The Penny Bank

1 March 1909

Canadians are known for being careful with their money. While this may have been true in the past, the reputation is more apparent than real today. The average Canadian household’s debt to income ratio is much higher than that of households in other countries, and seems to touch a new record level every year. Canadians also save a much smaller portion of their incomes today than they did their parents or grandparents. Still, Canadian financial institutions have been more conservatively run than their American and British counterparts, a factor that helped them get through the 2008 global financial crisis with only minor bruises. The Canadian reputation for thrift and prudence may have originated with our canny Scottish forebears, who founded many of Canada’s chartered banks during the nineteenth century, such as the Bank of Nova Scotia and the Bank of Montreal.

The thriftiness of our grandparents’ generation was also undoubtedly influenced by the Great Depression when they had little choice but to scrimp and save. But another important factor was the Penny Bank of Toronto, later known as the Penny Bank of Ontario. While a tiddler in the Canadian financial seas, the Penny Bank helped to instill a sense of thrift in hundreds of thousands of youngsters throughout Ontario and beyond during the early decades of the twentieth century. And, yes, Scots played a big role in its establishment too.

Penny BAnk Mcmurchy

Angus McMurchy, K.C., Key backer and organizer of the Penny Bank of Toronto. Carmichael Family Online.

The Penny Bank had its roots in informal saving associations established by religious groups in the late nineteenth century for working class men and women. At that time, one needed to make a minimum deposit of $1, more than $25 in today’s money, to open an account at a bank, or at the government-owned Post Office Savings Bank. This was beyond the means of the very poor. Two such groups in Toronto were the Savings Association of the St Andrews Presbyterian Church and the Victor Five-Cent Savings Association organized by the Fred Victor Mission. The Mission, which continues to thrive today, was established by Hart Massey, a prominent Toronto industrialist and devout Methodist who founded Massey-Ferguson, the agricultural equipment company. The Mission was named after his son, Fred Victor, who died in 1890 at age thirteen. In 1900, the Mission organized an informal “penny bank” with the Toronto Board of Education through which students at the Lord Dufferin School could make small deposits and earn interest. It was very successful. So successful that its backers thought that a more formal structure for the savings association would be advisable, and approached the Dominion Government for legislation.

Instead of incorporating the Penny Bank of Toronto through a private Act of Parliament, the government favoured more generic legislation to allow for the incorporation of penny banks throughout Canada. The Penny Bank Act was passed by the Dominion Government in 1903 as a way of encouraging thrift among the “labouring classes,” especially their children. In the event, the Penny Bank of Toronto was apparently the only such bank to be incorporated under the Act though there is a brief reference in the legislative record of the 1920s to a very small Penny Bank of Chicoutimi in Quebec.

The Penny Bank of Toronto, which brought together the St Andrews and Victor thrift organizations, was not an ordinary bank, but rather a philanthropic institution supported by many of Toronto’s prominent citizens. Early backers included Angus McMurchy, K.C., the solicitor for the Canadian Pacific Railway, Sir William Hearst, who became Premier of Ontario from 1914-1919, and Sir Byron Edmund Walker, president of the Canadian Bank of Commerce from 1907 to his death in 1924. Sir George Burn of the Bank of Ottawa later joined the Penny Bank’s Board of Directors. The manager of the Penny Bank was H. D. Lockhart Gordon, a principal in the Canadian accounting Clarkson, Gordon & Dilworth.  The Penny Bank, a not-for-profit institution, had no shareholders and no capital. Its backers provided a guarantee fund, initially $10,000, to support the organization. They also managed the institution. However, they were forbidden by the legislation from receiving any dividend or compensation for their work. The Bank payed depositors 3 per cent interest, the standard rate of interest of the day. All funds raised by the Bank were deposited with the Post Office Savings Bank owned by the Dominion Government. The maximum size of an account was $300. Despite the Bank’s backers managing the institution for free, there were clerical costs associated with keeping track of deposits and withdrawals. These costs were partially offset by interest earned on the guarantee fund. As well, the Post Office Savings Bank financially assisted the Penny Bank by giving it a preferential interest rate. Initially, this rate was set at ½ percentage point above the 3 per cent rate the Post Office paid on its deposits. The government increased this margin to 1 percentage point in 1911. Over time, the Penny Bank also received various grants from the Ontario and Dominion governments to help sustain its operations.

While the Penny Bank was open to all, its focus was on public school children. Supporters hoped that young, working class kids who might not otherwise be exposed to the banking system would learn through personal experience the value of thrift and the wonders of compound interest, thereby improving their quality of life in later years. Youngsters could bring in their pennies every Monday to their classroom teacher who would record their deposits in their personal passbooks. Deposits as low as one cent were accepted. School principals would receive the funds and in turn deposit them in the Penny Bank. Students or their parents went to a designated chartered bank to withdraw funds.

The Penny Bank of Toronto quickly spread throughout the Toronto School Board and beyond. Within five years, it was operating in schools in Oakville, Guelph, Galt, Port Hope and Orangeville. It reached Ottawa in 1909, though not without considerable discussion and opposition by Ottawa teachers who had to run the programme in their classrooms. It was estimated that it took thirty minutes a week for a teacher to handle Penny Bank deposits. The Ottawa’s Public School Board recommended a pilot project at five public schools—Glashan, Cambridge, Creighton, Osgoode and Elgin. But at a meeting of teachers on the issue, of the sixty-nine teachers that attended only seventeen supported the Penny Bank. School trustees were also divided, with some calling the Penny Bank “a fad” that had no bearing on education, and would cost as much as $1,200 per year to operate. One trustee believed that the Penny Bank would make “mammon worshippers of the children.” He maintained that the proper place “to teach little ones the value and importance of thrift [was] in the home.” (Sounds like what some people say about sex education today!)

