the balances outstanding on December 31-$45,302,729-is represented by the amounts of authorizations awaiting disbursement. Nearly 60 per cent of the number of loans made were for amounts not in excess of $50,000.
Up to the end of its last fiscal year on September 30, 1955, after writing off $355,101 in losses (of which some $3,000 has been recovered since September 30) and after providing a reserve for losses of $700,000, the bank had transferred $7,384,259 to reserve fund in accordance with the provisions of the act.
While I am sure that hon. members will agree that this is a commendable record, the resolution which is before you for consideration has as its objective what I consider should be non-controversial improvements which I am convinced will enable the bank to render assistance to a broader field.
Prominent in the changes we are proposing is a new definition of eligible borrowers. This is designed to cover a large number of operations which under the existing definition were borderline cases or clearly ineligible. No type of business which hitherto has been eligible is omitted from the new definition but, unfortunately, no definition we have been able to devise will eliminate borderline cases. The proposal will, however, considerably enlarge the field of eligible businesses. Some examples are that businesses which were not engaged in manufacturing or processing but which required buildings or investments in machinery or equipment for assembling, installing, overhauling, reconditioning, altering, repairing, cleaning (including seed cleaning), packaging, transporting or warehousing of goods, were not eligible borrowers but will be under the proposed definition. This is also true of the businesses of logging, operating a mine or quarry-but not prospecting, wild-catting, or developing-drilling, construction, engineering, technical surveys, or scientific research or the transportation of persons. On the premise that the bank should be able to finance the same fixed assets that it would be financing if they were directly owned by an industrial enterprise, it is proposed that those who supply such fixed assets to an industrial enterprise under a lease, contract or other arrangement, whereby title to the assets is retained by the supplier, should be entitled to apply for financial assistance in the same manner as an industrial enterprise.
Section 15 (1) of the present act requires that in every case the board must express an

opinion as to eligibility, the non-availability of credit from other sources, and the amount to be invested by others. One effect is that even for an application for a loan of a very small amount the officials of the bank must submit it to the board for authorization. A practical example is that a business in, say, Vancouver applying for a loan, even a very small loan, must await the result of the submission to and action by the board in Ottawa notwithstanding that in the judgment of the chief officer of the bank in Vancouver, who would have to recommend the loan in any event, the business is clearly eligible as a borrower and that because of his knowledge of the applicant and of the available security he considers the risk, if any, to be good. It is common practice in the chartered banks to give limited and defined authority to managers of their branches, and the change now proposed would enable the board to authorize the chief officers of the bank to express the opinion as to eligibility, the non-availability of credit from other sources and the amount to be invested by others and thus up to moderate amounts fixed by the board to make credit available without the prior approval of the board.
Another amendment would enable the bank to purchase or otherwise acquire, with a view to the re-sale thereof, stocks, bonds or debentures of a corporation from a shareholder of the corporation, in addition to the authority it now has to do so, directly from the corporation. This change, it is felt, may in some cases enable the bank to extend assistance which other available security would not justify.
We also propose to raise the limit on the aggregate amount of commitments exceeding $200,000 from $50 million to $75 million. The bank's commitments for loans of this size on December 31, 1955, amounted to $24,513,445 distributed amongst 47 accounts. It is not intended that there will be any change in the policy of the bank, which will continue to be to give particular consideration to the financing problems of small enterprises, but with changes which have taken place in the complexity and cost of modern machinery and buildings, it is felt that provision should be made to ensure that the bank would not be prevented from making its assistance available in desirable cases by reason of the present limit on such loans. With lending resources now approximately $130 millions and with commitments which do not exceed $200,000 totalling $27,132,610 on December 31 last, it will be seen that there will be ample room to provide for all of the smaller applications the bank is likely to receive.
Industrial Development Bank Act
The remaining amendments are of a minor character and for the most part deal with administrative matters.


James MacKerras Macdonnell: I have listened to the minister's statement with a great deal of interest -really more interest than I had expected- because the changes that are proposed seem to me more far-reaching than might be expected from the nature of the resolution.
The minister has recalled to our minds the circumstances of the origin of the bank. It was just at the end of the war, at a time when we were all concerned about the state of employment that was going to arise after the war.
As the minister has said, the bank was designed to meet situations which neither the chartered banks nor the bond issuing houses could easily meet. I think that his explanation there was clear. One comment that readily occurs to one is that at a timp when the minister's instrument, the Bank of Canada, is cracking down on bank loans and following a pretty tough policy of restriction, if reports are correct, we have here a provision whereby a considerable amount of new money can be created by the action of the Bank of Canada; in other words, fresh money, inflationary money unless the inflationary effect is counteracted by other policies of the bank.
When extensions were made before, for instance, in 1952 when the $25 million figure was raised to $50 million, the minister then gave us a very clear and explicit reason for the change which was being made. He referred to the fact that there was a special problem with the air transport companies and that the extra lending power was designed for that purpose. At that time I think that explanation was readily accepted. It was not a time such as we have now of tremendous activity elsewhere, not the extreme activity that we have now anyway, and that went through without question.
I am glad that the minister is proposing to refer the measure to the banking and commerce committee because it does seem to me that this great broadening of powers, which comes somewhat as a surprise, is something that we should scrutinize very carefully. We want to be sure that the government is not extending this beyond what is reasonable. In the 1952 extension the minister's predecessor carried our judgment, I think, because he referred to this special kind of enterprise which I believe carried certain definite hazards and which appealed, I think, to the common judgment of members of the house.
The explanation at this time which the minister has given sounds, superficially at

Industrial Development Bank Act any rate, much more like a spreading out and a competing with the existing financial institutions to a degree which may raise questions. One thing surprises me. The minister has indicated the extent to which the lending power has been availed of up to now. He has referred to the balance sheet of the bank as at the end of 1955, and while I have not done the mental arithmetic to figure out how much lending power is still left in the bank I think it is very substantial indeed. We can get that later in the afternoon when we come to questions. It will be some tens of millions of dollars, in fact, several tens of millions of dollars. Therefore I am a little surprised that at this stage and with all that lending power still left the minister has felt it necessary to come to ask for this further power. It would suggest a very wide, perhaps even far-ranging, extension into business which might tempt one to question it. At any rate, we can ask about that later in the afternoon.
The progress of the bank to date has been substantial but not rapid. I was surprised that in the last year the bank's loans, if I remember right, have increased less than $2 million. That is a small amount. If we question the actual operation, the number of loans made, the staff of the bank, the expenses of doing business, I think we shall find that it is a pretty expensive operation. As I say, its progress has been slow, and I would think there is a very considerable onus on the minister when we come to questions to satisfy us that this is really necessary.
I am not overlooking what I believe to be the fact, that before a loan may be made under the act

I should like the minister to listen to this-there has to be a statement by the borrower that he has tried to get money elsewhere and could not. I realize there is a certain protection there, but I do feel that we should watch carefully. We will be interested to see the details of the extensions proposed. The minister has referred to some very important lines of business, logging and so on, and when we get the bill we will have the whole situation before us.
These are the general considerations that arise in my mind. I will have questions to ask the minister, but having expressed my general thoughts I think I had better take my seat now, allow others to join in the discussion and await my time for asking questions later. I repeat that we have had this organization in operation for ten years. I think it was established with virtual unanimity. When the extension was made four years ago I noticed that there was little, if any, criticism because at that time we felt the bank was undoubtedly filling a gap which otherwise might not have been filled. In our
CMr. Macdonnell.l

scrutiny of the bill I think we should be very careful to see that the broadening out, which may take it quite far afield, is really needed and that the government is not just taking one further step into private business which people like myself feel should be watched with the greatest jealousy.


Mr. Cameron (Nanaimo):: Mr. Chairman, unlike the hon. member for Greenwood, I am not so much surprised that the powers in the resolution are larger than he anticipated as I am surprised that they are not a bit larger than they are and that the government has not decided to take advantage of the legislation to develop an institution which might do some of the things that have been proposed in the house this session and outside of it to meet some of the needs of our economy.
Since the session opened we have had in the house proposals for federal-provincial development of power, proposals for a national plan of conservation and development and proposals for decentralization and re-establishment of industry in other parts of the country. Just a week or two ago I came across a statement by the governor of the Bank of Canada which led me to believe that perhaps the Industrial Development Bank amendment we were going to have would be of a much more far-reaching nature than it actually is. The statement appeared in the Ottawa Journal of February 27 in a report of an address by Mr. J. E. Coyne, governor of the Bank of Canada. In addressing a joint meeting of the Canadian and Empire Clubs Mr. Coyne said that he meant that the savings held by life insurance companies, trust and loan companies, credit unions, pension funds and others should be channelled into a greater flow of such funds into common stocks and other forms of equity investment. He said that it would mean more Canadian savings invested in "growth" projects rather than in traditional fixed interest investments.
Mr. Coyne did not suggest any way in which this channelling could take place. As a desirable development in our economy he merely postulated that instead of such a very large proportion of Canadian savings going into careful, safe, fixed interest investments more of them should be channelled into the type of projects in which foreign investors have been engaging in Canada of late.
In the report the other day of a speech made by an eminent Canadian statesman I noticed that he took a rather dubious view of the rise of United States investment in our growth or developmental enterprise. I have here a statement of the United States direct investment in Canada from the years 1946 to 1954. It indicates that we are experiencing

in Canada a serious development in which control of our most profitable enterprises, the enterprises that are most important in our national development, are coming into the hands of those who are not citizens of this country. I think we can view that situation with some alarm without being accused of being chauvinistic in any way or antiAmerican. I think it is an extremely serious situation when those who are not citizens of the country manage to gain control of such a large part of our economy.
I note here that the rate of inflow of United States capital in Canada has been rising extremely rapidly in the last five years. In 1950 it was $243 million; in 1951, it was $309 million; in 1952, $363 million; in 1953, $372 million. Then in 1954, when we had what I see is now admitted to have been a recession, United States investment dropped to $346 million. That was the gross inflow of capital. The net inflow of capital, however, has been ranging in the neighbourhood of $350 million for the last several years.
We are sometimes told-indeed we were told it in this house not long ago-that we have to welcome this United States investment in our Canadian development because the Canadian economy is not capable of supplying the necessary capital. Many persons accept that statement at its face value and say, "Oh yes; Canada is a poor, poor country. We ain't got no money". But when we look into the figures of Canadian assets, we realize that an entirely different picture is the true one. Mr. Coyne states that a certain amount of the pool of capital in the control of life insurance companies should be directed to equity investments in the development of Canadian resources. When we see the figures for 1953-which are the last complete figures I have been able to get-and when we note that the total assets of insurance companies were $5,568 million, we realize that there are vast sums of capital in Canada.
It is interesting to see how those sums of capital are invested by those who have the responsibility for their investment, namely the life insurance companies. In many instances, of course, they are constrained by legal restraints as to the fields of investment they may go into. The life insurance funds are invested to the extent of over 60 per cent in bonds and debentures, and 23 per cent in mortgage loans. Only a small percentage- about 10 per cent of their total assets-is invested in either preferred stock or common stock or equity investments. The assets of the life insurance companies have been increasing at an enormous rate in recent years. In 1951 they amounted to $4,880 million. In 1952 this amount increased by almost $400
Industrial Development Bank Act million to $5,207 million. From reports that I have seen-they are not official reports but they are reports that I have seen in the financial press-I believe the assets of the life insurance companies today total well over $6 billion. Presumably the investments are carried on in much the same proportions as those I have read out.
With regard to the other institutions in which Canadian capital accumulates, we have the loan companies. The loan companies have total assets-and this is again as of 1954-of $253 million. Again we find that the large proportion of it is devoted to investment in bonds, debentures or in real estate mortgages and agreements of sale, and largely in agreements of sale. The percentages are: Mortgages, 70 per cent; bonds and debentures, some 20 per cent. Again only a small proportion-4-79 per cent-is invested in stocks or in equity holdings in development enterprises.
Trust companies are in much the same position, having available funds, as of 1954, of $139 million. Again nearly 50 per cent of this amount is invested in bonds and debentures of the Canadian government, provincial governments and municipal governments. Only 1-3 per cent is invested in stocks or equity holdings.
If we in Canada are going to combat this tendency or trend-which in my opinion is a rather dangerous one-in our economy of the valuable, profitable and economically important investments in resources development falling into the hands of people who are not citizens of the country, then we must take some decisive steps to channel those investments into other fields. That is my reason for being surprised that the government has not taken advantage of this legislation or of this amendment to set up the industrial development bank in that role. It is all very well for us to speak in general terms and say that our Canadian capital should be invested in this field or in that field, that it should be channelled here or there. But unless we set up some instrument for accomplishing that objective, we are of course merely talking to the wind. One can rest assured that those who are in control of these pools of capital know very well what are the best and safest investments for the funds that are entrusted to them and that they are not going to change their fields of investment merely as a result of exhortation. Hence I suggest, Mr. Chairman, that had the government seen fit to expand the powers of the industrial development bank, particularly in the field of the issuance of debentures, to a much larger extent than they are at present permitted, much of these funds might have been channelled into the industrial development bank


industrial Development Bank Act and have been made available for loans to those who are engaged in the development of our resources.
The debentures and bonds of the industrial development bank should be as attractive fixed-interest investments as any others, and might very well attract a sufficient volume of funds at the disposal of life insurance companies, trust companies and loan companies to offset the present $350 million to $400 million annual investment of United States funds in the development of Canadian resources. Sometimes I think we forget the process by which these United States investments are made. We perhaps forget that there have been Canadian citizens who have made certain discoveries and have required financing for their development. From these tables that I have been reading, it is perfectly obvious that the ordinary sources of funds for such development are not readily available in Canada from the traditional lending institutions. We have heard a great deal about risk capital, but apparently Canadian capital has an extremely strong aversion to taking any risks. The first thing we know is that a United States Company has decided to undertake this very development that has first been mooted by a Canadian. In reading over the reports in Hansard of 1944 when this bill was first introduced into the house I noted that there were members of parliament at that time who considered this step to be extremely dangerous, indeed to be a socialistic innovation. I refer to the setting up of the industrial development bank. It was apparently going to lead us down the path to complete socialism. I would suggest that it has signally failed to do that, and that it has not even functioned to the extent it was expected to function.
Never at any time has the industrial development bank been operating at the capacity of the existing legislation. At the moment it is operating at about half capacity. It has a lending capacity of approximately $100 million but has less than $50 million out now. This is, of course, partly because of the restricted fields of investment to which it was confined but it was also because for a number of years since 1944 the development of Canada was subordinated to some extent to the provision of arms for the Korean war and the provision of defence installations for the cold war. But since 1950 the tempo of development in Canada has increased enormously. I suggest, Mr. Chairman, that if we wish to preserve the Canadian economy primarily as a field for Canadian investment and Canadian opportunity, then the government must take some steps to see that we proceed in that direction.


1 would urge the Minister of Finance to seriously consider adding to his amendment an amendment which would increase the powers of the industrial development bank to issue debentures and to increase their capital stock to permit that, so that they would have on hand funds for development investment to equal or at least approximate the funds which are now brought in from across the line. Only in that way are we going to cope with the problem that more and more Canadians are viewing with increasing alarm.


Mr. Blackmore:: It will be my privilege, Mr. Chairman, to again disagree with the hon. member for Greenwood, as I have done so often, and approve of the minister's move to expand the activities of this bank. I see no reason, Mr. Chairman, why we should not develop this bank into something corresponding to the Reconstruction Finance Corporation of the United States. It seems to me that Canada acts altogether too helplessly and babylike for a nation of her economic strength and population. She does not seem to have enough courage to get up and do anything in a financial way to help herself. This institution could easily be developed into an institution through the use of which we should not sit around on a log and sigh because United States capital does not come in fast enough to develop our oil resources, our gas resources or build our pipe lines or do any of the many things that need to be done in Canada. We shall manage to do these things for ourselves, just as we undoubtedly have the capacity to do. I, therefore, heartily approve of the minister's move in expanding this act. My only disappointment is that he has not expanded it nearly far enough. I think if he had doubled the activities, capacities and powers of the bank this year, he would not have gone recklessly forward in his efforts.
Now, that is the first comment which Social Crediters would make, and I believe all factfacing people would take that attitude. We come now to this matter of inflation once more. We find the hon. member for Greenwood contributing to the delinquency of Canadian public opinion by trying to convey the absolute falsehood that what we are in at the moment is an inflationary period. He knows, and he has heard time and time again, that the increase in prices from which we now suffer were the direct result of the increase of $5 a ton in the price of steel in April, 1946. Will the hon. member rise and say he does not know that? If he does not know it, will he write it down somewhere in his notebook so he cannot forget it. He knows certainly that in 1946 the steel workers struck for their share of the $5 increase,

thereby increasing the wage rates all across Canada. Certainly he has enough intelligence to know that such a performance in our Canadian economy would result in an increase in price all across the board! Why in the name of common sense does the member get up here and time and again try to delude the Canadian people into thinking that this manipulated rise in prices from which we are suffering is inflation? I just cannot understand the mentality of the hon. member for Greenwood and so many of the people who are in behind him.


