The Bill consists of some 68 clauses and four schedules, and the amendments to the Bill begin with Section 15. I propose to put the preceding sections five at a time. I ask Senators to concentrate on the earlier sections, and if any Senator has any question to ask or motion to make in connection with them I will at once give him the opportunity to do so if he calls my attention to the matter.
CURRENCY BILL, 1927—COMMITTEE STAGE.
The Seanad went into Committee.
CATHAOIRLEACH
Question proposed—"That Sections 1 to 5 stand part of the Bill."
Section 4 reads that the standard unit of value of Saorstát Eireann shall be the Saorstát pound which shall be issued as hereinafter provided either in the form of gold coin or in the form of a legal tender note, or in both forms. My point is that where you have a unit which is definitely named and defined it is quite impossible that that unit can stand for more than one thing. Under the section as drafted there are two standards of value. One is the gold coin and the other is a piece of paper, or a legal tender note. I hold that if we are to have a standard of value it can be only one and singular, and that is the standard unit of gold coin, and the introduction of legal tender notes is not merely unnecessary but unwarrantable. I formally move that all the words after "Fine" in the section be omitted, and the word "either" deleted.
The intention is that there shall not be for some period any issue of gold coinage. The matter of gold coinage, getting back to gold issue, was dealt with in the Banking Commission's report. Certainly the Banking Commission did not favour the idea that we should at present attempt to restore the gold to active circulation. The whole of the first part of the Bill is put in to raise, as it were, the flag of the gold standard and to keep it flying, so that if conditions change and the countries return to active gold circulation, we will be enabled to put gold into circulation here without coming to the Oireachtas for fresh legislation. The position is that for a certain number of years, for six or seven or a greater number of years, certainly for a substantial period of time there will not be any coinage of gold, and there will be no such thing as a Saorstát gold coin in existence for a considerable period, so that the definition of a standard unit of value confined to this particular gold coinage would be very much in the air for this period. It seems to me that as the legal tender note will be for some time the actual standard of value, that it is necessary to retain the reference in the definition to the legal tender note. I do not see that there is anything to be objected to in this particular definition at present. The Saorstát gold coin and the Saorstát legal tender note, if both are in active circulation together at a future time, will be interchangeable and of equal value.
I wonder is the Minister right in that? They may be in circulation, and there may be a lot of things in circulation, but what we are debating is this legal tender note. There is no question whatever about the gold, and when we talk of a standard unit of value we are talking on something there is no argument about. We are tying up this legal tender note with British currency. When the Bank of England takes over the whole issue there will undoubtedly be a tying up of notes there to the unit of value of the standard gold coin, and we are tying our legal tender note to the British issue, and the British issue will be tied to the gold standard. So that when we come to the real standard of value I cannot see why we should not stick to the standard of value. I do not think we have a right to put in a certain thing which is illogical. Two things which are equal to the same thing are always equal to each other, but it is quite easy to see that a time might arise when a man would rather have a gold coin than a legal tender note, and to lay down in an Act of Parliament that two things are identical is a different matter, and it is not a point to divide the House about. I would like the Minister to think about the issue that has been raised. There is a great deal in the argument of Senator Guinness. I do not think there is anything to be gained by having a legal tender note in this section.
CATHAOIRLEACH
In my youth I had the misfortune to read a good deal about this subject, most of which I have forgotten. I always understood there is only one standard unit of value. I have no recollection of two so-called standard units running parallel together. I have no knowledge of that, but I can see that it might take a little time before the standard unit of value set up operates here. I suggest to the Minister that it might be desirable to limit the alternative by some such words "only to operate until the standard unit of gold is established." As it stands now the two units will run together for all time.
It seems to me that the Minister's argument involves this, that because gold would not be very largely in circulation for the next few years, therefore the legal tender note should be set up as the alternative standard. Now, I suggest that the fact that gold will not be largely in circulation is no reason why the legal tender note should be set up. There will be one standard only, and that will remain.
The only real standard is gold. That ought to be there, and the other ought not to be there. The fact that gold is not in common circulation does not alter the fact that gold is the standard.
This section would be quite intelligible if the word "standard" were left out. It would not affect the section if it were to read "The unit of value of Saorstát Eireann shall be," and so on. There is more emphasis on the word "standard" here than is necessary. The effect of the section is simply to equate the gold coin with the legal tender note. It is not a question of there being no gold coin in circulation, but of there being no gold in existence. The definition would be in the air. The gold would not merely not be in circulation, but it would not be in existence.
The gold coin would be in existence not necessarily in the Saorstát, but elsewhere, and I understand the note will be the equivalent of the pound.
CATHAOIRLEACH
If the words "gold coin" were left out, and if the standard were recited as "weight in gold," you do not require to put in the words "gold coin" at all. I think the Minister would be wise to look into this. It would not be easy to ask him to pronounce upon it straight away, because there is no amendment on the paper, but if the Minister would look into it he might find that it would be desirable to amend it in some form.
This is sprung on us now, and it is too technical a matter for the Minister to decide right off.
CATHAOIRLEACH
I was calling attention to that, and I said it was very difficult to ask the Minister to decide a question of this kind now. It is a matter that requires expert knowledge, and I think few of us are experts on it. I think it would be well if the House would agree that the matter should be left over for consideration between this and the Report Stage.
I would be satisfied with that.
I am prepared to look into it, but I would like to say that this particular section was examined because attention was called to it in the other House, and I then took the advice of outside experts on it. I was advised it is perfectly sound as it stands. I would like the House to understand that I am not saying that on consideration I would have the section altered.
CATHAOIRLEACH
It simply means that there is a matter brought to the attention of the Minister and that it is left over so that he will look into it. I think the word "standard" will create a difficulty, and the Minister might like to leave it out and to leave the unit of value simply a measure of gold weight and not gold coinage.
As far as I recollect, the standard value is defined in the Coinage Act by weight.
CATHAOIRLEACH
That is my recollection, too.
That is the case in every other country as well.
CATHAOIRLEACH
The Minister will allow it to stand over.
It would be well that the Seanad would be absolutely clear on this. Under the definition of standard of value in these coins there seems to be two. We are hoping to reach the gold standard, and there is a temporary standard which is legal tender notes, tied, as the Minister said in his speech in the Dáil, to a note of the same face value in Great Britain.
CATHAOIRLEACH
There is nothing said about a temporary standard. The section, as it stands, fixes permanently two standards. Neither of them is temporary under the section.
The inference is that with the gold standard, which is our ultimate objective, the legal tender note will be interchangeable for a sovereign; that is, when you reach it, you have a parity between the two. The bank note is not now interchangeable with the sovereign. But we must get down to a very clear definition of the standard of value we are to set up in the Saorstát, because it has a very close relation to the exchange value. If you have not a clearly defined standard of value, that other commodities have a clear relation to in the matter of value, then you get into very loose finance. An ounce of gold which was convertible into coin at a purchasing value of £3 17s. 10½d. was originally laid down as the standard in Great Britain and in the United Kingdom, and it is the standard that has been accepted by all civilised nations as the most perfect standard. Why was gold selected? Because it had the elements of permanency in it. It was a commodity in itself and cost a certain amount to produce. That is not a condition relating to a piece of paper which you may stamp for the value of £1. The other is a commodity, a thing with which we may go into the market and sell for its intrinsic value. It is stable. That was one of its factors as a medium of exchange. Another factor was that it was imperishable. Another was that it had small bulk, and there were other factors which recommended it universally to the nations as being a precious metal which always preserved and maintained a stable value relative to the cost of production. The cost of production was more or less stable. What was the evolution of the bank note? It was this: People found that it was very awkward to carry about a lot of gold with them, and in the matter of exchanges large transports of gold had to be made, and there was corresponding risk. Also, there was depreciation by friction in the gold itself and that loss had to be made up at considerable cost.
These were the causes that gave rise to merchants giving bills instead of settling their trade relations by means of gold transport, which was always inconvenient and attended with risk. The merchant gave a bill and this bill got into circulation. It was endorsed and passed on. These bills bore endorsements, and they were sometimes out for years. I have seen some of these bills which hardly held together. The result was that going back to the first endorsements was practically of no utility, as some of the first endorsers had got out of business and there was no trace of them. Then the Government stepped in as these bills became a sort of currency, and passed from hand to hand. The Government stepped in owing to the insecurity and complications that arose from these matters, and they said "It is better to stabilise." They said to the banks which were recognised institutions, "We will allow you to issue notes, which will be more convenient, provided that you lodge security with the State. In the first instance, we will allow you a fiduciary issue to a certain amount on your general credit and the amount of trade you are doing." That was giving to our banks, to certain banks, four or five of them, the privilege of fiduciary issues.
After some time they said that was not enough for trade needs. The Government said: "We will allow you to issue further notes on a secured basis." That was the origin of note issue. Things went on for a time and then needy governments took advantage of this and they said: "This is a good idea." They said: "We have given the banking institutions privileges on the general credit of their business; we have given them the privilege of issuing a certain amount of notes; why not on the general credit of the State, issue our own notes?" That gave rise to the legal tender note, which was a very convenient form by which governments discharged their liabilities. These notes were substituted and were put into circulation for the tangible sovereign. They were interchangeable. The banks had to lodge very substantial security with the Government. On the general credit of the State these notes were issued without any bank control. This was an inconvertible note that could be circulated for all time. There was no space of time in which the holder of a legal tender note could say: "I want to be done with this note; give me gold for it." The ultimate nominal liability rested with the State, but it was a liability that could never be brought home because it was inconvertible. Now I come to this point. The Minister has tied this legal tender note (which he proposes to issue) and put it on a parity with the legal tender note of Great Britain which is at the moment depreciated currency. It is, I suppose, the best thing to be done in the circumstances. He hopes that as the legal tender note in Great Britain will resume parity with the sovereign—it is tending in that direction—so our note, tied to it will also appreciate and keep pace with the legal tender note in that appreciation.
CATHAOIRLEACH
But, Senator, was the English pound note ever legal tender except on the basis of its inter-changeability for gold?
It was payable in gold at the head office of the Bank of England.
CATHAOIRLEACH
Exactly; that was why it was legal tender, but have you ever heard of a piece of paper being legal tender unless it was capable of being converted into gold?
It seems to be a contradiction in terms.
CATHAOIRLEACH
That is what I am afraid of. There is a fallacy in the whole case.
It is simply a piece of paper. It has no intrinsic value whatever other than the cost of the paper and the ink on it. The actual purchasing value is stamped on that paper by the Government. There is nothing further than that, whereas the sovereign on which it is based—there is a parity between them—is there, capable of redeeming itself at any time in the open market. The Minister puts this on a parity and hopes, as we all do, that the Free State legal tender notes will keep step by step in appreciation with the British legal tender note, but how far is he justified in that hope? Looking into the future, how far is he warranted in thinking that that hope will be realised? There are many factors one has to consider here. They are founded on an intangible thing— the credit of the State, both in Great Britain and here. So as the credit of the State appreciates or depreciates, so will the relative value of the legal tender note appreciate or depreciate in the future. On what does he ground his hopes? There are many factors to be considered—war, revolution, a continuing adverse balance, and other factors that affect the credit of the State. We have seen revolutions in other countries, as the result of which their paper currency was worth nothing. We have seen a currency that was not worth the paper it was written on. There is a very long interval to be considered in the transition period until the time when the ultimate gold standard will be reached. If, during that period, our credit does not keep pace with the English credit, at once will arise a difference in the rate of exchange adverse to this country. The two legal tender notes which at first were maintained at parity will cease to be maintained at that level. As long as we maintain our credit proportionately with Great Britain financially and from every other point of view, then so long will the parity be maintained, but we have no arrangement with the British Treasury so far as I know that that parity will be maintained. That is where I see danger in this matter. Once you depart from the only recognised legal standard, which is the sovereign, and its purchasing power, you are on the slippery slope of loose finance. In the case of Germany we all know what that meant. A change of Government with pressing financial needs might lead to a similar state of affairs.
Did Senator Kenny read the Bill, or was he too busy talking about it to read it?
Would the Minister be a little more specific and say in what respect I am wrong in the interpretation I have drawn from the Bill?
CATHAOIRLEACH
I do not think it is necessary that we should have any heat on this interesting question of currency. I think perhaps if the Minister would suggest to the Senator what section he thinks counteracts what the Senator is saying it would be some help, not only to the Senator, but to the rest of the House.
At present I will leave it at that and continue my arguments later on.
CATHAOIRLEACH
I would suggest to the House that we have discussed this sufficiently, seeing that it is to be held over for the Report Stage and that we should pass on.
