1967-03-20

[Stage Direction]
First and second reports of special committee on procedure of the house-Mr. Mac-Eachen.
[Note: Text of the foregoing report appears in today's Votes and Proceedings.]

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

Mr. Isabelle: 1.	How many civil servants have had their positions "red circled"?
2.	How many civil servants have had their positions "green circled"?
3.	Up to what salary level has such reclassification been made?
4.	How many persons earning (a) more than
$8,000 annually (b)	$6,000 to $8,000	(c) under
$6,000, have been so reclassified?


Hon. Judy V. LaMarsh (Secretary of State):: I have been given the following information by the Public Service Commission:
1 and 2. The most accurate figures available on February 1, 1967 showed 3,600 civil servants in the administrative support category, and 1,300 in the administrative and foreign service category whose positions were red circled.
There are no statistics on the number of green circled positions, but as of conversion it was estimated that 9,900 positions in the administrative support category and 8,200 in the administrative and foreign service category would be green circled.
3.	The top salary level in the administrative support category has a maximum salary of $9,472 per annum and in the administrative and foreign service category $20,802.
4.	Information according to this breakdown is not available.


C.B.C. STATIONS NOT RECEIVING LIVE TELEVISION SERVICE
Mr. Howard: 1.	How many C.B.C. owned and affiliated television stations are still not receiving live network service and what is the name of each such station and the community within which each is located?
2.	What (a) population (b) viewing audience, is served by each such station?
3.	Does any assessment exist of the cost of bringing live television to these stations, and what is that assessed cost in each case?
4.	Do any priorities exist for bringing live television to these stations and, if so, what is the schedule of such priorities?


Julia Verlyn (Judy) LaMarsh: I am informed by the C.B.C. as follows:
1.	CFTK-TV, Terrace; CBWFT, Winnipeg; CBWBT, Flin Flon/The Pas; CHGH-TV, Churchill; CFLA-TV, Goose Bay; CJCL-TV, Labrador city; CFKL-TV, Schefferville.
2.	Estimated population within the A and B service area: CBWFT (French) 50,000 (French mother tongue only); CBWBT, 26,600; CFLA-TV, 8,400. Figures for the remaining, privately owned stations would be available from the stations concerned.
3.	Cost of extending live microwave service varies according to the mileage, geographical area and network supplier involved. While the corporation has estimated approximate costs, these figures are not normally made public because of the competitive factor involved.
4.	Arrangements have been completed to extend service by microwave to CBWBT, Flin Flon/The Pas, and are being completed for extension of service of CFTK-TV Terrace, B.C. Estimated costs for the use of microwave for the remaining areas under (1) where feasible, are prohibitive to a point where satellite transmission may provide the only practical method of introducing live television. This too, will depend on satellite and associated costs which cannot yet be estimated. Meanwhile these areas are receiving quite comprehensive service through television recordings at up to one fifth the estimated cost of microwave service.

March 20, 1967
Questions


PRINTED LISTS OF HOUSEHOLDERS IN CONSTITUENCIES
Mr. Racine: 1.	How many issues of the list of householders are printed every year in each electoral district?
2.	How many copies are made available to each member of parliament?
3.	What procedure should a member adopt in order to obtain this or these lists?
4.	If a member requires additional copies, to whom should he make his request, and what is the unit cost?
5.	May a member obtain, free of charge, the list of householders for a federal electoral district other than the one which he represents, and what is the unit rate?


Hon. Jean-Pierre Cote (Postmaster General):: 1.	One. Quantities per issue vary for each electoral district from a minimum of 38 copies to a maximum of 174 copies, or an average of 71 copies per electoral district during 1966.
2.	Each member may receive one free copy of the householder directory for any electoral district.
3.	Write or telephone the Superintendent, Purchasing and Stores Division, Post Office Department, Confederation Heights, Ottawa 8, Ontario, naming the directory required.
4.	Write the Superintendent, Purchasing and Stores Division, Post Office Department, and enclose payment at the rate of $2.00 per copy, plus the provincial sales tax applicable for the province in which the directories are to be delivered.
5.	Yes. One copy of each directory may be obtained by a member free of charge. Additional copies of any directory are available at $2.00 pier copy, plus the provincial sales tax applicable for the province in which the directories are to be delivered.


ASSISTANCE FOR PRESERVATION OF TOTEM POLES
Mr. Priitie: 1.	Has the Skeena totem pole restoration committee of Hazelton, British Columbia, requested assistance of the Department of Indian Affairs and Northern Development in the restoration and preservation of totem poles in the villages of Kispiox, Kitseguecla, Kitanmax, Kltwancool and Kitwanga?
2.	If the answer to part 1 is yes, what was the reply of the department?


Hon. Arthur Laing (Minister of Indian Affairs and Northern Development):: 1. Yes.
[Miss LaMarsh.l
2.	The Skeena totem pole restoration society received a grant of $1,000 from the Indian affairs branch on April 15, 1965. A similar grant was made to the society on October 14, 1966. In addition, during April and May, 1965 the branch made it possible for the society, at its request, to obtain the services of a supervising carpenter to work on totem pole restoration.


ASSISTANCE TO FOUND BROS. AVIATION LTD.
[Stage Direction]
Question No. 2,618
Mr. Winkler:: 1.	Has the Department of Industry entered into an agreement with the aircraft manufacturing company of Found Bros. Aviation Ltd. whereby financial assistance in the form of a grant or otherwise is being given to this company for aircraft development?
2.	What is the amount of federal funds involved?
3.	What is the nature of the project concerned and what is the government financial participation expected to accomplish?


Hon. C. M. Drury (Minister of Industry):: 1.	Yes. The Department of Industry has entered into an agreement with Found Brothers Aviation Limited under which the department is sharing the cost of a development project in which the company is engaged.
2.	The total amount committed by the department to assist the project is $80,000.
3.	Information on the nature and objectives of the project is proprietary and the department, in accordance with its customary practice in respect of such industrial development projects, has undertaken in its agreement with the company to treat it as confidential.


INDIAN AFFAIRS OFFICE, BROADVIEW, SASK.
Mr. Douglas: 1.	Have any plans been made to close the Indian affairs office in Broadview, Saskatchewan?
2.	If so, what is the reason for closing this office?
3.	If the Broadview office is closed, what office will serve the reservations presently served by the Broadview office?


Arthur Laing: 1. No.
2.	N/A
3.	N/A


TARIFF ON MILITARY EQUIPMENT PURCHASED ABROAD
[Stage Direction]
Question No. 2,641
Mr. Crouse:: 1.	Has there been a change made in the tariff on military equipment purchased abroad by the Canadian government?
March 20, 1967

Questions
2.	If so (a) what is the amount of the purchase required for full remission of customs duties (b) is the duty still collected on components purchased by Canadian defence companies?


Charles Mills (Bud) Drury: 1.	After consultation with Canadian defence industry, a change was made as outlined in order in council P.C. 1966-2184 dated November 24, 1966, called the defence supplies remission order, as published in the Canada Gazette issue dated December 14, 1966.
2.	(a) $250,000. (b) Yes. However, when bids for defence supplies are being assessed in competition between Canadian companies and foreign companies, an adjustment is made to the Canadian bid to exclude such duty in order that the bids may be assessed on an equal basis.


SASKATCHEWAN MANPOWER STUDY
Mr. Pascoe: 1.	Did the federal government participate in a Saskatchewan manpower study by Hillis and Partners, Management Consultants, Limited?
2.	If so, how much did the federal government contribute to the cost of the study?


Hon. Maurice Sauve (Minister of Forestry and Rural Development):: 1. Yes. The study was formally proposed by the province of Saskatchewan in September 1965. It was approved in the same month by the federal government as an ARDA project in which we would participate.
2. The estimated total cost for the study was $57,000, of which the federal government agreed to pay half, $28,500. Federal expenditures to date are $15,846.


CHANGES IN AUTOMOBILE INSPECTION SYSTEMS
Mr. Asselin (Richmond-: Wolfe):
1.	Has the government received representations from the United Automobile Workers relating to the statement by Mr. Larry Sheffe of the U.A.W. on February 2, 1967, regarding a change in the inspection systems of the major auto manufacturing companies and its effect on the number of defective automobiles?
2.	If so (a) have these representations been brought to the attention of the Canadian government specifications board, and (b) does the government intend to bring in legislation to protect the Canadian consumer in this regard?


Charles Mills (Bud) Drury: 1.	No, however, Mr. Sheffe gave evidence on this subject to the standing committee on justice and legal affairs, on February 2, 1967.
2.	See answer to No. 1.


DESIGNATION OF YELLOWKNIFE AS N.W.T. CAPITAL
Mr. Dinsdale: 1.	As a result of the designation of Yellowknife as the capital of the Northwest Territories (a) what government operations will be transferred from Fort Smith to Yelloivknife (b) how many people are involved in this transfer?
2.	What developments are planned for Fort Smith to take up the slack created by the exodus to Yellowknife?
3.	In what manner will Hay River be affected by either (a) removal of existing government operations or (b) addition of new activities arising from the relocation of the seat of the Northwest Territories government from Ottawa to the territories?


Arthur Laing: 1. (a) Those territorial services now administered for the whole of the Mackenzie district of the Northwest Territories from Fort Smith but not including the purely regional headquarters functions carried out at Forth Smith, (b) No firm figure is yet available but not more than half the employees now at Fort Smith are likely to be affected. A small number will move this year with the balance phased over a two to three year period.
2.	(i) The transfer of officials from Fort Smith will be scheduled over a two year period or so. This will permit the orderly growth of facilities at Yellowknife and to lessen the impact of the move on Fort Smith, (ii) Plans for new institutions in Fort Smith or for the relocation of existing institutions to Fort Smith are being made by the federal and territorial governments, e.g., a $100,000 children's receiving home is to be constructed this year, (iii) The development of new and diversified industries is being studied by the people of Fort Smith. The senior governments will stand ready to assist where possible.
3.	(a) Not at all, (b) Natural growth by reason of its position as a distribution centre.

March 20. 1967
Questions


RETURN FROM ABROAD OF CANADIAN GRADUATE STUDENTS
Mr. Bell (Carleion): 1.	Has the attention of the Minister of Manpower and Immigration been directed to the recommendations contained in the report of Edward F. Sheffield and Mary Margot McGrail entitled "The Retrieval of Canadian Graduate Students from Abroad"?
2.	If so (a) has any action been taken to establish the Department of Manpower and Immigration as the central agency for the retrieval of Canadian graduate students from abroad, and (b) what, in detail is the nature of such action?
3.	Has any action been taken by the Department of Manpower and Immigration to compile and distribute information concerning Canadians studying abroad as recommended in the said report and, if so, what, in detail is the nature of such action and what distribution is given to such information?
4.	Has any action been taken to establish the Department of Manpower and Immigration as the agency through which guidance should be made available to Canadian gradute students abroad as recommended in the said report?
5.	If so, what action has been taken to make its role and services known to expatriate students through university placement officers, appointments boards, foreign student advisers and the like?
6.	If the answer to any of the foregoing questions is in the negative, what are the reasons for lack of decision or action?


Mr. J. C. Munro (Parliamentary Secretary to Minister of Manpower and Immigration):: 1.	Yes. The Department of Manpower and Immigration has studied this report in detail.
2.	(a) Yes. (b) This year the Department of Manpower and Immigration has worked closely with the association of universities and colleges of Canada, the Civil Service Commission and representatives of Canadian industry, and professional associations, in establishing a program called "Operation Retrieval". Visits were made to 27 American universities and eight universities in the United Kingdom and western Europe, where substantial numbers of Canadians are studying. Each university was visited by a team made up of representatives from the association of universities and colleges of Canada, the Civil Service Commission, and the Manpower and Immigration Department.
The purpose of these visits was to provide Canadians studying at these institutions with information on career opportunities in Canada. During these visits personal information forms were given to all those who wanted to contact Canadian employers. These forms are being returned to the department for distribution to prospective Canadian employers.
[Mr. Laing.l
For the past three years the association of universities and colleges of Canada has sponsored a series of tours to American and British universities, initially to inform Canadian postgraduate students about academic vacancies in Canadian universities, and then gradually about a broader range of job opportunities. The department helped to finance the teams last year; this year it financed the visits, provided a representative for each team, and arranged a one day briefing conference for the team members.
The Department of Manpower and Immigration and the association of universities and colleges of Canada have agreed that in future the department will assume full responsibility for planning and administering similar programs for this purpose.
3.	Yes. The Department of Manpower and Immigration publishes detailed information on Canadians studying abroad in the form of two directories; namely, the directory of Canadian students studying in the United States, and the directory of Canadian students studying in the United Kingdom. The directories list each student's name, address, degrees earned, degrees expected, expected year of graduation, name of university attended, field of study, and, in the case of graduate students, thesis topic and supervisor.
The directories are available from the department without charge, and are sent at present to a mailing list of some 2,500 representatives of education, industry, professional and scientific organizations, and federal, provincial and municipal government departments and agencies.
4.	Yes. Please see the answer to part 5.
5.	Each visiting team held a general meeting to which all Canadian graduate students were invited, and followed it with a full day of individual interviews. The teams were equipped to provide professional guidance and occupational information.
In addition to the visiting teams, about 7,000 copies of the Canada careers directory were mailed to Canadians studying in the United States. This directory is a useful guidance tool which provides information on employment opportunities.
By means of the activities described in 2(b) and 3, an increasing number of Canadians studying abroad, university placement officers, and student advisers are becoming aware of the services offered by this department.
6.	Not applicable.
March 20, 1967

Questions
FEDERAL BUILDING, ESTERHAZY, SASK.	LOCATION OF NATIONAL MUSEUM


Mr. Ormislon: 1.	How many sites were considered before a decision was made to purchase the property for the proposed federal building in Esterhazy, Saskatchewan?
2.	What is the legal description and location of these sites in question and the sale value quoted in each case?
3.	What was the deciding factor in making the choice to purchase the property finally selected?
4.	Was any representation made by any individual, group, committee, organization or company regarding the location of the proposed federal building?
5.	Have any complaints been registered against the choice of location by any individual, group, committee, organization or company?
6.	What is the (a) estimated cost of the proposed building (b) anticipated date of commencement of construction (c) date of completion?
Hon. G. J. Mcllrailh (Minister of Public
Works): 1. Two sites were considered.
2. Site 1: Owner:	Shepherd-Adamson Agency (1961) Ltd., Yorkton, Sask. Legal description: Lot 23, Block 6, Plan 66R41471, SE 1/4, Sec. 28, Twp. 19, Rge. 1, W2M, Esterhazy, Sask. Southeast corner of Main street and Third avenue, Esterhazy. Price $33,506.50. Site 2: Owner: Mike Zich, Esterhazy, Sask. Legal description: Lots twenty five (25) to thirty one (31), inclusive in Block two (2) according to a plan of record in the land titles office for the Regina land registration district as No. 59463. Southwest corner of Maple street and Second avenue, Esterhazy. Asking price: $50,000.
3.	The choice to purchase the property finally selected was based on its price, location for service to the public and the general support of a majority of the local residents.
4.	Representations were made in favour of the proposed location by the Esterhazy town council, community planning branch, department of municipal affairs, province of Saskatchewan and the International Minerals and Chemical Corporation (Canada) Ltd.
5.	Representations have been received against the proposed location from the Esterhazy Chamber of Commerce, Mr. Mike Zich, Esterhazy, Sask., and Van Ginkel Associates, Knowlton, Que.
6.	(a) It is not customary to reveal the estimated cost before tenders are called, (b) Anticipated date of commencement of construction: July, 1967.	(c) Date of completion,
March, 1968.

Question No. 2,730-Mr. Bell (Carlelon):
1.	In what location or locations has it been planned heretofore to erect buildings for the National Museum?
2.	Has there been any change of plan in relation to such location or locations?
3.	If so, what change?
4.	What is the present time schedule for the erection of each of such buildings?


Hon. G. J. Mcllrailh (Minister of Public Works):: 1. The plan was to erect the natural history museum on the site formerly occupied by the Woods-Canadian building, the Roxborough apartments, and adjacent lands extending east to the Driveway. There was a proposal to make use of a second site on Cartier Square for other related buildings, but no action on this was taken.
2.	This matter is under review as to the best utilization of the proposed building on the first site and of the space at the second site.
3.	See part 2, above.
4.	No time schedule has been established.


LABOUR RESEARCH CENTRES
Mr. Irvine: Is it the intention of the government to establish labour research centres in major metropolitan industrial cities as suggested by the representations made by local 27, U.A.W., London, Ontario, on March 7, 1967, and (a) if so, when may such action be expected (b) if not, for what reason?


Hon. J. R. Nicholson (Minister of Labour):: Mr. Speaker, consideration is being given by the Department of Labour to placing representatives of the economics and research branch of the department in at least some of the offices of the Department of Labour now established in larger centres across Canada. However, no final decision has been made.


TRANS-CANADA HIGHWAY-SUGGESTED RENAMING AS VANIER HIGHWAY
Mr. Olson: Is any consideration being given to naming the trans-Canada highway "The Vanier Highway"?


George James McIlraith: No.


PROHIBITION AGAINST WOMEN WORKING IN MINES
Mrs. Maclnnis (Vancouver-Kingsway): 1.	Has Canada ratified the I.L.O. convention prohibiting women from working in mines?

March 20, 1967
Questions
2.	II so, has the federal government passed legislation to give effect to this convention?
3. To the knowledge of the government have any of the provincial governments passed such legislation and, if so, which ones?


Mr. B. S. Mackasey (Parliamentary Secretary to Minister of Labour):: 1. Canada in September 1966 ratified I.L.O. convention No. 45 concerning employment of women on underground work in mines of all kinds.
2.	No.
3.	All provinces had passed legislation prohibiting work of women in manual occupations underground in mines before the convention was ratified.


BUILDING FOR EXHIBITION COMMISSION AND CHIEF ELECTORAL OFFICER
Mr. Bell (Carlelon): 1.	In what location in the city of Ottawa is it proposed to erect a building for the exhibition commission, Department of Trade and Commerce, and chief electoral officer?
2.	When is it anticipated that this building will be (a) commenced (b) completed?
3.	What is the estimated total cost of the building?
4.	How many square feet of space will be provided in the building?


George James McIlraith: 1. The proposed new building for the exhibition commission and Chief Electoral Officer will be located on the south side of Coventry road near the junction with Belfast road.
2.	It is anticipated that (a) construction will begin during April, 1967, and, (b) that the buildings will be completed around April, 1968.
3.	The lowest tender received is in the amount of $2,548,000.
4.	240,000 sq. ft.


FEDERAL CONTRIBUTION TO LAFONTAINE TUNNEL, MONTREAL
Mr. Isabelle: 1.	Did the government of Canada contribute toward the construction of the recently opened Louis-Hyppolite Lafontaine tunnel In Montreal?
2.	If so, what was its contribution?
3.	Who represented the federal government at its opening and what speeches did they make?


George James McIlraith: 1. Yes.
2. Estimated total federal contribution $53,774,607.
[Mrs. Maclnnis (Vancouver-Kingsway) .1
3. The Hon. George J. Mcllraith, Minister of Public Works, the Hon. Maurice Sauve, Minister of Forestry and Rural Development, and Mr. G. B. Williams, Senior Assistant Deputy Minister, Department of Public Works. None of these spoke.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. Gregoire: Who among the persons appointed by the governor in council since November 2, 1965, were candidates at the general election of November 8, 1965?
Return tabled.


EMPLOYMENT OF CONSULTANTS BY MANPOWER DEPARTMENT
Mr. Knowles: 1.	Has the Department of Manpower and Immigration, at any time since it came into being, engaged a firm of consultants?
2.	If so (a) what is the name of the firm (b) what terms of reference were given to it (c) was it engaged on a contract basis or otherwise, and (d) how much has been paid to the said firm to date?
3.	Was the firm engaged to study and report on any particular division, branch or section of the department, and, if so, which one?
4.	Have any reports or recommendations yet been submitted and, if so, what was their nature and are they being implemented?
5.	When will the firm's final report be submitted?
Return tabled.


EMPLOYMENT ON LOUISBOURG RESTORATION PROJECT
Mrs. Maclnnis (Vancouver-Kingsway): 1.	How many persons, labour, professional and civil service, were employed at the fortress of Louisbourg restoration project on January 1 of each year between January 1960 and January 1967?
2.	What were the classifications of these employees?
3.	What were the rates of pay, salaries and method of payment of these employees?
Return tabled.


GASPE-CAMPBELLTON MAIL CONTRACT
Mr. Caoueffe: 1. With respect to contracts awarded for the transportation of mail between Gaspe and Camp-bellton in replacement of the mail train, and for mail transports 100-101, 102-103, 140-141 and 160-161 respectively (a) what was the name of each of the
March 20, 1967

bidders, including their bids (b) who was awarded the contract for these mail transports (c) if the lowest bidder was not awarded the contract, why was this so?
2.	Who has the contract for the distribution of parcels originating from the Levis Post Office?
3.	Was a call for tenders made and, if so (a) what is the name of each of the bidders (b) what were their bids (c) who was awarded the contract?
Return tabled.


APPLICATIONS FOR REMOVAL OF RAILWAY AGENTS
Mr. Schreyer: 1.	How many applications have been received by the board of transport commissioners from the C.N.R. and C.P.R. relative to the removal of agents at specific localities in each month since January 1, 1965?
2.	Of the number of applications received from each of the two railway companies, how many were approved?
3.	What are the place names involved with respect to each of these applications for agent removal?
Return tabled.
[DOT] (2:40 p.m.)



HOUSING


Mr. Reid Scott (Danforth):: Mr. Speaker, I ask leave, seconded by the hon. member for Winnipeg North (Mr. Orlikow), to move the adjournment of the house under standing order 26 for the purpose of discussing a definite matter of urgent public importance, namely the serious housing crisis in Canada today, as evidenced by the disastrous drop in housing starts, high mortgage rates and the crippling rise in the prices and the rents of homes.


Mr. Speaker:: Would the hon. member for Danforth address the Chair on the question of urgency of debate.


Reid Scott: Yes, Mr. Speaker, I shall be very happy to take the opportunity to do so. As Your Honour knows, this is a type of motion which is rarely brought in the house.


Some hon. Members:: Oh, oh.


Reid Scott: Only when there is a matter which is felt to be of great and pressing urgency requiring debate is such motion brought. One of the requirements for debate is, as in this instance, that the subject matter of the matter to be debated be within the
Housing
ambit of government ministerial responsibility. Of this there is no doubt. The government is involved, perhaps inadequately, but it is involved in the matter of housing.
Another requirement is to satisfy Your Honour that no further opportunity to debate this matter, which is of great importance, will be afforded us. We all recall that the minister's estimates have been passed; there will be no further opportunity for us to raise a matter of such pressing national importance.
Also we are required to satisfy Your Honour on the whole matter of urgency of debate. It seems to me, Mr. Speaker-and I make this submission to Your Honour-that in the five years I have been in this chamber there has never been an occasion, in my recollection, when a matter so urgently required the adjournment of the business of the house for discussion. At the present moment we are confronted with a housing crisis of the first magnitude. Of that there cannot be the slightest doubt in the minds of hon. members here today. In this country our housing policy is non-existent.


Some hon. Members:: Order.


Reid Scott: Our record in the field of housing is a fiasco. Today, as we talk here, our young people cannot afford to buy the homes being built, and our old people are being overcharged for them.


Mr. Speaker:: Order, please. It seems to me that the hon. member is well launched in his argument. Would the hon. member please resume his seat? I should remind the hon. member that he has to address himself to a very limited question, whether there should be debate at this time and whether the business of the house should be adjourned for the purpose of debating the question.


Reid Scott: With the greatest respect, Mr. Speaker, one of the difficulties in trying to establish urgency is to demonstrate that a real crisis faces this country. I remember, for example, that a year or two ago Your Honour allowed a debate in this house on a matter of drought affecting farmers in the Ottawa valley. That was a proper debate. Today in Canada we have a drought in housing. This situation is far more critical than the situation Your Honour allowed to be debated previously.
It is impossible for us to adequately express in words the scandalous situation that has developed in the housing industry in Canada.

March 20, 1967
Housing
We can mention the gouging and the difficulties our people are suffering, but how else can we raise this subject and demonstrate the urgency of debate? We can only do it by trying to convince Your Honour that Canada faces a crisis.
In the middle of this hurricane of discontent sits the minister, calm, indifferent, serene, unconcerned and hiding behind the British North America Act. His sole contribution to this crisis has been to suggest the release of more mortgage money and all that will do, Mr. Speaker, is to build more homes that our people cannot afford to buy anyway. No later than last Saturday one of the leading Toronto morning newspapers did a survey of housing in Canada-
[DOT] (2:50 p.m.)


Mr. Graffley:: Name the other one.


Reid Scott: -pointing out that every province in this country, because of the delay and indifference of the federal government, has now developed some sort of housing policy of its own which varies from total inadequacy to mediocrity. Yet still, Mr. Speaker, we are hidebound in this house by rules that seem to say we cannot raise issues of this kind even though all members of the house know that every Canadian, almost from coast to coast, is feeling the pinch of housing, our young people and our old people. In such a situation we still have to try to convince Your Honour.
I could go on, but it would be transgressing the rules, to drag in the dreary statistics of failure in the whole housing field. But, Mr. Speaker, I want you to remember when you consider this motion that these statistics, which I would be willing to put on to the record and will do so if I get an opportunity, are people; and that every week end and every day-


Hon. A. J. MacEachen (Minister of National Health and Welfare):: Mr. Speaker, I rise on a point of order.


Reid Scott: -we members are receiving pitiful calls from people desperately crying out for action-


Mr. Speaker:: Order. The Minister of National Health and Welfare is rising on a point of order.


William Heward Grafftey: Let the right wing handle this.


Allan Joseph MacEachen: Mr. Speaker-


William Heward Grafftey: They have already dominated you. This is a right wing problem. Dinosaurs!


Allan Joseph MacEachen: Mr. Speaker, we have had a demonstration of a cynical disregard for the rules of the house in the performance by the hon. member who has just taken his seat.


Reid Scott: I rise on a point of privilege-


Mr. Speaker:: Order, please.


Allan Joseph MacEachen: The hon. member-


Reid Scott: On a point of privilege-


Mr. Speaker:: Order, please. The hon. member should have a bit of patience. There is a point of order raised, and I suggest that we should hear the minister out on the point of order. If the hon. member so wishes I shall recognize him afterward.


Reid Scott: Mr. Speaker, you have always told us a point of privilege must be raised as soon as it occurs and that is why I rise at this time, notwithstanding your suggestion, to ask you to reprimand the Minister of National Health and Welfare for his disgraceful comment that what we are doing is having an exercise in cynical misuse of the rules of the house.


Mr. Speaker:: Order, please.


Reid Scott: I suggest to Your Honour-


Mr. Speaker:: Order, please. There is no question of privilege at all in what the hon. member is now saying. The Minister of National Health and Welfare.


Allan Joseph MacEachen: Mr. Speaker, I had begun by saying we just had a demonstration by the hon. member of a cynical disregard for the rules of the house. On a procedural motion which ought to be directed exclusively to a point of order we have heard the hon. member import into his speech a whole series of allegations, statistics and criticisms of the government. We know that it is improper at this time. If the hon. member is to be allowed his place on the floor at this time he ought to argue directly on the point of order, namely whether the normal business of the house ought to be set aside in order to debate the problem of housing. That is the motion before us-


Mr. Knowles:: Hear, hear.
March 20, 1967


Allan Joseph MacEachen: -not a series of allegations, claims and charges, which have been cynically made by the hon. member in full knowledge that he was violating the rules of the house because he said himself-


Mr. Speaker:: Order, please.


Some hon. Members:: Hear, hear.


Allan Joseph MacEachen: Mr. Speaker-


Mr. Speaker:: Order, please. The minister has made his point and I recognize the validity of the point. I am sure the hon. member for Danforth knows what the rule is and the limitation placed on debate at this time, and I would ask him to bear this in mind in making his submission to the Chair.


Reid Scott: Mr. Speaker, it is also my understanding that the rules of the house provide that members may not impute motives to other members. In view of what the minister has said I would have hoped Your Honour would have drawn that to his attention, just as you have drawn the rules to my attention.


Mr. Speaker:: Order, please. I would ask the hon. member for Danforth to kindly limit his comments. I must say that since he started to discuss this motion this afternoon he has made it very difficult for the Chair. I would ask him to co-operate with the Chair and keep in mind what the rules are-rules which apply to him as they do to the rest of the house-and limit his remarks to whether there should be an adjournment of proceedings to discuss the matter to which he has referred.


Reid Scott: Surely the rules apply to both sides of the house, and I am entitled to your protection. The minister has made an outright charge that what I am doing amounts to a cynical misuse of the rules. I have been in this chamber for five years-


Some hon. Members:: Too long.


Reid Scott: Some say it is too
long. That may be, but in all that time I do not believe I have been charged with an offence of that kind by any minister. I ask Your Honour to give me the protection of the Chair against people like that.


Some hon. Members:: Oh, oh.


Mr. Speaker:: Order, please. If the hon. member needs this protection-and I have the impression that he can look after himself rather well-I can assure him he has that
Housing
protection. I invite him now to continue. I really did not think motives were imputed by the minister. He rose on a point of order and indicated that in his view the hon. member was going beyond what the rules allow him to do. I will not rule on that. I will just ask the hon. member to make it possible for the house to go on with its business, and to continue his speech.


Reid Scott: I will do so. Perhaps I have had sufficient opportunity to make the point I was trying to make. In conclusion I merely want to remind the house and Your Honour that the subject I am attempting to raise today involves one of the most urgent, critical and important social problems which face Canada today. It is one which has not been dealt with for as far back as I can remember. It is one which has been neglected, and the Minister of National Health and Welfare gave a good example today by his indifference.


Some hon. Members:: Order.


Reid Scott: When making your ruling I hope Your Honour will take into consideration the critical nature of the difficulties our people face, and that you will permit us to adjourn the business of this house in order to debate the matter until such time as we are able to force this indifferent and recalcitrant government into action.


Mr. G. L. Chatterfon (Esquimall-Saanich):: should like to say a few words in support of the motion to adjourn the regular business of this house in order to discuss what I consider to be the most important immediate problem facing Canadians today. Day after day we have asked the Minister of Labour and the government what they are proposing to do to help resolve this serious problem. Either the minister and the government are uninformed or they are disinterested.
To illustrate the urgency of this matter let me say that today it is almost impossible for Canadians earning an average income to acquire a house under the existing provisions of the National Housing Act. Furthermore, the difficulty has been compounded by the actions of the government itself, first by increasing the interest rate by 1 per cent in one year-


Some hon. Members:: Order.


George Louis Chatterton: -and then by increasing the cost of production, thus placing the price of a home beyond the reach of the average Canadian. Elderly citizens are unable to pay the high rents being charged because there is

March 20, 19G7
Housing
a shortage of housing. I can only add my support for this motion and urge Your Honour to allow us to discuss this subject today, so that at least there might be some hope of convincing the government that action is required.


William Heward Grafftey: In addressing Your Honour on this matter we must, as I understand the rules, establish urgency first of all. Next we must establish that we are discussing a national problem over which the government has jurisdiction. As to urgency, we understand the Easter recess is in prospect, and soon after that spring housing starts are due to begin.
[DOT] (3:00 p.m.)
Under the rules I would not be permitted at the present time to go into statistics. The Minister of Labour, however, when he became aware a number of weeks ago of the national housing crisis, started a series of cross country symposiums and study groups. In answer to questions we have put to him over the past number of weeks the minister has informed us that these now have to come to an end. Now that these symposiums and study groups have come to an end members of the house and people across this land are demanding immediate action. We all know that even with the modern construction techniques that are available the greatest number of housing starts normally take place in the early spring months. Now, with the symposiums and study groups having come to an end, with the Easter recess facing us, and with the time approaching when we hope there will be early spring housing starts, I think we have reached the time when we should have a debate now, not when it is too late. This is a problem which should be debatable under the constitution as it exists today.
One reason I am calling for constitutional reform is that so many of the people's problems are being pushed back and forth between federal and provincial jurisdiction. The Minister of Labour says that by and large this is a provincial problem. I differ with him. I believe the disgrace of our national crisis right now vis-a-vis housing is a national problem which should be the concern of the federal government. Because of the fact that we will come to grips with the housing crisis only if we have a national policy now and not tomorrow, because we are faced with an Easter recess and the necessity for housing starts in the early spring months, and because the study groups and symposiums are 
finished, I believe we should debate this matter now in the highest forum of this land, the House of Commons, so the thousands of Canadians who are looking for a decent roof over their heads right away will be given some hope by this government and this House of Commons.


Mr. Real Caouefle (Villeneuve):: Mr. Speaker, the adjournment motion moved by the hon. member for Danforth (Mr. Scott) reads in part as follows:

-for the purpose of discussing a definite matter of urgent public importance, namely the serious housing crisis in Canada today, as evidenced by the disastrous drop in housing starts-

I feel, Mr. Speaker that the country is not going through a housing crisis as much as a financial crisis which will not allow Canadians to buy homes.
The problem is not to build houses but to make it possible for Canadians to buy the houses already built. They should be given 75 to 90 years to pay a reasonable monthly instalment.
Today, the Conservatives are strongly in favour of adjourning the proceedings of the house to discuss that important matter: the housing crisis. If they had assumed their responsibilities while in office, it is likely that they would not have to support such a motion today.


Mr. Speaker:: Order. I hesitate to interrupt the hon. member, but I am taking the liberty of reminding him, as I did in the case of other members who took part in this debate, that we must restrict ourselves as much as possible to a single consideration, namely whether such a debate is urgent at this time.


David Réal Caouette: Mr. Speaker, I thank you for reminding me it is essential that I should deal exclusively with the adjournment motion.
I feel that even though it is urgent to discuss housing projects in Canada, our prime and most urgent concern should be to deal with the financial ways of enabling Canadians to order a house and this would then provide the required impetus. I do not feel this adjournment motion would bring anything to the Canadian people at the present time, as long as we retain a prohibitive financial system under which they are prevented from owning their own home.
March 20. 1967


Mr. E. Nasserden (Roslhern):: Mr. Speaker, in respect of this question of urgency which has been raised, I think we must accept the fact that there has been a decline in housing starts in Canada, that there has been a serious decline in plans for high rise construction, that we have tight money at high interest rates, and that all the minister opposite has done is raise the interest rate and suggest that this will solve the problem. Over the week end in Saskatoon I noticed that some persons who have been employed in the largest industries which supply the housing trades have been laid off over the last few months because of the decline in housing starts. All these things indicate it is time this government came to grips with this problem and gave this House of Commons and the Canadian people some leadership in so far as a housing policy is concerned.


Mr. Gilles Gregoire (Lapointe):: Mr. Speaker, I should like to support the motion of the hon. member for Danforth (Mr. Scott) and state the reasons why I feel this debate is urgent. It is because when we go to meet our constituents in our home ridings, the first question raised by the Canadian people and generally by the people of Quebec, is the one they consider the most urgent to settle, that is the problem of home building.
Settlement of this question is urgent first of all for the construction workers who are laid off precisely because there is no work available for them and, as a result, unemployment is rising noticeably. For them, it is an urgent problem to settle.
For the people who need a home and who cannot do without nor buy one because prices are too high, there is also urgency of debate so that we can suggest to the government what should be done to reduce the prices and how to adapt a new system which will enable the people to buy homes.
There is also urgency, Mr. Speaker, because construction is probably a field which, when in a bad way, has the worse effects on other sectors of the economy. That is the case today.
Everyone in Canada feels there is an urgent problem to settle in the field of construction. If the public agrees that the problem is urgent, we should at least recognize that it is urgent to debate the matter. That may not do much, but at least it will prove to the people that we agree it is an urgent problem, and that is why we are now considering it. Moreover, this would give the government an 23033-8965
Housing
opportunity to say whether it intends to take action or continue as before, that is do nothing.
Now, Mr. Speaker, there is another point that I would like to call to your attention, and it might prove the urgency of the debate. At present, we have no other opportunity to discuss it, and even the leader of the government expressed his intention to adjourn the session tomorrow evening, that is, Tuesday. Well, I for one am ready to put off the adjournment until Wednesday, and to deal with today's business tomorrow and Wednesday, in order to discuss today the housing problem, which is more urgent than any other business right now.
I submit that this is an urgent problem, since it is of vital importance to all the citizens whom we represent here.
You judge the urgency of a debate by the urgency of the problem to be settled. Therefore, if our constituents view this as a pressing problem, it must necessarily be urgent for us to deal with it and to say here what people think in our ridings.
[DOT] (3:10 p.m.)


