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2 Carr J. L., Mathewson F. and Quigley N. C., Ensuring Failure: Financial System Stability and Deposit Insurance in Canada (Ottawa, 1994), pp. 1–4.
3 Bordo M. D., Redish A. and Rockoff H., ‘The U.S. banking system from a northern exposure: stability versus efficiency’, Journal of Economic History, 54 (1994).
4 Beckhart B. H., ‘The banking system of Canada’, in Willis H. P. and Beckhart B. H. (eds), Foreign Banking Systems (London, 1929).
5 Urquhart M. C. and Buckley K. A. H. (eds), Historical Statistics of Canada (Toronto, 1965).
6 United States Federal Deposit Insurance Corporation [hereafter FDIC], Annual Report 1934, PP. 92–3.
7 ibid., p. 89.
8 ibid., p. 94.
9 ibid., p. 100.
10 ibid., p. 89.
11 As Neufeld E. P., The Financial System of Canada (Toronto, 1972), p. 81, points out, the record of the chartered banks was also ‘more tarnished’ than that of other Canadian intermediaries.
12 Annual Report of the Comptroller of the Currency 1920, 2, Table 37, pp. 80–123.
13 The Fund was held by the Minister of Finance and the banks received interest of three per cent per annum on their contributions. MacIvor R. C., Canadian Monetary, Banking and Fiscal Development (Toronto, 1961), p. 77.
14 Breckenridge R. M., The History of Banking in Canada (Washington, DC, 1910), p. 123.
15 Losses on United States non-national banks deposits are also from FDIC, Annual Report 1934.
16 ibid., pp. 92–3.
17 ibid., p. 110.
18 ibid., pp. 100–1.
19 ibid., p. 89.
20 Friedman M. and Schwartz A. J., A Monetary History of the United States (Princeton, NJ, 1963), p. 438.
21 FDIC, Annual Report 1934, p. 89.
22 Sprague O. M. W., History of Crises under the National Banking System (Washington, DC, 1910).
23 The FDIC Report for 1934, which we relied on to compute the estimates of deposit losses, is based on the Comptroller of the Currency's Annual Report (1896), pp. 52–7, for information concerning non-national bank losses.
24 FDIC, Annual Report 1934, pp. 112–13.
25 Bankers' Magazine, 32 (1877–1878), pp. 826–7.
26 Neufeld , Financial System, p. 104, concludes that ‘loss of confidence in banks almost always resulted from their having made imprudent loans and investments or from suffering defalcations, and almost never from external forces over which the banks had no control’.
27 Breckenridge , History of Banking in Canada, p. 116.
28 ibid., p. 127.
29 ibid., p. 168.
30 Jamieson A. B., Chartered Banking in Canada (Toronto, rev. edn, 1955), p. 43.
31 ibid., part II, passim.
32 Breckenridge , History of Banking in Canada, pp. 125–6.
33 Carr et al. , Ensuring Failure, pp. 27–36.
34 Jamieson , Chartered Banking, p. 68.
35 Bordo M. D., Rappoport P. and Schwartz A. J., ‘Money versus credit rationing: evidence for the national banking era, 1880–1914’, in Goldin C. and Rockoff H. (eds), Strategic Factors in Nineteenth Century American Economic History: a Volume to Honor Robert W. Fogel (Chicago, 1992).
36 We have relied on Balke N. S. and Gordon R. J., ‘The estimation of pre-war gross national product: methodology and new evidence’, Journal of Political Economy, 97 (1989) for estimates of GNP, rather than Romer C., ‘The pre-war business cycle reconsidered: new estimates of gross national product, 1869–1908’ Journal of Political Economy, 97 (1989), because the former appear to be closer methodologically to estimates of GNP for Canada in Urquhart M. C., ‘New estimates of gross national product, Canada, 1870–1926: some implications for Canadian development’, in Engerman S. L. and Gallman R. E. (eds), Long-Term Factors in American Economic Growth, 51 (Chicago, 1986).
