March 16, 1911

LIB

Daniel Duncan McKenzie

Liberal

Mr. McKENZIE.

He says that the great offence I committed the other day was to unite his name with that of the leader of the opposition. '

Topic:   PRIVILEGE-MR. NORTHRUP.
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CON

William Barton Northrup

Conservative (1867-1942)

Mr. NORTHRUP.

No such statement will be found on my part.

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LIB

Daniel Duncan McKenzie

Liberal

Mr. McKENZIE.

It will be found on 'Hansard' that he said he would not get on his feet were it not that I united his name with that of the leader of the opposition.

Topic:   PRIVILEGE-MR. NORTHRUP.
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CON
LIB

Daniel Duncan McKenzie

Liberal

Mr. McKENZIE.

Then, he went on to quote scripture. But there is one quotation from scripture which, had he used, he would have shut my mouth completely, and that is the reference to yoking an ox with an ass. Had he cited that as a reason why I should not unite his name with that of the leader of the opposition I would have nothing more to say. I did not get very much information or satisfaction out of the hon. gentleman's repeated speeches. If they are a question of privilege all right, but it is another matter altogether if they are merely made to keep my hon. friend in the limelight, and give him an opportunity to make little fiery speeches which I think is all the privilege he wants. Theire is another apt illustration that I might put on record in connection with the hon. member for Hastings. A Scotchman had a certain quadruped which he wanted to catch, and he chased it into a house in which there was only one window, and that a pane of glass 9 by 10. When he got the pig into the house he thought: Well, I've got you now, but the pig was not to be trapped, and he jumped through the 9 by 10 window. The Scotchman was perplexed, but he looked after the pig and said: Well, I lost you, but I've got your measure; it's 9 by

10. Well, I have got the measure of the hon. member for Hastings, but it would be tremendous extravagance to say be is 9 by 10 for I believe mathematically speaking he is nearer to 3 by 2. I care nothing for what the hon. gentleman says, and that is all the privilege I require.

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LIB

WAYS AND MEANS-THE FARMERS' BANK.


The House resumed the adjourned debate on the motion of Mr. Fielding that the House go into Committee of Ways and Means, and the amendment of Mr. Henderson thereto.


CON

John Wesley Edwards

Conservative (1867-1942)

Mr. J. W. EDWARDS (Frontenac).

Mr. Speaker, I regret to say that there was a branch of the Fartaiers' Bank established in my county in the village of Sharbot Lake; That there were 76 shares of stock held by residents of the county of _ Frontenac, and that with the double liability caused to these shareholders a loss of $15,200. That, added to the money placed on deposit in that one branch entailed a loss to certain residents of the county of Frontenac of some $60,000, which _ although a relatively small sum in comparison with the loss sustained in other pairts of the province is nevertheless a serious blow to that part of the county as it was distributed almost entirely over two rather poor townships. But, the sadness of the whole picture is only equalled by the splendid courage' exhibited by many aged men and women in bravely facing the loss of all they possessed and of being brought down to penury and want. I desire, Sir, to express in the strongest possible terms my appreciation of the resolution proposed by the hon. member for Halton (Mr. Henderson), asking for a Royal Commission, and in doing so I am but endorsing the expression of opinion of all the people in my county who have sustained loss through the failure of this bank. I support this resolution, Mr. Speaker, in the hope, that if a commission should be appointed certain evidence would be brought to light which would lead to the recovery of some of the money which has-been lost, and thus to a certain extent recoup those who have suffered. I also support the resolution in the hope that this Royal Commission may obtain some information which may enable it to give to the Minister of Finance and to the House some definite information which will lead to the improvement of the Bank Act, and in consequence prevent similar loss in the future. Before discussing the Farmers' Bank in particular, I desire to make a few general observations in regard to the working of the Bank Act and to certain losses which have been sustained, by bank failures from time to time in Canada. From 1880 to 1906 there were 43 chartered banks established in Canada, and of that number 12 or 25 per cent failed, and others only saved themselves from failure by amalgamation. In the neighourbood of 30 per cent of all the

banks which have been established since 1880 have failed and one half of these failures have occurred since 1896 during the time the present Finance Minister has held office. Surely, Sir, it is a sorry commentary on our banking system and on this government, that the percentage of failures of chartered banks in the Dominion of Canada has been greater since this administration came to power in 1896, and under the care of the present Minister of Finance, than in any other country in the world. Mr. H. C. McLeod, former general manager of the Bank of Nova Scotia, commenting on this deplorable state of affairs, used these words:

Most, if not all the above mentioned failures were fraudulent, and it is now plainly evident that a few hours examination by a skilled banker would have disclosed an insolvent condition in any one of these banks years before it collapsed.

