The Writing of Canadian Banking History and the Canadian Banking Stability Legacy Reconsidered Xu Xia Faculty of Law McGill University, Montreal April, 2020 A thesis submitted to McGill University in partial fulfillment of the requirements of the degree of Doctor of Civil Law © Xu Xia 2020 Acknowledgements As this lengthy endeavour draws to a close, my debts are mounting. Professor Catherine Walsh, my supervisor over the past six years, contributed not only supervision − her sympathy, support and sacrifice on the journey are beyond measurement. And on her 2019 calendar, a good part of her spring and summer was spent helping her DCL student bring his work to completion. Professor Richard Janda, a beloved member of the faculty, was a trusted source of comfort and encouragement during many moments of struggle. I am grateful for his warm recognition of my work, his contagious optimism, and his contributions to the overall working of the supervisory committee. Dr. Duncan McDowall joined the committee in the last ten months − not too late for an able scholar like him! I am immensely appreciative of his acceptance of the invitation to come on board. As one of the most respected banking historians in the country, he not only boosted my confidence − his knowledgeable and penetrating insights and quick turnaround of comments on and suggested revisions to my draft chapters were indispensable in getting the thesis to the finish line. Professor Paul Miller and the late Professor Blaine Baker, two past committee members, offered warm guidance and helpful advice during their tenure for which I am also most grateful. Professor Mark Antaki’s legal theory course in the first year of the program was inspiring. I still savour my memories of his gentle introduction to timeless ideas. Among the members of the McGill Law Faculty’s administration, I owe much to Associate Dean Rosalie Jukier. Looking back, I hope she is happy that she made the decision to admit me to the doctoral program in May 2012. I also want to thank Professor Richard Gold, who recently completed his term as Associate Dean (graduate studies) – he quietly helped me to obtain two extensions from the University, which allowed me to complete my work without disruption to my family life in Montreal. On the mentor and friend front, I have many to thank. Professor Andrew Godwin of Melbourne Law School selected me to be his research assistant in 1999 when he was a practising lawyer in Shanghai, and I was a law student in the graduate school. That was a defining moment for me. Mr. Godwin was my boss and mentor in the first four years of my legal career. In 2011, when we reconnected, he wrote the reference letter for my application to the doctoral program at McGill. Professor Gongyun Gu of the East China University of Political Science and Law was the other referee for my McGill application. But he is much more than that − his guidance dates to 1996 when I was an undergraduate student and he was later my supervisor in the graduate school for three years. Dr. Chuanhui Wang (economics and law) has been my friend since 1995. He was the first person to strongly suggest that I apply to McGill (and he also advised me, fourteen years ago, on my first international degree). I still believe that in coming to Montreal and McGill my family and I went to the best place. My family grew during my graduate studies from four to five. The youngest will start school this fall; the oldest passed her Gold solo less than two weeks ago; the middle one is as energetic and competitive as her exemplary sister was at the same age. They were born in the three cities where my wife and I met and lived together. That my wife’s hair went even more grey than mine over the period of my doctoral work says something about the toll this challenging project took on her. I thank her for her unwavering support and encouragement. I and my family have always been in the mind of my dear sister south of the border. We love you, Qian, Sun and Amanda. This thesis is dedicated to my parents. They are humble yet proud – they have the dignity of the common man and woman. In my moments of reflection on the challenges of this thesis, I drew the necessary strength to carry on from them − I would usually ask myself, is it really that hard (as hard as half of what I remember my Mother enduring)? This has been an amazing journey − Canada, thank you! Abstract The difference in the political cultures of the United States and Canada is a classic topic that has attracted the attention of generations of scholars. This difference is often said to be captured by the contrasting values expressed in their respective constitutions: “Life, Liberty and the pursuit of Happiness” in the United States Declaration of Independence and “Peace, order, and good government” in Canada’s Constitution Act, 1867. Some of the literature reflecting on the relative stability of Canada’s banking sector compared to that of the United States (US) in the wake of the 2007-08 Global Financial Crisis (GFC) suggests a correlation between the difference in the political cultures of the two countries and the difference in their approaches to banking regulation. The comparison of the Canadian and American banking history literature in this thesis tentatively confirms that hypothesis. However, the more intriguing and unexpected discovery is the under-developed state of the research and scholarship on the history of Canadian banking and the possible impact of this on the uncritical but prevalent assumption in much of the post-GFC literature that Canada’s banking industry has always been crisis-free (referred to in the thesis as Canada’s “banking stability legacy”). This is where the core originality of the thesis lies. After American R. M. Breckenridge and Canadian Adam Shortt laid the foundation at the turn of the 20th century, there was a clear decline in the writing of Canadian banking history within a meaningful political economy context. There was a moderate revival in the 1970s, reflecting the emergence of the social history school, and the recent GFC provided fresh impetus to banking historical research, with several substantial works in the business history tradition published in the past two years. But overall, the country’s banking history is underdeveloped and there is an evident under-appreciation of the historical works that do exist. In contrast, American scholars continued to produce a rich and sustained banking history literature with Bray Hammond’s Banks and Politics in America: from the Revolutionary War to the Civil War consummating the fusion of banking and political history. The award of the 1958 Pulitzer Prize for History to Hammond’s book testifies to the value of the political-economic approach to banking history. By examining Canadian intellectual history, this thesis concludes that the dominance of Harold Innis’s staples thesis beginning in the early 1930s was the major reason for the decline of banking history in the Shortt tradition in combination with the separation of political science and economics from traditional history as a result of the unstoppable trend toward specialization of social studies after WWII. The thesis further posits that the underdeveloped state of Canadian political-economic banking history invites reconsideration of the Canadian banking stability legacy. The shift in focus of the thesis to the state of the Canadian banking historical scholarship and a reconsideration of the banking stability legacy is the result of, or even the reward for, the surprise element inherent in historical research. It does not signify abandonment of the hypothesized relation between the contrasting political cultures of Canada and the United States and their respective approaches to banking regulation. On the contrary, the study of Bray Hammond’s banking history in comparison to the Canadian banking historiography sheds much light on that relationship. However, a thorough test of the hypothesis would need a larger framework than a doctoral thesis provides. Thus, the findings on the interaction between political culture and banking regulation are interwoven with, and subordinate to, the discussion on banking historiography as reflected in the framework of the thesis. Résumé La différence entre les cultures politiques des États-Unis et du Canada est un sujet qui a attiré l'attention de générations de chercheurs. On dit souvent que cette différence est exprimée par les valeurs divergentes exprimées dans leurs constitutions respectives: «Vie, liberté et la quête du bonheur» dans la Déclaration d'indépendance des États-Unis et «Paix, ordre et bon gouvernement» dans la Loi constitutionnelle du Canada, 1867. Une partie de la littérature traitant de la stabilité relative du secteur bancaire canadien par rapport à celle des États-Unis après la crise financière mondiale (CFM) de 2007-2008 suggère une corrélation entre les cultures politiques divergentes des deux pays, d’une part, et de l’autre part les divergences entre leurs approches à la réglementation bancaire. La comparaison des ouvrages sur l'histoire des banques canadiennes et américaines dans cette thèse confirme cette hypothèse en partie. Cependant, la découverte la plus importante et inattendue est l'état sous-développé de la recherche et de l'écriture sur l'histoire des banques canadiennes. Ce sous- développement a une incidence possible sur la présomption peu justifiée mais répandue dans la plupart des ouvrages post-CFM que le secteur bancaire canadien a toujours été exempt de crise (appelé dans la thèse «l'héritage de la stabilité bancaire» du Canada). Cette observation donne lieu à l’originalité de la thèse.