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I Dear Sir, , ^ IN asking my opinion relative to Banking associations ia the Canadas, and particularly as to tliose of this city, I fear you have impoed a task upon me which I shall not be able to discharge much to iny own satisfaction, or to yours, within the compass of a reasona- ble letter ; but as far as I am able to judge of their ten- dency, operation, and legality, and as far as I h.ve been informed of their practices you are welcome to all I can tell you. If in your province, the evil consequences that have ensued in this, from precipitancy, self-suffi- ciency and avarice, in the manngtment of those institu- tions, can be eschewed from our example, it may be recorded as the principal if not the only good that the Banks in Citnada have produced. That banking establishments may be rendered emi- nently useful in all commerci.l countries, when under proper management, and sufficiently under the surveil. lance of the mercantile interest and of the government) not to be able to assume to dictate to either,) cannot be denied, whilst on the other hand they may, if conducted on con- trary principles, be productive of incalculable evil, and become what I think I shall succeed in proving ours to be both in law and in farr />«;M«t«« ^^.i ^ .1,1,,. „...• v The evil* they have occasioned and msy produce wrll not be removed by the acts of Incorporation that have been applied for to our Legislature ; they might be in part remedied by the banks being bound hand and foot as it were, and by their mode of transacting business being regulated by an act of the Legislature, entering into the varic i minutiae of their operations, for which ■n act would be required like the Arabian Tales of one thousand and one sections ; but the very putting of any kind of trammels on such operations must paralyze them nearly into a state of annihilation, / The main objection is to the very essence of them, that is to the association of a number of mercantile individuals for the purpose of- monopolizing all the money and exchange bysines-; of the country, and controuling the whole remainder of the trading community. «• Reform it altogether" i$ the only way. Put the laws in execution for their suppres- sion and hold out encouragement for individuals or part- nerships of from two to six persons (to which number the British laws have wisely restricted all private bank- ing societies) to establish banks upon the same princi- pies as the country bankers in England, and priyatfi bankers in London. In ^ new country like this, some danger wa? to be ap- prehended in establishing associated banks, from it^ throwing into our circulating medium several hundred thousand pounds more than existed before, being just sq much more than had been previously found sufficient for the ^an^s of trade. Nevertheless, thanks to the operations of our banks we have npw less than the u-^ual and requisite amount of circulating medium ; for specie l^as in a gr^at treasure disappeared, ^4 the ^atyral ti- —nmmmmm ' produce will ion that have ' might be in laud and foot :ing business ire, entering IS, for which 1 ales of one atting of any aralyze them lain objection e association le purpose of- bysincs"! of emainder of ?ther" i$ the leir Fuppres- luals or part- lich number rivate bank- same princi- and private ^a« to be ap- s, from itsi ral hundred eing just so d sufficient nks to the n the u«ual i for sppcie ijiatyral ti- ■lidity and prejudices of the Cinadian population, added to the equivocal nature of our bank bills, and the facili- ty with which they have been counterfeited, prevent bank paper as a substitute for specie from circulating »ny where but in the precinct? of Montreal and Qiebec. Whilst the banks were ent^aged in putting thfir notes in circulation, they were equal y husieJ in purcha<:ing up our specie, and sending it to a foreign Tijrket. Plow this will operate in the eni! I do no- know, perhaps the country heing now pretty well drained of Spanish dollars «nd Ainerican gold, (the sp^'cies of coin ihpy preferred to trade in,) and the demand for dollars having for the present decreased in the United States, the evil may cure itself } unless they should discover that jonrie other description of specie will bear a premium in the States *nd fall to exporting it ; in which case, the J ord have mercy upon us ! !