HAYSEED CAPITALISTS: PRIVATE BANKERS IN ONTARIO HAYSEED CAPITALISTS: PRIVATE BANKERS IN ONTARIO by STEPHEN EDWARD mORNING, B.A., M.A. A Thesis Submitted to the School of Graduate Studies in Partial Fulfilment of the Requirements for the Degree Doctor of Philosophy McMaster University August, 1994 -- -- --- - --------------- DOCTOR OF PHILOSOPHY (1994) McMASTER UNIVERSITY (History) Hamilton, Ontario TITLE: Hayseed Capitalists: Private Bankers in Ontario AUTHOR: Stephen Edward Thorning, B.A. (University of Guelph) M.A. (McMaster University) SUPERVJSOR: Professor John C. Weaver NUMBER OF PAGES: viii, 502 ii ABSTRACT The structure of the Canadian banking system, and the establishment of strong chartered banks at a relatively early stage, have overshadowed banking institutions that operated outside the chartered system. The non-chartered or private banks can be categorized into three groups: the joint stock banks of the 1830s, the urban private bankers who appeared in the 1850s and after, and the small-town private banks of the post-1868 period. AJI three types of private banks were established to fill perceived niches in the chartered bank system. Those of the 1830s possessed an anti-establishment, hinterland bias. The urban private bankers specialized in savings and foreign exchange transactions, and often branched out into insurance, debentures, and ultimately stocks and bonds. The small town private banks began and prospered when the needs of small hinterland communities outpaced the inclination and ability of chartered banks to provide them with banking facilities. Unlike the urban private bankers, those in small towns offered a full range of banking services, and they often acted as insurance and real estate agencies as well. They appealed strongly to local loyalties, and operated more cheaply than chartered bank branches. In most cases these small-town private banks were supported by the chartered banks with loans, and with access to the cheque clearing system, though chartered banks varied considerably in their attitude to them. Locally, private banks recirculated a community's savings, and deployed the proprietor's capital in local enterprises. Like most industries, private banking displayed easily recognizable phases of rapid (and often reckless) growth, maturity, and decline. At its peak, with more than 150 firms, private banking dominated in the non­ urban areas of Ontario. Private banks constituted the majority of banking offices in the province in the 1880s and early 189Os, and in aggregate, their volume of business equalled that of a major chartered bank. The demise of private banking resulted from internal efficiencies in the chartered bank system that facilitated the profitable operation of small-town branches, a greater confidence by the public in chartered banks, and a reduced sphere of operation for private banks as an integrated financial system gradually displaced semi-autonomous local economies. In a broad sense, Ontario private banks represent a phase in the establishment of extensive branch systems by the chartered banks. Due to their relationships with the chartered banks, to the structure of the Canadian banking system, and to the nature of economic development in the hinterland of the province, Ontario's private banks have no precise parallel elsewhere. iii PREFACE Many years ago I stumbled upon the term 'private banker' in a reference book. The tenn was entirely new to me at the time, and I found it intriguing. Naturally, I perused all the references to private bankers I could find. There was very little, and what there was I did not find very satisfactory. I became convinced that there had to be more about these banks than had yet been written, and that, at some point in the future, I would like to take the time to investigate this fascinating aspect of financial history. Much later, through a series of serendipitous circumstances, I found myself at the beginning of a doctoral program in history. Private banking, of course, was my immediate choice for a dissertation subject. After some discussion, my supervisor, Prof. John C. Weaver, and my committee agreed to the proposal, probably with some doubts that the subject was significant enough to merit intensive study, and, I am certain, a suspicion that there were not sufficient primary materials in existence to form the basis of a dissertation. I had no doubts about the fragmentary nature of the evidence. There were few collections of private bank materials in archives or museums. This study, therefore, relies heavily on business directories, weekly newspapers, local histories, the Dun and Wiman reference books, and the Monetary Times. Scattered papers and documents, some in archives and some in private hands, have provided much illumination. In recent years the subject of private banking has interested numismatists more than historians. Mr. William Clarke of London and Prof. Ross Irwin of Guelph are two who provided assistance, particularly when this project was in its