1965-05-06

BANK OF CANADA ACT


Mr. Waller L. Gordon (Minister of Finance) moved: for leave to introduce Bill No. C-101, to amend the Bank of Canada Act.


Some hon. Members:: Explain.


Walter Lockhart Gordon: The purpose of this bill is to amend the Bank of Canada Act in a number of respects at a time when our chartered banking legislation is being revised and when we have had the benefit of a thorough review of the working of the financial system by the Royal Commission on Banking and Finance.
The most important change is a provision to clarify the relation between the Government and the Bank by authorizing the Government under circumstances specified in the Bill to give the Bank a directive concerning monetary policy. A second important change is to give the Bank statutory power to impose and vary a minimum secondary reserve requirement in place of its present power to vary the minimum cash reserve requirement. A number of technical changes are proposed as well as certain revisions to eliminate obsolete provisions of the act.
Motion agreed to and bill read the first time.



JOINT CANADIAN-U.S. STUDY OF CONTINENTAL RESOURCES

[Stage Direction]
On the orders of the day:
Hon. Alvin Hamillon (Qu'Appelle):: I should like to direct a question to the Prime Minister. It arises from a report in today's Globe and Mail of an interview given in Washington yesterday by the Minister of Trade and Commerce. In the course of this interview the Minister indicated-and I quote from the report-
-that the launching of a joint Canadian-U.S. study of continental energy resources, first proposed a few years ago, was being deferred at Canada's request because of a lack of personnel to provide all the information required to lay the foundation for such a study.
I should like to preface my question by reminding the Prime Minister that under his name there appeared an article in the January issue of the Foreign Affairs Quarterly-


Some hon. Members:: Order.


Francis Alvin George Hamilton: In this article a completely different policy was laid down. In effect, in the course of that article the Prime Minister called on Canada and the United States to step up their efforts to promote development of their industries on a rational continental basis wherever practical.
The obvious question is, what is going on? Will the Prime Minister give us some explanation for this schizophrenia?


Right Hon. L. B. Pearson (Prime Minister):: Yes, but not until I have consulted the Minister of Trade and Commerce as to the accuracy of the report quoted by the hon. gentleman. I expect he will be back this evening.



URANIUM


[Stage Direction]
On the orders of the day:
Mr. T. C. Douglas (Burnaby-Coquitlam):: May I ask the Prime Minister a question with regard to the proposed sale of 50,000 tons of uranium to France, to which the Prime Minister referred yesterday on the orders of the day. In view of the somewhat disastrous result of the uranium agreement we had with the United States, will there be any opportunity to discuss this agreement, when it is reached, in the House of Commons before it becomes final? Also I should like to ask whether it is the intention of the Government to sign a 25 year agreement at a fixed price, or whether the price will be fixed for a given period only and be open-ended or subject to negotiation for the balance of the period.


Lester Bowles Pearson: As I said yesterday, the commercial details of these negotiations are being worked out
May 6. 1966

Inquiries of the Ministry by the Canadian corporation and the French authorities. The Government is concerned about matters of policy, including safeguards to make sure that the uranium we sell is sold without violating any international agreements we have made. That is the responsibility of the Government. As to the details of the commercial arrangements, I cannot give the hon. gentleman an assurance that they will be discussed in the House before the agreement is signed. They are subject to negotiation, and that negotiation is going on at the present time both commercially and politically.


Thomas Clement (Tommy) Douglas: In view of the fact that if this agreement should be signed along the lines indicated Canada would be committing one quarter of its known uranium reserves, will the Atomic Energy Commission be consulted as to whether this is the best use which could be made of these reserves bearing in mind our future energy needs?


Lester Bowles Pearson: Yes, Mr. Speaker, indeed it will be consulted, and has been consulted at every stage of the negotiations.


Thomas Clement (Tommy) Douglas: A further supplementary question, Mr. Speaker. Are the press reports true, to the effect that Canada may delegate to the European Atomic Energy Commission the responsibility for policing this agreement to make sure that Canadian uranium sold to France is not used for other than peaceful purposes?


Lester Bowles Pearson: Mr. Speaker, I am not in a
position to confirm the details in regard to the safeguards which may be required. This is a matter under discussion. The report that my hon. friend has referred to is a speculative one at the present time.


Francis Alvin George Hamilton: I have a supplementary question on the same line, Mr. Speaker. The subject matter raised by the hon. Member for Burnaby-Coquitlam is exactly the same point that I am concerned about. I wonder whether the Prime Minister could give us some assurance that he will take this matter up with the Minister of Northern Affairs and National Resources and the Minister of Trade and Commerce in order to get together and prepare for the House some form of considered statement about the disposal of these resources of oil, gas, minerals such as uranium, electricity and water, so that we are not forever being faced with these resources being taken away from us one at a time.


Lester Bowles Pearson: Mr. Speaker, I certainly do not describe arrangements of the kind we contemplate as taking away our resources. We are marketing our resources with due regard to the interests of Canada. I think the subject is of very great importance, and I hope there will be an opportunity to debate it shortly in the terms mentioned by my hon. friend. There will be a supply motion on Monday; perhaps that would be a good occasion.



SOCIAL INSURANCE


[Stage Direction]
On the orders of the day:
Mr. Guy Marcoux (Quebec-Montmorency):: Mr. Speaker, I intended to direct a question to the Minister of Labour, but since he is not present I will address it to his parliamentary secretary.
Yesterday afternoon the hon. member for Red Deer (Mr. Thompson) asked a question concerning the registration of employees under a social insurance number. He was to receive an answer today. Since no answer was given I would like to ask the following question. Is it true that the only two charges laid by the minister were against Daniel E. Woodward and Canada Week Ltd.?
In the affirmative, why did the department not lay any other charge in this matter?


Mr. J. A. Byrne (Parliamentary Secretary to Minister of Labour):: Mr. Speaker, I will ask the Department to look into this matter in order to answer the question that has been put by the hon. Member.



FINANCE


[Stage Direction]
On the orders of the day:
Mr. Gilles Gregoire (Lapointe):: Mr. Speaker, I wish to ask the Prime Minister a question.
Can he tell us if at the next federal-provincial conference the present government intends to revise its position with regard to granting the provinces the right to hold shares in chartered banks? If so, does the Prime Minister intend to advise accordingly the provincial governments beforehand?
May 6, 1965

{T ext]


Lester Bowles Pearson: Mr. Speaker, if my hon. friend will wait for a few minutes, the resolution on this matter will be before the House and the Government's position will be made clear.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Hon. D. S. Harkness (Calgary North):: Mr. Speaker, I should like to direct a question to the Minister of National Defence. Can the Minister inform the House the result of the inspection of the Argus aircraft, which was ordered a week or so ago consequent upon the discovery of a structural defect, as a result of which they were taken out of service? Could the Minister tell us what is the situation with regard to these aircraft now, and particularly when it is expected they will be put back into service?


Hon. Paul Hellyer (Minister of National Defence):: Mr. Speaker, I do not have the detailed answer to this question, as I did not have notice of it. The structural defect was found in a number of airplanes. They have been grounded and a new section is to be manufactured to replace the faulty one. There are some aircraft which are not faulty; these will be returned to service immediately. As soon as the ones that had faulty sections have been reworked and the new sections installed, then the same new, manufactured part will be applied to the other aircraft where no fault was found on the original inspection.


Douglas Scott Harkness: A supplementary question, Mr. Speaker. How many of the Argus aircraft, then, will be in service in the immediate future?


Paul Theodore Hellyer: A very limited number, Mr. Speaker. I cannot remember the number offhand. I think perhaps I could get it very quickly and send it to my hon. friend. I cannot recall the number, but it will not be too long before the new parts will be available for the balance and we will be able to put them back into service.
[DOT] (2:50 p.m.)


Douglas Scott Harkness: A further supplementary question. By what means is the surveillance which is ordinarily carried on by these aircraft now being performed?
Inquiries of the Ministry


Paul Theodore Hellyer: Mr. Speaker, there are some aircraft which are not subject to this fault. The Neptunes are not, and those Argus which are still in operation are carrying on the normal surveillance tasks.


Mr. Gerald A. Regan (Halifax):: A supplementary question. I wonder whether the Minister could indicate whether any decision has yet been made as to the company or plant at which the alterations to the aircraft will be made?


Paul Theodore Hellyer: I cannot, Mr. Speaker.



PRINTING BUREAU


[Stage Direction]
On the orders of the day:
Mr. Alexis Caron (Hull):: Mr. Speaker, I should like to direct a question to the Minister of Industry and Minister of Defence Production.
Is the minister aware that the Printing Bureau sent French reports to Toronto to have them set in galleys and that they came back with so many mistakes that they had to be returned for corrections, which explains why the French versions of the committee reports are still unpublished?


Hon. C. M. Drury (Minister of Industry):: No, Mr. Speaker, but I shall inquire.


Alexis Pierre Caron: A supplementary question, Mr. Speaker. Is the minister aware that French speaking employees of the Printing Bureau are able to prepare those reports as long as they are given overtime as is the case for the reports in English?



SHIPPING


[Stage Direction]
On the orders of the day:
Mr. Heber Smith (Simcoe North):: Mr. Speaker, I have a question for the Minister of Transport. Can he tell me whether the ship pilots in pilotage district No. 2, which includes Port Weller and Sarnia, have been paid since they started work one month ago, on April 8?


Hon. J. W. Pickersgill (Minister of Transport):: Mr. Speaker, I am afraid I really cannot without making inquiries.
May 6, 1965

Inquiries of the Ministry


Heber Edgar Smith: Mr. Speaker, while the Minister is making inquiries would he find out the reason for the delay in their pay, and whether they were consulted concerning possible new pay arrangements?


John Whitney Pickersgill: If there has been a delay, Mr. Speaker, I will certainly inquire as to the reason.


EXTERNAL AFFAIRS
[Stage Direction]
On the orders of the day:
Hon. Paul Martir.eau (Poniiac-Temisca-mingue):: Mr. Speaker, I have a question for the Acting Minister of External Affairs. In view of the exchange of notes between the Government of Canada and the Government of France which were tabled in this House yesterday, the note from the Government of France to the Government of Canada indicating that on February 27, 1965 the Government of France which were tabled in this House entente had been signed between Quebec and the Government of France; and that on the same day a letter was forwarded by the Secretary of State for External Affairs acknowledging the letter received from the charge d'affaires of France, stating that he was being informed of those meetings and giving thanks for being so informed, does the Minister still maintain that the Government was kept informed of the negotiations in regard to this entente and that it also knew of its existence before it was signed in February 1965?


Lester Bowles Pearson: Mr. Speaker, perhaps I should answer that question by saying that I should like to study it carefully and will give a reply tomorrow.


[Stage Direction]
On the orders of the day:
Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, I wish to ask a question of the Minister of Industry who, I understand, is Acting Secretary of State for Exernal Affairs, which is a novel experience. In view of reports that an employee of the Department of External Affairs did communicate with the press in Washington and New York with respect to the number of communists who were supposed to be behind the people's government in the Dominican Republic, has the Minister had any opportunity to assess the evidence which has come to his Department to date,

and is he in a position to make a report to the House on this aspect of the question?


Charles Mills (Bud) Drury: Not yet, Mr. Speaker.


[Stage Direction]
On the orders of the day:
Hon. George C. Nowlan (Digby-Annapolis-Kings):: Mr. Speaker, I would like to direct a question to the right hon. Prime Minister in the absence of the Secretary of State for External Affairs. If the latter hon. gentleman were here I would like to ask him if he was as firm in his opinion now as he has been in the past, that we cannot join the
O.A.S. Since he is not here, has the Prime Minister any information to give us with respect to the conference of the O.A.S. powers yesterday, and is the newspaper story correct that although the force to be sent to the Dominican Republic will be nominally under the control of the O.A.S. it will actually be a force of marines and U.S. troops?


Lester Bowles Pearson: Mr. Speaker, I understand the O.A.S. meeting in Washington has approved of a force to go to the Dominican Republic under O.A.S. auspices, to help maintain peace. This force has been conceived, we understand, for the maintenance of order in a troubled situation in a Latin American country and would consist of contingents from Latin American countries, along with the United States. The operation will take place under the authority of the Organization of American States of which Canada, of course, is not a member.


George Clyde Nowlan: And I don't think it will be a member for quite a while.



FISHERIES


[Stage Direction]
On the orders of the day:
Mr. Heath Macquarrie (Queens):: Mr. Speaker, I have a question for the Minister of Fisheries based upon a newspaper report concerning some angry Newfoundlanders. I should like to ask the Minister whether he has received representations from Newfoundland fishermen regarding European boats fishing inside Canada's territorial waters-and I refer to the three mile limit-and sometimes destroying the gear of Canadian fishermen. If he has received such representations, will he
May S, 1965	COMMONS
tell us what steps have been taken to protect Canadians from such damage and encroachment?


Hon. H. J. Robichaud (Minister of Fisheries):: Mr. Speaker, in reply I wish to indicate that complaints have been received from Newfoundland fishermen to the effect that certain damage has been caused by foreign trawlers operating in Canada's territorial waters. A full investigation was carried out, and I am now in a position to confirm the fact that such damage did occur, but not inside the three mile limit.


Hon. J. A. MacLean (Queens):: Mr. Speaker,
I should like to ask the Minister of Fisheries a somewhat similar and related question. Is the Minister in a position to give a report regarding the progress which has been made toward the establishment of geographical coordinates from which Canadian territorial waters will be measured?


Hédard-J. Robichaud: Mr. Speaker, I replied to a similar question last week. I wish to assure the hon. Member that every possible action is being taken to proceed with the establishment of co-ordinates. However, I should add that the status of negotiations with certain countries makes it advisable to further delay such action as was contemplated in this regard.
[DOT] (3:00 p.m.)


Mr. T. S. Barnett (Comox-Alberni):: Mr. Speaker, in addressing a question to the Minister of Fisheries perhaps I might be permitted to welcome him back to the House from Washington, and to congratulate him upon the speech he made there, that is in so far as I have seen it reported. I should like him to permit me to do a little fishing by asking what I intended to be a twopronged question, one aspect of which related to the straight line co-ordinates about which the hon. Member for Queens asked a question.
While the Minister was in Washington did he find any opportunity of requesting our United States friends to have their nationals withdraw from Canada's fishing waters?


Hédard-J. Robichaud: I want to assure the hon. Member, Mr. Speaker, that I did not take such action while in Washington, although I had very good conversations with people interested in these problems. I am sure the conversations will have good results.


Thomas Speakman Barnett: May I ask the Minister why not?
DEBATES	979
Inquiries of the Ministry REQUEST FOR FURTHER POSTPONEMENT OF LOBSTER SEASON OPENING
On the orders of the day:


Mr. John Mullally (Kings):: I wish to direct a question to the Minister of Fisheries. Has the Minister received representations for a further delay in the opening of the lobster fishing season in district 7B and, if so, what decision has he taken?


Hédard-J. Robichaud: I did receive representations this morning from the hon. Member, and later in the morning I received a telegram from the President of the Prince Edward Island Fisheries Federation requesting a further delay in the opening of the lobster fishing season. In my reply I stated that as part of the area designated as district 7B was now clear of ice and fishing was possible as from tomorrow morning, it was too late to consider such a request. Furthermore, the latest ice reports which I received a few minutes ago suggested the possibility of the ice moving out very quickly providing the wind is favourable. Therefore I had to turn down this request for a further postponement.



ROADS TO RESOURCES


[Stage Direction]
On the orders of the day:
Mr. Reg Cantelon (Kindersley):: Mr. Speaker, I should like to ask a question of the Minister of Finance which is related to the roads to resources program. Both Premier Thatcher and Hon. Alex Cameron, Minister of Mineral Resources in the Saskatchewan Government, have stated recently that federal support for this project will be withdrawn in view of the fact that no provision was made for it in the budget. I should like to know whether it is the Government's intention to discontinue this aid, which these gentlemen say is essential to continued mineral development in the north.


Walter Lockhart Gordon: Mr. Speaker, at this moment the intention is to follow the policy laid down by the previous Government.


Mr. S. J. Korchinski (Mackenzie):: Mr. Speaker, I have a supplementary question which I should like to direct to the Minister of Northern Affairs. In view of the fact that the agreements with Prince Edward Island
May 6/ 1965

Inquiries of the Ministry and Alberta have now expired, is it the Minister's intention to renew these agreements or entirely cancel the aid program?


Hon. Arthur Laing (Minister of Northern Affairs and National Resources):: Mr. Speaker, I should like first of all to say that I believe the original agreements were somewhat defective in that there was an allocation of Federal funds in the same amount to each of the Provinces of Canada. I think it will be agreed by Members on all sides of the House that an allocation of the same sums to the Province of Prince Edward Island and to the Province of Ontario for a certain purpose could hardly bear any relation to the job that can be done.


An hon. Member:: Answer the question.


Arthur Laing: That is one attitude I am prepared to take.


Mr. Woolliams:: Let us have more facts and less dramatics.


Arthur Laing: For the reason I have outlined I think the program was incomplete. It is going to be very difficult today for us to extend the arrangements in respect of any one of the Provinces because the agreements conclude in different years. For instance, some of them end in 1968.
I want to say that the whole matter is under review. We desire to be guided by the Provinces, and we have circulated them asking for their opinions as to the efficacy of the program. In every instance it has been indicated that this was a very good program and one which should be extended. The ability to extend the program or to devise some program of assistance in this field is now under review.


Stanley James Korchinski: I have a further supplementary question. Have any Provinces made representations to the effect that the Federal Government should step out of this program because it infringes on provincial rights?


Arthur Laing: No, Mr. Speaker, we have received no such representations.


Mr. Donald Maclnnis (Cape Breton South):: I have a question for the Minister of Finance following the questions asked by the hon. Member for Kindersley and the hon. Member for Mackenzie. Will the Minister of Finance make a comparison between the answer he has given to hon. Members and the answer given by the Minister of Northern Affairs,

and try to reconcile the difference between the opinions expressed?


Walter Lockhart Gordon: I will be glad to do so.



CANADIAN PACIFIC RAILWAY


[Stage Direction]
On the orders of the day:
Mr. H. A. Olson (Medicine Hat):: Mr. Speaker, I should like to address a question to the Minister of Transport, asking whether he is aware that during the last few days the Canadian Pacific Railway has informed some of its trainmen that there will be a further curtailment of service in respect of trains 7 and 8 between Montreal and Vancouver. If the Minister is aware of this fact, will he ask the Board of Transport Commissioners to look into the matter to find out whether this further curtailment of service will be in the public interest?


John Whitney Pickersgill: I am not aware of it, or at least I was not until the hon. gentleman spoke, but I will certainly take the matter under consideration at once.



CANADIAN CONSTITUTION


[Stage Direction]
On the orders of the day:
Mr. Heward Graffley (Brome-Missisquoi):: I should like to ask a question of the Prime Minister as the Minister reporting to the House on federal-provincial affairs. Has the Prime Minister or any other Federal Minister been informed by Premier Lesage or any other Minister of the Government of Quebec that the Quebec Government now has no intention of putting the Fulton-Favreau formula on repatriation of the constitution before the Quebec legislature?


Lester Bowles Pearson: No, Mr. Speaker, no such information has been given to us by any representative of the Quebec Government.


William Heward Grafftey: Has the Federal Government been informed by the Quebec Government now that they do not intend to place the Fulton-Favreau formula before the Quebec legislature until an election has been held in the Province of Quebec?


Lester Bowles Pearson: No, I have had no information of that kind either.
May 6, 1965



EXPO '67 CONTRACTS WITH UNIONS RESPECTING BUILDING CONSTRUCTION

[Stage Direction]
On the orders of the day:
Mr. Jean-Luc Pepin (Parliamentary Secretary to Minister of Trade and Commerce):: On Tuesday last, Mr. Speaker, the hon. Member for Pictou questioned me concerning the existing agreements between Expo '67 and certain trade unions. Certain construction associations recently requested reassurance that Expo's labour agreement would apply on the site only, and that the corporation would not negotiate wages and working conditions with construction trades.
In order to make these two points abundantly clear the management of Expo, with the consent of the unions, have amended the existing agreements to establish clearly three basic points:
1.	The unions undertake that there will be no strikes which will in any way affect the success of the exhibition.
2.	The corporation undertakes that the exhibition shall be unionized.
3.	For all the many problems arising out of many differences of opinion, points of view and conditions, the agreement sets up machinery for reaching equitable solutions.



CANADIAN COASTGUARD


[Stage Direction]
On the orders of the day:
Mr. Lloyd R. Crouse (Queens-Lunenburg):: I should like to direct a question to the Minister of Transport. In view of the urgent need for larger and properly equipped coastguard ships on the east coast, will the Minister soon be in a position to give a report to the House on any improvements in this service that may be contemplated by his department?


John Whitney Pickersgill: Yes, sir.


Lloyd Roseville Crouse: May I ask a supplementary question. In giving this report will the Minister tell us whether the towing of disabled fishermen to port will become standard Government practice, and also whether, in expanding the coastguard to provide more ships, he will provide at least one more ship for the south shore of Nova Scotia?


John Whitney Pickersgill: I thank the hon. gentleman for making my statement for me.
Inquiries of the Ministry


Mr. H. Russell MacEwan (Piclou):: I should like to ask the Minister of National Defence whether it is the intention of his Department
to transfer some of the minesweepers at Halifax to the Department of Transport for use in the coastguard. Is it the intention of the department to pay off these minesweepers, as was done a short time ago with the four frigates, or to leave them in mothballs?