I would like to ask the Minister a question, not by way of criticism, but for information on a matter on which a great many people in the country are interested. I would like to be informed as to what happened the gold which, as far as I know, was taken over from the Irish banks at the beginning of the war or some time during the war, and which I heard has never been returned. Perhaps it has been, but I should like the Minister to tell us whether it was, or, if not, whether it is desirable that it should be returned. If you would allow me, a Chathaoirligh, I would like to go back to Section 2. In that section in line 29 the words are used: "direct obligations of the British Government." All obligations of the British Government are, I presume, direct. Does that mean that somebody else has got to pay first, before the British Government?
With regard to the second question Senator Moore asked, obviously obligations of the British Government which are not direct obligations are those which in the first instance are obligations of some other authority, as our Land Bonds would not be a direct obligation of the British Government.
As long as the British Government is responsible, directly or indirectly, I suppose the value is the same?
The definition states: "British Government securities means and includes." The other question which Senator Moore asks is dealt with in the report. I believe, and I think the Commission indicated that they believed, that gold could be got into this country for the legal tender notes that are in circulation and for the secured bank notes in circulation, but the Commission indicated that it would not be advisable or useful to try to have gold brought into this country in that way.
Question put and agreed to.
Sections 6 to 14, inclusive, ordered to stand part of the Bill.
SECTION 15—SUB-SECTION (1).
The Chairman shall receive such remuneration and allowances and be subject to such conditions of service as the ordinary Commissioners shall prescribe.
I move:—
Section 15, sub-section (1). To insert before the sub-section a new sub-section, as follows:—
"(1) The Chairman shall be a person learned and experienced in Banking and Finance. A person so qualified is hereinafter referred to as an eligible person."
The second sentence in the proposed sub-section is necessary, because an eligible person is mentioned so often afterwards in the Bill. It is obvious to any one who reads this Bill that the Chairman is far the most important member of the Commission. For all practical purposes he is the Commission. He is the only whole-time member of the Commission, and he is really responsible for the success of its working, notwithstanding that there is no provision in the Bill for any qualifications for this important post. The Commission, in the first instance, has the right to appoint a Chairman or elect a Chairman, or the Minister might appoint anybody as far as defined qualifications are concerned. Now, it may be objected that it is very difficult to define the kind of person whom you want as Chairman of this Commission, but that is not so. The existing currency in this country, as far as it is composed of bank notes, is managed by bankers, by men of experience in banking, and in what I might call public finance. The regulation and the management of our currency requires technical knowledge, and the Banking Commission were so impressed with the fact that this kind of knowledge and experience was essential in the Chairman of the Commission which they were recommending that they made what they themselves called an earnest recommendation, and it was a unanimous recommendation as well as an earnest recommendation, in respect of that, which I will read for you. It is contained in paragraph 11 of the first interim report, which deals with banking and currency:—
"It is evident that the Currency Commission, if created as just indicated, will be vested with unusual and very great responsibilities. These will appear more clearly as this report proceeds, but enough has already been said to show that it will not only be heavily burdened with obligations of a high type, but that it will also have to perform functions of a difficult and technical character. The present Commission, therefore, earnestly recommends that the proposed Currency Commission shall be made up in such a way as to ensure due consideration both of private and of public interests, and to enlist the best technical ability in its service. We believe that these objects will be best obtained by creating a relatively small body of seven directors or managers, of whom three shall be chosen by the Government, two of these three to be representatives of business, industry or trade, and not Government officials, and three by the banks which have become members or stockholders in the Currency Commission, while the seventh shall be a man learned and experienced in banking and finance, and shall be chosen by the six members appointed as above. Our view is that the seventh member so elected should be designated as Chairman of the Commission, and should be the working or managing director thereof. He should be a well-salaried man of unquestioned probity and past banking experience, whose relation to the undertaking would be that of general supervising manager, spending his whole time on his duties, and who would find his principal satisfaction in conducting a great public enterprise with success."
Everyone will see from what I have read the force of that earnest and unanimous recommendation of the Banking Commission. I, therefore, think that that should have been embodied in this Bill. It is not embodied in the Bill, although I have no doubt that no responsible Minister or no sensible Commission, acting for themselves in choosing a chairman, would choose a chairman without experience of that kind. At the same time, it is very important that that should be emphasised in the Bill itself. I, therefore, beg to move that this sub-section defining the qualifications of the chairman, be added.
I regard this amendment as very important, and, let me say at once, I intend to oppose it. The effect of this would be to give the banks a preponderating power in regard to the administration of this Commission, which is not necessary and which is very undesirable. I ask Senators to look at the schedule of the shareholding banks in this Bill. They consist of: the Bank of Ireland, the Hibernian Bank, the National Bank, the Northern Banking Company, the Munster and Leinster Bank, the Provincial Bank of Ireland, the Royal Bank of Ireland, and the Ulster Bank. Four out of these have their head offices outside the Saorstát. We know from what transpired on the Second Reading that some banks are deadly opposed to this Bill. Half of the Commission, that is to say, three of its members, will be elected by the share-holding banks. The recommendation embodied in the Bill is that three are to be nominated by the Minister for Finance, two of whom are to be business men of standing. I presume business men of standing will be independent men of high character and good judgment, and that when necessary they will side with the bankers, and when necessary will oppose the bankers.
What is banking experience, I would like to know? As far as I can see, banking experience might be said to be satisfied in a person who is manager of a bank in a small country town. That would satisfy the qualification of "banking experience." Let us see what the English bankers are doing. I saw recently that the Secretary to the British Treasury, Sir Otto Niemeyer, has been asked, I presume by the Bank of England, to become governor of that bank. Anyhow he has been transferred from the service of Secretary to the Treasurer in Great Britain, the highest post in the Civil Service, to the Bank of England. Sir Otto Neimeyer, by the terms of this amendment, is not a man of banking experience; neither is Mr. Reginald McKenna. Of course he was Chancellor of the Exchequer, but he had no definite experience of banking business. A man who had applied for twenty overdrafts might have had more experience than Mr. Reginald McKenna, but such a man as Mr. McKenna would be welcome in any bank in Great Britain. Senator Sir John Keane is a governor of the Bank of Ireland. At the time of his appointment had he any banking experience? I cannot get away from my mind that another recommendation with regard to this Commission by Senator Jameson was that the Commission was to consist of three, and that the Chairman was to be the Chairman of the Bank of Ireland. I regard this amendment as the alter ego of that other which would give the banks a preponderance which I think is not desirable.
After all this Currency Commission is for the benefit of the country. It is not exclusively for the benefit of the banks, though they will probably benefit. I think this amendment, if accepted, would perpetuate a certain amount of privilege and monopoly enjoyed hitherto by certain banks and which now they are about to lose to a certain extent, and which they held to the disadvantage and rather unfair competition with other banks that served the same purpose. Now these banks will become sharers in the privilege hitherto enjoyed only by certain banks of note issue. I hope this amendment will not be acceded to.
Perhaps it might meet the case if the word "or" was substituted for the word "and" in the amendment. That would define the matter to a certain extent.
There is no doubt Senator Dowdall totally disagrees with the recommendation of the Commission. Whether in other instances he will state a case for some of the Commission's recommendations and in favour of them will appear later, but there is no question that on this part of the Bill he is very much opposed to the recommendation of the Commission. In passing I might mention that he referred in two speeches to my recommendations, but these were in regard to mere management by the banks of public finance and the backing that lies behind note issue. They had nothing to do with the question we are now discussing, which is the question of the Chairman of the Commission, and the duties that he will have to perform. My recommendations had reference to the management of certain funds, the collection of revenue and things of that kind that can be done without any trouble. My idea was first that we ought to see that the Free State Government got the money it was entitled to, and that there should be a small Commission managing these affairs. I do not think anyone would imagine that the Bank of Ireland would get any special benefit from having its Governor Chairman of the Commission. The reason I put in the suggestion about the Governor of the Bank of Ireland was that he only remains in office for two years as Chairman of the Bank of Ireland, but he is in touch with affairs connected with banks and with Government officials, but there was no question of control by the banks. I would remind the Senator that he is talking of a totally different thing. In this case there was no question as to the earnestness of what the Commission recommended. The Seanad may disregard it, and the Minister may not think it necessary to put in this recommendation in the Bill. I do not know what the Minister will say on this matter, but there is no vestige of doubt of what the Commission wanted in this matter. Senator Brown read out the reason why the Commission thought that the individual who was to be Chairman, in whose hands this business was to be, should have a highly technical knowledge in connection with banks. I think we ought to wipe our minds clear of there being any banking interests fighting for their own ends.
I ask the Senator to read the first five lines of paragraph 15, page 15, of the Report.
They read: "We may now turn to the question of banking. First of all, it may be noted that the banking problem, while intimately bound up with the underlying question of currency and monetary standard is, of course, wholly independent of it. This is a problem or series of problems in and of itself." I was referring to something we are discussing now, and I do not see what this quotation has to do with it. At any rate I think the Senate would be better to recognise at once that the bankers of this country are not in the least trying to look at this matter from any unfair point of view, or that they are trying to grab the Commission. They are trying to grab make the Bill better, and along lines that the Commission wanted.
I notice in connection with a very long speech I made the other day and which was excellently reported by our official staff, that I stopped sooner, apparently, than I intended. I see on referring to the Report that I said the Bill should never be passed by the Oireachtas. I may have said that. What I meant to say was in its present shape. If I said that the Bill should not be passed at all I did not mean that. I want the Senate to understand that what we are here to do is to improve the Bill and improve its machinery and see that it is put right. I do not know what the Minister will say. He may have reasons of his own that will convince the Senate against accepting this amendment, but, undoubtedly, what the amendment aims at is one of the vital questions that the Commission insisted on, that the Chairman should be well qualified in technical knowledge.
May I ask Senator Brown a question? Does he mean that the Chairman should be a bank director or a bank employee or should have occupied one or either of those positions?
CATHAOIRLEACH
There is a provision that no bank director is to be appointed. He has to resign his directorship.
I quite understand that, but I want to find out if the person appointed should be a bank director or a bank employee. It seems to me there are other persons not exactly employed in banks who could be described as experienced in banking. Senator Dowdall has mentioned some of them in England, and I have no doubt there are many to be found in Ireland also.
The Commission recognise that the Chairman should be a man learned and experienced in banking and finance, and they so recommend it, and, if any man who fulfils these qualifications literally, and is otherwise unobjectionable and suitable, can be found, undoubtedly such a person should be appointed. But what we have got to remember is that there is a very limited range of choice in this country. If Senator Brown's amendment was passed and taken seriously and carried out seriously, I do not know that there is a single person in the country who would be qualified. As far as I know, there are not more than about two people in the country who could be described as learned and experienced in banking and finance: that is, if you take the point seriously. I do not think that the Commission felt that the choice of the Currency Commission or the Minister should be limited so much as that. Then if you do not take the amendment seriously it is better not to put it in at all. It is better not to be in a position where somebody, as Senator Dowdall said, who might be a bank manager in a small country town might be regarded as technically qualified, whereas somebody with a great deal more knowledge and wider experience would be technically regarded as unqualified. I am afraid that having a definition such as this put into the Bill would have the effect that some very highly qualified person might be ruled out and some very much inferior person might be appointed. We have not many men of the type of Sir Josiah Stamp, but if we had it would be much better to appoint men like him than a man who is qualified merely by his record because he had been the manager of a bank in a country town. There is this other difficulty, too. If we are to take this seriously the number of people who would have any possible chance would be only one or two, and although I do not know a single thing about this, I suggest that for various reasons that could not be regarded as satisfactory. I think we may take it from the words of the Report, with three people directly appointed by the banks from amongst their membership, with two business men of standing, and with an official in a responsible position in the Department of Finance as the sixth member, that the ordinary members of the Commission will certainly seek to put a highly qualified, responsible and experienced person in that position. I feel because our range of choice is so limited here that we ought not to tie them up; we ought to have some confidence that men put in this position of responsibility, men of this stamp, will take their duties seriously and choose wisely. If there should be a deadlock and it should fall to the Minister for Finance to make the appointment, I have always held the view the Labour Senator put up here, that you must take it that whatever Minister is appointed will take his duties seriously and will try to make a good appointment. If you cannot depend on that you can depend on nothing, and important as this office is, it is no more important than such offices as the Chief Justice's office, or other offices to which the Ministers have the appointment.
