Courtesy of Rogers Communications Inc.
The Fathers of Confederation painting by Rex Woods, depicting the Quebec Conference in October 1864 at the Old Parliament Building in Quebec City.
The Palace of Westminster from the Thames, by John MacVicar Anderson, 1867. The building is the meeting place of the British Parliament. in the United States and the United Kingdom, as they impacted the British North American colonies.
As noted by Charles Calomiris and Stephen Haber in Fragile by Design, the United States had a uniquely unstable banking system resulting in five major banking crises prior to the Civil War. Canadian political leaders were aware of this as they were developing their constitution. They were also aware that the newly created Canadian dollar began trading at a premium to the American dollar in January 1862, when the United States suspended gold convertibility.
Also important was the fact that in April 1861, the US Civil War erupted between the Union and the Confederacy. An estimated 40,000 Canadians fought in the war on the side of the Union. Galt, the Province of Canada’ s Minister of Finance, corresponded with US Secretary of the Treasury Salmon P. Chase about paper currency, a key issue for the North. He also dined with President Abraham Lincoln in Washington to ascertain American attitudes towards Canada.
As the war progressed and the Americans became more frustrated with British attitudes and actions, negativity grew towards British North America. The United States Senate brought forward legislation to abrogate the 1854 Reciprocity Treaty, which the President signed into law. This and other actions led to great concern in British North America about the military threat of the United States; it was a motivating factor for the Canadian colonies to unite as one country.
Simultaneously, attitudes toward the colonies were changing in the United
Kingdom. In 1858, the East India Company charter was liquidated. This gave hope to the Canadian colonists that the same would be done in Canada to the Hudson’ s Bay Company, allowing for westward expansion. And there was increased concern about the costs of maintaining the defenses of Canada as outlined in the Jervois Report of 1864.
The Constitutional Conferences( 1864 – 1867)
In early September 1864, Canadian political leaders, led by Macdonald, invited themselves to a conference in Charlottetown, which had been called to discuss Maritime Union of the British North American colonies. The Canadians’ plan was to pitch the idea of a broader Union. Galt explained to the delegates how the prospective federation might work financially and how the question of each province’ s debts would be settled. Macdonald focused on building trust with the delegates from Nova Scotia and New Brunswick.
The Charlottetown Conference adjourned to Quebec City in October. There, the purpose was to draft a framework for a national government, which was done; Macdonald personally wrote 50 of the 72 resolutions passed. Galt’ s responsibility was drafting the financial arrangements of the resolutions that had come out of the Charlottetown Conference.
The Colonial delegates did not leave North America for London until late 1866. During this period, the different colonies dealt with their local issues. Prince Edward Island withdrew.
The London Conference began in December 1866 and lasted nearly four months. Macdonald was quickly chosen as leader and chair. A British observer referred to him as the“ ruling genius.” A major change on the Canadian side was Galt’ s resignation from the cabinet, but his colleagues thought so highly of him that he joined them in London to deal with financial issues.
A major distraction in Great Britain was the change in government in July 1866 when the Conservatives replaced the Whig- Liberal government. Viscount Cardwell, who had been Liberal Colonial Secretary and had been pushing British support for confederation as well as pressing the maritime colonies to join the Union, was no longer in office. Perhaps most importantly, William Ewart Gladstone was no longer Chancellor of the Exchequer, having been replaced by the more sympathetic Benjamin Disraeli. Although out of office temporarily, Gladstone continued his criticisms of colonial defence costs and imperial loan guarantees for railway construction. It was Galt’ s challenge, along with George Brown, to deal with the criticisms of the formidable Gladstone.
The second reading of the British North America Act began in the House of Lords on February 19, when the new Colonial Secretary rose in the House of Lords to begin discussion. He reviewed the reasons for the legislation and stated the need for a common banking system and single currency. By the end of February, the bill passed and was sent to the House of Commons.
There too the bill moved with little opposition. On March 8, it was passed with
54 FINANCIAL HISTORY | Spring / Summer 2026 | www. MoAF. org