Paul Theodore Hellyer: A number of possibilities are under consideration but no final decision has been taken as yet.



CANADIAN BROADCASTING CORPORATION


[Stage Direction]
On the orders of the day:
Mr. Auguste Choquette (Lotbiniere):: Mr. Speaker, I should like to direct a question to the Secretary of State.
Could he tell the house what progress has been made in the proceedings instituted against the C.B.C. by the hon. member for York-Humber (Mr. Cowan) to prevent the operation of a French radio station in Toronto?


Mr. Lambert:: Discuss that with your colleague.


Hon. Maurice Lamontagne (Secretary of State):: Mr. Speaker, I have no information to give to the house on that matter at this moment, but I will gladly get that information and make it available to the hon. member.


Auguste Choquette: I should like to ask a supplementary question, Mr. Speaker.
Could the Secretary of State tell the house whether the proceedings instituted against the corporation are liable to change the objective set by this government to extend the French radio network across the country?


Maurice Lamontagne: No, Mr. Speaker.



BROADCASTING


[Stage Direction]
On the orders of the day:
Guy Marcoux: Mr. Speaker, I have a supplementary question for the Secretary of State.
Could he tell the house when he expects to receive the Fowler report, since he stated
May 6, 1965

Inquiries of the Ministry some time ago that he hoped to get it at the end of April?


Maurice Lamontagne: Mr. Speaker, Mr. Fowler got in touch with me about ten days ago and told me the commissioners were having difficulties in the special studies they have undertaken and that there would be some delay in submitting the report, having regard to the dates already mentioned. Therefore, I do not think now that the report will be submitted before June.



ADMINISTRATION OF JUSTICE


[Stage Direction]
On the orders of the day:
Mr. Erik Nielsen (Yukon):: In the absence of the Minister of Justice, who I hope will be back to the House shortly, and since his Parliamentary Secretary is wandering, may I direct a question to the Acting Minister of Justice. Will he remind the Minister or himself to bring to this house an answer to the question which I have asked so often in respect of laying charges in the Sefkind case?


Mr. Churchill:: Let us get an answer.


Hon. J. Watson MacNaughi (Solicitor General):: I shall be pleased to bring this to the attention of the Minister. I am sure he will give a reply as soon as possible.



GOVERNMENT POLICY RESPECTING COMMUTATION OF DEATH SENTENCES

[Stage Direction]
On the orders of the day:
Eldon Mattison Woolliams: Mr. Speaker, I would like to direct this question to either the Solicitor General or the Prime Minister. Is it now the Government's policy to commute all sentences in reference to capital offences prior to the free vote which is supposed to take place in the House on the question of the abolition of capital punishment?


Lester Bowles Pearson: No, Mr. Speaker. Each case is considered on its merits.


Eldon Mattison Woolliams: Has the case of Mr. Byrnes been considered, as he was convicted and sentenced to be hanged on Wednesday next? Has that case been considered by the Cabinet, and has a decision been made?


Lester Bowles Pearson: Yes, Mr. Speaker, that case has been considered by the Cabinet.


Eldon Mattison Woolliams: I have one question arising out of an answer I received from the Prime Minister. There was an interruption, and I may have misunderstood the Prime Minister with reference to the Byrnes case. At the present time Byrnes is waiting in the death cell. I understood the Prime Minister to say this case was being considered. Has it been considered, and what is the decision?


Lester Bowles Pearson: The hon. Member must know, surely, that it is against all the rules to make a statement in the House on a matter of this kind before it has been conveyed to the penitentiary authorities.



EMPLOYMENT ASSISTANCE FOR PERSONS RELEASED ON PAROLE

[Stage Direction]
On the orders of the day:
Mr. Robert C. Coates (Cumberland):: Mr. Speaker, I have a question for the Secretary of State. Does the Government, through the Civil Service Commission, have any policy related to parolees from penal institutions, that could assist them in securing employment during their rehabilitation period?


Maurice Lamontagne: Mr. Speaker, I will take this question as notice and answer later.



INDIAN AFFAIRS


[Stage Direction]
On the orders of the day:
Hon. J. R. Nicholson (Minister of Citizenship and Immigration):: Mr. Speaker, on Thursday last, April 29, the hon. Member for Fraser Valley inquired about any plans the Department of Citizenship and Immigration might have for the placement of teachers presently employed by the Indian Affairs Branch who may be affected by the integration of Indian children into the public school system. I undertook to inquire into this matter.
It is the policy of the Department to offer a transfer to qualified teachers, who have given satisfactory service, when the position they occupy is abolished or the school in which they have taught has been closed as a result of integration. If a transfer is accepted the Department pays the removal expenses of the teacher. In some cases, when a provincial school board or area is assuming responsibility for the operation of a school formerly conducted by the Federal Government, the school board has engaged the ser-
May 6, 1965

vices of the teaching staff presently employed by the Indian Affairs Branch.
The policy of integrating Indian children into the provincial school system has not yet resulted in any inability to offer alternative employment to a qualified teacher with satisfactory service, unless such teacher is unwilling to transfer to another location and the Indian Affairs Branch has no other school in the same area.



PENSIONS


[Stage Direction]
On the orders of the day:
Mr. D. M. Fisher (Port Arthur):: I should like to address a question to the Parliamentary Secretary to the Minister of National Health and Welfare relating to the Canada Pension Plan. I should like to welcome him back to the House after his long absence. I wonder if the Parliamentary Secretary can tell us when there will be available for popular distribution some kind of publication from the department setting out the benefits and the particulars of the Canada Pension Plan in a way the ordinary person can understand.
[DOT] (3:10 p.m.)


Mr. J. C. Munro (Parliamentary Secretary to Minister of National Health and Welfare):: Mr. Speaker, in the absence of the Minister I will ask her to look into this matter and have a report soon.


Mr. M. J. Moreau (York-Scarborough):: Could the Parliamentary Secretary also look into the pamphlet being circulated in Toronto by the N.D.P., which distorts the plan very much?


Douglas Mason Fisher: Make a charge.


Maurice John Moreau: I think a departmental publication would be much more worthy.



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Mr. David Orlikow (Winnipeg North):: Mr. Speaker, in the absences of the Minister of Labour and the Minister of Mines and Technical Surveys I would like to direct a question to the Parliamentary Secretary of the Minister of Labour which possibly he may take as notice. A month ago today I asked the Minister of Labour whether the unions concerned in the mining industry had been
Inquiries of the Ministry invited to sit in on the meetings between the Canadian Metal Mining Association and the Government with respect to the bringing in of miners because of an alleged shortage of workers. The Minister said they had not, but if they were interested he would be glad to arrange it. I would like to ask whether the union has communicated to the Government its desire to be consulted. If it has, has it been invited to sit in; and if not, why not?


James Allen (Jim) Byrne: Mr. Speaker, I will be glad to bring this question to the Minister's attention when he returns this afternoon.


Herbert Wilfred Herridge: As a
supplementary question, would the Parliamentary Secretary also mention to the Minister the fact that the Mine-Mill union would like to be represented at similar meetings?


James Allen (Jim) Byrne: As an old Mine-Mill member I would be delighted to do so.



PUBLIC UTILITIES


[Stage Direction]
On the orders of the day:
Mr. Andrew Brewin (Greenwood):: Mr. Speaker, I have a question for the Minister of Transport. I have not given him notice but I do not think that will worry him at all. On Tuesday last, in answer to a question of mine as to the Government's attitude toward a resolution of the Township of Thorold, endorsed by the Council of the City of Toronto, which recommended the appointment of a public utilities ombudsman to represent the public at hearings on rates and policies of the Bell Telephone and other public utilities, the Minister replied that the Government would start by reading the resolution. Has the resolution been read, and what will be the next step in response to this very reasonable and constructive proposal?


John Whitney Pickersgill: Mr. Speaker, the resolution has now been read, or at least what I believe to be the same resolution although the one I have is from the City of London; and having been read, it is now being digested.



CHURCHILL FALLS-CONSIDERATION AS WORKS FOR ADVANTAGE OF CANADA

[Stage Direction]
On the orders of the day:
Mr. G. W. Baldwin (Peace River):: Mr. Speaker, I have a question which normally
984	COMMONS
Inquiries of the Ministry would be directed to the Minister of Northern Affairs and National Resources, but from the nature of the question the Prime Minister might like to answer it. I would like to ask Whether in his opinion the works for the production of hydroelectric power at Churchill Falls and the transmission of that power would be regarded as works for the general advantage of Canada, or works for the advantage of the Provinces of Newfoundland and Quebec, within the meaning of section 92 of the British North America Act.


Lester Bowles Pearson: I think I would like to answer that, Mr. Speaker, by saying it appears I am being asked for a legal opinion, and I would like to study the question very carefully.


Gerald William Baldwin: As a supplementary question, if at some future federal-provincial conference this matter is being discussed with the Prime Minister of Quebec, would the Prime Minister call to his attention the speech he made in this House on February 10, 1955 when he quoted with approval section 92(10) as the section which should be invoked when works of this type are being considered for construction?


Lester Bowles Pearson: I will be very glad to call that to the attention of the Prime Minister of Quebec, whom I hope to see Saturday night.



BRIDGES


[Stage Direction]
On the orders of the day:
Mr. Gerard Perron (Beauce):: Mr. Speaker,
I should like to direct a question to the Minister of Transport.
When collection of tolls on the Jacques Cartier bridge was discontinued in 1962, Quebec apparently accepted the responsibility for maintenance of that bridge. However, various questions have been asked in the house in order to find out who was responsible for the maintenance of that bridge, and this started the rumour that the present Minister of Transport was considering reinstating toll collection on the bridge. Could the minister confirm or deny the report that the government proposes to re-establish tolls on the Jacques Cartier bridge?


John Whitney Pickersgill: I think, sir, that I had better consider very carefully the rather lengthy speech of

DEBATES	May 6, 1965
the hon. gentleman before attempting to make a response.



HEALTH AND WELFARE


[Stage Direction]
On the orders of the day:
Mr. Stanley Knowles (Winnipeg North
Centre): Mr. Speaker, may I direct a question to the Prime Minister. My question relates to a reply he gave me on Monday, when I asked whether he had received the resolution of the Winnipeg City Council calling for the early establishment of a federal-provincial health plan. The Prime Minister will recall that his reply was:
I will be replying to it in a very friendly way, Mr. Speaker.
In view of the fact that the Prime Minister's letter, a copy of which he was good enough to let me have and which is now public, merely says that he is drawing the matter to the attention of the Minister of National Health and Welfare, may I ask him could he not do better than that?
Lester Bowles Pearson: Mr. Speaker, I really cannot imagine any way of doing better than that on a subject of this kind, if it were not for the fact that the Minister is not here at the moment. But I would not like that answer to be interpreted as meaning that we were not interested in this matter and not proceeding with it, and would not be discussing it with the provinces at the forthcoming conference.


Mr. Knowles:: Is it the Government's intention to act on this matter during this Parliament, or is it to be left over until the next
election?


Lester Bowles Pearson: It depends of course, Mr. Speaker, on how long this Parliament lasts.


Douglas Mason Fisher: Why don't you pull the pin?


Mr. Gerard Chapdelaine (Sherbrooke):: Mr. Speaker, I would like to ask the Prime Minister how long this Parliament will last.


Lester Bowles Pearson: Mr. Speaker, that is a very good question. I want to take notice of it. Perhaps my hon. friend will put it on the Order Paper, and I will give him a written reply.
May 6, 1965	COMMONS



EARTHQUAKES


[Stage Direction]
On the orders of the day:
Herbert Wilfred Herridge: Mr. Speaker, at the request of the persons who are concerned I would ask a question of the Minister of Northern Affairs and National Resources. In view of the fact that Dr. Cherry, a professor of civil engineering at the University of B.C., who is also chairman of the Canadian National Committee on Earthquake Engineering, has stated "that the coastal area and parts of Southern B.C. is a hazard zone" and that "we have been very fortunate in the past that we have not had anything serious," would the Minister make inquiry into the circumstances with respect to the earthquake reported a few days ago and give a statement to the House for the assurance of the persons who are concerned?


Arthur Laing: Mr. Speaker,
I shall try.
[DOT] (3:20 p.m.)



RESEARCH


[Stage Direction]
On the orders of the day:
David Orlikow: May
I direct a question to the Minister of Industry and ask whether his attention has been drawn either by the Medical Research Council or by the authorities of a number of universities to the fact that the requests of the medical colleges for research funds have been met only to the extent of just over 50 per cent this year, as a consequence of which the services of very important research personnel will, it is likely, be lost?


Charles Mills (Bud) Drury: have seen this statement, and I would say briefly that a number of the requests made to the Medical Research Council were not accepted for technical reasons. Since last year the grants available to the Council have been increased by 50 per cent, as the hon. Member will recognize, and it is hoped that this large increase in the amount of funds available in the current fiscal year will go far to satisfy what are unquestionably growing and urgent needs.


David Orlikow: Is the Minister aware that in his own city, in the University of Montreal, the grant available to Dr. Selye, taking into
DEBATES	985
Inquiries of the Ministry account the decrease in the amount he will receive from the United States and the increase in the Canadian grant, amounts to less than last year by $165,000?


Charles Mills (Bud) Drury: I was not aware of that, but I will check into it.



BUSINESS OF THE HOUSE


[Stage Direction]
On the orders of the day:
Mr. Marcel Lessard (Lake SI. John):: Mr. Speaker, I should like to direct a question to the Minister of Industry and Defence Production.
As the speech from the throne mentions measures for the economic development of designated areas, could the minister tell us when he proposes to introduce them?


Charles Mills (Bud) Drury: Mr. Speaker, I could not give a firm date, but I hope they will be introduced in the near future.



FINANCE


[Stage Direction]
On the orders of the day:
Mr. P. B. Rynard (Simcoe East):: I should like to ask the Minister of Finance a question. I apologize for not having given him notice. Does the 50 per cent write-off he is allowing industry include land values where it is necessary to buy land to help clear up pollution problems?


Walter Lockhart Gordon: No, Mr. Speaker.



VETERANS AFFAIRS


[Stage Direction]
On the orders of the day:
Mr. J. Chester MacRae (York-Sunbury):: My question is for the Minister of Veterans Affairs. Is the Minister yet in a position to advise us when we may expect the special report in connection with the Hong Kong prisoners of war?


Hon. Roger Teillel (Minister of Veterans Affairs):: I will have to check into that, and report.

May 6, 1965
Bank Act BANK ACT



DECENNIAL REVISION AND EXTENSION OF CHARTERS

Walter Lockhart Gordon: that the House go into Committee to consider the following resolution:
That it is expedient to introduce a measure to provide for the decennial revision of the Bank Act and the extension of the charters of the existing chartered banks till July 1, 1975, and to provide further for certain changes in connection with the administration of the Act.
Motion agreed to and the House went into Committee, Mr. Lamoureux in the Chair.


Walter Lockhart Gordon: 
Some hon. Members:: Oh, oh.


Walter Lockhart Gordon: I do not think I am exaggerating, Mr. Chairman, although I hasten to add that I am not a lawyer and must bow to those who are members of that exalted profession.
In the past the courts have expressed the view that the essence of banking is the accepting of deposits which are transferable on demand by cheque or a similar instrument. This definition, which differs from the one proposed by the Commission, could be applied through the medium of the clearing system which is now operated by the chartered banks under the Act to incorporate the Canadian Bankers' Association. This is the channel through which settlement is made for the cheques issued by other institutions as well as banks.
The Royal Commission recommended that membership in the clearing system should be broadened to include all institutions engaged in "banking" as they defined it, and therefore requiring clearing facilities. They also proposed that there should be par clearing for out of town cheques. The Government intends to give further consideration to these recommendations before proposing any changes in the legislation relating to the clearing system.
The present Bill is, therefore, simply one to revise the Bank Act itself. It will cover the present eight chartered banks and extend their charters for a ten year period commencing July 1 of this year. It will also apply to any new banks incorporated during this ten year period. The various amendments which are being made in it represent a substantial move toward the general objectives proposed by the Royal Commission.
It is proposed, as recommended by the Royal Commission, to allow the banks to make conventional mortgage loans. The banks will be permitted to charge going rates of
May 6, 1965

interest on these loans if they meet certain specified requirements. The Bill provides that the entry of the banks into this part of the mortgage lending field shall be on a gradual basis. It is expected that these proposals will provide more competition in this important area of the capital market and pave the way for a reduction in the average cost of mortgage borrowing.
It is also proposed to provide explicitly that banks may receive the same rate of interest on N.H.A. mortgages as is fixed by the Government for other authorized lending institutions. It is hoped that this step will encourage the banks to resume N.H.A. lending and by so doing reduce the amount which the Government has found it necessary to do in recent years.
Apart from the foregoing exceptions with respect to mortgage loans, the present 6 per cent ceiling on interest rates will be retained.


Some hon. Members:: Hear, hear.


Walter Lockhart Gordon: As long as the general level of interest rates remains reasonably close to current levels, the exceptions being made in the case of mortgage loans and the customary service charges on personal loan plans should allow the banks to adopt somewhat more flexible interest rate policies on both loans and deposits. If, however, at some future time there should be a general rise in world interest rates which would make these proposals unworkable, then the Government would reconsider the 6 per cent limit.
It is proposed that the minimum Canadian cash reserve of the chartered banks be reduced from 8 per cent to 7 per cent of Canadian deposits. The Royal Commission recommended a system of cash reserve requirements involving different cash ratios for different categories of deposits, the result of which would have been to reduce the cash reserve requirements for the chartered banks. The Government does not feel that there are large enough differences in the types of deposits held by individual chartered banks to make it necessary or desirable to have as complicated a cash reserve formula as that proposed by the Commission.
Provision is also being made for a secondary liquid asset ratio which the Bank of Canada may impose from time to time and vary between 6 per cent and 12 per cent of Canadian deposits. This measure will replace the present voluntary agreement between the banks and the Bank of Canada regarding secondary reserves, and also replace the power to vary the cash reserve ratio which has been
Bank Act
in banking legislation since 1954 and which it is proposed to discontinue.
As I have already announced to the House in statements on September 22, 1964 and February 16 of this year, the Bill contains measures to place limits on certain resident and non-resident holdings of bank shares and to prohibit shareholdings by governments. So far as non-residents are concerned, these measures are similar to those which have already been enacted for Federal insurance, trust and loan companies.
The Government agrees with the views expressed by the Royal Commission regarding the undesirability of too close affiliations between banks and other Canadian corporations, and the Bill provides limits on both share ownership in such cases and interlocking directorships.
The Government hopes that part of the future growth of our banking system will take place on the basis of an increasing number of banks. The revisions which are being made in the Bank Act should encourage such a development. In order to make it easier for applicants to get a bank charter when they can meet all the specific requirements of the Act, it is proposed that a new bank may be incorporated by letters patent, with the House of Commons having the right to annul such letters patent within a stated period of time.
It is hoped to proceed with the second reading debate on this Bill as soon as possible, and to propose then that the Bill be referred to the Banking and Commerce Committee for detailed study and discussion. It may be necessary, Mr. Chairman, to propose legislation extending the present bank charters beyond June 30, depending on the progress made with the proposed Bill.


George Clyde Nowlan: I hope, Mr. Chairman, that the last statement of the Minister was not an understatement, but I am fearful that his prognostication may prove to be correct. Certainly those on the Banking and Commerce Committee will have, I presume, a relatively long and interesting session in dealing with this Bill if the House and the Committee of the Whole see fit to send it on to that Committee, as I assume will be the case.
As the Minister has said, we have had a Royal Commission dealing with this subject; a Commission which sat for some three years, I think, and brought down a report a few months ago-a lengthy, voluminous and very, very able report. It may be that all hon. Members, as the Minister intimated a few

May 6, 1985
Bank Act
minutes ago, will not agree with all the recommendations in the Royal Commission report, but certainly I would hope and expect that all hon. Members, particularly those who may be sitting on the Committee, will make it a requirement to read that report very carefully and rather intently.
It is not my intention this afternoon, Mr. Chairman, to deal in any detail whatsoever with the resolution which is now before us. The resolution has only four lines; it is very brief. It says "it is expedient to introduce a measure", and so on. "Expedient" in this case, of course, is the usual phraseology. But it is more than expedient; it is necessary by law because, as all hon. Members know, the time has come when we must proceed with the decennial revision of the Bank Act, and that is what is now before us. If we cannot conclude it before the 30th day of June, then certain remedial action will have to be taken; otherwise all banks of Canada will come to a stop and close their doors from the 2nd day of July, and that is something, of course, that could not be tolerated for a minute.
The Minister referred briefly to some points in the legislation that he said would be brought forward. I do not intend to refer to them at all. I think the proper course as far as we in the Opposition are concerned is to await the text which will be brought before us as soon as we have first reading, and then on second reading we can deal in some detail with the various provisions contained in that Bill.
[DOT] (3:40 p.m.)
On the basis of what the Minister said, I have no hesitation in saying that we on this side of the House in the Opposition will support the passing of this resolution. We would like to see the resolution pass at a relatively early date so that we can have the bill before us. I presume it will be a lengthy and voluminous bill probably running to scores and scores and scores of clauses, so we will have ample opportunity to examine those clauses before proceeding to second reading. I think, Mr. Chairman, that is all it is necessary for me to say at this time as far as the Official Opposition is concerned.


