VACANCY

Mr. SPEAKER:: I have the honour to inform the house that I have received a communication from two members notifying me that the following vacancy has occurred in the representation, viz:
Of William Spankie, Esquire, member for the electoral district of Frontenac-Addington.
I have accordingly issued my warrant to the chief electoral officer to make out a new writ of election for the said electoral district.



PRIVATE BILLS


[Stage Direction]
Mr. T. H. STINSON (Victoria) presented the tenth report of the select standing committee on miscellaneous private bills, as follows:
Your committee has had under consideration the following bills and has agreed to report the said bills without amendment, viz:-
Bill No. 12, respecting patents on certain inventions of which Duplate Safety Glass Company of Canada, Limited, is entitled to benefit.
Bill No. 102, for the relief of Edward Headley Acland.
Bill No. 103, for the relief of Ella Gertrude Bush Adamson.
Bill No. 104, for the relief of Helen Cohen Levine.
Bill No. 105, for the relief of Annie Rosner.
Bill No. 106, for the relief of Grayse Irene Westlake MacLaren.
Bill No. 107) for the relief of Naomi Willard Lyman Robertson.
Your committee also has considered Bill No. 30, an Act respecting a certain patent of the American Dairy Supply Company, and has agreed to report that the preamble of the said bill has not been proven to the satisfaction of your committee, and it is the opinion of your committee that in the public interest it should not be passed.
Your committee recommends that the private bills fee of $200 paid on Bill No. 30, an Act respecting a certain patent of the American Dairy Supply Company, be refunded.

Mr. STINSON moved:: That pursuant to resolution of the house of the 19th instant the said bills be now read a first time and a second time and referred to their respective committees as follows:-
To the select standing committee on banking and commerce: -
Canadian Railway Express

Bill No. 117, to incorporate Security National Insurance Company.
To the select standing committee on miscellaneous private bills (together with evidence, etc., taken before the standing committee of the Senate on divorce, to whom were referred the petitions on which the said bills were founded), viz: -
Bill No. 118, for the relief of Eugenie Margaret O'Reilly Stavert.
Bill No. 119, for the relief of George Harold Allen.
Bill No. 120, for the relief of Ena Beatrice Duclos Boyd.
Bill No. 121, for the relief of Paul Herbert Addy.


[Stage Direction]
Motion agreed to.

Thomas Hubert Stinson: That the recommendation contained in the tenth report of the select standing committee on miscellaneous private bills, with respect to refund of private bills fee in connection with Bill No. 30, an Act respecting a certain patent of the American Dairy Supply Company, be concurred in, except as to cost of printing.


[Stage Direction]
Motion agreed to.

Hon. R. J. MANION (Minister of Railways) :: I beg leave to introduce a bill to incorporate the Canadian Railway Express Company.


Some hon. MEMBERS:: Explain.


Robert James Manion: The object of this bill is to incorporate an express company for the purpose of enabling the Canadian National Railways and the Canadian Pacific Railway to effect economies and to provide more remunerative operation with respect to their respective express services, pursuant to the provisions of Part II of the Canadian National-Canadian Pacific Railway Act, 1933, if, as and when the trustees and directors of the two railways respectively determine that this should be done.
The only reason I should like to have the privilege of introducing this bill to-day, and a similar bill with respect to telegraphs, is to afford many hon. members, who have asked for copies of the bills, an opportunity of seeing them. The bill, for leave to introduce which I am now asking, commits no one to anything; it is simply an enabling bill the purpose of which is to permit the companies, if finally they come to an agreement, to carry out this measure. They have not yet come to such agreement and there is no certainty that they will; but both railways, through Mr. Beatty and Mr. Fullerton respectively, have written to me asking me to introduce these two bills and to endeavour to have them adopted by the house.


Mr. MACKENZIE KING:: Can the minister advise the house as to why it is that this particular bill has been held until this time? Why was notice not given earlier in the session? The house has had no notice of the intention of the minister to introduce such a bill this session.


Robert James Manion: The government had no information in regard to the matter, because the railway companies did not request us until very recently to introduce these bills. Apparently they had not arrived at the position of discussing an agreement of this kind until quite recently, when they wrote to me, and naturally I preferred that they should submit the bills themselves. They could have done so except for want of time, and they have asked us to deal with the matter. There is also a bill with respect to telegraph service along exactly the same lines, and if I am permitted to introduce at the present time the bill with respect to the Canadian Railway Express Company I shall ask for leave to introduce the other.


Mr. GRAY:: Is this bill a first step towards the amalgamation of the Canadian National Railways and the Canadian Pacific Railway?


Robert James Manion: This is not a step towards the amalgamation of the Canadian National Railways and the Canadian Pacific Railway. I shall explain the matter when it is before the house, but I may say that what is contemplated here is permitted under the act of last year with respect to subsidiary companies. It has nothing at all to do with the amalgamation of the railways; it deals entirely with the proposed express company in this case, and, in the other, with telegraphs.


Mr. BENNETT:: It has been in force in the United States for the last four years.


Pierre Édouard Blondin: Shall leave be granted?


William Lyon Mackenzie King: No, Mr. Speaker. I do not think we should be asked to give consent. May I say to the minister that it is a surprise to everyone that the government should be introducing further legislation at this stage. We have repeatedly received assurances from the Prime Minister that practically all the measures were before the house except those that were to come from committees, and I must say that so far as we are concerned the feeling on this side is that the government should not introduce further legislation of any kind until the people of the country have had an opportunity to express their views.

Interest Act


Robert James Manion: As this bill, as well as the
other bill which it is intended to introduce, requires unanimous consent, I will introduce them to-morrow.


Pierre Édouard Blondin: Consent is not given to
the introduction of the bill to-day.



INTEREST ACT AMENDMENT

[Stage Direction]
Mr. G. G. COOTE (Macleod) moved for leave to introduce a bill to amend the Interest Act.
Some hon. MEMBERS:: Explain.


Pierre Édouard Blondin: Shall leave be granted?


Some hon. MEMBERS:: Explain.


Mr. COOTE:: The purpose is to amend
the Interest Act so that after the first day of September no interest in excess of 5 per cent may be charged on any mortgage on real estate executed after that date.


Pierre Édouard Blondin: Is it the pleasure of the
house to adopt the motion? Those in favour of the motion will say aye.


Some hon. MEMBERS:: Aye.


Pierre Édouard Blondin: Those opposed will say
nay.


Some hon. MEMBERS:: No.


Pierre Édouard Blondin: In my opinion the motion is lost.


George Gibson Coote: Mr. Speaker-


Pierre Édouard Blondin: Do I understand that the hon. member supporting the bill desires to divide the house?


Mr. GARLAND (Bow River):: Certainly.


Mr. SPENCER:: Is it not the custom, Mr. Speaker, for leave to be granted for the introduction of bills when nobody objects?


Some hon. MEMBERS:: Carried.


Henry Elvins Spencer: Mr. Speaker-


Pierre Édouard Blondin: Not a sufficient number
of members have demanded a recorded vote.


Mr. MACKENZIE (Vancouver):: Then we will all stand.


Pierre Édouard Blondin: Call in the members.


Mr. ELLIOTT:: I was paired with the hon. member for South Waterloo (Mr. Edwards). Had I voted I would have voted for the motion.


Mr. MERCIER (St. Henri):: I was paired with the hon. member for West Hamilton (Mr. Bell). Had I voted I would have voted for the motion.


Mr. GOTT:: I was paired with the hon. member for Kent (Mr. Rutherford). Had I voted I would have voted for the motion.


[Stage Direction]
Motion agreed to.
Mr. COOTE moved that Bill No. 122, to amend the Interest Act be read the first time.
Motion agreed to.

[Stage Direction]
(Questions answered orally are indicated by an asterisk.)

[Stage Direction]
On the question:
Mr. McINTOSH:: 1.	When the postage rate on air mail was made 6 cents instead of 5 cents, were the 5 cent stamps then on hand utilized by printing the surchage on such stamps?
2.	If so, who did the work?
3.	Were any of such surcharged stamps found to be irregular by having the surcharge printed in an inverted position?
4.	If so, were the stamps containing such inverted surcharge called in, or were they allowed to be used in the regular way?


Mr. McINTOSH:: The information required in this connection has been given by the department.
Question dropped.
[Mr. Speaker.J


SILLARS VILLE, QUE., POST OFFICE
Mr. MARGIL:: 1.	Was the post office at Sillarsville, Quebec, ever taken away from Mrs. J. G. Sillars and given to Hudson Adams in 1933; if so, was contract entered into with Mrs. Sillars to perform the mail service?
2.	What was the amount of this contract; was the amount subsequently reduced by one-half; if so, why?
3.	Did Mrs. Sillars offer to perform the mail service after July 1, 1933, when the contract expired?
4.	Has the contract been given to another party; if so, to whom and' at what price?
5.	Who are the bondsmen and for what amount?
6.	Is the department aware that Mrs. Sillars was the widow of a returned soldier?
7.	Is the new contractor a returned soldier?


Mr. SAUVE:: 1.	(a) Yes, but Mrs. Sillars was only in temporary charge following the death of the postmaster.
(b) At the death of the contractor, Hugh Sillars, the mail service was placed in hands of Mrs. Margueret Gordon Duncan Sillars, for the balance of contract term, viz., to 30th June, 1934.
2.	$150 per annum. Yes, distance reduced from one-half to one-quarter mile at pro rata.
3.	Mrs. Sillars offered to perform the service after the expiration of present contract, viz., from 1st July, 1934.
4.	Yes. Contract was awarded to Hudson Adams at $75 per annum.
5.	Alexander Pratt and J. H. MacDonald. S100.
6.	No.
7.	Department has no information.


QUESTION PASSED AS ORDER FOR RETURN
Mr. DUGUAY:: 1.	Who was the superintendent in charge of works done at Riviere des Ilots, or Newport Islands river, Newport, county of Gaspe, from June, 1928, to January 1, 1930?
2.	Who supplied the materials in connection with such works and what was the cost of same ?


Mr. STEWART (Leeds):: Return tabled herewith.



DOMINION FRANCHISE ACT

[Stage Direction]
On the orders of the day:
William Lyon Mackenzie King: Before we come to the second reading of the Dominion Franchise bill I should like to ask the Prime Minister if he would consider referring the bill to

Australian Wheat
a select committee of the house as has been customary in connection with other election measures. I make this suggestion because I feel quite sure that if the bill comes into committee of the whole house there will be a protracted discussion on some of the clauses and that might be avoided if the measure were considered by a committee in the first instance.


Richard Bedford Bennett: It is not intended to move the second reading until to-morrow. The Minister of Justice (Mr. Guthrie) will not be here today. The suggestion made by the right hon. gentleman might be conducive to expediting the bill and I shall so represent to the Minister of Justice.



AUSTRALIAN WHEAT AND FLOUR

[Stage Direction]
On the orders of the day:
Mr. F. G. SANDERSON (South Perth):: I should like to direct a question to the Minister of Trade and Commerce (Mr. Stevens), but I am sorry he has left his seat so I shall direct my question to the Prime Minister. On three occasions during this session I have asked the Minister of Trade and Commerce for full information as to the importation of Australian flour and wheat via eastern ports, this vitally affecting Ontario farmers and millers. My reason for not pressing my question before because the Minister of Trade and Commerce did not give me a decided answer was that I did not want to embarrass the government before the Ontario election, but that is now past and gone and so I should like to ask the Prime Minister if he would be good enough to give to the house and the country a full statement in regard to the importation of Australian wheat and flour. The Minister of Trade and Commerce was not quite decided in regard to whether Australian wheat and flour-*


Some hon. MEMBERS:: Order.


Some hon. MEMBERS:: Speech!


Frederick George Sanderson: I am under the orders of the Speaker and not of my hon. friends
across the way.


Pierre Édouard Blondin: The hon. member is out of order.


Frederick George Sanderson: In answer to the question I directed to the Minister of Trade and Commerce regarding whether the Australian government subsidized wheat and flour coming into Canada he said that he thought the answer was in the negative but he was not
quite sure. I should like to ask the Prime Minister whether the wheat and flour that are coming into Canada from Australia are subsidized by the Australian government and what the Canadian government intends to do in regard to the matter?


Richard Bedford Bennett: I am not fully aware of all the details of the matter to which the hon. member for South Perth has referred. My information is that the Department of Trade and Commerce has communicated with Australia for the purpose of asking whether subsidies are being paid on the wheat from which the flour has been produced that has been shipped to Canada or on the flour itself. It is known of course to the hon. gentleman that quantities of wheat from Australia have for a long time been imported on the west coast of this country. The quantities that have been imported into the east have until recently been negligible. There have been communications maintained between the Australian authorities and the Departments of Trade and Commerce and of External Affairs. The matter is under consideration and advisement by both departments. I shall ask the Minister of Trade and Commerce to make a statement tomorrow on the orders of the day.



PRINTING OF BILLS

[Stage Direction]
On the orders of the day:
Mr. A. W. NEILL (Comox-Alberni):: I
should like to direct the attention of the Prime Minister (Mr. Bennett) to the constantly increasing delay in getting bills after their introduction in this house. It used to be that we could get them in half an hour. Yesterday the Minister of Justice (Mr. Guthrie) introduced Bill No. 115, dealing with the Representation Act and the election of members, and it has a distinct bearing on the consideration of Bill No. 101, which we would be considering to-day if the Minister of Justice did not happen to be absent. It is not available now and will not be received until to-morrow. The bill will be up to-morrow, and we shall not get the printed copy perhaps before three o'clock. We cannot be expected to consider bills received as late as that.


Richard Bedford Bennett: The question of the availability
of bills is governed by the rules of the house. When a bill is introduced it is sent to the printer. It has been the custom to have bills that were settled long in advance of their introduction printed before they were introduced. In some instances that is not possible.
Sale of Wheat in the Orient

For instance the bill introduced to-day was introduced in typewritten form. There is perhaps a little more time taken in the printing bureau because of the rush of work at the end of the session than is the case at the early part. I shall inquire, but I have no reason to believe that they are hot doing their very best to expedite the printing of bills.
SALES OF WHEAT IN THE ORIENT On the orders of the day:


Hon. W. R. MOTHERWELL (Melville):: May I ask the absentee Minister of Trade and Commerce (Mr. Stevens) through the Prime Minister (Mr. Bennett) when I may expect that return for which I asked yesterday regarding the probability of selling more wheat or wheat flour to China?


Richard Bedford Bennett: It is unfortunate that the hon. gentleman is under a misapprehension. I explained to him as clearly as I could that it was not the intention of the government to produce here the reports that have been received from the minister in Japan by the Department of External Affairs. Certain reports that have been received by the Minister of Trade and Commerce were not reports which can be produced. But in addition to those which were included in the return made a few days ago the minister has asked the officers of his department to go over the appropriate files for the purpose of ascertaining what information, not of a confidential nature and therefore producible, could be afforded to the hon. gentleman. I understood the minister to say yesterday that that information was being communicated to the hon. member for Melville. If it has not been it will be as soon as it is completed. But all the relevant and properly producible documents on his file have been produced, and for the reasons I have indicated the documents on the file of the Department of External Affairs are not producible.


William Richard Motherwell: My question was: When may I expect to get it-this year or next?


Richard Bedford Bennett: It has been brought down.


Mr. CASGRAIN:: You are not going to get it.


William Richard Motherwell: Well, I shall ask for it every day until the end of the session.



GERMAN MORATORIUM


[Stage Direction]
On the orders of the day:
Mr. S. W. JACOBS (Cartier):: I should like to direct a question to the Prime Minister (Mr. Bennett). A United Press dispatch announces this morning that Right Hon. Neville Chamberlain, Chancellor of the Exchequer for Great Britain, obtained first reading of a bill to authorize an exchange clearing house in Great Britain to seize German funds to compensate those who are affected by the moratorium in connection with the Young and Dawes plans. A few days ago an item appeared in the Berlin press stating that if Great Britain were to resort to any such action the German government would feel compelled to seize funds belonging not only to Great Britain and to her colonies, but to the self-governing dominions, including of course, Canada. Is the Prime Minister able to give us some official intimation with regard to this momentous situation?


Richard Bedford Bennett: It has not been the custom of
this government to interfere with or offer gratuitous advice to the British government in the conduct of their business. We have no information that affects this country at this time.


Samuel William Jacobs: It is in regard to the statement from Berlin.


Richard Bedford Bennett: That is what I said; we have no information.
PENSION ACT AMENDMENT On the orders of the day:


Ian Alistair Mackenzie: May I ask the Minister of Pensions (Mr. MacLaren) if it is his intention to introduce any amendment to the Pension Act this year?


Hon. MURRAY MacLAREN (Minister of Pensions and National Health):: I have no
statement to make at the present time.
TARIFF BOARD REPORTS On the orders of the day:


Hon. J. L. RALSTON (Shelburne-Yar-mouth):: I wish to draw the attention of the . Prime Minister (Mr. Bennett) to the matter of the tariff board reports. The acting Minister of Finance (Sir George Perley) has laid on the table of the house to-day three reports by

Bank f>f Canada
the tariff board. As hon. members know, the only copy of these reports which is available for members is the copy that is filed with the clerk. I should like to urge on the government consideration -of the matter of providing for the printing of these reports. I think they are of interest to members of the house as well as the country.


Right Hon.   S@: I may say that these reports tabled today call for no action whatever. The question o-f expense of printing all these reports would be quite an important one. However, I shall bring it to the attention of the Finance minister.


James Layton Ralston: They are equally important whether they call for action or not.



DREDGING AT TRACADIE

[Stage Direction]
On the orders of the day:
Hugh Alexander Stewart: Yesterday the hon. member for Gloucester (Mr. Veniot) inquired about dredge No. 12, which had been at Tracadie. I promised that I would secure some additional information to-day. In some respects my answer yesterday was not absolutely correct. I understood the hon. member to inquire whether the dredge was being moved for the purpose of engaging in work elsewhere. In that sense my answer was correct. I find that this dredge was in need of substantial repairs, and advantage was taken of the high spring tide to take it out of the position which it occupied, and it is now in deeper water ready to be taken to Chatham for the overhaul which it requires.


Samuel William Jacobs: Is that Chatham, Ontario, or Chatham, New Brunswick?
Mr. STEWART (Leeds) You may take it either place. As to the program for that dredge, it will be settled when parliamentary appropriations for the session are completed and the program drawn up.



BANK OF CANADA ACT

[Stage Direction]
Right Hon. R. B. BENNETT (Prime Minister) moved that the house go into committee on Bill No. 19, to incorporate the Bank of Canada.
Motion agreed to and the house went into committee, Mr. Sullivan in the chair.
On section 1-Short title.
Ian Alistair Mackenzie: May I
ask the Prime Minister if he would consider
discussing immediately section 17, to which I intend to move an amendment, with regard to the vital principle of the bill, public ownership as against the proposed system. If that subject were disposed of I think it would expedite the discussion of the rest of the bill.


Richard Bedford Bennett: I think there is no
precedent for proceeding in that way, but if there are any disputatious sections preceding section 17 I would try to dispense with the discussion of them and proceed to section 17. But I think we must take them in sequence.


Ian Alistair Mackenzie: May I
point out that I think the principle of the amendment would affect practically every section.


Richard Bedford Bennett: That is taken for granted when we reach it. If that be disposed of adversely to the government's view of course the bill falls and the government resigns.


Mr. LAPOINTE:: But I wish to point out to the Prime Minister that what my hon. friend from Vancouver Centre (Mr. Mackenzie) has in mind is that the principle of public ownership affects nearly every preceding section. Therefore it would perhaps be better to dispose of it immediately rather than discuss the whole question on every section prior to the vital one.


Richard Bedford Bennett: I think in any event
we would have to call these sections and have them stand. But, as I understand there is no dispute, if the principle is adopted, why could we not adopt these sections as we go along, then if section 17 carries that is the end as far as we are concerned. Any motion which might be made to reconsider any of these sections would of course be considered. I believe it is not the practice of parliament to proceed with a section in the middle of a bill before dealing with the sections that precede it.


Ian Alistair Mackenzie: My only idea was to expedite the progress of the bill.


Richard Bedford Bennett: I understand the position; my hon. friends think they might be charged with agreeing to the principle itself if they pass any of the other sections. I will at once make it perfectly clear that the acceptance of these sections is predicated on the assumption that section 17 passes as it is. I think that will get over the difficulty.


James Layton Ralston: I am in the same position; I have an amendment to move to section 9, but it will be only necessary to consider it after the proposed motion of my hon. friend from Vancouver Centre has been disposed of. In order that we might get right to the heart
Bank oj Canada

of the matter I would suggest to the Prime Minister that sections 1 to 16 inclusive be called and allowed to stand, so that we may come directly to section 17.


Richard Bedford Bennett: It is very unusual.


The CHAIRMAN (Mr. Sullivan):: We cannot do it except by unanimous consent.
Section stands.
Sections 2 to 16 inclusive stand.
On section 17-Capital.


Ian Alistair Mackenzie: 
George Gibson Coote: My sentiments in regard to
the question raised by the hon. member for Vancouver Centre (Mr. Mackenzie) are very well known; I stated them to the house very emphatically in connection with the second reading of the bill, so at this time I shall content myself with saying that after listening to all the arguments advanced in the banking committee I am still convinced that this institution should be under public ownership. The power to be granted to this institution will be greater than the power of the government itself so far as the economic conditions of Canada are concerned. To-day monetary

Bank 1oj Canada
policy should be a matter of government responsibility, and I do not see why the power of deciding monetary policies should be handed over to an institution which is not owned by the government. The time has arrived when cooperation between the institution that is going to determine the monetary policy of Canada and the government should be just as close as the cooperation between the Department of National Revenue and the Department of Finance. I can see no good reason why this institution should be set up under any but public ownership. I consider it a retrograde step at this time to establish a privately owned institution with the great powers conferred by this bill, and for that reason I support very heartily the amendment moved by the hon. member for Vancouver Centre.


