Mr. BENNETT:

-he is quite welcome to receive any benefit he wishes to receive from it. I can only say to him that his answer is not adequate; that is all. I propose to ask him further questions upon it.

Mr. DUNNING:

That is quite all right.

Mr. BENNETT:

As I have a right to do.

Mr. DUNNING:

Absolutely.

Mr. BENNETT:

His irritability will not assist him in passing his bill, and neither will his cheap observations of the character to wrhich I have just Listened.

Mr. DUNNING:

Nor your schoolmaster tactics.

Mr. BENNETT:

I am addressing the Chair. There are no such tactics as those assumed by the minister. I am desirous of obtaining information, and that information I propose to get. Here is a bank created by the parliament of Canada, with a capital of $5,000,000. It pays 4J per cent on that investment. Its capital is being doubled now, without any request from the bank or suggestion that it found itself short of capital, and the minister said that the reason for it was the desire to obtain control for the government of the institution. Instead of proceeding to expropriate the shares, as he has the right to do, and as normally would be done, by taking the proper steps to expropriate $5,000,000 of shares, and have their value fixed by the exchequer court or by arbitration, the minister increased the capital of the bank by $5,100,000, making the total capital $10,100,000, and the statute says that the money necessary to pay for them shall be paid out of corn-solidated revenue. It does not leave it a question of option, but says they "shall" be paid for out of the consolidated revenue fund. We know from the statement made by the finance minister on the budget that this country has made no provision for that payment. Therefore the money must be borrowed, and the very proper question was asked, whether or not it would be borrowed. To that question the minister replied that if we had to pay it now we would not have to borrow, which means that there is $5,000,000 in the treasury that might be used for that purpose. That was no answer to the question. The question was, will this money have to be borrowed? The minister clothed [DOT]his answer in many words, as to its being an investment. It is an investment in the bank, and according to the statement made by the minister on the budget-and certainly the revenues of the country so far

as customs are concerned have not increased beyond his expectations-the money will have to be borrowed.

The point I was endeavouring to make was why we should proceed by this method to risk our ability to pay what we promised to pay with respect to the "A" class of shares, by doubling the capital and borrowing the money, and running the risk of leaving in the hands of the bank, not in the hands of the government, an investment of $10,000,000 upon which 4J per cent interest is to be paid. What we really have done by this bill is to provide for borrowing $5,100,000 of money, and banding it over to the bank to invest in such a way as we hope will bring us a net return of 4J per cent. That is the situation as far as I can see it. That may be the tactics of a schoolmaster, as the minister says, but I am endeavouring to be enlightened, and I would like to have some further information on that point. I never have been able since I saw the bill to understand why any government found it necessary to double the capital of the bank for the purpose of being able to name four directors with two votes each. The only thing that need be done is to expropriate the $5,000,000 of shares outstanding. That was even discussed in this chamber on one occasion; the now Minister of National Defence (Mr. Mackenzie) made some references to that method when discussing the report that came from the banking committee.

Mr. MACKENZIE (Vancouver):

I moved an amendment in committee .to that effect.

Mr. BENNETT:

as we must if the budget expectations are realized, the money for the purpose of enabling the bank to have an additional $5,000,000 to invest-because that additional amount is not required for the purposes of the bank-and, on the other hand, the necessity of maintaining the payment of a dividend of per cent on the entire $10,000,000, when if additional money were required by the bank for temporary purposes it could be borrowed for less than one per cent, according to the statement just made by the minister.

Mr. DUNNING:

Mr. Chairman, if I am

clear as to the question-and I am not precisely clear-it is why the government did not proceed by way of expropriation of the existing shares; and that question was related to the other one, how would the money be raised? If the government had proceeded by way of expropriation of the existing shares, obviously money would be required for that purpose, and so I think that disposes of the question between those two methods.

With respect to the other point, the government believed that ownership normally in this country is represented by authority and control, and that it would be fairer to everybody concerned for the government to be an investor along with the other investors if it proposed to take control of the institution. That is to say, the government takes control of the institution not by force majeure but by an actual investment by the country in excess of the investment of private investors, thus justifying the government in assuming complete control of the institution by majority control and ownership.

Mr. QUELCH:

This bill will give the

government greater control over the bank's policy, and therefore when we vote on this bill we will be voting on the question whether we are in favour of the government being given greater control. In view of that fact, could the minister tell us briefly what the policy of the government will be in the matter, whether it will differ materially from the present policy, and if so in what way?

Mr. DUNNING:

I think I attempted, Mr. Chairman, in the address I made on the resolution preceding the bill to outline the factors which enter into considerations such as those now expressed by my hon. friend. I can tell him quite frankly that in justice to the great interests of the people which must be served in this matter I should be doing them a disservice if to-day I indicated to this House of Commons what the present policy of the bank is with respect to its day to day transactions. I should be doing those great interests a disservice if I indicated what

the policy of the government would be in connection with the major policies of the bank. If, for instance, just as an illustration, I indicated that it was the policy of the government, and therefore the policy of the bank, steadily to expand the volume of currency and credit, such statement by me from this place would be taken by everyone as an invitation to speculate in commodities and stocks because there would be the maximum possible assurance of a rising price level, depending upon the extent to which that policy was followed. There must be from day to day, from week to week and from month to month, by the experts in the employ of the bank, by the executive board of the bank, and particularly by the governor and deputy governor, and communicated to the Minister of Finance from time to time in order that he may be informed, continuous study of all the factors that have to do with the economics of this country in so far as they can be affected by monetary policy. I am not one of those who believe that monetary policy is the only factor in the economic welfare of the people. Many tend to exaggerate its importance, but at the same time I do not want to minimize its importance. When we have, as we have in Canada to-day, a managed currency, managed by the Bank of Canada, which obviously becomes a definite instrument of government policy, that materially increases the responsibility with regard to a declaration of policy. 1 can say in broad terms that I should regard a policy of deflation as utterly out of the question under the conditions which prevail to-day, but as to the extent to which any policy opposed to deflation may be applied, it must be a question of continuous study of all the factors entering into the problem on the part of those who are trained to assess their value and their effect, along with other factors, upon the economic life of the nation. I do not think I should be asked to go further -than that in this matter.

Mr. COLDWELL:

I was going to raise another point. Do I understand that any other powers than are to be found in clause 13 of this bill amending the principal .act are conferred anywhere in this bill? If so-

Mr. DUNNING:

What section?

Mr. COLDWELL:

Section 13.

Mr. DUNNING:

We are not there yet.

Mr. COLDWELL:

No, but that point was raised. The question of power and policy was brought up and I could find nothing in the act other than this section dealing with the powers or policy of the bank. Consequently-

Bank of Canada

Mr. DUNNING:

Has my hon. friend read, not the amending bill, but the act itself?

Mr. COLDWELL:

Yes, I have; but we are discussing new policies. Is there anything giving the bank a wider policy now

anything wider than is to be found in the old act?

Mr. DUNNING:

Not with regard to the matters about which the hon. gentleman was asking.