Province of Canada, Legislative Assembly, Scrapbook Debates, 8th Parl, 5th Sess, (4 August 1866)
By: Province of Canada (Parliament)
Citation: Province of Canada, Parliament, Scrapbook Debates, 8th Parl, 5th Sess, 1866 at 76-78.
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Note: All endnotes come from our recent publication, Charles Dumais & Michael Scott (ed.), The Confederation Debates in the Province of Canada (CCF, 2022).
SATURDAY, August 4, 1866
On motion of Alexander Galt [Sherbrooke, Minister of Finance] the House went into committee on the currency resolutions.
Alexander Galt [Sherbrooke, Minister of Finance] moved the adoption of the first resolution.
1. It shall be lawful for the Governor in Council to authorize the issue of Provincial notes payable on demand, of such denominations as may be determined upon, to an amount not exceeding five millions of dollars, and to re-issue the same. Such notes shall be a legal tender, and shall be redeemable in specie on presentation at offices to be established at Montreal and Toronto, according as the said notes may be made payable.
Walter Shanly [Grenville South] in the chair.
Luther Holton [Chateauguay] had not had time to give the subject all the attention which its importance required, besides which his usually vigorous constitution had for the first time yielded to the exhaustive labors of the Session. He would therefore confine his remarks to a few leading points in the scheme. He would first speak to the necessity of raising a given amount of money to meet the liabilities of the country. He thought his hon. friend had exaggerated that amount. It would be remembered that last Session, thought we had a large floating debt, the honorable member represented everything as coleur de rose, and professed that no special Legislation would be needed to supply the deficiency.
Now this Session when the country was in a much better position, when the country was in an unusually prosperous condition, on the event of a very great political change, his hon. friend came down to this House with his scheme, saying there is no possible resource, no other mode of meeting these five millions without assuming the currency of the country, and subverting the whole system of banking.
He believed his hon. friend had over estimated the pressing liabilities of the country, he had under-estimated the revenue, and he had over-estimated the expenditure. He had over-estimated the military expenses because if any events occurred, of war or insurrection, which would necessitate such an expenditure, it would be the duty of the Government to call Parliament together to provide means for meeting the emergency. Believing that the expenditure was over-estimated and the income under-estimated, he did not concede that there was any necessity to raise such a large amount as five millions. His hon. friend had put forth his proposition for raising a loan of $2,000,000 as an alternative with the other plan, which was more acceptable to the banking institutions of the country, and especially to the bank with which he hoped to negociate this project.
He (Mr. H.) had not the slightest expectation that the loan would succeed, and he firmly believed that the money could have been raised by the ordinary means, the issue of debentures bearing interest, which might be made receivable in payment of public dues. Another means was the issue of exchequer bills which his hon. friend had, at one time, proposed, and why was not that scheme tried now. There was one point to which he desired to call attention, that the letter which had been read last night, had declared that the banks were not in a position to raise the amount of money required. He thought the House ought to be placed in possession of all the correspondence which had taken place, when it would be found that the matter could have been arranged, had it been presented in a more satisfactory manner.
He did not thank the proposition of the Bank of Montreal deserved to have been characterised as unusually liberal. Of $5,000,000 said to be required that Bank was to receive $2,250,000 in satisfaction of an existing debt. It was a fair business proposition, but did not display any great liberality. He believed his hon. friend could have safely tided over the difficulty without availing himself of the necessities to change the whole Banking system of the country. A Finance Minister of far humbler ability than his hon. friend could have met the liabilities of the country, with the assistance of the Financial Agents of the Province here and in London. He believed his hon. friend had introduced this scheme to prepare the way for a Bank of issue, to which the House and the country had very strong objections.
Alexander Galt [Sherbrooke, Minister of Finance]—The objection to a Bank of issue is that it will make the Government dealers in money, which this scheme did not contemplate.