Among the strong supporters of the Penny Bank was the Ottawa Journal newspaper. Several editorials in favour of the Bank appeared in the paper. It rejected the teachers’ opposition as being irrelevant saying that it was for the School Board to decide. The newspaper argued that the Penny Bank had direct and practical educational benefits that would prepare children, especially those from working-class backgrounds, “for the battle of life.” It noted that 95 per cent of public school children went directly from school to earning their living. Consequently, “it naturally follows that the education be as utilitarian in nature as possible.”

Toronto’s successful experience was also noted. The newspaper claimed that children there were saving with a definite objective in mind rather than simply hoarding their money. “What wasted 5-cent pieces could not buy, saved 5-cent pieces, which invariably bulked into five dollars, could buy.” It also opined that during a recent economic downturn, which it described as an “out-of-work spell,” children’s savings helped their parents over “a most critical and trying time,” that prevented them from appealing to “the charity department.”

Despite teacher opposition, the pilot programme went ahead as planned though with one small change. Owing to concern expressed by school principals that they would have to leave their schools during the school day to deposit their Penny Bank collections, it was arranged that a clerk from the Traders Bank of Canada, the institution in Ottawa that initially handled the funds on behalf of the Penny Bank, would pick up the cash. Start-up expenses for ledgers, stationery and passbooks in the five schools was estimated at $65.

Penny Bank passbook 1

Passbook (exterior) for the Penny Bank of Ontario, October 1939, Courtesy of the Bank of Canada Museum, 1991.0007.00005.

On 1 March 1909, principals in the five test schools explained the Penny Bank system to students in assembly. Small passbooks were handed out. Pennies, nickels and dimes quickly flowed in. Of the five schools that participated in the pilot project, Glashan School topped the list that first day, raising $52.16 from 173 depositors out of a school body of 550 pupils. Deposits ranged in size from one cent to three dollars. The collection might have been higher as many students had forgotten to bring in their pennies that morning. Two months later, the youngsters in the five schools had squirreled away over $1,000 (equivalent to more than $22,000 in today’s money).

Penny Bank passbook 2

Passbook (interior) of the Savings Bank of Ontario, 1939, instructions for depositor and weekly deposits, Courtesy of the Bank of Canada Museum, 1991.0007.00005.

With the pilot project a great success, it was expanded the following year to the Rosemont Avenue, Kent Street, Percy Street and Wellington Street Public Schools, and subsequently to all nineteen Ottawa public schools.  By end-March 1910, Ottawa students had more than $3,800 on deposit in their names in the Penny Bank of Toronto. By December, the amount had topped $8,500. That Christmas, the youngsters “had the means to be generous gift-givers” said the Ottawa Journal that also opined that without the Penny Bank, the money would “likely to have been long spent.”

Penny Bank passbook 3

Passbook (interior) of the Savings Bank of Ontario, 1939, instructions for teachers, Courtesy of the Bank of Canada Museum, 1991.0007.00005.

Over the next two decades, deposits in the Penny Bank grew steadily as schools across Ontario and in other provinces joined the programme. The Y.M.C.A. also participated. Newspapers regularly reported on deposit growth. Schools competed on how much they could save. In 1921, Penny Bank directors initiated a contest for a banner to the school that had “made the best use of the bank.” The banner read: “Prize Banner, Province of Ontario, Penny Bank Competition” with a maple leaf and a penny centred on it, with space for the names of five schools and the years in which they won it. That first year, St Patrick’s Public School in Guelph won the banner, with the Hester How school of Toronto in second place.

The 1920s brought changes to the Penny Bank. With more and more schools outside of Toronto joining the scheme, its name was changed to the Penny Bank of Ontario in 1923. More schools and rapidly growing deposits also meant rising administrative costs. Bank directors sought and received government approval to invest the institution’s growing guarantee fund in higher-yielding assets, including Victory bonds and subsequently mortgages to help offset costs. Penny bank deposits continued to be invested with the Post Office. Reflecting the growth of the scheme in Ottawa, the Penny Bank hired Mrs Evelyn Topley in 1924 to administer the scheme, a position she held until her retirement in early 1939.

By 1929, total Penny Bank deposits had topped the $1 million mark with more than 350 participating schools. Ottawa deposits reached almost $53,000. Although teachers complained about the detailed work required to keep track of thousands of small deposits, the Journal reckoned that the “moral effect on children [was] incalculable.”

Despite the onset of the Great Depression, Penny Bank deposits continued to grow during the early 1930s, peaking at about $1.5 million in 1932 with 466 participating schools. Deposits of Ottawa’s nineteen public schools touched almost $59,000. However, the prevailing poor economic conditions began to take its toll. Ottawa school deposits began to slip, falling to just over $43,000 by the end of 1937. At the depth of the Depression, the Ontario Government provided a $150,000 guarantee to back-stop the Bank and protect the children from losses. There were allegations in the Provincial legislature that the provincial guarantee was required because the guarantee fund put up by the Penny Bank private backers had sustained losses.

Penny BAnk Winding up 6-7-48

Liquidation notice for the Penny Bank of Ontario, The Ottawa Journal, 6 July 1948.

But it was the onset of World War II that crippled the Penny Bank. Anxious to do their bit, children began withdrawing their savings to invest in war bonds and war savings stamps. Deposits dropped precipitously. By December 1942, Ottawa deposits in the Penny Bank had dropped by almost two thirds from their peak. At the end of February 1943, the directors of the institution suspended new deposits in the Penny Bank for the duration of the war. Existing account holders could keep their funds in the Bank and continue to earn interest but they could not make additional deposits.

The Bank never again re-opened for business. At the request of its managers, the Penny Bank was put into liquidation and ceased operations as of the beginning of August 1948. The winding up of the institution was supervised by the Inspector General of Banks. At that time, total deposits and accrued interest stood at roughly $164,000 in 128,000 accounts. Most of these accounts were dormant. Depositors had the choice of receiving a cheque for their balances or transferring their accounts to the Post Office Savings Bank. Just over $51,000 was so transferred. Deposit liabilities in dormant, unclaimed accounts of less than $1 were immediately extinguished. After paying all remaining liabilities, the Penny Bank gave the residual balance of $101,941.14 to the Toronto Hospital for Sick Children.