Mr. Speaker:: Order, please. I thank hon. members for their very interesting comments in connection with the motion raised by the hon. member for Danforth. Perhaps I should remind hon. members again of the general ruling in respect of the procedure to be followed, to the effect that members should limit their remarks in support of or opposition to a motion under standing order 26 to the question of the urgency of debate rather than the substance of the subject matter. I fully realize it is not easy to talk about the urgency of debate without referring also to the urgency of the matter. I try to keep this in mind in allowing hon. members to refer to a certain extent to the subject matter itself.
Having said that, I must now decide on the basis of precedent and the standing orders whether there is reason at the moment to allow the announced business of the house to be set aside for the purpose of discussing the matter raised by the hon. member for Danforth. As has been pointed out during the course of the procedural debate we have had, the Chair must be satisfied that there is a matter of sudden urgency. As I interpret the remarks of the hon. member for Danforth and others, this is not a matter which has arisen
March 20, 1967

Inquiries of the Ministry today or within the last few days. It is perhaps an important matter of continuing urgency, and because that is so I doubt very much whether it is possible to accept the motion.
The hon. member brought to the attention of the Chair one of the important considerations; that is, will there be an early opportunity to debate the matter. It is my understanding that at a very early date there will be an interim supply motion before the house. During the debate on that motion, I think is the time problems such as the one referred to by the hon. member can be discussed.
What the Chair has to take into account is the relative urgency of the matter raised under standing order 26 and the announced business for a particular day. The business for today is the consideration of amendments to the Bank Act. That is an important and urgent matter, and if my understanding is correct it is important that a decision in this regard be made before the end of the month. In considering the importance of one as compared with the importance of the other, and in light of other considerations to which I have refer? 'ed, I do not believe it is possible for the C' air to put the motion proposed by the hon. member.



HEALTH AND WELFARE


[Stage Direction]
On the orders of the day:
Right Hon. J. G. Diefenbaker (Leader of the Opposition):: Mr. Speaker, I should like to direct my question to the Solicitor General. In view of the increasing number of tragedies in the last few weeks, the last of which occurred in Toronto within the last 48 hours, in connection with the use of LSD, will the minister place before this house some method of restricting the use of this drug by putting it on the list of prohibited drugs under the provisions of the Narcotic Control Act? I should hope such a step would meet with general support, and that it can be taken before this house adjourns so there will be at least some slow-up in the number of tragedies which have occurred at an accelerated rate in recent weeks.


Hon. L. T. Pennell (Solicitor General):: Mr. Speaker, while this question is also related to the Department of National Health and Welfare perhaps I might be permitted to say that the question of control over LSD was recently brought before a cabinet committee


by the Minister of National Health and Welfare. The subject was discussed at considerable length. Possible amendments to the Food and Drugs Act and the Narcotic Control Act are under active consideration.


John George Diefenbaker: I have a supplementary question, Mr. Speaker. I appreciate the attention that has been given to this matter, which is grievously serious. Is it possible to put LSD on the list of prohibited drugs under the Narcotic Control Act in order that some control may be exercised in respect of its use? It seems necessary to place this substance under some kind of ban, as are other substances which are deleterious to individuals.


Lawrence T. Pennell: I can only say that the very point raised by the right hon. gentleman was the subject of the discussion in the cabinet committee to which I referred. I am not in a position to give a precise answer as to when any possible amendment could be brought before the house.



TELEVISION


[Stage Direction]
On the orders of the day:
Lawrence T. Pennell: Mr. Speaker, several weeks ago I took notice of a question adressed to me by the right hon. Leader of the Opposition regarding a television program which had to do with marijuana and LSD. I now wish to advise that I caused a transcript of the program to be sent to the Department of Justice. The R.C.M.P. also have a tape of the program. The Department of Justice gave an opinion that the only possibility of action might be against those persons on the program who admitted having been in possession of drugs. I am informed that one of the persons who appeared on the program is facing a charge of violating provisions of the Narcotic Control Act. The R.C.M.P. are continuing to investigate an incident referred to on the program.



AGRICULTURE


[Stage Direction]
On the orders of the day:
Mr. Ed. Schreyer (Springfield):: Mr. Speaker, I should like to ask the Minister of Agriculture whether he has received a request in recent days from a farm or dairy organization, advising him that if the present milk price continues they may take action to withhold milk supplies from the market. Will
March 20, 1967

the minister indicate what course of action he is taking to deal with the situation?


Hon. J. J. Greene (Minister of Agriculture):: Mr. Speaker, I just received a copy of a wire forwarded to the Prime Minister's office in this regard. In answer to the second half of the hon. member's question let me say that we will soon announce our dairy policy for the ensuing year. I have every hope that it will be sufficiently responsible and attractive to the dairying community that such action will not be necessary.


David Réal Caouette: A supplementary question, Mr. Speaker.
The minister says he will announce his dairy policy soon. Can we expect that this announcement will be made this week, before the Easter recess, for example?


John James Greene: Mr. Speaker, I am not sure when the house will adjourn, but I trust that the dairy policy will be announced before that time.


Eric Alfred Winkler: Mr. Speaker, I have a supplementary question. Since the minister has now answered the question posed by the hon. member for Springfield, which he refused to answer last week, can he indicate whether there will be an increase to the producer in the price of manufacturing milk?


John James Greene: Mr. Speaker, the policy will be announced in due course in the normal manner, and any increase will be made known at that time.


Eric Alfred Winkler: On a question of privilege, Mr. Speaker, I should like to know whether the minister will bring forward some beneficial legislation at the first opportunity in respect of farm machine prices. The minister has a habit of making political speeches outside the house in respect of other levels of responsibility.


Mr. Speaker:: Order, please.



IMMIGRATION


[Stage Direction]
On the orders of the day:
David Réal Caouette: Mr. Speaker, in the absence of the Prime Minister, I
Inquiries of the Ministry shall put my question to the Acting Prime Minister (Mr. Martin).
In its Saturday edition, Le Droit reported that a series of lectures on Karl Marx will be given at the Ottawa University, starting tonight, by a noted communist, Henri Lefebvre, the most complete marxist thinker of French expression. Is the government aware that seven lectures on communism will be given at the University of Ottawa, starting tonight, and has it approved or is it approving such lectures?


Mr. Speaker:: Order. I do not think that this question relates to a subject pertaining to the administrative responsibility of the government.


David Réal Caouette: Mr. Speaker, I direct my question to the hon. Minister of Manpower and Immigration.
Was the minister aware that Professor Henri Lefebvre from the University of Paris, was admitted into Canada in order to give lectures at the Ottawa University on the doctrine of Karl Marx?


Hon. Jean Marchand (Minister of Manpower and Immigration):: Mr. Speaker, I know that the doctrine of Karl Marx is being taught in several universities. I was a university student myself and I attended lectures on Karl Marx, Engels and Hegel, and I think such a procedure is normal in universities nowadays. I do not know-I was not informed-when Mr. Lefebvre crossed the border.


David Réal Caouette: Mr. Speaker, a supplementary question. Is it for that reason the minister seems to be inclined to communism?


Mr. Speaker:: Order.



LABOUR RELATIONS


[Stage Direction]
On the orders of the day:
Mr. Howard Johnston (Okanagan-Revel-stoke):: Mr. Speaker, I wish to address my question to the Minister of Labour and ask him to tell the house whether his recently reported remarks to the effect that there was something fundamentally wrong with the present industrial relations laws and mechanisms indicate the early introduction of legislation to provide labour courts or compulsory arbitration machinery to deal with strikes in essential services.
14176	COMMONS
Inquiries of the Ministry


John Robert (Jack) Nicholson: The remarks of the Minister of Labour were in line with the remarks previously expressed by him and, what is perhaps more important, with the remarks made by the Prime Minister that the time was overdue for such a study. That is why a task force was set up some months ago.


Hon. George Hees (Northumberland):: Mr. Speaker, I have a supplementary question for the Minister of Labour. In view of his statement that our labour laws are no longer in tune with reality and that something is fundamentally wrong with our industrial relations laws, will he introduce amendments to the Canada Labour Code to correct the situation which the minister himself said has become serious in the past few years?


Mr. Speaker:: Order. It seems to me that the question asked by the hon. member for Northumberland is a repetition of the one asked by the hon. member for Okanagan-Revelstoke.


William Heward Grafftey: Mr. Speaker, although I do not wish to repeat the question put by the hon. member for Okanagan-Revelstoke I would like to question the Minister of Labour on the speech he made in Halifax in which he spoke about our outmoded management-labour laws. In view of the urgency of this question would he now order the task force which he set up, to report before the end of 1967 rather than some time in 1968, in order that we can have action sooner rather than later?


Mr. Speaker:: Order, please. The hon. member suggests there should be a report before the end of 1967. This places his question within the category of those that can be placed on the order paper.


William Heward Grafftey: Mr. Speaker, because of the urgency of the question I would ask to be allowed to rephrase my question and ask the minister whether he is considering the setting up, apart from the task force, of study groups and symposiums to look into this matter.


John Robert (Jack) Nicholson: For the hon. member's
benefit, and because of his sarcasm, I would remind him that the task force was not set up by the Minister of Labour. It was set up by the Prime Minister, and the Prime Minister has already advised the house that he hoped an interim report would be available well before the end of the year.

DEBATES	March 20, 1967


William Heward Grafftey: With the problem as urgent as it is, when can we expect action?



FISHERIES


[Stage Direction]
On the orders of the day:
John George Diefenbaker: Mr. Speaker, in the hope that the Minister of Fisheries is in a better humour today than he was the other day I should like to ask him now whether he has received a request from the national Society for Prevention of Cruelty to Animals for the banning of the cruel and harmful killing of baby seals, and whether that society's representation has softened his resistance to action in this regard.


Hon.   H.-J. Robichaud@Minister of Fisheries: Yes, Mr. Speaker; Friday evening I received a telegram from Mr. A. L. MacLaurin, president of the Canadian Society for the Prevention of Cruelty to Animals. I was not surprised to receive this telegram, because the day before the seal hunt started he sent a circular letter to Canadian newspapers saying that he would ask for the complete abolishment of this operation.
The following was my reply to Mr. Mac-Laurin's telegram:
In reply to your telegram of March 17 I shall examine the written report of your observers St. Onge and Johansson in the light of information received from my officers and from the group of representatives of Canadian and international societies to whom we gave transportation. In spite of conflicting reports including some from irresponsible persons it is clear that conditions in the seal fishery in 1967 were improved by revised regulations and intensive enforcement and are comparable or perhaps better than in many activities involving the killing of animals. In view of the importance of the seal fishery to many residents of Atlantic provinces with relatively poor income opportunities I cannot consider abolition of the fishery at this time but assure you that we shall continue our efforts to improve conditions still further.


John George Diefenbaker: Mr. Speaker, in view of the small income derived from this operation-I believe each sealer makes approximately $300-would it not be cheaper for the government to pay these people rather than continue to give Canada the kind of black eye which the minister does nothing to correct?


Mr. Speaker:: Order, please. I believe the question asked by the right hon. Leader of the Opposition is more in the form of an argument than a question.
March 20, 1967	COMMONS


Mr. Robichaud:: Mr. Speaker, may I rise on a question of privilege. I believe I have a right to do so because the right hon. gentleman has referred to the bad image this operation is creating for Canada. I should like to repeat what I have said before, namely that the bad image is created by irresponsible people who request the complete abolition of this operation without obtaining proper information.


John George Diefenbaker: Does the minister include among those irresponsible people the president of the S.P.C.A. and the thousands of Canadians in every walk of life who are demanding action today?


Mr. Speaker:: Order, please. This is becoming a debate. We had a debate on this point last week, and the present exchange between the right hon. Leader of the Opposition and the Minister of Fisheries is a reiteration of the same points. I do not think this point can be raised as a question of privilege.


Mr. Andrew Chaiwood (Grand Falls-White Bay-Labrador):: Mr. Speaker, I have a question for the Minister of Fisheries. In giving appropriate consideration to the charges that have been made with regard to the seal fishery by some people, many of whom are poorly informed, will the minister take all possible measures to ensure that sealers are allowed to use the appropriate weapons for taking seals and thus ensure an increase in the seal fishery which is of vital importance to the livelihood of so many Canadians?


Mr. Speaker:: Order. The hon. member is asking a question which relates very closely to others asked earlier today. Although the question is quite in order, as asked it does not have particular urgency and the hon. member may want to discuss it during the adjournment debate.


Andrew Chatwood: Ten o'clock, Mr. Speaker.



INDUSTRY


[Stage Direction]
On the orders of the day:
Hon. Michael Starr (Ontario):: Mr. Speaker,
I wish to address a question to the Minister of Industry and ask him whether he has acceded to the request of Mr. George Burt, regional director of the U.A.W., for a meeting to discuss the announcement by General Motors of the discontinuance of the production of two
Inquiries of the Ministry additional models that were manufactured in Oshawa and will now be manufactured in the United States. Has such a meeting been held, and if not when is it to be held?


Charles Mills (Bud) Drury: Mr. Speaker, I advised Mr. Burt earlier this week that I am attempting to find a time at which the three ministers with whom Mr. Burt wants to meet can be together, and when I can arrange this time I will notify Mr. Burt.



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Mr. Robert Muir (Cape Breton North and Victoria):: Mr. Speaker, my question refers to a matter which I raised on March 2 in a question to the right hon. Prime Minister in the absence of the Minister of Manpower and Immigration. At that time the Prime Minister said he would be glad to discuss the matter with the minister. I brought the matter to his attention again on March 10, reiterating that a massive crash training program should be established in Cape Breton to assist the unemployed steel workers and other unemployed. At that time the minister said "I think I can answer that question on Monday". Is he now in a position to reply?


Jean Marchand: Mr. Speaker, unfortunately I was not here on Monday, and I believe the hon. gentleman was not in the house on the following days. This is why I did not answer his question, and I hope he will forgive me.
The only answer I can give the hon. member is the one I gave on March 1 with relation to training in Cape Breton. I must repeat that my department has a waiting list of people for whose training we are willing to pay when the province whose responsibility it is to provide facilities for them can do so. The province is engaged in expanding the training facilities available. In the meantime we are doing all we can.
However, with reference to another kind of assistance, I have designated Sydney and Sydney Mines under the manpower and mobility regulations to enable workers who wish to move to receive grants immediately.


Robert Muir: I think the minister is quite right; I was away on a speaking engagement, and I thank him
U178	COMMONS DEBATES	March 20, 1967
Inquiries of the Ministry
for his co-operation. May I add that the rea- General Simonds, from allied military colson for the large influx of unemployed on the leagues to the effect that they believe Cana-labour market is the lack of policies on the dians are nuts to continue with the unification part of this government. All it has to offer is program?
a one way ticket out of the area in which the Mr_ Speaker. 0rder. That question contains workers live.	allegations that are not proper on orders of


Mr. Speaker:: Order, please.	the day.



NATIONAL PARKS


[Stage Direction]
On the orders of the day:
Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, I wish to address a question to the Minister of Indian Affairs and Northern Development. In view of the increasing interest in the development of our national parks, and as a lifelong conservative, I wish to ask the minister a question. May I say that I am a conservative from a socialist point of view with respect to natural resources. Can the minister inform the house whether there have been any discussions between the minister and Premier Manning of Alberta with respect to the possible transfer of an area of Wood Buffalo park to the provincial government in return for an appropriate area of provincial land to be used as a second national park?


Mr. Speaker:: Order. The question should be placed on the order paper.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Mr. Jack McIntosh (Swift Current-Maple Creek):: Mr. Speaker, I have a question for the Acting Prime Minister. Would he advise the house whether the government has received any communications or representations from allied governments expressing concern that Canada will not be able to fulfil her alliance commitments in view of the unification program for our armed forces as described by the Minister of National Defence?


Hon. Paul Martin (Acting Prime Minister):: No, sir.


John (Jack) McIntosh: May I ask a supplementary question. Is the Acting Prime Minister aware that representations have been made to Canada's former chief of the general staff,



REPORTED WEARING OF NEW UNIFORM ON PARLIAMENT HILL

[Stage Direction]
On the orders of the day:
John George Diefenbaker: Mr. Speaker, I would ask the Minister of National Defence if he would clear up the mystery surrounding the two people belonging to the armed forces who on Friday paraded in a green uniform on parliament hill and then were taken into custody by the military police. Were these two individuals gremlins, or were they actually giving a first view of the jolly green jumper which the unified force is to wear?


Mr. Speaker:: Order, please.


John George Diefenbaker: Mr. Speaker, I cannot understand why we should not find out, even with help from the Minister of National Revenue who cannot look after himself. Can the Minister of National Defence answer whether this is indeed the kind of uniform that Canadians may expect for the three armed services?


Mr. Speaker:: Order, please. I wonder
whether the particular question asked by the right hon. Leader of the Opposition is one of immediate national emergency. I doubt it very much.


John George Diefenbaker: We want to know.


Mr. Harkness:: A supplementary question-


Mr. Speaker:: Order, please. The Chair has not accepted the question, so there cannot be a supplementary. The hon. member may wish to ask another question.


Mr. Donald Maclnnis (Cape Breton South):: Mr. Speaker, I should like to ask the Minister of National Defence under what authorization this uniform was worn.


Hon. Paul Hellyer (Minister of National Defence):: Mr. Speaker, all uniforms are worn under the authority of the minister pursuant to the National Defence Act.


John George Diefenbaker: Then that is the uniform? That is what we want to know.
March 20, 1967	COMMONS


Malcolm MacInnis: In the
case of something new, would it not be necessary for a new order to issued? Was a new order authorized by the minister?


Paul Theodore Hellyer: That is a hypothetical question.



EXPO '67 APPLICANTS FOR ACCOMMODATION QUERIED AS TO RACE

[Stage Direction]
On the orders of the day:
Stanley Howard Knowles: Mr. Speaker, may I direct a question to the Minister of Trade and Commerce. Is the minister aware of the advice being given by Logexpo to applicants for accommodation in Montreal during Expo '67 to the effect they should indicate their race? If so, will the minister use his good offices to see that this un-Canadian practice is brought to a halt?


Hon. Robert Winters (Minister of Trade and Commerce):: I will look into it.



ROYAL CANADIAN MOUNTED POLICE


[Stage Direction]
On the orders of the day:
Gilles Grégoire: Mr. Speaker, my question is intended for the hon. Solicitor General of Canada. I should like to ask him whether he has received a copy of a resolution passed by the general council of Expo '67 asking the recall of Inspector Riddell and the appointment of a bilingual inspector to replace him?


Mr. Speaker:: I doubt very much that the question is of national urgency. Therefore, I ask the hon. member to kindly put it on the order paper.


Gilles Grégoire: Mr. Speaker, I shall put it at ten o'clock. But I felt it was important enough to be put at this time. Ministers are constantly being asked in this house whether they have received this or that resolution.
Mr. Speaker, I rise on a point of order. A while ago the Minister of Fisheries (Mr. Robichaud) mentioned that he had received a copy of a telegram from the president of the Society for the Prevention of Cruelty to Animals and you authorized him to read his reply thereto. Today, I ask whether the minister has received a resolution from the general council of Expo, asking-
Inquiries oj the Ministry


Mr. Speaker:: Order. The hon. member knows that, according to standing orders, if he feels that he is being treated unfairly and that the question is really urgent, he may bring the matter up for discussion on the adjournment motion.


Gilles Grégoire: Ten o'clock, Mr. Speaker, because I feel that there is an injustice and that there is every reason to study the problem.


Mr. Speaker:: Order. May I remind the hon. member that the Chair can say there is injustice but that he cannot say so.



REQUEST FOR INDICATION OF EASTER RECESS

[Stage Direction]
On the orders of the day:
Douglas Scott Harkness: Mr. Speaker, I wish to direct a question to the Acting Prime Minister. In view of the difficulties that members have in securing travel reservations, could the Acting Prime Minister indicate when the government intends to move to adjourn the house for the Easter recess?


Hon. Paul  Marlin@Acting Prime Minister: Mr. Speaker, I am sure I express the views of all members when I say we would all like to know when it would be possible for such a motion to be made. I express the hope that we will be able to co-operate and finish the work that the government feels should be dealt with within a very short time. Perhaps later today we could indicate just what day this week, if not tomorrow, such a motion could be made.


Michael Starr: May I ask a supplementary question. Will the minister tell us when?


Paul Joseph James Martin: My hon. friend and I have generally learned to co-operate. I am sure that with the co-operation he will give, I will be in a position soon to give a definite answer.


Michael Starr: How much are you asking for?



REQUEST FOR STATEMENT ON NEGOTIATIONS RESPECTING INTERNATIONAL WHEAT AGREEMENT

[Stage Direction]
On the orders of the day:
Mr. S. J. Korchinski (Mackenzie):: Mr. Speaker, on Wednesday last the Minister of Trade and Commerce, in commenting on the
March 20. 1967

Inquiries of the Ministry GATT negotiations affecting cereals indicated, as reported on page 14032 of Hansard, that progress was being made. However, the president of the Saskatchewan wheat pool has recently returned from Geneva and has indicated that not much progress had been made in the negotiations up to March 10. Can the minister elaborate on his apparent optimism which does not seem to be shared by Mr. Gibbings?


Mr. Speaker:: The hon. member is asking for a statement and I do not think this is the kind of question that can be asked now.


Stanley James Korchinski: Ten o'clock, Mr. Speaker.



EXTERNAL AFFAIRS


[Stage Direction]
On the orders of the day:
Mr. David Lewis (York South):: Mr. Speaker, I have a question for the Secretary of State for External Affairs. In view of the reported statement by the Secretary General of the United Nations that he is now proposing that his three conditions for beginning negotiations for peace in Viet Nam should be proceeded with simultaneously rather than consecutively, namely that an end of the bombing of North Viet Nam, de-escalation by North Viet Nam and talks looking toward peace should all be started at the same time, would the minister inform the house whether the government has informed both the Secretary General of the United Nations and the governments of the United States and Viet Nam of its support for U Thant's proposals?


Paul Joseph James Martin: Mr. Speaker, the Secretary General made it quite clear he was not going to give details of the plan he had in mind. The government is aware of that plan and had an opportunity of discussing it with a representative of the Secretary General in Ottawa. Other governments are familiar with the plan and the Canadian government fully accepts it. It is not, however, for the Canadian government to decide on the matter; it is for the parties to the conflict. I sincerely hope that the proposals, the details of which the Secretary General feels should not be disclosed at this stage, will be accepted and will facilitate the negotiations that we all desire.
[Mr. Korchinski.)


David Lewis: A supplementary question. I appreciate that it is not up to Canada to start these things, but I should like to ask the minister whether Canada has expressed its approval to the governments concerned of the Secretary General's plans, whatever they may be, which he says he accepts.


Mr. Martin (Essex Easi):: Yes, Mr. Speaker. My hon. friend outlined some details, and if I did not comment on them this is not to say that these proposed details do represent the proposition that the Secretary General has put forward. The government has made known its views to the governments concerned.


CANADIAN CENTENNIAL
[Stage Direction]
On the orders of the day:
Hon. W. G. Dinsdale (Brandon-Souris):: Mr. Speaker, I have a question for the Secretary of State. In view of the recent speech by the Prime Minister urging a more positive participation in politics by Canadian youth, would the minister now call together the members of the ad hoc committee that was set up to assist in the preparation of such a program to be launched in our centennial year so we might consider the report submitted to her by the Canadian political youth council?


Julia Verlyn (Judy) LaMarsh: Mr. Speaker, I will be glad to ask my parliamentary secretary to do so.


HIGHWAY SAFETY
[Stage Direction]
On the orders of the day:
Mr. Barry Mather (New Westminster):: Mr. Speaker, I have a question I want to ask the Minister of Industry. Having in mind the continuing number of call-backs of faulty motor vehicles by Canadian plants-I understand that 105 Buicks have just been recalled-is any consideration being given to establishing a government inspection service in automobile plants in line with measures of public safety?


Charles Mills (Bud) Drury: Mr. Speaker, that question is now being studied by the house committee on justice and legal affairs, and I do not think it would be appropriate for me to comment upon it.
March 20, 1967	COMMONS


INCOME TAX
[Stage Direction]
On the orders of the day:
Mr. Raymond Langlois (Meganfic):: Mr. Speaker, my question is directed to the Minister of National Revenue.
Following the statements made by Mr. Pierre Bourgault, to the effect that he has not paid his federal income tax for three years, and since the minister has been made aware of those facts, can he tell the house if some measures have been taken so that Mr. Bourgault will now pay his income tax like all the other Canadian citizens?


Mr. Speaker:: That question is a repetition of a question which was asked last week.


Raymond Langlois: Mr. Speaker, I would not like to insist nor overtax your forbearance, but I believe that when the question was asked, the minister said that he would take it as notice. Is he in a position to give us an answer today?


Mr. Speaker:: Order. I think that the minister answered the question which was asked at that time.


HOUSING
[Stage Direction]
NEGOTIATIONS WITH ALCAN RESPECTING NEW PROCESS On the orders of the day:
Malcolm MacInnis: Mr. Speaker, I have a question for the Minister of Labour but in his absence I will direct it to the Minister of Trade and Commerce. Have any negotiations been carried on with the ALCAN company with respect to a revolutionary process which would alleviate the housing shortage?


Robert Henry Winters: Mr. Speaker, not so far as the Department of Trade and Commerce is concerned. If there have been negotiations carried on by other departments I will find out and inform the hon. member.


CANADIAN NATIONAL RAILWAYS
[Stage Direction]
On the orders of the day:
Mr. David MacDonald (Prince):: Mr. Speaker, I have a question for the Minister of
Inquiries of the Ministry Transport which relates to the loss of many thousands of dollars in potato shipments from Prince Edward Island. Has the minister been able to ascertain in the past few days what difficulties have confronted the C.N.R. in providing adequate double reefer cars to deal with this serious situation?


Mr. Speaker:: Order. I am wondering
whether this is the type of question that would better be discussed on the adjournment debate.


David Samuel Horne MacDonald: With respect, Mr. Speaker, this is a matter of grave urgency as almost half the present potato crop on the island is awaiting shipment. Unless we receive an immediate reply we will be in a very serious situation.


Mr. Speaker:: Very well; not being a specialist in potatoes I am easily convinced.


Hon. J. W. Pickersgill (Minister of Transport):: Mr. Speaker, I think I am forced to agree with the hon. member that the question does appear to be more urgent than many which have been asked today. There has been some difficulty in the port of Saint John, I understand, with the handling of cars and there was a back-up there which I believe has now been corrected. There was also, I regret to say, some shortage of motive power and the C.N.R. has said that it will do its utmost to correct that shortage as quickly as possible. All of this adds up to the fact that there is a lot more traffic than usual at this time of year, and I think for that we are all thankful.


AGRICULTURE
[Stage Direction]
On the orders of the day:
Mr. David Orlikow (Winnipeg North):: Mr. Speaker, I should like to direct a question to the Minister of Forestry. Has the federal government, in the projected ARDA agreement with the province of Manitoba, made it an essential condition of the agreement that there would be a dramatic improvement and change in the educational structure of the affected area?


Maurice Sauvé: Mr. Speaker, for that particular region there was no such requirement at any time.


David Orlikow: A supplementary question. Is the minister aware that the premier of the

March 20, 1967
Bank Act
province of Manitoba has blamed on the federal government the lack of a referendum in that particular area during the recent election campaign?


Mr. Speaker:: Order. That question is not in order.


HEALTH AND WELFARE
[Stage Direction]
On the orders of the day:
Stanley Howard Knowles: Mr. Speaker, may I direct a question to the Minister of National Health and Welfare. My question relates to the announcement of a conference to be held shortly between the federal government and the provincial governments with respect to medicare. May I ask the minister whether at this conference it will be possible for the provincial ministers of health to discuss the possibility of bringing medicare into effect at a date earlier than July 1, 1968?


Allan Joseph MacEachen: Mr. Speaker, there will be nothing to prevent the ministers from raising any subject relevant to the statute that we will be discussing.


BANK ACT
[Stage Direction]
The house resumed, from Friday, March 17, consideration in committee of Bill No. C-222, respecting banks and banking-Mr. Sharp- Mr. Batten in the chair.
The Chairman:: Order. When the committee rose on Friday, March 17, clause 72 of the bill was under consideration. The following clauses had been allowed to stand: 1, 29, 33, and 52 to 57 inclusive.
On clause 72-Cash reserve.


Mr. Lambert:: Mr. Chairman, I wonder whether the minister is ready to deal with clause 29, because I believe he has a proposal to make with regard to that clause. The minister will remember that I had raised a point on clause 29 (2) (b), and I think he may be able to propose something which is entirely acceptable.


Mr. Sharp:: I am prepared to revert to it, Mr. Chairman, but I do not have the text of the amendment with me now, though I will in
[Mr. Orlikow.l
a few moments. It would suit me to continue with clause 72.
[DOT] (3:50 p.m.)


Marcel Joseph Aimé Lambert: I am wondering about the clauses in the group from No. 52 to 57 and also about clause 33 which is tied in with the 52 to 57 group. The hon. member for Essex West and I believe the hon. member for Verdun have an amendment tying in with the clauses in the 52 to 57 group. I have some amendments to clause 72. I think we should go back to clause 29 which is non-controversial. If the minister will inform the committee what is proposed to be done with respect to this clause we shall allow it to pass.


Mitchell William Sharp: Mr. Chairman, the purport of the amendment is simply to eliminate subclause 2(b).


Marcel Joseph Aimé Lambert: That is perfectly all right.


Mr. Lalulippe:: Mr. Chairman-


Herman Maxwell Batten: Order, please. Does the committee wish to proceed with clause 72?


Marcel Joseph Aimé Lambert: I thought it would be No. 52.
[Translation\


Henry P. Latulippe: Mr. Chairman, with regard to clause 72, I had informed the Chair, last Thursday-


Herman Maxwell Batten: Order, please. Does the committee wish to proceed with clause 72 or to revert to clause 29?


An hon. Member:: To revert to clause 29.


Raymond Langlois: Mr. Chairman, I think the hon. member for Compton-Frontenac wishes to continue with clause 69 which was being discussed, I presume, last Friday.


Herman Maxwell Batten: When the committee rose on Friday afternoon clause 72 was being discussed, clause 69 having been carried.


Marcel Joseph Aimé Lambert: With regard to clause 72 I said on Friday that I was unhappy with the increase of the primary reserve on demand liabilities to 12 per cent, though I was glad to see the statutory reserve being reduced to 4 per cent with regard to liabilities payable after notice. It is my view, and I said this on Friday, that it is adequate to maintain the statutory reserve for demand liabilities at 8
March 20, 1967

per cent. In particular there is enshrined in the clause and in the bill a secondary reserve, which is something that did not exist before. In addition, since we discussed reserves on second reading and before that on the resolution stage, we have had the passage into law of deposit insurance which lessens the requirement for liquidity for which reserves serve the purpose. I agree that the banks can get along with somewhat less than 5 per cent in reserves. If there were no statutory requirements the banks' reserves would be about 5 per cent. Conditions have changed since this bill was drafted. As I have pointed out, we have deposit insurance, which is not now to come into force, and also the further secondary reserve called for the paragraph^).
Third, the governor of the Bank of Canada proposes to have bimonthly averaging. It seems to me quite improper to continue to insist, or to provide, that demand deposit liabilities should be backed by a 12 per cent reserve. I shall therefore propose an amendment, Mr. Chairman, whereby the 12 per cent shall read 8 per cent with regard to demand deposit liabilities. In addition thereto, there will be certain consequential amendments for the transitional period.
I also propose to move another amendment-perhaps I am anticipating that the minister will not accept the proposal I made to him privately and again on Friday-that there be a ceiling of 8 per cent and 4 per cent, that there be given to the governor of the Bank of Canada a further tool for flexibility in maintaining the amount of money in circulation in the country. The governor of the Bank of Canada would thereby be allowed under appropriate circumstances, rather than entering the bond market and purchasing securities from the banks and thereby creating the means whereby more money, that is, cash, could be put into circulation, to reduce either or both of the statutory reserve limits. Instead of having them at 8 per cent they could be reduced against demand deposit liabilities to 7J per cent or, if something different were wanted, they could be reduced to 3| per cent against deposit liabilities. The latter provision is actively in vogue in the United States. Unfortunately the minister has not expressed his views in this connection.
I have two amendments which I wish to put forward to the committee for consideration. I move:
That clause 72 of Bill C-222 be amended by (1) In subclause (1)	(a), deleting the word "twelve"
and substituting the word "eight".
Bank Act
(2) In subclause (2) by deleting in subparagraph (a) thereof all the words after the words "months and" in line 28.


Henry P. Latulippe: Mr. Chairman, before you accept this amendment, I should like to say a few words.


Marcel Joseph Aimé Lambert: It has to be accepted first, then you may discuss it.


Henry P. Latulippe: It is because I should like to return to clause 69. On a point of order, Mr. Chairman.


Herman Maxwell Batten: Order, please.


Raymond Langlois: Mr. Chairman, I think a point of order has been raised.


Herman Maxwell Batten: I shall hear the hon. member for Compton-Frontenac.


Henry P. Latulippe: Mr. Chairman, some clauses were passed fairly quickly last Friday and when you called clause 69, the hon. member for Edmonton West rose from his seat. I thought he was going to speak on clause 69 but he started on clause 72.
I had an amendment to move on clause 69 and I did not have the opportunity to put it forward.
[DOT] (4:00 p.m.)


Herman Maxwell Batten: Order. I should advise the hon. member for Compton-Frontenac that clause 69 was passed on Friday. The one now before the committee is clause 72.


Henry P. Latulippe: I know, Mr. Chairman, that it was passed but I did not have the opportunity to speak, you did not recognize me. Moreover, you knew that the clause was being studied and you had before you a brief showing that I had an amendment to move. You called the clause so rapidly that the hon. member for Edmonton West rose before I had time to speak. When the hon. member rose, I thought he was going to deal with clause 69. You called the clause and as soon as he rose, clause 72 was called and so he spoke on clause 72. I did not have any time at all to set forth my argument. Therefore, with the permission of the house, I should like to come back to clause 69 and move my amendment.

March 20, 1967
Bank Act


Mitchell William Sharp: I certainly have no objection it we re-open clause 69. I can understand that the hon. member may have overlooked an opportunity or that inadvertently he was denied an opportunity to speak. I am sure he was not denied purposely but I suggest we should proceed with our discussion of clause 72 now.


Herman Maxwell Batten: Does the committee agree to continue with the discussion of clause 72 and then return to clause 69?


Mr. Cameron (Nanaimo-Cowichan-The Islands):: Mr. Chairman, I do not know whether this is a point of order, but I would like to ask the hon. member for Edmonton West whether the copy of his amendment that I have is really correct. I do not want to be rude but to be quite frank it really does not make sense.


Marcel Joseph Aimé Lambert: I know that sometimes the hon. member is rather coy.


Colin Cameron: I am not being coy now. It just does not make sense.


Marcel Joseph Aimé Lambert: The amendment merely proposes to substitute the word "eight" for the word "twelve" in line 18.


Colin Cameron: Yes, but the next one?


Marcel Joseph Aimé Lambert: But then there is the transition period. It shall continue.


Colin Cameron: But that is not in the copy that has been distributed.


Marcel Joseph Aimé Lambert: For a period of two months.


Colin Cameron: Two months "and".


Marcel Joseph Aimé Lambert: And then you follow with subclause (b) covering term deposits. Of course the word "and" must follow at that point. If the hon. member checks it over he will see first of all that there is a transition period with regard to demand deposit liabilities and then a transition period with regard to notice deposit liabilities. They are different, but I am limiting my amendment merely to demand deposit liabilities. I am not touching the transition period with regard to notice deposit liabilities. I think the hon. member will find that my amendment is couched in the right terms.
[Mr. Latulippe.l


David Lewis: May I ask the hon. member to explain his amendment? If the committee accepts the first part of the amendment and the requirement for demand deposit liabilities is made 8 per cent, why do you need to state that the 8 per cent will remain in force for two months? Presumably it will remain forever.


Marcel Joseph Aimé Lambert: No, because there happens to be a transition period. It is merely indicated. I suppose you might say it may be somewhat in excess but it still shows that there will be this transitional period as it follows along within the proposed clause in the bill to show that there will be the same action taken with regard to demand deposit liabilities and then, after the two months, with regard to notice deposit liabilities. The other amendment I have, if the committee accepts my substitution of "eight" for "twelve", will follow along to give a degree of flexibility to the "eight" and "four".


David Réal Caouette: Mr. Chairman, it might be important that the hon. member for Edmonton West (Mr. Lambert) tell us the reason for his amendment to reduce from 12 to 8 per cent the amount of reserves held by the Bank of Canada for chartered banks.
Is it his intention to enlarge, to increase the power of chartered banks for a period of transition of two months? What more will that give?
It seems to me that the hon. member is not very specific when explaining why bank reserves should be reduced from 12 to 8 per cent. With 8 per cent, banks would have more lending power for a period of two months than they would have with 12 per cent as required in the present clause. If they have to maintain 12 per cent, it is obvious that their lending power will be less than with 8 per cent. Will the hon. member be more explicit.


