by Denis Smith
In the Montreal Gazette, financial editor John Meyer lamented that a government had demanded a central bank governor’s resignation “in such loud and insistent tone … It is a complete negation of all that a central bank stands for in matters of monetary integrity. A more sophisticated cabinet would have recognized this.”118
On June 20 – which was also budget day – cabinet agreed to a simple, one-sentence bill that read: “The office of Governor of the Bank of Canada shall be deemed to have become vacant immediately upon the coming into force of this act.” The dismissal bill was introduced on June 23 and adopted after four days of debate in the House on July 7. Apparently without prior thought, Fleming refused the opposition’s request that the bill should be referred to the House committee on banking and commerce, where Coyne might be called as a witness.119 But cabinet considered the issue again on June 30, and agreed that Coyne should not, in Fleming’s words, be given “a forum to propagate his groundless political attacks against the government and play his publicity game.”120 That decision gave Coyne another issue. He was being impeached and tried by parliament without the opportunity for a formal hearing.
The Liberal opposition took full advantage of the government’s disarray. Pearson excoriated the ministry for its failures of economic policy and its inability to manage relations with the governor. Yet he disagreed with many of Coyne’s prescriptions, conceded that Coyne’s usefulness had been destroyed, and recognized that his resignation was now necessary. Paul Martin and Jack Pickersgill went further in their invective, and were matched in return by Marcel Lambert, Dick Bell, and David Walker on the Conservative side. Members of the government suspected, and charged, that Coyne’s continuing flow of statements and documents was being produced in collusion with the Liberal Party – in particular, through the intermediacy of Coyne’s friend Jack Pickersgill. Pickersgill made an ambiguous denial, which added another theme to the tangled public discussion: Was Coyne in league with the opposition? The claim fitted Diefenbaker’s endemic suspicion that his opponents and challengers were united in a single camp. Coyne seemed to be his own man, but in this confrontation he was open to tactical suggestion and aid from the official opposition. In particular, once he was denied a hearing in the House, the opposition arranged for one in the Senate, where there was still a Liberal majority.121
The governor of the bank was now engaged in guerrilla warfare against the government, his weapons a daily stream of statements and confidential documents responding to the minister’s arguments.122 In defending his charge that Coyne’s policies had been incompatible with government policy, Fleming had retreated to the claim that once, in 1957, there had been a disagreement over the bank’s rules on the liquidity ratios of the commercial banks. Coyne revealed that the banks had agreed with him and not with the minister – and that Fleming himself had subsequently changed his mind. Coyne defended his fresh breaches of confidence on the ground that he had been denied the means of making his case before a parliamentary committee. While members of the opposition could not endorse the governor’s open conflict with the government, they seized – appropriately – on his right to a fair hearing before dismissal. That was the prime minister’s Achilles heel.
John Diefenbaker had remained undecided about participating in the debate until third reading of the dismissal bill on July 5, apparently content to see his bulldog colleague carry the fight. Fleming was, after all, the minister responsible for the affair, so it was prudent to let him take the political wounds. He was a doughty fighter who could be relied upon, and he had a better understanding of the technical issues than the prime minister. But Pearson successfully shifted the ground that day.
