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KING, EDWIN HENRY, banker; b. December 1828 in Ireland; m. 22 May 1856 Agnes Elizabeth Budden in Montreal; d. 14 April 1896 in Monte Carlo.
The financial system of the new Dominion of Canada was in large part shaped by a series of events during the second half of the 1860s. No one played a more significant role in these events than Edwin Henry King, the general manager (1863–69) and president (1869–73) of the Bank of Montreal. He was so powerful during these formative years that he has been referred to by historian Oscar Douglas Skelton* as “the most striking figure in Canadian banking history.”
After his arrival in Canada in 1850, King was employed until 1857 in the Montreal office of the Bank of British North America. During these years he worked successively under managers David Davidson and Robert Cassels*, and by 1857 occupied the position of sub-manager of the Montreal office. In 1855 Davidson left to assume the position of cashier of the Bank of Montreal and two years later King joined him. Engaged initially as the Bank of Montreal’s inspector of branches, he was appointed manager of its Montreal office on 8 Dec. 1857. Thomas Brown Anderson*, the bank’s president, named Davidson the first general manager of the institution in 1862, and when Davidson retired one year later, King was appointed to succeed him on 23 March 1863. Following Anderson’s resignation, King was elected president of the Bank of Montreal by the shareholders on 5 Nov. 1869, only to retire from the bank three and a half years later. He returned to England, where between 1879 and 1888 he chaired the Bank of Montreal’s London committee. In retirement he “led a life of leisure” and died a wealthy man, leaving an estate of £695,535 (about $3.5 million). In his last will and testament he bequeathed £20,000 to the Montreal General Hospital, £10,000 to McGill University, and £5,000 to the Ladies’ Benevolent Society of Montreal.
King played a major role in the world of Canadian finance for only a short period of time, but he clearly left his mark. Part of his legacy was a style that fellow banker George Hague described as “trenchant.” King was “utterly regardless of the views and feelings of the agents and managers” within the Bank of Montreal and was similarly unconcerned about what the leaders of other banks thought of him or his management of the bank’s affairs. After a “notorious[ly]” stormy meeting between King and representatives of a number of other banks in 1867, George Worts of the Bank of Toronto asked about King: “Is this man a little God that he dares to treat the representatives of all other banks in this manner?” Even one of King’s allies, Sir John Rose*, a director of the Bank of Montreal (1859–67) and minister of finance (1867–69), conceded that King was a “very peculiar fellow.”
This aggressive style was a factor in shortening King’s career with the Bank of Montreal. Nevertheless, during his years with that institution he exerted a considerable influence on its affairs, which were far from healthy when he assumed the responsibilities of general manager in March 1863. At the bank’s annual meeting later that year, the shareholders were told that the reserve fund had been reduced by $100,000 to offset losses. Under King’s management, nothing was added to the reserve in 1864 or 1865, but between 1866 and 1869 it received an influx of $1.3 million. King achieved this turnabout in the bank’s fortunes by cleaning up its operations in Upper Canada, where it had too much money in bad loans, and by improving its competitive position through stronger ties with the Canadian government.
In regard to the business situation in Upper Canada, King had entered office firmly convinced that too much commercial credit had been extended with too little security by most of Canada’s banks, including his own. Accordingly, he set out to restrict quite drastically the credit made available by the Bank of Montreal in Upper Canada. By 1867 the bank could claim that it had “appropriated $1 million, almost the entire amount of which was lost in extricating [itself] from the system of business which had so long prevailed in Western Canada.” From the Bank of Montreal’s point of view it was essential that there be “a withdrawal of banking accommodation from districts where business transactions do not possess collateral advantages of a legitimate character.”
This restrictive policy earned King few friends in Upper Canada, even among the bank’s Toronto directors: one of them, William McMaster*, resigned in protest and established the Canadian Bank of Commerce. Few people were impressed by King’s assurance that he and the Bank of Montreal would “take care of our clients so long as they are entitled to our support,” since it was common knowledge that the gold being withdrawn from Upper Canada by the bank was offered instead on the New York market, where gold prices were high because of the American Civil War. George Hague later explained King’s strategy on the New York market thus: “Gold could be lent at very high rates of interest. As security for the gold, current funds were generally deposited. These funds were employed again – so I was informed by Mr. King himself – in discounting commercial bills.”
