Over the years, this column has covered the history of some of the private banks that did business in Wellington County in the late nineteenth century.
For those not familiar with the term ‘private bank,’ these were financial offices operated by local businessmen, often with ties to other economic activities in their communities. Private bankers would simply open an office and begin taking deposits and writing loans.
There were more than a dozen such businesses in Wellington in the last three decades of the nineteenth century. The business was totally unregulated. Private bankers were subject to no special laws or regulations, and there were no reporting requirements.
Not surprisingly, there was a fairly high failure rate. With only limited resources, a private banker, no matter how honest he was, could quickly get into trouble if a couple of loans turned sour or if there was a run on deposits.
Peter Lillico, of Listowel, was a typical private banker. Active in a number of businesses in his home town, he went into banking there in 1879. Within two years he opened two branches, in Drayton and Arthur. He closed the Drayton office when the Traders Bank, an antecedent of the Royal Bank, opened an office there in 1886.
The Arthur office, though, did a considerable business, attracting customers from a wide area in the surrounding townships. Lillico cultivated farmers’ accounts, financing their cattle purchases and giving mortgages on farm property.
Lillico’s Arthur banking office was a great benefit to farmers in the area; the late 1880s were not good years for farming. Deposits slowly dwindled at the Arthur office, and there were several defaults on farm mortgages. As well, Lillico himself made some bad investments that affected the solvency of his two banking offices, which he operated as separate businesses.
The Arthur office closed its doors in the first week of April 1890, when there was not sufficient cash in the safe to pay out withdrawals. Lillico was able to keep the Listowel office open a few weeks longer, but it succumbed at the end of the month as well. Exact financial data was never revealed, but it appears that the Arthur office had deposits in the range of $30,000, equivalent to between $2- and $3-million in 2009 dollars.
Peter Lillico, and his son, R.E. Lillico, who managed the Arthur office, both had excellent reputations, but their good name evaporated in mere hours after the Arthur office closed. Some of the creditors obtained a court order to seize the assets and papers of the bank, but R.E. Lillico refused entry to the sheriff and barricaded the door when he tried to serve the papers.
Many believed that by then everything had been removed form the safe. Both the Lillicos issued vague statements that all creditors would be paid. The father-and-son team then had the audacity to sue the creditors who had launched the action against them, claiming that the publicity had ruined their reputations.
None of the charges and counter charges ever went to court. The Lillicos fled to the United States, sticking their own lawyer with a $700 unpaid bill, and leaving the creditors to try to sort out the affairs and realize something on them.
A major loser at the Arthur office was a farmer named Frank Tone, of West Luther. He had all his savings in Lillico’s bank, and was in the process of buying a farm. The property he wanted had been seized by a Toronto mortgage company when the previous owner fell behind in his mortgage payments. Tone and the company had not agreed on a price, and had been deadlocked for several weeks over a difference of only $50 between his offer and their price when Lillico’s bank failed.
Tone was 52 years of age, and had a wife and family to support.
The year 1890 had not been a good one for him. In February, he had suffered from a bad cold and very high fever. Some thought that he had suffered some brain damage as a result. The bank failure a few weeks later, and the loss of his life savings, sent him into a deep depression, accompanied by insomnia.
Tone’s family thought that a change of scene might be beneficial. They persuaded him to spend some time with his sister, Mrs. Simon Breen, who lived on Strachan Avenue in the west end of the Queen City.
Frank Tone arrived at his sister’s house in Toronto on the evening of June 14. He told her that he had not slept a wink in four weeks. She was alarmed at his ragged appearance and deep state of dejection. So deep was her concern that she thought her brother should be taken to the Queen Street mental asylum nearby. She telegraphed to Frank’s wife with the plan, and assumed that she could have him admitted on Monday.
Early in the evening she suggested that he try to get some sleep, and Frank turned in. Mrs. Breen heard her brother leave the house the next morning about 4am, but she did not rise herself until later. She would forever regret her decision to get a little more rest rather than follow her brother.
A night watchman at the railway crossing over King Street, near the Parkdale station, saw Frank a few minutes later, dressed only in trousers, a loose shirt, and barefoot. He was shuffling along slowly, and did not speak.
A half hour later, the watchman found Frank Tone under the King Street railway bridge, face down in a hole at the side of the street. The depression was about three feet deep, with three or four inches of dirty water at the bottom. Tone was face down in the water, and quite lifeless.
The watchman shouted to a couple of men working at a nearby stable. The three pulled Tone’s body out of the hole. They saw no marks on his face or body that would suggest he fell into the hole. They assumed that he was a suicide.
Sorting out the Lillico wreck took a great deal of time. There was an auction sale of some of the family property, including a store and hotel in Listowel, in the fall of 1890, but the bids failed to reach the reserves. When lawyers and accountants got the papers in order, there was nothing left for the depositors after their fees were paid.
A spinoff effect of the failure was that depositors in other centres lost faith in other private banks, and withdrew their money. That tended to make hard economic times even harder. Most small towns did not as yet have chartered bank branches, and there was nothing to fill the void when the local private bank could not meet demands for credit.
The Toronto coroner examined the body of Frank Tone on the afternoon of June 15. The remains returned to Arthur on the morning train of Monday, June 16. He was only one of the victims of the Lillico bank failure, but was certainly the most tragic of them. His wife and family also suffered, not only through his death, but through the loss of all the family savings.
Then, as now, the failure of a financial concern can have repercussions much wider than are at first apparent.