Mr. Fraser (Peterborough):: Like yourself.


John Horne Blackmore: I am ready to take on any member of the Conservative party any time he likes.


The Chairman:: Order. I wonder if the hon. member is making that assertion at the appropriate time? I listened carefully to the remarks of the hon. member for Greenwood and I found them to be on this resolution regarding the industrial development bank. I do not think in this resolution we are discussing inflation and I would ask the hon. member to confine his remarks to the resolution which is before us.


John Horne Blackmore: If Your Honour was listening to the hon. member, it certainly seems to me he would have heard the hon. member say that there was reason for anxiety about the expansion of the activities of this bank by reason of inflation. He said the money that would be coming out would be inflationary money. Surely the chairman remembers that. Then, if the hon. member for Greenwood can make remarks about inflation and get the headlines in this country to delude the people, surely it is fitting that the member for Lethbridge should answer what the hon. member had to say, even if he does not get the headlines.
In respect of this matter of inflation, I am answering what the member for Greenwood implied that we had in Canada at the moment.


William Alfred Robinson: If any reference was made by the hon. member for Greenwood to inflation, and I think I listened carefully to what he said, it was certainly a very minor one. I thought the hon. member was discussing this resolution. I feel that hon. members generally will agree that this resolution is considerably confined, and I do not think hon. members would wish me to allow a general discussion on inflation on a resolution of this kind, and I certainly do not intend to do so.


John Horne Blackmore: I am not opening up, Mr. Chairman, a general discussion; I am pointing out how absolutely fallacious the remarks of the hon. member for Greenwood were when
Industrial Development Bank Act he made objection to the expansion of the powers and functions of this bank; that is all. How could an extension of the activities of this bank, as is proposed in this resolution, possibly result in inflation when we have three or four different conditions existing in Canada which are anything but inflationary, namely substantial unemployment; surplus goods of every kind; we have extensive credit buying, indicating there is a shortage of purchasing power, and we have a tremendous amount of resources which are not being used.
In the face of those four conditions, how could anyone maintain that the expansion of money through this industrial bank is going to cause inflation? I will say no more at the present time about this aspect of the question. I simply state that no fact-facing individual who is desirous of giving the truth will object to the enlargement of the powers of the bank on the ground that it may cause inflation. That would be the second general observation of Social Crediters.
The next one is simply that something must be done to prevent the influx of United States capital into Canada to buy shares in our productive enterprise. I wonder whether the government really intends to give this country to the United States. I wonder whether government policy is definitely designed to get Canada so deeply in debt to the United States that she will come one morning and take us all over. We are permitting a vast accumulation of United States capital, as the hon. member for Nanaimo pointed out, to go on, with nothing being done by Canada to offset that, to produce Canadian capital with which to buy our own enterprises and develop them, thereby preventing so great an influx of United States capital. I would say that this move to expand the activities and the powers of this industrial development bank is a move designed to prevent in a measure the enormous use of United States capital in the development of Canadian industry.
The next comment which I would make is simply that the interest rate is going to be too high. I see no reason why the interest rate should be as high as it has been on loans from this institution. I see no reason why money should be borrowed by this institution with which to carry on its activities. I see no reason why the Bank of Canada should not create all the money required for the activities of this bank and put that money at the disposal of this bank at the cost of creating the money. The more I see-


Gordon Knapman Fraser: That is inflation for you.

Industrial Development Bank Act


John Horne Blackmore: That is what the Bank of Canada was created for, was it not?


Gordon Knapman Fraser: Not for inflation.


John Horne Blackmore: What is the Bank of Canada given the power to create money for?


Gordon Knapman Fraser: Not the way
you want it.


John Horne Blackmore: The hon. member thinks that any increase in money is inflation. Well, he has not even learned the a.b.c.'s about inflation yet. He just does not know what the word means. He has picked up some antiquated old dictionary and has found in it the statement that an increase in money is inflation. There is no inflation unless there is a rise in prices, and if there is a rise in prices which is not the result of money, that is not inflation.


Gordon Knapman Fraser: Just what is
inflation, then?


John Horne Blackmore: Inflation is a rise in prices resulting-


William Alfred Robinson: Order. I hope the hon.
member for Lethbridge will not answer that question.


Gordon Knapman Fraser: He does not
know the a.b.c.'s of it.


John Horne Blackmore: I did not hear what the
chairman said. I answered an argument of the hon. member for Greenwood a short time ago who said that inflation was too many dollars chasing too few goods. Talk about having too few goods in Canada when we have a surplus of every kind of goods we can mal;e, and labour ready to go to work to produce more goods, and a large percentage of our factory capacity unemployed! Talk about inflation in a situation like that! Why, it is just simply ridiculous; it is not to be believed. Therefore, I say, Mr. Chairman, the minister should be taking money out of the Bank of Canada with which to finance the activities of this bank.
These are the only objections and the only criticisms that I have to make in respect of the resolution before us. Therefore, the minister will have the complete approval of the Social Credit movement in going forward and expanding the activities of this industrial development bank to the extent that it will be able to finance a very large percentage of the industrial activity of this nation.


Mr. Mclvor:: Mr. Chairman, I am intensely interested in the amendments to this act because of certain business people who cannot borrow from this bank. In our cities and towns our retail merchants have had

a hard time because of the competition of chain stores and mail order catalogues from Canada and from the outside. These retail stores have decided to compete with the chain stores by changing the internal part of their stores and making it easy for a customer to pick up his basket and pick out the goods he wants the same as he can do in a chain store. The result is that they need to expand their buildings because their business is increasing. What I want the minister to tell me today or later is that these retail merchants, headed by the retail merchants' association of Canada, will be able to borrow from this bank, just as wholesalers and other business people can, for the construction of the extensions to their stores.
Thank you, Mr. Chairman, that is all I have to say now, but I shall say more later on.


John Borden Hamilton: Mr. Chairman, we certainly have wonderful opportunities here to take courses in economics, which cram in all the very different points of view in the course of a very few minutes.
I find myself just a bit on the horns of a dilemma in connection with how I feel about this resolution. I think it is well-known here that members of my party and I are strong advocates of the free enterprise system. I heard someone say "what does that word mean?" I, of course, understand that it is a word that a lot of people dare not pronounce at all, but it is one that I still feel I can use without any fear. It may be that in this particular instance the people who might have made sure that this type of help was available to industry may have overlooked the possibilities.
I believe the real reason for the legislation was to cover the gap which existed under our banking system and that which existed in the United States. Under the legislation in the United States the banks are quite entitled -the terms of reference under which they operate-to take security on real property as a method of giving loans. In this country, of course, that is not possible. Under section 75 of our own Bank Act, subsection 2(c), we find that our banks are not permitted to lend money or make advances upon the security, mortgage or hypothecation of any lands, tenements or immovable property. I know there is one exception to that, which is set out under section 79(1), under which they are entitled, under certain circumstances, to take mortgages of that kind as additional security. But generally speaking, the rule precludes them from making use of that kind of security. That restriction is not apparent under the United States legislation,

and as a result the average industrial borrower is able to get pretty good coverage as far as his financial requirements are concerned. When I speak about the average borrower, I am speaking about the smaller businessman. When we get up into the class referred to by the minister, the people who are borrowing $200,000 or more, in most instances they are able to go out and get a financial house somewhere to float their debentures, and are able to get the help they need. If I understand the amendment in this connection, it will tend to increase the help in that category, but I do not see it becoming any more available, as a result of this particular amendment, to those who are borrowing smaller amounts of money.
I am wondering why the chartered banks did not recognize this need, or shall I say this opportunity of getting into this type of investment. I do not think it was because they had not sufficient funds to handle this type of investment. Their most recent statements to the end of January this year indicate that the total amount of loans made by this government institution might be described as peanuts in so far as their total assets are concerned, and their ability to handle this type of transaction.
I want to give the same word of warning I gave last year when we were considering an item similar to this. If these institutions do not see the necessity for handling this type of loan, if they do not come forward at the time when assistance is needed, then they cannot complain if this government moves into every phase of business. I should think therefore that we might say to those institutions that this gap still exists. They are the people who have the facilities to handle this type of loan from one end of the country to the other.
I think this is one of the weaknesses in the industrial development bank set-up. We get their brochures every year and they indicate that they have only four offices across the country. That may be all right for those who are borrowing large sums of money and the necessity of travelling several hundred or a thousand miles to one of the offices would not be something to overcome them, but the small businessman who may want to borrow $25,000 or $35,000 has this hazard placed before him and there would probably be some reluctance to take this trip to see if he could borrow money. I think the total number of loans that have been made under this legislation offers concrete proof that this type of financing is not being made available to the people who really need it.
Then I think there is another restriction upon the use of the facilities of this bank. This is really an internal matter in so far 67509-122
Industrial Development Bank Act as administration is concerned. I do not know whether the minister is moving to correct this, but he has indicated that greater responsibility may be given to the regional people in accepting applications for loans. I think it is ridiculous to place a limit of $5,000 on an application that may be accepted by someone who is acting in a supervisory capacity over one-quarter of the country. At the present time applications for greater amounts must be submitted to the head office. There are also time-consuming delays in connection with the administration of this act, and these should be eliminated for the benefit of the borrower who is at the stage where he needs money and needs it in a hurry.
I think the minister said something about the board of directors not having to approve in certain instances, but I think he should move to correct a situation where various people who are acting in a supervisory capacity in one part of the country or the other are going to find themselves in a position where they have no discretionary power at all in the case of the ordinary type of loan.
I know that it is a characteristic of the chartered banks that limits are placed upon the discretion of their managers, but it should be remembered that these banks have branches in almost every town and hamlet in the country and it is much easier for someone to go to a branch to make an application and then have it sent forward for approval.
In considering this particular problem I am reminded of the speech made the other day by the hon. member for Brandon-Souris who had moved a resolution about the decentralization of industry. If we are going to have true decentralization of industry there should be decentralization of the facilities of this bank, which was created for the purpose of ensuring that industry could get the type of assistance it needed.
If we are going to provide these facilities, let us make them available to the smaller groups of people; let us see that they are available to the smaller communities. They should not be concentrated in just a few offices. I see that the office in Montreal has jurisdiction right through to Halifax. The office in Toronto has jurisdiction from Montreal to Winnipeg. Then there is an office for the west and another one for British Columbia. If this bank is to fulfil its true role there should be additional offices opened in order to make its facilities available to other people.
I want to say that the amendment made previously has done a remarkable job in the air transport field. It has enabled the development of air transport to remote districts

Industrial Development Bank Act by companies whose opportunity to borrow was limited because of the type of flying they were doing. It has enabled pioneering companies of this type to obtain assistance which would not have been available otherwise.
I have only one other observation to make. I notice that this bank does not pay corporation taxes. The other day one of the hon. members to my left argued that it should not be necessary for certain types of government institutions to make a profit, but it seems to me that if we are going to avoid socialism in the use of this particular type of institution we should expect this institution to face the same industrial and business hazards that we expect any other person carrying on any type of business or banking to face.


Mr. McCullough (Moose Mountain):: Some members would insist on that though we would end up with economic suicide.


John Borden Hamilton: Some hon.
members feel that if we do not agree with what they say we will be committing economic suicide. As a matter of fact, the world has not committed suicide yet and there are very few places where that group happens to be running things. I submit that the operations of this bank should be carried on the same as those of any other type of business. They should be ready to face the same hazards and be able to come back here and show a profit.
As they do not have to pay corporation taxes I suppose it could be assumed that those who borrow probably get a better deal than the fellow down the street who has to borrow from another institution which must show a profit for its shareholders. However, I think generally those institutions are able to show a profit and still operate on the same basis as institutions which do not have to show a profit.
These are observations which I think should be made at this time. If the facilities were extended to provide greater access for the smaller type of businessmen, then I think this would provide a greater future for the employees of this bank. I think there is a tendency in a great many cases with institutions of this kind that their employees get to a certain level and their opportunities then disappear. As a result we find that we lose a great many well qualified people from these institutions to other places in the economy. If we are going to use this type of thing, let us see that it benefits not only those who are borrowing. Let us see whether it can be made to give some benefit to those who spend their lives doing this work.


Mr. Regier:: In the preamble of the annual report of the industrial development bank I notice a portion of a sentence that refers to the objects of the bank. It says that one of its objects is with particular consideration to the financing problems of small enterprises.
The industrial development bank, I take it, was organized to provide a means of granting assistance to small enterprises. It was meant to be a means of sustaining and developing the so-called free enterprises of the dominion. However, when we look at the statistics released recently by the Department of Trade and Commerce and see the economic outlook for 1956, telling us that next year we can expect the sum of $7,500 million to be invested in Canadian enterprise, and when we look at the amount that is being supplied by the industrial development bank to small enterprise, and we realize that this year it was less than $13 million, we come to the conclusion that the government of Canada has very little faith indeed in the solvency of so-called small enterprises.
Small enterprises in Canada is the only type of free enterprise that we have, and I have regretted to see so little assistance available-$13 million out of $7,500 million-[DOT] to small enterprises. Large enterprise is able to get all the money it needs in the money markets of the nation and, if it is unable to get it here, as in the case of the Trans-Canada Pipe Lines, it then goes south of the border and is able to add to the amount of money available to it. I am quite prepared to grant that a large share of this $7,500 million that is going to be invested next year is being invested by the federal government, the provincial governments, the municipal governments and other local bodies such as hospital boards and so forth. However, the fact remains that nowadays there is oodles of money available for municipal, provincial or federal government enterprise. There is oodles of money available for huge private enterprise. There is very little money available in the nation for small enterprise; and I regret this.
In looking at the distribution of the little money that is available to small enterprise, I regret that, of the $12,700,000 that I believe was loaned by the industrial development bank last year, almost the whole of this money went to that section of industry that was engaged in manufacturing. The industries engaged in providing services received very little money indeed. The hon. member for York West expressed his appreciation of the money that was available to one service industry, for the expansion of air services. However, I believe that if he will look at the record he will see that thus far, out of

the $104 million worth of loans made, the air services received slightly over $3 million, a niggardly percentage. I see that the refrigeration services received only a little over $5 million.
If we look at the list of individual enterprises given on page eight of the report, we note that almost all of the money that was available was made available to manufacturing industry. You had to turn out a product, sr your application was almost automatically laid aside and you were declared ineligible. For example, I know the case of a man in southern Manitoba who erected a cleaning plant. These cleaning plants for the cleaning of seed grains are becoming popular across the prairies. This man found, after the completion of the building and the installation of some of the necessary machinery, that his estimate of the costs exceeded his estimate of the funds he would have available, and he applied to the industrial development bank for a loan. He received a very abrupt reply to this effect: "You are a man of good character; your investment in this enterprise will be much higher than the minimum standards laid down. However, because you do not manufacture a product, you are ineligible for a loan." I think that is regrettable.
I think our investment in Canada in enterprises of additional productive capacity is high enough. It is time we called a halt and applied the brakes to this ever-continuing investment to add to the productive capacity of the nation, the ability of the nation to produce more and more of the goods which we already cannot sell and for which we cannot find markets. More of the available resources of our nation might be devoted to investment in the provision of services.
I regret, for example, that more of the funds are not made available for investments on the part of our Canadian municipalities. I feel that amendments might very suitably be introduced whereby the industrial development bank might be used as an instrument to help municipalities to finance self-liquidating projects.
I am not advocating that money be made available to municipalities for the building of sidewalks or any other non-self-liquidating project. However, I think that such things as the municipal distribution of natural gas, electrical energy and municipal water services could very well be financed through the industrial development bank.
I regret that the industrial development bank is not operating to its authorized capacity. I believe it is authorized to make loans to a maximum of $75 million. However, I see that total loans outstanding at the present time only amount to some $44 million.
67509-122i
Industrial Development Bank Act Only a little over half the money available by law to the industrial development bank has yet been made available to Canadian industry. In my opinion the policies of those charged with the responsibility of administering the act are far too conservative. When we look at the record of the losses that have been suffered I think we will have to agree with the statement that the operations of the bank have been on a far too conservative basis. Last year their write-offs were only $37,000 out of an interest income on loans, investments and guarantees of $2,193,848. Looking at the whole history of the bank, we see that since November 1, 1944, it has had interest income-I should like to emphasize the word "interest"-of $12,329,626 while losses only amounted to $355,101. I think that in itself is sufficient evidence to convince anyone that the industrial development bank has not been taking its fair share of risk and has been overly and ultra conservative in its policies. The losses are small.
I believe that another reason why the bank has not been utilized even to the degree now allowed is that the services of the bank are, relatively speaking, unknown to those who have the greatest need of the bank. I think it can be fairly said that there is hardly a multimillionaire in Canada who does not know of the services available to the Canadian people through the industrial development bank. I think it is fair to say that there is not a member of the house or of the other place who does not know of the services available through the industrial development bank. However, as I go about the country I find that very few of the small enterprisers, and these are the only free enterprisers, have ever heard of the services made available by the parliament of Canada through the industrial development bank. I think a lot more energy might well be devoted to making the services that are available known to those who need the services and for whom the services were meant in the first place.
In glancing at who are responsible for the administration of the act and the names of the board of directors from across the country, I fail to see a single representative of the small enterprisers of our nation. I see a goodly number of men who are responsible for some of our major Canadian enterprises and who, if and when they need money, are easily able to obtain it, as are their associates, in the money markets of the world. We have our government bodies to whom money is available by the floating of bonds and debentures. We have our multimillion dollar corporations to whom money is available in the money markets of the world. However, in the case of those owning small

Industrial Development Bank Act enterprises money for capital expansion is often very hard to get, and in my opinion there should be some representative on the board of directors of those for whom the services of the bank are meant.
We had a resolution the other day concerning the decentralization of industry in Canada. I intended at that time to say a word on the decentralization of the biggest industry in the country, the government of Canada. Among other things that I meant to mention at that time, and I am going to mention it now because it is applicable here, is that in the list of supervisors of the bank I see the name of Mr. N. C. Tompkins, 475 Howe street, Vancouver, B.C. Mr. Tompkins is supervisor for the whole of Alberta, British Columbia, the Yukon and the Northwest Territories. The bank is intended to aid small enterprises, and I do not believe that a man stationed at 475 Howe street, Vancouver, has much knowledge of small enterprises in the northern part of Alberta. I think it is time that the government decentralized its own affairs. If the industrial development bank is supposed to help small industry, its operations will certainly have to be decentralized to a much greater degree than to have one supervisor responsible for as vast a territory as Alberta, British Columbia, the Yukon and the Northwest Territories.
As I mentioned before, I am concerned about the conservative policies of the bank as evidenced by their very small losses. I should also like to add that I think the bank is too conservative in that it provides only some of the debt capital and none of the risk capital of Canadian industry. I believe it could perform a valuable national service if it turned some of the United States capital invested in Canada from the risk capital category to the debt capital category. As far as I can ascertain, the industrial development bank is only willing to enter into the debt capital field and enters the risk capital field only to the extent of surplus funds on hand. I think that policy is wrong and a lot could be done both in the interests of Canadian industry and the national welfare of the country as a whole.


