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 OFFICIAL SYNOPSIS 
 
 OF THE 
 
 EEPOET 
 
 OP THE , 
 
 AGEICULTUEAL CEEDIT 
 
 COMMISSION : ■ 
 
 OF THE 
 
 PROVINCE OE SASKATCHEWAN 
 
 1913 
 
 PRINTED BY ORDER OF THE LEGISLATIVE ASSEMBLY 
 
 924 055 469 625 
 
 REGINA: 
 
 J. W. Reid, Government Printer 
 
 1913 
 
OFFICIAL SYNOPSIS OF THE EEPOET OF 
 
 THE EOYAL COMMISSION ON 
 
 AGRICULTUEAL CEEDIT 
 
 The report is a unanimous one, being signed by the three 
 commissioners, J. H. Haslam, Chas. A. Dunning and Dr. E. 
 H. Oliver. It comprises 386 pages of typewritten matter 
 and several appendices. Printed copies of the full report will 
 be available in a few weeks' time and may be had free of charge 
 upon request addressed to the Department of Agriculture, 
 Regina. 
 
 Following a copy of the Royal Commission come the 
 acknowledgments of the commissioners to the persons and 
 organisations that have assisted it in its labours. 
 
 INTBODUCTION. 
 
 An introduction sets forth the fact that "cheap money" 
 so-called forms only one phase of the whole great problem of 
 reordering rural life which European countries have so success- 
 fully accomplished through the medium of agricultural co- 
 operation. It is pointed out that there, as with us, agriculture 
 was the last industry to become organised and that the rural 
 rebirth of Europe, carrying with it better and cheaper agri- 
 cultural credit, dates from the organisation of the farmers 
 along co-operative lines. Through organisation their agricul- 
 ture has been profoundly affected om three sides, viz., as an 
 industry, as a business and as a life. And the problem is no 
 less broad in Saskatchewan. In the words of Sir Horace Plun- 
 kett, the apostle of rural Ireland, "Into the industry you must 
 introduce the teachings of modern science, as it has been intro- 
 duced into every other important industry. Into the business 
 must be imported methods of combination, simply because, 
 under modern business conditions, transactions must be on a 
 large scale to be economical. The life of the rural commimity 
 must also be modernised by making it physically more com- 
 fortable, mentally more satisfying and socially more enjoyable." 
 Out of this grows a slogan for Saskatchewan farmers: "Better 
 farming, better business, better living." 
 
 The legitimate place of credit facilities in agriculture is 
 also pointed out in the introduction. 
 
 After outlining the procedure followed by the Commission 
 in its inquiry, the report proceeds to a consideration of 
 Agricultural Credit as it exists at the present time. Respecting 
 mortgage credit this conclusion is reached: There is great need 
 of cheaper credit, based on sound security spread over a 
 considerable term of years, applied to assist mixed farming 
 and to improve the lot of the average farmer on a half section. 
 
The Commission concludes from the evidence it received that 
 four-fifths of the patented farms of the province are mortgaged 
 and at a rate of interest on the average in excess of 8 per cent. 
 The rate of interest, too, tends to increase rather than to 
 decrease. Owing to the smallness of the annual payments of 
 principal required and the general lack of insistence upon 
 the payment even of these, there is found to exist in Saskatche-. 
 wan under the guise of short term mortgages, a system in reality 
 of long term loans on mortgage. 
 
 After analysing a great deal of information relating to 
 mortgages prepared for it in the offices of the registrars of the 
 Supreme Court and of Land Titles throughout the province, 
 the Commission 'summarises the data submitted in these 
 words : 
 
 SUMMARY OF MOETGAGE INFORMATION. 
 
 During the period of fifteen months elided August 15, 1913, 
 there were no less than 1,723 sale and mortgage proceedings 
 under mortgage in this province. It should be pointed out 
 that the returns given above are not quite complete. Probably 
 not less than 2 per cent, of the farmers of Saskatchewan were 
 subjected to these proceedings under the conditions that 
 obtained in this period. Of the mortgages in connection with 
 these proceedings 150, or 8.7 per cent., bore an interest rate less 
 than 8 per cent. But 435, or over 25 per cent., bore an interest 
 .rate higher than 8 per cent.; 261, or over 15 per cent., a rate of 
 10 per cent, or higher; 35 a rate of 12 per cent, or higher; and 
 3 a rate of 15 per cent. And these mortgages were placed 
 at these rates before the present upward trend in interest rates 
 occurred. 
 
 BUSINESS HABITS OF THE FARMER. 
 
 The business habits of the farmer come in for some comment. 
 It is made clear that the unavoidable uncertainties of farming 
 and marketing frequently render prompt payment difficult if 
 not impossible, but it is also stated that when delays do occur, 
 many farmers fail to notify the company. The conclusion 
 reached is that interest payments are usually met the year 
 they fall due, payments on principal are seldom pressed for, 
 and renewal of the mortgage is made easy. 
 
 LONG TERM MORTGAGES. 
 
 "In fact the present system of payments seems designed 
 to render renewal necessary and debt perpetual. With the 
 final payment so large the borrower can seldom meet it out of 
 the current year's income. The mortgage is not only renewed; 
 the amount of the loan is very frequently increased. 
 
 "These features of our mortgage system are reprehensible. 
 The mortgage is not calculated to develop business habits nor 
 promptness. It is a document that places the farmer, from the 
 
beginning, in an impossible situation. It holds out to him 
 the prospect of confronting a payment which he can never hope 
 to meet. .Under the guise of a short term mortgage there 
 actually exists a system of long term mortgages, but with this 
 difference^ that the farmer is compelled to renew every five 
 years or lose his farm should he fail to meet the mortgage. 
 The system of long term mortgages with repayment on the 
 amortisation plan encourages promptness and does away 
 with that spectre of the final payment which, like the sword of 
 Damocles, hangs suspended over the farmer." 
 
 It is pointed out that the mortgages are numerous rather 
 than heavy. 
 
 WHY LOANS ARE SECURED. 
 
 The purposes for which loans on mortgage are granted may 
 be enumerated: 
 
 1. To consolidate past debts. 
 
 2. For machinery. In this matter there has been consid- 
 erable overstocking, due, as one farmer stated, to the "science 
 
 . of salesmanship." 
 
 3. For stock. 
 
 4. For building and general equipment. 
 
 5. To provide working capital. 
 
 6. To buy more land. 
 
 7. To "finance trips East" or similar purposes. 
 
 GRAIN .GROWERS ASSOCIATION ON LEGITIMATE USE OF LOANS. 
 
 A representative of the West Eagle Hills Grain Growers 
 Association placed before the commission the following state- 
 dient of the legitimate uses to which long term mortgage credit 
 .might be put: 
 
 "The purchase of stock of all kinds necessary for scientific 
 and correct farming, together with adequate stable accom- 
 modation for the same; the digging or drilling of wells to secure 
 a sufficient water supply, together with an equipment necessary, 
 such as small gasoline engine and pump jack for pumping 
 water where a large supply is necessary or a well is unusually 
 deep; fencing for pasturage or corral; tlie purchase of seed 
 grains that are of an earlier or more productive variety; to 
 redeem notes of the large machinery companies that are harass- 
 iing farmers so relentlessly at the present time; or for any 
 , other addition to the foregoing that would tend to save labour 
 and put the keeping and raising of stock and the production of 
 grain uppn more sound, satisfactory and scientific basis. It 
 should be assumed that mortgages under this head should be 
 limited to farms of one-half section in extent, which should have 
 , been resided upon and worked continuously during three years 
 previous to the application for mortgage." 
 
THE PROVINCE AND THE BANKS. 
 
 Regarding personal credit, as distinct from mortgage credit, 
 and which is furnished principally by merchants, dealers and 
 banks, ithe report says in part : 
 
 In appreciating the banking situation in this province it is 
 fair to consider not only the complaints against the banks, but, 
 as well, the services which they have rendered: 
 
 1. Services rendered by the banks : 
 
 (a) Jntil recently they have in general afforded an abund- 
 ance of credit; 
 
 (6) They have pushed out into the smaller places and 
 granted credit facilities when the amount of business 
 to be secured immediately did not yield a profit; 
 
 (c) They have exerted an educative influence upon the busi- 
 ness habits of the community and inculcated the 
 • virtue of promptness. 
 
 2. Complaints against the banks ; 
 
 (a) They have frequently sought to dominate the policy 
 
 of those businesses to which they have advanced 
 
 credit; 
 (6) They have sought rather to pay dividends and to 
 
 support expensive edifices than to afford credit to 
 
 customers at reasonable rates; 
 
 (c) They are not controlled within the province and in a 
 
 time of stress when credit facilities are most required, 
 the banks withdraw them from the western provinces; 
 
 (d) Their charges for transferring funds are unreasonably 
 
 high; 
 
 (e) The rate of interest on loans is minecessarily large; 
 (/) The interest allowed on deposits is too low. 
 
