The End of Road Tolls

9 February 1920

We’ve all heard the adage that there’s no certainty in life except for death and taxes. But, back in nineteenth-century Ottawa, it was more accurate to say there was no certainty in life except for death and tolls. People paid tolls, essentially user fees, on virtually everything. Commuters paid tolls to cross the Ottawa River on the Suspension Bridge. Boaters paid tolls to use the Rideau Canal. Lumbermen paid tolls to use the government timber slide. Farmers paid tolls to sell their produce at the Byward market. And, last but not least, everybody entering or leaving Ottawa paid a road toll.

The reason for this was simple. Governments had very few revenue sources in the nineteenth century. There was no income or sales taxes.  The federal government relied principally on custom duties and excise taxes for its revenues. Provincial governments relied on licences and permits, stumpage fees on timber, as well as grants from the federal government, while municipal governments depended on property taxes. Fortunately for governments, though not necessarily for their citizens, the problem of limited revenues was to a large extent mitigated by limited expenditures. There was no welfare state.

Habitants running the Toll Gate, 1867, watercolour copy of painting by Cornelius Krieghoff, artist unknown, Library and Archives Canada, 2837897.

Tolls were used to raise much needed cash to pay for necessary infrastructure, built either by the government or the private sector. Needless to say, there were lots of abuses and complaints.

The high cost of the tolls to use the Rideau Canal reportedly had a significant negative impact on trade. In 1850, the Ottawa Daily Citizen claimed that only a fifth of the wheat sold in Bytown was shipped there from points in Upper Canada via the canal owing to its high toll. It was cheaper to take freight the much longer route down the St. Lawrence River to Montreal and then ship it back west on the Ottawa River to the town. Farmers also complained continually about the tolls that they were required to pay to sell grain and other produce at the Byward and Wellington Markets.

But, by far, the biggest gripe people had was with road tolls.

During the nineteenth century, roads, particularly inter-urban “highways” (a misnomer if there ever was one), throughout Canada were terrible. Indeed, the way to travel long distance was by water or railway. In the early years, rural roads were typically maintained by legislated labour. In Upper Canada, a 1793 Act of Parliament obliged settlers to work for up to twelve days each year on maintaining the roads that went by their property, or pay a fine. When that proved insufficient, cash-strapped provincial and county governments encouraged private companies to construct turnpikes, i.e., toll roads, to meet the growing demand for road transportation by settlers. The only requirement was for investors to set up a company for that purpose, and file with the government a statement of what they proposed to do. There was no regulation on where the road was to be built, how it was to be built, or the amount to be charged for using it.

Advertisement in the Ottawa Daily Citizen, seeking tenders for construction of a toll house and two gates by the Bytown and Nepean Road Company, 5 June 1852.

As a consequence, toll roads proliferated. In the Ottawa area, turnpikes were constructed from the outskirts of the city, to farming communities in the Carleton Country hinterland and beyond. In 1852, the Bytown and Nepean Road Company took over a rough, narrow and ill-maintained road (Richmond Road) that extended five miles west from the outskirts of Bytown.[1] The road was only fourteen feet wide for the first mile and a mere nine feet wide for the remaining four miles. The company undertook to widen the road to a standard fourteen feet width for its entire length and to build toll-houses and gates at a cost of £500 per mile. The company later extended the road to Bell’s Corners. In the five months from when the company assumed control of the road in July 1852, it collected £300 in toll charges, out of which the company maintained the road, paid the salary of a toll-keeper, and declared two dividends to its shareholders.

Initially, the toll roads provided a useful service, opening up rural areas and linking communities. However, road maintenance was often poor. Macadamized roads, which were made of graduated layers of stone, frequently washed out and required constant upkeep; something that toll-road operators were often slow to provide. It was said that the road companies exacted the most from, and returned the least to, the general public.

While the toll charges were typically small, they added up. In 1897, it was reported that a farmer driving a team of horses ten to fifteen miles into Ottawa with a load of produce destined for the Byward market would have to pay no less than 50-60 cents in road tolls, and another 30 cents in market tolls, on each round trip. Adding in other expenses, including 25 cents for the farmer’s lunch and 25 cents to feed the horses, there wasn’t much profit left out of the $8 to $10 dollars made at the market.

Mr. Sparrow, a farmer from Cumberland, told the Ottawa Journal in 1892 that his tolls amounted to between $5 and $7 per month. “That money would go a long way towards buying boots for the child, or clothes for my wife or myself.” Mr. Richard Spratt who lived twelve miles out on the Gloucester Road, echoed Mr. Sparrow’s sentiments saying “The different tolls often mount up to a sum which greatly runs away with the profits, and keeps me from coming into the city as regularly as we might.”

Tariff of tolls leaving from Hintonburg heading west on the Richmond Road issued by the Bytown and Nepean Road Company, 1895. It cost 25 cents to drive a two-horse vehicle the length of the road.

One irate person said in an 1889 letter to the editor of the Ottawa Daily Citizen that country people didn’t object to paying “liberally” for road maintenance, as good roads increased the value of their property, and protected horses from harm and vehicles from damage. However, Ottawa-area highways were badly rutted or muddy in summer, and almost impassible in winter owing to long delays in clearing snow drifts. Added to this was the annoyance of having to stop at the toll-gates to pay the tolls. One could expect lengthy delays if there was a line-up to get through the gate, or if the gate-keeper had to make change. Woe betide anybody short of cash. Then, travellers were at the mercy of the toll-gate keeper who may or may let them through. A case in point was a country family whose supply of coal ordered from the city for delivery on a mid-winter Saturday was stopped at a toll-gate because the deliveryman only had five cents instead of the required seven cents for the toll. The deliveryman had to return to the city and remake the journey on the following Monday, leaving the family cold over the weekend.

There were many similar complaints. One person was incensed by a toll-gate operator demanding a toll on a Sunday in an apparent breach of the Lord’s Day Act. Another complained that the woman keeping the toll-gate at Osgoode forced a party returning from a funeral in Metcalfe to pay a toll. The County Crown Attorney, who was a member of the funeral party, paid it under protest after a pole was “neatly dropped between the dashboard of the cutter and the horse” when the rig attempted to run the gate.

