thl: HISTORY AND PRINCIPLES BANKING. BY JAMES WILLIAM GILBAllT, OKNKRAI. MANAGER OF THE LONDON AND WKSTMINSTKR UA\K. THIRD EDITION. LONDON: PKINTEn FOR LONGMAN, REES, ORME, BROWN, GREEN, & LONGMAN, FATI'-RNOSTEn ROW. 18S7. 6 2 6 1 1 London ■. Printed by A. Siottiswoode, New- Street- S((uare. ^ HG PREFACE. '3^7 This book was not written to applaud or censure the acts of any statesman ; to attack or defend any existing banking establishment; to advance or refute any new theory respect- ing the currency. It aims not to instruct the members of the cabinet, nor to guide the counsels of the senate. Its only aim <2 is to impart useful knowledge to the public at large, c^ i Banking is both an art and a science. As an art it is a ^ branch of trade intimately connected with every man's busi- Sc ness ; as a science, it forms an important portion of political 3 economy. The knowledge of banking as an art, is acquired like that of other arts, by serving an apprenticeship, or engaging practically in its operations. The knowledge of banking, as a science, may be acquired like that of other sciences, by reading, observation, and reflection. These two branches of knowledge do not always accompany each other. 3 Some, who are practically engaged in banking, do not study (O its principles ; while those who have written upon its princi- ples, have, for the most part, been political economists and statesmen, who were unacquainted with its pi*actical details. This publication will, perhaps, be thought worthy of some degree of attention, upon the ground that it professes to be a scientific work, written by a practical man. This book may be considered as a grammar of banking. ^ The general reader may here acquire a competent knowledge — of most of the facts and principles connected with the sub- g ject : and those who wish for a more extensive reading, would "^ do well to begin with this work, and then proceed to the perusal of those excellent pamphlets and treatises which have been w^ritten upon detached and controversial portions of the science. " The best way to learn any science," says Dr. Watts, " is to begin with a regular system ; or u .-licrt ami A 2 tn >^/f fe/ -rf >< > IV PREFACE. plain scheme of that science, well drawn up into a narrow compass." " If a man deals always, and only, in essays and discourses on particular parts of a science, he will never obtain a distinct and just idea of the whole; and may per- haps omit some important portion of it, after seven years' reading of such occasional discourses." J. W. G. 9. Waterloo Place, Jan. 31. 1834. PREFACE TO THE SECOND EDITION. The chief advantage which this edition possesses over its predecessor consists in having an index. This is framed so as to give facility of reference, and to bring together in one view those observations that may bear upon the same subject, though occurring in different parts of the volume. After a careful perusal of the work, the reader may recall to his mind most of its facts and principles by an occasional inspection of the index. J. W. G. 38. Throgmorton Street, April 22. 1 835. PREFACE TO THE THIRD EDITION. In this edition I have added only a few pages, necessary to bring the historical part down to the present period. As I wish this to be a standard work upon the subject, I have not enlarged upon matters of mere temporary interest. The facts and principles of this volume will remain perfectly unaffected by any change that may take place in the form of our banking institutions. J. W. G. .'?8. Tliro^'tnorton Stiwl, June 12. 1837. NOTICES OF THE FIRST EDITION. " A WORK likely to be extensively useful at this period has just appeared, entitled ' The History and Principles of Banking. By James William Gilbart' The author's object has been not to advance any theories of his own, but to make the reader acquainted with the facts and principles of the question as deduced from the existing practice. In this, his long experience must make him a very competent guide. The numerous claims on our crowded columns prevent our giving a fuller notice of tlie work: the recom- mendation of which may be summed up in his own phrase — that it is a ' Grammar of Banking.'" — Times, Feb. 20. 1834-. " This work may be advantageously consulted for a practical knowledge of banking in all shapes from the Bank of England down to loan banks, and the new law to facilitate the purchase of small annuities. It should also be added that a variety of tables are contained in the volume, not mere transcripts from official docu- ments, but intelligible recasts by a man of business. So far as we are able to judge by inspection, they seem to have the rare merit of containing what is wanted and nothing more." — Spectator, Feb. 15. 1834. " Combining a clear appreciation of the science of banking with the best practical knowledge of his business, we have seen no work on this subject which better deserves to be consulted and studied than Mr. Gilbart's volume." — Literary Gazette, Feb. 22. 1834-. " Mr. Gilbart claims for his book that it contains both features (theory and practice), and is a scientific work written by a practical man. His claims appear to be fully borne out by the perspicuity of his views and the analytical spirit in which he treats the subject. He is fully master of the details, and ascends with equal ease to the examination of the elementary principles. His account of the VI NOTICES OF THE FIKST KDITJON. nature of joint stock banks, of branch banks, of deposit, remittance, circulation, and discount, of cash credit, loan and savings banks, will be found by men of business to be of considerable value for reference." — ^//a*, Feb. 23. 1834.. " We have been highly pleased with its agreeable and instructive character ; and we think that no man connected with trade should be without this book." — Monthly Revieiv, May 1834. " As the author most truly says in his preface, the aim of this book is to impart useful knowledge. Those who are ignorant of the art or rather science of banking (for banking may be con- sidered as a science in political economy) will here obtain a knowledge of facts and principles which will sufficiently enlighten their minds on the subject, and they will have the good fortune of not having principles instilled which may lead them into error. The question of currency, cash payments, &c., which have been such a source of labyrinthic litigation, are not inooted. It is a clear well written work, and must have been written by a person endowed with a lucid head and an impartial mind." — 31etropolitan Magazine, August 1834. " A more complete and accurate work, with less irrelevant matter, we never read." — Gentleman s Magazine, October 1831. " We have before us a most interesting work, from the pen of Mr. Gilbart, entitled ' The History and Principles of Banking.' This subject, which is generally considered abstruse and recondite, has been, by the pen of Mr. Gilbart, rendered so plain, that the most ordinary capacity may easily comprehend it. It requires such a man as the manager of the London and Westminster Bank to produce this work. A speculative theorist, no matter how acute his intellect, must have failed in presenting us with those NOTICES OF THK FIHST EDITION. Vll forcible details which belong only to the practical man ; whilst, to the mere man of business, that power of combination and mastery of language must have been wanting, which the literary abilities of Mr. Gilbart have enabled him to bring to bear upon the subject. " The peculiar interest which it possesses is owing, as the author truly states in his preface, to the circumstance of its being a scientific work, written by a practical man.' Tlie subject of Banking, at all times of such importance to a mercantile country, possesses paramount claims to attention at the present moment, when two fresh bodies of Ai-gentarii have come into the field to bear away whatever spoil may have escaped the hands of the veteran campaigners. ' The History and Principles of Banking' should be in the hands of every man who wishes to be acquainted with the manner in wliich the money transactions of this great country arc carried on." — Waterford Chronicle, June 9. 1836. WORKS PUBLISHED BY THE SAME AUTHOR. 1. A PRACTICAL TREATISE ON BANKING. Fourth Edition. Price 6s. " A valuable and useful little work." — Mr, M'Cidlocb's Smith's ircalth of Nations. 2. THE HISTORY OF BANKING IN IRELAND. Price 5s. " It affords a succinct view of the Acts of Parliament, through which the banking operations of Ireland were effected, from the time of Henry VI. to the present day ; showing the main features of the monetary system in that country." — Atlas, June 19. 1836. " It is a valuable statistical work, and a desirable appendix to his ' History and Principles of Banking.' " — Gentleinaris Magazine, July, 1836. " It gives a very clever and succinct account of the history of Banking in Ireland." — Monthly Review, July, 1835. " It is a useful book for those who are anxious for practical information touching the money matters of the sister kingdom ; or who wish, by investigating her banking system, to track her slow and late progress in commerce and civilis- ation." — Spectator, July, 1836. 3. THE HISTORY OF BANKING IN AMERICA: With an Inquiry how far the Banking Institutions of America are adapted to this Country, and a Review of the Causes of the recent Pressure on the Money Market. Price 7s. IX TABLE OF CONTENTS. I. — The History of Banking, Seci'ION I. The Origin and Progress of Banking - ^ 1 II. The Rise of Banking in England - - 1 1 III. The History of the Bank of England - - 26 IV. The London Bankers - - - - 106 V. The Country Banks - - - - 109 II. — The Constitution of Banks. Section VI. Joint-Stock Banks 119 VII. Branch Banks 133 III. — The Principles of Banking. Section VIII. Banks of Deposit - - - - - 141 IX. Banks of Remittance - - . . - 1,30 X. Banks of Circulation - - - - 156 XI. Banks of Discount - - - - - 170 XII. Cash Credit Banks 199 XIII. Loan Banks - - - . . - 201- XIV. Savings' Banks _ . . - - i>20 XV. The London and Westminster Bank - - 25S J THE HISTORY AND PRINCIPLES BANKING, SECTION I. THE ORIGIN AND PROGRESS OF BANKING. An eminent historian observes, that, " it is a cruel mortification, in searcliing for what is instructive in the history of past times, to find that the exploits of conquerors who have desolated the earth, and the freaks of tyrants who have rendered nations unhappy, are recorded with minute and often disgusting ac- curacy, while the discovery of useful arts and the progress of the most beneficial branches of commerce are passed over in silence, and suffered to sink into oblivion." * This remark is strictly applicable to the origin and progress of banking. We have but little infoiTnation as to what kind of banks existed in the earlier ages, or on what system they conducted their business. As most of the nations of antiquity sub- sisted chiefly on agriculture, they probably had little occasion for banks ; for it is only in commercial countries that these institutions have attained to any * Robertson's Historical Disquisition on Indiii, page 46. B 2 THE HISTORY AND PRINCIPLES high degree of prosperity. And as even the com- mercial nations of antiquity were unacquainted with joint stock comj)anies or commercial corporations, and had not discovered the use of paper-money or bills of exchange, the business of a banker, even among them, must ha\e been somewhat different from that of a banker of the present day. The mer- cliants of those early times employed as money gold and silver bullion ; and received it and paid it away by weight. It is probable that the merchants would require that the precious metals they received should be of a certain degree of fineness. We read of Abra- ham* weighing unto Ephron 400 shekels of silver, current rnonei) with the merchant — a })hrase which implies that the money current with the merchant was different from that in ordinary use. After bullion was superseded by coin, and each nation had a coin of its own, the merchants would necessarily in the course of their business receive coins belonging to different nations, and hence would be applied to by strangers who wished to exchange their own money for the money of the country in which they sojourned. This would take ])lace more particidarly in those oriental countries whose inha- bitants were accustomed in certain seasons to meet together for the celebration of public festivals. We read in the New Testamentt of money-changers who had tables in the Temple of Jerusalem. It is pro- bable they attended for the ])ur})ose of gi\ing Jewish money hi exchange for those various coins whicli persons coming from the neighbourhig countries miji^ht have brought with them. Whether the busi- ness of money-changing was carried on as a separate employment, or united with the general business of a merchant, we are not informed ; but it is stated that the exchangeis allowed interest for money lodged in * Genesis xxiii. 16. f MaUhew xxi. VZ. OF BANKIXG. 3 their hands — ''Thou wicked and slothful servant, thou oughtest to have put my money to the exchangers, and then at my coming 1 siiould have received mine own with usury."* From the circumstance of their allowing interest on money, we may infer that they also lent money on interest ; otherwise they would have had no use for the money they borrowed. This scanty information forms the whole of oiu' knowledge respecting the mode of banking practised by the an- cient Babylonian, Egyptian, and Jewish nations. With respect to the bankers of Greece we have more ample details. In Greece the first banks were the temples. " The wealth and growing estimation of Delphi had also ano- ther source, of which information remains only so far as to assure us of the fact with far less explanation of circumstances than for its importance might be desired. In the genei'al insecurity of pro- perty in the early ages, and especially in Greece, it was highly desirable to convert all that could be spared from immediate use into that which might more easily be removed from approaching danger. By a compact, understood among men, with this view the precious metals appear to have obtained their early estimation. Gold then and silver having acquired their certain value as signs of wealth, a deposit secure against the dangers continually threat- ening not individuals only but every town and state in Greece, would be a great object of the wealthy. Such security offered nowhere in equal amount as in those temples, which belonged not to any single state, but were respected by the common religion of the nation. The priesthood, not likely to refuse the charge, would have a large interest in acquiring the reputation of fidelity to it. Thus Delphi appears to have become the great bank of Greece, perhaps before Homer, in whose time its riches seem to have been already proverbial. Such then was found the value of this institu- tion, that when the Dorian conquerors drove so large a part of the Greek nation into exile, the fugitives who acquired new settle- ments in Asia established there their ovvn national bank, in the manner of that of their former country, recommending it to the protection of the same divinity. The Temple of Apollo, at Bran- chidas, became the great depository of the wealth of Ionia."-|- * Matthew xxv. 27. f Mitford's History of Greece, vol. i. page 193. B Q 4< THE HISTORY AND PRINCIPLES Afterwards the temple of Olympia, like that at Delphi, became an athantageous repository for trea- sure. But, although the temples discharged one of the offices of banks, by being places of security, yet as they did not grant interest on the money deposited, they did not supersede banks of deposit established by private individuals. At Athens especially, bank- ing was a flourishing trade. " The greater part of tlie Athenians employ their money in trade, but they are not permitted to lend it for any place but Athens. They receive an interest for the use of it which is not fixed by the laws, but stipulated in a contract, deposited either in the hands of a banker, or some friend to both parties. If, for in- stance, a voyage is to be made to the Cynnnorian Bosphorus, the instrument specifies the time of the departure of the vessel, the kind of commodities with which she is to be freighted, the sale which is to be made of them in the Bosphorus, and the merchan- dise which she is to bring back to Athens ; and, as the duration of the voyage is uncertain, some agree that their money shall not be payable till the return of the vessel ; while others more timid, and contented with a less profit, require that it shall be repaid at the Bosphorus immediately after the sale of the goods carried out ; in which case they either themselves repair to the place where they are to receive it, or send thither some person in whom they can confide, and whom they empower to act for them. " The lender has his security, either on the merchandise or the goods of the borrower ; but as the dangers of the sea are in part risked by the former, and the profit of the latter may be very con- siderable, the interest of money thus lent may rise as high as thirty per cent., more or less, according to the length and hazards of the voyage. " The usury of which I have spoken is known by the name of maritime ; that called landed is more oppressive, and no less variable. " Those who, without risking the dangers of the sea, \vish to derive profit from their money, lend it to bankers at the rate of twelve per cent, per annum, or rather one per cent, for every new moon. But as the laws of Solon do not prohibit those who have money from demanding the most extravagant interest for it, some persons receive more than sixteen per cent., and others, especially among the lower classes of people, exact every day the quarter of tlie principal. These extortions are not concealed, and cannot be punished, except by public opinion, which condemns, but does not sufficiently despise those who are guilty of them. " Commerce increases the circulation of wealth, and this circu- lation has given birth to the occupation of bankers, which facili- OF BANKING. 5 tales it still more. A person who is about to make a voyage, or who fears to keep by him too great a sum of money, lodges it in the hands of these bankers, sometimes only as a trust and without requiring any interest, and sometimes on condition of sharing with them the profit it shall produce. They advance money to ge- nerals who go to take on them the command of armies, or other individuals who stand in need of their assistance. " In the greater part of bargains made by them, no witness is required : they content themselves with entering in a register that such a person has deposited in their hands such a sum, which they must repay to such another, if the former should happen to die. It would sometimes be very difficult to prove that they have re- ceived a sum of money, were they to deny it ; but if they should expose themselves to such a charge more than once, they would lose the confidence of the pubhc, on which depends their success in the business in which they are engaged. " By employing the money deposited in their hands, and lending it at a greater interest than they are to pay for it, they amass riches which gain them friends, whose protection they purchase by assiduous services. But all is lost when, unable to call in their money, they are incapable of fulfilling their engagements. They are then obliged to conceal themselves, and can only escape the severity of justice by surrendering all their remaining property to their creditors. " Those who wish to exchange foreign money, apply to the bank- ers, who by different means, as the touchstone and the balance, ex- amine whether they are not adulterated or deficient in weight."* In a treatise published by Xenophon upon the Athenian revenue, we meet with the first suggestion for the estabhshment of a joint stock bank. " A very remarkable project, which seems to have been original with Xenophon, next occurs, — the establishment of a bank by sub- scription, open to all the Athenian people. The interest of money it appears was enormous at Athens, an unavoidable consequence of the wretched insecurity of person and property. Throughout modern Europe, land is of all property esteemed the safest source of income; but in Greece it was held that the surest return was from money lent at interest. For in the multiplied division of Greece into small republics witii very narrow territories, the pro- duce of land was continually liable to be carried olF or destroyed by an invading enemy ; but a monied fortune, according to Xeno- phon's observation, was safe within the city walls. In proportion, then, to the interest of money and the insecurity of all things, the * See Travels of Anacharsis in Greece, by the Abbe Barthelcmy, and the authorities there referred to. b THE HISTORY AND PRINCH^LES profits of trade will always be liigli, and thus numbers would be in- duced to borrow, even at a high interest. Xenophon therefore proposed, by lending from the public stock and encouraging com- mercial adventure by just regulations, to raise a great revenue; and, by the same means, instead of oppressing, to enrich indivi- duals. As a corollary, then, to his project, when the amount of the subscription or its profits might allow, he proposed to improve the ports of Athens, to form wharfs and docks, to erect halls, ex- changes, warehouses, market-houses, and inns, for all which tolls and rents should be paid, and to build ships to be let to merchants. Thus, while numbers of individuals were encouraged and enabled to employ themselves for their private benefits, the whole Athenian people would become one great banking company, from whose pro- fits every member, it was expected, would derive at least an easy livelihood."* At Rome, the bankers were called Argentarii^ Mensarliy JVumuIarit\ or CoUi/histcB. The banking- houses or banks were called Tahernce^ Argentaricp^ or MenscE Numularicp. Some of these bankers were appomted by the government to receive the taxes, others carried on business on their own account. Their mode of transacting business was somewhat similar to that which is in use in modern times. Into these houses the state or the men of wealtli caused their revenues to be paid, and they settled their accounts witli their creditors by giving a draft or cheque on the bank. If the creditor also had an account at the same bank, the account was settled by an order to make the transfer of so much money from one name to another. To assign over money, or to pay money by a draft, was called perscribere and rescribere ; the assignment or draft was called attri- butio. These bankers, too, were money-changers. They also lent money on interest, and allowed a lower rate of interest on money deposited in their hands. In a country where commerce was looked upon with contempt, banking could not be deemed very res})cctable. Among most of the ancient agri- cultural nations, there was a ])rejudice against the * Mitford's History of Greece, vol. iv. page 22. or BAN KING. 7 taking of interest for the loan of money. Hence the private bankers at Rome were sometimes held in disrepute, though tliose whom the government had estabUshed as pubhc cashiers, or receivers -general, as we may term them, held so exalted a rank that some of them became consids.* The Romans had also loan banks, from which the poor citizens received loans without paying interest. We are told that the confiscated property of criminals was converted into a fund by Augustus Caesar, and that from this fund sums of money were lent without interest to those citizens who could pledge value to double the amount. The same system was pursued by Tiberius. He advanced a large capital, which was lent for a term of two or three years to those who could give landed security to double the value of the loan. Alexander Severus reduced the market rate of interest by lending sums of money at a low rate, and by advancing money to poor citizens to pur- chase lands, and agreeing to receive payment from the produce. After commerce and the arts had revived in Italy, the business of banking was resumed. The word bank is derived from the Italian word Banco, a hencli — the Jews in Lombardy having benches in the market-place for the exchange of money and bills. When a banker failed, his bench was broken by the populace ; and from this circumstance we have our word bankrupt. Though the States of Venice and Genoa made the most rapid advances in conmierce, and established public banks, yet the department of banking appears to have fallen more particularly into the hands of the Florentines. " As the Florentines did not," like the Venetians and the Genoese, " possess any commodious seaport, their active exertions were directed chiefly towards the improvement of their * See Bcckman's History of Inventions, vol. iii. page 19. B 4 8 THE HISTORY AND PRINCIPLES manufactures and domestic industry. About the be- ginning of the fourteenth century, the Florentine manufacturers of various kinds, particidarly those of silk and woollen cloth, appear from the enumeration of a well-informed historian, to have been very consider- able. The connection wliich they formed in different parts of Europe, by fiu'nishing them with the pro- ductions of their own industry, led them to engage in another branch of trade, that of banking. In this they soon became so eminent that the money transactions of almost every kingdom in Europe passed through their hands, and in many of them they were intrusted with the collection and administration of the public revenues. In consequence of the activity and success with which they conducted their manufactures and money transactions — the former always attended with certain though moderate profit, the latter lucrative in a high degree, at a period when neither the interest of money nor the premium on bills of exchange was settled with accuracy — Florence became one of the first cities in Christendom, and some of its citizens extremely opulent.'** Cosmo di Medici was reckoned the most wealthy merchant ever known in Europe ; and in a treaty whereby Lewis XL engaged to pay Edward IV. fifty thousand crowns annually, it was expressly stipidated that the King of France should engage the ])artners of the Bank of Medici to become bound for the faithful and regular })erfbrm- ance of this agreement on the part of himself and his heirs.t Although the business of banking has probably always been carried on by private individuals before it has been carried on by a ])ublic company, yet most coimtries have found it useful to establish a public or national bank. Some of these banks have been * Robertson's Disquisition on India, page 113. ■[ Macpheryon's History of Coninicrce, vol. i. page 698. I I OF BANKING. 9 founded for the purpose of facilitating commerce, others to serve the government. The most ancient bank was that of Venice. It is supposed to have been established in 1157.* The state being involved in debt, through a long and severe war, the public creditors were formed into a corporation, with peculiar privileges, and the debts were allowed to be transferred from one name to another, much in the same way as our public fimds, or the stock of our public banks. It was made a particular regulation that all payments of wholesale merchandize, and bills of exchange, shall be in bank money ; and that all debtors and creditors shall be obliged, the one to carry their money to the bank, the other to receive their payments in banco, so that payments were made by a simple transfer of stock from one account to the other. This bank may be deemed a wonder for the twelfth century, but requiring mucli alteration to adapt it to the modes and manners of the nineteenth.! So early as the year 1849, the business of banking- was carried on by the dra])ers of Barcelona, who were probably the most wealthy class of merchants in that city. But by an ordinance of the king of Arragon, they were not allowed to commence this branch of trade until they had first given sufficient security. In the year 1401, a public bank was es- tablished by the magistrates, and the city funds were responsible for the money placed in the bank. They exchanged money, received deposits, and dis- counted bills of exchange, both for the citizens and for foreigners.^ The bank of Genoa was established in 1107. This bank, like that of Venice, owed its origin to the * Anderson's History of Commerce, vol. i. p. 156. y See Montefiore's Commercial Dictionary, article Batik. \ Macpherson's History of Commerce, vol. i. pp. SW. 612. 10 THE HISTORY AND PRINCIPLES debts of the state. Considerable confusion had arisen from the multitude of loans which the republic had contracted with its citizens. These various loans were now formed into one total amount, and made the capital of the bank. This bank was called the Chamber of St. George, and its management was intrusted to eight directors, elected by the proprietors of the stock. As a security for the debt, the state made over to the bank several cities and territories, among which was the port of Catfa and the little kingdom of Corsica. The bank of Amsterdam was founded in the year 1609. It was occasioned by the vast quantity of worn and clipped coins tlien in circulation, in consequence of which the value of the currency was reduced above nine per cent, below that of good money fresh from the mint. The bank received these deficient coins at nearly their intrinsic value, and made all its issues in coin of the standard weight and fineness. At the same time a law was made that all foreign bills of exchange should be paid in bank money. This law raised the value of bills on Holland in foreign coun- tries, and compelled every merchant to keep an ac- count at tlie bank, in order that he might at all times have legal money to pay his foreign bills. The pre- mium (called the Agio) on bank money was regulated by tlie market price of gold, and was subject to con- siderable fluctuations. To prevent the gambling to which these fluctuations gave rise, the bank at length determined to sell bank money for currency at five per cent, agio, and to buy it again at four per cent. From this and other sources of profit the bank is sup- posed to have gained a considerable revenue. It was the entire })roperty of the city of Amsterdam, and was placed under the direction of four burgomasters, who were changed every year.* * Adam Smith's \\'caltli of Nations OF BANKING. H Tlie bank of Amsterdam was the model on which were formed most of the European banks now in existence ; but they have varied very considerably from each other, according to the circumstances of he respective countries in which they have been estabhshed. SECTION II. THE RISE OF BANKING IN ENGLAND. The exchanging of money, the lending of money, the borrowing of money, the transmitting of money, are the foiu' principal branches of the business of modern banking, and in most countries they seem to have taken their rise in the order in which they are here named. money-changing. For several centuries the only current coin in England was made of silver, and the highest denomi- nation was the silver penny. This coin contained the 2i0th part of a pound w^eight of silver, which is a little more than half the silver contained in one of oiu- sixpences. There were also silver halfpence and silver farthings, and frequently the silver pennies were cut into halves and quarters to serve the pur- pose of halfpence and farthings, until laws were made to prohibit the practice. Copper was not coined in England until the year 1609, and then the small leaden tokens previously issued by private individuals were suppressed. Gold is supposed to have been first coined in England in the year 1344, when Edward III. issued gold nobles, lialf nobles, and farthing nobles ; the noble to pass for 6.y. 8f/., the half noble for 3.f. 4 was restored. This reduced the bank capital to the original sum of 1,200,000/. 1708. The bank charter was extended or renewed until the expiration of twelve months, notice to be given after the first day of August, 1732, and until payment by the public to the bank of the demands therein specified ; being an extension or renewal of the said charter for twenty years. (7 Anne, c. 70 By' this act it is provided, "That during the continuance of the said corporation of the governor and company] of the Bank of England, it shall not be lawful for any body politic or corporate whatsoever, created or to be created (other than the said governor and company of the Bank of England), or for any other persons whatsoever united or to be united in covenants or partnership, exceeding the number of six personSy in that part of Great Britain called England to bor- row, owe, or take up any sum or sums of money on their bills or notes, payable at demand, or at a less time than six months from the borrowing thereof." From this year until the year 1729, the anhuaT" dividends varied, from nine to five and a half per cent. 1709. In this year there was a new subscription of 1,001,171/. 10^., another of 2,201,171/. 10.9., anda call upon the proprietors of fifteen per cent., 656,204/. \s. Od' ; altogether making the total capital of the 32 THE HISTORY -WD PRINCIPLES bank .'5,0,58,5 1<7/- 1-v. \)d. This increase of capital became necessary, from the bank having in tlie pre- ceding year lent the government 400,000/. v^dthout interest, and agreed to cancel one million and a lialf exchequer bills in their possession, amounting with interest to 1,775,027/. 17*. lOld, 1710. A flu'ther call of 501,448/. 12.v. 11^/., which increased the bank capital to 5,559,995/. 14*. 8f/. The interest on foreign bills raised from four to five per cent., the same as the inland bills. 1713. The bank charter was extended or renewed until the expiration of twelve months' notice, to be given after the first day of August, 1742, and until payment by the public to the bank of the demands therein specified, being an extension or renewal of the said charter for ten years. (12 Anne, stat. 1. c. 2.) In consideration of receiving this privilege, the bank undertook to circulate 1,200,000/. in ex- chequer bills. In this year the legal rate of interest was reduced from six to five per cent. 1716, July 26. The bank rate of discount on foreign and inland bills reduced to four per cent. 1717. The bank cancelled 2,000,000/. exchequer bills, and received interest from the government at five per cent, on the amount. 171 8. Subscriptions for government loans were first received at the bank. From this period the government have found it more convenient to employ the bank as their agents in all operations of this nature, than to transact them at the treasury or the exchequer. The bank becoming by degrees more closely connected with the government, began to make advances of money in anticipation of the land and malt taxes, and upon exchequer bills and other se- curities. 1719, April 30. The rate of discount at the bank upon bills and notes was raised from foiu' to five per cent. OF BANKING. 33 1720. The South Sea Bubble commenced April 7. " The directors opened their books for a subscription of one million, at the rate of 300/. for every 100/. capital. Persons of all ranks crowded to the house in such a manner, that the first sub- scriptions exceeded two millions of original stock. In a few days this stock advanced to 34-0/., and the subscriptions were sold for double the price of the first payment. The infatuation prevailed till the 8th day of September, when the stock began to fall. Then did some of the adventurers awake from their delirium. The num- ber of the sellers daily increased. On the 29th day of the month, the stock had sunk to one hundred and fifty. Several eminent goldsmiths and bankers, who had lent great sums upon it, were obliged to stop payment, and abscond. The ebb of this por- tentous tide was so violent, that it bore down every thing in its way, and an infinite number of families were overwhelmed with ruin; public credit sustained a terrible shock; the nation was thrown into a dangerous ferment ; and nothing was heard but the ravings of grief and despair. Some principal members of the ministry were deeply concerned in these fraudulent transactions. When they saw the price of stock sinking daily, they employed all their intiuence vvith the bank to support the credit of the South Sea Company, That corporation agreed, though with reluctance, to subscribe into the stock of the South Sea Company, valued at 400/. per cent., 3,500,000/. which the company was to repay to the bank on Lady-day and Michaelmas of the ensuing year. This transaction was managed by Mr. Robert Walpole, who with his own hand wrote the minute of agreement, afterwards known by the name of the Bank Contract. Books were opened at the bank to take in a subscription for the support of public credit, and con- siderable sums of money were brought in. By this expedient the stock was raised at first, and those who contrived it, seized the opportunity to realize. But the bankruptcy of goldsmiths and the sword-blade company, from the fall of South Sea stock, occasioned such a run upon the bank, that the money was paid away faster than it could be received from the subscription. Then the South Sea stock sunk again, and the directors of the bank, finding them- selves in danger of being involved in the company's ruin, renounced the agreement; which, indeed, they were under no obligation to perform, for it was drawn up in such a manner, as to be no more than the rough draft of a subsequent agi'eement, without due form, penalty, or clause of obligation."* The directors of the South Sea Company took legal advice, with a view to compel the bank to perform * Smollett. D S4f THE HISTORY AND PRINCIPLES their contract ; l)ut the matter was arranged through the intervention of tlie government, who remitted to the Soutli Sea Com})any two millions sterling as a compensation for the non-performance of the Bank Contract. 1721. By the 8th Geo. I. c. ^21., the South Sea Company were authorised to sell ^()0,0()()/. per annum, government annuities, and corporations purchasing the same at twenty six years' purchase, were allowed to add- tlie amount to their capital stock. The bank purchased the whole of this '200,000/. per annum, at twenty years* purchase, makhig 400,000,000/. 1722. The bank capital increased 3,100,000/. by a new subscription. This made the amount of ca])ital 8,959,99.5/. 14.9. 8rf. April 23d. The rate of discount on bills reduced from five to four per cent. I72G. The stock called three per cents. I72G, was created this year by the means of a lottery. 1727. The bank advanced to government 1,750,000/. upon the coal and culm duties, at four per cent, interest (1 Geo. II. c. 8.). 1728. Tlie bank advanced to government 1,250,000/. upon the lottery, at four per cent. (2 Geo. II. c. 3.) 1730. The half-yearly dividend at Lady-day was at the rate of six per cent, per annum, and that at Michaehnas, at the rate of five and a half per cent, per annum. 1731. The dividends were tlie same as in the pre- ceding year. 1732. The dividends were the same as in the pre- ceding year. From this year until tlie year 1717» the dividends were at the rate of five and a half per cent, per annum. Thursday, 3d of August, about one o'clock, the governor, sub-governor, and several of the directors of the bank, came to see the first stone laid of their new building, in Threadneedle Street ; and after they had \ iewed the stone, on which his Majesty's and their Matthew Raper. Moses Raper. John Rudge. William Snelling. Bryan Benson. Stamp Brooksbank. Clement Boehm. OF BANKING. 3.5 sevenil names were eiigraved, the same was covered with a })late of lead, and tliat, with the base of a pillar. They then gave twenty guineas to be dis- tributed among the workmen. The following are the names of the directors in this year. Sir Edward r)ELLAMY, Governor. Horatio Towns end, Deputy Governor. Robert Alsop, Alderman. Robert Attwood. John Bance. Sir Ger. Conyers, Knt. Aid. Delillers Carbonnel. Sir Joseph E^yles. Nathaniel Gould. SirGil.HeathcotEjKhI. Aid. I William Faukener. John Hanger. | James Gaulter. Samuel Holden. ' Christopher Lethieullier. William Hunt. ; Henry Neal. Joseph Paice, Jun. ' Robert Thornton. The last eight were not in the direction the preceding year. 1734, Thursday, 5th of June. The directors began to transact business at their new house in Thread- needle Street. The business of the bank had previ- ously been carried on at Grocer's Hall, in the Poultry. In the hall of the new building was erected a curious marble statue of King William III. with a Latin in- scription, of which the following is a translation : For restoring efficacy to the laws, Authority to the courts of justice, Dignity to the parliament, To all his subjects their religion and liberties, And For confirming these to posterity, By the succession of the illustrious House Of Hanover To the British Throne, To the best of princes, William III. Founder of the Bank, This corporation, from a sense of gratitude. Has erected this statue. And dedicated it to his Memory, In the year of our Lord M.DCC.XXXIV. And the first year of this building. D 2 36 THE HISTORY AND PRINCIPLES 1737. Considerable public discussion about the pro- priety of again renewing the bank charter. The fol- lowing extracts from the London Magazine, of this year, will shew the sentiments which different writers entertained n])on the subject : " The bank have power to lend money on land, and no doubt miglit have put out prodigious sums that way, and have had a bet- ter interest for their money than most private people. Had the bank, then, lent out their money on land, they would have strength- ened their credit and their interest, and also extended their usefulness by relieving the landed property, of which there is a great deal at this time in mortgage, most unaccountably, at five per cent., while inferior securities bear a premium at three per cent. " Another branch of business which the bank have power to trans- act, but yet never meddle with, is the remittance of money back- wards and forwards to London from all the chief trading cities in England, for which they should have proper offices or inferior banks erected in all such cities and towns as they intend to manage a remittance with ; — this, besides what profit might be ex- pected upon the remittances, would naturally bring great part of the cash which is circulated in the country to be lodged in their hands. " I must next observe that in that branch of business in which they do employ themselves, which is that of a London hanher., they very much contract and narrow their dealings, by refusing to take in payment the foreic/n coins, for which reason it is impracticable with many traders to keep their cash with them. " This very privilege which the bank has for so long enjoyed, I could demonstrate to be a most heavy burthen upon the people, and a great prejudice to the landed interest as well as the trading interest of this kingdom ; for if it had not been for this privilege, we should have had a bank, perhaps, in every county in England, and probably half a dozen different banks in London, by which means, no merchant of tolerable credit could ever have been straightened for want of ready money at a low interest when he had occasion for it, nor would any landed gentleman who had a good title to his estate have been obliged to pay such premiums to brokers, or such an interest to mortgagees as they have now generally to pay; — whereas our present bank has never, so far as I have heard, assisted any landed gentleman, or any merchant, except in and about London only." " I am of opinion that with respect to the banking trade and the trade to the East Indies, neither the one nor the other can be car- ried on with such success, or in such an extensive manner, by pri- vate adventurers, as by a public company, with such an exclusive privilege as our present companies have. The circulating of bank bills or cash notes must certainly increase the current cash of any country, and must, therefore, be of great use in trade ; consequently, OF BANKING. S'lf the more extensive and the more general such a circulation is, the better will it be for the inland trade of that country. It is true, a private man or set of men may, by a long series of good manage- ment, gain a very extensive credit, but that credit can never come to be so extensive or near so general as the credit of a rich public company, that has supported itself with honour, perhaps, for some ages; because the credit of a private man always depends upon himself, so that when he dies, his credit, as to any further circula- tion, generally dies with him, for it must require some time before those who succeed can revive or regain it ; whereas a public com- pany never dies, nor can their credit meet with any such inter- ruption ; and as their managers are always chosen annually by the company, there is a greater security for its being under good management than a private bank, whose chief managers are ap- pointed by the chance of natural or legal succession : therefore I shall always think it better for a trading country to have a public bank than to trust entirely to private bankers. " There certainly never was a body of men that contributed more to the public safety than the Bank of England. This flourishing and opulent company have, upon every emergency, always cheer- fully and readily supplied the necessities of the nation, so that there never have been any difficulties — any embarrassments — any delays in raising the money which has been granted by parliament for the service of the public ; and it may very truly be said that they have, in very many important conjunctures, relieved the nation out of the greatest difficulties, if not absolutely saved it from ruin." 1738, Dec. 14. The bank commenced issuing post bills, payable seven days after sight, that in case the mail was robbed the parties might have time to stop payment of the bills. Highway robberies appear to have been very frequent at this period. 1742. The bank charter was extended or renewed until the expiration of twelve months' notice, to be given after the first day of August, I764, and until payment by the public to the bank of the demands in this Act specified, being an extension or renewal of the said charter for twenty-two years. (15 Geo. II. c. 13.) In consideration of obtaining this charter, the bank lent to government 1,600,000/. without interest. To raise this sum the bank made a call u])on the pro- prietors of 810,004/. 5s. 4r/., which increased their capital to 9,800,000/. Oct. 18. The rate of discount, on bills drawn within the kingdom, was raised to five D 3 " T t-^V' -. ^-"R 1^ C'"» 38 THE HISTORY AND PUINCIPLES per cent. ; bills drawn without the kingdom were still discounted at four per cent. 1715. A RUN upon the bank, occasioned by the rebellion in Scotland, and :up})osed to be for the pur- pose of supplyhig the rebels with gold. A public meeting was held, and one thousand one hundred and forty merchants signed a declaration expresshig their readiness to take bank notes. 1746, May 1. The rate of discount on foreign bills reduced from five to four per cent. : inland bills and notes were still charged five per cent. These rates continued until the year IJ'Jo. By the 19 Geo. II. c. 6., the bank delivered up to be cancelled 980,000/. exchequer bills, in consideration of an annuity of 09,472/., being three per cent, per annum. To raise the above sum the bank made a call of ten per cent, upon their pro})rietors ; this increased the bank capital from 9,800,000/. to 10,780,000/. The following table shews the particulars of the per- manent debt due from the government to the bank. 1694 1697 1708 1717 1722 1728 1729 1742 1746 Paid off in 1707 1728 1729 1738 Acts. 5 W. & M. c. 8 & 9 Wm. c. 7 Anne, c, 7. 20. 19. 3 Geo. I. c. 8. .. 8 — C.21..., 1 Geo. II. C.8..., 2 — c. 3..., 15 — C.13... 19 — c. 6..., Original Subscription Ingrafted Tallies Exch. Bills cancelled. Advan^' without Int'- Excli. Bills cancelled. Trans. Ir. So. Sea Co. Advanced , Ditto , Ditto , Exch. Bills cancelled Total sum advanced Ingrafted Tallies Fart of. 1' 1,775,028 Remainder of ditto And part of .-/: 2,()0(),()00 of 1717 Further part of ^^ 2,()00,()00 of 1717. .. Not amount oi" permanent debt in J 1746, and as it stood up to 1816 j 1,200,000 1,001,171 1,775,028 4()(),0()0 2,000,000 1,000,000 1,750,000 1,250,000 1,600,000 986,800 1,001,171 1,000,000 775,028 500,000 1,000,000 15,962,999 4,276,199 .^'11,686,800 OF BANKING. S{) It will be observed that the permanent government debt is not exactly the same amount as the bank capital, as the directors did not always lend to the government the exact sum they received from the proprietors. 1747. The bank dividend was at the rate of five per cent, per annum : it continued at this rate until the year ]7<53. 17-50. A reduction took place in tlie interest of part of the national debt. Tiie bank held a court at Merchant-Taylor's Hall, and consented to receive a reduced rate of interest upon 8,486,800/. of the debt due to them by the government. The bank also agreed to advance to the government a sum of money to pay off the dissentients. 1751. In order to raise the sum promised to be lent to the government, the bank established what was called " I3ank Circulation." Books were opened to the public, and any person might enter his name and the sum he was willing to lend to the bank, in case it should be called for. The books being closed, the bank had the power of calling for the whole or any part of the sum subscribed at any time they pleased. The subscribers were to receive 2*. per cent, on the total amount of their subscription, and 4/. per cent, on the sum actually advanced. 1752. By 25 Geo. II. the balance of annuities granted by 8 Geo. I. was carried to a three per cent, stock, formed in 1731, and they were consolidated into one stock — the new^ stock is still called " three per cent, consols."' The word consols, is a contraction tor consolidated. 1753. The bank dividend this year was at the rate of four and three-quarters per cent. 1754. The bank dividend was at the rate of four and a half per cent. It continued at this rate until the year 17()4. 