Central Bank Bill, 1942—Second Stage.

Tairgím go léighfear an Bille den dara huair. Ocáid tábhachtach é seo—Bille dá thabhairt isteach chun an chéad Bhanc Ceannais sa tír seo do bhunú. Rud nuaaimseardha ar fad geall leis iseadh an Bhancaeracht Cheannais. Ní raibh aon ghá le n-a leithéid sin de Bhainc sa tsean-tsaol sara ndeachaidh an trádáil eadarnáisiúnta i méid agus sarar tosnuíodh ar bheith ag aistriú suimeanna móra airgid o thír go chéile. Is go mall d'fhásadar na Bainc sin sna sean-tíortha agus ní hé gur bunuíodh d'aon ghnó iad de ghnáth ach go dtáinig leathnú ortha do réir a chéile. Tá sé ráite ag duine éigin gurb amhlaidh a bhunuíodar iad féin i nganfhios dóibh féin, ach is mó d'fhás ná de bhunú a bhí ann le ceart. Nídh nach iongnadh d'fhásadar i gcéadóir sna tíortha a raibh margaí foirbhthe airgid ionta agus ina raibh Bainc a mbeadh na feidhmeanna san aca ag teastáil chun freastal ar thuile agus trághadh cúrsaí trádála agus airgeadais eadarnáisiúnta. Sna tíortha san féin níl sé ró-fhada in aon chor o tháinigeadar chun foirbhtheachta. Níor bunuíodh córas an Chúlchiste Chónasctha i Stáit Aonta Ameirice, cuir i gcás, go dtí an bhliain 1913.

Chuaidh an Bhancaeracht Cheannais chun cinn go mór de thoradh an Chogaidh Mhóir. Bhí treoir agus rialú láidir ceannasach ag teastáil mar gheall ar an gcuma ina raibh cúrsaí monaibh tré chéile ar fad tar éis an chogaidh agus ar na headar-bheartanna aimhréidhe a bhí le déanamh de dheascaibh na sean-aonaid airgeadais agus geilleagair, de shaghas Impireacht na Rúise agus Impireacht na hOstaire agus na hUngáire, do thuitim as a chéile agus mórchuid Státa Comharbais do bhunú. D'fhonn riaradh ar na fadhbanna móra práinneacha san do bunuíodh Bainc Cheannais d'iomad saghsanna a bheadh oiriúnach do gach tír fé leith. Ar ádhmharaighe an tsaoil ní riachtanas ná práinn den tsórt san fé ndeara dhúinne sa tír seo banc den tsórt san do bhunú, ach measaimíd gur ciallmhar an mhaise dhúinn ár gcóras airgeadais do chur in oiriúint do réim an lae indiu. Sin fáth an Bhille seo do thabhairt isteach.

Níl ach tamall beag de bhlianta o fuaireamar rialtas dár gcuid féin sa tír seo. Is gearr a bhí an Stát nua ar a bhonnaibh nuair a bunuíodh Coimisiún an Airgid Reatha. Sa bhliain 1927 a rinneadh san de bharr Choimisiún Fiosrúcháin do cheap an Rialtas. Chonnacthas dúinn gur mhaith an rud é cúrsaí airgeadais do thabhairt ar aon-chéim leis an bhfás a bhí déanta againn i gcúrsaí poilitíochta, agus cheapamar Coimisiún Fiosrúcháin eile. Do foillsíodh tuarascbháil an Choimisiúin sin. Toradh moltaí as Tuarascbháil Thromlach an Choimisiúin sin is mó atá i bhforálacha an Bhille seo, ach do chlaonamar o na molta san maidir le puintí tábhachtacha áirithe agus déanfad trácht ortha san ar ball.

Everybody is interested in the question of money from one angle or another. We are all primarily interested in it as we require it to purchase the essential and sometimes non-essential things of life. This interest might be described as the individual one. But, in addition, many people have become interested in the money question from what I might call the theoretical and social aspect. They want to know the nature and purpose of money and how it functions. Such interest has been due to various causes. In our own lifetime, we have seen many spectacular things happening to money. We witnessed the departure of the pound sterling from gold on two occasions and the eventual abandonment of the gold standard in almost every country of the world. We saw the Russian rouble fall in the summer of 1921 to one eighty-thousandth part of its 1913 value. We later witnessed the collapse of the German mark in 1923, towards the end of which year it fell to the nominal value of 50,000,000 marks to the pound sterling. The French franc also depreciated, but not in such precipitate and extreme fashion.

Apart from these striking events, we have heard frequent references to money in connection with rising and falling prices, and with booms and slumps. Those interested in finding solutions for various social problems come to consider the money aspect at some stage or another and concentration on the money aspect of these problems has given rise to various theories and various schools of thought. Interest in the theoretical and social aspect of money has, therefore, been widespread, and I am not unaware of the existence in this country of ardent disciples of various monetary reformers. In view, therefore, of everybody's concern in the money question, be it from the individual, or social, or theoretical angle, a Bill such as the present one which deals with a number of aspects of the matter should be of more than passing interest.

In order to get a correct perspective in considering the provisions of this Bill, it is, I think, desirable to refer to the Currency Act, 1927, many of the provisions of which are proposed to be amended and expanded by the present Bill. The 1927 Act was based on the recommendations of a commission appointed in March, 1926, under the chairmanship of Professor Henry Parker Willis, of Columbia University, New York. In its main reports on banking and currency problems, the commission dealt with three questions: (1) the standard of value; (2) legal tender; (3) apportionment and re-allocation of bank note issues; and it furnished supplementary reports on agricultural and industrial credit. Following upon the recommendations made, legislation was soon afterwards introduced to deal with each of these matters.

The Currency Act, 1927, provided for a unit of value, to be known as the Irish pound, which, in accordance with the arrangements prescribed in the Act, was to be maintained at an equal exchange value with the pound sterling. It provided for the issue of legal tender notes by the Currency Commission. It was prescribed that legal tender notes should be protected to the extent of 100 per cent. by a reserve consisting of gold, British legal tender or sterling balances, or British Government securities, the allocation of the reserve between these categories of assets being left to the discretion of the Currency Commission. The 1927 Act terminated the private note issue of the banks, and provided that the outstanding notes should be withdrawn from circulation under the supervision of the Currency Commission. Arrangements were made, however, for the introduction of a new issue of consolidated bank notes to be made by the Currency Commission to its eight shareholding banks.

The 1926 Banking Commission appreciated that its conclusions on a number of important points could not be regarded as final and that they would require re-examination in the course of time as a consequence of the change in the economic conditions on which they were based and the establishment of a further commission of inquiry after an interval of five years was recommended in a minority report submitted by the commission. Since the 1926 commission presented its reports, we have gained more experience in the handling of currency and credit problems and the community has developed a full sense of confidence in the ability of the Currency Commission to handle such problems.

In the meantime, there have been many developments abroad, in particular the phenomena of a varying standard of value not based on or associated with gold. The trend of development has been to have such problems dealt with through central banking organisations, groups of which have at least endeavoured to formulate an agreed policy in handling foreign exchange and other international problems.

The World Monetary and Economic Conference in 1933 passed a resolution to the effect that, for certain purposes, independent central banks with the requisite powers and freedom to carry out an appropriate currency and credit policy should be created in such developed countries as had not then an adequate central banking institution. This recommendation was implemented in a number of countries and it is of interest to note that between 1921 and 1936 inclusive 23 central banks were established in 23 different States. The result is that at present, with very few exceptions, there is no country of economic importance in the old or the new world which has not set up a central bank of its own. This central banking trend may be attributed to the growing realisation that, under modern conditions of banking and commerce, it is a great advantage to any country to have a centralised banking system with the control of currency and credit vested in one bank which has the support of the State and also has some form of State participation. In such circumstances it was felt that our currency and credit problems should be examined afresh with particular reference to the desirability of establishing in this country a central bank. That was accordingly one of the main problems set for the Banking Commission set up in November, 1934.

The first question which the commission set out to examine in this connection was whether the working of the existing provisions of the Currency Act, 1927, revealed any practical deficiencies in our monetary system. Allowing for the limited functions that may be performed under that Act, the commission came to the conclusion, as a result of its examination, that so far as the stability and safety of the currency and the provision of credit are concerned, our present monetary arrangements have worked in a way that can be described as generally satisfactory, account being taken of the great monetary difficulties through which many other countries have passed in the post-war period. The Irish economy has been spared the upheavals both of wild inflation and violent contraction of credit. In a measure, this was, no doubt, due to the monetary arrangements based on the link with sterling; but there was also the factor that the large foreign resources accumulated in the past have provided a strong reserve without which Irish economy and finance would not have stood so well the test during some of the most difficult years through which the world has ever passed.

The next question examined by the Banking Commission was the need for central banking action here, and what central banking functions might desirably be added to the existing functions of the Currency Commission. This involved a determination of what might be regarded as the essential functions of a central bank since there is no standard pattern for such institutions. Great differences are found, as regards both the organisation and the manner in which individual central banks carry out their operations. Allowing for the various differences of constitution and range of statutory powers and allowing for the fact that many such statutory powers are only rarely used, there emerge, however, certain functions which may be described as being the essentials of central banking.

The principal duty of a central bank is to maintain the integrity of the national monetary unit and to safeguard the credit position. To carry out this task, the central bank has to ensure the maintenance of external stability whether it be in terms of gold or of some foreign currency, to take care of the monetary reserves of gold and foreign exchange and also to have certain means to influence the currency and credit position within the country. These specific functions are, of course, not necessarily independent of each other. The maintenance of external currency stability, which is one of the main tasks of a central bank, is assured in Éire by the Currency Commission, to the extent that that body is bound to exchange Irish pounds for pounds sterling (andvice versa) in any amounts required. Central banks on an exchange standard are usually free to operate in a number of currencies, but this freedom is generally not utilised, for a central bank operates, as a rule, principally only in one foreign currency. It is natural that our monetary authority should operate principally in sterling because our foreign trade is so largely with the United Kingdom.

To ensure the convertibility of the Irish pound, the Currency Commission holds the monetary reserves of gold and foreign assets, which is one of the functions of a central bank. The commission may, if certain defined steps have been taken, hold in these reserves assets in currencies other than sterling.

As regards the right of note issue, which in modern times is becoming more and more concentrated in central banks, the issue of legal tender notes by the Currency Commission constitutes the flexible part of our monetary circulation.

Under the heads so far dealt with, the functions of the Currency Commission coincide in all essentials with those of a central bank. Now we come to an important difference, namely, that a central bank, but not the Currency Commission, is empowered to rediscount commercial and other bills for credit institutions, and to grant advances to them against specified securities. By these methods a central bank is able to supply funds against domestic assets, and in that way assist in the maintenance of the liquidity of the credit system.

Under existing provisions, our commercial banks are able to obtain legal tender from the Currency Commission against the surrender of sterling assets. As Irish banks all possess large sterling holdings, they can readily obtain whatever amounts of Irish currency they may require. That is the reason why the absence of other methods of obtaining funds from the Currency Commission has not created any difficulties for the banks.

I might add here that the central bank will also be able to issue legal tender notes directly in exchange for home Government securities of such kinds as are approved by it under the provisions of Section 3 of the Currency (Amendment) Act, 1930. The Banking Commission recommended the repeal of that section in view of the increased powers which it proposed for the central bank, but that recommendation has not been accepted by the Government. The central bank will, therefore, have adequate powers to provide legal tender notes in exchange directly for approved domestic securities.

It is desirable, however, that, in ad- dition to being able thus to secure legal tender notes from the central bank, commercial banks should also be able to secure accommodation not necessarily in the form of notes but by way of credit in the books of the central bank through the rediscounting by the bank of commercial and agricultural bills and through the granting by the bank of advances against specified securities. This form of credit accommodation is often more convenient than the receiving of legal tender notes to the same amount.

In no country in the world does the banking system normally possess enough cash to meet all its potential liabilities. Taking, for instance, the banking return for the December quarter, 1941, of the eight shareholding banks of the Currency Commission and the National City Bank published in the Quarterly Statistical Bulletin of the Currency Commission, the total of the current, deposit and other accounts of these banks was £194,927,551, while the total quick assets, i.e., cash, balances with London banks, money at call and bills held against these liabilities was £50,264,534, i.e., 25.8 per cent. approximately; a percentage which compares favourably with any banks in like circumstances elsewhere. If all the depositors wanted to withdraw their deposits at the same time in the form of cash the banks could not provide the cash. But normally all depositors do not want to do this at the one time. At certain times of the year, e.g., at the end of the month, when cash is drawn for salary payments, or at the end of the year or half-year when various dividends or tax payments have to be made, or during the holiday seasons or during the period of harvesting and marketing of the principal farm products and large-scale sales of cattle, there is a heavy drain on the cash reserves of the commercial banks. Moreover, in times of intense business activity or when the balance of current payments moves against a country and thus reduces the basis of bank credit, the strain caused by the regularly recurring factors just mentioned is considerably aggravated, and may reach breaking point and thus cause a crisis. In the absence of a central bank each of the commercial banks would have to carry an excessive and unremunerative amount of cash reserves to meet any such periods of financial strain or other emergency; whereas with a central bank to fall back on at such times a substantially smaller cash reserve is sufficient.

In the case of an emergency situation, however, whether arising externally or internally, it would be most advantageous that the central bank should have the necessary powers to meet any currency requirements by an extension of credit against assets other than those normally eligible to be exchanged for legal tender notes. For example, in the event of an international crisis that caused a freezing-up of gilt-edged securities in the London Stock Exchange coinciding with a crisis affecting one or more banks in this country, it would be desirable that the Irish central bank would, in such circumstances, be able to act as a lender of last resort. Banking crises have fortunately been rare in this country, but it is essential to provide for all contingencies. A central bank, therefore, performs the very essential duty of providing the necessary cash and credit against acceptable securities at all times, but especially in times of necessity.

Power to rediscount first-class commercial bills and bills drawn or issued for agricultural purposes or based on live stock is, accordingly, proposed for the monetary authority in this country. The quantity of commercial bills available in this country of a type which would be eligible for rediscounting with the monetary authority is small, the reason being that business here, as indeed in a great number of other countries, is to an increasing extent being financed by bank overdrafts, and not by bills that are repaid at maturity. A number of such bills is, however, available and it is proposed that the central bank should be empowered to rediscount them. In addition to rediscounting such bills, it is proposed that the monetary authority be empowered also to make advances against the collateral of Government securities, large amounts of which are held by our Irish banks. The exercise of the power of rediscounting bills and of the making of advances against specified securities will not necessarily be reserved for emergency contingencies such as I mentioned earlier. The central bank will publish its interest and discount rates, and specify the conditions on which it is prepared to grant accommodation, and it will then be for the commercial banks to approach the central bank if they require such accommodation.

Even when no extensive business is done by a central bank in rediscounting bills or making advances, nevertheless the fixing and publishing of a discount rate is a fact of special significance. The bank rate, as it is generally called, is one of the recognised weapons of a central bank for influencing domestic credit conditions inasmuch as the official discount rate exercises a certain influence on other interest rates. The bank rate determines not only the charge to be paid by borrowers from the central bank, but tends to influence general credit conditions, the use of savings, the flow of capital and the valuation of stock exchange securities and other capital assets. The relationship between the official discount rate and other rates of interest is, however, never a simple or a constant one.

It should first of all be noted that the discount rate of a central bank is, of course, not fixed independently of prevailing conditions in regard to savings and demand for credit accommodation. For instance, a cheap money policy cannot be more or less arbitrarily inaugurated and maintained by a central bank. The experience of many countries seems to prove conclusively that an attempt to force down interest rates when the underlying circumstances are not appropriate does not meet with success. The general rule is that, in periods of business prosperity, when the demand for capital is active, interest rates tend to stiffen, while in periods of depression interest rates tend to decline.

If the bank rate is fixed in arbitrary fashion without reference to prevailing conditions it will not then be an effective weapon, and will not produce the desired results. For instance, if credit is generally very plentiful, and commercial banks are lending freely at low interest rates, the raising of the bank rate by the central bank will not change the situation, as the commercial banks will not in such circumstances be forced to approach the central bank for accommodation. To make its policy effective in such a situation, a central bank would have to resort to what is known as open market operations, which will next be described. On the other hand, of course, if the central bank rate is reduced to such a level that it is cheaper to borrow from the central bank than from other lenders, then the central bank may be flooded with requests for loans, and will probably be compelled to raise its rate again. A central bank cannot, therefore, without incurring dangerous risks, fix interest rates which are altogether out of keeping with the requirements of prevailing market conditions of supply of, and demand for, funds. The weapon thus has its limitations, but it is nevertheless a useful weapon.

When bills are rediscounted and advances against Government securities granted to other credit institutions, the initiative is taken by those who wish to obtain facilities from the monetary authority. When the latter intervenes on its own initiative to purchase or sell bills or Government securities, such interventions are known as open market operations. Intervention of this kind has for its purpose the influencing of general credit conditions. Intervention may be prompted for several different reasons, and the actual object of any particular intervention will depend on the conditions obtaining at the time. As I already mentioned, a central bank may, for instance, so intervene in order to influence interest rates.

There are times—such as a period of depression—when the monetary authority deems it necessary deliberately to expand the cash basis of the whole banking system. It does so by buying securities in the stock exchange market, thus transferring cash to somebody else. If the seller is a bank, then that bank's cash reserve is increased, while its liabilities are unchanged and it is, therefore, in a position to lend more freely. Even if the seller is not a commercial bank the cash received by him is eventually deposited with his particular bank, and thus increases the cash reserve of that bank. The net effect will be that deposits and cash reserves will expand and the commercial bank or banks concerned will thereby be in a position to lend more freely and so set the wheels of trade and industry in motion again. Seasonal fluctuations of business are at times very marked, and there may be a need of central bank intervention to effect an equalisation of conditions at different periods of the year.

The Currency Commission has power to undertake what is equivalent to open market operations with the moneys in the general fund, in relation to which it may exercise the functions of a bank. However, its possibilities are not great, and the resources available are very limited. As a result of the merging of the note reserve fund with the general fund, as provided by this Bill, and of the acceptance of deposits from commercial banks, also so provided, the new central bank will have at its disposal much larger resources as a basis on which to conduct open market operations.

The main significance of such operations lies in the fact that they tend to increase or decrease the cash resources of the commercial banks, and that changes in such under given circumstances tend to bring about changes in loans granted by the banks, the interest rates thereon and, as a result of these, changes in general interest rates and economic conditions. A central bank which has the power of open market operations is equipped with a potent instrument for controlling and regulating credit, and this will be one of the powers of our proposed central bank.

When the commercial banks obtain credits from the central bank directly through the rediscounting of bills, or granting of advances or indirectly through the open market purchase of securities by the central bank, they may request the central bank to give them legal tender notes out of such credits in the central bank's general fund. Thus the central bank may be required to furnish legal tender notes against domestic assets, and not against those sterling assets normally accepted for the legal tender note fund. Moreover, under the Currency (Amendment) Act, 1930, the central bank will also have power to accept securities other than sterling for the purposes of the legal tender note fund. It is clear from these various provisions that in the issuing of legal tender notes there will be no limitation on the central bank confining it to the acceptance of sterling assets only such as described in the Currency Act, 1927. The objection of paragraph (b) of the Labour Party motion does not, in my opinion, therefore, apply. I notice that in paragraph (c) of the same motion, it is suggested that it is not possible for the proposed bank, within the framework of the Bill, to discharge the function and duty of safeguarding the integrity of the currency. I fail to see how such suggestion can be supported. Safeguarding the integrity of the currency implies maintaining its purchasing power at home and abroad. The external position is safeguarded by having a sufficiency of external assets in the legal tender note fund to meet any unfavourable turn in the balance of payments. Almost every central bank throughout the world is compelled to have a minimum of gold, foreign exchange, or other foreign assets to provide for such a contingency. The internal position depends on a variety of circumstances, but mainly on the price level. So far as purely monetary powers can regulate these internal conditions, the central bank will have such powers.

For reasons of convenience, safety and economy it has become the custom for commercial banks to maintain deposits and cash reserves with their appropriate central banks. Among the various other advantages for commercial banks this practice facilitates the settling of inter-bank payments, as such transactions can be settled by a transfer in the books of the central bank. Apart from this, the keeping of deposits with the central bank means that cash reserves are centralised and pooled, and can thus form the basis of a much larger and more elastic credit structure than if scattered among the various commercial banks. It is a fairly well established rule that central banks do not pay interest on deposits maintained with them. As they are not primarily profit-earning institutions it is essential that they should not be forced to devote undue attention to the earning of profits, and in consequence possibly incur risks inappropriate to their purpose.

Accordingly it is provided in the Bill that the central bank may receive deposits (not bearing interest) from any public authority or any banking or credit institution carrying on business wholly or partly within the State. This will allow institutions such as the Agricultural Credit Corporation and the Industrial Credit Company to make deposits with the central bank, if they so wish.

In addition to the numerous cases where deposits and cash balances are voluntarily kept with the central banks, following custom, there are some countries where the holding of minimum cash balances with the central banks is compulsory. Among the countries with such obligatory provisions are U.S.A., Canada, South Africa, India and New Zealand. The main reasons for such obligations are (1) to strengthen the liquidity of the banking system, (2) to provide the central bank with increased liquid resources, and (3) to immobilise a certain amount of the cash resources of the commercial banks and so prevent them from indulging in excessive lending and thus pursuing inflationary tendencies. In some countries where the holding of balances with the central banks is not compulsory, the commercial banks ensure their liquidity in part by voluntarily maintaining balances with their central banks, but more so by accumulating balances in foreign currencies. The position of our commercial banks may be regarded as analogous to the latter, as our banks have maintained a high degree of liquidity by their large holdings of sterling assets. I might add that without any compulsion the shareholding banks of the Currency Commission requested the commission to accept deposits from them by way of advance payments for the issue of legal tender notes which might be required at short notice and voluntarily deposited substantial sums with the commission for such purpose. The amount of such deposits at 31st March last was £3,019,000.

The new central bank will itself have adequate liquid resources for its own functions in the general fund and in the assets of the legal tender note fund and it is, therefore, unnecessary to compel banks to maintain deposits with the central bank on that score.

It is not necessary in the present circumstances of this country to immobilise part of the cash resources of the commercial banks for the purpose of preventing inflationary lending by them. Commercial banks in Ireland are not prone to err in this direction. In fact the opposite charge is sometimes made—that they do not extend sufficient credit. While not accepting this charge as correct, the Government think it desirable that the banks should increase their investments within the State, having regard to their relatively large holdings of external as compared with internal assets.

In considering this problem, it is necessary to inquire how our Irish banks came to possess their large holdings of sterling assets and to investigate whether there is any substance in the accusation that they are unpatriotically exporting Irish money for use in England instead of keeping it for investment at home. The banks' sterling assets came into being mainly in times when exports were in excess of imports, thus producing what are called favourable trade balances. This happened particularly during the Great War, 1914-18. These excess balances accumulated in the shape of credits in the books of English banks in the names of the Irish banks who held them for their Irish exporter-customers. At one time the Irish banks could have demanded gold from the English banks to settle such balances, but even then it was more profitable to buy some English Government or other securities yielding interest. The banks are not, therefore, primarily responsible for their external position. Initially, they are merely agents of the trading and other financial activities of their clients. The amount of foreign assets held by our banks is, therefore, to an extent outside their control.

