A panic when the banker skips town
Wednesday, 28 October 2009 05:00
October 28, 1859. It was a classic bank panic, not seen in Canada now for almost a century, with a clamouring crowd pushing, shoving and shouting for its money.
Only two small regional Canadian banks have failed since 1923, and today if a financial institution collapses, the savings of depositors up to $100,000 are protected by deposit insurance. When Toronto's International and Colonial banks failed in 1859 it was not depositors who lost most, but holders of the bank's worthless money, or notes.
Confidence in the International had been lacking. Its principals were not local men with impeccable reputations, but people who "lived in the United States; a circumstance of itself calculated to arouse suspicion," said the Toronto Globe.
On Wednesday, the bank's manager, a Mr. Fitch, paid his room and board at the Rossin House, and with his son and three carpetbags, took the 4:47 p.m. train for the United States. He paid his hotel bill with the bank's worthless money. Other Canadians and American similarly lost a few million dollars, measured in today's money.
On Thursday morning, well before opening time, Torontonians gathered at the bank's doors. They were greeted, reported the Globe, by "a small slip of paper on the shutter of one of the windows, on which was written, "This Bank has been suspended for a few days." A few days became forever.
A crowd also rushed the Colonial bank, where confidence was none too great, again seeking gold coins for the paper money issued by this bank. One husky man arrived covered with flour. Repelling others by scattering flour, he elbowed his way to the front of the line. For some 90 minutes, the Colonial redeemed its notes, paying an estimated $10,000 to $20,000 first in gold coins and then in notes of sounder banks. The doors were shut at 11 a.m., and a notice posted that the bank would reopen at 2:30. It never did.
"The farmers and people in the country will suffer most," said the Ottawa Citizen. Toronto shopkeepers were said to have lost small sums of $30 to $150, but farmers were left holding worthless bills in amounts up to $900. "The worst of it is that in every case, the holder is a poor person, and the amount lost is, in too many cases, the entire profits of the past good harvest."