1757. The government stock, called " three per D 4 40 THE HISTORY AND PRINCIPLES cent, reduced," derives its name from the operation of this year. This stock had borne four per cent, imtil the year 1750 ; from that time it paid three and a half per cent., and this year it was reduced to three per cent. 1758. It was legally determined that those per- sons who had given value for bank notes stolen from the mail had a right to receive payment of them from the bank. In this year occurred the first instance of the forgery of a bank note. It was committed by a per- son named R. W. Vaughan, w^ho had been a linen- draper at Stafford. The note was for ^20/., the smallest amount then in circulation. He was con- victed and executed. 1759. The bank commenced issuing notes and post bills of 1.5/. and 10/. It was proved by expe- riment, that five hundred and twelve 10/. bank notes weighed one pound. 17()3. In this year terminated the seven years' war. The following are the government loans con- tracted during this war. Years. Loans. Interest per cent. Date. 1 1 Loans. | Interest per cent.; 1 1756 1757 1 758 1 759 £2,000, 000'a£3 12 3,000,000 3 14. 3 i 5,000,000 3 6 5 6,600,000| 3 10 9 ! 1760 1761 1762 1763 ^8,000,()()(y £3 13 7 12,000,000 4. 1 11 12,000,000 4 10 9 3,500,000 4 4 2 1764. The bank cliarter was extended or renewed until the expiration of twelve months' notice, to be given after the first day of August, 178^->, J^nid until pay- ment by the public to the bank of the demands therein specified ; being an extension or renewal of the said charter for twenty-two years. (1 Geo. III. c. 25.) \n consideration of obtahiing this charter the bank advanced 1,000,000/. one xchequer bills until the year \''i(')(\ and ])aid into the exchequer 1 10,000/. The dividends this year were raised to fi\e per cent. OF BANKING. 41 per annum, at which rate they continued until the year 1767. 17()7. The bank dividend was raised to five and a half per cent., and was continued at that rate until the year I78I. 1773' The rate of discount on foreign bills raised from four to five per cent. The discount on both foreign and inland bills remained at five cent, until the year 1822. "^ 177'5. Bankers were prohibited to issue notes of a less amount than 20*. (15 Geo. III. c. 51.) 1777* Bankers were prohibited to issue notes of a less value than 5l. (I7 Geo. III. c. 30.) 1781, The bank charter was extended or renewed until the expiration of twelve months' notice, to be given after the first day of August, 1812, and until payment by the public to the bank of the demands therein specified ; being an extension or renewal of the said charter for twenty-six years. (21 Geo. III. c. 60.) In consideration of obtaining this renewal of their charter, the bank advanced to the government 2,000,000/. for three years, at three per cent. The bank dividend raised to six per cent., at which rate it continued till the year I788. It is legally decided that the bank is not liable to ])ay forged notes. 1782. A call of 862,400/., making the total capital of the bank 11,642,400/. There was no further in- crease of capital until the year I8I6. 1784. In this year terminated the war with the revolted colonies of America. The following loans were contracted by the government during this war. Ycius. Loans. Intercf t per cent. Years. Loans. Interest per cent. 1776 ^2,000,000 £?> 9 8 1781 ^a 2,000,000 ^5 11 1 1777 5,000,000 4 5 2 1782 13,500,000 5 18 1 1778 6,000,000 4. 18 7 1783 12,000,000 1- 13 9 1779 7,000,000 5 18 10 1784. 6,000,000 5 6 11 1780 12,000,000 5 16 8 "\ 42 THE HISTORY AND PKIXCn'LES I78G. Previous to this year the bank received an allowance from the government on account of the nianagcjnent of the public debt ; that is, for trouble ill paying the dividends, superintendhig the transfer of stock, &c., of BiVZl. lO.v. a million. It was now reduced to 4o0/. a million ; the bank being at the same tune entitled to a considerable allowance for trouble in receivmg contributions on loans, lotteries, &c. This scale of allowance was continued mitil the year 1808. 17 88. The bank dividend raised to seven per cent., at which rate it continued until the year I8O7. 1791. A bUl was brought into parliament to render 500,000/. of the imclaimed dividends on the public funds available for the service of the public ; but the bank agreed to lend that sum to the govern- ment without interest, and the bill was withdrawn. 1792. A calculation was made witli a view to ascertain the number of days that a bank note of each denomination remained in circulation in this year. The following are the results : — Notes of 10/. each, 236 days. Notes of 50/. each, 124 days, _ 15/. — 114 — — 100/. — 84 — — 20/. — 209 — — 200/. — 31 — — 25/. — 74 — — 300/. — 24 — — .SO/. — 95 — _ 500/. — 24 — — 40/. — Cy5 — — 1000/. — 22 — 1793. An act of parliament was j)assed (33 Geo. III. c. 32.) declaring that the bank should not be subject to any ])enalties for advancing money to the government for the ])ayment of bills of exchange, accepted by the commissioners of his Majesty's trea- sury, and made payable at the bank. The amount of sums so advanced was required to be anmially laid before parliament. According to their originiil char- ter, the bank were prohibited lending money to tlie government without the consent of ])arliament, under a penalty of three times the sum lent : one-fifth part of which was to <>o to the iiiformer. OF BANKING. 43 This was a year of groat commercial distress : twenty-two commissions oi" bankru})tcy were issued against country bankers. 17{H. The bank connnenced issuing notes for 51. 1795. The bank having resolved to reduce their discounts, placed the following notice in the discount office. *' Bank of England, 'i\st December, 1795. " Pursuant to an order of the Court of Directors : " Notice is hereby given, " That no bills will be taken in for discount at this office after 12 o'clock at noon, or notes after 12 o'clock on Wednesday. " That in future, whenever the bills sent in for discount, shall in any day amount to a larger sum than it shall be resolved to dis- count on that day, d. pro rata proportion of such bills in each parcel as are not otherwise objectionable, will be returned to the person sending in the same, without regard to the respectability of the |)arty sending in the bills, or the solidity of the bills themselves. " The same regulation will be observed as to the notes." 1797- 'i'HE SUSPENSION OF CASH PAYMENTS. This took place on Monday, Feb. ^7th, in conse- quence of an order m council, which ran in the fol- lowing terms : — " Upon the representation of the Chancellor of the Exchequer, stating that from the results of the infoi'mation which he had re- ceived, and of the inquiries which it has been his duty to make, respecting the effects of the unusual demand for specie that has been made upon the metropolis, in consequence of ill-founded or exaggerated alarms in different j)arts of the country ; it appears, that unless some measure is immediately taken, there may be rea- son to apprehend a want of a sufficient supply of cash to answer the exigencies of the public service, It is the unanimous opinion of the Board, that it is indispensably necessary for the public ser- vice, that the directors of the bank of England should forbear issuing any cash in payment, until the sense of parliament can be taken on that subject, and the proper measures adopted thereupon, for main- taining the means of circulation and supporting the public and commercial credit of the kingdom at this important conjuncture ; and it is ordered that a copy of this minute be transmitted to the directors of the bank of England, and they are hereby required, on the grounds of the exigency of the case, to conform thereto until the sense of parliament can be taken as aforesaid." 44 THE HISTORY AND PRINCIPLES Among the crowd assembled at tlie bank, with a view of demanding gold, hand-bills were distributed, of which the following is a copy : — " Bank of England, Feb. 21th, 1797. " In consequence of an order of" his Majesty's Privy Council, notified to the bank last night, a copy of which is hereunto annexed, the governor, deputy-governor, and directors of the bank of England, think it their duty to inform the proprietors of the bank stock, as well as the public at large, that the general concerns of the bank are in a most affluent and prosperous situation, and such as to pre- clude every doubt as to the security of its notes. The directors mean to continue their usual discounts for the accommodation of the commercial interest, paying the amount in bank notes, and the dividend warrants will be made in the same manner." On the same day was held a meeting of merchants, bankers, and others, the lord mayor in the chair, when the following resolution was unanimously passed : — " That we, the undersigned, being highly sensible how neces- sary the preservation of public credit is at this time, do most readily declare, that we will not refuse to receive bank notes in payment of any sum of money to be paid to us, and we will use our utmost endeavours to make all our payments in the same manner." Tliis resolution was left for signatin-e at several of the most respectable taverns, and a similar resolution was subsequently adopted by other public assemblies. Immediately afterwards, the House of Commons ap- pointed a committee to inquire into the affairs of the bank. The committee re])orted, that " The total amount of outstanding demands on the bank, on the 25th of Feb. was 13,770,390/. ; and that the total amoimt of the funds for discharging those demands (not including the permanent debt due from govern- ment, of ll,G8(vS00/., which bears an interest of three per cent.) was 17,-5975280/. ; and the result is, that there was, on the 25th day of February last, a surplus of effects belonging to the bank, beyond the amount of their debts, amounting to the sum of 3,825,890/., exclusive of the above-mentioned ])crmanent debt of 11,684,800/. due from government." From accounts OF BANKING. 4.5 since published, it appears that tlie amount of gold and silver in possession of the bank was reduced by the previous run to 1,086,170/. March 3. The bank were authorised to issue notes under 5l. ; 37 Geo. III. c. ^8. It is entitled, '* An Act to remove doubts respecting promissory notes of the governor and company of the bank of England, for payment of sums of money under 5/." Accordingly, on the 10th of March the bank issued, for the first time, notes for 1/. and ^/. March 6. The bank issued the following notice : — " In order to accommodate the public with a farther supply o. coin for small payments, a quantity of dollars, which have been supplied by the bank and stamped at the mint, are now ready to be issued at the bank at the price of four shillings and sixpence per dollar, and a farther quantity is preparing." After the issuing of the above notice, it was ascer- tained that the dollars were intrinsically worth about two-pence more than the price at which they were intended to be issued. The following notice appeared three days afterwards : — " Bank of England, March 9. 1797. " In consequence of its appearing to be the general opinion that the dollars will be more conveniently circulated at the rate of four shillings and nine-pence per dollar, than at that of four shillings and sixpence which had been proposed, Notice is hereby given, that dollars are now ready to be delivered accordingly at the rate of four shillings and nine-pence per dollar." May 3. The bank restriction act passed. It is the 37 Geo. III. c. 45. ; and is entitled, " An Act for continuing, for a limited time, the restriction contained in the minute of council of the 26th of February, 1797» on payment of cash by the bank." By this Act the bank directors were indemnified against any legal proceedings on account of having complied with the order of council. They were not permitted to issue cash, except for any sum under 46 THE TIISTORY AXD PRINCIPLES twenty shillings. Rut if any person lodged cash in the bank, he might be repaid in cash to the extent of three fourtlis of the sum lodged ; but the sum lodged must not be less than 500/. The bank were also allowed to advance to the bankers of London, Westminster, and Southwark, any sum of cash not exceeding in the whole 100,000/. ; and also '25,000/. each to the bank of Scotland and the royal bank of Scotland, during the continuance of this Act. The bank could not be sued for payment of any of their notes, for which they were willing to give other notes ; and no person could be held to special bail upon any process issuing out of any court, imless the affidavit made for the purpose stated also, that the party had made no offer to pay in bank notes. This act was to be in force till the 24th day of the following June, a duration of fifty-two days. Jime 22. Another Act was passed, continuing the bank restriction until one month after the com- ^^^.-Ttiencement of the then next session of parliament. Nov. 30. A third Act ])assed, continuing the re- striction until six months after the conclusion of the war. An Act was also passed (37 Geo. III. c. 32.) sus- pending the Acts passed in 1777» which })rohibited bankers issuing notes below tlie amount of 5/., and ""^^the country bankers commenced issuing notes of 1/. \1'\)''.), Jan. 3. The bank gave notice, '* That on and after the 14th instant, they would })ay in casli all fractional sums under 5/. ; and that on and after the 1st day of February next, the bank will pay cash for all notes of 1/. and 2/. value that are dated prior to the 1st day of July, 1798, or exchange tliem for new notes of the same value, at the option of the holders." This year the bank j)roprietors received a bonus of ten per cent, on their capital. The bonus was made in five per cents., 1797. OF BANKING. 4<7 1800. Tlie ])ank charter was extended or renewed until the expiration of twelve montlis' notice, to be given after the 1st day of August, 1833, and until payment by the pubHc to the bank of tlie demands therein mentioned ; being an extention or renewal of the said charter for twenty-one years. (40 Geo. ill. c. 28.) In consideration of obtaining tliis renewal of their charter, the bank agreed to lend the govern- ment the sum of 3,000,000/. without interest for six years. The 40 Geo. III. c. 36. was enacted to enable courts of equity to com])el a transfer of stock in suits, without making the Bank of England, or the East India Company, or the South Sea Company, partners in the sales. 1801. 41 Geo. III. c. .57. was enacted " For the better prevention of the forgery of the notes and bills of exchange of persons carrying on the business of bankers. " After July 10th, 1801, no person shall use or make any frame or mould for making paper, with the name or firm of any persons or body corporate appearing in the substance of the paper, without a written authority for that purpose ; or shall make or vend such paper, or cause such name or firm to appear in the substance of the paper, whereon the same shall be written or printed, — on being imprisoned for the first offence, not exceeding two years, nor less than six months ; and for the second offence, transported for seven years. " No person shall engrave, &c., any bill or note of any person or banking company, or use any plate so engraved, or any device for making or printing such bill or note, nor shall knowingly have in his custody such plate or device, or shall utter such bill or note without a written authority for that purpose, under a like penalty. " No person shall engrave, &c., on any plate, any subscriptions subjoined to any bill or note of any person or banking company, payable to bearer on demand, or have in his possession any such plate, on penalty, for the first offence, of being imprisoned not exceeding three years, nor less than twelve months ; and for the second transported for seven years." 1801. Tlie proprietors of bank stock received a bonus of five per cent, on their capital in navy five per cents. 48 THE HISTORY AND PRINCIPLES The war with the French repiibhc terminated this year by the peace of Amiens. The following loans were contracted dnring tliis war : — Vears. Loans. Interest per cent. Years. Loans. Interest per cent. 1793 ^4,500,000 ^4 8 7 1797 ^'14,500,000 ^6 6 10 1794 11,000,000 4 10 7 1798 1^000,000 6 4 9 1795 1 8,000,000 4 15 8 1799 3,000,000 5 12 5 1796 1 8,000,000 4 14 9 1799 15,500,000 5 5 1796 7,500,000 4 12 2 1800 20,500,000' 4 14 2 1797 18,000,000j 5 14 1 1801 28,000,000 5 5 180'2. The war having been concluded, the Bank Restriction Act would have expired six months after- wards, but it was by a new Act continued in force till tlie 1st day of March, 1803. The bank proprietors received a bonus of two and a half per cent, on their capital in navy five per cents. 1803, Feb. 28. The Bank Restriction Act was continued until six weeks after the connnencement of the next session of parliament. Dec. 15. War having recommenced, the Bank Re- striction Act was continued imtil six montlis after the conclusion of a definitive treaty of peace. The bank is said to have lost this year no less a siuii than 300,000/., llu'ough a fraud connnitted by one of their principal cashiers, Mr. Astlett. 1804. The bank proprietors received a bonus in cash of five ])er cent, on their capital. In consequence of the scarcity of silver, tlie bank issued five-shilling dollars. These dollars liad on the obverse side an impression of his Majesty's head, and the following superscription : " Georgius III. Dei Gratia Rex ; " and on the reverse side, the impression of Britannia and the following, "Five shillings dollar. Bank of England 1804." The bank subsequently issued silver tokens for three shillings, and for one one shilling and sixpence. By an Act passed in 1812, OF BANKING. 49 the couiitert'eiting these dollars and tokens was liable to a punishment of fourteen years' transportation. By 44 Geo. III. c. 98., the following duties were imposed upon the notes of country bankers : — s€ s. d. Not exceeding ^1 \s ,. 3 Exceeding 1 1 not exceeding ^^ 2 2,?.... 6 Exceeding 2 2 not exceeding 5 5 ... 9 Exceeding 5 5 not exceeding 20 ... 1 These duties continued until the year 1808. 1805. The bank proprietors received another bonus of five per cent, in cash. 1806. Another bonus of five per cent, in cash. 1807. The dividend on l)ank stock was raised from seven to ten per cent., at which rate it continued until the year 1823. 1808. The allowance from the government to the bank for managing the public debt reduced from 450/. a million to 340/. a million on six hundred millions of the debt, and to 300/. a million on all that it ex- ceeded that sum. This was exclusive of some sepa- rate allowances on annuities, &c. By 48 Geo. III. c. 149., the following duties were imposed upon country bank notes : — ^ s. d. Not exceeding Exceeding- 1 \s . . 4> 1 not exceeding ^2 2s... 8 Exceeding 2 2 not exceeding 5 5 .. . 1 Exceeding 5 5 not exceeding 20 .. . 1 6 Exceeding 20 not exceeding 30 .. . 3 Exceeding 30 not exceeding 50 .. . 4 6 Exceeding 50 not exceeding 100 .. . 7 6 These duties remained the same until the year 1815. 1810. The BULLION committee, appointed by the House of Commons for the purpose of inquiring into the causes of the high price of gold bullion, and its effect on the circidating medium. The committee delivered a very long report, in which they discussed a variety of matters connected E so THK HISTORY AND PRINCIPLED with the currency, and concluded by recommending that the bank sliould resume cash payments at the end of two years. The following are extracts : — " Your committee have found that the price of gold bulHon, which, by tlie regulation of his Majesty's mint, is 3/. 17^. I0\d. per ounce of standard fineness, was, during the years 1806, 1807, and 1808, as high as 4/. in the market. Towards the end of the year 1808 it began to advance very rapidly, and continued very high during the whole of the year 1809, the market price of standard gold fluctu- ating from 4/. 95. to 4/. I2s. per oz. The market price at 4/. lOs. is about 1.5^ per cent, above the mint price. " Your committee have likewise found that towards the end of the year 1808, the exchanges with the Continent became very un- favourable to this country, and continued still more unfavourable through the whole of 1809, and the three first months of the present year. " Mr. Whitmore, the late governor of the bank, stated to the committee, that in regulating the general amounts of the loans and discounts, he did ' not advert to the circumstance of the exchanges, it appearing upon a reference to the amount of our notes in circu- lation, and the course of the exchange, that they frequently have no connection.' " Mr. Pearce, now governor of the bank, agreed with Mr. Whit- more in this account of the practice of the bank, and expressed his full concurrence in the same opinion. Mr. Pkakce. — 'In con- sidering this subject with reference to the manner in which bank notes are issued, resulting from the applications made for discounts to supply the necessary want of bank notes, by which their issue in amount is so controlled that it can never amount to an excess, I cannot see how the amount of bank notes issued can operate upon the price of bullion, or the state of exchanges; and therefore I am individually of opinion that the price of bullion or the state of the exchanges can never be a reason for lessening the amount of bank notes to be issued, always understanding the control which I have already described.' *' The bank directors, as well as some of the merchants who have been examined, showed a great anxiety to state to your committee a doctrine, of the truth of which they professed themselves to be most thoroughly convinced : that there can be no possible excess in the issue of Bank of England paper, so long as the advances in which it is issued are made upon the principles which at present guide the conduct of the directors — that is, so long as the discount of mercantile bills is confined to paper of undoubted solidity, arising out of real comn)ercial transactions, and payable at short and fixed |)eriods. That the discounts should be made only upon bills growing out of real commercial transactions and falling due in a fixed and short period, are sovmd and well established principles. OF BANKING. 51 But that while the bank is restrained from paying in specie, there need be no other limits to the issue of their paper than what is fixed by such rules of discount; and that during the suspension of cash payments, the discount of good bills falling due at short periods cannot lead to any excess in the amount of bank paper in circulation, appears to your committee to be a doctrine wholly erroneous in principle, and pregnant with dangerous consequences in practice. " Upon a review of all the facts and reasonings which have been submitted to the consideration of your committee in the course of this inquiry, they have formed an opinion which they submit to the house — That there is at present an excess in the paper circulation of this country, of which the most unequivocal sympton is the very high price of bullion, and, next to that, the low state of the Conti- nental exchanges ; that this excess is to be ascribed to the want of a sufficient check and control in the issues of paper from the Bank of England, and originally to the suspension of cash payments, which removed the natural and true control. " Your committee would suggest, that the restriction on cash payments cannot safely be removed at an earlier period than two years from the present time ; but your committee are of opinion that early provision ought to be made by parliament for termi- nating, at the end of that period, the operation of the several statutes which have imposed and continue that restriction." This report was delivered late in the session, and was not taken into consideration by the house until the following year. 1811. The commercial distress of the country had become so great, that parliament authorized the sum of six millions to be advanced to merchants on their giving sufficient security ; but such had been the fall in the price of mercantile property, that not many could give the required security, and bankruptcies were numerous. Whether this distress arose from any preparations of the bank to return to cash pay- ments, from the American embargo, or from Buona- parte's Berlin and Milan decrees, was a matter of much controversy. From the accounts since pub- lished, it does not appear that the bank had taken any measures to increase their stock of gold ; but during the years of 1810, 1811, and 1812, they con- siderably reduced their private securities and increased the amount of their public securities. Thus, on the E 2 52 THE HISTORY AND PRIXCIPLES •last day of Feb. 1810, their public securities were 14,32'2,()31/., and their private securities 21,0.55,946/. On the same day, in 1813, tlieir public securities were 25,036,62(3/., and the private securities 12,891',324/. This progressive reduction of the discounts no doubt occasioned great distress, though it was in some degree counteracted by an increase m the same period of above two millions in the circulation. It has been asserted, however, that the reduction of discounts was not the cause but the effect of the distress ; that the bank were as ready to discount as before, but that in con- sequence of the falling off in prices, and the stagnation of trade, the amount of bills offered for discount was considerably reduced. The report of the bullion committee was taken into consideration by the House of Commons, and after much discussion rejected. Instead of the measures reconmiended by the committee, the House adopted certain resolutions proposed by Mr. Vansittart (now Lord Bexley), declaring that the value of bank notes was not de})reciated, but that the value of gold was enhanced ; and that the political and commercial relations of Great Britain with foreign states were sufficient to account for the unfavourable state of the foreign exchanges and the high price of bullion. July 24. Lord Stanhope's Act passed. This Act (51 (jco. III. c. 127.) is entitled," An Act for making more effectual provision for preventing the current gold coin of the realm from being paid or accepted for a greater value than the current value of such coin ; for preventing any note or bill of thegovernor and company of the Bank of England from being received for any smaller sum than the sum therein specified ; and for staying proceedings u})on any distress by tender of such notes." It enacts, that the taking of gold coin at more than its value, or Bank of England notes 'or less than their value, shall be deemed a mis- OF BANKING. .5.T demeanor. This Act was to be in force until the 15th of March, 181^. It was introduced by the Earl of Stanhope, in consequence of the following notice having been addressed by Lord King to his tenantry : — " By lease, dated 1802, you have contracted to pay the annual rent of 47/. 'js. in good and lawful money of Great Britain. In consequence of the late great depreciation of paper money, I can no longer accept any bank notes at their nominal value, in payment or satisfaction of an old contract. I must, therefore, desire you to provide for the payment of your rent in the legal srold coin of the realm ; at the same time, having no other object than to secure pijyment of the real intrinsic value of the same, stipulated by agree- ment, and being desirous to avoid giving you any unnecessary trouble, I shall De willing to receive payment in either of the man- ners following, according to your option: — 1st. By payment in guineas ; 2d. If guineas cannot be procured, by a payment in Portugal gold coin equal in weight to the number of guineas re- quisite to discharge tlie rent ; 3d. By a payment in bank paper of a sum sufficient to purchase (at the present market price) the weight of standard gold requisite to discha-ge the rent. The al- teration in the value of paper money is estimated in this manner : , the price of gold in ISCJ'i, the year of your agreement, was 4/. an ounce: the present market price is 4/. It*., arising from the diminished value of paper. In that proportion an addition of 171. IQs. percent, in paper money will be required as the equivalent for the payment of rent in paper." 1812. " An Act passed for the further prevention of the counterfeiting of silver tokens issued by the governor and company of the Bank of England, called dollars, and of silver pieces issued and circulated by the said governor and company, called tokens, and for the further prevention of frauds practised by the imi- tation of the notes or bills of the said governor and company." (52 Geo. III. c. 138.) Lord Stanhope's Act continued by 52 Geo. III. c. 5. until three months after the commencement of the next session of parliament. 1814. Lord Stanhope's Act revived and continued by 54 Geo. III. c. 52. during the continuance of the Bank Restriction Act. 1815. The following stamp duties were imposed upon the notes of country bankers. (56 Geo. III. c. 184.) , E 3 54 THi; HISTORY AM) I'HINCTI'LF.S £ *. £ s. s. d. Not exceed! ig 1 1 1 . 5 Exceeding 1 and not exceeding 2 2 ... 10 — 2 2 5 5 ... 1 3 — 5 5 10 ... 1 9 — 10 20 ... 2 20 30 ... 3 30 50 ... 5 — 50 100 ... 8 6 1S1.5. In tliis year terminated tlie war with the French Empire, by the defeat of Napoleon Buonaparte at the battle of Waterloo by the Duke of Wellington. The following loans were contracted during this war. Years. Loans. Interest per cent. Years. 1810 Loans. Interest per ct. 1803 ^'12,000,000 £5 2 56*12,000,000^^4 4 2 ISOi 14,000,000 5 9 2 1811 12,000,000 4 13 6 1805 22,500,000 5 3 2 1812 32,500,000 5 5 7 1806 20,000,000 4 19 7 1813 27,000,000 5 8 6 1807 14-,200,000 4 14 7 1814 24,000,000' 4 12 1 1808 10,500,000 4 14 6 1815 36,000,000 5 12 4 1809 U,600,000 4 12 10 1 Peace being restored, the Bank Restriction Act would have expired six months afterwards, but it was continued by a new Act until the fifth July, 181 6. ISlf). The Bank Restriction Act continued from July 1816 to July 1818. The bank was authorised to increase its capital from ll,r)t2,4()0/. to 14,553,000/., being an addition of twenty-five })er cent, to the stock of tlie several pro- prietors. This addition was made out of the surplus profits without any furtlier call. (56 (leo. III. c.[)6.) In consideration of obtaiiiing tliis privilege, tlie bank agi-eed to lend the government the sum of 3,000,000/. at three per cent. This increased the permanent debt due from government from 1 1,()8(),800/. to 14,680,800/. Tiie following table exhibits the variations which have taken })lace in the amount of the capital of the bank at different periods from the date of the first charter t^ the present time : — OF BANKING. 55 Years. 1694 1709 1710 1722 1742 1746 1782 1816 Original Subscriptions... 1,201,000 New Subscriptions 1,001,171 10 Ditto 2,201,171 10 A Call of 656,204 1 9 A Call of 501,448 12 11 New Subscriptions 3,400,000 A Call of 840,004 5 4 A Call of 980,000 A Call of I 862,400 Augmented l-4th'j out of the sur- j- .2,910,600 plus profits J I Augmentations. Aggregate. { 1,200,000 2/201,171 10 4,402,343 5,058,547 1 9 5,559,995 14 8 8,959,995 14 8 9,800,000 10,680,000 11,742,400 14,553,000 The new subscription of 1,001, lyi^^ 10.9. raised in 1697 having* been returned in I707 is not noticed in the above table. 1817j April 17. The bank gave notice that on and after the second day of May next ensuing, they would pay cash for all notes of 1/. and 2/. value, dated prior to the first day of January, 18 16, or exchange them for new notes of the same value, at the option of the holders. Sept. 18. The bank gave notice that on and after the first day of October then next ensuing, they would be ready to pay cash for their notes, of every description, dated prior to the first day of January, 18 17. 1818. The Bank Restriction Act continued from the 5th July, 1818, to 5th July, 1819- A calculation was made this year, to ascertain the number of days that a bank note of each denomination remained in circulation ; the following are the results : Notes of 40/. 38 days. Notes of 1/. and 21... — 51. . 147 days. . 148 _ 10/ . 137 — 15/. . 66 — 20/. . 121 — 25/. . 43 — 30/ . 55 501. — 1 00/. — 200/, — 300/. — 500/. 72 49 18 14 14 — 1000/. 13 The bank had always been in the practice of de- E 4 .5() THE HISTOHY AM) I'HIXCIPLKS taining the tbrgeil notes ottered tor payment. But two persons, wlio had forged notes retin*ned to them by tlie bank, paid tlie amount, and ke])t the notes. They were charged with having forged notes in their possession, and tried on this charge, but the juries acquitted tliem. In consequence of this decision the bank have since returned all forged notes to the par- ties presenting them, after having stiunped them in several places with the word " forged." I8I9. A bill passed through " parliament in the course of two nights to restrain the bank paying away any more gold imder its notice of September, I8I7, or any previous notice. A committee of the House of Commons had reported that the bank had paid away above five millions in gold ; the greater part of which had been taken to tlie Continent, and there re- coined into foreign money. From an account submitted to parliament of the total amount of outstanding demands on the Bank of England, and the funds for discharging the same, it appears that there was a surplus in favour of the bank of 5,^202,320/., independently of their ca})ital of 14,686,800/. Mr. Peel's Bill passed. This bill (59 Geo. III. c. 490 contains the followhig ])rovisions : — 1. The Bank Restriction Act was continued, abso- lutely, from the 5th of July, 1819, to Feb. 1. 1820. 2. Between Feb. 1 and Oct. 1. 1820, the bank were required to pay their notes in gold bullicm of standard fineness, at the rate of 4/. l.v. per ounce, but not to l)e liable to a demand for a less quantit}' than sixty ounces at one time. 3. Between Oct. 1. 1820, and May 1. 1821, the bank were required to pay their notes in gold bullion upon llie same plan, at the rate of 3/. l<)s. 6c/. per ounce. 4. Between May 1. 1821, and May 1. 1823, the bank were to pay in gold bullion upon the same plan, OF BANKING. 5J. at the rate of 3/. 17*'. lO^d. per ounce, which was the mint price of gold. 5. From May 1. 1823, the bank were to pay their notes in the gold coin of the realm. 6. But between Feb. 1. and Oct. 1. 1820, the bank might make payments at a less rate than 4/. l.y., and not less than Si. 19-v. Qd, per ounce ; and between Oct. 1. 1820, and May 1. 1821, the bank might pay at any rate less than Si. VJs. 6d., and not less than Si. IJs. lOid., on giving three days' notice in the Gazette. Such payments to be made in ingots or bars of gold, of the weight of sixty ounces. The bank were also permitted to pay in gold coin on or after May 1. 1822. 7. All the laws which restrained the exportation of gold and silver cohi were repealed, and the coin was allowed to be exported or melted witlioiit incurring any penalty. The bill did not give satisfaction to the bank di- rectors. They wished to be allowed to pay their notes in gold bullion at the market price of the day. The 59 Geo. III. c. 7G. was passed to prohibit the bank making advances to government without the au- thority of parliament. But the bank were allowed to purchase exchequer bills, or to advance money on them ; but the amount of such bills must be laid an- nually before parliament. 1820. An Act passed for the further prevention of forging and counterfeiting of bank notes (1 Geo. IV. c. 92.) It also enacted, that the names of per- sons authorised by the bank directors to sign the notes might be impressed by machine instead of being subscribed in the hand- writing of such persons. 1821. The bank commenced paying off their notes under 51. in gold. The directors had procured an act of parliament, 1 & 2 Geo. IV. c. 26., permitting them to do so from the first day of May, 1821. The gold coins issued by the bank were not guineas, but 5S THE HISTORY AND PRINCIPLES sovereigns, of the value of" twenty shillings, which were now first coined. The gold coined at the mint this year amounted to 9,<5!20,7«58/., and the silver to r — 4^3,686/. \ 1822. In this year an Act was passed, permitting the country bankers to continue the issuing of notes mider 5l. until the expiration of the bank charter in \l833. As the law previously stood, these notes were prohibited on the resumption of cash payments by the bank. The directors made the following reference to ■"this subject, in a memorandum they delivered to the parliamentary committee of 1832: — " By the resolution of the House of Commons of 1819, the bank w^ere required, within four years, to pay off in gold the amount of their one-pound notes then in circulation (about 7>500,000/.) ; further, to provide the coin for paying off the country small notes in 1825 (about seven or eight millions more), in ad- dition to which the necessity was imposed of })roviding the requisite surplus bullion for insuring the conver- tibility of all their liabilities, whicli addition of bullion to their then stock could not be estimated at less than 5,000,000/. ; making in the aggregate 20,000,000/. of gold as necessary to be provided from foreign countries within the space of four years from 1S19. " That supi)Iy of gold could only be ])urchased by reduced prices of connnoditics ; tlie bank withdraw- ing a given amount of securities, in tlic first instance, the notes for which might be re-issued in payment of the gold as imported. The low prices and general state" of trade from 1S19 to 1821, and the withdrawal of the bank's securities, enabled the bank to cancel their small notes in the latter year ; and in the follow- ing (1822), three years prior to the time fixed by ])arliament, they were in a situation to furnish the gold for ])aying off the country small notes, when, without any communication with the bank, the go- vernment thought proper to authorise a continuance OF BANKING. 59 of the circulation of the country small notes until 1833. The consequence of that measure was to leave in the possession of the bank an inordinate quantity of bullion (14,200,000/. in January, 1824) ; and further, to afford the power of extension to the country bankers' issues, which it is believed were greatly extended from 1823 to 1825." By a retiu'n from the stamp office, it appears that the number of country banks this year was fiv^e hun- dred and fifty-two, and the number of persons in those firms was one thousand six hundred and seventy-three. 1822, June 22. The bank reduced the rate of interest upon bills of exchange from five to four per cent., and extended the time of such bills from sixty- one to ninety-five days. In this year the government reduced the interest of the navy five per cents, to foiu* per cent. Each holder of 100/. stock received 105/. new stock bearing four per cent., with a guarantee that the interest should not be farther reduced until the year 1829. This new stock was distinguished by the name of " new fours." The bank agreed to advance the money to pay off the dissentients. In consequence of the abolition of the notes un- der 51. the bank found they had many more clerks than were necessary. A good number were therefore discontinued ; the bank giving them either a pension, or the value of a pension in ready money, at the option of the clerks. The conduct of the bank on this occasion was highly liberal, and met with universal approbation. 1823, Lady-day. The dividend on back stock was reduced from ten to eight per cent. The bank engaged to advance to government, be- tween April, 1823, and April, 1828, the sum of 13,089,419/-, for the purpose of defraying the charge of military and naval pensions, and to receive in lieu of this sum 585,740/. per annum ; to commence from the 5th of April, 1823, and to continue for a term of 60 THE HISTORY AND PRINCIPLES fotty-four years, and then to cease. This cliarge is commonly called " the dead weight." In the latter end of this year, the bank commenced advancing money upon tlie security of go\ ernment stock. They also lent 1,500,000/. to the East India Company. 18'24. The bank extended their advances upon stock, and commenced lending money on mortgage. The old four per cents, were reduced to three and a half per cent. The new stock is called " three and a half per cent, reduced." This and the subsequent year were remarkable for the commencement of a great' number of joint-stock companies. The total number of projects were six hundred and twenty-six, and to carry them all into effect would have required a capital of 372,173,100/. They have been thus classified * : — 74- Mining companies .^^'S 8,^570,000 29 Gas diUo 12,077,000 20 Insurance ditto 35,820,000 29 Investments ditto 52.600,000 54 Canal Rail-road ditto 4k051,000 67 Steam ditto 8,555,500 11 Trading ditto 10,450,000 26 Building ditto 13,781,000 24 Provision ditto 8,360,000 292 Miscellaneous ditto 148,108,600 626 ^'372,173,100 The above companies are divided by Mr. English into four classes. First, companies which continued to exist hi the year 1827 ; secondly, conqjanies whose shares had been sold in the market, but were after- wards abandoned ; thirdly, com])anies which ])ublished prospectuses, or which were announced in the papers, but which are not known to have issued shares ; fourthly, companies, the formation of which was no- * See " A complete View of the Joint-Stock Companies," formed during the years 1824 and 1825, by Henry English. or BANKING. 61 ticed ill the public papers, but the particulars not spe- cified. The following is the general summary : — Companies. Capital required. Amount actually advanced. 127 Companies existing in 1827* 118 Ditto abandoned a^n 02,781,600 .^'15,185,950 56,606,500 2,419,675 143,610,000 69,175,0001 236 Ditto projected 143 Ditto ditto not particularized 624 5^372,173,100^^7,605,625 Besides the capital required for the above com- panies, large sums of money were granted as loans to foreign powers, as appears from the following table : — A list of the foreign loans contracted in England, with the amounts of the same ; the names of the contractors, the years in which the contracts were made, and the prices at which they were issued. Austrian* Belgian* Brazilian* Ditto* 2,500,000 per ct. n N.M.Rothschild 1823 1832 185i4 1825 182^. 1824 1822 1822 1824 1825 1824 1825 1825 1825 1824 1825 1824 1818 1822 1823 1822 1824 1825 1822 1821 1823 per ct.i 82 75 75 85 85 70 84 881 75 59 56i 73 60 58 89| 92i 72 84 87 88 82 78 82 56 3Ji 2,000,000 — 3,200,000 — 2,000,000^ — 800,000, — 1,000,000^ 6 1,000,000 — 2,000,000 — 4,750,000 — 5,500,000 3 800,000 5 1,000,000 — 1,428,571' 6 600,000 5 3,200,000 — 3,200,000 6 2,500,000 5 5,000,000 — Ditto T. Wilson & Co N.M.Rothschild Ditto* Rothschild & Wilson Baring & Brothers Buenos Ayres Chili Hullett, Brothers Columbian Ditto Herring, Graham, & So. B. A. Goldschmidt & Co. T.Wilson & Co Danish* Greek Loughnan & Co Ditto Ricardos Guatemala ... Guadaljava ... Mexican Ditto I. & A. Powles W. EUvvard, jun B. A. Goldschmidt & Co. Barclay, Herring, & Co... N. M. "Rothschild Neapolitan* ... Prussian* Ditto* Ditto 3,500,000 1,500,000 450,000 750,000 616,000 3,500,000 1,500,000 6 5 Ditto Portuguese ... Peruvian Ditto B. A. Goldschmidt & Co. Frys & Chapman Ditto Ditto Ditto Russian* Spanish Ditto N.M.Rothschild A. F. Haldimand 1,500,000 — J. Campbell & Co Those I narked thus * continue to pay the divide) ids. * Many of these have since been discontinued. 62 TUr IIlSiT<">UY ASD PRINCIPLES 1821-. In this year ]Mr. Fauiitleroy, the acting- partner in tlie banking-liouse of Messrs. Marsh, Sibbakl, and Co., of Berners Street, Oxford Street, was executed for forging powers of attorney for the sale of government stock. The following statement was made at the trial : — " The Attorney-General, in his address to the jury, described the prisoner as the acting partner in the house of Marsh and Co. in Berners Street. Mr. Fauntleroy, the father of the prisoner, became a partner at its establishment, and continued such till his death, in 1807. At that period the prisoner was admitted into the concern, and became the most active member of it. In 1815, Frances Young, of Chichester, a customer of the house, lodged in their hands a power of attorney to receive the dividends on 5,4^501. 3 per cent, consols. The dividends were regularly received ; but soon after- wards another power of attorney, authorising the prisoner to sell that stock, was presented to the bank, and the sale was effected by him ; to this power the prisoner had forged the names of Frances Young, and of two witnesses to it. But the most extraordinary part of the case was, that among the prisoner's private papers, contained in a tin box, there had been found one in which he acknowledged his guilt, and adduced a reason for his conduct. " The Attorney-General then read the paper, which presented the following items, Sec. : — De la Place, 1 1,1.50/. '^ per cent, consols; E. W. Young, 5,000/. consols ; General Young, 6,000/. consols ; Frances Young, 5,000/. consols ; H. Kelly, 6,000/. consols ; Lady Nelson, 11,995/. consols; Earl of Ossory, 7,000/. 4 per cents.; W. Bowen, 9,4-00/. 4 per cents. ; Parkins, 4,000/. consols. " Sums were also placed to the names of Mrs. Pelham, Lady Aboyne, W. R. and H. Fauntleroy, and Elizabeth Fauntleroy ; and the learned gentleman observed that all the sums were added toge- ther, and the sum total, 120,000/., ajjpeared at the foot of this list in the prisoner's handwriting. The statement was followed by this declaration : — " ' In order to keep up the credit of our house, I have forged powers of attorney for the above sums and parties, and sold out to the amount here stated, and witiiout the knowledge of my partners. I kept up the payment of the dividends, but made no entries of such payments in our books. " ' Signed, " ' Henry Fauntleroy. "'Berners Street, May 7. 1816. «' ' P. S. The Bank began first to refuse to discount our accept- ances, and to destroy the credit of our liouse ; the Bank shall smart for it.' " OF BANKING. 63 ''J'he total loss sustained by the Bank of England by all the forgeries committed by Mr. Fauntleroy up to the time of his apprehension, amounted to 360,000/. The banking-house of Marsh, Sibbald, and Co. imme- diately became bankrupts. 1825. At the commencement of this year there was every appearance of general prosperity, but in Decem- ber occurred " the panic." The course of exchange, being unfavourable, had oc- casioned a demand for gold for exportation. The bank became under the necessity of restraining its issues. The house of Sir Peter Pole and Co., who were agents to several country banks, stopped payment. This occasioned a general alarm, and the notes of private bankers became discredited throughout the country. As the Bank of England had ceased to issue notes under 51., they were obliged to find gold to the country bankers to pay off their notes ; but their gold failing, they re-issued their 1/. notes, some of which, happily, had not been destroyed. Notwithstanding the great liberality of the bank, several London bank- ers, and a much greater number of country bankers, were obliged to suspend their payments. Most of the joint-stock companies that had been formed in the season of speculation fell to the ground. The following is the opinion of J. H. Palmer, Esq., the governor of the bank, as to the causes of the wild spirit of speculation which had preceded the panic : — " Will you state to the committee what, in your opinion^ was the nature and the march of the crisis in 1825? — I have always con- sidered that the first step towards the excitement was the reduction of the interest upon the government securities; the first movement in that respect was, I think, upon 135,000,000/. of five per cents., which took place in 1823. In the subsequent year, ISSi, followed the reduction of 80,000,000/. of four per cents. I have always con- sidered that reduction of interests, one fifth in one case, and one- eighth in the other, to have created the feverish feeling in the minds of the public at large ; which prompted almost every body to entertain any proposition for investment, however absurd, which was tendered. The excitement of that period was further pro- 64 Tin: HISTORY and principles moted by the ackiiowledgnuMit of South American republics by this country, and tlic inducements held out for engaging in mining operations, and loans to those governments, in which all classes of the conmiuuity in England seem to have partaken, almost simulta- neously. With those speculations arose general speculation in commercial produce, which had an effect of disturbing the relative values betWL';,'n this and other countries, and creating an unfavour- able foreign exchange, which continued from October, 1824-, to November, 1825, causing a very considerable export of bullion from the bank ; about seven millions and a half. Commercial specula- tions had induced some bankers, one particularly, to invest money in securities not strictly convertible, to a larger extent than was prudent ; they were also largely connected with country bankers. I allude to the house of Messrs. Pole and Co. : a house originally possessed of very great property, in the persons of the partners, but which fell with the circumstances of the times. The failure of that banking-house was the first decisive check to commercial and banking credit, and brought at once a vast number of country bank- ers, which were in correspondence with it, into difficulties. That discredit was followed by a general discredit throughout London and the interior. " (p. 47 j. Some of the other witnesses considered the panic to have arisen from an over-issue of notes on the part of tlie Bank of England and the country bankers. But whatever may have been the cause, the bank certainly acted with great liberality at the period of the alarm, even at tlie risk of its own stoppage of payment. "Will you describe the manner in which the bank lent its assistance at that time ? — We lent it by every possible means, and in modes that we never had adopted before. We took in stock as security; we purchased exchequer bills; we made advances on ex- chequer bills; AV^e not only discounted outright, but we made ad- vances on de[)0s.it of bills of exchange to an immense amount ; in short, by every possible means consistent with the safety of the bank; and we were not upon some occasions over nice: seeing the dreadful state in which th.e public were, we rendered every assist- ance in our pow er. " Did any communication take place between the bank and the government respecting an order in council to restrain payments in gold at that period? — Yes, it was suggested by the bank. " What answer did his majesty's government give to that ? — They resisted it from first to last. " The Bank of England issued one-pound notes at that period. Was that done to protect its remaining treasure? — Decidedly; and it worked wonders, and it was by great good luck that we had OF BANKING. 