1" ■•';f:V,>C;/ THE UNIVERSITY OF ILLINOIS LIBRARY 3S2 B675 ECONOMICS (K&KEVIEIjV CUyCCBSTKKS 'A PRACTICAL ESSAY ^ ON ^ BANKING : IN WHICH THE OPERATIONS OF THE BANK OF ENGLAND— THE VICISSITUDES OF PRIVATE BANKS— AND THE CHARACTER AND SECURITY OF UNCHARTERED JOINT-STOCK BANKS, ARE CONSIDEREn. ILLVSTRATEl) WITH A SKETCH OF THE DISTRICT-PLAN, OPERATIONS, AND POLICY THE COMMERCIAL BANK OF ENGLAND. BY JOSEPH MACARDY. LONDON: J. PIGOT AND CO. NATIONAL DIRECTORY OFFICE, BASING-LANB, BREAD-STREET, CHBAFSIOB, AND SOLD BY ALL RESPECTABLE BOOKSELLERS. MDCCCXXXIV. CONTENTS PACE. Letter to LORD ALTHORP 3 Introduction ' CHAP. L— BANK OF ENGLAND. Sect. 1. Origin 9 „ 2. Loans, and Tabular View 10 „ 3. Security — Issues 14 „ 3 and 4. Cash Restriction Act 14 — 15 „ 5. Profits 16 CHAP. II.— PRIVATE BANKS.— Vicissitudes 19 CHAP. III.— Sect. I. Security of Banks 24 „ 2. TPaiiic and Issues — Scotland 26 CHAP. IV.— Proats of Banking 27 CHAP, v.— JOINT-STOCK BANKS. Sect. 1. to 4. Special Charges ^ 28 CHAP. VI. — Branch Banks and Local Banks compated 35 Sect. 1. Transmission of Monies 36 „ 2. Negotiable Circulation 36 ,, 3. Regulation of CuiTency 36 „ 4. Organization compared 37 „ 5. Abuse of Branches 38 CHAP. VII.— District, Operation, and Policy of the Commercial Bank of England. Sbct. 1. The DUtrict Plan 89 „ 2. The Operations 99 „ 3. The Policy 40 TO THF. RIGHT HON. LORD VISCOUNT ALTHORP. My Lorp, The Bank pnrlour is again in action — the Cabinet is again overreached, and the legislature defeated, by the subtlety of the old lady- monopolist ; yes, my Lord, England is again in panic, and her Commercial Interests in revulsion, by the deep and heartless schemes of the directorial junto of the Bank of England. But, my Lord, Mr. Smith has said — (and who shall pi-esume to gainsay the spirited and well-merited panegyric ?) — that the Directors of the Bank of England are honourable, wealthy, disinterested, able men? Good, my Lord ; and what say these honourable, disinterested, able men of the present crisis ? Why, my Lord, they run the ordinary gamut of tlie fo- reign exchanges ; they tell an extraordinary tale of the currency of the United States ; and they subsidize their talented auxiliary — the press, to blow an exciting blast — to spread alarm from Printing-house-square to John o'Groat's house ! And what, my Lord, is the fearful note ? " Hos- tility" ! — " Such a formidable rivalry to the Bank of England as has never before arisen" !* But what is the reality.' Why, merely a determination on the part of some injured Banks to no longer patronise the Bank of England I • " There has occurred a considerable demand for gold to day at the Bank, of England, not through any alarm, which there is nothing in the state of things to justify, but as a measure uf hostility on the part of some of the large joint-stock country banks, who arc dissatisfied with the treatment they have experienced from the branches of the liank of England, and determined on such a competition with them as will shake their ascendancy in their respective neighbourhoods. One of their first measures is intended to be that of circulating their own notes instead of those of the Bank, and as they must reckon on retaliation from their powerfut opponents, they necessarily provide themselves, among other defences, with a good slock of specie. Several inunagcrs of joint-stock banks in various parts of the country are at present in town, and apparently carrying on their measures in concert. If may safely be affirmed thai no huch formidable rivalry te the Bank of England has presented itself since itti first establishment."— Times. Yes, my Lord, the Bank of England refused to give her Fictitious Capital for good Commercial Bills of Exchange;* and because some of the Commer- cial Joint-Stock Banks resolved upon equal independence — because they re- quired the Bank of England to realize her promise, and pay gold for a portion of her promissory notes, another note of alarm was sounded ;t and followed by the gentle liint that Banking "associations" (although acting without charter of limitation — although guaranteeing the public to the utmost farthing of the property of each indiNadual) must be plundered of their capital, and weighted Avith political credit. — And all, my Lord, to secure and accommodate the old monopoly ; which pretty distinctly articu- lates to ministers, j/ou must rob these Banks, or give me a Cash Re- striction Act. Surely, my Lord, the entire affair is obvious. — That the Bank of England has never been reconciled to the existence of Joint-Stock Banks in England, is well known ; but she was comparatively courteous, until her notes became a legal tender, and enabled her to drain the country of its coin ^X and this done, another operation was alone necessary to effect a crisis in the commercial districts. But what event could be involved in a crisis, my Lord, to make so much disaster desirable ? Simply the hope and anxious desire to embarrass any Company which had assumed the charac- ter of a Joint-Stock Bank ! What could arise from the embarrassment of * '' We stated some few day.s past, that the Bank of England had exhibited much jealousy of those Joint-Stocks Banks about to become banks of issue, and we then assumed that if the opposition of the Bank of England continued it would soon diminish their deposits of bullion ; in effect this is gra- dually going on, as it will be necessary that all the Joint-Stock Banks who purpose to, or do issue their own notes, must secure themselves from the influence of the monopoly of the Bank of England. The Bank, likewise, from an antiquated but fallacious custom, have always refused to discount, in periods of pressure, small paper, the bona fide bills of tradesmen, perhaps the safest that can be circu- lated, but which they only reject because they were not the peculiar character of paper which that Coi-poration generally take.— Thus, an establishment which onght to he purely national in its action upon puiKc credif, has become nothing more than an influential and almost party-corporate body. — But the time has arrived when the wings of monetary monopoly must be clipp'd, for the safety of the COMMERCIAL, — nay, the COMBIN ED INTERESTS of the BRITISH COMMUNITY." — Morning Herald. + " Can any thing be more contradictory and absurd, than for Gorernment to exact a security of about twelve millions from the Bank of England, and to allow any individual, or association of individuals, however bankrupt in character and fortune, who can contrive to get notes into circula- tion, to issue them without let or hindrance of any sort ? Can any thing but fraud and ruin result from such a system." — Courier. t The present crisis — most assuredly anticipated, and in a great measure effected — by the Bank parlour, should not be passed over without investigation. Why were the Bank of England Issues extended ? Why was the country drained of its Coin by the metropolitan establishment of the Bank " of England? Were the Directors of the Bank of England so blind to, or inexperienced in, the foreign markets, as not to anticipate their operation upon Bullion in this Country? Or must we ascribe to superhuman interposition a conjuncture in which — 1st, The Country is drained of its Coin by the metropolitan establishment of the Bank of England?— 2ndly, The Bank of England itself drained of Bullion by Foreign Operations ? AndSidly, The Discount business of the Joint-Stock Banks, embar. rassed or rejected by the Bank of England, under pretended necessity from these foreign operations? One inference is plain, the Directors of the Bank of England have again betrayed the Commercial Interests of the Kingdom ! Again, when the Bank of England had spread suspicion, and anticipated disaster, she treacherously spurned the Joint-Stock Banks from her breast, and flung them upon their own resources ; — Her pretence being a low stock of Bullion ; but how stands the fact — from 1825 tp' 1831 the lowest stock of Bullion averaged £6,000,000., and the liabilites £31,000,000.; whilst in 1834 the Bullion is £7,123,000., and the liabilites only £32,428,000. a Joint-Stock Bank that should be so devoutly desued by the Bank of England ? A nu-re pretence f<.r the serurit., guc.tion-n mere shadow toi a Quixote to make firmidahle :-But, however insignificant the tlnng may appear, had the Bank of England been ^^^^^^f^'^^^y^' Z^:^:l Parliament would have saluted the Joint-Stock Banks of England «ith a ompulsorv secnritv that would have limited their shares to a return o abmu 2 o'r3 per centum per annum! This was the Bank of England policy— is the cause of the present panic Ye. mv Lord, solelv actuate.l by this hope, the Bank of England advanced the terms of discount ; with this exclusive vie«-, the discount a olts of Joint-Stock lianks were declined ; and desperately resolved Ton this result, the best Commercial Bills of Exchange were treated as worthless paper ! And this by an establishment which was greivtly indebted for its preservation to a spirited resolution of Commercial Men in 1.45, and ao^in -m 1797. But thanks, my Lord, to our Public Banking Companies ; orir extended and enduring system of