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 H. H. WAf.KKK, 
 
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 Delivered at the Third and Fourth Annual IV\eetino[s 
 of the Canadian Bankers' Association 
 
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ADDRESSES 
 
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 OF 
 
 B. E. W^ALKER, 
 
 President 
 
 ■— X 
 
 Delivered at the Third and Fourth Annual Meetings 
 of the Canadian Bankers' Association 
 
 
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 (Extracted from the Journal of the Canadian 
 Bankers' AssJociation) v 
 
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 I TORONTO; 
 
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ADDRESS 
 
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 Dblivekrd at tiik tiiirp Awnual Mkbtino of tiiB Canadian Oankkrs' 
 
 AKaoCIATIQN, ilKLU At HALIFAX a6TII AND ayTH JUUY, 1894 
 
 WiiKN at the second annual meeting in- Toronto, a little 
 over a year ago, we elected a President to fill the position which 
 Mr. Hague had occupied for the year and a half which measured 
 the short existence of our Association, I little expected, as you 
 know, to address you to-day. It had teen understood that the 
 Presidency would be ofTeted to one of the bankers of Toronto, 
 but we in turn, while deeply cons<;ious of the honor, desired that 
 it'should be offered to the chief of our leading bank, both for his 
 own sake, and because of his high position, and, as you know, 
 he was elected. Mr. Clouston, however, was unwilling to accept 
 the office. The Executive Council were then courteous enough 
 to request the bankers of Toronto to express an opinion as to 
 who should be appointed to fill the vacancy for the balance of 
 the year, and we desired that the honor be conferred upon our 
 highly esteemed friend and veteran banker, Mr. James Steven- 
 son, but because J^ajd-vancing years he also declined, and when 
 the Executive ciwpcil met, 6th December, 1893, I was ap- 
 pointed. Up to this time Mr. Hague had not been relieved of the 
 duties of the office, and I ask you to remember tliat I therefore 
 •only, assumed them a little over ^even months ago. This must 
 be my excuse for many things which might otherwise have been 
 accompHshed. 
 
 While on the one hand a mere business association having 
 in view the interests of the banks of Canada as a whole, we 
 are o,n the other hand a#scientific association, consisting of a 
 body of associates anxious to understand the principles of bank- 
 ing and finance; and after the manner ot scientific societies, 
 it is expected that the President will set forth annually 
 . — before the associates the events of the past year which are 
 deemed of importance as objects of study for th(ise con- 
 cerned about the science of banking and finance. Although he 
 
 1^ 
 
 
 >.•*■ 
 
may do so, he will not b« expected to ditcuu the causes and 
 effects of actions with much fullness, and he will pmrhaps have 
 done his duty if he merely indicates the events worthy of rcpord 
 and study. In nny event, on this occasion it is the less necessary 
 that the causes and efTects of the recent panic in the United 
 States should be set forth by me, as the senior essay in the prize 
 competition of the year deals with that matter, and the paper by 
 the winner of the first prize has been printed in our Journal. 
 
 I will not, therefore, rehearse the facts connected with the 
 crises in South America, Australia. Italy and elsewhere, durmg 
 the last three or four years, and the effects in London ar^ the 
 bourses of Europe^ which seem to have been a prelude to the 
 Americiin drama of i993» although perhaps not in any very 
 direct way contributing to it. The historical events in the 
 United States,. dating back even to 1836, the logical outcome of 
 which was the terrific panic of last summer and autumn, are the 
 real prelude to the drama, and I had the. honor of speaking to 
 you on that subject at the dinne|r of the Association in Toronto, 
 although I have not yet quite reconciled my conscience to the 
 unwarrantable advantage I took of your comfortable after-dinner 
 condition in asking your attention at such a time to such a 
 tedious subject. I will then, with your permission, merely 
 sketch rapidly the leading events in the United States con- 
 necttcd with banking and finance, and in another paper which 
 I hope to read during this meeting I will ask your attention to 
 one^ particular feature of United States panics, from the close 
 study of which we in Canada may learji somethtng. 
 
 In the closing days of the Republican administration the 
 fear of trouble from the operations of the Sherman Silver Pur- 
 chase Act was £» string that it was fully expected resort would 
 be had to the power which the Secretary of the Treasury 
 possessed to sell bonds in order to strengthen the Treasury gold- 
 reserve. The gold-reserve which had maintained an average 
 as high as $20(>,ooo,ooo throughout 1888, fell in the succeeding 
 years as follows : 
 
 
 1889, maximum 
 
 $197,000,000, 
 
 minimum 
 
 $182,000,000 
 
 J 1 
 
 
 •1890 " . 
 
 190,000,000 
 
 ti 
 
 148,000,000 
 
 • ] 
 
 i ^.■-. . • .- 
 
 1891 '« 
 
 149,000,000 
 
 i< 
 
 1 1 7,000,000 
 
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 ■ 1892 " 
 
 125,000,000 
 
 « 4 
 
 110,000,000 , 
 
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 By February. 1893, the rewvc had decHn«d •till further to 
 lioft.ooo.cxx), tfio Ibwest point'touclMjd' Rincc; the rc<lcmp«ion of 
 specie in 187H, alihough two or three timts it had fallen nearly 
 «» low. Largo exportii of gold had taken place, and further 
 large ex|l')rl8 being in night, «oinc of the leading New York 
 bankn, viewing with alarm the fact that there was in the Trea«. 
 ury only $8,tx)o,cxM) over ihe reserve of $ioo,c)tx),ooo supposed 
 to be lit'hl against the War Legal Tenders, voluntarily deposited 
 with thi: Treasury a few njillionft of gold. Ilnniihating as it 
 was to the • Treasury, it was hoped tho«"action would help 
 to renew confidence. jik 
 
