This legislative restriction, together with the banks’ reluctance to make loans of long duration, gave rise to a great many difficulties and complaints. Farmers, fisherman and small business men who required implements, equipment and machinery, could not readily borrow the necessary funds from the banks, since they would only be able to repay the loans out of several years’ earnings. Homeowners who wished to carry out major repairs to their homes could not borrow the necessary money from banks, since they could only undertake to repay the loans over a period of years.
Parliament in recent years has passed legislation designed to remedy these specific deficiencies. By offering to share part of the losses which a bank might incur in making such loans, the government has encouraged the banks to lend money to farmers and fishermen for the purchase of implements and equipment, and to homeowners for the repair of their homes. The banks have been authorized, furthermore, to extend loans to farmers and fishermen on the security of property. In 1944 the government established the Industrial Development Bank as an agency which would lend money to small businessmen on longe terms than could be obtained from the regular commercial banks.
Legislation introduced in 1954 authorized Canada’s banks to extend loans toward the construction of houses and apartment buildings. The reason for this new departure was the government’s fear that the main sources of funds for such purposes, the life insurance companies would soon be unable to supply all the money required. The possibility existed, therefore, that home construction might be curtailed because builders would not be able to borrow enough money. With the banks authorized to lend for home construction, a major new source of funds would be available to builders. So far as the banks were concerned the loans would be virtually, risk-free, being guaranteed to the extent of approximately 98 percent by the Federal Government’s Central Mortgage and Housing Corporation.
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