Richard Bedford Bennett: There are three reasons
why the government is not prepared to accept this amendment. First, the experience of the world indicates that such a proposal would be bad. Second, it is essential that the bank should be free from political control. Third, all profits of the bank except $225,000 accrue to the people, to the country, and to all intents and purposes the bank itself is a publicly owned bank, for (a) the provisional directors are named in the bill, and (b) the governor, the deputy governor and the bylaws must be approved by the government of the day. In other words the operation of the bank must be subject to the approval of the government of the day, as to the personnel of its officers and the laws under which it operates.
Dealing very briefly with the matter-because it has been dealt with at such length that I do not propose to cover the ground again-I shall take the first point, namely, the question of the experience of the world. Central banks are either privately owned or bank owned, or partly privately and partly state owned. I think that is a fair way to put it. The countries in which the central banks are wholly owned by the public are, as I said in the committee, six in number, namely Australia, Bulgaria, Finland, Latvia, Russia and Sweden. The conditions under which the central bank of the Commonwealth of Australia became publicly owned were set out at length in the speech delivered by the Minister of Finance.
Those wholly privately owned are Albania, Austria, Belgium, Denmark, Danzig, Esthonia -the government owns a few shares, and is disposing of them-France, India, Germany, Hungaria, Italy, the Netherlands, New Zealand, Norway, Portugal, Spain and Switzerland. In those countries the central banks are privately owned, without limitations such as are imposed here with respect to either returns to the shareholders, or the restricting and supervising power exercised over the institution by the government of the country. That does not apply to all. In some instances the supervision is much the same as it is here. The wholly bank owned central authority is. of course, found in the United States of America. Technically it is not probably correct to say that the reserve banks of the United States could be described as central banks, but the banks are members of the central reserve body and therefore own the central reserve banks in the various parts of the United States.
Those which are part publicly and part privately owned are found in Poland, Czechoslovakia, Greece-where there is a limitation upon the amount of stock which may be owned by the government-and in Japan, where the same provision prevails, Lithuania, and Rou-mania. In Czechoslovakia and Roumania there is a limitation in the extent to which stock may be held in the central bank.
Public, private and bank owned are found in Chile, Colombia, and Peru. And there is private and bank ownership in South Africa. That is the position as indicated by the experience of the world. While, as I said the other day, it is not always desirable to rely upon the experience of other countries in arriving at conclusions in your own country- because conditions are so very different- nevertheless the fact remains that the functions of a central bank have been found to be best discharged, apparently, in the countries to which I have referred by recourse to the method indicated for the purpose of creating and owning the bank.
I shall not dwell longer upon that point. I am not unmindful of what Sir Thomas White said, but it is only fair to say that Sir Thomas White was opposed to the central bank, and he relied upon the Finance Act as being ample security for the protection of the credit of this country. This is neither the time nor the place to discuss at length a matter which has already been carefully considered in committee. Suffice it to say that the Finance Act, in itself, was an extraordinary expedient to meet an extraordinary circumstance. And with the country off the gold standard, as this country has been since a former Minister of Finance shipped $40,000,000 in gold to the United States-since that time the utilization of the Finance Act offered opportunities for chartered banks such as were not to be found in any other part of
Bank of Canada

the world, and which need not be here discussed more than to say that any reliance placed upon the observations of the former Minister of Finance to support the proposal in the amendment I believe must be considered in the light of his attitude of mind towards the whole proposal, and cannot be taken as an indication of opinion and separate from the view which he held with respect to the whole matter, as indicated by the report which he made following the proceedings of the Macmillan commission.
My second ground, as I explained to the committee, is I believe of the utmost importance. We had ample evidence during the progress of the discussion in the committee that considerations which govern in the appointment and discharging of the duties and obligations of the bank must have, from the very necessity of things, political consequence. And to make a political football out of a central bank is something which I do not think parliament should ask any body or any government to do. No one who has studied the conditions in this country, and understands them as thoroughly as many hon. gentlemen opposite understand them, will deny that instead of giving the people the broad base for their choice of directors, which they would have if the shareholders as provided by this act were to elect the directors, a proposal looking to a government-selected body of directors, some of whom would hold office during a term necessarily longer than the life of the government, involves considerations in the appointments of a character not conducive to the well-being of the bank. Shall men be appointed to the bank because they reside in a particular locality? Shall men be appointed to the bank because of their occupations? Shall men be appointed to the bank because of their religion? Shall men be appointed to the bank because of their politics? Shall men be appointed to the bank because of their race? Every one of those questions I have put to this committee this afternoon will be asked by every government having the responsibility for the appointment of directors. All you have to do is to look at the commissions and committees set up in this country during the last twenty-five years to realize the soundness of what I have said. Shall a man be appointed as a director of this bank simply to find for him a place because he no longer has a position in his own province? There have been cases in which, in order to find resting places for men no longer useful in their own provinces appointments have been made to important commissions. That is a well known fact. Shall political con-
siderations of that kind prevail, or not? That is the issue. Which is better? Is it better under democratic institutions where you have shares of small value being issued-in this instance shares of $50 each, and where in the selection of shareholders it is intended that there shall be the widest distribution of shares to those who will subscribe for small numbers of shares-which is better, that with the ballot sent to them after nominations have been made they should select the directors for this institution, or shall the considerations to which I have referred be given due weight? Those are considerations which as every hon. member knows provoke effective questions when appointments are to be made by a government. I speak feelingly, and with some small experience. There are hon. members in this house with larger experience. But there is no hon. member who does not know about the pressure which is always exercised with respect to the necessity for finding a place for some man who-and I am not speaking offensively is worn out, tired out or, shall we say, some politician or person who no longer has the opportunity to exercise his powers. These are the facts. I do not wish to mention names, but if I were driven to it I could. All you have to do is to look at the commissions which during the past twenty-five years have been appointed in this country. I am not speaking about one party; I have been very careful not to do that. You will find that the considerations to which I have referred are the considerations which have governed in making appointments.


Joseph Philippe Baby Casgrain: Not always.


Richard Bedford Bennett: I did not say always; I just simply said that those are the considerations which have governed. There is not an hon. member of this committee within sound of my voice who does not know that that is so.


Mr. HANBURY:: Might I ask the Prime Minister whether that consideration governed in connection with the appointment of the trustees of the Canadian National Railways?


Richard Bedford Bennett: I explained to the committee the difficulties which were incident to that. The hon. gentleman knows very well what they were. I shall be perfectly frank. The criticism against one gentleman who is serving without salary was that it was not a good thing to have two men of one religion on a committee. That is what was said.


Wilfred Hanbury: Evidently the Prime
Minister did not permit that criticism to influence his judgment, and quite properly so.

Bank oj Canada


Richard Bedford Bennett: It did not, but he has been violently criticized because he did not. There are other criticisms which I could mention which were made with respect to other commissions. I am being perfectly frank about this matter of commissions and appointments. I have no hesitation in saying that I should have liked to have approached this question under the conditions that obtain in other countries where there are not the vast areas which we have he_re in Canada and which have not our scattered population. But I realized that I was confronted with facts and not theories and the only method by which this matter could be dealt with as an actual condition in this body politic is the manner in which I have indicated it can be controlled satisfactorily.
I go a step further. How do we propose to elect the directors? Is this to be done by a few gentlemen sitting around a table in the east block? Are they to select them and appoint them? There is to be circulation of ballot papers to every shareholder. These ballot papers will contain the names of the persons nominated and the shareholders, accepting their responsibility, will select seven directors with as much wisdom as they are capable of exercising. That wisdom is good enough to select the hon. members of this parliament who reflect the genius of the Canadian people and it should be sufficiently great to select these directors.
I should like to give an experience I have had in this matter. In the early days of the Northwest Territories we established a law society which was perpetuated by legislation in Alberta and Saskatchewan. When it came to the election of the benchers we provided in the first bill that the benchers should be elected without nomination. Ballot papers were circulated to every member of the profession and he was asked to vote for nine benchers, with the proviso that not more than two should reside in any one judicial district. Strange as it may seem the result was that those who were most prominent at the bar were selected. Later on we provided in Alberta and Saskatchewan that there should be nominations by any three members of the profession. The names of the nominees were printed on a ballot paper, which was sent to each lawyer in the province. Ain addressed envelope was enclosed, upon the back of which was the statement that the ballot was to be returned to the secretary. Again, strangely enough, the leaders of the senior and junior bars were almost in every instance selected by election to fill the positions of benchers, the administrative officers of the law society. We propose
to do just that thing. We propose to put the selection of these directors upon the broadest democratic basis possible. It is not to be put upon the basis of a few gentlemen sitting around a table in the east block to determine who these gentlemen shall be.


Wilfred Hanbury: Who are the gentlemen to whom the Prime Minister (Mr. Bennett) is referring?


Richard Bedford Bennett: The government of the day.


Ian Alistair Mackenzie: They are responsible to parliament.


Richard Bedford Bennett: Certainly, but under the parliamentary institution as we understand it, we know perfectly well that the government must have a majority or it does not exist. That majority sustains the action of the government. I am adopting the broadest democratic basis in permitting the shareholders themselves to select the directors.


Wilfred Hanbury: The shareholders do not appoint members of the government.


Richard Bedford Bennett: That is the broadest basis of democracy. They select by their ballots those who shall be the directors of the bank. That is the method that will be pursued. Nominations will be made and ballots will be distributed and the shareholders of the bank, with a sense of their individual responsibility, will be called upon to vote for seven directors. Each shareholder will be instructed that the directors must not be confined to any one part of the country, that they should represent as many sections of the country and occupations as is possible.
I am not going to follow the argument any further because it has been done at such great length already. I say that it is not correct to describe this bank as a privately owned bank. It is true that there will be shareholders who will pay $50 each for their shares; they will have the right to vote for directors in the manner indicated, but where will rest the control of the bank? Shall the executive officer who must determine its policies be subject to the direction of government? Shall he be forced, as he would be forced in the case of a publicly owned institution, to do what he is told to do by the government of the day? In a moment of political crisis when it is desirable to do a particular thing for party reasons, shall he be subject to that control or shall he be free from such control? He is appointed by the governor in council for a term of years and he knows that his tenure of office depends, not upon the government but upon the extent to which he discharges his
Bank ioj Canada

duties in a manner satisfactory to the people of this country and to the shareholders of the bank. The governor and the deputy governor are to be the executive officers.
Then there is the question of administration. Banks like other institutions are governed by by-laws. By-laws are the rules and regulations under which a concern functions and these will have to be approved iby the governor in council. That is an indication that the government does not undertake to deal with details or with political patronage; it deals with the question only to the extent of approving the governor, the deputy governor and the by-laws that govern. Beyond that the government simply sees that the institution functions and it gives it such assistance as it can give to that end. In order that there shall be close communication and continuity of policy, having regard to the changes of administration in a country such as this, it is provided that the deputy minister shall be a member of the board. He is to have no vote but he is to be there for the purpose of seeing that the government is thoroughly informed as to the conduct and policies of the institution. That is the position there.
I am not going to dwell upon this any longer. In this country there have been many striking illustrations of a commission desiring to do what the government wanted done. There have been many such illustrations during the past fifty years and I think it is desirable that an institution such as this should be freed from such possible criticism.
Lastly, all the profits that are made by this bank, with the exception of $225,000 per year, shall accrue to this country. If the money were found by the Minister of Finance through the consolidated revenue fund it is not improbable that it would cost four per cent, and perhaps more depending upon where it was secured. However, we will say four per cent. Four per cent means $200,000 and the difference between $200,000 and $225,000 is $25,000. I think it will be admitted that that is a very small price to pay for the security which is obtained for the people of this country.
As I said, I shall not traverse the arguments which have been made by the Minister of Finance and myself before the standing committee. In approaching this problem, and it is a very important one in which great responsibility had to be taken by the government of the day, at first blush any hon. member would say:	Yes, a publicly-owned
bank, a bank owned by the country. But when I gave my best attention to the matter, without going again in detail into the reasons 
that influenced my judgment, I could not ask this house to vote for that purpose, and I am not doing so because I believe that if I did I should not be doing what I conceive to be right with respect to the institution which we are now creating and which will play so large a part in shaping the monetary policy of this country.


Ernest Lapointe: Before the members of
the committee reach a decision as to which way they will vote on this motion-of course, they have already done so-I would suggest to every one a careful reading of the preamble of this bill. The preamble states quite definitely what will be the functions of the institution which we are creating to-day: Those functions will be to:
-regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of the dominion.
In other words, we are entrusting the national life of Canada to the body of men who will guide, dominate and control these various functions which are enumerated in the preamble of this bill. Under these circumstances I cannot but agree with the views of Sir Thomas White, who was at one time a distinguished Minister of Finance in this country, who was one of the commissioners appointed by the government to study this question of banking and monetary matters in Canada, who himself stated that he was opposed to the establishment of a central bank and reported against the establishment of such a bank, but who stated emphatically that if there was to be a central bank it should surely be publicly-owned, a bank owned by the people of Canada.
My right hon. friend's argument, if he will allow me to say so, will militate against representative government, at least representative government elected by universal franchise. He asks, "How can a few gentlemen in the east block, instead of the shareholders, control this bank?" Well, the few gentlemen in the east block are the representatives of the people of Canada; they are supposed to be. They are elected by the people of Canada to voice their views and to represent those views in legislation, in administration and otherwise; and when the people of Canada are not satisfied with the representatives whom they have elected, the constitution provides a way to change them.

Bank of Canada


Richard Bedford Bennett: But their successors cannot change the board.


Ernest Lapointe: I beg your pardon. They have the confidence of the people of the country, and I have more confidence in my right hon. friend than he has himself. As against these gentlemen in the east block representing the people of Canada my right hon. friend says that we should prefer the shareholders who select the administrators of that bank. Now, the shareholders cannot be more than 2,000, with the capital which is going to be subscribed and the number of shares which everyone is allowed to own; so that 2,000 people in Canada instead of the government are going to control the economic and national life of the country. Against that principle I will certainly vote. I believe that under the circumstances the central bank, being given the powers which this parliament is giving it, must be publicly-owned. We are taking away from all the private banks which are being operated in Canada the gold which they have in their possession. This institution is going to possess all the gold in Canada, and it will be a privately-owned institution.
I think that if you consider these various elements in connection with this matter you will agree that the motion of my hon. friend from Vancouver Centre ought to be accepted by the committee. I am free to admit that I would rather have held the opinion that this should be a privately-owned institution publicly controlled, before I read the bill as it is and heard the discussion and knew all the functions that are going to be those of this public institution. Under the circumstances, the central bank being what it is going to be, I think I should be derelict in my duty if I did not support the principle of public ownership.


Mr. EULER:: When the Prime Minister
announced early in the session that we were to have a central bank I had hoped for two things; one was that the central bank would be given the power to issue all the currency. That is being partially carried out, and my regret is that it is not being carried out 100 per cent. The second was that the bank would be publicly-owned, a bank owned by the people of Canada. Now, I hope I do not prejudice my argument by a fact which is perhaps fairly well known, that in many instances, so far as public services are concerned, I favour public ownership; and I will freely admit that public ownership presents a good many drawbacks. I am not arguing that public ownership is perfect, but I do believe that in many instances
public ownership has nothing to regret when it is compared with the results that have flowed from private ownership. I think the committee and parliament should consider the advantages and disadvantages which may flow from the two separate propositions, private ownership as proposed in the bill, or public ownership as proposed in the amendment moved by the hon. member for Vancouver Centre.
My reason for saying that this should be a publicly-owned bank is this. I think that entirely too much power is being given to an institution which is not publicly-owned. I do not suppose I need to review these powers. Some of them have already been referred to; perhaps not all. In the first place the bank will be given the power of issuing currency, a great power. Again, it will have possession of all the gold in the country, amounting to $107,000,000. Again it will have in its possession five per cent of all the deposits in the chartered banks; it will have the reserves which have been put aside for certain purposes in the banks; it will have the repayment of advances made under the Finance Act and it will-and this is perhaps more important than any of the other features-[DOT] have control of the credit of Canada. I was going to say-and this is more or less by the way-that this bank, especially if it were privately owned might be given some additional powers; it might have control of the reserves, for instance, of insurance companies and of trust funds in various organizations, pension funds, and perhaps later on, when we establish, if we do an unemployment insurance scheme those funds might also very well be administered by this bank.
I may be wrong but I am credibly informed that this central bank will actually have in its control and possession funds amounting to the stupendous sum of between $300,000,000 and $500,000,000. That .is a tremendous power to give to a privately owned institution. I cannot quite agree with the Prime Minister when he says that it is not correct to describe this bank as a privately owned one. After all it is a privately owned bank and although the number of shareholders will be comparatively small, some 2,000 and no one of them-


Mr. HANSON (York-Sunbury):: The hon. member's mathematics is bad. It is 20,000.


William Daum Euler: I was repeating for the
moment what the hon. member for Quebec East (Mr. Lapointe) had said. Let us, however, say 20,000 persons. I am not going to dwell on this to any great extent but I believe it is possible to concentrate, by way of
Bank tof Canada

having the shares held in trust, a great deal of power in a few hands in the ownership of the shares of this bank.
Something was said also-and this was said in the committee-that ownership of the bank by private persons might lead to a great deal of external influence being exercised upon it. I need only read what Sir Thomas White, one of the commissioners, said. This is what he said:
It is also my view that a central bank of Canada should not be empowered except with the approval of parliament, to enter into agreements with other central banks which would undoubtedly, on account of their greater experience and wide sources of information, possess decided advantage in the negotiation of such agreements.
More than that-and I think this is important-Mr. Beaudry Leman, also one of the commissioners-and I do not think he can be accused of being a great advocate of public ownership-had this to say:
Measures calculated to develop intra-imperial cooperation, as set forth in paragraph number 211, should not be developed beyond the scope of providing ample facilities for the interchange of goods and services, unless the people of Canada understand and decide, in full knowledge of the consequences, that close monetary cooperation may lead to close economic association which in turn is a step towards common political action.
I am not attributing any sinister motives whatever to the Prime Minister or to the government in deciding finally that the bank shall be privately owned. The Prime Minister Stated-and I believe he is quite sincere-that at first blush, as he put it, he was in favour of having this a publicly owned bank. I wish he had adhered to that view, because I believe it to be true that there would be greater public confidence in a publicly owned than in a privately owned bank, restricted though it may be in its powers. The other day the Minister of Finance, in explaining this bill and the Prime Minister again to-day, made reference to central banks in other countries and in most instances those are privately owned. Banks like the Bank of England and the Bank of France are the growth of perhaps a number of centuries and those are older countries. I am afraid, unlike some of my friends the lawyers, I am not necessarily a great believer in precedents. Someone once said: We make our own precedents, and I believe we can make progress in all things and need not necessarily look to older countries for the course we ought to adopt. For example, in the United States, one of the newer countries if you like, this year there was introduced into congress a bill which provided for a number of things. This bill was sponsored by the two senior members

of the committee, Congressmen Stegall and Goldsborough, two prominent members of the United States congress. This is the kind of bank they proposed:
It would set up a federal monetary authority which would have sole custody of the nation's metallic currency reserves, power to regulate credit and, at the end of three years, the exclusive right to issue currency in the United States. As stated in details these powers correspond identically with the essential functions of any central bank.
This proposed institution was to supersede the federal reserve bank system as they now have- it in the United States. The article goes on:
The "authority" itself would consist of seven directors to be appointed by the president with Senate approval. They would- be representative of agriculture, industry and banking, and would be headed by a governor and deputy governors after the manner of a central bank. They would be subject to removal from office only by the president or by congress, but would be debarred from any private interest in finance, manufacturing or foreign trade.
The authority would thus be free from any control except that of the government; and any profits from its operations would, after deductions for reserves, go to the treasury.
I cite that merely as an argument against accepting the theory, if you like, that we must necessarily follow the practice of the older banks in the older countries.
There has been only one real objection advanced to having this bank publicly owned and that ds the danger or supposed danger referred to by the Prime Minister and the Minister of Finance that in the appointment of directors and in the conduct of the bank itself especially-and I think the Minister of Finance said this-if an election were in prospect, political influence would be brought to bear upon the conduct of the bank. I have said before in the house and also in the committee on banking and commerce that I am surprised and disappointed that the Minister of Finance and the Prime Minister himself should have so little confidence in the public men and the democracy of this country. Public men are constantly being criticized more I think in jest than in earnest that they are out to serve their own ends as members of parliament. I do not think that is borne out by the fact but certainly if we, the government of this country, say that we are not to be trusted, what can we expect from those who elected us? The Prime Minister has referred to the difficulties in making appointments, to the fact that certain interests have to be considered, such as language, religion, geography and ail the rest. He spoke a moment ago about the criticism which he received because he appointed two members of a certain faith

Bank of Canada
to the national railway board. My answer to that is this: Surely a government has backbone enough, as it had in that case, to resist any unjust demands that are made upon it. Therefore in the final analysis these would be my reasons for wanting the bank publicly owned. In the first place, it is entirely too great a power to be placed in the hands of private individuals; in the second, a central bank will have the confidence of the people of Canada to a much greater degree if it is publicly rather than privately owned, especially in view of the facts which have been disclosed before various committees of the house. For these reasons I am going to support the amendment.


Mr. HOWARD:: I wish to express in a feiw words my sentiments on this, to my mind, very important departure in Canadian history. May I say first that I am a private ownership man. As far as possible I believe in private ownership. But having regard to the preamble, which after all is the guiding principle of the whole bill, I cannot help but tell this house the reason I am supporting one hundred per cent the amendment moved by the hon. member for Vancouver Centre (Mr. Mackenzie). I was surprised to hear the arguments of the Prime Minister concerning the method of electing directors, and I wish to say a few words on that. Is there any man in this house who thinks that a cabinet representing all the people of Canada-not only those who are able to subscribe $2,500-[DOT] and having the confidence, as they should have, of the people of Canada as a whole, are not in a better position to select the men who are to control the financial policy and the national credit of Canada than 2,000 shareholders whose only qualification is that they were able to put up $2,500? I am sure that there is not any serious-minded person who will say that the men in the first category are not much better able to select proper directors to manage that institution than the shareholders as provided under the act.
Then I wish to say a word in connection with the gold situation. This institution is to have the control of all the gold of Canada. Furthermore it is to confiscate the gold of the private banks of Canada. I know that legal justification may be asserted for this, but I do not believe it is the proper thing to confiscate the property of any citizen and to hand that property over to another citizen. If we are going to have confiscation let us have it for the benefit of the state and no one else.
Then this institution is to have, progressively I will admit, but eventually, the entire control of the issue of money in Can-74726-263
ada. In view of the Prime Minister's changed attitude as to the money policy of this government as expressed in this house yesterday I begin to think it is most important that we should have a governmentally owned institution, or at least an institution controlled by the government, to manage safely the national credit in the interests of all the people of Canada. Then I submit another suggestion. Under the present legislation we have a treasury board acting under the Finance Act. With conditions as they are to-day I do not think any member of parliament should vote in favour of a system which in any way will lessen the present powers of the treasury board under the Finance Act. I believe that by this new institution we are lessening the powers of the treasury board. Then there is another argument as to the selection of the officers of the institution. I support the hon. member for North Waterloo (Mr. Euler) in his statement. When I want land surveyed, although I cannot rim a line I can hire a man to dio the job for me and can tell him where I want it run. I do not think this parliament has any reason to take second place to the business men of this country. The managements of our privately owned banks in Canada have been able to select men to manage their institutions, not perhaps in the interest of all the people of Canada, but at least in the interest of their shareholders. In spite of the fact that some of the directors, in fact many of them, are not at all qualified to manage those institutions, they are able to hire such men as Mr. Wilson, Mr. Logan and many others who have been successful in conducting banks for the benefit of their shareholders. Surely eighteen selected men-selected men, I say- out of a population of over ten million, are competent to hire officers who can manage this institution, especially when it is to be charged with responsibility-and I want to read it into Hansard because I think it is most important-
-to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of the dominion.
Furthermore, at present we have a privately owned system of note issue, which is covered at all times by assets to a varying degree. Under this new legislation we are handing over to the Bank of Canada, the absolute power of note issue for the whole Dominion of Canada. In view of these considerations, and after listening to the argument of the Prime Minister, I cannot see how any hon.

Bank oj Canada

member on either side of the house-I am uot speaking politically-can take any other stand than that the control of the national credit of Canada should be in the hands of people representing Canada or in the hands of the government of the country.