This criticism was made some years ago and had the Minister of Finance acted upon the suggestion of this eminent financier, Mr. McLeod, endorsed,- as it was, by many others from one end of the country to the other, I firmly believe that the people who are to-day suffering from the failure of the Farmers' Bank would not have sustained loss. The monthly bank statement for the month of December last shows the note circulation of all our banks in Canada to be $87,694,840. To what extent I may ask is that note circulation protected? The deposit with the government known as the Bank Note Redemption Fund, is only a fraction of the note circulation, and that is no use in saving a bank from failure in a time of stringency, because it is not available until the bank has closed its doors and gone into liquidation. The amount of it is so extremely small that it is practically of no use. So far as the Rest or Reserve Fund is concerned, the Farmers' Bank does not appear to have had any. The double liability of shareholders is represented as a very great guarantee of safety to depositors, but not only in regard to the failure of the Farmers' Bank, but in regard to the failures of the various banks which have taken place in this country for years past, the double liability of shareholders is absolutely no security whatever. That has been demonstrated time and again. The assets of the bank are the only guarantee that depositors have, and these assets, unfortunately, are often worthless or of such a kind that it is impossible to realize on them in time of need. What guarantee, I would like to ask, i3 afforded by the double liability of the stock of the bank when most of that stock is held by the bank itself? Take the case of the Banque Ville Marie, which failed in 1899, and was finally wound up in 1905; the total claims of depositors and noteholders were $1,364,000, and only $96,-

000 was collected from the shareholders on account of the double liability. Why? Because about $200,000 worth of the stock was held by the bank itself, having been bought up to support the price of the stock in the open market. And the greater part of the $300,000 of stock remaining was held by people from whom the double liability could not be realized-or, at least, was not collected. The paid up capital of this bank was $500,000, and although the Act restricts the amount of the note circulation to its paid-up capital, yet at the time it failed and for some time previously the note circulation was in excess of the paid-up capital. This is managed by the parties making false returns to the government, which, apparently, makes no effort to verify the bank returns made to it. This has occurred time and again. Another point in the failure of the bank just referred to is that the sum of $33,000 went to defray the expenses of liquidation and law costs, a very exorbitant sum, especially when you consider that the creditors, including depositors, received only 30 cents on the dollar.

Another evidence of the looseness of the Fielding Banking Act is furnished by the failure of the Bank of Yarmouth in 1905. This failure, occurring about the time this Farmers' Bank was seeking to get. incorporated and before its certificate was granted, should have caused the Finance Minister to exercise caution. In regard to the Bank of Yarmouth, the main, if not the only cause of failure, was found in the large loans and advances to one mercantile house with unhonoured drafts for $249,550 at the time of suspension, and a total indebtedness to the bank amounting to within a very few dollars of half a million. Take the case of the Ontario Bank, which closed its doors in October, 1906. I may say that was about the time when the hon. Finance Minister was receiving warnings in regard to the Farmers' Bank. The ' Monetary Times,' speaking of the failure of the Ontario Bank, said:

This is the story of as miserable a fiasco aa contemporary Canadian history affords.

Before the failure was made known to the shareholders, the Bank of Montreal made a private agreement whereby it acquired the business of the Ontario Bank for $150,000. By this deal it bought a business with over $12,000,000 of deposits, of which $3,000,000 were without interest, and a capacity for note circulation of $1,500,000. What was the cause of failure in that case? It bears a very close resemblance to the cause of failure in the Farmers' Bank-speculation by the manager, which began in 1901, but was covered up by such terms in the returns made to the government as ' current loans,' ' other securities,' &e., which the Finance Minister accepts, apparently, without question and without the slightest investigation

or inquiry as to their character. No less than $1,784,403 was lost through the speculation of the manager of the bank, and $230,091 by the bank purchasing its own stock in the open market, a practice which, as I have shown, makes the double liability a fallacy, a delusion and a snare. There are hundreds of men in Ontario who believe that, in the interests of the shareholders and of the people in general, there should be a Royal Commission to inquire thoroughly into all these bank failures that have taken place during recent years. The incapacity of the Finance Minister to deal with large financial problems effectively has become painfully evident to hundreds who have lost their all, and the hon. gentleman's indifference has aroused throughout the country the greatest indignation.