Luther Holton [Chateauguay]—These resolutions were certainly liable to that objection. They made the Government dealers in notes, dealers in gold, dealers in securities. He regarded their provisions simply in the light of a Bank of Issue. The currency question in England had engaged the attention of the best financiers of the whole country for four years previous to the legislation of 1844. Now the charters of all our Banks expire in 1870, just four years hence, and he thought instead of changing the whole system suddenly now, when no demand was made for it his hon. friend should come down and ask the House for a committee, either of this House, or of the Confederate Parliament, at its first session, so that the whole question could be well considered before the expiring of the bank charter. This House was not prepared, at the very heel of the session, when the members were all anxious to get home, to discuss the question of a bank of issue.
The scheme was condemned by every man who was capable of forming an opinion, some for one reason and some for another, and all were agreed that a committee should be struck, and the whole question fully and fairly considered. Why the very minor question of interest had been deemed of sufficient importance to be referred to a committee, and its consideration had been postponed, yet the great question of the currency was to be disposed of in this hurried manner. A remark has been made last night as to the facility to be afforded for expanding and contracting the currency, and in his judgment it was one of the worst features of the scheme; for if one thing more than another was required to preserve the interests of the country from disaster, it was stability in the currency.
Alexander Smith [Toronto East] said he would call the attention of the House to the effect of the scheme upon the circulation, which he believed would be contracted to nearly one half, and produce most disastrous results in Upper Canada.
He could not see why the Minister of Finance [Alexander Galt] could not have raised the money required by issuing exchequer bills or debentures, without interfering with the very foundation of the trade of the country. He thought he would be able to show that the Banks of Upper Canada would be compelled to curtail their circulation one-half. Whenever the banks “put the screw on,” as it was termed, the consequence was that the country storekeeper could not collect his debts, and could not pay the wholesale merchant, and the wholesale merchant could not pay the banks. The merchants of Montreal would come in for their share in this disaster.
Mr. S. then went into a statement of figures to show that the line of discount by the banks of Upper Canada would have to be curtailed $5,000,000, and thereby utterly ruin many of the best business men of the country. If the Finance Minister [Alexander Galt] persisted in pressing through the scheme, he would produce consequences which he would very much regret, and which every friend of the country would regret.
He (Mr. S.) was most anxious to support the government to the utmost of his power, but he could not so far outrage his feelings as to support these resolutions, and he did not believe there were five business men in Upper Canada who would stand up in defence of the scheme. He did not speak for the Banks, he did not care for the Banks, he spoke for the country at large. His hon. friend was attempting to grind every interest in favor of Montreal but he would find that he had made a very great mistake.
Alexander Galt [Sherbrooke, Minister of Finance] said the objections to the resolutions from the banking point of view had been ably represented by the members for Addington (Cartwright), Welland (Street), and Toronto (Smith), and the broader view of opposition upon the general principle had been no less ably presented to the House by the member for Chateauguay (Holton). The member for Addington [Richard Cartwright] had contended that all the Banks of the country would be compelled to come into the arrangement, that they could not resist the pressure that would be brought to bear upon them to force them into it, while the member for Welland [Thomas Street] said they would not come in. Here was a discrepancy, for the one upset the conclusions of the other.
Thomas Street [Welland] had said the banks would not voluntarily come in.
Alexander Galt [Sherbrooke, Minister of Finance] had taken down the words, and it was evident that he argued from the assumption that the banks would not come in, because he contended that the terms of the arrangement should change in a way to their advantage to induce them to come in. There was no provision for the exercise of any pressure upon the Banks, they were left free to come in or not, as they pleased, and they were free to withdraw after having come in if they should judge it to their interest to do so. Here was a member for Toronto, the President of a bank, to which this House had given existence, coming down here to claim a share of that which of right belongs to the public. If the banking institutions of the country were to make the privileges which this House had granted them a reason for restraining the action of the Government in providing for the requirements of the country, it was time that it should be understood.
The member for Welland [Thomas Street] had taken a different line of argument. He had desired that the Government should borrow money at a high rate of interest so that
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the banks might go but for nothing. The whole argument of the member for Toronto [Alexander Smith] was based upon the assumptions that all the Banks of the country would go into the scheme. But there was nothing in these resolutions to compel them to do so. They need not come in unless they like, and they will not come in if they find that it is not to their interest to do so. It was clear, if all the disasters were to follow predicted by the hon. gentleman that the Banks themselves would be the first to suffer, so that they would study their own interests by remaining out of the arrangement.