05 the means of doing it : because one box containing a quantity of one pound notes had been overlooked, and they were forthcoming at the lucky moment. " Had there been no foresight in the preparation of these one pound notes ? — None whatever, I solemnly declare. " Do you think that issuing of the one pound notes did avert a complete drain ? — As far as my judgment goes, it saved the credit of the country." (Evidence of Jeremiah Harman, Esq., page 154.) On the last day of December, 1825, the coin and biilhon in the bank amounted to only 1,260,890/. Dec. 13. The bank raised the rate of discount from four to five per cent, upon bills not having more than ninety-five days to run. This rate continued until July, 1827. 1826, Jan. 13. The government made a communi- cation to the bank directors, stating their intention, in order to prevent a recurrence of panic, to propose to parliament the gradual abolition of country bank notes under 5l. : and also proposing to the bank, " First, That the Bank of England should establish branches of its own body in different parts of the country. " Secondly, That the Bank of England should give up its exclusive privilege as to the number of partners engaged in banking, except within a certain distance from the metropolis." The directors were at first unwilling to establish branches, but ultimately they acceded to both the above propositions. The government also induced the bank to make advances upon the security of goods, and accordingly the bank established boards for this purpose at the following places, and advanced to the undermentioned amounts : — Manchester ^115,490 Glasgow 81,700 Sheffield 59,500 Liverpool 41,450 Huddersfield ^30,300 Birmingham 19,600 Dundee 16,500 Norwich 2,400 To carry these measures into effect several Acts of Parliament were passed, viz. F 66 THE HISTORY AND PRINCIPLES *' An Act to facilitate the advancing of money by the governors and company of the Bank of England, upon deposits and pledges." (7 Geo. IV. c. 70 It was enacted that })ersons in possession of bills of lading, warrants, &c. should be deemed owners of the goods therein mentioned, so far as to make valid any contracts for the advance of money thereupon by the Bank of England. *' An Act to limit, and after a certain period to prohibit the issuing of promissory notes, under a limited sum, in England." (7 Geo. IV. c. 6.) By this Act no further notes under 5l. were allowed to be stamped, and those already stamped could not be issued or re-issued after the 5th of April, 1829, under a penalty of 20/. The Bank of England were required to make monthly returns to the treasury, of the weekly amounts of their notes in circulation under 51. to be published in the Gazette, and laid before parliament. And after the 5th of April, 1829, all bankers* notes under 20/. were to be made payable at the place of issue, though they might also be made payable at other places. " An Act for the better regulating copartnerships of certain bankers in England, &c." (7 Geo. IV. re^6.) According to this Act — 1. Banks having more than six partners might carry on business in England at a greater distance than sixty-five miles from London, provided they have \ no establishment as bankers in London, and that all the partners are liable for the whole debts of the bank, 2. The banks shall not issue tlieir notes at a place within sixty-five miles from London, nor draw any bills on London for a less amount than 50/. 3. The banks may sue, and be sued in the name of their public officers ; and when judgment is obtained V_against such public officers, execution may be issued against any member of the copartnership. 4. Previous to issuing notes, tlie bank shall deliver to the stamp office, schedules containing the name or OF BANKING. 6? title of the bank — the names and places of abode of all the partners — the names of the places where the banks are established — and the names and descrip- tions of the public officers in whose names the bank wishes to sue and be sued. 5. These banks are allowed to compound for the stamp duties on their notes, at the rate of seven shil- lings per cent, per annum for every 100/. in circulation. By the fifteenth clause of this Act, the Bank of England were expressly authorised to establish branches. This was enacted to " prevent any doubts that might arise " upon the subject. The bank ac- cordingly opened branches this year at Gloucester, Manchester, and Swansea. 1827, July 5. The bank reduced the rate of dis- count from five to four per cent. The extension of the branches of the Bank of Eng- land this year occasioned great dissatisfaction among the country bankers. The establishment of rival banks in their own neighbourhood, was a circum- stance that the country bankers could not view with indifference. They declared that the Bank of England, and not themselves, had been the cause of the previous spirit of speculation ; that the Bank of England, by their advances to government and loans on mortgage, had made excessive issues, and that now to extend their influence, at the expense of the country bankers, was to reward the guilty, and to punish the innocent. The country bankers had been accustomed to charge five per cent, on the bills they discounted, and at some places five or six shillings commission besides the discount, but the branches of the Bank of England charged only four per cent, without any commission. The country bankers were of course compelled to do business on the same terms, or to permit their -.cus- tomers to go to the branch. The chief advantage the country bankers possessed over the branch banks was, that they continued to allow interest on deposits, which the branch banks did not. But the additional F 2 68 THE HISTORY AND PRINCIPLES confidence which was then possessed by tlie branch banks may, notwithstanding, h ave induced some dc' positors to give them a preference to the coimtry bankers. On December 7'> the country bankers held a meeting at the London Tavern, Bishopsgate Street, where they passed several resolutions, and appointed a deputation to wait upon Lord Goderich, the First Lord of the Treasury, and Mr. Herries, the Chancellor of the Exchequer. Among other resolutions, are the following : — " That the late measures of the Bank of England in the establish- ment of branch banks have the evident tendency to subvert the general banking system that has long existed throughout the country, and which has grown up with, and been adopted to the wants and conveniences of the public. " That it can be distinctly proved that the prosperity of trade, the support of agriculture, the increase of general improvement, and the productiveness of the national revenue, are intimately con- nected with the existing system of banking. " That the country bankers would not complain of rival esta- blishments, founded upon equal terms ; but they do complain of being required to compete with a great company, possessing a mo- nopoly and exclusive privileges. " That should this great corporation, conducted by directors, who are not personally responsible, succeed by means of these ex- clusive advantages, in their apparent object of supplanting the ex- isting banking establishments, they will thereby be rendered masters of the circulation of the country, which they will be enabled to contract or expand according to their own Hill, and thus be armed with a tremendous power and influence, dangerous to the stability of property and the independence of the country." At a meeting lield at tlie same place, on the l6th of December, Sir John Wrottesley, Bart., M.P., the chairman, reported to the meeting the result of the interview of the deputation with Lord Cxoderich and tlie cliancellor of tlie exclicquer on that day, and read their answer as follows : — " Lord Goderich and the chancellor of the exchequer state to the deputation, tliat they were fully sensible of the great importance of the subjects wliich were brought before them by the deputation ; and that, ahhough it w^as obviously impossible that they could undertake, on the part of OF BANKING. 69 tlie government, to express upon tliat occasion any o])inion upon the matters under consideration, they could assure the deputation that all that had been communicated should receive the most deliberate and serious attention." The country bankers complained, too, that the branch banks, instead of meeting them on the footing of equality, had refused to take their notes, unless the bankers had previously opened accounts with the branch banks, and provided funds for the purpose. 1828. Another subject of complaint on the part of the country bankers. — The Bank of England had always issued their notes and post bills unstamped, in consideration of paying, as a composition for the stamp duties, 3500/. per annum on every 1,000,000/. in circulation. When the branches were established they issued bills, drawn upon the parent establishment in London at twenty-one days after date, without being stamped, alleging that these were included in their composition. At the same time the country bankers could not draw bills upon London without paying the stamp duty. In a memorial, presented to the government by the bankers in the town and neighboiu'hood of Birmingham, it was shown that the stamp duty on a bill, drawn at twenty-one days on London, is three shillings and sixpence, while under the composition the Bank of England would pay but five-pence ; and that a circulation throughout the year of 10,000/., in bills of exchange of 20/. each, would subject the Bank of England to a payment, in lieu of stamp duty, of only 35 1. , while other banks would have to pay 6501. An Act of parliament (9 Geo. IV. c. 23.) was accordingly passed, to enable country bankers to compound for their stamp duties on the same terms as the Bank of England, and to include bills drawn upon London at twenty-one days' date in the composition. By this law the country bankers have the advantage of paying duty only on the amount of notes in circulation. 70 THE HISTORY AND PRINCIPLES May 9. '' The humble memorial of the country bankers in England and Wales'* was presented to " the lords commissioners of his Majesty's treasury" against the branch banks. It concludes thus : — " Your memorialists therefore deeply regret that your lordships do not feel justified in adopting measures for the withdrawal of the branch banks, and they hope that your lordships will be pleased, as far as lies in your lordships' power, to prevent any interference with the business of your memorialists ; and that your lordships will be pleased to institute an inquiry into the system of country banking, and take into your lordships' consideration the claims of the country tankers to be regarded as parties in the intended application for the renewal of the bank charter, and that no special privilege or mono- poly be granted or continued to the governor and company of the Bank of England ; but that they may be placed on a perfect equality with country bankers in the competition, which, by means of their branches, they are now carrying on with your memorialists." The government replied, *' that the interests of the country bankers should not be neglected in any nego- tiation between the government and the Bank of England for the renewal of the bank charter." In order to relieve the money market from the pressure which was always felt during the seasons that the funds were closed previous to the payment of the dividends, the bank commenced the practice of advancing loans during those periods upon the lodgment of securities. The following notices were accordingly issued : — *' Bank of England, December 3. 1829. " The governor and company of the Bank of England do hereby give notice, that from and after the 5th instant, they will be ready to receive applications for loans, at an interest of 3/. per cent, per annum upon the deposits of bills of exchange, exchequer bills, and East India bonds ; such loans to be repaid with interest on or before the 15th January next, and to be for sums of not less than 2000/., and for a period of not less than ten days." '' December % 1829. " The governor and company of the Bank of England do hereby give notice, that from and after this day they will be ready to receive applications for loans upon the deposit of gold bullion, valued at 77*. 9rf. per ounce, at 11. per cent, per annum interest." 1830. The government reduced the interest on the new four per cent, stock to three and a half per cent. OF BANKING. 71 This stock was formed in the year 1822, by the reduction of the navy five per cents, to four per cent. The holders had the option of receiving for every 100/. new four per cents. ; either 100/. stock at three and a half per cent., not redeemable until the year 1840, or 70/. at five per cent., not redeemable until the year 1873. Most of the holders chose the former. This stock is called " 7iew three and a half per cent.," and amounts to above 139,000,000/. The other stock, formed by those who chose the 70^' » is called the new five per cents., and amounts to little more than 46(3,000/. 1831. '* An account of the amount of silver coin melted ; also the loss sustained by the Bank of England thereby, in 1831.'* Amount of silver coin melted in bars ^565,000 Ditto, melted and re-coined 35,000 a£600,000 Loss on sixpenny pieces ..^ijeoi 1 3 Loss on other denominations 62,982 19 2 ^67,584 5 1832. May 22. A committee of secrecy was ap- pointed by the House of Commons, to inquire into the expediency of renewing the charter of the Bank of England, and into the system on which banks of issue in England and Wales are conducted. The committee w^as composed of tlie following members : — Lord Vise. Althorp. Sir R. Peel, Bart. Lord John Russell. Mr. GOULBURN. Sir J. Graham, Bart. Mr. Herries. Mr. P. Thomson. Mr. COURTENAY. Colonel Maberly. Sir H.Parnell, Bart. Mr. Vernon Smith. Mr. J. Smith. Mr. ROBARTS. Sir M. Ridley, Bart, Mr. Attwood. Sir J. Newport, Bart. Mr. Baring. Mr. Irving. Mr. Warburton. Mr. G. Phillips. Mr. J. Morrison. Lord Vise. Morpeth, F 4 Mr. Heywood. Ld. Vis. Ebrington. Mr. Lawley. Sir J. Wrottesley, Bart. Lord Cavendish. Mr. Alderman Wood. Mr. Strutt. Mr. BoNHAM Carter, Mr. E. J. Stanley. Mr. Aid. Thompson. 72 THE HISTORY AND PRINCIPLES On the 11th day of August tlie committee delivered the following report : — " The secret committee, appointed to inquire into the expediency of renewing the charter of the Bank of England, and into the system on which banks of issue in England and Wales are conducted, and to whom the petition of certain directors of joint-stock banking companies in England was referred, and who were empowered to report the minutes of evidence taken before them, have agreed upon the following report : — " Your committee have applied themselves to the inquiry which the House has committed to them, by calling for all the accounts which appeared to them necessary for the purpose of elucidating the affairs of the Bank of England, and have examined evidence for the purpose of ascertaining the principles on which it regulates the issues of its notes, and conducts its general transactions. They feel bound to state that the directors of the Bank of England have afforded to them every facility in their power, and have most readily and candidly answered every question which has been put to them, and produced every account which has been called for. The committee have also examined such witnesses as appeared to them, from their practical knowledge and experience, most likely to afford information on the important subjects under their con- sideration, who have all been ready to give the committee the most ample information. " The principal points to which they have directed their atten- tion are — " First. — Whether the paper circulation of the metropolis should be confined, as at present, to the issues of one bank, and that a commercial company ; or whether a competition of different banks of issue, each consisting of an unlimited number of partners, should be permitted. " Secondly. — If it should be deemed expedient that the paper circulation of the metropolis should be confined, as at present, to the issues of one bank, how far the whole of the exclusive privi- leges possessed by the Bank of England are necessary to effect this object. " Thirdly. — What checks can be provided to secure for the public a proper management of banks of issue, and especially whether it would be expedient and safe to compel them periodically to publish their accounts. " With respect to the circulation of paper in this country, the committee have examined, — First, into the effect produced by the establishment of tiie branch banks of the Bank of England ; and secondly, into the expediency of encouraging the establishment of joint-stock banks of issue in the country. " On all these, and on some collateral points, more or less in- formation will be found in the minutes of evidence ; but on no one of them is it so complete as to justify the committee in giving a decided opinion. OF BANKING. /" '* The period of the session at which the committee commenced their hxbours, the importance and extent of the subjects, and the approaching close of the session, will sufficiently account to the House for the limited progress of the inquiry, and for the incom- pleteness of the materials which have been collected for the pur- pose of forming an opinion ; — they have thought it better, therefore, to submit the whole of the evidence which they have taken, with a very few exceptions, to the consideration of the House. " In their opinion, no public inconvenience will arise from this publication. The only parts of the evidence which they have thought it necessary to suppress, are those which relate merely to the pri- vate interests of individuals. " The House will perceive that the committee have presented, as part of the evidence which they have taken, the actual amount of bullion at different times in the hands of the Bank of England. This information has never before been given to the public ; it is, however, very essential to a complete knowledge of the subject ; and if it had been suppressed by the committee, many parts of the evidence would have been unintelligible, and a false impression would have been produced in the minds of the public, that the bank were not so well provided with bullion as is desirable, which might have a very injurious effect. The House will, however, observe that the bank is amply provided with bullion at the present time ; and it does not, therefore, appear to the committee that this inform- ation being now given to the public, can be productive of any in- jurious consequences. " The committee, however, by no means wish it to be understood, from their having felt themselves called upon to include this evi- dence in their report, that they have formed any opinion as to the propriety of periodically publishing the affairs of this or of any other bank of issue. There appears to be a difference between a publication of the affairs of the bank when an inquiry is instituted for the purpose of deciding whether the bank charter shall be re- newed or not, and a periodical publication during the course of its ordinary transactions. " Of the ample means of the Bank of England to meet all its en- gagements, and of the high credit which it has always possessed, and which it continues to deserve, no man who reads the evidence taken before this committee can for a moment doubt ; for it ap- pears that, in addition to the surplus rest in the hands of the bank itself, amounting to 2^880,000/. the capital, on which interest is paid to the proprietors, and for which the State is debtor to the bank, amounts to 14',553,000/., making no less a sum than 17,433,000/. over and above all its liabilities." From the information laid before the committee, I have selected or constructed the following tables : — 74 THE HISTORY AND PRINCIPLES TABLE I. An account of tlie average amounts of gold and silver bullion held by the baiik in tJie followhig years, end- ing Feb. ^8. ; — distinguishing gold from silver. Years, Gold. Silver. Total. 1815 1,938,265 £ 240,882 2,179,147 1816 2,828,707 570,-^07 3,399,114 1817 6,64-3,100 861,184 7,504,284 1818 10,147,115 962,266 11,109,381 1819 6,066,603 655,044 6,721,647 1820 3,663,561 305,967 3,969,528 1821 6,291,44-6 1,882,973 8,174,419 1822 9,162,298 2,468,792 11,631,090 1823 8,135,629 2,119,069 10,254,698 1824 10,805,780 1,801,183 12,606,963 1825 10,213,247 1,645,348 11,858,595 1826 3,719,824 601,878 4,321,702 1827 5,880,811 727,165 6,607,976 1828 9,505,630 695,623 10,201,253 1829 8,749,920 1,013,210 9,763,130 1830 5,736,186 1,519,586 7,255,772 1831 8,235,162 2,095,199 10,330,361 1832 5,853,334 551,924 6,405,258 TABLE II. An account of the amount of the notes of the Bank of England in circulation — the amount of all deposits — the amount of the surplus capital — the amount of all securities held by the bank, and the amount of bullion in the bank on the last day of February in each of the following years. CAPITAL RAISED, Year. Circulation. 1778 1779 178o! 1781 1782 1783 1784 1785 1786 1787 1788 1789 1790 1791 1792 7,440,330 9,012,610 8,410,790 7,092,450 8,028,880 7,675,090 6,202,760 5,92,3,090 7,581,960 8,329,840'| 9,561,120| 9,807,210 10,040,540 11,439,200 11,307,380 Deposits. Rest, or Sur- plus Capital 4,662,1.50 4,358,160 4,723,890 5,796,830 6,1.30,300 4,465,000 3,903,920 6,669,160 6,151,660! 5,902,080j 5,177,050 5,537,370] 6,223,2701 6,364,550, 5,523,370 1,128,730 1,276,290 1,347,410 1,576,800 1,792,750 1,976,880 2,168,380 2,321,060 2,598,710 2,753,820 2,869,780 2,844,840 2,701,31 2,668,300 2,705,870 CAPITAL INVESTED. Public Securities. 7,898,292 8,862,242 9,145,659 8,640,073 10,346,055 10,016,349 7,789,291 7,198,564 6,836,459 7,642,587 7,83;5,857 8,249,582 8,347,387 10,380,358 9,938,799 Private Securities. 3,322,228 2,073,668 1, 75.5,371 2,546,067 3,448,015 2,779,431 3,829,929 4,97.3,926 3,516,781 3,716,463 4,030,653 2,711,108 1,984,733 2,222,282 3,129,761 Dullion. 2,010,690 3,711,150 3,581,060 3,279,940 2,157,860 1,321,190 655,840 2,740,820 5,979,090 5,626,690 5,743,440 7,228,730 8,63.3,000 7,869,410 6,468,060 OF BANKING. 75 CAPITAL RAISED. CAPITAL INVESTED. Year. Circulation. Deposits. 1793 1794 1795 1796 1797 1798 1799 1800 1801 1802 180.S 1804 1805 1806 1807 1808 1809 1810 1811 1812 1813 1814 1815 1816 1817 1818 1819 1820 1821 1822 1823 1824 1825 1826 1827 1828 1829 1830 1831 1832 Kest, or bur- pliis Capital. 11,888,910 10,744,020 14,017,510 10,729,520 9,674,780 13,095,830 12,959,800 16,844,470 16,213,280 15,186,880 15,319,930 17,077,830 17,871,170 17,730,120 16,950,680 18,188,860 18,542,860 21,019,600 23,360,220 23,408,320 23,210,930 24,801,080 27,261,650 27,013,620 27,397,900 27,770,970 25,126,700 23,484,110 23,884,920 18,665,350 18,392,240 19,736,990 20,753,760 25,467,910 21,890,610 21,980,710 19,870,850 20,050,730 19,600,140 18,051,710 5,346,450 7,891,810 5,973,020 5,702,360 4,891,530 6,148,900 8,131,820 7,062,680 10,745,840 6,858,210 8,050,240 8,676,830 12,083,620 9,980,790 1 1,829,320 11,961,960 9,982,950 12,457,310 11,445,650 11,595,200 11,268,180 12,455,460 11,702,250 12,388,890 10,825,610 7,997,550 6,413,370 4,093,550 5,622,890 4,689,940 7,181,100 10,097,850 10,168,780 6,935,940 8,801,660 9,198,140 9,553,960 10,763,150 11,213,530 8,937,170 Public Securities. 2,780,570 2,875,830 2,948,530 3,247,590 3,357,610 3,383,710 3,511,310 3,661,150 4,105,730 4,067,680 4,321,480 4,616,450 4,590,400 4,867,350 4,771,300 5,088,730 5,081,090 5,403,080 5,667,420 6,005,960 6,336,340 6,937,800 7,631,510 8,639,680 5,736,090 5,192,270 4,099,550 3,520,880 3,158,360 3,674,940 3,130,620 2,847,220 2,807,890 2,974,240 2,996,280 2,749,710 2,794,960 2,561,510 2,612,360 2,637,760 Private Securities. 9,549,209 9,950,756 13,164,172 12,951,812 11,714,431 11,241,333 11,510,677 18,975,663 15,958,011 14,199,094 9,417,887 14,684,686 16,889,501 14,813,599 13,452,871 14,149,501 14,743,425 14,322,634 17,201,800 22,127,253 25,036,626 23,630,317 27,512,804 19,425,780 25,538,808 26,913,360 22,355,115 21,715,168 16,010,990 12,478,133 13,658,829 14,341,127 19,447,588 20,573,258 18,685,015 19,818,777 19,736,665 20,038,890 19,927,572 18,497,448 Bullion. 6,456,041 4,573,794 3,647,168 4,188,028 5,123,319 5,558,167 5,528,353 7,448,387 10,466,719 7,760,726 14,497,013 12,314,284 11,771,889 11,777,471 13,955,589 13,234,579 14,374,775 21,055,946 19,920,550 15,899,037 12,894,324 18,359,593 17,045,696 23,975,530 8,739,822 3,991,970 9,099,885 4,472,322 4,785,280 3,494,947 4,660,901 4,530,873 5,503,742j 12,345,322 4,844,515| 3,762,493 5,648,085' 4,165,500| 5,281,408 5,836,042 4,010,680 6,987,110 6,127,720 2,539,630 1,086,170 5,828,940 7,563,900 6,144,250 4,640,120 4,152,950 3,776,750 3,372,140 5,883,800 5,987,190 6,142,840 7,855,470 4,488,700 3,501,410 3,350,940 2,983,190 2,884,500 2,204,430 2,036,910 4,640,880 9,680,970 10,055,460 4,184,620 4,911,050 11,869,900 11,057,150 10,384,230 13,810,060 8,779,100 2,459,510 10,159,020 10,347,290 ; 6,835,020 9,171,000 8,217,050 5,293,150 It will be observed, that the first three columns of the above table, added together, are equal in amount to the last three. Thus the circulation, the deposits, and the rest, are equal to the public securities, the private securities, and the bullion. Take for example the year 1832 : — Circulation ... ^18,051,710 || Public securities ^18,497,448 Deposits 8,937,170 i Private ditto ... 5,836,042 Rest 2,637,760 Bullion 5,293,150 ^29,626,640 ^29,626,640 70 THE HISTORY AND PRINCIPLES Thus the total capital possessed by the bank, on the last day of February, 1832, was oc)/)QC),(HoL : of which 18,051,710/. was raised by the circulation of notes ; 8,937,170/. was raised by deposits ; and 2,637,760/. was real capital belonging to the bank, over and above its capital of 14,686,800/., which is lent to government at tliree per cent. This capital of 29,626,610/. was employed as denoted in the last three columns of the tiible : 18,497,448/. was invested in government securities ; 5,836,042/. in private se- curities ; and 5,293,150/. in gold and silver bullion, either coined or uncoined. It is seen by the third and fourth columns of this table, that the bank employ their trading capital in public and private securities. The public securities consist chiefly of government stock and exchequer bills ; the private securities are chiefly bills of ex- change. It has latterly been considered by the bank desirable that one third of their capital raised by notes and deposits should be invested in bvdlion, and the remaining two thirds in public and private securities. If, however, an amount of bills is presented for dis- count, which would exceed this proportion, the bank do not reject the bills, but they sell out the govern- ment securities. TABLE III. The following table exhibits the amount of notes under 5/. in circulation on the last day of February, from 1798 to 1832 inclusive. Year. Circulation. 1798 1799 1800 1801 1802 180.'3 1 8{)4- 1805 1806 1,44.8,2'20 1,465,650' 1,4-71,540 2,634,760 2,612,020 2,968,960 4,5.31,270 4,860,160 4,458,600 Year. Circulation. Year. 1807 4,109,890 1808 4,095,170 1809!4,.301,500 18105,860,420^ 1811,7,114,090 1812 7,457,030 1813 7,713,610 18148,34.'5,.540 1815 9,035,250 1816{9,001,400i 181718,1.36,270 1818,7,400,680, 1819 7,354,230 ,18206,689,130 ;i8216,437,.560l : 1822 1,374,850 182.3J 68 1, .TOO 1824 486,100, Year. Circulation. 1825 1826 1827 1828 1829 18.30 1831 1832 416,7.30 1,375,250 661,.390 416,260 356,8.30 320,490 306,870 299,100 OF BANKING. 77 TABLE IV. A Statement of the affairs of the bank, Feb. 29. 1832. THE BANK. Dr. To bank notes outstand- ' ing--. : To public deposits, viz. £18,051,710 :} 2,034,790 550,550 85,030 38,360 490,000 Drawing counts Balance of au dit roll J Life annuities "1 unpaid J Annuities for " terms of yrs unpaid Exchequer 1 bills depos^'-J" To private deposits, viz. Drawing accts. 5,683 Various other "1 debts ) ^** To the Bank of England \ for the capital J To balance of surplus favour of the Bank England >• 3, 1 98,730 J 3,870 "j 1,560 j ind\ 3. £4,134,940 5,738,430 14,553,000 2,637,760 Cr, By advances on government securities, viz. Exchequer bills on the grow- ing produce of the conso- lidated fund ill the quarter ending 5th April, 1832, 3,428,340' 5th July, ditto 697,000 Exch. bills on"l r loor r 7,600 supplies 1825 J Ditto for ~j £10,500,000 I 2,000 for 1825 J By the advances to the trustees appointed by the Act S Geo. IV. c.51. to wards the purchase of an ^ 10,897,880 annuity of £585,740 for 44 years from the 5th April, 1823 By other creditors, viz. 3- ' 1 ir- 1 2 ,700,000 Exchequer bills pur- chased "TLr:...] '«.«<« City bonds ... Bills and notes "| discounted. . J Loans 1 500,000 2,951,970 >■ 9,166,860 on mortgages London Dock \ company.... J Advances onT security of I various ar- | tides J By cash and bullion 5,293,150 By the permanent debt due "1 ^ 4 686,800 from government J 1,452,100 227,500 570,690 £44,179,630 £44,179,630 Rest, or surplus, brouj down.. . ink capi prietors. S'^U 2,637, down J Bank capital due to pro-T 14 cr 760 3,000 £17,190,760 Besides the rest, or surplus capital, the bank hold dead stock to a considerable extent, such as buildings, &c. 79 THE HISTORY AND riUNClPLES TABLE V. A statement of the receipts and expenses for the year encUng 29tli February, 1832. Dr. To annual expenses, forgeries, losses, and ]■ £428,674: sundry items , Stamp duty on circula- "1 tion J Dividend to proprietors. . . S.1 70,875 1,164,235 1,663,784 Rest 2,637,760 4,301,544 Rest, 29th Feb. 1832.... 2,637,760 Rest, 28th Feb. 1831.... 2,612,368 Increase... £^25,392 Cii. Profit and loss, rest £2,612,368 By interest on loans T and commercial bills J Government securities i held by the bank... J Interest of capital re- ") ceived from govern- l ment J Allowance received fori the management of J. the public debt. Profit on bullion, rent, and sundry items. fit, I 248,321 670,598 446,502 251,896 71,859 i?4,301,544 The receipts of the bank for this year are thus clas- sified : — Interest on commercial bills .£130,695 Interest on exchequer bills 204,109 Annuity for 45 years (tlie dead-weight account) 451,415 Interest on capital received from government 446,502 Allowance received for management of the public debt 251,896 Interest on loans on mortgages 60,684 Interest on stock in the public funds 15,075 Interest on private loans 56,941 Profit on bullion, commission, rent, receipts on dis-~j counted bills unpaid, management of the business I 71 oco of the banks of Ireland, of Scotland, and royal j ' bank of Scotland, and sundry items J £1,689,176 In the total amount of annual expenses are included the following items : — The expense for conducting the business of the funded "j y, debt j^Att.4,14J The expense attending the circulation of promissory! -tnc a I'rom Apri , 1823, to Uct. I . i , ^^^i ^nr-.i I i ^i- m^ ,„,',',.,'. < per cent, per annum on 11^642,400/. V- 1,047,816 1831, both inclusive I • ^^ I ' [^ IS 9 years J In June, 1816. Increase of capital at 25/. per cent, is 2,910,600 r cent. ~| creased I 1,891,890 UCt. 18Ut>, i)(. UlllO From April, 1807, to Oct. f ^"H'^'^^, 1822, both inclusive | f ,_ L IS 16 y( ., r^. f Dividend at the rate of 10/. per From Oct. 18 6, to Oct. I orMr.rT„-v/ • „„^ . , • , ■ -{ per annum on 2,910,600/. inc: 1822, both inclusive •. . • ^t (_ capital, is Gt; years 1 -1 ^cr,n . r* . f Dividcud at the rate ( UmtI, 1823, to Oct. I ,i,>irv^ ',',.,'. -{ per annum on 2,910,( , both inclusive I '^ •» i • r. ' J^ capital IS 9 years From April, 1823, to Oct. I ■^■'■"^■*" ' Xi'-wX ^/-v^/ • i i r.^^^^00 ,',',.,'. < per annum on 2,910,600/. increased >■ 2,095,632 Aggregate amount of the whole 17,318,070 Annual dividend payable on bank stock in 1797, on a capital^ of 11,642,400/. at tlie rate of 7 per cent, per annum J 8 1 4,968 Annual dividend payable since June, 1816, on a capital of 14,553,000/. to October, 1822, inclusive, at the rate of 10/. }■ 1,455,300 per cent per annum •1 dividend payal)]e from Ajjril, 182.3, to 31st March, I832,"j inclusive, on a capital of 14,553,000/. at the rate of I l,l64,i cent, per annum J On tlie 7th May, 1832, Lord Lyndhiirst's motion for tlie postponement of the consideration of Sche- dule A. in the Reform Bill was carried in the House of Lords ])y a majority of 151 to 116. — This led the ])iil)lic to sujipose that the whole bill would virtually i)e rejected, and in consequence of this apprehension a demand for gold in exchange for notes was made upon the Bank of England. 'I'he amount issued was about 1,5()0,()0()/. The largest sum paid in one day (May 1 1'th) was 807,000/. or BANKING. 85 1833. May 31. A meeting of the proprietors of bank stock was held at tlie Bank ot England, to receive a communication from the court of directors, of the result of the negotiation with his Majesty's government respecting the renewal of the bank charter. The following letter from Lord Althorp, the chancellor of the exchequer, was read by the se- cretary. " Downing Street, May 2, 1833. *' Gentlemen, " After duly considering the conversation I have had with you, the substance of which I have reported to my colleagues, his Majesty's government have directed me to make the following proposals to you for the purpose of renewing the bank charter. " 1. We propose to renew the charter for twenty-one years ; subject, however, to this condition : — that if at the end of ten years the then existing government should so think fit, they may give a twelvemonth's notice to the bank that the charter shall ex- pire at the end of eleven years. " 2. That no banking company consisting of more than six part- ners shall issue notes payable on demand within the metropolis, or within sixty-five miles from the metropolis. Banking companies, however, consisting of any number of partners established at a greater distance from the metropolis than sixty-five miles, shall have the right to draw bills on London without restriction as to their amounts, and to issue notes payable in London. " 3. Bank of England notes shall be a legal tender, except at the Bank of England, or at any of its branches. " 4. Bills not having more than three months to run before they become due, shall not be subject to the usury laws. " 5. An account, similar to that laid before the bank committee, of the amount of bullion, and securities in the hands of the bank, and of the amount of notes in circulation, and of the deposits in the hands of the bank, shall be transmitted, as a confidential paper, weekly to the chancellor of the exchequer : these accounts shall be consolidated at the end of each quarter, and the average state of the bank accounts for the preceding quarter published quarterly in the Gazette. " A bill will be also introduced into parliament, with the view of regulating country banks. The provisions of this measure will be such as to hold out an inducement to the establishment of joint- stock banks who will not issue their own notes. " His Majesty's government desire me to call your attention to the advantages which these different propositions are likely to con- fer upon the bank. Their tendency must be to extend the cir- culation of its notes, and by relieving bills at short dates from the G 3 86 THE HISTORY AND PRINCIPLES usury lau's to Tacilitate its operations. While, on the other ha«id, the only relaxation in its exclusive privileges as they at present exist, v/hicli is required — is the permission given to joint-stock banks, established at a greater distance than sixty-five miles from the metropolis, to draw bills and to issue notes payable in London. His Majesty's government, therefore, think that they have a right to expect some considerable pecuniary advantages from the bank in the management of the government business. They consequently propose that government should repay to the bank twenty-five per cent, of the debts of li, 500,000/. now due, and that the bank should deduct from the payments made to them from the govern- ment for the transaction of the government business the annual sum of 120,000/. "I hope that this proposal will be satisflictory to the bank direc- tors, and that by making this arrangement an end may be speedily j)ut to the suspense now existing. " I have the honour to be, " Gentlemen, " Your most obedient humble Servant, " Althorp. " To the Governor and Deputy- 1 Governor of the Bank of England." J After some discussion, the further consideration of this letter was adjourned to a future meeting. In the same evening Lord Althorp brought forward the subject in the House of Commons. Besides the measures that were connected with the Bank of England, he announced the measures for regulating country banks. These were — 1. That government should have the power of granting charters to joint-stock banks issuing notes beyond sixty-five miles from London, and to joint- stock banks within the sixty-five miles, provided they issued only the notes of the Bank of England. 2. That the joint-stock banks which issued notes should be required to ])ay up one half of their capital, and all the shareholders be answerable individually to the full extent of their property. 3. That the joint-stock banks which did not issue their own notes should be required to pay up only one fourth of their capital, and the shareholders be responsible only to tlie amounts of their shares. 4. That the government when granting the charter OF BANKING. 87 should have the power to decide whether the amount of capital subscribed was a sufficient amount for the place in which the bank w^as situated. 5. That each private bank should be required to send a statement of its accounts to the government in London, as a strictly confidential paper, which was not to be published in a separate form, but the accounts being added together, the total result should be given to the public periodically. 6. That to enable the government to know the total amounts of notes in circulation, each private bank, as well as each joint-stock bank, should be compelled to compound for the stamp duties. The Bank of England proprietors agreed, at a subsequent meeting, to the measures which had a reference to them. But the country bankers ex- pressed great dissatisfaction ; and on the 12th of June, they presented a memorial to Earl Grey, the first lord of the treasury, and to Lord Althorp, the chancellor of the exchequer, upon the subject. In consequence of the opposition of the country bankers, Lord Althorp postponed his measures for the regulation of the private and joint-stock banks, and carried forward his plan for the renewal of the charter of the Bank of England. The following bill was ultimately passed into a law : An Act for giving to the corporation of the governor and company of the Bank of England certain privileges, for a limited period, under certain con- ditions, Aug. 29. 1833. " Whereas an Act was passed in the S9th and 40tli years of the reign of his Majesty King George III., intituled an Act for esta- blishing an agreement with the governor and company of the Bank of England, for advancing the sum of 3,000,000^. towards the supply for the service of the year 1800: and whereas it was by the said recited Act declared and enacted, that the said governor and com- pany should be and continue a corporation, with such powers, au- thorities, emoluments, profits, and advantages, and such privileges of exclusive banking as are in the said recited Act specified, subject nevertheless to the powers and conditions of redemption, and on the terms in the said Act mentioned ; and whereas an Act passed in the G 4 88 THE IIISTOllY Ax\U PRINCIPLES 7th year of the reign of his late Majesty King George IV. intituled an Act for the better regulating co-partnerships of certain bankers in England, and for amending so much of an Act of the 39th and 10th years of the reign of his late Majesty King George III. in- tituled an Act for establishing an agreement with the governor and company of the Bank of England for advancing the sum of 3,000,000/. towards the supply for the service of the year 1800, as relates to the same : and whereas it is expedient that certain privileges of ex- clusive banking should be continued to the said governor and com- pany for a further limited period, upon certain conditions ; and whereas the said governor and company of the Bank of England are willing to deduct and allow to the public, from the sums now payable to the said governor and company for the charges of man- agement of the ])ublic unredeemed debt, the annual sum hereinafter mentioned, and for the j^eriod in this Act specified, provided the privilege of exclusive banking specified in this Act is continued to the said governor and company for the period specified in this Act." Bank of England to enjoy an exclusive privilege of banking upon certain conditions : " May it therefore please your Majesty, that it may be enacted, and be it enacted by the King's most excellent Majesty, by and with the advice and consent of the lords spiritual and temporal, and commons, in this present parliament assembled, and by the authority of the same, that the said governor and company of the Bank of England shall have and enjoy such exclusive privilege of banking as is given by this Act, as a body corporate for the period and upon the terms and conditions hereinafter mentioned, and subject to termination of such exclusive privilege at the time and in the man- ner in this Act specified. During such privilege, no banking company of more than six persons to issue notes payable on demand, within London or sixty-five miles thereof: " And be it further enacted, that during the continuance of the said privilege, no body politic or corporate, and no society or com- pany, or persons united or to be imited in covenants or partnerships exceeding six persons, shall make or issue in London, or within sixty-five miles thereof, any bill of exchange or promissory note, or engagement in the payment of money on demand, or upon which any person holding the same may obtain payment on demand, pro- vided always, that nothing herein or in the said recited Act of the 7th year of the reign of his late Majesty King George IV. contained shall be construed to prevent any body politic or corporate, or any society or company, or incorporated company or corporation, or co- partnership, carrying on and transacting banking business at any greater distance than sixty-five miles ("rom London, and not having OF BANKING. 89 any house of business or establislunent as bankers in London, or within sixty-five miles thereof (except as hereinafter mentioned) to make and issue their bills and notes, payable on demand or other- wise, at the place at which the same shall be issued, beins^ more than sixty-five miles from London, and also in London, andto have an agent or agents in London, or at any other place at which such bills or notes shall be made payable for the purpose of payment only, but no such bill or note shall be for any sum less than 51. or be re-issued in London, or within sixty-five miles thereof." Any company or partnersliip may carry on the business of banking in London, or within sixty-five miles thereof, upon the terms herein mentioned : " 3. And whereas the intention of this Act is, that the governor and company of the Bank of England should, during the period stated in this Act, (subject, nevertheless to such redemption as is described in this Act,) continue to hold and enjoy all the exclusive privileges of banking given by the said recited Act of the S9th and 'iOth years of the reign of his Majesty King George III. aforesaid, as regulated by the said recited Act of the 7th year of his late Majesty King George IV., or any prior or subsequent Act or Acts of parliament, but no other or further exclusive privilege of banking: and whereas doubts have arisen as to the construction of the said Acts, and as to the extent of such exclusive privilege ; and it is expedient that all such doubts should be removed, be it therefore declared and enacted, that any body politic or corporate, or society, or company, or partnersliip, cdthough consisting of more than six persons^ may carry on the trade or business of banking in London, or within sixty-five miles thereof proi'ided such body politic or corporate, or society, or compaity, or partnership, do not borrow, owe, or take nj) in England, any sum or sums of money on their bills or notes payable on demand, or at any less time than six moidhs from the borroiving thereof during the continuance of the privileges granted by this Act to the said governor and company of the Bank of England.'' All notes of the Bank of England payable on de- mand, which shall be issued out of London, shall be payable at the place where issued, &c. : " 4. Provided always, and be it further enacted, that from and after the 1st day of August, ISS^, all promissory notes payable on demand of the governor and company of the Bank of England, which shall be issued at any place in that part of the United King- dom called England, out of London, where the trade and business of banking shall be carried on for and on behalf of the said governor and con)pany of tlie Bank of England, shall be made payable at the place where such promissory notes shall be issued ; and it shall not 90 THE HISTORY AND PRINCIPLES he lawful for the said governor and company, or any committee, agent, cashier, officer, or servant of the said governor and company, to issue, at any sucli place out of London, any promissory note pay- able on demand which shall not be made payable at the place where the same shall be issued ; any thing in the said recited Act of the seventh year aforesaid to the contrary notwithstanding." Exclusive privileges hereby given, to end upon one year's notice, given at the end of ten years after August, 1834 ; and what shall be deemed sufficient notice : " 5. And be it further enacted, that upon one year's notice given within six months after the expiration of ten years from the first day of August, 1834-, and upon repayment l:)y parliament to the said governor and company, or their successors, of all principal money, interest, or annuities, which may be due from the public to the said governor and company at the time of the expiration of such notice, in like manner as is hereinafter stipulated and provided, in the event of such notice being deferred until after the 1st day of August, 1855, the said exclusive privileges of banking granted by this Act shall cease and determine at the expiration of such year's notice ; and any vote or resolution of the House of Commons, signified by the speaker of the said house in writing, and delivered at the pub- lic office of the said governor and company, or their successors, shall be deemed and adjudged to be a sufficient notice." Bank notes to be a legal tender, except at the bank and branch banks : " 6. And be it further enacted, that from and after the 1st day of August, 1834, unless and until parliament shall otherwise direct, a tender of a note or notes of the governor and company of the Bank of England, expressed to be payable to bearer on demand, shall be a legal tender, to the amount expressed in such note or notes, and shall be taken to be valid as a tender to such amount for all sums above 51. on all occasions on which any tender of money may be legally made, so long as the Bank of England shall continue to pay on demand their said notes in legal coin : provided always, that no such note or notes shall be deemed a legal tender of payment by the governor and company of the Bank of England, or any branch bank of the said governor and company ; but the said governor and com- pany are not to become liable or be required to pay and satisfy, at any branch bank of the said governor and company, any note or notes of the said governor and company not made specially payable at such branch bank ; but the said governor and company shall be liable to pay and satisfy at the Bank of England in London all notes of the said governor and company, or of any branch thereof." OF BANKING. 