1961-06-14

[Stage Direction]
Mrs. Margaret Mary Macdonald, member for the electoral district of Kings, introduced by Right Hon. J. G. Diefenbaker and Hon. J. A. MacLean.
George Louis Chatterton, Esquire, member for the electoral district of Esquimalt-Saan-ich, introduced by Right Hon. J. G. Diefenbaker and Hon. E. D. Fulton.
John Ross Matheson, Esquire, member for the electoral district of Leeds, introduced by Hon. L. B. Pearson and Mr. G. J. Mcllraith. (Translation):
Edgar Fournier, Esquire, member for the electoral district of Restigouche-Madawaska, introduced by Right Hon. J. G. Diefenbaker and Mr. G. W. Montgomery.
(Text):


[Stage Direction]
Hon. Donald M. Fleming (Minister of
Finance): Mr. Speaker, I am now in a position to inform the house that if it pleases the house, I would hope, barring unforeseen occurrences, to introduce the budget next Tuesday evening, June 20, at 7.30 p.m.
Mr. Martin (Essex East):: A belated announcement.



FINANCE


Hon. Donald M. Fleming (Minister of Finance):: Mr. Speaker, may I offer the house a statement on another matter upon which questions were asked in the house yesterday. Yesterday morning Mr. James Coyne, governor-


Mr. Speaker:: Order. Before the minister proceeds may I call to his sympathetic attention a problem which concerns me respecting the statement he is about to make by leave of the house. Of course the statement has not been submitted to me and I do not know its contents, but I think the minister and the house will recognize that if it is about the governor of the Bank of Canada it is a statement about a very controversial matter which could very readily
give rise to a debate on routine proceedings, at a time when the practice of the house does not provide for a debate.
I do not presume to assume that the minister proposes to make a controversial statement, but I ask myself whether the matter can be dealt with without the expression of opinion on matters which are controversial. Therefore, if the minister's statement is one of simple fact which can be made in that way and accepted by the house without debate, then I have nothing further to say. If on the other hand the minister has in mind expressing views about the circumstances with which he proposes to deal, then I would think the house might very well agree on the method by which this matter will be dealt with. If controversy is introduced and an opportunity to comment in the same vein is provided, then an endeavour should be made to limit the debate.


Donald Methuen Fleming: Mr. Speaker, I can assure you and the house that the statement has been prepared with due regard for the practice of the house in these matters. I have endeavoured faithfully to confine the statement to a factual account of matters upon which it was quite obvious yesterday the house sought factual information.
I wish to make it abundantly clear also that I would not wish for myself in this situation any right that was not shared equally by those hon. members opposite who may wish to make comment on the statement after I have read it.


Hon. L. B. Pearson (Leader of the Opposition):: Mr. Speaker, the point you have raised is an important one, especially in the circumstances. If the statement to be made by the minister deals non-controversially with that matter only, then it will be accepted as such on this side, of course, and any statement we made in reply in accordance with our right will be along the same line. If, however, the minister's statement includes opinions or facts which are controversial-


Mr. Broome:: What is a controversial fact?


Lester Bowles Pearson: -then I hope we will be given exactly the same right in reply that the minister has undertaken to exercise in making his statement.


Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, if the statement the minister intends to make is non-controversial, there will be
6314	HOUSE OF
Request for Resignation of Bank Governor no objection on the part of the members of this group to his making that statement now. If it introduces controversial matters or opinions, we think it would be more fitting and proper for the statement to be made after the budget has been presented next Tuesday.


Right Hon. J. G. Diefenbaker (Prime Minister):: Mr. Speaker, the house recognizes that the Minister of Finance never makes controversial statements; therefore we are really dealing with something that does not occur very regularly. However, Mr. Speaker, the point you have made, followed by the Leader of the Opposition, is that if there is anything of a controversial nature in the statement it will always be interpreted in that way no matter how factual it is. There will be no objection to the Leader of the Opposition and one member of the third party making such observations thereon as they deem proper, having regard to the substance and the factuality of the statement to be made by the Minister of Finance.


Mr. Speaker:: I will call upon the minister to proceed, and will reserve to myself the right, if debate develops, to apply such strictures as appear to be necessary.


Donald Methuen Fleming: Mr. Speaker, yesterday morning Mr. James Coyne, governor of the Bank of Canada, issued a statement, which has been widely circulated, concerning his tenure of office as governor. It would not be appropriate at this point in the proceedings of the house to comment in detail on his published statement sentence by sentence or on its defiant and provocative character. At this stage I must confine myself to placing before the house the essential facts, virtually none of which appear in that statement.
During Mr. Coyne's period in office there has been a steady and deplorable deterioration in the relations of the Bank of Canada with the public. The governor, by a course of ill considered action and a series of public declarations of policy on public issues quite outside the realm of central banking, and by his rigid and doctrinaire expression of views, often and openly incompatible with government policy, has embroiled the bank in continuous controversy with strong political overtones.
Mr. Coyne's rigid attitude on the maintenance of high interest rates is one example. The government's policy is expansionist, aimed at the creation of more trade, more production and more jobs. The policies advocated by Mr. Coyne are restrictionist, restrictive of trade, restrictive of production and restrictive of jobs. The government has exercised patience in the hope of avoiding
[Mr. Herridge.l

further controversy pending the expiry of his term of office on December 31 next, but its hopes have been frustrated by Mr. Coyne and it can no longer postpone decisive action.
Matters of high importance are awaiting decision and co-operative action by both the bank and the government. The need of teamwork between them and leadership by them has never been greater. It has become impossible to expect this kind of co-operation as long as the present governor remains in office. It was perfectly plain to the government that whatever assurances Mr. Coyne might give of co-operation for the future, the public could have no confidence that Bank of Canada policy would support government policy, having in mind the frequent public declarations by the governor which clearly run counter to the policies of the government.
Mr. Coyne has, as I shall explain shortly, lost the confidence of the board of directors of the Bank of Canada. He does not possess the confidence of the government.
On May 30, on the instructions of the government, I asked Mr. Coyne to tender his resignation to the board of directors of the bank. I further asked that he do so before the regular board meeting to be held in Quebec on June 12 and 13, so that action on the resignation might be taken by the board1 at its meeting. I gave him an ample statement of the reasons for the course the government was following. The main reason was that the government was convinced that Mr. Coyne's continuation in office as governor of the Bank of Canada would stand in the way of the implementation of a comprehensive, sound and responsible economic program designed to raise the levels of employment and production in Canada. After an hour's discussion he asked to be allowed to think the matter over. Presumably his published statement yesterday is his reply to the government's request.
Section 6 of the Bank of Canada Act provides as follows:
The governor and deputy governor shall be appointed by the directors with the approval of the governor in council.
As is well known, Mr. Coyne was appointed by the board of directors with approval of the then governor in council in December, 1954, for a seven year term as governor expiring December 31, 1961. This term has six and a half months to run. Had Mr. Coyne complied with the government's request, the board of directors of the bank would have been in a position at its meeting in the last two days to take action on the resignation and, if so disposed, to appoint a successor with the approval of the governor in council.
I had hoped to announce in the house today that this course had been followed and that

the whole matter would have been handled with dignity and consideration. Mr. Coyne, however, has chosen to reject the request and to provoke a controversy.
Mr. Coyne has not contented himself with disregarding a request from the government. The board of directors met at Quebec on Monday and Tuesday. The subject of Mr. Coyne's tenure was discussed both days. Mr. Coyne himself introduced the subject at the board's meeting on Monday morning. Both at the morning session and again at the afternoon session that day he delivered a lengthy defence of his administration. Discussion followed. I am informed that Mr. Coyne was made fully aware on Monday that the board would ask for his resignation if he did not choose to submit it.
The board meeting resumed on Tuesday morning at 9.30; that was yesterday. When it became clear that the board was about to introduce a resolution requesting the immediate resignation of Mr. Coyne, he asked to be excused and asked the board to consider other matters of business while he was out. He returned to the meeting at 12.15 o'clock to inform the board that he had issued a statement to the press at 11 o'clock. This statement was apparently released simultaneously in Quebec and Ottawa. I am also informed that he read the press statement to the board and intimated that he would not resign even if the board of directors requested him to do so.
With Mr. Coyne in the chair the board then proceeded to vote on the following resolution:
That it is in the best interests of the Bank of Canada that the governor do immediately tender his resignation to the board of directors of the bank and further that this action and decision on the part of the board has been taken after prolonged consideration and with regret.
Mr. Coyne polled the directors. The resolution was carried by a vote of nine to one. Mr. Coyne did not vote. Having declared the motion carried, Mr. Coyne then immediately adjourned the meeting.
In doing so he not only defied the formally expressed wish of the board that he should resign immediately in the interests of the bank; he made it impossible for them to proceed to consider what action might be taken in the face of this defiance. It is of particular significance that Mr. Coyne deliberately issued his own press release prepared in advance of the board meeting before the board had reached its decision, and in the knowledge that the board was about to reach a decision. In doing so he left the public with the false impression that the only request for his resignation had come from the government.
14,	1961	6315
Request for Resignation of Bank Governor
As I indicated earlier, it is not my intention to comment in detail on Mr. Coyne's statement. I should like, however, to make two observations. First, by referring to a-I quote his words-"mysterious and alarming'' program which the government is contemplating, Mr. Coyne may have left a certain false impression with the public. Perhaps the best way to dispel this impression is for me to say at once that Mr. Coyne has not been told of the contents of the forthcoming budget and, therefore, has no right whatsoever to express views about it. Second, Mr. Coyne has asserted that he has been given no indication of disagreement with his views on economic policy. In my last two budgets and in various other public statements it has been clear for some time that there have been major differences of opinion with the frequently expressed views of the governor on economic matters.
The earnest efforts of the board of directors and the government to handle this unpleasant matter with dignity and with consideration for Mr. Coyne have thus been frustrated by him. The house will be able to judge whether this was the action of a governor with a proper sense of responsibility to the board of directors of the very important public institution of which he has been governor for the past six and a half years.
I have already indicated that under the terms of the Bank of Canada Act, in appointing the governor the board of directors is the appointing body and the governor in council is the approving body. The board has now asked for his resignation and the government has asked for his resignation. He on his part has asserted his determination to remain in office, though unwanted, for the remaining six and a half months of his seven year term.
Mr. Coyne has referred to his pension claims. Prior to February 15, 1960 Mr. Coyne under present circumstances of age and service would have become entitled on retirement this year to a life pension of slightly less than $12,000 per annum. As the result of a by-law passed by the board that day he claims to have acquired immediate entitlement to a life pension of $25,000 per annum on retirement this year at the age of approximately 50 years.


Some hon. Members:: Shame.


Donald Methuen Fleming: The government was not notified of this by-law and the governor did not publish it in the Canada Gazette until this week.


Some hon. Members:: Shame.

Request for Resignation of Bank Governor


Donald Methuen Fleming: The government became aware of the enactment of this bylaw only this spring. The government, as I informed him at the meeting on May 30, considers that the governor was lacking in a sense of responsibility in keeping with his high office in accepting an additional benefit worth $13,000 per annum for life without ensuring that the matter was brought to the attention of the government.
It is the government, not the governor, which has been continuously defending the integrity of the Bank of Canada. For this, and for this alone, the government has patiently borne misunderstanding and even abuse in the hope of shielding the bank from becoming, as a result of the actions and assertions of the governor, a centre of political controversy.
In the light of the foregoing I can now inform the house that the government will shortly invite parliament to take appropriate legislative action to meet the needs of the situation.


Mr. Speaker:: Before I recognize the Leader of the Opposition I would remind hon. members of what I said earlier in connection with the course that was considered appropriate in this regard; that is, that hon. members' remarks should be kept within the scope of the statement made and should be appropriate to that statement. It has been indicated to the house that there will be an opportunity to debate this matter, and this present discussion should be confined to proper limits. That is my reason for rising before the Leader of the Opposition begins his remarks.


Lester Bowles Pearson: Mr. Speaker, the Minister of Finance has made a statement which is as controversial in fact and opinion as any statement which could be made by a minister of the government.


Some hon. Members:: Hear, hear.


Lester Bowles Pearson: Mr. Speaker, naturally I believe I have a full right to reply to the best of my ability to these controversial statements made by the minister, statements which are controversial in fact and controversial in opinion.
The minister has seen fit, in a statement which he told us was to be non-controversial, to talk about the steady and deplorable deterioration of relations with the bank. He blamed it on the bank. He talked about ill considered actions on the part of the governor; he talked about the governor embroiling the bank in this, that and the other thing.


Some hon. Members:: Oh, oh.


Lester Bowles Pearson: He talked about the lack of co-operation between the bank and the governor; he talked about the government being frustrated, and he told us that he proposed to make a non-controversial statement on this matter.
The minister also said that he had hoped this matter could be dealt with with dignity and consideration. The conduct of the minister has made this quite impossible.


Some hon. Members:: Hear, hear.


Lester Bowles Pearson: The minister's statement this morning has contradicted not only the communications which have been made public by the governor of the bank-the communications which are before us-but it is contradicted by the minister himself in previous statements in this house during this session.


Some hon. Members:: Hear, hear.


Lester Bowles Pearson: Mr. Speaker, I propose to support that statement by putting on the record what the minister has said in this house. These are statements which contradict what he himself has said this morning, and surely I have the right to do that in view of what he has said. The minister has made the unprecedented decision of asking the governor of the Bank of Canada to resign just a few months before the end of his term of office. In fact the minister has demanded his resignation-


Donald Methuen Fleming: No.


Lester Bowles Pearson: -a few months before his term of office ends. This unprecendented decision, this unwarranted intervention in the affairs of the bank, was made by a government which only a few months ago claimed it had no authority over the bank or its management; that it had no authority over monetary policy and no intention of ever interfering with the Bank of Canada. Here is what the minister said on February 21, as reported at page 2258 of Hansard:
I say that the responsibility owed by the Bank of Canada is to parliament... It is a direct responsibility.
Then the minister went on to refer to the management of the bank on page 2260 of Hansard. He said:
The government has no power whatsoever, once appointments are made, to change them; only parliament can do that.
Then the minister, in defiance of those statements, on May 30 calls in the governor of the bank and demands his resignation. What did the minister say on February 21, the same day, a little later? Let me read from page 2265 of Hansard:
Let us take the extreme case of a headlong clash, Mr. Speaker.

Now the minister, after three months, tells us that there has been a headlong clash going on for months and years between the government and the bank, in spite of the efforts we on this side of the house have made to get the minister to tell us what he thinks of the policy of the governor of the bank and his statement that there has been a headlong clash. The minister took this position when he was speaking in the House of Commons on February 21. He said:
Let us take the extreme case of a headlong clash, Mr. Speaker. In a situation of that nature-
This is the Minister of Finance speaking, who spoke this morning in a very different vein:
In a situation of that nature the government would have no power whatever to terminate the terms of office of the directors or the governor. In that situation all it could do would be to go to parliament, as the Leader of the Opposition said yesterday in effect. That is all it could do. The government has not been given by parliament any power or authority over the bank or its senior officials or directors in that situation.
The Prime Minister had something to say about this, too. He said in a broadcast to the nation on October 1, 1959:
I point out that the Bank of Canada, not the government, controls the money supply in Canada.
Incidentally, that has been denied recently by the governor of the bank himself, and it has been denied by us from this side of the house many times. The Prime Minister continued:
The bank was set up under law by act of parliament. It is independent and autonomous. It has one master, parliament, and through parliament, the people. That is the law. It has been the law for almost 25 years. But, as with any law passed by parliament the Bank of Canada Act is, of course-as the Bank Act is-subject to review and amendment.
Surely the most important issue must have arisen between the governor of the bank and the government. The minister said this morning that this issue had been developing over the months and, indeed, for a long time, though he never indicated in this house during any of the debates we have had on this subject that any such issue was developing at all. If that issue was developing; if the Minister of Finance had had these feelings toward the governor of the bank which he expressed this morning in such strong terms, why has he not risen in the House of Commons in the past and told us about them?


Mr. Benidickson:: He told us the opposite.


Lester Bowles Pearson: He told us the opposite. He has contradicted himself by his own statement, and he has been contradicted by the letters written him by the governor of the bank which have now been made public. We know now that this issue, and the demand for the
Request for Resignation of Bank Governor resignation of the governor, have been hidden since May 30, the very day I asked the Minister of Finance why Mr. Bryden, a member of the board, had resigned. Incidentally, Mr. Bryden was a member of the committee of the board of directors which looked into the pension matter and made the recommendation of February, 1960.
I asked the minister about this on May 30. The hon. gentleman became very indignant and refused to tell us anything about it. As a matter of fact, since February we have asked the government on several occasions to call the governor before the banking and commerce committee so we might find out what was going on between the government and the bank. The minister refused to do that. He gave the impression that all was well. Now he tells us there was a general deterioration in relations.


Paul Joseph James Martin: Denied parliament its rights.


Lester Bowles Pearson: That was a most reasonable request, and in the light of what the minister has said today that request becomes even more reasonable. It was reasonable when we made it, yet it was summarily rejected by the government.
It is not easy to find out the nature of the issue which has led to this demand by the minister for the resignation of the governor, in spite of what the minister has said this morning. The issue, in the terms in which the minister put it this morning has, as I have said, been contradicted and denied by the minister himself. Let me read again from page 2258 of Hansard. The minister said this morning that the governor had been going around making speeches and contradicting in his speeches the money policy- the easy money policy-of the government.


Mr. Pickersgill:: That is something new.


Lester Bowles Pearson: That is something new, all right. Here is what the minister said as reported in Hansard in February about the governor and his speeches:
May I say that I have no right of censorship over the speeches of the governor of the Bank of Canada. He does not refer them to me. Why should he do so? This is a free country.
Well, if this "heads will roll" attitude becomes common on the part of the government, we shall not be a free country for too long. The minister went on to say:
He makes his own speeches and chooses his own themes ... I trust that I am not to be held responsible for what may be said by the governor of the Bank of Canada when he exercises his right as a citizen to make speeches.


Mr. Speaker:: I am sorry to interrupt the hon. gentleman, but I should tell him that in two more minutes I shall consider that he
6318	HOUSE OF
Request for Resignation of Bank Governor has exercised his right to comment on the statement which the minister has made.


John Whitney Pickersgill: Closure.


An hon. Member:: You are the expert.


Mr. Speaker:: The minister who introduced this matter did not speak at undue length; I noted how long he took, and I would consider it appropriate if the Leader of the Opposition would conclude his remarks before long.


Lester Bowles Pearson: Naturally, Mr. Speaker, I would wish to use my rights in accordance with the advice you have given, but the minister made two points to which I must refer. One is that the governor has been in conflict with the financial and monetary policy of the government for some time. That was completely contradicted by the governor himself when he said that at no time had the government expressed disagreement with the operation of the Bank of Canada under his management. This is a statement made by the governor of the bank himself. Was there ever a clearer case for a committee of parliament being set up to inquire into a matter of such importance, when the governor and the minister are in complete contradiction even as to the facts?
The other point the minister made dealt with pensions. According to the governor in his statement, this was brought up as one reason why, perhaps, the governor should resign; because the directors of the bank in February, 1960 unanimously took certain action with regard to pensions. Now, on May 30, 1961 the minister gets very indignant about that, and has the effrontery to tell us in this house that he did not know about it. The deputy minister of finance was a member of the board of directors of the bank and was at that meeting when this action was taken.


Donald Methuen Fleming: I think the hon. gentleman would wish me to correct the misstatement he has just made. The deputy minister of finance was not at that meeting. He had been called away the day before owing to the bereavement of a relative, and he did not attend that meeting.


Lester Bowles Pearson: The deputy minister of finance is a member of the board of directors of the Bank of Canada. Is the minister trying to tell me that because, as he has said now, the deputy minister was not at that particular meeting the deputy minister did not get a copy of the minutes of that meeting, and did not send those minutes to him? I ask the minister now if the deputy minister has ever reported previously about that meeting. If the minister cannot find out from his own deputy


what goes on at meetings of this kind he is hardly fit to be Minister of Finance.
The minister has been very active trying to find out from the board of directors, since, what went on at that meeting and at other meetings. This was action taken by the board of directors in accordance with their powers. Does the minister object to that action? If so he should fire all the other directors, too. He cannot fire Mr. Bryden because Mr. Bryden has resigned. And let us not forget that two thirds of the board of directors who took this decision were appointed by the present government.
The Minister of Finance who tells this house that neither he nor his government have any responsibility for monetary policy, now says he really must have some responsibility with regard to bank pensions. That is a strange attitude for the minister to take; and if he is trying to force the governor of the Bank of Canada out of office because of some pension difficulty I claim, to use the minister's own words, that it is very undignified-and I could use language much worse than that to discuss tactics of that kind.
That is the situation, Mr. Speaker, and I shall conclude by saying this; that nothing the minister has said this morning is in any way satisfactory as an explanation of the shocking and irresponsible action of the government in this matter. It is not a question of the policy of the board or of the governor of the Bank of Canada; it is a question of the relationship between the government and the Bank of Canada, and that relationship has been shown up in the last few days in a fashion which will cause lack of confidence in the financial community of this country and which may well be a shocking example of government interference with or injustice toward a man who has been a devoted public servant, whatever one might think of his policy or his words.


Herbert Wilfred Herridge: Mr. Speaker, without doubt the house has listened with great interest to the somewhat lengthy elucidation of a long standing enigma, but what the minister had to say in previous statements in no way indicated to the house that the situation he has now described actually existed. I think that is proven by the record, and there is no reason to quote it again. The members of this group are of the opinion that the minister has not been frank with the house or the country.
Now, Mr. Speaker, the minister said his main reason-we noticed he emphasized the word "main", because apparently there are subsidiary reasons which have also been given-for the government's action is that the governor is standing in the way

of certain policies to which the government intends to give effect, to improve the economy of this country. That is in direct contradiction to the correspondence that has been circulated quite recently by the governor of the Bank of Canada.
I have in my hand a letter addressed to the Minister of Finance written by the governor of the bank and dated June 13, 1961. I should like to briefly quote from this letter to indicate that the minister's statement is not accurate from our point of view. That portion of this letter which I wish to read is as follows:
Efforts were made by the directors to arrange for discussion with you in order to be absolutely clear that you were aware that there was no issue of substance between the government and the bank or the government and myself prior to your request to me on May 30-to be sure that you knew that the bank felt bound to support government policies in so far as they had financial implications, as it had always done.
I now wish briefly, in that connection, to refer to a television broadcast some months ago on which the Prime Minister and the Minister of Finance appeared, because I think the issue was the question of high or low interest rates. I understand that program appeared nearly two years ago, at which time both these hon. gentlemen appealed to the public of Canada to dispose of their low interest bonds and accept higher interest government bonds. That does not indicate any concern with the question of low interest.
A reading of the correspondence that we have received from the governor of the Bank of Canada indicates that the government's primary and first concern is political, not economic, and that the statements made by the governor of the Bank of Canada were, as indicated in the correspondence and as the government indicated, "embarrassing". I think that was the substance of the complaint in the first instance.
The Minister of Finance has mentioned that there was a difference between the government and the governor of the Bank of Canada in respect to policies. I am not going to take the time of this house to go into that subject. The Leader of the Opposition has quoted to some extent to prove that was not an accurate statement, and we agree with that statement.
What does the government do according to this correspondence, according to the statement by the minister, and according to what we have read about this issue, in order to achieve its main purpose, to cover its political embarrassment because of the statements made by the governor of the Bank of Canada? It uses the smokescreen of a relatively unimportant issue, relatively unimportant in relation to the welfare of this country as a
14, 1961	6319
Request for Resignation of Bank Governor whole. I might explain, Mr. Speaker, that we in this group do not endorse pensions of $25,000 a year for anyone. We are opposed to that type of pension being granted. We are also opposed to what is a relatively minor issue, compared to the issues at stake, being introduced by the government under this smokescreen to cover the real purpose of its actions and attitudes.
Mr. Speaker, I think in conclusion I should say that without any doubt, after this partial, and shall I say, somewhat phantasma-gorical elucidation of the minister, it is the responsibility of the government and the minister to give the house all the facts surrounding this important situation at the first opportunity. Then the house must have the opportunity, after having received the facts *-the house cannot debate the issue without the facts-of debating this issue. I agree with the suggestion made by the leader of the official opposition that this is a matter which should come before the committee on banking and commerce, and we should hear witnesses on all sides of the case. I am sure after we have heard that evidence the people of this country will know who is the real culprit.