Sources:

Carmichael Family Online, 2017. McMurchy Obituaries, https://carmichaelfamilyonline.wordpress.com/mcmurchy-family/mcmurchy-documents-pictures/mcmurchy-obituraries/.

Debates of the House of Commons, various years.

Debates of the Senate of Canada, various years.

Filey, Mike, 1994. Toronto Sketches 3, The Way We Were, Toronto: Dundurn Press Ltd.

Fred Victor, 2017. Fred Victor Beginnings, http://www.fredvictor.org/home.

Germain, Richard N, 1996. Dollars Through The Doors, A Pre-1930 History of Bank Marketing in America, Westport, CT: Greenwood Press.

Globe (The), 1922. “Penny Bank Banner,” 28 February.

Ottawa Journal (The), 1904. “The Penny Bank in Toronto,” 21 June.

————————–, 1906. “A Philanthropic Institution,” 2 June.

————————–, 1907. “Toronto Penny Bank,” 17 October.

————————–, 1909, “Penny Banks,” 8 January.

————————–, 1909. “Penny Savings Banks,” 2 February.

————————–, 1909. “Penny Banks To Open Here Soon,” 10 February.

————————–, 1909. “Deposits Made Into Penny Banks,” 1 March.

————————–, 1909. “Penny Banks Are Opened,” 28 February.

————————–, 1910. “The Children At Christmas,” 2 December.

————————–, 1912. “Criticism of R.A. Sproule,” 12 February.

————————–, 1921, “Penny Bank’s Directors Will Give A Prize Banner,” 25 January.

————————–, 1921. “Save The Pennies Campaign Coming,” 15 February.

————————–, 1926. ‘Have Never Had Run On The Penny Banks,” 26 February.

————————–, 1927. “Sir William Hearst,” 30 June.

————————–, 1929. “Ontario Children Save A Million,” 9 January.

————————–, 1929. “Penny Bank Bill Passes Senate,” 21 May.

————————–, 1931. “Increase Is Shown Penny Bank Savings,” 17 June.

————————–, 1936. “Says Poor Investments Made By Penny Bank,” 31 March.

————————–, 1939. “Toronto Girl Succeeds Mrs E.E. Topley,” 19 April.

————————–, 1943. “Suspend Deposits in Penny Bank,” 26 February.

————————-, 1948. “End of the Penny Bank,” 22 March.

————————-, 1948. “Ontario Penny Bank Finally Closes Its Doors,” 3 August.

 

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The Bank of Ottawa

20 January 1919

Toronto has its Toronto-Dominion Bank. Montreal has its Bank of Montreal. One hundred years ago, Ottawa had its own Bank of Ottawa too. Of the nineteen Canadian chartered banks at the end of 1918, the Bank of Ottawa ranked in the middle of the pack. Its assets stood at $72.7 million, with paid-in capital and reserves of $8.75 million. In comparison, the Bank of Montreal, Canada’s financial goliath at the time, had assets of $558 million and paid-in capital and reserves of $32 million. Still, the Bank of Ottawa was a well-respected regional bank whose main area of operations were located in the City of Ottawa and in the Ottawa Valley on both sides of the river. One of its directors, Sir George Burn, who had previously been its general manager for most of the bank’s existence, was also president of the prestigious Canadian Bankers’ Association.

Bank of Ottawa, Victoria Chambers, 1902, William James Topley-LACPA-008946

Victoria Chambers, 1902. First home of the Bank of Ottawa’s head office, corner of Wellington and O’Connor Streets, across from Parliament Hill, William James Topley/Library and Archives Canada, PA-008946.

The Bank of Ottawa commenced operations at the beginning of December in 1874 with its head office in the Victoria Chambers at the corner of Wellington and O’Connor Streets across from Parliament Hill. (The location is now the site of the Victoria Building, constructed in 1928.) The new bank had one branch located in Arnprior. Oddly, the Arnprior branch began operations roughly two weeks before the main branch as the bank’s headquarters were not ready on opening day.

The Bank of Ottawa was started by a number of the area’s lumber barons with the express purpose of having a sympathetic financial institution in the region to fund the lumber industry. Widely known as the “lumberman’s bank,” its first president was James Maclaren, a lumberman from Buckingham, Quebec. Other directors included George Bryson, a lumberman who operated out of Fort Coulonge, Quebec, Robert Blackburn, owner of the Hawkesbury Lumber Company, and Allan Gilmour, a pioneering Bytown lumberman who owned one of the largest timber companies in Canada. Other directors, all prominent Ottawa businessmen and suppliers to the timber trade, included Charles Magee, an important wholesale dry goods merchant, C. T. Bate, a wholesale grocer, and George Hay who owned a hardware business. The Bank of Ottawa’s initial paid-in capital was $343,000, and had thirteen employees. After its first year in business, the bank paid a dividend of 7 per cent.

Bank of Ottawa, 1901 William James Topley-LAC-PA-0118221,

Bank of Ottawa, Head Office, Wellington Street, 1901. Decorated for the Royal Visit of the Duke and Duchess of Cornwall and York, the future King George V and Queen Mary, William James Topley/Library and Archives Canada, PA-0118221.

Given the costs of starting a new enterprise, and the weak state of the Canadian economy during the mid-1870s, the profits of the new enterprise might not have justified such a dividend. Indeed, the bank temporarily cut its dividend in half. However, the new financial institution gradually expanded, building itself a profitable niche in eastern Ontario and western Quebec. By 1885, ten years after it started, the bank had a paid-in capital of $1 million, with a steadily expanding branch network in the Ottawa Valley. It opened its second and third branches in Carleton Place and Pembroke. Over time, it increased its annual dividend to 12 per cent (of paid-in capital).

