Left to right : Collection of the Museum of American Finance , Library & Archives Canada ( LAC ), Library & Archives Canada ( LAC )
Left to right : Alexander Hamilton , the first US Secretary of the Treasury and the grandfather of the Canadian Banking System ; Sir John A . Macdonald , father of Canadian Confederation , first Prime Minister and godfather of the Canadian Banking System ; Sir Frances Hincks , Canadian Minister of Finance and father of the Canadian Banking System .
But while the nations ’ financial systems were growing further apart , currency practices were gradually growing together . The pull of the United States was strong . In 1857 , the Province of Canada finally moved completely away from the sterling system and adopted the decimal-based currency system for provincial accounts .
Banking , a Federal Function
The 1860s were an important decade in North America . In the United States there was the Civil War . During the war , the US Congress passed a series of National Currency / Bank Acts , which established a nationalized bank chartering system and raised money for the Union war effort . In many states , such as New York , there was opposition to national banks .
North of the border , it was becoming clear that the governing structure in the Province of Canada was not working effectively . There was a deadlock . To break the deadlock , two political foes and their allies entered a political coalition , which resulted in the creation of a new country , Canada .
In September 1864 , the Canadian politicians invited themselves to a meeting of the Maritime colonies in Prince Edward Island . There , they came to a preliminary agreement for the creation of one British North American colony . This was quickly
followed by a second conference in Quebec City . From the first draft to the last , “ banking , incorporation of banks and the issue of paper money ” were among “ the great powers ” and , therefore , were to be the responsibility of the federal authority .
This was in line with future Prime Minister John A . Macdonald ’ s thinking , backed up by his reading of Hamilton ’ s comments in the “ Secret Proceedings of the 1787 Constitutional Conference in Philadelphia .” Metaphorically speaking , Hamilton was “ in the room where it happened ” in Quebec City as much as he was in the room where it happened with Jefferson and Madison in New York City . He was there because “ John A .,” as he was affectionately called , had a copy of the “ Secret Proceedings ” with him in Quebec City . Not only that , but he had marked passages .
Inspired by Hamilton , Macdonald expressed his support for the Canadian proposals : “ We can now take advantage of the experience of the last 78 years , during which that ( US ) Constitution has existed … They declared by their Constitution that each state was a sovereignty in itself , and all the powers incident to a sovereignty in itself . Here we have developed a different system . We have given the General Legislature all the great subjects of legislation ,” including banking .
A final conference was held in London , resulting in the passage of the British North America Act by the Imperial Parliament , which came into effect July 1 , 1867 , creating the Dominion of Canada .
The Battle of the Bank Acts
Confederation did not happen in isolation . The residents of Canada West ( now the Province of Ontario ) were stunned to learn of the failure of their two largest banks , which were among the three largest banks in all of Canada , in 1866 and 1867 . Thus , from the beginning , banking was an important issue for the new government .
Unfortunately , the new Dominion got off to a rocky start when the Minister of Finance , the Honorable Alexander Tilloch Galt — early visionary , father of Confederation and strong proponent of banking as a federal responsibility — resigned . Galt was heavily involved in the failed Commercial Bank of the Midland District . Galt wanted the government to provide financial assistance , which the government declined to do . His resignation came only four months after Canada was created .
The Prime Minister , by now SIR John A . Macdonald , turned to one of his closest friends , John Rose , a highly successful Montreal businessman with strong banking associations , to become Minister of
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