Donald Methuen Fleming: Mr. Speaker, I should like-


Mr. Speaker:: Order. Before I hear the Minister of Finance I should like to say to this house that this has been a debate, in my view, and one without precedent in our practice. It appeared to be the wish of the house to discuss this matter pro and con and, following the minister's statement, to allow a reply to that statement by the Leader of the Opposition and the spokesman for the C.C.F. party.
I foresaw that situation when I suggested at the beginning of the statement that it would be reasonable to agree that a debate should take place, if the house wanted a debate, in the usual way. If the question is to be renewed and debated again, as has been indicated in the minister's statement, that debate cannot be entered upon now. I think the practice of limiting the discussion to the three spokesmen, one of each party, is a correct practice. I also feel it is fair, in view of the course that has been taken, to allow the Minister of Finance, who made the original statement, a brief opportunity to comment in reply on what has been said by the other speakers.


An hon. Member:: Oh, oh.


Mr. Speaker:: Order. That is my best judgment on the matter. This is a situation without precedent. If the house disagrees with my decision, the house is master of its own
6320	HOUSE OF
Request for Resignation of Bank Governor rules and can take such course of action as it sees fit. I propose to allow the Minister of Finance to have the floor for three minutes.


Donald Methuen Fleming: Thank you, Mr. Speaker. I intend to be brief and to confine myself to correcting certain errors on the part of the two hon. members who have spoken on matters of fact. There will be occasion when debate can take place on the wider issue.
First of all the Leader of the Opposition said several times, not merely that I had asked for the resignation, but demanded it; and he roared out those words. At no time did I use the word "demand". On the instructions of the government I asked for the resignation of the governor to be tendered to the board of directors.
In the second place, he referred to statements made in which I had said that the government had no authority and no power to terminate the office of the governor. That is quite true, Mr. Speaker. I could do no more than ask, and the board of directors has likewise asked.
My statement this morning, and the course of action taken in recent days, is completely in accord with the statements I made in the house, as mentioned by the Leader of the Opposition. This has become an extreme situation; extreme within the kind of expressions used by Mr. Graham Towers on previous occasions, and which would call for the resignation of the governor, in the opinion of the government.
The Leader of the Opposition brought Mr. Bryden's name into this discussion this morning, and I think it ill-behooved him to do so. I gave a factual statement to the house concerning Mr. Bryden's resignation some days ago, and Mr. Bryden also made a statement in Toronto at the time, completely denying the attempt made by the Leader of the Opposition to insinuate certain reasons for his resignation. Mr. Bryden's resignation was, as he stated at the time, because of other burdens he had accepted.


Paul Joseph James Martin: Let us see his
letter of resignation.


Donald Methuen Fleming: I am limited to three minutes. Mr. Speaker, in regard to this matter of disagreement, I think no one who has taken the trouble to read the speeches of both the persons mentioned will have any doubt about there being wide divergencies. The efforts of the government and, if I may say so, of myself in particular in all these discussions have been to discharge a duty which I regard as a very important one resting on the Minister of Finance; that was to do, even at the expense of absorbing abuse and criticism,


everything that was within my power to try to keep the Bank of Canada out of political controversy. I have not finally succeeded, but I did make the effort.
The final point, Mr. Speaker, concerns a reference by the Leader of the Opposition to what happened at a meeting of the directors on February 15, 1960. I said that the deputy minister of finance, who is a non-voting member of the board, was not present at that meeting, having been called to Toronto the previous day to take charge of funeral arrangements of a relative who died very suddenly. The assistant deputy minister went to the meeting. I received no report; I received no copy of the minutes. The Leader of the Opposition looks surprised, but I am stating the fact. I learned of the action taken at that meeting, as I said in the statement recently this spring. That is the fact.


Paul Joseph James Martin: Unbelievable.


Donald Methuen Fleming: The point made in the statement was that there was a responsibility resting upon the governor to have seen to it that this fact was known to the government before such a substantial benefit was accepted.


Paul Joseph James Martin: The minister ought to resign; that is clear.



BUSINESS OF THE HOUSE


Mr. Speaker:: If the house agrees that it is not twelve o'clock we might proceed with starred questions. There is this difficulty, that starred questions are to be taken up not later than twelve o'clock noon.


Mr. Fulton:: I do not wish to stand in the way of what you have suggested, sir, but I have a short statement to make on motions which I assure the house will be non-controversial. If Your Honour has leave to stop the clock with regard to starred questions, perhaps it might be stopped for another 60 seconds in regard to this statement.


John George Diefenbaker: If the house agrees to the diversion so the statement can be made, I am sure it will also agree to its continuance to allow starred questions to be answered. I think that is the general consensus.


Mr. Speaker:: Is it agreed that we stand government notices of motion and revert to motions so that the minister may make his statement, and deal with starred questions afterward?


John Whitney Pickersgill: Let the minister speak first.


Mr. Speaker:: Is it agreed that we take starred questions alter we have dealt with routine proceedings in the usual course?


Some hon. Members:: Agreed.


[Stage Direction]
AUTOMOTIVE OIL, GREASE, ETC.;
Edmund Davie Fulton: think the house will be interested to know that the chairman ol the restrictive trade practices commission has ordered that there be public hearings held in connection with two general inquiries under section 42 of the Combines Investigation Act. The first that I think the house should know about relates to the drug inquiry. The second relates to an inquiry into the distribution and sale of automotive oil, grease, antifreeze, additives, tires, batteries, accessories and related products, commonly known as T.B.A. inquiry. In connection with the drug inquiry, the chairman has ordered that the public hearings commence in Ottawa on Tuesday, July 4, 1961; and he has ordered that the T.B.A. hearings commence on Monday, September 11. The chairman has come to the conclusion that public hearings in both these cases will serve the public interest.
In view of this fact I am now in a position where I consider that I am able to table the statement of materials in the drug inquiry, and I do so now. I will also be able to accept the motion of the hon. member for Skeena with regard to the statement of material in the other inquiry. I would also like to table for the information of the house copies of the orders made by the chairman of the restrictive trade practices commission.



WAR VETERANS ALLOWANCE ACT


Hon. Gordon Churchill (Minister of Veterans Affairs) moved: that the house go into committee at the next sitting to consider the following resolution, which has been recommended to the house by His Excellency:
That Bill C-101 intituled "An act to amend the War Veterans Allowance Act, 1952", now before the house, be amended, in clause 3 of the said bill, by adding the word "and" at the end of subparagraph (ii) and by striking out subparagraph (iv) of paragraph (a) in proposed subsection (4) of section 3 of the War Veterans Allowance Act, 1952.


[Stage Direction]
Motion agreed to.
Starred Questions STARRED QUESTIONS


Mr. Tardif: 1.	Have copies of the bill of rights been printed for distribution to the public?
2.	If so, is anything except the bill itself included in the printing?
3.	How many copies have been prepared?
4.	On what basis are they being distributed?
5.	Has the bill of rights been inscribed on calfskin?
6.	If so, was anything else inscribed with the text of the bill itself?
7.	What was the cost of preparing this document, and what is its purpose?


Hon. Noel Dorion (Secretary of State):: Stand.


Paul Joseph James Martin: May I ask the
minister why this is allowed to stand? The minister has had this question for a long time. There has been all sorts of publicity outside the house; why should the house not be given the information?


Some hon. Members:: Oh, oh.


Noël Dorion: I have received part of the material for drafting my answer but this morning I noticed that some of the material is not yet available.


Mr. Speaker:: Stands.
Question stands.



CANADIAN NATIONAL RAILWAYS PENSIONS


Mr. Fisher: 1.	Has the Canadian National Railways pension board a rule that pension rights are not available to operating employees for all service time which predates a removal from service and re-instatement?
2.	If so, how long must an employee be out of service before re-instatement for this to take effect?
3.	Has this period of time been constant in the last 25 years?
4.	If not, when was it lengthened or shortened?
5.	If the period out of service was lengthened at any time, in order to give employees a better chance for pension time rights, was the benefit of this extended to those employees penalized previously when a shorter period was in effect?
6.	If not, for what reason?


Hon. George H. Hees (Acting Minister of Transport):: The management of Canadian National Railways advise as follows:
1 and 2. The rules of the Canadian National 1959 pension plan provide that "service" means continuous employment as an employee without break of any kind, except as provided for in the company's regulations. The company's regulations provide that the pension board need not regard as a break in service a suspension or discharge subsequent to December 31, 1951, if followed by reinstatement or re-employment within two years.
3.	No.

Starred Questions
4.	The provision of the company's regulations referred to in the answer to parts 1 and 2 became effective as of January 1, 1952. The rules in force prior thereto provided that the pension board need not regard as a break in service a suspension or discharge which was followed by reinstatement or reemployment within one year.
5 and 6. As indicated above, the regulation which became effective as of January 1, 1952, applied only in the case of suspension or discharge subsequent to December 31, 1951.



POLAR CONTINENTAL SHELF PROJECT


Mr. Chevrier: 1.	On what date did the department ask the carriers for proposals on the polar continental shelf project?
2.	Which carriers were asked?
3.	By what date were proposals to be submitted?
4.	What carriers submitted proposals, and on what dates?
5.	On the date in (3) above, what carrier had the lowest tariff rates filed with the air transport board?
6.	Which carrier was first recommended to the minister by his officials for selection for this contract?
7.	On what date?
8.	On what date during this period (January 15 to March 31, 1961) did Autair Helicopter Services Limited file an amended tariff with the air transport board?
9.	What helicopters were required for the project?
10.	With what special equipment?
11.	On what date were the helicopters to be ready for transport to the site of the project?
12.	On what date were they in fact ready?
13.	Did they have all the required special equipment?
14.	Are all the helicopters employed on this project complying in all respects, both as to equipment and operation, with the safety requirements of the Department of Transport for operations in these areas?
15.	What inspection has there been to ensure such compliance?
16.	By whom?


Hon. Paul Comlois (Minister of Mines and Technical Surveys):: The answer to this question is as follows:
1.	Identical requests for an expression of interest were mailed between January 6 and 9, 1961.
2.	Autair	Helicopter	Services	Limited,Okanagan Helicopters Limited, Spartan Air Services Limited, Renting Helicopters Limited,	Pacific	Helicopters	Limited,	throughtheir	Ottawa	representative; Dominion Helicopters Limited, Hamilton Helicopters Limited.3.	The companies were asked to indicate their interest by January 15, 1961.4.	Autair Helicopters Services, by letterdated January 12, 1961; Renting Helicopters Limited, by letter dated	January	12, 1961;
Okanagan Helicopters Limited, by letter dated

January 10, 1961 indicated a general interest and on January 25, 1961 indicated their capability to supply one Sikorsky S55 and one Bell 47J.
5.	Autair Helicopters Services Limited had the lowest tariff rates applicable to the estimated amount of flying required.
6.	Autair Helicopters Services Limited.
7.	February 13, 1961.
8.	January 25, 1961.
9.	The communications referred to in question 1 were for the supply of three Sikorsky S55 helicopters and one Bell 47J. A subsequent communication dated January 19, 1961, was sent to the companies, who expressed an interest, requesting a company assessment of the relative advantage of substituting a Bell 47G2A for the Bell 47J.
10.	That listed in my answer to question No. 189, part 1.
11.	It was agreed that the four helicopters would be ready to depart from southern Canada on March 24, 1961; March 26, 1961; March 29, 1961 and March 30, 1961.
12.	March 29, 1961; March 26, 1961; March 31, 1961 and April 4, 1961.
13.	Yes.
14.	While the licensing, inspection of aircraft and their operation are not responsibilities of this department, in so far as we are aware all regulatory requirements are being met.
15.	Answered by No. 14.
16.	Answered by No. 14.



ARCTIC TOPOGRAPHICAL SURVEY-AUTAIR HELICOPTER SERVICES

[Stage Direction]
Question No. 392*-Mr. Chevrier:
1.	With what carrier and on what date were negotiations for the Arctic topographical survey contract commenced?
2.	Were this carrier's tariff rates at that time lower than those then in effect for Autair Helicopter Services Limited?
3.	Was this carrier recommended to the minister by his officials?
4.	On what date?
5.	On what date did Autair Helicopter Services Limited file an amended tariff with the air transport board?
6.	What helicopters were required for this project?
7.	With what special equipment?
8.	What is the date for commencement of operations under the contract?
9.	What evidence has Autair Helicopter Services Limited furnished that it possesses the required aircraft and equipment?
Paul Comtois: The answers are as follows:
1.	Following a review of all filed tariffs for S-55 helicopters we communicated with Canadian Helicopters Limited by letter dated January 25, 1961.

2.	Yes, Canadian Helicopters Limited had, at that time, the lowest tariff rates applicable to the estimated amount of flying required.
3.	Yes.
4.	February 14, 1961.
5.	January 25, 1961.
6.	Three Sikorsky S-55 helicopters.
7.	That listed in my answer to question No. 189, part 1.
8.	On or about May 15, 1961.
9.	The required aircraft and equipment are in the operational area.



C.B.C. BROADCASTS, COMMONWEALTH TECHNICAL TRAINING WEEK

Mr. Roberge: 1.	Did the Canadian Broadcasting Corporation request any person or persons to broadcast in connection with the commonwealth technical training week?
2.	If so, what persons were so requested, and how many broadcasts were made?


Mr. M. J. A. Lambert (Parliamentary Secretary to the Minister of National Revenue):: Mr. Speaker, the answer to part 1 is yes. As to part 2, Mr. Speaker, I would ask the indulgence of the house to have the reply, which is about 1J pages, printed in Hansard, at the appropriate place rather than being read at this time.


Mr. Speaker:: Does the house agree that this rather lengthy reply be printed rather than read?


Some hon. Members:: Agreed.
[Editor's note: The answer to part 2 follows:]
2.	Arrangements were made by the C.B.C. for special broadcasts on radio and/or television announcing and marking commonwealth technical training week by His Royal Highness the Duke of Edinburgh; His Excellency the Governor General; by the right hon. Prime Minister; and by the Minister of Mines and Technical Surveys. Other broadcasts dealing with the need for technical training were given by the following:
(a) English networks.
Mr. A. V. Piggot, president of the Canadian association for adult education, on the television program "701".
Mr. Max Swerdlow of the Canadian Labour Congress, on the radio program "Morning Commentary", broadcast on C.B.O., Ottawa.
Mr. T. J. Allen, of the Toronto Star, on the trans-Canada radio network program "Postnews Talk".
Mr. G. Commings of the E. B. Eddy Co., Ltd.; Mr. John Allard of Computing Devices of Canada Ltd.; Mr. William Thomson of the national employment service; Dr. Eugene Forsey of the Canadian Labour Congress; and
Starred Questions
Mr. S. H. Deeks of the industrial foundation on education, all of whom appeared in the radio and television program "Skills for the Job" in the "Citizens' Forum" series.
Halifax (regional) Gazette, interview with George Peach, director of training, N.S. department of education.
Halifax regional TV-interview with W. D. Mills, director of vocational education for Nova Scotia.
(Translation) :
(b) Technical training week. Participation: "Radio-Place publique", June 1: Maurice Barriere, assistant general director of specialized training studies with the department of youth; Fernand Bourret, Le Devoir reporter on labour matters; Paul Dubuc, director of the private vocational schools; Paul Emile Lefebvre, professional engineer, vice-chairman and general manager of "Lefebvre et freres". Moderator: Andre Morel, professor in the faculty of law at the University of Montreal. "Vie ouvriere"-June 12. Participating as a commentator will be Fernand Jolicoeur, director of the training service of the Canadian and Catholic Confederation of Labour. Topic: Technical training in Canada.
Television: "Carrefour": Friday, May 26. Specialized training. Guest: P. Marc-Aurele, director of the technical training program with the department of youth, recommended by J. M. Gauvreau. "Metro-Magazine", May 26: Interview given by Remy Lavigne, of the provincial technical schools.
(Text):



COMMISSION OF INQUIRY, INDIAN TREATIES 8 AND 11

Mr. Howard: 1.	With respect to meetings held by the commission of inquiry, appointed on June 25, 1959, to inquire generally into all matters arising out of the unfulfilled provisions of treaties 8 and 11 as they applied to Indians of the Mackenzie district, in each of the following settlements: Aklavik, Fort McPherson, Arctic Red river, Fort Good Hope, Fort Franklin, Fort Norman, Fort Wrigley, Fort Simpson, Fort Liard, Fort Providence, Hay River, Fort Resolution, Fort Rae, Snowdrift, and Fort Smith; what was, with respect to each such settlement:	(a) the place at which each member of
the commission, by name, stayed, and (b) the (i) travelling, and (ii) other expenses, by category, incurred by each member of the commission? '
2.	With respect to: (a) any draft, and (b) the final report of the commission; where was each prepared, and were any members of the commission absent at those times, and what was the reason in each case?
3.	Did each member of the commission have proficiency in the English language; and, if not, was an interpreter available at all times?
4.	If such an interpreter was available, what was his name, address, and qualifications; and with respect to each of the settlements mentioned in question number 1, what was: (a) the place at which he stayed, (b) the (i) travelling, and (ii) other expenses, by category, incurred?

Starred Questions


Mr. John Charllon (Parliamentary Secretary to the Minister of Citizenship and Immigration):: Mr. Speaker, I would ask that this question be made an order for return.


Mr. Speaker:: Order for return.



I.J.C. REVIEW OF REPORT, PEMBINA VALLEY DEVELOPMENT

Mr. Muir (Lisgar): 1.	Has the international joint commission reviewed the preliminary report with regard to the Pembina valley development?
2.	What is the recommendation of the international joint commission in respect to this report?
3.	Does the international joint commission contemplate proceeding with a full scale study of this project with a view to bringing it to an early completion?


John George Diefenbaker: The answers are as follows:
1.	Yes.
2.	That feasibility studies required for joint development of the Pembina water resources should be undertaken.
3.	The question of further studies of this project is at present being given active consideration by the government in the light of the international joint commission's above recommendation.



LOW RENTAL HOUSING PROJECT, MONTREAL

Mr. Lessard: 1.	Is the government aware of the intended construction, by the city of Montreal, of a 250 unit low rental housing project, along boulevard des Trinitaires, at the cost of $3,125,000, 25 per cent of which is to be financed by the city of Montreal and 75 per cent by the Central Mortgage and Housing Corporation?
2.	If so, has C.M.H.C. agreed to finance such project on a 75 per cent basis?
3.	Do the C.M.H.C. regulations provide for the granting of a loan, in the case of a housing project, outside a slum-clearance area?


Mr. Y. R. Tasse (Parliamentary Secretary to the Minister of Public Works):: Mr. Speaker, the answer to parts 1 and 2 is as follows. On June 8, 1961, Central Mortgage and Housing Corporation received a request from the city of Montreal for negotiations to be initiated with respect to a proposed low rental housing project under section 36 of the National Housing Act on land situated along boulevard des Trinitaires. The officials of the corporation are considering the city's request and the recommendation of the corporation will be submitted to the minister shortly.
The answer to part 3 is as follows. If the hon. member has in mind projects undertaken under section 36 of the National Housing Act, it should perhaps be pointed out that these projects are not financed by way of a loan but that they are built and owned by a partnership of the federal government and a province or its agent, which may be a

municipality. The capital cost of these projects, as well as the operating losses, are shared 75 per cent by the federal government and 25 per cent by the province or its agent. Federal-provincial low rental housing may be built on land outside slum clearance areas.



NEW CUSTOMS AND IMMIGRATION BUILDINGS, SAULT STE. MARIE

Mr. Nixon: 1.	Are plans being prepared for the new customs and immigration buildings to accommodate the new international traffic bridge between Sault Ste. Marie, Michigan, and Sault Ste. Marie, Ontario, which is now under construction?
2.	When will tenders be called for the construction of these buildings?
3.	What is the estimated cost of such buildings?
4.	Will the present customs and immigration buildings be closed to traffic when the new buildings are in operation?


Marcel Joseph Aimé Lambert: The answers are as follows:
1.	Yes.
2.	According to information from the state of Michigan international bridge authority, which is building both the bridge and the customs-immigration buildings, it is hoped that the tenders will be called and the contract awarded in time to begin construction of the buildings this fall.
3.	The government has no information as to the estimated cost of these buildings.
4.	The present ferry service will terminate with the opening of the new bridge, at which time the customs-immigration buildings at the ferry will be closed.



UNEMPLOYMENT INSURANCE FUND


Mr. McMillan: Generally, what bonds or securities are held in the unemployment insurance fund which show a depreciated market value from face value of over 14 per cent for securities held in the fund and over 18 per cent for securities pledged for loans by the fund?


Donald Methuen Fleming: Securities held in the unemployment insurance fund which show a depreciated market value of over 14 per cent:
June 1, 1974/76	 $ 1,120,500
Jan. 15, 1975/78	 170,000
Oct. 1, 1979	 9,519,500
Sept. 15/96, Mar.	15/98	 247,000

Securities pledged for loans by the unemployment insurance fund which show a depreciated market value of over 18 per cent:
June 1, 1974/76	 $37,620,000
Oct. 1, 1979	 22,332,000
Sept. 15/96, Mar.	15/98	 49,753,000



$109,705,000  UNSPENT BORROWINGS, UNEMPLOYMENT INSURANCE COMMISSION

Mr. McMillan: How much of the borrowings by the unemployment insurance commission to the amount of $140,500,000 was still unspent as of May 31, 1961?


Donald Methuen Fleming: The answer is $4,210,078.83.



OKANAGAN HELICOPTERS AND SUBSIDIARIES


Mr. Bourbonnais: 1.	Did Okanagan Helicopters and its subsidiaries, Canadian Helicopters and United Helicopters, have any accidents with its aircraft equipment during the years 1954, 1955, 1956, 1957, 1958, 1959, 1960, 1961?
2.	If so, how many accidents did they have, and what was the nature of each?
3.	What aircraft were involved?
4.	Did the accidents result in partial or complete writeoff of these aircraft?


George Harris Hees: Order for return.


Mr. Speaker:: Order for return.



OKANAGAN HELICOPTERS LTD.

Mr. Bourbonnais: 1.	Does Okanagan Helicopters Ltd., own any Sikorsky-55's which are used by the Canadian government in the polar continental shelf project area and being utilized by the army survey establishment?
2.	If so, has an accident been reported lately at Resolute concerning one of the Sikorsky's?
3.	Has a Sikorsky belonging to Okanagan Helicopters Ltd., been reported missing from its base at Goose Bay while carrying out operations for the Pine Tree line?
4.	What were the causes of two accidents involving Sikorsky-55's owned by Okanagan Helicopters Ltd., and in operation on the D.E.W. line?


George Harris Hees: The answers are as follows:
1.	Okanagan Helicopters Limited owns one Sikorsky S-55 working for the Canadian army on the Arctic survey.
2.	No flying accidents have been reported in this connection at Resolute, although one aircraft supplied by Renting Helicopters Limited for this purpose suffered some damage when being unloaded at Resolute.
3.	Okanagan Helicopters Limited has not had a Sikorsky missing out of its base at Goose Bay while carrying out operations for the Pine Tree line, and with respect to part 4 Okanagan has not reported any accidents with a Sikorsky S-55 on the D.E.W. line operation.
4.	Not applicable.



ADDITIONAL EMPLOYMENT THROUGH PRODUCTIVITY COUNCIL

Mr. Pickersgill: 1.	How much additional employment is it estimated has been provided as a result of the establishment of the national productivity council which
90205-6-399
Starred Questions
the Minister of Labour indicated would have notable results on the level of employment in the next six months after December 14, 1960?
2.	What precise action has been taken by the productivity council to achieve these results?