Its first branch outside of the region was in Winnipeg in 1881. As this was before the opening of the trans-continental Canadian Pacific Railway, the bank had difficulties in transporting a large safe to the branch. After being told by the Grand Trunk Railway that it would take up to six weeks to deliver it to Winnipeg, the Toronto, Grey & Bruce Railway agreed to do it in fifteen days via trains to Minneapolis, Minnesota, and then to Emerson, Manitoba, with the last leg to Winnipeg via boat on the Red River. The Bank of Ottawa subsequently opened offices in Toronto and Montreal, Canada’s two financial centres at the time, as well as Vancouver. In 1884, it moved into its new head office building on Wellington Street a short distance from its original offices. (The site is approximately the vacant lot between the former U.S. Embassy building and the former Union Bank building at 128 Wellington Street.)

The salad years for the institution occurred between 1908 and 1913, when the bank experienced rapid growth, with its paid-in capital rising to $4 million. By the end of World War I, the bank had 96 branches, with more than 60 in Ontario and another thirteen in the province of Quebec, mostly in the Outaouais.

Given its years of service and key position in Ottawa economic and financial life, imagine the shock in Ottawa and the Valley when the bank’s directors, many of whom were the sons of the Bank’s founders, announced on 20 January 1919 that they had agreed to merge with the Bank of Nova Scotia. The Bank of Nova Scotia, with its head office in Toronto, was roughly twice the size of the Bank of Ottawa with assets of $149 million in 1918 with capital, reserves of about $18.5 million. It had 194 branches coast to coast. It was a friendly take-over. Apparently, the Bank of Nova Scotia approached the Bank of Ottawa. Under the terms of the deal, shareholders of the Bank of Ottawa received four Bank of Nova Scotia shares for every five shares of the Bank of Ottawa. This was the ratio of their share prices prior to the deal; Bank of Nova Scotia shares were trading at $257 per share on the Montreal Stock Exchange while Bank of Ottawa shares traded at $206.

Bank of Ottawa, Kempville, Dept. of Public Works-LAC- PA-046461

Bank of Ottawa, Kemptville Branch, Department of Public Works/Library and Archives Canada, PA-046461.

The deal had advantages for both banks. For the Bank of Nova Scotia, the merger brought it a thriving business with a solid reputation in areas where it had few branches, both in the Ottawa region as well as in western Canada where the institution was eager to expand. The two banks had competing offices in only eleven locations, most of which were in major cities where there was more than enough business to go around. The merger would also raise the Bank of Nova Scotia to fourth place in the Canadian bank rankings, behind only the Bank of Montreal, the Royal Bank of Canada, and the Bank of Commerce.

For the directors of the Bank of Ottawa, who had brushed off earlier overtures by other banks, an alliance with the Bank of Nova Scotia offered “exceptional advantages.” The merger was a way of entering new more profitable areas at less expense. Alone, the bank had a choice of trying to expand organically in the Ottawa region, or through the expensive route of establishing new branches in unfamiliar areas. But by joining the Bank of Nova Scotia, it could take advantage of the growth potential of a bank that had branches across Canada, Newfoundland, the West Indies as well as operations in the United States. The Bank of Nova Scotia was also better diversified, reducing the consequences of an economic slowdown in the Ottawa region. This was an astute move as Canada experienced a sharp recession in the immediate post-war years.

Despite the many attractions of an alliance, there was one thorny issue to resolve—the name of the new institution. The directors of the Bank of Ottawa were loath to see the venerable name of their institution disappear. The Ottawa Evening Journal reported that for forty-four years, the Bank of Ottawa’s name was “identified with practically all of the best businesses and biggest industrial enterprises in central Canada.”  At the same time, the directors of the Bank of Nova Scotia were equally unwilling to see the end of their bank’s storied name that extended back to 1832. For a time, consideration was given to calling the merged bank “The First National Bank of Canada.” However, in light of the Bank of Nova Scotia’s considerable foreign connections, the Bank of Ottawa’s directors reluctantly concluded that it would be a mistake to change names; a view shared by Sir William White, the Minister of Finance, who gave his blessing to the merger.

Without any forewarning of the pending financial nuptials, the announcement of the merger created a sensation in Canadian financial circles. In Ottawa, there was consternation, especially when it became known that the Bank of Ottawa name was to disappear. One businessman, Mr. N. Poulin, said it was a “murder” not a merger. Another called it a “submerger.” Some worried about their access to credit; the Bank of Ottawa had an uncommonly good reputation for being considerate and liberal in its business decisions. One businessman was concerned that after years of dealing with the Bank of Ottawa he would have to start afresh with the Bank of Nova Scotia. Many regarded the bank as an important city asset. Its loss would be a major blow to the prestige to the nation’s capital.

Bank of Ottawa note

Bank of Ottawa, $5, 2 November 1880, hand-signed by James Maclaren, President, and George Burn, Cashier. Note the lumberjacks in the central vignette. Bank of Canada Museum.

The disappearance of the Bank of Ottawa name would also mean the withdrawal of almost $7 million in Bank of Ottawa banknotes from circulation and their replacement by Bank of Nova Scotia notes. Prior to the formation of the Bank of Canada in 1935, every chartered bank had the right to issue their own distinctive banknotes in the amount of its paid-in capital and reserves. While the circulation of bank notes did not represent a large portion of a bank’s business, it was quite profitable. (A bank earned the difference between the cost of printing and circulating its banknotes, and the interest earned on the assets backing the notes.) It also provided useful advertising for the bank, and in the case of the Bank of Ottawa, for the city as well.  Mr Poulin commented that “with a roll of Bank of Ottawa ten dollar bills in his pocket a man could go to any part of the world and fell comfortable and safe.”

