March 21, 1933

CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

No.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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LIB

Ernest Lapointe

Liberal

Mr. LAPOINTE:

It is no longer in force?

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

No. With respect to

the other matter, that is the securities acquired by the banks after the 31st of August, 1931- and I think it is only fair to say that the banks were not very much interested in acquiring securities after that; they were interested in providing cash with which to meet any possible demands that might be made by their depositors-it is a matter of satisfaction to say that even though we are but ten millions of people and our riches are relatively not great, there never has been a moment when any cheque presented by a depositor, whether for a small or large amount, has not been honoured by our chartered banks.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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?

Some hon. MEMBERS:

Oh, oh.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

I am assuming always,

of course, that the drawer of the cheque was in funds at the bank himself. I was not contemplating the possibility of not sufficient funds being the answer, but apparently that has happened to us all, so hon. gentlemen were in good1 company with their province with respect to similar conditions and circumstances. I was pointing out, Mr. Chairman, that this is a great distinction when we consider some other countries. One does not want to be boastful of the institutions of one's own country, but up to the moment they have weathered the storm very successfully by reason of what I have just said, namely a proper appreciation of the fact that you cannot invest the money of the depositors in unrealizable assets beyond a certain margin and remain solvent. That is all there is to it. This order in council provided for

Relief Act, 1933

a temporary necessity that arose by reason of a complete demoralization of the world's markets, but there was no change in the real value of the securities that were held, they being, as I have said, the class of securities that banks purchase in order to take care of conditions which, in the wisdom of those who manage them, may at any time arise. It is common knowledge that difficulties have arisen in some of the great countries of the world. Corporations have drawn their cheques to meet their pay-rolls and limitations have been placed upon the amount that might be drawn; so much has been set as the maximum for each workman, and so much as the maximum for each executive. Even great insurance companies have had to apply limitations and restrictions as to the payment of cash surrender values and the making of loans on policies. This action was taken to prevent any possible disruption or disorganization of our banking system and to maintain the confidence of the depositors so that, with few exceptions, there were no large withdrawals from the banks, and the integrity of our institutions has been maintained.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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LIB

Charles Gavan Power

Liberal

Mr. POWER:

I would not venture to

embark on a discussion of banking with the right hon. Prime Minister, but now that we are on this matter perhaps it might be just as well to clear it up. I gathered from the remarks of the Prime Minister that this order in council did not apply to securities such as those I mentioned, Brazilian and Canadian Pacific, but referred only to high grade securities.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

No, I did not say that.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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LIB

Charles Gavan Power

Liberal

Mr. POWER:

I have some recollection of having read a bank statement, or bank statements, in which I saw a column containing a list of railway and other securities held. I would assume that some of the chartered banks of Canada must have stocked up pretty heavily with Canadian Pacific, let us say, which was one of the best known securities, and which was considered almost as solid as the Dominion of Canada. If that were the case, Canadian Pacific stock, which was one of the securities they were permitted to value as of its market value on August 31 or its book value, most assuredly would be valued in the October statement at more than its real value in the markets of the world on that date. I hope if I am making any mis-statements I will be corrected, because I do not want to exaggerate the situation in any way or to say anything that is not correct. I would assume

that when Canadian Pacific fell to 12, let us say, as it did some time early in 1932, in the report made by the banks to the government it could have been valued at let us say 25. That was one of the points I was endeavouring to make. Whether or not the banks took advantage of this order in council I am unable to say, but it permitted them to make their reports for the months of September, October, November and December of 1931, and their annual report for that year, as well as their reports for the following months until March, 1932, showing the value of their securities on the basis set out in this order in council. The right hon. gentleman stated that a large proportion of the assets of Canadian chartered banks consisted of provincial and federal government bonds.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

Not a large proportion. But I should not interrupt the hon. gentleman.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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LIB

Charles Gavan Power

Liberal

Mr. POWER:

Then I will say that a considerable proportion, if my right hon. friend will agree to that, was invested in provincial and federal government securities because, we are told, these were liquid. I do not know that we ever had a better example of when they were not liquid than in the case we have been discussing. I suppose the same observation could be made with justice in respect to the banks in the United States which unfortunately have had to close. A large number of banks, under the state banking laws, were permitted to value their securities at other than the market value, but apparently that was not sufficient to save them from the liquidation which resulted, which forced a large number of banks in that country to close their doors.