Banking has well sustained its charac- Tr-the anticipated crisis is averted, and the deep deliberate treachery of the Bank parlour is obvious to the world. However, this glorious triumph, my Lord, over the ruthless machina- tions of the most powerful monopoly that ever existed is not altogether ovous- well-grounded apprehension imperceptibly mingles m gratulat.ons Uich 'should be pure and intense. As the people are not unacquainted Z h the influence and insidious character of the Bank of England ; neither, ,ny Lord, are they supinely indirterent to the efforts now making o rein- vigorate its expiring monopoly-and to cramp their energ.es and rising ,,rosperity,-Can these efforts obtain ministeri}il support • . Shall we be told, my Lord, that the paltry bribe,* and usurious ad- vances, of the Bank of England, produced public good ." Shall we hear . .V more of loans which were looked for and begged with all the anxiety andfervencv of eleemosynary gifts; although, in addition to principal in "version, and more than legal interest for the current time, the present and future rights of the people were bargained for and exacted r I ask, my 7LrlZuL people o/ England be again insulted with the bi". tale that the sum of ^1-2,000,()00. was required as a security for the holders of the promissory notes of the Bank of England, these notes hcmg-Mt cleprect- ated£^2hpercentuvir-mW^nt^:m^^\ as the circulating medium, by Act of ^'"" cCtTi'n I am, my Lord, that in this important struggle, the character of vour Lordship will never be tainted by tergiversati.,.,. I am equally sat.s- ■fiedthat should it devolve upon your Lordship to propose that political .•reditbe appended to r«c/,«r..r../Joint.StockBanksofIssue,yonr Lordship .ill announce the proposition with honest frankness And, my Lord uha n.ust vour Lordship's declaration then be r-That the Bank of England ,. apprehensive that its issues will be ser^sly redu ced, in a comp etition^ . £mfm given to the Government in 1763.-S« Tahulat Vtnr, M&i. 6 more substantial Banks of Issue ; that its political credit has already paid it so extravagantly, in principal, in interest, in alloivances for the public bumiess, and in a monopoly of the circulation, that it cannot presume to name it as a g;round of further favour ; but that it hopes the parliament will consider the great advantages its stockholders have hitherto realized, and, in compassion, enable it to still confer the same ; and that, for this purpose, it strongly urges that Joint-Stock Banks of Issue, although UNCHARTERED, should be Tobbed of their capital; that such -capital be placed under its management ; and that the entire juggle be got up for Bank of England expediency, and vindicated in parliament, on the prin- ciple of Public Security. And, my Lord, I can conceive, that, prompted by your Lordship's noble example, some other patriot member will then proceed. — Under these circumstances, it would be grossly fraudulent to allow the Bank of England to any longer retain the entire management of the Public Debt ; and, it would be equally so, to continue to her (to the exclusion of Joint- Stock Banks of Issue) a monopoly of the Circulation of the Metropolis and a district of 65 miles around it. — It is therefore proposed, that the metro- polis be thrown open to Joint-Stock Banks of Issue ; that such Banks as shall have given security for their issues in the ratio of the Bank of Eng- land, be Chartered ; and that amongst them be fairly apportioned the manag-ement of the Debt, and of the current Public Business. And this, my Lord, I confidently aver, must be the view of the Courier, although his sentiments are somewhat equivocal. However, to your Lordship it must be obvious, that in the exaction of deposits from Unchartered Joint-Stock Banks of Issue, an act would be performed by which the Note-Holders of such Banks could not be bene- fited in the slightest degi*ee ; because the existing laws (with a concise enactment for the registration of Banks of Issue) constitute the best depen- dence of creditors. On the other hand, to exact securities, with the intention of limiting the liability of Joint-Stock Banks of Issue, would be to subject the country to great inconvenience and loss.* In fact, my Lord, only imagine the case to exist, and every Joint-Stock Bank of Issue is a govern- ment Bank ; the day of Law re-opens with increased intensity ; and, although government-security Notes apparently soar to the clouds, they must descend with a gravity beneath which the throne itself will vanish as a bubble from the face of the waters. I have the honour, 'my Lord, to again subscribe myself, Your Lordship's Most obedient. Very humble servant, JOSEPH MACARDY. * As in the instance of the Bank of Entjland, under tlie Cash Restriction /let.— Chap. I.— Sect. 3 & 4. INTRODUCTION. DURING the last seven yeai-s we have observed and scrutinized the construction and operations of Banking Partnerships ; and, with a view and hope that the community should derive amelioration and benefit from our inquiries and experience, we occasionally published our observations ; — observations which, we are proud to say, have not been either inoperative or useless. Indeed, they have been reiterated in our Metropolis, in Ireland, in Yorkshire, and are now being published (mingled up with some equivocal notions) in the West of England. But to the pen alone we have not been confined; by our address and perseverance the Joint- Stock system of Banking has been introduced and securely founded in this district, and in Birmingham ; and, by our enterprise and labour, great and enduring establishments have been created, and profits to the amount of mil- lions sterling, realized by those interested in them ! Upon this point the most fastidiously-nice will indulge us with a remark ; — well considering our character, and that of the phalanx opposed to us, inflexible independence and jealous integrity have, from the moment in which we first took up our pen, guided our thoughts and movements ; to the present hour we have never allowed self-interest to bias our judgment or actions — never participated in the profits of the companies we projected — never, of the thousands of shares which we created and circulated, did we place one in the market— nor did we ever derive the smallest fraction from direct or indirect sale, or from compromise of any description ! Surely in a position so cautiously taken, so peculiar, so enviable, and so secure, we may well glance with a careless eye at the shafts and missiles of our opponents and their dependants ! PRACTICAL ESSAY ON BANKING. CHAPTER I. SECTION 1. liJXK OF ENGLAND.— PROHIBITION OF JOINT-STOCK BANKS. Private l^anUs owe their present existence in this country to mal-government. The poverty and crown of William III could be relieved and secured only by a subsidy ; a subsidy was raised by a body of merchants for certain pri\dleges in banking ;* and subsequent loan's, and advances upon taxes, were so conveniently rendered by this company, that it speedily became a powerful spring in Cabinet operations ; and the Cabinet,' acting upon the reciprocity system, secured for it a gigantic growth by declaring it a monopoly ; by decreeing that it 'should be exclusively great— have an altitude, in comparison with which every aspiring competitor, " though perched on Alps," should prove a mere pigmy— the Bank of England was to have any proprietary it pleased ; their liability was to extend only to their absolute advance— and no other bank in England was to exceed six partners, and their whole property must be liable.f Ex pcdc Hercidem ! England was then a Fi(jhling Country, and the Cabinet onlv cherished a War Bank.X William never considered that the Manufactures and Commerce of England would, within a few generations, require a hundred times the capital of his wars, and that such capital could be steadily and securely sustained only by large proprietaries — Joint- Stock Banks ! This, then, is the evil ;— * r. VV. & M.c. 20. t SandU \V. III. c. 20, s. 28. 1 " It is not ceitainiv a part of tlie regular dntv of the Banl«, under its original institii- tioiK 10 enter into the general views of policy, l-y wl.ich tins great empire is to he^governert in all its p,( uniarv and romnierriHl transaeti.wis ; Us peculiar and appropriate duty is the manairement of the concerns of the hanking establishment, as connected with the payment ofthe interest of the Xationol Debt ; the lodgments consigned to its care ; and the^ordmary advances it has been accustomed to make to government. '-Bank Address to Mmisttis, signed liy Mr. Secretary Best. ..... , , ^ ,., t.