I hope it will seldom fall to the Minister to make the appointment. I do not believe there is going to be a line up between the banking representatives and the other representatives. I believe it would only happen if the banking representatives were going to take some very stiff line, and say nobody but a bank official is to have any look in. I am assuming they will be reasonable, and that the other people will be reasonable, and that rather than have the choice of a chairman taken out of their hands altogether and exercised by the Minister for Finance, they will manage to come to a compromise. I think a lot of fears about the appointment of a chairman are not really well founded. My reason for not putting the recommendation of the Commission in addition to the actual words of the Bill, is the fear I would have that it would not lead to the best choice being made, but to the second or third best one.
I think the terms of the Bill reasonably fulfil the recommendations of the Commission, because the Commissioners appointed are to be three members of the shareholding banks. They have at least equal weight in the Commission. Then there are two members of the business community, and one member who may, or may not be, a member of the Government. I should think unless the Commission were forcing a man purely because he was a banker the Minister would not be called in to appoint a managing director. I think it would be wrong to tie the Minister in such an event to the small choice that Senator Brown's amendment would allow, because it would have been considered in advance by the Commission, and they apparently have come to the conclusion that no member, so to speak, of the banking institution was really a capable person to fulfil the position of managing director. That being the case, I think the amendment ought not to be pressed, and that the position as it stands in the Bill is the most desirable one from the point of view of the Commission itself.
I wonder would the Minister adopt my suggestion?
Before even agreeing to Senator Moore's suggestion I would like to consider it further. I do not know whether any benefit would really be attained by putting in a description of the qualifications of the Chairman, but if we were going to put it in I would like to make it as wide as possible. It might be useful to put in something as a headline, and I will consider that. I will put one other thing to the Seanad in reference to a clause such as is suggested by Senator Brown, and that is the difficulty of interpreting it. It is very easy to say, for instance, that a High Court Judge must be a barrister with ten years' practice at the Bar, because there is something definite there, but it would be very hard to find whether a person really complied with the provisions. There might only be some technical compliance which would mean nothing at all.
I realise this definition can only be a sort of headline, something that will indicate to the Commission or the Minister the kind of person who ought to be appointed. I would be very glad of some headline, and if the Minister would allow me to try to modify this amendment and bring it up on Report I shall be happy to do so.
Amendment, by leave, withdrawn.
Question—"That Sections 15 to 23 stand part of the Bill"—put and agreed to.
SECTION 24.
"(3) If the ordinary Commissioners shall fail to elect within the time hereinbefore limited in that behalf an eligible person willing to act to be the first Chairman, the Minister shall as soon as conveniently may be after the expiration of the said time nominate an eligible person willing to act to be the first Chairman."
I move:—
Section 24, sub-section (3). After the word "time" in line 28 to insert the words "and after consultation with each of the Shareholding Banks."
Section 24 deals with the election of the Chairman of the Commission. He is to be elected by the Commission, and if they arrive at a deadlock he is to be nominated by the Minister. The object of this amendment is to ensure as far as possible the absolute independence of this Commission from anything in the nature of Government control. The necessity for that is recognised by everybody, and I am sure by nobody more heartily than by the Minister for Finance. Once a Government gets a chance of interfering with currency disaster almost necessarily follows. I would have preferred some more certain way of arriving at that absolute independence than the one contained in my amendment but I recognise quite fully the difficulty in the way of the only two other proposals that we made that he has objected to, and I have put down my amendment as the best available one in the circumstances. Under this amendment in the case of a deadlock the Minister would, before he makes up his mind, have to consult with each of the shareholding banks and as long as we have a Minister for Finance in whom the country has confidence there will be no fear of the appointment by him of a person to whom there were serious and well founded objections on the part of the shareholders of the bank. If we have not a Minister of that kind, as the Minister for Finance said a moment ago, then no Act of Parliament would do us any good.
I regret that I must oppose this amendment, not that I have anything like the feeling of opposition to this that I had to the first amendment, but I think that the Commission has thirty days in which to make up its mind as to whom it would elect as its Chairman. Surely they can have as much consultation as is necessary during these thirty days. The three bank commissioners are elected by the banks. One of the commissioners is a direct nominee of the Minister for Finance and any necessity for negotiation is provided there in the machinery of the Commission and they can have as much consultation as is necessary within thirty days. If they cannot come to a decision on such a matter as this within thirty days then I think it is safer and better to leave the nomination in the hands of an outside independent authority such as the Minister for Finance.
Is it not objectionable that the reference to be made is to be made to a particular section of the Commission? The other members of the Commission are not to be consulted at all. The members of the shareholding banks have already an election and you want a referendum for them as to whether or not they like what is being done. If you are referring back, why should you not refer it back to the other three members of the Commission? It is an invidious election. It is the banking representatives who really would have the opportunity of election—the members of the banks.
You wish to refer back to these people any action the Minister takes.
No. If you look at the words of the amendment itself the Minister, if the appointment goes to him, is, before he makes the appointment, to consult with each of the shareholding banks, not with members of the Commission.
But each of the shareholding banks have already had the nomination of the Commission. I thought that was the machinery of the Bill. If I am right, they have already been consulted in the election of the members, and if, forsooth, a deadlock has arisen, we are to go back to the shareholding banks and say to them: "You put us in; we could not do what you wanted us to do. We are going to give you another opportunity." It seems a referendum on a thing which ought to be referred back to the electorate.
In view of what has happened to Senator Brown's first amendment, it seems to me that the second one should not have been moved, seeing that consideration of the first one has been postponed until the Report Stage. The object of the second amendment is to secure that a person who is a banker is to be appointed chairman of the Commission.
Not a banker.
He is to be learned in banking and finance. How was he to become learned in banking and finance? Had he to serve his time as a clerk in a bank? I know many people who have been appointed directors of banks who knew nothing about banking. They were appointed because of the number of shares they held in banks. I defy contradiction of the assertion that the best recommendation for appointment as a bank director is to hold a certain number of shares. Senator Brown knows that that statement cannot be contradicted. I am not suggesting that all directors are appointed in that way, but I say that the best recommendation for election as a bank director is to hold a certain number of shares. When victory was not secured on the first amendment, so as to get control of this Commission for the banks, this amendment comes along. I think the Minister has gone a long way to be fair to the banks. Three of the members of a Commission of six are to be appointed by the shareholding banks, and the other three are nominated, so that these six people have in their hands the appointment of a chairman. In his first amendment Senator Brown laid it down that the chairman should be a person learned and experienced in banking. That amendment has been postponed, and I cannot understand why we should now proceed to discuss another amendment, which in essence means the same thing. If the six representatives on the Commission do not agree on a chairman, the Minister cannot appoint one until he consults the shareholding banks. That is how I view the position. I do not profess to know very much about currency and banking, but I think I can understand English. My reading of the Bill is that the Minister, if he has to make the appointment, has to consult the shareholding banks.
But he need not take their advice.
He need not. Why is he to be compelled to consult them? The banks have already appointed three representatives on the Commission, and when the first amendment failed to get through another method is adopted so as to achieve the same thing. In view of what has happened to the first amendment I think this amendment should be withdrawn. I do not agree that the future of this country should be in the hands of the bankers. I do not believe that is right. Banks practically own the country. If they get what they want under the Currency Bill they will own the country body and soul. I was impressed by a statement made in the other House by ex-Deputy Hewat when discussing this Bill. He said that it was not the banks but the people that made the money. It was the people, he said, who kept up the prosperity of the country. While that is so, it is the banks get the profits. They do not build up the prosperity of the country. For that reason I strenuously object to the banks getting control of the currency of the State.
I rise with some diffidence to make any remarks because of the present atmosphere. We are developing an atmosphere in which bankers seem to be a group standing apart from the general community. Can we not get away from that atmosphere and clear the air? Evidently banking is looked upon as the vested monopoly of profit-seeking interests. Imagine what would happen to some prominent Senators if the banks got into jeopardy, and if the money of the depositors was in danger. On the Second Reading stage I think I said that for every £7 of shareholders' money in the banks, there is £162 of depositors' money. The banks are striving to secure sound methods and, at the same time, to safeguard, to a negligible extent, the interests of the shareholders. They are striving first in the interests of the depositors and also in the interests of the community. I need not labour the distress that would follow, and that invariably follows, when financial institutions are threatened with mismanagement and collapse. Let us take a more impersonal view of this matter, and let us realise that the interests of the community are widely affected by banking policy. I would be very much surprised to know that many of Senator Farren's colleagues are not bank depositors, and that any collapse of the banks would not affect his class as well as every other class in the community. This Bill deals almost entirely with the security of the banking business. The banks ask that their interests should be considered, and in doing so I think they are asking a small thing because they are asking for that almost entirely in the interests of national security. It is hard to determine who is a person qualified in banking.
Taking this amendment and the first one, I am not at all sure if this amendment is not the better one of the two. The Minister is troubled and says if there was a definition that he might not be able to get a suitable man with experience of finance to comply with it. Supposing the Minister consults the bankers on that question. The Minister will only deal with the question when the appointment has to be made by him. If the Minister and the bankers agree that a certain individual, who cannot be described as very learned in banking and finance, fulfils the requirements I think that is as far as we can go. The Minister can act only if the appointment falls to be made by him. He consults the banks and if he cannot get them to agree on a chairman he makes the appointment. He has then taken every step to get the right man. I think that if there was consultation it would not tie the Minister's hands. I believe that is the principle we want in the Bill, and that he should try it. If the appointment falls to be made by him he could consult people interested in financial conditions in the country.
Senator Jameson is correct in stating that this amendment is better than the previous one, from the point of view of the banks. Everyone knows that in legal phraseology, concerning questions of this kind, words are always put in so that a particular body or institution has a right to nominate a representative on a board or a commission. Words to the effect that they shall nominate a representative are not put in. As a rule the words are that the Minister "shall appoint," after consultation with certain authorities. What this amendment means and as it will be interpreted by any Minister in the future, is that the shareholding banks will have the right to nominate a chairman, and that he shall ratify that nomination. Only that the amendment is moved by a lawyer I would say that it is badly drafted. The amendment states that the appointment shall be made after consultation with each of the shareholding banks. As there are eight banks this means that while the Minister might get a suitable representative in the first bank he will now have to go and consult the other seven. I think consultation should be with the associated shareholding banks.
It is true that people are appointed directors of banks who have little or no knowledge of banking or finance. From what one sees of directors' general remarks and experience one has to ask oneself how in the name of Providence such persons became directors. The remark made to me on one occasion was that if a person had £200,000 invested in a bank one would have very little difficulty in becoming a director, irrespective of banking experience. It is the same thing in industrial concerns. A person who has sufficient capital and can command sufficient votes can become a director. Take the railways. How many railway directors know anything about railway work until they become directors? Some of them would not know a signal box from a waiting room. They carry on because the work is done by the whole-time officials. There is no reason why a man who is not a banker could not make a very useful and business-like chairman of this Commission. I know that the banks have the interests of the country at heart but I feel that they have, perhaps, the interests of the banks a little more at heart.
Senator Keane talked of the banks as if they were philanthropic institutions. They are indispensable and they wield a tremendous influence in the fate of nations. The late Walter Reade, who was probably the most eminent banker of his day, stated that the influence of bankers on the destinies of nations was greater than any other human institution. They could expand credit and cause deflation. They could cause sudden restrictions and depreciation of money and could cause employment or unemployment. They could, as is well known, be manipulators of finance and could cause war. It is not at all an innocent thing to hand over control of the currency of the nation to a Commission controlled by bankers, as would be so in this particular case. I do not know why the banks should form half the Commission, irrespective of the chairman. That right has been granted to them, I suppose, because it is considered necessary, as they have vested interests. It is no credit to the banks, when they get the people's money, that they should be able to return it when it is wanted. They do not hold the money for philanthropic purposes. They hold and accept money and invest it at a profit.
They are bound to make suitable investments to be able to return the money. One thing the Irish banks have done, to their credit, is that they have been able to pay their shareholders dividends of from 12 to 20 per cent. They pay a lower rate on deposits, and charge a higher interest on mortgages, than the banks in Great Britain. Generally speaking, they do not give the same facilities to the trading public as the banks in Great Britain. I fail to see why banks who have not that claim on the public that they seem to think they have, should get control of this Commission, which would be the case if this amendment were accepted.
I did not rise in the first instance because I was not taking any personal objection to the amendment, but if it could bear the meaning which Senator O'Farrell has taken from it I would regard it as objectionable. I would regard it as acceptable if it only meant that the Minister should take the views of bankers, but not if the Minister were to be bound in any way to accept their views.
In connection with the Railways Act similar words are used, "after consultation with labour."
CATHAOIRLEACH
In a court of law no lawyer would ever interpret these words in any other sense than that it was optional, and that after the consultation it would remain with the Minister what to do.
That is the law, but the practice is another thing.