At a hastily-called meeting of Ottawa retail merchants, a resolution was passed citing the merchants’ belief that the departure of the head offices of Ottawa’s only financial institution would have “a decidedly bad effect” on the city. More broadly, they were concerned that the concentration of more financial power and decision-making in Toronto and Montreal would be bad for the country. (There had been a rash of financial takeovers, including the acquisition of the Traders Bank of Canada, the Quebec Bank and the Northern Crown Bank by the Royal Bank of Canada, as well as the acquisition of the Bank of British North America by the Bank of Montreal.) Some thought that a committee should be struck to approach the directors of the Bank of Ottawa to get a better understanding of their decision. Some even pledged money to buy shares in the bank in an effort to stop the merger. Still others wanted to approach the Finance Minister to get him to reverse his decision to permit the merger. They noted that an attempt by the Royal Bank of Canada to acquire the Bank of Hamilton a few years earlier had been stopped by the Minister on the grounds that the merger was against the national interest. Mr A. E. Corrigan, the managing director of the Capital Life Assurance Company likened a bank to a “public utility” that had been given a franchise to serve the people. Consequently, the people had a right to protest if a merger was not in their interest. One person alleged that the reason why the Finance Minister approved the merger was because the Prime Minister, Sir Robert Borden, was a shareholder in the Bank of Nova Scotia.

The general manager of the Bank of Ottawa, Mr. D. M. Finnie, tried to allay people’s concerns. He noted that while he would be retiring following the merger, all Bank of Ottawa staff would be retained with the same seniority and opportunities. Critically for Bank of Ottawa customers, its directors would retain their positions within the amalgamated bank and would pay special attention to former Bank of Ottawa clients. Bank of Ottawa customers would also have complete access to the Bank of Nova Scotia’s branches across the country.

At special shareholder meetings held in early March, the shareholders of the Bank of Ottawa and the Bank of Nova Scotia overwhelmingly approved the merger. Following the declaration of a last dividend (no. 111) of 2 per cent for the two-month period ending 30 April 1919, the Bank of Ottawa disappeared into history with all of its assets and liabilities transferred to the Bank of Nova Scotia as of that day. The next morning, all branches of the Bank of Ottawa re-opened as branches of the Bank of Nova Scotia.

Sources:

Globe (The), 1919. “Bank of Ottawa Absorbed by Bank of Nova Scotia,” 20 January.

Ottawa Evening Journal (The), 1918. “Bank of Ottawa’s Gratifying Year,” 19 December.

————————————-, 1919, “Bank of Ottawa To Be Merger With Bank Of Nova Scotia, Making Fourth Largest Bank,” 20 January.

————————————-, 1919. “Says The Merger Will Result In Advantage To All Canada,” 20 January.

————————————-, 1919. “Evolution Of A Great Bank,” 20 January.

————————————-, 1919. “The Merging Of The Bank Of Ottawa,” 20 January.

————————————-, 1919. “Bank of Ottawa Swallowed Up, Strong Protest,” 20 January.

————————————-, 1919. “Bank of Nova Scotia Stronger Than Ever,” 20 January.

————————————-, 1919. “Strong Opposition To Banks’ Merger From Businessmen,” 21 January.

————————————-, 1919. “Mr. Finnie Tells About The Merger,” 21 January.

————————————, 1919. “Great War Veterans Debate Merger Of Banks Of Ottawa And Nova Scotia At Forum, 25 January.

————————————, 1919. “Bank Of Ottawa Now Disappears,” 30 April.

————————————, 1951. “Bank of Ottawa Developed Lumber Trade,” 31 October.

Outaouais’s Forest History, 2017, “The Bank of Ottawa and the financing of the forest industry,” http://www.histoireforestiereoutaouais.ca/en/c10/#10.

 

The Champagne Bank Robber

27 October, 1958

When Mr W.W. Pegg, manager of the Imperial Bank of Canada’s main Ottawa branch at 62 Sparks Street, arrived at work on Monday, 27 October 1958, he had no idea that he was about to experience the worst day of his long and successful career. Entering the classic, Temple-style, granite and sandstone building, his thoughts must have undoubtedly been on the Slater Street gas main explosion that had rocked Ottawa’s downtown core just two days earlier, injuring scores, demolishing buildings, and shattering store fronts and glass windows in a several block area from Sparks Street to Somerset Street. But on opening the bank’s vault for the start of the day’s business, all thoughts about the explosion would have been forgotten by the sight that confronted him, or, more correctly by what he didn’t see. The cash reserves of the bank were gone. Also missing, were funds transferred to his branch from smaller Imperial bank branches across the city the previous week. How the audacious theft was committed was not immediately apparent. There was no signs of forced entry. It took head office auditors days to determine the precise amount of the shortfall—an astonishing $260,958 (equivalent to $2.2 million today), the largest theft ever from an Ottawa bank.

Imperial Bank of Canada, 62 Sparks St

Imperial Bank of Canada, 62 Sparks Street, circa 1945. The building was most recently occupied by Ian Kimmerly Stamps. Currently vacant, press reports suggest that the building will soon be the site of a restaurant.

Suspicion immediately fell on Boyne Lester Johnson, Pegg’s 27-year old, trusted, chief teller. Johnson, a Renfrew native, was a seven-year veteran of the Imperial Bank, having joined the financial institution out of high school. Among his duties were handling the cash deposits brought in from other Imperial branches. Consequently, a large volume of money routinely passed through his hands. Although everything had appeared normal when he had left work with other bank employees the previous Friday, he had failed to show up Monday morning.

When police arrived at Johnson’s home, apartment #20 at 350 Chapel Street in Sandy Hill, there was no sign of him, or his wife Bernice. A search revealed a large sum of cash though there was no way of knowing whether the money was part of the missing bank funds; the bank had no record of the serial numbers of the stolen notes. The Johnsons’ family car was in the basement parking lot, a .22 calibre hunting rifle, hunting clothes, and maps were found in its trunk. The building’s caretaker told the police that he had last seen Boyne Johnson on Sunday morning when the young man had awoken him at 8.30am to ask to be let into his apartment. Johnson had told him that he had forgotten his key after going to church with his wife. The superintendent thought this was odd as Boyne was dressed in old clothes rather than his Sunday best. Police immediately issued a warrant for his arrest, alerting law enforcement agencies across the country, as well as the FBI in the United States. Rail stations, airports, car rental agencies, and customs posts were also advised to be on the watch for Boyne Lester Johnson.

