June 18, 1923

LIB

George Newcombe Gordon (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

The CHAIRMAN:

The bill was distributed on Friday.

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Section agreed to. On section 2-Definitions.


CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

I do not think it is fair to the members to rush on in this way until they can locate their copies of the bill. I know I was given a copy of the bill and I put it on my desk on Friday; but I cannot locate it myself, and it is not on my file. I am quite sure that the bill was distributed, but copies are not on our files.

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LIB

Ernest Lapointe (Minister of Marine and Fisheries)

Liberal

Mr. LAPOINTE:

A copy is on my file, and I think a copy should be on everybody's file.

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?

Some hon. MEMBERS:

No.

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CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

I see it is in the middle of the file.

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LIB

William Stevens Fielding (Minister of Finance and Receiver General)

Liberal

Mr. FIELDING:

It is in the proper place having regard to its number.

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Section agreed to. On section 5-Bank charters continued to July 1, 1923, as to some particulars.


UFA

Alfred Speakman

United Farmers of Alberta

Mr. SPEAKMAN:

I think the time has come in the discussion of this bill, when I may with perfect propriety make a few remarks; also probably at the close of my remarks, I may find occasion to move an amendment. During the discussion of this bill before the Banking and Com4 p.m. merce committee, I took occasion to bring forward a resolution asking for postponement of the revision of the act and asking that charters should be extended for one year. This proposal was not acceptable to the committee. As a matter of fact, the proposal itself was ruled out of order in the committee as not being within our powers at that time. My reasons for bringing forward that motion were several, but I shall state them very briefly. I am speaking now, not for purposes of obstruction, or simply because I wish to be contradictory to the action of the committee or of this House, but because, rightly or wrongly, I have come to the conclusion that the best interests of the country will not be guaranteed by passing this particular clause in this particular shape.

In the first place we have had a great deal of discussion in committee and have taken an enormous mass of evidence. I think the committee has worked faithfully and has tried

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fairly to bring out all the information along most, but not all, of the points which have been suggested. During the course of that discussion several points came up in my mind very strongly. The main points that impressed me-or amongst the main points- were these: Throughout the evidence, throughout the statements made by the leading bankers of this country who were there to testify it became so evident as not possibly to be gainsaid that the present banking system, as carried out under the present Bank Act, did not wholly meet all the financial requirements of the various industries in this country. It became apparent, in fact it was admitted, that, in regard to the principal mdustry of this country, that of agriculture, the Bank Act was not functioning satisfactorily. Statements were made and evidence was adduced which covered that point, and I think it was established to the satisfaction of the majority of the committee that one industry at least, that of farming, was not able to take full advantage of the provisions of this act, and was not able to secure the credit requisite to the carrying on of their business under the present banking system It was shown that the system which was embodied in the act, and carried on under the provisions of this act, was adapted very admirably for the purposes of commercial banking, for the carrying on of the ordinary classes of industry; but, by reason of the fact that advances could only be made under the provisions of this act by our present banks as at present constituted for a short term, it became absolutely ineffective for the needs of agriculture. That, I think, was admitted. It was admitted by many of the bankers, though contradicted by others, and I think it was the consensus of opinion, not only in the committee among the experts, the financial men themselves who gave evidence before that committee, that, under the way in which the banks were carried on, under the methods by which they secured the funds with which they carried on their work, they could not make provision for the mdustry of agriculture on any general scale. It was shown that, whereas in ordinary commercial life, a loan for three or six months might be amply adequate by reason of the fact that the turnover occurs three or four times a year, the case with the farmer was absolutely different. It was shown, and had to be admitted by everyone cognizant of the conditions under which farming was carried on, that a loan, in order to have any effect, to enable farmers to carry on under any system of credit, should be at least for

one year; and in the case of a farmer engaged in the cattle business, should be extended for three years. I am not speaking of long loans for capital outlay, but for current loans to carry on the yearly operations of the farm. I think that was distinctly proved.

The point of controversy then came up, could this be carried out, or could these loans be made by the banks at all, and could it possibly be comprehended within the Bank Act? And there is where the difference of opinion occurred. I think I am correct in my first statement that the general need was admitted, and the general inadequacy of the banks to fulfil that need was admitted, and the difference of opinion arose as to whether, under any act or Any circumstances, the banks could supply that need. I may say that it was on that point that I personally was not at all satisfied with the attitude of some of the witnesses who appeared before the committee, men who were fully familiar with the details of the banking profession, who had, for many years past, the handling of the savings of the people of this country and the use of those savings as applied to the various industries of the country. They acknowledged in many cases that the banks as at present carried on were inadequate. They acknowledged that in many cases the banks did not and could not meet the requirements of agriculture in particular; and yet at the same time, although those men were supposed at least to have full knowledge of their subject, and to have given a full and complete study of banking, the business of their lives, they were not prepared to accept any responsibility for this failure or to bring forward any suggestion [DOT] of value in order to meet the needs. In that respect I was dissatisfied, and I may say I was disappointed in their attitude.

We do not come here speaking for farmers simply, we do not come asking for anything which would be to the public detriment, and we do not come advocating, at the present time at least, any violent departure from any stable system of banking or economics. Those ideas were brought forward and discussed, though not given the consideration that I think was due them. But at the present time we are not advocating, and I am not advocating, the establishment of any system of banking which would not be for the public good and which would not be founded on sound and sane business principles. But we do look to these men who have taken the place in the commercial life of this country, as being the men most

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familiar with finance, to offer some remedy to meet the obvious conditions which prevail. But they did not. They absolutely failed, and I, for one, am not prepared to absolve them from responsibility in the matter. I am not prepared to say to them: The system under which you have been working is perfect, and the method under which you have carried it on is absolutely beyond reproach. I am not prepared to say to them: We will give you the power to carry on under the same act, in the same way, until you are able to show we can get relief in some other way. At the present time-and, of course, this was brought by way of objection to any discussion of this point in our committee-the subject of rural credits is being examined into, and is under discussion before another committee. That committee has not yet reported. Until that committee does report, and until we know what the suggested remedies to meet that existing condition may be, we do not feel-many of us in this corner of the House at least-that the present banks should be given a charter extending over ten years, enabling them to tie up and utilize practically all of the available capital in the country, all the savings of the people, some of which would have to be applied to any system of rural credits. We ask first to be told what the suggestions are and what the legislation may be to bring those suggestions into effect, and to what extent, if any, it will affect our present banking. These are reasons why I object to passing this clause at the present time and in its present shape.

There is another reason, a supplementary reason. When this act came up for discussion, we received, and the Minister of Finance no doubt received, communications from many public bodies in this country. We received communications from the legislature of Alberta, asking that the final revision of this act be postponed for one year, and that the present charters be extended for one year, and one year only. The reasons they gave were the reasons I have mentioned. They are confronted in that province with a serious situation as regards financing their agricultural conditions. Agriculture is the one great outstanding industry of that province, and not only is that industry of outstanding importance there, but we believe-and I do not wish to speak sectionally-that agriculture in those western provinces is, and must be of paramount importance, to the whole industrial life of the country. They are faced with the condition that they are being continually requested to establish provincial banks to provide some way of financial relief, some system under which agriculture can receive

[Mr. Speakman.l

its due quota of the money of the country, and they feel that they should not be tied up for a term of ten years until they have had time to study the points brought forward in the Banking committee, until they have had time to confer with the government and with the bankers to see whether they can jointly bring forward some change in the present Bank Act which will enable our banking system to adequately meet that condition. The government of Manitoba made a request on similar lines. They requested that the charters should be extended for one year only, in order that the provincial government might be able to weigh the evidence which has been adduced before the committee and have an opportunity, in consultation with their financial experts, with the bankers, with the Finance department and with the Dominion government, to suggest such amendments as they might deem necessary. The Canadian Council of Agriculture, representing agriculture as a whole throughout the Dominion, made the same request from the same point of view exactly, recognizing the inadequacy of the present system to meet the needs of the farmer, recognizing the paramount necessity of prosperity among the farmers in its relation to the national welfare, and recognizing that in the short space of time at their disposal they could not possibly make the suggestions which they thought might be made to the bankers and to the Dominion government. Therefore, they asked that the revision of the Bank Act be postponed for one year to give them an opportunity to take the necessary action in the meantime. The same request has come from our labour organizations. Of course, they are not treating the subject from exactly the same point of view. They point out that the banks have failed to some extent in their functions, that they are not financing the exchange of goods in a manner satisfactory to the people.