„,.i. ♦„ "VVI.at do von consider as the principal fiuuii their bills or notes, payable on demand or at any less time than six months from the borrowing thereof. Thus the War system of William and bis successor Ann speedily matured this state engine into one of the most formidable monopolief that ever existed in acoramercial country. Lent to Government From 1st August 1711, the interest upon the total debt to be 6 per cent. By 5 Ann c 13, the Bank undertook to cir- culate Exchequer bills, for £1,500,000— it now made this a loan, with interest. . Received subscriptions to double its capital A call of 15 per cent made stock Do. 10 per cent. ditto The Bank undertook tocirculale Exchequer bills for £1,200,000, for which accommo- dation the period of its Charter was pro- longed 29 years. The Bank added to its loan. Exchequer bills, with 5 per cent interest Reduced its interest (after Mid. 1718) from 6 to 5 per cent, on ±"1 ,775,027^. The Bank purchased South Sea Company Stock Interest till Mid. 1727, 5 per cent., subse- quently 4 per cent. Increased its capital for the purchase of South Sea Stock The Bank received^out of the Sinking Fund, being part of the £1,775,028 Exchequer bills, 5 Ann Reduced its interest on the exchequer bills, cancelled 1717, from 6 to 5 per cent. The Bank advanced to Government at 4 per cent.— on coal duties The Bank received out of the Sinking Fund (the bal. of £1,775,028 Exchequer bills, 5 Ann.) The Bank received out ofthe Sinking Fund, being part of the £2,000,000 of Exche quer bills of 1717. The Bank advanced to Government at 4 per cent — on lottery The Bank received out ofthe Sinking Fund (in further part of the Exchequer bills 1717) The Bank fora twenty-three years prolong- ation discounted Exchequer bills with- out further interest (thus making the 6 per cent, on £ 1,600,000 7 Ann c 7, 3 per cent, on £3,200,000.) Increased its capital by subscription. The alarm occasioned by the advance ofthe Pretender as far as Derby, led to a run upon the Bank ; and in order to gain time to concert measures for averting the run, the Directors adopted the plan of paying in shillings and sixpences. A resolution 7i'as also agreed to by the merchants and traders of the city, declaring their rvil lingness to rececve Bank notes in pay- ment of any sum that might be due to them, and pledging themselves to use every effort to make all their payments in the same medium. The Bank agreed to convert into loan Ex chequer bills issued on spirit licenses, on being allowed 4 per cent interest Advanced to Government. 1,200,000 400,000 1,600,000 1,775,128 3,375,128 2,000,000 5,375,028 4,000,000 9,375,028 1,000,000 8,375,028 1,750,000 10,12.5,028 775,028 9,350,000 500,000 8,850,000 1,250,000 10,100,000 1,000,000 9,100,000 1,600,000 10,700,000 986,800 Capital subjeit to Dividends. 11,686,800 9,800,000 13 MOSOPOl. Y. 23 Geo. 2, c. 6. 174'J. 1759. nnv. Prolonged in |4Gf0.3. c 2i. 1763 to All);. 1st 1763. Wb'J. ProlonRfd in 17»1 toAug.lst,' 1812.' ' Expiration Anticipated 8 years. 1780. -21 Geo 3.C.G0. 1781. Prolonged in 1800 to Aug. Is! 1 8:3:3. Expimtion Anticipated 1*2 year."!. 1792. 1793. 1797, Mr. Pitt administration 40 Geo. 3. c. 28. 1800. January 21st. 56 Geo. 3. c, 69. 1816. Loans, Nutes, Monopoly, Stt-ppagrs, Ifc. Advanced to Govemmenl. A call of 10 per cent added to stork.. . The Bank agreed to a proposition to receive ■1 per cent, on £8,48(5,81)0 to Christmas 17ol», thi n 3J to 17.57, and afterwards 3 percent, on the whole. £10 Notes first issued. I'lie B.mk diicouiiK-a £!,( IKI.IICO txche. quer bills, till I7ti M,.55:J,000 14 Money paid fur the Maaagemenl of the Public Debt, in the year 1829, with an Account of the allowance made by the Public to the Bank, or charged by the Bank against the Public, for the year 1829. £ s. d. Charge for Management of the Unredeemed Public Debt for one year, ending the 5th April, 1830, being the annual period at which the Accounts are made up, as directed by tlie Act 48 Geo. 3, c. 4 248,417 17 2| Ditto, ditto, for one year ending ditto, on sundry Annuities transferred to the Commis- sioners for the reduction of the National Debt, for the purchase of Life Annuities, per Act 48 Geo. 3, and subsequent Acts 2,922 11 9 Charges of Management, being part of an entire yearly fund of £100,000. enjoyed by the Governor and Company of the Bank of England, originally by the Act of the 5th and^ 6th of William and Mary, c. 20, confirmed to the said Governor and Company by several subsequent Acts, and lastly, by the Act of the 39th and 40th Geo. 3, c. 28, as per Return made to the Hon. House of Commons, on the 21st June, 1816 4,000 Ditto, ditto, on £4,000,000. South- Sea Stock, purchased by the Governor and Company of the Bank of England of the South Sea Company, and transferred by the said Governor and Company, in pursuance of the Act of the 8th Geo. I, c. 21, and which charges of management were assigned, by the said South Sea Company, to the said Governor and Company, out of a sum of £8,397. 9s. 6d. per annum, then paid by the Public to the said South Sea Company, for charges of management on their funds, as per Return made to the Honourable House of Commons, on the 21st June, 1816 1,898 3 5 £257,238 12 4f Bank of England, Uth of March, 1830. T. RiproN, Chief Cashier. CHAP. I.— SECTION 3. SECURITY OF THE BANK OF ENGLAND— ISSUES— CASH RESTRICTION ACT. We have shewn that the origin of the debt to the Bank of Eng- land was a loan of £1,200,000 ; that such loan was never intended to assume the character of even a plausible security to the public is demonstratively clear from its having been made to a govern- ment that was but just erected ; that sprang from revolution ; and that was frequently tottering. The subsequent loans were mere transactions of negociation, in which the Bank stealthily grasped, or protracted its hold of, the people's rights and property. If the paltry advances of the Bank had ever been intended as a security for its issues, their division amongst its creditors has been strangely averted. Chartered in 1694, it was bankrupt in 1696 — suspended the payment of its notes ! Why was the £1,200,000. of security not divided ? In 1 745 it had to resort to the bankrupt trick of paying its retrogressive issues in shillings and sixpences ! Why was the £10,700,000. of security not resorted to ? In 1797, with issues amounting to upwards of £10,000,000. it had but about £1,000,000. of cash and bullion. Why was the security still re- served, and a Cash Restriction Act fabricated? Bank Loans to Government, a security for the Holders of Bank Notes ! Surely the Courier cajoles the public ; the subtle fellow means to say that Bank Loans to Government may operate so as to evade the bank- rupt laws by obtaining an act to cherish and protract insolvency ! Of deliberate and gross mismanagement in its issues at a still later period, testimony is abundant and explicit. Of the late panic, Mr. TooKE affirms " that the Bank of England, precisely at the 15 time (1824) when there ought to have been a contraction, increased its issues three millions ; and that this increased issue gave a fresh and powerful stimulant to the spirit of speculation, and assisted in converting an incipient delusion into absolute insanity." Mr. MrsHET. — " That it is to the increased issues of the Bank of Eng- land, in 1824, that he is disposed to attribute the whole of the dis- tress." Mr. A. Baring — " That the issues of the Bank of England were the main cause of the existing evils." Mr. Drum- MOND " No one can have paid any attention to the nature of currency, without being assured, that the Bank of England pos- sesses a formidable power over the properties of its fellow-subjects, which has been and can be jiroductive of the most ruinous effects, without the possibility of conferring one redeeming benefit." Mr. Mc CuLLocH — *' That the Bank of England Directors fell into a double error — first, in forcing the issue of their notes ; secondly, in refusing to reduce, or indeed in actually increasing, the number of their notes in circulation for upwards of a twelve-month after the drain for bullion had begun to operate on their coffers." In December, 1825, the Coin and Bullion amounted to about one-tioentieth part of their Issues ! ! ! CHAP. I.— SECTION 4. ABUSES UNDER THE RESTRICTION ACT. We shall now introduce a statement that shews the average market price of linUion in each year from 1800 to 1821, giving', in juxta-position with the price of ItuUion, the average value of the Rank Note Currency, and its Depreciation per cent. ; also the Amount of Issues in August each year. . T» • i Averasreprcent.' . , i Vr"1f ^"'' of tl,e%ilue of A'f'^^ "^'^'^l I uf Gold per oz. ^j^^ currency. "^^'""^ percent, Year. Bank Issues. 1800 £3 17 10§ 1801 4 5 180-2 : 4 4 1803 4 1804 4 180.5 4 1806 1 4 1807 4 1808 ' 4 1809 1 4 1810 ! 4 10 1811 4 4 6 1812 i 4 15 6 1813 5 1 1814 5 4 1815 4 13 6 1816 ! 4 13 6 1817 4 1818 1 4 1819 1 4 1 6 1820 ! 3 19 11 1821 i 3 17 lOi £100 91 92 97 97 97 97 97 97 97 86 92 79 77 74 83 97 97 95 97 100 12 4 14 2 6 10 6 10 6 10 6 10 6 10 6 10 6 10 10 6 3 2 5 3 2 17 6 5 9 5 9 6 10 6 10 11 8 Nil. 7 5 13 13 13 13 13 13 13 9 £8 7 2 2 2 2 2 2 2 13 7 16 10 20 14 9 22 18 25 2 16 14 16 14 2 13 2 13 4 9 2 12 Nil. 14,735,378 14,970,321 16,887,113 17,03.5,959 17,320,994 16,296,178 19,072,893 20,034,112 17,365,266 19,357,241 24,446,175 23,723,115 23,482,910 24,024,860 28,979,876 27,024,049 27,07.5,8.54 3(I,U99,908 26,002,8:37 25,657,590 24,4.53,380 20,327,740 16 To explain to every reader, the robbery of the country under this Act, we shall quote the 18 th, 19 th, and 20 th propositions of Mr. Drummond : — 18. As long; as the Paper currency be convertible into a metallic one, the joint quantity of the two will never be greater nor less than it would be if there were no Paper at all, & therefore the Paper will be as eflicient a representative as the Metal. 