The Minister would have before him a number of names, and he would talk over these with the shareholding banks, and might say: "They are all the same to me, what are your views about these different names?"
Why should it not be after consultation with the Commission? It is giving a deliberate bias in favour of the banks.
The banks are the foundations upon which the whole thing rests. This is a subsidiary banking business, and the whole thing centres round banking activities, and that is why the suggestion is made "after consultation with the banks." As one who knows the facts, I can tell Senator O'Farrell that banking directors are appointed who are not bank shareholders. When I was appointed a banking director I had no shares whatever in any bank in this country or Great Britain. I had, under the Articles of the bank, to acquire a share qualification. That is a totally different matter.
The amendment was put, and on a show of hands, the voting being equal,
CATHAOIRLEACH
I suggest this hangs very much on the course of action to be taken on the other amendment, and this amendment might very well be left over for consideration on Report, as the two amendments are really part and parcel of the one idea, and the Minister might evolve a solution that would incorporate the best portions of the two.
I hope it will be understood that the Minister will incorporate the best portions of the two amendments.
CATHAOIRLEACH
Let us get on. Do not be too suspicious.
As a Senator who did not vote I agree with the suggestion proposed.
Amendment, by leave, withdrawn.
Section 24 agreed to.
Question—"That Section 25 stand part of the Bill"—put and agreed to.
SECTION 26.
(2) If and whenever the ordinary Commissioners on any occasion on which they are required by the foregoing sub-section to elect a person to become and be the Chairman fail to elect within the time therein limited an eligible person willing to act in that behalf they shall within the said time and from time to time thereafter appoint an ordinary Commissioner or any other person willing to act to be the Chairman temporarily after the expiration of the then expiring term of office of the Chairman and pending the election or nomination under this section of a Chairman and shall within three months after such expiration elect an eligible person willing to act to be the Chairman and shall immediately after such election communicate to the Minister the name of the person so elected.
(3) If and whenever the Commissioners on any such occasion as aforesaid fail to elect within the time limited in sub-section (1) of this section either an eligible person willing to act to be the Chairman or a person willing to act to be the Chairman temporarily, or, having elected a person willing to act to be the Chairman temporarily, fail within the said period of three months to elect an eligible person willing to act to be the Chairman or within such time or such period inform the Minister in writing that they are unable to elect any such person to be the Chairman, the Minister shall as soon as may be after the expiration of the time limited in sub-section (1) of this section or the expiration of the said period of three months or the receipt by him of such information in writing (as the case may be) nominate an eligible person to act to be the Chairman and shall immediately after such nomination communicate to the Commission the name of the person so nominated.
(4) If and whenever the office of Chairman becomes vacant by reason of the death, resignation, disqualification, or removal of the Chairman during his term of office, the ordinary Commissioners shall as soon as conveniently may be elect an eligible person willing to act to be the Chairman and if the ordinary Commissioners do not so elect any such person within three months after the office of Chairman so becomes vacant or if the ordinary Commissioners within such three months inform the Minister in writing that they are unable so to elect any such person the Minister shall as soon as conveniently may be after the expiration of such three months or the receipt by him of such information (as the case may be) nominate an eligible person willing to act to be the Chairman for the residue of the said term of office.
I move:
Section 26, sub-section (2). After the word "Commissioner" in line 55 to insert the words "who is not in the permanent service of the State."
According to the Bill, the temporary chairman may act quite a long time, for some months. The Government is given power to appoint on the Commission an officer of the Civil Service, who probably will be a Treasury official. I think it would not be right that a Government official should be appointed as Chairman for three months, or whatever time he is to act, with all these powers. We discussed at length in the Second Reading all about the inspection of bank books and matters of that kind. I think it would be better that anyone who is a permanent official in the Civil Service of the Government should not act as Chairman. It would be wiser that the Government should be free from suspicion, and that they should not have one of their officials acting as Chairman. There will be five other Commissioners, and it will be better to let one of them act. I think I might also here propose the second amendment, which reads:
Section 26, sub-section (2). To delete in lines 55-6 the words "or any other person willing to act."
According to the Bill, someone from outside might come in and act as temporary Chairman. Surely the remaining members of the Commission ought to be the right people from which to choose him. It occurs to me that these two changes which I suggest would be an improvement in the section —that a Government official should not act as temporary Chairman, and that no one from outside should be brought in so to act.
It would seem to me that if the Commission cannot within the period of thirty days agree as to one of the banking members being chosen as Chairman there must be some obstacle in the way, or an objection to the election of one of those men. The Chairman or an officer specially appointed by him is to carry out the duties specified in Section 37. I can readily see objections on the part of some of the banks, and objections on the part of some of the Commissioners to appointing one of their number in view of the information that will be acquired regarding the business of banks by the Chairman. I think, however, Senator Jameson will see that Section 37 provides that the Chairman, or his specially appointed officer, is not to reveal the identity of a customer of a bank to any ordinary member of the Commission, or such information as he gets in his administrative capacity. For that reason I think it is in the interests of the smooth working of the Commission if they have not been able to agree within thirty days to appoint a temporary Chairman that a nominee of the Minister for Finance should be appointed.
I see no objection to Senator Jameson's first amendment regarding a servant of the State being Chairman of the Commission, but I would not like to agree to the second amendment. It would prevent any person outside the other five acting as temporary chairman. I think that it probably would not be satisfactory to appoint any of the banking members, as even a temporary chairman would have to deal with individual banks. Each of the three banking members would be probably associated, either as chairman or in some other capacity, with some one of the banks, and it would not be desirable that he should have to deal with other banks. That in practice means that the choice is reduced to the two ordinary members. One of them might be suitable, and neither of them might be suitable perhaps. The Commissioners might find someone outside who would act temporarily, and I would not like to deprive them of the right of going outside themselves for a temporary chairman.
Amendment put and agreed to.
With regard to Amendment No. 4 I can see that probably there is an objection to taking one of the bankers, but why should there be an objection to taking one of the other two members of the Commission?
I do not object, but I say that in certain circumstances the Commissioners might not like, or they might not be willing, to act. They might be businessmen with other engagements.
There is an amendment I have down later on that this period that is allowed for these elections be less than three or four months. That is a long time to take anybody clean outside the whole of this Commission, and put him in for the position of Chairman with the right to inspect banks' affairs. It is rather a tall order. If the Minister will see his way to shorten that time it would meet this. My amendment later on will be for only a month, and they would have to make up their minds within a month. I do not think there is much in the second amendment. Probably they would agree amongst themselves that one of their number would act for a month, and that would get over it. But if you are to have a Chairman outside the Commission, who would come in and for a period of three or four months have the full powers of the Chairman on this matter, it is desirable that we should guard against that matter in some way.
I would like to support Senator Jameson's amendment. It is not very desirable that an outsider should be brought into the Commission. The amendment pre-supposes that a banker would never be appointed at all, because of the objection it raises to an outside person.
CATHAOIRLEACH
Is not this appointment to be made by the members of the Commission? They are never likely to bring in a stranger and there being five of them there would be a majority in favour of some one on a division.
The Government Commissioner has the right of voting.
There might be a deadlock there.
It is quite possible that for this office a permanent officer of the Commission might be appointed temporarily to act as Chairman; say the Accountant who had been doing a great deal of work for the Commission might be asked to act as Chairman. That might be the best arrangement. All I want to do is not to tie the hands of the Commission. No outsider can be brought in without the assent of the Commissioners. There are only six Commissioners, and an outsider will never be brought in if there are not very clear reasons for it, and I do not see that we should prevent the Commissioners doing that if it seems to be the best thing to do.
I quite agree with the Minister, if he will shorten the period for which the temporary Chairman will act.
That is a different point.
CATHAOIRLEACH
Would not the effect of this be that if there were disagreement amongst the six Commissioners and if the Government member was entitled to vote on that question and if there were three on one side and three on the other then this would give the Minister power to bring in a person from outside? It would then pass out of the hands of the Commissioners and it would then be in the power of the Government to bring in a stranger. It would not be the act of the Commissioners then, it would be the act of the Government.
This is for a temporary Chairman.
CATHAOIRLEACH
But if the six differ, and if there were three and three as to whom the temporary Chairman was to be, would not the appointment then rest with the Minister?
Yes.
And they have thirty days to consider it.
Amendment put and agreed to.
I beg to move Amendment 5:
To delete in line 59 the words "three months" and substitute therefor the words "one month."
This is the amendment to which I have already referred. In my view, it would be better not to have so long a period as three months.
CATHAOIRLEACH
In view of the fact that you have carried Amendment No. 4 and got rid of that objection is it necessary to press this?
I would really like to hear what the Minister thinks of the reasons for having such a long period as three months?
It is just this: In the case of a sudden vacancy owing to death, the Commissioners might take a few weeks to find a suitable man, and if they found a suitable man and he expressed his willingness to act, the man may have engagements that he could not get rid of in a week or two. That is the reason. A position may arise where there would be no disagreement, but still the time may be required.
Amendment, by leave, withdrawn.
Amendments 6 and 7, by leave, withdrawn.
Question—"That Sections 26 (as amended), 27 and 28 stand part of the Bill"—put and agreed to.
SECTION 29.
The Commission shall establish and maintain in such manner and form as it thinks proper such office, branch, or agency (in this Act called the London Agency) as it considers to be necessary or expedient for the performance of such of the functions of the Commission as are required by this Act to be performed or can in the opinion of the Commission be most conveniently performed in London.
I beg to move:
To delete the section and to substitute the following new section therefor:
"29.—The Commission may establish and maintain in such manner and form as it thinks proper such office or branch as it considers to be necessary or expedient or may appoint a Bank (not being a Shareholding Bank) having its head office in London as its agent, for the performance of such of the functions of the Commission as are required by this Act to be performed or can in the opinion of the Commission be most conveniently performed in London. Such office or branch, or the head office of such Bank, as the case may be, is in this Act called ‘The London Agency.'"
I have this amendment down on the Order Paper, and since handing in the amendment I may say that I have had an opportunity of conferring with the Minister on this Section 29 and on the alternative section that I proposed. An alternative amendment was sent to me this morning. It is exactly to the same effect, but is drafted in a different way to mine. I am willing to accept that new amendment. The nature of this amendment is:
To delete the section, and substitute the following section:—
29. (1) The Commission shall establish and maintain in such a manner and form as it thinks proper such office or branch in London as it considers to be necessary or expedient for the performance of such of the functions of the Commission as are required by this Act to be performed, or can in the opinion of the Commission be most conveniently performed in London.
(2) The Commission may, at any time and for such time as it thinks fit, in lieu of establishing or of maintaining (as the case may be) such office or branch as is mentioned in the foregoing sub-section employ a bank having an office in London, and not being a Shareholding Bank or a bank having a controlling interest in a shareholding bank, to be the agent in London of the Commission, and to perform as such agent for the Commission such of the functions of the Commission as are required by this Act to be performed, or can, in the opinion of the Commission, be most conveniently performed in London.
(3) The office or branch or the agency (as the case may be) for the time being maintained in London by the Commission under this section is in this Act referred to as the "London Agency."
Section 29 of this Bill is the section that deals with what is called in the Bill the London Agency. That is a place or office of the bank, as the place may be in London, at which our legal tender notes will be presented and redeemable for British legal tender notes or sterling. Now, as the Bill stands, it appears to me that if they have no alternative to setting up an office of their own, manned by their own officials, and with probably a very large amount of English sterling kept there, that would be a very expensive way of working this Exchange in London. Under the section as set out in the Bill, I was afraid that that was the only alternative.
It seems that it was not the idea of the Minister to exclude the possibility of having a bank as the London Agents of the Commission, and that that was implicit in the word "agency." On consulting with the draftsman he told me that that was his view, but I considered it was better to have the alternative quite definitely in the section, and to that the Minister has agreed. Accordingly I am willing to accept the draft as it appears in the amended amendment I have now read.
Now, I would wish to state for the Minister's information here that I have added to the draft of the draftsman the following words after the words "Shareholding Bank" in the second paragraph: "or a bank having a controlling interest in a controlling bank." I beg to move that alteration.
From listening to that it seems very explicit, but it seems a pity that such a long amendment as that has not been tabled and circulated.
CATHAOIRLEACH
I think if you follow it you will find that it is perfectly plain. The first paragraph of it is practically the clause that appears on the Order Paper. The second paragraph is an alternative which enables the Commission to use the Bank as agent.
It is only a different form of drafting.
On the Order Paper the matter was permissive. The word used was "may"; in this the word "shall" is used.
CATHAOIRLEACH
The altered amendment uses the word "shall" but goes on to say that that is not mandatory—it is only if the Commission thinks it proper to have such office or branch in London.
