Province of Canada, Legislative Assembly, Scrapbook Debates, 8th Parl, 5th Sess, (10 August 1866)
By: Province of Canada (Parliament)
Citation: Province of Canada, Parliament, Scrapbook Debates, 8th Parl, 5th Sess, 1866 at 84-87.
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Note: All endnotes come from our recent publication, Charles Dumais & Michael Scott (ed.), The Confederation Debates in the Province of Canada (CCF, 2022).
Click here to view the rest of the Province of Canada’s Confederation Debates for 1866.
FRIDAY, August 10, 1866
The concurrence of the House was taken in the following items of the supplementary estimates: […]
On the item for the purchase and maintenance of gunboats on the Lakes and River St. Lawrence $134,060,
William McDougall [Lanark North, Provincial Secretary] explained, that the commander of the forces in his discretion deemed it necessary to arm certain vessels, and gun-boats. Four of these boats were armed and equipped. The House would of course understand that in matters of this kind the government had to be guided in their action, to a great extent, by the suggestions of those who had the direct responsibility under them. There were at present two of these boats on the St. Lawrence—one at Fort Erie and the other on the Upper lakes. He also stated that there were three gun-boats sent out from England, of a very superior class, which have already arrived at Kingston. Hon. Mr. McDougall entered into full explanations as to what had been done, and what was still contemplated in maintaining gun-boats during the season.
John Cameron [Peel] had no doubt the House would readily assent to the appropriation for the payments already incurred, or to be incurred, during the season in maintaining gun-boats which, thought fortunately not as yet required, would, in an emergency, be of very great service to the country. But the question upon which information was especially desirable regarded the cost of maintaining these vessels. The share which the mother country is to assume in the cost of our defences, should be arranged and placed upon some definite basis.
William McDougall [Lanark North, Provincial Secretary] said the Canadian Government had not had time to enter into any negotiation with the colonial office, in anticipation of the necessity of gun-boats, the emergency had come suddenly and had to be provided for at once. He stated the position of the Government to be, that the Imperial Government ought to bear the whole of the expenses, not only of arming and equipping, but also of furnishing the gun-boats. Correspondence was now taking place with reference to the matter.
John Sandfield Macdonald [Cornwall] said it was now time that the people of this country should know precisely upon what footing the cost of defending the country was to be placed. They had already voted a sum equal to one-sixth of the entire revenue of the country, and if in addition to this, the people were to be called out to give their personal services and suspend the industry of the country, it would be a burden which they would find very hard to bear.
Christopher Dunkin [Brome] would shrink from making any specific bargain as to proportions of expense or divisions of responsibility between Canada and the mother country, against the future. How did we know what our capacity might to bear a specific share in a responsibility without also knowing the extent of that responsibility. He thought the only proper arrangement that should be entered into was that we should do all that we reasonably can, and the Imperial Government is bound to provide for the rest whatever it may be.
Antoine-Aimé Dorion [Hochelaga] argued that year after year they had been called upon to provide more and more for the defence of the country; that the present arrangements for defence were too vast to meet the incursions of land pirates, such as the Fenians, and too insignificant against the United States. He contended that the Imperial Government favored the early accomplishment of Confederation for the purpose of throwing the entire burden of defence upon the colonies.
Alexander Morris [Lanark South] repudiated the sentiments of the former speaker. It was the second time which the doctrine of no defence being the best had been asserted on the floor of the House. He had to right to assume that the British Government designed to abandon these Provinces the moment Confederation was accomplished, when but a short time ago the leaders on both sides in the Imperial Parliament had declared the contrary.
John Scoble [Elgin West] would like to knows what the hon. member for Hochelaga [Antoine-Aimé Dorion] desired. Did he want to enter into alliance with the United States for the protection of these colonies, or did he mean that they should form part of the American Union?
Antoine-Aimé Dorion [Hochelaga] explained the ground he had taken. He assumed that the British government designed, after Confederation to throw the whole burthen of defence upon the colonies, and that they were not strong enough alone to resist the military power of the United States.