Described as “medieval obstructions to traffic,” pressure to eliminate toll-gates mounted towards the end of the nineteenth century throughout Ontario. In 1897, the City of Ottawa proposed to the County Councils of Carleton and Russell that it would discontinue market tolls paid by farmers if the counties would buy out the private road companies and abolish road tolls in their jurisdictions. Ottawa also indicated that it would support the counties in securing legislation under which the province would provide funds for every mile of macadamized road constructed by the counties. It was to no avail. The Ottawa Journal remarked that “country men have never shown any disposition to meet the city halfway in the matter.”

Still, the writing was on the wall for toll roads. Owing in part to changes in provincial legislation, by 1914 only sixteen toll roads remained in Ontario, half of which were in Carleton County. These were: the Bytown and Nepean Road (8 5/8 miles); the Richmond Road (7 miles); the Nepean and North Gower Road (5 1/8 miles); the River branch of the Nepean and North Gower Road (2 miles); the Gloucester and Metcalfe Road (9 5/8 miles); the Hunt Club branch of the Gloucester and Metcalfe Road (3 5/8 miles); the Russell Road (4 ¾ miles); and the Montreal Road (8 ¼ miles). But this meant that virtually all access roads into Ottawa were subject to tolls. The only exception was Nicholas Street. In 1912, the new Nicolas Street subdivision at Bannermount, was advertised as being located “just the other side of the Hurdsman’s Bridge” on “the only road free from tolls into the city.”

In 1920, the Carleton County Council finally gave in, enticed by provincial legislation under which the Ontario government would pay 40 per cent of the cost of expropriating the remaining toll roads. This was sweetened by a deal with the City of Ottawa under which Ottawa would pay a further 30 per cent of the cost. Many old county councillors who had previously rejected the elimination of tolls became enthusiastic supporters of toll-free roads. In the end, only one councillor, the representative of Osgoode, dissented.

On the order of the court, the toll roads operated by the Bytown and Nepean Company, the Nepean and North Gower Consolidated Road Company, the Ottawa and Gloucester Road Company and the Ottawa, Montreal and Russell Road Company passed into the control of Carleton County. Starting Monday, 9 February 1920, the nine remaining toll gates—two gates on Montreal Road, one on Russell Road, two on Metcalfe Road (Bank Street), two on Richmond Road, and two on Merivale Road—were lifted for good. (There was another toll-gate on Hunt Club/Bowesville Road but it was not in operation at that time due to the poor condition of the road.)

To the joy of car owners and the sadness of now unemployed toll-gate keepers, ownership of the roads was transferred to the Ottawa Suburban Roads Commission whose first chairman, Mr. John Bingham, was a director of the Ottawa Motor Club. This was no coincidence. The Club, indeed all motorists, had been a major force behind the elimination of toll gates.

The Commission immediately set engineers to work to assess the state of the unpaved roads and the cost of bringing them up to a satisfactory standard. Richmond and Montreal Roads were deemed to be in fairly good shape. Merivale and Bowesville Roads were assessed as being in poor shape with their road surfaces irregular and in need of grading. Stretches of Metcalfe Road (Bank Street) were also in very poor shape. All the roads needed proper drainage. The engineers provided two estimates, $80,000 for essential improvements and $182,000 for paving them with asphalt.

Most of the old toll-gate houses—toll-gate keepers lost their homes as well as their jobs—were sold off to the highest bidder with the proviso that the houses had to be moved. The Russell Road toll-house was sold to a Mr. William Gorman for $377. The shack at the Ottawa West gate went to Mr. M.P. Merryfield for the munificent amount of $20. The Ottawa West’s toll-keeper’s house, which was situated a short distance away from the toll-gate, was put up for rent.

The final contentious issue was the compensation to be paid to the shareholders of the four road companies. Naturally, the four companies set high estimates of their roads’ value. But if the owners had expected to receive these amounts, they were sorely disappointed. In December 2020, a judge awarded the four companies a total of $159,000 in compensation compared to the $202,000 the companies had submitted in claims.

Toll roads in Ontario passed into history for more than seventy years. But they re-emerged in the 1990s with the construction of Highway 407 which bypasses Toronto north of Highway 401. The “407” is owned by a consortium of Canadian and Spanish investors. Another toll road, Highway 412, which links the 401 to the 407, opened in 2016.

Sources:

Allston Dave, 2015. “Expanding on the old Richmond Road tollhouse & O’Neil house,” The Kitchissippi Museum, http://kitchissippimuseum.blogspot.com/2015/11/expanding-on-old-richmond-road.html.

Bytown and Nepean Road Company. 1895. Tariff of Tolls.

Gilchrist, C.W., 2015. “Roads and Highways,” The Canadian Encyclopedia, https://www.thecanadianencyclopedia.ca/en/article/roads-and-highways.

Ontario, Government of, 1914. Report of the Public Roads and Highways Commission, L.K. Cameron, Toronto.

Ottawa Citizen, 1850. “Bytown and Prescott Railroad,” 16 November.

——————, 1852. “Slides,” 8 May.

——————, 1853, “Bytown and Nepean Macadamized Road,” 5 February.

——————, 1864. “Collection of Turnpike Tolls On Sunday, 9 February.

——————, 1873. “The Toll Gate,” 8 October.

——————, 1879. “The Market Grievance,” 7 February.

——————, 1887. “Our Municipal Free Lance,” 22 October.

——————, 1889, “Public Road,” 26 November.

——————, 1892. “The Abolition of Tolls,” 2 June.

——————, 1920. “Toll Roads Passing Hailed With Approval By Motorists,” 31 January.

——————, 1920. “Will Be Delay In Serving Notice On Toll Road Owners,” 2 February.

——————, 1920. “Suburban Road Commission Has Received Estimates From Engineers,” 13 February.

——————, 1920. “Carleton Sells Off Several Toll Houses,” 19 April.

——————, 1920. “Toll Road Award Has Been Agreed On By The Board,” 23 December.

