Mr. FIELDING:

I am not sure that I correctly caught the answer of the minister to the question of the leader of the Opposition as to the amount he is at liberty to borrow undeT this clause. Am I right in understanding 'that the object is to raise a new loan of $350,000,000?

Sir THOMAS WHITE:

Yes, $350,000,000, and to any amount for which we have not borrowing power, but which we have borrowed.

Mr. FIELDING:

If I read the resolution aright, the maximum the hon. minister could borrow under the Bill would be $350,000,000; but from that he must deduct the $150,000,000 which he says was over-borrowed last year. If that is correct, he will only borrow under this Bill $200,000,000. I would just draw the hon. gentleman's attention to that.

Sir THOMAS WHITE:

I shall be glad to have the clause examined by the Department of Justice. It seems a little complicated, but it was settled by my department for the purpose of insuring that we had borrowing power necessary to. raise $350,000,000.

Mr. FIELDING:

It is not within this Bill, if the hon. gentleman over-borrowed $150,000,000 last year.

*Sir THOMAS WHITE:

I merely used

that as an illustration. I do not know what amount was over-borrowed last year- at least, I have not accurate information. I stated to my hon. friend that if we raised, as we did, $670,000,000 by the Victory Loan of last year, and had a war appropriation of only $500,000,000, and if we had a surplus from the previous year, and had not borrowed the amount we were authorized to borrow the previous year, that unused borrowing power would apply in respect of the surplus expenditure. I will look at this section, but I do not think it should pass because it was settled, as I say, with that in view.

Mr. CANNON:

How much of the $670,-

000,000 of the 1918 loan was subscribed as cash, and how much by way of conversion of previous loans?

Sir THOMAS WHITE :

If we had taken into account the amount of conversions the last loan would have been very much in excess of $670,000,000. That amount represents cash subscriptions.

Sir THOMAS WHITE:

As to section 4, I have looked at it more closely since my hon. friend (Mr. Fielding) spoke, and I would direct his attention to this:

The Governor in Council may, in addition to the sums now remaining unborrowed. . . . raise by way of loan, .... such sum or sums of money, less any amount borrowed in excess of the amounts authorized by any war appropriation Act, as are required for the purpose of making any payment authorized by this Act.

Does my hon. friend see the force of the last few words there? That is to say, this section authorizes us to borrow in any event the amount required for making any expenditure if authorized by this Act. That is the way I would construe those last words:

Mr. FIELDING:

That is the way the money raised would have to be applied; but I do not think it creates power to raise money. I can understand the possibility that, as respects the war loan particularly, there' was overborrowing of over 1150,000,000; but if there were other borrowing powers unused, some portion of that $150,000,000, possibly the whole of it, might be covered by such other unused powers, and in that way there would not be overborrowing. But if there was actual overborrowing, meaning something in excess of what you have power to borrow, then clearly that must be deducted from the $350,000,000. However, it is enough to call my hon. friend's attention to it, and his solicitor no doubt will look into it.

Sir THOMAS WHITE:

Yes. I will have the Department of Justice consider the section, and if any change is necessary to effectuate the purpose we have in mind I will have the matter attended to on the third reading. My hon. friend, the leader of the Opposition, asked a question about section 5.

Mr. McKENZIE:

Section 5 states that after those securities or bonds are paid and called in they can be re-issued and re-sold without any reference to Parliament. I think that is rather unusual.

Sir THOMAS WHITE:

That is a frequent clause in company legislation and arises out of a decision-some of the lawyers in the House will recall it-under which it was held that if securities had been pledged*, and the amount of the loan paid off and the securities got back again, they could not then be sold, that they became extinguished by virtue of their redemption; hence this clause, which, I believe, is usually inserted. Supposing the Dominion had issued bonds with the intention of selling them outright but in the meantime had borrowed against them from the bank-which the Dominion now seldom does-and paid off the loan to the bank, and then desired to sell the securities, it is advisable that they should be able to sell them without getting fresh borrowing powers; in other words, that they should not be deemed to be extinguished. Frequently loans are effected for the purpose of carrying securities which it is intended to sell and repay the loan from the proceeds so obtained.

Mr. FIELDING:

I think the clause had its origin in reference to a railway company, and the principle having been laid down by the courts it was thought as respects all Government loans that the same precaution should be taken.

Sir THOMAS WHITE:

Yes, that is right.

Mr. McKENZIB:

I would like to ask the minister in connection with the many borrowings and bonds of the Government that are outstanding, has the Government any power to recall those bonds at any time, or must they remain outstanding for a set period of years? We are paying very heavy interest; that we can readily understand, having regard to the nature of the period through which we have been passing. But we hope that some day we shall get back to normal times, when money can be borrowed much cheaper than it can be borrowed now. If the Government had power to call in these bonds., pay them off, and convert them into new securities at a smaller rate of interest, it would be very much in the interest of the country. Will the minister retain to himself such powers in connection with future borrowings if he has to pay a very high rate of interest?

Sir THOMAS WHITE:

With regard to

future borrowings, the policy should be to borrow for shorter terms. No one can foresee what interest rates will be. My own view is that 'they are not likely to drop materially for a considerable time; I do not see how they can. What I have said is subject to this: in putting out loans

one has to consider the financing that has already been done and not have his loans in large amounts too close to the present time. Let me illustrate. Suppose the Dominion Government during the war had been fearful of the comparatively high interest rates and had resorted to short-date borrowing, which is all right for comparatively small amounts in times of high interest rates. And suppose the Minister of Finance had to face within the next five years, let us say, the raising of five, seven or ten hundred million dollars; that would be a very serious matter. The amounts expended in this war, the debt of Canada and the debts of all nations, are so vast that funding is not possible as it would be in normal times. One of the advantages of our situation is that our loans are distributed over five, ten, fifteen and twenty years. I know precisely what my hon. friend has in mind-that we shall have to pay high interest rates over a period of fifteen and twenty years. That is true in respect of certain of our loans. But I do not see what advantage it would be to us within the next five or ten years, having regard to the loans we have to meet before ten years are over, to be in a position to recall the other bonds, because the financial operations would not be possible to

enable us to retire them and replace them with further issues at lower rates; it seems to me that the transactions are too great. I do not like, any more than my hon. friends, the idea that the Dominion has to pay that rate of interest over so long a period. But short-date borrowing is almost fatal in war time, because you get accumulations of debt ahead of you and when you need fresh money you are confronted with maturities coming due, and a very serious situation results.