Richard Burpee Hanson: I had not intended to take any part in this discussion, but in view of what has been said I think a few remarks would not be out of place, giving my own views and the views of those with whom I am associated. First I should like to say that every view that has been presented here this afternoon was presented with force and power by gentlemen who I have no doubt honestly held the views they expressed. I give them credit for honest and honourable intentions, and they are quite justified in expressing their views. I must confess that I am rather surprised to find the hon. member for Quebec East (Mr. Lapointe) in the role of a supporter of public ownership. I have never heard that heretofore he has been included in that category. But there is always time for repentance. Personally, I am not a proponent of public ownership; I am not doing any violence to my conscience when I vote for private ownership in the sense in which it is restricted and limited by this bill. But certain statements have been made here to-day which I do not think are quite borne out by the facts. In the first place the hon. member for Quebec East said that the board of directors of this bank would be elected by 2,000 shareholders. That would be true if only 2.000 people should become shareholders of the bank, which would be possible having regard to the limitations imposed by the bill. But it is equally possible that there will be 100.000 shareholders, having regard to the announced policy of the government that the shares shall be distributed as widely as possible. So I suggest to my hon. friend that while his mathematics may be technically correct they are not practically correct.
Public ownership of any great and important utility is a great idea. But I have never seen a country yet where it worked out one hundred per cent, not even in the great province of Ontario.


William Daum Euler: You cannot expect one hundred per cent.
* Mr. HANSON (York-Sunbury): Certainly it has not worked out in connection with the railways of this country. For the reasons which have been alleged already I am going to support the principle of private ownership of this bank, as I think the committee would be well advised to do.

It has been stated here to-day that pressure would be brought to bear upon the government of the day in regard to creeds and sections throughout the country. I can show you a file of correspondence in my office coming from various parts of the country demanding that a certain number of the directors of this bank shall be chosen from one race in this country. There are many resolutions couched in exactly the same language,, showing the propaganda that is going on. That is one evidence. I will not mention the race; hon. gentlemen can draw their own conclusions. This indicates that the moment anything of this sort is set up there is a reaction of this kind in the minds of some people. Does that tend to strengthen the position of' the institution? I humbly submit that it does not. Then there is the question of sectionalism. Did we ever set up a board of directors for the national railways when sectionalism was not a paramount consideration?" I put that to hon. gentlemen opposite. They know it and we know it, and that does not make for the best cooperation possible. I think it is one of the great weaknesses of Canada that we are governed by sectionalism. We are bound to consider the different sections of the country; otherwise we would not have a maritime position on one question, a central Canada position on another and a western position on another. This is an embarrassment and a detriment to the proper-government of the country. We must admit that the principle of governing the country according to sectionalism is wrong, and surely the same principle should apply to the bank.


William Daum Euler: My hon. friend referred to the board of directors of the Canadian National Railways. Is he contending now that the present board was appointed with the idea of giving expression to the wishes of these various factions?


Richard Burpee Hanson: No, I do not say that, but I say that the board set up in 1922 or 1923, which went out of office in 1930, and the board set up in lieu thereof in 1930 or 1931 gave expression to this sectionalism in Canada, and it was very hard to operate the board because of the diverse interests that were represented.


William Daum Euler: But that does not applj*- to the present board?


Richard Burpee Hanson: No, it does not, because, as I understand it, that principle was discarded in the appointment of the trustees, of whom there are only three under the statute.

Bank of Canada
Surely the experience of other countries is of value; surely it is not a crime to follow the example of England, although in the minds of some members of this house it may be so considered. They have had a privately owned central bank, the Bank of England, ever since they have had a central bank. It has performed exactly the functions that are intended to be performed by this bank. More than that, in the great majority of cases where central banks have been set up in other countries, invariably and with very minor and few exceptions those banks have been privately owned in the same sense that this bank is to be privately owned. Why is that? Hon. gentlemen in this house should pause and query why that has been the case. In Canada we have reason to know why there might be interference with a bank if it were publicly owned. I can visualize what might happen, and it is to guard against that sort of thing that this institution has been set up in this way.
I should like to pay some attention to the remarks of the hon. member for Sherbrooke (Mr. Howard) with respect to the gold question. Very incorrectly, in my judgment, he said there would be confiscation of *the gold of the private banks. If I understand the word in its proper meaning, confiscation is taking without compensation. There is no such intention or underlying principle in this bill. The gold of the chartered banks is to be taken over, save and except that portion of it required for the external obligations of the banks, and due compensation is to be made. I did not understand that the banks as such objected *to the taking over of their gold, because they admitted that gold was no longer necessary as part of their reserves. What they did seek, however, in the brief filed for them, was to be allowed a great unearned increment which the possession and ownership of the gold at the present moment brings about. They thought this ought to accrue to them. This legislation does not recognize that principle. It recognizes the principle of full compensation to the banks at the statutory rate, and the profit goes to the state. What other principle could be followed by this house and by the country? I challenge hon. gentlemen opposite to bring in an amendment which would have the effect of paying the chartered banks of this country the full premium on gold to-day. I am sure they would not do so, so there is nothing in the argument that this will bring about confiscation. There is no confiscation; there is expropriation with due regard to compensa-74726-263J
tion. Any government has that right; it has been exercised by this government ever since we set up legislation having that effect.


Ian Alistair Mackenzie: Is it
not a fact that $70,000,000 of Finance Act gold is being transferred to a private corporation?


Richard Burpee Hanson: The gold
will be in the custody of the central bank and the private institutions will not reap the benefit of the unearned increment. Perhaps theoretically the ownership of the gold will be in the new bank, but the unearned increment is the thing that bothered the chartered banks, who wanted to be paid at the rate of $35 per ounce. I wonder what government, or what party, would dare pay the chartered banks of this country that unearned increment on a commodity in which they were not dealers.


Ian Alistair Mackenzie: No one
said so.


Richard Burpee Hanson: That was the only point in the remarks of the hon. member for Sherbrooke, the taking of the gold because gold is worth so much more than the statutory price.


Some hon. MEMBERS:: He never said
that.


Richard Burpee Hanson: I do not
think the hon. member for Sherbrooke had anything else in the 'back of his mind when he used the term "confiscation." If he did not mean that there was no point in bringing up the matter at all. Either he meant the confiscation of a commodity on which there was a large premium or his argument meant nothing at all. I suggest to the committee and to the country that this matter was given the very fullest and frankest consideration by the banking committee over a long period of time, and that this provision should have the support of the people of Canada.


Mr. IRVINE:: Just before you put the
question, Mr. Chairman, I should like to say a few words on this subject which has been discussed a good deal in this house, in connection with the bill now before us and at other times. I do not think I can add to the discussion anything that has not been brought forward by someone else or mentioned on previous occasions by myself, but I do desire to congratulate the hon. member for Vancouver Centre (Mr. Mackenzie) upon having offered this amendment, and I am very glad to note the enthusiasm of those who support him. As one who has always believed in
Bank of Canada

the public ownership of financial institutions I am very glad to welcome these gentlemen to the ranks of public ownership.
I do not care, of course, whether the job is done by the present government or by some other government; I want to see it done, and I am ready to vote for the men who are going to do it. Let me point out to my hon. friends that there are no new powers in this bill which have not been exercised by the private banks of Canada ever since their organization. Certainly up to the time of the Finance Act they had entire and abso-' lute control of the financial institutions, just as it is proposed now to give control to the central bank. And while of course I am going to vote for the amendment, because I believe in the principle involved therein, and while I am going to vote for every amendment which makes towards that principle, nevertheless I wish to take this opportunity to say that the central bank, as a private institution, as pointed out by the hon. member for Vancouver Centre, is a very excellent idea. There are some fine advances made in the measure now before us, and even if I cannot have all the amendments I should like, I certainly will vote for the bill when it comes up for third reading.
For a moment or two let me remark upon the arguments advanced by the Prime Minister. He set forth three arguments, the first being that the experience of the world would lead us to adopt the present form of private ownership of banks. In that connection may I observe that the experience of the world has been very meagre, in the matter of public ownership of banks, and secondly that all the experience of private ownership of banks has not been attractive. The methods adopted in financing, in other countries of the world, and especially during the period of and since the great war, as I say has not been attractive. Indeed, the mismanagement of the financial institutions by private corporations in various countries of the world has led to the necessity for the legislation now before the committee. I do not think we can draw our inspiration even from the historic old Bank of England in handling the financial affairs of the British nation, especially during the past decade or so.
Then, the second point made by the Prime Minister was that of having freedom from political control. I do not believe there is anything under heaven free from political control. I do not believe we can have anything free from political control. While I agree with what the Prime Minister said- and I state that so far as it went his argument in that connection was very forceful,

indeed-I think his argument was more of an indictment of the present parliamentary system than an argument against the public ownership of banks. I would say that there is only too much truth in what he said. So far as the party system is concerned-and perhaps we will not get the full working of the social ownership of banks until the C.C.F. comes into power-nevertheless, as I have said on many occasions, I would rather have bank governors and directors appointed by the Prime Minister or by the leader of the opposition than by any group of private bankers we might find anywhere.
The third point was that the presently proposed bank is really, in fact, a public institution, inasmuch as the government has the appointment of the governor and certain [DOT]functionaries of the institution. Of course, there is truth in this, that the private control of the banks is in many respects very strictly limited, and that those features of the bill are of course acceptable as a bill providing for a private institution. But the fact remains that the entire control of the central financial institution of this country is being reposed in a private concern. In my opinion that is not a wise thing to do and I would urge that the Prime Minister who, as he says himself, believes or had the opinion at the outset that the proper thing to do was to make this a government bank in reality, would give further consideration to the arguments which have been put forward this afternoon, and that he will make this bank wholly and entirely a socially owned, nationally owned, publicly owned-whichever term you desire to use-institution, so that we may control, and so that the financial policies of the country may be in the hands of the representatives of the Canadian people. I would point out to the Prime Minister that if under government control poor governors were appointed, governors who were incapable of carrying out their duties, we certainly would have direct recourse and ultimately, at least, could effect the necessary improvements by removing the incapable officials and appointing others in their places. But under a private institution we will have no such power. They will find their own governors and their own directors who will do business in the way they want them to do it. I urge that further consideration be given, and that the amendment be accepted.


Henry Elvins Spencer: Before the vote is put, and without wishing to take up the time of the committee, I should like to place myself on record in support of the amendment

Bank of Canada
offered by the hon. member for Vancouver Centre (Mr. Mackenzie). I happen to be paired with the hon. member for Athabaska (Mr. Davies), who has had to leave the chamber this afternoon. For that reason I should like to state my position as probably a vote may take place shortly. I agree entirely with what has been said in support of the necessity for making this a publicly owned bank. The matter was thoroughly discussed in the committee on banking and commerce, and there can be no advantage in repeating it here. May I place myself on record as being entirely in favour of the amendment.


Some hon. MEMBERS:: Question.


Mr. NICHOLSON:: Don't be so anxious. Hon. gentlemen opposite are quite free to express their opinions, and I claim the right to express mine. I am opposed to the amendment for the very reason advanced for its adoption by the ex-Minister of Justice (Mr. Lapointe), namely the provisions in the preamble of the bill under which the Bank of Canada can control the credit and currency, meaning the commercial credit and currency, necessary for carrying on the ordinary business of the country. As between a privately owned and controlled institution, with all the safeguards thrown around it by this bill, and a politically controlled institution which would govern the credit provided the business interests of this country, I must favour the privately controlled, or privately owned, publicly controlled and, if you like, privately managed institution for which there is provision in this bill. As a matter of fact, I would go farther than the bill has gone, and in addition to setting up a stock issue of $5,000,000 in shares of $50 each, or whatever they may be when the bill has passed, I would in addition make an issue of common shares representing a small proportion of the total capital of the bank, with the provision that the persons who purchased those shares, whether or not they be the same persons who purchased the preferred shares, would have an added interest in the success of the institution by the further possibility of sharing with the state the profits accruing to the State. Under the provisions of this bill the profits, such as they are, or whatever they may be, accrue one hundred per cent to the state, and when hon. members talk about the institution being managed, and talk about confiscation being effected to the advantage of private individuals they overlook entirely the fact that as now provided all of the profits arising out of the operation of this bank accrue to the state. When we
look at the experience which this country has had and is now having with publicly owned and directly parliamentary controlled institutions, we cannot hope to have an independent institution so long as it remains within the hands of any government, no matter what side of politics it may be on. A politically controlled bank could destroy the industry of this country in six months through unwise actions. That possibility rests within the provisions of the bill.
What has been our experience with our national railways? The hon. member for North Waterloo (Mr. Euler) has left the chamber but he knows what that experience has been. The first board of directors of the Canadian National Railways were still holding office when the government was changed in 1922. When the new government came into office the president and the entire board were dismissed and a new political board appointed. As was testified to by the then president, Sir Henry Thornton, that board continued to operate in a political manner. The commission which investigated the whole situation used the term, "the thin red line of political activity." We have a similar situation to-day in the province of Ontario. The management of one of the greatest publicly owned institutions are to be dismissed and political appointees put in their places. What guarantee have we that the same thing would not happen in the case of this bank? Should there be a change of government, the governor, the deputy governor and the board of directors who controlled, this great central bank would be automatically dismissed.


William Daum Euler: Will not the hon. gentleman admit that the hydro commission of Ontario, a publicly owned institution, has saved the people of that province hundreds of millions of dollars when it is considered what they would have had to pay for power had it been owned by private parties?


George Brecken Nicholson: At the moment I am not discussing the merits of hydro electric in Ontario; I am discussing the management. The governor, the deputy governor and the directors of a bank such as the central bank of Canada is to be should not be subject to political dismissal. I grant that a government may be trusted to find the best men available for these positions, but there can be no continuity of policy or that direction which is required in the managing of an institution of this kind when the governor and all the officers are subject to dismissal when a political change occurs. My hon. friend knows that the whole organization of the hydro electric in Ontario is to be subject to political dismissals.
41(52
Bank of Canada


William Daum Euler: Even if that were true, which I do not admit, has it not been advantageous to the people of Ontario to have the hydro publicly owned?


George Brecken Nicholson: It may have been up to the present, but there are arguments both ways. Is the central bank of Canada, the monetary policy and the credit of this country to be subject to political control?


William Daum Euler: That does not necessarily follow.


George Brecken Nicholson: That follows the
moment you adopt the principle that those who control are to be political appointments. That principle was put into practice by my hon. friend himself as a member of the government.


William Daum Euler: I never did that.


George Brecken Nicholson: What happened to the board of directors of the Canadian National Railways in 1922?


William Daum Euler: I was not a member of that government.


George Brecken Nicholson: You supported that government and you supported that action. My hon. friend is supporting the action which is going to be taken with regard to the hydro in Ontario.


William Daum Euler: That remark is entirely uncalled for.


George Brecken Nicholson: Just one last word. As a business man whose business will be directly affected by the control of credit in this country-this bank is to have rediscounting privileges-I am not going to risk my business nor am I going to risk the business of any other man and put it in a position where it can be destroyed by political actions. That is what a politically-controlled bank could do.


Mr. STEWART (Edmonton):: Mr. Chairman, I am rather surprised at the statement of the last speaker that there is to be no political control. Surely the governor and the deputy governor are going to run this bank, and they are to be appointed by the government for a definite period. If that is not political control and political appointments, I do not know what it is. Those two gentlemen are going to have the most control over this institution, and they are to be appointed by the government. Every hon. gentleman who has had to do with boards of directors knows how much influence such a board exercises. I am not very much concerned about the influence they will exercise.
fMr. Nicholson.]
We are being asked to give up two controls which parliament has exercised over the private institutions of this country. We are being asked to give up every vestige of control and the inspection of banks which has oeen carried on in recent years under the Finance Act.


Richard Bedford Bennett: No.


Charles A. Stewart: Yes. That becomes a function of this so-called private institution, using my hon. friend's description. It becomes a function of that institution to regulate other private institutions.


Richard Bedford Bennett: The inspector general
still continues.


Charles A. Stewart: Of course he does, but he will operate under the Minister of Finance. I want to be corrected if I am wrong in that.


Richard Bedford Bennett: Yes, he does.


Charles A. Stewart: Then the gold reserve of the government is taken by this private institution and the gold reserves not required by the private banks are also taken. What particular power has this private institution? My hon. friend is worrying for fear his business will be injured with a change of government, but the fact is that he will not be able to borrow a sou from this bank. The only corporations that can borrow are the governments of the day. I do not see anything very drastic or striking in that.


George Brecken Nicholson: Has not this bank the power to rediscount the bills of commercial organizations?


Charles A. Stewart: No.


George Brecken Nicholson: Yes, it has.


Charles A. Stewart: I have
never discovered that in the bill. It is to have power to do business with the federal and provincial governments and the banks. I am speaking without full information because the bill has been amended since I gave it some considerable attention.


William Daum Euler: This bank will not directly
rediscount any commercial bill.


Charles A. Stewart: Then it
takes the place of the Bank Act in regulating the private institutions.


George Brecken Nicholson: The hon. member
should read paragraph (h) of section 21.

Bank of Canada


Charles A. Stewart: It is to have complete control of the note issues. I am not quarreling about that; I am merely mentioning these things in passing. My own position is that this institution should not lend to any government, federal or provincial; it should do its business with the private banks so long as they remain private banks and carry on the commercial business of the country. This view is not shared by many of the hon. members with whom I am associated, but I think such a safeguard could well be thrown around this institution. It would avoid what my hon. friend is complaining of. In the functioning of the central bank, as provided for in this bill, I cannot see why it should not be under government control. The Finance Act has functioned fairly successfully under the Minister of Finance and the government, and I cannot see any radical difference from the point of view of administration. Certainly I have never heard of politics being played in connection with it.
My hon. friends have had a good deal to say lately-and I hope that we shall have some occasion to discuss the matter-with regard to the political control of the national railways. I would point out to hon. gentlemen opposite that there is one thing that is lost sight of entirely in the discussion of railway matters and that is that in Canada at the present time, as well as over a considerable period in the past, practically from the inception of the control of the national railways by the government of the day, lower freight and passenger rates have prevailed in Canada than in the United States, and we have had the benefit of that. But you never hear a single individual voicing that opinion or saying anything about it; yet no one can estimate what that has meant to the people of this country. I should deplore political control of the national railways, but I do not think it seriously interferes with the national railways to change administration, to change the directors on a change of government so long as you have in charge men who are capable of managing that institution. I do not think there is anything very serious in a change of directors and therefore I do not view with alarm that aspect of the matter. But if we are to trade away the control we now have by setting up an institution which will perform these functions, then I am entirely opposed to putting it in any measure at all under private control-and not only private control but private ownership. I say this because I am convinced that the operation of the Finance Act has been carried out to the benefit
of the whole country. It has functioned very acceptably, and if we are to set up another institution, even with additional powers, it should still be under the control of the government.


George Brecken Nicholson: Hon. gentlemen have questioned my statement that the central bank will have authority with regard to the rediscounting of commercial documents. Section 21 provides, in paragraph (h) of subsection 1 that the bank may buy and sell for rediscount bills of exchange and promissory notes endorsed by a chartered bank, and so on.


Charles Benjamin Howard: Endorsed, and who can rediscount them?


George Brecken Nicholson: The central bank can rediscount them.


An hon. MEMBER:: Through the chartered banks.


George Brecken Nicholson: If this institution, as provided for in the preamble, is going to control the credit of the country, what does rediscounting mean? Suppose the bank, for political reasons refused to rediscount, as it would have the right to do.


Charles A. Stewart: Is not that function performed by the Department of Finance at the present time?


George Brecken Nicholson: No. The Department of Finance has no right and never has had to rediscount paper used in the production of agricultural commodities, lumber and timber and everything else. I confess that the banks to-day have, from firms with which I am connected, notes that may be rediscounted in this bank, and as far as I am concerned I am not going to risk the business of this country by having the rediscounting privilege granted this bank subject to political control.
Amendment (Mr. Mackenzie, Vancouver) negatived: yeas, 27; nays, 53.


Mr. POWER:: I was paired with the hon. member for Muskoka-Ontario (Mr. Mc-Gibbon). Had I voted, I would have voted for the amendment.


Mr. TOTZKE:: I was paired with the hon. membei* for Fraser Valley (Mr. Barber). Had I voted, I would have voted for the amendment.


James Layton Ralston: I was paired with the Minister of Finance (Mr. Rhodes). Had I voted, I would have voted for the amendment.
Bank of Canada
COM MO No


Mr. BROWN:: I was paired with the hon. member for Souris (Mr. Willis). Had I voted, I would have voted for the ameudment.


Ian Alistair Mackenzie: I was paired with the hon. member for Saskatoon (Mr. MacMillan). Had I voted, I would have voted for the amendment.


George Brecken Nicholson: I was paired with the hon. member for North Timiskaming (Mr. Bradette). Had I voted, I would have voted against the amendment.


Mr. HACKETT:: I was paired with the hon. member for Wright (Mr. Perras). Had I voted, I would have voted against the amendment.


Charles A. Stewart: I was paired with the Minister of the Interior (Mr. Murphy). Had I voted, I would have voted for the amendment.


Wilfred Hanbury: I was paired with the hon. member for West Kootenay (Mr. Esling). Had I voted, I would have voted for the amendment.


Cameron Ross McIntosh: I was paired with the hon. member for Winnipeg South Centre (Mr. Kennedy). Had I voted, I would have voted 100 per cent for the amendment.


Mr. BEAUBIEN:: I w"as paired with the hon. member for Champlain (Mr. Baribeau). Had I voted, I would have voted for the amendment.


Mr. WEIR (Macdonald):: I was paired
with the hon. member for Selkirk (Mr. Stitt). Had I voted, I would have voted for the amendment.


William Irvine: I was paired with the hon. member for Glengarry (Mr. McGillis). Had I voted, I would have voted for the amendment.


Mr. TAYLOR:: I was paired with the hon. member for Brantford City (Mr. Ryerson). Had I voted, I would have voted for the amendment.


Mr. MacMILLAN (Mackenzie):: I was
paired with the hon. member for North Huron (Mr. Spotton). Had I voted, I would have voted for the amendment.


Mr. GEARY:: I was paired with the hon. member for Laurier-Outremont (Mr. Mercier). Had I voted, I would have voted against the amendment.


Mr. BUTCHER:: I was paired with the hon. member for Portage la Prairie (Mr. Burns). Had I voted, I would have voted for the amendment.


Mr. ROWE:: I was paired with the hon. member for Beauce (Mr. Lacroix). Had I

voted, I would have voted against the amendment.


Mr. MICHAUD:: I was paired with the hon. member for Charlotte (Mr. Ganong). Had I voted, I would have voted for the amendment.


Mr. BOULANGER (Translation):: I was paired with the hon. member for Dorchester (Mr. Gagnon). Had I voted I would have voted for the amendment.


Mr. FAFARD (Translation):: I was paired with the hon. member for Levis (Mr. Fortin). Had I voted I would have voted for the amendment.


Sir. EUGENE FISET (Translation):: I was paired with the hon. minister of Pensions and National Health (Mr. MaoLaren). Had I voted I would have voted for the amendment.