While Ottawa police were trying to track down Boyne, Bernice Johnson was becoming frantic with worry. On the Saturday, the couple had driven to Renfrew to visit their mothers, Mrs Mary Johnson and Mrs Julia Narlock who lived in the town. They had supper that evening with the two parents in a Cobden restaurant. Everything seemed normal. The couple spent the night at the home of Bernice’s mother. The next day, Boyne had risen early, telling his wife that he was going hunting close to the Renfrew golf course. She last saw him at 6.30 Sunday morning. He never returned. On Monday morning, she and a friend began searching the Renfrew area for her missing husband. Having no luck, and fearing that some serious had happened to him, she turned to the Renfrew police department for assistance. She was shocked to find out that her husband had become the subject of a nation-wide alert.

Johnson wanted poster

“Wanted” Poster released by Ottawa police and circulated throughout North America.

Johnson’s trail went cold. There were few clues to his whereabouts. Police speculated that he was still in the vicinity, but admitted they really didn’t know. To help their inquiries, the Ottawa police and RCMP issued a detailed “wanted” poster with a $10,000 reward for information leading to his arrest and conviction. He was described as age 27, height 5’ 8,” weight 135 pounds, with a fair complexion. Also noted was that he was a neat dresser, frequented night clubs, and had a penchant for champagne and the ladies. The poster went out to police stations and post offices across North America. Tips started to come in. A Trans-Canada Airways (TCA) stewardess thought she had spotted Johnson on a flight from Ottawa to Montreal. On 5 November, Montreal police were sent “scurrying” on receiving a phone call from a man who identified himself as Inspector Osborne, a vacationing Ontario Provincial policeman. He called Montreal police headquarters telling them that he had captured Johnson, and sought aid to bring him in. He also claimed to have the money in an airline carry-on bag. It was a hoax. No Inspector Osborne worked for the OPP.

The big break came on Monday, 10 November when Geneva Flowers, a waitress at Chez Paree, a Denver, Colorado night club, recognized Johnson from his wanted poster shown to her by a friend in the Denver police department. Another server, Ormonde Wynn, had spotted Johnson sipping champagne sitting at the bar. The Denver police were called, arresting Johnson without a fuss. He took the policemen to his YMCA room where they found a suitcase crammed with more than $233,000 in mostly Canadian cash. He also told them that on arrving in Denver he had bought a $4,150 sports car, and had planned to go skiing in the mountains. He said that he always wanted to know what it was like to have lots of money. He admitted that he knew he would eventually be caught, and was glad it was all over. He had wanted to experience the “have fun while you can principle.” Denver policemen said that the highly detailed wanted poster circulated by Canadian police that had highlighted Johnson’s love of champagne was responsible for his capture.

Under police questioning, Johnson freely explained how he robbed the bank, and his movements over the previous two weeks. Through the day on Friday, 24 October, he had removed cash from the vault, secreting the money in accessible spots around the bank. At some point, exactly when is not clear, he converted $7,000 into U.S. currency at another Ottawa bank. That night, he returned to the Imperial Bank’s Sparks Street branch, letting himself in using the key with which he had been entrusted as chief teller. He then retrieved the money from their caches, filled a suitcase, and left via a rear laneway exit to his car. There were no witnesses. Returning home with the suitcase in the trunk, he calmly drove with his wife to Renfrew the following day, the suitcase still in the back of the car. On Sunday morning, instead of hunting, he returned to Ottawa, stopping off at his apartment, where he left some money for his wife. He then flew to Windsor, Ontario. At the Windsor airport, he stored the cash-stuffed suitcase in a locker, and took a taxi to the Detroit airport. Pretending to have accidently forgotten his suitcase, he persuaded a Detroit taxi driver to go to the Windsor airport and fetch it for him. Incredibly, the driver agreed to do so, passing through US customs without incident. Johnson gave him a $20 tip for his trouble. From Detroit, he flew to Los Angeles, before going to Salt Lake City, Twin Falls, Idaho, Cheyenne Wisconsin, and finally Denver, where the law finally caught up with him. While in Cheyenne, Johnson, feeling blue, had telephoned a friend, Gerald Cotie, the third assistant accountant at the Imperial Bank branch. Cotie had urged Johnson to give himself up, but without success.

With Johnson waiving an extradition hearing, two Ottawa police officers, Inspector Ab Cavan and Detective Gordon Lowry, went to Denver on November 11 to officially identify him, and to return him to Ottawa. With a stop at Malton Airport in Toronto, Johnson arrived at Uplands Airport, Ottawa, accompanied by the two officers, on a regular TCA flight, at shortly before 10pm on 14 November, three weeks after the heist. On arriving in the city, he politely thanked the two detectives. Wearing a suede windbreaker, dark grey trousers, and running shoes, Johnson walked briskly down the steps to be greeted by flashing light bulbs and television cameras. More than 300 spectators were on hand to meet his plane. When asked why he did it by a Citizen reporter, Johnson replied “It’s hard to explain. I guess it was the climax to a lot of personal trouble.” He also told journalists that “It’s nice to have met you. But when you write this, don’t say ‘Go west, young man!’ It just doesn’t work out.”