19. The relative quantities of the two at any given period will vary from any other given period, according to the convenience of traders, and are immaterial, as the joint g«anf/t!/ is the essential circumstance. 20. If the Paper be not convertible ; if the quantity of currency become re- dundant ; and if the redundancy be greater than the export of Metal can correct, the remaining Paper currency will be depreciated ; i. e. will not be worth as much as it professes to be, and the prices of all other commodities will rise. The truth of Mr. Drummond's propositions being incontestible, we have only to glance at 1814, when we find the currency depre- ciated 25 per cent., or one fourth of the entire issues ; which, in the same year, amounted to about £29,000,000. CHAP. T.— SECTION 5. PROFITS OF THE BANK OF ENGLAND. In the beginning of this Chapter it is observed ; — " The poverty and crown of William III. could be relieved and secured only by a subsidy ; a subsidy was raised by a body of merchants for certain privileges in banking ; and subsequent loans, and advances upon taxes, were so conveniently rendered by this Company, that it speedily became a powerful spring in Cabinet operations." Of these loans we shall give an abstract ; as well as one of the profit derived by our government loan-mongers from their management. VEAR. SUMS BORROWED. £ 1743 1,800,000 3 8 4 1744 1,800,000 3 6 !0 1745 2,000,000 4 7 1746 2,500,000 5 5 1 1747 4,000,000 4 8 1748 6,300,000 4 8 VIEW OF LOANS FROM 1743 to 1815. The ff'ar with the French Republic. INTEREST. £ S. d. The Seven Years' War. 1756 2,000,000 1757 3,000,000 J 758 5.0IJ0,000 1759 6,600,000 1760 8,000,000 1761 12,000,000 1762 12,000,000 1763 3,500,000 Tlie American fVar. 1776 2,000,000 1777 5,(00,000 1778 6,000,000 1779 7,000.000 1780 12,000,000 1781 12,000,000 1782 13,500,000 1783 12,000,000 1764 <5,000,000 3 12 3 14 3 3 6 5 3 10 9 3 13 7 4 1 11 4 10 9 4 4 2 3 9 8 4 5 2 4 18 7 5 18 10 5 16 8 5 11 1 5 18 1 4 13 9 5 6 11 YEAR. INTEREST. d. SUMS BORROWED, £ £ 1793 4,500.000 4 8 1794 11,000.000 4 10 1795 18,000,00!) 4 15 1796 18,000,000 4 14 1 . i(6 7,.500.000 4 12 1797 18.000,000 5 14 1797 14..50on, Thomas Kadford (clerk to Samuel Hope) was the stalking horse ! Next of our district opponents — surcliarged with " well"- wishing and 20 overflowing with charity to the " Blind Asylum" — steps forth " a JOINT-STOCK BANK SHAREHOLDER" ! — An angel of light truly ! How disinterested this " sincere well-wisher !" How signal his adventure of love ! Of all the cant of the most canting age, surely the most repulsive is, that which assumes the holy garb of " charity."* The writer is obviously the creature of private bankers — ^known as the agent of an Insurance Office ; but as he declares himself a "joint-stock bank shareholder" what has he to fear; is he not the " sincere well-wisher" of his ^''fellow-townsmen ;" — the advocate of " charity ;" — the enlightener of " the bhnd ?" No, no ; he is not to be coaxed forward in his proper person ! No wand was ever yet wielded, by witch or conjuror, which could so operate upon the intellect of this "joint-stock- bank shareholder," as to make him truly declare himself ! Nevertheless, by this kind of anonymous trickery, this feigned charity, this diabolical cant, this bold imposture, are we deluded — imposed upon, daily ! However, we shall shortly have to notice Joint- Stock Banks, and we will then destroy the effect which this disinterested, this well-Avishing, this charitable man, has in view, this we shall do by entering into par- ticulars — by examining his sophisticated web of generalization. Before we conclude with Private Banks, we shall quote our former remarks upon their random advocate, Mr. Farren, the Resident Director of another " asylum "I " Private Banking (says Mr. F.) was commenced in England by Mr. Francis Child, in Fleet-street, in 1645. Soon after which, Messrs. Snow and Dean opened another Bank in the Strand. Those Establishments continue on the very spots where they commenced business nearly two hundred years ago ; unshaken monuments of the PRUDENCE and integrity of the Conductors ; and London and Westminster may justly boast of their two original Banks, still in friendly emulation, within a few yards of each other, and of the bar which separates the precincts of the cities. These are instances enough to show that Private Banks may be formed on the surest foundation, with security to the partners, and advantage to the pub- lic ; nor would fifty cases of failure, among Bankers, do more than prove the improvidence with which the particular Establishments had been conducted."! * The writer adveitised that ilie profits of his Essay slinuld be given to the Manchester Blind Asylum ! \ All infinitely better judge than Mr. Farreii exonerates the Private Bankers, and attri- butes the general ruin to \X\e systeniyXo Mr. Fairen's " surest fonndalion."' — "Mar.y Country Banks stopped payment in 1825 through no fault of theirs, but from the panic in the public mind. The Banks Aac? not in any way contributed to that panic." — Mr. Beckett's Evid. Commons' Committee, June 15th, 1832. 21 Mr. Farren here informs us that two Private Banks have weathered the storms of many years ; and from their having done so, he infers that the Private 'Banking System is the acme of perfection ;— in tact, that a little coterie with a very limited capital —an unavoidably fluctuating capital— or a spurious capital, is a durable and legitimate security for men of Property ; a ready source of supply for Trade and Manufactures ; an unfailing confidence for the Country ! Let us examine the annals of the age :— In 1793 the actual number of Private Banks that stopped payment was 100; viz. 12 in Yorkshire, 5 in Lancashire, 7 in Lincolnshire, 7 in Northumberland, 6 in Sussex, 4 in Northamptonshire, and the remainder in other counties. From 1793 to 1810, 87 commissions of bankrui)tcv 'were issued against Country Banks; in 1810, 26 ; between 1810 and 1814, 29; in 1814, 1815, 181(3, 92; from 1816 to 1825, 62; and between October, 1825, and February, 1826, 59! Making, between 1793 and February, 1826, a total of 355 commissions ; which, in numerical comparison with the compositions, bear a portion of 1 to 4, giving an aggregate total of 1,420 sm- pended Private Banks in a little better than 30 years ! Place this picture by the side of Mr. Farren's, and laud the system of Private Banking -A^ ''being on the surest foundation" affording ''security to partners, and advantage to the public" !* But, perhaps, the Irish bankers possessed something of the "PRUDENCE" of the TWO London firms; possibly they were not actuated by " IMPROVIDENCE;" but managed to hold on their course despite of the tornado— to find a track secure from the overwelming avalanche. Let us see :— Sir H. Parnell says—" The loss that Ireland has sustained by the failure of Banks may be described in a few words. It appears by the Report of the Com- mittee on Irish Exchanges, in 1804, that there was at that time in Ireland fifty registered Banks. Since that year, a great many niore have been established, but the whole have failed one after the other, involving the country, from time to time, in immense distress,^ with the following exceptions ; first, a few that withdrew from business ; secondly, four Banks in Dublin; thirdly, three at Belfast; and lastly, one at Mallow." •The Shi ew«buiy Private Bankers have honoured the " Asvhim Assurance resident director, Gt<.rtfC Farren, Esq." bv distrihuting his spumy paragraphs in the streets ; accon.|.aMie.l hv an oiiainal scrap oF their own chaste and eliRant composition- Beware of Joint-Stock Banks" ! These running fellows re not yet beyond the A. B. C. < t soual rainuig . If the Shrewsbury private Bankers be honest and well informed, why hesitate to appear before their town— fflcA in his own proper person ? 22 Mr, Wakefield, in his evidence before the Commons' Committee, on the Distressed State of Agriculture, 1821, says — " Up to the year 1813 there were Banks in almost all parts of England, forcing their paper into circulation at an enormous expense to themselves ; and, in most instances, it has been done to their own ruin. There were many Bankers who gave commission, and they sent persons to the markets to take up notes of other Bankers : and these people were^ called money-changers : and commission was paid for doing it in this way. In every instance in which I have traced such com- mission transaction, I have found that failure has certainly ensued." Mr. Chalmers, in reference to 1793, says— " The projects and arts, by which these notes were pushed into the circle of trade, were regarded with a very evil eye by those, who, in this management, saw great irnprudence in many, and a httle fraudulence in some. When suspicion stalked out to create alarm, and alarm ran about to excite panic, more than four hundred Country Banks sustained a shock ; all were shaken ; upwards of a hundred stopt." Lord Liverpool and Mr. Robinson, January 13, 1826, say " The principal source of the recent distress is to be found in the rash spirit of speculation, supported, fostered, and encouraged by the Country Banks." When we projected the Bank of Manchester * we had in part * We give this note from onr own Avoik, flie Commercial CvcLOPiEDiA :— " r/is Banking Si/stem.