Mr. Mitchell (London):: Mr. Chairman, in view of the fact that the bill to follow the resolution is going to go before the banking and commerce committee I have only one very short comment to make. I believe that the act as it has worked in the past has been in fact of considerable assistance to the small business enterprise which finds it difficult to attract capital in its initial stages. I have one worry resulting from the resolution which leads me to ask this question. Is the increase in the authorization for the larger loans going


to drain away money which was heretofore available for the smaller loans? Apparently there is no intention to increase the capitalization of the bank. When the bill is before the banking and commerce committee I hope there will be given some explanation as to why it has been found necessary or, in fact, desirable to make more larger loans available to institutions which, it appears to me on the face of it, could well find their necessary capital requirements through more normal money markets.


Mr. Hamilton (Notre Dame de Grace):: I
have just' a few comments to make on this bill, Mr. Chairman. I think all of us from Montreal have followed the rise and development of the bank with particular interest because it is one Ottawa operation which has been decentralized and which has, as it has had since its inception, its head office in Montreal. Just for a moment I should like to pay tribute, in dealing with the resolution, to the officers of the bank and the contribution which they have made not only to the development of the bank itself but in certain ways to the advancement of Montreal. I am thinking particularly of the man who took charge of the industrial development bank at its inception in 1944 and more or less guided and directed it until just a short time ago. I refer to Mr. S. R. Noble. Not only did he do an outstanding job for the government in that capacity but he found time to be a key figure in the development of one of our hospitals in Montreal-I refer to the Julius Richardson Convalescent Hospital Incorporated-and to play his part in the community in many ways. I think that men like him, coming from the public service of Canada, are both a credit to the public service and of great benefit to the community in which they are located.
The hon. member for Burnaby-Coquitlam in his remarks made one statement with which I at least should like to take issue. There may have been other statements I should like to take issue with, but to my mind this was an outstanding one. He said in effect that he felt it is time that we called a halt to this investment in manufacturing capacity in Canada, the producing of goods we cannot sell. He then went ahead to say that he would prefer to see investment in the service industries. We had this afternoon two speeches from hon. members of the C.C.F. party. The one preceding the hon. member for Burnaby-Coquitlam sounded to me very much as if he wanted an expansion of industrial capacity and welcomed the opportunity to find more capital for that purpose. I have already quoted the diametrically opposed remarks of the hon. member for Burnaby-Coquitlam.


Erhart Regier: Not necessarily opposed.


William McLean Hamilton: On
the Hansard record, Mr. Chairman, they are certainly and necessarily opposed irrespective of what, as an afterthought when the discrepancies are pointed out, the hon. members may feel.
I mention this point because I think that any group in this house, on this question of the development of Canada and the development of our manufacturing and industrial capacity, should have a clearly-defined and definite policy.


Mr. Ellis:: Tell us yours.


William McLean Hamilton: I
definitely shall do so. That is what I am coming to. I think the socialist party to my left are pulling in their horns and would like to see us go back to being a nation of hewers of wood and drawers of water. It is very interesting to have this on the record. Certainly one reason that I am in this Conservative group in this house, and one reason why I have a great deal of sympathy with the industrial development bank and its purpose, is the fact that I stand four square for the development of manufacturing capacity and industrial capacity and for the development of the economy of this nation as a whole. That point has been made time and again by members of this party. I think we saw, in some of the remarks that were made this afternoon, an evidence of one clear-cut difference between at least one of the gentlemen to my left-


Alfred Claude Ellis: The Tories put both points of view in one speech.


An hon. Member:: You can even change your vote.


William McLean Hamilton: Mr. Chairman, perhaps that is a misinterpretation of the fact that the Tories always try to look at both sides of a subject-


Alfred Claude Ellis: And play both ends against the middle.


William McLean Hamilton: -and then choose and support that which we believe to be right.


Mr. Dinsdale:: Common sense.


Mr. Argue:: Nonsense.


William McLean Hamilton: Mr. Chairman, you seldom-I almost said never- see a situation such as that which arose in the C.C.F. party this afternoon represented in the ranks of this group.


Some hon. Members:: Oh, oh.
Industrial Development Bank Act


Hazen Robert Argue: The whole party does it over there.


Alfred Claude Ellis: It is a commonplace over there.


William McLean Hamilton: Mr. Chairman, I enjoy all these interjections. I remember that when I first came to this house, someone said to me, "They will never barrack you or interrupt you unless you are making them uncomfortable and unless you are scoring points against them".


Alfred Claude Ellis: Or entertaining them.


William McLean Hamilton: There is nothing that pleases me quite so much as the type of barracking which I am getting from the socialists at the present time.
Having said that, Mr. Chairman, I should like to deal with one or two further points on this bill. The hon. member for Burnaby-Coquitlam made one point which I find here in my notes and on which we certainly find ourselves in agreement, namely the need for this industrial development bank to make itself better known to the small business men in Canada and to sell its services to that group in our economy. In a few moments I shall make reference to the rather weak job which has been done in that particular field by the bank. But I would point out that nowhere in their operating statement for the preceding year do I find any item whatsoever representing advertising or a sales effort of any kind on the part of this bank. As the large commercial banks move ahead and as they quite properly expand their operations and make their services better known to the Canadian public, it seems to me that a similar function might well be performed by the industrial development bank. As one example of the public relations work which is being done in this field by the other banks, I need only cite the monthly news letter published by, for example, the Royal Bank of Canada, the Bank of Montreal and the Bank of Nova Scotia. Those documents play an important part in influencing Canadian business men and in making them conversant with various matters. While I certainly do not counsel a tremendous expenditure on publications by the industrial development bank, nevertheless, since it is apparently going to have even more to do as the result of this bill which is to come before us, I would hope they would make an increased effort to let the small business men of the country know of the availability of their services.
Now, I would refer for a moment, Mr. Chairman, to the composition of the board of directors of this industrial development bank. It is an interesting fact that one-third of the board of directors come from Ontario,

Industrial Development Bank Act five out of the 15, and two out of 15 come from Quebec. The remainder of the board is composed of one member from each province in Canada. When I set that against the loans being made by the bank I found a surprising discrepancy. For example, taking the current authorizations at September 30, 1955, we find that while Ontario has one-third of the directors, businesses in Ontario have borrowed only some $19-6 million out of a total authorization for all parts of Canada of $67 million. Against that we find that Quebec, with only two directors, has borrowed $26-4 million, substantially more than Ontario. And then, we find that British Columbia, with only one out of the 15 members on the board, has had authorized for the use of businesses in that province some $11-6 million. It would seem to me that there is a substantial discrepancy between representation on this board of directors and the activities of the bank in Canada. While I have no doubt they are all fine and estimable men-I see a number of them are members of the public service of Canada, which makes them doubly estimable, I have no doubt, in the view of this house as in my own view-I would hope that some consideration would be given to dividing this one-third group from Ontario and distributing directorships somewhat more widely across Canada.
Again, the point has been made that the bank tends to work most heavily in the field of large loans, that is large loans for it. But 1 do not think anyone has yet made the point this afternoon of just how evident that is, because some 50 per cent of its total current authorizations at September 30, 1955, were for loans of $200,000 or over, whereas for loans of under $200,000 they only had the remaining 50 per cent of the bank's authorization. Admittedly many more individual firms were represented by smaller loans, but even there there was only a total of 632 firms with loans of $200,000 or less. In the real small-business class, with loans of $25,000 or under, there were only 240 firms that currently enjoyed the benefit of this banking service. I, for one, would be very happy to see the extension of the bank's activities more heavily in the field of the small borrower, the man who most needs this help, rather than in the field of the large borrower.


James MacKerras Macdonnell: I should like to ask the minister one or two questions. A point has been made that one effect of the present amendment will be to increase the amount from $50 million to $75 million which may be used for loans of $200,000 and over. In view of the fact that the total lending power is not, I think, being increased, that means that automatically the amount available for

smaller loans may be restricted. Can the minister say whether there has been an indication of increasing applications from the $200,000 and over class? Can he say whether the bank expects that, from some of the new businesses which may be dealt with, larger loans are to be especially expected?


Walter Edward Harris: First of all, Mr. Chairman, there is no particular large loan expected, but as my hon. friend knows, the amount of loans that may be used for loans over $200,000 began at $15 million, was then increased to $25 million, then to $50 million and now it is proposed to go to $75 million. Each of these changes has been made in connection with an extension, if you will, of the lending authority. As he pointed out himself in his earlier remarks, on the last occasion it was when we introduced into the class of matters on which loans could be made commercial aircraft. Now, at this time, when it was felt desirable to extend again the class of businesses to which loans could be made, it was felt that in that group there would be a proportionate number which would be over the $200,000 and for that reason it was thought desirable to increase the limit from $50 million to $75 million. I think the evidence which will be produced to the committee will show that, so far as I know, there is no one thing or one group of businesses except those we are now introducing for the first time. which would give rise to the additional lending authority over $200,000.


Mr. Brooks:: I just wanted to ask the minister one question. A good many of those speaking in this debate have emphasized the decentralizing effect of this borrowing, and of course that is a splendid feature. I should like to know from the minister just how much it does benefit each section of the country, that is if he can let me know how the borrowing has been distributed in the different sections of the country to illustrate just how there has been decentralization in the matter?


Walter Edward Harris: I am not in a position to do that at the moment, Mr. Chairman, but before the committee we will produce the figures by provinces or by areas to my hon. friend's satisfaction to indicate how this has been of use to businesses which otherwise would not have had a loan.


Alfred Johnson Brooks: You are satisfied it has been.


Walter Edward Harris: Yes.
Resolution reported and concurred in.

Mr. Harris thereupon moved for leave to introduce Bill No. 165, to amend the Industrial Development Bank Act.
Motion agreed to and bill read the first time.



SMALL LOANS ACT


Walter Edward Harris: the second reading of Bill No. 51, to amend the Small Loans Act.


James MacKerras Macdonnell: Is the minister going to make a statement?


Mr. W. M. Benidickson (Parliamentary Assistant to the Minister of Finance):: The
minister has indicated, Mr. Speaker, that it is his proposal that this bill be referred to the banking and commerce committee. Because of that, and since we have already had a debate this session on a public bill on the subject of small loans, and because we had a debate last year on the subject of small loans with respect to a similar bill, I propose to be quite brief. I know also that this particular bill has been in circulation for some time and has had fairly widespread comment throughout the country.
Last year, in connection with the debate on the bill proposed by the hon. member for Assiniboia I made some reference to the work of the parliamentary committees in this field in 1938 and 1939. My remarks are contained in Hansard of last year in the debates of May 6 and May 27. I do not propose to repeat illustrations of the points of view of the parliamentary committees again today. I do think, however, it would probably be appropriate to summarize the aims and objectives of past parliamentary committees by quoting from a brief that was submitted to the government last summer by the representatives of lenders in the small loans field. Amongst other things they gave the parliamentary committee this credit by saying:
In the words of the chairman of the House of Commons banking and commerce committee,-
That is the committee of 1938.
-"throughout its inquiry your committee's objective has been to secure the best procurable rate for the borrower".
That is the end of the quotation of the words of the chairman of the committee at that time. The brief of the lenders in this field went on to say:
In fact, the entire report of the House of Commons banking and commerce committee presents an excellent analysis of the basic problems inherent in providing consumer loans.
The two-fold purpose of the legislation was:
1. To protect the borrowers against exploitation by unethical and illegal lenders.
Small Loans Act
2. To provide a regulated lending service on a broad scale at a rate sufficient to provide an adequate supply of capital to meet the need.
The Small Loans Act does not apply to banks; it does not apply to pawnbrokers, and it does not apply to lenders whose charges do not exceed 12 per cent per annum. It does not apply to loans that are made beyond $500. The act stipulates that lenders of between $1 and $500 who have in mind a charge in excess of 12 per cent per annum must obtain a licence, must report to the Department of Insurance with respect to their business transactions; and interest and all other charges in connection with the accommodation to the borrower must not exceed 2 per cent per month.
The volume of business in this field has grown rather impressively. In the first year of our supervision, namely 1940, I believe the total volume of business was about $20 million. It is expected that in 1955 the volume will be not quite but almost ten times that amount of lending.
As I have indicated, at the present time there is no regulation with respect to lending over the amount of $500. Our statistics and information as to the extent of personal loans that are made in the field above $500 are not too complete. However, the licensed lenders who lend in the field under $500 do apparently supply to the Department of Insurance information as to the extent of their business in the field over $500. In addition to that, one of the large lending companies in Canada lends exclusively in amounts over $500, and information as to their business is available. And then, of course, there is known to be lending for which there is no report. But we do know there has been a great and rapid development in the amount of money that is being lent in the nature of personal loans in the field over $500.
Our information is that generally licencees under the Small Loans Act who lend both with respect to amounts under $500 and over $500 generally charge 2 per cent with respect to loans over $500. There are a few of the licensed lenders who charge less than that. We know of one or two who, in this unregulated field, charge more. And of course we have heard from time to time of unlicensed people who charge much more than the 2 per cent, which is the amount stipulated under the present Small Loans Act for loans under $500.
The association of licensed lenders have themselves indicated that, because of excessive charges sometimes made by unlicensed lenders in the field above $500, it appears now that it might be desirable to have a higher ceiling for the Small Loans Act. The
1S36

Small Loans Act
bill with which hon. members are familiar proposes that the ceiling be raised, that the government regulation be raised from $500 to $1,500.
If the scope of the act is increased from $500 to $1,500, I think it will be obvious to all hon. members that it would be inequitable and undesirable to maintain the same maximum interest or cost rate for the large loans that is now provided for relatively small loans. Thus the bill proposes that there be a graduated interest or cost rate, and it is proposed in the bill that the rate be 2 per cent on any part of the unpaid principal balance, not exceeding $300, plus 1 per cent on any part of the unpaid principal between $300 and $1,000, plus-if the loan is beyond that-one-half of one per cent per month on any remainder of the unpaid principal exceeding $1,000 up to the proposed ceiling of jurisdiction, which is $1,500.
In considering the propriety of a rate of this kind, hon. members might be interested in some of the rates that are applicable in the United States at the present time. When our act was introduced in the late thirties the regulated ceiling was set at $500, a higher ceiling than was generally provided in most of the states of the United States, which at that time was $300. Having regard to the fact that it is equitable to have a rather lower maximum rate with respect to a large loan in relation to a small loan, our maximum rate was rather lower than generally prevailed in the United States at that time because our ceiling was $500 instead of $300.
I find that the situation at the moment is that in the state of New York the charges under their small loans act are 2\ per cent on lending for the first $100; 2 per cent between $100 and $300, and one-half of one per cent between $300 and $500. They do not take jurisdiction under their small loans act beyond a ceiling of $500.
In the state of New Jersey the rates are 2\ per cent up to $300; one-half of one per cent from $300 to $500, with the maximum loan under their regulations being $500.
In the state of California the rate is 2J per cent for the first $100; 2 per cent between $100 and $500, and five-sixths of one per cent between $500 and $5,000. It will be seen that they have a very high ceiling of jurisdiction, namely $5,000, which I believe is the largest in the United States.
In the state of Pennsylvania the rate is 3 per cent on the first $150; 2 per cent between $150 and $300, and 1 per cent between $300 and $600. They have a ceiling of jurisdiction of $600.