 While these' alarming goM slupmenis were going off; the 
 agitation for the repeal of the purchasing section* of the 
 Sherman Silver Purchase Act w.i^ daily growing stronger, 
 and at the same time the public dislike of monopolies, whi<h 
 had already produced the Ant i- trust Act of 1890, was mani- 
 festing itself in many wayjj, and many of the large industrial 
 companies, especially the So-called Trusts, were"2Hstinctly losing 
 credit because of the exposure of their methods ofi making 
 money,vboth in the conduct of their business proper and in 
 ■the stockjobbing connected with their bonded debts and capital . 
 stocks. So that when President Cleveland took office and 
 it was known that to silver agitation, gold shipments, and shaky 
 trusts, there was to be added all the uncertainties of a thorough 
 revision of the tariff, the time was surely ripe, for great evefits. 
 
 By the itiiddle of April, Secretary Carlisle, in obedience to 
 the law, suspended the issue of gold certificates, that is. Treasury 
 certificates for which the actual gold was held in trust, the gold- 
 reserve against legal-tenders having fallen to $100,000,000, the- 
 point at which he was required to take this action. In Canada 
 the public began to be anxiou^ as to what our trade and finan- 
 cial relations with the United States would, be should that 
 country fall from the gold to a silver basis, which to some 
 seemed every day more probable. At this moment Secretary 
 Carlisle apparently determined to stop paying in gold the legal, 
 tenders of 1890 issued under the Sherman Silver Purchasing Act. 
 Had this been done the \«fbrst would soon have happened, but 
 President Cleveland promptly interfered, and it was made dear 
 to the public that the reserve of $100,000,000 would lie broken 
 
 4 
 
 4 
 
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into for any purpose necessary to protect the credit of the 
 United States Government. 
 
 Large gold exports continued, and the receipts of the Custom 
 House, about the only source apart from the sale of bonds by 
 which the Treasury could obtain gold, had so changed in com- 
 plexion that whereas the proportion paid in gold or gold certi- 
 ficates had been not far from the entire receipts at one time, the 
 payrfients were now entirely in legal-tenders. The pubUc had 
 been demanding before the inauguration that the first act of the 
 new President should be ^o call Congress together and repeal 
 the purchasing sections %i the Sherman Silver Purchase Act, 
 that being the only thing likely to restore credit, but the 
 President seemed strongly averse to acting hastily. Later it 
 was said, perhaps in grim satire, that the Administration 
 wanted the politicians to have an object lesson first. Towards 
 the close of April meetings were held between Secretary 
 Carlisle, and the New York bankers, and while an attempt 
 to borrow $50,000,000 for the Government in connection with 
 a bond issue failed because of inability to agree as to terms, 
 the result of the interviews was to steady matters, and it was 
 thought that the dread of a suspension of gold payments was 
 about at an end. 
 
 May opened with the collapse of the National Cordage 
 Co. and a wild paliic in industrial and railroad stocks, values 
 falling in every direction, banks stopping discounting commer- 
 cial paper, while the appalling news every day from Australia 
 unnerved many London operators who might otherwise have 
 come to the support of the New York stock market. The panic 
 was now fully under way, gold shipments were still being 
 made, and by the end of May the gold reserve had fallen to 
 $90,000,000. 
 
 During, the latter part of the month demands upon New 
 York banks for loans and re-discounts from the west aiid 
 south became alarming in extent, and with the opening day of 
 June bank failures in the west began. There had been fourteen 
 failures of National banks from March to the end of May. Dur- 
 ing June and July about 100 National banks suspended, while of 
 all kinds of banks about 200 failed. At the end of the year this 
 had reached for financial institutions of all kinds, National, State 
 
 Y 
 
•^ 
 
 savings and ptivate banks, and trust and mortgage companies, 
 to 600, of whom about 200 had by that time resumed. By the 
 middle of June three things of considerable interest to bankers 
 
 had taken place : , 
 
 ^ I. Savings banks in some cities had eflfectually stopped runs 
 
 by uniting in a public statement that the legal notice WQuld be 
 
 required. 
 
 2. Banks to a large extent, and all over the country, refused 
 to credit or undertake the collection of cheques, drafts or other 
 bills, unless owners remained responsible for the payment of 
 the drafts eventually remitted by the bank where the bill was 
 
 payable. . 
 
 3. The New York^nks decided to issue clearing-house 
 
 certificates. ^'^ , 
 
 Just before and after the decision to issue clearing-house 
 certificates there had been extraordinary shipments of currency 
 from New York to the west, for many days at the rate of 
 $1,000,000 per day. Nothing in the trade situation seemed to 
 warrant this and eventually it became clear that it was due to a 
 loss of confidence in the general situation which made ban% 
 .and individuals in the west desire tohave any cash they df uld com- 
 mand within immediate reach. This dread spread rapidly over 
 the whole country to such an extent that Comptroller Eckels in 
 speaking at the meeting of the American Bankers* Assolbiation, 
 stated that the drain upon the deposits of National ba^ks alone 
 from 4th May to lith July amounted to $193,000,000, while he 
 estimated that as much more had been drawn from State, savings ' 
 and private banks. - 
 
 On the 26th June, news came that the Indian Government 
 had closed the mint to the free coinage of silver. However 
 .^ great the consternation, and the inability to understand the 
 policy Of the Indian Government, after the first few days of 
 excited discussion, one thing became clear, that the purchasing 
 sections of the Sherman Silver Purchase Act must be repealed if 
 absolute ruin was to be averted. But on the very day when in 
 England the statement was made in Parliament, a body of silver 
 agitators in Washington were organizing to prevent repeal. 
 On the 30th June, the President at last issued his message 
 calling Congress for the 17th of August. June closed with a 
 
 sA^<iit^^^^^A 
 
:/-T- 
 
 money panic, the rate for call loans being for a few hours in 
 the neighborhood of 75 p.c. p.a., but trouble was'SVferted by 
 the bold action of several banks in taking out several millions of 
 clearing-house certificates and lending freely to\he brokers. 
 