In the first place the governor of the bank has said he has never refused to co-operate with the government … If the governor says he has co-operated, and the minister says he has not co-operated, surely the only issue is that in a dispute of that kind, before the governor resigns – and if his usefulness is destroyed by the government, naturally he has to resign – he is entitled to his day in court. That is the issue. By “court” I mean an appearance before a committee of the House of Commons which is being asked by legislation to throw him out of his job. Could there be any more simple and elementary issue than that?123
Frank Howard of the CCF made the same point in less temperate language. He accused the minister of making statements of fact, “or what he claims are facts … interlaced … with some fiction, some imagination and hallucination,” and then, when those facts were questioned, of insisting on his parliamentary right to have them accepted as true. “But Mr. Coyne does not have an opportunity to present his point of view to the people who are being asked to fire him, and to be examined on that point of view, as has the Minister of Finance.”124
When the bill went to third reading the same day, Pearson intensified the attack:
The issue is one of simply the fundamental right of justice and fair play, the right of a Canadian to be heard before condemnation and to be heard before the body which is condemning them. It is a right enshrined in that clause of the bill of rights which says that no Canadian act of parliament – and we are dealing with a Canadian act of parliament – no Canadian order or rule or regulation or law, shall be construed or applied so as to deprive a person of the right to a fair hearing in accordance with the principles of fundamental justice for the determination of his rights and obligations. By a “hearing” surely is not meant … the right, in default of a hearing before a court or tribunal, to write letters. So I ask the government this question: How dare it violate this right … a government which so often boasts about its devotion to this same bill of rights.125
For Paul Martin and H.W. Herridge, Coyne was being accused and deprived of his rights by bill of attainder, the ancient means of trial in parliament for high crimes. Yet parliamentary practice was meant to assure that the accused could “defend themselves by counsel and witnesses before both houses.”126
Diefenbaker, challenged by these claims that his own Bill of Rights had been ignored, rose angrily in self-defence. He was surprised, he said, to find “those who ridiculed, those who condemned” the bill were now its proponents. He recalled an obscure charge he had made against J.W. Pickersgill during the 1953 election campaign, which aroused Pickersgill’s fury and a cry of “McCarthyism” against the prime minister.127
Briefly Diefenbaker turned his attack on other Liberal ministers “who in 1945 and 1946 and 1947 destroyed the rights of individuals in this country by order in council,” and then he turned back to Pickersgill. One of Coyne’s recent letters, Diefenbaker said, had referred to someone “in whom he places reliance.” He glared at Pickersgill. “I look at that individual now and wonder whether I behold in fact the person who dictated certain portions of those letters.” Diefenbaker timed the accusation just as the Speaker called for the day’s adjournment; but after an appeal to the House, Pickersgill denied the prime minister’s charge. As the Speaker rose to adjourn, Paul Hellyer had the last word: “The Prime Minister plunged to new depths this afternoon.”128
Coyne responded the next day with a renewed call to be heard by a parliamentary committee, where he could present and be questioned about his complete record as governor. One paragraph of his statement referred to the prime minister:
Mr. Diefenbaker’s contribution to this debate was to charge that my letters and statements were “dictated” by Mr. J.W. Pickersgill, M.P. Mr. Diefenbaker has been the evil genius behind this whole matter. It was his unbridled malice and vindictiveness which seized on the Bank of Canada’s pension fund provisions with respect to the Governor and Deputy Governor as a clever stick with which to beat me, and intimidate me. If he had succeeded in getting me to resign meekly under such a threat, he would then have launched a smear campaign against me, which would have been represented as all the more damning because I had meekly resigned and admitted my error and guilt. Mr. Diefenbaker boasted about this in advance to some close friends. One of these was not so close as he
thought.129
When debate resumed the next day, Diefenbaker returned to the attack in calmer but still deadly tones. He would not respond to “bitter personal attacks far beyond the realm of criticism ordinarily accepted and necessary for our parliamentary system. I have never answered personal attacks.” And yet, “the last two epistles sent out from the ivory tower, irresponsible and intemperate, sent out on the letterheads and in envelopes belonging to the Bank of Canada and delivered by a personal messenger of the bank, make one wonder.”
“Shame,” cried some members.
“Sir,” the prime minister continued, “these letters reveal an attitude which, if accepted by the government, would result in two sovereignties in Canada, the government of Canada and the governor of the Bank of Canada; but not in that order. They would set up a rival government.”130 This somewhat enlarged the case against Mr Coyne.