37 Friedman and Schwartz, Monetary History.
38 Grossman R. S., ‘The macroeconomic consequences of bank failures under the national banking system’, Explorations in Economic History, 30 (1993).
39 The implications of the differences in susceptibility to system-wide shocks for long-run macroeconomic stability, however, are unclear. On one hand Rich G., The Cross of Gold: Money and the Canadian Business Cycle, 1867–1913 (Ottawa, 1988), p. 157, concluded that ‘Canadian GNP fluctuated less than its U.S. counterpart’. On the other hand, Williamson S. D., ‘Implications on financial intermediaries and implications for aggregate fluctuations: Canada and the United States 1870–1913’, in Blanchard O. J. and Fischer S. (eds), NBER Macroeconomics Annual, 1989 (Cambridge, Mass., 1989), p. 332, relying on more recent estimates of US GNP (due to Romer, ‘Prewar business cycle’ and Balke and Gordon, ‘Estimation of prewar Gross National Product’), and a different method for detrending the data, found, depending on the measure of US GNP used, that Canadian GNP was 11% or 56% more volatile than US GNP, and that the GNP deflator was 9% or 54% more volatile. Indeed, Williamson concludes that branch banking, the absence of reserve requirements on deposits and bond backing requirements on notes in Canada produced greater sensitivity to real shocks in Canada.
40 Jamieson , Chartered Banking, p. 65.
41 Calomiris C., ‘Regulation, industrial structure, and instability in U.S. banking: an historical perspective’, in Klausner M. and White L. J. (eds), Structural Change in Banking (Homewood, Ill., 1993), pp. 33–8.
42 MacIvor R. C., Canadian Monetary, Banking and Fiscal Development (Toronto, 1961), p. 65.
43 Rich G., ‘Canadian banks, gold, and the crisis of 1907’, Explorations in Economic History, 26 (1989).
44 United States National Monetary Commission, Interviews on the Banking and Currency Systems of Canada (Washington, DC, 1910), p. 181.
45 Carr et al. , Ensuring Failure, pp. 21–2.
46 Timberlake R. C. Jr, ‘The central banking role of clearinghouse associations’, Journal of Money, Credit and Banking, 16 (1984); Gorton G., ‘Clearinghouses and the origins of central banking in the U.S.’, Journal of Economic History, 45 (1985); and Gorton G. and Mullineaux D. J., ‘The joint production of confidence: endogenous regulation and 19th century commercial bank clearinghouses’, Journal of Money, Credit and Banking, 19 (1987).
47 Timberlake R. C. Jr, The Origins of Central Banking in the United States (Cambridge, 1987). Some states developed early deposit insurance schemes, but none were successful in preventing major panics;Calomiris C., ‘Is deposit insurance necessary? A historical perspective’, Journal of Economic History, 50 (1990).
48 Friedman and Schwartz , Monetary History, pp. 170–2.
49 Bond D., The merger movement in Canadian banking 1890–1920, some preliminary findings, University of British Columbia Discussion Paper, 21, p. 5.
50 Annual Report of the Comptroller of the Currency 1920, 2, pp. 156, 621.
51 Calomiris , ‘Regulation’, pp. 58–62, for a complementary discussion of these ratios.
52 F. Capie, ‘Prudent and stable (but inefficient?): commercial banks in Britain’, and Hannah L., ‘Effects of banking cartels’, both in Bordo M. D. and Sylla R. (eds), Anglo-American Financial Systems: Institutions and Markets in the Twentieth Century (New York, 1995).
1 A draft of this paper was given at the Colloquium ‘Financial Institutions and Financial Markets in Twentieth Century Europe’, Zürich, 27–28 May 1993, organised by the European Association for Banking History and the Verein für Bankgeschichte (Schweiz und Fürstentum Liechtenstein). For helpful comments on an earlier draft we wish to thank especially Neil Quigley and Ellis Tallman and an anonymous referee of this journal.
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