In order to give a comparative effective rate of interest in relation to the proposed maximum rates in the present bill and those charged in the states of New York and New Jersey, which I have indicated, the figures would be as follows: If the loan were $300 the charge under the rates recommended in the present bill would be 2 per cent; under the New York legislation the rate would be 2-26 per cent; in New Jersey the rate would be 2-50 per cent.
In the case of a loan of $500, which is the maximum of jurisdiction in those two states, the effective rate of interest under the present bill would be 1-81 per cent; in the state of New York it would be 1-88 per cent; in New Jersey, 2-12 per cent.
The bill recommends that the rate of interest or the rate of maximum cost will continue to be expressed as an all-inclusive percentage of the amount of funds loaned. This was the recommendation of the parliamentary committee of 1938, and I think it is generally the practice in the small loans field in the United States.
The bill contains a prohibition against the splitting of loans. Hon. members will realize that when the maximum rate of interest is on a graduated scale, being less for the larger amounts, there might be a tendency for a lender to exert pressure on an applicant for a loan to divide his application, a portion to be advanced to himself and a portion probably to his wife. As a consequence there would be a higher over-all rate of interest on a split loan provided to the lender. That is being legislated against in the bill.
As I have explained, the definition of cost of loan at the present time is quite embracive and includes practically all possible costs that might be involved in connection with a loan of this kind. However, it has come to our knowledge that in recent years lenders, particularly in the United States, have to a growing degree been asking borrowers to take out insurance policies, and the cost of the premium is an extra cost to the borrower. There has been little experience of that happening in Canada, although some lenders have voluntarily provided life insurance or other forms of insurance in connection with their loans for their own better security. The bill will provide that if an insurance policy is considered desirable by the lender the cost will be included in the definition of over-all cost to the borrower.
The present act provides with respect to overdue loans and loans for rather long periods that the rate of interest will revert from the maximum of 2 per cent to 12 per

cent per annum. A rate of 12 per cent per annum works out legally and technically at [DOT]95 of 1 per cent per month. Hon. members will realize that this is an awkward arithmetical calculation for all concerned, and it is proposed in the present bill that when 12 per cent per annum is referred to it will be 12 per cent per annum payable at the rate of 1 per cent per month, which is a much easier figure for arithmetical purposes.
Notwithstanding the Small Loans Act, the Money-Lenders Act is still in existence. I think that act was originally passed in 1906. For all practical purposes it has been superseded by the Small Loans Act. The continuation of the Money-Lenders Act is confusing to most persons and since its effectiveness is practically nil the present bill proposes to repeal the Money-Lenders Act.
In order to provide time for necessary investigation of lenders not presently licensed but who would become subject to the act, and also to enable licensees to make all necessary changes in practice, it is recommended that the amendments come into force on January 1, 1957.


James MacKerras Macdonnell: Mr. Speaker, this is a bill to amend the Small Loans Act, 1939. At the time the original bill was introduced the banking and commerce committee went into the matter fully and there is a report in the proceedings of the committee for that year. In 1946 the situation was reviewed and changes in the interest rates were considered but were not recommended. The banking and commerce committee report of that year again indicates a full discussion of the subject.
This business is of substantial size, as is indicated by the fact that in 1954 the number of small loans made was 831,721. We think it is desirable that the operation of the act should be reviewed, and are glad that the bill is to be sent to the banking and commerce committee where opportunity will be given for both borrowers and lenders to state their cases.
It should be pointed out that conditional sale and hire-purchase agreements where merchandising and loan transactions are included in the one transaction, do not come within the purview of this act. The reason given is that constitutionally this is a provincial matter. No doubt this question can be carefully looked into when the banking and commerce committee meets.
As I have said, we approve of a review of the operation of the act and will vote to have it sent to the banking and commerce committee. In doing so we are not committing ourselves to any particular rate *of interest 67509-123
Sviall Loans Act
but to a review of the whole situation, where both borrowers and lenders can come and state their case.


Hazen Robert Argue: I wish to express my appreciation to the parliamentary assistant to the minister for his very comprehensive review of this field in introducing this important bill. I welcome the proposed bill and the proposed amendments contained in it. I think it is a demonstration once again that parliament can be effective.
There is a view held in some quarters, which we hear expressed from time to time, that if a member of the opposition should propose a resolution or a bill, he automatically spells the doom of the proposition he advocates, and nothing can come of it. That would be rather a bleak attitude to take of this parliament and of parliamentary democracy if because a member of the opposition sponsored something, the government would automatically oppose doing anything about it.
There are, of course, many instances in which members of the opposition have proposed public bills or resolutions which the government, in fact agreed to adopt and put into legislative form. The hon. member for Winnipeg North Centre (Mr. Knowles) proposed and subsequently obtained amendments to acts that would prevent stoppage of pension rights to persons because they had gone on strike. The hon. member for Kamloops (Mr. Fulton) proposed a year or so ago that red wrapping should be removed from packaged bacon, and the government accepted that proposition.
I could go on and name other instances. The hon. member for Kamloops proposed that crime comics be abolished, and that suggestion too was adopted by the government. Other instances could be mentioned. The hon. member for Winnipeg North Centre, advocating that all medical expenses should be deducted from income for taxation purposes, was able to get the government to agree to reduce the 4 per cent provision to 3 per cent.
This is another of those instances where a proposition sponsored by a member of the opposition has found at least a measure of support on the government side of the house. Because of the general agreement among many members of different parties in the house and because of general support throughout the country, it has resulted in steps being taken to improve existing legislation. I am happy over the part I had to play in this field. As the parliamentary assistant pointed out, last session we had a considerable discussion based on a bill standing in my name, Bill No. 304, asking that the maximum rate


Mr. Gillis:: What are the names of the two companies?


Hazen Robert Argue: The Household Finance Company and the Personal Finance Company. Those are the two big ones, and they make a lot of profit. They are not in the business for fun. In the latest period for which statistics are available Household Finance Corporation, the largest one, had a total interest income of $12-76 million. Its profit before paying taxes was $6-86 million or 47 per cent. I am sure there are very few corporations in Canada that are in the enviable position of Household Finance Corporation which obtains a profit equal to 47 per cent of its gross interest income.


William Moore Benidickson: What was the net after paying taxes?


Hazen Robert Argue: I believe I can give that figure. I do not think I have it at hand, but I have something that I believe is rather comparable.


William Moore Benidickson: Taxes are almost half of the profits.


Hazen Robert Argue: That is correct. The taxes are close to half the gross profit of the company.


William Moore Benidickson: You have not indicated what funds they had employed.


Hazen Robert Argue: No. There are a lot of other things I have not indicated, but the statement I made is completely accurate. On the gross income obtained by this company from interest charges it is able to make a profit before taxes of 47 per cent, and even under the legislation now before the house the 47 per cent will only be reduced by 8 per cent and they will still have a very large profit of 39 per cent.
This legislation is not going to cripple the Household Finance Corporation. It is not going to cripple any of these loan companies. As a matter of fact they will still be in a position to obtain very large profits, profits that in my opinion are exorbitant in every way. Why are they able to make such large profits? Of course the main reason they are 67509-123i
Small Loans Act
able to do so is that the government allows them to charge such excessive rates of interest.
People go to their offices to borrow money in large measure, I believe, because of the high pressure advertising campaigns put on by these companies. They spend enormous sums of money for advertising. The two companies to which I referred spent almost $1 million in the same period for advertising purposes alone. While the parliamentary assistant has pointed out, and quite correctly, that they pay almost half their exorbitant profits in corporation taxes, I want to point out to him that the Department of National Revenue allowed these companies I am sure I am correct-to charge the whole $1 million against expenses for income tax purposes.
Because they are able to charge in that way this very large sum of money spent on advertising, they on the one hand deny the Canadian government substantial revenue and on the other hand-and this is the more serious part of it-engage in advertising that is definitely misleading to a great many potential borrowers. You hear this high pressure advertising over radio and television. You see it in the streetcars and in the newspapers. Do you want to borrow any money? If you are in any kind of trouble go to one of these small loans companies. They are not going to ask you any embarrassing questions. They have a credit manager with a wonderful personality who would just love to see you. Come on in and talk over your business with him. You will not have any trouble. You will not have to sign too many documents. It will be a very simple transaction. We will do it on a personal basis, and the costs are very moderate.
They do not mention the interest rate. They do not mention the fact that their charges are excessive. As a result many people in need of small loans go to the small loans companies; and when they do they must, of course, pay these exorbitant rates of interest. I should like to see our banks occupy this field to a much greater extent. I believe that by and large our banks have been falling down so far as this field is concerned. According to the statistics, the small loans companies spend relatively 40 times as much as the chartered banks on advertising in the small loans field. The fact that the small loans companies spend 40 times as much on advertising no doubt accounts for them getting so much business.
I suggest that our chartered banks should engage in a moderate amount of advertising and make known to Canadians generally that they are prepared to make small loans to

Small Loans Act
people who are good substantial risks. I have no doubt that would include almost everyone who is interested in obtaining a small loan because, as I have already pointed out, the rate of loss in this field is very small indeed.
In fairness to the chartered banks I want to point out that the Canadian Bank of Commerce has already done a substantial amount in this field. Their experience so far has shown that they are able to compete wtih the loan companies in the same field with a much lower rate of interest. I have in my hand a statement made by Mr. Neil J. McKinnon, general manager of the Canadian Bank of Commerce, to the banking and commerce committee on May 11, 1954, in relation to this subject. He had this to say:
I believe we are satisfied that we are in the field in the same sense that the small loan companies are. We believe that we are doing a similar type of business for which we are endeavouring to offer facilities at one-half their rates.
I should like to see our chartered banks occupy this field and do a great deal more advertising than they do in order to enable potential borrowers to obtain money, as they suggest, at half the rate of interest.


William Moore Benidickson: Mr. McKinnon said that the profit after taxes was a little over 1 per cent on the funds employed.


Hazen Robert Argue: That is quite correct; and I do not think he complained about that profit. I think he was quite happy that they were able to give that service at the profit he suggested. I think even that operating margin of profit would allow the Canadian Bank of Commerce to do more advertising than it is now doing so that it could increase the amount of money it lends in that field. I do not know what other banks are doing, but I have been reliably informed that the Bank of Montreal is endeavouring to increase its loans in the small loans field and is making loans at a rate of 6 per cent, with certain other charges for drawing up contracts and servicing loans. It is operating with an interest rate of 6 per cent and charges that are not substantially above the 6 per cent rate.
I repeat that we in this group should like to see the government go much further than it is now doing. I point out again that even in the matter of a large loan, the rate is substantially above 1 per cent per month. Hence the adoption of our proposal would save money for borrowers borrowing all sums that will be governed by this act. There is no doubt in my mind that members of the Social Credit group will support this measure because it is, at any rate, a move toward lower interest rates. Of course one of their spokesmen will state precisely where they stand.

In this debate this afternoon I noticed that the hon. member for Greenwood (Mr. Mac-donnell) did not say whether or not the Conservative party thought a 2 per cent per month rate was excessive. I want to point out that in any discussion we have had in the past with regard to this subject, we have yet to hear from a spokesman for the Progressive Conservative party. The hon. member for Notre Dame de Grace (Mr. Hamilton) this afternoon criticized members of the C.C.F. group because he said we had made the statement that we should like to see the capital used for service industries increased. I noticed the rather remarkable absence of any statement by the Conservative party as to how it stands with reference to the service that is being provided by these small loans companies.
While I think this legislation does not go nearly as far as it should, I believe we would be certain of having at least these provisions adopted and recommended by the banking and commerce committee if we knew the position of the Progressive Conservative party. But they are shifting from one foot to another. They are not taking a very responsible position this afternoon. They cannot be open to any great criticism, apparently, because they are not going to take a stand one way or the other. As I have said, we are prepared to support second reading of the bill, believing-


Mr. Hosking:: Move an amendment and they will vote with you.


Hazen Robert Argue: I imagine they will vote for this bill at some stage or another, but they have to be coaxed. They cannot make up their minds right off the bat. We can see that. Of course, if we criticize them there will be a long and academic explanation by the leader of that group as to why they took this very fair, responsible and parliamentary position of not saying how they would vote on second reading of the bill. We saw the attitude they took some time ago when a measure was divided into two parts. On the resolution they voted one way and on the bill another way. The explanation was that they had to see the bill.
This afternoon they have seen the bill. They have had weeks to see the bill. Yet even after seeing the bill they will not say whether the small loans companies, in charging Canadians 2 per cent per month, are in fact charging exorbitant rates. I believe that on this issue, as on other issues this session on which our group has already taken a position, we are in fact speaking for the great mass of Canadians generally who believe with us that a rate of 2 per cent per month is exorbitant and that even if we

reduced the rate, as it should be reduced, to 1 per cent per month, the small loans companies and the chartered banks will be able to stay in business and make a substantial profit, but at the same time we would save the ordinary people of this country a very substantial sum of money.


Mr. Victor Quelch (Acadia):: Mr. Speaker, I am glad that Bill No. 51 is to be sent to the banking and commerce committee. When that bill is before the committee I believe we should investigate not only the question of consumer credit but also that of merchandise credit, because today merchandise credit is playing a larger and larger part in the sale of commodities.
When the question of small loans was before the banking and commerce committee back in 1938 I recall that we made an exhaustive study of the whole question. We had before the committee representatives of the credit unions, the small loans companies, the Canadian Bank of Commerce and many other financial institutions. One thing of great interest was that at that time we also paid attention to the relationship between merchandise credit and consumer credit.
It is interesting to note what the committee reported on that question in their third report. I should like to quote from page 418 of the report of the committee of June 1, 1938:
The practice of mass-production resulted in a pressure for mass-consumption, with a widely advertised acceptance of "a small payment down and the balance on easy terms". Thus a large load of modern debt is in the form of unpaid balances for goods already consumed or in the process of consumption. These debt charges do not come directly within our reference or, for that matter, do they ordinarily come within legislative action; while legislatures have everywhere meticulously concerned themselves over debts incurred by borrowing money, legislatures have not shown equal concern over debt incurred by the purchase of goods.
Whatever the legislative distinction; in practice, there is a relationship between merchandise-credit and money-credit that cannot be safely ignored in prescribing the rate of charges in borrowed money. A strict comparison of the rates of merchandise-credit with cash-credit is difficult, if not impossible, largely because the cash price of goods so often bears a portion of the credit-cost.
However, it is safe to say that the two branches of consumers' credit are to some extent interchangeable. Upon evidence submitted to the committee, some of the money loaned at rates exceeding 2 per cent a month was borrowed to effect reduction in payment for goods, especially to avoid penalties under instalment plan of payment. And evidently there is a wide variation in the rates of charges involved in instalment sales. The committee was told that rates as high as 186 per cent per annum had been paid by Nova Scotian fishermen in the purchase of fishing equipment on six months' credit; while on certain household equipment the rate involved in instalment sales is about 12 per cent per annum.
Small Loans Act
Well, if that was true in 1938 I think it is probably even truer today, because we know that buying on the instalment plan and by charge accounts has become quite a big business in this country. 1 think, therefore, it would be very wise for the banking and commerce committee to spend some time investigating that situatibn and perhaps make recommendations regarding it.
The proposed amendments in this bill are improvements to the act in regard to the definition of costs, in regard to interest rates and in regard to the amounts of the loans that can be brought under the act at specified interest rates. But unfortunately this bill will not help the majority of the small loans borrowers, because the majority of the loans made under the Small Loans Act are for less than $300. For instance, I quote from one of the pamphlets put out by one of the large small loan companies, Household Finance Corporation, entitled "Consumer Finance in Canada". On page 5 it states:
In Canada, there are now over 165 household offices in cities and towns from coast to coast. These offices make over 600,000 loans annually, in sums up to $1,000. Sixty-eight per cent of the loans are for sums of under $300-
Now, 68 per cent of all their loans are under $300, and those borrowers will not get any help at all from this bill because they will still be paying 2 per cent per month interest. I think most of us will agree that in all probability these borrowers of small amounts are just as much in need of assistance as some of those who borrow larger amounts. I believe we should try to set a straight rate of 1 per cent per month on the whole of the first $1,000. I realize, of course, that the cost of making loans in small amounts is higher, the overhead is higher, but on the other hand the rate of 1 per cent per month is approximately 13 per cent per year and that is an exceptionally high rate. I believe that a rate of 1 per cent per month or 13 per cent per year should be sufficiently high to cover the loans made under the Small Loans Act, even if you had to average the costs in order to get a fair rate.
As has been mentioned by the hon. member for Assiniboia, the average rate charged by the Canadian Bank of Commerce in 1954 was 10-46 per cent. I believe if it is possible for the Canadian Bank of Commerce to get on satisfactory with a rate of 10-46 per cent, it should be possible also for the small loans companies to get on with a rate of 13 per cent. This would allow them a slightly higher rate than the Canadian Bank of Commerce in order to meet their requirements. I know it is often said that it is a different class of borrowing; the people who go to the small loans companies' are the people who are not

