Volume 2 - ElectricCanadian.com

DEVELOPMENT OF CANADIAN BANKING 443emerged in the shape of two Acts which effected an acceptablecompromise between the opposing views and did no violenceto well-established banking practice. The first Act dealtwith Dominion notes, the second with banks and banking.The first measure 1 amended an Act of 1868, 2 which,although entitled "An Act to enable Banks in any part ofCanada to issue Notes of the Dominion instead of issuingNotes of their own," not only accomplished that purpose, butalso recited and adopted the chief provisions of the ProvincialNotes Act of 1866, 3 and declared the notes of the province ofCanada to be now Dominion notes. 4 The first seven sections,that is, those providing for the surrender by the banks oftheir note issues, were repealed, except in so far as related toan existing arrangement with the Bank of Montreal madeunder the provisions of those sections, and the Act of 1870then went on to increase the amount of Dominion notes which5might be issued, from $5,000,000 to $9,000,000, subject tocertain conditions. Up to five million dollars they were to besecured by Dominion debentures and specie, the latter toamount to at least twenty per cent, of the issue. Betweenfive million and nine million dollars there was to be a minimum'33 Viet., 1870, c. x.31 Viet., 1868, c. xlvi.'See page 435.The declaration in this statute (31 Viet, 1868, c. xlvi) that the notes of theformer province of Canada should "be held to be the notes of the Dominion ofCanada" raises the question as to why the notes of the provinces of NewBrunswick and Nova Scotia, which are likewise redeemed by the Dominion, arealso not mentioned in it. The answer would appear to be that these notes, as wellas those of the province of Canada, were assumed by the Dominion under theprovisions of section 111 of the British North America Act (30-31 Viet. c. iii^.which reads as follows: "Canada shall be liable for the debts and liabiliteach province existing at the Union." The purpose of the statute of 1868 wmato enable the Dominion to reissue the notes of the province of Canada, whilethose of the other provinces were withdrawn from circulation as they werepresented.There had been authority under the Act. of 1866 and 1868 to issue up to$8,000,000 of Dominion (or Provincial) notes, but the additional $3,000,000 couldbe issued to banks only in exchange for the surrender of their note issues. The$9,000,000 authorized by the Act of 1870 was not subject to any such restriction.