Mr. R. D. Thrasher (Parliamentary Secretary to the Minister of Labour):: Mr. Speaker, the answers to parts 1 and 2 of this question are as follows. Estimates indicate that employment has increased, on a seasonally adjusted basis, by 59,000 over the four months, December 1960 to April 1961. It is impossible to attribute this increase in employment to any one factor. It is also impossible to measure in any precise manner the results achieved from many individual measures. Nevertheless, there is no doubt that the creation of the national productivity council and its activities have had a stimulating effect on employment. The work of the productivity council is also helping to increase general awareness in Canada of the need for greater efficiency in the competitive performance of our economy.



GUY JULIEN SASSEVILLE, CENSUS COMMISSIONER

Mr. Deschatelets: 1.	For which county was Guy Julien Sasseville appointed census commissioner?
2.	On what date was he appointed, and by whom was he recommended for such position?
3.	Before being appointed as census commissioner, was Mr. Sasseville investigated as to "his tact discretion and sound judgment"?
4.	Is Mr. Sasseville still acting as a census commissioner? If not, on what date was he suspended?


Mr. E. L. Morris (Parliamentary Secretary to the Minister of Trade and Commerce):: Mr. Speaker, the answers are as follows:
1. Julien Guy Sasseville was appointed census commissioner of census district D of the electoral district of St. James.
2 and 3. He was interviewed for the position by representatives of the dominion bureau of statistics on April 5, 1961, and, on the basis of this interview, was considered to have the qualities necessary to carry out the duties of a census commissioner.
4.	Mr. Sasseville was suspended on June 8, 1961.



ST. GEORGES DE BEAUCE AIRPORT   SUBSIDY PAYMENTS

Mr. Roberge: 
George Harris Hees: The answers are as follows:

Orders for Returns
1.	No financial assistance has been given by the department for construction or operation of the St. Georges de Beauce airport. The site is licensed as a private airport.
2.	Not applicable.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. Howard: 1.	With respect to meetings held by the commission of inquiry, appointed on June 25, 1959, to inquire generally into all matters arising out of the unfulfilled provisions of treaties 8 and 11 as they applied to Indians of the Mackenzie district, in each of the following settlements: Aklavik, Fort McPherson, Arctic Red River, Fort Good Hope, Fort Franklin, Fort Norman, Fort Wrigley, Fort Simpson, Fort Liard, Fort Providence, Hay River, Fort Resolution, Fort Rae, Snowdrift, and Fort Smith; what was, with respect to each such settlement; (a) the place at which each member of the commission, by name, stayed, and (b) the (i) travelling, and (ii) other expenses, by category, incurred by each member of the commission?
2.	With respect to; (a) any draft, and (b) the final report of the commission; where was each prepared, and were any members of the commission absent at those times, and what was the reason in each case?
3.	Did each member of the commission have proficiency in the English language; and, if not, was an interpreter available at all times?
4.	If such an interpreter was available, what was his name, address, and qualifications; and with respect to each of the settlements mentioned in question number 1, what was: (a) the place at which he stayed, (b) the (i) travelling, and (ii) other expenses, by category, incurred?



OKANAGAN HELICOPTERS AND SUBSIDIARIES


Mr. Bourbonnais: 1.	Did Okanagan Helicopters and its subsidiaries, Canadian Helicopters and United Helicopters, have any accidents with its aircraft equipment during the years 1954, 1955, 1956, 1957, 1958, 1959, 1960, 1961?
2.	If so, how many accidents did they have, and what was the nature of each?
3.	What aircraft were involved?
4.	Did the accidents result in partial or complete write-off of these aircraft?



FINANCE


Lester Bowles Pearson: Mr. Speaker, I beg leave to move the adjournment of the house under standing order 26 for the purpose of discussing a definite matter of urgent public importance, namely the unprecedented request by the government for the immediate resignation of the governor of the Bank of Canada and the circumstances related thereto.


Mr. Speaker:: I would be disposed to ask the house if it is prepared to grant leave, as this matter appears to come within the rule. The only reservation I have is that the government has indicated its intention to bring before the house a proposal which would permit debate on the definite matter of urgent public importance, namely the unprecedented request by the government for the immediate resignation of the governor of the Bank of Canada. Before I deal with the matter, perhaps I should hear hon. members.


Edmund Davie Fulton: Mr. Speaker, I should like to make a brief submission, not with respect to the importance of the matter itself but purely from the point of view of urgency of debate. I suggest that there might be three reasons why Your Honour would think the motion does not comply with that requirement of the rule. First, you permitted quite a far ranging discussion this morning, in which it is true that Your Honour did apply some limitation as to time, but with respect to which there was not much limitation as to range of debate. At least a full discussion was allowed within the context of the statement made by the Minister of Finance. The Minister of Finance, the Leader of the Opposition and the acting leader of the third party expressed, one assumes, the views of their parties in the house.
Second, the Minister of Finance announced today that the budget will be introduced on June 20. At that time, of course, there will be ample opportunity for debate, and that is just six days from now. It is, I suggest, difficult to see why the matter which has already been aired in the house would be so urgent of debate that the budget debate could not be awaited.
Third, Your Honour has yourself just made reference to the fact that the statement of the Minister of Finance indicated that legislation will be laid before parliament shortly to deal with this matter. I understand I have the authority of the minister to say that this will be as rapidly as satisfactory legislation can be drafted.
I would say, therefore, first that there has been quite a full airing of the matter here this morning; second, there is the budget debate; and third, legislation to amend the Bank of Canada Act itself will be introduced shortly, at which time a discussion can take place.


Paul Joseph James Martin: With your permission, Mr. Speaker-


Mr. Speaker:: I think I need not hear the hon. member unless he wishes to support the Minister of Justice.


Paul Joseph James Martin: That would be an unusual step for me to take.


Mr. Speaker:: The urgent importance of the matter has been demonstrated today. The reservation which I expressed has not been satisfied; that is, I feel it is rather indefinite as to when the government may introduce its measure. We have had a limited debate today, but if the rule is properly invoked then the hon. member is entitled to a fuller discussion which the rules permit. I therefore ask the house whether, in accordance with rule 26, the hon. member has leave to move a motion to adjourn the house to discuss this matter of urgent public importance. Has the hon. member leave?


Some hon. Members:: Agreed.


Some hon. Members:: No.


Mr. Speaker:: Those who support the motion will please rise.
And more than 20 members having risen:


Mr. Speaker:: I declare the rule satisfied, and the hon. member has leave of the house to propose a motion that the house do now adjourn. Mr. Pearson, seconded by the hon. member for Essex East, moves:
That the house do now adjourn.


Lester Bowles Pearson: Mr. Speaker, I have already had, though not in the course of debate, something to say on this matter. As you ruled, and quite properly, that a reply to a ministerial statement made on motions is not an occasion for debate, and as this matter is one of very grave importance and of the most immediate urgency, I have thought fitting to move this motion which will give to the members of the house an opportunity to discuss the whole question of the request by the government for the immediate resignation of the governor of the Bank of Canada and the circumstances related thereto.
It does not seem to me, Mr. Speaker, that anything the Minister of Finance said this morning removes the necessity for this kind of discussion at this time. It seems to me that it makes the urgency of such a discussion even greater than it was before the minister spoke. The minister made certain statements this morning which are in direct and complete contradiction to statements that have been made by the governor of the Bank of Canada in correspondence which has been made public. Surely, Mr. Speaker, it is in the interests of getting this matter cleared up as quickly and as satisfactorily as possible that we should have a discussion.
It is even more important, I believe-and this is one of the reasons for asking for this discussion, as has been pointed out by the 90205-6-399J
Governor of Bank of Canada acting leader of the C.C.F. group-that the banking and commerce committee should be convened at once for this particular purpose. We have been asking for this during the session. We have been asking for it at a time when the minister has said there was no necessity for it, having given the impression that there was not any fundamental disagreement between the governor of the bank and the minister which would warrant a discussion before a committee. Surely after what the minister has said this morning the government itself would wish to convene the committee and would wish to get these matters cleared up so we can find out what are the facts. The governor could appear before this committee and be questioned about the statements he has made and the communications he has published. The minister would also, of course, wish to appear, and he could be questioned on these and related matters.
Now, I am aware of the fact that the minister said something this morning about the action which the government intends to take by way of submitting a proposal to this parliament. What the form of the proposal will be, we do not know. Perhaps it will be an amendment to the Bank of Canada Act, which I believe the minister has stated previously was the only way by which this kind of change could be made. The Minister of Justice seemed to confirm that statement this morning. It has also been suggested this might be done by order in council. We do not know when this action will be taken. We do not know when this measure, in whatever form it may be, will be submitted to the House of Commons. We do not know whether it will be done before the budget or after the budget.
One of the extraordinary circumstances surrounding this whole sorry business is that it has become tangled up with a budget which should have been introduced weeks ago. I believe I am fair in suggesting, from what the minister has said this morning, that there is a relationship between the bank's monetary and financial policy and government policy. I confess I was very surprised, indeed, this morning to hear the minister say that the government at no time-I hope he will correct me if I am misinterpreting or misquoting what he said-during the consideration of the budget and the negotiations leading up to the budget consulted the governor of the Bank of Canada. You would have thought, Mr. Speaker, during all these weeks of preparation designed, we have been told this morning, to introduce some pretty far reaching financial changes-because those changes were put forward as the basis of the difference between the governor of the Bank of Canada and the government-that the governor of the Bank of

Governor of Bank of Canada Canada would have been consulted. That is an extraordinary position, to say the least.


Mr. Chambers:: No one said it.


Lester Bowles Pearson: I hear from over there an interruption that no one said it. The minister said it this morning, and it is on the record. Perhaps my hon. friend who interrupted was not listening to the minister.


John Whitney Pickersgill: He was too busy applauding.


Lester Bowles Pearson: There are some other reasons why this discussion is most important and urgent and which should be put on the record. A very grave indictment indeed has been made against the governor. But interference and intervention in the affairs of the bank has been dealt with in communications which have been made public by the governor of the bank himself.
This morning the minister said that on May 30 the resignation of the governor of the bank was asked for or requested by the government through the minister. There is no use in the minister trying to take refuge in semantics and suggesting that parliament will decide, and all that he did was to approach the governor. The resignation of the governor was asked for on May 30 in circumstances which are outlined in some detail by the governor himself in public statements.
The minister said this morning that subsequent to that date, until the governor issued his statement yesterday he had no contact with the governor of the bank; no opportunity was given to him by the governor to discuss this matter further after May 30. That is the minister's statement, but let me read what the governor himself has said in a letter to the minister dated June 13, 1961. This letter deals not only with the relationship between the governor and the minister but also with the relationship between the board of directors of the bank and the government. I will read from this letter, Mr. Speaker:
Further to my letter of June 9 I have now had the benefit of three days' discussion with my board of directors, during which time several of them were in frequent communication by telephone with you.
The nature of some of these communications was made fairly clear by the minister this morning. The letter goes on:
It became apparent that there were no new arguments to be advanced why I should resign-
Mr. Speaker, I ask the house to take note of this, which is in direct contradiction to what the minister said this morning about the attitude of the directors of the bank over the preceding month. This letter goes on to state:

-and indeed the directors were all surprised and disturbed when they first heard that you had requested my resignation.
There is one contradiction that should be cleared up and can only be cleared up satisfactorily by a committee holding hearings on this matter, with evidence being taken. The letter goes on:
Many conversations were held both in the full board meeting and outside it, in the course of which I expressed the view that no valid case had been made for my resignation and that the board had no reason to expect it other than the fact that the government had asked for it.
We on this side of the house certainly have the right to take that position also, because there was no indication, in all the discussions we have had on this subject during this session, at any time by any representative of the government, let alone the Minister of Finance, that the relationship between the bank and the government was such that this action was likely to be taken. I refer to the action which was taken on May 30. Then Mr. Coyne's letter goes on:
Efforts were made by the directors to arrange for discussion with you-
That is, the Minister of Finance:
-in order to be absolutely clear that you were aware that there was no issue of substance between the government and the bank or the government and myself prior to your request to me on May 30-
In other words these very same directors, who according to the minister were already dissatisfied with the governor and were looking for his resignation-and these directors were characterized in those terms by the minister in this house this morning-attempted in recent days subsequent to May 30 to get in touch with the minister himself to find out if there was in fact any issue of substance between the government and the bank or the government and the governor. The letter goes on:
-to be sure that you knew-
That is, the minister knew:
-that the bank felt bound to support government policies in so far as they had financial Implications, as it had always done.
The governor himself said in his statement that it is the duty-and of course it is the duty-of the governor and the bank to support policies of the government. That doctrine had already been laid down emphatically on this side of the house and rejected by this government. Mr. Coyne in his statement and in this letter having said that it is the duty of the bank to support the policy of the government in the field in which both have jurisdiction, and that the bank has always done so, the Minister of Finance gets up this morning and denies that. I have not

his words before me, but he certainly gave that impression-and I am sure I am not misrepresenting what he said-when he said that far from supporting the policy of the government, the bank had been acting in contravention of the policies of the government and that that is the reason why these developments took place which required the government to intervene and request the resignation of the governor.


Paul Joseph James Martin: That was the main reason the minister gave this morning.


Lester Bowles Pearson: Yes, that was the main reason the minister gave this morning, though the governor indicated in one of his letters that apparently another reason was put forward, which was presumably to bring great pressure to bear on him. I refer to the question of his pension, and I will come to that a little later.
The letter goes on:
Each time your answer-
That is, the answer of the Minister of Finance:
Each time your answer was that the government had made up its mind and there was nothing to discuss.
In a matter of such fundamental importance which has shaken the confidence of the country in the relationship between the bank and the government, after the action taken by the minister on May 30 calling for the resignation of the governor of the bank, in reply to the efforts of the directors of the bank to get in touch with the minister and try to find out, if they could, what was behind all this, according to this letter the minister's reply was that the government had made up its mind and there was nothing to discuss. What a reflection, not only on the attitude of the minister but on the relationship between the minister and the bank. Mr. Coyne's letter goes on:
Finally this morning-
"This morning" is June 13, the date of this letter:
Finally this morning at about ten o'clock, after a further telephone talk with you, it was reported in open meeting of the board of directors that you had said to Mr. Hill that you would not consent to see me to discuss the matter.


Paul Joseph James Martin: Shame.


Lester Bowles Pearson: And the minister this morning said that Mr. Coyne did not make the effort. I am not quoting the minister's words exactly, but he said Mr. Coyne had not seen him and therefore the minister was surprised at the action taken by Mr. Coyne because he had no opportunity to discuss this matter. In this letter Mr. Coyne said that Mr. Hill, at the meeting of the board of directors, had told the
Governor of Bank of Canada board that the minister would not consent to see the governor to discuss the matter. What an attitude to take in regard to a matter of such very great importance.
So that I will not misquote the minister's words or be unfair to him in any way I would refer to the text of the minister's statement which, it has been called to my attention, was circulated this morning. That statement includes this; I had better read the paragraph: On May 30, on the instructions of the government, I asked Mr. Coyne to tender his resignation to the board of directors of the bank. I further asked that he do so before the regular board meeting to be held in Quebec on June 12 and 13, so that action might be taken by the board at its meeting on the resignation. I gave him an ample statement of the reasons for the course the government was following. The main reason was that the government was convinced that Mr. Coyne's continuation in office as governor of the Bank of Canada would stand in the way of the implementation of a comprehensive, sound and responsible economic program designed to raise the levels of employment and production in Canada. After an hour's discussion, he asked to be allowed to think the matter over. Presumably his published statement yesterday is his reply to the government's request.
Presumably his public statement yesterday was made after the minister refused to receive him, according to Mr. Coyne's own statement. Presumably also, his public statement yesterday was made after the minister had refused to see the board of directors of the Bank of Canada to discuss this matter with them. This is an almost unbelievable procedure. This is arrogance of a kind which is hard to contemplate, especially in the person of one who in the past used to talk so much in this house about the rights and privileges of parliament and of the individual. Then Mr. Coyne's letter goes on:
It was apparent to all that this closed the door- It is certainly apparent to anyone who reads this letter, if the facts are as stated, that it closed the door.
-and there were no avenues left by which useful communication could take place.
So the only thing left for Mr. Coyne to do was resign-or else. If a committee were set up to consider this matter we might be able to find out what the "or else" was. We do not know yet. The letter goes on:
I left the meeting to consider my position. In the face of your refusal to see me, I felt it incumbent upon me to issue a statement, of which you have a copy, setting forth very briefly my view of the situation which had been created by the action of the government in this matter.
I subsequently returned to the board meeting (which in the meantime had been dealing with affairs of the industrial development bank) and read to the directors the statement which I had made public at about 11 a.m.
The directors then decided to bring forward a resolution, which I understand had been discussed with you the day before, and which you had demanded that they should pass.

Governor of Bank of Canada
"Which you had demanded that they should pass". This is the statement made in Mi-. Coyne's letter. The letter goes on:
The text of the resolution proposed by Mr. Hill is as follows:
Mr. Hill, I take it, is one of the directors.
"Resolved that it is in the best interests of the Bank of Canada that the governor do immediately tender his resignation to the board of directors of the bank, and further that this action and decision on the part of the board has been taken after prolonged consideration and with regret."
I can understand a resolution of that kind being passed by the board of directors when the governor had reported to them that the minister who had requested his resignation would no longer see him and talk with him. It is clear that once a government takes an attitude of that kind toward a man in a position such as Mr. Coyne holds and refuses to talk with him or see him, his usefulness as governor of the bank is, to say the least seriously damaged. But let it also be said that this resolution which I have read out contained no reference of any kind to the conduct of the governor; no reference to the resignation being related in any way to the governor's inability to support government policies; no reference to the governor's conduct in any shape or form. The resolution merely says that because of this situation it is now in the best interests of the bank for the governor to resign. Then the letter goes on:
There was a discussion of the motion. One director spoke against it. I then put the motion to a vote and polled the directors individually. There was one director absent from the meeting. Of those present all voted in favour of the motion save one who registered his vote against.
After a negative response to my inquiry as to whether there was any further business to come before the meeting, the meeting of the board of directors of the Bank of Canada was terminated.
So much for that aspect of the situation. We shall have to get a lot more facts before we can accept the minister's interpretation of the relationship between the governor and himself referred to in this letter and referred to in the governor's statement in terms which the minister has contradicted this morning and which indeed, the minister himself has contradicted in this house previously. Because if, in fact, as I said a few moments ago, this situation was developing in which the bank was frustrating government policy, then surely it was the duty of the government to bring that situation before the House of Commons.
We introduced a motion on this subject some months ago. There was no suggestion at that time in the discussion, either by the minister or anyone else on the government side, that this bad situation was developing. We asked questions as recently as May 30,

the day on which the resignation was requested. There was no indication then from the minister of what he now tells us is the real difficulty, the fact that the governor was frustrating, as the minister says, the policies of the government.
What is even more extraordinary, the minister now says the governor is impeding the carrying out of the government's new, expansionist policy; the expansionist policy, incidentally, of a government which introduced the conversion loan and has done so much to establish the highest interest rates in our history. But there is to be a new, expansionist policy, presumably to be embodied in the long delayed budget, and it would not be possible, according to the government, for the governor to work with the government in the implementation of this policy concerning which they did not talk to the governor at all in the discussions leading up to the budget. In the minister's own words:
The government's policy is expansionist, aimed at the creation of more trade, more production and more jobs. The policies advocated by Mr. Coyne are restrictionist.
If this is a fact, why did we not hear something about it in the house over the past weeks and months? If this is the way the government feels about Mr. Coyne, why was this matter not brought into the House of Commons where we could have discussed it together with the relationship between the government and the bank? The fact is that this is an ex post facto rationalization of the mess into which the government has got itself by its arbitrary and arrogant behaviour. If in fact the governor of the Bank of Canada could not work in harmony with the government-and he has denied this; he has denied, also, that he did not support its policy and denied that he would not support it-if the governor could not do that, then of course, he should resign. We have been saying that since this session began. Responsibility in these matters, we have repeatedly stated, belongs to the government, and if they feel that the governor is taking action and making speeches and interfering with monetary and fiscal policy then, of course, it is the duty of the governor to resign. That doctrine was laid down by Graham Towers, and it is a doctrine to which we subscribe. But that is not the situation with which we were confronted this session. The minister has denied the validity of that doctrine in the past and said that monetary policy is the responsibility of the Bank of Canada and we have no share in that responsibility at all. In other words the government may interfere with pension arrangements in the bank but not with monetary policy.

When we challenged that doctrine here the Prime Minister and the Minister of Finance rejected our challenge and insisted that what the governor did in this field was the governor's responsibility, and that what the governor said in his speeches was also the governor's responsibility, because this is a free country and he should be allowed to speak as a free man if he wished. We now learn from these documents, and I think the minister confirmed this fact this morning, although I am not sure, that he did indeed intervene with Mr. Coyne at one stage back in March, and told him that his speeches were embarrassing the government. Presumably that was after the speech made by Mr. Coyne in New York. I think I am right in saying that.
At that time, when Mr. Coyne was approached and told that his speeches were embarrassing the government, the minister got up in this house and said that he was a free man and could say what he wished. Now the minister informs us that this was the beginning of the end of Mr. Coyne. Mr. Coyne himself refers to this episode in his communication, and apparently admitted the right of the minister to quarrel with his speeches. However, he said in one of his letters that since that time he has made no public statement which could conceivably be of embarrassment to the government. He has also gone on to say that whatever policy, monetary or fiscal, the government sees fit to put into effect, he and the bank should support it or, naturally, he as governor should resign. He had no reason until May 30 to believe that this situation had developed to the point where his resignation could suddenly and shockingly be asked for by the Minister of Finance.
Mr. Speaker, that is the way this government does business. They allow problems to roll on and on, with the hope that something will happen by which they will disappear; and when the problems become crises, as this one has become a crisis, they take this kind of panic action based on political expediency in the hope of rushing something through which will do away with the crisis.
In this situation there is something else involved which relates to the board of directors, a question which is very much in the public mind, and which has certain sinister significance, namely the change in the pension position. The impression has been created that somehow or other the governor of the bank took action on his own in February, 1960 which increased his pension position, or that he should have prevented the action being taken. An impression of that kind has been given in respect to either negative or positive action on his part, and
Governor of Bank of Canada that this was too much for the high standards of political morality of the Minister of Finance.
In February of 1960, when this action was being taken, the government felt it was lawful action, and on May 30, 1961, the minister suddenly decided how awful it was; it was really terrible. That decision was made on May 30, 1961.
The minister told us this morning, and he reiterated this in his second statement, that he did not know anything about this action taken in February, 1960. He criticized me because I said the deputy minister, as a member of the board of directors of the Bank of Canada, should be present at such a meeting.


Donald Methuen Fleming: You said he was present.


Lester Bowles Pearson: The minister criticized me when I said the deputy minister should be, and probably was, present at that meeting. I was wrong, in that he was not at the meeting. However, the minister tried to create the impression that because the deputy minister was away, and he obviously had a very good reason for not being present, it would make it difficult for the minister to find out what happened. The minister then admitted, and it is just as well he did, that the assistant deputy minister was there.
The Minister of Finance had his assistant deputy minister attending a meeting of directors of the board of the Bank of Canada which made decisions which in the minister's mind, were of such fundamental importance that they were questioned 18 months later; yet he never heard from the assistant deputy minister about those decisions, even though he was there representing the Minister of Finance. Does the minister expect us to believe that the assistant deputy minister of finance made no report and submitted no memorandum in regard to this meeting to the minister? Does the Minister of Finance really ask us to believe that?