Mr. Pritiie:: Mr. Chairman, I agree with the hon. Member for Digby-Annapolis-Kings when he says we will not delay proceedings at this stage, and I hope we will be able to study the bill very soon. In the absence of the hon. Member for Nanaimo-Cowichan-The Islands I should like to make a few comments on the Minister's statement, but even though I speak
[Mr. Nowlan.l
for the hon. Member and from his place I do not pretend that I can match his knowledge of banking and monetary affairs.
The Banking and Commerce Committee will certainly be very busy with the proposals the Minister has made. Not only will they be dealing with the revisions to the Bank Act, but I believe they will have referred to them during the session also certain revisions to the Bank of Canada Act.
The Minister's statement dealt with a great many important points, including some of the recommendations of the Porter Commission. It is interesting to note that the Government has been very selective in accepting the recommendations of the Porter Commission; a great many of them have been left out. The Minister told the Committee that he will be recommending changes to the Bank Act concerning ownership of shares by foreigners and by provincial governments. The Minister also expressed fear on February 16 concerning provincial ownership of shares in chartered banks, and apparently he has a general fear that the ownership of shares by Provinces will in some way affect the federal monetary authority.
The answer to that, given at the time by my colleague the hon. Member for Nanaimo-Cowichan-The Islands, was couched in his usual forthright, concise manner, and I can do no better than repeat it now. As reported at page 11364 of Hansard for February 16 last the hon. Member said:
I take very strong exception to the final part of his statement, which proposes to prohibit investment in chartered banks by any provincial governments. I am surprised that the Minister of Finance should be so obviously ignorant of banking techniques in this country that he would suggest for one moment that the ownership of shares in a bank by a provincial government would raise questions of jurisdiction over monetary policy. That is absolute nonsense, and I am sure the Minister is aware of that. It is technically impossible for that to take place, and if he is in doubt in that regard I suggest he consult with the Governor of the Bank of Canada, who I am sure will disabuse his mind of this nonsense.
Now, Mr. Chairman, I should like to elaborate a little on this point. I think this fear has been greatly exaggerated by the Minister, and I notice that a number of editorial writers in this country have picked it up. I cannot believe that shares held in one or two banks by one or two provinces can have a very important effect upon the monetary policy of this country and upon general economic conditions. After all, we have at the present time eight chartered banks, and if the applications at present under consider-
May 6, 1965

ation are granted we will have 11 chartered banks, so a very small minority interest by one or two provinces in one or two banks cannot make very much difference to the total picture of monetary policy in Canada.
In any case, Mr. Chairman, I suggest that the powers presently held by the Bank of Canada and by the Inspector General of Banks are quite sufficient to regulate the chartered banks. At least that is what we have been told, and I am sure it is true. Whether the shares are owned by private organizations and individuals or by public organizations does not make much difference; the Bank of Canada and the Inspector General of Banks have adequate power over all chartered banks at the present time.
I also suggest that in any case the provinces have a good deal of power to influence economic conditions in the country even though they do not have control over monetary policy. The collective budgets of the provinces these days are very great, and they can be used to exercise some control over economic conditions in the country. Therefore I submit a small amount of ownership of shares will change that situation very little. I also suggest that the Premier of British Columbia has far more impact upon the economy of this country through his control over the natural resources of the Columbia River than any ownership of shares in any bank would ever give him.
I realize that insurance companies, trust companies and mortgage companies are not now credit creating institutions in the same sense that banks are, but they do accumulate large amounts of funds and they can decide who shall receive those funds, for what purposes they are to be used and in what parts of the country they are to be used. Therefore it seems to me only logical that if the provinces are to be prevented from owning shares in banks they should also be prevented from owning shares in these other financial institutions.
It seems to me that the General Development Corporation of the Province of Quebec would be in this category, and I question very much whether the Government will take any steps against that body. Yet the step they are now taking regarding the banks really will not have that much effect if the provinces can invest in and gain control of other financial institutions, as they are doing at the present time and as they will probably continue to do in the future.
If the Minister proceeds to introduce this amendment to the Act concerning the prov-22620-63
Bank Act
inces he can expect a great deal of opposition to that amendment in this House. He can also expect opposition from the Premier of British Columbia and from the Premier of Quebec, and in light of the present state of affairs in Canada today the opposition of these gentlemen might be more important than ours. Nevertheless this particular amendment will not be accepted lightly and will be opposed with a great deal of vigour. I am sure the Minister is aware that on March 26 the Legislature of British Columbia gave third and final reading to the amendment to the Revenue Act of that Province which permits the Province to buy shares in existing banks.
Generally, Mr. Chairman, we approve of the measures which the Minister has suggested will be designed to retain Canadian control and ownership of chartered banks. As far as I know only one has slipped out of Canadian control, and we trust that these measures will be such that this will not happen again. I should like to suggest though, that funds of the Canada Development Corporation might be used at some time to regain control of the bank we have lost to owners who do not reside in Canada. I do not suppose the Minister wants to introduce any retroactive legislation, but he might put a new section into the revised Act which would provide that if the shares of the bank which has been lost to Canadian ownership come up for sale again, the Canada Development Corporation should have first chance to buy them, which would perhaps rectify the mistake made in the past.
The report of the Porter Commission will be very important for hon. Members of the Banking and Commerce Committee and for the hon. Members of this House who will have to consider the report of the Committee later on. The hon. Member for Digby-An-napolis-Kings suggested that this report should be studied very carefully, as I am sure it will be, particularly by members of the Committee.
There have been a number of commentaries on the Porter Commission report and I should like to recommend to hon. Members one commentary which I read only recently. This is an article in the winter 1965 issue of the Queen's Quarterly by Professor J. C. Weldon. Very briefly, he says that the Porter Commission recommends modest institutional reforms of the existing system, but he complains that they did not relate Canadian banking to the total economy. And, indeed, there were no professional practising economists on the Commission. However, I merely

May 6. 1965
Bank Act
mention the article, which I think should be required reading for those members who will be actively considering the new provisions for the Bank Act.
My colleague the hon. Member for Na-naimo-Cowichan-The Islands has suggested that the Banking and Commerce Committee have quite wide scope and wide terms of reference when these matters are referred to it. In particular, he would like to see the whole question of international liquidity studied by that Committee. This is an active subject these days and is a matter of concern to the major trading nations of the world. [DOT] (3:50 p.m.)
My colleague has this point in mind. Whenever the Bank Act has come up for review, as in 1934, 1944 and 1954, some theme has always emerged from the Committee hearings. In 1934 it was related to the central bank, which was new to Canada at that time. In 1944 the late Senator G. G. McGeer presented certain policies to the Committee. He was a Social Crediter who had infiltrated the Liberal Party. In 1954 it was the relationship of the central bank to the chartered banks.


An hon. Member:: It went further than that; it went to the Senate.


Robert William Prittie: We will be discussing the Senate tomorrow.
My colleague suggests that this question of international liquidity might well be discussed this year by the Committee, before which some expert witnesses could be called. These Committee hearings can be very educational. These hearings, through the medium of the press, can be educational. I think this is a very good thing, because there are not more than four, five or six members of this House who understand very much about international monetary matters. I am certainly not one of them.
My colleague also suggests that many members of the press do not understand much in this regard. If this educational process could be a feature of committee hearings, as a result of the calling of expert witnesses in this field, I think there would be a general widening of public understanding of this very important subject.


An hon. Member:: Let us call General de Gaulle.


Robert William Prittie: Yes, we might call General de Gaulle.
Mr. Chairman, I conclude these brief remarks by informing the Minister that when

the Bill comes before us for second reading many Members will have studied its details and will be in a position to speak about it. I would also remind the Minister that he may expect a great deal of opposition to the amendment concerning provincial governments.


Horace Andrew (Bud) Olson: Mr. Chairman, as is well known to the Minister of Finance and to all other Members of this House, we in this party have always taken a keen interest in fiscal and monetary policies in Canada. We all realize that the decennial revision is now one year late. We hope that the Standing Committee on Banking and Commerce will commence its work at once so we can avoid any further delays in this revision.
I was very interested in some of the remarks made by the Minister of Finance in his opening statement, but I was unable to completely understand all he said in regard to what he referred to as the central theme of the Porter Commission report. I was not sure whether this was also to be regarded as the central theme of the Bill which is to be brought in to incorporate these changes.
The Minister pointed out that the Porter Commission suggested that the Bank Act be revised to broaden its application to other financial institutions in the country, which it referred to as "near banks". It was not completely clear to me from the Minister's statement whether the Bill to follow this resolution will contain provisions which will bring these other financial institutions within the ambit of the Bank Act and under the jurisdiction of the Federal authority.
The Minister then defined a bank, and in doing so suggested there was more than one definition and that the Porter Commission's definition was not necessarily synonymous with other definitions that have been made in the past. I suggest that we will be faced with some very serious constitutional problems regarding imposition by the Federal Government of restrictions on the ownership of banks as a result of these many definitions.
There are no apparent problems in respect of applying the provisions of the existing or revised Bank Act to chartered banks, of v/hich there are now eight. There will perhaps be nine or ten before very long. However, when we consider this restriction, using the Porter Commission's definition, in respect of other institutions which are near banks there will be serious difficulty.
In the Province of Alberta there exists a large financial institution, if one wishes to
May 6, 1965

call it that, known as the Treasury Branch System. This is as near to being a bank as possible. It provides all the services provided by a chartered bank with the exception of making clearances to banks outside of the Province. Of course this institution does have a working agreement with one of the chartered banks in order to carry out that operation. This institution does not account to the Federal Government, and if the Federal Government intends to attempt to limit Provincial ownership in this kind of financial institution because it is a bank within a certain definition, the Minister of Finance will have difficulty in determining that of which the Province will have to divest itself. Surely there is no suggestion that the Province will have to divest itself of its treasury, and this Treasury Branch System is simply an extension of the treasury and its branches are quite properly termed treasury branches.


An hon. Member:: That was just a gimmick.


Horace Andrew (Bud) Olson: It may have been a gimmick, but it has been a very successful one. It seems to me that if we are going to have bad legislation on the books of the Federal Government, the Provinces have no alternative but to devise ways and means of providing the kind of service their citizens demand in spite of those laws.
Mr. Chairman, I have raised this subject because if the Federal Government presumes that it has the authority to bring the operation of these treasury branches, for example, within the terms of the Bank Act, and the authority to say that no Provincial Government shall own an institution of this kind, it has locked itself to a position which it is not going to be able to put into effect.
The Minister of Finance and his Government may be able to prevent the Premier of British Columbia from obtaining a federal charter or in fact from owning any of the stock of a company holding such a federal charter, but I cannot understand how he is going to prevent the Premier of British Columbia from setting up provincial treasury branches if that Premier chooses to do so. I cannot understand how the Minister can be successful in preventing such treasury branches from providing these services normally provided by chartered banks.
We must also consider the application of this amendment to the Bank Act to credit unions. When we examine carefully the activities and the services provided by credit unions, the Minister will have to agree that many of these credit unions qualify as banks
Bank Act
or near banks within the terms of his definition. These credit unions accept deposits for less than 100 days. They transfer on demand balances from one account to another. I am sure the Minister of Finance and his Government generally will not be foolish enough to attempt to suggest that credit unions will have to comply with the proposed revisions to the Bank Act.
[DOT] (4:00 p.m.)


An hon. Member:: They are plenty foolish.


Horace Andrew (Bud) Olson: My friend says, "They are plenty foolish". However, I do not believe they are politically stupid enough to try to impose this Bank Act on the credit unions within the country.


Walter Lockhart Gordon: 1 wonder if my hon. friend would permit me to ask him a question? In view of the confidence he has just displayed in the wisdom of the Federal Government, I wonder why he thinks it is necessary to make this particular speech before he has had the benefit of reading the bill? It could be that a lot of what he is saying will turn out to be redundant.


Horace Andrew (Bud) Olson: I hope so, Mr. Chairman. However, at the commencement of the Minister's statement he said-if I am wrong I hope he will correct me now-that the central theme of the changes in the Bank Act would be to broaden the application of the Act to cover financial institutions or these near banks.


An hon. Member:: He was quoting the Porter Commission.


Horace Andrew (Bud) Olson: Oh, he was quoting the Porter Commission.


Walter Lockhart Gordon: My hon. friend asked me to correct him, and perhaps with the indulgence of the Committee I might be permitted to say I was quoting the Commission. I went on to say that these changes in the Bill were restricted to the Bank Act and that they avoided a lot of the difficulties that, by implication, my hon. friend is raising. 1 recognized these pitfalls and these dangers. I think he will be relieved when he sees the bill.


Horace Andrew (Bud) Olson: I am very pleased to hear this further explanation from the Minister. I suggest that when he prepares statements of this kind he should make it fairly clear to hon. Members of this House when he is quoting someone else and when he is actually expressing his own views. I am not sure that I could find that exact point.

May 6, 1965
Bank Act
There are a number of other things the Porter Commission recommended about which we were very apprehensive. One of these is referred to on page 364 of the Porter Commission report on Banking and Finance, and I quote:
The 6 per cent interest rate ceiling introduces undesirable rigidity in the financial system and hampers and distorts the working of markets. It also has arbitrary effects on the institutions' competition for business and on their ability to serve the community well which were not contemplated when the ceiling was originally introduced and subsequently amended. We recommend that it be removed regardless of other changes in the legislation.
I am very happy, Mr. Chairman, to hear the Minister say that they are not going to remove this 6 per cent interest ceiling except for certain types of loans such as conventional mortgages. After all, these chartered banks in the country, whether there be eight or ten of them, in fact have something of a monopoly. They are granted a franchise or charter by Parliament to carry on this kind of business in the country. I believe that whenever a franchise that does, in fact, provide for a monopoly, is granted by the Government there is then justification to impose some limits on the charges those institutions can make. I think it is right and proper, for example, for certain public utility distribution systems, such as power, water and gas, in which there is an absolute monopoly, to impose limits on the charges that can be made. This same principle applies to the banking institutions. I am pleased to hear the Minister is going to retain this limit of 6 per cent.
There is one very serious problem that has developed in the country over these past few years, Mr. Chairman, and that is the tremendous expansion of consumer credit companies. It is my belief that the banking system in the country could have picked up a great deal of this demand for consumer credit if it had chosen to do so, even within the confines of the 6 per cent ceiling. The fact that the banks, a few years ago, displayed no interest whatever in accommodating the demand for this consumer credit gave rise to all these consumer credit companies that charge, in many cases, exorbitant rates. I believe that the banking system in the country should have accepted its responsibility to the public, to Canadians generally, to provide this credit at reasonable rates rather than turning these people away from their doors and forcing them almost into the hands of small consumer finance companies, in some cases un-

scrupulous operators who charge as high as 18 per cent or 35 per cent interest.
We have an obligation as a Government, as a Parliament, to provide the services that Canadians generally demand. The banks should have recognized years ago that there was a demand for very small loans to finance the establishment of households, the purchase of automobiles and other things. The banks were not interested in this business and turned these people away. We have seen the phenomenal growth of the small finance companies.
I	believe the banks should accelerate their efforts, even now, to pick up some of this consumer credit demand. The existing banks have insisted that they were unable to do this within the limits imposed by the 6 per cent, but that is not an argument. As a matter of fact, even today they are charging an effective rate of interest of up to 9 per cent or 11 per cent after they add on some other charges. More than once I have questioned whether or not these charges are actually ultra vires of the Bank Act. Nevertheless, they have been doing it and they have not been prosecuted. Even the 9 per cent or the
II	per cent charged in some of these small loans would be preferable to the 1.5 per cent or 2 per cent per month that is being charged by other consumer financial institutions.
If I may turn to another subject, I am not at all sure what the procedure is going to be, on the basis of the Minister's explanation, for establishing banks by letters patent. Then, if Parliament is not satisfied, they can revoke the letters patent. It seems to me that this is a kind of left-handed or back door way of setting up a bank. There has been some difficulty in getting bank charters through this House on the present basis of having them introduced as private members' motions, and then having them talked out day after day because of the limitation of time devoted to private members' business. However, it seems to me that there are other ways of doing this, such as bringing them in as Government sponsored motions when there could be a whole day devoted to them. The other problem is that there have been some difficulties between the Federal Government and some of the Provincial Governments who have had some interest in the charters of new banks. This has agitated the problem. I hope the Minister of Finance does not go so far as to take away completely from Parliament the responsibility for granting charters to new banks in the country.
May G, 1965

[DOT] (4:10 p.m.)
It seems to me that there is a rather extreme way of handling what the Minister may regard as a difficult or awkward situation which has developed during the past session. I realize that this decennial review and revision of the Bank Act must be completed by the end of June, or else there will have to be another special resolution passed by Parliament to extend the bank charters for an additional period, because they expire on June 30.
Though the Minister of Finance did not suggest there were to be any revisions of the Bank of Canada Act at the same time as the review of the chartered banks act, I think it is time we gave consideration to some of the difficulties that have manifested themselves.


Walter Lockhart Gordon: I wonder if my hon. friend would permit me to ask another question, and make a comment in the form of a question. Was he not aware that the bill to revise the Bank of Canada Act received first reading at the beginning of the sitting today?


Horace Andrew (Bud) Olson: Yes I was, Mr. Chairman. There are one or two things which ought to be in the Bank of Canada Act, and it is probably unnecessary to go into this matter until we see the intention, but there has been some difficulty in defining the responsibility of the Minister of Finance respecting the operations of the Bank of Canada. We had a very serious manifestation of this between a former minister of finance, Mr. Fleming, and a former governor of the bank, Mr. Coyne, and the Porter Commission in its final chapter looked into this question and said:
We therefore recommend that any directive take the form of an Order in Council to ensure that it receives Cabinet consideration.
Further on, at page 557, dealing with the division of responsibility, it said:
We are convinced that this can best be achieved under a system in which the responsibilities of all concerned are sharp and real.
Up to the present time it has been fairly obvious that the responsibilities of the Minister and of the Government have not been sharp and real.
Further down page 557 the Porter Commission stated:
freedom which the central bank requires to fulfil its duties to the nation is not the freedom to evade the public will.
The Minister would be well advised to take under consideration the public demand
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for expansion at certain times, and it would be well for him to bear in mind that Parliament is the place where the public will is expressed-at least between elections-and the Bank of Canada should not operate in such a way as to defy the wishes of Parliament, or what could be called a consensus of public opinion.
I am not going to take up any more time this afternoon. These are some of the things we hope will be in the bill. The Minister has said that most of what I have suggested will be in the bill and that it is unnecessary to express many of the apprehensions which I mentioned, as provision is made covering them. I hope they are covered.
[DOT] (4:20 p.m.)


