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Vol. 9, No. 10 October, 2010
"The Crash of the Home Bank of Canada " "The Psy-War Shell-Case Cents" "Exporting British Silver, 1875" "Antecedents of the Franklin Half" Above: The original "beaver design" by George Kruger-Gray in 1937 was meant for a 10-Cent piece. It was transferred to the reverse of the 5-Cent and has remained to the present day. The Mid-Island Coin Club, Dues: $12 per year Mailing Address: Mid-Island Coin Club, c/o West Coast Stamp & Coin, Executive Officers: President: Felix Stawski
Happy Fiftieth, Alberni Valley !
In 1960, a group of collectors organized the Alberni Valley Coin Club, almost at once becoming a charter club of the Canadian Numismatic Association. It was a time when the numismatic pot in Canada was just starting to boil, a lot of clubs being organized across the country. But the boil went nova until the inevitable bursting of the bubble in 1965. Many of the clubs immediately disappeared; others staggered along for a few years, then faded away as well. A lot of them were from areas with a population base much larger than that of the Alberni Valley . There was a contraction here as well - but it never went under, the reason being that the AVCC had a core . Always there has been that little band soldiering on, refusing to let the light go out. Only 10 or 15 years ago, the numismatic map of British Columbia was pretty dark insofar as organized coin clubs were concerned: one in Victoria, two in Vancouver - and Alberni Valley . When you think on it, that's quite extraordinary. Of course, a club is not just an entity by itself - it's the sum total of the members of which it is composed. Their numbers, interests, projects and dedication. Particularly the last by (for want of better description) the core of the core. The result is that the AVCC is a fun club to attend, else so many Mid-Islanders would not be dual members. So, from their newsletter: "The Club's 50th Anniversary Dinner is to be held Friday, Oct. 22nd, at the Golden Dragon Restaurant (private room), with dinner commencing at 6:30 p.m. All members and partners are invited to attend. An RCNA rep is expected to be in attendance too!" Congratulations, Alberni Valley . Good on ya! * * * * * The September meeting of the Mid-Island Coin Club was attended by 30 members and guests. Highlight of the evening was the presentation of the Bill Potts Memorial Trophy to this year's winner, Joan Ryan, by last year's recipient, Phil Harris. Well deserved. Since the club may be slipping a little in the infotainment department, Phil Harris was appointed "Entertainment Director" to shore up this part of the evening. For the October meeting, it will be Show & Tell: Numismatic items of the Atlantic Provinces . So bring your PEI leather notes, Saint John tokens, Nova Scotia treasury notes, Newfoundland gold - whatever. Share your knowledge.
The Crash of the Home Bank of Canada .
The Toronto head office of the Home Bank of Canada in the popular "temple" style. Up until 3:00 p.m. , Friday, 17 August 1923 , some 60,000 depositors of the Home Bank of Canada , stretching from Quebec to British Columbia , were doing business in the 71 branches of the Toronto-based institution, all secure in the belief of the bank's stability. At 3:01 they were aghast to discover that the bank had crashed, their deposits frozen - perhaps unrecoverable. Much of it wasn't. In the aftermath, the bank's remaining assets permitted only a payment of 25¢ on the dollar to a maximum deposit of $500, and nothing thereafter. Two years later, government money was used to pay a further 35¢ on the dollar with, again, the maximum deposit amount of $500. In all, $3,460,000 was paid out in these compensations but the lost revenues set off a string of bankruptcies. One of the hardest hit was the mining town of Fernie , B.C., the Home Bank's most westerly branch and the only bank in town. Both the town's municipal funds and the miners' benevolent fund were largely wiped out. As the details of the crash came out, Canadians were shaken in the belief of their "secure" banking system - else how could this have happened? Perhaps worst of all, the federal government had known that the Home Bank was essentially broke for nine years but had covered up the fact and allowed it to continue wracking up the accumulated disaster it became. What happened? The answer goes back to Confederation and a new country that was already in debt to the tune of some $6-million, in large part due to the collapse of the Bank of Upper Canada (a bank that "couldn't" go broke - but did) and the overruns attendant with the construction of the Grand Trunk Railway, both inherited from the Province of Canada. The first