 (g) Their sympathies lie rather with the commercial than 
 with the agricultural class. 
 
 The diflSculty of securing bank credit in 1913 as compared 
 with other years and rates of interest ^re then discussed. The 
 practices of charging a minimum rate of $1 on small loans, 
 of deducting the interest from the loan when made and of 
 charging interest for days of grace when the loan is repaid 
 previously, come in for consideration and some criticism. 
 
 INDEBTEDNESS OF SASKATCHEWAN FARMEBS. 
 
 It is well nigh impossible to estimate with any degree of 
 accuracy the amount of the indebtedness of the farmers of this 
 province. The Commission gave every facility to implement 
 companies, loan companies and banks doing business within 
 the province to make an analysis of the credit extended to the 
 farmers and of their loans and deposits. 
 
WHAT FARMERS OWE. 
 
 There is no doubt that the largest factor in the indebtedness 
 of Saskatchewan fa mers is the amount which is due to mortgage 
 companies. A conservative estimate would place this in the 
 neighbourhood of $65,000,000. For the next largest amount 
 implement companies are responsible. We are certain from 
 evidence submitted confidentially to the commission by only a 
 limited number of branch offices that the total indebtedness of 
 farmers to merely six branch offices is $15,106,726,68. It is 
 not improbable that at present between $35,000,000 and 
 $40,000,000 is outstanding for machinery. The amount owing 
 on agreements of sale for land is very considerable. To one 
 company the farmers of this province owe $5,770,000 and to 
 another $3,622,920.45. The amount due for pre-emptions, 
 for horses, for store credit, lumber, bank credit and for mis- 
 cellaneous debts, together with that due for the purchase of 
 land is not less than $50,000,000. The farmers of Saskatchewan 
 are paying interest on at least $150,000,000. If this is the case 
 then their agricultural credit is costing them $12,000,000 an- 
 nually. The saving of only 1 per cent, in interest would 
 mean the saving to the farming industry of over $1,500,000 
 per year. If farmers could secure money at a rate as much as ■ 
 2 per cent, cheaper than at present they could, by making their 
 payments on the amortisation plan, discharge their total 
 indebtedness in about 24 years' time by simply continuing to 
 pay what they are now paying for interest. And this would 
 be abundantly worth while. 
 
 THE DEBT PER ACRE. 
 
 From the above estimate it can be clearly perceived that 
 •the average indebtedness of our farmers is, perhaps, $1,500. 
 The average farm of the province consists of about 295 acres. 
 Thus the indebtedness of the farmers is slightly in excess of 
 five dollars per acre of land under occupation at the present 
 time. The average farm has gathered about it assets in the 
 shape of buildings, stock, implements and grain. When we 
 remember that the province is in its infancy, that many of 
 our people came here with no other resources than resource- 
 fulness, strong determinations and the willingness to work, 
 and that they have met with energy and courage the problem 
 of planting a home in a new land, we can have no doubt that 
 our farmers are solvent, that their assets compare favourably 
 with their liabilities. But the thoughtful citizen will, never- 
 theless, regard the present situation as calling for serious 
 attention. 
 
 It is impossible in this synopsis to give any accbunt of 
 the methods which the commission found in existence elsewhere 
 for facilitating agricultural credit. Under this heading all of 
 the institutions for this purpose found in Germany, Italy, 
 Hungary, Austria, Denmark, France, Great Britain and 
 
Ireland are described and discussed, and those existing in India, 
 New Zealand and Australia, which could not be visited by 
 the Commission are also dealt with. 
 
 The observations of the Commission from investigations 
 in Europe are stated as follows : 
 
 GENERAL OBSERVATIONS FROM INVESTIGATIONS IN EUROPE. 
 
 1. 'There is in all European countries a frank and universal 
 recognition ,pf the supreme importance of agriculture as an 
 industry, as shown by : 
 
 (a) Government co-operation in: 
 
 1. Education; 
 
 2. Facilitating credit; 
 
 3. Promoting co-operative institutions for production 
 
 and distribution of products; 
 
 4. Supervision of processes; 
 
 5. Application of scientific knowledge, 
 
 (b) Sympathetic attitude of urban communities toward 
 
 agriculture. 
 
 (c) Active participation in agricultural affairs on the 
 
 part of public spirited citizens and national leaders 
 
 2. Co-operation in everything that affects agriculture has 
 advanced beyond the theoretical into the practical stage. 
 
 BENEFITS OF CO-OPERATION. 
 
 3. Co-operation has conferred enormous benefits upon the 
 rural communities of Europe by: 
 
 (a) Stimulating production; 
 
 (b) Increasing the area under production; 
 
 (c) Improving the price of products; 
 
 (d) Opening up markets; 
 
 (e) Cheapening, the cost of farm necessities; 
 (/) Reducing the expenses of transportation; 
 
 {g) Finishing the products of the soil on the farm; 
 
 (h) Use of live stock in the utilisation of roughages of the 
 
 farm and the return to the ^oil of natural manures; 
 (i) Putting farming on a business basis : 
 
 (1) By providing credit; 
 
 (2) By systematising business organisation: 
 
 (j) Stimulating scientific agriculture; 
 
8 
 
 (fc) Preventing frauds and deceptions in the purchase of 
 
 raw materials; 
 (0 Improving breeds of animals and plants: 
 
 (1) By community breeding and cow testing associa- 
 
 tions; 
 
 (2) Seed selection and distribution. 
 
 4. By organisation farmers have been able to provide a 
 security which has attracted loans at favourable rates. 
 
 5. Agricultural security h^s been based upon: 
 
 (a) Mortgage upon the amortisation scheme covering a 
 
 considerable period of time and at reasonable rates; 
 
 (b) Personal credit associated with 
 
 (1) Collateral; 
 
 (2) Indorsements. 
 
 6. By attracting local deposits to co-operative credit associa- 
 tions the resources of local communities have been made 
 available in the first instance for local purposes. 
 
 7. The securities based upon land credit have been in the 
 main less susceptible to the fluctuations of the money market 
 than other securities. 
 
 8. Though in various places the nominal rate of interest is as 
 low as 3 per cent., S}/2 per cent, and 4 per cent., yet the market 
 value of bonds is such that the present borrower is forced to 
 pay an actual rate considerably in excess of this. 
 
 9. A system of registration of Laiid Titles similar to the 
 Torrens System is of basic importance in securing agricultural 
 crediu. 
 
 10. Every effort is made to dispose of the bonds locally. 
 
 11. The face value of the bonds outstanding in no case 
 exceeds the net value of the mortgages held and frequently 
 withdrawal rights are inserted in the bonds. 
 
 AUSTRALIA. 
 
 The Government Agricultural Banks of Australia, patterned 
 largely after some European models, are described in a chapter, 
 of which the opening paragraphs are as follows: 
 
 "Agricultural banks, established, owned and operated by 
 governments are found today in various quarters of the world. 
 It cannot be denied that they have rendered substantial service 
 to the rural population of New iZealand and Australia. It is 
 as yet too early to estimate the usefulness of the one recently 
 established in the Philippine Islands. 
 
 "The Agricultural Banks of Western Australia, Queensland 
 and Tasmania, the Government Savings Bank of New South 
 Wales, the State Savings Bank of Victoria, the State Bank of 
 
South Australia and the State-Guaranteed Advances of New- 
 Zealand conform somewhat closely to one common type. The 
 deviations are due in a large measure to differences in the 
 wealth of the various communities and in the character of the 
 land system. In each case an advance fund is raised by the 
 issue of mortgage bonds or debentures guaranteed by the 
 government and the administration of this fund devolves upon 
 a small central board. The purposes for which advances are 
 made are similar, though not identical. The security demanded 
 is of the highest character, generally a first mortgage. In no 
 instance is more than two-thirds or three-fifths of the value 
 of the property offered as security granted, except only in the 
 case of South Australia, where a special advance may be made 
 when the land is under cultivation as a vineyard or an orchard. 
 Provision is usually made for the proper expenditure of ad- 
 vances. When they are not apphed to the purpose for which 
 they have been granted, or are expended in a careless or extrava- 
 gant manner, the central board is authorised to refuse to pay 
 further instalments of proposed advances and to call in the 
 whole amount already advanced. The repayments cover a 
 considerable term of years, as great as 363/^ years in New 
 Zealand and 42 years in South Australia and are made by 
 equal half-yearly instalments to cover principal and an interest 
 rate of about 5 per cent. Unpaid instalments and other moneys 
 due under the mortgage may be recovered in a court of 
 competent jurisdiction. The borrower is entitled to repay 
 the balance or any portion of the principal money with 
 accrued interest on any day appointed for a half-yearly pay- 
 ment." 
 