 In July and the first part of August, the staking features 
 were the scarcity of currency and the expedients resorted to to 
 supply the wants of the very restricted business that yras being 
 done. At the outset, as you will remember, it was merely the 
 hoarding of gold that was feared, but now everything ia the 
 nature of currency was being abstracted, and, owing to the in- 
 elastic nature of all paper currency in the United States, there 
 was practically in many places ijo financial machinery for the 
 carrying on of business. But the nature of this hoarding of cur- 
 rency is misunderstood by many. It will not do to lay the blame 
 upon the private individual who sought safety in a stocking, or, 
 what is'practically the same.a safe-deposit vault. The New York 
 savings banks were said to have increased their holdings of cash 
 by $10,000,000, and Trust companies suddenly developed a 
 yearning for large eash-reserves, although some had been con- 
 tent to lean on the banks before. But more serious than all 
 was the attitude of the country banker who desired to sleep 
 comfortably at night whether city bankers were able to do so or ' 
 not, and who, after being satisfied with a reserve consisting 
 largely of credit balances with bankers in reserve cities, say in 
 New York, suddenly wanted not only to increase the percentage 
 of his reserve, but to have it all in cash in his own vaults. This 
 of course was his strict right, but it wrought very great mischief, 
 and is one more added to the many defects arising from the 
 presence of innumerable small banks instead of compa|-atively 
 few large on^ with branches. / 
 
 When this scarcity was at its height avery high premium 
 was paid for currency, arid such rates as 2 and 3 per centl lasted 
 for many days. Naturally many devices 1 were suggested to 
 minimize the difficulty. A Buffalo banker proposed that Buffalo 
 banks should ilssue specially pi^pared drafti on New York for 
 such sums as I, 2, 5 and 10 dollars, payable to 'bearer, and 
 secured by deposit of collaterals Itidged with fhe Buffalo clearing- ' 
 house for one-third more than the amounts issued. Western 
 grain men talked of moving the crop with jjost-dated cheques. 
 
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 while border banks, mindful of ante-bellum days, obtained 
 Catiadjan bank-notes and circulated them. 
 
 ' Banks were enabled to settle between themselves in any 
 particular city by clearing-house certificates, loans, or other 
 devices, but no machinery was created to enable the banks in 
 the large cities to settle with banks in other large cities, and in 
 many cases there was absolute dead-lock. New York would not 
 send currency |o Chicago. Philadelphia was unable to pay 
 New York or other cities. What percentage of the entire 
 inland exchanges were thus affected I am unable to say, but as 
 the inland exchanges of the National banks alone have amounted 
 to sixty-three billions in a year, some idea may be formed of the 
 discomfort arising from the paralysis referred to. 
 
 The sale of gold and paper currency at a premium, chiefly 
 by New York specie brokers, at first excited the indignation 
 even of bankers, and this fact shows how unwilling we are some- 
 times to take the only medicine that will effect a cure. Even 
 the premium induced few people to part with their hoards, but it 
 induced gold imports. August had opened with a complete 
 cdllapse in the speculation in pork^'j following upon similar con- 
 ditions in wheat. Railroad and other stocks had fallen enor- 
 mously, and the export of the now released pork and wheat, 
 together with foreign buying of the now low priced securities, 
 created an exchange situation, which, further aided by the pre- 
 mium paid for gold to arrive, resulted in importations large 
 enough to bring relief. By the middle of August there was 
 ^23,000,000 of gold on the way out. By th^nd of the month 
 an entire change for the better had taken place, currency came 
 readily from its hiding places, and the panic, as such, was over. 
 
 Meantime Congress had assembled, the President had 
 issued a message recommending immediate r#p.eal of the pur- 
 chasing sections of the Sherman Silver Purchase Act, and with 
 the wrecks of hundreds of banks and industries about, factories 
 closed in every direqjtion, railroads in the hands of receivers, 
 and that army of idle men which eventually reached a million — 
 all as the object lesson. Congress began its debate. , yVe cannot 
 say that the House was slow to come to a conclusion, for by an 
 overwhelming vote they decided for repeal on the 30th of 
 August. A month later the Senate was still arguing; early 
 
 
in October there was serious talk of compromise; about the 
 middle of October the remarkable continuous session took 
 place* giving the silver men a physical victory, and not 
 until the first of November did the Senate,, and then only 
 by a majority of eleven, vote m favor of repeal. On 
 the 3rd the President approved, and a sanguine^ people imagined 
 that honest money had won a victory for all time. Many, 
 indeed, when the tariff bill was introduced at thtf end of 
 November, felt that the country could safely give its undivided 
 attention to that important subject and that no dangerous 
 schemes would be attempted in the interest of silver. But the 
 question of using the seigniorage on the silver was under dis- 
 cussion when the purchase sections of the bill ^ere repealed, 
 and within seven weeks a bill to coin the silver held as bullion 
 into standard dollars and thus turn the seigniorage on the same 
 into money, was offered. This particular bill opened the dis- 
 cussion, which in the end took shape 4n another bill to which I 
 shall refer later. 
 
