THE Province of New Brunswick had been in existence for thirty-six years before it enjoyed the benefits of a bank. In that time its commerce had grown to large proportions, and its merchants had become wealthy from their trade with Great Britain, the West Indies and the United States. But all this business had been done without the aid of a bank. The circulating medium of the Province was made up of a variety of coins, British and foreign, of gold and silver, and the value of these coins was fixed by an act passed at the first session of the Provincial Legislature. These values were lower than those that exist at the present day. An English guinea, twenty-one shillings sterling, was worth one pound three shillings and four pence, in New Brunswick currency. If such a coin now existed it would be worth five dollars and ten cents, or twenty-five shillings and six pence of the currency of New Brunswick, prior to the introduction of dollars and cents, in 1860. The Spanish milled dollar was the coin most frequently seen in New Brunswick in it8 early days, and Spanish and Mexican coins continued to circulate in the Province until it had a coinage of its own. Depending, as the Province •did, on foreign coins, there was always a liability to scarcity in the circulating medium. Ward Chipman, writing to Edward Winslow in 1805, speaks of the great scarcity of specie and says : " All our silver is carried to the States to pay for contraband articles, and so would the gold also have been, had it not been for another Act of Assembly fixing the standard weight of gold coin, which having made the gold as valuable here, or rather more so than it is in the United States, we have now a great deal of gold in circulation." To remedy the scarcity of the circulating " medium, the Legislature passed an act in 1805, authorizing the issue of treasury notes to the value of five thousand pounds. These notes bore interest at the rate of five per cent, but they were not a legal tender, -except for the payment of Provincial duties. As the people of the Province had been accustomed to the use of specie, it was thought that the adding of interest would tend to increase the circulation of the treasury notes, but the effect was quite different. Ordinary persons could not calculate the interest readily, and this made the people reluctant to take them. They never circulated freely, and at the end of a year and a half after the first issue, the number in the hands of the people was not much more than one-fourth of the authorized issue. The result was so unsatisfactory that in 1807, an act was passed for the purpose of redeeming and cancelling these treasury notes.

At the Legislative session of 1818 another act was passsed authorizing the issue of the treasury notes to the value of ten thousand pounds, of eight different denominations, from five shillings to five pounds. These notes bore no interest, and they were a legal tender only at the treasury. In January, 1819, there were £3,925 worth of these notes in circulation, but, unfortunately, the Province was not in a position to redeem them promptly, and an act was passed in 1820, which provided for the calling in, payment and cancelling of all treasury notes issued under the act of 1818. As this plan of increasing the circulating medium had failed, time was ripe for the chartering of a Provincial Bank.

At this session of the Legislature therefore, an act was passed incorporating certain persons under the name of the Bank of New Brunswick. The capital stock was to consist of current gold and silver coins of the Province, to the amount of fifty thousand pounds, one half of which was to be paid in before the 1st September, 1820, and the other half on the 1st September, 1821. The Bank was authorized to begin business when fifteen thousand pounds of its capital had been paid in, and it had power to issue notes, but it was provided that the total amount of the debts which the Bank should at any time owe, whether on bonds, bills, or notes, should not exceed twice the amount of the capital stock actually paid in by the shareholders. It might have been supposed that in a wealthy community like St. John, the shares of the Bank would have been speedily taken up, but this was not the case, for in 1821, the Directors of the Bank obtained an act to reduce its capital stock to thirty thousand pounds. This was done on the ground that only a part of the capital stock had been subscribed.

The failure of the Bank to receive the support of the merchants of St. John generally, seems to have been largely due to the fact that there were too many members of the Council and Assembly among its founders, the twenty incorporators named including no less than three members of the Council, eight of the House of Assembly, and five public officials. Such a financial institution seemed to be too much under the control of the ruling classes to be popular. A bank, if managed on business principles and solely with a view to the general interest, might be of great assistance to the merchants, but if managed otherwise, it might be the means of injuring and oppressing those who were not in favor with the officials and their friends.

In 1825 a bill was introduced to incorporate another St. John bank, under the name of the City Bank. The petition which accompanied this bill was signed by thirty-one merchants of the city, some of them being among its largest importers. They represented that the capital of the Bank of New Brunswick was " totally inadequate " to afford the accommodation the business of the country required. The City Bank was to have a capital of thirty thousand pounds. In the mean time the Directors of the Bank of New Brunswick took the alarm and asked to have their capital stock increased to the original sum, fifty thousand pounds. This was done and the bill to incorporate the City Bank was defeated in the House of Assembly. At the same session of the Legislature, the Charlotte County Bank was incorporated with headquarters at St. Andrews and a capital stock of fifteen thousand pounds.