91 Bills not having more than three months to run, not to be subject to usury laws : " 7. And be it further enacted, that no bill of exchange or pro- missory note made payable at or within three months after the date thereof, or not having more than three months to run, shall, by reason of any interest taken thereon or secured thereby, or any agreement to pay, or receive, or allow interest in discounting, nego- tiating, or transferring the same, be void, nor shall the liability of any party to any bill of exchange or promissory note be affected by reason of any statute or law in force for the prevention of usury, nor shall any person or persons drawing, accepting, indorsing, or signing any such bill or note, or lending or advancing any money, or taking more than the present rate of legal interest in Great Britain and Ireland respectively for the loan of money on any such bill or note, be subject to any penalties under any statute or law relating to usury, or any other penalty or forfeiture; any thing in any law or statute relating to usury in any part of the United Kingdom to the contrary notwithstanding." Accounts of bullion, &c. and of notes in circulation, to be sent weekly to the chancellor of the exche- quer, &c. : " 8. And be it further enacted, that an account of the amount of bullion and securities in the Bank of England belonging to the said governor and company, and of notes in circulation, and of de- posits in the said bank, shall be transmitted weekly to the chancellor of the exchequer for the time being, and such accounts shall be consolidated at the end of every month, and an average state of the bank accounts of the preceding three months, made from such con- solidated accounts as aforesaid, shall be published every month in the next succeeding London Gazette." Public to pay the bank one-fourth part of the debt of 14,686,800/. " 9. And be it further enacted, that one-fourth part of the debt of l^jBSGjSOO/. now due from the public to the governor and com- pany of the Bank of England, shall and may be repaid to the said governor and company." Capital stock of the bank may be reduced : — " 10. And be it further enacted, that a general court of proprie- tors of the said governor and company of the Bank of England shall be held at some time between the passing of this Act and the 5th day of October, 183 1-, to determine upon the propriet}' of dividing and appropriating the sum of 3,638,250/., out of or by means of the sum to be repaid to the said governor and company as hereinbefore mentioned, or out of or by means of the fund to be provided for that <^2 THE HISTORY AND PRINCIPLES purpose, amongst the several persons, bodies politic or corporate, who may be proprietors of the capital stock of the said governor and company on the said 5th da}' of October, IS.'St, and upon the man- ner and the time for making such division and appropriation, not inconsistent with the j)rovisions for that pur])ose herein contained ; and in case such general court, or any adjourned general court, shall determine that it will be proper to make such division, then, but not otherwise, the capital stock of the said governor and company shall be, and the same is hereby declared to be reduced from the sum of 1 4',553,000/., of which the same now consists, to the sum of 10,914', 750/., making a reduction or difference of 3,638,250/., capi- tal stock, and such reduction shall take place from and after the said 5th day of October, 1834-; and thereupon out of or by means of the sum to be repaid to the said governor and company as here- inbefore mentioned, or out of or by means of the fund to be provided for that purpose, the sum of 3,638,250/. sterling, or such proportion of the said fund as shall represent the same, shall be appropriated and divided amongst the several persons, bodies politic or corporate, who may be proprietors of the said sum of 14,553,000/, bank stock on the said 5th day of October, 1834, at the rate of '25/. sterling for every 100/. of bank stock which such persons, bodies politic and corporate, may then be proprietors of, or shall have standing in their respective names in the books kept by the said governor and com- pany for the entry and transfer of such stock, and so in proportion for a greater or lesser sum." Governor, deputy-goveror, or directors, not to be disqualified by reduction of their share of the capital stock : " 11. Provided always, and be it enacted, that the reduction of the share of each j)roprietor of and in the capital stock of the said governor and company of the Bank of ICngland, by the repayment of such one-fourth part thereof, shall not disqualify the present governor, deputy-governor, or directors, or any or either of them, or any governor, deputy-governor, or director, who may be chosen in the room of the present governor, deputy-governor, or directors at any time before the general court of the said governor and company to be held between the 25th day of March and the 25th day of April, 1835: provided that at the said general court, and from and after the same, no governor, deputy-governor, or director of the said corporation shall be capable of being chosen such governor, deputy- governor, or director, or shall continue in his or their respective offices, unless he or they respectively, shall at the time of such choice have, and during such his respective office continue to have, in his and their respective name, in his and thfir own right, and for his and their own use, the respective sums or shares of and in the capital stock of the said corporation in and by the charter of the said OF BANKING. 93 governor and company prescribed as the qualification of governor, depiitj'-governor, and directors respective!}'." Proprietors not to be disqualified : " 12. Provided also, and be it enacted, that no proprietor shall be disqualified from attending and voting at any general court of" the said governor and company, to be held between the said 5th day of October, 18Si, and the ^.jth day of April, IS35, in consequence of the share of such proprietor of and in the capital stock of the said governor and company having been reduced by such repayment as aforesaid below the sum of 500/. of and in the said capital stock; provided such proprietor had in his own name the full sum of 500/. of and in the said capital stock on the said 5th day of October, ISS-i; nor shall any proprietor be required, between the said 5th day of October, 1834, and the 25th day of April, 1835, to take the oath of qualification in the said charter." Bank to deduct the annual sum of 120,000/. from sum allowed for management of national debt : " 13. And be it further enacted, that from and after the said 1st day of August, 1 83 1, the said governor and company, in consider-- ation of the privileges of exclusive banking given by this Act, shall, during the continuance of such privileges, but no longer, deduct from the sums now payable to the said governor and company, for the charges of management of the public unredeemed debt, the annual sum of 120,000/., any thing in any act or acts of parliament or agreement to the contrary notwithstanding: provided always, that such deduction shall in no respect prejudice or affect the right of the said governor and company to be paid for the management of the public debt, at the rate and according to the terms provided in an Act passed in the 48th year of his late Majesty King George III., intituled 'An Act to authorize the advancing for the public service, upon certain conditions, a proportion of the balance remaining in the Bank of England, for payment of unclaimed dividends, annuities, and lottery prizes, and tor regulating the allowances to be made lor the management of the national debt.' " Provisions of Act 39 and 40 Geo. III. to remain in force, except as altered by this Act : " 14. And be it further enacted, that all the powers, authorities, franchises, privileges, and advantages given or recognized by the said recited Act of the 39th and 40th years aforesaid, as belonging to or enjoyed by the governor and company of the Bank of England, or by any subsequent act or acts of parliament, shall be and the same are hereby declared to be in full force and continued by this Act, except so far as the same are altered by this Act, subject never- theless to such redemption upon the terms and conditions following; 94 THE HISTORY AND PRINCIPLES (that is to say,) that at any time, upon twelve months' notice, to be given after the 1st day of August, 1855, and upon re-payment by parliament to the said governor and compan}-, or their successors, of the sum of 1 1,015,100/., being the debt which will remain due from the public to the said governor and company after the payment of the one fourth of the debt of 14',G86,800/. as hereinbefore provided, without any deduction, discount, or abatement whatsoever, and upon payment to the said governor and company and their successors of all arrears of the sum of 100,000/. per annum, in the said Act of the 39th and 40th years aforesaid mentioned, together with the interest or annuities payable upon the said debt or in respect thereof, and also upon re-payment of all the principal and interest which shall be owing unto the said governor and company and their successors, upon all such tallies, exchequer orders, exchequer bills, or parlia- mentary funds which the said governor and company or their suc- cessors shall have remaining in their hands, or be entitled to at the time of such notice to be given as last aforesaid, then and in such case, and not till then (unless under the proviso hereinbefore con- tained), the said exclusive privileges of banking granted by this Act shall cease and determine at the expiration of such notice of twelve months." Act may be amended this session : " 15. And be it further enacted, that this Act may be altered, amended, or repealed by any Act to be passed in this session of parliament." 1834-, March. At a meeting of the proprietors of bank stock, the governor stated, " the East India Company had so very large a bakmce at the bank that they proposed to draw it in order to employ it. On this, an arrangement was made between the company and the bank, by which the bank agreed to pay an interest of two per cent, for the sum of 1,500,000/. which it lent to the public at three per cent. There was a farther sum taken from the same body and at the same rate of two per cent. Of this sum the bank had lent 300,000/. at 2j per cent, and 200,000/. at 24 per cent." This was the first instance of tlie bank allowing interest on deposits. May 7. The following notice relative to the re- duction of the four per cents, of 1826 was this day communicated to the Bank of England from the Treasury, and immediately afterwards a copy was posted in the Stock Exchange. OF BANKING. 95 ♦'REDUCTION OF FOUR PER CENT. ANNUITIES, 182G. " All holders of four per cents., commonly called four per cent, annuities, 1826, who shall not signify their dissent, shall have for every 100/. of the said four per cents. 100/. of new three and a half per cent, annuities, the dividend upon which shall be payable 5th January and 5th July in each year. " The said new three and a half per cent, annuities shall be added to, and consolidated with, the existing new three and a half per cent, annuities, and shall not be liable to redemption until 5th January, 1840. " The holders of four per cent, annuities, 1826, to receive the half-year's dividend which will be due thereon on the 10th October, ISSi; and the first dividend — namely, one quarter of a year's dividend to be payable upon the said new three and a half per cent, annuities, on the 5th January, 1835. " Books will be opened at the Bank of England on Thursday, 8th May, to Wednesday, 28th May, both days inclusive, for receiving notices, by themselves or their agents, of those persons who may be desirous of dissenting. " Persons who shall be out of the United Kingdom during the whole of such period shall in such case be permitted to express their dissent at any time before 6th July, 1834; and any person who may be in any other part of the world except Europe, to be permitted to express such dissent at any time before the 1st March, 1835. " Persons not signifying their dissent within the periods before mentioned will be deemed to have assented. Persons signifying their dissent within these periods will be paid off in such order, at such time, and in such manner, as Parliament may direct. «' Treasury Chambers, May 7. 1834." On the same day, May 7-> a bill authorising the London and Westminster bank to sue and be sued in the name of their public officer was read a second time in the House of Commons by a majority of 143 to 3.5. The Bank of England petitioned to be heard by counsel against tlie bill in committee : this was granted, but the committee decided in favour of the bill, and on May 26. it was read a third time in the House of Commons by a majority of 137 to 76. After being read a first time in the House of Lords, the Bank of England were heard by counsel agamst the bill at the bar of that House. July 31. A special general court of the proprietors of bank stock was held to agree to the terms proposed 96 THE HISTORY AND PRINCIPLES by the government for j3aying off one fourth of the bank capital, as required by the Bank-charter Act. Upon the recommendation of the directors, the fol- lowing resolutions were unanimously passed : 1. " That a proposal from the chancellor of the exchequer to transfer to the bank the sum of 4<,080jOOO/. per cent, reduced an- nuities, in liquidation of a fourth part of the permanent debt to the bank, which will become due on the first of August next, be recom- mended to the court of proprietors for adoption ; provided the transfer be made so soon as the Act of Parliament shall have passed authorizing the same, and the interest on the returned capital be paid up to day of the said transfer. " That the court also concur in opinion with the court of di- rectors, that it will be of advantage to the future management of the affairs of the bank to retain the proportion of debt when repaid by the government ; this court do, therefore, in pursuance of the authority for that purpose, contained in the Act of 3d and tth of William IV. cap. 98. determine not to divide or appropriate the sum of 3,638,250/., or any part thereof, amongst the several persons, bodies politic or corporate, who may be proprietors of the capital stock of the governor and company of the Bank of England, on the 5th day of October next." Aug. 14. In pursuance of the above agreement between the government and the bank, an Act was passed (4th and 5th of William IV. c. 80.) entitled " An Act to provide for the repayment to tlie go- vernor and company of tlte Bank of England one-foiu'th ])art of the debt due from the public to the said com- pany in pursuance of an Act passed in the last session of ])arliament." It is enacted, that immediately after tlie passing of the Act, the sum of 4,080,000/. re- duced three per cents, should be placed to the credit of the Bank of England, and sliould form part of the public debt of the United Kingdom. The bank was to receive interest upon the 3,671,700/. from the 1st of August, 1834, until the 1,080,000/. shall be written in their books, and to continue a corporation until the said sum be redeemed. Sept. 18. At a meeting of bank proprietors the go- vernor stated that the directors had invested i31 2,783/. in the purchase of annuities for twenty-six years. The OF BANKING. 97 usual dividend of 4 per cent, was declared upon the half year ending the lOtli of October. Oct. 4. The rate of interest upon the loans granted during the time the funds were closed was fixed at four per cent, according to the following notice : — " The governor and company of the Bank of England do hereby give notice, that on and after the 4th instant, they will be ready to receive applications for loans, upon the deposit of bills of ex- change, exchequer bills, East India bonds, or other approved securities ; such loans to be paid on or before the 15th of January next, with interest at the rate of 4/. per cent, per annum and to be for sums of not less than 2000/. each." On the same day the following notice was issued : — " The court of directors of the governor and company of the Bank of England give notice, that with a view to afford further accom- modation to the public, it is determined that henceforward the undermentioned days only will be observed as holidays in the trans- fer offices, viz. Christmas, Good Friday, 1st May, 1st November.'' Oct. 7- Richard Mee Raikes, Esq. the governor of the Bank of England was gazetted as a bankrupt. The circumstance of a bank director becoming a bankrupt, and during the year he was governor, was so remarkable an event that it caused a considerable sensation. A Table of the Liabilities and Assets of the Bank of England during the year 1834 : — Dates, being average re- turn of three months, end- ing as follows 1834. Jan. 1.... Feb. 4.... March 4. April 1... May 6.... June 3... July 1.... July 29... Aug. 26.. Sept. 23.. Oct. 21... Nov. 18.. Dec. 16.. 18,216,000 18,377,000 18,700,000 19,097,000 18,978,000 18,922,000 18,895,000 19,110,000 19,147,000 19,126,000 18,914,000 1 8,694,000 18,304,000 Deposits. £ 13,101, 14,086; 14,418, 14,011, 14,081, 14,539, 15,096, 15,675, 15,384, 14,754, 13,514, 12,669, 12,256, Total Liabilities. 31, 32, 33, 33, 33, 33, 33, ,000J34, ,000 34, ,000|33, ,000 32, ,000|31, ,000 30, 000 000 000 000 000 ,000 ,000 £ 317,000 463,000 118,000 108,000 059,000 461,000 991,000 785,000 531,000 880,000 ,428,000 ,363,000 ,560,000 H £ 23,596,000 24,762,000| 25,547,000 25,970,000 26,691,000 27,312,000 27,593,000 28,502,0001 28,679,000: 28,691,O0o! 27,840,000j 27,138,000 26,362,000 £ 9,948,000 9,954,000, 9,829,000 9, 4 31, 000 ' 8,884,000 8,645,000 8,659,000 8,598,000 8,272,000 7,695,000 7,123,000 6,781,000 6,720,000 £ 33,524,000 34,716,000 3,5,376,000 35,401,000 35,575,000 35,957,000 36,252,000 37,100,000 36,951,000 36,386,000 34,963,000 33,919,000 33,082,000 98 THE HISTORY AND PRINCIPLES 1835. March 5. The bank issued the following notice : — " The governor and company of the Bank of England do hereby give notice, that on and after the 5th instant, they will be ready to receive applications for loans upon the deposit of bills of exchange, exchequer bills. East India bonds, or other approved securities ; such loans to be repaid on or before the 15th of April next, with interest at the rate of 4.1. per cent, per annum, and to be in suras of not less than 2000/. each." March 19. A meeting of the proprietors of bank stock. The governor stated, that to make up the dividend of four per cent, for the half year, it had been necessary to take 10,000/. from the rest. May 29. The bank issued the following notice : — " The governor and company of the Bank of England do hereby Tive notice, that on and after the 29th instant, they will be ready receive applications for loans upon the deposit of bills of ex- change, exchequer bills. East India Bonds, or other approved securities : such loans to be repaid on or before the 15th of July, with interest at the rate of 4/. per cent, per annum, and to be for sums of not less than 2000/. each." August 3. The West India loan contracted. This was a loan to government of 15,000/. raised for the purpose of giving compensation to the owners of slaves in the West India colonies. The contractor was Mr. N. M. Rothschild. The terms were, for every 100/. in money the contractor to receive, In the three per cent. Consols In the three per cent, reduced In long annuity /: s. d. 75 25 13 7 a6*100 13 7 This is at about the rate of 3/. Js. 8d. per cent. Tlie loan was payable by instalments, and interest at four per cent, allowed for prompt payment. OF BANKING. 99 The bank issued the following August 5. notice : — " The governor and company of the Bank of England do hereby give notice, that on and after the 5th instant, they will be ready to receive applications for loans upon the deposit of bills of exchange, exchequer bills. East India bonds, or other approved securities ; such loans to be repaid on or before the 20th of October next, with interest at the rate of 3/. 10*. per cent, per annum, and to be for sums of not less than 2000/." These advances were continued by subsequent no- tices, to the 15th day of January, 1836. It was considered remarkable that by the above notice, the bank lent money at S\ per cent., w^hile the government allowed a discount of four per cent, upon prompt payment on the West India Loan. September 24. A meeting of the bank proprietors. The governor stated, that to make up the dividend of four per cent, for the half year, the sum of 19,000/. had been taken from the rest; and on the 31st of August, the rest amounted to 2,740,000/. In the latter end of this year, the directors adopted the resolution to refuse to discount all bills drawn or indorsed by joint stock banks of issue. A Table of the Liabilities and Assets of the Bank of England during the year 1835 : — LIABILITIES. Dates being average returns of three months, ending Circulation. Deposits. Total Liabilities. 1835. Jan. 15 Feb, 10.... March 10.. April 7 May 5 Junes June 30.... July28 Aug. a5.... Sept. 22.... Oct. 20 Nov. 17..,. Dec. 15 £ 18,012, 18,099, 18,311, 18,591, 18,5^12, 18,460 18,315 18,322 18,340 1 8,240 17,930 17,549 17,821 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000| 1 4 ,000 16 ,000 17 £ 585,000 535,000[ 28 1,000 1 289,000| 72fi,000 568,000' 954,000l ,561,000 ,308,000 ,230,000 ,227,000 ,180,000 ,729,000 £ 30,597,000 30,634,000 30,592,00d 29,880,000 29,268,000 29,028,000 25, 29,269,OOoj25, 29,S83,OOo!26. 30,648.000,26. 31,470,000 27 32,157,000*28 33,729,000^30 35,050,000|31 ^ H 2 £ 390,000 482,000 65 7,000| 228,000 764,000 562,000 678,000 244,000 964,000 888,000 ,66 1 ,000 ,069,000 ,048,000; S3, £ 6,741,000 6,693,000 33, 6,536,000J33, 6,329,000132, 6,197,000|3L 6,150,000131, 6,219,000[31, 6,283,000|32, 6,326,000|33! 6,2'i 1,000 34! 6,186,000 34 6,305,000!36 6,626,O00!37; £ 131,000 1 75,000 1 93,000 557,000 ,961,000 7 1 2,000 ,897,000 ,527,000 ,290,000 ,149,000 ,847,000 ,374,000 ,674,000 100 THE HISTORY AND PillNCirLES 1836. March. A general meeting of proprietors. The following summary of the proceedings is taken from the Times : — " The meeting of bank proprietors, held this morning, passed over much more harmoniously than many former occasions of the same kind. The blunder of Mr. Spring Rice in allowing 4/. per cent, discount on the anticipated payments on the late loan, at the time when the bank were lending money on the same security, at 3^/. per cent, has worked admirably well for the proprietors, as every one foresaw who had paid the least attention to the subject must necessarily be the case. The profits of the establishment have been so considerable, that, in instead of the ' rest' of the bank being disturbed, as was done at the last dividend, to make up the 4/. per cent, shared among the proprietors ; there has occurred in the interval an addition to it of 25,000/., after providing for the present dividend, and carrying to account another sum of 15,000/., as the final loss sustained by the bank through the forgeries of Fauntleroy. The only facts elicited by the discussion of any interest out of the circle of bank proprietors, related to a recent transfer of a certain portion of the public business to the London and Westminster Bank. An impression prevailed, it seems, among the proprietors, that this business, which arose under the manage- ment of the excise, out of the hop duties in Surrey and Kent, had previously been managed by the Bank of England, and that the change had led to a diminution of the balances there. It appeared, however, that the business was wholly under private control, and had been conducted by Mr. Ward, lately a member of the court, but who did not keep any account at the bank. The directors were desirous, as the governor admitted, on the change that took place, to appropriate this business to themselves, and addressed a letter to the chancellor of the exchequer on the subject, pointing out, as an inducement, the large saving that might thereby be effected ; but they were informed that this was a matter over which the government had no control, and that it rested solely with the board of excise." June 2. The bank issued the following notice : — " The governor and company of the Bank of England do hereby give notice, that on and after the 2nd instant, they will be ready to receive applications for loans upon the deposit of bills of ex- change, exchequer bills, East India bonds, or other approved securities; such loans to be repaid on or before the 15th of July next, with interest at the rate of 4/. per cent, per annum, and to be for sums of not less than 2000/. each." OF BANKING. lOl July 21. The rate of interest raised to four and a half per cent, by the following resolution : — At a court of directors at the bank, on Thursday, the 21st of July : Resolved, — that the interest on bills of exchange and notes discounted by the bank be advanced to 4-^/. per cent, per annum. Aug. 10. The House of Commons voted the sum of 38,289/. to the Bank of England, to defray the loss sustained by the bank in 1831 by melting into bullion a large amount of silver coin, upon which the public had received the seignorage. Sept. 1 . The rate of interest raised to five per cent, by the following resolution : — At a court of directors at the bank, on Thursday, the 1st of September, 1 836 : Resolved, — That the interest on bills of exchange and notes discounted by the bank be advanced to 51. per cent, per annum. On the same day the bank issued the following notice : — " The governor and company of the Bank of England do hereby give notice, that on and after the 1st instant, they will be ready to receive applications for loans upon the deposit of bills of exchange, exchequer bills. East India bonds, or other approved securities ; such loans to be repaid on or before the 20th of October next, with interest at the rate of 51. per cent, per annum, and to be for sums of not less than 2000/. each." There was a great pressure on the money market, and great distress among the commercial classes * during the remainder of the year. Sept. 15. The bank gave notice that they would advance money upon the certificates of exchequer bills. " The governor and company of the Bank of England do hereby give notice, that they will make advances on the security of the certificates given by the paymasters of exchequer bills, now adver- * See an inquiry into the causes of the recent pressure on the money market in my History of Banking in America. H S 102 THE HISTORY AND PRINCIPLES tised, as have been delivered into the exchequer bill office for the purpose of being exchanged for new bills ; such advances to be repaid on or before the 20th of October next, together with interest at the rate of 5/. per cent, per annum." Sept. 29' The government raised the rate of interest upon exchequer bills issued on or after this date from l^d. to 2d. per day. Nov. 19th. The rate of interest upon all exchequer bills raised to Sgr/. per diem, according to the follow- ing communication : — " Treasury Chambers, November \9th, 1836. " Gentlemen, " The lords commissioners of His Majesty's Treasury' have de- termined that all exchequer bills, outstanding, shall on and after Monday next, the 21st instant, bear an interest of l^d. per 100/. per day ; I am commanded by their lordships to request that you will make this determination known at the Stock Exchange, and my lords will forthwith take the necessary steps for carrying it into effect. " I am, Gentlemen, " Your obedient servant, <' A. Spearman." " The governor and deputy- "I governor of the Bank of England." J This advance in the interest of exchequer bills was made at the suggestion of the bank directors, in order that the bank might be able to sell their exchequer bills without loss, and tlius, by contracting the circulation, to render the foreign exchanges favourable. The following is a table of the different rates of interest paid on exchequer bills since the year 1824: — Rate of interest paid on exchequer bills : Dated Uth of June, 182 1, 1^. per diem. From 19th of Dec. 1825, 2d. ditto. Dated 30th of Sep. 1829, Ifrf. ditto. 18th of Dec. 1829, \\d. ditto. 29th of Sep. 18.'}r>, 'Id. ditto., from day of date ; but this alteration did not apply to bills dated of a previous date. 21st of Nov. 1836, 2irf. on all bills. OF BANKING. 103 On the same day (Nov. 19th) the East India Company raised the interest on their bonds to four per cent. Nov. 19. The bank issued the following notice: — " The governor and company of the Bank of England do hereby give notice, that on and after the 21st instant^, they will be ready to receive applications for loans upon the deposit of bills of exchange, exchequer bills, East India bonds, or other approved securities ; such loans to be repaid on or before the 16th of January next, with interest at the rate of 5l. per cent, per annum, and to be for sums of not less than 2000/. each.'' December. In the beginning of this month, the bank afforded assistance to the Northern and Central Bank of England at Manchester, upon condition of their winding up thirty-nine out of their forty branches. And afterwards granted further assist- ance upon condition that the Northern Bank should discontinue business after February 1. 1837, until the bank should be repaid. A Table of the Liabihties and Assets of the Bank of England during the year 1836 : — LIABILITIES. Dates being average returns of three months, ending 6. Jan. 12 Feb. 9 March 8 April 5 May 3 MaySl July 1 July28 Aug. 25 Sept. 22 Oct. 21 Nov. 17 Dec. 15 1837. Jan. 14 Feb. 12 March 7 April 6 May 4 Circulation. y £ 7,262,000 7,427,000 7,739,000 8,063,000 8,154,000 8,051,000 7,899,000 7,940,000 8,061,000 8,147,000 7,936,000 7,543,000 7,361,000 7,422,000 7,868,000 8,178,000 8,432,000 8,480,000 Deposits £ 169,000 366,000 966,000 751,000 74 7,000 273,000 810,000 495,000 796,000 118,000 324,OOo' 682,000| 330,000 Total Liabilities. £ 36,431,000 :<5,793,000 33,705,000 32,814,000 31,901,000 31,324,000 31,709,000 32,435,00' 32,857,000 32,265,00( 31,260,000 30,025,000 30,691,000 14,354,000:31,776,000 14,230,000'32,098,000 13,260,000 31,438,000 11,192,000,29,624,000 10,472,000^28,952,000 H 4 £ 31,954,000 51,022,000 29,806,000 27,927,000 27,042,000 26,534,000 27,153,000 8,315,000 9,345,000 29,406,000 28,845,000 28,134,000 28,971,0001 30,565,000 31,085,000 30,579,000 28.813,000 28,017,000 £ 7,076 7,471 7,701; 7,801 7,782 7,663: 7,362; 6,926; 6,325; 5,719; 5,257, 4,933, 4,545; ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 000 000 000 4,287,000 4,032,000 4,048,000 4,071,000 4,190,000 Total .'Vssets £ 030,000 ,493,000 ,507,000 ,728,000 ,824,000 ,197,000 515,000 241,000 670,000 1 25,000 102,000 067,000 516,000 34,652,000 35,117,000 34,627,000 32,884,000 32,207,000 104 THE HISTORY AND PRINCIPLES 1837. January 15. The London banking-house of Messrs. Esdaile and Co. received assistance from tlie Bank of England upon condition of winding up their business. March 2. The bank issued the following notice : — " The governor and company of the Bank of England do hereby give notice, that on and after the 2nd instant, they will be ready to receive applications for loans upon the deposit of approved bills of exchange, not having more than ninety-five days to run ; such loans to be repaid on or before the 15tli of April next, with interest at the rate of 5A per cent, per annum, and to be for sums of not less than 2000/. each." It may be observed, that in this instance the advances are made only on approved bills of ex- change, and not as on former occasions, " on bills of exchange, exchequer bills, East India bonds, or other approved securities." March 16. A general meeting of proprietors. The governor stated, that after paying a di\'idend of four per cent, for the half year, the rest would be 2,878,316/. The following are the names of the lUrectors of the Bank of England for the present year : — TtMOTny Abraham Curtis, Esq. Governor. Sir John Rae Reid, Bart. Deputy- Governor. DIRECTORS. Robert Barclay, Esq. John Bowden, Esq. William Cotton, Esq. Bouamy Dobree, Esq. Char. Pascoe (jrenfell, Esq. Abel Lewes Gower, Esq. John Oliver Hanson, Esq, John Benjamin Heath, Esq. James Malcolinson, Es(j. William Mellish, Esq. Humphrey St, John MlLDMAY, Esq. Rowland Mitchell, Esq. James Morris, Esq. Sheffield Neave, Esq. John Horsley Palmer, Esq. James Pattison, Esq. Christopher Pearse, Esq. John Henry Pelly, Esq. Henry James Prescott, Esq. Charles Pole, Esq. Henry Pohcher, Esq. William R. Robinson, Esq. William Thompson, Esq. Alderman. Thomas Warre, Esq. OF BANKING. 105 The government of the bank rests entirely with the court of directors, who may, if they please, change the whole system of management. The only check upon their proceedings consists in the pub- licity of their measures, the half-yearly meetings of their proprietors, and the communications between the court and the government. The directors are elected by the proprietors of bank stock, at a general meeting. Eight directors go out and eight come in every year. The eight that come in are commended by the whole court, that is, a " house list " is sanc- tioned by the court ; and though the proprietors are not required to vote for the names included in the list, yet these persons have always been elected. The qualification for governor is 4000/. bank-stock, deputy-governor 3000/., director 2000/. The di- rectors are not usually large holders of bank-stock : none of them hold more than the qualification. The governor and deputy-governor are appointed by the directors, and usually continue in office for a year. The senior directors of the bank, who have passed the chair, form a select committee : to these are added, the director immediately succeeding by rota- tion to the deputy chair. The governor and the select committee have the management of the bank in the intervals between the sittings of the court, but nothing of consequence is done without the knowledge and concurrence of the court of directors. At the weekly meeting of the court of directors there is a statement read of the actual position of the bank in every department, of its securities, of its bullion, and of its liabilities. There is a committee of treasury, who may suggest any measure they think fit for the consideration of the court. The daily transactions of the bank are conducted by a com- mittee of three, assisted by the governor or deputy- governor : no responsible action is taken by the committee without reference to the governor. All 106 THE HISTORY AND PRINCIPLES bills presented for discount are presented before that daily committee, and they determine upon the bills to be discounted. There is also a Wednesday's committee for London notes, which consists of nine or ten directors : all London notes pass before that committee on Wednesday. The bullion is purchased by the governor, who considers that he has no power to refuse the issue of notes for gold bullion brought to him at the bank. The purchasing price of gold hae been fixed, for several years, at Si. I'Js. 9d. pei ounce. The price of silver is regulated by the cours* of the foreign exchanges. SECTION IV. THE LONDON BANKERS. After the establishment of the Bank of England, the goldsmiths or "new-fashioned bankers" con- tinued their business in the same manner as before. In the year 1705 they obtained greater facilities, from an alteration in the laws respecttng promissory notes. It had been held that promissory notes, whether issued by bankers or others, could not be legally transferred to a third party, and that no action at law could be sustained against the issuer, unless brought by the })erson to whom the note was originally granted. But by 3 and 4 Ann. ch. 9, all doubts were removed ; and it was enacted, that after the 1st of May, 1705, all notes in writing made and signed by any person or persons, bodies politic or corporate, or by the servant or agent of any cor- poration, banker, goldsiuith, merchant, or trader, who is usually entrusted to sign such j)romissory notes, sliall be assignable or endorsable over, in the same manner as inland bills of exchange. OF BANKING. 107 In the year 1714, the legal interest of money was reduced from six to tive per cent. The reduction of the rate of interest was probably the effect of the abundance of money produced by the issue of Bank of England notes, and the increase of deposits with the private bankers. The various small sums of money which had remained idle in the hands of individuals were collected into large deposits in the hands of the bankers. Hence the supply of capital was increased, and the rate of interest consequently fell. About the year 1775, the London bankers who lived in the city, established what is called *' the clearing-house," for the purpose of facilitating their exchanges with each other. By this means each banker is enabled to pay the cheques drawn upon himself by the cheques he liolds upon other bankers. And hence he is not under the necessity of keeping so large an amount of money unemployed in his till.* The London banks have long ceased to be banks of circulation : they are now banks of deposit, banks of discount, and banks of agency to country bankers. The oldest banking houses in London, are Messrs. Child & Co. of Temple Bar ; Messrs. Hoares, of Fleet Street ; and Messrs. Snow & Co. of the Strand ; these were established previous to the Bank of Eng- land. The others are comparatively of recent date, and their number has been considerably diminished within the last twenty years. In the year 1810, the number of banking houses who settled their accounts with each other at the clearing-house was forty-six, the present number is only thirty. * For a full account of the operation of clearing, and of the London bankers' system of book- keeping, see my "Practical Trea- tise on Banking." 108 THE HISTORY AND PRINCIPLES The following is the list of London bankers inserted in the London Post-office Directory of 1837 • — Ashley and Son, 135, Regent-st. Barclay and Co. 54, Lombard-st. Barnard, Dimsdale and Co. 50, Cornhill. Barnetts, Hoare & Co. 62, Lom- bard-street. Bosanquet & Co. 73, Lombard-st. Bouverie and Co. 1 1 , Haymarket. Brown, Janson and Co. 32, Ab- church-lane. Call, Marten and Co. 25, Old Bond-street. Child and Co. Temple Bar. Cockburn and Co. 4, Whitehall. Cocks & Biddulphs, 43, Charing Cross. Coutts and Co. 59, Strand. Cunliffes, Brooks and Co. 24, Bucklersbury. Curries and Co. 29, Cornhill. Denison & Co. 106, Fenchurch- street. Dixon and Co. Chancery-lane. Dorricn and Co. 22, Finch-lane. Drewett and Fowler, 60, Old- Broad-street. Drummond and Co. 49, Charing Cross. Feltham and Co. 42, Lombard- street. Fullers and Co. 84, Cornhill. Glyn and Co. 67, Lombard-st. Goslings & Sharpe, 19, Fleet-st. Hammersleys and Co. 60, Pall Mall. Hanburys & Co. 60, Lombard-st. Hankeys & Co. 7, Fenchurch-st. Herries & Co. 16, St. James's-st. Hoares, 37, Fleet-street. Hopkinson and Co. 3, Regent-st. Johnston and Co. 15, Bush-lane. Jones, Loyd & Co. 43, Lothbury. Jones and Son, 41, West Smith- field. Keil, L 2, Biliter-square. King, Charles & Co. 24, Bolton- street, Piccadilly. Kinloch, G. F. and Sons, 1, New Broad-street. Ladbrokes and Co. Bank Build- ings, Cornhill. Lees, Brassey and Co. 71, Lom- bard-street. Lubbock and Co. 11, Mansion House-street. Masterman & Co. Nicholas-lane, Praedsand Co. 189, Fleet-street. Prescott& Co. 62, Threadneedle- street. Price and Co. 1, Mansion House- street. Puget and Co. 12, St. Paul's Church Yard. Ransom & Co. 1 , Pall Mall East. Robarts & Co. 15, Lombard-st. Rogers and Co. 29, Clements- lane. Scott & Co. 1, Cavendish-square. Smith, Payne and Co. Thread- needle- street. Snow and Co. Temple Bar With- out. Spooner & Co. 27, Gracechurch- street. Stevenson & Salt, 20, Lombard- street. Stone and Co. 68, Lombard-st. Twinings, Devereux-crt. Strand. Vere, Sapte & Co. 77, Lombard- street. Weston & Young, 37, Borough. Whitmore and Co. 24, Lombard- street. Williams, Deacon and Co. 20, Birchin-lane. Willis and Co. 76, Lombard-st. Wright and Co. Henrictta-st. Covent Garden. OF BANKING. 109 111 the course of the last five-and-twenty years the following London banking houses have been discon- tinued : Anderson, J. & J. 1 7, Philpot- lane. Austen, Maude & Co. 10, Hen- rietta-street. Birch, Chambers and Co. 160, New Bond-street. Bolderos and Lushington, 30, Cornhill. Bond, Sons, and Patesall, 2, 'Change Alley. Brickwood and Co. Lombard-st. Brown, Cobb and Co. 66, Lom- bard-street. Brown, Langhorne & Co. Buck- lersbury. Bruce & Co. 2, Bartholomew-lane Cox, Merle & Co. 2, Cox's-crt. Little Britain. Duckett, Morland & Co. Pall Mall. Esdaile and Co. 21, Lombard-st. Everett and Co. 9, Mansion House-street. Fry and Sons, Mildred's-court, Poultry. Hodsoll & Stirling, S^S, Strand. Kensington and Co. 20, Lom- bard-street. Lawson, Newham and Co. 17, Buckler sbury. Lees & Co. 72, Lombard-street. Mainwaring & Co. 80, Cornhill. Marsh, Sibbald and Co. 6, Ber- ner's-street, Oxford-street. Sir John Perring and Co. 72, Cornhill. Sir Peter Pole and Co. 1, Bar- tholomew-lane. Ramsbottom and Co. 11, Lom- bard-street. Remington and Co. 69, Lom- bard-street. Sansom & Co, 65, Lombard-st. Sikes, Sneath & Co. 5, Mansion House-street. Whitehead and Co. Cateaton-st. SECTION V. COUNTRY BANKS. We have no autlientic details of the rise and progress of country banking. It is generally understood that very few country banks existed previous to the American war ; that they rapidly increased after the termination of that war ; that they received a severe check in the year 1793, when twenty- two became bankrupt ; and that they increased with wonderful rapidity after the passing of the Bank Restriction Act. 110 THE HISTORY AND PRINCIPLES Since the year 1808, every bank that issues notes has been compelled to take out an annual licence. But the number of licences does not correspond exactly with the number of country banks. In the first place, banks that do not issue notes do not take out a licence ; and secondly, a bank that issues notes in several places, must take out a licence for each place ; and instances are said to have occurred of persons taking out a licence to issue notes, and not carrying on any other branch of banking. Banks, too, that carry on business at more than four places are required to take out only four licences ; all the places beyond four being in- cluded in the fourth licence. TABLE I. An account of the number of licences issued to country bankers, and the number of commissions of bankruptcy issued against country banks, in each of the following years : — Years. 1809 Licences. Bankrupts. Years. Licences. Bankrupts. Years. Licences. Bankrupts. 702 4 1817 752 3 1825 797 37 1810 782 20 1818 765 3 1826 809 43 1811 789 4 1819 787 13 1827 668 8 1812 825 17 1820 769 4 1828 672 3 1813 922 8 1821 781 10 1829 677 3 1814 940 27 1822 776 9 1830 671 14 1815 916 25 1823 779 9 1831 641 — 1816 831 37 1824 788 10 1832 636 — TABLE n. {Opposite page.) An account of the number of country banks in England and Wales, for which licenses to issue promis- sory notes have been taken out in each year, from 1811 to 1818, distinguishing the number in each county, and the number of partners concerned in the banks of each county. OF BANKING. Ill 1 COUNTIES. 1811—12. 1 1812—13. 1813—14. 1814-15. 1815—16. 1816—17. 1817—18. 1818-19. 1 O o •A « P.( 6 -S 2i« o £ 65 "SS . c = e 6 5 6 = o o 4 Bedfordshire Berkshire 7 15 3 10 6 2 6 5 24 9 S 7 48 12 9 16 2 9 39 30 8 11 6 31 5 9 22 1 6 10 4 19 13 4 13 17 6 1 4 18 47 23 20 12 22 24 5 24 17 75 739 16 54 9 22 18 6 15 12 68 32 11 22 148 33 41 50 10 30 131 85 24 25 19 93 18 27 60 2 17 42 9 67 34 17 45 56 16 2 8 58 126 52 66 37 73 65 19 79 51 257 2277 7 19 2 8 8 2 6 7 23 8 4 9 46 15 11 15 3 10 39 34 7 13 5 39 5 10 22 1 3 7 6 18 14 5 14 17 5 3 22 47 27 17 12 24 26 3 22 18 73 761 19 69 6 18 27 6 14 17 28 7 34 140 40 59 48 10 28 130 94 2) 27 16 120 18 29 64 2 9 26 12 Q5 36 26 46 5^ 14 7 63 129 &rj 59 37 80 74 11 74 52 255 2350 7 19 4 6 8 2 8 7 22 7 4 9 44 14 11 16 2 11 40 31 9 11 6 58 4 10 23 1 2 6 4 18 12 4 13 15 5 4 22 43 22 18 13 22 24 3 22 16 71 733 19 64 10 IS 25 6 19 17 60 25 9 34 129 39 48 49 9 33 132 85 28 23 20 111 13 29 65 2 6 18 11 60 33 20 40 43 12 10 62 127 55 61 37 76 73 11 71 51 240 7 18 3 7 7 2 4 7 21 6 4 7 44 14 11 15 2 12 39 28 7 12 5 34 6 13 14 2 2 5 3 17 13 7 13 16 5 3 22 41 24 19 13 18 24 3 19 14 67 G99 17 59 7 16 22 6 10 16 58 22 8 28 130 36 51 49 8 37 126 80 22 30 16 95 24 41 39 4 5 15 7 55 33 30 44 50 13 8 64 124 60 59 39 64 79 11 60 45 223 6 17 3 ;i 6 4 8 21 5 5 8 40 11 10 13 2 7 38 30 7 12 6 31 6 8 12 1 2 5 2 17 12 5 13 12 3 2 21 31 22 19 14 20 23 3 17 13 68 643 16 54 7 9 21 10 20 54 17 10 28 119 26 40 41 8 22 127 83 23 30 16 87 23 24 37 2 6 15 5 54 33 20 40 35 7 5 63 89 54 62 35 72 79 11 56 41 220 1956 6 10 2 4 7 1 4 6 19 5 4 8 36 11 6 9 2 7 38 28 6 12 6 28 5 8 9 2 2 5 2 17 10 4 11 10 3 1 1 15 30 18 20 11 16 23 4 17 14 62 17 31 6 9 23 3 9 18 52 19 7 28 108 25 26 28 8 21 127 76 17 28 20 75 18 24 30 4 5 14 7 56 28 16 33 26 7 4 2 51 89 43 66 26 56 79 15 55 44 212 6 10 2 4 7 2 3 4 20 5 5 7 37 12 8 10 2 9 31 25 6 11 5 28 4 8 9 2 2 4 2 17 9 8 9 12 3 1 15 31 20 18 8 19 23 3 16 15 59 17 29 5 9 23 5 7 12 54 19 13 26 108 28 32 33 8 27 98 67 17 27 17 71 15 24 30 4 6 11 7 58 26 30 30 32 7 2 49 93 46 61 18 65 78 9 52 47 199 6 9 2 4 7 2 3 4 22 5 4 7 38 10 7 10 2 9 33 26 7 12 5 30 5 9 12 3 2 6 2 16 12 6 9 13 2 2 15 30 17 19 10 18 23 3 16 14 59 17 27 5 9 24 5 8 12 58 19 9 26 105 25 29 32 8 25 108 67 21 27 17 75 19 26 39 7 6 16 7 56 32 27 29 32 5 4 47 95 39 67 23 61 78 10 53 41 199 Brecknockshire.. Buckinghamsh.. Cambridgeshire . Cardiganshire ... Carmarthenshire Carnarvonshire. . Cheshire Cornwall Cumberland Denbighshire.... Derbyshire Devonshire Dorsetshire Essex Flintshire Glamorganshire. Gloucestershire.. Hampshire Herefordshire ... Hertfordshire.... Huntingdonsh. . . Isle of Anglesey Kent Lancashire Leicestershire. ... Lincolnshire Merionethshire... Middlesex Monmouthshire. Montgomerysh. . Norfolk Northamptonsh.. Northumberland Nottinghamshire Oxfordshire Pembrokeshire .. Radnorshire Rutlandshire Shropshire Somersetshire.... Staffordshire Suffolk Sussex Warwickshire ... Westmorland .... Wiltshire Worcestershire. .. Yorkshire Total 2234 2145 585 1791 576 1751 587 1776 Stamp Office, Somerset Place, Mayl, 1819. TEESDALE COCKELL, Assistant Distributor. 112 THE HISTORY AND PRINCIPLES According to the Post-office Directory for 1834, the number of private country banks, and branches of private banks in Engkuid and A\^ales is G38 ; and the number of joint- stock banks and their branches is 106. Tlie country banks are banks of deposits, banks of discount, and banks of remittance ; most of them are also banks of circulation. As banks of deposit, they allow interest upon deposits ; as banks of discount, they discount for parties who do not keep with them a current ac- count ; as banks of remittance, they conduct their business through the agency of the London bankers ; they also receive through the London agents tlie dividends on the public funds, on account of parties in their neighbourhood. The holders of stock grant in the first instance to the London banker a power of attorney to receive the dividends, which, when received, are placed to the credit of the country banker, by whom they are paid to the proprietors. This facility of receiving dividends in all parts of the country, has, no doubt, induced many persons to become holders of government securities, and thus the country banks have assisted in supporting public credit. The country banker pays his London agent either by a balance, by a coynmission, or by an annual fixed amount. In the case of a balance, the country banker agrees to keep in the liands of a London banker a certain sum, for which he is to receive no interest. The amount of this deposit varies, according to the extent of the business. If the country banker keeps less than the stipulated amount, he is charged interest for the deficiency, as upon an overdrawn account. If he keeps more than this amount, he is usually allowed interest at a rate per cent, wliich is agreed upon by the parties. In the case of a com- mission, the country banker pays at the end of each OF BANKING. 113 year a certain rate of commission on the transactions of the year ; the charge is made upon the amount of the debit side of his account. Some country bankers, instead of a commission, prefer paying a fixed sum per annum. In this case the charge does not vary with the amount of transactions as in the case of com- mission, but whether the transactions be great or small the payment remains the same. TABLE III. An account of the number of country bank notes, of all denominations, stamped in each year, from 1820 to 1831, both inclusive: Not Not Not Not Not Not Not Not Voarc exceeding exceeding exceeding exceeding exceeding exceeding exceeding exceeding Xcars. 11. Is. 2/. 2i. 5/. 5s. 10/. 20/. SO/. 50/. 100/. 5rf. lOrf. U. 3d. Is. 9rf. 2s. 3s. 5s. Ss. 6d. 1820 1,683,824 22,181 203,673 49,280 7,250 71 1060 182] 2,214,623 20,180 254,839 51,226 10,738 50 417 1600 1822 1,888,959 11,700 267,213 65,032 13,756 100 206 1060 1823 1,969,758 25,110 273,184 74,232 9,573 199 292 1392 1824 2,501,849 21,500 442,112 131,196 22,189 14 528 1861 1825 3,172,477 39,511 557,946 158,233 46,392 12 381 1845 1826 248,117 — 141,603 45,399 1,971 341 12 375 1827 291,377 — 245,91 1 57,683 6,933 — 95 208 1828 155,199 — 382,311 58,356 12,697 — 560 1100 1829 257,271 — 352,969 57,758 5,339 215 861 400 1830 532,431 4,500 282,107 50,975 11,192 215 615 40 1831 499,691 — 295,086 47,156 8,499 300 1800 The notes of a less value than 5l. stamped in Great Britain since the 3d of February 1826, are applicable to Scotland only. The above account does not in- clude the notes stamped in Ireland. 114 THE HISTORY AND PRINCIPLES TABLE IV. An account of the sums received for stamp duties, and as a composition of the duty upon country bank notes, in the years 1816 to 1832. Years. stamp Duties. Composition. Years. Stamp Duties. Composition. 1816 83,213 11 1824 93,277 1 11 — 1817 139,632 2 9 11825 114,916 1 6 — 1818148,314- 2 2 :1826 13,108 4< 6 — 1819 62,329 8 7 1J827 21,222 3 - 1820, 53,656 15 5 1828 30,443 8 6 297 3 J 821 66,961 3 7 1829 26,602 12 6 1966 6 11 1822 62,182 6 [1830 21,740 11 33328 3 5 I823J 65,054 15 1 jl831 23,600 11 9 2414 14 4 Henry Burgess, Esq., the secretary of the country bankers' committee, deUvered to the parliamentary committee of 1832, returns of the issues of 122 coun- try bankers in England and Wales from the year 1818 to the year 1825, taken in the month of July in each year. The amount of issue in 1818 was represented by the number 100, and proportionate numbers were employed to represent the issues of the subsequent years. The following is the result of the whole ; — TABLE V. Numbers repre- senting propor. tionate issue. liiffcrence. 1818 12,200 — 1819 11,991 209 being a^ 1 15 per ct. decrease from 1818. | 1820 11,487 709 5 16 10^ do. do. 1821 11,352 848 6 19 do. do. 1822 10,778 1422 11 13 U do. do. 1823 10,748 1452 11 18 oi do. do. 1824 11,640 560 4 11 9 do. do. 1825 12,478 278 2 5 6| per ct. increase over 1818. OF BANKING. 115 The circulation of country bank notes appears to have been the lowest in the year 1823, and the high- est in the year 182.5, the increase from the lowest to the highest is 16/. Is. ijr/. per cent. By 3 and 4 William IV. c. 83., passed in 1833, banks issuing promissory notes are required to make returns to the Stamp-office of the average amount of notes in circulation in the quarters ending the first day of January, April, July, and October in each year. The quarterly average is to be formed from the amount in circulation at the end of each week. In the memorial presented by the committee of country bankers to Earl Grey and Lord Althorp, June 12. 