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Relentless Change - Case Studies Summary.docx

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Department
Administrative Studies
Course
ADMS 1010
Professor
Alex Browning
Semester
Winter

Description
Bank Act of 1871 Need stability of financial institutions. After the second world war, the international monetary fund and the world bank were formed. Trust and confidence were the most important fundamental building blocks. Sir John A Macdonald was the prime minister. Sir Francis Hincks was the new minister of finance. They both discussed the unsatisfactory state of the affairs in Canadian banking. Hincks recommends to convert bank laws of four provinces into a contemporary banking act. New dominion government should have exclusive authority over banking currency, interest, and related matters. Existing bank charters would expire in 1871. Another challenge was to ensure a national currency and coinage. In 1869 Nova Scotia still had clung to sterling instead of dollars and still hadn’t settled the issue of government issued currency instead of bank notes. Sam Abbott was a young lawyer from Kingston who worked on several bank charters. Recommendations for a sound system of currency and banking were: 1. Minimum capital of $500,000 of which 10% had to be paid up 2. Power to issue notes in denominations of $4 dollars or more, not to exceed paid up capital and secured by gold or dominion notes. 3. Double liability on shareholders, to be paid before realizing on the assets of a failed bank 4. Total bank liabilities not to exceed three times the capital 5. Mandatory Decennial revision by parliament 6. One vote per share 7. Prohibition against extending credit on real property 8. Maintain 6% interest ceiling Currency Issues - No National Currency, No Standard Currency Rates Economic Issues - Lack of money for economic growth, Inability to Finance and get paid for Exports and Imports, Flooded with U.S. Silver Coins. Bank Issues - Banks in Britain were not very stable. Bank of Scotland in 1824 began a system of a few large banks with many branches. Canada’s First Bank - Bank of Montreal in 1817 – Funded mostly by wealthy U.S. Interests. Structured based on Alexander Hamilton’s bank. This included an interest rate limitation of 6%. Major Function of Bank and Issues - Function was the issuance of bank notes. Bank notes were redeemable on demand. Limits placed on liabilities and how much they could exceed paid in capital. Reserves Charter Limited to 10 years. Could not engage in any other trade or business and could not extend credit for real property Issue of Regional Banks and Reserve Issues/Bank Failures - Wars developed between Regional banks in Lower and Upper Canada. Restrictions were place on markets. Political Issues for Prime Minister - John A Macdonald Looking to expand Canada. Disagreements between Bank of Montreal – Gov. bank and the other banks. Provinces not happy with proposed bank act. Maritime and Toronto Banks oppose a US type system What recommendations went into the new Bank Act of 1871 – Answered above What did the constitution say about responsibility for banking - Loss of British System due to revolutionary War. Who was responsible for currency - First Bank of the United States in Philadelphia 1791 - Became the model of the first Canadian Bank Charters – Alexander Hamilton. It was a private bank with public shares. Gov. owned 20%. It was modeled after the Bank of England. Who opposed a National Bank - Opposed by Agarian States of the South Bankers of New York and Boston Who supported it - Supported by George Washington What was 3 main roles - Depository of Tax Revenue, Made loans to the Federal Government, Allowed Fed to oversee State chartered banks. How did it oversee Charter Banks – Bank Notes were redeemable on demand. Fed bank would accumulate notes of weak state banks and then would present them for redemption. What Happened to the Fed. Bank - Was revived in the 2 Bank in 1816 but was again allowed to lapse in 1836. Therefore no National Banking System in U.S. What was the consequence - Anybody could open a bank. Canada VS US banking system Canada had a few national banks with many branches. Federally chartered. U.S. had no national banks, controlled by states anyone could open a bank resulting in thousands of banks Canadian system regarded as more sound as the bank risk is spread across the country and across branches. The U.S. has higher level of instability. Massey-Harris Daniel Massey moves from NY State with his wife and children. Daniel Junior (his son) sees an opportunity that had not been available to his father when his family came to Upper Canada. Daniel continued in the business