Whenever the value of our imports, visible and invisible, exceeds the value of our visible and invisible exports, there occurs a fall in our external assets in order to make up the difference. Owing to the operation of various factors in the years preceding the outbreak of the present war, the general trend in Irish banking was in the direction of replacing external by internal assets. A policy of industrialisation, involving large-scale purchases of plant and machinery abroad, accelerates such a trend. The banks contend, however, that it is not their function to make such purchases and that the determination of such a policy is for industrialists and investors generally. They hold that the matter is thus not one which is concerned exclusively with deliberate banking policy.

It is felt, however, that the banks may be in a position, when times are more favourable, to assist further in the repatriation of our external assets where such can be done with benefit to the national economy as a whole. With this object in view, and in order to encourage banks, to increase their investments within the State, the Government have included in the Bill the powers set out in Section 45. These provide that the central bank board, with the consent of the Minister for Finance, may make regulations requiring every licensed banker to make with the central bank an interest-free deposit of a particular amount, or calculated in a specified manner, whenever after a certain date the assets held by such banker within the State fall below a specified proportion in relation to his liabilities within the State.

Following the addition of the various central banking powers described to the existing powers and functions of the Currency Commission, the next question to be considered is whether any change is desirable in the constitution of the Currency Commission. The Banking Commission Majority Report recommended that the same constitution should be retained, pointing out that the Currency Commission has worked with a great measure of success since it was established and during a most difficult period of the world's financial history. There is no uniform pattern of organisation for central banks or no uniform method for the holding of share capital of central banks. For example, in England, France, Belgium, Holland, Hungary and Portugal the capital of their respective central banks is held by private shareholders, though I might add that even in these cases, apart from the Bank of England, the governor and deputy governor of each bank are appointed by the State. In U.S.A. the 12 federal reserve banks are owned solely by commercial banks. The activities of the 12 federal reserve banks are co-ordinated by the board of governors of the federal reserve system consisting of seven members, all appointed by the President of the United States. The board of the federal reserve system appoints the chairman and two of the directors of each of the 12 federal reserve banks. The State owns the entire capital of the central banks in Denmark, Canada, Australia, and New Zealand.

The share capital of the Currency Commission is held by eight shareholding banks (which happen to be the banks named in the third schedule of this Bill) and the total amount of the capital paid up to date by them is £24,000. The accumulated reserves in the general fund of the commission are at least 12 times the amount of the paid-up capital, so that participation by the shareholding banks, in so far as the amount is concerned, is purely a formal one. While the Banking Commission recommended the continuance of such participation, the Government felt that it would be more in keeping with the purpose and function of the central bank that its share capital should be held entirely by the State. The constant and predominant aim of the central bank is set out in the Bill to be the welfare of the people as a whole. While serious differences in regard to implementing policy between the central bank and the commercial banks will, it is hoped, never arise, nevertheless some divergence on various matters may possibly arise, and it is felt that the central bank would be in a more independent position on these occasions and in other contingencies if its share capital were held by the State rather than by the commercial banks. It is proposed, therefore, that the share capital of the central bank shall be held by the Minister for Finance and that each of the eight shareholding banks of the Currency Commission shall be repaid the sum paid up by it.

It is also proposed in the Bill that these shareholding banks will be associated with the central bank for certain purposes, and provision is being mode whereby they will be represented by three banking directors on the board of the central bank. This is the same number as the banks have on the Currency Commission, but the method of appointment will be different. In the case of the Currency Commission three of its members are elected directly by a meeting of representatives of the shareholding banks, while in the case of the new central bank it is proposed that the associated banks will elect a panel of six names from which panel the Minister for Finance will appoint three banking directors. The presence of three banking directors on the board of the central bank will ensure the co-operation of the commercial banks in implementing the central bank's policy and will help to engender a spirit of mutual trust and confidence. The central bank will also benefit by the experience and advice of these three banking directors. The nation's savings are deposited with the banks and they are accordingly entitled to a place on the board of the institution which, by its policy in regard to credit and currency matters, will determine the real value or purchasing power of these savings. It has happened on the establishment of central banks in some countries, previously without a central bank, that the commercial banks viewed the new establishment with suspicion, and for some time kept aloof from it. It is necessary to guard against such a contingency here as the whole-hearted co-operation of the commercial banks is most desirable, if not indeed essential, for the success of the central bank's policy. The presence of three banking directors on the board of the central bank will, it is hoped, ensure good relations between the commercial banks and the central bank.

The Banking Commission recommended that the board of the new central bank should have four non-banking directors as against three in the case of the Currency Commission. The increase in membership would, it stated, afford the possibility of increasing the fund of knowledge available on the board. The Government, while agreeing with this view, felt that such objective would be better achieved by having up to five non-banking directors. It was also felt that a majority of four non-banking directors against three banking directors does not represent the greater qualitative influence of each banking director, especially as the non-banking directors would be drawn from different vocational groups or interests. The changed method of ownership of the share capital of the central bank is a further reason for having a lesser proportion of commercial bankers on the board as compared with the Currency Commission. The Government, accordingly, considered it more desirable that the statutory provisions should permit having up to five non-banking directors, not more than two of whom may be service directors. This will ensure that the various vocational groups and interests, other than banking, will not be inadequately represented. There are ample precedents for having a large number of directors, as is clear from the numbers on the boards of the central banks of the following countries exclusive in all cases of the governor and in some cases of the deputy governor. For instance, Argentina has 12 directors, Australia 8, Belgium 9, Canada 11, Netherlands 15, Norway 15, Portugal 10. It is proposed that the Governor of the new central bank shall be appointed by the President on the advice of the Government.

It is intended that there should be the fullest co-operation between the Government and the central bank. The Government does not, however, propose to interfere with the administration of the bank, which will be independent in the carrying out of its functions. This independence is possessed by almost every central bank throughout the world and is a very desirable provision. I notice that the Labour Party motion suggests that the House should refuse to give a Second Reading to the Bill because it does not provide,inter alia, that the central bank will be amenable to the authority of the Oireachtas. The Comptroller and Auditor-General will, under Section 35 of the Currency Act, 1927, audit the accounts of the central bank, and these will be presented annually to the Dáil. Similarly, the bank will be required to prepare an annual report which will also be presented to the Dáil.

The Oireachtas will be at liberty any time it wishes to amend the provisions of the Central Bank Bill when enacted and to entrust the bank with greater or lesser powers. In that sense, therefore, the central bank will be fully amenable to the Oireachtas. If, on the other hand, the proposers of the motion intend that the central bank should be subject to the Dáil in a manner similar to the ordinary Departments of State, then I must entirely disagree. Such a condition would be most undesirable, as it is essential that the central bank should be free from the apprehension of continual political messure.

Coming to the question of note issue, until the establishment of the Currency Commission the main currency in this country consisted of the notes of the joint stock banks. The 1926 Banking Commission gave full consideration to the question of terminating that system of bank note issue and its substitution entirely by legal tender notes. They favoured the course of authorising a pure bank note issue similar to the then existing fiduciary issue except that it would be freely convertible into Irish legal tender notes instead of, as before the 1914-18 war, into gold or into Bank of England notes. These notes were to be issued by the Currency Commission, convertible on demand into legal tender notes, but without legal tender status and payable by the responsible commercial banks.

The 1926 Banking Commission recommended that the consolidated bank note issue should be based on, and reflect, business conditions as represented by the volume of liquid sound advances granted by the banks within the State. This principle is recognised in the Currency Act of 1927 to the extent that the Currency Commission, in determining both the aggregate volume of consolidated bank notes and the allocation of that aggregate between several banks, is required to have regard to liquid sound advances by shareholding banks to persons within the State as well as other assets and liabilities of the shareholding banks.

The absence of a monetary authority endowed with all the usual powers and functions of a central bank was given by the 1926 Banking Commission as one of the main reasons for their recommendation to establish a consolidated bank note system. That reason will no longer obtain after the enactment of the present Bill. Furthermore, the fundamental basis recommended by the 1926 commission for the consolidated bank note issue was the volume of liquid sound advances granted by the banks concerned, and it has not been found practicable to employ that basis for the administration of the system of consolidated bank notes. Accordingly, the second important reason which motivated the 1926 commission in their recommendation no longer obtains. It has been decided, therefore, to terminate the system of consolidated bank notes and to have only legal tender notes issued solely by the central bank. This is entirely in keeping with the prevailing tendency throughout the world in recent years and in consonance with the widely held view that the issue of currency notes is the prerogative of the State or the duly authorised monetary authority in the State. In many countries ordinary commercial banks have had the right to issue notes but this right was generally subject to various conditions and safeguards limiting the total amount of notes that could be issued and providing secure backing for them. However, for the purpose of uniformity, better supervision and other reasons the general trend for many years past has been to give to the various central banks a monopoly of the privilege of note issue and there are but few central banks throughout the world which have not a complete monopoly of note issue.

It is not intended that the termination of the consolidated bank note system will have a deflationary effect and it is expected that as they are withdrawn they will be substituted by a roughly equivalent amount of legal tender notes. In order to give the banks an opportunity of adapting themselves gradually to the change, it is proposed to extend the process of extinguishing the notes over a 12 year period, sub-divided into four triennial periods. It is proposed that no further consolidated bank notes shall be issued after the 31st December, 1953, and that no bank shall pay out any such notes after that date.

It is inevitable, however, that numbers of consolidated bank notes will be outstanding with the public after 31st December, 1953. Even at present, there is outstanding a considerable number of old bank notes issued before May, 1929. Some of them are still trickling back to the banks and being redeemed at the rate of about £300 to £400 per week. Provision is, therefore, being made for the redemption of consolidated bank notes outstanding with the public after the 31st December, 1953.

In determining the amount of consolidated bank notes to be issued to each shareholding bank which prior to May, 1929, had the privilege of issuing bank notes, the Currency Commission has had regard under Section 60 of the Currency Act, 1927, to the amount of such former bank notes still outstanding. For instance, the maximum quota of consolidated bank notes for all banks was fixed at £6,000,000, but the amount actually issued in December last was £5,179,085, the balance of £820,915 being almost entirely in respect of unredeemed former bank notes which are deemed to be consolidated bank notes. It is probable that a substantial number of these outstanding former bank notes will never be presented for payment owing to loss by fire or some other cause. These notes are commonly described as "dead" notes.

Provision is being made in the Bill to allow the banks concerned to write off from time to time, with the sanction of the Minister for Finance, the amounts of notes estimated to be "dead". The basis to be taken will be the amount of former bank notes outstanding for all-Ireland on the eve of the 6th May, 1929, and the amounts of "dead" notes to be written off will also be estimated on the all-Ireland basis. This method is necessary as it is impossible to estimate how many notes are "dead" in the Twenty-Six County area and in the Six County area, respectively. It is provided that the Minister may attach to any sanction given by him to a writing-off such conditions as he may think proper. He may, in particular, require the bank concerned to pay either to the central bank or to the Exchequer a specified proportion of the amount written off. The object of this requirement is to secure for the State a share in the profits which result because of the non-presentation of such "dead" notes for payment.

The responsible banks are liable for payment of such notes. If, however, they are not presented for payment, they represent a windfall to the banks, as when these notes were originally issued to customers these customers received them in exchange for credits which they held with the banks. It is only just that the State should share such windfall with the banks having regard to the circumstances in which it accrued and as it resulted from the privilege of note issue given to the banks by the State. The shareholding banks of the Currency Commission at present pay a charge of 2½ per cent. on these old unredeemed bank notes. When a writing-off is effected such charge will cease in respect of those notes written off.

Part V of the Bill requires that every banker will deposit in the High Court a sum of £10,000 during the three years beginning on the 1st January next after the passing of the Bill and a sum of £20,000 thereafter. The object of the deposit is to protect the public against (1) persons who might attempt to conduct a banking business on too slender resources, and (2) against the solicitation of unscrupulous persons purporting to conduct a banking business which might, in fact, be of a very dubious nature and have something other than banking as its main objective. For many years our Irish banks have had remarkably sound records, but before the establishment of the joint stock banks (between 1825 and 1836) there had been several failures of small banks—some due to malfeasance and others to unsound policies. These cases, and more recent experience in other countries, demonstrate the need for protecting the public from unscrupulous persons posing as bankers or from persons who through the adoption of rash and unsound policies would jeopardise the funds deposited with them. Insurance companies are required to maintain deposits with the High Court under the Insurance Act, 1936, and a similar requirement has been embodied in the recent Trade Union Act. Following the recommendation of the Banking Commission, it is proposed that every banker should maintain a deposit with the High Court. The adoption of a flat figure for all banks or bankers is proposed, as it is doubted whether any useful purpose would be served by a scale varying with the business conducted by each bank. In order to avoid any hardship from an abrupt change the figure of £10,000 is suggested to apply for the first three years and £20,000 thereafter. It is to be remembered that there are some smaller banking concerns operating in this country apart from the joint stock banks and too high a deposit might inconvenience them.

Part VI of the Bill provides that as from the 1st January next after the enactment of the Bill no person may carry on a banking business unless he holds an annual licence issued by the Revenue Commissioners. Any person may apply to the Revenue Commissioners for such a licence. A fee may be charged for such licence and it is intended to provide in a subsequent Finance Bill for a small annual payment. The main object of this licensing system is to ensure the framing of a comprehensive list of persons conducting banking business. The licensing provision is being kept independent of the requirement to make deposits under Part V of the Bill, but in actual practice it is probable that every licensed banker will also have lodged a deposit under Part V. Every licensed banker will be required to prepare a balance sheet and to keep it posted up in a conspicuous place in each of his offices. He will also be required to furnish on demand to every one of his creditors and, in the case of a limited company, to every member of the company, a copy of the latest balance sheet on payment of a sum not exceeding 6d. The Minister for Finance is empowered, with the concurrence of the central bank board, to make regulations requiring licensed bankers to prepare and publish balance sheets at specified times and intervals and prescribing the form in which the balance sheets are to be prepared. Penalties are provided where a licensed banker does not comply with such regulations or with the requirement to post up the balance sheet in his various offices and branches. At present banks incorporated outside Ireland are not bound by the requirement to publish the financial statement prescribed under Section 108 of the Companies (Consolidation) Act, 1908. Unless they are exempted by the Minister for Finance the new provisions will apply to such banks as well as to banks incorporated in Ireland.

I might add that as well as these provisions for the publication of balance sheets, the central bank will have power under Section 37 of the Currency Act, 1927, to require any banker to furnish such information in regard to his banking business as the central bank may consider necessary or desirable in the due discharge of its statutory functions. Under another provision of the same section, the central bank, through its governor, may have access to the books or records of any associated bank where such course is considered desirable or necessary for the discharge of its statutory functions.

I do not propose now to describe at length the many provisions of the remaining Parts VII, VIII and IX of the Bill and I shall restrict myself to a brief account of main heads.

Part VII deals with counterfeit and unauthorised currency. The forgery of currency notes issued by or on behalf of the Government of any foreign country is to be made an offence under the Forgery Act, 1913. This follows on a recommendation made by the International Convention for the Suppression of Counterfeit Currency, 1929, which was ratified by both Houses of the Oireachtas and came into force in respect of this country on 22nd October, 1934.

Cases have arisen where photographs of bank notes have been published in newspapers or periodicals and again where imitations of bank notes, with various adaptations and changes, have been reproduced for advertisement purposes. While there has been no intention of forgery or deception in these cases, such publication or reproduction is a currency offence. A suitable penalty is provided for such offence, but one more lenient than the penalty for forgery.

It is necessary to safeguard the currency against unauthorised issues of documents which purport to be in substitution or in exchange for lawful money, and, accordingly, the issue of such documents or their receipt is to be made an offence. The issue of coinage and currency is the prerogative of the State. In addition to official currency and legal tender notes, the law and custom of every country permit bank notes, bank drafts, cheques and similar bank documents to be issued and received in payment. The laws of every country, however, set out conditions in regard to the backing of such bank notes and the protection of the public in connection with the issue of cheques and similar bank documents. The Bills of Exchange Act, 1882, and the Stamp Act, 1891, contain provisions designed for the latter purpose. The State cannot, however, allow the unregulated issue of currency with no safeguards or limitations. If every individual had the right to issue documents that could circulate as money, the monetary authority would have no control over the amount of money in circulation and the public could not be protected against depreciation of such money.

At present the responsibility for the issue of token coins rests under the Coinage Act, 1926, with the Minister for Finance. He has, however, discretion under the Currency Act, 1927, to make arrangements with the Currency Commission for the issue of coins through the commercial banks and, in fact, all issues up to the present have been made in this manner. It is provided under Part VIII of the Bill that the central bank will in future issue coins and that profits on the future issues will be paid into the bank's general fund, which will also bear the expenses of issue and redemption. It is proposed to dispose of past profits as follows: to repay advances made from the Exchequer to meet the expenses of the issue of coins in the past; to make £300,000 available to be paid to the Savings Certificates (Interest Charge Equalisation) Fund; and to carry the balance to the currency reserve in the bank's general fund.

The Currency Commission is at present required by statute to keep three main funds:—the general fund, the legal tender note fund and the note reserve fund. The assets of the legal tender note fund are required to be valued twice yearly on the basis of the current market value of the securities therein and any surplus is transferred to the note reserve fund. Conversely, any deficiency in the legal tender note fund is made good by a transfer from the note reserve fund. The result is, in all cases, to leave the assets of the legal tender note fund precisely equal in current market value to the face value of the legal tender notes outstanding. The procedure may sometimes necessitate that the assets of the legal tender note fund are written up to a value in excess of their original cost.

This system goes, however, to unnecessary lengths in reflecting short period fluctuations in the market value of securities and entailing publication of half-yearly adjustments. For this reason the Banking Commission Majority Report recommended that the existing legislation should be amended and that it should be left to the discretion of the central bank to write up or not, as it might think fit, the book value of any asset standing below current market value at the time of a valuation, and to decide whether any resulting surplus should be transferred from the legal tender note fund. Part IX of the Bill makes provision accordingly.

It is further proposed to wind up the note reserve fund, the maintenance of which in its present form is hardly any longer worth while. Accordingly, for purposes of simplification of accounts it is proposed to replace it by a currency reserve within the general fund. It is proposed to transfer part of the assets of the note reserve fund to the legal tender note fund and to apply them in writing down the assets of that fund below their market values at the time of the transfer. The remainder of the assets of the note reserve fund will be transferred to the new currency reserve.

Although no detailed statistical material is available, there is reason to suppose that in recent years the practice of purchasing certain goods on deferred payment terms has been increasing here as elsewhere. It is a matter of common knowledge that such articles as household furniture, radio sets, bicycles, etc., have been largely sold on deferred payment terms. Even though some of the enterprises selling goods in this way may have large resources of their own, the system as such almost inevitably entails, on the part of the sellers, resort to some degree of financing by outside bodies.

Apart from the question of the terms upon which commercial banks are prepared to finance such business, there is another question of wider economic and social significance. Buyers who purchase on "hire purchase" terms are in fact mortgaging future income, and, if the practice spreads, a new element is introduced affecting the general stability of economic life. The result may be to leave too small a free margin of unmortgaged income available for times of depression—with detrimental effects for the industries which are unable to sell their goods on "hire purchase" terms.

For these reasons the Banking Commission Majority Report recommended that the growth of the system of deferred payments should be carefully followed. It is of interest to note that, in August last, the Federal Reserve Board in U.S.A., in order to restrain spending and to help in checking inflation, was authorised to control instalment credit and to curb instalment purchases of consumers' durable goods, including motor cars, furniture and refrigerators. Statisticians estimated that about 6,000,000,000 dollars' worth of debts were outstanding at the time on merchandise bought on the instalment plan, about half of which represented debts on motor cars. Sales of various consumers' goods on the instalment system had been increasing and were estimated to have expanded as much as two or three times the incomes of the purchasers. Part XI of the Central Bank Bill provides that the central bank may demand from the persons engaged in selling goods on deferred payment terms and from persons specialising in the finance of hire purchase all such information as it may think necessary or desirable. The bank may require the persons concerned to furnish the information within a time limit of 14 days, or at three months' intervals.

In times of war and emergency, monetary and banking business becomes affected by the disturbed conditions, just as do ordinary business, trade, industry and life in general. Indeed, a change in any one kind of business has repercussions on all others. Among the general worldwide tendencies notable on the outbreak of war are a contraction of credits and a desire by all for more cash, though after the first shock is over, bank deposits increase. Interest, rates also are generally increased in the initial stage, but tend to fall later. For instance, at the outbreak of the present world war, the bank rates of a number of central banks were increased and some were again reduced within the following six months.

External transport and communications become dislocated or entirely interrupted with resulting effects upon external trade. Warring countries tend to decrease their exports and to look for increased imports. These various disturbances tend to produce drastic changes in the external trading of all countries. The balance of payments is affected and within a short period favourable balances may become transformed to unfavourable orvice versa.

Rates of exchange between foreign currencies suffer severe jolts and it generally becomes necessary to establish a system of exchange control in almost every country, whether belligerent or neutral. As trade and the balance of payments become disturbed, the amount of foreign exchange available for trading with certain countries is not always sufficient to cover the cost of the imports required from such countries. It, accordingly, becomes necessary to ration the amount of available foreign exchange—allocating it to essential imports and restricting the allocations for non-essential imports. A further object of the exchange control system is to prevent a depreciation of the external value of the currency of that country which imposes the control.

The most serious financial danger that is always encountered in times of war and emergency is that of inflation. Prices of imported materials and commodities first increase, producing, in time, increases in the prices of internally-produced materials and commodities. Incomes and receipts of certain classes of the community, for example, exporters and others, rise; there is increased Government expenditure on armies and armaments and the monetary circulation in general increases.

Any one of the disturbing changes which I have mentioned is liable to produce repercussions on a country's monetary system and may demand that immediate action should be taken by the responsible monetary authority. The cumulative effect of a combination of such changes may have far-reaching effects unless strong counter-measures are taken. Such measures usually fall to be performed by a central bank, and, without a central bank, we in this country are not effectively equipped to meet the contingencies which I have described. I may add, as an example, that when it became necessary at the start of the present emergency to establish a system of exchange control the administration of the system had to be undertaken by the Department of Finance—a function which would otherwise probably have been assigned to a central bank, if one were in existence.

I stated earlier that in order to provide for the event of an international crisis causing a freezing up of the external assets of commercial banks and coinciding with a domestic crisis affecting one or more of these banks, it was considered desirable, even before the present emergency, that an Irish central bank should be available to act as lender of last resort. The possibility of such an international crisis occurring is ever so much greater in war time than in peace. As the establishment of a central bank was considered desirable and necessary in normal times, it is doubly so now, and it is, therefore, only prudent that we should be prepared for all possible contingencies in the present critical times.

