Volume 2 - ElectricCanadian.com

66 HISTORY OF THE BANKIn 1872, as has been stated, foreign banking was more orless confined to a few private firms and the agencies of someof the Canadian banks. One firm of private bankers, Messrs.Brown Brothers and Company, were not only the leaders inthis department of banking, but the main source of supply ofexchange and of international credit for mercantile purposes,as opposed to what is called finance. The others includedgreat financial bankers, whose bills on London mightbut were notincidentally represent transactions in securities,dependent thereon for safety, and international houses,calling themselves bankers, whose main purpose, however, wasto keep afloat bills of exchange drawn upon affiliated firms inLondon. The bills of these houses, known as "finance bills,"had been extensively used to provide funds for the building ofAmerican railways and could be liquidated only by the saleof the railway securities behind them. The panic of 1873began with the failure of one of these houses, and this failurewas soon followed by others. As dealers in foreign exchange,The Canadian Bank of Commerce could not expect altogetherto escape loss, although it had sought to avoid purchasingsuch bills.From about 1862 gold and silver had commanded apremium in the United States, and the business of the brokersin coin in the city of New York had grown to such proportionsthat it had been regularly organized. A Gold Exchange hadbeen formed, of which several hundred brokers, bankers andleading merchants were members. This organization issuedregular quotations for gold in terms of paper currency, and bythese the foreign trade of the country was regulated. Theagency of The Canadian Bank of Commerce, in common withmany other banking institutions, lent gold on the security ofdeposits of paper currency sufficient in amount to provide areasonable margin against the risk of fluctuations in thepremium. As it also made similar loans for the Great West rnRailway Company of Canada, the bank was an importantfactor in the operations on the Gold Exchange. Almost all