I very much regret that I used the word "bank" with reference to the Manitoba savings office. I quite understand that there is some discussion as to whether or not provinces have the right to call these institutions banks, but I am not particularly concerned with that. This was an institution which held the savings of the people and, as such, it was entitled to whatever protection could be afforded. Whether or not it could be properly called a bank or an office is not material to the discussion; the fact that it was an office and not a bank should not be made an excuse for not extending to it all the assistance this government could give.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

I will not trespass upon the time of the committee beyond saying that the form of return provided by the Bank Act,

Relief Act, 1933

which is chapter 12 of the revised statutes of Canada, calls for the bank to make a return of its assets and liabilities. Under the heading of liabilities it must describe:

Liabilities

1. Notes in circulation $

2. Balance due to Dominion government after deducting advances for credits, pay-lists, etc

3. Advances under the Finance Act.

4. Balances due to provincial governments

5. Deposits by the public, payable

on demand in Canada

6. Deposits by the public, payable

after notice or on a fixed day, in Canada

7. Deposits elsewhere than in

Canada

8. Loans from other banks in

Canada, secured, including bills rediscounted

9. Deposits made by and balances due to other banks in Canada..

10. Due to banks and banking correspondents in the United Kingdom

11. Due to banks and banking correspondents elsewhere than in Canada and the United Kingdom

12. Bills payable

13. Letters of credit outstanding..

14. Liabilities not included under

foregoing heads

15. Dividends declared and unpaid..

16. Rest or reserve fund

17. Capital paid up

Under these seventeen heads the liabilities of the banks have to be stated. Now we come to the question of assets, which are listed under twenty-eight headings:

1. Current gold and subsidiary coin.

2. Dominion notes.

3. Notes of other banks.

4. United States and other foreign currencies.

5. Cheques on other banks.

6. Loans to other banks in Canada, secured, including bills rediscounted.

7. Deposits made with and balances due from other banks in Canada.

8. Due from banks and banking correspondents in the United Kingdom.9. Due from banks and banking correspondents elsewhere than in Canada and the United Kingdom.10. Dominion government and provincial government securities.11. Canadian municipal securities, and British foreign and colonial public securities other than Canadian.12. Railway and other bonds, debentures and stocks.

With my limited knowledge of the situation, I cannot recall at the moment any substantial holdings of Canadian Pacific or other stocks by any banks in Canada. So far as my knowledge goes, that is not the form of investment that the banks make, for reasons that are obvious.

[Mr. Benrett.l

13. Call and short (not exceeding thirty days) loans in Canada on stocks, debentures, bonds and other securities of a sufficient marketable value to cover.

14. Call and short (not exceeding thirty days) loans elsewhere than in Canada on stocks, debentures, bonds and other securities of a sufficient marketable value to cover.

15. Other current loans and discounts in Canada.

16. Other current loans and discounts elsewhere^ than in Canada after making full provision for bad and doubtful debts.

17. Loans to the government of Canada.

18. Loans to provincial governments.

19. Loans to cities, towns, municipalities and school districts.

20. Non-current loans, estimated loss provided for.

21. Real estate other than bank premises.

22. Mortgages on real estate sold by the bank.

23. Bank premises, at not more than cost, less amounts (if any) written off.

24. Liabilities of customers under letters of credit as per contra.

25. Deposit with the Minister of Finance for the security of note circulation.

26. Deposit in the central gold reserve.

27. Shares of and loans to controlled companies.

28. Other assets not included under the foregoing heads.

I speak now subject entirely to correction, for I have not taken the trouble to charge my memory with the matter; but so far as I know at the moment, if I were a witness in a cause, called upon to depose as to what my knowledge might be of any bank holding any shares of the two companies which the hon. gentleman has mentioned, I could not say I know of any bank holding any of them at any time during this troublesome period, because it was not with that class of security that we were dealing. We were dealing with a situation that had arisen by reason of the complete demoralization of the credits and prices on the markets of the world-that is, not only on our sidb of the world but in the old countries as well-as a result of Great Britain going off the gold standard, and consequently shaking the entire credit structure of the world.

I quite agree that the effect of this order in council was, as I have said, to permit the banks to fix, as of the 31st day of August, the then existing value as reflected in the exchanges of the country as the market price of their securities for the purpose of filling in under the proper heading the list of their assets-because their liabilities were not matters that we dealt with.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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LIB

James Malcolm

Liberal

Mr. MALCOLM:

Had the order in council anything to do with the valuation of securities held as collateral by the bank, as security against loans to customers?