On the following Monday, he was officially charged, and was remanded into custody by Magistrate Glenn E. Strike. No plea was entered, and no bail was set. In the crowded court room was his wife, Bernice. Johnson, who did not speak at the hearing, was represented by John Dunlop; James Maloney, QC, Member of Parliament for Renfrew, was retained as Johnson’s defence counsel. A month later, Johnson plead guilty, and was convicted. In court, it was revealed that all $260,958 that he had stolen from the Imperial Bank had been returned. The bulk of the money was discovered by Denver police in Johnson’s YMCA room. A further $5,000 was recovered from his Chapel Street apartment. He had spent only $12,050. Johnson’s father, Hartzell Johnson, made up the shortfall. His father also told the judge that he was planning to start a business in another city, and would offer Boyne a job on his release from jail. Wife Bernice also said she would stand by her man, and wait for him.

During his short hearing, police officers testified that Boyne had been “a model prisoner,” and it seemed that “he was glad to have been caught.” One testified that Johnson seemed to have been trying to run away from himself. Defence counsel argued that Johnson was “not really a criminal.” The prosecuting Crown attorney, Raoul Mercier, countered that it was important for society to be protected from thefts by trusted employees.

On Thursday 18 December, in front of several Johnson family members, Judge Strike pronounced sentence. The magistrate said that he had little sympathy for Boyne. His was a very serious crime involving a very large sum of money, and that Boyne had been disloyal to both his employer and his family. A pale but composed Boyne Johnson received his sentence—four years in the Kingston Penitentiary.

Sources:

McGuire, C.R., A History of 62 Sparks Street, Ian Kimmerly Stamps, http://www.iankimmerly.com/about/our-building/.

The Ottawa Citizen, 1958. “Ottawa Bank Teller Hunted After $250,000 Cash Taken, Sparks Street Branch Looted,” 27 October.

————————, 1958. “‘Tip’ on Man Hunt ‘Phony,’” 6 November.

————————, 1958. “Boyne Johnson Nabbed In Denver,” 11 November.

————————, 1958. “Led To Arrest,” 11 November.

————————, 1958. “Give The Mechanics Of Returning Banker,” 12 November.

————————, 1958. “‘Why?’ Hard To Explain,” 15 November.

————————, 1958. “Remanded, Boyne Silent After Charge,” 17 November.

————————, 1958. “All Fund Returned, Teller Admits $260,000 Robbery,” 10 December.

————————, 1958. “‘You Were Disloyal’—Magistrate, Four Years In Prison For Johnson,” 18 December.

————————, 2015. “Mover and shakers in capital’s foodie scene,” 26 April.

Images:

Imperial Bank of Canada, 62 Sparks Street, Ottawa, http://www.iankimmerly.com/about/our-building/.

Wanted Poster, The Ottawa Citizen, 7 November, 1958.

The Coyne Affair

13 July 1961

For six weeks during the late spring and early summer of 1961, Ottawa, and indeed the whole of Canada, was gripped by an unedifying public fight between the Conservative Government of John G. Diefenbaker and James E. Coyne, the governor of the Bank of Canada. The battle of words got downright nasty. At one particularly low point in the House of Commons, Coyne was called “an anarchist,” and “a communist in sheep’s clothing” who should be jailed for “the misappropriation [of funds] approaching larceny.” But Coyne gave as good as he got, calling Diefenbaker “an evil genius” who had acted with “unbridled malice and vindictiveness.”

The verbal punch-up, extensively covered in the nation’s press, was the culmination of months of growing unhappiness on the part of the Diefenbaker about Coyne. In the spring of 1961, the Bank’s board of directors on behalf of the government decided not to renew Coyne’s seven-year term as governor which was to expire at the end of that year. But when Diefenbaker learnt the size of the pension Coyne would receive, he became enraged, and tried to force the governor out immediately on the dubious pretense that Coyne had unjustifiably enriched himself by not vetoing a large pension increase granted earlier to him (and subsequent governors) by the Bank’s Conservative-dominated board of directors. In Parliament, Diefenbaker said that Coyne “sat, knew, listened, and took.”

James Coyne

James Coyne arriving at the Senate, 12 July 1961

But Coyne refused to go quietly, incensed by the slander upon on his personal integrity as well as that of the Bank. At the end of May 1961, the Diefenbaker government introduced Bill C-114, a terse one sentence draft act declaring the position of Governor of the Bank of Canada vacant. The bill was passed overwhelming by the House of Commons where Diefenbaker had a huge majority. However, after the Senate Standing Committee on Banking and Finance had listened to Coyne’s side of the story, and exonerated him from any wrongdoing, the Liberal-dominated Senate defeated the bill. Having had his day in court, and his name cleared, Coyne resigned. The Ottawa Citizen reported that “Mr. Coyne defended himself gallantly, fearlessly and courageously. He had not fought for personal interests but for principles. Any man of honor would have acted in the same manner.”  Deputy Governor Louis Rasminsky replaced Coyne as governor ten days later.

The seeds of the controversy were sowed years before. Coyne had been appointed governor by the previous Liberal government of Louis St-Laurent on the retirement of the Bank of Canada’s first governor, Graham Towers, at the end of 1954. Coyne, a lawyer by training and a Rhodes Scholar, was a brilliant, upright, and austere man. He had joined the bank in 1938 in the Research Department and rapidly rose through the ranks. He was only 44 years old when appointed governor. A man of strong views, he rubbed a lot of people the wrong way; many both inside and outside the Bank found him difficult to work with. Indeed, Coyne was sometimes an irritant to the Liberal government that had appointed him. He also had many critics among professional economists who disagreed with his views on monetary policy and the economy.

In the spring of 1957, a minority Conservative government under Diefenbaker was elected, partially on a populist platform that had denounced the prevailing tight monetary policy of the Bank of Canada. At that time, the Canadian economy was experiencing rising inflation which touched 3.2 per cent in December 1956, up from 0.5 per cent the previous year. Rising interest rates, however appropriate given the circumstances, were a new phenomenon in Canada, and discommoded many. But following the election, Conservative criticism of Coyne ended; indeed, Donald Fleming, the new Finance Minister, supported the Bank, speaking of the “lurking menace of inflation.” The volte-face of the government was widely commented on in Parliament. The change in government opinion was facilitated by an easing of monetary policy by the Bank as the economy slowed and inflationary pressures ebbed. The Conservatives were quick to take the credit for lower interest rates.

