Bank of the People

Last updated
Bank of the People
TypeJoint-Stock Bank
FounderJames Lesslie
FateAbsorbed by Bank of Montreal
SuccessorBank of Montreal
Headquarters
Toronto
,
Upper Canada
Key people
James Leslie, Dr John Rolph, Francis Hincks

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.

Contents

Bank Wars 1835-1838

Chartered vs Joint Stock Banks

Until 1835, every bank in Upper Canada required a legislated charter which established it as a legal person able to sue, and be sued at law. Only two Banks had been chartered: the Bank of Upper Canada and the Commercial Bank of the Midland District. Both banks were controlled by the "Family Compact" who used their control of the currency supply and credit to control trade and ultimately, the farmers. They had a "licensed monopoly" to print paper money, which reduced competition. [1]

In 1835, Dr Charles Duncombe, a Reform politician in the Legislative Assembly, was part of a "Select Committee on Currency" that offered a template for the creation of joint stock banks based on several successful Scottish banks. The Scottish bank system had always differed from the English system. The difference between the English chartered banks and the Scottish joint stock banks lay almost entirely on the issue of stockholder liability and its implications for the issuance of bank notes. The joint stock banks lacked limited liability, hence 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 chartered banks would loan out many more banknotes (little more than bank issued I.O.U.s) than they had specie (legal tender) to exchange for those notes once redeemed. The more banknotes they loaned out the more interest they made, but at the increased risk of bankruptcy. Protected by limited liability, their shareholders put profit above risk.

The Scottish joint-stock banks, in contrast, followed a "hard money policy", whereby they would issue a banknote only if they had enough specie to cover it. 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, thereby endangering the solvency of the speculative chartered banks. [2]

The Bank of the People

Eight dollar note issued by the Bank of the People Eight dollar currency note issued by Toronto's Bank of the People in Upper Canada (now Ontario).jpg
Eight dollar note issued by the Bank of the People

Dr. Duncombe's report opened the legal door for new banks to be founded. The Reformers' abandoned their attempt to establish a "Provincial Loan Fund" for farmers in the Legislative Assembly, and instead turned their efforts to creating a new joint-stock bank. The first bank to be proposed was the Farmer's Bank. However, in a bitter shareholder proxy battle, control of the bank was won by the Hon. John Elmsley Jr., a member of the Family Compact. He was one of the largest shareholders in the Bank of Upper Canada. [3]

Sir Francis Hincks, Bank of the People Cashier and later premier of Canada West Sir Francis Hincks.jpg
Sir Francis Hincks, Bank of the People Cashier and later premier of Canada West

William Lyon Mackenzie argued that the Bank of Upper Canada "served the double purpose of keeping the merchants in chains of debt and bonds to the bank manager, and the Farmer's acres under the harrow of the storekeeper. You will be shewn how to break this degraded yoke of mortgages, ejectments, judgments and bonds. Money bound you - money shall loose you" (Correspondent & Advocate 30-7-1835).

Inspired, the Reformers, led by James Lesslie, a prominent Toronto businessman and Reform city alderman, then founded the Bank of the People on Nov. 4, 1835, seeking to limit shareholders to known Reformers. Dr John Rolph was elected president, and James Lesslie the cashier (manager). Among its stockholders were David Willson and the Children of Peace who operated the first credit union in Canada in their village of Hope. Sir Francis Hincks, head cashier at the Farmer's Bank, later became cashier at the Bank of the People and Lesslie became president. [4]

One loan from the bank stood out: they gave William Lyon Mackenzie £200 to found the Constitution newspaper on July 4, 1836 to organize the democratic reformers of Upper Canada. [5]

The new bank was soon to prove its distinctiveness. Despite offering 5% interest on deposits, it was able to deliver a 6% dividend in 1837, in spite of paying off £1,200 in start-up costs. It managed to do this despite the general economic downturn, and without resorting to widespread litigation. The Bank was located in a house on New (Jarvis) Street owned by James Beaty, a reform city councillor.

During the financial panic of 1837-8, the Tory dominated Legislative Assembly banned all further joint-stock banks, even though it was the speculative chartered Bank of Upper Canada that was insolvent and required a government bailout. The Bank of the People survived the panic unscathed and without recourse to government protection. [6]

The bank was purchased by the Bank of Montreal in 1840. [7] Like the other Canadian chartered banks, it issued its own paper money. The Bank of Canada was established through the Bank of Canada Act of 1934 and the banks relinquished their right to issue their own currency.