early stages. Mr. Graham Esler, Director of the Currency Museum of the Bank of Canada, provided valuable help with his vast knowledge of some of the obscure comers of Ontario banking history. Due to the nature of the subject, I have made much use of local and county archives. Both archivists and volunteers have been most helpful, often spending hours searching for references or material. In this regard, Miss Jacqueline Stuart, curator of the Aurora Museum, leads the list for providing me with a brief history of Aurora and guiding me through the life of banker J.M. Walton. Later, she reviewed the section on Walton's bank. Mr. Edward Phelps of the University of Western Ontario Library provided valuable insights into the subject of his own M.A. thesis, banker John Fairbarlk. Mr. Brian Hendley of the Hamilton Public Library kindly consented to read the portion of this dissertation on Hamilton's private bankers. Mrs. Bonnie Callen, archivist at the Wellington County Museum, has provided much assistance and personal encouragement on my numerous visits to research this and other topics. iv I am indebted as well to the following, whose provided assistance beyond the mere retrieving of material in public collections. I list them in no particular order: Mr. I.E. Irving, volunteer at the Eva Brook Donly Museum, Simcoe; Mr. Bruce Beacock, assistant archivist at the Simcoe County Archives, Minising; Mr. Tom Hodgson, volunteer at the St. Catharines Historical Museum; Ms. Judy Liddle of the Chatham­ Kent Museum; Ms. Celia Wood, of the South Grey Museum, Flesherton; Ms. Sandra Lamoureux of the Sarnia Public Library; Mrs. Jayne Pettigrew of the Norwich and District Archives; Ms. Barbara Ribey, curator of the Bruce County Museum; Ms. Meg Stanley, city archivist at Woodstock; Mrs. Jill Jamieson of the Woodstock Public Library; Ms. Pat Zimmer, director of the Aylmer and District Museum; and Mrs. Nancy Sadek, special collections, University of Guelph. Mr. Gordon Pigden and his family, of Madoc, kindly allowed me to examine the remaining books of J.c. Dale and Co. at their store, which is the former bank premises. They are to be commended for restoring the original bank vault in the store. Miss Susan Higgins of Toronto graciously invited me to her home to examine her family papers relating to the McTaggart Bros. bank. A lengthy conversation with her and her aunt, Mrs. Mary Tisdall, provided me with much insight into Clinton's history, and led me to alter slightly my interpretation of the social role of private bankers in their communities. It is probable that there are other holdings of private bank records among family papers, and I hope that these may eventually become available to future researchers. This study was rendered much easier by the knowledge of banking I acquired during a former career. In this regard lowe a debt to the Canadian Imperial Bank of Commerce, and numerous former colleagues in 'the service.' My sister, Susan Thorning, deserves sympathy for tolerating my frequent overnight stays in Toronto when I was mining the weekly newspaper collection at the Ontario Archives. When the early draft had been written, Mr. James Gow of Fergus offered to read the manuscript, and to him must go the credit for removing the most blatant stylistic lapses and awkward turns of phrase. ][ owe a particular debt to Professor Gilbert A. Stelter of the University of Guelph, who guided me into the formal study of history. Professors Peter George and Harvey Levenstein, members of my committee, have provided much guidance and assistance. Most of all, Professor John Weaver has steered this project through some difficult and trying periods. Any merits it possesses are due to his wise counsel, determination, and enthusiasm. As the reader will quickly see, there are many holes in the history of Ontario private banking that I have been unable to fill. I have no doubt that, due to my faulty interpretation of some documents and my ignorance of other sources, there are factual errors and important omissions in this work. If it prompts a better researcher to undertake a more thorough and sophisticated analysis of the subject, it will have fulfilled its purpose. v CONTENTS ABSTR)I,.CT iii PREFAC:E iv LIST OF FIGURES ......... ............................ viii IJ'lfTRODUCTION , 1 I. PRIVATE BANKING AND BUSINESS HISTORY , 4 a. The Nature of Private Banking in Ontario b. Private Banks, Branch Banking, and Canadian Business History II. HINTERLAND BANKING IN ONTARIO BEFORE 1870 32 a. Bank Branches in Upper Canada, 1818 - 1840 b. The Private Banks of the 1830s c. Branch Banking in the Province of Canada, 1841 - 1860 d. The Upstart Chartered Banks of the 1860s III. PRIVATE BANKING IN THE CITIES. ..................... .. 104 a. The Character of Urban Private Banking b. Private Banking in Four Cities: i. London ii. Kingston 111. Toronto iv. St. Catharines c. Private Banking and the Financial Elite of Hamilton IV. THE RISE OF THE HAYSEED CAPITALISTS: SMALL-TOWN PRIVATE BANKERS, 1868 - 1880 169 a.