While the Bank of Montreal was accumulating large profits through these manœuvres, those banks whose affairs remained rooted in Upper Canada suffered from the financial crisis which the Bank of Montreal was in fact aggravating. Unable to meet its obligations because of a portfolio filled with bad loans, the Bank of Upper Canada, managed by King’s former employer Robert Cassels, failed in 1866 as a result of the Montreal bank’s demand that its notes be redeemed in gold. In 1867 the Commercial Bank of Canada found itself in serious difficulty. On 21 October, King and other representatives of the major Canadian banks met with officials of the Commercial to see if something could be done to prevent the suspension of its business. King was intransigent in his demand that an independent evaluation of the Commercial’s assets be made prior to any offer of support, and his “truculent and uncompromising” refusal to help the struggling bank was seen by many of his contemporaries as a contributing factor in the bank’s subsequent failure. Such financial prudence might be understandable, but it is more difficult to fathom his calling in of the Bank of Montreal’s balance from the Commercial Bank on the day of the meeting. This move no doubt further contributed to the lack of confidence in the bank and led to its failure before the end of the year.
King’s actions with respect to the financial crisis in Upper Canada earned the Bank of Montreal both profits and enemies; the same can be said of the close ties that he forged between the bank and the government, both before and after confederation. From March 1863, when King was appointed general manager, he was in regular contact with the government of the Province of Canada regarding the increased credit required to fulfil its heavy responsibilities towards the Grand Trunk Railway [see Sir Joseph Hickson]. As a major creditor, the bank was able to exert pressure on the ministry of John Sandfield Macdonald* and Antoine-Aimé Dorion late in 1863 to succeed the faltering Bank of Upper Canada as the government’s fiscal agent [see Luther Hamilton Holton*].
By the mid 1860s the value of the vast amounts of provincial debentures held by the bank as collateral for its extensive loans to the government was steadily declining. As a consequence the bank was reluctant to provide any further credit unless some new arrangement could be worked out; precisely such a deal was devised by King and his close associate the minister of finance, Alexander Tilloch Galt, and embodied in the Provincial Notes Act of 1866. Both men had long been proponents of a single, state currency backed by substantial reserves in the form of either specie or securities. In Canada banks were free to issue notes, with no reserves, up to the value of their unimpaired capital. King and Galt were convinced that the ease with which banks could print notes had played a role in the over-extension of credit in Upper Canada, and they were looking for a way in which the problems of the note issue and the government’s need for credit could be resolved.
Galt wanted the banks to relinquish their right to print notes. The government would then issue its own notes, secured by provincial debentures; by making its debentures the reserve for the currency the government hoped to make it easier to market them. Galt’s scheme, however, met the unyielding opposition of all the banks except the Bank of Montreal, whose position was different because of its vast holding of provincial debentures. The Provincial Notes Act of 1866 made the abandonment of the right to issue notes optional, and the Bank of Montreal was the only financial institution to accept the terms of the new law. The bank was paid five per cent of the value of its notes in circulation as compensation for removing them from the market and replacing them with government notes obtained by depositing the heretofore useless securities with the government. As if this were not enough, the bank also received a commission of one per cent on the total value of government notes in circulation in its capacity as government agent for the redemption of the notes.
Other bankers bristled as they saw the strengthening of the ties between the government and the Bank of Montreal, and King was quite aware of the hostility engendered by his close relationship with Galt and Galt’s successor, John Rose. King did nothing to reduce this hostility when in 1867 he announced his scheme for the future banking system of Canada upon the expiration of the bank charters in 1870. Under his proposal banks would have the right to distribute the notes of a single, state currency, but only if they were “entirely [secured] by government securities.” As for deposits, “they should at all times be protected by a proper reserve.” Such a system stood to benefit the Bank of Montreal, whose considerable resources could be employed to secure both its notes and its deposits. Although the smaller banks could continue in business, they would do so only on a very restricted basis. A further objection to the scheme, which even King anticipated, concerned the inelasticity of the note issue. Upper Canadian bankers in particular opposed limitations on their freedom to expand their note issue to facilitate the movement of agricultural products.