10 
 
 CHAPTER VIL^UMMAEY. 
 
 There seem to be three ways of establishing agricultural 
 credit ih the province upon a basis to provide money at a 
 reasonable rate: 
 Three methode (a) Strictly co-operative, t lat is to say, a Co-operative, 
 Credit' Association based upon: 
 
 1. Unlimited liability; or 
 
 2. Liability limited to a certain multiple of the share 
 
 capital or certain percentage in excess of the 
 obligations incurred. 
 (&) Strictly Governmental, that is to say, a provincial, bank 
 with land mortgage features or a provincial mortgage institu- 
 tion with bankihg features. 
 
 (c) Co-operative Credit Association with an initial govern- 
 ment guarantee adequate, and a supervision sufficient, 
 to establish, within a term of years, the independent 
 credit of the association. 
 In case any one of the three suggested plans were adopted 
 the Commission is of the opinion that three principles should 
 be laid down: 
 
 1. Loans should be provided to farmers only upon imques- 
 
 tioned security and for approved agricultural i pro- 
 ductive or improvement purposes only. 
 
 2. Provision should be made for repayment upon the 
 
 amortisation plan. 
 
 3. The aim should be to render a service to the borrower, 
 
 and not to secure profit to the institution. 
 
 WHAT IS INVOLVED IN EACH SCHEME. 
 
 (o) Strictly In case the strictly co-operative credit association were 
 
 established, this would necessitate : 
 
 (a) A series of local associations co iposed of individuals 
 grouped together on the principle of unlimited, 
 " multiple or additional liability. 
 
 (6) A federation of these local associations into a central 
 organisation to serve as a clearing house for the locals, 
 a supervisory body a id representative to the outside 
 world. 
 
 (c) The raising of money by: 
 
 1. Mortgage bonds to be sold upon their own merits 
 
 in the open markets of the world; 
 
 2. Deposits from members and nonmembers; 
 
 3. Share capital or fees from members. 
 
 (6) strictly In case a strictly governmental scheme were established 
 
 governmental ,, . , , •, , 
 
 this would necessitate — 
 
 (a) A centra] bank or mortgage institution. 
 
11 
 
 (&) Local branches established and controlled by the 
 central. 
 
 (c) The raising of money by — 
 
 1. Foundation capital provided by the govern- 
 
 ment; 
 
 2. Issue of mortgage bonds guaranteed by the 
 
 government; 
 
 3. Deposits by: 
 
 (a) Cover iment; 
 (6) Citizens. 
 
 In ease a co-operative credit association with at least an (cjCo-operatire 
 initial government guarantee and supervision were established, mentaT""' 
 this_would necessitate : 
 
 (a) A central commission for organisation and manage- 
 ment: 
 
 1. In the first instance to be appointed by the 
 
 government ; 
 
 2. To be replaced gradually and ultimately by 
 
 representatives of local associations. 
 
 (6) Local associations established on the principle of 
 collective liability: 
 
 1. Directly by central commission; 
 
 2. On local initiative, but with supervision and 
 
 consent of central commission. 
 
 (c) The raising of money by — 
 
 1. Bonds guaranteed by the government to be covered 
 
 by the first loans issued on mortgages; 
 
 2. Further issues of mortgage bonds guaranteed by 
 
 the goverimient till the credit of the association 
 is established; 
 
 3. Deposits. 
 
 ADVANTAGES AND DISADVANTAGES 
 
 The advantages of the strictly co-operative credit association (o) stHctiy 
 
 ^ co-operative 
 
 are: 
 
 (a) Self-government. 
 
 (b) It would not impair the credit of the provincial 
 
 government. 
 
 (c) It would be absolutely free to promote other co-opera- 
 
 tive activities. 
 
 The disadvantages of the strictly co-operative credit associa- 
 tion are: 
 
 (o) The difficulty of securing local organisations of suffi- 
 cient size and number in our as yet sparsely settled 
 province to establish the project upon an independent 
 footing. 
 
12 
 
 (Ii) strictly 
 gevernmental 
 
 (&) The time required: 
 
 1. To perfect the organisation. 
 
 2. To secure funds to provide any considerable 
 
 relief. 
 
 • (c) The difficulty of securing such a recognition in the 
 markets of the world as would secure funds at a 
 reasonable, rate. . 
 
 The advantages of a strictly governmental scheme are: 
 
 (a) Its recognition in money markets both at home and 
 abroad should be instant. 
 
 (&) It could be launched on an adequate scale without 
 unnecessary delay. 
 
 (c) It would give unquestioned security to attract deposits. 
 
 (d) It would supplement the present banking machinery 
 
 of the province by the addition of banks which pos- 
 sessed primarily provincial sympathies. 
 
 The disadvantages of a strictly governmental scheme are: 
 
 (a) The possibility of partisan political interference. 
 
 (&) The continuous impairment of the credit of the pro- 
 vincial government. 
 
 (c).It would fail to foster co-operative action between 
 farmers. 
 
 (?) cvopera- The advantages of a co-operative credit association with at 
 goverDmentai least an initial governmental guarantee and supervision are: 
 
 (a) Its recognition in money markets both at home and 
 abroad should be instant. / 
 
 (6) It would be launched on an adequate scale without 
 unnecessary delay. 
 
 (c) It would give unquestioned security to attract deposits; 
 
 (d) It would supplement the present banking machinery 
 
 of the province by the addition of banks which 
 possessed primarily provincial sympathies. 
 
 (e) It would stimulate the spirit of co-operation among 
 
 farmers. 
 
 The disadvantages are : 
 
 (a) The possibility of partisan political interference in the 
 
 early years of the association. 
 
 (b) The impairment of the credit of the Provincial Govern- 
 
 ment to a limited degree and for a limited time. 
 
 Investigations both at home and abroad have convinced 
 the Commission that a strictly independent co-operative credit 
 association is not under present conditions feasible. The 
 
13 
 
 other two schemes both involve the necessity for the present 
 at least: 
 
 (1) Of securing far the larger portion of the money required 
 
 from sources outside the province; 
 
 (2) Of active co-operation on the part of the government 
 
 of the province. 
 
 This province needs both a mortgage, business and a banking ^^""jjf, ,^ 
 business closely and intimately associated with the interests mortgage 
 of its people. The issue of mortgage bonds and the loaning of 
 money on mortgages, i.e., a mortgage business, is a distinct 
 type of business from the receiving of deposits and making 
 short time loans, i.e., a banking business. But if the machinery 
 of the mortgage business should be distinct and separate 
 from that of the banking business, the general policy of both 
 should be the same, to promote the interests of the borrower. 
 In Germany the Landschaften have overcome this difficulty 
 by establishing as a daughter but separate institution a bank to 
 transact the banking business for the Landschaften, to receive 
 deposits and to advance short time loans. The directors are 
 the same, the general policy identical, but the machinery has in 
 each case been adapted to the needs of the different tj^pes of 
 business. The difficulty, however, of launching two projects 
 successfully at one and the same time, helpful and necessary 
 as they may be, makes it advisable to establish the bank after 
 the mortgage institution. 
 
 At present provincial assistance would appear indispensable, ^g'g°^"*j^ 
 if service is to be promptly or adequately rendered. The task of required 
 inaugurating the whole scheme rightly devolves upon the pro- 
 vincial government. It should be prepared : 
 
 1. To pay expenses of organisation. 
 
 2. To provide certain guarantees for the mortgage asso- 
 
 ciation. 
 
 3. To render assistance in the establishment of the bank 
 
 at a later date. 
 
14 
 
 CHAPTEE VIII.— EXISTING ECONOMIC CONDI- 
 TIONS IN SASKATCHEWAN. 
 
 What Saskat^ 
 chet^an needs 
 
 Our depend- 
 ence on 
 transporta- 
 tion 
 
 Our 'relation to 
 
 the.tarifi 
 
 The situation in Saskatchewan merits the most serious 
 consideration. The conditions of our economic life, and 
 particularly of our agricultural economic life, cannot longer 
 pass unchallenged. In a large measure the springs of our 
 material progress must arise within the borders of our own 
 province. Hitherlo our fortunes have depended too largely upon 
 outsiders, who, naturally enough, have had their own interests 
 to serve. It is eight years since we became a province and in 
 that time we have accomplished much. We have laid the foun- 
 dation of many provincial institutions. But much remains. 
 We must at all hazards beget a provincial consciousness. We 
 must promote the cohesiveness of rural life in our midst. We 
 must in greater measure become masters of our fate and 
 authors of our own policies. To accomplish this we need to 
 co-operate and to apply ourselves to that type of agriculture 
 where co-operation counts most. More diversified farming 
 and better organisation for purchasing and distributing will 
 lead us far towards the solution we are seeking. To continue 
 selling grain in the lowest market and buying supplies in the 
 highest is only fatal. If the farmers unite, they can accomplish 
 in other spheres what they have achieved in the elevator 
 business — they can to a larger extent, regulate the conditions of 
 their own industry; and the result will not be simply econo- 
 mic. The benefits will extend to every department of our 
 moral, social and political life. 
 
