March 18, 1924

CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

Yes.

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PRO

Alan Webster Neill

Progressive

Mr. NEILL:

The hon. member for Marquette recommended a dry dock for Victoria on his own advice? Do I get that right?

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CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

What I said, and I do

not propose to be misrepresented, was that he was the member of the government which recommended it. When the hon. member asked me upon whose advice he was a member of the government, I said, on his own advice.

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PRO

Alan Webster Neill

Progressive

Mr. NEILL:

I did not refer to the creation of the hon. member for Marquette, I was talking about the creation of the dry-dock, or rather the vote for the drydock.

Now, I propose with your permission, Mr. Speaker, to quote a few extracts, a very few, from the Victoria Colonist. Those who are familiar with it know that the Victoria Colonist is a strong Conservative paper, and therefore its absolute accuracy can be relied on.

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CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

Much better than yours.

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PRO

Alan Webster Neill

Progressive

Mr. NEILL:

If the hon. member wants

to speak I will be happy to yield him the floor.

On October 16, 1919,-by the way I may say that while the hon. member was sworn in on the 2nd August, 1919, the election was not held until October 27-that date is important; October 27. So we find on October 16 an editorial reading as follows:

The announcement is made that tenders for the dry-dock will be called for immediately.

That was eleven days before the election. Just about the psychological moment was it not? On the same date in the same paper at a meeting we find Hon. Dr. Tolmie speaking as follows:

They tell you that this drydock scheme is merely a vote catching one. Before I left Ottawa I had the definite assurance from members of the Cabinet that

The Address-Mr. Neill

this work will be proceeded with. I fully believe that assurance.

On October 19, we again find my hon. friend making the following statement:

As to the drydock there is no camouflage so far as I and the government are concerned. The government has given me its solemn pledge that the work will be proceeded with and I am here to say the work will go on.

You see he had to be emphatic because this was the second time the drydock had been undertaken. Then again, on October 21, in his printed manifesto to the electors my hon. friend used this language:

We secured a vote for it (the drydock) at end of June (1919) and work will be proceeded with without delay.

On October 26, as the final windup before the election, which was next day, we find an editorial reading as follows:

People will attest by their votes their estimate of how much Mr. Tolmie was responsible for having made it possible for this great shipping facility to be begun this winter.

And there are more with which I will not burden the House.

There is just one other point I wish to allude to. The hon. member (Mr. Tolmie) said in his speech, and so did the hon. member for Nanaimo (Mr. Dickie) that, after all, Esqui-malt, where this dry dock is, is not in the district of Victoria but in that of Nanaimo. That is just one of these truths which is true but misleading. It is perfectly and literally correct that it is not within the actual confines of the district of Victoria, it is in that of Esquimalt which extends up to Nanaimo eighty or a hundred miles. But Esquimalt is, to all intents and purposes a suburb of Victoria about two and a half miles distant and connected with it by tram line. Citizens of Victoria live out that way in pretty villas, and so on. The working people of Victoria go out there to work and vice versa. They are one and the same to all intents and 10 p.m. purposes. The expenditure of $5,000,000 in Esquimalt would accomplish as much benefit and be as successful in vote getting in the city of Victoria as a like expenditure in Ottawa would be in the city of Hull; the parable is an exact one. While it is perfectly true it is in the Nanaimo district, yet to all intents and purposes the benefit and the vote catching value of it would be just the same as if it were in the actual city of Victoria. Truth is a noble thing. Truth is supposed to be at the bottom of wells, but some wells are very deep.

Now the text of my hon. friend's eloquence was directed towards the statement of the