The outward calm was short-lived. In the midst of the early 1958 election campaign which saw the election of a massive Conservative majority government, Fleming took Coyne to task for denying in the Bank’s just-released 1957 Annual Report that the Bank had ever pursued a tight monetary policy; Coyne called it a “sound” monetary policy. The public exchange of words, a prelude of things to come, became so heated that there was press speculation that the government would seek Coyne’s resignation. Again, nothing happened. Relations improved considerably with the “Conversion Loan of 1958,” a mammoth debt-management operation conducted by the Bank of Canada as agent for the government under which the maturities of bonds that the government had issued during the war were extended. While the Conversion Loan was criticized by many at the time, the government thought Coyne had provided sterling service.

The détente did not endure. In late 1959, Governor Coyne, on the suggestion of the Bank’s board of directors, began a country-wide speaking tour on the state of the Canadian economy. His key message, which was well received in the press, was that Canada was living beyond its means. Coyne, an ardent Canadian nationalist, was especially concerned about growing foreign domination of the Canadian economy as Canadians borrowed from abroad to cover the country’s widening trade deficit. He argued that unless steps were taken to boost domestic savings and to curtail excessive consumption, Canada was on an unsustainable and dangerous track, something which only the government could fix. Needless to say, this message did not play well with the Diefenbaker and his colleagues who saw only limitless, sunny horizons for Canada.

It was this speaking campaign more than anything else that got under Diefenbaker’s skin that led to the decision to remove Coyne from the Bank’s helm. Diefenbaker interpreted Coyne’s remarks as a direct attack on his government. In his memoirs, the prime minister called the governor “an unregenerate grit” (i.e. a Liberal).  Some observers of the Coyne Affair attribute Diefenbaker’s desire to oust Coyne as a dispute over monetary policy—an expansionist government being thwarted by an ultra-restrictive central bank. However, the government did not publicly or privately seek a change in Bank policy during the 1959-61 period despite widespread criticism on the part of academic economists that monetary policy was too tight.  Even as late as January 1961, Finance Minister Fleming took pride in the relative stability of prices, citing them as a contributor to “real gains achieved by the economy.” All the government did was distance itself from higher interest rates, now saying that monetary policy was the responsibility of the Bank not the government.

There was little doubt that Diefenbaker would win his battle with Coyne. But it was a pyrrhic victory. Peter Newman, in his book Renegade in Power on the Diefenbaker years, called the “successful attempt to dislodge James Elliott Coyne, the Bank’s troublesome governor,” Diefenbaker’s “least admirable crusade of his career.” Public opinion was squarely on the Governor’ side. In the general election the following year, the Conservatives were reduced to a minority government, its loss of popularity in part due to Diefenbaker’s unfounded, personal attacks on Coyne.

The impact of the Coyne “Affair” was lasting. On the positive side, responsibility for monetary policy was clarified—something demanded by Louis Rasminsky as a condition for assuming the governorship, and which was subsequently endorsed by a Royal Commission (the Porter Commission) into the state of banking and finance in Canada. Legislative changes made it clear that the government was ultimately responsible for monetary policy, with the Bank of Canada responsible for the day-to-day conduct of policy. In the event of an irreconcilable policy disagreement, the government would issue a public directive to the Bank—an act which would cause the governor to resign. The Porter Commission also concluded that the controversial pension increase awarded to Coyne was entirely justified. On the negative side, a chill descended over the Bank’s communications strategy. Governor Rasminsky refrained from speaking publicly on economic issues for two years. As well, according to John Crow, governor of the Bank from 1987-94, the “trauma” suffered by the Bank may have dampened its willingness to fight inflation during the 1960s and 1970s when inflationary pressures began to get out of control, and which later became so costly to subdue.

After the Coyne Affair, the Diefenbaker government tried to lower the value of the Canadian dollar as part of its expansionary program to boost economic growth. The attempt ended in tears as the currency, already weakened due to the Government’s fight with its central bank, dropped like a stone in financial markets. To arrest collapsing confidence, the government in 1962 dramatically tightened fiscal and monetary policy and introduced temporary import surcharges to reduce Canada’s trade deficit, a policy ironically recommended by Governor Coyne as a way to curb foreign borrowing. The government also suffered the embarrassment of having to go cap in hand to the international community for aid in stabilizing the dollar’s value, borrowing more than $1 billion (roughly $8 billion in today’s money) from the International Monetary Fund, the U.S. Export-Import Bank, the Federal Reserve and the Bank of England. The dollar’s value was fixed against the U.S. counterpart at U.S$0.9250, down from above parity at the time of Coyne’s resignation. It remained fixed at this rate until 1970.

The Diefenbaker government was ousted in the 1963 general election by Lester B. Pearson’s Liberal Party. Other than his involvement in the failed attempt to establish a western Canadian bank during the mid-1960s, James Coyne left the public eye following his resignation from the Bank of Canada. He died in 2012 at the age of 102.

Sources:

Fleming, D. M. 1961. Speech given to the Kiwanis Club of Brantford, Ontario, 12 January.

Newman, P., 1963. Renegade in Power: The Diefenbaker Years. Toronto: McClelland & Stewart.

Powell, James, 2005. A History of the Canada Dollar. Ottawa: Bank of Canada, http://www.bankofcanada.ca/2005/12/a-history-of-the-canadian-dollar-by-james-powell/.

—————–, 2009. The Bank of Canada of James Elliott Coyne: Challenges Confrontation and Change. Montreal and Kingston: McGill-Queen’s University Press.

The Ottawa Citizen, 1961. “Senators Vote 19-7, Committee Rejects Coyne Firing, ‘No Misconduct’ Motion Approved,” 13 July.

Image: James Coyne arriving at the Senate, 12 July 1961, Canadian Press Archives.