l-SfWr^i^iHP^^^P 
 
 THE UNIVERSITY 
 
 OF ILLINOIS 
 
 LIBRARY 
 
 1)875 
 v3j
 
 A VIEW 
 
 BANKING QUESTION, 
 
 RESULTING FROM 
 
 PRACTICE AND EXPERIENCE, 
 
 LONDON: 
 
 PRINTED BY W. MARCHANT, INCRAM-COUKT. 
 FENCHURCH-STREET. 
 
 18:^2.
 
 CONTENTS. 
 
 PAGE 
 
 INTRODUCTION 1 
 
 SECTION I.— THE BANK OF ENGLAND, &c 4 
 
 „ II.— ON THE ALLEGED DEFECTS OF THE 
 PRESENT SYSTEM OF BANKING IN 
 ENGLAND 45 
 
 „ III.— ON THE BRANCH-BANKS OF ENGLAND 83 
 
 ;, IV.— ON THE SCOTCH SYSTEM OF BANKING, 
 AND ITS ALLEGED SUPERIOR ADAP- 
 TABILITY TO THE WANTS OF THE 
 PEOPLE OF ENGLAND 120
 
 ADVERTISEMENT. 
 
 Lord Althorp, as Chancellor of the Ex- 
 chequer, gave notice that he would, on the 8th 
 of May, move for the appointment of a Select 
 Committee of the House of Commons, to in- 
 quire into the subject of the Bank-Charter, and 
 of the Banking Affairs of the country generally. 
 This appeared, therefore, to the writer of the 
 following pages, the fit occasion to attempt to 
 place that part of the subject relating to the 
 country-practice of Banking, and its influ- 
 ences on productive industry — on agricultural, 
 mining, manufacturing, and commercial, opera- 
 tions, — in a just and satisfactory point of view.
 
 VI 
 
 Error has, hitherto, had tlie ascendancy, — the 
 subject is difHcult, because the grounds upon 
 which an investigation must proceed are not 
 very easily explored ; and the materials to be 
 dealt with, present very different appearances 
 to the superficial, from those which they pre- 
 sent to the patient and searching enquirer ; — 
 but, in a matter of such great, and, indeed, 
 vital, importance to the industrious and enter- 
 prising portion of the community, to shrink 
 from the discharge of duty, on account of the 
 stubbornness of prejudice, and the difficulty of 
 removing it, would be supine and pusillani- 
 mous. 
 
 The recent measures concerning the sub- 
 ject of Banking emanated from the most 
 fallacious assumptions, and have, therefore, 
 been injurious in their operation, because no 
 investigation of the case was previously 
 assented to, and the Government proceeded 
 in its course of policy under the influence 
 of prepossession and ignorance. It is im-
 
 Vll 
 
 possible to imagine that the enhghtened 
 members to be appointed to serve on a Par- 
 hamentary Committee would enter upon their 
 labours, with prepossessions and prejudices im- 
 movably fixed in their minds. To them, 
 therefore, especially, and to the members of the 
 two Houses of Legislature generally, the fol- 
 lowing treatise is, with confidence in their 
 impartiality, most respectfully submitted. 
 
 Mill/ Wt/i, 1832.
 
 A VIEW 
 
 OF THE 
 
 BANKING QUESTION, 
 
 INTRODUCTION. 
 
 It is alleged b}'^ persons of great political in- 
 fluence, that defects very injurious to the com- 
 munity exist in the present system of Bank- 
 ing in England, and manifold evils in its prac- 
 tice ; and that the Legislature is imperatively 
 called upon to remove those defects, by sanctioning 
 some new method of Banking, and introducing a 
 better practice. Few subjects are of greater im- 
 portance than these, because the existing practice 
 of Banking is now as intimately connected with 
 internal industry, as turnpike-roads arc connected 
 with market-towns. If we destroy either Banks 
 or roads, we shall, in the one case, by throwing 
 
 n
 
 obstacles in the way of a proper distribution of 
 capital, greatly increase the difficulty of raising 
 sufficient produce for the wants of the people ; and, 
 in the other case, we shall have greater difficulties 
 in carrying our produce to markets and places for 
 consumption. Without contemplating an entire 
 destruction of the practice, we may predicate that 
 evils would result from any deep injury to the 
 existing system of Banking, corresponding to 
 the extent and nature of that injury. 
 
 These, therefore, are not matters of light concern. 
 It requires a thorough knowledge of the facts of 
 the case, a perfect acquaintance with local and 
 particular circumstances in the practice and opera- 
 tion of Banking, a clear view of its general 
 influences and consequences, and, above all, an 
 absence of all prepossessions in favour of some 
 particular theory, to facilitate the formation of ac- 
 curate conclusions. Almost all who have been 
 engaged on these important subjects, and who 
 have endeavoured to influence public opinion and 
 direct the course of public measures, have been 
 men of superficial knowledge and general views, 
 who, ingenious, confident, and plausible, have 
 succeeded in making erroneous impressions upon
 
 the minds of many distinguished and honourable 
 men. The object of the following observations is 
 to remove such impressions, and, by the guidance 
 of sound principles, and the evidence of practice 
 and experience; to place the Question upon a just 
 basis before the public. If that object should be 
 accomplished, its accomplishment must, at the 
 least, suggest to all legislators, the propriety of 
 withholding a judgement on the relative merit of 
 different Banking Systems, until a full and im- 
 partial public investigation have brought out the 
 facts of the case, and placed it on proper grounds 
 for Parliamentary Adjudication. 
 
 The subject, as we propose to treat it, naturally 
 divides itself into four parts : — 
 
 1st. The Bank of England — its peculiar Privi- 
 leges and Functions. 
 2d. The alleged defects of the present System 
 
 of Bankino: in Enoland. 
 3d. The Branch-Bank System. 
 4th. The Scotch System of Banking, and its 
 alleged superior adaptability to the 
 People of England. 
 
 li '2
 
 SECTION I. 
 
 THE BANK OF ENGLAND, ETC. 
 
 On the general bearing of the questions con- 
 nected with this division of the subject, it will not 
 be necessary to dwell at any length, on the present 
 occasion. The influence which the Bank of Eng- 
 land exercises on the public policy of the country, 
 its power over the measures of the Government, 
 the use of the extraordinary and dangerous func- 
 tion of raising or depressing prices, and thereby 
 dispensing prosperity or adversity to all who are 
 engaged in the pursuits of industry, are matters 
 which must now undergo the fullest and most deli- 
 berate examination by a Parliamentary Committee ; 
 otherwise a formal enquiry would be a deception, 
 delusive to the public, and dishonourable to the 
 Legislature and the Government. The leading- 
 object of the following observations is, to remove 
 certain misconceptions relating to the character and 
 conduct of the Bank of England, and to the 
 character and conduct of Private Bankers, when 
 considered with regard to their respective in- 
 fluences on the productive industry of the country
 
 5 
 
 — on agriculture, manufactures, and commerce ; 
 — and not, to discuss the nature and influence 
 of the Bank of England, regarded as a great politi- 
 cal engine of the State. 
 
 There are, however, some points of grave con- 
 sideration, connected with the general bearing of 
 the Bank-Question, which, notwithstanding the 
 more especial object to which these remarks are 
 intended to be directed, we consider it to be our 
 duty to bring into immediate view, before we 
 proceed to our main purpose. A brief advertence 
 to these appears to be necessary, preliminary to a 
 clear apprehension of our particular subject, and 
 to the producing of that conviction on the minds 
 of our readers which it is our desio;n to establish. 
 
 In the early stages of the progress of the Bank 
 towards its present magnitude and importance, it was 
 a matter of light concern to the public, whether or 
 not it should exercise the three very important and 
 responsible functions of Bankers to the Govern- 
 ment, Creators of Currency, and Bankers to the 
 Merchants and Traders of London. These func- 
 tions — the present operation of which appears to 
 us to be, in principle, vicious and bad, and, in 
 practice, at times, most injurious to the prosperity, 
 and dangerous to the best interests, of the com- 
 munity, — might be exercised with advantage to the 
 people, while the transactions of the Bank were 
 confined to the Metropolis, and the state of pro-
 
 ductive industry was less dependent on the alterna- 
 tions of credit. Men engaged in bringing forth 
 and exchanging the products of industry, at the 
 time when Liverpool began to emerge from a little 
 fishing- town, into an emporium of commerce, — 
 when Manchester was a village containing houses 
 and cottages inhabited by a few hand-spinners 
 and hand -loom weavers^ — when the marshes 
 were undrained, and the wolds and heaths un- 
 cultivated, — when our mineral treasures were almost 
 unexplored, — when national debts were small, 
 and the sale of the credit of Kings and States 
 was confined to their respective subjects, — men 
 engaged in productive industry would, in such 
 times, we repeat, have very little concern with the 
 alternations of general credit. To the industrious, 
 the effects produced on the affairs of the Bank of 
 England, by the vicissitudes of political events, 
 and the convulsions of States, were then but of 
 little moment. But when such changes had taken 
 place in every department of human industry and 
 traffic, as required a thousand times more currency, 
 of one kind or other, to pass, in every year, from 
 hand to hand, among the inhabitants of these 
 Islands, and when the prosperity of the country 
 was measured by the amount, and the degree of 
 activity, of the circulating medium, the influence 
 of political vicissitudes and convulsions upon the 
 state of the currency became of the greatest
 
 moment to the people. When these causes of de- 
 rangement in general credit, and particularly in 
 credit-currency, came into extended operation, and 
 began to exercise a constant, though varying, in- 
 fluence upon the affairs of National Banks, it 
 became the part of wisdom, to preserve the pur- 
 suits of productive industry and commerce, as much 
 as possible, from their influence and operation. 
 
 An attentive consideration of the circumstances 
 out of which the paper circulation of the Bank 
 arose and became extended, would render manifest 
 the impolicy and danger of the measures of the 
 Government, for enlarging the functions, and ex- 
 tending the application of the powers, of that 
 corporation. An attempt has, for the first time in 
 the history of the Bank, been made, to add to its 
 functions of Bankers and Agents to the Government, 
 and Creators of Currency, that of Bankers to the 
 producers of national wealth ; and that that attempt 
 must, if successful, be attended with great hazard 
 to the prosperity of the country, be embarrassing to 
 the independence and unfettered action of the Exe- 
 cutive Government, and, ultimately, prove, in an 
 especial manner, detrimental to those producers, 
 are points that might be established by a full and 
 impartial investigation. A mere reference to the 
 circumstances which caused, or accompanied, the 
 rise and growth of the Bank of England, would
 
 8 
 
 indicate the soundness and validity of this conclu- 
 sion, without the confirmation of experience. The 
 circulation of its credit forms the basis of the 
 power of the Bank of England : and what, let us 
 ask, was the origin of the Promissory Notes of the 
 Bank of England ? Loans to the Government, and 
 the payment of the debts, and the interest on the 
 debts, of the Government, to the creditors of the 
 Government. What is yet the fundamental source 
 of their continuous extended issue ? The payment 
 of the accruing interest on the permanent debt of 
 the Government, and payment for the sale and trans- 
 fer of portions of that debt. All other sources of 
 such issues by the Bank, beyond these and the 
 payment of the interest or dividends on its own 
 Stock, of those of the East-India Company, and 
 other public bodies, are small and unimportant. 
 The issues of the Bank to the Merchants, for bills 
 discounted, have always been insignificantly small, 
 except during the period when the Bank-Restric- 
 tion Act was in full operation ; and they can never 
 be, permanently, otherwise than small, so long as 
 the Bank shall be compelled to pay its debts in 
 gold, and the annual payments for the Government 
 and the Public Bodies remain without any great 
 diminution. 
 
 Such being the origin of the paper-money circu- 
 lation of the Bank, and such the means of uphold-
 
 ing and extending- it, it is obvious that it could 
 have little immediate connexion with the produc- 
 tive powers of the country. The issues of the 
 Bank were not drawn forth to aid new enterprizes 
 of genius in the pursuits of industry. The objects 
 upon which human labour could be employed were 
 extended and multiplied, in infinite number and 
 variety, without any direct stimulation or assist- 
 ance from the Bank of England. Commerce, in- 
 deed, might receive support from it, in temporary 
 loans advanced for the discount of bills ; but these 
 were made to the brokers and transmitters of pro- 
 ductions, and not to the producers, — to the mer- 
 chants and the interchangers of commodities, and 
 not to the farmers, graziers, miners, and manufac- 
 turers, of the kingdom ; — and the support thus 
 rendered was limited to one great centre of ex- 
 change and mart of commerce. In this remark- 
 ably contracted range of its operations, the Bank 
 of England exercised hardly any direct influence in 
 raising up those important interests connected with 
 the agriculture, the mines, the manufactures, and 
 the commerce, of the country, which form the source 
 of its wealth, and the basis of its greatness. For 
 more than a century and a quarter after its establish- 
 ment, the Bank was almost purely an engine of the 
 state, appointed to perform a part of the functions 
 of the King's Exchequer and the Kings Mint. It
 
 10 
 
 received the produce of the taxes, and paid the 
 creditors of the Government ; it created a currency 
 v^^hich, in practical efficacy and authority, is equal 
 to the coin of the reahn : and these functions it 
 performed, in concurrence with the policy of the 
 King's Executive, and not to sustain and invigorate 
 the expanding energies of production. Having no 
 immediate connexion with the application of capital 
 to the sources of production, and acting in general 
 conformity with the views of His Majesty's Govern- 
 ment almost as an organ of the Executive, the 
 Bank ought to be regarded as being, essentially, 
 like the Royal Mint — a convenient instrument for 
 exercising the King's Prerogative, — and not as an 
 instrument of commerce. 
 
 When, thirty-five years since, the currency of 
 the kingdom was found to be too limited for the 
 expenses of the war, the King, by order of his 
 Council, restricted the Bank from paying its notes 
 in the legal money of the country ; and he gave to 
 the promissory notes of the Bank, which were 
 issued instead of gold, all the practical authority 
 of the coin of the realm. The standard of 
 value was, in consequence, insidiously depre- 
 ciated, and the expenses of the war were thereby 
 readily discharged : and then, after the war had 
 terminated, the King's Minister caused a law to be 
 passed, which added nearly one half to the value
 
 11 
 
 of the currency ; and, in this manner, by raising 
 it from its depreciated condition, there was given 
 to every servant of the Government, and every 
 creditor of the state, an addition of forty pounds 
 to every claim of one hundred pounds. It is im- 
 possible that the great prerogative of coining money 
 should ever be exercised by the most despotic 
 Monarch, with such terrific energy, or be produc- 
 tive of such disastrous consequences, as was this 
 function or prerogative of issuing the practical 
 money of the country, by the Bank of England. 
 The effects of lowering the value of the currency at 
 one period, and raising it at another, were of precisely 
 the same kind as are produced by the arbitrary edicts 
 of Potentates who act from the pure impulse of their 
 will, in changing the value of their coins ; but they 
 were incalculably more extensive in degree. 
 
 Seeing, therefore, that the Bank was made the 
 agent for lowering the value of money, when the 
 the exigences of the Government required it ; and, 
 subsequently, after many years had elapsed, of 
 raising the value of money, to the great benefit of 
 the creditors and servants of the Government, and 
 the deep and lasting injury of the payers of taxes ; 
 it is impossible fairly to regard the Bank as any thing 
 but an organ of state — a part of the Executive 
 Government : and it will be hereafter seen how 
 entirely incompatible this, its character, is, with
 
 12 
 
 the regular and just performance of those duties 
 towards the industrious, which the Government 
 sought to impose upon it by the establishment of 
 Branch-Banks in eleven districts of the country. 
 As creators of the paper-currency, the Bank 
 ought to be responsible to the Government, whose 
 measures are freely canvassed and examined in 
 Parliament. Yet we have witnessed Bank-Directors 
 asserting in the House of Commons, that, although 
 the returns might be furnished by the Bank as a 
 matter of courtesy, the Parliament had no more 
 rio^ht to demand an account of the issues of Bank- 
 Notes, than they had to demand a return of the 
 outstanding Bills of a private trader ; because the 
 Bank of England was a corporation of associated 
 merchants, and the Directors were responsible only 
 to the proprietors of its stock. It is impossible 
 that that dangerous prerogative, or power, of 
 altering the value of money, shoiild be exercised 
 in a manner more perfectly uncontrouled and 
 irresponsible, by the Sultan, than it was by the 
 Bank of England for upwards of twenty years. It 
 was the guise of the humble, but independent, 
 character of merchants, that enabled the Govern- 
 ment to use the Directors of that establishment for 
 just the same ends as despotic princes use the 
 functionaries of their respective Mints. The basis 
 of all the measures connected with the paper-cur-
 
 13 
 
 rency issued by the Bank, was, for upwards of thirty 
 years, purely and almost exclusively, subserviency 
 to the policy of the Government ; and none of 
 those changes resulted from a desire to strengthen 
 and improve the energies of productive in- 
 dustry. It is altogether unquestionable, that the 
 Bank was, essentially, an engine of the state, 
 from its first formation, to the year 1826, — a period 
 of one hundred and thirty years ; and it had, 
 during that time, little more connexion with the 
 productive interests of the country, than His 
 Majesty's Mint. Two hundred years since, the 
 Royal Mint was used as a Bank by the Merchants, 
 and they deposited in it their bills and their trea- 
 sure : in later times, the Government has used the 
 Bank as a Mint, and compelled it to create the 
 practical money of the kingdom. 
 
 In all discussions and investigations relating to 
 the subject, it is of the utmost importance to pre- 
 sent this view of the functions and operations of 
 the Bank : first, because the uniform conduct of 
 that establishment shews it to be the clear and pro- 
 per view, and such as ought to have the greatest 
 weight with all Statesmen when they are meditating 
 changes in the Banking systems and Banking 
 operations of the country ; and, secondly, because 
 it is that view which appears to have been 
 altoo^ether absent from the minds of the First 
 Lord of the Treasury and the Chancellor of the
 
 14 
 
 Exchequer, when they recommended, and, vir- 
 tually, enforced, the last signal change in the 
 Banking affairs of the country. From their com- 
 munication to the Bank, enclosed with a letter, 
 dated Fife-House, the 13th of January, 1826, 
 which they describe as " a paper containing our 
 views of the present state of the Banking system 
 of this country, with our suggestions thereupon," 
 it is manifest that the Noble Lords were wholly un- 
 acquainted with the operations and relative im- 
 portance of the Banking systems of the kingdom. 
 On reference to the terms of that communication, 
 it would appear, by the 10th proposition, that, six 
 years ago, the Lords of the Treasury imagined 
 that the Bank of England had, up to within thirty 
 or forty years of that period, been the principal, 
 and almost the sole and exclusive, instrument 
 of the Banking transactions of the country. In- 
 deed, all the subjoined propositions, from the 10th 
 to the 16th inclusive, which lay the basis of the 
 change then recommended and enforced, proceed 
 upon an assumption of the Bank of England being 
 the principal instrument of all the Banking trans- 
 actions of the country ; and, also, upon the as- 
 sumption of the Country-Banks being altogether 
 inadequate to the due performance of the Banking 
 business which the increase of manufactures, trade, 
 and commerce, had thrown upon them. Those 
 propositions are not very clearly expressed, but
 
 15 
 
 their import is precisely such as we describe ; for 
 they say — 
 
 " 10. We believe that much of the prosperity 
 of the country, for the last century, is to be as- 
 cribed to the general wisdom, justice, and fairness 
 of the dealings of the Bank of England : and we 
 further think, that during a great part of that time, 
 it may have been in itself, and by itself, fully equal 
 to all the important duties and operations confided 
 to it. But the progress of the country, during the 
 last thirty or forty years, in every branch of in- 
 dustry, in agriculture, manufactures, commerce, 
 and navigation, has been so rapid and extensive, 
 as to make it no reflection on the Bank of England 
 to say, that the instrument, which by itself was 
 fully adequate to former transactions, is no longer 
 sufficient, without new aids, to meet the demands 
 of the present times. 
 
 " 11. We have, to a considerable degree, the 
 proof of this position in the very establishment of 
 so many country banks. 
 
 " 12. Within the memory of many living, and 
 even of some of those now engaged in public 
 affairs, there were no country banks, except in a 
 few of the great commercial towns. 
 
 '' 13. The money transactions of the country 
 were carried on by supplies of coin and Bank- 
 Notes from London. 
 
 " 14. The extent of the business of the country,
 
 16 
 
 and the improvement made from time to time, in 
 the mode of conducting our increased commercial 
 transactions, founded on pecuniary credit, rendered 
 such a system no longer adequate, and country banks 
 must have arisen, as, in fact, they did arise, from 
 the increased wealth and new wants of the country. 
 
 " 15. The matter of regret is, not that country 
 banks have been suffered to exist, but that they 
 have been suffered so long to exist without controul 
 or limitation, or without the adoption of provisions 
 calculated to counteract the evils resulting from 
 their improvidence or excess. 
 
 " 16. It would be vain to suppose that we could 
 now, by any act of the legislature, extinguish the 
 existing country banks, even if it were desirable ; 
 but it may be within our power, gradually at least, 
 to establish a sound system of banking throughout 
 the country ; and if such a system can be formed, 
 there can be little doubt that it would ultimately 
 extinguish and absorb all that is objectionable and 
 dangerous in the present banking establishments." 
 
 The terms " in itself and by itself," which ap- 
 pear in the first and last sentences of the first of 
 the foregoing propositions, seem, with the context, 
 to imply that the Bank of England was an instru- 
 ment fully adequate to the whole of the pecuniary 
 transactions of the country, until within a very re- 
 cent period. Now, it may, with safety, be affirmed, 
 that, at no time since the mining and manufac-
 
 17 
 
 turing productions of the country amounted to one 
 tenth part of their present annual quantity, has 
 any trader or manufacturer resorted to London;, for 
 " supplies of coin and Bank-notes," in the import- 
 ant manufacturing- and mining districts of Norfolk, 
 Yorkshire, Durham, Northumberland, Cumberland, 
 Westmoreland, Cheshire, Staffordshire, Derbyshire, 
 Nottinghamshire, Leicestershire, Warwickshire, 
 Shropshire, Worcestershire, Herefordshire, Mon- 
 mouthshire, Gloucestershire, Wiltshire, Dorset- 
 shire, Somersetshire, Devonshire, Cornwall, and 
 North and South Wales. These comprise every 
 county in England, in which coal is produced, 
 except Lancashire. They are the seats of all the 
 mines and manufactures of the country, and they 
 include a great portion of its agricultural wealth. 
 The practice of making payments without " sup- 
 plies of coin and Bank-notes from London," is, 
 and has always been, so general, that the solitary 
 exceptions that might be found would only prove 
 the universality of the rule. Throughout these 
 districts, goods for domestic consumption, raw ma- 
 terials for manufacture, and labour, have, we re- 
 peat, been paid for in some other way than by 
 " supplies of coin and Bank-notes" fetched from 
 London for that purpose. Lancashire, it is true, 
 is partially, in a very limited sense, an exception ; 
 
 c
 
 18 
 
 but it is an exception only in degree, and, princi- 
 pally, as concerns the payments for labour. La- 
 bour has, in the county of Lancaster, been chiefly, 
 but not wholly, paid for by " supplies of coin and 
 Bank-notes" carried from London. Goods for 
 domestic consumption, raw materials for manufac- 
 ture, and, partly, labour, have, even in this district, 
 been paid for in some medium other than Bank-of- 
 Eng'land Notes and the Coin of the Realm. 
 
 Statisticians have sometimes amused themselves 
 by estimating the annual value of the gross saleable 
 products of industry in the British Islands. What- 
 ever that might, at any time, amount to, is a matter 
 wholly immaterial for our statement ; but, taking 
 it at the sum of Five Hundred Millions, it would 
 be quite safe to aflirm that not one-twentieth part 
 has been produced, or the quantity or amount of 
 it in any manner affected, by the influence of the 
 banking transactions of the Bank of England with 
 the producers. We distinguish the influence of 
 the banking transactions of this great establishment, 
 from the influence which it has produced upon 
 industry in its character of the principal, and, in 
 some measure, the regulating, creator of the 
 current paper-money of the country. The func- 
 tions of Bankers (or dealers in capital), and issuers 
 of paper-currency (or creators of representative
 
 19 
 
 capital), are altogether distinct ; — it is most material 
 to mark the distinction, and to keep it constantly 
 in mind, in these enquiries. 
 
 This view of the particular branch of the subject 
 now under our consideration contains the very 
 essence of the matter which ought to have been 
 regarded by the Government, as of the first and 
 deepest interest, when they undertook, six years 
 since, to enforce changes in the Banking system 
 of the country. It is that matter with which the 
 productive classes are most essentially concerned ; 
 and any men duly impressed with the nature and 
 importance of the subject, and anxious to arrive 
 at a calm and dispassionate conclusion respecting 
 it, would, consequently, have proceeded to ascer- 
 tain the relative degrees of influence exercised by 
 the Private and Country Bankers, and by the Bank 
 of England, upon the productive interests of the 
 kingdom. Such an enquiry was vouchsafed to 
 Scotland and Ireland, and the information it 
 afforded caused the Government to relinquish its 
 plan of improving the currency of those parts of 
 the kingdom ; and they left, accordingly, the 
 Banking systems of the Scotch and Irish, which 
 are, in great measure, identified with, or dependent 
 upon, the nature of their currencies, untouched 
 and uninjured. We shall presently discover 
 grounds for believing, that, if a similar invosti- 
 
 c2
 
 20 
 
 gation had, at the same time, been granted in our 
 case, a part at least, if not the whole, of the ill- 
 digested projects for improving the Banking system 
 and paper-currency of England would also have 
 been abandoned. Those projects arose out of the 
 most. erroneous and fallacious assumptions; and the 
 crude plans resulting from them — especially that 
 of establishing Branch-Banks of England — expe- 
 rience has shewn to be unnecessary — inapplicable 
 to the purposes designed — and detrimental to the 
 interests of the most numerous — most industrious 
 — most frugal, stable, regular, and unspeculative, — 
 classes of the community. 
 