Ottawa Journal, 1893. “Away With Tolls,” 22 February.

——————-, 1897. “Market Fees And Road Tolls,” 15 May.

——————-, 1897. “Favor A Free Market,” 21 May.

——————-, 1912. “This Is The House,” 23 May.

——————-, 1920. “Couty Council Is Out Against The Toll Roads,” 28 January.

——————-, 1920. “Can’t Charge Toll When County Acts,” 31 January.

——————-, 1920. “Toll Road Owners Get Notice Today,” 7 February.

——————-, 1920. “The Toll Roads A Thing Of The Past After Monday,” 6 February.

——————-, 1920. “The Toll Roads Gone,” 12 February.

——————-, 1920. “Sell Old Toll Gates To Highest Bidder,” 19 April.


[1] For a more detailed account of toll gates and toll houses on the Richmond Road, see Dave Allston’s excellent blog, The Kichissippi Museum.

Chain Letters and Pyramid Schemes

22 June 1935

For many, the lure was irresistible. For only a small investment, they could make big money. It was a heady prospect, especially for the poor and unemployed. And in the mid-1930s, there were many such people. With the Great Depression still holding a powerful grip over the North American economy, the promise of quick money attracted thousands. All that somebody needed was a dime, some letter paper and envelopes, and the names of five people to give or send them to.

While similar schemes had surfaced from time to time in the past, there was nothing quite like great “Prosperity Club” or “Send-a-Dime” chain letter of the spring of 1935. Some claim that the scheme was started by a woman in Denver, Colorado, but we don’t know for sure. Regardless, it quickly spread across the United States, Canada, and even leaped across the Atlantic to Britain where it was called the Sixpenny Prosperity League.

Almost overnight, there were thousands of participants. Post offices were inundated with chain letters leading to postal backlogs and overtaxed postal workers who had to sort and deliver them. Early participants in the scheme made money, with news of their good fortune attracting more players into the Prosperity Club. But for most, the glitter turned out to be fool’s gold.

The wonders of multiplication! For a chain letter to remain unbroken by level 15, more than 6 billion people would have to sign up.

The concept was simple. Letter recipients were asked to send a dime to the person named on the top of a list of names contained in the letter, cross that name out, and put their name at the bottom of the list. Then, the person was to make five copies of the letter and send them to five other people. If this happened five times, the name of the recipient would reach the top of the list and would reap the reward of 15,625 dimes, or $1,562.50 if the chain remained unbroken on the next iteration. It was almost magical. The problem was that it was unsustainable. After only a relatively few iterations, the entire population of the world would have to participate to keep the chain alive. The Prosperity Club was a classic pyramid scheme.

This fact did not deter people. Most were mathematically illiterate or didn’t stopped to think about the odds. And many of who figured out that the chain would be quickly broken thought it was worth ten cents for a chance at making a small fortune. Those who joined early and whose names appeared near the top of the list stood to make significant money.

The Prosperity Club letter was quickly duplicated by other chain letters. Churches got into the act. One enterprising pastor in Kansas City claimed that St. Paul wrote the first chain letter—his epistle to the Galatians. He said his church’s revenues went up 75 per cent as a result of a “go-to-church” chain letter. Another pastor in Texas organized chain letters for every age group to raise money for his church in amounts starting as low as one cent so that all could benefit from the chain letters’ bounty.

Even Hollywood got a piece of the action. Out in 1935 was the movie Make a Million, staring George Sharrett, Pauline Brooks and George E. Stone. It was the story of a million-dollar chain letter started by a college professor. It was also an attack on the economic system that led to the Great Depression. The film showed at the Imperial Theatre in Ottawa that October.

A double bill at the Imperial Theatre–Make a Million and Dr. Jekyll and Mr. Hyde, Ottawa Citizen, 29 October 1935.

U.S. and Canadian post offices officials were not amused by the chain-letter fad, and quickly tried to put a break on such quick-money schemes. Operating in a legal grey zone in Canada, the Canadian post office said that chain letters were a “racket” and directed such letters, if they could be identified, to the dead letter branch.

While most participants were innocent players, some chains were started by the unscrupulous who sent out thousands of letters with their names at the top of the lists. When trusting people send them their dimes, the initiators of the chains stood to gain hundreds of dollars.

When Ottawa Mayor Nowlan received a chain letter that had assured him of the receipt of $1,562.50 if he sent his dime and copied the letter to five friends, he declined the opportunity and broke the chain. He also ordered a stack of similar letters addressed to city aldermen which had been left with the elevator man to be destroyed.  

One winner of the chain letter fad in Ottawa that spring was a young delivery boy who had been arrested for riding a motorcycle without a licence. Pleading guilty, but unwilling to either pay the $12 fine and court costs or go to jail, he asked the judge to delay his sentence a week. His request granted, the boy organized a chain letter in the meantime and “earned” enough money to pay his fine when next he appeared in court.

On Saturday, 22 June 1935, a new get-rich-quick opportunity took Ottawa by storm. It was the $1 for $10 scheme. That morning, an upstairs office at 193 Sparks Street opened for business, taking the names and dollar bills of investors. The scheme promised a payout of $10 to “investors.” Every time twelve new names were added to the list, the broker paid out $10 to the person whose name was at the top of the list, keeping $2. Unabashedly a pyramid scheme, payouts depended on new investors joining the scheme.

Business was brisk, so brisk that the elevator man said he would need a holiday after all this was over. Some players, unwilling to wait for the elevator, preferred to run up the three flights of stairs to get their names on the list as quickly as possible.

When a Citizen reporter went to the office at 11:00am that morning to see first hand what was happening, he saw frenzied investors lining up to put down their dollar bills to get their name on the list. He also claimed to have seen dozens of investors paid $10. Some reinvested their winnings. He described the office as resembling a “telegraph boys’ headquarters.” Telephones jangled, with dozens of messenger boys running in and out for those who were unable to get to the office in person.