Small Loans Act
sufficiently creditworthy to get loans from the Canadian Bank of Commerce. But of course that is not true. The reason the very large percentage of people go to the small loans companies instead of the Canadian Bank of Commerce is that they want privacy. If they borrowed from the Canadian Bank of Commerce they would have to get an endorser or perhaps two endorsers. They do not like to do that, and they are prepared to pay a higher rate rather than get an endorser. It is not merely a question of privacy. I think we all realize the position of anyone who has to go to another individual and ask him to guarantee his loan at the bank. Consequently they go to the small loan companies and pay a higher rate.
Now, since the amendments to the Bank Act in 1954 the chartered banks are able to take chattel mortgages. It may be possible for the Canadian Bank of Commerce and other banks to make loans through the personal loan branch without insisting upon an endorsement, in a similar way to the small loans companies. But there are many loans made under the personal loans branch that are unsecured. I have been informed that 40 per cent of the loans made by the personal loans branch of the Canadian Bank of Commerce were unsecured, and 29 per cent of those made by small loans companies were unsecured. The cost on this type of loan would be less than for a loan that had to be secured by a chattel mortgage.
Then another reason people go to the small loans companies is due to what you might call the high pressure salesmanship exerted by the large amount of advertising that is carried on. I believe that is one place the small loans companies could cut down; that is the cost of their advertising. The point is that this may be due partly to the fact there are too many small loans companies operating in Canada. When you increase competition beyond a certain point it actually has a tendency to increase costs.
I was not certain of that point myself, but I was very much interested in the discussion on an insurance bill that took place before the banking committee the other day. Mr. MacGregor told us that if too many companies got into the field in competition with one another it actually increased the cost of advertising and increased the cost of insurance to the purchaser. If that is true of insurance I should imagine it would be true of the small loans business. If you get too -many people in the field making small loans there is an increased amount of advertising necessary, and that unnecessarily increases the cost to the borrower.
[Mr. Quelch.l
I notice there has been quite a large increase in the small loans companies operating in Canada recently. In a report on small loans companies and moneylenders by the superintendent of insurance for 1954, we find this on page 6:
In my report last year, I referred to the greatly increased interest being manifested in the small loans business in Canada by established lenders outside Canada, more particularly by those with head offices in the U.S.A. Several of these lenders entered the field during 1954 through provincially-incorporated subsidiary companies and the same trend has continued up to the date of this report.
It seems strange to me that if the net profits of these small loans companies are so small, it is claimed down around 2 per cent, that so many more companies should be set up. Two per cent is not a high rate of profit. I cannot imagine a profit of 2 per cent encouraging the setting up of additional small loans companies. The suggestion that some of these companies are operating at 2 per cent is fantastic, but I have seen that statement in some of their advertising.
You have only to pick up the report of the superintendent of insurance and turn to the pages of balance sheets to find that their profits have been very much greater than that. The amount of the reserves and the amount of capital reinvested in the company is shown. You have to take the amount of profit reinvested in the company in order to ascertain the true picture of these companies. I think the mere fact that we have so many companies flocking into this country shows they are making a pretty substantial profit.
Now, I am not satisfied that a rate of 1 per cent per month or approximately 13 per cent a year would put the small loans companies out of business. I believe they could reduce their costs in many ways. They could certainly reduce the cost of operation by cutting down on a lot of their advertising. We have all received in the mail recently what I would call a very expensive type of advertising. One needs only to walk along Sparks street and Bank street to realize that almost every other building is plastered with the signs of small loans companies. One would come to the conclusion that Ottawa must provide a very profitable source of income for small loans companies, because I have never seen as many small loans company offices in any town as apparently are operating in the city of Ottawa.
Then I imagine they could take a lower rate of interest on the profits they themselves have reinvested back in their companies, and they could take a lower rate of profit generally. I am satisfied that these three things alone would make it possible for them to operate on a rate of 1 per cent a month.

I believe the government should also approach the chartered banks for the purpose of trying to get them to take a greater responsibility in the field of personal loans. Apparently up to 1954, the Canadian Bank of Commerce was the only bank that had entered seriously into the field. No doubt when this bill is before the committee we shall be able to find out what action has been taken by other banks since the amendment to the Bank Act permitting chattel mortgages.
It seems to me that at' the present time banks in this country are becoming altogether too prone to lean upon the government. Any time there is any risk involved they appear to want the government to guarantee them against loss. Of course any time the government guarantees them against loss, and pays part of that loss, it is subsidizing the banks. Surely the banks of Canada are in a sufficiently strong position to be able to stand on their own feet without everlastingly wanting the government to guarantee them.
In view of the great concessions the banks do get from the government of this country, I think as a service to the country they should be prepared to enter more and more into the personal loan field.
Then, of course, there is another class of people who have no credit or little realizable wealth. These people would not be considered credit worthy. They would not be able to borrow from the banks. It is very doubtful whether they would be able to borrow from any small loans company. Their only hope is to go to some welfare organization such as the Red Cross for help.
As time goes on the government will have to give consideration to setting up some kind of an institution to help the really down and out individual. It stands to reason that a person who is in a very difficult financial situation would probably have very little chance of borrowing from a bank. He would be forced to go to a small loans company-the amount of the loan could be small-and pay 2 per cent per month interest. He is the very last type of individual who can afford to pay 26 per cent interest a year. Those are the people who really need help.
I hope further consideration will be given the matter, to try to find ways and means of making credit available to those people at a low rate even if it means some sort of additional guarantee to the banks for making these loans.


Mr. A. H. Hollingworth (York Centre):: Mr. Speaker, there is no legislation which I have welcomed more since the opening of this parliament than this legislation. In my opinion its general tenor indicates reform
Small Loans Act
legislation at its best. It is an endeavour tc legislate in the best interests of the average Canadian citizen.
I believe, Mr. Speaker, there is a prevailing opinion today throughout the country-and 1 think it is a sound one-that loan companies and finance companies have been making excessive profits at the expense of the average Canadian citizen. This bill is designed tc correct that state of affairs. Even at the reduced rates it is my opinion that the loan companies can make a fair and reasonable profit. Hence sufficient money will still be available for those people who wish to borrow, and who are not able to meet the rather high standards of the chartered banks. Since they will still toe able to borrow money, they will not be thrown into the waiting arms of the loan sharks.
Let us briefly consider how small loans are made available today. First of all we have the chartered banks; second, we have the credit unions; and third, the small loans companies. With regard to chartered banks, hon. members know that personal loans are available at the rate of 6 per cent. As the result of legislation passed in 1954, the banks are now able to take chattel mortgages as security. Whether or not this has appreciably increased the number of loans granted by the chartered banks is not as yet known. We should have that information fairly soon.
Of course, as the hon. member for Assini-boia has mentioned, the Canadian Bank of Commerce has gone into this field; but some of the other banks are reluctant to do so because they feel they cannot charge more than 6 per cent, and they cannot add those different services to the basic amount of the loan. In other words, Mr. Speaker, it is a matter of interest. If the banks could charge, say, 12 per cent for small loans I believe they would go into this field more readily. Of course that brings up the most difficult question which I think was considered a year or so ago by the banking and commerce committee. No decision has been reached.
Again, I suppose, the bank is: more interested, on the present basis of 6 per cent, in lending money to finance companies, and they in turn lend it to the public.
With regard to the second form, namely credit unions, as the committee which investigated this whole problem in 1939 said, credit unions can remain effective only with homogeneity in social, religious and economic relation. That is to say, they are confined largely to special circumstances, although I admit they are prevalent in certain parts of this country, particularly the caisse populates in the province of Quebec, where they are doing

Small Loans Act
an excellent job. I understand they usually charge 1 per cent a month. However, no credit unions pay income tax.
Finally we come to the Small Loans Act, the small loans companies and the moneylenders.


Hazen Robert Argue: Six o'clock.


Allan Henry Hollingworth: In 1939 the commons banking and commerce committee recommended that the Small Loans Act be passed.


Mr. Speaker:: Order. Since it is six o'clock I do now leave the chair.



BUSINESS OF THE HOUSE

Walter Edward Harris: Mr. Speaker, may I just have a moment? It may be that I will not be here at ten o'clock tonight nor perhaps tomorrow. Last night I announced the business of the house for the remainder of today and indicated that after this item and the Canadian Farm Loans Act we would go on with the Trans-Canada Highway Act, and I think we will confirm that. Tomorrow it is understood that we will have fisheries and then transport, and on Monday and Tuesday a supply motion.
I would hope that, unless something should occur in the meantime to change our plans, we would find it possible to arrange that in the short period of Wednesday afternoon we might complete the debate on the atomic energy committee and pass it by Wednesday night.
At six o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at eight o'clock.


[Stage Direction]
The house resumed consideration of the motion of Mr. Harris for the second reading of Bill No. 51, to amend the Small Loans Act.
Allan Henry Hollingworth: Mr. Speaker, at six
o'clock I was saying that in 1939 the banking and commerce committee dealt with the Small Loans Act, and subsequently parliament passed that act. At the same time the MoneyLenders Act was in force. Actually it seems to be an anomaly because only four companies were subsequently incorporated under the Small Loans Act, including two of the largest small loans companies in this country, Household Finance Corporation of Canada
[Mr. Hollingworth.l
and Personal Finance Company of Canada. Actually most of the small loans companies have been incorporated under the MoneyLenders Act. As far as I can find out the terms of the two acts are pretty much the same.
The rates of interest provided were 2 per cent per month as a maximum up to 15 months, and then 1 per cent per month subsequently. As I say, at present there are only four companies which were incorporated under the Small Loans Act, but 61 companies have been licensed under the Money-Lenders Act. The parliamentary assistant to the Minister of Finance told us this afternoon that the Money-Lenders Act is to be repealed. I think that is a rather good idea, because confusion is apt to result unless one reads the two acts together.
As hon. members are well aware, the terms provided by the bill before the house are 2 per cent per month for loans not exceeding $300; 1 per cent per month for loans exceeding $300 and not exceeding $1,000; and half of one per cent for loans exceeding $1,000. I should have mentioned that under the old act the ceiling for small loans was $500, but under the bill we are considering this evening the ceiling will be $1,500.
At the outset may I say that I am certainly not accusing the small loans companies of sharp practices. I think in general they have shown integrity in their dealings with the public, but with respect I do question their good taste and wisdom in their high-pressure advertising. Certainly one is made aware of their advertising. There was a song popular not so long ago that ended with the words, "I owe my soul to the company store". The first two or three times I heard that song I thought Tennessee Ernie was saying, "I owe my soul to the finance co."
There certainly are usurers who are willing to live off the avails of destitution, if I may use the colourful phrase used by the hon. member for Peace River (Mr. Low), during the debate last year in a speech which I enjoyed very much. Certainly I am not accusing the finance companies of this, nor indeed did the hon. member for Peace River; but I do submit that an attempt has been made on the part of some finance companies to entice the unwary, the unwise and the timid into their counting houses there to be despoiled of their financial independence.
Particularly, Household Finance Corporation have used the slick, glossy pap of the typical supercharged United States huckster, much to the distaste and annoyance of the average Canadian. The Household Finance Corporation blasts forth over the radio every morning in Ottawa the merits of their loans.

That is all well and good, but when one lives in Ottawa during the session and has to hear this every morning it does become rather annoying.
We are interested in the profits made by small loans companies, and for this information we go to the report of the superintendent of insurance for Canada dealing with small loans companies and moneylenders. I believe this was referred to by the hon. member for Assiniboia. I should like to refer to the report for the year ended December 31, 1954. This report is interesting for the information it provides, but it is interesting also because of several omissions which I should like to point out to the house.
For example, only those companies registered under the Small Loans Act or the Money-Lenders Act are referred to. In other words, if a company does not make any loans under $500 there is no record of it in this report. I found that there was a very interesting reason for this. I hear it stated over the radio that Household Finance Corporation makes loans from $50 to $1,000, but on perusing this book I found no reference to any loans over $500.
There is a section which deals with other small loans companies and moneylenders, which indicates the volume of loans made other than small loans. In other words, I find nothing under Household Finance Corporation for loans of more than $500. Upon looking into the matter further I find that there are two companies. There is the Household Finance Corporation of Canada which lends up to $500 and does business under the Small Loans Act, and there is Household Finance Company Limited which makes loans of over $500. Unfortunately there is no record of that company in this book. [DOT]
As I say, we are interested in the profits made. I notice that for 1954 the profits of Household Finance Corporation of Canada operating under the Small Loans Act were $5,952,000, or practically a cool $6 million. It is true, as someone mentioned this afternoon, that out of that would have to come a considerable amount of income tax, and naturally they pay dividends to their shareholders. But I think we will all be ready to admit that the profits were considerable.
Now, if we may go to the other large small loans company, Personal Finance Company of Canada, we find that their profits amounted to $923,000. The interesting part about this is that the report deals with the profits of Personal Finance Company of Canada from loans of more than $500. Those profits are indicated as being $2,500,000, or two and a half times as much. Therefore if we project
Small Loans Act
this result into the results of Household Finance Corporation, if we multiply their profits of $5,952,000 by 2-6, we come up with profits of about $16 million. I am not saying that Household Finance Corporation made that much money, but I do say it shows that this is a most lucrative business.
I think the government has done a wise thing, something which will be appreciated by Canadian people from coast to coast, in bringing this reform legislation before the house. In view of the profits indicated I do not think the finance companies are going to suffer if their interest rate is reduced to 1 per cent.
There is one other thing I should like the house to consider, but I suppose I would be out of order in discussing it. This has been brought to my attention by my constituents and other persons. I think the larger acceptance corporations or discount houses should be brought under this legislation. I do not suppose we can do that, but I think that is one of the next problems we will have to face.
In any case this bill is going before the banking and commerce committee, where it certainly will be studied exhaustively. One interesting point to consider is whether the ceiling should be raised to $2,500. Hon. members will recall the very able speech by the hon. member for Essex West (Mr. Brown), that genial member from southern Ontario, in which he made a very good case for an increase of the ceiling to $2,000. I took note also that in the very able presentation by the parliamentary assistant this afternoon he pointed out that in California the ceiling was raised to $5,000. That is something the committee can carefully study when the bill goes before it.
Again, should the rate be 1 per cent right across the board? I should think there are cogent reasons why that should be considered. Or, again, should the ceiling for the 2 per cent per month be reduced to $200? Once again, the committee will have to determine that.
At this stage I should think that we would need to have more evidence on these points, but I want to make it very clear that I am supporting the general principle of the bill. I am sure that after the committee studies this bill an act will ensue which will incorporate the best features, will provide justice for the Canadian citizen and, at the same time, will enable the finance corporations tG enjoy a reasonable and fair return in their business. After all, they are legitimate business concerns in a free competitive society.
I take great pleasure, therefore, in congratulating the government, and particularly

Small Loans Act
the Minister of Finance, on their foresight in bringing in this bill and on their practicality, which at the same time is strongly tempered and imbued with social justice.