Relief Act, 1933

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

I think not, because that was not the phase of it with which we felt we had authority to deal. That was purely a banking transaction, between the bank and its customers, and to interfere with the bank's transaction of business would involve on the part of the country the examination of the various accounts of individuals, which we declined under any circumstances to do or to accept the responsibility for. And it was because of difficulties that arose by reason of the very circumstances to which the former Minister of Trade and Commerce has alluded that I for one did not feel, and I do not yet think, that it was desirable for the dominion to become responsible in the way of taking over the savings offices in Manitoba. To take them over and to become responsible for cash and to deal with customers was not the business of the country. What we did was to use the collective credit of the people of Canada to make certain that over 40,000 depositors in the province of Manitoba, having aggregate savings of 812,000,000, should not lose those savings or should not be delayed in receiving their money by reason of the fact that the money they had paid in had been invested in something that could not be realized upon. That is the short way of putting it. In other words, you could not realize on a mortgage on real estate for the purpose of meeting a cheque; and when you substituted, for the money you took, a mortgage and then exchanged the mortgage for a treasury bill with the promise to pay, and could not sell that, you were no better off, because your treasury was empty of cash in either event; and because it was empty of cash, the situation developed as I have indicated.

I think, without trespassing further on the time of the committee, that what we endeavoured to do we succeeded in doing, namely, preventing shall I say suspicion and distrust undermining the confidence of the Canadian people in their financial institutions, so that they might be tempted to withdraw their money and hoard it, as has been done in other countries of the world during the great depression through which we are passing. It is a matter of satisfaction and for that reason I felt especially pleased with what was said yesterday by the leader of the opposition regarding the condition of this country as compared with other countries, because, whatever else may be said, we had met the demands that were made by the depositors in our financial institutions for their money in accordance with the terms of their contract of deposit, without any hesitancy

or any request for delay or for limitation of the amount they might receive in accordance with the balance outstanding to their credit.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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LIB

Peter Heenan

Liberal

Mr. HEENAN:

I think the minister might give more information with respect to the question raised by the hon. member for Comox-Albemi as 'to what transpired at the dominion-provincial conference in regard to unemployment insurance. It is a very important question, especially when we are discussing unemployment relief measures, and it is one that has been the subject of debate in this house for several years. I can recall its being submitted to the industrial relationships committee on two occasions, after which the provinces were canvassed to see what view they took of the matter. I think the files of the department will show that at least four of the provinces agreed to participate in a conference looking to the establishment of an unemployment insurance scheme in Canada. Certainly the Prime Minister of Canada gave the workers of the country hope, on April 29, 1931, that there would be introduced in this house an unemployment insurance scheme. His words are to be found at page 1103 of Hansard of April 29, 1931. After stating what was first to be considered with regard to the number of those who would come under the scheme, and so forth, he said:

I propose, if we are spared as a government and as individuals, that the information we will have before our term of office is ended shall be crystallized into the form of legislative proposals to be submitted to this house.

I recall the large headlines that were carried in the newspapers of the country, to the effect that the government intended to introduce an unemployment insurance scheme in the House of Commons, and I also recall many of the labour men expressing the hope that it would come into existence at an early date. I realize of course that it was necessary to discuss the matter with the provinces, and that conference was called and met here not very long ago. I know that unemployment insurance was on the agenda and I think the committee has a right to know what took place at that conference. We have a right to know whether any serious attempt was made to get the provinces and the dominion together for the purpose of formulating an insurance scheme and-

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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CON

Armand Renaud La Vergne (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Conservative (1867-1942)

The CHAIRMAN:

I think the hon. member is wandering far away from the resolution.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
Permalink
?

Some hon. MEMBERS:

No.

Relief Act, 1933

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
Permalink
CON

Armand Renaud La Vergne (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Conservative (1867-1942)

The CHAIRMAN:

We cannot discuss

insurance and what took place at a conference.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
Permalink
LIB

Ian Alistair Mackenzie

Liberal

Mr. MACKENZIE (Vancouver):

We can

discuss any possible remedy for unemployment.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
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CON

Armand Renaud La Vergne (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Conservative (1867-1942)

The CHAIRMAN:

This is a resolution to cover a vote of $20,000,000 for unemployment relief, and in my humble opinion the hon. member is wandering far afield.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
Permalink
LIB

Ernest Lapointe

Liberal

Mr. LAPOINTE:

Peace, order and good

government.

Topic:   UNEMPLOYMENT AND FARM RELIEF
Subtopic:   CONTINUATION FOR ONE YEAR OF PROVISIONS OF RELIEF ACT, 1932
Permalink

March 21, 1933