 Up to the present wheat has been our chief product; and 
 wheat is a world product, with the price fixed at Liverpool, 
 where world forces operate. Every charge against this wheat 
 from local shipping points to Liverpool, or whatever may be its 
 ultimate destination, is not only subtracted from the farmer's 
 income, but is levied at points and under conditions over which 
 except for the operations of the farmers' co-operative companies 
 the farmer has absolutely no control. 
 
 Our geographical situation places Saskatchewan farmers at 
 the mercy of those who profit by transporting the wheat the 
 farmers have laboured to produce. We live in the heart of a 
 great continent, far from water transportation, so far, in fact 
 that our competitors in world markets have, without exception 
 a natural physical advantage which yields them a cash advan- 
 tage per bushel of from 6 to 8 cents. It is not denied that we 
 owe much, perhaps everything, to the building of railways. 
 It is only contended that the cost of transportation adds 
 enormously to the burdens that the farmers on the prairies 
 must under present conditions bear. 
 
 It is not our intention in this coimection to examine the 
 merits and defects of the Dominion tariff policy nor to investi- 
 gate its suitability to the country as a whole. It is not even 
 
15 
 
 ■urged that a policy which is Domimon wide in its scope could 
 possess the merit of special adaptation to the particular needs 
 of this province. At present only one point is insisted upon— 
 that tariff, as an actual fact, takes slight account of western 
 agriculture; and the tariff will continue to impose its load 
 upon the farmers, not because they desire it, but because our 
 fortunes are determined by those who live outside our borders. 
 
 What is true of transportation and the tariff is true as well of Onr credit 
 manufacturing, finance and banking. It is with the latter controlled 
 that we are at present concerned. With the exception of two or ^'"^ '""'Gut 
 three financial institutions only recently established, and as yet 
 too small to 'constitute an important exception, we have no 
 financial institutions of our own. We do not furnish directors 
 to the banks that operate in our midst. It is not in this 
 connection alleged that the banks and loan companies 
 have failed to provide credit facilities. It is not even 
 suggested that they have encouraged speculation by a too 
 mdiscriminate granting^ of credit. It is only contended that 
 we have had to depend upon the wisdom and sympathy of 
 Winnipeg, Toronto and Montreal. The time may be far 
 distant when this province will be independent of outside 
 sources of supply for the funds necessary for its development 
 and growth; but the time is already at hand to develop 
 financial institutions with local provincial sympathies. We 
 desire to supplement, not supplant, that which exists; for 
 it is easy in a time of stress for the Corinthian columns of the 
 metropolis to shut out from view the rude shacks of the prairie 
 farmer. 
 
 We have no need at this time to examine the whole economic lieiation of 
 environment of Saskatchewan agriculture. Still it has not Sat on g?aia 
 escaped us that in the solution of particular problems the task ™a'''"=tB 
 which confronts us is at once larger and more complex than 
 appears at first blush. In their essence the problems of our 
 rural life are intimately interrelated. No solution can come to 
 the question of agricultural credits which has not, at the same 
 time, arisen out of a serious study of general, and more par- 
 ticularly of market, problems. For this reason it is important 
 to point out that the Commission on Agricultural Credit 
 was associated with that on Grain Markets, and that in the 
 various centres of the province the general problems of grain 
 growing, mixed farming and marketing were investigated at 
 the same time as the question of Agricultural Credit. 
 
 Before endeavouring to indicate what may be at least a Economic- 
 partial solution to the economic difficulties that confront our 
 rural population, it will be helpful briefly to enumerate the 
 ^ore pressing among them: 
 
 1. The dependence of our economic life upon outsiders. 
 
 2. Our location in relation to the export market for our 
 principal farm products. 
 
 3. The lack of cohesiveness in our rural life. 
 
16 
 
 Baonomic 
 liroblbms 
 
 0«r policy 
 
 4.. Theprimitiveness of market arrangements for products 
 other than grain and dairy products. 
 
 5. The absence of concerted action in the sale of products 
 other than these. 
 
 6. The lack of even collective action in the purchase of 
 farm supplies. 
 
 7. Too exclusive devotion to grain growing. 
 
 8. A tendency towards extravagance, especially in the 
 purchase of implements, land and expensive sources 
 of power. 
 
 9. Relatively high rates of interest and short terms for 
 morbgage and personal loans. 
 
 10. The large amount of credit associated with the purchase 
 of agricultm-al implements and farm supplies. 
 
 11. The attractions in the past of real estate speculation in 
 urban communities. 
 
 12. The lack of social atmospherg in rural districts. 
 
 13. The enforced idleness during winter months in localities 
 where only grain is grown. 
 
 For much of this we have no remedy. We cannot alter the 
 facts of geography nor amend those handicaps which arise 
 from physical conditions. It is not possible to bring . this 
 province nearer to the Great Lakes, though much may be gained 
 from the route to Hudson Bay and something from the Panama 
 canal. The tariff, as such, is a matter for the whole Dominion. 
 We cannot, so long as we remain comparatively undeveloped, 
 build up those great reserves of funds which come from thrift 
 and which make cheap credit possible; but there is something 
 that can be achieved. . By concerted action and intelligent 
 marketing we can eliminate at least some transportation 
 charges, and we can outline a rural policy that will broaden 
 and deepen as the years pass by. That policy must be: While 
 seeking to encourage in every way trade and markets with other 
 provinces of the Dominion and countries of the world, and to 
 reduce to a minimum the costs of transportation and other charges, 
 before everything else to strive by every effort to foster such economic 
 relations within the province as will promote greater cohesiveness 
 of rural life, yield to the producer a larger share of the returns from 
 the products of his farm, while at the saw^ time cheapening the 
 costs of such products to the provincial consumer, and give to the 
 people of thi'S province a larger control over the conditions of their 
 own material' progress. 
 
17 
 
 CHAPTER IX.— THE SOLUTION IN THE LIGHT 
 OE EXISTING CONDITIONS. 
 
 The province is at the beginning of a new era. We have come ^ "«'' "'■ 
 in and possessed a goodly land — ^that has required enterprise 
 -and energy. Other virtues must henceforth be more largely 
 ■called into play. Individual effort has been its reward and it 
 has been abundant. Henceforth thrift and intelligent co- 
 operation will play a greater role than hitherto. In view of the 
 -changing conditions of our economic life, the Commission 
 believe that a solution of our problems must be sought along 
 "two lines, which after all do not greater differ : 
 
 1. The spread of co-operative effort, especially at present, 
 
 in the direction of selling and purchasing. 
 
 2. The fostering of financial institutions of our own, with 
 
 sympathies for our own problems and control by our 
 own people. 
 
 1 — CO-OPEEATION. 
 
 The need of our agricultural life is closer organisation. Co-opwatton 
 The farmer should be a cell in a rural organism. As it is, in 
 iiis relation to every other industry he stands as an individual 
 imit. He must accept low and give high prices because he 
 acts only for himself and by himself. Between himself and his 
 fellow farmers alone is there unrestricted competition, a 
 competition from which he can expect only to suffer. But 
 while agriculture is unorganised, every other industry is 
 highly organised. Whereas tradesman and dealers invariably 
 possess among themselves understandings and a common 
 policy, farmers have ever occupied too isolated a position 
 and too detached a relation to invite or reward competition on 
 the part of those who seek their trade. They do not act 
 together sufficiently to induce sellers to lower, or buj'ers to raise, 
 prices to secure a large block of business; and in this province 
 their too exclusive devotion to grain production has fostered 
 this aloofness from each other. The co-operative purchase of 
 binder twine and the achievements of the Co-operative Elevator Co-operatiTo 
 Company constitute splendid exceptions. But, with a larger nowT5lung 
 measure of mixed farming, and its attendant greater com- 
 pactness of settlement, the more uniform distribution of labour 
 throughout the year, the consequent development of markets 
 within the province itself, and the disappearance of the instinct 
 to stake the success of the whole farming industry on a single 
 throw for which exclusive grain growing is responsible, the 
 way would be clear for united action and for that success which 
 the operation of co-operative creameries so happily foreshadows. 
 At present the urban Saskatchewan consumer buys butter from 
 
Important 
 effects in 
 Burope 
 
 18 
 
 afar, and pays the cost of transportation, while at the same time 
 some rural Saskatchewan producers (unnecessarily, in view of 
 the government creamery policy) send as good or better butte'r 
 outside the province and lose the cost of transportation. 
 Co-operation in this matter and a dozen others would largely 
 eliminate this double charge for transportation, would increase 
 the profits of the producer,, decrease the cost to the consumer 
 a,nd tend to bind our population into an economic whole. 
 