This Bill is a measure dealing with banking credit, currency and coinage and not one proposing to reorganise the whole national economy. Such an ambitious plan would require a more extensive and elaborate measure, or, rather, series of measures, and it is doubtful whether the resultant effect would mean increased happiness and prosperity for the nation. There is no royal road to these objectives. Some people think we can spend our way into prosperity. They want to reinvigorate the economic machine by Government outlay. The system has been tiled time and again in democratic states, but in no case has it met with success. It is doubtful whether it can succeed unless under totalitarian conditions, or, at any rate, under conditions which we would regard as incompatible with our democratic institutions. This is not to lay down that the State has not made, and should not continue to make, large sums available for the purposes of national development. One need only look at the various items which the State reckons among its capital assets at present to see what has already been done in this respect. We have made large sums available for the development of electricity, sugar beet, industrial alcohol, coal, and other minerals, agricultural credit and industrial credit, aerial development, rationalisation of creameries and last, but not least, all the multifarious activities financed by the Local Loans Fund. The capital sums issued from this fund to local authorities for development works of all kinds are now little short of £13,000,000, and the total value of the assets represented by our cash investments in all the forms of development that I have mentioned exceeds £30,000,000.

If our unemployment problem has so far defied complete solution, it is not, as these figures show, because we have been niggardly in the matter of finance. To find a solution for the problem is most difficult and complex, as the causes are both numerous and elusive. Some people, I think, mistakenly, over-simplify the problem by ascribing it almost entirely to the lack of money. That is a most misguided and harmful attitude to adopt. Money is only one of the many aspects of this involved problem. Among the other aspects at least equally important are, for instance, the character of the works to be performed, whether reproductive or not, the availability of the necessary raw materials, plant and power at reasonable cost, the prospect of the ultimate product or finished article being turned out efficiently and at a reasonable price and the further prospect of such product or article being in demand by would-be purchasers. No worth-while project has been held up in this acountry by lack of money to start it, whether the initiators were private citizens or the State. Sufficient savings have always been available for such projects. So far as central banking action can reasonably enable the monetary mechanism to make its contribution to the national economy, our new central bank will have the necessary powers to assist. But we must not make the mistake of expecting that the central bank will perform miracles or do things that fall outside its proper sphere of action.

The motion is that the Bill be now read a Second Time. To that motion an amendment has been tabled by Deputy Norton.

I move the following amendment:—

To delete all words after the word "That" and substitute the following words:—

"this House refuses to give a Second Reading to the Central Bank Bill, 1942, on the grounds that—

(a) the Bill does not provide that the monetary authority, established thereunder, will be amenable to the authority of the Oireachtas;

(b) the Bill contains no provision for removing the limitation on the issue of currency by the Irish monetary authority imposed by the Currency Act, 1927;

(c) it is not possible for the proposed Bank within the framework of the Bill to discharge the function and duty of safeguarding the integrity of the currency or of promoting the welfare of the people as a whole, and

(d) the Bill fails to make provision fur the promotion of such reorganisation of tho national economy as would enable the Government to provide full employment at proper wages for the thousands of people who are out of work, cause a cessation of involuntary emigration, put an end to poverty, and enable the people in rural Ireland to derive a decent livelihood from the efficient cultivation of the land."

We have listened to a lengthy and extremely interesting address from the Minister for Finance in defence of his new Central Bank Bill. I could not help feeling that the Minister, when he spoke to-day, spoke for somebody else and not for the Government Party, because I can recall times when speeches of an entirely different character were made on behalf of the present Government Party: when there was a full-blooded denunciation by that Party of the iniquities of banking in this country, of the limitations of banking and of the miseries and poverty which flowed from the manipulation of credit and currency here. The Minister has done his best to put a good face on a very bad Bill. Notwithstanding the fact that there was a certain blare of trumpets when the introduction of a Central Bank Bill was foreshadowed, we can now see, from the Minister's statement, that this Central Bank Bill is a tame measure, that it will not inconvenience the banks in the slightest, that it will not disturb anybody, that the bankers will continue to sell money at the highest possible rates of interest, that people will crowd into the emigrant ships, that the bankers will still get away with the swag on their side, and that the poor will continue to suffer the miseries and destitution which they enjoy under this Government to-day.

This Bill, in fact, is really eye-wash so far as the people of this country are concerned. It makes no change whatever in the existing banking traditions and is not calculated to influence in the slightest the standard of living of any person in this country. But the Bill does certain important things, things which were at one time represented as national apostasy in this country. One of the things which the Bill does is to preserve our parity association with British sterling. Not only does it maintain our parity association with British sterling, but we are perpetuating in this Bill a provision which was carried into the Currency Act of 1927: that is, the provision by which our relationship with British sterling is fixed not by the Currency Commission, not by any executive act of the Government but by statute in the Act of 1927. In this Bill we are continuing to fix our parity with British sterling by means of statute.

Every central bank in every country in the world, I think, is permitted to fix the rate of foreign exchange. In this country the central bank is not permitted to fix the rate of foreign exchange. The Government is not taking any powers to direct the central bank to fix the rate of foreign exchange. In this Bill we are fixing the rate of foreign exchange by statute, with all the inconveniences and all the difficulties that necessarily flow from a policy of that kind. This Bill in short really does one thing: it re-christens the Currency Commission and calls it a central bank and leaves things almost exactly as they were. Matters in the future in banking and credit spheres will continue as if the Currency Commission had been allowed to continue its functions without interference.

This Bill, as I think the Minister indicated, was based pretty largely on the Majority Report of the Banking Commission, and, of course, any Bill based on the majority report of that commission is not the type of Bill that need disturb those who live on selling money at high rates of interest in this country. Some papers concerned with financial matters have expressed their views on this Bill.The Economist, writing on the 14th of this month, said:

"The new central bank is likely to be little more than the existing Currency Commission under a new name. It would be more accurately described by the old-fashioned title of Bank of Issue."

Again, in the same paper on the same date, we get this reference:

"The currency of Éire is based on sterling. There is no suggestion in the Bill that any change is contemplated in the present basis of Irish currency."

So that when we pass the Irish Central Bank Bill have no doubt about it thatThe Economist is right that the currency of Éire is definitely based on sterling and is definitely anchored to sterling. This Bill, far from purporting to interfere in any way with the parity link of sterling, continues by statute the existing statutory link with sterling. The Times Pictorial, referring to the Bill, says:

"The link with the sterling group remains unbroken by anything in this Bill."

So that so far as those authorities which are concerned with the purpose of this Bill, authorities capable of analysing it and of measuring the consequences of it: so far as they are concerned, this Bill in fact does nothing more than re-christen the Currency Commission. It maintains the link with sterling, and it ensures the continued anchorage of our money to British money. These functions, as they will be exercised under the Central Bank Bill, are at present exercisable by and, in fact, are executed by the Currency Commission which exists to-day. Of course, any Bill passed on the Majority Report of the Banking Commission was bound to have considerable limitations because that report was one which envisaged the continuance in this country of all the economic problems that are with us to-day. It told us about the possibilities of emigration. It based its report on the assumption that it was extremely difficult to get people to continue to live in this country, that there was no great necessity to break from the scheme of currency and credit in operation because in the long run we could not possibly encourage an increase of population. According to the Majority Report of the Banking Commission it was doubtful whether, as a matter of fact, we could keep in this country the people who are already here. The Majority Report of the Banking Commission, therefore, virtually recommended no change whatever, except the minor change necessary by the creation of a central bank.

In this country, as in every other country, banking is a vital public institution. A nation must concern itself with the operations of its banking institutions because these institutions go to the root not merely of the independence of the people but, in addition, regulate to a very substantial degree the economic conditions in the country and in that way dominate the lives of large sections of our people.

I never had much hope that the Majority Report of the Banking Commission, if implemented by the Government, would ever bring about any of the radical financial changes which are necessary in this country. The majority report condemned most of the beneficial governmental activities. It said, for instance, that subsidising housing was extravagant and wasteful. Everybody knows that, in existing circumstances, if housing were not subsidised there would be very few new houses erected in the country. It disapproved almost entirely, I think, of State borrowing for revenue purposes even in times of crisis. It disapproved entirely of the Land Commission policy which was being pursued by the Government, even though the object of that was to break up and bring into cultivation in the form of self-contained economic holdings the waste prairie land which we had in the country, and still have in many parts of the country. The Banking Commission, which attacked activities of so beneficial a character as housing and land division, obviously represented a viewpoint which did not desire any State interference whatever with economic activity in this country, which wanted to keep that economic activity to a minimum, with all the consequences which would flow to the plain people of this country through a State abandonment of those worth-while activities.

The majority report recommended that a central bank should be established, but even then it had a rather strange kind of central bank in its mind. It did not recommend a central bank which would have any control over the volume of money: at least it did not appear to make any provision for control over the volume of money. It did not recommend the holding of the reserves of the commercial banks by the central bank, and it made no provision for an activity of central banks in, I think, almost every country, namely, the rediscounting of bills. It is true, of course, that the rediscounting of bills is provided for in this Bill which we are now discussing, but I should like to know whether, in fact, that rediscounting of bills will be resorted to by this central bank acting as agent of the commercial banks, or whether it is not merely put in as a piece of embroidery, with very little likelihood that it will be implemented. I had hoped that the Minister would tell us if local authorities will have power to avail of the provision for the rediscounting of bills, or whether that function will be something which the central bank might do but in fact will never be operated by the bank.

The best section in this Bill, from the point of view of literature, is Section 6. Section 6 says :

In addition and without prejudice to the functions, powers, and duties vested by law in the commission immediately before the appointed day and to such functions, powers, and duties as are specifically conferred or imposed by this Act on the bank, the bank shall have the general function and duty of taking (within the limit of the powers for the time being vested in it by law) such steps as the board may from time to time deem appropriate and advisable towards safeguarding the integrity of the currency and ensuring that, in what pertains to the control of credit, the constant and predominant aim shall be the welfare of the people as a whole.

The last portion of that section, of course, is taken from the Constitution. Apparently those words were put into Section 6 to give this Bill a kind of patriotic flavour, and to impregnate it with a certain kind of high-mindedness. Now that we come to link up the welfare of the people with the integrity of the currency, it might be well if we were to ask ourselves what in fact is the integrity of our currency. Section 47 of the Currency Act, 1927, provides that an Irish monetary authority can only issue Irish currency in exchange for an equal amount of British currency, so that, as far as we are concerned in this country, the integrity which we attach to our currency is a type of integrity which no one will accept, which nobody will trust. It is only accepted and trusted, apparently, because it is necessary before we can issue Irish pound notes to back those pound notes of ours with British pound notes, the security obtained by lending the British Government a pound, the scrip then received being used as an anchor for the integrity of our pound note. Is that the type of integrity of the currency that we are going to maintain? Is there no other integrity with which we can endow our pound notes—the pound notes which are issued under this Bill; the pound notes which exist to-day? The only type of integrity visualised by this Bill and the Currency Act, 1927, is the integrity of being anchored to British currency. This Bill proposes to continue that position. The Irish pound might, in ordinary commercial relations, if there was no anchorage to sterling, have an integrity, but, when that integrity is read through the Currency Act, 1927, and this Bill, we find that the integrity which this Government gives our pound notes is the integrity of being anchored to British sterling, and anchored to it at a time when even the value of that sterling may be highly questionable.

We were told in Britain after the last war that it was necessary to deflate the pound, and Britain in consequence suffered a period of unparalleled economic distress. The deflation of the pound was carried out in Britain, and all the specious gentlemen who have an interest in deflation after their coffers are well swollen by inflation told the British people that the object of deflation was to enable the pound to look the dollar in the face. That was the purpose of British deflation as represented by the rentier class in Britain at the time. The pound never looked the dollar in the face, of course. Statements of that kind are financial rubbish. The only effect of the deflation was to give Britain £2,500,000 unemployed in an effort to maintain the deflation policy, which subsequently burst itself and created a situation that could only be controlled again by the British going off the gold standard, which, it was said in 1925, it was necessary for her to get back on to in order to cure the ills and evils then existing in Britain.

Perhaps we will be told now in support of our anchorage to sterling that the purpose of our anchorage to sterling in this Bill and in the Currency Act is to enable the Irish pound note to look the British pound straight in the face in Threadneedle Street. I do not understand the rigid reluctance of the Government to examine our currency problems in relation to our position here, with a view to breaking from the anchorage with sterling. Other countries that profess an undying loyalty to Britain as their motherland do not anchor their currency to British sterling on a parity basis. Instead they have found it in some instances, notably in Australia and New Zealand, advantageous to adjust the relationship of their pounds to British pounds and they have been able to do that with considerable success from the standpoint of solving their economic and fiscal problems.

We have now had approximately 20 years' experience, during which we had control over our currency and over our credit. For a good portion of that time we used British currency entirely; for the greater portion of that time we used an Irish currency anchored to Britain and, if we were to examine the consequences of that financial policy, we would find that it has certainly given us the miserable results which we see all round us to-day. The policy of financial dependence on British sterling, of an anchorage to British sterling, which completely destroys any effort on our part to create a price level suited to Irish conditions, has given us an impoverished people and has created a situation in which we export food to Britain at uneconomic prices, because our people are too poor to buy the food which we export to Britain. We are exporting that food to Britain to-day and are taking in return for it cheques which we may lodge to our credit in the Bank of England, but it may be very difficult to get somebody to give goods for those cheques when this war is over.

The financial policy which we have pursued during the last 20 years has resulted in keeping the mass of our people in a condition very little removed from poverty. It has resulted in filling the emigrant ships. Sometimes they went to America and sometimes to Britain, but no matter where they went the emigrant ships were full of people and no effort was made to end the rigid deflation policy which produced an abundance of men for export but inadequate credits at home to keep our people in employment. That condition of affairs would be bad enough in peace time, and it would be intolerable at any time, but in a time of crisis we propose to perpetuate that policy, perpetuate it not by any kind of executive decision, but by writing into our legislation a definite provision for our anchorage to rigid parity with sterling.

We used not always to believe—at least members of the Government did not always believe—that an anchorage to sterling w*as a desirable thing. The present Minister for Local Government and Public Health was reported in theIrish Press of 29th September, 1931, in these terms:—

"Even before that Party went into the Dáil its members had directed public attention to the dangers to which our people were exposed by reason, not only of our attachment to sterling, but of the short-sighted policy of the Anglo-lrish bankers in investing their depositors' funds in British securities. The Free State Government under President Cosgrave has been on the side of Britain; the Anglo-lrish bankers have been on the side of Britain; the Currency Commission has been on the side of Britain."

These were brave words.

Tell us what he said about gold ounces.

These were brave words from a man who, within the following six months, was appointed, apparently because of his ability to see financial matters in true republican perspective, to the high post of Minister for Finance in the first Fianna Fáil Government. According to the then Minister for Finance, there was grave danger for the nation, not merely by reason of attachment to British currency, but by the attitude pursued by the Irish banks, an attitude which they can still pursue with the utmost ease when this Bill is passed.

The Minister, in the course of his address this afternoon, took some pains to explain the constitution of the central bank. Under this Bill a governor will be appointed. There will be three banking directors, who will be really nominees of the banks, because they will be selected from a panel nominated only by the banks, and there will be five other people, if as many as five are appointed. The most striking part of the proposal in the Bill, so far as the bank is concerned, is that the State and not the commercial banks will put up the money as the capital for this new central bank. The State having put up the money, in other words the people's money having been invested in the new central bank— there is no provision for adequate parliamentary control over the bank. It may be that an annual statement will be submitted here, but that is not the type of parliamentary effort that suffices to ensure public control over an institution such as a bank.

The Minister apparently thinks it would be unreasonable, unfair and unprecedented for the central bank to be subject to parliamentary control through a Minister, but where central banks have been worked probably more satisfactorily than elsewhere, in New Zealand and Sweden, there is provision for parliamentary control through, the respective Ministers for Finance. Here, if the State has to put up the money for the central bank—in other words, if the people's money is to be invested—then there ought to be adequate parliamentary control, so that we can be sure that the activities of the bank are in consonance with the people's requirements, and so that there will be control by the people's representatives over the policies which may be pursued by the bank. In any case, if we want to ensure that some effort is made to implement what is set out in Section 6 of the Bill, we ought to provide adequate parliamentary control, because you may take it the directors of the central bank are not likely to waste much time with the high-sounding phraseology of Section 6, in so far as it affects the welfare of the people, and their main concern as bankers will be to perpetuate the banking practices which have given us the results we see to-day.

It is true that most countries have central banks, but central banks as such have not proved that they are capable of exercising any great influence over the economic conditions of the countries in which they exist. The central banks in France and the United States and other countries, and the manner in which they have been implemented there, have not achieved any very substantial change in the economic conditions of those countries. Where central banks, as in Sweden and New Zealand, have been implemented with the positive desire to transform the social and economic conditions of the people, very positive results have followed results which might very well cause envy here because of the extent to which they have transformed the conditions of life in those countries. I quoted a few moments ago the viewpoint of the Minister for Local Government and Public Health in respect of the anchorage to sterling and the pro-British character of our banking institutions here. Other members of the Government had views on central banks, too. Here was a view expressed by the present Minister for Industry and Commerce and Supplies. When speaking at a meeting in 1931 he, Mr. Lemass:—

"foreshadowed the establishment of a central bank in Dublin and the creation of a currency on an independent basis to save Ireland from the danger of the British financial crisis."

More brave words! And at that time he foreshadowed that as part of the policy of a Fianna Fáil Government.

Will the Deputy say, for reference purposes, what he is quoting from?

From a political speech made by the present Minister for Industry and Commerce in 1931; the Minister for Industry and Commerce then wanted to establish a central bank with a currency on an independent basis to save Ireland from the British financial crisis. What we are doing under this Bill is that we are anchoring our Irish currency, not to the goodwill of our people, not to the energies of our people, but anchoring our currency here exactly to the British currency, which the Minister for Industry and Commerce then stated was likely to bring aboat a catastrophe so far as our currency was concerned. He had another interesting speech to make at Collooney, Co. Sligo, on the same subject, as reported in theIrish Press of 14th September, 1931.

A bankers' meeting?

No; a public meeting in Collooney. He said:

"It was a very long time since the Irish people had experienced circumstances so bad as those now existing and this was due to our financial subjection to England. When the Free State Government decided to tie up its currency with British currency and to permit Irish banks to maintain their English entanglements, it destroyed with one blow the greatest benefit secured by the Treaty. When the Irish people struggled for independence it was not merely to enjoy the spectacle of green pillar boxes and uniforms and payment of taxes to an Irish-speaking Minister for Finance, but also that the forces which have produced depopulation and poverty in the country in the past could be checked and harnessed for the public good. Poverty persisted and depopulation continued because in financial matters the same conditions prevail now as before the Treaty. The Free State Government's policy was to leave everything to chance and hope for the best. Fifty-five thousand families in this country were being maintained on home assistance and the number was increasing."

If the Minister for Industry and Commerce has a ghost, he ought to charge the ghost with the responsibility of asking who is using the Minister's name to-day. The Minister for Industry and Commerce and the Government that now link us up definitely on a parity basis with sterling told us that all our evils in 1931 were due to the manner in which our finances were being manipulated in the interests of subserviency to Britain and that, because of that, 55,000 people were in receipt of home assistance. We have now 100,000 in receipt of home assistance and, in my opinion, we have got that problem with us largely because of the methods which the Minister rightly condemned in 1931, but which he has now swallowed, if the Minister for Finance speaks for the Government here this evening.

My strongest objection to this Bill is the manner in which it provides for a definite parity link with sterling in a statutory form. I believe that what the Minister for Industry and Commerce said in 1931 represented a much greater contribution to the solution of our economic difficulties than this Bill does. Will the Minister, who made that speech, now line up, notwithstanding the clear terms of his speech, in support of a Bill which is definitely anchoring this country in a statutory form to British sterling? British sterling may suit Britain. It may suit a country with Britain's entanglements. There is no evidence whatever that our anchorage on a parity basis to British sterling is in our interests. One of the obvious things that it does is that it prevents us from exercising any effective economic control here over price level, which means, in effect, that it prevents us from exercising any real control over conditions in this country, because they are maintained by price levels, by the cost of production, by the distribution of wealth, and by what goes from that wealth to keep people in employment, and to look on the whole question of our finances and our financial policy from the standpoint of what contribution they can make by effective organisation to the solution of our unemployment problem and the associated economic problems.

So far as I can see, this Bill makes no change whatever, in the existing position, of a kind that need trouble anybody. We can pass this Bill if we like, and when we have passed it unemployment, emigration, hunger and misery will continue for our people just the same as they exist to-day; we will still fill the emigrant ships, we will still keep idle men at the labour exchanges, we will still have 100,000 of our people living on home assistance— we will have all these problems with us when this Bill is passed, and let no member of the House delude himself into believing that this Bill will, in the slightest degree, influence beneficially the problems of life in Ireland to-day.

This Bill gives no hope whatever for any economic resurgence in this country, and it gives no hope whatever that any of our problems will be solved or their solution made easier by its enactment. When the Bill is passed, money will be as dear as ever. Money, so far as the mass of the people are concerned, will be as scarce as ever. Agriculture will still struggle on on subsidies. Idle workers will continue to gather around the labour exchanges for miserable pittances to sustain them in conditions which are a reproach to every decent conception of our Christianity. In short, this Bill, in so far as the mass of the people are concerned, is just make-believe. In so far as the people generally are concerned it means only for them disillusionment. We believe that this Bill will not do any of the things which it is necessary to do in present circumstances. The Labour Party have submitted an amendment to the Bill, and I offer it to the House in the hope that it will insist that the Government will examine the question of our currency and credit problems in a new light and in accordance with the aims and objects which, they indicated, constituted their policy before they adorned those benches.

I formally second the motion.

The Minister favoured us with a much longer and more detailed explanation than we usually get from a Minister in introducing a Bill into this House. He managed, in the course of his statement, to give us a good deal of information that had already been furnished in the Banking Commission report, and perhaps it is all to the good that that should have been so. His case for the Bill rests upon the fact that most countries have now got a central bank and we ought to have one, I suppose, as well. A central bank has been recommended by the Banking Commission, it is quite true, but it does not appear to have been recommended by the Banking Commission with any great degree of enthusiasm—even by the expert members of the Banking Commission. This Banking Commission was indeed a heterogeneous collection, picked from here, there, and everywhere, some with a knowledge of the subject, some with theories, others with an open mind, hardly a commission that would be selected by any body other than the Government of the country at the time.

However, its report is there. It is rather unfortunate that we had to wait for five years after the report was presented to the Government for this Bill to be introduced. It took a considerable amount of studying, and while the Minister and other members of his Party may have time to waste, he ought to have some consideration for those of us who have not sufficiently long to live to waste time. To read that report a second time is certainly equivalent to a penitential exercise during the holy season of Lent. A central bank is recommended mainly on the ground that other countries have central banks. We seek to discover the reasons why we should have a central bank and they are given to us in much the same sort of language as the Currency Commission was recommended so many years before—to safeguard the integrity of the currency.

The Currency Commission or the central bank is merely in the same capacity as a Guard on point duty, regulating traffic. Whatever hopes there are of regulating the currency of maintaining its integrity, of ensuring that the Irish £ will be equivalent to the English £, have been provided for us by the depositors in the banks of this country and by those who have been responsible for investing those deposits over the last 20, 30, 40, 50 to 100 years. The source of the integrity of the £ either now or in the future depends upon those depositors. There does not appear to be any special regard for the depositor in this Bill. He is the person who is providing the whole strength of the case for the integrity of the £. He is providing the means that Deputy Norton has spoken of, that the unlettered and unlearned Ministers spoke of before-they occupied those benches, when they thought that currency, finance and plenty of money could solve every problem. There is no special attention paid to the depositor in this Bill. His interests are not safeguarded. If I were asked what was the purpose of this Bill I would say it was to bring more money into the coffers of the Exchequer. That is the main purpose of it. We are told that the measure is to be one to permit of the discounting of bills. I am sure practically every paragraph in the Banking Commission Report dealing with bills says there is no such business here. In no case is it stated in the whole of the report, from beginning to end, that there is any bill business here.

