Volume 2 - ElectricCanadian.com

1867 TO 1901 111by paying higher rates of interest than were current at thetime, and by issuing deposit receipts at a discount. Thenloans were made in large amounts to a few favoured persons.In this way was squandered the whole paid-up capital of thebank, with as much more as was subsequently obtained fromthe double liability of its shareholders.In the case of the Federal Bank, which appealed to thebanking community for assistance again in January, 1888, thestate of affairs was wholly different. The management thenin control of the bank had been unfortunate rather than dishonest.When the bankers met to consider its fate, Mr.Walker was again selected as chairman. Up to this time thepractice had been to help a bank in difficulties only whenproperly hypothecated, was forthcoming; butgood security,when this was impossible, matters were allowed to take theircourse, and the bank was almost invariably wound up underthe drastic handling of a liquidator. At the first meeting inconnection with the Federal Bank, some of the bankers presentstrenuously objected to any course which did not meanenforced liquidation under the terms of the Bank Act. Thechairman, however, felt that the bank might well be assistedto wind up with its doors open, and that the other banks couldsafelylend against its general estate the money necessary toaccomplish this, provided certain matters affecting the liabilityof the shareholders could be satisfactorily arranged. Manymeetings were held, at which the discussion was long anddifficult. Finally, at a conference held on January 26, 1888,which lasted thirteen hours and extended beyond midnight,an agreement was reached, and on the morning of January 27,the Federal Bank opened its doors for voluntary liquidationunder the protection of all the other banks. The sum of$2,700,000 had been pledged,if needed, but it took much lessmoney than was expected; and the shareholders, instead ofbeing assessed under their double liability, received a handsomereturn on their shares; more important still, a dark and tryingsituation in Canadian banking was brought rapidly to an end.