Prime Minister that the drydock was built to

ensure his election. I maintain that I have sufficiently demonstrated the facts to hon. members to make up their minds. As to whether the Prime Minister was correct in that assertion I will leave it to them to say-I recall that some years ago, in the time of the great boom there was an intensive campaign to advertise motor cars throughout the States. One man advertised: "This is the best car." A second advertised: "This is the cheapest car." A third man sai4: "This is the safest;" and so on. But one particular man thought he knew the mind of the American people, thought he knew the class of people to whom he was appealing, and he advertised his car with these words: "This is the dearest car." He knew his clientele; he was out to catch the purse-proud millionaire who wanted to be able to say: "My car cost more than anybody else's." So we find a parallel to-day in the case of my hon. friend. He goes about the country a great deal, during the parliamentary recess, engaged in a business which is a sort of collateral to his political duties, and he will be able to point to himself as "a pearl of great price." I remember that when Paul was haled before-was it not Agrippa?-in the course of his trial it came out that he was a Roman citizen, a great honour in those days. The chief captain looked at him and asked how he came to be that. Paul said, Yes, he was a Roman citizen, and the chief captain replied, "With a great sum obtained I this." So my hon. friend can say "With a great sum obtained I this seat." But the commoner, the ordinary members from the prairies and other districts, can perhaps say, like Paul, "But we were free born."

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CON

Leon Johnson Ladner

Conservative (1867-1942)

Mr. L. J. LADNER (Vancouver South):

I wish to deal briefly with the remarks of the hon. member for Comox-A-lberni (Mr. Neill), but before doing so I wish to express my regret as a young man'-and I am sure many hon. gentlemen feel the same way-at the absence of one of our Canadian statesmen, the Minister of Finance, the member for Shelburne and Queen's (Mr. Fielding). We all miss him in this House. We miss the brilliancy of his mind and the soundness of his judgment. I had not anticipated making any references to the remarks of the last speaker, but he has hurled at me and my colleagues from Vancouver a defy regarding the Esquimalt drydock. He says that he defies the members from Vancouver to contradict the assertion that a drydock should have been built at Vancouver. Now, Mr. Speaker, I wish to deny this assertion and say that a drydock should have been built at Esquimalt, but may I add, as actually happened, another

The Address-Mr. Ladner

should have been built at Vancouver. I was much interested, really more interested, in the fact that the hon. member rose in this House for the first time as a champion of the government. He is the man selected to answer perhaps the most popular member of this House, the hon. member for Victoria City, and he seeks to throw ridicule upon him, invective, and to charge him with insincerity. Any hon. member who knows the hon. member for Victoria City knows perfectly well that none of those allegations could be applied to him, and these remarks, coming from an hon. member and a gentleman who for many years has known the reputation of such a distinguished member of this House as the hon. member for Victoria City, are somewhat surprising to me. I would have thought perhaps the government would have chosen someone from some other portion of the country to have performed this kind of deed, let me say, to use parliamentary language. The hon. member for Comox-Alberni reminds me of the experience of a friend of mine who was travelling from New York over to a great convention of Rotarians in Edinburgh, and, as many of you know, each Rotarian carries the badge on the lapel of his coat, with his name, place of residence and occupation. On one beautiful Sunday morning a certain serious-minded,-should I say long-facedindividual, proceeded about the boat, and without any explanation or without any words whatever, he would come to one member after the other, take hold of the lapel of the coat, and examine the badge with a magnifying glass. My friend proceeded with his reading, but soon this individual found his way to him, and the friend suddenly saw a large hand appear under his nose which hand grabbed the lapel of his coat adjusted the magnifying glass and examined the badge. The gentleman looked up in great surprise and this is what the man said: "I am Alex. Smith of Spokane undertaker; I am looking for somebody". The double application of the story rather fits the present situation. The hon. gentleman has endeavoured to answer the hon. member for Victoria City with arguments and assertions, which are witty, but which are not nearly so substantial, and not nearly so sound in fact as the assertion we have heard from the hon. member for Victoria.

Before proceeding with the main portion of my remarks I would like-and it is with a little diifidemce I undertake this duty-to refer to the words of the Minister of Railways (Mr. Graham) this afternoon. That hon. member is generally fairly accurate, but

to-day he launched into a torrent of political argument, no doubt for political effect, with regard to a certain statement made by Mr. Monty at Montreal. The fact of the matter is, Mr. Speaker, that although the Minister of Railways may be good in the administration of his department he was a little bit out in his French, not that I profess any excellent knowledge of French, but I have special means of knowing something about it. The actual words which were published in the press on Tuesday, the 29th January, 1921 were as follows-

Les liberaux, dit M. Monty, n'ont pas tenu parole; its avaient formellement declare que les chemins de fer nationaux seraient remis a une compagnie privee; au lieu de cela, on destitue les commissaires et on fait venir un etranger pour les administrer.

