Founded | 1821Confederation Province of New Brunswick, Canada | in pre-
---|---|
Founders | John Strachan William Allan |
Defunct | 1866 |
Headquarters | |
Key people | William Allan (first president) |
The Bank of Upper Canada was established in 1821 under a charter granted by the legislature of Upper Canada in 1819 to a group of Kingston merchants. [1] The charter was appropriated by the more influential Executive Councillors to the Lt. Governor, the Rev. John Strachan and William Allan, and moved to Toronto. The bank was closely associated with the group that came to be known as the Family Compact, and it formed a large part of their wealth. The association with the Family Compact and its underhanded practices made Reformers, including Mackenzie, regard the Bank of Upper Canada as a prop of the government. [2] Complaints about the bank were a staple of Reform agitation in the 1830s because of its monopoly and aggressive legal actions against debtors. [3]
The first Bank of Upper Canada was located on the south-east corner of King and Frederick streets in York, Upper Canada (later Toronto, Canada West). [4] York was then too small for a bank, and its promoters were unable to raise even the minimal 10% of the £200,000 authorized capital required for start-up. The bank succeeded only because its promoters had the political influence to have that minimum reduced by half, and the provincial government subscribed for 2000 of its 8000 shares. The lieutenant-governor appointed four of the bank's fifteen directors, making for a tight bond between the nominally private company and the state. Despite the tight bonds, the Receiver General, the reform-leaning John Henry Dunn, refused to use the bank for government business. [3]
The bank's principal promoters were the Rev. John Strachan and William Allan. William Allan, who became president, was also an Executive and Legislative Councillor. He, like Strachan, played a key role in solidifying the Family Compact and ensuring its influence within the colonial state. Forty-four men served as bank directors during the 1830s; eleven of them were executive councillors, fifteen of them were legislative councillors, and thirteen were magistrates in Toronto. More importantly, all 11 men who had ever sat on the Executive Council also sat on the board of the bank at one time or another. Ten of the men also sat on the Legislative Council. The overlapping membership on the boards of the Bank of Upper Canada and on the Executive and Legislative Councils served to integrate the economic and political activities of the church, state, and the "financial sector." The overlapping memberships reinforced the oligarchic nature of power in the colony and allowed the administration to operate without any effective elective check. Henry John Boulton, the solicitor general, author of the bank incorporation bill and the bank's lawyer, admitted the bank was a "terrible engine in the hands of the provincial administration." [5]
William Lyon Mackenzie, the Reform politician and newspaper publisher, was the first to demonstrate the nature of that oligarchic power by showing that the government, its officers, and legislative councillors owned 5,381 of its 8,000 shares. Once elected to the House of Assembly, he criticized the Bank's lack of transparency and accountability to the legislature.
The Bank of Upper Canada at York (Toronto) had obtained its charter at the expense of the larger, more economically developed town of Kingston. Deprived of their charter, they established an unchartered bank in 1818 supported with American capital. [7] The government refused to accept its notes given its American ties, and it went bankrupt in 1822. After its failure, the Bank of Upper Canada used all of its influence to prevent any other bank from being chartered in the province. The monopoly was crucial to keeping its notes in circulation and boosting its profits. It succeeded only until 1832, when the Commercial Bank of the Midland District was chartered finally giving Kingston the bank it desired. [3]
Paper currency was a banking innovation in the era. It had been experimented with to fund the American Revolutionary War but had devalued badly, leading to general distrust of banknotes. Banknotes then were not legal tender, issued by a state bank. They were, rather, similar to cheques written by the bank promising to pay the bearer with "real" (usually metallic) money, or specie, if they returned the cheque to the bank. Any bank that could not redeem its banknotes with specie was forced to close for good.
The Bank of Upper Canada was able to lend out many more banknotes than it had the cash to redeem because Upper Canada was a specie-poor province, and the notes would pass from hand to hand to enable trade without ever being returned to the bank. On average, the bank lent out more than three times more banknotes than it could redeem; it made 6% interest on each note that it loaned out.
The bank's manager, Thomas Ridout, estimated that in the first three years of its operation, the bank's notes comprised between 74 and 77% of the province's money supply. Between 1823 and 1837, its profit on paid in capital ranged between 3.6% (1823) and 16.5% (1832) at a time when the maximum legal interest rate was 6%.
