The Canadian chartered banks and the federal government : an analysis of the 1954 and 1967 Bank act revisions

Hugh Aitken in his essay on Canadian economic development posited a concept wherein economic development was viewed as aided by an amalgamation of government interests with certain private corporations. These private corporations, potentially powerful in their particular sectors, could be viewed as the 'chosen instruments' of government policy. Omitted from Aitken's essay was any reference to the Canadian chartered banks. The Chartered banks though can be seen as a relatively concentrated force within the national economy and intuitively prime examples of a 'chosen instrument'. This thesis attempts to explore the relationship between the Chartered banks and the federal government. In so doing we have attempted to establish that the concept of the chosen instrument may be applied to the chartered bank-government relationship. Recent history provides us with two opportunities for case examination of the concept in action. The 1954 and 1967 Bank Act revisions took place at a time of declining government control over monetary policy, declining market share held by banks and steadily increasing competition in financial markets from non-bank financial institutions beyond federal jurisdiction. The process of interaction between the banks and the government in relation to these problems provides the backdrop for our analysis. To properly lay the groundwork for a discussion of these trends, background information is provided on many of the structural and functional linkages between banks and government. Examination of the trends and reaction by both parties in the process leading to the 1954 and 1967 Bank Act revisions is then undertaken. While exploration of the various stands by actors involved in the 1954 and 1967 Bank Act revisions lends a certain degree of credence to the use of the chosen instrument concept several questions arise as to its applicability under all circumstances. These questions underlie the difficulty in describing any political situation.Arts, Faculty ofPolitical Science, Department ofGraduat