Under a banner head line on the following Monday, the journalist reported “Ponzi was a piker!” The jailed Boston financier and fraudster had only promised a 50 per cent return in 45 days—“small pickin’s” compared to the 900 per cent offered by the Ottawa scheme. (Ponzi paid the abnormally high rate of return guaranteed to investors by using the incoming funds of new investors.) The article noted, however, that if somebody was in tenth position on the list,120 new investors would have to join before they received a payout. At the fiftieth position, 600 new names would have to be added to the list.

To meet the demand, additional offices quickly popped up on Rideau Street in the Transportation Building, and on Bridge Street in Hull. This was followed by a curbside office at the corner of Cooper and Bank Streets. Two young men with a sign posted above them on a telephone pole, took in money from would-be punters until the police moved them on for blocking traffic. A third Ottawa outlet opened in the Ritz Hotel at the corner of Bank and Somerset Streets. When a reporter visited that office, two harried clerks, with their shirt sleeves rolled up, sat on a bed gathering up bills into rolls of various denominations. So busy were they taking in the money, there were reportedly having difficulty in paying out, their accounting system on the verge of collapse. They later called the hotel manager for a bigger room.

Besides the $1 for $10 list, the offices also offered alternatives for the would-be investor. For the faint of heart or those of lesser means, you could put your name onto the 50-cent list which offered a return of $2.50 as soon as six more people joined up. For those wanting to take a more significant plunge, there was a $10 list that returned $100 after twelve other gamblers joined. This list was apparently the least popular—no big surprise since that was the equivalent to roughly $200 today.

Although the police pursued a “hands off” policy for the time being, the head of the police morality squad toured the local “investment offices” to collect information on how they operated. Meanwhile, Crown Counsel J.A. Ritchie consulted a mathematician. Ritchie is reported as saying “I think it could be demonstrated that as the list grows it would take more than the entire population of the Dominion to pay off some of those on the list.” But without guidance from the authorities and a lack of complaints from the public, the police stayed their hand. As the law waited for the green light to close the offices, business boomed as a steady stream of both men and women eagerly signed the lists and parted with their hard-earned dollar bills.

Other enterprising Ottawa businesses joined the game. A number of Lower Town grocery stores began giving $1.00 grocery vouchers to every fifth person who paid 25 cents to place their name on a grocery list. Reportedly, housewives flocked to the stores once word got around. An Ottawa hotel set up a similar beer racket with the pay-off being 27 bottles of beer. This one quickly caught the attention of liquor licensing officials.

With the law vague on the legality of chain letters, Crown Counsel Ritchie urged the federal government to amend the Criminal Code to outlaw such schemes. Very quickly, the government leader in the Senate, Arthur Meighen, moved an amendment to the Code saying that it was “an attempt to define and prohibit the new so-called chain letter scheme of getting rich quickly.” In the dying hours of the 17th Parliament of R.B. Bennett in early July 1935, both the Senate and House of Commons approved an anti-chain letter amendment to the Code with little or no discussion.

Here in Ottawa, after raking in thousands of dollars, the so-called investment offices were closed. By this point, however, business had already begun to slow, the market saturated. Of course, those on the bottom of the list who still waiting for their pay-outs were out of luck. Their money was gone. The newspapers did not report the size of their losses.

In modern times, pyramid investment and marketing schemes have remained a thorn in the side of investors and regulators. The biggest of all time was the New York-based Bernard L. Madoff Investment Securities ran by the now deceased Bernie Madoff. The business, with accounts totalling US$65 billion, went spectacularly bust in 2008. Madoff’s company, which had operated for many years, was a giant fraud. Like Ponzi, Madoff hoped that investors, lured by the promise of high returns, would roll over their investments instead of redeeming them. The minority who took money out were paid off by inflows provided by new investors. Meanwhile, Madoff skimmed off millions.

This went on for years until people realized what Madoff was doing and that their financial statements were fictitious. Even those who had bailed out early lost money in the end as liquidators of Madoff’s firm clawed back their fraudulently-earned profits which were then shared out among the losers. Bernie Madoff died in April 2021 while serving a 150-year prison sentence.

Despite Madoff’s notoriety, people continue to fall pray to pyramid schemes and similar frauds. In 2020, an Ontario man was arrested in a $56 million Ponzi scheme under which he allegedly promised high returns to investors for investing in a company selling debit card machines.

Morale of this story: be wary of any investment or marketing scheme that looks too good to be true. It probably is.

Sources:

Global News, 2020. “Ontario man returned to Canada to face charges in $56 million debit terminal Ponzi scheme,” 14 September.

Mortal Journey, 2010. Send A Dime Chain Letter (1930’s), 19 November.

Ottawa Citizen, 1935. “Chain Letter Craze Labelled “Racket” By Canadian P.O.,” 9 May.

——————, 1935. “Amazing Scenes In Oklahoma As Chain Letter Fad Spreads,” 11 May.

——————, 1935. “Attendance At Church Better, Revenues Grows,” 13 May.

——————, 1935. “Mayor Nowlan Frowns On Chain Letter Idea,” 4 June.

——————, 1935. “Launch New ‘Get-Rich-Quick’ Scheme In Ottawa, 24 June.

——————, 1935. “How Boy Obtained Money For Fine,” 4 July.

——————, 1935. Chain Letter Schemes Are Failure in Britain,” 6 July.

Ottawa Journal, 1935. “Doing Business At Street Corner,” 27 June.

——————-, 1935. “Senate Moves To Stop ‘Get-Rich-Quick’ Schemes In Canada,” 4 July.

——————-, 1935. “Ban Is Placed On Chain Plan,” 5 July.

Senate Debates, 1935. Criminal Code Bill, 17 Parliament, 4th Session, Volume1, page 466, 4 July.

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.

The Royal Canadian Mint

2 January 1908

The right to mint coins has long been a jealously-held prerogative of the sovereign. During ancient and medieval times, those that tried to usurp this privilege risked dire punishments if caught, including death by decapitation, or by hanging, drawing and quartering. The severity of the punishment reflected the perceived severity of the crime—treason. A nation’s coinage was an extension of the sovereign whose image those coins carried. The making of money was also a very profitable business that the Crown wanted to protect for itself. The face value of the gold, silver or copper coins was higher than the intrinsic or bullion value of the metal. The difference was profit called “seigniorage,” meaning “belonging to the seigneur (lord).”  The counterfeiting of coins carried the death penalty in Canada well into the nineteenth century.