Mr. JEAN (Translation):: I was paired with the hon. member for East Simcoe (Mr. Thompson). Had I voted I would have voted for the amendment.


Mr. MERCIER (St. Henri) (Translation):: I was paired with the hon. member for West Hamilton (Mr. Bell). Had I voted I would have voted for the amendment.


Mr. SAUVE (Translation):: I was paired with the hon. member for l'Assomption Montcalm (Mr. Seguin). Had I voted I would have voted against the amendment.


Mr. LAURIN (Translation):: I was paired with the hon. member for Kent (Mr. Rutherford). Had I voted I would have voted against the amendment.


Mr. DUPRE (Translation):: I was paired with the hon. member for Joliette (Mr. Fer-land). Had I voted I would have voted against the amendment.


Mr. LARUE (Translation):: I was paired with the hon. member for Vaudreuil-Soulanges (Mr. Thauvette). Had I voted I would have voted against the amendment.


Mr. DORION (Translation):: I was paired with the hon. member for Lotbiniere (Mr. Yerville). Had I voted I would have voted against the amendment.


John Alexander Sullivan: Shall section 17 carry?


Some hon. MEMBERS:: Carried.


[Stage Direction]
Section agreed to.
Henry Elvins Spencer: I have an amendment to section 17.


John Alexander Sullivan: Section 17 is carried.


Ernest Lapointe: No one heard it.


Henry Elvins Spencer: In the event of any difference arising, after the establishment of the

Bank of Canada
central bank, between the government of the day and the bank, it should be possible for the government to step in and get control, and I wish to move as 17 (a) the following:
The minister may at any time call in the shares of stock held by the several shareholders on paying therefor the price at which such shares were issued by the minister, together with three months' interest,
I move that with the object of making it quite safe and acceptable for the bank to be taken over in case of need.


John Alexander Sullivan: There is no seconder.


William Irvine: I second it.


Richard Bedford Bennett: Is this to be added as a new clause?


Henry Elvins Spencer: Clause 17(a).


Richard Bedford Bennett: Clause 17 has been properly declared to be carried and therefore this is a new clause not an amendment to clause 17. We are reverting to clause 2 and when clause 17 is again reached the proper course to take would be to move that this be added as clause 17(a).
Sections 2 to 5 inclusive agreed to.
On section 6-Governor and deputy governor.


Mr. RAYMOND:: I desire to move an
amendment to clause 6, subclause 2, by substituting in paragraph (a) the words "Canadian national" in place of "British subject." This amendment is seconded by the hon. member for Chicoutimi (Mr. Dubuc).
In order to avoid any misunderstanding as to the meaning of "Canadian national," I wish to refer first to an act of parliament passed in 1921 defining a Canadian national. In that year Mr. Doherty, then Minister of Justice, thought it advisable to define by statute what constituted a Canadian national, and it was defined as follows:
The following persons are Canadian nationals, viz:-(a) any British subject who is a Canadian citizen within the meaning of the Immigration Act.
That is to say, who has Canadian domicile; and a Canadian domicile is acquired by having in Canada for at least five years a residence as his permanent abode,
I want to call the attention of members of the committee to the difference between clause 10, which deals with the qualification of the directors of the bank, and clause 6, which deals with the qualifications of the governor, the deputy governor and the assistant deputy governor. To be a director of the bank, one
must be necessarily a British subject ordinarily resident in Canada, while in the case of the governor, the deputy governor and the assistant deputy governor, one need only be a British subject. In view of this difference it is obvious that the government had it in mind to select the three last mentioned officers from outside Canada and when the Prime Minister was attending the committee on banking and commerce he made no secret of it. To this I am opposed, and the purpose of my amendment is to ensure the appointment of a Canadian. Why should it be otherwise?


Cameron Ross McIntosh: Canada first.


Donat Raymond: Clause 6 states that the governor and deputy governor shall be men of proven banking experience; under the bill, this is the only qualification required, so far as competency is concerned. Have we not in Canada men of proven banking experience? What are the facts? Not so long ago, while in the United States we had the alarming situation of every bank temporarily suspending payment, ours stood firm. While during the last ten years, more than 9,000 banks in the United States failed, is it not a significant fact that in Canada, during the last twenty years only one bank went into liquidation? Do not these facts sufficiently prove the ability and efficiency which have characterized the administration of our banks?
What took place in England from 1928 to 1931? The bankers of England and of the United States borrowed money from the bankers of France and made loans to Germany. Subsequently Germany repudiated her debts and the consequence is that large sums of money were lost by those bankers of England and the United States. No such thing has happened in Canada, and the least I can say is that we have no lesson to learn from those bankers.
More than that, Lord Macmillan, the head of the royal commission which conducted the investigation into our banking system, is reported as having expressed the view that Canadian bankers were men of integrity, high character and high efficiency. Why should we now question the capability of their management? The Prime Minister while before the committee on banking and commerce said: W7e have no Canadian with the necessary knowledge to operate a central bank.


Richard Bedford Bennett: Experience.


Donat Raymond: I accept the correction
of the Prime Minister. Let us deal with experience. I will refer him to the report of the royal commission on banking and currency in Canada and read what those two
Bank of Canada

prominent bankers, Lord Macmillan and Sir Charles Addis, have to say about the financial experience of our Canadian bankers. At page 67, sections 227 and 228, they say:
Regarding the vital importance to such an institution of the quality of the governors and [DOT]directorate. Experience, skill and integrity are required in the highest degree, and that, not [DOT]only to ensure that the operations of the bank shall be wisely conducted, but also that the institution should win and maintain the confidence alike of the government, the people and the commercial banks.
I ask the Prime Minister to follow this:
228. We have no reason to suppose from our discussions with leaders in Canadian finance and industry that these qualities are lacking in *Canada.
They continue:
On -the contrary, we are convinced that there are resources of intelligence combined with *experience-*
Do not forget that.
-and public spirit fully adequate to ensure the successful management of a central bank. It is true that the conduct of central banking *operations requires a technique and an outlook somewhat removed from those of commercial banking; but this fact has had to be faced in every country which in recent years has [DOT]established a central bank, and Canada appears to us not less well but better equipped than many other countries have been to provide the necessary administrative talent.
I ask the Prime Minister, why this lack of confidence in his fellow citizens? Why [DOT]does he not follow the opinion of those two prominent bankers that he borrowed from England to advise him? With those facts and those opinions, are we going to say officially, and by an act of parliament, that we have no Canadians with the necessary experience to manage a central bank? If in spite of the opinion of Lord Macmillan and Sir Charles Addis, the Prime Minister thinks we have no men in Canada with the necessary experience to manage a central bank,
I shall ask why he appointed three Canadians on the royal commission for the special purpose of considering the advisability of -establishing a central banking institution in *Canada? If they did not know about central banking, if they had no experience, they were not competent advisers. And with respect to special experience for specific matters, when the Prime Minister was called to form a cabinet what experience had he as prime minister? Yet our hon. friends opposite have been boasting that he is the best prime minister we ever had in Canada.


Some hon. MEMBERS:: Hear, hear.


Donat Raymond: There is a man here
who although modest does not disagree, and fMr. Raymond.]
that is the Prime Minister himself. What experience had the present deputy minister of finance before he was appointed? He was a good professor in a university, but he had no experience as deputy minister. What experience in railway management had Hon. Mr. Fullerton, who was on the high court bench for many years, and who is now chairman of the board of trustees of the Canadian National Railways? And I could1 cite many other examples.
I shall go a step further. Having in mind the very purpose of this act which according to its preamble is:
-to regulate credit and currency in the best interests of the economic life of the nation. .. and generally to promote the economic and financial welfare of the dominion;
having in mind the absolute powers granted by this act to the governor, who, referring to section 7:
-shall on behalf of the board have the direction and control of the business of the bank;
-having also in mind the constitution of the executive committee, which according to section 13:
-shail be competent to deal with any matter within the competence of the board ...
and considering that the executive committee is composed of the governor, the deputy governor and one director; having in mind all those facts, I do not hesitate to say that if we want to achieve the end proposed by this bill, we should appoint a Canadian to manage this bank. To act in the best interests of a nation one must know those interests thoroughly. To promote, as ex-piessed in the preamble, the economic and financial welfare of the dominion, one must know the economic conditions of this country. As the Prime Minister said, conditions vary from one country to another. They are not the same here as they are in England. And there are many other factors which have to be taken into consideration.
If this bank is to operate for the benefit of Canada and no other country, it is essential that those who manage it should know best what is good for Canada, that they should be persons who know the domestic and industrial requirements of the country. Canadian financial men are more competent to deal with such matters than any distinguished gentlemen from outside who do not know our local conditions. We want directors and officers who always have in mind the welfare of the dominion, rather than of someone else or the interests of some other country. We have read the letter written by Lord Beaverbrook in which he said that the charters of the

Bank of Canada
banks should not be renewed unless advances were made by them to some private enterprise in which he is interested. Is this Bank of Canada going to be run from London? Is it going to be a branch of the Bank of England, dominated by the Bank of England? Is it to be at the mercy of some group or individual who will dictate its policy for purposes quite foreign to our own interests? The determination of our credit and financial policy should be vested in the hands of Canadians, who are best acquainted with the needs of Canada. We have in Canada distinguished Canadian bankers, thoroughly versed in the economic and banking conditions of the country, who have intimate knowledge of our needs, and it will be not only to the detriment of Canada but an insult to Canadian citizens if we appoint officers from outside Canada to manage this bank.


Mr. DUBUC:: In supporting this motion
I shall add but one word, directing the attention of the committee to the important fact that the economic control of the country means unquestionably the political control. Canadians certainly can buy the experience that it has been said in the committee that possibly none of us possess. The board of directors of all our banks, which have had the success mentioned here to-day, have found general managers and men to administer those banks who had experience which the directors did not have. Surely this central bank, which is to be the foundation of the entire fabric of our economic life, should be controlled nationally and not privately. The management is to be in the hands of the committee of three; the board of directors will only give them advice. If those three gentlemen, or two of them, are from another country, surely the danger is great. Canadians should always preserve autonomy in and keep control of our economic affairs, because to fail to do so would also mean the abandonment and loss of our political autonomy. Mr. Chairman, this is a very important fact to which I invite the attention of this parliament and of the public of Canada.


John Thomas Hackett: I have listened with some interest to the remarks of hon. gentlemen opposite. At the moment we are not appointing gentlemen to fill any offices. There is a limitation placed by the bill upon the nationality of the person or persons who may be appointed to such offices. I think the only desire that animated those who prepared the bill was to provide this country with the best possible officers in the first years of the bank's operation. Not many years ago, when the city of Paris installed electric tramways, it
sent to Montreal for a man skilled in the operation of electric railways, one Duncan McDonald, who went to Paris 'and there carried out in a thoroughly satisfactory way the organization of that system. We have frequently had to go beyond our own frontiers to find skilled and experienced men to guide our enterprises in their infancy. Hon. gentlemen will recall that when the Canadian Pacific Railway was founded those who were interested in its management sent to the United States and brought here Mr. Van Horne and Mr. Shaughnessy, afterwards Lord Shaugh-nessy. They will also recall that just a few years ago, when the best man available was being sought to coordinate the Canadian National railways, hon. gentlemen opposite, despite the fact that in Canada we had great experience in railway matters, deemed it wise to go to Great Britain to find Sir Henry Thornton.


Donat Raymond: Do you consider that was a success?


John Thomas Hackett: That may have depended upon the quality of judgment which was exercised by those who were in office, but it by mo means undermines the principle by which that selection was made. That principle is all that is at stake here. We are seeking to get people who have experience in the administration of an organization of this kind, and for that reason it has not been restricted to Canada where such an organization never has been operated, and where it may be said no one, however skilled he may be in commercial banking, has ever had the duty of operating a central bank. These, I think, are some reasons which might well be considered by the committee when determining what form this section should take.


Richard Bedford Bennett: Mr. Chairman, I intend to say only a few words. I do deprecate the introduction into this discussion on every occasion of matters such as that raised by the hon. member for Beauharnois (Mr. Raymond). When it is not the Bank of England it is something else, always something savouring of nationalism.


Some hon. MEMBERS:: Canada first.


Richard Bedford Bennett: Certainly, and I shall presently point out exactly what that means. It is so evident that this is done in a desire to obscure discussion by appeals to prejudice, which I think is to be very much deprecated. The red thread runs through this whole discussion, and I see it with dismay and regret.
I have listened to this discussion with regard tc Canadians. I think probably I have
Bank oj Canada

as high regard for Canadian ability as any man in this committee, ajnd I have acted upon that opinion. But occasionally governments desire to have a dispassionate view of a situation. That was in the mind of the right hon. leader of the opposition when Sir Andrew Rae Duncan was brought here for the purpose of making a report on matters of transcendent importance to three provinces. He was chairman; his recommendations involved this country in very large annual expenditures. The successful effort to bring him here was not criticized, I am bound to say, and when the right hon. gentleman chose Sir Henry Thornton as head of the railways that choice met with the approval of at least one member of this chamber in addition to himself; that was myself. Sir Henry Thornton was a naturalized British subject, but not a resident of Canada. But I have higher authority than that, which I am sure will appeal to the hon. member for Beauharnois. I hold in my hand a speech made on the lottery issue by Premier Taschereau of Quebec, and in the next to last paragraph I find these words:
I do not know how we would organize if allowed to have a lottery. We could perhaps have a man attached to the French national lottery come here and advise us as to the organization work here.


Wilfred Hanbury: He would not necessarily leave him in control for many years.


Richard Bedford Bennett: If those who are now speaking will permit the hon. member for Beauharnois to ask his question I should be glad to answer it.


Donat Raymond: I did not know that Premier Taschereau had taken the trouble of going to someone else for advice, as the Prime Minister did in this case, when he asked the advice of Lord Macmillan as to the experience of our Canadian financial men.


Richard Bedford Bennett: I am just about to finish the quotation; I have not read the part of it in which I am particularly interested:
That was the procedure that we adopted when we created our system of provincial statistics, which is the best in Canada.


Some hon. MEMBERS:: To get advice.


Richard Bedford Bennett: That is exactly the basis of what I am endeavouring to say. The hon. gentleman has said that we have bankers in Canada who are equal to any bankers in the world. Yet there is not one general manager of a bank in Canada who would undertake this position. I put it to them in the committee; I asked them right then and there, and what is more I know it, not from hearsay 
but from definite statements. They are of the opinion that we have no one in this country yet trained in central bank experience, and if Mr. Taschereau found it necessary to send to Paris to get someone to teach him how to gather statistics, with all the men we have in this country trained in audits and statistics, with all the magnificent brains we have and the certificates tjjey have obtained from various parts of the country; if -the premier of Quebec found it necessary to establish his system by bringing in someone from France, would it be a violation of sound judgment if someone assisted these men to establish the central bank?


Wilfred Hanbury: Is that the reason-


Richard Bedford Bennett: The jumping jacks might sit down; I was not pushing the button at that moment.
Now just one further word. This act contemplates a successful central bank; this act contemplates the central bank being placed, in the first instance, in charge of someone who has some knowledge or experience in that regard. I should like to know what experience any banker in Canada has had with regard to central banks. I have asked every general manager who has had to do with the management of these banks, and not one of them has had any experience nor yet understands and realizes all that is involved in central banks. In commercial banking our bankers are equal to any in the world; in fact the large United States banks draw from the personnel of our chartered banks from time to time because of their high qualities, their experience and their training. But when it comes down to the question of a central bank we have no one that can lead. Whoever undertakes the responsibility as head of this central bank must have some knowledge in the first instance in order to give whatever Canadian is appointed the necessary and requisite experience to carry on his job. Just as Mr. Taschereau had to send to France to get someone to teach him statistics so it is proposed, by this government at least, that someone shall teach Canadians how to carry on with respect to central banks.
It is intended that this bank shall be managed, controlled and operated by Canadians; it has no more relation to the Bank of England than any other central bank in the world has to that bank. It will have to do business with the Bank of England; to hon. gentlemen opposite that is an offence. It will have to do business with the Bank of France, with the Bank of Germany, with the Bank of Austria and with the central banks

Bank oj Canada
of all the countries of the world with which the trade and commerce of Canada is carried on. Without anticipating the appointment I can only say that whoever undertakes this work, whoever is appointed, must get experience. He will have to spend some time after his appointment in studying central bank conditions throughout the world. He will have to learn what is to be done and how it is to be done. There is no contact between the management of the central bank and the individual except as he is affected by the policies of the central bank. If hon. gentlemen opposite had taken the trouble to inquire into the relations between the Bank of France and the provincial and city banks of France and between the Bank of England and the chartered banks of that country, as I have, I think they would realize that the qualities required in the governor of a central bank are just as far removed from the qualities required of the successful general manager of a commercial bank as are the qualities that fit a lawyer, for instance, to give legal advice as compared with one who has had no experience or training in the law at all. Why do we seek technicians? Why do we ask the assistance of technicians-not brain trusts, but technicians? Why do we do that? Because their training fits them to give advice which may be of assistance. I say to this committee, frankly, that this bank could not successfully be established without some training and assistance being given, training derived by the gentleman who is appointed spending his time in securing it, or assistance given for a limited time by someone who has knowledge of it. It could not otherwise successfully be created or set up. About that fact bankers have no doubt.-none of them. And these same bankers to whom the hon. member for Beauharnois referred, tell me that there are not in this country the trained minds to set up a central bank. And there is not one of them, I challenge the hon. gentleman-not a general manager in this country-but who will say that.


William Richard Motherwell: Rough on our
bankers.


Richard Bedford Bennett: Not a bit of it.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


Ernest Lapointe: Before this amendment is put to a vote I should like to congratulate the hon. member for Beauharnois (Mr. Raymand) not only upon his proposal but upon the argument he put forth in its support. I might say that the remarks of the Prime Minister (Mr. Bennett) at the opening of his speech do not lessen in any way the value of the proposal and argument of the hon. member for Beauharnois. It is unfortunate that an hon. member cannot suggest something of this kind without being charged with arousing prejudices. As far as I am concerned, I intend to support this proposal in apite of the charges made.
What is wrong with the proposal? The bill provides that the directors of this bank must be Canadians; the shareholders must be Canadians, and the hon. member for Beauharnois is simply asking that the same principle should apply to the governor and deputy governor. Section 14 of the bill gives supreme authority to the governor. No decision of the board of directors can have any value unless it is approved by the governor; he is the supreme master. Surely when such powers are being given to an institution, powers such as were mentioned this afternon and are enumerated in the preamble, it should not be considered as extraordinary to ask that these officers should be Canadians. Is there anything new in this proposal? My right hon. friend referred to nationalism in connection with this matter, but I should like to refer him to a book entitled Central Banks by Kisch and Elkin. In looking through this publication I find that the charter of the national bank of Yugoslavia provides that the governor and deputy governors must be subjects of the Kingdom of Yugoslavia and reside in Belgrade. In Italy, all the members of the board, the general manager and his deputy must be Italian subjects. In Germany, the president and the members of the managing board must be Germans. The same provision will be found in the charters of other central banks, and such a provision is not unreasonable in connection with this bank.
We are vesting in this institution powers which concern the economic life of our country. It is to look after credit, currency, employment and practically everything concerning our economic life. We are even giving to the bank certain powers which are now in the hands of the government. We are taking from the government certain powers which are very important and placing them in the hands of this institution. Under these circumstances, I think that any self-respecting people would see that the men who are to have supreme control over such an institution should be citizens of their own country. Any-
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one who makes such a proposal to the House of Commons of Canada should not be charged with arousing prejudices. I do not think my right hon. friend was serious when he compared this matter with the fact that Mr. Taschereau of Quebec had stated that before a lottery was set up he would have someone in France acquainted with the operation of lotteries come over and advise him. I have no objection to the governor or the board of directors of this bank calling for expert advice from England or anywhere else, but I do *object to the governor or the deputy governor of this bank not being Canadians. When my right hon. friend stated that this central bank probably would have to do business with the Bank of England, the Bank of France, the Bank of Italy and other banks, he was offering a strong argument for the appointment of a Canadian and not someone from the Bank of England. As the bill now stands, I assume it would have to be a gentleman from the Bank of England because he must be a British subject. I do not see where my right hon. friend could get a governor with sufficient experience except from the Bank of England, but I still contend that the governor and deputy governor should be Canadians. There are Canadians who are qualified for these positions just as they are qualified to be prime minister of Canada.


Mr. RINFRET:: I am sorry to have to prolong this debate, but in a few words I desire to place myself on record as being in favour of this amendment. May I say in all sincerity that I was amazed to find out this afternoon that at least some part of a speech of Mr. Taschereau had convinced the Prime Minister (Mr. Bennett). Apparently the speech as a whole did not mean much to him, but he took a few sentences w'hich suited his purpose in connection with this bill. I agree with the opinion of the Minister of Justice-


An hon. MEMBER:: The former Minister of Justice.


Louis Édouard Fernand Rinfret: -the former Minister of Justice (Mr. Lapointe), and the future Minister of Justice, that there is no comparison to be made between the organization of a lottery in Canada and this very important institution. It might as well be said that because we import coaches to teach cricket to the sportsmen of this country, or, as has been the habit lately, American coaches for rugby, this would be an argument in favour of the governor of the central bank being a British subject. He would probably be from

England and this bank would be an annex: of the Bank of England.
In a further section it is provided that the governor, the deputy governor and the assistant deputy governor are to be appointed for seven years. It is true there is a reservation that the first governor may be appointed by the government for a shorter period; but if I am to judge by the remarks made this-afternoon by the Prime Minister, and if we are remiss in anything connected with central banking operations in Canada, I am very much afraid that what the Prime Minister has in mind is not only to appoint a man from Great Britain to be governor, but that very likely he will allow his term to run the full period of seven years, as provided in the bill. This concerns not only the governor but also the deputy governor and the assistant deputy governor. So that this is not going to be a central bank of Canada but rather a branch in Canada of the Bank of England.


Joseph Philippe Baby Casgrain: The Bank of England
in Canada.


Louis Édouard Fernand Rinfret: If we deal with banks
in other countries we shall therefore be in a very humiliating position when it is found that the representatives of this country on the central bank of Canada had to be imported from somewhere else because we have no one in Canada who could undertake the duties.
The hon. member for Beauharnois (Mr. Raymond) has quoted from the commission which led to the establishment of this bank. I am quite convinced that we have in Canada bankers who are fully equipped to undertake the work. They might be advised by experts, as suggested, but it is not so much the technique of central banking that is important as it is the influence that will be vested in these-gentlemen; and I think that influence should remain wholly Canadian. The Prime Minister has said that the bankers themselves have suggested that there is no one able to take the position.


Joseph Philippe Baby Casgrain: There is no evidence of that.