Mr. W. Boss Thatcher (Moose Jaw-Lake Centre):: I had not intended to speak on this subject until this afternoon, when I heard my old friend and colleague the hon. member for Assiniboia (Mr. Argue) make his remarks.
The subject we are discussing, of course, is charged with emotion. Every hon. member, I am sure, regardless of his party would like to make sure that the working people of Canada can borrow money at the lowest possible rates. Yet it seems to me that parliament must take great care that in adopting arbitrary interest ceilings it does not force these companies in the small loans business to take their capital elsewhere and invest it in some other field.
In the year 1954 some 800,000 Canadians borrowed money from small loans companies. Most Canadians from time to time get into financial difficulties. If such a Canadian happens to be an employer, usually he can go to the bank and use an overdraft. But for working people usually this is not possible. In such cases they invariably go to a small loans company and make a cash loan. I think real hardship will follow if parliament, either indirectly or inadvertently, makes it impossible for people in the working class and in the lower income groups to get capital from those companies.
I certainly approve of government regulation in this field. I think everything possible should be done by parliament to eliminate sharp practices. Everything possible should be done by parliament to make sure that excessive and unjust interest rates are not charged by these loan companies. But I also think we should not forget the economic facts of life.
Today in Canada there are thousands of places where any company can invest its funds. Therefore I say again, let us make certain that our legislation is not restrictive to the point where these companies take their cash out of the small loans field and invest it somewhere else. Let us be sure that we do not prevent people in the lower income groups from obtaining urgently needed credit.
To illustrate the danger of this, I should like to remind my hon. friend from Assiniboia and my other C.C.F. friends of an act which the Saskatchewan government passed some 11 years ago. It was called the Saskatchewan moratorium act. During the depression years we had a great many farm foreclosures by mortgage companies in our province, and many of these foreclosures were unjustified. So the C.C.F. government, in good faith and (Mr. Holltngworth.]
with good intentions, introduced legislation which in effect prevented the mortgage companies from foreclosing on the home quarter section. I supported the legislation, and I thought it was sound at the time.
Unfortunately it has not worked out that way. For those who had already borrowed money and did not need any more, it was wonderful. They did not have to worry, even if they could not make a payment. However, the contrary was true for those who needed money in the future. The mortgage companies, feeling that they had no longer security of investment in the province of Saskatchewan, moved out lock, stock and barrel. As a result, in our province today you simply cannot buy a farm on credit unless it is through the Canadian farm loan board, and those loans are few and far between. In my opinion that legislation, which as I say was introduced with every good intention, has had the effect of virtually ruining farm credit in Saskatchewan.
So I say tonight, let us as members of parliament benefit from this example and make sure that we do not achieve the same results with these small loans companies. I think there should be no illusions. These people must be allowed to make a reasonable profit if we expect them to remain in the field. It is up to the banking and commerce committee to go into this whole question, study it carefully, and then decide what is a legitimate and reasonable profit. Personally I have always contended that parliament should give greater encouragement to the banks to get into the small loans field. But if we want them to do this we are going to have to permit them to charge interest rates that are more in line with what we permit the small loans companies to charge.
I remember that several years ago Mr. N. J. McKinnon, general manager of the Canadian Bank of Commerce, appeared before the banking and commerce committee. He stated that at that time, under existing laws, it simply was not feasible for the banks to enter extensively into the small loans business. The interest rate the banks are able to charge today is 6 per cent. That works out on a monthly basis to about 10-46 per cent. Mr. McKinnon told the banking and commerce committee that if the banks could charge 1 per cent per month, he was reasonably certain they would go into the small loans business more extensively.
So I suggest, Mr. Speaker, before you rise, that this might be a point for the banking and commerce committee to investigate. I think if the banks were to enter this field the small

loans companies would be forced by competition to lower their rates, and then it might not be necessary to do so much by legislation.
I repeat, let us approach this whole problem, not emotionally but realistically and sensibly, in an endeavour to give all working people the lowest possible interest rates. But let us not wake up and find that we have low interest rates, but no money available for loans.


Mr. F. S. Zaplitny (Dauphin):: Mr. Speaker, the hon. gentleman who has just taken his seat referred to the danger of capital being taken elsewhere, that is out of the lending field, if interest nates are made too low. I am glad he also coupled with that a desire to have all the facts placed before the committee, because in the report of the operations of small loans companies as of the end of December, 1954, there are some figures which show the position of some of these companies.
I shall not weary the house by going through the whole list, but I think this one will serve as an example, and I think it might allay the fears the hon. member may have as to the danger of the capital of this company going into another field.


James Allen (Jim) Byrne: Apparently it will not be going into Saskatchewan.


Frederick Samuel Zaplitny: I have the report of Household Finance Corporation of Canada as of December 31, 1954. It is shown in their balance sheet that while they have an authorized capitalization of $5 million the actual capitalization is only $3,070,000. On that capitalization they have outstanding balances at this time of $55,495,730.52, and their total assets now stand at $57,783,971.94. Even more interesting and significant is their revenue account. Bearing in mind that their total paid up capitalization is only $3,070,000, we find that their income earned on loans for that year came to $12,758,246.95. Added to that we have recovery of bad debts, doubtful accounts and disposition of some office property, which gives them a gross income for the year of $12,812,433.21.
Further down their expenditures are shown, and taking them off we find that their gross profit for that year came to $5,952,743.75 on a total capitalization of $3,070,000.


William Moore Benidickson: Before income tax.


Frederick Samuel Zaplitny: Yes, before income tax. I doubt if a company that can make a gross profit of almost $6 million on a total capitalization of $3 million are going to feel that they will want to take their capital elsewhere to a different field. The parliamentary assistant to the minister has interjected, "before income
Small Loans Act
tax." In order to satisfy his mind on that point, let us go to the dividend account. Of course dividends are not paid until taxes are paid. We go down further and find that dividends to shareholders in that year came to $3,048,510, and on a capitalization of $3,070,000 that is just a wee bit short of 100 per cent, almost dollar for dollar in the form of dividends.
I can assure the hon. member for Moose Jaw-Lake Centre that any commercial company that can pay its shareholders every year a dollar in dividends for every dollar they have invested is not going to take its capital elsewhere and look for a better investment unless, of course, they are exceedingly greedy. I would not want to accuse even this company of being in that category.
I doubt that the bringing down of interest rates generally as visualized by this legislation or as advocated by the members of the C.C.F. group over the years constitutes any danger so far as availability of capital is concerned for the small loans business. Not only that, but we find in looking at the statistics that the number of small loans companies is increasing very rapidly. The amounts they spend on advertising their business come to a tremendous figure. Such companies do not increase in number, nor do they put on a high pressure advertising campaign, if they are in a field which is not profitable. The fact is that they do spend huge sums of money on advertising, and while I would not say their advertising is dishonest it is not very far from being dishonest and is certainly misleading in the way it is put. For that reason I do not share the fear expressed by my hon. friend that this type of legislation, or the type of legislation envisioned by the hon. member for Assiniboia, would constitute a danger tc the availability of this kind of money.
I want to refer also to the remarks of the hon. member for York Centre (Mr. Holling-worth). If I heard him correctly this afternoon, and I speak now subject to correctior because it was a little difficult to hear at tha1 time, he said that credit unions do not paj interest. If that is what he said, and that i: the way I understood him, of course I wil have to say that he is quite mistaken. Credl unions do pay interest, and they do a grea deal more than that as far as the people the; do business with are concerned. They provide life insurance at no extra cost to those wh< make use of their facilities. They also provide loan insurance, so that if the person whi borrows money from the credit union is no able to repay the loan because of death, dis ability or some other reason the loan i written off as provided in the bylaws of tb

Small Loans Act
credit union. In the case of death the life insurance is, of course, payable to the beneficiary.
Therefore the credit unions are providing a service which is not comparable at all to that provided by the private small loans companies. But the chief difference between the operations of the credit unions and those of the small loans companies is the fact that the credit union is a non-profit organization. That in itself is a very important difference which sometimes is not recognized by the government.
Not so many years ago we had occasion, when discussing an income tax amendment, to try to impress upon the government the fact that co-operative institutions generally and credit unions in particular are non-profit organizations and therefore should not be treated in the same way as private companies for income tax purposes. We were not altogether successful, although we did persuade them to some extent.	*
The reason I bring that into the discussion at this time is that the hon. member who has just taken his seat referred to the desirability of the government providing encouragement to the banking system to get into the small loans field. I should think it would be far more desirable all around that if encouragement at the government level is to be made available, it should be made available first of all to the credit unions. Because of the nature of the credit union, which is a nonprofit organization, it does the most for the community in which it operates, not only for the people who invest their money directly in the credit union or make use of its lending facilities but also for the community generally, because every dollar that goes into the credit union remains in the community. None of that money goes to the headquarters of a huge company outside the province or sometimes outside the country, as is the case with the small loans companies. Every dollar circulates within the community.
They charge an interest rate of about 1 per cent per month, and when they have completed their fiscal year they sit down and draw up their accounts. If they find that the amount of interest money is more than is required for their general operations, they then divide the surplus in two ways, either in paying a certain amount in interest on the money that investors have placed in their credit union for the purpose of lending, or by reducing the interest rate to those who have borrowed money, or both. Therefore when they have a surplus at the end of the year the result is that the interest rate is much less than 1 per cent per month, because a rebate is made to the borrower in 
so far as it is possible to do so in order to give him the best possible break.
But the important thing to remember is that the money invested in the credit union, money that is circulating in the community' is left there for the purpose of building up' the community. None of that money is siphoned off in the form of profit to go outside the community, outside the province or outside the country. Therefore if the government is inclined to give encouragement to lending institutions as a principle, I respectfully suggest that the credit unions are the best possible vehicle through which they can provide that kind of encouragement and do the most good in the community and in the nation at large.


[Stage Direction]
Motion agreed to, bill read the second time and referred to the standing committee on banking and commerce.


James Garfield Gardiner: the second reading of Bill No. 84, to amend the Canadian Farm Loan Act.


William Moore Benidickson: Mr. Speaker, this is an amendment to a bill that I think over the years has proven very much worth while to the farming community. Its original purpose was not especially to lend money in great volume to farmers, but it was to be a sort of pace-setter in so far as interest rates were concerned, because interest rates were chiefly in the eyes of the legislators of 1927 and 1929 when this original bill passed the House of Commons. Since that time, however, some $100 million has been lent to farmers under the terms of the farm loan act. I think about 43,000 loans have been made. In the last year of record, namely the year ending March 31, 1955, the new lending amounted to $8,200,000.
In addition to this worth-while legislation providing farm credit, hon. members are aware that since the war we have also had in operation a form of government guarantee of loans made by banks to the farmers under the provisions of the Farm Improvement Loans Act. The difference between the two acts could probably be roughly described as long-term credit with respect to the Canadian Farm Loan Act and intermediate credit with respect to the Farm Improvement Loans Act. Originally the farm loan act board was accompanied by a provision for supervising loans to fishermen. Hon. members will well

remember that last year the house passed a bill which could be described as parallel to the Farm Improvement Loans Act, namely the Fisheries Improvement Loans Act. In consequence of that legislation the farm loan board will no longer be required to supervise loans to fishermen.
The bill before us tonight in summary could be said to simplify the capital structure of the farm loan board. It will simplify its capitalization, and it will also simplify the system with respect to reserves. It will broaden the board's activities by increasing the maximum amount of loans that can be provided under the act. It will simplify and improve the lending procedure by eliminating the short-term second and chattel mortgage loans, and it will dispose of the capital of the board acquired in connection with its operations under the Canadian Fisherman's Loan Act which I have described.
As the act stands at the present time, the capital of the board consists of $5 million which was originally advanced at the inception of the board, together with issued shares of stock to the amount of $2,240,301. The $5 million initial capital advance was made during the early years when the board was becoming established, and for three years it did not bear interest. But since that time it has borne interest paid by the board to the government in a manner similar to that in respect of any other borrowings of the board from the government. It is considered desirable to convert this original capital into an ordinary loan. The bill will provide for the repayment to the government of the original advance, and it is intended to refinance this repayment through an ordinary loan by the government to the board at current rates of interest.
The bill will further provide for the cancellation of the $2,240,301 issued capital stock of the par value of $1 per share, and in substitution the board will be capitalized by 30,000 shares of stock of the par value of $100 a share, the total value of which will be $3 million. With respect to reserves, under the existing statute the board has been required to set aside at least 10 per cent of its net annual earnings in a special reserve fund. This reserve is known as the "statutory reserve" and at the present time it amounts to $878,000. But this is not a reserve in the ordinary sense of the word because it has not been available, under the statute, for the payment of losses. In addition to this statutory reserve the board, under long practice, has had a special reserve built up on the basis of one-half of one per cent of its lending. This reserve now amounts to $2,349,258. In substitution fo" these two
Canadian Farm Loan Act reserves the bill will provide for the establishment of a single reserve account to which all losses may be charged, and it is stipulated in the bill that the amount of the reserve will never exceed the amount of capital which, as I have indicated, will be $3 million.
Prior to 1952 the board could raise money only by the issue and sale of bonds to the minister of finance. This was an awkward and cumbersome method of financing, and in 1952 parliament made provision for simple borrowing by the board from the minister of finance without the necessity of issuing bonds. It is now proposed to go a step further and drop the bond issuing provisions entirely, and to convert all the board's borrowings into simple straight loans from the minister of finance. The original purpose of the bondissuing power was to enable the board to borrow money directly from the public, but this was never done.
As part of the simplification of the capital position of the board, the bill will also provide for disposing of the capital and assets of the board under the Canadian Fisherman's Loan Act. Lending under that act was discontinued, as I have indicated, following the coming into force of the Fisheries Improvement Loans Act. The amounts involved are not substantial but are somewhat complicated from the point of view of the balance sheet and the annual report which is submitted to members of parliament.
The farm loan board received a capital advance of $29,000, and in addition the government holds 161 shares of stock of the board of the par value of $1 each, issued respecting loans to fishermen. It is proposed that the board shall repay the capital advance and retire the stock less the operating deficit which has accrued under this act. This deficit amounts to $5,203, and will be absorbed by the government. There are still a few outstanding fishermen's loans, and the bill will provide that the proceeds will be paid into the consolidated revenue fund as and when those loans are repaid by the fishermen. When completed this will wind up the Canadian Fisherman's Loan Act operation.
So far as the lending limits are concerned -and I think this is the most important feature of the present bill and the procedure under it-the board can now lend $10,000 on first mortgages plus $2,000 on second mortgages for a shorter term. Under the present legislation the board finds it mandatory, in connection with second mortgages, to take chattel security. The bill that is now before us will eliminate short-term second mortgage lending. I have indicated to the house we have very important and worth-while companion legislation for intermediate credit in

Canadian Farm Loan Act the Farm Improvement Loans Act. This bill will eliminate this type of second mortgage for short periods, and the chattel mortgage features of it, and it will increase the maximum amount of loan under the act under first mortgage procedure to $15,000.
The bill will change also the percentage ratio of loan value. Prior to the amendment of the act in 1952 the board was not able to lend beyond 50 per cent of the appraised value. In 1952 this was increased to 60 per cent. It is now proposed to further increase the ratio to 65 per cent. It is also proposed to drop the provision for setting up an advisory board. I think the hon. member for Greenwood (Mr. Macdonnell) will welcome this statement, because in 1952 when this provision was presented he felt that it would not be a useful part of the act.