In 1832 the leading merchants of St. John, endeavored to obtain an act of incorporation for a new bank to be called the Commercial Bank of New Brunswick. Their petition, which was very largely signed, represented that the Bank of New Brunswick also had become a monopoly, so that a few individuals had the power not only ta check, but absolutely to control the commerce of a large portion of the Province. The directors of the Bank of New Brunswick also sent in a petition justifying their management, and asking for an investigation of it. This petition contained what was virtually a threat, that if another bank should be established they would be obliged to call in at least half of their loans. Notwithstanding this threat, the bill to incorporate the Commercial Bank passed the Assembly by a substantial majority, but it was defeated in the Council, most of the eight old men who unanimously threw out the bill, being interested in the existing bank.

In 1833 the promoters of the Commercial Bank were again applying for incorporation, while the directors of the Bank of New Brunswick sought to have their capital stock increased. Both bills were passed in the House of Assembly, but with the proviso that neither bill should become law unless the other was also passed. This ridiculous rider, which was attached to both bills, only serves to show the violence of the conflict between the banking monopolists and their opponents. The Council threw out both bills, and thus again proved themselves faithful to the interests of the old bank.

In 1834 another effort was made to obtain a new bank in St. John, but with no better success than on the former occasions. The Bank of New Brunswick as before, met this with a bill ta increase their capital stock. This was rejected by the House of Assembly, but the Commercial Bank Bill was passed after a vigorous contest. The Council also passed it but with numerous amendments, and when it got back to the House it was rejected. At this session, however, something was done to increase the banking capital of the Province,, by the incorporation of the Central Bank, with headquarters at Fredericton. This bank had a capital of fifteen thousand pounds.

The petitions in favor of the establishment of the Commercial Bank had been very numerously signed and had come from York, Sunbury, Carleton, Charlotte and Westmorland, as well as from St. John. More than thirteen hundred respectable-residents of the Province had declared that St. John required a new bank, yet the Legislature had refused to grant the charter asked for, and showed a disposition to make a burlesque of the whole business. Under these circumstances an appeal was made to the Lieutenant Governor, for letters patent under the great seal of the Province, and a charter in this form was granted in August, 1834. Nineteen years later it was continued by an act of the Legislature. The new bank had a capital of one hundred and fifty thousand pounds, and more than half of it had been paid in within a year from the time its charter was granted. The large business it began to do immediately showed clearly that the demand for another bank was fully warranted by the needs of the Province.

Nothing was done to increase the banking facilities of the Province in 1835, but, during the session of 1836, four important acts were passed affecting the financial institutions of New Brunswick. The Bank of New Brunswick obtained power to increase its capital to one hundred thousand pounds; the Central Bank was authorized to increase its capital to fifty thousand pounds, and new banks were established at St. John and St. Stephen. The latter had a capital of twenty-five thousand pounds. The new St. John bank, which was named the City Bank, had an authorized capital of one hundred thousand pounds. Thus in ten years the number of banks in the Province had increased from one to six and the authorized banking capital from thirty thousand pounds to four hundred thousand pounds. In 1838 when all the new banks had become fully established their paid up capital reached the large total of £275,000; their notes in circulation were upwards of £200,000; their deposits exceeded £100,000 and their discounts aggregated almost £500,000. The Bank of New Brunswick which for so many years was the only bank in the Province, was far surpassed by the Commercial Bank and even by the Central Bank. The latter with a much smaller capital had twice as many notes in circulation as the Bank of New Brunswick, and a considerably larger line of discounts. The Commercial Bank had four times as many notes in circulation as the Bank of New Brunswick, and was discounting four times as much paper. The tremendous expansion of banking in the space of ten years, proves that the complaints in regard to the inadequacy of the old bank were well founded, and causes us to wonder how any business was done before any banking facilities existed. Probably in the beginning of this new era of free banking, the business was overdone and the collapse at a later period of four of the six banks I have named may have been due to reckless management which had its origin a quarter of a century before the final crash came. Yet it is nevertheless true that one of the primary conditions of success for any country is an abundance of banking capital. The logs which came down the St. John, the Miramichi, or the Restigouche during the spring freshet are floated on the money, just as much as they are on the waters of these great rivers. Without the necessary capital, which the banks largely supply, the lumberman could not send his choppers into the woods or keep them there during the winter. The snows of winter would melt in vain but for the money which enables him to keep his gangs of river drivers on the swollen streams. The noisy saw mills would remain silent, were it not for the capital which enables each working man to be paid his wages regularly, whether sales abroad have been made or not and without regard to the state of the market.