I am quite sure it is not meant to mislead the people, but why lead them to think there is such a thing when there is not? In what way then does this Bill help towards effecting the purpose that is set out in Section 6?— what we will call for the moment, in the absence of a better description, the pious section:

"in what pertains to the control of credit, the constant and predominant aim shall be the welfare of the people as a whole."

In what measure is there any contribution towards either the credit or the welfare of the people as a whole? Whatever money we have in this country is centred in the banks and in the central bank, or the Currency Commission at the present moment. The purpose of this Bill is to get more money annually from that source for Government purposes, for Government spending.

What further means are required in this country to improve the credit of it, to make credit available at a cheaper price? Take again the Banking Commission Report. What does it say on this subject? It says that the average price for the £48.7 millions of advances would be in the neighbourhood of 4.39 per cent.—less than £4 10s. per cent. per annum. Is it proposed in this measure to get the central bank to aim at a lower price for money than that? It is not. The Minister did not say so in the course of his speech. If I remember correctly, the trend of his case in the whole speech was that those were circumstances over which the central bank had not got and would not have voluntary control; that they were determined by conditions over which the central bank could have no control. Very good then. If we are honest with ourselves, there is no significance, there is no meaning whatever in the statement, "in what pertains to the control of credit, the constant and predominant aim shall be the welfare of the people as a whole." Terms like this are in the Constitution. To my mind they are dangerous because they excite the imagination of those who think they understand publications on money, on finance and on all these matters, and stimulate them to think that it is possible to get money issued at no price at all and that the solution of our difficulties is to be effected by the issue by the State of money with no backing. The Government, to my mind, is straddling itself on that question; it does not come down on one side or the other. It makes an attempt to placate that sort of thing instead of standing up to it.

If they have found during the last eleven years that the utterances that were mentioned by Deputy Norton are wrong, it is not fair to people to leave them in any doubt regarding such questions. It is morally wrong for those who ousht to know better to think that you can have in this country an issue, at the whim of either the Government or the central bank, of notes without any backing at all. Even though one need not regard the Banking Commission Report as the report of a conservative body, in the course of it they deal with the price that is charged by the banks for money. They deal with the profits of the banks. Although presumably, excepting those who are bank directors, none of those that were on that commission held any shares in the banks, they point out that the profits are a matter of importance in connection with banking in the country, that if they are not maintained, it gives rise to uneasiness, and that rumours of loss are most dangerous. That is dealt with very extensively, I think, in paragraph 316. It goes on to say that, although we are in the happy position of being a creditor country and have more than a sufficient amount of external assets to our credit, there is a danger, when the trend, as the trend happened to be at that time, is to drain these sterling resources, even in a strong creditor position, of becoming weak, without that development being observed and of the position, in a very short time, deteriorating to such an extent as to make it almost impossible to get back to a sound position.

I said at the beginning that one of the reasons urged for our having a central bank is that most other countries have a central bank. It would be rather interesting to examine the real reason for the establishment of central banks in most countries. Some of them are in a sound creditor position, but most of those which set up central banks had to do so because they were not in that position. They were forced to take this step in order to correct the rather uncertain conditions of their currencies and to endeavour to conserve, by means of the central bank, whatever resources there were in order to maintain the integrity or parity of their currency.

We are not in that unfortunate position—thanks neither to us nor to the Government, but merely to the depositors, and to the favourable trend of affairs, notwithstanding the picture painted by Deputy Norton of conditions for a certain number of years. We are concerned to know in what respect this Bill contributes towards maintaining that position, because, to appeal once more to the Banking Commission Report, it is stated that there is practically no country in which the price of credit is as moderate as it is in England and that our rates bear very fair comparison with even the rates ruling there.

The Banking Commission in their Report say—and I presume that as the Government had sufficient confidence in them to appoint them as a banking commission, they examined the case very carefully—that there is no complaint whatever on the part of the public of this country that sufficient credit was not made available by the banking institutions, by the commercial banks, as they are called, that in no case had there been a suggestion made that they had failed to do so, a suggestion which could be substantiated. We of the public know nothing of this matter except what we read there. We have heard at various meetings of the shareholders of banks on occasions when the chairman addresses the shareholders, that the money is available, but here we have it from a personnel selected by the Government that it is so. Even in the course of the Minister's speech, while he may not have said positively that that is so, he puts in the double negative in his statement in that respect.

What is the cause of this sound position? Obviously, because there must have been some careful management of the resources of this country as entrusted to the banks over a period. One would imagine, if that were so, that at least when the board of a central bank was being set up, the nominations would be left to the banks themselves. That was done in the case of the Currency Commission and no reason has been assigned for failing to follow the same practice. I have no brief on behalf of the banks. I am not interested in them. Not a sixpence of my money is in them; it is quite the other way. They are a convenience to me at the moment. I know of no reason in the world why, if the Currency Commission has been able to carry out the various functions allotted to it over the last 15 years with a statutory personnel of seven persons, the central bank could not operate with the same number. In fact, according to the Banking Commission Report, a vacancy on the Currency Commission has existed for a number of years.

I think it has existed since as far back as 1934 and has not been filled yet. At present, the number of persons constituting the Currency Commission, according to an answer to a question by Deputy Mulcahy the other day, is five. Now we are to have eight. It does not appear from anything the Minister said, or from what can be discovered from the Bill, that there is such an amount of work as to necessitate the appointment of eight persons is against five. I see no particular reason why there should be any more than five persons—two bankers, two persons nominated by the Minister and the chairman—and let them select-their chairman as in the case of the Currency Commission.

One of the reasons given by the Minister for the alteration is that he is putting up the money. That is a very interesting reason. He is putting up the money for a central bank from which he will get at least five times the capital investment annually as a dividend on the money he puts up. I suggest that, in the interests of decency, that ought not to be done. The capital will be, approximately, £40,000. The Minister has got for the last ten years from both the consolidated note issue and the legal tender issue an average of £180,000 a year. In addition to that, the Revenue Commissioners have also brought in an extra £60,000 and, at times, £90,000— from 1932 to 1937, £90,000, and, since 1937, £60,000. Why should we always add to the cost of maintaining State institutions? Why is it that, year after year, additions are made to the public services and extra costs added on? The Minister informed the House some time ago that one could not compare the work done in the office I held in previous years with the work done in the office of my successor. I am quite sure that is true. I do not see why it should cost more. The income of the people has not increased as between 1932 and 1942, and it is that which must pay all these charges. There is no good reason why the cost of this establishment should be greater than that of its predecessor.

Now we come to a section which was passed over rather lightly by the Minister and was not referred to at all by Deputy Norton. I refer to Section 45. Perhaps the Minister in his concluding statement will explain to us what purpose it is intended to fulfil. It provides that when, in the opinion of the board of the central bank and of the Minister, the percentage of the assets of a bank held within the State is out of proportion to the liabilities within the State they can insist upon a deposit, free of interest, with the central bank. Now what is the purpose? The purpose is to get that bank to increase its domestic assets in proportion to the sterling assets held by it. How is it going to be done unless there is an increase in the issue of domestic assets? Unless there is to be a competitive market for the assets that are there already, there is no means of changing sterling assets into domestic assets unless one buys goods. There is none that I know of unless one were to purchase Irish assets from those outside the country who held them. To use that very learned phrase, there is no other means by which one can repatriate the moneys that we have abroad. The Minister, in the course of his statement, gave no explanation as to the purpose intended by this new penalisation. If it be a method to punish a bank, the bank is tried and convicted without being heard. If it is decided that the amount of external assets is too big in proportion to our domestic assets, how is that situation going to be corrected? I think the House is entitled to be told that. I know of no means of doing that except the one that I have mentioned—that goods can be bought for the money, or that some persons who hold Irish assets outside this State are prepared to part with them.

There is a third means, and if this proves to be the case it would be unfortunate: that there might be a bank in this country which held a proportion of Irish assets that it was thought was too heavy for it, and it was desired to compel one of the other banks to part with some of its sterling assets in, order to enter into possession of Irish assets. But, for whatever reason, that is an interference with the management of a particular business in this country, an important business. Without any explanation as to why it is being done is, I think, not only bad —it is evil. In the course of the Banking Commission's Report it is asked on several occasions: should the banks be asked to put even minimum deposits with the central bank? In general, they said "No." That transpires in several parts of the Banking Commission's Report. In all cases, they were against it.

The next point that arises is: What is the state of the market in this country for Irish securities? Let us understand one another perfectly about this. I do not want any mug-wump of a financier to say at any time that I am opposed to the banks holding Irish assets. I am dealing here with the facts, and with facts that were brought out by the Banking Commission, which is not my child, but the child of the Ministry. They have said plainly, in the course of their report, that there is no market for Irish securities in this country: that if you were to sell, or wanted to sell, £40,000 worth of Irish securities it would probably take a week to do so. That is not the case with regard to sterling assets. In the case of sterling assets I suppose that if £1,000,000 worth of War Loan was thrown on the British market it would not bring it down by half-a-crown per cent. If one were to go down to the stock exchange to-morrow with £20,000 worth of National Loan it is quite possible one could sell it in a day, but the sale would affect the price. Surely it is not intended by this measure to affect the prices—that is to increase, the quoted price, because if a bank has to go into the market to buy, and if there is no market there, obviously the security must rise in price. Is it intended to introduce into the market here that disequilibrium which has been so often and so roundly condemned in the report of the Banking Commission?

Now what is the position of a depositor going to be in a case of that sort, assuming that this power is going to be exercised? I would have no hesitation whatever in recommending depositors to withdraw their money if that policy were going to be pursued. I think that not only would it be right to do that, but that it would be the duty of any public man to say, if that is the form in which the resources of the banks of this country are going to be treated by law: "The best thing you can do is to put your money somewhere else."

Now, if the purpose be to put a colour, a green colour, on this Bill let us examine the other side of it. For the best part of a century we have had bank notes circulating in this country. The First Banking Commission recommended that that practice should be discontinued, that the right of note issue be confined, and that a consolidated bank note be issued in the names of the banks by the Currency Commission. In accordance with the legislation introduced at the time the maximum amount of issue was fixed at £6,000,000—that is, of consolidated notes—including any of the old dead notes that had been issued by the banks of issue prior to that time. The sum outstanding at the present time is in or about £5,000,000—that is of consolidated notes. The balance of the £6,000,000 is made up of those notes which were issued by the banks authorised to issue under the Act of 1844 or 1845. That issue of £6,000,000 had its backing in advances made by the banks to their Irish customers and also in Irish securities. Under the Bill those consolidated bank notes are gradually disappearing. They will finally disappear in 12 years. At the end of that time and, in fact, during that time, allowing for their gradual disappearance, the central bank notes alone will operate, together with whatever balance of currency notes and consolidated bank notes may be issued.

The legal tender note issue at the present moment is about £13,000,000. If the note issue remains in its expanding form we would have something like about £20,000,000 of the legal tender notes out. Those must be backed pound for pound by British securities. The Minister, in the course of his statement, said this evening that it would be possible, under the Currency (Amendment) Act, 1830, to back some of that with Irish securities. Now, he was not quite right in that. He was substantially correct. It is one of the misfortunes of the present method of legislation in this country that although a Currency Act was passed in 1927, following the Coinage Act of 1926, we have an amending Act in 1930, and now we have an alteration, but we are keeping the whole four. We must look up the whole four of them to see where we are. In that Currency Act of 1930 it is necessary for the Currency Commission unanimously to recommend the Minister to allow them to take Irish securities, and it is further necessary then for the Minister, if he approves, to put a motion down here and get it passed through both Houses. That Act of 1930 was passed at a time when there had been a considerable shaking of confidence in the British pound. They had gone off the gold standard. A Bill of that sort is quite understandable at the period; it is not so understandable now, and possibly a proposal of that sort might give rise to suspicion in the special circumstances in our case here where there is so much suspicion about everything, and certainly the Ministry and their aiders find abettors have done their duty in that respect in arousing suspicion. They may have altered their policy in recent years, but certainly the seed is there, and all you have to do in a case of this sort is to start a rumour; in fact, you need not start it, you will hear it from someone else. A thing of that sort here might give rise to all sorts of speculations, and I do not think it is wise.

I think it was a mistake in this measure to stop the consolidated note issue. It is a recommendation of the Banking Commission that it should be stopped. I think it is a mistake. There is no earthly reason why we should not be different to the rest of the world if it suits us, and there was an easy method of putting into circulation in this country £6,000,000 backed by our own securities, without giving any grounds for uneasiness or suspicion or anything of that sort. If we are going to depart from the sterling asset backing of our currency we have got to introduce a motion here.

I do not profess to have any of the attributes of a prophet. I cannot, in consequence, envisage what is likely to happen the finances of this country, or of any country, during the next few years. I would venture to say that if the war were over this year our sterling asset position would be very seriously changed in the short space of 12 months. We have not been buying anything to any great extent, and presumably if it were possible to buy, we would buy. If the sterling assets were substantially reduced in the course of this year, it is possible that a motion in accordance with this section of the Currency Amendment Act would be introduced here. Just at that moment, if there happened to be a financial crisis in any part of the world the reactions of a motion of that kind would be bad. It is a question for the Minister to consider whether he would not alter his policy with regard to that. At any rate, whatever his policy with regard to that, the main objection I have to this Bill is, first of all, that the Minister is too closely concerned with the administration of the Bank Bill. It ought to be independent. It ought to start off with that independence from its earliest stage. There is no earthly reason why the banks' nominees should not get their position without being selected. There is a panel of six persons put up and three will be rejected.

The second point is that it ought not to be necessary to consult the Minister in regard to any administrative act. In other words, if the board that he sets up, the central bank board, decides that it is necessary to insist upon the bank lodging £1,000,000 with the central bank, free of interest, they ought to do so on their own responsibility. The Minister should not be brought into it. He ought not to have to answer here if there was a question put up in that connection. It should be their job, and we should trust them in the doing of it. As I have said, I see no earthly method of repatriating money. You can change the title, but you cannot change the fact. If we have to our credit in Great Britain £100,000,000, we cannot bring a penny of it back here to turn it into Irish money. There is no way that I know of, except buying goods, and the Minister's experts can, perhaps, give him much better advice than I would on that matter.

If it means insisting upon the bank altering its investment, that is a different matter. That is interference; that is not good. The responsibility of the directors to their shareholders and so on ought not to be interfered with. We have now lived for 55 years since there has been a banking upset in this country and the longer we can put between us and that catastrophe and any catastrophe of that kind the better.

In the course of the Minister's speech he referred to the United States. There is nobody who has greater respect for the United States than I have, for its people, for their generosity to us, for their capacity, their efficiency, their go-aheadness and the fact that they have been such a benefit to humanity, but, in the matter of banking, 10 or 12 years ago there was never such a catastrophic failure as there was in that country. It may be—it is quite possible—that it was due to the fact that one Administration was going out of office and another was coming in, and there was an interregnum of a certain period. At any rate, their system and ours are and must be different. They are a young country, an expanding country, and perhaps they expanded over a period far beyond what was required. We, on the other hand, with all our troubles and all our difficulties, have at least this much to our credit—that we are a creditor country. Although in the position of a creditor country we are probably all the poorer by reason of that fact. We must put the money somewhere. There are some who would say we ought to have put it in America, and I think the Ministry was at one time considering that. If they had done so they would have made a very great mistake. I believe on another occasion they sold some British securities because they were in conflict with the British at the time. Although a creditor country, we are relatively poor. It is absolutely necessary to balance our national economy and enable us to pay our way. I would say in a case of this sort that whatever has to be done in the future should be done with due regard to the sweat and labour of those unfortunate people who have put their money into the banks over a long period, and have kept the national economy here so sound.

Every effort should be made to ensure for them security for their money. They get little enough for it, at the most, 1 per cent. There is no man in this House with money in the bank to his credit earning more than a single per cent.—there may be, but he has not identified himself. There is all the stronger reason that we should have consideration for those who have done so. When people talk of banks they usually talk as if the directors of the banks owned them. The interest of the director of a bank is merely that he possesses the qualifying sum that enables him to be elected as a director. The average sum held in the bank that has the largest deposit in this country, according to the Banking Commission's Report, is £250. You can consider, therefore, how many small depositors there are, but it must be remembered also that there are some with £10,000, £20,000 and £30,000 there, so it is rather a pity that more consideration is not given in this Bill for that type of person. What I mean to convey is that banking profits have been depreciating; according to the Commission's Report, they have been going down; there have been no additions of any significance to the reserves held by the banks over the last ten years.

The Currency Commission was established in 1927 and, so far as I can find out from the published accounts, the first revenues to the State came in 1928-29. Since that time there was a sum of £220,000 for a number of years, tapering down in recent years to £180,000. The total sum is somewhere in the neighbourhood of £2,280,000, and we are now going to get an additional £300,000, making a total of £2,600,000 in 12 years, or over £200,000 a year. We owe something to those depositors. So far as this Bill is concerned, it is now making the banks liable for a higher percentage annually in respect of legal tender. When the Currency Commission was established the consolidated bank notes paid 30/- per cent. per annum, and it was raised in 1932 by the Government, as a means of taxation, to £3. It was lowered in 1937 by l0/-, so that the consolidated note issue paid £2 10s. 0d. Any man walking in this country with £100 in consolidated notes—either a £100 note or 100 separate £1 notes, anything totting up to £l00—was worth £2 10s. Od. per annum to the Currency Commission and they gave most of it to the Minister.

Under the new dispensation, if they have to buy War Loan, that stands at £3 10s. per cent.; it is up £1. It is true that the banks had to pay the cost of the issue of the notes and that now the Currency Commission or the central bank will do it. So far as the State is concerned, it is getting the last penny it can out of the currency; it would not be possible for it to get another penny. While that is the case you say to them: "You must regulate your business. If any one of you has more than a certain amount of sterling assets, if you are farmers or cattle dealers, people sending cattle into England and getting back credits from England, we do not care; if you exceed a certain amount in your sterling assets you will have to put money on deposit free of interest in the central bank." That is not just or workable and it is not fair to the depositors, nor is it fair to the banking system. It will do no good to the central bank. As long as the banks have the money, unless some extraordinary catastrophe affects the country they will have no need to employ a lender as a last resort. Who put them there, anyhow? Their money, whatever money they got as bankers, they got it from the depositors, and we ought to have more consideration for those who have done their bit in building up this country.

There are occasions when you hear people say that the banking system, our financial system and the harnessing of the pound to sterling, is responsible for all our ills. It is a very pernicious doctrine and, so far as I know, it is absolutely untrue. There is plenty of credit available in this country for any sound job that has to be done. When on one occasion it appeared to the Government of the State that it was a progressive, forward movement to establish a hydro-electric works in this country at a cost of even £5,000,000, it was done. We were told from certain political platforms in parts of the country where electric current did not, perhaps, circulate that it was no value to them and that if the £5,000,000 were lent to the farmers it would be very much better. There is much more money now in that great undertaking than was, perhaps, anticipated at the start. There is, in my view, plenty of money available for any useful, progressive work that can be undertaken, work which will show value for the money invested in it.

If those who concern themselves about proving the iniquity of linking the pound with sterling would concern themselves instead with giving us some progressive plan which would afford work and fair prices and which will have value to show when it is completed, they would be doing very much better. I think we would do very much better work for the country if we concern ourselves with that aspect of the situation. Occasionally one hears about the rates we pay here on borrowed money. The first time I heard it was from a Minister of another Government who asked me how it was that the Bank of England rate was always 1 per cent. under the bank rate here and why did we follow that. For those who are willing to learn something about that I think they will find if they look up the report of the Banking Commission of 1926 or 1927 there is a letter there from a member of the staff of the Finance Department explaining to some extent these peculiarities which very many people do not understand.

As long as the agricultural industry in this country is put in a relative percentage to our national economy it is obviously our duty to do everything that we possibly can to get the last penny in production out of that great industry. In the Banking Commission Report of 1926 or 1927 amongst the recommendations there was one in which it was suggested that we should set up an Irish agricultural bank. It was duly set up. To my mind it was a disappointment, a very grave disappointment. It was a great idea, but it has not been a success. My recollection is that the Banking Commission Report was to the effect that commercial banks had advanced something like £12,000,000 or £13,000,000 to the farming community and they had on deposit from the farming community something like £36,000,000 or £37,000,000.

The Agricultural Credit Corporation has not lent £2,000,000; I think it has lent very little over £1,000,000. It is an expensive institution. It can never, on its present basis, be of any great value to the country, and it is a very nice question whether the Minister should not concern himself with bankers to see if something better could not be done. Now, in the course of the first commission it transpired that while an agricultural borrower of £2 or £5 only paid a bank rate of, let us say, 4 or 5 or 6 per cent., as the case may be, the money cost to him was double that, and the reason was that he was at other expenses in connection with ths getting of that small loan. It was understood that in order to get people to back him he had to entertain them, and other expenses of that sort arose which made the debt almost an impossible one for him. That problem has not been solved, and it ought to be. It is one which concerns all of us. It may be that the best solution will not be found at once, but certainly something better than what has been done up to this ought to be possible, and the only contribution I have to make to it is that I think, if the Land Commission and the local parish priest were favourably disposed, five bonds to the extent of five years' purchase of the man's Land Commission annuity should be advanced in those cases, leaving the man responsible for the interest at as small a percentage as it is possible to take. Let us say that he pays an annuity of £10: would it be possible for him to get £50 of bonds, subject to 4 per cent? I do not think it would affect the credit position, or lead to inflation or anything of that sort, and it would be an easy method of disposing of most of the expenses and troubles that he is faced with, and might result in a greater degree of productivity from the land. If those people who are at present in a depressed financial condition are unable to get out of the land the full value that is in it, it is a national loss—it is their loss in the first instance, but a national loss in the second instance.

I think the Minister ought to consider the points I have put to him: first, the independence of this body: that it should not be so selected by the Minister as it is; secondly, that this proposal which, I think, is unworkable, which is expensive, and which must be abhorrent to anybody having the interests of depositors at heart, of insisting that the central bank should get a free deposit—a sort of a fine— should be departed from; and, thirdly, that some effort ought to be made towards affording an easy, expeditious and helpful manner for the smaller agriculturists to raise money.

I thought we might have heard more from the Labour Benches on this matter. But as they are not in a hurry to rise I should like to take the opportunity of saying what I want to say. When the Minister for Finance stands up in his real full stature he stands on a solid basis of material. First, he holds himself out as a man who can give a good back-answer any time that he thinks it necessary, and, in the second place, as a man who can listen to reason and who, when he hears a reasonable argument, can look the facts straight in the face and take a reasonable line of action. And he has given the House proof on a few occasions that he has some claim to standing on these two legs. It is valuable, in the case of a man who can give a good back-answer, that he can also listen to reason and that he can also face facts, because usually, when you find a person like that, the one quality is inclined to destroy the other. However, the Minister for Finance seems to preserve the two qualities quite well, and I think the House is indebted to him for his informative and elaborate statement on this banking business.