I am simply speaking for the people I know. We have no objections to a sound banking system being put into effect, a system that stands foursquare and sound from every point of view-from the point of view of industry, of commerce, of agriculture. We believe in a banking system which is sane, but which also, as I say, is equitable and will function satisfactorily for the benefit of all people requiring banking assistance. This, I think, the present banking system was proved before the committee not to be doing today.

There are other points of view which I might take into consideration and discuss, and one of the most important to my mind is this. It is a fact well known to members of parlia-

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ment, and particularly to members of the Banking committee, that great dissatisfaction with our banking system has arisen throughout a large part of the Dominion. It is a dissatisfaction which is not based on absolutely accurate knowledge, and it has given rise to all kinds of suggestions for improving the system. The people are demanding improvements with the nature of which they are not altogether familiar; they are asking for things which may not be sound; they are following men who may not have made a thorough study of the subject. I am not discussing whether that is so or not, but the fact remains that the number of people looking for relief in this way is increasing daily. Consequently, one of the reasons why I am so strongly in favour of having a thorough investigation into the whole system of credits is because I am convinced that, if the people were given an opportunity of having these men before the committee and having their ideas criticized by those who at least are supposed to be capable of criticism, and the people at home might read the evidence and judge how those ideas might or might not work out in practice, then if they came to the conclusion that they had been following false gods, that the theories placed before them were not sound, they would turn their attention to better and sounder ideas.

But what is the fact now? The people amongst whom this dissatisfaction is growing know that this subject has been under discussion most thoroughly before the committee; they know that the men in whom they have come to believe in great measure have submitted their suggestions to the committee, and that those suggestions have been criticized; but the people are not aware of everything that has been brought forward by way of suggestion or criticism. And if this act goes through now for a term of ten years, what will they think? They will simply say: What is the use of reading the evidence, what is the use of studying the various systems proposed, what is the use of the committee cm Banking and Commerce working for three or four months upon this Bank Act if parliament ties everything up for another ten years before we have an opportunity of studying the matter? It seems to me they will think that all these weaknesses which have been stated to be inherent in the Bank Act actually exist. I am not taking that view, but I do know that a great many people will think as I have indicated.

But it has been said, and said rightly, that the foundation of every good banking system lies not in its gold reserve but in the unshaken confidence of the people, and that

this is the only way in which any such system can function satisfactorily. I think the best way to secure that unshaken confidence is to have the people thoroughly acquainted with everything that led up to the granting of these charters. Let them know exactly what the Bank Act means, let them know exactly what suggestions were made and why they were not acceptable. If our banking system is sound, the best way to convince the people of the fact is to let them study the Bank Act before it is crystallized for another ten years. That is one of my strongest reasons for opposing the passing of the act in its present form. As others, no doubt, desire to speak on this subject, and as I only wished to bring forward what to my mind were some of the strongest points against this proposed revision, I shall simply move, seconded by the hon. member for Brandon (Mr. Forke):

That section 5 of Bill 83 be amended by striking out the words "thirty-three ' in the fourth and eighteenth lines thereof, and substituting the words "twenty-four'' therefor.

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LIB

William Stevens Fielding (Minister of Finance and Receiver General)

Liberal

Mr. FIELDING:

Mr. Chairman, the views presented by the hon. gentleman who has just spoken (Mr. Speakman) and by others along the same lines and in relation to various other aspects of the banking question, were put before the committee very fully and in many cases, I can say, with great zeal and great ability. The whole matter was fully considered with the utmost care, and I doubt if any measure submitted to the House has received more careful consideration than was given by the committee to the bill now before us. The best judgment of the committee, after hearing witnesses, after doing all that could be done for the intelligent discussion of the subject, was that the objections raised by these gentlemen were not very well sustained. There is a condition of affairs in the West which has alarmed some hon. gentlemen. I am largely of opinion that one good crop in the West-let us pray Heaven that it come this year-will remove very much of the irritation that exists among our western friends. At all events, after the discussion before the Banking committee, after the publication of the evidence-for every word was printed and is available, the newspapers have printed it very largely and the whole question has been threshed out in the light of public opinion-I believe that to-day the people of Canada are fully informed of all the essential questions involved in this present motion.

I think no good purpose can be served by our engaging in an extensive discussion

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of the question. I am going to presume- it may be presumption-to offer a suggestion to my hon. friends opposite. It is their right and their duty to place themselves on record against a measure of which they do not approve. But I point out to them that in committee they cannot reach any very satisfactory result, because they cannot get their names recorded in a vote. May I suggest, if it be not inconsistent with the general purposes of my hon. friends opposite, that they facilitate the passing of this bill through Committee of the Whole and let it come as quickly as may be to third reading? Then they will have the right to discuss, not a particular clause but the whole bill; they will have the right to make any motion they wish to offer by way of postponement, or in any other form, and they will have the right to get then what they cannot get in committee, a recorded vote. I can only make the suggestion to my hon. friends. I want, if I can, to put myself in their position, to see things from their point of view; and I think that would serve their purpose better than an extended discussion in committee. I recognize, however, the fact that it is the right of these hon. gentlemen to pursue the course they think best. But I repeat that in view of all the discussion that has taken place, in view of the printing of all the evidence; in view of the widespread publication of the discussions of the committee in the public press, I do not think the people will expect us to engage in a very protracted discussion of the subject in the House.

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LAB

James Shaver Woodsworth

Labour

Mr. WOODSWORTH:

by Labour and Progressive members suggested that they were merely tomfool amendments. Well, what are some of these amendments that have been urged? One was that in view of the near-failure of the Merchants Bank-I think we were told that it was not a failure, that we must call it a "fiasco that in view of the fiasco of the Merchants Bank it was well worth studying what were the weaknesses of the banking system that made that fiasco possible, and how those weaknesses could be remedied. Another amendment related to keeping down the exorbitant rates of interest, and that surely is a matter of tremendous importance when some people in the West at least are required to pay nine and ten and even a higher per cent of interest. Another amendment that occurs to me was that a government auditor or inspector be appointed so that the whole of the statements of the banks would be brought under definite supervision. Other amendments related to the question of ensuring that the statements as made by the bank should be accurate statements. We were told that at least with regard to real estate holdings the statements as at present given to the government were not at all accurate. This was asserted by Sir Edmund Walker. Other amendments related to providing for small banks and co-operative banks. As we all know these exist in large numbers and have proven themselves very successful in other countries. Why should we not at least have the opportunity of establishing these banks in this country? We did not plead that the government should immediately proceed to establish the banks but we did ask that provision be made in the Bank Act that if men wanted to start small banks they should have a chance to do so, that if they wanted to establish co-operative banks they should have a chance to do so. There is no such opportunity in the Bank Act as it now stands.

I should like very briefly to summarize my conclusions with regard to some of the facts that were brought before us by the various witnesses who appeared before the Banking and Commerce committee. It was clearly shown that money was to-day the measure of all things and quite properly; that this was so much the case that in many instances money has been confused with capital. I think most of us recognize that capital after all consists of the natural resources and the equipment for working them, and it is only by an extension of the term that it is applied to include credit. To-day the title deeds to the great natural resources and the equipment by which they are worked are

in the hands of a comparative few. I submit, though, that ownership itself is an empty thing unless there are some means by which a man can exploit those things which he owns, whether they be mines or water-powers or anything else. Yet under modern industrial conditions it is impossible even for the owner of these natural resources to exploit them without having to go to the banks in order to obtain credit. Money, then, is the key that opens the door to capital. Give me the key and you give me practical ownership. The bankers, I submit, hold to-day the key that admits us to the capital of this country.