It looks to me as if, in the winding-up proceedings of these broken banks, the ordinary shareholder gets unmercifully fleeced, while the solvent banks get whatever assets are worth having. But what can one expect? The Fielding Banking Act is framed to meet the wishes of the Bankers' Association, and grants powers to that association which should be possessed only by the government. Take, for instance, section 117 of the Bank Act. That section authorizes the Bankers' Association, if a* bank suspends payment in specie or Dominion notes of any of its liabilities as they accrue, forthwith to appoint a curator to supervise the affairs of such bank, and at any time to remove the curator and appoint another person in his stead. Thus, the affairs of the defunct bank are placed entirely in the hands of its competitors- surely a very illogical proceeding. The effect is that these banks purchase whatever assets are worth having at their own price. The Bankers' Association also have the naming of counsel, who makes the application at court for the winding-up order, and they appoint the liquidator as well as the curator. In the case of the 'Sovereign Bank, the public knew nothing of the condition of the bank until the morning after it was swallowed up by some of the larger banks. The directors entered into an agreement with thirteen banks, which declared the Sovereign Bank, with $20,000,000 of assets and over 80 branches, insolvent, transferred all that was of value to those thirteen banks, allowed them six months to look over the spoils and throw out anything which carried with it the appearance of liability, leaving the helpless shareholders to bear the brunt of the burden. At a meeting of the shareholders of the Sovereign Bank, a motion was submitted asking for a government investigation, but the president refused to put the motion, and said that he held proxies for the stock controlled by J. P. Morgan & Company of New York, and, if necesary, would exercise his voting power under these proxies to prevent an investigation.

Topic:   WAYS AND MEANS-THE FARMERS' BANK.
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CON

John Wesley Edwards

Conservative (1867-1942)

Mr. EDWARDS.

not issue in this matter that the Finance Minister had been deceived, and that we should, therefore, not hold the government responsible. He says that Travers was the agent of the shareholders, and that we should not reimburse these shareholders whose agent Travers was, but he failed entirely to answer the point raised by the leader of the opposition (Mr. Borden, Halifax), when he referred to the depositors who certainly were not to blame whatever blame may attach to the shareholders.

What are the facts in regard to tlie Farmers' Bank? The Farmers' Bank was incorporated in the year 1905. The matter came before the Banking and Commerce Committee in the regular way. An attempt was made by the Minister of Finance to have the members of the Banking and Commerce Committee share with him the responsibility for the incorporation of the Farmers' Bank. I do not think that was justified, because while the matter came before the Banking and Commerce Committee it is well known that many of the details, such as the examination of credentials, are not placed before that committee, but are supposed to be looked after by the Finance Department. The minister failed utterly in his attempt to drag the members of the Banking and Commerce Committee into the pool created by his own neglect, and lax administration. The Finance Minister has been deceived by Mr. Travers, the Prime Minister says. It is an old saying that there are none so blind as those who will not see, and in reference to the Farmers' Bank it does appear that the Finance Minister deliberately refused to either hear or see; from the time he took office in 1896 until to-day his pathway is strewn with the wreckage of banks, yet he has never taken warning from one of those banks. I do not know what warnings will be necessary to make him' realize his responsibility, he may wait until some bricks fall out of a breaking bank and hit him on the head before he realizes how weak his whole Bank Act is. The statement of a man like Mr. McLeod, former manager of the Bank of Nova Scotia, appears to have made no impression on him whatever. One of the ablest and oldest and most highly respected members of this House, the member for Halton (Mr. Henderson) went to the Finance Minister and gave him repeated warnings in regard to the Farmers' Bank, and yet the Prime Minister says the Finance Minister was deceived. I would like to ask why the Prime Minister objects to the issuing of a Boyai Commission? Can those who have suffered by the failure of the Farmers' Bank lose anything by the appointment of a commission, can matters be made any worse for them? Will anybody say there is no possibility that it might bring forth some facts which would lead to the recovery of part of Mr. EDWARDS.

the money? Why then object to the appointment of this Royal Commission? What is the premier afraid of? No doubt if there was a Royal Commission the Finance Minister would be placed in the box and would have to give evidence. Is the Prime Minister afraid of that? Is that the reason why they do not wish a Royal Commission? There is no doubt also that if a Royal Commission was appointed, Mr. Calvert, former chief Liberal whip, would have to go into the box. Is it for the sake of Mr. Calvert that the Prime Minister and his Finance Minister object to the appointment of a Royal Commission?

