Being involved in the Outaouais lumber trade in the nineteenth century was fraught with financial dangers. Economic crisis’s happened unexpectedly and bankruptcy laid in wait for any of the lumbering firms that were deeply in debt. In the first half of the nineteenth century, the region’s economy was at the mercy of what happened on the London Market. Since the transmission of information was slow (it was relayed at the same speed as the fastest available means of transportation), news of an economic recession in Great Britain got to Canada months after it broke out. In such circumstances, a drop in demand and, consequently, in the price of wood on the London Market, reached the timbering firms at the very end of the wood harvesting season which had caused them considerable expenses. This resulted in periodic wood surpluses, slumps in prices and ultimately bankruptcies1. In such situations, the Canadian lumbermen were vulnerable because the British brokerage firms were their financial backers2.
The British brokerage firms and commission merchants were middle-men in the business of importing wood from Canada. They negotiated the contracts that linked the buyers to the producers and they lent the timber firms the money that they needed to harvest the wood and to float it down to the Port of Quebec. In return, the lumbermen had to pledge that priority would be given to the broker when it was time to sell the squared timbers or deals that are delivered to Quebec. Amongst those lenders were companies such as Parker and Yeoward of London3 and Pollock, Gilmour and Company from Glasgow4. Some of these men set themselves up in Quebec City and Montreal to watch closely over their interests. Such was the case for Nathaniel Gould and James Dowie5. Baxter Bowman, for whom the legendary Joe Montferrand worked, was funded by Peter McGill and Company, a firm that was closely associated with Gould and Dowie6. It was thanks to these financial backers that Bowman’s lumbering firm, which operated in the Lièvre River watershed, was able to expand7.
The accumulation of Canadian capital and the creation of Canadian banks gave the lumbermen the possibility of coming to terms with lenders who were much more aware of their Canadian context. The financing of the wood industry by British brokerage houses operating out of Quebec City was replaced little by little by the sponsorship of Montreal-based investors.8. In parallel, lumbermen and timbering firms began to deal more and more with Canadian bankers. In 1817, the Bank of Montreal was the very first bank to be set up in Canada.9 (image) It had a near-monopoly until the beginning of the 1850s even though the number of banks operating inside Canada grew from five in 1825 to fifteen in 185010.
In the Ottawa Valley, the need for venture capital was closely linked to the requirements of the forest industry. That probably explains the reason for the founding of the Bank of Ottawa in 1874; better known as “The Lumberman’s Bank”. The avowed aim was to endow the region with a funding tool that would fill the capital and credit needs of the timber companies and lumbermen. Two of the best known Lumber Barons of the Ottawa Valley, George Bryson and James MacLaren, were amongst the founding fathers of the Bank11. (image) The first Board of Directors was essentially made up of lumbermen and merchants that supplied shanties with equipment and provisions12.
The Bank of Ottawa was launched at the very beginning of an economic crisis-13 a recession that spread throughout the country from 1874 to 1880. The fledgling organization therefore went through difficult times. The exceptional work of its manager, George Burn14, guided the bank through those difficulties without too much trouble. From 1900 to 1910, the bank tripled the number of its branch offices. It was in this period that the Bank of Ottawa expands into Western Canada, a move that increased the bank’s expertise and know-how in seasonal work. Over the years, it had mastered the intricacies of the lumber trade; expansion into Western Canada made it discover the financial problems associated with the wheat trade that were intimately connected to agriculture on the Prairies. But for want of capital, the expansion could not be kept up15. The shareholders bowed to the inevitable and decided to merge their little regional bank with the Bank of Nova Scotia. The Bank of Ottawa dropped out of sight on April 30th 191916 and the Bank of Nova Scotia became one of the most important banking establishments of Canada.
This brief overview of the financing of the forest industry allows us to appreciate the progress that’s been accomplished in that area since the beginning of the nineteenth century. The lumbermen who used to be hostages of British lumber brokers, and who had to live with the stress associated with the remoteness of the export market, were finally given access to more diversified funding tools that had the advantage of being adapted to their specific needs.
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1 Sandra J. Gillis, The Timber Trade in the Ottawa Valley, 1806-1854, Ottawa, Parks Canada, Manuscript Report no 153, p. 18-19.
2 These firms served as intermediaries between the contracting parties in their commercial and financial dealings.
3 http://www.biographi.ca/en/bio.php?id_nbr=4659
4 John W. Hughson et Courtney C. J. Bond, Hurling Down the Pine, Chelsea, The Historical Society of the Gatineau, 1987, p. 24.
5 The shadows of Gould and Dowie hang over Price and McGill. They scrutinized the financial doings of entrepreneurs like Peter Aylen, Ruggles Wright and Baxter Bowman who were associated with these two men. An example of this is found in the 1837 decision to compel Peter Aylen to sell out his Gatineau Privilege to William Price, Peter McGill, Nathaniel Gould and James Dowie; in short to William Price and Co. (BANQ-CAQ, E21/1877). Later, it was William Price and Peter McGill who are in turn at the mercy of Dowie and Gould. On May 19th 1843, in a letter sent to William Price, Peter McGill was optimistic when he said “that we are not going to fail yet and that the Banks will I am convinced be liberal to us…” and on December 13th of the same year he says to Price: “I cannot suppose that Mr. D. has any such feeling but of course we know that Mr. G. is a perfect Shylock… “On December 18th 1846, Peter McGill confided to William Price: “Our dependence must be on G. and Dowie… I am in fear and trembling…” (BANQ-CAQ, P666, Price Fonds, Correspondence 1843-1847).