Donald Methuen Fleming: Mr. Speaker, the Leader of the Opposition is putting a statement I made this morning into question. I have stated that I was not informed what happened at that meeting and that I learned what happened, and of the passing of the by-law, for the first time this spring. That is my statement, and the Leader of the Opposition is calling that statement into question. The assistant deputy minister was present at that meeting, as I mentioned earlier, but I was not made aware of the action taken by the board at that meeting and only learned about it this spring.

Governor of Bank of Canada Mr. Pearson: That statement of the min- It being one o'clock I do now leave the ister confirms-	chair.


Mr. Macdonnell:: Mr. Speaker, will the Leader of the Opposition permit a question?


Lester Bowles Pearson: Certainly.


James MacKerras Macdonnell: No one in this house appreciates more than the Leader of the Opposition the burdens carried by the Minister of Finance. Does he think the Minister of Finance is capable even if he worked for 24 hours each day to know every detail of everything that happens in every department with which he is concerned?


Lester Bowles Pearson: I do not consider a meeting of the board of directors of the Bank of Canada as an unimportant thing. That board meets very rarely. I think it meets twice a year.


Donald Methuen Fleming: Oh, no.


Lester Bowles Pearson: It meets rarely.


Donald Methuen Fleming: It meets regularly.


Lester Bowles Pearson: This meeting took place at a time of great economic difficulty and recession in this country, and I suggest the decisions of the board of directors of the Bank of Canada should be considered to be very important by any minister of finance.
While the Minister of Finance cannot perhaps read every paper that comes from his department, even though, as he has told us, he works 16 hours a day. I think he does, and that there has never been a harder working minister of finance. That makes it all the more incredible that a decision of this kind, of such great importance, was not brought to his attention until a year or so later. That is a very strange way of doing business.


Donald Methuen Fleming: Mr. Speaker, I rise on a point of order. The Leader of the Opposition has just said that a statement which I made to this house, and repeated this morning, is incredible. I made that statement, which the Leader of the Opposition has now said is incredible. The rules of this house are quite clear in this regard.


Some hon. Members:: Order.


Mr. Speaker:: Order. I understood the hon. member to say that it was incredible that this decision was not brought to his attention. That is perhaps a little different than what the minister suggests. It is correct, of course, that the house must accept a statement made by an hon. member from his place in respect to a matter peculiarly within his own knowledge.

At one o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at 2.30 p.m.
Lester Bowles Pearson: Mr. Speaker, when the house took recess at one o'clock the question had arisen as to the incredulity or otherwise of a situation where a meeting of the board of directors of the Bank of Canada could be held at which important decisions were taken and those decisions not be brought to the attention of the Minister of Finance. The minister has said that that was the situation and of course I accept his word, but it certainly is astonishing to say the least that in a situation of this kind in those circumstances the minister would not know what was going on; and a year and a half later would raise the issue with the governor.
It is true the deputy minister was not at this meeting; I believe he was at a funeral. The assistant deputy minister was there and therefore the situation undoubtedly is, from our point of view, one that inspires astonishment if not incredulity.
This whole sorry business, Mr. Speaker, is depressing evidence of the unprecedented break-down in relation between the governor of the Bank of Canada and the Minister of Finance. This break-down is disturbing to parliament; it is certainly disturbing to the business and financial community in Canada, and indeed abroad, and it is bad for business confidence in this country at a time when such confidence is so important.
The minister has emphasized that this has been developing over the months and the reason he had to take this kind of action on May 30 was that the governor of the Bank of Canada was standing in the way of an expansionist policy of the government, and that this had been clear. He referred to two previous budgets to show the difference between them. This brings us back a couple of years. While it may be clear to the minister now that the Bank of Canada was adopting a restrictionist policy at the time when the government wished to put into effect an expansionist policy in the monetary and economic field, it was not clear to the minister on February 21 of this year. That was the day when we on this side of the house criticized some of the policies of the Bank of Canada because in our view they were restrictionist. Did the minister agree with us then and give us an assurance that something would be done? Not at all. If hon. members

will turn to page 2265 of Hansard they will see where the minister challenged our criticism and put statistics on the record to show that the Bank of Canada's monetary policy had been expansionist. What happened between February 21 and June 13 to cause the minister to change his mind so completely in this matter and to use his changed position to justify the action taken on May 30?
It is interesting to note that in that same debate the minister had this to say about the responsibilities of the government in these matters, as reported at page 2264 of Hansard:
I made my statement with reference to over-all financial policy in Canada. I do not think there is anything in that statement which ought to be interpreted as supporting the thesis put forward by the Leader of the Opposition yesterday that under the provisions enacted by parliament with respect to the Bank of Canada Act, the government has power to direct the Bank of Canada or to call upon the Bank of Canada to observe a position of responsibility to the government as such, rather than to parliament.
In other words, on February 21 the minister said that he and the government have no authority "to call upon the Bank of Canada to observe a position of responsibility to the government", and yet on May 30 he calls in the governor of the Bank of Canada and says, "I want your resignation".
Let me also put on the record the proper doctrine, the doctrine which has always been accepted until recent months, on this matter of relationship between the government and the bank. I would refer to the banking and commerce committee of 1954 when the minister of today, a private member of the opposition of that day, was questioning the governor of the Bank of Canada of that day. He asked Mr. Towers a question on this matter and he received this reply. I quote from page 715 of the proceedings and evidence of the committee of that year. Mr. Towers said:
The government, of course, either through the deputy minister of finance, who is a member of the board and of the executive committee, or through quite frequent conversations between the governor and the Minister of Finance, is always aware of what the Bank of Canada is doing.
I wonder whether these quite frequent conversations which, in the opinion of the previous governor, were so desirable and necessary, have been going on in the last year or two between the minister and the present governor? If not, why not?
Then the hon. member for Eglinton (Mr. Fleming) asked this question:
For instance, in 1948 and in 1951, when you urged the chartered banks to restrict credit, was that advice given without the government first having been consulted by you?
90205-6-400
Governor of Bank of Canada
Mr. Towers replied:
The government would be aware that we were going to have the conversations. They would be aware, at least through the deputy minister.
Then the following exchange occurred:
Q. And having offered no objection, I suppose one could say they were parties to it, at least in the sense that they did not interfere?
A. Yes, because automatically, indeed, they must be parties to everything the central bank does unless they signify to the contrary.
Presumably, the hon. member for Eglinton was happy at that time to hear that doctrine expressed by the governor of the bank. It is certainly a quite startling contradiction of the doctrine he put forward this morning. I recognize, Mr. Speaker, we all recognize, that the views of the governor, even his right to express those views, are often controversial. This has been the case in respect of some statements that he, the governor, has made in the last year or two. These views have been questioned by many and they have been supported by many. Indeed, in this house members on this side have questioned the validity of some of the views put forward by the governor of the Bank of Canada. But what was the attitude of the government when we took that position? In all the discussions when we were the ones who were questioning some of these views there was not a word from the government either in defence or in criticism of the governor of the bank but rather a shrugging of the shoulders and the indication that monetary policy had nothing to do with them.
Mr. Coyne's views may have been criticized and they may or they may not be in dispute, but I do not think it is in dispute that he is a man of high principle and integrity who is devoted to the public service and to his duty and is uninfluenced by unworthy considerations. Therefore, whatever we may think about the validity of some parts of his economic doctrine, surely he should not be persecuted or victimized or misrepresented for stating his views when the Minister of Finance says that the governor has every right as a free Canadian so to do.
In the minister's statement this morning, the text of which I have now had the opportunity to read, the Minister of Finance had this to say:
As I indicated earlier, it is not my intention to comment in detail on Mr. Coyne's statement. I should like, however, to make two observations. First, by referring to a "mysterious and alarming" program which the government is contemplating, Mr. Coyne may have left a certain false impression with the public.


Donald Methuen Fleming: That is in quotes.


Lester Bowles Pearson: That is in quotes, "mysterious and alarming" program. I say that by using

Governor of Bank of Canada those words in that context the minister has indeed left a false impression as to what Mr. Coyne said. I have a copy of Mr. Coyne's statement before me, as the minister must have had before him, and here is what Mr. Coyne said:
The Minister of Finance has suggested to me that another reason the government wanted me out of the way was that they were preparing certain programs which were apparently thought to be of such character that I would oppose them.
He mentioned "certain programs" and that is the only expression he used. Then Mr. Coyne went on to say in his statement:
This mysterious and alarming suggestion has not been clarified.
"Mysterious and alarming" were the words used by Mr. Coyne to describe the suggestion that he would be opposing the program of the government. The minister takes those words, puts them in front of the word "program" and thereby certainly misrepresents what Mr. Coyne said. It is obvious on the face of it, of course. The minister said:
... by referring to a "mysterious and alarming" program-
Mr. Coyne made no such reference and the minister owes it to him to withdraw that statement. The minister went on to say in his statement, from the text of which I now quote:
Perhaps the best way to dispel this impression is for me to say at once that Mr. Coyne has not been told of the contents of the forthcoming budget-
This is the governor of the Bank of Canada and the budget has been under consideration for many months.
-and, therefore, has no right whatsoever to express views about it. Second, Mr. Coyne has asserted that he has been given no indication of disagreement with his views on economic policy. In my last two budgets and in various other public statements, it has been clear for some time that there have been major differences of opinion with the frequently expressed views of the governor on economic matters.
If there have been major differences of opinion of that kind dating back for two budgets, why did the minister not get up in the house and state these differences of opinion? The minister said that finally his patience was exhausted. What patience? How often has the minister discussed these matters with the governor of the Bank of Canada in an effort to clear up these differences of opinion? According to the governor in his statement, the minister refused to see him after May 30. The fact is that it is clear on the face of it and confirmed by what has happened since May 30 that there has been a failure on the part of the government to establish adequate communication with the bank. There has been a failure to consult,

to advise and to discuss. Obviously there has been a break-down in this important relationship, the result of which was the request from the Minister of Finance on May 30 for the governor of the bank to resign immediately on the ground that there is a fundamental difference of policy with regard to economic and financial matters between the governor and the government. Here is what Mr. Coyne has to say about that. Let the minister deal with this statement.
I may add that at no time has the government expressed disagreement with the operations of the Bank of Canada under my management, either in the field of monetary policy, or in those fields in which we act solely as agents and under the instructions of the Minister of Finance, namely, in debt management and in operation of the exchange fund. There has likewise never been any occasion on which the Bank of Canada has failed to co-operate, so far as it was concerned in the matter, in support of government policy. In financial matters we have always loyally played our part in carrying out positive government policies.
Perhaps, Mr. Speaker, the only way we will get down to the facts of the matter is to have a committee before which Mr. Coyne can appear and the minister can appear. Various explanations have been given outside the house, of course, to explain this crisis, this whole sorry business. Mr. John Meyer of the Montreal Gazette had this to say in his editorial this morning:
One St. James street source put it this way:
"Mr. Coyne isn't winning any votes for Mr. Diefenbaker so Mr. Coyne has to go."
That is another variation of the "heads will roll" approach of the government. Mr. John Meyer also had this to say in another article:
It was, as Mr. Coyne says, "A slander upon my own integrity which I cannot ignore or accept."
This refers to the pension.
This will be how the public as well will interpret the government's action. In seeking to discredit Mr. Coyne, the government has succeeded only in discrediting itself.


Mr. Graffley:: The Liberal party's new attitude to St. James street.


Lester Bowles Pearson: I would welcome any serious interruption by the hon. and learned financial pundit on my left. The issue before us, Mr. Speaker, is very important but a very simple one. If the government ask parliament to remove the governor of the Bank of Canada because the governor has in fact prevented them from implementing their monetary and financial policies, and if that can be established through a parliamentary inquiry, then, of course, we on this side would support his removal. That has been the relationship we have put forward all along and we would support it now. That has been the relationship, that has been the doctrine which has been opposed by the government.

If in fact the government can do this, if they can establish that they have been so opposed, the governor of the Bank of Canada should resign. We would support that course in those circumstances because we believe that our system of responsible government would necessitate such a course. We do not think that any public servant should be in a position where he can prevent a democratic government from implementing its policies. But, Mr. Speaker, the Minister of Finance has not made that case. Indeed all his observations in the last six months in the house challenge the validity of that case.


John Whitney Pickersgill: Four years.


Lester Bowles Pearson: He has never at any time given us any reason to believe that this was the situation, and when members on this side have suggested that perhaps there has been some difficulty he has pooh-poohed that suggestion. On the other hand, Mr. Speaker, we will not support the government in any attempt, and it appears now they are going to make an attempt, to use the governor as a scapegoat, and to use a phony issue to cover up their own mismanagement of the country's affairs and obscure their own failures, to conceal their own confusion.


Mr. Erhart Regier (Burnaby-Coquiilam):: Mr. Speaker, I believe that most of us will agree that we are debating this issue under a very great handicap, namely the lack of adequate information. We have not had a budget brought down as yet, and until we have had a look at the budget we cannot really understand what is meant by a possibility that the governor of the Bank of Canada may have serious reservations about the contents of the budget. Also, we have not been told what the proposed legislation is going to contain. I assume, since the minister mentioned legislation, that the government is contemplating the Bank of Canada Act. This is a move of great significance, and the information as to the intended legislation as well as the contents of the budget would enable us to debate the issue before us now in a much more intelligent manner.
I feel that the government has been negligent in not making this information available to us. However, I believe that at least all of us in the opposition would readily agree that the whole government is in a mess. The government did not expect the governor of the Bank of Canada to have the guts that history has now proven he has. They did not expect he would release to the public the information that he has released. In looking over this whole affair, it is obvious to me that "John" has won out over "Don". It 90205-6-400J
Governor of Bank of Canada appears that there is going to be the introduction of a new attitude on the part of the government toward Canadian economic problems.
The government, of course, is looking for an out. They remember only too well what happened the last time a Conservative government was unable to meet the needs of the Canadian people. This Conservative government, under the late Mr. Bennett, made a deathbed repentance in 1935. I believe the intention is to repeat that deathbed repentance by the introduction of some rather large, comprehensive new programs in order to help the people forget all the disappointments of the years since 1957. The government has to find an individual who can be used as a scapegoat. It is obvious to me at least that the governor of the Bank of Canada is intended to be the scapegoat so that the members who support the government will be able to pillory him during the next election campaign. I believe it is for this reason that the pension arrangements have been introduced into the argument.
We are not, in any way, defending the $25,000 a year pension. However, the government knows very well that private banks retire their governors on a much higher pension than even the $25,000, and at least one other civil servant, namely the head of the Canadian National Railways, would be entitled to an even higher pension than the one the board of directors arranged for the retiring governor of the Bank of Canada. In addition, I have read the act very carefully and I find no possibility of the government having any kind of voice in determining the level of the pensions of ex-employees of the Bank of Canada.
The pension matter was mentioned by the governor in his release to the press on June 13 last. If one reads this release very carefully, one is almost inclined to be a little suspicious that he was, in effect, advised that if he would be a nice boy and sneak away quietly the government might consider leaving his pension at $25,000 a year.


Donald Methuen Fleming: That is utterly untrue.


Erhart Regier: However, Mr. Coyne is a very responsible man, and Mr. Coyne also relates his responsibility to the board of directors. He says in paragraph 1:
He said the government-
The "he" refers to the Minister of Finance (Mr. Fleming).
-were considering what action to take in the matter of the pension, had not yet come to a decision, and wanted my resignation before they came to a decision.

Governor of Bank of Canada
The only conclusion I can come to from reading that part is that he was, in effect, told to be a nice little boy and we-the government-will not be overly harsh with you in the matter of reducing your pension. I do not believe the pension could be reduced without an amendment to the Bank of Canada Act.
There is another matter that alarms me. There is no indication that anywhere along the line a serious difference of opinion existed between the board of directors and the governor. We hear now that last night, by an almost unanimous vote, the board of directors has asked for Mr. Coyne's resignation. I believe the minister owes it to this house to inform us as to why there has been an apparent change of heart on the part of the board of directors of the Bank of Canada. I, for one, would like to know how many consultations the minister has had with how many members of the board on the matter of taking the action that the board took last night when they finally asked for the resignation of the governor. In all the correspondence we have been allowed to see, there has been no indication that at any time the board of directors was dissatisfied or displeased with the work of the governor. However, we find that at the very crucial moment the board of directors asked for the resignation of this man.
I agree at once that the Bank of Canada must work in harmony with the government of Canada. I believe that is essential. The Minister of Finance, for a very good reason, is the only owner, on behalf of all the people of Canada, of this institution known as the Bank of Canada, and that would not be so were the intention not that the Bank of Canada should work in harmony with the government of the day. I had always assumed that they were working in harmony and this revelation is rather surprising to us. In the past there has not been any appearance of a conflict. I had always considered Mr. Coyne and the minister to be good, true blue Conservatives when it came to financial matters. I would like to indicate that in my opinion a conflict did not appear to exist in previous years. Reading from page 1063 of Hansard of November 13, 1957, the Hon. James Sinclair the then member for Coast-Capilano, asked the minister:
Mr. Speaker, I wish to direct a question to the Minister of Finance. Actually it is a repetition of a question he was asked last Monday in Oakville, which he refused to answer on the ground that he could not answer it outside the House of Commons. Since he is now inside the House of Commons I should like to ask him, has there been a clash of opinions between the Bank of Canada and the government on economic policy?


The answer of the minister was:
I am not aware of anything that could be called a clash.
Mr. Sinclair asked another question:
A supplementary question. Does that mean the Minister of Finance is now in accord with the policy of the Bank of Canada which he called an unhappy legacy earlier this session?
The minister replied:
The expression "unhappy legacy" does not apply only to what the hon. gentleman has lust mentioned. There are a good many things in the unhappy legacy to which that expression ought to apply. When the time comes to deal with any questions of policy in the house I can assure the hon. gentleman that they will be dealt with fully.
I should like to underline the last word "fully". The minister has never on any occasion, in the years that have intervened since November 13, 1957, indicated that there was the slightest clash of opinion between himself and the governor of the Bank of Canada.
If there is a basic conflict, as the minister now seems to contend, I believe parliament is entitled to know what that basic conflict is and I hope, at least, the minister when he replies later on in the afternoon is going to be much more explicit as to the basic conflict than he was in his rather bland assertions this morning.
I had always assumed the two men were both excellent Conservatives. I realize, of course, that the governor of the bank was not appointed by this minister, but he was appointed by the equally Tory minded minister who preceded him. The minister mentions one possible clash. He complains-and these were his words-of Mr. Coyne's rigid attitude on the maintenance of high interest rates, as one example.
I can remember very well that the two men who led the campaign in Canada in favour of higher interest rates were our present Prime Minister (Mr. Diefenbaker) and our Minister of Finance. I have reference to their television appearance on the subject of the bond conversion loan.


An hon. Member:: Ridiculous.


Erhart Regier: It may well have been the governor of the Bank of Canada, I will probably never know, who hatched that nefarious scheme, but the two leading spokesmen on its behalf in Canada were our Minister of Finance and our Prime Minister.
We now realize that interest rates in Canada are on an average a number of percentage points higher than they were at the time when this government assumed office, and I feel this government must assume responsibility for that. It is in very poor taste, to say the least, for them, after four years in office to now all of a sudden be blaming the governor of the Bank of Canada for pursuing

a policy which they claim was in contradiction to government policy, in maintaining a rigid attitude on the maintenance of high interest rates. I believe the government cannot successfully escape its responsibility in this regard.
I notice also, in connection with the minister's attempt to blame the governor of the bank for high interest rates, that as reported at page 3093 of Hansard for April 27, 1959, the minister had this to say:
I think I should begin this reply, Mr. Speaker, by a reference to what actually has occurred in the money market of Canada. We have had a money market in this country now for approximately the last four years. Money markets are not greatly different from commodity markets in this respect, that they are governed, not entirely but very largely, by the law of supply and demand. Obviously if the demand is large in relation to supply the return on borrowings must be larger_
Yet today we are told the rigid policy of the governor of the Bank of Canada has been responsible for these high interest rates. At page 3095 the minister went on:
Then, the Bank of Canada, on November 1, 1956 set its rates in terms of a formula attached to the treasury bill rate.
Then a little later on:
Let us bear in mind that the government of Canada does not establish the Bank of Canada rate.
He continued:
The Bank of Canada, by an act of the parliament of Canada, is responsible for monetary policy, and this bank rate, as it is called, is set each week by the Bank of Canada in the exercise of its statutory powers.
This policy that was begun on November 1, 1956, was for the Bank of Canada rate to be automatically tied to the current rate payable on treasury bills. The Bank of Canada, as of that November 1, no longer determined the rate excepting that it attached an increase of a certain constant amount to the yield realized whenever the government offered treasury bills.
On the problem of tight money, at page 1444 of Hansard of February 27, 1959, the minister had this to say. I asked the minister this question:
X should like to direct a question to the Minister of Finance, of which I have not given him notice. Is the minister in a position to inform the house as to the effect on the Canadian economy of yesterday's announcement by the Bank of Canada of a new discount rate of 4.32 per cent, and does he still feel as he did on February 13 that this represents a fluctuation within a not very wide range?
The minister replied:
The rate on treasury bills over the past two weeks is approximately what it was when the Liberal government went out of office.
The hon. member for Bonavista-Twillingate (Mr. Pickersgill) interjected:
Tight money.
Governor of Bank of Canada
I then asked a supplementary question:
I should like to follow that with a supplementary question. Is the government taking any measures to establish a rediscount rate independent of the weekly offerings of treasury bills, or is this government now endorsing the tight money policy of the former government?
The minister proceeded to give me a considerable lecture, and I am getting used to them by now. He replied:
The hon. gentleman, if he is acquainted with what has been happening in the money markets of this continent, must be aware that interest rates have been rising rapidly in the United States. This has had an inevitable effect on interest rates in this country.
Today the minister is blaming the governor of the Bank of Canada for the unduly high levels of interest rates that have been prevailing. In my opinion the minister has been very long in arriving at this conclusion. If he had accepted his responsibilities as the sole owner of the Bank of Canada on behalf of the people of Canada, if this actually was happening the minister should have warned the Canadian people and should have taken action many years ago along the line he is now proposing. He would have saved the people of Canada a lot of the needless misery that unemployment has caused our country. The minister cannot rightfully claim that the governor of the Bank of Canada was responsible.
The minister further claims that the governor is not aware of the contents of the proposed budget. This sounds almost unbelievable, and had the minister not made that claim I would even label it as fantastic. Does the minister mean to say that before a budget is brought down-and I know the minister has no research facilities in his department-exceeding $5 billion-


William Moore Benidickson: Seven billion dollars.


Erhart Regier: -the effects of that budget are not called to the attention of the responsible people in the Bank of Canada? If that is the case, I say that the minister is completely unworthy of presenting a budget in this house. That is one of the purposes of the Bank of Canada, and if the minister is taxing the people of Canada to the tune of almost $6 billion a year without prior consultation with the bank on these matters I think he has been most derelict in discharging the duties assigned to him.
I am of the opinion that Mr. Coyne likely knows much more about the contents of the budget which is to come down than the minister is aware. I know the minister made his claim honestly, believing it to be true. However, in the release to the press which he prepared Mr. Coyne said this:

Governor of Bank of Canada
The Minister of Finance has suggested to me that another reason the govermnent wanted me out of the way was that they were preparing certain programs which were apparently thought to be of such a character that I would oppose them.
Later on, he said:
It is for the government to disclose to the public what it is they are planning to do.
I think that is so. I think it is for the government to disclose to the public what they are planning to do. However, the governor, who is an honourable man, thought it would be way out of line for him to tell the public about any action which the government planned to take. He says:
It is for the government to disclose to the public what it is they are planning to do. I have never opposed government policy and do not wish to do so. It is conceivable at some stage and in some circumstances it would be the duty of the governor of the bank to resign on an important question of principle or policy.
Yet the government wants Mr. Coyne out of the way before the budget is brought down. If relations are as the minister described them as being this morning, I think the honourable course would be to bring down the budget and then to see whether Mr. Coyne would carry out his pledge to work with the government in a co-operative spirit as I understand he has repeatedly assured the government he is anxious to do. The statement which I have just read is an indication that if Mr. Coyne found himself honestly unable to support the government in its proposal then, in his opinion, it would be his duty to hand in his resignation. I see nothing dishonourable in the course proposed throughout this controversy by Mr. Coyne, though I can find much that is reprehensible, to say the least, in this obvious attempt by the government to rid itself of the governor of the Bank of Canada without the public knowing anything about it. It is apparent that an effort was made to persuade Mr. Coyne to fold his tent like the Arabs and move away. I think the government has made a miscalculation inasmuch as they did not expect that Mr. Coyne would appeal to the public with regard to the methods being used by the government. I believe Mr. Coyne knows much more about the budget than the minister supposes and that he has very strong views on what is contained in it.