* This specie tr.ule raised at one time a pretty hubbub aniong«t us. A knowing one aware that the French half crowns had fallen ten per cent, in value in the United States, started off and brought % cargo of them to Canada where they retained and still eetain their original legi^lattv value of 2s. 9(1. Halifax. / These he paid into the batiks an J the amount was pl.ced to the credit of his account, .v »ich he then drew out in checks in the usual fornvand thus converted them inte othe-r specie. The bank dirrctor? having discc ered that he had got the weathsr-gige of them, and being averse to competition in ihe specie trade, and mortal • Since the above was written guineas and every ipecies of heivy gold have become objects of bpeciilation. In a country h.iving no mint of its own and where the coins of othtr countriet jUone circulate, the «»me law which mako any coin current atigttt to f [ohihit iti being dealt in a* aMrchaiMltfte. I / 6 enemJtf to the maxim " live and let live," then adopted the Illegal resolution of refusing to receive the half crowns at their legal rate. Now came the ««hurly burly." They made a bold push at once, condemning this species of coin as nothing but old silver and refused to receive or pay them. It was nothing to them that they had been made a legal tender by an act of the Provincial Parliament. Their High Mightinesses seem- ed to view it as derogatory to their dignity to be bound by any such enactment ; and as their original associa. tion was contrary to law, they appeared to consider themselves above the law in acting under it. This was followed by a puzzling, tantalising, contradictory con- duct between the banks— one would not receive the half crowns as a deposit— the other would not take them in payment of bills due to them— one would receive them in payment but « did not like them"— the other would not receive them until tendered in due legal form by a notary public, whose august presence (strange to tell) had a greater influence on them than the law of the land. A legal decision put an end to the question as to the value at which half crowns were to pass ; but this childish game was carried on till it produced an open rupture between cur two banks. The smothered flame of jealous rivalsb p which had been gendered from the time when a second bank was talked of, burst out and in the arrogance of seniority, and reputed greater wealth and influence, one bank refused to take the bills of the other. This was a scheme the effects of which, by cut- ting off the nose to be revenged on the face " there needed no ghost come from the grave to tell us." The bank whose bills were thus stigmatised, collected all those of the other, on which they could lay their hands, put ihetr own bills into circulation in their place, and then in teal of settling the bahnce at stated times be- tween the two bank^, as wis before customary, when probably only a compantive small amount would be due from one to the other, the senior b.mk had to pay all their nofe^ which the other htld in hard cash. Had this magnanimoii«! plan be'm carried on for a short time longtT it would have drained the vaults of one bank of all their specie, and extensively circulated the bills of the oth«»r. But, would you believe it my dear Sir ? such was the petulent animosity with which this helium Bancorum was carried on, that when this wise measure re- coiled upon the deviser-', a kind of tacit understanding, little sliort of a conspiracy, was entered into by jome of the directors of one bank (mark, not all) not to make any payment to any person concerned with, or keeping cash at, the nther bank, in the usual way by checks oa their own bank, by which their bills or s,)ecie would get into their opponent's hands, but to pay them in the bank bills of the other bank, a quantity of rhich they oro- cured and hoarded up for that special ourpose ! Such was the first memorable fracas betweeii these rival institutions. It is now over, and tranquility is re- stored to the moneyed public, but at the expense of a good deal of trouble and inconvenience at the time. Thus relation will give you some idea of the talents of our bank directors as such j but independent of this, their situations and occupatit ns in life render them ill qualified to act in that capacity. Do not conclude frota r\is that I mean any imputation against those gent'femen, in any other station than in their official **?ts at the a III board of Directors* They are all respectable, «« all tio- nourablc men," and men to whom the country is much indebted in various degrees, but not as bank directors. They are, with few exceptions, all mercmtile men and engaged in various commercial pursuits, which is alone> be their talents what they may, incompatible with the impartiti discharge oF theii* duty as b»nk dii'ectorst They assemble in secret conclave twice a Week, the bills sent in for Jiscount are presented before them, they thus get acquainted wirh the mom yed transactions of all wh() apply, and this united with the ihformatioh they get ai to the other p.irrs of the business of the applicants from their counting house and shop intercourse, totahy des- troys that secrecy which has been aptly termed " the soul of business." This puts every man who stands in need of an accoiMnodation by the banks, xmder