Again, we are told that money is the medium of exchange. Since the discontinuance of the system of barter, it is quite necessary that we should have a recognized medium of exchange. But that means that the men who control this medium control the whole of our commercial operations, and this control, under present conditions, is centred in the hands of a comparatively small group. I am not going into an academic discussion to-day as to what money is. I think it was clearly shown by the various witnesses that Walker was right when he said years ago that "money is that money does." It does not make much difference whether money is coin, or paper, or various kinds of cheques, or victory bonds. Any of these things is really money if it performs the functions of money. So that to-day we find that money has come to occupy a monopolistic position as a medium of exchange. Exchange to-day has passed beyond the earlier stage of barter; it has become an impersonal thing We need some clearly recognized medium. Money has come to take that place and hence it is all-important that this medium of exchange should be understood, because the men who control the medium of exchange control, as I have said, our commercial life of to-day.

Let me pass to one more conclusion in this connection and that is this. It appears to be true, as the economists have told us for a great many years, that the quantity of money determines its value. We were told by some of the leading bankers that they had never heard of the quantitative theory of money; and yet, when questioned they had to admit that the amount of money in circulation, together with the rapidity of the circulation, had a very decided effeet upon the value of money itself. Now under this act you give certain institutions the right to circulate a large amount of money. It is true that their circulation of gold is very limited indeed, it

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is true that the circulation of their bank cheques is limited; but the greater part of money to-day is not gold, is not bank cheques, it consists of credits and these can be extended or limited by the action of the banks. Hence, to no small extent, they control the value of money itself. The money that buys one bushel of potatoes to-day may buy tomorrow two bushels of potatoes, or only half a bushel; and I submit that the people who control the money situation can very largely decide the value of that money. Or to put it the other way about: The value of money really means the price of other things. If we decide to issue a larger amount of money we cheapen money, and send the price of commodities soaring. That, at least, is the accepted view of political science. I submit that no such power as this should be placed in the hands of any groups of private individuals. It means that they control the whole life of every individual, it means that we cannot buy a single box of groceries, we cannot buy a suit of clothes, we cannot live in a house, we cannot go abroad to enjoy ourselves, without paying out money the value of which is determined by a group of people over whom we have no control whatever.

We were told, of course, by some of the bankers that we could not get away from the gold standard. And yet they had to admit that since the war we have no gold standard. I do not intend to enter at this time, at any length upon this question of the gold standard. I can remqmber in my college days we used to debate at considerable length the whole question of bi-metallism, but I submit that in the last few years we have learned a great deal more about the gold standard than we knew before the war. The fact is that Canada is not to-day on a gold standard. I have my own suspicions that all along the gold standard has been, after all, nothing much more than a barometer which recorded certain changes in the financial conditions. But to-day all that is passed. We know perfectly well that although our bank notes call for payment in gold, no gold is forthcoming. The bankers say that we are going to return to the gold standard. That may or may not be; it is altogether another matter. So wo are faced with this situation: That not being on a gold standard and the banks having no obligation whatever to pay in gold, they are still coming to us and asking for a franchise that will extend for ten more years. Without considering the advisability of a return to the gold standard, I would suggest that the bankers might well offer to return to this standard before asking for a renewal of charters that

are so valuable. On the question of the gold standard I was rather interested in a little illustration of how very ridiculous the gold standard is in actual practice. D. H. Robertson in his book on "Money" gives the following:

It is said that there was once a mine manager in Johannesburg who had a glass eye. When business called him away he would take his eye out and leave it in a prominent place; and while the master's eye was on them the workmen continued to work like blacks, as indeed they were. But one day one of the workmen, more daring than the rest, stealthily approached the all-seeing orb and covered it up with an inverted cigarette tin: whereupon he and all his fellows promptly went away and got drunk.

Some of my Progressive friends and my colleague here (Mr. Irvine) would like to use inverted cigarette tin and cover up the glass eye. I would submit there is a great deal bigger question involyed than the cigarette tin and that is, if the gold standard is no more than a glass eye, a bogey to frighten people with, we may well ask ourselves what is its stability as the very basic of our whole financial system to-day. Let me give you still another illustration which, I think, will do more to drive home this point than anything of an abstract character that I might advance. This is quoted by Mr. Robertson from the Economic Journal of June, 1915, page 281:

There is among the Caroline Islands an island called Uap, whose money consists solely of huge stones called fei, many of them so large that they cannot be moved, so that even when they change hands in the course of business their physical location is left unchanged. . . . Some time ago the natives allowed the roads of the island to fall into disrepair, and steadily refused to mend them; and the Germans, who were at that time in possession of the island, had to devise some means of inflicting a fine. It was clearly useless to attempt to remove any of the stones from the island. "At last," so the account runs, "by a happy thought the fine was exacted by sending a man to every failu and pabai throughout the disobedient districts, where he simply marked a certain number of the most valuable fei with a cross in black paint to show that the stones were claimed by the government. This instantly worked like a charm; the people, thus dolefully impoverished, turned to and repaired the highways to such good effect from one end of the island to the other that they are now like park drives. Then the government despatched its agents apd erased the crosses. Presto! the fine was paid, the happy failus resumed possession of their capital stock, and rolled in wealth.' Just so gold is a fetish, if you will, but it does the trick.

That is a plea for the gold standard by a man who clearly recognizes how little it really amounts to if one could understand its real meaning.

Now, my main reason for pleading for delay in the granting of these charters is that we have developed in Canada a financial monopoly, and that by granting the charters we

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legalize this monopoly. The banks are reservoirs for the collection of deposits from the people from the Atlantic to the Pacific. The banks have the right to issue currency, a very valuable franchise, and they have the giving of credit. Perhaps these powers would not be so bad if they were very widely distributed. But the fact is that in the last few years we have seen merger upon merger taking place, and bank managers, according to their evidence, are inclined to think this amalgamation will continue. One of them at least said that he thought it was a very good thing to eliminate weak banks. But until such time as mergers actually take place, we have a Bankers' Association, formally recognized, that more or less accomplishes the same purposes as a merger, because we are told that the rates of interest were fixed by an arrangement made within the Bankers' Association. Thus you have a little group, practically a combine, that determines rates of interest and the terms upon which credits can be given. But, more serious perhaps than that, is the system which has grown up of interlocking directorates, by which men who control banks also control a considerable number of subsidiary financial institutions as well as various industrial concerns. I do not know if this is any discovery to some hon. members; but if we had not known of this fact before, it was very clearly brought to us as the investigations of the Banking committee proceeded.

Just recently I have been looking through the Annual Canadian Financial Review, and I should like to call the attention of the committee to some facts as revealed by a study of that publication. I quote from the issue of June 1922. I notice a large number of the gentlemen whose names are prominent in banking affairs, are also prominent in governmental circles. Perhaps that is to be expected. I notice a good many of them have the title "Sir" prefixed to their names. Under the old regime they were regarded as the most honourable and most worthy of honour amongst our Canadian citizens. I notice that a number of them are very prominent in educational work, in military activities, in all the social life of the country. That too, perhaps, is to be expected. I am not laying any blartie upon those individuals because of the prominence that they have attained; but I should like to show that these men, because of acquiring a monopoly of the finacial credit of the country, have been able to dominate many of our industrial and commercial affairs. Let me take the Bank of Montreal, as an example. That bank is generally known as the government bank as it does a good part of the business of the government. The president is Sir Vin-

[Mr. Woodsworth.)

cent Meredith, of Montreal. I notice he is also a director of the Canadian Pacific Railway Company-a rival, by the way, of our own Canadian National Railways-he is president of the Royal Trust Company and a director of the Guarantee Company of North America. Thus the committee will see the group of companies in which one man can exercise a very large measure of control. Let me in this connection quote a paragraph from a book published some years ago by Judge Brandeis, of the United States Supreme Court. He says:

Directors, officers and employees of banking institutions should, by a similar provision, be disqualified from acting as directors, officers or employees of life insurance companies. The Armstrong investigation showed that life insurance companies were in 1905 the mo3t potent factor in financial concentration. . . . and now instead of the life insurance companies controlling the banks and trust companies the latter and the bankers control the life insurance companies.