 Apart from this financial matters were improving. Gold 
 receipts at^the Custom House, a barometer of public confidence 
 in regard to the maintenance of the gold standard, had fallen 
 during the first half of iSg^'to otae per cent, of the total receipts. 
 But during the last half the proportion had risen to one-third, 
 and this very great improvement dated from the issue of the call 
 for Congress to njeet regarding the repeal of the purchase 
 sections in the silver bill. Many of the miners of Colorado had 
 already turned their attention to gold instead of silver, and the 
 world's product of gold for 1893 is said to be the largest on 
 record. On January 17th, bonds were at last offered for sale to 
 the extent of $50,000,000, and early iii February^ bids were 
 accepted, and in accordance with the terms of sale, payments 
 were made therefor in gold. Although the Government were 
 facing an enormous deficit between receipts and expenditures, 
 and were proposing a great reduction in tariffs at the same time, 
 the facts I have quoted practically reinstated the Treasury in 
 public confidence. But on loth February, Senator Bland, the 
 author of the Silver Act of 1878, introduced a Seigniorage bill 
 which was passed by the House by a vote of 168 to 129, on ist 
 Mai^clf, and by the Senate on 19th of that month. So strong 
 
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 was the political force in favor of the measure that some of the' 
 best informed financial journals, even those favorable to Mr. 
 Clevelafid, believed that he would approve the bill, but on 29th 
 of the month it was vetoed. To outsiders like ourselves the bill 
 seems to be so amazingly dishonest . that it is impossible to 
 understand how it received such support even from those who 
 merely wished to throw one last sop to the silver advocates, 
 and who honestly thought the country wanted more currency. 
 The intention of the Sherman Silver Purchase Act was that 
 the silver bought should be held as bullion unless more actual 
 silver dollars were wanted by the public, and all knew that no 
 more would be required. The silver was represented, not by the 
 issue of silver-certificates, as under the Bland Act, but by 
 legal-tender notes payable at the discretion of the Secretary of 
 the Treasury in gold or silver, Congress having expressed the 
 poliify of the United States to be that the parity of gold and 
 silver should be maintained. This Seigniorage bill proposed 
 that the bullion should* be coined into standard dollars. So that 
 if there was in the Treasury fifty dollars worth of silver bullion, 
 which was, however, enough in weight, to make 100 standard 
 dollars, the additional fifty dollars should be issued in legal 
 tender notes — shorn of all verbiage /introduced to give another 
 appearance to the measure, this was its true meaning. . Had the 
 bill become law, fifty-five millions of legal-tenders based oil 
 nothing but the credit of the Government would have been 
 issued. As a matter of fact the legal-tenders already "in circu- 
 lation, issued under the Sherman Act of 1890, far exceed th(&^ 
 market value of the silver bullion held against them, owing to 
 the decline in the price of silver since it was purchased. 
 
 There is still another question perhaps of greater interest to 
 us than anything I have mentioned, and certainly of greater im- 
 portance to the United States than anything except silver 
 repeal. I refer to the necessity of reform in the banking system. 
 The question has been persistently and"^ ably discussed by the 
 great financial journals of the United States, and has been the 
 most prominent feature in the reports of the Comptroller of the 
 Currency for years past. ''' Several proposed systems ?ire now 
 before the people, more than one being copied largely from our 
 own system, so far as security for bank-notes is concerned. It / 
 
 ■.'.: m 
 
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 f 
 
 ' M 
 
 ^l^tt^«!*d> 
 
13 
 
 is the subject also of earnest study in the universities and the 
 journals strictly devoted to economics, and yet there is so little 
 settled opinion on-^e subject that it would be almost fruijtless 
 for us to discuss it until some action is taken or public feeling 
 is further developed. One' of the burning points is the 
 repeal of the tax upon State-bank circulation, levied by the 
 Federal Government during the war, but retained ever 
 since. An attempt to have it repealed failed, and this is 
 about the only actual result of the agitation for banking reform 
 as yet. , 
 
 In order, however, that banking; Reform may be effective, . 
 means should be found, either to relieve the Treasury from its 
 present responsibility of providing gold, when required for 
 export or other purposes, or to increase its power of obtainin^'^^ 
 gold. This would doubtless involve the fundi'ng of the war Ipgal- 
 tenders and the legal-tenders issued under the Sherman Silver 
 Purchase Act. • Although many bankers aiid economists in the 
 United States see the necessity for this course, it is hard to 
 believe that the people who control the polls, misled as they are 
 as to their true interest, will consent to non-interest bearing 
 legal-tenders being funded into interest^bearing bonds. Witif- • 
 out thii^eform, however, the Treasury must remain more or less 
 at the mercy of the jgeneral public and the banks. It is prac- 
 tically required by law to redeem in gold about $500,000,000 of 
 paper money, representing the two issues of legal-tenders ab«ve 
 referred to, and it has no source of obtaining gold except by the 
 sale of bonds or by the receipts from dues to the Govern- 
 ment. For a short period following the panic, as we^aw, the 
 Treasury experienced several months during which the propor- 
 tion of gold paid into the New York Custom House maintained 
 an average of about ,one-third of the whole receipts, and this, 
 together with "the sale of the bonds referred to, in February, 
 built up the^reserve to fair proportions. But gold being again 
 required for shipment, and the reserve beginning in consequence 
 to rapidly fall, the bankers and the pifblic again became alarmed 
 and the receipts of gold at the Custom House in the month of 
 June fell to less than one per cent, of the whole, a repetition of 
 the worst experience in 1893. ^^ t^® ^^ur months ending with 
 the close of June the Treasury had suffered a loss of gold, this 
 
^ 
 
 13 
 
 time amountinfi^ to $40,000,000. The people of the United 
 States certainly should be courageous enough to admits failure. 
 They may as \vell face the -fact at once that they have imposed 
 upon the Treasury a contract impossible of performance should 
 conditions arise which we now see may arise at any moment. 
 Ifr'is reasonably safe to assert that the business and financial 
 interests of the United States cannot be placed on a sound basis 
 until a cure for this evil is found. / 
 
 At the moment, however, questions of currency and^finance 
 are hidden behind the confusion of tariff debate, the amazing 
 exposures of political corruption, and the business disorganiza- 
 tion and losses incident to« strikes iipon a scale never witnessed 
 in America before, and perhaps not elsewhere. 
 