contri- bution to their gooJ will, and may place him at the mer- cy, and subject him to the whims or caprice, of a compe*. titor in the same trade. It has been said (but I do not vouch for the truth of it,) that the credit and circum- stances of men are as freely discussed at these meetings as a piece of scandal at the tea table ol an old maid. There is a tacit under«tan ling amongst themselves, that whatever pcsses in the director's room is sui rosa^ but out it comes by some means or other, and if the unfortunate fellow whose bill has been rejected, does not hear of it from some good natured friend to whom a director has told it as a great secret, he will soon discover it from the looks and demeanour of the first director he goes to make a purchase from, unless he carries the cash in his hand. It is said moreover that from the mutual hostili* ty of the lianks if you look into the black book (i. «. 1]. S a book in which the names of persons whose notes are ^ decreed mt to be discounted are entered) of the on« bank , you will find k filled with the adherents and friends of the other and vice versa. Nay, not only ia the note of hand of such a person stamped with disgrace^ but even it is saia if a bill with undoubted names, narne^ of friends and customers of the bank sitting in judg- ment, comes before them, if it be contaminated by ati endorser who belongs to the other party away with it-^ it is consigned to reprobation. The bank directors be- ing engaged deeply in commerce • 7 themselves occa- sionally require discounts from the uanfcs. It has beea said that when an application for perhaps a large suni has been made by one of them, the rest do not like to refuse, as it may happen that he may have to serve some of them a similar good turn at a future day. The di. . rector in question gets it ; the amount he requires being * hrge, swallows up all the funds the bank had for the purposes of discount that day, and many demands made for smaller sums are declined, and people equally id their respective lines deserving of credit with him, have their bill* thrmvn out, their views disappointed, and perhaps from inability to meet » present pressing de- mand, thetr credit irrecoverably shaken ; and all because they happen not to be bank director? or rather because they who are so are engaged in commercial transaction*. On the same principle of « claw me, and I'll claw thee'» it is even said, that when from some explained or unex- \ plained motive, one director is desirous of having a parw r ticular name put on the black list, his co-asse^ors do! not object, trusting that when they have any avowable ^ or unavowable cause to desire the same thing, they wiU find an equally compliant board. Nor is it any merit in a person so black-balled that he has oever ha4 a note B / 10 protested nor ever suffered a creditor to ask fwicp for his money, nor ever required one day's extension <{ time ; if the fiat has gone forth, he is cast cut from the hallowed sanctuary of bank favorites, and it is decreed that " there is no health in him." if I Thus you see, this clashing of interests and union of duties whilst it produces disappointments to others draws together the parties themselves in closser bonds. It has been alledged (for what will not scandal say ?) that some of the directors (who by their articles of association must be stock-holders) have got bills discounted, and had cash lent on the credit of the stock they held. In such a case do you think they were stock-holders ? or men of straw ? Another evil which both affects the pros- perity of the bnnks, and the convenience of the public, arising from »he narrow prejudices of our bank directors, is, that they have foolishly made it a rule not to discount bills for, or have any dealings beyond the receiving depo- sits, with persons not in trade* An ounce of knowledge and experience would have told them, that far the larg- est and best customers, of all banks and bankers, are people not in trade, landholders and others; besides hoyw absurd to suppose that none but persons in trade have occasion to draw, accept on endorse bills, that A becaiise he lives in the country, and keeps neither store nor counting house, u less solvent than B, who sells i?.pe by the yard or sugar by the pound \ \ * A cinnilar regulation exists respecting gentlemen rf the hw. But foi this there may be some re;isoB being concious of the ille- gality of th( 8c institutions, thcro might he nome risk in theit soming in contact with men who practice Uw. 11 These you will perceive, are a few of the disadvanta- ges ariHing from mercantile men being bank directors, and many others may occur equally injurious to the in- stitutions and the public. It is usunl vrhenever any pro- posal is made in parliament, tending to tie up the hands of ministry to curtail the power of the judges