Dominion finance minister, Sir Alexander Galt (of the Eastern Townships Bank, "conflict of interest" being an unknown term), urged government intervention to save failing banks, smooth economic upheavals, rescue depositors and bail out investors if need be. Sir John A. Macdonald was having none of it - "The business of banking is bankers' business" - and Galt resigned with the first parliamentary sitting. His replacement, Sir John Rose (director of the Bank of Montreal) proposed legislation based on U.S. federal banking law but while this furnished increased safety, it tended to curtail easy access to loans, something much desired by businessmen, farmers - and many bankers. It, too, died on the table. The third finance minister, Sir Francis Hincks (at the time manager - or "cashier" - of the People's Bank in Montreal ) hammered out a Bank Act of 1871. It had all sorts of new rules and apparent safeguards - at least as far as the Canadian public was lead to believe - but its weakness was that there little or no overseeing that the rules were kept. The government was satisfied with monthly reports and while many banks did adhere to the regulations (they were, after all, only prudent banking practices), others did not, cooking the books as to amount of banknote issue, outstanding debts and so forth. Usually it was only after a bank's failure that the malpractices came to light - but no banker was ever successfully prosecuted and few even had charges brought against them. One that eventually went astray was the Home Bank of Canada . The Home Bank had its beginnings in 1854 as the Toronto Savings Bank, a savings and loan institution founded by Catholic senator James Mason and promoted by their priests to a largely working-class Irish clientele. The institution flourished to the extent that Mason had no trouble obtaining a federal charter for it in 1905 as the new "Home Bank of Canada ". The charter allowed bank note issue and branch banks across Canada , resulting in greatly increased deposits. These funds found ready use as loans for stock, bond and real estate speculators in the boom atmosphere of 1896-1912. One of these speculators (later to become the largest of four big debtors of the Home Bank) was Sir Henry Pellatt, a millionaire mining and utilities promoter, who was a friend of James Cooper Mason, son of the elder James. Pellatt relied on the Masons to bankroll his speculative land deals in Western Canada which made him millions and the mutual association continued after the charter of 1905 - if anything, to an even greater extent.
Lt.: Henry Mill Pellatt, ca 1880. Rt.: "Casa Loma", Toronto . Modelled on Balmoral Castle , Casa Loma contained 98 rooms, 30 bathrooms, an indoor rifle range and mahogany stalls in the stables.
But the western land boom collapsed abruptly in 1912, taking as its first bank casualty the new Bank of Vancouver. Pellatt lost hugely but kept on, being sustained by yet more loans from the Home Bank. Pellatt, as with the other three, was simply in the position of being a creditor whose debts were so large that the Home Bank could not afford to let him fail. At this point, Pellatt owed the Home Bank an astounding $4.5-million and had just started building his vanity castle, "Casa Loma", in Toronto that when finished in 1914 would cost $3.5-million. Yet Pellatt's loans were not being repaid; nor were those of the others. Apparently they considered the Home Bank funds as free money. The first indication of trouble to those outside the Home Bank coincided with the outbreak of the First World War. Following a few minor runs on banks due to war jitters, the Minister of Finance, Thomas White, in consultation with some of the country's leading bankers, brought out the "Finance Act, 1914" in which the government was made interventionist, the treasury becoming a central bank ready to make loans to the chartered banks to tide them over the bad times - if need be. One of the very first to come knocking was the Home Bank of Canada , requesting a loan of $450,000. As was normal practice, the Home Bank was asked for appropriate collateral - which it could not provide. At this point, the bank should have been closed but the Borden administration felt that a second bank failure at this time might throw the whole Canadian banking system in jeopardy so the Home Bank's shortcomings were papered over and covered up - with assurances that they would conduct themselves prudently in the future. It didn't happen. Pellatt and the other three major debtors (all of whom included Home Bank board directors from Toronto ), continued to demand - and receive - loan upon loan. These self-dealing financiers in charge of the Home bank were driving it into the ground.