 Some lay critic may tell me that the incidents ^ore or less 
 connected with banking and ti|iusiness in Canada during the past 
 year would have been a mor^ fitting subject for my remarks, 
 but our Associates will not, I think, agree with this view. The 
 addresses at the bank meetings and the reports of the Executive 
 Council and Sub-Sections of this Association cover a fairly 
 complete history oi the events in Canada, during the past year;. 
 It has been a quiet and uneventful year for us, and remarkably 
 so considering the conditions elsewhere in the world. "This may 
 be, however, but a happy accident, and we may have unpleasant 
 history forced upon us at any moment. It is by the study of 
 important events, occurring where the stage is larger than in 
 Canada, that we may learn how to be prepared when we have 
 serious trouble to meet. ' -^ 
 
 During the' year we have suffered the loss of oiw of our 
 Associates, Mr. J. L. Brodie, chief executive officer of the 
 Standard Bank of Canada. Owing to lAs delicate health he 
 was rarely able to attend conventions of bankers, especially if 
 it involved travelling from home. During th'e year 1893 ^^ was, 
 however, Chairman of the Bankers' Section of the Toronto 
 Board of Trade, and Was at all times ready with wise counsel, 
 which, from his long experience as a banker, both in India and 
 Canada, he was well prepared to give. A.short sketch of his 
 career appeared in the last number of our Journal. 
 
.^l 
 
 
 ADDRESS 
 Dblivbred at fourth Annoal. Mbbtino ov; tub Canadian Bankbrs' 
 
 AbSOCIATION, held at QUB9EC, IITH AND I2TH SePTBMBBR. ;l895 
 
 » / 
 
 The year or more which has passed since we met at Halifax 
 has not been a very eventful one in the financial world, but it 
 has made many changes among us as individuals. /While we 
 were meeting at^Halifax, news reached us of the deatn of Mr. J. 
 Murray Smith, well known in'^ Quebec and Ontario/ and doubt- 
 less elsewhere, as the manager at Montreal, for /many years 
 past, of the Bank of Toronto. 
 
 In December, James/ Stevenson, one of our bOnorary presi- 
 dents, and the general manager of the Quebec Bank, 
 passed away full of years and honors. He was not only the 
 venerable teacher ^nd adviser, but the genial friend and fellow 
 sportsman of many throughout Canada. A graceful writer 
 on all subjects, who even gave to the early history of banking in 
 our own country the charm of picturesque incident, we shall 
 mourn him as a personal link in that history stretching back to 
 the rebellion. 
 
 In March, Robert Henry Bethune, general manager of the 
 Dominion Bank, one of the most active and successful bankers 
 in Canada, died. At one time an officer under Mr. Stevenson, 
 whose junior he was by a generation, his death in the prime of 
 life, so shortly after his octogenarian friend and preceptor, startled 
 us all. There were those, I believe, who knew that he was not 
 as well in health as his firm bearing and cheerful speech indi- 
 cate;d, but to most of us his death came as a sudden grief for 
 which we were all unprepared. 
 
 We have also lost by jetirement Mr. R. R. Grindley, 
 general manager oi the Bank of Britisli North America, but we 
 must hope that in his well-earned repose he will not forget the 
 country in which he lived so long and his fellow workers in the 
 business of banking. With strong convictions ^s to the useful- 
 
 \ 
 
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 \ 
 
 i5 \ ■ 
 
 nrss and a clear yiew as to the future of the Association and its 
 Journal, his advice was always helpfnl to hid fellow members of 
 the Executive Cibuncil. 
 
 By the resignation of his position as cashier of the Banque 
 du Peuple, imniediately before the suspension of that bank, Mr. 
 Bousquet also leased to be a member of the Executive Council. 
 
 I hope it Will not>be thought out of place if one who was not 
 politically a follower, also oilers at this moment his tribute of 
 admiration to the late Sir John Thompson. Without entering 
 upon the qualities he possessed for which he will be remembered 
 in history, I inay safely assert that those who had to do with the 
 various important measures of legislation in which banks were 
 deeply interested, know how much we owe to his great ability 
 and profound sense of right. 
 
 NEWFOUNDLAND 
 
 In Decejnber a financial cpUapse occurred in Newfoundland, 
 serious enough to involve the credit of the island, and to cause 
 the failure of a large number in the niercandle comniunity, in- 
 cluding the <j>nly two joint-stock banks existing there. 
 