Walter Gilbert Dinsdale: have been interested, Mr. Speaker, in the remarks of the parliamentary assistant concerning this important piece of legislation.
I say it is important because the provision of credit to our farm population is a subject that has occupied the attention of parliament for a good many years. It was not until 1927, however, that this house took any definite action to deal with the specialized need of our farm population for a special type of credit. The original passing of the farm loan act came, I believe, as the result of pressure from the Progressive group which at that time made up a fair percentage of the representation in this house.
The general changes that have been outlined by the parliamentary assistant move in the right direction. Section 6 deals with the major changes so far as the terms of the farm loan act are concerned by increasing the amount of the first mortgage to $15,000 and also providing for the granting of a loan at 65 per cent of the actual value of the land upon which the loan is made. That is moving in the right direction. During world war II the subject of farm credit receded somewhat into the background, and also during the immediate period following world war II, when farm income was unusually buoyant. It is just in the last three or four years that organized farm opinion has begun to pay more attention to this problem, and the amendments that we have before us I am sure have come as a result of the demands from farm organizations for more generous credit provisions in the act.
At the outset of my remarks I said that the farm economy requires certain special features by way of credit provisions. In the early years the credit needs of the farmers were largely taken care of by private loan

companies which operated alone in this area up until world war I. This was particularly true during the development of the wheat economy on the prairies. However, in the boom period of world war I credit facilities became somewhat overextended, with the result that a huge indebtedness was incurred by prairie farmers. This indebtedness was still outstanding at the onset of the depression, and necessitated special adjustment legislation in order to assist the farmers in getting out from under their burden.
The first entrance of the government into this loan field came in the province of Manitoba in 1917, when the provincial government passed the Manitoba farm mortgage act. I should say that the provinces of Saskatchewan and Alberta followed suit very soon afterward. Unfortunately, because of inefficient management, because of the unpredictable nature of grain growing on the prairies, the wild price fluctuations and so forth, provincial activities in providing credit did not continue to function successfully beyond 1923. It was then that the agitation from the Progressives, the farm representatives, began. They were thinking in terms of the provision by the federal government of more extensive credit facilities.
Now, while these amendments are a step in the right direction, I think it is fair to state that they do not go as far as the special capital needs of our agricultural economy require. As a result of the unhappy experience of private lenders in this particular type of lending operation, the supply of capital from that source has been drying up. This means that more and more the farmer- I am speaking particularly from the standpoint of the western farmer, but I think it would apply generally-is dependent upon the sources of credit such as are provided under the farm loan act.
The parliamentary assistant indicated that this act was originally thought of as a pacesetter, encouraging lower interest rates and generally setting the pattern for the specialized needs of farm credit. However, it seems to me, Mr. Speaker, the activities of the farm loan board have today gone beyond the demands of pace-setting, and the board is in the position, because of the changing circumstances, where it is one of the major agencies for providing this kind of service to the farm population.
I say the farmer has special needs for credit. He has need for short-term credit. This is taken care of to a large extent by the banks, and by self-financing through friends. According to the latest figures I have seen on this matter, most of the short-term

credit used by the farmers comes from selffinancing sources. Also, of course, the credit union method of providing short-term emergency credit has become increasingly popular among our farm population. The real problem arises in connection with long-term capital provision. This was the basic function that the original farm loan board was established to perform.
Agriculture needs long-term credit more than any other type of business activity. The return on the farmer's investment is comparatively small and the recovery of the investment of necessity, because of this small return, occupies a long period of time. In most cases, particularly in reference to financing in the grain economy, it requires long-term financing up to a period of 40 years. Under the Canadian Farm Loan Act long-term financing is provided for up to 25 years. Therefore there is a real deficiency in this regard in the act as it stands at the moment.
Another special problem of the farm economy in regard to credit is the necessity of providing capital at the lowest possible interest rate. When I say "lowest possible interest rate" I do not wish to imply subsidization of this type of financial activity. I believe, of course, that the loan should pay for itself; that the necessary administrative costs, and so forth, should be provided by the interest rate. Because exceptionally longterm financing is required, there is a necessity to keep the interest rate as low as possible. This the farm loan board has endeavoured to do. When it was originally established it did fix the initial interest rate considerably below the going rate of funds available from other sources, particularly from private sources.
Another principle that has to be kept in mind in regard to farm credit is the need for flexible repayment. Again, this uncertainty of income, this fluctuating income, which certainly we have had brought home to us quite forcibly during this present session, places the farmer in a position where he never knows from one year to another whether he is going to be able to meet his current liabilities. If he is not in a position where he can feel fairly secure concerning his credit operations, then of course he shows a great deal of reluctance to finance on this basis.
The farmer, because of his unfortunate experiences in the past during successive boom and bust periods, is very suspicious of credit; yet, because he is operating a separate family farm unit, he requires a comparatively high percentage of capitalization. If he is going to operate successfully he must use considerable amounts of capital. These
Canadian Farm Loan Act matters should all be kept in mind in reference to the provisions of this act now before us.
As I said at the beginning, the amendments are a step in the right direction, but there are still grounds for maintaining that the act has not moved as far as necessary, particularly when we consider the tremendous changes that have taken place in the farm economy since the act was originally placed on the statute books.
There are two more points I would like to make before I conclude my contribution to this discussion, Mr. Speaker. There are two types of credit need that have not been met in any shape or form by any type of capital operation in Canada up to the present time. The first is the special need that arises where the farmer finds himself operating an uneconomic unit. The main reason that his farm is regarded as an uneconomic unit, or is undercapitalized if you prefer that term, is because it is not large enough and is not fertile enough to bring sufficient return to provide a satisfactory income and living. Obviously, if he is going to change his farming operation into an economic one he has to obtain credit from some source in order to improve his position. Here is just where he finds himself up against a brick wall, because there is no possible source of credit. Private lenders, of course, turn him down flat; also, he is unable to get any assistance from either the Canadian Farm Loan Act or the Farm Improvement Loans Act.
' I have come up against specific examples of this sort of problem in my own area. A young farmer, for example, finds himself occupying a large expanse of territory which is semi-arid, submarginal and suitable mostly for grazing purposes. He is not in a position to buy the necessary cattle to turn his farming operation into an economic one. He is turned down by the Farm Improvement Loans Act and also by the farm loan board on the basis of the 60 per cent value stipulation, which, in the present amendment, has been changed to 65 per cent. That is a problem that must be faced in meeting the needs of the farm economy. Whether it can be done through the existing acts or whether it requires a broader approach to the problem I am not in a position to say, but certainly it requires some further study.
Then in this day and age, when farming has become a commercial operation, there is a special need of assistance for young farmers who are attempting to get started in farming operations. There is limited assistance under the Veterans Land Act so far as veterans are concerned and young farmers who can come under that act are assisted most generously

Canadian Farm Loan Act in getting established. However, outside of that particular program there is no adequate provision for credit assistance for the younger farmer wishing to get started.
I have some figures which indicate how the financial situation has changed in the last half century. In 1882 when western Canada was first opened up to homesteading a homesteader could get into business with an investment of some $660, and within five years he could have parlayed that original investment into something like $3,320. Today in order for a young farmer to be successfully launched the following minimum amounts are required:
Land	 $13,500
Buildings		 8,956
Machinery	and	equipment	 8,469
Livestock		 1,580
Cash for first	year's	operation _____ 2,099

As the parliamentary assistant has indicated, provision for credit of this kind is available under the act, but it is limited to a maximum of $15,000. This is a problem which has been discussed in this house before, as well as in the legislatures, particularly of the provinces of western Canada. I believe two provinces have acted to provide some assistance in this regard, Ontario being one and Quebec the other. Up to the present time the western provinces have not gone beyond the discussion stage.
It is obvious that today there is a trend away from the farms. If we are going to encourage young Canadians to establish family-farm units there will have to be provision for much more generous credit than is available under the act as it stands. In recent years there has been an increase in the number of tenant farmers, and no doubt this arises from the difficulty the farmer faces in getting started today because of the almost fantastic rise in the cost of farm operations. No doubt it also accounts for the rapid exodus from the farms to more lucrative occupations in the cities and urban areas.
Perhaps what we need is not an amendment to the act but a separate act which could be described as the farmers' establishment loan act. Or as an alternative the farm loan act could have a special division to be described as the farmers' establishment loan division. However, on the whole I think this bill is a step in the right direction, and I trust that any remarks I have made as to improvements that are required will be kept in mind when the amended act goes into effect.


Mr. W. M. Johnson (Kindersley):: Mr. Speaker, like the hon. member for Brandon-Souris (Mr. Dinsdale) I welcome the fact that the government has recognized the problem

of agricultural credit, but I am disappointed that it is moving to resolve that problem at such a snail's pace. The problem of agricultural credit is particularly serious in Canada at the present time when agriculture is receiving such a small share of the national income, when we have a period such as last year when agriculture received only 6-8 per cent of the national income. This points up the necessity for the establishment of an overall agricultural credit policy to assist farmers in increasing their efficiency in order to offset the rising costs of production.
Agricultural credit is a serious problem in Canada at this time because of the transition which is taking place in many of our areas. In western Canada we have experienced a move toward larger farms, and we notice that the size of the farm is increased according to the efficiency of the equipment. That same move is taking place in Ontario, Quebec and the maritimes, indeed all across Canada. The size of the farm is co-ordinated with the efficiency of the farm machines which are being developed.
It is particularly important that we have a sound over-all agricultural credit policy to provide an opportunity to those of succeeding generations, who are desirous of taking up the occupation of farming, to take over the farms which their fathers have established on a sound and businesslike basis. As the hon. member for Brandon-Souris pointed out, in most instances the cost of becoming established is so prohibitive that unless assistance is provided by the father or by some magnanimous credit agency the young farmer is unable to become established. In many cases land which would become available as a family farm unit is absorbed by some other farm operator in the district who does not require it for the sake of efficiency but merely because he has a habit of acquiring more land.
We require an agricultural credit policy which will provide short-term, interim and long-term credit arrangements. As the parliamentary assistant pointed out, the Farm Improvement Loans Act is performing a most useful function in providing interim credit to farmers for the purchase of farm machinery, livestock and so on to ensure the maximum efficiency of their farms. I do not think we can say that the Canadian farm loan board has been achieving that same efficiency as a long-term credit organization.
The bill which is presently being discussed increases the percentage of the appraised value upon which a first mortgage can be granted. The parliamentary assistant has pointed out that this percentage is being increased from 60 to 65. At the same time the

maximum loan for a first and second mortgage is being increased from $12,000 to $15,000.
I had hoped at the time the resolution was introduced that the bill would include more than it has included, because it is necessary for this long-term credit policy to provide legislation that will achieve the function of establishing farmers on a sound basis in the agricultural industry of our economy.
The present Canadian Farm Loan Act has taken a very niggardly approach to giving credit to farmers for the avowed purpose of increasing the efficiency of the farm. Indeed, the total loans made have never approached the limit set for the board. The highest amount of outstanding Canadian farm loan board loans has been $30 million, as compared with an allowable $90 million. In 1954 this loan amount stood at $25 [DOT] 3 million, which indicates that the legislation does not encourage farmers to take advantage of this credit because of various defects in the Canadian Farm Loan Act.
One of the reasons would be, I think, the small margin upon which the board has to operate. Because of this small margin there is a very strong tendency to avoid making loans to high risk borrowers. In other words, if the farmer is in a hazardous position, if his farming operation does not appear to be an economic unit, the farm loan board is very reluctant to make him a loan so he can increase the efficiency of his unit.
I think another feature is the inadequate field staff with which the Canadian farm loan board has to operate. This is another indication of the operation of the Canadian farm loan board in trying to keep down expenses, whereas in effect it results in reductions in the loans that are actually made. There is an extensive delay in making appraisals. Because of the time element involved, there are many farmers that have not had an opportunity to purchase land, simply as a result of this delay.
I think the size of the loan as it stood before this amendment, $12,000, and the present $15,000, is still far too small. It is a small part of the actual purchase price for most farms. In addition to that, the board evaluations have in most instances been a half or less of market prices. The board has been very conservative in its appraisals, and has not given any recognition to the increase in land values that has taken place over the past number of years. The very fact that the percentage of the appraised value has been raised from 60 to 65 per cent is an indication of the fact that the appraised values have been far too low.
Another reason there have not been more loans made under the act would be the fact
Canadian Farm Loan Act that for a second mortgage a chattel mortgage is required on the livestock and assets of the farmer. This, in effect, ties up all the farmer's assets and puts him in an impossible position to get any further credit from any source whatsoever. Then in addition-


William Moore Benidickson: The chattel mortgage will not be mandatory under this bill.


Willis Merwyn (Merv) Johnson: I thought that was what the minister was pointing out. I am not too good at reading bills but I thought that was so, and I am pleased that the parliamentary assistant has drawn that to my attention. As the hon. member for Brandon-Souris pointed out, the terms of repayment under the Canadian Farm Loan Act are altogether too rigid. The fact that the repayment must be made in a period of 25 years by annual payments, with of course the option to prepay, does not take into consideration the weather cycles that periodically confront western Canada and, indeed, the whole of Canada. We need to have a flexible repayment policy that is geared to the average returns from the farm. By that I mean that, if a farmer has a good year, he should be expected to pay more to retire his debt. On the other hand, if he has a crop failure consideration should be given to that, and he should not be expected to pay any significant amount in that year.
The Canadian Federation of Agriculture is certainly indebted to Mr. J. C. Brodrick, of St. Catharines, Ontario, for the investigation he has made into the need for agricultural credit in Canada. The house is doubtless aware of the recommendations made by the federation of agriculture pointing out the necessity for lengthening the period of repayment of the loans, increasing the maximum to $20,000, and changing the maximum assessment percentage to 80 per cent of loans up to $8,000, with a graduated reduction on the balance up to $20,000. The very fact that the Canadian Federation of Agriculture has had a discussion on this and has brought forth a comprehensive resolution on the necessity for an agricultural credit policy would certainly highlight the need for the establishment of an over-all credit policy for Canada.
I would suggest that we have a very good pattern to follow in establishing a long-term agricultural credit policy. I am one of those who are operating under the Veterans Land Act, and I must say that I have been most satisfied with the operation of that act. It takes into consideration the individual capacity of the settler and, through guidance and through a flexible repayment policy at a very low rate of interest, gives him every opportunity to establish himself.
1954	HOUSE OF
Canadian Farm Loan Act
I should like to see the government go one step further and study the policy which has been in effect for some time in the United States. I am thinking of the farmers' home administration, which was set up in 1939 and modified in 1946. The administration receives its funds by annual appropriation from the government. The loans are made to those who have a good chance of succeeding if given assistance. The attitude is taken that the most important asset of the farm is the farmer, and if he is willing to work and has the ability and the guidance, there is every possible chance that he will succeed.
Loans are made on 100 per cent of the appraised value of a farm. They do not believe in going half way. They will give a farmer assistance on the basis of an economic unit and will fix up the farm home. Indeed, it is one of the provisos of the farmers' home administration that the farm must be established as an economic unit and one fit to be inhabited. In fact there was one instance in the United States where the farmers' home administration took over a farm to set up a bankrupt individual and get him back on his feet. They of course insisted that he build a new, modern home to house his wife and children, and of course funds were supplied for that purpose. The interesting aspect there is that the house he had been occupying had to be improved in order to be fit to house hogs.
They believe in going at things in a reasonable fashion so the farmer has every possible chance to succeed. They have a flexible repayment policy which, as I indicated, should be incorporated in this legislation so that if the farmer has the finances to repay the loan in any particular year he would be encouraged to do so.
He should also be given all possible assistance through agricultural research and by way of receiving the advice of officials having to do with the administration of the act so that he may be an efficient operator. You can see, Mr. Speaker, that there is a big field open with respect to this whole subject of agricultural credit. Many improvements can be made and are necessary in short-term, intermediate-term and long-term credit; and I suggest to the parliamentary assistant that the best way for this to be brought about is to refer the bill to the standing committee on agriculture for thorough study. It should be referred to the committee so those interested farm organizations such as the Canadian Federation of Agriculture who have discussed this matter, may have the opportunity to present their views in order that the bill may 

be revised in such a way as to provide a
dynamic source of agricultural credit which
is so needed in Canada today.


Mr. J. A. Smith (Battle River-Camrose):: Mr. Speaker, in rising to take part in the debate on the bill to amend the Canadian Farm Loan Act 1 do so with mixed feelings. We were very pleased in reading the terms of the bill to notice that some provision has been made for a certain amount of relaxation of the limitations which have been in previous bills of this type and which in our opinion have more or less fettered the operation of the legislation as a whole. On the other hand, in studying the bill we were somewhat disappointed because of the fact that the changes do not go quite far enough.
In studying the legislation I have noticed that throughout the years there have been constant revisions, which in my opinion have all been good, and the proposed revisions this year are also good to the extent they go. On the other hand, they just do not go far enough.


William Moore Benidickson: Four years ago the loan ceiling was only $5,000.


James Alexander Smith: Just one minute; I am going to bring that out. I noticed that a few years ago the ceiling was $5,000. It was increased to $10,000 and now it is anticipated that the maximum ceiling will be $15,000. I have mentioned that this is good but not good enough. I also note that throughout the years there have been changes in the percentage of money lent on the appraised valuation of the property concerned.
I notice that the amount has been increased from 50 per cent to 60 per cent and now to 65 per cent. We are prepared to give credit where credit is due, Mr. Speaker, but we will give just as much credit as is due and no more. We do not feel that the legislation is perfect in any way yet, and for this reason we should like to see further amendments.
I am particularly interested in the problem of the young man who wishes to take up farming. Some years ago a man could go out west, take up a homestead for $10, buy a team of horses, a sulky plow, a hayrack and so on for a few more hundred dollars and become established. That day is long past, and as we go down through the years we find that it has become ever more costly for a man to establish himself upon a farm. In fact in my part of the province of Alberta it would cost a minimum of $20,000 today for a young man to become established, and that not on the best grade of land in that part of the province but on average land.

That is a lot of money for a young man to have to pay to become established as a farmer.
We must remember that after he has paid $20,000 for the land he has to buy a full line of machinery. If he is engaged in mixed farming he has to go into cattle and so on. This is a costly investment, and for that reason I wish to submit, with all due respect to what has been done in the past, that a ceiling of $15,000 is far too low. I have here a copy of an application that one of my constituents submitted to the Canadian farm loan board. He was trying to borrow $10,000. It so happened that last summer he visited the branch office and met the man in charge at this particular point. He explained his case and was told that he did not have sufficient security for the board to grant him a loan of $10,000. One of the reasons advanced, of course, was that he did not have enough cultivated acreage.
I am thinking in terms of a farm of five quarter-sections of land. On these five quarter sections there were, according to this man's statement, 460 acres under cultivation. At that time the man had 50 head of cattle. Those of us who are acquainted with farming in the west will realize that it takes a goodly amount of pasture to feed the cattle through the summer and to have feed for them throughout the winter. He not only had 50 head of cattle but had 50 head of hogs; he was in the hog business as well. He had a full line of machinery, and an approximate estimate of the net value of the property he owned at that time would be $27,500. Nevertheless he was refused.


William Moore Benidickson: Was that the valuation of the appraiser?


