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78 The chartered banks were alarmed by the rate because they were limited by statute to a maximum 6 percent rate on their commercial loans. Donald Fleming to JGD, August 10, 1959, JGDP, VI/75/231, 66060-61
79 Telegram, Norman R. Whittall to JGD, August 13, 1959; Norman R. Whittall to JGD, August 13, 1959, ibid., 66063-67
80 Gowan Guest to Donald Fleming, August 15, 1959, ibid., 66073
81 Leslie M. Frost to JGD, August 20, 1959, ibid., 66054-56
82 Fleming, Near 2, 304-05
83 J.E. Coyne, Memorandum: “Speeches,” nd, 1961, JGDP, XII/56/C/118.2; Fleming, Near 2, 305
84 CAR 1960, 9-10
85 Globe and Mail, March 23, 1960
86 Fleming, Near 2, 305-08; CAR 1960, 69-70
87 W.E. Rowe to Donald M. Fleming, December 1, 1960, copied to JGD, JGDP, VII/70/A/575.1
88 The royal commission was chaired by Hon. Dana Porter, chief justice of Ontario, and reported after the Conservative government had lost power in 1963. Among other things, it recommended legislative redefinition of the relationship between the bank and the government, one later adopted by the Pearson government. Fleming lamented in his memoirs: “Had we had such legislation in effect in 1960 and 1961 the so-called Coyne affair would never have arisen.” CC, 149-60, December 6, 1960; Fleming, Near 2, 290-91
89 At its meeting on November 21, 1960, the board of directors gave its unanimous support for Coyne’s Calgary speech of October 5. “Living within our means by expanding our means to live better,” and his Toronto speech of November 14: “Foreign debt and unemployment.” J.E. Coyne, Memorandum: “Speeches,” nd, 1961, JGDP, XII/56/C/118.2
90 J.E. Coyne, “Living within Our Means by Expanding Our Means to Live Better,” a speech to the Annual Meeting of the Canadian Chamber of Commerce, October 5, 1960, JGDP, VII/70/A/575.1
91 Fleming, Near 2, 308-09
92 J.E. Coyne, Memorandum: “Speeches,” nd, 1961, JGDP, XII/56/C/118.2
93 Quoted in the Vancouver Sun, March 23, 1961
94 Debates, March 15, 1961, 3014, also quoted in Fleming, Near 2, 310-11
95 Fleming, Near 2, 312-13
96 Ibid., 313
97 Ibid., 313-14
98 CC, 35-61, March 23, 1961; Fleming, Near 2, 314
99 Fleming, Near 2, 314-15; CC, 35-61, March 23, 1961
100 Fleming, Near 2, 315-19; CC, 37-61, March 30, 1961
101 Fleming, Near 2, 318; CC, 37-61, March 30, 1961
102 Donald Fleming to JGD, handwritten note, March 30, 1961, JGDP, XII/56/C/118.2
103 Fleming, Near 2, 319; CC, 47-61, 48-61, April 28, May 1, 1961
104 Fleming, Near 2, 319-20; CC, 60-61, May 27, 1961
105 Fleming, Near 2, 320
106 Ibid., 320
107 Ibid., 320-21; CC, 64-61, June 8, 1961
108 Fleming, Near 2, 322-23
109 J.E. Coyne to Donald M. Fleming, June 9, 1961, JGDP, XII/56/C/118.2
110 J.E. Coyne to Donald M. Fleming, June 9, 1961, ibid. Fleming expressed surprise that Coyne claimed to favour such a change: “If he had been advocating such a course he had totally succeeded in keeping me in the dark about it.” He added: “Had it been in effect there would never have been a Coyne case.” But the extraordinary lack of communication between minister and governor, and the failure on both sides to clarify the relationship in private discussion before the breakdown, does not suggest that the law would have made any difference. Under the Pearson government, the Bank of Canada Act was amended to this effect. Coyne’s other two letters of June 9 dealt with the pension by-law and a 1961 proposal for a bond issue. Fleming, Near 2, 322-23
111 Fleming added: “In the light of what was about to transpire it might have been politically better in the end for all concerned if we had agreed and allowed Coyne to fill out his term to its end. I doubt, however, if we could have honourably justified that course at the time.” The minister was carrying the case almost entirely alone, without consulting the prime minister about tactics; Diefenbaker seemed, to this point, almost a bystander. Probably a prime minister in confident control of his cabinet could, if he wished, have reversed the decision, avoided a public fight with the governor, and come to a settlement. Coyne gave his own account of these discussions in a letter to Fleming of June 13. Fleming, Near 2, 323; J.E. Coyne to Donald M. Fleming, June 13, 1961, JGDP, XII/56/C/118.2
