Collapse
The post-war period brought prosperity and the inflationary boom gave Home Bank its share of the Canadian penchant for saving money. The bank opened 28 new branches (for a total of 82) between 1921 and 1923. Though this period, under greater government scrutiny and with the death of Senator James Mason in 1918, the new president of the bank, Herbert Daly was challenged to "keep all the balls in the air at the same time".
On 17 August 1923 the bank's main branch did not open and would remain closed indefinitely. The provincial and federal government appointed a liquidator, Geoffrey Teignmouth Clarkson of Clarkson Gordon to untangle the mess and seek recovery for the thousands of depositors who had lost millions of dollars in the collapse. Clarkson was highly experienced in liquidating banks, having served as liquidator in at least three prior. After thoroughly reviewing the affairs of the bank he wrote that “Never at any time in its career, was an experienced and trained banker at the head of the bank and in control of its affairs. It can be said that the [bank management] utterly failed to pay regard to or impose elementary safeguards in protection of the business of the bank.” [5]
The major chartered banks intervened in 1920 to control rising prices by raising interest rates. Demand for credit fell and the resulting recession drove prices down dramatically, making assets worth less than the money loaned to acquire them. During this time, and with the dust storms of the 1922–1923 drought, many farmers lost their land and livelihood.
The indifference of the Eastern banking community led to the success of populist parties in Western Canada and Ontario. In 1922 the United Grain Growers, whose officers comprised the western bank board members, sold all of their shares in the bank. At the same time the Western Canada Pulp and Paper Company had defaulted and, in the spring of 1923 the bank asked Mackenzie King's government for help, which was refused. The stock plummeted and depositors withdrew money in ever-swelling streams. On the August civic-holiday, J. Cooper Mason, son of the founder and a director, retired to his study and committed suicide.
The Canadian National Railway, whose director Richard F. Gough was also a member of the bank's board, withdrew $1 million just before the collapse. The bank closed for good August 17, 1923. Ten officials from Home Bank were arrested on charges ranging from concurring with false returns to fraud on October 4, 1923, at a time when the bank's assets were estimated at $2.7 million and liabilities at $15.5 million. 60,000 prairie farmers and a substantial portion of Toronto's Catholic community lost their savings. In the panic that followed the bank's closure, the Ontario Government shored up the Dominion Bank with $1.5 million to stop a deposit run. Herbert Daly, the Home Bank president, was unable to testify after a nervous breakdown and he died on October 22, 1923. However, liquidator GT Clarkson was extensively called to testify to better understand the situation.
Cabinet secrecy rules protected politicians from any liability in the matter and, in a precedent setting bailout, the federal government agreed to pay $5,450,000 to depositors (deposit insurance was not enacted until 1967 in Canada), providing some settlement to the thousands who lost money as a result of the failure which, had the bank been liquidated or merged in 1916 or 1918 would have been without any loss to depositors.
