Abstract: ... she cannot earn anything in Europe: Insider Networks, Marine Investments, and the Failure of the Home Bank of Canada, 1916-1923

M. Stephen Salmon

Abstract

Students of the Canadian banking system have correctly seen that the failure of the Home Bank of Canada in 1923 led to increased government regulation of financial institutions. However, commentators have given no more than a passing reference to the factors responsible for the demise of the Home Bank. This paper will focus on the Bank's marine investments, which provide a Canadian example of an international maritime network that was successful in the short run but which was incapable of surviving the difficult global shipping environment of the early 1920s. This network had its origins in the syndicate that formed and ran Canada Steamship Lines (CSL) from 1913 to 1922. Three prominent members of the CSL network—M. J. Haney, J. F. M. Stewart, and C. A. Barnard—were executives and directors of the Home Bank. During his term as president of the Bank (1916-1919), Haney used his knowledge of world shipping markets to the Bank's advantage. The centerpiece of his strategy was the Bank's profitable participation in the leveraged buyout of the Montreal Transportation Co. But disaster struck when Haney's resignation in December 1919 coincided with Barnard's dumping of his failed marine speculations on the Bank. In the end, the non-CSL network members of the Bank's executive had learned the wrong lesson about shipping markets, and Barnard's vessels became one of the prime reasons for the Bank's failure.