May 7, 1928 (16th Parliament, 2nd Session)

Mr. J. S. WOODSWORTH (Winninpeg North Centre):

Just before that motion is
adopted, there are a few remarks I should like to make, especially since it was on my motion that the inquiry was made before the banking and commerce committee. I do not desire to move an amendment to that report, which like all reports, is more or less of a compromise, but I should like to point out very briefly some of the facts which came before this committee which are not enibodied in the report..
While undoubtedly the attention of the committee was centered upon the suggestion of a central bank of issue and rediscount at the same time there were other suggestions made, such as the establishment of small local banks, and the possibility of setting up cooperative credit societies. These matters were not gone into by your committee.
Futher than that, there were a- number of general criticisms advanced with regard to the present banking system. The witnesses that came before the committee were, with one exception, either officials of the department or else those connected with the Canadian Bankers Association. Under these circumstances we had not the opportunity of considering as many of these criticisms as personally I should have liked. I am not blaming the committee; the trouble lay in the fact that very few business men cared to come forward to criticize the banks. I do not know whether their objections are well taken but while privately they criticize the banks, they express themselves as afraid to come forward publicly lest their credit should be interfered with. I do not know whether those fears are justified; I merely mention that for what it is worth.
In rebuttal of various criticisms which were made, the bankers made claims which I summarize as follows:
(a) That the small number of banks in Canada (four banks controlling approximately 70 per cent of the entire deposits) is in the interests of Canada.
(b) That according to the banks' code of honour, in the granting of credits there is no discrimination against a business concern that is a rival to one in which a bank director is also a director.
(c) That on the contrary, interlocking directorates are a distinct advantage.
(d) That districts remote from headquarters are under no disadvantage.
(e) That it is not the function of a bank to take the hazards of the commencement of a manufacturing business but that any solvent concern in a liquid shape can obtain all the cerdit it can reasonably desire for legitimate purposes.
Mr. A. E. Phipps.puts it this way:
No legitimate loan properly secured has been refused from one end of Canada to the other, since I have been a banker.
The evidence further shows:
(a) That under the Finance Act the government performed, with less machinery and expense, some of the functions of the Federal Reserve bank, but that the banks' use the Finance Act to a very limited degree.
Ob) That the control of the Federal Reserve banks over the money market through the open market transactions might be difficult to exercise in Canada.
(c) That in the opinion of Governor Harding,-
1. The mutual savings banks in New England have been highly successful.

2722 COMMONS
Banking and Commerce Committee
2. That in the United States, western cities would organize their own banks.
3. That the Federal Reserve banks have been helpful in stabilizing the prive level by stabilizing the money market.
4. That a federal reserve system organized on the same basis as in the United States- that is, a regional system-would be impossible in Canada.
With regard to the control of the price level, as a good many hon. gentlemen know, there are two schools of economists that differ widely. When introducing my resolution some weeks ago I quoted at length from Mr. Reginald McKenna-