Quebec’s history of bank bailouts!

You think bank bailouts are an “American” thing, think again, the province of Quebec was an early pioneer in the area of bailing banks. In 1923, the Quebec-city based Banque Nationale was on the edge of bankruptcy. After the Great War, it had invested its entire capital reserve ($ 5 million) in a single project based in Montmagny (South Shore of Quebec) which consisted of transforming production from war munitions to farm implements. The 1921 recession destroyed the value of the investment.

As a consequence, the Banque Nationale was bordering on insolvency (some argue that it was simply lacking liquidity to sustain it through debt collections) and this pushed Quebec premier Louis-Alexandre Taschereau to intervene. The premier convinced Georges-Elie Amyot, a Quebec city industrialist, to inject 1 million dollars (a huge sum for 1923 especially that the bank had $ 40 millions overall in value of deposits with 230,000 savers) . In the following months, the premier also convinced other bankers to bail out the Banque Nationale and the bank received a loan of $ 15 millions repayable over 40 years at a fixed five percent interest rates.

Interestingly, the board of the Hochelaga bank which contributed to the bailout was – like that of the Banque Nationale – was predominantly affiliated with the provincial liberal party, the party of premier Taschereau.

Is anyone reminded of TARP here or Bear Sterns? I know I am…

Source: Bernard Vigod. 1991. Quebec before Duplessis: The Political Career of Louis-Alexandre Taschereau. McGills-Queens University Press.

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