- (p. 85)
John Cameron [Peel] said it was extraordinary to hear a gentleman occupying the high position of the hon. member for Hochelaga [Antoine-Aimé Dorion] expressing such sentiments in this House. Did the hon. member mean to say that we should stand quietly by and allow our country to be wrested from us, without raising an arm in our defence? Were these the sentiments of the people of Lower Canada?
Some Hon. Members—Loud cries of “no! no!”
John Cameron [Peel]—He (Mr. C.) was sure they were not the sentiments of the people of Upper Canada, and he believed they were not the sentiments of the people of Lower Canada.
Some Hon. Members—Hear, hear.
John Cameron [Peel]—It was time that all this talk about England’s quarrels not being ours should cease. So long as we shared in her protection, so long were we bound to make her quarrels ours, and to stand up for the Empire in whatever part it might be assailed.
Some Hon. Members—Hear, hear.
Richard Cartwright [Lennox & Addington] regretted that anything should ever be said in the Canadian Parliament which would give the least countenance to the active but shallow-brained party in England who desired to sever the connection with the colonies. He argued that the possession fo the British American Colonies was essentially necessary to the maintenance of England’s pre-eminence among the nations of the world. The day she lost these American possessions she would sink to the level of a second or third rate power.
The item was then concurred in. […]
Mr. Gibbs’ Speech on the Proposed Changes in the Currency
Thomas Gibbs [Ontario South] said he desired to offer a few observations on the proposed changes in the currency, introduced by the Government, and which were now submitted in an amended form. He regretted that these changes were contemplated, and that he was compelled to speak of them in condemnatory terms. The hon. Minister of Finance [Alexpander Galt] himself felt the importance of these changes, and of the interests which were to be affected by them. In opening up this subject, and giving the House the resolutions now before it, his language was cautious, and he seemed to approach his subject with some degree timidity. He said it was necessary to deal tenderly and even delicately with the great interests that would be disturbed by the changes contemplated. As the debate advanced, the Inspector-General grew bolder, and assumed a more defiant and even contemptuous position.
Speaking of the banks he asked what they were, and whence did they derive their existence? Were they not the creatures of this Legislature, and as such liable to be legislated out of existence? The plea of necessity, urgent and immediate, had been set forth as warranting the proposed changes.
He (Mr. G.) would ask if all the available means to procure a loan had been resorted to before submitting a theme which must disturb, if not destroy; derange, if not overturn our banking system. When the hon. member for Toronto West [John Macdonald], who was President of the Royal Canadian Bank, spoke the day before in the interests of the institution with which he was connected, he was at once charged with not being a disinterested party, and his arguments were sought to be mollified on that account.
Now, he (Mr. G.) was not going to speak in behalf of any bank, not even of that with which he was immediately identified, an institution which had not merely benefitted the section of country in which it had originated, but had also extended its operation into other portions of Canada West, and even as far East as the commercial capital itself. On the contrary he was free to admit that in dealing with this bank (Ontario,) the basis laid down by the Government was a fair one, and so far as the bank itself was concerned, it would sustain no loss. The loss by the contemplated changes was not to the bank so much as to the public, in compelling the banks to curtail their discounts, confining their operation to capital, instead of allowing them to expand as they now could under certain restrictions, and thus meet the necessities of the country in moving produce to market, &c. To the Lower Canada banks this remark did not apply with so much force, as to those of Western Canada—the circulation of the latter being as three to one of the former.