Marcel Joseph Aimé Lambert: Mr. Chairman, I would have hoped that the hon. member for Villeneuve (Mr. Caouette) had been here at the outset of my explanation to judge whether or not my reasons for proposing a reduction from 12 to 8 per cent, as suggested in the bill, are justified.
After all, the proposal under clause 72(l)(a) is, in fact, an increase, since today the Bank Act requires a cash reserve of 8 per cent
March 20, 1967

against any deposit. The legislation, as proposed by the minister, provides for an increase from 8 to 12. Consequently, that is a reduction-how would I put it-of the freedom of the banks in this field of demand deposits, but on savings deposits or notice deposits, a reduction from 8 to 4 per cent is proposed because there is no demand period and no need to have the same degree of liquidity.
I contend that the present circumstances do not require an increase from 8 to 12 per cent, since, in the first place, as I have indicated, clause 72(4) of the bill contains a second statutory reserve. Second, we have passed the legislation to establish the Canada Deposit Insurance Corporation.


David Lewis: A second discretionary reserve, is it not?


Marcel Joseph Aimé Lambert: Yes, it is discretionary, but it did not come about in the bill under consideration today. At the present time, the governor of the Bank of Canada has the power, under the act, as proposed, to set up that second reserve.
Today, that is what we call a gentleman's agreement. That is why I will say that it is not necessary to increase the reserve requirement from 8 to 12 per cent and that the 8 per cent rate could be maintained.
Furthermore, as I indicated, we wanted a little more flexibility and at the present time, under appropriate conditions, the governor of the Bank of Canada could establish those reserves at less than 8 and 4 per cent, if necessary, instead of printing money as stated by some people, I am assured that some people say that. What he does today is to buy the currency held by the banks and to increase the bank reserves in cash and deposits, in the Bank of Canada, the total of their deposits and of their loans is therefore extended and increased.
I would like to introduce a further degree of flexibility. It has not yet been proposed as a second amendment but we have first to establish the amounts at 8 and 4 per cent, I shall come back then with my second amendment.
Mr. Chairman, I do hope that I have explained exactly what I had in mind, for the information of the hon. member for Ville-neuve.
Bank Act
[DOT] (4:10 p.m.)


Mr. Leboe:: Mr. Chairman, as I recall the committee hearings, no firm opinion was expressed in connection with the clause now before us. It appears that during the last 15 years a flexible reserve of between 8 and 12 per cent has been in existence in accordance with the Bank Act. The evidence before the committee showed that although during all those years there was the possibility of change, it was in fact unnecessary to do so. The other reserves were fixed on the basis of persuasion and varied from time to time in accordance with the wishes of the governor of the Bank of Canada. The banks themselves agreed to vary their secondary reserves.
One of the recommendations of the committee covers a multitude of sins in connection with the Bank Act. It is only fair to say there are a good many things we cannot anticipate because we do not know what the future will bring. With the idea, therefore, that experience will teach us along the way, the committee suggested in its report-I should like to read this recommendation in order to bring some substance to the position I take-that a different approach be made. It said:
Your committee recognizes the value of regular or decennial revisions of the Bank Act, the Bank of Canada Act, and the Quebec Savings Banks Act but believes that these should not prevent this committee carrying out special studies on subjects related to these Acts, and amendments being made to them from time to time if such become necessary in the interval.
We could dispute long and loud in this committee on many fine points with regard to which we have no experience which would enable us to form an opinion whether we were indeed taking the best possible course. The recommendations of the committee, if carried out, would meet this problem. As soon as it was found that something in the Bank Act needed revision the necessary adjustments could be made. In the light of the evidence before the committee that opinion on this particular matter has not crystallized I would just as soon wait, let the Bank Act function, and then put the matter before the committee if hardship arises or corrections need to be made.


Colin Cameron: Mr. Chairman, I do not intend to take up much time of the committee on this matter. I would merely point out that the effect of the new section if adopted-I am not referring to the amendment proposed by the hon. member for Edmonton West-would be

March 20, 1967
Bank Act
to reduce the percentage of cash reserves required from 8 per cent to 6.6 per cent. The actual amount may, of course, vary from time to time depending on the portfolio carried by the banks, but I do not think there will be any great difference over a short period of time. Thus we have provision for a substantial decrease in the statutory cash reserves and I would think that in a case of this sort we should be guided by the advice of the governor of the Bank of Canada and the inspector general of banks who both supported this new provision.
With regard to the new statutory requirement for secondary reserves, I would point out that it has been the practice of the banks for a great many years, as far as I have been able to ascertain, to keep liquid asset reserves at a much higher level than that agreed upon with the governor of the Bank of Canada. The governor sought to get agreement to maintain them at 15 per cent but for a number of years the banks have maintained them at 17 per cent. I believe this information is correct.
I doubt, therefore, that the banks can be considered to be very hard done by in this instance. Indeed, I would say that if the governor of the Bank of Canada is the source of the advice upon which this amendment is based, and I suppose he is, he has gone quite a long way in recommending a reduction from 8 per cent to 6.6 per cent in cash reserves, and I would be altogether opposed to the amendment introduced by the hon. member for Edmonton West.


David Réal Caouette: Mr. Chairman, further with regard to this amendment designed to reduce a bank reserve from 12 to 8 per cent of its deposit liabilities payable on demand in Canadian currency, it seems to me the hon. member could have submitted his amendment in another form, so as to require the Bank of Canada to give 100 per cent credit and banks to have a 100 per cent reserve when they make loans.
I wish to call the minister's attention to section 72, as well as to the amendment.
Suppose that I applied for a $1000 loan at a chartered bank and the manager complied with my request or accepted my guarantees for a $1000 loan, not one bank account is affected then. Other people's accounts are not reduced when mine is opened.
I deposit the $1000 in my savings account, and then chartered banks are allowed to use

that money as a 12 or 8 per cent reserve. This also enables them to multiply my loan by 12J, or 8, depending on the reserve rate.
[DOT] (4:20 p.m.)
Therefore, possibilities are practically unlimited, since chartered banks are in no way restricted from lending any amount. There is no limit because through the credit created it is still possible to create deposits, deposit liabilities. I appreciate the interaction of debit and credit, but the debit, or what I owe, is $1000, and the bank has the right to loan $12,000 even though my savings account amounts to $1000. That is how Canada, the whole country, is financially controlled.
Rather than requiring through an amendment an 8 per cent instead of 12 per cent reserve of the deposit liabilities-the banking system is given even more power-I believe the Bank of Canada should be ordered to create the credit necessary in the country. I do not see any danger of inflation, in spite of the fears often expressed by the Minister of Finance (Mr. Sharp). Why should there be more inflation if the Bank of Canada created credit instead of the chartered banks?
There is inflation now, when the chartered banks are told they may multiply their deposit liabilities by 12 or by 8 and charge interest on them. That interest is then definitely inflationary. It is the present system which creates inflation, not our suggestion that the Bank of Canada, which is our financial institution, should be used.
Mr. Chairman, I feel it is useless for us to accept this amendment which seeks to lower the reserves of the chartered banks from 12 to 8 per cent, especially when we, members of the Ralliement Creditiste, are fighting in this house against this financial control which is in the hands of a group of individuals.
We are discussing legislation which will be in force for the next ten years and we are asked to adopt the whole thing in a flash. It is much more serious than that, Mr. Chairman, and the amendment of the hon. member for Edmonton West cannot be accepted by us at this time.
What we are asking is that the Bank of Canada control the issue of money, credit and money supply in Canada instead of leaving this privilege in the hands of a group of private citizens called the chartered banks of Canada.
I think the minister could tell us at this point what is the limit of the banking system
March 20, 1967

at the present time? There is no limit, even though it may be set at 12, 10, 8, or 4 per cent, it does not matter if the chartered banks are allowed to use their deposit liabilities as reserves with the Bank of Canada to multiply it later 8, 10, 12 and even 15 times. There is no limit because any credit coming out of, or accepted by the bank may, through a simple gesture, or by pen being put to paper, create deposit liabilities from the very moment the loan is granted and thus create inflation.


Mr. Tremblay:: Mr. Chairman, this amendment of the reserves of chartered banks cannot be considered separately, without reference to the part reserves play in the operations of chartered banks.
The hon. member for Villeneuve (Mr. Caouette), after many other Social Credit speakers, raised the problems of reserves, 100 per cent at the chartered bank level, and by the same token stated that the central bank should assume full responsibility for the national debt instead of chartered banks.
Those two proposals go together. They have been put forward many times in this debate by the hon. member for Lapointe (Mr. Gregoire) and they would simply result in a situation where chartered banks would be obliged to have on deposit with the central bank or in cash one dollar for every dollar loaned.
Then, instead of what we have known for centuries, bank credit would simply replace the old bank-note method for transactions. We would have banks which from now on would merely make entries in their books, that is which would place at the disposal of the population an instrument of credit that would be exactly the same as the bank-note was for all transactions previously.
Replacing bank-notes by bank credit has allowed not only for an increase in currency to do business but also made it possible to do it more easily, and even from afar, and for huge amounts, etc. Everyone agrees that it has meant progress in the banking field throughout the world.
That is why the chartered and commercial banks must be allowed to maintain credit instead of keeping the old methods used in the past.
But to enable the chartered and commercial banks to continue doing business, they must be left free to some extent to grant credit as they see fit to those seeking it.
And, as a matter of fact, clause 72 now under consideration sets the reserves that our
Bank Act
chartered and commercial banks should keep. As stated earlier, the present method provides for a limit that ranges from 8 to 12 per cent; some variation was possible, depending upon the authority given to the central bank. According to the legislation introduced in this house. This reserve is now divided into two categories, one for demand deposits and one for term deposits.
The total effect of this variation, of this increase from eight to 12 and of this drop, in the other case, from eight to four, is that the average reserves will, in the present circumstances, amount to about 6.6 per cent. Therefore this means a drop in the average reserves of the chartered banks as a whole. This drop will, of course, allow the chartered banks, with their present reserves, collectively to create more bank credit or to facilitate credit. Of course, everything will depend upon the attitude of the central bank, following the enactment of this legislation, with respect to the reserves which will be left in the hands of the chartered banks. Either by its authority over the variation of the reserves, or by another and more usual operation which is called the open market policy and which involves the purchase and sale of government issues on the market, the central bank will still be able to siphon part of the reserves available to the chartered banks.
At any rate, to form an opinion on the reserves available to the chartered banks, one has to remember how financial reserves are meant to be used.
Their first and most obvious use, which strikes us immediately and which was emphasized by the hon. member for Edmonton West (Mr. Lambert), is that of liquidity. In other words, the chartered banks are required to keep part of their assets in the form of cash deposits at the central bank so that should customers ask that their deposits be converted into liquid money, the chartered bank will be able to fulfil its obligation toward its depositors. And just from the point of view of liquidity, it must be said that the reserve should exceed the normal needs of the customers with regard to the conversion of their deposits in bills.
[DOT] (4:30 p.m.)
That purpose of liquidity also forces the banks to keep their reserves as low as possible, due allowance being made for its needs, to ensure as well reasonable profits.
Now, that is but one of the purposes of the bank reserve. The other purpose, on which

March 20, 1987
Bank Act
the authorities of the central bank rightly insist, is that of controlling credit through the bank reserve.
From the time there is a central institution, that is a central bank, and this central bank is entrusted with the task of establishing the level of money which best suits the economy under given circumstances, in view of the goals already enumerated which are those of the central bank, it is then necessary that the level of the reserves of the chartered banks be such that the central bank can fulfil its controlling functions.
Should the reserves be too high, or too low, the efficiency of the central bank with regard to the chartered banks is threatened. The authorities of the central bank recommended to the committee a rate of 12 per cent in the case of deposits on demand as the one which best guaranteed its efficient control over chartered banks with regard to their assets on demand; and a reserve of 4 per cent in the case of term deposits as sufficient to ensure the central bank's efficient control over chartered banks.
Therefore, we see that the subdivision of the two rates is made because the behaviour of chartered banks is different and also because the effectiveness of the central bank control depends on whether it is based on term deposits or on demand deposits. Finally, it is because such reserves are also closely related to what is called the handling of the public debt.
In view of the fact that this is the most current and most effective method used by the central bank to exercise its own control, which is essential, in view of its functions with regard to chartered banks, the handling of the public debt, that is the purchase or the sale of government securities on the market, for the very purpose of creating reserves or of removing reserves within the portfolios of chartered banks, is absolutely essential within the present structures. So, it is essential that such determination of reserve rates be the same for all chartered banks. In view of the existing portfolios at the central bank level, it is essential that such determination be made here in the light of the objectives that the central bank may have in connection with

the interest rates which must exist within the economy itself as a whole, because all this is related. The central bank can in no way handle the public debt without first affecting the reserves of the chartered banks and causing a substantial fluctuation of interest rates on the market. Now, as those interest rates are very closely related to the yield of government bonds on the market, it is absolutely essential that the determination of the reserves of chartered banks should take into account the effects which the measures taken by the central bank to maintain such legal rates might mean. Hence the importance of the evidence given before the committee by the governor of the Bank of Canada about the rates which, in his opinion, should be applied in practice to the chartered banks. Those three elements, namely liquidity, the control of reserves and money in circulation and the handling of the public debt, must be taken into account. If they were, it would seem that the authorities of the Bank of Canada are in favour of a split rate from now on, a higher rate for reserves on current accounts and a lower rate for term accounts. And if an average of approximately 6.6 per cent is maintained, it seems likely, according to the authorities of the Bank of Canada, that the three objectives I mentioned would enable it to play its role which, in my opinion, is the most important element to control money within the chartered banks themselves-


Raymond Langlois: Mr. Chairman, I may well be fully in accord with the previous speaker who has made a brilliant outline of the operation of the present system, but because it is the present system, it does not necessarily ensue that it is the best.
It is perfectly clear that the former minister, with his academic knowledge as an economist, knows the present system. It is also because of our knowledge of the present system that we are in a position to detect its weaknesses and its mistakes.
I agree with the closing words of the hon. member when he said that reserves are the means through which the Bank of Canada, on the whole, controls the whole credit and the economy of Canada.
March 20, 1967

Obviously, it is one way of controlling things. They can be controlled by maintaining a reserve of 8 per cent, or of 12 per cent. They can also be controlled by having a 50 per cent reserve or even a 100 per cent reserve. They can be controlled also without any reserve whatever. It is a means, not an end. There is nevertheless a certain difference between the two. The views expressed a minute ago by the hon. member for Villeneuve (Mr. Caouette) in his statement must be understood. He indicated that this did not mean that the Bank of Canada or the chartered banks should necessarily have 100 per cent in cash.


René Tremblay: Or on deposit.


Raymond Langlois: Yes, 100 per cent or on deposit.


David Réal Caouette: Yes, but in cash or on deposit is not the same thing.


Raymond Langlois: It is not the same thing. So why give the control of the creation of such credit as the chartered banks now control to private institutions? Why not keep it? Chartered banks are certainly private institutions, whereas the publicly owned bank is the Bank of Canada. Why should such credit bear interest from its very inception when the Bank of Canada could take control, just as the chartered banks, of the creation of credit as well as the creation of paper money? I should point out to the hon. member that legal tender, whether credit, paper money or coins, is a conventional symbol accepted between individuals within a community for the exchange of goods and services. So that it is not goods, nor services, but an agreed symbol, a representation of the value of the goods exchanged.
On the other hand, if the control of this means of exchange is left in the hands of private institutions, it will be said: "The Bank of Canada controls the issues." Yes, very well, it controls the issues but it does not control the interest due in the long run, which is constituted by our national debt which we call mostly interest nor all the money now being created nor the interestbearing credit forthcoming from the chartered banks, which now makes up the greater part of our national debt. Since it bears interest from its inception, how can we pay it back when it has never been created or issued as paper money or as coin? The time
Bank Act
comes when someone has to carry the debt and, in the present circumstances, it is the federal government.
Why does the government not completely take over those credit issues through the Bank of Canada, charging a low rate of interest or operating costs, since it is a means of distributing goods and services within the country rather than the country's production? The government's role is to distribute goods and services according to the needs of every Canadian citizen. At present, distribution is restricted. The government is restricted with regard to the distribution of such goods and services through the control exerted by the chartered banks over currency, the creation of money and credit. It will be even more restricted under this bill.
Mr. Chairman, the statement made earlier by the hon. member is very well-founded in the present situation, but this does not mean it is the best system. It does not mean either that we should return to the former gold standard system which caused trouble to everybody. It does not mean either that the paper on which money is printed is worth something in itself. Money is worth something because it represents goods and services produced by the Canadian people. When the government issues a bond and the bank purchases it, it immediately becomes a deposit liability which enables the banks to create, if the reserve is fixed at 8 per cent, 12 times and a half as much credit as the bond purchased from the government.
[DOT] (4:40 p.m.)
This means that the government itself has to borrow from private institutions, is dependent upon them and that even a government bond is a source of interest for them. That is the vicious circle of the present system. Whether the system operates with a 100 per cent reserve or with no reserve being fixed by the Bank of Canada, I do not care either way, but the entire system should come under the complete charge and responsibility of the Bank of Canada, and that the chartered banks operate as any other lending institution in our country. That is all they have to do and if they cannot operate that way, then let the government use the Bank of Canada with its branches to look after the operation of our economy, to see to it that the proper equipoise is always maintained between production, services and natural resources and that our economic assets balance exactly our economic liabilities. That would allow us to operate a little more intelligently. At present, we endow chartered banks with

March 20, 1967
Bank Act
the power of creation, and it is somewhat ridiculous that any credit, any money coming out of a chartered bank bears interest. That means that, at 5 per cent-today it is 6 and 7 per cent and even more-it will not take 20 years before the chartered bank has gotten back all it has lent and we will still owe it twice as much. At 5 per cent, it would be twice as much.
Mr. Chairman, I would like the hon. Minister of Finance to give me, in another field, a power similar to the present power of chartered banks. I can assure him, that in 20 years, I shall own his house, and he will owe me another one, besides. Let him give me the control-


Mitchell William Sharp: May I ask then why the hon. member does not get some of his friends together and apply for a charter? I think he would have as much difficulty selling stock as some other people in the country who have recently obtained charters for banks. He will find it is not quite as easy and not quite as much of a gold mine as he thinks.


Raymond Langlois: I agree with what the minister has said but I am not asking for a charter. I am asking him to ask the government to give me a charter similar to the one granted to the chartered banks, one which would give me control of all the construction bricks in Canada. I will not sell these bricks but lend them to him at 5 per cent interest. In 20 years time he will have to give me back all my bricks and on top of that I will probably have a mortgage on his house for its total value, so that I will have both house and bricks.
This is the way in which the present system works. Credit is given at an interest rate so that one has to pay back the capital and the interest. Where will the interest come from? This is where the national debt comes in.
Why does the Bank of Canada not give the same privileges which it accords to chartered banks? The purpose of the chartered banks is to make money; they do not work for anybody else. If they have to do so at the expense of the Canadian nation, they will do it. Even the government is at their mercy. It is the chartered banks which are now in control. When the government loses control over credit one might say it loses control over everything. I think the minister knows very well that the Bank of Canada could fulfil the same obligations as the chartered banks if only it carried out a different policy. The govern-

ment could require the chartered banks to have reserves of 50 per cent before being allowed to make loans, as is required of the credit unions. Money is not a goal; it is only a means by which goods and services can be distributed. Means of distribution should be available for as many goods and services as there are in the country. Our financial system should enable the purchasing of goods and services.
A comparison could be drawn between the value of the dollar and weights and measures. A foot is always 12 inches long and a pound is always 16 ounces. They cannot be anything else. If anybody in Canada wanted to fool around with the pound he would be in trouble. Similarly the value of the dollar cannot be changed. The dollar is a basic value, and the only reason why the monetary value changes is that somebody speculates. The minister knows quite well that if the Bank of Canada were given more responsibility we could start reducing our national debt because at present the government cannot operate public services without paying interest on the money it borrows. As far as I am concerned this makes no sense at all.
What the hon. member for Matapedia-Matane has said about the present system is quite true. Our goal should be to satisfy the needs of all Canadians and to distribute goods and services. It is not sufficient to permit the distribution of these goods and services. It is the system which should be changed and not human nature. The present system might have been quite satisfactory a century ago when the problem was not the distribution of goods but their production. Today this problem has been solved and now we have to provide the necessary means for the distribution of goods and services. At the present time this is controlled by a small group, the chartered banks. I should like to see the Bank of Canada become the bank of the people. This would ensure that Canadian production was distributed interest free and not paid for twice.

[DOT] (4:50 p.m.)


René Tremblay: Mr. Chairman, the hon. member was right in pointing out that I only spoke of what happens within the present system.
The reason for that is simply that I never accepted the creditist doctrine which tries to make people think that the present financial
March 20, 1967

system, arbitrarily limits the physical possibilities of production in the economy.
Mr. Chairman, in my opinion what distinguishes our Creditiste friends from all the other members of this house, and the reason Why we will never understand each other, is that our Creditiste friends believe in what is known as the doctrine of plenty. They believe that the production of goods need have no limit provided unlimited funds are put at the disposal-


David Réal Caouette: No, no.


Raymond Langlois: No, there is a correction to be made there.


René Tremblay: -of the people; this country would then become a paradise on earth.
Mr. Chairman, we do not believe in that possibility; that is why on any of these points, we cannot-


Gilles Grégoire: Mr. Chairman, may I put a
question to the hon. member?


René Tremblay: Mr. Chairman, for two weeks we have been listening to Creditists in this house; I think they could allow us to take part in the debate now.


Gilles Grégoire: I only wanted to put a question to the hon. member.


René Tremblay: At the end of my remarks, Mr. Chairman, I will have no objection to the hon. member putting his question, but I think we need a minimum of time to tell our Creditiste friends why we are not in agreement with them on any of the points they raised during this debate, nor on the amount of money that has to be created in our economy, nor on the handling of the public debt by the central bank, nor on the possibility of eliminating the interest on the public debt, and so on.
The reason is, Mr. Chairman, that we are not living in the same world as they are. Creditists are like Martians who would come to this planet and tell us: "We come from a different world where economic laws are entirely different from those prevailing on earth." We would be told of the need for us to shrink to the size of those little green men supposedly coming from Mars and that it would then be easier to live on earth.
Yet, for 2,000 years or more now, there have been monetary operations and men have
Bank Act
built a world, generation after generation, have worked out the monetary system which is now ours; developments are still possible in certain circumstances but one cannot make a clean sweep of the economic and monetary laws which have existed for centuries and create overnight a completely new financial system.
The basic difference, Mr. Chairman, as I said at the beginning, between the Social Crediters or the advocates of an economy of abundance and ourselves is that we believe that there exists at a given time with a given volume of productive resources and a given productivity, a maximum national production.
Whatever may be the monetary transactions which could be made, we cannot produce more at a given time than let us say-let us mention a figure-$60, $65 or $70 billion of goods and services.
If that production is to be increased, it is necessary to have more productive resources, manpower, forests, farms and so forth, or still increase productivity, that is use more efficiently each of those available resources.


Henry P. Latulippe: You would rather let the people remain unemployed.


René Tremblay: Under those circumstances, Mr. Chairman, our economy must be organized so that resources-


Henry P. Latulippe: You have no products-


René Tremblay: Mr. Chairman, I would ask the hon. member for Compton-Frontenac (Mr. Latulippe), whom we have heard for two weeks, to listen now, because he was complaining that he had not received all the answers to his questions in the committee on finance, trade and economic affairs. I do understand his frustration, if he was hoping that he would be given a course in economics, for usually members are supposed to throw light on the matter in hand and not to be told what's what by bank directors or governors.
Today, the hon. member has an opportunity to quench his thirst for truth; I therefore bid him to be silent and to listen; if, later, he wishes to take part in the debate, I will gladly give him the floor.
Mr. Chairman, under these conditions, at a given time, there is a maximum amount of money which must be put into circulation,

March 20, 1967
Bank Act
and it is the duty of the Bank of Canada to make available to the people the currency to insure this maximum production.
I submit that it is the responsibility which has always been assumed by the Bank of Canada, and it is its function precisely to make available to the people the amount of money necessary to achieve that maximum production.
We almost have that maximum production. What is the number of unemployed in Canada at the present time?


Gilles Grégoire: 140,000 in Quebec.


René Tremblay: 3.6 per cent of the active labour force is unemployed on the average.


David Réal Caouette: 400,000 unemployed in Canada.


René Tremblay: But those unemployed, Mr. Chairman, may be idle because of physical conditions, such as the weather which prevents them from working. Those people may be unemployed, because they have left a position and want to go and find another one; those people may be unemployed because they do not have the necessary training to fill all the positions required by the technical production apparatus which we have developed.
Under the circumstances, Mr. Chairman, it is not surprising that we have a certain proportion of unemployed in our economy, and everyone must make an effort to reduce that percentage. Nobody is happy with the number of unemployed, even if it is only 3.6 per cent within the economy.
But it is not through monetary manipulation that we are going, on the one hand, to stop the seasons in Canada, that we are trying to prevent the necessary constant transfer of the labour force from depressed to developing sectors. Monetary manipulations will not succeed in creating among the people, the necessary technical knowledge required by modern technology. Those are all the measures which must be taken to reduce unemployment, and not to create artificial money which would only be a source of confusion within the economy.
That is the difference, Mr. Chairman, between the Creditistes and all the other members of this house whatever the party they

belong to, toward that basic problem which is called the creation of money.
The moment we agree that the quantity of money must be limited, that an authority such as the Bank of Canada is in a better position to determine the quantity of money at any time, in the economy; the moment that manipulation or that responsibility is left with the Bank of Canada, then, Mr. Chairman, it will be its responsibility to decide which portion of the public debt the bank is going to absorb constantly.
[DOT] (5:00 p.m.)
Mr. Chairman, if the government were to determine what amount of money is required at any given time, it would then be a matter of floating bonds and ordering the monetary authorities to issue money in exchange for bonds.


Henry P. Latulippe: That is what you are doing.


René Tremblay: No, Mr. Chairman, because when part of the public debt is absorbed by the central bank, its authorities decide to do so according to the monetary needs at the time. No government authority should force or dictate to the authorities of the Bank of Canada that it must absorb J, J or | of 1 per cent of the debt of the country, because the government would then interfere with the prime responsibility entrusted to the Bank of Canada by law, which law still upholds, that is to handle money so that it always corresponds with the needs of the economy.
Mr. Chairman, we at least recognize that there must be taxes, interest on loans, whether private or public. And why? Because we believe in the fundamental theory that there are real economic phenomena, that money must not exceed those real monetary phenomena but must merely adapt itself to the physical needs in a given economy.
Mr. Chairman, that is why it is so difficult to have a dialogue with our friends of the Ralliement Creditiste and the Social Credit and the other parties in this house on each every point concerning either the Bank of Canada Act or the Bank Act. That is why I wish to point out to our Creditiste friends that they can go on dreaming of a world where monetary manipulations would solve no problem.
March 20, 1967

As for us, we will continue to think that the monetary question must constantly be improved, that our Bank Act must be amended, that, as we are now doing through this clause, we must change the reserves of the chartered banks according to present needs and not those of the past. But we will never buy their suggestions that we manipulate the money supply, that we cancel the public debt or the interest on that debt. To do so would mean bringing about financial disaster and defeating the efforts which are being made to solve real problems, which is the well-being of the people and putting an end to unemployment.


David Réal Caouette: Mr. Chairman, it will surely be tough to make the hon. member for Matapedia-Matane (Mr. Tremblay) understand. Indeed, for the past 15 years at least, he has been blaming the Creditistes, and Social Credit and accusing us of reaching for the moon or Mars, etc.
I would remind the hon. member for Matapedia-Matane as well as to the Minister of Finance and the government itself that the Social Credit philosophy, for warfare purposes, has been largely applied except for this frightful creation or increase of the national debt.
In 1939, after 10 years of depression, the Liberal government of the day, of which the spiritual father of the member for Matapedia-Matane, Mr. William Lyon Mackenzie King, was the leader and prime minister, our national debt amounted to $3 billions. Everyone in Canada was paralysed. There were 600,000 unemployed, and products were not being sold. We had the production capacity and all that, but nothing was operating, precisely because money was lacking. The Bank of Canada had been in existence since 1934. Incidentally, I should tell the hon. member for Matapedia-Matane that the Bank of Canada was not created to deal only with the reserves of the chartered banks. Its main purpose was to maintain a continuous economic growth in Canada. That is the purpose for which the Bank of Canada was created and established. It is not a question of helping along chartered banks, but of maintaining Canada's constant economic growth. In 1939, Mr. Chairman, the national debt was $3 billion and, six years later, in 1945, it was a record $17 billion.
Bank Act
Let the hon. member tell the house and the people how the national debt increased by $14 billion. How is it that to make cannons, soldier's uniforms-and, incidently, there was no unemployment during the war; young Canadians who had never fired a gun were enlisted and the young people were never told: "You are unfit to go to war." No, everybody was fit. "Come on, young men, enlist, you will be provided with clothes, room and board, you will be supplied with armaments, and on top of that you will be paid to make war". And that is how $14 billion worth of credit have been created during the six years of war. The war is over and back we go to the same old sins of the hon. member for Matapedia-Matane (Mr. Tremblay).
Since 1945, that is in 22 years, the national debt increased by $5 billion. In peacetime, over a period of 22 years, it went up by $5 billion while, in wartime, over a period of 6 years, it increased by $14 billion. The former minister says he does not agree with the Creditistes. Small wonder. However, how can a government find $14 billion for slaughter over a period of six years, and puts up a measly $5 billion for everyday life over a period of 22 years? It is because of the present system.


An hon. Member:: At double the rate of interest.


David Réal Caouette: Mr. Chairman, the former minister does not want to accept the Creditistes' philosophy, he finds it nebulous. But is the present system any better? When the hon. member says that productivity has practically reached its maximum, does he realize that there is a relation between productivity and production? If productivity were at its peak, production would increase. There would not be a single farmer in the hon. member's constituency who would not double his farm's output within two years. I challenge him to come with me and discuss before the farmers of Matapedia-Matane the possibility of increasing the production of their farms, if they were assured of a market. And the hon. member knows that I am right. Therefore, the problem does not lie with the production system. National production could double and treble with a few years. At the present time, some plants are not operating at full capacity because the market would not absorb the increased production. And as long as there is no reorganization-

March 20, 1967
Bank Act


René Tremblay: Production, not productivity.


David Réal Caouette: Not among the consumers a purchasing power to enable them to order the distribution of that production, and the former minister, the present member for Ma-tapedia-Matane, will be all at sea. And Anally, in his riding, he will be put straight by his own electors because those people will not accept another economic recession, will refuse to be pushed around any longer by a few people who control the economic blood of the Canadian nation.
And the hon. member knows that the main problem is the Anancial problem. However, for 2,000 years we have been oriented towards that system. And the hon. member believes that it is the best system there can be, a system which hurts everyone, which forces the federal government to increase taxes when the citizens cannot pay any more, which forces the province of Quebec to increase its sales tax to 8 per cent when people could not even pay 6 per cent, which forces the municipalities to live in a deplorable state of stagnation, which has the school boards by the throat, ready to choke them overnight.
[DOT] (5:10 p.m.)
Mr. Chairman, it is that system which the former minister would like to protect and to see respected by the whole population. And when we tell him-what he has not yet understood: "Our basic theory is to make Anancially possible what is materially practical and desirable-"


An hon. Member:: The hon. member
applauded me when I said that.


David Réal Caouette: But afterwards he rises and speaks to the contrary. He then gives the impression that he understands Social Credit when he says: "The unlimited issuance of bank notes, the unlimited creation of credit." When did we ever say: "The unlimited issuance or creation of credit."
And they want the people to believe that Social Crediters would devote their time to the issuance of bank notes. Greenbacks are seen everywhere. Mr. Chairman, this is not the matter involved. The greenbacks or the currency now in circulation hardly represent 5 per cent of the total amount of money in circulation in Canada or the total volume of money in Canada at the present time.


René Tremblay: Would you allow a question?


David Réal Caouette: Certainly.


René Tremblay: Mr. Chairman, I would ask the hon. member why he would restrict the amount of money in circulation or the credit available to the people if, as he has just stated we can double or even triple our national production at a given time? Then, why not double, triple and quadruple the amount of money?


David Réal Caouette: Inasmuch as it is necessary, Mr. Chairman, and let me give an example to the hon. member.
When we undertake to build a $300,000 school, with the present system, the school board will borrow this $300,000 sum from a chartered bank. The chartered bank will not take the member's money nor mine, it will open a new credit for the setting-up of a school, and exact 5 per cent for a 20 year period. Now in 20 years the school will cost $600,000 instead of $300,000. That is the kind of interest we cannot admit and to which we are opposed. We do not object to paying interest on anything lent by the person who owns it, but right now the bank creates the credit, according to what the member, the government and each Canadian citizen is worth, and demands an interest on this new credit, which is pure nonsense.
We are not opposed to paying interest on something that actually exists. If the member for Matapedia-Matane lends me $100; I will reimburse him $106 or $107 which is only normal since he helped me with something that belongs to him. But as for the banker, he lends something he does not own; so much so that he wants guarantees, such as my marriage contract, and my insurance policies. He is ready to take my wife and children; he is ready to take everything. And then only will he agree to lend me $10,000, $20000 or $25,000, according to the guarantees I can offer. Where do these $20,000 or $25,000 come from? They come from this creation authorized by the Canadian parliament. This money, this credit is not taken from anybody's account. No one sees any reduction in his savings account or his current account, as a result of the $20,000, $25,000 or $300,000 loans of a Canadian chartered bank, but the bank exacts an interest on this new credit. In short, I pay interest to the banker on my own property, on my own guarantees.
According to the member for Matapedia-Matane this is logical and normal. What
March 20, 1967

Creditistes ask is whimsical. The present system is not whimsical: it is barbaric. We are not the only ones who condemn it. The other day the member for Kamouraska quoted what Pius XI said in his encyclical letter, Quadragesima Anno in 1931, 36 years ago.
What did Pius XI say? "He said: "Those who control money and credit are the masters of our whole lives and no one has a right to breathe any longer against their will". The hon. member would have no right to breathe against the will of those who control money and credit. The same thing applies to the government, and to any undertaking, public or private. They are the ones who control.
Mr. Rothschild, for his part, said: "Give me control over a nation's credit and I do not care about who makes laws in that nation".
Mr. Chairman, we are the ones who make laws in this country and the minister is not even able to take a decision against the financial system. Why? Because we give them, and we are about to give them for a further period of ten years, the power to control Canada's economy, and the economic life of Canadian families and individuals. You ignore those who develop the country, but you care about those who plunge it into debt, about those who devour the country, about those who loot it.
Mr. Chairman, this act is going to be in force for ten years. We will talk about it ten years hence, in 1977; the hon. member for Matapedia-Matane will no longer be here then and we will have another minister of finance, for I hope that by that time we will have Creditistes on the other side to put some order in Canadian finance.
Mr. Chairman, the Creditistes are not asking for anything so extraordinary. We merely ask for some balance, for an adequate accounting system in line with reality. As I said a few moments ago, such an accounting system was applied by the government in wartime. But in peacetime, when money is in short supply, they spend their time talking twaddle like: This system must absolutely be respected, endured, tolerated, renewed so that it may continue its exploitation.
Mr. Chairman, when the Canadian consumers' buying power is based on reality, on statistical data about Canada's output, then we can command maximum output in this country. We know that we have not now reached our maximum output, and this applies to any of Canada's regions, be it British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, the maritimes. Speaking of
Bank Act
the maritimes, do you thing that fishermen in those provinces have the same production or make as good catches as they made even ten years ago? No. And it is strange that no solution should be found in peace time, and that instead people should be asked to tighten their belt.
The Bank of Canada, whose first responsibility is to maintain a continuous economic growth in the country, tolerates years of depression, of restriction, of privation, years of small economic booms here and there, which do not last long except in war time. In war time, while any amount of money was found for the manufacture of guns and shells, we had a higher standard of living than in depression years or in peace time, even if we had ration tickets, as some have said. Price control and ration tickets meant absolutely nothing all though the war, for with ration tickets you could buy anything to the value of the ration ticket and you could get as many of those as you wanted on the black market by paying extra.
We knew about those underhanded practices but everyone had at least a little something during the war whereas during the depression most Canadians did without a lot of things and went through a lot in one of the richest countries in the world.
Mr. Chairman, as long as the monetary system has not been adapted to the physical possibilities and realities of our country, it is useless to believe that we will give our people a wealthy Canada where they will be able to live decently.
If billions of dollars can be found to kill, it is time to look for the billions of dollars which will enable Canadians, young and old, men, women and children, to live sensibly and according to our country's physical possibilities.
Mr. Chairman, those are some of the things I wanted to say. I will probably add to them later if the hon. member for Matapedia-Matane wants to rise again because I like to answer him; he knows so much about the present system. The hon. member for Lapointe is indicating he wants to have his say. The debate should prove quite interesting in the next few hours.
Mr. Chairman, I wish to draw your attention to the fact that clause 72 of Bill No. C-222, as well as the bill itself, will be in force for a decade. For the next ten years we will have to put up with what is in it. Therefore, since we advocate monetary reform, it is now

March 20, 1967
Bank Act
or never for us, as members of the Ralliement Creditiste, to say to the minister, to the authorities of the Bank of Canada, to the leaders of the financial system what we think, what we want for the Canadian people and what the Canadian people expect from their government, namely in administration for the general welfare of the people and not for that of some financiers in Canada.
[DOT] (5:20 p.m.)


