Mr. FRASER (Northumberland):
That is what I thought. As has been stated, these reserves are to protect the banks against losses on loans and declining prices and are submitted to the careful scrutiny of the three gentlemen I have mentioned. On that point, Mr. Chairman, have we in this country
reached the stage where the people of Canada cannot trust the Minister of Finance, the Minister of National Revenue, a deputy minister, and probably the governor of the Bank of Canada, no matter what government happens to be in power? If we have,
certainly there must be a weakness in our democratic system somewhere. So far as I am concerned, as a customer of the banks I am perfectly happy to have the reserves of the banks scrutinized in that way.
Reference has been made to the cash reserves of the banks and it has been proposed that 100 per cent cash reserves be held by the banks. I do not think the hon. member for Parry Sound is really serious in what he suggested because he knows perfectly well, for it has been repeatedly stated, what an impossible situation it would toe if the banks had to carry 100 per cent Bank of Canada cash against their deposits. Let us analyse for a few moments what the banks really are.
To me and, I believe, to most hon. members there is nothing funny about this banking business. The banks are simply the bookkeepers of the nation. They are the retailers of credit. There is nothing funny about money. I can take this blank cheque that I have on my desk, fill it out for five or ten dollars, write my signature and hand it to the Postmaster General and he will give me a ten dollar Bank of Canada bill for it. Why? Because he is satisfied that behind that cheque I have in the bank of Montreal a credit, created through selling lumber, apples or something else and depositing the proceeds in the bank. The banks are a repository of the stored-up energy and production of the people of Canada. That is another reason why confidence in our banks should not be jeopardized by anything that is said here by any hon. member. Previous speakers, notably the Minister of Finance, have pointed out all the ramifications that would be involved in insisting upon the banks carrying 100 per cent cash reserves. As the minister said, it would be an impossible situation.
The hon. member for Vancouver-Burrard stated that the government of Canada had no control over the chartered banks. I remember well the submissions that were made to the banking and commerce committee in 1934; I am quite willing to give credit to the hon. member for Vancouver-Burrard who, along with many others of us at that time, advocated the establishment of a national bank, and in consequence the Bank of Canada was set up. The banking system in no other country in the world has made as much progress, so far as government control is concerned, as has the Canadian banking system
Bank Act Amendment
since 1934 and on through the years to 1937, when we took over the whole stock of the Bank of Canada. I submit that under the set-up of the Bank of Canada the government of Canada has ample control, practically total control, over the flow of money and credit in the Dominion of Canada, Anyone who has studied the financial system knows perfectly well that the Bank of Canada controls the flow of money and credit throughout this dominion.
I listened attentively to the statements made by the hon. member for Vancouver-Burrard and the hon. member for Parry Sound. But it is a bad thing to put people to doing things to which they are not accustomed. With all due respect to my hon. friends, I must say that they are first-class lawyers who can argue on either side of a case with equal dexterity and facility. There is no question in my mind as to that. I prefer to take the opinion of gentlemen who have spent their lives in the banking business of this country- managers of banks, the Minister of Finance, the governor of the Bank of Canada, the deputy minister of finance, the gentlemen who make it their lifelong business to handle the banking requirements of the people, who understand not only those requirements as respects our banking system but also the ramifications of the foreign connections of the ' banking of the dominion. It is a bad thing at this time to create any suspicion in the minds of the people of our banking system. It is also unjustifiable. We have the most flexible banking system in the world, one which stood up during the years of depression; a system which, unlike the banks of the United States, did not go by the wayside. Our banking system is flexible in the set-up of its branches across the country. The branch banks not only serve the people in the communities in which they are established, but are repositories of the savings of the people of those communities, and can transfer credits to different parts of Canada where those credits are required. Our banking system provides the flexibility required by a country such as ours. It can serve the fisherman on the east coast, the grain grower of the prairie provinces, the lumberman of British Columbia, because the collection and flow of funds are made possible through the branch bank set-up. I repeat that it is a bad thing to try to shake confidence in this system, because I do not believe any of the allied nations possess banking systems which have been as successful as our own in handling the demands of the present war.
At this time I wish not only to make reference to the splendid way in which the chartered banks are handling the demands
of industry, agriculture and the services of the dominion, but to pay tribute to the foresight, the tenacity, the judgment, and the never-ceasing application of thought and untiring effort which the present Minister of Finance has given, not only to the banking system through the Bank of Canada, but to the whole financial set-up of this country in the prosecution of the war. As somebody said the other day, and as is acknowledged beyond the dominion, the pattern of finance, the success in controlling inflation, the application of our price ceiling, the application of wage and salary controls, have not only been a matter of pride in Canada but recognized in the United States and Great Britain as models of efficiency. I do not believe any other banking system in the world has served, under the direction of the officials I have mentioned, the purposes of the prosecution of this war as effectively as that of the Canadian banks.
After all that has been said in connection with this bill, not only in this chamber this afternoon and evening, but in the long sessions of the banking committee, I do not think it is necessary for me to go into further details in connection with our banking system, except to say that unless somebody can submit evidence such as, I claim, has not so far been presented, there is no reason why these bank charters should not be renewed for the next ten years. Personally, as a member of this house, I would consider it extremely disastrous should anything occur to hold up the renewal of the charters of these banks for any less period than the banks have been granted in the past. Do not forget that we shall be shortly entering the great post-war period. ' The last thing we want is any uncertainty in connection with our financial set-up. The last thing we want to do is to inject into the management of our financial system anything except experience and capable management, under the assurance that there will be no interruption with the operations of the banks for the next ten years.
As I said a minute ago, there are ample safeguards. There is no question of the scrutiny of the banks, no question of their solidity, no question as to their ability, in all of the ramifications of the country's business, to handle it efficiently. I submit that neither in this committee nor in the banking and commerce committee has any reason been advanced why these charters should not be renewed. All along the greatest emphasis and stress have been applied to the matter of these hidden reserves. Some of my hon. friends have dW'elt on these things. The Min-
Bank Act Amendment
ister of Finance this afternoon refuted the suggestion made by the hon. member for Vanco'uver-Burrard in the banking and commerce committee. The hon. member for Parry Sound followed with this hidden reserve stuff. I say not only to you, Mr. Chairman, but to the hon. member himself, let us get away from this talk of hidden reserves. Let us acknowledge what it is. Let us accept the statements we have received andi admit that there is nothing sinister about the thing.
Mr. SLA'GHT: Two of the banks were caught a few weeks ago by the minister and are refunding amounts which they had taken excessively under the hidden reserve scheme.
Topic: BANK ACT AMENDMENT
Subtopic: CONDITIONS GOVERNING TEN-YEAR EXTENSION OF BANK CHARTERS