or officers of state, or even to restrain the royal prerogature to pre- mise that the present ministers, judges or sovereign as the case may be, are all " good men and true," but that such restraints are necessary to guard against the future abuse of power, and this salvo is always taken as it is meant, as words of course ; so in the instance under contemplation I beg to declare that the present men are all just and true, wellmeaning, and though forming a defective and imbecile board, yet not individually or wil- fully blameworthy. But who knows how soon an avari- cious or unprincipled character may creinf, because few were making remit- tances in proportion to the amount neccssiiry to pay the military establishment. Since the banks have laid hold of this branch, bills on England have invariably brought a premium, and will continue to do so. The Commis- sary General when in want of money advertises govern- ment bills for sale. The banks who have the command of cash, give in their oftl-rs, and a bargain is closed on the most f^jvourable terms they can. By this means and by having the sale of the bulk of the bills which the directors (the chief private drawers) have to pa^s, thry become the holders of almost all the disposeable ex- change, and merchants when they have to make a renir- tance, must purchase of them at the premium they choose to exact. In all cases the banks will demand a profit in addition to what it would have cost the remittor had he bought it at the first hand, had not the banks stepped forward and forestalled the market. I believe there are instances in whlcli the banks on finding ex- change brought a higher price in the United States have carried it there for sale ; so that the Canada merchant had to pay not only the price exchange brought her-, but also the highest rate which could be procured for it at New- York or Boston. Trading in specie (not the current coin of the conn- ' try) is undoubtedly a legitimate pursuit for bankers, though in the mother country very few besides the bank of England purchase and sell bullion. AUhough there too, no public banks, and very few private ones, meddle with foreign exchanges, bills of exchange are equally a fair object for banking operations ; but ir is the Jewish traffic in the circulating medium, the abuse of these ^ur- tuits in forestalling, monopoliiing, anJ controuliog the transactions m them, whicli would otherwise be as it vrere ft* mtura^ and the system which our banks have prartisvd with the vie*«r of enriching the few it the ex- pense of the many, which have tended in the words of an act of Parliament I shall presently have occasion to il'tote, to the common grievance, prejudice^ atti inconvenienct of His Majesty's subjects, or gfeat $mmhers of ihim^ in their f'-Oiif, commerce^ exJtangCf ami other iaivful affairu Ir will appear singular to you that schemes carried on in this way should ever be countenanced by the public, or thit they should ever have attained the credit and conscqiunce requisite to form any thing in the shape of .1 banking establiohment. 'J'he first may be accounted for fn)ni the general embarrassment which prevailed, '^nd the deceptive liberality of the banks in the outset,, which drew many of the unwary into their books, who h;ive never yet been able to extricate themselves. Such persons being still under the weight of their power, pre- icr being quiet, as they know they cannot with impunity either oppose or expose their conduct To their first establishment many things concurred. Monied men ^ho saw and felt the depressed and declining state of commerce, were anxious to embark their capitals in any- undertaking whence a reasonable recompence could be expected, and they did not trouble themselves to enquire how that return was to be made. In this way they rea- dily grasped at the idea of instituting banks, as an ob- ject which had the chance of meeting their expectations. 'I'he designing and ambitious saw in them the means or the contingency of becoming personally the masters of their neighbours' «ecrets and trade, by those means of M 11 !i I lii / . (i j i 14 which a glimpse has before been given. The Indoleflt orthose who had more profitable wnys of employing their clerks than in counting quarter dollars and York shil- lings, saw that by the banks they would have their la- bours abridged and their expenses curtailed. The needy- looked forward to liber.