Gilles Grégoire: Mr. Chairman, I listened with pleasure earlier to the hon. member for Matapedia-Matane (Mr. Tremblay) and I think he summarized the situation as it never was before.


Some hon. Members:: Hear, hear.


Gilles Grégoire: Very well, your applause is quite justified.
What did the hon. member for Matapedia-Matane have to say about you? You want a system of abundance? We prefer the present system. That is what the hon. member for Matapedia-Matane said earlier and it is so revolting to say such things that the hon. member for Quebec-Montmorency (Mr. La-flamme) can hardly believe it. It is hardly believable. I agree with him, that the hon. member for Matapedia-Matane could have said such a thing. But he did. And it is precisely the present situation. You, Creditistes, want a system of abundance, but we-


René Tremblay: You are in favour of economy.


Gilles Grégoire: That is right, we are in favour of an economy of abundance.
You are the supporters of the present state of affairs.


René Tremblay: What do you want?


Gilles Grégoire: The hon. minister says: What do you want? We have money. If we produce, we cannot add more. The Minister of Finance, who must always borrow, should be told, as well as Quebec, the municipalities or school boards that we have as much money as we can produce. Is it because there is enough money in circulation in Canada that the premier of Quebec (Mr. Johnson) has to go down on his knees in New York or in Toronto in order to borrow money to build a university, to develop a school or build highways or bridges in the province of Quebec? No. It is because he does not have any money.
If the hon. member for Mount Royal (Mr. Trudeau) has something to say, let him rise
[Mr. Caouette.l
and say it. Maybe that would do him a lot of good-


Mr. Trudeau:: You are talking against the Prime Minister.


Gilles Grégoire: I am not saying anything against the Prime Minister nor against anybody else. I am talking against the system of sweeping up everything. And the hon. member for Matapedia-Matane is saying: There is enough money. In fact it is for that reason that the Canadian citizens are unable to have houses built. If there is at present a housing shortage in Canada, the like of which we have not seen since the war, it is precisely because, as pointed the hon. member for Matapedia-Matane, we are at present under a sweeping up system and not the system of an affluent economy.
If there is a decrease in the sales of motor vehicles, is it because there is too much money in circulation or because there is a shortage of money?


René Tremblay: It is on account of a shortage of money.


Gilles Grégoire: It is because there is not enough.


René Tremblay: It is due to an imbalance.


Gilles Grégoire: Imbalance of what? Imbalance of the system. Because we have, in Canada, the needed persons in order to produce motor vehicles and there are potential buyers. But there is no money to meet the needs of the buyers and that is why we have a crisis and a decrease.
When, for instance, we call for highway repairs or construction to connect our municipalities with one another, what kind of an answer do we get? Lack of money. Ask any mayor of the constituency of Matapedia-Matane: Why not build a hospital here? What will be his answer? We have no money.
I never saw any municipal council or a school board sit around a table and ask themselves how to get labour or materials, no. But they will ask themselves where they are going to get money, because that is unfailingly the problem.


René Tremblay: Money shields reality.


Gilles Grégoire: Someone says that money shields reality. I should like to have the hon. member for Matapedia-Matane explain that
March 20, 1967

sentence. He might be able to remove the shield because he may not see reality. It might be for that reason that he states that reality is shielded.


René Tremblay: Because money is a means.


Gilles Grégoire: Money is a symbol, it symbolizes production, the product. It is not even a means. It is a symbol. And what is symbolized is the product. But see what happens to production when the symbol is not there; production stops.
That is precisely why automobile manufacturers have slowed up their production: sales are decreasing. And the sales are going down because Canadians do not have the money needed to buy automobiles.
If the member for Saint-Maurice-Lafleche (Mr. Chretien) has something to say, let him say it, let him rise-or let him speak so that we can hear him.


Mr. Chretien:: I should like to have a big boat, but I have not enough money. I am not rich enough.


Gilles Grégoire: Well, that just shows that money is lacking. The member for Saint-Maurice-Lafleche would like to have a boat, but he cannot because he has not enough money. That is the situation all over Canada.


Joseph Jacques Jean Chrétien: That is because I do not spend more than I can afford.


Gilles Grégoire: This is an ad hominem argument which must not be applied generally. When the present system can only be justified with such arguments, well then we shall know that it is not worth much.
Coming back to the matter of reserves, Mr. Chairman, I heard a moment ago the hon. member for Matapedia-Matane say: "The reserve for long-term loans, for loans, for notice deposits has been lowered to 12 per cent, and the reserve for demand deposits, to 4 per cent. The hon. member for Matapedia-Matane said also that we have the money precisely because it was the calculated percentage which could best enable the Bank of Canada to control the amount of credits and the banks to operate without having money that is not being used.
Bank Act
On that point, Mr. Chairman, I want to say that, whatever the reserve percentage, it is obvious that chartered banks will ask that this percentage be as low as possible because in the past the general percentage amounted to 8 per cent and as worked out by the Minister of Finance, with these two new percentages, it is lowered to an average of 10.6 per cent of loans made by chartered banks. This means that, in the past, when a bank had $8 it could create credit by making loans up to $92, whereas now a bank will need only $6.60 to lend $93.40. Calculating this for all of the reserves of the chartered banks, which now stand at $1.5 billion, and if the percentage is lowered from 8 to 6.6 per cent, it means that overnight from the moment the law is passed, taking into account the whole money supply, the banks will be able to lend over $4 billion more without needing a single cent more in reserves or in deposits.
Of course, if the Bank of Canada puts this legal money into circulation as reserves for the chartered banks, that is different. But the chartered banks may not want to give up their reserves, and if these remain the same, if the chartered banks keep their $1.5 billion in reserves, it means that the moment the percentage is lowered from 8 to 6.6 per cent, the banks can create and lend an additional credit of $4 billion, without needing a single cent more in legal reserves or in deposits.
If the Bank of Canada leaves the same amount in legal reserves in the hands of the chartered banks, the hon. member for Matapedia-Matane will tell me: "But has the Minister of Finance told the house what policy the government would adopt in such a case?"


René Tremblay: That is the responsibility of the central bank.


Gilles Grégoire: Mr. Chairman, the hon. member for Matapedia-Matane says that this is the responsibility of the central bank. I shall answer him that when the question was put directly to the Minister of Finance in the committee on finance, trade and economic affairs, the minister said: "The Minister of Finance is the one who has the authority". He mentioned that the authority did not rest with the governor of the Bank of Canada, but with the Minister of Finance. This is what the hon. member took up-

March 20, 1967
Bank Act


The Acting Chairman (Mr. Richard):: Order. I understand very well the great desire of the hon. member for Lapointe (Mr. Gregoire) and the hon. member for Matapedia-Matane (Mr. Tremblay) to assist the hon. member for Lapointe in his speech, but I should prefer, and I know that all the hon. members agree with me, that each member make his speech by himself and without too many interruptions, so that all may have the opportunity to speak in turn.
[DOT] (5:30 p.m.)


Gilles Grégoire: Mr. Chairman, I would like to say that the hon. member from Matapedia-Matane was not interrupting me; on the contrary, he was helping me. I was wondering what was the name of the hon. member who had precisely insisted on the fact that there is a section in the new Bank of Canada legislation which gives primary responsibility to the Minister of Finance, and it was precisely the hon. member for Perth (Mr. Monteith) who, at that time, observed that it was not as in former times when the governor of the Bank of Canada had refused to follow the instructions of the minister.
So, finally, to go on with what I was saying, it is in fact the Minister of Finance who is responsible for the volume of the money supply. This is all the more so that when I asked the Minister of Finance what was his basis to determine the volume of the money supply, he replied; It takes feeling and flair. Not much, perhaps, but to a certain point, some judgment. He was not sure that it required judgment to determine the volume of the money supply. Indeed, I mentioned it last week.
The minister recognized that it took flair and feeling but as far as judgment was concerned, he did not feel it was indispensable to have some to figure out the volume of the money supply.
So, I say to my friend, the hon. member for Matapedia-Matane, that it is the Minister of Finance who determines what statutory reserves remain in circulation. The minister himself refused to make any statement on that. He refused to say whether with the changes in rates provided for under section 72 and the reduction of rates from 8 to 6.6 per cent, the Bank of Canada would allow the chartered banks the same amount of statutory reserves.
If the amount remains the same as we can rightly presume, it will mean that as soon as

this legislation is adopted, the chartered banks will turn around and be entitled to lend an additional $4 billion without a single penny more in reserves and without a penny more on deposit than they have at the present time.
I challenge the hon. member for Matapedia-Matane to contradict me. If the legal reserves remain the same, the percentage decrease from 8 to 6.6 per cent enables chartered banks, once this legislation is implemented, to go right ahead and create $4 billion of credit without having a cent more in legal reserve or in additional deposit. I challenge again the hon. member for Matapedia-Matane to say anything to the contrary. I also challenge another of his economist colleagues, the hon. member for Outremont-Saint-Jean (Mr. Lamontagne), to gainsay by statements, because they both know very well that with 6.6 per cent, in view of the existing legal reserves, chartered banks will be allowed to create $4 billion more as soon as the Bank Act is implemented, without having a cent more in deposit or in reserve. Why could the Bank of Canada not create that $4 billion credit, without interest, for the benefit of Canadians?


An hon. Member:: It could lend money in the Mount Royal constituency.


Gilles Grégoire: It could make loans to municipalities who are in need of it, as well as to the provinces, without interest. The member for Matapedia-Matane could not deny it, because he knows it is true.
This would become a buoyant economy for the people, but the member for Matapedia-Matane prefers the buoyant economy for the bankers. There lies the difference between the member for Matapedia-Matane and us. He is for the banks, whereas we want the system to operate for the people.
Such is the difference in the affluent systems. We have the choice: affluence for the bankers or affluence for the people; as for me, my choice is made: affluence for the people. The member for Matapedia-Matane has also made his choice: affluence for the bankers. He certainly cannot say otherwise. All he can do is to give a sickly smile because the mask is falling. We are exposing the hypocrisy of these pseudo-economists who have studied the conventional economy with a view to satisfy the appetite and consuming thirst of the big bankers to the detriment of the people.


An hon. Member:: Pure demagoguery.
March 20, 1967


Gilles Grégoire: I have just heard the typical retort of those who have run out of arguments. When they are cornered, stuck, what do they do? They sit on their hands and shout "demagoguery". That is the argument of those who have no more arrows in their quiver. Instead of saying that, why does he not prove that I am wrong? Let him prove that the new clause 72, if the legal reserve remains the same, will not allow the banks to create $4 billion more for their benefit and advantage.
What are we asking for? We say that if it is possible to increase the money supply by $4 billion, let the Bank of Canada do it, so that it can benefit from it and enable the Canadian people to take advantage of the economic growth which we owe not to the bankers but to the work of the Canadian people our fellow-citizens. The money supply increases as a result of increased production due to the toil and sweat of the Canadian citizens. But they are not the ones who benefit from it. The bankers do.
Mr. Chairman, the hon. member for Me-gantic (Mr. Langlois) said it a while ago: placing his argument within the frame of the existing system, the hon. member for Matapedia-Matane rattles off what he has learned in books.
On the other hand, when we show him the results of the present system, when we give him concrete figures with the help of clause 72, on the bank reserves, he is at a loss. He feels cornered, and his sole argument is to cry out "demagoguery". It is the argument of people who have run dry.
Mr. Chairman, the hon. member for Matapedia-Matane talks about an affluent economy. Well, we want it, but for the people and not for the bankers. For Canada, but not for the bankers, not for the banks. That is the difference between the argument of the hon. member for Matapedia-Matane who expresses the reasoning of his colleague, a reasoning which is hard to imagine, since even one of his colleagues, who had not heard him make one of his speeches, said earlier: what the hon. member for Matapedia-Matane says there, does not make any sense, he did not say that. He was shocked to see that his colleague could have said that. It is true that the theory and the system advocated by the hon. member for Matapedia-Matane are shocking.
Bank Act
Mr. Chairman, I shall ask the hon. Minister of Finance to change his course, to the benefit of those who elected him from one end of Canada to the other, those who elected their representatives here in the House of Commons. We are here to work for them and not for the bankers who have done nothing, who represent an infinitely small group, a very small sector in Canada. Why not let all the people benefit therefrom?
If the steps advocated by the hon. member for Villeneuve, the hon. member for Megantic and myself, as well as the hon. member for Compton-Frontenac and others, were taken instead of following the system advocated by the hon. member for Matapedia-Matane, we would not be faced today with a housing shortage, an unemployment crisis with
400.000	people out of work, including
150.000	in Quebec alone.
Yesterday afternoon, I met the dairy producers of the riding of Lapointe.


Mr. Guay:: I met them also.


Gilles Grégoire: The hon. member for Levis tells me that he met them also. I know that the hon. member for Chicoutimi (Mr. Langlois) and another Liberal member met them. In the province of Quebec, all federal members were able to meet their farmers.
Will the hon. members for Levis and Matapedia-Matane tell me that the Quebec farmers are well off? Are they not living rather in the same old misery? When you met the dairy producers, the farmers of the riding of Levis, did you tell them: Gentlemen, be happy, we get along fine in an affluent society? No. You did not dare tell them that because it would have been sheer provocation when they have trouble making ends meet in spite of back-breaking days starting early in the morning and ending late at night.


Raynald Joseph Albert Guay: We tell them about things that can be done and we do not make pie-in-the-sky promises like you do.


Gilles Grégoire: Does the hon. member for Levis mean that the $5 per hundredweight of milk asked for by the farmers cannot be achieved?


Raynald Joseph Albert Guay: That is not what I am saying. But you indulged in demagogy in your riding, as usual.

March 20, 1967
Bank Act


Gilles Grégoire: There you have another one who has no arguments, Mr. Chairman. From the time I have been on this side, I have become accustomed to see people without arguments. That is the only thing they can say: That is demagogy. Demagogy. They are free from that. Oh yes. When you saw the former member for Saint-Jean-Iberville-Napierville (Mr. Dupuis), with his wide smile, the hon. member for Matapedia-Matane or the hon. member for Levis (Mr. Guay) and the others who were rubbing their bellies when they saw Yvon Dupuis throwing bundles of dollars in the air, that was not demagogy, Mr. Chairman, oh no, that was intelligent. He did the same in his riding. "The Social Crediters will get the money machine rolling and you will need loads of dollars to buy a pack of cigarettes". That is not demagogy, Mr. Chairman, oh no.
We say that it is not intended to print one dollar more, but rather to make sure that the credit now created by chartered banks will be created, in the same amounts, if you want, by the Bank of Canada. Is that what you call printing money? And that has been repeated for a week in this house.


Raynald Joseph Albert Guay: It is the same thing.


Gilles Grégoire: That is the same, except that it is the Bank of Canada that will do it without interest and that the federal government, the provinces and the municipalities would then have the interest to boot to administer their own affairs.
Let the hon. member for Matapedia-Matane and the hon. member for Levis make inquiries in their own constituencies and they will find out that between 30 and 45 per cent of municipal estimates are expended to pay interest on the debt.


Raynald Joseph Albert Guay: We know what is going on in our ridings; we are always there, but you are never in yours.


Gilles Grégoire: The hon. member should not worry about that. But let me say that this is not only demagogy but a lie as well, because I am more often in my own riding than he is in his.
When we suggest a system, a means whereby municipalities could have interest-free loans and use the money they are now paying as interest on their debts, we are not suggesting the printing of bills, and there you have the difference between the present system and the one we have been advocating. And it would spell prosperity not only for the banks but
IMr. Guay.]
also for municipalities and the Canadian people.
Well, Mr. Chairman, I hope that the hon. member for Matapedia-Matane will not pursue his defence here especially when one sees him take his stand on paragraphs learned by heart from orthodox manuals of political economy often dating back to first world war.
I hope that the hon. member for Matapedia-Matane will not continue to defend an obsolete economic system, which is exactly the same as the one in effect at the time of Napoleon but that, adapting himself to progress, he will try to see, to advocate the implementation of a new system which will not be an economy of abundance for bankers only but for all Quebeckers.
[DOT] (5:40 p.m.)


Bert Raymond Leboe: Mr. Chairman, I really did not intend to become involved in this debate a second time, but it does seem to me that perhaps it would be profitable for me to say a few words in connection with the topic before us. We have had a very wide-ranging debate. It seems to me that some statements have been made which certainly need to be refuted or clarified. To begin, I should like to refer to page 13840 of Hansard and quote from comments of the Minister of Finance. He said:
Mr. Chairman, I have been trying for most of my adult life to understand Social Credit.


Mitchell William Sharp: So I am.


An hon. Member:: You said that.


Bert Raymond Leboe: I am quoting the minister. If the minister has not succeeded very well in understanding Social Credit, it is a great puzzle to me how he could continue as he did in the next few sentences. He said:
But what has puzzled me even more is how anyone could accept these doctrines.
He is referring to the doctrines that he does not understand. If you can figure that out, you are better than I. I should like to read another quotation from the remarks of the minister as found on page 13371 of Hansard:
Mr. Speaker, I should like to reply to the young, amiable and handsome member who has just asked the question that the statement made by the premier of British Columbia is, so far as I know, without foundation. I would categorize it as both absurd and without foundation.
We have heard a lot about co-operative federalism. We have heard a lot about how the provinces should get along with the federal government and how the federal government should get along with the provinces. The minister's portfolio, of course, in essence
March 20, 1967

is a product of the getting together of the provinces and is not something which got the provinces together. I suggest to the minister that the use of sarcasm and ridicule is no way to find a solution to problems. I should like to read again from Hansard, page 13111:
-this is the sort of program that one might expect the Social Credit party to propose since they believe in a different form of financing, one that would be very inflationary and under which they would simply print money.
I should like to know what Social Credit material he has been reading. He says he cannot understand it, wonders how anybody can believe it, and then proceeds to say that it would be very inflationary in that we would simply print money. How does he know if he does not understand it. I should like to know who, in the Social Credit party, at any time advocated the printing of money. I have read items in the newspapers which have suggested that this is what we are advocating. I have been a Social Crediter since 1934 and I have never heard a Social Crediter advocate that we print money indiscriminately by means of a printing machine. This is something which has been suggested in the United States by none other than Mr. Anderson who at one time was secretary of the United States treasury. He suggested that this might be a good solution. The Social Credit party in this country has never recommended this.
I should like to deal with this question in retrospect. I go back to the time when we were in a depression, a time when people were being paid 10 cents a day to sit in a concentration camp, if you wish to call it that or relief camp because they did not have any money with which to do any purchasing. Retail stores across the country were amply supplied with goods for sale. I remember a storekeeper telling me that he had to keep a great deal more on the shelf because he could not afford to miss a sale.
What was the upshot at the beginning of the war? It was found absolutely necessary to increase the money supply greatly in order to fight the war. What was done in order to prevent inflation? I should like to go into this to some extent. In the first place, the government started selling victory bonds. They did not tell the people that the victory bonds were for the purpose of taking money out of circulation. They said it was to help fight the war. This was not the case at all. We know that. The victory bonds were sold for the sole purpose of taking money out of circulation which had already been pumped into the economy. It was already there and the expansion of credit was going on.
Bank Act
The next step was the introduction of war savings certificates. By this time the government was after the $5 bills. One could buy certificates for amounts as low as $5. In this way the government was able to take more money away from the people so they would not be able to spend it. Then the government introduced savings stamps in an effort to take more money out of circulation.
After having exhausted this procedure the next step was compulsory savings. No one could suggest for a minute that this was not proposed for the purpose of curtailing spending. Of course it was. I am not saying there was anything wrong about it. I am simply saying that these steps were taken by the government to prevent inflation inasmuch as the money supply had to be expanded in order to help the war effort. When compulsory saving failed to meet the demands rationing was introduced so that people would not be able to buy simply because they had money in their pockets. When rationing failed price controls were introduced.
At that time the man in charge of keeping prices down was one of the best men Canada has produced, Mr. Donald Gordon. He did a good job. During the war years the government did a good job in preventing inflation. They took the necessary steps. I am sure that if the minister would try to understand Social Credit he would understand some of the steps that were taken by the government in those days, because the concept of Social Credit is the converse of this. When the money supply is deficient there is a process by which money can be made available to the purchasers of the country.
I have heard it said that in Alberta and British Columbia the governments do not know anything about Social Credit and do not practice it. I can tell the committee that the concept of Social Credit is being practised directly in Alberta and British Columbia and now in the province of Saskatchewan. Right now in Saskatchewan a Liberal government is practising the concept of Social Credit. I make the statement this afternoon that if Saskatchewan, which is practising the concept of Social Credit, does not go ahead I will eat my shirt on the steps of the parliament buildings.


An hon. Member:: You will not have one left by the time you get there.


Bert Raymond Leboe: The hon. member says that I will not have one left by the time I get there. I will. Surely we can expect more from the minister than this nonsense of ridiculing something that he does not know much about.

March 20, 1967
Bank Act
Surely we should be able to expect a minister of the crown at least to look at Social Credit proposals, come up with an analysis of what Social Credit stands for and then tell us where we are wrong, if we are wrong. It is not good enough to dismiss the whole concept with ridicule. The people of this country are getting fed up with this kind of nonsense. The day will arrive not too long from now when the people will take desperate measures to rid the country of this kind of attitude.
[DOT] (5:50 p.m.)
I referred to the concept being followed by the provinces of British Columbia and Alberta. I should not mention them without coming to grips with this concept and pointing out exactly what the situation is. If there is a deficiency of purchasing power in a province the 'people can not buy back that which is produced by the people. There is only one answer and that is to increase the money supply. Under our federal system there is only one way of doing that, in a province by creating a financial vacuum within the province so that money will flow into the capital account. If this is done there is more money with which the individual can buy the products of the country. In this way you increase purchasing power in respect of goods and services available and the people can then buy back what they produce.
The minister should take note of this method of expanding the tax base and increasing the source of tax revenue. This is the first year in 14 years there has not been a tax reduction in the province of British Columbia. The Sprovince increased home owners' grants by another $10 per month bringing them to $120 per year. This is tantamount to a decrease in taxes for home owners. This is not an across the board decrease in taxes.
In British Columbia the financial vacuum is created by the construction of highways, railways, and other transportation and power facilities. In this way money is attracted back into capital account. An individual would not buy a pulp mill worth $50 million but if one is built a great deal is paid out in the form of wages which creates purchasing power for the individual to purchase the goods being manufactured. This is the concept of Social Credit. The Minister of Finance or anyone else can bury his head in the sand, but this concept does work.


David Réal Caouette: Mr. Chairman, the hon. member who has just resumed his seat is absolutely right when he reproaches the Minister

of Finance and Receiver General (Mr. Sharp) his inability to understand the Social Credit theories, but his capacity to condemn them. He cannot understand them but he wants to condemn them at every opportunity, anytime, anywhere, and mostly here in the house.
I should like to quote what his parliamentary secretary (Mr. Chretien) had to say on February 15, 1967, as reported in Hansard on page 13095. He said:
It is useless to try to make people believe that we find money on trees or that some obscure mechanism in the Bank of Canada can be used to solve all our problems. Money spent at any level of government comes out of the pockets of the taxpayers.
Mr. Chairman, if the parliamentary secretary to the Minister of Finance had been able to tell us at that time and if he could do it now, that all the money we need for the administration has to come out of the pockets of the taxpayers, the parliamentary secretary should have said who has enabled the taxpayers to have money in their pockets. If money does not grow on trees, as he said, he could have told us where it grows. But, nobody ever wants to tell us that, never.
Nobody wants to admit it either. As the bankers would not admit they create credit. No. They call it credit expansion.
Mr. Chairman, I do not know if some officials prepare the parliamentary secretary's speeches but it seems to me that such would not be their reasoning; they would never say that at any level of government the money spent comes out of the taxpayers' pockets.
In 1935, that is already 32 years ago, William Lyon Mackenzie King said this:
As long as the government or Parliament has not recovered control of the issuing of the volume of money and credit in Canada, it is futile and trifling to talk about democracy in Parliament.
Any nation will be ruined once usury prevails.
And that is precisely the control over finance that we are studying in Bill C-222. As for the parliamentary secretary, he has certainly not understood his former spiritual leader.


Joseph Jacques Jean Chrétien: I am fed up with Social Credit.


David Réal Caouette: He tells us that money does not grow on trees. But where does it grow? Who is the sovereign in Canada? Who is the supreme authority in our country?
March 20, 1967

[DOT] (6:00 p.m.)
The banking system, or the Canadian government, the Canadian parliament? The authority is vested in parliament, as the former governor of the Bank of Canada, Mr. Graham Towers, once said:
Parliament has power to amend the Bank Act... Parliament has power to give orders to the Bank of Canada ... Parliament has power to dictate the monetary policy of the country-
Mr. Chairman, precisely due to tight money, to the fact that credit remains in the hands of a few individuals who lay down the law in economic matters in Canada, we have to put up with the harm done by this system in all sectors of economic activity.
A while ago, I heard the hon. member for Lapointe (Mr. Gregoire) mention the government's dairy policy. All the hon. members in the province of Quebec, as well as outside Quebec, I believe, have been invited by the farm organizations, by the Catholic Union of Farmers in Quebec. I had the opportunity to meet the farmers last week. They ask for $5, $5.10 per hundredweight for manufacturing milk. The government will announce its policy before the first of April and will say: $5 is too much, we cannot afford it. On the other hand, we certainly can afford to help other countries, producers throughout the whole world, execept in Canada.
If war broke out tomorrow morning, we could afford to finance it. But we cannot afford to finance and help the farmers who represent the very foundation of the whole Canadian economic system.
And I am convinced that the hon. member for Levis (Mr. Guay), who made an intervention earlier, promised the producers in his riding, to represent them here in parliament, to be their spokesman, to make claims for them, whether they are from St. Romuald, St. David or other places in his riding. And when the time comes to vote for $5 per hundredweight for manufacturing milk, the hon. member will bow to party discipline and vote as he is told to vote.


Raynald Joseph Albert Guay: It is not true.


David Réal Caouette: He knows it-or else he will not be here to vote, if it is too difficult.


Raynald Joseph Albert Guay: I never hide when it is time to vote, against you for instance.


David Réal Caouette: Mr. Chairman, the hon. member for Levis knows it. He said earlier that we are demagogues, that we practise demagoguery, and every time we attack the financial system, it is demogoguery. But every time the farmer is crushed, it is normal, let
Bank Act
us forget about him. The farmer who paid $1,200 or $1,400 for a small farm tractor about ten years ago must pay today $4,500 or $5,000 for the same tractor. The farmer is faced with a financial system without a heart or soul; he is a member of an outcast social group throughout Canada, either in the east or in the west of the country.
Mr. Chairman, we will witness soon the conflict on the milk policy and there again it will be a monetary problem. The Minister of Finance will tell us: "I do not understand Social Credit". Does he understand the present system? He does not understand it any better. That is why it is difficult for him to understand Social Credit.
Mr. Chairman, at that time it was because I was speaking to the hon. member for Levis; I knew that he could not understand.


Raynald Joseph Albert Guay: You addressed the electors of Levis and I won in spite of that.


David Réal Caouette: Mr. Chairman, if the hon. member for Levis is so afraid not to understand Social Credit, or if he is unable to, let him rise and explain the present system, if he understands it. I challenge him to prove that he understands it.


David Lewis: On a point of order, Mr. Chairman, without, I hope, offending the hon. member for Villeneuve and some of his colleagues and despite the fact that I am educated every minute that I listen to them, I wonder whether it is not time to remind ourselves that we are no longer on clause 2 but are on a specific clause of the bill and that if we are ever to get through the bill the rule of relevance should be made to apply.


Raymond Langlois: On the same point of order, Mr. Chairman, we are talking about the reserves of the Bank of Canada and their implications.


David Lewis: That is what we are supposed to be talking about and not what the hon. member is talking about.


Raymond Langlois: We are trying to point out the wide range of these implications. I gather that some hon. members do not seem to understand us, but that is what we are talking about. We have a long way to go before some hon. members will understand us.


David Lewis: On the same point of order, Mr. Chairman, there is no doubt as to what the hon. member for Megantic will think of the suggestion that some of the discussion may

March 20, 19G7
Bank Act
not be directly relevant, but I say very seriously that unless we are to sit here until Christmas rather than rise tor Easter surely we have arrived at the point in our debate when all of us should be kept to the particular provisions of the particular clause under discussion and should not be allowed to range all over the bill. In fact we have had *,wo debates. First we had a debate on second reading. Then we had a debate, which was a second reading debate, on clause 2 during which all of us expressed our views. Now we are having a third debate similar to the debate on second reading during which we are again hearing views about the monetary and banking system. If we do not call a halt to this, we will be doing this useless educating of each other until doomsday.


Gilles Grégoire: Mr. Chairman, with respect to the same point of order, section 72 deals with bank reserves and we know-and the Minister of Finance and Receiver General (Mr. Sharp) knows it, but I do not know whether the hon. member for York South (Mr. Lewis) does-that the bank reserve is what permits banks to create money and credit. And when we talk about creation of money and credit, we are dealing precisely with section 72, which permits such a thing. The hon. member for York South may think we are spending much time, but how many days did he make us lose by lingering over the question of a spy in British Columbia? When we talk of money, the most important thing for the economic life of people, socialists do not want to speak any more about it.


David Lewis: Demagogy is over, is it not?


Gilles Grégoire: Mr. Chairman, the hon. member for York South, here is another one talking about demagogy. He would not want us to talk about the most important thing.


David Lewis: Maybe we should say "nonsense" instead of "demagogy." It is over now.


Gilles Grégoire: Mr. Chairman, the hon. member for York South thinks we are spending too much time discussing what has to do with the creation of money, while they spend days and days on other subjects far less important than the one we are dealing with at the present time.


David Réal Caouette: Mr. Chairman on the same point of order. The member for York South (Mr. Lewis) is afraid that consideration of Bill C-222 may go on until Christmas. He does

not realize that the Canadian people will have to stick until 1977 with the same system, under the same coercion regime.
Furthermore, I will observe here that the member for York South, as well as his friends the Socialists put themselves in their true light and show their real financial philosophy. They are not interested in improving the financial system in order to put it at the disposal of the people. On this score, the New Democratic Party differs in no way from the Conservatives, nor the Liberals; all they want is to take their place; move over, that is all they say.
It is a good thing that the member for York South has risen majestically in support of Bill C-222, telling us that we should limit ourselves to the consideration of clause 72 and to the amendment which precisely deal with the monetary reserves which allow the expansion of credit by some individuals in Canada and not at all by the Bank of Canada. It is not the central bank which ensures the expansion of credit; it is the chartered banks. A moment ago I quoted the member for Saint-Maurice-Lafleche (Mr. Chretien). As stated in Hansard, page 13096, he said on February 15:
-However, due to the present state of our economy, we cannot act irresponsibly.
[DOT] (6.10 p.m.)
"Responsible", that means, let us get deeper into debt or increase taxes. And this comes after the high-sounding statements of the Minister of Finance: The government has only two ways of finding money in Canada. Two ways. Either by borrowing money or by collecting taxes. We borrow and then, we collect taxes to repay the loans and then, we borrow in order to distribute, through public works or other, to pay the interests on a tremendous national debt that Canada will never repay. Then, the minister has only one solution: borrowings and taxes.
We keep telling him to use the Bank of Canada. He replies that it would cause inflation. Would there be any more inflation if the Bank of Canada rather than chartered banks created credit? Let the minister tell us once and for all. Let us be told. The Bank of Canada could create debt-free credit without interest to finance the public sector. Would it cause inflation? Chartered banks charge interest on their expanded credit or on the credit they create, and that is inflation. But it is not when the Bank of Canada is involved, though. The minister knows it.
March 20, 19S7

So the hon. member tor Saint-Maurice-Lafleche goes on:
There is one good point to that: the taxpayers will pay for the old age pension-
We were dealing with old age pensions.
From now on, when people see the platforms, they will understand that there is a direct relationship between the purse and the platform.
That statement is made in the house, but the hon. member for Saint-Maurice-Lafleche would never have made it in his own constituency during the election campaign, because at the time it was said: We will increase your pensions even up to $125 a month, because the right hon. Prime Minister (Mr. Pearson) has announced it in the maritimes. And it was stated: Without a tax increase. We shall save money. We shall save. We shall save.
It is always a matter of saving in peacetime. If the war broke out tomorrow, immediately, savings would be out of order and we would spend as much as we could to manufacture weapons. But to produce welfare in Canada, that is impossible. We do not have the financial means.
Now money does not grow on trees. No, Mr. Chairman. But the hon. member should tell us where it grows. It does not grow on firs or maples nor in Shawinigan, Rouyn or Montreal. Money grows in chartered banks. That is Bill C-222. And we are asked to approve reserves of 6.6 per cent instead of 8 per cent. That is what the hon. member for Matapedia-Matane (Mr. Tremblay) stated earlier. He is right. But when the hon. member for Lapointe (Mr. Gregoire) said: "That would enable chartered banks to create immediately tomorrow an additional amount of $4 billion in Canada, without increasing the reserve by a single cent, without issuing a single cent of legal currency-whether it be a figure or a bank note it does not matter as long as it is illegal-he also asked: Who grants them that right? Bill C-222. Passed by whom? By the Canadian parliament, by the sovereign parliament which can decide the general economic future of Canada.
And we, the members, the minister, and the government who are about to give that vast power to a few individuals for a ten-year period.
Mr. Chairman, we cannot let Bill C-222 pass without objection. No. The Conservatives are silent. Earlier, I was asked: "When are you going to stop? You are worse than Mr. Black-more in 1936, 1937, 1938. When are you going
Bank Act
to stop talking about finance and the economic system?
Mr. Chairman, we of the Ralliement Credi-tiste, were elected precisely because we oppose that perfidious system, the present Canadian banking system which gives to a few individuals control of the economic life of the whole nation. All the social classes have to kowtow before the financial system. The banking system has the right to bring somebody into the world financially speaking tomorrow morning and to put him into bankruptcy the next morning.
Why do we witness today such a large number of bankruptcies in the province of Quebec as well as in other Canadian provinces- but it is even worse in Quebec because bank credit is cut off? Industrialists and business people are caught in a vise, they are forced to go into bankruptcy.
However, that is not what the bankers told the finance, trade and economic affairs committee. They told us what they had promised the Minister of Finance and Receiver General (Mr. Sharp) to say: Allow us to expand; cut down our reserve requirements and raise our lending rate so that we may help further the small-wage earners, lend them more money. That will enable us to control further the government or parliament, as we do at the present time.
Mr. Chairman, are we going to accept such a policy? Promises were made in the parliamentary committee on finance, trade and economic affairs, but do you believe that bankers will put them into practice later on?
As I said before, these people have the power to lend us an umbrella when the sun is shining, but, when it rains, when economic conditions are precarious, the umbrella is snatched away and we are left stark naked, and defenseless. That is the financial system we have, controlled by people who have no parliamentary power.
We have been elected to serve the Canadian people, not to serve the banking system. Through Bill C-222, the Minister of Finance and Receiver General and the government are beginning to bow to the financial powers- and hang the constituents, be they in the minister's riding or anywhere else.
Mr. Chairman, the member for Cariboo (Mr. Leboe) was quite right when he asked the minister earlier: "If you do not understand Social Credit, how come you say that it

March 20, 1967
Bank Act
will cause inflation and that Social Credit is dangerous. Don't you feel that our present system is much more dangerous? It has been tried and found wanting".
People fear inflation. Social Credit does not control the present government, and yet we have inflation, rising costs, rising interest rates and a general upward trend. We have inflation indeed. Is it because of Social Credit? The minister does not understand Social Credit, he is afraid of inflation caused by Social Credit.
Let him look at the present system, let him read attentively Bill C-222 which was drafted by the minions of finance in the hope of having it adopted here for the next ten years. Having adapted it, well, we shall still be the victims of this financial system all over Canada. We can change it, we can amend it. This does not mean that the bookkeeping system, the accounting system used by the banks is bad, no. It is good, but let us have this system operate for the benefit of the Canadian people, not of a few bank managers who number, say, 30 or 40 in all Canada against 20 million inhabitants.
And when I hear members like the one for Matapedia-Matane say: Social Credit is dangerous. I became a Creditist in 1939, that is 28 years ago. The member for Matapedia-Matane is an economist, as well as the member for Outremont-Saint-Jean (Mr. Lamon-tagne). I was never afraid to discuss finance and banking with them. I do not pretend to be an economist, but I know for sure that two plus two equal four. I know how to count, I know what is a balance sheet of a company and a balance sheet of a government. But I am also aware that if private companies were administered in Canada in the same manner that the government is administered, everybody would be bankrupt tomorrow morning. I have no doubt about that.
[DOT] (6:20 p.m.)
The minister does not know it. He says their hands are tied. Here we are: there is no other way: borrowing and taxes. A time comes when they say: "We cannot borrow, we must tax". They tax to the limit, that is to the point where people are crushed by taxation. Such is the present situation.
They talk of new houses financed by the Central Mortgage and Housing Corporation. Canadians cannot pay $125, $150 a month; everybody knows that. We should not wonder if houses are not erected: we lack financial means; and it is the same in every field, whether it be agriculture, labour or construction. It is always the same interrogation

mark, the same problem: money, money, money.
Our Minister of Finance has not yet found the means and he refuses to admit that we should pass an amendment to this Bill C-222, so that the Bank of Canada may create all the necessary credits for expansion and growth of the Canadian economy. Later, when credit is in circulation, whether it is on deposit with the chartered banks, whether the chartered banks lend such deposits, whether the chartered banks do business with the government or with private industry, it does not matter, but let new credit come out of the Bank of Canada. That is what Credi-tistes demand. It is there to be used and it is the purpose for which it was established.
So, Mr. Chairman, the Minister of Finance should not be surprised; we will insist as much as we can to have this Bank Act amended so as to serve the Canadian people instead of the bank directors. Let this be clear, let the minister understand it perfectly.
Let us have no more thoughtless statements on the principles of Social Credit. If nothing better can be found to say than "demagogues", "demagogy", "stirring up the people", etc., that is now an old story, it is old-fashioned. We have had our fill of all that. We know what we want. We know where we are going. Three American presidents took the financial system to task. These people were surely as intelligent as the Minister of Finance and Receiver General of Canada and as intelligent as any of us. When Lincoln said:
I have two enemies: The Army of the South in front of me and the finance behind me. Of the two, the one behind is the most dangerous.
It is still true today, in Canada.
John Adams was right when he said:
Credit should be controlled by the government ... Confusion and anguish in the United States stem less from the deficiencies of the constitution and confederation than from the ignorance of credit, currency and its circulation.
We are experiencing exactly the same situation today and it must be changed. As I said earlier, we have been elected for that. We are going to fight for that, regardless of political affiliations. We believe in Social Credit and not in the present financial system.
And the Social Credit would serve the people to nobody's prejudice. Bankers would indeed keep on living, rich bankers would still be rich, millionaire bankers would remain millionaires, but at least the Canadian
March 20, 1967

people would be assured of the vital minimum, of a decent living in a country as rich as Canada. That is why the Ralliement Cre-ditiste and its members are fighting both inside and outside parliament. I insist that the Minister of Finance and Receiver General give us every detail about this system which exploits all social classes, including the central government.