 We endeavour, in these preliminary observations, 
 to direct our attention constantly to the distinctive 
 difference between the functions which the Bank 
 has performed, of Bankers (or dealers in capital), 
 and Creators of Currency. They involve almost 
 the whole of the Banking-Question, as far as the 
 Bank of England is concerned. If the Ministers 
 had, in the year 1826, duly attended to the evi- 
 dence of facts, and had been guided by the light 
 which experience affords, they would have hesitated 
 in recommending the Bank to extend its banking 
 business into eleven districts of the country, and 
 the question of extinguishing or not extinguishing 
 " the existing Country-Banks," could never have 
 been balanced in their minds. It is extremely
 
 21 
 
 difficult to confirm by the evidence of facts, any 
 proposition of this abstruse character, relating to 
 matters so excluded from common observation as 
 banking transactions are, and to a subject so little 
 understood. The secrecy with which all the de- 
 tailed operations of Banks are conducted, pre- 
 cludes the possibility of our having recourse to 
 much direct evidence of a satisfactory nature ; but 
 we will try, by the light of very short and imper- 
 fect experience, to shew that the functions of 
 creators of the paper-money of the country which 
 is universally current, and of Bankers to the pro- 
 ducers of wealth, which the Bank- Directors now 
 claim to exercise concurrently, are altogether in- 
 compatible with the interests of the industrious, 
 and must frequently be productive of shocks and 
 convulsions in their affairs. 
 
 The paper-currency, which is intended to im- 
 prove and support productive industry, should flow, 
 freely and equably, from its source, according to 
 established and unvarying principles. It should 
 not be liable to sudden contraction, from causes 
 beyond the controul, and hidden from the know- 
 ledge, of those who depend upon it for the 
 employment of labour. If the source of its issue, 
 in any district, be one, or principally one, and the 
 approach to it be prescriptive and exclusive, these 
 principles for its government are more iniperativo
 
 22 
 
 than if the sources of issue be many, and those 
 readily accessible and open to all classes. Let us 
 examine, therefore, if there be not insurmountable 
 obstacles or intractable circumstances, connected 
 with the issues of the Bank of England, which 
 render that establishment unfitted for creating paper- 
 currency for the uses of industry, and for applying 
 capital, at the same time, to the fields of produc- 
 tion, as Bankers to the industrious. 
 
 As any detailed observations upon the operations 
 of the Branch- Bank system will arise more con- 
 veniently under that particular head of our dis- 
 course, we shall here make no other reference to 
 the Banking transactions of that system, than such 
 as is necessary to a correct apprehension of the 
 effects likely to result from the exercise by the 
 Bank, of the function of Creator of Currency, along 
 with that of Country- Banker to the producers of 
 wealth. Regarded as Bankers to the industrious, 
 the Bank of England is placed in different circum- 
 stances from all other Bankers. Private Bankers 
 are brokers of capital ; and those in the country, 
 who, also, create a currency, rarely issue promis- 
 sory notes, amounting to one fifth-part of their own 
 capital, and that which has been placed in their 
 hands for the purpose of being applied to the 
 uses of commerce. Money is not placed in the 
 Bank of England and its Branches, as it is in the
 
 23 
 
 hands of Private Bankers, with the intention of its 
 being lent by the Directors, to farmers, miners, 
 manufacturers, and those who deal in the products 
 of their labour and skill. It is not capital, there- 
 fore, in whole or in part, which the Bank of Eng- 
 land lends to the public ; but it is credit — promis- 
 sory notes, and bills at not exceeding twenty-one 
 days' date. This difference against the Bank is a 
 very remarkable one ; and we direct particular at- 
 tention to it, for we shall presently see that it may, 
 in practice, lead to consequences of the utmost mo- 
 ment to the public. The lending of capital, by 
 brokers of capital, is an operation, if the brokers 
 be prudent, skilful, and discreet, persons, which 
 has a firm and stable basis. It is conducted 
 by known and established regulations, which make 
 it mutually advantageous to those who own the 
 capital, and those who seek to borrow it. It, there- 
 fore, has a sound and permanent character, founded 
 on the general interest of the community, and is 
 not liable to interruption from causes arising witliin 
 the circle of the influence of the Country-Banks. 
 Whenever the regular, free, and continuous, opera- 
 tion of this most important banking function, which 
 is one of vital interest to the industrious, is in- 
 jured, that injury, as far as concerns stable and 
 prudent Bankers, invariably arises from the measures 
 and proceedings of the Government and the Bank 
 of England, or from causes which they, alone, can
 
 24 
 
 put into operation, mitigate or suspend, counteract 
 or controul. The Bank of England is not a 
 broker of capital ; and never can, with safety, 
 become one, so lono" as it remains the Banker to 
 the State : and, in all the essential requisites for 
 becoming agents for applying capital to production, 
 in agriculture, mines, and manufactures, it must 
 for ever remain incompetent. 
 
 If, under the influence of such suggestions as 
 these, a Parliamentary Committee, warned by the 
 example of 1826, avoid drawing conclusions from 
 something which appears upon the surface, and 
 proceed, with caution and integrity, to examine the 
 matter radically and thoroughly, the causes of our 
 erroneous policy at the period of, and subsequent 
 to, the Panic, will soon be discovered. The notes 
 of the Bank of England are never discredited ; but 
 they circulate freely, in all parts of the kingdom : 
 therefore, said Lord Liverpool to the Bank-Direc- 
 tors, establish Branch-Banks in different districts 
 of the country, that these notes may, in the course 
 of time, drive all other notes out of circulation, 
 and afford a safe and unvarying currency to the 
 public. The operation of that principle which 
 renders this currency safe to the holder, must make 
 it more variable, uncertain, and precarious, as a 
 means to be relied-upon for the improvement and 
 support of industry, than any kind of paper-currency 
 issued by stable and discreet Bankers. Let us see
 
 25 
 
 how this principle works ; it is a matter of deep 
 and serious import. 
 
 Takino; the circulation of the Bank of Enofland 
 at a given sum — say, for the sake of illustration, 
 at twenty-one millions, — if we could ascertain what 
 proportion of this circulation is issued for paying 
 the demands of the Government and other public 
 bodies, and what portion of it is issued directly 
 into the channels of commerce, we should obtain 
 a pretty accurate knowledge of the principle that 
 governs the amount of that circulation. In tran- 
 quil and ordinary times, it is believed that not 
 more than one part out of seven, of the circulation 
 of the Bank, is issued direct into the channels of 
 trade and commerce ; and that the remaining six 
 parts are issued pursuant to the demands of the 
 Government and other public bodies. Now, that 
 which, at all times, constitutes six-sevenths of the 
 whole amount of circulation, is that portion of it 
 over which the Directors can exercise no controul. 
 Assuming twenty-one millions of notes in circula- 
 tion to be requisite for the healthy action of the 
 productive energies of the country, eighteen mil- 
 lions of this sum must be issued for the payments 
 of Government and opulent corporated bodies, for 
 dividends upon Public Securities, Bank-Stock, 
 East-India Stock, for payments for the Court of 
 Chancery, Insurance-Offices, and Joint- Stock Com-
 
 26 
 
 panies of various kinds. The warrants, and checks, 
 and orders, for such payments, are imperative ; 
 and, if the sum of Twenty-one Millions of Bank- 
 notes be requisite to the satisfactory support of the 
 industry of the country, let it be borne in mind that 
 Eighteen Millions of that sum are virtually placed 
 out of the power of the Bank, and cannot be dimi- 
 nished without producing terrible convulsions in 
 the affairs of manufacturers, traders, and merchants. 
 In this assumption of the relative amounts of issues 
 passed through different channels to the public, 
 precision cannot be had : it is an estimate, and not 
 a statement of facts. 
 
 There is no other general mode by which the 
 Bank can force its circulation directly into the 
 channels of mercantile traffic, than by discounting 
 bills: — the longest date at which bills will be taken 
 for discount, according to the established rules of 
 the Bank, is ninety-three days : the interest charged 
 for the discount-accommodation is at the rate of 
 four pounds per centum per annum. Now, as the 
 market-rate of discount has been generally, for 
 many years, under that of the Bank of England, it 
 is not likely that a very large amount of bills 
 should be taken to the Bank of England to be 
 discounted. Many bills at very short dates are 
 taken to the Bank in the latter part of the quarter, 
 to obtain funds while money is comparatively scarce, 
 for the use of the holders of such bills until the
 
 27 
 
 quarterly dividends are paid : bills are very rarely 
 tendered for discount at the extreme length of 
 ninety- three days. It would, consequently, be fair 
 to assume that the average period which bills dis- 
 counted at the Bank of England have to run, at the 
 time they are discounted, does not exceed sixty- 
 one days, or one-sixth part of a year : it follows, 
 therefore, that the amount of notes issued for bills 
 discounted would be returned to the Bank six times 
 in the year, on the bills discounted becoming due. 
 The sum here supposed to be issued through direct 
 mercantile channels, into circulation, at a time 
 when the industry of the country is not cramped 
 by contracted issues, being Three Millions floating 
 at any given time, which sum is returned six times 
 in the year, we are led to the conclusion that the 
 whole amount of bills annually discounted by the 
 Bank does not exceed Eighteen Millions,* 
 
 If this view of the matter be substantially correct 
 — if it be made apparent that Three Millions may be 
 the whole sum over which the Bank of England can 
 exercise an immediate and effective controul, — 
 when an unfavourable state of the Foreign Ex- 
 changes renders it necessary to reduce the general 
 
 * A few questions put by any member of the proposed Parlia- 
 mentary Committee might shew the reasonableness of the estimate, 
 render the validity of the grounds here taken manifest, and 
 establish the accuracy of the conclusion to which they lead.
 
 28 
 
 paper-currency of the Bank, the Directors cannot 
 have recourse to any other expedient than that of 
 lessening the accommodation to the public. Tem- 
 porary loans, lent upon Public or other Securities, 
 must be called in, and the amount of bills dis- 
 counted must be contracted and limited. If the 
 contraction or limitation take effect principally 
 amongst those classes of the people engaged in 
 finding employment for labour, and promoting the 
 industry and traffic of the country ; and not, as 
 heretofore, amongst the speculative Loan-contrac- 
 tors, Exchange and Bullion Brokers, and Merchants, 
 of London; the consequences to the productive 
 classes that have been seduced to deal M^ith the 
 Bank must be disastrous. Consequently, the 
 Branch-Bank system, which the Government of 
 1826 forced upon the Bank-Directors for the pur- 
 pose of bringing the Bank of England into imme- 
 diate and extended connection with productive 
 industry, appears to be in principle a crude, ill- 
 digested, and dangerous, measure of State-policy. 
 Whether this conclusion could be fully sub- 
 stantiated by evidence, is a problem that can be 
 satisfactorily proved by a vigilant and impartial 
 Committee of Parliament; and by that, alone. 
 The experience of the working of the Branch-Bank 
 system is, necessarily, most imperfect and unsatis- 
 factory: — it has not been in operation, in any
 
 20 
 
 district, six years, and, in some districts, not four 
 years : it has not yet obtained any direct connexion — 
 the assertion may be made with almost literal 
 accuracy — with persons engaged in productive 
 industry, in eight of the districts where Branch- 
 Banks have been opened, out of eleven, the whole 
 number. The period in which the system has been 
 in operation is one characterized by an unusual 
 degree of pressure on the most important of the 
 springs of industry, and by a remarkable absence 
 of the spirit of speculation, in all trades except 
 two — viz. in the Cloth-and-Wool- Trade, and the 
 Corn-Trade : and the result of the experience — 
 such as it is — can be satisfactorily made known by 
 nobody but the Bank-Directors and their Mana- 
 gers. These circumstances render the perfect 
 development of the subject difficult to all, and 
 impossible to any but a searching, scrutinizing-. 
 Committee of the House of Commons. 
 
 By such light, however, as has been afforded 
 us, we proceed to refer, very briefly and imper- 
 fectly, to the circumstances that have transpired, 
 in support of our argument against the Bank 
 exercisino' the function of Banker to the internal 
 producers of wealth, in addition to those of Creators 
 of Currency and Bankers to the State. 
 
 On looking at the Branch-Banks now established 
 in eleven commercial towns and cities — some of
 
 30 
 
 tbem as remote, one from another, as Swansea 
 from Hull, Exeter from Newcastle-upon-Tyne, 
 Liverpool from Norwich, — and the nearest being 
 one hundred and six miles distant from London, 
 the seat where the fountain of supply for all is 
 stationed, — it is obvious that the mercantile con- 
 nexions of the Branch-Banks must be strangers to 
 the Bank-Directors. Persons who resort to them, 
 to borrow money, see only the Managers of these 
 Banks. The negociations for loans upon bills 
 offered for discount, or upon any securities such 
 as the rules of the Bank permit to be taken, are 
 conducted solely with the Managers, by whom all 
 transactions in the routine of business must be 
 sanctioned, and who, alone, (subserviently to ge- 
 neral orders,) determine, day by day, the amount 
 of pecuniary accommodation to be granted to any 
 applicant. That these Managers, after they have 
 formed connexions in their new characters of dis- 
 tributors of the money or paper-currency of a 
 wealthy corporation, will become, like other men, 
 subject to the influences of social habits, is natural. 
 Intercourse, whether relating to affairs of friend- 
 ship or to those of business and traffic, leads to 
 confidence, and to engagements grounded upon it. 
 In periods when there is no pressure on the Bank — 
 when its gold-reservoirs are full, and a desire pre- 
 vails at the Treasury and in the Bank-Parlour, to
 
 31 
 
 relieve the distress of the country caused by the 
 previous contraction of the circulation, — the Mana- 
 gers will receive instructions to grant and extend 
 all reasonable accommodations by loan to the 
 public. At such times, agreements will be made 
 with applicants, to lend them a given sum of 
 money by discounting bills, whenever they may 
 have occasion for such a previously-stipulated 
 amount. And these agreements would, at all 
 times, be punctually fulfilled, if the Bank-i\Ianager 
 regulated the creation of his own currency, or 
 were a broker of capital which would be con- 
 stantly flowing into and out of his offices : but he 
 is neither a Creator of Currency, nor a Factor of 
 Capital; and his means of fulfilling agreements are, 
 wholly and exclusively, dependent on the supplies 
 that the Bank-Directors may order to be created 
 for him. This is a most important feature of the 
 case. The Branch-Manager sees all that passes 
 around him — knows eill that the public exigencies 
 demand at his hands ; but he has no means of 
 completing engagements, formed though unexe- 
 cuted — of continuing accommodations long and 
 regularly available for the public — or of filling up 
 a vacuum in the circulation suddenly created by 
 failures and commercial convulsions — but such as 
 the Directors in London vouchsafe to him. Then, 
 let us turn to look at their position, to ascertain
 
 32 
 
 whether it be possible for him to place a just 
 and firm reliance on having- a full, regular, and equa- 
 ble, supply from the mother-fountain in London. 
 
 It is necessary to keep constantly in mind, the 
 very small portion of the paper-currency of the 
 Bank which is under the control of the Directors, 
 to lessen or augment at their pleasure ; — it does 
 not exceed one-seventh part of the whole. When, 
 from any cause — war, revolutions, hoarding, un- 
 usual purchases of corn, or other commodities, 
 abroad, — a long-continued drain of gold has been 
 experienced at the Bank, a contraction of its jDaper- 
 issues becomes necessary. What is the process by 
 which this must be effected ? By paying a less 
 amount to the public, in all cases where the 
 Directors have the option of withholding. This 
 option can be exercised only in the channels of 
 commerce, and must principally be felt by those 
 persons who are accustomed to borrow money of 
 the Bank by discounting bills. The determination 
 of limiting the amount of bills to be discounted, 
 and, by that means, contracting the circulation, 
 may be intended to be general in its operation ; 
 but it will not be general. It will operate partially, 
 and in a manner injurious to productive industry. 
 The weakest, who have necessarily the most de- 
 pendence on the aid of the Bank for loans, will be 
 its victims ; and these will be, when the Branch-
 
 33 
 
 Bank system is in full operation amongst the 
 industrious, — the manufacturers and traders who 
 depend upon the Bank of England for discounts 
 to pay for labour, and for the materials that they 
 are compelled to purchase. How can this be 
 proved? Not, in any manner, positively and per- 
 fectly; but, by circumstance and inference, to the 
 satisfaction of any candid inquirer. 
 
 General circumstances, habit, and the influence 
 resulting from intercourse and reciprocity, show as 
 forcibly the tendency of men's conduct, as particular 
 facts : and, in such a case as this which we are con- 
 sidering, where details are so hidden from our view, 
 general circumstances, with a few particular facts 
 to support them, would clearly exhibit the operation 
 of the new system, and prepare us to decide what 
 must be the ultimate consequences of its full 
 development and general application. The Di- 
 rectors of the Bank of England are London Mer- 
 chants ; but the most influential members of the 
 Board are not, as formerly, commission-merchants 
 who receive consignments of commodities from 
 distant countries, and purchase, by order, our 
 manufactures and colonial produce, for exporta- 
 tion. They partake more of the character of 
 Bankers, employed to facilitate, and give effect to, 
 the credit, and to the pecuniary transactions, of 
 individuals and of governments and public bodies, 
 
 D
 
 34 
 
 in international traffic: and this characteristic of 
 their business leads them to an intercourse with 
 dealers in Bullion and Exchanges, Stock-Jobbers, 
 Loan-Contractors, Bankers, and Bill-Brokers, and 
 not with the producing classes in the British 
 Islands. This sort of intercourse gives the first 
 general impulse to their conduct as Directors — 
 an impulse which soon becomes a principle of 
 action, by association at the same Board with 
 those who have before them been impelled into 
 the same course of proceeding, under a similar 
 influence, and who had become inextricably habi- 
 tuated to the traffic growing out of such an in- 
 fluence. 
 
 The connexions arising out of this intercourse 
 of business are of the closest and most binding 
 character : the Bankers, Loan-Contractors, and 
 Bill- and Stock- Brokers, — 'those classes that con- 
 stitute what is known by the term " the great 
 Money-Interest of the City," — form, in private 
 life, the personal friends of the Bank-Directors, 
 with whom they associate in the most confidential 
 habits of friendly intercourse. When money is 
 solicited from the Bank by the familiar acquaint- 
 ances or friends of the Directors, it is difficult to 
 refuse compliance. But, over and above the effect 
 of this general influence arising from daily inter- 
 course, there are specific circumstances that fre-
 
 35 
 
 quently increase the difficulty ; and they are such 
 as must not be passed over, if a full development 
 of the subject be required. We shall, therefore, 
 briefly avert to them. 
 
 A great change has taken place in the mode by 
 w^hich the leading merchants of London regulate 
 their credit- and money- concerns. Thirty years 
 since, the trade of a bill-broker was scarcely 
 know^n; and it w^as not till within a much more 
 recent period, that it began to be exercised to 
 much extent, and to obtain much influence in the 
 credit- and money- concerns of the merchants and 
 bankers of the City. None of the wealthier class 
 were ever seen in their oflices, and they would 
 have considered it discreditable to them to be 
 known as borrowers of money from bill-brokers. 
 Now, it is well known that almost all merchants 
 and loan-contractors who are in that station in 
 mercantile importance, from which Bank-Directors 
 are selected, resort frequently to the offices of the 
 bill-brokers, to raise money by discounting bills, 
 or upon other security than bills. Some of the 
 Bank-Directors themselves do this ; and not the 
 slightest discredit is, generally speaking, the con- 
 sequence of doing it. The rate of interest charged 
 by the wealthy brokers, for discounting good bills 
 at not exceeding three months date, is, generally, 
 from ten to fifteen per cent, below that charged by* 
 
 n 2
 
 36 
 
 the Bank of England ; and when they charge a 
 higher rate of interest than the Bank, it is for 
 discounting bills which the rules of the Bank 
 exclude from its Discount-Office. The bill-brokers 
 have, in consequence of this traffic, acquired an 
 extraordinary power in deciding upon the credit 
 of the merchants and traders of London. They 
 can either give currency and validity to the in- 
 dividual credit of the Bank-Directors, or they can 
 check and injure it. 
 
 If we look attentively at the power now ex- 
 ercised by this new influential class of money- 
 agents, we shall be able to form some estimate 
 of the degree of influence which they have ac- 
 quired in the general credit- and money- concerns 
 of the country. They have now established a cor- 
 respondence with the depositaries of capital, in all 
 parts of the kingdom, which gives them an extra- 
 ordinary command over the circulation of mer- 
 cantile credit. Bank-Directors not only borrow 
 money from them, upon securities many of which 
 would not generally be taken by the Bank, for 
 Loans ; but they are aware, at the same time, 
 that their own credit as merchants would not have 
 the same free circulation upon bills accepted by 
 them, without the sanction of the bill-brokers. 
 The circulating credit of the merchants who com- 
 pose the Board of Directors, amounts sometimes
 
 37 
 
 to a very large sum. If, for example, a 13ank- 
 Director be an importer of silk, the custom of the 
 brokers, dealers, and manufacturers, of the raw 
 material, being to give notes at eight and ten 
 months' date, for their purchases from the im- 
 porters, the Director may find it advantageous, 
 and, at times, extremely important to his credit 
 and prosperity, to be able to discount these long- 
 dated notes of his customers ; and this accom- 
 modation he can obtain no where but in the Dis- 
 count-market in London, and, almost uniformly, 
 of the opulent bill-brokers. Another Bank- 
 Director may be an East-India agent : it is the 
 custom of such agents to take, for securing their 
 advances, property which may remain in their 
 hands, for a very long period, unavailable. The 
 unmarketable and inconvertible nature of the Indian 
 landed and mercantile securities, the distance of 
 the East-Indies from England, and the high rate 
 of interest at the respective presidencies, are the 
 circumstances that gave rise to the practice 
 amongst the East- India Bankers and merchants, 
 of accepting bills at very long dates. From this 
 custom, while charj^es for interest and commission 
 at Calcutta were exorbitantly high, the means of 
 obtaining great incomes were derived ; and many 
 of those gentlemen who sit at the Board of Di- 
 rectors, ill the Bank, have accej)te(l bills which
 
 38 
 
 are circulating in the money-market, at twelve and 
 eighteen months' date. The advantage to a com- 
 mission-merchant, of giving an engagement to pay 
 a sum of money at a distant day, instead of pay- 
 ing it immediately, is obvious : if the property 
 lodged be the same, for a loan of credit as for a 
 loan of money, the man who uses credit may 
 quintuple his traffic and his profits. These long- 
 dated bills were the instruments for drawing 
 capital from England, where the rate of interest 
 is five per cent., to India, where the rate of in- 
 terest, together with mercantile charges, is fifteen 
 per cent. Suppose any one of these bills to be 
 held by a Scotch Banker who freely paid his 
 money for it, because an opulent and skilful Lon- 
 don bill-broker assured him of its validity, and 
 suppose the Bank-Director who had accepted it 
 knew that his bill-broker had given it an authority 
 and a sanction which it would not have com- 
 manded without the stamp of the bill-broker's 
 recommendation, how strong must be the Direc- 
 tor's sense of obligation to the bill-broker, and 
 how ready he must be to testify that feeling when- 
 ever the opportunity should arise ! 
 
 These circumstances are of vast importance in 
 deciding the question of the expediency or inex- 
 pediency of allowing the Bank of England to 
 become Bankers to the productive classes, while
 
 39 
 
 they are the principal Creators of the general 
 Paper-Currency of the country. The influence of 
 the London Bankers, Bill-brokers, and Loan-Con- 
 tractors, must so far prevail with the Board of 
 Directors, as to make it certain that, in the event 
 of any pressure which causes them to contract 
 their accommodations to the public, and to limit 
 their issues, the effect of the contraction and limi- 
 tation will not be felt in the money-market of 
 London, until the principal dealers and agents 
 in that market have placed themselves in a con- 
 dition of safety ; but, that its effect will fall, with 
 sudden and unmitigable force, upon the weaker 
 customers of the Bank — men engaged in giving 
 activity and effect to capital and labour in the 
 mining and manufacturing districts. Nor is it in 
 the power of the Directors to prevent this conse- 
 quence, without endangering their own positions 
 in society, or placing the system which governs 
 our finances and our currency in the utmost jeo- 
 pardy. It has been said, that, to check the opera- 
 tions of a noted loan-contractor when he was 
 causing an alarming drain of our gold currency to 
 Foreign countries, the Directors decided to reject 
 his bills when they were offered to the Bank for 
 discount. This could avail them nothing ; be- 
 cause such contractors are always in league witli 
 the opulent bill-brokers, imd the latter would be
 
 40 
 
 able to command the same sum, either directly 
 or indirectly, for the use of the contractor : and 
 this would be accomplished so secretly and in- 
 sidiously, that the Directors might suppose they 
 were checking a speculation in Bullion, on the one 
 hand, and, on the other, answering the demands 
 of industry and legitimate commerce, when, in 
 fact, the real origin of demands that would be 
 made upon them would be the necessity felt by 
 the bill-broker, of supporting a loan-monger against 
 the rejection of those same Directors who wished 
 to cripple and circumvent him. 
 