The Bank of Upper Canada suspended payments from March 5, 1838 to November 1, 1839 during the financial panic of that year. It was bankrupt, but a special act of legislature allowed it to continue operating without having to repay its loans with specie. [8] The bank was a small operation, which, like many other early Canadian banks, collapsed in 1866.
On 10 July 1832, President Andrew Jackson vetoed the bill for the rechartering of the Second Bank of the United States, arguing that it was utilized by a "moneyed aristocracy" to oppress the common man. The same complaint was lodged by the Reformers against the Bank of Upper Canada, which served a similar role. The dismantling of the bank plunged the Anglo-American world into an enormous depression (1836-8) that was worsened by bad wheat harvests in Upper Canada in 1836. Farmers were unable to pay their debts. Most banks, including the Bank of Upper Canada,- suspended payments (i.e. declared bankruptcy) by July 1837 and requested government support. While the banks received government support, [9] ordinary farmers and the poor did not.
The Bank of Upper Canada was the subject of almost continuous political attack. Shortly after its founding, Reform critic William Lyon Mackenzie published a series of articles on how speculative the Bank's loan practices were, and how close to bankruptcy it was. That resulted in an event, now known as the Types Riot, in 1826 in which the clique of Bank officers dubbed the Family Compact destroyed Mackenzie's printing press. Mackenzie, a bank critic, pushed for a non-speculative "hard money" policy where the bank loaned out only money that it actually had. [10]
Until 1835, all banks in Upper Canada required a legislative charter. Reformers tried several legislative strategies to get their own bank, including attempts to incorporate credit unions such as the Farmers' Storehouse company. That came to an end in 1835 when Charles Duncombe produced a "Report on Currency" for the Legislative Assembly, which demonstrated the legality of the Scottish joint-stock bank system in Upper Canada.
The difference between the English chartered banks and the Scottish joint stock banks is that the Scottish banks were considered partnerships and hence didn't need a legislated Act in order to operate. The joint stock banks thus lacked limited liability, and every partner in the bank was responsible for the bank's debts to the full extent of their personal property. The chartered banks, in contrast, protected their shareholders with limited liability and hence from major loss; they thus encouraged speculation. The Scottish joint-stock banks followed a "hard money policy." They avoided speculative risk because if they failed, their shareholders were responsible for the full loss. Since the banks did not require a legislated charter, many more banks could be founded, and they were more competitive and freer from political influence and corruption. [11]
Duncombe's report opened the gate for many new competitive banks to enter the market - just as the entire Anglo-American financial system was coming apart at the seams in a financial panic lasting until after the Rebellions of 1837. The Bank of Upper Canada survived only because of its influence on government.
Following Duncombe's report, the Farmers' Bank and the Bank of the People were founded on a joint stock basis, until the Family Compact conspired to make new ones illegal in 1838.
The monopoly of the Bank of Upper Canada had been slowly eroding with the chartering of the Commercial Bank, and then the joint-stock banks. The Act to outlaw further joint-stock banks in 1838 again tilted towards monopoly. However, in 1841 the Bank of Montreal, long seeking an entry into Upper Canada, purchased the Bank of the People and quickly began to expand its branch network. The Bank of British North America also entered the provincial market around that time.
As a result, the Bank changed its strategy and in 1850 it became the official bank of the Province of Canada, collecting all government revenue and issuing all government cheques. [3]
By 1863, the bank was struggling; in 1866 the Bank of Upper Canada closed its doors; the stockholders lost all of their investment of more than $3 million, and over $1 million dollars in taxpayers money was also lost. [12]
The 1827 Bank of Upper Canada Building, its second headquarters (first home was a Georgian building from 1822 and demolished 1880s with current building (now Young People's Theatre) replacing it in 1887), still exists, located on Toronto's Adelaide St East. It has been designated a National Historic Site of Canada. [13] Designed by architect William Warren Baldwin, 1825–27, the bank resembled a London townhouse with a Doric portico. [1]
The Toronto building is on the Registry of Historical Places of Canada, [14] along with two branches. The 86 John Street branch in Port Hope, Ontario, built in 1857 by Cumberland and Storm [15] (last operated by Ontario Bank in 1881 and now Hotel Carlyle and Restaurant) and the 46 West Street branch in Goderich, Ontario, built in 1863 [16] (now offices for Orr Insurance).