1833, they made the following observations upon the circulation of the country banks : — " Your memorialists are prepared to prove that the issues of country bankers have less tendency to promote fluctuations in the country than those of the Bank of England ; and that their effect in throwing the exchanges against the country is comparatively insignificant. The sHghtest attention to facts would indicate the truth of these positions. It has been established by parHamentary evidence that the issues of country bankers fluctuated much less between the years 1817 and ]8'26 than those of the Bank of England ; and it is indisputable that adverse exchanges, which endanger the bank, always succeed great importations of foreign produce, and that they never can be occasioned by large export- ations of domestic productions. Now it is notorious that the cir- culation of country bankers acts ahnost exclusively in promoting these productions : and that, when it is in an extended state, the direct and proper influence even of an alleged excess of that circu- lation, would be to provide the means of paying for the importations of foreign produce without causing so great an export of gold as to derange and endanger the monetary system of the country. This is looking at the separate and distinctive character of the issues of country bankers ; if regarded as a part of a whole, any excess in which must bear its relative proportion of effect in producing derangement, that proportion can never exceed one- tenth; be- cause, assuming that all paper currency has an equal bearing upon depreciation and appreciation, the issues of country bankers never amounted to one-tenth part of that which is used for effecting the interchanges of commodities and property in the country. All experience shows that great fluctuations have originated in the speculations of influential merchants, and never I 2 116 THE HISTORY AND rillNCIPLES originated in the channels to which the issues of country bankers are confined ; their source is in great mercantile cities, and they are promoted by the issues ot the Bank of England. That this is the invariable course which fluctuations resulting in excess and derangement take, is proved by the evidence of Mr. Ward and others, before the bank charter committee, and is fully explained by the speeches of the King's Ministers in the year 1826. The debts of a few speculative merchants who failed in a single year in the town of Liverpool, where country bankers' notes never circulated, amounted to between seven and eight millions sterling, and their bills were either lodged in the Bank of England for loans, or were current in all parts of the country, stimulating circulation and promoting excess. " Then, with regard to the alleged tendency of many sources of issue to promote fluctuation — the rivalry of numerous banks of issue was set up by the government of 1826 as a principle which ensures solidity and equability to the circulation, ' from the con- stant exchange of notes between the different banks, by which they become checks upon each other, and by which any over-issue is subject to immediate observation and detection.' That was the report of the lords' committee, after full and complete investi- gation. The government of 183S is proceeded with a measure founded on the principle that rival banks of issue promote fluctu- ation ; this, however, is before investigation. Deposits and cash credits were declared by the witnesses from Scotland to be abso- lutely dependent on local bank issues, and the government of 1826 admitted the validity of the plea ; the government of 1833 concludes that the system of deposits and cash credits may be maintained in England without local issues, but this conclusion is adopted without any inquiry into the case. It would be fruitless to dwell on this contradictory conduct in two administrations pro- fessing to be guided, in dealing with the currency, by the same policy. Admitting, that by one source of issue, the actual amount of notes payable on demand might be kept more equal than by many, it does not follow that their distribution would not be in- finitely more unequal — every man possessed of practical inform- ation who understands the subject knows that by giving the exclusive circulation of notes to the Bank of England abundance will be created in the money market, and in the great commercial emporiums — raising the price of public securities, and stimulating the produce markets — while unexampled scarcity will be the consequence in the country, producing embarrassment and discon- tent among the cultivators of the soil of all who are dependent upon them. Therefore the real practical point to be determined concerning the tendency of different issues is, whether 2,000,000/., or any given sum, laid out in purchasing French rentes in Paris, and indigo in Calcutta, or in replenishing with stock the exhausted corn and jiasture fields of England, have the most effect in drawing OF BANKING. 117 gold out of tJie country. It is hardly possible to imagine any measure of greater danger than the projected plan of government. The present bank directors may be men of unimpeachable in- tegrity ; but others less scrupulous may succeed them ; and it is within the range of possibility for a man of influence who had obtained a seat at their board, to make a speculation by purchasing indigo in Calcutta, and then proceed to stimulate the market for that commodity in London, just before the sale at the East India house, by discounting the bills of favoured connections ; then, at nearly the same period, he might cause instructions to be given to the manager of the branch bank in Manchester to contract the customary and stipulated discounts ; which would have the effect of depressing the market for cotton twist and piece goods, which are the principal commodities transmitted to India in exchange for the produce of that country. By this double operation the produce of a director's capital employed in Hindostan might be temporarily raised in price in the London market, and the produce of English capital and labour sunk to favour the interests of one bank director or of several. The same result might be produced by the importer of Baltic produce : indeed, the importation of corn in 1831 pro- bably created that state of things which suggested to the govern- ment the plan of suppressing all local issues as the remedy for an alleged evil in the country bank system. It is hardly necessary to disclaim all personal imputation in this illustration. The chan- cellor of the exchequer has taken the self-interest of country bankers to be an element of so much danger, from its tendency to induce them to extend their issues^ as to adopt it as a principle in framing a legislative measure of the most hazardous character. Is the danger of the operation of the same principle to be disregarded when it might be exercised, not in a manner where it would be open to ' immediate operation and correction,' but in secret, where it could not be detected and challenged ? The history of national banks proves that their funds may be applied by their directors to far more daring private speculations than is described by this supposititious case. "If all bankers should be compelled to supply their customers with the notes of the Bank of England, a charge of 7 per cent, for the interest of loans to graziers, farmers, and dealers in agri- cultural produce, would not remunerate the country bankers so well as 4 or 5 per cent, does now upon the present system. The contemplated change in the usury laws, which if intended to afford to your memorialists some advantage for that which it is intended to deprive them, would give them some satisfactory com- pensation, because its tendency is to disorder or change that system upon which loans are made by country bankers with promptitude, facility, and comparative uniformity and cheapness ; the distinctive characteristics of their business are regularity and the absence of extortionary charges — In the event of the subver- I 3 118 THE HISTORY AND riUNCIPLES sion of that system it wouid be impossible for a great corporation, forming rules of conduct in London, and thence directing their application, to appoint agents competent to conduct the pecuniary affairs of the productive portion of the community. Those affairs, as far as banks are concerned with them, always demand peculiar local knowledge, and are in a great measure based on the confi- dential intercourse of fellowship and neighbourhood ; they fre- quently require personal knowledge of the circumstances and character of individuals, and the closest sympathy with i'eelings arising from family difficulties, or family ex})ectations and pro- spects. The governing principles, therefore, for conducting those important pecuniary affairs are totally incompatible with any that can govern the conduct of an hired agent in attempting to conduct the same. From these premises it results that the free ap|)lication of labour to land would be prevented, the costs of cultivation en- lianced, markets and the sale of produce impeded, and the pursuits of agriculture deeply injured. " Then with respect to miners and manufacturers, any system which would bring them into immediate contact with the operation of the bank for regulating the foreign exchanges, without that pro- tection and defence from those convulsive changes, which the local circulations afford, would be a system pregnant with inde- scribable hazard. Many of the bank directors are connected by friendship or commercial dealings with the great speculators in London and the populous towns, whose transactions mainly cause excess of circulation and an adverse state of the exchanges. In this class any contraction of the paper currency for the rectification of derangement, upon the present system, acts ; but upon the projected plan, parliamentary evidence, as well as the nature of things, shows that the contracting force will be put into operation by the branch bank managers at a distance from London, and pro- duce confusion in the affairs of mining and nuauifacturing industry, and discontent among a dense and excitable population. It may, under such a state of things, be rationally a])preliended that occa- sions will arise when workmen will be sudilcnly dismissed for the want of the power to pay them their wages, sho])keepers deprived of their weekly receipts, and the regular custom at markets for the supply of agricultural })roduce, impaired." Ill yv\)\y to the question, " Wliat effect do you sii])po,se that an increase or decrease of London bank notes has u])on the issue of country bankers ? " J. H. Palmer, Esq. replied : — " A material increase of the bank in London tends, in the first instance, to reduce the value of money, and consequently the rate of interest, upon all negotiable securities. That abundance of money renders it difficult for the country bankers to find beneficial OF BANKING. 119 investment for that part of the country money sent up to the capital for employment, consequently they are forced to resort to their immediate neighbourhoods for new channels for investing their surplus money ; and which tends to create additional issues in the country at an early period after the London increase has taken place. But it does not follow that a diminution of issues has an equally rapid effect in reducing the issues of the interior." SECTION VI. JOINT-STOCK BANKS. In the year I7O8, a clause was inserted in the charter of the Bank of England, prohibiting the establishment of any other bank having more than six partners. This clause prevented the formation of any other joint-stock bank ; and, as the increasing wealth and commerce of the nation occasioned a demand for banks of some sort, a great number of banks, each having no more than six partners, rose into existence, as they were successively required by the wants of the country. The charter of the Bank of England had no reference to Scotland, which at that period was a separate kingdom. Hence, with the increasing wealth of Scotland, joint-stock banking companies were formed ; and at present they conduct nearly the whole of the banking business of that country. But, with every renewal of the charter of the Bank of England, this clause was retained, and hence has arisen the difference which subsists between the Scotch and the English systems of banking. In the year 1826, an act of parliament was passed to permit the formation of banks having more than six partners, at a greater distance than sixty-five miles from London ; with a provision, however, that such banks should not make their notes payable in London, nor draw bills upon London for a less amount than I 4 120 THE HISTORY AND PRINCIPLES 50/. By an act passed in 1833, tliesc banks have the privilege of drawing bills on their London agents, either on demand or otherwise, and for a less sum than 50/. The advocates of joint-stock banks allege that they possess the following advantages over private banks : — 1. Joint-stock banks possess greater security than private banks. Security is of the first importance to a bank. One branch of the business to a banker is to take charge of money committed to his care. But who will entrust money to a banker who is not known to be, or, at least, supposed to be rich ? And if a banker be rich, but afterwards, by mismanagement or mis- fortune, become poor, and fail, what dreadful misery is inflicted upon those who have money in his hands. How many respectable individuals may be suddenly bereft of their whole dependance. How many indus- trious tradesmen may become bankrupts. What distrust, what inconvenience, what interruption of business is occasioned, even to those who can bear the loss. But by a joint-stock bank all these evils are avoided. Anotlier branch of the business of a bank is to remit money from one ])art of the country to another ; but who will trust them with money to remit when they may fail before they have executed their trust ? Banks, too, issue their own notes, and thus supply tlie circulating mediimi of the coimtry. Here wealth and security are more necessary than ever. In the former cases, the creditors of tlie banker may hav^e liad some opportunity of judging of his safety, and would probably make previous in- quiries upon the subject. But when the notes of a banker have become the circulating medium of a neighbourhood, they are readily taken witliout any inquiries about his solvency. And, indeed, in some cases, if the notes were suspected, they could not be refused. If a tradesman will not deliver goods to OF BANKING. 121 his customers for such notes as they offer him, tliey will take the notes to some other tradesman. Men who receive wages must receive them in such notes as the master chooses to pay. Since, then, each banker supplies the circulating medium of a large district, and the notes are thus circulated among all classes, some of whom have not the option of refusing them, nor the ability to judge of their value, it is of the utmost importance that banks should be establish- ed on those principles which will prevent their failure. That a bank having a great number of partners should be more secure than a bank consisting of only a few partners, seems a very obvious proposition ; and it has received abundant confirmation from the nu- merous failures that have occurred among the bankers in England, and the few failures that have occurred in Scotland. This is a fact that demonstrates the superior security of joint-stock banks. If a bank of this kind has a charter, it must previously possess a large fund, which forms a guarantee for the punctual payment of its notes or deposits. If the bank have no charter, then every individual shareholder is answer- able for all the debts of the bank to the whole extent of his property, as fully as though he had incurred those debts himself. In either case the security is greater than can be offered by any one individual, or by any four or five individuals, however respectable they may be. 2. A joint-stock bank is less liable to runs. A run is a sudden and general demand for the payment of notes, or deposits. It is not sufficient that a banker be safe : it is also necessary that he should be believed to be safe. He derives the larger portion of his gains from the confidence which is placed in him by others. Confidence is money. However wealthy or respectable a banker may be, he may not always be believed to be so. The mis- fortunes of others may cause him to be suspected. 122 THE HISTORY AND PRINCIPLES But no banker has always in his coffers all the sums necessary to pay all the claims that may be made upon him. If lie were to do this, from what quarter would he obtain his profits ? What, then, is he to do in case of a run ? He must at all events obtain money to meet the demands made upon him ; for if he once suspend his payments, all his credit is destroyed and his business is broken up. Hence he may be compelled to borrow money at a high rate of interest, or to sell stock or estates below their value, and to incur great expense, in order that the money may arrive in time to meet the demand. But the effects of a run are not confined to the banker himself. One run is over, but another may come. He will be anxious to be better provided next time. He will be more cautious. He will call in the money he has lent. He will lend no more. He will discount fewer bills. Those tradesmen and others who have been accustomed to obtain from the banker facilities for carrying on their business, can obtain them no longer. Some have depended on these facilities, and will now fail ; others will circumscribe their business ; labourers will be thrown out of work, and trade will be obstructed and depressed. Such are the effects of a run when the banker is solvent, and the run is met with promptitude. But the banker may be good, and yet the run may cause him to stop payment. In this case, though the banker may ultimately pay the whole of his debts, yet this sto})page will produce for a while the same effects as though lie were insolv^ent. But it is pos- sible that he might have been solvent before the run, and have been rendered insolvent by the run. The sacrifices he may have been compelled to make for the purpose of raising the money in time to meet tlie demand, may have absorbed the whole of his property. Now, what is it that causes a iiin ? It is merely OF BANKING. 123 an apprehension that the banker cannot discharge tlie whole of his obHgations, and hence each creditor tries to be first, that he may secure the full amount of his own claim. But no apprehension of this kind can exist in reference to a joint-stock bank. Every body knows that all the partners are liable for the debts of the bank to the full extent of their property ; and each creditor feeling assured that even should the bank fail, his property is secure, abstains from engaging in a run whereby he can gain no advantage. 3. Another advantage which joint-stock banks are alleged to possess, consists in the prudence of their management. A joint-stock bank is managed by a board of direc- tors, men of character and ability, who are chosen to fill the office from their superior knowledge of mer- cantile and banking business. The united know- ledge and wisdom of a number of individuals must be greater than that of two or three individuals. They are not so liable to be imposed upon by false representations, to be deluded by false reasonings, or to be biassed by personal attachments. As among many persons there is sure to be a difference of opinion on almost every question brought before them, it is certain that no measure will be adopted without having first received a full discussion. On the other hand, the management of a private bank is too frequently entrusted to one or two of the partners ; men who cannot be expected to act with the caution and prudence of an elected body, answer- able for their conduct to the great body of proprie- tors : men, too, who have their prejudices to indulge, their friends to please, and their partialities to gratify. Not so with the directors of a joint-stock bank, where the follies of an individual would be checked, and his deficiencies supplied by his colleagues. It often happens, too, that the partners of a private bank are engaged in some branch of manufactures or com- 124 THE HISTORY AND PRINCIPLES merce ; and in this case tlic bank will be made sub- ordinate to the trading concern. The banking merchant or manufacturer will extend liis business, or engage in speculation, under the consciousness of behig able to make good his purchases. The trading concern will have an account at the bank, and will always be overdrawn. The money which ought to be employed by the bank in discounting bills for their customers, will be absorbed by the trade of the partners. If the trading concern fails, the bank too must fail : the one involves the ruin of the other. Perhaps, indeed, the bank, by supplying money in the first instance for the parties to specidate with, may have been the cause of the ruin. Even when the partners of a private bank are not themselves engaged in any other employment, the bank often becomes connected with some large manufacturing or commercial establishments. Such establishments are useful to the bank, by enabling them to circulate a considerable amount of their notes. Hence the bank is induced to make large advances to them. After- wards a further advance is necessary. A run upon the bank compels them to call in the money they have advanced. The money cannot suddenly be replaced. Hence all the parties become bankrupts. From all these evils joint-stock banks are alleged to be free. As some persons abstain from becoming partners in joint-stock banks, from an ap})rehension of the danger which they incur in consecpicnce of the w^hole of their property being answerable for the debts of the bank, I sliall quote those sections of the Act which have a reference to this subject: — " And be it further enacted, that all actions and suits, and also all petitions to found any commission of bankruptcy against any person or persons, who may be at any time indebted to any such copartnership carrying on business under tlie provisions of this Act, and all proceedings at law, or in equity, under any commission pf bankruptcy, and all other proceedings at law, or in equity, to be OF BANKING. 125 commenced or instituted for or on behalf of any such copartner- ship, against any person or persons, bodies poUtic or corporate, or others, whether members of such copartnership or otherwise, for recovering any debts, or enforcing any claims or demands due to such copartnership, or for any other matter relating to the concerns of such copartnership, shall and lawfully may, from and after the passing of this Act, be commenced or instituted and prosecuted in the name of any one of the public officers nominated as aforesaid for the time being of such copartnership, as the nominal plaintiff or petitioner for and on behalf of such copartnership ; and that all actions or suits, and proceedings at law or in equity, to be com- menced or instituted by any person or persons, bodies politic or corporate, or others, whether members of such copartnership or otherwise, against such copartnership, shall and lawfully may be commenced, instituted, and prosecuted against any one or more of the public officers nominated as aforesaid for the time being of such copartnership, as the nominal defendant for and on behalf of such copartnership. " And be it further enacted, that no person or persons, or body or bodies politic or corporate, having or claiming to have any de- mand upon or against any such corporation or copartnership, shall bring more than one action or suit, in case the merits shall have been tried in such action or suit, in respect of such demand ; and the proceedings in any action or suit, by or against any one of the public officers, nominated as aforesaid for the time being of any such copartnership, may be pleaded in bar of any other action or actions, suit or suits, for the same demand, by or against any other of the public officers of such copartnership. " And be it further enacted, that all and every decree or decrees, order or orders, made or pronounced in any suit or proceeding in any court of equity against any public officer of any such copart- nership carrying on business under the provisions of this Act, shall have the like effect and operation upon and against the property and funds of such copartnership, and upon and against the persons and property of every or any member or members thereof, as if every or any such members of such copartnership were parties members before the court to and in any such suit or proceeding; and that it shall and may be lawful for any court in which such order or decree shall have been made, to cause such order and decree to be enforced against every or any member of such co- partnership, in like manner as if every member of such copartnership were parties before such court to and in such suit or proceeding, and although all such members are not before the court. " And be it further enacted, that execution upon any judgment in any action obtained against any public officer for the time being of any such corporation or copartnership carrying on the business of banking under the provisions of this Act, whether as plaintiff or defendant, may be issued against any member or members for the 126 THE HISTORY AND PRINCIPLES time being of such corporation or copartnership ; and that in case any such execution against any member or members tor the time being of any such corporation or copartnership, shall be in- effectual for obtaining payment and satisfaction of the amount of such judgment, it shall be lawful for the party or parties so having obtained judgment against such public officer for the time being, to issue execution against any person or persons who was or were a member or members of such corporation or copartnership at the time when the contract or contracts, or engagement or engage- ments in which such judgment may have been obtained was or were entered into, or became a member at any time before such contracts or engagements were executed, or was a member at the time of the judgment obtained ; provided always, that no such execution as last-mentioned shall be issued without leave first granted, on motion in open court, by the court in which such judgment shall have been obtained; and when motion shall be made on notice to the person or persons sought to be charged, nor after the expiration of three years next after any such person or pei'sons shall have ceased to be a member or members of such corporation or copartnership." From the above extracts it appears that no legal proceedings can be taken in the first instance against an individual shareholder, but must be directed against the public officer, whose name is registered at the Stamp-office. — That not more than one action can be brought for one demand.— That after a share- holder has transferred his share, he is not liable for any debts which the bank may subsequently con- tract ; nor for debts contracted at the time he made the transfer, unless the execution issued against the fimds of the bank, and against the existing share- holders, should be " ineffectual for obtaining pay- ment and satisfaction of the amount ; " and in this case the proceeding must first be by motion in open court. — And that three years after the transfer, the party is released from all responsibility, though the funds of the bank should be annihilated, and every shareholder become bankrupt. This responsibility, whicli even legally considered is very triffing, may be still farther limited by the deed of settlement. When a joint-stock bank is formed, a deed of ])artnershi}) is pre])ared, and is OF BANKING. 127 signed by every shareholder. Tliis instrument is called a deed of settlement. The shareholders have no power to limit their responsibility in reference to their creditors, but they may do so in reference to each other ; and may guarantee one another against any claims that may be advanced against any one of their number. This is actually done. The deed of settlement provides, that no shareholder shall be answerable for the debts of the bank to a greater extent than the proportionate amount of his share ; and that the moment he has transferred his shares to another party, he is wholly free from any claims or responsibility whatever. The act of parliament says to every shareholder, " You are responsible to the whole extent of your property for all the debts of the bank." The deed of settlement says to him, " If any claims be made upon you, while a share- holder, by the creditors of the bank, we, the other shareholders, engage to pay our proportion of the debt ; and if you have ceased to be a shareholder, we indemnify you against any claim whatever." It is obvious, then, that while the other shareholders continue in a state of solvency, no individual share- holder runs any risk. This may be illustrated by supposing an extreme case. I will suppose that I am the holder of five shares in a banking com23any, whose stock is divided into ten thousand shares ; and that all the money paid up, whatever it may be, is lost, and the bank is 20,000/. in debt. The propor- tion of this debt which I ought to pay is 10/. The creditor sues the public officer of the bank, and ob- tains judgment against him ; and considering me to be a rich man, he singles me out as the shareholder against whom he will first issue execution. The sheriff's officers seize my goods and chattels, or what- ever property I have, to the extent of the 20,000/. This is law, and I have no redress. But in the deed of settlement it is covenanted and agreed that no 128 THE HISTORY AND PRINCIPLES shareholder sliall be answerable for the debts of the company, to a greater extent than the proportionate amomit of his shares ; and all the shareholders guarantee every one of their number against any claim beyond this proportion. Now then, though I have no redress against the creditor, I have a redress against the other shareholders, and I will sue them upon the deed of settlement. As soon as I have ob- tained judgment, I will issue execution against their property, until I have repaid myself the whole 20,000/., excepting the 10/., which is my proportion of the loss. I hav^e here supposed the case to pro- ceed to extremities ; but it is highly improbable that the affairs of any bank would be allowed to proceed to this extremity. As soon as the state of its affairs were known, a meeting of the proprietors would take place ; they would pay down the 2/. per share which they liad lost ; the deed of settlement would be put into the fire ; and there would be an end of the company. It appears then tliat the enactment which renders the whole of the property of every shareholder answerable for tlie debts of the bank, is very just and satisfactory. It is satisfactory to the public, inas- much as it gives them the most ample guarantee for the payment of the debts of the bank, whether those debts arise from notes or deposits. It is satisfactory to the shareholders ; for although each shareholder may consider tlie whole of his property liable for all claims upon the bank, yet he knows that by the deed of settlement the property of all the other shareholders is answerable to him for all claims, be- yond the proportionate amount of his shares ; and hence the guarantee to him is just as ample as the guarantee to the public. So far from militating against the interest of the shareholders, this enactment has the effect of in- creasing their ])rofi1s, inasmuch as it enables them OF BANKING. 129 to carry on business with a less amount of capital, and hence to make a larger dividend. I will sup- pose that a banking company employs a capital of 200,000/., upon which there is an annual profit of 16,000/., or 8 per cent., and all the shareholders are responsible to the full extent of their property. Let a law be passed abolishing this responsibility. The public will now look with greater scrutiny into the affairs of the bank ; they will calculate whether this capital be sufficient to sustain any heavy loss, and what risk they may run in receiving their notes or making deposits. To secure public confidence, the directors will find it necessary to make a further call upon the proprietors for 200,000/. But as this surplus capital cannot be employed in the business, it must be invested in government securities, which, at the utmost, will yield but 4 per cent. Now the shareholders, instead of having a profit of 16,000/. upon a capital of 200,000/., will have a profit of 24,000/. upon a capital of 400,000/. Instead of re- ceiving 8 per cent, on their capital, they will divide but 6 per cent. It is obviously not for the advan- tage of a bank to call up a larger portion of its capital than what is necessary for carrying on its operations. All the surplus capital must be employed in a manner less productive, and the average profit will be dimi- nished. And, besides, when a bank has immense sums invested in the public securities, there is danger that the directors will attempt to make these sums more productive, by gambling in the funds ; where- by the capital of the bank — the sole security to the public — may be placed in jeopardy. The following is a list of the country joint-stock banks at present existing in England. They are arranged alphabetically, according to the places in which the head offices are established. 130 THE HISTORY AND PRINCIPLES » n m u 6 -a -c -s 13 s B = S p i? c^ rt w rt c5 >. -a .!? c a; S o t; „" - o -5 TS o -t; o _ . _^ c o ^ c o S ^ -a cs « ?i 3 U J- « OOOOOOOOOOOOOOOOOOOOOOODOOcjOWOOOOOCOOCOWXaoOOCCOCOXXCOQOXOOOO • ■" bo >, S &. p — ►^ cc ■< l-s Q; Qj CC Q^ Q> OQSQQ Ph;p;z;i ;2;>^Q e a -rs <5cqSP c ^ P-s ^-^ >- i; to „ ^ >> lU 2 2 >«n oo|^i5Soo^:5;i2S^2^§2:3^§:§^2^ QOpQWPqpqQQpquyQuunuunGqQQoQKQSKffiO a 6 « bC -i^ u o -■c.S c^^ ca = B" ° c j= P5 o --: " tc . U .2 fq W fcO 5 wo 2cq S S £ 2 c £ P S C " O ^ i||pqo2 fo'S.^'^-HO a! .S .= O K b b MP5fqmcqcqm es 3 D. O goi fcD •r: c ^ o (« fco E — a, S o .5 « o ^ « bo-s;^ u ' O .b ^ - i J= S 3-J< fcf : ^0 ^ =s p y c I c ^ — is I 02 ^ 3 ^ "^ ' -3 ^ "S O 0) -^ O w ^- C^ *j I 3 -d > 3 -S •£ o . - a. cs -?, o ^ be 3 .^U. o-r ^ »«= n "s c: ■n 3 3 3pc/3 5 g StS 5^ C'Sw- ^ '^ ^ ^3 P Q _-K ; c,^ 2 ca ►-* 3 .-3 Q ' O tg >, >^2 3 >.i: i i bc =« P ^ ^ ^ M . :: .-^ til •* ^ QJ ai r3 ^ *-* 3 0) >. > I- I- ■" ^_„_.. .. OJ300«^v5^ bo 3 o ts 3 C 5? ^ -3 CD ' ^ 3 rg — « « t- 01 t- '^ ,0 > 0) .-= ;n >-. U 13 p 2 '^ - o ^ ffi J « -^ 13 r; t, I. O C rt 2 2^ <« t-, a) aJ >< >^ i> o o ,gg ^cd OF BANKING. 131 n pq m o s 0"S "O c3 'a c c c !s o U « "^ oi SB — C8 cd O c^ 'o "^ ~ „s s 3 ^ r^ "r rr; rs c ? ■TS o T3 "^ "^ ^^ CT3rj H C S-Cra U5 « "C en « ' « =* rt m S d S o • ° g t3 ca _0 'qlll =^1 C w j3 ^ 5 >»~ s a' 5 5 Ji* o '6 .^ ■£ S S " -2 .2 oil Sj^S^ -a «^ g ^ oS O O) e ^ Ji o " Men— iCOlOlO'-T'*ilo;oa> to «lCr-iO>lOCO«5tDtO^O00dcr>T} o in >< fcc! ,Ji H^l H^l ,^ Q q Q ^..5 oooooo'oyocooo ;j ;:3 a Q Q Q Q S Q S ^3 H a o g ^ _aj 2 "w "^ o _3 ^ «> =3 .-ti .-ii .tj .-S .-S .-S !u 5 £ g Q Q Q Q p Q ^ ;z; ;zi a -13 hfl-3 .S 3 -^^ c I-' '3 = Gc3 CQ C3 >> o c e sp .; u o *j rt.S-^ oO.-i tjo g pa f^ s . 2 §f5 c c:i2 o Ml c >.^ s s a, >. a,p5 i « i5 bc-^ K^m -2 « '« c i-5 S-a^i-.^ 3 J « W I pq o"^ m : • ^ s^ c'2 CD ^ o o S 2 £ 0/ OS ■;: 'S !« w tj o c g -a .^ 2 C cS Bi 0) I; C p3 dj OJ 01 O tij hJ H^ |_1 H^l >^ 5i(UC«P'^3C'Corto == - ^ ^-grt >c3-^fi;^ s- - .,•'5 C " ^ « -a M Tf !« -^ "^ mo s 13 S s ©r: s -= c o o g c -- gf^S § SKI'S a a,— c ° !- i- 03 o _i^ •> > O rt* S W O CG '^ 01 "d O =< <«- ^' -d Opq bD« C u ^ "S >>pqP _ i^ S M c 2 J= P5 Sec b "so 6C-S — c! t2 P5l5- .2 i2 CS -5 c 35 J3 0) 55 .2 B e « .-^ W J h3 S^ o 2 Spq, .3 .— Bi .s c .:; o .z, .•::. o ca « « o S « ,_iK5Pah-5DHq:^i^i-irt:z;p5S;z;op 2 ,2 o o o r~C0010'-iO-J!r3T}-<01CO' C3 Glyn and Co. London and Westmin Smith, Payne, and Co Glyn and Co. Barclay and Co. Hanlniry and Co. Jones and Co. Barclay and Co. Jones, Loyd, and Co. Smith, Payne, and Co London and Westmins Jones, Lloyd, and Co. Glyn and Co. Rogers and Co. Ladbroke and 'Co. Robarts and Co. Price and Co; Williams and Co. Barclay and Co. Barnett and Co. o 3 c- ra fill 3 S 2 & i; 2 ::5 * i cc CO .^ ♦J O O „ M Hj :m.£ bCPQ i.s c .t: 1 .5 ^._ o bn c .- E « :3 CO wo;^ 01 o >» « s •= J^ '^ ,"> 3 bc<^ o o w) c ^ § z: ^ -^ E -^ rt •s m u i s -^ - b£=-£ P5 Jr 15 W P^ g T3 ^ '^ « ^ S222 cj a» CD o •^ r;2 0* Qj at rS ;> ,-5 rS :5 a r- o 3 ~ — a, 0) cj .« "^ T3 ■S C g !>^K! • - n.U « ^ ^ I «'p| . rs to c ^ -^3 rr is ^ ?:; " ^ -H " cc •- « ^ o cu Z: ~ CQ ,=« ^ ^c^ -S 3 f? 0; ^ ^:a b£CJ be O be s. « 01 E S.7 bC- 3 r- I E ' f^ ^ ^ ■u^ E 00O> Oi-i(N«^lOtOt^ «o > C8 « ^•- .ii j= 43 >- So i 0) 0) S* 43 C .'S .t: .i 3 -^ .i ~ ~ " 3 ,0 C OF BANKING. 133 SECTION VII. BRANCH BANKS. The establishment of branch banks may be consi- dered as the effect of the formation of joint-stock banks. A bank, consisting of only six partners, is seldom sufficiently well known over a great extent of country, to be able to open many branches. The credit of such a bank would be liable to be shaken, at one or other of its branches, and this might throw a suspicion on the whole establishment. But a joint- stock bank, possessing undoubted credit, may extend its branches with confidence wherever adequate busi- ness can be obtained. The comparative merits of an independent private bank, and a branch of a joint- stock bank, and the effects they are adapted to pro- duce in any town in which they may be introduced, form a useful subject of inquiry. In the first place, the branch bank may be sup- posed to possess greater security. The branch, how- ever small, would possess all the security that be- longed to the whole establishment. The notes issued at the branch would be as valid as notes issued at the head office ; and deposits made at the branch would be recoverable from all the partners in the whole bank. In case a run were upon even the smallest branch, the directors would be as anxious to meet tlie demand as though the run were directed against the largest. A small private bank, on the other hand, would have its only resource within itself. Its own capital woidd form its only guaran- tee ; and, in case of a sudden demand, it must ex- pect but little assistance from its neighbours. Secondly, a branch bank would command the use of greater capital. K 3 134 THE HISTORY AND PRINCIPLES Every joint-stock bank would call upon its share- holders, for a supply of capital equal to the carrying on of tlie business. This capital would be kept in a disposable form, and, not like the capital of some private banks, locked up in loans upon inconvertible security. The confidence the bank possessed would create more banking capital, by attracting deposits and facilitating the issue of notes. Some banks create more capital than they can employ : such is the case when the amount of notes and deposits is gi'eater than that of the loans and discounts. Others employ more than their banking capital ; and some banks employ more at one season of the year, and less at another. In such cases a branch bank would be fed with capital from the parent bank, as its wants might demand. If it yielded more capital than it required, the parent bank would employ it elsewhere. If it wanted capital, tlie parent bank would grant an arnple supply. But in these cases a private bank would be troubled with an excess of capital which it might not be able to employ advantageously for a short period ; or it might be distressed to raise capital to meet the wants of its customers. Thirdly, a branch bank would probably do busi- ness with the public on lower terms. "'A bank having many branches, usually charges the same rate of interest at all the branches. The Bank of England discounts at all its branches on the same terms as in London. This cheapness of dis- count occasioned a great reduction of profits to the private bankers. A branch bank, too, conducted on the principle of allowing interest on deposits, will probably allow a higher rate, because tlie money can always be employed at some one or other of the branches ; and it will return the deposits at a shorter notice, because the funds of the whole bank are ready to meet the call. In the transmission of money, a system of branch banks has a decided advantage, be- OF BANKING. 135 cause the branches draw direct upon each other, and discount bills, payable at all the branches respectively. In a system of independent banks the transmission of money from one to another is usually effected by a bill on London ; and bills drawn by one town on another are obliged to be made payable in London. Branch banks are enabled to charge less than private bankers, from their expenses and their ex- pected profits being less. If a country bank, having many branches, employs a London agent, the charge for agency will be much less than though the branches were all independent banks. A branch bank is not under the necessity of keeping in its coffers so large a stock of gold as though it were an independent bank, because, in case of emergency, it is sure of ob- taining supplies. The rate of profit, too, expected from a branch bank is much less than would be ex- pected by a private banker. A banking company would be induced to establish a branch, could they be assured of obtaining a clear profit of one or two per cent, on their capital above the market rate of interest ; but a private banker, who may be sup- posed already a wealthy man, would not consider that amount a sufficient remuneration for his own trouble and superintendence. Hence, his charges must be higher, to meet this increased rate of profit. Were the profits of a private banker, in proportion to the amount of capital employed, to be reduced to the average rate of profit of joint-stock banks, he would very soon think of retiring from business. A branch bank may thus be established in a place where a private bank could not exist. It may also be opened in places not sufficiently wealthy to furnish capital for a joint-stock bank, and where the people have no banking facilities ; branches being opened in such places, prevent the formation of banks with insufficient capital. For, to be without a bank is felt to be so great an inconvenience, that, if a good bank K 4 130 THE HISTORY AND PRINCIPLES cannot be obtained, a bad one will, for a while, be supported. Hence, shop-keepers and others have become bankers ; and, having but a small capital, and being unacquainted with their business, they have, ultimately, involved themselves and others in irretrievable ruin. I have hitherto, too, compared a branch bank with an independent private bank. I will now compare it with an independent joint-stock bank. Several of the advantages already specified will apply as justly in this case as in the other. The branch may, in this case, also be supplied with a greater amount of capital if it could be profitably employed, or it may have better means of disposing of its surplus capital. The charges of the branch, especially for the transmission of money by letters of credit, or by discounting bills, may also be less at the branch. In point of security, the two banks may be considered as on an equality ; though, perhaps, in some cases, the advantage may be in favour of the branch. The expense of managing a branch must be less than that of managing an independent bank, as a less number of directors would be necessary. The direc- tors or managers of a branch, too, acting under the direction of a superior board, are less liable to be in- volved by indiscreet advances of loans from personal friendship or imperfect information. The transac- tions are more thoroughly sifted, and no important measure adopted without full discussion. The very circumstance of being accountable to a superior board would render the agents at the branch more scrupu- lous and cautious tlian they might otherwise be ; and the periodical returns made to the head office would constantly bring all the business of the branch under the notice of experienced and unbiassed in- spectors. There are, however, some disadvantages attend- ing a branch bank. As a branch bank is a mere co- OF BANKING. 137 lony, the agents must be directed by the commands they receive from the seat of government ; and the branch may be directed, in some cases, to adopt measures more adapted to promote the welfare of the whole establishment than to advance the interest of that individual branch. The Bank of England, for instance, may engage to lend, on advantageous terms, a certain sum of money to the government ; and might consequently direct their agents at the branches to limit their discounts. As it is the duty of the directors to consult the interest of the whole esta- blishment, they might consider themselves justified, as commercial men, in adopting this line of conduct. At the same time, it would be a great inconvenience to the persons resident at the places where the branches are established to be deprived of their usual discounts. So any other joint-stock bank having branches might limit their discounts at those branches in consequence of having more profitable ways of em- ploying their capital at head quarters. Another possible inconvenience to a branch arises from the circumstance, that most cases of importance are necessarily referred for the consideration of the head office : not that these cases are more difficult than ordinary cases, but because they are deviations from the usual course of business, or they belong to a class of transactions which is very properly reserved for the decision of the highest authority. And hence, persons who have dealings with the branch may be obliged to wait the return of post, or a still longer term, before they can obtain answers to important inquiries. This inconvenience may, however, be con- siderably diminished by giving to the managers or agents a high degree of discretionary power, and re- serving as few cases as possible for the decision of the supreme board of directors. The respective claims of these three different kinds of banks, as far as regards any particular place, must 138 THE HISTORY AND PRINCIPLES depend on local circumstances. It is easy to imagine cases wherein a private bank of undoubted wealth and judicious management is superior to either a branch bank or an independent joint-stock bank. But private banks depend entirely upon the persons by whom they are managed ; and these persons, whatever other endowments they may possess, are not endowed with immortality, nor with the power of bequeathing their good qualities to their successors. Leaving private banks out of the question, a branch bank seems best adapted for a small town ; and an independent joint-stock bank for a large one. When banking is left perfectly free, the natural force of competition will soon enable each town to provide itself with that kind of bank which is best adapted to its own wants and circumstances. The Bank of England has established twelve branches. The business of the branches consists in discount- ing bills ; in receiving deposits ; in issuing bills on the London bank, at twenty-one days after date ; and in the transmission of money to and from Lon- don. Each branch issues its own notes, which are payable at the place of issue, and in London. The rate of discount is the same as in London ; no in- terest is allowed on deposits ; no charge is made for a twenty-one-day bill on the parent establishment : but if money be lodged at the branch, to be received the following day in London ; or lodged in London, to be received at the branch ; a charge is made for commission, unless the parties have accounts at the branch. 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CO tx. CO '"' CS G ,a c» # c 03 T3 C CJ OF BANKING. 141 SECTION VIII. BANKS OF DEPOSIT. Banking is a kind of trade, carried on for the pur- pose of getting money. The trade of a banker differs from other trades, inasmuch as it is carried on chiefly from the money of other people. The trading capital of a bank may be divided into two parts : the invested capital, and the banking capital. The invested capital is the money paid down by the partners for the purpose of carrying on tlie business. This may be called the real capital. The banking capital is that portion of capital which is created by the bank itself in the course of its business, and may be called the borrowed capital. There are three ways of raising a banking or bor- rowed capital : first, by receiving deposits ; secondly, by the issuing of notes ; thirdly, by the drawing of bills. If a person will lend me 100/. for nothing, and I lend that 100/. to another person at four per cent, interest, then, in the course of the year, I shall gain 4/. by the transaction. Again, if a person will take my *' promise to pay," and bring it back to me at the end of the year, and pay me four per cent, for it, just the same as though I had lent him 100 sove- reigns, then I shall gain 4/. by that transaction ; and again, if a person in a country town brings me 100/. on condition that, twenty-one days afterwards, I shall pay the same amount to a person in London, then, whatever interest I can make of the money during the twenty-one days, will be my profit. This is a fair representation of the operations of banking, and of the way in which a banking capital is created by means of deposits, notes, and bills. 