At the end of his statement he told us something to the effect that a people cannot spend themselves into prosperity. In the same way, we cannot promise ourselves into prosperity, and the Minister for Finance, I hope, from hearing Deputy Norton on the subject of this measure, will realise how much he has to undo at the present time if the proposal with regard to the central bank is to be properly understood: how much he has to undo in connection with a lot of the things that have been said, with regard to the monetary policy and the central bank and all that it can do for the people, by, say, the members of his Party, both the Front Bench and the back. For instance, we see, in a great country like the United States, a person like Mr. Sumner Welles making the following statement with regard to the past, at a meeting held in New York on the 7th October last:

"After the last war, at a time when other countries were looking to us for help in their stupendous task of economic and social reconstruction, the United States suddenly became the world's greatest creditor nation and, incomparably strong economically, struck heavy blows at their war-weakened, debt-burdened economic structures, that were heavy morally as well as economically. The harmful effects of this policy on the trade, industry and conditions of living of people of many other foreign countries were immediate. Our high tariff policy reached out to virtually every corner of the earth, and brought poverty and despair to innumerable communities."

And then the reporter remarks that "the confession of past blunders is the beginning of wisdom". We all have, in life, to get over our sins, and we have the machinery for doing it. If we were to lie down under our sins and our mistakes we would never make any progress at all and our salvation would be a thing that would completely disappear. It is the same thing with countries as with individuals, and if the United States can shake itself up and say that it was guilty of terrible sins in the past which brought despair and misery to innumerable communities in every corner of the earth, and if it proposes in present circumstances to face things in a different spirit, we can also open our eyes to the realities of the situation; we can also realise our responsibilities, realise what are the things that really matter, and face the future without any weakening of our wills or weakening of our strength or our resources, and throw all our strength and all our intelligence into the job that is in front of us.

Now, one of the things that has to be done in connection with this Bill, I think, is that we have to confess to ourselves and to tell our people that this is not a weapon for dealing with any of our present distresses or avoiding any of our present dangers. Clause 6 reminds us that this Bill is to be operated in order to safeguard the welfare of our people. Just as in the case of monetary policy, long-term policy is to emerge from short-term policy, and anything that provides for stability as a matter of short-term policy usually provides for stability as regards long-term policy, so in the whole policy of the general welfare of our people at the present time, in the same way, short-term policy is the thing that is going to safeguard our people in the long terms.

That is the monetary policy we want in people's minds generally to secure for us at the present time that we will be able to carry on, particularly the expenditure that is required in these extraordinary times. We want money available at low rates of interest. In the second place we require that our producers will get a reasonable price for what they are producing and that our consumers will be able to purchase what they require at a reasonable price too. Just as the original Banking Commission in its final report pointed out on page 29 that the legal tender system itself is able to render satisfactory service only when it is supplemented and rendered efficient through good banking, good banking can only render service when good banking is able to find profitable assets to put against its liabilities. On page 55 of the final report, signed on the 31st January, 1927, we find this:

"Greater confidence on the part of the public, greater disposition to support and maintain local industries and to buy their securities, stronger public opinion on behalf of the collection of legitimate debts, and a determination to bring about the growth of an active, vigorous, home market for capital and home money will be absolutely essential as a background for the full success of the plans which we have outlined in this report. We are aware that the attainment of these ends is not an easy or transitory process. They cannot be attained at all without the recognition on the part of influential members of the public that they are called for, or without determination on their part to assist in the achievement. The first step towards the development of such a condition among the public at large is obviously the recording and making known our opinion concerning it, and this we have accordingly undertaken to do in the foregoing pages and in the four interim reports to which we have made reference."

The first step towards the development of a condition among our people here of understanding how the welfare of the people is to be safeguarded at the present time is that the Government should record and make known their real opinions with regard to it. I think that would do something to clear the minds of a lot of people who have been talking about monetary reform and what can be done with monetary reform.

It would clear the minds of people who approach the discussion of the Central Bank Bill in the frame of mind that Deputy Norton approached it if members of the Front Bench would make it clear in the discussion on this Central Bank Bill the extent to which any operations under the central bank so set up are going to affect the present situation. I do not believe they are going to affect it at all. What would help to get better prices for our people would be, as has been pointed out here before, more direct Ministerial touch with the members of the British Government in relation to our agricultural produce that we export to Great Britain. That is going to do a lot more to increase the prices that we would get for outproduce than any manipulations of any kind of machinery that may be set up under a central bank. There is no question at all that, up to the present, in spite of certain changes that have taken place, the Irish is not as good as the English . If we are getting less at the present time than we might be getting, it is because there has not been an effective Ministerial approach to the question of price-fixing for the goods we are sending to Great Britain.

On the other hand, if we are not getting for essential public works here the necessary money at a price as cheap as the rate at which the British Government are getting money for carrying on their war, it is not because of anything wrong with our machinery here; it is because the Government have not made up their mind that they are not-going to pay any more for the work of construction that is being carried on in this country than the British Government are paying for the work of destruction that is being carried on. I have already referred to the necessity for keeping the money that we get for carrying on, particularly our emergency expenditure, as cheap as possible. That is obvious when we consider what the effect of borrowing a large amount of money at high rates of interest was in the case of Great Britain in the last war. The necessity for getting a reasonable price, or the best possible price, for what we are producing in this country is obvious too. The price we get for agricultural produce from Great Britain determines to a very great extent, in spite of control and one thing and another, the price that our own people have to pay for agricultural produce. Therefore, it is Government policy that can best and most directly bring itself to bear on what is the well-being and advantage of our people at the present time.

The central bank is really one of the carrots, without going back over the other carrots, that the Fianna Fáil Party offered. I call the central bank carrot No. 6. I know there is a carrot No. 7 offered, but I think, in fairness to the country, in fairness to the general situation here, and in the light of the emergency we are in, the Central Bank Bill ought to be made clear for what it is. In the discussion on the Central Bank Bill, for what it is, there are some questions that require to be answered. Deputy Cosgrave pointed out that one of the reasons for the Central Bank Bill was to enable the Government to make more money. On page 32 of the first interim report of the original Banking Commission the commission discussed the possibility that by having a consolidated note issue of their own the banks might prevent the legal tender notes being distributed as much as they otherwise would be, and we find this statement:

"If at the end of any half-year the legal tender issue shall have fallen below £4,000,000, the Currency Commission may reduce the bank note issue so that it shall not be more than £1,000,000 in excess of the legal tender issue."

As Deputy Cosgrave pointed out, the consolidated note issue was to be fixed at £6,000,000, and members of the commission felt that the Government might feel that their own legal tender note issue would not be scattered enough and, therefore, the consolidated note issue was to be reduced in case the legal tender note issue fell below £4,000,000.

I think the legal tender note issue at present is up to £15,000,000, and in the Bill we have a provision by winch the whole consolidated note issue is to he wiped out. As Deputy Cosgrave has pointed out, the Minister suggests that the new and extended legal tender issue will have to be backed by sterling assets, unless a resolution is passed unanimously by the commission and a resolution also passed by the two Houses of the Oireachtas that issues or securities of another kind may be substituted. Two years have passed since permission was given for that and no steps have been taken to secure that the legal tender note issue will be backed by anything but sterling. It is due to the country as a whole that the Minister should deal specially with the necessity for backing the legal tender note issue by sterling and backing it by sterling up to 100 per cent.

When the legal tender note was first introduced, it was decided it should be backed 100 per cent. by sterling. That has been maintained since and is being continued in this Bill. The British, pound before the last war was backed 100 per cent. by gold. There were the ups and downs and, before the present war, it was backed 100 per cent. by gold. Now, in 1942, we are told by Crowther, the editor ofThe Economist, in his book The Outline of Money, that the British pound is backed by one-tenth of 1d. per £. If the position is that we have passed from circumstances in which, because, as was explained in the Banking Commission Report, the British were securely backed by gold, we should base our money on sterling, to a time in which there has been an-enormous monetary inflation in Great Britain, and, instead of being backed 100 per cent. by gold, the British £ is backed by one-tenth of 1d. per £, why we should be extending our liability to back an increasing amount of our currency 100 per cent. by sterling is something that requires to be explained. The object of backing our currency by sterling is indicated on page 28 of the final report of the 1926 Banking Commission, in which it is stated:

"Some have asked why Irish securities should not be used for the purpose in question. To all this, the answer may be returned that while there are many other excellent types of securities whose safety would be beyond reasonable question, and whose yield would be doubtless higher than that of British Government obligations, and while, there can be no doubt of the safety of the obligations of the Saorstát itself, the purpose to be served is not merely that of insuring the safety of the proposed notes hut their convertibility into sterling at all times."

Later on, we have:

"immediate provision for, and issue of, an Irish paper pound sterling which shall be legal tender, and which shall be maintained at a parity of value with that of Great Britain by holding behind it a reserve of 100 per cent. of the amount of such notes outstanding, carried primarily in British Government securities of varying maturities, but including also in the total such sum in current bank and other cash balances or in gold or both, as may be determined upon by qualified persons hereinafter to be designated, the object in view being the maintenance of immediate convertibility of outstanding legal tender paper at all times on demand into British sterling."

What on earth is the likelihood or chance of there being any immediate demand for the conversion of all our legal tender paper into British sterling? It is a matter which requires to be fully explained, and if the Minister can give a reasonable explanation as to why we should have the whole of our currency backed by sterling in present circumstances, be ought to go further and show the House whether or not it is a costly operation for us. I do not know whether it is. It probably is not, but, if it must be done for any particular reason, we ought to know that reason and we ought to know whether the operation is costly, what it costs and why it costs so much. We ought also to kilow whether it is restrictive in any way of the volume of money circulating here and whether it has the effect of raising our interest rates here, or any effect of any kind in that respect.

When I look at the amount of money available in Great Britain, I find that, even since the beginning of this emergency our Irish banks have added to the amount of cash they hold in Great Britain. As between September, 1939, and December, 1941, I find that they have added £12,432,000 of cash £6,528,000 of money at call and £27,569,000 in Government investments. There you have an addition of money of about £46,000,000, and I understand that all that money by transfer to the Currency Commission here, even under the present restricted way of backing our legal tender note by sterling, can be made available here in the form of additional money in circulation for purposes for which it is required here.

Apart altogether from the sterling assets they held before, they have added £46,000,000 in cash and Government investments since September, 1939, so that even though we have to back whatever additional money we circulate here by sterling or British notes, the money is available. Much of that sum of £27,569,000 invested in Government securities since September, 1939, must be drawing 1? per cent., some of it must be drawing 3 per cent. and other portions of it 2½ per cent., but I take it that it is no different from the general mass of money which has been borrowed by the British Government for the prosecuting of the war, which they figure they have got at an average of 2 per cent., so that there should be no great loss in transferring any of that money to back additional legal tender notes here or to provide additional credit to Irish borrowers for anything that was worth a bank's regarding as an asset.

It does require explanation why, in circumstances such as those, Irish turf-cutting, which was carried out last year, had to be carried out on money for which the county councils had to pay 4½ per cent. Even under our present circumstances, the Government had power. I think, to step in and to say that money was available for local bodies at 3 per cent. or even less, in order to enable them to do this turf cutting, but they were simply left to their own resources and left to borrow in whatever way they could. Irish turf-cutting for the production of turf for our own consumption—regarded, I suppose, as a productive piece of work—had to be carried out last year on money which was bought at 4½ or 5 per cent., while a European war can be fought by the British, with whom we have this money and from whom we could transfer it, or, at any rate, which we could convert into additional note issue here, at 2 per cent.

I tried in the beginning of last year, when there was a big demand for increased tillage, to find out from the Minister for Agriculture how much a farmer who was doing an extra acre of tillage would require in the way of capital for which he could get no return until the harvest came in. The Minister could not say either in respect of a particular county or of the country as a whole how much capital Irish farmers had to sink in their additional acreage by way of wages, seeds and ploughing for which they could get no return until the harvest came in. In a paper read recently by Senator Johnston before the Statistical Society I have seen the figure put at £6,000,000. It is probably more than that. But the farmers in order to do their extra tillage had to pay at least 5 per cent. for the money they required. According to the way they borrowed they probably had to pay more. There you had constructive work that it was absolutely necessary to have carried out under emergency conditions and for an emergency. It was constructive productive work and yet our farmers had to pay 5 per cent. and probably more for the capital they required, while the British are able to get money at 2 per cent. to fight a European war.

These are the things that are disturbing. Following along the echoes that they have heard from Government speakers, many of our people, it is feared, believe that a central bank is going to save them from things of that sort. I think the Minister ought to tell them that no central bank that may be set up here is going to get turf cut at 2½ or 3 per cent. or additional farming work done at the same rate of interest on the capital required for it. The setting up of a central bank is not going to change or improve things. What we really need is a change in the Government's approach to matters of this sort. If that was right, then you could do all these things under the Currency Commission just as well as you could under a central bank.

I do not think there is any special reason for opposing the general principle of setting up a central bank here. Deputy Cosgrave has dealt with the general idea. If there are members of the House who think that the proposal in this Bill is going to work miracles iu a short time, I would like to draw their attention to the following statement that appears on page 24 in the final report of the Banking Commission that was pet up in 1926. There the central bank is described as an institution

"which even under the best conditions cannot be brought into existence immediately and cannot exert itself effectually in any market without the lapse of a considerable period of time after organisation."

These are some of the points I desire to make to counter some of the fantastic claims made for a central bank by a lot of political propaganda on the other side. It should be made perfectly clear that this Bill is not going to provide better machinery for handling either the volume of money that is going to be available in the country or the rates of interest charged. The Minister indicated recently that there has been a certain amount of monetary expansion here. I submit that some of that was brought about by the Government agreeing to allow the banks to increase their charges to people who had current accounts with them. One of the effects of that has been that a number of people, instead of writing out cheques are now keeping a lot more notes in their hands. This action on the part of the Government has brought about an increase in note circulation which, in turn, is bringing an increased profit to the Government. I imagine that aspect of the question was present to the mind of the Government when they allowed the banks to increase their charges.

I think, in view of the seriousness of the situation, that the Government ought to adopt an attitude of complete frankness in regard to this Bill and what it portends as well as an attitude of the most complete tolerance towards people who are monetary cranks because, to a large extent, the Government themselves have been responsible for breeding them. The position is that a lot of these monetary cranks are thinking in a very clouded and obscure way. The fact that the people have allowed themselves to become cranks in this matter shows that they are anxious to learn. If the Minister has a big job in explaining the whole circumstances to the people of the country through this House, he may also have a big job in exorcising the spirit that has taken possession of the cranks. I think, however, it is imperative that it should be done. In so far as we can help him to do that by putting aspects of the situation before him, or by carrying on tedious discussions that very often may try his patience, we will certainly try to do our utmost by availing of the opportunity which this Bill prevents of getting clear about the general situation. We are quite satisfied to do that because we think we can afford to spend time over this measure.

This Bill has got nothing to do with our immediate distresses and certainly provides no solution of them. One of the things that must distress people is that there are so many who think that the setting up of a central bank is going to relieve them of all their difficulties. No bank of any kind can do that unless there is constructive work going on in the country. The Minister has a serious job in front of him, one that it is well worth his while facing up to. If he does that. then we may succeed in getting a central bank placed in its proper perspective as a national institution. It is quite evident that it is going to be costly. So far as the welfare of the people is concerned, the things that are urgent and necessary to improve their condition can only be dealt with by Government policy. An increase in agricultural production cannot be brought about if the money required for it has to be bought at 5 or 6 per cent., or if the money required to carry on the business of Government is to cost 3¼ per cent., while at the same time the people across the Irish Sea, using the money that we have anchored ourselves to, are able to fight a gigantic war with money that is coating them 2 per cent.

Listening to the Minister for Finance and Deputy Cosgrave, I am not surprised that our unemployment problem has not been solved. It would be interesting to hear from the Minister why it is that so much of our best manhood is leaving the country when there is so much work to be done here. I suggest, notwithstanding what the Minister has said in his closing remarks, that it is because we have not the money to give employment to those people. In his closing remarks he told us that some people think we can spend ourselves into prosperity. Let me repeat what I said before in this House, that we cannot borrow ourselves into prosperity. I have very good evidence of that in our own city and in our own county. I was glad to hear Deputy Mulcahy referring in his closing remarks to the question of why it was that turf cutting had to be done by borrowing money at 4 per cent., and why the farmers of this country, in order to produce the necessary food for the nation, have to pay 6 per cent. for the money which they borrow.

I listened with some interest to Deputy Gosgrave in talking about the banks. I have nothing to say about the bankers; I am more concerned with the system which the bankers operate; he stressed the point that the banks had nothing but what they got from depositors. He also talked about there being no market here in this country, and suggested that bankers would be justified, by the way legislation is being introduced, in taking their money out of the country. It reminded me of an incident which occurred a week or two ago, when a number of men were looking for houses in the City of Cork. We have anything up to 2,000 or 3,000 applicants for houses, but we have no money available for building. One man came to me and told me that he and his wife and four children were living in a house containing one room and a small kitchen. He had already buried four children, and he himself had been nine months in a sanatorium. I was not inclined to believe his story, and I went to see the particular house a few days afterwards. I discovered that this unfortunate man, who had been nine months in a sanatorium, was sleeping in a room about seven feet by eight feet. There was one bed in that bedroom for himself and his wife and four children. The kitchen was nothing larger. He told me that the rain was coming through the roof.

I stepped outside the door and put my back to the next house in the lane, which is about eight feet wide, and while I was there the wireless was turned on. I shall never forget that incident. I could not help listening to the wireless recording the prices on the Dublin Stock Exchange, and telling us that the recent emergency loan or security loan at 3¼ per cent. had now reached 100. Everything was right on the stock exchange. Everything was right for the people who had invested thousands of pounds, but here was humanity crushed to the dust; here was a man who could not get out of the house which I have described because the local authorities were not in a position to give him alternative accommodation, notwithstanding the tact that the Cork Corporation had within the last five years paid, in bank interest, £204,406 19s. 9d. The county council paid within the period of five years ending September last, £20,261 11s. 3d. The Cork Harbour Board paid £22,749 14s. Od. The South Cork Board of Public Health paid £116,930 6s. 7d., and the Public Assistance Board paid £4,126 5s. 6d., making a grand total of £368,474 17s. 1d. for the use of money to do desirable social work in Cork City and County. I want to say to the Minister, and to everybody else who thinks like him, that the sooner we get rid of that system the sooner we are going to have decent order in this country.

I listened to the Minister telling us that there was no shortage of money for any desirable work, and Deputy Cosgrave re-echoed that by saying that there was plenty of credit available for any sound job. The four bodies of which I happen to he a member are handicapped in carrying out desirable work because of the powers of the bankers and those who control money and credit. I am disappointed that the Minister and the Government have not cut themselves away from that entanglement and taken credit into their own hands, doing what they advocated years before they came into this House as the Government. The Minister also talked about the Electricity Supply Board. I must again remind him of the statement made recently by the chairman of the Electricity Supply Board, in which he said that they were charged 5 per cent. interest on the money they had got, and that if they had got that money at 3¼ per cent. it would have meant a saving of £225,000 a year in interest. When I think of the number of people in rural Ireland who have not yet been facilitated by having electricity put into their homes and farmsteads, I think it is about time that we should have a little more regard for those people rather than for the people who control money and credit.

The system of control in operation at the moment decides what we shall eat, the kind of clothes we shall wear, and the type of house we shall live in. Everything in our lives is dominated by the money system under which we are living at the moment. We have to build our houses down to a price rather than to a decent plan. I happened to go into two cottages in the country last week. One of the Fianna Fáil Deputies happened to be in the neighbourhood. We were appreciating what these men were doing on their plots of ground, but discovered that, because of the scarcity of money, the houses built for these people had no back doors to them. The reason given for that was that it saved expense on so many houses. As I said, the South Cork Board of Health paid £116,000 in the past five years in interest. Does the Minister seriously suggest that that is going to continue? Deputy Mulcahy rightly said that people are anxious to know whether the Central Bank Bill is going to do away with all those things. I do not stand for confiscation of any kind, and nobody on these benches wants to confiscate the deposits of anybody who has money in the banks, but I want to see the Government of this country controlling the issue of credit. Money should be issued to correspond to the goods that the people of this country can produce. Their incomes should be equal to the goods they can produce each year. We should be in a position to put men to work rather than have to continue to pay doles. I have seen ten men go out of industry in one week, 20 men go out in the next week and 30 in the next week—all divorced from industry because of modern methods of production and distribution. I often ask myself why those men who have been divorced from industry by modern methods should not have an equal amonnt of food and clothing to that which they enjoyed when they were in industry and were employed in producing goods.

Is it not because we have not control of money? Someone accused me of suggesting that we should print notes. I do not suggest anything of the kind. The country can live only on what it produces. The income of any nation is based only on what it is capable of producing. I am at a loss to understand the conservatism of the Government, and I think Deputy Cosgrave was very conservative in his views, too. One thing I will say about Deputy Cosgrave is that when he was in power he did not promise any plan. He had not a plan for solving unemployment. The Minister's Party had a plan, and perhaps he will tell us why that plan has not been put into operation. I suggest that you are not masters in your own house because other people control the money and the issue of credit. In Section 7 (e) there is a reference to discounting bills. Is it the intention of the Government that that power will be utilised to enable local authorities to have their bills rediscounted?

I think the Minister should answer that at once.

If he does, I shall probably have a different viewpoint.

Does this mean cheap money for local authorities?

I am glad the Taoiseach is here. I want to tell him that I do not know of any man who has a better opportunity to do the right thing for this country than he has. He has the people behind him fully 95 per cent.; he has the co-operation of anybody worth knowing in the country, and I believe he is the one man who has a very favourable opportunity to do what is right now. I want to see the Government having full control over the money and the issuing of credit in this country. Do we not realise that every day the banks are creating credit and money and what a private company can create surely the national authority also can created I can see nothing wrong about that. On the subject of tillage, having some knowledge of the country and the farming community. I know there is a number of small farmers who have been hit by the Black and Tan war, by the economic war and the present war, and these people have not the means to go in for extensive tillage. If they had money advanced to them, free of interest for a period, it would enable them to get implements to till and seed the land. So far as housing their poultry and pigs is concerned, they are in a deplorable condition through lack of money to enable them to make proper provision. In Sweden the Government advance loans to the farmers free of interest for a period of ten years. No Government is master of its house unless it is in a position to do that for its people. I do not mean to say that control of credit means everything. It is what is done with credit that matters.

I am sorely disappointed to see thousands of men leaving this country. No later than yesterday I saw hundreds of men entering the train at various places on the way up from the south. These young men are going over to produce wealth for another country and they send back paper money to their relatives here. It would be good policy and sound economics if they were put to work here producing wealth for this country.

If the Government do not propose to discount the money of local authorities, this Bill is worthless. As regards the indebtedness of local authorities, I discovered that the total indebtedness for 1939-40 was £34,794,254. I want to convey to the Taoiseach that until the Government here have complete control over finances and the issue of credit in this country we will not have the peace and prosperity, or that nation of contented people, that we all so earnestly hoped for.