It had been admitted that the Bank of Montreal’s circulation was not to be injuriously affected by the scheme, and since he expected that he could meet the requirements of the Government by an arrangement under this scheme with that institution, the Upper Canada Banks would be perfectly free to continue using their own notes if they choose. They were offered a circulation as equivalent to gold, and if they declined to accept it, let them continue to circulate their own notes. It was not fair that the privileges which had just been granted by this House should be put forward against the assumption by the country of the undoubted right to the profit of the currency.
His hon. friend had argued that this scheme was going to bring ruin upon the country, but he (Mr. G) did not believe that the Banks controlled the prosperity of the country if Providence blessed it with a good harvest; there need be no fear entertained, but that the means would be found to bring the produce to market. He would not enter into a discussion of the figures brought forward, to prove that the circulation of the country was to be curtailed by the scheme, because as he had said before, the matter was entirely left to the option of the Banks, and surely they would not enter into it, warned before hand of the ruin that [text missing] would bring upon the country and upon themselves, since there was no pressure to be brought upon them to force them into it when they found that it would be to their own interest, and in case they should see fit it was provided that they might withdraw.
Richard Cartwright [Lennox & Addington]—It would be to the interest of the large Banks, whose circulation was small compared with their capital to enter into the arrangement, but not to smaller banks whose, capital was smaller in comparison to circulation.
Alexander Galt [Sherbrooke, Minister of Finance]—His honorable friend would see that this distinction came precisely to the same thing; if the terms were made more favorable to the banks, they would all accept it, but if the smaller institutions preferred the use of their own notes, they may avoid the loss to which his hon. friend had referred by keeping out of the arrangement. With reference to the broader issues raised by the member for Chateauguay [Luther Holton], he would now make a few remarks. That hon. gentleman had accused him of having exaggerated the expenditure of the country; under-estimated the revenue, and overstated the amount of liability to be provided for: he had said $5,000,000 when the amount actually to be met was $5,700,000.
Luther Holton [Chateauguay]—I only said you had over stated the amount for which immediate provision was actually necessary
Alexander Galt [Sherbrooke, Minister of Finance] did not suppose his hon friend meant to accuse him of having represented the total amount of the liability as more than it really was. As to the revenue it was a very easy thing to say that he had underestimated it, and he would be glad to find at the end of the year that his estimate had been too low. But the hon. gentleman should remember that many circumstances might arise during the course of the year that would materially interfere with the productiveness of the revenue, and the greatest care should be exercised in estimating for the future.
He would, however, be happy if, with the good harvest that was now in prospect, and a continuance of prosperity in the country, it should be found that the revenue would reach a larger amount than he had calculated upon. He had also accused him of having over-estimated the expenditure.
He (Mr. G) had carefully gone over the figures within the past few days, and in no branch of the public service did he see that any great or serious over-estimate had been made. There might, and he hoped there would be some considerable reduction on a few items under the control of the Commissioner of Public Works [Jean Chapais], but not to the extent to lessen materially the liabilities for which provision was now sought to be made. As to the militia estimates, he (Mr. G) placing them at too small figure.
He denied that the sum appropriated to that service was in the slightest degree too large, though it might be that it was not sufficient. The hon. gentleman had said that in case of any urgent emergency, such as war or insurrection, it would be the duty of the Government to call Parliament together to provide the means for the country’s defence. But in case of a raid, such as that which had lately occurred, the whole affair would be over before. Parliament could have time to assemble. The Government could not know, could not be expected to know, beforehand, when such a calamity was to befall the country, and it was not to the deliberative action of Parliament that its safety should be entrusted, but to the rapid and severe action of the Executive, the prompt motion of the military power. In an emergency of the kind it was not to Parliament but to the Executive that the country would look for protection, and he repeated if any mistake had been made in the estimate in question, it was in putting it at so low a figure.
The member for Chateauguay [Luther Holton] had said that the loan should have been tried sooner, and that the large Banks would now oppose it, because it was their interest to do so.
Luther Holton [Chateauguay]—The banking institution on which you rely would now oppose the loan, because they would find the currency proposition more to their interest.