The credit of the Province must be sustained, and the House was prepared to clothe the Government with the necessary to meet their wants, but this plan should not be attempted until all others had been exhausted. The Government expected by this change to pay off indebtedness, and save interest by the issue of notes bearing interest. To do this, Government would undoubtedly displaces the present circulation of the banks, for he, (Mr. Gibbs) saw no alternative; if the notes were issued, and the Bank of Montreal entered into the arrangement, which the Inspector-General desired to confine that institution, all the other banks would obliged to entry into the arrangement also. There was no option. To supply this circulation, now up to $12,000,000, the Government would be required, under the resolution, to obtain the money for their notes on the following terms:
- (p. 87)
|To hold in gold reserve up to $3,000,000, at 20 per cent is||$1,000,000|
|“ up to 2nd, $5,000,000 at 23 per cent is||$1,250,000|
|“on $2,000,000 at 33 per cent is||$ 666,667|
Leaving $9,083,333 on which profit would accrue. This at 6 per cent would yield $545,000 per annum
|One per cent bank commission||$120,000|
|Five per cent paid banks for relinquishing circulation||600,000|
|Loss of bank tax||25,000|
|Cost of engraving notes||20,000|
Showing direct loss of $220,000 per annum. Besides this, there would be a loss of $750,000 on the $3,000,000 of debentures, now only worth 75 cents in the dollar, but which the Government were obliged to take at par. This distributed over four years would make an annual loss of $407,500, but against this it was fair to state that the indemnity to the banks for giving up their circulation, would cease at the expiration of their charters in 1870. The Inspector-General had made it optional for the banks to return to the present system, if on trial, the scheme of the Government was not satisfactory.
But he (Mr. G.) apprehended that would be very difficult, though not impossible. In such case it was by no means certain that the charters of the banks, all of whom expired in 1870, would not be revived. Instead, therefore, of profit to the Government, he (Mr. G.) believed that not only would it injuriously affect the country, but the Government would not derive from it the advantages anticipated. He would now turn to its effects on the community in Western Canada. The public desired to know how these government notes were to be redeemed. The hon. Minister of Finance [Alexander Galt] had said that it would afford better security to the public than the notes of any chartered bank. This was quite correct.
But he (Mr. G.) doubts whether the government would be in as good position to redeem on presentation, the bills which might be sent in for this purpose as the Chartered banks now were. The gold usually held by the banks was equal to 40 or 50 per cent of their circulation, and they always had available assets to meet any emergency. The government only intended to hold an average of 22 per cent in gold to redeem their circulation. It was therefore quite clear that the balance obtained from the sale of their notes, having been applied to the payment of debt they must be at the mercy of their financial agents as to the rate of interest to be paid, for necessary advances and debentures to meet the demands of bill-holders. The changes announced to-day were in the wrong direction. In restricting the issue to $5,000,000, as now proposed, the Government could only realize a sufficiency to meet the demand of $5,000,000 the balances being required to pay off debentures held by the bank accepting the proposals of the Government, and return specie to redeem their circulation.
Now there was no doubt that, under this arrangement, the whole would be absorbed by the Bank of Montreal; and by permitting the issue, other banks had the door closed against them should they deem it advisable hereafter, to enter into the Government proposition. It was infinitely better to allow the Government to extend the issue to $15,000,000, so that all may come in if they please, than confine it to one monopoly, which it will most undoubtedly be if confined to $8,000,000.
He (Mr. Gibbs) did not, therefore, look on the change mentioned to-day with favor, as many hon. members seemed to do. Had the banks of Canada not maintained a high reputation for their management during the many years they had been in existence? Taking the report of the cashier of the Bank of Montreal, who was so anxious for this change, at his last annual meeting this was admitted, although changes were hinted at in that report, of the nature of which he (Mr. G.) now believed they could form some opinion by the resolutions now before the Committee.
Alexander Galt [Sherbrooke, Minister of Finance]—No—no.
Thomas Gibbs [Ontario South]—The chief objection to this scheme was its utter inability to meet the expansion necessary at certain seasons of the year. During last fall, our banks had found it necessary to increase their circulation $6,000,000, and this was done beneficially to the country, and with safety to the banks. This fatal objection in the present scheme had not and could not be met. In future banking could only be conducted on capital in hand, and this advantage of circulation would in future be lost, as no Provincial note could be paid out until gold had first been paid for it. He would now show the terms on which the Government proposed to settle with the bank, with which he was connected. The basis of settlement was the circulation of 30 April last.