I always listen with great interest to Deputy Hickey. I never fail to be present when he is speaking, because some day he is going to tell me where the money is to come from. He is always talking about the expansion of credit and he ties himself in knots in his revolt against the credit restrictions that at present harass and hamper the local authorities with which he is associated. One cannot help feeling a deep sympathy with him because it is exasperating to see the solution of all human ills continually evading you like theFata Morgana dancing across the bog. I am always waiting for the day when Deputy Hickey will catch up on the will-o'-the-wisp and find out where the money is going to come from. If he is not going to print it, where is it to come from?

Our present system is based on individuals or banks borrowing from the public and reloading the money. That is the fundamental principle so far as I know. So long as you withdraw money from the consumers of the country by way of savings and lend it out to a local authority then you have a situation which does not carry within it the dangers of what is called inflation. But if you do not draw the money away from the saving public and if you create what Deputy Hickey pleases to call credit, but what appears to me to be simply printing bank notes, then you may have a situation arising in which the people who will suffer most are the poor, for whom Deputy Hickey and I share a common solicitude.

This Bill is in danger of confusing counsel. The rates at which money is lent to local authorities for building houses, or to farmers for carrying out agricultural operations, can be controlled by the Government. There is no reason why the Government should not borrow from the public and lend money to the local authorities in Cork at 1 per cent. if they want to, and let the Exchequer pay the difference between the rate at which it borrows from the public and the rate at which it lends to the Cork Corporation. There is no reason why the Exchequer should not lend money to the farmers, interest free, as the Swedish Exchequer does, and let the community pay the difference. But there is every objection to adding suddenly £20,000,000 or £30,000,000 to the currency circulating in the country by printing notes and issuing them to the farmers or the local authorities.

I do not think this is an appropriate occasion for embarking on a general budget debate, and I am not prepared to do that now, but I think it might be fruitful for us all to remember that if you issue 20,000,000 £ notes for the purpose of building houses in Cork, that money is going to go to the contractor and the worker and the producer of raw materials. If you print 20,000,000 £ notes, as Deputy Hickey wants us to do, and you hand it out for house building in the County Cork, some people seem to think that at that moment it vanishes. It does not, because the people who get the money in their capacity as labourers or suppliers of raw material and the contractor who builds the houses ultimately spend that £20,000,000 on something, and at some stage they will spend some of it on consumed imported goods.

I invite Deputy Hickey and the members of the Labour Party to consider the problems that will arise if you periodically inject into the currency of this country large funds of money which have not been withdrawn from the consuming capacity of our community on a prior occasion, because I think that if they do so they will come to realise that economic complications will ensue, such as Deputy Hickey has in mind, of a character which will bear most heavily on the very poor people whom he and I are most anxious to help.

You must give the national authority some of the credit.

Now let me refer to what Deputy Hickey says: that you must give the national authority some credit. Deputy Mulcahy has been lamenting the rise in the sterling assets of the joint stock banks during the last few years. Why are they rising? They are rising because the Taoiseach and his Government steadfastly refused to remove the tariffs and quotas during the first two years of the war, with the result that instead of buying £50,000,000 or £60,000,000 worth of raw materials and necessary consumer goods during the first two years of the war on tick, and paying for them with our exports now, we brought nothing in during the period when goods were available in the world's markets; but now, when we have to export our surplus goods to Great Britain, instead of using them to pay off debts accumulated for the purchase of valuable, tangible assets, we are constrained to accept from Great Britain paper and credits which we cannot negotiate for anything, because there are no supplies of anything to be had.

And the publication of the statistical returns for 1938-39 and 1940 would prove that, but they will not let that be done.

No, but Deputy Hickey says, in effect, that I am to throw myself on the mercy of the poor creatures who fell into that trap. These are the creatures that we have inflicted upon us as a Government, and, mind you, I would not mind if they were invincibly ignorant, but they are not. What happens to them is that they always find out 18 months too late.

They took off all the quotas the week before last, when everybody could have told them that there was nothing to be got. They have done in 1942 what might have been profitably done in 1939, and what would have left us sitting pretty, probably, until 1944 or 1945, if they had done it in time. They did not do it then, but they do it now, in 1942, when it helps nobody and merely serves to exasperate most of us who realise what might have been achieved for the Irish people had those vincibly ignorant creatures awakened to their duty in time. And this is the bunch that Deputy Hickey says are to be our salvation in their unrestricted control of the future credit policy of the country. There they are! Just look at them! The Irish people chose them in the freest election ever held in this country, and they were elected by the largest majority ever given to a political party in this country. There they are. No rational person looking at them, would take them if they were given away with a pound of tea, but the Irish people took them, and we see what has happened; and what guarantee have we that that is not the kind of a Government that we will have if the proposals in Deputy Hickey's mind are followed? Is there any reason to believe that that bunca or the likes of them will remedy the evils that Deputy Hickey desires to have remedied, or do you think it good to put into their hands the unrestricted control, with a free hand, which the issue of currency really means? Mind you, poor and all as they are, and they are very poor, I do not think you can safely put into the hands of any popularly-elected Government the absolute control of the issue of currency from day to day and from week to week. We are not all angels. A lot of people in this world fall into the error of believing that you can alter human nature by legislation. I do not think you can, and I never did think so. Men are fallible; they are liable to pressure or influence, and men in public life in a democratic country are peculiarly susceptible to these things. I think that if you had a row of archangels sitting as the Executive of a democratic State, the argument for placing in their hands unrestricted discretion in the issuance of credit is unanswerable, but the sad thing is that you have not now got and, this side of Heaven, you never will get, a Government consisting of archangels.

Now, I challenge the most conservative Deputy in this House to get up and demonstrate to me the contrary to that proposition. If the Government consisted of archangels they ought to control credit, but they do not consist of archangels and they never will. They are human beings. I doubt very much if the exercise of such power should therefore be placed in the unrestricted discretion of any Government. Deputy Hickey may say: "Why place it in the hands of the bankers, then?" But it is not in their unrestricted control. It is true that they exercise a certain measure of control on the volume of credit available from time to time, but the bankers know that there is a controlin terrorem waiting for them if they should attempt grossly to abuse that power. That control in terrorem is right here in Dáil Eireann, and Deputy Hickey or I or anybody else would get up and pester the Government if they tried to abuse that power. Bankers, like anybody else, are fallible and they will fall into errors, but Governments will fall into errors also, and while I do not regard the present credit system as being perfect, I do say that it does contain within it a rough-and-ready system of check and balance which leaves absolute power in the hands of no individual authority and which, I think, Deputies will have to admit has so far operated as to make credit available to every credit-worthy person who wanted credit in the country so far. I am constantly hearing lamentations that this one and that one cannot get credit. Does any Deputy know of a man, to whom the Deputy would have been willing to lend his own money, having been refused accommodation by a bank? We all know of men, to whom we would not lend 6d., but whom we would very gladly recommend to the bank, being refused accommodation. We all know of men with whom we have gone into the bank manager, and when the bank manager turned round and said: “Would you like, Deputy, to sign a guarantee?” you said: “No, we never do it,” and the man was refused accommodation. What hardship is it if a banker refuses credit to a man to whom we would not give credit ourselves?

Even public bodies?

I do not know of any public body being refused credit.

On terms.

Let us deal with each thing in order. I am now talking of the lamentation that there are hundreds of poor men going through this country, who are eminently creditworthy, and to whom the bankers will not lend money. Do Deputies know of any such men, to whom they themselves would have lent money, being refused? It is perfectly manifest that no Deputy knows anybody to whom he would be willing to lend money whom the bank would not lend it to. Now, with regard to public bodies. Is there any public body in this country, which has put up schemes for housing or any other useful public work which has received the sanction of the Department of Local Government, that has been refused accommodation by the banks?

Let me tell Deputy Dillon that Cork Corporation floated a loan in 1938 at 4 per cent. at par. and not l/- did we get from any bank in the Twenty-Six Counties; we got some money from a bank in Belfast, and 15 months previously one firm alone gave us £20,000 towards similar stock in the same corporation, because it was floated at 4 per cent. at 98½.

That does not answer the question at all.

It does, of course.

No. I am not proposing the thesis that any man in this country or any local authority could go out and announce that they would be prepared to borrow money at 1 or 2 per cent. below the current rate and have banks rushing to lend them money. I am asking this question: is there any local authority who ever put up a scheme and who was prepared to pay the current rate of interest charged who was refused accommodation by the bank? Of course, there is not. It is like every other man who goes to the market to buy a commodity. If a man goes into a market and bids less for the commodity that he wishes to acquire than the seller is prepared to sell it for, then, of course, he cannot expect to buy. The seller does not want to sell. In this case the bank was selling credit at a certain figure. If the Cork Corporation offered less, naturally the banks would not sell.

Now, we come to the rates of interest. Are the rates of interest charged reasonable considering general circumstances? As Deputy Cosgrave pointed out, the joint stock banks of this country accept deposits and their primary responsibility is to see that those who leave money with them will get their money back intact if and when they want it. In order to ensure that the joint stock banks of this country invest their money in investments or advance it on loans to those who desire to borrow from them, the resultant revenue is devoted (1) to the payment of interest to their depositors, and (2) to the payment of dividends to the shareholders. Deputy Hickey has just told me that we ought to put the whole credit control into the hands of the bunch who are sitting on the Government Bench. This is the bunch who, three weeks ago, told this country that the banks were not making enough profit out of the rates of interest they were charging the Cork Corporation and that, therefore, it was necessary to permit the banks to increase their charges.

Deputy Hickey does not stand for that.

Deputy Hickey was telling me we ought to confide the whole matter of credit, with confidence, into the hands of the Taoiseach, and if we did, we would be high, wide and handsome. The Taoiseach is the very man who told us that out of the 4 or 5 per cent. Deputy Hickey was asked to pay on behalf of the Cork Corporation to the banks of this country on his loans there was not enough profit to pay their expenses and who insisted in this House that all banks should be allowed to increase their charges to their customers. You cannot have it both ways. Either the banks are making excessive profits at the expense of the corporation or else the Taoiseach was wrong.

You do not agree with that.

Of course, I do not. That is why I am telling the Deputy that he is a very foolish man to be putting the entire destinies of the nation under the credit control of the Taoiseach, who is responsible for that "codology." Deputy Hickey thinks that by that means all human ills will be solved. To tell you the truth, I followed Deputy Hickey a little further than I intended to because the absurdity of many of his well-meant intentions exercises an irresistible fascination over me. I have still got to wait for the glorious day when he can get up and tell me where the money is going to come from. I promise Deputy Hickey the day he discovers the answer to that question the pair of us will go out and make whoopee while the going is good.

I think there is a certain danger in discussing this Central Bank Bill at this time because certain Deputies may associate the proposal with the present emergency through which we are passing and of course, it ought to be considered quite divorced from the context of the present emergency. It has got nothing to do with the present emergency. It is a permanent banking reform which must be contemplated, not in the light of the peculiar circumstances in which we find ourselves now, but in so far as we can, for the purposes of normal circumstances, whatever they may be, which will reappear at the conclusion of the present war. In that spirit then I look on this Bill and I ask myself the question, "Should we have a central bank?" My answer to that question is in the affirmative. I think we should. I ask myself, "Is the bank envisaged in this Bill an evil institution?" I answer that question in the negative: no, I do not think it is. The truth of it is that this Bill is a somewhat innocuous measure.

I think the Minister for Finance is greatly indebted to Deputy Cosgrave for his speech to-day. Deputy Cosgrave envisaged dangers which I confess I cannot see, but he managed to paint the Minister for Finance a pale pink, in anv case, and inasmuch as Deputy Norton and Deputy Hickey were trying to persuade the public he was a black reactionary, I think the Minister will emerge as a zebra figure with alternate stripes of black and pink, which will enable him to go down with the sugarstick-loving people of this country. That is what he principally wants. I think the Bill is a harmless kind of instrument, but it has in it this inherent danger: if they put all the dafties who are camp-followers of Fianna Fáil on the board, then there are grave dangers inherent in the whole proposal. There are a whole lot of "cods" and frauds—well-meaning "cods" and frauds—who write long articles and weep crocodile tears over the sufferings of the poor and who are indignant with anybody who criticises them for the egregious follies which they encourage. Some of them put up to be great economic authorities. Many of them at one time or another figured as economic prophets of the Fianna Fáil Party.

If this type of person were put upon the board of this bank they could do a great deal of damage before we got them kicked off it. But I have often noticed, I am glad to say, that in regard to that particular type of camp-follower Fianna Fáil has acquired some wisdom since they came into office. When they first came into office they did instal a lot of these absurdities in responsible positions. They sat on that hot-plate which they created for themselves for a year or two years, and then they began to turf them out. As we all know, without naming any names, a lot of the poor old cranks and "cods" that they installed have been pensioned off or given soft jobs or disposed of in one way or another. Some of them have even written to the paper to say that the allegation that they retired as a result of ill-health is not true, that they were turfed out and want everybody to know it. The net result is the same—they were got rid of.

After five or six years' experience of them the Government are probably learning sense, and I am not without hope that at least one of the Government nominees will he an intelligent man. If we can get one Government nominee with a modicum of intelligence and three bankers' representatives with a responsible chairman I think the situation is reasonably safe, but we ought to go into this with our eyes open. We ought to realise that the follies of the Party constituting he Government of this country at present are so gigantic that giving them any discretion in a matter of this kind is extremely dangerous, but what can you do? The Irish people chose them and we have to assume they represent the Irish people. Whether we like it or not, we were all born in this country and are proud of it, and that is the best the Irish people were able to do the last time they had a shot at it. We can only hope that the next time they get an opportunity, they will make a better "fist" of it. In the meantime, however, we have to do with them. They are there and we can only pray God that they have acquired some vestige of wisdom. We have to legislate, whether we like it or not, on the assumption that they have acquired some measure of wisdom. The Leader of the Opposition is a little more optimistic than I am, but in this, as in many other things, I propose to follow him, in the hope that his optimism will be better than my pessimistic forebodings.

There is one last matter to which I want to refer. I cannot find in the body of the Bill any proviso authorising the central bank to set up the research institute recommended in, I think, paragraph 336 of the Banking Commission Report. Of all the proposals associated with the central bank as envisaged by that report, I thought that one of the most useful, and I should be glad to hear from the Minister (1) as to whether power to do this is to be found in the Bill, and (2) as to whether it is his view that the central bank, when established, should embark on the transaction. I endorse very heartily what Deputy Mulcahy said in closing, that is, that it is most important to make it clear to the people now that this proposal for a central bank is not one by means of which we may expect to solve all the evils that beset mankind. It is merely; so far as I can see, a piece of machinery which may be used for a good purpose and which may be used for a bad purpose. If it is used for a good purpose, I do not think it will make any radical difference, so far as the community is concerned. I think that in many ways it will be a more convenient way of handling many tasks which have to be done than the system we have had at our disposal so far.

There is, however, another section in the Bill to which I want to make special reference. It is the section enabling the central bank to require a joint stock bank to make a deposit, free of interest, with it, commensurate with any given quantity of external assets the bank may hold. That is an evil proviso and it ought not to be in the Bill. I want to tell the House this, and it is as certain as the fact that we are here: that proviso has been put into the Bill by the same kind of mind which put the postal vote into the Railway Act. It is the same kind of silly schoolroom, schoolboy idea that you are going to outwit the big fellows this time. I remember the whoops of joy from the Fianna Fáil Benches at the prospect of kicking all the railway directors out with the postal vote. Everyone thought the postal vote was a way of beating the big fellows at last, but of course the postal vote was a complete "cod", and was abandoned six months ago at the instance of the Minister responsible for introducing it into this House.

This proposal to coerce the banks to withdraw their money from where it is profitably employed abroad and bring it home is a proposal of a very similar kind. I do not believe that any responsible central bank would ever use pressure of that kind, and I do not think its use could ever achieve any useful purpose. At present if the Government goes to the banks, the banks have always shown themselves ready to lend to the Government whatever quantity of money is consistent with the safety of the banking system of the country, and the Government was always in a position to say, if the banks ever refused to do so: "We will take steps to make you do it"; but that would have involved legislation, would have involved coming to the House and explaining the reason for seeking such powers. There is, however, no instance of that ever I having happened. Yet we propose to give the central bank a power, the use of which might give rise to very serious evils and might even imperil the solvency of the banking system of the country. So far as I have heard, no syllable of justification has been attempted for the proposal by the Minister who introduced it.

Sometimes it is possible to be silly without doing any serious harm, but sometimes silliness does damage which it is extremely difficult to repair. The Leader of the Opposition referred to-day to the catastrophic experience the United States of America had in 1929, during the great economic blizzard when the banks began to burst. Anyone who lived through that would never want to see it happen here.

It was not the rich who suffered— they got their money out. The people who were absolutely crushed and crippled were the small industrious depositors up and down the country— the men with 8,000 or 10,000 dollars saved after a long life and which they had left with their banker for investment. They were completely wiped out. This proviso requiring a joint stock bank to repatriate, against that joint stock bank's own judgment, funds which they had invested in a foreign market can be used by an imprudent authority for the purpose of creating a lack of liquidity in the ordinary joint stock banking system of this country which could precipitate a panic. To start a panic is one thing, but to stop it is quite another, and once you have had a panic it will not be forgotten for generations.

There is no conceivable reason for putting that clause in. It is put in purely from the point of view of silliness; it is put in in order to give the Minister for Finance the chance of saying to Deputy Hickey: "There is the power under which we can make the Bank of Ireland lend money to the Cork Corporation," and it is hoped by means of that paragraph to pull the wool over Deputy Hickey's eyes. Deputy Hickey is a decent, deceivable mail, but I do not think he will fall for that. That instrument, designed primarily to pull the wool over the eyes of a few Deputies, is pregnant with danger. It ought to come out of the Bill, and if it comes out of the Bill and if the Minister for Finance gives us any indication that he intends to appoint responsible and sensible men to the board of this bank, I will vote against the Labour motion, which everyone knows is the purest "codology," and will vote in favour of the Second Reading, because, all things considered, I believe the institution of a central bank is a desirable reform.

I want to make a few observations on this Central Bank Bill. I admit quite frankly that a study of central banks is a most complicated one. I do not pretend to understand either the results of their development in other countries or how far the economies of other countries have been affected merely by the position of a central bank as distinct from other factors which have arisen to alter those countries' prosperity. But I do think it is important in discussing this Bill to bear in mind the fact that conditions obtaining now and after the war can only make any central bank what may be described as an adjuster in the national economic position. It will be unable to make any new or terrific changes in the national economy or in the method of carrying out financial reforms. A great deal more than the powers possessed by any central bank is required to enable a country to carry on its ordinary commerce. Take the effect of a central bank on other countries. They have the power to affect the flow of the rate of interest of a country and the power to modify the proportion of current savings and investments by their attitude towards the rate of interest. There is always, of course, to some degree the very important factor of public opinion, and the desire of the investor to act in one way or another. Central banks have certain powers to off-set the effects of inflation or deflation. Where deflation or inflation has taken place one thing has been noted in central banking. Very often the central bank acts too late, and before it takes steps to prevent the excessive inflation the damage has been done. One criticism of central banks that I find is the fact that when action is most required the conservatism of their directors is undesirable, whereas if you appoint directors who are not naturally conservative the effect created may he still more undesirable.

In other words, it is very hard to make a central bank act in the way in which it will do all the things that you want a central bank to do. This is quite obvious from a study of central banks in countries which have had varying periods of prosperity and in which there is a fair record of financial rectitude. We are agreed on this side of the House that there should be a central bank to co-ordinate the forces of credit to a reasonable degree, and that we should get used to the idea that we should have these forces coordinated.

The next thing to examine is, what is likely to be the effect of a central bank both now and after the war. Immediately we find that a central bank alone cannot possibly have any major effect on our economic development. Let us, for example, speculate on what are likely to be the least serious results of the war on this country so far as they affect credit. We are very likely to have accumulated a considerable balance in trade. Great Britain is likely to owe us a vast quantity of goods for which we have paid in advance. At the end of the war, materials of every kind will be lacking and there may be an unequal flow of materials. It may be easy for us to get certain classes of goods and extremely diflicult to get others. A very large proportion of our invisible exports may eventually disappear. It may be impossible for our kith and kin to send us the £2,500,000 in gifts which they had been sending us every year up to the war. It may be impossible to resume the Hospital Sweepstake. We may find that there will even be a decline in the dividends from our foreign investments, so that in many ways we will be subject to external influences over which we have very little control. Great Britain, by the end of this war, may have become virtually a debtor country, having to buy and sell in the world's markets according to a rigid system of exchange control. That may affect, in a most fundamental way, the character of her trade with this country. Although we may hope that normal trade will continue to take place between us, it may have a very profound effect on our whole economy.

Then there is the relation of this country to the possibility of serious inflation after the war. We have no means of foreseeing the degree of that inflation. We have been told recently by the British Chancellor of the Exchequer that about 40 per cent. of the war cost is being paid for out of current income and savings, as compared with 28 per cent. in the case of the last war.

We are also aware of the fact that economists in England gave warning that considerable inflation is imminent. There again the relation of this country to England, taking into account the fact that we do 90 per cent. of our trade with that country, is going to relate in some way to the degree of inflation. The degree to which England can prevent inflation after the war depends partly on the degree to which she can continue rationing commodities, and a most rigid control of imports and exports. Arising out of all those conditions, a whole lot of new economic circumstances will arise, which go far beyond the influence of any central bank. All countries make use of tariffs and quotas to direct the flow of goods in and out. They have commenced a system of barter for the direct exchange of goods, in which the element of currency is determined entirely by the circumstances which relate to the trade between the two countries, and in certain cases no money passes, except purely as a bookkeeping operation. At the same time there is a system of subsidising both raw materials and finished products for the sake of altering artificially the cost of living in one direction, thereby decreasing the cost of certain commodities and increasing the cost of others, the whole thing indirectly falling on the taxpayer. That is another artificial facts of present day economics.

Most important of all in relation to the influence of any credit scheme is the fact that the gradual growth of rationing, owing to the complete cutting down of civilian production, has entirely altered the value of any currency. The Germans claim that they have perfected their system of finance to such a degree that the complete rationing card in Germany, whether the rationing card of the type held by the consumer or the trader, is the currency of the country, and that it does not matter, as far as they are concerned, whether they issue too much or too little currency, because the thing that maintains economic stability is the rationing card. At the same time we have heard from the British that the system of rationing is gradually developing, so that in a very short time the rationing card there will be the real currency of the country. Those are wider changes, but we may be quite certain that after the war, until every country has converted its whole economy from a wartime to a civilian state, rationing will continue—rationing from the producer to the wholesaler, from the wholesaler to the retailer, and from the retailer to the consumer. There is no way of avoiding the most frightful inflation except by a continuance of rationing. Therefore, it would seem to me that a central bank will have a certain value, as I said before, as a lubricant to industrial and agricultural development, as an assurance that the State, which has to have complete knowledge of all that is going on, will be able to direct credit, that there will be some co-ordination between all those various economic controls now being exercised, and that in that way the country's economic position can be safeguarded. Nevertheless, in spite of the value of a central bank from that point of view, its effect in the future will be limited.