Now, Mr. Speaker, for the interpretation of those words I have not only my own authority but, the authority of one more skilled in interpretation than I am. The interpretation of that word "etranger" literally means stranger, not in the sense of meaning foreigner, but someone outside our gates. The French language is full of delicacies and sentiment which I am afraid most of the Anglo-Saxon race do nut appreciate.

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PRO

John Livingstone Brown

Progressive

Mr. BROWN:

Give us the whole quotation, because we require to hear the whole of it to understand its significance.

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CON

Leon Johnson Ladner

Conservative (1867-1942)

Mr. LADNER:

If the hon. gentleman's

French is in working order to-night he will have understood it.

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PRO
CON

Leon Johnson Ladner

Conservative (1867-1942)

Mr. LADNER:

The interpretation of it

would be-

"The Liberals," said Mr. Monty, "did not keep their word. They formally declared that the National Railways would be returned to private ownership, instead of which they dismissed the directors and had a stranger appointed to administer them."

A foreigner and an alien would be a different individual in sentiment and warmth of feeling, from an ordinary stranger. There is that line of demarcation on which the Minister of Railways in his characteristic, witty and skilful manner has seen fit to take a political advantage of ^nd make a great fuss over, so that the newspapers would have a Lord Dundonald case i'll over again.

Most of the discussion in this House has been directed to the question of tariff. We have heard advocates cf tariff and more tariff. We have heard advocates of duties and less duties, and, if I remember my history cor-

The Address-Mr. Ladner

rectly, I think for the past 70 years public men have been advocating the pros and cons of the principles of free trade and protection without giving actual practical application of those principles to the conditions of the country as we find them. I was reading the other day in the Life of Sir Alexander Galt, a speech which he made in the House in 1850, when he was raising the duty from 7i to 10 per cent, and in that speech he was remarking on the disaster that would fall upon the United States because they had such high duties. I think they were 25 per cent, and he had it skilfully worked out that people would' leave the United States because the cost of living would go up and they would come to Canada. He used the very arguments which hon. members to my left are advancing, which arguments have been proven in the light of history to be absolutely without foundation.

I propose to say a few words with respect to the portion of the Speech from the Throne dealing with the question of banking. The Speech from the Throne says-

The amendments made to the Bank Act in the last decennial revision of the last session provided better guarantees for the public in banking operations; their wisdom has already been abundantly apparent.

I suppose the wisdom which has already been abundantly apparent may be found in the disaster of the Home Bank, as to which some hon. members of the government have had some information. The fact of the matter is, Mr. Speaker, that although the Banking Committee sat three and a half months, and took a great amount of evidence, which, with the report covers 1,060 pages; yet the government, in the full possession of a number of facts which I shall disclose to the House, made scarcely any changes in the act, in the face of a situation which is becoming inimical to the best interests of the country and of our banking institutions. The banks constitute the heart of our economic system. Our agriculture, our industry, our business generally, all live or die under that, system. To continue the parallel, money is the life blood of the economic state; and so long as the heart of the economic system pulsates normally and distributes that life blood properly throughout the whole economic being, the national health will be maintained in vigour and be able to carry all the burdens of war and taxation which bear down on the shoulders of this virile northern race. The banking question is not a very complicated one. The functions which the banks discharge are simple. They are to receive the savings of depositors subject to repayment on demand, and to act

as a medium for loaning those moneys to the business of the country. Banks, like other businesses, must take their chances; the shareholders and creditors must take a certain amount of risk. For nearly one hundred years parliament has seen fit, in the public interest, to make laws respecting our banks, and our banking institutions have performed a splendid service in this country. There is no question about that; in fact, I think we have one of the best banking systems in the world. Like all good systems, however, the banking system in Canada is capable of improvement, and I hope to demonstrate this in a few moments. With respect to the Committee on Banking and Commerce and its report, the responsibility lay primarily on the government. What did they do as a matter of fact? Briefly, these are the accomplishments. They restricted the loans to bank officials. They made a change in the form of monthly returns, but with little improvement. Amendments were made to make more effective the shareholders' audit and to give greater power to the minister to investigate the banks. The trouble, however, is that the powers which the minister has in that regard are generally not exercised until after the failure has occurred or until some catastrophe has overtaken the institution.

