The Bank of Canada: Origins and Early History

Duncan McDowall is a professor of history at Carleton University and the
author of Quick to the Frontier: Canada’s Royal Bank.

Every Tuesday afternoon, Canadians are reminded by the weekly setting of
the prime interest rate that our monetary health is guided by the Bank
of Canada, our central bank in Ottawa. Sixty years ago it took the
economic and financial disaster of the Depression to provoke Canadians
into abandoning their traditional reliance on private bankers as the
sole regulators of national credit; the Bank of Canada was created in
1935 as an arm’s-length agent of the government. Much of its early
staff was either foreign-born or foreign-trained. Hence, George Watts, a
young Queen’s graduate later schooled at Columbia, joined the bank’s
research staff in 1936 as an expert on the balance of payments. Watts
bonded with the bank and stayed until 1977, after which he remained a
consultant and de facto bank historian.

Prior to retirement, Watts contributed seven articles to The Bank of
Canada Review on the first two decades of the bank’s operations, from
1935 to 1954. Republished in book form, these provide us with a model of
lucid narrative on a difficult topic. Historians will enjoy Watts’s
intimate understanding of the bank’s evolution. We appreciate the
crucial role of R.B. Bennett, usually viewed as fiscal and monetary
dinosaur, as the bank’s creator; Graham Towers, its first governor, is
presented as the steady builder of the bank over its first two decades.
Economic historians will value the author’s careful dissection of the
bank’s early years into “distinct phases,” beginning with the
“comparatively uncomplicated” prescriptions of the late Depression
and concluding with the “active monetary policy” of the early 1950s,
the role we now associate with the bank every Tuesday. In short, this is
an excellent primer on the roots of a crucially important national
institution.