112 Fleming, Near 2, 323-25; J.E. Coyne to Donald M. Fleming, June 13, 1961, JGDP, XII/56/C/118.2
113 J.E. Coyne, “Press Statement,” June 13, 1961, JGDP, XII/56/C/118.2
114 Fleming, Near 2, 325. The statement was almost three times the length of Coyne’s.
115 Debates, June 14, 1961, 6314-16
116 Ibid., 6326-57
117 Editorial, “Mr. Coyne’s Masters Speak Their Piece,” Montreal Star, June 15, 1961
118 Montreal Gazette, June 15, 1961
119 Diefenbaker was not in the House at the time, and Fleming believed that he was bound by the cabinet’s previous decision not to refer the bank’s annual report to committee. When the prime minister returned, Fleming told him of the refusal and, according to Fleming, “he saw no reason to alter our planned strategy.” Diefenbaker recalled: “My own view was that we should have agreed. However, once Mr. Fleming had taken his position there could be no change; certainly I was not going to countermand him on this issue. Had we set up the committee of the House of Commons, we could have destroyed Coyne for all time.” Fleming called this a “barefaced attempt to escape responsibility … Diefenbaker presided day after day at the cabinet meetings where all the decisions were taken. Never did he voice the opinion that Coyne should have had a hearing before a parliamentary committee.” This was another point in the saga at which tactical skill and self-confidence would have reduced the government’s exposure to criticism. Fleming, Near 2, 330-31, 344; OC 2, 275; Debates, June 26, 1961, 7047-61
120 Fleming, Near 2, 384-35
121 Pickersgill commented on the issue afterwards in at least three places. He told Peter Stursberg in 1975: “Once it had become a political issue, once it was clear that in my opinion he was being done the grossest injustice, I saw no reason whatever for concealing my support of him and going to see him and talk to him. There was nothing improper about it. I had a perfect right to do it.” He denied Fleming’s charge of collusion (also made to Stursberg) in a letter to Fleming in 1982, and added: “It was only after the government asked Coyne to resign that we discussed the matter at all. I felt, at that stage, when I had learned about the issue over the pension, that I was quite justified as a friend in giving him my views on the matter as it had then developed.” In his 1994 memoir, he reviewed his role in the debate, and repeated his denial of Diefenbaker’s claim that he had written parts of Coyne’s letters during the affair.
Bruce Hutchison’s papers show that Coyne met secretly with Pearson at least once in April 1960 to discuss his views on policy at the reporter Grant Dexter’s home. But Hutchison reports that Coyne’s views were “too hair-raising for comfort,” and that “it is easy for Mike to refuse Jim’s counsel.” In Hutchison’s view, Coyne was much closer to the Tories than to the Liberals in policy, and offered Diefenbaker an excellent cover: “If I were Dief I wouldn’t fire Jim. I would encourage him to go on and develop his ideas to their ultimate logic, which is sheer protectionism. If he would give his blessing to some thimble-rigging of the tariff, import controls etc., the government would have the blessing of the most respected public servant in the country. What could be sweeter?” Hutchison believed that Pearson had no coherent economic policy, and probably saw more consistency in Conservative policy than there really was. Stursberg, Leadership Gained, 234; Fleming, Near 2, 726-27; Pickersgill, Seeing Canada Whole, 549-53; Bruce Hutchison to Grant Dexter, April 16, 1960; Bruce Hutchison to Victor Sifton, April 18, 1960, Hutchison Papers, I.B
122 Besides his press statement and letter to Fleming dated June 13, 1961, Coyne’s other releases included statements or letters (some of them accompanied
by bank documents) on June 15, 19, and 26, July 6 (two statements), 8, 10, and 11, 1961. JGDP, XII/56/C/118.2
123 Debates, July 5, 1961, 7563
124 Ibid., 7574-75
125 Ibid., 7589-90
126 The quotation is from Erskine May’s Parliamentary Practice (16th edition), referred to by H.W. Herridge. In the United States, he noted, bills of attainder were unconstitutional. Debates, July 5, 1961, 7591-92
127 Debates, July 5, 1961, 7593; GTG, Memorandum To: The Prime Minister, July 15, 1959, JGDP, XII/118/F/356
128 During his appearance before the Senate committee, Coyne identified the adviser “in whom he places reliance” as the former governor of the bank, Graham Towers. Debates, July 5, 1961, 7592-95; Proceedings of the Standing Committee on Banking and Commerce, Senate of Canada, July 10, 1961, 49-50
129 “Statement by J.E. Coyne, Governor of the Bank of Canada,” July 6, 1961, JGDP, XII/56/C/118.2
130 Debates, July 7, 1961, 7685
131 Ibid., 7693
132 Pearson insisted on answering that he did not favour the pension. Ibid., 7694-95
133 Judith Robinson, “Diefenbaker … with a difference,” Telegram, July 10, 1961
134 Debates, July 7, 1961, 7707-08
135 Globe and Mail, June 13, 1961
136 CAR 1961, 18; Newman, Renegade, 421-22
137 JGD, “Memorandum: Re: Coyne in Senate Committee,” July 12, 1961, JGDP, XII/56/C/118.2
138 “Statement by J.E. Coyne,” July 13, 1961, ibid.