142 THE HISTORY AND PRINCIPLES The profits of a banker are generally in proportion to the amount of his banking or borrowed capital. If a banker employ only his real or invested capital, it is impossible he should ever, in the ordi- nary course of business, make any profits. Bankers can seldom obtain more upon their advances than the market rate of interest ; and that may be obtained upon real capital, without the expense of maintaining a banking establishment. If, after deducting the ex- penses, the profits amount to nothing more than the market rate of interest upon the invested capital, the bank may be considered to have made no profits at all. The partners have received no higher dividend upon the capital invested in the bank than they W' ould have received if the same money had been laid out in government securities. To ascertain the real profit of a bank, the interest upon the invested capital should be deducted from the gross profit, and what remains is the banking profit. A bank that receives lodgments of money is called a bank of deposit. A bank that issues notes is called a bank of circulation. Each bank attempts to pro- cure a banking capital, but by different means. When a bank of deposit is opened, all the people in the district, who have money lying idle in their hands, will place the money in the bank. This will be done by the merchants and tradesmen, who are in the habit of keeping by them a sufficient sum of money to answer daily demands ; by the gentry and others out of business, who receive their rents, dividends, or other monies, periodically, and disburse them as they have occasion. The various small sums of money which were lying unproductive in the hands of nu- mei'ous individuals, will thus be collected into one sum in the hands of the banker. The banker will retain a part of this sum in his till, to answer the cheques the depositors may draw upon him ; and with the other part he will discount bills, or otherwise OF BANKING. 143 employ it in his business. But if, instead of a bank of deposit, a bank of circulation only be established, then the several small sums of money will remain un- productive, as before, in the hands of various indi- viduals ; and the banker, in discounting bills, will issue his own promissory notes. Now% it is obvious that these two kinds of banking are adapted to produce precisely the same effects. In each case a banking capital is created, and each capital is employed in precisely the same way ; namely, in the discounting of bills. To the parties who have their bills discounted, it matters not from wdiat source the capital is raised — the advantage is the same to them — the mode in w^hich they employ the money is the same — and the effects upon trade and commerce will be the same. Let us suppose that in each case the banking capital created is 50,000/. Now, the bank of cu'culation will have increased the amount of money in the country by 50,000/. The bank of deposit will not have increased at all the amount of money in the country, but it will have put into motion 50,000/. that would otherwise have been idle. Here, then, is a proof, that to give increased rapidity to the circulation of money, has precisely the same effects as to increase the amount. Here, too, is a proof of the ignorance of banking, on the part of those writers who consider that the banks which issue notes are the sole cause of high prices, over-trading, and speculation ; whereas it is obvious, that if those effects are to be attributed to banking at all, they may as fairly be ascribed to banks of deposit as to banks of circulation. Even those bankers who do not issue notes create a banking capital by the discounting of bills. They render their discounts subservient to the increase of their deposits. The London bankers will not discount, except for those persons who have deposit accounts with them. A party who has had bills discounted, I'i'i' THE HISTORY AND PRINCIPLES and has paid interest on the whole amount, must leave some portion of that amount in tlie hands of the banker, without interest. By this means the banker obtains more than the current rate of interest on the money actually advanced, and raises a banking capital to the amount of the balance left in his hands. " A good account," in the language of the London bankers, is an account on which there is a large deposit : a bad account is that on which the sum deposited is small. A person who keeps a good account may have his bills discounted readily ; but a person who keeps a bad account will have his bills more severely scrutin- ised. The depositors are aware of this ; and there- fore they endeavour to keep a fair account with the banker, that they may at all times be able to obtain such accommodation in the way of discounts as they may require. This mode of raising a banking capital by means of discounts, without allowing interest on the deposits, appears to be less advantageous to the borrower than by means of notes. In the one case the borrower has to lodge some portion of his money in the hands of the banker, but in the other case he has only to take the banker's notes, which are pro- bably as serviceable to him as gold. Hence, such banks appear adapted for the service of tlie rich rather than the poor. A young tradesman, who is commenc- ing business with a slender capital, will hardly find it worth his while to o])en an account at a banker's, unless he has always by him a certain portion of his capital, which he is obliged to keep imemployed. The London bankers grant no interest for money placed in their hands, nor cliarge any commission upon the amount of the transactions. Their customers pay them for the trouble of conducting their accounts by keeping a certain balance to their credit. The amount of the balance is never definitely fixed, but is regulated very much by the good sense and proper feeling of the parties. The number of cheques a OF BANKING. 145 party draws — the degree of accommodation he re- ceives by discount or otherwise — these and other cir- cumstances are taken into consideration ; and thougli the amount of the balance is not expressly stipulated, yet few people of business habits are at a loss to judge whether the average balance of their account throughout the year is sufficient to remunerate the banker. By the Scotch banks, deposit accounts are divided into two classes: "accounts current,'* and "deposit receipts." The "accounts current" are similar to the " current accounts" kept by merchants, traders, and others in the English banks. The party pays his money into the bank, and makes all his payments by cheques upon the bank. The deposit receipts are similar to what the English bankers call " dead ac- counts." The depositor pays his money into the bank, and there it lies " dead " until he has occasion for it, and then he produces his receipt and withdraws the whole amount, or takes a new receipt for any part he wishes to leave. The deposit receipts are chiefly for the use of those who lodge their money in the bank merely for the purpose of security and interest. The accounts current are for those who, in addition to security and interest, wish to make use of the bank as a means of facilitating their pecu- niary transactions. As far as regards the circulation of the banker's notes, each kind of account has the same effect ; but as the operations on the current accounts are more frequent, they put into circulation a larger amount. When a banker's own notes are lodged on a deposit account, they do not diminish the amount of his bank- ing capital. The banking capital raised by liis notes is diminished, but that raised by his deposits is in the same proportion increased. If, however, the interest lie allows upon the deposits is greater than the expense of the wear and tear of his notes, then L 116 THE HISTORY AND PRINCIPLES will his banking capital be diminished in the more ])rofitable, and increased in a less profitable, direction. But when a deposit consists of notes of other banks, his banking capital is increased by that amount. Hence, if a banker could know that all the money deposited in his hands w^ould consist chiefly of his own notes, it might not be for his advantage to allow any interest on deposits. It would be better for him that his notes shoidd remain in circulation. It will be observed that the amount of notes issued on deposit accounts, depends not on the banker but upon the depositors : they lodge money in his bank, and draw it out when they please. The deposit system, therefore, cannot place in circulation any additional amount of money. The depositors cannot draw out of the bank more money than they had de- posited. After the deposits are made, the amount of money in existence is precisely the same as before : the only difference is, that what was previously in the hands of many individuals, is now in the hands of the banker ; and until he has made use of this money in the way of discounts or loans, or in some other mode, no effect whatever can be produced upon the trade and commerce of the district. All the advantage the people of the neighbourhood obtain by the deposit system, considered by itself, consists in having a place of security in which they may lodge their money, in receiving interest for the sums thus deposited — and in the saving of time and trouble in effecting their pecuniary transactions. But although the de- posit system does not affect the amount of the cur- rency, it changes its character. As the lodgments will be made in the previously existing currency — whether gold, or silver, or notes of other banks — and all the issues will be in the banker's own notes, the effect will be, that in course of time all the previous currency will have passed into the bank, and all the existing currency wull consist exclusively OF BANKING. 147 of the banker's own notes ; and the more frequent and heavy are the operations on the deposit accounts, the more rapidly will this effect be produced. Banks of deposit serve to economise the use of the circulating medium. This is done upon the principle of transfer. The principle of transfer was one of the first which was brought into operation in modern banking. The bank of Amsterdam was founded upon this principle. Any person who chose, might lodge money in the bank, and might then transfer it from his own name to that of another person. All foreign bills of exchange were required, by law, to be paid by such transfers. Although the money might at any time be drawn out, either by the original de- positor or by the party into whose name it had been transferred, yet, in fact, this was seldom done, be- cause the bank money was more valuable than the money in common use, and consequently bore a pre- mium in the market. The transfer of lodgments is ex- tensively practised in our own times. If two persons, who have an account in the same bank, have business transactions with each other, the debtor will pay the creditor by a cheque upon the bank. The creditor will have this cheque placed to his credit. The amount of money in the bank remains the same ; but a certain portion is transferred into a different name in the banker's books. The cheque given by the debtor is an authority from the debtor to the banker to make this transfer. Here the payment between the creditor and debtor is made without any employment of money. No money passes from one to the other : no money is paid out or received by the banker. Thus it is, that banks of deposit economise the use of the circulating medium, and enable a large amount of transactions to be settled with a small amount of money. The money thus liberated, is employed by the banker in making advances, by discount or otherwise, to his L 2 148 THE HISTORY AXD PRINCIPLES customers. Hence tlie principle of transfer gives ad- ditional efficiency to tlie deposit system, and increases the productive capital of the country. It matters not whether the two parties who have dealings with each other keep their accounts with the same banker or with different bankers ; for, as the bankers exchange their cheques with each other at the clearing-house, tiie effect, as regards the public, is the same. The deposit system might thus, by means of transfers, be carried to such an extent as wholly to supersede the use of a metallic currency. Were every man to keep a deposit account at a bank, and make all his pay- ments by cheques, money might be superseded, and cheques become the sole circulating medium. In this case, however, it must be supposed that the banker has the money in his hands, or the cheques would have no value. Since 1825, the following facilities have been granted by the bank of England to those who liave deposit accounts ; or, as they are called, ** drawing accounts" at the bank : — 1. The bank receive dividends, by power of attorney, for all persons having drawing accounts at the bank. 2. Dividend warrants are received at the drawing office for ditto, 3. Exchequer bills, and other securities are received for ditto — the bills exchanged, the interest received, and the amount carried to their respective accounts. 4. Clie(|ues may be drawn for 51. and upwards, instead of 10/., as heretofore. .5. Cash boxes taken in, contents unknown, for such parties as keep accounts at the bank. 6. Bank notes are paid at the counter, instead of drawing tickets for them on the ])ay clerks, as heretofore. 7. Cheques on city bankers, paid in by three o'clock, may be drawn for between four and five ; and those paid in before four will be received and passed to account the same evening. 8. Cheques paid in after four, are sent out at nine the following morning, received and passed to account, and may be drawn for as soon as received. 9. Dividend warrants taken in at the drawing office until five in the afternoon, instead of till three as heretofore. OF BANKING. 149 10. Credits paid into account are received without the bank book, and are afterwards entered therein without the party claiming them. 11. Bills of exchange, payable at the bank, are paid with or without advice ; heretofore with advice only. 12. Notes of country bankers, payable in London, are sent out the same day for payment. 13. Cheques are given out in books, and not in sheets as here- tofore. The following is an account of the average annual amounts of the public and private deposits in the hands of the bank, from the year 1807 to the year 1831. Previous to the year 1807, the public and private accounts were kept in the same office, but then they were separated : — Years. Public Deposits, i Private Deposits. Years. Public Deposits. Private Deposits. £ £ £ £ 1807 12,64-7,5.51 1,582,720 1820 3,713,442 1,325,060 1808 11,761,448 1,940,630 1821 3,920,157 1,326,020 1809 11,093,648 1,492,190 1822 4,107,853 1,373,370 1810 11,950,047 1,428,720 1823 5,526,635 2,321,920 1811 10,191,854 1,567,920 1824 7,222,187 2,369,910 1812 10,390,130 1,573,950 1825 5,347,314 2,607,900 1813 10,393,404 1,771,310 1826 4,214,271 3,322,070 1814 12,158,227 2,374,910 1827 4,223,867 3,931,370 1815 11,736,436 1,690,490 1828 3,821,697 5,701,280 1816 10,807,660 1,333,120 1829 3,862,656 5,217,210 1817 8,699,133 ] ,672,800 1830 4,761,952 5,562,250 1818 7,066,887 1,640,210 1831 3,948,102 5,201,370 1819 4,538,373 1,790,860 In consideration of having so large an amount of public deposits, the bank advanced, in March 1808, 3,000,000/., without interest, ibr the public service ; this advance was continued until April 1818. The great increase in the amount of the pri^^ate deposits, since the year 1825, has arisen from the increase of accounts, occasioned partly by distrust in the private bankers, and partly by the additional facilities granted by the bank to the depositors. L 3 150 THE HISTORY AND PRINCirLES SECTION IX. BANKS OF REMITTANCE. In the infancy of commerce, all trade was carried on with ready money. Before good roads are formed, and posts are established, trade between distant places is carried on by merchants, who associate together in considerable numbers, and meet at fixed times at particular places, whence they commence their journey to the country with which they intend to traffic. When arrived at the place where the market is held, they dispose of their goods for ready money; they then lay out their money in the purchase of other goods, with which they return. Such was the practice with the merchants of the East, who formed the immense caravans that formerly traded between Europe and India ; and such is the practice of similar caravans that now trade between Egypt and Mecca. In such cases all the transactions are carried on with ready money. The bankers, if such they may be called, are mere money changers, who exchange the money of the country in which they live, for the money of other countries. The labour of carrying money from one country to another, was considerably diminished by the in- vention of bills of exchange ; but the same mode of remittance was continued even in England, until a very recent period, with regard to the transmission of money through the provinces. When a country is considerably improved, good roads are established, and places hitherto obscure become seats of manu- facturing and agricultural industry ; an interchange of commodities will take ])lacc between the pro- vinces y the jHoduce of one district will be trans- OF BANKING. 151 ported to another ; hence will arise the necessity of having some means of transmitting money in })ay- ment of these respective commodities, and banks will consequently be established. It is not the banks that give rise to the trade, it is the trade that gives rise to the banks ; though, after trade is established, the introduction of a bank extends the trade. Tlie most effectual means of transmitting money throughout a country is by an extensive establish- ment of banks ; banks transmit money by means of their agencies, by means of their branches, and by means of the circulation of notes. First. — Banks transmit money by means of their agencies. This is the way in which it is carried on by the country bankers. Each country banker em- ploys a London agent to pay his notes or bills, and to make payments in London ; and, on the other hand, to receive sums that may be lodged by parties residing in London for the use of parties residing in the country. As each country bank is thus con- nected with London, it is virtually connected with all the other banks in the country ; as far, at least, as concerns the transmission of money. Money is remitted from London to a country town, by being paid into a London bank, to the credit of the country bank, for the use of the party who resides in the country. Money is remitted from a country town to London, by being paid into a country bank, to the credit of their London agents, for the use of the party who resides in London, or by remitting to the party a bill drawn by the country upon the London bank. Money is remitted from one country town to another by paying the money into the country bank, to be paid by their London agents to the London agent of the country bank established in the town to which the money is to be remitted, or by sending direct to the party a bill drawn by the country upon the London bank, which L 4 152 THE IIISTORV AND PRINCIPLES bill will be discounted by tlie bank establislied in the place to which the bill is sent. Secondly. — Banks remit money from one place to another by means of their branches. Money is re- ceived at the head office for the credit of any branch ; and money is received at each of the branches for the credit of the head office ; and letters of credit are also granted at every branch upon all the other branches. The Bank of England transmits money from London to a branch ; and, vice ven-Oy for only the charge of postage. The branches also draw bills upon the parent establishment at twenty-one days date, without any charge. Thirdly. — Banks remit money from one place to another by means of their circulation. Every bank of circulation will necessarily become a bank of re- mittance, whether it carry on the remitting of money as a branch of business or not. Some of the notes which are issued, will be sent as payments from one place to another. This will be more frequently the case if the notes are payable at any place besides the place of issue, or, if the bank that issues them has credit over a great extent of coimtry : thus Bank of England notes serve the purpose of remittance all over the kingdom. They are usually cut in halves and sent by post, one half being retained till the receipt of the first is acknowledged. The issue of bank })ost-bills, })ayable seven days after sight, and granted in favour of the })arty to whom the })ayment is made, has still farther increased the efficiency of the Bank of England as a bank of remittance. The extent of the remittances of any place must depend in a great degree upon its trade — that is, uj)on its exports and its imports. Money must be sent from a place to ])ay for its imports, and money must be received in exchange for exports. Both these branches of remittance, as far as regards provincial towns, are ellecled through the banks. OF BANKING. 153 Exporters and importers, residing in a city or town, do not meet together, like the mercliants engaged in foreign trade, and traffic for their bills, but both parties go to the bank. The exporter draws bills, which he discounts with the bank ; the importer obtains from the bank, bills or letters of credit, which he remits in payment of his imports. The amount of this kind of business must, of course, depend upon the amount of the trade. Where the imports are great, there will be demand for bills, or other modes of remittance, upon the banker. When the exports are great, bills will be brought to him for discount, or lodgments will be made to his credit at his agent's. By comparing the sums which are thus transmitted in different directions, a banker can merely, by a reference to his own books, ascertain the balance of trade between the place in which he resides, and any other place with which it may have commercial in- tercourse. If he finds his exchanges with the neigh- bouring bankers are unfavourable, he may infer that the balance of trade is against the place in which his bank is established : and if, on the other hand, the exchanges are in his favour, he may infer the balance of trade is favourable. It will generally be found, that the trade between sea-port and inland towns is always in favour of the former. Manufacturing towns and large cities have usually the balance in their favour. It may be observed, however, that the balance of remittances will not always show the balance of trade. With regard to places of fashion- able resort for instance, there must be a great con- sumption of commodities imported from other places, and at the same time there is no commodity ex- ported : here the balance of trade is unfavourable ; at the same time there must be great remittances in money to the parties residing there, to enable them to pay for tlie commodities they consume. Thus, too, when large sums are remitted from England to 154f THE HISTORY AND TRINCIPLES absentee landlords, or as loans to foreign powers, the balance of remittance may be against England, while the balance of trade may be in her favom". The remitting of money to London by a country bank, diminishes the currency to that amount in the j)lace where the bank is established. If a person at Birmingham takes one hundred sovereigns to the branch of the bank of England, and obtains a bill at twenty-one days on the parent establishment in London, then is there a banking capital created for twenty-one days. If, when tlie bill becomes due, the Bank of England pay the bill in gold, the bank- ing capital is destroyed. The currency of Birming- ham is now one hundred sovereigns less, and that of London is one hundred sovereigns more. During the existence of the bill there were one hundred sovereigns less in circulation, and these one hundred sovereigns were represented by the bill. Some coimtry bankers, instead of drawing bills upon their London agents, re-issue the bills they have dis- counted. By this means the banker saves the ex- pense of remitting the discounted bill to London, and the person taking it saves the expense of the stam]) for a new bill. Banks of remittance encourage the trade of a dis- trict in two ways : First, by diminishing the prices of commodities. The facility of conveying money has the same effect upon trade as a facility of con- veying commodities. The opening of good roads diminishes the expense of the conveyance of goods. This cheapness in the conveyance causes the com- modities to be sold at a lower price. As the im- j)orts into the town are sold at a cheaper rate, and the exports are also sold at a lower price at the place of consumption, the increased cheapness in both cases increases the demand, and hence trade is advanced. The cheapness of conveying money ope- rates in the same way as cheapness in the convey- OF BANKING. 155 ance of goods. After the goods are sold, the money must be transmitted. The expense of remittmg the money, Hke the expense of conveying the goods, must be regarded as an item in the cost of produc- tion, and be taken into account in fixing the price at which the goods must be sold. Banks remit money at a less expense tlran it can be remitted in any other way. Hence the merchants are enabled to sell their merchandise at a lower price, and there- by consumption is increased and trade is extended. The second way in which banks of remittance promote trade, is by enabling capital to revolve more rapidly. They cause money to be remitted in a shorter space of time. For instance, an Irish but- ter merchant may purchase of a farmer a quantity of butter, and ship it for London. He may, on the same day, draw a bill for the value of the butter, and have it discounted at the bank. With this money he may purchase a farther quantity of butter, against which he may draw another bill, and have it dis- counted. This operation, if he be in good credit, may be repeated as often as he pleases. Now, if there be no bank in the district, he could not get the money for the first shipment of butter until the return of post from London, and then he would re- ceive large Bank of England notes, which he might not easily be able to get changed. During this in- terval he can make no purchases for want of money, and the farmer has no sale for his butter : thus the banks enable the merchants' capital to revolve several times more rapidly tlian it could otherwise do. To increase the rapidity of the returns of capital has the same effect as to increase its amount. If any given amount of capital, that now revolves once in a year, be made to revolve twice in a year, it will have the same effect upon trade as if the amount of capital were doubled, and its progress remained the same. Banks of depo.sit encourage the trade and wealth 156 THE HISTORY AND PRINCIPLES of a district, by collecting together the various small amounts of money, that previously lay idle in the hands of the depositors, and employhig this sum in adv^ances, by way of loan or discount, to the produc- tive classes of the community. The commodities thus produced, are remitted to a distant })lace for sale. But in the interval between the transmission of the goods and the return of the money for which they may be sold, the manufactiu'er is deprived of the use of this amount of capital. Banks of remit- tance guard against this inconvenience, and advance immediately to the manufacturer the value of the goods, by discounting his bill upon the party to whom they are consigned. By this means he has all the adv'antage to be gained from the higher prices of a distant sale, in connection with that prompt pay- ment he would obtain from a home market. Thus it is, that while banks of de})osit enable the capital of any district to revolve more rapidly icithin the difitrictf banks of remittance enable it to revolve more rapidly with reference to other places. Both produce the same effect as that positive increase of capital which is introduced by banks of circulation. SECTION X. BANKS or CIRCULATION. A BANK that issues notes, is called a bank of cir- culation. Tlie amount of notes that any bank has in circulation, is usually called by bankers " the cir- culation.'''' Banks of circulation, both in England and Scotland, have all of tliem iiad to sustain heavy accusations. I shall notice some of these charges, OF BANKING. 157 not with a view of rebutting them in regard to any individual bank, but in order to discuss the general principles by which we should be guided, in judging of the effects produced by banks of circulation. The most common charge against banks of circu- lation is, that they have issued an excessive amount of their notes ; and thus have encouraged specula- tion, raised the price of commodities, and led to commercial convulsions similar to that of December, 1825. Before entering upon the consideration of these charges, I shall point out the checks that operate against an over-issue of notes. I have already stated, that similar accusations may be as justly advanced against banks of deposit as against banks of circulation ; for to give increased motion to the currency has the same effect as to increase its amount. If a million of money be taken from the counting-houses of the merchants, and the tills of the shopkeepers, and lodged in the hands of a London banker, for him to employ in advancing loans or discounting bills, this has the same eftect as though he issued for the same purposes a million of his own promissory notes. There is, however, one difference. The advances of a London banker are limited by the amount of his lodgments. If the money be not placed in his hands, he cannot issue it ; and hence he may be regarded as merely an agent regulating the distribution of the previously existing currency. But the country banker having the power of making money, the amoimt of his advances is not subject to this restraint. But the amount of notes issued by a bank must be limited by the demand of its customers. No banker is so anxious to put his notes into circulation, that he gives them away. He advances them either by way of loan or discount ; and he always believes that the security on which he makes his advances is sufH- 158 THE HISTORY AND TRINCirLES cicntly arnj^lc. He expects that the money will be repaid with interest. It is true, that hke other com- mercial men, he is sometimes deceived in his cus- tomers ; and by placing too much confidence in them, he sustains losses. But this is a misfortune against which he is always anxious to guard. The issues of bankers are limited, therefore ; on the one hand by the wants of the public, and on the other by the bankers* desire to protect their own interests. A further check upon the issues of banks is, that all their notes are payable on demand. Although a banker has the power of issuing his notes to excess, either by advancing them as dead loans or on slender security, yet he has not the power of keeping them out : their remaining in circulation depends not on him, but on the public ; and tlie uncertainty, as to the time of their return for payment, compels him to keep at all times a sufficient stock of money, to meet the most extensive demand that is likely in the ordinary course of business to occur. Another check upon an excessive issue of notes, is the system of exchanges that is carried on between the banks. Every banker that issues notes, has an interest in withdrawing from circidation the notes of every other banker, in order to make more room for his own. When a banker receives the notes of another banker, he never re-issues them. If the two bankers live in the same place, they meet once or twice a week, as they may find convenient, and excliange their notes. The balance between them, if any, is paid by a draft on London, payable on demand ; or, which amounts to the same tiling, the London agent of the one party is directed to pay the amount to the London agent of the other party. If tlie country banker Hves at a distance from the banker whose notes he has received, he sends them to his London agent to present for payment. Hence it is that country notes seldom travel far from the OF BANKING. 159 place of issue : they are sure to be intercepted by some of the rival banks ; and in a country where banks are so numerous as in England, it is obvious that the notes of any individual bank must move in a very limited circle. If a banker attempts to force out a higher amount of notes than the wants of this circle require, he will soon find that the notes will be returned to him in the exchanges with the neigh- bouring bankers, or else they will speedily find their way for payment to his London agent. Another check upon an over-issue on the part of the banks is, their practice of allowing interest upon money lodged in their hands. No man will keep money lying idle in his hands if he can obtain interest for it, and have it returned to him upon demand. If a banker attempts to force out a large amount of notes, they will get into the hands of somebody. And those who do not employ them in their trade will take them back to the bank and lodge them to their credit, for the purpose of receiv- ing the interest. Thus, if the notes of a banker are put in motion by the operations of commerce, they are soon intercepted by rival bankers ; and if they attain a state of rest, they are brought back and lodged upon interest ; so that in either case they are withdrawn from circulation. Banks of circulation have also been accused of en- couraging a spirit of speculation. To obtain clear ideas as to the justice of this charge, it will be necessary to define accurately the nature of speculation, and to view the circvmi stances by which it is governed. Between the producer and the consumer of any commodity there are generally two or more parties, who are merchants or dealers. The demand for any commodity is either a speculative or a consumptive demand. The demand by the consumers who pur- chase for immediate use, is always a consumptive IGO THE HISTORY AND PRINCIPLES demand. 13iit if the commodity purchased be not intended for innnediate use, but is purchased at any given time, merely because the purchaser a])})rehends that its price will advance, then is that demand a speculative demand. So, if a merchant purchase of a manufacturer, or a farmer, such a quantity of com- modities as, in the ordinary course of his trade, he is likely to require, that demand may be considered a consumptive demand ; but if, in expectation of a rise in price, he iills his warehouses with goods for which he has no immediate sale, then is that demand a speculative demand. A speculation, then, is that kind of traffic in which the dealer expects to realize a profit, not by the ordinary course of trade, but by the intervention of some fortuitous circumstance that shall change the price of the commodity in which he deals. A speculation in any commodity, therefore, is oc- casioned by some opinion that may be formed of its future price. It is well known that the price of commodities is governed by the proportion that may exist between the supply and the demand. Whatever increases the supply, or diminishes the demand, will lower the price ; and, on the contrary, whatever diminishes the supply, or increases the demand, will advance the price. The greater part of our food, and the materials of most of oiu' clothing, are ])ro- duced by the seasons ; and the quantity })roduced in each year depends, in a great degree, upon the most uncertahi of all things, — the weather. Here, then, is a wide field for speculation. If our food, like the manna in the wilderness, were supplied to us day by day, in exactly the (juantity that each individual required, it would furnish no subject for speculation. But as long as the seasons are variable in the quantity of their })roductions, so long will specula- tion exist. Many commodities, too, besides being influenced by the seasons, are influenced by several OF BANKING. l6l other circumstances, — as a state of peace or war, — the opening of new markets, — the discovery of cheaper modes of production, — or the substitution of a rival commodity ; all these circumstances have an effect upon price, and the dealer who buys or sells any commodity in expectation that an alteration in price will be produced by such causes, is a speculator. Now, it is obvious that no system of banking can prevent speculation, and that speculations would be formed, even were there no bank in existence. We learn from Holy Writ, that the owners of corn some- times refused to sell, in expectation of an advance of price. These were speculations, though Judea had neither banks nor paper money. If it be said that the country banks are the cause of speculation, I will ask how it is that speculations exist in countries where there are no country banks ? If it be said that the issuing of country notes is the cause of speculation, I will ask how it is that Liverpool is the most speculative place in England, although the Liverpool bankers do not issue notes ? If it be said that the speculations of 1825 were produced by the country banks, I will ask, what produced similar speculations in I72O, when there was not a single country bank in the kingdom ? It must not, however, be denied, that all banking gives to speculation facilities that would not other- wise be so easily supplied. It is the object of bank- ing to give facilities to trade, and whatever gives facilities to trade gives facilities to speculation. Trade and speculation are in some cases so nearly allied, that it is impossible to say at what precise point trade ends and speculation begins. When a banker discounts a bill, he does not usually ask the party how he intends to employ the money ; and, for aught he knows, it may be employed in speculation. Wherever there are banks, capital is more readily obtained, and at a cheaper rate. The cheapness of M 162 THE HISTORY AND PRINCIPLES capital gives facilities to speculation, just in the same way as the cheapness of beef and of beer gives facili- ties to gluttony and drunkenness. The legitimate operations of banking, however, are such as to place speculation under some degree of restraint. As to men of large capital and im- mense wealth, they may speculate as much as they please ; over them the bankers have no control. But if men of moderate means engage in speculation be- yond their capital, it is not the interest of the banker to support them. For such persons to carry specu- lation to any great extent, it is necessary either that they raise money on slender security, or that the money be advanced for a considerable length of time. It is not the interest of a banker to meet their wishes in either of these respects. It is not his interest to advance his money on insufficient security. It is not his interest to advance money as a dead loan. The security a banker requires ought to be both ample and convertible. It is contrary to all sound princi- ples of banking for a banker to advance money on dead security. In the first place, such loans do not create any banking capital ; and, in tlie second place, they cannot be suddenly called up, in case any con- traction of the banking capital should render it ne- cessary. In admitting that banking, by granting facilities to trade, necessarily grants facilities, to a certain extent, to speculation, it is not admitted tliat bankers gene- rally have granted facilities to speculation beyond the fair operations of their trade. All speculation, by increasing tlie number and amount of commercial transactions, puts into motion a greater quantity of money. This money is supplied by the bankers either in the way of repayment of deposits, or of dis- counting of bills, or by loans. Now, as increased issues on the part of the banks are almost simulta- neous with a spirit of speculation, it has been inferred OF BANKING. 163 that the issues of the notes have excited the spirit of speculation, wliereas it has been the spirit of specu- lation that has called out the notes. In the years 1824 and 1825, as the speculations increased, the issues of notes increased ; and when the speculations were over, the notes returned. This was the case not merely in England, but also in Scotland, though none of the vScotch banks sustained the least diminu- tion of public confidence. Another charge that has often been preferred against banks of circulation is, that by an increased issue of their notes they have caused a general rise in prices. In investigating this charge, it will be proper to inquire what are the cases in which an increased issue of notes may produce a rise in prices. It cannot be denied that if any bank have the pri- vilege of issuing notes, not convertible into gold — that is, not payable in gold on demand — the notes may be issued to such an amount as to cause a con- siderable advance in prices. It is now generally believed that the issues of the Bank of England during the operation of the Restriction Act, did pro- duce this effect. It may also be admitted that in a country where there is one chief bank, possessing an immense capital and unbounded confidence, the notes of such a bank, even if payable in gold, may be issued to such an extent as to cause an advance of prices, until an unfavourable course of the exchange shall cause payment of the notes to be demanded in gold. For gold will not be demanded until the course of the exchange is so unfavourable as to cause the exportation of gold to be attended with profit. Hence the issues of the Bank of England being at present under no other restraint than liability to pay in gold on demand, may for a time cause an advance in prices. In cases where the increased issue of notes is M 2 iHi tHE HISTORY AND PRINCIPLES caused by the increased quantity of commodities brouglit to market, the additional amount of notes put into circulation does not cause any advance of prices. In all agricultural districts there is a great demand for notes, about the season of harvest, to pay for the produce then brought to market. In the south of Ireland the amount of notes in circulation is much greater in the winter, when corn and bacon are being exported, than in the summer months. Almost every trade and every kind of manufacture is carried on with more acti\ity at some periods of the year than at others ; and during the active seasons when money is in demand, more notes are in circulation. These notes are at such periods drawn out of the banks, either as repayments of money lodged, or by discount of the bills drawn against the exported commodities. An increased issue of notes often causes the pro- duction of an additional quantity of commodities, and in this case does not produce an advance of prices. The issue of notes will be either in the form of discounts, or loans, or the repayment of deposits. In either case the parties receiving the money will spend it, and a demand will thus be oc- casioned for a certain class of commodities. If this demand should not exceed the quantity that can be readily supplied, tliere will no advance of price. The parties who receive the money from the banker may give it to the dealer in exchange for the articles they purcliase. The dealer wishes to replace the goods he has sold, and passes the money for more goods to the manufacturer. Tlie manufacturer con- sequently buys more raw material and employs more labourers. An increased quantity of goods is thus produced, and exchanged against the increased quan- tity of money. But while the supply can keep pace witli the demand, the price will remain the same ; it is only when the demand exceeds the supply, and OF BANKING. " l65 the commodities are consequently comparatively scarce, that the price will advance. In many cases, an increased issue of notes- is not the cause but the effect of an advance of prices. If a Yorkshire clothier sells a thousand pounds' worth of goods to a London merchant, he will draw a bill for a thousand pounds, and take it for discount to a country banker, whose notes for a thousand pounds may thus be put into circulation ; but if, in conse- quence of a scarcity of wool, or from any other cause, the goods that were sold for a thousand pounds are now worth two thousand pounds, then will the banker discount a bill for two thousand pounds, and put into circulation two thousand pounds of his notes. In this case it is obvious that the issue of notes is not the cause of the high price of wool ; but that the high price of wool is the cause of the in- creased issue of notes. Such is often the case with many other commodities ; a real or apprehended scarcity causes an advance in price. The same com- modity exchanges for a greater quantity of money. The bills are drawn for higher sums, and the bankers who discount these bills issue, of course, a greater amount of notes. The rise in price, too, renders more capital necessary to carry on the same extent of business. Many persons who had money in the bank on interest will now draw it out, to employ it in their trade, and these operations will occasion a still farther issue of notes. A rise in the price of one commodity will sometimes advance the price of other commodities, and hence similar banking ope- rations are effected by persons engaged in other branches of trade. The process by which high prices cause an increase in the amount of notes in circulation, can thus be easily and obviously traced. In cases where an increased issue of notes does cause an advance of price, the advance can be but temporary, and this advance may generally be M S iGf) THE HISTORY AND PRINCIPLES ascribed to a spirit of speculation on the part of the dealers, and not to an excessive issue on the part of the banks. As the prices of all commodities are re- gulated by tlie proportion that may exist between the demand and the supply, whenever an increased issue of notes raises prices, it must be either by increasing the demand for commodities, or diminishing the sup- ply. The cases in which an increased issue of notes may cause an advance of prices, are chiefly those in which the money is employed in purchasing such commodities as cannot be readily produced by human labour. Thus, if a banker lend money to a corn merchant to purchase a stock of corn, he increases the demand for corn. If he lend money to a farmer to enable him to pay his rent without selling his corn, he diminishes the supply. In both cases he may cause an advance in price. But even in this case, the most unpopular that can well be imagined, the effect on price will be but temporary : for these speculations do not diminish the quantity of corn in the country. The supplies now withheld must ulti- mately be sold, and in proportion as they advance the price when withheld, will they lower the price when brought to market. A degree of speculation in some commodity or other is always on foot, and occasions fluctuations in the price. The banks have no control over tliese speculations, and ought not to be deemed answerable for the changes they occasion. To suppose tliat tiie banks can so regulate tiieir issues as to maintain permanent prices, is to ascribe to them a power which they do not possess, and which, if they dkc possess, they ought never to use. There are various cases wherein an increased issue of notes causes a reduction of prices. The specula- tions which advance prices are chiefly those carried on by dealers. The speculations of producen- who invest their capital in new undertakings, with the view of producing any given commodities at a less OF BANKING. 1 67 cost, will, if successful, reduce the price to the con- sumer, and so far as such speculations are assisted by the banks, the issue of notes thus occasioned tends to the reduction of prices. An advance of money which enables a farmer to bestow a higher degree of culti- vation on his land — or which enables a manufacturer to extend his business — has the effect of increasing the quantity of commodities offered for sale, and, con- sequently, to reduce the price. The banks, too, by advancing capital on lower terms than it could be otherwise obtained, diminish the cost of production, and consequently, the price. The banks still farther reduce prices by destroying monopoly. In towns where there are no banks, a few monied men have all the trade in their own hands ; but when a bank is established, other persons of character are enabled to borrow capital of the bankers. Thus monopoly is destroyed, competition is produced, and prices fall. Hence it is obvious, that in the ordinary course of business the issues of the banks tend not to advance but to lower prices. The effect which the amount of notes in circulation has upon the foreign exchanges has been the subject of much discussion. One party contended, that as the amount of notes increases, the exchange must become unfavourable. Another party maintained, that the exchanges were not at all affected by the issue of notes, but by the state of foreign trade. The authors of the Report of the Bullion Committee ex- pressed the former opinion, some of the Bank Direc- tors maintained the latter.