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CON

Arthur Cyril Boyce

Conservative (1867-1942)

Mr. BOYCE.

Would not other hon. gentlemen opposite have to go into the box?

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CON

John Wesley Edwards

Conservative (1867-1942)

Mr. EDWARDS.

I cannot say, but it seems to me very probable that the hon. member for West Peterborough (Mr. Stratton) would have to testify before such a commission. Is it because of this that the leader of the government, and the Finance Minister object to a Royal Commission? They have not given any good reason why a Royal Commission should not issue, and it does look very suspicious indeed. If they have nothing to conceal, if they have no party favourites to defend and protect, why should not a Royal Commission be appointed to investigate this matter without loss of time? It looks to me as if the objection to the Royal Commission was not on the grounds of economy-think of this government practising economy along any line

but purely on the ground of party political expediency. The Prime Minister says his Finance Minister was deceived. Buit, suppose he was-though in the face of facts that were placed before him previous to that certificate being issued I do not see how he could be deceived-but, if he were deceived all the moTe reason there is why a Royal Commision should be appointed which will get at the methods by which men like Travers can come along and deceive a man like the Minister of Finance, so that we may be able to guard against that sort of thing in the future. On the 8th of October, 1906, Mr. Leighton McCarthy wrote the Minister of Finance giving notice that a number of subscribers would dispute the bona fide character of the subscriptions, and that was followed by another letter from the same gentleman on the 19th of October inclosine a special endorsement of writ from the High Court of Justice and giving the names of plaintiffs and defendants. These letters and documents allege fraud, deception, and misrepresentation in getting subscriptions; they gave numerous examples and all of this information was in the hands of the Minister of Finance before the certificate was granted. The Prime Minister tells us, however, that his Minister of Finance waa

deceived, but the allegations made in these letters of Mr. McCarthy and in the documents sent were acknowledged by Travers when he paid back the money and gave up the notes to these subscribers, which he did rather than face the court. I repeat that all of these facts were before the Minister of Finance prior to the certificate being granted. It was the duty of the Minister of Finance to guard the people's interest and to see that section 13 of the Bank Act was complied with. Did he do so? No, on the contrary he knew it had been violated and that Travers and the provisional directors had no right to call the meeting of the subscribers which they did call under that section. Was the Minister of Finance deceived in that? I think he knew, and he must have known that the meeting was called illegally, and it looks to me that he was indifferent rather than that he was deceived. The names of men who had been released by the High Court of Justice as subscribers to the Farmers' Bank and whose money and notes had been returned to them by the order of that court were falsely retained on the list as subscribers for shares, and how can the Minister of Finance say he was ignorant of that fact. And yet, the Prime Minister puts forward as his only reason for opposing the appointment of a Royal Commission, that his Minister of Finance was deceived. Will the Minister of Finance say that the $250,000 was properly raised by the taking of notes from the subscribers and the discounting of the same. Why. the Minister of Finance himself says in a letter to Travers dated November 30:

We have been told that in some cases the subscribers did not actually pay in cash hut gave notes to the provisional directors which were used to raise money.

On the very same day Sir Edward Clous-ton, president of the Canadian Bankers' Association wrote a letter to the Minister of Finance counselling delay in the issuing of the certificate and urging thorough investigation for the protection of the public. And yet, with all these facts before him, the Minister of Finance issued a cir-tificate without which the Farmers' Bank could not have gone on and without which these losses would have been impossible. And yet we are told by the Prime Minister that the government is in no wav responsible, because the Minister of Finance was deceived. Now, Sir, this brings us up to the granting of the certificate, and I say it is a most remarkable thing that the Finance Minister in the face of these repeated warnings; in the face of this indisputable evidence that Travers was crooked, granted this certificate. But, I would take the matter just a step further; I would like to know if the responsibility of the govern-171

ment ends with the granting of the certificate. Has the government no further duty to perform? has it no further obligation to protect the people? Let them read sections 112 and 113 of the Bank Act. Section 112 says:

Monthly returns shall be made by the bank to the minister in the forms set forth in the schedule to this Act.

Section 113 reads:

The minister may also call for special returns from any bank whenever in his judgment they are necessary to afford a full and complete knowledge of its conditions.