 If there prevail in Parliament, a sincere desire 
 to understand this important subject, and to place 
 it on a satisfactory basis, all the involutions of 
 credit, and all the powerful influences which govern 
 the actions and proceedings of the Directors, must 
 be clearly seen and understood. 
 
 In applying to its practical uses such information 
 as we are now indicating rather than developing, 
 it would be of great importance if we could trace 
 the effect of the interference and influence of 
 powerful Bankers, Brokers, and Money-agents, in 
 London, upon the conduct of the Bank-Directors, 
 in the immediate and direct channels of its opera- 
 tion ; — if we could, in short, say that, on such 
 a day, an influencial contractor, or his agent the 
 bill-broker, induced the Bank to advance him a
 
 41 
 
 very large sum of money; and that, as there existed, 
 at the time, an imperative necessity for contraction 
 instead of extension, the Directors, on the same 
 day, wrote to the Branch-Bank Managers to limit 
 their issues of Bank-notes in the country-districts, 
 and contract the amount of bills held under dis- 
 count. But such confirmatory facts are not to be 
 obtained ; or they would show the irresistible as- 
 cendancy of the powerful agents of the Money- 
 interest of London, in the affairs of the Bank of 
 England ; would prove, to demonstration, the in- 
 compatibility of the functions of Creators of Cur- 
 rency, and Bankers to the industrious, in the hands 
 of the Bank- Directors ; and would establish a 
 conviction of the impolicy of the Branch-Bank 
 system, as well as of the danger of extending it, 
 and rendering it permanent. 
 
 Five, or even ten, years, would, by intelligent 
 and scientific Bankers, be considered a very short 
 period for shewing the issue of any enterprise in 
 Banking-affairs, on an extensive scale of operation. 
 The Branch-Bank system has hardly gained a 
 footinof in several of the districts where Branch- 
 Banks have been opened. The experiment has 
 not yet afforded any results in confirmation of the 
 wisdom of its projectors. Wherever the system 
 has met with encouragement from the public, and 
 much custom has arisen from the temptations lield
 
 42 
 
 out by the Managers and by the terms of transacting 
 business, circumstances, developed in the course 
 of a very short and imperfect experiment, clearly 
 indicate how great would have been the danger 
 to the public welfare and prosperity, if the system 
 had been temporarily successful, and great in- 
 terests had become generally connected with it, 
 and dependent upon it. We are assured that a 
 convincing illustration of the evil consequences to 
 be apprehended from a general application of the 
 system might be given in evidence, from the ex- 
 perience of two or three Branch-Banks where more 
 business has been performed than at almost all the 
 rest put together. It might, we believe, be proved, 
 that, on the one hand, the Managers have given 
 greater encouragement to inconsiderate and reckless 
 speculators, than all the Private Bankers in the 
 same districts as those in which the Branch-Banks 
 are situated ; and, on the other hand, that, in a 
 moment of pressure arising from the export of 
 gold, engagements to grant accommodations have 
 been broken by the Manager, which would have 
 been faithfully fulfilled by every stable and judicious 
 Private Banker in England. It is not, -^ perhaps, 
 at present, necessary to prolong the discussion 
 upon this subject. Nothing further can be accom- 
 plished by an essay, than establishing a conviction 
 of the necessity of enquiring into the expediency
 
 43 
 
 of allowing the Bank of England to continue to 
 be the Creators of the general Paper-Money of 
 the country, and Bankers to those classes of the 
 people engaged in productive industry. An ap- 
 propriate enquiry would show whether the latter 
 function could be safely and satisfactorily exercised 
 by any other agents than brokers of capital, which 
 the Bank of England, according to the fundamental 
 principles of its constitution, and the established 
 regulations for its practice, can never become. 
 
 If the operation of the principles relating to the 
 concurrent exercise by the Bank of England, of the 
 distinct functions of Creators of Currency, and 
 Bankers to men engaged in productive industry, here 
 brought into view, should receive any satisfactory 
 illustration from the proceedings of the Parliamen- 
 tary Committee, it would, whatever should be the 
 conclusion, be acknowledged as a proof of the impar- 
 tiality and integrity of the Government : and, how- 
 ever disagreeable it may be to their dispositions, 
 whatever obstacles may lie in their course, whatever 
 labour and difficulty may attend the execution of the 
 investigation, the Members of the Parliamentary - 
 Committee will be bound to penetrate the mystery 
 in which the proceedings of the Bank have been 
 enveloped. It is impossible that the public should 
 remain content with seeing the vast pecuniary re- 
 sources of the Kingdom directed to distant objects,
 
 44 
 
 while the productive powers and commercial ener- 
 gies of this country, in the internal channels of pro- 
 duction and consumption, are decaying for the want 
 of that nourishment which a judicious distribution 
 of capital would afford. 
 
 In the foregoing observations, it has been the 
 anxious desire of the writer to refrain, as much as 
 the nature of the subject would permit, from all re- 
 marks of a personal and particular character. It is 
 a great and most important public Question, and 
 whatever should be found necessary to its full and 
 perfect elucidation must be brought to light ; but 
 all who are acquainted with the conduct of the Bank- 
 Directors, in their very important trust, must freely 
 admit that there never was a body of men who admi- 
 nistered their affairs with more impartiality and jus- 
 tice towards the public, as far as this could be done 
 under the powerful influences that govern them.
 
 45 
 
 SECTION II. 
 
 ON THE ALLEGED DEFECTS OF THE PRESENT 
 SYSTEM OF BANKING IN ENGLAND. 
 
 It has never been accurately defined what is 
 meant by " the defective system of Banking in 
 England." Whether the phrase be applicable to 
 the Country-Banks only, or to all Banks carrying 
 on business with a limited number of co-partners, 
 has never been clearly laid- down by those who 
 rendered it current. If the latter, it includes 
 London-Banks as well as Country-Banks ; for all 
 Banks in London, except the Bank of England, 
 are limited, by law, to a number of co-partners 
 not exceeding six. But, as the London Banks 
 have never been denounced by our statesmen and 
 Legislature, for their incompetency to the wants 
 of the community, and their " objectionable and 
 dangerous" properties, and as the Country-Banks 
 have received the full measure of their censure and 
 condemnation, we must conclude that these, alone, 
 have been pronounced to be defective and bad, 
 and to require alteration and improvement. That 
 this conclusion is correct, appears by the whole
 
 46 
 
 tenour of the communication of Lord Liverpool, 
 dated January 13, 1826 : and its correctness is 
 confirmed by the proceedings of the Government 
 and the Legislature of that year, and by the Act 
 of the 4th of Geo. IV. cap. 46, which grew out 
 of them ; the operation of which is limited to a 
 distance exceeding sixty-five miles from London, 
 and, consequently, all Bankers in London, as well 
 as all Country- Bankers within that distance of 
 London, are excluded from its operation, and 
 remain limited to a number of co-partners not ex- 
 ceeding six persons. 
 
 The specific measures for the correction of as- 
 sumed defects in the system of Banking in England, 
 which have been recommended on authority, appear 
 to have for their object an improvement in the sys- 
 tem of Banking in the country, and that alone. The 
 changes which have taken place, and other changes 
 which have been contemplated, avowed, and pro- 
 mulgated, by the Governor of the Bank, may all 
 be traced to the doctrines contained in the aforesaid 
 communication of 13th of January, 1826, to the 
 Governor and Deputy-Governor of the Bank, in 
 which the disorder and the remedy are dwelt-on 
 in thirty-nine consecutive propositions. This is 
 the great fountain of those opinions that have, 
 subsequently, been diffused through all the channels 
 of circulation that are used for giving currency
 
 47 
 
 to opinions of party- disputants on great public 
 Questions: — Pamphlets, Reviews, Magazines, and 
 Periodicals of all kinds, have lent their aid in this 
 work of disseminating doctrines rendered safe and 
 fashionable by the example of the highest func- 
 tionaries in the Realm; but, as they are merely 
 subsidiary in diffusing the opinions flowing from 
 the main fountain, and contain little beyond the 
 repetition of such phrases as " wretched system 
 of Banking," " worthless currency," '* the fraudu- 
 lent practices of Country-Bankers," with disserta- 
 tions upon these texts, which can make no im- 
 pression on any man acquainted with the subject, 
 we shall confine our notice, principally, to the 
 opinions expressed in the following extracts from 
 the aforesaid public document : — 
 
 " 1. The panic in the money-market having sub- 
 sided, and the pecuniary transactions of the country 
 having reverted to their accustomed course, it be- 
 comes important to lose no time in considering 
 whether any measures can be adopted to prevent 
 the recurrence, in future, of such evils as we have 
 recently experienced. 
 
 " 2. However much the recent distress may 
 have been aggravated, in the judgement of some, 
 by incidental circumstances and particular measures, 
 there can be no doubt that the principal source of 
 it is to be found in the rash spirit of speculation
 
 48 
 
 which has pervaded the country for some time, 
 supported, fostered, and encouraged by the country 
 banks. 
 
 ***** 
 
 " 8. The failures which have occurred in 
 England, unaccompanied as they have been by 
 the same occurrences in Scotland, tend to prove 
 that there must have been an unsolid and de- 
 lusive system of banking in one part of Great 
 Britain, and a solid and substantial one in the 
 
 other. 
 
 * * * * * 
 
 ^' 15. The matter of regret is, not that the 
 country banks have been suffered to exist, but that 
 they have been suffered so long to exist without 
 control or limitation, or without the adoption or 
 provisions calculated to counteract the evils result- 
 ing from their improvidence or excess. 
 
 " 16. It would be vain to suppose that we could 
 now, by any act of the legislature, extinguish the 
 existing country banks, even if it were desirable , 
 but it may be within our power, gradually at 
 least, to establish a sound system of banking 
 throughout the country ; and if such system can 
 be formed, there can be little doubt that it would 
 ultimately extinguish and absorb all that is objec- 
 tionable and dangerous in the present banking 
 establishment.
 
 49 
 
 " 17. There appear to be two modes of obtaining- 
 this object : — 
 
 " 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 privileges to 
 
 the number of partners engaged in 
 
 banking, except within a certain 
 
 distance of the metropolis. 
 
 " 18. It has always appeared to us, that it 
 
 would have been very desirable that the Bank 
 
 should have tried the first of these plans : — that of 
 
 establishing Branch Banks upon a limited scale. 
 
 But we are not insensible to the difficulties that 
 
 would have attended such an experiment, and we 
 
 are quite satisfied that it would be impossible 
 
 for the Bank, under present circumstances, to 
 
 carry into execution such a system, to the extent 
 
 necessary for providing for the wants of the 
 
 country. 
 
 " 19. There remains, therefore, only the other 
 plan : the surrender by the Bank of their exclu- 
 sive privilege as to the number of partners, beyond 
 a certain distance from the metropolis. 
 
 " 20. The effect of such a measure would be 
 the gradual establishment of extensive and respect- 
 able Banks in different parts of the country ; some, 
 
 E
 
 50 
 
 perhaps, with charters from the crown, under cer- 
 tain qualifications, and some without. 
 
 " 21. Here we have again the advantage of the 
 
 experience of Scotland. 
 
 * * # # # 
 
 " 26. If the concerns of the country could be 
 carried on without any other bank than the Bank 
 of England, there might be some reason for not 
 interfering with the exclusive privilege; but the 
 effect of the law at present is, to permit every 
 description of banking, e.vcept that which is solid 
 and secure.'' 
 
 It would appear from the above considered and 
 matured propositions of the King's Ministers — which 
 substantially embodied all the opinions relating to 
 the subject of Banking, that were then current 
 among men of authority in Parliament and Admi- 
 nistration, — that no measures could be contemplated, 
 but such as proceeded on the undisputed assumption 
 contained in number 8 — viz. that the system in 
 England is " unsolid and delusive," while that in 
 Scotland is ^' solid and substantial." This forms 
 the basis of every suggestion and recommendation 
 of the Government, the text for every commentary 
 of the essayist, and the ground for every banking 
 scheme of the speculative and visionary. 
 
 Owing to the reprehensible supineness of the 
 Country-Bankers, this assumption was allowed to
 
 .51 
 
 circulate as an undisputed axiom. They made no 
 effort to counteract the effect which it produced 
 on the conduct of the Government, and the pro- 
 ceedings of the Legislature ; and we apply to them 
 the term reprehensible, because men whose fortunes 
 had been raised, augmented, or improved, by a 
 species of commerce which resulted from the con- 
 fidence of the public, were bound in honour to 
 step forward as a body, in defence of a system, 
 when they found that deep and irreparable injuries 
 would be inflicted upon the productive classes of 
 the community, with whose interests they were 
 indissolubly united, in consequence of the dan- 
 gerous prepossessions of the Ministers. The 
 Private Bankers have a great public trust, and they 
 are morally responsible for its exercise and guar- 
 dianship. 
 
 There never, we venture to assert, was a matter 
 of grave general concern and importance, dealt with 
 so ignorantly, so confidently, and with so much 
 deep and injurious prejudice; and, as nothing can 
 more strongly conduce to that state of mind which 
 is requisite to enable us to enter upon a temperate 
 and impartial inquiry into the alleged defects of 
 the present system of Banking in England, than 
 a just apprehension of the extent of the ignorance 
 prevalent amongst those who have had the power 
 
 e2
 
 52 
 
 to decide the Question in public life, we will first 
 advert to a few facts in illustration of it. 
 
 All writers and public speakers, who have taken 
 
 a prominent part in discussions on the subject, have 
 
 asserted that the practice of receiving sums of 
 
 money on interest, and accounting for the same on 
 
 demand, and of lending sums to the industrious 
 
 on the system of cash-credits, is peculiar to the 
 
 Bankers of Scotland. " The Banking system of 
 
 our neighbours," says a writer in the Quarterly 
 
 Review,* " presents three great and leading 
 
 ' features : it offers to the frugal a safe, and at 
 
 ' the same time, a profitable depository for their 
 
 ' loans advanced upon cash-credits ; and the public 
 
 ' at large it provides with a safe, economical, and 
 
 ' convenient circulating medium. The utility of 
 
 * the two former functions is too manifest to admit 
 
 ' of dispute; but with regard to the latter function 
 
 ' — that of providing a circulating medium — it is 
 
 ' strenuously contended that that is not an essential 
 
 ' feature of, but merely an adjunct to, the system. 
 
 ' Those who hold this opinion, urge that, although 
 
 ' the Scotch system of Banking be good as it 
 
 ' stands at present, it would be still better without 
 
 * See an able article on Banking, in the 86th Number, for 
 October, 1830.
 
 53 
 
 " this adjunct, wliich they represent as an un- 
 " necessary, and even injurious excrescence. From 
 " these views we must take the liberty of ex- 
 " pressing our unequivocal dissent : far from re- 
 " garding this function as an excrescence, which 
 " might be lopped off, we consider it as the hinge 
 " upon which the whole system turns." And in a 
 subsequent part of the same article — " When an 
 " English farmer," says the writer, " sells any 
 " portion of his produce, he has generally no alter- 
 " native which can serve his purpose better than 
 '' to keep the proceeds locked up in his drawer 
 " until the next rent-day. He may, it is true, 
 " lodge it in the hands of some Country-Banker ; 
 " but then he can get no interest for it, and 
 " besides, the Banker may fail." The late Mr. 
 Tierney, in a debate on the 26th of May, 1826, 
 said — " Because, what was there — if the law 
 " continued in a state to allow it — what was to 
 " prevent our doing just the same thing in Eng- 
 " land V (viz. receive deposits on interest, and 
 grant cash-credits.) " I can see no reason for it, 
 " and I deny that in England the same may not 
 " be done : indeed, I was surprised to find, wliat 
 " / (lid not k)ww imtil this day, that cash-credits 
 " do exist in some of the most respectable Country- 
 " Banks in England. (Hear.) The cheers of the 
 " Honourable Gentlemen opposite would be suffi-
 
 54 
 
 " cient evidence that I am not misinformed by 
 " the eminent banker to whom I am indebted for 
 " my knowledge." 
 
 Mr. Tierney was a man of quicker apprehension 
 than most other members accustomed to deal with 
 financial questions, and light appears to have 
 penetrated his mind, upon this subject, when the 
 minds of almost all other senators were enveloped 
 in darkness ; but this charoe lies aa^ainst this acute 
 and abJe financier — that he had proceeded, very 
 confidently, to assist in passing laws affecting 
 Country-Bankers, when he was in utter ignorance 
 of all that relates to their practical operations. Mr. 
 Huskisson, who wrote the draft of the afore-men- 
 tioned famous document to the Governor and Deputy- 
 Governor of the Bank, was, equally with Mr. Tierney, 
 ignorant of the practice of Country-Bankers. One 
 of these Bankers — a Member of Parliament — held 
 a conversation with the Right Honourable Gentle- 
 man, in the lobby of the House of Commons, during 
 the session of 1826, when the measures relating to 
 Banking, which have produced such disastrous 
 consequences, were under consideration. In this 
 conversation the Banker alluded to the Deposits of 
 Country-Bankers on interest. " Deposits ! — What 
 " do you mean?" inquired this influential Minister. 
 " I mean," responded the Banker, " sums of 
 *' money received by Country-Bankers, from the
 
 55 
 
 ** public, on interest, to be paid back whenever 
 " demanded." This information was so new and 
 surprising to the Right Honourable Gentleman, that 
 his only reply was, " No, no ; you will not make 
 " me believe that you Country-Bankers are such 
 " fools as to allow interest on deposits, and pay 
 '* them on demand." These facts are adduced to 
 shew how entirely destitute of information were 
 the Government and public men, when they pro- 
 ceeded to legislate upon the subject. Similar 
 ignorance was exhibited by Lord Liverpool and the 
 Bank-Directors at interviews with merchants and 
 country-gentlemen who were wholly unconnected 
 with Bankers, when they came to London for the 
 object of devising means for mitigating the evils 
 of the panic. 
 
 The briefest reference to the practice of the 
 English Country-Bankers will shew the fallacy 
 of those assumptions upon which measures of 
 the greatest importance to the community were 
 grounded. 
 
 Every Country-Banker in England and Wales is 
 in the practice of lending money to the indus- 
 trious : if the borrower desire to have it advanced 
 and received back by the Bank, upon the system of 
 a cash-credit, he may receive it and pay it back in 
 that manner. The practice, in most of the prin- 
 cipal Banks in England, is reduced to a pretty
 
 56 
 
 regular per-centage system : — the borrower may 
 command a stipulated amount to be lent on a 
 cash-credit, corresponding to the amount returned 
 in his Banking account, and the profit to the 
 Banker arising from it ; and he may use the whole, 
 or any portion, of such stipulated amount, when- 
 ever he wishes : he may take any part of it for a 
 week or a month, and pay it back again ; and the 
 interest upon each distinct entry, for or against 
 him, will be calculated from the day of the receipt 
 or payment. Messrs. Gurneys and Co., of Norfolk, 
 had, at one period, nearly a million sterling 
 lent to the industrious in the vicinity of their 
 several Banks. This sum was lent chiefly to manu- 
 facturers, farmers, millers, and dealers in agricultural 
 produce. This is so far from being a solitary ex- 
 ample of the practice, that it may be safely affirmed 
 that nothing but the increased risk attending it — a 
 risk owing to causes over which the Bankers had no 
 control, and which were altogether superinduced 
 by the erroneous policy of the Government, — has, 
 to this day, abridged the power of the farmers and 
 traders of England to borrow money of the Coun- 
 try-Bankers. 
 
 Then, with respect to the other " great and 
 leading feature," as it is called, of the Banking 
 system of Scotland, this short statement will shew 
 the monstrous fallacy of assuming it to be a pecu-
 
 57 
 
 liar excellence of the system which is in operation 
 in that country. 
 
 There always did exist a few Country-Bankers 
 in England, who allow no interest upon deposits. 
 Their number has increased since the panic of 
 1825-6, owing to the difficulty of finding employ- 
 ment for money placed in their hands by the public. 
 But, at this moment, thirty-nine, out of every forty, 
 of the Country-Bankers of England and Wales, 
 allow interest upon deposits : nine, in every ten, 
 of these, allow an interest which is, in most 
 cases, one per Cent., and, in all cases, a half per 
 Cent., more than is allowed by the three chartered 
 Banks of Scotland. And that they encourage the 
 frugal to make small savings, equally with the 
 Scotch Banks, is indisputable, not only from the 
 above- cited fact, that they allow a higher rate of 
 interest; but, also, from the following reference to 
 an individual case, which, though it may be soli- 
 tary as regards a large aggregate sum accruing 
 from a great number of very small deposits, is, 
 nevertheless, merely an example of general prac- 
 tice : — An English Country-Bank, of known wealth 
 and responsibility, has an amount of upwards of 
 forty thousand pounds deposited on interest, com- 
 posed of separate sums, the largest of which does 
 not exceed thirty pounds. This may suffice to 
 show the validity of the claim for exclusive excel-
 
 58 
 
 lence in favour of the Scotch Bankers, with regard 
 to the two most important of the three great 
 leading features of their system of Banking; the 
 other will be discussed more appropriately in 
 another part of this inquiry. 
 
 Having made a brief, but a sufficiently explicit, 
 allusion to the deplorable ignorance of public men, 
 respecting the nature of the business of the 
 Country-Bankers, and having shewn the absurdity 
 of the claim for the superiority of the system of 
 the Scotch Banks with reo;ard to these two essen- 
 tial points of their practice, we shall now proceed 
 from discussing the functions, to a calm and delibe- 
 rate examination of the specific charges on which 
 the assumption of the " alleged defects of the 
 present system of Banking in England" mainly 
 rests. 
 
 The proof of the defective state of Banking in 
 England rests principally upon two assumed facts — 
 viz. first, the disposition and practice of Country- 
 Bankers, to encourage speculation ; and, secondly, 
 the number of failures. Fair investigation would 
 shew, that the one was altogether without foun- 
 dation, and that, in respect to the other, gross, 
 erroneous, and exaggerated, statements had led to 
 conclusions which are exceedingly fallacious. 
 
 The last signal speculation witnessed in this 
 country was that which immediately preceded the
 
 59 
 
 Panic of 1825-6. Speculation, indeed, through- 
 out all classes, was, about seven years since, 
 carried to an unjustifiable extent; but it is a re- 
 markable fact, and pregnant with instruction, that, 
 speaking of merchants, interchangers, and manu- 
 facturers, and not of Bankers, all the large conspi- 
 cuous failures which occurred between July, 1825, 
 and April, 182G, were arnong persons who had no 
 coniieaion with English Country-Bankers, and luho 
 resorted, not to Country- Bankers Notes, but to 
 those of the Bank of England and the Scotch 
 Bankers, to keep up the excess of their own credit- 
 circulation, which was the consequence of their 
 sanguine speculations. These failures occurred 
 amongst merchants and booksellers, in London, 
 Liverpool, and Edinburgh, where English Country- 
 Bank Notes are never used. The first remarkable 
 failures that occurred, in the year 1825, were 
 those of the Cotton- Merchants, and other specula- 
 tive persons, in Liverpool. Then the Booksellers 
 of London and Edinburgh, and the Merchants of 
 London. Messrs. Crowder, Clough, & Co., of Li- 
 verpool, with many connected with them in specu- 
 lation, failed early in the autumn. What the gross 
 amount of their enormous debts was, we cannot 
 state; but we will take for illustration another 
 failure which resulted from the same " rash spirit 
 of speculation," and which was '* supported, fos-
 
 60 
 
 tered, and encouraged," not " by Country-Banks^^" 
 but by the Bank of England, the Scotch Banks, 
 and the Bill-brokers and Bankers of London : — 
 Messrs. Hurst, Robinson, & Co., Booksellers, of 
 London, were the correspondents of Messrs. Con- 
 stable & Co., of Edinburgh, and were associated 
 with them as publishers. The two houses failed 
 at the Panic, as did Sir Walter Scott, and Messrs. 
 Ballantyne & Co. the Printers ; the whole being 
 connected together in the great manufacture of 
 Books, and supporting each other by accommoda- 
 tion-Bills, cash- credits, and by discounts, in Lon- 
 don. What was the amount of the debts of 
 Messrs. Constable & Co., or how much they paid 
 in the pound, we do not know. The amount 
 proved under the Bankruptcy of Messrs. Hurst, 
 Robinson, & Co., is £618,000, and the dividends 
 paid by that firm amount to fourteen pence in the 
 pound. The amount owing by insolvent Book- 
 sellers and Stationers in London and Edinburgh, at 
 the time when they stopped payment, in 1825-6, 
 exceeded two millions sterling; and their specu- 
 lations in land, hops, and various commodities, 
 had been carried to an excess which never could 
 have existed if it had depended on the encourage- 
 ment of Country-Bankers. Those speculations 
 were conducted mainly upon the individual credit 
 of the respective speculators, and by accommoda-
 
 61 
 
 tion-bills, which were, in great measure, uplield 
 by means of a practice prevalent in Scotland — viz. 
 by each party having two or three cash-credits, 
 and discount-accounts, with different Scotch Banks. 
 They were, almost wholly and exclusively, main- 
 tained by this means, and by discount-accounts at 
 the Bank of England, and at the offices of the 
 Bankers and Bill-Brokers of London. 
 