In the face of widespread opposition to the plan, because of both its contents and its architect, a scheme closely resembling King’s proposal was introduced into parliament by Rose in May 1869. So categorically negative were the reactions to it that Prime Minister Sir John A. Macdonald withdrew it after one day of debate and Rose resigned as finance minister later in the year. King’s personal connection with the scheme had been frequently cited as an objection. This was an indication that King’s years of riding roughshod over other Canadian bankers had finally caught up with him. A further sign came in the fall of 1869 when he tried to acquire the ailing Gore Bank of Ontario. His offer was superior to that of the Canadian Bank of Commerce, whose bid was nevertheless accepted: at least one of the shareholders of the Gore Bank felt that “Mr. King was much too clever a man for them to deal with.” On both of these issues King’s image as a ruthless businessman undermined his usefulness to the Bank of Montreal. It was no coincidence, then, that in October 1869 King submitted his resignation as general manager to assume the more honorary position of president.
A new banking bill was presented in 1870 by Rose’s successor, Sir Francis Hincks*. King called upon Prime Minister Macdonald to guarantee “the absolute security of the currency” by the terms of the new bill, but such pleas had little impact upon Hincks, who had close ties with the easy-money banking interests in Ontario [see William McMaster]. His scheme retained for the government a monopoly over the issue of notes in denominations less that $4.00. The banks were to have a monopoly on the larger denominations, and more significantly they were to have the right to issue these notes up to the unimpaired value of their capital with no compulsory reserve. When this scheme became law in 1870 the Bank of Montreal lost the special relationship with the government regarding the note issue that it had had since 1866, although it remained the government’s fiscal agent. The passage of Hincks’s bank act was a clear victory for Upper Canadian interests over those from Montreal, centred on the Bank of Montreal. When in 1871 the government proposed the establishment of its own savings banks, King was convinced it was a step along the road to Hincks’s termination of the bank’s role as fiscal agent.
Following his elevation to the presidency of the bank in 1869, King had made little impact upon the affairs of the bank or upon the evolving financial system of the young dominion. He played an active role, as he had during his years as general manager, in extending the Bank of Montreal’s operations abroad, and in 1870 he opened the bank’s office in London, England. King, however, was no longer in the thick of the action, a situation that may well have led to his retirement at such a young age.
Upon leaving the bank in 1873 he responded to a tribute from the shareholders, who offered him a service of plate valued at $10,000, by noting that he had “frequently been exposed to harsh and unfriendly criticisms.” King had earned this treatment by adopting a harsh and unfriendly attitude towards those who had to deal with him. This aggressive style was profitable to the Bank of Montreal during an important period in its history; it was probably also responsible for King’s relatively short career at centre stage in the world of Canadian finance.
ANQ-M, CE1-63, 22 mai 1856. NA, MG 26, A; MG 27, I, D8; MG 28, II 2. Can., Prov. of, Statutes, 1866, c.10. Can., Senate, Select committee upon the causes of the recent financial crisis in Ontario, Report (Ottawa, 1868). George Hague, “The late Mr. E. H. King, formerly president of the Bank of Montreal,” Canadian Bankers’ Assoc., Journal (Toronto), 4 (1896–97): 20–29. Gazette (Montreal), 15 Nov. 1867, 3 June 1873. The centenary of the Bank of Montreal, 1817–1917 (Montreal, 1917). Merrill Denison, Canada’s first bank; a history of the Bank of Montreal (2v., Toronto and Montreal, 1966–67), 2. Adam Shortt, “Currency and banking, 1840–1867,” Money and banking in Canada; historical documents and commentary, ed. E. P. Neufeld (Toronto, 1964), 132–48. Skelton, Life and times of Gait (MacLean; 1966). D. C. Masters, “Toronto vs. Montreal: the struggle for financial hegemony, 1860–1875,” CHR, 22 (1941): 133–46.