Mr. G. D. STANLEY (East Calgary) (for Mr. Matthews) presented the sixth report of the select standing committee on banking and commerce, as follows: The select standing committee on banking and commerce begs leave to present the following as a sixth report: On Mouday, February 6, 1933, the following order of reference issued from the house, viz.: Ordered,-That the following proposed resolution be referred to the select standing committee on banking and commerce:

Whereas the question of public and private indebtedness has become one of our greatest and most perplexing problems, enhanced during the past years by the extremely low price level of all primary commodities, through which this indebtedness must be in large part met, and the effect of which has been to double and treble the actual burden of these liabilities; and, . Whereas this fact has been recognized in respect of certain international obligations, and has become a practical issue in respect of the public obligations of many countries; and, Whereas no such recognition has as yet been given to the heavy private indebtedness within this country, although these, together with the high interest rates which prevail, constitute just as heavy and impossible a burden to the individual, as do national and international obligations to the countries concerned; and, Whereas this situation is one of the greatest factors in the present economic depression, and is one of the greatest barriers to the financial recovery of agriculture and industry, and as such, deserves and commands the immediate attention of this parliament; Therefore be it resolved,-That, in the opinion of this house, the government should give serious and immediate attention to the question of debts and interest rates within this country, and the possibility of their reduction, either by way of direct action, or by the submission of the entire problem to the select vMr. Speaker.] standing committee on banking and commerce, in order that the subject may be fully inquired into, and if possible, some solution found. Attest. Arthur Beauchesne, Clerk of the House. In view of the general terms in which the resolution is expressed, the sponsor was asked to prepare a memorandum indicating more specifically the ground he would suggest the committee endeavour to cover. This was done, and the memorandum may be found on page 3A of the printed evidence. The committee accepted the task set before it, but to obtain the information outlined to the committee by the proposer of the resolution, was an undertaking that in part was incapable of fulfilment. For example, a comprehensive answer to the question asking for a general classification of the wealth level of all lenders of money would require a complete census of the wealth of private individuals as well as of corporations. Such a census, in the view of the committee, could not accurately be taken. While the dominion statistician was able to supply from existing records a large amount of relevant statistics, additional data are needed which can only be obtained by special inquiries for which a period of time covering some weeks or even months will be necessary. In view of these facts, this report must necessarily be limited in scope and is not intended to be a complete review of the subjects contained in the reference. Nevertheless, studies of the material gathered to date reveal tendencies upon which certain conclusions may be based. These are developed in the paragraphs which follow: 1. Public Debt-Dominion of Canada (a) Debt outstanding- The total of unmatured funded debt of the dominion on March 31, 1933, was $2,715,910,607. From this amount should be deducted sinking funds of $66,001,724, leaving the net funded debt at $2,649,908,883. (b) Interest rates- Interest payable on this total was $127,239,499, or an average rate of 4-68 per cent. On specific bond issues the rate varies from 2J per cent on the loan of $4,888,186 made in London in 1897, due in 1947, to 5J per cent payable on victory loans maturing in 1933, 1934 and 1937. Evidence presented to the committee indicates a downward tendency in interest rates in recent years. The yield on typical Dominion government bonds used by the Bureau of Statistics in their index of long term interest rates, which was as high as 5J per cent in 1922, was down to a rate of 4£ per cent in 1933. This cheapening of the cost of money is reflected in the current interest rates, which have been paid on various classes of debts. The average rate of interest paid on Dominion government funded debt was 5-20 per cent in 1922, and in 1932 was 4-97 per cent. The current rate, due to the effect of conversion loans, is 4-68 per cent. Since the committee began its sittings, the rate of interest on savings deposits in banks has been reduced from 3 per cent to 2i per Banking and Commerce cent, in loan and trust companies from 4 per cent to 3J per cent, in the post office from 3 per cent to 2J per cent, and in the province of Ontario savings office from 3 per cent to 2J per cent. (e) Sinking funds- Sinking funds are applicable only to sterling bonds issued in London, of a par value of 8254,000,000. The amount presently held in the sinking fund represents about one-quarter of the outstanding principal of the issues to which the sinking fund applies. With respect to other issues, retirements have been made from yearly surpluses from time to time, but no definite program of debt retirement has been laid down in