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The attitudes of Canada's bankers towards their role during the depression, 1930-1935 Newell, George Russell

Abstract

The Problem The subject of this paper is the Canadian chartered banks during the period from 1930 to 1935. In these years of economic disruption, strains were imposed on the banking system and criticisms levelled at the banks to an unprecedented extent. These strains and criticisms came from diverse sources, and the problem has been to identify the demands which they made on the banks, the sources of the demands, the nature of the banks' responses, and the effectiveness of the banks' reactions. The Investigation The problem was tackled first through a consideration of the main features of the Canadian banking system. This involved not only the determination of the machinery of the banks but also the main ideas which determined the conduct of the bankers. The former aspect of this question was determined not only from statements by the bankers and books published under the aegis of the banks, but also from governmental and academic accounts of the system. The question of the bankers' rationale was largely investigated through the statements of the leading bankers and from the nature of the proposals made by the bankers in response to specific situations. The investigation was then concentrated on the position taken by the banks with respect to certain economic problems of importance. The period saw considerable discussion of these problems by both bankers and non-bankers, and much of the commentary on the questions was garnered from that discussion. The final area investigated was that of problems raised by various groups in Canada and the response of the banks to these. In general, the method followed was to determine the precise nature of each problem, the sources from which these came and their reasons for raising the questions, and the position taken by the banks in response. Conclusions The study concludes that the Canadian chartered banks performed a commendable function for Canada during the first years of the Great Depression. In a period which saw financial disruptions and innumerable bank failures in other countries, the chartered banks provided Canada with stable institutions which commanded national as well as international respect. The security of Canada's banks was never seriously questioned. It is not possible to evaluate the importance of this confidence instilled by the banks; that it was essential to the economic welfare of the nation was evident. That the bankers pursued policies which showered on their heads the abuses of many people does not alter the fact that those policies in the long run were essential to the financial well-being of the nation. The bankers must be commended for pursuing unpopular courses. But this praise of the banks is tempered. They were private institutions of national importance. Consequently they had a responsibility for the public repercussions of their policies. They must be criticised not that they pursued policies antagonistic to the general welfare but rather that they were never willing to consider the broader consequences of their actions. Compounding this shortcoming was the fact that the 'laissez-faire' philosophy expounded by the bankers could no longer be sustained, since the gold standard, on which the operation of that philosophy had rested, had been abandoned. In the hiatus of leadership, the banks declined to contribute to the creation of a managing authority.

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