 Agricultura,l co-operation has produced a rural rebirth in 
 Penmark, Germany, Italy, Ireland and other lands. These 
 countries have found the co-operative society rather than the 
 joint stock company suited to secure better prices for the sale 
 of produce and the advantages of wholesale purchase of agri- 
 cultural supplies. The reason is not far to seek. The profits 
 of the latter belong to the shareholder who may or may not give 
 his patronage to the company; but the profits of the former 
 belong to the purchaser according to, the extent of his dealings, 
 and furnish a constant incentive towards fostering the develop- 
 ment of the co-operative society. 
 
 Mmmarwad '^^^ chief advantages of co-operation as applied to agriculture 
 
 may be briefly summarised: 
 
 1. Economies due to handling goods on a large scale, both 
 
 in buying and selling. 
 
 2. The elimination of multitudes of nonproductive middle- 
 
 men. 
 
 3. Protection against adulteration and inferior articles and 
 
 implements. 
 
 4. A more intelligent study of market conditions and 
 
 arrangements. 
 
 5. Co-operation develops responsibility in private and 
 
 public life, makes for education in good citizenship, 
 and trains men to act with prudence. 
 
 6. Co-operation produces a more cohesive rural social 
 
 life. 
 
 In a powerful plea for the establishment of the rural com- 
 munity, George W. Russell, Editor of the Irish Homestead, 
 declared to the American Commission at the Plimkett House 
 Dublin,July 15, 1913: 
 
 "If this ideal of the organised rural community is accepted 
 there will be difficulties-, of course, and enemies to be encoun- 
 tered. The agricultural middleman is doubtless as powerful 
 aperson on the American continent as he is in this little island. 
 He will rage furiously— he will organise all his forces to keep 
 the farmers in subjection, and to retain his peculiar functions 
 of fleecing the farmer as producer and the general public as 
 consumers. Unless you are determined to eliminate the middle- 
 man in agriculture, you will fail to effect anything worth while 
 attempting. I would lay down certain fundamental proposi- 
 tions which, I think, should be accepted without reserve as a 
 
* 19 
 
 "basis of reform. First, that the farmers must be organised to 
 have complete control over all the business connected with 
 their industry. Dual control is intolerable. Agriculture will 
 never be in a satisfactory condition if the farmer is relegated 
 to the position of a manual worker on his land; if he is denied 
 the right of a manufacturer to buy the raw materials of his 
 industry on trade terms; if other people are to deal with his 
 raw materials, his milk, cream, fruit, vegetables, live stock, 
 grain and other produce; and if these capitalist middle agencies 
 are to manufacture the farmers' raw material into butter, 
 bacon, or w latever else; are to do all the marketing and export, 
 paying farmers what they please on the one hand and charging 
 the public as much as they can on the other hand. The 
 existence of these middle agencies is responsible for a large 
 proportion of the increased cost of living, which is the most 
 acute problem of modern industrial communities. They have 
 too much power over the farmer and are too expensive a 
 luxury for the consumer. It would be very unbusinesslike 
 ■ for any country to contemplate the permanence in national 
 life of a class whose personal interests are always leading them 
 to fleece both producer and consumer alike. So the first 
 fundamental idea for reformers to get into their minds is that Geo. w.Ruskh 
 farmers, through their own co-oper,ative organisations, must tion among 
 control the entire business connected with agriculture. There ^™''" 
 will not be so much objection to co-operative sale as to co-opera- 
 tive purchase by the farmers; but one is as necessary as the 
 other. You must bear in mind, what is too often forgotten, 
 that farmers are manufacturers, and as such are entitled to 
 buy the raw materials for their industry at wholesale prices. 
 Every other manufacturer in the world gets trade terms when 
 he buys. Those who buy, not to consume, but to manufacture 
 and sell again, get their requirements ^j wholesale terms in 
 every country in the world. If a publisher of Dooks .is 
 approached by a bookseller he gives that bookseller trade terms 
 because he buys to sell again. If you or I, as private individuals, 
 want one of those books we pay the full retail price. Even the 
 cobbler, the carpenter, the solitary artist get trade terms. 
 The farmer, who is as much a manufacturer as the shipbuilder, 
 or the factory proprietor, is as much entitled to trade terms 
 when he buys the raw material for his industry. His seeds, 
 fertilisers, ploughs, implements, cake, feeding stuffs are the 
 raw materials of his industry, which he uses to produce wheat, 
 beef, mutton, pork, or whatever else, and, in my opinion, there 
 should be no differentiation between the farmer when he buys 
 and any other manufacturer. Is it any wonder that agriculture 
 decays in countries where the farmers are expected to buy at 
 retail prices and sell at wholesale prices? You must not, to 
 save a row, sell the rights of farmers. The second proposition 
 I lay down is that this necessary organisation work among the 
 farmers must be carried on by an organising body which is 
 entirely controlled by tiose interested in agriculture — ^farmers 
 and their friends." 
 
20 " 
 
 2— THE FOSTERING OF FINANCIAL INSTITUTIONS OF 
 OUE OWN. 
 
 Featares of The following featuiBS are characteristic of financial institu- 
 
 fMtkStiona tions which at present exist within the province: 
 
 1. With two or three rniimportant exceptions they are not; 
 
 controlled within the province. 
 
 2. Being associations of lenders whose primary object is to- 
 
 secure profits, their interests in the final analysis are 
 different from those of the borrowers. 
 
 3. The extremely low rate of interest allowed on deposits^ 
 
 does not afford an inducement for people to save or to 
 invest. 
 
 4. The great bulk of the funds used within the province is 
 
 derived from sources outside the province. 
 
 5. The same institutions do aot furnish mortgage and 
 
 personal credit. 
 
 b™oTht*° '^^® following features should be characteristic of those 
 
 financial institutions, the primary object of which is public 
 service : 
 
 1. They should be controlled within the province. 
 
 2. They should seek to serve both borrowers and lenders 
 
 alike. Associations of borrowers grouped together to 
 furnish the most ample security and who stand collec- 
 tively liable, would have as their first duty to keep 
 the lenders safe and as their primary object to secure 
 credit cheaply. 
 
 3. Profits should be reduced to a minimum, only sufficient 
 
 to cover expenses of administration and to build 
 up the necessary reserve fund. 
 
 4. They should allow sufficient interest on deposits to 
 
 encourage thrift and to induce people to invest 
 safely. 
 
 5. Though for a considerable time in \he future the great 
 ^ bulk of the funds used within the province must be 
 
 derived from sources outside the province, they 
 should constantly aim to place the financial resources . 
 of our districts and our province, however meagre 
 to begin with, primarily at the services of these 
 districts and this province. 
 
 6. Though different institutions furnish mortgage and 
 
 personal credit they should operate harmoniously and , 
 sympathetically. 
 
 Security the To cmbody thcsc principles in an ins titution in this province 
 
 is not impossible if regard be had to existing conditions and,, 
 the laws of natural growth. In work of thi^ nature we must 
 hasten slowly, but we must hasten for even now debt is clinging 
 
21 
 
 like a millstone to the neck of many a homesteader and farmer 
 on the prairie. Those who expect the touch of Midas will be 
 disappointed. If we would build for the future we must 
 build wisely. In the world of finance the corner stone is ever 
 the same — security. The first and greatest commandment 
 must be to avoid risk. They greatly err, who, in their search 
 for cheap money, seek only London and the marts of the 
 world. The world of finance is like the Kingdom of Heaven. 
 The beginning is within and at home. The only basis for 
 cheap credit is the security that cannot be questioned. With- 
 out that the farmers of this province cannot secure money at 
 favourable rates; with that they can challenge the money 
 markets of the world. 
 