Gilles Grégoire: Mr. Chairman, I listened closely to the preliminary remarks of the Minister of Finance (Mr. Gordon) concerning the revision of the Bank Act which is effected normally every ten years.
The first thing which struck me-it is indeed the most striking, and I am sure the minister will not be too surprised at our remarks since he is somewhat familiar with our views-about the reform to be made in our present banking system, is the lower percentage of the liquid reserve that a chartered bank must have. We are disappointed to find that this reserve, which is now set at 8 per cent, will be lowered to 7 per cent.
This means that in the past, if a bank had $8 in available cash, it could lend $100 in scrip or bank money. A bank having $8 could lend $100, which means that it could lend $92 it did not have and which did not exist. Therefore, it created 92 per cent of all the money in circulation in Canada. A bank having $8 in ready money could lend $100, thus creating $92, that is, 92 per cent of the money supply then outstanding in Canada.
This 8 per cent will be reduced to 7 per cent, which means that in the future, a chartered bank might lend $100 even though it has only $7. In the past, with $8, it could lend $100; in other words, every one of its dollars was multiplied by 12J. This means that the Bank of Canada, by controlling the legal currency, controlled 8 per cent of the money in circulation, that is, of the money supply, and the chartered banks controlled 92 per cent of the money supply, that is, all the scrip money.
Through this reduction of their cash reserves from 8 to 7 per cent, banks will now be able to lend 14J times what they have instead of 12 J times, that is $93 which do not

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exist when they have $7. Therefore, they will make money at the rate of 144 times their cash reserves instead of 12J times.
In figures, what does that mean? When a bank lends $100 at 6 per cent, it gets $6 interest at the end of one year. But to lend $100 it needs only $8. That means that when banks have only $8, the government authorizes them, because they hold a charter, to lend $100, that is $8 they have and $92 they do not have but create by lending them. So, they make a profit of $6, but since they have only $8, that represents a profit of 75 per cent.
Under the new system, banks will be allowed to lower their cash reserves to 7 per cent. Therefore, when they have $7 in cash reserves and lend $100, they will still get $6 interest but that will represent from now on a profit of 85 per cent on their cash reserves.
Mr. Chairman, as you can see, in the future, the banks will have the opportunity to grow rich at the rate of 144 times rather than 124 times the actual value of their assets.
Mr. Chairman, as a matter of fact, we wonder why the Minister of Finance does not do that himself, why the Bank of Canada, which is a crown corporation, a government agency does not do that itself? If the Bank of Canada were authorized to multiply by 144 times its cash reserve instead of leaving it with the chartered banks, then it would be the one to control all the new scrip money put in circulation, it would be the Bank of Canada which would actually make profits for the government, for the Canadian people, while today we leave it in the hands of private companies, of few private companies-there are eight altogether-always controlled by the same big financial interests. We wonder why the Minister of Finance does not choose rather to reform the Bank Act so as to compel the chartered banks to maintain their cash reserve at 100 per cent at all times and to let to the Bank of Canada the privilege of creating the bank money which is now created by chartered banks.
Mr. Chairman, that would be quite a change because then the government would not have to borrow money from the chartered banks. In fact, if I were the Minister of Finance in a sovereign country, in a country such as Canada, I would find it shameful to have to borrow money from private interests, when the government, through the reform which takes place every ten years with

respect to the Bank Act, could take away from the chartered banks the privilege of creating money and grant that privilege to the Bank of Canada so that in the future the government might deal with it to borrow whatever amounts of money it might need.
And the provinces could also use the Bank of Canada for borrowing, without interest, the amounts of money they might need for their development.
Mr. Chairman, here is another point regarding this cash reserve reduction from 8 to 7 per cent. Formerly, the $900 million cash reserves of the banks represented about 8 per cent of the $11 billion, $114 billion which they lent. Now that they will be required to have only a 7 per cent cash reserve, they will be able with the same cash reserve, to lend $13 billion and a few hundred million dollars instead of $11 billion and a few hundred million dollars. Therefore, this will enable the chartered banks to create $2 billion more, and to automatically become richer by $2 billion more than previously, which they will be able to lend as bank money. That is $2 billion more that the banks will be authorized to lend without even having one cent more in their coffers, because of the fact that they will be able to reduce their cash reserve by 1 per pent. This will allow the chartered banks to lend $2 billion more overnight through the revision of the Bank Act which the government or the Minister of Finance just introduced. This will allow the chartered banks which were already sufficiently wealthy, to become wealthier to an additional extent of $2 billion.
It can be said that the Minister of Finance is truly the best friend of big financial interests, the chartered banks in Canada. Corporations do not receive windfalls of $2 billion every day. But the Minister of Finance just made a gift of $2 billion to the chartered banks in allowing them to maintain a cash reserve of only 7 per cent of their loans. This is quite a gift, and the minister did not have such a gift for the people of Canada when he introduced his budget a few days ago. He just offered a monumental gift of $2 billion to eight private companies in Canada, namely, the chartered banks.
Mr. Chairman, regarding revision of the Bank Act, the main item which will come up for discussion will be the restriction that the federal government intends to impose on holdings of bank shares by the provinces. According to the Minister, such a restriction is necessary if the federal government is to keep control over banking.
May G, 1965

Mr. Chairman, I fail to see how the holding of bank shares by the provinces would reduce federal government control over banking. Would the fact that a municipality or a city like Montreal, Toronto, Quebec or Winnipeg had shares in chartered banks mean that the federal government would lose its control over banking?
Is the Minister of Finance suggesting that if the city of Toronto-the minister represents a Toronto constituency in this house- were, tomorrow morning, to buy shares in a bank, say the Toronto-Dominion Bank which is in that city, the federal government would thus lose part of its control over banking to the hands of the city of Toronto? I think that the Minister of Finance would automatically say that he has no fear that the federal government would lose its control over banking. But if that were the case, why would it be so if a provincial government held shares in a chartered bank?
Suppose a Protestant church or a Catholic church decided to buy bank shares, would that mean that the church would then exercise some control over banking to the detriment of the federal government? The federal government control over banking is not impaired by the fact that municipalities are buying shares in chartered banks; if churches were to buy shares in chartered banks, the federal government would not lose any of its control over banking because of that fact. Then, could the federal government lose its authority over banking because of the very fact that a province would acquire shares in a chartered bank?
Obviously, the argument made by the Minister of Finance does not hold water because the authority over banking does not necessarily depend on the person, the body or the corporation having shares in a bank; it comes mainly from the fact that only the federal government has the right to legislate in that field. The fact, for a province, to have shares in chartered banks does not give this province the right to legislate in the banking field. This can allow a province to take advantage of certain banking operations, as all other shareholders in a chartered bank, but it does not give the province the right to legislate in banking.
Then, why is the Minister of Finance so afraid of the participation of provinces in banking? The true reason is this. The economic development of any individual or any public body is made much easier if it enjoys privileges and prerogatives presently held by
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chartered banks. Now, the federal government has always refused to enjoy privileges and prerogatives enjoyed by chartered banks.
Moreover, the provinces have recognized that the chartered banks were enjoying a great number of privileges and prerogatives and they would like to enjoy those also, as any individual, in order to promote development within their boundaries. That is what the Minister of Finance is afraid of. He is afraid that the provinces might develop too rapidly while the federal government, depriving itself of the privileges and prerogatives of chartered banks, will not be able to keep pace with a province that would have access to the privileges and prerogatives of chartered banks.
The solution, Mr. Chairman, is not to keep the provinces from enjoying economic development through an interest in the bank operations of chartered banks. Neither is it to prevent the provinces from developing financially by taking advantage of the privileges which the Minister of Finance is granting today to chartered banks, that is the privilege of lending 14J times what they have. No, Mr. Chairman, that is not the answer. The answer would be to let the federal government enjoy the prerogatives and privileges of the chartered banks and take steps to ensure that the bank it owns at present, namely the Bank of Canada, is also in a position to create scrip money the way the chartered banks are doing now. The answer is to let the federal government itself create the over-all money supply outstanding and not only 7 or 8 per cent, so as to encourage national development.
But no, the federal government does not want to get involved in this. The Minister of Finance goes on favouring the chartered banks by granting them the exclusive control over the creation of credit and scrip money in Canada.
Without any control on the creation of credit and scrip money, the federal government cannot develop as quickly as if it had the privileges and prerogatives given to chartered banks. But the provinces would like to take advantage of these privileges and prerogatives. They are not seeking authority on banking, but they do want to enjoy those privileges granted under the federal legislation to any public body, association or individual that is a shareholder of a chartered bank or is interested in its banking operations.
The provinces should enjoy the economic, financial and monetary advantages of banking operations as other Canadian citizens. In

May 6. 1965
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fact, if Canadian citizens are allowed to do so, why should a province or a group of Canadian citizens incorporated for the establishment of a chartered bank not be entitled to the same privilege? Would it not be even more advantageous to allow a group of Canadians to form an even greater corporation, that is a province? That way, all the inhabitants of a province could benefit from those advantages.
Mr. Chairman, I feel that the minister's contention that such a step might restrict federal authority in the field of banking is a very weak argument and I hope that not only British Columbia but also Quebec- which has already announced its intentions in that respect-will, with the help of the other provinces, put up a good fight against the decision taken by the Minister of Finance.
Mr. Chairman, when we see individuals or chartered banks get rich, these days, at a fantastic rate because they control and create scrip money in this country, we would like to see the provinces, Quebec, for instance, or British Columbia, enjoy the same privileges, so that they could promote the development of a whole province, not for the profit of a few individuals, but for that of all the citizens of a province.
In fact, I suggest it is far more important for the provinces to enjoy these advantages for the whole of their population, than for individuals to do so for their own profit, often to the prejudice of a great many of their fellow citizens.
Mr. Chairman, of course we do not know yet the provisions of the bill which will follow the passage of this resolution, but there are some improvements to the Bank Act which we would like to see achieved.
First of all, we would like the Bank of Canada to take over, to the extent of 100 per cent, the control of the creation of the outstanding money supply, the control of all scrip money, of all bank money, so that the Canadian government would control, to the extent of 100 per cent, the outstanding money supply.
Another change we would suggest to the Bank Act is that, taking into account the rate of its circulation, the volume of the money supply should always be equal to the country's production, with the consequence that whatever may be the volume of production, there will always be the purchasing power needed to buy it. In fact, there will always be as much purchasing power in circulation as there are goods on the market,

and this will allow the Canadian citizens to avoid having to buy under finance plans.
When the Canadian people have the required purchasing power to buy the whole of the production offered on the market, they will no longer have to buy under finance plans or to borrow from finance companies at high interest rates, as happens today.
Another change we would like to see made in the revision of the Bank Act-
[DOT] (4:30 p.m.)


The Deputy Chairman:: Order. I must
advise the hon. Member that under Provisional Standing Order 61-A, the time allotted to him has expired.


Mr. Gelber:: "Neither a borrower nor a lender be" was the advice given to his son, Laertes, about to depart for England, by Polonius, adviser to Kings of Denmark. This advice would be the death of the banking system and make us all cash customers at much higher prices, and a considerably lower standard of living. The great bounties of this continent were originally developed with the assistance of capital borrowed abroad. To this we added our own savings. The joint investment, plus much hard labour, yielded from our rich resources a great bounty. The ability of Canadians to borrow both at home and abroad has made possible this remarkable continental economic society, which has achieved great things.
We are now in the midst of a post-war expansion of longer duration than any of the earlier periods of expansion. Our growth has varied with the rate of investment, and we are projecting in the year 1965 the highest investment in the history of Canada. The alltime high in 1964 of $10,827 billion will be outpaced by 14 per cent to a total of $12,305 billion. Business capital, excluding housing, will total $7,253 billion, while housing and social capital will reach $5,052 billion, according to estimates which have been tabled in this House by the Minister of Trade and Commerce in the Annual Survey of Public and Private Investment Outlook in 1965.
The largest increase in social capital will be for universities, where 60 per cent more will be spent than in the previous year. Hospitals and schools also account for a much larger sum, while all levels of government are expected to increase their expenditures by 19 per cent. The greatest of these will be for highway construction by provincial governments. There is an anticipated increase in business investment of 12 per cent. Capital
May 6, 1965

outlays in the manufacturing group are expected to increase by 23 per cent, with the chemical industry doubling its percentage, with new facilities for fertilizers, plastics, synthetic fabrics and other products. The petroleum and coal products industry will add to its outlays by 86 per cent, particularly in view of the expansion of refinery capacity. The large increase in expenditures by automobile companies largely makes up for the 50 per cent increase in transportation equipment, while the pulp and paper industry accounts for another 35 per cent.
An analysis of these figures indicates that the biggest increases are in industries other than those producing commodities. In construction the largest percentages will be in non-residential building activity. Thus, improvement in productive facilities and their expansion is strongly indicated. The modernization of Canadian industry makes it more competitive both at home and abroad. All this activity underscores the importance of a strong, dynamic financial base to provide large services and at a reasonable price. The financial tempo of Canada is closely related to the dominant market with which historically we have been associated.
[DOT] (4:40 p.m.)
A number of very revealing charts are published in the Budget Papers, pages 534 and 535, indicating the intimate association of money rates between Canada and the United States. The year 1962 is a sad and costly exception. In the debate about the seat of monetary power in Canada, those who pointed to the Government as the seat of authority were able to establish their position. Certainly fiscal policy in Canada is a potent instrument, providing a climate for investment. This has also a most important influence on money rates, but we cannot dissociate ourselves from the importance of rates established by the New York Federal Reserve Board. Probably the discount rate of the New York Board has a more potent influence in Canada, in the long run, than that of the Bank of Canada itself.
Deficits, both in our national accounts and in our balance of indebtedness, limit our ability to manoeuvre. The economic independence of Canada can be more readily asserted when we do not have to meet large deficits, both in our international account and in our account at home. This does not mean that on occasion it is not important to use the facilities of deficits, both at home and abroad, but in the long run this qualifies our 22620-64
Bank Act
ability to plan. The lesson of the last Government indicates that mounting deficits at home and a worsening balance of payments problem forced us into a position where very high rates of interest were paid by the Government to finance its operation, and eventually control over the rate of the Canadian dollar was temporarily lost. Very substantial assistance by friends abroad and a sizeable devaluation of the Canadian dollar established a new basis. We continue to pay those high rates of interest, which were contracted in those days by the Canadian Government, in the wake of the reconversion loan of 1958. We want to ensure that we can plan for the economic well-being of our country and that the facilities available are not weakened by deficits at home and abroad.
The review of the Bank Act gives us once more the opportunity to assess an important area for financing our national development. Tables published on pages 106 and 107 of the report of the Royal Commission on Banking and Finance, 1964, indicate that while the assets of the chartered banks for the 27-year period 1935-1962 multiplied almost six times, as a percentage of the total assets of all the chief financial institutions they declined in the same period from 44.4 per cent to 34.9 per cent. The relative role of life insurance companies plus pension plans, plus mutual funds, remained about the same; but this was due to the large increase in pension funds, and while life insurance assets in Canada multiplied five times, their percentage declined from 35.2 per cent to 23.4 per cent of the total.
The recent increase in assets of the trust companies has brought their relative position at the end of the period to exactly what it was at the beginning. An eight times growth was assisted by an increase between 1955 and 1962 of more than two and a half times. Caisses populaires and credit unions show a growth about six times over. Finance and consumer loan companies increased their assets 28 times and as a percentage of the total grew from 1.4 per cent in 1935 to 5.3 per cent in 1962.
This certainly indicates that the role of various institutions within the financial complex of Canada has changed materially, and in reviewing the total financial spectrum the relative positions of institutions must be carefully evaluated. The Government, in accepting responsibility for monetary and fiscal policy, as expressed by the Minister of Finance when he first took office, must ensure that measures which it undertakes can be

Minister this afternoon to the effect that, with the exception of mortgages, the price line for money offered by chartered banks is to be held. I said before that the influence of the major money markets on the cost of money in Canada must always be remembered, and with this centripetal force we must ensure that the cost of money in Canada does not rise too far away from that prevailing in the United States. When the spread is too great, activity in Canada will not only be dampened, but our competitive position abroad will also be impeded. Money rates should be kept cheap enough to ensure an adequate rate of growth at home, only limited by factors abroad of which we must be aware, while vigilant of the dangers of inflation. This Government is to be highly commended for maintaining a policy of cheap money.
The other aspect is that money supplies should be adequate. The deflationary aftermath of the reconversion loan of 1958 should have impressed us with the important relationship between fiscal policy and the availability of capital for development. The Government should pursue, as it has, policies of an adequate money supply. A healthy financial market with adequate sums at attractive rates provides an important basis for the economic well-being of Canada.
I should also like to say how strongly I support the position announced by the Minister this afternoon in reaffirming federal authority in the field of banking. Certainly the hon. Member who preceded me, who spoke about the opportunities for provinces to invest in banks, in no way established that this would add to the services available to Canadians who require banking facilities. I am pleased with the statement of the Minister to the effect that additional charters would be welcomed and that the competitive aspect of banking will be promoted.
These are some of the thoughts that occur to me as we approach the renewal of the charters of the banks which have played such an important role in the growth of this country. We are proud of our national banking system. The role of the local bank in other countries has been important; but in our own, where geography plays such a dominant part, the banking system has helped to establish a lingua Franca for commerce and industry. The totality of the financial institutions in Canada must be examined at this time when we are reviewing the role of the chartered banks, because the near-banks and other 22620-64J
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financial institutions play important roles in the same scheme of economic activity. We must see our banks strong and we must see them playing the important roles that our economy requires, and we must ensure the continuing service to the people of Canada through the financing of a high rate of economic growth and well-being.


Mr, Lambert:: Mr. Chairman, the resolution we now have before us is the precursor of a Bill which I think will affect Canadians as much as any other piece of legislation which has been passed by this Parliament, the Canada Pension Plan and others notwithstanding. I think the impact of our banking system on the Canadian economy and the lives of all Canadians has been far greater than anything else, with the exception perhaps of the light touch by the Minister of Finance on the income tax. That might be felt a little more by Canadians than a change to the banking system. We in Canada have been very fortunate in having one of the soundest banking systems in the world. This system has been developed through hard experience.
During the last session of Parliament, when we were considering an attempt to incorporate the Laurentide Bank, I made a resume of the incorporation of banks since before Confederation, which indicated what attempts had been made to get into the banking business, what had failed and what had been successful. Today and on other occasions we have been told that there are many strictures as a result of the monopolistic positions of Canadian banks. To be quite frank, that does not bother me at all. As a matter of fact, the fact that two of our chartered banks are among the 12 largest banks in the world-I am subject to correction in this regard, but certainly one of them is among the first 12, with another just slightly lower down the scale-is a great and worthy reflection on the strength of our banking system.
In this day and age we do know that the competitive operations of banks are not limited to that area within the boundaries of this country. Many of our chartered banks have very strong connections abroad. In fact one certainly was the backbone of the banking system in the Caribbean area for a long period of time.
In any event, we as Canadians have a very sound banking system, but that does not mean there is not room for improvement. I think the wisdom of a Minister of Finance in past years in setting up the Porter Royal Commission, after a period of some 25 years-I

May 6, 1965
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believe in the mid-1930's Lord MacMillan sat as the President of the Commission on the Canadian banking system-has led to an understanding that we should have a revision following public hearings by a royal commission.
I am sure that all the Members of this House and of the other place will be duly appreciative of the efforts of that Commission and its valuable report. The country as a whole owes the Commission a deep debt of gratitude for having brought forward such a fine report. I am sure, however, that even the commissioners are not so sanguine as to think that everything they suggest should be accepted as gospel. That Commission has made certain recommendations following a considerable number of hearings. I am sure the Government will see fit to accept certain propositions put forward in that report; that is why we have royal commissions. But the Government does not have to accept the entire report. The crucial thing is, how much should be accepted, how much should be deferred and how much should be rejected. Very often it is when making these decisions that the soup gets spoiled, and the over-all factors become blurred.
The Minister has very briefly indicated the propositions which the Government intends to put forward in a bill which I hope we will see later this day, perhaps at ten o'clock or, hopefully, earlier. In any event, if I may claim some affinity for the banking system, having in my earlier years spent some time in a humble capacity with one of the chartered banks, I should like to say that I believe there is some wisdom in erring on the side of caution with regard to our banking system. [DOT] (5:00 p.m.)
There have been some, shall we say, not necessarily progressive suggestions but some rather radical suggestions with regard to the Canadian banking system. Frankly, I am quite prepared to have not only a second look at these propositions, but even a third and a fourth look. Having listened to the hon. Member for Lapointe a few minutes ago indicate that the party with which he is associated intends to have a lot to say about this bill and the other bills, the one dealing with the Quebec Savings Bank and also the one about which no doubt the Minister gave notice today-and I am not sure that the happenstance will be entirely happy-I found it rather singular that the representatives of that party on the Banking and Commerce Committee last session were conspicuous by their absence

when we were dealing with trust and loan companies, which form an integral part of our financial system. I am wondering where they are going to fit into this particular context. In any event, it will be interesting to see the assiduity with which they attend the Banking and Commerce Committee when this bill comes before it.
The Minister has indicated that there is going to be some gathering in of other institutions under the umbrella of the Bank Act.


Walter Lockhart Gordon: It was recommended.