*So that after the certificate was granted the Minister of Finance had the right not only to a monthly return, but he had the right at any time to ask for a special return that he might be apprised of the condition of the bank in any respect. Did the Minister of Finance find nothing in the correspondence which passed between him and the state superintendent of insurance for New York over a year ago, to warrant him in asking for a special return in order that he might have full and complete knowledge of the condition of the Farmers' Bank. Let me read what is said by an American paper of date, January 17, 1910, commenting on this matter:

An amazing and almost incredible story, which should make every Canadian blush for shame is on file here in the public records of the Department of Insurance of New York1 State. It relates how, in the face of repeated warnings and urgent entreaties, based on undisputed facts, the Finance Department of Canada refused summarily to investigate the Farmers' Bank a year ago when it was beginning to totter on the brink of inevitable disaster.

There we have the whole thing in a nutshell so far as the minister's responsibility is concerned after the certificate was granted, I repeat that his responsibility as Minister of Finance did not end with the granting of the certificate, but that it was up to him in the face of the correspondence which passed between him and the New York state superintendent of insurance to hold the most rigid and careful examination into the condition of the Farmers' Bank. Had he done his duty in that respect the people of this province would have been saved the heavy losses they have sustained. Now, Sir, what members do we find on the government side of the House opposing this resolution asking for a Royal Commission? We have in opposition the Minister of Finance, and that is of course very natural I suppose, and we have the opposition of the Prime Minister, who thinks it is necessary to protect and shield his followers, which I suppose is very natural also. In addition to that, up to the present time we have had the opposition of

the hon. member for South Grey (Mr. Miller) to the granting of this- Royal Commission. That hon. gentleman interested himself very energetically and enthusiastically some time last year, in raising that beautiful fund which was presented to the Minister of Finance, the $120,000 present. I believe it is said that the hon. member for South Grey contributed slightly to that fund. At all events I think I am correct in saying that the hon. gentleman told us himself in this House that he was one of those who solicited subscriptions. Well, that was last year; he occupies the position of chairman of the Banking and Commerce Committee, this year.

Now, Sir, the Farmers' Bank in all its transactions from beginning to end is a very sorry spectacle. It seems to me that it was conceived in fraud and iniquity, and that there was a deliberate attempt from the very beginning of the organization of this bank to rob the people of the province. From the day that the Finance Minister, regardless of the repeated warnings which he had received, granted the certificate, down to the time that the bank failed a short time ago, every bit of history of the transaction is marked with fraud and deceit. The Minister of Finance and the Prime Minister have failed in their duty to the people and I regret that they are disposed at the present time to add to the burden of their sins, already one would think, greater than ordinary mortals could bear, by refusing this very reasonable request of my hon. friend from Hal-ton that a Royal Commission be issued to inquire into the Farmers' Bank. For my part, I am very strongly in accord with the resolution. I think I would not be doing my duty to the people of my constituency who have suffered serious loss from the failure of this bank did I not urge upon the House the appointment of a Royal Commission. After hearing the Minister of Finance and the Prime Minister oppose the resolution we who come from constituencies where people have sustained heavy losses by the failure of this bank have nothing much to expect in the way of the granting of the request of this resolution. Very well, the responsibility will be put on this government and I can assure the hon. Minister of Finance that the people of my county, when they are aware, and they are pretty well aware now, of his inefficiency as a Minister of Finance, of his inability to cope with the financial situation, of his failure to regard repeated warnings given to him and which, if he had regarded them, would have saved them from the loss which they have sustained, will not have very much confidence in his ability to go to Washington and negotiate a treaty for the benefit of this country.

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CON
LIB

Edward Walter Nesbitt

Liberal

Mr. E. W. NESBITT (North Oxford).

Mr. Speaker, there is a great deal in the remarks of the hon. member for Halton (Mr. Henderson) in introducing this resolution, with which I personally am entirely in accord. It is a great pity in the financial interests of the country and also in the interests of the people who have been so severely punished that a fraud of this kind should have peen perpetrated on the public. I also have a large number of people in the riding that I haye the honour of representing in this House who have been very severely punished, and I know that we have in two townships in North Oxford lost $105,000 in deposits. It would not require a person to have very much sympathy in his nature to sympathize with these people. I heard the hon. leader of the opposition (Mr. Borden, Halifax) last evening read a letter from some one at Lakeside in iny constituency, the lady who wrote the letter, I suppose, being either the wife of one of my constituents or a widow in that constituency. I have been approached by people who lost money deposited in that bank to ask the government to see that they were reimbursed for their losses. I have also been approached by people to ask the government to appoint a Royal Commission to investigate, although I may say not exactly the kind of Royal Commission that is proposed by the resolution. I heard the resolution read yesterday, but I am slow to gather in what is read in that way, and until to-day I did not know what was in that resolution. If I may be allowed I would like to read it just to hear myself read it:

