Mr. QUELCH:

Investments of Canadians in the United States are strictly controlled by the foreign exchange control board. Will the insurance companies, under this measure, be allowed to buy all the securities they wish, or will the foreign exchange control board set a limit on the amount of foreign securities they may buy? If not, it is bound to have an adverse effect on our exchange position.

Mr. ABBOTT:

Investments by Canadian companies in the securities of the bank will be subject to the Foreign Exchange Control Act. Insurance companies doing business in and having assets in the United States will be permitted to invest in the securities of the bank, but under present conditions they would not be permitted to convert Canadian dollar assets into United States dollars to invest in the securities of the bank. I think that answers my hon. friend's question. I would think that indirectly this might have a beneficial effect on our United States dollar position, because the bank, in making loans to European countries, as it has done to France and will no doubt do to others, will provide those countries to which we sell goods with the necessary United States dollar resources with which to pay us. I would say that indirectly this should have-I would hope it would have-a favourable effect on our United States dollar position on balance.

Insurance Companies Act

Mr. QUELCH:

The great shortage in the world is United States dollars, to a far greater extent than Canadian dollars, and except to a very limited extent a country with an unfavourable balance of trade with Canada cannot get a loan from the international bank. So the bank would be of no help there. What was the rate of interest charged by the international bank on the loan to France?

Mr. ABBOTT:

The rate was 3J per cent, plus a commission to establish a reserve against losses of one per cent, or a total rate of ii per cent. There is a commitment charge of \\ per cent on amounts not drawn. That is, if a country has a loan but has not made use of it, the interest rate will be 1J per cent.

Mr. QUELCH:

What rate will the bank pay on securities?

Mr. ABBOTT:

I cannot say. It has not yet been announced, but the understanding is that a public offering will be made shortly, and at that time the terms and conditions will be made known.

Mr. QUELCH:

The loans so far have been made out of the capital of the bank?

Mr. ABBOTT:

That is correct.

Mr. IRVINE:

Will the minister answer my question as to whether the proposals made in this bill would be likely to affect investments in Canada?

Mr. ABBOTT:

I do not think it would have any effect, one way or the other, on the investment by Canadian insurance companies of their Canadian assets in Canada.

Mr. QUELCH:

Why?

Mr. ABBOTT:

Because for the time being at any rate they would not be able to convert their Canadian dollar assets into United States dollars.

Mr. QUELCH:

Will that be the policy until the position with respect to United States dollars eases off?

Mr. ABBOTT:

It is hard to make a commitment in perpetuity as to policy. That would be a matter to be determined by the foreign exchange control board, and a matter of government policy with respect to exports of capital.

Mr. CASE:

The minister stated that the insurance companies have not asked for this legislation. I take it that the bank will have huge sums of money which it will be anxious to keep invested, that the real business transactions will be through the international bank; that is, the insurance companies will not be investing in foreign securities. I think the matter could be set at rest if the committee 83166-288i

were assured that there is no thought of pressure being put on the banks or the insurance companies to make these investments. As long as it is voluntary on their part, I am satisfied to leave it to their judgment.

Mr. ABBOTT:

I give that assurance in the most unqualified terms. There will be no pressure, direct or indirect, placed on *the insurance companies to invest in these securities. It will be left to their own business judgment.

Mr. BENTLEY:

Was this legislation not brought in at the request of the insurance companies?

Mr. ABBOTT:

No, it has not been brought in at their request. I have no means of knowing whether they would invest in the securities, but I express the personal hope that they will consider it desirable to do so. At any rate, the legislation was not introduced at their suggestion, directly or indirectly. It is purely a government measure.

Mr. BENTLEY:

But the minister, in reply to certain questions asked him by different members, said he hoped that certain things would be and certain other things would be. Now there must be good grounds for hoping or thinking, particularly if the legislation comes from his department and on the advice of his financial experts. He should be more positive than merely expressing a hope or thinking such and such. He should be able to say what will take place. Why is it so necessary at the present time that this should take place? Wrhen the Bretton Woods agreement was before the house-I am speaking for myself-I agreed to it, hoping that the international bank would do some good, but I do not see them taking a very active part in the international meeting held in London. I do not see them acting on the financial advice of those who are trying to bring about trade agreements. When will they do something which will vindicate the confidence that some of us had in Bretton Woods as a means of bringing about world peace and improved international relations?

Mr. ABBOTT:

As its name implies, this is an international bank for reconstruction and development. It is not to provide loans for the purchase of wheat, for example, or to negotiate a wheat agreement. It is an institution that is new. Nothing of its sort has been tried before, and it is hoped that it will help to provide financial resources for the war-devastated1 countries in Europe to enable them to reconstruct their economies and do what is necessary to produce goods to export to us in order to pay for goods that we may

Insurance Companies Act

send them. The hon. member wishes to know why we should do it now. For this reason. We are a partner, along with many other nations, in this International Bank for Reconstruction and Development. It is about to make its first issue of securities to the public, and if I may express a personal view I think it is desirable that we should take our place along with the other partners and not have it said in the United States that they are the only people who are doing anything in this direction. We must not have them say, "We are going to put up all the money while Canada is not doing anything about it". We are a partner in the thing and we have an interest as great as or greater than that of almost any other country in working out suitable financial relations; and, having approved the principle two years ago, we must I think take our proper part in carrying it into effect. That is the only reason for it now. When I was approached as Minister of Finance and was advised that there was about to be an issue of securities, as contemplated from the beginning, I assured the management of the bank that I would introduce the bill into our parliament not later than the middle of June and endeavour to have the house pass it as quickly as possible. That is the reason I am bringing it in now.