Again he says:

Combination and control of other people's money and. of other people's businesses are the main factors in the development of the money trust.

A few weeks ago I took the trouble to glance through the lists of shareholders of a number of the leading banks in Canada. It is quite true that there are no very large holdings by wealthy men. It is quite true that a very considerable number of the shares are held by comparatively poor people. That is the very point I want to make-that the savings of comparatively poor people are all pooled in the banks and then the control of these institutions is put into the hands of a very small group.

I see that the next name on the list of directors is Sir Charles Gordon, GJB.E., vicepresident, Montreal. He is also a director of the Royal Trust Company-I might note in passing that the names frequently occur in groups; certain group domination is evident. He is also president of the Dominion Textile Company, president of the Montreal Cottons, president of the Montreal Cotton

5 p.m. Company, president of Penman's Limited, that is of companies manufacturing many articles which every household in the country requires and which more or less receive certain privileges through the tariff from the government of Canada. Further, he is a director of the Ogilvie Flour Mills,-that brings us to what we eat. He is also director of the Tuckett Tobacco Company, manufacturing one of the luxuries. He is also director of the Canadian Consolidated Rubber Company, president of the Dominion Glass Company, director of the Provincial Paper Mills, and president of the Hillcrest Collieries. I do not think any hon. member

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would claim that one individual, even Sir Charles Gordon, has any expert knowledge of these various industries of which he is direc tor or, in many cases, president. I think we can clearly see that the only reason why he should be on those boards is because of his financial ability. That is, we have had the division of labour go on until the financial men form a group by themselves, and the people who actually do the manufacturing, whether the employees or the employers, the organizers and managers, do not really own the factories. The real ownership is with the financier. He controls, not merely one line of industry, but a host of industries widely varying in character. We have been told recently in the papers of the danger in Germany of such men as Stinnes getting control of a very large number of industries of different classes, not merely perpendicular control, but horizontal control; yet we have that selfsame system prevailing in Canada. Perhaps it is not without significance that this director of the Bank of Montreal who is director of so many other companies should have been last year appointed by this government as a member of the Canadian Economic Commission.

Again let me quote a paragraph from Judge Brandeis. Speaking of other people's money and how the bankers use it, he says;

The control of these institutions means the ability to lend a large part of these funds, directly and indirectly to themselves; and, what is often even more important, the power to prevent the funds being lent to any rival interests.

He further says:

But far more serious even than the suppression of competition is the suppression of industrial liberty, indeed of manhood itself, which this overweening financial power entails. The intimidation which it effects extends far beyond the banks, trust companes and other institutions, seeking participation, from this inner group, in their lucrative undertakings, and far beyond those interested in the great corporations directly dependent upon the minor group. Its blighting and benumbing effect extends as well to the small and seemingly independent business men, to the vast army of professional men and others directly dependent upon "big business", and to many another.

And he goes on to elaborate his argument. I think it is hardly necessary to comment on the criticism of Judge Brandeis on the system which had grown up a few years ago in the United States, and which is so rapidly developing here in Canada.

The next name on the directorate of the Bank of Montreal is R. B. Angus, of Montreal, director of the Royal Trust Company, a director of the Canadian Pacific Railway, a director of the Minneapolis, St. Paul and Sault Ste. Marie railway company, a director of the Laurentide Paper Company, a director

of the Canada Northwest Land Company. Thus we see the organization extended not merely to Montreal and its vicinity, but away to the western country. The next name i3 that of Lord Shaughnessy, K.C., V.O., Montreal, director of the Royal Trust Company, director of the Canadian Pacific Railway Company, director of the Minneapolis, St. Paul and Sault Ste. Marie Railway Company, director of the Canada Northwest Land Company. The next is C. R. Hosmer, Esquire, Montreal, director of the Canadian Pacific Railway, director of the Commercial Cable Company, director of the Sun Life Assurance Company, director of the Royal Trust Company, director of the Canadian Cottons Company, director of the Dominion Textile Company, president of the Ogilvie Flour Mills Company, president of the Consolidated Mining and Smelting Company, director of the Canada Paper Company, director of the Laurentide Company, vice-president of the Kaministiquia Power Company, director of the Montreal Light, Heat & Power Company.

Let me quote another paragraph from Judge Brandeis:

Senator Owens, chairman of the Committee on Banking and Commerce said: "My own judgment is that a bank is a public utility institution, and cannot be treated as a private affair for the simple reason that the public is invited, under the safeguards of the government, to deposit its money with the bank, and the public has a right to have its interests safeguarded through organized auditors.

And he goes on to point out that the practical difficulty is that these men who are at the head of these industrial concerns are not fitted by their training to conduct industrial enterprises successfully. He says the failure of bank management is due mainly to two reasons: First, that no man can serve two masters, and, secondly, that a man cannot at the same time do many things well.

I return to the list of directors of the Bank of Montreal. The next name is Huntley R. Drummond; he is also vice-president of the Royal Trust Company. The next name is that of D. Forbes Angus, Esquire, Montreal. I am not aware how closely he is related to R. B. Angus who was a member of the Canadian Pacific Railway group. It is strange how some of the old family names crop up. I am reminded that two generations ago in this country a fight had to be made against what was then known as the Family Compact, I am reminded that there are those in this House whose forebears took a very active part in that fight. I srubmit we have, in the financial oligarchy of to-day, a far more serious menace to the welfare of this country than was the Family Compact in our grandfathers' day.

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The next name on the list is William Mc-Master, Esquire, Montreal, also a member of the Royal Trust Company, a director of the Guarantee Company of North America, the president of the Montreal Telegraph Company, a director of Penman's Limited, a director of the Belding Corticelli Company, a director of the Asbestos Corporation of Canada, the vice-president of the Dominion Glass Company, a director of the Dunlop Tire and Rubber Company, director Sherwin Williams, director Tooke Brothers, director Canadian Car and Foundry Company.

Here let me quote a further paragraph from Louis D. Brandeis:

The compelling reason for prohibiting interlocking directorates is neither the protection of stockholders, nor the protection of the public from the incidents of inefficiency and graft. For even more important than efficiency are industrial and political liberty, and these are imperilled by the money trust.

I submit that, side by side with the governments of this country, there are growing up other rival powers that have an immense influence, and that our so-called political democracy is valueless if we allow these institutions to develop which have such a large power over the life of every man, woman and child in the country.

I go back now to the list of directors, and the next one is Lieut.-Col. Herbert Molson, C.M.G., M.C., Montreal, director of the Royal Trust Company, director Canada Paper Company, director Canadian Consolidated Rubber Company, director Goulds Manufacturing Company. The next is Harold Kennedy, Es>-quire, Montreal. I think he is the only one who is not a director in other companies. I have no idea at all as to whether he is devoting his attention to the work of the Bank of Montreal, or whether he is one of those who are frequently described as dummy directors, who would carry out the policies of others more powerful outside. The next is H. W. Beauclerk, Esquire, Montreal, director of the Brompton Pulp and Paper Company, a director of the Canadian Car & Foundary Company, a director of P. Lyall & Sons Construction Company. The next name is G. B. Fraser, Westmount, Quebec. Yes, here is another who is not listed in the Financial Review as a director of any other institution outside of the Bank of Montreal. The next is His Honour Henry Cockshutt, Esquire, Brantford. He is a director of the Cockshutt Plough Company. I presume when the Labour representatives a few weeks ago were accorded the honour of shaking hands with the Lieutenant Governor of Ontario, they were in reality shaking hands with a director of the Bank of Montreal. No doubt His Excellency was

there as representing some of these financial and industrial interests. His Honour is also a director of the National Life Assurance Company.

