The provision of cash reserves by the Bank of Canada would bring about changes in chartered bank holdings of liquid assets, which over time would affect the banks’ willingness to make loans. However, when quick results were deemed necessary, the Bank felt that resort to direct limits on bank lending would be justified.
On the several occasions that moral suasion had been employed in the 1950s, it had seemed to work. The Commission showed little enthusiasm for such intervention. It argued that controls impaired market efficiency, were discriminatory, and were of diminishing effectiveness over time.