Herman Maxwell Batten: Order. There is an amendment before the house and perhaps the committee will permit me to read it now. Moved by the hon. member for Edmonton West:
That clause 72 of Bill C-222 be amended by:
(1)	In subclause (1)	(a), deleting the word
"twelve" and substituting the word "eight".
(2)	In subclause (2) by deleting in subparagraph (a) thereof all the words after the words "months and" in line 28.
Perhaps the committee will also permit me at this time to announce the proceedings on the adjournment motion: The hon. member for Kootenay West, Health and Welfare; the hon. member for Richmond-Wolfe, Agriculture; the hon. member for Mackenzie, Grain.


Mitchell William Sharp: Mr. Chairman, perhaps I ought to say a word about the amendment moved by the hon. member for Edmonton West which is the subject of our debate at the present time. I know my hon. friends in the Social Credit party and the Ralliement Cre-ditistes and the hon. member for Lapointe are very anxious that we should proceed with this bill as expeditiously as possible, and I hope that they will permit the committee to express its views upon the proposals we are making. I am sure they understand that this is how our democracy works, and I think we all agree that they are having a wonderful opportunity in this debate to express their views and to make the people of this country and of their own constituencies aware of the difference that separates them from us.
There are two parts to the suggestion made by the hon. member for Edmonton West. Some of his propositions were put forward last Friday and some of them today. On the last occasion he was speaking particularly about the power to vary the reserves. It is significant that the Bank of Canada has had the power to vary these reserves during the last ten years and still retains the power to vary them.


Marcel Joseph Aimé Lambert: Down from 8 per cent?


Mitchell William Sharp: No, between 8 and 12 per cent. These powers have been there during periods
Bank Act
when, if the bank had felt that this was a proper way of tightening up the money supply, it would certainly have increased the reserve requirements. However, it chose not to do so. I believe this reinforces the arguments advanced before the committee by the governor of the bank to the effect that the necessary influence upon the money supply can in fact be exercised more delicately and in more timely and equally effective fashion by varying the amount of cash in the system rather than by varying the primary reserve requirements.
On this point, Mr. Chairman, I am very much like other members of the house. I have to be guided by the experience of the governor of the bank who has operated the system now for a great many years, if I may say so-I am sure I speak for a great many members of this house other than perhaps hon. members who espouse the Social Credit doctrine-with some skill. It is his view that he can influence the cash reserves of the system and the operations of the banks more effectively by varying the amount of cash in the system than by varying the reserves.
I accept that judgment and I commend it to the house. I have heard no evidence to the contrary. I know the hon. member for Edmonton West cited the example of the United States, where the power to vary reserve requirements is contained in the legislation. I have spoken about this to the governor of the bank and it has not induced him to change his views in any way. He said: "It may be appropriate in the United States to exercise an influence in this way upon the money supply. In Canada my experience has been that we can exercise the necessary influence to better advantage by varying the amount of cash than by varying the primary reserves". He said: "If I had thought otherwise I would have used the powers that are now contained in the act."
This was the first of the points made by the hon. member on Friday before the conclusion of the debate. I have been contemplating my answer since and that is the substance.
Today he has moved an amendment. I am not sure whether it accomplishes the purpose he has in mind but it has the effect of reducing the minimum reserves from 12 per cent to 8 per cent in so far as they relate to demand deposits. This would have the effect of reducing the over-all reserve requirements on the basis of the present distribution of deposits down to a little over 5 per cent.
The view of the governor of the bank is that this is too low a ratio for him to operate

March 20, 1967
Bank Act
monetary policy effectively. Even in the amendments now before us as reported by the committee and included in the bill the ratio is reduced from 8 per cent to less than 7 per cent. I gather that on the present distribution of deposits the ratio is not 6.6 but a little less than that, probably closer to 6.3 per cent. So while the bill proposes some over-all reduction in the proportion of reserves, and is in line with the recommendations of the Porter commission, it does not go, and I do not think it should go, so far as to reduce the effective level of minimum reserves down to something over 5 per cent.
I know that the banks would like to have the maximum amount of freedom. I believe that we in this house should also have regard to over-all requirements of public policy and be governed more by the experience of the Bank of Canada in operating the monetary system to the advantage of the public as well as of the banks. I am not saying that the banks are motivated only by selfish considerations, but I am more impressed by the arguments put forward by the governor of the bank that a ratio of 5 per cent is too low for him to operate the monetary system of this country effectively. For these reasons, Mr. Chairman, I find the proposed amendment unacceptable. Neither do I feel that we should go a step farther and make the reserves flexible as well as lower.
[DOT] (6:30 p.m.)


Mr. Kindt:: May I ask a question? Would the Minister of Finance tell us what is at the back of the decision to split the reserves on the basis of 12 per cent and 4 per cent. As is stated in the bill the 12 per cent applies to current liabilities, the other amount to deposit liabilities. Was this decision asked for by the banks or was it suggested by Mr. Rasminsky, governor of the Bank of Canada? That is my first question.
Second, the 4 per cent figure would obviously let the banks expand their credit. They could expand up to 12 times their deposits, keeping 4 per cent at the back. Was it the thought of the Minister of Finance that by changing this ratio we would get more money in circulation?


Mitchell William Sharp: Mr. Chairman, the change in reserve requirements was partly recommended by the Porter commission which said that the ratio should be reduced from 8 per cent to 7 per cent. The trend toward a lower reserve thus was recommended by the Porter commission.
The particular form of the reserve is the result of recommendations of the Bank of

Canada which believes that it would be more suitable to Canadian conditions to have the reserves based partly on demand deposits and partly on notice deposits.


Lawrence Elliott Kindt: I have one other point to raise. What were the feelings of the banks with respect to this matter? How did they participate in the suggestion? What are their feelings with respect to this particular ratio.


Mitchell William Sharp: The banks were not very enthusiastic about this change. It was not done in the interests of the banks; it was done in the interests of giving the Bank of Canada more effective control over the money supply. The banks, I am sure, would have preferred a continuation of a simple ratio at a lower level still. It was the judgment of the governor of the Bank of Canada, which I accept, that it would serve public interest better if the reserve ratios were based upon a differential rate between demand deposits and notice deposits somewhat higher than that which the banks had asked for.


Marcel Joseph Aimé Lambert: Mr. Chairman, there is only one comment I wish to make to the minister. I am sure he would not want to leave the wrong impression. I gather, with regard to the proposal I made as to the variable reserve rate, that he would not think I was proposing this as a sole alternative to, shall we say, the methods now used by the governor. I was suggesting something as a supplement, something more in the hands of the governor. There could be occasions when it might be preferable to work under the particular type of variation I have suggested than under the open market transactions that the Bank of Canada must carry on, as it normally does. That is what I was suggesting, and I was not suggesting it as an exclusive alternative.
I would also make a further correction. The present variable rate from 8 per cent to 12 per cent does not give the governor permission to go below the statutory 8 per cent, the minimum set. My proposal was that there should be this permission.


Mitchell William Sharp: Mr. Chairman, the second part of the proposal contained in the bill of course is to provide for a secondary reserve; that is the added element of flexibility of which we have not talked on this occasion. But it is contained in the bill. In other words, when the governor of the bank had to make a recommendation to me as to the best form of controlling the money supply he recommended to me a system of fixed minimum reserves based upon a proportion of deposits, demand and notice, and the putting into the statutory
March 20, 1967

form of a secondary reserve to replace the agreements that the Bank of Canada has had with the chartered banks in the recent past. In this bill there is a well rounded and flexible system.


Marcel Joseph Aimé Lambert: All the way up.


Mitchell William Sharp: The system has this advantage. Whereas if you vary the cash reserves you may sometimes be having an enormous effect upon the earnings of the chartered banks either up or down, the money supply can be influenced through the secondary reserves, with only a marginal effect on the earnings of the chartered banks.


Marcel Joseph Aimé Lambert: With the greatest respect, I still feel that the minister has missed the point of the proposal I put forward. At no time did I suggest that the variable rate should be above 8 per cent. We have that as a primary reserve. The secondary reserve is now being enshrined. All I say is that controls breed controls. That is my opinion of that.
What I should have liked to see is the additional facility open to the governor, in that he could move downwards from the primary rate-the primary rate of 8 per cent, 12 per cent, or whatever it is. This facility is not open to the governor at the present time; he is not authorized to go below 8 per cent. In the proposed act the rates are to be fixed at 12 per cent and 4 per cent and there are no deviations up or down. The government can move with respect to the secondary statutory reserve-perhaps one should call it the statutory secondary reserve-but that is a movement upward. Then, of course, he could come back to the former level. The flexibility is all in one direction, and that is the point I want to get across.
As an alternative tool I should like to see some downward flexibility in the primary reserves, rather than having that flexibility only in the secondary reserves. I do not think it is right to say that the governor had that power and he has not used it, and that therefore we are not impressed with it. The governor has never had the power to do this.


Mr.   Kindi@: May I ask the Minister of Finance a question? Is it not true that the 8 per cent in effect now against reserves, and I refer to deposits, controls primarily the amount of credit a bank can extend? It must keep 8 per cent against deposits. A loan is made to an individual and it comes back as a deposit. Of course 8 per cent must be kept against that deposit.
Bank Act
[DOT] (6:40 p.m.)
The 8 per cent is reflected in the amount of credit which can be extended by the banks. Reducing it to 4 per cent will double the credit which theoretically the banks are able to provide. It may not work out this way in practice, but the lending facilities of the chartered banks will certainly be increased tremendously. How does the minister explain this? What is the answer? Is it the thought of Mr. Rasminsky that all this additional credit should be in the hands of the banks on the assumption that the banks will take care of whatever need for credit exists? I should like to hear the minister's ideas on this subject.


Mitchell William Sharp: I think the best way of answering would be to say that these recommendations were made at a time when it was clear that monetary expansion had to be restrained. In other words, these changes are being made, not for the purpose of influencing the amount of money in circulation at the present time but to change the form of control over the money supply by relating it, not as in the past to 8 per cent of total deposits, but to 12 per cent of demand deposits and 4 per cent of notice deposits. The combined effect is somewhere between 6 and 7 per cent. It does indicate some reduction in the amount of reserve which needs to be kept against deposits.
If the hon. member will look at the clause under discussion he will see that there are transitional arrangements. In other words, we move in stages, month by month from the 8 per cent requirement down to the new minimum requirement, as provided for in clause 72(2) paragraphs (a) and (b). However, it would be the object of the Bank of Canada to exercise whatever might be the appropriate restraint or stimulation of the money supply as economic conditions dictate.
In other words, it is not the purpose of this amendment to enlarge the money supply or to restrict it. It is intended to change the way in which the Bank of Canada may influence the amount of the money supply. It is certainly not the purpose of this bill to enlarge the money supply. After all, the bill was brought in at a time when the governor of the Bank of Canada was concerned, as I was, about the money supply expanding too rapidly. He looked upon this bill as constituting a different form of control over the total volume of money in circulation, to be exercised in the light of economic conditions at the time the bank is making its decisions, operating in the open market or otherwise.

March 20, 1967
Bank Act


Mr.   Kindi@: In order to bring about an understanding between two individuals who are discussing a monetary problem it is necessary, before anything else, to define the terms used. What does the minister mean by "money supply"? Is it currency; is it money given by the Bank of Canada to the people? Is it hard currency or is it paper notes? If I go to the bank and borrow $1,000 I simply get a $1,000 credit on the books. I do not take any money out with me. I write cheques against my credit. What is the money supply? I think we must define that before it is possible to understand the minister's meaning.


Mitchell William Sharp: I have explained this on a number of occasions, both in committee and in the house. The money supply is the amount of currency, deposits in chartered banks and, to some extent, deposits in other institutions, against which cheques may be written. It is the total amount of money available for circulation whether through cheques or as currency.


Edward Richard Schreyer: Listening to the exchanges between the hon. member for Edmonton West and the Minister of Finance I was not sure whether the difference between them was one of degree or of kind. I gather that in any case it is a minor one.
My first reaction on looking at clause 72, and in particular at the provision for reducing the reserve requirements, was one of opposition. But I suppose a case can be made for reducing the reserve requirements, if for no other reason than to conduct an experiment under conditions of control. I think the decision to reduce the requirement by this small amount from 8 per cent to 6J per cent is not an imprudent one. I am a little puzzled by the position taken by the hon. member for Edmonton West. He seems to think that the clause does not allow for sufficient flexibility. It seems to me that the provision is such as to allow for the flexibility he believes to be desirable. The wording says clearly that the reserve requirement "Shall not be less than" and so on. Then it specifies what the minimum limit shall be. Beyond this there is, of course, room for discretionary judgment and variation on the part of the money management authorities.
Speaking more from feeling and instinct than from knowledge I cannot escape the impression that to the extent we reduce the reserve requirements we are giving to the banks greater discretionary power, and impinging upon the money management power of the central bank or of the public authority.

I see this kind of inverse relationship existing and I am not sure I like it one bit. However, as I say, the provision set out in the clause seems to be prudent enough. I look upon it as a kind of experiment within control, and on this basis I find it possible to support the proposal to reduce the requirements.
[DOT] (6:50 p.m.)
Since I have not taken an opportunity earlier in this debate to speak about money management generally, I should like to take a few minutes in which to comment on some of the statements which have been made in this chamber in connection with this subject, particularly by those speaking for the Social Credit party and the Ralliement Credi-tistes. I am not one who has ever ridiculed their monetary theories or taken an opportunity to make fun of some of their basic propositions. Like the Minister of Finance I must say I really cannot pretend to understand all of Social Credit theory, but unlike him 1 have not, as I said, felt the urge to tilt at Social Credit theory with sword in hand. I believe it is possible to effect an expansion in the money supply without necessarily engaging a debt creating process. I do not want to get too involved with the immediate concept of debt creating but, after a considerable amount of reading and having interviewed some people who are in positions of authority respecting our economy and banking, I have come to the inescapable conclusion that, within limitation, it is possible, feasible, and practical to effect an increase in the money supply without necessarily bringing about an increase in debt.
What I mean is that it is simply no more inflationary to have the Bank of Canada take up government securities directly than it is for the chartered banking system to take them up. It is often said that one reason why we cannot entertain the prospect of the Bank of Canada taking up government securities directly is that this would have a direct inflationary effect, but the fact is that every time the chartered banks take up government securities there is an increase in the money supply.
Why should one kind of increase be inflationary and the other not? After persistent questioning on this point I have come to one hard bit of information: The main reason why there has been a reluctance or refusal on the part of central banks to take up government securities directly is that it would be psychologically disadvantageous. That is not a very satisfactory answer to hear, but it is the only one I have been able to get.
March 20, 1967

Before going to the point where I would be prepared to endorse the main body of Social Credit monetary thinking, I must enter one major caveat with respect to it. I do not apologize for taking the time of members of the committee in this way because this matter is one of the most central, crucial problems that face governments or any body of people elected to fill positions of public responsibility and trust. The one caveat I have to enter is that even if it were a matter of deliberate and conscientious government policy, and of central bank policy, to have central banks take up more and more government securities, this in itself would not ensure that the economy would progress without inflation and without interruption, because very often the problem is not one of inadequate supply of money or loanable funds. Very often it is a case of maldistribution of money and loanable funds within the economy, of a wrong distribution as between one industrial sector and another.
I can make reference to a specific case in point. Last year and to date there has been widespread consensus that we are facing a crisis in the residential construction industry and in housing. Many people are of the impression that this is due to a chronic shortage of loanable funds in the economy or of tight money. There may be some element of justification for this position, but I think it can also be said that it is not so much a case of shortage of loanable funds as the fact that existing loanable funds were being lent out to sectors of the economy that were more profitable. Last year, while we had a dramatic increase in industrial and commercial construction, we had a falling off in residential construction.
Very often an increase in the money supply is not what is required. Very often what is needed is a selective channeling of supplies of money, loanable funds, purchasing power-[DOT]-call it what you want-into particular sectors of our economy. At the present time when we have this crisis in housing and residential construction I submit that nothing short of massive injections of funds by direct channeling into residential construction will deal with the problem effectively.
To increase the money supply indiscriminately in the context of today would not necessarily deal with the problem of the downturn in residential construction starts and would, in fact, add to the problem of inflation. This is because these added funds would be attracted to higher return commercial construction and away from housing. So
Bank Act
there must be channeling. We are really facing somewhat of a problem of inflation. Even though many of the indices show a turning away from the spectre of inflation which we faced last year, the problem still lurks with us and is around the corner at all times.
As I say, the solution is not as simple as merely advocating an increase in the money supply and saying this will cure the problem, because attendant with it much thought must be given to matters of distribution, allocation, and so on.
In conclusion, Mr. Chairman, I agree in part with those who advocate a greater degree of public, political or parliamentary control over our monetary system. I believe we have such control in large part now, but I have misgivings when I see provisions in this legislation to reduce the reserve requirements on the part of our commercial banks and, as I say, the ratio there seems to be an inverse one. The less the amount of reserves which commercial banks are required to hold with the central bank, the more is the reduction in public or parliamentary control and management within our monetary system.
Now I would like to make passing reference to the recommendation put before the committee just the other day by my colleague from Nanaimo-Cowichan-The Islands. I believe we should endorse a policy of some experimentation in our monetary and banking system. That is one reason why we are supporting this clause of the bill. There is nothing wrong with experimentation, if it is prudent and conducted under conditions of close control. In like vein the hon. member put forward the proposition that the government should give consideration to the feasibility and desirability of owning and operating a commercial bank, and that it consider the desirability of having one of our eight or nine chartered banks publicly owned. [DOT] (7:00 p.m.)
There is nothing rash or imprudent about that. Admittedly it would be a matter of experimentation. It certainly is in the public interest that we have a degree of experimentation in order to find out which innovations and which approaches are in fact the best ones and the ones most likely to be most beneficial so far as the public good is concerned.


Some hon. Members:: Seven o'clock.


Henry P. Latulippe: It is seven o'clock, Mr. Chairman.

March 20, 19S7
Bank Act


Some hon. Members:: Question.


Herman Maxwell Batten: Some hon. members are calling it seven o'clock. Perhaps I should remind the committee that last week when the house and committee did suspend sittings during this hour, this was done pursuant to an order of the house made on March 3. That order expired last Friday. Is the committee ready for the question?


Some hon. Members:: Question.


Colin Cameron: Mr. Chairman, I should like to move that we rise until eight o'clock.


George James McIlraith: Mr. Chairman, there was an understanding that we would rise from seven o'clock until eight o'clock. I think that is agreeable.
I wonder whether it might be agreed that the question be dealt with before seven o'clock.


Some hon. Members:: Agreed.


Edward Nasserden: Mr. Chairman, I have an inquiry for the minister before the question is put. Does he think that clause 72 weakens or strengthens the position of the Minister of Finance in the matter of influencing monetary policy.


Mitchell William Sharp: It strengthens; otherwise it would not have been proposed.
Amendment (Mr. Lambert) negatived: yeas 6, nays 43.


Herman Maxwell Batten: Shall clause 72 carry?


Henry P. Latulippe: No.
Progress reported.


Mr. Deputy Speaker:: Is it the understanding that the sitting of the house be suspended until eight o'clock?


Some hon. Members:: Agreed.


Mr. Deputy Speaker:: Perhaps the house would now agree to resume the business interrupted a few minutes ago in committee.


Some hon. Members:: Agreed.



[Stage Direction]
The house resumed consideration in committee of Bill No. C-222 respecting banks and banking-Mr. Sharp-Mr. Batten in the chair.
Herman Maxwell Batten: The committee will resume its work at eight o'clock.


SITTING SUSPENDED
[Stage Direction]
(Mr. Latulippe.]

[Stage Direction]
The committee resumed at 8 p.m.
Herman Maxwell Batten: When the committee rose shortly after seven o'clock clause 72 was being considered.


Henry P. Latulippe: Mr. Chairman, I wish to say a few words about clause 72 with regard to bank reserves, and then move an amendment.
When the Bank of Canada was established in 1934, a five-line section provided that the Bank of Canada had to maintain a reserve of at least 5 per cent of the value of deposit liabilities required in Canadian dollars. Following the 1944 decennial review, a 12 line paragraph said the same thing: "a 5 per cent reserve". Following the decennial review of 1954, the 5 per cent reserve rate was increased to 8 per cent in a section containing 37 lines. In 1967, after a decennial review which has lasted 13 years, since it is being made this year instead of in 1964, that same currency reserve takes up 97 lines and involves various types of rates for several kinds of deposits in the same banks. It is beyond understanding, Mr. Chairman.
The amendments of the 1934 and 1954 decennial reviews were very easy to understand, consisting of only a few lines and fixing the reserve at 5 per cent in one case and at 8 per cent, in the other. People could then understand something.
We now have a 12 per cent reserve, a 4 per cent reserve, another 8 per cent reserve and still another of 8 per cent, so many reserves that it is practically impossible to understand anything. I wonder why things have to be so complicated when it would be so easy to simplify them. It is practically incomprehensible. One must have a university degree to understand something and still, many with university degrees fail to understand anything.
The hon. member for Matapedia-Matane (Mr. Tremblay) said earlier that financiers or bankers who appeared before the committee on finance, trade and economic affairs should have given me a course in political economy or financial economy. I think that several members opposite would need such a course. I feel the hon. member for Matapedia-Matane himself has still something to learn, even though he is an economist, because he does not have a clue about the whole system.
As a matter of fact, the present system is so complicated that something should surely be changed. We do not have to accept such
March 20, 1967



situations and complications. We should explain those things as simply as possible. Whether it be a rate of 8, 5 or 10 per cent, we should know that it is a rate and only a figure. There is no need for ten figures to complicate the system. It is so complicated that even experts, such as the hon. member for Matapedia-Matane, find it difficult to understand. Many people should take these courses, because you can take my word for it, the more it goes, the more complicated it gets and the more difficult it is to understand. The population is being held in ignorance, people are prevented from understanding anything in all this and the whole truth is being hidden from the population of Canada, as far as financial affairs are concerned. And the great economists such as my hon. friend opposite, who are supposed to do something to enlighten the population, are doing everything they can to keep them in the depth of ignorance, the deepest in the country.
So, Mr. Chairman, I say to the hon. member for Matapedia-Matane you have responsibilities, and I am asking you to honour them, because the population will not long tolerate private preserves as in the past, it will not tolerate things the people should have known and that no one knows today.
Mr. Chairman, the same experts who have had classical education and taken university courses do not understand anything any longer; they do not know what to believe about cash reserves, about bank reserves; the more complicated it gets, the more confusing it becomes for the people who have no business understanding anything about this medley of bank acts, particularly when it is desirable to prove that the banks are not creating either money or credit.
So, Mr. Chairman, I move: That section 72 be deleted and the following substituted therefor:
"72. The bank shall maintain a cash reserve in the form of notes of, and deposits in Canadian currency with, the Bank of Canada.
Such reserve shall not be less than ten per cent of all its deposit liabilities in respect of all its depositors, for the first year of the present Act, and shall be raised by ten per cent each year, thereafter, until it becomes one hundred per cent of its deposit liabilities.
Such reserve shall be calculated on the monthly average of the bank deposit liabilities."
Mr. Chairman, by passing this amendment, we would allow chartered banks to finance private enterprise and enable the government to assume their responsibilities; we would enable the government to give the Bank of
Bank Act
Canada what it needs to assume its own responsibilities and then the Bank of Canada would finance public projects and with interest-free money. When we talk about interest-free money, we know that there are going to be administration costs, but we know that those administration costs, for instance, will not be like under the present system. Within the space of a dozen years, we have doubled the capital and this is nonsense.
When the hon. Minister of Finance and Receiver General (Mr. Sharp) says there will be administration costs, this will not change anything. The administration will not cost twice as much, if we know how to administer.
Therefore, Mr. Chairman, I move this amendment. I have copies of it here, if someone wishes to send them to the Chair. I read it a while ago, so I do not have to read it again.
[DOT] (8:10 p.m.)


Herman Maxwell Batten: It is moved by the hon. member for Compton-Frontenac that clause 72 be deleted and the following substituted therefor:
72. The bank shall maintain a cash reserve in the form of notes of, and deposits in Canadian currency with, the Bank of Canada.
Such reserves shall not be less than 10 per cent of all its deposit liabilities in respect of all its depositors, for the first year of the present act, and shall be raised by 10 per cent each year, thereafter, until it becomes 100 percent of its deposit liabilities.
Such reserve shall be calculated on the monthly average of the bank deposit liabilities.


Some hon. Members:: Question.


Herman Maxwell Batten: Is the committee ready for the question?


Raymond Langlois: Mr. Chairman-


An hon. Member:: Talk it out.


Raymond Langlois: I will not talk out the amendment of my own party.


Mr. Cole (Longueuil):: Are you going to speak for or against the amendment?


Raymond Langlois: Mr. Chairman, in the past I have seen, on the other side of the house, members of the party in power speak against the amendment presented. In the present case, however, the party to which I belong does not compel me to speak for or against an amendment; you may be sure of that. Since I have been elected to the House of Commons thanks to the good sense of my constituents, I am trying to act with

March 20, 1967
Bank Act
the same good sense. Sometimes, it is the reverse on the other side of the house. Indeed, we witness obvious inconsistencies. In any event, I state for the benefit of those who doubt it, that I favour the amendment.
The hon. member for Compton-Frontenac (Mr. Latulippe) has precisely suggested a simplification of the matter, and his amendment is, after all, rather simple, practical and logical.
If I am referring to it, it is because I understand it. I do not know exactly what the Minister of Finance has stated following a question put by the member for Fraser Valley (Mr. Patterson) on March 10, but he answered:

The minister said:
I have been trying for most of my adult life to understand Social Credit, I have not succeeded very well. But what has puzzled me even more is how anyone could accept these doctrines.
The hon. member for Cariboo spoke about that a few moments ago. I do not understand how the minister can condemn anything which he does not understand. Before approving or condemning something one should know what it is all about, if he does not wish to act in an irresponsible way. Sometimes I think that the minister has a tendency to do just that.
I also believe that ridicule is a way of hiding total ignorance. We have often seen it happen that when someone does not understand a principle or a doctrine he does the ostrich act and hides his head in the sand, or else ridicules it as a form of defence. In such a case what else can he expect but a kick in the posterior? The minister says he does not understand the Social Credit doctrine. If that is so, then obviously he also cannot accept it. Of course it is his privilege to reason that way but this is certainly not my way of thinking.
The hon. member for Compton-Frontenac moved an amendment whereby the bank shall maintain a 10 per cent reserve which shall be gradually raised by 10 per cent per year until its deposit liabilities become 100 per cent. By this process the operations of the bank would be restrained to a certain extent and a totally new credit would be created. Under the clause as it stands at present the bank can maintain 4 per cent to 8 per cent reserves in different sectors, which allows the chartered banks to give credit up to approximately $4 billion without requiring larger savings deposits.
LMr. JLanglois (M6gantic).]
Not too long ago, in 1965, I was called a prophet by the former minister of finance, the hon. member for Davenport. I made the prophecy, and I am still here, but he has changed his seat. My prophecy was made in May of 1965 and anybody who wishes can look it up and check it. At that time the minister lowered the reserves from 8 per cent to 7 per cent, thus allowing the chartered banks to extend loans up to the sum of $1,428 million. This prevented the government from restricting credit in May and early June of 1965. The government planned to have an election in the fall following which credit restrictions would be imposed. If the hon. member for Matapedia-Matane would care to look back to the time in 1965 he would see that there was an election on November 8, 1965 immediately followed by credit restrictions.
In the months of May, June and July the government even cut down expenditures on government construction in Montreal. It tightened the screws wherever it could. This measure gave the bank more power to operate for another two or three months without having to ask for a return on some of the loans it had made. The situation maintained itself until November when the election took place. There was no reason for the election because the government had not been overthrown at that time.
That is what I prophesied in May of 1965 and the former minister of finance called me a prophet. I did not want to be a prophet. All I did was to think logically on the basis of a system which had operated in the same way for the past 40 or 50 years. It will not change today. The present system is following a definite pattern. Some amendments or changes will have to be brought in before the situation can change. At present we live from one crisis to another. We have a high rate of unemployment, credit restrictions, and wide fluctuations in our economy. At one time we have a period of inflation and at another time a period of recession. Then, we have a boom period, but it is fairly short. Normally the country is alternating from one to the other. What is wrong, Mr. Chairman? I feel that we should try to look more deeply into the financial policies of the country. This Bill No. C-222, governs the financial policies of this country. The minister introduces this bill and when it is passed the financial institutions must operate according to its provisions. It will permit the financial institutions, the banking institutions of the country, to operate for
March 20, 1967

Bank Act
the next ten years. Before we can have another discussion of banking policies in Canada, we will have to wait until 1977.
[DOT] (8:20 p.m.)
I believe it is time we looked at this question. There is one aspect of this policy into which the government has not looked deeply enough. Last Friday one of our members made a speech concerning the public sector and private sector of our economy.

Mr. Chairman, there are two sides or rather two sectors in our economy; the private and the public sectors.
I might say to the hon. member for Mata-pedia-Matane (Mr. Tremblay) that I do not object in the least to the banks being allowed to charge interest on their loans. It is their privilege. By lending money they help and we must pay for goods and services.


René Tremblay: Would the hon. member permit a question?


Raymond Langlois: Certainly.


René Tremblay: Mr. Chairman, has the hon. member for Megantic (Mr. Langlois) calculated what interest rate chartered banks would have to ask the public if they were to keep reserves of 100 per cent, either in bank notes or in deposits with the central bank?


Raymond Langlois: They could operate like the caisse populaire. Let me say this to the hon. member for Matapedia-Matane (Mr. Tremblay): In fact, if chartered banks were to have non-usurious interest rate, a normal interest rate, from which the people of this country would not suffer, then if the bank did not manage, that would be the least of my worries.
In private enterprise, when things do not work out successfully, it is because the goods or services are useless.
Nowadays, the Canadian taxpayer or citizen has to go and kneel before the financial or banking institutions because their system does not allow him to live otherwise. That is where the problem lies.
If we had a system in which human beings are shown some respect, chartered banks could exist if there was need for them. They say themselves that they are private undertakings operated to make profits. If they did not make a profit, I am sure they would
be intelligent enough to close shop. And I would not be too unhappy about it.
However, there might be more competition than we have now. Why? Because the individual would not be caught by the throat, or constantly strangled. He could not be told: Go that way or else you're done for. That is what our present system does.
If we could choose between the private and the public sectors, but that is not possible.
I would say to the hon. member for Matapedia-Matane that if he planted potatoes in the school yard, he would be told: You, listen, your potatoes, your onions, your garden, they do not belong to you. As an individual, no, collectively, yes. Then, if you do not have the right to plant potatoes in the school yard, how is it that they have the right to take your savings, as an individual, to pay for a public undertaking? And charge interest to you for a thing belonging to the whole society.
Why not use what is a public property, a public credit, that is the Bank of Canada, to finance the public sector of the economy. I have no objection to private enterprise being financed by private credit or private banks, with interest, because the people have something to do with production.
There is a productive field and a non-productive field; the service sector which is the public field.
A highway produces nothing. It can help the private sector to produce more, but the highway itself produces nothing. After its construction, it starts to depreciate until it disappears completely.
Yet, when depreciation starts, interest begins on the other side of the balance. Ultimately we have a road which has no value at all but there is the capital to repay, and interest which multiplied, which doubled, tripled, depending on circumstances, during 20 or 30 years of payment.
The hon. member for Kamouraska (Mr. Dionne) quoted the example of the Jacques Cartier bridge which was built in that way. After a given amount had been paid for the construction of the Jacques Cartier bridge, it was again paid for in interest. There is still interest owing, as well as the cost of the whole bridge. And that is not a productive sector, it is a public service. Public affairs are financed by interest, capital and money taken from the private sector. Why does the

March 20, 1967
Bank Act
government, through the Bank of Canada, not finance school boards, which are also governments? Why does the Bank of Canada not finance municipal governments, provincial governments and all that comes under the jurisdiction of these governments, at all the different levels of economy, whether municipal, educational, provincial or federal?
There is a public sector, and it is as ridiculous to ask the private sector to finance public affairs as to ask the public sector to finance private enterprise. Let us distinguish between the two. We would at least then clip the wings of some financiers who profit at all levels.
At the moment, the federal government, which is a public body, has to finance itself by taxing the small private investors in the country. The economy of the country is now completely based upon the taxpayers, the small investor. He is the one who bears all the burden. The small worker has to bear the consequences of all that happens at different levels in the economic life of the country.
When the government borrows money on which interest has to be paid, it signs a debt for each Canadian citizen. That is not the way things should be; the system should not work like that.
Mr. Chairman, if the banks operate, fine. I have nothing against banks lending money. What I hold against the hon. minister and the government is that they give these chartered banks almost unlimited powers, greater even than those of the government itself. But why? Why give this group of nine chartered banks and their directors complete control over our economy?
[English1
We cannot permit these conditions to continue. If they are given the green light they can go, but if there is a red light you can stop them for as long as you desire.
[DOT] (8:30 p.m.)
The amendment introduced by the hon. member for Compton-Frontenac seeks to raise by 100 per cent the reserves of the chartered banks. This seems to be the principle adopted by the credit unions, though they espouse only 50 per cent, and charge the public a reasonable interest rate. At the moment the banks do not only lend the money they have, but they also create money.
In 1936 the government of the day prohibited the banks from making their own paper money and the Bank of Canada was given the

sole right to issue currency. There is in circulation $3 billion and there is a purchasing power of $21 billion. How do we account for this difference of $18 billion when there has only been minted or printed $3 billion?
The minister admitted in committee that the chartered banks were given certain privileges in order to create credit. This is what I am opposed to. This is the prerogative of the Bank of Canada. The task of every member of this house is not to place more power in the hands of the private institutions, the affairs of which the people do not control. The government is responsible for the fiscal and monetary policies of Canada. If it does not control monetary policy it will place into the hands of private organizations the control of the economy of this country, which is what I am objecting to. The minister knows that this is not to the advantage of the Canadian people. The bankers themselves admitted in committee that they were profit making institutions, and not operating purely to the advantage of the Canadian people. In such circumstances how can you place the total economy in the hands of private institutions which are working for their own benefit?
We ask these questions of the minister but do not receive the answers. He says that he cannot control this situation. Why does the minister not admit that it is the banks that control the situation? Because this bill will give them that control. This house will not consider any further revision for another ten years, and if we do not take action today we will be in exactly the same position in ten years time.
I do not agree with the suggestion that the banks are in financial straits. A visit to any town will reveal that in the best located part is to be found a chartered bank. Take for example the present Bank of Canada building, the bank of the Canadian people, and compare it with the Royal Bank on Sparks Street. Prosperity shows. Let us look at the fantastic size of the chartered banks.
The hon. member for Compton-Frontenac talked of hidden inner reserves. There are six or seven different kinds of inner reserves which the banks are not obliged to call upon. How many Canadian private institutions are privileged to the point that that they can hide from the government and the income tax department different kinds of inner reserves? Why are they granted this privilege? Why should we grant that privilege? In comparison they are a mere handful of people. The
March 20, 1967

Minister of Trade and Commerce could probably tell us about this because he was in the banking business himself.
If we confer upon these institutions further privileges by this bill, it may be good for business but it is not necessarily good for the people. We are not here to confer favours upon little individual businesses. We are here to tend the welfare of the people and to see they get action from the government. The job of the government is to produce the results that the Canadian people expect. If we require a better distribution of goods we will achieve it if we eliminate some of the controls in Bill No. C-222. But if the government maintains their ostrich-like position of putting their head in the sand and leaving their posteriors sticking out, in another ten years we will be faced with a system that as far as I am concerned has produced swings in the economy from recession all the way through to inflation.
I suggest that the minister take a close look at the situation and consider the amendment moved by the hon. member for Compton-Frontenac limiting the powers of the chartered banks in the financial field. They should not be allowed to create credit and charge interest on that credit. This is within the province of the Canadian government, and if the government does not control the economy it can start to take measures to gain control. This would be one of the measures they should take. Therefore I hope the minister will consider carefully the proposition put forward by the hon. member for Compton-Frontenac.