Louis Édouard Fernand Rinfret: Well, I know of many
bankers in Montreal who would advise the-Prime Minister to drop the bill altogether. But he will take the advice of such bankers as suits his purpose, in the same way as he has culled a few sentences from Mr. Tas-chereau's speqch because they happen to suit him. He will not pay any attention, how

ever, to anyone except those who advise him to do the very things that he has defied them to do before taking their advice. We are

Bank oj Canada
taking the proper stand to-night and I congratulate my good friend from Beauharnois on his amendment. If there is any institution in Canada that should be Canadian, that institution in my opinion is the proposed Bank of Canada; otherwise Bank of Canada is a misnomer and will lead us nowhere. Personally, owing probably to my environment in Montreal, I have no strong faith in this institution, but that faith will be weakened if I find that it is not a Canadian bank at all but merely a branch of a bank in some other part of the empire.
May I point this out further without any desire to offer personal criticism. I think that if this amendment had not been moved the house would not have been aware that the Prime Minister had already decided not to appoint a Canadian to the position. That is very much the case with this government in many other instances; unless they are pressed by our opposition we are not told what certain measures actually involve. In this instance, if it were only that it brought out a clear statement from the Prime Minister that he would not appoint a Canadian banker to the position of governor, I think the amendment was worth while and I hope that the committee will vote affirmatively on it. Indeed, it deserves exactly the same vote as the one we had this afternoon on the introduction of another bill; we should be unanimous in our desire that the governor of the central bank should be a Canadian.


Ian Alistair Mackenzie: The four speakers on this side who have previously spoken in favour of the amendment are all from the province of Quebec. I assure the committee that, coming from British Columbia, I am in full accord with the amendment moved by the hon. member for Beauharnois (Mr. Raymond). And I speak not only as a western Canadian but as a Scottish-born Canadian when I say I have no desire to tie up the Bank of Canada as an apanage of the Bank of England.


Cameron Ross McIntosh: You are no colonial.


Ian Alistair Mackenzie: There
were two gentlemen of the Bank of England 

Messrs. Kershaw and Fisher-who accompanied the Macmillan commission on its travels throughout Canada. After the mission was completed a dinner was given for Lord Macmillan in Canada House in England and very significant statements were made there in regard to the future governance of the Bank of Canada and the dominance of Bank of England policies in our Canadian bank.


Richard Bedford Bennett: That is not correct. Just read what was said.


Ian Alistair Mackenzie: I am
quoting from Hansard, page 1319.


Richard Bedford Bennett: From what?


Ian Alistair Mackenzie: From
Hansard, to which reference had been made,


Richard Bedford Bennett: The hon. gentleman
made a statement in regard to what was said in Canada House. I ask him to read it.


Ian Alistair Mackenzie: I shall
be glad to produce the press extract on a future occasion for the benefit of the Prime Minister.


Richard Bedford Bennett: The hon. gentleman's
statement is not correct.


Ian Alistair Mackenzie: These
two gentlemen, I say, accompanied the com* mission throughout Canada. They were never mentioned in the press nor were their activities heralded, and so far as I am concerned. I want this Bank of Canada to be a Canadian-controlled bank and Canadian-directed, by a Canadian. My right hon. friend made the cry of Canada first ring from shore to shore in this dominion in 1930. So far as this Bank of Canada is concerned, I say Canada only and all for Canada. The right hon. gentleman this afternoon mentioned some statement of Premier Taschereau in regard to lotteries.


Richard Bedford Bennett: With regard to statistics.


Ian Alistair Mackenzie: Statistics-


Richard Bedford Bennett: And lotteries.


Ian Alistair Mackenzie: I took
down the Prime Minister's statement as he spoke and I shall be borne out by Hansard, that he used the word "lotteries" in connection with the quotation he made in this house. He said that Premier Taschereau had imparted someone from another country to>
advise him.


An hon. MEMBER:: Would import.


Ian Alistair Mackenzie: Would import. Now, I agree with the Prime Minister in this, that if there is necessity for technical experts in connection with the Bank of Canada expert advice should be given, and we will support him to the limit in getting from the Bank of England or the Bank of France or any other central bank all the technical advisers, at good salaries, who are' necessary' for the inauguration of the Bank of Canada. But we do say' that a bank that is
Bank oj Canada

going to control $107,000,000 of .the people's gold; a bank that is going to take over $40,000,000 from the private banks of Canada; a bank that is going to have securities amounting to $63,000,000, on which the taxpayers of Canada are going to pay $1,800,000 a year in interest; a bank that is going to take over deposits of chartered banks at five per cent; a bank that will have a total asset value on the day i.t opens its doors of over $300,000,000, is an institution over which no Englishman or Scotchman or anyone else but a Canadian should be in control.


Mr. MITCHELL:: I am an English Canadian and proud of the fact, but I do not think that nationality should enter into the question. I think the soundest approach is the practical approach. I do not care where we get the first governor of the Bank of Canada so long as he knows his business. I would like to know where civilization would have been were it not for a good Frenchman by the name of Pasteur. I have kicked around this world quite a bit. I remember a Scotchman who was chief of a dockyard in Singapore out in the East Indies. If I recall correctly, on one or two previous occasions the late Sir Henry Thornton was criticized because he was a naturalized British subject. He was brought from Great Britain to this country because it was considered that he was one of the greatest railroad men in the world, and I believe the former Liberal government was absolutely sound in that appointment no matter what opinions there may be to the contrary.
I would like to point out to the committee that one of the directors of the Bank of England at the moment is a good Canadian by the name of Peacock, and the people of this country should be proud of him. I am not unmindful of the possibility that there may be an effort by the Bank of England to dominate this country financially, but that problem lies squarely upon the doorstep of the Canadian people and we should not permit any such thing to happen. In our approach to this problem on the basis of high policy, might I say, we should get the best man procurable, and if it is necessary to go to Great Britain, let us go there just the same as wre did in connection with the Canadian National Railways.
I have heard in debates in this house criticisms of the national railways of this country, but I think it has been one of the fundamental driving forces that has placed Canada in the position in which it is to-day. I am not inclined to agree with those who say that we have overbuilt in the matter of railways.

If you read the history of the situation of European countries to-day, you will find that the fact that they are infinitely worse off than we are has been brought about largely by lack of transportation. I make that observation because I think we should approach this problem on a high plane, having in mind the fact that the bank is being established and if it is necessary to go to England for the first governor I do not see any objection to doing so.


Richard Bedford Bennett: I feel I must make one or two observations. In the first place I did not say to-day that a Canadian would not be appointed governor; I said that there was no Canadian among the bankers of Canada at present qualified to be appointed governor, and I was so informed by the bankers themselves. It does not follow from that that a Canadian will not be appointed and will so acquire knowledge to carry on the functions of his office. It is unfortunate that we should be asked to accept an amendment which would prevent the appointment to that position of a man like Mr. Peacock, assuming that he would be available, a man who went from 'Canada, trained in London, became a director of the Bank of England, and yet under the amendment moved by the hon. member for Beauharnois (Mr. Raymond) could not be appointed. In the same way nobody else who had been born in Canada and gone elsewhere to acquire his training would be available. This would be the same as saying that you cannot take as president of a university of this country any person other than someone who lives here, the same as saying that your doctor, the man you consult with respect to your own physical condition, must necessarily be a Canadian and nothing else.
Perhaps I have as high an opinion of Canadians as have most men, and I know as much of their attainments and qualifications. When I made the observations I did this afternoon I made them in the light of exact knowledge of qualifications and attainments of members of the banking fraternity who would be available for the position. I endeavoured to make it clear to the committee it well might be that a Canadian might be appointed if he had sufficient time to acquire the necessary knowledge and information to discharge the duties of governor of this bank, but in any event he would have to be assisted by someone who had knowledge.
It seems to me that it is not an edifying spectacle in dealing with a situation of this kind to have the suggestion that we should by law enact that men of the type I mention

Bank of Canada
should not be available for the position and that willy-nilly, fit or unfit, failure or success, we should take for this position men whose residence in Canada would be the sole determining factor if they were good bankers although they knew nothing of central banks. In other words, you do not consult a doctor when you desire to be advised on a question of law, and you do not consult a lawyer when you desire to improve your physical condition. When it is necessary to appoint someone for the purpose of discharging the duties of governor I can only assure the committee that the appointment will be a man who will be well able to discharge those functions, and he must necessarily have knowledge in the first instance. It is no good talking about technical assistance and advice, because there must be under those circumstances one with knowledge with the deputy governor and the assistant deputy governor to enable the business of the bank to be carried on. Every sentence that has been uttered here during the last few minutes magnifying the importance of the office is at the same time a striking illustration of the necessity of having the best man possible available.
I mentioned in the committee what has been reported to have been said by the late J. P. Morgan when he came back from Europe when it was suggested that New York should become the money centre of the world. He said that first of all it was necessary for them to get the men to do the job. They speak of the Bank of England and the advice given to it. Who is one of its advisers? A distinguished American who advised the United States on the matter of the federal reserve bank and things of that kind. There were English and French advisers.


Ian Alistair Mackenzie: Advice- we agree with that.


Richard Bedford Bennett: You cannot advise a man who knows nothing of a matter; he has first to learn something of the rudiments of central banking. You do not appoint a doctor to the bench; you appoint a lawyer; you do not appoint to the position of professor of physiology an eminent lawyer. Banking is a special branch of human endeavour; it is disposed of very simply under two heads. First, we have the commercial banker and, second, the man who has knowledge of central banking. That knowledge can be derived only from countries where there are central banks. I resent very bitterly the observation made in the house that this bank is being created to be an adjunct to the Bank of England. Why is that statement made? There is not the slightest 74726-264
evidence upon which to found it. Why do they say it? Why is that statement being made in this country? Show me a shred of evidence upon which to found it? Why did the hon. member for St. James (Mr. Rinfret), a former mayor of Montreal, say in this chamber that this bank is to be a branch of the Bank of England? What is the purpose of saying that without a shred of evidence? Why did he say it? I ask him why he said it. The country wants to know why he said it. Why do other hon. gentlemen say it? Why did the hon. member for Vancouver Centre say it?


Ian Alistair Mackenzie: Because these two gentlemen travelled on the commission.


Richard Bedford Bennett: That is, the fact that these two gentlemen were members of a commission appointed to study the banking situation in this country and to assist in digesting the evidence taken, is evidence that this bank is to be a branch of the Bank of England. Imagine a member of the legal profession saying that. When the leader of the opposition (Mr. Mackenzie King) was asked by the Rockefeller Institute to go to the United States to advise in certain matters, was there any question about that?


Ernest Lapointe: We heard about it many times.


Joseph Philippe Baby Casgrain: During the election they played politics with it.


Richard Bedford Bennett: That might well be, and it is quite obvious then why this is now being said with respect to this other matter. After Lord Macmillan returned to the old country a dinner was given to him by the Canada Club. The hon. member for Vancouver Centre said, in Canada House; it was not in Canada House. That is mistake number one. Secondly he said that the speeches made at that dinner indicated that this bank was subject to the domination of the Bank of England.


William Lyon Mackenzie King: The Prime
Minister said I was asked to advise by the Rockefeller Institute; it was the Rockefeller Foundation, not the institute.


Ernest Lapointe: Another mistake.


Richard Bedford Bennett: Well, as long as it was something that bore the name Rockefeller that is sufficient. I corrected that statement only for the purpose of directing attention to the fact that on the return of the chairman of that commission a dinner was tendered to him by the members of the Canada Club, the

Bank of Canada

oldest of the Canadian clubs in England, and the speeches there, as reported in the London Times, did not indicate that there was any suggestion on the part of anyone that there was domination of the situation by the Bank of England. And Mr. Fisher and Mr. Kershaw, to whom reference has been made, were men not sent by the Bank of England but men whom Sir Charles Addis and Lord Macmillan asked to accompany them to act as digesters of the evidence. That is all. There was no secret about it; I saw them here. They were present at the final dinner given to Lord Macmillan by myself. I asked other hon. gentlemen to be present and they were there; they know the speeches that were made on that occasion. I say to this committee that I regard it as a terrible thing to think that this country cannot put on the statute book provision for a central bank without having members rise in this house and say that it is intended to be an adjunct to the Bank of England. Is that an economic argument or just a political argument? Is it intended to serve any useful purpose or to create prejudice? Does it advance anything, does it serve any purpose except to create prejudice in the minds of the people, to say that this bank is to be a branch of the Bank of England?


William Lyon Mackenzie King: May I ask the Prime Minister, when throughout the general election he spoke continuously of Canada first, was he appealing to prejudice or to patriotism?


Richard Bedford Bennett: The answer is very
simple; he acted upon what he spoke. What is more, the report of the speech made by the right hon. gentleman in Barrie, Ontario, when for the sake of appealing to the few descendants of British settlers in that community he said that Mr. Bennett was talking Canada first, was that calculated to advance the relation between communities?


William Lyon Mackenzie King: Half a dozen times that misstatement has been corrected in this house and yet it is repeated. Why does the Prime Minister continue to thresh old straw?


Richard Bedford Bennett: But I say I do stand for Canada first, on all occasions. And what is more, in the centre of the empire I made my position clear. About that there need be no uncertainty, because I believe I can best serve the British Empire by serving that dominion of it in which I live, namely Canada. I believe that is the best way it can be done. I said this afternoon, and I repeat it, that I left with the then Prime Minister a memorandum saying that I be-
lieved that Sir Henry Thornton was eminently well qualified to be the head of our Canadian railways. Without hesitancy I say that. I had just returned from London and I left that memorandum with the then Prime Minister. That does not in any sense indicate that I have not full confidence in Canadians. I think it was the right hon. gentleman himself who once said that at least on a question of brains there was no boundary line between countries.


An hon. MEMBER:: Internationalism.


Richard Bedford Bennett: That is not a question of internationalism, it is a question of countries requiring the services of men specially qualified. Sir William Osier did much to establish Johns Hopkins; other eminent Canadians have done much in the realm of medicine in other lands. Canadian lawyers have made great places for themselves on the bench in other countries. Men from Great Britain have attained to high places in the banking world, and we are now told that these men should not be selected for any position here because they do not live here.
Now the distinction between directors and governors is so simple that it does not require much discussion. The directors, from the very nature of things, have to be Canadians, for this is a Canadian bank. It might well be that the qualification as a British subject will be the only qualification that will ensure either one of the three positions being filled by some person with the requisite experience to give this bank a start. How about the great banks established in this country in the early days; how many of them were started by men born outside of this country, the men who founded and established them and made them what they are? If the law now proposed had been in force they could not have held their positions.


Charles Gavan Power: They had their interests in Canada.


Richard Bedford Bennett: No, they were brought here to take the positions.


Charles Gavan Power: The Bank of Montreal?


Richard Bedford Bennett: I did not say the Bank of Montreal; I said great banks established here in the early days. I could name great Scotsmen-


William Lyon Mackenzie King: That was the colonial period.


Richard Bedford Bennett: That was not the colonial period by any means. And as we make progress we have to call upon those who are

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British subjects. The hon. member for Quebec East referred to Italian subjects, German subjects, we say British subjects. Since when has it been an offence to be a British subject? Since when is it an offence for any Canadian institution to be able to draw upon the great reservoir of knowledge that is in the centTe of this empire with respect to international banking?


Frederick George Sanderson: That was not the policy of the Prime Minister in the election of 1930.


Richard Bedford Bennett: No man in this committee can point to any utterance of mine that favoured placing any embargo upon brains being utilized from any country.
I continue to point out that section 6 is essential for this bank to function. I desire in the most unequivocal terms to say that no relation, direct or indirect, understood or otherwise, by implication or in any other way, between the Bank of England and the proposed Bank of Canada, is possible. The Bank of England is a great central bank and it discharges great functions with all the banks of the world. It will have to do business with the Dominion of Canada, but there is no question of suzerainty, no question of subordination, no question of control. I just want to ask this committee one question: Having heard the ex-mayor of Montreal (Mr. Rinfret) say he was opposed to a central bank and that if I asked the opinion of those who were bankers in Montreal I would not proceed with the establishment of a central bank, is he unmindful of the fact that his own party was committed to that policy? The difficulty is that he cannot understand any party preparing a bill and submitting it to this parliament that involves just what is involved in this bill for the good of the Canadian people regardless of what the great financial interests of this country may say. That is the real difficulty. All you have to do is to read the first few pages of the book by Kisch and Elkin to find exactly why this afternoon I put it to this committee that a government controlled bank does involve political intrigue, as they point out, and one of them at least is regarded as one of the most outstanding authorities in the world on the subject. Such influences lead to chaos and disaster. That is the way he puts it. We have seen an example in this house since three o'clock of what would happen if this had been a publicly owned bank.


Louis Édouard Fernand Rinfret: Inasmuch as the Prime
Minister (Mr. Bennett) has directed some remarks-
74726-264 J


Some hon. MEMBERS:: Order.


Louis Édouard Fernand Rinfret: Possibly I may be allowed to reply right away to what the Prime Minister has said; as the right hon. gentleman made reference to me, I think it is only proper that I should reply.
I will say in the first place that the very heat displayed by the Prime Minister shows that he at last realizes the importance of the question raised this afternoon by the hon. member for Beauharnois (Mr. Raymond), because I have noticed from past performances that the less secure the Prime Minister feels about some attitude or measure the more likely he is to try to drown us under the waters of his indignation. When he points to me and wants to put questions to me because I took the stand in this house-I did it very briefly-that we might perhaps have a Canadian governor for a Canadian bank, and thinks he is going to embarrass me by having me explain to the country why I feel that way, well, my reply is that when we get to the country-and we would like to go there very soon-he will have to explain much more than I shall about this very measure.
I did say, Mr. Chairman, that I do not feel very strongly myself in favour of a central bank, and that in Montreal quite a proportion of the people feel the same way. But my right hon. friend did not understand my argument properly. He said he was following the advice of bankers in not appointing a Canadian governor of this bank.


Richard Bedford Bennett: I made no such statement.


Louis Édouard Fernand Rinfret: The great embarrassment, in replying to the Prime Minister, is that we can never stop him at a certain point. I appeal to the committee if the Prime Minister did not state that on the advice of bankers he was aware that there was no Canadian able to fill this position, and my retort was that if he followed the advice of certain bankers he would not have this bill at all. That was all. There is no reason to get up in the air because of that; it is a well known fact.
My right hon. friend seemed to be under the impression that the hon. member for Vancouver Centre and myself were the only ones to have any suspicion that this bank might be regarded as we suggested. Let me tell him that in Montreal it is current rumour on St. James and Notre Dame streets that this bank is intended to be an adjunct of the Bank of England. I am not speaking for myself; I am saying that this is the
Bank of Canada

common opinion expressed on the streets of the city of Montreal. I want to be kind to the Prime Minister, because I have a very high regard for him. The best way to dispel that suspicion which exists not only in the minds of the hon. member for Vancouver Centre and myself but also in the minds of a great number of people in this country, would be to appoint a Canadian governor. If my right hon. friend will do that he will wipe out that suspicion. I am not raising any prejudice; I am being kind enough to bring that prejudice to the attention of the Prime Minister. I am giving him a chance to make good before this bill is adopted. Really I think the Prime Minister is ungrateful for the very kind advice we are giving him to-night.


Mr. MacINNIS:: As a native-born Canadian and I assure the committee it was an accident as far as I was concerned-I think it is very poor statesmanship to take up the time of the committee with a question of this kind. This afternoon we were discussing whether the central bank should be owned nationally or privately, and the question came to a vote. One of the arguments against public ownership and control was that politics might enter into it. I do not hold with that argument, but I believe those who brought it forward could exhibit this discussion as proof that the argument was good.
What is the purpose of the national bank? I think the intention is to use it to improve the economic life of this country. Then if by importing, if you like, a governor and a deputy governor from somewhere else, we can do the job better than we can do it ourselves -I am not saying that would be necessary- for goodness sake let us leave it open to the government to take advantage of that opportunity if it does become necessary. We want the very best administrator it is possible to get; if we have to get that administrator from somewhere else, let us bring him here to help us out. Many of us have gone to Rochester and consulted the Mayo Brothers when we were ill. Surely if we have done that we should not protest against getting the best advice possible in a matter of this kind. My only fear is that the bank may be used for the further exploitation of the people of Canada, as the private banks are used already, and if I am going to be exploited I am not particular whether the exploiter lives in Montreal or in London, England. From the evidence that has been given before the price spreads committee I notice that they can exploit the people in Montreal and Quebec as well as they can in London.

Arts and sciences are international, and to-day the science of banking is as exact as many of the other sciences. We should get the best and most efficient management possible regardless of where it comes from. The only thing on which we should be definite is that when these people come here they should be our servants and do what we tell them to do.


Mr. BOURASSA:: It is to be regretted that on a matter of this importance and after practically the whole house has committed itself to the principle of this bill, a tone of passion should be introduced in dealing with this particular section. I suppose one must remember that we are very close to various provincial elections that have raised passions and the temper of parliament, and perhaps this debate is a forerunner of future speeches to be made in the federal arena. Being altogether disinterested, however, I venture to express an opinion entirely foreign to party considerations and, may I add, to racial considerations as well. I will deal immediately with the argument advanced by the hon. member for Vancouver South (Mr. Maclnnis), which to a certain extent coincided with the argument of the Prime Minister (Mr. Bennett), that we should look first and exclusively to the matter of competence, and that national considerations should not be considered.
If that is the case, Mr. Chairman, why limit this to British subjects? If we substitute imperial nationalism for Canadian nationalism I do not see that we have reached our objective, because we may find in the United States, in Germany, in Italy or in Japan a man more competent to organize a central bank than any British subject at our disposal. If we confine it to British subjects it is because we consider that from a British point of view we should exclude the foreigner. But in order to maintain this institution in its proper character, as an intermediary between Canada and Great Britain and between Canada and the United States in financial matters, I think it is highly important that the directing head should be a Canadian. So far as technical advice is concerned I agree with the hon. member for Quebec East (Mr. Lapointe). No one would blame the government for looking for the best experts to be found. I would go this length with the Prime Minister, that probably he would find in the Bank of England or the Bank of France, or perhaps even in the United States, some experts already familiar with the technical business with which this bank will have to deal.