 While i^ was evident that this was the natural result of a 
 long perio<d Of trading and banking on an unsound basis, the 
 readjustment ' of which will prove beneficial to the colony, it 
 was unfortunate for Canada that there should be in the ilbinds of 
 many foreigners a doubt as to the political relations of the island 
 to us. Although we owe them no duly, except the good will 
 arising from geographical adjatcency and a common ancestry, it 
 will doubtless be remembered in our favor, when at some future 
 time the question of the annexation of Newfoundland with Can- 
 ada is again discussed, that at the hour of their severest financial 
 trial three Canadian iilstitutions, the Bank of Montreal, the 
 Bank of Nova Scotia and the Merchants Bank of Halifax, 
 stepped into the breach and aided largely in rehabilitating the 
 commerce and the finances of the island. Many of the bankers 
 here present are much better informed as to Newfoundland 
 affairs than I am, yet all will be glad, I think, to hear that during 
 the ensuing year we^Kpe to have iiL our Journal a very 
 complete article, by ^^ffioroughly coffl|>etent writer, dealing, 
 with the commercial and political conditions of the island. 
 
 
 ^1 
 
i6 
 
 CANADA 
 
 U/is with regret that we have to record the suspension of 
 one Clanadian bank during the past year, but as the period has 
 not/yet expired during which the institution is permitted by the 
 rovisions of the Bank Act to resume, it would not be proper for 
 le to enlarge upon the event, deeply interesting as tl\e circum- 
 stances surrounding it have been to all of us. Whatever there 
 is in the history of the institution which is materially connected 
 with the history of banking in Canada, will doubtless be recorded 
 in the Journal sooner or later. 
 
 It is probably inexpedient for the President of this Associa- 
 tion to attempt to deal in his annual remarks with such conditions 
 of bankii)ig in Canada as the present almost unparalleled plethora 
 of money, but I hope that it will not be regarded as improper 
 if I draw attention to the unfortunate degree of competition 
 which appears more and more to be characterizing our relations 
 with one another as bankers, and which is particularly lo be 
 regretted at a time when it would seem as if the dictates of self- 
 preservation would induce us to co-6perate in order to bring 
 about many reforms. We seem to be in very great danger of 
 almost entirely losing the minor .profits coming from inland 
 exchange and similar operations, not simply by the constant 
 cutting in two of the commissions charged, but by the wholesale 
 manner in which these commissions are being waived in favor 
 of the mercantile public. The same spirit of reckless determii^a- 
 tion to secure business at any cost is seriously affecting all 
 branches of profit in banking at a tifne when the natural condi- 
 tions are all adverse, and one woulc^^xpect that prudence would 
 cause us to jealously preserve^ll legitimate sources of profit. 
 
 tJNITED STATES \ 
 
 In this connection I wish to draw your attention to the 
 very rapid growth of bankers' associations in the United 
 States. The great federal body, the American Bankers' Asso- 
 ciation, ^as, if I remember aright, alone, or almost^ alone, a 
 very few years ago, as a body of co-operating banlf^. There 
 are'j^ow local associations representing thirty States, in all 
 thirty-two associations, one federal and twenty-nine State 
 bankers' associations, and two savings bank associations. White 
 
 v/ 
 
17 
 
 at the present time these associations are discussing banking 
 reform for the nation, the avowed purpose of many of them, and 
 the distinct good many of them arc able to perform, is in the 
 direction of improving the practical conditions of banking in 
 tlieir own district, such as rates of interest and commission, and 
 the proftis of banking generally, provisions against fraud, and 
 the avoidance of undue competition. There is also noticeable 
 among all of them an admission of the benefit of actual personal 
 ^^ contact, that is, they are beginning to feel, as I hope we are also 
 beginning to feel, that by becoming personally acquainted with 
 each other the desire for friendly co-operation is increased, while 
 they are less disposed to enter into unfair competition with one 
 another. 
 
 Financial events in the United States during\the past year 
 have mainly centred around three points of interest: (i) The 
 position of ihe gold reserve of the Treasury, (a) The possibilities 
 ,of the free coinage of silver; and (3) The reform of the cur- 
 rency and banking. ' And these three points may be said to be 
 inseparable in any discussion of United States finances at thp 
 moment. 
 
 We noticed, in speaking on this subject a year ago, that the 
 gold receipts at the Custom House in June, 1894, had fallen to 
 less than one per cent, of the whole payments. By July there 
 were practically no gold receipts, and by November another 
 bond issue of fifty million dollars became necessary in order to 
 replenish the Treasury gold reserve. This was offered to the 
 ' public in lo-year 5 per cent, bonds (issued under an old Act), 
 to be sold on the basis of yielding the buyer not more than three 
 per cent, per annum, or at a premium of 116.008. Although 
 these bonds were payable in coin and not expressly in gold, the 
 entire issue went to one syndicate at 117.077, or a return of 
 2.878 per cent, per annum, showing that thus far the faith of 
 Congress and the ability of the Treasury to redeem in gold was 
 fully credited. 
 
 In December the Committee on Banking and Currency 
 decided to report favorably to the House a bill looking to the 
 reform of banking and currency, the main feature of which was 
 the is^ue of bank-notes not secured by Government bonds, but 
 resting on the general estate of the bank, in a manner avow- 
 
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 » -• 
 
 |8 
 
 
 «^y »r/7|i<Bd t(» some extent from -our own •y«rem. Thii pro- 
 posal, convNttionly known as thn Carlisle plan, differed in tome 
 details from that siiggetited at Baltimore in the preceding Octp- 
 ber by the American }iankers' Aasoctation» but both were the 
 outcome of the same school of re-forra. But the bill was op- 
 posed on the one hand by the Republicans and most of the 
 National banks, and on the other by the advocates of the free 
 coinage of silver, ond after much discussion, and the ^jfTer ol 
 many substitutes, by January it becanie evident that no"^ action^ ^' 
 coulil be taken. Among the many who gave evidence before 
 the Committee on Banking and Currency, I cannot forb^tflr 
 quoting the following terse statement from one of the ablest 
 writers on financial subjects in the United States : 
 