* It is obvious that the exchanges are regulated by the amount of gold that is required to be sent abroad, either to pay the balance of trade, or to pay our armies, or to subsidize foreign powers, or as rents to absentees, or for some other purpose. Now it is * See page 49. M 4 168 THE HISTORY AND PRINCIPLES clear that an increased or diminislied issue of notes will in no way diminisli the amount of gold that is to be sent abroad, and therefore can have no direct effect u})on the exchanges. If we owe the gold, we must pay it. We may diminish our issues of notes, but that will not pay our debts. If, then, the issues of notes have any effect upon the exchanges, it must be in an indirect way. I have already stated that an increased issue of notes can liave no effect upon the prices of com- modities at home, but by influencing either the sup- ply or the demand. If the increased quantity of money raises the demand for commodities beyond a certain point, it will advance the price. And if it increases the supply, it will lower the price ; but in no way can the quantity of money in circulation affect the price of commodities but through the channels of supply and demand. Just so with the foreign exchanges. An unfavoiu'able course of ex- change arises generally from our owing a sum of money which we have to pay in consequence of our imports having exceeded our exports. An increased quantity of money, therefore, to affect the exchanges must diminish the amount of our foreign debt, and it can do this only by either increasing our exports or diminishing our imports. When money is abundant our merchants can import more than formerly. This increases our debt. The importers are disposed to lay in stocks of goods, and the competition between the importers raises the price they give to the foreimier. Hence there are hea\'v sums to be sent abroad. It is true that when money is abundant our manufacturers and exporters can also export more goods, but tlie competition among cx})orters dimi- nishes tlic price to the foreigner, and hence we have a less pro])ortionate sum to receive. The exporter, too, liaviug abundance of money, gives the foreigner long credit, and hence tlie money is not received in OF BANKING. IGQ England for a considerable time after the goods have been shipped. In the mean time the exchanges be- come unfavourable, and gold must be sent abroad. Now suppose in this state of things the bank contract their issues ; money becomes scarce — bills cannot be discounted, and trade is dull. Now, then, the importer having already a heavy stock of goods, will buy no more ; he is anxious to sell, for he has not now sufficient capital to keep so large a stock. A general desire of selling will cause a fall of price. Fewer commodities will now be imported, and these ob- tained at a less price, hence there is less money due to the foreigner. The exporters, on the other hand, deprived also of their usual accommodation, cannot carry on business to the same extent ■ — the supply will be reduced — the competition is less, and prices rise to the foreigner. The exporters, too, cannot now give such long credit as formerly ; they will call in the sums due to them, and hence more money must come in from abroad. As, then, we have to pay other nations a less amount of money for our imports, and they have to pay us a greater amount for our exports, the exchanges will become favourable. It is obvious that this operation will cause great embarrassment in trade ; in fact it is only by producing embarrassment that a contraction of the currency can affect the exchanges. The amount of notes in circulation affects the foreign exchanges in another way. When an in- creased issue takes place, money becomes more abundant ; the lenders are more numerous, and the supply of capital is increased. Hence the price given for the loan of money, that is, the rate of interest, falls. Persons who have money to employ will find they cannot obtain the same interest as formerly, hence they will be disposed to invest it in the foreign funds, where it can be employed to greater advantage. In order to remit this money they will purchase 170 THE HISTORY AND PRINCIPLES foreign bills ; this demand for foreign bills will ad- vance their price, and the exchanges will conse- quently be initavourable. On the other hand, when the circulation is considerably reduced, money be- comes scarce, a higher price will be given for the use of it, the rate of interest rises ; persons who hav^e property abroad will be disposed to bring it home, where it can be more profitably invested ; they will draw bills against it and sell them in the market. This new supply of bills will lower the pnce, and make the exchanges favourable. It should always be recollected that the transmis- sion of money as subsidies, loans, or for investment in the foreign funds, will have the same effect upon the exchanges as though it were transmitted in pay- ment of commodities imported. Whenever, there- fore, the issue of notes shall, directly or indirectly, cause a transmission of money from one country to another, the exchanges will be affected. But when this shall not be the case, the expansion or contraction of the currency will have no effect upon the foreign exchange. SECTION XL BANKS OF DISCOUNT. A CONSIDERABLE braucli of the business of modern banking consists in discounting bills of exchange. As they have only a short time to run before they fall due, the capital advanced soon returns ; and being transferable, they can, if necessary, be re-discounted. Hence they are admirably adapted for the purposes of the bankers : for, as the advances of bankers to their customers are made with other people's money, OF BANKING. I7I and tliat money may at any time be withdrawn, it becomes necessary that the securities on which those advances are made should rapidly revolve and be at all times convertible. By means of bills of exchange bankers can easily extend or diminish their advances in proportion to the capital the}' may have to employ. If they find that the amount of their deposits or the amount of their circulation is diminishing, they will diminish their discounts. If these increase, they may increase their discounts. I. Nature and Origin of Bills of Exchange, — Bills of exchange are first mentioned in the reign of Henry II., Anno, II60 ; but they were not used in England until 1307, the first year of Edward II. In the fifth year of Richard II. they were the only mode allowed by law for sending money out of the kingdom. They are said to have been invented by the Jews or the Lombards, for the purpose of with- drawing their property from the countries from which they were expelled. The drawer and the accepter of a bill were two persons, residing at two distant places, and the bill was probably nothing more than a written order delivered to a third person, who was going to visit the place where the debtor resided, and who would return with the money to the drawer. But it might happen that this person was not going to return ; in this case he might advance to the creditor the amount of the order, and receive the money again from the debtor when he arrived at his journey's end. But this third person might not be going to the place where the debtor resided, he might be going only a part of the way, and he might then fall in with some other person who was going the other part ; he would then request this other person to advance him the money in exchange for the order he had received from the creditor, and the order would then be transferred. It would thus be dis- 172 THE HISTORY AND PRINCIPLES covered that as a creditor might give an order upon his debtor to a tliird person, this third person might transfer the order to a fourth, the fourth to a fifth, and so on. To effect these transactions it would be necessary that each person receiving tlie order or bill, had confidence in the drawer or some of the indorsers, and also that each person receiving it should have some compensation for the trouble it occasioned him. If the order were not payable on demand, but at some months after date, the compensation would be increased by the amount of interest for the time the order had to run before it would be payable. Such is at present the case. The drawer of a bill on a person residing in the country sells it on the ex- change. Foreign bills are never said to be discounted, but to be sold ; for the person who gives the drawer the amount, is supposed to deduct not only the in- terest on the bill, but also the expense of its trans- mission. The buyer of a bill is a person who owes a sum of money to a person in another country (say in France), and who wants a bill to remit thither to pay his debt. The seller of a bill is a person who has exported a quantity of goods to France, and who draws a bill for the amount : it will be for the con- venience of these two people to deal together : the buyer will give his money in exchange for the bill, which lie Avill send to his creditor in France, and the seller will give liis bill in exchange for the buyer's money, by which he is paid for the goods he has ex- ported. If this money is equal to the amount of the bill, minus only wliat may be deemed equal to the discount and the expense of transmission, the ex- cliange is said to be at par ; but there are various circumstances which may cause the exchange to be either above or below par, and the price given for bills of exchange will vary accordingly. Wlien two nations excliange their commodities with each other to exactly the same amount, the OF BANKING. 173 buyers will be just as numerous as the sellers. The demand for bills and the supply of bills will be equal ; the exchange will now be at par ; but it rarely or never happens that the exports and imports between any two countries are precisely the same ; and as gold is the medium of traffic between nations as well as between individuals, the balance or difference be- tween the purchases and the sales must be remitted in that metal. Now the expense in freight and in- surance of sending a quantity of gold from one country to another will not be inconsiderable. If, then, I owe a sum of money to a merchant in France, I would be willing to give something more than that sum for a bill rather tlian submit to the expense and trouble of remitting gold. But if the bill would cost more than the expense at which I could send the gold, why, then the gold should go. It is evident, then, that in that nation which is in debt to another nation, and which, consequently, has to send gold to pay its debts, the demand for bills of exchange will be greater than the supply. These bills will be sold for more than the amount of the money for which they are drawn ; they are then at a premium, but this premium never can rise higher than the expense of remitting an equal amount in gold : for if it were cheaper to remit gold, the gold would be remitted. The price of bills in the market is usually called the rate of exchcUige ; and when the balance of trade is against a country, and gold must be remitted to pay that balance, and, consequently, the price of foreign bills rises beyond their real value or par, then the course' of exchange is said to be against that country : thus, for instance, if in London I can sell a bill on Paris for more than the amount for which it is drawn, then the course of exchange is said to be against England and in favour of France ; but if I am obliged to sell my bill for less than the amount, then the ex- change is against France and in favour of England. 174 THE HISTORY AND PRINCIPLES The price of bills is regulated entirely by the propor- tion that may exist between the demand and the supply, and the demand and the supply are regulated chiefly by the state of trade between the respective countries. The trafficking in bills of exchange is now a dis- tinct branch of business. When bills, say on France, are at a high premium in our market, a house in Lon- don will draw bills upon a house in Paris, and the bills will be sold at a good price. On the other hand, when bills on England are at a high premimn in the Paris markets, a house in Paris will draw upon a house in London and sell the bill in the Paris market. This seems to be a very honourable kind of business ; but it is said that some inferior persons engaged in this traffick, sometimes have recourse to unjustifiable means of raising or lowering the price of bills, in the same way as stock jobbers are said to do to affect the value of the public funds. Not only are bills employed as the means of trans- mitting money from one country to another, but also as the means of making remittances from one town to another. If a person in a country town wishes to send money to London, he can go to the bank and procure a bill upon a banker in London. If he wants to receive money from London, he will draw a bill upon his debtor and get the money for it at the bank. If he wish to send money from one provincial town to another, he will get from the bank a bill upon a London banker and send it to his correspondent by post. When the country banker discounts, or, as it would be called in the foreign market, hutj.s a bill, he usually charges, in addition to the discount, a com- mission to pay the ex})ense of its transmission and collection. And when he issues or sells a bill, he usually gives in exchange for cash a bill at a certain number of days after date. Hence the number of days at which a provincial banker is in the habit of OF BANKING. 175 drawing upon his London agent is usually called the par of exchange between that place and London. II. Advantages of Bills. — Besides their utility as a means of transferring money from one place to another, bills have the following advantages. 1. Bills are a means of transferring debts from one person to another. If I owe a man 100/. and another man owes me 100/., I will draw a bill for that amount on my debtor and give it to my creditor. I have thus transferred the debt from my debtor to my creditor, and my own debt is liquidated. My debtor, instead of paying me the money he owed me, will pay it to the holder of the bill. My creditor will now look for payment to my debtor, and consider me simply as a guarantee for the payment of the bill. If he wishes to make use of the bill he will again transfer the debt to another party, placing his own name on the bill as an additional guarantee. The bill may thus pass through a variety of hands, and liquidate a great number of debts, before it becomes due. When due, it will be paid by the accepter, who was the original debtor, and all these inter- mediate transactions will be closed. Hence, in Lancashire, bills of exchange serve the purpose of a circulating medium, in tlie same way as bank notes. The only difference is, that in transferring a bank note you are not responsible for its ultimate pay- ment ; but in passing a bill of exchange you place your name on it as a guarantee. A bill of exchange, too, cannot always be passed for its full amount ; but you will have to pay a discount according to the time it has to run before it will fall due. 2. Bills fix the period for the payment of debts, and in case of litigation they afford an easy proof of the debt. A person will have little scruple in putting off a tradesman to whom he owes money, and the creditor dares not be urgent lest the debtor should 176 THE HISTORY AND nilNCIPLES no longer deal witli him, hence the time of payment can never be calculated upon with certainty. But if tlie customer has given a bill for the amount he owes, that bill will circulate into the hands of other persons who will be more peremptory in demanding payment, and whose applications cannot be disregarded with impunity. Besides, if a man dishonour his acceptance, his character is stamped at once in the commercial world as being either very poor, very negligent, or very unprincipled, and at no future time will he be able to raise money upon the credit of his name. Hence many persons who are very tardy in paying a book debt, are very punctual in paying their bills. In case, too, a tradesman is under the necessity of bringing an action at law against his customer, he will have to prove the actual delivery of every article mentioned in his account. This, at a distance of time, is often difficult to do ; but if a bill has been accepted for the amount, it is only ne- cessary to prove that the acceptance is in the de- fendant's hand-writing. 3. Bills enable a tradesman to carry on a more extensive business with tlie same amount of capital. If, by the custom of trade, a dealer give his cus- tomers three months' credit, he can, during that period, make no use of that portion of his capital which is invested in the commodities they have purchased ; but if tliey accept his bills, drawn at three months after date, he can, if in good credit, get those bills discounted at the bank in his town, and then employ this money in the farther extension of his business. He will thus, while selling on credit, obtain nearly the same advantages as though he sold for ready money. Should he, instead of having these ])ills discounted, pay them to the manufacturer or wholesale-house of whom he makes his pin'chases, it will amount to nearly the same thing. The whole of his capital is thus kept in motion, and is not dimi- OF BANKING. 177 nished by any amount of out-standing debts. To give credit without drawing bills requires that a tradesman should have a large capital. To give no credit will restrict his business. By means of bills he is enabled to give credit and to extend his business, without requiring any addition to his capital. 4. Bills afford an easy way of giving a guarantee. A person may wish to borrow money of me, and I may be unwilling to lend it to him unless he procure a more wealthy person to guarantee the re-payment at a given time. If he has a friend that will do this, the most easy way of effecting the guarantee is by means of a bill drawn by the borrower upon his friend. This, in point of security, is the same thing as a letter of guarantee ; but it has also this additional advantage, that if I should want the money before the time fixed for its re-payment, I can get this bill discounted and reimburse myself the money I have advanced. Bills of this description are called ac- commodation-biUs, or wind-bills, or kites. When employed only as a means of affording occasional assistance to a needy friend, or for raising a sum of money for a short time, to meet an unexpected call, they do not appear to be very objectionable. But when systematically pursued for the purpose of raising a fictitious capital whereon to trade, they uniformly indicate the folly and effect the ruin of all the parties concerned. 5. Bills are the means of facilitating the removal of capital from one branch of trade to another as circumstances may require. When the demand for any commodity increases, the price advances, and more capital is put into requisition to increase the supply. When the demand for any commodity declines, the price falls, the trade is bad, and capital will be withdrawn to be invested in a more profitable employment. Every branch of trade is liable to fluctuations from an alteration in the proportion be- N 178 THE HISTORY AND PRINCIPLES tween the demand and the supply, and lience capital is continually undergoing a transfer fi'om the pro- duction of those articles for which there is a less demand to the production of those articles for which there is a greater demand. But in what way is this transfer effected ? Is it by a manufacturer leaving one employment for another ? No. The manufac- turer in the declining trade will reduce his capital, while the manufacturer in the prosperous trade will augment his capital ; and the transfer of capital from one trade to the other is effected chiefly by bills of exchange. The manufacturer who has sold a less quantity of commodities, will have fewer bills for his banker to discount ; the other, having sold a greater quantity of commodities, has more bills for discount. The banker's capital, which he employs chiefly in the discount of bills, is thus easily transferred from one branch of manufacture to another, in exact pro- portion to the circumstance of the respective parties. On this subject I quote Mr. Ricardo : — '* In all rich countries there is a number of men foi'ming what is called a monied class. These men are engaged in no trade, but live on the interest of their money, which is employed in discounting bills, or in loans to the more industrious part of the com- munity. The bankers, too, employ a large capital on the same objects. The capital so employed forms a circulating capital of a large amount, and is employed in larger or smaller proportions by all the diflferent trades of a country. There is, perhaps, no manufac- turer, however rich, who limits his business to the extent that his own funds alone will allow, he has always some portion of tliis floating capital increasing or diminishing according to the activity of the de- mand for his commodities. When the demand for silks increases, and that for cloth diminishes, tlie clotliier does not remove \vith his cai)ital to tJie silk trade, but he dismisses some of his workmen, and he OF BANKING. 179 discontinues his demand for the loan from bankers and monied men. While the case of the silk manu- facturer is the reverse : he wishes to employ more workmen, and thus his motive for borrowing is in- creased ; he borrows more, and thus capital is trans- ferred from one employment to another without the necessity of a manufacturer discontinuing his usual occupation." * III. Classes of Bills. — The bills presented to a bank for discount may generally be divided into the following classes : — 1. Bills drawn by producers or manufacturers upon wholesale dealers. 2. Bills di'awn by wholesale dealers upon retail dealers. 3. Bills drawn by retail dealers upon consumers. 4. Bills not arising out of trade, but yet drawn against value, as rents, &g. 5. Kites, or accommodation bills. The first two classes of bills are the best, and are fair legitimate bills for bankers to discount. The third class ought not to be too much encou- raged. They are for comparatively small amounts, and are drawn by shopkeepers and tradesmen upon their customers. To discount these bills freely would encourage extravagance in the accepters ; and- ultimately, prove injurious to- the drawers. When a man accepts bills to his butcher, baker, tailor, upholsterer, &c., he may fairly be suspected of living beyond his income. Solvent and regular people pay their tradesmen's accounts with ready money. The fourth class of bills, though sometimes proper, ought not to be too much encouraged. Persons, out of trade have no business with bills.. * Ricardo's Principles of Political Economy, page 84. N 2 180 THE HISTORY AND PRINCIPLES The last class of bills should almost always be re- jected. To an experienced banker, wlio knows the parties, the discovery of accommodation bills is by no means difficult. They are usually drawn for even amounts, for the largest sum that the stamp will bear, and for the longest term that the bank will discount, and are presented for discount soon after they are drawn. The parties are often relations, friends, or parties who, from their avocations, can have no deal- ings with each other. Not only the parties and the amounts of bills are matters of consideration to a banker, but also the time they have to run before they fall due. A bill drawn for a long term after date, is usually styled, not perhaps very properly a long-dated hill. A bill drawn at a short term, is styled a short-dated bill. Query, — Is it most for the interest of a bank to discount long-dated bills or short-dated bills ? Short Bills versus Long Bills. — First, There is more safety in discounting short bills, because the parties may fail before the long ones become due. Secondly, If any given amount of capital be em- ployed in discounting bills, it will accumulate more rapidly by discounting short bills than long bills, operating in the same way as money placed at com- pound interest, which increases the faster, as the times of paying the interest are more frequent. Thirdly, If a bank charges commission on- the amount of the bills discounted, the commission will be more in the course of a year upon any given amount of capital employed in discounting short bills than employed in discounting long bills. Fourthly, If a bank issue notes, a greater amount of notes will be issued in discounting a succession of short bills, than by discounting long bills. Thus if I discount a bill for 1000/. drawn at twelve months after date, I issue only 1000/. of notes ; but if I discount in suc- cession four bills, each having only three months to OF BANKING. 181 run, I issue, in the course of the year, 4000/. of notes. Fifthly, Long-dated bills lock up the funds of a bank so that they cannot be discounted with safety but from the bank's own capital ; for if a bank employs its deposits or its circulation in discounting long-dated bills, and payment of the notes or de- posits should be demanded, the long-dated bills could not be re-discounted, and the bank must stop. Sixthly, Long bills may encourage speculation. Per- sons may purchase large quantities of commodities in the expectation that the price will advance before the long bills which he accepts in payment shall fall due. But if the bills are of short date, the speculation will be prevented. Long Bills versus Short Bills. — First, The amount of discount is greater on a long bill than on a short bill. If, therefore, a gentleman out of business wants a temporary advance, and proposes to draw a bill on his friend, it is better to advise him to draw a long bill than a short one. Secondly, Long Bills will employ a larger amount of capital. If a banker dis- counts any given amount per week, he will always have twice the amount of bills current, if they are drawn at four months' date, than he will have if they are drawn at two months. And, as bankers wish to employ their capital, it will be more for their advan- tage to discount such bills as will employ the largest amount. Thirdly, The discounting of long-dated bills, being a more permanent advance of capital, is more beneficial to the commercial and agricultural classes in the district. If a retail dealer can get long bills discounted, he can afford to give longer credit, and this will induce his customers to buy more goods of him, and he will do more business. If a manu- facturer or wholesale dealer can get his long bills discounted, he also can give longer credit, and will sell more goods. If a landlord can get a long bill on his tenant discounted, he need not urge him for rent, N 3 182 THE HISTOHY AND PRINCIPLES and the money may, in the interim, be employed in improving the land. The discounting of long bills is similar to a permanent advance of capital. The money may be profitably employed, and be repro- duced before the long bill may become due ; but if the bill be short, this cannot be done. IV. Notaries Public. — "A notary was anciently a scribe that only took notes or minutes, and made short drafts of writings and other instruments, both public and private. But, at this day, we call him a notary public, who confirms and attests the truth of any deeds or writings, in order to render the same authentic." * This part of the business of a public notary must have been very necessary before the dis- covery of the art of printing, and when many of the first men in the state were unable to read or write. We find that some public documents have been at- tested by notaries in the following form : — " As my Lord Bishop is unable to write, I do hereby certify, that the above is his mark." These notaries were appointed by the archbishop of Canterbury, and took an oath of fidelity on receiving their appointment. All instruments made by them were considered public instruments, and were received as evidence in the courts of law. The business of a notary in the present day in- cludes the making of wills, drawing up powers of attorney, bonds of arbitration, bills of sale, charter parties, and attestations. The drawing of instru- ments of this description, constitutes almost the sole employment of some notaries, while the chief busi- ness of others consists in nothig and protesting bills of exchange. Some notaries are translators of lan- guages, but more frequently they employ a foreigner for this purpose. * Burns' Ecclesiastical Law, vol. iii. page 1. OF BANKING. 183 The difference between the noting and the pro- testing of a bill of exchange for non-payment» is this : — In noting, the notary, after having presented the bill at the proper place, and demanded payment, attaches to it a small piece of paper, on which he writes the amount of his charge, and the reason why the bill is not paid — such as " no effects," " no advice," " out, no orders," " will be paid to-morrow," &c. This piece of paper is called " the notaiy's ticket," and the writing on it is called " the notary's answer." Some notaries have their names and address printed on their tickets. The notary also places on the bottom part of the bill, in front, the initials of his name, the amount of his fee, and the date of the noting. The same form is used in noting a bill for non-acceptance. The practice of noting bills of exchange is not recognised by the laws of England. It is said to have taken its rise from the following circumstance : — After the modern system of banking was established and bills of exchange became numerous, it was cus- tomary for one of the clerks of the banking-house to act as a notary. If tlie bill had been presented in the morning and was not paid, he called in the evening to ask the reason of its non-payment, and he charged a small fee for this additional trouble. By degrees this practice became established, and, ulti- mately, a notary public was employed for the purpose. A protest is a legal instrument, drawn on stamped paper, generally according to the following form : — On this day, Wednesday, i\\e first day o^ Jamiary, one thousand eight hundred and t\\'\xty -four, I, A.B., Public Notary, by legal authority admitted and sworn, dwelling in the city of , did present ^or jmyment the original bill (a true copy whereof is within written) to a woman at , who replied, that said hill could not then he paid. Wherefore, I, the said notary, do solemnly protest against the drawer and endorsers of the said bill, and all others therein con- N 4 184 THE HISTORY AND PRINCIPLES cerned, for all exchange, re-exchange, losses, costs, interests, and damages, suffered and to be suffered, for want of payment of said bill. Thus done in my office, the day and year aforesaid. Which I attest, A. B. Not. Pub. If a bill has been protested for non-acceptance, it must, when due, be again protested for non-payment. The holder of a protested bill should immediately send the protest to the party of whom the bill had been received. If the bill was only noted, the party should receive due notice. If an action be brought upon a bill which has been only noted, it will be necessary to produce a witness in court, to prove that the bill was duly and properly presented for payment : but if the bill has been pro- tested, the production of the protest will be sufficient evidence. No action can be brought upon a foreign bill unless it has been protested. But if the bill has been duly noted, a protest may be drawn up at any time previous to the commencement of a suit, with- out a second presentation of the bill at the place where it was payable. An inland bill may be protested for non-acceptance if it be above 5/., if drawn after date, and if the value is stated therein to be received. Inland bills, in such cases, may also be protested for non-payment, if they ' have been accepted. No other inland bills can legally be protested. This excludes bills drawn after sight, or for a less sum than o/.* Although every foreign bill must be protested, yet it is not considered absolutely necessary that an inland bill should be either noted or protested, in order to sustain an action for the amount. A bill is usually noted or })rotested for non-payment after bank hours, on the evening of the day on which it falls due. But if not done then, it may be noted • See Bayloy on Bills of Exchange, p. 262. OF BANKING. 185 or protested at any subsequent time. The omission of the noting or protesting by the holder does not nulUfy his claims upon any of the antecedent parties, provided they received due notice of the dishonour. Foreign bills should be noted on the day that accept- ance or payment was refused. Inland bills may also be noted on that day, but a protest for non-payment of an inland bill cannot be made out until the day after it is due. If a bill be refused acceptance by the drawee, and another party accept it for honour of the drawer or of an indorser, it must again be protested for non- payment by the drawee before an action can be sustained against the accepter. In London it is not the custom to protest inland bills at all. And in case of non-acceptance, they are not even noted, unless drawn after sight. It is then necessary that they should be noted, in order to fix the time on which they fall due. Inland bills are always noted for non-payment. Foreign bills are protested both for non-acceptance and for non-pay- ment. Bills drawn from Ireland or from Scotland are regarded as foreign bills. The notary's charge for noting a bill within the site of the ancient walls of the city of London is 1.9. 6d. Beyond those limits the charges are 2,y. 6 o . , y. 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K O D >~ > c c • t- "^ ^^ i^ CO Tj- 1- 5 c -TS O '3 "rt =5 ;:; S a> S .c« is - > QJ tfi ^t-^^ I- cy Hi — ofH a c o .S "^ S '^ CC?2 ^'S '-' ^c3 o ^ H-i a !^ =^ «3 c "bb -^ ^ •- a " t« jj — H-i ^ " •■ ^"^ c c S cu C^ '^^^ ^ ° 1 c o Ch cc« > "(« 5u QJ - « ■" cu CU C 7l ^ ^ 4:2 Cfl f^ u ^ cu O C hO *J .r- rt C3 3 u en QJ CS ■ I cj n: CO ':2 -3 2 i -^ S CO -^2 *j C-co C ■*■ J3 =i; o~ § ^ o ti_ •— .£ ■" « ^ o P o c tfl 5 ^j "-5 l-H , OF BANKING. 271 W < a CO o S« CO 5< 0^ 1— < •"I 00 00 Ol Oi ^ •^ CN ^ '% CO 'S .^ 2 Q '^ 00 S^^ b CO e jr ^ a» o OS o 3 o go ^ M o) ^ ■>-> ^ ^ 13 0) .S G ^ .S e c3 *' e QJ O ■« 0) o o 0) ■s-H-?^ S 0) 13 ^ .S a> otH QJ u 00 CO «^w s „- -!-> OJ L< g to 'hJPl, CO 0) %-i cs o - »-} CO as O c4 « S a. i -a % 272 THE HISTORY AND PRINCIPLES PRELIMINARY EXPENSES. Account of the Preliminary Ex- £, s. d. penses of the London Office and the Westminster Branch, to the 31st of Dec. 1834, as detailed in the First Annual Report 10,635 12 10 Expenses since incurred, viz Solicitor's Account, not included in bills for current business 2685 1 Tradesmen's Bills and Incidental Expenses 537 18 9 3222 19 9 Preliminary Expenses for Four New Branches 6451 1 5 Deduct— 20,309 14 Paid off out of the Profits of 1835 1000 £19,309 14 " The above report and statement having been read to the meet- ing by the secretary, it was unanimously resolved — "1. That the report now read be received and printed, and circulated among the proprietors. " 2. That the thanks of the meeting be presented to the directors for their able and successful conduct ; and that the sum of 2,500/. be awarded to them for their services during the past year. " 3. That John Stewart, Esq., M.P., Joseph Esdaile, Esq., and Thomas Farncomb, Esq., be re-elected directors. " 4. That the thanks of the proprietors be given to James William Gilbart, Esq., the general manager, to Oliver Vile, Esq., manager of the Westminster Branch, and to the other managers of the bank, for the zealous and effective manner in which they have discharged their official duties. " 5. That the thanks of the meeting be offered to Patrick Maxwell Stewart, Esq., M.P., for his able and courteous con- duct in the chair. " Extracted from the Minutes. "FREDERICK NEALE, Secretary." 8. The following are the names of the directors and officers for 1837 : — or BATSfKING. 0*73 iDircctors Kenry Bosanuuet, Esq. Frederick Burmester, Esq. Wm.Rt. Keith Douglas, Esq. Joseph Esdaile, Esq. Thomas Farncomb, Esq. Sir Thomas F. Fremantle, Bart., M.P. Charles Gibbes, Esq. JosiAn John Guest, Esq.,M.P. for 1837. William Haigh, Esq. Henry Harvey, Esq., F.R.S. James Holford, Esq. Jon. Ha worth Peel, Esq. Mat. Boulton Rennie, Esq David Salomons, Esq. Patrick Maxwell Stewart, Esq., M.P. John Stewart, Esq., M.P. Henry Bosanquet, Esq. Frederick Burmester, Esq. Joseph Esdaile, Esq. Charles Gibbes, Esq. Henry Harvey, Esq. HEAD OFFICE, 38, THROGMORTON STREET. James William Gilbart, General Manager. William Thompson Henderson, Suh-Manager. Frederick Neale, Secretary. Joseph Tapp, Chief Clerk. Westminster Branch, 9. Waterloo Place. Oliver Vile, Manager. Bloomsbury Branch, 213. High Holborn. William Ewings, Manager. Southwark Branch, 12. Wellington Street, Borougli. Edward Kingsford, Manager. Eastern Branch, 87. High Street, Whitechapel. Charles G. Rees, Manager. St. Marylebone Branch, 155. Oxford Street. Frederick Vulliamy, Manager. 274. INDEX. A. Abraham made a purchase with money current with the merchant, 2 — paid the money by weight, 2. Accej)tance of bills of exchange, laws respecting the, 184, 185. Act of Parliament passed to encourage loan societies, 215. Advances, made by the bank of England upon merchandise in 1826, G5 — an act of parliament passed to facilitate, 66 — on govern- ment securities, held Feb. 29. 1832, 77 — on bills and cash cre- dits compared, 203. Agency, banks of — the London banks are banks of agency for country banks, 112 — mode of payment, 112 — Bank of Eng- land are agents to the bank of Ireland, bank of Scotland, and roj'al bank of Scotland, 78 — Country joint stock banks allowed to have agents in London, 89. Agio, the premium on bank money at Amsterdam, so called, 10. Agriculture the chief employment of ancient nations, 1 — does not require banks so much as commerce, 1. Alexander Severus reduced the market rate of interest by lending money at a lower rate to poor citizens, 7. Alloivance to the bank of England for conducting the government business, 42 — reduction of in 1786, 42 — further reduction in 1808, 49 — further reduction by 120,000/. per annum, in 1833, 93 — a source of their profits, 83 — amount received in the vear 1832, 78. Althorp, Lord (now Earl Spencer), chancellor of the exchequer, his letter to the directors of the bank of England, 85 — his reso- lutions for regulating country banks, 86 — is successfully op- posed by the country bankers, 87 — his act for the renewal of the bank charter, 87 — memorial of the country bankers to, 115. American embargo alleged to be the cause of great distress in England, 51. Amiens, peace of, between England and France, 48. Amsterdam, the bank of, occasioned by the bad state of the coin, 10 — the property of the city, and governed by four burgomas- ters, 10 — adopted the principle of transfer, 147. Ancients, their employment chiefly agriculture, 1 — were unac- quainted with joint stock banks, paper money, and bills of ex- change, 2. INDEX. 27.5 Anecdote of Oliver Cromwell upon the readmission of the Jews into England, 18. Annuities, Act for granting government, for sums not exceeding 201., 239 — may be administered by savings' banks or parochial societies, 239 — rules of St. Clement Danes annuity society, 243 — tables showing the annual payments necessary to obtain an annuity of 20A, 251 — table showing the value of an immediate life annuity of 20/. at various ages, 252. Annuities, government, purchased by the Bank of England, 59, 96. Annuity society, rules of the St. Clement Danes, 24'3. Apollo, the temple of, the great bank of Ionia, 3. Apprentices, public notaries in London must serve an apprentice- ship of seven years, 186 — savings' banks very useful to, 222. Aristotle condemned the taking of interest for money, 19. Arragon, legal rate of interest fixed there by James I. at eighteen per cent, 20. Art, banking as an art and as a science, preface — the progress of useful arts passed over by historians, 1. Astlett, Mr., his fraud on the bank of England, 48. Athens, banking a flourishing trade at, 4. Attornies may be licensed to act as notaries beyond ten miles from the Royal Exchange, 187. Augmentations of the capital of the Bank of England, table of, 55. Augustus Ccesar established a loan bank, and lent money without interest to poor citizens who could pledge value to double the amount, 7. Austrian loan contracted in England, 61. B. Banh, the word whence derived, 7. Banking is both an art and a science, preface — is a kind of trade, l^l — the four principal branches of, 11. Bank of Engla7id projected by Mr. Paterson, 26 — arguments for and against its establishment, 26 — title of the act, 27 — its charter, 28 — charges against in 1737, 36 — public advantages from, 37 — mode of government, 98 — their opposition to the London and Westminster bank, 95, 261, 262. Bank of Scotland empowered to act as a loan bank, 205 — the Bank of England the agent to, 78. Bank charter, see charter. Bank charter renewal Act, copy of, 87. Bank circulation, a mode of borrowing money adopted in 1751 by the Bank of England so called, 39. Bank contract, a contract between the Bank of England and the South Sea Company, 33. Bank post hills first issued by the Bank of England, 37. Bank restriction Act passed in 1796, 45 — continued, 46 — farther continued, 48 — farther continued, 54 — farther continued, 55. T 2 27C INDEX. JBanJtruptcies among bankers, 110. Barcelona, a bank established tlierc, 9. Belgian loan contracted in England, 61. Berlin and Milan decrees, decrees issued at tliose places by Napo- leon Buonaparte against English merchandise, 51. Bexlejj, Lord, (formerly Mr. Vansittart), his resolutions respect- ing the bullion question adopted by the House of Commons, 52. Bills of exchange, nature and origin of, 171 — foreign and inland, 172, 184 — traffick in is a distinct branch of business, 174 — are the chief means of making remittances, 175 — five advan- tages of bills, 175 — five classes of bills, 179 — short bills versus long bills, and long bills versus short bills, 180 — laws respecting the noting and protesting of bills, 183 — country bankers reissue the bills they have discounted, 186 — rate of discount on, 187 — effects of on the circulation of notes, 196 — bills are drawn for larger amounts in seasons of high prices, 165 — investments in are well adapted for bankers, 170. Birmingham, advances to in 1826, Q5 — state of the Bank of Eng- land branch at, 140 — joint stock banks at, 130. Bonuses granted by the Bank of England to its proprietors, 46, 47, 48. 84. Branch banhs are the eff'ect of joint stock banks, 133 — comparison between a branch bank and a private bank, 133 — comparison between a branch bank and an independent joint stock bank, 134 — their defects, 136. Branches of the Bank of England, suggested in the year 1737, 36 proposed by the government in 1826, 65 — authorised by law, 67 — caused dissatisfaction among the country bankers, 67 — refused the notes of country banks, 69 — issued unstamped bills at 21 days upon the parent establishment, 69 — their notes must be payable at the place of issue, 89 — number and business of, 138 — affairs of from 1828 to 1831, 139 — affiiirs of the indivi- dual branches, 140. Brazilian loans contracted in England, 61. Bristol, state of the Bank of England branch at, 140 — joint stock banks at, 130. Bubble, South Sea, an account of, 33. Bucldersbury, the banking goldsmiths' shops extended from the Old Change to, 14. Buenos Ayres, loan on account of, contracted in England, 61. Bullion used as money in the early ages, 2 — amount of in the Bank of England first published, 73 — gold and silver in the bank from 1815 to 1832, 74 — total amount of from 1778 to 1832, 74 — increase of diminishes the profits, 80 — amount of during 1834, 97. Bullion committee appointed in 1810, 49 — tlieir report, 50 — re- jected by the House of Commons, 52. INDEX. ^^77 Burgess, Henry, Esq., his calculation as to the circulation of coun- try banks from 1 SI 8 to 182.5, 114. Burnett, Bishop, his observations on the Bank of England, 27. Capital, to increase the rapidity of its circulation has the same effect as to increase its amount, 143 — how banks of remittance cause it to revolve more rapidly, 155 — effects of its advance by way of discount, 197 — is obtained at a cheaper rate when banks are established, 161, 162 — how its cheapness promotes specu- lation, 162 — its removal from one country to another may sometimes be occasioned by an increased issue of notes, 169 — the same capital made to carry on a larger business by means of bills, 176 — way in which capital is transferred from one branch of trade to another, 177 — the abundance of capital a reason for abolishing the laws of usury, 189 — profit on was formerly in- fluenced by the legal rate of interest, 190 — advanced by way of loans has the same effect as when advanced by way of dis- counting bills, 206. Capital, banking, three ways in which it may be raised, by depo- sits, notes, or bills, 141 — usually regulate the amount of a banker's profits, 142 — how raised by discounting bills, 143. Capital of the Bank of England, its original amount, 27 — its va- rious augmentations, 55 — the proprietors determine not to re- duce it, 96. Capitals of joint stock banks, Lord Althorp's regulations respecting, 86 — the smaller the capital the greater the dividend, 129. Capitals of branch banks, 133. Case of need, on bills of exchange, explanation of, 186. Cash Credits, definition of, 199 — advantages to the borrower, 200 — gives additional facilities to the merchants of Scotland, 201 — bills of exchange versus cash credits, 203 — cash credits ver- sus bills of exchange, 203 — designed to promote the circulation of notes, 116, 204. Cash payments, suspension of by the Bank of England, 43 — re- sumption of recommended by the bullion committee, 51 — ac- tual resumption of, 57. Chamber of St. George, the name of the Bank of Genoa, 10. Chamberlain, Dr. Hugh, projected the Bank of England, but his plan was not adopted, 26. Champagne, the rate of legal interest in the fairs of, 20. Charges at a branch bank less than at an independent bank, 135. Charitable musical society in Dublin, a loan bank so called, 210. Charitable societies, amount of their deposits in savings' banks, 236 — cannot deposit more than 100/. a year, nor more than 300/. in the whole, 227. 230. T 3 278 INDEX. Charles I. revived the office of royal exchanger, 12 — his curious proclamation, 12 — his reply to the Goldsmiths' Company, 14< — took possession of 20(),0{)0/. of the merchants' money that had been lodged in the mint, 21. Charles II. borrowed money of the bankers at 10 per cent, 23 — shut up the Exchequer, and would not pay the principal or the interest of the money he had borrowed, 2.5. Charles V. fixed the rate of interest in the Low Countries at 12 per cent., 20. Charter of the Bank of England, its provisions, 28. 32 — discus- sions respecting, 36 — its various renewals, 30, 31, 32. 37- 40, 41. 47 — committee appointed respecting, 71 — the last bank charter renewal act, 87. Chatham set fire to by the Dutch, occasioned a run on the London bankers, 24. Cheapside, the shops of the banking goldsmiths were situated chiefly in the south row of, 14. Cheques, regulation of the Bank of England respecting, 148, 149. Child, Sir Josiah, his attack on the new-fashioned bankers, 23 — his observations on the rate of interest, 190. Children, one-fifth of the deposits in Exeter Savings' Bank lodged by, 238. Childs Sf Co.'s banking-house established before the Bank of England, 107. Chili loan contracted in England, 61. Circulation of notes by the Bank of England, 15/. notes first issued, 40 — 10/. notes first issued, 40 — Ftl. notes first issued, 43 — IZ. and 21. notes first issued, 45 — \l. and 2/. notes withdrawn, 57 — total amount of notes in circulation from 1778 to 1832.74 — ^ notes under 5/. in circulation from 1798 to 1832,76 — in- crease of, a source of increased profit, 80 — expense attending the, 78. Circulation, banks of, defined, \BG — charges against, 157 — com- pared with banks of deposit as to their effect on the currency, 142 — checks upon excessive issue by, 158 — accused of en- couraging speculation, 159, see speculation — accused of ad- vancing prices, 163, see prices — effects of, on the foreign exchanges, 167. Circulating medium, economised h\ banks of deposit, 147 — an in- crease in amount is no proof of excess, 164 — amount of, regu- lated by the (|uantity of conunodities to be circulated, 164 — and their scarcitjs 165 — an increase in the amount of some- times causes an increase in the quantity of commodities pro- duced, 164 — an increase of sometimes causes a reduction of prices, 166 — how an increase of affects the foreign exchanges, 167 — effects of discounts upon, 196. Citg hands in the hands of the Bank of l^ngland, 77. Clearing-house, when established, 107 — number of clearing INDEX. 279 bankers, 108 — London and Westminster Bank excluded from, 261. Clergy prohibited to take usm-y, 15 — were divided as to the re- admission of the Jews into England, 18. Clerks, number of in the Bank of England, and the average amount of their salaries, 79 — some pensioned off when small notes were discontinued, 59. Coin, loss on silver coin remelted by the Bank of England^ 71. Colony, a branch bank resembles, 13G. Columbian loan contracted in England, 61. Commerce of Athens, 4 — increases wealth and gave rise to bankers, 4. Commercial distress, seasons of, 1697, 30 — 1793, 42 — 1811, 51 — 1826, &5. Commissions of bankruptcy, number of, issued against country bankers, 110. Composition for stamp duties, country bankers allowed to com- pound for the stamp duties on their notes, and twenty-one day bills on London at 7*. per cent, per annum, 69 — rendered com- pulsory as far as making the returns, 115 — amount of, received in the years 1820 to 1823, 114. Compound interest, case in which it may be charged by bankers, 196 — is granted by the savings' banks, 229. Copper first coined in England in the year 1609, 11. Corsica, the kingdom of, held by the Bank of Genoa as security for the debts of the state, 10. Cosmo di Medici, the banker, was reckoned the most wealthy mer- chant ever known in Europe, 8 — his bank was to become surety for Louis XL, King of France, 8. Cotton, a comparison between the price of cotton and the interest of money, 191. Counterfeiting silver dollars and tokens, an act passed to prevent, 49. Country hanks, origin of, 109 — their number, 59. 110. 112 — licences granted to, 110 — number of, bankrupts, 110 — the kind of business they carry on, 112 — their connection with the London bankers, 1 12 — their notes, see 7iotes — sums paid by, for stamp duties, 114 — are allowed to compound for stamp duties, 69 — are required to make quarterly returns of the weekly amount of notes in circulation, 115. Country bankers are dissatisfied with the establishment of branches of the Bank of England, 67 — hold a meeting at the London Tavern, and pass resolutions upon the subject, 68 — their inter- view with Lord Goderich, 68 — complain of the branch banks issuing 21 day bills on London without a stamp, 69 — their me- morial to the Treasury in 1828, 70 — their memorial to Earl Grey and Lord Althorp in 1833, 115 — way in which their issues are affected by the issues of the Bank ol' England, 118. T 4 280 INDEX. Country bank circulation, number of notes stamped from 18-20 ta 1831, 113 — amount of stamp duty received, 114- — propor- tionate view of the circulation of, 156 — country banks fron> 1818 to 1825, 114 — has a tendency to increase the manufacture and exportation of domestic productions, 115 — effect of, on the foreign exchanges comparatively insignificant, 115 — fluctuated less from 1817 to 182G than the circulation of the Bank of England, 115 — effect of numerous banks of issue upon the amount of the circulation, IIG — numerous banks occasion a more equal distribution of the circulation, 116 — way in which the command of the circulation may be rendered subservient to individual advantage, 117 — enable the country banker to lend money at a lower rate of interest, 117 — useful to miners and manufacturers, 118 — effect produced upon the country bank circulation by the issues of the Bank of England, 118. D. Danish loan contracted in England, 61. Days, number of that notes of different denominations remain in circulation, 42. 