139 On the recommendation of the Porter Royal Commission on Banking and Finance, the Bank of Canada Act was amended in 1967 to incorporate this understanding in law. “Statement by Louis Rasminsky, Governor of the Bank of Canada,” July 31, 1961, JGDP, VI/6/231.1, 66210-213; Fleming, Near 2, 345-47
140 Ottawa Journal, July 18, 1961; Fleming, Near 2, 347-48
141 JGD to Elmer Diefenbaker, July 15, 1961, JGDP, V/4, 2182
142 CAR 1961,70-74
143 Quoted in Smith, Gentle Patriot, 80-81
144 CAR 1961, 81-86
145 These included, in 1961, the Glassco Commission on government operations, the O’Leary Commission on publications, the McPherson Commission on transportation, the Porter Commission on banking and finance, the Hall Commission on health services, the Bladen Commission on the automotive industry, and the Gill Commission on unemployment insurance. The Globe and Mail likened the commissions to a psychiatrist’s couch on which ministers could relieve their tensions and “go away refreshed, having banished from their minds whatever was bothering them.” Globe and Mail, July 24, 1961
146 When he met a delegation from the Voice of Women, the prime minister pointed out to them that their anti-war campaigning mirrored Soviet propaganda, but he was also influenced by the strength of their national support. CC, 84-61, 89-61, 90-61, 91-61, 92-61, 93-61, 96-61, 98-61, July 24, August 17, 21, 22, 23, 25, and 31, September 6, 1961; Fleming, Near 2, 370-74; JGD to Elmer Diefenbaker, September 14, 1961, JGDP, V/4, 2213; JGD, “Memorandum: Re: Meeting with ‘Voice of Women’ Delegation,” September 27, 1961, JGDP, XII/78/C/445
147 CAR 1961, 20
148 Debates, May 6, 1961, 4445-55
149 JGD, “Secret, Re PC party,” handwritten notes, July 30, 1961, JGDP, XII/35/B/137
150 Fleming, Near 2, 428-30
151 On December 22 Diefenbaker received a telegram from J.M. Macdonnell regretting that he had not denied the rumours of a change in Finance, and indicating that Fleming’s removal would be regarded with “positive alarm” by “leading business men.” Ibid., 430-31; telegram, J.M. Macdonnell to JGD, December 22, 1961, JGDP, XII/60/C/178
152 Telegram, Ottawa Citizen, December 21, 1961; Globe and Mail, December 22, 1961
153 Ottawa Citizen, Telegram, December 27, 1961; Toronto Star, December 29, 1961; Fleming, Near 2, 433-37. Newman wrote in Renegade in Power that Fleming had only won the battle by capitulating on an expansionist, pre-election budget for 1962. Fleming described this account as “probably the one farthest removed from the truth.” Newman, Renegade, 188-89; Fleming, Near 2, 434
154 Fleming, Near 2, 435
155 Alternatively, Fulton is placed in Health and Welfare - which would apparently have meant dropping Waldo Monteith. JGD, Memorandum (handwritten), December 27, 1961, JGDP, XII/51/C/66
156 Fleming’s naiveté in the memoirs seems unusal for someone who so distrusted Diefenbaker. An alternative explanation could be that Fleming, who saw himself as the best English-speaking friend of Quebec in cabinet, realized but could not admit that he had frustrated Diefenbaker’s plan and thus prevented the elevation of Noël Dorion to a senior ministry.