 •• In respect to silver money, I assume that though the policy 
 of increasing or diminishing its volu^ie is still a seething ques- 
 tion, yet it does not specifically con^n the problem immediately 
 before your Committee. 0^ 
 
 " As to the system of note issues provided under the National 
 banking laws, I shall take it for granted— as I think I safely 
 mAy — that, among economists, practical bankers and intelligent 
 students of monetary questions, it is the largely preponderant 
 conviction that the system has outlived any adaptation it may 
 have originally possessed for satisfying the currency wants of 
 th^Pountry ; the main grounds for that conclusion being : 
 
 "I. That the bond form of guarantee has bee^r found in- 
 icompatible with elasticity of issue: 
 
 •• 2. That said guarantee leHlifes no suffictei 
 profit to the issuer, and consequently prevents issi 
 
 ' : " 3; That the bonds themselves must, in a few years, mature 
 •and it^lfetired ; r 
 
 '*^»|TMt thes Government's engagement to pay the notes 
 
 *^ ^'^ '^I^Hliil^ ^^'^'^^ °i ^deral power ; 
 
 * '^^SSk'.Mmafi to' olsetructive restraints, the volume of 
 notes cn^Ppt^^adily aHMMEnted to meet public emergencies; 
 
 " &/*ThatVthe arrangements for insuring current redemp- 
 tion of the notes fail of tpeir purpose, , thereby keeping the 
 Volume rigidly inflexible at the season when it should auto- 
 matically contract or ejcpanl ; and 
 
 " 7. That, for these reasons, the National bank circulation 
 
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 hat shrunk to one-half its ikmer voluHne, whl^ the public re- 
 quirement! for money have been incrottiing." ^ 
 
 The Carliite plan had many excellent featureift along with 
 thert, in my bpinion, not admirable, but it is clear that before 
 y comprehensive legislation can l)e obtained the nilver heresy 
 must disappear, and many who arii not advocates of cheap money 
 must be educated out of unsound ideas born 9f the financial 
 expedients of Andrew Jackson and Salmon P. Chaie. 
 
 All this discussion at Washington of the shocking condition 
 of United States finances, accompanied by the usual reckless- 
 ness in statement by politicians, did no good, «i|^ white it was 
 going on the Treasury was drifting into ft ti^ble position/ 
 The gold received from the February and Novemt>er bond sales 
 amounted to $117,000,000, but the withdrawals were on such 
 a scale that the net balance when the last sale wAs concluded 
 was slightly less than the figure of $100,000,000^ which the 
 Treasury endeavors to maintain and the public has come to 
 regard as danger point. Withdrawals continued, and towards 
 the end of. January the largest withdrawals occurred ever made 
 in one week since the Treasury was established. By the aSth 
 the reserve was down tq $56,000,000, and in the next five days 
 over $14,000,000 went out, leaving less than $49(^000,000. 
 While Congress refused to reform the currency the firee-silver 
 advocate caught the ear of the public, and aided by the great 
 depression in business and a newspecies of illustrated •conomic 
 literature, his opinion; flew like wild fire again over maaypKrts 
 of the wes^ and south. Another bond issue was abiolutely 
 necessary, but the faith of November was gone in January, and 
 eventually a sale was negotiated so different in results from the 
 sales of 1894 and surrounded by such pregnant facts that it will 
 doubtless find a place in history for many years to come. 
 President Cleveland Was strong enough to enforce the repeal 
 of the Sherman Silver Purchase Act, strong enough to onab„le 
 the Treasury by bond sales to keep up gold payments, but 
 he was not strong enough to enforce the passage of a com- 
 prehensive measure of currency and banking reform tviuch would 
 soun^the knell of free silver and begin at once the relief of the 
 Tri^sury from its intolerable obligations* 
 
 This failure to pass a banking and ciirrency bill, accom- 
 
 
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 panied -by the clearest evidence that the free-silver advo< 
 cates wereitill a power, ahB at a time when the Treasury had 
 barely strength to stand the drain for a few weeks longer, 
 greatly weakened the belief in the good faith of Congress to 
 continue payments in gold of obligations made payable in coin, 
 and it was for'this reason that the President in his message of 
 28th January, appealed once more to Congress for power to 
 make the forthcoming bond issue expressly payable in gold 
 instead of com. >' 
 
 Congress failed to act, and a bargain was made with a syn- 
 dicate of bankers, representing in a large measure the wealth of 
 Europe and America, by which, under power , conferred by 
 the resumption of specie Act of 1875, thef Government bought 
 from the syndicate 3,500,006 ounces of gold, paying for it in 
 bonds. The Jjractical result of this was that f6r f 62,31 7,500 
 of 30-year 4 per cent, bonds the Government obtained 
 $65,117,560. The price, therefore, in dollars was 104.49, yield- 
 ing in interest to the purchaser 3f per cent, p.a., about the 
 price at which a first-class city can borrow money in America, 
 and an astounding price for the great Government of the United 
 States to pay. Let us make sure that we understand the 
 reason for"^guch a transaction. ^ > 
 
 You will remember that in the previous November, as in 
 the previous February, bonds had been sold to yield less than 
 3 per cent. Did any one in 1895 doubt the ability of the 
 United States to pay the bonds when due, who had not doubted 
 it irfi894 ? It would be absurd to suppose so — there was no 
 doubt. But would they pay in the money of the world, in gold ? 
 The syndicate, in order to leave no doubt as to what the high 
 rate of interest meant, offered to take 30-year 3 per cent, bonds- 
 at par if payable in gold instead of coin. Congress had ex- 
 pressed to the world its intention to pay in gold all obligatibns 
 made payable in coin. Why not say so in the obligation itself? 
 The President having obtained this option, as opposed to the 
 terms already mentioned as those in which the sale was finally 
 made, put upon Congress the responsibility of declining to 
 authorize gold bonds, and thus causing an enormous loss of 
 both money and credit. Congress, however, refused, and the 
 direct loss to the country in excessive interest to be paid during 
 
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 9*"^ 
 
 'VT^"pr 
 
 21 
 
 the term of the bonds exceeds $16,000,000, while the less direct 
 loss by this wanton disregard of national credit is incalculable. 
 