I think that we will have a very serious position to face at the end of this war. We shall have agricultural trade on a competitive basis, which will be most frightening in the extreme to face. It would seem to me, from making a study of agricultural production, that we shall require a huge capital expenditure, in order to modernise agriculture in this country. It will require a plan on an extensive scale involving expenditure over a number of years. I hope, and I would like to believe, that the central bank, whether in its present form or suitably amended, will do something to enable credit to be available for that purpose. It is certainly too much to ask the ordinary private bank to give credit for what would be a revolutionary change in agricultural technique based on modern principles. The central bank appears to me to be a very useful instrument for enabling credit to be available. We have to take the risk of pledging a certain amount of our external assets in that regard. I absolutely agree with that clause in the Bill which makes it possible to direct the operation of external assets, if by so doing we can rely less on our invisible exports by having an agricultural system which can compete with any other in the world, allowing always for natural conditions which make our productivity difficult. I think myself that that will be the biggest problem at the end of the war, and that it will require more than normal credit facilities. I am no believer in giving money to the farmers simply for the giving, but I am a believer in an agricultural plan which will include both propaganda and education. That involves, of course, in its turn, ability to sell our agricultural produce, and that involves again international relations of a satisfactory character. In turn, that involves a settlement of the world international problem of trade. I do believe, and I would like to repeat, that the central bank is essential for carrying on the various economic controls of the country, and for enabling the Goverment to make use of credit facilities in conjunction with all the other controls which they will have to exercise at the present time and at the end of this war.

I rather think that this is not an appropriate time to introduce this Bill. I am not opposed io the setting up of a central bank, but it is rather a peculiar time in the history of this country to introduce a Bill of this kind as part of our permanent legislation. Obviously, that is what is intended. It is not a part of any emergency legislation, but is intended to be a part of our permanent legislation. It is following a course which has been followed in a great number of other cases—a sort of departmentalising of every part of our public life and our public activity by bringing under the semi-control of the Government or a Government Department one institution or another.

There are just one or two observations in connection with this Bill which I think are proper to a Second Reading debate. Like the last speaker, I find it very hard to talk about central bank systems, because I know very little about them, and certainly I do not know very much about credit and things of that kind, but I have read the Currency Act of 1927 and this Bill which we are discussing now, and so far as I can make out I think it is the intention that this bank should be the authority for issuing unlimited notes as against sterling assets. I think the limit of the notes that can be issued is to be confined to the amount of the sterling assets. If I am correct in that—I may be wrong, but I think that is the general scheme behind the Bill—have the Government or has the Minister considered it from the other aspect? I do not wish to be too much of a pessimist as to what may happen to our neighbour on the other side of the water, and I certainly do not want anything serious to happen to him or to his economic existence, because the two of us, as is admitted now, are bound up together, but what is to happen in this country in case of an emergency where possibly it might happen that the sterling assets would entirely disappear?

At that very moment it is necessary that unlimited credit should be available. I advert to this because this is intended to be part of our permanent legislation and, when dealing with permanent legislation, we must envisage every possibility and every eventuality that could arise. In normal times different considerations would apply, but in view of the experience we have had of world events during the last few years, it is necessary, in the framing of permanent legislation, to take many matters into consideration. It might be flying a bit wide of the mark to say that sterling assets might disappear, but when we are framing permanent legislation we must take everything into consideration. That is one aspect of the matter which I will bring to the attention of the Minister for Finance.

The second matter with which I should like to deal is the composition of the board of directors of the banking company. I do not like the way this board will be brought into being. I think the idea is to have not more than two permanent civil servants. In my opinion, it would be quite sufficient to have one. The governor of the bank will be nominated, on the advice of the Executive Council, by the President, and in order that the bank may be kept in touch with the Government, I suggest that one civil servant will be quite sufficient. The governor will be appointed by the State and, I think, one director, and not two, to be appointed by the Minister or by the Government, would be quite sufficient.

There is another point with regard to the election of directors to which I must object. You are going to have a very elaborate form of election. I do not know whether you would call it proportional representation, but, according to the procedure set out in the Second Schedule, you are going to have six elected at a time, knocking out those who get the lowest number of votes. In the end you get six nominees of the bankers elected, six people representing the eight associated banks. The election is a very complicated one and it might go on for a considerable time, because you may have contending interests among the eight associated banks. Having eventually, and with great trouble, elected six nominees, the Government then step in and immediately turn down three of them. That is what it amounts to. They turn down three on the spot and it seems to be something of a farce, having had a very elaborate election—there is quite a big schedule setting out how the election will take place—that the whole thing is more or less nullified by leaving 50 per cent. of the elected persons turned down by the Government. Some better procedure should be introduced to deal with that aspect.

Section 6 has been referred to. It contains this very pious expression "in what pertains to the control of credit, the constant and predominant aim shall be the welfare of the people as a whole." I hope what is contained in that section will be interpreted in such a way that credit will be loosened up, because that is absolutely necessary. At any time that I have spoken in this House on a subject with which credit could even be remotely connected, I have always stressed the necessity of increased credit facilities. I do not mean making presents of money recklessly here, there and everywhere, but I do say that credit is the life-blood of the nation, particularly of a nation like this, and the greater the value of our real assets, such as land, stock, food, our climate and the hard work of our people, the better for the country. Those assets are increasing-in value every day, but there will be some stoppage or interference unless better credit facilities are given.

I will give one simple example, showing that not only is there no credit in the country but that the system is operating in a direction opposite to that in which it should really operate. I had a letter from a constituent who is in arrears with his Land Commission annuity. At the time he wrote me he was about to prepare his land for the production of food. He had nothing but his horse and agricultural implements. Surely a man in his position, prepared to do quite a large amount of tillage, would be entitled to credit? I think he should be quite entitled to go somewhere and get money in order to assist him to grow a crop. What happened in this case was the very opposite. I had to write to the Land Commission to prevent the execution of an order that was actually in the hands of the sheriff, instructing him to seize the horse and plough. What was the result of my communication? He was told that if he paid up £13—an unlucky figure to choose, certainly—by return of post, and the balance by 1st June, the seizure would not take place. That meant that it would take place, because the unfortunate man could not get the money. That is one example of the situation in many parts of the country. If this mail is prepared to grow a crop for which it is alleged he will get an adequate return in the autumn, he should at least be given sufficient credit to enable him to stave off the seizure of his agricultural implements, all that he has for the purpose of producing food.

We could produce much more food if credit facilities were extended and I ask the Government to interpret the wording of Section 6 in what I submit is its real meaning—"in what pertains to the control of credit, the constant and predominant aim shall be the welfare of the people as a whole". The people as a whole are the producers of wealth in this country and credit should be made available for them. I do not mean that we should give money away, but until there are credit facilities you will not have a maximum national effort in connection with the production of food at this particular time. Apart from what I have said, I have not very much against this Bill. It is only right and proper to have a central bank, but I wonder is it wise to bring in this Bill at the present juncture when, from day to day, we do not know what the situation is going to be either in this country or in any other part of the world.

The Labour Party oppose this measure. It is not that they feel that a change is not necessary in the monetary system, but they do feel that if a change is to be made it ought to have some regard to the hardships that have been imposed upon the people by the existing monetary system and they feel that steps should be taken in any new measure that is introduced to make possible the development that has so far been hampered and hindered hy that system. Deputy Esmonde has siven us one interesting example. He has instanced the plight of one small farmer and indicated the limitations of that man and the hardships he has suffered because of the system of credit, or rather lack of credit, that is operating through the country. He cited the case of one of the most important men in our community to-day, a man anxious and prepared to produce food for the nation. All these labourers having been withdrawn from the land, the productivity of that land has suffered accordingly, and they have not been able to make that contribution towards the solution of the problem, which could be made, because of the lack of a little credit. In the general position we find that the Government have complained time after time when appeals were made to them to grapple with the enormous unemployment problem in this country, and the consequent deterioration of the country as a whole as a result of that problem, that they did not know where the money was to come from. Time after time, when appeals were made to them, all they said was, where is the money to come from? That was their set reply—that it was all very well to be talking about huge schemes for employment and development, but where was the money to come from? I do not think it has been ever denied that the schemes are there or that we have been left a legacy of arrears of such works by the British Government in this country that would take us 20 or 25 years to make up for, working under high pressure, but notwithstanding that all these schemes are awaiting development, such as housing, afforestation, reclamation of lands, and all the other things that matter to make for the success and prosperity of the nation as a whole, they have been only tinkered with in some cases and the fringe of the problem barely touched upon, and in many other cases, they have not been attended to at all, and the only reason that is given is that it is because of the system of obtaining money—that money could not be got.

On the other hand, we have a mass of unemployed people, who are really the nation itself. We have also this problem of the undeveloped resources of our country and the real problem is to put the one thing in contact with the other, but for some reason that cannot be done. It cannot be alleged that the Government are so callous to the sufferings of the unemployed, or so unmindful of the necessities of the nation as not to want to do something to remedy the situation, and I feel quite sure that they would enthusiastically tackle the problem of developing all our resources and putting our unemployed into production if something did not bar their way. That something, as I and others have said repeatedly, is the monetary system, the lack of money to do these things.

This Central Bank Bill might be welcomed if it would help the Government to bridge that gap, and help to put our people into employment and to develop the resources of the country; if it would help to bring more agricultural land into production and make more land available for tillage; if it would help to rescue our lands from being swamps and morasses; if it would help to deal with the problem of coast erosion, and other problems of that kind; if it would make possible for the Government and the different local authorities to build more and more houses, utilising native materials such as we have at our disposal as much as possible, and enable these houses to be built and let at rents inside the scope of the ordinary average citizen and the country to pay; but it will not help any of these things. Instead of that, as things are now, houses are being built, with the best efforts of the Government and of the local authorities, which eventually have to be let at inordinate rents. People are being transferred from the slums to these houses, but because of the rents that are being charged, the tenants are being evicted as speedily as they are put into the houses. It is not nice to think that that should be the situation.

All through the country, boards of health and other public authorities are doing the best they can to rescue people from the slums, both urban and rural, and put them into proper houses. Medical officers of health are constantly pointing out that bad housing conditions are the chief cause of disease, and that, in its turn, is adding to the cost generally by making it necessary to provide sanatoria, and so on, in an effort to remedy the situation. But the real remedy is to put these people into good new houses. The houses are being built, but they are being let at rents outside the scope of the people who are to occupy them. That is not the fault of the local authorities, and evidently it is not the fault of the Government. Nevertheless, it is a fact. What, then, is the cause? Is it because of the amount of wages paid, or is it because of the costs of the materials? Is it not really because of the cost. of money? Is it not because of the usurious charges that are made by the banks in giving money to the Government and the local authorities for the building of these houses? I think that is the answer.

Why should the Government of this country be in the position that they could not provide money and take control of the monetary system to enable them to provide for the national necessities, without having to go hat in hand to any bank, whether you call it a central bank or a currency commission, whose eventual control is dictated from outside the country? Why should it not be vested in the Government? If they are to be a national Government, I suggest that the first essential for the successful working of the country is to take control themselves of the necessary credit to enable their people to be pat into employment at reasonable rates of wages, to build the necessary houses and do the necessary things for agriculture and the building up of the nation as a whole. I say that that has been rendered impossible up to now because of the system under which we are working. I suggest that the present Bill will only perpetuate the present condition of things. It is merely changing the name on the label of the bottle; it is not changing the contents. The Government will not have control, and the proposed bank will not be responsible even to this Oireachtas.

We are told, in connection with the general function and duty of this bank, that the constant and predominant aim shall be the welfare of the people as a whole, in anything that pertains to the control of credit, but we are tied to a parity with sterling, and that is the under-writing and overriding dictation to the banks. The reference in Section 6, which has been referred to by Deputy Esmonde, is no more than what he called it, a pious aspiration— if you could leave it at that, because it is actually throwing dust in the eyes of the people to say that the central bank is to have as its main function and predominant aim the serving of the rights of the citizens and the preservation of the welfare of the people as a whole. They will not be able to do it, and they are not being given a chance to do it. I suggest to Deputy Esmondo that this is an inopportune time for this measure to be introduced —I do not know when it would be opportune to introduce such a measure —but I think that the time is overdue when a measure of monetary reform should be brought in. It is time for the Government to break from the old traditions and take their courage into their hands and bring in a definite measure giving themselves control of the monetary system and having some confidence in the future of this country and its natural resources. That is the real credit of the country: the undeveloped resources and the idle men that could be put to work. That is the credit and the only credit that we have in this country, the only one that is going to lae a lasting asset to us. This linking up with, and perpetuating the maintenance of parity with sterling is not in the best interests of the country, and anything else that you have there is only by way of a pious aspiration. When one examines the powers of this proposed bank and the limitations put upon it, one can see that it cannot hope to achieve what has been set out in Section 6 as its main function, because it means the subordination of our currency to the English currency, and as long as the Government allow the monetary system to be governed by that particular dictate, then there is no hope for the country.

Do the Government contemplate solving the unumployment problem by a continuance of the exodus of our people, by deporting them in tens of thousands out of this country to earn a living somewhere else? Is that the hope that they have? What hope are the Government giving us? Will these people get an opportunity to work in their own country? We have been told by the Taoiseach that it was because they could not get as high a rate of wages here. Increases in the rates of wages are not available here for them, but across the water they can earn £5, £6 and even £10 a week, and send it back here; but that exodus was going on long before Order No. 83 was in effect here. That is all part and parcel of a very short-sighted, nebulous outlook on the part of the Government, and I believe that until they break, and break definitely, from the old tradition, we will never be able to grapple properly with these problems. Before the English left this country we were in a bad way enough, but in some ways we had a better chance then even than we have now. These problems are as far away, and even farther, from being solved as they were when the British were here, and all as a result of being tied to the Bank of England.

We are as much tied to that old system now as we were when the Union Jack was flying here. This Bill will not alter that state of affairs. It is unworthy of the Government, because it holds out no hope of any measure of relief for the serious problems of the country; and until the Government deal with, and grapple courageously with, this whole problem, the life of this nation will be jeopardised, because we cannot, with our small population, afford the constant drain caused by the best of our people leaving the country, and by the declining birth rate resulting from the fact that people cannot afford to marry because of the miserable conditions in which they are living, from hand to mouth, on doles, grants, and all the rest of it, trying to keep body and soul together. The cause of it all is this tinkering, miserable and niggardly policy, which is the result of the monetary system to which this Government seems to be slavishly attached, for what reason I do not know.

It has never been beneficial to the country. It is more disastrous now than ever. I see no prospect of any improvement in this Bill. For that reason, the Labour Party are opposed to giving a Second Reading to this Bill which holds no promise of any good for the country.

I did not expect to be called on so soon. I had hoped to hear a wider expression of opinion from the House on this matter of very great importance to the country, its economic and financial future. We have heard some interesting speeches, mostly critical of the Central Bank Bill introduced by me to-day. I do not know if anybody really seriously hoped that any Central Bank Bill that would be introduced here would offer a solution of our economic ills. I wonder if anybody was so full of foolish hope as to imagine that any Bill, whatever type of Bill, founding a central bank, that would be introduced in this House by anybody, even by Deputy Keyes, if he were in my position, would offer a solution of our economic and financial ills. It could not be done. No measure ot the kind can, alone, provide a solution for the economic ills that Deputy Keyes and other Deputies referred to in the course of this debate. It would be a very simple matter Indeed if this Government or any other Government, or the Labour Party, could suggest that a central bank such as we know exists in so many countries. could be set up through whose operations in a month, or in a year, or in five years, unemployment could be ended in this country. I most earnestly wish that somebody could suggest to me a bank of the kind, the constitution of a bank of the kind, that would achieve that desirable object. We will have opportunities again on the Committee Stage and other stages of this Bill and I will be prepared to consider any reasonable suggestion that would not hurt the financial and economic structure of this country, that is offered from any source. I will be very happy to consider any suggestion that will go any step in the direction of helping us to end unemployment, for instance, to stop emigration, to provide houses at the ideal rents that Deputy Keyes and I and others would like to see in operation.

I and practically all my colleagues have given a great deal of thought to this subject of a central bank. Before I became Minister for Finance I was interested, in the subject. Since I became Minister for Finance the Government has given many long hours of thought and discussion to this important subject. There are people among us who have ideas and ideals for the welfare of the large body of this country which generally one might call the poorer classes of the community, who wish for their welfare and hope for their improvement and social uplifting, just as there are people in the Labour Party and, I am sure, in the main Opposition Party who try, and try hard, to find a way of solving our economic and financial difficulties, and to solve them without doing more harm than good to the community as a whole, particularly to the interests of the poor. It is not the easy thing that some Deputies seem to imagine it is, if we are to credit their words.

The first speaker to-day, Deputy Norton, denounced the Bill in unmeasured terms because it failed, in his view, as an instrument to do the things that, later, Deputy Keyes referred to. Deputy Cosgrave, on the other Land, speaking for the main Opposition Party, if I understand his speech correctly, regarded it as a dangerous weapon that was going to do more harm than good unless, as he said, it was amended in some vital sections. There you have two extreme views. I certainly am satisfied that the Central Bank Bill, as put before this House by me to-day in the name of the Government, is an instrument which, if adopted by the House, will work for the social, economic and financial security, improvement and progress of this country.

I have listened to views, some of which I may call extreme views, expressed here to-day by the Labour Party. I have been listening to and reading that type of view on central banking for a number of years. Deputies here, public men and all interested in these matters, know as well as I do the calamitous state of finance and currency in some countries after the last war. What happened in Germany will leap to the mind of Borne people; what happened in Russia; what happened in Austria-Hungary; and what happened even later in England. Extraordinary things happened and revolutionary changes were made. Although, the week before the 1914 war broke out,the currency of Russia could look the English pound or the American dollar in the face, as the saying is, where did they end up three or four years later? I saw in Germany after the war people receiving their week's wages in the form of drafts worth hundreds of thousands of marks which, so far as purchasing power was concerned, were not worth the paper they were written on. Relative to the English pound, the German mark collapsed practically without cessation for more than a year, and every morning one got up, one found that it was hundreds of thousands of marks less in value.

That kind of thing could, and may, happen again. As a result of these happenings, central banks were set up in most of the countries of Europe in which such banks did not already exist and they have proved useful instruments for safeguarding the currency and the monetary value of the currencies in these countries. This Bill is one that perhaps should have been introduced before now. It is not introduced because of the emergency. It is a Bill that would have been a useful measure at any time since the State was set up. I again want to emphasise that it will not work, and was never intended by me or by the Government to work, miracles and produce money from nowhere to build houses or to give employment. It cannot do these things, but it certainly can help, and help materially, to sustain the currency in times of peace, when there is no risk, and most certainly in times of danger and difficulty.

One of the points made by Deputy Norton was that this bank could not fix exchange rates. He said that so far as he could see it did not seem to be the function of this bank to fix such rates. Exchange rates are fixed by Governments and not by central banks. It is a modern development of finance which is useful in these years, when there is so much international trade, when it is necessary to have some stable measure, some yardstick, by which to value one currency against another, and when, because of big economic changes, because of the introduction of tariff systems in one country as against free trade systems in another, because one country with free trade wants to protect itself against tariffs and so on, there had to be found some standard by which to measure the currency of one countryvis-a-vis another and exchange rates were arranged by Governments.

Governments have funds to keep their currencies at a certain value. If the currency goes below a certain value, there are funds which are specially set aside for this purpose by a great many Governments, and particularly those of the more important States which do a greater amount of international business. They peg, in other words, their currency with their cash, and it is not done by the central bank in these countries, but by the Government. If it is done by the central bank, it is done with the consent of the Government and at the cost of the Government. Therefore, there is no foundation for Deputy Norton's point about the independence of the central bank. In that matter, so far as I am aware, central banks are not independent.

A number of speakers referred to what appears in their minds to be the Hamlet in this matter—the link with sterling. Deputy Keyes, for example, seemed to imagine that, to end our ills, the first step we should take would be to smash the link with sterling. The link with sterling is something arranged by ourselves here with the approval of the Dáil and Seanad, in the interests of this country and not in the interest of any other country, Great Britain or any other. The hour that we are convinced, after due examination of the effects of any change we may make, that it would be better, in the interests of Ireland, in the economic interests of our country, that we should separate from any tie of that nature, we have anywhere—the tie with sterling, for example—there is nothing in the world to prevent a one-clause Bill being put before this Dáil and made an Act with the approval of the House that day to end that link with sterling, if we are satisfied that it is the best thing in the country's interest. It was only entered into because the market of this country for the surplus agricultural produce, which, in the main, is our only export, is in England. Where else have we succeeded in getting a market?

You never did succeed.

What about the alternative markets?

We tried hard for alternative markets. We got some, but nothing compared with the market we had in England.

What did we get?

We did not get much of a market, but we got some. The facts, however, are there, that our chief market for our surplus agricultural produce is in Britain.

The market which we thanked God had gone.

It suits us. It suits our farmers; it suits our bankers; and it suits the people who have anything to sell to have a regulated means of exchange. We have an Irish £ that is as good as the English £. It is on a parity with it and is not subservient to it in any way. It can stand up to the English £. When an Irish farmer sends out his produce he knows what he is going to get for it. We could have in this country—it is a matter for ourselves to decide—an exchange rate. Supposing that we went off sterling, for reasons good and sufficient to ourselves and tied ourselves anywhere else: suppose we were tied to the American dollar and that there was a difference then in the value of our £vis-a-vis the English pound and we still had to do our trading with England, we would need to have an exchange rate. That exchange rate would, in the course of trade, alter from day to day. That happens to the British pound vis-a-vis some of the foreign exchanges.

It does not happen with New Zealand.

It does. The Deputy, I am afraid, is not up to date in his knowledge so far as New Zealand is concerned.

I would advise the Minister to look the matter up.

In New Zealand they had to go off parity, and so had Australia.

But for their own reasons though.

Certainly, and we could go off it if it suited our trade. But they had to go off.

No. They wanted to go off.

They were forced off. That is what happened.

And they had to give 25/- for an English £.

I do not know what the rate of exchange is at present. At any rate, the English £ was of stable value. Many people in this country, myself included, when going abroad often found it convenient, instead of getting travellers' cheques or of adopting other means of carrying currency, to get as many English £5 notes as one could afford. I have travelled a good deal and I never found a banker, businessman or shopkeeper in any of the countries I visited who was not prepared to take an English £5 note from me and give me value for it in the currency of that country. That was my experience in France, Germany, Italy, Belgium, Holland, Switzerland and other countries. But each day I had to inquire at the bank in these countries what the rate of exchange was on that particular day. If I thought that I was not getting sufficient for my note I argued with the teller.

And you lost.

Not always, because sometimes if I was not satisfied I went to the neighbouring bank and got better terms there. The point I want to bring out is that, even with the English £ abroad, the rate of exchange would hardly be the same for two days in succession. There would be fluctuations in accordance with the amount of British moneys that were being bought and sold. Rates of exchange would be quoted in London and Rome for Italian money, and the same would be happening in other capitals.

But is it not agreed that it is possible to arrange a fixed ratio as between the currency of one country and another?

There is a fixed ratio for the Irish £vis-a-vis the English £. It is of equal value. But suppose we were linked to a lesser standard of value we would then be obliged to have a rate of exchange so that the farmer down in Deputy Norton's constituency would not know in advance what he was going to get for the agricultural produce that he sold outside.

How is it that the New Zealand farmer and the Danish farmer can know it?

In the case of New Zealand, the rate of exchange fluctuates there. It is not stable, and that is true also of Australia. The farmers there have that difficulty.

The farmer himself does nor export.