Colin Cameron: Mr. Chairman, it is not very often that we have a really brilliant new idea but I think we have one here, if only we can make it work. May I just read the amendment so that we know what we are doing:

The bank shall maintain a cash reserve in the form of notes of, and deposits in Canadian currency with, the Bank of Canada.
Such reserves shall not be less than 10 per cent of all its deposit liabilities in respect of all its depositors, for the first year of the present act, and shall be raised by 10 per cent each year, thereafter, until it becomes 100 per cent of its deposit liabilities.
Such reserve shall be calculated on the monthly average of the bank deposit liabilities.

If I can translate that correctly-I might point out that I have only the French copy-
Bank Act
this is a really brilliant idea. We will get the chartered banks to undertake the job of collecting the savings of the Canadian people in the form of deposits and then make them hand them over to the central bank-a very sound idea. They collect the money and the central bank will lend it.
The only question in my mind is whether the chartered banks would go along with us on this score. They might all go broke, in which case I suppose we would take them over; and in that event we might get all of the 5,000 branches they have across the country at fire sale prices. But I doubt whether the government would go along with this. In fact, I doubt whether the Social Crediters will accept it, because I understand that they are great upholders of free enterprise and do not believe in government-owned banks. That is what I have been told a great many times.
This, Mr. Chairman, is really what the amendment means. We will ask the chartered banks to continue their task of collecting the savings of the Canadian people-savings upon which all advance in the economy must be based-and hand them over to our central bank, and the central bank will then lend the money.
[DOT] (8:40 p.m.)
That is a very sound idea, I think, if we could make it work. I notice that we have a representative of the Canadian Bankers Association in the gallery. I suggest to my hon. friend from Megantic that he go up and consult him, and see whether he can sell this idea to the chartered banks. Then all our troubles would be over.


David Réal Caouette: Mr. Chairman, I think the hon. member who has just resumed his seat would have done better by remaining seated instead of rising to talk such nonsense. The amendment moved by the hon. member for Compton-Frontenac (Mr. Latulippe) does not mean that the chartered banks should place on deposit with the Bank of Canada the savings they receive; it is not that at all. They could, like the caisses populaires and the credit unions of western Canada, lend on what they have in cash. That is what is meant by a 100 per cent reserve. If the Bank of Canada is empowered to multiply the money according to Canada's needs or to create money in this country, this does not mean that the chartered banks will disappear, but that any new credit will come from the

March 20, 1967
Bank Act
Bank of Canada, which is the financial institution of the Canadian people. Once that money is in circulation, people do not keep it in their pockets; they place it on deposit in chartered banks, caisses populaires or savings banks. That is quite natural and the hon. member who has just resumed his seat does not need to have set the world on fire to understand that, or he will never understand anything in his life.
The Creditistes never suggested for a single moment, that the chartered banks should disappear. We suggest that chartered banks use what they have in their drawers. As the hon. member for Lapointe rightly said this afternoon, under this amendment to Bill No. C-222, and as soon as this legislation is passed, the chartered banks will have the right to issue $4 billion in additional credit, without having one dollar more in deposits. It seems to me that the socialist member who has been preaching against finance for 25 years, should know that by now. Is it realized, Mr. Chairman, that $4 billion loaned at 7 per cent, under the new rate, means that which we are placing in the hands of Canadian chartered banks $280 million a year in interest alone?


An hon. Member:: Would you allow me a question?


David Réal Caouette: Certainly, Mr. Chairman. [English]


Colin Cameron: Would the hon. member permit a question? My French, as the hon. member may realize, is defective. Perhaps he would translate these words for me. Do these words, "jusqu'a ce qu'elle soit de 100 p. 100 de pas-sif-depots" not mean, "until it is 100 per cent of deposit liabilities"?


David Réal Caouette: Yes, but it is not necessary for the bankers to deposit those reserves with the Bank of Canada. They have only to do what the caisses populaires and the credit unions in the hon. member's own province are doing. They do not ask the Bank of Canada to receive deposits from the public; not at all. We do not want to make laws to suit only the chartered banks, to support the creation of credit for the benefit of only a few individuals in our country. That is what we are up against, and that is what we are fighting. We are not asking the chartered banks to take deposits away from other banks and put them in the Bank of Canada. What would be the use of that?
[Mr. Caouette.l
We admit that the chartered banks have a role to play in our economy, and they will play it notwithstanding that they have 100 per cent reserves behind their loans, as we suggest in this amendment. That is what we mean, and nothing else.

Mr. Chairman, the hon. member is showing me that the representative from the Canadian Bankers' Association is in the gallery. I do not know where he is or who he is and I do not care either if he is a director, president or vice president. I am the representative of the electors of Villeneuve; I was elected to defend their interests here, to fight a financial system which crushes everyone, because even the government is not free to do as it pleases.
The power which the banks would have, as soon as this bill is passed, to create $4 billion more in credit, without increasing their deposits by a penny, and to lend it at 7 per cent to the federal government, would mean that the latter would pay $280 million per year in interest alone. Let us say that it is the whole banking system which would accept to lend $4 billion because it is not only the National Canadian Bank, the Provincial Bank, the Royal Bank and the Bank of Montreal. Together they would have the right to lend $4 billion in new credit. It is expansion, not creation. Expansion at 7 per cent; $280 million in interest annually. To the eight Canadian chartered banks, this would mean an additional $35 million a year. Not bad, and by simply providing that from now on total reserves will be 6.6 per cent instead of 8 per cent, instead of 12 per cent.
[DOT] (8:50 p.m.)
Mr. Chairman, that is the kind of control they would get out of the interest alone, each bank becoming a millionaire over a period of about four months, according to the terms the house is asked to include in Bill C-222.
Mr. Chairman, the amendment moved by the hon. member for Compton-Frontenac states that reserves shall be 10 per cent of deposits for the first year and shall be raised 10 per cent each year for ten years until it becomes 100 per cent of loans made. As I said a moment ago, if new credit is issued by the Bank of Canada, it does not remain as cash in the pockets of citizens but is deposited at the bank which can use the deposits, as do caisses populaires, to make loans to private enterprise, to individuals, to small borrowers. The chartered batiks can do exactly as caisses populaires do, and I do not think it
March 20, 1967

Bank Act
would affect the banks to any great extent. However, they would lose control over the issuance of credit, over the money supply and credit, because actually this control is in the hands of chartered banks, even if we are told that it is exercised by the Bank of Canada. It is definitely not, for the only function of the Bank of Canada is to cater to the branches of Canadian chartered banks. That is the function of the Bank of Canada. And nobody can tell me that the inspector of the Bank of Canada has the power to dictate to chartered banks, because that is not true. And I dare the Minister of Finance to say otherwise. Chartered banks have absolute control over all credit in Canada. The only function of the Bank of Canada is to wait on the chartered banks. As a matter of fact, we saw it in the committee. Officials of the Bank of Canada were careful not to contradict the Bankers' Association and representatives of the latter were careful not to contradict officials of the Bank of Canada.
Meanwhile, we do not know whether we are coming or going, so many whopping lies and all sorts of insults are being thrown at us. Why? To save the system. Care must be taken not to make the system known to the general public. The general public must be kept in the dark as far as big business is concerned. This is why, when we speak about Social Credit, the old political parties take turns raving against Utopians, dreamers, preachers of obscure and foggy concepts.


An hon. Member:: Hear, hear.


David Réal Caouette: Mr. Chairman, there goes a bright boy, shouting: "Hear, hear." What does he know about the present system. Nothing. What does he know about Social Credit? Nothing. But during the election campaign they wandered throughout Canada saying, "Social Credit is dangerous. Where has it been applied? It has never been applied anywhere". A very good reason indeed to continue to be victimized by the present financial system.
Mr. Chairman, everybody feels the effects of that system, when we suggest to the Minister of Finance to include in clause 72 of his bill the bank reserves which we are asking, to use the Bank of Canada to finance provinces, municipalities and school boards, we get nowhere. There is no doubt about it we are in a bad way.
Recently, the budget of the province of Quebec upped the sales tax from 6 to 8 per cent. Other items were increased to raise the
provincial budget from $140 to $150 million. The Quebec premier was asked: "Have you any other alternative than the increase of the sales tax to 8 per cent? He answered "We had no choice. We had to increase those taxes."
When income tax was increased here to raise old age security from $120 to $240 per year, the Minister of Finance stated: "We have no other alternative. To increase old age pensions, we have to get it out of all the taxpayers' pockets." Well, now-
Same answer at the provincial, municipal and federal levels as well as from school boards. And the system is still grinding away.
Mr. Chairman, have we not had enough of these government's financial acrobatics? The minister told us the other day that we have enough money. We have a lot of money. I never heard him say that we lacked money. But when we ask him something for the provinces, then there is no money left.
When there are federal-provincial conferences in Ottawa, and the federal Minister of Finance, the Prime Minister (Mr. Pearson), the deacons, the sub-deacons, besides this, are all in conference, what is being discussed? The possibility to give something to the provinces? No. They quibble about which of the two will be the first to dig into everybody's pocket. That is the major purpose of the federal-provincial conferences.
When the provinces ask for money, the Minister of Finance says to them: We have no money, we do not create any, we do not make any, we have no other alternative but to borrow and to tax.
Then the premier of Quebec blames Ottawa for having to increase taxes in his province at this time. If Ottawa gave us what we are entitled to, we would not have to increase taxes. All we hear is this: If Ottawa gave us what belongs to us, if Ottawa minded its own business, if Ottawa did this, if Ottawa did that.
Why does the Quebec government say that? Because it would have liked to see the federal government increase taxes instead of the provincial government, increase equalization payments in order to enable the province to finance itself and putting the blame concerning taxes on the federal government. You can understand that, it is as plain as that.


Raynald Joseph Albert Guay: It is true.


David Réal Caouette: Of course it is true. But because the federal government does not want to shoulder the burden of a tax increase, then

March 20, 1967
Bank Act
the province has to go ahead in order to repay the loans made by the former government, and the one before that, the loans made in New York, in Washington, in Boston, in Belgium, in Switzerland, in France, throughout the world; a reimbursement has to be made even to British Columbia; a hundred million dollars to British Columbia.
Mr. Chairman, as the federal government does not want to increase taxes for fear of losing its prestige, the provincial government has no other alternative but to levy more taxes; to save face it has to denounce the federal government. "It is Ottawa's fault if we are compelled to increase the sales tax, if we have to increase the income tax," even if the income tax will be lower in the province, because there are exemptions of $2,000 for single people and of $4,000 for a couple.
My good friend, the hon. member for Chapleau (Mr. Laprise), has nine children. He is a remarkable father. He is entitled to an exemption of $4,000, on provincial taxation, according to the new budget. On the other hand, his $300 exemption per child is taken from him. For nine children the exemption was $2,700. Now, it is gone.


Mitchell William Sharp: On a point of order, Mr. Chairman. I am very interested in the remarks of the hon. member but do you not think they might be more closely related to the clause under discussion?


Jean-Thomas Richard: I am
aware that some of what has been said by those who have spoken today has been more or less irrelevant. They have taken the opportunity to speak in this debate to discuss many of the problems involved in the finances of municipalities and the relations between the provinces and the federal government, as well as their pet policies and party doctrines. I would ask the hon. member for Villeneuve, who always understands the interest of the Chair in keeping the debate in line, to refer his comments to clause 72. I believe he has made his point very clearly, as he always does, and I am sure that other hon. members of the house, like myself, appreciate what he is trying to say.


David Réal Caouette: Mr. Chairman, I thank you for your kindness and I shall limit myself to clause 72 and the amendment moved by my colleague from Compton-Frontenac (Mr. Latulippe).
[Mr. Caouette.l
I still believe that the whole thing is related to the conditions under clause 72 of bill C-222, since these same conditions allow for the expansion of credit, or the creation of credit in Canada and this very expansion enables the Minister of Finance to tell the provinces: "We have no money to give you, none to lend you, we cannot afford it; you go ahead but tax your own people yourselves".
Mr. Chairman, this is simply an economic machinery in which we are living, precisely and directly linked with the reserves which chartered banks are supposed to keep in the Bank of Canada for credit expansion.
[DOT] (9:00 p.m.)
I have something here that directly pertains to clause 72, that is the report of the Carter royal commission on taxation; in the last paragraph of page 2 it is said:
Creating money.
This paragraph has to do with bank reserves.
-The government can simply create money and use this money to outbid private citizens for the resources it needs.
-As we shall show later, the creation of money has an important role to play in the achievement of economic objectives;
The heading is "Creating money", not "The expansion of money" nor "Inflation of money". I read on:
-the creation of money has an important role to play in the achievement of economic objectives; but-
And this is most interesting:
-if practised when all our resources are productively employed, increasing the money supply more rapidly than national output expands can bring about a rapid increase in the general level of prices.
I see that my good friend, the hon. member for Matapedia-Matane (Mr. Tremblay) is happy, proud that I quote these excerpts. But the Carter report rightly says:
-increasing the money supply more rapidly than national output extends.
But if there is balance between the money supply and the national output, is there a risk of inflation?
Today, the reverse is happening. The money supply is not sufficient to permit the normal distribution of the output; such is the problem now. It is not a problem of output but of distribution. Distribution is precisely linked to clause 72, as worded in Bill C-222.
The member for Matapedia-Matane may deny whatever he wants, tout let him visit
March 20, 1967

with me any part of Canada, any area, whether it be Quebec, Amqui, Causapscal, in his own region, Trois-Rivieres, as well as Montreal; he will see enormous store inventories and special Easter sales everywhere. No store is afraid to be short of goods the next day, and the member for Matapedia-Matane is not afraid either to find himself deprived.
He knows that if he wants a suit, a hat, or food, there is plenty of all that in every store. On the other hand, he knows that a great number of Canadians do not have the purchasing power to buy from the stores the products they need. The case of production is solved in Canada. There is no Canadian production problems. The real problem is distribution, and distribution is precisely what the Creditistes are battling for because we believe that it is very badly organized.
When a distribution system similar to the present taxation system increases taxes, takes money away from some people to give it to others who do not have any, it does not increase the general or global purchasing power in Canada, it takes from those who have a little without giving much to those who do not have anything. In my opinion, that increases the number of poor people and reduces the number of those who can live better.
Mr. Chairman, that is not a solution. The solution lies in the equilibrium which must exist between the true production of goods and services and the purchasing power in the hands of consumers. When the consumers have the purchasing power, there is no need to worry, demand follows and the products are taken up by consumption. That is what the Creditistes have been advocating for 35 years. The Minister of Finance and Receiver General (Mr. Sharp) has failed to understand that yet. He might never understand it. However, we have at least the satisfaction of explaining to him what we believe in, what we really believe to be in the best interest of the Canadian people, not in the interest of a small group of men in Canada who control everything. No. Of the people who are building up Canada.
Mr. Chairman, Lincoln said:
Credit and the expansion of credit control the whole economic life of the United States.
It is impossible to have prosperity by discouraging initiative. Initiative is discouraged with a government fiscal and taxation system. It is impossible to strengthen the weak by weakening the strong.
Bank Act
Destroying what is good will not improve the lot of those who live in shacks for instance. It is possible in Canada to give everyone decent and healthy housing.
Let us go then. Let us build something in adapting our monetary system directly to the physical possibilities we have. "You cannot help the poor by destroying the rich." Lincoln said it. "You cannot avoid trouble when you spend more than your income." That is still true, Mr. Chairman.
"You cannot build lasting security on borrowed money." The Minister of Finance should consider that for a few hours before retiring tonight. Sleep on it. The next day he would introduce a logical amendment to the Bank Act.
"You cannot form character and build up courage by depriving a man of his initiative and his self-respect." There is no one like the Creditistes to preach respect for initiative and self-respect of the individual, of the human being. You cannot help men indefinitely by doing for them what they could and should do for themselves. But they must be helped and encouraged to do what they can and should do for themselves. You cannot uplift the employee by crushing the employer. You cannot uplift the little man by bringing down the big ones.
What Lincoln said at that time, Mr. Chairman, is as true to day as it was then, over a hundred years ago. That is why we are saying: Instead of trying as we always do in this house, and throughout Canada, instead of trying to tame men, women and children according to the whims of the financial system, let us once and for all, tame the financial system and make it serve the human beings which make up Canada, a Canada which, in the end, must bring security with freedom to each and every one of its citizens.
Mr. Chairman, that is the perspective in which we see the possibility and the urgency of amending the financial system, not in order to set one class against another or to make some people hate each other, but to create a united Canada, where Canadians feel at home and will always feel at home, where they will acquire financial independence through their bank which we call the Bank of Canada.


Gilles Grégoire: Mr. Chairman, I should like to say a few words on the clause and the amendment now before the house.
In clause 72, we have obviously reached the core of the problem and the very heart of our Canadian monetary system. Clause 72 fixes

March 20, 1967
Bank Act
the bank reserves, the legal reserves which the chartered banks must maintain in their regular operations. An average of 6.6 per cent is fixed, starting with 12 per cent for demand deposits and 4 per cent for notice deposits.
Mr. Chairman, it is precisely this bank reserve fixed at a certain level which allows the chartered banks to use their reserves, which are legal, and then to multiply them by 12J under the former system and by 15 under the new one. And by that multiplication, banks create credit.
[DOT] (9:10 p.m.)
What we ask, Mr. Chairman, and what we have been straining to ask for some ten days, during consideration of the Bank of Canada Act, and again today during consideration of the Bank Act, is that credit be created by the Bank of Canada rather than by the chartered banks. This afternoon someone quoted the following statement made by the parliamentary secretary to the Minister of Finance and Receiver General (Mr. Chretien):
Money does not grow on trees. It must be obtained either as taxes from taxpayers, or as loans.
Those are the only two methods found by the parliamentary secretary to the Minister of Finance and Receiver General when it comes to formulating the budget of the government: to take money, either as taxes out of the pockets of the public, or as loans.
Well, Mr. Chairman, this afternoon I heard the hon. member for Villeneuve (Mr. Caouette) say a very clear sentence, which is a very good illustration of the problem, and I wonder whether the parliamentary secretary to the Minister of Finance and Receiver General, by recalling this, or at least by having recalled to him what happened at the beginning of the war, will not realize that there are other monetary sources. That is what happened when the war broke out in 1939.
They are certainly not going to make us believe, Mr. Chairman, that when the Canadian government wanted to finance a war, which cost it about $14 billion, it got that kind of money from the pockets of Canadian citizens. No there was no money in there. Canadians certainly did not have the $14 billion required to finance the war.
In the United States, the situation was no better. The beginning of the war was for them the end of a depression. There was no more money in the United States to finance everything that the Americans spent during the 1939-45 war than there was in Canada
[Mr. Gregoire.l
before the war. Therefore we could not have borrow it or find it somewhere else to wage States since the Americans themselves had to borrow it or find it somewhere else to wage their war.
We could not borrow it either from France or Italy or Germany or England; on the contrary, we were lending money to England. We were able to find money during the war, which was quite a feat, and yet when war began, the government was dead broke, as well as the provinces, the municipalities, and the school boards, and Canadian citizens were in the midst of an economic crisis, they lived on relief with meager amounts which barely allowed them to exist.
Suddenly, overnight, a madman in Europe declared war; Canada found money to buy cannons, cannon balls, planes, warships; it found some more to lend England billions of dollars during the six years the war lasted. Suddenly money was found, not in the pockets of the Canadian people, because they did not have any money, they were dead broke.
Therefore, Canadian citizens did not pay for the 1939-45 war, nor for the loans to England, with their taxes. No, and we could not borrow from the United States or England since we were lending them money, nor from Germany or Italy. So where did we get it? How is it that during a period of depression, from 1929 to 1939, during ten years, the government allowed itself to let all the people of Canada in misery and, suddenly, when war was declared, the funds needed were found? There was always money to finance the war and it was never necessary to do it on finance. I have never heard of a Canadian airman dropping bombs on Germany and then sending the bill to the finance company saying that he had 24 months to pay. Indeed, bombs were not paid through finance companies but were dropped free of charge on the Germans. They just got them, nothing more. Money was found for all kinds of things, whereas money was scarce during the depression.
People rightly complain nowadays about the difficult housing situation. I heard an N.D.P. member, the hon. member for Dan-forth (Mr. Scott) move this afternoon the adjournment of the house in order to discuss an important problem, namely the housing shortage in Canada. The Conservatives supported the motion and I did too. Everybody admits, including the Liberals, that there is a housing shortage. There is no money, as during the 1929-39 depression, when no money could be found for public works, for hospital and road
March 20, 1967

building. When the war came, all the required money was found to make all cannons, bombs, planes and submarines needed. And now, there is-


Jean-Thomas Richard: Order, please. Would the hon. member for Lapointe please return to the subject of the amendment? He started off well by dealing with the amendment concerning the "currency reserve in the form of bank notes and deposits in Canadian money-


Gilles Grégoire: Precisely, Mr. Chairman, I said so at the outset. It is that reserve and the interaction of reserves which enable banks to create money. We maintain that banks create money, but that they do not create it according to the needs of the country. They create it with flair, with feeling and perhaps a little judgment, but that is not too sure. Since the minister is not sure, we cannot be either. Then, I am referring precisely to that section which deals with the creation of credit, and I was saying that chartered banks whose role and duty today is to create credit, are not doing it as they should, since even though they control credit creation, they are not successful in settling our credit and money problems.
That is my point and it is precisely because banks perform badly the duty assigned to them under the Bank Act, that we want that duty to be taken away from them and entrusted to the Bank of Canada which should perform it much better than chartered banks have done. That is why I say that chartered banks which during the 1929-39 depression had the same powers as today, have perfomed their duty so badly during the depression that they have maintained the Canadian people in poverty. But when a war breaks out, then they are forced to play their part. Then all of a sudden they made a decision-if it is a question of manufacturing lethal instruments-they decide to fill accurately the part they are entrusted with, under clause 72 of Bill No. C-222, and during the war, they put money into circulation, in great quantity, to destroy their fellow men.
Then when peace is restored and a constitutional crisis arises much as the one we are witnessing at the present time. The chartered banks are not playing the part assigned to them, under clause 72, namely that of creating credit. They do not create the credit that is necessary to enable the building industry to pick up again, and that is why we are going through a stagnation period. It is not only in
Bank Act
the building industry. I have here Mr. Chairman, an article, which proves precisely what I am saying, namely that chartered banks do not play the part assigned to them, under section 72 of Bill C-222. Here is the title of the article: "300,000 Montrealers want to have their place in the sun." Mr. Chairman, the hon. member for Levis may joke, but in fact, in his own constituency of Levis, there are also people calling for their place in the sun, who would like not only to exist but to live, who do not want to be satisfied any more with a mere pittance such as is allowed them by the government at the present time, but who would like to have more than that.


Jean-Thomas Richard: Order. The hon. member for Lapointe heard me, a while ago, asking him to come back to the amendment to section 72. I am therefore asking him to come back to the subject before us.
[DOT] (9:20 p.m.)


Gilles Grégoire: Mr. Chairman, that is exactly the point I am on. The amendment asks that chartered banks stop creating credit, that the Bank of Canada do so instead. Why do we ask that? I told you a moment ago; it is because we realize that chartered banks have failed as creators of credit and we think that the Bank of Canada could do better.
I was precisely trying to prove that chartered banks have been remiss in their duties and have allowed Canadians to live in extreme poverty. I was saying that the hon. member for Levis (Mr. Guay) may joke about it, but let him try and explain to his constituents the building situation now, in Levis as elsewhere, where all companies stop making loans, banks cannot advance money for loans on mortgage. The building industry is going through a crisis seldom matched since 1867.
The hon. member for Levis may joke but this is not a laughing matter. Things are really serious. The hon. member for Levis may joke behind the curtains but he never rises, for instance, to say something worth while to protect the interests of his constituents in the house. He is one of those members who keep silent, who never speak except to joke behind the curtains, who is afraid to express his opinion on the crisis in the building industry. [Sundry noises]


Jean-Thomas Richard: Order. I would ask the hon. member to allow the hon. member for Lapointe (Mr. Gregoire) to continue his speech. Once again, I would remind the hon. member for Lapointe who is quite

March 20, 1967
Bank Act
experienced in this house that he surely knows he is departing from the rules and that he could keep some of his remarks for another time. He should deal at the moment with the reserve mentioned in clause 72.


David Réal Caouette: Mr. Chairman, I rise on a point of order. I think you are right to call the hon. member for Lapointe (Mr. Gregoire) back to clause 72 of Bill No. C-222. Only, does the hon. member for Levis (Mr. Guay), sitting behind the curtains, have the right to grumble all the time, to interrupt all the time and to try to annoy the hon. member for Lapointe? And yet he knows that he cannot faze him.


Jean-Thomas Richard: agree with what the hon. member for Vil-leneuve (Mr. Caouette) has just said, and I have even asked the hon. members to allow-order, please-the member who now has the floor, the hon. member for Lapointe, to finish his speech without interruptions. I might add that I have been sitting in this chair for quite some time, and I think we would have finished dealing with many clauses already, had there been no interruptions.


Gilles Grégoire: Mr. Chairman, I thank you for calling the hon. member for Levis to order. I forgive him, Mr. Chairman, because I imagine he must be frustrated-


Jean-Thomas Richard: would ask the hon. member for Lapointe not to go astray, once again, because he only has a few minutes left and I would like to learn something about clause 72.
Mr Gregoire: Mr. Chairman, I would be only too happy to enlighten you, but I could not teach the hon. member for Levis anything because he does not want to learn.


Raynald Joseph Albert Guay: Not your brand of learning anyway.


Gilles Grégoire: More interruptions, Mr. Chairman. You can see he does not care one bit about the rules or your authority. That stems from the frustration of never being able to speak in the house, and if it can be any consolation, if it can simmer him down-


Jean-Thomas Richard: Order. I would ask the hon. member for Lapointe, who has enough experience here to know that nobody questions his ability to talk, to carry on with his speech and refrain from looking at the hon. member for Levis.
[The Acting Chairman (Mr. Richard).]


Gilles Grégoire: I should not do so very long, Mr. Chairman, because it is not worth it. I was on clause 72, more particularly on the amendment dealing with transferring the power of creating credit from chartered banks to the Bank of Canada. I think this should be done because, considering the way chartered banks have abused this privilege granted to them under clause 72, it must be taken away from them.
The purpose of the amendment is to put back in the hands of the Bank of Canada the privilege to create credit. Everybody knows that chartered banks do create credit today; everybody knows also that they make poor use of this privilege because, they have not met in the monetary field the needs of Canadian citizens.
It should be noted that at the hands of chartered banks, this privilege to create credit is far from reaching its goal. And after all, what is the aim of credit? The purpose of a monetary system is to allow citizens of a country to enjoy what they produce and their natural resources. Here, in Canada, it cannot be said, in the framework of the present system, that our citizens can take advantage of their natural resources, or of their productivity.
When we say, Mr. Chairman, that the chartered banks, having the privilege to create credit according to clause 72, do not even know how to use it to assist consumption, and that when a Canadian citizen must buy something on the instalment plan, whether because of the price or because that an article retains a certain value for a long time, like a house or an automobile, Canadian citizens are not able to apply to the chartered banks, or at least, very seldom, they must instead use the finance companies where the interest rates are much higher. And in return, these companies will be financed by the chartered banks which will simply endorse the bills of the purchasers of cars or furniture. But then, the consumer will have to pay a very high interest rate whereas if he could simply have dealt with the creator of the credit he could have taken advantage of it at a much lower interest rate.
Mr. Chairman, this is the purpose of the amendment: to take away from the chartered banks a privilege which they used badly in the past. And the advantages that would accrue to Canada, if the creation of the credit were passed on to the Bank of Canada: first, the Bank of Canada would do all the public financing interest free, because the Bank of
March 20, 1967

Canada does not aim at profits, whereas this is one of the goals of the chartered banks.
The objective of the Bank of Canada is to serve the country, not to make profits, whereas the chartered banks aim at profits. They charge high interest to grant loans to the municipalities, the federal and the provincial governments, and these interests that these different governments must pay every year represent too great a part of the governments' estimates.
Mr. Chairman, let me give you an example of what would happen if the creation of credit were entrusted to the Bank of Canada instead of the chartered banks. It was calculated that in 1966, the latter created credit to the tune of almost $1,900,000,000 and that credit was new credit.
Mr. Chairman, calculations were made to see what it would represent in Quebec if some day the Bank of Quebec were to create credit for the province of Quebec. Basing ourselves on the principle that Quebec would not benefit from an increase of $1,900 million, which amount was for the whole of Canada, but merely on 28 per cent, namely $500 million per year, the increase in credit if those $500 million were loaned without interest for a term of 25 years, to be reimbursed at the rate of so much a year, $20 million a year during 25 years, well, Mr. Chairman, if one figures out the increase that would represent each year at an annual economic growth rate of 5 per cent a year, with reimbursements without interest from municipalities, or school boards or the Quebec government itself, without interest; if all that were taken into account, after 12 years, the Bank of Quebec could loan each year, without interest, for public development, an amount of $3,225 million, which represents almost twice the overall economic growth in Canada at the present time.
Well, Mr. Chairman, if that holds good for Quebec, I cannot see why it should not apply to the whole of Canada. Personally, I figured it out according to the Quebec level. One can see the continuous increase involved in this endeavour to favour economic growth or public development, without charging a single cent of interest to the budgets of the municipalities, the schools or the province of Quebec itself.
[DOT] (9:30 p.m.)
Well, if such an increase can be possible in the single state of Quebec, you can imagine, Mr. Chairman, what this would represent for
Bank Act
Canada as a whole. The point is to effect a simple change in clause 72 of the Bank of Canada Act: not to leave in the hands of the chartered banks the creation of credit, but to vest it into the hands of the Bank of Canada.
The question is to amend the clause and not to ask the chartered banks always to keep $100 in legal tender, when they have to make loans amounting to $100 or when they receive a deposit of $100, it is a matter of asking them to operate on the same basis, according to the same regulations and subject to the same privileges and to the same rights nothing more than what the savings banks are doing at the present time. We shall study somewhat later the bill concerning the savings banks, as well as the caisses populates, the credit unions and the trust companies.
And if chartered banks were placed on an equal footing with those other economic institutions, well then, they would no longer over a year, create a single cent of credit, but this would be done by the Bank of Canada. And this was very ably expressed by a member of the New Democratic Party this afternoon; whether the money comes from the Bank of Canada or the chartered banks, provided it comes in equal quantity, the monetary supply will not be increased, nor inflation be produced; however, this will provide for the budgets of the municipalities or any other level of government some savings equivalent to the interests that these various departments of the government must pay each year.
And when one considers the tremendous amounts that must be spent by the various governments only for interests on their debts, well, Mr. Chairman, one can reflect that a whole portion of our economic growth escapes from us, escapes from the citizen. And who will benefit by this? Some bankers. And this is what we object to.
We know that precisely because the chartered banks are the institutions entitled to control credit according to clause 72, the federal government pays in interest on its debt each year the amount of $1 billion. This year, the government will pay $1,273 or $1,283 million, and next year the amount will be even larger, since the interest increases each year.
After our election in 1962, in one of my first speeches in this house, I tried to point out that the amount of interests we were paying on Canada's debt was astronomical. During

March 20, 1967
Bank Act
my first year of office as member of the house, when I saw the astronomical amount that we were paying in 1962 in interests only, I was completely astounded. And then, I believe that the amount was of the order of $770 or $775 million.
Well, Mr. Chairman, in five years, that is one year with the Conservatives and four with the Liberals, the interest on the national debt increased by $500 million. These last five years, the interest on the debt has risen at a rate of $100 million per year, that is more than any other item in the federal budget.
Mr. Chairman, we have today the opportunity of putting an end to all that by amending clause 72 of Bill C-222 and, as suggested by the hon. member for Compton-Frontenac (Mr. Latulippe), of withdrawing from the chartered banks the privilege of creating money and putting it into the hands of the Bank of Canada which, in turn, will grant interest-free loans to the federal government, the provinces, the municipalities and school boards. I see that a member is willing to support that right away. He should rise and support the amendment. We are happy to see that at least one member has seen the light, namely the hon. member for Bona-venture (Mr. Bechard). I see him only when he comes in my corner to mumble; otherwise he never speaks, except perhaps to read, from time to time, figures and question numbers.
So, Mr. Chairman, for the reasons I just explained, I say that the amendment is highly justified, that it will ensure enormous benefits to the various levels of government in the balancing of their budgets as well as considerable advantage for the economic growth of the Canadian people, and that is what we all wish after all.
Consequently I ask why the Minister of Finance would not accept the proposed amendment, after all the explanations we gave him, after the detailed description of the situation? It would enable him to recover, for the benefit of the people of Canada, the greatest of all possible privileges, that of creating credit, which should not be left with a few individuals, but should be vested in the Bank of Canada.


Jean-Thomas Richard: Is the
committee ready for the question?


David Réal Caouette: Mr. Chairman, just one word.


Some hon. Members:: Oh no, oh no.


David Réal Caouette: I hear some members say: "Oh no, oh no''.

Are we going to pass a bill enabling people to continue their exploitation for another ten years? Now the Liberals are blaming us. But there was a time when the Conservatives spent three whole months discussing the adoption of a flag, and that was tolerated. But the financial question, without which perhaps not a single Liberal member would have been elected, that we must not discuss.
Mr. Chairman, in 1962, as reported on page 1290 of Hansard for November 5, an amendment was proposed by the hon. member for Red Deer (Mr. Thompson) which read as follows:
.-that the amendment be amended by adding the following at the end thereof: "and replaced with a policy of debt-free money and constructive proposals to foster balanced domestic economy and balanced international trade."
A little later on in the day a vote was taken, as reported on pages 1350 and 1351. The Conservatives were then in power, the Liberal in the opposition. And I see those who voted in favour of debt-free money, that is of going to the Bank of Canada to benefit from a debt-free monetary system. Here are but a few of those who voted in favour of it:
Bechard, Benson, Boulanger, Cardin, Drury, Dupuis-
The one who laughed at us.
-Gordon, Hellyer, Nicholson, Pearson, Pennell, Pickersgill, Pilon, Richard, Sauce, Turner.
Several other Liberals voted for the debt-free money.
[DOT] (9:40 p.m.)
Now, we have here an amendment favouring the creation of debt-free money and those who voted in favour on November 6, 1962, look at them blush now. As if they were not red enough, they get even redder. Wanting to annoy the Conservative government of the time, the Minister of Transport voted with us. He was in favour of debt-free money. Now that they are in office, that we ask for debt-free money, they are against the principle for which they voted in 1962. That is the logic of politicians more concerned with their seats than with their constituents. That is important.
Mr. Chairman, the hon. member can talk of mistakes in reckoning as much as he wants; his name is recorded in Hansard.


Gilles Grégoire: Is it because the hon. member did not know for what he was voting?


David Réal Caouette: Then it would be serious.
Mr. Chairman, the parliamentary secretary to the minister, Mr. Chretien was not a member at that time. If he had been, he also would have voted for debt-free money.
March 20, 1967


Joseph Jacques Jean Chrétien: That is a hypothetical question.


David Réal Caouette: A political, yes. But the government now makes a political issue with the monetary question. Not simply a question of economics. An effort is being made to bamboozle us. They are trying to lull the committee by saying: "Quick. Hurry up and adopt this Bill No. C-222 if you want Easter holidays.'' Why was this whole Bank Act with section 72 and all the others, not brought down six, seven or eight months ago? But no, they always wait until the last minute and then they tell us: "Hurry up and carry the bill. Hurry up and vote the amendments brought down by the government. Hurry up and vote the sections of the bill."
Mr. Chairman, there is no fooling around with a bill that will be in force for the ten years to come. The entire membership of the house, whatever their party, cannot be asked to vote blindly on such a bill.
Mr. Chairman, we maintain that if our amendment of November 5, 1962, introduced by the hon. member for Red Deer (Mr. Thompson) was valid at the time, since the Liberals voted for it, today March 20, 1967, six days before Easter, it is just as valid today: Adopt a debt-free monetary policy.
I see the hon. member for Matapedia-Matane is nodding his approval.
Well, Mr. Chairman, what we suggest is that the minister recommend to parliament the adoption of legislation which will not bring about inflation, but rather the economic balance needed by this country.
Unfortunately, too many countries now suffer from economic chaos, terrible and incredible economic conditions. Here in Canada we have the physical means and we could have the financial means to create an economy as stable as possible. The only way to do this is to have a financial system reflecting as much as possible our physical
potential.