— The Bankiug opeiations of Mimcliester long and uiiifoimly tended to strengthen and perpetuate the iinvvieldy nionopolv of the Bank of England. The Issues of this estahlishmeiit constituted the exdusive Note currency, and, with Commercial Bills, the agar egate Paper circulation of the town. Upon this medium the husiness of Manchester was based, and, because a growinu irarle and rising establishments extracted from it a moderate support, it was assumed that the greater vigour which would be derived from a more exteii'ded and liberal currency, could not fail to create speculative dealing, and an unsound system. The Bank of Enirland (although tottering, and re- volvin« the consideiations 'to he, or not to he') was thought to be the tortoise that supported, and could alone support, the Manchester world.— We care not what supports the tortoise, he sustains us loell, and ' let wf.ll alone !' However, despite of the Bank of England ascendancy— of the obvious and indirect influence of the wealthy and highly- respectable local Bankers— of the laboured harangues of commercial orators and anti- commercial economists— and of a Newspaper warfare carried on by 'a country banker,'* • LET WELL ALoNE.'t &c.— despite of this vast, and powerful "opposition, in 1828, we successfully introduced the Scotch Banking system ; a svstem which has the power to adapt itself to a great and increasing commerce— and which is alone commensurate with, uiidecaying enterprise. "The ' Bank of Maivchester' was oiieinated in 1828, as the " Commercial Bank of Manchester," upon the plan of allotting 20,000 shares, and erecting branches, in the chief manufacturing and tradina; towns of the district. Our policy and object was to unite all interested in the manufactures and trade of Manchester and Liverpool; and to * Thomas Attwood io the Manchester Courier.— This gentleman adopted the tactics of Agathocles ■ who, abandoning defensive measures in Sicily, carried a vigorous warfare to the gates of his enemy' Cartilage. However, not only was Mr. A. discomfited, but we shortly afterwards oririnated the Join'- Stoek system in Birmingham. + The most able of the old system champions in the Manchester Guardian. 23 resolved to detail the vicissitudes and disasters just stated in ab- stract; but, on reflection, concluded that such an exhil>ition would lead many to imas^ine that the very business was hazardous ; that danger was necessarily iidierent in Banking^. Now, however, a few occurrences may be briefly noticed as beinsf illustrative of tlie inse- curity and unavoidable dissolution of Private Banks. About the time alluded to occurred, 1st, the faihire of Frys and Chapman, and 2ndly, the death of a wealthy Banker. By the latter event, a property, which would prove a sufficient stay for any Private Bank, became di\-ided ; — such division taking^ from the Bankinjr establish- ment some portion of its wealth ; and still further portions were shortlv retired by some partners whose secession was consequent upon the demise of their rich relative. A further division of the Bank capital would, of course, still further circumscribe its means. And in this way, independently of the risk of excessive issues, of uncovered advances, of distant or hazardous speculations, &c., the name and very organization of Private Banks naturally fade away. In the event of failure, as instanced in the case of Frys, how suddenly are pret-ent the formation of small, indepetident companies, wliich coulrl not fail to obstruct the free transfer of capital — to limit the accommodation of trade in the markets of purchase and sale — and, ultinia'ely, /o involre the entire community in all the calamities of an insecure ai.d fluctuating bankin" competition. The Directors', however, overruled our phin, and adopted tliat of a local, independent cstablii-htnenl ; this point ascertained, our duty was plain and imperative : — we had undertaken a tremendous responsibility — voluntarily placed ourselves under a heavy oblinatioii to the present ase and posterity — and were lelt without alternative ; onr derision was, iherefi«re, prompt and energetic — we projecied and brought forward the ' Manchester and Liverpool District Bank ' in 1829. " On noticing these institutions vve cannot overlook the opportunity afforded to camion the commercial public against supporting, even t>y a momentary sanction, the erection of Banking companies wiili an insufficient proprietary, vad small capital! Attempts t'> get up snch have been made in this important town ; and, of them all, the most incmorable, bocanse the most elaborately argumentative, and at the same time superlativfiy fallacious and preposterous, wa^ that of 182(;; we allnde to 'The .Merchants' and .Manufactu- rers' Union Bank' with .SjOOO shares of £100 each! Of Banking schemes of this descripiiot), every conipetint judge must cxrlaim crgrescit medendo, and our self- gratulati.in is, that from all such we have for ever rescued the 'Merchants and Manufacturers' of Lancashire." [Soon afier we penned the preceding paragraph an individual of little influence and less information, called to solicit our aid i:i erecting a new Bank ; we of course dec lined ; bnt onr man of the law was said to be still preparing his gleanings and crudities for the good of the town. Lender these circumstances we originated the Northern and Central Bank of England; and upon principles more decidedly advantageous and secure, and under a patronage more exi)er!enced, wealthy, and influential— the Commercial Hank of England.'] "The Joint-Stock Banks ofMancbestei' have destroyed the web so aitfully sophi>tica;c(l in the Banking estatilishments of this country; by affording a practical les.^on to the great commercial interests of the neigbhouting di>iricts, they have eminently coniiibuttd to the formation of similar companies ; and these companies cannot fail to tive information, spirit, and decision in more remote quarters, and to raise an infliienlial voice in the present crisis. The effects of their general adoption will be — \. A happy exemption from currency-panics and commercial-revulsions. 2. .\ decided, liberal, enduring support to trade, manufactures, and commerce. 3. A competition with, and wliolesome check upon, that inscrutable old Cabinet engine,— the Bank of England." 24 we Involved In panic and embarrassment. It will be enough to point to the peril of private Bankers themselves, and of those who confide in them, as exemplified in the cases of Stephenson and Fauntleroy ; and we doubt not, the recent failure of Kinnears, Smith and Co. will successfully awaken the public to the danger of trusting implicitly in a Private Bank. What estabhshment had more of the public regard, or bore a higher character, until the vanity of Kinnear took him to London ? His death, and the insol- vency of the Firm, may be put down as the direct consequences of a mere conceit — an ill-judged adventure ! And where is this evil to end ? Already JRohert Allan and Son sink with the wreck of Kinnear ! We have now done with the organization of Private Banking Partnerships ; and is there amongst our readers a man of property or independence who does not wish to see all such partnerships for ever absorbed ? We are practically acquainted with all the horrors of the system It is vain for interested principals, or their hirelings, to assume a, joint-stock character, (into which they may have plau- sibly insinuated themselves) to act the part of traitors It is still more vain for them to appeal to our sympathies ; selfishness and charity mingle badly, even in the presence of " the blind"! CHAP. III.— SECTION 1. THE SECURITY OF BANKS. We have seen the Origin and Progress of the Bank of England Security of £12,000,000. We have seen that, from its first date to its last, it bears one uniform and exclusive character — a job uniformly against the Country, and altogether of the worst and vilest description. We have seen that this £12,000,000. is a politi- cal security which cannot be touched by Note-Holders ; but for which the business of the country has been convulsed, and the people plundered, under a Cash Restriction Act. And we know that it is a part of that public debt to which David Hume would apply a wet sponge ; — the wiping away of which he and his disciples con- tend to be an act of justice — that the few public creditors should voluntarily or compulsorily sacrifice to the many of the public ; in which event, we well know, that it would be no security at all ! Let us now take this £12,000,000. as a Bank of England security for its NOTE-HOLDERS ; and set against it the estimated aggre- gate responsibility of the Unchartered Joint- Stock Banks of this district. 25 CumjMiativc Saurilij of the Note IIoUUks of the Bank OF England and o////<' Unchartered Joint-Stock Banks of this district. HANK OF ENGLAND. Bank of England Issues. . £2n,000,OrO Secnrily 12,000,U0(I I>e6cit ill Security . .