I think the existing section was adequate to any ordinary mind.
I am afraid I have not an ordinary mind then.
You have an extraordinary mind, no doubt.
Amended amendment put and agreed to.
Question—"That Sections 29, 30 and 31 stand part of the Bill"—put and agreed to.
SECTION 32.
(1) The Chairman and every other member and every officer of the Commission shall, immediately after his election, nomination, or appointment and before he begins to act as such Chairman, member or officer, make and subscribe a declaration in the following form:—
"I do solemnly declare that I will not disclose any information in relation to the business, records, or books of any bank which may come to my knowledge by virtue of my position as the Chairman or a member or an officer of the Currency Commission except to such persons only as shall act in the execution of the Currency Act, 1927, and where it shall be necessary to disclose the same to them for the purposes of the said Act."
(2) The declaration prescribed by the foregoing sub-section shall be made before a Peace Commissioner.
(3) Every person who acts as Chairman or other member of the Commission or as an officer of the Commission before he has made the declaration prescribed by sub-section (1) of this section shall be guilty of an offence under this section and shall be liable on summary conviction thereof to a penalty not exceeding one hundred pounds.
I move amendment 9:
To delete in line 12 the words "make and subscribe a declaration" and to substitute therefor the words "take and subscribe an oath."
This section is the section which provides for secrecy in connection with the examination of banks' books. The amendment which I am moving merely strengthens the declaration that is provided in this section.
CATHAOIRLEACH
You propose to substitute an oath for the declaration?
Yes, that is the only change that is made. It also involves amendments 10, 11 and 12.
I do not raise any objection except to point out to the House that it is contrary to the policy generally pursued since the Permissive Oaths Act of 1868. Since then the tendency has been to have a declaration instead of an oath.
That is so, sir, but anyone who objects to taking an oath for the reasons set out can, under the Statutory Declaration Act of 1835, make a statutory declaration which has the same effect. But this amendment will be some satisfaction to that section of the public who are I think quite unduly nervous about this. It will satisfy them to know that there is actually an oath taken preventing disclosure.
Amendment put and agreed to.
Amendments 10, 11 and 12 (being consequential) also put and agreed to.
Section 32, as amended, agreed to.
Question—"That Sections 33 to 36 stand part of the Bill"—put and agreed to.
SECTION 37.
I move to delete the section. The section, as drafted, is applicable to private banks, and to none other but private banks. As the Bill deals entirely with shareholding banks, I cannot see why private banks should be introduced. The Commission is not concerned with the business of private banks or with people who undertake banking. The business of the Commission is largely connected with the currency, the fiduciary currency, which is being replaced by consolidated bank notes and legal tender notes, with neither of which private banks are interested or concerned. If this clause were put into the Bill it would give the Commission power to go into any merchant banker's office, or any private banker's office, and demand the books of the bank for the purposes of inspection, for what object I fail to see. It is an exceedingly inquisitorial provision, quite unnecessary, and quite outside the purview of the Bill.
In regard to the shareholding banks, which form the main subject of the Bill in relation to currency, under Sections 40 and 52, the Commission has full power to investigate the books in relation to the issue of consolidated bank notes. That, I think, is sufficient for all purposes. That being so, I fail to see any reason why the affairs of private banks should be brought within the purview of the Bill.
CATHAOIRLEACH
If the Minister is satisfied to put in the words "shareholding banks," would that meet the Senator?
Certainly, but he has already that power under Sections 40 and 52. Under sub-section 3 of Section 40 the Commission "may require a bank applying under this section to be admitted to be a shareholding bank, to furnish to the Commission such information in relation to its business, and to permit the chairman or an officer of the Commission specially authorised in that behalf in writing by the chairman, to make such inspection of books as appears to the Commission to be necessary." Under that sub-section all shareholding banks are captured. I, therefore, move the deletion of Section 37.
Senator Guinness's objection may fall under two heads. Firstly, he objects to the Commission requiring any information from a bank other than a shareholding bank. I do not stand so strongly on that, though if we were to alter this so as to apply only to shareholding banks it might require other amendments in the Bill, and there would be certain minor objections to it. I do not stand too strongly on that, though I do not want entirely to accept that view. I said in conversation with the Cathaoirleach that I was not standing too strongly on the right to require information from the non-shareholding banks, but on the section at large I think it is vital to the scheme in the Bill. It is vital to have powers of receiving information and to take powers of inspection. The whole framework of the Bill provides for a new type of bank note. You no longer have the fixed fiduciary issue which remains no matter what changes take place. Here you have an issue which is related to the liquid sound advances of the banks and other facts in relation to the business of the banks, which certainly have a relation also to general assets and liabilities. This issue may be varied in amount at the end of every three years. It is an issue which may be re-apportioned amongst the banks and in that re-apportionment the liquid sound advances of each individual bank to the people in the Saorstát must be taken into account.
In order that the Commission may do its work, in order that it may determine what amount of issue is required for the country as a whole and what amount of the issue may be allocated to each bank, it must be in a position to obtain all the information it requires and considers necessary to discharge its functions. It has been suggested that the Commission should be satisfied with certain returns presented to it by the various banks. I do not think that would serve the purpose at all. In the case of many items, whether of deposits or of advances, it might be doubtful as to the category in which they should be put. If you have five, six or seven accountants preparing returns and certifying them, sending them along to the Commission, you cannot be sure that a common measure is used. One particular accountant might take a particular view of certain facts, whereas another accountant might take another view, and you might have the notes allocated to the various banks in such a way that you would have an equal allocation to two banks where the facts were really not the same and did not justify an equal allocation. I think consequently the power of inspection by the Chairman, which would be used, I take it, to test and check any returns supplied by the banks themselves, must be retained. I think it would be impossible for the Commission to do its work satisfactorily otherwise.
Another suggestion that was put to me was that the banks should agree to some one accountant who would prepare and certify all the returns for the banks. Again, I do not think that would be satisfactory. That accountant would not necessarily be thinking of the currency problems which should occupy the mind of the Chairman of the Commission, and it would be really unnecessarily interposing another person between the Chairman of the Commission and the facts on which he would have to base his recommendations to the Commission. I do not believe there is any real objection to this section. I have discussed it with representatives of the banks. They have urged it should be taken out, but on discussion of the matter I found none of them to say that there was any danger in the section. Their statement was that it might be made a subject of panic-mongering propaganda, but that in itself it was no danger. I think anybody who looks at it must see that that is true. Suggestions have been made that this section could be used to procure information for the Government in regard to the affairs of private individuals. I think that suggestion is simply ludicrous, and that no action should properly be taken as a result of it.
I have said that this section is vital to the Bill. The system which the Bill sets up cannot work properly without it. I think there is no real objection to it except the objection I have mentioned, that it would be made the subject of panic-mongering propaganda. I perhaps was unwise in the Dáil because I made a number of concessions as a result of representations there, and I have whittled the powers given in this particular section down to the last possible limit. I am not in a position to give concessions here. If I had refused to go as far as I have gone, in giving concessions in the Dáil, I might be in a better position to make concessions here. I had the section recently shown to the Chairman of the Banking Commission, and his comment was that he thought the powers given in it had been already too much restricted.
With great respect, I think the Minister has misunderstood the nature of Senator Guinness's amendment. The amendment does not propose to take away from the Chairman of the Banking Commission the right to inspect books of the banks, either by himself or by his officer. It does not take that right away at all. These rights are expressly given in the case of a bank that wants to be a shareholding bank, in Section 40, and they are given in Section 52, which is the section which fixes the maximum issue of consolidated notes. The two sub-sections are respectively sub-section 3 of Section 40 and sub-section 4 of Section 52. What Senator Guinness objects to is the words in the very first line of Section 37: "The Commission may require any person carrying on in Saorstát Eireann the business of a banker ... to furnish to the Commission such information..." Of course that is limited by the last two or three lines, which state: "Such access to the books and records of such business as the Commission may consider necessary or desirable for the due discharge of its functions under this Act."
But if a private bank does not want to issue bank notes, and does not want to get any currency of its own, if it is willing to carry on the banking business without references to currency issue or notes, why should the Chairman of the Commission have a right to investigate its business and to get at its books? Senator Guinness proposes to delete that altogether, but leaving the right of inspection given by the other section to the only case in which the Commission has any business in inspecting the books.
Will it not be necessary for such a banking concern to get consolidated banking notes, and if so will not these notes have to be applied for by one of the shareholding banks because this private bank cannot apply itself? Then if one of the shareholding banks has to arrange for the supply of notes to this private bank one would want to know how much of the consolidated notes the shareholding bank will get for the purpose of handing over to the private bank in order to carry on its business. They cannot carry on their business without consolidated bank notes. Might it not be necessary, therefore, for the Commission to know as between the private bank and the shareholding bank what issue went to the private bank?
As I understand it, no private bank can get consolidated notes; they may hold legal tender notes. If they issue consolidated notes they do so under very severe penalty. Another objection to this section is that it refers to private banks and private bankers who do not want special issues of currency. In London the great business and advancing houses of the merchant bankers are not banks in the sense of shareholding banks. They are private banks, and to suggest that their books should be examined and should be open for inspection is contrary to all custom.
If Senator Guinness's amendment was in a different form I would be better prepared to meet him. I could not agree to wipe out the whole section. It gives power in relation to the other banks not given elsewhere and which we need. If it was a question of getting information in regard to private banks I would be prepared to consider how far we could go and what amendments could be adopted. I am not sure that we ought not to take certain powers with regard to private banks or rather I should say non-shareholding banks. You might have some big foreign banks coming in here and doing a great deal of business. It may be important to have information in regard to the transactions of that bank, so that the Commission might have a statistical background for coming to a decision. The matter is not entirely a simple one. It is not a question of the non-shareholding banks merely.
I would point out to Senator Brown that Section 40 does not cover the point which he made, but Section 52 may.
CATHAOIRLEACH
I think that is quite right, but if Section 37 is allowed to stand it would carry all these powers, but it could be framed in such a way as to apply only to shareholding banks; for example, "the Commissioners may require any shareholding bank"—then the powers will remain in the section.
Might I suggest that the whole section should be deleted and sub-section (3) incorporated in Section 40.
There would have to be a series of amendments.
CATHAOIRLEACH
Why not leave Section 37 in and make it plain it was not to apply to private banks? There are powers given in Section 37 which might be very necessary in regard to shareholding banks, notwithstanding what is in Sections 40 and 52.
We say sub-section (3) of Section 37 must be introduced into a subsequent section.
CATHAOIRLEACH
It is far better to leave Section 37, subject to amendments that would confine it to shareholding banks.
I think the right thing would be to delete it.
There has been a great deal of discussion about this section but the point that Senator Guinness has raised was never raised heretofore. It was objected to on the ground of the power that it gave over shareholding banks. Senator Guinness is raising a new point and one that does not appear upon the face of his amendment. Consequently I could not agree to any amendment of this section but I am prepared to consider what we could do with regard to private banks. I am afraid we could not allow Section 37 to go as a whole.
Would the Minister look into the matter or shall we do so?
CATHAOIRLEACH
I think you should put your heads together in regard to it.
Amendment, by leave, withdrawn.
There is one other amendment, No. 14—
Sub-section (1), to delete in line 34 the word "an" and to substitute therefor the words "a permanent."
I think the Minister will raise no objection to this amendment.
Amendment agreed to.
Section 37, as amended, agreed to.
Sections 38 and 39 agreed to.
SECTION 40.
(3) The Commission may require a bank applying under this section to be admitted to be a shareholding bank to furnish to the Commission such information in relation to its business and to permit the Chairman or an officer of the Commission specially authorised in that behalf in writing by the Chairman to make such inspection of its books as appears to the Commission to be necesary for the due consideration of such application by the Commission.
I move amendment 15—
Section 40, sub-section (3) to delete in line 30 the word "an" and to substitute therefor the words "a permanent."
Amendment agreed to.
Section 40, as amended, agreed to.
CATHAOIRLEACH
Is amendment 16 necessary?
It is only necessary if Section 37 goes out.
Section 41, 42, 43, 44 were agreed to.
SECTION 45.
(2) Every legal tender note shall be of such form, size and design and printed in such manner and on such paper and numbered and authenticated in such manner as the Commission shall, with the sanction of the Minister for Finance, prescribe.
I move to insert before the sub-section a new sub-section as follows—
(2) Whenever the market price of gold bullion rises above the Mint price, the issues of legal tender notes in Saorstát Eireann shall be contracted until the market price of gold bullion and the Mint price are again in accordance.
CATHAOIRLEACH
Is not this, more or less, involved in the amendment that was allowed to stand over in regard to the standard unit of value? Is not this mixed up with it?