Norman Platt Lambert: Yes, there was a recommendation in connection with these deposittaking institutions, that there should be some greater control. In my view, there are a lot of institutions that are carrying on the business of near banking that must be brought under some form of control. Frankly, their operations are very close to the line. It will only take the failure on the part of one or more of these institutions to honour their depositors' credits to start a terrible run, and a lot of people will get hurt. A number of these institutions operate on what I think is a far too narrow principle, in so far as liquid reserves are concerned. They are well overextended in real estate and construction promotion. It would take but one or two bad breaks for the whole house of cards to tumble.
As a matter of fact, we have seen recently the suspension of dealings in shares of a certain corporation that was sailing high and wide in the field of real estate development and promotion. It is in trouble. It is strange that a number of these so-called near banks are tied in with concerns that operate in much the same manner in Canada. The two of them are so closely tied together, we must be most careful that a run does not start in that particular sector. I hope to see in the bill just what the Minister's intention is in regard to some form of control. Certainly this is what was behind the thinking of the Royal Commission.
I think there was some wisdom in this regard on the part of the Government in not agreeing with the wide ambit or sweep of these general recommendations that all deposit receiving institutions be brought under the mantle of the Bank Act, in so far as at least part of their operations is concerned. This would bring in such operations as the Provincial Treasury Branches of the Province of Alberta and, I presume, some savings associations in the Province of Ontario as
May 6, 1965

well as, unless specifically exempted, the caisses populaire or credit unions. These cais-ses populaires are already governed by legislation as a group, not by the Parliament of Canada but by the province. By and large their operations are under reasonable supervision. In any event, the scope of their operation is not in that highly speculative field where they are brought into an area of danger.
In so far as the Alberta Provincial Treasury Branches are concerned, certainly those of us who do not share the political views of the present administration in Alberta would like to see a great deal more light shed on their operations. The Provincial Treasurer merely brings in a record of the year's operations, showing either a loss or a profit. We do know that in the background there have been some rather odd things that have happened. There is no power to bring any of the officers of the system before a committee of the legislature. There is no committee examination, and there has not been any committee examination of the operations of the Provincial Treasury Branches. I think there should be.
In so far as the Minister's proposal for keeping out foreign ownership from our banks is concerned, it will be interesting to see just what has been written into the bill. I have had a number of things to say in the past about the so-called Canadianization of companies, and also some of the restrictions that were placed on the ownership of life insurance companies in Canada as well as some of our trust and loan companies. It will be interesting to see just how the Minister proposes to define domestic ownership of a bank. Is it going to be based on citizenship? Is it going to be based on residence? If it is merely on residence, then I do not believe that is workable, because one could drive a coach and four or, if you want to update it, a tandem truck through the principle of residency in so far as the Canadianization of companies is concerned. Subject to the provisions of the bill, I would have thought one could leave the question of domicile or residence of a shareholder alone. One could simply say that the shares held by foreign residents or foreign citizens or organizations would not be votable. This is the essence of control, the voting right of shares.
[DOT] (5:10 p.m.)
I do not believe we should discourage investment in the shares of Canadian chartered banks. After all, they are a very valuable asset in any investment portfolio.
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I believe it is wrong to say that you are not going to be able to invest in them. If we wish to maintain control of our chartered banks, and I think we should, then why not impose a disability so far as voting shares are concerned or make provision for the creation of a class of non-voting class of shares? After all, this exists among certain types of corporations, and I think one would get into less trouble. At least it is a very arguable point.
One less acceptable feature of the statement made by the Minister appears to be the intention to bypass Parliament with respect to the chartering of new banks, making it possible to charter, create or inaugurate banks via letters patent, with some sort of formula of voidability. I do not know whether this would be by way of private bill, or petition to Parliament, to invalidate the issue of letters patent issued by the Registrar of Companies. When the whole thing is brought in it will be interesting to see just what is the formula. I am not too sure that this will be so successful. As a matter of fact, I think this is really a very pragmatic approach to a certain problem that exists today, and is an attempt to get away from what had been a problem with regard to three applications.
Well, Mr. Chairman, one of the applications did have something radically wrong. I do not think that a provincial government should have the right to invest directly in the voting shares of a chartered bank; and notwithstanding all the things said by the hon. Member for Lapointe with regard to the desirability of provincial governments, or the people through governments, participating in the profits of a chartered bank, I think we could spend hours showing how the wrong type of influence could be brought to bear with regard to direction and investment.
As a matter of fact, I could take the hon. Member for Megantic aside and suggest some ways in which ties with near banks and the use of influence between them and chartered banks created certain abuses. But I do not feel that there should be an absolute bar on ownership of bank stock by certain emanations of the provinces, where they are using them as investment funds, and in this connection I suggest funds such as a state university might have in trust for scholarships, or workmen's compensation funds, and others. There should not be a disability where these are used for bona fide investment purposes.
As a further safeguard against any undue influence there could be a provision that
10C2

May 6, 1965
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shares should not have voting rights when held by a province. But surely to goodness if the emanation of a province, a crown company, crown organization, or public body set up by a provincial legislature has funds to invest, it has the right to include in its portfolio valuable bank stocks which give a good return. Why disable them to that extent? I do not think such an ownership would give rise to the danger of a question of control by a provincial government, but certainly I do not think any provincial government should be allowed to enter directly into the ownership of bank stocks where, by reason of its position, it might be able to elect directors and to influence the placing of accounts in a certain bank.
There are all sorts of abuses that could arise. I think the hon. Member for Megantic had some experience of chartered banks at one time, and I think he knows what I am talking about when I say you can play around with the placing of accounts. Certainly he is well aware-


Mr. Langlois:: On a question of privilege, Mr. Chairman, I hope the hon. Member for Edmonton West is not insinuating I played around with accounts? If he is I would like him to clarify that statement.


Norman Platt Lambert: The hon. Member misses the point. I am certainly not suggesting anything like that. I am perhaps attributing to him too much knowledge in regard to banking operations. He would be aware, if he knew the job of banking-and I do not know whether he does-where abuses could creep in, and through his experience surely he has become aware of how things could be influenced.


Raymond Langlois: I have known people playing around, but not to get away with it.


The Chairman:: The hon. Member's time has expired.


Norman Platt Lambert: Thank you, Mr. Chairman. I hope we will see the passage of this resolution tonight.


Mr. Howard:: Mr. Chairman, I thought the rule guaranteed that the resolution would pass tonight, and that regardless of what occurs at ten o'clock the resolution will be carried.
If I may say, with respect, I thought the Minister was rather vague in explaining what the bill will contain and if, by paraphrasing, I may recall what he said, he stated he would talk on the resolution stage about the general

principles contained in the bill, and then on second reading he would deal in more detail with some of the principles and ideas outlined in it. This approach, of course, makes it somewhat difficult for other speakers to do anything else but the same sort of thing, that is, to talk in the same general terms as the Minister and make comments equally general in nature until we see the contents of the bill itself.
My position with regard to the investment by provincial governments in chartered banks-and I am sure this is no surprise- differs from that of the Minister and the Government, and I presume also, of the Official Opposition. We think it is the correct course to follow, to permit a provincial government to invest money in the share capital of banks chartered under the Bank Act. If there is some concern on the part of the Government that a provincial government may, by large investment in the share ownership of a bank, thereby become the controlling factor in that bank, then perhaps there might be a case made for limiting in a percentage way the amount of investment which a provincial government may have in any one chartered bank.
This concern about what originally was a theoretical concept concerning provincial governments engaging in the banking field arose by reason of the petition last year by the promoters of the Bank of British Columbia, and the statements by Premier Bennett of B.C. that his government endorsed the idea and would invest money in the Bank of British Columbia, o (5:20 p.m.)
Then, in an effort to convince the Senate that the B.C. government was not interested in control of the bank, the B.C. government, on the insistence or upon the objection of the Senate Banking Committee, gradually changed its position by reducing the amount which it said it desired to invest in that bank. If memory serves me correctly the final proposal made in the Senate committee last year was that this limit should be 10 per cent. This is presumably a reasonably small percentage of the share capital of a bank, and this may be the extent to which the Parliament of Canada would allow investment by provincial governments in shares of chartered banks. To prohibit such investment completely would, I suggest, be most unfair to those provinces, especially in the West, who have for years been at the mercy of banking interests controlled in Eastern Can-
May 6, 1965

ada. It would be an interference with their legitimate desire to do something worth while and constructive with provincial funds. It would be a direct interference with the constitutional right of a province to do as it sees fit with its own money.
I foresee a running battle lasting three or four years between the Province of British Columbia and the Government of Canada on this question, because as I understand it the provincial Legislature has already passed an Act permitting it to do the things which the Minister of Finance tells us that through these amendments to the Bank Act he will not allow them to do. I wish Premier Bennett well in his ventures in this direction because the financial welfare of British Columbia is at stake, as well as the political integrity of that province and its rights under the constitution. I foresee Premier Bennett testing this case in the courts to determine whether or not Parliament has the right to prevent a provincial government investing its funds in this way. I contend that if a province wishes to invest in private chartered banks it should be permitted to do so without interference from the Federal Government.
When it comes to the international control of banks in Canada the New Democratic Party has made its position clear on a number of occasions. It has done this not only with respect to banks but with respect to other sectors of the economy. We believe we should be taking steps, first, to prevent further encroachment by interests in the United States and other foreign countries upon the control of industry in Canada, and, in the second place, to regain control ourselves of the industries which have been lost. In this regard I will do no more than express the hope that the announcement made by the Minister regarding this concept of international control will really mean something worth while and that it will be borne out by the legislation itself.
A few days ago we had occasion here to deal with a petition for a bank, the Laurentide Bank Bill. The words I had to say at that time were to the effect that I wished the Bank Act, when amended, would contain a provision to prevent Parliament having to deal with individual petitions for the incorporation of private banks. I suggested that this would be done better by following the procedure used when other companies are incorporated. I am pleased to note that the Minister has agreed to this proposal with such alacrity and has finally placed it in the bill he is about to bring forward.
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I will say one thing more. If the House of Commons is to have the right to nullify the incorporation of a bank after it has been incorporated by letters patent-I believe that is the expression-then I submit that the arrangements for nullity must be based on the principle that all Members in the House are equal. Any Member of the House of Commons or of the Senate, for that matter, if this is to be a legislative process, should have the right to introduce a bill to nullify the incorporation of a bank and provision should be made to guarantee that the issue will come to a vote. We are all familiar with the process which goes on now. Because the Government has control of the Order Paper and is able to bring Government Bills forward at any time it chooses, the Government can ensure that its legislation reaches the point where a vote is taken. Either that, or the Government decides to withdraw it after objection is made, or determines not to proceed further with it as has been the case on a number of occasions. A bill introduced by a private Member does not fall into this category: a Member who sponsors one immediately loses control of it. None of the public bills now appearing in the names of private Members will, presumably, be voted upon. No conclusion will be reached upon them unless the Government is gracious enough to so permit. We are only allowed one hour a week to deal with these items and they will never be allowed to come to a vote unless the Government decides that this is desirable. They will be talked out.
If Parliament is to have the final say as to whether or not a bank should be incorporated by letters patent, then any Member of the House should have the opportunity, within a time limit-and I think it should be a reasonably long time limit; a year, for example, not a matter of days-to introduce whatever mechanism is available, whether a resolution or a bill, and it should be guaranteed that such a measure would come to a vote. It should be the responsibility of the Member who introduces such a motion to make a case for nullifying the incorporation of a bank and to present all the relevant arguments in support of his contention. If he succeeds in convincing the House, a vote should be taken and that should be the end of it. Similarly, if he does not carry the rest of the House with him, the matter should end there. But it should not be allowed to fall by the wayside just because the Government intends to operate the rules as it pleases.

May 6, 1965
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That is all I intend to say now. We look forward with interest to the details of the bill itself and we hope that some of the points we have raised will be contained in the measure in the form in which we have raised them. If not, we shall proceed to deal with it point by point and word by word if necessary to ensure that the Bank Act operates so as to enhance the financial position of Canadians and enable them, first, to control their own financial resources and, second, to permit them whether directly or through a province to exercise a degree of control by way of investment.
[DOT] (5:30 p.m.)


Mr. Lalulippe:: Mr. Chairman, at this stage of the business of the house I would feel very remiss if I did not say a few words on this resolution respecting chartered banks.
Certainly there would be many things to say on chartered banks, because they are great institutions; they are institutions which do some good in society, but they are also harmful, and therefore they are in need of reforms, and those reforms we must discuss, we must show them up in order to find solutions which will meet the needs of a greater number of people and will provide more efficient service to them. Certainly, they are service institutions, but also exploitation institutions.
The resolution before us has already been discussed several times and will be discussed again often in the future. Here is a group of men who want to use the privileges granted by the Bank Act in order to do a lending business under a charter which gives them certain privileges.
But we are convinced that the privileges granted those private institutions have become disastrous for the people, because those institutions offer credit only by creating debts; they take under consideration neither public nor private capital. They are far from taking into consideration the production achieved by Canadians when they issue their debt credit, they "manufacture" credit according to their legal tender deposits, which they multiply 8 or 10 times, as many times as the deposits or legal money are redeposited. The most interesting thing for those institutions is that with a bank charter, they can "manufacture" their credit on request, have it passed through the subsidiary of their finance, do unlimited exploitation and practice further the old usury criticized by many citizens who ask that we bring some order in our financial house.

Mr. Chairman, the D.B.S. announced on September 8 that the debt of Canadian consumers reached, at the end of June 1964, $5 billion and some odd hundred million and that the debt of businessmen in 1964 reached $8 billion and a few hundred million; so it is a borrowing debt of $14 billion, a new debt for individuals. This proves that Canadians live or merely exist on borrowed money or credit, if you prefer.
I know that the Minister of Finance is right when he states that Canada is enjoying an unprecedented prosperity, but I would say that only a handful of financiers, are enjoying that prosperity, while those who must borrow to make both ends meet, who have to repay more than they obtained, are deprived to the extent that they have to live largely on public charity.
Mr. Chairman, when those figures were annunced, it was explained in the newspapers that the increase in the debt of private individuals resulted from too many consumer credit facilities.
That might be, but this indebtedness proves three things: Canadian consumers have needs; there are goods to meet those needs; there is not enough money to meet those needs.
If Canadians must borrow money without the permission of those who control credit and money, the needs can be met, but if they refuse, consumers must starve. Therefore, the dilemma is either to starve or to go into debt. That is where the present system has led us.
Mr. Chairman, part of those debts is actually owed to finance companies, but the loans granted by finance companies or the sales on credit allowed by business concerns are mostly financed by bank loans made to those finance companies. The billions of dollars owed by Canadians are therefore owed to bankers, those who control and create credit in this country.
To those billions owed by Canadian consumers, one must add the billions owed by the federal government, the billions owed by the provinces, the billions owed by the municipalities, the billions owed by the school boards and the billions owed by those who have mortgaged their homes. According to statistics, the total debt owed by Canadians is $85,000 million. That amount bears interest and is the equivalent of more than $4,000 per capita or $20,000 for an average family of five.
May 6, 1965

It is the financiers of those institutions, the masters of credit, who thus dominate our governments, who threaten them with a big stick and who appoint their own men, like Kierans, for instance, to key positions. Financiers control the provinces, the municipalities, the towns, the school boards, the universities and every institution.
Those same financiers hold a power of life and death over all institutions; they control everything in Canada.
Those are the real masters, and not the people who are working, who are building up this country, who are manufacturing the products, the goods that are needed. The workers, the builders, the producers are the "have nots", they are controlled, and in debt. The "haves", those who hold a controlling hand, who force people to go into debt are those who are controlling credit, manufacturing credit so as to produce debts. It is an institution of that kind that this resolution has in mind. We need not go to Russia, Mr. Chairman, to see a dictatorship, we have one here in Canada, in this so-called democratic country. It is the financiers' dictatorship that controls all human activities. The dictatorship that has a power of life and death over each one of us is the financial dictatorship, the one which flourishes in a democracy.
[DOT] (5:40 p.m.)
There are some who find that normal, who consider that such a system is sound and perfectly normal.
I say that those who think so are like people who stick their nose in manure and do not smell anything or even think it smells good. The fruits of the financial system are rotten, and yet it is proclaimed that the tree which bears such fruits should be preserved and protected by legislation.
The Creditistes have realized that it is the financial system, this debt building system that has got to be changed if we are to get rid of our collective and individual debts. That is why they suggest that financial credit should reflect real credit and the products which do or could exist, considering the productive capacity and the needs to be met.
Mr. Chairman, the resolution does not meet the requirements or the needs of the nation; what Canadians want and demand from their institutions is social service.
It is between the borrower and the lending banker that the use of the required money is discussed; that is where the verdict on proposed production is reached and where orders to speed up or slow down production
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originate. The banker's books are the only thing that counts, the needs of the consumers do not count in the least.
Mr. Chairman, why must the sovereign Canadian government, which has sole jurisdiction over money in this country, borrow at interest from chartered banks, and then levy taxes on the people to pay this interest?
Chartered banks are creatures of the Canadian parliament; they literally owe their existence to parliament and every ten years they have to apply to parliament for renewal of their charter without which they would cease to exist. All their rights and privileges have been obtained from parliament, even the exclusive right of creating and issuing money. Furthermore, when the government, a sovereign body representing the whole nation, needs money over and above taxes collected or savings borrowed from the people, it has to stoop before its own creatures, the chartered banks, and beg them for a loan or credit which it has the exclusive right to issue.
Can you imagine that? Did you ever hear of such nonsense? Yet, we recall that to finance the war, chartered banks made money readily available, but in peacetime if you want money for food, clothing and shelter, you cannot find any, unless the government guarantees the loans made to provinces or municipalities through such agencies as the Central Mortgage and Housing Corporation and the Industrial Development Bank.
Therefore, Mr. Chairman, why should all the money put into circulation in the country take the form of a debt bearing interest, when it is a recognized fact that the government is empowered to use other means to ensure that there is always enough money in circulation in the country to meet the needs?
Mr. Chairman, under the 1954 amendments to the Bank Act, the Bank of Canada can require the chartered banks to increase or decrease their cash reserve which at the present time represents from 8 to 12 per cent of all their liabilities.
The Bank Act and the Bank of Canada Act should both be amended in order to make it unlawful for chartered banks to use the credit advanced by the Bank of Canada to the Canadian government as a cash reserve to issue new credit. The same objective could also be achieved by requiring the chartered banks to progressively increase their cash reserve, even up to 100 per cent of the amount of their deposits if necessary.
At the same time, the Bank of Canada should be authorized to advance chartered

May 6, 1965
Bank Act
banks all the cash reserves they might need to continue issuing bank credit by granting as many loans as required to promote the progressive development of the national economy. The object of such proposals is twofold. The first, and it is the most important, is to see to it that business and industry continue to receive from chartered banks all the money required to maintain Canadian production at full capacity. It is only through the full and progressive use of our material and human resources that we shall be able to ensure the continuous prosperity of the nation, and the highest possible standards of living for its people.
Such standards, Mr. Chairman, will preclude the chartered banks from issuing an unlimited amount of money. Moreover, the money put into circulation by the government would provide the country with a purchasing power which would not represent a debt toward the chartered banks but would nevertheless be available for trade and industry and assist them in paying part of their borrowings from the chartered banks and in keeping their business in operation.
Mr. Chairman, under the circumstances the greatest mystery of all is to see a sovereign government, our own Canadian government, which has sole and exclusive authority for regulating, controlling and issuing money in the country, transferring such a sovereign prerogative to private institutions which operate for their own advantage, and thereafter requesting from them the money it needs for the general welfare of the country. This goes beyond the bounds of comprehension. We hold that before borrowing from private banking institutions or outside the country, the government should first of all use the Bank of Canada to obtain the money it requires from time to time, in addition to its revenues from taxation, to help finance, especially in the field of public enterprise, the development of Canada. In fact, why should Canada borrow from chartered banks and then tax the people in order to pay interest, whereas it can get the same funds, interest free, from the Bank of Canada, a public institution which was established by the government to regulate and control the issuing of money and credit in Canada.
Mr. Chairman, today the federal debt has become so oppressive that we must think seriously about the establishment, through our modern banking system and our treasury institutions, of an interest-free debt. If the government would borrow only from its own central bank without interest, there would be
[Mr. Latulippe.l
no interest charges at all. The capital would be paid off and the principle under which too much money should not be injected into the system would be safeguarded.
None the less, our debt must be paid. The amount of interest must be reduced. There is not a single member representing Canadians who has asked that interest rates be lowered; they are too high and they are a means of exploiting the public on a large scale.
Mr. Chairman, this will only be done by gradually replacing our interest-bearing debt by money at cost provided by the Bank of Canada.
Immense services were rendered by many important institutions in this country. But today, with our colossal debt and its constant increase, the government or the governed must take some measures in order to overhaul the banking system, to check the control on money issue and credit under which many Canadians are exploited.
Some reforms must be brought about, and in my opinion too few people advocate such reforms. I do not know how those who do not accept those reforms and can accept that such an anarchical system-


Lucien Lamoureux: I regret having to interrupt the hon. member but his time has expired.
Is the resolution adopted? e (5:50 p.m.)


John Carr Munro: Mr. Chairman, on a question of privilege, I think it should be noted that during the debate in this chamber on an important subject such as this not one Member of the New Democratic Party is present in his seat.


Mr. Winkler:: It is interesting to see that
you are back.


Mr. Pelers:: Mr. Chairman, on the question of privilege I should like to remind you that the statement made by the hon. Member is incorrect. As usual the hon. Member is misinformed.


Lucien Lamoureux: Order, please.


Eric Alfred Winkler: You should have said you were happy to see him back.


Lucien Lamoureux: Order, please.


William Arnold Peters: But I am not happy to see him back.


Mr. Thompson:: Mr. Chairman, we found the statement of the Minister of Finance in relation to the revision to the Bank Act of
May 6, 1965

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great interest, and we now await with greater interest the bill to follow, which the Minister has suggested will be a complicated one. Until we are able to study the detail of the new legislation as it will appear in such a bill, it is difficult to speak at any great length on this resolution, except to outline certain basic fundamentals which relate to banking, and to refer to several points the Minister has made.
In Canada banking is big business. In a nation as large as Canada big business is necessary, and I am not opposed to the fact that some of our nation's businesses fall within that category. However, I am concerned with and opposed to big business when it does not serve the best interests of all Canadians, or when it uses the force of its size and privileges solely for its personal interests, instead of for the general welfare of Canada. Therefore it is of great importance to consider seriously any legislation which relates to the banking system of Canada.
The bill that will be introduced in this chamber following our debate on this resolution is one of great importance. It is perhaps the most important piece of legislation we will have to deal with during this entire session. It has been noted with much interest that reference has been made to the recommendations of the Royal Commission on Banking and Finance. The members of that Commission deserve our commendation and gratitude for a very important job, done rather efficiently and effectively, in that they have reported concisely and without too much detail the situation as they found it. It is also interesting to note that the cost of that Royal Commission was comparatively less than the cost of other royal commissions which have been appointed in recent years. The Royal Commission on Banking and Finance certainly used discretion and caution in the expenditure of public funds.
I should like to make a few comments regarding one or two of the points made by the Minister. He acknowledged a recommendation of the Commission to the effect that coverage of the Bank Act should be broadened so as to include institutions other than chartered banks which accept deposits. This seems to mean that institutions not covered by the Bank Act will not be able to engage in the business of banking. This is a sound principle.
Obviously the fact that many near banks have developed in recent years is proof
enough that the Bank Act as it now functions does not adequately cover commercial operations requiring banking service, or operations closely related to banking business. The Bank Act should be broadened to cover these institutions, but it must be remembered that the fact that these institutions have developed is also proof that the Bank Act and our banking institutions operating under that Act have not been adequate to meet the over-all needs of the economy. If that were not so, I do not think many of these banking institutions, or near banks, would have developed as they have.
However, Mr. Chairman, there is a word of caution to be said in this regard. The Minister has a very great responsibility in the expansion of the Bank Act regulations, to include and cover some of the near banking operations, to see that they are not so restrictive as to prevent these institutions from carrying on a very important job. I think it is obvious that we require more competition in the banking field, and any expansion of the Bank Act which would permit more competition is a good expansion. The Minister must exercise caution in this regard so as not to defeat the very purpose which I think is intended by the decennial revision of the Bank Act, with which we are now dealing.
Any change in the Bank Act should not be such as to interfere with operations like the Treasury Branches in Alberta, or credit unions in Canada. There is a very genuine service rendered by these institutions. However, these services should logically be covered in some measure by the Bank Act, but not to the point where these institutions and the services they provide are restricted.
The Minister also has a great responsibility in relation to the powers of the Federal Government over the entire banking picture in Canada. I agree that banking policy, and general policy in relation to money and the money supply within our economy, must in some way come under a central authority. At the same time it is important that this policy be not misused, or abused, to the point where it interferes with provincial or local governments carrying on a legitimate business, a right which is theirs under the autonomy ascribed to them by the British North America Act.
Mr. Chairman, I note that it is six o'clock.
At six o'clock the Committee took recess.
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The Committee resumed at 8 p.m.