James Alexander Smith: Just a minute; if you give me time I will get to you. He was refused a loan by the manager of the particular branch. They did not send out an appraiser. He had $27,500 worth of property, requested a loan of $10,000, and an appraiser has not been there yet. Just the other day I advised this young man to submit a further application, because I hoped that the terms of the new act would make it possible for him to borrow the $10,000 he requested.
The matter of appraising has been mentioned. I have been given to understand by people who have attempted to deal with the farm loan board branch that the appraisers of this particular branch are the toughest appraisers to be found in the province of Alberta. Let us keep that in mind. What is the purpose of the legislation about which we are talking? Its purpose is to make loans
Canadian Farm Loan Act to farmers. As I have mentioned, I am particularly concerned about having young farmers established on the land. Here was a young man who was prepared to take over his father's farm. He could not do so because of the fact that the farm loan board was not prepared to lend him a total of $10,000 on property that, according to a fair assessment, was worth $27,500.
In going through the history of this particular board it is interesting to find some of the things that have been said about it by people who have studied its operations throughout the years. I am quoting now from a statement of policy submitted by the Canadian Federation of Agriculture on January 26, 1956. They have this to say about the present Canadian farm loan board:
The farm loan board provides only a relatively small proportion of the mortgage credit in this country-perhaps 15 per cent of the total.
This is interesting, Mr. Speaker, in view of the remarks made by my good friend the hon. member for Brandon-Souris.
Its lending policies are conservative, and its own financial policies are also very conservative.
I do not know just what the policies of the present Progressive Conservative party happen to be, but I know that there is something wrong with the present policies of the Canadian farm loan board. Perhaps there is also something wrong with those of the party I have just mentioned. The statement continues:
In a recent report the Auditor General noted that the farm loan board is providing for reserves substantially in excess of the requirements of the act under which it operates, and that nothing in the accounts pointed to the necessity for such reserves.
I submit, Mr. Speaker, that these reserves have been built up as a result of the fact that loans were not granted unless the farm loan board had more than gilt-edged security behind them.
Because of its relatively small volume of lending, its costs per loan are high. If the board were to discontinue setting aside its special provision for losses above the legal requirements the interest rate could be reduced by one-half of one per cent. If further, its present low volume of lending (less than $8 million in 1953-54) could be doubled or better, lowered costs would, no doubt, compensate for a further one-half of one per cent reduction in the interest rate.
The reserves have already been mentioned and I will not deal with that matter. I can see no reason in the world why greater use should not be made of this particular act. This afternoon we listened with great interest to a description of the advertising policies used by small loans companies throughout Canada. They are highly successful. I think that all the farmers of the west are
1956	HOUSE OF
Canadian Farm Loan Act asking is that the farm loan board, through its directors, branch managers and so on, give the farmers of the west an even break- no more-in securing legitimate loans. I wish to point out again, Mr. Speaker, that we welcome the relaxation that is being given to us in this particular bill, but in committee we shall likely ask that further relaxation or loosening up be given. We are not entirely satisfied by any means.
I have already mentioned the conservative policies of the board. It seems to me that this particular board must take its guidance from the parliament of Canada and, through the parliament of Canada, from the government and so on. In other words what it means is this. The present government of Canada has been exercising a conservative influence upon the Canadian farm loan board. I did not expect that influence from the present government.
I have also mentioned the fact that on the part of the officials of the Canadian farm loan board little or no attempt is made to sell the product they have; and the product they have is the authority to make loans available to the farmers and the fishermen of Canada when they are necessary. I would also mention the cumbersome type of application form used by the present Canadian farm loan board. I submit, Mr. Speaker, that there is only one other form, to my knowledge, that is any more complicated than this one, and it is the form the farmer must fill out when he files his income tax.
I believe that the man who drafted this form must also have drafted its sister form, the farmer's income tax form. I believe it would take an exceptionally good lawyer to satisfy the directors of the Canadian farm loan board that these questions were answered properly.
Then there is the matter of appraisement. Just what is wrong with the present system of appraisement? In the particular case I have mentioned no appraisal was made, of course; there was just an offhand statement, "No, you don't get it". There was no attempt to find out whether or not the statements which this young man submitted were correct. When a man drives in from the country to the city and makes a personal application for a loan, surely the least we should expect from the farm loan board is a survey or investigation, through the municipal officials or some other body, to find out as a preliminary whether or not the figures submitted by this particular farmer were fair, honest and so on.


William Moore Benidickson: Will the hon. member give me, either now or privately, the name of this applicant?


James Alexander Smith: Certainly. I have already written to the office to which I am referring for a copy of the correspondence in this connection. I wrote about 10 days ago. If I do not get it I plan on taking the matter up with you in any case. The information will be available.


Hazen Robert Argue: Let us hope you get results.


James Alexander Smith: I hope so as well. As to the method of appraisal, may I say that we have all kinds of land inspectors and assessors in the province in which I live. Surely there is no reason in the world why an appraisal made, say, by the municipal assessors should not be accepted. In the province of Alberta we are headed for and hope some day to have a uniform system of assessment throughout the whole province, an assessment that is fair. Surely there should not be such a great spread between the assessed value of land as given by the municipal inspectors on a uniform basis and the appraisal given by the farm loan board officials at the present time.
I was much interested in the remarks made by the hon. member for Moose Jaw-Lake Centre a few moments ago when he said that the loans made under the farm loan board were few and far between. I think perhaps he was talking in terms of the province of Saskatchewan. I can also say that, to my knowledge, the loans made in the province of Alberta are few and far between. I am given to understand, Mr. Speaker, that there are certain areas in the province of Alberta which we cannot say have been blacklisted but in which we do say it is practically impossible for the farmers to secure a loan from this particular board.


An hon. Member:: They are greylisted.


James Alexander Smith: They are not greylisted nor blacklisted but just listed. They just do not get loans. Why?
I submit that in the committee stage some of the questions I have asked should be answered.
In closing, Mr. Speaker, I repeat that we like to see a step in the right direction. We appreciate it. But we would far more greatly appreciate a bigger step in this direction which would result eventually in establishing young men on the farms of western Canada.


Mr. G. T. Purdy (Colchester-Hants):: Mr. Speaker, in rising to say a few words in this debate I should first like to congratulate the parliamentary assistant to the Minister of Finance on the clear and concise report he gave with respect to the amendment to this act. Since his presentation I have listened with interest to the remarks made by the

hon. member for Brandon-Souris the hon. member for Kindersley and the hon. member for Battle River-Camrose.
Dealing with the last first, I would say that the hon. member devoted most of his remarks to a criticism of one special case which had come to his notice. Dealing next with the hon. member for Kindersley, I would say he commended the government on a special case, and that was his own. Going back to the first, I listened to the remarks of the hon. member for Brandon-Souris but I cannot really admit that he contributed too much to this debate. It seemed to me that his thinking was along the same lines he exhibited the other evening when he attempted to cure the ills of the maritime provinces on the decentralization problem by telling us we should go back to the policies introduced by the Conservative party at the time of confederation.
I would come now to the bill itself Mr. Speaker. I would say that I agree entirely with the principle of this bill, but I do not entirely agree with the application of its principle to date. At its annual meeting held in Truro in January of this year, the Nova Scotia federation of agriculture passed the following resolution under the heading of "Farm Credit Policy":
Whereas our present credit facilities are not adequate to meet the requirements of an expanding industry in a way that producers may increase their production units to a profitable and efficient level.
Resolved that provincial and federal authorities make every effort to expand all types of farm credit policy.
I am very hopeful, Mr. Speaker, that the amendment to this bill is carrying out the policy advocated. Perhaps those of you who are interested in the problems of Nova Scotia will recall that our provincial legislature has set up a royal commission to study all phases of agriculture credit. I would say that is a step in the right direction.
Now, sir, perhaps some of you will say to me, what right has a member from Nova Scotia to participate in an agriculture debate? I should like to state here that Nova Scotia, small as it is, has a farm population of
112.000,	according to the census of 1951, compared with a farm population in Canada of
2.827.000.	In other words Nova Scotia, in spite of all that has happened in the past, still has 4 per cent of the farm population of Canada.
I am going to deal now more specifically with the workings of the Canadian Farm Loan Act in Nova Scotia. In trying to lead up to this I placed a question on the order paper as far back as February 13 requesting a breakdown of the farm loans granted and
Canadian Farm Loan Act applied for in Nova Scotia during the last calendar year. I might say that my reason for doing this was based on that resolution passed by the Nova Scotia federation of agriculture previously referred to. I was afraid that the Canadian farm loan board had forgotten there was any agriculture in Nova Scotia. As yet I have not received a reply to this question, so in dealing with this problem I must base my remarks on the last annual report of the Canadian farm loan board, for the year ending March 31, 1955.
As I have said, Nova Scotia has 4 per cent of the farm population of Canada; yet according to the figures in the annual report, at March 31, 1955, Nova Scotia had 3-4 per cent of the farm loans outstanding as compared with the rest of Canada. I am coming now to the application of the farm loan program in Nova Scotia in the last year. I want to again impress the fact upon you that Nova Scotia has 4 per cent of the farm population of Canada. According to this report, in the last year Nova Scotia was given only 1-2 per cent of the farm loans which were made, that is according to number, and according to amount we fared even worse because we got only 1-07 per cent of the loans.
In view of those figures, and in view of the fact I have not been able to get an answer to the question I asked concerning loans made in the calendar year, I find myself in the position where I must agree with the criticism which was raised at the annual meeting of the Nova Scotia federation of agriculture. They said that the Canadian farm loan board had lost interest in the farmers of that province.
Where is the parliamentary assistant? I hope he will follow me when I say that I trust this new program will mean the farmers of Nova Scotia will not be forgotten. I have given you the figures showing what we have had. Our farmers think this is a great plan if it is properly applied but they cannot see that, on the percentage of loans granted under the present scheme, they are being properly treated.
The farm loan board maintains an office in Halifax, the capital of Nova Scotia. With all respect to my good friends from Halifax, I would say that Halifax is not in touch with the rural portions of the province because it is so far away. Last year this loan office granted to the farmers of Nova Scotia 31 loans totalling $88,750. I might say in all sincerity that if a farmer loan organization in Nova Scotia, where there are 112,000 farm people and with all the applications they have had, cannot put out more money than that, then either agriculture in Nova Scotia is doomed or the farm loan board is not doing its duty.

Canadian Farm Loan Act
Let me go back a bit. A few years ago it was my privilege to sit in this house, and it still is. With all respect to my good friends from Halifax-the war was on and Halifax was carrying the load for Canada, as every Nova Scotian did, but Halifax bore the brunt of it-I advocated that the place for the Canadian farm loan board was in the centre of agricultural production in Nova Scotia, not away out on the headland with the shipping, which had very little connection with agriculture. Although I made my point, it was indicated to me at that time that in addition to administering the Canadian farm loan, the farm loan board had to look after fishermen's loans. There was nothing I could say to offset that, because farming and fishing in the interior of Nova Scotia had nothing in common.
In view of the remarks of the parliamentary assistant I now find, sir,-and I am now saying this to the parliamentary assistant and through him to the Minister of Finance- that the terrific job the Canadian farm loan board had to do to look after loans to fishermen in Nova Scotia was to make four loans to the total of $1,291.11. Because of this new outlook on farm loan advances, I hope the rural people of Nova Scotia will be able to get a proper office in the centre of the province.
In addition to the improvement in the farm loan board administration, I hope the board will put its offices in the centre of the farming population where they will be in close contact with our farming problems. Why should the Canadian farm loan board, lending money to the farmers of Nova Scotia, be
located where it is? Halifax is a wonderful city, but on the other hand the federal Department of Agriculture has its main offices in the constituency of Colchester-Hants. The Veterans Land Act, which lends money to put people on the land, has an office there, and the Nova Scotia government in all its wisdom-and it is a good government-has the agricultural college at Truro. The headquarters of all their agricultural activities is there. If I could only impress upon our federal people, if they are to play a real role and do a decent job for the farmers of Nova Scotia, the necessity of bringing their activities to the farmers rather than have the farmers going to them, it would be a great day for the farm loan board, for the Minister of Finance, for his parliamentary assistant, and for the member for Colchester-Hants.
Thank you very much.


Robert Henry Winters: Mr. Speaker, I wonder whether I might make a suggestion at this time. I wonder whether hon. members would agree to give this bill second reading tonight on the understanding that if that is done I shall move that it be referred to the standing committee on banking and commerce?


Mr. White (Middlesex East):: No, sir. I move the adjournment of the debate.
On motion of Mr. White (Middlesex East) the debate was adjourned.


Robert Henry Winters: I move the adjournment of the house.
Motion agreed to and the house adjourned at 9.57 p.m.



ANSWERS TO QUESTIONS

[Stage Direction]
The following answers, deposited with the Clerk of the house, are printed in the official report of debates pursuant to standing order 39:

[Stage Direction]
Question No. 145
Mr. Tustin:: 1.	Did the Royal Canadian Air Force accept responsibility tor damage to gill nets of George W. Offen, Carrying Place, Ontario, by their crash boat in the Murray canal zone on November 26, 1953?
2.	If so, was any settlement made, and in what amount?
3.	Was any influence brought to bear on Mr. Offen to accept this settlement? If so, by whom?
4.	What value did Mr. Offen place on his complete losses?
Answer by: Mr. Campney:
1.	No.
2.	Although no evidence of legal liability was adduced, an ex gratia payment of $650, representing the cost of the gill nets, was offered and accepted.
3.	No.
4.	$5,150.


MILITARY PENSIONS
Mr. Balcom: 1.	Has consideration been given by the government or the Department of National Defence to increasing the service pension of officers (male or female) of the permanent forces of Canada who retired before 1950, so as to bring their pension in line with those permanent force officers retired since the second world war?
2.	If so, has a decision been made?
3.	If not, will the matter be studied and reported upon?
Answer by: Mr. Campney:
1.	No.
2.	Not applicable.
3.	No.


MILITARY PERSONNEL
Mr. Diefenbaker: What was the total amount paid to (a) Trans-Canada Air Lines: (b) Canadian Pacific Air Lines; (c) British or commonwealth air lines; (d) foreign air line companies, from January 1, 1955 to date, in respect of transportation for (i) officers; (ii) other ranks of the Canadian defence services?
Answer by: Mr. Campney:
(a)	(i) $1,192,358.83; (ii) $586,036.19.
(b)	* (i) $136,488.53; (ii) $223,851.25.
(c)	(i) $3,797.20; (ii) nil.
(d)	(i) $70,269.34; (ii) $17,867.51. Amounts given are for the period January
1,	1955 to January 31, 1956.
*-Excludes cost of transporting personnel-officers and men-under contract with C.P.A. to and from the Far East.
Questions


EXECUTIONS OF PERSONS RECOMMENDED TO MERCY
Mr. Diefenbaker: How many persons who had been recommended to mercy in the verdict of the trial jury have been executed in Canada since January 1, 1930?
Answer by: Mr. Garson:
Twenty-one persons.


BUTTER SALES TO D.V.A. HOSPITALS
Mr. White (Haslings-Frontenac): 1.	How many pounds of butter have been sold to D.V.A. hospitals in Canada under the assistance policy of the Department of Agriculture since February, 1955?
2.	What was the price per pound for such sales? Answer by: Mr. Gardiner:
1.	The number of pounds of butter purchased by D.V.A. hospitals in Canada under the assistance policy of the Department of Agriculture since February, 1955, to February 28, 1956 was 252,144 pounds.
2.	Each D.V.A. hospital has received a discount of 21 cents per pound on butter distributed under this program.


BUTTER SALES TO ARMED SERVICES CAMPS
Mr. White (Hasiings-Frontenac): 1.	How many pounds of butter has been sold to army, navy and air force camps and establishments under the assistance policy of the Department of Agriculture since February, 1955?
2.	What was the price per pound for such sales?
Answer by: Mr. Gardiner:
1.	Nil.
2.	See answer to No. 1.


POST OFFICE DEPARTMENT INSURANCE
Mr. Lennard: 1.	Does the Post Office Department carry insurance for any purpose?
2.	If so, for what purposes, in what amounts, and with what company?
3.	If no such insurance is carried, by what method is provision made for losses (a) which must be borne by the Post Office Department itself; (b) when it is necessary to recompense users of the postal service?
Answer by: Mr. Lapointe:
1.	No.
2.	See answer to No. 1.
3.	(a) and (b): Charged to postal revenue.

Friday, March 9, 1956



COMMITTEES OF THE HOUSE


[Stage Direction]
Mr. Charles Cannon (Iles-de-la-Madeleine)
presented the first report of the standing committee on public accounts, and moved that the report be concurred in.
Motion agreed to.


[Stage Direction]
Mr. W. J. Henderson (Kingston) presented the first, second and third reports of the standing committee on miscellaneous private bills, and moved that the first report be concurred in.
Motion agreed to.