Bank of Canada
But there is another aspect of the question. This bank will have practically supreme control over the economic activities of Canada. If it is important that the head of such an institution should be familiar with affairs in England or the United States or elsewhere, it is at least equally important that the same head should be very familiar with the affairs of Canada and should know the situation of the various classes in Canada. What is the present economic situation of agriculture, of industry, of trade in Canada? What are the present needs of the various classes of producers in Canada, in their dealings with the foreign world? I think the first duty of the governing body of this institution will be, in the very words of the Prime Minister,-words which I applauded when he uttered them and which in my heart to-day I still applaud-* that the first duty of this governor and his board of directors will be to think of Canada first.
I can quite imagine, and it is even plausible, that if you borrow a gentleman from the Bank of England who has the traditional competency and sense of honour that those great English bankers have, most likely he would endeavour to consider his first duty was to Canada. But human nature is there. It has been well said that all the men who have been in the employ of such institutions as the Bank of England or, in the old days, the Hudson's Bay Company, or, in France, the Bank of France, are so imbued with the spirit and traditions of those great institutions that if they go out and serve other institutions they transport with them the spirit of the Bank of England or the spirit of the Bank of France. That is a well known fact, and it is to the great honour of those institutions, that they have instilled such a spirit in the minds and habits of their servants. But I repeat, from our Canadian point of view, in order to establish a proper kind of relationship either with the Bank of England or with the great financial institutions of the United States, is it best for us-is it even best for Great Britain'-that an Englishman should be appointed governor to stand at the head of this Canadian institution? I do not think it is. I repeat, I do not think it is. I think that by force of influence, even with the most honest intention on his part to consider himself, at least for the time being, a servant of Canada, instinctively he would continue to have at heart the interests of the country he left, his country of origin, and of the great institution in that country of which he may have been a servant. Because if we
want to borrow the most competent men in England we must take them from where they have acquired that competency for the managing of a central bank, and that means from the Bank of England.
To show that this was not out of the mind of Lord Macmillan and his English associates I shall point out one part of the Macmillan report. In the appendix to the report, in which there is drafted a skeleton of what the central bank should be, there is a short paragraph which struck me at once, innocent as I am of all technical knowledge in those matters, as a very dangerous one. Paragraph 13 stated:
The hank should maintain a proportion of twenty-five per cenit in gold and foreign exchange against its outstanding note issue and sight liabilities.
It immediately struck me that if the bill to be introduced by the government contained such a disposition with regard to the reserve, it would have enabled our central bank to export the whole of our gold either to London or to New York in exchange for foreign values. Everybody knows that the great struggle in the last fifteen years,-during the war first, but especially in the last fifteen years-has been between the Bank of England, the Bank of I ranee and the Federal Reserve bank of the United states to control gold, to exchange for gold foreign issues or the issues of their own countries in order to accumulate as much gold as possible and thereby to dominate the financial situation of the world. Under a clause such as the one I have quoted, a board of directors, under the direction of an English governor, may well have been tempted, and perhaps for excellent reasons from the governor's point of view, to export the whole of our gold to London in order to strengthen the hand of the Bank of England and the British government, because in national matters the Bank of England and the British government mean the same thing. Although it is not officially a state owned bank, yet, with its old traditions of patriotism, and of service to the state, the Bank of England is as much, and perhaps more, a national institution than would be, in a country like this, a bank with a board of directors chosen by the government. ;So far as that is concerned, I do not know how I would have voted, but I think I shohld have been inclined to vote with the government against the appointment of directors by the government.
It will be the governor and the deputy governor who will rule this institution; let there be no mistake about that. The directors will be the advisers and will probably give
Bank of Canada

a small portion of their time, but they will be devoted to other enterprises. The governor and the deputy governor will be the soul and body of this institution. Therefore, under those circumstances, I insist on what I have said, and I do not speak from a narrow nationalistic viewpoint which, in matters of this kind, should be set aside. The world is suffering too much from extreme and narrow nationalism. I might say that I for one, who for years and years have preached nationalism, have renounced it. I have not renounced the basic principles of nationalism, but I deprecate the practice of nationalism as it is propounded to-day in almost every country in the world. But, as between an extreme and narrow nationalism and the abandonment of all safeguards in the interests of the nation, of its economic life, of its policy,-because, unfortunately in these days economics dominate policy-we should not lay down the principle, first, that Canada is not capable of producing men to put at the head of an institution like this, and secondly that we have to go outside of this country but remain within the circle of the empire to find men to rule an institution which will have to deal-I hope always in friendship and amity-with the Bank of England or with the financial institutions of the other portions of the empire.
We know history and we know human nature. Occasions may present themselves whereby it may become the duty of this institution to resist the influence of the Bank of England, and perhaps to come to terms-I will not say an alliance-but to terms of understanding with other foreign institutions in order to resist the domination of the Bank of England, just as the Prime Minister himself and just as some of his predecessors, including Sir John A. Macdonald and Sir Wilfrid Laurier, to name only two of them, at times had to refer to outside influences to counteract the influence of the British government which wanted to impose upon them certain tenets of policies or certain measures of practical administration, especially in dealings with the foreign world. The so-called civilized world is dying from the fact that questions of money, questions of trade and questions of industry are at the forefront. The so-called civilized humanity and Christianity have forgotten all the great principles which should govern national as well as international relations. But taking facts as they are, we must at the present time acknowledge the predominating influence of money, of national and international trade, of relations between consumers and producers, of balance of trade between countries. If by a closer under-

standing with Great Britain and the other British dominions we can better the financial and economic conditions of this country, and help them to better their own conditions, well and good. But surely it is not by putting a Canadian at the head of this institution that we could endanger our good relations with Great Britain. I agreed with the Prime Minister when he stated in London that he stood for Canada first. I do not say I agreed with the concrete proposals he put before the English people; but with the pronouncement he made at that time I fully agreed, and I applauded him as I applauded when his illustrious predecessor Sir Wilfrid Laurier made the same statement. I applauded him as I applauded his more immediate predecessor, Mr. Meighen, when on the question of the Japanese treaty he told the English government that he would not. consent to a renewal of that treaty because it would be against the interests of Canada. It is the duty of every prime minister of Canada to stand for Canada first, as against England, against France or any other foreign country, provided he does not do that in a narrow spirit of selfish nationalism.
We are now creating the most important instrument in our economic life. We are endeavouring to centralize the forces of money and to bring our private banks under such discipline as will make them serve the interests of the country in preference to the interests of their shareholders or clients. Now that we are endeavouring-I do not say in a perfect way-to give some form of cohesion to our economic life, are we going to lay down the principle that the positions at the head of this most important part of our administrative machinery and organization are to be excluded to Canadians because a few bankers have stated that they do not think there is a Canadian competent enough? I do not ask the Prime Minister to betray any secrets, but it may be that the suggestion arose from the fact that the majority of the bankers do not want to see one of themselves at the head of this institution, because he would know too much about their trade. Perhaps that had something to do with the suggestion made. I believe that if all the directorships of all the private banks of Canada were abolished, many of those bankers would find themselves quite competent to direct the only bank that would remain. I do believe that this was the thought in the minds of the banking advisers of the Prime Minister; but I do not think he should give way to that advice.
As far as the technical advice is concerned, he is quite right. He would receive the

Bank of Canada
approval of every true Canadian if he secured the best possible expert advice, either from England or elsewhere. If on that account he were attacked by French Canadians for not giving them enough positions in the bank, or by Ontario, British Columbia or any other section of the country, I should be the first to defend him. This is probably one of the reasons why the Prime Minister refused to make this a politically governed body. Let this board, with the approval and help of the government, import or invite from England -preferably from England because of the similarity between that country and Canada- or from elsewhere, the best advice obtainable. From a Canadian point of view, from a broad British point of view, from a sensible point of view in the interests of the Canadian people, I cannot agree with the idea expressed by the hon. member for South Vancouver (Mr. Maclnnis) that this is similar to a consultation of the Rockefeller Institute by a sick man who wants advice. Neither do I think that the Prime Minister was true to himself when he quoted a portion of Mr. Taschereau's speech. Mr. Taschereau is an extremely clever man. I think the two ablest men we have in Canada at the present time, even with all their defects, are the Prime Minister of Canada and the Premier of Quebec. I really believe that, but should they begin to take arguments from one another, then I would distrust them. I would be in great disquietude about Canada if that were to happen. It is a good thing that they are opposed to one another.
We have Frenchmen, we have Germans, we have Norwegians in the public service of Canada. In the Department of the Secretary of State it has been necessary to employ foreigners in connection with naturalization matters; but would the Prime Minister appoint a foreigner or an Englishman in Doctor Skelton's place? Would the Minister of Justice (Mr. Guthrie) appoint an English lawyer in the place of his deputy? No, they would not, because in matters of this nature, apart altogether from a man's ability, he must know the real conditions of the country in which he lives and for which he exercises his powers. The responsibility of the governor and the deputy governor of this bank will be to Canada, and they should know first the conditions which prevail in Canada. They should have a sufficient knowledge of financial conditions the world over; they should take the best advice possible to obtain, but their main responsibility is to the Canadian people.
Amendment (Mr. Raymond) negatived: yeas, 37; nays, 79.


Charles Gavan Power: I was paired with the hon. member for Muskoka-Ontario (Mr. Mc-Gibbon). Had I voted, I would have voted for the amendment.


Paul Mercier: I was paired with the hon. member for West Hamilton (Mr. Bell). Had I voted, I would have voted for the amendment.


James Layton Ralston: I was paired with the Minister of Finance (Mr. Rhodes). Had I voted, I would have voted for the amendment.


Mr. VALLANCE:: I was paired with the hon. member for Wentworth (Mr. Wilson). Had I voted, I would have voted for the amendment.


Wilfred Hanbury: I was paired with the hon. member for West Kootenay (Mr. Esling). Had I voted, I would have voted for the amendment.


Albert Frederick Totzke: I was paired with the hon. member for Fraser Valley (Mr. Barber). Had I voted, I would have voted for the amendment.


Charles Benjamin Howard: I was paired with the hon. member for Grenville-Dundas (Mr. Cassel-man). Had I voted, I would have voted for the amendment.


Cameron Ross McIntosh: I was paired with the hon. member for Winnipeg South Centre (Mr. Kennedy). Had I voted, I would have voted for the amendment.


Ernest Lapointe: I was paired with the Minister of Justice (Mr. Guthrie). Had I voted, I would have voted for the amendment.


Mr. BOTHWELL:: I was paired with the hon. member for Hastings-Peterborough (Mr. Embury). Had I voted, I would have voted for the amendment.


Mr. WILLIS:: I was paired with the hon. member for Lisgar (Mr. Brown). Had I voted, I would have voted against the amendment.	[DOT]


Joseph Enoil Michaud: I was paired with the hon. member for Charlotte (Mr. Ganong). Had I voted, I would have voted for the amendment. [DOT]


Mr. SPOTTON:: I was paired with the hon. member for Mackenzie (Mr. MacMillan). Had I voted, I would have voted against the amendment.


Mr. JOHNSTONE:: I was paired with
the hon. member for Willow Bunch (Mr. Donnelly). Had I voted, I would have voted against the amendment.
Bank of Canada


Joseph-Alexandre Mercier: \ I was paired with the hon. member for West Hamilton (Mr. Bell). Had I voted, I would have voted for the amendment.


Joseph-Ernest-Henri LaRue: I was paired
with the hon. member for Vaudreuil-Soulanges (Mr. Thauvette). Had I voted, I would have voted against the amendment.


Mr. BARIBEAU (Translation):: I was
paired with the hon. member for Provencher (Mr. Beaubien). Had I voted, I would have voted against the amendment.


Charles Napoléon Dorion: I was paired \ with the hon. member for Lotbiniere (Mr.' Verville). Had 1 voted, I would have voted against the amendment.
Mr. DESROC'HERS (Translation): I was paired with the hon. member for West Essex (Mr. (Robinson). Had I voted, I would have voted for the amendment.
Section 6, paragraph (a), agreed to.
Paragraphs (b), (c), (d) and (e) agreed to.
Section 7 agreed to.
On section 8-Tenure of office.


George Gibson Coote: I have an amendment to
propose * to subsection 2. As it stands, this subsection reads:
The first governor, deputy governor _ and assistant deputy governor shall be appointed and their salaries shall be fixed by the governor in council and thereafter appointments shall be made by the directors with the approval of the governor in council.
It seems to me that not only should the first governor and deputy governor be appointed by the governor in council but that their successors should also be so appointed. My reason for urging this, even though the committee has decided against public ownership, is that a certain section of the bill provides, as nearly as I can remember, that no resolution of the directors shall have any force or effect until approved by the governor of the bank. That gives the governor very great power, and this bank being in the nature of a national institution, I think the governor in council should appoint the governor and deputy governor. I move therefore that section 8 be amended by striking out the present subsection 2 and substituting therefor the following:
The governor, deputy governor and assistant deputy governor shall be appointed and their salaries shall be fixed by the governor in council.
As amended, it provides simply for government appointment.


Richard Bedford Bennett: I am sorry we cannot
' accept the amendment. The proposal by 'which the deputy minister becomes a member of the board without a vote meets, I think, the situation to which the hon. gentleman refers, and the relationship between the government and the bank is sufficiently established to enable the bank to veto if it does not agree with the selection of the directors, and it would then select someone else. I rather disagree with what the hon. member for West Edmonton (Mr. Stewart) this afternoon suggested, that directors do not exercise a great deal of influence. The fact is that directors do select the president and the executive officers in all the various corporations of the country. I am sure the hon. gentleman as a director takes part in all matters that affect the wellbeing of western Canadian loans in connection with the affairs; of the Canada Life. I am sure he is not unheard; he must be. And so far as this is-concerned, it is proposed that the directors shall exercise the same power and select their own governor, but it must be subject to -the-approval of the governor in council in order that there shall be observed that measure of continuity indicated this afternoon, without impairing the control of the directors over the executive officers of the bank. I was glad when it was arranged that the-deputy minister should become a member without a vote, and this amendment would serve no useful purpose. It cannot therefore be accepted.


Charles A. Stewart: What particular control would the governor in council have? If they exercised it, it would be against the decision of the board. After having delegated to the board all those powers which in my opinion should be retained by the governor in council, they would be in an unhappy position if they refused to accept the decision of the board.


Richard Bedford Bennett: It is for that reason that the arrangement contemplates the deputy minister being a member of the board.


Charles A. Stewart: Without a vote.
Mr. BiENNETT: Yes, without a vote; so that there would be a clear understanding in ninety-nine cases out of a hundred as to what action the board might propose to take.


Charles A. Stewart: I am sorry I cannot agree with the right hon. gentleman.


Richard Bedford Bennett: In my happier days I never saw an occasion on which the question'

Bank of Canada
of the appointment of executive officers was determined by directors, when the matter was not weli understood before the vote was actually taken. Yet I never saw any surprise manifested by anyone in respect of a matter of that kind. I have never known a board to propose that I should be president unless I knew about it and had expressed my willingness. The appointment of the deputy minister leaves no room for any possible difference, shall I say, between the government and the directors which would make for trouble. Having given the matter some little thought,
I think the happy suggestion that the deputy minister should be a continuing member of the board without a vote overcomes the difficulty.


Charles A. Stewart: May I mention an incident that occurred in the government of Sir Oliver Mowat, who appointed a certain minister without portfolio. This minister was a Frenchman and he called on one of his supporters, who was a Highland Scotchman, and said, "The county has conferred a great honour upon me; I have been appointed a minister without portfolio." The Scotchman replied; "Yes, that is very true. You have been invited to the table but you have no plate."
Amendment (Mr. Coote) negatived on division.


The CHAIRMAN (Mr. Stirling):: An
amendment has been proposed by Mr. Howard, seconded by Mr. Hanbury, in the following terms:
That the following section be inserted after section 8 in Bill No. 19, and that the sections of the bill be numbered accordingly:
"The minister may at any time give notice by mail to the registered holders of the capital stock of the bank, or their legal personal representatives as the case may be, of his intention to acquire all outstanding shares of such capital stock not then held by the minister; and upon a date to be specified in such notice and to be not less than two months after such mailing the minister shall, upon receipt of the certificate or certificates of such shares, duly endorsed for transfer to the minister, pay to each such holder the amount then paid up on such stock plus any cumulated dividends thereon apportioned up to such date together with a premium of ten per cent on such amount so paid up. Concurrently with such mailing or in the next issue of the Canada Gazette thereafter, the minister shall publish in the Canada Gazette a copy of such notice addressed to all such registered holders and from and after such publication all the rights of the registered holders of such stock, except the right to receive such payment, shall be vested in the minister."


Charles Benjamin Howard: I might say just a word in explanation of this. I have already expressed my opinion on the subject, but I hope the Prime Minister will accept this amendment and I say so for this reason: it does not in any way change the principle of the bill; it provides simply a means without using force, if at any future date it is decided by parliament that it would be better to have a government-owned than a privately owned bank as is provided at present, whereby to call in the shares. I am placing the premium at ten per cent. If the stock was fully paid up, this means in the case of a shareholder who has subscribed for the stock and paid up $100, if the government so decided the minister would be authorized to take in the stock and pay him'
SI 10 a share and he would be obliged to-surrender the certificates. There is not any change. This will not violate any of the Prime Minister's principles as I see them, and I trust he will accept the amendment. If it is never used, all well and good, but if at any time in the future the necessity should be' seen of taking in the stock, this amendment provides a legitimate decent way of taking it in, and the people will know this when they are subscribing for the stock.


Henry Elvins Spencer: Mr. Chairman, you have-before you an amendment I suggested covering somewhat similar ground. It was rather shorter and I should like to read it for the consideration of the committee. It reads:
The minister may at any time call in the shares of stock held by the several shareholders on paying therefor the price at which such shares were issued by the minister, together with three months' interest.
It seems to me that these two might be discussed at the same time because they cover the same subject. I am prepared to support the amendment of the hon. member for Sherbrooke.


Grote Stirling: The
amendment before the committee is the one moved by Mr. Howard.


Richard Bedford Bennett: The government cannot accept the amendment of the hon. member. It would be fatal to put into the hands of the minister any such power as this. It may be that parliament in its wisdom may decide otherwise, but the policy as it now is has been decided, and in that regard my hon. friend was referring this afternoon to the opinion of Kisch and Elkin. In their book entitled Central Banks it seems to me they put the matter very concisely. They say:
Monetary policy should be independent of political contingencies and the surest way to
Bank of Canada

secure this result is to place the control of the note issue in the hands of a bank. . . . Central banks have more and more come to be looked upon as analogous to large public trusts and less and less as departments of state.
Then there is a chapter in which they deal with the matter at some length and give the reason why the conclusion which I mentioned to the committee this afternoon should be adopted by central banks. I take it that this is the reason most central banks are based upon the principle to which I alluded. This is another way of overcoming that principle and placing in the hands of the minister a power which it may well be this parliament might conclude should be exercised. When it does so, well and good. To exercise it in that manner, it might be, just as is said by these authors, that exigencies of political circumstances might bring about that condition and the minister might take the action indicated. I suggest that the hon. member realizes that, if the bank were functioning in the manner indicated in the bill and suddenly this action were taken, the dislocation that might follow might be very great.


Wilfred Hanbury: To the shareholders only.


Richard Bedford Bennett: Not to the shareholders. There would be no dislocation to them; on a four per cent investment most of them would be very happy to get $110. I am speaking about the dislocation of the business of the country when a banking institution which is founded upon one set of principles has them suddenly changed in the midst of a year at the caprice of any government, whatever that government might be, with all the results that might follow to the credit of the country. The government regrets it cannot accept the amendment. I shall not discuss the matter further because it was discussed in the committee at great length and voted down there, and I trust the same action will follow here.


Charles A. Stewart: I rather
dislike the suggestion of the Prime Minister chat all the wisdom lies within the ranks of the Conservative party. They are responsible for this bill; they are putting it over by a majority which they possess at the present time; minorities apparently count for nothing here, and if we are any judge of what the people in this country are thinking the government does not represent public opinion in Canada to-day. To say that because they happen to be in authority at the present time and can by their majority impose upon the minority that at present exists here their opinion which will be perpetuated by a majority in another house, creates an em-
barrassing situation. In 1921 I had some experience of having to face an adverse majority in another chamber that had control so far as legislation is concerned, and I rather resent the statement made just now by the Prime Minister.


Richard Bedford Bennett: What statement is that?


Charles A. Stewart: The statement that we must beware of sudden fluctuations in political thought in regard to legislation that is now being imposed upon the people of Canada. That is what I resent. It seems to me that we are drifting a long way from democracy when one parliament cannot change the opinion of another when public opinion decides that it has lost confidence in the particular party as it did in 1930. In that case did we attempt to perpetuate our opinions? We did not. Hon. gentlemen opposite have had the opportunity and not only in this but in many instances they are seeking to fasten upon Canada the opinions they possess without any chance of the elected representatives of the people being in a position to change those opinions. That is what I object to and I object to the statement of the Prime Minister in regard to this particular clause as I have objected in many other cases. Surely the people of Canada are entitled by their voice, by their votes, to change any legislation which in their opinion is not in their best interest. To say that because you happen to be in power and possess a majority you are going to perpetuate for at least seven years or until such time as another chamber will have changed its complexion in conformity with public opinion-


Mr. MORAND:: You should have abolished the Senate while you were in.


Charles A. Stewart: I am willing to take my chance, but in the light of my experience I must speak my mind on this occasion. It is not fair for this government) as they have done on many occasions, to make it impossible to change legislation except by a vote of both houses of parliament, thus perpetuating policies that we object to very strenuously. In my opinion when the public do have an opportunity to deal with them they will speak with no uncertain voice.


George Gibson Coote: The bill as it stands now certainly leaves every possibility of a deadlock between the government and the authorities of the central bank if there should be a difference of opinion in regard to the monetary policy to be followed. It seems to me that this amendment is simply to safeguard the

Bank oj Canada
supremacy of parliament. In case of a difference of opinion parliament must be supreme.
I think the suggestion is a very fair compromise on the question of public ownership, because it leaves it in such a position that at any time parliament or the government is satisfied that the policy of the central bank is not in the best interests of the country the government can then secure control of the bank simply by exercising the right to buy up the shares, and no harm is done to the shareholders if a fair price is fixed. I think this may be regarded as a reasonable compromise between those who believe in public ownership and those who think that the central bank should be a private institution.
Amendment (Mr. Howard) negatived: yeas, 40; nays, 61.


Henry Elvins Spencer: I was paired with the hon. member for Athabaska (Mr. Davies). Had I voted I would have voted for the amendment.


James Layton Ralston: I was paired with the Minister of Finance (Mr. Rhodes). Had I voted,
I would have voted for the amendment.


Charles Benjamin Howard: I was paired with the hon. member for Grenville-Dundas (Mr. Cassel-man). Had I voted, I would have voted for the amendment.


Cameron Ross McIntosh: I was paired with the hon. member for Winnipeg South Centre (Mr. Kennedy). Had I voted, I would have voted for the amendment.


Charles A. Stewart: I was paired with the Minister of the Interior (Mr. Murphy). Had I voted, I would have voted for the amendment.


William Irvine: I was paired with the hon. member for Glengarry (Mr. McGillis). Had I voted, I would have voted for the amendment.


Joseph-Ernest-Henri LaRue: I was paired
with the hon. member for Vaudreuil-Soulanges (Mr. Thauvette). Had I voted, I would have voted against the amendment.


Mr. DESROCHERS (Translation):: I was
paired with the hon. member for West Essex (Mr. Robinson). Had I voted, I would have voted for the amendment.


Henry Elvins Spencer: As we have been informed that the amendment just negatived gives too much authority to the Minister of Finance, and as the Prime Minister says it is up to parliament to do what in its wisdom it sees
fit, I am going to move the following amendment:
That section 17 of Bill No. 19 be amended by inserting the following as subsection
^The* minister may at any _ time with the authority of parliament call in the shares of stocks held by the several shareholders on paying therefor the price at which such shares were issued by the minister, together with three months' interest.
This puts it up to parliament-the Minister of Finance with the authority of parliament behind him.


Raymond Ducharme Morand: Parliament has always had that authority.


Samuel William Jacobs: We do not need that; parliament always has the authority.


Richard Bedford Bennett: I think that amendment is out of order because it implies something which is always the prerogative and right of parliament, namely to take such action as it may think desirable in the premises.


Grote Stirling: I call the attention of the hon. member to the fact that he is proposing to deal with section 17 and we are dealing now with section 9.