Within a year, the debacle became even more difficult to hide. The three western directors, lead by Thomas Crerar, the head of the influential Grain Growers' Grain Company, wondered why the Home Bank was asking for "bail-out funds" when all the reports to them showed it to be strong and solvent. Even though Crerar saw the Home Bank as a welcome addition to western finance, he wanted answers - and was shocked and angered to find that the Bank's books were closed to him. But Crerar was persistent and even though there were attempts by the Home Bank debtors to discredit him, he succeeded in having the federal government examine the books. They had been, of course, entitled to do so for decades - but simply hadn't bothered. Finance Minister White turned to his friend and trusted lawyer, Zebulon Lash, vice president of the Canadian Bank of Commerce, to examine the books. By 1916, Lash had found that the four big debts alone constituted more than three times the Bank's entire assets. Still, with banking interests himself and in light of the war situation, Lash advised little more than cosmetic changes, one of which was the removal of James Mason as general manager for his equally inept son, James Cooper Mason. The Bank continued to slide. A "proper" time for the Bank's closure never arrived as coverup after coverup continued into the post-War era. Canadians' confidence in their banks was shaken even further by the "merger" of the country's two largest banks: the 400-branch Merchants Bank of Canada with the Bank of Montreal in 1922. Actually, it was not a merger at all; the Merchants Bank had been so badly mismanaged with "bad debts and unwise loans" (sound familiar?) that it faced $8-million in losses. But since its assets were greater than its debts, it was taken over by the Bank of Montreal. Merchants Bank shareholders took a big hit on their investments. The Merchants Bank fiasco prompted a new Bank Act by Liberal Finance Minister William Fielding in March 1923 including mandatory auditing by independent firms, the prompt reporting of any large suspect loans, and new conflict of interest rules. Hidden among the rules were two of import: current market valuations were to be given rather than future expectations and the definition of a bad loan was nailed down. No longer could loans be called "good" when nothing had been paid on them for years. But before the rules could be set in place, the Home Bank crashed that August. As the Home Bank's day of reckoning loomed, James Cooper Mason succumbed to cancer on 9 August. His successor, assistant general manager A.E. Calvert discovered a horror story in the "real" books and laid his findings before president H.J. Daly who scrambled with the other officials to obtain a bailout loan from Ottawa or merger with another bank. Neither were possible. At 3:00 p.m. , 17 August 1923 , the Home Bank of Canada crashed. Pellatt was forced to sell his Casa Loma and eventually forced into bankruptcy. That was largely the fate of the other major debtors as well. Criminal and civil charges were brought against a number of Home Bank officials in December 1923 but (as usual) to no avail. While the bank notes remained freely redeemable (as have all Canadian bank notes since 1896), no one ever received back more than $300 on their deposits no matter how large the amount. Shares, of course, were worthless. A new government office was created in 1924: the "Inspector General of Banks" who was given wide powers of supervision. In 1935, the Bank of Canada was created to oversee and direct the Canadian banking system.
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Although it was 1905 before the renamed Home Bank of Canada received its charter, it was obviously quite sure it would do so since its first notes, all printed by the American Bank Note Company of Ottawa, are dated 1904. All five denominations are "patriotic" in nature, showing on their face: Sir Isaac Brock ($5); the Ridgeway monument of the 1866 Fenian Raid ($10); the 1885 Riel Rebellion monument ($20); the 1900 Boer War monument ($50); and the Champlain monument ($100). There were a total of four issues: 1 March 1904 ; 2 March 1914; 1 March 1917 and 1 March 1920 although not all denominations were printed for all dates.
A single back was used for all denominations and issues (even to the colours), differing only in the type of lathework and denomination: a vignette called "Mutual Improvement" and showing three students. Although there is still an amount of about $35,000 in notes for the Home Bank outstanding - quite large for a defunct bank - all remain very scarce or even rare today. Some are known only as proofs or specimens, not as an issued note. In the following list of Home Bank notes, those unknown today as issued notes are starred. (1904) $5, $10, $20*, $50*, $100*. (1914) $5, $10, $20*, $50*, $100*. (1917) $5 - manuscript signature, $5 - typed signature, $10, $100. (1920) $5, $10, $20. ************************************************************************
The Psy-War Shell-Case Cents.
