Mr. BENNETT:

That comes later.

Mr. BENNETT:

The word "interpretation" comes out.

Mr. SPENCER:

I think it was said that when we got into committee an explanation would be made.

Mr. BENNETT:

Mr. BENNETT:

The sixty per cent and forty per cent make one hundred per cent, and that is included in the sums I read.

Mr. MACKENZIE (Vancouver):

Are the two sums of $300,000 and $89,609 respectively included in the total of $37,480,973 as the total amount taken over?

Mr. BENNETT; Yes.

Mr. MACKENZIE (Vancouver):

So that all the gold was actually delivered to the Bank of Canada on the due date?

Mr. BENNETT:

Yes, with the reservation that was made by the two banks with respect to these amounts.

Exchange Fund

Mr. MACKENZIE (Vancouver):

But the actual gold was all delivered by the banks?

Mr. BENNETT:

It was delivered in the sense that the Bank of Canada took delivery of it. I am not in a position to say that it was all moved from one place to another, for as a matter of fact much of it remained in the vaults in which it has been held for the last twenty-five years, but qua bank the Bank of Canada became the responsible custodian of the whole of the gold. I gather that is what the hon. gentleman asked. There therefore remained, as the hon. gentleman has just pointed out, something over $22,000,000 of gold in the hands of the Bank of Canada; that is, of the gold received from the banks, at $20.67, and the profit on that inures to the credit of the consolidated fund of the country. It amounts, as will be observed, to a fairly substantial sum of money at $35 an ounce instead of $20.67.

Mr. EULER:

Might I ask a question? I take it from what the Prime Minister has said that the forty per cent rate was arrived at more or less arbitrarily, or was there any basis or any principle upon which they proceeded to fix that rate? While I am on my feet I might also suggest that in my judgment as between the various banks there would be a difference in the proportion of gold they had for foreign commitments. Were any representations made by the banks that some should get more or less than forty per cent, or why was the flat rate fixed?

Mr. BENNETT:

It will be observed that some of the banks had very small sums of gold, but the banks contended that there was a liability that could be settled only in terms of gold because of dealings with countries still on a gold standard, bills of exchange and settlements of obligations which they had incurred. Those are the smaller ones. In the case of the larger banks, holding large amounts of gold, they presented elaborate claims based upon particular dealings over long terms of years and the necessity for being able to deal with a transaction on a gold basis. I cannot say that the banks were satisfied, but ultimately the minister concluded, after the most careful investigation, that forty per cent was all that he could possibly allow for the purpose of meeting foreign obligations, and he applied that principle to all the gold held, which as I say was a large amount in the case of three of the banks and a smaller sum in the case of one bank, of the others one had as little as $10,000, just the accumulation which goes on over a period of years. I supfMr. Bennett.]

pose it is true to say that it was an arbitrary exercise of power based upon all the information that it was possible to obtain under the circumstances.

Mr. EULER:

My thought was that there must be a considerable variation between the various banks as to their foreign commitments, but the forty per cent was a flat rate.

Mr. BENNETT:

With the exception of the two instances I have mentioned there was no variation, because each had a volume of business commensurate with its size and the magnitude of its holdings. Of the others one held $10,000, another $200,000, another $40,000 and still another $400,000, and it was not thought desirable to endeavour to differentiate between them. The minister concluded that a flat rate of forty per cent was reasonable.

Mr. MACKENZIE (Vancouver):

Did I understand from the Prime Minister that a profit of $15,000,000 in round numbers was not transferred to the banks or not to be transferred, but was just to stand as a credit entry?

Mr. BENNETT:

I think the hon. member misunderstood me. I say that the revaluation on the new basis will be a bookkeeping entry in the books of the Bank of Canada by crediting the banks with this credit which they will receive in the basis of valuation as fixed by the terms of the bill.

Mr. MACKENZIE (Vancouver):

It has not happened yet?

Mr. BENNETT:

No, it cannot, until this bill passes.

Mr. IRVINE:

What check will the government or the central bank have on the forty per cent gold to see that it will be used for the purposes for which the government has permitted its retention for foreign commitments?