Robert Norman Thompson: Mr. Chairman, without
going into all the details of the remarks made this afternoon by the Minister of Finance, I would say that there are a number of other points which he brought up which I believe are commendable, and it is a good thing they are being included in the revision of the Bank Act. It is in accordance with the recommendations of the Royal Commission on Banking that banks be allowed to make conventional mortgage loans. I note also the Minister has stated that the banks will receive the same rate of interest for those loans as is presently charged on national housing mortgages.
I note, too, that the Minister intends to retain the 6 per cent ceiling on interest rates.
I think this is a sound suggestion. As a matter of fact, I believe that as more competition comes into the banking business we can well expect that interest rates will come down even below this. It is probably good for an expanding economy such as we have, particularly at the moment, that the cash reserves of the chartered banks be lowered from the required 8 per cent to 7 per cent. I note with some interest the Minister's reference to the ratio of cash reserves to the different categories of deposits. We will have some remarks to make with regard to this provision later.
It is interesting also to note that the Government intends to permit the incorporation of new banks through letters patent, with the House of Commons having the right to annul such letters patent within a stated period of time. This seems to be a reasonable approach. So long as there are the requirements which any proposed bank must meet before it is permitted to be incorporated, then it should not be necessary to have that incorporation through Act of Parliament. However, there is a real danger here. There is a lesson to be noted from the present situation of banking in the United States, a warning on one hand but an indication of a freer policy in regard to banks on the other. During the last ten years in the United States there have been 614 new national banks come into being. In addition to that, there have been nearly twice as many state banks come into being. It has to be admitted that there have been a number of bank failures, although in comparison to the number of new bank charters the number of failures is small.

DEBATES	May 8, 1965
I mention this to the House not only with regard to the fact that there will be this new policy for incorporation of new banks but also to suggest to the Minister, when he states so emphatically that banks must be kept definitely under the direct control of the Federal Government, that in the United States there are two types of banks. As long as they are both part of the federal reserve system, they apparently operate quite effectively. There are those incorporated under national charters and those incorporated under state charters. While agreeing in principle with the statement the Minister has made, certainly he should not become so rigid as to prevent certain types of near banks or provincial governments from carrying on a legitimate phase of banking, provided they come within the over-all framework.
There are just one or two more comments I should like to make very briefly as they relate to banking. When we are considering the revision of the Bank Act, we ought to be aware of the actual purpose and function of a bank. I went to a dictionary to find out just what was the definition of a bank. I did this because, as I went back to the Statutes of Canada, particularly to those referring to banking, I found that there were various descriptions, but I found it very difficult to get a definition of a bank. Webster's Dictionary, second edition, says that a bank is an establishment for the custody, loan, exchange or issue of money; for the extension of credit. According to the Statutes of Canada, volume I of the 1953-54 edition, chapter 48, which is the Act respecting banks and banking, section 2(c) defines a bank as a bank to which this Act applies. This is the sum total of the definition.
In the same volume, chapter 47, I found an Act respecting savings banks in the Province of Quebec. In section 2(a) I found that a bank is here defined as a bank to which this Act applies. This all seems rather confusing. If we were to go to the Statutes of Canada to determine just what the terms of reference of a bank are, or the responsibilities of a bank, I do not think we could find an answer. It is interesting to note that according to section 2(c) a bank cannot lend or invest money or make advances.
In reading a book from Britain entitled "The Theory and Practice of Banking" by one Mr. H. D. McLeod, I found a definition which stated this:
The essential and distinctive feature of a "bank" and a "banker" is to create and issue credit payable on demand, and this credit is intended to be
May 6, 1965

put into circulation and serve all the purposes of money. A bank, therefore, is not an office for borrowing and lending money, but a manufactory of credit.
Then I came across a statement by a former Chancellor of the Exchequer, Right Hon. Reginald McKenna, Chairman of the Midland Bank of London-the largest bank in the world-who said:
I am afraid the ordinary citizen will not like to be told that the banks can and do create and destroy money. The amount of money in existence varies only with the action of the banks in increasing and decreasing the bank deposits and bank purchases. Every loan, overdraft, or bank purchase creates a deposit, and every repayment of a loan, overdraft or bank sale destroys a deposit.
Then, Robert H. Hemphill, who is likewise a noted banking and financial authority, this time from the United States, also has something to say about this subject.
[DOT] (8:10 p.m.)
Writing in the foreword of a book on money by Irving Fisher he stated:
If all bank loans were paid, no one would have a bank deposit and there would not be a dollar of currency or coin in circulation. This is a staggering thought. We are completely dependant on commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money, we are prosperous; if not, we starve! We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible-but there it is. It

-said Mr. Hemphill-
-is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it is widely understood and the defects remedied very soon.
So, Mr. Chairman, according to these quotations we find that banking is a very vital and important part of our economy, and as we discuss the revisions to the Bank Act for the period ahead of us, it certainly behooves us to be very careful that we make sure of what we are doing.
In Canada our money supply is made up of Canadian currency plus bank deposits. Approximately 20 per cent of this, I believe, is created by the Bank of Canada, and the remainder by the chartered banks. That is why I appreciate the fact that the Minister at this time is simultaneously bringing in a bill which is intended to deal with the Bank of Canada itself.
It should be noted that it costs our banks very little to create our money supply. Most of it is nothing more than figures in a book, as is taught in many Canadian schools. A cer-
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tain textbook defines it as being created out of thin air. The strange thing is that our money supply constitutes an interest bearing debt against the Canadian people. Canadians are paying hundreds of millions of dollars yearly in interest on borrowed money because of certain imperfections in our present Bank Act.
I would say that the two basic imperfections in our Canadian money and banking system are as follows. One concerns the manner in which our money supply comes into existence, the other the lack of a definite relationship, between the amount of money in circulation and the value of the production of goods and services within the country. When these two imperfections are taken out, our banking system will function much more effectively than at the present time, albeit I believe we have one of the finest banking systems anywhere in the world.
We in Social Credit do not for a moment suggest that the banking system as it presently functions should be destroyed; rather, it should be preserved and those things which can be regarded as imperfections should be corrected in order that money can function according to its intended purpose, acting as the medium of exchange so that the production of goods and services within the country can be distributed to the consumer for whom they are intended.
I was a little bit disturbed by the terminology used this afternoon by the Minister as he related the ratio of reserves to bank deposits. Actually banks do not lend their deposits. What they lend is bank credit, and this money appears as a deposit in the borrower's account without lowering any other deposits and without increasing the supply of money when a loan is made.
I was interested to note that Mr. Graham Towers, when he was Governor of the Bank of Canada, stated very clearly 11 years ago, when revisions to the Bank Act were being considered at that time, and when replying to a question as to whether or not banks lend their deposits:
The banks cannot, ol course, loan the money of their depositors. Now what the depositors do with these savings is something quite beyond the control of the banks.
That can be found on page 455 in the 1939 Banking and Commerce Report, which he was quoting at the time. Therefore, Mr. Chairman, I would say that our banking set up is something that we owe it to ourselves- certainly we owe it-

May 6, 1965
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Lucien Lamoureux: Order. I regret to interrupt the hon. Member but his time has expired unless he has the unanimous agreement of the Committee to continue.


Robert Norman Thompson: I wish to finish my sentence, Mr. Chairman. We owe it to ourselves and to the nation to come to grips with the real issue that is involved in our whole banking set-up. As we consider the revisions to the Bank Act, this lengthy and complicated Bank Act as the Minister himself has described it, we must concern ourselves with how we can make our banking system work more effectively, with greater competition, because certainly it is one of the greatest enterprises we have within our economy, and which I believe, must continue to operate, as far as possible on a private enterprise basis.
[DOT] (8:20 p.m.)


Gérard Perron: Mr. Chairman, my remarks at this stage will be very brief and consist only in a few statements of principle. I will also try to replace in its context the conception that the members of my group have on the definition of banks.
During his remarks this afternoon, the Minister of Finance (Mr. Gordon) described banks as institutions authorized to accept deposits and carry out transfers of those deposits. If this is the only definition that can be given of banks doing business in Canada, within our present banking system, I believe this is restricting and over-simplifying the question. Other banking authorities have given a quite different definition of the more important role fulfilled by banks within the Canadian banking system.
At this time, I would like to quote a few extracts from the report of the "Conseil d'ex-pansion economique incorpore de Quebec" which, in a pamphlet entitled "Our Chartered Banks" outlined the operation of our banking system and the creation of credit.
First, a definition of money is given.
The public are often under the impression that money is essentially a bank-note while actually, judging by the way Canadians make their payments, monetary operations are largely made by means of cheques or internal accounting operations at the banks (transfers of funds from one customers account to that of another customer).
Money as an instrument of payment or means of exchange may take various forms: coins, paper money, cheques, etc. On the other hand, money is used in many ways in the national economy.
What is money used for?
(a)	As an instrument of payment, money is accepted by everybody by virtue of its legal value as an instrument to pay debts;
TMt. Thompson.]
(b)	As a value standard, it allows each and everyone to deal with people in terms of prices without any difficulty;
(c)	As a savings instrument, it ensures future purchasing power for a relatively long period.
Further on in this book there is a very-important statement by a person who knew all about the banking system of this country. In 1939, before the parliamentary committee on banking and commerce, the president of the Bank of Canada, Mr. Graham Towers, answered certain questions in this way:
He was asked:
Is it true that banks create a medium of exchange?
He answered:
That is correct. That is their function... it is their business just like a steel mill produces steel.
That can be seen at page 287 of the 1939 report of the committee on banking and commerce.
He went on:
Their manufacturing operation consists in making the necessary entries on a card or in a ledger with a machine or a pen.
That can be found at pages 76 and 238 of the same report. Further:
In general terms, any new money comes from a bank in the form of a loan.
This is found on page 561 of the report. Those were answers by Mr. Graham Towers, the then governor of the Bank of Canada.
To another question he gave the following answer, that the Minister of Finance should certainly heed:
Will you tell me why a government that has the power to create money should relinquish that power in the hands of a private monopoly from which it borrows what parliament can create, and borrows with an accumulation of interest which could lead to national bankruptcy?
Mr. Towers answered:
... we realize of course that the amount thus paid covers the operating cost of the banks plus the interest paid to depositors. However, if parliament should so desire, it certainly could change the way the banking system operates.
I was referring to page 394 of the report of the committee on banking and commerce.
As seen on page 12 of the publication of the economic council, those people highly trained in banking asked this question:
But is this how banks create money?
Answer:
Obviously, it is a manner of speaking. By opening a credit, the banker has made available to his customer $10,000 of new money (in account: bank money).
But if the bank can create money, how is it interested in receiving savings?
May 6. 1965

Here we revert to the principle of savings. They are merely cash reserves which, as my colleague from Lapointe (Mr. Gregoire) said this afternoon, make it possible, under the Bank Act, to multiply by 12, and even sometimes by 14| if the cash reserve is lowered from 8 to 7 per cent. That is giving the chartered banks a greater possibility than the one they already have to create more money and get 6 per cent interest on loans extended through mere consent, and even more if the right of banks to lend on mortgages is extended.
This multiplication of credit is striking when one considers that it necessarily results in the piling up of debts.
This afternoon, the hon. member for Edmonton West (Mr. Lambert) was proud to mention that Canada has the best banking system in the world. Perhaps it would be wise for him to look at the situation of consumers and Canadian wage earners to whom chartered banks refuse loans which they need to get immediately the things they cannot pay for with the savings they would have accumulated one, two or five years before, if they had not been so heavily taxed, which compelled them to buy on the instalment plan.
I have here the report on general indebtedness of the Canadian people:
At the end of April 1963, Canadian consumers owed $745 million to finance companies for consumer goods; $393 million for purchases of commercial goods; $580 million to small loan companies; $36 million for goods bought on the instalment plan; $366 million to departmental stores; $181 million to stores selling furniture and electrical appliances; $1,544 million to banks for personal loans.
Such was the situation of the little people, who buy the things they need in chain stores and small local stores and who must get loans from finance companies.
Just yesterday we received the report of the operations of small loans companies and money lenders for the year ended December 31, 1963. We noticed that the number of loans granted increased considerably, because those small companies opened new branches throughout the country. The increases are rather heavy for the few years covered by the report: from 1961 to 1963 the number of borrowers whose loans did not or practically not exceed 1,500 amounted to 1,169,699 out of a population of 20 million Canadians. If you take out the old people and children under 20, I assure you that you get quite a high percentage of heads of families who are obliged to seek help from those loan sharks.
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In 1963 the number increased rather considerably since 1,380,000 people borrowed from these companies a total of $769,648,673. And these are not loans at 5, 6 or 7 per cent interest, but loans at 12, 18, 24 per cent and sometimes even more.
How many small businesses are denied loans by banking institutions, which, nevertheless, increase their assets at approximately the same ratio as the increase in public and private debts in Canada.
For the enlightment of those who, in a few years from now, will read Hansard and see how our wise administrators, the Minister of Finance and his supporters, could boast on May 6, 1965, that the Canadian banking system is the best in the world, I shall give an account of the federal financial situation for the year ended on March 31, 1961.
I have here a table showing the federal financial situation from 1868, that is, the first balance sheet after confederation, up to 1961. It is very interesting to note the increase of debts.
At the end of the year 1868 the net debt amounted to $75,757,135, whereas in 1961 it had reached $12,437,115,095.
Let us look at the per capita debt. This is something rather interesting, because we see that as this country develops, as it gets better in the field of productivity, as science progresses for the benefit of humanity, debts are increasing under the best banking system in the world.
[DOT] (8:30 p.m.)
A fine progression indeed. In 1868, the per capita debt was $21.58. It increased to $47.18 in 1911, to $773.59 in 1952, and, in 1961, it had reached $684.56. Quite a nice progression in the field of per capita debt. Under this system, the government, instead of using its sovereign authority on its own institutions, the Bank of Canada continues in 1965 its revision of the Bank Act, whereas such revision should have normally taken place in 1964, but we had to wait for the report of the Porter Commission to establish future data and future guidance.
Instead of using its authority, according to the resolution now under consideration, the government seemed to favour this system which they are fond of considering as the best banking system in the world. However, the power to impose interest, this scourge of contemporary society-an ever increasing power-belongs to a small clique, whose financial influence becomes stronger and who

May 6. 1965
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controls the economic and social life of the nation; as well as the life of an ethnic group in the country, and even family life to such an extent that most of the time, the main victims of this exploitation are compelled to have their purses emptied even more rapidly in resorting again to finance companies, which are but the emanation and the end result of this banking system that has been praised.
We are coming now to the interest item, of which the Minister of Finance is proud. Here is the per capita progression. In 1868, the earnings per capita, that is the income, were $3.95, in 1911, $9.81 and in 1952, $284.17. The debts have increased at the same rate as the cost of living. Such is the system about which we hear so much praise.
Another point that I should like to bring to the attention of the house at this stage has always been the object of great praise also. This afternoon, I heard members on the government side applaud one of their own who spoke right after the hon. member for Lapointe. The speaker in question stated that it behove the federal government to reassert its authority in the field of banking.
Cheers went up from the Liberal benches but, a few minutes later, the same member mentioned that the exchange rate in New York had greater effect on our means of exchange than the Bank of Canada itself. It is sought to strengthen Canada's banking system through a revision of the bank act, while government circles already recognize that the rate of exchange in New York has greater influence over the control and stability of the Canadian dollar than the Bank of Canada.
Is that not making fools of the Canadian people? Speaking precisely of the reasserting of federal authority in the field of banking, the issue under consideration, the hon. member for Edmonton West mentioned the Quebec savings banks and advocated closer control over Alberta's treasury house and Quebec's caisses populaires, in accordance with this need for reaffirming the federal government's policy.
I am afraid that faced with this drive for decentralization under which economic regionalism is getting stronger, the provincial governments, conscious of their responsibilities under the Canadian constitution, will want to take themselves the necessary means to remedy a situation which has been lasting for too long, the control of the federal government to which we had to surrender our rights little by little. We are also conscious

of the fact that Canada's banking system has impoverished families in years of plenty and that it works well only in periods of world slaughter or on the eve of an economic depression which might be worse than that we experienced from 1929 to 1939.
This devaluation or lowering to 7 instead of 8 per cent of the amount of the liquid reserve is nothing but a way to enable banks to keep until 1967, for private borrowers, this state of fictitious prosperity in which we have been living for some years, and then go back to the 1962 situation when, under pressure from our southern neighbors, we had to devaluate the Canadian dollar. It is only to maintain this situation until 1967 in order to continue this fictitious prosperity, and I say fictitious because I maintain that, with the present banking system in Canada, we cannot do anything but create debts, that is all.
This act, once passed, will allow banks to take over production means, to control the economic and political life of this country through this control of the banking system. We have made suggestions and many proposals; we have suggested that the government use the Bank of Canada and create a national credit office which would monetize part of the national credit to enable consumers to buy the production. Let us spend fewer billions for Sputniks and a little more for the Canadian consumers.
This office could even direct production toward consumption. It is this new credit, created through the national credit office that could correct this situation and should enable people to profit by the wealth to the extent of the production capacity made available by science and progress.
It is no use re-asserting the federal control in the banking field such as that of the Bank of Canada, if we prevent provincial institutions from obtaining controls allowing them to develop so that-


Lucien Lamoureux: I regret I have to interrupt the hon. member, but his time has expired.