The most important change was the amendment in connection with the famous section 88, under which the Dominion banks advance moneys to business concerns and have a first charge on the goods. The government proposed-and it was inserted in the bill-to add section 8S (a), by which notice of intention to borrow is filed with the Receiver General for the express purpose of giving notice to the public of the existence of a charge against these particular goods of the business. The real truth is that this amendment, pretending to be in the interests of the public and of our business institutions, was nothing more nor less than a sham, because it was a very simple matter for a man to borrow under section 88, file his notice, order his goods from England and then borrow again under section 86, repaying what he got under section 88, cancelling the notice under section 88 (a), and then standing before the world as though his goods were not encumbered, whereas, in fact, they would be just as much encumbered as they were before. It was not from any lack of information that the government pursued that course. An expert witness from Great Britain explained the matter, as can be seen by reference to the Banking Committee's report. Yet the government pursued that policy, which was fair neither to the public nor to the

The Address-Mr. Ladner

business institutions. In fact, it was deceiving ; and business men will easily carry on their affairs under that amendment believing that there are no encumbrances against particular goods when in fact there may be. What is it that the government have failed to do? They have failed to grapple properly with the question of rural credits. Years ago when the banking institutions were first started in this country their purpose was as we see in the preamble to the bill incorporating the Bank of Montreal in 1817, namely, to use the words of this preamble:

The advancement of agriculture and commerce and the promotion of the prosperity of the province.

What a change has come over the institution of banking in one hundred years! We know to-day that banking is adapted to the commerce and industry of the country; short term loans are made covering periods of sixty, ninety and a hundred and twenty days, and money which is loaned over a longer period-investment money-is placed usually in long term bonds and mortgages for three and five year terms. But there is nothing to enable the farmer to secure a loan for nine, twelve or fifteen months. In that respect the last decennial revision of the Bank Act failed to grapple with the problem of rural credits, and nothing has been accomplished; no step has been taken to stop the absorption by the larger banks of the smaller ones, I will deal with that phase of the matter in a few moments.

Then we have the extraordinary situation in connection with the small amount of capital which is carrying an immense amount of deposits of the people. And nothing was done with regard to excessive rates of interest. I know that you cannot legislate on the question of interest rates, but steps can be taken to make impossible such incidents as were disclosed before the committee where on loans an interest of 10 and 12 per cent, was charged farmers in remote sections of Saskatchewan. Then, again, in connection with audit and inspection, it is well known that the government has not accomplished anything of advantage. They made certain amendments but they do not solve the question. It is generally understood that the government will probably provide some measure this session, but nothing satisfactory has been accomplished so far. There is also the question of penalties for false or incorrect returns. These penalties do not attach to the officials of the institution in the way they should in order to bring home the responsibility when such a catastrophe occurs as happened in the case of the Home Bank. Let me add that these are not dark

and mysterious questions which cannot be investigated nor understood. The history of the development of banking and financial institutions in Canada discloses the fact that time and again problems have arisen before the Banking committee and solutions have been suggested, tried and failed. In that respect the government, I think, have failed entirely to fix the responsibility, and they have not solved the problem as they should have done.

May I now direct the attention of the House concretely to some of the very important indications of the general tendency of events to-day. After all, the course of events to-day is merely a connection between the past and the future. I have obtained certain information from the returns given by our banks under the Bank Act and published in the Canada Gazette. In 1867 there were 22 banks in Canada; in 1890 there were 40, affording a wide field for competition. In 1900 there were 36, in 1910, 28, and in 1923 the number had been reduced to 14. What will the number be in 1933? If this does not indicate the trend of events, let me call attention to the question of the capital invested in the banking business of this country and the volume of the business carried on. In 1890, we had $60,000,000 of paid-up capital; in 1900, $67,000,000, in 1910, $100,000,000 and in 1923, 123,000,000 While during the last 23 years the capital has increased 84 per cent the volume of business done, as indicated by bank clearings and liabilities to the public, has increased 1100 per cent. So that you will see what a disproportion there is in the respective increases. It is true that a large reserve of $123,000,000 has been built up, I will deal with that shortly. In 1900 the bank capital was $67,000,000 and the bank clearings were $1,500,000,000; in 1923 the capital had increased to $123,000,000, and the bank clearings to $17,500,000,000.