 To begin at the bottom. It is clear that the individual 
 farmer needs money to bring forth the productive qualities of 
 his land, but he cannot of himself offer a security that will 
 attract investors at home and abroad. He can, however, 
 become the unit cell of a vast system. He can go to his neigh- 
 bours and say, "At present the lender is in a position to dictate 
 terms to borrowers. This can be reversed if we only safeguard 
 the rights of the lender and recognise that the interests of 
 both borrower and lender are the same. Let us stand together 
 in this matter — let us be responsible for each other. The 
 property we pledge will be more than sufficient to discharge 
 the obligations we incur. But we must remember that we are 
 offering a commodity for sale — credit security, and tocoUeefcre 
 obtain what we desire we must offer a quahty that is unques-'^*'''''*^ 
 tioned. Should one of us fail, the rest must stand in the 
 breach. The very acceptance of a loan means the acceptance 
 of an obligation to meet the annual instalment of interest and 
 principal promptly. If we accept a loan of say $1,000 we 
 must be liable not only for that amount but also for an addi- 
 tional amount, say $500, to cover a contingent loss either 
 through the default of a fellow member or through any other 
 cause. Before this collective liability could operate to our 
 individual disadvantage, the assets of that member who was 
 responsible for the loss must first be taken. But as loan could 
 be, say only 40 per cent, of the valuation of his property 
 pledged, the probability of calling on us individually would 
 be very small. In any case we are safeguarded in two ways. 
 We shall admit to our group only those in whose integrity we 
 can place the most ample confidence; and we shall approve of 
 only those loans which we believe are for productive purposes 
 and are calculated to leave the. borrower in better shape after 
 he received the loan than he was in before." 
 
 Here is the nucleus of our system — a local group of members Propoawi 
 jointly and severally liable for each other's debt, and as a group, Ened"*" 
 in due proportion with other similar groups responsible for the 
 whole association. While those local groups are springing 
 into existence in various parts of the province and are waiting 
 to be approved and registered by a central commission, this 
 
22 
 
 ComiuissioD 
 
 Advisory 
 board 
 
 Features of 
 loans 
 
 PromptDesa 
 essential 
 
 commission should be at work organising, directing and in- 
 spiring. Though in the meantime appointed by the govern- 
 ment, which, as we shail see, in the early stages of this enter- 
 prise, has much at stake, it should ultimately be entirely chosen 
 by representatives of these local groups. As soon as adequate 
 machinery has been devised and some measure of success 
 attained, the government should proceed gradually to efface itself 
 and tg allow the institution to proceed upon practically an 
 independent career. 
 
 The centrar commission shoxild be the controlling force. It 
 should not be too large, else it will be cumbersome. It should 
 represent the locals but at the same time regulate their actions. 
 As it must represent the institution before the outside world, 
 and especially in the money markets, it shou d have the final 
 voice in the acceptance of all loans, having the power to veto 
 those approved by the locals but not the power to approve those 
 vetoed by the locals. To keep this central commission in close 
 and intimate sympathy with the whole rural constituency, there 
 should be brought into existence another and larger body whose 
 chief function should be advisory. Of this advisory board 
 a part should be chosen by the annual general meeting of the 
 association and the remainder might represent the Grain 
 Growers' Association, the Convention of Agricultural Societies, 
 the Union of Rural Municipalities, the Provincial Winter Fair 
 Board, the University of Saskatchewan, and, perhaps, in the 
 course of time, the agricultural co-operative societies of the 
 province. 
 
 Money should be raised by mortgage bonds, issued in small 
 denominations, payable to bearer, and bearing interest. They 
 should be issued not against individual properties but against 
 the total aggregate of properties pledged and to an amount 
 not exceeding the aggregate of the loans advanced. Loans 
 should be granted only for approved agricultural productive or 
 improvement purposes, and care should be taken, either by 
 recalling th& loan or in some other way, that the borrower 
 adheres to the purpose for which the loan is granted. It is, 
 of course, to be expected that neighbours, who are responsible 
 in the event of a fellow member's default, will keep a sharp 
 eye on his use of that for which they too are liable. The loans 
 should cover a period of years, say from fifteen to thirty-five, 
 and should be repaid in equal payments covering both interest 
 and principal. Provision should, however, be mide whereby 
 a borrower might repay at an earlier date if he felt so inclined. 
 
 The aim should be to render credit cheap, not to secure 
 profits. The borrower should be required to meet all legitimate 
 expenses and provide for the perpetuation of the association 
 by the creation of a reserve fund. The reserve fund should 
 increase indefinitely and serve as a guarantee against loss. 
 
 Individuals and locals should remember that promptness 
 is the quickest way to establish a reputation for security. 
 
23 
 
 Locals should, therefore, see that all obligations are met at 
 due date. As we have already indicated, this is accom- 
 plished in Germany in a rather, drastic manner. 
 
 Better credit facilities can be provided. We desire to 
 place the emphasis upon the word "better," for it is better 
 credit rather than more credit that the farmers of this province 
 need. Investigation indicates this clearly and the evidence 
 of the farmers themselves confirms it strongly. But to secure 
 that better credit it is not enough to assail existing institutions. 
 A constructive policy is essential. The conviction of the 
 Commission after careful study is that the sober-minded 
 farmers of this province realise thoroughly that the prime 
 requisite in a progressive and constructive programme that 
 will yield better credit is to provide security unquestioned 
 and indisputable; security that is adequate, and, one might Abundan 
 almost add, superfluous and unnecessary. But the thought- ^^^.'^^^^^y 
 ful farmer who has addressed himself to these problems knows 
 that in this matter no security should be regarded by the 
 borrower as superfluous and unnecessary. He understands 
 that it is just that precise factor in his security which his 
 neighbour styles "unnecessary," which will render his mort- 
 gage bonds readily saleable at reasonable rates. It is in this 
 way that from being a mendicant for credit he becomes a mer- 
 chant of security. The lender will seek him out, if the security ' 
 he offers is, as Caesar's wife should be, above suspicion; 
 and in the scheme which this Commission suggests the security 
 which the farmer will offer will be beyond reproach. Every 
 mortgage bond will be secured, even after the period of govern- 
 ment guarantee has expired, by the following provisions: 
 
 1. The aggregate of the bonds issued may not exceed the ?*f^^H"''= 
 
 total amount of the mortgages placed. posed mortgage 
 
 ' bonds 
 
 2. Mortgages will not be granted beyond a certain propor- 
 
 tion of the value of the land estimated with the 
 utmost care. 
 
 3. The amount of debt will be constantly reduced by 
 
 amortisation. 
 
 4. The restriction of the loan to productive or improve- 
 
 ment purposes will operate constantly to increase the 
 value of the security. 
 
 5. The total amount of a perpetually increasing reserve 
 
 fund, and all the property of the association, will 
 be liable for all claims. 
 
 6. In the final analysis the borrowers are collectively 
 
 liable to an amount 50 per cent, greater than the 
 total amount of their loans to meet the claims of 
 bondholders. 
 
24 
 
 ^^^^ Arising out of this sketcli of our projected co-operative 
 
 mortgage association, some difficulties immediately present 
 themselves: 
 
 1. Who is to bear the expense of organisation? 
 
 The Provincial Government may reasonably be 
 expected to bear the cost of initial organisation and, 
 as well, the salary,, during a period of say three years 
 of that commissioner whom it designates managing 
 commissioner. * 
 
 2. What is likely to be the farmer's attitude towards the 
 
 principle of collective liability? 
 
 This principle was thoroughly explained to the 
 farmers of the province at the meetings of the Com- 
 mission and was almost invariably heartily indorsed. 
 It is a much more favourable arrangement than the 
 ordinary partnership or the present system of store and 
 implement credit, under which the merchant or dealer 
 has to collect from those who pay the debts of those 
 who will fail to pay; and in the co-operative pur- 
 chase of binder twine it has already been tried with 
 marked success in many districts of the province. 
 
 3. Where is the money to be obtained? 
 
 (o) Sources within the Province. — In any scheme, that 
 seeks to be permanent, provision should be made for 
 an increasing use of local funds. By the sale of 
 interest bearing bonds within the province, the 
 resources of our own people are made available in 
 the first instance for our own local needs. A grow- 
 ing number vdll welcome the ppportunity to invest 
 in bonds that yield a higher rate of interest than 
 savings deposits, and at the same time are easily 
 negotiable within the province. 
 
 It is exceedingly difficult to form an accurate estimate of 
 the amounts that might be available for investment or even 
 for deposit within the province. At the present time, as the 
 following table indicates, only about one-third of 1 per cent, 
 of the balances in the Post Office Savings Bank of the Domin- 
 ion comes from Saskatchewan: 
 
 Saving^ bank STATEMENT OF BALANCES IN POST OFFICE SAVINGS BANK, 
 
 MONTH BY MONTH. 
 