There are other aspects that I will confine myself to and I will not advert to what has been arranged to be held over, that is, the definition of the standard unit of value of exchange. This is a question of the redemption of legal tender notes and of consolidated notes. My amendment has a bearing upon those two aspects of the case because so far as consolidated notes are concerned they stand on a very sound footing.
The banks will, as at present, have to lodge realisable security as against their issue. The only flaw is that the securities, if allowed to depreciate in value—and indeed it is not a flaw but rather a strength in the present Bill with reference to our present currency —are held liable both as bankers and shareholders for the ultimate redemption of the consolidated notes held by the banks. It is not so with regard to the legal tender notes issued by the State. In the ultimate and last resort they are redeemable by the State, and the only provision made here for the redemption of these notes is the legal tender note fund. That legal tender note fund has certain forms of assets— money in any form—which, I take it, would mean British legal tender notes and British Government securities. These are liable, at any time, to depreciate. There is no stability about the value of British securities, for instance, Consols, no more than any other.
In this Bill provision is made for any lack or deficiency in the security of the legal tender note fund. That can be replenished from what is called the note reserve fund. This fund is subject to some weakness so far as certain securities are concerned. If on a half-yearly revision of both the legal tender note fund and reserve fund, it is found the assets are not sufficient to bear the responsibility and liability of those funds, then provision is made out of what is termed the general fund. If the general fund be found not sufficient to do all that is required to make up deficiencies in the note reserve fund they can borrow from the Central Fund. So that finally you come back to this, that, after all, in the adjustment, the State accepts liability and the legal tender note is based upon State credit. That, of course, has intimate relation with my amendment here. I think that while conditions are, as they are at present, very unstable, and out of the normal, it would not be a wise policy for the Free State to put into circulation more legal tender notes than are actually required for the needs of trade. There is only a certain amount of money required in circulation for the needs of trade. Anything over and above that is excess and tends to depreciate the whole currency, but we have provision made in the Bill by which our needs can be supplied by bankers issuing out consolidated notes, and there is no State liability incurred in supplying trade needs from that channel and source. The banks, as it were, would act as a buffer between currency and the State, and there would be no immediate or ultimate liability for redemption falling upon the State for consolidated bank notes. Now the provision is that the fiduciary issue calculated at about six million pounds would supply part of the currency for trade requirements.
There is also provision made for an excess issue, and there is a third provision made for what is called an extraordinary issue of consolidated bank notes. The first issue, which is fiduciary, is based on liquid advances, but the third issue, which is an extraordinary issue, is limited to "rests" or reserves of the various banks. Looking up the figures for 1925 of all the banks, we find there is a very ample margin left for allowing banks the privilege of issuing consolidated notes as an extraordinary issue. The whole requirements of the Free State trade circulation is estimated at twelve million pounds. The fiduciary issue supply is six millions. After the extraordinary issue of six millions the "rests" of the banks are quite sufficient and show sufficient margin to enable the banks to utter another six million pounds. Under that head you have the whole trade requirements of the State catered for without the issue of any legal tender notes or incurring of any State liability.
What about the profits to the Government?
It would be the same; they get their profit on the circulation whether it is consolidated notes or legal tender notes. The banks pay for the circulation.
The banks only pay one-and-a-half per cent. in the case of their note issue, but they would have to pay £ for £ in the case of legal tender.
There is a difference in notes in circulation and notes issued. They have to pay £ for £ security against their consolidated notes. The returns for 1925 showed that the reserves in the aggregate in the banks in Ireland amounted to £8,400,000.
Some of these banks, of course, traded with the North of Ireland, and some of these returns are not available. There should be a deduction made from the aggregate reserve in proportion to the trade some of these banks were doing in the North. The subscribed capital of these banks amounts to eighteen millions, as against a paid-up capital of seven millions. So there is a big margin of call on shareholders. The figures here show that over and above the fiduciary issue of £6,000,000 there ought to be ample security for the Government allowing banks, should trade requirements so require, the other £6,000,000 by way of an extraordinary issue of consolidated bank notes. My amendment has for its object the minimising of the issue of legal tender notes, and disturbing as little as possible existing arrangements, according to our circulation and the supplying of our trade needs, in the matter of circulation.
The bearing of my amendment upon that aspect of the case is this: If gold bullion is above its cost value, money will be of a high value and the price of all things, labour included, will be low; expenses of production will be reduced but returns will also be reduced, so that there will be no advantage obtained by any purchaser except the producer of gold and he increases his output. He will have less expenses to pay and higher profits on the higher price of gold. The reverse is the case if the metal is below its natural value. Prices will be high and returns generally will be high but the miner, the man who produces gold, will be losing and therefore he restricts his output. Thus, they adjust themselves to conformity and gold coin will exchange for its own cost with regard to goods. If the commercial value of gold is higher there is a disposition to melt down coin. Therefore there is a contraction of your gold currency and coin. We do not want that. We want to establish a nucleus here of gold currency. We want to reach the gold standard. This is a step towards that. The principal object I have in view is to maintain our legal tender notes during this transition period as near to the gold standard as we possibly can, and to keep our legal tender notes at a high value. We can do that by restricting our issues and our legal tender note will be interchangeable with gold.
If the Minister cannot see his way to accept the amendment he might, at least, consider whether he cannot introduce a clause into this Bill for the issue of consolidated bank notes under two headings, under fiduciary headings and the extraordinary issue heading sufficient for present requirements.
I am still wondering whether Senator Kenny read the Bill. The scheme of the Bill is that there shall be absolute convertibility of sterling into legal tender notes and legal tender notes into sterling. Our currency will be tied to sterling and the points Senator Kenny talks about seem not to arise at all.
There is only one legal tender note exchangeable and the same remarks I have directed towards the instability and unsoundness of legal tender notes have application to the British currency. No one knows that better than the British financier. When you say these notes are redeemable in British sterling I think it is a misnomer. If you go back to the origin of sterling it means absolutely pure money. The Easterlings, traders of North Germany, coming to England brought pure money with them.
What were the coins like?
We are dealing with general principles, and when you say that a piece of paper stamped, with an arbitrary value on it, is sterling, it is an absolute misnomer in the sense of the root of the word "sterling." That seems to be the whole weakness of the case. You simply provide for redemption of your legal tender note by another piece of paper.
I challenge that last sentence of the Senator. You can go and obtain bar gold in exchange for your British legal tender. That is the whole basis of the British currency at present, and British sterling is now, in effect, on the basis of the gold standard, although the gold is not in circulation internally.
When you have to pay in paper for an ounce of gold more than that ounce represents when converted into coin, then your currency is depreciated just to the extent of the difference. That is what happened and will happen. How many marks would you have had to pay for the British sovereign at one time? If British Treasury notes are interchangeable with gold at a parity what is the idea of all this furore in England in trying to get back to the standard? It is because she has departed from the standard and set out to depreciate the piece of paper which she arbitrarily says shall act as a pound that the whole trouble has arisen. In how far are we sound in associating our legal tender notes with that other note which is practically on the same basis, I am not prepared to say, but I say to the extent that you depart from the recognised universal standard, that is the gold standard, there will be a rate of exchange. If all countries had the gold standard there would not be a rate of exchange. The moment you depart from that you create a rate of exchange, and before the provisions of this Bill go very far, you may have a rate of exchange in this country.
Under Section 45 it is stated that the legal tender notes shall be payment for any amount. I should like to ask how that affects existing sterling obligations. No doubt the majority of contracts and obligations are not specifically settled in the currency in which they were contracted but certainly they have been so many pounds sterling. That being so are those obligations, after the passing of the Act, legally repayable in legal tender notes? The Minister may say the point does not apply because legal tender is convertible into sterling but I do not think that is quite watertight. You cannot exclude all possibility of exchange ultimately arising. If the drain on our sterling securities were continuous there might be apprehension that might lead to an exchange that might destroy that factor of convertibility. Then what would be the position of the person who held sterling obligations? Would he insist on sterling payment or would the law of the land enable him to be repaid by legal tender notes? When the Irish and English currencies amalgamated in 1825 this matter was specifically dealt with. The currencies were not then of the same value. There are two clauses in the Act specifically setting out the position of prior obligations. This point is important although it may not have any immediate bearing. It has been brought to my notice by one, very learned in economic theory, who regards it as important. On account of the views this person has put before me I would ask the Minister to look into the matter before the next Stage.
Might I ask the Minister what is the meaning of the words in Section 10 "coins or notes which are for the time being legal tender"?
10.—Every contract, sale, payment, bill, note, instrument, and security for money, and every transaction, dealing, matter, and thing whatever relating to money or involving the payment or the liability to pay any money which is made, executed, entered into, done, or had on or after the day appointed under this Act for the commencement of the issue of legal tender notes shall be made, executed, entered into, done and had according to coins or notes which are for the time being legal tender under the Coinage Act, 1926 (No. 14 of 1926) or this Act and not otherwise, unless the same be made, executed, entered into, done or had according to the currency of some state or country other than Saorstát Eireann.
Does the section refer to the time when contracts were made or when the contracts ended? I presume the words "for the time being" mean the time when the contract was made, and have no reference to one extending for years or months, the last payment on which might be made two years after the contract was made, when legal tender notes and all would have a different value.
As I understand the Bill, the section does not affect past contracts. If under a past contract payment had to be made in sterling, the Bill would not affect it. Section 10 specifically applies to future contracts.
The words used are "for the time being," meaning the time the contract was entered into.
I am afraid Senator Kenny made his question so long that I lost the thread of it.
I think when a Senator is seeking for information a certain amount of courtesy is due to him. I did not make my question long, but I read from the section. I now ask the Minister again, if the words "for the time being" mean the time the contract was entered upon? A contract might extend for five years and part payments might be made as the work was done. When the last payment would be made the relative value of money might have altered considerably.
CATHAOIRLEACH
It does not matter what the words mean. That would be a matter to be determined, not by what the Minister states, but by what a court of law would state.
Is it not better to clear up the ambiguity?
CATHAOIRLEACH
If that is the only ambiguity it will be a very lucky Bill. I think there is something more than what the Minister states when you come to look at Section 45. It seems to me that there is no exception made in that section in favour of past contracts. It refers to legal tender for payments of any amount. If the words are not intended to apply to existing contracts that should be stated. In the absence of any contract to the contrary the notes shall be legal tender for any amount unless the contract otherwise provides. Section 45 is unqualified, and it does not exempt existing contracts.
Unless there is a contract to the contrary.
I should not like to put complications into the Bill that would cause needless difficulties. I think if there is a definite contract for sterling it stands. If there is nothing specified I think we had better leave the position so. On the spur of the moment I would not like to agree to the insertion of some refinement that might perhaps cause difficulties.
CATHAOIRLEACH
It is suggested that the words "shall be legal tender for the payment of any amount" do not cover all cases.
They do not cover cases of contract where the payment was to be outside the Saorstát.
CATHAOIRLEACH
They apply only to the Saorstát. Is it to be paid in sterling? I understand that is not the intention.
Not if it is to be paid in sterling.
CATHAOIRLEACH
So long as money has to be paid in the Saorstát under the contract this section will enable it to be paid in notes. The notes are made liable for any amount. I understood the Minister said that if the contract, though it had to be performed in the Saorstát, had words and terms which compelled it to be paid for in sterling, it would have to be paid in sterling. I think there is a contradiction, as the section says that when issued the notes shall be legal tender for the payment of any amount. If it is intended that it will not apply where there is an existing contract to the contrary, why not say so? That is a matter that the Minister might look into.
I think further words might modify that.
CATHAOIRLEACH
The words are: "And shall be legal tender in Saorstát Eireann for the payment of any amount." Does that mean up to any amount?
If amendment is required I think it would be better on sub-section (2) of Section 10 which deals with this question.
In connection with sub-section (2) of Section 45 which deals with the design and the printing of these notes as it is intended that they are to be exchangeable in London for sterling, will it be stated on the face of the legal tender notes that they are not alone legal tender in Ireland but are redeemable or payable in London at the agency of the bank? The reason I ask the question is, that a person going to London with these notes in his possession who buys goods will find that the notes are more acceptable if it is stated on them that they are payable in London. I think we all know the difficulty of exchanging Irish bank notes in London.
Or English provincial bank notes?
Yes. If our legal tender notes were deliberately enfaced as payable in London I think in a short time people would become accustomed to them, and the difficulty of exchange would be got rid of. At present if a person tries to change an Irish pound note in a shop in London commission has to be paid. That is really exchange. By enfacing the note as payable in London any possibility of exchange would be avoided. I would ask the Minister to consider the matter.