But, Mr. Speaker, there is a more significant feature than this. The bank premises in 1890 stood at $4,000,000, in 1900 at $6,500,000, in 1910 at $25,000,000, in 1923 at $70,000,000 plus $6,000,000 in other real estate. Leaving aside the reserves, we find this extraordinary situation, that out of a total of $123,000,000 capital invested in the banking business of this country, no less than $76,000,000 is frozen or locked up in the premises and real estate on which the business of the banks is carried on. In many cases these are handsome pillared institutions of considerable architectural beauty, presenting an appearance of solidity and substance to depositors. Let me repeat that out of a total capital invested in the banking business of

The Address-Mr. Ladner

$123,000,000, no less than $76,000,000 is invested in bank premises. Consequently, leaving aside for the moment the reserves, we have a total net liquid capital of $47,000,000 to carry on the banking business of the Dominion, amounting to $2,686,000,000, which represents the liabilities of all the banks to the public. There arises the extremely important question of confidence in our banking system, which to some extent has been shaken by the Home Bank failure. May I remind hon. members in connection with these figures that in 1890, 1900 and 1910 we had more liquid capital in the banking business than we had in 1923, and I submit that the situation is one requiring the attention of the government.

In order the better to understand my contention, may I ask the House to visualize a base representing $47,000,000 in net capital, and on top of that an inverted pyramid representing $2,686,000,000 liability to the public. The House will thereupon appreciate the delicacy of the situation in the event of business disturbances throughout the world, and it will understand the need for a substantial increase in this capital, or some other arrangement to meet any difficulty which might arise through international complications.

It is not because the business has not been profitable that we find this reduction in the number of banks, because the returns furnished by the banks show that, taking the net earnings or dividends of all the banks, good and bad-and some of them are bad-the dividends paid were: in 1890, 6i per cent; in 1900, 7 per cent; in 1910, 8 per cent; in 1923, 11 per cent, while the reserve has increased from $34,000,000 in 1910 to $123,000,000 in 1923. I suggest that these figures are very significant. But perhaps the most astounding discovery which I made while examining these returns was in connection with the deposits which the public have placed in the banks, and which the banks loan to the institutions of the country to cany on their business. Out of $2,050,000,000 and more of deposits, no less than 70 per cent-and these calculations are practically accurate within i per cent-are to be found in the four largest banking institutions of the country, while the ten smaller institutions endeavour to carry on their business with 30 per cent. The course of events during the past thirty years shows a most interesting development in relation to these deposits and their distribution among our banks. In 1890 thirty per cent of these deposits were in the four largest banks, and

TMr. Ladner.]

seventy per cent in the remaining institutions; in 1900, the percentages were 40 per cent and 50 per cent respectively; in 1910, 45 per cent and 55 per cent respectively; but in 1923, 70 per cent are found in the four largest institutions and only 30 per cent in the others.

Now, in face of these facts, whether in regard to capital, deposits, number of banks, or the creation of reserves, my submission is that unless something is done by co-operation between our banking institutions and the federal government-and the responsibility is primarily on the government-we must ask ourselves-What will be the situation in 1934? For my part, I do not think it is in the national interest or the interest of our banks that the banking business of the country should be centralized in four or five large institutions. When the decennial revision of the Bank Act is taking place we find, and quite properly so, the most experienced and able men in the banking world appearing before the committee to make their submissions. They are the master minds in the banking world. What opportunity has the average member of parliament or the average man in public life of offsetting their advice so far as the public interest is concerned? Though looking after the public interest the member is very seriously handicapped. The point I wish to put frankly before the House is this; the course of events is tending towards a strong centralization of our banking business, and the government, with all its protestations against mergers, combines and trusts, has failed to take any action whatsoever to correct this tendency during last session after an exhaustive inquiry into our banking system.

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LIB

Thomas Vien

Liberal

Mr. VIEN:

Would my hon. friend submit his proposals to prevent the tendency he complains of?