|The Ontario Bank then had||$1,205,000.|
|They gave this up which was worth, say 8 per cent||$96,400.|
|Also interest on $120,000 debentures relinquished, bearing 5 percent||$9,500.|
|Less interest received for debentures $190,000 at 8 per cent||$15,200|
|Profit on gold 20 per cent not required to be held, say $240,000 at 8 per cent||$19,200|
|Five per cent on circulation||$60,250|
|From which bank tax has to be deducted, leaving the amount 8 or $10,000. But it would affect the ability of the bank to discount as follows: Suppose the bank required to increase its circulation to $1,500,000, as it has already done. Under the present plan, it could only issue Government notes for amount received for its debentures||$190,000|
|and gold not then required to be held as now 20 per cent on $15,000,000||$300,000|
|This shows that the bank would be obliged to reduce its discounts a million of dollars. Another view, placing it in its most favorable light:—Suppose its circulation, as on 30th April, $1,200,000, and that it held 40 per cent in gold against that circulation, it would stand thus:—Amount of circulation||$1,200,000|
|Less notes for debentures||$190,000|
|Gold—40 per cent||$480,000–$670,000|
|Must reduce discounts||$530,000|
|But the Bank has a right to expend to the amount of—|
|1st—Its paid up capital||$1,900,000|
|2nd—Gold and Silver on hand||580,000|
|3rd—Bonds or debentures||190,000|
It will thus be seen at a glance that the proposed system must practically affect the banks of Western Canada, and prevent them from rendering the facilities to the country they are now enabled to do. He had thus chosen to illustrate his views by showing how it would affect the Ontario Bank, because he was more familiar with it than any other. But what applied to that institution would apply in a greater or less degree to all the others. He maintained that the case of necessity had not been made out. He believed that if proper exertions had been made, this debt could have been provided for, by simply offering seven or eight per cent on the issue of debentures, having abort dates to run, without interfering with the currency of the country. These institutions had withstood many monetary crises, and had inspired confidence from the fact that not one of any importance had failed under every circumstance to meet its obligations promptly.
The banks had been the pride and glory of the Canadian people, and their interests were so thoroughly identified with those of the people as to be identical. For these reasons which he believed would be approved of very generally in Canada West, he felt it his duty to protest against the proposed changes.
Some Hon. Members—Cheers.
 Non-relevant material that had been left out just prior to Geoffrion speaking. To view the entire original document, see PrimaryDocuments.ca.
 The Fenian movement gained strength in North America when British antipathy in the United-States were raised after American politicians blamed “unneutral” British interference during the civil war after it concluded and raids on the Irish Republican Brotherhood in Ireland in the Fall of 1865 angered American immigrated Irish. In America, membership in the Fenian movement swelled late-1865 and it aimed at invading British North American to encourage rebellion and free Ireland from English subjugation. While the movement itself did attempt actual invasions of British North America, these were inefficient and unorganized – compared to “a crowd of seedy theatrical extras, hired by the hour for some battle scene in a play or a film.” The Fenians are mentioned once in the “Confederation Debates” of 1865 by T. D’Arcy McGee on Feb. 9,. 1865 when quoting a passage from Archbishop Connolly’s letter in favor of confederation published in the Halifax Morning Chronicle on Jan. 13, 1865. There Archbishop Connolly wrote:“A cavalry raid or a visit from our Fenian friends on horseback, through the plains of Canada and the fertile valleys of New Brunswick and Nova Scotia, may cost more in a single week than Confederation for the next fifty years; and if we are to believe you, where is the security even at the present moment against such a disaster?”
 More non-relevant material has also been excised here. Supra footnote 1.
 This speech is a standalone speech, which is found directly after the debates for Aug. 10, 1866 in the Scrapbook Debates, p. 86. The speech ends on p. 87 and is followed by the debates from Aug. 11, 1866. However, this debate most certainly did not occur on this day as the bill which Thomas Gibbs is discussing had passed the day before on Aug. 9. This expanded speech is certainly from one of the days of early August, when the bill was debated, but the editors are unable to pin down an exact day. Therefore, we have left it where it is placed in the original Scrapbook Debates—lodged between Aug. 10 and 11.
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