Mr. Green:: Mr. Chairman, I would like to take this opportunity to say a few words in respect of this resolution. I am particularly pleased to do so, not only because of the fact that I had the honour of being a member of the Banking and Commerce Committee during the last session, but particularly in respect of the work we have done to date on the Joint
May 6, 1965

Committee on Consumer Credit, of which I have the honour to be a joint chairman. I do not believe that Committee or any of the work of that Committee, or any of the aspects of credit as brought before that Committee, have been discussed before this House; and inasmuch as the question of banking is integrally involved in any question of consumer credit, I think it might not be inappropriate to discuss at this time on this resolution some of the things we have found before that Committee.
First of all I would point out those memorable and immortal words of Polonius in his precepts to his son, in Scene 3 of Act 1 of Hamlet. We all recall that Polonius said:
Neither a borrower nor a lender be: For loans oft loses both itself and friend, And borrowing dulls the edge of husbandry.
If such be the case, Mr. Chairman, then I have no doubt that Canadians have very few friends left, and they are indeed a very dull crew; because the statistics indicate that the extent of borrowing, and of consumer borrowing in particular, in the last few years has increased to a very, very great degree. Singularly enough, in the year immediately following the Second World War the total of consumer borrowing in Canada was something like half a billion dollars. In 1963, the last year for which we have authentic statistics, that borrowing had increased to the extent of some $5 billion. I think those figures indicate something of the importance of this question of borrowing and of consumer credit, which is wound up in the question of the Bank Act, and to its importance to our economy.
[DOT] (8:40 p.m.)
I might point out that during this period, at any time when there has been a regression in the quantum of consumer borrowing there has been a concomitant relapse in the economy. Such industries as the retail trade and the car industry, in all its various areas from manufacturing to sales, would certainly suffer immeasurably if the quantum of credit and the extension of credit over the years did not continue to grow and expand. It has been notable before our Committee that the many briefs which we heard from many institutions and representatives of those institutions have been largely presented by the producers of consumer credit, by those who sell consumer credit, rather than by the consumers of the credit, the borrowers themselves. Accordingly it may be that I have obtained a somewhat slanted view of this entire subject, having heard more from the producers than from the
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consumers. However, I would point out that in this entire area there are very grave problems, essential problems, problems which I suggest may affect the life of each Canadian, his home and his family, a great deal more possibly than some of the loftier topics which we sometimes discuss in this House, such as external affairs and other matters, which are possibly of greater moment but of less immediate concern to the average Canadian homeowner.
I would point out, Mr. Chairman, that the consumer of credit is in the position of being continually sold the idea of credit and the need for credit, and the fact that he should borrow day after day and hour after hour. By means of the media of communications with all their effectiveness today he is told that he can borrow, that he can buy anything he wants just by walking in the door. He is told to take it now, pay later. That is the philosophy to which he is subjected almost continually during his waking hours.
I think this is demonstrated to some degree by the statistics covering consumer credit, which I should like to read into the record of the House at this time. These figures are broken down between the various types of institutions which provide what we call consumer credit. The largest of these is the chartered banks, of course, with which we are concerned at the present time in this resolution. However, the growth of other types of institutions which provide consumer credit is also indicated by these statistics. I merely point out the statistics themselves and the indicated growth between the years 1955 and 1963.
Instalment finance companies in 1955 provided some $599 million worth of credit to the Canadian consumer; and in 1963 this had grown to $873 million. Consumer loan companies providing instalment credit provided $215 million worth in 1955 and $808 million in 1963. Chartered banks provided $351 million in 1955 and $1,432 million in 1963. From that ratio, Mr. Chairman, we can see that the chartered banks have invaded this field of consumer credit to the extent that they have shown the largest increase of any of these institutions in that area supplying consumer credit during that period. I think it was the hon. Member for Medicine Hat who in his address charged the chartered banks with failing to accept the needs of the consumer, and in the early days that was quite patently true. But they certainly have demonstrated, since they have decided to enter the field,

May 6. 1965
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that they have been very effective in gamering unto themselves a very good share of the market. To complete the statistics, credit unions and caisses populaires during this period grew from $151 million in 1955 to $640 million in 1963. The total growth during that period showed an increase in consumer credit of from $2,136 million in 1955 to $5,292 million in 1963.
I have placed these statistics on the record, Mr. Chairman, to indicate the very vast problem that exists and the very great growth in this area of consumer credit during that period, some very substantial proportion of which is taken up by the chartered banks in this country.
Also in connection with the evidence we have heard before the Consumer Credit Committee, the great need for legislation, not only specifically qua credit in respect to the consumer but for various other wider ambits of consumer legislation, has been demonstrated. This legislation is needed to protect the consumer as a consumer of credit as well as a consumer in other ways. I pointed out earlier that so few of the very able representations which we have heard emanated from the consumers themselves, and it is by the very nature of things that the producers, the sellers, are well organized and usually very capable financial institutions, whereas the consumer as such is an individual, to a very large degree unorganized, and to the same degree not able in a collective fashion to bring forth his views in any voluble or professional manner. Such organizations as the consumers organizations attempt to do this, but by and large, Mr. Chairman, I suggest that the consumer as such, in this corporate age in which we live, is very much left to the tender mercies of the well organized and well heeled collective bodies of our society. I suggest that his greatest and only protection is right here in this House in the consideration which the elected representatives must have for the consumer as such.
The grave difficulty in aiding the consumer in his problem as a consumer with respect of credit, as well as in other areas such as packaging and disclosure, and so on, is very plain under our constitution. The Minister quite properly pointed out in his statement to the House today the difficulty of embodying into the revisions to the Bank Act the lofty concepts of the Royal Commission regarding pervasive legislation which will cover banking in all its aspects. I think this same problem exists with regard to legis-
[Mr. Green.1
lating on behalf of the consumer for consumer credit and other things.
I think the area of banking and interest is very clearly within the ambit of federal legislation, and I think the revisions to the Bank Act will no doubt bring forth measures which will be of some help to the consumer of credit. But this is only one aspect of the entire problem. We have noted in our work in the Consumer Credit Committee that many of the provinces are very much concerned with these problems facing the consumer at the present time, and it is our great hope that this is one area where this new approach to confederation which the Prime Minister has ably brought forth, this idea of co-operative federalism, can be used between federal and provincial agencies so that the consumer of credit and the consumer, as a consumer in so many other ways, may be protected. I think co-operative federalism, joint legislation, overlapping legislation covering the entire constitutional field, is the area of great hope in this regard, o (8:50 p.m.)
I might also point out that one of the very grave problems in respect of consumer credit, as we have observed it, relates not only to usurious interest rates, to which earlier speakers have referred, to interest rates on short-term loans as high as 154 per cent, which is rather shocking. The only way these things can be prevented is, as I have said, by joint legislation.
The second grave problem in respect of consumer borrowing relates to the fact that most of the time it is the consumer who is paying these usurious rates who has very little protection, if any, by way of information regarding the rate of interest he must pay. There is no law, either provincial or federal, at this time which requires a disclosure of interest rates in simple annual terms so that a consumer of credit may know the rates he must pay, and may realize exactly what he is getting into.
I suggest with the greatest respect that it might be appropriate for the Federal Government in respect of the Bank Act to set an example for other lending institutions in this area, by amendments which would make it compulsory for chartered banks to show interest rates in terms of simple annual interest rates. I have in mind consumer loans in respect of which banks are now charging interest rates in excess of the 6 per cent rate provided for by the Bank Act, which is accomplished by monthly interest charges, costs of loans, and in other ways. People are
May 6, 1965

paying more than 6 per cent on loans from chartered banks, and I respectfully suggest that it would be a singular example to the other and sometimes more usurious institutions if the Bank Act were amended so that under the Bank Act interest rates on loans made by chartered banks would have to show the simple annual terms of the interest rates. I hope the Minister will consider this respectful submission.
I would certainly commend the Minister, as I know all hon. Members on this side of the House will, for the forthright, clear and unequivocal position he has taken in respect of the ownership of shares of chartered banks by provincial governments. In this regard I find the position taken by the New Democratic Party to be a rather anomalous one. The hon. Member for Burnaby-Rich-mond and the hon. Member for Nanaimo-Cowichan-The Islands have taken the position that it is quite in order, and that no harm is done, if provinces own, and even control, federally chartered banks. On the other side of the New Democratic Party coin we have Members such as the hon. Member for Greenwood, who talk about the formula for revising the constitution which will create havoc, with the need for strict central fiscal powers. They suggest that powers to control the flow of the economy, and for other necessary economic measures, should be centred at the federal level. There seems to me to be a rather striking contradiction between these views.
I should like to relate a grade school anecdote which seems to be apropos of this striking contradiction between the positions taken by various Members of the New Democratic Party. I realize that the majority of the Members of that Party started their education at the university or postgraduate level, and probably did not go to the humble grade school at all, as the rest of us did. I hope these intellectually elevated gentlemen will forgive me for drawing this very humble anecdote to their attention. I think it has some bearing on this contradiction between the views taken by the various Members of that Party, who seem to adopt whatever stand looks good politically, on whatever measure comes before this House. Consistency is the least of their worries.
The anecdote I wish to relate is about the birds and the animals, and a strange creature known as a bat, which is neither bird nor animal. This bat would fly with the birds one day and run with the animals the
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next day. It was having a ball, going whichever way happened to be good on a particular day. Suddenly the birds and the animals got wise to the bat and realized that the bat was not one of them. That was the end of the bat.
Let me suggest to hon. Members of the N.D.P. that the Canadian elector is a pretty wise old bird. One day he will get wise to the N.D.P. bat, and that may be the end of that Party. Let me also suggest to those gentlemen that they get together and decide whether they are in favour of a strong federal fiscal authority, or for the control of the federal banks, which have played such an important part in the control of our economy, and certainly in the flow of money, by provincial governments. The position of that Party is anomalous, contradictory and typical of very many of the stands it has taken on various issues. It seems to me they adopt whatever is popular today, whatever will catch a few votes in British Columbia, or somewhere else, without worrying about adopting a consistent philosophy until some later date.
Again I commend the Minister for the strong stand that he has taken in this matter, and I should like to-


Lucien Lamoureux: Order, please. I am sorry, but I must remind the hon. Member that his time has expired.


Some hon. Members:: Carry on.


Horace Andrew (Bud) Olson: May I direct a question to the hon. Member?


Some hon. Members:: No.


Lucien Lamoureux: The hon. Member's time has expired, and apparently the hon. Member for Medicine Hat does not have the unanimous agreement of the Committee to ask a question at this time, a (9:00 p.m.)


Mr. Caoueile:: Mr. Chairman, the proposal of the Minister of Finance (Mr. Gordon) -


An hon. Member:: The Bank of Canada.


David Réal Caouette: Yes, Mr. Chairman, following the hon. member's interjection, we are certainly going to speak about the Bank of Canada, and not only about chartered banks in Canada which are endeavouring, by all possible means, to crush the Canadian people even more and which, in addition, are trying to control the Canadian government. In fact, they succeed when the Minister of Finance

May 6. 1965
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announces that the liquidity or bank reserve will be decreased from 8 to 7 per cent, which means that the banks will have the privilege, under this provision, to multiply 14J times their reserves with the Bank of Canada.
Therefore, instead of improving the situation, the Minister of Finance is in the process of giving them greater and more devastating control, if you want, of our national economy. Then, the government will have to go and borrow from those private institutions. As I indicated the other day, during the budget speech, the government issues bonds that the chartered banks could buy and multiply 12J times. Now they will have the privilege to multiply them 14J times.
Why does the government not take the responsibility, through the Bank of Canada, to multiply the credit necessary for the development of the Canadian economy and the elaboration of a system which will allow every Canadian to live decently in a country such as ours?
Mr. Chairman, some cabinet members are undoubtedly interested in the passage of a proposal such as this. There probably are some bank directors among the ministers. There are some among the members of the house and among the senators. It goes without saying that the Canadian people will not be surprised to see what the Minister of Finance is now proposing, namely to give to some individuals complete power over distribution or control of the economic blood of the nation, that is credit and money.
Mr. Chairman, the management of chartered banks are afraid of Social Credit, but I do not think there is any ground for such a fear. Unlike the socialists who advocate nationalization of chartered banks, Social Credit does not want to nationalize them but only to require that they have 100 per cent reserves to guarantee their loans and that all new credit issued be created by the Bank of Canada and issued to the public through the construction of roads or public buildings, the financing of federal, provincial and municipal administrations, school boards, and others.
By using the credit issued by the Bank of Canada, people will make deposits in chartered banks, and that will enable them to keep on making loans, probably as much as they are now doing. But instead of lending a monetary creation, they will lend something that they have in hand, something that they own in their institutions. Then, they will be able to charge interest to their
[Mr. Caouette.l
borrowers. We are not the least opposed to that.
We do not object either to having the rate of interest, for those who must have bank credit, set through competition and offers of service.
Mr. Chairman, the Creditistes strongly object to reducing the liquidity from 8 to 7 per cent. Furthermore, we object to the chartered banks continuing to exploit the Canadian people. That is why we are right when we say that the Government should use the facilities of the Bank of Canada.
Today, in every western country, and particularly in the United States, renowned economists, sociologists and businessmen suggest that governments should immediately bring about changes in their financial system. Otherwise, the United States will head into a depression worse than the one it experienced from 1929 to 1939.
However, one may ask what will result from the application of such a system, a Social Credit system, instead of a social indebtedness system which the Minister of Finance would like us to approve through this measure?
The Creditistes know that the essential source of financial credit in Canada rests- and I insist upon the word "rests"

in the Canadian capacity to produce. That is the essential source of financial credit in Canada. Therefore, any new credit issued must derive from a central bank, namely the Bank of Canada.
Therefore when plans for public expenditures are brought down before the house, the members need not worry whether these plans are financially possible, whether the government has the money required and whether it is possible to milk further the hard-pressed taxpayers. The Minister of Finance need not worry unduly about that or rack his brain; he will be able to understand more easily that the economic objectives of a country are based on satisfying the needs of its citizens. Members will ask simply if the required expenses will meet real needs, if they are physically possible, if Canada has the required workers, brains and materials. In this connection I have no doubt that the Minister of Finance fully agrees with me that we have the workers. But, we also have some unemployed in the country, and even though the Minister is boasting about Canadian prosperity, we have people who are receiving welfare allowances nowadays. The Minister of Finance is telling us that this
May 6. 1965

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country is prosperous while the Prime Minister and other members of the Government are telling us that there is poverty and destitution in Canada.
Workers, brains, materials required to provide the development of our national economy are available. Let us take, for instance, the decision regarding the building of another seaway at the cost of $500,000,000. Such a decision will be taken regardless of financial considerations. Since we have the necessary workers, brains and materials, the part to be played by finance should be to serve, not to make decisions.
Now when the Minister of Finance wants to do something for his country, Canada, he is obliged to kow-tow before the financiers and ask for their permission. It is rather unseemly for the Minister of Finance of a sovereign government which is master in its own country, to grovel before the financiers and beg their financial permission to do something, to make financially possible the limited development he is trying to do in this or that region of Canada. The decision will be taken independently of finance; its role will be to serve and not to decide.
The construction of that seaway has been decided because it fills a need and because this production will not affect adversely the production of other consumer goods. Here is a group of companies which offer to build that seaway for $500 million. They buy the material, supply the machinery, pay their employees, even an interest to the bank on the money borrowed for that purpose.
Let private enterprise borrow from chartered banks, I have no objection. But for the Government to do so when it can resort to the Bank of Canada, no. That is what the Creditistes are fighting for throughout Canada.
You may say that this is stupid. For instance, let us consider the St. Lawrence Seaway. Once the work is completed, the department concerned, after the engineers have established the probable duration of the Seaway, according to the use to which it will be put, and the wear and tear to which it will be submitted, then the department charged with inspecting government works will issue a cheque in the amount of $500 million. Where will the government get this money from? From the Bank of Canada? From the source of the financial credit of Canada?
[DOT] (9:10 p.m.)
Will the government contract a debt toward the Bank? Not at all, because the Seaway will be an asset created by the people of
Canada, by those who have contributed directly or indirectly to its construction. The people of this country cannot run into debt regarding its own production. If the Seaway had been built in the United States by the Americans, Canada would have incurred a debt toward that country. But in a sound financial system, a national debt, together with the interest it carries, can only be owed to other countries, when our imports exceed our export.
But there may be a danger of inflation, people will say especially during an electoral campaign, when the Liberals always charge Social Credit with creating inflation, while it is caused by their own system. When the Government must pay $1,103 million in interest on the national debt to chartered banks and to other financial institutions outside Canada, this causes an increase in prices throughout Canada. That is true and real inflation which does nothing for the economic development of this country.
Would not this policy lead us to inflation? The Creditistes say that Canadians have nothing to pay for building the St. Lawrence Seaway, which is its own production. But they will have to pay for its achievement, its use, and its depreciation. And this in accordance with one of the basic principles of Social Credit: Every new production must be financed by new credit, and the withdrawal of these credits must be accompanied by consumption at the same speed of consumption or disappearance of created resources, or of their depreciation.
It seems to me that an intelligent person is able to understand that through such a technique inflation can be avoided; but, instead, inflation is created through the present system.
Assuming that the St. Lawrence Seaway depreciation is achieved after 50 years, and that we should then build another one, the annual depreciation, destruction and consumption will therefore take place at the rate of $10 million a year, which the government will have to seek from the consuming public, users and others; those $10 million will be returned every year to the bank to be cancelled. But on the contrary, some rather unscrupulous politicians will try to make believe, especially during election campaigns, that Social Crediters will bring about inflation.
Since a product can only be consumed once, its consumption must only be paid for once. The consumer of bread or milk pays the price shown only once. The same applies to the goods of public capital. It is only through

May 6. 1965
Bank Act
the absurdity of the present financial system that the people must pay two or three times for seaways, public buildings, highways, bridges, which are burdened with an interest doubling and tripling their cost.
It would be possible, by applying this principle, to alleviate the present burden of the taxpayers for all expenditures of public capital. Through the financing of public capital by the Bank of Canada, taxes would be reduced gradually, since the interest on the fictitious national debt would no longer exist.
Then, any government could reduce taxes and alleviate the heavy burden on the Canadian people. Taxes would decrease and be limited to taxes necessary for the depreciation of public capital, which would not return to its place of origin, the Bank of Canada, interest laden. Then, it would be repaid only once and not two or three times.
Under the legislation introduced today by the Minister of Finance, we must continue to pay interest on pure and simple creation of money by a few individuals, which is contrary to the best interests of the nation.
The implementation of such a scheme would permit the progressive repayment of the national debt which now accounts for more than 14 per cent of the expenditures covered by the federal budget.
It goes without saying that under a Credi-tiste regime, small wage earners and low income families would be the first to benefit from a tax reduction. The first taxes that a Credististe government would abolish would be those on basic commodities. One of the first pieces of legislation it would introduce would provide income tax exemptions for married taxpayers earning less than $5,000 a year and for single taxpayers with a yearly income of less than $2,500.
That, Mr. Chairman, would be the difference between a Creditiste government which would favour the freedom and the fulfilment of man and a Liberal government which binds and strangles people with chains which prevent them from disposing themselves of the fruit of their labour.
Mr. Chairman, the bill which we will undoubtedly be called upon to examine within the next few days is what I would call an example of government stinginess. It increases further the control of a handful of individuals.
The other day, I quoted the following from the encyclical "Quadragesimo Anno" which Pope Pius XI addressed to the world some 34 years ago, in 1931:
[Mr. Caouette.l
"Those who control money and credit are the masters of our lives and without their authorization, no one has the right to breathe."
We have reached the point where not only hon. members but even the public realize that the Minister of Finance and the government cannot breathe without the consent of those who control the economic lifeline of the nation. When we call for detailed reforms of our system, our opponents deride us by saying ''Let us nationalize and socialize power, our natural resources, the Bell Telephone and private companies" whereas the only thing we ask the house to nationalize or socialize is money and financing. But it has to be left alone. We discuss here for months all kinds of bills, but when the interest to be paid on the national debt is mentioned, nobody dares to criticize a system which decreases the purchasing power of Canadian workers and consumers.
[DOT] (9:20 p.m.)
Mr. Chairman, nothing is said about the socialization of money. Nationalize private enterprise? Fine. But financial problems should not be dealt with.
Some people tell us: The system has always existed and survived. We cannot change it.


An hon. Member:: It is a madmen's system.


David Réal Caouette: Yes, Mr. Chairman, it is a madmen's system, there is no doubt about it and it is administered by the maddest among them. That system torments individuals, human beings.
We have nothing against a bank's president and directors. We are against the power they have to give life to someone today and to put him into bankruptcy the next day.
In most cases of bankruptcy in Canada today, the main reason is-


Herman Maxwell Batten: Order. I must advise the hon. Member that under Standing Order 61A his time has expired.


Raymond Langlois: Mr. Chairman, I wish to make a few observations on the resolution introduced by the Minister today and on the different propositions and intentions which he stated he had in mind.
Every ten years we have to renew this Bank Act so that chartered banks and the Quebec savings banks may continue to operate for another ten years. The Minister mentioned with some pride that the interest rate on commercial loans was to remain at 6 per
May 6, 1965

cent, but that other interest rates either on mortgage loans or on personal loans would be raised if the banks so wished. There is one thing I should like the Committee to remember in this regard. It is this: At the moment this is all a lot of window dressing. The Minister was trying to cover up in the course of his opening remarks what was to come later.
Some of my colleagues have already dealt with this point, but I shall take it up again. I am referring to the 7 per cent bank reserve requirement. We all know that the banks now have 8 per cent of their reserves with the Bank of Canada in accordance with the Bank Act. When they have $8 in reserve, $8 guaranteed either in currency or in Government bonds, they can lend out in a form of credit $100. Discounting the $8 held in reserve this amounts to giving the banks permission to create out of nothing $92, which they then lend out at interest to Canadian consumers. To put it another way, if I deposit $8 of my savings with a chartered bank, they pay me interest on it at the rate of 2} per cent. On the basis of this $8 the bank is then given permission to lend out $100 upon which they collect interest at the rate of 6 per cent. In other words they give 24 cents to the depositor while receiving $6 on the $100 created on the basis of his deposit. This means a profit of $5.76. That is the way in which the banks operate at the moment. They have the right to create 12& times the amount they have on deposit either in their savings accounts or in Government bonds. By reducing this reserve requirement to 7 per cent the Minister is giving them permission to create funds amounting to 14.28 times their reserve-some of my colleagues have mentioned 14J as a round figure.
Why is this being done? There is a reason, and I will tell the Committee what it is. First, this is a pre-election measure in the interests of the Liberal Party right now. At the moment, every chartered bank across the country is doing everything in its power to get people to deposit more money in their savings accounts. They do this because, as I say, these deposits provide them with credit to a multiple of 12J times. But the banks are finding it increasingly difficult to get people to increase their savings. The Minister, by this change in the Act, has found one way which will permit the banks to continue to lend as before, without having to impose financial restrictions.
If the chartered banks were obliged at this moment to restrict credit across the country
Bank Act
the result would certainly not be to the Gov-vernment's advantage. We know what the reaction of the Canadian consumer would be. If the Minister does not know it, he can ask one of his predecessors what happened when he dictated a tight money policy. The measure before us would delay such a necessity until 1968, at least, permitting the Government to face an election and ensuring loose credit for the next three years. The Government will be able to get through the centenary year. But by 1968 if this country does not hit rock bottom and economic chaos I shall be surprised. However, at the moment this measure permits the Government to escape the trap which the Minister himself has created through his own monetary policy in past years.
As I mentioned a few minutes ago, the Minister of Finance knows that deposits going into savings are not as numerous as they were. He knows the banks can create credit on the basis of the 8 per cent of their reserves held by the Bank of Canada. He has only to read over the Bank of Canada Act to know this. It was made clear in 1935 and 1936 when the Committee on Banking studied this question. At that time Mr. Towers was governor of the Bank of Canada and Mr. Graham was questioning him. The Minister can read the report and find out what happened. We are now being asked to consider one move which will prevent the necessity for a tight money policy-and a tight money policy, added to all the taxes the Minister has placed on the shoulders of the people of this country, would mean a tight squeeze for the Government in the event of an election. We all know an election will come before 1968. The Minister hopes to get away with it for another three years, through 1967, and what happens to the Canadian people afterwards he does not seem to care.
Why is there a decline in the amount of money going into the savings departments of the banks today? There is only one reason. The people depositing in these accounts have less money in their pockets, less purchasing power. That is what we in this comer of the House are saying. They do not have enough money to buy Canadian products at the moment. So, instead of applying tight money policies as was done in 1959, the Minister has reduced the reserve requirement from 8 per cent to 7 per cent, thus allowing the banks to continue to lend at the present rate for another two or three years before the wheel goes round once more and we have