157 Globe and Mail, December 30, 1961; Ottawa Citizen, December 29, 1961; Toronto Star, December 29, 1961
158 Debates, February 22, 1962, 1138-41
Chapter 12 A Government Disintegrates
1 Macmillan’s conversations on the subject with Kennedy were confirmed by George Drew in a confidential discussion with the British cabinet secretary, Sir Norman Brook, on May 4. Drew reported to Diefenbaker that Macmillan was convinced that “unless there could be some form of economic and trade unity established throughout Europe within ten years, it would be impossible for NATO to stand together and Russians would be able to walk in.” A strong Europe, on the other hand, “with an expanding economy working in some form of cooperative association will provide a better market for Canada, the Commonwealth and USA than would be the case if Europe and Britain were weakened through the present divisions becoming permanent.” Telegram, Drew to JGD, May 5, 1961, 1690, JGDP, XII/81/D/37
2 Drew’s contacts with Beaverbrook and his special interest in the views of the Daily Express are noted, for example, in Diefenbaker’s memo of a telephone conversation with Drew on June 10, 1961, and in telegrams from London in November 1961 and April 1962. JGD, “Confidential Memorandum Re: Conversation with Hon. George Drew from London Saturday June 10, 1961 …”; Drew to External, 4042 Emergency, November 11, 1961; Drew to JGD, 1564 Emergency, April 30, 1962, JGDP, XII/111/F/200; XII/81/D/37
3 Diefenbaker gave the same message, in what seemed more sarcastic terms, to the UK high commissioner three days later. The French government confirmed to Canada that it would insist on “stringent” terms for UK entry, which would include the application of the common tariff to “all countries not themselves members of the common market.” JGD, “Confidential Memorandum Re: Telephone Conversation with Prime Minister Macmillan, June 9, 1961 …” JGDP, XII/86/D/149; JGD, “Memorandum Re Conversation with Sir Saville Garner … June 12th 1961 …”; NAR, “Memorandum for the Prime Minister: The United Kingdom and the European Common Market,” June 14, 1961, ibid., XIV/8/D/15.2
4 Sunday Telegraph, June 11, 1961, quoted in telegram, Drew to JGD, June 11, 1961, JGDP, XII/54/C/108
5 That point was emphasized in an accompanying “Paper for Mr. Diefenbaker.” The Canadian government was soon awash in documents laying out the details of current Canadian trade with the United Kingdom. In 1960 Canadian exports to the United Kingdom amounted to $915 million. About $300 million of this trade would be unaffected by application of the EEC common tariff, while another $500 million would be “especially vulnerable” through the loss of free entry or preference. But actual estimates of Canadian loss remained highly speculative and subject to exaggeration. As Duncan Sandys told Diefenbaker in July 1961, joining the Common Market “would not change the eating habits of the English people.” Harold Macmillan to JGD, July 3, 1961, JGDP, XII/111/F/200; “Possible British Accession to the EEC-Trade Effects,” nd, 1961, ibid., XII/81/D/37; JGD, “Conversation of the Prime Minister with the Rt. Hon. Duncan Sandys …” July 15, 1961, ibid., XIV/8/D/15.2
6 Harold Macmillan, “Paper for Mr. Diefenbaker,” July 3, 1961, JGDP, XII/11 l/F/200
7 Robertson attended a meeting of the cabinet committee on the subject to express his opposition to the government’s public line at about the same time. RBB, “Memorandum for the Prime Minister: Re: Sandys’ visit next we
ek,” July 4, 1961, JGDP, XII/81/D/37; Robinson, Diefenbaker’s World, 212-14
8 Robinson, Diefenbaker’s World, 214-15; JGD, “Conversation of the Prime Minister with the Rt. Hon. Duncan Sandys - Ottawa - July 14, 1961,” JGDP, XII/54/C/108; Fleming, Near 2, 387-88
9 “Message from the Rt. Hon. Harold Macmillan, M.P. to the Rt. Hon. John G. Diefenbaker, Q.C., M.P.,” July 26, 1961, JGDP, XII/81/D/37
10 “Remarks by the Honourable George Hees at the Commonwealth Conference on the Question of the U.K. Move into the European Common Market,” September 1961, JGDP, XII/111/F/200; Fleming, Near 2, 391
11 “Text of Press Communiqué issued at close of Commonwealth Economic Consultative Council Meeting in Accra, September 15, 1961,” JGDP, XII/81/D/37
12 Ottawa Citizen, September 15, 1961; Financial Times, September 22, 1961. Donald Fleming denounced Young’s report as Liberal propaganda, but his own account of the meetings sustains Young’s interpretation. The Financial Times article is included in full in a dispatch from the Canadian High Commission in London to Ottawa that Diefenbaker extensively marked. He triple-circled the description of Canadian pleadings as “violence.” Fleming, Near 2, 389-96; telegram, London to External, 3443, September 22, 1961, JGDP, XII/81/D/37
13 JGD, “Thoughts on ECM,” nd, JGDP, XII/54/C/108
14 The press comments were reported in dispatches from the Canadian High Commission in London to Ottawa. High Commission to External, 4042 Emergency, November 11, 1961, JGDP, XII/81/D/37; High Commission to External, Scan No. 46, November 13, 1961, ibid., XII/81/D/39. See also the Globe and Mail, November 11, 1961.
15 Drew instructed a senior officer, Benjamin Rogers, to attend the November meeting “at very short notice” in his place. Two weeks later, in a personal message to the prime minister, Drew reported that he would certainly attend Heath’s next briefing “as I have finally thrown off the severe chest cold which has been bothering me for more than two weeks.” JGD to high commissioner, London, PMO 106/12, November 13, 1961; Drew to JGD, 4043 Emergency, November 12, 1961; Drew to JGD, 4220, November 24, 1961, JGDP, XII/81/D/37; Robinson, Diefenbaker’s World, 216; Benjamin Rogers to author, July 28, 1995