 To confine our observations, however, to those 
 persons and occurrences which attracted the most 
 notice, would not be doing full and perfect justice 
 to the subject. Patient inquiry has given us local 
 information, which, to avoid tedious details, may 
 be comprised in the following summary statement. 
 We assert, therefore, that, if the circumstances 
 of all the persons who failed ivithin that period were 
 examined, it would be found that the far greater 
 proportion of failures was amo7igst persons who had 
 most to do with Accommodation- Bills and Bank-of- 
 England Notes, and least luith Country -Banker's' 
 Bills and Notes. Consequently, we find that the 
 failures of manufacturers were most numerous, and 
 the amount of their debts the largest, amongst 
 those who wrought up cotton, silk, hemp, and flax, 
 because they had most concern with bills and credit- 
 currency, which was passed into circulation by 
 sanguine or speculative traders in league with them, 
 without regard to its amount, and which was not 
 under the regulation of Country- Bankers, wlio
 
 62 
 
 would liave checked its increase : whilst the failure 
 of those who wrought up sheep's wool (whether in 
 the west, east, middle, or north, of England,) — 
 leather, iron, and other metals, — were, in the com- 
 parison, small in numbers and amount, because 
 the manufacturers of these materials were most 
 under the influence and salutary operation of 
 the Country- Bank System. 
 
 If the facts to which this brief reference applies 
 should be investigated by a competent authority, 
 they would unanswerably demonstrate, that to Eng- 
 lish Counti^y- Bankers does not attach the charge 
 of fostering s'pecidation and inducing failures. But 
 a reference to the condition of places with respect 
 to the number of failures in them — a reference 
 which any man who visits those places might 
 make — would establish the proposition, not in a 
 stron2:er, but in a more tano;ible and confirmative 
 manner, because this kind of evidence is more 
 conspicuous and undeniable. Let any man take, 
 proceeding in a zig-zag direction throughout Eng- 
 land, a few large places distinguished for manu- 
 factures or considerable traffic, where Country- 
 Banking has been the longest time established, and 
 where the system is well understood and benefi- 
 cially practised : and we may confidently ask any 
 one acquainted with the merchants, manufacturers, 
 and traders, in Newcastle-upon-Tyne, Kendal, 
 Leeds, York, Hull, Lincoln, Sheffield, Newcastle-
 
 (33 
 
 under-Line, Stoke (the Potteries), Nottingham, Der- 
 by, Leicester, Birmingham, Wolverhampton, Kidder- 
 minster, Worcester, Gloucester, Bristol, Taunton, 
 Yeovil, Myrther-Tydvill, Swansea, Exeter, Truro, 
 or Norwich, to describe the condition of these 
 places, as to failures, during the crisis of 1825-6. 
 These are selected because they are all towns of 
 considerable business, where Country-Banks have 
 been long established, and where, with some 
 exceptions, they have, of late years, been conducted 
 upon sound principles. Great distress existed in 
 several of these places, amongst the working classes; 
 but it is notorious that, in many of them, not a single 
 failure took place during, or in consequence of, the 
 great convulsions in credit ; ivhile in all, the failures 
 were very few, compared with other towns containing 
 the same number of inhabitants, where the Country- 
 Bank System was not in operation. 
 
 We, therefore, confidently ask all who deny the 
 position that Country-Banking has less tendency to 
 promote speculation and induce failures, than other 
 systems of Banking, to j)rove, by a reference to the 
 failures in London, Liverpool, Lancashire, and all 
 Scotland, where Bank-of-England and Scotch Notes 
 almost exclusively circulate, that the Scotch and 
 Bank-of-England systems of banking have less ten- 
 dency to promote speculation than the Country- 
 Bank system of England. If they fail to do this, 
 what can be thought of the rash and ground-
 
 64 
 
 less charges made by the Ministers ? and what 
 would impartial justice say of the knowledge 
 and discretion of men who recommended proceed- 
 ings in Parliament, respecting Country-Bankers, 
 founded upon so injurious and fallacious an as- 
 sumption ? 
 
 To all acquainted with the subject, the fact, 
 that the great mass of mercantile failures in 1825-6 
 occurred within six miles of St. Paul's, within sixty 
 miles of Liverpool, and in Scotland, is notorious 
 and undeniable ; and it proves the monstrous in- 
 justice of Lord Liverpool's allegation, " that the 
 " principal source of distress is to be found in the 
 '' rash spirit of speculation which has pervaded 
 " the country for some time, supported, fostered, 
 " and encouraged, by the Country- Banks." 
 
 We now see how reprehensively ignorant of the 
 actual state of the case were the Ministers of the 
 Crown in 1826, when they presumed to stop the 
 operation of a law by an Order in Council, and 
 recommended proceedings affecting, most inju- 
 riously, the productive classes of the community, 
 through the mischief done to the Country-Bankers 
 of England. And, if it can be demonstrated that 
 the charge of encouraging speculation could not 
 be fairly made against Country-Bankers before the 
 great convulsions in commerce seven years ago, 
 all the facts that have transpired since that epoch 
 confirm the correctness of that conclusion by ex-
 
 05 
 
 perience : and any attempt made at this day, 
 to controvert it, would be absurd from the igno- 
 rance, or contemptible from the obstinacy, which 
 it would display. It might be said, with almost 
 exact, literal, truth, that (taking the places before 
 cited as affording a fair illustration of the working 
 of the English Country-Bank System) hardly one 
 important failure has occurred since the year 1826 
 at these twenty-four towns, except at Birmingham 
 and Bristol : and the failures at these places have 
 been mixed up with, if not absolutely caused by, 
 the operations of the Branch-Banks of England. 
 Nobody can deny that, after London and Lanca- 
 shire (where other systems of Banking and cur- 
 rency than those exercised by Country-Bankers 
 chiefly prevail,) the towns of Newcastle, Kendal, 
 Leeds, York, Hull, Lincoln, Shefiield, Newcastle- 
 under-Line, Stoke, Nottingham, Derby, Leicester, 
 Birmingham, Wolverhampton, Kidderminster, Wor- 
 cester, Gloucester, Bristol, Taunton, Yeovil, Myr- 
 ther-Tydvill, Swansea, Exeter, Truro, and Norwich, 
 are the centres of all the principal mines, manu- 
 factures, and commerce, of England. They are the 
 places where the Country- Bank system has been the 
 longest in operation, and where that system has 
 been eminently successful in bringing credit and 
 credit-currency under its salutary regulation and 
 control. The amount owing by persons who failed 
 
 F
 
 66 
 
 at these important towns, during the convulsive 
 crisis of 1825, was not, we believe, in a greater 
 proportion than one-eighth (rated according to 
 the respective traffic carried on) to that which was 
 owing by the persons who failed, at the same 
 period, in London, Liverpool, Glasgow, and Edin- 
 burgh : and, looking at the failures that have 
 taken place since the " panic in the money-market," 
 we find scarcely any of magnitude, except those 
 which have taken place in London, Bristol, Bir- 
 mingham ; at Glasgow, and in different parts of 
 Scotland. The most conspicuous of these are 
 those which occurred in the Sugar-trade, the 
 West -India trade, and five Banking-firms, of 
 London, — a factor, and a manufacturing drug- 
 gist, with some minor failures, at Birmingham, — 
 those amongst the corn and cattle dealers, the 
 Rennies and Armstrongs, of Scotland, — the mer- 
 chants of Glasgow, the clothiers of Gallow- 
 Shiels, the cloth-factors of London, and the mer- 
 chants of Bristol, 
 
 So far, therefore, from experience, whether before 
 or since the Panic, establishing the truth of the 
 allegation that speculation " has been supported, 
 fostered, and encouraged, by Country-Bankers," 
 precisely the opposite of this is the truth. Country- 
 Bankers, on the main, are the most active and 
 vigilant repressers of speculation. We go further,
 
 67 
 
 and assert, without the fear of contradiction from 
 any man acquainted with the subject, that hardly 
 any great speculation is ever carried on in any part 
 of the country, without receiving its main support 
 from the Bank of England, the Bankers of Scotland, 
 or the Bankers or Bill-brokers of London. This 
 assertion could be proved by facts connected with 
 the great failures in Glasgow in the year 1828, as 
 well as those in the present year ; by the other Scotch 
 failures above referred to ; and by those con- 
 spicuous failures that have also occurred in Eng- 
 land, since the Panic. The two largest of these 
 are Bourne & Co. in the cloth-trade, who, it is 
 believed, owed upwards of ten thousand pounds 
 to the Branch- Bank of England in Bristol, and 
 another larg:e sum to the Bank of Eno-land in Lon- 
 don ; and J. L. Chance & Co., manufacturers of 
 glass and exporters of manufactures generally. The 
 last is a Birmingham house, with an establishment in 
 London : as their credit was in general circulation 
 in Warwickshire and Staffordshire, it was natural to 
 expect that the Private Bankers of that district would 
 be the greatest sufferers. This, however, is not the 
 case : Mr. Chance, in a circular dated April 6th, 
 and addressed to his creditors, says, " having con- 
 " suited four ol my principal creditors ;" and then 
 he names, as these principal creditors, two London 
 Banking firms, that of an eminent bill-broker in 
 
 r 2
 
 68 
 
 London, and one mercantile firm whose trade lies 
 with the East Indies. It is not meant to be in- 
 ferred that London Bankers are disposed to encou- 
 rage speculation ; but, from the magnitude of their 
 concerns, it is impossible for them to detect ac- 
 commodation-bills and other evidences of impru- 
 dent speculation, with the same facility and cer- 
 tainty as Country-Bankers. Speculative merchants 
 generally keep more than one Banking account 
 with Private Bankers, as well as one with the 
 Bank of England, for the purpose of disguising 
 their operations. These are methods of preventing 
 the nature of the traffic becoming known to the 
 Bankers, which cannot be resorted to in the coun- 
 try, except with the Branch-Banks of England and 
 the Joint-Stock Banks. 
 
 We may now confidently close this part of our 
 discussion, with a firm reliance upon the impartial 
 judgment of every just and considerate man, 
 to decide whether the facts and circumstances here 
 presented to his mind, do not prove, beyond all 
 dispute, that the allegation of Country-Bankers 
 being promoters of speculation is altogether false. 
 
 Respecting the other general charge relating to the 
 losses encountered by depositors of money-capital, 
 from the failures of Country-Bankers, less need be 
 said, because, on this head, truth requires that we 
 should make considerable admissions. The trade
 
 09 
 
 of Banking is of the most delicate and important 
 character. The practice of receiving deposits of 
 money on interest, and lending the same, on the 
 slenderest security, to the industrious, for the pur- 
 poses of production, requires a combination of 
 peculiar properties in the man who exercises it. 
 It is not like the business of a scrivener, into whose 
 transactions considerations of personal character 
 enter but little, and in which real security, in land or 
 otherwise, forms the basis of the traffic. The busi- 
 ness of a Banker, on the contrary, in his intercourse 
 with his borrowing customers, requires the nicest 
 powers of observation and discrimination to decide 
 upon the character and moral habits of the person 
 to whom he makes a loan : and it consists in esti- 
 mating justly all those general circumstances that 
 would warrant a Banker, at any particular period, 
 in giving or extending credit to a greater number 
 of people, or in increasing or diminishing the 
 amount to be lent to the same number. That a 
 business of this character should, in the earlier 
 stages of its operation, be liable to the conse- 
 quences resulting from inexperience, ignorance, 
 or misconduct, is a matter which can surprise no 
 considerate person. Wherever the practice of 
 Banking has been generally introduced — whether 
 Banks were formed upon the principle of Joint- 
 Stock Proprietaries, or of private copartnerships, — 
 disasters have marked its earlier progress. Up-
 
 70 
 
 wards of one hundred Joint- Stock Banks have 
 been closed in the United States of America, 
 from insolvency. In a business so subtle in its 
 influence, so delicate in its character, and so pow- 
 erful in its operation, it is not wonderful that 
 many of the Country-Bankers should have been 
 brought to ruin, by proceeding sanguinely in a 
 course of apparent prosperity, without adequate 
 knowledge, circumspection, and experience. What 
 we contend for is, that, when the Country-Bank 
 system had been a sufficient number of years in 
 operation to render the imperative necessity for 
 these qualities manifest, prudential influences had 
 gained such an ascendancy in the minds of Coun- 
 try-Bankers, and so altered, in consequence, had 
 become the conduct of the sanguine and confiding, 
 that the interference of the Government, on this 
 ground, was, in the last degree, unnecessary and 
 mischievous. It should, moreover, be constantly 
 borne in mind, that the loss of capital, the disturb- 
 ance of its just application, and the derangement of 
 credit-engagements altogether, have been less under 
 the operation of the Country- Bank system, than 
 under that of the Scotch as practised in Scotland. 
 
 Without this reference to the peculiar charac- 
 teristics of the Banking business, it would be im- 
 possible to aflbrd such a candid, deliberate, and 
 satisfactory, consideration of the subject, as would 
 enable us to appreciate justly the consequences
 
 71 
 
 that have flowed from it. It is a subject that cannot 
 be safely dealt with, upon partial and superficial 
 examination : and, if the Ministers of the Crown 
 had vouchsafed such a full and perfect investigation 
 as they granted to the Scotch and Irish Bankers, 
 the fallacy of their assumptions, the error of their 
 opinions, and the injustice of their judgment, re- 
 specting the Country-Bankers of England, would 
 have been apparent. 
 
 With regard to this point of the failures — upon 
 which, we have said, we are disposed to make 
 considerable admissions, — such an investigation 
 would have placed it in a different point of view 
 from that which has been taken of it, by public 
 writers, lecturers, and Cabinet-Ministers. Those 
 admissions would not relate to the Country-Bankers 
 as a body, during the last fifteen years ; because, 
 during that period, their conduct has, on the whole, 
 been distinguished by great prudence and circum- 
 spection, accompanied with not less remarkable 
 moderation and forbearance. After the numerous 
 failures of Country-Banks, which accompanied the 
 commercial convulsions that marked the closing 
 years of the war and the few first years of the suc- 
 ceeding peace, this important body of men began 
 to conduct their affairs with increased attention and 
 greater ability ; necessity obliged them to become 
 more cautious, circumspect, and skilful. The
 
 72 
 
 Science of Banking was better understood, the 
 disasters resulting from ignorance and inexperience 
 operated as a salutary warning, and the Banking- 
 business was rendered altogether more sound and 
 substantial. This signal change in the practice of 
 Banking — a change on which our case, in great 
 measure, depends, — is perfectly well understood by 
 men initiated in Banking mysteries ; and its effects, 
 seen in the diminished number of insolvencies, and 
 in the better state of the assets of those who became 
 insolvent, are such as might have been apparent to 
 the most ignorant and superficial. Many Country- 
 Bankers failed during the war, who paid little or 
 nothing; and very few, indeed, of them, delivered 
 their assets, in a tolerably satisfactory state, to their 
 assignees. But almost all that failed at the panic 
 of 1825-6 paid nearly in full. Taking the mass of 
 all who were then compelled to stop payment, it 
 may, we believe, be demonstrated, that between 
 eight and nine tenths of the whole of their debts 
 have been paid. Let us take, for illustration of 
 this position, those five names whose respective 
 stoppages created the greatest sensation in the public 
 mind, because their debts to the public were re- 
 spectively larger than the debts of any other Bankers 
 that stopped at that crisis. We allude to 
 Messrs. Elford and Co., of Plymouth. 
 
 Wentworth and Co., of Wakefield and York.
 
 73 
 
 Messrs. Hollick and Co., of Cambridsre. 
 
 Gibbins and Co., of Birmingham, Swansea, 
 
 &c. 
 Sparrow and Co., of Chelmsford, Braintree, 
 
 &c. 
 The two first owed their failure to the bad system 
 of conducting- Banking business, which prevailed 
 amongst the sanguine and inconsiderate during the 
 war. They became involved in the risks and em- 
 barrassments which resulted from that system ; and 
 they either had not the power, or resolution, to 
 extricate themselves from it, when a better system 
 began to prevail among their competitors. Tne 
 failure of these two Banks was, therefore, the 
 effect of a disease which was caused by the' 
 excitements of the war and the credit-excesses of 
 the Government, and which was in a natural course 
 of being eradicated by gradual improvement. But 
 even these failures, surpassing almost all others of 
 recent date in their disastrous consequences, were 
 not of so bad a character as almost all of those 
 which occurred during, and immediately subse- 
 quent to, the war. 
 Messrs. Elford and Co. have paid 125'. Gd. in the 
 
 pound. 
 Wentworth and Co. have paid, at their 
 
 York Brancli, 14.y. in the pound; 
 
 and at the Wakefield Brancli, \2s.
 
 74 
 
 Then, of the three remaining — Messrs. Hollick and 
 Co. have, under a Commission of Bankruptcy, 
 paid in full; — Messrs. Gibbins have, at their Swan- 
 sea Branch, paid in full ; at their Birmingham 
 Branch, 13.?. in the pound ; and they are ready to 
 pay in full, if they could get their affairs out of 
 Bankruptcy, and the commission superseded; — 
 Messrs. Sparrow and Co. paid in full, with in- 
 terest; and they resumed their business within 
 three months after its suspension, the firm being 
 opulent at the time that it was compelled to 
 suspend its payments. 
 
 Since the year 1826, five London Banks have 
 failed. Two of these were the depositaries of the 
 surplus cash of more than twenty Country-Banks. 
 Many of the sums in their hands, belonging to the 
 Country- Banks, were large, and some very large, — 
 in one instance, more than £30,000, and, in two seve- 
 ral instances, more than £40,000. The two London 
 Banks most connected with the Country-Banks 
 will pay but a small portion of their debts. Yet, 
 but one of the Country-Banks connected by cor- 
 respondence with them has failed ; and, though its 
 loss by the insolvency of the London Bank is up- 
 wards of £35,000, the whole of its own debts will 
 be paid to the public. The partners of this unfor- 
 tunate and deeply-injured Country- Bank, are, not- 
 withstanding the full payment of their debts,
 
 75 
 
 Bankrupts, and will, as such, serve tlie purpose of 
 some speculative schemer, to make an impression 
 upon the mind of an inexperienced Minister, of 
 the unsound state of the Country- Bankers of 
 England. Including this, eight Country-Banks 
 have stopped payment since the Panic-year 1825-6: 
 by six of them, the public will sustain loss — the 
 result of excitement and imprudence generated by 
 the circumstances of the war. Their debts do not, 
 collectively, amount to £250,000 ; which, it is 
 believed, is less than a three-hundredth part of the 
 gross amount of the deposits and issues of the 
 Country- Bankers of England. 
 
 The last six years have been years of unexampled 
 pressure on the productive classes of the commu- 
 nity. Among these classes, alone, are, generally 
 speaking, the debtors of Country- Bankers to be 
 found. That, during so long a period of trial, 
 only seven or eight, out of five hundred, should 
 fail, is, assuredly, no proof of the unsoundness 
 of the system. In such difficulties as those in 
 which the Government have placed the Country- 
 Bankers of England, that any errors should have 
 been discovered in the conduct of an eightieth part* 
 of the number — that there should have been any 
 
 • The proportion is less than an eightieth part, reckoning the 
 number of persons licensed as Bankers, and the number of persons 
 who have failed as Bankers.
 
 76 
 
 irregularity in the payment of a three hundredth 
 portion of the amount of their debts, — that any 
 insolvency should, ultimately, be proved against 
 any Country-Bankers whatever, — are circumstances 
 to be lamented ; but such circumstances afford so 
 insignificant an exception to a general rule, that it 
 ought to be taken as an unequivocal sign of the 
 soundness and stability of the Country-Bank 
 system ; and, when contrasted with the results of 
 former practice, as a conclusive proof that it was 
 undergoing that wholesome change in the only 
 defective parts of its operation, which rendered the 
 interference of the Legislature, with its functions and 
 effectiveness, extremely detrimental and pernicious. 
 
 This brief sketch faithfully indicates the actual 
 state of the affairs of those Bankers whose opera- 
 tions furnished the strongest case for the Admini- 
 stration to proceed upon, in their dangerous course 
 of policy relating to this important subject : and 
 when we reflect, that the inconsiderate and ill- 
 advised measures of the Government caused a 
 sudden and ruinous decline in the value of pro- 
 perty, which rendered it impossible for all but the 
 wealthy instantly to fulfil their engagements, it be- 
 comes evident that the conduct of the Administra- 
 tion was immeasurably more deserving of censure, 
 than the conduct of the Country-Bankers. 
 
 It may be a very effective stroke of policy, for men
 
 77 
 
 who wish to raise up Joint-Stock Banks for the pur- 
 pose of gambling in shares, to represent the number 
 of Bankers that liave become bankrupts, as a crying 
 evil ; and well-meaning, superficial, persons may be 
 deluded by such representations : but no man who 
 merits to hold the important trust of a Legislator 
 will venture to pass on to a conclusion, without un- 
 dertaking an analytical examination of the matter. 
 It is acknowledged that several Country-Bankers 
 failed, owing to their having abused their trust, by 
 diverting the funds of their customers to private 
 speculations ; and a heavy censure rests upon them, 
 for such conduct. But many have been ruined 
 by the misconduct of others, and by the mea- 
 sures of the Government; and, after paying their 
 creditors in full, under a commission of Bankruptcy, 
 have retired to live upon the wreck of their pro- 
 perty. Every man who issues promissory notes 
 payable on demand, is compelled to take out a 
 Banker's Licence. Manufacturers and shopkeepers 
 have often been placed in the Bankrupt-list as 
 Bankers, who were merely issuers of notes to pay 
 the wages of workmen. The issuing of notes may 
 be for no other purpose than paying wages, and 
 may be wholly subsidiary to the financial opera- 
 tions of a person who is in a course of ruin from 
 carrying on some declining manufacture. When 
 such an individual becomes insolvent, he will be
 
 78 
 
 apt, for many reasons, to choose to appear in the 
 Gazette under the term of " Banker." A man who is 
 both a tailor and a woollen- draper will be gazetted 
 as a woollen-draper, although none of his losses 
 may have arisen in that branch of his traffic. Look- 
 ing to his future credit, he will avoid being de- 
 scribed by that term which would be most prejudi- 
 cial to his future pursuits. A man who is both a 
 licensed Banker and a manufacturer, may, after his 
 bankruptc}^, again become a manufacturer ; but he 
 never can again become a banker. In the little 
 town of Trowbridge, there were, at one time, ten 
 firms that issued promissory notes, and their Bankers' 
 Licences would cause them to appear in the list of 
 Country-Bankers, in Directories and Parliamentary 
 returns ; but there never were, at the most, (pro- 
 perly speaking,) more than two Banks in that 
 place. The practice of issuing notes, by miners 
 and traders, was, a few years ago, rapidly extending 
 itself in Cornwall : it became inconvenient and in- 
 jurious to the Bankers, and full of risk to the public. 
 The respectable Bankers of Truro, consequently, 
 determined to put a stop to this practice, and they 
 effected it by this means. They sent a man on horse- 
 back, into the obscure recesses of the hills, and into 
 the villages, daily, to different places where these 
 notes were issued, and demanded gold for such as 
 they held. At first, the issuers endeavoured to evade
 
 79 
 
 the demand, and tendered other notes, or other 
 paper, in discharge for them. " No — I demand 
 gold," said the applicant. " Then, you will take 
 '• your own notes, which have been issued by your 
 " own employers?" "No — I demand gold. Send our 
 " notes to the Bank where they are issued, and they 
 " shall be paid in gold ; but I will not take them 
 " in exchange for your notes." This plan rendered 
 the practice difficult, and the trade unprofitable ; 
 and it was soon relinquished. If it had not been 
 eradicated in this manner, there might, in a few 
 years, have been dozens of licensed note-issuers, 
 who, in the event of failure, would have appeared in 
 the Gazette as Bankers. 
 
 We have not alluded to these facts, for the pur- 
 pose of palliating the conduct of the speculative 
 Bankers of former days ; for the only palliation 
 which that admits of, is the novelty and peculiar 
 character of the business of a Banker, the want of 
 experience in those who sanguinely and credulously 
 scattered their funds amongst the people, and the 
 exciting circumstances of the war and the financial 
 proceedings of the Minister : neither do we urge, 
 by way of extenuation, that, even in almost all the 
 worst cases of recent failure, the broken Bankers 
 have paid much larger dividends than broken mer- 
 chants or manufacturers in the same stations of life ; 
 because the banker who issues notes, invites, not
 
 80 
 
 only the trust of his connexions and acquaintances, 
 but, also, the confidence of people who are 
 strangers to his person, circumstances, and habits ; 
 and he ought, therefore, to be visited with severer 
 censure when he fails in his engagements : but we 
 make the statement to shew the necessity of caution 
 in adopting conclusions drawn from such erroneous 
 data. 
 
 In this Section, an attempt has been made to 
 prove — 
 
 1st. That the assumptions of the Government 
 and the Parliament of 1826, concerning 
 Country-Bankers, were almost entirely 
 groundless ; that the measures founded 
 upon those assumptions flowed from the 
 most reprehensible ignorance of their 
 functions and conduct. 
 2d. That the preference given to the Scotch 
 system of Banking, over that of the 
 Country-Bankers, as affording a better 
 support to industry, arises from the 
 grossest misconceptions relating to the 
 English practice. 
 3d. That a similar preference, on account of the 
 Scotch Banks offering greater induce- 
 ments to the frugal to save money by 
 allowing depositors of savings a higher 
 interest, is an error of the same kind.
 