The next is J. H. Ashdown, Winnipeg, Manitoba, the only western name on the list. He is director of the Ashdown Hardware Company and director of the Northern Trust Company. Those of us who happen to know Winnipeg recognize very clearly that in the case of Mr. Ashdown-as I have no doubt whatever in the case of all these other men whom I have named-he is also prominent in provincial matters, in civic matters, in the board of trade and in the educational, religious and philanthropic life of the city. I am not saying this in any disparagement whatever of these men, but merely to point out that they who secure such great financial power have also a very dominating influence in every concern of the entire community.

The next name is that of E. W. Beatty, Esquire, K.C., as we all know, president of the Canadian Pacific Railway. I am afraid that if I started in as a western member to speak of the Canadian Pacific Railway and its power it would take a very long time to exhaust what might foe said on the subject. We in the West know the strength of that great corporation. I think in one of the songs which were sung by members of the Press Gallery last year there was one which went something like this:

God save the C.P.R.

Long to reign over us,

Happy and glorious,

God save the C.P.R.

Well, I am inclined to think that we have in these great corporations rival institutions that stand in power side by side with, if not superior to, those which are recognized as governmental institutions. Mr. Beatty is also a director of the Royal Trust Company.

The next name on the list is that of Sir Lomer Gouin, K.C.M.G., of Montreal, who is not only a director of the Bank of Montreal but also of the Royal Trust Company, of the Mount Royal Assurance Company, of the Mutual Life Assurance Company, of the Cockshutt Plow Company, of the Laurentide Company, of the Montreal Light, Heat and Power Consolidated, of the Shawinigan Water and Power Company. I am sure that a good number of the Progressive members will feel satisfied that the interests of the West are being well looked after by the director of the Cockshutt Plow Company in the person of the Minister of Justice. A few weeks ago the member for Cape Breton South and Richmond (Mr. Carroll) objected to the Mayor of Glace Bay having taken action officially in connec-

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tion with some trouble there because he was a labour man. The hon. member stated that the mayor was an official in a labour union. That, I believe, is not in accordance with the facts, but it was implied by the hon. gentleman that a man connected with the labour movement could not dispassionately perform his duties as mayor. Now, if that is true, I am not quite sure how the Minister of Justice or any other member of the cabinet can adequately perform his duties when he is so closely connected with big financial and industrial corporations. Again I am saying this not in disparagement of the Minister of Justice, but merely to point out the actual conditions that exist to-day and to emphasize the need for careful consideration lest we perpetuate and aggravate these conditions. In a recent discussion respecting closed towns on the west coast the member for Skeena (Mr. Stork), I think it was, pointed out that very frequently the men were so held down that no one was even allowed to land from a boat until a company policeman standing on the gangplank had decided in his favour. I have seen standing beside the company's representative a mounted policeman, and I remember that he is responsible to the Minister of Justice. The Labour people across this country cannot forget that the Minister of Justice is also interested in paper companies and other big industrial concerns. I say this simply to drive home-

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LIB

George Newcombe Gordon (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

The CHAIRMAN:

I draw the attention of the hon. member to the fact that the section under discussion is "that bank charters continue to be granted to July 1, 1933, as to some particulars," and that he is not given the same freedom in committee as when discussing the principles of a bill on the second or third reading. Rule 13, section 5, provides that:

Speeches in Committee of the Whole must be strictly relevant to the item or clause under consideration.

I am merely drawing this to the hon. member's attention so there will not be any danger of his wandering from the point.

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LAB

James Shaver Woodsworth

Labour

Mr. WOODSWORTH:

Mr. Chairman, I shall bear this in mind. I think I have not wandered very far. It seems to me that these remarks are very pertinent indeed when we are considering the advisability of extending the franchises to the companies represented by these very individuals.

The next name on the list is that of General Sir Arthur Currie, G.C.M.G., of Montreal. I do not think he is a director in any of the industrial companies listed, but we all know he is president of McGill University; and it is rather interesting to find that our universities also are so closely tied up with the financial interests. The trouble is that in the Canadian Financial Review we do not have the educational institutions listed, or else we would find that the universities, as also the newspapers, are more or less controlled by these same individuals.

Now that is the list of directors of the Bank of Montreal. Just a few minutes more with regard to one or two other prominent bank directors. I notice that the vice-president of the Bank of Commerce, Sir John Aird, is also a director of the British America Insurance Company, of the Imperial Life Insurance Company, of the Western Insurance Company, of the National Trust Company, of the Cockshutt Plough Company, of the Western Canada Flour Mills and of the Brazilian Traction, Light and Power Company. This reminds me that in the Financial Review there do not appear foreign investments. The fact is, as brought out in the Committee on Banking and Commerce, our banks are more and more going into foreign investments, and no doubt many of these gentlemen are privately interested in these foreign concerns. I note that there is the very closest co-operation between the Canadian Bankers' Association and the American Bankers' Association. I also note, by reference to some of the English publications, that the British Empire Producers' Association has as one of its units the Canadian Manufacturers' Association. Thus we see that these concerns are linked up very closely with American institutions and those of other foreign countries, and also to the big financial and industrial corporations of Great Britain.

I am not going to more than mention some of the other outstanding financial figures-Sir Thomas White, vice-president of the Bank of Commerce; Sir Joseph Flavelle, vice-president of the Bank of Commerce; Sir Herbert S. Holt, a director of some nineteen financial and industrial enterprises; Sir Augustus Nanton, a director of a large number of enterprises, including the Canadian Pacific Railway and the Winnipeg Electric Railway. I need not do more than mention the Wolvins' and J. W. Norcross, who have come to the front in connection with the investigation into lake freight rates. I need not mention American capital, which is coming from Boston into Nova Scotia and up through Detroit into western Ontario, to be used in the operation of the mines, timber limits and fisheries of northern Ontario and British Columbia-one of the more recent developments is the sale of our bonds in New York. I would note in passing that although we have

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had the near failure of the Merchants Bank, those who were prominent officials and directors of that institution are still directors in important financial and industrial companies in Canada. Not only have they not been punished, but they are proceeding to carry on their work. Whether or not the near failure was owing to anything culpable or to inefficiency, the fact is that they still occupy prominent positions in financial and industrial affairs. According to the statement made by the hon. member for Brome (Mr. McMaster) last year in connection with some figures that he presented, sixteen corporations through interlocking directorates control over $4,000,000,000 of Canadian capital. May I quote a paragraph to show how this concentration of capital is proceeding in the United States? Mr. Roger Babson, of Babson's Statistical Service, says:

We said that the employing class was immensely more powerful thq>n in 1914. There is more money at its command. Eighteen thousand new millionaires are the war's legacy. This money capacity is more thoroughly unified than ever. In 1914, we had 30,000 banks functioning in a great degree in independence of each other. Then came the Federal Reserve Act and gave us the machinery for consolidation and the emergency of five years' war furnished the hammer blows to weld the structure into one.

The war taught the empfloying class the secret and the power of widespread propaganda. Imperial Europe had been aware of this power. It was new to the United States. Now, when we have anything to sell to the American people, we know how to sell it. We have learned. We have the schools. We have the pulpit. The employing class owns the press. There is practically no important paper in the United States but is theirs.