£8,(100,000 ; JOINT-STOCK BANKS. ' Estimatnl Issur.s uf 18 Joint.Stock Banks, 3l1ppo^inp all I to be Banks of Issue; and to issue Iralf the amount of '' their p;:id Capital I,i00,n00 i „ , ?in. of Estimaltd 1 Jioiiks. Sharehldrs. Wfalth. 1 Bank of Mmcliesfer 504 . . 10,000,000 i Mancliester & Liverpool District 1 109 . . 15,'100,000 Com. Bunk of England (in progi-e.ss) .. 1.500 . . 15,llOO,(00 : North. & Central Bk. of England (do.) lOrt) .. 10,100.000 i Bank of Liverpool 461 . . 9,mt0,000 I Commercial Bunk of Liverpool 201 . . 3,000,(K;« I 4735 fi2,C410,UOO I Birmingham Banking Company 301 I Bank of Biruiingliani 24:2 GInucestersliire Banking Compaiw .. 188 Wolvri hauipton 244 S!ourl>ridi;e and Kidderminster 158 I York Union 245 York City and County 270 I Leeds 312 I Yorkshire District (in progress) 1000 I Halifax 181 I Bradlurd 174 tt aki fii-ld 107 3718 say 38,0OO,fKH1 100,ll00,«i00 Excess of serurily over issues in this district £98,500,000 •«* Several small Companies are omitted. Wf challenge the Coitn'cr to analyse this statement, and to then honestly tell us what he thinks of "associations of individuals" which guarantee their note holders with an excess of security, amounting to upwards of £90,000,000 ! And is this amount the less secure because it is available if needed ? Should it — (to be squandered in war and profligacy) — be vested in a political govern- ment ? And to secure the people, should they be again robbed under a (Vtsh Bestrictioii Art — by a Currency that is depreciated £25. 2s. Gd. ptM' cent, as in 1814? These are points which few men will venture to affirm. We will now tell the Courier what security should be exacted from Joint- Stock Banks. I. As sm.all independent Banking Companies deteriorate the Cur- rency, 1. by a competition in Issues ; and 2. by their Issues being inconvenient in the general Circulation — no Company should issue Notes which had not a paid-up Capital of at least £100,000. And places which could not support Companies upon this scale of magni- tude, should be furnished with Branches from other establishments. To fall into this secure and desirable policy the existing small Banks might form a coalition, and constitute Extended Companies. II. An accurate Register of Shareholders should be placed on the Counter of every Bank, for daily reference ; and filed in the Stamp Office, to afford facility in obtaining authentic copies. D 26 III. A Report of the Issues — Paid-up Capital — and Number OF Proprietors of and in each Company, should be published Weekly in the London Gazette. This plan should also be laid down for every Private Bank which issued Notes. CHAP III.— SECTION 2. PANIC AND PAPER ISSUES. We shall now glance at the subject of Panic and Paper Issues in Scotland. We quote from the Report of the Commons' Com- mittee, 1826 : — PANIC. Mr. Roger Ayton.— " Do the people of Scotland prefer bank notes to gold ? They do. — Do you feel that the system of banking- in Scotland is safe from those risks which occur in this country from panic ? I think it perfectly safe from panic. — In point of fact, has there ever been a run upon the Banks throughout Scotland? I never knew one." Mr. A. Blair. — " Do you think the system a secure one, in case of sudden panic ? I consider a sudden panic a most improbable thing in Scotland, from the great confi- dence that generally prevails in the establishments throughout that country." Mr. K. FiNLAY says — " It is the knowledge men possess of the means of the Scotch Banks, which creates that confidence, that puts aside all belief of the probability of the existence of such a panic as has prevailed in this country." Mr. John Thompson. — "Did any dangerous run take place upon the Banks in Scotland, in the year 1745 .' I believe not. — Has any run at any time taken place, arising from a panic in England ? There has never been any thing like a panic among the people." ISSUES. Mr. J. G. Craig. — " Do you think, that, if all the Banks were to combine, they could by any means force more notes permanently into cir- culation than the transactions of the country required ? I think it quite im- possible : the notes that were not required for the use of the country, would instantly be returned into the banks." — Mr. Alexander Blair. — "If the notes issued by a Bank are over and above the amount the country could ab- sorb in circulation, they would be necessarily paid into one of the other banks, and they would bring them against the banker who issued them." — Mr. KiRKMAN Fin LAY says — "If a Bank at Glasgow were to issue more notes than the circulation could absorb, than the wants of the country re- quired, the consequence would be, a balance of notes against that particular Bank, in the hands of the other Banks." — "As each Bank is directly inte- rested in issuing as much paper as it can, when there is a very active spirit of speculation, might there not be for a time a considerable over-issue of notes • from the whole Banks together ? I think it quite impossible that there could be an over-issue of notes, because the universal practice at Glasgow is to pay into the Bank, with which the individual transacts his business, the whole of the notes he has in his possession, or nearly the whole, every day. The consequence is, if all the Banks were to attempt to issue a larger amovmt of notes than the demands of the country required, all these notes M'ould find their way into some Bank or other, and then would meet in a very few days, perhaps in a very few hours., at the Exchange." — Mr. Robert Paul. — " If all the Banks could be supposed to combine, so that they should all over- issue ; would not that over-issne be in the same way corrected, by being re- ^7 turned into the coffers of each Bank by the neighbourinj? B;"'';'^' *»'"; [i;'^ such over-issue ? Yes, but that is an extreme supposition -Hut indei that extreme supposition, «o«hl not there still be a correction aflorded to an over- issue? Certainly." ^ t-, i i ii Such arc the Banks from ^^hich the Bank of England would require deposits, bv way of securities 1 And this same Bank ot England would hope to realize £300. per million, for the book- keeping of these deposits ! CHAP. IV. THE PROFITS OF BJXKIXG. "THE WAVES NEVER RISE BLT WHEN THE WINDS BLOW."— The motto of our opponent; and seldom was motto better chosen, —beinff at once, musical, prettv, and most appropriate ; tor, mdeeupon 50 such names ; and imagine these 50 names to hold its 10,000 shares; and these 10,000 shares to be nominally £50. each, of which (as is 0ie general practice) £10. per centum has been paid-up. What is the result— why, 50 names of wealth and influence, involving a private property of (say about) five millions sterling, and subscribing a Bank Capital o£half a million, would lead the public to exclaim this is good— sound— as it should be ! But the initiated will readily perceive that the Bank has not the slightest use of the five millions sterling private property ;— that £450,000. of this Capital is only nominal ; — and that (as its 50 wealthy shareholders may sell their interest to 10, 50, or 100 persons who are worth just the paid-up E 34 price) the whele affair assumes its proper character — a very insigni- ficant Bank of barely £50,000. Capital ! " We have thus exhibited one of our numerous establishments; — an undertaking with a respectable price and capital — its shares BEING £50. EACH, and its capital £500,000.! But it is all fallacy — the fallacy of nominal capital — the real price being £5. per share^ and the real capital £50,000 ! *' Hence, Sir, the absolute necessity that Joint- Stock Banks should truly and honestly declare their real Stock ; and- not only guard against the fallacy of nominal capital, but, on the contrary, increase their shares — appropriate them discriminately — and avail themselves of full capitals, derived from large proprietaries ! Upon these obvious, unyielding principles, the Capital and Proprietary of the Commercial Bank of England will be such as to afford a security to the public which far exceeds that of the Bank of England ! " Why, Sir, has English Banking been so disastrous to those engaged in it, and to the public in general ? — Because its Capital was equivocal, and derived from small proprietaries — proprietaries which were in continual change from Insolvency, Death, Division of Property, Retirement, &c. — proprietaries which were too insigni- ficant to afford confidence to the public in times of vicissitude or commercial embarrassment." CHAP, v.