I think the Commission would most probably think that the notes would have to have on their face a statement that they would be exchanged for sterling in London. If that were the view of the Commission and if I were Minister for Finance I would agree that it should be so. I see no objection to that. I do not think it is necessary to prescribe it as the Commission would probably keep to it.
Amendment negatived.
Section 45 put and agreed to.
Section 46 agreed to.
SECTION 47.
(5) The Commission may, whenever on or after the appointed day it thinks fit so to do, issue in Dublin to any shareholding bank or to the general fund or the note reserve fund legal tender notes against—
(a) a bank draft payable at sight in London, approved by the Commission, and of a nominal amount equal to the amount of the legal tender notes so issued, or
(b) the transfer to the Commission for the account of the legal tender note fund of such amount of British Government securities approved by the Commission as in the opinion of the Commission is equal in value at the current market prices to the amount of legal tender notes so issued.
I move:
To delete in line 57 the words "may whenever" and to substitute therefor the word "shall" and to delete in line 58 the words "it thinks fit so to do."
In Section 47 it is stated that an appointed day is to be arranged. When that is done that will be the day on which the Commission will commence to issue legal tender notes. In sub-section (5), to which I moved the amendments, it is stated that "the Commission may, whenever on or after the appointed day it thinks fit so to do, issue." I hold that it is mandatory on the Commission to issue the notes as soon as the appointed day has been actually published in "Iris Oifigiúil." With that object in view I have put down the amendment.
"Shall" would be rather a different word to use. "Shall, if it thinks fit so to do."
CATHAOIRLEACH
He proposes to leave out "it thinks fit so to do." The two amendments have to be taken together. The proposal is to leave out the words "may if it thinks fit so to do."
I wonder did Senator Guinness read sub-section (2), which prescribes that the Commission shall issue legal tender notes for gold bullion? But then sub-section (5) goes on to say that instead of taking legal tender notes it may take a bank draft payable at sight in London or British Government securities.
Amendment, by leave, withdrawn.
Section 47 put and agreed to.
Sections 48 to 51 put and agreed to.
SECTION 52.
(2) The total amount of the consolidated bank notes at any time outstanding (otherwise than on an extraordinary issue) with a Shareholding Bank shall not exceed the total amount of the liquid sound advances by such bank to persons in Saorstát Eireann proved to the satisfaction of the Commission to exist at that time.
(3) Proof for the purposes of the foregoing sub-section of the existence of liquid sound advances by a Shareholding Bank to persons in Saorstát Eireann shall be given by such bank to the Commission in such manner as the Commission shall direct or allow and for the purposes of such proof the Chairman or an officer of the Commission specially authorised in that behalf in writing by the Chairman may inspect the relevant books and documents of such bank.
I move:—
To delete in line 61 the word "liquid."
This section touches one of the fundamental points of the Bill. In speaking on the Second Reading I said what I have to say on the subject of "liquid sound advances" and on the matter of the inspection of the bank books. I do not at present propose to divide the House on the subject whether that part of the Bill is to go through. It is no use my doing so if the Government has made up its mind. If they are to have those bank books examined to see if these advances are there, and if they are going ahead with that part of the Bill, it will be on their heads if anything happens. I am not going to argue the subject further. The sub-section says that the note issue should be based on the amount of the liquid sound advances that the chairman or his officer ascertains from the books of the bank. When the Minister was asked: "What are liquid sound advances?" he said it was a conundrum. Granting that is a proper definition, is it wise for the Minister or anybody to say to the chairman or his officer: "You are to go into a bank and to look for a series of securities which are of the nature of a conundrum"? Really, I think that is not a question that should be left to any Commissioners. There certainly ought to be a definition of what the Chairman was to look for. I know very well why the words, "liquid sound advances," were used. The Chairman of the Banking Commission had his head full of the American thing. That is to say, certain bills that had been discounted with a definite fixed date of repayment, and with names on them of people who were able to pay. Those are liquid sound advances, and he told us on the Commission that those were the sort of things that are to be used for the establishment of the note issue. I think everyone in banking told him that this kind of thing did not exist in the banking system of the Saorstát. They are not there. Every farmer in the Seanad will know that where farm loans are given and taken they are given and taken knowingly, with the knowledge that the bill is to be stretched as the borrower requires it, until he gets rid of his stock and various other things.
In the Saorstát there are no business bills that to any extent could be used for the foundation of a note issue which are what are called liquid sound advances. They are sound but they are not liquid. But it occurred to me I never made the remark to the Chairman of the Banking Commission, but he did set the task here to this Currency Commission to look for a thing that was not there. He would have to get a metaphysician to find it. I once heard a definition of a metaphysician. He was a man who was looking for something in a pitch dark room without light and what he was looking for was not there. That is a problem that is to be put to the unfortunate Chairman of the Currency Commission. Now if we were only to face realities and say "let me look for sound advances," it would be different, but we have been told and definitely told that these sound advances are not to be looked for, because they are on the basis of repayable notes. But it is the other things that the banks have that are the real security. That is where we join issue with them. I am arguing that in this matter of getting the Chairman to determine what are liquid sound advances you are setting an impossible task. If you take away the word "liquid" and call them sound advances—and in the Saorstát you have got all you really want of them—you are stating a fact. The next amendment deals with the matter of settling the amount of note issues to the banks, and it reads: "To add at the end of the sub-section the words ‘and such total amount shall be fixed with due regard to the other assets of the bank.'" The two things which the Currency Commission will have to do will be to look at the advances which that bank is giving to see that they are sound.
AN LEAS-CHATHAOIRLEACH took the Chair.
I do not like this section at all. It gives the Commission the right to let the banks have this consolidated note issue right up to the amount of the sound advances in the Saorstát. It gives the Commission leave to give the bank consolidated note issues right up to the limit of their liquid sound advances. If I were out against this Bill, if I wanted to wreck the whole project, I would leave in the words "liquid sound advances," because I believe conscientious members of the Currency Commission would say that the amount of liquid sound advances they could find in the banks of the Saorstát are extremely small, because they are not there. But if you take sound advances, they are there. Then for the real basis of note issue the Currency Commission will look to the assets of the banks. In that way you can get a sensible, solid, sound arrangement. I would ask the House to consider whether it is wise to leave in the words "liquid sound advances" which honestly do not mean anything in the Saorstát. I do think that the section will be far better and sounder and not setting more or less the foolish task of solving conundrums to the Commission.
It is better to be clear in framing an instrument, and not leave things in an indefinite state. Anybody having any experience of banking will know that the bank has always a certain amount of liquid assets. It must make that provision. What is meant by liquid assets? They are assets that you can go into the market with, and convert at whatever rate the market price of them at the moment stands at, and you can get your money for them. Now the bank has to provide for that in the very nature of its business. Advances are made by banks on mortgage and otherwise. The nature of the advances in this country is mainly to farmers and to the agricultural interests, who could not, under any straining of the position, be expected to pay on demand what they owe to the bank.
That applies to all classes of advances immediately outside the category in estimating the amount of consolidated note issue that might be advanced to the banks. If you strike out all the advances by the banks that are not, from the practical point of view liquid, you may strike out the whole class, and that contracts very considerably the margin of privilege which the banks will enjoy under this particular section. These words and the interpretation of them are not met by the Minister's conundrum. A conundrum should not be introduced into an Act of the Oireachtas. We have plenty of them elsewhere. We do not want to exercise our spare time by solving these conundrums. Here and now is the time, I submit, to clear up this and I only want to get it cleared up by the Minister or his draftsman. They had something in mind when they arrived at that form of words, "liquid sound advances." There it is, but the form of words they use does not evidently convey what they had in mind, and could not possibly convey what they had in mind; that is, if they mean to refer to the advances as we understand them in the Free State— that is, advances to the agricultural community. I suppose they did mean advances to them. These advances are sound advances but they are not "liquid" to any extent. If they meant to refer to certain advances of a liquid nature then you must strike out all advances to farmers for agricultural purposes.
I am afraid this is a very late hour for discussing this subject.
It is not a dry subject —it is liquid.
Not the liquidity some of us would prefer. There is a good deal more than finance in this amendment. There is a certain amount of political strategy and psychology, and it has to be examined, and you have to have regard to what this involves because it may lead to developments. We may be charged later on that we did not to the best of our ability apprise the House and the country of what was behind this. I think I might begin by referring to the Minister's statement in the Dáil on one of the stages of this Bill. He said this method of linking up what we call the fiduciary issue, that is money the banks get at very low rates, linking that up with the liquid sound advance currency policy, is a line of thought that wants careful examination. Possibly the basis of issue of the notes will be liquid sound advances. He says the proportion of the notes any bank gets will depend on the liquid sound advances which the bank is making.
He says:—"I think that because of this new basis of the issue of notes we will have the credit requirements of the country better met than they have been in the past, and I think that the institution of the new system is going to have a very good effect upon the banks," and that the banks will be more generous in lending. He also says:—"I do think that it is a fact that there has perhaps not been sufficient attention paid by the banks to the national requirements of the country. Certainly there has been no such thing as a currency or a credit policy here. There has been no machinery for giving effect to such a policy." But now you see it here. These advances in connection with the note issue will constitute what the Minister is pleased to call the credit or currency policy. Does the Minister suggest that the banks have been willing to lend money under conditions of liquidity? It must be known that that is not a fact. When the security is sound, a bank would not hesitate to lend money on it—that is, if it is a marketable security that could be sold at any time. There has been no complaint that that is where the banks have failed. Probably what the Minister had in mind when he made his remarks were loans on fixed expenditure, on buildings or land—anything which is fixed and cannot readily be sold and realised—and so in time to link up the notes with liquid advances. The Minister said the banks should be more generous, that is finance operations which should be financed by share capital.
The position is this: that the depositor will not invest his money in a concern. There is any amount of money in banks and you cannot get subscriptions for Irish enterprise. Although the depositor is not prepared to release this money the bank is expected to do it with the same person's money. The bank is a trustee for the depositor, and is unwilling to invest for purposes to which the depositor objects. That is sound. In so far as that underlies the Bill I say it is wrong, and we should clearly see what we are doing. No bank hesitates to make advances against liquid sound security. It is unliquid sound security on which a bank hesitates to advance loans.
Presumably these are not taken into consideration when you examine the basis of any redistribution of the note issue. What one objects to in the Bill is the tacit and subtle attempt to induce the banks to lend unsoundly. I hope they will not. But there is that temptation put in the way of banks that the more they lend the bigger the note issue they will get. That will not satisfy the Government or those dissatisfied with the policy of the banks. Good loans are freely made, and the more frozen loans the more stagnant loans you make——
The more liquid loans.
No. Liquid loans are freely made. It is the security that is not liquid, like land, which is not very marketable.
That is the security that is naturally proposed by some people who want banks to make liberal advances. The whole thing is a contradiction in terms, and that is why it is very necessary we should make the facts of this case clear —that there is a tinge of politics in this connection in the amount of the issue and the amount of the so-called liquid sound advances. It is very necessary that no temptation should be placed in the way of any banks, whether they are likely to resist it or not, to make loans on an unsound basis in return for favours which it is in the power of the Commission to give.
The amendment deals only with liquid sound advances, and Senator Keane warns us in connection with the amendment that the Government are inviting the banks to make loans which are of an unsound nature. That may be argued against the Bill as a whole, but to understand how that argument would apply to the partilar section we are dealing with surpasses me. Senator Jameson suggests that the word "liquid" should be left out, and the words "sound advances" left in. That may be a very wise thing, but why we should be asked to believe that the Government would suggest to the banks to advance sums of money on unsound securities is something I cannot imagine.
I think it might be well to leave out the word "liquid." I fear that the assets of farmers in Ireland are certainly liquid. I feel that in this State the work of farmers is held up to obloquy, but if the farmers fail the country fails. The whole business of the country is intimately connected with farming interests. The main interest of the country is shop-keeping, which is dependent on farming, because, with the exception of Guinness's, Jameson's and Jacob's, there are practically no industries in this country. That being so, the liquidity of the country actually depends on the farmers' ability and the ability of those who are making a living on them, the shopkeepers, to meet their liabilities. I hardly think it would be possible to issue fiduciary notes on the capacity of the liquid assets. I think for the purpose of making the Bill more workable it would be wise to leave out the word "liquid." Unless I see grave reasons to the contrary, it is my intention to vote for the amendment.