No, but our farmer knows pretty well what the value of his £ is. If we had a fluctuating rate of exchange he would not know what the value of his £ was for a day or two after getting Ins money. That would be his position. Our present position is what it is because we will it. Of our own free will we have entered into an arrangement with Britain and, again, of our own free will we can break it in 24 hours here in the Dáil and Seanad. We have not a rate of exchange because we have a parity of values. Australia and New Zealand do a big trade with Britain. Both countries would like to have their £ in the position that our £ occupiesvis-a-vis the English £. They would like that, but they are not in that position to-day.

They were on a parity.

They were a few years ago. Then they knew exactly what they would get for, say, a cargo of butter that was being shipped to London or Liverpool. They knew exactly what its value was in British £s and in New Zealand £s. But now they are not sure of the value of their own money because it changes from day to day, and during the course of a day. They have been driven into that position because of the policy pursued by the Labour Government set up in recent times in New Zealand. It was set up with magnificent ideals.

It wiped out unemployment.

As an idealist, I am not going to say a word against these magnificent ideals. But as a Minister for Finance, I want to say that they went on for a few years implementing their ideals—excellent ideals—and where did they land them?

The Minister for Finance in New Zealand visited this country less than three years ago. What was he doing over in London? Unfortunately for him, he had to go to London with his hat in his hand to beg the British Government to get him out of a financial hole.

He did not admit that.

He denied that.

That is the truth.

He denied that.

That is the fact, and he had to pay dearly for being got out of the financial hole. The British did not want to get him out of the financial hole. It suited them to get him out of the financial hole, because they wanted the food, but they made him pay through the nose for it.

Is it not the position that an old loan fell in then?

And they were not able to meet it, and had to borrow more at very high rates.

What was the cause of that?

That is a long story.

They were not able to pay for the huge imports.

It is a story worth telling.

It is very well worth telling, and I wish Deputy Davin would study it. I wish he would, and he would see that it is only possible to expend within limits. Even on the most useful and helpful things, you cannot expend unlimited credit without doing an injury to the parties you want to serve. I think Deputies on the Labour Benches will give me this credit, that I was most anxious to see that every deserving family in this country should have a decent house. That was my ideal, and the Government's ideal, but you cannot continue building and providing credit and cash for it at an unlimited rate. There is no country in the world where credit can be provided free.

The interest is half the economic rent.

There is not a country in the world—not even Russia, which went as far as any country could go in that line—where credit is provided free. Even there, credit has to be paid for, because, if it did not have to be paid for, unwise people would go to unlimited expense in carrying out their perhaps desirable projects, but they would come up against an hour when there was an end to the credit, when credit would not be forthcoming any longer, and all their schemes would have to be discontinued.

Is it not a fact that in some cases the interest covers half the economic rent?

I do not know what it covers. Perhaps the Deputy is right. Perhaps the interest in some of those cases may have cost more. There are some cases where there were high rates of interest for short term loans. There were some cases where boards of health borrowed money at high rates of interest, and that had the economic effect to which Deputy Davin refers.

And the Minister is defending that?

I am not defending that. Do not misrepresent me, please. We are not talking now about the rate of interest. I have not mentioned the question of the rate of interest at all, but I have said that there is no country where credit is free. Even in Russia you have to pay for your credit. You may pay less than some local authorities have paid here, but you have to pay for it anyway. Therefore, even for all the desirable things that Deputies on any benches in this House might wish to see developed, it is not possible to get unlimited credit without cost. Deputy Norton, I think, rather suggested that this Bill was nailing down the Irish pound to sterling and was copper-fastening it, the fact being to the contrary—that there is nothing in the Bill about the link with sterling. There is not a word about it. That link is there. Nobody wants to deny it— not the Government, not I. It is there. It is worthy of comment, if you like, that we did not propose in this Bill to put in a section to wipe out that link with sterling. I do not mind people calling attention to that. That is a fact. It has been commented on, and will be commented on again, and the reason is the reason I have given.

Since this State was set up the Currency Commission has considered and discussed whether it was wise to change that link, whether it would be of value to tie up elsewhere, with France or with the United States. That was considered. That board of men—the chairman, a whole-time man, a man of energy and experience, and the other members of the board, some of them experienced in financial matters, and others good businessmen —discussed that between themselves. The Government asked them to discuss it, the last Government and this Government, and they advised against it. If Deputy Norton were here as head of the Government I am sure he would ask—as we did before we were long in office—the Currency Commission to consider that matter and advise on it. Without consulting with the currency authority, without consulting the people whose job it is to know those things, to be experts, and to advise the Government, I do not think that Deputy Norton would bring in a Bill to abolish the link with sterling. I do not think he would. He has too much sense for that. We did ask for advice. We got the advice, and it was that the best interests of this country would be served by continuing the link. If there had been advice otherwise we might have tied up with the dollar, let us say.

When the Currency Commission was set up first in 1926, supposing they had tied up with the dollar at that time, where would we have been in 1932 and 1933? What would have been our position if we had remained tied to the dollar? One of the greatest financial collapses in history occurred during those years in the United States. I do not know how many thousand banks failed. It was not one or two or ten or 100 or 1,000; I think in the neighbourhood of 4,000 banks failed in the United States. Was it not a lucky thing for us that we were not tied up with the dollar? We have gone through a period tied up with sterling during which we have had stability for our exchange and stability and full knowledge for our trade conditions and the value of our currency. Deputy Norton talked of the re-discounting of bills as a piece of embroidery, not intended to be operative. That is not the fact. It is intended as a serious power to be utilised, and I hope it will be fully utilised if and when the board of the bank think it proper and desirable to use it in the best interests of this country.

Why not extend that to the local authorities?

As a matter of fact, I do not think the local authorities ever had any deposits to make or any bills to discount; they do not have them, so far as I am aware. Usually, the local authorities have overdrafts, and they are not of much value on the market to the local authority or to anybody else. Deputy Norton made play with the integrity of our currency. The integrity of our currency is a very important thing; it is a thing not to be lightly talked of. We are in the happy position of being a creditor country. That has some disadvantages, strange as it may appear, especially from the point of view of dealing with a central bank, but it is nevertheless important and helpful that we are a creditor country because we can make sure that we are in a position to change our link and go where we like, provided we consider the interests of our trade and industry, which are the life-blood of the community as a whole.

Deputy Norton said the Bill gives no hope for economic resurgence and that money will be as dear as ever. I hope the Deputy is a false prophet, and I think he would hope that himself, too. I firmly believe that this central bank will be of considerable help to us in controlling and regulating our currency and our credit and it will enable us— it will certainly enable the Minister for Finance—to have somewhat more independence in going into the money market.

Deputy Cosgrave objected to having to go over the Banking Commission's report a second time. I had to read it more than once. He described it as a penitential exercise. Even taking it on that low plane, we are told that penance is good for all of us. Penance is good for the soul, and I know that is a subject in which Deputy Cosgrave is deeply interested. Therefore, I am sure it did him no harm. He harped at great length on the depositors, on the interests of the depositors. All through his speech he made play on the interests of the depositors. I was going to say that he suggested, but he went even further than suggesting when he said that the interests of the depositors were not safeguarded. Deputy Nbrton thought this Bill a bad Bill. I do not know whether he used the words "rotten Bill". I do not think he did, but at any rate he said it is a bad Bill, bad because it is too conservative. Deputy Cosgrave thinks, on the contrary, it is a bad Bill because it is so liberal and progressive. There you are.

I think that it is a useful and a helpful Bill and, therefore, a good Bill. It does not please the leaders of the two main Opposition Parties, but they are men of very different mentality and different outlook, socially, financially and, otherwise. We have had from those two Deputies representative expressions of opinion. Taking a middle course, taking the middle of the road as it were, I hope that the Bill will prove helpful and useful. As a matter of fact, I am satisfied that it will. Sometimes in driving perhaps the middle of the road might be a very dangerous place, but I do not think there is any element of danger in this instance. I believe that this Bill will be helpful so far as the financial and economic interests of this country are concerned. When I say that, I have mainly in mind the interests of the poor, whom we wish to serve, just as well as the interests of the depositors, whom Deputy Cosgrave spoke so liberally about.

There is no risk or danger for depositors in this Central Bank. Their money will be as well safeguarded as ever when this Bill is in operation. It will be safeguarded just as well as it has been since depositors put their money into the banks. All the Irish banks have safeguarded the interests of their depositors. As Deputy Cosgrave reminded us, there has been no failure of a bank here for 60 years, whereas there were failures in the United States. I know some individuals, mostly poor people, friends of mine, who lost every cent. they had in bank failures in the United States. I know people in this country who got money from relatives in the United States to help them to buy houses and farms and, after the collapse in the States in 1931 and 1932, these people, well-to-do people in the United States, were writing home to their brothers and sisters, their fathers and mothers, to send out something to help them until things would improve. We had nothing like that in this country.

Were it not for our bankruptcy courts, the people of this country would be the chattels of the moneylenders and the bankers.

We have a low rate of bankruptcy in this country. On the whole, our business people and our farmers are conservative. That is much more in the nature of our people in the South of Ireland than in the business men of the North of Ireland. I have not been studying the matter much in recent years, but, comparing the number of bankruptcies in Dublin and Belfast, I would say you will find, for one reason or another, that there is a lower rate of bankruptcy here than in the North. It may be that the men in the North are more adventurous in business.

I do not object to the criticism offered by Deputy Cosgrave to this Central Bank Bill. I expected some criticism, and what he said was not very far removed from what I expected. The criticisms offered by Deputy Norton and Deputy Cosgrave were more or less what I did expect, but there was one thing I did not expect Deputy Cosgrave to say, and I am sorry he said it, and perhaps he is sorry now that he did say it. He said that unless certain changes that he recommended were made, he would encourage people, he would suggest to them, to put their money elsewhere. That is very subversive.

I think that is an extension of what Deputy Cosgrave said.

I do not want lo extend it.

It certainly is an extension.

That was my impression of what he said.

He did not say that.

If I am wrong, I am open to correction, but I do not think I am wrong.

You are wrong.

That was a statement I certainly did not expect to hear from Deputy Cosgrave.

Let us be clear upon this matter. The Minister is now saying that Deputy Cosgrave said unless certain things in the Bill were amended he would recommend people to withdraw their deposits. That is quite beside what Deputy Cosgrave said—it is an astonishing extension of it.

What did he say?

He said that if that remained in and that the powers were, in certain circumstances, being used under it, he would recommend depositors to take out their money.

I do not want to misrepresent Deputy Cosgrave. Perhaps I misunderstood what he said. I would not like to misrepresent him or any other Deputy in the House, but more particularly I would not like to misrepresent the Leader of the Opposition. I am glad, however, if my interpretation is wrong.

I think the Minister will find that he is, when he sees Deputy Cosgrave's speech.

Well, I am very happy to know that, and I am far from wishing to misrepresent him.

It is all the greater reason that nobody should take money out of the country except with the consent of the Government.

I think I am as interested as Deputy Cosgrave or any other member of this House in seeing that the hard-won savings of our people are safeguarded, and I am satisfied that there is not a syllable in that Central Bank Bill that is going to do any damage to the interests of the most modest depositor in any of our banks so far as keeping their money safe is concerned.

When we come to deal with Section 45 in the Bill, Deputy Cosgrave will have a better chance of understanding the Minister and the Minister will have a better chance of understanding Deputy Cosgrave.

In the meantime, the Minister might be allowed to conclude.

Oh, he is getting on very well.

Deputy Cosgrave, in talking of open market operations here, said that there were no bills in this country, that there could not be any bills held by Irish banks in this country. Well, on the 31st December last the Irish banks held bills to the value of £3,934,979. Deputy Cosgrave is so used to talking in large generous sums that he may mean that that amounts to practically no bills, but after all it is almost £4,000,000 worth of bills, held by Irish banks on the 31st December, within the country, and these same banks held bills outside the country amounting to another £500,000, or at least a total of £4,400,000 odd, and these were not Government bills. There are Government bills also that can be dealt with. Deputy Cosgrave, again, talked of the Minister being too closely concerned with the functioning of the bank. There, again, he and Deputy Norton are entirely at odds in this matter. Deputy Norton and, I think, Deputy Keyes, say that the Government are not taking control and that they have no powers to interfere, while Deputy Cosgrave, on the other hand, asks what do we mean by interfering in the banks so much.

Have you any control?

I have, to a certain limited extent.

It is very limited.

Certain limits are laid down. I am quite frank and open about this thing, and I do not want to say that there is anything in the Bill that is not there. I do not want to misrepresent by a single syllable anything that is in that Bill, or to claim for it any power that is not fully expressed, and I quite admit that the Minister's powers are limited. The constitution of the board of the bank, as suggested there, is such that the Minister's power, as I say, is limited, but would it be wise for the Minister to have unlimited power to interfere? I think that, on reconsideration, the gentlemen of the Labour Party would agree that it would not be for the best interests of government or of the country, and particularly of the poor, that political influences should be operative from day to day in the affairs of the central bank. I think it would be anything but helpful to have the Minister for Finance in a position to be influenced by political considerations that arise from day to day, to be able to get on the 'phone to the governor of the bank and ask him for unlimited credit for particular purposes, however good in themselves. It would not be wise, it would not be proper, and I would not stand over control of that kind.

Surely, not unlimited credit?

Well, even to ask for it: to be able to ask from day to day for a credit of millions. It is a terrible temptation to put in the hands of a Minister for Finance who, as well as being Minister for Finance, is also a politician, and who has his ideas and ideals of what he would like to see in operation in the country. It is wise to have brakes. I do not agree with Deputy Gosgrave at all that it is proposed in the Bill that the Minister for Finance should have power to intervene and interfere unduly with the governor and board of the central bank. I do not agree with his representation of the case at all, so far as that is concerned. I do say that there are safeguards. Some people may think the safeguards are too many and too strict, but certainly the boot is not on the other foot. I have not proposed that the Minister, under this Bill, should have too much power or that he should interfere too closely, as Deputy Cosgrave put it, with the functioning of the bank. That is not true, in my judgment.

Have you not the welfare of the people as a whole on your hands?

That is so, certainly.

If that is so, you should have the means of dealing with it.

Well, there will always be differences of opinion as to how that will be operated. According to Deputy Cosgrave, even the limited power that the Minister has is too much.

That leaves us where we were.

It does not. There is one other matter, of which several Deputies spoke, to which I should like to refer, and that is the question of agricultural credit. I talked on that subject in this House last week when dealing with the Central Fund Bill, and I talked on it again last night in the Seanad. I am interested in agricultural credit just as I am interested in credit for other desirable objects in this country. I think that a great deal of money is put annually into agriculture in one way or another out of Government sourecs. I quoted the figures here in the House last week and I quoted them again in the Seanad last night. I have not got them here now with me, but certainly millions and millions of money are poured into agriculture every year out of a variety of Government sources. In the last year or two it has gone up by leaps and bounds.

Could the Minister give us an indication from memory of what they are?

If the Deputy will refer to the Official Report, which was issued to-day and is in his hands, he will find the details there.

Is that money?

Has the Minister the other details, of the number of people who have left the country?

No, I am talking about the money given to agriculture. Deputy McGilligan wants to make a point, but why did he not get up here and talk earlier in the day? He had plenty of opportunities, and he was invited to do so, but for some reason or another, he did not do so, which is rather unusual with the Deputy.

I was waiting for the big noises over there to speak, but they did not get up.

I can say that the Taoiseach has paid great attention to this Bill all through, and I am happy to have had his advice and assistance at every stage.

And his silence to-night.

It was not necessary for him to speak. He knew he had somebody here who was well able to talk, and well able to answer Deputy McGilligan if he had the courage to get up and talk on this Bill to-night. We will hear him, I hope, on the subject, on other stages of the Bill.

The Minister has the advantage over him now.

What is the meaning of Deputy McGilligan's silence to-night? I was intrigued. He would have had the time of his life to-night. I was expecting this debate would go on all day to-morrow. I would have been interested. I am rather disappointed that it did not. I do not take it as any compliment to me or to the Bill that the debate ended so soon.

A few Deputies were caught out.

I think they were. I thought I saw the Deputy himself making a few notes.

I was cut out when I went for a cup of tea.

I said last night in reply to several speeches, particularly in reply to one from Senator Counihan, who has to my knowledge raised the question of credit for farmers on several occasions in the Seanad, that I wonder if there are many farmers who, even in a liberal sense, were credit-worthy who could not get credit now. I wonder are there many. Senator Counihan seemed to think there were small farmers and big farmers who were credit-worthy who failed to get credit. I told the Senator that if he assured me that that is so— and he did—I would be prepared to consider the question of agricultural credit. I can say that to Deputy Cosgrave, Deputy Esmonde and others who raised the subject again here to-day. I would like, especially in these times when it is particularly well worth seeing to it, that all the men engaged in agriculture would have as much help, financial help, if necessary, and any other help they require to enable them to produce the food we need, and I am prepared to give consideration to that matter. Deputy Mulcahy asked about the farmers who borrowed money to enable them to till extra acres to produce extra food. Somebody, Deputy Mulcahy said, estimated the figure that the extra tillage would cost some of those farmers at £6,000,000. I think it was Senator Johnston.

That they paid 5 per cent. and 6 per cent., yes.

That they paid 5 and 6 per cent. on £6,000,000?

But the farmers have at least £25,000,000 deposited in the banks.

Mr. Brennan

Not the farmers who are borrowing.

I do not know. It is a fact that they have that money. I am not saying there are not some farmers in the country who need credit. A lot of them may be people to whom Deputy Mulcahy would not lend 1/- or to whom even I would not, perhaps, lend 1/-, not that I have money to lend. I do not know what recommendations any commission, body, committee or advisory council we might set up to look into their case, might make. I do not know whether they would be very willing to hand over money to the people about whom Deputies here and Senators in the other House spoke on this Bill and have spoken on several occasions. At any rate, it is a fact that at least £25,000,000 lies in the various banks of this country to the credit of farmers.

At 1 per cent. for putting it in and 6 per cent. for taking it out.

That might be. I am sure many farmers who had to provide money for extra tillage produced the money out of their savings in the banks and they will get good interest on it if they put it into extra acres of tillage, even at the price that is now offered for wheat and beet.

Deputy Dillon asked about the power to set up a research bureau. It is not necessary to legislate for that. There is all the power that is necessary to set up a bureau by the central bank board and I hope such a bureau will be set up and that all the necessary statistics about our financial position that can be produced will be produced and published by them.

Deputy Mulcahy asked what the central bank will cost. I was not quite sure what exactly he meant. I think he meant what it will cost the taxpayer. I do not think it will cost the taxpayer anything. I expect it will be a source of profit to the taxpayer, to the Exchequer.

My point is that if the Government are going to get increased revenue out of the central bank, that increased revenue is going to come from some place and will be out of somebody's pockets in this country.

Yes. I could not estimate what the increase will be. There will be, I hope, some increase, but not much. Deputy Cosgrave quoted the figures the other day. We are getting on the average in the last few years £180,000 a year out of the Currency Commission.

It will be up by about £300,000 more. Instead of getting £180,000 you will get nearly £500,000.

I do not think that we will get that much. If we do, I will not object, as Minister for Finance.

Then it is going to cost that much to somebody.

Deputy Esmonde spoke of the constitution of the board and Deputy Gosgrave referred to that to some extent also. I am satisfied that the arrangement suggested for selecting the bankers is a reasonable one. I do not think there is any discredit to any man who was selected on the bankers' panel of six if he is not selected by the Minister. I do not think there is any disparagement of his ability. I think the number, nine, is not excessive. I gave the House to-day the number of directors of the central banks in other countries. In Norway I believe the number of directors of the central bank is something like 21. There is an almost unlimited variety of constitutions of central banks. There are a great many central banks now and there are no two of them that have exactly similar constitutions.

Why is representation not given to the bank officials instead of to the bank directors? The directors have representation on every board in the country.

That is an exaggeration.

I know some of them who are on seven different corporations or bodies.

I suppose they are worth their place or they would not be there. These banks are business concerns. They have to make money for their shareholders.

Their qualifications are based on the money they are able to command.

I do not think so. If they are not fit for their positions, they would scarcely be selected.

Some of them have more money than brains.

Oh, now. You might find that even in the Dáil. I recommend the Bill to the House as a reasonable Bill.

Question put: "That the words proposed to be deleted, stand."
The Dáil divided: Tá, 74; Níl, 12.

  • Aiken, Frank.
  • Allen, Denis.
  • Bartley, Gerald.
  • Beegan, Patrick.
  • Bennett, George C.
  • Boland, Gerald.
  • Bourke, Dan.
  • Brady, Brian.
  • Brady, Seán.
  • Breathnach, Cormac.
  • Breen, Daniel.
  • Brennan, Martin.
  • Brennan, Michael.
  • Breslin, Cormac.
  • Briscoe, Robert.
  • Browne, Patrick.
  • Buckley, Seán.
  • Carty, Frank.
  • Childers, Erskine H.
  • Cleary, Micheál.
  • Coburn, James.
  • Cooney, Eamonn.
  • Corry, Martin J.
  • Cosgrave, William T.
  • Crowley, Tadhg.
  • Derrig, Thomas.
  • De Valera, Eamon.
  • Dockrell, Henry M.
  • Esmonde, John L.
  • Fitzgerald-Kenney, James.
  • Flynn, John.
  • Flynn, Stephen.
  • Fogarty, Patrick J.
  • Friel, John.
  • Fuller, Stephen.
  • Gorry, Patrick J.
  • Harris, Thomas.
  • Hogan, Daniel.
  • Hughes, James.
  • Humphreys, Francis.
  • Keane, John J.
  • Kennedy, Michael J.
  • Killilea, Mark.
  • Kissane, Eamon.
  • Lemass, Seán F.
  • Little, Patrick J.
  • Loughman, Francis.
  • Lynch, Finian.
  • Lynch, James B.
  • McCann, John.
  • McDevitt, Henry A.
  • McEllistrim, Thomas.
  • McFadden, Michael Og.
  • Meaney, Cornelius.
  • Moran, Michael.
  • Morrissey, Michael.
  • Moylan, Seán.
  • Mulcahy, Richard.
  • O Briain, Donnchadh.
  • O Ceallaigh, Seán T.
  • O'Grady, Seán.
  • O'Loghlen, Peter J.
  • O'Reilly, Matthew.
  • O'Rourke, Daniel.
  • Rice, Brigid M.
  • Ryan, James.
  • Ryan, Martin.
  • Ryan, Robert.
  • Sheridan, Michael.
  • Smith, Patrick.
  • Traynor, Oscar.
  • Victory, James.
  • Walsh, Richard.
  • Ward, Conn.

Níl

  • Byrne, Alfred.
  • Cogan, Patrick.
  • Corish, Richard.
  • Davin, William.
  • Hickey, James.
  • Hurley, Jeremiah.
  • Keating, John.
  • Keyes, Michael.
  • MacEoin, Seán.
  • Nally, Martin.
  • Norton, William.
  • Pattison, James P.
Tellers:—Tá: Deputies Smith and S. Brady; Níl: Deputies Keyes and Hickey.
Question declared carried.
Main question put and declared carried.
Committee Stage ordered for Wednesday, 22nd April.
The Dáil adjourned at 9.35 p.m. until 3 p.m. on Thursday, 26th March.