— SECTION 4. EXPOSURE OF CONFIDENTIAL AFFAIRS. A stale and blatant charge has yet to be noticed ; it is extracted from the Times of October 7, and will, if scrutinized, prove neither more nor less than a new version of the old fiction of the private bankers. — " Facts have been openly mentioned on the Exchange to-day, on the testimony of an individual who, being invited to be- come a proprietor, was allowed, at his own request, to inspect the books of the Company. He there ascertained that some proprietors, holding, for example, 200 shares, and who had paid a deposit of £5. each, making £1,000. in all, were favoured by loans of from £20,000. to £30,000.; and, indeed, judging from what was revealed, that not only the capital of the Company, but much of that of their customers also, was out on security of rather a questionable nature, and certainly not employed on any true principle of banking manage- ment. Any reverse connected with trade, or extensive fall in the price of commodities, must prove fatal to a bank thus circumstanced. It will behove monied men in all parts of the kingdom to watch carefully the proceedings of some of these new banking companies." The line in italics will satisfy every man, who knows any thing of the discipline of Joint- Stock Banks, that the Times has been artfully im- posed upon by some party whose interest prompted his inventive powers. However, that the Commercial Bank of England is not the delin- 35 3uent bank, we most unequivocally affirm ; and, in prompt and irect refutation of the charge, so far as this establishment is con- cerned, we give an extract from its by-laws : — " The Inspecting Director is empowered to inquire into and investigate the entire affairs of Branches ; but no Honorary Director^ of Head Bank, or Branchy has permission or can be allowed to examine Bills of Exchange, Current Accounts^ or Confidential Affairs of any description, unless officially authorised so to do !" Will the Times believe that a man who is not pledged to secrecy — who is not even a shareholder ; m ould be allowed to exercise a privilege which is absolutely withheld from Directors who act under a solemn obliga- tion? Or, should the Times have ascertained that a Joint-Stock Bank absolutely compromised its confidential character, why not broadly declare its name and locality ? We have now incontestibly shown that nominal capital in a Banking Company is impolitic, delusive, dangerous; — that paid- up, is the only legitimate and securely-tangible capital, and should alone be recognised by the public; — that if additional capital be wanted, it should be obtained by a further sale of shares and ex- tension of the proprietary ; and that if such shares prove unsah' able, the Company is just in that state which requires scrutiny with a view to its dissolution ! We have also shown that the Bank of England does not even insinuate that it is a Commercial Bank, and that Private Banks are constitutionally insecure and fugitive ; and we have admitted the Bad Practice of the Bank of Manches- ter, and the reckless policy of the Northern and Central Bank of England. But "^ Joint- Stock Bank Shareholder" (because the Northern and Central Bank of England inundates the Country with its notes, and works upon one-half of its capital) — must not assume that the Commercial Bank of England is going to run into extravagance and error; no, no, — this Bank before its opening prudently and judiciously called up its full price, so that it should be in a condition to work with an absolute capital of £500,000. ! A consideration which should have been known to and admitted by the ^'- Joint- Stock Bank Shareholder." The Times should, upon the like principle, have gone into particulars of the grossly repre- hensible affair animadverted upon ; and, before making it a general charge, have at least shewn that it was something more than the mere slander of inveterate opponents. Of the extravagant schemes called National Banks, we offer but one remark, and that is — their fundamental principles will involve every General Meeting in discord, and must end in a division of the establishments. CHAP VI.— SECTION 1. BRANCH BANKS AND LOCAL BANKS COMPARED. In the Receipt and Transmission of Monies. — In a letter to Mr. P. E. Wedgwood in May last, we said " To every man of busi- 36 ness, it must be obvious, that, in our business district, a Bank which is extended (that is, having a Branch in every town of im- portance) can alone be effective, useful, and economical, in the various forms of paying and receiving monies ; — take, as illustra- tions, the receipt or transmission of sums on account of firms, or individuals, in our ports and manufacturing towns ; — letters of credit, &C.&C." Surely it is unnecessary to go into further explanation of this important consideration ; all commercial houses feeling the accommo- dation rendered them by Branch Banks, in granting Drafts, Letters of Credit, &c., upon any of the several trading towns of the district by and through their own agencies. It is vain for Independent, or Local Banks to attempt the hke facilities ; for, when two or more companies operate in the same transaction, it unavoidably obtains an undesirable publicity in passing through their various forms ; their cognizance and discipline being, not unfrequently, objectionable. Unity in interest, obligation, and mode of business, can alone preserve that confidence which is at all times looked for in commercial affairs. CHAP. VI.— SECTION 2. In maintaining a Circulation that will be ordinarily negotiable THROUGHOUT THE DISTRICT AND IN LoNDON. In the letter just quoted, we further observed — " Whilst, by Local Circulation, our general trade is obstructed or inconvenienced, by the Circulation of an Extended Company it will be sustained and facilitated. Every Tradesman knows how Commercial Travellers are perplexed, by having to receive payments in Local Notes after banking hours ; — Innkeepers also bear a share in this inconvenience ; and when these Notes stray to a distance, they are a perfect nuisance.* Now the Notes of an Extended Company, are at all times desirable, being as negotiable as Sovereigns, and infinitely more convenient." CHAP, VI.~SECTION 3. In keepijig the Currency of the District under proper regulation — ^in a sound and healthful condition. Local Companies constantly increase our Currency evil ; because their anxiety to make large Dividends, induces them to push their Issues ; whilst their compe- tition with each other relaxes the legitimate principles of credit ; creates a speculative trade ; and terminates in panic and disaster. These evils are avoided by having Extended Companies ; for such Companies not only preclude unsafe banking competition, and maintairi legitimate principles of credit ; but, also check and regulate their general issue ; and, by a uniform system of weekly check, and monthly revision and controul, ensure their own safety — giving unity, and a healthful tone, to the business of the entire district. These brief remarks will satisfactorily show, that Extended Com- panies can alone afford Accommodation to the public — sustain the general Circulation — and regulate the Currency of the country. * Evei7 Bank of Issue should be comFelled to make its Notes payable in London. ii7 CHAP. VI.— SECTION 4. The Organiztition and Operations o/* Local Banks compared with those of Branch Banks. Upon this point we merely intro- duce a letter which was addressed to Lord Althorp, last April " My Lord — There is a letter now making- the roinul of the newspapers of this district, purporting to be a copy of one, addressed to your Lordship within the last few weeks, by Mr. W'ilmam Brown, in his character of Chairman of the Uank of Liverpool. A letter, my Lord, wliich, after saying much in favour of Joint-Stock, and a little in extenuation of Private Banks, seems to insinuate a necessity for some legislative measure, which would support Banking Companies of One Esfal/lis/n/wtit, and be repressive of liranih Banking Companies — the principles, o]»erations, and compara- tive merits of the two systems being left unexplained. "My Lord, the 5th condition of the Prospectus of the CoM.MERn.M. Bank OF England, will particularize to your I/ordship, the peculiar ac- commodation and security afforded to tlie Public, by a Branch lianking Company — advantages, my Lord, whicli can neither enter into the consti- tution, nor arise from the operations, of a Banking Company of One Esta- blishment. It is as follows, viz. "niat at the earliest moment after the formation of the Company, steps be taken for the establisliment of a Bank, in each of the principal Towns, the Head Bank being in Manchester: and that Shares be liberally distributed in every Town in which a Bank may be opened ; the desirable objects being— 1st. To establish in each a resident DIRECTION and extensive proprietary, the best security in times of commercial embarrassment — 2nd. To give to each the credit and security of a GREAT cnflcctcating CAPITAL. — 3rd. To connect the Towns so as to SECURE and facilitate THEIR BUSINESS generally — and 4th, To prevent the formation of small Banking Companies ; which, from their CONTRACTED CAPITAL, and POPULAR CREDIT, would be morc dangerous than Private Banks." '* That the profits, my Lord, of Banking Companies of One Establish- ment can never equal those of our Branch Banks, is obvious ; because 1st. Affording no ramified or branch facilities for the business of our important and closely connected district, their operations are necessarily limited (to comparative insignificancy") in number ; and 2nd. Losing these (the ordinary and multitudinous transactions of the commerce, manufactures and trade, which constitute our general district business) they aim at local trade, and employ a large capital in hea\^' advances, even although such advances be attended with extraordinary risk ! '* Further, my Lord, compared with a Branch Bunk, not only arc the transactions of a Bank of One Establishment reduced in number and profit, and increased in amount and risk ; but the very rules and management, which direct and guide its operations, are necessarily questionable, loose, and hazardous. " Thus, my Lord, to instance the Bank of which Mr. William Brown is chairman, it may be presumed that the Liverpool (there being no Branch) Directors decide upon advances to their townsmen — their friends — them- selves. The funds of the Company arc at their command, and they arc not subject to any controul. Now, my Lord, glance at the like operations in a Branch Bank. The Directors of the Head Bank direct their own operations, and, by weekly abstracts, check and regulate the operations of each Branch ; but they are themselves also subject to check and controul every month, when a General Board — (constituted of the Head Directors and of a Director from each Branch) — see that the fundamental principles are observed, and that the security of the Company is maintained against every individual interest. 