$newcoins
First series of distinctive Canadian coins, minted in England in 1858. Note the 20 cent piece. Bank of Canada Museum

In 1850, a shortage of coins led the government of the Province of Canada to pass legislation to establish a mint in Canada. Hitherto, all coins in circulation in Canada were minted in other countries, mostly Britain, the United States, Mexico and France. Although the legislation was signed into law by the Governor General, Lord Elgin, the act was “disallowed” by the Imperial government in London on the grounds that it involved “an uncalled for and most objectionable interference with the Prerogative of the ‘Crown.’” It didn’t help that the issue was part of a much broader tussle between the Canadian and British governments on whether Canada’s currency should be consistent with that of the United States, i.e. dollars and cents, or should conform to that used throughout the British Empire, i.e. pounds, shillings and pence.

In the event, the forces in favour of using dollars and cents won the day. In 1858, the first distinctive Canadian coins, denominated in cents, were produced. However, the coins were made in England by the Royal Mint, the principal supplier of Canadian coinage for the next fifty years. Canadian coins were also minted by Ralph Heaton & Sons, a private Birmingham mint, when the Royal Mint was too busy to fill a Canadian coinage order. Such coins are identical to those made at the Royal Mint except for a small letter “H.”

In 1862, a mint was briefly established in New Westminster, British Columbia to convert gold that was being panned or mined along the banks of the Fraser River into useable coins. Hitherto, the gold bullion had to be transported at considerable cost to San Francisco for conversion with the profit going to the San Francisco mint. As James Douglas, the Governor of the colony, was initially supportive of the initiative, minting equipment was purchased from the United States. However, Douglas subsequently changed his mind. Nevertheless, he permitted a very small number of trial gold and silver pieces called patterns to be struck for the London Industrial Exhibition of 1862. Although most of the patterns were melted down after the exhibition, a few, which had been given to senior government officials, survived. These trial coins are among the rarest of Canadian coins. Examples were recently acquired by the Bank of Canada Museum.

Following the establishment of the Dominion of Canada in 1867, Canadian coins continued to be made in England. In the 1890s, Senator Thomas McInnes of British Columbia was the most prominent champion for the establishment of a mint in Canada. He argued that under the British North America Act the Dominion had the authority to establish a mint, and that a Canadian mint could profitably convert Canadian-mined gold, which mostly came from British Columbia, into coins. He added that mints had been established in Australia at both Melbourne and Sydney some thirty years earlier.

The federal government was not enthusiastic. It its judgement, there was not a lot of profit to be had in making gold coins. As well, the government feared that Canadian gold coins would displace Dominion notes that were already in circulation. (U.S. gold eagles and British gold sovereigns, while both legal tender in Canada, were seldom used.) Some also feared that a domestic mint would lead to pressures to make excessive amounts of subsidiary silver coins leading to inflation. Opponents also noted that the Australian examples cited by McInnes were not relevant as Australia used the same currency as Britain. Hence, the sovereigns, which were produced by the Australian mints to the same specifications as British-made sovereigns, could circulate freely in Britain. There were also concerns about the cost of establishing a Canadian mint. Some claimed that the annual demand for Canadian coins could be minted in just one month, leaving a domestic mint idle eleven months out of twelve.

Despite these objections, Senator McInnes introduced resolutions in the Senate in favour of a mint on at least two occasions. Each time, he was asked to withdraw it, something that he reluctantly did. Sitting as an independent, he did not have the backing of any political party. He was also known for championing the quixotic idea of making Gaelic an official language in Canada. Senator McInnes was appointed Lieutenant-Governor of British Columbia in 1897. Out of his depth in his new capacity, he was later fired by Governor General, Lord Minto, at the request of Sir Wilfrid Laurier.

The Canadian banking community was divided over the issue of a Canadian mint. Some saw merit in having one from a nationalistic standpoint. National mints were established in all important countries, including many smaller than Canada. However, others worried that Canadian-minted gold coins would find little acceptance outside of Canada. In transactions with the United States, they feared that U.S. banks would demand U.S. gold coins or bullion. Hence, Canadian gold coins would have to be melted down before the gold could be transferred to U.S. banks. Consequently, Canadian banks would likely continue to hold their reserves in readily usable U.S. gold coins.

But McInnes’ idea for a Canadian mint found supporters. Several Boards of Trade, including that of Ottawa, came out in favour of his plan on both economic and nationalistic grounds. In 1894, John Mara, a Conservative MP also from British Columbia, advocated the establishment of a Canadian mint to make silver coins using metal mined from his province. However, Sir George Eulas Foster, the Conservative Minister of Finance at the time, quashed the idea.

Government attitudes towards the establishment of a mint in Canada began to shift in 1899. In May of that year, the now Liberal Finance Minister William Fielding indicated that steps might be taken to establish a branch of the Royal Mint in Canada. In October 1900, he announced in Montreal that the government had entered negotiations with the British government and that enabling legislation to permit the establishment of a branch of the Royal Mint in Canada would be introduced in the next session of Parliament. He stated that since the new branch would be making British coins when not needed to mint Canadian coins, concerns that a Canadian mint would be underutilized had been addressed.

The Ottawa Mint Act was well received by both sides of the House of Commons, and was given Royal Assent in May 1901. The legislation appropriated up to $75,000 per year to cover salaries, contingencies, other allowances and expenses incurred in operating the branch of the Royal Mint. In return, all fees, duties or charges received or collected by the branch would be paid to the Canadian government. Mr Fielding, the Finance Minister, told the House that the Mint would be under the direction of experts from the Royal Mint in London, and that plans for a building had been submitted to Public Works with the cost of construction estimated at about $259,000. The minting machinery would cost an additional $64,000. While most of the minting equipment were to come from England, the electrical equipment for the facility was to be provided by Ottawa’s own Thomas Ahearn and Warren Soper. Annual maintenance expenses were placed at $65,000 annually. This would be more than covered by the seigniorage profits on the production of silver and copper coins; little profit was expected on the making of gold coins. Profit after expenses were estimated at no less than $20,000 per year. When not producing Canadian coinage, the branch would be making British sovereigns using Canadian gold.