Mr. Brunsden:: On a point of order, the hon. member repeatedly suggests that Mr. Coyne knows all about the budget. We have the assurance of the Minister of Finance that the budget is still locked in his own brain. Regardless of party we all respect the Minister of Finance, and I suggest that this

repeated allegation, which is in direct contradiction to the minister's statement, is almost an insult and that it should be withdrawn.


Mr. Speaker:: The hon. member who raises this point of order may recall what has been said earlier. He may remember that the hon. member for Burnaby-Coquitlam did accept unreservedly the statement of the minister that as far as he knew, within his knowledge, Mr. Coyne did not know about the budget. The other statement is, to my mind, a different statement and I do not think the hon. member for Burnaby-Coquitlam can properly be asked to withdraw it.


Erhart Regier: I believe the government owes it to parliament and to the country at this time to disclose the nature of the major moves which are being contemplated by the administration because we cannot adequately assess this situation which now faces us without that information. It may be the government is contemplating a billion dollar deficit in an attempt to win an early election. It may be the government is contemplating the sale of crown corporations-I notice that Mr. Coyne refers to these corporations-and thus may be linked with the announcement of the Prime Minister that the next election will be based on socialism versus free enterprise. Or, it may have something to do with the proposed disposal of mortgages, and over a billion dollars worth of them are held by the Central Mortgage and Housing Corporation. If it were possible to sell these successfully I can see how the government might embark on an ambitious vote catching program without having to increase taxation or, necessarily, incurring a deficit. I should like to refer to one of the statements made by the minister in his speech this morning. He said:
At this stage I must confine myself to placing before the house the essential facts virtually none of which appear in that statement.
"That statement" refers obviously to the release issued by Mr. Coyne. I should like to ask the minister to tell us exactly which of the statements made by the governor of the Bank of Canada he denies. I should like to have a list of the statements made by Mr. Coyne and contained in this three-page press release of June 13 that are being denied by the minister. More specifically I should like to have the minister reconcile the reports of the meeting which was held last night in Quebec city when the board of directors asked the governor to resign. The governor, in a letter dated June 13 addressed to the minister had this to say in the final paragraph:
After a negative response to my inquiry as to whether there was any further business to come

before the meeting, the meeting of the board of directors of the Bank of Canada was terminated.
Yet the minister, in his monstrous attempts to cast reflections on the integrity of the governor of the Bank of Canada, reported that Mr. Coyne took an altogether different action. On page 3 of what the minister had to tell us this morning this version appears:
Mr. Coyne polled the directors. The resolution was carried by a vote of nine to one. Mr. Coyne did not vote. Having declared the motion carried, Mr. Coyne then immediately adjourned the meeting.
In doing so, he not only defied the formally expressed wish of the board that he should resign immediately in the interests of the bank, he made it impossible for them to proceed to consider what action might be taken in the face of this defiance.
Obviously Mr. Coyne has given us a wrong report of what happened, or the minister has misunderstood the report of what actually happened and conveyed the misunderstanding, through his own interpretation of what took place. However, the allegation contained in this discrepancy is a very important one to Mr. Coyne and to all of us who are interested in accurate reporting and the maintenance of the reputations of the individuals concerned.
Mr. Coyne reports that after the vote was taken and recorded he asked whether there was any other business to come before the board. No one said anything so the meeting was adjourned. The minister has indicated that Mr. Coyne made it impossible for the board to proceed with any other business that was before it at the time. There is a contradiction there of a very serious nature.
I hope the minister, in the interest of accuracy, and I know he does wish to be accurate, will clear this matter up. I hope he is able to tell us that Mr. Coyne wrongly reported what took place at the meeting, or that he was in error, or that one of his advisers supplied him with wrong advice, because I cannot imagine the minister deliberately making a statement with such implications. He either made the statement knowing that he was not accurately reporting what did take place, or was unaware of the fact that he was in error.
After blaming Mr. Coyne for his rigid attitude in maintaining high interest rates, the minister goes on to blame him for other things. Before I resume my seat I should like to make it very clear that we have always assumed that Mr. Coyne and the minister were working together in harmony. We have had no indication, either in the policies of this government or in the statements made by the governor of the Bank of Canada, that there was a basic conflict in the attitudes of the Bank of Canada and the government of Canada. However, we do claim that the
Governor of Bank of Canada two must work in harmony. If the minister can supply us with adequate reason, substantiated by facts and not by mere assertions, that the governor of the Bank of Canada has been working against the announced policies of this government then, of course, we should have no alternative but to support the demand of the government that the governor of the Bank of Canada resign because we still contend, in spite of everything the minister has said over the years, that this government is responsible for the monetary policies of Canada and it cannot evade that responsibility.
I am pleased to note that in at least one respect this government has now returned to that attitude which was once held by the minister himself when he was in opposition. However, I regret very much that this whole situation has to be part of an election campaign, and that one of our most highly esteemed federal civil servants, even though he was a Tory, has to have his name blackened and smeared by a government which is so ruthlessly desperate to win re-election it feels it must resort to measures of this kind.


Mr. C. A. Cathers (York North):: Mr. Speaker, I should like to say a few words about this very serious subject. I suggest it is serious in view of the fact that I have never before seen the Leader of the Opposition (Mr. Pearson) so het up as he was today.


Mr. Habel:: You ain't seen nothing yet.


Cecil A. (Tiny) Cathers: I suggest to the Leader of the Opposition that he get his facts straight, following the example set by the Minister of Finance (Mr. Fleming) who, I understand, took history lectures from him at university in the 1920's.
I should like to draw attention to the statement the Leader of the Opposition made regarding Mr. Jack Bryden, who was a director of the Bank of Canada, and the implication therein contained. That hon. member was brought up sharply by the Minister of Finance who stated that he knew with assurance that Mr. Bryden resigned from the Bank of Canada on his own initiative due to the fact that his other duties were very heavy.
I have known Jack Bryden for at least 30 years. He is a fine, upright, brilliant economist and the head of one of the large life insurance companies. I have very high regard for him, and think it was very small on the part of the Leader of the Opposition to cast the aspersion which he did, on the reputation of Mr. Bryden.
Another example of the type of statement the Leader of the Opposition makes without having checked the facts, was presented this morning when the Minister of Finance informed him that the deputy minister was not

Governor of Bank of Canada at the meeting of directors when the change in pension was made. The Leader of the Opposition then corrected his statement. I suggest he should have lectured in mathematics at the university, a little more exacting subject than history.
I have had special interest in the Bank of Canada for a good number of years because, in 1934, when that great Canadian, R. B. Bennett, incorporated the Bank of Canada as a private enterprise, the shares were sold to Canadians. I had one share certificate which I cherished but it was redeemed because of the policies of the last Liberal government. I can remember the year 1935 as though it was last night, when Mackenzie King went out on the hustings. I attended a meeting on College street in Toronto when Hugh Plaxton the Liberal candidate announced the policy of the Liberal party, saying that if that party was elected it would nationalize the Bank of Canada. That government, of course, was elected and did nationalize the bank. For that reason I suggest we can now lay the blame on the opposition side of this house for the troubles we are having.
Mr. R. B. Bennett established the Bank of Canada originally on the same basis as the Bank of England, and I wish it was still that way because I am sure we would not have had the problems with which we are faced today.


John Whitney Pickersgill: We are back to old R. B. again.


Cecil A. (Tiny) Cathers: Yes, sir.


Mr. Hellyer:: Are you going to denationalize the bank?


An hon. Member:: Get on your motorcycle and ride away.


John Whitney Pickersgill: You do not like it.


Cecil A. (Tiny) Cathers: I should think hon. members would hesitate to bring personalities into this debate, particularly in reference to the presidents and heads of our crown corporations. I believe it is quite unfair for any hon. member to engage in personalities in this house in respect of individuals who find themselves in positions in which they cannot defend themselves. I refer particularly to the hon. member for Port Arthur (Mr. Fisher) who, with his flair for publicity, stood up and demanded that Donald Gordon resign. I was very sorry to hear some of our own party members concur with that statement because I do not agree with that type of practice at all. If we intend to have good men at the head of our corporations it ill behooves us to stand up in this house and verbally cut them down. We certainly cannot expect to build up the morale or prestige

of those organizations by appointing individuals and then immediately criticizing them.


William Moore Benidickson: What about the governor?


Cecil A. (Tiny) Cathers: How many members have risen in their places in this house-and this applies particularly to the hon. member for Port Arthur-and criticized Donald Gordon for not making the railroad pay? When Donald Gordon as head of the Canadian National Railways has endeavoured to put some efficiency into the operation of the railways how many times has the hon. member for Port Arthur and others opposed it? Time after time they have done this. When the C.P.R. lays off men because they have no work for them, or tries to eliminate costs, we do not hear about it in this house, but every time the C.N.R. does it we hear about it. I defy any man to manage the Canadian National Railways on the basis on which we are trying to operate it.
In the late 1920's Sir Henry Thornton was president of the Canadian National Railways and there were kicks about his methods of running the railroad. I defy any man-


John Whitney Pickersgill: The Tories cut his throat as well.


Cecil A. (Tiny) Cathers: I hesitate to engage in personalities with respect to the governor of the Bank of Canada but the opposition have asked for it. I support the Minister of Finance in the action he has taken.
Let us take a look at this Mr. Coyne. Who is he? He graduated from the university of Manitoba in 1931. He was a Rhodes scholar. I commend him for that. He took up law and was engaged in the practice of law from 1934 to 1938, and then lie got a job as secretary in the Bank of Canada. I believe he was in the armed forces for a couple of years during the war. He came back and became deputy governor of the bank. But what experience did the man have to operate a bank? I do not set myself up as an authority on the operation of a central bank but I was engaged in finance and I do know that two and two make four. I have sometimes wondered in the last year, when I have read Mr. Coyne's speeches, whether he knows that two and two make four. The first speech I read was the one he made in Calgary when he said we were spending far beyond our means. Well, he is the governor of the Bank of Canada and he had a certain amount of control over things. Consumer buying had gone up; consumer credit had expanded and he could have controlled that very easily. He should not have waited until 1960 to start his program.

Another point he made had to do with foreign investment coming into Canada. He said that if we stopped it and lived within our means it would help the unemployment situation. Well, gentlemen, I was at the other place-


John Whitney Pickersgill: Don't forget the ladies.


Cecil A. (Tiny) Cathers: -and I heard the members of the other place try to find out what his solutions were. I wish the hon. member for Essex East (Mr. Martin) could have been there to hear what the governor had to say, because I as the chairman of the banking and commerce committee would have liked to have Mr. Coyne appear before our committee-


Paul Theodore Hellyer: Why didn't you?


Cecil A. (Tiny) Cathers: I would have liked it but after-


Paul Joseph James Martin: Because the Minister of Finance would not let you.


Cecil A. (Tiny) Cathers: Oh, no.


John Whitney Pickersgill: That is right.


Cecil A. (Tiny) Cathers: I will give you the answer. After going to the Senate committee on manpower and listening to the deliberations and Mr. Coyne's cure for unemployment-he said he had all the plans, he had all the solutions for this and that-I came to a different conclusion. Let hon. members ask the senators how much they got out of him; and they were not Conservative senators. The first thing I took exception to after we were elected was his statement when he was accused of operating under a tight money policy. We came in, in 1957. I used the statement because I know I was right. The statement said we were operating the Bank of Canada on a tight money policy. The governor denied it. I understand that the Liberals had some doubts about Mr. Coyne. As a matter of fact, I have heard that they laid a great deal of the blame for losing the 1957 election on the tight money policy.
This morning the Leader of the Opposition (Mr. Pearson) was disturbed. I think the reason he was disturbed was that he would have liked, and those on the other side would have liked, to see Mr. Coyne continue in his position so that his policies might help to defeat us.


William Moore Benidickson: The hon. members have been quite slow in coming to that conclusion; it has taken four years.


Cecil A. (Tiny) Cathers: I do not know that we have been so slow.


Paul Theodore Hellyer: The hon. member does not mind wrecking the country but he does not want to lose the election.
Governor of Bank of Canada


Mr. Bell (Saint John-Albert):: Speak for yourself.


William Heward Grafftey: There are no Mackenzie Kings in our party.


Cecil A. (Tiny) Cathers: I think that if we had had Mr. Coyne before the banking and commerce committee we would have further advertised what the Liberals have been advertising all over the world, namely that conditions in Canada are not good. They have enjoyed the gloom and this is another example. The hon. member for Essex East has been trying every day to get the governor of the Bank of Canada before the committee in order further to depress foreign credit. I should like to point out to hon. members the danger of weakening our foreign credit. We need the money from foreign investments in this country to develop our resources and we cannot get along without it. I know because I was in the investment business for a long time.
I know the attitude of United States investors toward Canada. It has taken a long time to build up and establish the fine credit we have in foreign countries. I think speeches such as those delivered by Mr. Coyne last year have undone a great deal of the good done in past years.
He has made reference to foreign investment in Canada. This foreign investment did not really start until 1949, when the foreign exchange control regulations were lifted and foreign capital came in. It came here because Canada was a safe haven for investment for people all over the world. I recall being in Switzerland in 1951 and talking to the bankers there. The reason they were so inclined to invest in Canada was that they knew us, that we were honest and that we had no exchange regulations.


William Moore Benidickson: And at that time we had a good government.


Cecil A. (Tiny) Cathers: The good government referred to is the government that is responsible. They saw what was happening. It started in 1949 and continued thereafter and if they thought it was such a bad thing they could have done something to remedy the situation.
There is something else which arouses a great deal of fear in my mind with respect to Mr. Coyne and that is his judgment with regard to foreign investment. In one of his statements he said that in companies in Canada for which the capital has been provided by foreign investment the majority of the directors should be Canadian. Can you imagine people handing their money over to strangers and saying, "Here is the money; you run our business". That is an impossible situation.
6342	HOUSE OF
Governor of Bank of Canada Mr. Pugh: He does not believe in directors anyway.


Cecil A. (Tiny) Cathers: There might be something in that. I have looked at the Bank of Canada Act and I see that the directors of the bank have the right to set salaries and that the governor of the bank has freedom and there is to be no interference by the government. Some 18 months ago the directors of the Bank of Canada took a certain action, on whose prompting I do not know, although I suspect there must have been persuasion on the part of the governor of the bank. They did something that I think is unforgivable. They increased his pension from a little less than $12,000 a year to $25,000 a year. According to the Bank of Canada Act, that action should have been approved by the governor in council. If this had been done in a private company the directors would have had to have their action approved at the annual meeting of shareholders. No approval was obtained in this case and the matter was not heard of until nearly 16 months later.
I should like to ask the hon. member for Essex East (Mr. Martin), who has been such a staunch supporter of Mr. Coyne, what he thinks of this pension of $25,000 a year. Here is a person who started working for the Bank of Canada as a young man in 1938. He is only 50 now and he will have a pension of $25,000 a year. The hon. member for Essex East has been a member of the house since 1935 and I believe I am correct in saying that if he were to retire tomorrow he would have a pension of $3,000 a year. I do not know of a single instance in the business world where a man who started at the bottom in 1938 would receive a pension of $25,000 a year after 23 years.
I think that the way Mr. Coyne has behaved himself since May 30 has been entirely improper. He must have known that a request for his resignation would be made because he had heard from professors, from the banks and from the investment dealers that they were not in agreement with his policies. 1 admire the Minister of Finance for the way he has protected this man. I cannot condone the action of this group of professors in writing a letter to the press. I cannot approve of their action in belittling the governor of the Bank of Canada in the way they did. If the Minister of Finance had been looking for an opportunity to get rid of Mr. Coyne, it would have been the easiest thing for him to have used the writing of this letter as a reason for doing so. But no, he was protecting a servant of the government, and I commend the minister for it.
I have talked with presidents of the chartered banks and my old colleagues in the 

investment business and I know they have no confidence in the governor of the Bank of Canada. I also know that the bankers and business people have the greatest confidence in the Minister of Finance.
I should like to point out that after the speech that the governor made in October of last year the price of the 4J per cent conversion bonds to mature in 1983 started to fall on the bond market. They were then selling at a price of 95. They started to fall a day or two after his speech and continued to fall until on December 1 when they sold at 87. I do not know why we have not had more dumping of securities from the other side of the line when the governor has been going around preaching gloom. He certainly has done everything possible not to sell Canada to foreign investors.
I knew for some time that the governor of the Bank of Canada was paid a salary of $50,000 a year. That is not bad for a young fellow who has had no banking experience. I will give him credit for being trained in the law, but I would ask members of the former administration why he was ever appointed? On what grounds?


Mr. Cardiff:: Political grounds.


Cecil A. (Tiny) Cathers: I know I was told that C. D. Howe did not approve of it.


William Moore Benidickson: He is not here to speak for himself.


Cecil A. (Tiny) Cathers: No, and I hate to say that. I cannot understand why this man with his background should ever have been appointed to this position with a salary of $50,000 a year and an additional amount of $12,500 a year from the industrial development bank, or a total of $62,500 a year for a man who had no business experience. I do not think he is an economist. I do not think he has ever professed to be an economist. If there is any blame for the situation we are in today with respect to the Bank of Canada, I think it should be put right over there on the doorstep of the opposition.
What were the qualifications of Graham Towers, the first governor of the bank who was appointed by R. B. Bennett? He was a graduate of McGill University and an outstanding student. He went into the Royal Bank and soon rose to the top. In all the years I was in business and while he was the governor of the bank I never heard one word of criticism of his operations in the Bank of Canada. Why?


William Moore Benidickson: Do you think he did not
recommend his successor?


Cecil A. (Tiny) Cathers: Yes, I heard that. At that time, the late C. D. Howe said he had lost

respect for Graham Towers because he recommended Mr. Coyne as his successor. I speak of the things I know.
Now, we could have settled this problem some months ago, but we did not. The Minister of Finance displayed the greatest of patience. I know that if I had occupied his position this man would have been out of here long ago. I believe the actions of the governor were deliberate. The Leader of the Opposition (Mr. Pearson) did not declare himself this morning, and I could not gather from what he said whether or not he was a supporter of Mr. Coyne. He seemed to be annoyed by the fact that we were getting rid of Mr. Coyne.
I think that, for the good of this country, we have to protect our credit. I was in the financial business in 1931, and Great Britain went off the gold standard in September of that year. I remember the event quite well. Government bonds that were selling on a 4J per cent basis dropped overnight. I recall that every bond house, every bank and every life insurance company, if they had been forced to liquidate their portfolios, would have been bankrupt. I recall that when I started my own business in the dark days of February 13, 1932, these 4 J per cent bonds of 1957, which had a 5i per cent coupon attached to them, were selling at from $82 to $84.
Now, why did that happen? It happened because we were tied up with the British empire, thank goodness. Great Britain was forced off the gold standard and the world markets dropped so many securities on the Canadian market that the price was knocked down from par to $83 in a very short time. I feel, therefore, that the members of this house should be most careful to follow the example of the Minister of Finance, who has tried not to advertise this rumpus between the governor and the country. The foreign investors are very fickle, and they will soon withdraw money from this country. I would say that if the United States investors started to withdraw from this country, there would be chaos in our bond market. We cannot finance this dumping of our securities on the market. I hope we will be very careful in the way we deal with foreign investors.
Before I sit down, I should like to say that, as a person who was formerly in the financial business, I admire the job that the Minister of Finance has done during the last four years. I know that I speak for a great many of the business people of Canada when I say that.


William Moore Benidickson: Before the hon. member resumes his seat, may I say that we all recall that at the beginning of his speech this
Governor of Bank of Canada afternoon he made reference to his long friendship with a Bank of Canada director, Mr. Bryden. He suggested that the Leader of the Opposition had been rather unfair in his references to Mr. Bryden. I would ask the last speaker who is the chairman of the banking and commerce committee, and who was nominated by the government, whether or not he has read the last sentence of the letter dated June 9 from the governor of the Bank of Canada to the Minister of Finance, wherein this statement is made:
I will spare your feelings by not referring in this letter to the outraged comment made by the chairman of the committee having to do with pension matters, when I repeated the minister's comments made to me a few days ago.
Has the hon. member who took such umbrage at what the Leader of the Opposition said, read this sentence, and does he know whether or not the chairman of that pension committee was indeed his friend, Mr. Bryden?


Cecil A. (Tiny) Cathers: I have not read it and I do not know whether or not it is true. I will check with him at the first opportunity.


Paul Joseph James Martin: I have listened with interest to the hon. member who has just spoken. He will not misunderstand me if I do not follow all that he has said in the course of what I have to say. I will make this observation, however, that as chairman of the banking and commerce committee, to whom I directed questions on several occasions as to when the banking and commerce committee would meet for the purpose of enabling members of that committee to question the governor of the Bank of Canada, I naturally expected that, if he were going to intervene, he would have given us reasons for not giving us the opportunity of confronting the governor of the Bank of Canada. If such an opportunity had been provided, possibly we would not have had the very serious situation that now confronts Canada which has the most serious implications, as the hon. member himself said, when he referred to its influence on foreign investment in this country.
The hon. gentleman made perhaps the most succinct and important statement yet made in this debate when he said that unless this particular matter were handled properly there would be consequences for Canada of a most serious character. He had in mind, I believe, foreign investment and the like. I say to him, and I say to this government that if, as a result of this situation which has prompted this debate, we are confronted with that kind of situation it is because of the actions of the Minister of Finance and the government of Canada, and the way they have handled this regrettable situation.
6344	HOUSE OF
Governor of Bank of Canada We have repeatedly asked the government, and we have asked the hon. gentleman who has just taken his seat, to afford us the opportunity of questioning the governor of the Bank of Canada on his annual report, and questioning him on the statements that he made from time to time throughout the country with regard to methods to meet the serious economic problems now confronting the nation. We have been denied that opportunity. Yet the chairman of the banking and commerce committee has just made the statement that he would have liked to have had the governor of the bank appear before a House of Commons committee. One can only conclude that if his desire was not gratified it was because of the difficulties prevailing during the last few months between the Minister of Finance and the governor of the Bank of Canada about which we were not made aware and which the Minister of Finance did not want parliament to become aware of at that time. That is apparently the real reason why the House of Commons was denied this right with respect to a matter which the Minister of Finance had said belonged to parliament under the Bank of Canada Act.
The hon. gentleman who has just resumed his seat also spoke of a side issue, the facts of which are not clear and about which I have no comment to make. That was with regard to the pension of the governor of the bank. All I want to point out with regard to that side issue is this. One of the directors in Quebec, Mr. Baribeau, as reported in today's Toronto Star intimated that the dispute over pensions for governors was not a big factor in yesterday's decision.
I do not know whether or not that is the case, but I simply want to say to the hon. gentleman and to the Minister of Finance that the fact is that if there was an increase of pension provided for the governor, that was provided first as a result of the initiative taken by Mr. Bryden, a friend of the Minister of Finance and a political supporter of the Minister of Finance, who thought it was the right thing to do. And it was approved by every director of the Bank of Canada, every one of whom was appointed by this government.
Those are the facts. So that if there is anything questionable about that, my hon. friend can discuss it with the Minister of Finance. He will find that it was as a result of the unanimous decision taken by members of the board of directors of the Bank of Canada who were appointed to their office by the present government.
This is a matter of the greatest importance. Whether or not we agree with the policies of the government in financial matters; whether
IMr. Martin (Essex East).]

or not we agree with the attitude the government takes with regard to monetary policy and its responsibility therefor, the fact is that the governor of the Bank of Canada, in our economic system, holds one of the key positions in the public service of our country. Any miscalculation by this government or any government with regard to that office; any act taken by it that is not fully responsible can have the most serious consequences for the economic welfare of this country, as the hon. gentleman who has just spoken knows.
If this situation is as the Minister of Finance sought to indicate this morning, why did he not bring in today the proposal his government has in mind to deal with the governor of the Bank of Canada? Why does the hon. gentleman wait? Why did he not confront us this morning with the proposed procedures he has in mind regarding the attitude taken by the governor of the Bank of Canada following his request for the governor's resignation?
This is a unique situation. I doubt if there will ever be found a parallel in any country which has a central banking system, and where the governor of the bank is given the unusual powers given to the governor of the Bank of Canada, where there has been a withdrawal from office of the governor under circumstances such as those that now confront us in Canada.
The Minister of Finance knows that this man, who is one of those in charge of the investment committee of the unemployment fund; who is a paid official of the industrial development bank as well as being the governor of the bank; who traditionally is consulted by the Minister of Finance in the preparation and formulation of budget policy, holds a post which has to be treated by the government with circumspection and with a high sense of responsibility.
I regret to say to my hon. friend of many years that I do not believe his attitude toward the governor of the Bank of Canada since he has been Minister of Finance, particularly during the last three years, his statement of this morning and his utter disregard of the rights of parliament in this matter establish little reason for having confidence in him as Minister of Finance.
I regret to say, that if there is occasion for any resignation, I believe the circumstances warrant resignation by the Minister of Finance.


