Volume 2 - ElectricCanadian.com

130 HISTORY OF THE BANKwas to obtain power to circulate its notes as money. As thenote circulation was limited mainly by the capital, the biggerthe capital the better, provided that loans could be made to asufficient extent to utilize both capital and note circulation.This was the underlying reason for the unwise competition inthe early "seventies" between Sir Hugh Allan, 1 the Hon.William McMaster and Mr. E. H. King, the respectivepresidents of the Merchants Bank, The Canadian Bank ofCommerce, and the Bank of Montreal. Sir Hugh Allanled with the evident intention of increasing the capital of theMerchants Bank of Canada to $6,000,000, to equal that ofthe Bank of Montreal.The story of the successive increasesin the capital of The Canadian Bank of Commerce hasalready been told. The result of the contest was that thecapital of the Bank of Montreal was doubled, being increasedto $12,000,000, the capital of the Merchants Bank wasincreased to $9,000,000, while that of The Canadian Bank ofCommerce did not go beyond $6,000,000 until many yearslater. In the light of history and experience, it must beadmitted that these increases were grave mistakes. Theimprovement of the means of transportation in Canadahastened the return of the bank-note circulation and therebyrendered it less profitable to the issuing bank; deposits meanwhilewere growing, although only at a slow pace; and thusnew banking conditions were being created. It is obviousthat a large paid-up capital, on which dividends must be!Sir Hugh Allan (1810-82) was born at Saltcoats on the Firth of Clyde, and came toCanada in 1826. He began his career as a clerk in a dry goods establishment inMontreal, but in 1831 entered the employ of Millar, Edmonstone and Company, shipagentsand shipbuilders. Four years later he became a partner, and in 1861 obtainedfull control of the business with his brother Andrew, since which time it has beenknown as the H. and A. Allan Company. For many years the firm were interested in aline of small sailing vessels which plied between Montreal and Great Britain. Thenin 1852 the two brothers joined with a number of Canadian merchants in forming theMontreal Ocean Steamship Company, which founded the well-known Allan Line ofsteamships. Mr. Allan was founder and first president of the Merchants Bank ofCanada, and president of the Montreal Telegraph Company. In 1871 he was knightedin recognition of his great services to Canadian commerce.