The Minister also assured the House that there would not be a “reckless” coinage of silver coins. The silver issue would only be as large as the Canadian economy could absorb. He stated that no one wanted a “silver question” in this country. This was an allusion to the currency “battles” underway in the United States at that time between those who wanted easy money achieved through the free minting of silver coins, and those who favoured a strict adherence to the gold standard.

Royal Mint, c.1908 Topley Studio Fonds Library and Archives Canada PA-012645
Royal Mint, Sussex Street, Ottawa, circa 1908. The building remains largely unchanged today. Topley Studio Fonds/Library and Archives Canada, PA-012645.

Despite widespread support for the establishment of a branch of the Royal Mint in Canada, it took several years to find an appropriate location for the new mint. One suggestion was to locate it at Nepean Point. This idea was rejected by the militia authorities who owned the land. The government took so long to find a building site that Mr Thomas Birkett, the MP for Ottawa, asked “if it was their [the government’s] intention to erect a mint or just dangle it in front of the electors of Ottawa.”

A site on Sussex Street was finally acquired in 1905 after lengthy negotiations with the Canadian Pacific Railway, the owner of the property. The CPR had initially asked $40,000 but settled for $21,500 after the government moved to expropriate the land that had an assessed value of $19,000. The government also acquired a neighbouring lot for $5,000. The actual building, which was constructed by Sullivan and Langdon of Kingston, Ontario, took two years to erect at an all-in cost (land, building and machinery) of $509,000, far higher than the original estimate. However, the government owned a state-of-the-art facility that was unmatched in the world. While senior officials and experts were brought over from the Royal Mint in London to manage and operate the new branch, most of the 60 plus Mint workers were Canadian, largely from the Ottawa area.

Royal Mint, 1909, Steaming Operation, William James Topley Library and Archives Canada PA-009646
Steaming Operations, Royal Mint, Ottawa, 1909, Topley Studios/Library & Archives, PA-009646.

At 3pm on 2 January 1908, the Governor General, Lord Grey, formally declared the Canadian branch of the Royal Mint open in front of roughly 300 guests, including Cabinet Ministers, Deputy Ministers, MPs, Senators, Supreme Court Justices, managers of all local banks, and other dignitaries, including Sir Sanford Fleming, the man who first proposed worldwide standard time zones. The guests were received by Dr J. Bonar, the head of the Ottawa Mint and his wife Mrs Bonar. Dr Bonar’s official title was Deputy Master since the British Chancellor of the Exchequer was the Master of the Royal Mint. Dr Bonar sent a cablegram to his counterpart at the Royal Mint in London announcing the formal start of Canadian operations. After the typical congratulatory speeches, guests were taken on a tour of the facility by Dr Bonar and Mr A. W. Cleeve, the Superintendent of the Mint.

Royal mint 50 cents
1908 Canadian silver 50 cent piece, the same as the first coin ceremonially struck by Lord Grey, Bank of Canada.

The highlight of the afternoon was the striking of the first silver coin—a 50 cent piece—by the Governor General. This coin was placed in a small box with a blue satin interior and presented to Lady Grey. After this ceremony, the party moved to a copper stamping machine. There, Lady Grey raised the lever and struck the first copper coin to be minted in Canada. Each guest was presented with a newly-struck copper penny to commemorate the event.

Mint sovereign
Canadian-minted British sovereign, 1908. The small “C” (indicated by red arrrow) above the date indicates its Canadian provenance, Bank of Canada.

At the start, the new Royal Mint branch focused on making subsidiary, i.e. silver and copper, Canadian coins. Its production of British sovereigns was limited to only 636 during 1908, the Mint’s first year of operation, though production did ramp up to almost 257,000 in 1911. (Given the limited production of the 1908 sovereign, the numismatic value of this coin today is considerable.) The gold sovereigns minted in Ottawa are identified with the letter “C” for Canada just above the date, but are otherwise identical to sovereigns minted in Britain. The Mint didn’t get around to coining Canadian $5 and $10 coins until 1912. Production was discontinued in 1914 at the beginning of World War I. The minting of gold sovereigns was also halted for a time. Production resumed from 1916 to 1919.

Royal Mint $10, J&M
Canadian $10 gold piece, minted in Ottawa, 1914, Bank of Canada.

In August 1931, the Conservative Government of R.B. Bennett severed the link between the Royal Mint and its Canadian branch. Under new legislation, the Ottawa facility commenced operations as the Royal Canadian Mint reporting to the Minister of Finance. In 1969, the Mint became a Crown Corporation. Today, the Royal Canadian Mint’s Sussex Avenue facility produces Canadian collector and commemorative coins. Circulating Canadian coins are produced at the Mint’s Winnipeg’s facility that was opened in 1976. This facility also produces coins for many other countries. 

Sources:

Berry, Paul, 2017. “New Acquisitions: British Columbia Gold Pieces,” Bank of Canada Museum, 30 May.

Canada, Government of, 1931. An Act respecting the establishment of the Royal Canadian Mint.

Canada, Province of, 1851. Appendix to Journals of the Legislative Assembly, “Message, Dispatch from Her Majesty’s Secretary of State for the Colonies communicating Her Majesty’s disallowance of an Act of last Session, entitled, “An Act to Amend the Currency Act of this Province,” also, of sundry communications in relation to that Act,” 28 July.

Canadian Coin News, 2015. Rare 1862 gilt coins offer glimpse into B.C.’s gold rush, 18 August, http://canadiancoinnews.com/rare-1862-gilt-coins-offer-glimpse-into-b-c-s-gold-rush/.

Chard, 2017. Gold Sovereigns, Branch Mints – Ottawa Canada, https://goldsovereigns.co.uk/ottawamintcanada.html.