-.l discounts and abundant ?ccom* modation. These motives operated with some, \vith others of a cautious temper a different or additional in- ducement was required, to reconcile them to the esta- blishment of banks. They knew that one effect of the want of a charter was ta make the stockholders liable for the whole debts of the bank to the whole amount of private property they might have, and as no charter of incorporation was obtainable,* the fear of involving themselves beyond the amount of their shares, should any untoward accident happen to the banks, prevented many from readily joining in the scheme. To reconcile these people, and (as they thought er alleged) for their own safety, the more zealous advocates for a bank pro- posed one of the articles of association, by which «» the ♦• joint stock shall alone be responsible for the debts and " engagements of the company, and that no person who '*^ shall or may deal with the company, er to whom they • The bills in'roduced in the House of Assembly in the set- sionsof 1817-18, and also those m the spssion of 1820-21, for the incorporation of the Lower-Canada banks, though thfy pas- £cd the Legislative Council, have nnet the fate of being reserved for his Majesty's approbation. In this WHy the bills of 1817-l» have been allowed to die the dtalh of oblivion, and the same fate may be predicted of the more recent bills. A strong pro- test, it ij said, wag cntmd against them in the Council by tfce fust law authority in the country, the Chief Justice of the Pro. wince. 15 « shall or may become in anywise indebted, shall on any " pretence whatever have recourse against the separate " property of any present or future member of the com- *♦ pany, or against their persons, further than may be " necessary to secure the faithful application of the funds <* thereof to the purposes to which by these presents «• they are liable. But all persons accepting «ny bond, *« bill, note, or other contract of this company, signed »' by the president and countersigned or attested by the " cashier of the company for the time being, or dealing " with it in any other manner whatsoever, thereby re- " spectively giv» credit to the said joint stock or pro- «« perty of the said company, and thereby respectively ^' disavow having recourse, on any pretence whatever, *< to the person or separate property of any present or •« future member of the company, except as before men- ** tioned." This article then goes on to dictate to the Courts of law, and says that " all suits to be brought " against the company shall be brought ngainst the "president for the time being," and « in case of any " suit at law, the president for the time being shall " have full power in his own name, and in behalf of the « company to prosecute to judgment and execution," <:oncluding, in the face of common sense and statute law, " it being expressly understood that all persons «* dealing with the said company agree to these terms, " and are to be bound thereby." Absurd and illegal as this article is, the next exceeds it in absurdity and ille- gality. By it " for the information of all persons who *< may transact business with, or in any manner give « credit to the company, every bond, bill, note, or other " instrument or contract, by the effect or terms of which " the company may be charged or held liable for the '! I 1(1 •♦payment Of money, shall specially dechre. that fnt. mm shall be made out of the joint funds of the co^aZ, according to the present articles of association, and L «a/W.. " And it is declared « that no en^.agen.ent « can be legally made in the name of the company un. •ess It contain a limitation or restriction to the dF ct « above recited, and that the company expressly di.avo.^ all respon.,biIi,y for any debt or engagement which mayhemade.ntheirn.nne. not containing a limitation or restriction to thjieffect aforesaid." It is a maxim 'n law ( md those wl^ deny maxims cannot be argued with) that no per.on can bind himself to do any thing contrary ta law, and that no agreement or part of an agreement, or contract, that is contrary ,o raw can be yalid, but is from that circumstance utterly iroid and of no force agamst either party. Now, borh By the common and written law of England, and by the Cvil law, on which the French laws are founded, every person concerned in an undertaking is liable for the full extent of that undertaking, and for all the claims that may be made upon it. So says likewise the /.;. mercatori, or custom of merchant., and the laws and usager reluivr^ to trade m Holland, and of the Hanse towns. To fancy' therefore, that such clauses as have been introduced into the articles of association of the Canada banks, which are contrary to law, could be binding either upon the^e companies, or upon any one who had a claim upon them, seems preposterous. A man may certainly in some cases, s.gn and be bound by a defeasance of his own rights, and the bank-cu.tomers who have signed the agreement inserted m their bank-books, as is practised here, to abide by those article* of association which I have been A t I 1* quoting may protjaKly be held to the tenor o* them : but nothing upon earth could extend this to the holders of bank bilU, who could not, supposing even the articles in question