Volume 2 - ElectricCanadian.com

DEVELOPMENT OF CANADIAN BANKING 437fact that a few of the issuing banks were tottering on thebrink of bankruptcy. In the course of the prolonged discussionit developed that the strongest position was held bythose who favoured an issue of government notes for an amountso limited that it would not interfere with the existing system,which had adjusted itself to the peculiar geographical andseasonal needs of the country. This proved to be the basisof the final compromise. In the face of the severe criticismand strong opposition which his measure evoked, Gait graduallymodified his proposals. The time within which individualbanks might adopt the government plan was extended toJanuary 1, 1868, and in any case such a bank might, on givingdue notice, resume its note issue and its former privileges. Afurther compromise was offered in the form of a suggestionto relieve the necessities of the Government by issuing$3,000,000 in government notes and $5,000,000 in two yearseven per cent, debentures. In the meantime Gait resignedfrom the cabinet over the question of Separate schools, 1andthe Government finally declared that if the $5,000,000 indebentures could be secured in time to meet its obligations, itwould not avail itself of the powers of note issue contained inthe currency bill. 2 As a result of this concession by theGovernment, the opposition to the measure was reducedfor it to become law.The financial stringency which was general at that period,sufficientlyhowever, made it impossible to obtain the proposed loan intime to avoid the issue of provincial notes, and these graduallypassed into circulation through the agency of the Bank ofMontreal. For a considerable time the government notes putinto circulation did not exceed in amount the Bank of Montrealnotes withdrawn from circulation and so did not materiallyaffect the note issues of the other banks. Thus the situationstood at Confederation, when the interests and opinions ofxThis refers to Gait's resignation in 1866. He resigned again the following year, justafter the failure of the Commercial Bank, for totally different reasons. See page 28.'29-30 Viet., 1866, c. x.