 Canada Saskatchewan 
 1911 
 
 September $43,259,218 1123,378 
 
 October 43,159,291 123,307 
 
 November.... 43,051,991 118,666 
 
 December 43,022,772 119,526 
 
25 
 
 1912 
 
 January $42,962,553 $118,409 
 
 February..... 42,769,594 116,397 
 
 March 43,563,764 111,133 
 
 April 43,104,213 111,184 
 
 May 42,792,297 1 14,613 
 
 June 42,683,232 116,666 
 
 July. 42,696,793 121,366 
 
 August 42,726,347 127,271 
 
 September.... 42,661,908 132,928 
 
 October 42,406,934 130,914 
 
 November 42,174,667 122,666 
 
 December 42,034,988 117,879 
 
 1913 
 
 January 41,963,040 113,378 
 
 February 41,751,241 112,020 
 
 March 42,728,941 113,964 
 
 April 42,189,244 116,170 
 
 May 41,938,210 120,321 
 
 June 41,885,255 124,763 
 
 July 42,027,632 127,519 
 
 August 42,125,880 131,152 
 
 Information as to amounts on deposit in Saskatchewan was 
 supplied by the general managers of only two of the chartered 
 banks doing business in the province, and is therefore too 
 incomplete to be of any value. 
 
 (b) Sources outside the Province. — For a considerable time to 
 come the larger bijlk of the funds required must inevi- 
 tably come from sources outside the province. Until 
 the association has established its reputation it must 
 offer a security that is known to the investing public. 
 To begin with, it must be remembered, the association 
 possesses practically no assets, and, so far as the invest- 
 ing public abroad is concerned, no financial standing. 
 Large mortgage corporations which float mortgage 
 mortgage bonds abroad possess both. To serve in 
 their place the association must secure one or both 
 of the two following privileges: 
 
 1. The guarantee of the provincial government. Government 
 
 guarantee 
 
 This would be required only temporarily, till the "i"''«<i 
 association had established its reputation. Should 
 this be employed, as seems likely to be necessary, it 
 is proper that the amount of the government guaran- 
 teed bonds should be determined annually by agree- 
 ment between the government and the association. 
 
 2. The inclusion of these mortgage bonds in the British 'T"^"^**" '•=' 
 
 trustee list. 
 
 For the regulation of the investment of trust funds 
 the Lords Commissioners of the British Treasury 
 
26 
 
 have approved certain investments and laid down 
 certain conditions. The trustee list includes the 
 securities of the Overseas Dominions, India and 
 certain Crown colonies. 
 
 The following are the conditions: 
 
 1. The colony shall provide by legislation for the payment' 
 
 out of the revenues of the colony of any sums which 
 may become payable to stockholders under any judg- 
 ment, decree, rule or order of a court in the United 
 Kingdom. 
 
 2. The colony shall satisfy the Treasury that adequate 
 
 funds (as and when, required) will be made available 
 in the United Kingdom to meet any such judgment, 
 decree, rule or order. 
 
 3. The colonial government shall place on record a formal 
 
 expression of their opinion, that any colonial legis- 
 lation which appears to the Imperial Government 
 to alter any of the provisions affecting the stock to 
 the injury of the stockholders, or to involve a depar- 
 ture from the original contract in regard to stock, 
 would properly be disallowed. 
 
 The securities of the Dominion of Canada have access to 
 this list. So, also, have those of the various Australian States, 
 Natal, the Cape of Good Hope, New Zealand, Newfoundland 
 and India. The Australian States secured admission before 
 they were constituted a commonwealth, while they were still 
 individually in the colonial relation to Great Britain. This 
 privilege the Province of Saskatchewan never possessed. Nor 
 under clause 3 Can our securities qualify for admission, for our 
 constitutional arrangements do not contemplate bringing our 
 provincial legislation directly under the purview of the Imperial 
 Government. Yet the injustice of according our securities an 
 inferior status to those of Hong Kong seems evident. So far 
 representations have proved unavailing. 
 
 Mr. Henry Wolff, the eminent authority on co-operative 
 banking, writes: "Why should not colonial land bonds be 
 gladly accepted as good investments in Great Britain? It- 
 all depends upon the system upon which they are issued, and 
 the safeguards observed to make sure that they represent 
 good value. * * * Once land bonds could be made to find 
 a market in the old country — which it is only reasonable to 
 presume that they would— capital, which is, in the colonies, 
 largely wanted for purposes of development, might be attracted 
 in substantial sums from the United Kingdom. " 
 
 OTHER SOURCES. 
 
 bJndf ra* ^"'^ ^" ^^^ Continent.— The market for co-operative mort- 
 
 continent gage bouds Oil the continent at present must ,be 
 
 acknowledged to be problematical. Such bonds from 
 
27 
 
 Denmark do find a ready market in Germany and 
 are issued contemporaneously in Hamburg and Copen- 
 hagen. Saxon bonds sell throughout the German 
 Empire. But these are rather the exceptions. In some 
 cases the boast, in others the complaint, is that 
 these bonds sell at home where the security is best 
 known. It can reasonably be expected that the sale 
 of a Saskatchewan co-operative mortgage bond on 
 the continental market belongs rather to the future 
 than to the present. 
 
 (6) In Canada. — Apart from direct investment in mort- caSada" 
 gage bonds, which, it can be anticipated, if the rate 
 of interest be sufficient, will take place on an increas- 
 ing scale throughout the Dominion it may be well 
 to enumerate briefly the various funds, which, either 
 themselves or those corresponding to them, are in 
 ' other countries devoted to this purpose. 
 
 1. Post oflice savings funds. (August, 1913, $42,125,880.) 
 
 2. Proportion of profits accruing to banks as a result of 
 
 their privilege of issue. 
 
 3. Annuities funds. 
 
 4. Direct grant from national government. 
 
 5. Government savings bank funds. 
 
 4. How is personal credit to be 'provided? 
 
 Experience shows that mortgage business is dif- 
 ferent from banking business. But because the two 
 branches of business are distinct is no reason why 
 they should not be sympathetic. To secure this 
 sympathy two features should be embodied in their 
 relationship : 
 
 (a) Those who direct, the policy of one should direct the 
 policy of the ocher as well. The scheme of the inter- 
 locking directorates, which has operated to the 
 disadvantage of the public, can be made to work for 
 the public benefit. 
 
 (6) That policy should be in the interests of the borrowing 
 community. 
 
 It is expedient, therefore, that the co-operative mortgage Association 
 
 . ,. ,.,. ... /,, 111 should aim to 
 
 association, which is an association ot borrowers, should establish bank 
 itself establish a sister but independent institution to transact 
 a regular banking business. The majority stock of this bank 
 should be held by the mortgage association, and the balance 
 sold to agriculturists within the province. The provincial 
 government should at the time of the establishment of this 
 bank render such assistance as will enable the association to 
 control the bank in the interests of the agricultural industry. 
 
28 
 
 Bank's Tcla- 
 tloD to 
 aSBOciatioii 
 
 The bank should open branches in such centres as from a 
 banking point of view would be proper, and grant to locals 
 of the mortgage association lines of credit for personal loans to 
 its members. The officers of these locals should act as receiv- 
 ing agents for deposits for the bank, and, subject to the instruc- 
 tions of the bank, apply those deposits to personal loans up 
 to the limit of the line of credit granted to the local by the bank. 
 In this way the funds of every community would be available 
 in the first instance for the needs of that community and the 
 expense of transmitting funds would be reduced to a minimum. 
 The various public and semi-public institutions of the province 
 should be encouraged to transact their banking business with 
 this bank. The profits might be devoted to two objects : 
 
 (a) To spread the activities of the bank throughout the 
 province. 
 
 (6) After the bank is well established their proportion of 
 the profits should be handed over to the agriculturist 
 shareholders. The portion paid to the mortgage 
 association might be devoted to : 
 
 1. The building up of a reserve fund; 
 
 2. The paying of amortisation instalments 
 
 outstanding debts. 
 
 of 
 
 A natton- 
 
 »Me issue 
 
 Nor should it be forgotten that no small part of the function 
 of this bank should be to raise the rate of interest on deposits 
 and thus to secure to tho^e who have funds to deposit a more 
 reasonable return for their money. 
 
 5. Is the solution offered adequate or final? 
 
 The Commission would particularly insist that the solution 
 which it offers is a solution in the light of existing conditions, 
 one that is practicable and calculated to afford relief. The 
 system proposed possesses within itself elements of permanence 
 and a capacity for expansion and growth. But the Commission 
 would be lacking in candour did it fail to reiterate a conviction 
 to which it gave expression in the introduction to this report: 
 "Agricultural Credit is a problem which cannot be solved 
 by one borrower or one community and perhaps not even 
 satisfactorily by one province." This is a nation-wide issue 
 demanding a nation-wide policy. The adoption of Raiffeisen or 
 Schulze-Delitzsch or other neighbourhood societies may not be 
 immediately practicable, but these societies contain the germ 
 of a tremendous principle within their constitution, the principal 
 of local cohesion. Through them, local resources are allowed 
 to exert their fructifying influences. They stand upon a solid 
 basis of security, the security of mutua. confidence and control. 
 
