Central Bank?

Canada's ten many-branched banks have no Federal Reserve overlordship, no small bank competition, but the law under which they operate must be overhauled every ten years. When the question of a new Bank Act came up in Parliament as usual last spring, the danger of the banks' situation was suddenly plain. From the Western prairies rose furious anti-banker howls for a new system, for lower interest rates, for "nationalization of credit." Parliament was impressed. To avoid financial confusion when Canada could least afford it, Conservative Premier Bennett got the Parliament to extend bank charters for one year during which he promised to call a commission to study Canada's banking, currency and coinage.

He invited to its headship a famed Scottish lawyer, son of a Scottish parson, Hugh Pattison Macmillan, Baron Macmillan of Aberfeldy, co-author of the brilliant "Macmillan Report" of the British Treasury Committee on Finance & Industry. So sound and lucid was it that it became the only Blue Book ever published in Britain to net a profit. Second member of the Commission was another son of a Scottish parson, Sir Charles Addis, onetime director of the Bank of England. These two Scotsmen Premier Bennett balanced with two Canadian bankers, Sir William Thomas White and Beaudry Leman. To give Western Canada a voice he threw in Premier John Edward Brownlee of the Province of Alberta. For two months the Commissioners have inched over the wide Canadian landscape from bank to bank (TIME, Aug. 28). Last week, after the two Scotsmen had gotten back to London for congratulation dinners, the Commission's findings were issued at Ottawa.

Big news was that a majority of the Commission recommended a Central Bank for Canada, modeled on the Bank of England. In the majority were the two Scotsmen and the Western Canadian Premier. The Commission's minority—the two Canadian bankers—dissented on the grounds that a central bank would soon get messed in Canadian politics. Conscientious Lord Macmillan with his old laurels to protect warned:

"A Central Bank could not cure all the economic ills of Canada: it would not be a source of unlimited credit for all borrowers on all occasions: indeed, its operations might as often be restrictive as expansive."

Speaking at a dinner of the Canada Club in London last fortnight, he anticipated the possibility that the Bank might be a disappointment until Canadian bankers were converted to its principle. Puffed he: "When you reflect that not a single depositor has lost a cent in this troublesome period and that the banks are firm and solvent, you will agree that the bankers of Canada may well take credit to themselves. . . . I am not at all sure that Canada may not, before many years are over, become the economic centre of the British Empire."

To the Commission's second recommendation all five members set their hand. It called for an organization to extend intermediate and short-term credit to Canada's furious farmers. Observers last week expected Parliament, when it meets next January, to make the Commission's recommendations Canadian law.