This House is of opinion that a Royal Commission should forthwith issue to inquire into and investigate the incorporation and organization of the Farmers' Bank of Canada, and the granting of a certificate by the Treasury Board permitting said bank to issue notes and transact business, and all the circumstances connected therewith

That is into the issuing of the certificate:

-and generally to inquire into and investigate the operation and efficiency of the Bank Act in relation to the affairs and transactions of said bank.

There is nothing asking the government to appoint a commission to inquire into the working of the Farmers' Bank after it was instituted or into the present condition of the Farmers' Bank that was. What I would think would be much more necessary would be to inquire into the present condition and find out if there were any means of recovering some of the money that the depositors and shareholders of the Farmers' Bank were beaten out of. As far as the issuing of the certificate is concerned, I cannot agree with the hon. member

for North Toronto (Mr. Foster) when he says that the shareholders were looking to the Finance Minister to protect them in not issuing the certificate. I venture to say that there was not one in twenty of these subscribers who knew that when the charter was issued the bank did not come into existence. I venture to say that until this discussion came on in the newspapers with reference to the certificate there were very few subscribers of the Farmers' Bank who knew that a certificate had to be issued after the charter was obtained. I believe that most of them thought that the instant the charter was obtained it authorized the bank to go on and do business. Therefore, I do not believe that there was deception in so far as the subscribers were concerned. Perhaps a good many people who bought stock in the Farmers' Bank now do not really understand what the discussion is as between the certificate and the charter. The fact is that these stocks are sold by very enterprising gentlemen as a rule, men who have very smooth tongues, and you will see in this Return which has been brought down by the government that the prospectus points to the profits that might be obtained by buying stock in this bank, comparing it with the older banks that have been in existence for a long time. That. I know, is done. I am not selling stock for any corporation. I frequently ^^-r^^^itions brought to my attention and I have many times been asked to sell stock for various institutions, but up to the present I have refused for the very simple reason that I never know whether the corporation will be a success or not. I do occasionally buy some stock, if I can borrow money enough to do it, and I have generally been deceived myself, although 1 do not know that I know so very much less than the ordinary individual shareholder in my section of the country Coming down to the question whether the finance Minister was guilty of any negligence or not, I am quite sure that none of my hon. friends opposite will say that they charge him with anything else. I

hon. member of this House. In executing that Act, he acts in an administrative position. He has to administer the Act as he finds it, and I claim that he did so administer it. Under clause 15, after all other requirements have been complied with, the promoters have to deposit $250,000 with the Receiver General and $5,000 for currency. The hon. minister (Mr. Fielding) did see that that $250,000 was deposited. It is quite true that Mir. Leighton McCarthy notified him not to issue a certificate until some irregularities were removed, but in another letter Mr. McCarthy withdrew that notification. He said most distinctly that he withdrew the charges he had made, and his opposition to the issue of the certificate. He withdrew entirely his apposition, in so far as his clients were concerned. I do say that I can sympathize with my hon. friend from Halton (Mr. Henderson), who may have given a hint to the Finance Minister that everything was not right, but did not want to put himself in writing. He did not want to commit himself to writing for the simple reason that none of us want to assume the position we would have to assume by putting ourselves in writing if we were not absolutely sure of the facts. I quite believe that if we were aware that a fraud was about to be committed on the government or anybody else, we would be only too willing to give notice to the parties interested. But my hon. friend from Halton was naturally very careful not to put himself on record in writing. He was very careful not to tell the Finance Minister in writing that he thought a fraud was about to be committed. The Finance Minister was in exactly the same position. He dared not move until he was absolutely sure because he might do a good deal more harm than he possibly could do good. When Mir. McCarthy withdrew his objections, the minister had nothing before him to show that there was anything wrong. He had the affidavit required by clause 15, and after Mr. McCarthy had withdrawn his opposition there was certainly nothing to warrant the minister in concluding that Travers was not telling the truth when he told him that the subscriptions were regular and that everything was regular. If my hon. friend from Halton did not want to put himself in writing, I can quite understand that the Minister of Finance would not dare to prevent the issuing of that certificate. If he had, there would have been a cry to high heaven that he was standing in with the moneyed interests and the banking association and consequently had refused to give the farmers a charter and see how they could run a bank for themselves.