What does this mean? It means to make financially possible what is physically possible and desirable. It means that there would never be any inflation or deflation. There would always be a perfect balance between the purchasing power of the Canadian consumers and the production which is the
Bank Act
work of Canadians, of the Canadian people and of Canada. That is all that the Creditistes ask for. We do not, as the hon. member for Lapointe (Mr. Gregoire) rightly pointed out this afternoon, ask that an unlimited number of bank notes be printed; this was never part of Creditiste policy.
The Creditiste policy, the Creditiste doctrine, the Creditiste philosophy, means the balance between the consumers' money and the Canadian production. That is what we want and that is why we are asking the committee to support and to pass the amendment moved by my colleague, the hon. member for Compton-Frontenac (Mr. Latulippe).


Herman Maxwell Batten: Is the committee ready for the question?
Amendment (Mr. Latulippe) negatived: Yeas, 7; nays, 47.


Herman Maxwell Batten: I declare the amendment lost. Shall clause 72 carry?


Henry P. Latulippe: Mr. Chairman, on clause 72.


Gilles Grégoire: Mr. Chairman, on clause 72 I note that, at this time, the government that does not have very many opportunities to vote on such matters, has just voted and rejected the idea we had brought forward, without any counter-opposition.


Herman Maxwell Batten: Order, please. The hon. member for Lapointe is now reflecting on the vote just taken. I suggest that the proper thing for him to do at this time is to direct his remarks to clause 72 now before the committee.


Gilles Grégoire: Mr. Chairman, it is not at all my intention to comment upon the vote, and I will not do it either. I simply wish to mention that while we rejected the amendment, we did not deem it necessary to make any alternative proposal. I am in order, which may shock you, but let the Liberals remember what they did in 1962; their systematic obstruction campaign was much worse than ours, which is not a filibuster after all.

March 20, 1967
Bank Act


Raynald Joseph Albert Guay: That is a fine filibuster.


Gilles Grégoire: You are the ones who did it when you prevented someone from speaking in this house.
Mr. Chairman, I will simply read a paragraph from the article the title of which I was just quoting which is an ironical illustration of what we are trying to make you understand. Here is what it says:
In the shade of the sky-scrapers, In the heart of Montreal lies the decaying world of slums.
Skyscrapers on one side. To whom do they belong? To banks. The large building at the corner of Dorchester and Peel? To banks. Place Ville-Marie? To banks. And in the vicinity of those imposing buildings, of skyscrapers in the centre of Montreal stagnates a world of slums, those old districts built more than a century ago and where some 80,000 families are living.


Herman Maxwell Batten: Order, please. I am sure the hon. member for Lapointe must realize the remarks he is now making, while having something to do with banking, are not very closely related to the clause before the committee. Again I invite him to confine his remarks to clause 72. I am sure that he wishes to go along with the committee in the work that the committee is trying to do, and also to assist the Chair.
[DOT] (9:50 p.m.)


Gilles Grégoire: Mr. Chairman, I can assure you that it is exactly what I want to speak of, that is section 72; but to illustrate an idea sometimes, one needs testimonies of others and this is precisely what I was doing when I quoted a five-line sentence to emphasize the fact that section 72 does not render service to the people.
Then, Mr. Chairman, if you allow me to read those five lines that would be a clear testimony confirming my allegation to wit that section 72 of Bill C-222 is far from doing a service for the Canadian people. And this testimony-I quote or I repeat it where I stopped when I said:
In the vicinity of skycrapers, stagnates a world of slums. Those old districts built more than a 
century ago shelter some 80,000 families with an income which seldom exceeds $2,000 per year.
And now banks are authorized to create credit under section 72. Nothing is changed to that even if the effect of the system is to encourage stagnation-as above mentioned- 80,000 families, 300,000 persons in the most abject poverty with an income which does not exceed $2,000. And all this in the vicinity of the skycrapers in the centre of Montreal. Banks are encouraged by section 72 of the Bank Act which enables them to create credit and lend it under terms favourable to them.
It is owing to that act, owing to that clause 72, that chartered banks can allow themselves to create credit, which makes them grow million and billion dollars richer, which enables them to build skyscrapers, to which I do not object, Mr. Chairman, far from it. But the sad thing is that banks are selfish; they do not care about the people and they let stagnate under the shadow of their skyscrapers 80,000 households, 300,000 people whose revenue never exceeds $2,000.
It is that system, Mr. Chairman, that must be changed, it is that system where credit, the sinew of the economy, is controlled by a few bankers, a few individuals, who are using it for their own profit, while they are neglecting the Canadian citizens, the Canadian people.
Something will have to be done, Mr. Chairman, to cope with such a situation. We suggested the Bank of Canada should do it instead of the chartered banks. That was not accepted by the majority. Could the Minister of Finance and Receiver General tell us whether he intends to bring forward some other kind of measure or some other kind of system or of scheme, so that clause 72 could be amended? If the government does not want to take away completely from the chartered banks that privilege of creating money, would not the government be prepared then to grant them part of that privilege, on a trial basis? If the government thinks it t(fo great a danger to put 100 per cent of the creation of credit into the hands of the Bank of Canada

and it is its last opportunity to do so with clause 72, once that clause will be passed, there will be nothing more to be done in that field. Would it not be possible, at
March 20, 1967

least for the government, to grant say 5 per cent of the credit privileges to start with, on a trial basis? And if things go well for a year, well, if it brings about the results we are expecting, we shall try 10 per cent and the following year 15 per cent. And if this does not work, Mr. Chairman, we will be the first to admit it and we shall say: "It is true, you were right". But at the present time we are convinced, and logic, figures, statistics, the scientific basis of an economic system are here to prove it, it could not go wrong. Therefore, in order to convince and reassure yourself, try it. Let us say 5 per cent for a year; instead of having a 6.6 per cent reserve, let us have a 1.6 per cent reserve and let the government create another 5 per cent of credit. We shall see then if the idea was a good one.
iEnglish1


George James McIlraith: Mr. Chairman, I ask that the committee rise, report progress and ask leave to sit again later this day.


Herman Maxwell Batten: Shall I rise, report progress and request leave to sit again later this day or at the next sitting of the house, as the case may be?


Some hon. Members:: Agreed.
Progress reported.


George James McIlraith: Mr. Speaker, I move, pursuant to standing order 6 (2), that the house continue to sit after ten p.m.


Michael Starr: Mr. Speaker, it was agreed earlier that we would be prepared to co-operate to the extent that we would sit until this bill was passed in its entirety, with the exception of third reading. However, over the past two hours we have had to sit here and listen to a discourse from the other side of the house and have been prevented from reaching the clauses on which we had a few comments to make. If this continues I am a little dubious about agreeing to sit, because we are only wasting our time. Unless the government house leader is prepared to give some assurance that we will move from this clause to other clauses at once, then we are not prepared to go ahead. But if this does happen we are prepared to sit to complete this bill, with the exception of third reading.
Bank Act


George James McIlraith: Mr. Speaker, I do not know that it is possible for me to control the debate on this clause, and I am sure that that is not what the hon. member for Ontario meant. In any event what I will do is this: If we do not make progress on this clause in very short order I will move that it stand and that we proceed to other clauses, if that is agreeable. I am trying to meet the wishes of the hon. member in what I think is the most practical way.


Michael Starr: Under those circumstances, Mr. Speaker, we could not agree to a motion to have us sit without any time limit stated. Under the circumstances I think we are prepared to have the motion amended to read that we sit until eleven o'clock. We can then see what progress we have made by that time, and we may be inclined to do otherwise when that period arrives.


Gilles Grégoire: Mr. Speaker, if I may suggest something, because I am convinced that those who speak on this bill which we consider important, are ready to co-operate and get on as fast as possible.
Mr. Speaker, I have a suggestion to make to the house leader; he should try to muzzle, a certain group of members who, I think Mr. Speaker, delay the debate, or at least prevent them from barking or purring. We are ready to co-operate and I would suggest that something be done to teach them good manners.


Mr. Deputy Speaker:: Order, please. I
think the hon. member for Lapointe (Mr. Gregoire) is now debating the motion before the house. I am sure he is quite familiar with standing order 6 (2), which states:
No debate or format vote shall be held on such a motion to extend a sitting.


George James McIlraith: Mr. Speaker, the difficulty is that if we wished to continue we could not put another motion. That is a difficulty in which we would find ourselves. I am willing to go along with the suggestion and try to meet what I think the hon. member for Ontario has expressed to be the wishes of his party. I think this can best be achieved by

March 20, 1967
Bank Act
leaving the motion as it is. There seems to be a willingness to co-operate. We will see how we get along, and if necessary, if we do not make progress, I can then move that the house adjourn.


Mr. Monteith:: Mr. Speaker, would the house leader give the commitment that he will move that the house adjourn at that time, if we do not make progress?


George James McIlraith: Yes, Mr. Speaker, if no progress is being made. I would also reserve the right to move that clause 72 stand if it is clear that we are not getting ahead-if it is clear that progress is not being made with clause 72.
[DOT] (10:00 p.m.)


David Lewis: Mr. Speaker, for our part we think the minister ought to be a little more definite than that. If Creditiste and Social Credit members find it necessary to debate at length, that is their business. Other amendments are to be moved. We have one or two that the hon. member for Nanaimo-Cowi-chan-The Islands will move and we think they are important. We have been waiting for days to move them. I do not think they can be listened to, let alone be discussed intelligently at twelve o'clock or one o'clock in the morning. We are not prepared to agree to sitting indefinitely.


Mr. Horner (Acadia):: I agree with that.


George James McIlraith: There is some misunderstanding of the procedure. The real difficulty, as hon. members know, is in getting third reading after the present stage has been completed, so that the bill may go to the other place where it must be considered. It was in an effort to meet that requirement that I think all representatives of all parties discussed some formula for getting forward tonight with the clauses as far as we possibly could, with a view to finishing third reading tomorrow.
It is a matter of meeting this situation in a practical way that will best meet the wishes of all parties. I should prefer to leave it that we continue to sit; then, I shall consult wtih the house leaders about the rest of the evening, and I will move the necessary motion depending on progress. If we are making good

progress and everybody is satisfied, there is no point in our being confronted with a situation where there is a time limit. We can move the motion to continue if it meets with the wishes of everybody.


David Lewis: May I suggest that perhaps we sit until eleven o'clock, by unanimous consent, without the motion?


George James McIlraith: No.


David Lewis: At eleven o'clock if we are making progress the minister can move the motion.


George James McIlraith: That is precisely the difficulty. The minister cannot move this motion then. He has to move it before ten o'clock. Having moved it before ten o'clock tonight, he does not want to lose that right. It is precisely that difficulty arising out of the interpretation of the standing order that made it necessary that the motion be moved now.
My offer is, if we are not making progress, to adjourn at eleven o'clock. I will keep in consultation with the other house leaders to see what progress is being made, to try to meet the wishes of all parties.


John (Jack) Henry Horner: Not agreed.


Michael Starr: 
George James McIlraith: We can move the adjournment of this house at eleven o'clock.


Michael Starr: I want it clearly understood, and I want an undertaking to this effect from the government house leader that, if no progress is made, at eleven o'clock we shall move to adjourn.


George James McIlraith: That is agreeable. That is what I thought I said earlier.


David Réal Caouette: Mr. Chairman, I will not be long. We agree with the proposal of the minister that we sit until eleven or eleven thirty. We want to pass the bill. Now if we spend fifteen or twenty minutes discussing whether
March 20, 1967

Bank Act
we should or should not continue to sit, that will leave us less time from now until eleven, when there are many clauses on which we would undoubtedly like to move amendments.
In any case, we agree with the proposal of the government house leader.


Mr. Patterson:: I do not know why the hon. member for York South (Mr. Lewis) brought the Social Credit party into his discussion.


David Lewis: I withdraw.


Alexander Bell Patterson: We of the Social Credit party have taken little part in today's debate. We have made our position clear.


Jay Waldo Monteith: What about last Thursday and Friday?


Alexander Bell Patterson: We have made our position clear on this legislation dealing with banks and banking. While we do not agree with every clause, we realize the importance of getting ahead with the bill as quickly as possible.


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


Gilles Grégoire: What motion?


Mr. Deputy Speaker:: The motion moved by the Minister of Public Works is that this house sit beyond ten o'clock. Is it the pleasure of the house to adopt the said motion?


An hon. Member:: On division.


[Stage Direction]
Motion agreed to.

[Stage Direction]
The house resumed consideration in committee of Bill No. C-222, respecting banks and banking-Mr. Sharp-Mr. Batten in the chair.
Herman Maxwell Batten: Is the committee ready for the question?


Some hon. Members:: Question.


Gilles Grégoire: Mr. Chairman, I would like to ask that this clause be put to a vote because I object to it and I would like to vote against it. I then ask that this clause be put to a vote.

Clause agreed to: Yeas 65, nays, 8.


Herman Maxwell Batten: Clause 75.


Jay Waldo Monteith: I wonder whether it would not be preferable to go back to clause 29 and clean that up.


Mitchell William Sharp: I think an undertaking was given the hon. member for Compton-Fronte-nac that we should revert to clause 69.


Herman Maxwell Batten: I apologize to the hon. member for Compton-Frontenac. That agreement was made this afternoon.
On clause 69-Report on excess appropriations.


Henry P. Latulippe: Mr. Chairman, I wish to thank the hon. Minister of Finance for having suggested that the house study again clause 69, because it had been passed Friday last. Inadvertently I did not rise in time to put forward my amendment.
Since the Minister of Finance has helped me to have this clause reconsidered, maybe he will vote with us.
Mr. Chairman, section 1 of clause 69 reads as follows:
(1) Where in the opinion of the minister an amount set aside or reserved by the bank out of income, either by way of write-down of the value of assets or appropriation for the purpose of meeting losses on loans, bad or doubtful debts, depreciation in the value of assets other than bank premises or other contingencies, is in excess of the reasonable requirements of the bank, having regard to all the circumstances, the Minister shall notify the Minister of National Revenue of the amount so set aside and of the amount of such excess.
That means that this is left up to the bank and to its point of view, if it is a reasonable one.
Then, who is going to determine whether or not it is reasonable? It is a vague clause. I believe it is most important when it has to do with secret reserves, hidden reserves or indiscreet reserves, call them what you like. There are excessive amounts, there are quite high amounts which the Minister of Finance, I think, does not know because I asked him when he was before the committee whether he was aware of those reserves and he said yes. I asked him what was the amount of those reserves and he could not answer me. He did not know the amount of the reserves and it is very plainly stated in the clause that the Minister of Finance cannot take any action with regard to the matter of secret or secondary reserves.

March 20, 1967
Bank Act
Banks already have enough reserves of all kinds that they must not be given a free hand with the other secret reserves, which would be limited only by their own judgment, under the present act, for "The reasonable requirements of the bank."
Who is going to determine what are reasonable requirements? The Royal Bank, for instance, in 1933, during the depression, transferred, in that one year, $15 million from its general reserves to its secondary, secret and hidden reserves, as reported on page 306 of the French version of the proceedings of the standing committee on banking and commerce, in 1934. Page 4 contains many other monstrous statements concerning secret bank reserves.
The Minister of Finance told the house on two or three occasions that, for the first time, chartered banks would be forced to disclose their secret reserves. Now that deposit insurance has been introduced, banks have even less reason to have unlimited secret reserves, left at the discretion of bank directors.
Surely, the limit is set high enough-I think it is one half of 1 per cent-when we know that deposit insurance easily covers a guarantee of 1/30 of 1 per cent, as insurance premium, of all the deposits in Canada and of companies that want or have to pay deposit insurance premiums.
[DOT] (10:10 p.m.)
As far as paragraph (2) of the same clause, just imagine, sir, the condescension necessary when it comes to keeping a close watch on the bankers' scheme. Just refer to the wording of the clause: this is not an invention of mine:
Nothing in subsection (1) shall be construed to give the minister any jurisdiction ... with regard to amounts set aside, reserved or transferred to any reserve-
Thus there are reserved, sacred, hidden, direct or indirect accounts, whatever you call them.
How much did the banks hide in 1966? How much did they put aside in the last ten years? For what reasons do we allow banks to have hidden reserves? Did all large corporations have hidden reserves, for different amounts in 1967? There are many other companies, many other institutions which would surely be entitled also, Mr. Chairman, to indirect reserves, internal reserves or hidden reserves.
I note that clause 69 of the bill is similar to section 68 of the present act and there is no evidence that banks will be obliged to state their secret reserves in the future, any more

than in the past. Why did the Minister of Finance state to this house, and I quote:
Banks will have to give a detailed statement of their earnings and expenses, and, for the first time, of their hidden reserves.
In your own mother tongue, I quote No. 8 of your principal resolutions:

The banks to reveal revenue and expenses in detail and for the first time their hidden reserves.

The minister should tell us under what clause of Bill No. C-222 the banks are forced to reveal their hidden reserves. Whom can we trust if we are deceived by the Minister of Finance on such an important matter as the presentation in the house of Bill No. C-222 on banks and banking?
In 1934, Mr. Chairman, when the Bank of Canada was created, in the same committee on banking and commerce, at pages 305 to 308 of the Minutes of Proceedings, there was talk of making such reserves. In a strange way, several questions by hon. members remained unanswered by the bankers. It is just like today, and it is the best proof that the stronger is not the government but the banker who hides everything he wants from the people, the government and his shareholders. I could give many other examples of hidden reserves by banks and big corporations. But what is the use, Mr. Chairman?
I will not say any more about that because I cannot do any more to force the minister to speak and tell the people the truth. I used all the means at my disposal. He speaks neither French nor English, but an incomprehensible language.
In another statement made to the House of Commons by the Minister of Finance, one could read in clause 5 on page 9:
We propose to require from the banks that they reveal to the public for the first time their hidden reserves made up with taxable income.
The minister himself said that. And in his own language:

We propose to require the banks to reveal to the public for the first time their hidden reserves created out of taxable income.

Mr. Chairman, is this the same Minister of Finance? Is he still prepared to make the same statement? Is he prepared to include in the bill the clause he had advocated requiring banks to disclose their hidden reserves?
March 20, 1967

I will now move my amendment, Mr. Chairman, for I do not want to extend the debate too long. It reads as follows:
(1)	That the words in "reasonable requirements of the bank" in section 69 (1) be deleted and replaced by the words "i of 1 per cent of its deposit liabilities".
(2)	That subsection (2) be deleted and replaced by the following: "Any amount in excess of the authorized reserve shall be immediately declared as taxable profits of the bank by the Minister of National Revenue".


Jean-Thomas Richard: Is the
committee ready for the question?


Gilles Grégoire: Mr. Chairman, I would like to support to a certain extent the amendment moved by my colleague the hon. member for Compton-Frontenac (Mr. Latulippe).
It is obvious that in clause 69, what we used to call hidden reserves, are not hidden any longer today, but what I object to is that the banks are empowered to put up a reserve for losses and that such reserve, whether the bank incurs losses or not, is exempt from tax.
Mr. Chairman, if any business man, any store owner, any automobile dealer, any furniture salesman, any home builder, were putting up reserves against losses, they would have to pay taxes. But the bank gets more benefits than the businessman. The ordinary bank has an additional privilege, it is exempt from tax, not on its losses, but on what it declares to be a reserve for losses, whether or not it incurs any losses, and that is what I object to.


Mitchell William Sharp: Mr. Chairman, the committee will be aware that when we approved clause 60 of the present bill we did approve the following. I should like to draw attention to paragraph (2)(c) of clause 60. Subclause 2 reads as follows:
At every annual general meeting of the shareholders, the outgoing directors shall submit a statement (hereinafter called the "annual statement"), which shall present fairly the financial position of the bank for the financial year immediately preceding the meeting, and shall contain-
I will read paragraph (c):
[DOT] (10:20 p.m.)
-a statement of accumulated appropriations for losses of the bank for the financial year, showing the information in the form specified in schedule P-
Bank Act
I will not read the rest of that paragraph. Schedule P provides for the revelation for the first time, as I said before, and as referred to by the hon. member for Compton-Frontenac, of inner or so-called hidden reserves. This act does in fact carry out the undertaking that I made in the house that for the first time the inner reserves of banks will be publicly revealed. Clause 69 with which we are now dealing provides that I shall continue, as I have in the past, to have some control over the amounts of those reserves that are to be considered taxable or non-taxable. I submit it is better for public administration to have that judgment made by the Minister of Finance rather than by the Minister of National Revenue, who is concerned with taxation but not with banking questions.
In respect of the particular amendment moved by the hon. member for Compton-Frontenac let me assure him that the kind of inner reserves dealt with in clause 69 have nothing to do with the deposit liabilities of banks. These have to do with their investments and they are reserves against the possibility of losses. Therefore I submit, Mr. Chairman, that these amendments do not fulfil the purposes of clause 69 and should be rejected.


Gilles Grégoire: Why grant a special treatment to the banks and say to them: "Whether you lose money or not, it does not matter, because you are entitled to a reserve for losses; furthermore you have tax exemptions". And it is also indicated in schedule P to which the minister referred a moment ago:
Accumulated appropriations at beginning of year, general-Tax-paid-Total.
In no other field of trade or business would the Minister of National Revenue say: "Gentlemen, you are entitled to an appropriation for losses, for example, and it will be tax-free. It is obvious that if a loss is real, the interested party will find an arrangement and will have a delay of five years to substract that loss from its income tax report. The loss will be spread over a period of five years. But for the bank it comes to more than that. Even if it has not sustained a loss, it will pay no tax on its reserve for losses. This is irregular and I cannot accept it. I believe that if we remove this idea or notion that appropriations for losses should be tax-free-and this is where I am slightly at variance with my friend, the member for Compton-Frontenac

March 20, 1967
Bank Act
(Mr. Latulippe)-I would ask him to forget the i per cent and say that, since the reserves are now open and known, the bank may appropriate whatever it wishes for losses, it does not matter, provided it pays income tax. It would then be a reserve such as those of any business concern. The purpose of section 69 is to prevent banks from having reserves that are too high since they are tax free. But even if the reserve is not too high, the bank should not enjoy any unfair privilege. As soon as the bank looses money, it should be allowed to deduct it from its income tax like all the other business concerns, over a five year period, but it should not be tax exempt for losses not incurred. A bank should not be told: Build up a tax reserve which is tax-free. It is on that point that I support the amendment of my colleague, the hon. member for Megantic (Mr. Langlois). I wonder if the Minister of Finance does not find our request reasonable. After all, banks are not to so much to be pitied. The saying "as sound as the bank" is very significant. That means it is a well-established institution. I wonder why it should need preferential treatment or such a favour which is not given to any other business. There are businessmen here, doctors who may lose accounts, lawyers who may be unable to collect certain fees; dentists who may be unable to collect certain bills. They are not taxed, it is true, but the lawyer, for instance, is not told: Take $5,000 and put it aside as a reserve against losses. Whether he loses it or not does not matter. According to the legislation as it stands, it is just a reserve on which the bank is not taxed.
The hon. member for Compton-Frontenac mentions one half of one per cent. I think that in committee, the question was put. I think it was said that bank losses, if I am not mistaken, my memory may fail me, but I think the losses were under one tenth of one per cent. I would not swear to it, I do not have the report of this committee with me, but possibly the hon. member for Nanaimo-Cowichan-The Islands (Mr. Cameron), who attended the committee as I did, could tell me whether it was approximately this amount that was mentioned. If my memory serves me well, the losses were of one tenth of 1 percent. Then, if no tax is levied on this, quite right. However, if we charge one half of one per cent-for a bank, this is a great deal. On a business turnover of 18 billion per annum, 1 per cent represents $1,800 million, and half of one per cent is $900 million. If they are allowed reserves in con-

nection with which we declare: "On this, you will have no taxes to pay", well, perhaps- If we were doing this for all concerns, if everybody were on an equal footing, personally, I am for this, but when there is favour for some one and disfavour for the others, I am against that.
This is why I am asking whether the minister would agree to delete this discriminatory clause. I think that the request is perfectly logical and reasonable; the banks are not to be pitied, they are not in the red, they need no other favours from the government, since I figure that they have enough; then the tax is always removed. And on this I could reach an agreement with my friends of the New Democratic Party, who say at all times taxes should not be paid by the little fellow but by the big fellow; well, are not the big fellows in Canada the chartered banks? If so, let us not grant them special favours concerning income tax; under section 60(2) and Schedule (p) they get some valuable favours: they are told: "Gentlemen, do put aside a reserve for losses, and on this, whether you lose it or not, you will not be charged income tax." Then I wonder whether the Minister of Finance (Mr. Sharp) would have a few remarks to make on these points, whether he would not be prepared to accept what we are asking from him.


Mitchell William Sharp: Mr. Chairman, there seems to be some misunderstanding about the basis of our taxation system. There is nothing special about this clause. All businesses have the right to have reserves against bad debts. That is all this is. The reason that discretion is given to the minister is to see that the amounts set aside are not excessive, and that is the spirit in which it is administered. The inspector general of banks advises me every year of the amounts set aside, and he advises me whether in his opinion they are excessive. In my opinion there is greater control over taxation of banks than there is over taxation of other institutions.


Gilles Grégoire: Mr. Chairman, may I ask the minister a question?
Schedule (p), point no. (1) where it is said:
Accumulated appropriations at beginning of year tax-paid.
Does the same apply to any kind of trade? This tax paid accumulations, this tax free reserve for losses that exists for all kinds of trade, must an ordinary merchant not declare
March 20, 1967



it, and when he declares it, has he not already lost it in fact? At that moment, does he not pay the tax on that reserve? And is it not then what distinguishes the other trades from the banks? From this particular point of view?
[DOT] (10:30 p.m.)


Mitchell William Sharp: No, the treatment is identical for the banks and for other corporations that pay taxes.


Jean-Thomas Richard: Is the
committee ready for the question?


Henry P. Latulippe: Mr. Chairman, I have a question for the minister. Could he tell us whether there are other institutions that have the same privileges as the chartered banks nowadays.


Joseph Jacques Jean Chrétien: All the corporations. [English]


Jean-Thomas Richard: those in favour of the amendment will please rise.


Gilles Grégoire: Mr. Chairman, what then is the idea behind this clause, since the bank is compelled by the terms of clause 69 to reveal its reserves? I am told it pays taxes on them, like all other corporations. If there are no actual losses, what is the idea behind clause 69? Does the minister not admit in schedule P that all those reserves are exempt from tax, whether losses have been incurred or not? If this is not the case, I should like the minister to give me an answer concerning this subject.
Are not reserves for losses exempt from tax in the case of banks, whether losses have been incurred or not, whereas in the case of other companies reserves for losses are taxable, or are those reserves taxable only if there has been no loss? That is what I should like to minister to explain.


Mitchell William Sharp: I must repeat what I said before, that the taxation of banks and other corporations in this respect is exactly the same, except, in so far as banks are concerned, not only does the bank have to satisfy the tax collector but it has to satisfy the inspector general of banks and me. There is therefore greater control over the reserves set aside for banks than there is for other corporations. Clause 69 is simply a reinforcement of the tax laws so that banks are treated no more favourably than other corporations. All 23033-900
Bank Act
corporations pay taxes on exactly the same basis.
Amendment (Mr. Latulippe) negatived: Yeas, 7; nays, 60.


Jean-Thomas Richard: I declare the amendment lost. Shall clause 69 carry?


[Stage Direction]
Clause agreed to.
Jean-Thomas Richard: Clause 75?


Mitchell William Sharp: Would the committee be agreeable to going back to clause 29, one of those which was allowed to stand?


Some hon. Members:: Agreed.
On clause 29-Report to directors.


Mitchell William Sharp: I should like to have an amendment moved to carry out a suggestion made by the hon. member for Edmonton West to whom I am grateful for drawing this unnecessary subclause to our attention. I ask one of my colleagues to move the following amendment:
That Bill No. C-222, an act respecting banks and banking, be amended by striking out paragraph (to) of subclause (2) of clause 29 on page 18 of the bill and by relettering paragraphs (c) to (e) thereof as paragraphs (b) to (d), respectively.


Robert Henry Winters: I so move.


[Stage Direction]
Amendment agreed to.
Clause as amended agreed to.
Mitchell William Sharp: May I suggest that we move on to clause 52 and take clauses 52 to 57.


Raymond Langlois: Mr. Chairman, I do not have anything to say on clause 29 but I would remind the Chair that before the last amendment reached this end of the house the clause had been carried and I had not time to see it. Therefore I would ask the Chair to make sure before carrying a clause that there is nothing to be said on any amendment.
On clause 52-Definitions.


Colin Cameron: Mr. Chairman, last Friday I asked that clause 52 be allowed to stand, because I had an idea that I wanted to move an amendment. I now see I do not need to do this and I do not wish to hold up the clause any further.


[Stage Direction]
Clause agreed to.
On clause 53-Limit on shares held by nonresidents.
Colin Cameron: Mr. Chairman, I have two amend-

March 20, 1967
Bank Act
ments to this clause. The first is as follows. I move:
That paragraph (a) of subclause (3) of clause 53 be amended by striking out the following words in line 38 on page 31 "in right of Canada or", and also by striking out the word "either" where it appears in line 40.
I am quite sure that the minister realizes the significance of this amendment, because it deals with the question I raised with him during the committee hearings, and again the other day when I was speaking in the committee of the whole. I am proposing this amendment, not to alter any powers that the government of Canada has at this moment but to prevent the minister from divesting the government of Canada of the power of making an investment in a commercial bank.
I feel it is important at this particular juncture that the government of Canada should retain that power in its hands. I set out the reasons for this the other day when I was speaking in the house. At this time I would merely like to underline again the possibility of having to use this power in connection with a circumstance which still could possibly cause some trouble with our American neighbours.
I am not at all sure, as I said in the committee, that we have solved the problem of the Mercantile Bank by the only course left open to us at the time, in passing an amendment which I seconded to give the bank five years to expand their shares and make them attractive to Canadian investors. I have the uneasy suspicion that at the end of five years we will find the bank not anxious to divest itself of its shares, and may present the government of Canada with the very difficult task of asking the bank to shrink its shares back to this twenty to one ratio, or to get rid of 75 per cent of its shares.
[DOT] (10:40 p.m.)
I have an idea that if at this time the Minister of Finance for Canada were to recognize this and say that he accepts this amendment, that action of his might be noted in New York and Washington, and the conclusion might be drawn that the Canadian Minister of Finance was retaining in his hip pocket a club which he might see fit to use if necessary in five years. For that reason I urge the committee to support my amendment, to leave in the hands of the government of Canada the right to invest in a bank.
The other day my hon. friend from Edmonton West, as I noted from reading Hansard, though I did not hear him, meant to say, I think, that I have an obsession. He told me
[Mr. Carr*pron (Nanaimo-Cowichan-The Islands) 1
the other day-even today-that I have a coy way of using words. I do not wish to say this to my friend, but he has an incorrect way of using them. He used the word "fetish" quite incorrectly. I suspect that he meant to say I had an obsession with the nationalization of the banks of Canada, and using "fetish" was quite incorrect. It was incorrect even in its original Ashanti form in West Africa, to say nothing of its modern psychological connotation.


An hon. Member:: Smart.


Colin Cameron: One has to be smart with me, my hon. friend. I have no obsession with the nationalization of the banks; but I do have an obsession, and it is not shared with my hon. friend from Edmonton West. My obsession is that every institution in our society must serve the welfare of the Canadian people. I have another obsession, that no one has the right to be allowed to exploit his fellow citizens, that no one has the God given right to make money out of any operation of our society, or to assume that this is a privilege we grant to certain people under certain terms, a privilege that can be amended or withdrawn at any time. No institution serves the welfare of the Canadian people if it is for the aggrandizement of only a few of our citizens.


Mitchell William Sharp: Mr. Chairman, may I say a brief word about this proposed amendment. The hon. member for Nanaimo-Cowichan-The Islands is relating it to the experience of the Mercantile Bank. Mr. Chairman, if the Mercantile Bank is unable to dispose of its shares to Canadians it would be better that it remain as a very small operation, as it is today. Certainly, if that is the position of the Mercantile Bank, then I have no quarrel.
On the other hand if the government is to make an investment in a bank, a chartered bank, or a bank operating under one of our charters, in my opinion it should not have other private shareholders. Therefore if we are to embark on that course of action-and this is an arguable case; I think there is a good deal to be said for having a government-owned bank-let us do so not by inadvertence or indirection, but let us do it as the result of a positive decision by this parliament to form a bank for that purpose.
I am therefore opposed to the amendment proposed by my hon. friend. It seems to me that if we are to change our policy and have a government bank in competition with pri-
March 20, 1967

vate banks, let us do it, not now, but let us charter a bank for that purpose.


Colin Cameron: I could not agree more with the minister. I am not proposing that we change our present position; he is proposing the change. That change is to prohibit the government of Canada from ever following this course of investing in a bank. Certainly, if this bill passes as it is worded now, Her Majesty in the right of Canada would be prohibited from investing in a chartered bank.


Mitchell William Sharp: That is right.


Colin Cameron: Then it is the minister who is changing the position which presently prevails, because the power now lies in his hands or in the hands of the government of Canada, and will continue to do so until this bill is passed.


Mitchell William Sharp: What this clause does is to prevent Her Majesty in the right of Canada from acquiring any shares in a chartered bank included in the schedule to this bill. If parliament were to decide that it would form a government bank to operate like a chartered bank, it could certainly do so and would not be bound by this act.


David Lewis: This does not explain why the minister and the government found it necessary to include this prohibition. The fact is that under the present Bank Act there is no such inhibition which would prevent the government entering into a partnership, if you like, with a chartered bank or buying any shares in a chartered bank which in the public interest it believed would be desirable.
What my hon. friend is saying to the minister is that his amendment is not the one which proposes a change in the present law; it is this new clause which proposes a change, and I have heard no explanation why this change should be made. The minister has not told us why it should be necessary for this parliament to tie its hands for the next ten years. It may be that the government of the day will not wish to use the powers it presently has to buy shares in a chartered bank. But why should we now decide that in no circumstances in the next ten years will the government of Canada be able to do so, no matter what the circumstances may be?
The minister should explain to the committee why he found it necessary to include this provision in the bill. What are the circumstances in 1967 which differ from those of 1965 or 1957 when this prohibition was not contained in our banking laws? What has 23033-9001
Bank Act
happened to make this provision necessary? The minister should tell us what moved him to propose this fundamental change in the banking law. If his explanation is that because he wished to prevent the provinces from doing so he is making things even, then I suggest this is the type of equality which does not appeal to any logical mind.


Mitchell William Sharp: The change was made because we wanted to prohibit any government, whether provincial or federal or foreign, from owning shares in a chartered bank. We do not think it is appropriate to the kind of banking system we have that governments should be shareholders in banks. As far as I know, the government of Canada has no shares in a chartered bank and never has had any. Perhaps by inadvertence it may have got into some pension fund, or something like that but, as I have said, I do not know of it.
[DOT] (10:50 p.m.)
I would come back to my original point that if the parliament of Canada wants the government of Canada to invest in the shares of a bank it should authorize them specifically for some purpose and not have the government in the position of becoming an investor in an existing chartered bank. I believe this is thoroughly consistent with the whole philosophy of the act.


Mr. Barnett:: The thing that puzzles me, Mr. Chairman, is why the minister does not admit that this is a case of the government biting off its nose to spite its face. The last time the Bank Act came up for decennial review this question did not arise. No change was made at that time in the concept of ownership of bank shares, or laws in that respect, and I presume those laws were the same since banking legislation first came into being in this country.
Why does the minister not admit that it was because the government of B.C. expressed an interest in acquiring the shares of a bank that this whole question came to the fore? Why does he not admit that the government of Canada never thought of this question until the government of the province from which I come expressed some interest in the idea of developing a regional bank in which the government of that province would have some say, so far as its management and policy were concerned?
I do not suggest that we should enter into a debate on that question at this time, nor does the amendment moved by my colleague from Nanaimo-Cowichan-The Islands suggest that we do so; but certainly so far the minister has

March 20, 1967
Bank Act
failed to impress me with the logic of there being any parallel between the views the government has with regard to provincial governments or foreign governments holding bank shares, and leaving within the power of the federal government the right to hold shares in the name of the body which I have always understood to be the authority over monetary and fiscal policy in Canada. I think the amendment carefully emphasizes that particular distinction in the concept of money and banking business.