In February, 1942, Malaya fell to the Japanese, and in so doing, deprived the Allies of the world's major source of tin. Britain , with the ancient Cornwall tin mines still producing, had enough for her own needs but both Canada and the U.S. were caught short in this metal which had urgent wartime uses. The need was too great for either country to "waste" undue amounts in their coinage, the lowly cent. Canada was the first to make her move, some time in 1942 changing the formula of the cent from "95 ½ % copper / 1 ½ % zinc / 3% tin" to "98% copper / 1 ½ zinc / ½ % tin", really just a whisper of tin to meet current legislation that specified some tin content. This was a temporary measure which nevertheless became permanent as it proved satisfactory and remained until the Canadian cents became copper-plated zinc in 1997. The U.S. could have gone the same route - in fact, even easier than Canada since its official composition of the cent was ".950 copper to .050 tin and zinc". There being no mention as to the exact per centage content of the last two base metals, it would have been extremely possible to raise the zinc content and reduce the tin to virtually nothing had they so wanted. Instead, throughout 1942, the three U.S. mints continued to churn out the old high-tin cents: some 950-million of them. But in that year, Congress granted the Secretary of the Treasury wartime authority to change the composition as he saw fit. In the meantime, a change in the cent was certainly in the works. The government would very much have liked to reduce their mintages but that wasn't possible with the new sales taxes needed to conduct the war. A lot more cents were needed. Private industry, fully aware that a change was coming, were especially prolific in submitting suggestions and samples in all sorts of substitute materials including base metals and their alloys and even non-metallic materials such as glass and cardboard. One submission was even in hard rubber, which seems rather silly considering that rubber was the other wartime commodity in short supply. The final decision was made in favour of zinc-coated steel cents, beginning in 1943, and as of February that year, the first of them entered circulation. But they met with a wave of complaint and protest: "too easy to confuse with the dime" some said (a fairly valid objection; "when they become worn - ewww! " (not valid at all). Perhaps the silliest was the odd rumour that they were mildly poisonous (they weren't - at least no more than the ordinary bronze cent). The war leaders viewed all these objections as distinctly unpatriotic; after all, the whole purpose was to release copper stores for the use of the boys overseas - and in this, the 1943 cents were fairly successful, some 1,794 tons of copper and 120 tons of zinc freed for wartime uses. But, behind the scenes and quietly, the mint wasn't all that happy with the "white cents" either: the plating of the steel was an additional step and the steel strip was hard on the planchet punches. And everyone knew that the exposed steel edges would be liable to rust one of these days.
For the U.S. government, 1943 was a much better year as far as the war was concerned. Increasingly, events were favouring the Allies rather than the Axis powers. Copper production was up as well, to the extent that there seemed adequate amounts for foreseeable needs. The U.S. government could go back to copper cents. It was at this point that the psychological warfare boys stepped in. As military, they were never overly sympathetic to civilians and they were downright irritated by the unpatriotic complaining and carping about the "white cents". So they hatched a scheme to kill two birds with one stone: in late 1943, it was announced that the U.S. would return to copper cents starting in the new year but only because the necessary supply came from used cartridge and shell cases. Immediately, American newspapers and magazines carried pictures of their boys overseas scurrying around battlefields - presumably under fire - picking up the used brass. Just so the folks at home could have their copper cents. The silent implication was "Ain't you ashamed?" They troweled it on thick - and it stuck. To this day, authoritive works such as the Red Book notes: "Cartridge cases were salvaged for coinage of (cents for) 1944 through 1946". Americans of the day fully believed that every cent bearing these dates was actually struck from "veteran" brass that had seen service on the battlefield and "shell case cents" or similar description was often applied to them. The truth was somewhat different. Some such used cases were turned into cents - whenever convenient or a photo op presented itself. The biggest contributor was the U.S. Navy whose used shells could most easily be gathered and stored. Previously, the sailors had found it cheapest and most efficient to simply throw them overboard but now space had to be found for empty shells equal to live rounds in this "recycling program". It was a liability so far as they were concerned but made less so by selecting the best such shells (probably most) ashore and returning them to the ammunition factories for reloading. The "seconds" were indeed shipped to the smelters where they were mixed with other scrap copper and brass as well as virgin bricks to make more "cartridge brass". Since cartridge brass is usually in the order of 88% copper - 12% zinc, metal destined for the mint would have had to be topped up to "95% copper - 5% something else (probably zinc)". Although the three U.S. mints coined about 5,143-million cents during these three years, the actual saving in copper through recycled shell cases was infinitesimal. But the government and mint were happy with the return to copper cents as was the general public. And the carping stopped - now. In 1947, the cents returned to the old formula containing (probably) 2 ½ % tin until 1962 when the relatively expensive tin was dropped completely. It could probably have been done many years before.
Exporting British Silver, 1875.