of making ready-made farms for new immigrant families. However, change was coming, the market for trees and land buyers were declining. There was a machine called American thresher and Daniel as a frequent visitor to NY learned of this machine in 1830 and decided to import it into upper Canada. Daniel sold the farm to hart, his son. He bought his own foundry from where he supplied farm implements by buying manufacturing licences for equipment designed in the US which faced a tariff. He’s constantly seeking the latest machinery to import. The US wasn’t interested in trade with Upper Canada. He was drawn to a reciprocity trade deal, one where parties would agree on some goods they would trade amongst themselves, tariff free. Duties of 15% were made on manufactured goods, imported into British North America. The reciprocity treaty allowed Massey’s firm to import natural products such as timber from US, free of duty. Timber was important component of hart’s farm business. Coal was included in the Treaty and benefited Massey because of steam- run machinery, if farmers could afford coal, they could buy Massey machinery. Civil war caused high prices of wheat, encouraging farmers to grow wheat. He developed innovative campaigns and distribution channels for the equipment; advertising. Massey began thinking about business outside of Canadian borders. He was chosen to represent Canada by some international exhibition. Massey still wanted to open up a US branch (to avoid taxes) and also secure a rebate on the tariffs he had been paying. To sum up the events:  In 1846, farming business was down.  It drove him out of farming and into manufacturing  Competitive advantage – he had lots of experience  Gave licence and paid loyalty and slightly modified it to Canadian  Population grew, as well as the number of farms  Change of leadership as his son took over the farm (sold to Hart)  Hart had sales technique, marketing, innovation, quality, efficiency, building the brand  There was free trading of lumber & wheat & steel & coal  1867, he expanded to Europe market  He moved the plant because demand was increasing  Demand increased, exports increased by 40%, paid tariffs  Government paid subsidy to company  Massey wanted to invade the US market Railway Case – CNR Sir Wilfred Laurier – soon to become prime minister Sir Robert Borden – Canada’s prime minister Sir William Mackenzie – wealthy businessman Donald Mann – entrepreneur and investor Wilfred laurier was Canada’s 8 Prime Minister and its first French Canadian Prime Minister Although Canada by the 1890s was traversed from sea to sea by the CPR, the issues of monopoly in the West and of partisan politics federally led to further transcontinental ventures. The Canadian Northern, founded by William MACKENZIE and Donald MANN, was begun with small Manitoba lines in 1895. In 1903 Sir Wilfrid LAURIER's Liberal government authorized the building of the Grand Trunk Pacific from Winnipeg west to Prince Rupert, and of the National Transcontinental from Winnipeg east to Moncton. All of these lines were financed by heavy borrowing and, when WWI diverted the credit of English banks, the debt loads of these railways had to be absorbed through government nationalization. Completion of government ownership in the early 1920s led to the appointment of Sir Henry THORNTON as CN's first president. Despite an inherited debt of $1.3 billion, gross earnings that barely covered operating expenses, and the difficulty of keeping the government at arm's length, Thornton gradually established annual surpluses while drawing remarkable personal support from among the 99 000 employees of CN. Economic depression in the 1930s reduced traffic volume, leading to cuts in wages and dismissal of employees. At the same time, highway and air travel diverted traffic away from the railway. In 1937, however, under C.D.HOWE as minister of transport, CN organized formation of AIR CANADA, and in 1938 the federal government cancelled more than $1 billion of its inherited debt. As a result, before WWII CN was able to purchase and to finish and service in its own huge shops at Pointe St-Charles, Montréal, a large number of Canadian-built steam locomotives, in particular the 4-8-4 Northern type, which hauled millions of tons of freight and thousands of troops during the war. In the 1950s and 1960s CN was modernized under the dynamic presidency of Donald GORDON, who rationalized 80 subsidiary companies down to 30, one of which, CN Marine, operates all ferry service in the Atlantic provinces. Two problems remain characteristic of CN as a huge crown corporation with profits in 1985 of $75 million. Financially, it has unt
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