Alexander Galt [Sherbrooke, Minister of Finance]—The hon. gentleman would find the opinion of the Banks regarding the loan, from a letter he would read to the House.
John Sandfield Macdonald [Cornwall]—The loan of $2,000,000, if taken by the Banks would withdraw so much money from the circulation of the country.
Richard Cartwright [Lennox & Addington]—Its tendency would be in that direction.
Alexander Galt [Sherbrooke, Minister of Finance] read a letter on behalf of the bankers, stating that the banks were not prepared to advance a loan equal to 15 per cent of their capital; that the Banks were not willing to come into the arrangement with regard to the notes, unless they had permission to resume their own circulation again after reasonable notice, any time within the duration of their charters, and that the Commercial Bank would not come into the arrangement unless the restriction as to usury was withdrawn. As to the issue of debentures, the letter declared, and he wished the House to note the statement, that the proposed issue of short date Debentures would injure and derange the interests of trade far more than the issue of the notes.
The hon. member had approved of the issue of debentures receivable in the payment of dues to the country, but the adoption of that plan would reduce our credit by the depreciation which such debentures must suffer, in the ordinary transactions of trade. Sooner than adopt that plan, he would be willing to submit to any sacrifice. To issue debentures upon such terms as would tend to their depreciation, and to be reduced to the necessity of paying even the very messenger at the door, with a bill which his baker or his butcher might refuse, would be placing the country in a mean and undignified position, to which he should never consent to see it reduced. If they cannot get a loan they should take the means that are open to them, and honorably meet the obligations of the country. They should resume a portion of those rights which they had deputed to others, and meet the liabilities of the country with the currency which belonged to it.
Luther Holton [Chateauguay] did not approve of that plan. He had only said it would be better even to adopt that temporary expedient than the plan before the House.
Alexander Galt [Sherbrooke, Minister of Finance]—That plan was intolerably worse, if he might use the expression. If they were to resort to a temporary expedient, let them take the best that was open to them, and if they chose, they could make the plan which he had submitted a temporary expedient. It was only a proposition to issue $5,000,000 of notes, repayable in gold, and if they saw fit to abandon the plan, if the money was no longer required, all they had to do was to pay them off, and there would be an end of it.
Then the hon. member could not see any liberality in the offer of the Bank of Montreal, but he (Mr. G.) thought it was a liberal offer to tender to the Government a loan of fifteen per cent of their entire capital, and if the other banks failed to make up the balance to give five hundred thousand more. The member for Chateauguay had also said that he (Mr. G.) could easily have raised the money to meet this “pretty” deficiency, by some other means than the plan now proposed.
He thanked the hon. gentleman for this expression of his confidence, and wished he would show it on many other occasions.
Some Hon. Members—Laughter.
Alexander Galt [Sherbrooke, Minister of Finance]—But this very confidence of the hon. gentleman was to lead him now to vote against these resolutions.—His hon. friend said “I will not allow you to raise the money in the way you propose; the money can be got in some other way, and you are the man who must do it.”
Luther Holton [Chateauguay]—If you don’t, I will.
Some Hon. Members—Laughter.
Alexander Galt [Sherbrooke, Minister of Finance]—Would be very happy to surrender the responsibility to the hon. gentleman, when it was the pleasure of the House to direct him to do so.
Some Hon. Members—Laughter.
Alexander Galt [Sherbrooke, Minister of Finance]—The hon. gentleman had charged the proposition before the House as being one for the establishment of a Bank of Issue, but there was no analogy between the establishment of a Bank of Issue, and the issuing of legal tender notes. He would like to know the difference between the issue of a debenture for $1,000 by the Receiver-General, and the issue of a $1 note by the Receiver-General. The one was a promise to pay a thousand dollars, and the other a promise to pay one dollar, and the only difference was that the debenture was issued payable at a specified date without security for its payment, and the note was issued payable on demand, and security for that payment provided. The hon. gentleman had asked him to strike a committee and enquire into the whole question should be gone into fully and deliberately before the expiring of the bank charter in 1870, but there was no use in commencing this enquiry in this Parliament.