Mr. Peters:: I too am puzzled by this problem. I listened with interest to the discussions which took place concerning the Mercantile Bank and the desire of the Canadian government to obtain Canadian control over that institution. I agree with the method by which such control may be obtained, as outlined in a previous clause, whereby expansion of that bank will be allowed in order to make the sale of its stock to Canadians more advantageous, but I think the minister should face the very simple proposition that if that bank's shares are not bought by Canadians, then it may be necessary for the federal government to buy control from the foreign owners in order that control may rest in Canadian hands. The government might have to set up a crown agency to buy that stock if Canadians as individuals do not buy it.
I cannot see how the minister believes he should allow such expansion of the bank to take place in order that the stock can be sold to Canadians and, at the same time, expect that the institution will remain a very small bank. For this reason the government should reserve the right to buy the stock through a crown corporation operating in the right of Her Majesty. Personally I feel this provision should be left in the bill, also covering the right of a province.
I would think, if there really is a desire to implement the idea of establishing a method to obtain Canadian control over foreign owned financial institutions, that a start should be made at least in respect of the one bank in question. If you leave in the one exception where no shares are to be held by a government, then obviously you are taking away the machinery which would make possible what has been suggested. When one considers the proposition of exempting Her Majesty from having any control, he can better understand the government's inability to obtain Canadian control over other financial institutions, including near banks and insurance companies.

Evidently the minister is sincere in his wish that the Mercantile Bank eventually will flow into Canadian control. 1 believe, if this particular clause in its present form, or with the limitation against provincial government ownership, is to be retained, that a clause should be included which at least would allow the minister to establish a corporation which eventually would be able to buy the stock, which may not always be easily disposed of. It may not be easy to persuade Canadians to buy this stock, particularly with the pressure which would be applied in a situation where it was desired to unload that stock on Canadians.
I believe the minister should give a better explanation of the reason he is not willing at least to leave with the federal government the right to establish a crown corporation. If the government itself does not wish to buy the stock it should allow an agency to assume the financial control which, in my opinion, the Bank Act is designed to do. If the minister is unwilling to provide the machinery to make it possible, then I think we should have passed the previous legislation without amendment, because this certainly will not accomplish the desire of most Canadians eventually to obtain control of one foreign owned bank through purchase of the stock by Canadians, or through government purchase of the outstanding stock.


Colin Cameron: Mr. Chairman, I do not wish to hold up the committee, but I must say I am shocked at the way in which the Minister of Finance of Canada places the government of this country on all fours with foreign and provincial governments. I think this is another example of truckling to the provincial governments. This is something which this government has been doing continually with disastrous results. The minister has given no logical or acceptable reason for wanting to divest himself or the people of this country of this power. He has no right to take from the Canadian people the power to decide whether they wish to have a hand in the banking system of this country. His suggestion that a crown corporation would not be the same as a chartered bank is another example of his sophistry. There is no difference between a crown corporation of this nature and any other crown corporation. If this bank were set up in Canada as a public bank it would operate, I would hope, under the framework of the Bank Act. So the argument that this applies only to banks which are now in existence is completely specious and phony, because if we
March 20, 1967

organize any other new bank it comes under this act.
[DOT] (11:00 p.m.)
I suggest to the minister that this is another disastrous example of fear on the part of this government to exert its authority in a field in which there is no doubt about its constitutional right. This is another example of truckling to provincial governments to encourage intransigencies on their part, because they realize this government in Ottawa is too afraid of them to exercise its rightful authority.


Mitchell William Sharp: Mr. Chairman, I want to repeat, so the record is quite clear, that there is nothing to prevent this parliament from establishing a government owned bank. There is no limitation in this act to prevent that. I think it would be most inappropriate to amend the law in this way, if for only one reason, namely that we could hold only 10 per cent of the shares of any bank under the law as it now is proposed.


John (Jack) Henry Horner: Mr. Chairman, I should like to ask the minister whether this clause prohibits the government, as suggested by the hon. member for Timiskaming, from buying the block of 75 per cent of the shares of the Mercantile Bank, which must be sold in the next five years? If it does, why does the minister continue to insist on preventing this from happening in view of the limitation placed on this bank? This bank cannot expand unless it sells to Canadians. Does the government really want Canadians to participate in Canadian banking?
This bank was given a charter and we should honour that charter. This particular clause prohibits the government from assisting Canadians in acquiring ownership of that bank, which we as Canadians are forcing to release 75 per cent of its interest.


Mitchell William Sharp: All this clause does is prevent the government of Canada from owning 10 per cent of the shares of any bank. I see no useful purpose to be served by the government of Canada having a 10 per cent ownership in any bank. Moreover, if the Mercantile Bank is not able to sell its shares to Canadians I think it should operate as a very small institution. I do not think the public interest would be damaged if that happened.


John (Jack) Henry Horner: Mr. Chairman, I am not too worried about the public interest. We as Canadians made an agreement in 1953 to grant a charter to a foreign concern. Let us be honest and live up to that agreement which was granted, rightly or wrongly, to this
Bank Act
concern. Perhaps if we were asked to do this again we would not do it. We did do it with our eyes open, without any stipulations at all. Then we allowed that foreign concern to sell its shares to another foreign concern. Canada is respected throughout the world as a country which lives up to its agreements. Certainly we would not want to be considered as having a preference for a Dutch concern over an American concern. We are very dependant upon United States capital and its commerce, and we would not want to create an impression that we preferred Dutch firms to American firms. All foreign concerns should be treated equally. We allowed the transfer or sale of stock in one foreign concern to another. Surely we cannot now come along and enact retroactive legislation having the effect of devaluing those shares. That is exactly what we are doing.
By passing this clause we are taking away the one safeguard that still lies in the hands of the Canadian government. We must live up to our commitment. Whatever the foreign concerns are, we should not show preference to one over another. So if the charter was good for the Dutch in 1953 it is good for the Americans today, and we are not going to allow those shares to devaluate. We will not deliberately, through a misunderstanding at the transfer of those shares, force their value down. Surely we will live up to a prior commitment, regardless of whether it was right or wrong.
The only safeguard we have is contained in the particular clause with which we are dealing now. Let us suppose for example that the First National City Bank of New York had the opportunity to divest itself of only 25 per cent of its interests in the next five years and still owned 75 per cent, so that its interests would be larger than permitted under the act. As the minister said, it would have to divest itself of the rest of its interests and withdraw completely from the banking business. Surely we do not want to force foreign capital out of Canada even if the former minister of finance was still in the driver's seat. We may not welcome foreign capital but we do not want to force it to flow back to the United States.
This is exactly what would happen if the bank were not able to sell 75 per cent of its stock in the next five years. Surely we should keep this one safeguard to allow the government to set up a trust which would buy 50 per cent of the remaining amount that was not sold. I am using a fictitious figure. The bank may only have been able to sell 25 per

March 20, 1967
Bank Act
cent, which would leave 50 per cent to be sold. Surely we can expect the Canadian government to honour its commitment and to safeguard the value at which those shares traded in 1966. It should be able to buy them, to put them in trust and then to sell them.
Both the former minister of finance and the present minister have spoken a great deal about the establishment of the Canada Development Corporation. This would be an ideal body for such a transaction. Surely the minister should not destroy the one remaining safeguard in the bill.


Mitchell William Sharp: Mr. Chairman, of course I cannot predict what form the Canada Development Corporation will take but if it is of the kind that had been proposed by my colleague, the former minister of finance, it would not be debarred under this bill from buying the shares, since it would not be an agency of Her Majesty.


Herman Maxwell Batten: Is the committee ready for the question?


Gilles Grégoire: Mr. Chairman, I would like to say a few words on the amendment moved by the member of Nanaimo-Cowichan-The Islands (Mr. Cameron) because I approve of it and also because according to the amendment a bank could not allow the transfer of capital stock to the federal government. But the member does not say anything about the problem which then crops up with regard to provincial governments. The member seems to object to the fact that the federal government is denied the right to own bank capital stock but he also seems to accept the fact that the provinces are denied the same right or power. Personally, I believe that neither the federal nor the provincial government should have the right to own bank shares, and that their right should not be limited to 10 per cent but that the provinces should be able to set up a bank if they so wished. I see no objection to that. On the contrary. It is generally recognized that banks have tremendous privileges to facilitate economic growth; but the public that is the province, is not allowed to have a chartered bank and all the powers which chartered banks are granted, including that of creating credit.
The provinces are to be denied that power. The Bank of Canada is denied the power to create credit, and the provinces are also denied it. If the federal government does not want to do it, why does it not allow the provinces to do so, at least to a certain extent, through ownership in a provincial bank or a chartered bank? Clause 53(3)(a) forbids any

province and the federal government to purchase shares of the capital stock of a bank.
[DOT] (11:10 p.m.)
Then, I think I cannot agree with the minister on this subsection (3)(e). I agree with the hon. member for Nanaimo-Cowichan-The Islands who said that the federal government should not, through this subsection, be prohibited to hold shares, or a share of the share capital of a bank. I think that neither should the provinces be prevented from doing so.
That is why I would like to move a subamendment. I have not yet written it but I would like-it will not take long to write it -to move a subamendment which would strike out from subsection (3) paragraph (a) not only the words "to Her Majesty in the right of Canada", but also the words "in the right of a province". The subamendment would then mean that the whole paragraph (a) of subsection (3) is struck out. I therefore move that paragraph (a) of subsection (3) be struck out.
Then I believe, that it could be used as a subamendment, since the amendment only strikes out the words "Her Majesty in the right of Canada" and I would also strike out "or in the right of a province", and finally when both are stricken out, paragraph (a) of section 3 has more or less been been removed.
Then, I believe that my hon. friend from Nanaimo-Cowichan-The Islands will have no objection, if the federal government is allowed to hold shares in a chartered bank, to let the provinces also have some.


An hon. Member:: There is a difference.


Gilles Grégoire: One can perhaps claim that there is a difference, but we will wait and see what will be the argument brought up by the hon. member to the effect that there is a difference.
There is obviously a difference in this that the federal government and the provincial government are not one and the same government. But I do not see that other point where there is no difference, and I do not see why there should be objections to allow the provinces to own shares in a bank and even to own a chartered bank. Furthermore, Mr. Chairman, one argument in support of this would be the following; The federal government, and the provincial governments, have huge amounts deposited in chartered banks, on which they draw no interest. It has also been mentioned in the committee on finance, trade and economic affairs. I believe the amount is almost $200 million if I remember correctly. That money belongs to the
March 20, 1967

federal government and is deposited in the chartered banks, but the federal government does not receive any interest.
Now, there are too many privileges granted. If the federal government is entitled to own shares, to own a chartered bank, well then it could allow itself to deposit such amounts in its own bank, and thus not lose substantial amounts in interest, as when this money is deposited in banks that are privately-owned institutions.
I therefore wish to introduce an amendment to the main amendment which excludes from the formal prohibition specified in subclause 3, to own shares in a bank, the federal government and the provincial governments.


David Réal Caouette: Mr. Chairman, I do not think it is in the interest of the federal government to own one or several shares in any commercial bank.
In fact, the federal government owns or rather the parliament owns the Bank of Canada. That is why we do not have to buy shares from commercial banks. Moreover, it is not for the government to do business or to be interested in doing business.
Now there is a difference between this attitude and preventing a province from owning its bank or from buying shares from a commercial bank. The provinces have no power on the Bank of Canada, whereas the government or the federal parliament have complete control over it. As for us, we suggest that the Bank of Canada own a branch in every Canadian province to process of to finance provincial, municipal and education projects in these provinces.
So I do not believe that the federal government would be justified in buying commercial bank shares but it should, for instance make full use of the services of the Bank of Canada owned by the Canadian people. That is something the federal government and the federal parliament have the means and the power to do. Let us use our powers without buying shares which would not in the least give us ownership of a bank, but let us allow the provinces the opportunity, the possibility, the power and the permission to purchase bank shares or to establish provincial banks to serve their own ends and their people.


Gilles Grégoire: Mr. Chairman, I should like to add just one word and state that I second the member for Villeneuve when he says: "I do not see how the federal government could need to invade the area of the chartered banks since they already have the Bank of
Bank Act
Canada. All they need to do is to give the Bank of Canada the privileges the chartered banks have. It would be much better than to buy shares of another bank. They would have their own.
All he has to do is leave to the Bank of Canada the same privileges as those which are vested in chartered banks: he would not have to buy stock in another bank, for he will have his own.
On the other hand, I would not object to withdrawing from the bill this interdiction to secure stock affecting the federal government especially for exceptional cases which may occur, such as in the Mercantile Bank, where American interests will have to remit within five years 75 per cent of their shares. If they do not succeed in selling them in the meantime, it might prove useful for the federal government to act directly.
That is why I did not see any objection to withdrawing the whole paragraph a of subsection 3 from clause 53 and for that reason I did not leave in this subsection 3 the limitations prescribed to the federal government.


John (Jack) Henry Horner: Mr. Chairman, a few more words with respect to this clause. If what the minister says is correct the Canada Development Corporation may be involved. Would the minister assure us that the Canada Development Corporation will get off the ground in the next five years? I was interested in his remarks, because he suggested that this was the idea of the former minister of finance and he did not take full credit for it.
There is some doubt about this in my mind and I would like to know whether the Canada Development Corporation is going to be founded. Does the minister hold it up as the possible saviour of Canada's good name and reputation in respect to the exchange of the charter of the Mercantile Bank between the Dutch and American interests? Does the minister regard this as a possible saviour for the good name of this government in world banking and trading relationships?
Another question I would put in all seriousness is this. Over a number of years we have had treasury branches operating in the province of Alberta. While I have never been a depositor in these banks I have used them from time to time and I say without hesitation they have played a part in the banking world of Alberta. Many sound, financially interested people in that province would like these treasury branches to obtain a charter to do business elsewhere. Though the branches

March 20, 1967
Bank Act
are solely owned by the province, would the minister allow them to obtain a charter because of their long standing reputation in Alberta?
[DOT] (11:20 p.m.)
I would have thought that members of the Social Credit party, who are long on banking and finance, would be interested in this clause. From time to time we hear them making utterances in that province, suggesting that these banks be chartered in Canada to be allowed, using the party's words "to multiply or make money", so that these institutions may serve the people of Alberta. I should like to hear the minister on these three questions, before passing this clause.


Mitchell William Sharp: I only made notes of two questions, the first being about the Canada Development Corporation. This is part of the government's policy, to which I am firmly committed and in which I believe strongly. The Canada Development Corporation would be a very useful addition to the financial institutions serving this country.
I qualified the answer I gave earlier, because I said that if the Canada Development Corporation was organized along the lines which had been suggested by my predecessor in office, the present senior Minister without Portfolio, then it would be empowered to buy the shares of the Mercantile Bank; if, however, it were organized as an agency of Her Majesty, which was not the idea of my colleague, then it would not be able to buy those shares. That is why I made the qualification. I can assure the hon. member that that remains an important part of this government's agenda.
Speaking of the treasury branches of the government of Alberta, if an application were to come from-I do not know from whom it would be-the government of Alberta for a bank, I do not know what this parliament would do with such application, I would think it would be rejected, on the grounds that we do not want any province running a chartered bank. Indeed that is what the legislation we are considering says. Parliament, of course, can override the Bank Act, if it wishes to, to enact a special statute enabling the treasury branch to be organized as a chartered bank. It would be perfectly possible for a group of entrepreneurs, private citizens, to take over that enterprise, apply for a charter, and operate it as a chartered bank. That would be perfectly possible and would probably commend itself to parliament.

Those are two points. I regret that I have forgotten the third raised by my hon. friend.


John (Jack) Henry Horner: The minister asked me a question, Mr. Chairman. May I answer?


Herman Maxwell Batten: Before the committee goes any farther I wish to say a word about the subamendment moved by the hon. member for Lapointe. The amendment moved by him purporting to amend the amendment moved by the hon. member for Nanaimo-Cow-ichan-The Islands I think should not be accepted at this time because the subamendment does not amend the amendment. The subamendment would have to amend by leaving out certain words, by inserting other words or by adding other words. I would point out, too, that the subamendment as proposed by the hon. member for Lapointe, while slightly defective in form, might well be accepted as an amendment to subclause 3 if these corrections were made.
At this time I cannot accept as a subamendment the proposition moved by the hon. member for Lapointe.


John (Jack) Henry Horner: Can the minister give an assurance on the other point I raised? Can he assure us that the Canada Development Corporation will, in fact, get off the ground? Will we be able to place our hope in it? Will it really carry out our aspirations? After all, the setting up of the corporation was proposed some three and a half years ago. Does the government intend to bring in the necessary legislation this session, or in the next session? I suppose that as long as the session continues the government will continue to place material on the order paper; we see it lengthening every day.
Before we pass this clause, perhaps the minister will tell us whether he is still committed to this idea. Will it be before parliament during the coming session as, one might say, a fitting centennial project, if the hon. gentleman firmly believes in it? Or shall we have to wait and hear about it at the next election?


Mitchell William Sharp: The answer to that is, yes; it is the intention to bring this forward in the next session.


William Arnold Peters: I was surprised by two things the minister said. He told us he was opposed to provinces purchasing shares in chartered banks, though he agreed that individuals involved could set themselves up in such a way as to do so. I was more concerned about his
March 20, 1967

comments on the Canada Development Corporation. He felt that because this was not directly an agency of the government, as crown corporations are, one of the roles it could play would be to purchase the outstanding stock of Mercantile Bank. I suggest this is one heck of a way of neutralizing the corporation and making a real eunuch of an organization which it was hoped would become a vitally important institution for the economic development of this country.
I agree with the hon. member for Acadia that this is an important clause affecting the responsibility of Canada. We have reached a simple decision to get control of our financial institutions, and two banks have been affected, one under foreign ownership. We have decided they will be given a special dispensation to expand so that they can sell on a reasonable basis.
Mr. Chairman, in my opinion it will only be possible for them to sell either to the government directly or to a crown corporation. I suggest that what we appear to be saying to the Americans is not what is actually being said. This clause would make it impossible for the Canadian government to expropriate at the proper time the shares in the Mercantile Bank which are outstanding, in terms of the Bank Act, and as a result they will be sold at bargain basement prices to the other chartered banks, if those banks are interested in them.
[DOT] (11:30 p.m.)
I believe this is not in keeping with the standard Canada has had in expropriation in other fields. I believe there is little difference between the expropriation that may be necessary to get control of the stock of Mercantile Bank and expropriation to get control of other property which the government thinks it is desirable to have in the right of Canada.
Therefore I think the minister is limiting not only this government-and this government will not be in office too long-but is also limiting future governments which may desire to honour the intent of the Canadian people to get control over their own institutions while at the same time paying a reasonable price and, if necessary, getting control by government expropriation. The minister is tying the hands of all governments for at least 10 years ahead.


Mr. More:: I am left confused by the minister's answer to the hon. member for Acadia. He spoke about the Canada Development Corporation being able to buy the stock of a bank. Is it not true it can buy only up to 10 per cent?
Bank Act


Mitchell William Sharp: That is right.


John (Jack) Henry Horner: What is the effect of this clause on the newly chartered Bank of Western Canada? I am under the impression that one concern owned something like 53 per cent of its stock, and recently that figure was reported as being 51.5 per cent. Has that concern to sell a certain percentage of its ownership?


Mitchell William Sharp: So far as I know this clause has no effect upon the Bank of Western Canada. Clause 75(2)(g) has; except of course in due course the Bank of Western Canada will have to comply with the requirement that no shareholders shall have more than 10 per cent of the stock and, of course, so far as any shareholders do have more than 25 per cent it is subject to the restrictions in clause 75(2)(g).


John (Jack) Henry Horner: Would the minister explain what he means by "in due course"? Before the recent transfer of Bank of Western Canada stock to a concern in Montreal I had the impression that three individuals in Toronto owned 53 per cent of the stock. Does this clause mean they will have to reduce their individual ownership to 10 per cent per person, and 10 per cent per company? Is there some time limit for all banks, and is there some special time limit for that bank?


Mitchell William Sharp: "In due course", in the case of the Bank of Western Canada, means in 10 years. With respect to the other question, no transfer of stock in the Bank of Western Canada was involved in the transactions the other day. As I understand it, those were transactions in the stock of the British International Finance Corporation.


John (Jack) Henry Horner: Why is the Bank of Western Canada being given ten years to dispose of stock? In the standing committee I asked the inspector general of banks whether, if a group of people raised $13.5 million, they would get a bank charter, and would he feel it his duty to examine the management of such a group. In this case the group is the B.I.F. corporation. That official answered that this group were examined and that their banking ability, management, and experience were considered to be of a high degree.
Since all this has taken place we have seen what in effect is the direct opposite. The former governor of the Bank of Canada has practically dissociated himself from the B.I.F. group. We have seen the Toronto Stock Exchange place the B.I.F. group in trust for a period of two weeks. We have seen huge trading in B.I.F stock. All this is based on an examination of the capability of their man-

March 20, 1967
Bank Act
agement by the inspector general's branch. If I am mistaken, I should like the minister to correct me. A special order in council was passed by the minister which in a sense makes a special provision to deal with this concern to grant it 10 years to divest itself of a huge percentage of its interest in this bank. Surely the minister should have something to say concerning the reason this special provision was given to these people, who since have proven to the investment world that they were not capable of raising the money, and were not capable of managing their financial interests. They appeared before the committee on finance, trade and economic affairs and suggested they would have to go to the United States in order to obtain the capital.
I wonder why the minister would suggest that the government should pass such an order in council in respect of this shaky concern, this poorly managed concern which reached out for more than it actually could control. This concern not more than a year ago guaranteed to the committee that it could put up $6.5 million. Yet, when they actually had to put up the money they were $1,400,000 short. Last July or August the government of this country, without even ascertaining whether or not the $1.4 million was there, took upon itself to provide an order in council to get around this particular clause in the bill, which would grant this concern 10 years to divest itself of its interest. The story that was spread across Canada was that this management was so sound that we should not force it to divest its interest within three years, because it had to get the bank off the ground.
I say that this bank is not off the ground yet. Mr. Coyne, the former governor of the Bank of Canada, made quite clear last fall that there was some hanky panky going on in respect of the B.I.F. group. I should like to know why last July the minister felt it was necessary to give this poor group of financial experts 10 years within which to divest themselves of their interest. They should have been forced to do it within three years. In fact I am sure that all Canadians across the country, if they knew the complete story, would realize that this group should not have been given the charter in the first place. I am certain that if Mr. James Coyne had this to do all over again he would never have been sucked in. I use that expression, because I know everybody knows what it means. He was sucked in; his name was used to sell shares all across western Canada. Now he would like to get out. He displayed very, very

shrewd business judgment by investing only $7,500 in it.
I should like to hear from the minister a further explanation concerning why a special order in council was granted to allow this company 10 years within which to divest itself of its interest when it could not even put up the full amount of money which the committee on finance, trade and economic affairs was assured would be put up and would be readily available.
[DOT] (11:40 p.m.)
I should like the minister to explain why the 10 year period was granted to this shaky group, which has proven itself to be made up of poor financial managers. Surely the committee is entitled to some kind of reply by the Minister of Finance as to why he took it upon himself to ask the Treasury Board and the governor in council to grant this group of poor managers a 10 year period in which to divest itself of this interest.
We are setting a precedent. It is all very well for hon. members on that side of the house to laugh and clap their hands, because they are trained seals; but we should remember that we will be granting charters for years to come. Will every group or individual who makes a request to this government be permitted 10 years to divest themselves of their interest, or will they have to qualify in some way for that longer period? I am sure many of these groups could qualify under the same provisions as B.I.F. qualified. I am sure anyone who can raise $13.2 million could qualify.
Will the minister indicate whether all charters to be granted from this time on will carry the 10 year term during which the interest may be divested, or is there some special regulation, clause or rule which applies to this period as opposed to the five year period? I am sure that I can continue to talk about this particular subject until the minister is prepared to give us some answer.


Mitchell William Sharp: There is a very simple explanation. If the hon. member will look at clause 59, which we will come to in due course if he has a little patience, he will see that it provides that all new banks will be given time to comply with the provisions of clause 53. That was the practice followed in the case of the Bank of Western Canada and I think it will be the practice followed in the case of all new banks which become established in Canada. It is my belief that this is a good practice because it is useful to have new banks in Canada owned by Canadians. The Treasury
March 20. 1967

Board and the governor in council in order to facilitate the establishment of those banks should allow some time for the shares to be distributed.
We have not had a new bank established in Canada for such a long time that this may seem an unusual provision. I do hope it will become increasingly common for groups to apply for charters, and that they will be granted some leeway to distribute their stock as widely as the law intends.


John (Jack) Henry Horner: I do not see any reference to 10 years in clause 57 such as was the case in respect of the B.X.F. group, which has proven to have consisted of of poor financial managers. It was given 10 years, whereas the Mercantile Bank, which does not have to prove its ability in financial management, was given only five years. The B.I.F. group must prove itself in the financial field yet it was given 10 years. Will the minister give us some reason for this difference?


Mitchell William Sharp: The Mercantile Bank does not have to dispose of any of its shares, if it does not wish to. If it wishes to remain a small operation, as it is today, it does not have to distribute any shares. The provisions of the law, to which we have not yet come, place restrictions upon any bank whose shares are owned to the extent of more than 25 per cent by any single individual, but if the bank chooses to remain small it may do so and retain 100 per cent of its ownership.
What we are talking about here is the incorporation of a new bank in Canada. I do believe that there should be some discretion to assist Canadians in establishing new banks. I believe we need more new banks and there will be many applications. I doubt whether it will be possible at the outset to distribute the shares so widely that all the banks will be able to comply from the first day with the 10 per cent requirement. It seems to me that under the circumstances 10 years is reasonable. Of course this is always a question of judgment. All these orders have been tabled for a long time. They were discussed to some extent in the committee on finance, trade and economic affairs.
We are not now confronting parliament with some very special, hidden arrangement. The details have been well known. They have been discussed in the newspapers and elsewhere. While some questions may be raised about some of the shareholders, it is hardly surprising that some difficulties should be ex-
Bank Act
perienced in getting a new bank started. This is one of the reasons why I doubt that a lot of the argument we have heard today, about the enormous profitability of banks, is justified. We are seeing evidence that it is very difficult indeed to get new banks started. Therefore I believe we should encourage them as far as possible, and permit them to have in excess of 10 per cent of their shares in the hands of individual shareholders. To me this seems a very small concession to make in order to get a bank successfully established.


Some hon. Members:: Question.


John (Jack) Henry Horner: Mr. Chairman, hon. members seem to be in a great hurry. Surely we are not in any particular hurry. Finance is a very important subject. We are dealing with every facet of the Canadian economy. Hon. members on the other side are making great deal of noise. I wish they would rise and speak so that I could hear them more clearly. The microphones should be turned on and then all of us could hear them more clearly.
I should like to ask the minister why this restriction was put on the Mercantile Bank in particular. Was there a limit put on the Dutch interests, then we must conclude that the gov-back in 1953? If a limit is put on the U.S. interests, then we must conclude that the government is anti-American. I would not like to think that a country as big as Canada but dependant upon the economy of the U.S. and its ups and downs, as has been proven in the past, has acted in an anti-American manner by placing a limit on the size of a charter that was granted back in 1953 and forcing that company to divest itself of 75 per cent of its interests.
This suggests to me that the government is definitely anti-American. If the minister wishes to deny that, then I hope he will do so because I am very proud of our good relations with the U.S.
There is another question with regard to the management of the B.I.F. group which I should like to address to the minister. Would he admit now that only a very cursory examination was given by this department to the financial ability of the B.I.F. group before a licence was granted to the Bank of Western Canada? I would like to think that the minister gave this question a lot of thought before the charter was granted and the licence issued by his department.
We have seen Mr. Coyne, who is a very honest individual. I do not think there is a

March 20, 1967
Bank Act
man in Canada who would question his honesty. I am not saying his judgment is always correct but I believe that his intentions are honest. However, he certainly did not do the Bank of Western Canada any good by raising the furore he raised last fall. He did maintain his basic integrity. He could not live with the shakiness of the B.I.F. group which is still $1.4 million short.
[DOT] (11:50 p.m.)
I wonder if the minister will now admit that his department should have made a much more thorough examination of the financial ability of that group before he permitted it to have a charter? I know several ministers with whom I have talked in private who have told me that a bank charter is a very special and very valuable commodity in this country of ours. Just the charter alone is a very special and very valuable commodity. Surely, now that we have seen the difficulties into which the B.I.F. group has fallen, when we have seen that they are $1.4 million short, the minister could honestly declare to this house that in the future a much more thorough examination will be made of the financial management capabilities of a group asking for a charter. Surely this is not asking too much of the minister before this clause passes, to say that he is now convinced that the examination of the management of the bank was not enough. The examination should have been far more thorough.
The minister should be able to say that in the granting of bank charters in the future a much more detailed study will take place before the inspector general of banks comes before a committee and says, "Yes, the committee can rest assured that the management is sound and has ability". We even saw Mr. Stevens, the main spokesman for the B.I.F. group, come before us eight months later and say he was a little short. He wanted to go down to the United States to pick up the $1.4 million because there he would get the money and also experienced advice. Surely there has been a shortfall in the examination the minister's department has made. I should like him to say that in so far as future charters are concerned, there will be a much more thorough examination.
The minister may ask why I am so concerned. I am concerned because very close to

$6.3 million was money invested from western Canada, which money was invested on the strength of the understanding that the management had been examined, that James Coyne was in a group of very wise, shrewd financial men. This is why I am so concerned. I am firmly convinced that we westerners, as James Coyne said five months ago, were sucked in along with him. Now we are going to have to ride that out.
We have heard lately that the stock has changed hands and gone to Montreal from Toronto. I ask the Minister of Finance, has the inspector general of banks or his department examined this new group to see whether they are capable of managing a bank? Can we expect within a few weeks, five months or five years, that the whole bundle will go somewhere else? Surely the minister now realizes that his department did not examine the management ability of this group. As a result of that, the people of western Canada invested $6.3 million, and they find they have not had the money to use. It has been placed in trust, so to speak. The shares were bought at $15 per share, and the value has dropped substantially below that. If those shares were placed on the market, that would be the result and nobody on that side of the house can deny it.
We were sucked in, along with James Coyne, who invested only $7,500 in the bank. His intent was honest, but he found he could not live with the Stevens group from Toronto. Last fall he did not ask any questions. He did not point out anything factual to the committee, but he felt firmly this was going to happen. He raised a great furore and cleared his own name. But there is still a huge amount of money invested in that concern in western Canada. Does the minister realize that there was a shortfall in that concern which was examined by his department? Can he assure the house that before granting charters in the future a more thorough examination will take place? Because that is an important point.
Charters were granted in B.C. and others may be granted in Quebec and Ontario. I would not like to see the minister agree to granting a charter to a firm which had ten years to divest itself of its interest among aunts, uncles and brothers-in-law. That is what Mr. Stevens did in Toronto, according to the evidence given in the committee last year. He spread his investment around in this way. Therefore I should like the minister to assure
March 20, 1967

Bank Act
the committee that in granting further charters his department will make a much more thorough examination of the firm in question, so that we as legislators are assured that people enticed to join the firm in the years ahead can do so with confidence.
The B.I.F. group sold 50 per cent of its interest to a concern in Montreal. Let us suppose that the concern in Montreal does not get started. Could the minister step in under this clause and buy up that 50 per cent, place it in trust and hope to entice some financial experts to move in? No, he could not. This clause would limit the government to buying only 10 per cent, which would not be enough to bail out the B.I.F. group. I think this clause needs further study and that the minister should comment on the anti-American approach the government appears to be taking on the Mercantile Bank.


Gilles Grégoire: Mr. Chairman, I rise on a point of order. The Minister of Public Works and government leader (Mr. Mcllraith) has made a rather firm commitment at ten o'clock to the effect that we would discuss the bill for one hour or so and then report progress. Two hours have now elapsed I think and the minister had stated that if no noticeable progress had been made by eleven o'clock or so debate would be adjourned until tomorrow.
We have been discussing the bill for two hours. In my opinion the progress accomplished since ten o'clock is not too noticeable since we have not tackled any new clause; instead we reverted to clauses already considered.
Since the hon. Minister of Public Works is not here, I want to know who replaces him. To whatever minister who replaces the government house leader, I ask if he is ready to rise and comply with the rather serious undertaking on the part of the Minister of Public Works and move the adjournment of the house until tomorrow?


Herman Maxwell Batten: The hon. member for Ti-miskaming.


Gilles Grégoire: A point of order, Mr. Chairman.


Herman Maxwell Batten: Is the committee ready for the question?


Gilles Grégoire: Mr. Chairman, it is not a question of being ready or not. It is midnight and the Minister of Public Works had made a formal commitment. I am wondering who is replacing him and whether he intends to honour the commitment made this afternoon by the government house leader.
[DOT] (12:00 midnight)


William Arnold Peters: The minister raised an important question in which I am vitally concerned. A few moment ago he answered questions asked by the hon. member for Acadia.


Gilles Grégoire: On a question of privilege, Mr. Chairman.

Mr. Chairman, I rise on a question of privilege.
The government house leader made a commitment. There were other ministers, at that time, who are still in the house. He said that if no substantial and appreciable progress was made, he would move the adjournment around eleven o'clock, we have been discussing for two hours already.
Did the minister make that proposal in order to fool us? That is my question of privilege. Furthermore, the Minister of Public Works, who made that commitment, is no longer here to answer. So we might go on until five o'clock tomorrow, without making any progress, and as the minister is no longer here, there is no one to answer now.
So here is my question of privilege: a commitment was made by a cabinet minister, with whom all the others are solidary. I ask them, on the basis of this ministerial solidarity, whether they are ready to honour that commitment made by one of their colleagues and whether or not any progress has been made. If not, let us have the adjournment.
That is my request and I think, Mr. Chairman, that my question of privilege should be taken into consideration by the other members of the cabinet.


Edward Nasserden: I think the hon. member's question of privilege is well taken. In answering some questions the Minister of Finance brought up the relationship between some shareholders and directors of the Bank of

March 20, 1967
Bank Act
Western Canada. I should like to take a look at the record, when it is official, to follow what has been brought up.


Herman Maxwell Batten: I am having trouble relating the remarks of the hon. member to the question of privilege.


Edward Nasserden: The relationship is that because of answers made the debate has been prolonged.


Herman Maxwell Batten: Is the committee ready for the question?


William Arnold Peters: Mr. Chairman, I am interested in a matter the minister has raised.


Gilles Grégoire: On a question of privilege, Mr. Chairman. I refer to the same question of privilege. I see that the government house leader has arrived and I think the question I have raised requires an answer. We have a definite commitment from the house leader about what would happen if he finds we have made progress-and I do not think the majority of the committee thinks we have. He should respect that commitment.


George James McIlraith: I shall be glad to deal with the subject. The hon. member, who heads a party that is unanimous in the house in that it has only one member, gave a firm commitment to me that he intended to finish the committee stage of the bill tonight, that there would be no objection from him and no delaying in the committee of the whole procedure, and that it would finish tonight. In the light of that I am mystified by the question of privilege he has now raised. Some progress has been made, notwithstanding the hon. member for Lapointe. I shall be glad to carry out my commitment exactly as it was made with other members of the committee. I recognize the lateness of the hour, but I also recognize that many members want to proceed and are trying their best to proceed with the discussion of this bill. It is just a matter of what the committee wishes to do in the circumstances in which we find ourselves at the moment.


David Lewis: On a point of order. May I ask the minister how long he intends to request

the committee to sit? It is now after midnight. I will not enter into a debate as to precisely what the commitment was, but it is my impression that the kind of progress we have made would not have justified continuing as long as we have. It would certainly not justify our continuing beyond midnight. But I am not arguing about that. I should like to know from the Minister of Finance or from the leader of the house whether it is intended that we sit until the bill is passed, which may be three or four o'clock in the morning.


George James McIlraith: No. I would think it has to be made clear, very quickly, that there is a will on the part of hon. members to get down to the discussion of clauses, and some apparent progress has to be made. Otherwise I will move the adjournment.


Gilles Grégoire: Mr. Chairman, on the same question of privilege. I would like to refer to a statement made by the Minister of Public Works (Mr. Mcllraith.) When he tells me that I agreed that we could finish the bill tonight, I must tell him that I am not responsible for what happens in all corners of the house.
Mr. Chairman, I committed myself to the same thing as the Minister of Public Works namely that if noticeable progress was made within a few hours, we would be ready to finish examining the bill. But when it looks as if this might go on all night, until six o'clock in the morning, then, Mr. Chairman, I certainly did not agree to that, I never told the minister that I was ready to continue until six o'clock in the morning. I think it would have been better for the Minister of Public Works to report faithfully what has been said or not to have asked us our opinion outside the house.


George James McIlraith: I would point out that there
is no question of privilege in what the hon. member for Lapointe has said. But as to the substantive question as to whether or not the committee should rise now, I am quite prepared to act in a way which, I hope, will meet the wishes of hon. members, because I recognize the lateness of the hour. Does the committee feel there is any possibility of making any progress by continuing?


Some hon. Members:: Yes.
March 20, 1967


John (Jack) Henry Horner: No, no.


George James McIlraith: Then, Mr. Chairman, I think I should ask you to rise and report progress.
Progress reported.
[DOT] (12:10 a.m.)


George James McIlraith: Mr. Speaker, I move that this house do now adjourn.
Bank Act


Mr. Depuly Speaker:: Maybe I should point out to the house that there will be no other adjournment motion, and therefore no proceedings on the so-called late show.


Stanley Howard Knowles: We have had it.
Motion agreed to and the house adjourned at 12.15 a.m.