Diefenbaker turned to a 1953 speech by Jack Pickersgill, a “delightful dissertation” on the relations of public servants to politicians (followed by thanks from a certain J.E. Coyne) in which Pickersgill had declared that “one way to put it is that civil servants, like children, should be seen and not heard.” But now, the prime minister insisted, “the government is challenged, and the sovereignty of parliament is challenged.” He found defence in statements about the bank from 1934 and 1936 by Mackenzie King and his minister of finance, and he threw back at Mike Pearson his own words that the governor’s usefulness had been destroyed.
Had Mr Coyne’s rights been infringed? Was the government neglecting the guarantees in its own bill of rights? That was “utter hypocrisy.” Parliament was sovereign; parliament was the source of rights. The opposition’s claims were simply the result of misunderstanding the distinction between parliament and the courts. The courts determined the rights and obligations of individuals under the law, but parliament made the law and it could change that law. “There is no inviolable right,” he declared, “to continue to the end of any term in any position that comes under parliament.”
Any rights in the case of the governor of the Bank of Canada exist by virtue of an act of parliament … there is nothing in the bill of rights to suggest that there is any limitation on the power of parliament to change or repeal a law enacted by parliament. The tenure of office of the governor has been created by that act, and I underline and emphasize this fact.
…If there is any right, which there is not, I would refer the matter to the committee.131
Diefenbaker denied that Coyne’s integrity could have been impugned by criticizing the increase in his pension. “The governor,” he suggested, “had the right of veto in that matter. Is it impugning a man’s integrity to say that he sat, knew, listened and took? Where is the impugning of integrity there?…The number of letters I am receiving on this question indicates that the people are beginning to think that these vast, swollen pensions deserve to be looked into.” Coyne had hidden his pension from the government. But an ex-prime minister, Louis St Laurent, had a pension of less than $3000 a year.
How many people in public life receive a pension of that size? I have been in public life longer than Mr. Coyne. When I retire, no matter how many years from now it may be, I will be in the same position as Mr. St. Laurent.
Mr. Pearson: Oh, that is the reason…
Mr. Diefenbaker: That is true. I am glad the hon. member mentioned that, because he has given years of devoted service and I am prepared to admit it. I ask him not to answer this question. Does the hon. member think $25,000 a year is a fair pension?132
Diefenbaker’s advocate Judith Robinson wrote in the Toronto Telegram that “being called an evil genius and vindictive and a menace by a disturbed public servant” brought out the best in John Diefenbaker: “It broadens his sympathy and makes him less prone to count petty scores with enjoyment.”133 But that was not a universal opinion. No members of the government other than the prime minister and the minister of finance took part in debate on third reading, and most members of the House seemed dismayed by the proceedings. The Coyne affair was a stinking, soiled rag to be held at arm’s length until it could be safely dropped. The CCF member for Port Arthur, Douglas Fisher, closed the debate with some philosophic reflections about what had been going on. The prime minister, he conceded, had “made the kind of speech that impresses people and moves them along a certain line with him, persuading his listeners that somehow this parliament had a case and that somehow the governor of the Bank of Canada had got in the way and was impeding the whole role of the elected representatives as reflected in this parliament.” But Fisher wondered. “There is a great deal of misunderstanding or, if you wish, nonsense talked about the responsibility of parliament and the supremacy of parliament. What is supreme in this particular parliament or in any Canadian parliament? Is it the Prime Minister? It seems to be that this is what it is.” Fisher suggested a general election, in which Canadians could decide once and for all whether they “want to go on with a government that is so incompetent and so much given to procrastination.” The day would come. For the moment, the government applied its majority to pass the bill by a vote of 129 to 37.134
Now the legislation passed to the Senate, where the Liberal majority had promised that Coyne would be given his chance to testify before the banking and finance committee. On Monday morning, July 10, James Coyne was called to the committee, where he testified for three full days in a crowded committee room reeking of cigars and perspiration. “Sitting through the emotional events on Parliament Hill,” reported Walter Gray in the Globe and Mail on July 13, “was as trying as five consecutive Joan Crawford movies.”135 From the Parliament Buildings, after his final words, Coyne strode down Wellington Street and into the Bank of Canada, where four hundred employees presented him with a commemorative gold medal, inscribed “for his courage and integrity in defending the position of Governor of the Bank of Canada, June and July, 1961.”136
Diefenbaker remained uncertain about the outcome. When two Conservative members of the Senate committee called him that afternoon to suggest that the dismissal bill should be dropped if Coyne would resign, the prime minister rejected the idea. “That cannot be accepted,” he noted, “because then, if the matter were dropped, he would withdraw his resignation and we would be left high and dry.”137
Next morning the committee voted on party lines, by sixteen votes to six, to report that the bill “should not be further proceeded with, and the committee feels that the Governor of the Bank of Canada did not misconduct himself in office.” The Senate accepted the report, and the bill was dead. On the afternoon of July 14 James Coyne issued one final press statement to announce that he had resigned his office.