There was nothing in these resolutions to prevent the Confederate Parliament from discontinuing this plan, this time next year, if it did not meet their approval. There was nothing in it to bind either the banks or the country to it longer than it was found to be advantageous. But the Government would not trust to the chance of meeting the engagements of the country by borrowing large sims of money at high rates of interest. They had taken the means certainly open to them which would maintain the credit of the country, and any member who took the responsibility of voting against these resolutions was bound to submit some other plan for discharging the liabilities of the Province.
It was not fair to condemn the proposition before the House, unless members were ready to submit better proposition; to vote against these resolutions without showing some other mode of meeting the object which they contemplated, was to peril the character and the credit of the country. Before incurring such a serious responsibility, gentlemen were bound to lay before the House a plan equally certain to meet the country’s engagements.
George Brown [Oxford South] would like to have the point made perfectly clear, whether the Minister of Finance [Alexander Galt] was certain that his plan would succeed. Had he got an assurance from the Bank of Montreal in writing as he ought to have done, that that institution was prepared to enter into the arrangement?
Alexander Galt [Sherbrooke, Minister of Finance]—The hon. gentleman had no right to ask the question. The government had made no agreement with the Bank of Montreal, or any other Bank, to enter into the arrangement. But the government would certainly raise the money; they had the power to do so, and if need be, they could use it independently of the Bank of Montreal, or of any other Bank in the country. He believed, however, that the Government would be able to make the arrangement with the Bank of Montreal.
Richard Cartwright [Lennox & Addington] rose to elucidate the point to which he had referred last night, that the large banks would profit, while the smaller ones would suffer by the arrangement. He read certain figures to show the effect of the scheme on the Commercial Bank, to show that it would be profitable to that institution, and to the Bank of Montreal, and the Bank of British North America, though he would not say that it would be beneficial to the country.
George Brown [Oxford South] agreed with the member for Chateauguay [Luther Holton], and other members who condemned the propriety of dealing with this very important question at the end of the session, disposing of these resolutions with a few hours’ discussion last night, and a few hours more today.
The hon. Minister of Finance [Alexander Galt] had endeavored to carry away the House by the notion that the opposition to this scheme all proceeded from interested motives. He protested against treating such a serious and important question in so undignified a way. The great people of England had taken four years to consider this question before legislative on it, and we were asked to dispose of it in two days. He ventured to say that they was scarcely a member in the House who was really in favor of this measure, if any other way could be devised to meet the present liabilities of the country.
He complained that the Minister of Finance [Alexander Galt] had not made it plain to the House where the money was to go in. Why had this question been kept over so long? Why had not some means been adopted to do away with this floating dept which, year after year, had been hanging over the country? If it had to be dealt with now, it was due to the extravagance of the gentleman himself; no other person but the Minister of Finance [Alexander Galt] and the Postmaster-General [William Howland] were to be blamed for this state of affairs. He did not so much blame
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the Postmaster-General [William Howland], because he had not been very long in office, but he should have sold debentured at a time when they could have been sold to better advantage than now. The hon. gentleman had represented the chartered banks of the country as harpies endeavored to prey upon the vitals of the country, but no (Mr. B.) apprehended that no country in the world had been so much indebted to its banking system as Canada.
With regard to the disposition of this five million of money, it ought to be understood that the Bank of Montreal was to receive $2,250,000 of it, and no doubts million and a half of that sum could be received upon the same terms as it had been first obtained by the member for Chateauguay [Luther Holton]. The hon. gentleman had endeavored to impress upon the House, that the banks had positively refused to load the money required by the government, but he had been told by bankers, within the last twenty-four hours, that he could have got every cent of it. It was clear, therefore, that he had no necessity for forcing this scheme upon the country at this time.
He had, during all the years he had been in office, draining upon Baring’s & Glyn’s, from 1858 to 1860 and now, at the very last moment, he had become wonderfully punctilious, and declined to continue that system. The hon. gentleman had dared the opponents of his scheme to submit a proposition of their own. It was all very well to ask one member to propose his, so that the one might conflict the other; but he would make a fair proposition. Let the hon. Finance Minister [Alexander Galt] move that the Committee rise, let him then strike a Committee of the most experienced men of the House, and he (Mr. B.) would guarantee, that in five hours’ time, a scheme would be devised that would meet the pressing liabilities of the country without a resort to the plan before the House.