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CON

Leon Johnson Ladner

Conservative (1867-1942)

Mr. LADNER:

That is on the next sheet

of my notes, and I shall be pleased to tell him exactly what I would do. I would suggest that as the banking business is a monopoly under our Bank Act, and property so, placed entirely in the hands of our chartered banks, with certain great privileges, such as note issue up to the extent of a bank's unimpaired capital, and likewise with certain obligations -I would suggest that parliament should assume its responsibility to the public and at this juncture stop the course of events by adopting the principles governing the Federal Reserve Bank of the United States and the Bank of England which are applicable to Canada-incorporate them in the Bank Act,

The Address-Mr. Ladner

and give this country an institution which will be representative of both the banks and the people, and so control the course of events which is now only too apparent. We need such an institution. Some of the older members in this House may smile or cast doubt upon my proposal, but if they will study the history of the development of our banking system, and will face the facts squarely and assume their responsibilities to the public, they cannot help but realize the necessity of taking some steps to carry out a proposal on the lines I have suggested. If the government and parliament fail at this juncture to take the necessary action, it is only a question of time when a similar proposal will be put into effect.

These are some of the reasons why we require a reserve bank. We need a check on the rediscount facilities provided by the Bank Act; we should divorce the banking business from the government; we should put it in the hands of the bankers. These rediscount facilities are not complete at present and do not operate to the best advantage of the country. There is hesitancy on the part of the banks to take advantage of them. And we all know the necessity for such facilities.

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IND

William Findlay Maclean

Independent Conservative

Mr. MACLEAN (York):

Is not the rediscount system obtaining to-day in the United States eminently satisfactory? It is in the hands of the government.

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CON
IND

William Findlay Maclean

Independent Conservative

Mr. MACLEAN (York):

The bankers of

the United States and the public say it is.

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CON
LIB

Thomas Vien

Liberal

Mr. VIEN:

Will my hon. friend allow me a further question? Does he think that the federal board system would be any better in Canada than it has been in the United States, where one hundred banks have failed of late?

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CON

Leon Johnson Ladner

Conservative (1867-1942)

Mr. LADNER:

The hon. gentleman has apparently altogether missed my point. I am not advocating the adoption in Canada of the principle of the federal reserve bank exactly as it is applied in the United States. I have said twice that that system should be improved upon; that it is the Bank of England system we should use here, where rediscount is penalized. But we should have rediscount facilities. To continue my illustration: the bank cannot carry this manufacturer of lumber, because the bank, like other institutions, must pay its debts-and the banks have a lot of debts; they owe more money than any other institution I know of. Now, under the rediscount system, if the 'manufacturer cannot pay up, the bank takes his paper to the federal reserve bank, hands it over and gets money in its place, and the federal reserve bank carries the manufacturer over the awkward period. In every commercial country of the world to-day except Canada you have rediscount facilities, and in Canada you have a pretence at it in the Finance Act. We have just reached the stage of a halfway measure,

The Address-Mr. Ladner

and the course of events is forcing us on, impelled by the power of an economic force which hon. members have not, I believe, perceived, which the public have not perceived and never do perceive until disaster overtakes them-and then public men are driven on by the force of public opinion instead of acting as leaders of public opinion.

Then, we need something in this country in connection with our smaller banks. How many hon. members here honestly believe that in the face of the official data which I have given to the House to-day our smaller banking institutions, which have only 30 per cent of the total deposits of this country on the basis of which to carry on their business while the larger institutions have 70 per cent- how many hon. gentlemen think that these institutions can go on under these circumstances? They cannot reduce their overhead, as one banker told me the other day. With the failure of the Home Bank, the agitation that has prevailed among the public and the consideration of the matter by parliament, there has been a weakening of that most delicate and powerful instrument of finance-confidence, and the result is that very quietly-we might as well face it; we might as well talk about it and assume our responsibility in that connection-very quietly the deposits are being taken from the smaller institutions and placed in the larger ones. Does anyone think the larger institutions are objecting to that? Not at all. And if they are not being placed in larger institutions they are being placed, as I know for a fact, in the United States, or, if not there, they are being put into Victory Bonds or other securities, resulting in an investment of money on long terms which should be used in the commerce and business of the country. So Mr. Speaker, I say that we must do something to maintain in the competitive field the few small banks which now exist, because there is no doubt that if we do not take some action they will go out and we will have a financial oligarchy in this country which will dictate not only to business and finance but to governments, federal and provincial. Experience has shown time and again, as would be proved if we had an opportunity of going into some of these facts, the wisdom of parliament's assuming its responsibility early before disaster occurs.