Some hon. Members:: Hear, hear.


Some hon. Members:: No, no.


Paul Joseph James Martin: All over this country there is disquietude about the financial policies of this government.


Some hon. Members:: Oh, oh.


Mr. Marlin (Essex Easl):: That has been clear ever since the days of the bond conversion program. This situation today involving the position of the governor of the Bank of Canada only adds to that disquietude and to that concern. If there can be any doubt about this, all we have to do is look at the first paragraph in the statement of the governor of the Bank of Canada given yesterday to the press, in which he said:
The Minister of Finance has suggested to me that another reason the government wanted me out of the way was that they were preparing certain programs which were apparently thought to be of such a character that I would oppose them.
That is a most serious statement. Is there any justification for that statement, I ask the Minister of Finance? Is that the real reason why the Minister of Finance has created this situation only a few days before the presentation of the budget?
I ask the house to recall the readiness with which the Minister of Finance announced the date of the budget today, and to compare that with the refusal he manifested during the course of the last few weeks in indicating to the house (a) whether there would be a budget in 1961 and (b) if there was, when we might expect it to be introduced. But now the Minister of Finance has no hesitation in giving us the date of the budget. Why? Because he has got the governor of the Bank of Canada out of the way; because he is out of his tracks.


Donald Methuen Fleming: He is still there.


Murdo William Martin: This is the gentleman who by virtue of his office and with all the skills behind him has been used by every minister of finance, and rightly so, in the presentation of government budgetary policy.
I tell the Minister of Finance I believe there are other reasons for this action. I suggest that the Minister of Finance wants to divert public attention from the character of the budget which inevitably he is going to have to present to this country next Tuesday.


An hon. Member:: Tuesday.


Murdo William Martin: This will be a budget in which he is going to show a deficit of at least $700 million, and it has been suggested that the deficit might reach the $1 billion figure. Another reason is that the Minister of Finance does not apparently propose to do anything about the perilous state into which the unemployment insurance fund has been plunged. That is clear from the reply given by the Minister of Labour (Mr. Starr) the other day to the hon. member for Peterborough (Mr. Pitman) with regard to what course the government was going to follow, if
Governor of Bank of Canada any, regarding the replenishment of the fund. No effort to becloud the issue by the emergence of this situation is going to prevent a clear indication being given to the Canadian people of the state of the financial situation in our country. This will be revealed by the budget.
The Minister of Finance cannot say that he and the governor of the Bank of Canada have not shared the same views. It is only within the last few months and particularly within the last few days that the Minister of Finance has taken the position that he and the governor of the Bank of Canada have opposite stands. It will not be forgotten that the former minister of trade and commerce, the present Minister of Veterans Affairs, expressed views not very long ago, in 1960 and late 1959, which were contrary to those expressed by the Minister of Finance and the governor of the Bank of Canada. The Minister of Finance said in this house, and he said in Toronto before the Canadian club in January 1959, that he shared the views expressed by the governor of the bank, forgetting, of course, that the Minister of Veterans Affairs had in this house clearly expressed views which were contrary to those held by the Minister of Finance and the governor.


Donald Methuen Fleming: May I ask the
hon. member a question?


Murdo William Martin: At the end of
my speech.


Donald Methuen Fleming: Would the hon. member be good enough to quote my exact remarks?


Murdo William Martin: At the end of
my speech. Will the minister deny that the baby budget of last December incorporated very important considerations which had been put forward by the governor of the Bank of Canada? I mention these things only so the record may be clear. The criticisms of Bank of Canada policy which have been expressed in this house have been expressed by the former minister of trade and commerce and by the Liberal opposition. That is a fact. We are here not as protagonists of current Bank of Canada policy but to challenge the minister in the particular course he has taken and for the reasons the Leader of the Opposition has mentioned today.
Another reason why the minister perhaps wishes now to give the impression that there is a real issue between himself and the governor of the Bank of Canada is because that gentleman has been saying repeatedly in this country that Canada does have the capacity to meet the problem of unemployment which confronts us at this time. It is
S34S	HOUSE OF
Governor of Bank of Canada true that when he appeared before the manpower committee of the other place he declined to expand on that subject notwithstanding that he had said on at least five occasions that we could adopt policies-the implication was that the government had not adopted them-to meet the unemployment problem. The reason given by the governor for not going into details before the committee of the other place was that the Minister of Finance had asked him not to express views which were at variance with declared government policy. That is what the governor said in a statement he gave to the press yesterday.
But the Minister of Finance cannot hope to escape responsibility for explaining, either in this debate or in debates relating to this matter in the future, why he has never disclosed to this house the nature of the consultations between himself and the governor of the Bank of Canada with regard to the latter's solutions of the problem of unemployment and the like. Is it because the government, closer to an election than it was a year ago, has now decided to embark on policies which it hopes will extricate it from its present difficulties? Clearly the minister does not want to have the governor of the Bank of Canada in his way. Is this the reason? There are good reasons for this thinking. As a matter of fact, Mr. Harris, the former minister of finance, apparently foresaw this when he said on May 18 of this year as reported in the Toronto Star:
"Mr. Fleming is so far in debt he is still looking for words to explain why."
He criticized the finance minister's refusal to accept responsibility for the decisions of the Bank of Canada. He said if the Liberals are elected they will co-ordinate the actions of the government and the bank which is intended to offset the effects of high and low swings in the economy.
Mr. Harris said when he was finance minister the unemployment insurance fund had nearly a billion dollars. In the 31 years since the Conservatives took over, $750 million has been taken from the fund.
Are these not the real reasons for this situation? Of course, if there had been a difference between the government of Canada and the governor of the bank over monetary policy then, of course, it would have been proper, as the Leader of the Opposition said, for the government, through the Minister of Finance, to have taken steps either to bring about the retirement of the government itself or that of the governor of the bank. There can be no doubt about that right, in the event of any difference with regard to policy, that is monetary policy. But what is the reason in law for the course which the government has now taken? The minister told the governor: we do not want you to be making these general speeches. Apparently


that form of discipline-a discipline which I urged many months ago in this house-has had its effect and properly so. But now that has been removed, what is the reason for the unique action, the cataclysmic action, almost, which is now being taken by the government? It cannot be the governor's pension because apart altogether from the merits of that issue, under the Bank of Canada Act this is a matter for the directors of the bank. What other reason can the Minister of Finance give for the unusual and dangerous course he has taken or proposes to take? Is it because, as the governor of the bank says-
The Minister of Finance has suggested to me that another reason the government wanted me out of the way was that they were preparing certain programs which were apparently thought to be of such character that I would oppose them.
If this is the real reason, I say to the Minister of Finance that he is failing in his duty, that he is violating his oath and that he must explain to this house and to the people of Canada why he has assumed the authority to eliminate from his path the governor of the Bank of Canada. The minister cannot say justifiably it is because the latter might express views contrary to those which the Minister of Finance may be taking with regard to problems facing the country at this time.
The words used by the Prime Minister over the television network on October 1, 1959, bear repetition here. The Prime Minister said, when he was confronted, as he had been in western Canada earlier, with questions concerning the tight money situation and, in particular, the developing problem of unemployment:
The question might be asked as to whether there should be a substantial increase in the money being used in Canada. Well, let me make this clear. An excessive increase in money supply at any time means inflation. We do not intend to encourage a situation whereby the dollar value will be drained away, thereby bringing hardship to all, and particularly to the pensioners, the retired people, and others with fixed incomes.
I should point out, too, that the Bank of Canada, not the government, controls the money supply in Canada. The bank was set up under law, by act of parliament. It is independent and autonomous. It has one master, though: parliament, and through parliament the people.
That's the law. It has been the law for almost 25 years. But as with any law passed by parliament, the Bank of Canada Act is, of course-as the Bank Act is-subject to review and amendment.
Contrast that statement with the statement made this morning by the Minister of Finance when he said that the government's policy is expansionist, aimed at the creation of more trade, more production, and more jobs.


Some hon. Members:: Hear, hear.


Paul Joseph James Martin: Hon. members applaud. That is the very kind of thing that the Leader of the Opposition and this party have been urging on this government for three and a half years. It has now discovered it. The Prime Minister said in 1958 that was something which belonged to the Bank of Canada, and to avoid inflation the matter must be left to the Bank of Canada. Yet the Minister of Finance (Mr. Fleming), now obviously being coached by the Prime Minister in preparing for an event some months away, seeking to curry public favour, and is now resorting to an expansionist policy along lines urged by the Liberal party, which would have corrected many of our current economic problems, particularly unemployment. Then the Minister of Finance made the following statement:
During Mr. Coyne's period in office, there has been a steady and deplorable deterioration in the relations of the Bank of Canada with the public.
When did this begin, on May 31, or in the month of March? We have been talking about the relations between the bank and the government, and particularly between the governor of the bank and the Minister of Finance, for over two and a half years. We have been saying that there was a deplorable deterioration in these relations for a long time, but the Minister of Finance has denied this. Now because he is confronted with this situation, and wishing to see it develop along particular lines for reasons I have suggested, he acknowledges two and a half years later that the relations between the governor of the bank and himself have been deplorable. Whenever that was suggested in this house by anyone, the Minister of Finance indignantly rose to say hon. gentlemen knew perfectly well that relations between the governor of the Bank of Canada and the Minister of Finance were those of two colleagues working together in the public interest.


Lester Bowles Pearson: Like Damon and Pythias.


Paul Joseph James Martin: As the Leader of the Opposition points out, the Minister of Finance gave the impression that he and the governor of the bank, up until a few months ago, were as Damon and Pythias.
The minister's statement then contains the following:
Mr. Coyne, has, as I shall explain shortly, lost the confidence of the board of directors of the Bank of Canada. He does not possess the confidence of the government.
The latter is perfectly clear. I indicated, two months ago in this house, my attitude with regard to ex parte statements of the governor of the Bank of Canada. But there is no evidence to support the statement that
Governor of Bank of Canada the governor has lost the confidence of the board of directors of the Bank of Canada.
Under the Bank of Canada Act the governor is appointed by the board of directors, subject to the governor in council, to hold office for seven years during good behaviour. The resolution passed by the board of directors yesterday indicates nothing about good or bad behaviour. As Mr. Baribeau clearly indicated today, the reason for the resolution of yesterday which, by the way does not and cannot legally constitute any procedural basis for dismissal, is that the government and the governor cannot get along and one of them should get out. There is no advantage if the governor works one way and the government another, he noted.
There is no evidence to support the Minister of Finance in his statement that the governor of the Bank of Canada lost the confidence of the board of directors of the Bank of Canada. I should like to ask the Minister of Finance to tell me under what authority he has the right to approach one director of the Bank of Canada, as he has done-I presume it was Mr. Hill-and to tell him and two others, as Mr. Baribeau again indicated today, that the government wanted the resignation of the governor of the Bank of Canada? The Prime Minister says the Bank of Canada is an autonomous body, yet the Minister of Finance interferes with the operations of the Bank of Canada by this clandestine relationship with certain of the directors of the Bank of Canada. That is a situation which calls for condemnation and explanation. We are told that this liaison between the Minister of Finance was through three directors; Mr. Bruce Hill of St. Catharines, Mr. L. Patrick of Calgary, and Mr. J. H. Mowbray Jones of Liverpool, Nova Scotia. By what authority did the Minister of Finance go to any director, or any privileged group of directors of the Bank of Canada and reveal the government's desire with regard to the resignation of the governor of the bank?
The minister cannot deny what I am saying because at the bottom of page 2a he makes the following statement:
I am informed that Mr. Coyne was made fully aware on Monday that the board would ask for his resignation if he did not choose to submit it.
I suggest to the Minister of Finance that he asked the board of directors to pass the resolution of yesterday; a resolution, however, that does not declare that the governor of the Bank of Canada had acted within the mischief of the words "good behaviour" as I understand them in the Bank of Canada Act.
Let me ask the Minister of Finance this question. When did he first discuss directly with the governor the divergence of views

Governor of Bank of Canada as to policy which now require his resignation? Let him tell us that when he replies. I think his reply will reveal the basis for much of what I have had to say today.
Then the minister had this to say:
With Mr. Coyne in the chair, the board then proceeded to vote on the following resolution:-
I intend to read out this resolution because it confirms what I have just said about the question of behaviour. The resolution reads as follows:
That it is in the best interests of the Bank of Canada that the governor do immediately tender his resignation to the board of the directors of the bank and further that this action and decision on the part of the board has been taken after prolonged consideration and with regret.
The minister did not suggest regret. The board of directors had at least that much confidence in the governor that they expressed their regret and were apparently acting as Mr. Baribeau suggested only because of the differences between the government and the governor of the Bank of Canada, and that they had to take this course because the Minister of Finance would not talk to the governor. It is difficult to appreciate how the Minister of Finance in the preparation of his budget should not have found time to discuss this matter of national interest with the governor of the Bank of Canada. I suggest to the Minister of Finance that he will have much difficulty in explaining his refusal to see the governor of the Bank of Canada to the people of this country who, I repeat, are increasingly showing their disquietude over the irresponsible way in which the financial affairs of our country have been conducted by this government.


Gordon Minto Churchill: Did they show it in the by-elections?


An hon. Member:: They sure did.


Paul Joseph James Martin: The Minister of Finance in his statement then said the following:
Mr. Coyne may have left a certain false impression with the public. Perhaps the best way to dispel this impression is for me to say at once that Mr. Coyne has not been told of the contents of the forthcoming budget and, therefore, has no right whatsoever to express views about it.
I agree fully with the hon. member for Burnaby-Coquitlam (Mr. Regier) that the governor of the Bank of Canada is still the governor of the Bank of Canada. As the minister said earlier, he is responsible to parliament. What right has the minister to refuse to consult on matters of high economic policy, in the presentation of his budget, with one who still occupies the important post of governor of the Bank of Canada.
Mr. Speaker, this matter might well have been resolved if the government had acted
[Mr. Martin (Essex East) .1

on the request that this whole matter, involving differences between the government and the bank, and the views that the governor had with regard to matters outside the field of monetary policy, be referred to a parliamentary committee of this house and not to a committee of the other place. That had been denied us, and therein lies the reason at least in part, why this present situation has resulted. I say to the Minister of Finance, not only is it fair to the governor of the Bank of Canada but it is in the national interest that the members of this house be given an opportunity to assess not only by way of debate in this house but by examination in a committee of this house what are the true facts. The institution of the Bank of Canada is too important to have it shelved or dealt with today or tomorrow merely by a majority of this house acting obviously for political purposes and not for any other purpose.
The Bank of Canada is a vital institution in our national life and the resignation of the governor of the Bank of Canada is vitally important to that institution. Before this matter is finally disposed of we should have the opportunity of confronting the governor of the Bank of Canada and, if need be, the directors of the Bank of Canada, to ascertain precisely what is the situation. We should not have to rely merely upon the obiter dicta of the Minister of Finance, obviously a prejudiced party, a member of a government obviously moved at this time by political considerations. We should have an opportunity in the national interest of acting under the chairmanship of the hon. member who has just spoken, and putting questions to the Minister of Finance, to the governor of the Bank of Canada and to others, to ascertain all the circumstances in this unfortunate incident, an incident that is going to reflect seriously on the financial policies and the prestige of this government and in consequence on the people of Canada.
The Minister of Finance has taken the position, of course, that neither he nor the government has any responsibility in any way for monetary policy. It is only in that field that the Minister of Finance would have the right to call for the resignation of the governor of the Bank of Canada through impeachment or by an amendment to the act. In these circumstances I am sure, as Mr. Towers indicated, and as Mr. Coyne himself said, there would be no hesitation on the part of the governor to voluntarily withdraw where such differences prevailed. But the Minister of Finance is in this unhappy position, he has maintained that the government of Canada, notwithstanding what the Prime Minister said in a television broadcast in

1959, is not in any way responsible for monetary policy; that this is exclusively the responsibility of the Bank of Canada and the parliament of Canada. I wish to remind the Minister of Finance what he said in the banking and commerce committee on March 18, 1954, when he put this question to the governor of the bank:
For instance, in 1948 and in 1951, when you urged the chartered banks to restrict credit, was that advice given without the government first having been consulted by you?
A. The government would be aware that we were going to have the conversations. They would be aware, at least through the deputy minister.
Q. And having offered no objection, I suppose one could say they were parties to it, at least in the sense that they did not interfere?
A. Yes, because automatically, indeed, they must be parties to everything the central bank does unless they signify to the contrary.
I throw these words back to the Minister of Finance. They apply to the present situation. Every act of the present governor of the Bank of Canada is an act the responsibility for which must be assumed by the government and by the Minister of Finance. That being so, under our democratic system, notwithstanding the whimsical denial of the Minister of Finance at the moment, in the condemnation which he made this morning of the governor of the Bank of Canada he also indicted himself because the responsibility is one that cannot be divided. If the bank takes a particular course it is a course which the government must accept unless it takes steps to remove the governor of the Bank of Canada. Now it is taking steps to remove the governor, but not on the basis of the only ground which under the act and under our system of government it can take, but on pretexts that destroy any confidence that we legitimately might have had in the financial administration of this government. This government has dealt a death blow to the strength of the Bank of Canada.


Mr. Bell (Carleton):: Ridiculous.


Paul Joseph James Martin: It has confirmed the public uneasiness with regard to the way in which our financial policies have been conducted. That uneasiness began when this government imposed an added fixed charge of $100 million a year as a result of the costly and ill-conceived bond conversion program which is at the basis of so much of our trouble, so much of the very trouble which the governor of the Bank of Canada has sought to correct by methods which he publicly declared in speeches outside of this house, and contrary to government declared policy. Let the government then not stand today as an accuser. Let the government stand in the position in which it really must be placed, and that is as the accused. The governor of the Bank
Governor of Bank of Canada of Canada is not the accused in this case; it is the Minister of Finance; it is the government of Canada. They stand accused as a result of those ill-conceived policies which have now come home to plague them.


Donald Methuen Fleming: Mr. Speaker, I should prefer to speak on an occasion of this kind with restraint. I do not wish to-


Paul Theodore Hellyer: The minister does not know how.


Donald Methuen Fleming: -add to the injury which I believe, and believe with deep regret, the governor of the Bank of Canada has done to himself. Least of all would I wish to see any prolongation of controversy, particularly political controversy, in relation to the Bank of Canada. But some things stand out today, Mr. Speaker, as a result of this debate, and I think the significance of them will become more and more clearly apprehended as the days pass.
First and foremost stands out this fact, regardless of what may have been said in the past by certain hon. members. The fact is that the Liberal party and the C.C.F. or New party in this house, are in this situation. They have chosen to make themselves the declared champions of Mr. Coyne. There is no half-way position in this situation, Mr. Speaker, and hon. members opposite in the opposition, both wings of it, have gone the full way today. There is an issue that has become sharper and clearer as this debate has proceeded.
One wonders how it was that for participation in a debate of this kind the opposition could have chosen as their spokesmen the Leader of the Opposition and the hon. member for Essex East. If there are two members in the official opposition whom the opposition would have been well advised not to have called upon to participate in this debate today it is the Leader of the Opposition and the member for Essex East. They have rung the changes today on the assertion, if it be such, of Mr. Coyne that he was unaware of differences between himself and the government.


William Moore Benidickson: Parliament was.


Donald Methuen Fleming: The Leader of the Opposition said that we should not have asked for the resignation of Mr. Coyne under those circumstances. We also heard this afternoon from the hon. member for Essex East that parliament had not been made aware of differences between the government and the governor in relation to matters of policy. The Leader of the Opposition claimed he had never heard of the deep-seated differences on policy between the government and the governor of the Bank of Canada.

Governor of Bank of Canada
Such innocence, Mr. Speaker, is most unimpressive. I prefer to base my impressions upon the record. Let us look at the record. Let us turn back to a debate which has been referred to frequently by hon. members opposite and from the record of which they have read copiously today, a debate in this house on February 20, 1961. Was the Leader of the Opposition unaware of deep-seated differences between the government and the governor of the Bank of Canada? Let me read you this, Mr. Speaker.
-the Minister of Finance so far has refused to say whether or not the governor of the Bank of Canada is speaking for the government.


William Moore Benidickson: Page?


Donald Methuen Fleming: You will get it. And further:
One contradicts the other in this field-
This is a reference to the governor and the Minister of Finance. Note these words.
One contradicts the other in this field, and the result obviously is a feeling of instability, a feeling of uncertainty-*
These are the words of the Leader of the Opposition uttered in this house on February 20, 1961, as found on page 2198 of Hansard. He was not satisfied then with exhibiting his complete knowledge of the existence of these deep-seated differences because he returned to the subject in the same debate as found on page 2206:
It is most regrettable indeed that the Bank of Canada has become the centre of the present controversy because it may weaken seriously the prestige and the authority of a most essential institution whose prestige and authority in this country since it was established have been strong and which has commanded the highest respect.
Yet the Leader of the Opposition has the temerity to make the pretence before this house today that he was unaware of differences between the government and the governor of the Bank of Canada.


William Moore Benidickson: Mr. Speaker-


Donald Methuen Fleming: My time is limited and I will have to ask the hon. member to reserve his question until I have finished.


William Moore Benidickson: Would the minister give us the page again?


Donald Methuen Fleming: Page 2206. The story does not end there, Mr. Speaker.


William Moore Benidickson: I do not think the page number is accurate.


Donald Methuen Fleming: I have given it twice. It is on the record. Let us look a little further at these interesting statements. There were more of them that day. In stressing this difference of points of view the Leader of the Opposition went so far, as found on


page 2200 of Hansard, that he got on the subject of the appointment and removal of the governor and the directors of the bank. So completely conscious was he of the differences between the government and the governor in relation to questions of deep-seated policy that he said:
The governor and the directors are appointed by the government. They can be removed only by parliament, it is true.
This was very much in his mind. His mind has changed. He has been very forgetful today, perhaps conveniently so. We are indebted to the Leader of the Opposition for not having contented himself with exhibiting his complete knowledge of the fact that there were these deep-seated differences. He went on to prescribe the remedies that should be followed in such a case and to deal with what should be the proper course. As found on page 2201 of Hansard for February 20, the Leader of the Opposition said:
If the governor cannot agree with the general policy which the government desires him to implement, then the government (governor; see page 7039) has no alternative, of course, but to resign.