 81 
 
 4th. That, proceeding' from these errors con- 
 cerning the functions of the English 
 Bankers, to their practices, it is shewn 
 that the specific charges of their mis- 
 conduct are, in tlie main, false; first, 
 as reo;ards their aflfordinp; encoura^e- 
 ment to " a rash spirit of speculation," 
 and, secondly, as concerns their lia- 
 bility to fail, and the losses which the 
 public have encountered from their 
 failures, 
 A deliberate and mature investigation of the case, 
 conducted by men of sense and impartiality, would 
 make manifest, not alone the unimportant blemishes 
 in the system of Country-Banking ; but would ex- 
 hibit a system which is, on the whole, more sound and 
 perfect in its constitution, more convenient and useful 
 in its operation, and more conducive to national 
 wealth, than any other system, of extensive influence 
 and operation, which has been any where introduced 
 into the commercial affairs and industrious pursuits 
 of any country. 
 
 That any man entrusted with the power and in- 
 fluence of the King's Prime Minister should, upon 
 vulgar allegations and vague assumptions, meditate 
 the extinction of such a system, without an investi- 
 gation into its nature and operation, is unaccounta- 
 ble and marvellous. The English Country-Banks 
 
 G
 
 82 
 
 are the means by which the industry of the country 
 has been brought forth, developed, and extended ; 
 and they now form its main support. There is 
 hardly a man distinguished for success in his pur- 
 suits, at a distance from London, who has not been 
 guided in his course by the advice of a Country- 
 Banker, and aided by him in his struggling efforts 
 for wealth and independence. The Banker has 
 been his counsellor in enterprise, his supporter in 
 difficulty, his sympathising friend in depression. 
 The Country-Banker and the man of industry are, 
 therefore, knit together by the closest relations of 
 social intercourse. In the present condition of the 
 people of England, to interfere with a system out 
 of which these relations have grown is to disturb 
 the foundations of society. Mr. Owen has been 
 considered a visionary, for attempting to transfer 
 the impulses, the duties, and the habits, subsist- 
 ing between parent and child, to the manage- 
 ment of a general agency into which feeling and 
 sympathy cannot enter. Let any man who is 
 convinced that this was a senseless project, delibe- 
 rately inquire whether Lord Liverpool's dream of 
 extinguishing Country-Banks were not of precisely 
 the same character ; and he may find that the only 
 difference is, that the project of the Minister ap- 
 plied — not to the natural affections, but — to a system 
 by which the industry of the country has been fos- 
 tered, encouraged, and supported.
 
 83 
 
 SECTION III. 
 
 ON THE BRANCH-BANKS OF ENGLAND. 
 
 In proceeding to the consideration of this third 
 division of our subject, it will be necessary again to 
 make reference to the letter and communication of 
 the First Lord of the Treasury and the Chancellor 
 of the Exchequer, to the Bank of England ; be- 
 cause the prevalent notions relating to the defects 
 in the present system and practice of Country- 
 Banking, are therein embodied and sanctioned by 
 the highest authority ; and because that authority 
 has given them an influence in Public Opinion, 
 which a full and impartial examination of the sub- 
 ject, it is believed, will not justify. That commu- 
 nication from the Lords of the Treasury affords a 
 curious, and it ought to be an instructive, proof of 
 the lamentable insufficiency of the information 
 which his Majesty's Ministers had acquired, when 
 they proceeded to enforce by their authority, and 
 to encourage by legislation, new systems of busi- 
 ness, in this vital department of Commercial Eco- 
 nomy. The existing evils appeared to the Minis- 
 ters so great, that there wanted nothing but the 
 
 c; 2
 
 84 
 
 formation of Branch-Banks and Joint-Stock Banks, 
 to show the pressing necessities of the community 
 for such establishments. So urgent and over- 
 whelming appeared to these Statesmen the exigen- 
 cy, that it was deemed impossible for the Bank to 
 establish Branch-Banks with sufficient promptitude 
 to meet the demand : — " it would be impossible for 
 " the Bank," says Lord Liverpool, " under present 
 " circumstances, to carry into execution such a 
 " system, to the extent necessary for providing for 
 " the wants of the country." After inserting the 
 document entire, as the fountain of the existing 
 policy, and of the prevalent opinions, on this im- 
 portant subject, we shall proceed to try by the test 
 of experience the soundness and validity of the 
 measures proposed by the Government. 
 
 " TO THE GOVERNOR AND DEPUTY-GOVERNOR OF THE 
 BANK OF ENGLAND. 
 
 " Fife-House, I3th Jan. 1826. 
 " Gentlemen, 
 
 " We have the honour of transmitting to you here- 
 with, a paper containing- our views upon the present state of the 
 banking system of this country, witli our suggestions thereupon, 
 which we request you will lay before the Court of Directors of 
 the Bank of England, for their consideration. 
 " We have, <fec. 
 
 (Signed) " LIVERPOOL, 
 
 " FRED. JOHN ROBINSON. 
 
 *' 1 . The panic in the money market having subsided, and the
 
 85 
 
 pecuniary transactions of the countiy having reverted to their 
 accustomed course, it becomes important to lose no time in con- 
 sidering whether any measures can be adopted, to prevent the 
 recurrence, in future, of such evils as we have recently ex- 
 perienced. 
 
 " 2. However much the recent distress may have been aggrava- 
 ted, in the judgment of some, by incidental circumstances and par- 
 ticular measures, there can be no doubt that the principal source 
 of it is to be found in the rash spirit of speculation, Avhich has 
 pervaded the country for some time, supported, fostered, and 
 encouraged, by the country banks. 
 
 " 3. The remedy, therefore, for this evil, in future, must be 
 found in an improvement in the circulation of country paper ; and 
 the first measure which has suggested itself, to most of those 
 who have considered the subject, is a recurrence to gold circula- 
 tion throughout the country, as well as in the metropolis and its 
 neighbourhood, by a repeal of the act which permits country 
 bankers to issue one and two pound notes, until the year 1833; 
 and by the immediate enactment of a prohibition of any such 
 issues at the expiration of two or three years from the present 
 period. 
 
 " 4. It appears to us to be quite clear, that such a measure 
 would be productive of much good ; that it would operate as some 
 check upon the spirit of speculation, and upon the issues of 
 country banks ; and whilst, on the one hand, it Avould diminish 
 the pressure upon the Bank and the metropolis, incident to an 
 unfavourable state of the exchanges, by spreading it over a wider 
 surface ; on the other hand, it would cause such pressure to be 
 earlier felt, and thereby insure an earlier and more general 
 adoption of the precautionary measures necessary for counteract- 
 ing the inconvenience incident to an export of the precious 
 metals. But though a recurrence to a gold circulation in the 
 country, for the reasons already stated, might bo ])roductive of 
 some good, it would by no means go to the root of the evil. 
 
 " 5. We have abundant proof of tiic truth of this position, in
 
 86 
 
 the events which took place in the spring of 1793, when a con- 
 vulsion occurred in the money transactions and circulation of the 
 country, more extensive than that which we have recently expe- 
 rienced. At that period, nearly a hundred country banks were 
 oblig-ed to stop payment, and Parliament was induced to grant 
 an issue of exchequer-bills to relieve the distress. Yet in the 
 year 1793 there were no one or two pound notes in circulation in 
 England, either by country banks or by the Bank of England. 
 
 '* 6. We have a further proof of what has been advanced, in 
 the experience of Scotland, which has escaped all the convulsions 
 which have occurred in the money-market of England for tlie last 
 thirty-five years ; though Scotland, during the whole of that 
 time, has had a circulation of one pound notes, and the small 
 pecuniary transactions of that part of the United Kingdom have 
 been carried on exclusively by the means of such notes. 
 
 " 7. The issue of small notes, though it be an aggravation, 
 cannot, therefore, be the sole or even the main cause of the evil 
 in England. 
 
 " 8. The failures which have occurred in England, unaccom- 
 panied as they have been by the same occurrence in Scotland, 
 tend to prove that there must have been an unsolid and delusive 
 system of banking in one part of Great Britain, and a solid and 
 substantial one in the other. 
 
 " 9. It would be entirely at variance with our deliberate 
 opinion, not to do full justice to the Bank of England, as the 
 great centre of circulation and commercial credit. 
 
 " 10. We believe that much of the prosperity of the country, 
 for the last century, is to be ascribed to the general wisdom, 
 justice, and fairness of the dealings of the Bank of England : 
 and we further think, that during a great part of that time, it 
 may have been in itself, and by itself, fully equal to all the im- 
 portant duties and operations confided to it. But the progress of 
 the country, during the last thirty or forty years, in every branch 
 of industry, in agriculture, manufactures, commerce, and naviga- 
 tion, has been so rapid and extensive, as to make it no reflection
 
 87 
 
 on the Bank of England to say, that the instrument, whicli by 
 itself was fully adequate to former transactions, is no longer suf- 
 ficient, without new aids, to meet the demands of the present times. 
 
 " 11. We have to a considerable degree, the proof of this 
 position in the very establishment of so many country banks. 
 
 " 12. Within the memory of many living, and even of some 
 of those now engaged in public affairs, there were no country 
 banks, except in a few of the great commercial towns. 
 
 " 13, The money transactions of the country were carried on 
 by tlie supplies of coin and bank notes from London. 
 
 " 14, The extent of the business of the country, and the im- 
 provement made from time to time, in the mode of conducting 
 our increased commercial transactions, founded on pecuniary 
 credit, rendered such a system no longer adequate, and country 
 banks must have arisen, as, in fact, they did arise, from the 
 increased wealth and new wants of the country. 
 
 " 15. The matter of regret is, not that country banks have 
 been suffered to exist, but that they have been suffered so long 
 to exist without control or limitation, or without the adoption of 
 provisions calculated to counteract the evils resulting from their 
 improvidence or excess. 
 
 " 16. It would be vain to suppose that we could now, by any 
 act of the legislature, extinguish the existing country banks, even 
 if it were desirable ; but it may be within our power, gradually 
 at least, to establish a sound system of banking throughout the 
 country ; and if such a system can be formed, there can be little 
 doubt that it would ultimately extinguish and absorb all that is 
 objectionable and dangerous in the present banking establishments^ 
 
 " 17. There appear to be two modes of obtaining this object : 
 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 exclu- 
 sive privileges to the number of partners engaged in 
 banking, except within a certain distance of the me- 
 tropolis.
 
 88 
 
 " 18. It has always appeared to us, that it would have been 
 very desirable that the Bank should have tried the first of these 
 plans ; — that of establishing Branch Banks upon a limited scale. 
 But we are not insensible to the difficulties that would have at- 
 tended such an experiment, and we are quite satisfied that it 
 would be impossible for the Bank, under present circumstances, 
 to carry into execution such a system, to the extent necessary for 
 providing for the wants of the country. 
 
 " 19. There remains, therefore, only the other plan ; the sur- 
 render by the Bank of their exclusive privilege as to the number 
 of partners, beyond a certain distance from the metropolis. 
 
 " 20. The effect of such a measure w^ould be the gradual esta- 
 blishment of extensive and respectable banks in different parts of 
 the country ; some, peihaps, with charters from the crown, under 
 certain qualifications, and some without. 
 
 " 21. Here we have again the advantage of the experience of 
 Scotland. 
 
 " 22. In England there are said to bo between 800 and 900 
 country banks ; and it is no exaggeration to suppose, that a great 
 proportion of them have not been conducted with a due attention 
 to those precautions which are necessary for the safety of all 
 banking establishments, even where their property is most ample. 
 When such bankers stop, their creditors may ultimately be paid 
 the whole of their demands ; but the delay and shock to credit 
 may, in the mean time, involve them in the same difficulty, and 
 is always attended with the greatest injury and suffering, in the 
 districts where such stoppages occur. If this be the case where 
 the solidity of the bank is unquestionable, what must it be where 
 (as too often happens) they rest on no solid foundation. 
 
 " 23. In Scotland there are not more than thirty banks ; and 
 these banks have stood firm, amidst all the convulsions in the 
 money-market in England, and amidst all the distresses to which 
 all the manufacturing and agricultural interests in Scotland, as 
 well as in England, have occasionally been subject.
 
 89 
 
 " 24. Banks of this description must necessarily be conducted 
 upon the general understood and approved principles of banking. 
 
 " 2.5. Individuals are, from the nature of the institutions, 
 precluded from speculating in the manner in vhich persons engaged 
 in this country, and even in London banks, speculate in England. 
 
 " 26. If the concerns of the country could be carried on with- 
 out any other bank than the Bank of England, there might be 
 some reason for not interfering with the exclusive privilege ; but 
 the effect of the law at present is, to permit every description of 
 banking, except that which is solid and secure. 
 
 " 27. Let the Bank of England reflect on the dangers to 
 which it has been recently subject, and let its directors and pro- 
 prietors then say, whether, for their own interests, such an im- 
 provement as is suggested in the banking system is not desirable, 
 and even necessary. 
 
 " 28. The Bank of England may perhaps propose, as they 
 did upon a former occasion, the extension of the term of their 
 exclusive privilege, as to the metropolis and its neighbourhood, 
 beyond the year 1833, as the price of this concession. 
 
 " 29. It would be very much to be regretted that they should 
 require any such condition. 
 
 " 30. It is clear that, in point of security, they would gain 
 by the concession proposed to them, inasmuch as their OAvn safety 
 is now necessarily endangered by" all such convulsions in the 
 country circulation as we have lately and formerly witnessed. 
 
 " ol. In point of profit, would they lose anything by it, for 
 which they are entitled to demand compensation ? 
 
 '• 32. It is notorious that at the present time their notes cir- 
 culate in no part of England beyond the metropolis and its neigh- 
 bourhood, except in Lancashire ; and perhaps for that district 
 some special provisions might be made. 
 
 " 33. But as it is the interest, so it has been and ever will be 
 the endeavour, of the country bankers, to keep the Bank of I'^ng- 
 land notes out of circulation in those parts of the kingdom where
 
 90 
 
 their own circulation prevails. In this they must always be suc- 
 cessful, while public credit continues in its ordinary state, and the 
 exchanges not unfavourable to this country. The consequences 
 are, that in such times the Bank of England becomes, in a man- 
 ner, the sole depositary for gold ; and in times of an opposite 
 tendency, the sole resort for obtaining it : that at one period, 
 their legitimate profit is curtailed by an accumulation of treasure 
 beyond what would be required by a due attention to their own 
 private safety as a banking establishment ; and at another period, 
 they are exposed to demands which endanger that safety, and 
 baffle all the ordinary calculations of foresight and prudence. 
 
 " 34. If, then, the Bank of England has no country circulation, 
 except in the county above named, the only question for them to 
 consider, is, whether, on the ground of profit, as well as security 
 to themselves, the existing country circulation shall or shall not 
 be improved. 
 
 " 35. With respect to the extension of the term of their (Bank 
 of England) exclusive privileges in the metropolis and the neigh- 
 bourhood, it is obvious, from what passed before, that parliament 
 will never agree to it. 
 
 " 36. Such privileges are out of fashion ; and what expecta- 
 tion can the Bank, under present circumstances, entertain, that 
 theirs will be renewed ? But there is no reason why the Bank of 
 England should look at this consequence with dismay. They will 
 remain a chartered corporation for carrying on the business of 
 banking. In that character they will, we trust, always continue 
 to be the sole bankers of the state ; and with these advantages, so 
 long as they conduct their affairs wisely and prudently, they 
 always must be the great centre of banking and circulation. 
 
 " 37. Theirs is the only establishment at which the dividends 
 due to the public creditor can by law be paid. 
 
 " 38. It is to be hoped, therefore, that the Bank of England 
 will make no difficulty in giving up their exclusive privileges, in 
 respect to the number of partners engaged in banking, as to any 
 district miles from the metropolis.
 
 91 
 
 " 39. Should the Bank be disposed to consent to a measure of 
 this nature, in time to enable the Government to announce such 
 a concession at the opening- of parliament, it would aflford great 
 facilities to the arrangements which they may have to propose for 
 insuring the stability of private credit, in which the support of 
 public credit, and the maintenance of public prosperity, are so 
 materially and closely involved." 
 
 Six years have elapsed since the First Lord of 
 the Treasury and the Chancellor of the Exchequer 
 wrote, in this manner, to the Governor and Deputy- 
 Governor of the Bank ; and grounded upon these 
 views a recommendation to the Directors, to 
 establish Branch-Banks at different towns in the 
 country. After enforcing that recommendation at 
 various conferences, it was adopted by the Board 
 of Directors, and Eleven Branches were, succes- 
 sively, opened ; one at each of the following places 
 — viz. Swansea, Gloucester, Birmingham, Man- 
 chester, Bristol, Liverpool, Leeds, Exeter, New- 
 castle, Hull, and Norwich. The experiment has 
 now been a sufficient number of years in operation, 
 to render manifest (if the anticipations respecting 
 it were well founded) the wisdom of the recom- 
 mendation, and the utility of the measure. The 
 grounds of the recommendation for this remarkable 
 departure from the practice of the Bank of England 
 — this extraordinary inroad upon the interests of 
 the existing Bankers, by a privileged, monopolizing,
 
 92 
 
 Corporation, — were, the defective character of 
 Country-Banks, their insecurity, and the insufficient 
 accommodation which they rendered to the public. 
 These grounds were, without proof, assumed as valid 
 and indisputable; and it was concluded that Branch- 
 Banks of England, or other Joint-Stock Banks, were 
 required by so pressing and exigent a necessity, 
 that no doubt could be entertained of their com- 
 manding the decided, and almost exclusive, pre- 
 ference of the public, wherever they were formed. 
 Then, how stands the fact after an experience of 
 six years ? Is the accommodation of the Branch- 
 Banks of England proved, as was assumed, to be 
 so much better than that of the old establishments ? 
 Is their superior fitness to the wants of the public 
 so manifest that the public desert the Country- 
 Banks, and flock to those of the Bank of England ? 
 Have the Banks which were existing when the 
 measure was enforced been closed, for want of 
 stability, or want of profitable business ? We can 
 have no means of solving these questions, by a 
 reference to the actual records of the transactions 
 of the several Banks ; but the outward and visible 
 signs afford, as we think, demonstrative evidence 
 to justify the conclusions at which we have arrived, 
 and which are diametrically opposite to those formed 
 by Lords Liverpool and Goderich six years ago. 
 When a Bank is formed, it is, as a matter of
 
 93 
 
 course, upon a calculation that its accommodations 
 will be sought by the population dwelling- within 
 fourteen or fifteen miles of it : this, indeed, is a 
 narrow limit. Now, taking that radius as the 
 extent of the influence of the several Branch-Banks, 
 it will be found that the Bank-Directors have, by 
 these establishments, proferred their alleged superior 
 accommodations, to a population exceeding two 
 millions of souls. The field of experiment is, 
 therefore, sufiiciently extensive ; and, with one or 
 two exceptions, selection has been made of those 
 places where more capital is employed in produc- 
 tion, and a more active spirit of enterprize and 
 industry prevails, than in any other parts of the 
 country, of equal extent. Then, what, upon a 
 broad and general estimate, is the result ? Looking 
 at this Branch-Bank sj^stem as a system undertaken 
 by the wealthiest National Bank in the world — at the 
 temptation which it offers to the public, of perform- 
 ing business at lower charges, — and at the desira- 
 ble secresy of its operations, — the custom at the 
 Branch-Banks is insignificantly small. The means 
 are not afforded us, of making any satisfactory com- 
 parison between the amount of the business of the 
 Branch-Banks, and that of their rivals : no Private 
 Banks are placed in circumstances which admit 
 of an exact comparison with the Branch-Banks. 
 There are, however, three firms which carry on very
 
 94 
 
 extensive Banking operations in the country as 
 Country-Bankers, the aifairs of which mainly 
 centre in London, under the management of the 
 same firms, or of members of the same firms : 
 with these, therefore, a comparison may be fairly 
 made. Now, no man, capable of forming the 
 least rational estimate on the subject, would be 
 bold enough to say that the amount of legitimate 
 banking business transacted by the eleven Branch- 
 Banks, in the year 1831, exceeded the amount 
 of the returns of either Messrs. Jones, Loyd, and 
 Co., Messrs. Smith, Payne, and Smith, or Messrs. 
 Gurneys and Co. Different members of these 
 firms conduct business in the country, as well as 
 in London ; and, taking into account the trans- 
 actions at the several Banks in which they are 
 partners, we believe that the collective amount of 
 payments made, annually, by their several Banks, 
 far exceeds the gross amount of the payments made 
 for proper banking business by all the eleven 
 Branch-Banks of England. This is the first strik- 
 ing proof, of a presumptive character, of the 
 utter misconception of the nature of the case dealt 
 with in such an inconsiderate manner by the 
 Government, during Lord Liverpool's Administra- 
 tion. If the business performed by the whole of 
 the Branch-Banks amounted to the sum of the 
 gross returns of these three eminent firms, at the
 
 95 
 
 sajiie rates of charge upon all transactions, it 
 would be no proof of the urgency of the public 
 want of the new system. That such a result as 
 we witness should be the consequence, after 
 an experience of several years, is a tolerable 
 proof that no change was wanted. Another 
 such proof — perhaps, more satisfactory than 
 this, because it is actually numerical, — may be 
 found in the fact, that, taking the whole of these 
 eleven places into account, the number of clerks 
 employed by the Bankers carrying on business in 
 competition with the Branch-Banks of England, at 
 the present time, considerably exceeds the number 
 of clerks employed by the rivals of these establish- 
 ments at the time they commenced their operations 
 five and six years ago. We are compelled to speak 
 in this collective sense, because changes have 
 taken place — some Banks have been discontinued, 
 and some new Banks have been opened, — within 
 the last six years ; but this general conclusive fact 
 is indisputable — viz. that the number of clerks 
 employed by the rivals of the Branch-Banks has 
 been increased during the competition ; and it 
 would, alone, be almost sufficient to decide the 
 judgement of an impartial inquirer, respecting 
 the alleged advantages of the Branch-Bank system 
 over others — it is manifest from this fact, that the 
 public have not experienced the *' defects,"' or tliey
 
 96 
 
 would liave deserted the established Banks, and 
 hastened to obtain the preferred advantages. 
 
 This evidence is, from the nature of the subject, 
 necessarily, in some degree, of a presumptive 
 character ; but it is sufficient to carry a conviction 
 of the utter groundlessness of the allegations of 
 the Earl of Liverpool and Lord Goderich, of a 
 want of confidence, generally, in the public, to- 
 wards the Banks, and a want of power and stability, 
 in the Bankers ; upon which allegations the mea- 
 sures of establishing Branch-Banks and Joint-Stock 
 Banks were enforced. But there is negative, as 
 well as positive, evidence of the fallacy and absur- 
 dity of the opinions which formed the basis of the 
 proceedings for altering the Banking system of 
 of England. Those Statesmen say, that, " if such 
 " a system" (contemplating the establishment of 
 Branch-Banks of England, or Joint-Stock Banks) 
 " can be formed, there can be little doubt, that it 
 " would, ultimately, extinguish and absorb all 
 " that is objectionable and dangerous in the present 
 " Banking establishments." Then, let us examine 
 the operation of this principle of eMingidslunent 
 and absorption. At Exeter, Messrs. Floud and Co. 
 have failed since the Branch-Bank was opened in 
 that city. At the time of their failure, the amount 
 of their issue of notes was under £1500, and the 
 whole amount of the debts of the Bank was under
 
 97 
 
 £5000. At Birmingham, Messrs. Gallon and Co., 
 persons of great wealth, have relinquished business. 
 It would be erroneous to attribute the " extinouish- 
 ment" of these, to the influence of the Branch- 
 Banks ; but, if we did so, it would be no very- 
 striking proof of the unsoundness of the system, and 
 the urgent necessity of prompt measures for its 
 subversion. That two Banks, only, out of upwards of 
 sixty Banks, carrying on business amidst an active 
 and enterprising population exceeding two millions 
 of people, should be thus closed in a term of six 
 years — those years being remarkable for extreme 
 pressure on the customers of Country-Banks — is a 
 proof of their great general stability, and of the 
 necessity of upholding their efliciency for the 
 benefit of the community. These two instances 
 of Banks being closed cannot be cited as any 
 evidences whatever, against the Country-Bank 
 system, nor in favour of that of the Branch -Banks, 
 because the relinquishment of business was owing, 
 almost wholly, to other causes than the competition 
 of the Bank of England ; and because the old 
 system is, numerically, compensated for their with- 
 drawal, by the establishment of two new Private 
 Banks, each having a number of Partners not ex- 
 ceeding four, at places where Branch-Banks had 
 been formed. That two Private Banks should have 
 sprung up since those establishments from the 
 
 II
 
 98 
 
 Bank of England began their operations, would 
 indicate, not the unfitness, but the superior fitness 
 and peculiar adaptation, of such Private Banks, to 
 the wants of the public. These facts are suflScient 
 to shew the force of the " e.vtinguishing'" influence 
 of the Bank of Eiicrland. 
 