On the occasion of the second reading Senator Sir John Keane asked for a definition of "liquid sound advances." I do not think it is a very difficult thing to define. A liquid sound advance, as I understand it, is an advance made by a banking institution to a customer which that bank can realise, if necessary, at a moment's notice. That is what is meant by a liquid sound advance, but these advances, to my own knowledge in this country, do not form more than one per cent. of all advances. They are not made against bills which Senator Jameson spoke about, because there are no such bills in this country. They are made occasionally against securities, but the amount of money advanced against liquid securities, which could be realised at a moment's notice, is extremely small. As I said, it is possibly not one per cent. of the whole advances of the country. That being so, if the Commission is bound by the word "liquid," the amount of the consolidated note issue to be issued to any bank will be exceedingly small.
On the other hand, if the Minister is prepared to accept Senator Jameson's amendment to delete the word "liquid" and leave in the words "sound advances," which, in my opinion, is ample to enable the Chairman of the Commission to come to a decision as to the amount of notes to be issued, then the section would be workable. It is not to be taken that I approve of it as a sound basis for the note issue, but the Government has adopted this basis, and I am not prepared to contest it. However, I do think it would be in the interests of the Government and in the interests of the shareholding banks that the word "liquid" should be struck out for the reasons I have given, otherwise the clause would be unworkable.
The Commission specifically used the words "liquid sound advances," and they recommended a note issue of six million pounds. I am not going to say what definition the Commission would have given for "liquid sound advances." Possibly if the definition were exactly the definition Senator Guinness put forward, they might not have found that a justification for a note issue of six million pounds. But they had, at any rate, information I have seen, and they were satisfied that there were liquid sound advances, advances that could in their opinion be described as liquid sound advances sufficient to justify an issue of six million pounds. If they did not think so they should not, after having recommended that the issue should not be in excess of the liquid sound advances, have recommended a note issue of six million pounds.
Has the Commission reported that there were six millions of liquid sound advances?
I am not saying that.
The inference from what the Minister has said would imply that there were such advances.
It seems to me that the whole of Senator Sir John Keane's arguments, in which he tried to enlarge on my remarks and to draw inferences from them, inferences which are not justified, are against Senator Jameson's amendment. If he was not against Senator Jameson's amendment I do not know what the purport of the argument was. He said the Government was apparently going to force the banks to make advances that would become frozen.
I am satisfied to leave the interpretation of the word "liquid" to the Commission. Certainly it is the liquid sound advances that should be related to the note issue, not the advances that become frozen. I am satisfied to leave the interpretation of that to the Commission, and I feel justified in doing that because the Banking Commission consisted of representatives of the Irish banks, three of whom signed the report, and of other people who had more intimate knowledge of these problems than I have, and they recommended that the note issue should be related to the liquid sound advances. I do not think we are going to be benefited by the adoption of Senator Jameson's amendment. With reference to loans to farmers and the necessity for making money available for agriculture, which has been referred to, other steps outside this Bill have been taken to that end. Provision has been made in the Agricultural Credit Bill for the advance of substantial sums to farmers.
I am willing to take the Minister's word. If the Currency Commission act as I believe they must act there will be a very great advance of these notes, and I think the damage done will be wide, which, probably, the Government may regret far more than I can say. In attempting to take the word "liquid" out of the Bill I was making a sound suggestion to have the truth in the Bill. Again and again during the sitting of the Banking Commission allegations were made that these things did not exist, and that if this was put into the Bill it was something that was not known in the Free State. I shall not push the matter any further.
I wish to join in this discussion. I have heard more about liquid assets during this debate than I ever thought I would hear on a subject in which we are all interested. I wish to put forward my views from the farmers' point of view. The Minister has spoken about the attraction that was more or less intended for the bankers in dealing with advances to the farmers, and the rate of interest and in what category they would come in to help the agricultural community. One of the matters upon which I was most anxious to hear some statement from the Government is one that is looked upon by people in the farming industry with a good deal of suspicion. The banks have formed a ring to carry out everything in connection with their banking institutions by combined methods, doing away with competition in the matter of giving better terms one over another. That is looked upon from the business point of view of bankers as very sensible and the proper thing to do. On the other hand, if the farmers combined and said: "We will pay only 5 per cent. until the times alter," the banks would look upon them as doing something dishonest. The two combines are in opposition to one another in the sense that one set of people belongs to what is called Society and the other belongs to what is called the working class people, who have to face hard times and world-wide competition. Personally, I have every respect for gentlemen representing the banks, and many friends of mine are amongst those who speak for the banks. But I have a recollection of a statement made by Daniel O'Connell on the first indication of a Land Bill in the British House of Commons in which he said that you might as well ask the butchers to write out regulations for Lent as to ask the landlords to frame a good Land Bill, and I would be inclined to apply Daniel O'Connell's version to this suggestion of leaving these matters in regard to banking in the hands of bankers. I hope the Government will take another view than leaving matters in that position, and that they will help the people who are most interested, namely, the farmers.
I must answer the last speaker. He seems to point to bankers as monopolists. Now if there is one thing less monopolistic than another it is money. This money in the banks is the property of the people for whom the Senator pleads. What is to prevent them coming in to-morrow, drawing that money out and starting a bank of their own and giving all those favours that they think so easy to their own class? There may be a monopoly in precious metals and scarce articles and so on but there is no monopoly in money. People put it into the banks to have it looked after properly and they have confidence that the bankers are looking after it. If they want to give better terms to their fellow-farmers they can take out that money and start their own banks and see how they will fare in giving those favourable rights and concessions which the bankers are accused of withholding. That is the whole story and I would like to have it on record that there is no vestige of monopoly in banking practice.
CATHAOIRLEACH
I think this is really a very serious matter. The position is curious. As far as I understand it the Minister does not profess to know and will not commit himself to any definition of what liquid sound advances are and therefore there is no guidance to the Commission. There is no definition of what are liquid sound advances and therefore the Commission has to interpret that for themselves. It is said that liquid sound advances are matters that are capable of being defined. I do not know whether that is so or not. It is said by one Senator the phrase is capable of definition and if it is capable of definition I think the definition ought to be put in because otherwise the Commission will find itself wholly at sea. It may be that the Chairman of the Banking Commission understood what he had in mind but that may not be the meaning that will be given to it by the Commission set up, under this Bill, or some members of the Commission. They may interpret and carry out the Bill when it becomes an Act in a way opposite to what was understood. If there is a definition put in of what liquid sound advances are then the Commission will know where they are. Otherwise it looks as if Ministers were shifting on to the Commission a responsibility that lies upon themselves. They must know what they mean by putting into their Bill this expression "liquid sound advances" and if they know what that means they should say so; otherwise I am afraid your Commission will find itself in a quandary and in a bog. However, I suppose all this has been considered.
May I call the Minister's attention to this very serious subject? The Minister is absolutely under the impression that the six millions was a limit arrived at having regard to some idea they had in mind with reference to liquid sound advances. There is not a word to show how it was arrived at there. Section 20 of the Report shows how it is arrived at.
What I said was that the Commission recommended those liquid sound advances and that they also recommended this six millions, and the clear inference is that what they regarded as liquid sound advances would be this six millions.
The fiduciary issue was six million pounds. They accepted that without any reference or investigation as to what liquid sound advances would be.
CATHAOIRLEACH
Even if they had an idea in their minds as to what liquid sound advances were that would not bind the Commission. The Commission would have to decide themselves. They would be compelled to determine what the Government meant by liquid sound advances and might give a different interpretation from what the Government intended. Unless it has a distinct meaning in commercial circles its meaning should be defined. If it has not a definite meaning in banking circles there will be tremendous trouble over it.
It ought to be possible to introduce an amendment. The Minister might possibly find some definition of the word.
Amendment, by leave, withdrawn.
Amendment 21:—Section 52, sub-section (2). To add at the end of the sub-section the words "and such total amount shall be fixed with due regard to the other assets of the bank."—(Senator Jameson.)
Amendment not moved.
Remember if they work on any lines with regard to liquid sound advances such as men of their class would work on, I think the assets of the bank need not be much considered. There will not be sufficient advances to bother anybody.
Amendment 22:—Section 52, sub-section (3). To delete in line 5 the word "an" and to substitute therefor the words "a permanent."— (Senator Brown.)
Agreed.
Section 52, as amended, agreed to.
SECTION 53.
(5) If the average amount of legal tender notes outstanding during any half-year which expires during the initial period is not less than six million pounds the Commission by unanimous vote may, if it so thinks fit, fix the maximum limit at such amount as it considers proper having regard to the total amount of liquid sound advances by Shareholding Banks to persons in Saorstát Eireann then existing and such other matters as it considers relevant and if and whenever the maximum limit is so fixed the same shall be and continue to be the maximum limit until the expiration of the initial period or the fixing of a maximum limit under the next following sub-section whichever shall first happen.
Amendments 23 and 24 not moved.
I move amendment 25—
"Section 53, sub-section (5). To delete in line 2 the word ‘unanimous' and to substitute therefor the word ‘majority.'"
This was, I believe, an arranged section after discussion with the Minister over some troubles that would be met in the initial period. It was a question that, at that time, the banks might get more of the consolidated bank note issue out than the six millions because if the six millions were adhered to strongly and if they would have no more they would have to use a large number of legal tender notes, more expensive to the banks than the others. The Minister met them to the extent of putting in this clause. He put in the words "unanimous vote." That means for instance if the Treasury official on the Commission was very zealous for the profits for the Government he could veto the whole proposal by saying "I object to this." The whole clause is not worth anything. I think it is a sort of arrangement which appealed to the Minister as being just. It ought to be left to the majority of the Commission. Amongst seven of them they ought to arrive at a decision whether it is a thing to be granted or not. We ought not to pass it and then leave it to one out of seven members to wreck the whole thing. I believe the Minister thinks it a reasonable clause and that it should be workable.
The increase above six millions would, in any case, be subject to the Minister's consent. If we are to assume any reasonable case for an increase were blocked merely by the civil servant, and he persisted in it, the presumption is that if he could be overridden in the Commission the Minister would probably still block it. I do not think we need concern ourselves too much with what a civil servant would do in dealing with such a case before the Commission, because even if his objection were overridden it would still be possible for the Minister to withhold consent. The view taken in drafting this section was that, presumably, the three banking representatives would be inclined very readily to agree to the increase, as it would be of benefit to the banks, and the provision for a unanimous vote was inserted to ensure that the two business representatives and the other three representatives should also be convinced that a fair case had been made out. It was inserted for the purpose of being worked.
This section is an agreed section, and was not put in merely for show. It was put in for the purpose of being worked, and, also, so that the members of the Commission who were not directly concerned, might be convinced that a case had been made. I am not arguing very strongly against Senator Jameson's amendment, but am trying to indicate that there is a case for retaining the word "unanimous." As I have stated, if it was a case of an unscrupulous or over-zealous civil servant backed up by a Minister who supported his view, who was simply desirous of getting some little money for the Treasury, the amendment would not meet it. I think a reasonable view will be taken, if a reasonable case can be made, and that there is no danger that an individual will hold it up for reasons of concern for the Exchequer. On the other hand, I admit that if the actual recommendation, even of a majority, came to the Minister it might be more difficult for him to refuse it than for an individual on the Board to stop it. I leave it to Senators to give their own views on the matter. I do not think a Minister would hesitate, if it was improper, that the limit should be increased, to refuse to consent to it. On the other hand, if a fair case were made, I think the Commission would not refuse to make the recommendation. If it were an unanimous recommendation I do not think a Minister could under any circumstances refuse consent. If Senator Jameson's amendment were adopted, and if a poor case were made, from the point of view of the impartial outsider, it might be sufficient to convince the three bank representatives, whose institutions would directly benefit, and if they got any one person on the Commission to agree with them, there would be a majority.
If a proposal was made to the Commission in the terms of this section, and if there was not an unanimous vote, or if it was turned down by the Commission, the matter would not come before the Minister for approval or disapproval. What the Minister has been arguing would not then materialise. The Minister visualised the Commission not agreeing on this matter, and that he should then, as a superman, have to say yea or nay on the question of increasing the note issue. That does not come into the picture until an unanimous vote has been passed. If the matter was left to his decision by a majority, then it is open to him to say nay or yea. As the Bill now stands, I do not see that the matter will come before the Minister at all, unless, and until, there is an unanimous vote, when I think he would hardly refuse to agree.
What about ruling out the Treasury representative, and leaving the matter to the other five? One representative might block the whole proposal.
CATHAOIRLEACH
I have written down the following suggestion: "That the Commission by a vote of not less than five of its members."
I have no great objection to that.
Amendment, as amended, agreed to.
Is it also necessary to amend sub-section (4), line 51, in which the word "unanimous" occurs?
That is the other side of the picture. I think the banks would not agree with the Senator there.
The Seanad went out of Committee: Progress reported; the Committee to sit again to-morrow.