This decision by the Senate, this verdict both by the Committee and by the full Senate, I regard as a vindication of my own conduct, of my personal honour and of the integrity of the position of Governor of the Bank of Canada as established by Act of Parliament. It is my earnest hope that the result of these proceedings will constitute a precedent which will deter any Government in future from adopting methods designed to remove any person from high offices established by Parliament to be held during good behaviour such as the methods which have been attempted in the present case.138
At 6:21 pm Coyne, with his wife at his side, left the Bank of Canada by the front door through a crowd of bank employees. He kept his pension.
Cabinet had no difficulty in agreeing that Coyne’s successor should be Louis Rasminsky, but for several days it also insisted that three other officials of the bank, including deputy governor Robert Beattie, should be dismissed for supporting Coyne. Rasminsky refused to accept such a dictation of terms, and ministers withdrew the demand rather than lose him. Rasminsky took office at Coyne’s $50,000 salary, on agreement that the contentious pension by-law would not apply to him. On July 31 he issued a statement outlining his understanding of the governor’s relationship to the government. While the bank required a “degree of independence and responsibility” to regulate credit and currency,
he recognized that if there should be persistent conflict between the central bank and the government over monetary policy, the ministry should be able to instruct the bank about the policy it wished to be applied. If the governor could not conscientiously carry out such instructions, “his duty would be to resign and to make way for someone who took a different view.”139
That was satisfaction for the cabinet, at a price. The government had suffered profound and self-inflicted wounds. The Toronto Star called for the minister of finance’s resignation, and Ottawa gossip reached the newspapers that the prime minister hoped to counter criticism by moving Donald Fleming out of Finance.140
ON JULY 13 AN EXHAUSTED PARLIAMENT TOOK RECESS FOR THE SUMMER, MUCH OF its legislative business incomplete. Diefenbaker was glad to escape Ottawa briefly for a visit to Uranium City, Yellowknife, Fort Simpson, Whitehorse, and the new Inuvik townsite on the Arctic coast. He had with him his new executive assistant, John Fisher, the celebrated broadcaster who was known for his enthusiasms as “Mr Canada.” He had joined the prime minister’s office in April. Fisher brought fresh energy and his gift for words to Diefenbaker’s aid. “He has been most helpful and prepared draft speeches for me,” Diefenbaker wrote, although “I never follow too closely … But they are helpful. They constitute a kind of insurance.”141
The Conservative Party had been trailing the Liberals in the opinion polls since the fall of 1960, but the minor parties were also showing gains. The public indicated increasing difficulty in distinguishing between the two major parties. On May 29 four by-elections in Prince Edward Island, New Brunswick, Ontario, and British Columbia, in seats won by the Conservatives in 1958, returned three Tories and one Liberal. Conservatives were encouraged, especially in Esquimalt-Saanich, where Social Credit and the New Party had split the vote four ways and given them a narrow victory in George Pearkes’s old riding.142 As Conservative fortunes declined, the prospect of a splintered vote looked increasingly attractive as a means of holding power against the Liberal opposition.