 Then, respecting the principle of " absorption," 
 which must mean the blending: of the existino^ 
 Banking-firms into Joint-Stock Banks of extensive 
 proprietaries, a few words will render manifest the 
 extent of its power and operation. This can, 
 fortunately, be done by a reference to obvious 
 facts, — a mode of illustration which is seldom 
 available in conducting inquiries respecting this, 
 the most hidden and inaccessible (with respect to 
 the details of practice) of all subjects connected 
 with commercial economy. The extensive Private 
 Banking firm of Messrs. Stuckey & Co., of Lang- 
 port, has been enlarged, and now consists of ten 
 or twelve co-partners. But, as those gentlemen 
 who have been introduced into it are relations of 
 the principals of the Bank, " Stuckey 's Banking 
 Company" can hardly, in fairness, be taken as an 
 example in point. It is altogether a family con- 
 cern ; and not a Proprietary-Bank, the shares of 
 which can be sold in the market. Mr. Joseph Gib- 
 bins opened a Private Bank in Birmingham about 
 five years since, and that has been converted into
 
 99 
 
 a Joint-Stock Bank. The small Bank of Messrs. 
 Prideaux and Hinxton, of Plymouth, has also been 
 extended into one of a numerous proprietary. The 
 Bank of Messrs. Hordern & Co., of Wolverhamp- 
 ton, has been transformed into a Joint-Stock Bank. 
 This Share- Bank, and that at Birmingham raised 
 upon the foundation of Mr. Gibbins's Bank, issue no 
 promissory notes, payable on demand, but those of 
 the Bank of England. The Private Bank of Messrs. 
 Smiths and Ridsdale, at Oundle, has been discon- 
 tinued ; and Mr. Ridsdale is the manager of a Joint- 
 Stock Bank, which w^as raised principally by his 
 exertions. 
 
 We have now enumerated all the Country-Banks 
 that have been converted into Joint-Stock Banks ; 
 and, we ask, if four, or, at the most, five. Private 
 Banks beino- thus converted into Banks of nume- 
 rous proprietaries, can be admitted as any proof 
 of the correctness of the opinion concerning the 
 character of the existing Banks, entertained by 
 the Government of Lord Liverpool ? The Act of 
 the 4th of Geo IV., cap. 46, has now been in 
 operation six years : the necessity for passing it 
 was alleged to be the urgent want of a better 
 system of Banking. " If such a system," says 
 Lord Liverpool, " can be formed, there can be 
 " little doubt that it would, ultimately, extinguish 
 *' and absorb all that is objectionable and dan- 
 
 II 2
 
 100 
 
 " gerous in the present Banking establishments." 
 We believe it may, with perfect safety, be affirmed, 
 that not one of the above-named Joint- Stock Banks 
 arose out of the principle here laid down — viz. 
 the insufficiency, and objectionable character, of 
 the present establishments ; — but all arose from a 
 desire in speculative individuals, to make profit 
 out of the mania for Joint-Stock Banks, which 
 Lord Liverpool had mainly contributed to create. 
 The immediate impulses for forming them were — 
 expected gain from a traffic in Shares, a wish to 
 possess the salaries of the Managers, and a desire 
 to participate in the power and influence of a 
 Director of a Bank. 
 
 We have now stated the effects of the principles 
 of " extinguishment" and " absorption," which the 
 operation of the Act, during a period of six years, 
 has developed. We shall, presently, show the 
 numerical progress that Joint- Stock Banks have 
 made in England : — besides the Birmingham Bank- 
 ing Company, and that of Messrs. Stuckey, only 
 three have been opened at places selected for 
 Branch-Banks of England ; while, notwithstanding 
 the inducements held out to the people, the towns 
 of Exeter, Swansea, Gloucester, Leeds, Newcastle, 
 and Hull, remain, to testify to the public satis- 
 faction with Banks as they existed when the 
 Government denounced them. With the foregoing
 
 lOl 
 
 unimportant exceptions (of the petty Bank of 
 Messrs. Floud & Co. of Exeter, from insolvency, 
 and that of the opulent Messrs. Galtons, of Bir- 
 mingham, from private considerations,) every 
 Country-Bank is now existing at the places se- 
 lected for Branch-Banks of England, that did 
 exist when those establishments were formed. 
 
 Such is the result of this great experiment in 
 Banking, as it is exhibited by a few years of com- 
 petition with the old establishments which were 
 considered so " objectionable and dangerous." 
 There cannot, we believe, be adduced a similar 
 instance of any measure connected with an essen- 
 tial part of oar internal policy being succeeded by 
 so complete and unredeeming a failure. There 
 nev^r was a measure, commenced with headlong 
 confidence and inconsiderate precipitation, so soon 
 succeeded by such signal and unequivocal demon- 
 strations of the folly and ignorance in which it 
 originated. But, if its operation were attended 
 by none but these negative evidences of its policy, 
 the Branch-Bank system might remain to waste 
 the treasure of Bank-Stock Proprietors, in expen- 
 sive establishments which yield no profitable re- 
 turns in business. This, however, is far from being 
 the case ; and we proceed to ofter a few observa- 
 tions on this part of the subject. 
 
 Traders of extensive traffic, who are most con-
 
 102 
 
 cerned with credit-obligations, and who require 
 discounts and Banking facilities for some transitory- 
 speculation, are the class of persons out of which 
 the borrowing customers of a Branch-Bank chiefly 
 arise. They are very seldom resorted to by those 
 persons engaged in productive industry, who have 
 most need of Banking accommodations, for paying 
 the wages of labourers, and carrying on the pro- 
 cesses of manufacture. All writers, and all intel- 
 ligent witnesses who have been summoned to give 
 evidence before Parliamentary Committees, have 
 concurred in attesting to the beneficial results of 
 the Cash-Credit system of Scotland ; and, with 
 such exceptions as will be hereafter explained, 
 it is, we think, impossible to estimate too highly 
 the salutary effects of that system upon productive 
 industry. Now, nothing can be more hostile, 
 than the principles of business and the practice 
 of the Branch-Banks of England are, to this vital 
 and most essential property of all Banking systems 
 connected wuth creative industry. The practice of 
 the Bank of England may be very well suited to 
 the Metropolis, where almost all traffic is con- 
 fined to interchanges of commodities not under- 
 going any manufacturing process ; but it can never 
 be adapted to an industrious population, where 
 one of the essential properties of the Banking 
 system is, the collecting of money-capital into
 
 103 
 
 masses, from the overflowing sources of inert 
 accumulators, to be again broken-down, and lent 
 out, in minute portions, to the industrious. This, 
 indeed, is a system which requires the daily, 
 unremitting, anxious, care of the principal, who 
 is to lose, or gain, by the traffic, — personal and 
 and local knowledge, at once comprehensive, 
 accurate, and minute. The man engaged in it 
 must be thoroughly acquainted with the ever- 
 changing currents, and altering circumstances, 
 of every kind of trade ; and be employed in 
 ascertaining the state of the habits, circumstances, 
 and connexions, of every man, being a borrowing 
 customer of a Bank, who is entering into, con- 
 tinuing upon, or going off, the field of industry 
 in his vicinity. This part of a Country-Banker's 
 business is of that peculiar and delicate nature 
 which can never be successfully conducted by a 
 deputy ; it must be directed and superintended 
 by a man who is personally interested in the risks 
 and profits attending it. We bespeak particular 
 attention to this point, which is a most essential 
 one; and it was altogether overlooked by the 
 Ministers and Bank-Directors in 182G. Some 
 illustration of a more practical nature, relating 
 to it, will be subsequently ofiercd. It a})peared, 
 however, to be necessary in this place, to enforce, 
 emphatically, the principle which arises IVom the
 
 104 
 
 circumstances of tlie Banker being a broker of 
 capital, and being, in that character, responsible 
 for the principal-money and accruing interest 
 to the accumulator : that responsibility, which 
 affects the entire property of a Private Banker, 
 must render him vigilant, circumspect, and skilful, 
 in the application of the capital entrusted to 
 him. This is the important, fundamental, pri?iciple, 
 which, as far as that is concerned, renders the 
 Private Banks superior to Joint-Stock Banks, as 
 well as to Branch-Banks of England. Its ope- 
 ration cannot be too much investigated and con- 
 sidered. For the present, hov^^ever, as the Branch- 
 Banks neither take in deposits of money on in- 
 terest, nor lend money out on cash-credits ; and 
 as it is manifest to all v^^ell acquainted with the 
 principles of Banking, that, if the Directors 
 adopted this practice, its free and extensive exer- 
 cise would be attended with ruinous consequences 
 to the Bank ; it is unnecessary now to dwell upon 
 the important points of Banking practice, that 
 would grow out of it in the operation of the 
 Branch-Bank system. We will, therefore, proceed 
 to inquire whether the existence and competition 
 of Branch-Banks tend, in any manner, to obstruct 
 and injure the salutary operation, in the hands of 
 other Bankers, of this vital principle of all good 
 Country-Banking systems.
 
 105 
 
 The charge formerly made by Country- Bankers, 
 for loans to the public, was, with very unimportant 
 variations in the practice, at the rate of five pounds 
 per centum per annum : in some parts of England, 
 an additional charge for commission was made, of 
 five shillings, for every sum of one hundred pounds 
 returned in the account of the borrowing customers ; 
 this latter charge was, in some districts, made only 
 upon the sum borrowed. There existed no regula- 
 tion absolutely fixed and uniform, except that of 
 five per cent, per annum, for the interest on loans : 
 all other charges varied according to the risks en- 
 countered and the customary profits of Bankers : 
 those who derived profit from the circulation of 
 their own promissory notes, rarely made any charge 
 beyond five per cent, for the interest on the sum 
 advanced to the borrower. When the Bank of 
 England established its Branches, the Directors 
 fixed one uniform rate of charge, which was four 
 per centum per annum, for discounting bills at not 
 exceeding ninety days' date — the only mode of 
 making loans to the public which they put into 
 regular practice. This tended to fix a maa:imum 
 upon Banking profits, and to obstruct and coun- 
 teract the working of that principle of banking 
 operations, viz. varying charges for different de- 
 grees of risk. When we reflect, that it is by the 
 operation of that principle that the struggling man,
 
 106 
 
 of limited means and good character, who can 
 command more labour than capital, obtains the 
 power of paying his workmen until the products 
 raised by him become marketable, we shall, at 
 once, see the injurious tendency of such an inter- 
 ference. Bankers cannot vary their rates of profit, 
 like market-jobbers; and, by Branch -Banks of 
 England fixing the rate at four per cent., their rivals 
 were compelled, either to lower theirs to the same 
 standard, and cut off the supplies to all their cus- 
 tomers where loans were attended with any portion 
 of risk, or to continue their former charge of five per 
 cent., and drive their wealthiest customers to the 
 Branch-Banks. It produced both these effects, at 
 different places ; and it operated in one direction, 
 or the other, according to the circumstances and 
 connexions of competing Bankers. An interest of 
 five per cent., increased by commission-charges, 
 afforded the Bankers such a profit as justified them 
 in making loans to other classes than those com- 
 posed of wealthy capitalists ; and that upon the 
 slenderest security — often upon the mere confidence 
 in the solvency, integrity, and ability, of an ap- 
 parently thriving borrower. This source of relief 
 under pressure, and of aid under exertion, was of 
 the greatest importance to small industrious manu- 
 facturers and traders ; and it received injury from 
 the competition of Branch-Banks. At a time when
 
 107 
 
 this source of supply for the industrious required 
 additional fulness and vigour, it was contracted and 
 enfeebled by the effects resulting from that compe- 
 tition. 
 
 These effects were produced in two ways : first, 
 in obstructing and lessening the supply of money 
 which was customarily flowing into the Private 
 Banks ; and, secondly, in destroying that extra- 
 profit fund whose influence and operation, being in 
 the nature of an assurance against risks, justified 
 the Bankers in making advances in obscure and 
 minute channels of production and interchange. 
 In respect to the former, it is well known that the 
 supplies of a Bank are derived from various sources; 
 but, speaking of Country-Banks, they are all com- 
 prised in the following — viz. 1st, the capital paid-up, 
 severally, by the co-partners ; 2d, the circulation of 
 promissory notes; 3d, the circulation of bills-of- 
 exchange; 4th, the balances of current accounts; and, 
 5th, the permanent deposits on interest or otherwise. 
 Of these, the two last-named are by far the most 
 important ; and it may suffice for the present oc- 
 casion, to treat them as forming one and the same 
 fund, although their properties are different, and 
 they furnish the Bankers with assets available only 
 for distinct and different purposes. The deposit- 
 fund, whether arising from balances in current ac- 
 counts, or from permanent deposits on loan, is that
 
 108 
 
 fund tlie varying amount of which indicates, in a 
 great degree, the measure of accommodation which 
 it is in the power of a Bank to afford to the indus- 
 trious in its vicinity. Anything, therefore, that in- 
 jures this fund, damages one of the most essential 
 springs of public prosperity. When it is considered 
 that a Banker's deposits are composed of sums 
 brought by individuals of every profession and 
 pursuit, it will not be difficult to imagine the con- 
 sequences to the Private Banker and the public, 
 when all the timid who shrink from responsibility — 
 all trustees, who consider themselves, e.v officio, 
 prohibited from encountering risk, — all government- 
 officers, — all assignees of insolvent or embarrassed 
 estates,^ — and many public Companies, — will feel 
 themselves bound to take the funds placed in their 
 hands for investment, or for ulterior and deferred pur- 
 poses, to the Branch-Banks of England, instead of 
 to Private Banks as heretofore. In this manner, 
 there is great danger lest the Branch-Banks should, 
 in the course of time, " extinguish and absorb" a 
 great portion of that supply which is most valuable 
 to the Private Banking Establishments, and most 
 useful to the public. It will be an extinguishment 
 and absorption of one of the best and most essential 
 sources of aid to industry. 
 
 This statement, which is necessarily somewhat 
 hypothetical, might be more fully established by 
 evidence before a Committee competent to investi-
 
 109 
 
 gate the matter. It would be then clearly seen that 
 the tendency of the establishment of Bank-of-Eng- 
 land Branches is, to divert capital from the chan- 
 nels of industry in the country, to those of specu- 
 lation in London, Paris, Hamburgh, or Vienna. 
 Let us take a practical illustration of the effects of 
 this influence. — The Bank of Ireland formerly cor- 
 responded with Messrs. A. Heywood and Son, of 
 Liverpool, as their English Bankers in that part of 
 the country ; and, of course, they kept, constantly, 
 a balance corresponding to the nature of the ac- 
 count. This balance would (for example) be natu- 
 rally employed by Messrs. Heywood, in discount- 
 ing the bill of some Bolton cotton-spinner who came 
 to purchase cotton ; or it would be lent to a respon- 
 sible grocer, for an undefined period, to pay for the 
 duties upon sugar or coffee. It would be employed 
 in some channel connected with production or con- 
 sumption in England. The Bank of Ireland has 
 now removed this account to the Branch-Bank of 
 England at Liverpool ; and, as the Bolton spinner 
 has no account with this Bank, and the grocer can- 
 not borrow upon a cash-credit, which the Bank of 
 England does not grant, the money is diverted from 
 its useful application in the country, and is sent to 
 London to be employed in discounting the bills of 
 Mr. Rothschild, drawn by Mr. Aguado of Paris, 
 or Mr. Geymiiller of Vienna.
 
 no 
 
 Enterprising foreigners resorting to our markets, 
 to purchase manufactures, who are unacquainted 
 with the respectability and stability of our Private 
 Bankers, will be apt to lodge their money, during 
 the time that elapses between their arrival in this 
 country and the delivery of the goods for payment, 
 in Branches of the Bank of England. They will 
 prefer the absolute security of a National Bank, 
 with the temporary loss of interest on capital, to 
 encountering the smallest risk by opening a current 
 account with a Private Banker. In some instances, 
 the money for such purchases lies many months be- 
 fore the orders to the manufacturers can be com- 
 pleted, and payment required. 
 
 Again, all money-capital sent by strangers to any 
 part of England at a distance from London, for the 
 purpose of being invested in some permanent secu- 
 rity, will, at first, be committed to the custody of a 
 Branch-Bank, in preference to that of a Country- 
 Bank. It is said that, when Charles the Tenth arrived 
 in England with his treasure, it was immediately 
 deposited with Messrs. Coutts ; but this resulted 
 from the eminence of that firm and its undoubted 
 responsibility being familiarly known throughout 
 the circles of society in which the King had moved 
 in all the vicissitudes of his life. 
 
 As the evil of Branch- Banks is mainly felt in 
 the channels of industry, let us take another ex-
 
 HI 
 
 ample of the diversion of capital : a man may 
 have accumulated property, in a life of enterprise 
 and risk in a distant climate, or by speculation 
 in one of the capitals of Europe ; and be about to 
 return to his native country. He will, in all like- 
 lihood, remit the proceeds, by instalments, to some 
 confidential friend or relative, preparatory to making 
 one investment with the bulk of his property, on 
 arriving- himself in England : or they may be re- 
 mitted for immediate investment, on some security 
 already provided. Such delays in completing the 
 affair may take place, as are incidental to business 
 of this nature, especially when the parties in the 
 negociation are separated by great distance. In 
 such cases, if temporary deposits of cash, pending 
 their ultimate application, were made with a Pri- 
 vate Bank, they would be useful to the public, and 
 would be rendered available for production. Now, 
 on the contrary, a person consigning property from 
 abroad, would be induced, in changeful times, to 
 prescribe in his letters accompanying his remit- 
 tances, that the money should be temporarily placed 
 in a Branch -Bank of England, instead of in a 
 Country- Bank. Whereas, if no such establish- 
 ments as Branch-Banks existed, the consignee, 
 living, perhaps, in a remote county, having no ac- 
 count with the Bank of England and but little 
 intercourse with London, would, undoubtedly, for
 
 112 
 
 his own convenience, and to have it under his im- 
 mediate control, place it in some stable Country- 
 Bank. It seems unnecessary to illustrate this ten- 
 dency of the working of the new system, by ex- 
 ample. But, suppose a man in Calcutta, with the 
 disastrous failure of Palmer and Co. in his view, — 
 in Lisbon, where all is treachery, suspicion, bank- 
 ruptcy, and distrust, — in Paris, with the wreck of 
 Lafitte's fortune to affright his contemplation ;- — 
 such a man would, undoubtedly, in making a remit- 
 tance to his brother in Norfolk or Northumberland, 
 direct the money to be paid into a Branch-Bank of 
 England. This brother might be a clergyman, a 
 yeoman, a schoolmaster, or some person unaccus- 
 tomed to travel far beyond his own county, and not 
 very conversant with pecuniary concerns. He would, 
 from habit and long-established confidence, be as 
 well satisfied with the security of Messrs. Gurneys 
 and Co., or Messrs. Ridley and Co., as with that 
 of the Bank of England ; and the money would, 
 as a matter of course, pass through their medium 
 into the channels of production, if the Bank-of- 
 England Branch-Banks were not placed as a barrier 
 to arrest its course. 
 
 The aggregate of the deposits constitutes the 
 main fund by which the Country-Banker is enabled 
 to relieve and invigorate the springs of industry : a 
 regulated portion, only, of that fund is kept un-
 
 113 
 
 employed, ready to answer immediate demands. 
 Such diversions of capital from Banks essentially 
 connected with creative industry, into a channel 
 which is not, and never can be permanently, con- 
 nected with the productive portion of the commu- 
 nity, must ultimately produce most injurious con- 
 sequences. Nor is the point of mere security that 
 which constitutes the most important and essential 
 consideration, connected with this question of the 
 relative degree of public usefulness of different de- 
 positaries of money-capital. We have before stated, 
 that the charge of insecurity appertaining to the 
 Private Banks was mainly ascribable to the novelty 
 of the business of a Country-Banker, to the ab- 
 sence of the valuable lessons of experience in the 
 earliest stages of its exercise, and to the injurious 
 measures of the Government. This position has 
 been conclusively established by the stability evinced 
 by the great body of these Bankers during the last 
 six years, when the extraordinary pressure upon all 
 interests has broken many of the wealthiest and 
 most eminent merchants of former times. We be- 
 lieve the risk of failures amongst Country-Bankers, 
 to be, now, small and insignificant ; and to be an 
 item, which, in balancing the comparative utility 
 of different systems of Banking, is extremely un- 
 important. The material point for consideration is 
 — whether the community will be best served by 
 
 I
 
 114 
 
 agents who administer capital to the uses of in- 
 dustry in the best manner, although accompanied 
 with some risk ; or by agents, with whom there is 
 no risk of the principal, but who will withdraw 
 the capital requisite for the support of industry 
 in the most important channels of production, for 
 the purpose of applying it to speculative objects, 
 hostile to the real interests of the country. It is a 
 question — whether it be wise to apply legislation 
 to the providing of means for the protection of the 
 capital of inert accumulators, at the risk of de- 
 priving the sources of production of their reple- 
 nishing and invigorating powers. 
 
 This tendency to divert capital from its most 
 beneficial uses, pertains to the essential, insepara- 
 ble, properties of the Branch-Bank system. It is 
 not pretended that the influence of the changes in 
 Banking, introduced under the authority of Lord 
 Liverpool, is yet general throughout England ; but 
 the establishment of Branch-Banks is one of the 
 causes of the resources of industry in the country 
 being lessened and dried up, and, from their most 
 obscure and remote channels of usefulness, altoge- 
 ther withdrawn. Merchants, manufacturers, traders, 
 and even farmers and graziers on a large scale, 
 have still the power of borrowing temporary loans 
 from Country-Bankers ; but the fructifying influence 
 of capital administered in small portions, in aid of
 
 115 
 
 humble industry, where the chief security rests, not 
 upon the property, but the character, of the bor- 
 rower, is altogether destroyed ; and the establish- 
 ment of Branch-Banks, by locking-up floating and 
 unfixed money-capital, which forms a material part 
 of the available funds of a Country-Bank applicable 
 for loans in the shape of cash-credits to the indus- 
 trious, must be placed among the co-operating 
 causes of this injurious effect. 
 
 Nothing more is wanting to show the pernicious 
 tendency of Branch-Banks to obstruct the flowing 
 of those floating sums of money, in their course to 
 the long-established and well-known reservoirs of 
 capital. Sums of money that form, in great part, 
 the funds for the temporary uses of the industrious, 
 which the Country-Bankers are accustomed to ad- 
 minister so beneficially for the public, and so ad- 
 vantageously to themselves, are forced into chan- 
 nels unconnected with production in England ; and 
 their application is altogether extraneous and mis- 
 chievous to the British community. 
 
 Then, with respect to the next point — the fixing 
 of an unnatural maximum upon banking charges, 
 by a powerful, monopolizing, corporation, — this 
 has, with regard to the humble, thrifty, and in- 
 dustrious, borrower, virtually the effect of apply- 
 ing the condemned principle of the usury-laws, to 
 exclude him from the advantage of obtainino; tem- 
 
 I 2
 
 116 
 
 porary loans, on easy terms. Commercial men who 
 seek the accommodations of the Branch-Banks, are, 
 usually, interch angers — men who deal in commodi- 
 ties, without altering their shape and substance. 
 Manufacturers, however, upon a great scale, also 
 seek them. One of these, who may employ a 
 thousand workmen, will have no difficulty in ob- 
 taining discount for a bill at ninety days' date, 
 however it may have been concocted, and whatever 
 be its character. But a thrifty competitor of the 
 overgrown manufacturer — a man who employs half- 
 a-dozen sons, and twenty or thirty labourers ; and 
 who can pay back a sum borrowed, not when a 
 ninety days' bill arrives at maturity, but when the 
 product of his manufacture, to perfect which he 
 borrowed a portion of his money-capital from a 
 neighbouring Bank, becomes marketable; — has no 
 power to borrow of a Branch-Bank. This distinc- 
 tion between the influence of the Branch-Banks of 
 England, and that of the Country-Banks, is very 
 remarkable and important ; and it is altogether 
 unknown or disregarded by public men : but it 
 shows itself unequivocally in practice to those who 
 are acquainted with the silent and unobserved ope- 
 rations of Banking. In Birmingham, where the 
 great mass of productions is raised from the innu- 
 merable separate exertions of little traders and ma- 
 nufacturers, four parts out of five of the money
 
 117 
 
 applied to the uses of industry by the Bankers, 
 are lent at the rate of five per cent, per annum, for 
 the interest : while, in JXlanchester, the reverse of 
 this is the case ; and four parts out of five of the 
 money so lent, are at a rate of interest not exceed- 
 ing the Bank-of-England rate of four per cent. In 
 Manchester, the class of lesser manufacturers and 
 traders is greatly diminished, and almost annihi- 
 lated : in Birmingham, no material progress is yet 
 made in breaking down this class. The tendency 
 of the Branch-Bank system, to raise-up an exclu- 
 sive class of monopolizing manufacturers, is, in 
 both cases, the same ; technical and particular cir- 
 cumstances connected with the respective manufac- 
 tures make the difference in its progress in regard 
 to Manchester and Birmino-ham. 
 