I have already referred to the question of interest rates. The federal reserve system is the most effective way of correcting unfairness in connection with interest rates in different districts. The federal reserve bank does not deal with the public, as a rule, but only with member banks. There is one occasion, however, when they do deal with the public.

If in some districts the banks get together and endeavour to force a high interest rate, as happened in Canada, according to the evidence which was revealed before the Banking committee, where the rate was never less than 10 per cent and was often 12-if a situation of that kind arises, under the federal reserve system a board of trade or some other public body or individual may protest against it, and the federal reserve bank then operates its only power to deal with the public, called its open market operations. They go into that district and they offer the money at 7 per cent, and by the law of supply and demand the banking institutions which had refused to give a fair deal are forced to reduce their rate to a fair level. We have no such institution in Canada; we have no protection of that kind, and having public responsibility I think it is our duty to say something about these things and to endeavour to bring about some improvement in regard to them.

Then, a federal reserve bank would be the proper institution to handle that most delicate and most difficult question of inspection and audit. We have had much discussion in the House on this subject, and still more before the Banking committee. It is something that cannot be handled by m.en who are not experts in the business. I believe that in the United States a great deal of good has been accomplished in that regard. Then there is the question of note issue. Our note issue at present is carried on under the Finance department; that should be placed under the federal reserve bank-our gold reserve and the control of our notes. Moreover, the federal reserve institution is a splendid thing in connection with foreign trade, as has been eminently established in the United States. I see no reason also why the government should not place all their business in one banking institution. If you had a federal reserve bank acting on behalf of the state as well as the other banks, an institution in which all banks were members, the government could carry on its financial business with that federal reserve bank. Then there is the very important question of disciplinary authority. There must be many occasions in connection with the relation of our banking institutions to the public where certain discipline would be helpful to the banks as well as to the people. A federal reserve bank could accomplish that.

Before I close I wish to give one or two reasons why parliament should act in this matter now and not ten years hence at the

The Address-Mr. Ladner

next decennial revision of the Bank Act, when we may have four or five banks left. A depressed situation arises and becomes acute owing to war or other extraordinary conditions. In all history wars have been the cause of disaster in finance and in business. Our debt in Canada increased from $330,000,000 before the war to two and a half billions after the war. The Great War was financed not as other wars, by the accumulated savings of the people, but upon the principle of inflation, and any of you who have gone into the question at all will know that just as the banks build up their assets and liabilities, debits and credits, so the government borrows from the public and from the banks. After absorbing all the accumulated savings in Great Britain and in Canada and after drawing upon the savings of the United States they were forced to resort to inflation in order to carry on the war, and the results has been that the purchasing power of the dollar has gone down through deflation, to the extent that it will never, in my opinion, attain the same purchasing power that it had reached before the war. Let me impress your mind with the seriousness of the situation by informing those who perhaps have not the information, of the colossal expenditure which this war has meant. During the six years from March 31, 1914, to March 31, 1920, more money was spent by the British Empire than it spent during the 226 years prior to that date. That is official data from authorities that are accepted as such. In other words, from 1914 to 1920 there has been more money spent than there was back to 1688, when the national debt of Great Britain was commenced. What does that mean? It simply means taxation. It means obligation on the backs of the people. It means an encumbrance on all financial operations, and the obligation of the state to recognize the necessity in the course of events to co-operate with the banking institutions, and in the face of obligations of that kind face the future, as we will be bound to do a few years hence if we do not do it at the present time. Let me remind you that the Napoleonic wars from 1793 to 1817, some twenty-four years, cost Great Britain 1,200 million pounds while the late war cost the Empire 11,268 million pounds during the six years from 1914 to 1920, and you will remember that the Napoleonic wars waged from one end of Europe to the other, and bear in mind the shortness of the late war. These are wide-world factors which have created the present financial situation.