The name selected by the reformers, the Bank of the People, reflects their emerging strong ties and shared strategies with reformers in Lower Canada, who were founding a similarly named bank in Montreal at the same time, in an effort to break the Bank of Montreal's monopoly there. La Banque du Peuple was formed under the title of Viger, Dewitt & Company, organized as a société en commandite, the French form of joint stock company. The Montreal bank's founders were Louis-Michel Viger, a Montreal lawyer and popular Patriote politician, and Jacob DeWitt, a wealthy American-born hardware merchant, ship owner and reform politician. They drew their clientele from among the French farmers and artisans.

Related Research Articles

Upper Canada Former British colony in North America

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.

Upper Canada Rebellion 1837 populist rebellion against the government of Upper Canada

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.

Family Compact Political clique in Upper Canada (1810s to 1840s)

The Family Compact is the term used by historians for 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.

Bank of Upper Canada

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. 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. Complaints about the bank were a staple of Reform agitation in the 1830s because of its monopoly and aggressive legal actions against debtors.

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.

Samuel Lount Canadian politician (1791–1838)

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 19th-century Upper Canada politician and doctor

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 Canadian doctor, businessman, lawyer, judge, architect and reform politician

William Warren Baldwin was a 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.

John McIntosh was a Scottish-Canadian businessman, ship's captain and political figure in Upper Canada. He was a leading figure of the Upper Canadian reform movement, and was described by his contemporaries as a moderate reformer. He was elected to the province's legislature in 1834, but was unable to be elected to the parliament of the Province of Canada in 1841. He continued supporting reformers, allowing William Lyon Mackenzie to stay in his home upon Mackenzie's return to Canada in 1849.

James Hervey Price Attorney and political figure in Canada West

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 (Quaker)

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 and 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

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.

Reform movement (Upper Canada) Political party in Canada

The Reform movement in Upper Canada was a political movement in British North America in the mid-19th century.

Farmers Storehouse Company

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.

Imprisonment for debt (Upper Canada)

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.

Corporations (Upper Canada)

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.

Toronto House of Industry

In 1834, the United Kingdom passed a new Poor Law which created the system of Victorian workhouses that Charles Dickens described in Oliver Twist. Sir Francis Bond Head, the new lieutenant-governor of Upper Canada in 1836, had been a Poor Law administrator before his appointment. Fearing that Head wanted to introduce these workhouses in Toronto, a small group of reformers and dissenting ministers led by publisher James Lesslie and Dr. William W. Baldwin founded the Toronto House of Industry on alternate, humane principles. The Toronto House of Industry was started by the reformers in the ‘unused’ courthouse on Richmond Street in January 1837 where they had previously met as the "Canadian Alliance Society" of which Lesslie had been president. The Toronto House of Refuge and Industry appears to have been founded on the model of the Owenite Socialist "Home Colonies". A constant struggle between the ruling elite, the "Family Compact", and the Reformers to gain control of the institution prevented this plan from ever fully being implemented.

References

  1. Schrauwers, Albert (2009). Union is Strength: W.L. Mackenzie, the Children of Peace and the Emergence of Joint Stock Democracy in Upper Canada. Toronto: University of Toronto Press. pp. 24–9.
  2. Schrauwers, Albert (2009). Union is Strength: W.L. Mackenzie, the Children of Peace and the Emergence of Joint Stock Democracy in Upper Canada. Toronto: University of Toronto Press. pp. 154–5.
  3. Schrauwers, Albert (2009). Union is Strength: W.L. Mackenzie, the Children of Peace and the Emergence of Joint Stock Democracy in Upper Canada. Toronto: University of Toronto Press. pp. 155–60.
  4. Schrauwers, Albert (2009). Union is Strength: W.L. Mackenzie, the Children of Peace and the Emergence of Joint Stock Democracy in Upper Canada. Toronto: University of Toronto Press. pp. 167–72.
  5. https://www.archives.gov.on.ca/english/on-line-exhibits/sharon-temple/bank.aspx Archived 2012-09-20 at the Wayback Machine Archives of Ontario
  6. Schrauwers, Albert (2009). Union is Strength: W.L. Mackenzie, the Children of Peace and the Emergence of Joint Stock Democracy in Upper Canada. Toronto: University of Toronto Press. pp. 172–4.
  7. Schrauwers, Albert (2009). Union is Strength: W.L. Mackenzie, the Children of Peace and the Emergence of Joint Stock Democracy in Upper Canada. Toronto: University of Toronto Press. p. 206.