May 6, 1965
Bank Act
to tighten our belts again. My colleagues say the money is all in books. That is a fact. The hon. Member for Edmonton West mentioned it today, and it is mentioned also in the Bank Act itself. It is a fact.
[DOT] (9:30 p.m.)
I know this is exactly the way things happen. Whether you like it or not, it is the permission given to the local bank by the head office that will determine whether a loan is made to an individual-an individual the head office never saw in their lives; an individual they do not know. To that extent, I have nothing against it. But there is something I wish this Government would take hold of, and this House. I refer to the difference between our party and the N.D.P., which we often call the Socialist Party. They want to socialize production and private enterprise. As the hon. Member for Villeneuve mentioned a few moments ago, they want to socialize electricity, natural resources, this and that. There is one domain or one section of the economy wherein the Social Credit or the Creditistes are socialist, and this is the only sphere of economic activity in which we are socialist. This is in socializing the monetary policies of this country to give their control to the Canadian Government. This is one thing that the Government cannot rid itself of, namely controlling the currency. When the Government has lost control of the currency, you can say it has lost control of everything. There is a monopoly here. The Minister of Finance well knows there is a monopoly here. It is a monopoly controlling the distribution of goods. The distribution of goods, and production and services in this country is controlled by the currency that permits that distribution to come about.
I am going to put a question to you here, Mr. Chairman. We all know that currency is a conventional means accepted by the people, and in which people have confidence, as a unit of measure. It measures value; that is all it does. The wealth is not in the dollar bill; it is in what the dollar bill represents. It is a representation of goods. If the dollar bill is a unit of measure to measure value, how come that the dollar bill can change its value? How can it be worth $1.04 at one time, and at another time 92 cents? Have you ever seen a pound worth 14 ounces? You never did, and you never will. It is always worth 16 ounces on the dot. That is a unit of measure, to measure weight. Have you ever seen a metre shorter than 100 centimetres? You never saw it more than 100
[Mr. Langlois.l
centimetres, and you never saw it less than 100 centimetres. The true metre is held in a conservatory in France, in a platinum bar, and every other metre has to be measured by that. How come the lineal measure does not change? How come it is the measure of financial value that changes? If the measure of weight, pounds, does not change, and if the lineal measure, the foot or the metre, does not change, how come the value measure, the dollar, changes?
It is because there is speculation in regard to it. Somebody is applying tight money policies; somebody is applying loose money policies; somebody is speculating on it. The Minister knows about this. This is exactly the control that is in the hands of the chartered banks at the moment, given by the Government of the Canadian people. This control is given to these private institutions, which control the distribution of goods, services and production in this country. All we ask is that the Government control our currency, and control it from one end to the other. Let the chartered banks operate as they are, as a free enterprise; but let them have in their treasury enough capital to guarantee their loans 100 per cent. The caisses populaires and the credit unions in the different provinces must have 50 per cent in reserve as a guarantee. Ask them all to have 100 per cent in reserve as a guarantee. You cannot lend what you do not have. How can the Government permit private institutions to make loans when they do not have sufficient guarantee behind the loans? This is not a proper thing to do. This is the privilege of the Bank of Canada. That is the control we in this party desire to have belong to the Government, which is voted in by the people and should work for the people and with the people.


Some hon. Members:: Question.


Herman Maxwell Batten: Shall the resolution
carry?


Some hon. Members:: Carried.
Resolution reported and concurred in.
Mr. Gordon thereupon moved for leave to introduce Bill No. C-102, respecting Banks and Banking.


The Acting Speaker (Mr. Batten):: Is it the
pleasure of the House to adopt the said motion?


Some hon. Members:: Agreed.


Gilles Grégoire: On division.
May 6, 1965	COMMONS
Motion agreed to and Bill read the first time.


The Acting Speaker (Mr. Batten):: When shall the said Bill be read a second time?


Some hon. Members:: Now.


Gilles Grégoire: No.


The Acting Speaker (Mr. Batten):: Next sitting of the House?


Gilles Grégoire: Next sitting of the House.



QUEBEC SAVINGS BANKS ACT


Walter Lockhart Gordon: that the House go into Committee to consider the following resolution:
That it is expedient to introduce a measure to provide for the decennial revision of the Quebec Savings Banks Act and the extension of the powers of the existing savings banks till July 1, 1975, and to provide further for certain changes in connection with the administration of the Act.
Motion agreed to and the House went into Committee, Mr. Batten in the Chair.


Walter Lockhart Gordon: Mr. Chairman, the bill to be based on this resolution provides for the revision of the Quebec Savings Banks Act under which two savings banks operate, one in Montreal and one in the City of Quebec. This bill follows, wherever appropriate, like provisions in the bill to revise the Bank Act, and many of the administrative changes proposed in that bill have been incorporated in this one as well. I shall be pleased to give a more detailed explanation when the bill is before the House for second reading; and after it has been given second reading I shall move that it be referred to the Banking and Commerce Committee.


Herman Maxwell Batten: Shall the resolution carry?


Frank Howard: Mr. Chairman, because we are in Committee I think the rules will permit a question to be posed to the Minister which, if he has time, I think he will be able to answer. Are banks which are incorporated under the Quebec Savings Banks Act, banks in the same sense as, say, the Bank of Montreal? Is it permissible for savings banks, for the sake of argument, under this Act to do business in British Columbia, just as an example?


Walter Lockhart Gordon: There are important differences, Mr. Chairman. The banks that are incorporated under the Bank Act have more
DEBATES	1021
Quebec Savings Banks Act powers and can do a lot of things that the banks incorporated under the Quebec Savings Banks Act are not entitled to do. I would prefer to answer more detailed questions when the bill is before the House, if I may.
[DOT] (9:40 p.m.)


Frank Howard: Just one other question, if I may, Mr. Chairman. I can appreciate the desire of the Minister to deal with this matter when the bill is before us, when we will be able to see it in black and white, but it would be helpful if the Minister would point out which provisions relating to the Bank Act, the resolution regarding which has just been dealt with, are also applicable to the Quebec Savings Banks Act. For instance, the provision about interest rates, the one about provincial government participation, the one about mortgage lending and the like.


Walter Lockhart Gordon: Perhaps I might briefly summarize the provisions of this bill. The principal features are, first, the extension of the banking powers of these two banks for a further period of 10 years up to July 1, 1975, to conform with the period for the decennial revision. Second, the provision to prohibit after July 1, 1970 the election or appointment of a person to be a director if he has reached the age of 75. That was something which was incorporated into the Bank Act some time ago.


Frank Howard: Will he be sent to the Senate then?


Walter Lockhart Gordon: I do not know what will happen to him. I am rapidly approaching that age myself so I will have to look into this. Third, a provision to permit the banks to fix any price on new issues of shares which is not less than $1 par value. That is something which can be done under the Bank Act. Fourth, provisions with respect to resident, non-resident and government ownership of shares of savings banks, which are the same as those in the bill to revise the Bank Act and which I dealt with briefly at the resolution stage of the previous bill. Fifth, an increase in the amount banks may lend on conventional mortgages and, sixth, an increase in other lending and investment powers.
They are the main provisions of the bill. The Royal Commission on Banking and Finance recommended that the savings banks be given the same powers as the chartered banks. However, these banks have expressed no wish to extend their operations to include commercial lending but prefer to carry on under their own Act as in the past.
May 6. 1965

Quebec Savings Banks Act
I should perhaps answer my hon. friend's direct question put to me a few moments ago. These two banks can operate only in the Province of Quebec.


Frank Howard: What about interest rates?


Walter Lockhart Gordon: Same limits.


Gilles Grégoire: Mr. Chairman, I wish to ask the Minister of Finance a question.
Can he tell us if the reduction from 8 to 7 per cent of the chartered banks' liquid reserves applies also to the savings banks in Quebec?


Walter Lockhart Gordon: Mr. Chairman, I would be delighted to answer as many questions as I can, but I do think it would be more appropriate to do so when we come to that stage of the proceedings where detailed questions are normally put to the Minister concerned.


Gilles Grégoire: Mr. Chairman, I should like to direct a supplementary question to the Minister.
If he were assisted by his experts, perhaps he could give an immediate answer to our questions.
What we want the Minister to tell us is whether the percentage of cash reserves that the Quebec savings banks have to maintain when they grant loans will also be reduced, as proposed for chartered banks. Moreover, can he tell us what percentage of cash reserves the savings banks will have to keep from now on?


Walter Lockhart Gordon: The same procedure will be followed as in the past, Mr. Chairman.


David Réal Caouette: Mr. Chairman, we should like the Minister of Finance to tell us what the difference is between the chartered banks, concerning which changes were discussed earlier, and the Quebec savings banks? Do these enjoy the same privileges as chartered banks in Canada?


Walter Lockhart Gordon: No, Mr. Chairman. As I just pointed out, it was suggested by the Royal Commission that the Quebec savings banks be placed, for all practical purposes, on the same footing and be permitted to go in for commercial banking, as do chartered banks. But the Quebec savings banks decided they

did not want to do this, that they would like to continue their operations in the way they have been successfully doing for many years, so there is no reason to force them into a field which they do not wish to enter.


Gilles Grégoire: Mr. Chairman, I should like to direct another question to the Minister of Finance.
Is it not a fact that savings banks have to keep liquid reserves equivalent to 100 per cent of their loans or deposits?


Walter Lockhart Gordon: Five per cent, Mr. Chairman. May I just point out that I think this is a fairly good example of some of the small differences in percentages about which we have heard so much this evening. We have been hearing all sorts of figures tossed out by our friends in that corner of the House-as an hon. Member says, these great experts in finance, who in my humble opinion, if they ever got their hands on the financial machinery of this country, would bring about one of the greatest financial panics which Canada or any other country could ever experience.


Some hon. Members:: Oh, oh.


Some hon. Members:: Hear, hear.


Gilles Grégoire: Do not forget the Liberals were in power in 1929.


Herman Maxwell Batten: Order. The Minister of Finance has the floor.


Gilles Grégoire: May I ask a question?


Walter Lockhart Gordon: Well, wait until I have answered the last one.


Herman Maxwell Batten: Order. The Minister of Finance has the floor.


Walter Lockhart Gordon: Whether or not my hon. friend was around here in 1929, I do not know. But I would suggest to him that he look forward rather than backward. I was around here in 1929, and one of the things which sustained this country-


Gordon Minto Churchill: Were you a "whiz kid" then?


Walter Lockhart Gordon: No, I was not a Member then- was that the Canadian banks weathered the storm of 1929.


Gilles Grégoire: What about 1937?


Walter Lockhart Gordon: Let me finish dealing with 1929. If my hon. friend remembers, this was not the case in the United States of America. One bank after another failed in 1930 and
May 6, 1965

1931, and a major financial catastrophe occurred in that country until the election into office of that great leader, Franklin D. Roosevelt, who managed to get things back on the road again.
I hope to have the opportunity, during second reading of the bill to revise the Bank Act, to deal with some of the peculiar theories which my hon. friend in that corner are fond of repeating, I almost said "ad nauseam" but I do not want to become offensive in any way. So perhaps they will wait until then.


Mr. Monleith:: Try explaining that to those who voted for them a couple of years ago.


Walter Lockhart Gordon: I will do that, too. I do not think I have anything more to say about 1929; I am more interested in 1969 and 1989.


Mr. Lessard (Lake St. John):: Mr. Chairman, I should like to put a question to the Minister of Finance.
In view of the fact that he has just stated that Quebec savings banks do not have the same privileges as other chartered banks and taking that difference into consideration, will the minister authorize the Quebec provincial government to acquire shares and to control savings banks, and consequently credit in Quebec?
[DOT] (9:50 p.m.)


Walter Lockhart Gordon: I would be glad to consider this, Mr. Chairman.


Gilles Grégoire: A supplementary question, Mr. Chairman. Do the caisses populaires come under the provisions of the Quebec Savings Bank Act?


Walter Lockhart Gordon: No, Mr. Chairman. [Translation]


Gilles Grégoire: Mr. Chairman, very good questions can be put in that connection.
Can the minister tell the house exactly what difference there is between chartered banks and Quebec savings banks?


Walter Lockhart Gordon: Mr. Chairman, I am sure that my hon. friend knows that the lending powers represent the main difference.


Gilles Grégoire: Mr. Chairman, I have another question.
22620-65J
Quebec Savings Banks Act
In view of the fact that the minister has just stated that the difference between chartered banks and Quebec savings banks lies in the lending power, can he tell the house whether chartered banks lend a different kind of money than Quebec savings banks? Is the difference between these banks in the interest rates, or how does their lending power differ?


Walter Lockhart Gordon: The powers are different because of the legislation under which these institutions operate.


David Réal Caouette: Mr. Chairman, these answers are preposterous. The Minister of Finance should state clearly the difference between the two.


Lucien Lamoureux: Order. Is the hon. member making remarks within the limits of the debate, or is he putting a question to the Minister of Finance. As the hon. member knows, we have to take into consideration the time allowed the minister, and I am informed that his time has expired.


Gilles Grégoire: Mr. Chairman, we are only questioning the minister.


Lucien Lamoureux: That is exactly what I was asking the hon. member for Villeneuve. Does he merely wish to ask questions or does he now want to take part in the debate?


David Réal Caouette: No, Mr. Chairman, I just want to ask the Minister of Finance a few questions. We would like to know exactly what difference there is between the lending privileges of a chartered bank and those of a Quebec savings bank. Also, is there any difference between the privileges of a Quebec savings bank and those of the caisses populaires and between chartered banks and those two banking systems?


Walter Lockhart Gordon: Mr. Chairman, I think this is a perfectly proper and reasonable request. Naturally the differences will be spelled out in great detail in the legislation. First reading has now been given to the revisions to the Bank Act, so my hon. friend will be able to see exactly what are the powers of the chartered banks. If we are able to deal with this resolution, the proposed changes to the Quebec Savings Bank Act, which are incorporated in the bill, will be available, and my hon. friend will be able to spend many interesting hours reading that bill, and will see
May 6. 1965

Quebec Savings Banks Act the differences set out in a way which is clear, but which I am not prepared to summarize now.


David Réal Caouette: Then, Mr. Chairman, could I use my own glasses instead of the minister's to deal with this question?


Walter Lockhart Gordon: I think that would be a good idea, Mr. Chairman.


Gilles Grégoire: I should like to direct another question to the Minister of Finance.
Does he agree with the statement made by Mr. Graham Towers, former governor of the Bank of Canada, who, in 1940, said that chartered banks had the right to multiply their money when they granted loans, while the savings banks did not have the same right?
Is the Minister of Finance ready to grant this same right to the savings banks and to the caisses populaires?


Walter Lockhart Gordon: I should like to read that testimony very carefully, Mr. Chairman. I think the hon. Member has his dates wrqng and, if that is the case, it is just possible that his short synopsis of Mr. Towers' testimony will require checking.


Lucien Lamoureux: Shall the resolution carry?


Some hon. Members:: Carried.


Gilles Grégoire: On division.


Lucien Lamoureux: Shall I report the resolution?


Some hon. Members:: Carried.


Gilles Grégoire: On division.
Resolution reported and concurred in.
Mr. Gordon thereupon moved for leave to introduce Bill No. C-103, respecting Savings Banks in the Province of Quebec.


Mr. Deputy Speaker:: Is it the pleasure of the House to adopt the said motion?


Gilles Grégoire: On division.
Motion agreed to and bill read the first time.



BUSINESS OF THE HOUSE

Mr. Mcllrailh:: Mr. Speaker, tomorrow we propose to call item No. 6 on today's Order Paper, second reading of Bill No. C-98, an Act to make provision for the retirement of Members of the Senate. If that is completed we will spend the remainder of the time on the resolution preceding the housing bill.
At ten o'clock the House adjourned, without question put, pursuant to Standing Order.
May 6, 1965



APPENDIX


[Stage Direction]
Motion No. 7-Mr. Coates:
That an humbie Address be presented to His Excellency praying that he will cause to he laid before this House a copy of a letter dated on or about December 30, 1964, from the Minister of Revenue of the Province of Quebec to the Minister of Justice concerning the Honourable Member for Saint-Jean-Iberville-Napierville.
Motion agreed to.

[Stage Direction]
Motion No. 8-Mr. Rondeau:
That an Order of the House do issue for a copy of (a) letter of May 19, 1963, from A. G. Heakes to the Honourable Lionel Chevrier, Minister of Justice, together with its covering letter of May 21, 1963 (b) letter from Miss Marguerite Ritchie, Executive Assistant to Honourable Lionel Chevrier of July 16, 1963, acknowledging the said letter from A. G. Heakes of May 19, 1963 and its covering letter of May 21, 1963, to Mr. Chevrier (c) all others letters listed in Miss Ritchie's letter of July 16, 1963, to Mr. Heakes (d) complete dossier of court records relating to Mr. Heakes' proposal No. 37-1955 SCM as held in Department of Justice and in particular (i) original proposal of February 7, 1955 (ii) amended proposal of May 31, 1955 (iii) report of the debtor's proposal of September 14, 1955 with its attached record of creditors' meetings and minutes of said meetings (iv) judgment of November 22, 1955 ratifying said proposal (v) petition of Trustee Dansereau of June 3, 1958, cancelling proposal (vi) judgment of June 9, 1958, cancelling proposal: also attached envelope addressed by registered mail and returned as evidence that Mr. Heakes had moved from his place of business (vii) Trustee's motion for discharge of July 2, 1959 (viii) Trustee's petition to cancel unreinstated proposal of August 8, 1963, together with its attached exhibits of minutes of creditor's meetings held on March 8, 1955 and April 15, 1955 (ix) judgment of September 11, 1963, cancelling the unreinstated proposal for a second time (x) judgment of September 12, 1963, discharging Trustee (xi) notice of discharge hearing on September 12, 1963, if any (e) correspondence covering arrangements for postponement of discharge hearing as referred to by the Honourable Davie Fulton in Department of Justice estimates of June 9, 1961 (f) reports by Registrar Gerard Deniger to Department of Justice re cancellation of proposal including all correspondence with and/or reports on other contacts with Registrar Deniger (g)	all correspondence and/or other communications with Trustee J. Alexandre Dansereau and/or reports on same (h) report on investigations into cancellation
as recorded in speech by the Honourable Davie Fulton in Department of Justice estimates of June 9, 1961 (i) telegram of October 15, 1965, from Mr. Heakes to Mr. Favreau requesting protection of papers relating to proposal (j) letter of February 4, 1965, to the Honourable Guy Favreau, Minister of Justice, together with its enclosure of letter of February 2, 1965, to the Rt. Honourable Lester B. Pearson (k) all letters to Mr. A. G. Heakes from officers and Ministers of Department of Justice and in particular (i) letter of February 5, 1960 from Assistant Deputy Minister Favreau (wrongly dated February 5, 1940) to Mr. Heakes (ii) letter of July 16, 1959, from Supt. Larose to Mr. Heakes (iii) letter of November 9, 1959. from Miss K. Kierans, Secretary to the Honourable Davie Fulton to Mr Heakes (iv) letter of the Honourable Davie Fulton, referred to in said letter of Miss Kierans, to the Honourable George Hees (v) all other letters from officers of the Department of Justice and Ministers of Justice to Mr. Heakes (1) letters of July 14, 1959, and July 15, 1959 to Supt. Larose (m) letters and other communications from Mr. Heakes to officers of the Department of Justice and the Minister of Justice listed in the said letter of Miss Kierans of November 9, 1959?
Mr. Speaker:: Transferred for debate.



ACCEPTED ORDERS FOR MINT COIN SETS

[Stage Direction]
Motion No. 14-Mr. Langlois:
That an Order of the House do issue for a copy of all the names of those who acquired a series of 1965 coins from the Mint in Ottawa between January 1st and 10th, 1965.
Motion agreed to.

[Stage Direction]
Motion No. 16-Mr. Marlineau:
That an Order of the House do issue for a copy of all documents, contracts, letters and correspondence exchanged between the Centennial Commission of Canada and Mr. William Fair or any other person or association in relation to the settingup of a Youth Parliament to commemorate this event.
Motion agreed to.

[Stage Direction]
Motion No. 18-Mr. Langlois:
That an Order of the House do issue for a copy of every communication, telegram and letter exchanged between the Postmaster General and the Member for Levis, Mr. Raynald Guay, relating to door to door delivery by mailman, in Chamy in the County of Levis.
Motion agreed to.
[Stage Direction]
May 6. 1965

[Stage Direction]
Motion No. 19-Mr. Langlois:
That an Order of the House do issue for a copy of every communication, telegram and letter exchanged between the Postmaster General or his assistant or any one else acting on his behalf, or
the head of his Department and Mr. Jean-Luc Pepin, Member for Drummond-Arthabaska, relating to home mail delivery by mailman in Arthabaska.
Motion agreed to.
[Editor's note: Due to an oversight these motions were omitted from Hansard of May 5, 1965.]
[Stage Direction]
Friday, May 7, 1965