That was published in the Grain Growers' Guide of June 30, 1920. The most serious indictment against the present banking system is summed up in a sentence by Louis D. Brandeis: "The bankers control the people through the people's own money." In this great money trust which has grown up we have, as I have pointed out, a monopoly of the collecting of deposits, a monopoly of the issuance of credits, a monopoly of the issuing of our currency. Through this means the bankers have it very largely in their power to say what shall be produced, where it shall be produced, and at what price it shall be produced. This great money trust levies tribute on everything required by the consumer. As I read that long list of directorates one could not but be impressed by the fact that these companies represented the control of almost all the commodities that were commonly in use by the people. Further than that, this great money trust, in the judgment of some of us at least, to no small extent controls the governmental machinery. Men in high government positions are men who

IMr. Woodsworth.]

are prominent in these banking concerns. There is at least a very close interrelation, and I think we may say assuredly that it i3 the same group that controls in both cases: hence the policies adopted are very largely the policies of the great money trust.

And lastly, this money trust seeks as well to dominate the educational agencies. That to me, is the most serious of all, because it means that in time we are not going to be free. I do not mean for one moment to insinuate that these moneyed men go out deliberately to buy people; I do not mean to say that they go out deliberately to threaten people. But we do know that a very large number of those in the employ of all sorts of private concerns are afraid to speak out their minds because, when they desire to carry on business they may be denied credits or otherwise be forced to succumb to the power of the financial men.

I would point out that this group resists even the most moderate reforms. I think there was not a single resolution introduced in the committee-well, possibly with the exception of one that I recall at the moment- that was generally considered to be in the interests of the people when that interest seemed to conflict with the interest of the bankers-not a single resolution of that kind that was not voted down. We were pleading for public inspection; we were pleading for the prevention of usury, for the formation of small banks, and so on; for limiting the period of charters, as we are to-day; but these moderate resolutions were resisted. How can we claim that we are doing our duty by our constituents if, in the face of their expressed dissatisfaction with the present system, in face of the widespread discussion that has gone on in the newspapers, showing that the public generally are in favour of these reforms-how can we, I say, proceed to grant charters for a ten-year period on practically the same terms on which these charters have been held in the past?

In closing, let me say just a word from the point of view of labour. Labour is not consciously and definitely interested in this question, but generally takes the attitude that all these questions belong to the capitalist, that all this is part of the present system, which they desire to see superseded. I urge however that when we touch the financial system we touch the very nerve centre of our present system. We understood its operations a little better, I think, as we observed how things were managed in the Banking and Commerce committee. I think of one little amendment that I should like to reintroduce on the floor of the House-it shows how

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far this group goes-asking on behalf of the bank clerks the recognition of their right to organize for any legitimate purpose, a right guaranteed to all employed people under the Treaty of Versailles; yet even an innocent little resolution like that is voted down. It is obvious that we cannot hope to get much through this House; the most we can do is to protest. Let me say, as has been said elsewhere, that either we as a people must own and democratically control these great financial institutions, or they will absolutely own and control us. .

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PRO

John Alexander Wallace

Progressive

Mr. WALLACE:

Mr. Chairman, several sound reasons have been advanced in support of the amendment moved by the hon. member for Red Deer (Mr. Speakman) and seconded by the hon. member for Brandon (Mr. Forke). These reasons have been elaborated, and I do not propose to go over the same ground, but I do wish to register my support of the principle of the amendment, namely, that we extend the charters of the banks for one year, thus allowing further time for the consideration of the mass of evidence taken before the Banking committee. To my mind the Banking committee have done excellent work in the taking of evidence. There is a large amount of material available for the consideration of the members of the House, but unless the members have ample time to give it their considered judgment I feel that the evidence will not reach its full value to us as a parliament. Probably a great many of the members of that committee feel that they have had time to consider the evidence, but I know that a number of them do not; much less have the members of this House who were not on that committee had time to consider it. The Minister of Finance has said that the evidence has been before the country in the publications of the committee and in the press, but I do not feel that the country has had sufficient time to give it the consideration that is required. A number of letters have been received by many members of this House urging that the consideration of this act be postponed for another year. The hon. member for Red Deer has referred to the requests of the Alberta and Manitoba governments for postponement of consideration, and I think that these requests should carry considerable weight. Organized agriculture through the Canadian Council of Agriculture has also asked for a postponement of consideration, and I believe that organized labour is also of the same opinion. I think, Sir, that this weight of opinion should not be passed over lightly.

We are not in this amendment asking for anything for which there is not a precedent. I believe the same course was followed in May, 1911, and also in April, 1912. I feel that there is no sound reason why we should hurry this thing through unduly. I do not see why there is such a terrific rush to consider this act and get it out of the way. The banking system of this country is one of the most vital questions that we have to consider and I cannot help feeling that we should have further time to consider the evidence. I cannot see how any public interest will be prejudiced by a postponement of consideration of the act. I do not think that the banks themselves have anything to fear from that. We are men of reasonable judgment I think in this House, and I believe that the public interest will best be served by a postponement of consideration of the act for one year. For this reason and for the reasons that have been given by the hon. member for Red Deer I propose to support the amendment.

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PRO

Donald Ferdinand Kellner

Progressive

Mr. KELLNER:

In rising to support the amendment which has been moved I desire to make a few comments on the continuation of our banking system as we now have it. I think all members will agree that conditions at the present time are very unstable. There is a good deal of dissatisfaction throughout the country at large and I think it would be a very unpopular thing to renew these bank charters as we now have them. It would almost be a proclamation that we had decided that our banking system was as good as we could hope to make it, or that we had decided that we would not go to the trouble of studying it and investigating other systems which have been proposed.

May I also call attention to the fact that at the present time marketing conditions from a world standpoint are almost an impossibility. We find many countries that are badly in need of the produce we are able to grow in Canada, but we find that their currency is so depreciated that they are unable to buy our produce. On the other hand, our banks are making a very strenuous effort to get back to the gold standard. I do not think that anything could be done that would so much retard the development of Canada as that, for if we get back to the gold standard and some of the countries to which we hope to sell have a greatly depreciated currency it would mean that those countries already debt-ridden would have to pay three and four times the ordinary price to buy what we have to sell, and we would have to take less. It is

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an impossible position, and I do not think it can be continued.

There have been placed before the Banking committee three different proposals for a banking system which might give better satisfaction than the one we have at the present time. I venture to say that there is not a member of this House or a member of the Banking and Commerce committee who fully understands any one of those three systems, and surely there could be no objection to renewing these charters for another year in order to give us time to study these systems and find out if there is not a possibility at least of adapting one of them to our needs.

I would also add that in practically every country there are students at present studying the financial problem. Now if we renew our bank charters I should think it would discourage those students who are making a study of the banking system of Canada. I would almost think that they would interpret it in one of two ways: They would either say that we have a banking system and banking institutions in this country which cannot be improved upon in the opinion of this parliament, and that therefore there was little to be gained from a study of our system, or they would say that this government has taken an arbitrary stand, and therefore even if they study our system with a view to trying to improve it there would be no prospect of bringing an improved system into force.

I am also convinced that if we pass this act renewing the bank charters and the banks continue to function as they have been in the past, some of .our industries will be forced to seek other sources to enable them to carry on their business. I do not know that I would be prepared to suggest what might happen in that line, but it would almost seem that they will have to devise something to take the place of money. It is possible that our agriculturists instead of selling grain will go out and sell bonds. It might be a good idea to encourage that, but I do not believe that we should actually make it necessary for them to do so by the imposition of a banking system which evidently has never met their demands at least.

I should also like to make a few remarks about the inefficiency of our present banking system, especially in regard to the banks carrying on their own business. We have very recently had what has often been referred to as the Merchants Bank catastrophe. We have seen some of the managers of that bank tried, and we have seen them whitewashed. We know that that bank lost sev-

(Mr. Kellner.

eral millions of money and the courts have proclaimed that no one was to blame. Now, if there is something the matter with our act so that when a man who has not used due discretion or honesty in handling the funds of the public cannot be convicted under it, I think we should know what it is, and I very much doubt if any member of this House does know wherein the weakness of the act in that respect lies. If it is our criminal code that is at fault, an investigation into that, which we shall probably never have if we renew these charters now for more than one year, would probably give us very valuable information.

