Upper Canada
Currency and banking
### Currency and banking

#### Currency

The government of Upper Canada never issued a provincial currency. A variety of coins, mainly of French, Spanish, English and American origin circulated. The government used the Halifax standard, where one pound Halifax equalled four Spanish dollars. One [pound sterling](/wiki/Pound_sterling "Pound sterling") equalled £1 2s 2¾d (until 1820\), and £1 2s 6½d Halifax pounds after 1820\.

Paper currency was issued primarily by the Bank of Upper Canada, although with the diversification of the banking system, each bank would issue its own distinctive notes.

#### Bank of Upper Canada

[thumbnail\|left\|The Bank of Upper Canada, Toronto](/wiki/File:Bank_of_Upper_Canada.JPG "Bank of Upper Canada.JPG")
The Bank of Upper Canada was "captured" from Kingston merchants by the York elite at the instigation of [John Strachan](/wiki/John_Strachan "John Strachan") in 1821, with the assistance of [William Allan](/wiki/William_Allan_%28banker%29 "William Allan (banker)"), a Toronto merchant and Executive Councillor. York was too small to warrant such an institution as indicated by the inability of its promoters to raise even the minimal 10% of the £200,000 authorised capital required for start\-up. It succeeded where the Bank of Kingston had failed only because it had the political influence to have this minimum reduced by half, and because the provincial government subscribed for two thousand of its eight thousand shares. The administration appointed four of the bank's fifteen directors that, as with the [Clergy Corporation](/wiki/Clergy_Corporation "Clergy Corporation"), made for a tight bond between the nominally private company and the state. Forty\-four men served as bank directors during the 1830s; eleven of them were executive councillors, fifteen of them were legislative councillors, and thirteen were magistrates in Toronto. More importantly, all 11 men who had ever sat on the Executive Council also sat on the board of the Bank at one time or another. 10 of these men also sat on the Legislative Council. The overlapping membership on the boards of the Bank of Upper Canada and on the Executive and Legislative Councils served to integrate the economic and political activities of church, state, and the "financial sector." These overlapping memberships reinforced the oligarchic nature of power in the colony and allowed the administration to operate without any effective elective check. The Bank of Upper Canada was a political sore point for the [Reformers](/wiki/The_Reform_Movement_%28Upper_Canada%29 "The Reform Movement (Upper Canada)") throughout the 1830s.

#### Bank wars: the Scottish joint\-stock banks

The difference between the chartered banks and the joint\-stock banks lay almost entirely on the issue of liability and its implications for the issuance of bank notes. The joint\-stock banks lacked limited liability, hence every partner in the bank was responsible for the bank's debts to the full extent of their personal property. The formation of new joint\-stock banks blossomed in 1835 in the aftermath of a parliamentary report by Dr [Charles Duncombe](/wiki/Charles_Duncombe_%28Upper_Canada_Rebellion%29 "Charles Duncombe (Upper Canada Rebellion)"), which established their legality here. Duncombe's report drew in large part on an increasingly dominant banking orthodoxy in the United Kingdom which challenged the English system of chartered banks. Duncombe's Select Committee on Currency offered a template for the creation of joint\-stock banks based on several successful British banks. Within weeks two Devonshire businessmen, Capt. George Truscott and John Cleveland Green, established the "Farmer's Bank" in Toronto. The only other successful bank established under this law was "[The Bank of the People](/wiki/Bank_of_the_People "Bank of the People")" which was set up by Toronto's Reformers. The Bank of the People provided the loan that allowed [William Lyon Mackenzie](/wiki/William_Lyon_Mackenzie "William Lyon Mackenzie") to establish the newspaper The Constitution in 1836 in the lead up to the Rebellion of 1837\. Mackenzie wrote at the time: "Archdeacon Strachan's bank (the old one) ... serve the double purpose of keeping the merchants in chains of debt and bonds to the bank manager, and the Farmer's acres under the harrow of the storekeeper. You will be shewn how to break this degraded yoke of mortgages, ejectments, judgments and bonds. Money bound you – money shall loose you". During the financial panic of 1836, the Family Compact sought to protect its interests in the nearly bankrupt Bank of Upper Canada by making joint\-stock banks illegal.


How did the joint-stock banks contribute to the economic instability of the time?