William Moore Benidickson: There is no question
about that. We have said that for four years.


Donald Methuen Fleming: So much for that hollow assertion of the Leader of the Opposition. I have something to say as well about the hon. member for Essex East. This debate, of course, would not have been complete without his participation, and he regaled us today with the same kind of speech that he turns on about every second day in the house. Let us look back and see what he said when he said something to which I think he had given some thought. I refer to page 3242 of Hansard for March 22 of this year. This is under the name "Mr. Martin (Essex East)":
If the observations made by the governor of the Bank of Canada do not stand in the position of opposing the policies of the government, they at least stand in the position that there are no known declarations made by any of the ministers of the government, more particularly the Minister of Finance, that support the contentions made by the governor of the Bank of Canada.


Paul Joseph James Martin: Hear, hear.


Donald Methuen Fleming: Lest you in your innocence, Mr. Speaker, should think that is a pretty weak statement made by that hon. member, let me tell you that there is another one that follows three pages later. As found on page 3245 the hon. member had this to say:
The governor of the Bank of Canada is a very able man and has been well trained for the high post he occupies. He must know the extent of his authority. He must know that his authority is limited to monetary policy.


Paul Joseph James Martin: 
Donald Methuen Fleming: You see, he was talking about the speeches that the governor had been making on the subject of fiscal policy-


Paul Joseph James Martin: That is right.


Donald Methuen Fleming: -which, of course, is the responsibility of the government.
He must know that his authority is limited to monetary policy. If he persists, as he does, in making these declarations on such a wide economic front, he must be doing it for a purpose.
I suggest that purpose is clear. He is concerned about the results of government policy and particularly the policy of the Department of Finance and the consequences of those policies. He must feel that he is serving his country best by making these declarations which are tantamount to warnings to the Canadian people. What other conclusion can one come to?
Then I rose and asked this question:
If that is what the governor is seeking to do, does the hon. member approve of such a course of action?


Paul Joseph James Martin: Finish the sentence.


Donald Methuen Fleming: This was the answer of the hon. member for Essex East:
I certainly do not approve.
Note this, Mr. Speaker.
I am stating that I do not believe that under our system of government it is right or proper for a government official, in areas of authority not specifically extended to him by parliament, to take in public a position that puts him in disagreement with the government of the day.


Paul Joseph James Martin: Hear, hear. That
is our position.


Donald Methuen Fleming: Out of thine own mouth hast thou condemned thyself.


An hon. Member:: St. Paul.


Paul Joseph James Martin: Why did you not
follow that policy?


Donald Methuen Fleming: No one, of course, would expect the hon. member for Essex East to confine his vocal effusions to the House of Commons, and he did not. The Ottawa Citizen of March 15, 1961, contains the following news item under the heading, "Make Government or Governor Quit: Martin":
Toronto (C.P.). Paul Martin, Liberal member of parliament for Essex East, said Tuesday a difference of opinion between the government and the governor of the Bank of Canada should result in the resignation of one or the other. Mr. Martin told the Liberal businessmen's club governor James Coyne's responsibility was restricted to monetary policy and he had transgressed this in recent speeches.
But, Mr. Speaker, what of the brain trust?


Paul Joseph James Martin: How about dealing with the question?
Governor of Bank of Canada


Donald Methuen Fleming: What of the arch adviser, what of the high priest of economic Liberalism? Here is the Ottawa Citizen of April 12, 1961. The heading of the article is, "Dead End, Pearson Economic Aide Joins Attack on Coyne". This is a Canadian Press dispatch from Toronto.
Maurice Lamontagne, economic adviser to Liberal Leader Pearson, said Tuesday the economic policies advocated by the governor of the Bank of Canada "would lead our country to a dead end."
Yet we heard the hon. member for Essex East a few minutes ago talk about our ruining the country. The article went on to say:
Bank governor James Coyne has made a wrong assessment of Canada's long term difficulties, Mr. Lamontagne said in a speech to the Liberal businessmen's club of Toronto. He took issue with Mr. Coyne's arguments in favour of reduced imports of goods and capital.
And further, Mr. Speaker;
"We can safely assume therefore that the governor is speaking for the government in this debate."
I interpolate, Mr. Speaker, that this has been Liberal strategy all the way through the session, to try to bedevil the relationship in this field by trying to pin on the government responsibility for the things that the governor was saying, and which were quite outside the field of central banking.
The article continues:
Mr. Lamontagne said that in his view "Mr. Coyne's assessment of Canadian long term difficulties is wrong, and the direction he would like the Canadian economy to take would lead our country to a dead end.
"It is wrong to explain our recent stagnation by the current high level of our imports.
"The volume of our imports has always been high throughout our history and Canadian experience shows very clearly that increased exports have been a consequence of expansion, not a cause of stagnation."
Mr. Lamontagne rejected the argument in Mr. Coyne's last annual report that recent high levels of unemployment are a consequence of "diversion of purchasing powers from domestic production to foreign production".
There had not been any such diversion. Since 1956, when the first signs of stagnation and high structural unemployment began to appear, the volume of exports had risen nine per cent and the volume of imports had declined four per cent.
He added that it is difficult to accept Mr. Coyne's statement that high unemployment has not arisen from a deficiency in capital investment spending.
Total capital investment in volume terms had declined 13 per cent since 195? and business investment had declined 25 per cent.
Mr. Coyne's proposal for reduced imports and greater self-sufficiency was an "invitation to a narrow economic nationalism". This program "would only make our situation worse".
These, Mr. Speaker, are the authentic voices of Liberalism, but they are not the voices to which we have been listening today, not these hollow sounds that we have heard today. These are statements made under circumstances in which hon. members opposite

Governor of Bank of Canada and their advisers were not so ready to yield to the temptation of trying to score a political advantage, even though in so resorting they might be doing severe damage to an important public institution in this country.
In the face of these facts, Mr. Speaker, which are known, what was the government to do? In the face of a plain contradiction of policy, deep-seated differences of policy at a time when these deep-seated differences became more and more serious in their consequences, at a time, as I tried to suggest this morning, when the necessity for teamwork and co-operation between the Bank of Canada and the government is greater than perhaps ever before in our history, what was the government to do? At a time like this, to be faced by contradictions in policy in the case of a man who has made so many statements, very strong statements, was the government to wait until December 31 and let his term expire?


Paul Joseph James Martin: Why did you not
act a long time ago; that is the point?


Donald Methuen Fleming: Possibly we could have waited until that time, but by then we would have been into another winter.


Paul Joseph James Martin: You have waited for a year and a half.


Donald Methuen Fleming: The hon. member has obviously not finished his speech. I do not wonder that he wishes to amend the last one he made.
We considered it to be our duty, under these circumstances, to take the course which we did. Let me say this: We had every right to assume that when the governor of the bank spoke as he did and made firm assertions, very firm assertions as he has been making for months now, these represented deep-seated beliefs on his part. Out of respect for those deep-seated beliefs, it was impossible for us to expect that a governor holding these views could extend to the government, under existing circumstances, the co-operation that is so essential.
In recent days we have heard about letters of the governor which the opposition now has containing professions of a willingness to co-operate. I think hon. members will wish to be realistic about this and ask themselves whether these important statements and firm opinions extending over a period of a year and a half should be just ignored under these circumstances.
It is said, and said wrongly, that there have been no warnings given to the governor of the Bank of Canada. As to this, it is of interest that even hon. members opposite could recognize what they called a contradiction so deep and clear resulting from a difference of


opinion. Perhaps I may expect the governor of the Bank of Canada to be aware of what the Minister of Finance says in his speeches or in his budget speech. Certainly there were all the indications there in the past two budgets, of deep-seated differences of opinion.
The governor of the bank communicated with me frequently with a view to trying to persuade me to accept his ideas. We have heard today talk about conversion loans. Well, there was an attempt made to convert me to the views of the governor of the Bank of Canada. If a complaint is made that I did not encourage this gentleman to sit down and spend a lot of time listening to those views and submit to the attempt to be converted to them, I am not going to apologize for that. I think most people, under the circumstances, would have drawn some pretty obvious conclusions from the fact that I had not indicated interest in being converted to those ideas which the governor of the Bank of Canada had been proclaiming in public.
I did not attempt to muzzle him in making his speeches. I was not responsible for his speeches. I was never once consulted about those speeches. Hon. members opposite in playing politics, the low political game they have been playing all the way through, have been trying to pin on me and through me on the government responsibility both for the making of those speeches and for the contents of those speeches. I reject these contentions in their entirety. When you see hon. members opposite playing this shilly-shallying game of politics in this house today, can you imagine what a field day they would have looked forward to if they could have come to this house and said that the Minister of Finance had tried to muzzle the governor of the Bank of Canada and prevent him from speaking in public?
Yes, there were warnings, Mr. Speaker. I have been told by certain members of the board of directors of the Bank of Canada, to whom the governor is in a certain sense responsible, that some of them had given him warnings about these speeches. I have been informed by one of them that the governor was told if he went on making these speeches, he would be out.
I pass now to the manner in which certain events have been brought to pass. Questions have been asked as to what happened on May 30. I will give the house an account. I had no authority or power, and the government had no authority or power to discharge the governor or dismiss him from office. This is what I said during the debate on a former occasion, that the government had no power to dismiss him and that only parliament can do that. The Leader of the Opposition thought he had laid an egg this

morning when he came across my statement. If the government had had the power through parliament to terminate the tenure, under those circumstances that power would have been exercised. The government would have taken this responsibility and have discharged that duty. But, Mr. Speaker, we did not have the power to terminate; we did not have the authority to terminate. Parliament has not given that to us and for that reason I asked Mr. Coyne for his resignation; it was not a demand as the Leader of the Opposition has suggested, as though I had taken the governor by the throat, abused him and demanded his resignation.
Let me give the facts, and not the distorted impressions the Leader of the Opposition has sedulously been endeavouring to create in the minds of hon. members. The meeting lasted about an hour. The tones in which the three persons present spoke were quiet. I expressed regret that it was necessary for me to perform the duty that it was so essential I should perform under those circumstances. I gave Mr. Coyne the reasons in detail.
At the conclusion of the meeting he asked if he might think the matter over. He asked me three questions before the meeting broke up and before he went on his way. He asked whether the government had decided on his successor. I said, "No". He asked me whether the directors had been consulted, and I said no, that I was trying to spare him all the embarrassment I possibly could. When the discussions ended it was Mr. Coyne, not I, who carried the information about the request for his resignation to others. I did my best all the way through to play this matter down and to spare the governor every possible embarrassment that I could.
The third question he asked me was in regard to his pension. Here, contrary to the very unfair reflection cast by the hon. member for Burnaby-Coquitlam (Mr. Regier) this afternoon, there was no suggestion to him, as the hon. member put it, that if he would be a good boy he would get his pension. On the contrary, we had discussed the events of February 15, 1960, in the board of directors' meeting and I had expressed to Mr. Coyne the shock and consternation of the government in discovering what had happened that day, that a governor who went into a meeting entitled to a pension worth a little under $12,000 a year for life on retiring, even if he retired at 50 years of age, came out of that meeting with a pension, according to his contention, worth $25,000 per annum for life commencing at the date of retirement.
I expressed to the governor my view and the view of the government that under the circumstances, having regard to the high
Governor of Bank of Canada office he held and the high degree of responsibility attached to that office, it was not an adequate discharge of the responsibilities of that office that the governor did not see that this was brought to the attention of the government.


Some hon. Members:: Hear, hear.


Donald Methuen Fleming: The Leader of the Opposition says there was an official there from the Department of Finance. Yes, it was one substituted on very short notice for the deputy minister-


Lester Bowles Pearson: The assistant deputy minister.


Donald Methuen Fleming: Yes. He was substituted on very short notice because of a crisis which existed the day before, and he went to that meeting. It was not reported to me; I did not hear about this.
The Leader of the Opposition talks about minutes. I can give him this information, because he needs plenty of it,-


Lester Bowles Pearson: You did not give it.


Donald Methuen Fleming: -that the bank does not circulate minutes.


An hon. Member:: Make a note of that.


Donald Methuen Fleming: The bank does not circulate minutes. I have never seen a minute of the Bank of Canada except when this spring, I asked for minutes of the meeting of February 15, 1960, and it was then that we had the full information with regard to the pension.


Lester Bowles Pearson: You just said there were no minutes.


Donald Methuen Fleming: Those are the facts, Mr. Speaker.


Mr. Henderson:: Take your medicine.


Donald Methuen Fleming: The government became aware in the spring of the voting of this pension. Those are the facts, Mr. Speaker, and I have told the house the views I expressed to the governor on May 30.
The third question Mr. Coyne asked me that afternoon before he left was, "Well, what about my pension?" I said, "I cannot tell you anything as to what you may expect in regard to pension", and I made that very clear and emphatic. I said, "The government has learned of this situation. The pension may be of doubtful validity and no decision has been reached yet, and you must realize that". I do not know how much clearer I could have been.
So, Mr. Speaker, we move on. After May 30 I did not hear from the governor. I am told I should have seen him. I was expecting, or hoping I would hear from him, but not a word did I hear from him. With regard to this

Governor of Bank of Canada request tor a hearing made yesterday, that request did not come to me from Mr. Coyne at all. One of the directors called me from Quebec in the morning to say that Mr. Coyne had proposed that the board should rise and that he should come back to Ottawa and talk to me.
It was perfectly clear that what this meant as it was conveyed to me was that the board was asked to terminate its meeting without having taken any action on this matter, even though we considered action to be necessary, and urgently necessary. While he would come back and talk to me, the net effect would come that the matter would ride over to the next meeting, and that might be September. I interpreted it so, and I thought I correctly interpreted it so on the information that was given to me. I said there was just no sense in that. "What is required is a decision". It was hoped even up to that time that good sense would prevail on the part of Mr. Coyne. I have related the later events of yesterday.
In taking the course that he has, Mr. Coyne has gone contrary to advice that was given to him by gentlemen whom he well knew on the board and who talked to him in a manner designed to serve both his own good and the good of the Bank of Canada. I regret very much the manner in which Mr. Coyne chose to make this a matter of public controversy. The fact is that he had prepared his statement in advance. It was only slightly revised yesterday; it had been prepared prior thereto.
I regret very much the fact that he excused himself from the meeting while the matter was under discussion and went out and released the statement, and released it, according to his later admission, at 11 o'clock so it would be known in parliament that morning, and also so that the release would come from him before the Minister of Finance had the opportunity to make any release on the subject.


Mr. Deschalelels:: This is your weakest speech in a long time.


Donald Methuen Fleming: This gentleman's regard for deliberate timing I must say I regret. I had no thought of rushing into print on this. My whole attitude had been to try to spare Mr. Coyne all the embarrassment possible and it is he who has chosen to bring the matter onto this stage. I will have some further comments in that regard.
Mr. Coyne saw fit to write me a letter dated June 13.. It must have been written after he came back to the city late last night, and evidently a copy of that letter came into the hands of the Leader of the Opposition as soon as it came into my hands this morning.


Paul Joseph James Martin: It was distributed.


Donald Methuen Fleming: This is all part, I regret to say, of a clearly calculated attempt to build up controversy and, I think it is quite clear, to attract as much public attention as possible, and this notwithstanding any effect it may have upon the Bank of Canada.
I cannot adequately express my, shall I put it mildly and say "profound regret" that the governor has chosen this manner of embroiling himself, and I am afraid to some degree the Bank of Canada, in controversy; and indeed, if you please, political controversy having regard to what has happened in the house today. Any gentleman of the intelligence of the governor must have been aware that this would be the result, and anticipated it.


Edmund Davie Fulton: And had intended it.


Donald Methuen Fleming: And it will not be difficult, I think, for many to infer that it was so intended, regardless of the effect it might have upon the Bank of Canada or upon public confidence.
I shall endeavour to conclude, Mr. Speaker. I think I need say no more on the subject of pension except to recall to the minds of hon. members a fact that I mentioned this morning. The final clause of the Bank of Canada Act calls for the gazetting of by-laws. This particular by-law was interpreted by the board, evidently, as not being governed by that clause. But that clause provides that by-laws shall not come into effect until they appear in the Canada Gazette.
This by-law was not gazetted at the time. The responsibility for seeing to the gazetting is the responsibility of the governor. It is not the responsibility of the board of directors; it is the responsibility of the governor. It was after my discussion with him on May 30 and after I had pointed out to him that this by-law had never been gazetted and that the effect of gazetting at that time would have been to bring the contents of this by-law and his handsome increase in pension to the attention of the government, to the attention of parliament and the public-it should have been gazetted back in February, 1960-that the governor apparently then decided to have it gazetted-


William Moore Benidickson: You did not read the minutes.


Donald Methuen Fleming: -and caused it to appear in the Canada Gazette published last Saturday. I regret it very much if a man who has held the high and responsible office of governor of the Bank of Canada seeks to make a martyr of myself in this situation, because the role of martyr does not fit under

these conditions. There are many Canadians who will find it hard to associate the mantle of the martyr with a gentleman who according to his claims under the by-laws is now entitled to an immediate pension of $25,000 a year for life.
Finally, I wish to say a word about the institution itself, the Bank of Canada, one of the most important of our national institutions. I said this morning, Mr. Speaker, and I hope you will not mind my saying it again, that throughout this entire period both when there were difficulties and when the difficulties took on changed forms, in periods when there was co-operation and in periods when there was difficulty, in all these situations and, above all, at times when the opposition in its irresponsible and callous way was trying to exploit these difficulties and turn them to their own base political advantage, I did my best to stand between the bank and political controversy. There were times when I might have spoken more freely in this house than I did but, perhaps unwisely in the light of recent events, I forebore from making contentious statements in these circumstances because even at the expense of being a target for criticism and, frequently, abuse, I felt I had the duty to try to the limit of my power and patience to keep the Bank of Canada from becoming a subject of political controversy.
I have respect for the office of governor of the bank. It is one of the most important public offices in Canada besides being one of the most powerful offices in Canada and one calling for the greatest measure of responsibility. I can say for the government that as soon as this office becomes vacant, a strong successor will be chosen. That, I can assure the house, is the wish of the board of directors of the bank and it is certainly the wish and the intention of the government. In these circumstances, with a new governor appointed without delay as soon as the office becomes vacant, I believe we can look forward to a new era of improved relations between the government and the Bank of Canada, a new era of co-operation, a new era of joint effort in meeting the economic problems of Canada. I believe we can look forward to a measure of team work of the kind that prevailed in the days when Mr. Graham Towers was governor of the bank. I believe that in this situation the confidence of the Canadian people and the confidence of business in Canada will not be shaken, notwithstanding the effort of the governor to make this matter one of supreme political controversy and notwithstanding the irresponsible efforts of the opposition to exploit and exaggerate the situation regardless of the effect upon our institutions.
Governor of Bank of Canada
I believe that in spite of these efforts on the part of hon. members opposite to profit from the events-the unpleasant and regrettable events-through which we are passing, the people of Canada and especially the business community of Canada will find renewed reason for confidence, not only in our institutions generally but in the Bank of Canada and the responsible way in which its affairs will be administered. I trust, as well, there will be renewed confidence in the determination of this government to see that the Bank of Canada is not made a target of political controversy but that it will be made, as far as the present government can contribute towards this end, a partner with the government in serving the best interests of Canada.


Paul Joseph James Martin: Would the minister kindly answer the question I put to him earlier: when was the first occasion when he directly discussed his difficulties with the governor of the bank?


Donald Methuen Fleming: It depends what the hon. member means by "discuss", whether it is a matter of sitting down to talk.
I think the hon. member has some wrong conceptions about what happened. The governor and I met from time to time in the ordinary course to discuss financing and bond issues and having regard to the greater frequency with which those issues have been put out, our meetings in that respect have been increasingly frequent since 1960. In addition I have frequent meetings, of course, with the deputy governor, Mr. Rasminsky, to discuss matters pertaining to the international monetary fund, the International Bank, the international development association, the Industrial Development Bank, O.E.C.D. and so on, and with other deputy governors with regard to other matters of financing of which I have spoken. I have received numerous communications from the governor in regard to his suggestions in this field and, of course, I was not unaware of the fact that he was making numerous public speeches. He heard from me, with certain comments on the views he was expressing in his communications to me, and I may say that at Easter, when the hon. member for Essex East was enjoying a thoroughly good holiday-


Paul Joseph James Martin: I was in hospital, incidentally.


Donald Methuen Fleming: While the hon. member was enjoying a well deserved holiday.


Paul Joseph James Martin: I said I was in hospital.

Governor of Bank of Canada


Donald Methuen Fleming: Oh, that is right. The hon. member was in hospital at that time. He was not on holiday. It was an enforced lay-up and we are all glad to see him back after it.


Paul Joseph James Martin: I do not think you are.


Donald Methuen Fleming: The governor, the deputy minister and I had a long discussion at that time with regard to all these matters.


Paul Joseph James Martin: It began at Easter.


Donald Methuen Fleming: I did not say it began at all. There is a fine example of the way hon. members opposite time and time again distort what are the facts of the case.


Some hon. Members:: Answer the question, then.


Donald Methuen Fleming: I have referred to a long series of communications which passed between us and the fact that we had occasion to see each other on matters of common concern. I do not intend to sit back and see hon. members opposite distort my remarks. I think that the governor of the Bank of Canada is quite intelligent enough to understand fully the views of the minister in this matter upon which he, the governor, expressed contrary opinions. Indeed, Mr. Speaker, his previous hope was to convince the Minister of Finance that he should embrace the ideas that the governor was espousing and publicly declaring.


Mr. Speaker:: Is the house ready for the question?


Some hon. Members:: Question.


Mr. Speaker:: Does the Leader of the Opposition (Mr. Pearson), who proposed the motion, agree that it be withdrawn with the unanimous consent of the house?


Some hon. Members:: Agreed.


Some hon. Members:: No.


Mr. Speaker:: If he is not willing, I shall put the question.


Lester Bowles Pearson: Put the question.


Donald Methuen Fleming: Mr. Speaker, if the mover of the motion wishes to withdraw it I am sure there is no objection on this side of the house.


Lester Bowles Pearson: There were objections.


Mr. Harkness:: The objection was raised by the hon. member for Ottawa West (Mr. Mcllraith).


An hon. Member:: There were objections from your backbenchers.


Lester Bowles Pearson: Put the question.


Mr. Speaker:: The motion can be withdrawn only by unanimous consent.


Paul Joseph James Martin: Question.


Mr. Speaker:: If the house does not give unanimous consent the motion must be put.
Motion negatived on division.



MOTIONS FOR PAPERS


[Stage Direction]
Motion No. 144-Mr. Pigeon:
For a copy of the contract, correspondence, and other documents exchanged between the Canadian National authorities and the Meunerie Cooperative de Joliette (Joliette Co-operative Flour Mill), following the acquisition by, or rental to, the Meunerie Cooperative de Joliette, of the Canadian National property.
(Translation):
He said: Mr. Speaker, I wonder if the house would grant me leave to withdraw this notice of motion for production of papers?
(Text) :
Motion dropped.

[Stage Direction]
Motion No. 145-Mr. Dumas:
For a copy of all payrolls, with names of employees, duration of employment, and amount paid in the case of each, with respect to works carried out in 1958 and 1959 on the Solitaire river, at Rollet, in the township of Desandrouins, province of Quebec.
Hon. D. J. Walker (Minister of Public
Works): Mr. Speaker, the project referred to is one of those being investigated by the Royal Canadian Mounted Police in the general area. We have made many investigations and will be making many more. I suggest that this order can be accepted with the reservation that the return be tabled after the investigations are completed.
Mr. Speaker:: Is the hon. member prepared to have the motion put subject to that reservation?


Mr. Dumas:: Yes, Mr. Speaker.


[Stage Direction]
Motion agreed to.


[Stage Direction]
On the orders of the day:
Lester Bowles Pearson: Mr. Speaker, I should like to ask the Minister of Finance whether the government would consider setting up a committee to discuss the situation surrounding the request for the resignation of Mr. Coyne.