the past. Recommendations re Public Debt 1. The committee highly recomends the conversion of outstanding obligations from a higher to a lower rate of interest when the state of the money market warrants it. The conversion loan of 1931 is an example of the benefits of this practice, as shown by the following table: Conversion Loan, 1931 Description of Loan Converted Amount Converted Interest Old Rate New Maturity of Conversion Issue Annual Saving in InterestSecond War Loan, 1916-31 Renewal Loan, 1922-32 Victory Loan, 1918-33 Vicory Loan, 1919-34 $ 38,625,700 37,523,200 276,688,100 285,772,300 per cent 5 54 54 54 per cent 44 44 44 44 1956 1957 1958 1959 $ 193,128 375,232 2,766,881 2,857,723638,609,300 6,192,964 Tile annual saving of interest is shown to be $6,192,964. _ . . In pointing out that bonds maturing within a short time should be converted to lower rates of interest as soon as it can be done, the committee calls attention to the possibilities as shown in the following figures: There are outstanding victory loans maturing in 1933 and bearing 54 per cent interest $169,971,850 Victory loans maturing in 1934 and bearing 54 per cent interest.. .. 226,138,350 The conversion of these 54 per cent securities presently falling due affords an opportunity of further reducing the burden of fixed charges. If they were converted to a 44 per cent coupon the saving per annum in interest would be $3,961,102. If the rate of interest were 4 per cent, the saving would be $5,941,653, The committee expresses the hope that a coupon rate not exceeding 4 per cent may be used. Any discount on the sale of the bonds could be absorbed by amortization. 2. A general amortization or debt retirement plan should be put into effect as soon as finances permit, and the annual payment to effect this end should be budgeted for each year. The adoption of this plan would ensure an orderly retirement of the existing debt within a definite period. The committee particularly draws attention to the fact that after the heavy refundings that will be necessary up to and including 1937, there follows a period of twenty years in which the maturities in any one year are not so large as to involve major borrowing operations. 3. Future long term bond issues should either (a) have sinking fund provisions; or (b) have their maturity dates arranged, in so far as practicable, to conform with the suggested plan of annual debt retirement. In good times, when revenues are buoyant and no bonds maturing, the pressure for increased capital expenditure throughout the country is almost irresistible. When maturities are coining due, the Minister of Finance must provide for them. Hence the desirability of regularity of maturities. 4. Long term issues should, when possible, have callable provisions so that in times of low interest rates advantage may be taken to re-finance. If and when these recommendations are adopted, the whole debt structure of the Dominion of Canada will be on a retirement basis that will tend to safeguard and indeed improve the credit of the country. The committee is of opinion that an emphasis on the integrity of our national obligations will re-affirm to our own people and to the world that in trustworthiness and quality we stand for the honour of our bargains, whether convenient or not. The following table summarizes the situation as regards public debt in the dominion, its provinces and municipalities, and the funded debt of corporations: Banking and Commerce

Public Debt of Canada, its Provinces and Municipalities, Funded Debt of Corporations, together with Interest Payments (Latest Available Figures) - Amount Interest A\rerage RateNet debt of Canada March 31st, 1933 (preliminary) (1) Bonds guaranteed by the Dominion of Canada as to principal and $ 2,599,089,000 $ 121,637,365 per cent 4-68interest, and interest only March 31st, 1933 (2) 996,148,354 45,356,904 4-55Gross direct liabilities of provinces, fiscal years ending in 1932 (3) 1,363,382,464 62,715,593 4-6Indirect liabilities of provinces, fiscal years ending in 1932 (4) Grand total direct liabilities of all Canadian municipalities Dec. 215,977,011 9,071,034 4-231st, 1931 (5) Corporations- 1,584,000,000 77,616,000 4-9Railways (6) 919,000,000 40,897,000 4-45Other corporations (7) 1,178,000,000 64,672,000 5-498,855,596,829 421,965,896 4-77(1) Funded debt was $2,715,910,607 with interest charges of $127,239,499. The net debt figure is used in preference to that for gross debt ($2,990,315,000) because certain items in the gross debt are offset by active assets ($391,226,000), which are in large part cash assets and interest bearing assets. Among the active assets are loans to provinces which should appear among provincial debts. If they were included in Dominion government debt also there would be duplication. Net debt figures are used in preference to funded debt because the latter would include money raised and put into active assets, such as loans to provinces. (2) Bonds guaranteed by the dominion. Of these, interest only is guaranteed on principal amounting to $216,000,000. Principal and interest are guaranteed for the remaining $780,148,354. (3) The largest item in provincial public debt is the bonded debt which totals $1,148,451,597. In addition there were treasury bills amounting to $103,707,602, bank loans, savings deposits, etc. (4) Indirect liabilities of the provinces include guarantees of railway, hydro-electric, municipal obligations, etc. (5) This figure