The Finance Minister was not authorized by anything shown here to refuse that.

certificate. The next day after the certificate had been issued, when Mr. Clous-ton, President of the Banking Association, told him he did not think everything was right and that the moneys had not been all obtained for that certificate, properly Mr. Clouston was very careful in the letter he wrote not to be very definite in his statements. He did not say that there was something wrong, but that he heard something was wrong, and asked the Minister to delay issuing the certificate. But there was nothing in the Act to authorize the Minister of Finance to stop that certificate. Had he done so, he and the government would have been open to prosecution.

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CON

Arthur Cyril Boyce

Conservative (1867-1942)

Mr. BOYCE.

Would the hon. gentleman say that the certificate having been issued, and the attention of the Minister of Finance or the Treasury Board having been drawn to the fact the following day that that. ceirtificate had been obtained by fraud, the government were powerless to prevent a continuance of that fraud on the public?

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LIB

Edward Walter Nesbitt

Liberal

Mr. NESBITT.

There is nothing in the Bank Act to show what the government should do in such a case. There is no power or instructions in it to meet such a case. Mr. Clouston said in his letteir that he had heard that there were rumours and asked that they be investigated. There was no charge.

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CON

Arthur Cyril Boyce

Conservative (1867-1942)

Mr. BOYCE.

Mr. Clouston safid, as President of the Canadian Bankers' Association, to the Finance Minister that he had reason to believe, and that is very different from having heard.

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LIB

Edward Walter Nesbitt

Liberal

Mr. NESBITT.

when we axe to take up the revision of the Bank Act itself in a few days, and if there is anything lacking in the Bank Act that will be the time to make it right. When that time comes, I hope that hon. gentlemen opposite will show just as much interest in preparing a thoroughly efficient and proper Bank Act, as they are now in asking for a Royal Commission.

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CON

Richard Blain

Conservative (1867-1942)

Mr. RICHARD BLAIN (Peel).

My excuse for taking up a short time of the House in discussing this question, is that in my own county, at a small place called Chilten-ham, the people have lost already, or will lose, $36,600. I was much interested in listening to the remarks of my hon. friend from North Oxford (Mr, Nesbitt). He stated that those who organized this bank were guilty of fraud, but he is unwilling to vote for a resolution that will bring about a searching examination to find out who is responsible. My hon. friend suggests that possibly a revision of the Bank Act might reach the case. For myself, I cannot understand how any revision of the Bank Act is going to assist to bring those who are guilty to justice, or recover any of the money which has been lost by many persons in the province of Ontario by reason of the failure of the Farmers' Bank. I crave the indulgence of the House to read a petition that was presented from my own county, bearing the signature of 70 men who are sufferers from this failure, men who had invested their money either in stock of the bank, or placed it on deposit. This petition is only one among many others that have been presented to the right hon. the First Minister and the Finance Minister in relation to this difficulty:

To the honourable the House of Commons in parliament assembled:

The petition of shareholders and of creditors of the Farmers' Bank of Canada humbly sheweth

1. The bank was incorporated by an Act of the parliament of Canada, chapter 77, of Edward VII.

2. The Act was amended by subsequent Acts.

3. The bank was organized in the year 1906.

4. A large proportion of the shareholders are farmers.

5. The government return for October, 1910, reports the total assets of the bank at $2,670,195, and the total liabilities at $2,051,081, leaving a surplus of $619,114.

6. The bank suspended on the 19th day of December, 1910, and Geoffrey T. Clarkeson, accountant, has been appointed curator, and has taken possession of the head office and branch offices of the bank, and of the books, assets and securities at the offices.

7. The curator has with the assistance of a . retired bank manager and some of the officers

of the bank, made a partial examination and investigation into the assets and liabilities of the bank, and your petitioners are informed and believe that the curator will report to the shareholders and creditors that a large pro-Mr. NESBITT.

portion of the capital and deposits has been, lost by the officials of the bank in their own speculative and unlawful transactions, and amongst others:

(1) In the purchase, equipment and development of a mining prospect.

(2) In loans on unlawful and insufficient securities.

(3) In personal loans to borrowers who have no means or ability to repay them.