 From this sketch, it would appear that Branch- 
 Banks can never supply the place of Country-Banks 
 to the productive classes of the community — 
 
 1st. Because experience has proved that tlie 
 reasons which appeared to impel Lord 
 Liverpool and the Bank-Directors to 
 project those establishments, were fal- 
 lacious assumptions, unsupported by 
 facts : 
 '2d. Because, as Branch-Banks allow no interest 
 upon deposits, they counteract the great 
 principle of ccononjical thrift, nhicli
 
 U8 
 
 is best promoted by easy means for ob- 
 taining interest on accumulations ; — a 
 principle which never can meet with 
 encouragement from Branch-Banks, be- 
 cause no Banks can allow interest for 
 money, that have not channels open for 
 its application, of the nature of cash- 
 credits, — the flowing-in must be kept 
 pretty equally balanced by the flowing- 
 out ; and this is an operation which 
 never can be conducted, either with 
 safety to the Bank or advantage to the 
 public, by the delegated authority of 
 Branch-Bank Managers : 
 
 3d. Because, loans being made only at a 
 rate of interest not exceeding four per 
 cent., and that by discounting bills, 
 a sort of maximum is placed upon 
 the profits of Bankers, detrimental 
 to the interests of small manufactu- 
 rers, traders, and farmers, who are, 
 consequently, in great measure, exclu- 
 ded from their former advantages of 
 borrowing temporary loans of money 
 on easy terms : 
 
 4th. Because the presence and operation of 
 Branch-Banks is injurious to the Pri- 
 vate Bankers and the public, inasmuch
 
 119 
 
 as their tendency is, on the one hand, 
 to divert capital from those depositaries, 
 the Private Banks, which are the well- 
 known local fountains of capital for the 
 industrious ; and, on the other hand, 
 to raise-up a class of speculative tra- 
 ders and manufacturers, by offering 
 loans of money on long bills, to the 
 deep injury and eventual annihilation 
 of the class of small manufacturers and 
 traders, who cannot have recourse to 
 the same means of obtaining accommo- 
 dation.
 
 120 
 
 SECTION IV. 
 
 ON THE SCOTCH SYSTEM OF BANKING, AND ITS 
 ALLEGED SUPERIOR ADAPTABILITY TO THE 
 WANTS OF THE PEOPLE OF ENGLAND. 
 
 On proceeding to enter upon this fourth division 
 of our subject, it is obvious that it will not be 
 necessary to allude to the two " great leading 
 features" of alleged superiority : we have proved 
 that the Country-Banking system does afford equal 
 facilities with the Scotch system, for the deposit, 
 on interest, of the earnings and accumulations of 
 the frugal, and for the obtaining of cash-credits by 
 the industrious. Nothing but the pernicious inter- 
 ference of the Government can render the exercise 
 of these functions less efficient and useful to the 
 community in England, than they are in Scotland, 
 where no such interference has been hazarded. 
 The only remaining point to be discussed, there- 
 fore, is, whether the Scotch system of Banking — 
 by which we understand to be meant Banks found- 
 ed upon extended Joint-Stock Proprietaries — be, 
 or be not, more secure ; and, if they be more
 
 121 
 
 secure, whether they be, or be not, for that reason, 
 more beneficial to the public. 
 
 There can be no hesitation in admitting- at once, 
 that either Chartered Banks with a large paid-up 
 capital, or Joint-Stock Companies consisting of 
 many hundreds of persons of property, all, jointly 
 and severally, responsible for debts, are more secure 
 against failure, than private co-partnerships con- 
 sisting of three or four persons : that, in regard 
 merely to constitution and formation, apart from all 
 considerations of management, Banks so formed 
 are more safe depositaries for capital, than Private 
 Banks. This obvious and undeniable truth has 
 been sufficient, with all Parliamentary declaimers 
 and all writers who have advocated the introduc- 
 tion of the Scotch system (as they ignorantly term 
 it) into England, to decide the whole question. 
 Men, however, who presume to legislate on such 
 grave and important matters, should reflect, whether 
 there are not countervailin": considerations con- 
 nected with this naked question of security against 
 failure, which render it a question of doubtful 
 issue. 
 
 All failures in the performance of pecuniary ob- 
 ligations are to be deprecated. It would be a pre- 
 cipitous and unwise proceeding, however, to legis- 
 late for the prevention of their recurrence amongst 
 Bankers, without first examining in what manner
 
 122 
 
 the failures of different classes of traders affect the 
 community. We are so apt to be carried away by 
 the constant use of axioms abstractedly true, that, 
 when plausible men proceed, under their sanction, 
 to introduce changes pregnant with momentous con- 
 sequences, we assent too readily to their proposi- 
 tions. This has been fearfully verified in all recent 
 measures relating to Banks and paper-currency. 
 Failures, in all promises to pay — in all undertakings 
 to refund sums of money placed in a man's hands, 
 on the faith of punctual performance, — are bad ; 
 and failures from insolvency are the worst of all. 
 But, why ? An attempt to explain the reason may, 
 perhaps, lead us to a more correct appreciation of 
 the evil arising from the failure of Banks. 
 
 A failure in restoring money-capital, which has 
 been lent to aid the important processes of produc- 
 tion and interchange, interferes with the just appro- 
 priation of capital; and, by destroying confidence, 
 it damages that principle which gives floating 
 money-capital its chief value in commerce — viz. 
 free circulation in all channels of production. It 
 obstructs, therefore, the just and salutary employ- 
 ment of the accumulations of industry, and sus- 
 pends, or damages, the processes of reproduction. 
 A Banker is entrusted with capital of great value, 
 because he is a professional agent for the applica- 
 tion of capital in all the pursuits of industrious
 
 123 
 
 and active life ; and, therefore, when a Bank fails, 
 the mischief is extensive. 
 
 Failures, whether of Bankers or of other per- 
 sons, are immediately detrimental, because of their 
 partial destruction of capital which has been mis- 
 applied and wasted ; and very pernicious in their 
 progressive consequences, because of the distur- 
 bance which they produce in the future application 
 of capital, to the uses of industry. If these effects 
 are produced equally by the injurious working of a 
 system of Banking which provides, at all hazards, 
 for the stability of the Banks, and by the operations of 
 insolvent Banks, the bad consequences to the com- 
 munity are, in either case, the same. This, we 
 apprehend, is a fair statement of the problem ; and 
 if a Government were dealing with the case of a 
 country in which no Banks had been formed, they 
 would be altogether guided by the solution to be 
 given to it. Then, it appears that the true ques- 
 tion for a Statesman to consider is, whether the 
 Scotch system of Banking cause more, or less, fre- 
 quent and abrupt destruction of capital, than the 
 English, and more, or less, injurious disturbance 
 in the processes of production. 
 
 On entering upon so wide a field of inquiry, we 
 find that the actual facts which would enable us to 
 form a correct judgement are, from the nature of 
 the subject, hidden from our view, and inaccessi-
 
 124 
 
 ble ; and that our conclusions must, consequently, be 
 deduced, in a great measure, from evidence derived 
 from general knov^^ledge, and the testimony of com- 
 petent witnesses. There can be no dispute respect- 
 ing the obvious truth, that fewer failures have oc- 
 curred in the practice of the Scotch system of 
 Banking, than in that of the English : and that is 
 a matter which deeply affects the inert accumula- 
 tors of capital, who deposit money in Banks ; but 
 it does not so immediately concern the industrious 
 creators of capital, who borrow money from Banks, 
 for the purpose of reproduction. Security for the 
 former class is frequently obtained, in Scotland, by 
 the destruction of the latter class. Whenever dif- 
 ficulties arise, and alarm seizes the minds of the 
 Directors of Scotch Banks, cash-credits are con- 
 tracted or closed ; and money is called in, with as 
 much unforbearing harshness and promptitude as 
 by an Exchequer- process. It is the exercise of this 
 tremendous power over the fortunes and welfare of 
 individuals, which has engendered that feeling of 
 apprehension of, and servility towards, the Bankers, 
 which, in its degree, is utterly unknown in Eng- 
 land. A Board of Directors will act with the un- 
 relenting promptitude of one who administers a 
 judicial execution, in cases where a Private Banker 
 would expostulate and advise, and resort to tempo- 
 rary expedients to prevent the ruin of debtors.
 
 125 
 
 The money advanced on cash-credits is considered 
 by the Banks, to be secure ; and, even when lent 
 to men in precarious circumstances, it is so, gene- 
 rally, to those Banks that issue the first process for 
 its recovery. Almost all considerable traders, in 
 Scotland, have several cash-credits open at one and 
 the same time ; and so generally does the operation 
 of the system pervade all kinds of traffic, that it 
 may be said, almost without exception, that all 
 traders, and most farmers, are connected as debtors, 
 either in their own persons or as bondsmen for 
 their friends, with several Banks at once : conse- 
 quently, there prevails the strongest motive for 
 prompt and harsh measures, on the part of the 
 Bankers. There is no example in England, of 
 such extensive destruction produced amongst the 
 productive and distributive classes of the commu- 
 nity, as has frequently been produced in Scotland. 
 It is fifty-nine years since the famous Ayr Bank 
 failed in Scotland. If that Bank had been carry- 
 ing on business at this day, half the people of the 
 surrounding country would have been broken up, 
 but the Bank would have remained firm. The 
 debtors would have been ruined on the remotest ap- 
 proach of danger to the creditors. The Dukes of 
 Buccleuch and Queensbury, with Mr. Douglas as 
 their leading partner, were novices in the art and 
 mystery of Banking; or they would have had no
 
 126 
 
 misgivings with regard to securing themselves and 
 their depositing customers, at the expense of their 
 debtors. " When the Banking Company, under 
 " the Firm of Douglas, Heron, and Co., of Ayr," 
 says Macpherson, " resolved to discontinue their 
 *' business, they found it vi^ould be impossible to 
 " call in their funds immediately, without spread- 
 " ing great and general distress throughout the 
 " country ; and, therefore, they had recourse to 
 " other methods for discharging the demands upon 
 " them." These other methods for discharging the 
 demands upon them, consisted partly in borrowing 
 money, " but chiefly by the sum of £450,000, 
 " arising from the sale of annuities for one or two 
 " lives." There is a general federative spirit that 
 now actuates the conduct of all the Banks through- 
 out Scotland, which sustains any particular Bank 
 that may be placed in jeopardy, until it recover its 
 power ; which, in ordinary cases, will promptly 
 be accomplished, by demanding the sums lent on 
 cash-credit to be paid up, and thus ruining 
 the weaker portion of its debtors. The Stirling- 
 Bank, although, as a Bank, insolvent to the amount 
 of £100,000, was sustained in this manner, in the 
 year 1826, pending the inquiry in Parliament re- 
 lating to the Banking system of Scotland. The 
 skilful managers of that inquiry knew how injurious 
 would be the eft'ect of a failure of a Scotch Bank
 
 127 
 
 at such a juncture. This Bank subsequently failed, 
 " spreading great and general distress throughout 
 " the country," and bringing ruin upon many per- 
 sons associated as co-partners in its affairs. 
 
 Lord Lauderdale and Mr. Huskisson both de- 
 clared that the distress in the Spring of 1826, suc- 
 ceeding the Panic in the money-market, Avas, be- 
 yond all description, more intense and long-con- 
 tinued in Abroath, Montrose, and Dundee, than in 
 any part of England. In Abroatli and Montrose, 
 more than four-fifths of the manufacturers were 
 either ruined altogether, or compelled to stop pay- 
 ment and suspend their works ; and this was pro- 
 duced principally by the unmitigated rigour with 
 which loans upon cash-credits were drawn in by 
 the Joint-Stock Banks. More mischief, in the des- 
 truction and disturbance of capital, resulted from 
 the conduct of the Scotch Banks at the period re- 
 ferred to, than could have been produced by the 
 failure of a Private Bank, conducted on the 
 English system, at every town from Stirling to 
 Aberdeen. 
 
 In our observations in the foregoing Section " on 
 " the alleged defects of the present System of 
 " Banking in England," we have shown that spe- 
 culation is " supported, fostered, and encouraged," 
 infinitely more, under the Scotch Banking System, 
 than under that of the Country-Bankers of England.
 
 128 
 
 The great competition — the unbroken reliance which 
 all the Bankers feel, of never being incommoded 
 by runs, — the deceptive security of bonds to cover 
 advances, — and the abundance of money on deposit, 
 — induce them to encounter risks, by dealing with 
 speculative people. This has been abundantly 
 proved since the Panic of J 825-6. During the 
 period which has elapsed since its termination, viz. 
 from Midsummer 1826 to May 1832, the failures of 
 merchants and manufacturers in England were un- 
 usually few. There were none that could be put into 
 comparison with the failures in Glasgow, resulting 
 from speculations in the East-Indian and South-Ame- 
 rican trades, — those of the great cattle- and corn- 
 dealers, — and those in the cloth-trade, at Gallow- 
 Shiels. The amount of debt owing in the last-cited 
 case was small, compared with that in the other cases ; 
 but it was, notwithstanding, a very instructive in- 
 stance of the effects of the Scotch system of Banking. 
 The cloth-trade in Gallow-Shiels was a recently- 
 introduced manufacture ; it had risen with rapidity, 
 under the fostering influence of the Banks which had 
 been opened there to encourage it. There were 
 about eighty distinct clothing establishments exist- 
 ing, when the Banks suddenly contracted their 
 accommodation upon cash-credits. These were 
 secured by reciprocal bonds, which linked almost 
 the whole manufacturing community in one " joint
 
 129 
 
 ** and several" money-obligation. Consequently, 
 when the first demand was made for the repayment 
 of an advance, it affected all who were so bound to- 
 gether; and more than sixty, out of eighty, establish- 
 ments were stopped at one time. No disaster, in 
 the remotest degree approaching this, in severity 
 and comparative extent, has occurred at any manu- 
 facturing town in England, during the same period. 
 
 These facts prove that security against failure 
 may be obtained by Banks, at a great sacrifice. 
 We could prove in evidence, that English manu- 
 facturers, who send travellers to all the market- 
 towns in England and Scotland, lay on a higher 
 profit for risk from bad debts in Scotland, than they 
 do upon their sales in England. This arises 
 solely from their experience of the greater hazard 
 attending their dealings in Scotland, which they 
 attribute to the operation of the Banking system of 
 that country. All judicious writers, acquainted 
 with this matter, confirm this view of the subject. 
 Even Mr. Macculloch, with the strongest prejudices 
 against the Country-Bank system of England, bears 
 his testimony, in a work recently published, in 
 favour of that view which we have endeavoured to 
 explain : 
 
 ** A banking system," he says, 
 
 *' fitted only for a period of prosperity, and unable 
 " to sustain itself, and to assist the country, in 
 
 K
 
 130 
 
 " times of distress and difficulty, is as ill calculated 
 " for the great purposes it should serve, as the 
 " paper cannons of the Chinese for being used 
 *' in war. 
 
 " The example of the Scotch Bankers may here 
 " be referred to. They are most liberal of their 
 " advances so long as they consider they run no 
 " risk in making them ; but that moment that alarm 
 " and discredit begin to make their appearance, 
 " they demand payment of every advance that is 
 '* not made on the very best security ; they cease 
 " in a great measure to discount ; and provide for 
 *' their own security by ruining thousands of their 
 *' customers. Had the Bank of England acted, in 
 " 1792, 1815, and 1816, and in 1825 and 1826, 
 '* as the Scotch Banks act when they apprehend a 
 " return of their notes, all classes would have been 
 " involved in bankruptcy, and we should have been 
 " fortunate had we escaped a revolution ! 
 
 " Similar results are said to be exhibited in the 
 " State of Massachusets, the banking system of 
 " which has received some encomiums in this 
 " country. We learn, from the best authority, 
 " that in Massachusets the oscillations in the quan- 
 " tity of paper afloat are very sudden and violent, 
 " and have been productive of most injurious con- 
 '' sequences." 
 
 These admissions of the defective operation of
 
 131 
 
 the Scotch system of Banking are very curious ; 
 and, as they proceed from a distinguished Scotch 
 Economist, are of great importance as a means of 
 dissipating the prejudices of the uninformed. That 
 system which causes the Bankers, the " moment 
 '' that alarm and discredit begin to make their ap- 
 " pearance, to demand payment of every advance 
 " that is not made on the very best security, and 
 " to cease, in a great measure, to discount, and 
 ** provide for their own security by ruining thou- 
 " sands of their customers," must be a most delu- 
 sive and dangerous system for the community. We 
 defy any person to adduce a single instance through- 
 out England, where alarm in the Bankers for their 
 own safety, or even the failure of a Bank, has 
 ruined — not thousands, as Mr. Macculloch says in 
 the case of the Scotch Bankers, — not even hun- 
 dreds; — but, we defy any one to prove that scores of 
 the customers of any English Country-Bank have 
 been ruined by the alarm or the failure of the Bank. 
 There is another important characteristic of the 
 English system of Banking, which gives it a de- 
 cided superiority over that of Scotland, for all 
 borrowers, and, therefore, for the productive classes 
 of the community : and that is the power of prompt 
 and immediate decision in special and critical 
 cases. Banks managed by persons whose character 
 and entire property are involved in its success, are 
 
 k2
 
 132 
 
 able to make advances, on the instant, upon the 
 judgement of one or two partners in a Bank, with- 
 out the risk of that annoyance and injury to the 
 borrower, which is attendant on the Scotch system ; 
 where many individuals, meeting at public boards, 
 scrutinize, judge, and decide, the case referred to 
 them. The operation of the principle will be best 
 illustrated by example : the facts in the following 
 cases could be proved in evidence : — 
 
 The first case that we shall adduce, is one on a 
 contracted range of operation ; but it is, neverthe- 
 less, forcibly illustrative of the beneficial influence 
 of English Bankers, when the circumstances con- 
 nected with it are considered. It is commonly 
 known that Chester, Wrexham, Shrewsbury, Bristol, 
 and Exeter, are each a description of emporium for 
 the manufactured goods and commodities consumed 
 in the more inaccessible districts of which they are 
 the marts and centres of interchange. Formerly, 
 the inhabitants of these more inaccessible districts 
 were in the habit of purchasing their stores for do- 
 mestic consumption, at their great fairs in the 
 Spring and Fall of the year, which, like those on a 
 large scale at Frankfort and Leipsic, were esta- 
 blished, in great measure, for this specific purpose. 
 Even at this day, that former practice has a great 
 influence upon demand ; which, at these places, is 
 periodical — occurring at wider intervals than at
 
 133 
 
 other large towns ; and not equable, regular, and 
 of daily or weekly recurrence, as at places not so 
 situated. A purchaser for this sort of demand 
 was lately at Manchester, to lay in supplies, — where 
 his credit was unquestioned, his purchases and pay- 
 ments regular, and where he was esteemed a wel- 
 come customer by all the manufacturers, — when a 
 circumstance occurred, that, at once, destroyed his 
 favourable position in the Manchester-Market. His 
 brother — a person living in the same town, and 
 carrying on a business similar to his own, — failed 
 under circumstances which deeply injured his moral 
 reputation. The effect of this upon the credit of 
 the stable and respectable brother, who was totally 
 unconnected in business with the bankrupt, was 
 such that he found it utterly impracticable to buy 
 the accustomed supply of goods, in the usual man- 
 ner, on credit. He promptly determined to re- 
 turn home : and, after consulting with his partners, 
 the case was submitted to their friend and counsel- 
 lor, the Country-Banker, who was able and willing 
 to render assistance to his customers, in all cases of 
 emergency where prudence and liberal confidence 
 directed. The Banker was convinced of the sta- 
 bility, and of the existing prosperity, of the firm : 
 the money was, forthwith, advanced to enable the 
 purchaser to buy his goods, with cash, instead of 
 with credit: he returned, immediately, to Man-
 
 134 
 
 Chester ; and obtained the requisite supply of goods, 
 without losing the chance of his periodical market. 
 The delay of a week, or even of a day, might have 
 damaged his business, for this year ; and perma- 
 nently and irreparably injured it. 
 
 Now, this is a case with which no Joint-Stock 
 Bank could have dealt in the same satisfactory 
 manner. A compliance with such an application, 
 would have broken some established rule : the 
 Board of Directors alone, who might not meet for 
 nearly a week, could decide upon it : there might 
 be rivals in the same trade as that of the applicants, 
 sitting at the Board of Directors, or in their special 
 confidence. In short, the relief could not have 
 been sought from a Joint-Stock Bank : and, if it had 
 been possible to seek relief, it must, nevertheless, 
 have failed to prove efficacious to the applicants, and 
 beneficial to their credit. They were, by the nature 
 of the case, compelled to make such an exposure 
 of the state of their aflfairs, as could be done to 
 no other than one in the character of a private con- 
 fidential friend. 
 
 The next case to which we shall allude, is one of 
 a bolder character ; in which great confidence, 
 prompt decision, and clear judgement, in the Ban- 
 ker, were required in no ordinary degree. A 
 Merchant, at one of our principal manufacturing 
 towns, had his property locked up in Foreign mar-
 
 135 
 
 kets, during a period of extraordinary stagnation. 
 No sum less than twenty thousand pounds would 
 relieve him from embarrassment, and prevent him 
 from stopping payment. He determined to ask his 
 Banker to advance that amount. The Banker be- 
 stowed due examination and consideiiation upon the 
 nature of the affairs of his customer, and iipon his 
 general responsibility ; and, after convincing him- 
 self of the prudence of the proceeding — bold as it 
 was, — he supplied the required amount. The event 
 justified his confidence. He was moved to adopt 
 this course, by other considerations than those which 
 were, exclusively, connected with the personal con- 
 venience and prosperity of his customer. The dis- 
 trict was, at the time, sutfering under a depressed 
 state of trade : the failure of the Merchant, at that 
 juncture, would have greatly aggravated the general 
 distress; and the eventual loss of property to the 
 district, over and above the damage and incon- 
 venience resulting from a public acknowledgement 
 of embarrassment by the Merchant, would have 
 been very large. Nothing is better established than 
 this fact — viz. that, when an English exporter of 
 goods fails, a great proportion of all his property 
 lying at distant Foreign markets is, immediately, 
 confiscated, by means of fraud, to the use of the 
 consignees. We know an instance whore a mer- 
 chant failed, who had goods lying at one market in
 
 136 
 
 South America, equal to the value of Twenty-Eight 
 Thousand Pounds. If he had not failed, Twenty- 
 Five Thousand at the least, and, probably, the 
 whole of this sum, would have been received. 
 Nothing was, however, ever recovered by the cre- 
 ditors : it was not only a total loss ; but heavy 
 expenses were defrayed, in addition to the principal 
 sum, for persons sent out to enforce demands by 
 legal process. In the above-recited case of the 
 Merchant who obtained the seasonable aid of 
 Twenty Thousand Pounds, from his Banker — a 
 Country-Banker, — a sum, amounting, probably, to 
 a Hundred Thousand Pounds, was received by the 
 small manufacturers in one district of England, 
 which, but for such aid, would have been for ever 
 lost to the people of England. 
 
 In this case, as in the former, what could a Joint- 
 Stock Bank have done ? It could have rendered no 
 assistance which would have been effectual — none, 
 indeed, which would have been of the least service 
 to the Merchant and the district in which he carried 
 on business. There would have been the operation 
 of the same machinery of Boards — open consulta- 
 tions — rivalship — confidential disclosures and se- 
 crets whispered from one to another; — in short, 
 the ruin of the Merchant must, in the end, have 
 been the consequence of such an application to a 
 Joint-Stock Bank. These cases may be sufficient
 
 137 
 
 to show that there are many considerations con- 
 nected with a change of system, which demand 
 attention, besides the question of security against 
 the failure of the Bank. 
 
 There are, moreover, other consequences to be 
 apprehended from the general introduction of Joint- 
 Stock Banks into countries out of Scotland, " be- 
 sides the sudden and violent oscillations in the 
 quantity of paper afloat :" and, tliough they may 
 be such as do not greatly affect the principle of 
 higher security, which is the sole recommendation 
 of Banks formed on the basis of extended proprie- 
 taries ; yet, as they exhibit the greater danger at- 
 tendant on the delegated management of public 
 funds, than on the management of the resources of 
 a Private Bank by its co-partners, we bring them 
 into view. 
 
 Since our Banking changes were commenced in 
 the year 1826, upwards of a hundred of the Joint- 
 Stock Banks and their branches, in the United 
 States, have declared their insolvency, or their in- 
 capability of paying their engagements in cash. 
 Some make compositions with their creditors, by 
 means of the property placed in their hands by the 
 public, and transfer titles to land-sections, and 
 other property : some pay a per-centage upon their 
 debts, in the notes of other Banks, and get a dis- 
 charge in full. It was from the experience of the
 
 138 
 
 evil resulting from forced and extended credit — 
 which is the aliment of life, to the Scotch system 
 of Banking, — that Judge Catron of Nashville re- 
 commended the Legislature to pass a law " e.v- 
 empt'mg any one from bei?ig bound as security for 
 another, in any case, by word, bond, Jiote, or en- 
 dor sementy If this system should prosper in other 
 countries, it would require unexampled circum- 
 spection to prevent the issues of the Banks being 
 forced to excess. The Bank of the United States, 
 which is a National Share-Bank, like our Banks of 
 England and Scotland, with branches in all parts 
 of the Union, narrowly escaped being ruined and 
 disgraced by failure from this cause. Three gen- 
 tlemen who were Directors or Managers of that 
 department of this great National Bank, which is 
 carried on at Baltimore, — named Macculloch, Smith, 
 & Buchanan, — contrived to advance to themselves, 
 from the funds of the Bank, a very large sum of 
 money. The amount was so large, that, after the 
 parties had repaid all that they could when the 
 advance was called in, the deficiency, which they 
 could never pay, amounted to Three Millions of 
 Dollars. 
 