includes the total liabilities of all municipalities in six provinces and the bonded debt of the others (the total liabilities not being available). The amount given is. therefore, the lowest at which the aggregate direct liabilities of Canadian municipalities can be placed. (6) Only the unguaranteed portion of Canadian National bonded indebtedness is included here, the guaranteed debt being included in the second item of the table. (7) Other corporations include industrial, financial, merchandising, etc., in fact, all except public and railways. II. Municipal Debt The gross debenture debt of municipalities nurrjbering over 4,200, by provinces, as at December 31, 1931, was as follows: Province Alberta British Columbia Manitoba Ontario Nova Scotia New Brunswick Prince Edward Island (a) .. Quebec Saskatchewan Bonded Debt $ 78,679,570 129,913.890 116,864,937 499.002,074 31,386,025 21,477,521 1,863,211 362,132,334 47,488,595 Total $1,288,808,157 (a) 1930. Other liabilities, consisting of temporary loans and overdrafts on banks, accounts payable and miscellaneous floating liabilities, amount to $295,223,318. Interest payments on municipal bonded debt average 4-9 per cent, or on the total shown in the table above, $63,151,599. III. Private Debt While the figures for public debt can be obtained with approximately completeness, those for private indebtedness can only partially cover the field. Figures for bank loans are a matter of monthly record, and were submitted to the committee. Concerning mortgages, definite information is obtainable for only a portion of the field. In the census of 1931, a question regarding mortgages was included in the farm schedule. As a result of this investigation it was ascertained that out of a total of 654,297 owned and partly owned farms in the dominion, 244.201 were mortgaged to the extent of $677,564,100. It should be pointed out that these figures refer only to the debt secured by a mortgage or by an equivalent legal instrument on lands and buildings. Details may be found in the evidence. These figures apply also only to "owned" farms. It is estimated that urban mortgages held by corporate lenders amount to about $765,000,000. No attempt has been made to compile information on debts of private individuals which may have been contracted in various ways, because of lack of available data. IV. Bank Interest Rates of bank interest and discount are not available by provinces but average rates for the dominion as a whole are known. Average interest rates on loans, including call loans, show declines from 1930 to 1932. Banking and Commerce Maximum and minimum average interest and discount rates charged by all banks on loans or advances in Canada during the years 1930, 1931 and 1932. Average Interest Average Discount Maximum* Minimum* Maximum* Minimum*per cent per cent per cent per cent1930 6-43 6-29 6-99 6-866-39 6-05 6-80 6-666-18 603 6-81 6-67N.B.-These average rates include call loan transactions on which for some years past the prevalent interest rate had been 6 per cent. , Each bank reports quarterly its maximum and minimum rates. The averages shown above are the averages of four quarterly periods and of all banks. V. Mortgage Rates of Interest Considerable data were secured by the Dominion bureau of statistics from the Dominion Mortgage and Investment Association, and from some individual mortgage companies relating to interest charged on mortgages. Average, rates were obtained from 57 companies, which show current rates ranging from G per cent to 8 per cent in all provinces except Quebec, where slightly lower rates were reported. One large company furnished records showing that the average rate on new rural and urban mortgages for. the Dominion declined from 8-35 per cent in 1921 to 6-84 per cent in 1931. On renewals the rate fell from 8-17 per cent in 1921 to 6-90 per cent in 1931. In general, it may be concluded in the cases of the figures supplied that mortgage rates have declined throughout the dominion in recent years on both new mortgages and renewals. Nevertheless, these conclusions should only be taken as tentative, because they are based on returns from corporate lenders only. No data are available yet from private lenders or from mortgagors themselves. Statistical enquiries should be instituted to secure information from these sources to round out the case presented by the mortgage companies. VI. Supplementary Information Required On several other subjects which came to the attention of the committee, partial information was furnished by the Dominion bureau of statistics, but it is felt that the data thus far brought together are insufficient upon which to base definite conclusions, and that an allround enlargement in the bureau's organization of financial statistics should be instituted. In particular, in addition to the supplementary information required on mortgage rates (which has already been mentioned) the committee recommends that the Dominion bureau of statistics be authorized to obtain the following: Data on fees and charges to which mortgagors are subjected when taking out new mortgages or renewing old ones. Very meagre information is available on this subject, but enquiries are already under way in the bureau of statistics. Data on the cost of money to loaning bodies are required so as to get some idea of the spread between actual costs and loaning rates. Only partial information is now available. Data on arrears of interest payments and on the amount of principal and interest written off by mortgage companies. VII. Jurisdiction of Parliament The following questions respecting the jurisdiction of parliament to legislate on the subject of interest and loans were submitted to the Deputy Minister of Justice, the Deputy Minister of Finance, and the attorneys-general of the various provinces (pp. ix and x): "1. Has the Dominion parliament the power to fix a maximum rate of interest which may be charged on loans, et cetera, granted by corporations created by Dominion statute or letters patent where such corporations were (a) previously incorporated; (b) to be incorporated? 