It would be still better if an investigation were held to see if our juridical authorities might not be persuaded to at least consider the law in the light that parliament intended. Where the law is ignored entirely you have occurrences like the Merchants Bank catastrophe. If we were to go through another period of stress and some of the other banks were to get into a similar condition, I am a little afraid the managers of those banks would feel they were quite entitled to go ahead and make such disposition of the funds at their command as they saw fit; that there would be no punishment coming to them if they did so. The impression is going abroad that where a large sum of money, well up into the thousands or even into the millions of dollars, is involved there is little need for a man to fear the law; in some way or other he always seems to evade it. On the other hand it is held there is no escape for the offender if the amount lost is insignificant.

One other argument, I think, can be advanced against an extension of these bank charters for ten years, and it can be based on the statement that domination, in the end, will be eliminated. I do not believe that as matters stand we are getting very close to the elimination of that domination. I am convinced that the vast majority of the money which the banks have lent in the last few years has gone to pay interest on debts. Now, I ask you where are matters going to end if it is going to take our entire production to pay the interest on our borrowing? I do not think that anyone will argue that we can keep making fresh loans if it takes more than it is possible to raise in this country of ours to pay the interest on those loans A good deal of evidence was given befoie the committee on Banking and Commerce showing that many of our industries, and in particular that of agriculture, have found it impossible to pay the rate of interest which the banks claim they require in order to

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be able to operate. It would seem to me, under all the circumstances, that we have leached this stage: We must either find a better banking system or we are faced with the elimination of agriculture. I believe that is one of the things we should consider veiy seriously before we decide to give the banks a new lease of life for ten years. Personally, I am convinced it would be much more important to the country to have a prosperous farming community, or at least have that community carrying on under decent livable conditions, than to have a dominating banking system in Canada. The present conditions, in my opinion would be greatly ameliorated if the government would only be brave for awhile and see if it were not possible to, at least, bring about a reduction in the interest we are compelled to pay. It is all very well to talk about a safe banking system, or a safe monetary system, but if that system gets "too safe" it is liable to become very weak. I think that fact was pretty well demonstrated at some of our committee meetings.

Now, the Bank Act, as I understand it, is in reality a contract between the banking institutions and the people and, I suppose, it is more or less assumed that this agreement is reasonably fair to both parties. But many hon. members will recall that there were quite a number of lobbyists operating in connection with the Banking and Commerce committee, and I think, perhaps, it is not too strong a statement to say that these lobbyists were encouraged, and probably paid for their attendance, by the banking institutions. It therefore seems scarcely possible-when one party is represented by active lobbyists, and the other party is left unrepresented-that the agreement arrived at can be absolutely fair. In conclusion I desire to say that I shall support the amendment, and that in my opinion it would be a fatal mistake to renew these charters at the present time for a longer period than one year.

At six o'clock the committee took recess.

After Recess

The committee resumed at eight o'clock.

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PRO

Thomas William Bird

Progressive

Mr. BIRD:

Before I proceed to the few

general remarks I am about to make, I should like to pay a moment's attention to the remarks of the Minister of Finance (Mr. Fielding), and I do so very deferentially because of the unfailing tolerance that the hon. gentleman always shows towards opinions that differ from his. But in his remarks he showed

himself to be under some misapprehension as to our motives in taking up the time of the committee in further debating the Bank Act. I do not think we are anxious for publicity; at least we are not more anxious for it than other people are to avoid it. Our motive is pretty straightforward, and it is simply that due attention should be given to a very critical matter, I might say matters. I was referring more particularly to the one I had personally in mind. The hon. member implied that the Bank Act had already received a very thorough and searching revision, but I wish to take exception to that. The investigation into the Bank Act up to the present time has been of a rather perfunctory character with the exception of the part played by the small group representing this corner of the House. The word "revision" is almost a misnomer. What we have had has been a rather monotonous re-affirmation of the sanctity, inviolability and general unimpeachability of the Bank Act of this country.

I do not think we have had a very earnest and whole-hearted inquiry into the weaknesses and the failings, the demonstrated failings, of our present Bank Act; that in spite of the fact that in the last decade we have had one of the most unprecedented bank failures in the history of our country. The fact that we have had such a failure seems to have had very little influence upon this House. This House, or at any rate, a large section of it, is counting upon the shortness of the memory of the public. It is adopting the wisdom of the proverb that instructs us to "let sleeping dogs lie." I believe the memory of the public is short. I think it all too soon forgets the wrongs and injustices that take place from time to time. The lessons go unlearned. The people are unprofited by these things that hurt their interests, that inflict serious wounds upon the body politic. They forget them all too soon, and I am sorry to say that our statesmen and members of parliament exploit that weakness with regard to the public. I am not saying this on the strength of my own judgment, for it is well known that the press of this country, after the trials in connection with the Merchants Bank case, were clamorous for some kind of public inquiry, some efficient investigation. Those demands were widespread and unequivocal. Yet here we are almost at the end of this session; this matter has been smoothed over, passed over, and the proposition is to let it go.

I do not intend to take up the time of the committee, but I wish to make my earnest protest against this action of the House. Some one will say that attempts have been made to remedy the act so that these things

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will not occur again. I want to give the Finance Minister, who is responsible for the amended act, due credit for a sincere attempt to remedy the act, so far as it can be remedied by words; but I do not think the act can be remedied in that way. One scrap of paper cannot amend another scrap of paper. The old section was just as plain, as explicit and as watertight as ingenuity could make it. You can pick out any one of the Ten Commandments, and you will find that it is not more explicit than the old section, but in spite of that fact $10,000,000 disappeared. It seems to me, Mr. Chairman, that an act of parliament that has a hole in it big enough to allow $10,000,000 to slip through needs, not merely to be tinkered in the gingerly fashion we have attempted to amend it, but requires a new bottom, and an overhauling through and through. I do not think we have attempted to learn from the things that have befallen us. We have been bitten once, and we are still as bold as ever. We have not only left the stable door open but it seems to me we are about to open the paddock gate too. By our passivity we are inviting a recurrence of this affair.

Just a word on another phase of this question. I imagine that the side of the Merchants Bank question that is most interesting to the public has to do with the transactions that occurred previous to the false returns that were the basis for an action in court. It was not so much the lending as the borrowing that interested the public. One paper, I remember, came out very boldly in this regard, and made the suggestion that behind the Merchants Bank case there was all the sinister evil of stock exchange gambling. I think it was the Finance Minister who assured us some time ago that there was no mystery about the Merchants Bank case. It was just bad loans-injudicious loaning. I wish to say that I think he has left out the most important phase of the question. It was not the injudicious loaning that was the important thing, but it was the judicious borrowing-the very judicious borrowing, I would say-and the public has a right to know something at any rate of the influences that so worked upon our bank officials as to make them commit the error which they committed, f you like to call it an error. I would not characterize this borrowing as being in any sense criminal, although some of the public papers went so far as to suggest that it was almost verging upon criminality. I do not want to go so far as that. It reminds me of the reproaches that Reynard, the fox, made when the cat charged him with stealing a goose. He said, "Do not say 'steal' pussy,

that is not courteous or kind; but say that I obtained it through my superior ability." Well, there is a lot of that kind of acquisition going on unknown to the public, and I think the public has a right to know the methods by which people can get into the inside of our banks and get away with astounding sums of money, as they did in this case. We have heard a lot about the business acumen of our bank presidents and our bank directors; but how can they hold up their heads again before the world and claim that they are supermen in all things that pertain to sound finance when, under their very noses, people entered into their institutions and took out $10,000,000? I am sometimes amazed at the futility of the ordinary bank robber, the man who undertakes all the risk attached to an ordinary bank robbery, where he breaks into the bank in the dead of night, fully armed, ready to take all the consequences. I wonder at men being content to go on in the old-fashioned way doing these things and taking all the risk, when this other kind of thing goes on, and when men go into financial institutions and take out all this wealth, get away with it and nothing is said.

