April 13, 1928

UFA

Henry Elvins Spencer

United Farmers of Alberta

Mr. SPENCER:

Although most of these

bonds are. I understand, owned by Canadians,

they are owned by very few Canadians, so that the majority of the people are paying for the privilege which this minority enjoy. It would be in the interests of the mass of the people-probably 85 or 90 per cent of the citizens-if these few, this small minority who have received this great benefit for a number of years since the war were paid off so that everybody would come under the ordinary taxation of the country.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

The tax-exempt bonds outstanding are: 1931, five per cent; $52,931,600; 1933, five and a half per cent, $416,658,800; 1937, five and a half per cent, $236,299,850.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

And 1934?

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

That is not tax-exempt. Then there is a five per cent issue of $90,166,900. These are the tax-exempts.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

The quotation to-day on the

1933's is $104.90.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

What is it for the 1937's?

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

They are selling at $110, tax

free.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

Obviously to buy those

at.SHO will make it necessary for the minister to sell securities at a lower yield than 41 per cent, say about 4.10 per cent. When you take into consideration other matters in connection with them the minister would have to sell securities at not more than 4J per cent to be able to buy these other securities, so I cannot see how he can make any money if the market continues as it is at present. Two or three years from now, however, when they begin to go down in price due to the fact that they are nearing maturity-because the price is dependent upon the nearness to maturity in some instances-he might be able to make a little money, but that is the only way I can see in the circumstances.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

I believe my hon. friend will not make use of this legislation unless the price readies such a point as will ensure an immediate profit to the country in these transactions; I would assume that to be his underlying policy in this matter. I do think, however, that the minister should take very careful cognizance of the suggestion made by my leader in connection with the right of redemption. Personally I think we are in for lower money rates; we have had no difficulty at all in disposing of very large emissions both in Canada and the United States where the right of retirement is given after the lapse of so many years, at $102, $104

or $106, which is the highest I remember in any single emission of really good securities. That, of course, is extremely valuable in case what I expect does come about; that is, if we have a progressively lowering rate of interest so far as governmental securities are concerned.

During the discussion another point has come up; that is, the danger of these maturities accumulating at any one time. I assume that my hon. friend does not consider issuing all these securities at once, or making them all payable at a certain time; I suppose he will issue them in each instance having regard to two things. First he will consider the way to get the best value for the security at the time it is issued, and then he will bear in mind the dates upon which other payments fall due, in order to avoid that lumping of governmental obligations which would naturally depress the market price.

Then my hon. friend said something about a sinking fund, and I think he is really getting around to that idea. I will admit that it does cost something to administer a sinking fund, but I do not think it is going to cost much more to administer it if we make use of the machinery and personnel we already have. Even if we give them a great deal more work to do I do not think it will cost a great deal more, although of course my hon. friend has to consider several things in connection with that proposition. He has mentioned the sinking fund on the one hand, while on the other he appears to lean more to the alternative that we should sell instalment bonds. I desire to point out to my friend that instalment bonds do not command a price anything like as good as the bonds which are issued for a stated period, and I think he would find that as a rule we would save money by looking after our retirements through a sinking fund, even though it cost a little more, rather than by selling securities at the lower rate which these instalment bonds always carry.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

I will keep that in mind. Just before the chairman rises I want to point out one fact in connection with the last long term loan, which was made not very long ago. My hon. friend will be glad to know that we then followed the practice which he has emphasized to-day, of putting in a callable clause operating within ten or fifteen years.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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CON

Robert Charles Matthews

Conservative (1867-1942)

Mr. MATTHEWS:

AVas there a callable clause in the railway bonds issued in 1927?

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

I could not say; I am talking about the government financing. We have adopted this callable clause.

Loan of S500,000,000

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

We should have that clause in all the bonds, whether for railways or anything else.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

I quite agree.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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UFA

Henry Elvins Spencer

United Farmers of Alberta

Mr. SPENCER:

I think this is probably the best time to draw to the attention of the minister the fact that in December last the government borrowed from the banks on treasury bills to the extent of $48,000.000, I think. The minister will correct me if I am wrong.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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CON

Robert Charles Matthews

Conservative (1867-1942)

Mr. MATTHEWS:

They borrowed $45.000,000.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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UFA

Henry Elvins Spencer

United Farmers of Alberta

Mr. SPENCER :

They borrowed that money at 4 per cent, and I understand that under the Finance Act these same treasury bills can be bought back by the banks, and that they can get Dominion notes upon them at 3J per cent. In other words, the government borrows from the banks at 4 per cent, and the government loans money back to the banks on the same security at 3f per cent. I would like an explanation of this, if the minister would be good enough to give it.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

As a matter of fact, under the Finance Act I think the rate was reduced to 3j per cent, but the banks have not availed themselves of that privilege to any great extent. Of course my hon. friend will understand that to keep the finances of the country sound that sort of thing cannot go on indefinitely, although I admit that it can be done to a limited degree.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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UFA

Henry Elvins Spencer

United Farmers of Alberta

Mr. SPENCER:

The minister will admit

that it does seem extraordinary for the government to pay one-quarter per cent more when they borrow on a security than when they lend on the same security to private institutions.

Topic:   LOAN OF $500,000,000 REDEMPTION OF LOANS AND PURCHASE OF UNMATURED SECURITIES
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April 13, 1928