Volume 2 - ElectricCanadian.com

DEVELOPMENT OF CANADIAN BANKING 457with them. To Mr. B. E. Walker, of The Canadian Bankof Commerce, had been assigned the task of dealingwith thequestions affecting the note issues, and the proposal that thebanks should be required to hold a fixed minimum of cashreserves. As the Minister of Finance had apparently madeup his mind quite strongly in opposition to the general opinionof the bankers, and adhered to his views with much tenacity,these matters had to be gone into very thoroughly, both withthe Minister and afterwards before the Prime Minister andthe whole Cabinet. Mr. Walker pointed out that the idea of afixed reserve and of a note circulation based upon governmentbonds, and therefore in practice limited in amount, hadbeen obtained from the National Bank system of theUnited States, the characteristics of which were entirelydetermined by the financial conditions brought about bythe Civil War in the United States. These conditions, however,were very different from the normal state of affairs ina country such as Canada, where the bank-note currency hadbeen developed in conformity with the economic requirementsof the country, and therefore responded to the variations inbusiness activity. He demonstrated from the experience ofthe United States how ill-adapted the American system hadbecome to the business requirements even of that country.The rigidity of the system prevented the automatic expansionand contraction of the note issue to meet the seasonal fluctuationsin the demand for currency, and the practical resultwas a rise in interest rates at certain seasons of the year,which imposed a penalty on legitimate business. At othertimes the anxiety to find employment for a currency verycostly to maintain in idleness, led through the central reservesystem to its concentration in the larger centres, where itfound employment at comparatively low rates in speculativedealings, from which it could not always be readily withdrawnwithout precipitating, or at least aggravating, crises in themoney market. Most of these difficulties were avoided underthe Canadian system, because the notes held in the head