The Province of Upper Canada was a part of British Canada established in 1791 by the Kingdom of Great Britain, to govern the central third of the lands in British North America, formerly part of the Province of Quebec since 1763. Upper Canada included all of modern-day Southern Ontario and all those areas of Northern Ontario in the Pays d'en Haut which had formed part of New France, essentially the watersheds of the Ottawa River or Lakes Huron and Superior, excluding any lands within the watershed of Hudson Bay. The "upper" prefix in the name reflects its geographic position along the Great Lakes, mostly above the headwaters of the Saint Lawrence River, contrasted with Lower Canada to the northeast.
William Lyon Mackenzie was a Scottish Canadian-American journalist and politician. He founded newspapers critical of the Family Compact, a term used to identify elite members of Upper Canada. He represented York County in the Legislative Assembly of Upper Canada and aligned with Reformers. He led the rebels in the Upper Canada Rebellion; after its defeat, he unsuccessfully rallied American support for an invasion of Upper Canada as part of the Patriot War. Although popular for criticising government officials, he failed to implement most of his policy objectives. He is one of the most recognizable Reformers of the early 19th century.
The Upper Canada Rebellion was an insurrection against the oligarchic government of the British colony of Upper Canada in December 1837. While public grievances had existed for years, it was the rebellion in Lower Canada, which started the previous month, that emboldened rebels in Upper Canada to revolt.
Charles Duncombe was a leader in the Upper Canada Rebellion in 1837 and subsequent Patriot War. He was an active Reform politician in the 1830s, and produced several important legislative reports on banking, lunatic asylums, and education.
The Family Compact was a small closed group of men who exercised most of the political, economic and judicial power in Upper Canada from the 1810s to the 1840s. It was the Upper Canadian equivalent of the Château Clique in Lower Canada. It was noted for its conservatism and opposition to democracy.
The Farmer's Joint Stock Bank was a bank that operated in Upper Canada, and later in the Province of Canada, from 1834 to 1854.
The Bank of the People was created by radical Reform politicians James Lesslie, James Hervey Price, and Dr John Rolph in Toronto in 1835. It was founded after they failed to establish a "Provincial Loan Office" in which farmers could borrow small sums guaranteed by their land holdings. The Bank of the People was the only bank in Upper Canada not to suspend payments during the financial panic of 1837-8. Many of the shareholders, however, took part in the Rebellion of 1837 and the Family Compact plotted to have it taken over by the Bank of Montreal in 1840.
The Battle of Montgomery's Tavern was an engagement which took place on December 7, 1837 during the Upper Canada Rebellion. The abortive revolutionary insurrection, inspired by William Lyon Mackenzie, was crushed by British authorities and Canadian volunteer units near John Montgomery's tavern on Yonge Street at Eglinton, north of Toronto.
Samuel Lount was a blacksmith, farmer, magistrate and member of the Legislative Assembly in the province of Upper Canada for Simcoe County from 1834 to 1836. He was an organizer of the failed Upper Canada Rebellion of 1837, for which he was hanged as a traitor. His execution made him a martyr to the Upper Canadian Reform movement.
Thomas David Morrison was a doctor and political figure in Upper Canada. He was born in Quebec City around 1796 and worked as a clerk in the medical department of the British Army during the War of 1812. He studied medicine in the United States and returned to York in 1824 to become a doctor in Upper Canada. He treated patients and served on the Toronto Board of Health during the 1832 and 1834 cholera outbreaks and co-founded the York Dispensary. In 1834 he was elected to the 12th Parliament of Upper Canada, representing the third riding of York County as part of the reform movement. That same year he was elected as an alderman to the Toronto City Council and reelected the subsequent two years. In 1836, he served a term as mayor of Toronto.
William Warren Baldwin was a medical doctor, businessman, lawyer, judge, architect and reform politician in Upper Canada. He, and his son Robert Baldwin, are recognized for having introduced the concept of "responsible government", the principle of cabinet rule on which Canadian democracy is based.