From the Halifax British Colonist of 1875 comes this item: "In the exports of the week we note a shipment of silver coin to the value of nearly $20,000. These coins are British silver which are collected and shipped to London on the account of the Canadian Government, and there are sold or recoined into half dollars and quarters in Canadian currency. This process has been going on for four years with no sign of stoppage and the movement is something akin to what is tightening the money market in England . In 1871 when our Currency (i.e., " Nova Scotia currency" - ed.) was assimilated to that of the Dominion the coinage in circulation was the old British silver, and the Ottawa Government engaged to rid the country of this broken coinage, and replace it by pieces which would work smoothly in the new system. The Bank of Montreal agreed to handle the operation for one half per cent, Government paying expenses of shipment and taking the coin by tale, thereby footing the loss in weight in smooth and defaced coins. Had there been no inflow the country would have been cleaned out long ago, but considerable sums of British silver are paid to the troops and the navy both here and in the West Indies, and as a saving to shopkeepers is effected by taking the quarter (sic. - probably "shilling") at twenty-four cents and other coins in proportion, while the banks receive at the legal rate. Most of the silver speedily finds its way into the bank vaults and thence to Britain . Very much of this silver has not lost the "mint bloom" when it is consigned to the money bag in company with the old "Georges", and it seems to be a great waste of money to ship new silver out here only to be shipped back again and consigned to the melting pot, but such are the eccentricities of trade and currency." (Ed. notes: When Nova Scotia went decimal in about 1860, she adopted a "Nova Scotia dollar" that was different from that of the two Canadas and New Brunswick who valued the gold sovereign (thus the pound sterling) at $4.83 2/3, just like the United States - allowing them to use U.S. gold coins as "legal tender to any value" at face. But in doing so, these Canadian provinces had to issue their own coins in both bronze and silver. Nova Scotia opted to value the gold sovereign at a full $5.00 N.S., thus allowing the use of British silver as: florin = 50¢; shilling = 25¢; sixpence = 12 ½ ¢ (the last forcing the issue of a ½ ¢ coin). This was the situation at Confederation; Nova Scotia was using a "cheaper" dollar. This had to be brought into line with the rest and was done so in 1871 with the passage of the Uniform Currency Act, Nova Scotia currency converted into Canadian at the rate of 75¢ N.S. = 73¢ Canadian. At the same time, the British shillings in circulation - and there were a lot in Nova Scotia - were dropped in value to 24¢, the other silver coins in proportion. But for some reason, the British garrison in Halifax, both army and navy, continued to be paid in British coin. Thus the export mentioned above. However, the reporter is almost certainly wrong in assuming that this exported British coin was melted and recoined into Canadian pieces. Not having fallen off the turnip truck recently, the Canadians would have exported and sold this coin at sterling face, using the funds to buy silver bullion for their coinage needs at the Royal Mint. After all, British silver coin contained about 7% less than face in bullion value - and by 1875, the spread was probably even greater.)
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The Antecedents of the Franklin Half.
Unsurprisingly, few coin designs pop up full blown. Most derive their inspiration from other, earlier, coins or medals. The U.S. Franklin Half-dollar that first appeared in 1948 was no exception. The result of both the designs and engraving skills of John Ray Sinnock, then Chief Engraver of the U.S. Mint, the coin harkened back to a pair of previous Sinnock works, both of which appeared many years before.
The obverse is a re-working of the portrait from Sinnock's "Benjamin Franklin Memorial Medal" of 1932. Struck at the U.S. Mint, this was a large bronze piece, reduced here from its original 75.2mm. The above are not actually obverse and reverse of the same piece; they were issued in pairs, an extra gilt uniface reverse with a screwback suitable for mounting being part of the set. For some reason, the extra reverse was struck in slightly different size: 76.8 mm. As may also be seen, the gilt didn't stand up well. The reverse of the Franklin Half-dollar is an adaptation of an even earlier Sinnock work. This was the commemorative half-dollar of 1926, memorializing the sesquicentennial (150th year) of American Independence. For the occasion, an international fair was held in Philadelphia and issues of special silver half-dollars and gold quarter-eagles (also by Sinnock) used to defray the costs.
An issue of 141,120 of these half-dollars were struck and are highly unusual in that the portrait of a living president was shown for the first time, that of Calvin Coolidge, president in 1926, overlain (actually "jugate") by that of George Washington, the first U.S. president. Sinnock was the modeler of designs by John Frederick Lewis. The reverse was a completely accurate representation of the Liberty Bell and later appeared on the Franklin Half-dollar reverse. Not so good was the fact that the relief on the above coins was very low with a loss of fine detail. That shown above is a superb example. In ordinary MS-60, the coin is easy to acquire but really well-struck examples are distinct rarities. So the Franklin Half combines Sinnock's medal obverse with his sesquicentennial half-dollar reverse. There really wasn't much new under the sun.
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Oct 2010"The Crash of the Home Bank of Canada " "The Psy-War Shell-Case Cents" "Exporting British Silver, 1875" "Antecedents of the Franklin Half"
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