Volume 2 - ElectricCanadian.com

410 HISTORY OF THE BANKand hold such securities, proved comparatively successful.second attempt of a similar character was made the same year,when a bill was brought in to establish a government bankof issue, the purpose of which was to transfer to the Governmentthe sole right to issue paper currency. This currencywas to be obtained in exchange for, or on the deposit of, specieand government securities. As long as any securities sodeposited were held by the Government, the interest on themwas to be retained for the purpose of providing a fund for theoperation of the system. The bank of issue was not toperform any of the other functions of banking, such asdiscounting notes, receiving deposits, or dealing in exchange.The chief sponsor for this plan was understood to be Mr.Francis Hincks. 1 The strenuous opposition of the banks, atwhose expense the Government would have profited, andtheir influence with the commercial element, secured thedefeat of the measure. The banks were required, however,to pay a tax of two per cent, on note circulation.The next movement of this character promoted by Mr.Hincks, some features of which will be referred to later, wasthe "free banking system" instituted in 1851. The object ofthis was to create an extensive permanent market for governmentsecurities. On the failure of this expedient, therefollowed the Provincial Note Act of 1866, which was re-enactedin 1868 for the whole Dominion and thus formed the basis ofthe present Dominion note system, which is a partial reversionto the plan for a government bank of issue. All these expedientswere primarily measures of government finance andonly incidentally measures of banking and currency. Thelast is still in operation, but its character has been modified bythe suspension of specie payments introduced at the outbreakof the late war.Nearly all the new elements which had been introducedinto the Act continuing the charter of the Bank of Montrealwere gradually extended to the other charters, as they came up6ee Vol. I, p. 81.A