James Hervey Price was a Canadian attorney and political figure in Canada West. He was born and grew up in Cumberland, United Kingdom, and studied law at Doctors' Commons. He moved to Upper Canada in 1828 and became an attorney in 1833. He was appointed the city of Toronto's first city clerk in 1834 and the following year built a house north of Toronto that he named Castlefield. In 1836 he was elected as a city councillor for St. David's Ward in Toronto but was defeated the following year. Although he considered himself a Reformer, he did not participate in the Upper Canada Rebellion. In 1841 he was elected to the first Parliament of the Province of Canada, representing the 1st riding of York as a Reformer. He served as the commissioner of Crown lands from 1848 to 1851 when he was defeated in his reelection campaign for his seat in the Parliament. He withdrew from politics and worked as an attorney until his retirement in 1857. In 1860 he returned to Britain to Bath, and died in Shirley, Hampshire, in 1882.
James Lesslie was an Ontario bookseller, reform politician and newspaper publisher. His career was closely associated with - and somewhat overshadowed by - William Lyon Mackenzie, the Reform agitator, mayor of Toronto, and Rebellion leader. However, as a leader himself, Lesslie took a prominent role in founding the Mechanics Institute, the House of Refuge & Industry, the Bank of the People, as well as the political parties known as the Canadian Alliance Society and Clear Grits. In many way, he defined the Reform movement in Upper Canada without having reverted to the violent methods of Mackenzie. His legacy may thus have lasted longer.
David Willson (1778–1866) was a religious and political leader who founded the Quaker sect known as, 'The Children of Peace' or 'Davidites,' based at Sharon in York County, Upper Canada in 1812. As the primary minister to this group, he led them in constructing a series of remarkable buildings, the best known of which is the Sharon Temple, now a National Historic Site of Canada. A prolific writer, sympathizer and leader of the movement for political reform in Upper Canada, Willson, together with his followers, ensured the election of William Lyon Mackenzie, and both "fathers of Responsible Government", Robert Baldwin and Louis LaFontaine, in their riding.
The Children of Peace (1812–1889) was an Upper Canadian Quaker sect under the leadership of David Willson, known also as 'Davidites', who separated during the War of 1812 from the Yonge Street Monthly Meeting in what is now Newmarket, Ontario, and moved to the Willsons' farm. Their last service was held in the Sharon Temple in 1889.
The Reform movement in Upper Canada was a political movement in British North America in the mid-19th century.
The Farmers’ Storehouse was Canada's first farmers' cooperative, founded in Toronto and the Home District in 1824. It stood at the centre of a broad economic and political reform movement that, in its essentials, was not greatly different from contemporary movements such as the Owenite socialists in Britain, as well as much later cooperative movements such as the United Farmers of Alberta in the early twentieth century.
A series of parliamentary reports describe the scope of the problem of debt in Upper Canada; as early as 1827, the eleven district jails in the province had a capacity of 298 cells, of which 264 were occupied, 159 by debtors. In the Home District, 379 of 943 prisoners between 1833 and 1835 were being held for debt. Over the province as a whole, 48% or 2304 of 4726 prisoners were being held in jail for debt in 1836. The number of debtors jailed was the result of both widespread poverty, and the small amounts for which debtors could be indefinitely detained.
Samuel Hughes (1785–1856) was a prominent member of the Children of Peace, a reform politician in Upper Canada, and the president of Canada's first farmers cooperative, the Farmers' Storehouse Company. After the Rebellions of 1837 he rejoined the Hicksite Quakers and became a minister of note.
There were two types of corporations at work in the Upper Canadian economy: the legislatively chartered companies and the unregulated joint stock companies. These two business forms had different legal standing; chartered corporations had a "separate personality" - they were a legal person quite distinct from its members or shareholders, a legal fiction which protected those shareholders with limited liability. In contrast, joint stock companies were made illegal by the English Bubble Act of 1720. Joint stock companies were considered extensive partnerships under common law, and English legislation limited these to a maximum of six partners. Without incorporation, the company was not considered a "separate personality." It could not hold property; this was held by trustees, who usually had to provide a bond or security. Without incorporation, the company could neither sue nor be sued at law. And without incorporation, shareholders were personally responsible for the debts to the company to the full extent of their personal property; shareholders were not protected by limited liability. There were, then, significant legal hurdles that made the joint stock company an unwieldy form of partnership.