Volume 2 - ElectricCanadian.com

8 HISTORY OF THE BANKsums were paid for wild lands. Plans of new towns, bornof railway extension, in which everyone was to become richby the rise in realty values, were produced to tempt the farmerand the wage-earner. The result was that the year 1857found the average Canadian deeper in debt than he had beeneven before the golden era of commercial expansion and quickprofits began to dawn. This was especially true of the farmingcommunity, at that time paramount in the country's affairs.As Breckenridge, the historian of the Canadian bankingsystem, says: "They had sold for cash and bought largely oncredit. Considerable additions were made to improvedfarming lands, but many tied up their capital by speculatingin unproductive real estate. Trade was stimulated to anunprecedented degree, and bank accommodations werestretched to the utmost limit. Excessive and extravagantimportations occurred in 1856 and 1857. The MunicipalLoan Fund, a scheme whereby the province guaranteed theborrowing of the towns and counties, served to swell theinflation." 1 No permanent improvement took place untilafter the American Civil War, 2 during which great profitsaccrued to the Canadian farmers, and to those traders whohad staple products to sell.In this craze for speculation the banking communityseems to have shared as deeply as the farmer and the trader,and the suspensions and bankruptcies that followed shookpublic confidence in the banks. During the regime of theHincks administration and the trial of the free banking systemno charters had been granted, but when the succeeding Governmentcame into power, little or no attempt seems to havebeen made to stem the tide of applications for new charters.Not only were they granted regardless of whether any additionto bankingfacilities was needed in the district which the1R. M. Breckenridge, Ph.D., The Canadian Banking System, 1817-1890. (Publicationsof the American Economic Association, Vol. X), p. 159. Mr. Breckenridgewas at one time Seligman Fellow in Economics, Columbia College.*The American Civil War lasted from 1861 to 1865.