Evening Citizen (The), 1907. “Mint Will Open Thursday,” 31 December.

Evening Journal (The), 1890, “The Question Of A Mint For Canada,” 5 May.

————————–, 1894. “Canada’s Native Silver,” 19 July.

————————–, 1897. “Wanted A National Mint,” 18 May.

————————–, 1897. “National Mint Wanted,” 3 June.

————————–, 1899. “Resolution Favoring A Canadian Mint,” 16 May.

————————–, 1900. “A Dominion Gold Coinage,” 24 October.

————————–, 1907. “Money Making Experts Here,” 12 September.

————————–, 1908. “Formal Opening of Royal Mint,” 3 January.

————————–, 1909. “A Gold Coinage,” 20 October.

————————–, 1912. “The Annual Address of the Imperial Bank’s President,” 28 May.

J&M Coin & Jewellery Ltd. 2017. Canadian Gold Sovereigns, 1908-1919, https://www.jandm.com/script/getitem.asp?CID=3&PID=50.

Powell, J. 2005. A History of the Canadian Dollar, Bank of Canada.

Powell, J. & Moxley, J. 2013. Faking It! A History of Counterfeiting in Canada, General Store Publishing House: Renfrew.

Royal Engineer (The), 2017. The Gosset Gold Coin Affair, http://www.royalengineers.ca/GossetGold.html

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 feel 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.

Monetary Matters

11 March 1935

At 10am on Monday, 11 March 1935, Canada entered a new monetary age. That day, the Bank of Canada, located at its temporary offices in the Victoria Building at 140 Wellington Street across the street from Parliament Hill, opened for business. It was supposed to have begun operations at the beginning of the month, but its opening was delayed owing to the late arrival of new Bank of Canada dollar bills from the British American Bank Note Company. The first governor of the new central bank was 37-year-old Graham Towers who previously had been a senior officer of the Royal Bank of Canada.

Note1923
Note1935
Dominion of Canada note, 1923 (upper), Bank of Canada note 1935 (lower). Initially, the Bank of Canada issued unilingual English and French notes. From 1937, notes became bilingual. Bank of Canada notes were smaller than Dominion notes.

As stated in the preamble of the Bank of Canada Act, which received royal assent the previous July, the job of the new financial institution was “to regulate credit and currency in the best interest of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of the Dominion.”

More specifically, the Bank became the issuer of Canadian bank notes. It also assumed responsibility for the government’s foreign exchange and debt management operations, and the conduct of monetary policy. It additionally began to act as adviser to the government on economic matters. Consistent with these new responsibilities, the same day the Bank opened for business, the Dominion Notes Act, under which Dominion notes had previously been issued, and the Finance Act, hitherto used by the Department of Finance to conduct monetary actions, were repealed. Offices of the Receiver General of Canada across the country were also converted to agencies of the new Bank of Canada.

Under the Bank of Canada Act, the new central bank was given a monopoly on issuing Canadian paper currency. Previously, the Dominion government issued small-value notes ($1 and $2 bills) as well as very large notes used as reserves by the chartered banks. As well, each chartered bank issued its own bank notes in distinctive colours and designs. These private bank notes were widely accepted by the general public though they were not “legal tender,” an attribute reserved for Dominion notes. Chartered bank notes were convertible on demand into Dominion notes or gold. If a bank could not deliver on this promise, it failed. But Canadian chartered bank notes were very secure. In the event of a bank failure, the notes represented the first charge against the failing bank’s assets, ranking ahead of other liabilities, including deposits. Further protection was provided by a note protection fund akin to today’s deposit insurance fund. Notes of failed banks also earned interest from the day of the failure to the day the bank’s liquidator called in the notes for redemption. Following the establishment of the Bank of Canada, chartered bank notes were phased out over a ten-year period, ending a banking privilege that dated back to 1817 when the Bank of Montreal issued the first Canadian bank notes. The last private bank notes were issued in 1944, and were removed from circulation by 1950.

Prior to the establishment of the Bank of Canada, Canada had little in the way of an active monetary policy. The government didn’t adjust interest rates up or down in response to economic activity and price pressures. Indeed, for most of the previous century, excluding during World War I and the immediate post-war years, most countries, including Canada, were on the gold standard. Consequently, monetary policy was essentially on autopilot with the domestic money supply moving in tandem with flows of gold in and out of the country and the mining of gold. However, this strict monetary system proved unable to cope with the Great Depression. Starting with Great Britain in 1931, country after country abandoned the gold standard and floated their currencies. Canada, which had reintroduced the gold standard in 1926, followed suit by banning the export of gold in late 1931. Two years later, it officially left the gold standard; Canadian paper money was no longer convertible into gold at a fixed rate.

In theory, the move to a freely floating currency gave scope to the government to use monetary policy to fight the Great Depression. However, it lacked the knowledge and the tools to adequately do so. While the Finance Act introduced in 1914 at the outset of World War I allowed the Dominion government to lend to the chartered banks, in essence to act as a lender of last resort, advances under the Act were made solely at the request of the banks. The government had no means of forcing banks to borrow reserves, which would have expanded the money supply, other than through “arm-twisting.” The government could increase the so-called “fiduciary” issue of Dominion notes, that is to say the small issue of notes that was not backed by gold, but this would take an act of Parliament, a process that would take a long time to implement.

Although the Canadian banking system, unlike that of the United States, weathered the Depression without failures, slumping domestic economic activity and a great distrust of private banks fuelled importantly by farm foreclosures led to strong political pressures on the government to do something—its answer, the creation of a central bank. Additional impetus came from the British government that favoured the establishment of central banks in its overseas dominions and colonies.

In July 1933, the Conservative government of R.B. Bennett formed the Macmillan Commission to study the issue. Chaired by Lord Macmillan, a pro-central banking British jurist, the Commission comprised another five members: Sir Charles Addis, a former Bank of England director, John Brownlee, the premier of Alberta, and two Canadian bankers, Sir William White and Beaudry Leman. Its conclusion was never in much doubt. After only seven weeks of testimony in hearings across the country, the Commission came out 3-2 in favour of establishing a central bank, with the two Canadian bankers, concerned about losing their bank-note issuing privileges, dissenting.