 These circumstances serve to shew that the in- 
 troduction of Joint-Stock Banks into other coun- 
 tries, may not be attended with the same results as 
 they have latterly produced in Scotland. Experi-
 
 139 
 
 ence demonstrates that the catastrophe which 
 closed the East Lothian Bank — the Banks at Ayr, 
 Stirling, Falkirk, and in the United States above 
 referred to, — is more likely to be the issue of 
 Share-Banks formed under the auspices of the 
 Aristocracy, in England, than permanent advan- 
 tage to the public, and profit to the responsible 
 share-holders. Real knowledge of the actual state 
 of the affairs of those which have been opened in 
 England, during the last six years, would strengthen 
 this anticipation. There are between four and five 
 hundred Country- Banks in England : the magni- 
 tude of their transactions is, probably, more than 
 twenty times greater than that of the whole of the 
 newly-raised Joint-Stock Banks. Now, during 
 this period of six years, there have not been, as far 
 as we know, above two instances of Country-Banks 
 having incurred bad debts exceeding eight thousand 
 pounds in any one instance : while, even in this 
 short period, when almost all distributors of money- 
 capital have been increasingly circumspect, there 
 are, we believe, four or five instances of Joint- 
 Stock Banks, or Branch-Banks of England, having 
 incurred bad debts amounting, in each instance, to 
 a sum exceeding ten thousand pounds. 
 
 If these facts should be established in evidence, 
 they would throw a strong light upon the operation 
 of a principle contended for in a former part of this
 
 140 
 
 essay ; which principle is — that the knowledge, 
 experience, vigilance, and deep personal interest, 
 of a Private Banker, are requisite to enable 
 a man to distribute money-capital, judiciously, 
 amongst the industrious, — that the habits of 
 a Branch-Bank or Joint-Stock Bank manager 
 must prevent the Bank of England and Public 
 Share-Banks (but especially the former), from ex- 
 ercising the function of Broker of Capital, bene- 
 ficially for the Proprietors of the Bank, and satis- 
 factorily for the Public. If it be true that nearly 
 every instance of " a rash spirit of speculation" 
 being fostered and encouraged in England, during 
 the last six years, is to be found in the proceeding 
 of the Branch-Banks and the Joint-Stock Banks, 
 it shows the fallaciousness of Lord Liverpool's 
 assumptions, and affords grave matter for the con- 
 sideration of the existing Government. The pre- 
 sent Ministers cannot, without mature deliberation, 
 adopt measures for extending, perpetuating, and 
 confirming, the new systems of Banking. 
 
 Examples of the early success of Joint-Stock 
 Banks are often cited to promote the system. 
 They are delusive ; and, as proofs of superior 
 utility, altogether unworthy of regard. The Pro- 
 vincial Bank of Ireland is the most stable of all 
 the Joint-Stock Banks that have been formed since 
 the Act of 1826 was passed. The highest interest
 
 141 
 
 paid by this Bank, is four per cent, per annum, 
 upon the capital advanced. It is, notwithstanding, 
 managed with more skill, and is intrinsically more 
 prosperous, than any Joint-Stock Bank raised upon 
 a new foundation. Yet the shares of some of the 
 latter sell at a premium of 100 per cent, upon the 
 sum paid up ; while those of the Provincial Bank 
 have, generally, been either at a small discount, or 
 at par. These premiums are, in all cases, the 
 effect of other causes than profit, or even of anti- 
 cipated profit : and, as great stress is laid upon 
 this circumstance in all recommendations for an 
 extension and general adoption of the system, it is 
 necessary to expose the delusion. We have no 
 doubt that shares in Joint-Stock Banks have been 
 sold at large premiums, which would not, intrin- 
 sically, be w^orth three quarters of the sum which 
 they have cost, if they could be estimated by the 
 actual balance of profit and loss, after all the debts 
 owing to and by the Bank had been discharged. 
 The delusion which causes the premiums is com- 
 pounded, partly, of that gross kind which influ- 
 ences the gamblers in shares on the Stock-Exchange, 
 and, partly, of something of a more subtle quality, 
 which requires to be explained. 
 
 The shares of the Joint-Stock Banks which are 
 formed and conducted at Provincial Towns, at any 
 time marketable, are few, compared with the whole
 
 142 
 
 number into which the Bank is divided. Experi- 
 ence shews the public, that the possessor of shares 
 has accommodations granted to him by the Bank, 
 which cannot be obtained by a man who possesses 
 no shares. The shares themselves are accepted as 
 security for any loan from the Bank to the indivi- 
 dual shareholder, at the market-value of the shares; 
 and they give him a credit and an influence, beyond 
 .their value in the market. Suppose a man, trading 
 with a deficient capital, to buy ten or twenty shares 
 in a Bank, at a certain loss of one hundred pounds : 
 that loss is a matter of no consequence, because 
 the possession of the shares enables him to truck 
 with a Director, for an advance of money from the 
 Bank. " If you will use your influence to get me 
 " a loan equal to double the cost of the shares, 
 *' the shares shall be held as security for it, and I 
 *' will vote to keep you in the Direction, and will 
 " bring a score of my friends for the same pur- 
 " pose." In the noted case at Baltimore above 
 referred to, Messrs. Macculloch, Smith, and Bu- 
 chanan, pledged shares at the market-value, for 
 the advances made to them ; yet, when the bubble 
 burst, the Bank lost Three Millions of Dollars by 
 the transactions. The traffic in credit and shares, 
 now carried on at some of the Joint-Stock Banks 
 which have been raised in England upon new foun- 
 dations, is only an imitation, after the manner of
 
 143 
 
 petty jobbers, of the conduct of these three ambi- 
 tious and magnificent speculators at Baltimore. 
 
 After contemplating these facts, and reflecting 
 on the disasters that attended the issue of St. 
 Patrick's Marine Insurance-Company in Dublin, 
 which caused scores of men of property to go into 
 involuntary exile for life, to prevent being ruined 
 by law-suits arising out of their liabilities for the 
 debts of that insolvent Company, — on the failure 
 of the Ayr Bank, which impoverished wealthy 
 landowners for generations, — on that of the Stirling 
 Bank, whose deficiencies must be supplied, alto- 
 gether, by fewer than twenty nominal partners 
 according to their respective shares, and, princi- 
 pally, by three or four of the wealthiest, — the 
 Landowners of England will not inconsiderately 
 give the sanction of their names, to encourage the 
 extension of a system fraught with so much risk. 
 It is impossible that any benefit can result to those 
 who engage in such schemes, unless they can first 
 " extinguish" all existing Private Bankers, that the 
 ground may be cleared for their own operations. 
 
 On the function of the Scotch System of Bank- 
 ing providing " a safe, economical, circulating 
 medium," it will not be necessary to dwell at any 
 length. The writer in the Quarterly, before referred 
 to, says " far from regarding this function as an
 
 144 
 
 " excrescence, which might be lopped off, we 
 " consider it as the hinge upon which the whole 
 " system turns." We are quite ready to subscribe 
 to this opinion of the great convenience and im- 
 portance of the circulation of promissory notes, to 
 the Scotch Bankers; it is the hinge without which 
 their machinery would be obstructed and move 
 with difficulty. But, excepting in the single point 
 of security, upon which we have made as full an 
 admission as could, in fairness, be demanded, the 
 circulating medium provided by the Scotch Banks 
 is an instrument of less efficient utility than that 
 provided by the English Bankers, because it is 
 under less circumspect and discreet management ; 
 and it is not a whit more necessary to Scotch Banks, 
 than the same kind of circulation is to the Country- 
 Bankers of England. In both cases, it is found to 
 be extremely beneficial to the public. There is no 
 point of advantage which the Scotch possess over 
 the English, in the routine management of their 
 circulation. The English make their exchanges of 
 notes, as frequently; they watch the circulation 
 of one another, as circumspectly ; and they are 
 as much disposed, and as able, to check extra- 
 vagant issues, with promptitude and effect. The 
 single point of security to the holder of notes — if 
 it should be considered a matter of that importance
 
 145 
 
 which does not actually belong- to it — might easily 
 be guarded and set right, by the simplest regu- 
 lation. 
 
 There is only one other point necessary to be 
 introduced here; and rather by way of allusion, 
 as a consideration that deeply concerns the Govern- 
 ment, than as an argument in a practical view of the 
 subject: it is, however, an important matter of prin- 
 ciple,which demands the most serious and deliberate 
 attention of the legislature, in making permanent 
 regulations for the government of our circulating- 
 medium. 
 
 This difficult and intricate subject has hitherto 
 been approached by Ministers, with such extremely 
 narrow views concerning its practical operation, 
 that they have regarded only the single point of 
 security : this they have seen conspicuously, but 
 not clearly and perfectly. They have thought only 
 of security for the Bankers and their depositors, 
 neglecting altogether the more important consider- 
 ation of security for the industrious customers of 
 Banks. With that point, alone, in their contempla- 
 tion, they have been led by the statements of plau 
 sible philosophers and the delusive exhibitions of 
 Scottish prosperity, into errors almost fatal, and 
 measures almost irreparable. 
 
 Ever since the principles for governing the issues 
 and circulation of paper-money began to be dealt 
 
 I.
 
 146 
 
 with by philosophers, and the means of regulating 
 them formed an object of legislation, it passed as an 
 undisputed axiom amongst economists, that liability 
 to pay, on demand, promissory notes, in legal me- 
 tallic currency, was an effectual preventive of ex- 
 cessive issues : and to this doctrine the Scotch 
 Bankers have attempted to append another, which, 
 as well as the former, is sanctioned by the high au- 
 thority of Dr. Smith, — viz. that the frequent and 
 regular exchange of notes, amongst all the Bankers 
 of Scotland,* is a perfect bar against over-issue in 
 any one Bank, and, collectively, in all the Banks of 
 the country. Experience has now cast the first of 
 these doctrines, to the winds, — no man, since the year 
 1825, would be so absurd as to bring it forward : the 
 latter is contradicted by common sense, and the 
 practice of the Scotch Bankers. For the purpose 
 of supplying the defect of the inoperative property 
 of ready convertibility into cash. Lord Liverpool 
 had recourse to the notable plan of suppressing the 
 circulation of small notes in England, leaving full 
 scope for them to circulate in Scotland, where, 
 from the nature of the Banking operations, the ten- 
 dency to overflowing excess was indefinitely greater 
 than in England : and his Lordship also meditated 
 the suppression of the five-pound notes, if the ex- 
 tinction of the small notes failed to accomplish the 
 purpose. He could not have stopped there, unless
 
 147 
 
 such measures permanently repressed the commer- 
 cial enterprise of England, deprived industry of its 
 just remuneration, and kept the condition of the 
 labourers near to the point of absolute want ; — that 
 is the only point at which a paper currency con- 
 vertible, on demand, into gold, is, with our present 
 laws and regulations, safe from over-issue. 
 
 Then, if convertibility into gold at the will of 
 the holder be not an effectual check against excess, 
 what are the circumstances in which such an effec- 
 tual check will be found ? This is a most import- 
 ant question to take into consideration, before the 
 judgment of Parliament can be conducted to a sa- 
 tisfactory conclusion concerning the proposition of 
 extending and perpetuating the Joint-Stock Banking 
 system. All experience proves that that system is, 
 and ever must be, conducted, in practice, upon prin- 
 ciples incompatible with the principle of converti- 
 bility. If it be determined that payment in gold 
 shall remain the fundamental basis of our circula- 
 tion, it is impossible to imagine a greater absurdity 
 than to attempt, at the same time, to establish and 
 extend the influence of Joint-Stock Banks ; for a 
 constant, free, and perfectly unrestricted, exercise of 
 the power of demanding cash whenever interest 
 dictates, and the operations of the Scotch Banking 
 system, are grounded upon antagonist principles. 
 In a country abounding in paper-money currency, 
 
 L 2
 
 us 
 
 cash payments can be upheld only by circumspec- 
 tion, caution, — knowledge of the general state of 
 the circulation, of the exigencies of Governments, 
 and the bearing of the Foreign Exchanges upon the 
 general currency ; — and by these being skilfully ex- 
 ercised by the Government, or its agent the Bank 
 of England. Now, all these principles for the re- 
 gulation of a paper-money currency convertible into 
 cash are, at all times, almost wholly inoperative 
 with Joint-Stock Banks ; and the conduct of those 
 Banks is determined by considerations and objects 
 which are in direct opposition to such principles. 
 
 Notes issued by a Bank with a numerous and 
 wealthy proprietary, have a general and unobstructed 
 credit. Every one of its many proprietors is, in 
 his circle of intercourse, actively engaged in pro- 
 moting the exclusive credit of its notes, in order 
 that the profits of which he partakes may be aug- 
 mented, and that he may, over and above his 
 Banking profits, reap those particular individual 
 advantages which activity for the interest of the 
 Bank commands. Runs upon such a Bank, when it 
 has been firmly established, are not likely to occur, 
 because every member of the surrounding commu- 
 nity, who is a shareholder or a cust(jmer of the 
 Stock- Bank, or a friend of either, is interested in 
 preventing a demand for gold ; and a general un- 
 derstanding prevails, that it would be disgraceful
 
 149 
 
 to cripple the Bank, by obstructing the circulation 
 of its notes, or causing deposits to be withdrawn 
 from it in gold. Each individual shareholder who 
 chooses to busy himself with the concerns of the 
 Stock-Bank, is a sanguine, ignorant, and com- 
 paratively irresponsible, Banker, engaged in pro- 
 moting the success of his Bank. He feels that he 
 may, himself, acquire some of the profits of sue 
 cess ; and he does not habitually feel himself 
 amenable, either in his property or his character, 
 for the consequences of indiscretion. A discreet 
 Private Banker, on the contrary, whose whole pro- 
 perty and income depend upon his prudence and 
 circumspection, will vigilantly watch, and anxiously 
 regulate, his issues ; and when his notes are in the 
 hands of the public, there is nobody engaged in 
 promoting their circulation by the stimulus of a 
 participation in the profit arising from it. With a 
 very imperfect knowledge of those general circum- 
 stances — which we have above stated to be re- 
 quisite in the Government or the Bank, as regu- 
 lators of the circulating medium of the country, — 
 the discreet Private Banker will be careful not to 
 extend his circulation in a dangerous manner, be- 
 cause his property, his professional income, his 
 character, and his station in life, are involved in 
 the risks attending such a course. Let us briefly 
 examine the effects of the |)rinciples here brought
 
 150 
 
 into view, in their practical operation in the affairs 
 of Joint-Stock Banks. 
 
 With respect to discount-transactions : — The 
 custom most prevalent amongst English Country- 
 Bankers is, and always has been, to discount bills 
 at not exceeding about two months' date. Very 
 few of them, as a rule of general practice, discount 
 them at so long a date as three months, except in 
 Lancashire; in that county, three months is establish- 
 ed as the customary date at which bills are drawn, 
 and at which they are circulated by the Bankers. 
 The practice of discounting bills at long dates, by 
 the English Bankers, was so little known, that an 
 instance could, we believe, be proved in evidence, 
 in which one of the newly-formed English Joint- 
 Stock Banks, for the sake of increasing its profits, 
 was induced to take active measures for prevailing 
 upon the manufacturers of a particular district, to 
 draw bills at three and four months' date, instead 
 of at two months' date, and for inducing them to 
 bring such bills to be discounted. This fact proves 
 that the Country-Bankers carrying on business in 
 the same part of England, had never given en- 
 couragement to similar transactions, or bills adapt- 
 ed to their purpose would have been ready pre- 
 pared for the hands of the new Joint-Stock Mana- 
 gers. We believe no similar instance of the active 
 interposition of any Country-Banker, for the pur-
 
 151 
 
 pose of promoting circulation by discounting bills 
 at long dates, could be found : and we request 
 particular attention to it, because it forcibly illus- 
 trates the inevitable tendency of Joint-Stock Banks 
 to stimulate speculation, and to induce excess in 
 paper-currency. It is one of the fruits of tlie new 
 system in England ; and this brief allusion may be 
 sufficient to indicate the different principles by 
 which the discreet Private Bankers and the Joint- 
 Banks are actuated in their dealings with the 
 public. 
 
 While the leading motive of every discreet 
 Private Banker must be, to conduct his business in 
 such a manner as to secure his individual property 
 from danger, the leading motive of every Joint- 
 Stock Manager is, to increase the traffic and the 
 profits of the Bank — individual responsibiliti/ not 
 being the living principle of such Banks. The 
 tempting means of increasing traffic, is an exten- 
 sion of accommodation in every channel of inter- 
 course : hence, forced issues, extended discounts, 
 and cash-credits on inferior security. The Stirling 
 Bank had, at one time, a circulation of promissory 
 notes in the northern counties of England, from 
 one hundred to one hundred and fifty miles from 
 the place where tney were issued and payable, the 
 amount of which exceeded one hundred thousand 
 pounds. This is only an example — an extreme
 
 152 
 
 one — of the effects of the system. It is very well 
 known that the Scotch Bankers have been in the 
 practice of discounting bills at very long dates. 
 Bills at four and six months' date have been 
 common ; and bills at twelve, eighteen, and twenty- 
 four, months' date, though more extraordinary, are 
 very well known in the discount-transactions of the 
 Bankers of Scotland. Then, with respect to the same 
 system in America ; — we have seen a letter written 
 at New York, in April 1832, by a person of great 
 experience, to his friend in England, in which the 
 writer attributes the stagnation in commerce, pre- 
 valent throughout the United States, to the reaction 
 caused by the Banks having locked up their funds 
 by discounting bills at twelve months' date. 
 
 All experience, consequently, proves that the 
 system of Joint-Stock Banks cannot be brought 
 into extensive operation in any country, without in- 
 ducing an excessive circulation of paper, in a man- 
 ner which has no parallel amongst Country-Bankers : 
 and the circumstances here alluded to, as deve- 
 loped by the practice of that system, in Scotland, 
 in the United States, and, lastly, in England, con- 
 firm the truth of our position ; which is — that, 
 inasmuch as the issues of a Joint-Stock Bank flow 
 from a source not guarded by deep personal re- 
 sponsibility and interest, they are sufl"ered to flow 
 in abundance, — that their circulation is un-
 
 153 
 
 obstructed, because the credit of the issuers is 
 genera], and the particular private interest of every 
 active man in the vicinity of a Public Share Bank 
 is engaged in promoting it, — and that imprudence is 
 not visited by the same penalties, in a Joint- Stock 
 Bank, as in a Private Banker, because every share- 
 holder endeavours to make it esteemed disgraceful 
 in a holder of notes to demand payment for them 
 in gold. 
 
 The influence of the confederated union of a 
 Joint-Stock Bank is astonishing : — every body is 
 now acquainted with its force and operation in 
 Scotland. The same effect has taken place in the 
 United States. We have seen letters written by 
 inhabitants of New York and Baltimore, in De- 
 cember 1831, to their fellow-countrymen then in 
 London, at the time when the drain of silver 
 for England was flowing strongly : in these 
 letters, the writers stated the names of those 
 merchants who had been induced by an expec- 
 tation of gain, to demand silver from the 
 Banks, for exportation to England; adding that 
 they believed the transaction would not be re- 
 peated — first, because the profit would be less than 
 had been anticipated, and, second, because the 
 conduct of these shippers of silver had been uni- 
 versally reprobated as " meanly selfish and un- 
 patriotic." The public is always disposed to stig-
 
 154 
 
 matize those who demand payment from Joint- 
 Stock Banks, when they begin to feel, in their 
 private affairs, the consequences which always 
 succeed a contraction of paper- money currency. 
 
 The interesting and important inferences to be 
 deduced from such a development of facts as this 
 sketch would indicate, are — first, that the exten- 
 sion of the Scotch system of Banking is incom- 
 patible with the existing principles upon which 
 our paper - money currency is founded ; and, 
 secondly, that it must lead to convulsions in credit 
 hitherto unknown to England, except in the in- 
 stance of that of 1825, which was hardly, in the 
 smallest degree, superinduced by the conduct of 
 the Country-Bankers. The first of these may be 
 best explained by the Governor of the Bank ; the 
 last is shown by the sudden ruin of whole classes 
 of merchants in the commercial cities of North 
 America, and by the present condition, as well as 
 the recent commercial history, of Glasgow. 
 
 We submit these views of the principles and 
 operation of Joint-Stock Banks, leaving it for those 
 statesmen to reconcile their conduct, who, to give 
 effect to their crude speculations, would, at all 
 hazards, enforce payments in cash in a high stan- 
 dard of value, and, at the same time, promote a 
 system of Banking, which, necessarily, leads to 
 excessive paper circulation ; — who would put two
 
 155 
 
 diametrically opposite forces, both of great power, 
 into operation, at one and the same time, to pro- 
 duce the same result. 
 
 From these premises, it would appear — 
 
 1st. That the Scotch or Joint-Stock system 
 of Banking has no superiority over the 
 Country -Bank system of England, 
 in the two great functions of receiving 
 deposits of money, on interest, from 
 the frugal, and of granting loans to 
 the industrious, in the manner of cash- 
 credits, or otherwise . 
 2d. That the Scotch system of Banking is 
 more secure in regard to failure of Banks, 
 than the English ; — that this quality 
 of greater security operates mainly for 
 the advantage of inert accumulators, 
 and is obtained, in great measure, 
 by means which are extremely pre- 
 judicial to the active creators and 
 distributors of productions ; and that 
 it produces evils in society greater 
 than can be compensated by the mere 
 advantage of security against loss by 
 the insolvency of Banks : 
 3d. That frequent and dangerous speculations, 
 and indiscreet enterprises, are some of 
 the fruits of the Scotch system of
 
 156 
 
 Banking ; and that this is proved by 
 extensive failures in Scotland, since the 
 effects of the great convulsion in cre- 
 dit of 1825-6 had subsided. It is 
 also confirmed by the testimony of 
 public men, which shows that the sti- 
 mulating effects of the Scotch system, 
 in prosperous times, are followed by 
 ruin and distress, which, in intensity 
 and duration, have no parallel in Eng- 
 land : 
 
 4th. That the English system of Banking has 
 the power of adapting itself to special 
 and particular cases, in a manner very 
 advantageous to borrowers ; while the 
 Scotch system of Banking has not that 
 power : 
 
 5th. That the experiments made of the 
 Scotch system of Banking, in the 
 United States of America, and more 
 recently in England and Ireland, prove 
 that " its alleged superior adaptibility 
 " to the wants of the people " must 
 be altogether a delusion ; and that 
 landed proprietors cannot give their 
 sanction to its extension, without great 
 hazard to themselves : 
 
 6th. That the Scotch system of Banking is
 
 157 
 
 founded upon principles, and is, in 
 practice, subjected to regulations and 
 influences, utterly incompatible with 
 the principle of the convertibility of 
 credit-currency into cash ; and that it 
 leads, in its operation, to commercial 
 convulsions, such as are never pro- 
 duced by the practice of the Country- 
 Bank system of England. 
 
 POSTSCRIPT. 
 
 There is one point of Banking practice not intro- 
 duced into the body of the subject in the preceding- 
 pages, because, though a matter of importance, 
 it did not appear to the writer a necessary and 
 inseparable part of it. — In some parts of the coun- 
 try, the Branch-Banks have undertaken to collect 
 and transmit the taxes to the King's Exchequer. 
 In the performance of this duty, their agents visit, 
 periodically, various towns, to collect the taxes, 
 within a circuit surrounding the Branch- Bank. 
 At several of these places, they have declared to 
 the tax-gatherers and sub-collectors, that they 
 would receive no notes but those of the Bank 
 of England. In remote parts of the country, 
 the notes of the Bank of England are hardly 
 to be found ; and the sole currency passing at
 
 158 
 
 fairs and markets, for cattle, corn, hay, wool, 
 cheese, hops, &c., is such as is provided by the 
 Country Bankers — consisting of their notes, checks, 
 bills, &c. Now an order proceeding from an 
 agent of the Bank, who is in an obscure country 
 town, in the character of an officer of the Govern- 
 ment, has great influence and authority. An order 
 not to receive such paper money as the people are 
 accustomed to and satisfied with, spreads conster- 
 nation : it proclaims that the common currency 
 which is in almost exclusive circulation is unsound ; 
 and that the currency of the Bank of England, 
 which the people scarcely ever see, and know 
 little about, is, alone, held to be valid by the 
 Government. The effect of an order of this kind, 
 at a large fair for cattle, was, in one instance, 
 such that four-parts out of five of the horses, sheep, 
 and horned cattle, were, in a brisk state of de- 
 mand, driven home unsold. The Bank of England 
 had thrown discredit upon all the currency of 
 the district, and thereby put a stop to the business 
 of the fair. 
 
 No adequate impression could be given to 
 any person unacquainted with country-business, 
 of the effect of such interference as this. It destroys 
 or damages the effectiveness of an indispensable 
 instrument of barter, with which the people were,
 
 159 
 
 before such interference, perfectly satisfied, with- 
 out giving' them any thing in its room. It is, un- 
 doubtedly, in the power of the Government, to 
 order all tax-collectors and tax-receivers throus^hout 
 the Kingdom, to receive nothing in payment for 
 taxes, but the King's coin and Bank-of-England 
 notes. But such an order never was given; and, 
 if it had been given, the old receivers of the 
 taxes would, with their knowledge of the custom 
 of the country, have disregarded it : they would 
 rather have taken upon themselves the responsibility 
 of evading it, than have caused the disturbance 
 which it is calculated to produce. The Branch- 
 Bank agents, who know no more of the habits and 
 feelings of the people than an Exchequer-messenger, 
 obey the will of their masters, and create alarm 
 and difficulty amongst the people: they have 
 occasioned this alarm and embarrassment, in Devon- 
 shire, Somersetshire, and Yorkshire. Consequently, 
 although this evil does not pertain integrally to the 
 Branch-Bank system, it is a very mischievous and 
 injurious consequence which has resulted from its 
 operation. 
 
 THE END.
 
 LONDON: 
 
 MARCHANTi PRINTEH, I N G H A V O.n -j P.T.

 
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