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.
Vincent Geloso 