Debate then moved to the House of Commons. Although the creation of a central bank was supported by most MPs, excluding certain members of the ruling Conservative Party with links to the banking industry, the focus of debate was on whether the Bank of Canada would be privately or publicly owned. During the 1930s, most central banks, including the Bank of England, were privately owned. The government favoured a privately-owned, widely-held central bank with limits placed on profits.  It contended that private ownership would distance the central bank from political interference, enabling the bank to “avoid pressure from particular interests.” Opposition parties rejected this view and called for a government-owned institution. In the event, the government got its way. When the Bank of Canada started operations in March 1935 it was a widely-held, private institution. Its directors were appointed by shareholders from diverse occupations. The only link to government was through the Deputy Minister of Finance who was appointed as an ex officio member of the Board. However, when Mackenzie King’s Liberals were voted back into office in 1936, the Dominion government took control of the Bank of Canada in two stages, fully nationalizing it in 1938.

Despite its creation to help address the effects of the Great Depression, the Bank of Canada did relatively little to counter the high level of unemployment and low prices in Canada during the pre-war years. The Bank Rate, (i.e. the interest rate that the Bank of Canada charged on loans to chartered banks) remained unchanged from the similar Advance Rate that the Government charged under the Finance Act. Initially, the Bank focused its energy in acquiring the staff necessary to operate a modern central bank. Its research abilities were also called upon by the government to provide advice on provincial finances and later on Dominion-provincial relations (the Rowell-Sirois Commission). Subsequently, with political events taking an ominous turn in Europe, the Bank began to prepare for war, laying the groundwork for the imposition of exchange controls that were introduced in September 1939.

$bankofCanadafinished
Bank of Canada, circa 1938. Note the stoppers in the urns on either side of the entrance patio. Associated Screen News Ltd. Bank of Canada Archives, PC300.5.78

Work also got underway in designing and building a new head office that met the specialized requirements of the new central bank, including secure vaults for storing securities and Canada’s gold reserves. In 1936, the Bank acquired property on Wellington Street across the street from the newly constructed Justice and Confederation Buildings. The design of the new Bank of Canada building, drawn by architect Sumner Davenport in co-operation with the Toronto architectural firm Marani, Lawson & Morris, was inspired by classical architecture then favoured by banks that provided a sense of stability and strength. Called “stripped classical” owing to its austere façade, the plain, grey cube of granite complemented the château-style government buildings across the street. Costing roughly $1 million ($17.5 million in today’s money), it was also comparatively cheap to build.

Between the plain pilasters that decorate the Wellington Street front of the building are panels of Vermont Verde antique marble decorated with bronze allegorical figures by Canadian sculptor Jacobine Jones. The figures symbolize the seven major industries of Canada in the 1930s: agriculture, construction, electricity, fishing, forestry, manufacturing, and mining. The front door, made of cast bronze, was designed by Ulysses Ricci, and features images of Greek coins. Amphorae stand on either side of the entrance terrace. These urns were very controversial. Deputy Governor J.A.C. Osborne, who had been seconded from the Bank of England, likened them to “very large bombs” that “suggest the next war.” Originally, the urns came with stoppers. But shortly after the building was completed, the stoppers were removed, apparently owning to complaints that they were too phallic for public viewing.

Bank staff moved into their new quarters in late April 1938. By the time World War II began the following year, the new head office was already inadequate to accommodate the growing number of Bank employees, owing to the Bank of Canada’s being given additional responsibilities for managing and enforcing Canada’s foreign exchange controls through the Foreign Exchange Control Board. To accomodate the central bank’s burgeoning staff needs,  wooden, temporary office buildings were constructed on the Sparks Street and Kent Street sides of the granite Bank headquarters.

BofCbyWladyslaw2009
Bank of Canada headquaters, 234 Wellington Street, circa 2009. The orignal granite building nestles within the glass towers and atrium designed by Arthur Erickson, by Wladyslaw, Wikipedia.

During the 1970s, these “temporary” buildings were finally demolished to make way for the Bank of Canada building that we know today. Vancouver architect, Arthur Erickson, in collaboration with the firm Marani, Rounthwaite & Dick, the successor firm to the original Bank architects, designed two twelve-story, glass towers on either side of the original granite building. The towers were linked to the centre block by four pedestrian bridges, and a glass atrium. The original building was also extensively renovated at that time though care was taken to preserve the original Art Deco front lobby, executive offices and board room.

In 2014, work began on extensive renovations to the Bank’s head office complex. At a cost of $460 million, the renovations upgraded the building’s heating, plumbing, ventilation and electrical systems, strengthened the structure to meet today’s seismic standards, enabled the building to meet current health and safety requirements, updated its security systems, and improved energy efficiency and environmental sustainability. The most prominent new feature of the renewed Bank complex a glass is a pyramid located at the corner of Bank and Wellington Streets that houses the public entrance to the Bank of Canada Museum. The construction and renovations were finished in 2017.

Sources:

Bank of Canada, 2005. The Bank of Canada: An Illustrated History, Ottawa.

——————-, 2007. More Than Money: Architecture and Art At The Bank Of Canada, Ottawa.

——————-, 2010. Light and Space: The Architecture of the Bank of Canada, http://www.bankofcanada.ca/multimedia/light-space-architecture-bank-canada/.

——————-, 2016. The Bank’s Head Office, http://www.bankofcanada.ca/about/bank-head-office/.

Bordo, M. and Redish, A., 1986. “Why Did the Bank of Canada Emerge in 1935?” NBER Working Paper No. 2079.

Fullerton, Douglas, 1986. Graham Towers And His Times, Toronto: McClelland and Stewart.

Powell, James, 2005. A History of the Canadian Dollar, Ottawa: Bank of Canada.

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

Powell, James and Moxley, Jill, 2013. Faking It! A History of Counterfeiting in Canada, Renfrew, Ontario: General Store Publishing House.