 While the sale of bonds brought $65,000,000 into the im- 
 poverished Treasury, it had become clear that the mere selling of 
 bonds, even directly for go!d, would not alone save the situation. 
 There is no real relation between revenue deficits which have to 
 be met by the sale of bonds and the requirements in gold of the 
 public for export or for hoarding. It is to some extent an 
 accident that the gold receipts from the bond sales of February 
 and November, 1894, met the public's requirements, at the time, 
 of gold for exporti The real evil is the absence of gold in the 
 receipts at the custom houses ; and only confidence, and the stop- 
 page of excessive gold shipments, will cure that. 
 
 For such reasons the Government came to an understand- 
 ing with the syndicate, that the latter would, in supplying the 
 gold referred to, bring one-half of it from Europe, and would 
 •• exert all financial influence and make all legitimate efforts to 
 protect the Treasury of the United States against the with- 
 driiwals of gold^ pending the complete performance" of the 
 contract, which has been generally understood to mean until 
 the ist October, 1895.* So far as it enabled the Treasury 
 to maintain its gold reserve for the time being, this part 
 of the scheme has been successful. At the lowest point 
 reached, 9th February, 1895, the gold reserve had fallen to 
 $4i»393»2i2. By the bond sale it received $65,1 17,500, and this 
 addition would make a reserve of $106,510,712. On the ist of 
 August the reserve was $107,236,486, but during that month 
 considerable gold was shippedj the syndicate, however, re, 
 plenishing the Treasury sufficiently to have the reserve at 31st 
 ultimo a trifle over $100,000,000. 
 
 The syndicate being composed of the leading European and 
 
 * The If ew York Tribune of 14th instant contains the following authorized 
 statenient by the syndicate : 
 
 The impression has become Keneral that the members of the bond syndicate entered 
 into an agreement with the United States Treasury to maintain the tioo,ooo,ooo reserve 
 until October ist, and that upon that date said obligation will cease. Such is not the case 
 /The bond Svndicats fulfilled all its obligations to the Government in June last, and has not 
 since been bound in any way to the Treasunr. It is true that it has, from time to time since 
 last June, paid over various sums in gold coin to the Treasury, which have sufficed to main- 
 tain the reserve, but it has done so voluntarily, and will continue so to do in the same spirit 
 and from the same motive. It v^iU continue to deposit gold until November ist, and 
 Pecember ist, and January ist if necessary, and if existing conditions make it feasible 
 to do so, 
 
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 \ 22 ■ • - 
 
 American bankeYs, and being bankers and not a government, 
 were able to do many things not open to the Treasury to do. Jn , 
 order to avoid gold shipments they must supply the sterling or con-' 
 tinental exchange necessary to take its place ; and such is their 
 strength th'ey have been able to do this at a price exceeding the 
 actual cost of shipping gold b^an abnormal profit. The high price 
 was made possible by creating a feeling against gold shipments so 
 strong that ordinary bill-drawers did not care to incur the odium 
 of creating exchange in that way. And of course there has 
 been a strong desire on the part of prudent bankers to do 
 nothing which would militate against a return of confidence. 
 But great as is the wealth and credit of the syndicate, they 
 could not issue an indefinite amount of e:^change against 
 nothing. No doubt they have used their credit to a great 
 extent, but we are told that they have by their influence, and 
 the improved feehng regarding American finances, sold securi 
 ties abroad to the extent of over §100,000,000. 
 
 This statement is made by a leading financial journal, a list 
 of the securities being given. Of the amount about one-third was 
 in United States Governnient bonds, presumably the European 
 share of the syndicate purchase. That such a large volume of 
 United States securities has been placed by the syndicate is not 
 generally credited, and certainly of those sold a considerable 
 proportion has already been resold and returned to New York. 
 In any event it cannot be doubted that the syndicate has 
 averted large shipments of gold by its ability to place a very 
 considerable amount of securities abroa.d. 
 
 Whatever criticisms may have b*en made regarding the 
 large profits of the syndicate in this transaction, it is, I think, 
 probable that the profits are not out of proportion to the services 
 rendered by the syndicate to the Government, and therefore to 
 the people of the United States. The general public are not 
 apt to understand the extent of the financial peril in that 
 country at the moment when the transaction was enterecj i$to, 
 and they are also not apt to understand, as bankers wiHffee 
 amount of skill, courage, resource and confidence in the future, 
 shown by the leaders of the Syndicate, in practically carrying 
 such a great country through the past four or five months. The 
 Treasury has now passed safely through the summer.and the ex- 
 
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 port of the country's products will doubtless avert heavy gold ship- 
 ments for some months. The rapid advance in the prices of all 
 commodities which began practically in May, has so stimulated 
 business that the silver advocate may not be able to charm much 
 longer, and confidence may return and American securities go 
 abroad in quantities sufficient to put off the evil day. But this is 
 uncertain, and apparently there can be no financial rest for that 
 country until new measures arfe adopted, based upon what the 
 majority of the worldregards as honest and free from political 
 truckling to silver miners. 
 
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