Henry Elvins Spencer: I think we are on section 8. It goes to section 8.


Grote Stirling: Do I understand the hon. member to wish this to be an amendment to section 8?


Richard Bedford Bennett: As I understand it the hon. member is suggesting this as section 8 (a).


Henry Elvins Spencer: Yes.


Richard Bedford Bennett: I raised the question whether it is in order, because it says, "with the authority of parliament" the minister shall do something, and tries to indicate how he shall do it. That power is incidental to parliamentary institutions. If the minister is so authorized by parliament in the future, that action will be taken. This only anticipates that parliament may hereafter take action which it always has the right to take in any event.


Wilfred Hanbury: If the hon. gentleman will make his amendment to read that the House of Commons may do so, I will support it.


William Irvine: While it may be perfectly true that parliament may at any time take such action as the amendment provides, it is surely clear that parliament at some future

Bank oj Canada
time cannot take action that will fix the conditions under which public ownership might be effected. In other words if and when parliament should decide to have public ownership, it will probably be argued very forcibly that it would be taking advantage of the shareholders who bought stock in this bank in good faith to take it out of their hands. But if we include now the condition provided by the proposed amendment, no shareholder could at any time object to the taking over of the institution when parliament may see fit. I can understand hon. members being opposed to public ownership at the present time, but I do not see why we should take the attitude that public ownership is going to be forever an impossibility. If the time should come that parliament desires to take control of this institution, the proposed amendment would make it easier for that to be effected.
I think that is the real purpose of the amendment.
Amendment (Mr. Coote) negatived on division.


[Stage Direction]
Section agreed to.
On section 9-Provisional directors.
James Layton Ralston: I want to propose an
amendment to this section, which provides for the appointment of the board of directors. I think in view of what was said this afternoon by some hon. gentlemen that it should be understood clearly that any statement to the effect that as the bill stands, this is to be a publicly controlled bank is not strictly in accordance with the facts. This bank, as this act stands at present, is not publicly controlled. There have been repeated statements n the press to that effect; some such statements have been made in this chamber this afternoon. Under this act every dollar's worth of shares of this bank may be owned by individuals in Canada. Its directors are ten in number, seven of whom, according to section 9 to which we are now directing our attention, are appointed by the shareholders, the people who get together $5,000,000 with which to buy shares and who have no public responsibility of any kind or description. The remainder of the board is made up of the governor, the deputy governor and the deputy minister of finance. The governor in the first instance is appointed by the governor in council, and after the expiration of his first term is appointed by the directors subject only to the approval of the governor in council. The deputy governor in the first instance is appointed by the governor in council, and after the expiration of his first term is ap-
pointed by the directors subject to the approval of the governor in council. The tenth director is the deputy minister of finance, who is entitled to attend the meetings of the board but not to vote. Let me say that the provision with regard to the deputy minister of finance was moved in committee by those of us on this side of the house who felt that there was no attempt whatever by the government to have any supervision over the actions of the board of directors. It now appears as subsection 2 of section 5. To summarize: Seven directors are to be appointed by the' shareholders; two are to be appointed or subject to the approval of the governor in council,, and the tenth is to be the deputy minister of finance, who has no vote at all. The amendment I am now proposing is a considerable' modification of that provision, and in view of the fact that the committee have refused the amendment providing for government ownership this amendment is designed to endeavour to do the next best thing, and ensure governmental or public control. The-provision is an exceedingly modest one, but it is along the line of central bank charters in other countries, to some of which the Prime Minister referred this afternoon. In effect the amendment proposes that four of the seven directors may be elected by the shareholders but that three of the directors must be appointed by the governor in council. These three, along with the governor and deputy governor, who in the first instance are appointed by the governor in council and who after that time are subject to the approval of the governor in council, thereby form a majority of the board. Under the hmend-ment as proposed the seven directors are appointed for what I might call staggered terms; that is to say, so many are retired each year and so many appointed in their place. This provides for continuity of administration and it also provides against the possibility of one government or one party perpetuating the board. This is a sincere endeavour to provide that, along with the directors appointed by the private interests-there shall be a public interest majority in the directors' room. As I have said, Mr. Chairman, this is only proposed as the next best thing to government ownership.
This afternoon, in making the references he did, the Prime Minister seemed entirely to miss the point as to the importance of the functions of this institution which is being constituted by this bill. He seemed to think of this as some sort of little department of government which was being established; or, less than that, some sort of private institution,

Bank oj Canada
something which would carry on business for the purpose of profit. In his remarks my right hon. friend indicated that it was exceedingly difficult for a government to make appointments. Therefore, forsooth, because it was difficult and disagreeable, and because my right hon. friend or whoever occupied that position had to take into consideration certain matters which are always constant in Canada and which exist in connection with any public appointments made by any government anywhere, my right hon. friend asked to be rid of the responsibility entirely.
I do not think the house has ever listened to a more complete abdication of the job of prime minister and of governing this country than this house listened to this afternoon from the right hon. gentleman. He might just as well have suggested that because it is difficult to appoint postmasters, deputy postmaster generals, superintendents of post offices and so on, therefore we ought to hand over the post offices to private shareholders, let them run the post office department and let us just take a share of the profits. He might as well have suggested that the Department of National Revenue be farmed out to some board or some private individuals who would subscribe for stock; that they be given the power to tax, that this country receive a certain percentage of the receipts and that the remainder should go to the private institution. Why? Because it is difficult to make appointments and because one has to consider so many things in connection with making appointments to the public service. That is nothing new; it has existed since the day sixty or seventy years ago when Joe Howe said, "Take away patronage and I will stay in power for fifty years." There always will be difficulties in making public appointments, but that does not excuse my right hon. friend in the slightest for declining the responsibility which I submit is his and the responsibility which rests on this government to see to it that the currency and credit system of this country is preserved under the control of the people of this country, and administered by the government.
Some members of the committee suggested a little while ago that the board of directors has not much power anyway. As my right hon. friend quite properly apprehended, and as he said in answer to that hon. gentleman, the board of directors has more power than perhaps hon. gentlemen think. It is true that the governor and the deputy governor, with one director, form the executive, but it is also true that 'the executive submits its actions to the board of directors. Further than that
it is true that under the act itself there are many important powers vested in the board, and hon. gentlemen must remember that as section 9 of the act stands at present seven of the nine directors who are to perform the functions to which I shall refer are appointed or elected by the private shareholders. The board of directors appoints the governor, the deputy governor and the chairman of the board, subject to the approval of the governor in council. In other words the governor in council is powerless to appoint a governor or deputy governor, after the first appointment, without having such appointments initiated by the board of directors. That is a rather important power to invest in private shareholders. In the second place the board of directors, and nobody else-not the governor-initiates the increase of capital. In other words, unless parliament changes this provision, there can be no increase in capital without first the action of the board of directors. In the third place, and perhaps the most important, the suspension of the twenty-five per cent gold backing, which is laid down here as the basis for the note issue of this central bank of Canada-the initiation of the suspension of that requirement for that ratio is left with the board of directors of the central bank, seven of whom are selected, as the Prime Minister is pleased to portray, by private interests, who are not influenced by racial prejudice, sectional differences, the colour of a man's hair, or anything of that kind-seven men nominated by people who have no other interest in this bank than the fact that they are getting four and one-half per cent. They are the ones who elect the seven out of the nine on the board who will decide as to the ratio of gold backing for note issue of the Bank of Canada, which may go up to over $400,000,000. They are the ones who make that decision, or at least who initiate that decision. Nothing can be done by the governor in council or by the minister until that decision has been first made by the board of directors.
Further than that, they initiate the extension of the suspension. They may initiate an extension of suspension of that ratio to extend for a period of one year, and without their initiation there can be no such suspension. Further than that-and this also is most important-when the question comes up as to what amount shall be paid to the consolidated revenue fund of Canada they are the ones who decide what provision is to be made for all debts, what provision is to be made for depreciation. They are the ones to decide what is left for the purpose of paying over to the consolidated revenue fund,
41S3
Bank oj Canada

or to put to rest. Those are the rather important functions of the board of directors, and the amendment which I propose is to provide that a majority of that board shall be at least under the control of or subject to the approval of the governor in council.
What are the functions of the bank? The hon. member for Quebec East (Mr. Lapointe) went over them this afternoon as they appear in the preamble to the bill. But the functions are these-and they are set out not only in the preamble to the bill but in the report of the royal commission. They are to provide for the maintenance of national sovereignty over credit and currency. Paragraph 206 of the Macmillan report is as follows:
In the first place, from a national point of view, the central bank, within the limits imposed by law and by its capacities, should endeavour to regulate credit and currency in the best interests of the economic life of the nation and should so far as possible control and defend the external value of the national monetary unit. In the second place, from the international point of view, the central bank by wise and timely cooperation with similar institutions in other countries, should seek, so far as may lie within the scope of monetary action, to mitigate by its influence fluctuations in the general level of economic activity. ...
Then, paragraph 207-and imagine giving this power to a board of directors seven out of nine of whom are appointed by private shareholders:
A central bank is at the same time an instrument and a force. As an instrument it is the means by which the state-which must necessarily retain ultimate sovereignty in matters affecting the currency-can give effect to the national policy. ...
I submit, Mr. Chairman, that the Prime Minister and whoever drafted this legislation, and, with all due deference, some of the commissioners who made the suggestions which appear as a schedule, have for a moment forgotten that after all this is a state function, that the control of credit and currency is the biggest and most important public utility in the economic activities of the Dominion of Canada. I am not one who necessarily champions public ownership at all times and in all places, but I say there are certain things which should be under public ownership, or public control and certainly the very first and most important of those is the institution which controls, which guides and which directs the whole economic life of the dominion.
The function with regard to credit and currency is exercised, as has been said repeatedly, by making advances under the section of the bill which provides that this bank may make advances to banks by way of loans, is entitled to purchase securities, and, to a large extent,

the quantity of credit available in Canada, ought to, if this bank is properly regulated and properly run, depend on the rediscount rate and operation of the bank. That is the first method of controlling credit. The second way in which it is done is by open market operation whereby the bank may go out into the market and purchase securities, if it is found that it is necessary, in order to regulate the market, to control the price of money, or to go through the reverse process, and sell them. Those things require people who are first imbued with the point of view of the state, with the point of view of the national interest, with the point of view of public service, and not the control of seven out of nine men who are simply elected as ordinary directors by private shareholders. That board of directors must act as the trustees for the nation, and they are by no means a board of directors in the ordinary sense of the term.
And then we come to the other function, which is just as important, and perhaps more important-and I know the Prime Minister is particularly cognizant of this-the function of endeavouring to maintain the value of our currency internationally, the function of seeing how our gold and currency holdings shall be regulated-because after all, these are the most important things if we are going to have exchange stabilization, and heaven knows that this country needs exchange stabilization in view of our hoped for export trade. I say those things are vital and I say that this power should not be vested in a board of directors seven out of nine of whom are elected by private shareholders.
My right hon. friend has mentioned precedents. Let me give him a list of countries-


Richard Bedford Bennett: They are already on
Hansard.


James Layton Ralston: Let me give him a list
of countries-and with all due respect, as I understand it, this list was not put on Hansard. I am giving a list of the countries where there is all government control or government control by a majority. I refer to Australia and Finland. My right hon. friend did not mention the United States.


Richard Bedford Bennett: He did mention it afterwards.


James Layton Ralston: Would my right hon.
friend permit me to continue? He did not mention it as a government controlled system, but he mentioned it as a privately owned system. The United States reserve bank is a bank owned bank, but it is controlled by a

Bank of Canada
reserve board which is appointed by the United States government. They are the ones who determine the matter of advances.
Let me go further. The United States, Sweden-another one which is all government controlled-Latvia and Norway. Russia is controlled through the public commissioner, and then there is Spain. Then we have those where there is a mixed board, but with government control, such as in Bulgaria, Italy, Japan, Switzerland and New Zealand. My right hon. friend has said that we can take some lessons from the rest of the world. These are rather important countries who have felt that government control wholly or by a majority was desirable on their boards. And this brings me to the Dominion of New Zealand, which was the last country to adopt a central bank, and whose legislation has at least to some extent been copied in the bill before us to-night. Let me ask my right hon. friend to bear in mind that New Zealand has exactly the system of control which I propose here. New Zealand has privately owned shares, but New Zealand at the same time has a majority of government control on the board. In New Zealand there is a governor and a deputy governor appointed by the state on the recommendation of the board. There are four directors appointed by the shareholders, two to be actually engaged in farming and two in industrial or commercial pursuits; another three are appointed by the state, and the secretary of the treasury is a member of the board without voting power. As the Prime Minister has said to-day, it would be worth while for us to consider the experience of other countries. New Zealand is well known to be a country which studies economics pretty carefully. New Zealand has gone into the matter thoroughly and has come to the conclusion that government control is the proper thing. I think we would be well advised, outside of the arguments I have endeavoured to put forward, in following the example of New Zealand.
Let me come back again to the argument of my right hon. friend with regard to political control. He heard an address delivered the other day by the Right Hon. Stanley Bruce. We enjoyed his hospitality although he was not present in person. An address was delivered by the Right Hon. Stanley Bruce in connection with the Commonwealth bank of Australia and the work which had been done there. That bank is owned by the people and there is no suggestion of political interference of any kind. The governor stood up to his work and I think it is largely due to his efforts that Australia now finds herself in the situation of being on the right side of
economic recovery. That is what a government controlled bank did. No doubt the government of Australia feared the same difficulties which the right hon. gentleman fears and apprehends in connection with appointments, but that institution has carried on successfully. After all, I think these are largely imaginary lions in the path. The right hon. gentleman has never had very much difficulty in making appointments when he had to make them. We did not approve of them all but he has always taken the responsibility for them and I think he should be quite prepared to again take responsibility. While it may have appeared to be frankness on the part of the right hern, gentleman to discuss this matter of control, let me say here that I challenge him and I challenge any hon. member to find a single case, either in a Liberal or a Conservative administration, where the treasury board of Canada, which has practically as much power as this central bank will have, has shown the slightest evidence of partisan or political control or has been influenced by political considerations in administering the Finance Act. There has been no suggestion of that kind; party politics have played no part.
I submit to my right hon. friend that he might well accept the amendment which I suggest. As I said a minute ago, it is a very modest approach towards what I think there should be in this country, a government owned bank. If we cannot have a government owned bank, let us have government control in the way I have suggested. I submit that it is vital in the interests of this country that the monetary financial and currency systems should be under such control. This bank will have $117,000,000 worth of gold when it is revalued and it will be able to authorize the issue of $468,000,000 in currency. I submit that that is too much power to give to a little group of men who are to be elected by the citizens all over the Dominion of Canada who are able to scrape together $5,000,000, with which to purchase shares in this bank. I submit that this is abrogating the sovereign rights of this dominion and it is practically flying in the face of the principles laid down in the Macmillan report, the recommendations of which we are trying to follow here. I repeat that this is a public utility of the greatest magnitude and importance, and the citizens of Canada should not relinquish control of its administration to any group of private citizens.


Richard Bedford Bennett: Mr. Chairman, the arguments made by the hon. gentleman are the same as those he made in the committee
Bank of Canada

except that he has been pleased to make certain observations with respect to myself which he did not make in the committee because I was not there. The fact is that it was not on the grounds of difficulties that I stated that this bank should be one of the character it is; I put it on the grounds of efficiency and effectiveness. I indicated the difficulties which stood in the way of its being efficient if it were publicly owned. I explained to the best of my ability just what those considerations were, but when the hon. gentleman quotes from the report of Lord Macmillan and Sir Charles Addis, I think he should say also that they recommended this type of bank.


James Layton Ralston: I think my right hon.
friend is wrong about that. I have heard it repeatedly stated in committee by hon. members on the other side, as well as outside the committee, that the supplement to this report was merely by way of suggestion and was not in any sense a recommendation. We have been told that repeatedly when we relied on some of the suggestions made there for the arguments which we put forward. If my right hon. friend says that it is otherwise, we accept his word.


Richard Bedford Bennett: I shall be very glad
to substitute "suggested" for "recommended." The suggestion was made that it should be a bank of the character I have indicated.


James Layton Ralston: With this exception, that both Mr. Brownlee and Sir Thomas White dissented. There were three to two.


Richard Bedford Bennett: I said that Lord Macmillan and Sir Charles Addis had suggested this form of bank. At first I said "recommended" but I now use the word "suggested."
The hon. gentleman has now drawn an acute distinction between ownership and control. This afternoon I gave to the committee a list of the central banks in the world, whether privately owned, publicly owned or partly privately and publicly owned. I now observe that the hon. gentleman draws a sharp distinction between ownership and control. The question of ownership has been settled, as we have voted upon that. The next question is that of control, and I venture to say that there is no bank among all those I have indicated in which there is such complete public control of any privately owned organization as there is in this. I shall try to substantiate that by tracing the exact situation as it will be. First, there will be a board of directors representing the shareholders and involving private ownership. Second, of that board of directors, seven will
TMr. Bennett.]
be elected by the shareholders while three, the governor, the deputy governor and the deputy minister of finance, will represent the crown. The deputy minister of finance will have no vote. Third, the governor will be appointed by the governor in council; he will be the nominee and appointee of the crown, of the people. Fourth, when his term of office expires, his successor cannot be appointed unless he is acceptable to the crown.


James Layton Ralston: Or unless the seven
directors-


Richard Bedford Bennett: Unless he is acceptable
to the crown. The statute says that he must be approved by the governor in council. There can be no appointment by the seven directors that is not approved by the crown. Let there be no doubt about that.


James Layton Ralston: And the reverse; there
can be no appointment by the crown unless approved by the seven directors.


Richard Bedford Bennett: I need hardly mention that the cardinals elect the Pope, but under a former dispensation, Austria had the power of veto. That power has been exercised twice within a century and there was no election. That is this case. There is no election until the crown approves.


Charles A. Stewart: Surely my right hon. friend is not arguing that the governor in council can go against the selection of the board?


Richard Bedford Bennett: I state distinctly and positively that the power of veto rests with the governor in council. Let there be no misapprehension on that. We have that power and there can be no governor who is not acceptable to the people as represented by the government of the day. What is the next point? There can be no by-laws or resolutions passed by the board of directors which are not acceptable to the governor. Section 14 provides for that.


James Layton Ralston: The governor cannot make any without the approval of the board of directors.


Richard Bedford Bennett: If the hon. gentleman would listen instead of just engaging in talk it might perhaps be better. I listened to his remarks without making any observations. I am going to express the whole case and not make a special plea, as was done a few moments ago, on a particular part, leaving some matter of substance out. If the com-

Bank of Canada
mittee will take the trouble to read section 14 they will find these words:
No action or decision of the board of directors, or of the executive committee, shall have any effect unless the same is concurred in by the governor, or in his absence or incapacity, by the deputy governor.


James Layton Ralston: That is an amendment which I moved; it was not in the original bill.


Richard Bedford Bennett: But it was to be in the original bill. I will state quite frankly that those responsible for the bill had some hesitancy in believing that the committee would accept it. 1 cannot be too grateful to my hon. friend for suggesting it, and I say that to him frankly, because it was endeavoured to be brought about, namely, a control by the crown as representing the people. I have traced now, up to the final act, that there can be no by-laws, no resolutions, no decisions with respect to all these matters mentioned. Think of it-depreciation, profits, matters of that kind. Why could not this committee have been told that they are subject entirely to the governor in council through the governor? The governor, notwithstanding what may be said, is to be the supreme power; he is manager of this institution. In the very nature of things he is charged ivith responsibility, and when it is said that these seven men can issue any amount of paper money they like, I say, they cannot do it without the approval of the governor, and the governor is the man who is approved by the governor in council. Therefore the governor in council's man must be satisfied before any question can arise as to the twenty-five per cent coverage, or any question as to gold, any question as to depreciation, or any question as to profits. No conclusions can be arrived at unless the governor of the bank approves; and that governor, as I pointed out, is only such person as the government of the day approves, and no one else.
Under those circumstances, looking through the volume of Kisch and Elkin that deals with central banks, I find no statute in any country that gives such complete and absolute control, as distinguished from ownership, of any central bank as this one does-complete and absolute, regarding which there can be not the slightest doubt.
The hon. gentleman said I treated this transaction as one of a little state department dealing with a few dollars. Well, I make no boast, but I think I know as much about this central bank bill as any member of this committee; and, what is more, I say that, 74726-265
but for the determination of this government, the pressure from sources indicated by the hon. member for St. James, the ex-Mayor of Montreal (Mr. Rinfret), and from other parts of this country, would have seen to it that there was no central bank that was a real central bank. And when he suggests, as he did, that I do not know what this bill means or contains, I am perfectly content that he should make the suggestion that I was trying to treat this as a little picayune side-wind of the government.


James Layton Ralston: My right hon. friend will find no such expressions of any kind or description. As usual, he is setting up a straw man to knock him down.


Richard Bedford Bennett: I did not suggest that he used those words, but he said this afternoon that he was amazed at the way the Prime Minister had treated the measure, that he had regarded it apparently as some little branch of government and not a great institution that will deal with all these important matters that so greatly concern the country. Well, I am always willing to learn, but I have nothing to learn from that quarter with respect to this bill. I have given more time and attention to this matter than the hon. gentleman has done, great though his attention to it has been. But, as I said a moment ago. both the government and I are deeply grateful that section 14 is there in the terms in which it is, for I could indicate to him the discussion and the efforts to place the question of public control beyond peradventure, to maintain the principle of all great countries whose experience indicates private ownership and public control. I ask any member of this committee who has studied the matter to point to any country in the world in which public control is so absolute in terms, so clear in ensuring the application of the principle of the people controlling the institution.
I will not trespass longer upon the time of the committee because the arguments were answered by the Minister of Finance in the committee. At times one wonders whether or not any good purpose is served by discussions that take three months in committee. All these suggestions have been made, all these amendments we have had this afternoon have been considered

that is, in terms, not in detail-and conclusions arrived at by recorded votes which appear in the minutes of the committee. I will therefore do no more than point out, as I have done, that the supreme power, so far as it is possible to have supreme power and free it from political con-

Bank oj Canada

trol, is vested in the governor in council; and the dangers and difficulties which were pointed out by others, all those peculiar difficulties, we have endeavoured to escape in the manner I have indicated, following the principles laid down by various countries in dealing with the situation.
New Zealand, it is true, has established a central bank. When I was in London at the economic conference last year I gave much attention to this central bank question and discussed it with representatives of the various countries. New Zealand was then discussing the establishment of a central bank, and they were good enough to show us the statute they proposed to enact, and told us of the difficulties they had to encounter. Now New Zealand has launched its bank. It has a capital of half a million pounds divided into shares of five pounds each, and control of the bank with regard to directors is as the hon. gentleman has indicated. The first governor has in point of fact been named and the bank has begun to function. The islands of New Zealand, with a population which is either more or less, I am not sure, than that of the island of Montreal, are dealing with problems that are somewhat different from ours, though there is some essential likeness between the two. And as regards Australia, I wonder whether the hon. gentleman has for the moment forgotten the acute difficulties between the bank and the government with respect to currency matters. Does he realize that it was not the directors of the bank that did it but the governor, Gibson, who made possible the achievement of the supremacy of the governor over the forces that were against him? Now, adjustments, compromises and readjustments have taken place in connection with that matter. The bank came into being as a public bank, owned by the state.


