Published by EH.Net (February 2019)

Christopher Kobrak and Joe Martin, From Wall Street to Bay Street: The Origins and Evolution of American and Canadian Finance. Toronto: University of Toronto Press, 2018. xii + 401 pp. $35 (paperback), ISBN: 978-1-4426-1625-7.

Reviewed for EH.Net by Hugh Rockoff, Department of Economics, Rutgers University.

Why did the Canadian financial system escape the devastation that the American system experienced in the Great Depression (although Canada did not escape the decline in economic activity) and in 2008? Indeed, why has the financial system of Canada been so much more stable throughout its history than the American system? It’s a question that many economic historians have thought about. Calomiris and Haber (2014) is a recent attempt to come to grips with this and other comparisons which highlight the instability of the American financial system. And I have done some work on this with Michael Bordo and Angela Redish (1994, 2015).

From Wall Street to Bay Street sheds light on these questions. The book, I should note, is written for the layperson and not for the typical reader of EH.Net. One imagines (hopes?) that the intended audience might include a journalist, a politician, or a business executive looking for an explanation of a puzzling fact that might in turn affect what they write or do. Although Kobrak and Martin include some comparative charts at the end of the book, the text itself includes no charts, tables, or equations. As an explanation for lay readers, it works well. But, as I will explain below, I think it is also a book that professional economic historians will profit from reading.

Joe Martin is the Director of Canadian Business History at the Rotman School of Management of the University of Toronto. Christopher Kobrak (an undergraduate philosophy major at Rutgers, a clear marker of excellence, and a Columbia Ph.D.) was at the Rotman School at his untimely death in 2017. They chose to tell the whole story of American and Canadian finance — insurance, investment banks, and so on, as well as commercial banking — chronologically. There are introductory and concluding chapters, and five chapters in which they take their story from the colonial period to today.

Although the American systems were and very likely are still more crisis-prone than the Canadian system, there have been some bad moments in Canada that they duly note. There was a “near panic” in Western Canada in 1907 that the government addressed by allowing banks to issue notes in excess of those permitted under existing reserve requirements (p. 146). The Home Bank failed in 1923 and the government provided compensation for 35 percent of small deposits. And an emergency loan was made to the Dominion Bank. The Office of the Inspector of Banks was then created in the wake of the Home Bank failure. During the 1930s the Sun Life Insurance Company received special treatment from regulators probably because it was considered “too big to fail” (p. 184). The less-developed countries debt crisis of the early 1980s hit the Canadian financial system hard. And there were other difficulties including failures of trust companies and banks. The Office of Superintendent of Financial Institutions was created in the wake of these difficulties. But all of this pales in comparison with the American record of financial crises – 1819, 1837, 1857, 1873, 1893, 1907, 1930, and 2008, just to name some of the big ones.

What explains the relative stability of the Canadian system? Kobrak and Martin rely on two explanatory factors. One, that will be familiar to most American and Canadian financial historians, is Canada’s system of nationwide branch banking; a stark contrast with the United States which for much of its history had a fragmented banking system in which banks were always prevented from branching across state lines and in some cases were prevented from establishing any branches at all by unit banking laws. Most financial historians, I believe, agree that the absence of branching made American banks far more vulnerable to economic shocks than their Canadian cousins. The problem of state-centric regulation, however, was not confined, Kobrak and Martin show, to banking, but also troubled the American Insurance industry. This comparison illustrates one of the strengths of From Wall Street to Bay Street: its broad sectoral coverage creates opportunities for comparisons that test their conclusions about the origins of the difference in stability between the systems.

The other explanation that Kobrak and Martin rely on is culture. There is a tradeoff, they argue, between innovation and stability. “American finance,” in their estimation, “has been associated with an abundance of the former and not enough of the latter, with Canada assuming the opposite approach” (p. 14). In their concluding chapter they say that “Americans have always exhibited a tolerance for recklessness in commercial innovation, which appears curious to much of the rest of the world, including Canadians.” A reference to Tocqueville, who said much the same, helps to establish the venerable lineage of their observation about different attitudes toward stability (p. 262). Their reliance on cultural differences inevitably raises the question of whether it is “Kosher to Talk about Culture” to quote the title of one of Peter Temin’s (1997) well-known papers. A reliance on cultural explanations is always problematic. It is far easier to suggest cultural explanations for economic phenomena than to test them rigorously. For that reason, many economic historians shy away from them. Kobrak and Martin, however, are not afraid. I was skeptical at first, but I found myself coming away persuaded that part of the difference in institutional arrangements (including regulatory structures) and records of stability in the two financial systems ultimately derives from different attitudes toward innovation and stability.

Some parts of the book will be familiar to professional economic historians, such as summaries of work by economic historians on slavery and the Great Depression, and can be skipped by someone already familiar with these literatures. But professional economic historians are likely to encounter ideas that are worth pondering. The repeated emphasis on cultural differences is one example. Their conviction that to understand financial systems one has to look at the systems in their entirety and not focus solely on banking is another.

My bottom line is that this is a fine book. It delivers the explanation that they promised to the lay reader, but professional economic historians, such as those of us that read the posts on EH.Net, will also find that the book is worth their time.


Bordo, Michael D., Angela Redish, and Hugh Rockoff. “The U.S. Banking System from a Northern Exposure: Stability versus Efficiency.” Journal of Economic History 54, no. 2 (1994): 325-41.

Bordo, Michael D., Angela Redish, and Hugh Rockoff. “Why Didn’t Canada Have a Banking Crisis in 2008 (or in 1930, or 1907, or …)?” Economic History Review 68, no.1, (2015): 218-43.

Calomiris, Charles and Stephen Haber. Fragile by Design: The Political Origins of Banking Crises and Scarce Credit. Princeton: Princeton University Press, 2014.

Temin, Peter. “Is It Kosher to Talk about Culture?” Journal of Economic History 57, no. 2 (1997): 267-87.


Hugh Rockoff is a distinguished professor of economics at Rutgers University and a Research Associate of the National Bureau of Economic Research. His current research focuses on the origins of America’s national income accounts and in joint work with Michael Leeds at Temple University on the coming of Jim Crow to American horse racing.

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