Bank of Montreal
$ 4 bill from the Bank of Montreal ( BMO ) featuring Edwin King . King — known as the “ Napoleon of Canadian Finance ”— was the general manager of BMO from 1863 – 1869 .
Finance . Among those strong associations was one with Edwin King , the youthful “ Napoleon of Canadian Finance ,” who was the general manager of the Bank of Montreal , a position he attained when he was only 35 . The Bank of Montreal was at the time by far the largest bank in Canada and one of the largest in North America . In addition to their Canadian operations , they had offices in New York and Chicago . The bank was second only to Brown Brothers in the New York gold market . Much of the money they invested in gold came from Canada West ( now Ontario ), as King withdrew lines of credit in the western province .
The first response to King ’ s reduction of credit to Ontario farmers came from his own board of directors , when Senator William McMaster , a Toronto businessman , resigned . McMaster established a new Toronto-based bank , the Canadian Bank of Commerce , which for the next half century was the Bank of Montreal ’ s major rival .
King — impressed by the National Bank and Currency Acts in the United States — pressed for a similar system in Canada , whereby the federal government would be responsible for all note issues . This was a challenge . In Quebec , the banks were banks of deposit , while in Ontario they were banks of circulation . Note issue was far more important to Ontario ’ s banks than to Quebec ’ s . King foresaw a system where there would be only one ( Montreal ) or two major banks — Montreal would be like the Bank of England — and all other banks would have to give up their branch system and be strictly local .
When Parliament convened in 1869 , Minister of Finance Rose tabled a proposed new Bank Act , seconded by the Prime Minister . The Act was in line with
King ’ s proposal . All hell broke loose in Ontario , where King was an anathema . From Toronto to Guelph to Stratford , groups such as Boards of Trade protested . The opposition , aided by some of the more independent Ontario members of the governing party , succeeded in defeating Rose ’ s banking scheme , helped by strong manifestations of public sentiment against the measure . The bank scheme was withdrawn , and Rose and King resigned their positions in the fall . Both left Canada — Rose to London and King to Monte Carlo — never to return .
With Rose ’ s resignation , the Prime Minister had to choose his third Minister of Finance in just over two years . He chose an old rival , Sir Francis Hincks , who had been Treasurer in the former Province of Ontario but had spent the past dozen years in the Caribbean as an Imperial Governor . Hincks brought deep knowledge of public finance to the position . And perhaps most importantly , he had no connection with Montreal .
It must be clear that the Montreal / Toronto rivalry was not a French / English rivalry . It was a rivalry between the upand-coming Anglo Saxon second city of Toronto against the first city of Montreal , which was dominated by a conservative Scots establishment .
As Hincks was settling into his new job , he asked Senator McMaster to chair the Senate Banking Committee . Together they would work on the Bank Acts of 1870 and 1871 . Meanwhile , George Hague , cashier of the Toronto Bank , was busy organizing the other banks to ensure there was not a repeat of the Rose / King bill .
Hincks worked hard , consulted widely and produced a bill that affected a “ grand compromise ” on the issue of who would
issue currency — the government or the banks . Henceforth , the government would issue notes of less than $ 4 , while the banks would continue to issue notes of $ 4 and more . In addition , the Act also prescribed minimum capital levels , double liability on shareholders , limits on bank liabilities and prohibition against extending credit on real property . The unique Canadian provision was a requirement for decennial Parliamentary reviews of the Act . If a bank did not measure up , its charter could be revoked .
When Parliament convened in 1870 , Hincks explained the new Bank Act . The liberal opposition was strongly critical of the new legislation . They did not want government involved in note issue , as had become law in the United States . Throughout the debate , the Prime Minister offered words of encouragement , wisdom and humor to move the process along . In early April , both pieces of legislation — the one dealing with banks and banking and the one dealing with dominion notes — received approval .
In early 1871 , banking was still an issue . On March 3 , the Minister of Finance moved a new bill relating to banking and finance . Only one bank had taken advantage of the previous year ’ s legislation and requested a new charter . The Minister now knew that the great majority of banks wanted their charters renewed and wanted all to be on the same basis . A new Act was proposed , which included “ not only the provisions of the Act of last session , but also the general provisions of … the internal regulation of banks .” The new Act moved quickly through the House and the Senate and , on April 14 , 1871 , was proclaimed as the law of the land .
38 FINANCIAL HISTORY | Summer 2021 | www . MoAF . org