55. Dead weight, military and naval pensions, so called, 60 — sum advanced on Feb. 29, 1832, 77. Debt, permanent, due from the government to the Bank of England, 38 — increased in 1816, 54 — reduced in 1834, 91. 96. Debts, time of payment fixed by bills, 175 — are most easily proved or transferred by means of bills, 175 — between coun- tries, how settled, 172, 173. Delphi, its temple the great bank of Greece, 3. Deposit, banks of, 141 — how capital is raised by, 141 — effects of, 143 — their different kinds of deposits, 145 — the issue of notes by, 145 — effects of on the circulating medium, 147 — compared with banks of remittance as to their effects on the revolution of capital, 156. Deposits, facilities granted by the Bank of England to persons having, 148 — amount of in the Bank of England, from 1807 to 1831, private and public, 149 — gross amount of, from 1778 1832, 74— amount of, during 18.S4, 97. Devonshire, deposits in savings' banks as compared with the popu- lation, 238. Directors of the Bank of En (f land, their qualification, 28 — names of the first, 29 — names of in 1732, 35 — names of in 1835, 98 — their power, 98 — committees of, 99 — of the London and Westminster Bank, 246. Discount, hanks, of, 170 — i. Nature and origin of bills of exchange, 171 — ii. Advantages of bills, 175 — iii. Classes of bills, 179 — iv. Notaries public, 182 — v. The rate of discount, 187 — vi. Effects of discount on the circulation, 196. INDEX. ^81 Discounts, amount of, in the Bank of England, from 1795 to 1831, 198 — amount of, at the respective brandies, 110 — notices from tlie bank respecting, 43 — rules for discounting, 179 — banks that issue notes can discount on lower terms, 117 — query, is it most for the advantage of a bank to discount long-dated or short-dated bills ? 1 80 — is it better for a bank to make advances by means of cash credits, or by discounting bills? 203. Dividends on the public funds^ are received by the London bankers on account of the country banks, 112 — are received by the Bank of England for their customers, l^S — proposal to render the unclaimed available to the public service, 42. Dividends on Bank of England stock, from 1708 to 1729, 31 — 1730 to 1747, 34—1747 to 1753, 39— 1754 to 1764, 39 — 1764 to 1767, 40—1767 to 1781,41 — 1781 to 1788, 41 — 1788 to 1807, 42—1807 to 1823, 49—1823 to the present time, 59 — annual amount paid, 78, 84. Dollars issued by the Bank of England in 1797, 45 — in 1804, 4 — an act passed to prevent the counterfeiting of, 53. East India Bonds, interest on raised to five per cent., 103. East India Company., lent money to the Bank of England at 2 per cent., 94. Edward the Confessor prohibited the taking interest for money, 15. Edward I., curious law respecting the Jews passed in his reign, 17. Edward III., in his reign gold was first coined in England, 1 1 — established the office of royal exchanger, 12. Eight per cent, made the legal rate of interest in England, 21. English, Mr., his view of joint stock companies formed during the years 1824 and 1825, 60. Equitable loan Bank, formed in London in 1824, but failed to obtain an act of parliament, 206. Esdaile and Company, a London banking house, received assist- ance from the Bank of England on condition of winding up, 104. Exchange, why the place where merchants meet is so called, 12. Exchanges between bankers, a check to an over-issue of notes, 158. Exchanges, foreign, see foreign exchanges. Exchequer Bills, advance in the rate of interest on, in 1836, 102 — table of the different rates on, 102. Exeter, state of the Bank of England branch at, HO — the branch abandoned, 140 — the savings' bank at, 238. Expenses of the Bank of England in the year 1832, 78 — of the branches, 139. Exportation of gold and silver coin permitted, 57. Extracts from public documents, from the Bank of England charter, 28 — the order in council commanding the suspension of cash payments, 43 — from the act of parliament against forgery, 47 — 282 INDEX. from the report of the bullion committee, 50 — from the evi- dence taken before the bank committee, 58. G'5, 61-. 1 18. liS — from the memorial presented by the country bankers to the treasury against the Bank of England branches, 70 — the report of the bank committee, 72 — letter from Lord Althorp to the bank directors, 85 — the last bank charter renewal act, 87 — notice of the reduction of the 4 per cents., 1826, 95 — from the memorial presented by the country bankers to Earl Grey, 115 — from the act permitting joint stock banks to be established 65 miles from London, 125 — the resolutions of a committee of the House of Commons against the usury laws, 191 — official in- structions for the establishment of parochial societies for granting small government annuities, 240. F. Failures of banks, evil effects of, 122. Faiinthroy^ Mr., executed for forgery of powers of attorney, 62 — total loss sustained by the bank, 63. Fifteen pound notes first issued by the Bank of England, 40. Five per cent, made the legal rate of interest in England, 21 — five per cent, navy stock reduced to four, 59. Five pound notes first issued by the Bank of England, 43. Fee paid to barrister for certifying the rules of savings' banks and annuity societies, 243. Flanders, the Countess of, borrowed money at from twenty to thirty per cent, to pay her husband's ransom, 19. Florence was one of the first cities in Christendom, 8 — its inhabit- ants had great skill in banking, 7. Fluctuations in the price of commodities, not promoted by the issues of the country banks so much as by the issues of the Bank of England, 115 — originate in the speculations of influential merchants, 115 — not promoted by numerous banks of issue, 116 — see prices. Foreign exchanges, explanation of, 172 — were unfavourable in 1808 and 1809, 50 — are stated to have no connection with the issues of Bank of England notes, 50 — opinion of the bullion committee on this subject, 51 — affected by commercial specula- tions, 64 — adverse exchanges succeed great importations, 115 — said to be not so much affected by the issues of country bankers, as by those of the Bank of England, 115 — effect on by the in- creased issue of notes, 167 — two ways in which this effect is produced, 168 — are regulated by the proportion between the exports and imports, 168 — and by the removal of capital from one country to another, 169. Foreign loans, a list of contracted in England, 61. Forgery, the first Bank of England notes, 40 — it is legally decided that the bank is not liable to pay forged notes, 41 — law passed INDEX. 283 to prevent, 47 — detention of forged notes by the bank dis- continued, 56 — an act to prevent forgery, 57 — annual loss to the Bank of England from forgeries in the public funds, 79 — the forgeries of Fauntleroy, 63 — penalty of forging certificates in annuity societies, 249- Foundation stone of the Bank of England laid, 34. Foundling hospital of St. Petersburg!!, profits of the loan bank given to, 209. Four per cents., 1826, reduction of to S^per cent., and consolidated witii the new 83 per cent., 95. Friendly Societies, act extended to the Isles of Guernsey, Jersey, and Man, 215 — not superseded by savings' banks, 253 — acts of parliament for establishing, 254 — number of their members in 1815, 255 — may subscribe their funds in savings' banks, 223 — this privilege repealed, 225 — renewed with limitations, 227. 230 — the limitations removed, 237 — amount of their deposits in «:avings' banks, 236. Friendly Loan Society formed at 50. Leicester Square, 215 — first report of, 216. Funds, public, investing money in, not an operation of banking, 207. G. Genoa, Bank of, 9 — its capital formed of loans lent by the citizens to the state, 10 — called the chamber of St. George, 10 — held as security the port of Caffa and the kingdom of Cor- sica, 10. Gloucester, state of the Bank of England branch at, 140 — joint stock banks at, 130. Goderich, Lord (now Earl Ripon), deputation from the country bankers waited upon him, 68. Gold first used as money in the form of bullion, 2 — first coined in England, 11 — how procured from abroad by the Bank of Eng- land, 58. Goldsmiths accused of melting and exporting the coin of the rcahn, 3 — their shops extended from the Old Change to Bucklersbury, 14 — their business, 22 — became new-fashioned bankers, 21 — allowed fourpence per cent, per diem interest on money deposited, 22 — became agents for receiving rents, 23 — advanced money to the king, 23 — accused of causing a scarcity of money, especially in the country, 23 — and of raising the rate of interest, 24 — mode of transacting their business with the king, 25 — a run vipon, 25 — the king refused to pay them the money he had borrowed, 25 — their notes rendered trans- ferable by indorsement, 106. Goldsmiths' company petitioned against the renewal of the office of royal exchanger, 14 — the king's reply, 14. Goldsmiths' notes were probably transferable receipts for money lodged, 21 — the first kind ot bank notes issued in England, 21. 284 INDEX. Gold watches, forty casks of, lodged in the loan bank at Paris, '209. Gooil luck, an instance of, 64. Government annuities may be granted for 20/. and under to depositors in savings" banks and others, 239 — rules for annuity societies, 243 — tables of, 251, 252, Greece, the first banks there, 3 — different modes of lending money, 4 — interest as high as thirty per cent., bankers allowed 12 per cent, on deposits, 4 — plan for joint stock in, 5. Greek loans contracted in England, 61. Grey, Earl, memorial of the country bankers to, 115. Grocers Hall in the Poultry, the business of the bank of England formerly transacted there, 35. Gtiadalijava loan contracted in England, 61. Guarantee, an easy mode of giving one, 177. Guatemala loan contracted in England, 61. Guernsey, Friendly Societies Act extended to, 215. H. Harman, Jeremiah, Esq., extract from his evidence before the bank committee, 64. Henry III. prohibited the Jews taking more than two-pence per week for every 20*. they lent to the students of Oxford, 16. Henry VIII., in his reign the office of royal exchanger fell into disuse, 12 — interest of money fixed at 10 per cent., 20 — the coin of the realm greatly debased, 13. Herries, Mr., chancellor of the exchequer, interview of the country bankers with, 68. Hibernian Bank empowered to act as a loan bank, 206. Highrvay robberies occasioned the issue of bank post bills, 37. Historians have neglected to record the progress of banking, 1. Hoares, Messrs. of Fleet Street, their bank was established before the Bank of England, 107. Holland, the Earl of, appointed to the office of royal exchanger by Charles I., 13. Holidays kept at the Bank of England, 97. House of Commons rejected the report of the bullion committee, 52 — number of members who voted on the London and West- minster Bank bill, 95. Hull, state of the Bank of England branch at, 140 — joint stock bank at, 131. I. Immortality, private bankers not endowed with, 138 — a public company never dies, .37. India, what rate of interest may be charged on bills returned j)rolested iiom, 196. INDEX. 285 Inscription on the statue of King William III. in the liall of the Bank of England, 35. Interest of money, high at Athens, 5 — the taking of deemed sinful in the middle ages, 19 — condemned by the Mosaic law, 15 — and why, 188 — prohibited in England by Edward the Confessor and by a council held at Westminster, in 1 126, 15 — the pro- hibition of not adapted to the present times, 15 — a defence of, 189 — amount received at the several branches of the Bank of England, 110 — alterations in the rate of, 189, see rate of interest — compound, see compound interest. Interest, rate of, charged by loan societies, 215. Interest on deposits, in hands of bankers, a check to over-issue of notes, 159 — granted by the Bank of England to the East India company, 94 — granted by the London and Westminster Bank, 257. Ireland, facilities granted by banks to exporters of butter in, 155 — the legal rate of interest in, 77 — the laws of usury repealed in, as far as regards three months' bills, 91 — bills drawn from are regarded as foreign bills, 185 — an account of the charitable loan banks in, 210 — an Act passed to encourage loan banks in, 211 — manner in which they are conducted in, 212 — an Act passed to encourage savings' banks in, 225 — a view of the savings' banks in, and the number of their depositors, 236 — compared with the population, 236 — their progress from 1831 to 1833, 237 — bills returned to protested may be charged six per cent, interest, 196 — Bank of Ireland employ the Bank of England as their agent, 78. Issues of notes by country bankers, alleged to have less tendency to promote fluctuations of price than those of the Bank of En- gland, 116 — act exclusively in promoting home productions, 115 — do not greatly influence the foreign exchanges, 115 — advantage of numerous banks of issue, 116 — effects of the issues of the Bank of England upon those of the country bankers, 118. J. James I, fixed the legal rate of interest in Arragon at 18 per cent., 20. Jersey, Friendly Societies Act extended to, 215. Jerusalem, probable business of the money-changers in the temple of, 2. Jews arrived in England about the time of the conquest and be- came famous for wealth and usury, 16 — opinions as to the cause, 16 — prohibited taking more than two-pence per week for the loan of 20*. to the students at Oxford, 16 — curious laws respecting, 17 — letter concerning them from the Archdeacon of Bath, 17 — expelled from England in 1290, 18 — re-admitted by Oliver Cromwell, 18. 286 INDEX. John, King, farmed out tlie office of royal exclianger for five thousand marks, 13. Joint stock banks, suggestion for forming one by Xenophon, 5 — prohibited in England in 1708, 31 — permitted beyond sixty- five miles from London in 1826, QiQ — permitted in London if not banks of issue, 89 — advantage of, 120. 256 — possess greater'^ security than private banks, 120 — are less liable to runs, 121 — more prudent in their management, 123 — the legal liabilities of shareholders in, 121' — a list of in England and Wales, 130. Joint stock companies, the number of, projected in 1824- and 1825, 60. Journeymen, savings' banks useful to, 221. K. King, Lord, his letter to his tenantry requiring his rents to be paid in gold, 53. Kites, or accommodation bills, uses of, 177 — should not be en- couraged by bankers^ 179. Labourers thrown out of employ by runs upon banks, 1 22 — may be assisted by loan banks, 212 — savings' banks useful to, 222. Land, the value of, reduced by a high rate of interest, 23. Leeds, state of the Bank of England branch at, 140 — joint stock bank at, 131. Legal tender. Bank of England notes above Bl. made so, 90. Letters from the Archdeacon of Bath to the Bishop of Ely, 17 — from Lord King to his tenantry, 53 — from Lord Althorp to the bank directors, 85. Liabilities of the Bank of England from 1778 to 1832, 74 — during the year 1834, 97. Liabilities and securities of the bank during the year 1834, 97 — during 1835, 99 — during 1836, 103. Licences to country bankers, an account of the number of, 110. Liverpool, large amount of debts of speculative merchants who failed there, 116 — the most speculative place in England though without country notes, 161 — state of the Bank of England branch at, 140 — joint stock banks at, 131. Loans, all advances by bankers are loans, 206 — dead ones opposed to sound principles of banking, 1()2. 207. Loans, foreign, contracted in England, a list of, 61. Loans, toia\ amount granted by the Friendly Loan Society, 217 — classifications of, 218 — smaller loans more regularly paid, 219. INDEX. 287 Loans, government, raised during tlic seven years' war, and the rates of interest, 40 — during the American war, 11 — during the war with republican France, 48 — during the war with the French empire, 5^ — subscriptions for, first received at the Bank of England, 32 Loa7i Banks, in ancient Rome, 7 — of two kinds, 204-, 205 — the Bank of England, the banks of Scotland, and the Hibernian Bank are loan banks, 205 — established in Italy, 208 — in France, 208 — in Russia, 209 — in Ireland, 210 — act for regulating in Ireland, 211 — Sir Francis Brewster's proposal for one, 209 — the equitable loan bank attempted to be formed in London, 206 — effects of capital advanced by, 206 — Mr. Trench's observations on charitable loan banks, 212 — are worthy of legislative encouragement, 214'. Loan Societies, act of parliament passed to encourage, 215. Lombards, who so called, 18 — dealt largely as bankers^ 19 — fre- quently lent money to the English monarchs, 20. Lombard Street, so called from the Lombards residing there, 20. London Bankers, are successors of the goldsmiths or new-fashioned bankers, 9 — their business, 106. 14'4' — do not issue notes though they have the power, 106 — the oldest in London, 107 — established the clearing, 107 — discount for those only who have current accounts with them, 143 — list of in 1837, 108 — list of those discontinued, 102 — how paid for their agency by the country banks, 1 12. London Dock Company, their debt to the Rank of England, Feb. 27, 1832, 77. London Gazette, announcement in, that the Bank of England would lend money on plate, lead, tin, copper, steel, and iron, at 4 per cent., 30 — quarterly account of the affairs of the Bank of England to be published monthly in, 91. London Magazine., extracts from in 1737, respecting the Bank of England, 36. London and Westminster Bank, extracts from the original prospec- tus, 255 — terms of doing business, 257 — mode of suing and being sued, 257 — copy of the annual report, 260 — a statement of its affairs, 263 — summary of its deed of settlement, 259 — names of directors, 273. Long bills versus short bills, 180. Losses increased by the Friendly Loan Society, 216. Low Countries, the rate of interest fixed there by Charles V., at 12 per cent., 20. Lyndhurst, Lord, his motion with reference to the Reform Bill produced a run on the Bank of England, 84. M. Man, Isle of, Friendly Societies Act extended to, 215. 288 INDEX. Manaqeimnt of joint stock hanks more prudent than of private hanks, 123. Manchester, state of the Bank of England hranch at, 140 — joint stock banks at, 131. Manna in the wildcrnesS;, could not be a subject of speculation, 160. Marriages, early and improvident, prevented by savings' banks, 222. Married women may deposit money in savings' banks, 230. Marylebone savings' banks, rules of, 228. Memorial of the country bankers to the treasury, 69 — to Earl Grey, 115. Meath Charitable Loan Society, an account of, 210. Meetings of proprietors in 1835, 98, 99 — in 1836, 100 — in 1837, 104". Merchants used for money gold and silver bullion of a certain fine- ness, 2 — of Athens, their dealings with their bankers, 4 — sign a declaration of their willingness to take Bank of England notes, 38. 44 — Irish, benefited by banks, 155. Mexican loans contracted in England, 61. Minors may deposit money in savings' banks, 230. Mint price of gold, £3 lis. IQld. per ounce, 50. Moment, a lucky one, (^5. Money current with the merchant, 2 — bankers are dealers in, 141 — see circulating medium. Money borrowing at Jerusalem, 3 — by the goldsmiths, 22 — a branch of modern banking, 11 — see banks of deposits. Mo7iey changing at Jerusalem, 2 — a branch of banking, 11 — a public officer appointed in England for, 12 — see royal ex- changer. Money lending a branch of banking, 14 — see loan banks, and banks of discounts, and cash credit banks. Money market, pressure on in 1836, 101. Moneyed class are the means of transferring capital from one branch of trade to another, 178. Mortgage, the Bank of England advance money on, 60 — amount of outstanding, 77 — interest received on account of, 78. Moses prohibited the taking of interest for money, but not from strangers, 15 — the spirit of his laws, 188. Mounts of Piety, loan banks so called, 208, 209. N. Nations, the farther back vvc trace their origin the poorer we find them, 15. Neapolitan loans contracted in England, 61. Netv three and a half per cent, stock created, 71. INDEX. 289 New four per cent, stock created, 59 — reduced to three and a half per cent., 70. Neio five per cent, stock created, 71. iVew-fashioned bankers, their mystery discovered, 22. Newcastle-\x\)orL-TynQ, state of the Bank of England branch at, 140 — joint stock bank at, 132. Noble, a gold coin worth 6s. Sd., first issued by Edward III., 11. Northern and Central Bank of England, at Manchester, received assistance from the Bank of England, and on what conditions, 103. Norwich, state of the Bank of England branch at, 140 — joint stock banks at, 131. Notaries public, origin of, 182 — business of in the present day, 182 — difference between noting and protesting bills of exchange, 183 — form of protest, 183 — laws respecting protesting, 134 — charges of notaries, 185 — acts of parliament for regulating notaries, 186. Notes of a less amount than 20s. prohibited in England, 41 — under 51. prohibited in 1777, 41 — permitted in 1797, 46 — continued in 1822 until the termination of the bank charter, 58 — prohi- bited in 1826 after 1829, 66. Notes payable on demand are a check to over-issue, 158 — no bank having more than six partners allowed to issue them in London, or within sixty-five miles thereof, 89 — see Circulation. Notice, one year's notice after the expiration of ten years from the 1st August, 1834, to be given to the Bank of England of the non- continuation of their charter, 90 — a resolution of the House of Commons delivered at the bank to be deemed a sufficient notice, 90 — should such notice not be given for six months after Aug. 1, 1844, then the charter to be continued until the end of twelve months' notice to be given after August 1. 1855, 94. Notices from the Bank of England respecting lending money on plate, &c., 30 — on suspending payment, 44 — on issuing dol- lars, 45 — to pay cash, 46 — to pay cash, 55 — • to make ad- vances while stocks are closed, 70. 97 — to reduce the number of holidays, 97. Notices issued by the bank, 97, 98, 99. 101. 103, 104. O. Officers of savings' banks to pay the money they owe to such banks before any other debts, 253. Old Change in Cheapside, a street so called from the office of royal exchanger being there, 13 — goldsmiths' shops extended from the Old Change to Bucklersbury, 14. Old four per cents, reduced to three and a half, 60. Oliver Cromwell readmitted the Jews into England, 18. Olympia, the temple of, a great bank. U 290 INDEX. One pound notes saved the credit of the country, 6.5. Oxford, students at, not to pay more than two-pence per week for every twenty shillings they borrowed of the Jews, 16. Palmer, John Horsley, Esq., his opinion as to the causes of the panic, 63 — his statement as to the effects of the issues of the Bank of England upon those of the private bankers, 118. Panic of 1825, causes of, 63 — conduct of the Bank of England in, 61^. Par of exchange between nations, 173 — between country towns and London, 175. Parochial societies for granting government annuities, 206. Partnership, law of, an instance of its pernicious absurdity, 24'0 — in what way it affects the operations of large companies, 262 — how its inconveniences are obviated by means of trustees, 257 — modification of, as far as regards joint stock banks beyond sixty-five miles from London, 126, 127. Pnterson, William, projector of the Bank of England, 26 — one of the first directors, 29. Peel, Mr. (now Sir Robert), his bill for the resumption of cash payments on the part of the Bank of England, BQ. Penny, silver, the highest denomination of coin formerly in Eng- land, 11 — the quantity of silver it contained, 11 — cut into half-pence and farthings, 11. Pe7isions to Bank of England clerks, 59 — average amount of, 79 — naval and military pensions, arrangement between the go- vernment and the bank respecting, 59. Peruvian loans contracted in England, 61. Peter of Blois, Archdeacon of Bath, his letter to the Bisliop of Ely, 17. Philip IV. fixed the legal interest of money in the fairs of Cham- pagne at twenty per cent., 20. Placentia, the interest of money there forty per cent, in the year 1490, 20. Pole and Co., the failure of their bank in 1825 one cause of the panic, 64. Political economy, banking a part of, preface — see articles capi- tal, circulation, circulating medium, foreign exchanges, interest of money, prices of cominodities, speculation, usury, &'C. &c. Popidation of England, Wales, and Ireland, average lodgments in savings' banks for each person, 236. Portsmouth, a bank of England branch opened there, 140. Portuyuese loans contracted in England, 61. Price of gold, standard of at the mint, 50 — market price during the years 1S06, 1807, and 1608, 50 — price at which it is taken by tlie Bank of England, 99. INDEX. ^291 Prices of commodities, reduced prices of commodities the only means whereby the Bank ollMigland can obtain gold from abroad, 58 — nia}' be altered by the bank directors for the purpose of speculation, 117 — how affected by banks of remittance, 151 — how far they can be affected by banks of circulation, IQ'i — may be advanced for a time by the issues of the Bank of England, 163 — cases in which an increased issue oi^ notes will not ad- vance prices, 16^ — an increased issue of notes sometimes the effect not the cause of an advance of prices, 1G5 — an advance of prices caused by an issue of notes can be only temporary, 165 — an increased issue of notes sometimes causes a reduction of prices, 166. Privilege, exclusive of the Bank of England, when first granted, 31 — relaxed in 1826 with regard to banks at a greater distance than sixty-five miles from London, 66 — relaxed or explained in 1833 with regard to banks of deposit in London, 89 — how long continued, 90. Proclamation of Charles L respecting the office of royal exchanger, 12. Proctors may be licensed to act as notaries beyond ten miles from the Royal Exchange, 187. Profits of the Bank of England, annual amount of, from 1779 to 1832, 79 — years in which the profits increased, 80 — years in which there was a diminution of profits, 82 — sources of profits, 83 — amount of from the destruction of bank notes, 83 — distri- bution of to the proprietors, 84<. Promissory notes rendered transferable by indorsement like bills of exchange, 106. Protest of bills of exchange, form of one, 183 — wherein protesting differs from noting, 183 — laws respecting, 184 — charges for, 185 — rate of interest chargeable on protested bills, 196. Prn,ssian loans contracted in England, 61. Public officers, joint stock banks have power to sue and be sued in their names, 125 — this privilege not obtained by the London and Westminster Bank, 95. 262. Q. Qualifications for governor, deputy governor, director, and voter at the bank of England, 28. Queen Elizabeth, the 13^<^/., 9(^/., and'l^rf. pieces coined in her reign were melted down by the goldsmiths, 14. Questions in banking: Arc chartered banks advantageous or injurious to a country ? 26 — ought the charter of the Bank of England to be continued ? 36 — was the suspension of cash payments by the Bank of England in 1797 justifiable ? 43 — can the issues of the Bank of England be excessive if the notes are issued oiily in the discount of bills founded on real commercial transactions ? 50 — u 2 292 INDEX. is the opinion correct, tliat " the amount of notes of the Bank of England in circulation, and the course of the exchange during the operation of the Bank Restriction Act had frequently no connection?" 50 — was the unfavourable course of tlie foreign exchange in 1806, 7, and 8, produced by an excessive issue of Bank of England notes, or by the political and commercial rela- tions of the country? 52 — was the panic of 1825 produced by an over-issue of notes on the part of the Bank of England and the country banks? 64' — are the branches of the Bank of Eng- land or the private country bankers the best adapted to promote the prosperity of trade, to support agriculture, and increase ge- [ neral improvement? 68 — whether the issuing of notes in London should be confined to one bank, or whether a competition of dif- ferent banks of issue, each consisting of an unlimited number of partners, should be permitted? 72 — supposing the issue of notes in London ought to be confined to the Bank of England, what exclusive privileges ought that bank to have in order to secure this object ? 72 — what checks are necessary to secure to the public the proper management of banks at issue, and especially would it be expedient and safe to compel them periodically to publish their accounts ? 72 — would it be advisable to adopt the resolutions proposed by Lord Althorp for the regulation of coun- try banks ? 86 — have the issues of the Bank of England or those of the country bankers the greatest effect in causing fluc- tuation in the foreign exchanges? J 15 — would it be desirable to have throughout the country numerous banks of issue, or only one bank of issue? 116 — have the directors of the Bank of England by means of their control over the issues of notes the power of rendering those issues subservient to their individual advantage? 116 — are the state of the foreign exchanges a safe guide for a country banker in granting accommodation to his cus- tomers ? 118 — what effect has an increase or decrease of Lon- don bank notes upon the issues of country bankers ? 1 1 8 — what adeantage have joint stock banks over private banks? 120 — what responsibility is incurred by shareholders in joint stock banks, and would it be for the advantage of those banks to dimi- nish the responsibility ? 124'. 129 — what advantages or disad- vantages have branches of joint stock banks as compared with private banks? 133 — what advantage or disadvantage has a branch as compared with an indejjendent joint stock bank? 119 — have banks of deposit a tendency to produce the same effects upon trade and connnerce as banks of circulation? ItS. 156 — in what way do banks of remittance encourage the trade of a district? 154- — what are the checks to an over-issue of notes on the part of the country bankers? 157 — have banks of circu- lation a tendency to promote speculation ? 159 — what effect have banks of circulation upon the prices of commodities? 163 ill what way do banks of circulation affect the foreign exchanges? INDEX. 293 167 — is it most for the interest of a banker to discount long- dated bills or short-dated bills? 180 — is it just to take interest for the loan of money? 189 — is the rate of interest in any country regulated by the rate of profit? 189 — is a low rate of interest advantageous or injurious to a country? 23. 19t — ought the usury huvs to be repealed? 191 — is it better for a bank to make advances of money on cash credits, or by discount- ing bills of exchange? 903 — ought an act of Parliament to be passed for the encouragement of charitable loan banks? 214' — do savings' banks supersede the necessity for friendly socie- ties ? 253. Quotations from Dr. Watts upon the best way of learning a science, preface — from Dr. Robertson upon History, 1 — from Scrip- ture respecting the money changers, 3 — from Mitford upon the banks of Greece, 3 — from Abbi Barthelemy upon the Athenian bankers, 4 — from Mitford upon Xenophon's plan of a joint stock bank, 5 — from Dr. Robertson upon the Florentine bank- ers, 7 — from Dr. Henry upon the office of royal exchanger, 12 — from Anderson upon ditto, 12 — from ditto upon ditto, 13 — from Michaelis upon the Mosaic law against usury, \o — from Hume upon the usury of the Jews, 16 — from Dr. Henry upon ditto, 17 — from Dr. Robertson upon the rate of interest in the middle ages, 18 — from Anderson respecting the new-fashioned bankers, 22 — from Sir Josiah Child upon ditto, 23 — from Bishop Burnett upon the Bank of England, 27 — from Smollett on the South Sea bubble, 33 — from the London Magazine of 1737 on the Bank of England charter, 36 — from Mr. Ricardo upon the transfer of capital, 178 — from Burn's ecclesiastical , Law upon notaries public, 182 — from Adam Smith upon cash credits, 201 — from Sir Francis Brewster upon lumbers, 209 — from Mr. Trench upon loan societies, 212 — from the Hon. George Rose upon savings' banks, 220, 221 — from the Times upon the increased deposits in savings' banks, 237. R. Raikes, Richard Mee, Esq., governor of the Bank of England, de- clared bankrupt, 97. Rate of discount charged by the Bank of England in 1694 and 1695 29 — in not, 31 —in 1716 and 1719, 32 — in 1742, 37 — in 1746, 38 — 1773 to 1822, 5 per cent, 41 — June 22, 1822, to Dec. 13, 1825, 4 per cent., 59— 1825 to July 5, 1827, 4 per cent., where it still remains, 67. Rate of Interest, the bankers at Athens allowed 12 per cent., 4 maritime interest in Greece sometimes 30 per cent, 4 — first mentioned in English history in the year 1 199, 16 — the market rate appears to have been 10 per cent, till the time of Henry U 3 294 INDEX. VIII., but a higher rate taken by the Jews and Lombards, 16 — the Lombards demanded 20 per cent., 19 — the Jews allovred to charge the scholars at Oxford 43/. 6s. 8d. per cent, 16 — fixed in the fairs of Charlemagne at 20 per cent., 20 — at Placentia in 1490 at 40 per cent., 20 — Charles V. fixed it in the low coun- tries at 12 per cent., 20 — fixed by law in England in 1546 at 10 per cent., 20 — in 1624 at 8 per cent., 21 — in 1651 at 6 per cent., 21 — in 1714 at 5 per cent., 21 — in Ireland the legal rate of interest is 6 per cent. 21 — advanced by the new-fash- ioned bankers, 23 — country bankers better paid by charging 4 or 5 per cent, on their own notes than 7 per cent, on the notes of the Bank of England, 117 — whether it regulates the rate of profit, 191 — its effect on the price of land, 190 — causes which regulate, 190 — must vary in different places, 193 — injurious effects of a low rate of interest, 63, 194 — rate of interest charged on temporary loans by the bank of England, 70. 97 — rate of interest paid on government loans, see loans — rate of in- terest granted by savings' banks, see savings' hanks. Kate of interest, on temporary advances, 4 per cent., 98 — allowed for prompt payments on West India loan, 98 — on temporary ad- vances, 3^ per cent., 99 — on discoimts raised to 4J per cent., 101 — on discounts raised to five percent., 101 — on temporary loans raised to five per cent., 102 — advances of on Exchequer bills, 102 — and on East India bonds, 103. Receipts and expenses of the Bank of England in the year ending February, 1832, 78. Tteductions in the interest of the national debt, of navy 5 per cent, to 4 per cent., 59 — old 4 per cents, to 3^ per cent. 60 — new 4 per cents, reduced to 3^, 70 — 4 per cents, of 1 826 reduced to 3^ per cent., 95 — the first cause of the panic of 1825, 63. Reform bill, during its progress a run for gold upon the bank of England, 84. Remittance, banks of, none in new countries, 150 — are the result of extensive intercourse, 151 — different ways in which money is remitted, 151 — how remitted from London to the country, from the country to London, and from one part of the country to another, 152 — banks remit by agencies, 151 — by branches, 152 — and by their circulation, 152 — amount of remittances regulated generally by the trade, 152 — affected by imports and exports, and indicate the balance of trade, 154 — advantage of branch banks in remitting, 134 — effects of banks of remittance \ on the operations of trade, 154 — effect upon the currency, 144 — on the prices of commodities, 144 — on the revolutions of capital, 155 — banks of remittance compared with banks of de- posit, 155, 156. 7?e«# or surplus profit of the Bank of England in 1797,44 — in 1819,56 — from 17H8 to 1832,74 — the profits of each year mav be calculated Irom, 80. INDEX. 205 Rest, sums taken from to make up the dividend, 98, 99 — addition to, 100— amount of, 99. 104-. Renciools of the Bank of England charter, in the year 1697, 80 — in 1708, 31— in 1713, 32 — in iTt'i, 37 — in 1764, 10— in 1781, 41 — in 1800, 47 — in 1833, 87. Report of the bullion committee, 50 — of the bank charter renewal committee, 72. Resolutions of the merchants in reference to taking bank notes, 44 — of a meeting of bank proprietors, 96 — of a committee of the House of Commons respecting the laws of usury, 191. Resumption of cash payments by the Bank of England, 57. Ricluird I., first mention of a yearly allowance for the interest of money was in his reign, 16. Rome, bankers of, 6 — names of their banking-houses, 6 — some of their bankers receivers-general and consuls, 7 — settled ac- counts sometimes by transfer, 6 — the loan banks, 7. Rose^ Right Hon. Sir George, procured the Acts of parliament for the establishment of savings' banks, 223 — his pamphlet on the subject, 220, 221. Rothschild, Mr. N. M., foreign loans contracted by him, 61. Royal exchanger, the office of, established in the reign of Edward in. ,12 — was farmed by king John for five thousand marks, 13 — fell into disuse in the reign of Henry VUI., 12 — revived in 1627 by Charles I., 12 — Lord Mayor, the court of aldermen, and the common council petitioned against, 14 — the king's reply to the goldsmiths' company respecting, 14. Royal bank of Scotland, empowered to act as a loan bank, 205 — the Bank of England agent to, 78. Runs tq)on banks, the first mentioned in English history, 24 — evils of, 122 — joint stock banks less liable to than private banks, 121 — run upon the Bank of England occasioned by the re- bellion in Scotland, 37 — a run during the passing of the reform bill, 84. Russian loans contracted in England, 61. S. Salary, average, of the clerks in the Bank of England, 79. Savings' Banks, nature of, 220 — origin of, 220 — classes of per- sons to whom useful, 221 — acts of parliament relating to, 223 — interest granted to them three-pence per cent, per diem, 224 reduced to two-pence half-penny from the government, and not to exceed two-pence farthing to the depositors, 227. 229 — amount of deposits to be received from any one person, 224, 225.227. 229 — mode of establishing a savings' bank, 227 — rules of the Marylebone savings' bank, 228 — an account of the number of depositors in savings' banks, in F.ngland, Wales, and Ireland, 236 — compared with tlic population, 236 — increase in Q9Q INDEX. the deposits, 237 — Exeter savings' banks, 238 — savings' banks in Scotland, 239 — annuities may be granted by savings' banks, 239 — effect on capital and trade, 253 — do not supersede benefit societies, 253. Scie?ice, banking is one, the best way of learning a, preface. Scotland, rebellion in, caused a run on the Bank of England, 37 — bills drawn from, regarded as foreign bills, 185 — its commerce inconsiderable before the establishment of banks, 15 — its mer- chants have great advantage from the system of cash credits, 202 — bank of, and royal bank of, empowered to act as loan banks, 205 — savings' banks in, 239 — the prudence and frugahty of the lower classes of, how produced, 239. Scripture, the money-changers mentioned in, 2 — corn speculators noticed in, 161 — manna in the wilderness could not be a sub- ject of speculation, 161. Securities held by the Bank of England, public and private, from 1778 to 1832, 74^ — of what they consist, 76 — securities and liabilities during the year 1834', 97- Securities in loan banks, 214' — in savings' banks, 228. Seignorage, amount repaid to the Bank of England, by vote of the House of Commons, 101. Short bills versus long bills, 180. Silver coin, for several centuries the only coin current in England, 11 — loss sustained by the Bank of England by melting, 71. Six per cent, made the legal rate of interest in England, 21 — is still the legal rate in Ireland, 21. Sixpenny -pieces, loss of the Bank of England by, 71. Snow and Co., their banking-house established before the Bank of England, 107. Solicitors may be licensed to act as notaries beyond ten miles from the Royal Exchange, 187. Solon, his laws did not prohibit usury, 4. South American loans contracted in England, 61. South American republics, acknowledgment of their independence one cause of the panic, 64'. South Sea Bubble, Smollett's account of, 33. South Sea Company, an account of, 33 — their contract with the Bank of England, 34. Sovereigns, when first issued, 57- Spanish loans contracted in England, 61. Specidation, in commercial produce, renders the exchanges un- favourable, 64 — banks of circulation accused of encouraging, 1,57 — the nature of, 160 — no system of banking can prevent, 1(31 — liow far it may be promoted by banking, 162 — not the interest of bankers to encourage, 162 — cft'ect of on the amount of the circulating mcdiuni, 1()3 — maybe carried on success- fully by Bank of England directors, 117. aSV. Petersburgh, a loan bank Ibrmcd at, 209. INDEX. 297 Stamp duties, on country notes, 49 — increased, 49 — fartlier in- creased, 54 — composition for, 67 — composition for on notes and bills, 69 — sums received iVom country banks, 114 — sums received from the Bank of England, 69. 78 — bonds connected with loan banks not chargeable with, 211 — legacies and powers of attorney connected with savings' banks not chargeable with, 224. 232, 233, 234 — exemption in case of annuity societies, 247 — and friendly societies, 254. Stamp dutij, no note, security, receipt, or other documents con- nected with loan societies to be liable to, 215. Statue of King William erected in the hall of the Bank of England, 35. Statute of distributions, sums above 20/. in savings' banks to be divided by, 224. Stanhope, Earl of, his bill for preventing Bank of England notes being taken for less than their nominal value, 52 — the act con- tinued, 53 — the act revived and continued, 53. Statement of the affairs of the Bank of England, Feb. 29. 1832, 77 — of the affairs of the London and Westminster Bank, Dec 31. 1834, 263. Steel y aril company were a kind of bank to our kings, 20. Stock government, dividends are received on through country banks, 112 — and by the Bank of England, 148 — the Bank of England first advanced money on the security of, 60. Stocks market, so called from the public stocks being placed there for the punishment of offenders, 209. Stolen notes, it is legally decided that the bank is not liable to pay, 40. Subscriptions for government loans first received by the Bank of England, 32. Suspension of cash payments by the Bank of England, 43. Swa7isea, state of the Bank of England branch at, 140. Tables, particulars of the permanent debt due from the government to the bank, 38 — the government loans contracted during the seven years' war, and the respective rates of interest, 40 — the loans contracted during the American war, and the respective rates of interest, 41 — the loans contracted in the war with republican France, and the respective rates of interest, 48 — the loans contracted during the war with the Fren(;h empire, and the respective rates of interest, 54 — the various augmentations of the capital of the Bank of England, 55 — a list of the various classes of joint stock companies formed in 182t and 1825, 60 — a list of the foreign loans contracted in England, 61 — an account of the average amoimt of gold and siver bullion held by the Bank of England from 1815 to 1832, 74 — an account of the 298 INDEX. amount of the notes of the Bank of England in circulation, the amount of all deposits, the amount of the surplus capital, the amount of all securities held by the bank, and the amount of bullion in the bank on the last day of February, from 1778 to 1832, 74 — the amount of notes under 51. in circulation on the last day of February, from 1798 to 1832, 76 — a statement of the affairs of the Bank of England, Feb. 29, 1832, 77 — the receipts and expenses of the Bank of England for the year ending 29tli of February, 1832, 78 — an acccount of the annual profits of the Bank England from 1779 to 1832, 79 — the amount of Bank of England notes in circulation, of dates beyond five, ten, fifteen, and twenty years respectively, 83 — an account of all distributions of profits made by the Bank of England among its proj^rietors, 84 — the liabilities and securities of the Bank of England during the year 1834, 97 — an account of the number of licences issued to country bankers, and the number of com- missions of bankruptcy issued against country banks from 1809 to 1832, 103 — an account of the number of country banks in England and Wales, from 1811 to 1818, distinguishing each county, 111 — an account of the number of bank notes of all denominations stamped in each year from 1820 to 1831, 113 — an account of the sums received for stamp duties, and as a com- position of the duty upon country bank notes, from 1816 to 1832, 114 — proportional circulation of 122 country banks from 1818 to 1825, 114 — a list of the country joint stock banks at present existing in England, 130 — a statement of the affairs of the branches of the Bank of England from 1828 to 1831, 139 — a statement of the affairs of the branches individually during the year 1831, 140 — the amount of the public and private deposits in the Bank of England from 1807 to 1831, 149 — average annual amount of bills under discount at the Bank of England from 1795 to 1831, 198 — the amount of weekly savings of one shilling deposited in savings' banks for various periods, 235 — an account of the number of depositors in savings' banks and the amount of deposits in England, Wales, and Ireland, 236 — the annual payments necessary to obtain an annuity of 20/. for life, 251 — the value of an immediate life annuity of 20/. at various ages, 252 — a statement of the affairs of the London and West- minster Bank, 263. Temple, money-changers in the temple at Jerusalem, 2 — of Delphi, the great bank of Greece, 3 — of Apollo, the chief depository of the wealth of Ionia, 3 — of Olympia, used also as a bank, 4. Temporary loans granted by the Bank of England while the funds are closed previous to the payments of dividends, 70. 97. Ten jicr cent, made the legal rate of interest in England, 20. Ten pound notes first issued by the Bank of England, 40. Threadneedle Street, nevv Bank of England house built there, 34. Three per rents., 1726, created l)y means of a lottery, 34. INDEX. 299 Three per cents, consols created in 1 752, 39. Three per cents, reduced created in 1 757, 39. Thiee and a half per cents, (new), created in 1830, 71 — reduced, created in 1824, 60. Tokens, silver, issued by the Bank of" England, 48. Toicer of London used by the merchants as a bank, 21. Trade, banking a branch of" trade, preface — the Athenians em- ployed their money in, 4 — engrossed by the Lombards, 18 — promoted by the circulation of 15ank of England notes, 36 — its prosperity promoted by country banks, 68 — how affected by the issues of country banks, 115 — how it may be regulated by the Bank of England directors, 117 — how affected by runs upon banks, 121 — wherein banking differs from other trades, 111 — influence upon, by banks of deposit and banks of circulation, 143. 155. 164 — was at first carried on with ready money, 150 — how it is facilitated by banks of remittance, 154 — sometimes is nearly allied to speculation, 162 — effects of, on the foreign exchanges, 168 — facilities granted to by bills of exchange, 176 — bills arising out of trade, 179. Trades' Unions cause deposits to be withdrawn from savings' banks, 237 — trades and occupation of persons who borrowed loans of the friendly loan society, 218. Transfer, debts at Rome paid by a transfer in the bankers' books, G — at Venice by a transfer of bank money or stock, 9 — and in Holland, 10 — the principle of transfer early applied to banking, 146 — economises the use of the circulating medium, 147 — might supersede money altogether, 148 — transfer of debts by means of bills of exchange, 175 — transferring capital from one employment to another, how effected, 178 — transfer of capital from one nation to another may be caused by an operation on the currency, 169 — transfer of deposits in savings' banks, 222. Transmission of money, how effected, 25 — see remittance. Trench, Mr., his remarks on loan banks, 212. U. Unclaimed dividends, a proposal to render them available to the public service, 42. Usury, prohibition of, increases it, 19 — prohibited by the Mosaic law except to strangers, 15 — allowed by the law of Solon, 4 — practised by Jews and Lombards, 16 — change in the meaning of the word, 21 — cases in which bankers are not guilty of, though they receive more than legal interest, 148. Usury, loan societies may charge five per cent, at the time of granting a loan without being subject to, 215. Usury laws, bills not having more than three months to run exempted from their operation, 91 — may have been useful in former ages, 189' — resolutions of a committee of the House of Commons respecting, 191. 300 INDEX. Vansittart, Mr. (now Lord Bexley), his resolutions in opposition to the bullion committee, 52. Vaughan, R. W., the first man who was hanged for forging Bank of England notes, tO. Venice, the bank of, 9 — stock transferable, 9 — bills of exchange payable only in bank money, 9 — debts paid by transfers, 9. W. Wales, savings' banks in, 236. Walpole, Sir Robert, drew up the bank contract, 33. Weekly accounts required to be sent from the Bank of England to the chancellor of the exchequer, and an average of tlie preceding three months to be published monthly in the London Gazette, 91 — amount of weekly savings of one shilling for various periods, 235. Weight oi 512 10/. Bank of England notes, 40. West India loan, conditions of, 98 — interest allowed for prompt payment, 98. William III., his statue in the hall of the Bank of England, 35. Wrotesley, Sir John, chairman at a meeting of country bankers, and formed one of a deputation that waited on Lord Goderich, 68. Wills made by purchasers of small government annuities, regula- tions respecting, 248. X. Xenophon, his plan of a joint stock bank, 5. TTIK END. 5 26 1 London : Printed by A. Spottiswoodk, New- Street- Square. 'if^ 1.U5 Ai\lj£.J-i:3 UNm. f CALTFOT^NTA /^ 3 1158 00138 2489 UC SOUTHERN REGIONAL LIBRARY FACILITY AA 001 100 708 5 mmi