6 BANQ-CAM, contracts of Notary André Jobin, December 2nd 1826, no 4164 et December 12th 1827, no 4439. Refer also to the “discharge” or “receipt in full” dated September 26th 1831 which accompanies the first of these contracts.
7 Sandra Gillis, op. cit., p. 92.
8 A. R. M Lower, Great Britain’s Woodyard, Montréal, McGill-Queens, 1973, p. 168-169.
9 William L. Marr and Donald G. Paterson, Canada: An Economic History, Toronto, Gage, 1980, p. 245 and 247-248.
10 Ibid, p. 249.
11 Lorne Hammond, Capital, Labour and Lumber: James MacLaren, Ottawa Valley Lumberman, 1850-1919, University of Ottawa, Ph.D. thesis, 1993, p. 265-266.
12 Ibid., p. 267 et 269.
13 For a detailed survey of the economic recessions of the first half of the 19th century and of their impact on the square timber trade, see : Sandra J. Gillis, op. cit., p. 17, 33, 36, 37, 48, 52 and 56.
14 Ibid., pages 269-271.
15 Ibid., p. 285-287.
16 Ibid., p. 290.
17 Ibid., p. 253-255.
PHOTO No 1
Source: Bank of Canada. National Currency Collection, item 1965, 0136, 06748, 000, a1, 2d0124.
Caption: First $4 bank note issued by the Bank of Ottawa in 1874. To the left can be seen the photograph of George Bryson and to the right that of James MacLaren.
PHOTO No 2
Source: Pierre Louis Lapointe Collection. Photography of a painting. Painter unknown.
Caption: Horatio Gates was involved in the founding of the Bank of Montreal in 1817. Thanks to his numerous contacts with Boston and New York merchants, the new bank is able to accumulate the capital that was needed for its launching. Gates will be president of the bank in 1826 and from 1832 to 1834. This businessman and politician, born in Massachusetts in 1777, died suddenly in 1834.
PHOTO No 3
Source: BANQ-CAO, P117, S1, SS1, D1, P2. Photographer: William Notman.
Caption: This photograph, touched up with charcoal, portrays James MacLaren the industrialist and banker around 1880. Born in Scotland in 1818, he died in Buckingham in 1892. In 1874, he became the Bank of Ottawa’s main promoter by investing $100 000 in the project. He chaired its Board of Directors as President, from 1874 until his death in 1892.
PHOTO No 4
Source: Library and Archives Canada, PA 9905. Photographer unknown.
Caption: The Bank of Ottawa’s branch office on Main Street in Hull around 1915.
PHOTO No 5
Source: Pierre Louis Lapointe Collection. Plan of the City of Hull drawn by Théo Lanctôt, engineer, in 1938.
Caption: Part of the plan entitled City of Hull showing the city core and the islands of the Chaudières Falls sector. Number 34 marks the location of the Hull branch office of the Bank of Nova Scotia, which merged with the Bank of Ottawa in 1919.
PHOTO No 6
Source: Bank of Canada. National Currency Collection, item 1963, 0014, 00018, 000, a1, 2d0024.
Caption: Obverse or front side of a $5 bank-note issued by the Bank of Ottawa in 1880. The centre of the note is illustrated with a typical scene showing lumberjacks trying to break a log-jam. Until 1866, banks were the only ones allowed to print paper money. After 1866; however, the Government of Canada began printing Dominion bank-notes and in 1935 the banks lose that privilege in favour of the Bank of Canada.17
PHOTO No 7
Source: Bank of Canada. National Currency Collection, item 1963, 0014, 00018, 000, b1, 2d0024.
Caption: Reverse or back side of $5 bank-note issued by the Bank of Ottawa in 1880. On the left side of the note is a scene showing a square-timber raft and raftsmen at work.
PHOTO No 8
Source: Bank of Canada. National Currency Collection, item 1975, 0025, 00135, 000, a1, 2d0058.
Caption: Dominion of Canada $50 000 bank-note issued by the Government of Canada in 1918. King George the Fifth and his wife Mary de Teck are portrayed at the centre of the note.
PHOTO No 9
Source: Bank of Canada. National Currency Collection, item 1976, 0001, 00003, 000, a1, 2d0024.
Caption: Five-dollar bank-note issued by the Bank of Ottawa in 1906. The centre of the note is taken up by a shanty scene in which lumberjacks are piling logs.
PHOTO No 10
Source: Bank of Canada. National Currency Collection, item 1989, 0029, 00054, 000, a1, 2d0024.
Caption: Twenty-dollar bank-note issued by the Bank of Ottawa in 1903. James MacLaren’s photograph is at the centre. On the left is a log-driver at work and to the right is a ship moored to a wharf with grain elevators in the background, waiting to be loaded with wheat.