to be unobjectionable in point of legality, by Any latitude of construction be converted mto t>ersonf dtaling with th compaty. Bb this as It may, in pursuance of those sage articles of association a chiuse was inserted in the bank-bills, af a aalvo specifying that the bills are to be paid ««<»«/ of the joint funds of the association, and no other," implying that the private property of the stockholders was not answer- able for the payment of the bills they might issue; and that on an emergency they might evade the payment of the bills by the simple answer that « there are no funds belonging to the association." That such an answer is not an impossible one, however weahhy the individuals may be who compose the banks, or in whatever hi^h de- gree of credit the banks may stand with the public will be evident from the following supposed case. Should, at a time of war with the United States, an actual inva- sion of the Province take place : and, under thp fear o^ the vaults being robbed by the 6neray, suppose a general meeting of the directors resolve that each shareholder should be allowed to withdraw from the banks either the whole or a part of hjs c;apiral paid in. and that the sharer holders did 80. and carried off each his quantum of spe- cie i then there virould be the answer ready, ♦« there are "no joint funds of the association in the chest." and as the stocholderj do not consider themselves liable for the debts of the bank, tiie holders of bankbiUs might go waistle. * • , To return to my narrative, this evasive anJ nmbigt,- ous clau^e ha.l ho^vcvcr the dosireu effect. It lulled the doubt.r.g ,nto security and raised the desire for hnnkinp. so rhat all ran full tilt in favour of the erection of banks upon the.e preposterous principles. The "Vtill small voue " of reason was not heard, or was drowned by cla.- tnour atid bold assertion-.he necessary number of shares to enn ,le them to commence operations was soon sub- jcnbcd and their fan.ou. nates made their appearance. Here aga.n they were met by the genius of commercial law wl,o plumply told them that according to the rcutun,e ^^ ^/My (generally received as the law of exchange ^^rot.ghout the commercial world) and to the lr.w of ?"filand as established by precedent and analogy, no biU or note containing any species of condition, clause or prov,.o, or which was any other than an absolute uncon- ^monal and peremptory warrant or engagement to pay a specfic sun. ot money, at a specific time and to a sne- C'fic party, <:o„ld be considered as a bill or note accord- inp: to the rustom of merchants, or within the meanin. ^Li!; ^ ^V7"^' "'^'"^ to bills of exchange J and they mundated the country with a r.or:strous .orgrL ywnlous ahort,.n of la.k ^aper, totally unlcncwn before, not exprcssmg even the essenwal averment of .-value process, lou will have head of the opfnion delivered, some t.n,e ago .n Court h.re, from which it appears this tlnuse relative ^ the jo.nt funds of the association is a • There is moreover a Provincial ordinance which directs that bjIUo nndcr it val.d. Their Utcx bi,i» a..,^ Jl^LZ 19 ■:u\ mere nrce. Each and every stockhoIJtfr and every man who can be proved to have been one, and who hav nor given public intimation of his ceasing to be so, ac- cording to the law and practice in such cases, is Uable for the due payment of these bills to the last shilling of property he possesses. It is true that in the legal quei- tions that have hitherto arisen in which th^i merits of the bills of our banks have been involved, no 4ecision has taken place, as to the moJe in which the am«'jnt might be recoverable from the bank or from the stock- holders; nor as to the real validity of them as notes or bills (that they are a security for money is no', denied, but so are many thing^';ng which lately occurred in the course of mf ftwn;. s^"j readmg (as ^ noble Lord used to say,>I thinfc appbcait """"on •• nd Plantation"- ; ^'''"''' "•""'"'°'"- C-'onies •• erv thf 7 M" '^'"'"" ' -^""^ "■">« "" "nd ev. "reTitM a" :^n':"^^ ""?" """ "-■"«=• "> "•» said tcciiea Act mentioned or descnhoH n»,^ i -i.- . « be arfp,? ,1 uescnoed and prohibited to ;:- Kingdom, as ais'or:.::rd:\r„t:rL^^^ " empts Zr™' !, "."." °" ""^ '"e undertakings, at. •• deTcr bed ":: '.'""«' ■""'" W.re.me„,ioned or descr bed, are and shall be deemed ,„ be illegal and "tain? : ""'""'' '^'■■"'"'°-- Colonies anf Plan' mtons .n Amenca. also, and shall not &„ be prac. tised, or « anj, wm put in cxeMion." J. J 34 '• '/• IV. Becau« ,he proposed clauw of ihi. Bill, wit,!, i. •h p boyond ,h. ,„„„„, of ,h. «ock which ,h„ "" r«P«..,.ly p„3s«., i. aU. equally rep„g„.r.„7. pro.„,o™ of .h. U.h Ceo. „. cap's:.",*, ^ ^ t 0,0. 1, cap 6. Ina,much a, if ,hey are no. er„„d . wants support) i, confirmed by thTrLontef ^ i " (Signed) ;^/.,S|^L, Speaker. J r { I y v^/l msssROfm, printbp