Volume 2 - ElectricCanadian.com

1901 TO 1914 233It closed its doors on October 12, and subsequent legal proceedingsshowed that the failure was due to reckless speculation.There had been no defalcations, but the law had been seriouslytransgressed and the financial condition of the bank concealedthrough false statements in the sworn monthly returns to theGovernment. The failure differed from others, in that theperilous condition of the affairs of the bank was unknown andunsuspected even by the banking community. As the generalmanager of The Canadian Bank of Commerce explained atthe annual meeting of that bank immediately following thefailure, the other banks in Toronto were informed of thecritical position of the Ontario Bank only on the day onwhich the decision was reached that the institution mustsuspend payment. By taking prompt action, the Torontobanks, in the few hours available, effected an arrangementwhereby no delay or loss was suffered by the depositors orother creditors. The plan adopted was the liquidation of theOntario Bank with open doors by the Bank of Montreal; anumber of other banks, including the Bank of Montrealitself, guaranteeing that bank against loss,in case the assetsof the suspended institution and the double liability of itsshareholders should prove insufficient to meet its liabilities.The guarantee of The Canadian Bank of Commerce wasfixed at $400,000. As matters turned out it was not necessaryto call on the guarantors, inasmuch as the assets and so muchof the double liability as was collected (after much litigation)sufficed to pay all claims. Nevertheless, the prompt actionofthe other banks served to avert anything approaching apanic among bank depositors in general, and to maintainpublic confidence and financial calm at a critical time, justas did similar action at the time of the failure of the FederalBank of Canada some years previously. Unquestionably,the method of dealing with a crisis by liquidation with opendoors proved wise and timely.The annual meeting of 1907 witnessed important changesin the executive of The Canadian Bank of Commerce. The