Mr. Speaker, had I not occupied so much of the time of the House, I would like to have had the opportunity of saying a few words- which I will not do-in connection with the development of banking institutions in Canada. But the Prime Minister, whom I see in the chamber, may be interested in learning of an incident which occured away back in 1837 in connection with one of his ancestors, a distinguished Upper Canada reformer, Mr. William Lyon Mackenzie. Mr. Mackenzie instigated a run on the Bank of Upper Canada, and historians tell us that the bank paid the notes in silver and kept friends at the counter all day, and at night these friends brought back the specie in wheel-barrows. The analogy I wish to make is this: We have in this present generation a run of a different kind by his descendant. It is a run on the revenues of the country coming from agricultural implements and instruments of production, and while this descendant carries on a run of that kind, his cabinet friends carry on a run on other business in the country by increasing taxation and bringing back the money to the coffers of the government in that way. It is true these are in different ages but they have a political effect as they may have had at that time.

So far as the tariff is concerned, British Columbia wants a reasonable protection. The outlook of British Columbia is one of commercial, industrial, agricultural and mercantile development. We have diversified interests. Our agriculture amounted last year to $55,000,000; fisheries, $20,000,000; minerals, $44,000,000; forest production, $92,000,000. We have many things which we can send to the prairies, and they have their wheat which they can send to us, but I think that after all the West, British Columbia, and the prairies, together have one thing in common, and that is the claim for equalization of freight rates and the elimination of the discriminatory rates. I shall refer to this matter only in a general way because it has been so well threshed out that it is unnecessary to go into details. When one listens to this debate on the tariff and hears hon. members rising to lofty heights of eloquence on the subject of free trade or protection, one wonders exactly what the consequences would be if the tariff on agricultural implements were altogether eliminated. I suggest to hon. gentlemen to my left that more would be gained in a single month by equalization of freight rates than they would gain in ten years by the elimination of the tariff on agricultural implements. Mr. Speaker, the whole question is a farce so far as the tariff

The Address-Mr. Ladner

is concerned. It is a political farce, and anyone who has observed the attitude of our Progressive friends this year, as compared with last year or the year before, will realize the apparent intent, and in that connection I would ask the leader of the Progressive party, the hon. member for Brandon (Mr. Forke), to bear with me while I take him on the course of events which may lie before him in the near future when the budget comes down. The leader of the Progressive party claims with great enthusiasm that the promise in the Speech from the Throne is a renewal of the Liberal platform of 1919. I wonder what he will say when the actualities are divulged in the budget. I suggest to him that he will be in the position of the Scotchman who was being married, and if I listen rightly I would judge that the hon. member for Brandon is connected with the Scotch himself. In the middle of the ceremony this Scotchman stopped; he could not go any further. The best man rushed up to him and said, "Jock, what ails ye. Have ye lost the ring?" "No," said Jock, "but I have lost my enthusiasm." I think the member for Brandon will find himself in that position when the budget comes down.

In closing, I wish to make an appeal to the members of this House on the question of making permanent the bonus which now forms a portion of the pension given to the soldiers. I am not aware that any comment has been made on this subject, but I do know from representations, from resolutions that have been passed and public meetings that have been held from one end of Canada to the other, as well as from newspaper comment, that the soldier body of this country is greatly exercised over this matter. There seems to be an idea that this bonus, which under the Pension Act of 1920, automatically expires on the 1st of September next will not be renewed by the government. If the government has any intention of not renewing that bonus, I think it is only fair and proper to the soldiers who are in receipt of this pension to say so.

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LIB

Henri Sévérin Béland (Minister of Soldiers' Civil Re-establishment; Minister presiding over the Department of Health)

Liberal

Mr. BELAND:

My hon. friend suggests that the government should make known to the country whether it is their intention to extend the payment of the bonus to the soldiers. Six weeks ago in Toronto, before the Amputation Association, I was asked that question and I answered it, and my statement was published in the newspapers. It was to the effect that the government intended to introduce legislation to extend the bonus to the soldiers.

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March 18, 1924