James Layton Ralston: A commercial bank.


Richard Bedford Bennett: Yes, under a Labour government, for the purpose of competing with the chartered banks as it did and as, to some extent, it still does in certain branches of its activities. It became a central bank at a later date, but there was no change of ownership, naturally, by reason of that fact. They have been extremely fortunate in connection with the appointment of governors, and those who have read its history, or heard it as a matter of fact from the distinguished former Prime Minister of Australia, who was here the other day, know something of the difficulties which * they experienced and the way in which those difficulties were overcome. Those who know

all this will realize the importance that attaches to the office of governor.
If I have learned anything from the discussions that I have had and the inquiries I have made, it is as to the desirability of clothing the governor of the bank with the widest possible power. There must always be somewhere some authority who speaks with absolute certainty on problems connected with central banks, and the governor is that person. The governor, in the very nature of things, is clothed with authority not customary in the case of any chairman or any executive officer. For instance, none of our chartered banks, in the persons of their presidents, exercise any such authority or power as may be exercised by the governor of the bank. It is well known that the presidents of our chartered institutions could not for a single moment be permitted to have conferred upon them the power that rests with the governor of the bank. It is related that during his lifetime the late Mr. Harriman secured that the by-laws of the Union Pacific were in such terms that all powers not required by law to be exercised by the shareholders should be exercised by the directors and all powers not required by law to be exercised by the directors in meeting were to be exercised by the president-and he was president. Something of that character may be said about the governor of this bank, the governors of all central banks. All the powers that the shareholders have in general meeting are practically conferred upon the directors, and all powers that the directors have are in terms, unless by law required, vested in the executive committee.
We have further the provision in clause 14 that notwithstanding all the actions that may be taken by the board of directors, all the resolutions they may pass, all the conclusions at which they may arrive, they have no possible effect unless they are approved by the government. I would therefore submit that to the extent of my reading there is no other bank in which you find wider powers of public control conferred, absolute control by governor in council, than there is in this particular case.
There is only one further observation I think I should make. The hon. gentleman said that the Finance Act had practically all the powers of a central bank. I am certain he did not mean that; I am certain no one knows better than he how contrary to experience and fact that is. It was indicated, I think in evidence, that under the Finance Act what happened is that the treasury board once or twice a year, usually once a year, authorizes

Bank o/ Canada
the extent to which borrowings under that act may be made by chartered banks and determines the values to be placed upon securities deposited for the purpose of securing that credit. The maximum of the line of credit was, so to speak, indicated in respect of each bank. I remember reading in the house in answer to a question the line of credit the various banks could secure under the provisions of the Finance Act by reason of a minute of the treasury board fixing that amount and the values to be placed upon the securities lodged for the purpose of enabling currency to be obtained. I hardly think the hon. gentleman would suggest that that is at all comparable with the powers of a central bank
He says that there was never any political interference. In the nature of things the way in which this power was exercised brought about the very conditions that necessitated a central bank. I wonder whether the hon. gentleman has studied closely the operations of the Finance Act. In the light of the experience of this country from the time that act first came into being as an emergency measure to the present time there is just this outstanding fact: there never was in a time of great speculation when there was an enormous volume of currency in this country any effort on the part of the treasury board, because it did not deal with that side of the matter, to control credit and stop speculation. All you have to do is to look at the borrowings and the relation of the Finance Act to the circulation of the country to realize the necessity of a central bank, and I quite agree with what the hon. gentleman said that the rate of rediscount becomes of tremendous importance. When the Bank of England and the Bank of France ran their discount rate up to as high as eight per cent, this was to try to put the brakes on speculation, and I am using the word in a broad sense. The Finance Act and the operations of it under the treasury board were never in the world used for the purpose of endeavouring to deal with that phase of the situation. I speak now subject to correction, but I think if the minutes of the treasury board are looked at, it will be found that not more than twice, and usually once a year from 1915 to date, there was nothing more than an authorization of credit and of the values at which securities were to be taken for the purpose of securing the credit when the applications were made.
This afternoon I was looking at a list in the appendix to the Macmillan report showing the extent to which those borrowings 74726-265J
went. It is amazing to learn what happened, for instance, at the time Great Britain went off the gold standard. At this point I should like to correct a statement attributed to me the other day that I said that this country was not off the gold standard long after it was and I would not admit it was. I say to the committee that this country went off the gold standard on the day following the day that the late Mr. Robb sent $40,000,OOG in gold to New York. I was in opposition at the time and because of certain complications I asked my colleagues in the opposition to say nothing of the matter because I thought to do so might have an injurious effect upon the country. We were off the gold standard from that time, but our gold coverage for our currency never changed since the statute was not amended. We maintained the statute in its integrity until I proposed to make certain amendments to it the other day.
Let me go a step further. Shortly after England went off the gold standard in September, 1931, I met the bankers; I was then in the Finance department and I reduced the rate to three per cent in order if possible to expand credit and meet the difficulties of a situation which then existed.


Ian Alistair Mackenzie: We were never off the gold standard so far as metallic coverage for our currency is concerned; we were off it only for the export of gold.


Richard Bedford Bennett: Yes. There was no free market for gold, as the books put it, and there was no coverage from that standpoint, but so far as metallic coverage for currency is concerned there was never a change.
The effect of that reduction may or may not have been beneficial; I ana not expressing any opinion on that point, but the reduction in the price paid for the accommodation received under the Finance Act was for the purpose of meeting that situation. In October the high level of borrowing under the Finance Act was $24,500,000; the low being $9,000,000. In November the high level was $66,500,000, the low being S17,500,000. That indicates quite clearly that while there was an expansion or contraction of credit there was no supervision by the treasury board of that contraction or expansion. They never purported or undertook to do so; there was nobody there for that purpose. Anyone who knows the circumstances knows the chairman of the treasury board was the Minister of Finance, and there never was any effort made to deal with those problems of expansion and contraction of credit and all the questions allied to the credit problem to which the hon. gentleman referred that must be
Bank of Canada

dealt with by an efficient central bank. I do not think he intended to convey what his words, literally taken, would mean, that is, that the powers under a central bank were those which might be found in the provisions of the Finance Act. That is too far-reaching a statement to make, because there was no supervision and no control at any time with respect to matters of that kind.
We believe that by the methods we have adapted we have met the situation, and clause 14, which the hon. gentleman is entitled to credit for having suggested in the committee, concerns a matter which has given considerable thought to those responsible for the legislation. It has been said to-day that somebody must take the responsibility for it. This government takes the responsibility for this legislation. When we went into the committee we explained that as regards any constructive suggestions that might be made, if we could reconcile them to our view of what we were seeking to do we would gladly accept them. The rapidity with which the suggestion made by the hon. gentleman was embodied in clause 14 is an indication that the government wanted a supervision of that character, but we knew if we undertook to insert it when the bill was prepared what condemnation we would have received for having done so.


Wilfred Hanbury: That is a very high plane.


Richard Bedford Bennett: That is the fact with respect to this legislation. I do not look upon this as being legislation regarding which a government must have views for the purpose of enforcing them-not at all. I have never in all my little experience with legislation approached any problem with a greater sense of individual responsibility, and I have never endeavoured to obtain information from so many sources to enable me to arrive at sound conclusions. If I have arrived at conclusions which are at variance with those of my hon. friends opposite I trust they will credit me with sincerity in my convictions, as I do them, except when they endeavour to interject politics into it. I think this far transcends purely political views. Every action that has been taken in connection with this measure has been first of all to maintain the sense of a great public trust on the part of the shareholders, to relieve this bank from any possible interference with its operations through political intrigue, to use the language of the volume to which I have already referred; secondly to ensure that there shall be continuity of policy by having one of the permanent members of the civil service, the

deputy minister of finance, a permanent member of the board, so that there shall be continuous knowledge on the part of the minister, and that means' the government of the day, of the operations of the bank. And thirdly, to ensure that the governor of the bank, who is responsible for its operation in the large true sense of the term, should be one who represents the government of the day. He is appointed in the first instance by the government, and there can be no appointment made thereafter that is not acceptable to the government. And no resolution or action of the board of directors of any kind, shape or form, or of the executive committee, can become effective unless the governor approves. Therefore I submit frankly, and as fully as I can from the knowledge that I possess, what little it may be, that there is no central bank to which reference can be made in a country such as this, with conditions as they are, where public control has been so clearly defined and can be easily exercised as in this bill, and at the same time maintaining what Kiseh and Elkin think should be maintained, the sense of private ownership of shares, vesting in those who have them the sense of a great public trust.


William Lyon Mackenzie King: May I ask the Prime Minister a question? If the government parts with both public ownership and public control of a great financial institution such as the Bank of Canada will be, is there not a possibility that at a time of crisis a situation might arise in which the power of this bank will be greater than that of the government itself? Might not the bank be in a position to defy the government if it so desired? I use the word "government" rather than the word "parliament" because I know the Prime Minister will say that parliament can always alter any law that has been made. But I am assuming a moment of crisis at some time of financial stress in the affairs of the country or of the world when this bank would be operating. The government has parted with ownership of the bank; it has parted with the control of the bank. It has a limited control but not the final control. Both the ownership and the control will be in private hands. This will be the great banking power of the nation. Under those circumstances is there not a possibility, assuming the government may wish to act in such an emergency, of a situation arising where the government would be less powerful in dealing with it than the corporation which it has created?


Richard Bedford Bennett: As a matter of fact, if the right hon. gentleman has read the history

Bank of Canada
of what recently took place in Australia, he will have observed there was a moment when the attitude of the government was at variance with that taken by the governor of the bank. Had the view of the government prevailed in that particular instance I think it is now generally conceded that the results would have been ruinous. The fact that the governor of the bank was a man of such firmness of character and determination that he carried out the plans that were made they believe was largely responsible for the success following the efforts that were made for rehabilitation at a time when the situation became acute.
To admit that there is a possibility of differences of opinion between the government and the governor of the bank is but to admit that there is always the possibility of differences of opinion. That I think may be taken for granted. That is, there might be a moment when the view of the governor of the bank and that of the Minister of Finance of the country might be at variance. That might happen. But I cannot conceive of that happening as a practical question, because with the continuous communication betwen the government and the bank, the government of the day doing what it thought desirable as conditions changed from time to time, the governor of the bank, with his wide knowledge of international conditions, his wide experience in the bank and knowledge of conditions in his own country, I should say would be perfectly willing to accommodate his views to those of the government if no question such as aroce in Australia was to be considered. In Australia at one time the question involved the movement of the gold itself. It will be recalled that substantially the gold reserve was moved to Great Britain, if my memory serves me, and deposited in the branch of the bank there, to save the credit of the commonwealth at that particular moment. I speak subject to correction. Then subsequently the differences of opinion were adjusted; the governor did succeed in having his views prevail, with the result that Australia emerged from the situation. But that was a case in which it was thought at the time that the government took a rather extreme view, because of the attitude of some people with respect to certain qee-tions of interest and other matters of that character, involving, I should say- although perhaps Australians would not like me *e u-e the word-possible repudiation. Perhaps if I put it that way I am fair to the right hon. gentleman. I do not conceive that in this country, as I know it. that need give us such concern as would necessitate any
change being made in the proposals submitted to the committee. If I did I would say so.


William Lyon Mackenzie King: I should like to enlarge a little on what I have in mind. In the world of finance the money power, as it is termed, is of course the all important factor, a factor that many people believe is greater than the power of government itself. What I am anxious to be perfectly sure of is that the government of the day, in parting with some of the ownership of money power, as it is doing, and so completely with the control that it has of money power, to a privately owned and controlled institution which will be allied to all of the banks of the country and through them to all the financial interests of the country, is not bringing about a situation in which at some critical time should a question arise as between the financial interests in a large way and the interests of the public as represented by the government in a large way, the two might clash, and the government find itself powerless, at least until parliament could be called together, to deal with the situation. In the meantime in such a case the financial interests may have had their way in the furthering of their ora interests, albeit their action might be against the public interest. I do not say they will act that way; I am quite prepared to believe that those who may be appointed will be honourable men and will seek to do what as they see it is the right thing. But with affairs as they are in the world to-day the point of view of those who think that a certain thing is right may differ very much, depending upon whether it is to the financial end of things they are looking, or to social and public ends.


Richard Bedford Bennett: Yes, and I think that
what the right hon. gentleman has said is dealt with by Kisch and Elkin in the volume to which the former Minister of Justice (Mr. Lapointe) referred, commencing at chapter 2. There is recognition of the very fact to which the right hon. gentleman has referred, namely the power of the money interest, and it is for that reason that the conclusion seems to have been arrived at that it is safer to have the central bank a privately owned and government controlled organization than otherwise. I will not take time to read more than this:
The tendency of the nineteenth century, particularly as regards actual statutory provisions. was somewhat to stress the control of the state over the central bank. The case of the Reiehsbank may be cited as an instance of a general disposition to regard a state or semistate bank as analogous to a state railway
Bank of Canada

system or a state tobacco monopoly. The war period exhibited in extreme terms the danger of this system. Since then the tide has set strongly against granting the state power to interfere with the functioning of a central bank.
Then follow statements about it, and the writer continues:
Central banks have more and more come to be looked upon as analogous to large public trusts and' less and less as departments of state.
Then he goes on to discuss the matter with respect to many central banks. At page 18 he says:
The case for the direct intrusion of the state into the actual workings of a nicely balanced economic machine loses its force as soon as the public responsibilities and public objects of the institution are fully recognized by those responsible for its management and in the code of legal provisions or established tradition by which they are guided.
Then he inserts this paragraph:
Thus in times of crisis the bank, like many other normally independent organizations, is likely to find itself to a large extent under the influence of the government. At all other times, however, its independence is secure and unassailed. The inner history of the Bank of England is known only to those in authority, but it is probably safe to assume that the relations of that institution with the government present few difficulties that are not capable of amicable solution. The bank has in the course of years built up a body of tradition and experience directed to the public service which is unrivalled, and it may be fairly surmised that no government in this country would seriously attempt to intervene in its administration.
Then he refers to the German bank, the opening sentence of its charter being:
The Reiehsbank is a bank independent of government control.
We have gone much further than that. The discussion that follows, at pages 22 and 23, with respect to banks might be worth looking at, without taking up too much time:
As long as convertibility is maintained the worst evils resulting from government intervention in banking and currency control are avoided. Doubtless the governments which have laboriously dragged themselves out of the morass of inflation will not readily slip back; nevertheless, if the control of the operations of the central bank lies directly or indirectly with the government, it becomes fatally easy for the government to finance itself for a time by means of book entries and short loans from the bank, a course which is the first step towards currency depreciation and inconvertibility.
Even apart from such risks there are other serious dangers from a government controlled bank. The network of financial and commercial life is so intricate, and the decisions of the bank on important points have such widespread results, that all interests are not
TMr Bennett.1
affected in the same way. A change in the rate of discount, for example, which benefits some may be unwelcome to others. But if the government has a controlling influence over the bank, there are obvious ways by which the more powerful interests in the country can try to enforce their wishes. The road is open for political intrigue, and there can be no safeguard that the policy of the bank will be carried on without bias as national interests require. It seems a paradox that when the object is to secure the execution of a national policy, this should not most readily be achieved by the creation of a state bank under official control; but even in the countries where the capital of the bank is held by the state, steps have been taken in certain instances to remove its administration from political influences and to give it a measure of independence from the government.
I will not take time to quote more than those observations. I really do not think there is any more danger here than there is with respect to the relations of the Bank of England with the government of that country. That is an old institution, with established traditions. It will take many years for us to establish like traditions, but I believe that can be done more effectively and efficiently by the means provided in the bill, particularly- I say again-section 14, which in its present form we owe to the hon. member for Shel-burne-Yarmouth (Mr. Ralston). I believed something of that sort was essential in this bill, and I say again I think that is one of the most powerful of the provisions of the bill to ensure the efficiency and effectiveness of government control as against government ownership.


William Lyon Mackenzie King: There is one other question I should like to ask the Prime Minister. Is there not a danger, if the government parts with both ownership and control of the central bank, of some government being seriously embarrassed in the matter of carrying out its trade and fiscal policies? Let me instance what I have in mind. Assume that private interests in control of the central bank are favourable to a policy of trade within the empire; let us say, are in favour of promoting trade within the empire to the exclusion if need be of trade by Canada with other countries throughout the world. Is it not possible, through the control of credit which this central banking institution will possess, that its officers may be in a position to cause their policy to be made to prevail rather than that the government should be in a position to have its policies prevail? It seems to me that unless the government has some control or some ownership of this central institution there will be that danger at all times. Where you have an administration whose policies as to trade

Bank of Canada
harmonize with the policies of the bank as to finance; assume for example, that both have imperial policies in trade and finance, there everything might work very smoothly. But assume that the bank once established is determined on certain imperial policies, and it is likely to have such as a guiding principle if the governor of the bank is to be chosen from the old country and assume that the government of the day should seek to promote world trade even if such a policy should happen to some extent to be at the expense of trade within the empire itself, is there not a danger of this institution being in a position to make it very difficult, if not impossible, for the government, representing the people, in its policies to carry out those policies as effectively as it otherwise would be able to do?


Richard Bedford Bennett: I am bound to say, Mr. Chairman, that the very organization of this bank in this form is calculated to prevent that.


William Lyon Mackenzie King: In what way?


Richard Bedford Bennett: I will try to explain. If
the government were in complete control of the bank it would mean that if you had one government succeeded by another the bank would naturally change its policy, assuming that the policy was as the right hon. gentleman suggested. Then you would have governments controlling policies without continuity. What we wish to secure is a policy based upon the economic conditions of the country, not a policy of the bank based upon policies of a government. That is what the right hon. gentleman desires.


William Lyon Mackenzie King: I have always felt that the government represented parliament. If a government or a political party has placed certain policies before the people and the people have endorsed those policies, returning the party to power in order to enforce them, it seems to me that no institution should be created by the state which could interfere with the will of the people as thus expressed through their representatives in parliament. It is that danger that I confess I see in this institution as it is to be constituted under this measure. That, just as the Prime Minister says, you may have the bankers desiring continuity in their banking policy, and determined to have it even if it runs counter to what may be the trade policy or the fiscal policy of the government of the day. You will almost certainly, sooner or later, have a conflict between financial and fiscal policies, the former in the control of private interests the latter in the control of
the government. If there is a conflict anywhere my feeling is that the view that ought to prevail is the view of the administration of the day, not the view of any institution privately owned and controlled that may originally have been given power by the state.


Richard Bedford Bennett: Of course the only difficulty about that is the fact that it is always so difficult to say that a particular policy has been approved by the people. That is always the difficulty where you have no direct referendum upon a particular matter. That is why that on the continent of Europe they contend so vigorously for the submission of questions in order that there may be a direct determination by the people. I need not remind the hon. gentleman, with his wider knowledge than mine, of what that has led to, but that is a fact. There can be no policy of the central bank, as related to the chartered banks and the country, that is not similar to all. The deputy minister of finance is familiar with the transactions of the central bank and its relation to the chartered banks. The chartered banks continue to establish credit for the industrialists and the agriculturists, just as they do now. The only difference is that the central bank supplies the requested credit to the individual chartered banks to carry on, where formerly under the provisions of the Finance Act reliance was placed upon that measure.
Let us assume that the government of the day is apprehensive of the continued evidence of speculation on the part of the people, and it has made up its mind that something must be done to curb their activity. The government discusses the matter, and the Minister of Finance says to the deputy minister, "You may indicate to your board and to the bank the desirability of raising the discount rate for the purpose of enabling that to be done." The Minister of Finance sends for the governor, and discusses the matter with him. It is common, of course, in countries like France and continental Europe, for the minister of finance to be constantly in communication with the governor of the bank. He says, "We must raise the discount rate." The discount rate is raised from four per cent to six per cent. Still the speculation continues on the stock exchanges, and last year the rate was raised to seven per cent. I think, if my memory serves me correctly, that it went as high as eight per cent at one time.


Mr. YOUNG:: Did that stop speculation?


Richard Bedford Bennett: It had a very great effect upon it, yes. And it will be recalled that the central reserve bank of the United States made
Bank oj Canada

some effort in that direction. It is also within the memory- of this committee and those who have read the report of the Macmillan commission that in the opinion of Sir Charles Addis there is no central bank in the United States. I fancy, as a matter of fact, there is not any central bank of the United States. There are, of course, twelve central reserve areas or regions in which there are what I think they call regional banks. The member banks are the banks within that region, and the control of the government is as was indicated by the hon. member for Shelburne-Yarmouth. But there is no eon-tral bank dealing with the question of credit and rediscount rates in the manner in which we have been dealing with those matters.
I will say this to the right hon. gentleman: if between now and to-morrow any thought that may be given to this measure by hon. members opposite would result in indicating wherein they see the possibility of that danger, I shall endeavour by appropriate terms to remove it. But I see no likelihood of there being any such exercise of that power. I did look into something which was said in this house on a former occasion, and as the bill stands I cannot see that it would be possible for that result to follow. If there is any member of the committee who has any suggestion to make which would indicate that that is a possibility, I should certainly be very glad to have it, and the government would welcome any suggestion in that direction.


William Lyon Mackenzie King: I should like to make clearer what I have in mind. In a word it is this: Taking matters as they are at present, it seems to me that so far as this House of Commons is concerned, as respects the banking and financial institutions of the country, it makes very little difference what particular trade policy we may have. We feel an absolute security in our ability to give effect to our own trade policy. But under this measure the government is parting with some measure of ownership-what in this bank will become privately owned. It is parting to a certain extent with the control it now has over the regulation of credit. It is not merely creating an institution which will be privately owned and controlled, but it is parting with a certain control by government which it has to-day.


Richard Bedford Bennett: In what way?


William Lyon Mackenzie King: This bank will have the issue of currency and it will have the control of credit, which at least to some extent, through the Department of Finance, the government itself is able to exercise to-

day. During and since the war the government exercised this control, the Finance Act having been amended at the time of the war for that very purpose. The powers which the government there had are now being transferred to this privately owned institution. If you alter the situation by taking away from the government the power that it has to-day; and the banks are lo be allowed to control the central bank-for that is what it really amounts to, the banking interests are all to be one, the central bank being in private hands let us put it that way -there is, it seems to me, a real danger of the financial control which may thus be exercised by the bank being exercised against what may be the fiscal policy of the government of the day.


Richard Bedford Bennett: I should be glad to give the matter such reasonable attention as I can between now and to-morrow, and if the right hon. gentleman or any other member of the committee sees that danger, and indicates to me where it is to be found in the bill. I shall certainly consider it and try to provide a remedy against it, because I realize there is no desire to place the question of the fiscal policies of governments in the hands of the banks of the country, either the central bank or any other bank. I cannot conceive that it is possible under this measure.


William Lyon Mackenzie King: The line of
remedy will lie in the matter of control; the government ought certainly to have a very large measure of control over this institution, I would say " the " control of the institution. The question of ownership, is, I think debatable.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned without question put, pursuant to standing order.
Friday, June 22, 1934