The hon. gentleman affected great opposition to the plan proposed by the member for Chateauguay [Luther Holton] of issuing short date debentures, but on referring to the Supply Bill of 1864, he found that this very plan was proposed by the hon. gentleman himself, for the very purpose of meeting the floating debt of the country, which had not yet been provided for. Why not resort to this plan now? It was because the hon. gentleman desired to get the control of the currency of the country, that he might deal with it as Minister of Finance [Alexander Galt], that he had proposed this scheme.
It was not to be supposed that the hon. Minister of Finance [Alexander Galt] should have any difficulty now in providing for the liabilities of the country when, in 1849, a similar plan to that suggested by the member for Chateauguay [Luther Holton], had been successfully resorted to by Mr. Hincks, and the act was still in force. There was still another way of raising the money.
The hon. gentleman had announced that he would issue $2,000,000 debentures at 6 per cent, though he was paying 8 per cent on $3,000,000, borrowed in London, and he (Mr. B) thought that in a young country like this, this debentures should be issued at a rate below the current rate of interest. But let him put these debentures at 7 per cent, and he would guarantee that every cent required would be got. He contended in view of these means of providing the money required, proved clearly that the Minister of Finance [Alexander Galt] had entirely failed to establish the necessity for reporting to the plan now proposed.
Mr. Brown then entered into a discussion of the working of the scheme, contending that the cost to the country would be $700,000 a-year and the saving $400,000 leaving an annual loss to the country of $300,000, merely for the sake of replacing the bank currency for a currency issued by the Government. Another objection to the scheme was that it had no power of expansion, to meet the wants of the trade of the country. The currency of the country, last year, had gone up $3,000,000 to move off the produce of the last harvest and this year the prospect was that the currency might go up to $16,000,000 or $17,000,000, and how was it possible to expand to that extent, under the system of the Minister of Finance [Alexander Galt]?
When the banks had nothing but Government notes they would not contract and expand with the interests of trade, but having no fear of being called upon for specie, they would arrange with their customers to keep their money out at interest the whole year round. If a man came into the country to buy produce with a first class exchange on New York, at three months, in his pocket, for a large amount, it would then be impossible for him to get it discounted. It was true, the hon. gentleman had said he was not insensible to this difficulty, and that it should be provided for, but he had not told them how.
He (Mr. B.) desired him to explain how this was to be done. He called upon Hon. Mr. Galt to explain this point as his speech would not be complete without it. The hon. gentleman was not treating the House fairly in keeping back this information, but he (Mr. B.) had risen with knowledge that the scheme would have to be dragged out of his hon. friend. But the hon. gentleman had said he did not mean to force his scheme upon banks, he would only make an arrangement with the Bank of Montreal. The directors of that bank were a most respectable body of men, and he admitted that it was a most respectable and useful institution to the country, but he was unwilling to use any more power or influence placed in its lands.
Next to the Grand Trunk Company it was the most powerful and the most dangerous corporation in the country, and when it was found that they had been making 13 per cent, and yet were not satisfied with that, but had shutdown upon the Upper Canada merchants, and taken away their capital to make more of; it was time that the House should refuse to put any more power in its hands. The hon. Minister of Finance [Alexander Galt], would fail in being able to pay the amounts proposed by this scheme because he dare not send Iris five millions away. These notes will come in on the first operation in a very short time after their issue, and he must keep on hand for their redemption, an amount beyond the ordinary reserve to a large extent.—He also intended to show that in the course of time this currency would drive bank notes out of circulation, and reduce the currency to a specie basis, but it being nearly five o’clock the Committee rose with the intention of resuming the debate on Tuesday.
John Sandfield Macdonald [Cornwall] suggested that the government should allow two sittings on Monday to expedite the business before the House.
George-Étienne Cartier [Montreal East, Attorney-General East] said the matter would be considered, and it would be arranged to have two sittings on Wednesday, and perhaps three on Tuesday.
The House then agreed to amendments made by the Council to several bills passed and adjourned.