With reference to those false returns, the courts of this country-and we do not need to reflect upon their decision-said that these returns were not false, but that they were involuntarily misleading. The disappearance of all this money occurred in a fit of absence of mind. It was done without anybody being consciously blameworthy. It was not a fault, or a criminal action. It was an involuntary action, misleading, it is true, but misleading in an involuntary sense. Now the public's interest in a thing of that kind is clear. It does not matter to the public whether it was voluntary or involuntary. It is dangerous just the same. It makes no difference whether it was done wilfully or not, the same amount of money is missing. And this is what we are concerned about. It seems to me that the only way of preventing a recurrence of such a scandal is for parliament to see to it that in future the government make its own returns. I am not going to enter into all the threadbare arguments against outside inspection-arguments which appeal only to those who represent our big financial interests and who are jealous of having their privileges inquired into. The view taken by the average man in the street is that the government should be able to make certain that this sort of thing does not go on in our banks. The evidence before the courts showed that two government officials after only two days' inspection of the books of the

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Merchants Bank discovered that millions of dollars were missing. We are not asking for any elaborate inspection and audit, we are not asking that all the petty accounts of the myriad branches should be investigated. We are simply asking that an efficient man in the pay of the government should have the right to scan the ledgers at the main offices of these banks and at their more important branches and so ascertain the actual condition of affairs. Common sense would dictate that such a man, almost by a single glance, could tell if there was serious mismanagement. I think that is what the public expects and what it would demand if this question could only be kept before the public mind, for, as I said before, the public has a knack of forgetting these important things and waiting until the next financial disaster occurs before rousing itself to renewed action.

Now, a word in regard to the merger of the Merchants Bank with the Bank of Montreal. In announcing this merger the Minister of Finance regretted the trend of the concentration of financial control in a few hands, and yet he saw no alternative but to impose this merger upon the country. He proposed to cure one evil by inflicting another. Our banking system had been affected, so to speak, with scarlet fever, and he straightway inoculated it with typhoid in the hope of eradicating the first disease. He stated that we were passing through serious times, that the public mind is fickle, and therefore we must not hesitate or delay but must plunge into this recognized evil in order to escape another. Some of our newspapers strongly criticized-not the action of the Minister of Finance, but the action that instigated the merger, and one prominent journal called it a cowardly action not justified by the circumstances.

Now, Mr. Chairman, I do not think the Minister of Finance-and he is about the only spokesman for the forces of hurry in this House; there are not very many others who are bold enough to stand up and plead for rushing the Bank Act through-I do not think the minister advances any other argument but that of stability. And to stabilize has become characteristic of him. We know that he has stabilized our tariff. Now he proposes to stabilize our financial system.

We have seen a very significant combination of forces brought about in this House to prevent us in this quarter securing what we consider to be a very reasonable delay in the revision of the act. It is said that trouble makes strange bed-fellows. Well, sometimes even the unfounded anticipation of trouble

has the same effect. We have had the spectacle of Liberal members joining hands with Conservative members in trying to thwart the very reasonable desires of the Progressive party. The other night I saw what I thought was the extreme of incompatibility -a lion riding on the back of a mule; but during the progress of this act through parliament we have seen an equally strange sight-the Conservative party in an "unholy alliance" with the Liberal party in an attempt to block free discussion of the Bank Act.

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LIB
PRO

Thomas William Bird

Progressive

Mr. BIRD:

The trouble is you do not feel the shame. To me it is strange how enthusiasms evaporate in this House. Last session when the Progressives were not saying very much about inadequate discussion of the Bank Act, we had some very eloquent speeches from the Conservative side urging a thorough discussion of the act in view of the Merchants Bank fiasco, and the House will pardon me for reading at length a few extracts from last year's Hansard because I know hon. members will find them very interesting. At that time a prominent member on the Conservative side said:

Let me turn to another subject that has not been mentioned in the Speech from the Throne. I refer to the Bank Act. I understand tliat next year is really the time for the amendment of that act. I was of the opinion that it should have been amended this year to conform with the practice of the past, but in that perhaps I am mistaken. Whether that be the case or not, however, I think that the Banking and Commerce committee might very properly make a careful examination this year into the workings of the Bank Act, that is to say, into some of its evident weaknesses. I am not one of those who subscribe to the statement that our banking system has not proven workable, or that it is an unsuccessful system which is not in the best interests of the people. I am not ready to endorse the remarks of the hon. member for East Calgary (Mr. Irvine) made this afternoon-statements which seemed to me with great facility and despatch to dispose of this great problem with a complacency that one might well envy, if, indeed, the remarks of the hon. gentleman could bring about a solution of the problem. I believe that our banking system is, in the main, a sound one; it is one of the best systems in the world. Nevertheless, we have to consider the incident of the Merchants Bank during the past few months to realize that there are weaknesses, or, shall I say, loopholes in the Bank Act, and that it is necessary, if not to reconstruct, at least to amend it, so as to render impossible a recurrence of the failure of the Merchants Bank.

And the word "failure" is not mine.

Perhaps that word is too strong; at all events, let me say the incident of the Merchants Bank. For instance, the Merchants Bank directorate or management must have made false returns to the Department of Finance for several months before the crash came. I do not see how the returns that they did make could approach accuracy in view of the sudden collapse, or partial collapse that confronted us. If it

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is true, as I surmise-and I think the evidence strongly supports the assumption-that the bank made false returns, then this parliament ought to know it, and I believe that the Banking and Commerce committee should summon before it the management, the president and any other officials of the Merchants Bank, who might throw light on the matter, in order that parliament might be fully seized of all the steps which led up to this very regrettable incident in the banking life of this country. Furthermore, the Banking committee could very well make this examination for the purpose of preparing amendments to the Bank Act, when it comes up for general revision next year.

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IND
PRO

Thomas William Bird

Progressive

Mr. BIRD:

The hon. member for Centre Vancouver (Mr. Stevens), I think. I might supplement that by a quotation from another hon. member on the Conservative side of the House, just to show that we on this side are not doing anything at the present time that need be taken as unwonted or extraordinary; we are taking an attitude which was taken by others last session. Another hon. member said:

In conclusion, I want to refer to three or four other matters which I think should be mentioned in this debate, because this is the only opportunity we have of doing so under the rules of the House.

This is the utterance of a member for Toronto-one of the greatest financial centres in Canada-who was specially interested in this subject. [DOT]

'If there ever was in this country an act that needed overhauling, it is the much-heralded Bank Act. Some newspapers are beginning to wonder whether there is to be one law for the rich and another for the poor in this country.

I think it is necessary for me to say again that this is the utterance of a Conservative member, otherwise the committee might think I was quoting from the speech of one of the representatives of labour.

I have read, in some very reputable newspapers, in Canada, articles referring to some people who stole $8,000 out of a bank, and some other poor fellow who took $1.25 out of a postal envelope. The people who stole $8,000 got a life sentence because they robbed the bank with violence; the poor postman, on a small salary without bonus, who took $1.25 out of an envelope, was sent down. This matter of the Merchants Bank should not be left to any superior or high court judge of the province of Quebec; or the Appellate division either; there should be an independent inquiry by the High Court of parliament and no whitewash. We should find out whether we have a Bank Act, whether it is a mere scrap of paper or not, and whether the monthly returns made by the bank to the minister are scraps of paper or not. I believe the losses will run to twelve or thirteen million dollars before they get through. What protection has the investor, the stockholder? I know one man in my city who has started to sell out every dollar's worth of stock he has in some small banks. When I asked him the reason, he said that he was very doubtful if, in some of the smaller banks, the shareholders have the protection which they should have. This parliament should be big enough to go into the whole

question of the Merchants Bank. The banks have been allowed to increase their note circulation; they have been given many special privileges, and a thorough inquiry should be made into the whole matter. The House and the country expect us to do our duty in this matter. Where do the Progressives stand upon it?

I notice that the hon. gentleman is not in the House to-night to say where he stands.

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June 18, 1923