By Joe Martin

Regional bank failures in the United States have raised concerns in both the United States and Canada about the safety of the banking systems . Tony Fell , the legendary leader of RBC Dominion Securities , recently asked , “ How many times does this have to happen before we learn the lesson that history matters , and you ignore it at your peril ?” Examining the Panic of 1907 , which is well remembered in the United States , may reveal some answers .

In Canada the story is largely forgotten , although occasionally the phrase “ financial

Remains of The Canadian Bank of Commerce on the ground floor of the Mutual Life building , San Francisco , 1906 . contingency ” is used . The Monetary Times , a weekly business publication , described the Canadian stock markets as experiencing only a sympathetic flurry , but nothing like the “ financial cyclone ” which struck New York . They added that “ the disturbance scarcely ruffled the calm surface of Canadian conditions .” And the Times gave full credit to the positive role played in the United States by Treasury Secretary George B . Courtelyou . However , the Times did conclude with a warning that because of the importance of the United States to the Canadian economy that a slackening of the Canadian economy was not at all unlikely . The Canadian economy had modest growth in 1907 ( 0.7 % in terms of increase in per capita GDP ), but in 1908 the Canadian economy declined sharply , by 7.8 % per capita , the eighth worst year in the 20th century and the worst until 1914 when World War I broke out .

There were several bank failures in the United States during this period , but only a few in Canada . Canadian banks were larger on average than those in the United States . In addition , the Canadian banks had a network of bank branches , which helped spread risk . Nevertheless , they did see a decline in note circulation ( Canadian banks issued all paper currency $ 5 and above until the Great Depression ) and in loans , although both overdue debts and loans to provincial governments jumped dramatically . However , deposits grew by 0.5 %.

In the first decade of the 20th century , while Canadian banks were big , growing and consolidating their share of financial intermediation was declining and was

20 FINANCIAL HISTORY | Fall 2023 | www . MoAF . org