38 "But, my Lord, Mr. William Brown commends the scheme of Mr. Dyer, as laid before the Bank Committee of the House of Commons, July 13, 1832, and this theory recommends " That Joint-Stock Banking Com- panies shall not establish Branches at a g-rcater distance than twenty miles from the Parent Bank, nor shall such be empowered to issue notes or bills other than those of the Parent Bank." A whim so crude and preposterous, my Lord, that it will ever be found futile in practice ! Indeed, the very Board which concocted, and propounded, almost immediately abandoned, it. — 1st. By opening" a Branch Bank, at Newtown, in Montgomeryshire (94 miles from the Manchester Parent Bank) ; and 2nd. By issuing' notes dated ' NewtownJ " Mr. Dyer, my Lord, is Chairman of the Bank of Manchester, and the Bank of Manchester established this Branch of Issue subsequently to July 13, 1832. So that Mr. Dyer has himself seen the absurdity of his own theory, and practically refuted it. But Mr. Brown insinuates that the Banks of Liverpool and Manchester will become Banks of Issue — to this, my Lord, the Branch Banks have not the slightest objection ; nor will they ever address to your Lordship the slightest insinuation against such policy. A fair competition will benefit the Public ; and those institu- tions which are founded upon sound principles, subjected to salutary check, and regulated by a steady and uniform controul, will ever have the greatest confidence," CHAP. VI.— SECTION 5.— THE ABUSE OF BRANCHES. In their erection with an insufficient capital. — Nothing short of indisputable fact — the most appalling example, could have induced us to notice this subject ; but it cannot be overlooked, — the system being open to censure from the imprudence of a few inexperienced men. When a young estabhshment erects a greater number of Branches in six months, than it should have done in two years ; when it plants these by random over an extent of country, in which there is neither manufacturing establishments, nor commercial in- tercourse ; and when all this is done with a grossly inadequate capi- tal, one view only can be entertained, viz. — that excessive paper ISSUES are the almost exclusive object. Experience has amply ilustrated this conclusion. However, the delinquent establishment has been checked with a severity and promptitude which demon- strate that such trickery will not be permitted ; and this fact alone is sufficient to induce us to drop the curtain on its unprecedented folly. CHAP. VII. SKETCH OF THE DISTRICT-PLAN, OPERATIONS, AND POLICY OF THE COMMERCIAL BANK OF ENGLAND. An inspection of the prefixed Topographical Sketch will help the reader to form a correct view of the design of this Company — The erection of a Banking Establishment that should connect the Towns of this vast and important district, and secure and facilitate their hanking transactions ;— an Establishment that should be based upon principles so approved, and in a proprietary so extended, so influential, and so wealthy, as to withstand assault and revulsionj and endure from age to age. Liverpool 32 Birminfifham 82 Gloucester 128 Burslemii Potteries.. 35 Leek* 30 Bolton* 11 Wigan* 18 Blackburn* 24 Preston* 31 Buriilev* 2o Skiptoii* 43 Rochdale* H Halifax* 27 f Leeds 40 fWakefield 38 fSheffield 40 Chester 38 tkr Branch. Ellesmere 60 Shrewsbury "0 f Ludlow 99 f Uttoxeter 51 fBurtonn n-Trent . + Ashbourn 15 ^tl^eigh 7 ■^ +;Chowbent , of course, ^^ VH.-SECTION 2.-THE OPERATIONS And 3 Their Intercourse, or Business Connexion. + A Sub-Branch is carried on at a fractional expense ; being a m one.day-a-week.Bank, which is opened for the use of a Market ; or of ManufactminK Customers of the contiguous Branch Bank, whence emanates. As a Market-day Bank, it is a great convenience ^id ben to sma 1 towns, in furnishing a supply of Cash, Exchanging Notes, S and^rives spirit and confidence to the Market Section 1 is an abstr of the Blanches, their distance from the Head Bank, and their lead Busines«=. And, from these particulars, combined with the Map relative topography, will be at once inferred the mutual •"tercourse of Towns-the close connexion of their several Banks-and the perf organization and unity of this entire Establishment. 40 CHAP. VII.— SECTION 3.— THE POLICY. The Commercial Bank of England is based upon a broader and more enduring policy than any one of the three old Joint-Stock Banks of Scotland. The British Linen Company, with a Capital of £500,000. — (the paid-up Capital of the Commercial Bank of England) is in pos- • session of a Charter of Limitation. The Bank of Scotland, and the Royal Bank of Scotland have also Charters limiting their liability to their paid- tip Capital, but the amount is =£' 1,500,000. each. When the Note-Holders and Creditors of the Commercial Bank of England compare the above sums with the entire property of ihe Share- holders of this establishment, they will see how much better they are guaranteed than people in the like situation with the three Chartered Banks of Scotland — these having an aggregate Capital of barely £3,500,000. — Whilst the estimated wealth of the proprietary of the Cowwer- cialBank of England, may be taken at from£l0,000,000! to ^"20,000,000. When the Shareholders of the Commercial Bank of England consider that by thus amply securing the public they found their establishment upon a rock, whilst they are themselves protected by their Deed of Settle- ment, from further loss than one fourth of the Amount paid upon their Shares, surely they will prefer being thus constituted ; — maintaining an ascendancy in credit and public confidence, not only over the Chartered Banks of Scotland and iheBank of Ireland — but even over the Bank of Eng- land itself, considering that its chief security is/Jo/^7^Va/. — 5'eeSec.3. Ch. I. The policy of the Commercial Bank of England must not be identified with the scheme of the National Provincial Bank of England, the National Bank of Ireland, &c. Novelties, which arrange numerous and distinct proprietaries in an individual establishment ; and pretend to reo^ulate the interest of each proprietary by the profit or loss of the Bank in its immediate locality. Surely to comprehend the issue of these speculations it is only necessary to imagine a yearly general meeting and the announce- ment of a iong string of Towns, with their varying Dividends ! Or the reading of an Annual Report, which will excite the same dissatisfaction, ridicule, and contempt. In reference to the charges which are urged against Joint-Stock Banks by the Tifnes, and hinted by the Courier, suffice" it to say, that the jdan and policy of the Commercial Bank of England repudiate a babbling, intermeddling, irresponsible Directory; and protect the affairs of Custo- mers alike from curious and interested inquisitors. And, in reference to its Notes, they are direct — payable where Issued, in London, and ordinarily at any, and every one of its Branches; and it absolutely disclaims evej-y scheme which cherishes accommodation paper with a view to extend Bank- Note Issues. Its general policy was thus announced in the Prospectus : — " That at the earliest momejit after the formation of the Company, steps be taken for the establishing of a Bank in each of the principal towns, the Head Bank being in Manchester : and that shares be liberally distributed in every town in which a Bank may be opened ;— the desirable objects being— 1. To establish in each aresident direction and extensive proprietary— the best security in times of commercial embar- rassment: — 2. To give to each the credit and security of a great unfluctuating capital:— 3. To connect the towns so as to secure and facilitate their business generally ;— and 4. To prevent the formation of Small Banking Companies ; which, from their contracted capital and popular credit, would be more dangerous than Private Banks." J. PIGOT AND SON, PRINTERS.