2. Has the Dominion parliament any pow'er !to prescribe the maximum rate of interest chargeable on loans generally made by (a) persons, (b) corporates created by statute or letters patent other than Dominion? 3. Has the Dominion parliament the power (a) to fix; (b) to alter rates of interest in respect of bills of exchange and promissory notes? 4. (a) Has the Dominion parliament power to enforce reduction of principal of debt in respect of loans made i. by corporations incorporated under jurisdiction of the Dominion parliament; ii. by corporations incorporated under other jurisdictions; iii. by individuals? (b) If necessary for the determination of the above questions, is any differentiation to be made between loans i. secured upon real property; ii. secured upon personal property; iii. without security?" Answers to these questions were made by the Department of Justice and the attorneys-general of Nova Scotia, British Columbia, New Brunswick, Manitoba and Quebec. These answers appear in the minutes of proceedings and evidence as follows: Department of Justice, pp. 43 to 48; A.-G. of Nova Scotia, p. 49; A.-G. of British Columbia, pp. 65-66; A.-G. of Newr Brunswick, p. 187; A.-G. of Manitoba, pp. 188 to 190; A.-G. of Quebec, pp. 198-2CG. The answers may be summarized as follows: Questions l (a) and (b)-all answers were in the affirmative. Banking and Commerce

Questions 2 (a) and (b)-all answers were in the affirmative. The A.-G. of British Columbia, however, said that: "so far as corporations other than federal are concerned, the dominion perhaps could not interfere with a contract made with a foreign company outside Canada though the party liable for the interest might reside within Canada." Questions 3 (a) and (b)-all answers were in the affirmative. Questions 4 (a), i, ii, iii-all answers, with the exception of that of Manitoba, were in the negative, the Department of Justice excepting, however, bank loans. The A.-G. of Manitoba said that it was difficult to give a satisfactory answer but stated that in the ease of legislation arising out of what might be termed a national emergency, or legislation which could be classed as relating to banking, incorporation of banks, the issue of paper money, bills of exchange and promissory notes, bankruptcy and insolvency, the answer would be in the affirmative. He further stated that in the case of a debtor who resides in one province and the creditor outside the said province, the legislature of the province of the debtor could not validly legislate in derogation of a civil right existing and enforceable outside the province. Questions 4 (b), i, ii, iii-all answers, except in the case of Manitoba, were in the negative. The A.-G. of Manitoba did not answer this question expressly, but it would appear by implication that his answer would have been in the negative. General It is hardly necessary to point out that obligations, both public and private, undertaken when the general price level was much higher, present a serious problem under economic conditions presently prevailing. This is particularly true of Canada, in which within a comparatively short period, heavy obligations have been assumed for capital investments in plant, equipment and transportation facilities connected with the development of our natural resources and the expansion of the productive capacity of the country. In so far as public debts are concerned, we believe that the most desirable course to be pursued lies in the direction of means that may be taken to cheapen money, and other measures, including international cooperation, designed to lay the foundation for a rise in the general price level and a restoration of world confidence and trade. Within the country, the balancing of governmental budgets and the conversion of maturing debts at lower interest rates will be a constructive influence. Measures which will tend to relieve the burden of fixed public debts will of course also operate with similar effect in the field of private debts. The committee believes that the reduction in interest rates on bank deposits recently achieved with the cooperation of the government is a constructive step, and, it is to be hoped, a forerunner of more important action which Canada may be enabled to take in the international sphere as a participant in the World Economic and Monetary Conference. A printed copy of the evidence taken is tabled with this report. Mr. STANLEY moved that the report be concurred in.

(Questions answered orally are indicated by an asterisk).

Mr. BRA'SSET: 1. Is the government aware that Rodrick Eden, of Gaspe village, recently appointed collector of customs at Gaspe, is unable to either speak or write French? 2. Is the government aware that the same Rodrick Eden has a contract to carry the mail from Gaspe to the Wakeham post office?