 In Europe these neighbourhood banks are through central 
 organisations intimately associated with the banks of issue and 
 serve for them as a species of gauge or financial thermometer. 
 
I 29 
 
 More significance is attached to the resources and needs of the 
 local communities, thesecurity at the base, than to the arbitrary, 
 if honest, policy of the director at the top. In Canada we pride 
 ourselves on our centralised system of banking. In the face of 
 severest criticism it does not stand condemned. It has a 
 function to perform, and, on the whole, it has performed it Present baak- 
 fairly well. But it is not suited to the producing agriculturist. iSldTqilte 
 It is not calculated to respond to local needs and local sym- 
 pathies. 
 
 In Quebec co-operative banks have been introduced. But 
 conditions in Quebec are more like those in Europe than are 
 conditions in any other part of the Dominion. It will be long 
 before Saskatchewan resembles either Quebec or Europe. 
 And yet these neighbourhood banks established on co-operative 
 principles are the ultimate goal. They fmrnish the farmer the 
 ■open account. They place agriculture upon a business basis. 
 But they are possible only under two conditions: 
 
 1. When the funds of the neighbourhood tend to be sufficient 
 
 for the economic needs of that community. 
 
 2. When the resources of the local community are supple- 
 
 mented by resources put at the disposal of that 
 community by some strong central body. 
 
 In Europe this assistance comes from banks of issue, savings 2°^'^°° 
 banks or governmental sources. In our country this should 
 come from postal savings, the profits on note issues or the 
 Dominion government. It is a nation-wide issue, to supple- 
 ment, not to supplant our banking facilities in the interests of 
 agricultural credit. The solution offered by this Commission 
 is practicable. It will endure. But it does not solve the whole 
 question of rural finance. That is a problem for the whole 
 Dominion. 
 
30 
 
 CHAPTER X.-EECOMMENDATIONS. 
 
 Co-operation 
 should be 
 foaterad 
 
 Mortgage 
 association 
 ahould be 
 formed 
 
 Its constituent 
 parts 
 
 Central 
 commission 
 
 Advisory 
 board 
 
 Conditions of 
 membership 
 
 1. That, inasmuch as in the experience of older communi- 
 
 ties cheaper agricultural credit is invariably associated 
 intimately with other phases of agricultural co-opera- 
 tion, such additional legislation be 6nacted by the 
 Legislature and information and guidance provided 
 by the government as will further facilitate on the part 
 of the farmers of the province the establishment 
 upon a soimd basis of a system of local and central 
 rural co-operative societies for purchasing and selling 
 farm products and supplies. 
 
 2. That legislation be enacted to provide for the establish- 
 
 ment of a Co-operative Mortgage Association for 
 the raising of funds on mortgage bonds and the 
 granting of loans to farmers on mortgage security 
 for approved agricultural productive or improvement 
 purposes only; such legislation to embody the features, 
 hereinafter mentioned. 
 
 3. That the Association be known as the Saskatchewan 
 
 Co-operative Farm Mortgage Association and consist 
 of a central commission, an advisory board, local 
 associations, individual members and an annual 
 general meeting. 
 
 4. That the central commission consist of at least three 
 
 members clothed with the necessary authority as the 
 executive body of the association; 
 
 (a) At the outset the government to appoint all 
 members : 
 
 (6) One of the members to devote his whole time 
 to the work of the association as managing 
 commissioner and to be the only salaried 
 member of the commission; 
 
 (c) As the association acquires financial standing, 
 and is able to dispense with the provincial 
 guarantee in the marketing of its securities,, 
 the selection of c6mmissioners to be gradu- 
 ally transferred to the association acting 
 through its annual general meeting. 
 
 5. That an advisory board of fifteen members be created 
 
 to act in an advisory capacity in relation to the 
 commission; the members to be appointed part by the 
 association acting through its annual general meeting, 
 and the remainder by such organisations and institu- 
 tions in the province as exist to promote agricultural 
 betterment. 
 
 6. That the individual members be borrowers admitted 
 
 by vote of the local association into its membership. 
 
31 
 
 approved mutually and by the central commission 
 and who have paid the initial entrance fee of $10. 
 
 7. That each local association consist of ait least ten J;°°'^?!f°''''" 
 
 - , - HOD OOW 
 
 members with a combmed mortgage loan of at least f®™«^ 
 15,000, united on the basis of joint and several liability, 
 formed by mutual consent and with each member 
 approved by the isentral commission. 
 
 8. That the armiial general meeting consist of representa-g^^"^^ 
 
 tives, one from each local association. meeting 
 
 9. That the first general meeting be not summoned and ^^oned 
 
 loans to individuals be not made until at least twenty- 
 five local associations have been formed as provided 
 in section seven by the central commission. 
 
 10. That the liability of the individual member, whether j^|,^^"' 
 as member of the local association or as member of the 
 Saskatchewan Co-operative Farm Mortgage Associa- 
 tion, in respect of any obligation incurred or losses 
 suffered or in any other respect whatever, be limited 
 
 to an amount not more than fifty per cent, greater 
 than the amoimt of his loan. 
 
 11. That the liability of the, several local associations ,^«^'j''25yj°|^ 
 to the Saskatchewan Co-operative Farm Mortgage *'<>» 
 Association be in the ratio of the aggregates of the 
 mortgage loans of the members composing such 
 associations. 
 
 12. That all mortgage loans be issued on an amortisation J^"""?""^ 
 
 • 1 c 1 1 r- r- 1 amort satroD 
 
 basis to cover a period of not less than fifteen, and plan 
 not more than thirty-five years, with the option 
 reserved to the borrower, upon three months' notice 
 being given or a bonus of three months' interest being 
 paid, of paying the whole or any part of the balance 
 due in excess of the stipulated payment on any regular 
 day of payment before the final; always provided 
 that payments in excess of the regular payment 
 shall not release the borrower from his obligation 
 to meet promptly his subsequent consecutive annual 
 payments until the amount of his indebtedness has 
 been discharged. 
 
 13. That the funds required by the association for loans Seo^«'e 
 to its members be raised on mortgage bonds issued 
 
 by the association and fully guaranteed by the 
 provincial government, the amount of such government 
 guaranteed bonds to be determined annually by agree- 
 ment between the provincial government and the 
 association. 
 
 14. That the association advance its funds to the borrower j^f'e^e^t'. n„ 
 at a rate of interest which will include only the costp™^'' 
 
 to the association of the money itself, the expenses 
 of administration and provision for the creation of a 
 
32 
 
 Limit of 
 loans 
 
 Government 
 grant for 
 organisation 
 
 Bank for 
 personal 
 credit 
 
 Land titles 
 fees 
 
 Trustee list 
 
 Training 
 aocountants 
 
 reserve fund to provide such security and guarantee 
 for the future issue of mortgage bonds as will in the 
 course of time render government guarantees unneces- 
 sary and place the association upon a purely self- 
 supporting basis. • 
 
 15. That loans be limited to 40 per cent, of the central 
 commission's valuation of the property to be mort- 
 gaged. 
 
 16. That the provincial government make a grant of not 
 less than $10,000 towards the expense of organising 
 the Saskatchewan Co-operative Farm Mortgage 
 Association and also pay the salary of the managing 
 commissioner for at least three years. 
 
 17. That the Saskatchewan Co-operative Farm Mortgage 
 Association establish as soon after its foundation as is 
 feasible a bank with headquarters within the province 
 to conduct a regular banking business both through 
 branches of its own and, wherever possible, with and 
 through the locals and officers of the association: 
 
 (a) Such assistance to be rendered by the pro- 
 vincial government at the time of the estab- 
 lishment of such bank as will enable the 
 Saskatchewan Co-operative Farm Mortgage 
 Association to control it in the interests of 
 the agricultural industry. 
 
 18. That the schedule of land titles fees be so revised that,, 
 while not yielding any less revenue to the provincial 
 treasury or causing specific services to be performed 
 at a loss, they shall bear less heavily upon the home- 
 steader whose land is incimibered at the time of the- 
 issuance of the patent therefor. 
 
 19. That the representations which for some time past 
 have been made by the government be continiled 
 through the proper channels to the Lords Commis- 
 sioners of the British Treasury to include the securities- 
 of the Province of Saskatchewan and securities- 
 guaranteed by the provincial government in the 
 British trustee list. 
 
 20. That the provincial university be asked to furnish 
 either by regular classes or through its extension 
 department or otherwise such instruction as will 
 provide a knowledge of accounting methods and 
 disseminate' throughout the proyince an adequate 
 acquaintance with co-operative principles. 
 
 All of which is respectfully submitted. 
 
 J. H. Haslam, Chairman. 
 Chas. a. Dunning, 
 Edmund H. Oliver.