Donald Methuen Fleming: Mr. Speaker, it is interesting to have this confession from the Leader of the Opposition that after the long harangue he delivered here today, he did not have the facts.


Mr. Speaker:: Perhaps I should remind the hon. minister that the debate is over.


Lester Bowles Pearson: Mr. Speaker, may I ask the minister whether we are going to get the facts from Mr. Coyne?


Donald Methuen Fleming: Mr. Speaker, the hon. gentleman has evidently indicated a preference for that source. I can only offer the house the facts, and 1 have done that today. It still rests with the hon. gentleman to make a choice where he finds differences.


Lester Bowles Pearson: Does the minister realize there is a complete contradiction between his opinion of the facts and the version the governor of the bank has, and does he not agree that this contradiction should be resolved?


Donald Methuen Fleming: Mr. Speaker, I did not agree that there has been a contradiction of facts as he has asserted. In the letters that Mr. Coyne has chosen to write there certainly is a slanting of the matter and a selection, and they were written from a partial point of view. Perhaps that is natural in a situation where a man is pleading his own case. It is certainly a good example of the fact that no man is the best judge in his own cause.


Paul Joseph James Martin: Mr. Speaker, I should like to ask the Minister of Finance a supplementary question. If and when the banking and commerce committee commences its work, will the Minister of Finance place any obstacle in the way of that committee interrogating the governor of the Bank of Canada?


Donald Methuen Fleming: Mr. Speaker, I do not think I have ever placed an obstacle in the way of anyone, and least of all in the way of the hon. member for Essex East.


An hon. Member:: Answer the question.


Donald Methuen Fleming: I leave it to him to
hang political millstones around his neck, and I put no obstacles in his way.



PUBLIC BUILDINGS


[Stage Direction]
On the orders of the day:
Mr. John R. Matheson (Leeds):: Mr. Speaker, I wish to direct a question to the Minister of Public Works. Can the minister inform the house what progress has been made with respect to the new federal building at Brockville, and the new post office 90205-6-401
Inquiries of the Ministry at Portland, promised by the Minister of Public Works on Wednesday, May 24, last.


An hon. Member:: An eager beaver.
Hon. D. J. Walker (Minister of Public
Works): Mr. Speaker, I should like on behalf of all of us on this side of the house to express a very hearty welcome to the very gallant member who now represents Leeds, and tell him that I hated to have to correct the open letter that he wrote in a Brockville newspaper which misled the public in connection with all matters about which he has spoken, because the federal building has been under way for some time. I refer to the acquisition of the property and the completion of plans for the federal building at Brockville as well as plans for the post office at Portland. Perhaps he should be excused on the grounds of ignorance at that time. But now that he is in the House of Commons, he will have the opportunity to avail himself of all the information obtainable here, to keep himself completely up to date, and will find out that things do move along, particularly now that we have a Conservative government.



THE CENSUS


[Stage Direction]
On the orders of the day:
Jean-Paul Deschatelets: Mr. Speaker, I should like to ask a question of the Minister of Trade and Commerce or, in his absence, of his parliamentary secretary, arising out of information given to me this morning in answer to a starred question. Could the parliamentary secretary tell the house the reason why Mr. Sasseville was suspended as a census commissioner on June 8, 1961?


Edmund Leverett Morris: Mr. Speaker, Mr. Sasseville was, as I understand it, charged with an infraction of the Criminal Code for the operation of an illegal distillery.


Mr. Robichaud:: Was he selected?


Edmund Leverett Morris: I hear the interjection in regard to his being selected, and therefore take the opportunity of stating that he was selected after being interviewed by the dominion bureau of statistics, and that he alone, of 28,000 Canadians, has been suspended from this activity, which is rather a good record.


Mr. Peters:: That just goes to show that there are not very many stills in Canada.


Edmund Leverett Morris: The operation of an illegal distillery, Mr. Speaker, is an infraction of the

Inquiries of the Ministry Criminal Code but not of the Statistics Act. Mr. Sasseville was suspended for non-availability to the general public.


Jean-Paul Deschatelets: Mr. Speaker, I should like to ask a supplementary question. Could the parliamentary secretary inform us when Mr. Sasseville was interviewed as to his tact and judgment, and as to whether it was known then that he has been wanted by the Royal Canadian Mounted Police since October 24?


Edmund Leverett Morris: No, Mr. Speaker. The interview revealed that he was a man who was considered to be above average intelligence, which is borne out by the activity in which he was engaged.


Paul Theodore Hellyer: How did he get in the Conservative party in the first place?



SHIPPING


[Stage Direction]
On the orders of the day:
Mr. J. R. Tucker (Trinity-Conception):: Mr. Speaker, may I direct a question to the Minister of Transport. In his absence, may I direct it to the acting minister. Can the minister advise whether the C.N.R. proposes to cancel the agreement between the shipping companies chartered during the winter months, plying between Halifax and St. John's, Newfoundland, thereby causing the loss of approximately $250,000 to longshoremen in St. John's and over $250,000 to longshoremen in Halifax?


Edmund Davie Fulton: Perhaps in the circumstances I may be allowed on behalf of the Minister of Transport to say that we shall take this question as notice and bring it to his attention. I understand it is under close study; therefore the answer should be forthcoming very shortly.
(Translation):



PUBLIC WORKS


[Stage Direction]
On the orders of the day:
Mr. J. G. Raielle (Lafontaine):: Mr. Speaker, I wish to direct a question to the Minister of Public Works.
Could the minister indicate how many people were employed in his department in 1957 and 1961 as carpenters, painters, plumbers, etc? Could he also indicate how many buildings located in the city of Montreal and suburbs, including Longueuil, St. Lambert and Ville Jacques Cartier, came under the responsibility of the Department of Public Works?
The reason I am asking this question, Mr. Speaker, is to avoid having to ask a number
[Mr. Morris.)
of questions of the minister when the estimates of this department come up.
(Text):


Mr. Speaker:: The hon. member seldom troubles the house with a question. He is asking for statistical information which he could not expect to receive without notice. Does the minister prefer that the question be placed on the order paper?



FINANCE


[Stage Direction]
On the orders of the day:
William Moore Benidickson: Mr. Speaker, I should like to address a question to the Minister of Finance. Having regard to the rather new views on policy expressed in the debate today by the minister, will he indicate to the house whether he is prepared to recommend to the Industrial Development Bank that its rate of interest be reduced in conformity to the rate of reduction which has been initiated by the commercial banks as a prime lending rate?


Donald Methuen Fleming: Obviously that is not a proper question at all to ask on the orders of the day. I reject altogether, Mr. Speaker, the assertion in the first part of the question that some new policy has been enunciated today by the Minister of Finance in relation to interest rates. We have, as the hon. member well knows, expressed our opposition to high interest rates and our determination that interest rates should not be one degree higher than is necessary under all circumstances. I expressed the satisfaction of the government some days ago when the chartered banks reduced the prime lending rate in this country.

The house in committee of supply, Mr. Flynn in the chair.



DEPARTMENT OF PUBLIC WORKS

[Stage Direction]
329. General administration including a grant of $2,000 to the Canadian good roads association, $10,667,720.
The Chairman:: This item will be found on page 67 of the blue book, and the details on page 452. Shall the resolution carry?


Mr. Bourgef:: Is the minister not going to make a statement on the activities of his department?


Hon. D. J. Walker (Minister of Public Works):: Mr. Chairman, if the hon. member for Levis would like me to, with the permission of the committee, perhaps I should say

a few words. I do not propose to be long because I think hon. members are girding their loins for many questions and I shall just outline, as the hon. member for Levis suggests, some of the highlights.
In the first place, may I make a few general remarks concerning the activities of the Department of Public Works. I should like to mention at this time some of the more important developments in the department's activities in the year 1960-61, and to indicate, if I may, the salient features of our construction and development plans as reflected in the 1961-62 estimates which hon. members will be asked to approve.
I shall review briefly the activities of the year 1960-61. I am very pleased to be able to say that the department's record of work carried out this year, as measured by the amount expended, compares quite well with the construction program as it was envisaged when the estimates were introduced in the house last year. This comparison of expenditures with appropriations does, I think, indicate the extent to which we have been successful in carrying on a 12-month works program which would compare in complexity and extent with any construction program ever undertaken in Canada.
In 1959-60,-this may be of interest to the lone member of the New party; if he will give me his attention I will outline it-90.7 per cent of the total moneys appropriated were paid out for work done during that year. In the next year, that is, 1960-61, a considerably better record was achieved. In that year total appropriations were $216,203,000. Total expenditures for work done during that year were $203,899,000 or 94.3 per cent. Hon. members will appreciate that the execution of the variety of tasks as they are planned depends on a number of factors, not the least among them being weather sufficiently favourable to permit certain types of work to be done. In view of this and other factors, 94.3 per cent is a good record, and I say this with all modesty.
I turn now to building construction. In the construction of new buildings to provide needed accommodation for government services good progress was made during the year 1960-61 on several large projects for which contracts had been awarded previously. With your permission, Mr. Chairman, I should like to account for them. New contracts were awarded during 1960-61 for a number of buildings which will also be of interest. These included, in Nova Scotia additional alterations to the federal building at Halifax, $895,000; in New Brunswick, addition and alterations to the Moncton building, $1,674,000; in Quebec, a contract of more than $3 million for the new postal terminal at Quebec city; in Ontario, a contract for a new postal terminal 90205-6-401J
Supply-Public Works
building at London to cost more than $3 million; in Saskatchewan, a new building to accommodate the taxation division of the Department of National Revenue, at a cost of $835,000; in British Columbia, a contract for a new federal building at Penticton, $600,910; in the Northwest Territories, construction of federal housing and related work at Inuvik, $369,694.
In dealing with this building construction, I should mention that the work was completed during the year on two of the buildings in the new Riverside drive development at Ottawa. One of them is a headquarters building for the Department of Public Works and the Department of Fisheries, the Sir Charles Tupper building as it is now known, and the other houses the department of insurance. A testing laboratory building for the Department of Public Works, which is also in the development, was completed earlier. Work is still in progress on a headquarters building and two smaller structures for the Post Office Department, a cafeteria building, a communications laboratory for the national research council and the heating plant itself for the development as a whole.
A considerable amount of landscaping work has been done on the grounds and more will be required as these buildings are completed. I invite hon. members to take a look around when they are on their way to the airport or if they are out that way they can drop in to see me and I will show them around the very wonderful development at that location. We hope to call it confederation heights. We think that might be an appropriate name under all the circumstances. When the whole development is finished it will, I think, be one of the most important fruits of the national capital planning which has been going on now for some time. I repeat my invitation to hon. members to visit the project. If they have not yet done so, I assure them that they should. As the national capital commission has made a tour available, I think we should all avail ourselves eventually of the opportunity to see Ottawa.
The department continued during the year the program of construction of standard post office buildings in the smaller communities of Canada with the work being done during the cold weather to provide winter employment. A total-and this seems remarkable- of 90 contracts for these buildings was awarded in the past winter. This means that a total of 220 of these small post office buildings will have been constructed under this section of the winter works program since it was begun in 1958.
I come now to harbour and river works. In harbours and rivers engineering projects

Supply-Public Works
a very large program was carried out during the year 1960-61, and in particular I should like to mention some of the most important projects. In Newfoundland, for instance, work was continued on the tremendous harbour development at St. John's with the aim of providing the port with modern cargo-handling facilities. The Department of Transport agency wharf and the mooring basin were completed in this year. A number of old buildings and wharves were demolished and a sunken ship was removed. Work was well under way on the main terminal structure.
In Nova Scotia work was continued on the harbour repairs at Cariboo, reconstruction of the harbour facilities damaged by fire at Pictou and reconstruction of the wharf at Sydney. In Prince Edward Island construction of a breakwater and dredging were carried on at Wood islands.
In New Brunswick harbour improvements were completed at Caraquet and work was under way on an extension to the breakwater and dredging in the Saint John area at Negro point.
With respect to Quebec, in the development program for the winter port at Pointe-au-Pere dredging and construction of the substructure for the wharf were carried out. At Newport point harbour improvements were completed. In Ontario, at Hamilton and Toronto construction of important facilities, including provision for seaway shipping, was continued. At the lakehead access roads and bridges for the new harbour terminal were completed and other work connected with this large project was carried on.
In British Columbia work was continued on the assembly wharf and fishing harbour at Port Alberni and on the boat harbour at Westview. Dredging on the Fraser river was also carried out.
I should like to say a word or two now about the trans-Canada highway. In activities under the Trans-Canada Highway Act there were two very important developments during this year. One was the signing of a construction agreement with the government of the province of Quebec. May I say now how delighted I am to have them participate in this project. Vive Quebec!
(Translation):


Maurice Bourget: Vive Quebec!


David James Walker: Vive Quebec. You are right. The province of Quebec, not the government, not necessarily.
(Text):
I cannot be political here.


Maurice Bourget: You are never political.


Paul Theodore Hellyer: Will you speak up? We do not want to miss anything you are saying.


David James Walker: I am so pleased to hear that. If the hon. member was not able to understand, I will send one of my officials to see him at six o'clock.


Paul Theodore Hellyer: I would appreciate that very much.


David James Walker: In activities under the Trans-Canada Highway Act, as I say, we at last have the province of Quebec taking part. I know the hon. member for Levis was interested in this matter when he was parliamentary assistant. All ten provinces are now participating in the project and the highway has become, so to speak, a truly national highway. Until this agreement was signed the highway did not completely traverse the nation, nor did it provide, as it now does, an additional link in the ties which unite the French and the English speaking parts of Canada.
The other main development was that one of the two gap sections which I mentioned when I introduced the department's estimates in the house last year, the section north of lake Superior in Ontario, was finally opened to traffic. It was a tremendous project. This means that, although not completed yet, the whole highway, 4,876 miles in length, is now open to traffic winter and summer with the exception, of course, one 90-mile gap in the Rocky mountains between Donald and Revel-stoke in British Columbia. This latter section passes through spectacular scenery but I should add that it involves construction problems equally spectacular, problems which at times have appeared almost insurmountable. It will not be completed until 1962 but if the weather permits progress in the present fiscal year may enable sufficient work to be done for it to be opened to traffic. I should mention that a good alternate route for those hon. members who are going to be among the first to travel the trans-Canada highway is available around this gap in the summer by way of the big bend highway in British Columbia.
In construction of those sections of the trans-Canada highway which pass through the national parks, the work, as hon. members know, is entirely a federal responsibility and excellent progress has been made. Work in Terra Nova national park in Newfoundland was completed during the year to the extent that the road has been opened to unrestricted traffic. Some of the final paving has been laid in Banff national park while in Glacier and Revelstoke the grading, several of the structures and the base course were substantially completed.
In the bridge construction field an agreement was signed with the government of the province of New Brunswick during the

year for the construction of the Campobello island bridge to the state of Maine. As you know, this is a very interesting spot for tourists. As you also know, another agreement between the provinces of Quebec and Ontario and the dominion was signed for the construction of the new Macdonald-Car-tier bridge between Ottawa and Hull. This is an achievement of which I think we can all be proud, particularly because of the co-operation of all five levels of government in bringing this matter to a successful conclusion.
I come now to the program for 1961-62. The total amount requested for the Department of Public Works in the main estimates is $220,565,554. As in previous years, this includes the estimates of Central Mortgage and Housing Corporation. I should mention, however, that it also includes this year for the first time the estimates of the national capital commission. However, they are all segregated, as hon. members know.
In the estimates of the Department of Public Works proper the total amount requested is $209,565,304. This is approximately $5,600,000 more than the amount appropriated by parliament for the department last year in the main and supplementary estimates.
There is a decrease in the amount requested for public buildings in 1961-62. This is caused mainly by the completion of a number of large building projects in some of the major population centres in the past few years. This decrease, however, will be more than offset by increases in other categories of work, mainly in harbours and rivers engineering and in the expenditures anticipated for the trans-Canada highway.
In harbours and rivers work, the increase of approximately $4 million is due mainly to a number of large projects on which expenditures are expected to be heavy during the present fiscal year. In trans-Canada highway work, expenditures on those sections which pass through national parks are expected to be about $2 million less because of the extent to which construction has been completed. This is more than offset, however, by expenditures anticipated because of the entry of the government of the province of Quebec into a trans-Canada highway agreement. Hon. members will be asked to approve smaller increases in other categories, including building maintenance and furniture and furnishings.
In connection with building construction I mentioned a decrease in the amount required for building construction because of fewer really large buildings being in progress. There are, however, a number of noteworthy building construction projects which will be of
Supply-Public Works
interest to hon. members. Foremost in this category is a building for which preparations will be completed during the present fiscal year, with construction scheduled for 1962. I am sorry the Minister of Citizenship and Immigration is not here because she has been one of the many members who have been importuning us with regard to the national library building which will be located on Wellington street on the site of the No. 1 temporary building. It is expected to cost between $10 million and $12 million, and will be of supreme interest to Canadians everywhere.
The accommodation requirements for various government agencies following the explosion damages to the Jackson building made it necessary to continue using the No. 1 temporary building. However, plans are now being prepared, and we have an item in the supplementary estimates to provide funds for a building at Tunney's pasture for a unit of the Department of National Revenue. This unit is now in the No. 1 temporary building. We hope to have construction of the new building in progress this summer. This will make it possible to clear the No. 1 temporary building site by calling tenders and having it demolished ready for the start of construction on the new national library building. Thus, it has only now become possible for us to schedule construction of the national library and while funds for the building will not be sought until the main estimates are presented for the next fiscal year, I thought the committee would be interested in having a general description of the plans that have been made for this nationally important building.
The building will be approximately 300 feet by 210 feet and will contain an assembly and theatre hall capable of seating 300 persons. The exterior walls will be faced with Canadian granite-which seems to be appropriate under the circumstances-and the building will be air conditioned because of library requirements. It will be capable of handling some two million volumes as well as many manuscripts on its 15 stack levels, three of which will be below ground. The ground floor will provide offices for the Royal Society of Canada and exhibition halls and offices for the national library. Reading rooms and rare book displays will be included on the second floor, while the third floor will be used for the dominion archives displays and offices. The fourth floor will be used in part by the national library and may, for a period, be used as well as office space for other government departments.
Hon. members will be interested also in a number of other building construction projects in various parts of Canada on which work

Supply-Public Works
is expected to start during the present fiscal year. I will run over them very briefly, and I hope to get through by six o'clock. Then, the hon. member for Trinity or the hon. member for Levis can follow if they so desire. The list is as follows:
Newfoundland-construction of a new public building at Dark Cove.
Nova Scotia-a new public building at Kentville.
New Brunswick-a public building at Florenceville.
Quebec-new public buildings at Beau-harnois and Magog and an addition and alterations to the public building at Marieville.
Ontario-new public buildings at Acton, Bolton, Smiths Falls, and Weston and a new postal terminal at Kitchener.
Saskatchewan-new public buildings at Cabri, Carlyle and Kerrobert and an addition and alterations to the public building at Nipawin.
Alberta-new public buildings at Lacombe and Saint Albert.
British Columbia-new public buildings at Clinton, Creston and a building for the unemployment insurance commission at Vancouver.
The program for construction of small, standard post office buildings in the smaller communities of Canada during the winter has been, I believe, highly successful and has been particularly well received in the communities affected. This program will be continued during the winter of 1961-62 and according to present indications it will be of approximately the same order as those for previous years. I want to thank hon. members, including members of the opposition, for giving me so many opportunities to provide post offices for places in their particular ridings.
In so far as harbour and river works are concerned, the committee will be asked to approve appropriations for the continuation of several noteworthy projects, as well as for the beginning of new ones which have an important bearing on the economic growth and development of the communities concerned. Some of these will be of more than usual interest to the committee. They are:
Newfoundland-the main terminal in the St. John's harbour development is expected to be completed as well as the marginal wharf on the north shore and two large transit sheds. In addition, the construction of a breakwater will be undertaken at Fortune.
Nova Scotia-at Dingwall, construction will be undertaken on a novel system of breakwaters designed on the basis of a model study carried out by the national research council. We get tremendous help from this

council. It is hoped that this system will provide protection and prevent the silting of the harbour which has caused very difficult maintenance problems in the past. In addition the reconstruction of the wharf at Pictou should be completed during the year, and a new public wharf will be started at Yarmouth.
Prince Edward Island-the breakwater at Wood islands will be completed and dredging undertaken.
New Brunswick-dredging will be carried out at Saint John and an extension built to the breakwater there.
Quebec-harbour improvements will be carried out at the Magdalen islands, at Etang and Caps and Havre Aubert, and reconstruction of the wharf will be undertaken at Les Eboulements. Also several important projects will be carried forward which are associated with the industrial development of the north shore generally. These include harbour improvements at Baie Comeau- which is a tremendous community and becoming more and more so-completion of the harbour construction at Pointe-au-Pere and enlargement of the wharf at Sept Isles.
Ontario-a harbour development will be undertaken at Cornwall and work continued on the new harbour terminal at the lake-head. In Toronto dredging and other harbour improvements will be undertaken including an eastward extension of the existing ship channel to provide extra berthage.
Manitoba-construction of a new breakwater will be undertaken at Gimli.
Alberta and Northwest Territories-we expect to begin construction of wharves at Fort Good Hope, Fort Norman and Fort Providence.
British Columbia-dredging in the Fraser river and maintenance on the river control works will be carried out as well as reconstruction of the assembly wharf at Nanaimo. Harbour improvements will be undertaken at Qualicum Beach.
Then, in so far as trans-Canada highway construction is concerned, I may say that in actual practice the section through Terra Nova will be fully completed this year. A substantial amount of the final paving is expected-


Jacques Flynn: Order; it is now six o'clock and the minister seems to have a good deal more to complete his statement.


Gordon Minto Churchill: I wonder whether we could have another two minutes, Mr. Chairman, to complete this statement.


David James Walker: Mr. Chairman, I do not want to take advantage of the good nature of the

hon. members of the committee. There are two more pages and it would take approximately five minutes.
Progress reported.



BUSINESS OF THE HOUSE

Paul Theodore Hellyer: Mr. Speaker, I wonder whether the house leader would indicate if there is
Business of the House
any change in the business announced for the rest of the week.


Gordon Minto Churchill: There is no change, Mr. Speaker; we will continue with the estimates of this department tomorrow.


[Stage Direction]
It being two minutes after six o'clock the house adjourned, without question put, pursuant to standing order.
[Stage Direction]
Question

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

Mr. Fisher: 1.	What would the 1960 Canadian National Railways charges for pensions have been if the company's practice with regard to funding pension liabilities had been on a basis consistent with that of the preceding year?
2.	What would the 1960 C.N.R. deficit have been if the company had not, in 1960, changed its
method of accounting for charges in respect of certain of its pension plans?
Answer by: Hon. Leon Balcer (Minister of
Transport):
Parts 1 and 2. The management of the Canadian National Railways advise that an explanation of this matter is to be found on page 12 of the annual report of the railways for 1960, and that Note 4 to the balance sheet on page 18 of the same report is also explanatory of the situation.
The Minister of Finance also answered a question on this subject in Hansard of 26th April, page 4011.

Thursday, June 15, 1961



NEW MEMBERS INTRODUCED

[Stage Direction]
Mrs. Margaret Mary Macdonald, member for the electoral district of Kings, introduced by Right Hon. J. G. Diefenbaker and Hon. J. A. MacLean.
George Louis Chatterton, Esquire, member for the electoral district of Esquimalt-Saan-ich, introduced by Right Hon. J. G. Diefenbaker and Hon. E. D. Fulton.
John Ross Matheson, Esquire, member for the electoral district of Leeds, introduced by Hon. L. B. Pearson and Mr. G. J. Mcllraith. (Translation):
Edgar Fournier, Esquire, member for the electoral district of Restigouche-Madawaska, introduced by Right Hon. J. G. Diefenbaker and Mr. G. W. Montgomery.
(Text):