8. The deposits are stated to be more than $1,500,000 and the paid-up capital stock about $580,000.

9. Your petitioners are informed and believe that the shareholders will be called upon to pay the double liability on their shares, and that all the available and collectable assets, inclusive of the double liability, will not realize a sufficient sum of money to pay more than an approximate rate of twenty-five cents on the dollar to the general creditors after payment of preferential claims.

10. Your petitioners have been trusting to the published government returns of the assets and liabilities of the bank and the difference between the published returns and the actual state of the accounts of the bank, appear to show a loss of the money of the shareholders and depositors within a period of four years of approximately the sum of $1,500,000.

11. The grief, the sorrow, the physical and mental suffering brought on the families of shareholders and creditors cannot be told in a petition.

12. Your petitioners refer to the examination under oath of the inspector of the bank in open court at Lindsay, and to the report which will soon be prepared by the curator.

13. And it is evident that in too many instances the families of shareholders and creditors will be compelled to meet great distress and suffering.

14. And your petitioners respectfully submit-

I want to direct attention particularly to this.

And your petitioners respectfully submit to the parliament of Canada that it is material and necessary in the public interest to have a thorough and exhaustive examination of the government returns which have been made by the officers of the bank and of all the affairs, accounts and transactions involving the use of the money of the bank.

Now in closing, I want to direct this latter paragraph to the attention of my hon. friend from North Oxford, because in his county there are some people who are losing money.

15. And your petitioners respectfully pray that a Royal Commission shall at once be issued with full powers to examine into the affairs of the bank from the time of its incorporation until its suspension, and of all the accounts, dealings and transactions witli the money, securities, assets and liabilities of the bank, and your petitioners wifi ever pray.

This is signed by P. 0. Macdonald, T. H. Elliott, F. P. Hames, in all by 70 persons, who have suffered by the wrong-

doing of some persons. For myself I cannot agree with my hon. friend from North Oxford when he says that the responsibility for this difficulty does not rest upon the government; in my opinion all the responsibility rests on the government of the day. There is responsibility somewhere. The Prime Minister has stated that it does not rest with the Banking and Commerce Committee or with the House in passing the incorporation Bill, the one important point is the minister's responsibility for granting the certificate that allowed the bank's doors to be opened for the people to deposit their money. Let me suggest that if the Banking and Commerce Committee of this House when this bank was seeking incorporation for the first time, and subsequently when it came for extension of time had been made aware of such a letter as was written by Mr. McCarthy, then a member of this House, not a member on either side of the House would have granted the extension or granted the bank incorporation at all. Therefore, whatever responsibility may attach to the members of the Banking and Commerce Committee, and of this House there is surely a special responsibility resting on my right hon. friend as Prime Minister, upon the Treasury Board and particularly upon my hon- friend the Minister of Finance. Leaving out the question of incorporation and extension what does the Finance Minister say about it in his speech of yesterday:

The first stage in this matter of the issue of the certificate is to be found in a communication from Mr. Leighton McCarthy, who says he is instructed by some shareholders, his clients, to object to the issue of the certificate, and he states in a subsequent letter that he complains that in come cases where large sums of money have been paid, notes have also been given. Now, at that time the application for a certificate had not yet been received, and, therefore, there was no such application.

Then when this all-important time arrived in the bank's history, the first matter that came to the attention of the Finance Minister was a letter from Mr. McCarthy which was as follows:

Home Life Building, Victoria St.,

Toronto, Oct. 8, 1906.

Counsel, Wallace Nesbitt, K.C. Honourable W. S. Fielding Minister of Finance,

Ottawa.

My Hear Mr. Fielding,-I have been consulted on behalf of a number of subscribers to the shares of the Farmers' Bank, and from the instructions I have received, a number of the subscribers will dispute the bona fide character of the subscriptions. I have not time to-night to give a full statement of the grounds of this request to you, but I beg to assure you that grave conditions have arisen

which will require careful consideration before the Treasury Board would grant any certificate for the organization of this bank.

I, therefore, ask you to be good enough to stay any action which might be taken until I have had an opportunity of discussing this with you. If it is not asking you to hold it too long, I would prefer not having to go to Ottawa this week, but will go any day next week which would suit your convenience. Of course, if there is no immediate prospect _ of your granting such a certificate, my seeing you at an early date will not be necessary.

Topic:   WAYS AND MEANS-THE FARMERS' BANK.
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March 16, 1911